FORM 51-901F
QUARTERLY REPORT
| Incorporated as part of: | Schedule B and C |
| Name Of Issuer: | Westrange Corp. |
| Address of Issuer: | 201 – 2500 13th Avenue |
| Regina, Saskatchewan | |
| S4P 0W2 | |
| Contact Person: | Lionel Kambeitz |
| Contact's Position: | Chairman and Chief Executive Officer |
| Contact's Telephone Number: | (306) 545-2277 |
| For the second quarter period ended: | June 30, 2002 |
| Date of Report: | August 30, 2002 |
CERTIFICATE
the schedules required to complete this quarterly report are attached and the disclosure contained therein has been approved by the board of directors. A copy of this SECOND fiscal quarter end report will be provided to any shareholder who requests it. Please note this form is incorporated as part of the required filing of scheduleS B&C.
| /s/Lionel Kambeitz | August 30, 2002 | |
| Lionel Kambeitz, CEO, Chairman and Director | Date signed | |
| /s/Kevin Sidloski | August 30, 2002 | |
| Kevin Sidloski, Director | Date signed |
Westrange Corp.
SCHEDULE B
| General and Administration expenses |
| First quarter August 30, 2002 | |
| Professional and Consulting fees | 77,471 | ||
| Total | $ | 77,471 |
No expenditures to parties not at arms length with the Corporation.
Share capital and stock options
On January 15, 2002, a private placement was closed with an investor, at which time 100,000 Common Shares were issued at a price of $1.00 per Common Share, for cash consideration.
On April 8, 2002, 335,000 Common Shares were issued on the exercise of 335,000 stock options at an exercise price of $0.10 per Common Share, for total proceeds of $33,500.
No stock options were granted during the second quarter period ended June 30, 2002.
Note 9, attached, identifies the share capital and Note 10, attached, identifies the stock options outstanding as of June 30, 2002.
Directors and officers as of June 30, 2002, were:
Lionel Kambeitz, Director, Chairman and Chief Executive Officer
Kevin Sidloski, Director
Wayne Bernakevitch, Director
2
Westrange Corp.
Schedule C - Management's Discussion and Analysis
Management's Discussion and Analysis
Please see the M, D & A below.
Description of Business
Westrange continues to diversify its core business competencies by exploring investment opportunities in the alternative energy sector to enhance shareholder value.
Discussion of operations and financial condition
Please refer to the M, D & A below.
On June 30, 2002, the corporation reached an agreement to sell all the issued and outstanding shares of its wholly owned subsidiary, Terra Fibre Utility Corp., for a total consideration of $400,000. The price included retirement of the subsidiary's shareholders loans due to Westrange in the amount of $313,503, as of June 30, 2002. The payment terms of the sale are 10 semi-annual payments of $40,000. Westrange Corp. holds security agreements and guarantees from the purchasers until the note receivable is paid in full.
Current Capital of Toronto, Ontario, has been contracted to provide public relations services to create a more informed investor community regarding Westrange as an investment opportunity.
Subsequent Events
Ø No subsequent events to report.
Financing, principal purposes and milestones
There were no material differences in actual and any disclosed intended use of proceeds from prior year financings.
Liquidity and solvency
Please refer to the M, D & A, below.
3
Westrange Corp.
Management's Discussion and Analysis
Results of Operations
For the period ended June 30, 2002, the Corporation posted a profit of $25,327. The Corporation incurred a net loss of $77,409 from continuing operations, as compared with a net loss of $99,773 from continuing operations for the same period of the year prior.
Revenues
Westrange generated $30,860 in consolidated net revenues for the period ended June 30, 2002. Consolidated net revenues from operations, for the same period of the prior year, were $38,946. Operating revenue of $1,117,509 was removed from operations results due to the sale of discontinued operations (Terra Fibre Utility Corp.) as of June 30, 2002.
Liquidity and Capitalization
During the period the Corporation issued 100,000 Common Shares at $1.00 per share on the basis of a private placement with a private investor. These issuances contributed $100,000 to the Corporation's capital account.
During the period two directors exercised the remainder of their stock options, which resulted in the issuance of an additional 335,000 Common Shares at an exercise price of $0.10 per Common Share, with total proceeds contributed to the capital account in the amount of $33,500.
4
Westrange Corp.
Management's Discussion and Analysis
Discontinued Operations
On June 30, 2002, the corporation reached an agreement to sell all the issued and outstanding shares of its wholly owned subsidiary, Terra Fibre Utility Corp., for a total consideration of $400,000. The price included retirement of the subsidiary's shareholders loans due to Westrange in the amount of $313,503, as of June 30,2002.
The payment terms of the sale are 10 semi-annual payments of $40,000. Westrange Corp. holds security agreements and guarantees from the purchasers until the note receivable is paid in full.
Competition
There are a number of regional and national competitors in this industry. All provide quality and efficient services.
Risks and Uncertainties
Due to the uncertain nature of the Terra Fibre Utility Corp. business, Westrange cannot be certain of the timely collection of the $400,000 note receivable.
Risks and uncertainty also relate to management's ability to seek out and perform timely due diligence to make appropriate investments in the targeted alternative energy sectors.
During the past quarter Westrange has repositioned itself for doing business in the alternative energy sector. It is currently exploring a number of opportunities for possible purchase and/or merger with companies that have proprietary alternative energy technologies.
Management believes the Corporation has access to the technology and intellectual assets to be a participant in the alternative energy and energy industry sectors.
/s/Lionel Kambeitz
Lionel Kambeitz
Chairman and Chief Executive Officer
5
Westrange Corp.
Notes to the Consolidated Financial Statements for the Period Ended
June 30, 2002 and 2001, and the Year Ended December 31, 2001
Nature of operations:
The Corporation was incorporated under the Business Corporations Act (Alberta), on November 26, 1996.
From the date of its Major Transaction, May 21, 1999 through to the first quarter of 2001, its principal business activity had been that of equipment leasing. Since the first quarter of fiscal 2001, the corporation's major business has been that of energy, electrical and telephone infrastructure planning, construction and maintenance, as performed through its subsidiary Terra Fibre Utility Corp. The operating assets of this subsidiary were sold June 30, 2002, as described in note 14. Westrange will continue to diversify its core business competencies by exploring investment opportunities in the alternative energy sector.
The principal business activity of the Corporation during fiscal 1999, as performed through its subsidiary Bowser Petroleum (1992) Ltd. ("Bowser"), was to provide maintenance and environmental remediation services to oil and gas pipeline contractors and to petroleum retailers. The operating assets of this subsidiary were sold during 2000, as described in note 5.
Significant accounting policies:
These financial statements have been prepared in accordance with Canadian generally accepted accounting principles. Those principles which have a significant impact on the consolidated financial statements are summarized below.
Consolidation
The consolidated financial statements include the accounts of the Corporation and its wholly owned subsidiaries.
Capital assets
The Corporation amortizes its capital assets over their estimated useful lives utilizing the declining-balance method at the following rates:
| Buildings | 4 | % | |
| Equipment | 20 - 30 | % | |
| Computer equipment and vehicles | 30 | % |
Revenue recognition
Lease revenue is recognized on an accrual basis in accordance with the terms of the lease agreement.
Revenue for services rendered in connection with construction fixed price contracts is recognized using the percentage of completion method. The cumulative effect of any revisions to complete contracts in process is reflected in the period when they become known.
6
Westrange Corp.
Notes to the Consolidated Financial Statements for the Period Ended
June 30, 2002 and 2001, and the Year Ended December 31, 2001
Significant accounting policies (continued)
Mortgage receivable
The mortgage receivable is valued at the lower of cost and net realizable value.
Income taxes
The Corporation uses the asset and liability method of accounting for income taxes. Under this method, future income tax assets and liabilities are recognized for the future income tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax basis (temporary differences). The resulting changes in the net future tax asset or liability are included in income. Future tax assets and liabilities are measured using enacted or substantively enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on future income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment or substantive enactment. Future income tax assets are evaluated and if realization is not considered "more likely than not" a valuation allowance is provided.
Use of estimates
Management of the Corporation has made a number of estimates and assumptions relating to the reporting 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 year to prepare these financial statements in conformity with Canadian generally accepted accounting principles. Actual results could differ from these estimates.
Change in accounting policy:
In December 1997, the Accounting Standards Board of the Canadian Institute of Chartered Accountants ("CICA") issued Section 3465 of the CICA Handbook, "Income Taxes" ("Section 3465"). Effective January 1, 2000, the Corporation adopted Section 3465, which requires a change from the deferral method of accounting for income taxes to the asset and liability method of accounting for income taxes as described in note 2.
The Corporation has adopted this standard retroactively and has not recognized any future income tax asset or liability in the current or prior periods (see note 13). Accordingly, the adoption of the new accounting standard does not result in a restatement of the prior period financial statements.
Business combinations:
On July 1, 2001, the Corporation assumed additional long-term debt in the amount of $568,179, related to the acquisition of certain equipment, with a fair value of $321,000, through its Terra Fibre Utility Corp. subsidiary. In addition, the Corporation sold its infrastructure development rights for proceeds of $81,522, and acquired accounts receivable in the amount of $328,701 as a part of this acquisition.
Terra Fibre Utility Corp. was sold June 30, 2002 (see note 14).
7
Westrange Corp.
Notes to the Consolidated Financial Statements for the Period Ended
June 30, 2002 and 2001, and the Year Ended December 31, 2001
Discontinued operations:
On August 18, 2000, the Corporation disposed of the net operating assets and business operations of Bowser. To August 18, 2000, the Corporation recorded an operating loss of $55,227 (1999 – operating income of $2,787) net of income tax recovery of $8,950 (1999 – $0) in respect of Bowser. Net revenues applicable to Bowser to the date of disposition were $220,366 (1999 - $614,128).
The consideration received on the sale of Bowser's net operating assets and business operations consisted of cash proceeds of $196,392, including bank indebtedness of $67,392, resulting in a loss on disposition of $31,081. The total assets, other than cash, and total liabilities sold were $261,001 and $33,528, respectively.
These financial statements have been restated to reflect the decision by management to sell the operations of Terra Fibre Utility Corp. on June 30, 2002. The results of operation of Terra Fibre Utility Corp. for the period ended June 30, 2002 have been presented as discontinued operations in the statement of operations.
For the period ended June 30, 2002 sales of this business were $1,117,509 and loss before income taxes was $41,649. As at June 30, 2002 total net assets of Terra Fibre Utility Corp. included accounts receivable of $825,943, equipment inventory of $81,414, fixed assets less depreciation $277,490, current liabilities of $517,592.
Mortgage receivable:
Mortgage receivable bearing interest at eight per cent per annum, repayable in monthly installments of $1,406, including principal and interest, due October 31, 2010. The mortgage receivable is secured by the land and building mortgaged.
Capital assets at cost less accumulated amortization:
|
|
|
| As at June 30, 2002 | |||
|
|
|
| Accumulated |
| Net Book | |
|
|
| Cost | Amortization |
| Value | |
|
|
|
|
|
|
|
|
| Equipment | $ | 212,910 | $ | 147,498 | $ | 65,412 |
|
|
|
|
|
|
|
|
|
|
|
| As at December 31, 2001 | |||
|
|
|
| Accumulated |
| Net Book | |
|
|
| Cost | Amortization |
| Value | |
|
|
|
|
|
|
|
|
| Equipment | $ | 564,036 | $ | 185,127 | $ | 378,909 |
| Vehicles |
| 26,797 |
| 10,853 |
| 15,944 |
|
|
|
|
|
|
|
|
| Equipment held for sale |
| 149,167 |
| 0 |
| 149,167 |
|
|
| 740,000 |
| 195,980 |
| 544,020 |
Certain equipment, which is not employed in current operations, has been segregated ending disposition and is carried at an amount not exceeding management's best estimate of net realizable value.
8
Westrange Corp.
Notes to the Consolidated Financial Statements for the Period Ended
June 30, 2002 and 2001, and the Year Ended December 31, 2001
June 30/02 | Dec 31/01 | ||||
Bank loan payable in monthly | |||||
installments of $833 plus interest at bank | |||||
prime plus 1 per cent, due December 2002, | |||||
secured by land and building | $ | 5,000 | $ | 10,000 | |
Bank loan payable in monthly | |||||
installments of $4,238, including interest | |||||
at 8.75 per cent, due June 2003, secured | |||||
by equipment | 44,638 | 67,522 | |||
Bank loan payable in monthly | |||||
installments of $666, plus interest at bank | |||||
prime plus 1.5 per cent, due December 2002, | |||||
secured by equipment | 5,000 | 9,001 | |||
Loan Payable to Teckon Contractors Inc. | |||||
("Teckon") in installments of $21,750 including interest | |||||
at 12.75 percent to be made in the months of January and June | |||||
through December of each year, due 2005. | |||||
Security consisting of the equipment acquired as | |||||
described in note 4 (a), has been provided to CitiCapital | |||||
on behalf of Teckon. In the event of repossession | |||||
of the equipment by CitiCapital, the Corporation | |||||
would be absolved of its responsibility to repay | |||||
the loan to Teckon and would receive the excess | |||||
of any disposal proceeds over the amount of the | |||||
loan outstanding. | 0 | 501,224 | |||
54,638 | 587,747 | ||||
Less: Current portion | 54,638 | 183,105 | |||
$ | 0 | $ | 404,462 | ||
9
Westrange Corp.
Notes to the Consolidated Financial Statements for the Period Ended
June 30, 2002 and 2001, and the Year Ended December 31, 2001
Authorized:
An unlimited number of common shares
An unlimited number of preferred shares
| Issued: | |||||||||
| As of June 30, 2002 | As at December 31, 2001 | ||||||||
Number | Amount | Number | Amount | ||||||
Common shares | |||||||||
Balance, beginning of year | 6,298,581 | 1,049,546 | 6,108,581 | 859,546 | |||||
Issued under private placement | 100,000 | (1)100,000 | (1)190,000 | 190,000 | |||||
Options exercised | 335,000 | (2) 33,500 | |||||||
| Balance, end of year | 6,733,581 | 1,183,046 | 6,298,581 | 1,049,546 | |||||
| (1) | Issued for cash consideration of $1.00 per Common Share |
| (2) | Issued for cash consideration of $0.10 per Common Share |
Stock options:
The Corporation has a stock option plan for the directors and officers whereby common shares are reserved for the options granted.
Outstanding stock options under the plan are as follows:
Exercise Price | Number of Options | Expiry Date | ||
| $ | 4.00 | 30,000 | May 14, 2005 | |
| $ | 10.00 | 30,000 | May 14, 2005 | |
| $ | 20.00 | 30,000 | May 14, 2005 | |
| 4 | 50.00 | 30,000 | May 14, 2005 | |
The Corporation's financial instruments consist of accounts receivable, mortgage receivable, accounts payable and accrued liabilities, and long-term debt. The fair values of these instruments approximate their carrying value due to their short-term nature, due to terms being recently negotiated for the mortgage receivable, due to the variable market interest rates attached to certain long-term debt, and due to management's best estimate as to fair value of the remaining long-term debt.
10
Westrange Corp.
Notes to the Consolidated Financial Statements for the Period Ended
June 30, 2002 and 2001, and the Year Ended December 31, 2001
Income tax recovery from continuing operations differs from the amount that would be computed by applying the Federal and Provincial statutory income tax rate of 45 per cent (2000 - 46 per cent, 1999-46 per cent) for the following reasons:
2001 | 2000 | ||||
Computed income tax recovery | $ | (17,860) | $ | (94,541) | |
Permanent and other differences | 1,662 | (11,360) | |||
Change in valuation allowance | 16,198 | 105,901 | |||
| $ | 0 | $ | 0 | ||
The tax effects of temporary differences, including those from discontinued operations, that give rise to future tax assets and future tax liabilities are presented below: | |||||
2001 | 2000 | ||||
Future tax assets: | |||||
Losses carried forward | $ | 167,533 | $ | 158,502 | |
Capital assets - difference in net book value | |||||
and undepreciated capital cost | 41,432 | 27,714 | |||
Other | 9,803 | 16,354 | |||
218,768 | 202,570 | ||||
Less valuation allowance | 218,768 | 202,570 | |||
0 | 0 | ||||
Future tax liabilities | 0 | 0 | |||
Net future tax assets | $ | 0 | $ | 0 | |
The Corporation has approximately $388,000 of non-capital losses available at December 31, 2001, to reduce taxable income of future years. These losses will begin to expire if not used by December 31, 2004.
Earnings per Common Share:
Basic net income (loss) per Common Share has been calculated using the weighted average number of Common Shares outstanding during the period of 6,733,581.
For the period | For the period | |||||||
ended | ended | |||||||
June 30, 2002 | June 30, 2001 | |||||||
Net loss per Common Share | $ | 0.00 | $ | (.02) | ||||
| Diluted net income (loss) per Common Share is not presented, as the effect of Common Share options is anti-dilutive. | ||||||||
11
Westrange Corp.
Notes to the Consolidated Financial Statements for the Period Ended
June 30, 2002 and 2001, and the Year Ended December 31, 2001
June 30,2002, Westrange Corp. sold the shares of its subsidiary Terra Fibre Utility Corp. for the sum of $400,000.
The terms of the sale are as follows:
1. | $400,000 note payable in 10 semi-annual payments of $40,000 over 5 years. | |
2. | Note secured by general security agreement over Terra Fibre Utility Corp. and purchasers holding company. | |
3. | Guarantees from Terra Fibre Utility Corp. and principals of the purchasing company. | |
4. | Sale price includes retirement of existing shareholders loans between Westrange Corp. and Terra Fibre Utility Corp. |
Certain comparative figures have been reclassified to conform to the financial statement presentation adopted in the current year.
12
Directors and Officers
| Directors: | Lionel Kambeitz, Chairman and CEO | |||
| Kevin Sidloski, | ||||
| Independent Entrepreneur, Independent Director | ||||
| Wayne Bernakevitch, | ||||
| Barrister and Solicitor, Independent Director | ||||
| Officers: | Lionel Kambeitz, Chairman and CEO | |||
Shareholder Information
| Stock exchange: | The Toronto Stock Exchange Venture | ||
| Stock symbol: | WRC | ||
| Common Shares outstanding as of June 30, 2002: | |||
| 6,733,581 | |||
| Head office and Investor relations address: | |||
|
|
| Westrange Corp. |
| Registrar and Transfer Agent: | |||
Computershare Investor Services Inc. | |||
| Bank: | CIBC | ||
13
Shareholder Information
(continued)
| Auditors: | KPMG, LLP | ||
| Legal Counsel: | McDougall Gauley | ||
Armstrong Perkins Hudson, |
Dividend policy:
No dividends have been paid on any common shares of the Corporation since the date of inception, and it is not contemplated that any dividends will be paid in the immediate or foreseeable future.
Duplicate communications:
Some shareholders may receive more than one copy of the annual report and proxy-related material. This is generally due to ownership of registered shares in addition to non-registered shares; holding shares in more than one account; or purchasing shares from more than one stock brokerage firm. Every effort is made to avoid such duplication.
Shareholders who receive duplicate mailings should notify the investor relations department at the above address.
14
