Current, Quarterly or Annual Report by a Foreign Issuer — Form 6-K — SEA’34 Filing Table of Contents
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The following discussion and analysis prepared as at April 27,2021, explains trends in the financial condition and results of
operations of Digatrade Financial Corporation.
(“Digatrade” or “the Company”) for the
three months ended March 31, 2021 as compared to the same period in
2020. This discussion and analysis of the results of operations and
financial condition of the Company should be read in conjunction
with the unaudited consolidated financial statements of the Company
for the three months ended March 31, 2021. The Company’s
critical accounting estimates, significant accounting policies and
risk factors have remained substantially unchanged and are still
applicable to the Company unless otherwise indicated. The financial
statements have been prepared in accordance with International
Financial Reporting Standards (IFRS). All financial statement
figures are reported in Canadian dollars unless explicitly stated
otherwise.
Caution on Forward-Looking Information
This report contains certain statements that constitute
forward-looking information. These forward-looking statements are
not descriptive of historical matters and may refer to
management’s expectation or plans. These statements include
but are not limited to statements concerning our business
objectives and plans and future trends in our industry. Inherent in
forward-looking statements are risks and uncertainties beyond
management’s ability to predict or control including risks
that may affect Digatrade’s operating or capital plans.
Actual results and developments are likely to differ, and may
differ materially, from those expressed or implied by the
forward-looking statements in this discussion and analysis as well
as contained in other components of the annual report. Such
statements are based upon a number of assumptions that may prove
incorrect, including but not limited to, the following assumptions:
that there is no material deterioration in general business and
economic conditions; that there are no unanticipated fluctuations
in interest or exchange rates; that there is no cancellation or
unfavorable variation to its current major contracts; that if
required, Digatrade is able to finance future acquisitions on
reasonable terms; and that Digatrade maintains its ongoing
relations with its business partners. We caution you that the
foregoing list of important factors and assumptions is not
exhaustive. You should also carefully consider matters discussed
under “Risk and Uncertainties” contained elsewhere in
this discussion. Digatrade undertakes no obligation to update
publicly or otherwise revise any forward-looking statements or the
list of factors, whether as a result of new information or future
events or otherwise, except as may be required under applicable
laws.
Overview
The Company is a British Columbia corporation, incorporated on
December 28, 2000. The registered and corporate office is at 1500
West Georgia Street, Suite 1300, Vancouver, British Columbia,
Canada, V6C 2Z6. The Company does not have an agent in the United
States.
2
DIGATRADE FINANCIAL CORPORATION
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
Digatrade Financial Corp. is a financial technology (FinTech)
services company. The Company has been focused on the financial
technology industry since 2015. During that time, the Company has
pursued several different areas of business including blockchain
development services, transaction services for crypto-currencies
(e.g., Bitcoin) and other related financial services
technologies.
In March 2015, the Company entered into an agreement with Mega
Ideas Holdings Limited, dba ANX (“ANXPRO and ANX
International”), a company incorporated and existing under
the laws of Hong Kong. ANX owns a proprietary trading platform and
provides operational support specializing in blockchain development
services and exchange and transaction services for
crypto-currencies e.g. Bitcoin and other digital assets. Effective
October 17, 2018the Company closed its online retail trading
platform but will continue to evaluate opportunities and continue
with research in digital-asset trading for prospective
institutional customers while continuing to seek new opportunities
within the blockchain and the financial technology services
(non-trading) sector.
On February 28, 2019, the Company executed a Definitive Agreement
with Securter Inc., a private Canadian Corporation that is
developing a proprietary, patent-pending credit card payment
platform to significantly increase the security of online credit
card payment processing. Securter technology reduces immense losses
by financial institutions and merchants that arise from fraudulent
credit card use and protects cardholder privacy by eliminating the
distribution of personal information to third parties. With the
current worldwide surge in online commerce expected to continue for
years to come, the problem of credit card security is large and
growing. The Definitive Agreement with Securter sets out that
Securter’s technology will be launched and commercialized as
a Digatrade subsidiary.
The Company is listed as a fully reporting issuer on the FINRA OTC
bulletin board and trades under the symbol
“DIGAF”.
Prior to the change of name on February 19, 2015, the Company was
an energy exploration company focused on the identification and
evaluation for acquisition of energy assets.
Organization Structure
As of the date of this report the Company has three wholly-owned
subsidiaries, Digatrade Limited (a British Columbia corporation),
Digatrade Limited (a Nevada corporation), Digatrade (UK) Limited (a
United Kingdom corporation),
3
DIGATRADE FINANCIAL CORPORATION
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
During
the period commencing on January 1, 2021, until the date of the
report, the Company experienced the following corporate
developments:
Convertible Promissory Notes Issued
During
the period January 1, 2021 to the date of this report, the Company
issued further convertible promissory notes, raising net proceeds
of $174,127 (US$137,000).
The
notes are unsecured, bear interest at between 10% and 12% per annum
from the date of issuance and mature between six months and one
year after the date of issuance.
Any
amount of interest or principal that is not paid on the maturity
date bears interest at 15% to 22% per annum from the maturity date
to the date of payment. Any amount of principal and/or interest
that is unpaid may be converted, at the option of the holder, in
whole or in part into common share of the Company at a price equal
to 61% of the Market Price. The “Market Price” means
the lowest closing bid price for the Company’s stock as
reported on the OTC during the fifteen trading days or the average
of the two lowest closing bid prices during the twenty-five days
prior to a Notice of Conversion. The Company may prepay the
principal and all accrued interest at any time between the date of
issuance and the maturity date, together with a prepayment premium
of between 15% and 40% of the amount prepaid, determined by
reference to the date of repayment.
Conversion of Convertible Promissory Notes
During
the period January 1, 2021 to the date of this report, the Company
converted promissory notes with a face value of US$153,880 into
87,526,697 common shares of the Company.
COVID-19 Pandemic
The
outbreak of the COVID-19 virus and the worldwide pandemic has
impacted the Company’s plans and activities. The Company may
face disruption to operations, supply chain delays, travel and
trade restrictions, and impacts on economic activity in affected
countries or regions can be expected and are difficult to quantify.
Regional disease outbreaks and pandemics represent a serious threat
to hiring and maintaining a skilled workforce and could be a major
health-care challenge for the Company. There can be no assurance
that the Company’s personnel will not be impacted by these
regional disease outbreaks and pandemics and ultimately that the
Company would see its workforce productivity reduced or incur
increased medical costs and insurance premiums as a result of these
health risks.
4
DIGATRADE FINANCIAL CORPORATION
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
In
addition, the pandemic has created a dramatic slowdown in the
global economy. The duration of the outbreak and the resulting
travel restrictions, social distancing recommendations, government
response actions, business disruptions and business closures may
have an impact on the Company’s operations and access to
capital. There can be no assurance that the Company will not be
impacted by adverse consequences that may be brought about by the
pandemic’s impact on global industrial and financial markets
which may reduce share prices and financial liquidity thereby
severely limiting access to essential capital.
Selected Annual Information
The following table provides a brief summary of the
Company’s annual financial data for the latest three fiscal
years ended December 31, 2020:
For the three months ended March 31, 2021, the Company had a net
profit for the period of $201.231 as compared with a net loss for
the period of $324,739 for the three months ended March 31,2020.
Accounting Audit and Legal Expenses amounted to $16,000 for the
three months ended March 31, 2021, as compared with $24, 000 for
the three months ended March 31, 2020, a decrease of $8,000. The
decrease resulted from additional audit work in connection with the
2019 audit which did not reoccur during the 2021 audit. The Company
did not incur any legal expenses during the three months ended
March 31, 2021 and 2020, respectively.
Consulting expense for the three months ended March 31, 2021
decreased by $15,827 to $53,269 as compared with $69,069 for the
three months ended March 31, 2020. The decrease during the three
months ended March 31, 2021 resulted from varying levels of
corporate activity during the respective periods.
5
DIGATRADE FINANCIAL CORPORATION
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
Management fees for the three months ended March 31, 2021 amounted
to $50,732 as compared with $64,520 for the three months ended
March 31, 2020, a decrease of $13,788. The decrease during the year
three months ended March 31, 2021, resulted from changes in the
levels of corporate activity during the respective
periods.
During the year three months ended March 31, 2021the Company
incurred Filing and Transfer Agents Expenses in the amount of
$5,487 as compared with $6,285 incurred during the three months
ended March 31, 2020, a decrease of $798, as a result of decreased
filing activity during the period.
The Company incurred Marketing expenses in the amount of $Nil
during the three months ended March 31, 2021, as compared with
$4,039 during the three months ended March 31, 2020.
During the three months ended March 31, 2021, the Company incurred
office expenses in the amount of $3,500, an increase of $3,500 as
compared with $Nil incurred during the three months ended March 31,2020,
The Company realized a foreign exchange gains of $444 during the
three months ended March 31, 2021 aa compared with a loss on
foreign exchange of $12,615 during the three months ended March 31,2020. The gain and loss resulted from changes in the foreign
currency exchange rates between the Canadian and US
Dollars.
The Company incurred Interest Expense during the three months ended
March 31, 2021 and 2020 respectively, in the amounts of $8,498 and
$5,579. This expenditure was incurred in connection with the
issuance of Convertible Promissory Notes.
The Company realized Accretion Expenses in the amounts of $11,988
and $58,589 for the three months ended March 31, 2021 and 2020,
respectively. During the three months ended March 31, 2021, the
Company recognized a gain in the fair value of derivative
instruments of $350,496 as compared with a loss of $57,109 during
the three months ended March 31, 2020. The changes in the Fair
Value of Derivative instruments resulted from changes in the
calculated volatility of the price of the Company’s publicly
traded stock.
The Company incurred a loss in connection with the operations of
Securter Systems Inc. during the three months ended March 31, 2020
in the amount of $22,811. Following the disposal of the investment
in SSI on September 8, 2020, the company incurred no further losses
during the three months ended March 31, 2021 in connection with
this investment.
6
DIGATRADE FINANCIAL CORPORATION
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
As at March 31, 2021, the Company had a working capital deficiency
of $147,795 as compared with a working capital deficiency of
$238,702 at December 31, 2020, a decrease in working capital
deficiency of $90,907.
The decrease in working capital deficiency during the three months
ended March 31, 2021 is due to increases in Cash of $8,212 and GST
Recoverable of $2,736, together with decreases in Trade and Other
Payables, Convertible Promissory Notes – Liability Component
and Promissory Notes amounting to $30,750, $49,132 and $77,
respectively.
Liquidity and Capital Resources
As the Company has historically generated nominal revenues from our
operations, the Company no internal sources of funds and are
reliant upon investors and lenders to fund its operations to
continue to further develop its products. The Company has funded
its operations to date principally from the sale of convertible
promissory notes and, to a lesser extent, sale of equity
securities. Management believes that the Company will continue to
be reliant upon debt and equity financing to fund continuing
operations until the business plan is fully implemented. The
Company has incurred losses since inception and have incurred
negative cash flows from operations from inception through March31, 2021.
During the three months ended March 31, 2021the Company raised
$171,621 by the issuance of Convertible Promissory Notes (three
months ended March 31, 2020 - $79,494).
Changes in non-cash working capital accounts during the three
months ended March 31, 2021 provided $82,695 (the three months
ended March 31, 2020 - provided $9,464).
The Company has not paid any dividends on its common shares. The
Company has no present intention of paying dividends on its common
shares as it anticipates that all available funds will be invested
to finance the growth of its business.
8
DIGATRADE FINANCIAL CORPORATION
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
As reported in the unaudited consolidated financial statements for
the three months ended March 31, 2021, the Company was involved in
certain transactions with related parties:
The
Company incurred management fees for services provided by key
management personnel for the three months ended March 31, 2021 and
2020, as described below.
Refer to Note 2 to the Company’s audited annual consolidated
financial statements for the year ended December 31, 2020 for the
Company’s significant accounting policies.
Off Balance Sheet Arrangements
The Company has not entered into any material off-balance sheet
arrangements such as guarantee contracts, contingent interests in
assets transferred to unconsolidated entities, derivative financial
obligations, or with respect to any obligations under a variable
interest equity arrangement.
Financial Instruments
Refer to Note 2(k) to the Company’s audited annual
consolidated financial statements for the year ended December 31,2020 for the Company’s financial instruments.
Internal Control over Financial Reporting
As at the date of this report, management is not aware of any
change in the Company’s internal control over financial
reporting that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over
financial reporting.
9
DIGATRADE FINANCIAL CORPORATION
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
We have a history of operating losses and need additional capital
to implement our business plan.
For the three months ended March 31, 2021, we recorded a net
comprehensive profit of $201,231 as compared to a net comprehensive
loss of $305,426 for the three months ended March 31, 2020. The
financial statements have been prepared using IFRS principles
applicable to a going concern. However, as shown in note 1 to the
unaudited consolidated financial statements for the three months
ended March 31, 2021, our ability to continue operations is
uncertain.
We continue to incur operating losses and have a consolidated
deficit of $10,303,973 as at March 31, 2021. Operations for three
months ended March 31, 2021 have been funded primarily from the
issuance of share capital, debt financing and the continued support
of creditors. Historically, we have met working capital needs
primarily by selling equity to Canadian residents, raising debt
finance and from loans (including loans from relatives of principal
shareholders).
10
DIGATRADE FINANCIAL CORPORATION
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
We estimate that we will require at least US$500,000 to further
expand in South America and fund the marketing and distribution of
the proprietary, patent-pending credit card payment platform to
significantly increase the security of online credit card payment
processing, reducing financial losses being experienced by
financial institutions and merchants from fraudulent credit card
use, while also better protecting cardholder privacy. A full
implementation of our business plan will be delayed until the
necessary capital is raised.
We cannot predict when or if we will produce revenues.
We have not generated any revenue to date from operations. In order
for us to continue with our plans and open our business, we must
raise capital. The timing of the completion of the milestones
needed to commence operations and generate revenues is contingent
on the success of this raise. There can be no assurance that we
will generate revenues or that revenues will be sufficient to
maintain our business.
Our entry into the development of a secure mobile application for
card not present “CNP” transaction business may not be
successful and there are risks attendant on these
activities.
The Financial Technology “FinTech” business is
extremely competitive. There are many companies, large and small
entering the market with the capital to develop and create new
innovative applications resulting in a highly competitive and
fast-moving environment. Even with capital and technical expertise,
industry, political and compliance risks are significant.
Regulatory compliance and the overall ecosystem for secure online
payments is extremely complex and not yet fully defined by
governments and financial institutions worldwide. We may not be
able to finance our business plan and marketing plan, there is no
assurance that our entry into this business will be
successful.
Cybersecurity risks associated with the FinTech industry are
becoming increasingly challenging and we may be unable to meet
future regulatory requirements related to data protection and
privacy.
Cybersecurity is becoming increasingly challenging with the growth
in the number of hackers and financial stalkers seeking
opportunities to disrupt operations and/or extort funds from
persons or companies whose cybersecurity measures were unable to
prevent malicious data harvesting and misuse. We cannot guarantee
that all such attempts shall be defeated, nor that our intellectual
property shall remain beyond the reach of parties seeking
proprietary insights. Data protection and privacy is never
absolute, regardless of method(s) used. Independent of any 3rd
party malicious intent referred to above, there is a risk that
despite best efforts our data protection and privacy shall not meet
a future regulatory definition of a reasonable standard, if it is
imposed or “expected” retroactively. Information at
risk may or may not be financial in nature and may or may not be
our own information. We do not have sufficient resources to
evaluate all possible outcomes, or all possible measures that we
could take now, or could have taken in the past, to attain an even
higher level of diligence and care than we are taking
presently.
Regulatory compliance in the FinTech sector is
evolving.
We are unable to guarantee that we will be able to proceed with all
desired plans if the regulatory environment changes in a manner
that undermines existing business plans. Such regulations have an
impact in every country in which we will be deriving revenue from
licensing or by any other commercial mechanism.
11
DIGATRADE FINANCIAL CORPORATION
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
We may be unable to meet growth Open Source technology trends which
could have a detrimental impact on our business.
Open source software compliance and vulnerability management has
become an area of risk due to the expanding scope of this realm of
software. We cannot ensure that we will at all times fully
understand the state-of-the-art standing of
every aspect of our own development goals until such time that a
sufficient expenditure of time, money and effort has been made to
understand all open source material and trends, and their relevance
to our own interests.
Customers may not adapt to our new te Customers may not adapt to
our new technology which may affect our ability to generate
revenues in the future.
Culture risk emerges when our organization interfaces with
financial institutions as our customers. We do not know in advance
whether all our customers will be willing to make changes, if
necessary, to accommodate protocols that arise from the adoption of
our technology, or incompatibility that may arise from the nature
of our software development methods, including our approach to
FinTech problem solving.
Reliance on systems governance on third party transactions may risk
compliance issues.
Governance for intelligent automation is of increasing importance
in business activity that is characterized by a large number of
small-dollar-value transactions. Our revenue model requires sharing
of transaction fees for commerce that, in aggregate, may represent
millions or even hundreds of millions of consumer transactions. We
may therefore need to rely upon systems-governance more than
individual situational oversight where third party transactions are
concerned. This may mean that non-compliance of some type may come
to light too late to remedy in the immediate tense and may
therefore only be correctable with systemic adjustment for the
future.
FinTech is an emerging industry that may be subject to changes in
accounting standards in the future the adoption of which may
require time for our business to adjust.
New accounting standards in the category of FinTech sector
businesses may be introduced over time and have a bearing on our
planning, execution and reporting in respect of issues that have
hitherto been satisfactory and understood but may require a period
of transition to grasp implications at the strategic level and
communicate same to shareholders effectively.
Use of data and analytics in our internal audit may become more
complex as metadata becomes increasingly important to our
analyses.
It is not known whether the effect upon our internal practices of
new analytics will remain permissible from the perspective of
third-party audits occurring after-the-fact.
12
DIGATRADE FINANCIAL CORPORATION
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
Our use of Cloud computing, data storage and/or cloud collaboration
may not conform to future operational “best
practices.
Transitioning to and operating “in the cloud” is a
matter whose risks and rewards are subject to conflicting
strategies even amongst companies who otherwise are considered to
have best practices, operationally. It is not knowable in advance
whether our own policies regarding the use of cloud computing,
cloud data storage or cloud collaboration in our use of
information, our sharing of information and our design of
proprietary information assets will conform to a future
interpretation of “best practices”, after cloud
eco-system techniques and their implications are better
understood.
We rely on third party service providers which we may not be able
to control. This subjects us to risks for failure of performance in
development of our business plan.
We will at all times in the pursuit of our goals rely on at least
some expertise that is external to our company. Despite best
efforts to vet the competency of service providers, it will not be
possible to fully appreciate the quality of their contribution
until after-the-fact, which may in some instances require second
attempts, corrections or new directions. We shall always seek to
mitigate our risk and liability arising from any failures of
performance that may arise; however, it is not possible to quantify
this in financial terms or predict it in operational terms. The
risk in our development work is inherently high and does not
diminish over time as we will continually focus on customer
problems that require new solutions yet to be created.
The loss of key personnel or the inability of replacements to
quickly and successfully perform in their new roles could adversely
affect our business.
We depend on the leadership and experience of our key executive and
chairman, Brad Moynes. Mr. Moynes functions as our chairman and
executive officer, and as such, we are heavily dependent upon him
to conduct our operations. In 2018, the Company added two
additional directors which now brings the board to four directors.
We do not have key man insurance. If Mr. Moynes resigns or dies,
there could be a substantial negative impact upon our operations.
If that should occur, until we find other qualified candidates to
become officers and/or directors to conduct our operations, we may
have to suspend our operations or cease operating entirely. In that
event, it is possible you could lose your entire
investment.
13
DIGATRADE FINANCIAL CORPORATION
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
If we are unable to protect our intellectual property rights,
including those related to Securter technology, our competitive
position could be harmed or we could be required to incur
significant expenses to enforce our rights.
Our ability to compete effectively is dependent in part upon our
ability to protect our proprietary technology. We rely on patents,
trademarks, trade secret laws, confidentiality procedures and
licensing arrangements to protect our intellectual property rights.
There can be no assurance these protections will be available in
all cases or will be adequate to prevent our competitors from
copying, reverse engineering or otherwise obtaining and using our
technology, proprietary rights or products. For example, the laws
of certain countries in which our products may be licensed may not
protect our proprietary rights to the same extent as the laws of
Canada or the United States. In addition, third parties may seek to
challenge, invalidate or circumvent our intellectual property, or
applications for same. There can be no assurance that our
competitors will not independently develop technologies that are
substantially equivalent or superior to our technology or design
around our proprietary rights. In each case, our ability to compete
could be significantly impaired. To prevent substantial
unauthorized use of our intellectual property rights, it may be
necessary to prosecute actions for infringement and/or
misappropriation of our proprietary rights against third parties.
Any such action could result in significant costs and diversion of
our resources and management’s attention, and there can be no
assurance we will be successful in such action. Furthermore, many
of our current and potential competitors have the ability to
dedicate substantially greater resources to enforce their
intellectual property rights than we do. Accordingly, despite our
efforts, we may not be able to prevent third parties from
infringing upon or misappropriating our intellectual
property.
Claims by others that we infringe their intellectual property
rights could harm our business.
Our industry is characterized by vigorous protection and pursuit of
intellectual property rights, which has resulted in protracted and
expensive litigation for many companies. Third parties may in the
future assert claims of infringement of intellectual property
rights against us or against our customers for which we may be
liable. As the number of service providers and competitors in our
market increases and overlaps occur, infringement claims may
increase.
Intellectual property claims against us, and any resulting
lawsuits, may result in our incurring significant expenses and
could subject us to significant liability for damages and
invalidate what we currently believe are our proprietary
rights.
Our involvement in any patent dispute or other intellectual
property dispute or action to protect trade secrets and know-how
could have a material adverse effect on our business. Adverse
determinations in any litigation could subject us to significant
liabilities to third parties, require us to seek licenses from
third parties and prevent us from developing and selling our
products. Any of these situations could have a material adverse
effect on our business. These claims, regardless of their merits or
outcome, would likely be time consuming and expensive to resolve
and could divert management’s time and
attention.
14
DIGATRADE FINANCIAL CORPORATION
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
We are generally obligated to indemnify our end-customers for
certain expenses and liabilities resulting from intellectual
property infringement claims regarding our software products, which
could force us to incur substantial costs.
We have agreed, and expect to continue to agree, to indemnify our
end-customers for certain intellectual property infringement claims
regarding our software products. As a result, in the case of
infringement claims against these end-customers, we could be
required to indemnify them for losses resulting from such claims or
to refund amounts they have paid to us. Our end-customers in the
future may seek indemnification from us in connection with
infringement claims brought against them. We will evaluate each
such request on a case-by-case basis and we may not succeed in
refuting all such claims. If an end-customer elects to invest
resources in enforcing a claim for indemnification against us, we
could incur significant costs disputing it. If we do not succeed in
disputing it, we could face substantial liability.
Risks Related to Our Stock
The market price of our shares may fluctuate
significantly.
The market price and liquidity of the market for shares may be
significantly affected by numerous factors, some of which are
beyond our control and may not be directly related to our operating
performance. Some of the factors that could negatively affect the
market price of our shares include:
●
our actual or
projected operating results, financial condition, cash flows and
liquidity, or changes in business strategy or
prospects;
●
equity issuances by
us, or share resales by our stockholders, or the perception that
such issuances or resales may occur;
●
loss of a major
funding source;
●
actual or
anticipated accounting problems;
●
changes in market
valuations of similar companies;
●
adverse market
reaction to any indebtedness we incur in the future;
●
speculation in the
press or investment community;
●
price and volume
fluctuations in the overall stock market from time to
time;
●
general market and
economic conditions, and trends including inflationary concerns,
the current state of the credit and capital markets;
●
significant
volatility in the market price and trading volume of securities of
companies in our sector, which are not necessarily related to the
operating performance of these companies;
●
changes in law,
regulatory policies or tax guidelines, or interpretations
thereof;
●
operating
performance of companies comparable to us; and
●
short-selling
pressure with respect to shares of our shares
generally.
15
DIGATRADE FINANCIAL CORPORATION
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
As noted above, market factors unrelated to our performance could
also negatively impact the market price of our shares. One of the
factors that investors may consider in deciding whether to buy or
sell our shares is our distribution rate as a percentage of our
share price relative to market interest rates. If market interest
rates increase, prospective investors may demand a higher
distribution rate or seek alternative investments paying higher
dividends or interest. As a result, interest rate fluctuations and
conditions in the capital markets can affect the market value of
our shares. For instance, if interest rates rise, it is likely that
the market price of our shares will decrease as market rates on
interest-bearing securities increase.
If we have to raise capital by selling securities in the future,
your rights and the value of your investment in the Company could
be reduced.
If we issue debt securities, the lenders would have a claim to our
assets that would be superior to the stockholder rights. Interest
on the debt would increase costs and negatively impact operating
results. If we issue more common stock or any preferred stock, your
percentage ownership will decrease and your stock may experience
additional dilution, and the holders of preferred stock (called
preference securities in Canada) may have rights, preferences and
privileges which are superior to (more favorable) the rights of
holders of the common stock. It is likely the Company will sell
securities in the future. The terms of such future transactions
presently are not determinable.
If the market for our common stock is illiquid in the future, you
could encounter difficulty if you try to sell your
stock.
Our stock trades on the OTC "Pink" Marketplace but it is not
actively traded. If there is no active trading market, you may not
be able to resell your shares at any price, if at all. It is
possible that the trading market in the future will continue to be
"thin" or "illiquid," which could result in increased price
volatility. Prices may be influenced by investors' perceptions of
us and general economic conditions, as well as the market for
energy generally. Until our financial performance indicates
substantial success in executing our business plan, it is unlikely
that there will be coverage by stock market analysts will be
extended. Without such coverage, institutional investors are not
likely to buy the stock. Until such time, if ever, as such coverage
by analysts and wider market interest develops, the market may have
a limited capacity to absorb significant amounts of trading. As the
stock is a “penny stock,” there are additional
constraints on the development of an active trading market –
see the next risk factor.
16
DIGATRADE FINANCIAL CORPORATION
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
The penny stock rule operates to limit the range of customers to
whom broker-dealers may sell our stock in the market.
In general, "penny stock" (as defined in the SEC’s rule
3a51-1 under the Securities Exchange Act of 1934) includes
securities of companies which are not listed on the principal stock
exchanges, or the Nasdaq National Market or the Nasdaq Capital
Market, and which have a bid price in the market of less than
US$5.00; and companies with net tangible assets of less than $2
million ($5 million if the issuer has been in continuous operation
for less than three years), or which has recorded revenues of less
than $6 million in the last three years. As a "penny stock" our
stock therefore is subject to the SEC’s rule 15g-9, which
imposes additional sales practice requirements on broker-dealers
which sell such securities to persons other than established
customers and "accredited investors" (generally, individuals with
net worth in excess of US$1 million or annual incomes exceeding
US$200,000, or US$300,000 together with their spouses, or
individuals who are the officers or directors of the issuer of the
securities). For transactions covered by rule 15g-9, a
broker-dealer must make a special suitability determination for the
purchaser and have received the purchaser's written consent to the
transaction prior to sale. This rule may adversely affect the
ability of broker-dealers to sell our stock, and therefore may
adversely affect our stockholders' ability to sell the stock in the
public market.
If you are a United States investor, your legal recourse could be
limited.
The Company is incorporated under the laws of British Columbia.
Most of the assets now are located in Canada. Our directors and
officers and the audit firm are residents of Canada. As a result,
if any of our shareholders were to bring a lawsuit in the United
States against the officers, directors or experts in the United
States, it may be difficult to effect service of legal process on
those people who reside in Canada, based on civil liability under
the Securities Act of 1933 or the Securities Exchange Act of 1934.
In addition, we have been advised that a judgment of a United
States court based solely upon civil liability under these laws
would probably be enforceable in Canada, but only if the U.S. court
in which the judgment were obtained had a basis for jurisdiction in
the matter. We also have been advised that there is substantial
doubt whether an action could be brought successfully in Canada in
the first instance on the basis of liability predicated solely upon
the United States' securities laws.
Approval
The Board of Directors of Digatrade Financial Corporation has
approved the disclosures in this MD&A.
Additional Information
Additional information relating to the Company is available on
SEDAR at www.sedar.com
or EDGAR at www.sec.gov
17
Dates Referenced Herein and Documents Incorporated by Reference
