UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2007
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
[ ] SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 000-14740
Widescope Resources Inc.
(Exact name of Registrant as specified in its charter)
Province of British Columbia, Canada
(Jurisdiction of incorporation or organization)
#208 - 828 Harbourside Drive, North Vancouver, British Columbia, Canada V7P 3R9
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
None None
Securities registered or to be registered pursuant to Section 12(g) of the Act.
Common Shares, no par value
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act. None
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common shares as of the close of the period covered by the annual
report:
12,227,283 inclusive of the conversion of the outstanding Series 1
Convertible Preferred Shares
Indicate by check mark if the registrant is a well-known seasoned issuer.
[ ] Yes [X] No
If this report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934. [ ] Yes [X] No
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer.
[ ] Large accelerated filer [ ] Accelerated filer [X] Non-accelerated filer
Indicate by check mark which financial statement item the registrant has elected
to follow. [X] Item 17 [ ] Item 18
If this is an annual report, indicate by check mark whether the registrant is a
shell company as defined in Rule 12b-2 of the Exchange Act. [ ] Yes [X] No
Unless otherwise indicated, all references herein are expressed in Canadian
dollars and United States currency is stated as "U.S.$__________."
THIS SUBMISSION SHOULD BE CONSIDERED IN CONJUNCTION WITH PREVIOUSLY FILED FORMS
20-F AND 6-K. THE AUDITED FINANCIAL STATEMENTS AND NOTES THERETO ATTACHED ARE AN
INTEGRAL PART OF THIS SUBMISSION.
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not required
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not required
ITEM 3. KEY INFORMATION
A. SELECTED FINANCIAL DATA.
The following selected financial data has been extracted from the consolidated
financial statements for the last five years prepared pursuant to Canadian
generally accepted accounting principles ("GAAP"). Where material differences
exist between Canadian and US GAAP, corresponding comparison data has been
provided in US GAAP for clarity.
2
WIDESCOPE RESOURCES INC.
Selected Financial Data in accordace with United States GAAP
(Expressed in Canadian Dollars)
Years Ended December 31,
2007 2006 2005 2004 2003
---------- ---------- ---------- ---------- ----------
Net operating revenues $ 0 9,689 0 20,000 3,000
Loss from continued operations $ (60,556) (370,305) (54,804) (39,742) (37,863)
Income from discontinued
operations $ N/a N/a N/a N/a N/a
Net loss $ (60,556) (370,350) (54,804) (39,742) (37,863)
Loss per share from continued
operations $ (0.01) (0.03) (0.01) (0.00) (0.00)
Income per share from
discontinued operations $ N/a N/a N/a N/a N/a
Income per share after
discontinued operations $ N/a N/a N/a N/a N/a
Share capital $ 13,649,333 13,649,333 13,499,333 13,265,283 13,265,283
Common shares issued 10,883,452 10,883,452 9,883,452 8,323,119 8,323,119
Weighted average shares
outstanding 10,883,452 10,383,452 9,084,049 8,323,119 8,323,119
Total assets $ 74,339 110,607 218,438 53,870 49,070
Net assets (liabilities) $ (104,642) (44,086) 176,219 (3,027) 36,715
Convertible debentures(current
and long term portions) $ N/a N/a N/a N/a N/a
Cash dividends declared per
common share $ 0 0 0 0 0
Exchange rates (Cdn$ to U.S.$)
period average $ 0.9304 0.8818 0.8253 0.7683 0.7135
3
Exchange rates (CDN$ to U.S.$)
for most recent six months
Period High Period Low
----------- ----------
December 2007 $ 1.0205 0.9756
January 2008 $ 1.0096 0.9686
February 2008 $ 1.0298 0.9814
March 2008 $ 1.0206 0.8521
April 2008 $ 0.9975 0.9737
May 2008 $ 1.0158 0.9815
Exchange rate (CDN$ to U.S.$)
June 23, 2008 $ 0.9840
B. Not required
C. Not required
D. RISK FACTORS.
The business of the Company entails significant risks, and an investment in the
securities of the Company should be considered highly speculative. An investment
in the securities of the Company should only be undertaken by persons who have
sufficient financial resources to enable them to assume such risks. The
following is a general description of all material risks, which can adversely
affect the business and in turn the financial results, ultimately affecting the
value of an investment the Company.
THE COMPANY HAS NO VIABLE BUSINESS.
Having no viable business it is difficult to determine a price for the
common shares. That price must therefore be dependent on the value that
each individual buyer and seller place on the future prospects of the
company, rather than any objective measurement. This is a very risk
position for shareholders, as the majority perception may turn negative and
price decline severely.
THE COMPANY HAS LIMITED FUNDS.
Funds are the fuel needed to drive the company. Should current funds be
consumed, and the company not be able to attract more capital, prospects
for shareholders would become extremely negative, and shareholder losses
will inevitably occur.
THERE IS NO ASSURANCE THAT THE COMPANY CAN ACCESS ADDITIONAL CAPITAL.
The company will need to demonstrate performance in order to attract
additional capital. As the mineral exploration business has a high element
of chance associated with it, it is possible that none of the current
properties will have any value. The capital markets could perceive this to
be a demonstration of poor performance, and be unwilling to provide
additional funds. Should this happen, shareholders will incur significant
losses.
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THERE IS NO ASSURANCE THAT THE TRANSACTION DISCLOSED HEREIN WITH PINEFALLS
GOLD WILL BE SUCCESSFUL IN ITS QUEST TO FIND A COMMERCIALLY VIABLE QUANTITY
OF MINERAL RESOURCES.
Unless the company is able to secure other more viable projects, providing
better future prospects, buyer interest for common shares will decline
severely, resulting in lower prices and significant shareholder losses.
THERE IS NO ASSURANCE THAT OTHER PROSPECTIVE MINERAL PROPERTIES OR OTHER
ASSETS CAN BE ACQUIRED, AND IF ACQUIRED THAT THE NECESSARY ADDITIONAL
CAPITAL CAN BE ATTRACTED.
Either of these is possible. Either occurring will have the same inevitable
outcome. Demand for the common shares will decline severely, resulting in a
drop in trading price, and significant shareholder losses.
THE COMPANY HAS A HISTORY OF OPERATING LOSSES AND MAY HAVE OPERATING LOSSES
AND A NEGATIVE CASH FLOW IN THE FUTURE.
This will mean that additional shares will need to be sold to fund
operations. Without a concurrent improvement in future prospects, this will
result in supply of stock exceeding demand, and much lower prices. This
will cause shareholders to lose money.
THE COMPANY'S AUDITORS HAVE INDICATED THAT U.S. REPORTING STANDARDS WOULD
REQUIRE THEM TO RAISE A CONCERN ABOUT THE COMPANY'S ABILITY TO CONTINUE AS
A GOING CONCERN.
Additional capital will need to be raised. This could result in the
perception of lowered future prospects, lower demand for the company's
common share, lower stock prices, and shareholder losses.
THERE CAN BE NO ASSURANCE THAT A LIQUID MARKET WILL DEVELOP FOR THE
COMPANY'S SHARES AND THEREFORE NO ASSURANCE THAT SHAREHOLDERS WILL BE ABLE
TO SELL THEIR SHARES.
Lack of liquidity that prevents shareholders from selling, or limits their
abilities to sell, will all too likely lead to significant losses for
shareholders.
MANAGEMENT HAS LITTLE EXPERTISE IN MINING OR EXPLORATION, WHICH MAY
ULTIMATELY CAUSE SHAREHOLDERS TO LOSE MONEY.
Management may waste the company's limited capital on worthless properties,
or it may do the wrong things with properties that could have value. Either
way, the outcome will be the same. Money will have been wasted without any
corresponding creation of value. This will cause shareholders to lose
patience and lose interest. This could lead to significantly increased
selling of shares, driving down the price, and leading to losses for
investors.
THE COMPANY'S COMMON STOCK IS THINLY TRADED SO IT IS MORE SUSCEPTIBLE TO
EXTREME RISES OR DECLINES IN PRICE, AND YOU MAY NOT BE ABLE TO SELL YOUR
SHARES AT OR ABOVE THE PRICE PAID.
You may have difficulty reselling shares of our common stock, either at or
above the price paid, or even at fair market value. The stock market often
experiences significant price and volume changes that are not related to
the operating performance of individual companies, and because our common
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stock is thinly traded it is particularly susceptible to such changes.
These broad market changes may cause the market price of our common shares
to decline, regardless of how well the company performs.
This may be exaggerated by the fact that the shares trade on the
over-the-counter bulletin board ("OTCBB"), which although owned and
operated by the NASDAQ Stock Market Inc., is not the same as the NASDAQ.
Trading on the OTCBB is often extremely sporadic, and subject to
manipulation by market-makers, and short sellers. This may cause you to
lose money as you may have difficulty selling the shares that you own.
THE COMPANY'S COMMON STOCK IS SUBJECT TO THE "PENNY STOCK" REGULATIONS,
WHICH ARE LIKELY TO MAKE IT MORE DIFFICULT TO SELL.
A "penny stock" is generally a stock trading under $5.00 per share, and not
registered on a national securities exchange or quoted on the NASDAQ
national market. The SEC has adopted rules that regulate broker-dealer
practices in connection with transactions in penny stocks. These rules,
intended to protect investors, generally have the result of reducing
trading in such stocks, restricting the pool of potential investors, and
making it more difficult for investors to sell their shares once acquired.
Since our common shares are subject to the "penny stock" rules, you may
find it more difficult to sell your shares.
AS A FOREIGN ISSUER, THE COMPANY IS EXEMPT FROM CERTAIN INFORMATIONAL
REQUIREMENTS OF THE EXCHANGE ACT TO WHICH DOMESTIC ISSUERS ARE SUBJECT.
As a foreign issuer we are not required to comply with all of the
informational requirements of the Exchange Act. As a result, there may be
less information concerning our company publicly available than if we were
a domestic United States issuer. In addition, our officers, directors, and
principal shareholders are exempt from the reporting and short profit
provisions of Section 16 of the Exchange Act, and the rules promulgated
thereunder. Therefore, our shareholders may not know on a timely basis when
our officers, directors, and principal shareholders purchase or sell shares
of our common stock.
AS A CANADIAN COMPANY WITH MOST ASSETS AND KEY PERSONNEL LOCATED OUTSIDE
THE UNITED STATES, YOU MAY HAVE DIFFICULTY IN ACQUIRING UNITED STATES
JURISDICTION, OR ENFORCING A UNITED STATES JUDGMENT AGAINST US, OUR KEY
PERSONNEL, OR ASSETS.
As a Canadian company many of our assets and key personnel, including
directors and officers, reside outside the United States. As a result, it
may be difficult or impossible for you to effect service of process within
the United States upon us or any of our key personnel or to enforce against
us or any of our key personnel judgments obtained in United States' courts,
including judgments relating to United States federal securities laws.
Canadian courts may not permit you to bring an original action in Canada,
or recognize or enforce judgments of United States courts obtained against
us predicated upon the civil liability provisions of federal securities
laws of the United States, or of any state thereof. Furthermore, because
many of our assets are located in Canada, it would be extremely difficult
to access these assets to satisfy any award entered against us in a United
States court. Accordingly, you may have more difficulty in protecting your
interests in the face of actions taken by our management, members of our
board of directors, or our controlling shareholders than you would
otherwise as shareholders of a United States public company.
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THE COMPANY DOES NOT INTEND TO PAY ANY COMMON STOCK DIVIDENDS IN THE
FORESEEABLE FUTURE.
We have never declared or paid a dividend on our common stock, and, because
we have very limited resources, we do not anticipate declaring or paying
any dividends in the foreseeable future. It is unlikely that the holders of
our common shares will have an opportunity to profit from anything other
than potential appreciation in the value of our common shares. If you
require dividend income, you should not rely in an investment in our common
shares to provide it.
FUTURE ISSUANCES OF COMMON STOCK MAY DEPRESS STOCK PRICES AND DILUTE YOUR
INTEREST.
We may issue additional shares of our common stock in future financings, or
grant stock options to our employees, officers, directors, and consultants
under our stock incentive plan. Any such issuances could have the effect of
depressing the market price of our common stock, and, in any case, would
dilute the percentage ownership interests in our company of our
shareholders. In addition we could issue securities having rights,
preferences and privileges senior to those of our common shares. This could
depress the value of our common shares.
ITEM 4. INFORMATION ON THE COMPANY
A. HISTORY AND DEVELOPMENT OF THE COMPANY.
The Company was incorporated under the laws of the Province of British Columbia,
Canada, by filing of Memorandum and Articles of Association on September 20,
1983, under the name Rainbow Resources Ltd. The company's name was changed to
Widescope Resources Ltd. on May 1, 1984, and to Gemini Technology Inc. on
September 17, 1985. In conjunction with a reverse split of its common shares on
a five-old for one-new basis, the Company adopted the name International Gemini
Technology Inc effective September 23, 1993. The Company's name was changed to
Widescope Resources Inc., effective July 12, 2006 Registrant is currently in
good standing under the laws of British Columbia. The registered and records
office of the Company and the Company's principal executive offices are located
at #208 - 828 Harbourside Drive North Vancouver, British Columbia V7P 3R9,
telephone 604-904-8481.
From September 1985 the company became involved in the design and marketing of a
circuit board for a Zenith computer that allowed it to emulate an IBM PC and
utilize much of the related software. Over the next year it broadened its
product line to include proprietary computer graphics chips, custom electronic
components and equipment. As the line of proprietary computer graphics chips
were in final development, the demand for the circuit boards for the Zenith
computer ended.
The company licensed its graphics chips to third parties, and concentrated on
developing second and third generation products. Due to cash flow problems
brought about by external and unforeseeable circumstances and bad management
decisions the company was forced into a position of attempting to develop a new
generation product with little cash.
In August of 1989 the board changed direction and top management. The new
strategy was to accelerate R&D on a new product, targeting a small number of
very large customers. With little cash and little ongoing revenue, the
inevitable delays to the R&D process caused the company to be unable to meet
payroll in February 1990. All of management resigned and the board of directors
7
was changed. The shareholders spearheaded an effort to save the Company, which
eventually resulted in the change to the board of directors and a plan to revive
the Company's operations.
During 1991 the Company concentrated considerable effort on establishing a joint
venture in Czechoslovakia to exploit the European market, as well as effort to
establish a considerable technical presence in the Middle East. In addition,
contracts and joint ventures were pursued in Russia, Singapore and Taiwan. None
of these efforts yielded tangible results.
A great deal of time and energy was expended in 1993 and 1994 in an effort to
target and conclude an acquisition that would be complimentary to Gemini's
technical and financial capabilities. This effort continued through 1996, and at
the end of 1996 has been unsuccessful. In July of 1997, Gemini entered into
discussions to acquire the assets and intellectual property of Abraham
Publishing Group Inc. and certain other privately owned assets which in
combination operate as a profitable publishing business. These discussions and
negotiations had not been concluded by the end of 1997, but in the first quarter
of 1998 resulted in an acquisition agreement with closing conditional on raising
US$3.25 million in expansion capital.
Closing had not taken place by the end of 1998 due to small cap market
conditions frustrating efforts to raise the required capital. Initiatives were
undertaken to identify and review other potential acquisition or mergers
requiring less capital.
The dot.com frenzy in the years 1999 and 2000 distorted valuations and made any
prospective acquisition prohibitively expensive. The return to more normal
valuations after mid 2000 has resulted in fewer but more reasonably priced
prospective candidates. However as valuations became more reasonable the sources
of funding became fewer. And the events of September 11 virtually shut down the
availability of funding for most smaller transactions, particularly the size
targeted by the company. Toward the end of the year discussions were entered
into on a proprietary medical device, which had met some amount of success in a
niche market in Texas. At yearend discussions were progressing, particularly as
it appeared that this device could be sold in considerable quantity by the
application of effective marketing. This was abandoned as marketing was found
not to be the greatest challenge. The greatest challenge was providing the
paperwork for the multiplicity of insurers ultimately paying for the use of the
device.
During 2002 due diligence was done on two businesses, but neither was able to
demonstrate the business case necessary for expansion financing. Accordingly
neither was pursued further as a merger or acquisition candidate, despite one
being in the bus shelter advertising business, a business usually demonstrating
generally attractive economics.
During 2003 due diligence was done on several more businesses. All but one were
abandoned as not being able to support the additional financing required to
close. One of those abandoned became the subject of further review toward the
end of the year as the owners lowered their price expectation. At year end,
alternatives were being considered including merging with a like business, also
available. A separate business was the subject of low level investigation
throughout the year, as it was fairly early stage. It remained under observation
at year end, having made considerable business progress.
During 2004 alternatives in the resource sector were explored. Oil and gas
projects were investigated, and one in particular was the subject of
considerable attention. Increasing energy prices brought with them increasing
expectations on the part of the owners of that project, ultimately causing
interest to wane. Precious metals projects continued to be reviewed as the entry
8
cost was deemed to be lower, and expenditures in minerals exploration appeared
to be more controllable. Toward the end of 2004, the Directors were
contemplating making a proposal on one particular project.
A proposal was made on a precious metals mining prospect in 2005. The precious
metals prospect is comprised of some 2800 hectares in the Rice Lake Mining area
of the Province of Manitoba, Canada. The property is just over 3 miles from a
mine that had produced over 1.3 million ounces of gold before being closed
because it became uneconomic at $35 per ounce gold. (This mine has now been
reopened.) The company carried out early stage geological and related work
during 2005, through an investment in the company owning the mining claims.
In 2006 further work was done on the prospect, In accordance with the terms of
the agreement with the owners of the prospect the cost of work done effectively
resulted in the company acquiring ownership in the company owning the prospect.
This, combined with the exercise of an option agreement with one of the owners,
results in Widescope now owning just over 65% of the company owning the
prospect.
In 2007 due to unavailability of qualified personnel no significant work was
undertaken on the claims in the Rice Lake Mining area.
B. BUSINESS OVERVIEW
In April 2005 the Company entered into a subscription agreement to invest
$200,000 into Outback Capital Inc. dba Pinefalls Gold ("PFG") a private Alberta
company with certain directors and a principal shareholder of PFG in common with
the Company. PFG is an exploration company with mining claims located in the
area of Bissett, Manitoba. Pursuant to the subscription the Company invested
$90,000 in exchange for 1.8 million units during 2005 and an additional $110,000
in exchange for 2.2 million units in 2006 of PFG at $0.05 per unit with each
unit comprised of one common share and one share purchase warrant to purchase an
additional common share at $0.075 for a period of two years. Without the
exercise of the warrant the Company purchased approximately 37% of the common
shares of PFG. As at June 30, 2006, the Company had invested $200,000 in
exchange for 4 million units under this subscription agreement.
In addition, the Company entered into a share exchange agreement with one of the
principal shareholders of PFG, a director of the Company, under which the
Company acquired a further 3 million common shares of PFG in exchange for one
million common shares of the Company. As a result of the share exchange
agreement, the director in common no longer has an ownership interest in PFG.
As at June 26, 2007 the Company's owns 65.42% of the common shares of PFG.
PFG has been actively exploring for mineral resources on its seventeen (17)
mining claims in the area of Bissett, Manitoba. The claims are included in the
Rice Lake greenstone belt and cover an area of approximately 2800 hectares. The
claims are the subject of Qualifying Reports dated May 1, 2006 and June 30, 2004
prepared by Edward Sawitzky, P. Geo. of Arc Metals Ltd. ("Arc"). Arc prepared
the report to standards dictated by National Instrument 43-101.
Following the recommendations of the May 2006 Qualifying Report - during the
summer of 2006 an exploration program was completed under PFG's direction. The
primary focus of the work plan was to complete more detailed geological mapping
9
of the claims, stripping of over-burden and grab sampling. Approximately 30
man-days of field work were completed and more than seventy samples were
collected and delivered to TSL Laboratories in Saskatoon for assay and analysis.
Subsequent to the year-end the Company has received the detailed geologist's
maps, data and assay results. Review of these materials plus the detailed report
of the activities, findings and recommendations are under review by the Company.
This review, and a small amount of professional work represent the total of the
progress made in 2007, to some extent due to the inability to attract a
geologist to the short work window the Company wanted.
The Company remains optimistic about the prospect for discovery of a definable
mineral resource on its claims in Manitoba. However, its exploration to date has
failed to immediately delineate the indicators required to step-up to a drilling
program. Further groundwork will be required to elevate the status of the claims
to drill-ready. Cautious optimism was gained from the reported success of the
local San Gold Corp., in extending existing gold bearing veins and discovering
new ones, by deeper drilling below their existing San Antonio mine site.
There is some seasonality to mineral exploration in that part of Manitoba. The
groundwork required to elevate the status of the claims to drill-ready is best
conducted during the summer. The soil and surface rock is more easily and
economically accessed when there is no snow cover. Actual drilling is most
easily carried out in the winter, as some of the surrounding area contains swamp
land, and access is much easier over frozen ground.
In conducting its business operations, the Company is not dependent on any
patented or license processes, technology, industrial, commercial or financial
contract or new manufacturing processes.
The Company competes with other exploration companies, some of which have
greater financial resources and technical facilities, for the acquisition of
mineral interests, as well as for the recruitment and retention of qualified
employees. Exploration in Manitoba has experienced a dramatic revival in recent
years and increased activity is forecast for the future. We compete for
qualified employees with other Canadian companies, including Harvest Gold Corp.,
Grandview Gold Inc., and San Gold Corp. amongst others.
C. ORGANIZATIONAL STRUCTURE.
The Company is part of no other group. During the year ended June 30, 2006
Outback Capital Inc. dba Pinefalls Gold ("PFG") a private Alberta corporation
became a majority-owned subsidiary of the Company. PFG was incorporated under
the Alberta BUSINESS CORPORATIONS ACT on February 6, 2001.
D. PROPERTY, PLANTS AND EQUIPMENT.
The Company's head office and principal facility, which is leased, is located at
828 Harbourside Drive, North Vancouver. Its only other property is its interest
in the mineral claims referenced above, held through its ownership in PFG. PFG's
interest in these mineral claims requires that annual work be done on these
claims in order to maintain them in good standing. Based on work done to date it
is estimated that they will remain in good standing until some time in 2009.
10
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED HEREIN (SEE ALSO
"SELECTED FINANCIAL DATA"). THE CONSOLIDATED FINANCIAL STATEMENTS HAVE BEEN
PREPARED IN ACCORDANCE WITH CANADIAN GAAP. REFER TO NOTE 7 TO THE CONSOLIDATED
FINANCIAL STATEMENTS FOR A DESCRIPTION OF TRANSACTIONS THAT WERE SUBJECT TO
MATERIAL MEASUREMENT DIFFERENCES BETWEEN CANADIAN GAAP AND U.S. GAAP UNDER ITEM
17.
OVERVIEW
With the acquisition of PFG effective June 30, 2006, the Company's primary focus
shifted to mineral resource exploration operations rather than acquisitions. The
Company charged PFG a modest management fee to offset its reciprocal efforts to
coordinate PFG's affairs until control of PFG was acquired. In 2006 PFG was
charged $9000 in management fees. This management function has been largely
carried out by the directors and large shareholders, at their own expense. The
Company's management team, affiliates and directors have special expertise in
the areas of operations, due diligence, financial analysis and corporate finance
strategy with respect to emerging growth enterprises. Additionally, the Company
retains Dockside Capital Group to provide certain management functions and in so
doing can also access its similar expertise.
From time-to-time the Company is approached, through referral, to provide these
services on a consulting basis. Thus the Company has generated some revenue by
providing these services. As these sources of revenue are not core to the
Company's focus, the services are not actively marketed. No consulting revenue
was earned in 2005, 2006, or 2007; however $20,000 was earned in 2004.
A. OPERATING RESULTS
Historically, the Company has shown modest losses for the past several years.
These losses result largely from having little or no revenue and minimal
operating expenses, rather than having significant operating and overhead
expenses. In 2004 the Company elected to sell its passive investment, and this
resulted in a loss that was somewhat greater than usual. Prior to the completion
of the PFG acquisition, the expenses of the Company were almost completely
related to satisfying regulatory requirements, including the annual meeting,
financial reporting, communications with shareholders; and seeking and
evaluating acquisition prospects for suitability and ability to attract
financing.
With the June 30, 2006 completion of the PFG acquisition the Company's expenses
are now more heavily weighted in favor of the exploration work and analysis
being carried out on the properties by PFG.
With the PFG acquisition the Company expects to report significant additional
expenses related to the exploration activities undertaken in the area of
Bissett, Manitoba.
11
BUSINESS OVERVIEW
In April 2005 the Company entered into a subscription agreement to invest
$200,000 into Outback Capital Inc. dba Pinefalls Gold ("PFG") a private Alberta
company with certain directors and a principal shareholder of PFG in common with
the Company. PFG is an exploration company with mining claims located in the
area of Bissett, Manitoba. Pursuant to the subscription the Company invested
$90,000 in exchange for 1.8 million units during 2005 and an additional $110,000
in exchange for 2.2 million units in 2006 of PFG at $0.05 per unit with each
unit comprised of one common share and one share purchase warrant to purchase an
additional common share at $0.075 for a period of two years. Without the
exercise of the warrant the Company purchased approximately 37% of the common
shares of PFG. As at June 30, 2006, the Company had invested $200,000 in
exchange for 4 million units under this subscription agreement.
In addition, the Company entered into a share exchange agreement with one of the
principal shareholders of PFG, a director of the Company, under which the
Company acquired a further 3 million common shares of PFG in exchange for one
million common shares of the Company. As a result of the share exchange
agreement, the director in common no longer has an ownership interest in PFG.
As at June 23, 2008 the Company's owns 65.42% of the common shares of PFG.
PFG has been actively exploring for mineral resources on its seventeen (17)
mining claims in the area of Bissett, Manitoba. The claims are included in the
Rice Lake greenstone belt and cover an area of approximately 2800 hectares. The
claims are the subject of Qualifying Reports dated May 1, 2006 and June 30, 2004
prepared by Edward Sawitzky, P. Geo. of Arc Metals Ltd. ("Arc"). Arc prepared
the report to standards dictated by National Instrument 43-101.
Following the recommendations of the May 2006 Qualifying Report - during the
summer of 2006 an exploration program was completed under PFG's direction. The
primary focus of the work plan was to complete more detailed geological mapping
of the claims, stripping of over-burden and grab sampling. Approximately 30
man-days of field work were completed and more than seventy samples were
collected and delivered to TSL Laboratories in Saskatoon for assay and analysis.
Subsequent to the year-end the Company has received the detailed geologist's
maps, data and assay results. Review of these materials plus the detailed report
of the activities, findings and recommendations are under review by the Company.
The Company remains optimistic about the prospect for discovery of a definable
mineral resource on its claims in Manitoba. However, its exploration to date has
failed to immediately delineate the indicators required to step-up to a drilling
program. Further groundwork will be required to elevate the status of the claims
to drill-ready.
Subsequent to the end of the year the Company's directors resolved to change the
expiry date of the warrants outstanding. The warrants entitle the holder,
subject to certain conditions, to purchase one common share per warrant at a
price of $0.18 per share; the warrants will now expire on December 5, 2008 - an
extension of six months. Prior to December 7, 2007 the expiry date of the
warrants was extended for a further six months.
FLUCTUATIONS IN RESULTS
The Company's annual operating results fluctuate, but very little. Revenues at
this point are solely derived from consulting activities which are not core to
the Company's focus and will fluctuate greatly based upon the Company's receipt
12
of infrequent, third-party referrals for these services. There is no revenue
from operations. Expenses fluctuate on the basis of costs for exploration and
related activities, and the ever increasing administrative and other costs of
complying with the various regulatory requirements of a public company. We
expect that these regulatory related expenses will continue to increase due to
the upward pressure on professional fees charged to reporting companies,
resulting from changes to securities legislation throughout North America.
With the PFG acquisition the Company expects to report significant additional
expenses in the future related to the exploration activities undertaken in the
area of Bissett, Manitoba.
B. LIQUIDITY AND CAPITAL RESOURCES
Since the Company is organized in Canada, the Company's December 31, 2007
consolidated financial statements have been prepared in accordance with Canadian
generally accepted accounting principles.
As at December 31, 2007, the Company had accumulated losses totaling $13,463,364
and a working capital deficit of $37,161. The continuation of the Company is
dependent upon the continued financial support of shareholders as well as
obtaining additional financing for the current and subsequent resource projects.
As noted, these conditions raise substantial doubt about the Company's ability
to continue as a going concern. The financial statements do not include any
adjustment that might arise from uncertainty. The auditors' report includes an
explanatory paragraph disclosing the Company's ability to continue as a going
concern.
As at December 31, 2007 the Company had cash of $69,628 and a working capital
deficit of $37,161.
C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.
Not applicable
D. TREND INFORMATION
Other than the continuing demand for various metals driven by the rapidly
growing economies of China and India, the only other trend that could be
expected to impact results is the scarcity of geologists in the area.
IMPACT OF INFLATION
The Company believes that inflation had minimal effect on costs related to its
exploration activities in the 12 months ending December 31, 2007.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to the Company.
E. OFF-BALANCE SHEET ARRANGEMENTS
Not applicable
13
F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
Not applicable
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
It should be noted that the management discussed below is primarily involved
with the Company's current activities. As the Company concludes an acquisition
or merger, or embarks on any other type of project, additional personnel with
differing areas of expertise will be utilized. Directors are elected annually by
a majority vote of the shareholders and hold office until the next general
meeting of the shareholders. Officers are appointed by, and serve at the
discretion of, the board of directors. The names, place of residence, positions
within the Company and the principal occupations of the directors and senior
officers of the Company are set out below.
14
A. DIRECTORS AND SENIOR MANAGEMENT.
Name, Municipality of Principal Occupation and
Residence and Position Position During the
with the Corporation Age Past Five Years
-------------------- --- ---------------
Douglas E. Ford (1) 44 Director since September 10, 1992;
West Vancouver, B.C. General Manager of Dockside Capital, a
Director private merchant banking and venture
capital firm, from 1986 to present.
Martin Schultz 64 Director and Secretary since March 20,
Vancouver, B.C. 1990; Self employed corporate
Secretary and Director development advisor for over 10 years.
John Stanton 62 Director since November 15, 1990; Self
Queensburg, New York Director employed pharmacist
Edward Dolejsi 63 Director since March 20, 1990;
Delta, B.C. Vice-President and General Manager of
Director and President BRI from July, 1994 until April, 1999;
self-employed software consultant since
May, 1999.
Edward D. Ford (1) 72 Director since March 20, 1990; also has
Whistler, B.C. devoted a portion of his time to
Director investment activities and as President
of Dockside Capital, a private merchant
banking and venture capital firm, for
more than the last five years; chartered
accountant for more than 20 years.
- ----------
(1) Edward Ford is the father of Douglas Ford.
B. COMPENSATION.
Management compensation is determined by the board of directors based on
competitive prices for services provided. During the year ended December 31,
2007, directors and officers, including private companies controlled by
directors and officers, as a group, were paid a total of $24,000 in management
fees and rent. See "Item 7. Major Shareholders and Related Party Transactions"
for more detail on fees paid to members of management or to entities owned by
them.
For the year ended December 31, 2007, the Company paid no compensation to
Directors for acting as Directors. The Company does not have any pension or
retirement plans, nor does the Company compensate its directors and officers by
way of any material bonus or profit sharing plans. Directors, officers,
employees and other key personnel of the Company may be compensated by way of
stock options.
15
C. BOARD PRACTICES.
Pursuant to the provisions of the COMPANY ACT (BC), the Company's directors are
elected annually at the regularly schedules annual general meeting of
shareholders. Each elected director is elected for a one-year term unless he
resigns prior to the expiry of his term.
The Company has no arrangements in place for provision of benefits to its
directors or upon their termination.
The Board has one committee, the Audit Committee, made-up of Messrs. Edward
Ford, John Stanton and Douglas Ford. The Audit Committee meets with the auditors
annually prior to completion of the audited financial statements and regularly
with management during the fiscal year. On May 2, 2006, the Company's board of
directors adopted a new charter for the Audit Committee.
D. EMPLOYEES.
Effective at December 31, 2007 the Company had no salaried employees.
E. SHARE OWNERSHIP.
A total of ten percent (10%) of the common shares of the Company, outstanding
from time to time, are reserved for the issuance of stock options pursuant to
the Company's Incentive Stock Option Plan. None were allocated at December 31,
2007. Other information on ownership is contained in the table below.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.
A. MAJOR SHAREHOLDERS.
The following table sets forth certain information regarding beneficial
ownership of the Company's shares at December 31, 2007 by (i) each person who is
known to own beneficially more than 5% of the Company's outstanding Common
Stock, (ii) each of the Company's directors and executive officers and (iii) all
current directors and executive officers as a group. The table does not reflect
common shares held of record by depositories, but does include currently
exercisable options and warrants which are included in the calculation of
percentage of class ownership for each individual holder. As of December 31,
2007 there were 10,883,452 common shares issued and outstanding. Each of the
listed persons may be reached at the Company's head offices.
16
Name and Address Amount and Nature of Percent of
of Beneficial Owner Beneficial Ownership Class
- ------------------- -------------------- -----
PRINCIPAL HOLDERS
Not applicable
OFFICERS AND DIRECTORS
Edward Ford 4,493,000 (1)(2) 41.28
John Stanton 55,000 * 0.005
Douglas Ford 914,000 (3) 8.398
Martin Schultz 483,167 4.439
Edward Dolejsi 6,200 * 0.001
All Officers and Directors
as a Group (5 Persons) 5,951,367 54.68
- ----------
* Less than one percent.
(1) All shares subject to Lock-up Agreement dated November 15, 2006, attached
as Exhibit 99.2 to the June 28, 2007 Form 20-F of the Company.
(2) Includes 1,483,000 shares held directly; and 430,000 shares held through
Singer Associates Holdings Ltd.; and 430,000 shares held through Arizona
Outdoor Specialists Inc.; and 430,000 shares held through BWN Oil
Technologies Inc.; and 430,000 shares held through Dockside Capital Group
Inc.; and 430,000 shares held through Good Times Enterprises Inc.; and
430,000 shares held through Specialty Holdings Inc.; and 430,000 shares
held through Wheels `n Gear Inc.
(3) Includes 430,000 shares held through Wink Holdings Ltd.
The Company knows of no arrangements which may at a subsequent date result in a
change in control of the Company.
B. RELATED PARTY TRANSACTIONS.
During the fiscal year ended December 31, 2007, directors, officers and
companies controlled by them have been engaged in the following transactions
with the Company:
During the year ended December 31, 2007, a company in which a director has an
interest charged the Company $24,000 (2006: $24,000, 2005: $24,000) for rent and
management fees. The unpaid portion of these amounts, plus additional advances
and other amounts due to directors, aggregating $87,280 (2006: $72,350, 2005:
$34,810) was included in accounts payable and accrued liabilities at December
31, 2007.
During the year ended December 31, 2004, a company controlled by a director
purchased the Company's investment, a 3% interest in a private company, for
$30,000 resulting in a loss of $16,024. The $30,000 purchase price formed part
of the year end accounts receivable.
The above transactions were made on terms as favorable as or more favorable to
the Company than those that could be obtained from unaffiliated third parties.
17
C. INTERESTS OF EXPERTS AND COUNSEL
Not required
ITEM 8. FINANCIAL INFORMATION
A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
See Item 17 and our consolidated financial statements and accompanying notes
beginning on page F-1
B. SIGNIFICANT CHANGES
The Company is not aware of any significant change since December 31, 2007 that
is not otherwise reported in this filing.
ITEM 9. THE OFFER AND LISTING
Effective December 21, 2006 our common shares became quoted on the United States
OTC Bulletin Board, under the symbol "WSCRF". The table below sets forth certain
information regarding the price history of our common shares.
Period High (USD) Low (USD)
------ ---------- ---------
Fiscal year ended December 31, 2006 $0.25 $0.10
Fiscal year ended December 31, 2007 $0.30 $0.05
Quarter ended December 31, 2006 $0.25 $0.10
Quarter ended March 31, 2007 $0.30 $0.05
Quarter ended June 30, 2007 $0.20 $0.20
Quarter ended September 30, 2007 $0.21 $0.19
Quarter ended December 31, 2007 $0.17 $0.16
Quarter ended March 31, 2008 $0.16 $0.10
Month ended December 31, 2007 $0.17 $0.16
Month ended January 31, 2008 $0.16 $0.11
Month ended February 29, 2008 $0.11 $0.11
Month ended March 31, 2008 $0.11 $0.10
Month ended April 30, 2008 $0.11 $0.10
Month ended May 31, 2008 $0.11 $0.11
Month ended June 30, 2008 (1) $0.11 $0.11
- ----------
(1) Through June 23, 2008
18
ITEM 10. ADDITIONAL INFORMATION
A. SHARE CAPITAL
Not required
B. MEMORANDUM AND ARTICLES OF ASSOCIATION
1. The company was incorporated as Rainbow Resources Ltd. September 20
1983 under certificate of incorporation no. 268952 in the Province of
British Columbia Canada. The name was changed to Widescope Resources
Ltd. May 1 1984, to Gemini Technology Inc. September 13 1985, to
International Gemini Technology Inc. September 23 1993, and to
Widescope Recources Inc., effective July 12, 2006. No objects and
purposes are described.
2. If a director has a material interest in a matter subject to a vote,
he must declare it and abstain from voting, or have his vote not
counted, except for certain specific exclusions which include setting
director compensation. There are no restrictions on directors issuing
debt however shareholder approval may be required in connection with
convertible debt or other debt driven requirements to issue shares.
There is no retirement age or share ownership requirement for
directors.
3. Dividends are declared by directors and subject to any special rights,
paid to all holders of shares in a class according to the number of
shares held. Voting rights are one vote per share. Directors stand for
election every year at the annual meeting. Shareholders have no rights
to share directly in the company's profits. Subject to prior claims of
creditors and preferred shareholders, common shareholders participate
in any surplus in the event of liquidation according to the number of
shares held. The company may redeem shares by directors' resolution in
compliance with applicable law unless the company is insolvent or may
become insolvent by doing so. It must make its offer pro rata to every
member who holds a class, subject to applicable stock exchange rules
or company act provisions. The directors have wide discretion.
Shareholders have no liability for further capital calls. No
discriminatory provisions, against an existing or prospective
shareholder of a substantial number of shares, are imposed by the
articles.
4. Rights of holders of any class of shares can only be changed with
their consent, and in accordance with the company act. Consent must be
in writing by the holders or by a three fourths majority of a vote of
the holders, and by the consent of the British Columbia Securities
Commission.
5. A notice convening an annual general or special meeting must specify
the place, date, hour, and in the case of a special meeting, the
general nature of the special business, and must be given in
accordance with the company act. There are no special conditions
outlining rights of admission.
6. There are no limitations on rights to own securities.
7. There are no provisions to delay, defer, or prevent a change in
control.
8. Nothing in the articles requires ownership disclosure.
19
9. Not applicable.
10. Not applicable.
C. MATERIAL CONTRACTS
The Company entered into a subscription agreement to invest $200,000 into
Outback Capital Inc. dba Pinefalls Gold (PFG) a private Alberta Company with
certain directors and principal shareholders in common with the Company. PFG is
an exploration company with mining claims located in the area of Bissett,
Manitoba. The Company will invest $200,000 in exchange for 4 million units at
$0.05 per unit, each unit comprised of one common share and one warrant to
purchase an additional common share at $0.075 for a period of two years. Prior
to exercising the warrants, after making the investment of $200,000 the Company
will own approximately 37% of the common shares of PFG. As at December 31, 2005,
the Company had invested $90,000 for 1.8 million units, approximately 17% of the
outstanding common shares of PFG.
In addition the Company entered into an option agreement with one of the
principal shareholders of PFG, a director of the Company, which entitles the
company to acquire a further 3 million common shares of PFG in exchange for one
million common shares of the Company. The option, exercisable at the Company's
discretion until March 31, 2007, was exercised.
Pursuant to the terms of the subscription agreement and the option agreement,
the latter having been exercised, the company owns 65.42% of the common shares
of PFG.
D. EXCHANGE CONTROLS
THIS SUMMARY IS OF A GENERAL NATURE ONLY AND IS NOT INTENDED TO BE, AND SHOULD
NOT BE INTERPRETED AS, LEGAL ADVICE TO ANY PROSPECTIVE PURCHASER. ACCORDINGLY,
PROSPECTIVE PURCHASERS OF THE COMPANY'S SHARES SHOULD CONSULT WITH THEIR OWN
ADVISORS WITH RESPECT TO THEIR INDIVIDUAL CIRCUMSTANCES.
There are no laws or governmental decrees or regulations in Canada that restrict
the export or import of capital, or which affect the remittance of dividends,
interest or other payments to holders of the Company's securities who are not
residents of Canada, other than withholding tax requirements. Reference is made
to "Item 7. Taxation".
There are no limitations imposed by the laws of Canada, the laws of Alberta or
by the charter or other governing documents of the Company on the right of a
non-resident to hold or vote common shares of the Company, other than as
provided in the Investment Canada Act (the "Investment Act") and the potential
requirement for a Competition Act Review.
The following summarizes the principal features of the Investment Act and the
Competition Act Review for a non-resident who proposes to acquire common shares.
This summary is of a general nature only and is not intended to be, nor is it, a
substitute for independent advice from an investor's own advisor. This summary
does not anticipate statutory or regulatory amendments.
THE CANADIAN INVESTMENT ACT
The Canadian Investment Act generally prohibits implementation of a reviewable
investment by an individual, government or agency thereof, corporation,
partnership, trust or joint venture that is not a "Canadian" as defined in the
Investment Act (a "non-Canadian"), unless, after review, the minister
20
responsible for the Investment Act (the "Minister") is satisfied that the
investment is likely to be of a net benefit to Canada. Under the Investment Act,
a United States citizen qualifies as a "World Trade Organization Investor."
Subject to the restrictions noted below, an investment in a Canadian business by
a World Trade Organization Investor would be reviewable under the Investment Act
only if it is an investment to acquire control of such Canadian business and the
value of the assets of the Canadian business as shown on its financial
statements is not less than a specified amount, which for 1999 was $184 million.
An investment in the shares of a Canadian business by a non-Canadian other than
a "World Trade Organization Investor" when the Company is not controlled by a
World Trade Organization Investor, would be reviewable under the Investment Act
if it is an investment to acquire control of the Canadian business and the value
of the assets of the Canadian business as shown on its financial statements is
$5 million or more, or if an order for review is made by the federal cabinet on
the grounds that the investment relates to Canada's cultural heritage or
national identity.
The acquisition by a World Trade Organization Investor of control of a Canadian
business in any of the following sectors is also subject to review if the value
of the assets of the Canadian business exceeds $5 million (as shown on its
financial statements): uranium, financial services (except insurance),
transportation services and cultural businesses, which include broadcast media
(publication, distribution or sale of books, magazines, periodicals, newspapers,
music, film and video products and the exhibition of film and video products),
television and radio services. As the Company's business does not fall under any
of the aforementioned categories, the acquisition of control of the Company, in
excess of the $5 million threshold, by a World Trade Organization Investor would
not be subject to such review.
A non-Canadian would acquire control of the Company for purposes of the
Investment Act if the non-Canadian acquired a majority of the common shares.
The acquisition of less than a majority but one-third or more of the common
shares would be presumed to be an acquisition of control of the Company unless
it could be established that, on acquisition, the Company was not controlled in
fact by the acquirer through the ownership of common shares. Notwithstanding the
review provisions, any transaction involving the acquisition of control of a
Canadian business or the establishment of a new business in Canada by a
non-Canadian is a notifiable transaction and must be reported to Industry Canada
by the non-Canadian making the investment either before or within thirty days
after the investment.
Certain transactions relating to common shares are exempt from the Investment
Act, including:
* an acquisition of common shares by a person in the ordinary course of
that person's business as a trader or dealer in securities;
* an acquisition of control of the Company in connection with the
realization of security granted for a loan or other financial
assistance and not for a purpose related to the provisions of the
Investment Act; and
* an acquisition of control of the Company by reason of an amalgamation,
merger, consolidation or corporate reorganization, following which the
ultimate direct or indirect control in fact of the Company, through
the ownership of common shares, remained unchanged.
21
CANADIAN COMPETITION ACT REVIEW
Investments giving rise to the acquisition or establishment, directly or
indirectly, by one or more persons of control over, or a significant interest in
the whole or part of a business of a competitor, supplier, customer or other
person are subject to substantive review by Canada's Competition Law Authority,
the Director of Investigation and Research (the "Director"). If or when the
Director concludes that a merger, whether by purchase or lease of shares or
assets, by amalgamation or by combination, or otherwise, prevents or lessens, or
is likely to prevent or lessen competition substantially, he may apply as may be
necessary to eliminate the substantial lessening or prevention of competition.
Such substantive merger review power applies to all mergers, whether or not they
meet limits for pre-notification under the Competition Act.
In addition to substantive merger review, the Competition Act provides for a
pre-notification regime respecting mergers of a certain size. The regime applies
in respect of share acquisitions, asset acquisitions, amalgamations and
combinations. For ease of reference, this filing refers specifically to share
acquisition, although the pre-notification regime applies, with the appropriate
modification, to other types of acquisition of control as well.
In order for a share acquisition transaction to be pre-notifiable, the parties
to the transaction (being the person or persons who proposed to acquire shares,
and the corporation the shares of which are to be acquired), together with their
affiliates (being all firms with a 50% or more voting shares linkage up and down
the chain) must have:
(i) aggregate gross assets in Canada that exceed $400,000,000 in value, as
shown on their audited financial statements for the most recently
completed fiscal year (which must be within the last fifteen (15)
months); or
(ii) aggregate gross revenue from sales in, from or into Canada that exceed
$400,000,000 for the most recently completed fiscal year shown on the
said financial statements; and
(iii)the party being acquired or corporations controlled by that party
must have gross assets in Canada, or gross revenues from sales in or
from Canada, exceeding $35,000,000 as shown on the said financial
statements. Acquisition of shares carrying up to 20% of the votes of a
publicly-traded corporation, or 35% of the votes in a private
corporation, will not be subject to pre-notification, regardless of
the above thresholds. However, exceeding the 20% or the 35% threshold,
and again exceeding the 50% threshold, gives rise to an obligation of
notification if the size threshold is met.
If a transaction is pre-notifiable, a filing must be made with the Director
containing the prescribed information with respect to the parties, and a waiting
period (either seven or twenty-one days, depending on whether a long or short
form filing is chosen) must expire prior to closing.
As an alternative to pre-notification, the Director may grant an Advance Ruling
Certificate, which exempts the transaction from pre-notification. Advance Ruling
Certificates are granted where the Director concludes, based on the information
provided to him, that he would not have sufficient grounds on which to apply to
the Competition Tribunal to challenge the Merger.
E. TAXATION
THIS SUMMARY IS OF A GENERAL NATURE ONLY AND IS NOT INTENDED TO BE, AND SHOULD
NOT BE INTERPRETED AS, LEGAL OR TAX ADVICE TO ANY PROSPECTIVE PURCHASER OR
HOLDER OF THE COMPANY'S SHARES AND NO REPRESENTATION WITH RESPECT TO THE
22
CANADIAN FEDERAL INCOME TAX CONSEQUENCES TO ANY SUCH PROSPECTIVE PURCHASER IS
MADE. ACCORDINGLY, PROSPECTIVE PURCHASERS OF THE COMPANY'S SHARES SHOULD CONSULT
WITH THEIR OWN TAX ADVISORS WITH RESPECT TO THEIR INDIVIDUAL CIRCUMSTANCES.
The following summary describes the principal Canadian federal income tax
considerations generally applicable to a holder of the Company's shares who, for
purposes of the Income Tax Act (Canada) (the "Canadian Tax Act") and the
Canada-United States Income Tax Convention, 1980 (the "Convention") and at all
relevant times is resident in the United States and not resident in Canada,
deals at arm's length with the Company, holds the Company's shares as capital
property, and does not use or hold and is not deemed to use or hold the
Company's shares in or in the course of carrying on business in Canada (a
"United States Holder").
This following summary is based upon the current provisions of the Canadian
Income Tax Act, the regulations thereunder, all specific proposals to amend the
Canadian Tax Act and the regulations announced by the Minister of Finance
(Canada) prior to the date hereof and the Company's understanding of the
published administrative practices of the Canada Customs and Revenue Agency
(formerly Revenue Canada, Customs, Excise and Taxation). This summary does not
take into account or anticipate any other changes in the governing law, whether
by judicial, governmental or legislative decision or action, nor does it take
into account the tax legislation or considerations of any province, territory or
non-Canadian jurisdiction (including the United States), which legislation or
considerations may differ significantly from those described herein.
DISPOSITION OF THE COMPANY'S SHARES
In general, a United States shareholder will not be subject to Canadian income
tax on capital gains arising on the disposition of the Company's shares, unless
such shares are "taxable Canadian property" within the meaning of the Canadian
Income Tax Act and no relief is afforded under any applicable tax treaty. The
shares of the Company would be taxable Canadian property of a non-resident if at
any time during the five-year period immediately preceding a disposition by the
non-resident of such shares, not less than 25% of the issued shares of any class
or series of all classes of shares of the Company belonged to the non-resident,
to persons with whom the non-resident did not deal at arm's length, or to the
non-resident and persons with whom the non-resident did not deal at arm's length
for purposes of the Canadian Income Tax Act. For this purpose, issued shares
include options to acquire such shares (including conversion rights) held by
such persons. Under the Convention, a capital gain realized by a resident of the
United States will not be subject to Canadian tax unless the value of the shares
of the Company is derived principally from real estate (as defined in the
Convention) situated in Canada.
F. DIVIDENDS AND PAYING AGENTS
Not required
G. STATEMENT BY EXPERTS
Not required
23
H. DOCUMENTS ON DISPLAY
All documents referenced in this Form 20-F may be viewed at the offices of the
Company during business hours #208 - 828 Harbourside Drive, North Vancouver BC
V7P 3R9 Canada, Telephone 604-904-8481.
I. SUBSIDIARY INFORMATION
As of June 30, 2006 Outback Capital Inc. dba Pinefalls Gold ("PFG") a private
Alberta corporation become a majority-owned subsidiary of the Company. PFG was
incorporated under the Alberta BUSINESS CORPORATIONS ACT on February 6, 2001.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not required
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
Not applicable
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS
Not applicable
ITEM 15. CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
Under the supervision and with the participation of management, including our
chief executive officer and the chief financial officer, we conducted an
evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act, as of December 31, 2007. Based on this evaluation, our chief
executive officer and chief financial officer concluded as of December 31, 2007
that our disclosure controls and procedures were effective.
24
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial reporting is
designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of consolidated financial statements in accordance
with generally accepted accounting principles and includes those policies and
procedures that:
(1) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of a company's assets,
(2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of consolidated financial statements in accordance with
generally accepted accounting principles, and that a company's receipts and
expenditures are being made only in accordance with authorizations of a
company's management and directors, and
(3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of a company's assets that could
have a material effect on the consolidated financial statements.
Internal control over financial reporting is a process that involves human
diligence and compliance and is subject to lapses in judgment and breakdowns
resulting from human failures. Internal control over financial reporting also
can be circumvented by collusion or improper management override. Because of
such limitations, internal control over financial reporting cannot provide
absolute assurance of achieving financial reporting objectives. Also,
projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies and procedures may
deteriorate.
However, these inherent limitations are known features of the financial
reporting process. Therefore, it is possible to design into the process
safeguards to reduce, though not eliminate, this risk. Management is responsible
for establishing and maintaining adequate internal control over financial
reporting for the company.
Management has used the framework set forth in the report entitled Internal
Control--Integrated Framework published by the Committee of Sponsoring
Organizations of the Treadway Commission, known as COSO, to evaluate the
effectiveness of the Company's internal control over financial reporting. Based
on this assessment, management has concluded that our internal control over
financial reporting was effective as of December 31, 2007.
This annual report does not include an attestation report of our registered
public accounting firm regarding internal control over financial reporting.
Our management's report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the SEC that permit us to provide
only our management's report in this annual report on Form 20-F.
25
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes in our internal controls over financial reporting that
occurred during the period covered by this annual report on Form 20-F that have
materially affected, or are reasonably likely to materially affect our internal
controls over financial reporting.
ITEM 16.
A. AUDIT COMMITTEE FINANCIAL EXPERT
The company has as its audit committee financial expert Mr. Edward D. Ford who
is a Canadian Chartered Accountant. He has held this professional qualification
since 1961. During his career Mr. Ford has been an associate, manager and
partner of several Canadian professional accounting firms that specialized in
audit/assurance, taxation, insolvency and independent business consulting.
Additionally he has served as a Chief Financial Officer of several public
companies.
B. CODE OF ETHICS
The Company has adopted a code of ethics applicable to its directors, principal
executive officer, principal financial officer, principal accounting procedures,
and persons performing similar functions. A copy of the Company's Code of Ethics
will be made available to anyone who requests it in writing from the Company's
head office.
C. PRINCIPAL ACCOUNTING FEES AND SERVICES
(A) AUDIT FEES
Dale Matheson Carr-Hilton LaBonte, Chartered Accountants ("DMCL") billed the
Corporation $14,500 for audit fees in the year ended December 31, 2007; $13,000
in 2006; $9,000 in 2005; and $6,200 in 2004. The former auditor, Charlton &
Company, Chartered Accountants billed $2,675 in 2004.
(B) AUDIT RELATED FEES
DMCL billed the Company $1,000 for audit related services in the year ended
December 31, 2007; $nil in 2006, $nil in 2005 and $nil in 2004. The former
auditor, Charlton & Company, Chartered Accountants billed $nil in 2004.
(C) TAX FEES
DMCL did not provide the Corporation with any professional services rendered for
tax compliance, tax advice and tax planning in the years ended December 31,
2007, 2006, 2005 and 2004. The former auditor, Charlton & Company, Chartered
Accountants billed $nil in 2004.
(D) ALL OTHER FEES
DMCL did not bill the Corporation for any other products and services in the
years ended December 31, 2007, 2006, 2005 and 2004. The former auditor, Charlton
& Company, Chartered Accountants billed $nil in 2004.
(E) AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
To ensure continuing auditor objectivity and to safeguard the independence of
our auditors, our audit committee has determined a framework for the type and
authorization of non-audit services which our auditors may provide. The audit
committee has adopted policies for the pre-approval of specific services that
26
may be provided by our auditors. The dual objectives of these policies are to
ensure that we benefit in a cost effective manner from the cumulative knowledge
and experience of our auditors, while also ensuring that the auditors maintain
the necessary degree of independence and objectivity.
Our audit committee approved the engagement of Dale Matheson Carr-Hilton LaBonte
to render audit and non-audit services before they were engaged by us.
D. EXEMPTION FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not Applicable
E PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Not Applicable
ITEM 17. FINANCIAL STATEMENTS
The financial statements and notes thereto as required by Item 17 are attached
hereto and found immediately after the text of this Registration Statement. The
auditors' report of Dale Matheson Carr-Hilton LaBonte LLP, independent
registered public accountants, on the audited consolidated financial statements
and notes thereto is included immediately preceding the audited consolidated
financial statements.
Auditors' Report.
Consolidated balance sheets as at December 31, 2007 and 2006.
Consolidated statements of operations and deficit for the years ended
December 31, 2007, 2006 and 2005.
Consolidated statements of cash flows for the years ended December 31,
2007, 2006 and 2005.
Notes to the consolidated financial statements.
ITEM 18. FINANCIAL STATEMENTS
Not applicable. See "Item 17. Financial Statements" above.
ITEM 19. EXHIBITS
Attached hereto are the following exhibits:
12.1 Certification of President pursuant to s.302 of the Sarbanes-Oxley Act
of 2002
12.2 Certification of Director pursuant to s.302 of the Sarbanes-Oxley Act
of 2002
13.1 Certification of President pursuant to s.906 of the Sarbanes-Oxley Act
of 2002
13.2 Certification of Director pursuant to s.906 of the Sarbanes-Oxley Act
of 2002
27
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing
on Form 20-F and that it has duly caused and authorized the undersigned to sign
this annual report on its behalf.
WIDESCOPE RESOURCES INC
Date: June 23, 2008
By: /s/ Martin Schultz
---------------------------------
Name: Martin Schultz
Title: Secretary and Director,
as duly authorized signatory
28
[LETTERHEAD OF DALE MATHESON CARR-HILTON LABONTE LLP
CHARTERED ACCOUNTANTS]
INDEPENDENT AUDITORS' REPORT
To the Shareholders of Widescope Resources Inc.
We have audited the consolidated balance sheets of Widescope Resources as at
December 31, 2007 and 2006 and the consolidated statements of operations,
shareholders' equity and cash flows for the years ended December 31, 2007 and
2006. 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 audits.
We conducted our audits in accordance with Canadian generally accepted auditing
standards and with the standards of the Public Company Accounting Oversight
Board (United States). 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 our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 2007
and 2006 and the results of its operations and its cash flows for the years
ended December 31, 2007 and 2006 in accordance with Canadian generally accepted
accounting principles.
/s/ DMCL
Dale Matheson Carr-Hilton Labonte LLP
CHARTERED ACCOUNTANTS
Vancouver, Canada
April 8, 2008
COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA
-UNITED STATES REPORTING DIFFERENCES
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by conditions and events that cast substantial doubt on
the Company's ability to continue as a going concern, such as those described in
Note 1 to the financial statements. Our report to the shareholders dated April
8, 2008 is expressed in accordance with Canadian reporting standards which do
not permit a reference to such events and conditions in the auditors' report
when these are adequately disclosed in the financial statements.
/s/ DMCL
Dale Matheson Carr-Hilton Labonte LLP
CHARTERED ACCOUNTANTS
Vancouver, Canada
April 8, 2008
F-1
WIDESCOPE RESOURCES INC.
Consolidated Balance Sheets
- --------------------------------------------------------------------------------
December 31, 2007 December 31, 2006
----------------- -----------------
ASSETS
Current assets
Cash $ 69,628 $ 105,504
Receivables 3,606 3,524
------------ ------------
73,234 109,028
------------ ------------
Mineral properties (Note 3) 343,955 333,158
Equipment, net of amortization (Note 3) 1,105 1,579
------------ ------------
$ 418,294 $ 443,765
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 110,395 $ 77,426
------------ ------------
Non-controlling interest (Note 3) 68,586 77,267
------------ ------------
Shareholders' equity
Share capital - preferred (Note 5) 604,724 604,724
Share capital - common (Note 5) 13,044,609 13,044,609
Contributed surplus (Note 5) 53,344 53,344
Deficit (13,463,364) (13,413,605)
------------ ------------
239,313 289,072
------------ ------------
$ 418,294 $ 443,765
============ ============
Approved by the Board:
"Martin Schultz"
- -------------------------------------
Martin Schultz
"Douglas E. Ford"
- -------------------------------------
Douglas E. Ford
The accompanying notes are an integral part of
these consolidated financial statements.
F-2
WIDESCOPE RESOURCES INC.
Consolidated Statements of Operations, Comprehensive loss, and Deficit
- --------------------------------------------------------------------------------
Years Ended December 31,
2007 2006 2005
------------ ------------ ------------
Revenue
Interest income $ -- $ 689 $ --
Management fess (Note 4) -- 9,000 --
------------ ------------ ------------
-- 9,689 --
------------ ------------ ------------
Expenses
General and administrative 58,440 51,311 54,804
------------ ------------ ------------
Loss from operations (58,440) (41,622) (54,804)
Non-controlling interest (Note 3) 8,681 4,475 --
------------ ------------ ------------
Net loss and Comprehensive loss (49,759) (37,147) (54,804)
Deficit, beginning of year (13,413,605) (13,376,458) (13,321,654)
------------ ------------ ------------
Deficit, end of year $(13,463,364) $ 13,413,605 $(13,376,458)
============ ============ ============
Earnings per share - basic $ (0.01) $ -- $ --
============ ============ ============
Weighted average number of common shares outstanding 10,883,452 10,383,452 9,084,049
============ ============ ============
The accompanying notes are an integral part of
these consolidated financial statements.
F-3
WIDESCOPE RESOURCES INC.
Consolidated Statements of Cash Flow
- --------------------------------------------------------------------------------
Years Ended December 31,
2007 2006 2005
--------- --------- ---------
OPERATING ACTIVITIES
Net loss $ (49,759) $ (37,147) $ (54,804)
Non cash Items:
Non-controlling interest in loss (8,681) (4,475) --
Amortization 474 -- --
Net change in working capital items:
Receivables (82) (3,920) 22,086
Accounts payable and accrued liabilities 32,969 20,664 (14,678)
--------- --------- ---------
Cash used in operations (25,079) (24,878) (47,396)
--------- --------- ---------
INVESTING ACTIVITIES
Cash acquired on acquisition of PFG, net of
amounts invested -- 16,108 (90,000)
Mineral property development costs (10,797) (13,852) --
BWN sale proceeds -- -- 30,000
--------- --------- ---------
Cash (used in) provided by investing activities (10,797) 2,256 (60,000)
--------- --------- ---------
FINANCING ACTIVITIES
Proceeds from sale of common shares -- -- 234,050
--------- --------- ---------
Cash from financing activities -- -- 234,050
--------- --------- ---------
Net increase (decrease) in cash (35,876) (22,622) 126,654
Cash, beginning of year 105,504 128,126 1,472
--------- --------- ---------
Cash, end of year $ 69,628 $ 105,504 $ 128,126
========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ -- $ -- $ --
========= ========= =========
Cash paid for income taxes $ -- $ -- $ --
========= ========= =========
The accompanying notes are an integral part of
these consolidated financial statements.
F-4
WIDESCOPE RESOURCES INC.
Notes to the Consolidated Financial Statements
DECEMBER 31, 2007
- --------------------------------------------------------------------------------
1. NATURE AND CONTINUANCE OF OPERATIONS
The Company's principal business activities include the exploration of
natural resource properties. The Company has acquired, directly and by way of
the acquisition of Outback Capital Inc. (Note 3), interests in various
mineral claims in Manitoba providing the right to explore. The Company had a
working capital deficit of $37,161 at December 31, 2007 and has incurred
substantial losses to date. The Company will require additional funding to
meet its obligations and the costs of its operations.
Effective July 12, 2006, the Company changed its name from International
Gemini Technology Inc. to Widescope Resources Inc.
The Company's future capital requirements will depend on many factors,
including costs of exploration and development of the properties, production,
if warranted, and competition and global market conditions. The Company's
potential recurring operating losses and growing working capital needs may
require that it obtain additional capital to operate its business. Such
outside capital will include the sale of additional common shares. There can
be no assurance that capital will be available as necessary to meet these
continuing exploration and development costs or, if the capital is available,
that it will be on terms acceptable to the Company. The issuances of
additional equity securities by the Company may result in a significant
dilution in the equity interests of its current shareholders.
The Company is dependent upon the discovery of economically recoverable
reserves, to obtain necessary financing to complete the development of its
properties, and future production or proceeds from the disposition thereof.
The financial statements have been prepared under the assumption the Company
is a going concern. The ability of the Company to continue operations as a
going concern is ultimately dependent upon attaining profitable operations.
To date, the Company has not generated profitable operations from its
resource operations and will need to invest additional funds in carrying out
its planned exploration, development and operational activities. As a result,
more losses are anticipated prior to obtaining a level of profitable
operations.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
These financial statements have been prepared on a consolidated basis and
include the accounts of the Company and its 65.42% owned subsidiary, Outback
Capital Inc. effective June 30, 2006 (date of acquisition). All intercompany
balances and transactions have been eliminated on consolidation.
MINERAL PROPERTIES
The cost of mineral properties and related exploration and development costs
are deferred until the properties are placed into production, sold, abandoned
or management has determined there to be an impairment. These costs will be
amortized over the useful life of the properties following the commencement
of commercial production or written off if the properties are sold, allowed
to lapse, or abandoned. Properties acquired under option agreements, whereby
payments are made at the sole discretion of the Company, are recorded in the
accounts at such time as the payments are made. It is reasonably possible
that economically recoverable reserves may not be discovered and accordingly
a material portion of the carrying value of mineral properties and related
deferred exploration costs could be written off. Although the Company has
taken steps to verify title to mineral properties in which it has an
interest, according to the usual industry standards for the stage of
exploration of such properties, these procedures do not guarantee the
Company's title. Such properties may be subject to prior agreements or
transfers and title may be affected by undetected title defects.
F-5
WIDESCOPE RESOURCES INC.
Notes to the Consolidated Financial Statements
DECEMBER 31, 2007
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES CONT'D
ESTIMATES, ASSUMPTIONS AND MEASUREMENT UNCERTAINTY
The preparation of financial statements in conformity with Canadian generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
period. Actual results could differ from those estimates. By their nature,
these estimates are subject to measurement uncertainty and the effect on the
financial statements of changes in such estimates in future periods could be
significant. Areas requiring significant use of estimates by management
relate to determining the carrying value of mineral properties and tax rates
to calculate future income taxes.
FINANCIAL INSTRUMENTS
Effective January 1, 2007, the Company adopted the Canadian Institute of
Chartered Accountants (CICA) Handbook Sections 3855, and 3861 financial
instruments; Section 1530, comprehensive income and Section 3865, hedges.
Section 3855 prescribes when a financial instrument is to be recognized on
the balance sheet and at what amount. Under Section 3855, financial
instruments must be classified into one of five categories: held-for-trading,
held-to-maturity, loans and receivables, available-for-sale financial assets,
or other financial liabilities. All financial instruments, including
derivatives, are measured at the balance sheet date at fair value except for
loans and receivables, held-to-maturity investments, and other financial
liabilities which are measured at amortized cost.
These standards have been applied prospectively. The adoption of these
standards has not resulted in any adjustments to the carrying amounts of
financial assets and financial liabilities at January 1, 2007.
The Company does not have any items that would cause comprehensive loss to be
different than net loss of the year ended December 31, 2007.
The Company's financial instruments consist of cash, receivables, and
accounts payable and accrued liabilities. Unless otherwise noted, it is
management's opinion that the Company is not exposed to significant interest,
currency or credit risks arising from these financial instruments. The fair
value of these financial instruments approximates their carrying values,
unless otherwise noted.
The Company has determined that it does not have derivatives or embedded
derivatives.
EQUIPMENT
Equipment is recorded at cost. Amortization is calculated using the following
annual rate, which is estimated to match the useful lives of the asset:
Computer hardware 30% declining balance
Equipment used in exploration activities, where substantially all the
economic life or value of the asset is expected to be derived from a specific
project, is accounted for as dedicated assets and included as a separate
category within the costs allocated to the related exploration stage mineral
interests. Amortization for dedicated assets are provided over the estimated
lives based on utilization and is recorded as deferred exploration costs of
the related project.
F-6
WIDESCOPE RESOURCES INC.
Notes to the Consolidated Financial Statements
DECEMBER 31, 2007
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES CONT'D
LOSS PER SHARE
The loss per share figures are calculated using the weighted average number
of shares outstanding during the respective fiscal years. The calculation of
loss per share figures using the Treasury Stock Method considers the
potential exercise of outstanding share purchase options and warrants or
other contingent issuances to the extent each option, warrant or contingent
issuance was dilutive. For the years presented, diluted loss per share is
equal to basic loss per share as the conversions are anti-dilutive.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid instruments with a maturity of three
months or less at the time of issuance to be cash equivalents.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company follows the recommendations of the CICA Handbook Section 3063,
"Impairment of Long-Lived Assets". Section 3063 establishes standards for
recognizing, measuring and disclosing impairment of long-lived assets held
for use. The Company conducts its impairment test on long-lived assets when
events or changes in circumstances indicate that the carrying amount may not
be recoverable. Impairment is recognized when the carrying amount of an asset
to be held and used exceeds the undiscounted future net cash flows expected
from its use and disposal. If there is impairment, the impairment amount is
measured as the amount by which the carrying amount of the asset exceeds its
fair value, calculated using discounted cash flows when quoted market prices
are not available.
INCOME TAXES
The Company accounts for income taxes using the asset and liability method,
whereby future tax assets and liabilities are recognized for the future
income tax consequences attributable to differences between the carrying
values of the asset and liabilities and their respective income tax bases.
Future income tax assets and liabilities are measured using substantively
enacted income tax rates expected to apply to taxable income in the years in
which temporary differences are expected to be recovered or settled. The
effect on future income taxes and liabilities of a change in rates is
included in operations in the period that includes the substantive enactment
date. Where the probability of a realization of a future income tax asset is
more likely than not, a valuation allowance is recorded.
STOCK-BASED COMPENSATION
The Company applies the fair value method of valuing all grants of stock
options. All stock options granted are accounted for as a capital transaction
at the time of the grant with the related fair values being reflected as
contributed surplus in shareholders' equity. The fair value of options
granted is estimated at the date of grant using the Black-Scholes option
pricing model incorporating assumptions regarding risk-free interest rates,
dividend yield, volatility factor of the expected market price of the
Company's stock, and a weighted average expected life of the options. The
estimated fair value of the options is recorded over the options' vesting
period. Any consideration paid on the exercise of stock options is credited
to share capital.
NEW ACCOUNTING PRONOUNCEMENTS
GOING-CONCERN
In June 2007, the CICA amended Handbook Section 1400, "General Standards of
Financial Statement Presentation", which requires management to make an
assessment of Company's ability to continue as a going-concern. When
financial statements are not prepared on a going-concern basis, that fact
shall be disclosed together with the basis on which the financial statements
are prepared and the reason why the Company is not considered a
going-concern. The new section is effective for years beginning on or after
January 1, 2008. The Company is in the process of assessing the impact of
this new section on its consolidated financial statements.
F-7
WIDESCOPE RESOURCES INC.
Notes to the Consolidated Financial Statements
DECEMBER 31, 2007
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES CONT'D
NEW ACCOUNTING PRONOUNCEMENTS CONT'D
INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS")
In 2006, the Canadian Accounting Standards Board ("AcSB") published a new
strategic plan that will significantly affect financial reporting
requirements for Canadian companies. The AcSB strategic plan outlines the
convergence of Canadian generally accepted accounting principles with IFRS
over an expected five year transitional period. In February 2008, the AcSB
announced that 2011 is the changeover date for publicly-listed companies to
use IFRS, replacing Canada's own generally accepted accounting principles.
The date is for interim and annual financial statements relating to fiscal
years beginning on or after January 1, 2011. The transition date of January
1, 2011 will require the restatement for comparative purposes of amounts
reported by the Company for the year ended December 31, 2010. While the
Company has begun assessing the adoption of IFRS for 2011, the financial
reporting impact of the transition to IFRS cannot be reasonably estimated at
this time.
CAPITAL DISCLOSURES
In December 2006, the CICA issued Section 1535 which specifies the disclosure
of information that enables users of an entity's financial statements to
evaluate its objectives, policies and processes for managing capital, summary
quantitative data about what the entity manages as capital, whether it has
complied with any capital requirements and, if it has not complied, the
consequences on non-compliance. The mandatory effective date is for annual
and interim financial statements for years beginning on or after October 1,
2007. This new requirement must be adopted by the Company effective January
1, 2008.
FINANCIAL INSTRUMENTS DISCLOSURES AND FINANCIAL INSTRUMENTS PRESENTATION
Sections 3862 and 3863 will replace Section 3861, Financial Instruments
Disclosure and Presentation, revising and enhancing disclosure requirements
while carrying forward its presentation requirements. These new Sections will
place increased emphasis on disclosure about the nature and extent of risk
arising from financial instruments and how the entity manages those risks.
The mandatory effective date is for annual and interim financial statements
for years beginning on or after October 1, 2007. The Company will begin
application of these sections effective January 1, 2008. It is not
anticipated that the adoption of these new accounting standards will impact
the amounts reported in the Company's financial statements as they related
primarily to disclosure.
F-8
WIDESCOPE RESOURCES INC.
Notes to the Consolidated Financial Statements
DECEMBER 31, 2007
- --------------------------------------------------------------------------------
3. ACQUISITION OF OUTBACK CAPITAL INC. DBA PINEFALLS GOLD ("PFG")
In April 2005, the Company entered into a subscription agreement to invest
$200,000 into Outback Capital Inc. dba Pinefalls Gold ("PFG"), a private
Alberta company with certain directors and a principal shareholder of PFG in
common with the Company. PFG is an exploration company with mining claims
located in the area of Bissett, Manitoba. Pursuant to the subscription, the
Company invested $90,000 in exchange for 1.8 million units during 2005 and an
additional $110,000 in exchange for 2.2 million units in 2006 of PFG at $0.05
per unit with each unit comprised of one common share and one share purchase
warrant to purchase an additional common share at $0.075 for a period of two
years. Without the exercise of the warrants, the Company purchased
approximately 37% of the common shares of PFG. As at June 30, 2006, the
Company had invested $200,000 in exchange for 4 million units under this
subscription agreement.
In addition, the Company entered into a share exchange agreement with one of
the principal shareholders of PFG, who is also a director of the Company,
under which the Company acquired a further 3 million common shares of PFG in
exchange for one million common shares of the Company at a value of $150,000.
As a result of the share exchange agreement, the director in common no longer
had an ownership interest in PFG.
The Company completed the transactions above effective June 30, 2006; and as
at December 31, 2007 the Company owned 65.42% of the common shares of PFG.
The Pinefalls Gold mining property is subject to a 2% royalty based on the
gross cash proceeds received from the sale of minerals, less the cost of
smelting, refining, freight, insurance and other related costs, and the cost
of marketing and sale of minerals derived from PFG properties. The royalty
will be calculated on a cumulative basis and will be payable in cash by the
Company within 180 days of each fiscal year end of the Company.
F-9
WIDESCOPE RESOURCES INC.
Notes to the Consolidated Financial Statements
DECEMBER 31, 2007
- --------------------------------------------------------------------------------
3. ACQUISITION OF OUTBACK CAPITAL INC. DBA PINEFALLS GOLD ("PFG") CONT'D
The fair value of the assets acquired and liabilities assumed effective June
30, 2006 are as follows:
- $ -
---------
Current assets 126,108
Mineral claims and equipment 320,885
Current liabilities (3,861)
Due to related parties (11,390)
Non controlling interest (81,742)
---------
350,000
=========
CONSIDERATION PAID:
1,000,000 common shares at $0.15 per share 150,000
Cash 200,000
---------
350,000
=========
Mineral Claims and equipment includes the following:
- $ -
---------
Unproven Mining Claims - not subject to depletion 319,306
Equipment 1,579
---------
Totals 320,885
=========
Mineral claims since the acquisition consist of:
- $ -
Total
---------
Balance as at June 30, 2006 319,306
Geological consulting fees 13,852
---------
Balance as at December 31, 2006 333,158
Geological consulting fees 10,773
Filing fees 24
---------
Balance as at December 31, 2007 343,955
=========
4. RELATED PARTY TRANSACTIONS
During the year ended December 31, 2007, a company in which a director has an
interest charged the Company $24,000 (2006: $24,000) for rent and management
fees. The unpaid portion of these amounts, plus additional advances and other
amounts due to directors, aggregating $87,280 (2006: $72,350) is included in
accounts payable and accrued liabilities at December 31, 2007.
The Company charged $nil (2006: $9,000) for rent and management fees to PFG
prior to the acquisition date.
Related party transactions were in the normal course of business and have
been recorded at the exchange amount which is the fair value agreed to
between the parties. Amounts due to related parties are unsecured,
non-interest bearing and without specific terms of repayment.
F-10
WIDESCOPE RESOURCES INC.
Notes to the Consolidated Financial Statements
DECEMBER 31, 2007
- --------------------------------------------------------------------------------
5. SHARE CAPITAL
a) The authorized capital of the Company comprises 100,000,000 common shares
without par value and 100,000,000 Series 1 convertible preferred shares
without par value. The rights and restrictions of the preferred shares are as
follows:
i) dividends shall be paid at the discretion of the directors;
ii) the holders of the preferred shares are not entitled to vote except at
meetings of the holders of the preferred shares, where they are
entitled to one vote for each preferred share held;
iii) the shares are convertible at any time; and
iv) the number of the common shares to be received on conversion of the
preferred shares is to be determined by dividing the conversion value
of the share, $1 per share, by $0.45.
b) Common shares
2007 2006
-------------------------- --------------------------
Shares $ Shares $
---------- ---------- ---------- ----------
Balance, beginning of year 10,883,452 13,044,609 9,883,452 12,894,609
Issued on acquisition of PFG
(Note 3) -- -- 1,000,000 150,000
---------- ---------- ---------- ----------
Balance, December 31 10,883,452 13,044,609 10,883,452 13,044,609
========== ========== ========== ==========
c) Preferred shares
2007 2006
-------------------------- --------------------------
Shares $ Shares $
---------- ---------- ---------- ----------
Balance, beginning and end of year 604,724 604,724 604,724 604,724
========== ========== ========== ==========
d) Warrants
2007 2006
---------- ----------
Balance, beginning and end of year 1,560,333 1,560,333
========== ==========
Each warrant gives the holder the right to purchase one common share of the
Company at $0.18 per share on or before the expiry of the warrants on June 6,
2008.
e) Stock Options
As of December 31, 2007 and 2006, there were no stock options outstanding.
F-11
WIDESCOPE RESOURCES INC.
Notes to the Consolidated Financial Statements
DECEMBER 31, 2007
- --------------------------------------------------------------------------------
6. INCOME TAXES
A reconciliation of income taxes at statutory rates with the reported taxes
is as follows:
2007 2006
-------- --------
Loss before income taxes $ 49,759 $ 37,147
======== ========
Income tax recovery at statutory rates
$ 16,978 $ 12,667
Unrecognized benefit of
non-capital losses (16,978) (12,667)
-------- --------
Future income tax provision $ -- $ --
======== ========
The significant components of the Company's future income tax assets are as
follows:
2007 2006
-------- --------
Future income tax assets:
Non-capital loss carry forward benefit $ 81,500 $ 74,481
Capital losses carried forward 1,250 1,506
Valuation allowance (82,750) (75,987)
-------- --------
Net future income tax asset $ -- $ --
======== ========
The Company has approximately $261,000 in non-capital losses that can be
offset against taxable income in future years which expire at various dates
commencing in 2007 and approximately $8,000 in capital losses which may be
available to offset future taxable capital gains which can be carried forward
indefinitely. The potential future tax benefit of these losses has not been
recorded as a full-future tax asset valuation allowance has been provided due
to the uncertainty regarding the realization of these losses.
The related potential income tax benefits with respect to these items have
not been recorded in the accounts. Application and expiration of these
carryforward balances are subject to relevant provisions of the Income Tax
Act, Canada.
7. RECONCILIATION BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
These financial statements have been prepared in accordance with Canadian
generally accepted accounting principles ("Canadian GAAP"), which differs in
certain respects from United States generally accepted accounting principles
("US GAAP"). A description of US GAAP and practices prescribed by the US
Securities and Exchange Commission ("SEC") that result in material
measurement and disclosure differences from Canadian GAAP are summarized as
follows:
F-12
WIDESCOPE RESOURCES INC.
Notes to the Consolidated Financial Statements
DECEMBER 31, 2007
- --------------------------------------------------------------------------------
7. RECONCILIATION BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES CONT'D
December 31, December 31,
2007 2006
--------- ---------
Consolidated Balance Sheets
Total assets under Canadian GAAP $ 418,294 $ 443,765
(a) Mineral property exploration and acquisition
costs expensed under US GAAP (343,955) (333,158)
--------- ---------
Total assets under US GAAP $ 74,339 $ 110,607
========= =========
Total liabilities under Canadian and US GAAP $ 110,395 $ 77,426
========= =========
Non-controlling interest under Canadian and US
GAAP $ 68,586 $ 77,267
========= =========
Total shareholders' equity under Canadian GAAP $ 239,313 $ 289,072
(a) Mineral property exploration and acquisition
costs expensed under US GAAP (343,955) (333,158)
--------- ---------
Total shareholders' equity (deficit) under US GAAP $(104,642) $ (44,086)
========= =========
Year ended Year ended Year ended
December 31, December 31, December 31,
2007 2006 2005
--------- --------- ---------
Consolidated Statements of Operations and Deficit
Net loss under Canadian GAAP $ (49,759) $ (37,147) $ (54,804)
(a) Mineral property exploration and acquisition
costs expensed under US GAAP (10,797) (333,158) --
--------- --------- ---------
Net loss under US GAAP $ (60,556) $(370,305) $ (54,804)
========= ========= =========
Basic and diluted loss per share under US GAAP $ (0.01) $ (0.04) $ (0.01)
========= ========= =========
F-13
WIDESCOPE RESOURCES INC.
Notes to the Consolidated Financial Statements
DECEMBER 31, 2007
- --------------------------------------------------------------------------------
7. RECONCILIATION BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES CONT'D
Year ended Year ended Year ended
December 31, December 31, December 31,
2007 2006 2005
--------- --------- ---------
Consolidated Statements of Cash Flows
Net cash used in operating activities under
Canadian GAAP $ (25,079) $ (24,878) $ (47,396)
(b) Mineral property exploration costs incurred (10,797) (13,852) --
--------- --------- ---------
Net cash used in operating activities under US GAAP $ (35,876) $ (38,730) $ (47,396)
========= ========= =========
Net cash provided by (used in) investing activities
under Canadian GAAP $ (10,797) $ 2,256 $ (60,000)
(b) Mineral property exploration costs incurred 10,797 13,852 --
--------- --------- ---------
Net cash provided by (used in) investing activities
under US GAAP $ -- $ 16,108 $ (60,000)
========= ========= =========
Net cash provided by financing activities under
Canadian and US GAAP $ -- $ -- $ 234,050
========= ========= =========
(A) INTEREST IN UNPROVEN MINERAL PROPERTIES
In accordance with Canadian GAAP, the cost of mineral properties and related
exploration and development costs are deferred until the properties are
placed into production, sold, abandoned or management has determined there to
be impairment.
In accordance with US GAAP, mineral property acquisition costs are initially
capitalized when incurred using the guidance in EITF 04-02, "Whether Mineral
Rights Are Tangible or Intangible Assets" and in accordance with Financial
Accounting Standards Board ("FASB") SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", the carrying value of
intangible assets and other long-lived assets is reviewed on a regular basis
for the existence of facts or circumstances that may suggest impairment. The
Company recognizes impairment when the sum of the expected undiscounted
future cash flows is less than the carrying amount of the asset. Mineral
property exploration costs are expensed as incurred until commercially
minable deposits are determined to exist within a particular property as cash
flows cannot be reasonably estimated prior to such determination
Accordingly, for all periods presented, the Company has expensed all mineral
property exploration costs for US GAAP purposes and impaired the property
acquisition costs incurred during the period (see Note 3).
F-14
WIDESCOPE RESOURCES INC.
Notes to the Consolidated Financial Statements
DECEMBER 31, 2007
- --------------------------------------------------------------------------------
7. RECONCILIATION BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES CONT'D
(B) MINERAL PROPERTY COSTS INCURRED
Under Canadian GAAP, cash flows relating to mineral property acquisition and
exploration costs are reported as investing activities. Under US GAAP, these
costs are classified as operating activities. The net cash provided by (used
in) operating and investing activities has been adjusted accordingly for all
periods presented.
(C) RECENT ACCOUNTING PRONOUNCEMENTS - US GAAP
In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities" ("SFAS 161"). SFAS 161 is intended to
improve financial reporting about derivative instruments and hedging
activities by requiring enhanced disclosures to enable investors to better
understand their effects on an entity's financial position, financial
performance, and cash flows. SFAS 161 achieves these improvements by
requiring disclosure of the fair values of derivative instruments and their
gains and losses in a tabular format. It also provides more information about
an entity's liquidity by requiring disclosure of derivative features that are
credit risk-related. Finally, it requires cross-referencing within footnotes
to enable financial statement users to locate important information about
derivative instruments. SFAS 161 will be effective for financial statements
issued for fiscal years and interim periods beginning after November 15,
2008, and will be adopted by the Company beginning in the first quarter of
2009. The Company does not expect there to be any significant impact of
adopting SFAS 161 on its financial position or results of operations.
On December 21, 2007, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 110, ("SAB 110"). SAB 110 provides guidance to
issuers on the method allowed in developing estimates of expected term of
"plain vanilla" share options in accordance with SFAS No. 123(R),
"Share-Based Payment". The staff will continue to accept, under certain
circumstances, the use of a simplified method beyond December 31, 2007 which
amends question 6 of Section D.2 as included in SAB 107, "Valuation of
Share-Based Payment Arrangements for Public Companies", which stated that the
simplified method could not be used beyond December 31, 2007. SAB 110 is
effective January 1, 2008. The Company is currently evaluating the potential
impact, if any, that the adoption of SAB 110 will have on its consolidated
financial statements.
In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interest in
Consolidated Financial Statements, an amendment of ARB No. 5"1 ("SFAS No.
160"), which will change the accounting and reporting for minority interests,
which will be recharacterized as noncontrolling interests and classified as a
component of equity within the consolidated balance sheets. SFAS No. 160 is
effective as of the beginning of an entity's first fiscal year beginning on
or after December 15, 2008. Earlier adoption is prohibited. Management has
not determined the effect that adopting this statement would have on the
Company's financial position or results of operations.
In December 2007, the FASB issued SFAS No. 141 (Revised 2007), "Business
Combinations" ("SFAS No. 141R"). SFAS No. 141R will change the accounting for
business combinations. Under SFAS No. 141R, an acquiring entity will be
required to recognize all the assets acquired and liabilities assumed in a
transaction at the acquisition-date fair value with limited exceptions. SFAS
No. 141R will change the accounting treatment and disclosure for certain
specific items in a business combination. SFAS No. 141R applies prospectively
to business combinations for which the acquisition date is on or after the
beginning of the entity's first annual reporting period beginning on or after
December 15, 2008. Accordingly, any business combinations completed by the
Company prior to January 1, 2009 will be recorded and disclosed following
existing GAAP. Management has not determined the effect that adopting this
statement would have on the Company's financial position or results of
operations.
F-15
WIDESCOPE RESOURCES INC.
Notes to the Consolidated Financial Statements
DECEMBER 31, 2007
- --------------------------------------------------------------------------------
7. RECONCILIATION BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES CONT'D
(C) RECENT ACCOUNTING PRONOUNCEMENTS - US GAAP CONT'D
In February 2007, the FASB issued Statement of Financial Accounting Standards
No. 159, "The Fair Value Option for Financial Assets and Financial
Liabilities - Including an amendment of FASB Statement No. 115" ("SFAS No.
159"). This statement permits entities to choose to measure many financial
instruments and certain other items at fair value. The objective is to
improve financial reporting by providing entities with the opportunity to
mitigate volatility in reported earnings cause by measuring related assets
and liabilities differently without having to apply complex hedge accounting
provisions. This Statement is expected to expand the use of fair value
measurement, which is consistent with the Board's long-term measurement
objectives for accounting for financial instruments. This statement is
effective as of the beginning of the Company's first fiscal year that begins
after November 15, 2007, although earlier adoption is permitted. Management
has not determined the effect that adopting this statement would have on the
Company's financial position or results of operations.
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measures". This
Statement defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles (GAAP), expands disclosures
about fair value measurements, and applies under other accounting
pronouncements that require or permit fair value measurements. SFAS No. 157
does not require any new fair value measurements. However, the FASB
anticipates that for some entities, the application of SFAS No. 157 will
change current practice. SFAS No. 157 is effective for financial statements
issued for fiscal years beginning after November 15, 2007, which for the
Company would be the fiscal year beginning January 1, 2008. The adoption of
this statement is not expected to have an effect on the Company's future
reported financial position or results of operations.
In June 2006, FASB issued Interpretation No. 48, "Accounting for Uncertainty
in Income Taxes-an Interpretation of FASB Statement No. 109" ("FIN 48"). This
Interpretation clarifies the accounting for uncertainty in income taxes
recognized in an enterprise's financial statements in accordance with FASB
No. 109, "Accounting for Income Taxes." This Interpretation prescribes a
recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken
in a tax return. This Interpretation also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition. This Interpretation is effective for fiscal years
beginning after December 15, 2006. The Company has determined that the
adoption of Statement No. 158 during the year did not have any material
impact on the Company's results of operations or financial position.
In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of
Financial Assets, an amendment of FASB Statement No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities". This statement requires all separately recognized servicing
assets and servicing liabilities be initially measured at fair value, if
practicable, and permits for subsequent measurement using either fair value
measurement with changes in fair value reflected in earnings or the
amortization and impairment requirements of Statement No. 140. The subsequent
measurement of separately recognized servicing assets and servicing
liabilities at fair value eliminates the necessity for entities that manage
the risks inherent in servicing assets and servicing liabilities with
derivatives to qualify for hedge accounting treatment and eliminates the
characterization of declines in fair value as impairments or direct
write-downs. SFAS No. 156 is effective for an entity's first fiscal year
beginning after September 15, 2006. The adoption of this statement did not
have an effect on the Company's financial position or results of operations.
F-16
WIDESCOPE RESOURCES INC.
Notes to the Consolidated Financial Statements
DECEMBER 31, 2007
- --------------------------------------------------------------------------------
7. RECONCILIATION BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES CONT'D
(D) RECENT ACCOUNTING PRONOUNCEMENTS - US GAAP CONT'D
In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain
Hybrid Financial Instruments-an amendment of FASB Statements No. 133 and
140", to simplify and make more consistent the accounting for certain
financial instruments. SFAS No. 155 amends SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities", to permit fair value
remeasurement for any hybrid financial instrument with an embedded derivative
that otherwise would require bifurcation, provided that the whole instrument
is accounted for on a fair value basis. SFAS No. 155 amends SFAS No. 140,
"Accounting for the Impairment or Disposal of Long-Lived Assets", to allow a
qualifying special-purpose entity to hold a derivative financial instrument
that pertains to a beneficial interest other than another derivative
financial instrument. SFAS No. 155 applies to all financial instruments
acquired or issued after the beginning of an entity's first fiscal year
beginning after September 15, 2006, with earlier application allowed. The
adoption of this statement did not have an effect on the Company's financial
position or results of operations.
F-17