G O I N G ~ C O N C E R N
Please review the following carefully Folks.
FORM 20-F
Commission File Number D-23566
For the fiscal year ended April 30, 2000
Pages 11 & 12
Thermo Tech Technologies Inc. (Summary of Significant Accounting Policies)
While the consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern, the occurrence of significant losses to date and other factors set out below raise substantial doubt about the validity of this assumption.
The Company has experienced significant losses over the past five years, including $29,301,841 in the current year and has a working capital deficiency of $1,919,629 as at April 30, 2000.
During the year ended April 30, 2000, the company settled $26,150,658 (1999 - $25,949,925) in trade payables through the issuance of shares in connection with the exercise of stock options by consultants, a company controlled by the former President’s spouse and employees of suppliers as set out in Note 15 ( c ).
In connection with a continuous disclosure review, the British Columbia Securities Commission (the "Commission") determined that the Company’s disclosures with respect to certain 1998 transactions were deficient and issued a cease trading order with respect to the securities of the Company in British Columbia.
The cease trading order was partially lifted during the year but remains in effect for certain former directors and officers.
Management subsequently learned that in granting certain options to individuals whose services were provided through consulting contracts with the Company and who, in the opinion of management, qualify as full or part-time dependent contractors for the purposes of the Securities Act (British Securities Rules (British Columbia).
The Company’s non-compliance with the Securities Rules (British Columbia) and the implications thereof are discussed further in Note 20 ( a ) and ( b ) but may result in further cease trading orders being issued against the Company.
During the year, the Company advanced shares as collateral to a supplier and to realize on amounts owed by the Company to the supplier, the supplier sold the shares. It is possible that the Commission may consider the above transactions to be in contravention of the cease trading order.
The impact on the financial position or results of operations of the Company with respect to any enforcement actions which the Commission may take in regard to this matter are not presently determinable, but they may result in further cease trading orders being issued against the Company (see Note 20) ( c ).
During the year ended April 30, 2000, there was a fire at the Company’s Richmond, British Columbia plant which caused extensive damage to the plant and equipment. It is Management’s intention to rebuild the Richmond plant. The Company carried replacement cost insurance to cover the cost of repairs and collected $10,500,000 in insurance proceeds during the year. These funds were used to remove liens, settle outstanding supplier payables and claims and satisfy other creditors. The Company does not anticipate recording a loss on the Richmond plant as a result of the fire.
As the Richmond plant had not reached profitable operations, the Company did not carry business interruption insurance on the Richmond plant.
The Company has financed its activities primarily from the proceeds of various share and convertible debenture issues. As a result of the Company being in the early stages of operations, the recoverability of plant and equipment, engineering design, licenses and all other non-current assets on the consolidated balance sheet will be dependent upon the Company’s ability to: have cease trading orders removed, obtain additional financing and creditor support, redeploy the Corinth plant, rebuild the Richmond plant, obtain supplies of waste sufficient to attain a level of profitable operations from the existing plants and any future plants placed in production and/or the disposition thereof, and from the sale of its license rights.
If the going concern assumption were not appropriate for these consolidated financial statements, then adjustments would be necessary in the carrying value of assets and liabilities, the reported net loss and the balance sheet classifications used. |
