UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-QSB



(Mark One)


[ X ]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarter ended March 31, 2003


[     ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from _____________ to _____________


Commission file number:  1-23456




ABC SAMPLE COMPANY, INC.

_______________________________________________________________________________

(Exact name of registrant as specified in its charter)



Delaware

12-34567890

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)




677 – 999 Canada Place, Vancouver, British Columbia Canada V6C 3E1

(604) 682-8439

_______________________________________________________________________________

(Address and telephone number of registrant’s principal executive offices and principal

place of business)



Check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), or (2) has been subject to such filing requirements for the past 90 days.


Yes

[ X ]

No

[     ]



The number of outstanding common shares, no par value, of the Registrant at:


March 31, 2003:  4,855,774


















TABLE OF CONTENTS


Interim Balance Sheets


Interim Statements of Net Earnings and Retained Earnings


Interim Cash Flow Statements


Notes to Interim Financial Statements




















SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS


This Quarterly Report on Form 10-QSB contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995.  Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements, which are other statements of historical facts.  These statements are subject to uncertainties and risks including, but not limited to, product and service demand and acceptance, changes in technology, economic conditions, the impact of competition and pricing, government regulation, and other risks defined in this document and in statements filed from time to time with the Securities and Exchange Commission.  All such forward-looking statements are expressly qualified by these cautionary statements and any other cautionary statements that may accompany the forward-looking statements.  In addition, ABC Sample Company, Inc. disclaims any obligations to update any forward-looking statements to reflect events of circumstances after the date hereof.

















Table of Contents



ABC SAMPLE COMPANY, INC

INTERIM BALANCE SHEETS

AS AT MARCH 31, 2003 WITH AUDITED FIGURES AS AT SEPTEMBER 30, 2002

AND WITH COMPARATIVE FIGURES AS AT MARCH 31, 2002


(Unaudited – Prepared by Management – See Note 1)


 

March 31

2003

September 30

2002

March 31

2002

    

ASSETS

CURRENT

   

Cash

$        425,553

$       223,072

$       155,176

Accounts receivable

126,622

370,201

250,240

Prepaid expenses

-

18,427

61,528

    
 

552,175

611,700

466,944

    

LEASE DEPOSITS

72,210

23,876

23,876

    

PREPAID – EXPENSES (Notes 2(c) and 10)

67,170

-

-

    

CAPITAL ASSETS (Notes 2(a) and 4)

547,739

532,673

560,675

    

INVESTMENTS

   

Investment in XYZ Company, Inc. (Note 5)

127,428

-

-

    

OTHER ASSETS

   

Future income tax asset (Notes 2(f) and 8)

140,664

-

-

    

Total Assets

$     1,507,386

$    1,168,249

$    1,051,495


LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT

   

Accounts payable and accrued liabilities

$          507,031

$          420,073

$        381,763

Provision for income taxes

29,708

-

-

    

Total Liabilities

536,739

420,073

381,763

    

SHARE CAPITAL (Note 6)

260,116

260,116

260,116

    

RETAINED EARNINGS

710,531

488,060

409,616

    

Total Shareholders’ Equity

970,647

748,176

669,732

    

Total liabilities and Shareholders’ Equity

$     1,507,386

$     1,168,249

$    1,051,495





APPROVED ON BEHALF OF THE BOARD:



(signed) John Doe_________________

John Doe, Director


(signed) Mark Smith_______________

Mark Smith, Director















Table of Contents



ABC SAMPLE COMPANY, INC.

INTERIM STATEMENTS OF NET EARNINGS AND RETAINED EARNINGS

FOR THE THREE MONTHS AND SIX MONTHS ENDED MARCH 31, 2003 AND 2002


(Unaudited – Prepared by Management – See Note 1)


 

3 months

ended

March 31

2003

3 months

ended

March 31

2002

6 months

ended

March 31

2003

6 months

ended

March 31

2002

     

REVENUES

    

Physicians’ billings

$      2,073,759

$    1,969,054

$   4,061,204

$   3,663,134

Less: payments to physicians

1,269,057

1,180,916

2,450,458

2,221,710

     

Fee to the company

804,702

788,138

1,610,746

1,441,424

     

EXPENSES

    

Accounting and legal

19,994

30,606

30,919

44,988

Advertising and promotion

29,004

33,549

59,757

51,620

Amortization

22,308

30,720

44,616

57,432

Business promotion and travel

714

1,257

9,310

5,164

Consulting

49,608

9,118

68,468

18,547

Directors’ fees and expenses

12,899

11,681

21,843

12,350

Equipment rental

3,888

2,737

7,776

5,197

Information systems and support

7,637

10,349

18,166

19,001

Insurance

2,799

1,613

5,598

3,225

Interest and service charges

4,138

3,312

8,335

6,444

Medical supplies

47,735

35,554

99,327

74,180

Office

24,061

39,127

53,572

80,802

Patient file acquisition expense

603

13,166

16,951

22,403

Printing, stationary, postage & courier

11,870

4,599

23,120

11,956

Rent

161,120

160,492

313,538

296,544

Repairs and maintenance

31,549

23,275

68,891

43,569

Shareholder information

13,949

6,810

14,660

9,317

Telephone and telecommunications

8,600

10,751

16,508

20,695

Utilities

7,888

9,212

14,914

15,473

Wages and benefits

316,283

337,146

641,007

641,643

     

Total expenses

776,647

775,074

1,537,276

1,440,550

     

OPERATING EARNINGS/(LOSS) FOR THE PERIOD

28,055

13,064

73,470

874

     

OTHER INCOME

    

Retroactive increase to physicians’ billings

-

-

-

55,928

Other income

24,182

32,654

35,633

38,767

Interest income

1,410

105

2,412

1,920

     

Total  Other Income

25,592

32,759

38,045

96,615

     

EARNINGS BEFORE INCOME TAXES

53,647

45,823

111,515

97,489

PROVISION FOR INCOME TAXES

(14,228)

-

(29,708)

-

FUTURE INCOME TAX RECOVERY

(Notes 2(f) and 8)


(6,850)


-


140,664


-

     

NET EARNINGS FOR THE PERIOD

32,569

45,823

222,471

97,489

RETAINED EARNINGS, BEGINNING OF PERIOD

677,962

363,793

488,060

312,127

     

RETAINED EARNINGS, END OF PERIOD

$          710,531

$        409,616

$        710,531

$       409,616

     

BASIC EARNINGS PER SHARE

$                0.01

$              0.01

$              0.02

$             0.02

DILUTED EARNINGS PER SHARE

$                0.01

$              0.01

$              0.02

$             0.02

















Table of Contents



ABC SAMPLE COMPANY, INC

INTERIM CASH FLOW STATEMENTS

FOR THE THREE MONTHS AND SIX MONTHS ENDED MARCH 31, 2003 AND 2002


(Unaudited – Prepared by Management – See Note 1)



 

3 months

ended

March 31

2003

3 months

ended

March 31

2002

6 months

ended

March 31

2003

6 months

ended

March 31

2002

     

OPERATING ACTIVITIES

    

Net earnings for the period

$             32,569

$          45,823

$       222,471

$        97,489

Item(s) not involving cash

    

Amortization

22,308

30,720

44,616

57,432

Provision for income taxes

14,228

-

29,708

-

Future income tax recovery

6,850

-

(140,664)

-

     

Gross cash flow from operations

75,955

76,543

156,131

154,921

     

Changes in non-cash working capital items:

    

Accounts receivable

200,251

142,437

243,579

(169,611)

Prepaid expenses

11,648

57,994

18,427

(50,692)

Lease deposits

(48,334)

(23,876)

(48,334)

(469)

Accounts payable and accrued liabilities

64,012

(243,777)

86,958

64,563

     

Net cash flow from operations

273,532

9,321

456,761

(1,288)

     

INVESTING ACTIVITIES

    

Purchase of capital assets

(38,853)

(2,729

(59,682)

(313,051)

Investment in XYZ Company, Inc..

(51,323)

-

(127,428)

-

Increase/(decrease) in prepaid expenses

(67,170)

9,380

(67,170)

140,496

     

Net cash flow from investing activities

(157,346)

6,651

(254,280)

(172,555)

     

NET INCREASE/(DECREASE) IN CASH

116,186

15,972

202,481

(173,843)

     

CASH, BEGINNING OF PERIOD

309,367

139,204

223,072

329,019

     

CASH, END OF PERIOD

$           425,553

$        155,176

$        425,553

$       155,176



















Table of Contents



ABC SAMPLE COMPANY, INC.

NOTES TO INTERIM FINANCIAL STATEMENTS

FOR THE SIX MONTH PERIOD ENDED MARCH 31, 2003


(Unaudited – Prepared by Management – See Note 1)




NOTE 1 – GENERAL


ABC Sample Company, Inc (the “Company”) is a public company, incorporated in 1998 in the State of Deleware.  The Company’s shares, which are widely held, trade on the New York Stock Exchange.  The Company is in the business of operating and developing full service medical care centres in the State of Washington.

 

Please read these interim financial statements in conjunction with the audited annual financial statements for the year ended September 30, 2002.  The Company applies the same accounting policies and methods in these interim financial statements as those in the audited annual financial statements.




NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


(a)

Capital Assets


The Company carries capital assets at cost less accumulated amortization and it calculates amortization annually as follows:


Furniture and fixtures

       

-  20%  declining balance

Computer hardware

-  20%  declining balance

Computer software

  

- 100% declining balance

Leasehold improvements

- straight-line over lease term


The Company amortizes software, in the year of acquisition, at one-half the annual rate.


(b)

Revenue Recognition


The Company receives a fee for providing management services to physicians practising out of the Company’s clinics.  This fee is a percentage of the physicians’ billings and the Company records this fee when billings are made.


(c)

Prepaid Expenses


The Company charges current operations with clinic development costs when new clinics open during the year.  The Company records clinic development costs for clinics that are not yet open as prepaid as set out in Note 10 of the financial statements.


(d)

Earnings Per Share


The Company calculates basic earnings per share based on the weighted average number of shares outstanding during the period and diluted earnings per share using the treasury stock method. This method uses an adjusted weighted average number of shares that reflects the exercise of stock options.

 

(e)

Use of Estimates


The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.  Management reviews these estimates periodically and reports necessary adjustments in the period in which they become known.


(f)

Income Taxes


The Company uses the liability method of accounting for income taxes.  Under this method, the Company recognizes current income taxes for the estimated income taxes payable for the current year.  The Company recognizes future income tax assets and liabilities for the temporary differences between the tax and accounting bases of assets and liabilities, as well as for the benefit of losses available to be carried forward to future years for tax purposes that are likely to be realized.




NOTE 3 – FINANCIAL INSTRUMENTS


The fair value of all items that meet the definition of a financial instrument approximate their carrying values.  These items include cash and cash equivalents, accounts receivable, and payables and accruals.  Unless otherwise stated, management believes that the Company is not exposed to significant credit, currency, or interest rate risk arising from these financial instruments.




NOTE 4 – CAPITAL ASSETS



  

31Mar03

      31Mar03

30Sep02

31Mar02

  

Accumulated

Net Book

Net Book

Net Book

 

Cost

Amortization

Value

Value

Value

      

Computer equipment

$     107,432

$         49,678

$       57,754

$      43,246

$    46,776

Computer software

52,930

22,482

30,448

3,190

3,556

Furniture, fixtures, and equipment

481,645

288,941

192,704

200,792

225,495

Leasehold improvements

872,369

605,536

266.833

285,445

284,848


 

$  1,514,376

$      966,637

$     547,739

$    532,673

$  560,675




NOTE 5 – INVESTMENT IN XYZ COMPANY, INC.


On November 30, 2002, the Company acquired a 50% interest in XYZ Company, Inc. (“XYZ”) – the US distributor of a revolutionary, hearing aid device that significantly improves hearing in patients with moderate to severe hearing loss.


The Company is providing the initial funding of XYZ by way of a non-interest bearing loan.  Loan repayments will be made from XYZ’s cash flow available for loan repayments.  With two directors of XYZ appointed by the Company and two directors appointed by IR Marketing Inc., the Board of Directors of XYZ will determine when its cash flow is sufficient and available for repayment of any outstanding indebtedness owing to the Company.




NOTE 6 – SHARE CAPITAL


(a)

Authorized:

20,000,000 common shares without par value

Issued and fully paid:

 4,855,774 common shares

 

31Mar03

30Sept02

31Mar02

    
 

$        260,116

$     260,116

$    260,116


 (b)

Warrants:


There are no warrants outstanding at the end of the current period.



(c)

Stock Options:


The Company has granted stock options to certain employees and directors.  Stock option transactions for the current period are as follows:

 

Number

  

Balance, September 30, 2002

450,000

  

Balance, March 31, 2003

450,000




Options outstanding at the end of the current period are as follows:


Exercise Price Per Share

Number of Shares

Expiry Date

   

$0.25

100,000

September 21, 2005

$0.50

250,000

June 27, 2006

$0.50

100,000

July 11, 2007



(a)

Common shares in escrow:  


There are no common shares in escrow at the end of the current period.




NOTE 7 – LEASE COMMITMENTS


Obligations under various rental and operating leases are as follows:


Year

Amount

  

2003

$   459,679

2004

451,646

2005

414,297

2006

374,867

2007

261,549

Thereafter

842,094

  
 

$     2,804,132




NOTE 8 – INCOME TAXES


The calculation for the provision for income taxes includes using the available loss carry-forwards.  The Company has non-capital losses of $36,074 for income tax purposes that may be deducted in the calculation of taxable income in future years.  The losses expire as follows:


2006

$    14,787

2007

21,287

  
 

$    36,074


The Company has capital losses carried forward of $20,495.


The components of future income taxes are as follows:


Capital assets

$    52,617

Cumulative eligible capital

85,307

Capital losses available for carry-forward

2,740

  
 

$  140,664




NOTE 9 – RELATED PARTY TRANSACTIONS


During the period the Company paid consulting fees of $58,470 (2002 - $18,000) to consulting firms owned by two directors.  Other fees of $21,000 (2002 -  $15,700) were paid to a director.   Legal fees in the amount of $3,017 (2002 - $7,295) were paid to the law firm of one of the Company’s directors.  Directors and officers were also reimbursed for travel expenses of $2,614 (2002 - $7,350).


The Company has entered into an agreement with a director where, upon board approval, the Company will compensate the director for identifying and submitting proposals for new clinics.  There is also an additional fee commitment on behalf of the Company to this director if the clinics that have been recommended meet future operating targets as outlined in the submitted proposals.  


These transactions are in the normal course of operations.  The Company measures these transactions at the exchange amount, which is the amount of consideration established and agreed to by the related parties.




NOTE 10 – PREPAID EXPENSES


The Company investigates new clinic locations on an ongoing basis.  The Company allocates costs to this account for preliminary design fees, lease negotiation costs, and the purchase of furniture that is currently in storage.  The Company allocates these costs to the new clinics when they open.


















SABANES-OXLEY ACT SECTION 302(a) CERTIFICATION


I, John Doe, certify that:


1.

I have reviewed this quarterly report on Form 10-QSB of ABC Sample Company, Inc.;


2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements where made, not misleading with respect to the period covered by this quarterly report;


3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;


4.

The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-16) for the registrant and have:


a)

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)

evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c)

presented in this quarterly our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;


5.

The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):


a)

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize, and report financial data and have identified for the registrant’s auditors any material weakness in internal controls; and

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and


6.

The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weakness.




Date:

April 30, 2003

(signed) John Doe_________________

John Doe

President and Chief Executive Officer

















SABANES-OXLEY ACT SECTION 302(a) CERTIFICATION


I, Mark Smith, certify that:


1.

I have reviewed this quarterly report on Form 10-QSB of ABC Sample Company, Inc.;


2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements where made, not misleading with respect to the period covered by this quarterly report;


3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;


4.

The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-16) for the registrant and have:


a)

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)

evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c)

presented in this quarterly our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;


5.

The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):


a)

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize, and report financial data and have identified for the registrant’s auditors any material weakness in internal controls; and

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and


6.

The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weakness.




Date:

April 30, 2003

(signed) Mark Smith_______________

Mark Smith

Chief Financial Officer