UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT TO
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 DATE OF REPORT
(Date of earliest event reported): February 28, 2003
UGOMEDIA INTERACTIVE CORPORATION
--------------------------------
(Exact name of Registrant as specified in charter)
NEVADA 000-31160 88-0470239
--------- ------------------- -----------
(State of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
1020 NORTH JOHNSON, BAY CITY, MI 48708
--------------------------------------------------------
(Address of Principal Executive
Offices Zip Code Registrant's telephone number,
including area code:(989) 892-8740
(Former Name or Former Address, if Changed Since Last Report)
N/A
- --------------------------------------------------------------------------------
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
We previously reported, in a Current Report on Form 8-K, dated March 27, 2003,
our acquisition of control of Sciax Technology, Inc., a Canadian corporation
("Sciax"). We are filing the within amendment to include the financial
statements of Sciax required to be filed herewith.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
Financial Statements of
SCIAX TECHNOLOGY INC.
Years ended July 31, 2002 and 2001
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report F-1
Balance Sheets F-2
Statements of Operations F-3
Statements of Shareholders' Deficiency and Comprehensive Income (Loss) F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6 - F-14
AUDITOR'S REPORT
- --------------------------------------------------------------------------------
To the Shareholder of:
Sciax Technology, Inc.
We have audited the balance sheets of Sciax Technology Inc., as of July 31, 2002
and 2001 and the related statements of operations, shareholders' deficiency and
comprehensive income (loss) and cash flows for the years then ended. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in Canada. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Sciax Technology, Inc. at July 31, 2002
and 2001, and the results of its operations and its cash flows for each of the
two years then ended in conformity with accounting principles generally accepted
in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2(a) to the
financial statements, the Company has incurred recurring losses from operations,
working capital deficiencies and shareholders' deficiency's, which raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 2(a).
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
[REPRESENTATION OF GRAPHIC]
Burlington, Ontario Harrison Carlson Criminisi
May 23, 2003 Chartered Accountants LLP
F-1
SCIAX TECHNOLOGY INC.
BALANCE SHEETS
July 31, 2002, with comparative figures for 2001
(IN US DOLLARS)
- ------------------------------------------------------------------------------------------------------------------
2002 2001
ASSETS
CURRENT ASSETS
Cash $ 53,327 $ 11,455
Accounts receivable 32,279 67,115
Inventories 12,635 62,043
Prepaid expenses 2,888 2,904
Investment Tax Credit Receivable (Note 4) 49,135 49,135
- -----------------------------------------------------------------------------------------------------------------
150,264 192,652
PROPERTY AND EQUIPMENT (NOTE 5) 16,406 13,183
- -----------------------------------------------------------------------------------------------------------------
$ 166,670 $ 205,835
=================================================================================================================
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Current portion of bank indebtedness (Note 6) $ 91,509 $ 124,292
Accounts Payable and Accrued Liabilities 89,037 125,587
- -----------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 180,546 249,879
BANK INDEBTEDNESS, NET OF CURRENT PORTION (Note 6) 33,047 41,631
DUE TO SHAREHOLDER (NOTE 7) 121,604 119,036
- -----------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 335,197 410,546
- -----------------------------------------------------------------------------------------------------------------
COMMITMENTS (NOTE 10) - -
SHAREHOLDERS' DEFICIENCY
Capital stock
Authorized:
An unlimited number of Exchangeable shares of no par value - -
An unlimited number of Class A shares of no par value - -
An unlimited number of Class B shares of no par value - -
An unlimited number of Common shares of no par value - -
Issued and outstanding:
20,782,000 Common shares 1 1
ACCUMULATED DEFICIT (177,378) (205,402)
ACCUMULATED OTHER COMPREHENSIVE INCOME 8,850 690
- -----------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' DEFICIENCY (168,527) (204,711)
- -----------------------------------------------------------------------------------------------------------------
$ 166,670 $ 205,835
=================================================================================================================
APPROVED ON BEHALF OF THE BOARD:
Director
- ------------------------
See accompanying notes to financial statements.
F-2
SCIAX TECHNOLOGY INC.
STATEMENTS OF Operations
Year ended July 31, 2002, with comparative figures for 2001
(IN US DOLLARS)
- -----------------------------------------------------------------------------------------------------------------
2002 2001
- -----------------------------------------------------------------------------------------------------------------
SALES $ 361,784 $ 319,631
COST OF GOODS SOLD 191,866 253,967
- -----------------------------------------------------------------------------------------------------------------
GROSS PROFIT 169,918 65,664
OPERATING EXPENSES
Selling, general and administrative 300,647 257,266
Research and development 78,673 20,742
- -----------------------------------------------------------------------------------------------------------------
379,320 278,008
- -----------------------------------------------------------------------------------------------------------------
LOSS FROM OPERATIONS (209,402) (212,344)
Interest and other income 19,917 21,330
Interest and other expenses (32,947) (23,104)
Gain on sale of product (note 8) 250,456 -
- -----------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 28,024 $ (214,118)
=================================================================================================================
See accompanying notes to financial statements.
F-3
SCIAX TECHNOLOGY INC.
STATEMENT OF SHAREHOLDERS' DEFICIENCY AND COMPREHENSIVE INCOME (LOSS)
(in US Dollars)
Accumulated
Common Stock Other Total
------------------------ Accumulated Comprehensive Stockholders' Comprehensive
Shares Amount Deficit Income Deficiency Income (Loss)
----------- ---------- ---------- -------------- ------------ -------------
Balance at August 1, 2000 20,782,000 $ 1 $ 8,716 $ (835) $ 7,882
Change in cumulative
translation adjustment 1,525 1,525 $ 1,525
Net loss - - (214,118) (214,118) (214,118)
----------- ---------- ---------- ------------- ------------ -------------
Balance at July 31, 2001 20,782,000 1 (205,402) 690 (204,711) $ (212,593)
=============
Change in cumulative
translation adjustment 8,160 8,160 8,160
Net income - - 28,024 28,024 28,024
----------- ---------- ---------- ------------- ------------ -------------
Balance at July 31, 2002 20,782,000 $ 1 $ (177,378) $ 8,850 $ (168,527) $ 36,184
=========== ========== ========== ============= ============ =============
See accompanying notes to financial statements.
F-4
SCIAX TECHNOLOGY INC.
STATEMENTS OF CASH FLOWS
Year ended July 31, 2002, with comparative figures for 2001
(IN US DOLLARS)
- -----------------------------------------------------------------------------------------------------------------
2002 2001
- -----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 28,024 $ (214,118)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation 5,271 5,689
- -----------------------------------------------------------------------------------------------------------------
33,295 (208,429)
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Accounts receivable 34,836 136,750
Inventories 49,408 (21,693)
Prepaid expenses 16 (926)
Investment tax credit receivable - (49,135)
Accounts payable and accrued liabilities (36,550) 41,900
- -----------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 81,005 (101,533)
- -----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures on property and equipment (8,494) -
- -----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in due to shareholder 2,568 11,724
Decrease in cash overdraft - (15,294)
(Decrease) Increase in Bank Indebtedness (41,367) 115,033
- -----------------------------------------------------------------------------------------------------------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (38,799) 111,463
- -----------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE ON CASH 8,160 1,525
- -----------------------------------------------------------------------------------------------------------------
INCREASE IN CASH 41,872 11,455
CASH, BEGINNING OF YEAR 11,455 -
- -----------------------------------------------------------------------------------------------------------------
CASH, END OF YEAR $ 53,327 $ 11,455
=================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID DURING THE YEAR FOR:
Interest $ 33,370 $ 23,948
=================================================================================================================
See accompanying notes to financial statements.
F-5
SCIAX TECHNOLOGY INC.
NOTES TO THE FINANCIAL STATEMENTS
Year ended July 31, 2002, with comparative figures for 2001
- --------------------------------------------------------------------------------
1. NATURE OF BUSINESS
Sciax Technology Inc. (the "Company") was incorporated in the province
of Ontario, Canada on August 2, 1996. The Company is engaged in the
manufacturing and sale of optical and opt-electronic remote viewing
systems for military and law enforcement applications. Sciax sells
their products to governments in Canada, The United States, and Europe,
and to industrial customers in manufacturing, aviation/aerospace, oil
and gas, and power generating and mining.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation - The accompanying financial statements have
been prepared assuming that the Company will continue as a going
concern. The Company has incurred recurring losses from operations of
$209,402 and $212,344 for the years ended July 31, 2002 and 2001,
respectively. Additionally, the Company has a net working capital
deficiency of $30,819 and $57,227 and shareholders' deficiency's of
$168,527 and $204,711, at July 31, 2002 and 2001, respectively. These
conditions raise substantial doubt about the Company's ability to
continue as a going concern. Management expects to incur additional
losses from operations into the foreseeable future and recognizes the
need to raise capital to achieve their business plan. Management's
plan with respect to these matters include raising additional capital
through future issuance of stock and/or debt, and the re-structuring
of operations to generate future profitable operations. There can be
no assurance that management will be successful in accomplishing its
business plan. The accompanying financial statements do not include
any adjustments that might be necessary should the Company be unable
to continue as a going concern.
(b) Use of estimates - In preparing financial statements in conformity
with accounting principles generally accepted in the United States of
America, management is required to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the
financial statements and revenues and expenses during the reporting
period. Actual results could differ from those estimates.
(c) Accounts Receivable and Allowance for Doubtful Accounts - The Company
routinely reviews its accounts receivable, by customer account aging,
to determine the collectibility of the amounts due based on
information it receives from the customer, past history and economic
conditions. In doing so, the Company adjusts its allowance accordingly
to reflect the cumulative amount that the Company feels is
uncollectible. This estimate may vary from the proceeds that it
actually collects. If the estimate is too low, the Company may incur
bad debt expense in the future resulting in lower net income. If the
estimate is too high, the Company may experience lower bad debt
expense resulting in higher net income.
F-6
SCIAX TECHNOLOGY INC.
NOTES TO THE FINANCIAL STATEMENTS
Year ended July 31, 2002, with comparative figures for 2001
- --------------------------------------------------------------------------------
(d) Fair Value of Financial Instruments - The carrying amounts reported on
the balance sheet for cash, trade receivables, accounts payable and
accrued expenses approximate fair value based on the short-term
maturity of these instruments. The carrying amount of the Company's
borrowings also approximates their fair value based upon debt terms
available for companies under similar terms.
(e) Inventories - Inventories are stated at the lower of cost (first-in,
first-out basis) or market. All inventories at July 31, 2002 and 2001,
respectively, consisted of finished goods.
(f) Property and Equipment - Property and Equipment are stated at cost,
less accumulated depreciation which is provided on the declining
balance method over the estimated useful lives of the assets. The
Company uses an accelerated depreciation method for both financial
reporting and tax purposes.
(g) Accounting for Long-Lived Assets - The Company reviews long-lived
assets for impairment whenever circumstances and situations change
such that there is an indication that the carrying amounts may not be
recovered. Recoverability of assets to be held and used in operations
is measured by a comparison of the carrying amount of the assets to
the future undiscounted cash flows expected to be generated by the
assets. If such assets are considered to be impaired, the impairment
to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets.
(h) Foreign Currency Translation and Foreign Assets - In accordance with
the provisions of Statement of Financial Accounting Standards
("SFAS"), No. 52, "Foreign Currency Translation," assets and
liabilities of the Company were translated into United States dollars
at the exchange rates in effect on the reporting date, while income
and expenses are translated at an average exchange rate for the
respective period. The resulting translation adjustments, if material,
are recorded as a component of shareholders' deficiency while foreign
currency translation gains and loses are included in earnings.
(i) Comprehensive Income - The Company has adopted SFAS 130, "Reporting
Comprehensive Income", which establishes standards for the reporting
and display of comprehensive income, its components and accumulated
balances. Comprehensive income is defined to include all changes in
equity except those resulting from investments by owners and
distributions to owners. Comprehensive income is displayed in the
statements of shareholders' deficiency and in the balance sheet as a
component of shareholders' deficiency. The Company's comprehensive
income consists of foreign currency translation adjustments.
(j) Income Taxes - The company uses the liability method for income taxes
as required by SFAS No. 109 "Accounting for Income Taxes". Under this
method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax basis of assets and
liabilities. Deferred tax assets and liabilities are measured using
enacted tax rates and laws that will be in effect when the
F-7
SCIAX TECHNOLOGY INC.
NOTES TO THE FINANCIAL STATEMENTS
Year ended July 31, 2002, with comparative figures for 2001
- --------------------------------------------------------------------------------
differences are expected to reverse. Valuation allowances are
established when it is more likely than not that the deferred tax
assets will not be realized.
(k) Revenue Recognition - Revenue is recognized when product is shipped,
the price has been fixed or determined and collectability is
reasonably assured.
(l) Advertising Costs - Advertising costs are expensed as incurred.
Advertising expenses amounted to $19,381 and $18,204 for the years
ended July 31, 2002 and 2001, respectively, and are included in
selling, general and administrative expenses in the accompanying
statements of operations.
(m) Research and Development - Research and development costs, which
consist primarily of product development costs, are expensed in the
period incurred and are included in selling, general and
administrative expenses in the accompanying statements of operations.
(n) Acquisitions - The Company has adopted SFAS No. 141, "Business
Combinations". SFAS 141 requires that the purchase method of
accounting be used for all business combinations initiated after June
30, 2001, and eliminates the pooling-of-interest method. SFAS 141
further clarifies the criteria for recognition of intangible assets
separately from goodwill.
(o) Recent Accounting Pronouncements
(i) SFAS 144
Effective January 1, 2002, the Company adopted SFAS
144, "Accounting for the Impairment or Disposal of
Long-lived Assets". SFAS 144 superceded SFAS No. 121,
"Accounting for the Impairment of Long-lived Assets
and Assets to be Disposed of" and the accounting and
reporting provisions of Accounting Principles Board
Opinion No. 30, "Reporting the Results of Operations -
Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions". SFAS 144 also
amends Accounting Research Bulletin No. 51,
"Consolidated Financial Statements," to eliminate the
exception to consolidation for a subsidiary for which
control is likely to be temporary. The adoption did
not have a material effect the Company's financial
statements.
(ii) SFAS 148
In December 2002, the Financial Accounting Standards
Board ("FASB") issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure -
an amendment of FASB Statement No. 123." SFAS No. 148
amends SFAS No. 123, "Accounting for Stock-Based
Compensation," to provide alternative methods of
transition for a voluntary change to the fair value
based method of accounting for stock-based
F-8
SCIAX TECHNOLOGY INC.
NOTES TO THE FINANCIAL STATEMENTS
Year ended July 31, 2002, with comparative figures for 2001
- --------------------------------------------------------------------------------
employee compensation. In addition, SFAS No. 148
amends the disclosure requirements of SFAS No. 123 to
require prominent disclosures in both annual and
interim financial statements about the method of
accounting for stock-based employee compensation and
the effect of the method used on reported results. The
disclosure requirements apply to all companies for
fiscal years ending after December 15, 2002. The
interim disclosure provisions are effective for
financial reports containing financial statements for
interim periods beginning after December 15, 2002. The
adoption of SFAS No. 148 is not expected to have a
material impact on the Company's financial statements.
(iii) FIN 45
In November 2002, the FASB issued FASB Interpretation
No. 45 ("FIN 45"), "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN 45
requires that upon issuance of a guarantee, the
guarantor must recognize a liability for the fair
value of the obligation it assumes under that
guarantee. FIN 45 also requires additional disclosures
by a guarantor in its interim and annual financial
statements about the obligations associated with
guarantees issued. The disclosure requirements are
effective for financial statements of interim or
annual periods ending after December 15, 2002. The
recognition and measurement provisions are effective
on a prospective basis to guarantees issued or
modified after December 31, 2002. The adoption of FIN
45 is not expected to have a material impact on the
Company's financial statements.
(iv) SFAS 150
In May 2003, the FASB issued SFAS 150, "Accounting for
Certain Financial Instruments with Characteristics of
both Liabilities and Equity." SFAS 150 establishes
standards on the classification and measurement of
financial instruments with characteristics of both
liabilities and equity. SFAS 150 will become effective
for financial instruments entered into or modified
after May 31, 2003. The Company is in the process of
assessing the effect of SFAS 150 and does not expect
the implementation of the pronouncement to have a
material effect on its financial condition or results
of operations.
3. CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS
Financial instruments that potentially subject the Company to
significant concentrations of credit risk consists of cash and trade
receivables. The Company places its cash with high credit quality
financial institutions, and therefore management believes the risk is
relatively limited. In regards to trade receivables, management
believes the risk is relatively limited due to the credit assessment of
its customers.
F-9
SCIAX TECHNOLOGY INC.
NOTES TO THE FINANCIAL STATEMENTS
Year ended July 31, 2002, with comparative figures for 2001
- --------------------------------------------------------------------------------
The Company relies on vendors located in Germany for a significant
amount of its purchases. Purchases from one supplier represented 71%
and 60% of purchases for the year ended July 31, 2002 and 2001,
respectively. As of July 31, 2002 and 2001, the amounts due to the
supplier were approximately $20,030 and $72,634, respectively, and are
included in accounts payable. Management believes that other suppliers
could provide the materials on comparable terms.
Accounts receivable are due from various industrial and defense
customers through out the United States of America and Canada;
accordingly the Company is exposed to business and economic risk.
Although the Company does not currently foresee a concentrated credit
risk associated with these accounts receivable, repayment is dependent
upon the financial stability of the industries served. During the years
ended July 31, 2002 and 2001, four customers accounted for
approximately 26% and 51%, respectively of the Company's sales. These
same customers accounted for approximately 23% and 57% of the Company's
outstanding accounts receivable at July 31, 2002 and 2001,
respectively.
4. INVESTMENT TAX CREDIT RECEIVABLE
Investment tax credits are eligible on certain research and development
costs incurred by the Company. As such, the Company has applied for
refundable Canadian tax credits relating to research and development
costs in the year ended July 31, 2001. Such credits are accounted for
using the cost reduction method. Under this method, tax credits
relating to eligible expenditures are accounted for as a reduction of
related expenses in the period during which the expenditures are
incurred, provided there is reasonable assurance of realization. The
company has recorded $49,135 of such credits, as realizable, as of July
31, 2001. In August 2002 the Company received these tax credits.
5. PROPERTY AND EQUIPMENT
July 31,
Useful ----------------------------------
Life 2002 2001
---------- -------------- ---------------
Office Furniture and Fixtures 10 years $ 15,704 $ 13,880
Computer Equipment 4 years 18,339 14,609
Camera 4 years 6,901 6,901
Software 2 years 7,346 4,406
------------- ---------------
48,290 39,796
Less Accumulated Depreciation (31,884) (26,613)
------------- ---------------
$ 16,406 $ 13,183
============= ===============
F-10
SCIAX TECHNOLOGY INC.
NOTES TO THE FINANCIAL STATEMENTS
Year ended July 31, 2002, with comparative figures for 2001
- --------------------------------------------------------------------------------
6. BANK INDEBTEDNESS
Bank indebtedness is comprised of the following:
July 31,
---------------------------
2002 2001
----------- -----------
(a) Line of credit $ 78,969 $ 70,473
(b) Bank loan 45,587 54,708
(c) Bank overdraft - 40,742
----------- -----------
124,556 165,923
Less: current portion 91,509 124,292
----------- -----------
Long-term portion $ 33,047 $ 41,631
=========== ===========
(a) The Company's line of credit with a commercial bank in Canada provides
for a maximum borrowing of up to $111,000 at July 31, 2002. The line
bears interest at prime plus 1.90% per annum. The prime rates at July
31, 2002 and 2001 were 4.50% and 6.00%, respectively. Interest on this
line of credit is paid monthly. The line of credit is secured by all
of the assets of the Company, and loans under the line of credit are
guaranteed by the President of the Company. At July 31, 2002, the
Company had $32,031 available under this line of credit.
(b) The Company entered into a five-year bank loan with a commercial bank
in Canada in March 2001 totaling $57,350 at July 31, 2002. The loan
accrues interest at an effective annual rate of 14.70% per annum. The
loan requires monthly principal payments of $1,045. This loan is
secured by the assets of the Company, subordinated to the security
held by the Company's primary lender. During the year, the lender
waived the principal payment requirements for five months.
(c) The Company's bank overdraft with a commercial bank in Canada provides
for a maximum borrowing of up to $47,800 at July 31, 2002. The
overdraft bears interest at prime plus 3.00% per annum. The prime rate
at July 31, 2002 was 4.5%. Interest on this line is paid monthly. The
overdraft is secured by all the assets of the Company. The bank
overdraft was repaid in 2002.
Bank indebtedness matures as follows:
Year Ended July 31,
-------------------
2003 $ 91,509
2004 12,540
2005 12,540
2006 7,967
--------
$124,556
========
F-11
SCIAX TECHNOLOGY INC.
NOTES TO THE FINANCIAL STATEMENTS
Year ended July 31, 2002, with comparative figures for 2001
- --------------------------------------------------------------------------------
7. DUE TO SHAREHOLDER
The amounts due to shareholder are unsecured advances. As it is not the
intention of the shareholder to call for repayment of these advances
within the next fiscal year, the advances have therefore, been
classified as long term.
8. GAIN ON SALE OF PRODUCT
In 2002 the Company disposed of a potential new product that was being
developed for future use. The net proceeds received from the
disposition were $250,455. Costs and expenses in connection with the
development of this product were previously expensed in research and
development costs of prior periods.
9. INCOME TAXES
The Company has a net operating loss carry forward for Canadian federal
tax purposes in the amount of approximately $290,600 at July 31, 2002.
These net operating losses can be carried forward seven years to offset
future taxable income and begin to expire in 2007. The resulting
deferred tax asset of approximately $ 58,000 has been offset by a
corresponding 100% valuation allowance, since it's more likely than not
that the Company will not realize a benefit for the net operating loss
carryforward.
A tax benefit of approximately $18,950 for the year ended July 31,
2002, and $39,200 for the year ended July 31, 2001, has been offset by
a corresponding valuation allowance, therefore none of the benefit has
been recognized in the accounts of the Company.
10. COMMITMENTS
The Company leases its primary office premises in Toronto, Ontario
Canada. The lease is for twelve months, expiring in June 2003.
In addition to their lease for their premises, the Company has entered
into various non-cancelable operating leases for equipment.
Future minimum lease payments are as follows:
Years Ended July 31,
-------------------------
2003 $ 30,364
2004 13,695
2005 12,620
2006 6,097
---------
$ 62,776
=========
F-12
SCIAX TECHNOLOGY INC.
NOTES TO THE FINANCIAL STATEMENTS
Year ended July 31, 2002, with comparative figures for 2001
- --------------------------------------------------------------------------------
11. SUBSEQUENT EVENTS
a. In February 2003, the Company's shareholders authorized the creation
of an unlimited number of exchangeable shares. These shares have a
preference over the Company's existing Class A stock, Class B stock
and common shares.
b. In February 2003, the Company sold 318,000 of their no par value
common shares for $99,000.
c. On March 19, 2003, UgoMedia Interactive Corporation, a Nevada
corporation ("UgoMedia"), completed its acquisition (the
"Acquisition") of the Company, according to the terms of a Shareholder
Purchase Agreement that was executed on January 8, 2003. The Company
is now a wholly owned subsidiary of UgoMedia. The Company was acquired
by UgoMedia in a stock-for-stock transaction in which the former
shareholders of the Company now own approximately 77% of UgoMedia's
outstanding common stock. Although the UgoMedia is the legal acquirer
in the merger, and remains the registrant with the Securities and
Exchange Commission, under accounting principles generally accepted in
the United States of America, the merger was accounted for as a
reverse acquisition, whereby the Company is considered the "acquirer"
of UgoMedia for financial reporting purposes as the Company's
shareholders controlled more than 50% of the post merger combined
entity. Substantially all the assets and liabilities of the Company
were acquired by UgoMedia. Expenses of the acquisition were
approximately $135,000 and were charged to operations during the
fiscal year end July 31, 2003.
The terms of the acquisition of the Company include as follows:
- The majority shareholder of the Company ("Major Shareholder")
surrendered 20,782,000 of his common shares in the Company to
4137639 Canada, Inc., a Canadian company wholly owned by
UgoMedia, where upon he received from the Company 18,812,144 of
their exchangeable shares ("exchangeable shares"). In addition,
the Major Shareholder received 4,703,036 shares of the UgoMedia's
Preferred Stock. Each share of UgoMedia's Preferred Stock is
entitled to four votes per share. Each UgoMedia preferred share
together with four exchangeable shares of the Company, are
convertible into four shares of UgoMedia's common stock. The
maximum number of annual conversions can be no greater than 4% of
the shares, of UgoMedia's common stock issued and outstanding as
of the end of the previous year.
- The remaining former shareholders of the Company ("remaining
shareholders") received 287,858 shares of the UgoMedia's common
shares in exchange for their 318,000 common shares of the
Company. The remaining shareholders' common shares received are
in proportion to the exchangeable shares received by the Major
Shareholder.
F-13
SCIAX TECHNOLOGY INC.
NOTES TO THE FINANCIAL STATEMENTS
Year ended July 31, 2002, with comparative figures for 2001
- --------------------------------------------------------------------------------
- In addition, UgoMedia entered into two consulting agreements,
with one officer and one principal shareholder of UgoMedia, for
services to be performed for the Company. Each received 1,000,000
shares of the UgoMedia's common stock. The terms of the
consulting agreements are for one year, commencing January 8,
2003. The common shares issued were valued at $0.16 per share.
UgoMedia has recorded a prepaid asset for the value of the shares
issued, to be amortized over the life of the agreements. As of
March 31, 2003 UgoMedia had a $240,000 prepaid asset related to
these consulting agreements.
- Prior to the completion of the merger, the UgoMedia purchased a
total of 3,709,668 shares of its common stock in exchange for two
promissory notes payable, each for $175,000. These notes bear
interest at 6% per annum, and are repayable at the first
anniversary of the closing of the merger, or March 19, 2004. The
notes are convertible, all in part, into shares of UgoMedia's
common stock at the rate of $0.20 per share. If UgoMedia should
default on these notes, the holders can convert their notes into
UgoMedia's common stock at the lower of $0.20 per share, or the
average trading price of UgoMedia for 20 days immediately prior
to the holders converting their notes.
F-14
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Combined Financial Statements of UgoMedia
Interactive Corporation ("UgoMedia") and Sciax Technology, Inc. (the "Sciax")
give effect to the merger between UgoMedia and the Company under the purchase
method of accounting. Although UgoMedia is the legal acquirer in the merger, and
remains the registrant with the Securities and Exchange Commission, under
accounting principles generally accepted in the United States of America, the
merger was accounted for as a reverse acquisition, whereby Sciax is considered
the "acquirer" of UgoMedia for financial reporting purposes as Sciax's
shareholders controlled more than 50% of the post merger combined entity. Among
other matters, this requires that UgoMedia present in all financial statements
and other public information filings, from the date of completion of the merger,
prior historical financial statements and information of Sciax. It also requires
a retroactive restatement of Sciax's historical stockholders' equity to reflect
the equivalent number of shares of common stock received in the merger.
Substantially all the assets and liabilities of the Company were acquired from
Sciax. These pro forma statements are presented for illustrative purposes only.
The pro forma adjustments are based upon available information and assumptions
that management believes are reasonable. The Unaudited Pro Forma Combined
Financial Statements do not purport to represent what the results of operations
or financial position of UgoMedia would actually have been if the merger had in
fact occurred on January 1, 2002, nor do they purport to project the results of
operations or financial position of UgoMedia for any future period or as of any
date, respectively.
These Unaudited Pro Forma Combined Financial Statements do not give effect to
any restructuring costs or to any potential cost savings or other operating
efficiencies that could result from the merger between UgoMedia and Sciax.
The consolidated financial statements of UgoMedia for the year ended December
31, 2002, are derived from audited consolidated financial statements and are
included in Form 10-KSB as filed by UgoMedia on April 14, 2003, with the
Securities and Exchange Commission. The historical financial statements of Sciax
for the year ended December 31, 2002, are derived from their audited financial
statements for the year ended July 31, 2002, contained in this amended Current
Report on Form 8-K, then adjusted for the unaudited periods August 31, 2001
through December 31, 2001, and August 1, 2002 through December 31, 2002.
You should read the financial information in this section along with UgoMedia's
and Sciax financial statements and accompanying notes in prior Securities and
Exchange Commission filings and in this amended Current Report on Form 8-K.
1
Ugomedia Interactive Corporation
Unaudited Pro Forma Combined Balance Sheet with
Sciax Technology, Inc.
December 31, 2002
Sciax Ugomedia
Technology Interactive Pro Forma Pro Forma
Inc. Corporation Adjustments Combined
----------- ----------- -------------- -----------
in US$
Total Assets
Current Assets
Cash $ 83,779 $ - $ - $ 83,779
Accounts Receivable 213,966 213,966
Inventory 12,662 12,662
Prepaid Expenses and Other Current Assets 2,893 320,000 322,893
----------- ----------- -------------- -----------
Total Current Assets 313,300 - 320,000 633,300
Fixed Assets 13,238 - - 13,238
----------- ----------- -------------- -----------
$ 326,538 $ - $ 320,000 $ 646,538
=========== =========== ============== ===========
Liabilities and Shareholder Deficiency
Current Liabilities
Line of Credit Payable $ 98,592 $ 36,416 $ - $ 135,008
Current Portion of Debt 13,408 13,408
Accounts Payable and Accrued Liabilities 184,627 184,627
Note Payable - Shareholder - 38,436 38,436
----------- ----------- -------------- -----------
Total Current Liabilities 296,627 74,852 - 371,479
----------- ----------- -------------- -----------
Long-Term Portion of Debt 27,085 350,000 (4) 377,085
Due to Shareholder 157,412 42,965 200,377
Shareholders' Deficiency
Preferred Stock 4,703 (1) 4,703
Capital Stock 9,910 288 (2) 8,488
(3,710) (5)
2,000 (6)
Additional Paid In Capital 1,093,351 (4,703)(1) 188,992
(288)(2)
(1,221,078)(3)
3,710 (5)
318,000 (6)
Treasury Shares (350,000)(4) (350,000)
Other Comprehensive Income 18,420 18,420
Accumulated Deficit (173,006) (1,221,078) 1,221,078 (3) (173,006)
----------- ----------- -------------- -----------
Total Shareholders' Deficiency (154,586) (117,817) (30,000) (302,403)
----------- ----------- -------------- -----------
$ 326,538 $ 0 $ 320,000 $ 646,538
=========== =========== ============== ===========
See accompanying notes.
2
Ugomedia Interactive Corporation
Unaudited Pro Forma Combined Statement of Operations with
Sciax Technology, Inc.
Year Ended December 31, 2002
Sciax Ugomedia
Technology Interactive Pro Forma Pro Forma
Inc. Corporation Adjustments Combined
----------- ----------- ----------- -----------
Net Sales $ 404,994 $ $ $ 404,994
Cost of Goods Sold 30,391 30,391
----------- ----------- ----------- -----------
Gross Profit 374,603 0 374,603
----------- ----------- ----------- -----------
Operating Expenses:
Selling, General and Administrative 389,494 389,494
Research and Development 41,387 41,387
----------- ----------- ----------- -----------
Total Operating Expenses 430,881 (0) 430,881
----------- ----------- ----------- -----------
Loss from Operations (56,278) (0) (56,278)
Interest and Other Income 32,620 32,620
Interest and Other Expenses (17,573) (17,573)
----------- ----------- ----------- -----------
Net loss $ (41,231) $ $ (0) $ (41,231)
=========== =========== =========== ===========
Basic Net Loss Per Share $ (0.00)
===========
Basic Weighted Average Common Shares 8,487,858
===========
See accompanying notes.
3
Ugomedia Interactive Corporation
Unaudited Pro Forma Combined Statement of Operations with
Sciax Technology, Inc.
Three Months Ended March 31, 2003
Sciax Ugomedia
Technology Interactive Pro Forma Pro Forma
Inc. Corporation Adjustments Combined
----------- ----------- ----------- -----------
Net Sales $ 29,607 $ $ $ 29,607
Cost of Goods Sold 9,257 9,257
----------- ----------- ----------- -----------
Gross Profit 20,350 0 20,350
----------- ----------- ----------- -----------
Operating Expenses:
Selling, General and Administrative 242,179 242,179
Research and Development 51,543 51,543
----------- ----------- ----------- -----------
Total Operating Expenses 293,722 (0) 293,722
----------- ----------- ----------- -----------
Loss from Operations (273,372) (0) (273,372)
Interest and Other Income 1,936 1,936
Interest and Other Expenses (4,540) (4,540)
----------- ----------- ----------- -----------
Net loss $ (275,976) $ $ (0) $ (275,976)
=========== =========== =========== ===========
Basic Net Loss Per Share $ (0.03)
===========
Basic Weighted Average Common Shares 8,487,858
===========
See accompanying notes.
4
UGOMEDIA INTERACTIVE CORPORATION
NOTES TO THE UNAUDITED PRO FORMA
COMBINED WITH SCIAX TECHNOLOGY, INC.
FINANCIAL INFORMATION
On March 19, 2003, UgoMedia Interactive Corporation ("UgoMedia") completed its
acquisition of Sciax Technology, Inc. ("Sciax"). Sciax was acquired in a
stock-for-stock transaction in which the former shareholders of the Sciax now
own approximately 77% of UgoMedia's common stock. The transaction has been
accounted for as a reverse acquisition whereby Sciax is considered the
"acquirer" of the UgoMedia for financial reporting purposes as Sciax's
shareholders controlled more than 50% of the post merger combined entity.
The terms of the acquisition of the Sciax include as follows:
- - The majority shareholder of Sciax ("Major Shareholder") surrendered
20,782,000 of his common shares in Sciax to 4137639 Canada, Inc., a
Canadian company wholly owned by UgoMedia, where upon he received from
Sciax 18,812,144 of their exchangeable shares ("exchangeable shares").
In addition, the Major Shareholder received 4,703,036 shares of the
UgoMedia's Preferred Stock. Each share of UgoMedia's Preferred Stock is
entitled to four votes per share. Each UgoMedia preferred share
together with four exchangeable shares of Sciax, are convertible into
four shares of UgoMedia's common stock. The maximum number of annual
conversions can be no greater than 4% of the shares, of UgoMedia's
common stock issued and outstanding as of the end of the previous year.
- - The remaining former shareholders of Sciax ("remaining shareholders")
received 287,858 shares of the UgoMedia's common shares in exchange for
their 318,000 common shares of Sciax. The remaining shareholders'
common shares received are in proportion to the exchangeable shares
received by the Major Shareholder.
- - In addition, UgoMedia entered into two consulting agreements, with one
officer and one principal shareholder of UgoMedia, for services to be
performed for Sciax. Each received 1,000,000 shares of UgoMedia's
common stock. The terms of the consulting agreements are for one year,
commencing January 8, 2003. The common shares issued were valued at
$0.16 per share. UgoMedia has recorded a prepaid asset for the value of
the shares issued, to be amortized over the life of the agreements. As
of March 31, 2003 UgoMedia had a $240,000 prepaid asset related to
these consulting agreements.
- - Prior to the completion of the merger, UgoMedia purchased a total of
3,709,668 shares of its common stock in exchange for two promissory
notes payable, each for $175,000. These notes bear interest at 6% per
annum, and are repayable at the first anniversary of the closing of the
merger. The notes are convertible, all in part, into shares of
UgoMedia's common stock at the rate of $0.20 per share. If UgoMedia
should default on these notes, the holders can convert their notes into
UgoMedia's common stock at the lower of $0.20 per share, or the average
trading price of UgoMedia for 20 days immediately prior to the holders
converting their notes.
5
The adjustments to the unaudited pro forma combined financial statements for the
year ended December 31, 2002 assume the merger occurred as of January 1, 2002
and are as follows:
(1) Issuance of 4,703,036 shares of preferred stock of UgoMedia in the
merger at $.001.
(2) Issuance of 287,858 shares of common stock of UgoMedia in the merger
at $.001.
(3) Elimination of UgoMedia accumulated deficit to additional paid in
capital.
(4) Surrender of 3,709,668 shares of UgoMedia common stock for the
issuance of notes payable in the amount of $350,000. The surrender of
these common shares has been accounted for as treasury stock. The
notes bear interest at 6% per annum, commencing January 1, 2003. The
notes are due and payable on March 19, 2004.
(5) Elimination of UgoMedia treasury stock from common stock outstanding.
(6) Issuance of a total of 2,000,000 shares of UgoMedia common stock for
two consulting agreements one of the principal stockholders and an
officer of UgoMedia. These shares have been valued at fair value,
$.16, at the date of the merger agreement.
6
EXHIBITS: None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,the
registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: July 14, 2003 UGOMEDIA INTERACTIVE CORPORATION
--------------------------------
(Registrant)
By: /s/ Nitin Amersey, CEO
----------------------------