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Exhibit 7.4
PRIME BATTERY PRODUCTS LIMITED
Financial Statements
December 31, 2002
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INDEPENDENT AUDITORS' REPORT
To the Directors of
Prime Battery Products Limited
We have audited the accompanying balance sheet of Prime Battery Products Limited
as of December 31, 2002 and the related statements of operations and cash flow
for the two month period then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform an audit to obtain reasonable assurance about 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. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Prime Battery Products Limited
as of December 31, 2002 and the results of its operations and its cash flows for
the period then ended in conformity with generally accepted accounting
principles in the United States of America.
Toronto, Canada "MINTZ & PARTNERS LLP"
March 26, 2004
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PRIME BATTERY PRODUCTS LIMITED
Balance Sheet
December 31, 2002
<Table>
Assets
Current assets
Cash $ 67,675
Accounts receivable 192,663
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Total assets $ 260,338
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Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 7,499
Due to affiliates 245,996
Income taxes payable 3,010
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Total current liabilities 256,505
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Stockholders' Equity
Common shares, no par value, 100 shares issued and outstanding (note 3) 1
Retained earnings 3,832
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Total stockholders' equity 3,833
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Total liabilities and stockholders' equity $ 260,338
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See notes to financial statements
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PRIME BATTERY PRODUCTS LIMITED
Statement of Operations
<Table>
<Caption>
November 1 to
December 31
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2002
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Sales $ 304,030
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Cost of goods sold 256,892
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Gross profit 47,138
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Selling, general and administrative expenses 40,296
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Net income before taxes 6,842
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Provision for current income taxes (3,010)
Net income $ 3,832
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Earnings per share of common stock $ 38.32
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Weighted average number of common shares outstanding 100
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</Table>
See notes to financial statements
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PRIME BATTERY PRODUCTS LIMITED
Statement of Cash Flows
<Table>
<Caption>
November 1 to
December 31
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2002
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Cash flows from operating activities
Net income $ 3,832
Adjustment to reconcile net income to net cash
(used) by operating activities
Changes in operating assets and liabilities
Accounts receivable (192,663)
Accounts payable 7,499
Income taxes payable 3,010
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Net cash (used) by operating activities (178,322)
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Cash flows from financing activities
Issuance of common stock 1
Due to affiliates 245,996
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Net cash provided by financing activities 245,997
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Net increase in cash 67,675
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Cash, end of period $ 67,675
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</Table>
There is no supplemental disclosure of non-cash financing activities as there
were no such activities.
See notes to financial statements
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PRIME BATTERY PRODUCTS LIMITED
Notes to Financial Statements
December 31, 2002
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
The Company commenced batteries and ancillary electronic products in Canada on
November 1, 2002.
BASIS OF PRESENTATION
The financial statements have been prepared in accordance with generally
accepted accounting principles in the United States.
USE OF ESTIMATES
Use of these accounting principles required management to make estimates and
assumptions that affect the reported amount 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.
These estimates are reviewed periodically, and, as adjustments become necessary,
they are reported in earnings in the period in which they become known. The
financial statements reflect the following policies.
REVENUE
Revenue from the sale of products is recognized at the time of delivery when all
requirements of a completed transaction have been met.
INVENTORY
Batteries and ancillary electronic products inventory is recorded at the lower
of cost and net realizable value with cost being determined on the first-in,
first-out basis.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. Under SFAS No.
109, deferred tax assets and liabilities are determined based on temporary
differences between the financial statement and tax bases of assets and
liabilities and net operating loss and credit carryforwards using enacted tax
rates in effect for the year in which the differences are expected to reverse.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amounts expected to be realized. A provision for income tax
expense is recognized for income taxes payable for the current period, plus the
net changes in deferred tax amounts.
EARNINGS PER SHARE
For the period November 1 to December 31, 2002, net income per share has been
computed using the net income for the period divided by the weighted average
number of shares outstanding.
Diluted loss per share is not presented as the Company has no diluting items.
FOREIGN CURRENCY TRANSLATION
The functional currency of the Company is Canadian dollars. Certain purchases
are made in US dollars and have been translated into Canadian dollars, the
reporting currency, in accordance with Statement of Financial Accounting
Standards No. 52 "Foreign Currency Translation". Monetary assets and liabilities
are translated at the exchange rate at the balance sheet date and revenue and
expenses are translated at the exchange rate at the date those elements are
recognized.
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PRIME BATTERY PRODUCTS LIMITED
Notes to Financial Statements (continued)
December 31, 2002
NOTE 2 - DUE TO/FROM AFFILIATES
Amounts due to/from affiliates consists of amounts due to/from companies under
common control and are non-interest bearing with no specific terms for
repayment. Amounts due to/from affiliates at December 31, 2002 were as follows:
<Table>
Due to Prime Wireless Corporation $ 17,457
Due to DCS Electronics Limited 123,851
Due to Pivotal Self Service Technologies Inc. 104,688
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Total $245,996
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DCS Electronics Limited sold batteries to the Company during the period November
1 to December 31, 2002 and is considered a related party by virtue of common
management. Prime Wireless Corporation and Pivotal Self Service Technologies
Inc. provided financing to the Company during the same period and are considered
related parties due to common management.
NOTE 3 - CAPITAL STOCK
The Company was incorporated under the laws of Ontario, Canada.
Common Shares:
Authorized: Unlimited
Issued: 100
Common shares have no par value and the full amount of consideration has been
credited to capital stock.
VOTING RIGHTS
The holders of shares of common stock are entitled to receive notice of, attend
and vote at all meetings of the stockholders. Each share of common stock carries
one vote at such meetings.
NOTE 4 - INCOME TAXES
The Company's combined federal and provincial income tax rate is 20% on income
eligible as a Canadian controlled private corporation.
NOTE 5 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of accounts receivable, accounts payable and income taxes
payable approximates fair value because of the short maturity of these
instruments. Unless otherwise noted, it is management's opinion that the Company
is not exposed to significant interest, currency or credit risk arising from
these financial instruments.