Deepspatial Inc. — Interim / Quarterly Report 2021

Mar 1, 2021

DEEPSPATIAL INC.

(formerly, Aylen Capital Inc.)

Condensed interim consolidated financial statements

For the three and six months ended December 31, 2020 and 2019

(Unaudited - expressed in Canadian Dollars)

NOTICE TO READER

Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that the interim financial statements have not been reviewed by an auditor.

The accompanying unaudited consolidated interim financial statements have been prepared by and are the responsibility of the management.

The Company's independent auditor has not performed a review of these consolidated interim financial statements in accordance with the standards established by the Chartered Professional Accountants of Canada for a review of interim financial statements by an entity's auditor.

DEEPSPATIAL INC. (formerly AYLEN CAPITAL INC.)

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

THREE AND SIX MONTHS ENDED DECEMBER 31, 2020 AND 2019

(Unaudited - Amounts expressed in Canadian Dollars)

TABLE OF CONTENTS

Page No

Cover
Index
Condensed Consolidated Interim Statements of Financial Position as at December 31, 2020	5
(unaudited) and June 30, 2020 (audited)
Condensed Consolidated Interim Statements of loss and Comprehensive loss for the three and	6
six months ended December 31, 2020 and December 31, 2019 (unaudited)
Condensed Consolidated Interim Statements of Changes in Equity for the six months ended	7
December31, 2020and December31, 2019(unaudited)
Condensed Consolidated Interim Statements of Cash Flows for the six months ended	8
December31, 2020 and December31, 2019(unaudited)
Condensed notes to the interim consolidatedfinancial statements	9-18

DeepSpatial Inc. (formerly, Aylen Capital Inc.)

Interim Consolidated Statements of Financial Position (Unaudited- expressed in Canadian dollars)

ASSETS CURRENT Cash $ Restricted cash (Note 6) Sales tax receivable Intangible assets(Note 5) TOTAL ASSETS $ LIABILITIES AND SHAREHOLDERS’ EQUITY LIABILITIES CURRENT Accounts payable and accrued liabilities $ TOTAL LIABILITIES SHAREHOLDERS’ EQUITY Share capital (Note 6) Obligation to issue shares Share subscriptions Accumulated deficit TOTAL SHAREHOLDERS’ EQUITY TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $	December 31, 2020 211,969 $ 1,258,350 37,566 1,507,885 1,743,126 3,251,011 $ 31,937 $ 31,937 5,597,104 210,000 - (2,588,030) 3,219,074 3,251,011 $	June 30, 2020 560,900 642,000 -
		1,202,900 1,897,178
		3,100,078
		40,354
		40,354
		2,940,601 642,000 (522,877)
		3,059,724
		3,100,078

Organization and nature of operations (Note 1) Basis of presentation and going concern (Note 2) Subsequent events (Note 10)

Approved on behalf of the Board of Directors:

“Rahul Kushwah” “Sheldon Kales”

Signed: Rahul Kushwah, CEO and Director

Signed: Sheldon Kales, Director

The accompanying notes are an integral part of these interim condensed consolidated financial statements

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DeepSpatial Inc. (formerly, Aylen Capital Inc.) Condensed Interim Consolidated Statements of Loss and Comprehensive Loss (Unaudited- expressed in Canadian dollars)

For the	For the For the For the
three	three six six
months	months months months
ended	ended ended ended
December 31, 2020	December 31, 2019 December 31, 2020 December 31, 2019
Expenses:
Amortization of intangible assets (Note 5) $ 77,026	$ 76,607 $ 154,052 $ 94,608
Audit and accounting 5,000	- 5,000
Consulting fees 19,500	5,650 39,000 5,650
Legal fees 112,799	- 122,157 -
Management fees (Note 7) 43,630	11,500 88,130 11,500
Marketing expenses (Note 7) 10,500	- 21,000 -
Office and miscellaneous 253	- 253
Professional fees 550	7,500 4,550 7,500
Research and development (Note 7) 1,500	- 5,500
Transfer agent and regulatory fees 10,387	- 10,387
Vehicles use expenses (Note 7) 3,000	- 4,000 -
Travel, entertainment, and related 1,429	- 2,971 -
$ (285,574)	$ (101,257) $ (457,000) $ (119,258)
Loss on acquisition of subsidiary (Note 4) (1,608,153)	- (1,608,153) -
Loss and comprehensive loss $ (1,893,727)	$ (101,257) $ (2,065,153) $ (119,258)
Lossper share-Basic and Diluted $ (0.022)	$ (0.001) $ (0.025) $ (0.002)
Weighted average number of shares outstanding-Basic and Diluted 84,540,164	75,056,250 84,057,582 72,893,008

. The accompanying notes are an integral part of these interim condensed consolidated financial statements

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DeepSpatial Inc. (formerly, Aylen Capital Inc.) Statement of Changes in Shareholders’ Equity (Unaudited- expressed in Canadian dollars)

	Number of
	common
	shares			Obligation to			Share
	outstanding	Share capital			issue shares		Subscriptions		Deficit		Total
Founder shares
issued	11,550,000		1		-		-		-		1
Purchase of
intellectual property	63,450,000		2,145,000		-		-		-		2,145,000
Private placements	5,175,000		517,500		-		-		-		517,500
Net loss for the period	-		-		-		-		(119,258)		(119,258)
Balance as at
December 31, 2019	80,175,000	$	2,662,501	$	-	$	-	$	(119,258)	$	2,543,243
Balance as of June
30, 2020	83,575,000	$	2,940,601	$	-	$	642,000	$	(522,877)	$	3,059,724
Share
subscriptions
received	-		-		-		623,700		-		623,700
Shares issued for
subscriptions	4,219,000		1,265,700		-		(1,265,700)		-		-
Share issuance
cost	-		(7,350)		-		-		-		(7,350)
Reverse takeover
of subsidiary
(Note4)	4,660,509		1,398,153		-		-		-		1,398,153
Finder shares for
reverse takeover
(Note 4)					210,000						210,000
Net loss for the
period	-		-		-		-		(2,065,153)		(2,065,153)
Balance as at
December 31,
2020	92,454,509	$	5,597,104	$	210,000	$	-	$	(2,588,030)	$	3,219,074

The accompanying notes are an integral part of these interim condensed consolidated financial statements

7

DeepSpatial Inc. (formerly, Aylen Capital Inc.) Interim Consolidated Statements of Cash Flows (Unaudited- expressed in Canadian dollars)

	For the six months ended December 31, 2020 For the six months ended December 31, 2019
	OPERATING ACTIVITIES Net loss $ (2,065,153) $ (119,258) Non-cash items included in net loss and other adjustments: Amortization 154,052 94,608 Loss from acquisition of subsidiary 1,608,153 - Changes in non-cash working capital: Sales tax receivable (37,566) - Accountspayable and accrued liabilities (8,417) - CASH USED IN OPERATING ACTIVITIES (348,931) (24,650) INVESTING ACTIVITIES Intangible asset acquisitionpaid in cash - - CASH USED IN INVESTING ACTIVITIES - - FINANCING ACTIVITIES Share subscriptions received 623,700 517,501 Share issuance cost (7,350) - CASH PROVIDED BY FINANCING ACTIVITIES 616,350 517,501 NET CHANGE IN CASH DURING THE PERIOD 267,419 492,851 CASH, BEGINNING OF PERIOD 1,202,900 - CASH, END OF PERIOD $ 1,470,319 $ 492,851 Cash consists of: Cash 211,969 492,851 Restricted cash 1,258,350 - $ 1,470,319 492,851

Cash paid for interest and income taxes $ - -

Non-cash transaction:

4,660,509 common shares valued at $0.30 per share for a consideration of $1,398,153 were issued for the reverse merger transaction and 700,000 common shares valued at $0.30 per share for a consideration of $210,000 have been reserved for issuance as finder shares (Note 4)

The accompanying notes are an integral part of these interim condensed consolidated financial statements

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DeepSpatial Inc. (formerly, Aylen Capital Inc.) Notes to Condensed Interim Consolidated Financial Statements For the Three and Six Months Ended December 31, 2020 and 2019 (Unaudited- expressed in Canadian dollars)

1. Organization and Nature of Operations

Aylen Capital Inc. (“Aylen” ) was incorporated on October 28, 2010 under the Canada Business Corporations Act.

Aylen completed a three- corner amalgamation (the “Transaction”) pursuant to the terms of an acquisition agreement dated September 2, 2020 among Aylen, Loc8 Corp., 2774951 Ontario Limited, John Pennal and Grapevine Analytics Inc. The transaction was completed on December 22, 2020.

The transaction involved: (i) the acquisition of all of the issued and outstanding securities of Loc8 Corp. (now called DeepSpatial (Ontario) Inc.) (“Loc8”) by way of a three- cornered amalgamation, pursuant to which, 2774951 Ontario Limited (a wholly owned subsidiary of Aylen) amalgamated with Loc8 (the “Loc8 Acquisition); (ii) the sale of Grapevine Analytics Inc. to RDH Inc.; and (iii) immediately prior to completion of the Loc8 Acquisition, the consolidation of the common shares of Aylen on a one (1) new share for four (4) old share basis (the “Consolidation”) resulting in 4,660,509 post Consolidation Common shares and the payment of a special dividend of approximately $0.02 per Common Share on a pre-Consolidation basis.

Pursuant to the Loc8 Acquisition, each shareholder of Loc8 received one (1) post-Consolidation Common Share for each Loc8 share held, resulting in the issuance of 87,794,000 post-Consolidation Common Shares to the shareholders of Loc8. Following the completion of the transaction, Aylen has a total of 92,454,509 Common shares outstanding. Aylen will issue 700,000 Common shares as finder’s fee in connection with the completion of the transaction. The finder’s shares were issued in January 2021.

At completion of the transaction, Aylen changed its name to DeepSpatial Inc. (the “Company”).

The Company leverages Artificial Intelligence to create robust location intelligence solutions for transforming existing location data into business outcomes. Location data can be anything from addresses and latitude/longitude coordinates, buildings, monuments or alike and when this data is correlated with internal business data, it creates business context to improve decision making backed by data driven analytics.

The Company’s corporate head office is located at 77 King Street W, Suite 3000, Toronto, Ontario, Canada, M5K 1G8.

The Board of Directors of the Company authorized these financial statements for issuance on March 1, 2021.

2. Basis of Presentation and Going Concern

Basis of Preparation

These condensed interim consolidated financial statements have been prepared on the historical cost basis except for financial instruments recorded at fair value. In addition, these interim consolidated financial statements have been prepared using the accrual basis of accounting, except for cash flow information. The functional currency of the Company is the Canadian dollar, which is also the Company’s reporting currency.

Statement of Compliance

These condensed interim consolidated financial statements (the "Financial Statements") are unaudited and have been prepared on a condensed basis in accordance with International Accounting Standard 34, Interim Financial Reporting issued by the International Accounting Standards Board ("IASB"), using accounting policies of International Financial Reporting Standards ("IFRS") and interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”). Accordingly, they do not include all of the information required for full annual financial statements required by IFRS as issued by IASB and interpretations issued by IFRIC.

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DeepSpatial Inc. (formerly, Aylen Capital Inc.) Notes to Condensed Interim Consolidated Financial Statements For the Three and Six Months Ended December 31, 2020 and 2019 (Unaudited- expressed in Canadian dollars)

2. Basis of Presentation and Going Concern (Cont’d)

Statement of Compliance (Cont’d)

The condensed interim financial statements should be read in conjunction with the annual audited financial statements for the year ended June 30, 2020, which have been prepared in accordance with IFRS, as issued by the International Accounting Standards Board (“IASB”). The unaudited condensed interim financial statements are based on accounting policies as described in the June 30, 2020 annual financial statements.

Going Concern Assumption

These financial statements have been prepared using IFRS on a going concern basis, which presumes the realization of assets and discharge of liabilities in the normal course of business, for the next fiscal year. At December 31, 2020, the Company had cash of $211,969, restricted cash of $1,258,350, working capital of $1,475,948 and an accumulated deficit of $2,588,030. The continuing operations of the Company are dependent on funding provided by equity investors. The Company intends to finance its future requirements through a combination of equity and/or debt issuance. There is no assurance that the Company will be able to obtain such financings or obtain them on favorable terms.

Since February 29, 2020, the outbreak of the novel strain of coronavirus, specifically identified as “COVID-19”, has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and physical distancing, have caused material disruption to business globally resulting in an economic slowdown. Global equity markets have experienced significant volatility and weakness. The duration and impact of the COVID-19 outbreak is unknown at this time, as is the efficacy of the government and central bank interventions. It is not possible to reliably estimate the length and severity of these developments and the impact on the financial results and condition of the Company in future periods.

This uncertainty may cast significant doubt about the ability of the Company to continue as a going concern. These financial statements do not include any adjustments to the carrying value or presentation of assets or liabilities that might be necessary should the Company be unable to continue as a going concern. These adjustments could be material.

Significant Accounting Judgments and Estimates

The preparation of these consolidated financial statements in compliance with IFRS requires management to make certain critical accounting estimates and assumptions. These estimates and assumptions affect the reported amounts of assets, liabilities, shareholders’ equity, and the disclosure of contingent assets and liabilities, as at the date of the financial statements, and expenses for the period reported.

Critical Judgements

The preparation of these interim consolidated financial statements requires management to make judgements regarding the going concern of the Company (discussed above), as well as the determination of functional currency. The functional currency is the currency of the primary economic environment in which an entity operates. The functional currency for the Company has been determined to be the Canadian dollar.

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DeepSpatial Inc. (formerly, Aylen Capital Inc.) Notes to Condensed Interim Consolidated Financial Statements For the Three and Six Months Ended December 31, 2020 and 2019 (Unaudited- expressed in Canadian dollars)

2. Basis of Presentation and Going Concern (Cont’d)

Significant Accounting Judgments and Estimates (Cont’d)

Key Sources of Estimation Uncertainty

Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates and such differences could be significant.

Significant estimates made by management affecting the financial statements include:

Deferred tax assets & liabilities

The estimation of income taxes includes evaluating the recoverability of deferred tax assets and liabilities based on an assessment of the Company’s ability to utilize the underlying future tax deductions against future taxable income prior to expiry of those deductions. Management assesses whether it is probable that some or all of the deferred income tax assets and liabilities will not be realized. The ultimate realization of deferred tax assets and liabilities is dependent upon the generation of future taxable income. To the extent that management’s assessment of the Company’s ability to utilize future tax deductions changes, the Company would be required to recognize more or fewer deferred tax assets or liabilities, and deferred income tax provisions or recoveries could be affected.

Useful life of intangible assets

The intangible asset is depreciated over its estimated useful life. Estimated useful lives are determined based on current facts and past experience and takes into consideration the anticipated life of the asset, the potential for technological obsolescence, and regulations.

3. Significant Accounting Policies

The accounting policies set out in the financial statements at June 30, 2020, have been applied consistently to all periods presented in these interim consolidated financial statements.

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DeepSpatial Inc. (formerly, Aylen Capital Inc.) Notes to Condensed Interim Consolidated Financial Statements For the Three and Six Months Ended December 31, 2020 and 2019 (Unaudited- expressed in Canadian dollars)

3. Significant Accounting Policies (Cont’d)

COVID-19 Estimation Uncertainty

In March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, potentially leading to an economic downturn. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s business or ability to raise funds.

New standards adopted

Effective July 1, 2020, the Company adopted the amendments that were issued by the International Accounting Standards Board on October 22, 2018, to IFRS 3 Business Combinations, which clarified the classification of whether a transaction results in an asset or a business acquisition. The amendments include an election to use a concentration test. This is a simplified assessment that results in an asset acquisition if substantially all of the fair value of the gross assets is concentrated in a single identifiable asset or a group of similar identifiable assets. If a preparer chooses not to apply the concentration test, or the test is failed, then the assessment focuses on the existence of a substantive process. The adoption of the amendment to IFRS 3 had no impact on the Company’s condensed interim consolidated financial statements as at and for the three months ended December 31, 2020.

4. Reverse merger transaction

During the six months ended December 31, 2020, the Company completed the following acquisition:

Effective December 22, 2020, Aylen was part of a three-cornered amalgamation among Aylen, 2774951 Ontario Limited. (a wholly owned subsidiary) and Loc8 (the “Transaction”). The result of the transaction was that Aylen acquired all the issued and outstanding securities of Loc8 on the basis of one share of Aylen for each share of Loc8. At completion of the transaction, Aylen changed its name to DeepSpatial Inc. and Loc8 was amalgamated into 2774951 Ontario Limited.

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DeepSpatial Inc. (formerly, Aylen Capital Inc.) Notes to Condensed Interim Consolidated Financial Statements For the Three and Six Months Ended December 31, 2020 and 2019 (Unaudited- expressed in Canadian dollars)

4. Reverse merger transaction (Cont’d)

Under IFRS, this was considered a Reverse Merger and Recapitalization (commonly referred to as a Reverse Take Over or “RTO”). The Company issued 4,660,509 shares to the shareholders of former Corporation valued at $0.30 per share, with a total value of $1,398,153 and 700,000 common shares (finder shares) valued at $210,000 for the acquisition.

The fair value of the acquired assets and liabilities assumed is as follows:

Assets acquired by the Company:		-
Liabilities assumed by the Company:		-
Net assets (liabilities) assumed		-
Consideration:
4,660,509 common shares issued at a fair value of $0.30 per
share		(1,398,153)
700,000 common shares being finders’ shares at a fair value
of $0.30 per share (Note 10)		(210,000)
Listing expense (Loss on acquisition of subsidiary)	$	(1,608,153)

5. Intangible assets

On September 9, 2019, the Company issued 63,450,000 common shares with a fair value price of $0.0338 per common share for a total fair value consideration of $2,145,000, issued to Algo8 AI Private Limited, a Company incorporated in India and its associates including their designates, being the purchase and assignment of Intellectual Property comprising of development and creation of the work product related to geospatial artificial intelligence for enterprises. The issuance of shares is being recorded as an asset acquisition. This intellectual property amount of $2,145,000 is estimated to have a useful life of 7 years and is being amortized on a straight-line basis.

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DeepSpatial Inc. (formerly, Aylen Capital Inc.) Notes to Condensed Interim Consolidated Financial Statements For the Three and Six Months Ended December 31, 2020 and 2019 (Unaudited- expressed in Canadian dollars)

5. Intangible assets (Cont’d)

		Intellectual Property
Cost:
Balance as at September 4, 2019	$	-
Additions		2,145,000
Balance as at June 30, 2020	$	2,145,000
Additions		-
Balance as at December 31, 2020	$	2,145,000
Accumulated amortization:
Balance as at September 4, 2019	$	-
Amortization		247,822
Balance as at June 30, 2020	$	247,822
Amortization		154,052
Balance as at December 31, 2020	$	401,874
Net book value:
At December 31, 2020	$	1,743,126
At June 30, 2020	$	1,897,178

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DeepSpatial Inc. (formerly, Aylen Capital Inc.) Notes to Condensed Interim Consolidated Financial Statements For the Three and Six Months Ended December 31, 2020 and 2019 (Unaudited- expressed in Canadian dollars)

6. Capital Stock

The Company is authorized to issue the following shares:

• Unlimited number of common shares and an unlimited number of preferred shares issuable in series

a) Common shares

The holders of common shares are entitled to receive dividends which are declared from time to time and are entitled to one vote per share at meetings of the Company. All shares are ranked equally with regards to the Company's residual assets.

At December 31, 2020 the Company has 92,454,509 (June 30, 2020: 83,575,000) common shares issued and outstanding.

b) Share issuances

• During the six month period ended December 31, 2020

• On December 22, 2020, the Company issued 4,219,000 common shares at $0.30 per share in private placements which included subscription funds for $642,000 received during the prior year. The Company incurred share issuance costs for $7,350.

• The Company issued 4,660,509 shares in connection with the acquisition discussed in Note 4.

During the period from incorporation to June 30, 2020

• On September 4, 2019, the Company issued 11,550,000 common shares, as founders’ shares, for $1.

• • On September 9, 2019, the Company issued 63,450,000 common shares for the purchase of intellectual property valued at $2,145,000 (Note 4).

• On January 30, 2020, the Company issued 8,325,000 common shares at $0.10 per share in private placements and raised $832,500.

• On April 21, 2020, the Company issued 250,000 common shares at $0.10 per share in private placements and raised $25,000.

• In conjunction with the above private placements, the Company incurred cash share issuance costs of $61,900.

c) Share subscription and restricted cash

As of June 30, 2020, the Company had received cash in escrow for $642,000, being subscription for common shares at $0.30 per share. As of December 31, 2020, the cash in escrow is $1,258,350, reflected as restricted cash in the financial statements. This cash in held in escrow until the completion and listing of a Going Public Transaction.

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DeepSpatial Inc. (formerly, Aylen Capital Inc.) Notes to Condensed Interim Consolidated Financial Statements For the Three and Six Months Ended December 31, 2020 and 2019 (Unaudited- expressed in Canadian dollars)

7. Related Party Transactions

Related parties include key management personnel, the Board of Directors, close family members and enterprises that are controlled by these individuals as well as certain persons performing similar functions. Key management of the Company are members of the Board of Directors, the Chief Executive Officer (“CEO”), the Chief Financial Officer (“CFO”) and the Chief Technology Officer (“CTO”). Transactions with key management personnel not disclosed elsewhere in the financial statements include the following:

		Six months ended December 31, 2020 Six months ended December 31, 2019
Management fees to the Executive Chairman Management fees to the CEO Management fees to the CFO Total Management fees Research and development fees to a company in which the CTO and director of the Company is also a director Marketing fees to a company controlled by a child of the Executive Chairman Consulting fees to a company controlled by a child of the Executive Chairman Vehicle expense to the Executive Chairman and CEO	$	30,000 $ 5,000 39,000 6,500 19,130 -
	$ $	88,130 $ 11,000 4,000 - 21,000 - 15,000 - 4,000 -
		132,130 $ 11,000
		Three months ended December 31, 2020 Three months ended December 31, 2019
Management fees to the Executive Chairman Management fees to the CEO Management fees to the CFO Total Management fees Research and development fees to a company in which the CTO and director of the Company is also a director Marketing fees to a company controlled by a child of the Executive Chairman Consulting fees to a company controlled by a child of the Executive Chairman Vehicle expense to the Executive Chairman and CEO	$	15,000 $ 5,000 19,500 6,500 9,130 -
	$ $	43,630 $ 11,500 - - 10,500 - 7,500 - 3,000 -
		64,630 $ 11,500

As of December 31, 2020, there was $nil due to any related parties (December 31, 2019 - $nil)

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DeepSpatial Inc. (formerly, Aylen Capital Inc.) Notes to Condensed Interim Consolidated Financial Statements For the Three and Six Months Ended December 31, 2020 and 2019 (Unaudited- expressed in Canadian dollars)

8. Financial Instruments

The fair value of the Company’s sales tax receivable and accrued liabilities approximates carrying value, due to their short-term nature. The Company’s cash and restricted cash is measured at fair value under the fair value hierarchy based on level one quoted prices in active markets for identical assets or liabilities.

Financial risk management and objectives

The Company’s activities expose it to a variety of financial risks: credit risk, liquidity risk, and market risk (including interest rate risk, foreign currency risk, and commodity price risk).

The Company thoroughly examines the various financial risks to which it is exposed and assesses the impact and likelihood of those risks. Where material, these risks are reviewed and monitored by the Board of Directors.

Credit risk

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. The Company is not exposed to significant credit risk.

Liquidity risk

Liquidity risk is the risk that the Company will not have sufficient cash resources to meet its financial obligations as they come due. The Company’s liquidity and operating results may be adversely affected if its access to the capital market is hindered, whether as a result of a downturn in stock market conditions generally or matters specific to the Company. The Company generates cash flows primarily from its financing activities.

The Company manages its liquidity needs by carefully monitoring scheduled costs. Liquidity is measured in various time bands, on day to day and week-to-week basis, as well as on long term liquidity needs over 180 day to 360 day look out periods. Funding for long term liquidity needs is based on the ability of the Company to successfully complete private placements.

As at December 31, 2020, the Company had sufficient unrestricted cash of $211,969 to settle current liabilities of $31,937.

Market Risk

Market risk is the risk of loss that may arise from changes in market factors such as interest rates, commodity and equity prices, and foreign exchange rates.

(a) 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.

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DeepSpatial Inc. (formerly, Aylen Capital Inc.) Notes to Condensed Interim Consolidated Financial Statements For the Three and Six Months Ended December 31, 2020 and 2019 (Unaudited- expressed in Canadian dollars)

8. Financial Instruments (Cont’d)

(b) Price risk

The Company is not exposed to significant price risk as it does not possess investments in publicly traded securities.

• (c) Currency risk

Currency risk is the risk that the fair value of future cash flows of a financial instrument denominated in a foreign currency will fluctuate because of changes in foreign exchange rates. The Company is not exposed to significant currency risk as it is not actively dealing in foreign currency.

9. Capital Management

The Company considers its capital to be shareholders’ equity, which is comprised of share capital and deficit, which as at December 31, 2020 totaled $3,219,074. The Company’s capital structure is adjusted based on the funds available to the Company such that it may continue to seek new opportunities. The Board of Directors does not establish quantitative return on capital criteria, but rather relies on the expertise of management and other professionals to sustain future development of the business.

The sources of future funds presently available to the Company are through the sale of equity capital of the Company. The ability of the Company to arrange such financing in the future will depend in part upon the prevailing capital market conditions as well as the business performance of the Company. There can be no assurance that the Company will be successful in its efforts to arrange additional financing, if needed, on terms satisfactory to the Company.

Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. The Company is not subject to externally imposed capital restrictions.

10. Subsequent Events

• a) On January 4, 2021, the Company issued 700,000 common shares being finder’s shares in connection with the reverse merger transaction.

• b) On January 29, 2021, the Company announced that it has received conditional approval from the Canadian Securities Exchange for the listing of its shares for trading, which is expected to commence on March 4, 2021 under the symbol DSAI.

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