Fareport Capital Inc.

Fareport Capital Inc.

July 11, 2008 19:26 ET

Fareport Provides an Update to Its Financial Statement Reporting Requirements

Default Status Report CSA Staff Notice 57-301

TORONTO, ONTARIO--(Marketwire - July 11, 2008) - Fareport Capital Inc. (TSX VENTURE:FPC) (the "Company") wishes to announce its continued efforts to comply with its National Instrument 51-102 Continuous Disclosure Obligations ("NI 51-102") obligations, the violation of which resulted in the imposition of the Management and Insider Cease Trade Order dated July 26, 2007 (the "MCTO") by the Ontario Securities Commission (the "OSC") pursuant to Canadian Securities Administrators Staff Notice 57-301 ("Staff Notice 57-301"). To date, the Company remains unable to file its April 30, 2007 interim financial statements, July 31, 2007 annual financial statements, October 31, 2007 interim financial statements, and January 31, 2008 interim financial statements. Further, the Company was not able to file its April 30, 2008 interim financial statements on time as required by NI 51-102 due to continued problems with its internal accounting and records management as described below.

The Company intends to satisfy the alternative information guidelines recommended by OSC Policy 57-603, including the filing of Default Status Reports on a bi-weekly basis, disclosing the details required by Appendix B of Staff Notice 57-301 for so long as the Company remains in default of its NI 51-102 financial reporting obligations. The Company understands that it has been subject to the MCTO for a period longer than two months after the filing deadline of its April 30, 2007 interim financial statements and that the OSC may impose an issuer cease trade order (a "CTO") on the Company at any time.

The new management of the Company, since taking control of the Company pursuant to the previously announced corporate reorganization transaction as described in the Company's management information circular dated August 24, 2007, has undertaken an ongoing examination and restructuring of the Company's infrastructure and operations. The completion of the reorganization transaction was announced by the Company on October 1, 2007. Certain common shares issued by the Company in connection with such transaction remain in escrow pending the termination of the MCTO. Current management wishes to report the following preliminary conclusions from its ongoing examination since that time based on information currently in its possession:

- Management has determined that the Company's internal accounting and reporting systems prior to September, 2007 were severely deficient in their structure, organization, controls and accuracy. As a result, management has taken steps to implement an accurate and timely accounting and financial reporting system.

- Due to a lack of accounting information currently available, including the Company's records and accounts, management has been unable to either confirm or deny the accuracy of the Company's 2006 closing financial statement balances or the corresponding 2007 opening financial statement balances, and will continue to provide updates regarding its review, analysis and any final determinations regarding such financial information as part of its ongoing examinations.

- The inability of the Company to confirm to date its 2007 opening financial statement balances has, as of the date hereof, restricted the ability of its auditors to provide an unqualified opinion for the 2007 annual financial statements. The Company is therefore currently unable to provide an expected date for the filing of its July 31, 2007 annual financial statements, its April 30, 2007 interim financial statements, its October 31, 2007 interim financial statements, its January 31, 2008 interim financial statements, and its April 30, 2008 interim financial statements. Management will continue to work with its auditors to issue its annual and interim financial statements.

In addition to the preliminary conclusions of current management's ongoing examination set out above, management also reports that prior management was delinquent with its GST reporting and payments on behalf of the Company for the 2005, 2006, and 2007 fiscal years ended July 31, which periods were prior to the completion of the corporate reorganization transaction. On February 5, 2008, the Company received a notice of reassessment regarding the GST amounts payable by the Company in its 2004 and 2005 fiscal years. The Canada Revenue Agency (the "CRA") claimed the Company owed an additional $456,000 of unpaid taxes. On May 5, 2008, the Company filed an objection to these assessments. Pending resolution of its objection the Company has worked out a payment schedule with the CRA. As well, the Company was required to file and pay GST returns for the calendar years 2006 and 2007 which GST returns had previously not been paid. The Company's GST returns are now up to date and current.

In March, 2008, the CRA commenced a review of the Company's employee tax remittances for the 2006 and 2007 fiscal years. Upon the completion of that review, the Company was reassessed for the improper reporting of payroll taxes in 2006. The Company negotiated a payment plan with the CRA regarding this matter. The payment of the Company's pay roll taxes is now current and up to date.

Also in March, 2008, management learned that prior management failed to file the Company's annual corporate income tax returns for the fiscal years from 2004 to 2006. The Company is currently working with the CRA in an attempt to rectify the Company's income tax reporting requirements and will continue to provide updates of the progress of such efforts as they occur.

Current management will continue to work to improve the Company's operations and its business in an effort to bring financial stability to its operations and accountability to its financial reporting systems. The Company is also continuing to seek the appointment of an additional independent and qualified director to the Company's board of directors in order to satisfy the requirement in section 2.1 of Policy 3.1 of the TSX Venture Exchange Corporate Finance Manual.

The Company is not subject to any insolvency proceedings and management of the Company is not aware of any material changes in the information contained in the Company's press releases since the completion of the corporate reorganization transaction other than as disclosed herein, and to the knowledge of the Company there is no other material information concerning the affairs of the Company that has not been generally disclosed.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Fareport Capital Inc.
    Emlyn David
    President, and Chief Executive Officer
    (416) 725-2177