QUARTERLY AND YEAR END REPORT BC FORM F (previously Form 61)

Transcription

1 British Columbia Securities Commission QUARTERLY AND YEAR END REPORT BC FORM F (previously Form 61) INCORPORATED AS PART OF: X Schedule A Schedules B and C (Place X in appropriate category.) ISSUER DETAILS NAME OF ISSUER FOR QUARTER ENDED DATE OF REPORT YY/MM/DD Info Touch Technologies Corp. October 31, /12/30 ISSUER S ADDRESS Suite Still Creek Drive, CITY PROVINCE POSTAL CODE ISSUER FAX NO. ISSUER TELEPHONE NO. Burnaby, B.C. V5C 6C6 (604) (604) CONTACT PERSON CONTACT S POSITION CONTACT TELEPHONE NO. Hamed Shahbazi Director (604) CONTACT ADDRESS ir@infotouch.net WEB SITE ADDRESS CERTIFICATE The three schedules required to complete this Report are attached and the disclosure contained therein has been approved by the Board of Directors. A copy of this Report will be provided to any shareholder who requests it. DIRECTOR S SIGNATURE PRINT FULL NAME DATE SIGNED YY/MM/DD Hamed Shahbazi Hamed Shahbazi 02/12/30 DIRECTOR S SIGNATURE PRINT FULL NAME DATE SIGNED YY/MM/DD Nikolaos Cacos Nikolaos Cacos 02/12/30 (Electronic signatures should be entered in quotations.)

2 Info Touch Technologies Corp. Interim Consolidated Financial Statements (Unaudited prepared internally by management) Quarter 1 Fiscal 2003 October 31, 2002

3 Info Touch Technologies Corp. Interim Consolidated Balance Sheets (Unaudited prepared internally by management) For the quarter ended October 31, 2002 Assets Oct 31, 2002 July 31, 2002 Current assets Cash 96,958 26,763 Cash held pending distribution (note 2) 540, ,769 Accounts receivable 225, ,435 Prepaid expenses and deposits 17,956 42,952 Inventory 41, , ,919 Property and equipment (note 3) 203, ,560 Liabilities 1,125,937 1,074,479 Current liabilities Accounts payable and accrued liabilities 1,410,526 1,405,011 Payable to deployment partners 540, ,769 Current portion of obligations under capital lease (note 6) 2,617 2,617 Customer deposits and deferred revenue 156, ,189 Deferred lease inducement (note 4) 94, ,646 Due to shareholder (note 8) 26,570 26,440 2,231,488 2,116,672 Obligations under capital lease (note 6) 1,250 2,124 Shareholders Deficiency 2,232,739 2,118,796 Capital stock (note 7) 5,223,033 5,223,033 Warrants (note 7) 134, ,080 Contributed surplus (note 7) 1,285,932 1,285,932 Deficit (7,749,847) (7,687,362) Nature and continuance of operations (note 1) Commitments and contingencies (note 10) Approved by the Board of Directors (1,106,801) (1,044,317) 1,125,937 1,074,479 Hamed Shahbazi Director Nikolaos Cacos Director

4 Info Touch Technologies Corp. Interim Consolidated Statements of Deficit (Unaudited prepared internally by management) For the quarter ended October 31, 2002 Oct 31, 2002 July 31, 2002 Balance - Beginning of the period (7,687,362) (5,622,811) Loss for the period (62,485) (2,064,551) Balance - End of the period (7,749,847) (7,687,362)

5 Info Touch Technologies Corp. Interim Consolidated Statements of Operations (Unaudited prepared internally by management) For the quarter ended October 31, months to Oct 31, months to Oct 31, 2001 Revenue 684,822 1,241,030 Cost of sales 212, ,176 Gross profit 471, ,853 Expenses General and administration 334, ,086 Selling and marketing 207, ,282 Amortization of property and equipment 20,499 15,477 Bad debt expense 2,074 28,227 Foreign exchange loss (gain) (29,197) 19,716 Interest income (154) (801) 534, ,987 Loss for the period 62, ,134 Loss per share - basic and fully diluted (0.005) (0.022) Weighted average number of shares used to compute loss per share 13,392,256 12,135,251

6 Info Touch Technologies Corp. Interim Consolidated Statements of Cash Flows (Unaudited prepared internally by management) For the quarter ended July 31, months to Oct 31, months to Oct 31, 2001 Cash flows from operating activities Loss for the period (62,485) (267,134) Adjustments to reconcile loss for the year to net cash used for operating activities Amortization of property and equipment 20,499 15,477 Bad debt expense 2,074 28,227 (39,912) (223,430) Changes in non-cash working capital items Accounts receivable 168,321 (357,833) Prepaid expenses and deposits 24,996 26,575 Inventory (41,776) (257,217) Accounts payable and accrued liabilities 5,515 2,508 Customer deposits and deferred revenue (59,125) (57,201) Repayments to shareholder - 1,223 Due to shareholder ,061 (641,945) Cash flows from investing activities Purchases of property and equipment (6,633) (12,285) Net proceeds on disposition of property and equipment 19,553 12,920 (12,285) Cash flows from financing activities Issuance of common shares - 829,249 Share issuance costs - (59,768) Repayment of obligations under capital lease (874) (1,291) (874) 768,190 Decrease in cash and cash equivalents 70,195 (109,470) Cash and cash equivalents - Beginning of period 26, ,779 Cash and cash equivalents - End of period 96,958 94,309

7 Info Touch Technologies Corp. Notes to the Interim Consolidated Financial Statements (Unaudited prepared internally by management) For the quarter ended October 31, Nature and continuance of operations The company is incorporated under the laws of British Columbia and its principal business activities include the out-sourced manufacturing and marketing of various public Internet access solutions, including integrated Internet kiosks and related software, primarily to businesses in North America to date. The company is actively involved in the development of enabling software such as bill-pay applications that broaden the scope of services offered at the kiosk. Going concern The company has suffered operating losses and has net working capital and shareholders deficiencies, and has no assurance of future profitability. The company will require financing from outside sources and existing stockholders to finance its operating and investing activities until sufficient positive cash flows from operations can be generated. Accordingly, there is doubt about the company s ability to continue as a going concern. These consolidated financial statements have been prepared on the basis that the company will be able to continue as a going concern and realize its assets and discharge its liabilities in the normal course of business, and do not reflect any adjustments which may be necessary if the company is unable to continue as a going concern. 2 Significant accounting policies and basis of presentation Basis of presentation These consolidated financial statements include the accounts of the company and its wholly owned subsidiaries Clicks and Mortar Media Inc. and Infotouch USA Inc. All inter-company balances and transactions have been eliminated upon consolidation. Use of estimates The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, 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 estimated. Cash and cash held pending distribution Cash and cash held pending distribution consist of cash on deposit, short-term interest bearing securities with a term to maturity on the date of purchase of three months or less. Cash held pending distribution relates to cash collections on behalf of third parties, under the control of the company and which are to be distributed to those parties in accordance with the terms of the related revenue sharing agreements.

8 Inventory Inventory consists of raw materials used in the assembly of public access Internet kiosks. Inventory is valued at the lower of cost and replacement cost, cost being determined on a weighted average basis. Property and equipment Property and equipment are stated at cost. Amortization is provided at the following annual rates with 50% of the annual rate taken in the year of acquisition: Leasehold improvements Manufacturing equipment Furniture and fixtures Kiosks Office equipment Computer equipment Computer application software straight-line over the term of the lease 20% declining balance 20% declining balance 30% declining balance 30% declining balance 30% declining balance 100% declining balance Revenue recognition The company sells products containing multiple elements, which may include a combination of any of hardware, software licenses, and maintenance services. Revenues earned from these bundled sales, except for amounts related to maintenance services, are recognized upon delivery, when a contractual arrangement is in place, the fee is determinable, and collection is probable, based on the fair values of the bundled products. Deposits received from customers in advance of delivery are recorded as customer deposits and deferred revenue. Where these agreements include other contingent revenue streams, such as a share of pay-per-use or advertising fees, the company s share of these amounts is recognized as they are earned. The company recognizes fees earned from its hardware and software maintenance services and Internet portal maintenance fees on a straight-line basis over the period that the services are provided. Where the company enters into arrangements to sell a fractional interest in Internet kiosks, bundled with any combination of software licenses and maintenance services, because of its continued involvement in the operation of the kiosks, the company defers the profit margin on the kiosk sales. This deferred revenue is recognized over the term of the arrangement. Income taxes Income taxes are calculated using the liability method of accounting. Temporary differences arising from the difference between the tax basis of an asset or liability and its carrying value on the balance sheet are used to calculate future income tax liabilities or assets. Future income tax liabilities or assets are calculated using tax rates anticipated to apply in the periods that the temporary differences are expected to reverse. The measurement of future tax assets is reduced, if necessary, by a valuation allowance where, based on available evidence, the probability of realization of the future tax asset does not meet a more likely than not criterion.

9 Foreign currency transactions Revenue and expenses arising from foreign currency transactions are translated into Canadian dollars at exchange rates in effect on the date of the transactions. Monetary assets and liabilities are translated into Canadian dollars at the exchange rates in effect at the balance sheet date. Gains and losses on foreign currency transactions are included in operations. Loss per share Loss per share has been calculated using the weighted average number of common shares outstanding during the year, adjusted for any stock splits. Fully diluted loss per share is calculated when dilutive by adjusting the number of common shares outstanding for the year for the effects of the potential exercise of stock options and warrants. Prior year comparatives Certain comparative figures have been reclassified to conform to the current year s presentation. 3 Property and equipment Oct 31, 2002 Cost Accumulated amortization Net Leasehold improvements 118,575 23,714 94,861 Furniture and fixtures 27,544 4,829 22,715 Kiosks 38,548 14,010 24,538 Office equipment 38,433 18,557 19,876 Computer equipment 90,374 49,838 40,536 Computer application software 29,456 28, , , ,355 July 31, 2002 Cost Accumulated amortization Net Leasehold improvements 118,575 5, ,646 Furniture and fixtures 27,544 3,440 24,104 Kiosks 51,468 11,094 40,374 Office equipment 38,433 16,620 21,813 Computer equipment 90,374 40,004 50,370 Computer application software 29,456 24,203 5, , , ,560

10 4 Deferred lease inducement During 2002, the company agreed to lease a 7,822 square foot facility for a period of 20 months, beginning July 1, A condition of the lease included the landlord updating the facility, at its cost, to the company s specifications. An agreed total of 118,575 was disbursed for these improvements directly by the landlord and has been included in property and equipment. A corresponding liability is shown on the balance sheet and will be amortized over the term of the lease. 5 Payable to deployment partners The company has entered into agreements with certain deployment partners whereby the company is responsible for collecting the proceeds of pay-per-use and transactional applications generated at kiosk networks. These funds are collected and banked. They are subsequently paid out to the partners at specified dates in accordance with the agreements with the respective partners. The amounts recorded as payable to deployment partners represent those parties share of net revenues as defined in the agreements. The related cash under the company s control is reflected in these financial statements as cash held pending distribution. 6 Obligations under capital lease Future minimum lease payments for equipment under capital lease are as follows: Oct 31, 2002 July 31, 2002 Total minimum lease payments 4,240 5,513 Less: Amount representing interest at an average rate of 15% (373) (772) Balance of obligation 3,867 4,741 Less: Due within one year 2,617 2,617 7 Capital stock Authorized 100,000,000 shares of common stock without par value Issued 1,250 2,124 3 months to Oct 31, months to July 31, 2002 Number of shares Amount Number of shares Amount Common stock Balance - Beginning of the period 13,392,256 5,223,033 10,863,977 4,293,014 For cash - private placements - - 2,143, ,000

11 For cash - exercise of options ,000 16,000 For cash - exercise of warrants , ,950 Non-cash allocation of outstanding warrant value upon exercise of warrants ,588 Stock issuance costs pursuant to private placements ,027 54,250 For cash - stock issuance costs (5,519) Stock issuance costs pursuant to private placements (54,250) Balance - End of the period 13,392,256 5,223,033 13,392,256 5,223,033 Warrants Number of warrants Amount Number of warrants Amount Balance - Beginning of period 727, ,080 1,457, ,083 For cash - private placements Expired - - (535,728) (109,415) Exercised - - (195,000) (25,588) For cash - stock issuance costs Stock issuance costs pursuant to private placements Balance - End of period 727, , , ,080 Warrants included as part of the equity units have been separately allocated within shareholders deficiency. The value allocated to the warrants was estimated using the fair value assigned by the Black-Scholes valuation model, relative to the fair value of the related common stock issued. Contributed surplus Contributed surplus relates to the value of compensatory stock options issued to non-employees for performance of services and to the value of expired warrants previously issued pursuant to private placements.

12 Stock option plan The company s stock option plan allows for the issuance of up to 2,631,450 common shares including options granted at the discretion of the directors of the company. The vesting period of the options is at the discretion of the board of directors and the exercise period of the options is generally for three years. At the company s Annual General Meeting scheduled for January 10, 2003 the shareholders of the company will be asked to approve the 2003 Stock Option Plan, authorising the issuance of up to 20% of the Company s issued and outstanding shares for a total of 2,678,451 stock options, all at such price or prices and upon such terms as may be acceptable to the TSX Venture Exchange. At October 31, 2002 and July 31, 2002, the following stock options were outstanding: 3 months to Oct 31, months to July 31, 2002 Number of options Weighted average exercise price Number of options Weighted average exercise price Balance - Beginning of period 2,434, ,156, Options granted - - 1,602, Options forfeited 151, (284,475) 0.61 Options exercised - - (40,000) 0.40 Balance - End of period 2,283, ,434, Options exercisable Range of exercise prices Number outstanding at Oct 31, 2002 Weighted average remaining contractual life (years) Weighted average exercise price Number exercisable at Oct 31, Related party transactions , , , , , , , , ,283, ,701,250 The company entered into the following related party transactions:

13 a) During 2002, the company received a loan of 26,000 from a shareholder related to an officer of the company. The unpaid portion of the loan shall accrue interest at a rate equal to prime plus 2% per annum. The amount due as at October 31, 2002 is 26,570, including accrued interest. There are no specified repayment terms and the loan is unsecured. 9 Financial instruments Concentration of credit risk Financial instruments that potentially subject the company to a significant concentration of credit risk consist primarily of cash, cash held pending distribution and accounts receivable. The company limits its exposure to credit loss by placing its cash and cash held pending distribution with high credit quality financial institutions. Accounts receivable are concentrated in three customers, which comprise approximately 65% of the total balance. The company believes these customers pose minimal credit risk. The company performs ongoing credit evaluations of customers in order to limit its exposure to credit loss with respect to accounts receivable. Foreign exchange rate risk The company undertakes certain transactions in U.S. dollars and as such is subject to risk due to fluctuations in exchange rates. The company does not use derivative instruments to manage its exposure to foreign exchange rate risk. Fair values The fair values of the company s cash, cash held pending distribution, accounts receivable, prepaid expenses and deposits, accounts payable and accrued liabilities, payable to deployment partners, customer deposits and deferred revenue, due to shareholder, and obligations under capital lease approximate their carrying values due to their immediate or short-term maturity. 10 Commitments and contingencies a) As at Oct 31, 2002, the company has obligations under operating leases for its premises and equipment. Minimum annual lease payments are as follows: Year ended July , , ,521 b) During 2002, the company commenced selling certain products pursuant to an understanding reached with a software supplier. The company has, based on its understanding of the arrangement, provided for the estimated committed portion of its obligations to the supplier in respect of license fees and royalties. The company is currently in discussions with the supplier regarding the execution of formal agreements governing the use of the applicable software. Adjustments to the amounts recorded may be necessary and such adjustments could be material.

14 11 Segmented information The company has one operating segment and three principal products and services including kiosk systems, professional services, and transaction services. Kiosk systems include hardware, software and implementation services related to the initial sale of the company s kiosks described in note 1. Professional services include kiosk maintenance and support services, computer software programming and consulting services. Transaction services relate to business activity for which the company earns a fee on a per transaction basis from consumer pay-per-use transactions such as bill payments performed via kiosks that the company has deployed, and/or the share in the net revenues derived from its deployed kiosks. Total Kiosk Systems Media Services Softwar e Professi onal Services Transac tional Revenue Mainten ance Other Revenue Canada 112,140 10,698-1,675 2,421 66,469 30,877 - U.S.A. 552, ,419 51, ,114 70,134 82,363 35,847 17,747 Europe and other 19,908-8,869-5,454 5, , ,117 51, ,658 72, ,286 72,309 17,747 The company s property and equipment are located primarily in Canada. Assets, cost of sales and other operating expenses and income are not allocated for internal reporting purposes and therefore have not been presented above.