R ANNUAL REPORT 2001
RTICA CORPORATION
R INDEX
Introduction ......................................................... 1
Letter to Shareholders ............................................... 2
Management Discussion and Analysis ................................... 4
Auditors' Report ..................................................... 5
Financial Statements ................................................. 7
Notes to Financial Statements ........................................ 10
Directors, Officers, Investor Information ............. Inside Back Cover
R DIRECTORS AND OFFICERS
Directors Officers
WARREN ARSENEAU WARREN ARSENEAU
President of the Company President
MARTIN H. BECK ROBERT H. STIKEMAN
President, DevTech Labs Chief Fiancial Officer,
General Counsel
MICHAEL M. BOYD
Managing Director, Audit Committee
Merchant Banking, HSBC Capital (Canada) Inc. MARTIN H. BECK
ROGER J. SHORT
President, LeCourt Enterprises MICHAEL M. BOYD
ROBERT H. STIKEMAN ROBERT H. STIKEMAN
Partner, Stikeman, Graham, Keeley and
Spiegel, LLP
STEVEN LETWIN
Group Vice President, Distribution and
Services, Enbridge Inc.
INFORMATION FOR INVESTORS
Legal Council Transfer Agent
STIKEMAN, GRAHAM, KEELEY AND SPIEGEL, LLP EQUITY TRANSFER SERVICES INC.
220 Bay Street Suite 700 120 Adelaide Street West,
Toronto, Ontario M5J 2W4 Suite 420
Toronto, Ontario
Auditors Stock Information
KPMG LLP Shares listted on the
Mississauga Executive Centre Canadian Venture Exchange--
Four Robert Speck Parkway, Suite 1500 RTN
Mississauga, Ontario L4Z 1S1 Shares outstanding
at May 31, 2001--34,052,636
CUSIP--78108N
Corporate Headquarters
RTICA CORPORATION
999 Barton Street, Stoney Creek, ON L8E 5H4
(905) 643-8669
INVESTORS@RTICA.COM
R YOU READY
FOR THE NEXT
GENERATION
OF
INSULATION?
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RTICA(R)
WWW.RTICA.COM
RTICA CORPORATION is based in Stoney Creek, Ontario and is engaged in the
commercialization of RTICA(R) brand insulation.
RTICA(R), a new generation of insulation, is manufactured utilizing a patented
technology that converts recycled plastic to form a bulked-up, fiber mass. Its
high insulation efficiency, measured by R-value, is equal to or better than
comparable insulation presently offered in the marketplace. Perhaps equally
important, the benign nature of RTICA(R) presents no health risk of a
respiratory or skin irritation kind commonly associated with present-day
installation environments. As such, RTICA(R) represents a significant
improvement in industrial hygiene for both homeowners and professional
installers.
RTICA(R) meets building code standards in Canada, while in the U.S.A., where
multiple codes exist, RTICA(R) has gained acceptance in several key
jurisdictions, with other important approvals fully expected to be confirmed in
the near future.
Initially, RTICA(R) will be offered as a blowing wool for pneumatic delivery by
insulation contractors into attics and other applications. Batts will be added
to the product line once the specialized production facilities are in place.
You are invited to visit the Company's web site, www.rtica.com for more
information.
RTICA(R) is a registered trademark of Rtica Corporation
1
LETTER TO SHAREHOLDERS
Last year at this time we shared with you our priority for the coming year. It
was to transform the Company from its stage of development to that of a fully
operating, commercial enterprise. Although ground has yet to be broken in the
construction of our planned, high capacity plant, we believe significant
progress has been made in pursuit of this goal.
On the investment front, we expanded our shareholder base to include potential
customers and institutions. Fiscal 2000 began in early June with the wrapping up
of a private placement, in which certain members of a U.S.- based buying group,
the National Insulation Contractors' Exchange (NICE), participated as lead
investors, joined by prominent institutional participants.
The investors' interest in RTICA(R) brand during the year extended well beyond
that of passive investment. As members of NICE, they took a proactive role on
our marketing advisory board, by helping to define specifications for our
blowing wool product, and by undertaking field tests to confirm them.
Additionally, we extended our dialogue with other potential customers throughout
the entire industry. The field trials proved very successful, conducted as they
were in real commercial applications, and further validated our belief that
RTICA(R) will fulfill its promise and become the Next Generation of Insulation.
Certainly, our perspective on these activities leads us to believe that the
market support we knew existed may be even greater than imagined. Further, we
believe that our relationship with the insulation contractors will provide the
Company with a core competency in distribution. We intend to capitalize on this
market support with a continued and unwavering focus on becoming a significant
commercial entity as quickly as possible.
To facilitate our transition to operations, we shifted virtually all Research
and Development to our long-standing research collaborator, the National
Research Council Industrial Materials Institute, (NRC-IMI) in Boucherville,
Quebec. NRC-IMI enjoys an excellent, world wide reputation as a leader in
plastic processing and technology. Already at NRC's facility is an R&D scale
manufacturing line engineered, built and installed by the Company that
incorporates all our technical processing advances to date. This new arrangement
allows us to direct the activities of the Stoney Creek plant solely towards
product and market development.
Technical advances have always been the core competency of RTICA Corporation.
During the year we achieved substantial breakthroughs in fiber properties,
processing methods, equipment design and product features. Aside from
substantially broadening our know-how, these advances have led to an application
for another patent. Most significantly, we developed R-Buds(TM), an innovation
in blowing wool configuration with far reaching benefits. R-Buds(TM) allows us
to ship product cost-effectively on a national basis, and radically simplifies
the handling and installation of blowing wool by professional contractors.
R-Bud(TM) is a trademark of Rtica Corporation
2
Corporate governance issues became more complicated during the year. We
registered shares from our private placement with the SEC, and now have ongoing
disclosure responsibility both in Canada and the United States. As well, audited
statements now include a U.S. GAAP reconciliation. We monitored the Fair
Disclosure guidelines by the SEC and similar guidelines in Canada and used them
accordingly as templates to structure our own corporate disclosure policy.
Also during the year, our investor relations/communications program was expanded
significantly. New hits on the Company web site were up and a steady flow of
information packages was directed to the investment community, as were regular,
in-person presentations.
Keeping pace with a dramatic increase in administrative and manufacturing
activity led to a significant strengthening of the Company's human resources.
New staff appointments include a controller, office coordinator, project
manager, plant supervisor, plant mechanic and technician. As a result, trained
staff can now operate the plant 24 hours per day, 4 days per week. Considerable
resources were allocated to the building code approval process, particularly as
they apply in U.S. jurisdictions. After many months of delay and frustration, we
are pleased to report progress, having overcome the inertia of the U.S. system
to secure approvals for a significant portion of the U.S. market.
As 2002 approaches, we now know our product is better than we had anticipated
and the market potential greater than we had believed a year ago. In the face of
these dynamics, we go forward with even greater resolve to sell existing plant
product output to capacity in the short term, while re-doubling efforts to reach
an agreement with a strategic partner so that a commercial scale plant will be
up and running by year end, 2002.
Finally, our shareholder base continues to strengthen. The addition of potential
customers, institutions and many individual investors has made us better.
Existing shareholders continue to support our vision. And the Company's board
actively guides management on the strategic issues we confront. All in all, we
have every reason to look forward confidently to a rewarding, successful 2002.
Warren Arseneault
President
3
R MANAGEMENT DISCUSSION AND ANALYSIS
RTICA Corporation ("RTICA") is involved in the development of insulation made
from polyethylene terephthalate ("PET").
Consolidated assets of RTICA Corporation during the fiscal year ended May 31,
2001 decreased from $2,401,330 to $1,938,395. Cash, short-term investments and
cash in trust comprises $1,394,051 and $1,712,725 of total assets at May 31,
2001 and 2000 respectively.
During the year, RTICA raised a total of $2,759,241 from the issuance of special
warrants, share purchase warrants and the exercise of stock options. On May 29,
2001, convertible debentures of $370,722 were converted into common shares of
the Company. In the prior year, the Company raised $1,680,570 pursuant to a
private placement.
As a development stage company, RTICA has generated NIL revenues from the sale
of product during the year. Interest income of $97,101 was earned during the
year versus $7,095 in the prior year, as a result of higher cash balances
following the share issuance previously discussed.
Operating expenses of $3,061,814 were significantly higher than the prior year
of $1,318,579, as a result of product and market development activities
undertaken.
During the year, RTICA has received $200,694 in repayable contributions received
from the National Research Council ("NRC") to assist in pre-commercialization.
In addition, RTICA has been reimbursed for $156,000 in the current year for
research and development projects carried out by the NRC.
4
R AUDITORS' REPORT TO THE SHAREHOLDERS
We have audited the consolidated balance sheets of RTICA Corporation (formerly
Inzeco Holdings Inc.) as at May 31, 2001 and 2000 and the consolidated
statements of operations and deficit and cash flows for the years ended May 31,
2001, 2000 and 1999 and cumulative period from June 13, 1991 (inception) to May
31, 2001. 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 United States generally accepted auditing standards. 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 May 31, 2001 and
2000 and the results of its operations and its cash flows for the years ended
May 31, 2001, 2000 and 1999 and for the period from June 13, 1991 (inception) to
May 31, 2001 in accordance with Canadian generally accepted accounting
principles.
Accounting principles generally accepted in Canada vary in certain significant
respects from accounting principles generally accepted in the United States.
Application of accounting principles generally accepted in the United States
would have affected the financial statements to the extent summarized in note 13
to the consolidated financial statements.
KPMG LLP
---------------------
Chartered Accountants
Mississauga, Canada
June 29, 2001
5
COMMENTS BY AUDITORS FOR U.S. READERS ON
CANADA-U.S. REPORTING DIFFERENCES
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the 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 consolidated financial statements. Our report to the directors
dated June 29, 2001, is expressed in accordance with Canadian reporting
standards which do not permit a reference to such events and conditions in the
auditors' report when these are adequately disclosed in the financial
statements.
KPMG LLP
---------------------
Chartered Accountants
Mississauga, Canada
June 29, 2001
6
R CONSOLIDATED BALANCE SHEETS
May 31, 2001 and 2000
--------------------------------------------------------------------------------
(Expressed in Canadian Dollars) 2001 2000
--------------------------------------------------------------------------------
ASSETS
Current assets:
Cash, short-term investments
and cash in trust (note 6(e)) $ 1,394,051 $ 1,712,725
GST and other receivables 74,301 92,953
Prepaid expenses 8,442 8,442
------------------------------------------------------------------------------
1,476,794 1,814,120
Fixed assets (note 3) 435,236 534,481
Goodwill, net of accumulated amortization
of $82,574 (2000 - $56,210) 26,364 52,728
Deferred development costs 1 1
--------------------------------------------------------------------------------
$ 1,938,395 $ 2,401,330
================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 299,369 $ 768,248
Due to government (note 4) 200,694 --
Convertible debentures (note 5) -- 349,278
Shareholders' equity:
Share capital (note 6) 8,743,768 5,613,805
Equity component of convertible debentures (note 5) -- 10,722
Deficit accumulated during development stage (7,305,436) (4,340,723)
------------------------------------------------------------------------------
1,438,332 1,283,804
Going concern (note 1)
Commitments and contingencies (note 11)
--------------------------------------------------------------------------------
$ 1,938,395 $ 2,401,330
================================================================================
See accompanying notes to consolidated financial statements.
On behalf of the Board:
/s/ MICHAEL M. BOYD /s/ ROBERT H. STIKEMAN
---------------------------------- ------------------------------
Michael M. Boyd Robert H. Stikeman
Director Director
7
CONSOLIDATED STATEMENTS OF
OPERATIONS AND DEFICIT
May 31, 2001 and 2000
================================================================================================================
CUMULATIVE
PERIOD FROM
JUNE 13, 1991
YEARS ENDED (INCEPTION) TO
MAY 31, MAY 31,
(Expressed in Canadian Dollars) 2001 2000 1999 2001
----------------------------------------------------------------------------------------------------------------
Income:
Interest $ 97,101 $ 7,095 $ 60,233 $ 167,524
Fees and licenses -- 6,077 -- 622,482
--------------------------------------------------------------------------------------------------------------
97,101 13,172 60,233 790,006
Operating expenses:
Development 947,651 246,870 568,562 2,657,300
Consulting 610,354 354,110 102,434 1,427,188
Professional fees 445,138 117,109 176,652 909,371
Sales and marketing 262,895 93,600 27,060 383,555
General and administrative 238,276 160,660 58,161 633,666
Amortization of fixed assets 149,139 8,025 4,094 173,253
Management fees 127,000 129,174 209,864 873,386
Rent and property taxes 123,822 68,187 12,683 223,542
Travel 58,863 44,795 82,965 356,325
Interest on convertible debentures 36,586 40,248 65,000 141,834
Factory overhead 34,393 18,673 -- 53,066
Amortization of goodwill 26,364 26,364 26,364 82,574
Interest and bank charges 1,333 10,764 892 136,096
Patents -- -- 12,962 44,286
--------------------------------------------------------------------------------------------------------------
3,061,814 1,318,579 1,347,693 8,095,442
----------------------------------------------------------------------------------------------------------------
Loss for the period (2,964,713) (1,305,407) (1,287,460) (7,305,436)
----------------------------------------------------------------------------------------------------------------
Deficit accumulated during
development stage, beginning of period (4,340,723) (3,035,316) (1,747,856) --
----------------------------------------------------------------------------------------------------------------
Deficit accumulated during development
stage, end of period $ (7,305,436) $ (4,340,723) $ (3,035,316) $ (7,305,436)
----------------------------------------------------------------------------------------------------------------
Loss per share (notes 2(i) and 9) $ (0.13) $ (0.09) $ (0.11)
----------------------------------------------------------------------------------------------------------------
Weighted average number of shares
outstanding 22,050,619 14,194,298 11,960,818
================================================================================================================
See accompanying notes to consolidated financial statements.
8
CONSOLIDATED STATEMENTS OF CASH FLOW
May 31, 2001 and 2000
================================================================================================================
CUMULATIVE
PERIOD FROM
JUNE 13, 1991
YEARS ENDED (INCEPTION) TO
MAY 31, MAY 31,
(Expressed in Canadian Dollars) 2001 2000 1999 2001
----------------------------------------------------------------------------------------------------------------
Cash provided by (used in):
Operating activities:
Loss for the period $ (2,964,713) $ (1,305,407) $ (1,287,460) $ (7,305,436)
Items not involving cash:
Interest on convertible debentures 10,722 40,248 65,000 115,970
Amortization 175,503 34,389 30,458 255,827
Interest expense on converted loan -- -- -- 96,000
Expenses settled by issuance of
common shares -- -- -- 431,388
Foreign exchange gain (23,590) (3,281) -- (26,871)
Change in non-cash operating
workingcapital balances:
GST and other receivables 18,652 (15,494) (57,539) (74,301)
Prepaid expenses -- 13,524 7,010 (8,442)
Accounts payable and accrued liabilities (468,879) 726,898 (9,492) 218,024
----------------------------------------------------------------------------------------------------------
(3,252,305) (509,123) (1,252,023) (6,297,841)
Financing activities:
Due to government 200,694 -- -- 200,694
Issuance of convertible debentures -- 360,000 -- 1,860,000
Issuance of common shares 3,000 1,715,854 25,250 2,272,767
Issuance of special warrants 2,202,700 -- -- 2,870,659
Exercise of share purchase warrants 553,541 -- -- 553,541
Decrease in due to related parties -- -- (259,792) --
Proceeds from loan payable -- -- -- 254,000
----------------------------------------------------------------------------------------------------------
2,959,935 2,075,854 (234,542) 8,011,661
Investing activities:
Purchase of fixed assets (49,894) (523,716) (19,180) (608,489)
Deferred development costs -- -- -- (1)
Cash acquired on reverse takeover -- -- -- 261,850
------------------------------------------------------------------------------------------------------------
(49,894) (523,716) (19,180) (346,640)
Foreign exchange gain held on
foreign currency 23,590 3,281 -- 26,871
--------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and
cash equivalents (318,674) 1,046,296 (1,505,745) 1,394,051
Cash and cash equivalents, beginning
of period 1,712,725 666,429 2,172,174 --
--------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end
of period $ 1,394,051 $ 1,712,725 $ 666,429 $ 1,394,051
==============================================================================================================
For further cash flow information see note 10.
Cash and cash equivalents are comprised of cash, short-term investments and cash
in trust.
See accompanying notes to consolidated financial statements.
9
R NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
RTICA Corporation (formerly Inzeco Holdings Inc. (a development stage company))
(the "Company") is a public company that was incorporated on May 30, 1997 under
the Business Corporations Act (Alberta), was continued under the Business
Corporations Act (Ontario) on April 25, 2001 and is listed on the Canadian
Venture Exchange. The Company is engaged in the commercialization of technology
and productivity processes that converts 100% recycled PET plastics into
insulation products.
1. Going Concern
These financial statements have been prepared on a going concern basis and, as
such, it has been assumed that the Company will be able to realize its assets
and discharge its liabilities in the normal course of operations. To May 31,
2001, the Company has incurred continuing losses from operations and an
accumulated a deficit of $7,305,436. The ability of the Company to continue is
dependent upon the ongoing support of its shareholders, the attainment of
financing necessary to complete the technology and begin commercial production
and the achievement of profitable operations from the commercial production and
licencing of the insulating products and sale of licensing rights. These
financial statements do not include any adjustments relating to the
recoverability of assets and classification of liabilities or any other
adjustments that might be necessary should the Company be unable to continue as
a going concern.
2. Significant Accounting Policies
These financial statements have been prepared in accordance with accounting
principles generally accepted in Canada. A reconciliation to accounting
principles generally accepted in the United States is provided in note 13.
Significant accounting policies adopted by the Company are as follows:
(a) BASIS OF PRESENTATION
These financial statements include the accounts of the Company and its wholly
owned subsidiaries, Inzeco Overseas Limited and RTICA Inc. ("RTICA") (formerly
E2 Development Corporation ("E2D")). RTICA was acquired in a reverse takeover
and is treated as the continuing entity and the acquiror for financial
accounting purposes, notwithstanding that the Company is the continuing entity
for legal purposes given that the former shareholders of RTICA controlled the
combined entity after the transaction. Accordingly, the consolidated statements
of operations are a continuation of RTICA's financial statements, and therefore
reflect the following:
(i) the operations of RTICA from inception (June 13, 1991); and
(ii) the operations of the Company after April 28, 1998, the date of
acquisition.
As part of the reverse takeover, the Company entered into share-for-share
agreements with each shareholder of E2D whereby the Company agreed to acquire
all of the outstanding common shares and 310,908 common share purchase warrants
of E2D, in exchange for 17,499,995 common shares and
10
1,243,633 common share purchase warrants of the Company which represented 86% of
the issued and outstanding common shares of the Company on a fully diluted basis
as at April 28, 1998. The accounting for the business combination was as
follows:
================================================================================
Ascribed value attributed to shares and
warrants issued to acquire the Company $ 480,000
Less transaction costs (190,557)
--------------------------------------------------------------------------------
Net proceeds $ 289,443
================================================================================
Fair value of net assets of the Company:
Current assets (including cash of $261,850) $ 350,811
Goodwill 108,938
Current liabilities (170,306)
--------------------------------------------------------------------------------
$ 289,443
================================================================================
All significant intercompany transactions and balances are eliminated on
consolidation.
(b) SHORT-TERM INVESTMENTS
Short-term investments include investments with maturities of less than 90 days
at date of acquisition and investments with maturities of 365 days at date of
acquisition which are readily convertible into cash.
(c) FIXED ASSETS
Fixed assets are recorded at original cost less accumulated amortization.
Amortization is provided when the assets are available for use, on a
declining-balance basis over the estimated useful lives of the assets at the
following annual rates:
================================================================================
Machinery and equipment 25%
Furniture 25%
Vehicles 30%
Computer hardware 30%
================================================================================
(d) GOODWILL
Goodwill is recorded at cost less accumulated amortization and is being
amortized on a straight-line basis over five years. On an annual basis,
management reviews the recoverability of goodwill by assessing future cash flows
on an undiscounted basis.
(e) DEVELOPMENT AND PATENTS
Development costs are expensed in the period incurred until technical
feasibility has been obtained, adequate resources exist and recoverability is
assured at which time development costs are capitalized. Patent costs are
expensed in the period incurred.
11
(f) CHANGE IN ACCOUNTING POLICY
In December 1997, the Accounting Standards Board of The Canadian Institute of
Chartered Accountants ("CICA") issued Section 3465 of the CICA Handbook, Income
Taxes ("Section 3645"). Effective June 1, 1999, the Company retroactively
adopted Section 3465. Section 3465 requires a change from the deferred method of
accounting for income taxes to the asset and liability method of accounting for
income taxes.
Under the asset and liability method of Section 3465, future tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Future income tax assets and
liabilities are measured using enacted or substantively enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under Section 3465, the
effect on future income tax assets and liabilities of a change in tax laws and
rates is recognized in income in the period that includes the enactment date.
Pursuant to the deferral method, which was applied for the year ended May 31,
1999 and prior years, deferred income taxes are recognized for income and
expense items that are reported in different years for financial reporting
purposes and income tax purposes using the tax rate applicable for the year of
the calculation. Under the deferral method, deferred income taxes are not
adjusted for subsequent changes in tax rates.
There was no cumulative effect of this change in accounting for income taxes as
of June 1, 1999 and, thus, no restatement of the opening balance of deficit for
the years ended May 31, 2000 and 2001 was required.
(g) FOREIGN CURRENCY TRANSLATION
Transactions denominated in foreign currencies are translated into Canadian
dollars using exchange rates in effect on the date of the transaction. Monetary
assets and liabilities are translated into Canadian dollars using current
exchange rates and non-monetary assets and liabilities using historical exchange
rates. Translation gains and losses are included in the consolidated statements
of operations and deficit.
(h) USE OF 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 revenue and expenses during the period. Actual results
could differ from those estimates.
(i) EARNINGS PER SHARE
Effective with the year end May 31, 2001, the Company adopted the new
recommendations of the CICA relating to earnings per share. This new standard
has been given retroactive application. Under the new standard, basic per share
amounts have been calculated by dividing net income attributable to common
shareholders by the weighted average number of shares outstanding in a manner
inconsistent with that followed in prior reporting periods.
12
Under the treasury stock method, the weighted average number of shares
outstanding used in determining basic earnings per share in each of the years
presented excludes 9,298,939 of the escrowed shares as described in note 6(a).
These shares require the Company to meet specified performance measures and are
considered contingently issued. The effect of the retroactive application of the
new standard resulted in an increase in loss per share for 2000 by $0.03 and for
1999 by $0.05.
(j) FAIR VALUES OF FINANCIAL INSTRUMENTS
Cash, short-term investments and cash held in trust, other receivables and
accounts payable and accrued liabilities are reflected in the financial
statements at carrying values which approximate fair values because of the
short-term maturities of these instruments. The carrying value of the debt
component of the convertible debentures approximates its fair value since the
interest rate approximates current interest rates. There is no market for the
due to government and consequently, it is not considered practical to determine
its fair value.
(k) STOCK-BASED COMPENSATION PLAN
The Company has a stock-based compensation plan, which is described in note
6(c). No compensation expense is recognized for this plan when shares or stock
options are issued to employees or non-employees. Any consideration paid by
employees or non-employees on exercise of stock options or purchase of shares is
credited to share capital. If shares or stock options are repurchased from
employees or non-employees, the excess of the consideration paid over the
carrying amount of the shares or stock options cancelled is charged to deficit.
3. FIXED ASSETS
================================================================================
ACCUMULATED NET BOOK
2001 COST AMORTIZATION VALUE
--------------------------------------------------------------------------------
Machinery and equipment $ 525,292 $ 137,263 $ 388,029
Furniture 11,108 3,724 7,384
Vehicles 15,848 5,542 10,306
Computer hardware 56,241 26,724 29,517
--------------------------------------------------------------------------------
$ 608,489 $ 173,253 $ 435,236
================================================================================
================================================================================
ACCUMULATED NET BOOK
2000 COST AMORTIZATION VALUE
--------------------------------------------------------------------------------
Machinery and equipment $ 525,292 $ 7,842 $ 517,450
Furniture 10,105 1,263 8,842
Vehicles 7,500 1,125 6,375
Computer hardware 15,698 13,884 1,814
--------------------------------------------------------------------------------
$ 558,595 $ 24,114 $ 534,481
================================================================================
13
4. DUE TO GOVERNMENT
On November 1, 2000, the Company signed a contract with the National Research
Council Canada whereby the Company is eligible to receive up to $445,000 as a
repayable contribution for various research and development projects carried out
by the Company. Repayment of these contributions begins on January 1, 2004 based
on 1% of the Company's gross revenue up to a maximum of $667,500.
The Company is required to contribute two-thirds of the total cost of the work;
otherwise, its reimbursements will be proportionately reduced. If the Company is
found to be in breach of the contract, the National Research Council Canada is
able to demand repayment of up to three times the total amount of advances
already made. For the year ended May 31, 2001, the Company has incurred costs of
$899,000 and has received $200,694 of the repayable contribution.
5. CONVERTIBLE DEBENTURES
On May 26, 1998, the Company issued a $1,500,000 Series I Convertible Senior
Debenture. The principal was convertible at any time, in whole or in part, at
the option of the holder into common shares at $0.55 per common share. Once the
Company built a plant which produced a specified output, the debenture was
convertible at the Company's option. On December 21, 1999, the debenture was
converted at the Company's option into 2,727,723 common shares at $0.55 per
common share.
On April 15, 2000, the Company issued three $120,000 convertible debentures for
total proceeds of $360,000. The principal and any accrued and unpaid interest
was convertible at any time, in whole or in part, at the option of the holder
into common shares at $0.40 per common share. The principal outstanding was
interest bearing at 6.5% per annum payable semi-annually and in arrears on June
15 and December 15 of each year, commencing on June 15, 2000 and was due on June
30, 2001. The debentures were secured by the tangible assets of the Company and
could have been subordinated to other debt incurred by the Company up to
$1,250,000. On May 29, 2001, the debentures were converted into 900,000 common
shares at $0.40 per common share.
The amount of interest recorded in the current year prior to conversion was
$36,586 (2000 - $40,248; 1999 - $65,000).
The equity component represents the excess of the face value over the debt
component at the date of issuance. The continuity of the equity component of
convertible debentures from inception is as follows:
================================================================================
Equity component of $1,500,000 convertible
debenture, May 26, 1998 $ 105,000
--------------------------------------------------------------------------------
Balance, May 31, 1998 and 1999 105,000
Conversion of $1,500,000 convertible debenture,
December 21, 1999 (105,000)
Equity component of three $120,000 convertible
debentures, April 15, 2000 10,722
--------------------------------------------------------------------------------
Balance, May 31, 2000 10,722
Conversion of three $120,000 convertible
debentures, May 29, 2001 (10,722)
--------------------------------------------------------------------------------
Balance, May 31, 2001 $ --
================================================================================
14
6. SHARE CAPITAL
The authorized share capital of the Company consists of unlimited preference
shares issuable in series and unlimited common shares.
Common share transactions from inception are as follows:
================================================================================
SHARES AMOUNT
--------------------------------------------------------------------------------
Shares issued for cash, June 13, 1991 1,000 $ 10
Shares issued on stock split, May 30, 1996 2,199,000 --
Shares issued for consulting services, May 30, 1996 456,166 431,388
--------------------------------------------------------------------------------
Balance, May 31, 1997 2,656,166 431,398
Shares issued for cash, August 29, 1997 825,000 275,000
Shares issued on conversion of warrants,
December 23, 1997 145,833 121,528
Shares issued on conversion of warrants,
March 7, 1998 153,750 128,125
Shares issued on conversion of E2D warrants,
March 7, 1998 20,250 --
Shares issued for debt and accrued
interest, April 28, 1998 236,830 350,000
Shares exchanged on reverse takeover,
April 28, 1998 (4,037,829) --
Shares exchanged on reverse takeover,
April 28, 1998 17,499,995 --
Shares issued to the Company's shareholders at
reverse takeover, April 28, 1998 2,925,000 289,443
Shares issued on exercise of options, May 20, 1998 20,000 4,000
--------------------------------------------------------------------------------
Balance, May 31, 1998 20,444,995 1,599,494
Shares issued on conversion of special
warrants, October 25, 1998 1,666,667 667,959
Shares issued on exercise of options, May 20, 1999 126,250 25,250
--------------------------------------------------------------------------------
Balance, May 31, 1999 22,237,912 2,292,703
Shares issued on conversion of debenture,
December 21, 1999 2,727,723 1,605,248
Shares issued on exercise of options,
October 26, 1999 75,000 33,750
Shares issued on exercise of options,
November 26, 1999 125,000 25,000
Shares issued for cash, May 31, 2000 2,807,500 1,657,104
--------------------------------------------------------------------------------
Balance, May 31, 2000 27,973,135 5,613,805
Shares issued on exercise of share purchase
warrants, June 30, 2000 850,418 553,541
Shares issued on conversion of special warrants,
October 15, 2000 4,033,333 2,202,700
Shares issued on exercise of options,
October 31, 2000 15,000 3,000
Shares issued on Registration Statement
not being filed and declared effective
by December 31, 2000, April 19, 2001 280,750 --
Shares issued on conversion of debentures,
May 29, 2001 900,000 370,722
--------------------------------------------------------------------------------
Balance, May 31, 2001 34,052,636 $ 8,743,768
================================================================================
15
(a) On April 28, 1998, all of RTICA's outstanding common shares and warrants
were exchanged for 17,499,995 common shares and 1,243,633 warrants of the
Company. The warrants had an exercise price of $0.65 per common share, with
an expiry date of June 30, 2000. On June 30, 2000, 850,418 of the 1,243,633
common share purchase warrants issued in connection with transactions were
exercised for $553,541. The remaining 393,215 warrants expired on the same
day.
In connection with this transaction, the Canadian Venture Exchange required
that a total of 10,939,937 common shares be held in escrow. Of these
shares, 1,640,998 shall be released at a rate of 1/3 each year commencing
June 3, 1999. On June 3, 2001, 546,999 (June 3, 2000 - 547,000; June 3,
1999 - 546,999) shares were released from escrow. The remaining 9,298,939
are to be released at a rate of 1 share for every $0.20 of cash flow
generated to a maximum of 1/3 per year. Cash flow generated is defined by
the escrow agreement to be audited net income adjusted by certain non-cash
items. None of these shares were released from escrow in 2001.
1,350,000 common shares are also held in escrow in connection with the
initial public offering of the Company pursuant to the prospectus of the
Company dated September 19, 1997. These initial escrowed shares will also
be released at a rate of 1/3 for each of the three years ending April 28,
1999, 2000 and 2001, respectively. All shares have been released from
escrow as of April 28, 2001.
(b) On April 28, 1998, the Company completed a private placement of 1,666,667
special warrants at a subscription price of $0.45 each for net proceeds of
$667,959. The special warrants were converted to common shares on October
25, 1998. In addition to the commission of 10% of the gross proceeds of the
issue, the Agent was granted a non-transferable option to acquire 166,667
common shares at $0.45 per share. On October 26, 1999, the Agent exercised
75,000 share options for total consideration of $33,750. The remaining
91,667 options expired on October 27, 1999.
(c) Shares which may be issued under options, warrants and convertible
debenture are as follows:
=====================================================================================================
WEIGHTED
AVERAGE WEIGHTED
RANGE OF REMAINING AVERAGE
NUMBER EXERCISE CONTRACTUAL EXERCISE
OF SHARES PRICE EXPIRY LIFE PRICE
=====================================================================================================
Directors' and management's December 20, 2001
stock option plan 1,855,250 $ 0.20 - 0.25 to April 29, 2003 1.75 years $ 0.20
-----------------------------------------------------------------------------------------------------
Directors' and management's December 20, 2001
stock option plan 145,000 0.35 - 0.39 to February 8, 2003 1.46 years 0.38
-----------------------------------------------------------------------------------------------------
Directors' and management's June 6, 2003 to
stock option plan 1,115,000 0.53 - 0.75 March 30, 2004 2.36 years 0.68
-----------------------------------------------------------------------------------------------------
3,115,250
=====================================================================================================
16
The Company has established a stock option plan for its directors and officers
and certain consultants and has reserved for issuance 3,288,750 common shares.
Pursuant to the plan, stock options vest immediately and are exercisable for a
period of between three to five years from the date of grant. Options are
granted at the closing market price of the Company's common stock on the date of
grant. At year end, 3,115,250 (2000 - 2,015,250; 1999 - 2,020,250) options are
outstanding at exercise prices ranging from $0.20 to $0.75 per share with
1,990,250 (2000 - 1,705,250; 1999 - 1,830,250) options issued to six directors
and officers.
A summary of the Company's stock option activity is as follows:
======================================================================================================
2001 2000 1999
------------------------------------------------------------------------------------------------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AVERAGE NUMBER OF AVERAGE NUMBER OF AVERAGE
STOCK EXERCISE STOCK EXERCISE STOCK EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
------------------------------------------------------------------------------------------------------
Outstanding,
beginning
of year 2,015,250 $ 0.21 2,020,250 $ 0.20 2,035,000 $ 0.20
Granted 1,115,000 0.68 120,000 0.38 85,000 0.28
Exercised (15,000) 0.20 (125,000) 0.20 (71,250) 0.20
Forfeited -- -- -- -- (28,500) 0.20
------------------------------------------------------------------------------------------------------
Outstanding,
end of year 3,115,250 0.38 2,015,250 0.21 2,020,250 0.20
------------------------------------------------------------------------------------------------------
Exercisable,
end of year 3,115,250 $ 0.38 2,015,250 $ 0.21 2,020,250 $ 0.20
------------------------------------------------------------------------------------------------------
Available
for grant 173,500 488,500 108,500
=====================================================================================================
During the year, the maximum number of shares issuable under the stock option
plan was increased by 800,000 to 3,500,000.
(d) In connection with an initial public offering in fiscal 1998, 150,000
non-transferable common share purchase options at $0.20 each were granted
to the Agent. 95,000 options were exercised in fiscal 1998 for total
consideration of $19,000. On May 20, 1999, 55,000 options were exercised
for total consideration of $11,000.
(e) On May 31, 2000, the Company completed a private placement of 2,807,500
common shares with a subscription price of U.S. $0.40 per share for gross
proceeds of U.S. $1,123,000 or Cdn. $1,680,570. The shares were fully paid,
with the proceeds held in trust by the Company's escrow agent until June 6,
2000 when the funds were wired to the Company. Costs of arranging the
private placement were $23,466. If the Company did not have a Registration
Statement filed and declared
17
effective by the Securities and Exchange Commission in the United States by
December 31, 2000, the Company was required to issue one additional common
share for each ten shares issued under this private placement.
The Registration Statement was not declared effective by December 31, 2000.
The Company has issued, for nil consideration, the 280,750 additional
common shares required due to not having the Registration Statement filed
and declared effective by December 31, 2000.
(f) On June 14, 2000, the Company completed a private placement of 4,033,333
special warrants at a subscription price of $0.60 each for gross cash
proceeds of $2,420,000. Each special warrant was convertible into one
common share or 1.1 common shares if a receipt for the related prospectus
was not received by October 15, 2000. Costs of arranging the private
placement, including Agent's commissions is $217,300 plus 201,667
compensation options expiring June 14, 2002, which entitles the Agent to
purchase one common share for $0.60 per share.
The prospectus was filed on October 12, 2000 and, on October 15, 2000, the
special warrants were converted into 4,033,333 common shares.
7. RELATED PARTY TRANSACTIONS
In the normal course of operations, the Company had the following transactions,
which were measured at the exchange amount, with certain related parties:
================================================================================
NATURE OF RELATIONSHIP 2001 2000 1999
--------------------------------------------------------------------------------
Sales and marketing Shareholder and officer $ 174,000 $ 86,000 $ --
Management fees Shareholders, officers
and directors 127,000 129,000 210,000
Development charges Shareholders, officer
and director 117,000 57,000 452,000
Consulting Shareholders, officers
and directors 90,000 163,000 18,000
Professional fees Shareholder, officer
and director 69,000 26,000 36,000
Purchase of
fixed assets Shareholder -- 330,000 --
================================================================================
18
8. INCOME TAXES
(a) The tax effects of temporary differences that give rise to significant
portions of the future tax assets and future tax liabilities are presented
below:
================================================================================
2001 2000
--------------------------------------------------------------------------------
Long-term future tax assets:
Non-capital loss carryforwards $ 1,553,000 $ 1,085,000
Research and development expenses 101,000 51,000
Fixed assets 67,000 29,000
Reserve for repayment of government assistance 60,000 --
Investment tax credits 44,000 12,000
Deferred financing costs 35,000 74,000
Cumulative eligible capital 1,000 1,000
--------------------------------------------------------------------------------
Valuation allowance (1,861,000) (1,252,000)
--------------------------------------------------------------------------------
$ -- $ --
================================================================================
The valuation allowance on the future tax asset must reflect that portion
of the future tax assets including the income tax loss carryforwards which
more likely than not will not be realized from future operations.
Considering the Company's cumulative losses in recent years, the Company
believes it is appropriate to provide an allowance of 100% against all
available future tax assets including income tax loss carryforwards,
regardless of their terms of expiry.
(b) During the year, none of the non-capital losses expired (2000 - $301,000;
1999 - nil).
At May 31, 2001, the Company has approximately $5,344,000 (2000 -
$2,949,000; 1999 - $1,853,000) of non-capital losses and $336,000 (2000 -
$125,000; 1999 - nil) of research and development expenses available to
reduce future years' income for income tax purposes. The non-capital losses
and year of expiry and research and development expenses are as follows:
================================================================================
NON-CAPITAL LOSSES:
2002 $ 257,000
2003 200,000
2004 210,000
2005 813,000
2006 349,000
2007 1,025,000
2008 2,348,000
2009 71,000
2010 71,000
Research and development expenses - no expiry 336,000
================================================================================
19
9. LOSS PER SHARE
Loss per share figures are calculated using the weighted average number of
common shares outstanding calculated on a daily basis. The effect of the
exercise of the special warrants, share purchase options and share purchase
warrants and the conversion of the convertible debenture would not have had a
dilutive effect on the years presented. The following are items which could
potentially dilute basic earnings per share in the future:
(a) the release of the 9,298,939 performance release escrow shares disclosed in
note 6(a); and
(b) the exercise of the 3,115,250 directors and officers stock options
disclosed in note 6(c).
10. STATEMENTS OF CASH FLOWS
================================================================================
CUMULATIVE
PERIOD FROM
JUNE 13, 1991
YEARS ENDED (INCEPTION) TO
2001 MAY 31, 2000 1999 MAY 31, 2001
--------------------------------------------------------------------------------
Supplemental cash flow
information:
Interest paid $ 18,464 $ 10,214 $ 1,241 $ 65,216
--------------------------------------------------------------------------------
Supplementary disclosures
relating to non-cash
financing activities:
Conversion of debentures $ 370,722 $ 1,605,248 $ -- $ 1,975,970
Other non-cash share
issuances -- -- -- 1,070,831
================================================================================
11. COMMITMENTS AND CONTINGENCIES
(a) On September 1, 1997, the Company sold for proceeds of $20,000 an option
for an exclusive license to make, use and sell insulation products in
western Canada using the Company's technology. If the option is exercised,
the price for the license is $500,000 for a 10-year term. The option
expires after the Company meets certain production milestones.
(b) The Company is committed to minimum annual payments under an operating
lease for its administrative office and manufacturing facility as follows:
================================================================================
2002 $ 60,000
2003 63,000
2004 65,000
--------------------------------------------------------------------------------
$ 188,000
================================================================================
20
(c) On June 21, 1999, the Company signed a contract with the National Research
Council Canada who is to perform certain research and development projects
on the Company's behalf. The Company is committed to pay $745,000 to June
1, 2002. The Company is eligible to be reimbursed up to 40% of total
expenditures incurred, to a maximum of $200,000. For the year ended May 31,
2001, the Company has paid the National Research Council Canada, $385,000
(2000 - $115,000) and has been reimbursed for $156,000 (2000 - $30,000) (of
which $10,000 (2000 - nil) is included in other receivables) under the
contract.
12. COMPARATIVE FIGURES
Certain 2000 comparative figures have been reclassified to conform to the
financial statement presentation adopted in 2001.
13. DIFFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
These consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in Canada ("Canadian GAAP") which
differ in certain respects with those principles and practices that the Company
would have followed had its financial statements been prepared in accordance
with accounting principles and practices generally accepted in the United States
("U.S. GAAP").
The Company's accounting principles generally accepted in Canada for measurement
of the consolidated balance sheet and the consolidated statements of operations
and cash flows differ from accounting principles generally accepted in the
United States as follows:
(a) STOCK OPTIONS
Beginning in 1996, United States accounting principles allow, but do not require
companies to record compensation for employee stock option plans at fair value.
The Company has chosen to continue to account for employee stock options using
the intrinsic value method as permitted under Canadian and United States
accounting principles. Using this approach, however, the Company is still
required under United States accounting principles to account for stock options
issued to consultants under the fair value method.
Since none of the Company's stock options have been issued by virtue of
employment or directorship, all of the stock options have been accounted for
under U.S. GAAP using the fair value method. The fair value of these options has
been estimated at the date of grant using a Black-Scholes option pricing model
with the following assumptions for 2001, 2000 and 1999, respectively: risk free
interest rate of 5.7%, 6.4% and 4.7%; dividend yields of 0%, volatility factors
of the expected market price of the Company's common stock of 182%, 310% and
160%; and a weighted average expected life of the options of three years. The
estimated fair value of these options is expensed in the period granted since
there is no vesting period. The weighted average grant date fair values of
options issued in 2001, 2000 and 1999 were $0.61, $0.38 and $0.35, respectively.
21
The United States accounting pronouncement also requires the disclosure of pro
forma loss and loss per share information as if the Company had accounted for
its employee stock options issued in 1995 and subsequent years under the fair
value method. As all options have already been accounted for under the fair
value method, the pro forma information is the same as reported for the year.
(b) CONVERTIBLE DEBENTURES
Under Canadian GAAP, convertible debentures are split for accounting purposes
between debt and shareholders' equity as described in note 5. Under U.S. GAAP,
the convertible debenture is recorded as debt, except if the conversion price at
date of issuance is less than the fair market value, in which case the intrinsic
value of the beneficial conversion feature is allocated to paid-in capital and
the resulting discount is recognized as interest expense over the period through
to the earliest conversion date. The convertible debenture issued on April 15,
2000 is considered to have a beneficial conversion feature under U.S. GAAP given
that the conversion price of $0.40 per share was less than the private
placements of $0.60 per share as described in note 6.
(c) SHARE CAPITAL
Under Canadian GAAP, the additional common shares issued, as described in note
6(e), are accounted for like a stock split. Under U.S. GAAP, the additional
shares would be recorded at $193,718 ($0.69 per share) which is the market value
on December 31, 2000, the date they became issuable, by a charge to deficit. The
shares are included in the basic earnings per share calculation for U.S. GAAP
purposes from December 31, 2000.
(d) BUSINESS COMBINATIONS
Under Canadian GAAP, a reverse takeover transaction is accounted for as a
business combination, with the amount of the purchase price in excess of the
fair market value of the net assets acquired allocated to goodwill. Under U.S.
GAAP, the merger of a private operating company into a non-operating public
shell corporation with nominal net assets is considered to be a capital
transaction, rather than a business combination, with no goodwill being
recorded.
(e) COMPREHENSIVE INCOME
Under U.S. GAAP, comprehensive income or loss must be reported which is defined
as all changes in equity other than those resulting from investments by owners
and distributions to owners. Under U.S. GAAP, the Company's comprehensive loss
is the same as its reported loss for the year.
(f) NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 established methods of
accounting for derivative financial instruments and hedging activities related
to those instruments, as well as other hedging activities. Application of this
SFAS has been postponed. As such, the Company will be required to implement SFAS
No. 133 for its fiscal year ended May 31, 2002.
The Company expects that the adoption of this pronouncement will have no
material impact on its financial position, results of operations or cash flows.
22
In June 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 142 replaced the requirements to amortize intangible assets
with indefinite lives and goodwill with a requirement for an impairment test. It
also requires an evaluation of intangible assets and their useful lives and a
transitional impairment test for goodwill and certain intangible assets. The
Company will be required to implement this SFAS for its fiscal year ended May
31, 2003.
As the Company's goodwill will be fully amortized for the year ended May 31,
2002, the adoption of this pronouncement will have no material impact on its
financial position, results of operations or cash flows.
In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations, which addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. The standard applies to legal obligations associated
with the retirement of long-lived assets that result from the acquisition,
construction, development and (or) normal use of the asset. The Company will be
required to implement this SFAS for its fiscal year ended May 31, 2004.
The Company expects that the adoption of this pronouncement will have no
material impact on its financial position, results of operations or cash flows.
The impact of the items noted above on the financial statements is as follows:
================================================================================
2001 2000 1999
--------------------------------------------------------------------------------
Loss for the year per
Canadian GAAP $ (2,964,713) $(1,305,407) $ (1,287,460)
Goodwill amortization
(note 13(d)) 26,364 26,364 26,364
Compensation expense from
stock options issued to
non-employees (note 13(a)) (675,565) (45,950) (29,450)
Additional interest resulting from
beneficial conversion feature
on convertible debt (note 13(b)) -- (180,000) --
--------------------------------------------------------------------------------
Loss for the year per
U.S. GAAP $ (3,613,914) $(1,504,993) $ (1,290,546)
================================================================================
Basic loss per share per
U.S. GAAP $ (0.16) $ (0.11) $ (0.11)
================================================================================
Weighted average number of
shares outstanding per
U.S. GAAP 22,050,619 14,194,298 11,960,818
================================================================================
23
================================================================================
2001 2000
--------------------------------------------------------------------------------
Total convertible debentures per Canadian GAAP $ -- $ 349,278
Reclass equity component of convertible debentures -- 10,722
--------------------------------------------------------------------------------
Total convertible debentures per U.S. GAAP $ -- $ 360,000
================================================================================
Fair value of stock options issued to non-employees $ 1,100,947 $ 438,195
Beneficial conversion feature of convertible debentures 180,000 180,000
--------------------------------------------------------------------------------
Other paid-in capital, end of the year per U.S. GAAP $ 1,280,947 $ 618,195
--------------------------------------------------------------------------------
Share capital, end of the year per Canadian GAAP $ 8,743,768 $5,613,805
Additional shares issued (note 13(c)) 193,718 --
Elimination of goodwill (108,938) (108,938)
Fair value of stock options exercised 12,813 --
--------------------------------------------------------------------------------
Share capital, end of the year per U.S. GAAP $ 8,841,361 $5,504,867
================================================================================
The consolidated statement of deficit under U.S. GAAP is as follows:
================================================================================
2001 2000 1999
--------------------------------------------------------------------------------
Deficit, beginning of year,
per Canadian GAAP $ (4,340,723) $ (3,035,316) $ (1,747,856)
--------------------------------------------------------------------------------
Cumulative adjustments:
Goodwill amortization 56,210 29,846 3,482
Compensation expense
from employee stock
options issued to
non-employees (438,195) (392,245) (362,795)
Additional interest resulting
from beneficial conversion
feature on convertible debt (180,000) -- --
Additional shares issued (note 13(c)) (193,718) -- --
--------------------------------------------------------------------------------
Loss for the year per U.S. GAAP (3,613,914) (1,504,993) (1,290,546)
--------------------------------------------------------------------------------
Deficit, end of year,
per U.S. GAAP $ (8,710,340) $ (4,902,708) $ (3,397,715)
================================================================================
24