TAGALDER (2000) INC.
(FORMERLY TAGALDER INCORPORATED)
REVISED CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2001 AND DECEMBER 31, 2000
TOGETHER WITH REPORT OF INDEPENDENT AUDITORS
(AMOUNTS EXPRESSED IN US DOLLARS)
TAGALDER (2000) INC.
(FORMERLY TAGALDER INCORPORATED)
REVISED CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2001 AND DECEMBER 31, 2000
TOGETHER WITH REPORT OF INDEPENDENT AUDITORS
(AMOUNTS EXPRESSED IN US DOLLARS)
TABLE OF CONTENTS
Report of Independent Auditors 1
Revised Consolidated Balance Sheets 2-3
Revised Consolidated Statements of Operations 4
Revised Consolidated Statements of Cash Flows 5
Revised Consolidated Statements of Changes in
Stockholders' Equity 6
Notes to Revised Consolidated Financial Statements 7-23
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
Tagalder (2000) Inc.
(Formerly Tagalder Incorporated)
We have audited the accompanying revised consolidated balance sheets of Tagalder
(2000) Inc. (formerly Tagalder Incorporated) (incorporated in the Province of
Ontario, Canada) as at December 31, 2001 and 2000 and the related revised
consolidated statements of operations, cash flows and changes in stockholders'
equity for each of the years ended December 31, 2001, 2000 and 1999. These
revised consolidated financial statements are the responsibility of the
management of Tagalder (2000) Inc. (formerly Tagalder Incorporated). Our
responsibility is to express an opinion on these revised consolidated financial
statements based on our audits.
We conducted our audits 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 whether the revised consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the revised consolidated financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall revised financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the revised consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Tagalder
(2000) Inc. (formerly Tagalder Incorporated) as at December 31, 2001 and 2000
and the results of its operations and cash flows for each of the years ended
December 31, 2001, 2000 and 1999 in accordance with generally accepted
accounting principles in the United States of America.
The accompanying revised consolidated financial statements have been prepared
assuming that the company will continue as a going concern. As discussed in
note 1 to the revised consolidated financial statements, the company has no
established source of revenue. This raises substantial doubt about its ability
to continue as a going concern. Management's plans regarding this matter also
are described in note 1. The revised consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
The previous Report of Independent Auditors dated May 21, 2002 has been
withdrawn. The revised financial statements have been adjusted as described in
note 2.
On October 22, 2002, we reported separately to the stockholders of Tagalder
(2000) Inc. (Formerly Tagalder Incorporated) on revised financial statements for
December 31, 2001 and December 31, 2000, prepared in accordance with Canadian
generally accepted accounting principles.
/s/ Schwartz Levitsky Feldman llp
- -----------------------------------
Toronto, Ontario
October 22, 2002 Chartered Accountants
F-1
TAGALDER (2000) INC.
(FORMERLY TAGALDER INCORPORATED)
REVISED CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN US DOLLARS)
2001 2000
$ $
ASSETS
CURRENT ASSETS
Cash . . . . . . . . . . . . 3,087 16,566
Prepaids and sundry assets . 2,718 5,328
Advances receivable (note 5) - -
------ -------
5,805 21,894
MINERAL PROPERTIES (note 6). . 1 1
EMU FARM (note 7). . . . . . . 1 356,662
INVESTMENTS (note 8) . . . . . 3 -
WEB SITES (note 9) . . . . . . 1 116,746
------ -------
5,811 495,303
====== =======
APPROVED ON BEHALF OF THE BOARD
___________________________________Director
___________________________________Director
F-2
TAGALDER (2000) INC.
(FORMERLY TAGALDER INCORPORATED)
REVISED CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN US DOLLARS)
2001 2000
$ $
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities (note 10) 62,898 18,646
LOANS AND ADVANCES (note 11) . . . . . . . . . . . . 16,470 -
------------ ----------
79,368 18,646
------------ ----------
STOCKHOLDERS' EQUITY (DEFICIENCY)
COMMON STOCK (note 12) . . . . . . . . . . . . . . . . 3,836,484 1,475,082
ACCUMULATED OTHER COMPREHENSIVE LOSS . . . . . . . . (24,360) (11,416)
DEFICIT. . . . . . . . . . . . . . . . . . . . . . . (3,885,681) (987,009)
------------ ----------
(73,557) 476,657
------------ ----------
5,811 495,303
============ ==========
The accompanying notes are an integral part of these revised consolidated
financial statements.
F-3
TAGALDER (2000) INC.
(FORMERLY TAGALDER INCORPORATED)
REVISED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31
(AMOUNTS EXPRESSED IN US DOLLARS)
2001 2000 1999
$ $ $
REVENUE . . . . . . . . . . . . . . . . . . - - -
EXPENSES
Administrative services . . . . . . . . 11,625 7,137 12,132
Communications. . . . . . . . . . . . . 1,155 1,397 1,727
Consulting. . . . . . . . . . . . . . . 31,359 1,821 72,059
Exploration costs (recovery). . . . . . - (241) 16,826
Management fees . . . . . . . . . . . . . . 31,920 - -
Office and general. . . . . . . . . . . 4,987 4,970 6,876
Professional fees . . . . . . . . . . . 38,994 19,216 17,963
Public relations. . . . . . . . . . . . 383 481 205
Shareholder information . . . . . . . . 4,379 4,775 2,282
Transfer agent fees . . . . . . . . . . 3,097 5,166 4,382
Travel and accommodation. . . . . . . . - 9,735 4,857
----------- ----------- ----------
127,899 54,457 139,309
----------- ----------- ----------
LOSS FROM CONTINUING OPERATIONS
BEFORE UNDERNOTED ITEMS . . . . . . . (127,899) (54,457) (139,309)
Write-down of investments (note 8). . . (2,312,317) - -
Write-down of emu farm (note 9) . . . . (345,437) - -
Write-down of web sites (note 10) . . . (113,019) - -
Forgiveness of debt (note 13) . . . . . - - 258,609
----------- ----------- ----------
EARNINGS (LOSS) FROM CONTINUING
OPERATIONS. . . . . . . . . . . . . . . (2,898,672) (54,457) 119,300
Discontinued operations (note 14) . . . - - (72,021)
----------- ----------- ----------
NET INCOME (LOSS) . . . . . . . . . . . . . (2,898,672) (54,457) 47,279
----------- ----------- ----------
Net earnings (loss) per common share
(basic and diluted) . . . . . . . . . . (0.13) (0.01) 0.01
----------- ----------- ----------
Weighted average number of common
shares outstanding, adjusted for
reverse split of company's stock (1:10)
on August 30, 2000 (note 12). . . . . . 21,483,649 10,333,276 7,085,946
=========== =========== ==========
The accompanying notes are an integral part of these revised consolidated
financial statements.
F-4
TAGALDER (2000) INC.
(FORMERLY TAGALDER INCORPORATED)
REVISED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
(AMOUNTS EXPRESSED IN US DOLLARS)
2001 2000 1999
$ $ $
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss). . . . . . . . . . . . . . (2,898,672) (54,457) 47,279
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Write-down of web sites. . . . . . . . . . . 113,019 - -
Write-down of emu farm . . . . . . . . . . . 345,437 - -
Write-down of investments. . . . . . . . . . 2,312,317 - -
Forgiveness of debt. . . . . . . . . . . . . - - (258,609)
Discontinued operations. . . . . . . . . . . - - 72,021
Prepaid and sundry assets. . . . . . . . . . 2,362 (4,843) 111,355
Accounts payable and accrued liabilities . . 46,646 (27,707) 6,907
----------- --------- ---------
Net cash used in operating activities. . . . . (78,891) (87,007) (21,047)
----------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common shares. . . . . . . . . . 49,083 103,016 33,652
Loans and advances . . . . . . . . . . . . . 16,942 (3,367) 16,826
----------- --------- ---------
Net cash provided by financing activities. . . 66,025 99,649 50,478
----------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in joint venture under
development. . . . . . . . . . . . . . . - - (25,797)
----------- --------- ---------
Net cash used in investing activities. . . . . - - (25,797)
----------- --------- ---------
EFFECT OF FOREIGN CURRENCY EXCHANGE
RATE CHANGES . . . . . . . . . . . . . . . . (613) (1,099) 186
----------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS . . . . . . . . . . . . . . (13,479) 11,543 3,820
Cash and cash equivalents, beginning of
year . . . . . . . . . . . . . . . . . . 16,566 5,023 1,203
----------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF
YEAR . . . . . . . . . . . . . . . . . . . . 3,087 16,566 5,023
=========== ========= =========
Income taxes paid. . . . . . . . . . . . . . - - -
=========== ========= =========
Interest paid. . . . . . . . . . . . . . . . - - -
=========== ========= =========
The accompanying notes are an integral part of these revised consolidated
financial statements.
F-5
TAGALDER (2000) INC.
(FORMERLY TAGALDER INCORPORATED)
REVISED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31,
(AMOUNTS EXPRESSED IN US DOLLARS)
Accumulated
Common Stock Other
Number of Common Stock Comprehensive
Shares Amount Deficit Loss
----------- ------------ ----------- -------------
$ $ $
Balance as of December 31,
1998. . . . . . . . . . . . . . 6,335,972* 793,921 (979,831) (819)
Issuance of common stock
(note 11) . . . . . . . . . 1,000,000* 50,478 - -
Foreign currency translation. - - - (8,765)
Net income for the year . . . - - 47,279 -
----------- --------- ----------- --------
Balance as of December 31,
1999. . . . . . . . . . . . . . 7,335,972* 844,399 (932,552) (9,584)
Issuance of common stock
(note 11) . . . . . . . . . 8,991,910 630,683 - -
Foreign currency translation. - - - (1,832)
Net loss for the year . . . . - - (54,457) -
----------- --------- ----------- --------
Balance as of December 31,
2000. . . . . . . . . . . . . . 16,327,882 1,475,082 (987,009) (11,416)
Issuance of common stock
(note 11) . . . . . . . . . 21,541,136 2,361,402 - -
Foreign currency translation. - - - (12,944)
Net loss for the year . . . . - - (2,898,672) -
----------- --------- ----------- --------
37,869,018 3,836,484 (3,885,681) (24,360)
=========== ========= =========== ========
*Adjusted for reverse split of company's stock (1:10) on August 30, 2000
The accompanying notes are an integral part of these revised consolidated
financial statements.
F-6
TAGALDER (2000) INC.
(FORMERLY TAGALDER INCORPORATED)
NOTES TO REVISED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN US DOLLARS)
1. GOING CONCERN ASSUMPTION
These consolidated financial statements have been prepared on the going concern
basis, which assumes the realization of assets and liquidation of liabilities
and commitments in the normal course of business. The application of the going
concern concept is dependent on the company's ability to generate sufficient
working capital from operations and external investors. These consolidated
financial statements do not give effect to any adjustments should the company be
unable to continue as a going concern and, therefore, be required to realize its
assets and discharge its liabilities in other than the normal course of business
and at amounts differing from those reflected in the consolidated financial
statements. Management plans to obtain sufficient working capital from opera-
tions and external financing to meet the company's liabilities and commitments
as they become payable over the next twelve months. There can be no assurance
that management's plans will be successful. Failure to obtain sufficient working
capital from operations and external financing will cause the Company to curtail
operations.
2. REVISION TO FINANCIAL STATEMENTS
These financial statements have been revised to reflect the write-down of
investments in the emu farm and web suites to $1 each. These write-downs were
necessary to reflect the impact of uncertain cash flows with respect to these
investments.
The following table presents the effects of the aforementioned adjustments:
2001 2001
as as previously
revised reported
$ $
Total assets 5,811 410,668
Net loss (2,898,672) (2,482,672)
Net loss per common share (0.13) (0.12)
Notes 3, 4, 7, 8, 9, 12 and 19 have been revised.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Presentation
These consolidated financial statements include the accounts of Tagalder (2000)
Inc. ("the company") and its wholly-owned subsidiaries, 1122403 Ontario Ltd. and
Tagalder Technology Corporation. A former wholly-owned subsidiary, Sinotag
Corporation was disposed of during 2000 for $1.
All material inter-company transactions have been eliminated.
F-7
TAGALDER (2000) INC.
(FORMERLY TAGALDER INCORPORATED)
NOTES TO REVISED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN US DOLLARS)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
b) Background Information
The company was incorporated in Ontario on August 16, 1961 as Sock Fiberglass
(Canada) Limited. Sock Fiberglass (Canada) Limited changed its name to L'Air
D' Or Corporation on September 22, 1997. On July 11, 1996, L'Air D'Or
Corporation amalgamated with Tagalder Corporation, which was incorporated on
December 19, 1994. The amalgamated corporation continued under the name of
Tagalder Incorporated until August 31, 2000 when the name was changed to
Tagalder (2000) Inc.
The company was originally formed as an agricultural company primarily doing
business in China. The company is currently concentrating operations raising
emu in Peru. The company also holds mineral exploration rights in Labrador
and has expanded operations with the acquisition of web sites and various
investments in private companies.
c) Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand, amounts due from and to banks,
and any other highly liquid investments purchased with a maturity of three
months or less. The carrying amounts approximate fair values because of the
short maturity of those instruments.
d) Other Financial Instruments
The carrying amount of the companies' accounts receivable and accounts payable
approximates fair value because of the short maturity of these instruments.
e) Long-term Financial Instruments
The fair value of each of the companies' long-term financial assets and debt
instruments is based on the amount of future cash flows associated with each
instrument discounted using an estimate of what the companies' current borrowing
rate for similar instruments of comparable maturity would be.
F-8
TAGALDER (2000) INC.
(FORMERLY TAGALDER INCORPORATED)
NOTES TO REVISED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN US DOLLARS)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
f) Income taxes
The company accounts for income tax under the provisions of FAS No. 109, which
requires recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Deferred income taxes are provided using the
liability method. Under the liability method, deferred income taxes are
recognized for all significant temporary differences between the tax and
financial statement bases of assets and liabilities.
Current income tax expense (recovery) is the amount of income taxes expected to
be payable (recoverable) for the current year. A deferred tax asset and/or
liability is computed for both the expected future impact of differences between
the financial statement and tax bases of assets and liabilities and for the
expected future tax benefit to be derived from tax losses. Valuation allowances
are established when necessary to reduce deferred tax asset to the amount
expected to be "more likely than not" realized in future returns. Tax law and
rate changes are reflected in income in the period such changes are enacted.
g) Emu Farm
The assets of the emu farm are recorded at cost and are amortized on the basis
of their estimated useful lives at the undernoted rates and methods:
Building 4% Declining balance
Fence 10% Declining balance
Equipment 20% Declining balance
Production animals 30 years Straight-line
h) Web Sites
The Web sites are recorded at cost and are amortized over five years on a
straight-line basis. The company reviews annually the estimated useful life of
the web sites.
i) Investments
The company's investments are accounted for by the cost method whereby the
investments are initially recorded at cost and the carrying values are annually
adjusted only for dividends received.
F-9
TAGALDER (2000) INC.
(FORMERLY TAGALDER INCORPORATED)
NOTES TO REVISED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN US DOLLARS)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
j) Foreign Currency Translation
The company maintains its books and records in Canadian dollars, its functional
currency. The financial statements are converted to US dollars, the company's
reporting currency. The translation method used is the current rate method
which is the method mandated by SFAS 52 where the functional currency is the
foreign currency. Under the current method, all assets and liabilities are
translated at the current rate, stockholders' equity accounts are translated at
historical rates and revenues and expenses are translated at average rates for
the year.
Due to the fact that items in the financial statements are translated at
different rates according to their nature, a translation adjustment is created.
This translation adjustment has been included in accumulated other comprehensive
income.
k) Earnings or Loss Per Share
The company adopted FAS No. 128, "Earnings per Share" during fiscal 1998, which
requires disclosure on the financial statements of "basic" and "diluted"
earnings (loss) per share. Basic earnings (loss) per share is computed by
dividing net income (loss) by the weighted average number of common shares
outstanding for the year. Diluted earnings (loss) per share is computed by
using the treasury stock method.
l) Use of Estimates
These consolidated financial statements have been prepared in accordance with
generally accepted accounting principles in the United States of America.
Because a precise determination of assets and liabilities, and correspondingly
revenues and expenses, depends on future events, the preparation of consolidated
financial statements for any period necessarily involves the use of estimates
and assumption. Actual amounts may differ from these estimates. These
consolidated financial statements have, in management's opinion, been properly
prepared within reasonable limits of materiality and within the framework of the
accounting policies summarized herein.
m) Long-Lived Assets
The company adopted the provisions of FAS No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of which has been
superceded by FAS No. 144(note o). FAS No. 121 requires that long-lived assets
to be held and used by an entity be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable.
F-10
TAGALDER (2000) INC.
(FORMERLY TAGALDER INCORPORATED)
NOTES TO REVISED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN US DOLLARS)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
n) Stock Based Compensation
The company has adopted, FAS No. 123, Accounting for Stock-Based Compensation,
which introduced the use of a fair value-based method of accounting for
stock-based compensation. It encourages, but does not require, companies to
recognize compensation expenses for stock-based compensation to employees based
on the new fair value accounting rules. The company chose to continue to
account for stock-based compensation using the intrinsic value method prescribed
in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees", and related interpretations. Accordingly, compensation cost for
stock options is measured as the excess, if any, of the quoted market price of
the company's stock at the measurement date over the amount an employee must pay
to acquire the stock.
o) Recently Issued Accounting Standards
FAS No. 141 - Business Combinations and FAS No. 142 - Goodwill and Other
Intangible Assets. FAS No. 141 requires that companies use only the purchase
method for acquisitions occurring after June 30, 2001. FAS No. 142 required
that goodwill and intangible assets acquired after June 30, 2001 should no
longer be amortized but reviewed annually for impairment.
FAS No. 143 - Accounting For Assets Retirement Obligations - this standard
requires that entities record the fair value of a liability for an asset
retirement obligation in the period in which it is incurred. This standard is
effective for fiscal years beginning after June 15, 2002.
FAS No. 144 - Accounting for the Impairment or Disposal of Long-Lived Assets.
This standard supercedes FAS No. 121 - Accounting for the Impairment of
Long-Lived Asset to be disposed of. This standard requires that business
recognize impairment when the financial statement carrying amount of long-lived
asset or asset group exceeds its fair value and is not recoverable. The
provisions of this statement are effective for financial statements for fiscal
years beginning after December 15, 2001.
FAS No. 145 - Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB
Statement No. 13, and Technical Corrections. FAS 145 updates, clarifies and
simplifies existing accounting pronouncements. FAS 145 rescinds Statement No.
4, which required all gains and losses from extinguishment of debt to be
aggregated and, if material, classified as an extraordinary item, net of related
income tax effect. As a result, the criteria in APB Opinion No. 30 will now be
used to classify those gains and losses because Statement No. 4 has been
rescinded. Statement No. 44 was issued to establish accounting requirements for
the effects of transition to provisions of the Motor Carrier Act of 1980.
Because the transition has been completed, Statement No. 44 is no longer
necessary.
F-11
TAGALDER (2000) INC.
(FORMERLY TAGALDER INCORPORATED)
NOTES TO REVISED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN US DOLLARS)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
o) Recently Issued Accounting Standards (cont'd)
FAS 145 amends Statement No. 13 to require that certain lease modifications that
have economic effects similar to sale-leaseback transactions be accounted for in
the same manner as sale-leaseback transactions. FAS 145 also makes technical
corrections to existing pronouncements.
FAS No. 146 - Accounting for Cost Associated with Exit or Disposal Activities.
FAS 146 requires Companies to recognize costs associated with exit or disposal
activities when they are incurred rather than at the date of a commitment to an
exit or disposal plan. Previous accounting guidance was provided by Emerging
Issues Task Force ("EITF") Issue No. 94-3. FAS 146 replaces EITF 94-3. The
Statement is to be applied prospectively to exit or disposal activities
initiated after December 31, 2002.
The company believes that the above standards would not have a material impact
on its financial position, results of operations or cash flows.
4. COMPREHENSIVE INCOME (LOSS)
The company has adopted FAS No. 130 "Reporting Comprehensive Income" as of
December 1, 1998 which requires new standards for reporting and display of
comprehensive income and its components in the financial statements. However,
it does not affect net income or total stockholders' equity. The components of
comprehensive income are as follows:
2001 2000 1999
$ $ $
NET INCOME (LOSS) . . . . . . . (2,898,672) (54,457) 47,279
OTHER COMPREHENSIVE
INCOME (LOSS)
Foreign currency translation. (12,944) (1,832) (8,765)
----------- -------- -------
COMPREHENSIVE INCOME (LOSS) . . (2,911,616) (56,289) 38,514
=========== ======== =======
F-12
TAGALDER (2000) INC.
(FORMERLY TAGALDER INCORPORATED)
NOTES TO REVISED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN US DOLLARS)
4. COMPREHENSIVE INCOME (LOSS) (cont'd)
The foreign currency translation adjustments are not currently adjusted for
income taxes as the company is located in Canada and the adjustments relate to
the translation of the financial statements from Canadian dollars into United
States dollars as disclosed in note 3(j).
5. ADVANCES RECEIVABLE
2001 2000
$ $
Advances receivable 31,966 33,955
Less: allowance for doubtful accounts (31,966) (33,955)
-------- --------
Advances receivable, net - -
======== ========
Advances receivable represent the balance owed to the company from Sinotag
Corporation, a former subsidiary. The company has filed a claim for the amount
owing (note 18) and is diligently attempting to recover the amount, though
collection cannot be assured.
6. MINERAL PROPERTIES
2001 2000
$ $
75% interest in 55 (250 in 2000)
mineral claims in Labrador subject to
a 3% net smelter return on 10 of
these claims, at nominal value 1 1
======== ========
The mineral properties have been recorded at nominal value of $1 as management
currently has not determined whether these properties contain ore reserves and
is not actively exploring these properties.
F-13
TAGALDER (2000) INC.
(FORMERLY TAGALDER INCORPORATED)
NOTES TO REVISED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN US DOLLARS)
7. EMU FARM
In 2000 the company acquired an Emu farming operation in Peru. The
consideration for the purchase was the issue of 5,336,910 shares of common
stock. The purchase price was determined through an independent third party
valuation.
The farming operation includes the following:
2001 2000
$ $
Building 58,950 60,770
Fence 39,480 40,807
Equipment 29,025 30,010
Production animals 217,983 225,075
------- -------
345,438 356,662
Less: Write-down 345,437 -
------- -------
1 356,662
======= =======
As a result of uncertain future cash flows derived from the operation of the emu
farm, management made a decision to write-down the assets to $1.
The company has entered into an agreement for the management of the farm and the
lease of land for three years commencing January 1, 2001 at a cost of $32,000
per year.
8. INVESTMENTS
Purchase Carrying
Ownership price Write-down value
---------- ------------ ------------ --------
% $ $ $
Tung Shing Development Limited . 40 1,437,882 (1,437,881) 1
Super Success Electronic Company
Limited. . . . . . . . . . . 15 247,030 (247,029) 1
Tagalder Global Innovations Ltd. 15 627,408 (627,407) 1
--------- ----------- --------
2,312,320 (2,312,317) 3
========= =========== ========
F-14
TAGALDER (2000) INC.
(FORMERLY TAGALDER INCORPORATED)
NOTES TO REVISED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN US DOLLARS)
8. INVESTMENTS (cont'd)
a) TUNG SHING DEVELOPMENT LIMITED ("Tung Shing")
On April 25, 2001 and on December 19, 2001, the company acquired a total of 40%
(20% and 20% respectively) in a Hong Kong company, Tung Shing. Tung Shing is in
the business of investment, import/export and general trading in plywood. The
agreed purchase price between the company and Tung Shing was $1,437,882 which
was paid for through the issuance of 13,096,560 shares of common stock in the
company. At the time the investment was acquired. Tung Shing held an interest
in joint ventures that were expected to be sold at a profit. Subsequent to the
company's investment in Tung Shing, it was determined that Tung Shing would not
be able to sell their interest in the joint ventures.
b) SUPER SUCCESS ELECTRONIC COMPANY LIMITED ("Super Success")
On December 19, 2001, the company acquired a 15% interest in Super Success, a
Hong Kong company. Super Success is in the business of manufacturing and
exporting electronic products. The agreed purchase price between the company and
Super Success was $247,029 which was paid for through the issuance of 2,250,000
shares of common stock in the company. As at December 31, 2001, Super Success
had uncertain future cash flows.
c) TAGALDER GLOBAL INNOVATIONS LTD. ("TGI")
On December 19, 2001, the company acquired a 15% interest in TGI, a British
Virgin Islands company involved in multi-media entertainment. The agreed
purchase price between the company and TGI was $627,408 which was paid for
through the issuance of 5,714,576 shares of common stock of the company. As at
December 31, 2001, TGI had not commenced business and had uncertain future cash
flows.
As a result of the above factors, management made a decision to write-down the
investments to $1 each as at December 31, 2001.
9. WEB SITES
In 2000 the company acquired 4 developed web sites. The consideration for the
web sites was the issuance of 1,750,000 shares of common stock. The purchase
price was determined through an independent third party valuation.
These web sites were acquired to promote Chinese culture, trade and travel and
to provide revenue resulting from use of these web sites.
F-15
TAGALDER (2000) INC.
(FORMERLY TAGALDER INCORPORATED)
NOTES TO REVISED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN US DOLLARS)
9. WEB SITES (cont'd)
2001 2000
$ $
Web sites, at cost 113,020 116,746
Less: Write-down. 113,019 -
------- -------
1 116,746
======= =======
As a result of uncertain future cash flows derived from the operation of the web
sites, management made a decision to write-down the assets to $1.
10. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
2001 2000
$ $
Accounts payable and accrued liabilities is comprised of
the following:
Trade payables . . . . . . . . . . . . . . . . . . . . . 50,341 6,975
Accrued liabilities. . . . . . . . . . . . . . . . . . . 12,557 11,671
------ ------
62,898 18,646
====== ======
11. LOANS AND ADVANCES
2001 2000
$ $
Advances from directors are unsecured, bear no
interest, are without specific terms of repayment
and are not expected to be repaid prior to
January 1, 2003. The fair value of the advances
has been estimated by discounting future cash
flows using an estimated rate of 8%. The fair
value of the advances is $15,240. . . . . . . . . 16,470 -
====== ======
F-16
TAGALDER (2000) INC.
(FORMERLY TAGALDER INCORPORATED)
NOTES TO REVISED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN US DOLLARS)
12. COMMON STOCK
a) Authorized
An unlimited number of common shares, no stated value
Issued
2001 2000
$ $
37,869,018 Common shares (2000 - 16,327,882). 3,836,484 1,475,082
========= =========
b) Changes to Issued Share Capital
Effective August 30, 2000, the company's stockholders approved a 1:10 reverse
stock split.
Shares Shares
Number $
Balance, December 31, 1998. . . . . . 6,335,972* 793,921
Issued for cash . . . . . . . . . . 666,667* 33,652
Issued for repayment of debt. . . . 333,333* 16,826
---------- ---------
Balance, December 31, 1999. . . . . . 7,335,972* 844,399
Issued for cash . . . . . . . . . . 1,530,000 103,016
Exercise of options . . . . . . . . 375,000 50,498
Issued for acquisition of emu farm. 5,336,910 359,340
Issued for acquisition of web sites 1,750,000 117,829
---------- ---------
Balance, December 31, 2000. . . . . . 16,327,882 1,475,082
Issued for cash . . . . . . . . . . . . . . 200,000 21,958
Exercise of options . . . . . . . . . . . . 280,000 27,125
Issued for investment in Tung Shing . . . . 13,096,560 1,437,882
Issued for investment in Super Success. . . 2,250,000 247,029
Issued for investment in TGI. . . . . . . . 5,714,576 627,408
---------- ---------
Balance, December 31, 2001. . . . . . 37,869,018 3,836,484
========== =========
F-17
TAGALDER (2000) INC.
(FORMERLY TAGALDER INCORPORATED)
NOTES TO REVISED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN US DOLLARS)
12. COMMON STOCK (cont'd)
c) Stock Option Plan
The company has adopted a stock option plan ("the plan") on July 27, 1996
pursuant to which the maximum number of shares which may be optioned under the
plan may not exceed 20% of the total of the issued and outstanding common stock
less the number previously reserved for issuance or 1,460,000* shares,
whichever is greater.
Options may be granted to officers, directors, consultants, key employees,
advisors and similar parties who provide their skills and expertise to the
company. Options granted under the plan may be exercisable for up to 5 years,
may require vesting and shall be at an exercise price, all as determined by the
board.
If a participant ceases affiliation with the company other than by reason of
death, termination for cause, retirement at normal retirement age or upon the
optionee's ceasing to be a director other than by reason of death, removal or
disqualification by law, the option remains exercisable by the participant for a
period of 90 days or the expiry date whichever occurs earlier. If the optionee
dies while employed by the company or while serving as a director, the options
remain exercisable for a period of 180 days or the expiry date whichever occurs
earlier. Termination for cause or removal or disqualification by law results in
immediate termination of the option.
Options granted under the plan by the directors of the compensation committee,
may be exercised with cash.
On September 1, 2000, all previously unexercised options were cancelled and
2,525,000 new options were granted at an exercise price of CDN $0.15 prior to
September 1, 2001 and CDN $0.25 for the period from September 1, 2001 to August
31, 2002.
F-18
TAGALDER (2000) INC.
(FORMERLY TAGALDER INCORPORATED)
NOTES TO REVISED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN US DOLLARS)
12. COMMON STOCK (cont'd)
c) Stock Option Plan (cont'd)
Shares
Available Shares Subject Option
For Grant to Options Prices
----------- --------------- ------------
CDN $
Outstanding at December 31, 1998 233,595* 500,000* 0.50*
Granted. . . . . . . . . . . . (50,000)* 50,000* 0.50*
Expired. . . . . . . . . . . . 280,000* (280,000)* 0.50*
----------- ---------- ------------
Outstanding at December 31, 1999 463,595* 270,000* 0.50*
Amendment. . . . . . . . . . . 3,200,000 - -
Granted. . . . . . . . . . . . (2,525,000) 2,525,000 0.15 or 0.25
Granted. . . . . . . . . . . . (375,000) 375,000 0.20
Exercised. . . . . . . . . . . - (375,000) 0.20
Cancelled. . . . . . . . . . . (463,595)* (270,000)* 0.50*
----------- ---------- ------------
Outstanding at December 31, 2000 300,000 2,525,000 0.15 or 0.25
Granted. . . . . . . . . . . . . . . . (100,000) 100,000 015 or 0.25
Granted. . . . . . . . . . . . . . . . (200,000) 200,000 0.15
Exercised. . . . . . . . . . . . . . . - (280,000) 0.15
Expired. . . . . . . . . . . . . . . . 325,000 (325,000) 0.15 or 0.25
----------- ---------- ------------
Outstanding at December 31, 2001 325,000 2,220,000 0.15 or 0.25
=========== ========== ============
F-19
TAGALDER (2000) INC.
(FORMERLY TAGALDER INCORPORATED)
NOTES TO REVISED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN US DOLLARS)
12. COMMON STOCK (cont'd)
c) Stock Option Plan (cont'd)
Pro-forma information regarding net income and earnings per share is required by
FAS No. 123 - "Accounting for Stock Based Compensation" and has been determined
as if the company had accounted for its employee stock options based on fair
values at the grant date for options granted under the Plan. The company's
pro-forma information for the year ended December 31, 2001 would have been as
follows:
2001 2001
----------- ------------
As Reported Pro-Forma
----------- ------------
Loss from continuing operations. . . . . . . . . (2,898,672) $(2,917,672)
Basic and diluted EPS from continuing operations (0.13) $ (0.14)
2000 2000
----------- ------------
As Reported Pro-Forma
----------- ------------
Loss from continuing operations. . . . . . . . . (54,457) $ (279,657)
Basic and diluted EPS from continuing operations (0.01) $ (0.03)
1999 1999
----------- ------------
As Reported Pro-Forma
----------- ------------
Income from continuing operations. . . . . . . . 47,279 $ 46,279
Basic and diluted EPS from continuing operations 0.01 $ 0.01
The fair value of each option grant used for purposes of estimating the
pro-forma amounts summarized above is based on the grant date using the
Black-Scholes option pricing model with the weighted average assumptions shown
in the following table:
2001 2000 1999
Risk free interest rate . . . . . . . 4.0% 6.7% 6.7%
Volatility factor . . . . . . . . . . 100% 100% 100%
Weighted average expected life. . . . 1.12 years 1.99 years 1.35 years
Weighted average fair value per share $0.06 $0.08 $0.02
Expected dividends. . . . . . . . . . nil nil nil
F-20
TAGALDER (2000) INC.
(FORMERLY TAGALDER INCORPORATED)
NOTES TO REVISED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN US DOLLARS)
13. FORGIVENESS OF DEBT
During 1999, the company and certain of its creditors entered into agreements
whereby the amounts owing to them were settled at rates ranging from 10% to 40%
of the original debt.
14. DISCONTINUED OPERATIONS
During 1999, the company received notice from its joint venture partner that the
agreement with Teiling City in China was terminated as a result of being unable
to raise required funding. Accordingly, all assets associated with the joint
venture were written off.
15. INCOME TAXES
The components of deferred tax assets and liabilities are as follows:
2001 2000 1999
$ $ $
Deferred tax assets:
Net operating loss carryforwards 288,000 248,000 211,000
Net capital loss carryforwards . 120,000 128,000 11,000
--------- --------- ---------
Total deferred assets. . . . . . 408,000 376,000 222,000
Less: valuation allowance . . . (408,000) (376,000) (222,000)
--------- --------- ---------
Net deferred tax asset . . . . . - - -
========= ========= =========
The company has accumulated losses for income taxes purposes amounting to
$654,378, which may be carried forward to reduce taxable income in future years.
The potential future income tax benefits have not been recognized in these
financial statements. The deductibility of these losses expires as follows:
2003 $ 14,391
2004 127,219
2005 310,063
2006 158
2007 78,212
2008 124,335
------------
$ 654,378
============
In addition, as at December 31, 2001, the company has net capital loss carry
forwards of $273,583 which may be used to offset any future capital gains.
F-21
TAGALDER (2000) INC.
(FORMERLY TAGALDER INCORPORATED)
NOTES TO REVISED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN US DOLLARS)
16. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Non-monetary transactions:
2001 2000 1999
$ $ $
Shares issued for investments. . . . . . . 2,312,320 - -
Shares issued for repayment of debt. . . . - - 16,826
Shares issued for acquisition of emu farm. - 359,340 -
Shares issued for acquisition of web sites - 117,829 -
Options issued to settle debt. . . . . . . - 50,498 -
Forgiveness of debt. . . . . . . . . . . . - - 258,609
Write-off due to discontinued operations . - - 72,021
17. RELATED PARTY TRANSACTIONS
The following transactions were entered into with related parties.
2001 2000
$ $
Acquisition of web sites for common stock - 29,453
18. CONTINGENT LIABILITY
The company is a defendant in an action commenced by a former president and a
company controlled by the former president for salaries in his capacity as
president in the approximate amount of $52,000 and for office services in the
approximate amount of $42,000, provided by that company.
The directors are of the opinion that the claim is without merit and the company
has filed a Statement of Defense and a counterclaim for approximately $34,000.
Since the amount of the loss, if any, cannot reasonably be estimated, no
provision has been made in the accounts. Any loss resulting from this action
will be recorded in the period in which the judgment is made.
F-22
TAGALDER (2000) INC.
(FORMERLY TAGALDER INCORPORATED)
NOTES TO REVISED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
(AMOUNTS EXPRESSED IN US DOLLARS)
19. SEGMENTED INFORMATION
The company has adopted FAS No. 131 - "Disclosures About Segments Of Enterprise
And Related Information".
a) The breakdown of net income (loss) by geographic area is as follows:
2001 2000 1999
$ $ $
Canada . . (208,998) (54,457) (139,309)
China. . . (2,312,317) - 186,588
Peru . . . (377,357) - -
----------- -------- ---------
(2,898,672) (54,457) 47,279
=========== ======== =========
b) The breakdown of identifiable assets by geographic area is as follows:
2001 2000
$ $
Canada. . . 5,807 138,641
China . . . 3 -
Peru. . . . 1 356,662
----- -------
5,811 495,303
===== =======
F-23