For the quarters ended October 31, 1998, October 31, 1997, cost of
consulting services accounted for $16,392 and $22,361, respectively.
Cumulatively, the cost of consulting services accounted for $1,342,019.
The Company anticipates managed growth in this area as people are added
to satisfy consulting services provided by the Company. As the
employment market becomes more competitive as the result of channeling
human resources toward the Year 2000 problem, the Company expects to pay
a premium for skilled consultants and engineers. These consulting
services will be allocated to projects in which the Company has signed
contracts.
Cost of software transformation services accounted for $151,433 of total
expenses for the quarter ended October 31, 1998. Comparatively, the
Company spent $93,753 for the same quarter ended October 31, 1997 and,
has spent $1,451,370 cumulatively in the development stage. The Company
anticipates adding people to this area by the fiscal year ending July
31, 1999, but, only if contracts are in hand. This growth will depend on
the volume of conversion services and year 2000 scan and repair services
provided to our customers.
Software development accounted for $110,292 of total expenses for the
quarter ended October 31, 1998. Comparatively, the Company spent $50,242
for the same quarter in 1997 and, has spent $363,701 cumulatively in the
development stage. The increases in costs of product development are
expected to continue as the Company expands its product offerings.
General and administrative expense accounted for $475,382 of expenses
for the quarter ended October 31, 1998. Comparatively, the Company spent
$274,808 for the same quarter in 1997 and, has spent $3,220,912
cumulatively in the development stage. The Company's general and
administrative expenses consisted primarily of salaries, rent,
consulting fees, advertising and legal costs associated with running a
publicly traded company.
Cost of Consulting Services, Conversion Services and Product Development
The Company's variable costs of software consulting, translation
services and development are in a direct relation to the volume of sales
and anticipated revenues. As a percentage of revenue, these costs will
vary depending on the nature of the sale and the product mix required to
satisfy customer needs. Sales based on mature product will yield a
higher margin while specific project type environments may call for a
higher degree of manpower and travel costs.
The Company will continue product development of the core software
product to enable the company to broaden its impact on many vendor
environments. The development of translators to translate application
code from any type of machine language to virtually any target platform
will serve as the benchmark of the Company to respond effectively to end
user requirements. The key to this objective is a responsive,
knowledgeable development team.
General and administrative
General and administrative costs consist of management and
administrative staff, professional services, office and occupancy costs.
Significant costs are attributed to tservices, office and occupancy
costs. Significant costs are attributed to the Company becoming a public
company. This status will increase audit and legal costs significantly.
In relation to the Company becoming a public company, the cost of
corporate relations will also increase as quarterly reports and other
investor information is required. The Company anticipates that its
General and Administrative costs (
Liquidity and Capital Resources
The Company has funded its activities through October 31, 1998 primarily
from the net proceeds of private placement of its securities and, to a
lesser extent, from cash flow from operations and the proceeds of two
bank loans. The outstanding principal balance of the bank loans are
approximately $37,950 and the loans bear interest at an annual rate
equal to 2.5% over the bank prime rate of interest in effect from time
to time. Repayment of the loans, together with interest thereon, is
secured by a lien on substantially all of the fixed assets of the
Company and the personal guarantees of the Company's executive officers
and directors.
At October 31, 1998, the Company had a deficit accumulated during the
development stage of ($7,812,254), current assets of $284,101 and
current liabilities of $650,352. During the three-month period ended
October 31, 1998, the Company entered into a convertible debenture with
Thomson Kernaghan a registered broker dealer. The convertible debt will
require the issuance of common stock at date of conversion, not cash
resources of the Company. Otherwise, the Company did not incur any
additional long-term debt. The company has funded its activities to
October 31, 1998 primarily through private placements of securities and
the issuance of convertible debentures. The Company will continue to
raise
capital through these vehicles to fund operating activities and other
capital requirements. Failure to obtain such equity capital could have a
material adverse impact on the Company's ability to expand its
operations. There can be no assurance that equity capital will be
available to the Company on acceptable terms or at all.
In addition, implementation of the Company's business plan will require
capital resources substantially greater than those currently available
to the Company. The company may determine, depending on the
opportunities available to it, to seek additional debt or equity
financing to fund the cost of continuing expansion. To the extent that
the Company finances expansion through the issuance of additional equity
securities, any such issuance would result in dilution of the interests
of the Company's stockholders. Additionally, to the extent that the
Company incurs indebtedness or issues debt securities to finance
expansion activities, it will be subject to all of the risks associated
with incurring substantial indebtedness, including the risks that
interest rates may fluctuate and cash flow may be insufficient to pay
the principal of, and interest on, any such indebtedness.
The Company has no current arrangements with respect to, or sources of,
additional financing, and it is not contemplated that its existing
stockholders will provide any portion of the Company's future financing
requirements. There can be no assurance that any additional financing
will be available to the Company on acceptable terms, or at all. The
inability of the Company to obtain financing when needed will have a
material adverse effect on the Company, including possibly requiring the
Company to significantly curtail or cease its operations.
Inflation
The Company believes that the impact of inflation and changing prices on
its operations since commencement of operations has been negligible. |
