Jetcom Inc. (the "Company") (TSX VENTURE: JTM) announced today that
the Ontario Securities Commission (OSC) has completed its
continuous disclosure review of the company and of its financial
statements for the periods up to and including March 31, 2008. The
Company has now restated its 2005, 2006 and 2007 annual financial
statements, and its interim statements for the period ended March
31, 2008, and has filed those restated financial statements
together with its revised Management Discussion & Analysis.
Copies of these documents have been posted to www.sedar.com.
The financial statements were restated to address prior period
errors (See "Change in Accounting Policies including Initial
Adoption" and "Amendments to Financial Statements and MD&A -
Prior Period Errors" below) and have been presented as a three year
comparative (2005, 2006, and 2007).
The MD&A was revised to reflect the changes to the financial
statements, and to expand and rectify the overall presentation and
disclosure contained therein.
Change in Accounting Policies including Initial Adoption
(a) Financial Instruments
Effective January 1, 2006, the Company adopted the new
recommendations of The Canadian Institute of Chartered Accountants'
("CICA") Handbook Section 1530, Comprehensive Income; Section 3251,
Equity; Section 3855, Financial Instruments - Recognition and
Measurement; and Section 3865, Hedges, retroactively without
restatement. These new Handbook Sections, which apply to fiscal
years beginning on or after October 1, 2006, provide requirements
for the recognition and measurement of financial instruments and on
the use of hedge accounting. Section 1530 establishes standards for
reporting and presenting comprehensive income, which is defined as
the change in equity from transactions and other events from
non-owner sources. Other comprehensive income refers to items
recognized in comprehensive income that are excluded from net
income calculated in accordance with generally accepted accounting
principles. Under the new standards, policies followed for periods
prior to the effective date generally are not reversed and
therefore, the comparative figures have not been restated. The
adoption of these Handbook Sections had no impact on opening
deficit.
Under Section 3855, financial instruments must be classified
into one of these five categories: held-for-trading,
held-to-maturity, loans and receivables, available-for-sale
financial assets or other financial liabilities. All financial
instruments, including derivatives, are measured in the balance
sheet at fair value except for loans and receivables, held-to
maturity investments and other financial liabilities which are
measured at amortized cost. Subsequent measurement and changes in
fair value will depend on their initial classification, as follows:
held-for-trading financial assets are measured at fair value and
changes in fair value are recognized in net income;
available-for-sale financial instruments are measured at fair value
with changes in fair value recorded in other comprehensive income
until the investment is derecognized or impaired at which time the
amounts would be recorded in net income.
Upon adoption of these new standards, the Company designated its
cash and cash equivalents as held-for-trading, which are measured
at fair value. Accounts receivable are classified as loans and
receivables, which are measured at amortized cost. Accounts
payable, accrued liabilities and debenture, are classified as other
financial liabilities. The Company had neither available-for-sale,
nor held-to-maturity instruments during the year ended December 31,
2007.
The Company had no "other comprehensive income or loss"
transactions during the year ended December 31, 2007 and no opening
or closing balances for accumulated other comprehensive income or
loss.
The Company reviewed significant contracts entered into on or
after January 1, 2003 and determined that there were no significant
embedded derivatives or non-financial derivatives that require
separate fair value recognition on the consolidated balance
sheet.
(b) Non-monetary Transactions
Effective January 1, 2006, the Company adopted the new
recommendations of The Canadian Institute of Chartered Accountants'
("CICA") Handbook Section 3831, Non-monetary Transactions
prospectively. This standard requires all non-monetary transaction
be measured at their fair value unless they meet one of the four
criteria. Commercial substance replaces culmination of the earnings
process as the test for fair value measurement. A transaction has
commercial substance if it causes an identifiable and measurable
change in the economic circumstances of the entity. The adoption of
this standard had no impact on the Company's consolidated financial
statements.
(c) Correction of Errors in Prior Period Financial
Statements
The company stated that in 2005 there was a change its
accounting policy with respect to Netstar Networks Inc. from being
consolidated to being recorded on a cost basis due to a share
transaction in Netstar Networks Inc. that resulted in Jetcom Inc.
holding less than 10% of the stock of the former consolidated
subsidiary. The errors that were made were as follows:
Jetcom Inc. made an error back in the 2003 financial statements
(upon acquisition of Netstar) by consolidating Netstar Networks
Inc. instead of recording its interest at cost. As at year end
2003, Jetcom had held shares entitling it to 80% of distributions
to shareholders, but which represented less than 10% of the voting
shares in Netstar Networks Inc. As a result the following amounts
of Netstar Networks expenses were consolidated with Jetcom Inc. in
error (2005 - $1,144,547 ), (2004 - $1,642,094 ) and (2003 - $NIL)
for a total of $2,786,641.
The original correction of the error was recorded as a gain on
the income statement in the 2005 financial statement representing
the expenses consolidated in error, however in 2007 it became clear
that the treatment of this correction was in fact incorrect itself.
The revised 2005 financial statements reflect the reversal of the
gain of $2,786,641 and an adjustment to the retained earnings
representing the correction of an error in the same amount. That
error being, the incorrect consolidation/inclusion of Netstar
expenses in the consolidated financial statements of Jetcom Inc. In
addition, this also resulted in a correction in the earning per
share calculation from $0.04 per share to ($0.04) per share.
Therefore in the revised financial statements, we have corrected
this error with the following adjustment 1) reversing the gain
recorded in error in the 2005 statement of operations, and 2)
adding back the sum of Netstar expenses claimed in the consolidated
entity from 2003 to 2005 as an error adjustment in the 2005
statement of retained earnings. As per CICA Handbook Section
1506.05(c) ... "Such errors include the effects of mathematical
mistakes, mistakes in applying accounting policies, oversights or
misinterpretations of facts, and fraud." CICA HB Section 1506.42
... "An entity shall correct material prior period errors
retrospectively in the first set of financial statements completed
after their discovery by: (a) restating the comparative amounts for
the prior period(s) presented in which the error occurred; or (b)
if the error occurred before the earliest prior period presented,
restating the opening balances of assets, liabilities and equity
for the earliest prior period presented."
(d) Netstar Networks Inc. and Online Hearing Inc.
With the benefit of hindsight, for the year ended December 31,
2006, management decided to write off Jetcom's investments in
Online Hearing Inc. and in Netstar Networks Inc. (related companies
to Jetcom as they all share a common president and director) after
determining that the company will receive no future benefit from
these investments and that the related companies themselves have a
nominal value.
The change reflected was as follows:
2006 2005
--------- ---------
Investment in Online Hearing Inc. - $ 120,000
Investment in Netstar Networks Inc. - $ 60,000
--------- ---------
- $180,000
--------- ---------
--------- ---------
Factors such as continued economic growth in the 2004 - 2006
years, led management to believe it would be able to develop and
expand these investments in 2004, 2005. However, in the fiscal year
2006, management's direction changed as well did the opinion on the
future recovery and/or benefit of the investments.
In 2005, Online Hearing had become a holding company, holding
shares in a US company that we thought had a reasonable opportunity
to commercialize the hearing technology and to generate some
liquidity for shareholders. Consequently, we had adopted a wait and
see approach to the value of our investment. By the time of our
2006 year end financials, we had observed negative market trends in
the over the counter US micro cap markets, and no longer believed
that a timely return in Online Hearing would be achieved.
Consequently, we wrote down our investment to zero in 2006.
In 2005, Netstar had been seeking to build an online sales
channel for a new VOIP product line and had sought to take a piece
of the rural dial-up internet market. Consequently, we had adopted
a wait and see approach to the value of our investment. These
markets proved more difficult to master, with extensive online
fraud and chargebacks, substantially different from what we would
have expected. By the time of our 2006 year end financials, we had
observed negative market trends in the over the counter US micro
cap markets, and no longer believed that a timely return in Netstar
would be achieved. Consequently, we wrote down our investment to
zero in 2006.
Amendments to Financial Statements and MD&A - Prior Period
Errors.
The Company has restated its Financial Statements and its
Management Discussion & Analysis reporting for the fiscal years
2005 and 2006 and 2007, and interim 2008. A new section has been
added to the Financial Statements entitled "Prior Period Errors",
which sets out the errors that were made, and the actions taken to
rectify those errors. These restatements and amendments address the
following:
(a) Write-off of our interests in Online Hearing Inc. and
Netstar Networks Inc. as at December 31 2006, substantially as
disclosed herein.
(b) The Company corrected errors in its method of accounting for
its interest in Netstar Networks Inc. Jetcom Inc. first made an
error back in the 2003 financial statements (upon acquisition of
Netstar) by consolidating Netstar Networks Inc. instead of
recording its interest at cost. As at year end 2003, Jetcom had
held shares entitling it to 80% of distributions to shareholders,
but which represented less than 10% of the voting shares in Netstar
Networks Inc. As a result the following amounts of Netstar Networks
expenses were consolidated with Jetcom Inc. in error (2005 -
$1,144,547 ), (2004 - $1,642,094 ) and (2003 - $NIL) for a total of
$2,786,641. The original correction of the error was recorded as a
gain on the income statement in the 2005 financial statement
representing the expenses consolidated in error, however in 2007 it
became clear that the treatment of this correction was in fact
incorrect itself. The revised 2005 financial statements reflect the
reversal of the gain of $2,786,641 and an adjustment to the
retained earnings representing the correction of an error in the
same amount. That error being, the incorrect
consolidation/inclusion of Netstar expenses in the consolidated
financial statements of Jetcom Inc. In addition, this also resulted
in a correction in the earning per share calculation from $0.04 per
share to ($0.04) per share. Therefore in the revised financial
statements, we have corrected this error with the following
adjustment 1) reversing the gain recorded in error in the 2005
statement of operations, and 2) adding back the sum of Netstar
expenses claimed in the consolidated entity from 2003 to 2005 as an
error adjustment in the 2005 statement of retained earnings. As per
CICA Handbook Section 1506.05(c) ... "Such errors include the
effects of mathematical mistakes, mistakes in applying accounting
policies, oversights or misinterpretations of facts, and fraud."
CICA HB Section 1506.42 ... "An entity shall correct material prior
period errors retrospectively in the first set of financial
statements completed after their discovery by: (a) restating the
comparative amounts for the prior period(s) presented in which the
error occurred; or (b) if the error occurred before the earliest
prior period presented, restating the opening balances of assets,
liabilities and equity for the earliest prior period
presented."
(c) The Company has expanded its disclosure as to its position
respecting liability for Part XIII tax imposed on a dormant
subsidiary.
(d) Additional and modified disclosure was made of related
parties and related party transactions. A.G. Dragone is the
Chairman and President of Netstar Networks and Online Hearing
Inc.
(e) An error in stock option expensing has been corrected. The
Company accounts for its stock option plan using the fair value
method. The fair value of each stock option granted is estimated on
the date of the grant using the Black-Scholes option pricing model
and expensed over the service period which equals the vesting
period. As initially filed, Jetcom Inc. allocated a cost of Nil to
stock option expense for options granted in 2006. The stock options
had an exercise price of $0.10, and were issued at a time when the
stock price was $0.035. In error, a stock option expense of Nil was
recorded. Jetcom also stated, in error, in the notes to the
original 2006 financial statements that the average grant date fair
value of options granted during the year was $0.10. This reference
to $0.10 was a reference to the exercise price of $0.10 and
incorrectly stated as 'fair value'. The error has been corrected in
Note 8 to the revised 2005, 2006 and 2007 financial statements,
ascribing a value of $0.02 to each option. In the revised 2005,
2006 and 2007 financial statements, the error has also been
corrected by adding to the administrative expenses an amount
equaling stock option expense of $80,000 ($0.02/share) over 18
months commencing with the quarter ended December 31, 2006 (2006 -
$13,333; 2007 - $53,333), and this stock option expense is recorded
as an expense in the Consolidated Statements of Operations.
(f) Additional disclosure about financial condition, results of
operations, and cash flows is included.
(g) We have included additional explanation as to our liquidity
and capital resources.
(h) Jetcom Inc. has revised the disclosure of the adoption of
the new financial instruments standards and the impact of the
adoption on the financial statements. The adoption of the new
standards will not affect the financial statements. The revised
note is as follows:
Financial Instruments
(a) Financial Instruments
Effective January 1, 2006, the Company adopted the new
recommendations of The Canadian Institute of Chartered Accountants'
("CICA") Handbook Section 1530, Comprehensive Income; Section 3251,
Equity; Section 3855, Financial Instruments - Recognition and
Measurement; and Section 3865, Hedges, retroactively without
restatement. These new Handbook Sections, which apply to fiscal
years beginning on or after October 1, 2006, provide requirements
for the recognition and measurement of financial instruments and on
the use of hedge accounting. Section 1530 establishes standards for
reporting and presenting comprehensive income, which is defined as
the change in equity from transactions and other events from
non-owner sources. Other comprehensive income refers to items
recognized in comprehensive income that are excluded from net
income calculated in accordance with generally accepted accounting
principles. Under the new standards, policies followed for periods
prior to the effective date generally are not reversed and
therefore, the comparative figures have not been restated. The
adoption of these Handbook Sections had no impact on opening
deficit.
Under Section 3855, financial instruments must be classified
into one of these five categories: held-for-trading,
held-to-maturity, loans and receivables, available-for-sale
financial assets or other financial liabilities. All financial
instruments, including derivatives, are measured in the balance
sheet at fair value except for loans and receivables, held-to
maturity investments and other financial liabilities which are
measured at amortized cost. Subsequent measurement and changes in
fair value will depend on their initial classification, as follows:
held-for-trading financial assets are measured at fair value and
changes in fair value are recognized in net income;
available-for-sale financial instruments are measured at fair value
with changes in fair value recorded in other comprehensive income
until the investment is derecognized or impaired at which time the
amounts would be recorded in net income.
Upon adoption of these new standards, the Company designated its
cash and cash equivalents as held-for-trading, which are measured
at fair value. Accounts receivable are classified as loans and
receivables, which are measured at amortized cost. Accounts
payable, accrued liabilities and debenture, are classified as other
financial liabilities. The Company had neither available-for-sale,
nor held-to-maturity instruments during the year ended December 31,
2007.
The Company had no "other comprehensive income or loss"
transactions during the year ended December 31, 2007 and no opening
or closing balances for accumulated other comprehensive income or
loss.
The Company reviewed significant contracts entered into on or
after January 1, 2003 and determined that there were no significant
embedded derivatives or non-financial derivatives that require
separate fair value recognition on the consolidated balance
sheet.
(b) Non-monetary Transactions
Effective January 1, 2006, the Company adopted the new
recommendations of The Canadian Institute of Chartered Accountants'
("CICA") Handbook Section 3831, Non-monetary Transactions
prospectively. This standard requires all non-monetary transaction
be measured at their fair value unless they meet one of the four
criteria. Commercial substance replaces culmination of the earnings
process as the test for fair value measurement. A transaction has
commercial substance if it causes an identifiable and measurable
change in the economic circumstances of the entity. The adoption of
this standard had no impact on the Company's consolidated financial
statements.
Press Release Technical Disclosure
The revised MD&A for the years ended December 31, 2005, 2006
and 2007 also contain disclosure as to proposed transactions
involving Jetcom's Yellowcake Resources Inc. subsidiary that had
previously been disclosed in press releases filed in 2006 and 2007.
The disclosure in the MD&A originally filed for the year ended
December 31, 2007 had provided additional and modified disclosure
as to those proposed transactions, to address non-compliance with
National Instrument 43-101 by our original press releases filed
earlier.
In the originally filed 2007 MD&A, and in the revised
MD&A, disclosure from those press releases was amended to
clarify that the only volume and grade data that we have obtained
is historical in nature and is not National Instrument 43-101
compliant. In addition, required risk warnings were added, and the
source and reliability of disclosed information identified. For
full text of the disclosure, we refer you to our MD&A posted at
www.sedar.com.
November 9, 2006 and November 15, 2006 Press Releases
On November 9, 2006 and November 15, 2006, Jetcom filed press
releases disclosing that Jetcom's wholly owned subsidiary,
Yellowcake Resources Inc., entered into an agreement with Robert
Rosenblat, a mining consultant with over 50 years experience,
whereby Yellowcake has been granted an option to purchase a 100%
interest in 23 uranium claims totaling 3100 acres in the Campbell's
Bay area of Quebec. The total purchase price is payable in cash,
shares and a work commitment over the next four (4) years. The
contract terms required the Company to pay Mr. Rosenblat, as
follows: in the first year the Company will pay Mr. Rosenblat
$20,000 plus 1,000,000 common shares and a work commitment of
$60,000; in the next 12 months the Company is to pay $25,000 plus
1,000,000 shares and a work commitment of $80,000; within 24 months
the Company will pay $30,000 plus 1,000,000 shares with a work
commitment of $100,000; in the final 36 months the Company will pay
Mr. Rosenblat $35,000 plus 1,000,000 with a work commitment of
$120,000. This contract is subject to due diligence and to TSX
Venture Exchange approval, and has been in abeyance pending such
approval.
In our MD&A we advised that historical field work, analysis
and reporting in the 1950s were not completed in contemplation of
the higher standards of disclosure and rigour required in today's
public markets. Our Qualified Person has not conducted any site
visits or independent exploration work in respect of these
properties. He has not tested the work, or the assumptions of the
persons whose reports are referenced herein. There is no assurance
that further or future exploration work would convert any tonnage
and grades to Mineral Resources. The historical work referenced in
our MD&A or this press release, has not been validated by the
company or Michel Boily, the Qualified Person for the technical
content of this disclosure.
In our MD&A we attributed the data we presented to historic
reports (Leblanc (1954; GM 02710-B; D.M. Shaw, 1958 report entitled
Radioactive Mineral Occurrences of the Province of Quebec (RG-080)
issued for Calumet Uranium Mines Ltd.; M. Tiphane in a 1954 report
(GM 02975-D), Calumet Uranium Mines Ltd., Progress Report and
further 1955 and 1956 reports by Tiphane) from which they were
derived. We noted that we and our Qualified Person are unable to
verify the validity of any of the estimates or any of the data, and
warned that the data contained in the referenced Quebec government
files (cogite 31F15 - 0026) and reported in Albarmont Inc's 1983
annual report was identified by Tiphane as speculation, and then
repeated, and we will not rely on it. All tonnage and grading
estimates we viewed from these prior reports are non NI 43-101
compliant and Jetcom Inc. will diligently verify these assertions
during its exploration campaign should this transaction be
completed. We remind the reader that there is no assurance that
further or future exploration work would convert any tonnage and
grades to Mineral Resources and that the information presented is
not necessarily indicative of the mineralization on the Yellowcake
property.
Jetcom also advises in its MD&A that most of the results
stated above are from property held by third parties that
Yellowcake will not be acquiring, the Qualified Person is not able
to independently verify this information, and the information
stated is not necessarily indicative of the nature, grade or extent
of the mineralization on the Yellowcake properties.
April 13, 2007 Press Release
On April 13, 2007, Jetcom announced that it had signed an option
agreement to acquire 6 mining claims in the Lac a David, Saguenay
area of Quebec located in the township of Dumas. The Company has
been granted the exclusive and irrevocable option to purchase a
100% interest in the claims.
We confirmed in our press release that the technical and
exploration information in our disclosure was reviewed and approved
by Edwin Gaucher, P.Ing., Ph.D. in his capacity as a Qualified
Person (Q.P.). Mr. Gaucher examined a report by Virginia Mines,
written in January 2003 by Mathieu Savard, today an experienced
geologist still working for Virginia Mines. Based on his
examination Mr. Gaucher reports the following: "The report has been
submitted to the MRN-Geoinformation and carried the number GM
60044. The report covers a large area which includes a group of 6
claims registered in the name of Nicolas Lavoie. The claims,
numbered CDC1012416 to 1012421, are renewed until 2008.In the
middle of claim 1012422, the above report describes the works
completed by Virginia on a PGM showing previously discovered by a
prospector. Five parallel trenches separated by some 25 meters were
dug by a power shovel. Altered pyroxenite encountered in the three
middle trenches were channel sampled. Three intervals in the middle
trench over a distance of 14 meters assayed 2.12 g/t PGM and gold
over 7.55 meters, 1.08 g/t PGM and gold over 3.25 meters. Smaller
values in the two adjoining trenches suggest a lateral extension of
the favourable horizon. The assays were done by fusion by Chimitec
Bondar Clegg, a reputable Canadian laboratory. The average grade in
the middle trench is quite reliable, as the content of Au, Pt and
Pd is reasonably uniform grade in the 15 individual one-meter wide
channel samples assayed. The examination of this showing was
perhaps interrupted by Virginia, as no other occurrence of the
favourable pyroxenite was discovered neither in the last two
trenches nor in a large area around the showing. Such a decision
was in my opinion perhaps premature: such a valid showing should be
further stripped, trenched at the right angle to the existing ones.
Then, a few DDH should check the possible vertical extent of the
mineralization." The total purchase price is payable in cash,
shares and a work commitment over the next four (4) years. Payment
of $1,000 upon signing. An additional payment of $6,000 in cash by
May 15, 2007 plus 50,000 common shares of Jetcom. An additional
payment of $12,000 in cash by May 15, 2008 plus 50,000 shares. An
additional payment of $18,000 in cash by May 15, 2009 plus 50,000
shares and an additional payment of $24,000 in cash plus 50,000
shares by May 15, 2010.The work commitment is as follows:
Completion of exploration work in the amount of $18,000 by May 15,
2008. In addition, Completion of exploration work in the amount of
$30,000 by May 15, 2009. In addition, Completion of exploration
work in the amount of $36,000 by May 15, 2010 and completion of
exploration work in the amount of $48,000 by May 15, 2011.
In the MD&A and in this press release, Jetcom advises that
the Qualified Person has not independently verified the information
he reviewed, and the information stated is not necessarily
indicative of the nature, grade or extent of the mineralization on
the Yellowcake properties.
Completion of the transaction is subject to a number of
conditions, including Exchange acceptance and disinterested
Shareholder approval. The transaction cannot close until the
required Shareholder. There can be approval is obtained no
assurance that the transaction will be completed as proposed or at
all.
July 10, 2007 Press Release
On July 10, 2007, the company issued a statement concerning
certain uranium exploration property option agreements entered into
by Jetcom's wholly owned subsidiary, Yellowcake Resources Inc.,
located in the Campbell's Bay area of Quebec and in Lac a David,
Saguenay area of Quebec located in the township of Dumas, Jetcom
wishes to clarify that, while it proposes to enter the mineral
exploration business, it is not currently in the business. Given
that this is considered to be a change of business under the TSXV
policies, any of these agreements must be approved by Jetcom's
shareholders and by the TSXV beforehand.
There can be no assurance that the approvals will be granted and
that the transactions will be completed as proposed or at all.
Investors are cautioned that, except as disclosed in the Management
Information Circular or Filing Statement to be prepared in
connection with the transaction, any information released or
received with respect to the change of business may not be accurate
or complete and should not be relied upon. Trading in the
securities of Jetcom Inc. should be considered highly
speculative.
The TSX Venture Exchange has neither approved nor disapproved
the contents of this press release.
Contacts: Jetcom Inc. A. G. Dragone President (416) 447-4884
(416) 447-8868 (FAX)
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