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, 2006
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
(Expressed in Canadian Dollars)
Years Ended December 31
2006 2005 2004 2003 2002
----------- ---------- ---------- ---------- ----------
Net operating revenues $ 9,689 0 20,000 3,000 22,000
Loss from continued operations $ (37,147) (54,804) (39,742) (37,863) (35,264)
Income from discontinued
operations $ N/a N/a N/a N/a N/a
Net loss $ (37,147) (54,804) (39,742) (37,863) (35,264)
Income per share from continued
operations $ 0 0 0 0 0
Income per share from
discontinued operations $ 0 0 0 0 0
Income per share after
discontinued operations $ 0 0 0 0 0
Share capital per Canadian GAAP $ 13,649,333 13,499,333 13,265,283 13,265,283 13,265,283
Common shares issued 10,883,452 9,883,452 8,323,119 8,323,119 8,323,119
Weighted average shares
outstanding per Canadian GAAP 10,383,452 9,084,049 8,323,119 8,323,119 8,323,119
Total assets $ 443,765 218,438 53,870 49,070 157,186
Net assets (liabilities) $ 289,072 176,219 (3,027) 36,715 74,578
Convertible debentures(current
and long term portions) per
U.S. GAAP ) $ 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 $ 0.8818 0.8253 0.7683 0.7135 0.6368
3
Exchange rates (CDN$ to U.S.$)
for most recent six months Period High Period Low
----------- ----------
December 2006 $ 0.8700 0.8660
January 2007 $ 0.8524 0.8482
February 2007 $ 0.8559 0.8521
March 2007 $ 0.8576 0.8541
April 2007 $ 0.8834 0.8794
May 2007 $ 0.9150 0.9107
Exchange rate (CDN$ to U.S.$)
June 26, 2007 $ 0.9349
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.
4
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.
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 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.
5
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
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
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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.
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.
7
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
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
8
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
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
9
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.
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
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.
10
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.
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.
Subsequent to the end of the first quarter of 2007, 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 7, 2007 - an extension of six months.
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
11
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.
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 $9000.00 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; 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 just
completed quarter, 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.
12
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.
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
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.
13
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 quarter 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 7, 2007 - an
extension of 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
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, 2006
consolidated financial statements have been prepared in accordance with Canadian
generally accepted accounting principles.
As at December 31, 2006, the Company had accumulated losses totaling $13,413,605
and a working capital surplus of $31,602. 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, 2006 the Company had cash and term deposits of $105,504 and a
working capital surplus of $31,602.
14
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, there are no trends that could be expected
to impact results.
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, 2006.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to the Company.
E. OFF-BALANCE SHEET ARRANGEMENTS
Not applicable
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.
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) 43 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.
15
Martin Schultz 63 Director and Secretary since March 20,
Vancouver, B.C. 1990; Self employed Secretary and
Director corporate development advisor
for over 10 years.
John Stanton
Queensburg, New York 61 Director since November 15, 1990; Self
Director employed pharmacist
Edward Dolejsi 62 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) 71 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,
2006, 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, 2006, 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.
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.
16
D. EMPLOYEES.
Effective at December 31, 2006 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,
2006. 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, 2006 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,
2006 there were 10,883,452 common shares issued and outstanding. Each of the
listed persons may be reached at the Company's head offices.
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
17
(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, 2006, directors, officers and
companies controlled by them have been engaged in the following transactions
with the Company:
During the year ended December 31, 2006, a company in which a director has an
interest charged the Company $24,000 (2005: $24,000, 2004: $38,000) for rent and
management fees. The unpaid portion of these amounts, plus additional advances
and other amounts due to directors, aggregating $72,350 (2005: $34,810, 2004:
$55,395) was included in accounts payable and accrued liabilities at December
31, 2006.
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.
A Company in which a director has an interest was charged $nil (2005: $nil,
2004: $20,000) for consulting fees during the year ended December 31, 2006. The
unpaid portion of these amounts, aggregating $nil (2005: $nil, 2004: $20,000,)
was included in 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.
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
18
B. SIGNIFICANT CHANGES
The Company is not aware of any significant change since December 31, 2006 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
Quarter ended December 31, 2006 $0.25 $0.10
Quarter ended March 31, 2007 $0.30 $0.05
Month ended December 31, 2006 $0.25 $0.10
Month ended January 31, 2007 $0.30 $0.05
Month ended February 28, 2007 $0.22 $0.22
Month ended March 31, 2007 $0.22 $0.20
Month ended April 30, 2007 $0.20 $0.20
Month ended May 31, 2007 $0.20 $0.20
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
19
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.
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,
20
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
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
21
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.
22
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.
23
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
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
24
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
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
25
ITEM 15. CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
Our President and Acting Chief Accounting Officer, performing the function of
principal executive and principal financial officer, respectively, have
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rule 13a-15(e) under the Securities
Exchange Act of 1934, as amended) as of the end of the fiscal year covered by
this annual report on Form 20-F (in accordance with Rule 13a-15(b) under the
Securities Exchange Act of 1934, as amended). Based on this evaluation, our
President and Acting Chief Accounting Officer have concluded that these
disclosure controls and procedures are effective and designed to ensure that the
information required to be disclosed in our reports filed or submitted under the
Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
and reported within the requisite time periods.
MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our President and Acting Chief Accounting Officer, performing the function of
principal executive and principal financial officer, respectively, have
evaluated the effectiveness of the design and operation of our internal control
over financial reporting (as defined in Rule 13a-15(f) under the Securities
Exchange Act of 1934, as amended) as of the end of the fiscal year covered by
this annual report on Form 20-F. Based on this evaluation, our President and
Acting Chief Accounting Officer have concluded that these internal controls over
financial reporting are effective and provide reasonable assurance regarding the
reliability of our financial reporting and the preparation of our financial
statements for external purposes in accordance with generally accepted
accounting principles.
During the course of their evaluation, our President and Acting Chief Accounting
Officer did not discover any fraud involving management or any other personnel
who play a significant role in our disclosure controls and procedures or
internal controls over financial reporting. Furthermore, because there were no
significant deficiencies and/or material weaknesses discovered no remedial
measures were necessary or taken during the period covered by this report to
correct any such deficiencies.
ATTESTATION REPORT OF THE REGISTERED PUBLIC ACCOUNTING FIRM
Not applicable.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
No changes in our disclosure controls and procedures or other factors have
occurred during the fiscal year covered by this annual report on Form 20-F that
would materially affect or be reasonably likely to materially affect our
disclosure controls and procedures.
26
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 $13,000 for audit fees in the year ended December 31, 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 did not provide the Corporation with any assurance and related services in
the years ended December 31, 2006, 2005 and 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,
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, 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
may be provided by our auditors. The dual objectives of these policies are to
27
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, 2006 and 2005.
Consolidated statements of operations and deficit for the years ended
December 31, 2006, 2005 and 2004.
Consolidated statements of cash flows for the years ended December 31,
2006, 2005 and 2004.
Notes to the consolidated financial statements.
ITEM 18. FINANCIAL STATEMENTS
Not applicable. See "Item 17. Financial Statements" above.
28
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
99.1 Certificate of Name Change from International Gemini Technology Inc. to
Widescope Resources Inc.
99.2 Lock-up Agreement
99.3 Share Exchange Option Agreement
99.4 Share Exchange Option Agreement - Amendment
99.5 PFG Subscription Agreement
99.6 PFG Subscription Agreement - Amendment
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 28, 2007 By: /s/ Martin Schultz
-----------------------------------
Name: Martin Schultz
Title: Secretary and Director,
as duly authorized signatory
29
[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 Inc.
(formerly International Gemini Technology Inc.) as at December 31, 2006 and 2005
and the consolidated statements of operations and deficit and cash flows for
each of the three years in the period ended December 31, 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, 2006
and 2005 and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2006 in accordance with Canadian
generally accepted accounting principles.
"DMCL"
Dale Matheson Carr-Hilton LaBonte LLP
April 27, 2007 Chartered Accountants
Vancouver, Canada
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 consolidated financial statements. Our report to the shareholders
dated April 27, 2007 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.
"DMCL"
Dale Matheson Carr-Hilton LaBonte LLP
April 27, 2007 Chartered Accountants
Vancouver, Canada
F-1
WIDESCOPE RESOURCES INC.
(Formerly International Gemini Technology Inc.)
Consolidated Balance Sheets
--------------------------------------------------------------------------------
December 31, 2006 December 31, 2005
----------------- -----------------
ASSETS
Current assets
Cash $ 105,504 $ 128,126
Accounts receivable 3,524 312
------------ ------------
109,028 128,438
------------ ------------
Mineral properties (Note 3) 333,158 --
Equipment, net of amortization (Note 3) 1,579 --
Investment (Note 3) -- 90,000
------------ ------------
$ 443,765 $ 218,438
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 77,426 $ 42,219
------------ ------------
Non-controlling interest (Note 3) 77,267 --
------------ ------------
Shareholders' equity
Share capital - preferred (Note 5) 604,724 604,724
Share capital - common (Note 5) 13,044,609 12,894,609
Contributed surplus (Note 5) 53,344 53,344
Deficit (13,413,605) (13,376,458)
------------ ------------
289,072 176,219
------------ ------------
$ 443,765 $ 218,438
============ ============
Approved by the Board:
----------------------------------
Martin Schultz
----------------------------------
Douglas E. Ford
The accompanying notes are an integral part of these
consolidated financial statements.
F-2
WIDESCOPE RESOURCES INC.
(Formerly International Gemini Technology Inc.)
Consolidated Statements of Operations and Deficit
--------------------------------------------------------------------------------
Years Ended December 31,
2006 2005 2004
------------ ------------ ------------
Revenue
Interest income $ 689 $ -- $ --
Management fees (Note 4) 9,000 -- --
Consulting Fee (Note 4) -- -- 20,000
------------ ------------ ------------
9,689 -- 20,000
------------ ------------ ------------
Expenses
General and administrative 51,311 54,804 43,718
Loss on sale of investment -- -- 16,024
------------ ------------ ------------
Loss from operations (41,622) (54,804) (39,742)
Non-controlling interest (Note 3) 4,475 -- --
------------ ------------ ------------
Net loss (37,147) (54,804) (39,742)
Deficit, beginning of year (13,376,458) (13,321,654) (13,281,912)
------------ ------------ ------------
Deficit, end of year $(13,413,605) $(13,376,458) $(13,321,654)
============ ============ ============
Earnings per share - basic and diluted $ -- $ -- $ --
============ ============ ============
Weighted average number of common shares outstanding 10,383,452 9,084,049 8,323,119
============ ============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
WIDESCOPE RESOURCES INC.
(Formerly International Gemini Technology Inc.)
Consolidated Statements of Cash Flow
--------------------------------------------------------------------------------
Years Ended December 31,
2006 2005 2004
---------- ---------- ----------
OPERATING ACTIVITIES
Net loss $ (37,147) $ (54,804) $ (39,742)
Loss on sale of investment -- -- 16,024
Non cash Items:
Non-controlling interest in loss (4,475) -- --
Net change in working capital items:
Accounts receivable (3,920) 22,086 21,311
Accounts payable and accrued liabilities 20,664 (14,678) (44,542)
---------- ---------- ----------
Cash used in operations (24,878) (47,396) (487)
---------- ---------- ----------
INVESTING ACTIVITIES
Cash acquired on acquisition of PFG, net of
amounts (invested) 16,108 (90,000) --
Mineral property development costs (13,852) -- --
BWN sale proceeds -- 30,000 --
---------- ---------- ----------
Cash from (used in) investing activities 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 (22,622) 126,654 (487)
Cash position, beginning of year 128,126 1,472 1,959
---------- ---------- ----------
Cash position, end of year $ 105,504 $ 128,126 $ 1,472
========== ========== ==========
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.
(Formerly International Gemini Technology Inc.)
Notes to the Consolidated Financial Statements
DECEMBER 31, 2006
--------------------------------------------------------------------------------
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 financial
statements have been prepared under the assumption the Company is a going
concern. The Company had working capital of $31,602 at December 31, 2006
but 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 and pursuant to shareholder approval, 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 from an ore body. 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
These financial statements have been prepared in accordance with Canadian
generally accepted accounting principles ("Canadian GAAP"). Except as
indicated in note 7, they also comply, in all material respects, with
United States generally accepted accounting principles ("US GAAP").
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, estimated useful life of equipment
and taxes rates to calculate future income taxes.
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.
F-5
WIDESCOPE RESOURCES INC.
(Formerly International Gemini Technology Inc.)
Notes to the Consolidated Financial Statements
DECEMBER 31, 2006
--------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES CONT'D
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 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.
FINANCIAL INSTRUMENTS
The fair value of the Company's cash, accounts receivable, accounts
payable and accrued liabilities, and due to related parties were
determined by management to approximate their carrying values due to the
immediate or short-term maturity of these financial instruments.
Management does not believe the Company is exposed to significant credit,
currency, market or interest rate risks.
EQUIPMENT
Equipment is recorded at cost. Amortization is calculated using the 30%
declining balance annual rate, which is estimated to match the useful
lives of the assets.
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.
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 Canadian Institute of Chartered
Accountants (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.
F-6
WIDESCOPE RESOURCES INC.
(Formerly International Gemini Technology Inc.)
Notes to the Consolidated Financial Statements
DECEMBER 31, 2006
--------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES CONT'D
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.
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, 2006 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-7
WIDESCOPE RESOURCES INC.
(Formerly International Gemini Technology Inc.)
Notes to the Consolidated Financial Statements
DECEMBER 31, 2006
--------------------------------------------------------------------------------
3. ACQUISITION OF 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
========
4. RELATED PARTY TRANSACTIONS
During the year ended December 31, 2006, a company in which a director has
an interest charged the Company $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 $72,350 (2005:
$34,810) is included in accounts payable and accrued liabilities at
December 31, 2006.
The Company charged $9,000 (2005: $nil) 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. Amounts due to related parties are
unsecured, non-interest bearing and without specific terms of repayment.
F-8
WIDESCOPE RESOURCES INC.
(Formerly International Gemini Technology Inc.)
Notes to the Consolidated Financial Statements
DECEMBER 31, 2006
--------------------------------------------------------------------------------
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
2006 2005
------------------------- -------------------------
Shares $ Shares $
---------- ---------- ---------- ----------
Balance, beginning of year 9,883,452 12,894,609 8,323,119 12,660,559
Issued via private placement -- -- 1,560,333 234,050
Issued on acquisition of PFG 1,000,000 150,000 -- --
---------- ---------- ---------- ----------
Balance, December 31 10,883,452 13,044,609 9,883,452 12,894,609
========== ========== ========== ==========
During 2005, the Company completed non-brokered private placement by
issuing 1,560,333 units at $0.15 per unit for proceeds of $234,050. Each
unit consists of one common share and a share purchase warrant to acquire
an additional common share at $0.18 per share by June 7, 2007.
c) Preferred shares
2006 2005
------------------------- -------------------------
Shares $ Shares $
---------- ---------- ---------- ----------
Balance, beginning and end of year 604,724 604,724 604,724 604,724
======= ======= ======= =======
d) Warrants
2006 2005
--------- ---------
Balance, beginning of year 1,560,333 --
Issued -- 1,560,333
--------- ---------
Balance, December 31 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 7, 2007.
e) Stock Options
As of December 31, 2006 and 2005, there were no stock options outstanding.
F-9
WIDESCOPE RESOURCES INC.
(Formerly International Gemini Technology Inc.)
Notes to the Consolidated Financial Statements
DECEMBER 31, 2006
--------------------------------------------------------------------------------
6. INCOME TAXES
A reconciliation of income taxes at statutory rates with the reported
taxes is as follows:
2006 2005
-------- --------
Loss before income taxes $ 37,147 $ 54,804
======== ========
Income tax recovery at statutory rates 34.1% $ 12,667 $ 19,072
Unrecognized benefit of non-capital losses (12,667) (19,072)
-------- --------
Total income taxes $ -- $ --
======== ========
The significant components of the Company's future income tax assets are
as follows:
2006 2005
----------- -----------
Future income tax assets:
Non-capital loss carry forward benefit $ 74,481 $ 61,814
Capital losses carried forward 1,506 1,506
Research and development expenses carried forward -- 1,220,128
Valuation allowance (75,987) (1,283,448)
----------- -----------
Net future income tax asset $ -- $ --
=========== ===========
The Company has approximately $212,000 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.
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:
December 31, December 31,
2006 2005
--------- ---------
Consolidated Balance Sheets
Total assets under Canadian GAAP $ 443,765 $ 218,438
(a) Mineral property exploration and acquisition
costs expensed under US GAAP (333,158) --
--------- ---------
Total assets under US GAAP $ 110,607 $ 218,438
========= =========
F-10
WIDESCOPE RESOURCES INC.
(Formerly International Gemini Technology Inc.)
Notes to the Consolidated Financial Statements
DECEMBER 31, 2006
--------------------------------------------------------------------------------
7. RECONCILIATION BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES CONT'D
Total liabilities under Canadian and US GAAP $ 77,426 $ 42,219
========= =========
Total shareholders' equity (deficit) under Canadian GAAP $ 289,072 $ 176,219
(a) Mineral property exploration and acquisition
costs expensed under US GAAP (333,158) --
--------- ---------
Total shareholders' equity (deficit) under US GAAP $ (44,086) $ 176,219
========= =========
Year ended Year ended Year ended
December 31, December 31, December 31,
2006 2005 2004
--------- --------- ---------
Consolidated Statements of Operations and Deficit
Net income (loss) under Canadian GAAP $ (37,147) $ (54,804) $ (39,863)
(a) Mineral property exploration and
acquisition costs expensed under US GAAP (333,158) -- --
--------- --------- ---------
Net loss under US GAAP $(370,305) $ (54,804) $ (39,863)
========= ========= =========
Basic and diluted loss per share under US GAAP $ (0.04) $ (0.01) $ (0.01)
========= ========= =========
Year ended Year ended Year ended
December 31, December 31, December 31,
2006 2005 2004
--------- --------- ---------
Consolidated Statements of Cash Flows
Net cash used in operations under Canadian GAAP $(24,878) $(47,396) $ (487)
(b) Mineral property exploration costs incurred (13,852) -- --
-------- -------- --------
Net cash used in operations under US GAAP $(38,730) $(47,396) $ (487)
======== ======== ========
Net cash provided by (used in) investing activities
under Canadian GAAP $ 2,256 $(60,000) $ --
(b) Mineral property exploration costs incurred 13,852 -- --
-------- -------- --------
Net cash provided by (used in) investing activities
under US GAAP $ 16,108 $(60,000) $ --
======== ======== ========
F-11
WIDESCOPE RESOURCES INC.
(Formerly International Gemini Technology Inc.)
Notes to the Consolidated Financial Statements
DECEMBER 31, 2006
--------------------------------------------------------------------------------
7. RECONCILIATION BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES CONT'D
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).
(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 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 that begins after September 15, 2006, with earlier
application allowed The adoption of this statement is not expected to
have an effect on the Company's future reported financial position or
results of operations.
F-12
WIDESCOPE RESOURCES INC.
(Formerly International Gemini Technology Inc.)
Notes to the Consolidated Financial Statements
DECEMBER 31, 2006
--------------------------------------------------------------------------------
7. RECONCILIATION BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES CONT'D
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 is not expected to have an effect on the
Company's future reported 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 impact on its financial position or results
of operations.
In September 2006, the FASB issued SFAS No. 158, "Employers'
Accounting for Defined Benefit Pension and Other Postretirement
Plans." This Statement requires an employer to recognize the over
funded or under funded status of a defined benefit post retirement
plan (other than a multiemployer plan) as an asset or liability in its
statement of financial position, and to recognize changes in that
funded status in the year in which the changes occur through
comprehensive income. SFAS No. 158 is effective for fiscal years
ending after December 15, 2006. The adoption of this statement had no
effect on the Company's reported financial position or results of
operations.
In September 2006, the SEC issued Staff Accounting Bulletin ("SAB")
No. 108, "Considering the Effects of Prior Year Misstatements when
Quantifying Misstatements in Current Year Financial Statements." SAB
No. 108 addresses how the effects of prior year uncorrected
misstatements should be considered when quantifying misstatements in
current year financial statements. SAB No. 108 requires companies to
quantify misstatements using a balance sheet and income statement
approach and to evaluate whether either approach results in
quantifying an error that is material in light of relevant
quantitative and qualitative factors. SAB No. 108 is effective for
periods ending after November 15, 2006. The adoption of this standard
had no effect on the Company's reported financial position or results
of operations.
F-13
WIDESCOPE RESOURCES INC.
(Formerly International Gemini Technology Inc.)
Notes to the Consolidated Financial Statements
DECEMBER 31, 2006
--------------------------------------------------------------------------------
7. RECONCILIATION BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES CONT'D
(D) RECENT ACCOUNTING PRONOUNCEMENTS - CANADIAN GAAP
The Canadian Institute of Chartered Accountants ("CICA") has issued
three new accounting standards related to financial instruments:
Section 3855, "FINANCIAL INSTRUMENTS - RECOGNITION AND MEASUREMENT",
Section 3865, "HEDGES", and Section 1530, "COMPREHENSIVE INCOME".
These new standards apply to the Company beginning July 1, 2007.
Section 3855 expands on Handbook Section 3860 "FINANCIAL INSTRUMENTS -
DISCLOSURE AND Presentation", by prescribing when a financial
instrument is to be recognized on the balance sheet and at what
amount. It also specifies how financial instrument gains and losses
are to be presented. Section 3865 provides additional accounting
treatments to Section 3855 for entities that choose to designate
qualifying transactions as hedges for accounting purposes. It replaces
and expands on AcG-13, "HEDGING RELATIONSHIPS", and the hedging
guidance in Section 1650, "FOREIGN CURRENCY TRANSLATION", by
specifying how hedge accounting is applied and the required
disclosures. Section 1530 introduces a new requirement to present
certain revenues, expenses, gains and losses, that otherwise would not
be immediately recorded in income, in a comprehensive income statement
with the same prominence as other statements that constitute a
complete set of financial statements. The Company is still assessing
the implications of these new standards, but it may require the
recognition of certain financial instruments that would previously not
have been recognized. Also, for the interim period commencing January
1, 2007, the Company will be required to present a new financial
statement entitled "COMPREHENSIVE INCOME".
The CICA has issued Section 3251, "EQUITY". The Section replaces
Section 3250, "SURPLUS" and incorporates amendments resulting from the
issuance of Section 1530, "COMPREHENSIVE INCOME". The Section becomes
effective on January 1, 2007 and, as noted previously, the Company
will be required to present a new financial statement entitled
"COMPREHENSIVE INCOME".
The CICA has issued two additional accounting standards related to
financial instruments: Section 3862, "FINANCIAL INSTRUMENTS -
DISCLOSURES", and Section 3863, "FINANCIAL INSTRUMENTS -
PRESENTATION". These standards enhance the existing disclosure
requirements in previously issued Section 3861, "FINANCIAL INSTRUMENTS
- DISCLOSURE AND PRESENTATION". Section 3862 places greater emphasis
on disclosures about risks related to recognized and unrecognized
financial instruments and how those risks are managed. Section 3863
carries forward the same presentation standards as Section 3861. Both
Sections become effective for the Company on January 1, 2008 and it is
not expected that they will have a significant impact.
The CICA has released Section 1535, "CAPITAL DISCLOSURES". The Section
requires an entity to disclose information about its objectives,
policies and processes for managing capital and its compliance with
any externally imposed capital requirements. The Section becomes
effective January 1, 2008 and will require the Company to expand its
disclosure in this area.
F-14