Current, Quarterly or Annual Report by a Foreign Issuer — Form 6-K — SEA’34 Filing Table of Contents
Document/ExhibitDescriptionPagesSize
1: 6-K Current, Quarterly or Annual Report by a Foreign HTML 24K
Issuer
2: EX-99.1 Financial Statements HTML 213K
3: EX-99.2 Management's Discussion HTML 101K
4: EX-99.3 Miscellaneous Exhibit HTML 19K
5: EX-99.4 Miscellaneous Exhibit HTML 19K
6: EX-99.5 Material Change Report HTML 18K
13: R1 Document and Entity Information HTML 28K
14: R2 Interim Consolidated Balance Sheets HTML 54K
15: R3 Interim Consolidated Statement of Changes in HTML 32K
Shareholders' Equity
16: R4 Interim Consolidated Statements of Operations, HTML 65K
Comprehensive Loss and Deficit
17: R5 Interim Consolidated Statements of Cash Flows HTML 57K
18: R6 Nature and Continuance of Operations HTML 22K
19: R7 Significant Accounting Policies HTML 43K
20: R8 Significant Accounting Judgements, Estimates and HTML 24K
Assumptions
21: R9 Securter Systems Inc. HTML 42K
22: R10 Trade and Other Payables HTML 19K
23: R11 Convertible Promissory Notes HTML 31K
24: R12 Share Capital HTML 26K
25: R13 Related Parties Transactions HTML 20K
26: R14 Financial Risk Management Objectives and Policies HTML 24K
27: R15 Capital Management HTML 18K
28: R16 Subsequent Events HTML 16K
29: R17 Significant Accounting Policies (Policies) HTML 64K
30: R18 Significant Accounting Policies (Tables) HTML 21K
31: R19 Securter Systems Inc. (Tables) HTML 38K
32: R20 Trade and Other Payables (Tables) HTML 18K
33: R21 Convertible Promissory Notes (Tables) HTML 25K
34: R22 Share Capital (Tables) HTML 19K
35: R23 Related Parties Transactions (Tables) HTML 17K
36: R24 Nature and Continuance of Operations (Details HTML 18K
Narrative)
37: R25 Significant Accounting Policies (Details) HTML 34K
38: R26 Significant Accounting Policies (Details 1) HTML 21K
39: R27 Securter Systems Inc. (Details) HTML 36K
40: R28 Securter Systems Inc. (Details 1) HTML 31K
41: R29 Securter Systems Inc. (Details 2) HTML 30K
42: R30 Trade and Other Payables (Details) HTML 21K
43: R31 Convertible Promissory Notes (Details) HTML 46K
44: R32 Share Capital (Details) HTML 25K
45: R33 Related Parties Transactions (Details) HTML 16K
46: R34 Capital Management (Details Narrative) HTML 17K
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Management’s Responsibility for Financial
Reporting
2
Report
of Independent Registered Public Accounting Firm
Consolidated Statements of Financial Position
3
Consolidated Statements of Changes in Shareholders’
Deficiency
4
Consolidated Statements of Comprehensive Loss
5
Consolidated Statements of Cash Flows
6
Notes to the Consolidated Financial Statements
7
Management’s
Responsibility for Financial Reporting
These
unaudited consolidated financial statements have been prepared by
and are the responsibility of the management of the Company. The
unaudited consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards, using
management’s best estimates and judgments based on currently
available information. When alternative accounting methods exist,
management has chosen those it considers most appropriate in the
circumstances.
The
Company maintains an appropriate system of internal controls to
provide reasonable assurance that financial information is accurate
and reliable and that the Company’s assets are appropriately
accounted for and adequately safeguarded.
Digatrade
Financial Corp. (the “Company”) is governed by the
Business Corporations Act (British Columbia). The head office,
principal address, and records office of the Company are located at
1500 West Georgia Street, Suite 1300, Vancouver, British Columbia,
Canada, V6C 2Z6. The Company's common shares are listed on the
NASDAQ Over-the-Counter Board (“OTCB”) exchange under
the symbol "DIGAF".
In
March 2015, the Company entered into an agreement with Mega Ideas
Holdings Limited, dba ANX (“ANX”), 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. Effective October 17,2018the Company closed the online retail trading platform and
shared liquidity order book with ANX International owing to low
transaction volumes. The Company will continue to offer OTC trading
for institutional customers and accredited traders while continuing
to seek new opportunities within the blockchain and the financial
technology sector.
In
February 2019, the Company entered
into a Definitive Agreement with Securter Inc.
(“Securter”), 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 (Note 5).
These
consolidated financial statements have been prepared in accordance
with International Financial Reporting Standards on the basis that
the Company is a going concern and will be able to meet its
obligations and continue its operations for its next fiscal year.
Several conditions as set out below cast uncertainties on the
Company’s ability to continue as a going
concern.
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.
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 prices in general, share prices and financial
liquidity thereby severely limiting access to essential
capital.
The
Company’s ability to continue as a going concern is dependent
upon the financial support from its creditors, shareholders, and
related parties, its ability to obtain financing for its
development projects, and upon the attainment of future profitable
operations.
The
Company has not yet achieved profitable operations and has
accumulated losses of $10,303,973 since inception and working
capital deficiency of $147,795
as at March 31, 2021. Accordingly, the Company will need to raise
additional funds through future issuance of securities or debt
financing. Although the Company has raised funds in the past, there
can be no assurance the Company will be able to raise sufficient
funds in the future, in which case the Company may be unable to
meet its obligations as they come due in the normal course of
business. It is not possible to predict whether financing efforts
will be successful or if the Company will attain a profitable level
of operations.
The
current cash resources are not adequate to pay the Company’s
accounts payable and to meet its minimum commitments at the date of
these consolidated financial statements, including planned
corporate and administrative expenses, and other project costs;
accordingly, there is significant doubt about the Company’s
ability to continue as a going concern. These consolidated
financial statements do not give effect to adjustments that would
be necessary to the carrying amounts and classifications of assets
and liabilities should the Company be unable to continue as a going
concern.
These
consolidated financial statements have been prepared on a
historical cost basis except for financial instruments classified
as available-for-sale that have been measured at fair value. Cost
is the fair value of the consideration given in exchange for net
assets.
b)
Statement
of Compliance
These
consolidated financial statements have been prepared in accordance
with International Financial Reporting Standards
(“IFRS”) as issued by the International Accounting
Standards Board (“IASB”).
These
consolidated financial statements were approved and authorized for
issue by the Board of Directors on April 09, 2021.
c)
Basis
of Consolidation
These
consolidated financial statements include the accounts of the
Company and its subsidiaries (collectively, the
“Company”). Intercompany balances and transactions are
eliminated in preparing the consolidated financial statements. The
following companies have been consolidated within these
consolidated financial statements:
Entity
Country
of Incorporation
Voting
Control
Functional
Currency
Digatrade Financial
Corp.
Canada
Parent
Company
Canadian
Dollar
Digatrade
Limited
Canada
100%
Canadian
Dollar
Digatrade (UK)
Limited
United
Kingdom
100%
Pounds
Sterling
Digatrade
Limited
USA
100%
US
Dollar
d)
Foreign
Currency
These
consolidated financial statements are presented in Canadian
dollars, which is also the functional currency of the parent
company. Each subsidiary determines its own functional currency
(Note 2(c)) and items included in the financial statements of each
subsidiary are measured using that functional
currency.
i.
Transactions
and Balances in Foreign Currencies
Foreign
currency transactions are translated into the functional currency
of the respective entity using the exchange rates prevailing at the
dates of the transactions. Foreign exchange gains and losses
resulting from the settlement of such transactions and from the
re-measurement of monetary items at year-end exchange rates are
recognized in profit or loss. Non-monetary items measured at
historical cost are translated using the exchange rate at the date
of the transaction and are not retranslated. Non-monetary items
measured at fair value are translated using the exchange rate at
the date when fair value was determined.
ii.
Foreign
Operations
On
consolidation, the assets and liabilities of foreign operations are
translated into Canadian dollars at the exchange rate prevailing at
the reporting date and their revenues and expenses are translated
at exchange rates prevailing at the dates of the transactions. The
exchange differences arising on the translation are recognized in
other comprehensive income and accumulated in the currency
translation reserve in equity. On disposal of a foreign operation,
the component of other comprehensive income relating to that
particular foreign operation is recognized in earnings and
recognized as part of the gain or loss on disposal.
e)
Financing
and Finder’s Fees
Financing and
finder’s fees relating to financial instruments with a term
of one year or less are expensed in the period incurred. For
financial instruments with a term of over one year, the fees are
netted against the financial instruments and amortized over the
term of the financial instruments.
The
Company records proceeds from share issuances, net of commissions
and issuance costs. Shares issued for other than cash
consideration are valued at either: (i) the fair value of the asset
acquired or the fair value of the liability extinguished at the
measurement date under current market conditions, or (ii) the
quoted price on the Over-the-Counter Bulletin Board in the United
States based on the earliest of: the date the shares are issued, or
the date the agreement to issue the shares is reached.
g)
Loss
per Share
Basic
loss per share is calculated by dividing net loss by the weighted
average number of common shares issued and outstanding during the
reporting period. Diluted loss per share is the same as basic loss
per share, as the issuance of shares on the exercise of stock
options and share purchase warrants is anti-dilutive.
h)
Share-Based
Payments
The
fair value method of accounting is used for share-based payment
transactions. Under this method, the cost of stock options and
other share-based payments is recorded based on the estimated fair
value using the Black-Scholes option-pricing model at the grant
date and charged to profit over the vesting period. The amount
recognized as an expense is adjusted to reflect the number of
equity instruments expected to vest.
Upon
the exercise of stock options and other share-based payments,
consideration received on the exercise of these equity instruments
is recorded as share capital and the related share-based payment
reserve is transferred to share capital. The fair value of
unexercised equity instruments are transferred from reserve to
retained earnings upon expiry.
i)
Income
Taxes
Tax
expense recognized in profit or loss comprises the sum of deferred
tax and current tax not recognized in other comprehensive income or
directly in equity.
i.
Current
Income Tax
Current
income tax assets and liabilities comprise those claims from, or
obligations to, fiscal authorities relating to the current or prior
reporting periods that are unpaid at the reporting date. Current
tax is payable on taxable profit, which differs from profit or loss
in the consolidated financial statements. Calculation of current
tax is based on tax rates and tax laws that have been enacted or
substantively enacted by the end of the reporting
period.
ii.
Deferred
Income Tax
Deferred income
taxes are calculated using the liability method on temporary
differences between the carrying amounts of assets and liabilities
and their tax bases. Deferred tax assets and liabilities are
calculated, without discounting, at tax rates that are expected to
apply to their respective period of realization, provided they are
enacted or substantively enacted by the end of the reporting
period. Deferred tax liabilities are always provided for in
full.
Deferred tax assets
are recognized to the extent that it is probable that they will be
able to be utilized against future taxable income. Deferred tax
assets and liabilities are offset only when the Company has a right
and intention to offset current tax assets and liabilities from the
same taxation authority.
Changes
in deferred tax assets or liabilities are recognized as a component
of tax income or expense in profit or loss, except where they
relate to items that are recognized in other comprehensive income
or directly in equity, in which case the related deferred tax is
also recognized in other comprehensive income or equity,
respectively.
j)
Revenue
Recognition
Revenue
is comprised of consulting fees and commissions earned on trades
executed on the digital currency trading platform. Consulting fee
income is recognized as the consulting services are provided.
Commission is considered earned when a trade is completed by the
Company’s customers. As the platform is not yet fully live,
commissions and consulting fees earned have been accounted for as a
recovery of development costs incurred.
The
following is the Company’s accounting policy for financial
instruments under IFRS 9:
(i)
Classification
The
Company classifies its financial instruments in the following
categories: at fair value through profit and loss
(“FVTPL”), at fair value through other comprehensive
income (loss) (“FVTOCI”) or at amortized cost. The
Company determines the classification of financial assets at
initial recognition. The classification of debt instruments is
driven by the Company’s business model for managing the
financial assets and their contractual cash flow characteristics.
Equity instruments that are held for trading are classified as
FVTPL. For other equity instruments, on the day of acquisition the
Company can make an irrevocable election (on an
instrument-by-instrument basis) to designate them as at FVTOCI.
Financial liabilities are measured at amortized cost, unless they
are required to be measured at FVTPL (such as instruments held for
trading or derivatives) or if the Company has opted to measure them
at FVTPL.
The
following table shows the classification under IFRS 9:
Financial
assets/liabilities
Classification
Cash
FVTPL
Marketable
Securities
FVTPL
Accounts
payable
Amortized
cost
(ii)
Measurement
Financial assets and liabilities at amortized cost
Financial assets
and liabilities at amortized cost are initially recognized at fair
value plus or minus transaction costs, respectively, and
subsequently carried at amortized cost less any
impairment.
Financial assets and liabilities at FVTPL
Financial assets
and liabilities carried at FVTPL are initially recorded at fair
value and transaction costs are expensed in the Consolidated
Statements of Comprehensive Income. Realized and unrealized gains
and losses arising from changes in the fair value of the financial
assets and liabilities held at FVTPL are included in the
Consolidated Statements of Comprehensive Income in the period in
which they arise.
(iii)
Impairment of financial assets
The
Company recognizes a loss allowance for expected credit losses on
financial assets that are measured at amortized cost. At each
reporting date, the Company measures the loss allowance for the
financial asset at an amount equal to the lifetime expected credit
losses if the credit risk on the financial asset has increased
significantly since initial recognition. If at the reporting date,
the financial asset has not increased significantly since initial
recognition, the Company measures the loss allowance for the
financial asset at an amount equal to twelve month expected credit
losses. The Company shall recognize in the Consolidated Statements
of Comprehensive Income, as an impairment gain or loss, the amount
of expected credit losses (or reversal) that is required to adjust
the loss allowance at the reporting date to the amount that is
required to be recognized.
l)
Non-Controlling
Interest
Non-controlling
interest in the Company’s less than wholly owned subsidiary
is classified as a separate component of equity. On initial
recognition, non-controlling interest is measured at the fair value
of the non-controlling entity’s contribution into the related
subsidiary. Subsequent to the original transaction date,
adjustments are made to the carrying amount of non-controlling
interest for the non-controlling interest’s share of changes
to the subsidiary’s equity.
On
September 26, 2019, IASB amended some of the existing IFRSs
requirements for hedge accounting. The amendments are designed to
support the provision of useful financial information by companies
during the period of uncertainty arising from the phasing out of
interest-rate benchmarks such as IBORs. The amendments modify some
specific hedge accounting requirements to provide relief from
potential effects of the uncertainty caused by the IBOR reform. In
addition, the amendments require companies to provide additional
information to investors about their hedging relationships which
are directly affected by these uncertainties. These amendments were
effective for annual periods beginning on or after January 1, 2020
and must be applied retrospectively. Early application is
permitted.
NOTE 3 – SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND
ASSUMPTIONS
In the
application of the Company’s accounting policies which are
described in Note 2, management is required to make judgments,
estimates, and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
The
estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognized in the
period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods, if the revision affects both current and future periods.
Significant judgments, estimates, and assumptions that have the
most significant effect on the amounts recognized in the
consolidated financial statements are described below.
Deferred Tax Assets
Deferred
tax assets, including those arising from unutilized tax losses,
require management to assess the likelihood that the Company will
generate sufficient taxable earnings in future periods in order to
utilize recognized deferred tax assets. Assumptions about the
generation of future taxable profits depend on management’s
estimates of future cash flows. In addition, future changes in tax
laws could limit the ability of the Company to obtain tax
deductions in future periods. To the extent that future cash flows
and taxable income differ significantly from estimates, the ability
of the Company to realize the net deferred tax assets recorded at
the reporting date could be impacted.
Share-based Compensation
The
fair value of share-based compensation is subject to the
limitations of the Black-Scholes option pricing model that
incorporates market data and involves uncertainty in estimates used
by management in the assumptions. Because the Black-Scholes option
pricing model requires the input of highly subjective assumptions,
including the volatility of share prices, changes in subjective
input assumptions can materially affect the fair value
estimate.
Impairment of Assets
An
impairment loss is recognized for the amount by which the
asset’s or cash generating unit’s carrying amount
exceeds its recoverable amount. To determine the recoverable
amount, management estimates expected future cash flows from each
asset or cash-generating unit and determines a suitable interest
rate in order to calculate the present value of those cash flows.
In the process of measuring expected future cash flows, management
makes assumptions about future operating results. In addition, when
determining the applicable discount rate, estimation is involved in
determining the appropriate adjustments to market risk and
asset-specific risk factors. These assumptions relate to future
events and circumstances. Actual results may vary and may cause
significant adjustments to the Company’s assets within the
next financial year.
Fair Value of the Embedded Derivatives in the Convertible
Debentures
The
Company has determined that its functional currency is the Canadian
dollar and has issued convertible debentures with face value in US
dollars. Furthermore, the Company conversion feature of the 2018,
2019 and 2020 convertible debentures failed the fixed-for-fixed
equity classification provision due to the debentures being
denominated in a foreign currency and a variable number of shares
being issuable.
NOTE 3 – SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND
ASSUMPTIONS (Continued)
Fair Value of the Embedded Derivatives in the Convertible
Debentures (Continued)
As
such, the convertible debentures consisted of a liability component
(“financial liability”) and an embedded derivative
conversion feature (“derivative liability”) and contra
asset account of deferred derivative loss due to significant amount
of fair value of the derivative liability at inception in excess of
the net proceeds. The net proceeds of these convertible bonds were
first allocated to the fair value of the derivative liability. As
the fair value of the derivative liability at inception exceeds the
net proceeds, the indication of significant loss at inception
exists. As a result, nominal values of US$1,000 per newly issued
convertible bonds were allocated to the financial liability. The
remaining balance was set up as deferred derivative loss as a
contra asset account. The deferred derivative losses were then
amortized to profit and loss over the life of the convertible
bonds. Subsequent changes in fair value of the conversion feature
were recognized at FVTPL.
The
Company measures the fair value of the embedded derivative by
reference to the fair value on the convertible debenture issuance
date with an estimated life ending on the convertible debenture
maturity date and revalues them at each reporting date. In
determining the fair value of the embedded derivatives, the Company
used the Black-Scholes option pricing model with the following
assumptions: average volatility rate; market price at the reporting
date; risk-free interest rate; the remaining expected life of the
embedded derivatives and an exchange rate at the reporting date.
The inputs used in the Black-Scholes model are taken from
observable markets. Changes to assumptions used can affect the
amounts recognized in the consolidated financial
statements.
NOTE 4 – SECURTER SYSTEMS INC.
On
February 26, 2019, the Company entered into an agreement with
Securter Inc., in terms of which a newly formed corporation,
Securter Systems Inc. (“SSI”) would acquire all the
assets and liabilities of Securter Inc. Upon incorporation, SSI
issued 25,937,594 Class A common shares (“Original Class A
Common Shares”) to the shareholders of Securter Inc. and
100,000 Class B common shares to the Company. Each Class B common
share is non-participating and carries 1,000 votes. The Company
shall have the right to purchase up to 30.3% Original Class A
Common Shares of SSI at a price of US$0.23 per share for a total
purchase consideration of up to US$3,000,000.
As at
December 31, 2019, SSI had 26,064,546 Original Class A Common
Shares issued and outstanding whereby the Company held 126,951 of
Original Class A Common Shares of SSI. Together with the
Company’s holding in Class B common shares, the Company held
a voting interest of 79.4% and a participating economic interest of
0.49% as at December 31, 2019. During the period January 1, 2020 to
September 8, 2020, SSI issued a further 733,482 Original Class A
Common Shares to the Company, giving the Company a voting interest
of 79.1% and a participating economic interest of 3.13% or 860,433
Original Class A Common Shares in SSI as at September 8,2020.
On
September 8, 2020, SSI effected a reorganization of its capital
structure. All the issued and outstanding Original Class A Common
Shares and Class B shares of SSI were cancelled, and new Class A
shares (“New Class A Common Shares”) were issued. As a
result of the reorganization, the Company received 4,396,000 New
Class A Common Shares or 16% ownership of SSI in exchange for the
Company’s return of its 860,433 Original Class A Common
Shares and its 100,000 Class B common shares. Consequently, the
Company ceased to hold voting control of SSI on September 8, 2020.
The reorganization is accounted for as the disposition of SSI, the
subsidiary by the Company. The fair value of the consideration
received, the 4,396,000 New Class Common Shares or 16% economic
interest in SSI is estimated at $Nil. This is based on the early
stage of the business project of SSI and the uncertainty of ability
to finance the development cost to commercialization of SSI’s
business project.
The
convertible bonds consisted of a liability component
(“financial liability”) and an embedded derivative
conversion feature (“derivative liability”) and contra
asset account of deferred derivative loss due to significant amount
of fair value of the derivative liability at inception in excess of
the net proceeds. The net proceeds of these convertible bonds were
first allocated to the fair value of the derivative liability. As
the fair value of the derivative liability at inception exceeds the
net proceeds, the indication of significant loss at inception
exists. As a result, nominal values of US$1,000 per newly issued
convertible bonds were allocated to the financial liability. The
remaining balance was set up as deferred derivative loss as a
contra asset account. The deferred derivative losses were then
amortized to profit and loss over the life of the convertible
bonds. Subsequent changes in fair value of the conversion feature
were recognized at FVTPL (Note 2(k)).
a)
During the three
months ended March 31, 2021, the Company issued convertible
promissory notes for gross proceeds of $184,837 (US$147,500) (three
months ended March 31, 2020 – $88,149 (US$66,500)). 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 shares of
the Company at a price equal to 61% of the Market Price. The
“Market Price” means either 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 closing bid
prices during the twenty-five trading 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.
At
inception, the net proceeds of $171,621 (US$137,000 or gross
proceeds of US$147,500 net of US$10,500 cash discount and
transaction costs) were allocated to the derivative liability at
$761,214 related to the conversion feature which was determined
using the Black-Scholes option pricing model. The remaining balance
of the net proceeds were then allocated to nominal values of $3,771
(U$1,000 per each convertible bond issued) and deferred derivative
loss, a contra asset account of $593,364.
b)
During the three
months ended March 31, 2021, the Company recognized through profit
and loss a change in the fair value of the derivative liability and
the amortization of the deferred derivative loss of $350,496 (March31, 2020 – $57,109). As at March 31, 2021, the fair value of
the derivative liability related to the conversion feature of
$668,608 was determined using the Black-Scholes option pricing
model based on the following assumptions: share price of US$0.0087;
a risk-free rate of 0.23%; stock price volatility ranging from 297%
to 363%; dividend yield of 0%; and expected life of conversion
features ranging from 0.23 to 0.93 years. (December 31, 2020
– $1,610,858, determined using the Black-Scholes option
pricing model based on the following assumptions: share price
ranging from US$0.001 to US$0.004; a risk-free rate of 0.25%; stock
price volatility ranging from 172% to 502%; dividend yield of 0%;
and expected life of conversion features ranging from 0 to 0.8
years.)
c)
During the three
months ended March 31, 2021, promissory notes with a face value of
US$206,000 were converted into 87,526,697 common shares of the
Company (three months ended March 31, 2020 - US$171,575 converted
and 229,986,206 common shares issued).
NOTE 7 – SHARE CAPITAL
a)
Authorized
Capital
Unlimited number of
common shares, participating, voting (voting right of 1 vote per
share), with no par value.
2,100,000 Class
“B” common shares, non-participating, voting (voting
right of 1,000 votes per share), with no par value.
b)
Issued
and Outstanding Common Shares
i.
i.
During the three
months ended March 31, 2020, the Company converted promissory notes
with face value of US$171,575 into 229,986 common shares of the
Company. An amount of $252,102 was allocated to the share capital
in connection with these promissory note conversions.
ii.
During the three
months ended March 31, 2021, the Company converted promissory notes
with face value of US$206,000 into 87,526,697 common shares of the
Company. An amount of $1,197,425 was allocated to the share capital
in connection with these promissory note conversions.
On
February 14, 2019, the Company granted 5,750,000 stock options to
directors of the Company and 4,250,000 stock options to
consultants. The options have an exercise price of US$0.006 and
expire on February 14, 2027. The continuity of stock options is
summarized below:
The
Company did not issue any stock options in 2020.
f)
Escrow
Shares
On
September 19, 2014, the Company entered into an escrow agreement
with a creditor. The Company agreed to pay the creditor $2,500 upon
signing of the agreement and to issue 1,500 shares to be held in
escrow. The Company was obligated to pay the creditor a further
$7,334 (US$6,687) forty-five days after the Company’s stock
becomes DWAC-eligible. On December 22, 2016, the Company paid
$5,374 (US$4,000) and the creditor agreed to release these shares
from escrow.
As of
March 31, 2021 and December 31, 2020, the 1,500 shares were held in
trust by the corporate lawyer and have not been returned to the
Company’s Treasury.
NOTE 8 – RELATED PARTY TRANSACTIONS
Balances
and transactions between the Company and its subsidiaries, which
are related parties of the Company, have been eliminated on
consolidation and are not disclosed. Details of transactions
between the Company and other related parties, in addition to those
transactions disclosed elsewhere in these consolidated financial
statements, are described below. All related party transactions
were in the ordinary course of business and were measured at their
exchange amounts.
a)
Compensation
of Key Management Personnel
i.
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.
During the three
months ended March 31, 2021, the Company incurred consulting fees
for services provided by a former director of the Company in the
amount of $Nil (three months ended March 31, 2020
-$1,831).
NOTE 9 – FINANCIAL RISK MANAGEMENT OBJECTIVES AND
POLICIES
The
Company is exposed to various risks in relation to financial
instruments. The Company’s financial assets and liabilities
by category are summarized in Note 2(k). The Company’s risk
management is coordinated in close co-operation with the board of
directors and focuses on actively securing the Company’s
short to medium-term cash flows and raising financing for the
Company’s capital expenditure program. The Company does not
actively engage in the trading of financial assets for speculative
purposes. The most significant financial risks to which the Company
is exposed are as follows:
Liquidity risk is
the risk that the Company will not be able to meet its financial
obligations as they fall due. The Company is dependent upon the
availability of credit from its suppliers and its ability to
generate sufficient funds from equity and debt financing to meet
current and future obligations. The Company has a working capital
deficiency of $238,702 as at December 31, 2020. There can be no
assurance that such debt or equity financing will be available to
the Company.
b)
Interest
Rate Risk
Interest rate risk
is the risk that the fair value or future cash flows of a financial
instrument will fluctuate because of changes in market interest
rates. The Company is not exposed to significant interest rate risk
as the interest rates associated with the convertible promissory
notes are fixed.
c)
Credit
Risk
Credit
risk is the risk of loss associated with a counter party’s
inability to fulfill its payment obligations. As the Company is in
the development stage and has not yet commenced commercial
production or sales, it is not exposed to significant credit
risk.
d)
Foreign
Exchange Risk
Foreign
exchange risk is the risk that the fair value or future cash flows
of a financial instrument will fluctuate because of changes in
foreign exchange rates. The Company is exposed to foreign exchange
risk to the extent it incurs currency exchange platform service and
development expenditures and operating costs in foreign currencies
including the U.S. Dollar. The Company does not hedge its exposure
to fluctuations in the related foreign exchange rates.
e)
Fair
Values
The
Company uses the following hierarchy for determining fair value
measurements:
Level
1:
Quoted prices in
active markets for identical assets or liabilities.
Level
2:
Other techniques
for which all inputs which have a significant effect on the
recorded fair value are observable, either directly or
indirectly.
Level
3:
Techniques which
use inputs that have a significant effect on the recorded fair
value that are not based on observable market data.
The
level within which the financial asset or liability is classified
is determined based on the lowest level of significant input to the
fair value measurement. The Company’s financial instruments
were measured at fair value using Level 1 valuation technique
during the years ended December 31, 2020, 2019 and 2018. The
carrying values of the Company’s financial assets and
liabilities approximate their fair values.
NOTE 10 – CAPITAL MANAGEMENT
The
Company’s objective for managing its capital structure is to
safeguard the Company’s ability to continue as a going
concern and to ensure it has the financial capacity, liquidity and
flexibility to fund its ongoing operations and capital
expenditures.
The
Company manages its share capital as capital, which as at March 31,2021, amounted to $10,073,706. At this time, the Company’s
access to the debt market is limited and it relies on equity
issuances and the support of shareholders to fund the development
of its business. The Company monitors capital to maintain a
sufficient working capital position to fund annualized
administrative expenses and capital investments.
As at
March 31, 2021, the Company had a working capital deficiency of
$147,795. The Company will
issue shares and may from time to time adjust its capital spending
to maintain or adjust the capital structure. There can be no
assurance that the Company will be able to obtain debt or equity
capital in the case of operating cash deficits.
The
Company’s share capital is not subject to external
restrictions. The Company has not paid or declared any dividends
since the date of incorporation, nor are any contemplated in the
foreseeable future. There were no changes in the Company’s
approach to capital management during the three months ended March31, 2021.
NOTE 11 – SUBSEQUENT EVENTS
The
Company did not identify any subsequent events during the period
from April 1, 2021, to the date of this report.
17
Dates Referenced Herein and Documents Incorporated by Reference
