-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ISNY47uLoUGiuPzfLt51i2sz3ZleawpUx6RhfIRgG+xDznUcwGOm66rkPysmV7bS jmGxDSaSevOraC/OhBensw== 0001021890-99-000236.txt : 20000218 0001021890-99-000236.hdr.sgml : 20000218 ACCESSION NUMBER: 0001021890-99-000236 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990922 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19991123 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TELEMETRIX INC CENTRAL INDEX KEY: 0000742814 STANDARD INDUSTRIAL CLASSIFICATION: 2400 IRS NUMBER: 593453156 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-14724 FILM NUMBER: 99762816 BUSINESS ADDRESS: STREET 1: 633 SEVENTEENTH STREET STREET 2: SUITE 2700 CITY: DENVER STATE: CO ZIP: 80202 BUSINESS PHONE: 3033837610 MAIL ADDRESS: STREET 1: 633 SEVENTEENTH STREET STREET 2: SUITE 2700 CITY: DENVER STATE: CO ZIP: 80202 FORMER COMPANY: FORMER CONFORMED NAME: ARNOX CORP DATE OF NAME CHANGE: 19960612 8-K/A 1 AMENDED FORM 8-K--SEPTEMBER 22, 1999 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A-1 CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF EARLIEST REPORTED EVENT - SEPTEMBER 22, 1999 (THIS CURRENT REPORT AMENDS SEC FORM 8-K FILED OCTOBER 7, 1999) TELEMETRIX INC. --------------------------------------------------- (Exact name of Registrant as specified in its charter) Delaware 0-14724 59-3453156 ------------------------------ ----------- --------------------- (State or other jurisdiction of (Commission (IRS Employer incorporation or organization) File Number) Identification Number) c/o Michael L. Glaser, Secretary 633 Seventeenth Street, Suite 2700 Denver, Colorado 80202 --------------------------------------------------- (Address of Registrant's principal executive offices) (303) 292-1200 -------------------------------------------------- (Registrant's telephone number, including area code) (303) 292-1300 -------------------------------------------------- (Registrant's facsimile number, including area code) ITEM 4. CHANGES IN THE REGISTRANT'S CERTIFYING ACCOUNTANT. BDO Dunwoody, LLP ("BDO Dunwoody") whose address is 200 Bay Street, Toronto, Ontario, Canada M5J 2J8, audited the financial statements for the year ended 12/31/98 for Registrant's subsidiary, Telemetrix Resource Group, Inc., a Colorado corporation, (now known as Telemetrix Solutions Inc.). BDO Dunwoody also audited the financial statements for the year ended 12/31/98 for Telemetrix Resource Group Ltd., a Nova Scotia, (Canada) corporation, another subsidiary of Registrant. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS Registrant files the following financial statements for the transaction described in Item 2 of Registrant's current report on SEC Form 8-K filed October 7, 1999: (a) Financial statements of businesses acquired. (i) Financial Statements for the year ended December 31, 1998 for Registrant's subsidiary, Telemetrix Resource Group, Inc., a Colorado corporation (now known as Telemetrix Solutions Inc.). (ii) Financial Statements for the years ended December 31, 1998 and 1997 for Registrant's subsidiary, Telemetrix Resource Group Ltd., a Nova Scotia, (Canada) corporation. (iii)Financial Statements for the years ended December 31, 1998 and 1997 for Registrant's subsidiary, Tracy Corporation II, a Nebraska corporation doing business as Western Total Communications. (b) Pro forma financial information. (i) Registrant's Unaudited Pro-Forma Condensed Combining Financial Statements as at December 31, 1998. Registrant's SEC Form 10-QSB filed November 19, 1999 reports the results of operations since the reorganization described in Registrant's Current Reports on SEC Form 8-K filed April 14, 1999 and October 7, 1999. (c) Exhibits. (99.1) List of Registrant's Subsidiaries 2 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, thereunto duly authorized. TELEMETRIX INC., a Delaware corporation November 22, 1999 By: /s/ Michael L. Glaser --------------------------------------------- Michael L. Glaser, Secretary 3 INDEX TO FINANCIAL STATEMENTS TELEMETRIX INC. PRO FORMA CONDENSED COMBINING FINANCIAL STATEMENTS Introduction.......................................................... F-2 Pro Forma Condensed Combining Balance Sheets.......................... F-3 Pro Forma Condensed Combining Statement of Operations................. F-4 Notes to Pro Forma Condensed Combining Balance Sheets................. F-5 TRACY CORPORATION II D/B/A WESTERN TOTAL COMMUNICATIONS Independent Auditor's Report.......................................... F-8 Balance Sheets........................................................ F-9 Statements of Income and Changes in Retained Earnings.................F-11 Statements of Cash Flows..............................................F-12 Notes to Financial Statements.........................................F-13 TELEMETRIX RESOURCE GROUP, INC. Independent Auditor's Report..........................................F-22 Comments by Auditors for U.S. Readers on Canada-U.S. Reporting Difference.............................................F-23 Balance Sheets........................................................F-24 Statements of Operations..............................................F-25 Statement of Shareholders Equity......................................F-26 Statements of Cash Flows..............................................F-27 Statement of Significant Accounting Policies .........................F-28 Notes to Financial Statements.........................................F-29 TELEMETRIX RESOURCE GROUP LIMITED Independent Auditor's Report..........................................F-36 Comments by Auditors for U.S. Readers on Canada-U.S Reporting Difference.............................................F-37 Balance Sheets........................................................F-38 Statements of Operations and Deficit..................................F-39 Statements of Cash Flows..............................................F-40 Statement of Significant Accounting Policies .........................F-41 Notes to Financial Statements.........................................F-42 F-1 UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL INFORMATION The following pro forma condensed combining statements of operations are set forth herein to give effect to the following acquisitions as if such acquisitions had occurred as of the beginning of each period presented: o in January 1999, the acquisition of 100% of the shares of Telemetrix Resources Group Inc. ("TRG"), acquired Telemetrix Resource Group Limited, a Nova Scotia corporation from TRG's parent, Hartford Holdings Ltd. pursuant to a share exchange and plan of reorganization. o on March 22, 1999, Arnox Corporation (an in active public corporation, TRG and Tracy Corporation II d/b/a Western Total Communication ("WTC") executed a Plan of Reorganization for a "reverse takeover combination ("Combination"). o in April 1999 Arnox acquired all the outstanding TRG common shares in exchange for 6,127,200 Arnox common shares (approximately 48%). The Company accounted for this transaction as a reverse take-over with TRG as the acquirer, since TRG's former shareholder acquired 81.5% of Arnox's shares in this transaction. o in September 1999 the Company issued 5,372,800 shares of common stock to WTC in exchange for all outstanding WTC stock. Through this Combination, the stockholders of WTC and TRG ("Principle Stockholders") acquired a total of 11,500,000 Arnox shares (approximately 90%) and therefor acquired control of Arnox. After the Combination, the companies changed their names to reflect their complementary businesses: - Arnox become Telemetrix Inc. - TRG became Telemetrix Solutions Inc. The Company offers wireless telemetry and communications technology to telecommunications carriers and other businesses. The pro forma condensed combining statements of operations combines the statements of operations of the Company, WTC, and Telemetrix Resource Group Ltd (TRG Canada) for the year ended December 31, 1998. The pro forma condensed combining balance sheet data gives effect to the acquisitions described above as if such acquisitions had occurred on December 31, 1998. The pro forma combined consolidated financial information does not reflect any potential cost savings, which may be obtained following the acquisition. The pro forma adjustments and assumptions are based on estimates, evaluations and other data currently available. The pro forma condensed combining statements of operations is provided for illustrative purposes only and is not necessarily indicative of the combined results of operations that would have been reported had the acquisition occurred on January 1, 1998, nor does it represent a forecast of the combined future results of operations for any future period. All information contained herein should be read in conjunction with the individual financial statements and the notes thereto of the Company and its subsidiaries contained in this Form 8-K and the notes to the Unaudited Pro Forma Condensed Combining Financial Information. F-2
Telemetrix Inc. Unaudited Pro - Forma Condensed Combining Financial Statements As at December 31, 1998 Telemetrix Inc. Pro - Forma Condensed Combining Balance Sheet As at December 31, 1998 (in thousands) (unaudited) Assets Telemetrix Telemetrix Telemetrix Wesstern Pro - Forma Inc. Solutions Resources Total Pro - Forma Combined Inc Group Ltd Communications Adjustments Dec 31/98 ---------- ---------- ---------- -------------- ----------- ----------- Current Cash .................................. -- -- 112 161 -- 273 Accounts receivable ................... -- -- 265 75 -- 340 Prepaid Expenses ...................... -- -- 11 -- -- 11 Due from related companies ............ -- 1 116 -- -- 117 ------- ------- ------- ------- ------- ------- -- 1 504 236 -- 741 ------- ------- ------- ------- ------- ------- Property, plant & equip, net ............ -- 19,444 756 138 -- 20,338 FCC Licences ............................ -- -- -- 755 -- 755 Patents ................................. -- -- -- 52 -- 52 Construction in progress ................ -- -- -- 1,180 -- 1,180 Organizatonal costs ..................... -- -- -- 87 -- 87 In Process R&D .......................... -- 4(2) -- Goodwill & Other Intangibles ............ -- -- -- -- 7,329 4[2] 7,329 ------- ------- ------- ------- ------- ------- -- 19,444 756 2,212 7,329 29,741 ------- ------- ------- ------- ------- ------- Total Assets ............................ -- 19,445 1,260 2,448 7,329 30,482 ======= ======= ======= ======= ======= ======= Liabilities & Shareholders'Deficiency Current Accounts payable & Accrued .............. -- 5 580 407 992 Current portion of Long term ............ -- -- -- 1,080 1,080 ------- ------- ------- ------- ------- ------- -- 5 580 1,487 -- 2,072 ------- ------- ------- ------- ------- ------- Obligations under capital lease ......... -- -- 51 -- 51 Leasehold inducements ................... -- -- 144 -- 144 Notes payable ........................... -- -- -- 1,720 (500)4(2) 1,220 Due to related companies ................ -- 93 2,169 -- 2,262 ------- ------- ------- ------- ------- ------- -- 93 2,364 1,720 (500) 3,677 ------- ------- ------- ------- ------- ------- -- 98 2,944 3,207 (500) 5,749 ------- ------- ------- ------- ------- ------- Shareholders'Deficiency Shares Share Capital ......................... -- 25,000 1 7 (24,995)4(3) 13 Contrib Surplus ....................... 32 -- -- 148 43,807 4(2)(3) 43,987 Deficit ............................... (32) (5,653) (1,685) (914) (10,983) (19,267) ------- ------- ------- ------- ------- ------- -- 19,347 (1,684) (759) 7,829 24,733 ------- ------- ------- ------- ------- ------- Total Liabilities & S/her's Def ......... -- 19,445 1,260 2,448 7,329 30,482 ======= ======= ======= ======= ======= =======
F-3
Telemetrix Inc. Pro - Forma Condensed Combining Statement of Operations For the Year Ended December 31, 1998 (in thousands) (unaudited) Telemetrix Telemetrix Telemetrix Wesstern Pro - Forma Inc. Solutions Resources Total Pro - Forma Combined Inc Group Ltd Communications Adjustments Dec 31/98 ---------- ---------- ---------- -------------- ----------- ----------- Revenue Equipment sales & rental ................ -- -- -- 72 72 Service income .......................... -- -- -- 278 278 Royalty income .......................... -- 1 -- -- 1 Fees .................................... -- -- 427 -- 427 ------- ------- ------- ------- ------- ------- -- 1 427 350 -- 778 ------- ------- ------- ------- ------- ------- Expenses Amortization ............................ -- 5,556 79 141 1,832 4(2) 7,608 Customer support ........................ -- -- 53 -- 53 Development ............................. -- -- 356 91 447 General & administrative ................ 10 98 519 523 1,150 Operations & implementation ............. -- -- 356 -- 356 ------- ------- ------- ------- ------- ------- Sales & marketing ....................... -- -- 244 -- 244 ------- ------- ------- ------- ------- ------- Total operating expenses ............... 10 5,654 1,607 755 1,832 9,858 ------- ------- ------- ------- ------- ------- Other Interest expense (income) .............. -- -- 142 108 250 Interest on capital leases ............. -- -- 3 -- 3 Bad debts (recoveries) ................. -- -- -- 14 14 Lease expense( income) .................. -- -- -- (36) (36) Other expense( income) .................. -- -- (80) 6 (74) Non recurring organization costs ........ 5,535 4(1) 5,535 Non recurring in process R&D ............ 4,530 4(2) 4,530 ------- ------- ------- ------- ------- ------- Total other .......................... -- -- 65 92 10,065 10,222 ------- ------- ------- ------- ------- ------- Net loss .................................. (10) (5,653) (1,245) (497) (11,897) (19,302) Opening Deficit ........................... (22) -- (440) (417) 914 4(2) 35 ------- ------- ------- ------- ------- ------- (32) (5,653) (1,685) (914) (10,983) (19,267) ======= ======= ======= ======= ======= =======
F-4 NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL INFORMATION 1. Description of Business Telemetrix Inc. (the "Company") was recently formed through a series of corporate combinations. o On January 5, 1999, the acquisition of 100% of the shares of Telemetrix Resources Group Inc. ("TRG"), acquired Telemetrix Resource Group Limited, a Nova Scotia corporation from TRG's parent, Hartford Holdings Ltd. pursuant to a share exchange and plan of reorganization. o On March 22, 1999, Arnox Corporation (an in active public corporation, TRG and Tracy Corporation II d/b/a Western Total Communication ("WTC") executed a Plan of Reorganization for a "reverse takeover combination ("Combination"). o On April 5, 1999 Arnox acquired all the outstanding TRG common shares in exchange for 6,127,200 Arnox common shares (approximately 48%). The Company accounted for this transaction as a reverse take-over with TRG as the acquirer, since TRG's former shareholder acquired 81.5% of Arnox's shares in this transaction. o On September 22, 1999 the Company issued 5,372,800 shares of common stock to WTC in exchange for all outstanding WTC stock. Through this Combination, the stockholders of WTC and TRG ("Principle Stockholders") acquired a total of 11,500,000 Arnox shares (approximately 90%) and therefor acquired control of Arnox. After the Combination, the companies changed their names to reflect their complementary businesses: - Arnox become Telemetrix Inc. - TRG became Telemetrix Solutions Inc. The Company offers wireless telemetry and communications technology to telecommunications carriers and other businesses. 2. The unaudited pro forma condensed combining statements of operations for Telemetrix and its subsidiaries have been prepared as if the acquisition was completed as of January 1, 1998. The unaudited pro forma combined net loss per share is based on the weighted average number of common shares of Telemetrix Common Stock outstanding during the period. 3. The financial statements of TRG Canada have been translated into US dollars using the following exchange rates. For the 1998 statement of operations Canadian dollars were translated to US dollars at the rate of $0.641 and for the December 31, 1998 balance sheet, Canadian dollars were translated to US dollars at the rate of $0.670. 4. The following pro forma adjustments are reflected in the unaudited pro forma condensed combining financial information: (1). Reflects the legal and formation costs of $5,535,000 which have been expensed. The costs were settled in exchange for 1,067,000 shares of the company (2) The components of the purchase price for WTC and its allocation to assets and liabilities of the company are as follows: Total Purchase Price of shares of WTC $13,432,000 Allocation of purchase price: Stockholders equity of WTC 259,000 In Process R&D (4,530,000) Cost in excess of net assets acquired $ 9,161,000 ---------- Amortization of excess cost over 5 years $ 1,832,000 (3) The pro forma adjustment to record the issuance of shares of TRG and the transfer of common stock in TRG to contributed surplus are as follows: Common Stock Acquired $ 25,000,000 Contributed Surplus $(24,994,000) ----------- Shares of Telemetrix Inc issued $ (6,000) 5. The Pro Forma Condensed Consolidated Financial Information is unaudited and not necessarily indicative of the consolidated results which actually would have occurred if the above transactions had been consummated at the beginning of the period presented, nor does it purport to present the future financial position and the results of operations for future periods F-5 TRACY CORPORATION II Scottsbluff, Nebraska FINANCIAL STATEMENTS and INDEPENDENT AUDITOR'S REPORT For the Years Ended December 31, 1998 and 1997 F-6 TRACY CORPORATION II Scottsbluff, Nebraska TABLE OF CONTENTS * * * * Page Number Independent Auditor's Report 8 Financial Statements Balance Sheets 9 - 10 Statements of Income and Changes in Retained Earnings 11 Statements of Cash Flows 12 Notes to the Financial Statements 13 - 19 F-7 INDEPENDENT AUDITOR'S REPORT To the Board of Directors Tracy Corporation II Scottsbluff, Nebraska We have audited the accompanying balance sheets of Tracy Corporation II as of December 31, 1998 and 1997, and the related statements of income and changes in retained earnings, and cash flows for the years then ended. These financial statements are the responsibility of management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits 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 financials 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 our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Tracy Corporation II as of December 31, 1998 and 1997, and the results of its operations and cash flows for the years then ended in conformity with generally accepted accounting principles. Scottsbluff, Nebraska May 27, 1999 F-8 TRACY CORPORATION II Scottsbluff, Nebraska BALANCE SHEETS December 31, 1998 and 1997 1998 1997 ---- ---- Assets Current assets: Cash ........................................... $ 161,497 $ 62,566 Accounts receivable - trade, less allowance for doubtful accounts of $1,000 in 1998 and 1997 ................... 47,295 52,403 Accounts receivable - other .................... 26,180 26,416 ---------- ---------- Total current assets ......................... $ 234,972 $ 141,385 ---------- ---------- Property, plant and equipment: Land ........................................... $ 13,301 $ 3,000 Buildings and improvements ..................... 13,729 12,910 Office equipment ............................... 75,338 48,869 Communications equipment ....................... 695,016 672,756 Vehicles ....................................... 32,147 32,147 ---------- ---------- Total property, plant and equipment .......... $ 829,531 $ 769,682 Less accumulated depreciation ................ 693,298 651,571 ---------- ---------- Total property, plant and equipment net of accumulated depreciation .......... $ 136,233 $ 118,111 ---------- ---------- Other assets: Deferred patronage dividends ................... $ 2,247 $ 2,191 FCC license C & F block, net of accumulated amortization of $210,131 and $113,570 in 1998 and 1997, respectively .................. 755,477 852,038 Patent, net of accumulated amortization of $3,898 and $1,569 in 1998 and 1997, respectively ................................. 52,074 24,028 Construction in progress ....................... 1,180,557 488,045 Deposits ....................................... 605 170,430 Organizational costs ........................... 87,000 -- ---------- ---------- Total other assets ........................... $2,077,960 $1,536,732 ---------- ---------- Total assets ..................................... $2,449,165 $1,796,228 ========== ========== See accompanying independent auditor's report and notes to the financial statements. F-9 TRACY CORPORATION II Scottsbluff, Nebraska BALANCE SHEETS (CONTINUED) December 31, 1998 and 1997 1998 1997 ---- ---- Liabilities and Stockholder's Equity Current liabilities: Accounts payable ............................... $ 256,436 $ 163,683 Accrued interest ............................... 142,018 101,684 Other accrued expenses ......................... 597 758 Customer deposits .............................. 8,185 10,840 Current portion of long-term liabilities ....... 1,080,328 898,786 ----------- ----------- Total current liabilities .................... $ 1,487,564 $ 1,175,751 ----------- ----------- Long-term liabilities: Notes payable (net of current portion) ......... $ 1,720,227 $ 882,555 ----------- ----------- Total long-term liabilities .................. $ 1,720,227 $ 882,555 ----------- ----------- Total liabilities .......................... $ 3,207,791 $ 2,058,306 ----------- ----------- Stockholder's equity: Capital stock-authorized 1,000 common shares, $10 par value; issued 652 shares ............. $ 6,520 $ 6,520 Capital surplus ................................ 148,500 148,500 Retained earnings (deficit) .................... (913,646) (417,098) ----------- ----------- Total stockholder's equity ................... $ (758,626) $ (262,078) ----------- ----------- Total liabilities and stockholder's equity ....... $ 2,449,165 $ 1,796,228 =========== =========== See accompanying independent auditor's report and notes to the financial statements. F-10 TRACY CORPORATION II Scottsbluff, Nebraska STATEMENTS OF INCOME AND CHANGES IN RETAINED EARNINGS For the Years Ended December 31, 1998 and 1997 1998 1997 ---- ---- Sales and services ............................. $ 350,702 $ 381,961 --------- --------- Gross profit ................................. $ 350,702 $ 381,961 --------- --------- Expenses: Depreciation and amortization ................ $ 140,617 $ 125,862 Research and development costs ............... 91,428 91,256 Bad debts .................................... 14,817 11,248 Selling, general and administrative .......... 523,055 313,059 Interest ..................................... 110,508 93,576 --------- --------- Total expenses ............................. $ 880,425 $ 635,001 --------- --------- Operating income (loss) .................. $(529,723) $(253,040) --------- --------- Other income: Interest income .............................. $ 2,549 $ -- Lease income ................................. 14,294 16,431 Miscellaneous income ......................... 22,591 17,414 Income (loss) on investments ................. (6,259) -- --------- --------- Total other income ......................... $ 33,175 $ 33,845 --------- --------- Net income (loss) .............................. $(496,548) $(219,195) Retained earnings, beginning of year ........... (417,098) 2,097 Distributions .................................. -- (200,000) --------- --------- Retained earnings, end of year ................. $(913,646) $(417,098) ========= ========= See accompanying independent auditor's report and notes to the financial statements. F-11
TRACY CORPORATION II Scottsbluff, Nebraska STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1998 and 1997 1998 1997 ---- ---- Cash flows from operating activities: Net income (loss) ..................................... $ (496,548) $ (219,195) Adjustments to reconcile net income to net cash flows provided by operating activities: Depreciation and amortization ..................... 140,617 125,862 (Increase) decrease in accounts receivable ........ 5,344 72,553 (Increase) decrease in deferred patronage dividends (56) (615) (Increase) decrease in other assets ............... (175) -- Increase (decrease) in accounts payable ........... 92,753 151,872 Increase (decrease) in other accrued liabilities .. (161) 47 Increase (decrease) in accrued interest ........... 40,334 78,282 Increase (decrease) in customer deposits .......... (2,655) (2,011) ----------- ----------- Net cash flows provided by (used in) operating activities .................................... $(220,547) $ 206,795 ----------- ----------- Cash flows from investing activities: Cash payments for the purchase of property ............ $ (177,224) $ (42,466) Cash payments for the purchase of FCC license ......... -- (122,252) Cash payments for investments in other organizations and other assets .................................... (522,512) (569,013) ----------- ----------- Net cash flows (used in) investing activities ... $ (699,736) $ (733,731) ----------- ----------- Cash flows from financing activities: Proceeds from issuance of long-term debt .............. $ 1,393,000 $ 788,821 Principal payments on long-term debt .................. (373,786) (1,214) Dividends paid ........................................ -- (200,000) ----------- ----------- Net cash flows provided by financing activities . $ 1,019,214 $ 587,607 ----------- ----------- Net increase in cash and cash equivalents ............... $ 98,931 $ 60,671 Cash and cash equivalents, beginning of year ............ 62,566 1,895 ----------- ----------- Cash and cash equivalents, end of year .................. $ 161,497 $ 62,566 =========== =========== Supplemental disclosures of cash flow information: Cash paid during the year for Interest expense .................................... $ 71,113 $ 15,294
See accompanying independent auditor's report and notes to the financial statements. F-12 TRACY CORPORATION II Scottsbluff, Nebraska NOTES TO THE FINANCIAL STATEMENTS December 31, 1998 and 1997 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of the Business - Tracy Corporation II (Company) is a Nebraska corporation operating for profit in Western Nebraska and Eastern Wyoming. The Company's primary sources of revenue are the sales and rental of communication pagers and monthly service charges. In the course of its business, the Company extends credit to its customers for the purchase and rental of paging equipment and the provision of service thereon. During 1996, the Company acquired 100% interest in a partnership investment. This acquisition enabled the Company to have all the rights granted in the FCC Franchise License issued for Basic Trading Area (BTA) 411, which covers much of Western Nebraska and a portion of Eastern Wyoming. This license permits the operation of Personal Communications Systems (PCS) in this designated area. Basisof Accounting - The Company uses the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when they are earned, and expenses are recognized when they are incurred. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Accounts Receivables - The Company provides for doubtful accounts by maintaining a provision for such amounts. This amount was $1,000 for 1998 and 1997. Property, Plant and Equipment and Depreciation - Property, plant and equipment are stated at cost less accumulated depreciation. Expenditures for major betterments are capitalized. Maintenance and repairs are charged to operations in the year incurred. Gain or loss on sale, retirement or other disposition of property, plant and equipment is credited or charged to operations in the year sustained. Depreciation is provided on an accelerated basis in accordance with generally accepted accounting principles over the estimated useful lives of the respective assets using the following lives: Buildings and improvements 5 - 31.5 years Office equipment 5 - 7 years Communications equipment 5 - 7 years Vehicles 5 years See accompanying independent auditor's report. F-13 TRACY CORPORATION II Scottsbluff, Nebraska NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) December 31, 1998 and 1997 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Intangible Assets - Intangible assets subject to amortization include patents and franchise rights. These assets are amortized on a straight-line basis using the following economic lives: Term Cost ---- ---- Patent 15 Years $ 55,972 FCC Franchise License 10 Years 965,608 ------------ Total $ 1,021,580 ============ Following is an analysis of activity in intangible assets for the years ended December 31, 1998 and 1997:
Beginning Ending Balance Additions Removals Balance 1998 --------- --------- -------- ------- ---- Patent ....................... $ 25,597 $ 30,375 $ -- $ 55,972 FCC Franchise License ........ 965,608 -- -- 965,608 ---------- ---------- ------------ ---------- Total ...................... $ 991,205 $ 30,375 $ -- $1,021,580 Accumulated amortization ............... 115,139 98,890 -- 214,029 ---------- ---------- ------------ ---------- Net total ................ $ 876,066 $ (68,515) $ -- $ 807,551 ========== ========== ============ ========== 1997 ---- Patent ....................... $ 15,059 $ 10,538 $ -- $ 25,597 FCC Franchise License ........ 843,356 122,252 -- 965,608 ---------- ---------- ------------ ---------- Total ...................... $ 858,415 $ 132,790 $ -- $ 991,205 Accumulated amortization ............... 21,418 93,721 -- 115,139 ---------- ---------- ------------ ---------- Net total ................ $ 836,997 $ 39,069 $ -- $ 876,066 ========== ========== ============ ==========
See accompanying independent auditor's report. F-14 TRACY CORPORATION II Scottsbluff, Nebraska NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) December 31, 1998 and 1997 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Research and Development Costs - Company sponsored research and development expenses related to present and future products are expensed as incurred. Research and development costs determined in accordance with FASB Statement No. 2, "Accounting for Research and Development Costs", were $91,428 and $91,256 for the years ended December 31, 1998 and 1997, respectively. Income Taxes and Deferred Taxes - The Company has elected to be taxed for federal and state purposes as a Subchapter S Corporation. This election transfers the income tax liability to the stockholders of the corporation. There are no taxes for the Company in 1998 or 1997. Cash and Cash Equivalents - For purposes of the statements of cash flows, the Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents. NOTE 2 - CONCENTRATION OF RISK The Company through a partnership investment and subsequent acquisition of the entire interest, was the successful bidder for an FCC Franchise License for Wireless Communications. In order for this franchise license to be profitable, a substantial sum of capital will be required before any return on investment is realized. Start up costs will be substantial before any revenue is received. Management has estimated the time frame for realization of revenue to be up to three years from the acquisition of the franchise license. The Company has applications pending for patents which operate in conjunction with various types of digital communications systems and system technologies. The number of patent claims which will ultimately be granted is not known and it is not possible to place a value on the patent applications. The patents deal with systems and technologies that reduce the overall cost of consolidating and delivering data, including such things as electrical and gas meter information, security services, and vending replenishment information. The technology will be first deployed on the Company's Personal Communications Systems in Basic Trading Area 411. Upon successful deployment, the Company will license the use of the technology and equipment to other digital communications providers thoughout the world. See accompanying independent auditor's report. F-15 TRACY CORPORATION II Scottsbluff, Nebraska NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) December 31, 1998 and 1997 NOTE 3 - PROPERTY, PLANT AND EQUIPMENT AND ACCUMULATED DEPRECIATION Following is an analysis of changes in property, plant and equipment and accumulated depreciation for the years ended December 31, 1998 and 1997:
Beginning Ending Balance Additions Deletions Balance 1998 --------- --------- --------- ------- ---- 1998 Land ......................... $ 3,000 $ 10,301 $ -- $ 13,301 Buildings and improvements ............... 12,910 819 -- 13,729 Office equipment ............. 48,869 26,469 -- 75,338 Communications equipment .................. 672,756 22,260 -- 695,016 Vehicles...................... 32,147 -- -- 32,147 -------- -------- -------- -------- Total ...................... $769,682 $ 59,849 $ -- $829,531 Accumulated depreciation ............. 651,571 41,727 -- 693,298 -------- -------- -------- -------- Net total ................ $118,111 $ 18,122 $ -- $136,233 ======== ======== ======== ======== 1997 ---- Land ......................... $ 2,000 $ 1,000 $ -- $ 3,000 Buildings and improvements ............... 11,549 1,361 -- 12,910 Office equipment ............. 37,151 11,718 -- 48,869 Communications equipment .................. 644,369 28,387 -- 672,756 Vehicles ..................... 32,147 -- -- 32,147 -------- -------- -------- -------- Total ...................... $727,216 $ 42,466 $ -- $769,682 Accumulated depreciation ............. 619,430 32,141 -- 651,571 -------- -------- -------- -------- Net total ................ $107,786 $ 10,325 $ -- $118,111 ======== ======== ======== ========
See accompanying independent auditor's report. F-16 TRACY CORPORATION II Scottsbluff, Nebraska NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) December 31, 1998 and 1997 NOTE 4 - UNASSERTED CLAIMS AND ASSESSMENTS On December 8, 1998, the Company, by board resolution, authorized the issuance of stock to two entities that had notes payable outstanding to the Company. The issuance of stock under this board resolution was completed January 2, 1999. The action revised the board resolution of December 16, 1997, authorizing the negotiation of the sale of up to thirty percent of the Company. NOTE 5 - LONG-TERM OBLIGATIONS Federal Communications Commission, C Block - This note payable was effective September 17, 1996, for the principal sum of $773,888. It is due in quarterly installments of approximately $55,874 beginning December 31, 2002. The installment payments include interest calculated at an annual rate of 7%. Interest up to the date of December 31, 2002, will be paid as follows: one annual interest payment on September 30, 1997, of approximately $56,128; quarterly installment interest payments of approximately $13,543 due on the last day of the month and every 90 days thereafter beginning on December 31, 1997, through and including September 30, 2002. The note is secured by the FCC License No. PBB411C. Federal Communications Commission, F Block - This note payable was effective April 28, 1997, for the principal sum of $74,467. It is due in quarterly installments of approximately $2,974 beginning July 28, 1999. The installment payment includes interest calculated at an annual rate of 6.25%. Interest up to the date of July 28, 1999, will be paid in equal quarterly installments of approximately $1,163 due on July 28, 1997, and every quarter thereafter on October 28, January 28, April 28 and July 28 through and including April 28, 1999. The entire unpaid principal amount plus accrued and unpaid interest is due and payable on April 28, 2007, if not paid sooner. The note payable is secured by the FCC License No. CWB411F. Federal Communications Commisssion, F Block - This note payable was effective April 28, 1997, for the principal sum of $34,200. It is due in quarterly installments of approximately $1,366 beginning July 28, 1999. The installment payment includes interest calculated at an annual rate of 6.25%. Interest up to the date of July 28, 1999, will be paid in equal quarterly installments of approximately $534 due on July 28, 1997, and every quarter thereafter on October 28, January 28, April 28 and July 28 through and including April 28, 1999. The entire unpaid principal amount plus accrued and unpaid interest is due and payable on April 28, 2007, if not paid sooner. The note payable is secured by the FCC License No. CWB270F. See accompanying independent auditor's report. F-17 TRACY CORPORATION II Scottsbluff, Nebraska NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) December 31, 1998 and 1997 NOTE 5 - LONG-TERM OBLIGATIONS (CONTINUED) The annual requirements for the extinguishment of long-term liabilities for the next five years and thereafter are as follows: 1998 1997 ---- ---- 1998 $ -- $ 898,786 1999 1,080,328 5,328 2000 854,164 11,164 2001 11,879 11,879 2002 54,970 54,970 2003 190,312 Thereafter 608,902 799,214 ----------- ----------- Total $ 2,800,555 $ 1,781,341 =========== =========== NOTE 6 - SUBSEQUENT EVENTS Tracy Corporation II has entered into agreements with TECORE, Inc. and UNISYS. These agreements are for the purchase of communications equipment to utilize the FCC Franchise License for Personal Service Communications in Basic Trading Area 411. The amount that has been obligated for the payment of the communications equipment is approximately $1,080,000 and $188,700 for the years ended December 31, 1998 and 1997, respectively On January 2, 1999, the Company by board resolution authorized the issuance of additional shares of stock in exchange for a portion of the outstanding debt, accrued interest and other consideration as follows: Hartford Holdings, Ltd. a Cayman Islands Corporation 85.35 shares Michael L. Glaser 85.35 shares Michael J. Tracy 118.30 shares The above issuance of stock resulted in the elimination of $557,613 in notes payable and accrued interest. In addition, $386,441 in goodwill was acquired. On February 19, 1999, the Company sold Federal Communications Commission, McCook F Block for $200,000. This sale is pending subject to regulatory approval. The net asset value of this asset at December 31, 1998, is $42,750. See accompanying independent auditor's report. F-18 TRACY CORPORATION II Scottsbluff, Nebraska NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) December 31, 1998 and 1997 NOTE 6 - SUBSEQUENT EVENTS (CONTINUED) An agreement entered into March 22, 1999, contemplating a corporate reorganization transaction involving the Corporation, Arnox Corporation and Telemetrix Resource Group Inc. is pending subject to various regulatory approvals. Costs incurred by the Company through December 31, 1998, relating to this reorganization were $87,000. The total cost including legal expense is estimated to be $175,000. It is contemplated that the final phase of the agreement requiring Security Exchange Commission approval will be completed after June 30, 1999. NOTE 7 - RELATED PARTY DISCLOSURES The accounts receivable other of $26,180 and $26,416 as of December 31, 1998 and 1997, respectively, were due from corporations with the same ownership as Tracy Corporation II or the major stockholder. The current portion of long-term liabilities includes $75,000 and $325,000 for 1998 and 1997, respectively, that is due to Mike Tracy. These notes bear interest at the rate of 9.75% for 1998 and 7.5% on $125,000 and 9.75% on $200,000 for 1997. The facility occupied by the Company in Gering, Nebraska, is being leased at $2,500 per month from the sole stockholder. The lease is month to month. A management fee of $20,000 per month is paid to a corporation with the same stockholder ownership. This contract is month to month and includes all employee related expense. NOTE 8 - YEAR 2000 ISSUE The Year 2000 issue is the result of shortcomings in many electronic data processing systems and other equipment that may adversely affect the Company's operations as early as fiscal year 1999. The Company has completed an inventory of computer systems and other equipment necessary in conducting corporate operations and has procured and tested the systems that are Year 2000 compliant. Because of the unprecedented nature of the Year 2000 issue, its effect and the success of related remediation efforts will not be fully determinable until the year 2000 and thereafter. Management cannot assure that the Company is or will be Year 2000 ready, that the Company's remediation efforts will be successful in whole or in part, or that parties with whom the Company does business will be Year 2000 ready. See accompanying independent auditor's report. F-19 Telemetrix Resource Group, Inc. (a development stage company) Financial Statements For the year ended December 31, 1998 (in United States dollars) F-20 Telemetrix Resource Group, Inc. (a development stage company) Financial Statements For the year ended December 31, 1998 (in United States dollars) Contents - - -------------------------------------------------------------------------------- Auditors' Report 22 Comments by Auditors for U.S. Readers on Canada U.S. Reporting Difference 23 Financial Statements Balance Sheet 24 Statement of Operations 25 Statement of Shareholder's Equity 26 Statement of Cash Flows 27 Summary of Significant Accounting Policies 28 Notes to Financial Statements 29 F-21 - - -------------------------------------------------------------------------------- Auditors' Report - - -------------------------------------------------------------------------------- To the Shareholder of Telemetrix Resource Group, Inc. Delaware, Colorado We have audited the balance sheet of Telemetrix Resource Group, Inc. (a development stage company) as of December 31, 1998 and the statements of operations, shareholder's equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards in Canada. Those standards require that we plan and perform an audit to obtain reasonable assurance 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. In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 1998 and the results of its operations and its cash flows for the year then ended in accordance with generally accepted accounting principles in the United States. /s/ BDO Dunwoody LLP BDO Dunwoody LLP Chartered Accountants Toronto, Ontario August 19, 1999 F-22 - - -------------------------------------------------------------------------------- Comments by Auditors for U.S. Readers on Canada-U.S. Reporting Difference - - -------------------------------------------------------------------------------- In the United States, reporting standards for auditors require the addition of an explanatory paragraph(following the opinion paragraph) when the financial statements are affected by conditions and events that cast substantial doubt on the Company's ability to continue as a going concern, such as those described in Note 1 to the financial statements. Our report to the shareholders dated August 19, 1999 is expressed in accordance with Canadian reporting standards which do not permit a reference to such events and conditions in the auditors' report when these are adequately disclosed in the financial statements. /s/ BDO Dunwoody LLP BDO Dunwoody LLP Chartered Accountants Toronto, Ontario August 19, 1999 F-23 - - -------------------------------------------------------------------------------- Telemetrix Resource Group, Inc. (a development stage company) Balance Sheet (in United States dollars) December 31, 1998 - - -------------------------------------------------------------------------------- Assets Current Due from related company (Note 2) ....................... $ 166 Capital asset (Note 3) .................................... 19,444,444 ------------ $ 19,444,610 ================================================================================ Liabilities and Shareholder's Equity Current Accounts payable ........................................ $ 5,000 Due to related company (Note 4) ......................... 92,653 ------------ 97,653 ------------ Shareholder's equity Share capital (Note 5) Authorized 100,000,000 Common shares of no par value 100,000,000 Preferred shares at $.001 par value Issued 100 Common shares ................................. 100 Additional paid in capital .............................. 24,999,900 Deficit accumulated during the development stage ........ (5,653,043) ------------ 19,346,957 ------------ $ 19,444,610 ================================================================================ On behalf of the Board: /s/ Oz Pedde - - ------------------------------ Oz Pedde Director The accompanying summary of significant accounting policies and notes are an integral part of these financial statements. F-24 - - -------------------------------------------------------------------------------- Telemetrix Resource Group, Inc. (a development stage company) Statement of Operations (in United States dollars) For the year ended December 31, 1998 - - -------------------------------------------------------------------------------- Revenue .............................................. $ 166 ---------- Expenses Amortization ....................................... 5,555,556 Professional fees .................................. 5,000 Salaries ........................................... 66,025 Travel ............................................. 26,628 ---------- 5,653,209 ---------- Net loss for the year ................................ $(5,653,043) ================================================================================ The accompanying summary of significant accounting policies and notes are an integral part of these financial statements. F-25 - - --------------------------------------------------------------------------------
Telemetrix Resource Group, Inc. (a development stage company) Statement of Shareholder's Equity (in United States dollars) For the year ended December 31, 1998 - - -------------------------------------------------------------------------------- Common Additional Comprehensive Shares Paid in Capital Deficit Loss Total - - -------------------------------------------------------------------------------------------------------- Balance, January 1, 1998 ...... $ -- $ -- $ -- $ -- $ -- April 30, 1998 100 Common shares issued for $1 per share and Tele- communications billing and information management software .................... 100 24,999,900 -- -- 25,000,000 Comprehensive loss Net loss for the year ....... -- -- (5,653,043) $ (5,653,043) (5,653,043) ----------- ----------- ----------- ----------- ----------- Comprehensive loss ............ $ 100 $ 24,999,900 $ (5,653,043) $ (5,653,043) $ 19,346,957 =========== =========== ============ =========== ===========
The accompanying summary of significant accounting policies and notes are an integral part of these financial statements. F-26 - - -------------------------------------------------------------------------------- Telemetrix Resource Group, Inc. (a development stage company) Statement of Cash Flows (in United States dollars) For the year ended December 31, 1998 - - -------------------------------------------------------------------------------- Cash flows from operating activities Net loss for the year ....................................... $(5,653,043) Adjustments to reconcile to net cash from operations Amortization of capital asset ............................. 5,555,556 Changes in assets and liabilities Increase in accounts payable ............................ 5,000 ----------- (92,487) ----------- Cash flows from investing activities Advances to related company ................................. (166) ----------- Cash flows from financing activities Advances from related company ............................... 92,653 ----------- Net increase in cash .......................................... -- Cash, beginning of year ....................................... -- ----------- Cash, end of year ............................................. $ -- ================================================================================ The accompanying summary of significant accounting policies and notes are an integral part of these financial statements. F-27 - - -------------------------------------------------------------------------------- Telemetrix Resource Group, Inc. (a development stage company) Summary of Significant Accounting Policies (in United States dollars) December 31, 1998 - - -------------------------------------------------------------------------------- Nature of Business Telemetrix Resource Group, Inc. (the "Company") was originally incorporated as Datapath Communications Corporation on May 8, 1996 in the State of Colorado. The name was changed on December 16, 1997 and operations effectively began on April 30, 1998 (see Note 9). The Company's primary sources of revenue are non-exclusive licensing agreements for its telecommunications billing and information management software. The software addresses the requirements of a telecommunications service provider's order fulfilment, customer care, fraud control, billing, cash remittance and accounts receivable processes. Basis of Financial Statements These financial statements have been prepared by management in accordance with generally accepted accounting principles in the United States. Basis of Accounting The Company uses the accrual basis of accounting. Under the accrual basis of accounting, royalty fees revenue is recognized when they are earned, and expenses are recognized when they are incurred. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Capital Asset Capital asset is stated at cost less accumulated amortization and is written down when a permanent impairment in the carrying value is identified. Amortization has been provided annually at rates calculated to amortize the asset over its estimated useful life as follows: Telecommunications billing and information management software - 3 years straight line Impairment of Long-Lived Assets Management reviews assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted future cash flows resulting from the use of these assets. If deemed impaired, measurement and recording of an impairment loss is based on the fair value of the asset. F-28 - - -------------------------------------------------------------------------------- Telemetrix Resource Group, Inc. (a development stage company) Summary of Significant Accounting Policies (Continued) (in United States dollars) December 31, 1998 - - -------------------------------------------------------------------------------- Income Taxes The Company accounts for income taxes under the asset and liability method. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial reporting and tax bases of assets and liabilities and available loss carryforwards. A valuation allowance is established to reduce deferred tax assets if it is more likely than not that all or some portions of such deferred tax assets will not be realized. F-29 - - -------------------------------------------------------------------------------- Telemetrix Resource Group, Inc. (a development stage company) Notes to Financial Statements (in United States dollars) December 31, 1998 - - -------------------------------------------------------------------------------- 1. Basis of Presentation The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has not, to date, realized any significant revenues, and as a result the Company has incurred operating losses and a shareholder's deficiency. These factors raise substantial doubt about the Company's ability to continue as a going concern. The Company's ability to continue as a going concern is dependent upon achieving profitable operations based on the commercial viability of the Company's telecommunications billing and information management software. The financial statements do not include any adjustments that might result from the outcome of the uncertainty. The Company plans to minimize working capital requirements and is dependent on the continued support of its related companies. The continued support and forbearance of its related companies will be required, although this is not assured. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the company to continue as a going concern. - - -------------------------------------------------------------------------------- 2. Due from Related Company Telemetrix Resource Group Limited $ 166 =========== The amount due from the related company is non-interest bearing and due on demand. Telemetrix Resource Group Limited, a Nova Scotia corporation, is a company under common ownership. - - -------------------------------------------------------------------------------- 3. Capital Asset Accumulated Cost Amortization Telecommunications billing and information management software $ 25,000,000 $ 5,555,556 ----------- ------------ Net book value $ 19,444,444 ============ - - -------------------------------------------------------------------------------- 4. Due to Related Company Telemetrix Software Factory Inc. $ 92,653 ============ The amount due to the related company is non-interest bearing and due on demand. Telemetrix Software Factory Inc. is a company under common ownership. F-30 - - -------------------------------------------------------------------------------- Telemetrix Resource Group, Inc. (a development stage company) Notes to Financial Statements (in United States dollars) December 31, 1998 - - -------------------------------------------------------------------------------- 5. Share Capital (a) Authorized 100,000,000 Common shares at no par value 100,000,000 Preferred shares at par value of $.001 per share (b) Changes to Issued Share Capital On April 30, 1998, the Company entered into an asset purchase agreement with its parent company, Hartford Holdings Ltd. ("Hartford"), a Cayman Islands corporation. Telecommunications billing and information management software recorded at $25,000,000, which is the carryover basis, was acquired by the Company in exchange for 100 shares of the Company's common stock. - - -------------------------------------------------------------------------------- 6. Related Party Transactions Royalty fees from Telemetrix Resource Group Limited $ 166 Salaries and travel paid by Telemetrix Software Factory Inc. 92,653 All transactions between the related companies are recorded at their exchange amount as agreed upon by the parties. In June 1998, the Company entered into a five year non-exclusive licence agreement with Telemetrix Resource Group Limited, a Nova Scotia corporation (see Note 9) to use the Company's telecommunications billing and information management software in Canada and worldwide. The Company receives a monthly royalty of 1% of all fees received from services using and sublicensing the software. - - -------------------------------------------------------------------------------- 7. Economic Dependence Currently, 100% of the Company's revenue is derived from royalty fees received from Telemetrix Resource Group Limited which became a wholly owned subsidiary effective January 2, 1999 (see Note 9). F-31 - - -------------------------------------------------------------------------------- Telemetrix Resource Group, Inc. (a development stage company) Notes to Financial Statements (in United States dollars) December 31, 1998 - - -------------------------------------------------------------------------------- 8. Income Taxes The Company is taxable at the federal and state levels within the United States. The Company is not taxable in any other jurisdictions. The difference between income taxes computed at the federal statutory rate and the income tax provision reflected in the statement of operations is primarily due to a full valuation allowance against deferred tax assets at December 31, 1998, as described below. The net deferred tax assets (liability) consists of the following at December 31, 1998: Net operating loss carry forwards @ 45% tax rate $ (2,543,869) Valuation allowance 2,543,869 ------------- $ -- ============= The Company has provided a full valuation allowance against deferred tax assets at December 31, 1998, due to uncertainties as to the Company's ability to utilize its net operating losses. The net operating loss carryforwards in the amount of $5,653,043 expire in the year 2005. - - -------------------------------------------------------------------------------- 9. Subsequent Events On January 2, 1999, the share exchange and plan of reorganization between the Company, the Company's parent, Hartford, and its wholly owned subsidiary, Telemetrix Resource Group Limited ("TRG"), a Nova Scotia corporation was completed. Hartford transferred all its issued and outstanding shares of TRG to the Company in exchange for 100 common shares of the Company's capital stock. Therefore, TRG became a wholly owned subsidiary of the Company. Effective April 5, 1999, the Company completed, by way of an exchange of shares a reverse take-over of Arnox Corporation ("Arnox") . Under the agreement, Arnox, an inactive public shell corporation, acquired all of the outstanding common stock of the Company in exchange for 6,127,200 shares of common stock of Arnox. Prior to the acquisition, Arnox had no operations. This transaction was equivalent to the issuance of stock of the Company for the net assets of Arnox, accompanied by a recapitalization. Arnox's assets were recorded at carryover basis and no goodwill was recorded from this transaction. Arnox's historical financial statements became those of the Company. This business reorganization was accounted for as a reverse take-over with the Company being deemed the acquirer, because this exchange of shares left the former shareholder of the Company with 81.5% of the shares of Arnox. Upon the business reorganization, Arnox became the legal parent and changed its name to Telemetrix Inc. ("Telemetrix") and the Company became its wholly owned subsidiary. Upon receipt of regulatory approval from the Federal Communications Commission, Telemetrix will issue 5,372,800 shares of common stock to Tracy Corporation II d/b/a Western Total Communications ("Tracy II") in exchange for all of the outstanding stock of Tracy II. This transaction will be accounted for as an acquisition of Tracy II at fair value. Upon completion of this transaction, the Company's and Tracy II's former shareholders will own 53.5% and 32.1% respectively of Telemetrix. On June 29, 1999, the Company changed its name to Telemetrix Solutions Inc. F-32 - - -------------------------------------------------------------------------------- Telemetrix Resource Group, Inc. (a development stage company) Notes to Financial Statements (in United States dollars) December 31, 1998 - - -------------------------------------------------------------------------------- 10. Recently Issued Accounting Standards In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 establishes methods of accounting for derivative financial instruments and hedging activities related to those instruments as well as other hedging activities. SFAS No. 133 requires companies to record derivatives on the balance sheet as assets or liabilities, measured at fair value. Gains or losses resulting from changes in the fair values of those derivatives would be accounted for in current earnings unless specific hedge criteria are met. The key criterion for hedge accounting is that the hedging relationship must be highly effective in achieving offsetting changes in fair value of cash flows. SFAS No. 133 is effective for fiscal years beginning after June 15, 2000. The Company is currently determining the additional disclosures and accounting treatments, if any, that may be required under this pronouncement. In March 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-1 ("SOP 98-1"), "Accounting for the Costs of Computer software Developed or Obtained for Internal Use." This standard requires companies to capitalize qualifying computer software costs which are incurred during the application development stage and amortize them over the software's estimated useful life. SOP 98-1 is effective for fiscal years beginning after December 15, 1998. The Company does not expect that there will be any material impact as a result of SOP 98-1 on its financial statements and related disclosures. In April 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities." SOP 98-5 requires that all start-up costs related to new operations must be expensed as incurred. In addition, all start-up costs that were capitalized in the past must be written off when SOP 98-5 is adopted. The Company will be required to implement SOP 98-5 for its fiscal year ended December 31, 1999. There will be no material effect on the financial statements. F-33 Telemetrix Resource Group Limited Financial Statements For the years ended December 31, 1998 and 1997 F-34 Telemetrix Resource Group Limited Financial Statements For the years ended December 31, 1998 and 1997 Contents - - -------------------------------------------------------------------------------- Auditors' Report 36 Comments by Auditors for U.S. Readers on Canada U.S. Reporting Difference 37 Financial Statements Balance Sheets 38 Statements of Operations and Deficit 39 Statements of Cash Flows 40 Summary of Significant Accounting Policies 41 Notes to Financial Statements 42 F-35 - - -------------------------------------------------------------------------------- Auditors' Report - - -------------------------------------------------------------------------------- To the Shareholders of Telemetrix Resource Group Limited We have audited the balance sheets of Telemetrix Resource Group Limited as at December 31, 1998 and 1997 and the statements of operations and deficit 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 Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance 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. In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 1998 and 1997 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles. /s/ BDO Dunwoody LLP BDO Dunwoody LLP Chartered Accountants Toronto, Ontario August 6, 1999 F-36 - - -------------------------------------------------------------------------------- Comments by Auditors for U.S. Readers on Canada-U.S. Reporting Difference - - -------------------------------------------------------------------------------- In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when the financial statements are affected by conditions and events that cast substantial doubt on the Company's ability to continue as a going concern, such as those described in Note 2 to the financial statements. Our report to the shareholders dated August 6, 1999 is expressed in accordance with Canadian reporting standards which do not permit a reference to such events and conditions in the auditors' report when these are adequately disclosed in the financial statements. /s/ BDO Dunwoody LLP BDO Dunwoody LLP Chartered Accountants Toronto, Ontario August 6, 1999 F-37 - - -------------------------------------------------------------------------------- Telemetrix Resource Group Limited Balance Sheets December 31 1998 1997 - - -------------------------------------------------------------------------------- Assets Current Cash .......................................... $ 173,769 $ 6,719 Accounts receivable ........................... 413,251 -- Prepaid expenses .............................. 17,821 9,125 Due from related companies (Note 3) ........... 181,848 -- ---------- ---------- 786,689 15,844 Capital assets (Note 6) ......................... 1,179,947 96,992 ---------- ---------- $1,966,636 $ 112,836 ========== ========== Liabilities and Shareholders' Deficiency Current Accounts payable .............................. $ 907,322 $ 67,455 Due to related companies (Note 3) ............. 3,393,881 702,832 ---------- ---------- 4,301,203 770,287 Obligations under capital lease (Note 7) ........ 78,819 -- Leasehold inducement (Note 8) ................... 223,833 -- ---------- ---------- 4,603,855 770,287 ---------- ---------- Shareholders' deficiency Share capital Authorized 1,000,000 Common shares Issued 1 Common share ........................ 1 1 Deficit ....................................... (2,637,220) (657,452) ---------- ---------- (2,637,219) (657,451) ---------- ---------- $1,966,636 $ 112,836 ========== ========== - - -------------------------------------------------------------------------------- On behalf of the Board: /s/ Oz Pedde - - --------------------------- Oz Pedde Director The accompanying summary of significant accounting policies and notes are an integral part of these financial statements. F-38 - - -------------------------------------------------------------------------------- Telemetrix Resource Group Limited Statements of Operations and Deficit For the year ended December 31 1998 1997 - - -------------------------------------------------------------------------------- Revenues Fees ................................... $ 637,592 $ -- Disbursements .......................... 101,916 -- ----------- ----------- 739,508 -- ----------- ----------- Expenses Amortization ........................... 117,573 16,433 Customer support ....................... 79,812 -- Development ............................ 531,843 -- General and administrative ............. 775,315 -- Interest ............................... 212,102 43,927 Interest on capital leases ............. 3,964 -- Operational and implementation ......... 634,583 -- Sales and marketing .................... 364,084 -- Start up costs (Note 4) ................ -- 597,092 ----------- ----------- 2,719,276 657,452 ----------- ----------- Net loss for the year .................... (1,979,768) (657,452) Deficit, beginning of year ............... (657,452) -- ----------- ----------- Deficit, end of year ..................... $(2,637,220) $ (657,452) =========== =========== The accompanying summary of significant accounting policies and notes are an integral part of these financial statements. F-39 - - --------------------------------------------------------------------------------
Telemetrix Resource Group Limited Statements of Cash Flows For the year ended December 31 1998 1997 - - -------------------------------------------------------------------------------- Cash flows from operating activities Net loss for the year .............................. $(1,979,768) $ (657,452) Adjustments to reconcile to net cash from operations Amortization of capital assets ................... 117,573 16,433 Amortization of leasehold inducement liability ... (25,167) -- Changes in assets and liabilities Accounts receivable ............................ (413,251) -- Prepaid expenses ............................... (8,696) (9,125) Accounts payable ............................... 839,867 67,455 ----------- ----------- (1,469,442) (582,689) ----------- ----------- Cash flows from investing activities Advances to related companies ...................... (181,848) -- Purchase of capital assets ......................... (1,116,211) (113,425) ----------- ----------- (1,298,059) (113,425) ----------- ----------- Cash flows from financing activities Repayment of capital lease liability ............... (5,498) -- Increase in leasehold inducement liability ......... 249,000 -- Increase of payable to related companies ........... 2,691,049 702,832 Proceeds from issue of share capital ............... -- 1 ----------- ----------- 2,934,551 702,833 ----------- ----------- Net increase in cash ................................. 167,050 6,719 Cash, beginning of year .............................. 6,719 -- ----------- ----------- Cash, end of year .................................... $ 173,769 $ 6,719 =========== =========== Supplemental disclosures of cash flow information Cash paid during the year for: Interest ......................................... $ 3,964 $ -- ----------- ----------- Supplemental disclosure of non-cash financing and investing activities Assets acquired under capital lease .............. $ 84,317 $ -- ----------- -----------
- - -------------------------------------------------------------------------------- The accompanying summary of significant accounting policies and notes are an integral part of these financial statements. F-40 - - -------------------------------------------------------------------------------- Telemetrix Resource Group Limited Summary of Significant Accounting Policies December 31, 1998 and 1997 - - -------------------------------------------------------------------------------- These financial statements have been prepared by management in accordance with accounting principles generally accepted in Canada, the more significant of which are outlined below. A reconciliation to accounting principles generally accepted in the United States is shown in Note 13. Use of Estimates The preparation of the Company's financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Capital Assets Capital assets are recorded at cost less accumulated amortization and are written down when a permanent impairment in the carrying value is identified. Amortization has been provided on both the diminishing balance and straight-line basis at the following annual rates: Computer and billing equipment - 30% Computer equipment held under capital lease - 30% Furniture and equipment - 20% Leasehold improvements - 10 years Revenue Recognition Consulting and programming related revenues are recognized as the services are provided. Leased Assets Leases entered into that transfer substantially all the benefits and risks associated with ownership are recorded as the acquisition of a capital asset and the incurrence of an obligation. The asset is amortized in a manner consistent with assets owned by the Company, and the obligation, including interest thereon, is liquidated over the term of the lease. Foreign Currencies Foreign currency accounts are translated to Canadian dollars as follows: At the transaction date, each asset, liability, revenue or expense is translated into Canadian dollars by the use of the exchange rate in effect at that date. At the year end date, monetary assets and liabilities are translated into Canadian dollars by using the exchange rate in effect at that date and the resulting foreign exchange gains and losses are included in income in the current period. Financial Instruments It is management's opinion that the Company is not exposed to significant interest rate, currency or credit risks arising from its financial instruments. The Company's cash is held by one financial institution and $96,013 of the cash balance is foreign currency denominated in U.S. dollars. Included in accounts receivable and accounts payable are foreign currency denominated in U.S. dollars in the amount of $270,217 and $13,101 respectively. F-41 - - -------------------------------------------------------------------------------- Telemetrix Resource Group Limited Summary of Significant Accounting Policies (Continued) December 31, 1998 and 1997 - - -------------------------------------------------------------------------------- Income Taxes The Company accounts for income taxes under the asset and liability method. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial reporting and tax bases of assets and liabilities and available loss carryforwards. A valuation allowance is established to reduce deferred tax assets if it is more likely than not that all or some portions of such deferred tax assets will not be realized. Impairment of Assets Management reviews assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, and, if deemed impaired, measurement and recording of an impairment loss is based on the fair value of the asset. Leasehold Inducements Leasehold inducements are capitalized as a deferred liability and are amortized over the useful life of the leasehold improvement. F-42 - - -------------------------------------------------------------------------------- Telemetrix Resource Group Limited Notes to Financial Statements December 31, 1998 and 1997 - - -------------------------------------------------------------------------------- 1. Description of Business The Company was incorporated on August 15, 1996 in the Province of Nova Scotia, but effectively began operations on January 1, 1997. The Company's product offerings specifically address the requirements of a telecommunications service provider's order fulfilment, customer care, fraud control, billing, cash remittance and accounts receivable processes. The Company works closely with customers in defining their requirements and then designs, develops and implements user-based billing and customer care programs. - - -------------------------------------------------------------------------------- 2. Basis of Presentation The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has not, to date, realized any significant revenues, and as a result, the Company has incurred operating losses, has a deficit working capital, has negative cash flows from operations and a shareholders' deficiency. These factors raise substantial doubt about the Company's ability to continue as a going concern. The Company's ability to continue as a going concern is dependent upon achieving profitable operations and on financing provided by related parties. The financial statements do not include any adjustments that might result from the outcome of the uncertainty. - - -------------------------------------------------------------------------------- 3. Due from Related Companies 1998 1997 ---------- --------- Mondetta Telecommunications Inc. ("Mondetta") $ 70,099 $ -- Web CCB Systems Inc. ("WEB") 45,000 -- Telemetrix Software Factory Inc. 66,749 -- ---------- --------- $ 181,848 $ -- ========== ========= Due to Related Companies Hartford Holdings Ltd. $ 3,092,842 $ 702,832 The Becker Group of Companies Inc. ("BGC") 300,784 - Telemetrix Resource Group, Inc. ("TRG") 255 - ---------- --------- $ 3,393,881 $ 702,832 ========== ========= The amounts due from related companies are non-interest bearing and due on demand. The amounts due to related companies are due on demand bearing interest at US prime except amount due to TRG which is non-interest bearing and due on demand. Hartford Holdings Ltd. is the Parent of the Company, WEB, BGC, TRG and Telemetrix Software Factory Inc. Mondetta is controlled by a person related to the shareholder of Hartford Holdings Ltd. Included in accounts receivable is the amount of $389,000 owing from Telehub Communications Corporation, where the substantial shareholder is Hartford Holdings Ltd. Included in accounts payable is interest in the amount of $256,029 (1998 - $43,927) due to related companies. Royalty fees in the amount of $255 are included in general and administrative expenses. F-43 - - -------------------------------------------------------------------------------- Telemetrix Resource Group Limited Notes to Financial Statements December 31, 1998 and 1997 - - -------------------------------------------------------------------------------- 4. Related Party Transactions 1998 1997 Purchases of capital assets from BGC $ 161,000 $ -- Purchases of net leasehold improvements from BGC 22,000 -- Net cash advances to BGC 10,000 -- Cash advances to WEB 45,000 -- Payment of rent to Northern Cablevision Ltd. ("NCL") 137,000 -- Royalty fees paid to TRG 255 -- Sales to Telehub Communications Corporation 612,000 -- All transactions between the related companies are recorded at their exchange amount as agreed upon by the parties. In June 1998, the Company entered into a five year non-exclusive license agreement with Telemetrix Resource Group, Inc. ("TRG"), a Colorado corporation (see Note 10), to use TRG's telecommunications billing and information management software in Canada and worldwide. The Company pays a monthly royalty of 1% of all fees received from services using and sublicensing the software. In 1997 the start up costs were funded by Hartford Holdings Ltd. on behalf of the Company. Northern Cablevision Ltd. is controlled by a person related to the shareholder of Hartford Holdings Ltd. - - -------------------------------------------------------------------------------- 5. Economic Dependence Approximately 96% of the Company's sales and 94% of accounts receivable is derived from Telehub Communications Corporation. - - -------------------------------------------------------------------------------- 6. Capital Assets
1998 1997 ------------------------- ------------------------- Accumulated Accumulated Cost Amortization Cost Amortization Computer and billing equipment .............. $ 799,528 $ 74,369 $ 101,808 $ 15,271 Computer equipment held under capital lease ....................... 84,317 12,648 -- -- Furniture and equipment ..................... 160,724 18,164 11,617 1,162 Leasehold improvements ...................... 269,383 28,824 -- -- ---------- ---------- ---------- ---------- $1,313,952 $ 134,005 $ 113,425 $ 16,433 ---------- ---------- ---------- ---------- Net book value .............................. $1,179,947 $ 96,992 ---------- ----------
F-44 - - -------------------------------------------------------------------------------- Telemetrix Resource Group Limited Notes to Financial Statements December 31, 1998 and 1997 - - -------------------------------------------------------------------------------- 7. Commitments (a) The principal repayments on the capital leases (see note 4) are as follows: 1999 - $43,400 2000 - 24,300 2001 - 11,100 (b) The Company entered into a lease for shared office space with NCL during the year which has committed the Company to an annual rental payment of approximately $228,000. The effective term of the lease is from June 1, 1998 to May 31, 2008. - - -------------------------------------------------------------------------------- 8. Leasehold Inducement 1998 1997 Leasehold inducement $ 249,000 $ -- Accumulated amortization 25,167 -- ---------- ---------- $ 223,833 $ -- ========== ========== During the year the Company received an inducement from NCL to subsidize leasehold improvement expenditures. The inducement has been capitalized as a deferred liability and will be amortized over the same 10 year useful life as the leasehold improvements. Approximately $25,000 in amortization of the inducement has been recognized as a reduction of general and administrative expense during the year. - - -------------------------------------------------------------------------------- 9. Income Taxes The Company is taxable at the federal and provincial levels within Canada. The Company is not taxable in any other jurisdictions. The difference between income taxes computed at the federal statutory rate and the income tax provision reflected in the statement of operations is primarily due to a full valuation allowance against deferred tax assets at December 31, 1998 and 1997, as described below. The net deferred tax assets (liability) consists of the following at December 31, 1998 and 1997: 1998 1997 ----------- ---------- Net operating loss carry forwards @ 45% tax rate $ (1,186,749) $ (295,853) ----------- ---------- Valuation allowance 1,186,749 295,853 ----------- ---------- $ -- $ -- ----------- ---------- The Company has provided a full valuation allowance against deferred tax assets at December 31, 1998 and 1997, due to uncertainties as to the Company's ability to utilize its net operating losses. The net operating loss carryforwards in the amounts of $657,452 and $1,979,768 expire in the years 2004 and 2005 respectively. F-45 - - -------------------------------------------------------------------------------- Telemetrix Resource Group Limited Notes to Financial Statements December 31, 1998 and 1997 - - -------------------------------------------------------------------------------- 10. Subsequent Event On January 2, 1999, the Company's shareholder exchanged shares with Telemetrix Resource Group , Inc., (TRG) a Colorado corporation. Therefore, the Company became a wholly owned subsidiary of TRG, a Colorado corporation. - - -------------------------------------------------------------------------------- 11. Segmented Information The Company's consulting and programming services are provided primarily to clients in the U.S. As Canadian operations are not yet significant, the Company has determined that it operates in one segment. The following table presents information related to the Company by geographic area: Canada United States ---------- ------------- For the year ended December 31, 1998 Revenue $ -- $ 739,508 Operating loss -- (1,979,768) Assets 1,966,636 -- ---------- ------------ For the year ended December 31, 1997 Revenue $ -- $ -- Operating loss -- (657,452) Assets 112,836 -- ---------- ------------ - - -------------------------------------------------------------------------------- 12. Uncertainty Due to the Year 2000 Issue The Year 2000 Issue arises because many computerized systems use two digits rather than four to identify a year. Date-sensitive systems may recognize the year 2000 as 1900 or some other date, resulting in errors when information using year 2000 dates is processed. In addition, similar problems may arise in some systems which use certain dates in 1999 to represent something other than a date. The effects of the Year 2000 Issue may be experienced before, on, or after January 1, 2000. If the Year 2000 Issue is not addressed by the Company and its major customers, suppliers and other third party business associates, the impact on the Company's operations and financial reporting may range from minor errors to significant systems failure which could affect the Company's ability to conduct normal business operations. It is not possible to be certain that all aspects of the Year 2000 Issue affecting the Company, including those related to the efforts of customers, suppliers, or other third parties, will be fully resolved. F-46 - - -------------------------------------------------------------------------------- Telemetrix Resource Group Limited Notes to Financial Statements December 31, 1998 and 1997 - - -------------------------------------------------------------------------------- 13. Reconciliation of Results Reported in Accordance with Generally Accepted Accounting Principles (GAAP) in Canada with United States ("U.S.") GAAP There are no significant adjustments required to give effect to the differences between United States GAAP and Canadian GAAP which is the basis of presentation of the financial statements of the Company. Recent Accounting Pronouncements In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 establishes methods of accounting for derivative financial instruments and hedging activities related to those instruments as well as other hedging activities. SFAS No. 133 requires companies to record derivatives on the balance sheet as assets or liabilities, measured at fair value. Gains or losses resulting from changes in the fair values of those derivatives would be accounted for in current earnings unless specific hedge criteria are met. The key criterion for hedge accounting is that the hedging relationship must be highly effective in achieving offsetting changes in fair value of cash flows. SFAS No. 133 is effective for fiscal years beginning after June 15, 1999. The Company is currently determining the additional disclosures and accounting treatments, if any, that may be required under this pronouncement. In March 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-1 ("SOP 98-1"), "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." This standard requires companies to capitalize qualifying computer software costs which are incurred during the application development stage and amortize them over the software's estimated useful life. SOP 98-1 is effective for fiscal years beginning after December 15, 1998. The Company is currently evaluating the impact of SOP 98-1 on its financial statements and related disclosures. In April 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities." SOP 98-5 requires that all start-up costs related to new operations must be expensed as incurred. In addition, all start-up costs that were capitalized in the past must be written off when SOP 98-5 is adopted. The Company will be required to implement SOP 98-5 for its fiscal year ended December 31, 1999. F-47 EXHIBIT TABLE ......... Exhibit Page # ------- ------ ......... 99.1 EX-99.1 2 LIST OF SUBSIDIARIES List of Registrant's Subsidiaries
Percentage Owned by Name of Subsidiary Jurisdiction Registrant - - ------------------ ------------ ------------------- Telemetrix Resource Group Ltd.1 Nova Scotia, Canada 100% Telemetrix Solutions Inc.2 Colorado 100% Tracy Corporation II Nebraska 100% dba Western Total Communications
- - ----------- 1 Registrant owns 100% of Telemetrix Solutions Inc., a Colorado corporation, which in turn owns 100% of Telemetrix Resource Group, Ltd., a Nova Scotia, Canada corporation 2 Formerly known as Telemetrix Resource Group, Inc., a Colorado corporation -----END PRIVACY-ENHANCED MESSAGE-----