Financial Statements of NATIONAL CAPITAL FREENET INCORPORATED Year ended December 31, 1993 and three months ended December 31, 1992 AUDITORS' REPORT TO THE BOARD OF DIRECTORS We have examined the balance sheets of National Capital FreeNet Incorporated as at December 31, 1993 and 1992 and the statements of revenue, expenses and surplus and changes in financial position for the periods 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. Except as explained in the following paragraph, we conducted our audit in accordance with 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 common with many non-profit organizations, the company derives revenue from donations and fundraising, the completeness of which is not susceptible of satisfactory audit verification. Accordingly, our verification of these revenues was limited to the amounts recorded in the records of the company and we were not able to determine whether any adjustments might be necessary to donation and fundraising revenues, excess of revenue over expenses, assets and surplus. In our opinion, except for the effect of adjustments, if any, which we might have determined to be necessary had we been able to satisfy ourselves concerning the completeness of the revenues referred to in the preceding paragraph, these financial statements present fairly, in all material respects, the financial position of the company as at December 31,1993 and 1992 and the results of its operations and the changes in its financial position for the periods then ended in accordance with generally accepted accounting principles. As required by the Canada Corporations Act, we report that, in our opinion, these principles have been applied on a consistent basis. original signed by KPMG Peat Marwick Thorne Chartered Accountants Ottawa, Canada January 24, 1994 ----------------------------- NATIONAL CAPITAL FREENET INCORPORATED Balance Sheet As at December 31, 1993 and 1992 1993 1992 ASSETS Cash $ 107,335 $ 2,120 GST receivable 3,000 - _________ ______ 110,335 2,120 Computer and telecommunications equipment 81,653 23,300 Less accumulated depreciation 10,207 - _________ ________ 71,446 23,300 _________ ________ $ 181,781 $ 25,420 ========== ========== LIABILITIES AND SURPLUS Liabilities: Accounts payable and accrued liabilities $ 35,181 $ 599 Deferred contributions (note 4) 34,388 23,300 Surplus 112,212 1,521 _________ ________ $ 181,781 $ 25,420 ========== ========= See accompanying notes to financial statements. On behalf of the Board original signed by David Sutherland, Chairman and Jean Wilmot, Treasurer ----------------------- NATIONAL CAPITAL FREENET INCORPORATED Statement of Revenue, Expenses and Surplus Year ended December 31, 1993 and three months ended December 31, 1992 1993 1992 REVENUE: Government grants (note 2) $ 90,000 $ - Donations 85,959 2,120 Conference (note 3) 22,276 - Fundraising drive 19,714 - Line sponsorships 5,960 - Deferred contributions (note 4) 4,912 - Contributed services 1,208 - Promotional items 1,141 - __________ ______ 231,170 2,120 EXPENSES: Phone lines 40,626 599 Office staff and supplies 25,379 - Conference 20,931 - Depreciation 10,207 - Systems administration 8,282 - Administration (note 5) 4,651 - Printing 3,594 - Public Events 3,240 - Public Access 2,011 - Promotional items 1,203 - Fundraising 355 - _________ _______ 120,479 599 _________ _______ Excess of revenue over expenses 110,691 1,521 Surplus, beginning of period 1,521 - _________ _________ Surplus, end of period $ 112,212 $ 1,521 =========== ============ See accompanying notes to financial statements. ------------------------- NATIONAL CAPITAL FREENET INCORPORATED Statement of Changes in Financial Position Year ended December 31, 1993 and three months ended December 31, 1992 1993 1992 Cash provided by (used in): Operations: Excess of revenue over expenses $ 110,691 $ 1,521 Items not involving cash: Deferred contributions (4,912) - Depreciation 10,207 - Changes in non-cash working capital items: GST receivable (3,000) - Accounts payable and accrued liabilities 34,582 599 _________ ________ 147,568 2,120 Financing activity: Purchase of computer and telecommunications equipment (42,353) - __________ ________ Increase in cash 105,215 2,120 Cash, beginning of period 2,120 - _________ ________ Cash, end of period $ 107,335 $ 2,120 ============ =========== See accompanying notes to financial statements. ----------------------- NATIONAL CAPITAL FREENET INCORPORATED Notes to Financial Statements Year ended December 31, 1993 and three months ended December 31, 1992 National Capital FreeNet Incorporated is a non-profit organization, the aims and objectives of which are to establish and operate a community based computer network to store, access and exchange information between individuals and organizations in the national capital region. The Company was incorporated on September 29, 1992 under the Canada Corporations Act as a non-profit organization without share capital within the meaning of the Income Tax Act (Canada) and accordingly is exempt from income tax. 1. Significant accounting policies: These financial statements have been prepared in accordance with generally accepted accounting principles. The significant accounting policies are summarized as follows: (a) Computer and telecommunications equipment: Computer and telecommunications equipment which is purchased is recorded at cost. Contributed equipment is recorded at fair value at the date of contribution. Depreciation is provided on the straight-line basis using an annual rate of 25%. (b) Revenue recognition: Government grants provided for specific purposes are recognized as revenue in the period in which the related expenses are incurred. Unrestricted government grants are recognized as revenue when received. (c) Contributed services: Contributed services are recognized when a fair value can be reasonably estimated and when the services would otherwise have been purchased. 2. Government grants: Grants have been received from the following sources: 1993 1992 Ontario Ministry of Economic Development and Trade (Ontario Network Infrastructure Program) $ 60,000 $ - Ontario East Economic Development Commission 20,000 - Federal Department of Communications 10,000 - _______ ______ $ 90,000 $ - ======== ======== 3. Conference revenue: Conference revenue includes a $10,000 contract fee obtained from the Federal Department of Communications to organize and deliver a conference on community networks and FreeNets. 4. Deferred Contributions: Deferred contributions relate to the unrecognized portion of contributed computer and telecommunications equipment. The changes in the deferred contributions balance for the period are as follows: 1993 1992 Balance, beginning of period $ 23,300 $ - Add contributed computer and telecommunications equipment 16,000 23,300 Less amount recognized as revenue (4,912) - __________ ________ Balance, end of period $ 34,388 $ 23,300 ======== ======== 5. Administration expenses: Administration expenses include bank service charges, filing and audit fees, and board of directors and committee expenses. =================================================== Submitted by: Jean Wilmot, aa145@freenet.carleton.ca Board Member & Treasurer, National Capital FreeNet ===================================================