VICTORIA FREENET ASSOCIATION FINANCIAL STATEMENTS OCTOBER 31,1996 (Unaudited) NOTICE TO READER We have compiled the balance sheet of Victoria Freenet Association as at October 31, 1996 and the statements of revenue and expense and changes in cash for the year then ended, from information provided by management. We have not audited, reviewed or otherwise attempted to verify the accuracy or completeness of such information. Readers are cautioned that these statements may not be appropriate for their purposes. Victoria, British Columbia (signed) MacPherson Brown Flanagan & Fletcher January 2, 1997 CHARTERED ACCOUNTANTS --------------------------------------------------------------------------- VICTORIA FREENET ASSOCIATION BALANCE SHEET AS AT OCTOBER 31, 1996 1996 1995 (Note 4) ASSETS Current Cash and term deposits $ 19,565 $ 20,862 Accounts receivable 13,126 - Inventory - 1,866 Prepaid expenses 788 4,725 -------- --------- 33,479 27,453 Capital, at net carrying amount (Note 5) 25,156 14,652 -------- --------- $ 58,635 $ 42,105 -------- --------- LIABILITIES Current Accounts payable $ 16,553 $ 7,018 -------- --------- MEMBERS' EQUITY Association balance, beginning of year 35,087 32,971 Excess of revenue over expense for the year 6,995 2,116 -------- --------- Association balance, end of year 42,082 35,087 -------- --------- $ 58,635 $ 42,105 -------- --------- --------------------------------------------------------------------------- VICTORIA FREENET ASSOCIATION STATEMENT OF REVENUE AND EXPENSE FOR THE YEAR ENDED OCTOBER 31, 1996 1996 1995 (Note 4) Revenue Casino and fund raising $ 11,559 $ 34,353 Donations 21,793 27,094 Government funded contracts 64,882 5,000 Member dues 12,575 525 Sales 1,924 3,012 ------------------ 112,733 69,984 ------------------ Expense Operations Amortization 6,830 7,837 Computer 1,252 3,211 Conferences - 5,251 Goods and services tax 4,503 2,907 Rent 10,062 6,057 Telephone 36,900 18,807 ---------- --------- 59,547 44,070 ---------- --------- Contract services B.C.C.N.A. contract 27,220 - Youth employment wages 9,233 - ----------- --------- 36,453 - ----------- --------- Fund raising Casino 5,142 18,121 Sundry 134 - ----------- --------- 5,276 18,121 ----------- --------- Administration Advertising and promotion 1,782 372 Bad debts 90 309 Bank charges 327 229 Dues and subscriptions 327 75 Honorarium and management fees - 2,000 Insurance 425 425 Office and postage 1,011 1,506 Professional fees 500 761 ----------- --------- 4,462 5,677 ----------- --------- Total expenses 105,738 67,868 ----------- --------- Excess of revenue over expense for the year $ 6,995 $ 2,116 ----------- --------- --------------------------------------------------------------------------- VICTORIA FREENET ASSOCIATION STATEMENT OF CHANGES IN CASH FOR THE YEAR ENDED OCTOBER 31, 1996 1996 1995 (Note 4) Operating activities Excess of revenue over expense for the year $ 6,995 $ 2,116 Add: Item not affecting cash Amortization 6,830 7,837 -------- -------- 13,825 9,953 Cash provided (consumed) by changes in non-cash working capital items 2,212 (159) -------- -------- 16,037 9,794 -------- -------- Investing activity Purchase of capital assets (17,334) (8,494) -------- -------- Increase (decrease) in cash and term deposits during the year (1,297) 1,300 Cash and term deposits, beginning of year 20,862 19,562 -------- -------- Cash and term deposits, end of year $ 19,565 $ 20,862 -------- --------- --------------------------------------------------------------------------- VICTORIA FREENET ASSOCIATION NOTES TO FINANCIAL STATEMENTS OCTOBER 31,1996 1. Purpose The purpose of the Association is to provide computer-based telecommunication services at no charge to the community, and promote electronic data exchange locally and on an international basis. The Association is registered under the provisions of the Society Act of British Columbia and provides its services on a not-for-profit basis. 2. Summary of significant accounting policies o Capital assets Capital assets are recorded at cost, net of any Government funding. Amortization is provided for using the following rates and methods: Computer equipment: 70% declining balance Software licenses: 5 year straight-line One-half of the normal amortization is taken on assets acquired during a particular year. o Revenue recognition Revenue is recorded when earned. Government grants related to the acquisition of equipment are applied to reduce the cost of the equipment as described in Note 2(a) above. o Donated services The Association receives the benefit of a significant amount of donated services, the value of which is not recorded in the accounts. 3. Income taxes The Association is exempt from income taxes under provisions of the Income Tax Act. 4. Comparative figures The comparative figures have been compiled by another public accountant. 5. Capital assets 1996 1995 Cost Accumulated Net Carrying Net Carrying Amortization Amount Amount (Note 4) Computer equipment$ 74,380 $ 49,394 $ 24,986 $ 14,312 Software licenses 850 680 170 340 -------- ------------- ------------ ------------ $ 75,230 $ 50,074 $ 25,156 $ 14,652 -------- ------------- ------------ ------------