1
EXHIBIT NO. 19
REPORTS FURNISHED TO SECURITY-HOLDERS
2
Deloitte &
Touche LLP
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[LOGO] 250 East Fifth Street Telephone: (513) 784-7100
P.O. Box 5340
Cincinnati, Ohio 45201-5340
INDEPENDENT ACCOUNTANTS' REPORT
To the Directors of
Cintech Tele-Management Systems, Inc.
We have reviewed the accompanying balance sheets of Cintech Tele-Management
Systems, Inc. (the "Company") as of March 31, 1997 and 1996 and the related
statements of operations for the three months and the nine months then ended
and of stockholders' equity and cash flows for the nine months then ended (all
expressed in U.S. dollars). These financial statements are the responsibility
of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytic procedures to
financial data and of making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to such financial statements for them to be in conformity with
accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of the Company as of June 30, 1996, and in our
report dated August 23, 1996, we expressed an unqualified opinion on that
balance sheet.
/s/ DELOITTE & TOUCHE LLP
April 28, 1997
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Deloitte Touche
Tohmatsu
International
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CINTECH TELE-MANAGEMENT SYSTEMS, INC.
BALANCE SHEETS
MARCH 31, 1997, JUNE 30, 1996 AND MARCH 31, 1996
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MARCH 31, JUNE 30, MARCH 31,
ASSETS 1997 1996 1996
(UNAUDITED) (UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents $ 313,169 $ 203,441 $ 113,076
Marketable securities (Notes 3,5) 537,061 770,391 928,875
Accounts receivable, trade - (Net of allowance
of $58,030, $53,726 and $55,261 at
March 31, 1997, June 30, 1996 and
March 31, 1996, respectively) (Note 2) 984,945 1,151,471 1,210,945
Inventory (Note 2) 158,830 1,009,960 1,012,008
Prepaid expenses 25,552 18,224 15,845
---------- ---------- ----------
Total current assets 2,019,557 3,153,487 3,280,749
---------- ---------- ----------
FIXED ASSETS (Note 2):
Equipment 602,263 574,551 546,481
Furniture and fixtures 125,372 123,906 123,586
---------- ---------- ----------
Total 727,635 698,457 670,067
Less accumulated depreciation (480,120) (394,184) (362,854)
---------- ---------- ----------
Total fixed assets - net 247,515 304,273 307,213
---------- ---------- ----------
OTHER ASSETS:
Deposits 5,062
Deferred software development
costs - net (Note 2) 340,550 303,205 268,753
---------- ---------- ----------
Total other assets 340,550 303,205 273,815
---------- ---------- ----------
TOTAL $2,607,622 $3,760,965 $3,861,777
========== ========== ==========
See notes to financial statements.
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LIABILITIES AND MARCH 31, JUNE 30, MARCH 31,
STOCKHOLDERS' EQUITY 1997 1996 1996
(UNAUDITED) (UNAUDITED)
CURRENT LIABILITIES:
Accounts payable $ 747,805 $ 649,271 $ 860,777
Accrued liabilities:
Accrued salaries 129,696 82,228 103,517
Accrued payroll taxes 2,239 13,568 6,780
Accrued vacation 77,728 60,945 49,803
Accrued lease termination costs (Notes 4, 5) 158,950
Other 157,249 128,542 85,387
Current portion of notes payable (Note 5) 85,000 100,000
Deferred maintenance revenue (Note 2) 173,363 140,667 90,519
---------- ---------- ----------
Total current liabilities 1,373,080 1,175,221 1,355,733
ACCRUED LEASE TERMINATION
COSTS (Note 4, 5) 37,118
---------- ---------- ----------
NOTES PAYABLE (less current portion)
(Note 5) 30,000
---------- ---------- ----------
STOCKHOLDERS' EQUITY (Notes 1, 6, 7):
Common stock 8,982,842 8,982,580 8,972,958
Contributed capital 675,757 675,757 675,757
Treasury stock (2,290) (2,290) (2,290)
Accumulated deficit (8,421,767) (7,100,303) (7,177,499)
---------- ---------- ----------
Total stockholders' equity 1,234,542 2,555,744 2,468,926
---------- ---------- ----------
TOTAL $2,607,622 $3,760,965 $3,861,777
========== ========== ==========
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CINTECH TELE-MANAGEMENT SYSTEMS, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED MARCH 31, 1997 AND 1996
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FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1997 1996 1997 1996
NET SALES (Note 2) $1,934,725 $2,337,700 $ 5,062,611 $5,942,822
COST OF PRODUCTS SOLD 261,796 904,059 663,752 2,076,052
RESERVE FOR OBSOLETE INVENTORY (Note 2) 824,385 824,385
AMORTIZATION AND WRITE-OFF OF DEFERRED SOFTWARE
DEVELOPMENT COSTS (Note 2) 62,272 37,755 107,514 103,306
LICENSING FEES 386,728 119,267 982,895 385,152
---------- ---------- ---------- ----------
GROSS PROFIT 399,544 1,276,619 2,484,065 3,378,312
RESEARCH AND DEVELOPMENT 78,285 39,074 285,800 233,605
SELLING, GENERAL AND ADMINISTRATIVE (Notes 2, 4) 1,212,824 1,270,344 3,542,663 3,363,627
LEASE TERMINATION COSTS (Notes 4, 5) 23,693 74,943
---------- ---------- ---------- ----------
LOSS FROM OPERATIONS (891,565) (56,492) (1,344,398) (293,863)
OTHER INCOME - Interest income 7,184 13,649 22,934 57,120
---------- ---------- ---------- ----------
NET LOSS $ (884,381) $ (42,843) $(1,321,464) $ (236,743)
========== ========== =========== ==========
NET LOSS PER COMMON SHARE (Note 6) $ (0.07) $ -- $ (0.11) $ (0.02)
========== ========== =========== ==========
See notes to financial statements.
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CINTECH TELE-MANAGEMENT SYSTEMS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND 1996
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COMMON TOTAL
STOCK CONTRIBUTED TREASURY ACCUMULATED STOCKHOLDERS'
NO PAR VALUE CAPITAL STOCK DEFICIT EQUITY
BALANCE AT JUNE 30, 1995 $8,965,690 $675,757 $(2,290) $(6,940,756) $ 2,698,401
SALE OF COMMON STOCK 7,268 7,268
NET LOSS (236,743) (236,743)
---------- -------- ------- ----------- -----------
BALANCE AT MARCH 31, 1996 $8,972,958 $675,757 $(2,290) $(7,177,499) $ 2,468,926
========== ======== ======= =========== ===========
BALANCE AT JUNE 30, 1996 $8,982,580 $675,757 $(2,290) $(7,100,303) $ 2,555,744
SALE OF COMMON STOCK 262 262
NET LOSS (1,321,464) (1,321,464)
---------- -------- ------- ----------- -----------
BALANCE AT MARCH 31, 1997 $8,982,842 $675,757 $(2,290) $(8,421,767) $ 1,234,542
========== ======== ======= =========== ===========
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CINTECH TELE-MANAGEMENT SYSTEMS, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND 1996
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1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,321,464) $(236,743)
----------- ---------
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation 85,936 77,009
Amortization and write-off of software development costs 107,514 103,306
Reserve for obsolete inventory 824,385
Provision for doubtful accounts 4,304 (1,812)
Loss on disposal of fixed assets 613
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 162,221 (336,770)
(Increase) decrease in inventory 26,745 (512,512)
Increase in prepaid expenses (7,327) (15,845)
Increase in accounts payable 98,534 288,567
Increase in accrued expenses 81,629 81,037
Decrease in accrued lease termination costs (52,932)
Increase in deferred maintenance revenue 32,696 2,511
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Total adjustments 1,416,637 (366,828)
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Net cash provided by (used in) operating activities 95,173 (603,571)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from marketable securities 233,330 816,788
Purchase of fixed assets (29,178) (86,421)
Expenditures for software development costs (144,859) (139,701)
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Net cash provided by investing activities 59,293 590,666
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock 262 7,268
Payment on notes payable (45,000)
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Net cash provided by (used in) financing activities (44,738) 7,268
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NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 109,728 (5,637)
CASH AND CASH EQUIVALENTS:
Beginning of period 203,441 118,713
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End of period $ 313,169 $ 113,076
=========== =========
See notes to financial statements.
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CINTECH TELE-MANAGEMENT SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF JUNE 30, 1996 AND AS OF MARCH 31, 1997 AND 1996 AND FOR THE THREE-MONTH
AND NINE-MONTH PERIODS THEN ENDED (INFORMATION RELATED TO THE THREE AND NINE
MONTHS ENDED MARCH 31, 1997 AND 1996 IS UNAUDITED)
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1. INITIAL PUBLIC OFFERING
In January 1994, Cintech Tele-Management Systems, Inc. (the "Company")
completed its initial public offering of 2,181,820 shares of common stock.
The Company's shares are traded on the Toronto Stock Exchange (TSE) under
the symbol "CTM".
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS - The Company develops and markets computer software in
the emerging Computer-to-Telephone Integration (CTI) industry which
integrates the voice functions of the telephone with the data functions of
the computer to provide various business applications. This provides the
means for small to mid-sized offices to take advantage of the rapid
advances and emerging capabilities of CTI. This is accomplished through
StarDome, the Company's marketing and distribution organization that
offers Business and Personal Computer Telephony Applications to this
market. StarDome applications may be developed by the Company or by
selected development companies. These products are offered through the
Company's extensive distribution network with all the major telephone
companies in North America.
USE OF ESTIMATES - The preparation of the financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
FINANCIAL STATEMENT PRESENTATION - These financial statements have been
prepared in accordance with accounting principles generally accepted in
the United States of America and are expressed in United States dollars.
The differences in accounting principles generally accepted in the United
States of America and Canada are described in Note 9.
REVENUE - Generally, the Company records revenue from product sales when
the product is shipped. Contracts with certain distributors may have terms
which cause the Company to record revenue when the product is sold to
third parties. Also, the Company records an estimate of potential future
returns of product sold at the time of sale.
The Company sells product maintenance agreements which provide for repair
of hardware and no-cost upgrade of software. These agreements normally
cover a one-year period with revenue being recognized on a straight-line
basis over the maintenance period.
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DEPRECIATION - Fixed assets are carried at cost. Depreciation is based on
the estimated useful lives of the assets and is computed using an
accelerated method. Depreciation is computed using the following useful
lives:
Equipment 5 years
Furniture and Fixtures 7 years
INVENTORY - Inventories are valued at the lower of cost or market, with
cost being computed using the first-in, first-out method. Due to slower
than expected sales, the Company decided to record a reserve of
approximately $800,000 for OCTuS PCTA inventory during the fiscal third
quarter. This reserve represents essentially the entire cost of the OCTuS
PCTA-related retail product inventory. Inventories consist of:
MARCH 31, JUNE 30, MARCH 31,
1997 1996 1996
Literature and other documentation $ 36,792 $ 70,935 $ 59,117
Computer hardware 995,706 973,166 952,891
Allowance for obsolete inventory (873,668) (34,141)
--------- ---------- ----------
Total inventory $ 158,830 $1,009,960 $1,012,008
========= ========== ==========
SIGNIFICANT CUSTOMERS - Most of the Company's sales are to distributors in the
telephony industry.
The Company had sales to major distributors, as follows:
SALES FOR THE THREE MONTHS SALES FOR THE NINE MONTHS
ENDED MARCH 31, ENDED MARCH 31,
1997 1996 1997 1996
---------------------- ----------------------- ---------------------------- ------------------------
Amount % Amount % Amount % Amount %
Distributor A $1,175,150 61% $2,809,490 56%
Distributor B $347,788 15% $677,734 11%
---------- -- -------- -- ---------- -- -------- --
Total $1,175,150 61% $347,788 15% $2,809,490 56% $677,734 11%
========== == ======== == ========== == ======== ==
The Company had gross accounts receivable from major distributors,
each of which was in excess of 10% of the Company's total accounts
receivable, as follows:
DISTRIBUTORS PERCENT OF
GROSS
ACCOUNTS
RECEIVABLE
March 31, 1997 1 66%
June 30, 1996 2 58%
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INTERNATIONAL SALES - The Company had international sales as follows:
Sales for the Three Months Ended March 31, Sales for the Nine Months Ended March 31,
1997 1996 1997 1996
------------------------ ----------------------- ---------------------- ----------------------
Amount % Amount % Amount % Amount %
Canada $27,654 1% $227,587 10% $ 93,480 2% $647,691 11%
Other 5,405 27,870 6,845
------- -- -------- -- -------- -- -------- --
Total $27,654 1% $232,992 10% $121,350 2% $654,536 11%
======= == ======== == ======== == ======== ==
SOFTWARE DEVELOPMENT COSTS - Costs incurred internally for creation of the
computer software product are charged to research and development expense
when incurred until technological feasibility has been established for the
product. Thereafter, until general release, all software production costs
are capitalized and subsequently reported at the lower of amortized cost
or net realizable value. As the Company's products are in their early
product life cycle, the capitalized costs are amortized on a straight-line
basis over the estimated economic life of the product.
Costs capitalized were $51,977 and $74,338 and related amortization was
$35,687 and $37,755 for the three months ended March 31, 1997 and 1996,
respectively. Write offs of capitalized costs were $26,585 in the three
months ended March 31, 1997. Costs capitalized were $144,859 and $139,701
and related amortization was $80,929 and $103,306 for the nine months
ended March 31, 1997 and 1996, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying value of certain of the
Company's financial instruments, such as cash, trade accounts receivable
and trade accounts payable, approximate their fair values. The Company's
notes payable also approximate fair value based on the borrowing rates
currently available to the Company for notes with similar terms and
average maturities.
CASH AND CASH EQUIVALENTS - For purposes of reporting cash flows, the
Company considers all money market instruments to be cash equivalents.
RECLASSIFICATION - Certain fiscal 1996 amounts have been reclassified in
order to conform to fiscal 1997 presentation.
3. MARKETABLE SECURITIES
The Company maintains various investments in treasury bills which are
classified as held to maturity and are reported at amortized cost in
accordance with FASB Statement No. 115 "Accounting for Certain Investments
in Debt and Equity Securities". All items mature within one year. The
cost and market value of the investments are summarized below:
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NET
AMORTIZED UNREALIZED
DESCRIPTION COST MARKET GAIN
March 31, 1997 - United States Treasury Bills $537,061 $550,461 $13,400
======== ======== =======
June 30, 1996 - United States Treasury Bills $770,391 $778,146 $ 7,755
======== ======== =======
March 31, 1996 - United States Treasury Bills $928,874 $944,959 $16,085
======== ======== =======
4. OPERATING LEASES
OPERATING LEASES - The Company leases its office facility in Norwood,
Ohio. This operating lease, which began in March 1995 and expires in
April 2002, calls for escalating lease payments over the term of the
lease. The Company records lease expense on a straight-line basis over the
life of the lease.
The annual minimum rent to be paid under the operating lease agreement for
the facility in Norwood, Ohio is as follows:
Year Ending March 31:
1998 $ 176,813
1999 205,000
2000 206,250
2001 220,000
2002 220,000
2003 18,333
Rent expense for the leased office space was $73,276 in both the
three-month periods ended March 31, 1997 and 1996, respectively. Rent
expense for the leased office space was $219,829 and $203,651 in the
nine-month periods ended March 31, 1997 and 1996, respectively.
During 1996 and 1995, the Company remained obligated for the lease on its
former office facility in Cincinnati, Ohio leased from a partnership in
which two of the Company's stockholders, one of whom is also a director,
are partners. As a result of the duplicate office facility the Company
accrued as lease termination cost the remaining lease payments on the
Cincinnati facility, less projected sublease income and expenses. In May
1996, this obligation was removed through a buyout of the lease as
discussed in Note 5.
5. NOTES PAYABLE
Notes Payable consisted of the following at March 31, 1997 and
June 30, 1996, respectively:
MARCH 31, JUNE 30,
1997 1996
Term Note Payable - Bank $ 45,000 $ 90,000
Term Note Payable - Other 40,000 40,000
-------- --------
Total $ 85,000 $130,000
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The Term Note Payable - Bank bears interest at the prime lending rate
(8.25% at March 31, 1997). The remaining term is 9 months. The note is
secured by various securities on deposit with the bank.
The Term Note Payable - Other bears interest at 6%. The term of the note
is for 12 months with principal and interest due in full on May 13, 1997.
The note is with a partnership in which two of the Company's stockholders,
one of whom is also a director, are partners.
The notes are a result of the buyout of the lease on the Company's former
office facility in Cincinnati, Ohio. As a result of the lease buyout, the
Company has eliminated the liability for accrued lease termination costs.
6. CAPITAL STOCK AND LOSS PER SHARE
The following schedule is a summary of the Company's shares of capital
stock.
COMMON IN
AUTHORIZED ISSUED OUTSTANDING TREASURY
Balance at March 31, 1997 15,000,000 12,281,751 12,279,751 2,000
========== ========== ========== =====
Balance at June 30, 1996 15,000,000 12,281,371 12,279,371 2,000
========== ========== ========== =====
Balance at March 31, 1996 15,000,000 12,272,331 12,270,331 2,000
========== ========== ========== =====
Loss per common share was based on the weighted average number of common
shares outstanding during each period. Exercise of stock options is not
assumed as the effect is antidilutive. The weighted average number of
common shares outstanding was 12,279,751 and 12,270,331 for the three
months ended March 31, 1997 and 1996, respectively and 12,279,498 and
12,267,028 for the nine months ended March 31, 1997 and 1996,
respectively.
7. STOCK OPTION PLAN
During 1994, the Board of Directors approved a plan providing for the
granting, to employees, options for the purchase of a maximum of 1,500,000
shares of common stock. In 1996, the plan was amended to provide for
non-employee eligibility. In February 1994 the Company granted 141,500
stock options to purchase common stock at prices which reflect a discount
from the market value at the date of grant. The related compensation
expense is recognized over the period earned. Options granted become
exercisable over a two-year period and expire at the end of ten years from
the date of grant. In November 1994, the Company adjusted the exercise
price on the options to $.88. In March 1995, the Company granted an
additional 118,000 stock options. These options were granted at prices
equal to the market value at the date of grant and become exercisable over
a four-year period and expire at the end of ten years from the date of
grant. In January, March, June, August and October of 1996, the Company
granted additional stock options of 35,000; 10,000; 174,015; 50,000 and
7,500, respectively. These options were all granted at prices equal to
market value at the date of the grant and become exercisable over a
four-year period and expire at the end of ten years from the date of
grant. The status of stock options granted at March 31, 1997, June 30,
1996 and March 31, 1996 is as follows:
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March 31, June 30, March 31,
1997 1996 1996
Forfeited 127,031 95,213 84,226
Exercised 21,265 20,885 11,845
Currently exercisable 90,447 90,447 61,837
Exercisable in fiscal year 1997 60,225 72,405 51,501
Exercisable in fiscal year 1998 85,334 72,405 51,502
Exercisable in fiscal year 1999 77,834 72,405 32,339
Exercisable in fiscal year 2000 61,379 54,755 11,250
Exercisable in fiscal year 2001 12,500
------- ------- -------
Total options granted 536,015 478,515 304,500
======= ======= =======
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," which is effective for the Company beginning
July 1, 1996. SFAS No. 123 requires expanded disclosures of stock-based
compensation arrangements with employees and encourages (but does not
require) compensation cost to be measured based on the fair value of the
equity instrument awarded. Companies are permitted, however, to continue
to apply APB Opinion No. 25, which recognizes compensation cost based on
the intrinsic value of the equity instrument awarded. The Company will
continue to apply APB Opinion No. 25 to its stock based compensation
awards to employees.
8. INCOME TAXES
Deferred income tax assets and liabilities are computed for differences
between the financial statement and tax basis of assets and liabilities
that will result in taxable or deductible amounts in the future based on
enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances
are established when necessary to reduce deferred tax assets to the amount
expected to be realized. Income tax expense is the tax payable or
refundable for the period plus or minus the change during the period in
deferred tax assets and liabilities.
Deferred taxes consist of the following:
March 31, June 30, March 31,
1997 1996 1996
Current deferred tax asset:
Deferred revenue $ 58,943 $ 47,827 $ 30,776
Inventory reserve 280,291 - -
Accrued compensation 8,086 9,411 10,156
Reserves not currently deductible 25,283 18,267 18,789
Accrued lease termination costs 54,043
Accrued rent 22,026 14,328 11,641
--------- -------- ---------
Total 394,629 89,833 125,405
Less valuation allowance (394,629) (89,833) (125,405)
--------- -------- ---------
Net $ - $ - $ -
========= ======== ==========
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March 31, June 30, March 31,
1997 1996 1996
Non-current deferred tax asset:
Accrued lease termination costs $ - $ - $ 12,620
Net operating loss carryforward 2,347,134 2,173,836 2,359,569
Research and development credits 151,175 134,525 128,975
----------- ----------- -----------
Total 2,498,309 2,308,361 2,501,164
Non-current deferred tax liability:
Deferred software development costs (124,826) (103,007) (91,376)
----------- ----------- -----------
Net non-current deferred tax asset 2,373,483 2,205,354 2,409,788
Less valuation allowance (2,373,483) (2,205,354) (2,409,788)
----------- ----------- -----------
Net $ - $ - $ -
=========== =========== ===========
The provision for income taxes for the three months and nine months ended
March 31, 1997 and 1996 consists of the following:
For the Three For the Three For the Nine For the Nine
Months Ended Months Ended Months Ended Months Ended
March 31, March 31, March 31, March 31,
1997 1996 1997 1996
Current provision $ - $ - $ - $ -
Deferred credit 303,674 17,549 472,925 306,184
--------- -------- --------- ---------
Total 303,674 17,549 472,925 306,184
Less increase in
the valuation allowance (303,674) (17,549) (472,925) (306,184)
--------- -------- --------- ---------
Income tax expense $ - $ - $ - $ -
========= ======== ========= =========
At March 31, 1997, the Company has net operating loss carryforwards of
approximately $6,903,000 for U.S. Federal tax purposes. Such loss
carryforwards, if unused as offsets to future taxable income, will expire
beginning in 2002 and continuing through 2011. Also at March 31, 1997,
for U.S. Federal tax purposes, the Company has research and development
credit carryforwards available to offset future income taxes of
approximately $151,000 which will begin to expire in 2003.
9. RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES ("CANADIAN GAAP AND U.S. GAAP")
These financial statements have been prepared in accordance with
accounting principles generally accepted in the United States.
During the three months and nine months ended March 31, 1997 and 1996,
differences between Canadian GAAP and U.S. GAAP arose as a result of
depreciation. For U.S. GAAP purposes, furniture and fixtures and equipment
are depreciated over useful lives of seven and five years, respectively,
using an accelerated method. For Canadian GAAP purposes, furniture and
fixtures and equipment are to be depreciated over useful lives of five and
three years, respectively, using a straight-line method. The difference
does not have a material effect on income nor on the earnings per share
calculation.
* * * * * *
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