Financial Statements Users

Who will be reading the financial statements?

< the owner operator

< public shareholders

< a banker or creditor

< a potential purchaser of the business

< government

Financial Statements Components

Balance Sheet

Provides information about the nature of an enterprise’s resources or investments, its obligations to creditors, and the owners’ equity in net enterprise resources.

Asset

< Economic resources

Liabilities

< Economic obligations

Equity

< Economic wealth

Assets - Liabilities = Equity

Financial Statements Components

Income Statement

Provides information concerning the revenue earned during a period and the expenses related to earning those revenues.

Revenue

< Economic inflows

Expenses

< Economic outflows

Revenue - Expenses = Income before income taxes

Income before income taxes - Taxes = Net income

Balance Sheet

September 30, 2002, with comparative figures for 2001, unaudited

2002 2001

Assets

Current assets

Cash $ 447,833 $ 161,053

Accounts receivable 662,318 877,592

Prepaid expenses 13,699 4,417

1,123,850 1,043,062

Capital assets (Note 2) 152,633 93,949

$ 1,276,483 $ 1,137,011

Liabilities and Shareholders' Equity

Current liabilities

Accounts payable and accrued charges $ 260,446 $ 261,092

Income taxes 23,655 28,780

Due to shareholders 194,726 273,500

478,827 563,372

Shareholders' equity

Share capital (Note 3) 16,200 16,200

Retained earnings 781,456 557,439

797,656 573,639

$ 1,276,483 $ 1,137,011

Commitments (Note 4)

Approved on behalf of the Board:

Director Director

Statement of Income and Retained Earnings

Year ended September 30, 2002, with comparative figures for 2001, unaudited

2002 2001

Revenue

Fees $ 3,035,449 $ 2,722,562

Expenses

Advertising and promotion 65,085 43,104

Amortization 50,357 19,310

Bad debts - 6,437

Bank charges and interest 1,190 1,897

Dues and fees 1,466 964

Equipment rental 10,929 4,329

Insurance 10,855 3,425

Office 111,786 98,332

Other expenses 6,868 -

Professional fees 22,929 20,669

Rent 119,462 61,535

Repairs and maintenance 11,172 -

Salaries and benefits 1,721,202 1,623,858

Subcontractors 527,557 545,760

Telephone 18,618 15,015

Travel 11,647 11,056

2,691,123 2,455,691

Income before income taxes 344,326 266,871

Income taxes 91,559 68,023

Net income 252,767 198,848

Retained earnings, beginning of year 557,439 398,761

Redemption proceeds - (11,420)

Dividends (28,750) (28,750)

Retained earnings, end of year $ 781,456 $ 557,439

Balance Sheet

December 31, 2001, with comparative figures for 2000, unaudited

2001 2000

Assets

Current assets

Accounts receivable $ 279,160 $ 145,842

Inventory (Note 2) 379,639 272,277

Prepaid expenses - 2,049

Income taxes recoverable 219,195 174,244

877,994 594,412

Capital assets (Note 3) 68,829 36,661

$ 946,823 $ 631,073

Liabilities and Shareholder's Equity

Current liabilities

Bank indebtedness (Note 4) $ 197,096 $ 51,499

Accounts payable and accrued charges 452,643 347,283

Deferred revenue 126,502 -

Current portion of capital lease obligation 18,629 10,818

794,870 409,600

Due to related party (Note 5) 44,347 68,584

Due to shareholder (Note 6) 43,122 54,271

Obligations under capital lease (Note 7) 16,734 14,171

899,073 546,626

Shareholder's equity

Share capital (Note 8) 1 1

Retained earnings 47,749 84,446

47,750 84,447

$ 946,823 $ 631,073

Approved on behalf of the Board:

Director

Statement of Loss and Retained Earnings

Year ended December 31, 2001, with comparative figures for 2000, unaudited

2001 2000

Sales

Product $ 1,536,815 $ 762,989

Government grants 22,521 62,489

Other 1,361 226

1,560,697 825,704

Cost of sales

Product 762,157 359,075

Freight 21,247 8,937

783,404 368,012

Gross profit 777,293 457,692

Expenses

General and administration (Schedule A) 270,724 136,872

Research and development (Schedule A) 184,026 119,072

Sales (Schedule A) 135,773 33,836

Marketing (Schedule B) 144,730 98,719

Manufacturing (Schedule B) 90,898 37,061

Warranty (Schedule B) (12,161) 4,391

813,990 429,951

Net (loss) income (36,697) 27,741

Retained earnings, beginning of year 84,446 56,705

Retained earnings, end of year $ 47,749 $ 84,446