SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
December 31, 2001
Date of Report
(Date of Earliest Event Reported)
K-Tronik International Corp.
(Exact name of Registrant as Specified in its Charter)
290 Vincent Avenue, 4th Floor, Hackensack, New Jersey 07601
(Address of Principal Executive Offices)
604-608-4226
(Registrant's Telephone Number)
LMC Capital Corp.
Suite 2602 - 1111 Beach Ave Vancouver, BC Canada V6E 1T9
(Former name and former address)
Nevada 000-31639 88-0436364
------ --------- ----------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
Share Purchase Agreement with K-Tronik (N.A.) Inc.
The Registrant has closed its purchase of all of the issued and outstanding
shares of K-Tronik (N.A.) Inc. ("K-Tronik N.A."). K-Tronik N.A. was formerly
named K-Tronik Int'l Corporation.
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The Registrant had agreed, pursuant to a share purchase agreement executed
November 29, 2001 (the K-Tronik N.A. Agreement"), to purchase all of the issued
and outstanding shares of K-Tronik N.A. from the two holders of these shares:
Mr. Robert Kim (47%) and ETIFF Holdings, LLC (a wholly owned subsidiary of Eiger
Technologies Inc., a Toronto Stock Exchange listed company)(53%) by way of the
issuance of 6,714,286 common shares to Robert Kim and 7,571,428 common shares to
ETIFF Holdings, LLC ("ETIFF"). The common shares were issued at a deemed price
of $0.70 for a total purchase price of $10,000,000. These common shares were
issued on December 24, 2001.
As a condition of closing the K-Tronik N.A. Agreement, the Registrant settled
the debts of K-Tronik N.A. to its parent, ETIFF, in the amount of $4,071,000 by
way of the issuance to ETIFF of 4,071,000 common shares of the Registrant at a
deemed price of one common share per $1.00 of outstanding debt principal.
However, subsequent to closing (and in connection with the preparation of
ETIFF's and K-Tronik's December 2001 financial statements) it was found that the
debt of K-Tronik N.A. to ETIFF was not $4,071,000 but rather $3,788,172. As a
result, 282,828 common shares were returned to treasury by ETIFF and a new
certificate representing 3,788,172 common shares of the Registrant was issued to
ETIFF.
As a condition of closing, ETIFF was granted the option (and exercised the
option) to purchase a total of 3,000,000 common shares of the Registrant from
existing shareholders of the Registrant . Prior to closing, there were
4,500,000 common shares of the Registrant issued and outstanding.
The K-Tronik N.A. Agreement, the debt settlement with ETIFF and the transfer of
the 3,000,000 shares of common stock were all approved by unanimous directors'
resolutions dated effective December 12, 2001.
Under the terms of the K-Tronik Agreement, the former directors and officers of
the Registrant (Phillip Cassis, Christopher D. Farber, William J. Little)
resigned upon closing. The Directors were replaced by Mr. Keith Attoe (also
Director and CFO of Eiger Technologies Inc.), Mr. Gerry Racicot (also Director
and President of Eiger Technologies Inc.) and Mr. Robert Kim (also Director and
President of K-Tronik). Mr. Robert Kim was appointed as President of the
Registrant, Mr. Keith Attoe as Treasurer and Mr. J.K. Lee (also controller of
K-Tronik) as Secretary of the Registrant.
A copy of the K-Tronik Agreement was filed as an exhibit to the report on Form
8K dated December 16, 2001 on the EDGAR system.
Control of the Registrant:
On December 31, 2001, the Registrant had 22,573,886 shares of common stock
issued and outstanding. The following table sets forth certain information
regarding the beneficial ownership of the common stock of the Registrant as of
December 31, 2001 of (1) each person who is known to the Registrant to own
beneficially more than 5% of its outstanding common stock, (2) each of its
directors and officers, and (3) all of its directors and officers as a group:
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Name and Address Position Amount of Stock Percentage of Class
Beneficially Owned
- ----------------------------------------------------------------------------------------------------------
ETIFF Holdings Inc. 5% shareholder 14,359,600 63.61%
(Eiger Technology,
Inc. subsidiary)
- ----------------------------------------------------------------------------------------------------------
Robert Kim Director and President, 6,714,286 29.74%
5% shareholder
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Gerry Racicot Director (1) (1)
- ----------------------------------------------------------------------------------------------------------
Keith Attoe Director and Treasurer (2) (2)
- ----------------------------------------------------------------------------------------------------------
J.K. Lee Corporate Secretary 0 0%
- ----------------------------------------------------------------------------------------------------------
Directors, Officers and 26,788,171 93.35%
5% stockholders in
total (5 Persons)
- ----------------------------------------------------------------------------------------------------------
1. Mr. Gerry Racicot does not personally own any common stock. However, as
well as being a director of the Registrant, he is a Director and President
of Eiger Technology Inc. which, through its wholly owned subsidiary ETIFF
Holdings Inc., owns 14,359,600 shares of common stock of the Registrant. As
stated in the table above, ETIFF holds a total of 63.61% of the issued and
outstanding stock of the Company
2. Mr. Keith Attoe does not personally own any common stock. However, as well
as being a director of the Registrant, he is a Director and President of
Eiger Technology Inc. which, through its wholly owned subsidiary ETIFF
Holdings Inc., owns 14,359,600 shares of common stock of the Registrant. As
stated in the table above, ETIFF holds a total of 63.61% of the issued and
outstanding stock of the Company. Mr. Keith Attoe is also a Director and
Officer of ETIFF.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
As used in this current report, the terms "we", "us", "our", "our company", "the
Company" and "the Registrant" mean, as the context requires, K-Tronik
International Corp. (formerly LMC Capital Corp.) and its wholly owned
subsidiaries, K-Tronik N.A. ("K-Tronik N.A."), a Nevada corporation and K-Tronik
Asia Corp. ("K-Tronik Asia"), a Korean corporation in which K-Tronik holds an
86.66% interest.
(a) Acquisition of K-Tronik:
The terms of the K-Tronik N.A. Agreement (whereby the Company acquired K-Tronik)
are described in detail in Item 1 of this report on Form 8K/A. The K-Tronik
N.A. Agreement is attached to the Company's report on Form 8K dated December 16,
2001 and filed on the EDGAR system.
(b) Corporate History of the Company and K-Tronik N.A.:
The Company was incorporated in the State of Nevada on September 2, 1999, under
the name of "LMC Capital Corp.".
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At its meeting of shareholders dated November 13, 2001, the shareholders of LMC
approved a name change of the corporation to "K-Tronik International Corp.".
The necessary documents (including directors' resolutions) have been filed with
the Secretary of State of Nevada to effect this name change but this name change
has not been processed as of the date of this report on Form 8-K/A.
K-Tronik N.A. was incorporated in the State of Nevada on March 17, 1998 under
the name of "K-Tronicks, Inc.". Its name was changed to "K-Tronik Int'l
Corporation" on August 7, 1998. K-Tronik N.A. was formed by its former parent,
Eiger Technology, Inc. and a predecessor company, K-Tronicks Industries Inc. (a
New Jersey corporation incorporated in 1995) as a joint venture. Shares in
K-Tronik N.A. were issued to the two (at that time) shareholders, Mr. Robert Kim
(in exchange for vending in the assets of K-Tronicks Industries, Inc.) and Eiger
Technology, Inc. (in exchange for financing the company). K-Tronik N.A. has one
subsidiary, K-Tronik (Asia) Corp., a Korean corporation incorporated on May 31,
1998, of which it owns 86.66%.
(c) The Company's Products and Technology
K-Tronik N.A. is an energy efficiency lighting company. K-Tronik N.A. has been
in the business of designing and manufacturing and selling electronic ballasts
for the last five (5) years and has key personnel who have lighting ballast
manufacturing experience of over ten (10) years. K-Tronik N.A. is a leading
North American, electronic ballast manufacturer. K-Tronik N.A. ballasts have
recently been installed in JFK Airport, J.F. Kennedy Center, Ford Motor
Corporation, Chase Manhattan Bank, Citibank, Florida Department of
Transportation as well as numerous schools and hospitals throughout United
States. K-Tronik N.A. currently manufactures ballasts for the US, Canadian,
Asian, Latin-American and European markets although past sales have focussed on
the United States.
K-Tronik N.A. is particularly active with supplying ESCOs (Energy Services
Companies) ballast products used in generating energy savings for customers'
commercial and industrial buildings.
A "ballast" is a device in lighting systems that operates fluorescent lights.
The ballast provides the necessary starting voltages, frequency and wattage to a
fluorescent lights while limiting and regulating the current during the light's
operation. Without a ballast, a fluorescent light would be destroyed
immediately when voltages were applied by switching it on. Many people
recognize ballasts as the "black boxes" in their fluorescent light fixtures at
home that are visible when they replace the fluorescent tubes.
Electronic ballasts use semi-conductor components to increase the frequency of
fluorescent light operation. The smaller inductive components provide the
light's current control. Fluorescent system efficiency is increased due to high
frequency light operation. Electronic ballasts, when used with T-8 fluorescent
light systems, result in about a 30% savings of electricity when compared to
conventional T-12 40watt light systems (or bulbs).
K-Tronik's N.A.'s main sales target is the niche market which other, larger
manufacturers find too small to accommodate and the design and custom
manufacture of specialty ballasts has been key to K-Tronik N.A.'s acceptance in
the lighting industry.
K-Tronik N.A. has a number of product lines including its new "MVP" product line
which is designed to cater to growing market demand for multi voltage electronic
ballast products.
Page 5
(d) Key Employees
The key employees of K-Tronik N.A. include the following:
Mr. Robert Kim, President of the Company and President of K-Tronik N.A.:
Robert Kim has a number of years of experience in the ballast industry in sales
and management roles.
Mr. John Andrews, Director of Sales and Operations of K-Tronik N.A.:
John Andrews joined K-Tronik N.A. in June of 1999. His responsibilities include
managing national sales, inventory management, credit and collection and
corporate marketing. John Andrews was employed by LG Industrial Systems USA (a
small ballast manufacturer) from 1996 to 1999 as Director of Sales and
Operations.
K-Tronik N.A., on occasion, utilizes the services of engineering and design
consultants where its internal expertise is insufficient or otherwise committed
to other projects.
K-Tronik N.A. has a total of 6 employees and K-Tronik (Asia) has a total of 40
employees. The majority of K-Tronik (Asia)'s employees (25) are involved in
production / manufacturing positions. A total of 5 employees (2 in K-Tronik
N.A. and 3 in K-Tronik (Asia)) are involved in Research and Development and
Engineering positions.
K-Tronik N.A., through hirings from industry competitors, has attempted to
build service, distribution and sales capability. Hirings have come from
Motorola (which ceased ballast production operations in 1999) and from Magnetek.
(e) Product Pricing
As electronic ballasts have become more of a commodity item in the lighting
industry over time, the prices for ballasts have dropped from $20.00 to $11.27
on average from 1993 to 2001.
The result has been increasingly difficult competition, mergers and closures in
the ballast industry and attempts by companies to find low labour cost
jurisdictions (such as China or Mexico) in which to manufacture product.
(f) Intellectual Property
K-Tronik N.A. has applied for US patents on its MVP product line and these
patents are pending.
The "K-Tronik" name has been trademarked in the United States but not in other
jurisdictions.
Page 6
(g) Research and Development
K-Tronik N.A. and its engineering team engage in ongoing research and
development relating mostly to product design and market requirements. The
result has been the introduction of a number of products in the last two years
which are designed to meet changing consumer demands, regulatory requirements
and energy saving goals.
K-Tronik N.A. intends to focus on new product development in the ballast
industry, in particular the development of smaller ballast products and better
production systems which reduce production and delivery time (reducing costs and
increasing production reliability).
(h) Markets
The market for ballasts is essentially split in two parts: the market for
original installations (such as those in new buildings) where ballasts are
purchased by original equipment manufacturers ("OEM"s) and the market for
replacement of existing ballasts to install energy saving ballasts (the
"retrofit" market).
The market for electronic ballasts grew significantly in the 1990s (000s of
units) as exemplified by the following figures for 4' x 8' electronic ballasts:
Year OEM Retrofit
1989 713 713
1990 1,501 1,501
1991 4,172 4,172
1992 6,912 6,380
1993 13,103 10,721
1994 14,238 10,741
1995 15,334 11,065
1996 16,089 11,765
The OEM market growth has outpaced retrofit market growth.
(Source: US Census Bureau, 4' x 8' ballast models only.)
Distribution in the OEM market is effected by a large number of distributors
which typically will carry a whole range of lighting and building products.
Distribution in the retrofit market is effected by energy saving companies
("ESCO"s) which will often be involved in the analysis of a buildings or
institution's potential cost savings from a retrofit and which are often owned
or operated by energy utilities.
There are two main types of ballast products: those which rely on magnetic
technology ("magnetic ballasts") to carry and regulate current in lighting and
those which rely on electronic transformers ("electronic ballasts") to carry out
the same functions.
There are many different types of magnetic and electronic ballasts, each suiting
individual customer needs which may vary according to customer tolerance for
energy consumption, EMI emissions and multi voltage needs.
Page 7
Estimating the size of the ballast market overall is difficult and it varies
from year to year with general economic growth, commercial and residential real
estate markets and other factors (including some "shocks" to the market such as
the Department of Energy's requirement for magnetic ballasts to be phased out by
April 1, 2005 or the energy difficulties of California in 2000-2001 which saw
demand for electronic ballasts increase).
In the year 2000, a total of 101,676,000 ballast were sold in the United States.
Of these ballasts sold, 55,118,000 were magnetic ballasts and 46,558,000 were
electronic ballasts (Source: US Census Bureau). The market is likely to further
shift to electronic ballasts in the future because of changing regulatory
requirements regarding magnetic ballasts' EMI emissions, reliability of
electronic ballasts, decreasing costs of electronic ballasts over time and
electronic ballasts' relative versatility. The number of electronic ballasts
sold has been increasing over time at a much greater growth rate than the
overall number of ballasts sold, which has been essentially flat and has not
shown significant growth as a industry (Source: US Census Bureau).
The market for ballasts is experiencing significant changes which K-Tronik N.A.
hopes to exploit. The United States Federal Department of Energy has mandated
the elimination of magnetic ballasts n the commercial and industrial new
construction or renovation industry (because of perceived EMI emissions problems
and because of energy efficiency concerns, Department of Energy news release
dated October 15, 1999 at www.energy.gov/HQPress) by April 1, 2005. As a
result, electronic ballasts such as those manufactured by K-Tronik N.A. will
capture the entire ballast market and competitors which have typically
manufactured magnetic ballasts (such as Magnetek) will be forced to introduce
new products or lose their market share.
At this time, electronic ballasts account for 46% of ballast sales.
K-Tronik N.A. manufactures and distributes only electonic ballasts.
(i) Marketing Strategy:
The Company's marketing strategy is characterized by the following:
Delivering niche products to customer groups: As a small manufacturer, the
Company can deliver niche or specialty products which it is uneconomical or
unattractive for its larger competitors to deliver.
Exploiting market changes: As a manufacturer of electronic ballasts, the
Company is likely to experience sales growth due to the banning of magnetic
ballasts by the US Department of Energy in 2005 in commercial and industrial
installations.
Building brand name recognition: With sales expanding in the five years since
its founding, K-Tronik N.A. is becoming more recognized in this industry where
brand name recognition is important to overall acceptance of your products by
customers. Sales are typically made to purchasing agents who often base a
buying decision on whether or not they recognize and trust the manufacturer's
name.
Page 8
Focussing on ballasts with energy efficiency advantages: K-Tronik N.A.'s
ballasts (because they are electronic) are less susceptible to variations in
power grid currents ("brownouts") which have occurred in the United States and
South America in recent years. K-Tronik N.A. hopes to continue developing
products which have some superiority in this area and to exploit markets where
this competitive factor is key (eg. California, the Northeastern United States,
South America).
Focussing on relationships with ESCOs: the retrofit market has a higher margin
than the OEM market and, as a result, relationships with ESCOs are crucial in
building profitability.
(j) Competitors in the ballast industry:
The chief competitors in the ballast industry are Advance (a division of
Philips), Magnetek and Osram (a division of Sylvania). Motorola was also a
competitor until 1999 when it sold its ballast manufacturing, distribution and
sales division to Osram (Sylvania).
Advance (Philips) had approximately 25% of the ballast market, Magnetek had
approximately 22.5% of the ballast market and Osram (Sylvania) had approximately
16.5% of the ballast market. (US Census Bureau). SLI (a division of Valmont
Industries Inc.) had approximately 13% of the market. ESI (a division of Energy
Savings Inc.) is also a competitor with 10% of the market in 2001.
K-Tronik N.A. and two other small competitors combined had only 13% of the
ballast market.
It is possible but unlikely (because of the existing low margins and highly
competitive atmosphere) that additional competitors will enter the ballast
market.
(k) Competitive Factors in the Market:
The Company has a number of strengths and some weaknesses relating to the
competitive factors in the ballast manufacturing industry.
The main competitive factors in the ballast market are as follows:
- -brand name recognition (credibility)
- -low cost production
- -quality and length of customer relationships
- -distribution (warehousing and shipping) capabilities
- -new product development capability
- -quality (reliability) of ballast products
- -relationships with ESCO (Energy Saving Companies) for industrial and commercial
energy savings retrofits
- -increasingly, ability to produce electronic rather than magnetic ballasts
Page 9
Each of its competitors has strengths and weaknesses. Magnetek is a
manufacturer of magnetic ballasts only. ESI (Energy Savings) has only "plug in"
ballast models that fit a minority of fixtures (most fixtures require lead
wires, especially in industrial and commercial fixtures). Advance does not have
low cost overseas production at this time (although it is in the process of
developing such production).
The Company hopes to take advantage of low cost production (possibly through the
acquisition of one of its suppliers, Dae Gyung Corp.) in China. In a highly
competitive industry, this low cost production could be key to its long term
profitability and survival.
K-Tronik N.A. has begun to sell direct to consumers while its largest
competitors (because of established intercorporate relationships) must often
sell through distributors. This gives K-Tronik a chance to capture the profits
normally realized by those distributors.
K-Tronik N.A. and K-Tronik (Asia) have an experienced Korean and American
engineering team to allow it to develop mew products in response to changes in
the ballast market (such as those which are periodically created by regulatory
changes or initiatives).
K-Tronik N.A., through its hiring of many former employees of competitors, has
long term relationships with many customers and has itself (through its own
sales) built its long term relationships. K-Tronik is building name recognition
through advertising (trade magazines and shows) in addition to its sales.
K-Tronik N.A. has a well run warehousing and shipping department which, because
it ships only ballasts, is focussed on delivering ballasts on a timely basis
unlike large competitors with a wide range of products.
K-Tronik N.A. is able to market directly to customers because it does not have
distribution divisions (such as its larger competitors, Osram (Sylvania) and
Advance (Philips)) for which ballasts may be a small item or a low priority.
K-Tronik N.A. is actively attempting to expand its sales in ESCO (Energy Saving
Company) and South American markets, growing segments which its major
competitors have not seemed to target. The ESCO (Energy Saving Company) market
is particularly important. ESCOs perform engergy usage audits and evaluations
to large companies, the US government, hospitals, school systems and other
groups. Most ESCOs are owned by large utility companies. They typically will
recommend upgrade of existing ballasts to bring cost savings to their customers.
These ESCO companies continue to gain ballast market share annually and have
become a key base for ballast purchases. Approximately 50% of buildings and
institutions in the US have not yet retrofitted to energy saving electronic
ballasts (Market Studies Inc., North Carolina).
However, K-Tronik N.A. is still a minor player in the ballast industry. It does
not have the brand name recognition that Sylvania or Motorola have. It does
not have the strategic business relationships with distributors (or ownership of
them) that its major competitors have. It does not have access to the same
financial resources that its largest competitors may have through their parent
companies.
Page 10
Risk Factors Associated with our Business:
The following risks should be considered carefully. Our business, financial
condition and results of operations could be materially and adversely affected
by any of the following risks:
- - We may be unable to attract or retain customers;
- - We may be unable to anticipate changes in the ballast market or in our
customers' needs;
- - Our infrastructure may fail (including production and distribution) to
efficiently handle the volumes they are required to handle;
- - We haven't paid dividends and don't know if or when we will be able to;
- - Changes in laws (especially laws relating to energy saving devices and
regulatory requirements or specifications) could potentially hurt our
business if we are unable to develop new products or redesign existing
products;
- - If we succeed in increasing our sales, we might not be able to handle a
rapidly expanding operation and various problems associated with this (such
as installations, timing and amount of capital expenditures, limits to
production capacity in the K-Tronik (Asia) plant and other problems);
- - We rely on our Korean and Chinese manufacturing operations (through our
subsidiary K-Tronik (Asia) and through our suppliers in China. As a result,
we are vulnerable to significant downturns in these countries' economies,
currency instability, political instability and other potential risks.
- - We will have to rely on future equity financing (which could dilute
existing shareholders) because we do not have sufficient revenue to fund
ongoing operations right now and are not profitable;
- - We may not be able to obtain future equity or debt financing, especially
if economic or securities market conditions deteriorate further;
- - We are very dependent on our key personnel and management and if they
leave, they make some of our customers with them;
- - General economic conditions may affect funding for energy retrofit
initiatives through federal, state and provincial budget cuts and we are
particularly vulnerable to this because many of our customers are government
institutions or hospitals and schools;
- - We believe that our profitability in the future will depend on our ability
to build relationships and in some cases acquire ESCOs. There is no
certainty that we will be able to build these relationships or that we will
have the funds necessary to acquire ESCOs.
(l) Forward Looking Statements
This report includes `Forward Looking Statements' within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act.
Any statements that express or involve discussions with respect to predictions,
expectations, beliefs, plans, projections, objectives, assumptions or future
events or performance (often, but not always, using words or phrases such as
"expects" or "does not expect", "is expected", "anticipates" or "does not
anticipate", "plans", "estimates" or "intends", or stating that certain actions,
Page 11
events or results "may", "could", "would", "might" or "will" be taken, occur or
be achieved) are not statements of historical fact and may be "forward looking
statements". Such statements are included in many places in this Form 8-K/A
including in "Future Plan of Operations" and in discussions of the market for
SchoolWeb's products and its size. Forward-Looking Statements are based on
expectations, estimates and projections at the time the statements are being
made that involve a number of risks and uncertainties which could cause actual
results or events to differ materially from those presently anticipated. See
"Risk Factors Associated with the Company and Its Business" herein. Although we
believe that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct.
(m) Description Of Property
The Company currently does not have any physical property.
K-Tronik (Asia) and K-Tronik N.A. do not have any physical property other than
their production and office equipment. K-Tronik(Asia)'s plant in Korea is leased
(as is the office and warehousing space of K-Tronik in New Jersey). K-Tronik
(Asia)'s plant has a production capacity of 100,000 ballast pieces per month.
(n) The Company's Directors, Executive Officers, Promoters and Control Persons
The following persons are the directors, executive officers, promoters and
control persons of the Company:
- --------------------------------------------------------------------------------
Name Position Term of Office*1*2
- --------------------------------------------------------------------------------
Robert Kim President and Director Expires November 12, 2002
- --------------------------------------------------------------------------------
Gerry Racicot Director Expires November 12, 2002
- --------------------------------------------------------------------------------
Keith Attoe Director and Treasurer Expires November 12, 2002
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
J.K. Lee Corporate Secretary *2
- --------------------------------------------------------------------------------
1. Directors, whether appointed at a meeting of stockholders or by the
remaining directors, are appointed until the next annual meeting of
stockholders. As the Company had its annual meeting of shareholders on
November 12, 2001 (and its annual meeting of shareholders is held
approximately every twelve months), all of the directors' terms expire on
or around November 12, 2002.
2. The President, Secretary and Treasurer do not have a set term of office.
They serve at the pleasure of the Directors and can be removed at any time
by the Directors.
Robert Kim, President and Director
Robert Kim, in addition to being President of the Company, is President and CEO
of K-Tronik N.A. Mr. Kim began work in the lighting and energy management
industry in 1990. He was the founding President of Daewoo America's subsidiary,
King Tech, which in its first year produced sales exceeding $15 million. Mr.
Kim also worked with GoldStar Electronic Ballast Corporation from 1993 until he
founded K-Tronicks Industries, Inc. (a predecessor company of K-Tronik N.A.) in
1995.
Page 12
Gerry Racicot, Director
Gerry Racicot, in addition to being a director of the Company, is director and
President of Eiger Technology, Inc. Eiger Technology, Inc., of which K-Tronik
N.A. was an operating division until the closing of the K-Tronik N.A. Agreement,
is a diverse manufacturer and distributor of a number of products in the
technology and commercial lighting industries. Eiger Technology Inc. is listed
for trading on the Toronto Stock Exchange and its shares are also posted for
trading through the facilities of the NASD's OTCBB. Gerry Racicot was, from 1988
to 2001, President of ADH Custom Metal Fabricators Inc. and Vision Unlimited
Equipment Inc., companies which manufacture and distribute various lighting and
other products.
Keith Attoe, Treasurer and Director
Keith Attoe, in addition to being a director and Treasurer of the Company, is
director and CFO of Eiger Technology, Inc. A chartered accountant by
background, Keith Attoe has been with Eiger Technology, Inc. since 1996.
J.K. Lee, Corporate Secretary
J.K Lee, in addition to being Corporate Secretary of the Company, is the
controller of K-Tronik N.A
Each officer and director generally serves until the next annual meeting of
stockholders or until such time as he or she resigns. The officers of the
Company are appointed at the pleasure of the board of directors and may be
removed at any time (subject to labour laws and other constraints).
(q) Executive Compensation
Summary Compensation Table
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Annual Compensation Long-term compensation
-------------------------------------------------------------------------------
Awards Payouts
--------------------------------------
Name and Year Salary Bonus Other Restricted Securities LTIP All Other
principal ($) ($) annual stock underlying payouts compen-
position compen- award(s) options/ ($) sation
sation ($) SARs ($)
($) (#)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- ----------------------------------------------------------------------------------------------------------------------------------
Robert Kim(2) 2000 $150,000 -- -- -- -- -- --
President & Director 0 -- -- -- -- -- --
2001 $172,000 -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Keith Attoe 2000 -- -- -- -- -- -- --
Treasurer & Director 2001 -- -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Gerry Racicot 2000 -- -- -- -- -- -- --
Director 2001 -- -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
T.W. Chung 2000 (3) -- -- -- -- -- --
Director 2001 (3) -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
J.K Lee(1) 2000 -- -- -- -- -- -- --
Corporate Secretary 2001 $11,000 -- -- -- -- -- --
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(1) J.K. Lee is paid by the Company's subsidiary, K-Tronik. As J.K. Lee
only joined K-Tronik N.A. in September of 2001, his salary figure does not
reflect his annual salary of $33,000.
(2) Robert Kim is paid by the Company's subsidiary, K-Tronik N.A.
The Company, at its annual meeting of shareholders held on November 13, 2001,
approved a stockholders' resolution to adopt a Stock Option Plan. As a result,
some or all of the persons named above may be granted options in the future. To
date, no options have been granted or are contemplated to be granted.
Other than as stated below, there is no known relationship between any of the
Directors and Control persons with major clients or providers of essential
products and technology, nor are there any known related transactions.
(r) Description Of Securities.
The Company is authorized to issue 100,000,000 shares of the common stock of
which 22,573,886 shares of common stock were issued and outstanding as of
December 31, 2001. Each outstanding share of the common stock entitles the
holder to one vote, either in person or by proxy, on all matters that may be
voted upon by the owners thereof at meetings of the shareholders.
The holders of the common stock (i) have equal rights to dividends from funds
legally available therefore, when, and if, declared by our the Board of
Directors; (ii) are entitled to share ratably in all of our assets available for
distribution to the holders of the common stock upon liquidation, dissolution or
winding up of our affairs; (iii) do not have preemptive, subscription or
conversion rights; and (iv) are entitled to one non-cumulative vote per share on
all matters on which shareholders may vote at all meetings of shareholders.
The holders of the common stock do not have cumulative voting rights, which
means that the holders of more than 50% of such outstanding shares of common
stock, voting for the election of directors, can elect all directors of the
Company if they so choose and, in such event, the holders of the remaining
shares of common stock will not be able to elect any of the directors.
(s) Litigation
The Company and its subsidiaries are not party to any litigation and have no
knowledge of any threatened or pending litigation against them.
(t) Market For the Company's Securities
Currently the Company's common stock does not trade on any exchange or quotation
system including the NASD's OTCBB.
Page 14
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 5. OTHER EVENTS
Successor Issuer Election
Upon closing of the Share Purchase Agreement on September 10, 2001, pursuant to
Rule 12g-3(a) of the General Rules and Regulations of the Securities and
Exchange Commission, the Company elects, should that election be necessary, to
remain an issuer for reporting purposes under the Securities Exchange Act of
1934 (the "Exchange Act") and will continue to report under the Exchange Act.
ITEM 6. RESIGNATION OF DIRECTORS AND EXECUTIVE OFFICERS
Upon closing of the K-Tronik Agreement, William J. Little, Philip Cassis and
Christopher D. Farber resigned as directors and officers of the Company. Upon
closing of the K-Tronik Agreement, Gerry Racicot, Keith Attoe and Robert Kim
were appointed as directors and officers of the Company.
ITEM 7. FINANCIAL STATEMENTS
Attached to and forming part of this Report on Form 8-K/A are the following
unaudited pro-forma financial statements of the Company together with audited
consolidated financial statements of K-Tronik N.A.:
(a) Unaudited Pro-Forma Consolidated Financial Statements of the Registrant:
Introduction
Pro-Forma Consolidated Statement of Stockholders' Equity as at September
30, 2001
Notes to Pro-Forma Consolidated Statement of Stockholders' Equity as at
September 30, 2001
(b) Audited Consolidated Financial Statements of K-Tronik N.A. Inc. (formerly
K-Tronik Int'l Corporation):
Report of Independent Auditor dated November 30, 2001 (except for Notes 4
and 14 for which the dates are December 3, 2001 and December 6, 2001
respectively)
Consolidated Balance Sheet as at September 30, 2001
Consolidated Statement of Changes in Stockholders' Equity as at September
30, 2001
Consolidated Statement of Cash Flows for the year ended September 30, 2001
Notes to Consolidated Financial Statements as at September 30, 2001
Page 15
ITEM 8. CHANGE IN FISCAL YEAR
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Current Report on Form 8-K/A to be signed on its
behalf by the undersigned hereunto duly authorized.
K-TRONIK INTERNATIONAL CORP.
By: /s/ Robert Kim
-------------------------------
Robert Kim, Director and President
Dated: March 7, 2002
LMC CAPITAL CORP.
(A Development Stage Company)
PRO-FORMA CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
SEPTEMBER 30, 2001
(Unaudited)
INTRODUCTION
PRO-FORMA CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
NOTES TO PRO-FORMA CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
LMC CAPITAL CORP.
(a development stage company)
PRO-FORMA CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
SEPTEMBER 30, 2001
- -----------------------------------------------------------------------------------------------------------------------------------
(unaudited) (expressed in United States dollars)
Pro-Forma
LMC K-Tronik Pro-Forma Adjustments Consolidated
LMC
30-Sep-01 30-Sep-01 (a) (b) (c) (d) 30-Sep-01
- -----------------------------------------------------------------------------------------------------------------------------------
$ $ $ $ $ $ $
CAPITAL STOCK 45 100,000 (45) (9,487) 38 (90,325) 226
ADDITIONAL PAID-IN CAPITAL - 1,053,162 - - 3,788,134 90,325 4,931,621
ACCUMULATED DEFICIT (9,532) (2,222,397) 9,532 - - - (2,222,397)
ACCUMULATED COMPREHENSIVE LOSS
- Foreign Currency Translation Adjustments - (120,372) - - - - (120,372)
- -----------------------------------------------------------------------------------------------------------------------------------
(9,487) (1,189,607) 2,589,078
Less: Minority Interest in K-Tronik Asia - (718,589) (718,589)
- -----------------------------------------------------------------------------------------------------------------------------------
(9,487) (1,908,196) 1,870,489
===================================================================================================================================
The accompanying notes are an integral part of this pro-forma consolidated
statement of stockholders' equity
LMC CAPITAL CORP.
(a development stage company)
PRO-FORMA CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
SEPTEMBER 30, 2001
================================================================================
(Unaudited)
INTRODUCTION
By agreement dated November 29, 2001 and approved by the board of directors
effective December 12, 2001, LMC Capital Corp. ("LMC" or the "Company"), a
Nevada corporation, issued 14,285,714 shares of restricted common stock to the
shareholders of K-Tronik Int'l Corporation ("K-Tronik"), a Nevada corporation,
in exchange for 100% of the issued and outstanding shares of K-Tronik. K-Tronik
also owns an 86.7% interest in K-Tronik Asia Corporation ("K-Tronik Asia"), a
Korean corporation. In connection with this transaction, LMC changed its name
effective December 12, 2001 to K-Tronik International Corp.
This transaction will be accounted for as a recapitalization using accounting
principles applicable to reverse acquisitions whereby the financial statements
subsequent to the date of the transaction will be presented as a continuation of
K-Tronik. Under reverse acquisition accounting, the value assigned to the
common stock of consolidated LMC on acquisition of K-Tronik will be equal to the
book value of the common stock of K-Tronik plus the book value of the net assets
of LMC as at the date of the transaction.
The pro-forma consolidated statement of stockholders' equity has been prepared
to reflect the statement of stockholders' equity of LMC as at September 30, 2001
assuming the acquisition of K-Tronik had occurred effective September 30, 2001.
The ongoing results of operations of consolidated LMC are considered to be a
continuation of the results of K-Tronik. As LMC does not have any significant
operations or assets, and the audited financial statements of K-Tronik as at
September 30, 2001 and 2000 and for the years then ended have been included in
the Company's filing on Form 8-K/A, no pro-forma consolidated balance sheet or
pro forma consolidated statements of operations have been presented.
The pro-forma consolidated statement of stockholders' equity is based on the
following financial statements:
- LMC - unaudited interim financial statements as at September
30, 2001.
- K-Tronik - audited financial statements as at September 30, 2001.
Also, the closing of this transaction was conditional upon LMC issuing 3,788,172
shares of restricted common stock in settlement of a $3,788,172 debt of K-Tronik
to its parent company. This issuance, as described in the notes, has been
reflected in the pro forma statement of stockholders' equity.
This pro-forma consolidated statement of stockholders' equity should be read in
conjunction with LMC's December 31, 2000 audited financial statements as filed
on Form 10-KSB.
LMC CAPITAL CORP.
(a development stage company)
NOTES TO PRO-FORMA CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
SEPTEMBER 30, 2001
================================================================================
(Unaudited)
NOTE 1 - ACQUISITION
- --------------------------------------------------------------------------------
By agreement dated November 29, 2001 and approved by the board of directors
effective December 12, 2001, LMC acquired 100 % of the issued and outstanding
shares of K-Tronik, which includes K-Tronik's 86.7% interest in K-Tronik Asia,
in exchange for 14,285,714 shares of restricted common stock of LMC. As a
condition of this acquisition, LMC issued 3,788,172 shares of restricted common
stock to ETIFF Holdings Inc. ("ETIFF") in settlement of $3,788,172 owed to ETIFF
by K-Tronik. ETIFF, a wholly owned subsidiary of Eiger Technologies, Inc., a
Toronto Stock Exchange listed company, owned 53% of the issued and outstanding
shares of K-Tronik. Also in connection with this transaction, ETIFF was granted
an option, which has been exercised, to acquire an additional 3,000,000 shares
of LMC from the original shareholders of LMC. As a result of this transaction,
the former shareholders of K-Tronik own 93.4% of LMC representing 21,073,886 of
the 22,573,886 total issued and outstanding shares of LMC.
For purposes of this pro-forma consolidated statement of stockholders' equity,
this acquisition has been accounted as a recapitalization using accounting
principles applicable to reverse acquisitions whereby the value assigned to the
common stock of consolidated LMC on acquisition of K-Tronik will be equal to the
book value of the common stock of K-Tronik plus the book value of the net assets
of LMC as at the date of the transaction.
The book value of LMC' capital stock, resulting from the reverse acquisition
before giving effect to the settlement of debt, is calculated as follows:
K-Tronik capital stock $ 100,000
K-Tronik additional paid in capital 1,053,162
LMC net assets (liabilities) (9,487)
------------
LMC pro-forma capital stock $ 1,143,675
============
LMC pro-forma capital stock, resulting from the reverse acquisition, is made up
as follows:
Capital stock (18,785,714 common shares issued and
outstanding) $ 188
Additional paid-in capital 1,143,487
------------
$ 1,143,675
============
NOTE 2 - PRO-FORMA ADJUSTMENTS
- --------------------------------------------------------------------------------
(a) Elimination of LMC's stockholder's equity
In accordance with reverse acquisition accounting, the financial
statements subsequent to the date of the transaction will be presented as
a continuation of K-Tronik and as a result the stockholders' equity of LMC
has been eliminated as follows:
Total
Elimination
------------
LMC share capital $ 45
LMC additional paid in capital -
LMC accumulated deficit (9,532)
------------
Book value of LMC net assets (liabilities) $ (9,487)
============
LMC CAPITAL CORP.
(a development stage company)
NOTES TO PRO-FORMA CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
SEPTEMBER 30, 2001
================================================================================
(Unaudited)
NOTE 2 - PRO-FORMA ADJUSTMENTS (cont'd)
- --------------------------------------------------------------------------------
(b) Record value assigned to LMC under reverse acquisition accounting
As at the date of the transaction, LMC does not have any significant
operations or assets and as a result the transaction will be accounted for
as a recapitalization using accounting principles applicable to reverse
acquisitions. Accordingly, no goodwill is recorded and the value assigned
to LMC is equal to the book value of the net assets (liabilities) of LMC
as at the date of the transaction. As at September 30, 2001, the net book
value of the net assets (liabilities) of LMC is $(9,487).
(c) Record shares issued on settlement of debt.
As described in Note 1, as a condition of this acquisition, LMC issued
3,788,172 shares of restricted common stock to ETIFF in settlement of
$3,788,172 owed to ETIFF by K-Tronik. As at September 30, 2001, the date
of the pro-forma statement of stockholders equity, the balance of this
debt was $3,709,180. The pro-forma statement of stockholders equity
reflects this issuance of 3,788,172 shares of capital stock by LMC in
settlement of this amount as follows.
Total
Adjustment
------------
LMC share capital $ 38
LMC additional paid in capital 3,788,134
------------
Value of shares issued on settlement of debt $ 3,788,172
============
(d) Restatement of share capital under reverse acquisition accounting
In accounting for this reverse acquisition, the legal share capital is
that of LMC (the legal parent) and the value of share capital is
calculated as described in Note 1. Upon completion of this transaction and
the related debt settlement, LMC will have 22,573,886 of its $0.00001 par
value common shares issued and outstanding as follows:
Additional Total Share
Capital Stock Paid in Capital Capital
-----------------------------------------------
LMC as at September 30, 2001 $ 45 $ - $ 45
K-Tronik as at September 30, 2001 100,000 1,053,162 1,153,162
Pro-forma adjustment (a) (45) - (45)
Pro-forma adjustment (b) (9,487) - (9,487)
Pro-forma adjustment, to reconcile par value (90,325) 90,325 -
-----------------------------------------------
188 1,143,487 1,143,675
Pro-forma adjustment (c) 38 3,788,134 3,788,172
-----------------------------------------------
Pro-forma balance, September 30, 2001 $ 226 $ 4,931,621 $ 4,931,847
===============================================
K-TRONIK INT'L CORPORATION
CONSOLIDATED FINANCIAL REPORT
SEPTEMBER 30, 2001 AND 2000
K-TRONIK INT'L CORPORATION
FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000
C O N T E N T S
Page
----
INDEPENDENT AUDITORS' REPORT 1-2
CONSOLIDATED FINANCIAL STATEMENTS:
Balance Sheet 3
Statement of Operations and Comprehensive Loss 4
Statement of Changes in Stockholders' Equity (Deficiency)
and Minority Interest 5
Statement of Cash Flows 6
Notes to Consolidated Financial Statements 7-12
SUPPLEMENTARY INFORMATION TO CONSOLIDATED
FINANCIAL STATEMENTS:
Independent Auditors' Report on Supplementary Information 13
Consolidating Balance Sheet 14
Consolidating Statement of Operations and Comprehensive Loss 15
Consolidating Statement of Cash Flows 16
Page 1
Board of Directors
K-Tronik Int'l Corporation
290 Vincent Avenue
Hackensack, New Jersey 07601
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheet of K-Tronik Int'l
Corporation as of September 30, 2001 and 2000, and the related consolidated
statements of operations and comprehensive loss, changes in stockholders' equity
(deficiency) and minority interest, and cash flows for the years then ended.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We did not audit the financial
statements of K-Tronik Asia Corporation, a majority owned subsidiary, which
statements reflect total assets of approximately $1,526,000 and $2,135,000 as of
September 30, 2001 and 2000, respectively, and total revenues of approximately
$5,843,000 and $2,992,000 for the years then ended. Those statements were
audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to the amounts included for K-Tronik Asia
Corporation, is based solely on the report of the other auditors.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated 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
audits and the report of other auditors provide a reasonable basis for our
opinion.
The opinion of the other auditors on the September 30, 2000 financial statements
of K-Tronik Asia Corporation was qualified because they were not able to observe
the counting of the physical inventories of K-Tronik Asia Corporation as of
September 30, 1999 (stated at $297,906), nor were they able to satisfy
themselves about inventory quantities by means of other auditing procedures.
Page 2
K-Tronik Int'l Corporation
Hackensack, New Jersey 07601
In our opinion, based on our audits and the report of other auditors, except for
the effects of such adjustments, if any, that might have been determined to be
necessary had the other auditors been able to observe the counting of the
physical inventories of K-Tronik Asia Corporation as of September 30, 1999, the
consolidated financial statements referred to in the first paragraph present
fairly, in all material respects, the financial position of K-Tronik Int'l
Corporation as of September 30, 2001 and 2000, and the results of its operations
and its cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.
As discussed in Note 13 to the consolidated financial statements, certain errors
resulting in the previously reported loan payable - related party and
intercompany activity as of September 30, 1999 were discovered. Accordingly, an
adjustment has been made to retained earnings as of September 30, 1999 to
correct the errors. In addition, as discussed in Note 12 to the consolidated
financial statements, the Company changed its method of accounting for
organization costs during the year ended September 30, 2000.
/s/ SMOLIN, LUPIN & CO., P.A.
Fairfield, New Jersey
November 30, 2001, except for Notes 4 and 14
as to which the dates are December 3, 2001 and
December 6, 2001, respectively
Page 3
K-TRONIK INT'L CORPORATION
CONSOLIDATED BALANCE SHEET - SEPTEMBER 30, 2001 AND 2000
ASSETS
2001 2000
---------- ----------
CURRENT ASSETS:
Cash and Cash Equivalents 95,600 297,585
Accounts Receivable - Net of Allowance for
Doubtful Accounts of Approximately $19,000
in 2001 and $5,000 in 2000 1,363,613 961,206
Inventory 2,395,261 1,519,162
Prepaid Expenses 151,429 179,164
---------- ----------
Total Current Assets 4,005,903 2,957,117
---------- ----------
PROPERTY AND EQUIPMENT - Net 405,289 484,095
---------- ----------
OTHER ASSETS:
Security Deposits 44,058 36,009
Regulatory approval - Net of Accumulated
Amortization of $33,035 in 2001 and
$18,511 in 2000 116,072 119,194
Loans and Advances 9,983 6,190
---------- ----------
170,113 161,393
---------- ----------
TOTAL ASSETS 4,581,305 3,602,605
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Notes Payable 1,426,611 1,027,835
Accounts Payable and Accrued Expenses 1,353,710 813,606
Loan Payable - Employee - 415,453
---------- ----------
Total Current Liabilities 2,780,321 2,256,894
---------- ----------
LOAN PAYABLE - Parent Company 3,709,180 2,479,180
---------- ----------
COMMITMENTS
STOCKHOLDERS' DEFICIENCY:
Common Stock - No Par Value; 25,000 Shares
Authorized, Issued and Outstanding 100,000 100,000
Additional Paid-In Capital 1,053,162 1,053,162
Accumulated Deficit (2,222,397) (1,655,022)
Accumulated Other Comprehensive Loss - Foreign
Currency Translation Adjustments (120,372) (41,322)
---------- ----------
Total (1,189,607) (543,182)
Less: Minority Interest 718,589 590,287
---------- ----------
(1,908,196) (1,133,469)
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY 4,581,305 3,602,605
========== ==========
See notes to consolidated financial statements.
Page 4
K-TRONIK INT'L CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE YEAR ENDED SEPTEMBER 30, 2000
REVENUE 4,494,699
COST OF SALES 3,086,716
----------
GROSS PROFIT 1,407,983
OPERATING EXPENSES 1,646,893
----------
INCOME FROM OPERATIONS (238,910)
OTHER INCOME AND (EXPENSES):
Interest Income 498
Research and Development Costs (441,987)
Interest Expense (168,221)
Loss on Sale of Equipment (443)
--------
Total Other Income and (Expenses) (610,153)
----------
LOSS BEFORE MINORITY INTEREST IN LOSS OF CONSOLIDATED
COMPANIES, INCOME TAXES AND CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE (849,063)
MINORITY INTEREST IN LOSS OF CONSOLIDATED COMPANIES 158,752
----------
LOSS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE (690,311)
INCOME TAXES 11,404
----------
LOSS BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (701,715)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (337,896)
----------
NET LOSS FOR THE YEAR (1,039,611)
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS (53,404)
----------
COMPREHENSIVE LOSS FOR THE YEAR (1,093,015)
==========
See notes to consolidated financial statements.
Page 5
K-TRONIK INT'L CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY) AND
MINORITY INTEREST
FOR THE YEAR ENDED SEPTEMBER 30, 2001 AND 2000
Comprehensive
Loss -
Adjustment
Additional Retained for Foreign
Common Paid-In Earnings Currency Minority Total
Stock Capital (Deficit) Translation Interest Equity
---------- ---------- ---------- ---------- ---------- ----------
BALANCE - October 1, 1999 as
previously reported 100,000 1,053,162 (751,239) 12,082 (570,313) (156,308)
Prior Period Adjustment -
Error in Unrecorded
Foregiveness of Debt - - 282,828 - - 282,828
Error in Recording
Intercompany Activity - - (147,000) - 147,000 -
------- --------- ---------- -------- -------- ----------
BALANCE - October 1, 1999
as Restated 100,000 1,053,162 (615,411) 12,082 (423,313) 126,520
Net Loss for the Year - - (1,039,611) - (158,752) (1,198,363)
Foreign Currency Translation
Adjustment - - - (53,404) (8,222) (61,626)
------- --------- ---------- -------- -------- ----------
BALANCE - September 30, 2000 100,000 1,053,162 (1,655,022) (41,322) (590,287) (1,133,469)
Net Loss for the Year - - (567,375) - (116,134) (683,509)
Foreign Currency Translation
Adjustment - - - (79,050) (12,168) (91,218)
------- --------- ---------- -------- -------- ----------
BALANCE - September 30, 2001 100,000 1,053,162 (2,222,397) (120,372) (718,589) (1,908,196)
======= ========= ========== ======== ======== ==========
See notes to consolidated financial statements.
Page 6
K-TRONIK INT'L CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000
2001 2000
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss for the Year (567,375) (1,039,611)
Adjustments to Reconcile Net Loss to
Net Cash Used by Operating Activities:
Amortization and Depreciation 147,098 88,074
Bad Debt Expense 54,494 5,000
Loss on Sale of Fixed Assets 9,423 443
Minority Interest in Loss of Consolidated Companies (128,303) (166,974)
Cumulative Effect of Change in Accounting Principle - 337,896
Net Change in Operating Assets and Liabilities:
Accounts Receivable (456,901) (266,779)
Inventory (876,099) (719,548)
Prepaid Expenses 27,735 (104,658)
Security Deposits (8,049) (18,400)
Loans and Advances (3,793) (6,190)
Accounts Payable and Accrued Expenses 540,106 (153,899)
---------- ----------
Net Cash Used by Operating Activities (1,261,664) (2,044,646)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Equipment (132,048) (454,752)
Sale of Equipment 68,856 -
Purchase of Regulatory Approval (11,402) (34,695)
---------- ----------
Net Cash Used by Investing Activities (74,594) (489,447)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Notes Payable - Net (16,677) 385,054
Proceeds from/(Payments of) Loan Payable
- Employee - 415,453
Proceeds from Loan Payable - Parent Company 1,230,000 2,070,360
---------- ----------
Net Cash Provided by Financing Activities 1,213,323 2,870,867
---------- ----------
EFFECT OF EXCHANGE RATE CHANGES (79,050) (53,404)
---------- ----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (201,985) 283,370
CASH AND CASH EQUIVALENTS - Beginning 297,585 14,215
---------- ----------
CASH AND CASH EQUIVALENTS - Ending 95,600 297,585
========== ==========
See notes to financial consolidated statements.
Page 7
K-TRONIK INT'L CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2001 AND 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of Business:
K-Tronik Int'l Corporation ("The Company") is engaged in the
manufacture and distribution of various types of electronic stabilizers
and illuminator ballasts for fluorescent lighting fixtures. The Company
grants credit, on an unsecured basis, to distributors and installers
located throughout the United States.
The Company is 53% owned by Eiger Technology, Inc. ("Eiger"), a
publicly traded Canadian corporation, and 47% by one other stockholder.
Method of Accounting:
These financial statements have been prepared on the basis of
accounting generally accepted in the United States of America.
Principles of Consolidation:
The consolidated financial statements include the accounts of the
Company and its 86.66% owned interest in K-Tronik Asia Corporation. All
material intercompany accounts and transactions have been eliminated in
consolidation.
Cash and Cash Equivalents:
The Company considers all highly liquid debt instruments purchased with
a maturity of three months or less and money market accounts to be cash
equivalents.
Cash in Excess of FDIC Limits:
The Company, at times during the year, maintained cash in excess of the
$100,000 FDIC limit with its financial institution.
Inventories:
Inventories are stated at the lower of cost or market. Cost is
determined by the moving weighted average method.
Property and Equipment:
Property and equipment are stated at cost. The Company provides for
depreciation using straight-line and accelerated methods over the
estimated useful lives of five years.
Advertising Costs:
Advertising costs are charged to operations when incurred. Advertising
expense was $111,129 and $103,697 for the years ended September 30,
2001 and 2000, respectively.
Page 8
K-TRONIK INT'L CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2001 AND 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)
Research and Development Costs:
Research and development costs are charged to operations when incurred.
Profitability and Liquidity:
The accompanying financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of
America, which contemplates continuation of the Company as a going
concern. The Company has sustained substantial operating losses and has
used significant amounts of working capital in recent years.
In view of these matters, realization of a major portion of the assets
in the accompanying balance sheet is dependent upon the success of its
future operations, which in turn is dependent upon, the continued
support of Eiger, the parent company. Eiger's management has
represented that Eiger will continue to support the Company and intends
to convert to equity the loan payable from the Company to Eiger
pursuant to a successful public offering of the Company's common stock
(see Notes 6 and 14). Management believes that actions presently being
taken to revise the Company's operating and financial position provide
the opportunity for the Company to continue as a going concern.
Use of Estimates:
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 period. Actual
results could differ from those estimates.
NOTE 2 - INVENTORY:
Inventory consists of the following::
2001 2000
---- ----
Raw Materials 323,522 373,124
Work-in-Process 119,488 211,367
Finished Goods 1,952,251 934,671
--------- ---------
2,395,261 1,519,162
========= =========
Page 9
K-TRONIK INT'L CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2001 AND 2000
NOTE 3 - PROPERTY AND EQUIPMENT:
Property and equipment are as follows:
2001 2000
---- ----
Transportation Equipment 32,989 42,310
Computer Equipment 45,082 44,508
Tools 155,907 141,388
Furniture and Fixtures 54,815 59,340
Machinery and Equipment 318,826 289,839
------- -------
Total 607,619 577,385
Less: Accumulated Depreciation 202,330 93,290
------- -------
405,289 484,095
======= =======
NOTE 4 - NOTES PAYABLE:
The Company has drawn $1,205,351 and $1,027,835 at September 30, 2001
and 2000, respectively, under a $1,500,000 revolving credit line with
Business Alliance Capital Corporation ("Alliance"), which is due on
demand. The line of credit is secured by equipment, general
intangibles, inventory, the minority stockholder's guarantee and the
majority stockholder's guarantee of $250,000. The line expires June 30,
2002. The availability of funds is limited to percentages of eligible
accounts receivable and inventory. Interest, which is payable monthly,
is computed at 1.5 percent above Alliance's prime rate. Finance fees,
also charged to interest expense and payable monthly, are charged at an
amount equal to one-half of one percent of the average outstanding
balance of the previous month based on a minimum outstanding balance of
$200,000. The loan agreement contains covenants that the Company was in
violation of at September 30, 2001 and 2000. The Company obtained a
waiver from Alliance on December 3, 2001 for the violation at September
30, 2001. The Company also obtained a waiver on March 7, 2001 for the
violation at September 30, 2000.
K-Tronik Asia has drawn approximately $221,260 under a revolving line
of credit of approximately $300,000 at September 30, 2001. The line
expires May 29, 2002. Interest which is payable upon borrowing, is
charged at an adjustable rate, currently 5% per annum.
NOTE 5 - INVESTMENT IN FOREIGN JOINT VENTURE:
The Company has a 86.66% ownership interest in K-Tronik Asia Corp.
("Asia"). Asia is a Korean factory which currently manufactures
products for the Company.
The functional currency of Asia is the Korean won. The assets and
liabilities of the foreign entity has been translated at the exchange
rates as of September 30, 2001 and 2000. Income and expense accounts
were translated at the average rates in effect during the reporting
Page 10
K-TRONIK INT'L CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2001 AND 2000
NOTE 5 - INVESTMENT IN FOREIGN JOINT VENTURE: (Continued)
period. Translation adjustments are included as a component of
stockholders' equity.
The opinion of the other auditors on the September 30, 2001 and 2000
financial statements of K-Tronik Asia Corporation emphasized that the
operations of K-Tronik Asia Corporation have been and may continue to
be affected for the foreseeable future by the adverse economic
conditions in the Republic of Korea in recent years and those in the
Asia Pacific region in general.
NOTE 6 - RELATED PARTY TRANSACTIONS AND CONCENTRATIONS:
As of September 30, 2001 and 2000, the Company had been advanced a non-
interest bearing loan from Eiger, the parent company, which is not
expected to be repaid within the current year. Transactions between the
Company and companies under control of the stockholder are not
necessarily the same as would occur between related parties.
At September 30, 2001, the Company had been advanced $250,000, with
interest payable monthly at 7% per annum, from Eiger, the parent
company, which is not expected to be repaid within the current period.
Asia is the major supplier of the Company's inventory. All of the
purchases are from Asia. If this investment were to terminate, there is
a reasonable possibility that a reduction to the Company's gross profit
would result.
NOTE 7 - COMMITMENTS AND CONTINGENCY:
The Company assumed a lease of its office space located in Hackensack,
New Jersey which expires November 30, 2002. The lease contains a
provision requiring the company to pay property taxes and operating
expenses which exceed base year amounts. Asia occupies a factory
located in South Korea under a lease which expires March 31, 2004.
Total rent expense was approximately $105,500 and $90,000 for the
years ended September 30, 2001 and 2000, respectively.
Future minimum annual rent payments and related operating expenses
under these leases are approximately as follows:
Year Ending
September 30,
-------------
2002 97,000
2003 61,000
2004 27,000
--------
185,000
========
Page 11
K-TRONIK INT'L CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2001 AND 2000
NOTE 7 - COMMITMENTS AND CONTINGENCY: (Continued)
The Company is involved in a bankruptcy claim filed against one of its
customers. The suit calls for $142,806 in trade accounts receivable
claims. The Company believes it will receive $53,306, the amount
included in accounts receivable, within the next fiscal year.
NOTE 8 - MAJOR CUSTOMER:
One customer accounted for approximately 11% and 12% of sales for the
years ended September 30, 2001 and 2000, respectively, which accounted
for $104,365 and $137,509 of accounts receivable as of September 30,
2001 and 2000, respectively.
NOTE 9 - INCOME TAXES:
Income taxes for the years ended September 30, 2001 and 2000 are as
follows:
2001 2000
---- ----
Federal 5,245 5,362
State 4,648 6,042
------ ------
9,893 11,404
====== ======
Deferred income taxes reflect the tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and amounts used for income tax purposes. The
significant components of the Company's deferred tax asset is the loss
in the foreign joint venture. A valuation allowance has been
established equal to the amount of the deferred tax asset.
NOTE 10 - RETIREMENT AND SEVERENCE BENEFITS:
Employees who have been with K-Tronik Asia Corporation for over one
year are entitled to lump-sum payments based on current rates of pay
and length of service when they leave K-Tronik Asia Corporation. It is
not the policy of K-Tronik Asia Corporation to fund retirement and
severance benefits accrued. However, provision has been made in the
accompanying financial statements for the estimated accrued liability
(approximately $44,000 and $21,000 at September 30, 2001 and 2000,
respectively) under the plan, which would be payable if all employees
left on the balance sheet date.
The Company did not adopt Statement of Financial Accounting Standards
(SFAS) No. 87, "Employers' Accounting for Pensions". However,
management believes that the adoption of SFAS No. 87 would not have a
material effect on the Company's results of operations or financial
position.
Page 12
K-TRONIK INT'L CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2001 AND 2000
NOTE 11 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest for the years ended September 30, 2001 and 2000
was $203,033 and $155,496, respectively.
Cash paid for income taxes for the years ended September 30, 2001 and
2000 was $19,698 and $7,904, respectively.
NOTE 12 - CHANGE IN ACCOUNTING PRINCIPLE - ORGANIZATION COSTS:
During the year ended September 30, 2000, the Company changed its
method of accounting for organization cost to conform with the new
requirements of Statement of Position 98-5 Reporting on the Cost of
Start-up Activities. The effect of this change was to decrease net
income for September 30, 2000 by $337,896.
NOTE 13 - PRIOR PERIOD ADJUSTMENTS:
Retained earnings at the beginning of September 30, 2000 has been
adjusted to correct the following errors made in the prior year. Had
the errors not been made, net income for September 30, 1999 would have
been increased by $282,828, net of income tax of $-0-.
Error in Unrecorded Forgiveness of Debt 282,828
Understatement of Expenses of K-Tronik International (300,000)
Understatement of Management Fee Revenue of K-Tronik Asia 300,000
--------
282,828
========
NOTE 14 - SUBSEQUENT EVENT:
On December 6, 2001, Eiger announced the signing of an agreement to
take the Company public, in the first quarter of 2002 by way of a
reverse acquisition with LMC Capital Corp. ("LMC"), a U.S. reporting
issuer. Eiger is to receive 7,571,428 shares of LMC for its 53%
ownership of the Company. In addition, Eiger will receive an additional
7,071,000 shares of LMC in part because of its agreement to convert
debt owed to it by the Company. The total consideration of 14,642,428
shares will represent 64% of the shares of LMC.
On December 4, 2001, Eiger acquired 17,199 shares (13.34%) of K-Tronik
Asia Corporation for $79,000, Eiger then transferred the 17,199 shares
to K-Tronik Int'l Corporation for $79,000. After this transaction,
K-Tronik Int'l Corporation owns 100% of K-Tronik Asia Corporation.
SUPPLEMENTARY INFORMATION TO CONSOLIDATED FINANCIAL STATEMENTS
Page 13
Board of Directors
K-Tronik Int'l Corporation
290 Vincent Avenue
Hackensack, New Jersey 07601
INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTARY INFORMATION
Our report on our audit of the consolidated financial statements of K-Tronik
Int'l Corporation for September 30, 2001 and 2000, appears on page 1. That
audit was conducted for the purpose of forming an opinion on the consolidated
financial statements taken as a whole. The accompanying supplementary
information contained in the consolidating balance sheet, statements of
operations and comprehensive loss, and cash flows is presented for purposes of
additional analysis of the consolidated financial statements rather than to
present the financial position, results of operations and cash flows of the
individual companies. Such information has been subjected to the auditing
procedures applied in the audit of the consolidated financial statements and, in
our opinion, is fairly stated in all material respects in relation to the
consolidated financial statements taken as a whole.
Our opinion, insofar as it relates to K-Tronik Asia Corporation is based on the
report of other auditors, such information is fairly stated in all material
respects in relation to the consolidated financial statements taken as a whole.
/s/ SMOLIN, LUPIN & CO., P.A.
Fairfield, New Jersey
November 30, 2001
Page 14
K-TRONIK INT'L CORPORATION
CONSOLIDATING BALANCE SHEET - SEPTEMBER 30, 2001
ASSETS
K-Tronik
Int'l K-Tronik
Total Eliminations Corporation Asia Corp.
-------------- -------------- -------------- --------------
CURRENT ASSETS:
Cash and Cash Equivalents 95,600 - 70,852 24,748
Accounts Receivable - Net of Allowance for
Doubtful Accounts of $19,000 1,363,613 (303,738) 1,359,372 307,979
Inventory 2,395,261 20,794 1,718,643 655,824
Prepaid Expenses 151,429 - 38,806 112,623
---------- ---------- ---------- ----------
Total Current Assets 4,005,903 (282,944) 3,187,673 1,101,174
---------- ---------- ---------- ----------
PROPERTY AND EQUIPMENT - Net 405,289 - 24,423 380,866
---------- ---------- ---------- ----------
OTHER ASSETS:
Investment in Foreign Subsidiary - (808,916) 808,916 -
Security Deposits 44,058 - - 44,058
Regulatory approval - Net of Accumulated
Amortization of $33,035 116,072 - 116,072 -
Loans and Advances 9,983 - 9,983 -
---------- ---------- ---------- ----------
170,113 (808,916) 934,971 44,058
---------- ---------- ---------- ----------
TOTAL ASSETS 4,581,305 (1,091,860) 4,147,067 1,526,098
========== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Notes Payable 1,426,611 - 1,205,351 221,260
Accounts Payable and Accrued Expenses 1,353,710 (303,738) 442,937 1,214,511
---------- ---------- ---------- ----------
Total Current Liabilities 2,780,321 (303,738) 1,648,288 1,435,771
---------- ---------- ---------- ----------
LOAN PAYABLE - Parent Company 3,709,180 - 3,709,180 -
---------- ---------- ---------- ----------
STOCKHOLDERS' DEFICIENCY:
Common Stock - No Par Value; 25,000 Shares
Authorized, Issued and Outstanding 100,000 (525,115) 100,000 525,115
Additional Paid-In Capital 1,053,162 (2,747,693) 1,053,162 2,747,693
Accumulated Deficit (2,222,397) 3,074,121 (2,243,191) (3,053,327)
Accumulated Other Comprehensive Loss -
Foreign Currency Translation Adjustments (120,372) 129,154 (120,372) (129,154)
---------- ---------- ---------- ----------
Total (1,189,607) (69,533) (1,210,401) 90,327
Less: Minority Interest 718,589 718,589 - -
---------- ---------- ---------- ----------
(1,908,196) (788,122) (1,210,401) 90,327
---------- ---------- ---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIENCY 4,581,305 (1,091,860) 4,147,067 1,526,098
========== ========== ========== ==========
See independent auditors' report on supplementary information.
Page 15
K-TRONIK INT'L CORPORATION
CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE YEAR ENDED SEPTEMBER 30, 2000
K-Tronik
Int'l K-Tronik
Total Eliminations Corporation Asia Corp.
-------------- -------------- -------------- --------------
REVENUE 4,494,699 2,975,463 4,478,187 2,991,975
COST OF SALES 3,086,716 2,995,528 3,402,288 2,679,956
---------- ---------- ---------- ----------
GROSS PROFIT 1,407,983 (20,065) 1,075,899 312,019
OPERATING EXPENSES 1,646,893 - 918,561 728,332
---------- ---------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS (238,910) (20,065) 157,338 (416,313)
---------- ---------- ---------- ----------
OTHER INCOME AND (EXPENSES):
Interest Income 498 - - 498
Research and Development Costs (441,987) - - (441,987)
Interest Expense (168,221) - (168,044) (177)
Loss on Sale of Equipment (443) - (443) -
Loss from Investment in Subsidiary - 1,031,295 (1,031,295) -
---------- ---------- ---------- ----------
Total Other Income and (Expenses) (610,153) 1,031,295 (1,199,782) (441,666)
---------- ---------- ---------- ----------
LOSS BEFORE MINORITY INTEREST IN LOSS OF
CONSOLIDATED COMPANIES, INCOME TAXES
AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (849,063) 1,051,360 (1,042,444) (857,979)
MINORITY INTEREST IN LOSS OF CONSOLIDATED
COMPANIES 158,752 158,752 - -
---------- ---------- ---------- ----------
LOSS BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (690,311) 1,210,112 (1,042,444) (857,979)
INCOME TAXES 11,404 - 11,404 -
---------- ---------- ---------- ----------
LOSS BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE (701,715) 1,210,112 (1,053,848) (857,979)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE (337,896) - (5,828) (332,068)
---------- ---------- ---------- ----------
NET LOSS FOR THE YEAR (1,039,611) 1,210,112 (1,059,676) (1,190,047)
FOREIGN CURRENCY TRANSLATION
ADJUSTMENTS (53,404) 61,626 (53,404) (61,626)
---------- ---------- ---------- ----------
COMPREHENSIVE LOSS FOR THE YEAR (1,093,015) 1,271,738 (1,113,080) (1,251,673)
========== ========== ========== ==========
See independent auditors' report on supplementary information.
Page 16
K-TRONIK INT'L CORPORATION
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 2001
K-Tronik
Int'l K-Tronik
Total Eliminations Corporation Asia Corp.
-------------- -------------- -------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss for the Year (567,375) 1,058,221 (755,025) (870,571)
Adjustments to Reconcile Net Loss to
Net Cash Provided by (Used by) Operating Activities:
Amortization and Depreciation 147,098 - 23,729 123,369
Bad Debt Expense 54,494 - 54,494 -
Loss on Sale of Fixed Assets 9,423 - - 9,423
Minority Interest in Loss of Consolidated Companies (128,303) (128,303) - -
Loss on Investment in Subsidiary - (833,487) 833,487 -
Net Change in Operating Assets and Liabilities:
Accounts Receivable (456,901) (89,172) (402,669) 34,940
Inventory (876,099) (187,649) (912,187) 223,737
Prepaid Expenses 27,735 - (17,668) 45,403
Security Deposits (8,049) - - (8,049)
Loans and Advances (3,793) - (3,793) -
Accounts Payable and Accrued Expenses 540,106 89,172 (96,275) 547,209
---------- ---------- ---------- ----------
Net Cash Provided by (Used by)
Operating Activities (1,261,664) (91,218) (1,275,907) 105,461
---------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Equipment (132,048) - (574) (131,474)
Sale of Equipment 68,856 - - 68,856
Purchase of Regulatory Approval (11,402) - (11,402) -
---------- ---------- ---------- ----------
Net Cash Used by Investing Activities (74,594) - (11,976) (62,618)
---------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Notes Payable - Net (16,677) - 177,516 (194,193)
Proceeds from Loan Payable - Parent Company 1,230,000 - 1,230,000 -
---------- ---------- ---------- ----------
Net Cash Provided by (Used by)
Financing Activities 1,213,323 - 1,407,516 (194,193)
---------- ---------- ---------- ----------
EFFECT OF EXCHANGE RATE CHANGES (79,050) 91,218 (79,050) (91,218)
---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (201,985) - 40,583 (242,568)
CASH AND CASH EQUIVALENTS - Beginning 297,585 - 30,381 267,204
---------- ---------- ---------- ----------
CASH AND CASH EQUIVALENTS - Ending 95,600 - 70,964 24,636
========== ========== ========== ==========
See independent auditors' report on supplementary information.