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Dynamite Blockchain Corp. — Management Reports 2024
Dec 31, 2024
47277_rns_2024-12-31_81ce1f85-7905-4fdc-96cb-44a729671543.pdf
Management Reports
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Dynamite Blockchain Corp.
(formerly Cryptoblox Technologies Inc.)
MANAGEMENT DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 2024
Prepared as of December 30, 2024
Contact Information
Dynamite Blockchain Corp.
6th floor - 905 West Pender Street
Vancouver, BC
V6C 1L6
Telephone: 236-259-0279
Website: www.dynamiteblock.com
Email: [email protected]
This management, discussion and analysis is prepared as at December 30, 2024, and should be read in conjunction with the condensed consolidated interim financial statements of Dynamite Blockchain Corp. (formerly CryptoBlox Technologies Inc.) (the "Company") for the three and nine months ended October 31, 2024. The condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and the accompanying notes thereto. Except as otherwise disclosed, all dollar figures included therein, and the following management discussion and analysis ("MD&A") are quoted in Canadian dollars. Additional information relevant to the Company's activities can be found on SEDAR at www.sedar.com.
CAUTIONARY STATEMENT ON FORWARD LOOKING INFORMATION
This Management's Discussion and Analysis may include forward-looking statements with respect to business plans, activities, prospects, opportunities, and events anticipated or being pursued by the Company and the Company's future results. Although the Company believes the assumptions underlying such statements to be reasonable, any of the assumptions may prove to be incorrect. The anticipated results or events upon which current expectations are based may differ materially from actual results or events. Therefore, undue reliance should not be placed on such forward-looking information. A number of risks and uncertainties could cause our actual results to differ materially from those expressed or implied by the forward-looking statements, including: (1) a downturn in general economic conditions in North America and internationally, (2) obtaining enough customers, (3) market competition, (4) the risk that the Company does not execute its business plan, (5) inability to retain key employees, (6) inability to finance operations and growth, (7) the Company's ability to protect proprietary rights, and (8) other factors beyond the Company's control.
Forward looking statements speak only as of the date of this MD&A and actual results could differ materially from those anticipated in the forward-looking statements as a result of a number of factors. Investors should not place undue reliance on forward-looking statements as the plans, intentions or expectations upon which they are based may not occur. The forward-looking statements contained herein are expressly qualified by this cautionary statement. Investors are cautioned against attributing undue certainty to forward-looking statements.
OVERVIEW
Dynamite Blockchain Corp. (formerly CryptoBlox Technologies Inc.) (the "Company") was incorporated under the laws of British Columbia on January 16, 2015. On November 26, 2024, the Company changed its name to Dynamite Blockchain Corp. The Company's shares are listed on the Canadian Securities Exchange (the "Exchange") under the symbol "KAS" (formerly BLOX). The Company's registered records office is 6th floor – 905 West Pender Street, Vancouver, BC V6C 1L6. The company has the following wholly owned subsidiaries: 1Linx Ltd, CryptoPlug Technologies Inc., Optimal CP Inc. and Red Water Acquisition Corp ("Redwater").
Dynamite Blockchain Corp. is a blockchain technology and infrastructure company focused on building three (3) primary divisions: Mining, Products & Services, which collectively comprise its Blockchain Ecosystem Strategy.
Mining
The Company has been building its Digital Asset Mining Division since 2021. Since then, it has continued to build on this division with the acquisition of both Bitcoin and Kaspa mining assets.
The Company has recently made a strategic decision to focus on the Kaspa ecosystem. This was evidenced by the rebranding which included changing the Company's trading symbol to "KAS". The Company believes that Kaspa's blockDAG architecture will enable this digital asset to be scalable, secure and decentralized, by allowing multiple blocks to be created and validated simultaneously. The Company also believes that Kaspa will achieve transaction throughput without compromising security or decentralization, which is why the Company has strategically chosen to focus on this digital asset.
3
Products
The Crypto Green license agreement positioned the Company to produce renewable energy mining products which it intends to launch and market.
Services
The Company intended to centre this Division around the Blockchain Fintech acquisition, which has since been terminated. The Company plans on establishing this division in the near future.
Blockchain Ecosystem
Taken collectively, these three divisions make up the building blocks or "pillars" for Dynamite's Blockchain Ecosystem. With a portfolio of mining, products and services, the Company will be focused on building value by generating revenues across each of the divisions, while simultaneously achieving economies of scale through vertical integration.
Redwater Bitcoin Mining
Description of the Project
Redwater is a modular air-cooled data center facility, powered by flared gas and equipped with heat recapture capabilities in Sturgeon County, Alberta. On June 16, 2023, the Company entered into a Share Purchase Agreement (the "Redwater Agreement") with Redwater to acquire 100% of the issued and outstanding shares of Redwater. The acquisition is determined to be a business combination. In exchange for 100% of the total issued and outstanding shares of Redwater, the Company will issue 22,000,000 common shares of the Company (the "Consideration Shares") at a deemed price of $0.50 per Consideration Share to the shareholders of Redwater for a deemed transaction value of $11,000,000. The Consideration Shares will be issued in tranches with 11,828,080 Consideration Shares delivered to Redwater's shareholders on closing of the Acquisition on June 29, 2023, and the remaining 10,171,920 Consideration Shares to be delivered upon the completion of certain milestones being met by Redwater pursuant to the terms of the agreement. The fair value of the consideration for the first tranche of 11,828,080 common shares is $1,774,212 at $0.15 per common share. The fair value of the outstanding consideration second and third tranche of 10,171,920 common shares is $0.12 per common share for a value of $1,216,921. The equipment acquired from Redwater consists of 133 units of Bitmain S19J Pros 104 T.H. ASIC Miners at the cost. On October 7, 2024, the Company through Red Water Acquisition Corp. entered into a Management Service Agreement with True North Data Ltd. to put the Company's 133 S19J Pro mining machines into operation upon completion of on-boarding.
Updates
On June 28, 2024, all original parties to the Acquisition Agreement executed a second addendum agreement (the "Second Addendum") that pushes the outside date of the agreement from June 30, 2024 to September 30, 2024. This follows the same structure of the addendum agreement (the "Addendum") entered into on May 15, 2024 that revises the process of the Milestone Cash Payments where they will be made into an escrow account maintained with Endeavor. Pursuant to the Addendum, the Vendors of Redwater have agreed to transfer an aggregate of $828,865 (the "First Cash Payment"). Upon Redwater receiving the consent of Longshore to certain assignments of the Comgen Assets to Redwater, the First Cash Payment will be released to the Company (the "First Release") to be used to acquire the Comgen Assets from Comgen. Upon completion of the same, the Vendors will be issued an aggregate of 6,024,427 common shares of the Company (the "First Milestone Shares").
Within thirty (30) calendar days of the First Release, the Vendors will transfer an additional aggregate of $585,000 and US$145,950 (together, the “Second Cash Payment”) into an escrow account. Upon Redwater receiving, among other things, evidence of certain amendments to the Miners Agreement and the Data Centre Agreement, the Revised Second Cash Payment will be released to the Company to be used to acquire the True North Miners and the True North Data Centre. Upon completion of the same, the Company will issue the remaining Milestone Shares to the Vendors, being an aggregate of 4,147,492 Milestone Shares (the “Second Milestone Shares”).
The Revised First Milestone Shares and Revised Second Milestone Shares will be subject to a hold period expiring 10 calendar days after the later of (i) the date on which the Company files a business acquisition report under National Instrument 51-102 respecting its acquisition of Redwater, (ii) the date on which the Company files its consolidated annual financial statements for the year ended January 31, 2024 and (iii) the date on which the Second Milestone Shares are issued.
The Company and the vendors of Redwater are currently in the process of completing their post-closing obligations and, in particular their obligations contemplated under the Second Addendum (described below), which was not completed by September 30, 2024. The Company continues to work with the original vendors of Redwater to find a path forward to complete post-closing obligations. On October 7, 2024, the Company through Red Water Acquisition Corp. entered into a Management Service Agreement (“MSA”) with True North Data Ltd. to put the Company’s 133 S19J Pro mining machines into operation upon completion of on boarding. The Redwater site is now operational.
Crypto Green Products
Description of the Project
On November 17, 2023 the Company acquired a four-year royalty-free, assignable, worldwide license (the “License”) to develop and distribute products based on Crypto Green’s modular technology that generates energy off-grid through wind and solar which can power digital asset mining.
In consideration for the license agreement, the Company issued 40,000,000 common shares to Crypto Green’s shareholders. A finder’s fee of 2,800,000 common shares was issued to the party that introduced Crypto Green to the Company. The fair value of the consideration was $0.025 per common share for a total of $1,070,000 where $1,000,000 for the Patent license and 70,000 for the share issuance cost. The Crypto Green Patent license was fair valued at $800,000 on the date of purchase and recognized a $200,000 impairment on intangible during the year ended January 31, 2024. The Crypto Green License is amortized over 4 years.
Updates
The Company intends to optimize the design and subsequently manufacture the renewable energy mining product and market them under its own brand. The Company anticipates that the projected costs for an initial prototype are approximately $250,000.
Following the closing of the Crypto Green license acquisition, the Company has been actively sourcing funds to manufacture the prototype. The Company has also begun discussions with manufacturers in anticipation of producing the Crypto Green Products in commercial quantities.
The Company has not yet sourced any funds for this division or manufactured the prototype. There has not been any material cash expenditures made on the product and plan to date. There have been significant man-hours invested in research towards the optimization of the technology.
There have been no factors that have affected the value of the License since the acquisition.
5
Blockchain Fintech
Description of the Project
On March 4, 2024, the Company signed an agreement to acquire Blockchain Fintech. This was to be the key component in establishing the Company's Services division.
Updates
The Company entered an amended and restated share purchase agreement to acquire Blockchain Fintech on November 1, 2024. This has since been terminated and the Company plans to focus on new transactions.
Kaspa Miners Acquisition
On November 13, 2024, the Company completed an asset purchase agreement with 1001038815 Ontario Inc. (the "Vendor") to purchase five (5) IceRiver KS3 Kaspa mining units. Following the closing of this transaction, the Company and the Vendor have entered into a Management Services Agreement (the "MSA") to provide for the hosting, set up, operations and ongoing maintenance, of the Miners by the Vendor. As consideration for the Agreement, the Company has issued 11,000,000 common shares at a deemed price of $0.10 per share for a deemed transaction value of $1,100,000. The Company also paid a finder's fee of 550,000 common shares at a deemed price of $0.10 per share, for total consideration of $55,000.
Kaspa Mining Limited
On December 2, 2024, the Company entered into a Securities Exchange Agreement to acquire 100% of Kaspa Mining Limited. Kaspa Mining currently owns and operates twenty-five (25) Bitmain KS5 Pro Kaspa Miners. This transaction is not closed as of the date of this report.
SUMMARY OF ANNUAL INFORMATION
The following table sets forth selected financial information of the Company which has been derived from the annual consolidated financial statements of the Company for the years ended January 31, 2024, 2023, and 2022.
| Year ended January 31, 2024 | Year ended January 31, 2023 | Year ended January 31, 2022 | |
|---|---|---|---|
| Total Revenue | $Nil | $Nil | $Nil |
| Total Expenses | $686,075 | $1,157,409 | $21,867,294 |
| Net Loss – Continuing Operations | (2,213,813) | ($7,061,443) | ($21,748,025) |
| Net Gain – Discontinued Operations | $Nil | $1,179,357 | $Nil |
| Net Loss - Per Share – Continuing Operations | ($0.03) | ($0.13) | ($0.05) |
| Net Gain - Per Share – Discontinued Operations | $Nil | $0.02 | $Nil |
| Total Assets | $7,161,830 | $3,879,209 | $10,690,169 |
| Total Long-term Financial Liabilities | - | - | $46,531 |
| Cash Dividends Declared per Share | $Nil | $Nil | $Nil |
During the year ended January 31, 2024, the net loss from continuing operations was $2,213,813 (2023 – loss $7,061,443). The decrease in net loss is mainly attributable to a decrease in impairment of intangibles. The Company recorded a goodwill impairment on Redwater of $2,660,895 and an impairment on BMS Technology License intangible asset of $760,278 compared to the year ended January 31, 2023 which had an impairment of $6,000,000. The company had an investment gain of $1,450,333 as it sold its investment in IONiX Pro Battery Technologies Inc. to Modern Battery Solutions Inc. for $1,725,484. The total expenses reduced as consulting fees reduced by $200,784
and advertising costs reduced by $374,800. Professional fees, amortization expense and office and general expense also reduced over this period. The total assets increased from assets acquired through the acquisition of Redwater Acquisition Corp., Crypto Green Patent License Technology and investment in Modern.
During the year ended January 31, 2023, the net loss from continuing operations was $7,061,443 (2021 - $21,748,025). The decrease in net loss is mainly attributable to a decrease in acquisition cost, consulting fees, advertising expenses, and impairment of intangibles.
During the year ended January 31, 2022, the net loss from continuing operations was $21,748,025 (2021 - $1,654,213). The increase in net loss is mainly attributable to an increase in consideration in excess of net assets acquired from acquisition, an increase in advertising expenses, consulting fees, amortization expense and directors' fees.
SUMMARY OF QUARTERLY RESULTS
The following is selected financial information as prepared in Canadian dollars under International Financial Reporting Standards derived from the Company's most recently completed fiscal quarters since inception:
| October 31, 2024 $ | July 31, 2024 $ | April 30, 2024 $ | January 31, 2023 $ | |
|---|---|---|---|---|
| Total Assets | 7,024,162 | 7,068,460 | 7,120,072 | 7,161,830 |
| Working Capital | 78,517 | 91,050 | 235,809 | 310,785 |
| Revenue | - | - | - | - |
| Net Loss before other income | (171,738) | (247,979) | (237,878) | (187,767) |
| Loss per Share – Continuing Operations | (0.00) | (0.00) | (0.00) | (0.00) |
| October 31, 2023 $ | July 31, 2023 $ | April 30, 2023 $ | January 31, 2023 $ | |
| Total Assets | 6,701,007 | 6,790,565 | 3,845,879 | 3,879,209 |
| Working Capital | (1,561,353) | (1,436,586) | 1,445,360 | 1,514,596 |
| Revenue | - | - | - | - |
| Net Loss – before other income | (194,137) | (209,186) | (94,985) | (146,434) |
| Loss per Share – Continuing Operations | (0.00) | (0.00) | (0.00) | (0.00) |
Factors causing significant variations in quarterly results are as follows:
During the three months ended January 31, 2023, the Company earned revenue of $nil, and incurred operating expenses of $146,434, comprised mainly of consulting fees of $30,000, marketing and advertising expense of $4,110, professional fees of $50,369, and office and general expense of $37,158.
During the three months ended April 30, 2023, the Company earned revenue of $nil, and incurred operating expenses of $94,985, comprised mainly of consulting fees of $30,000, professional fees of $17,875, and office and general expense of $19,460.
During the three months ended July 31, 2023, the Company earned revenue of $nil, and incurred operating expenses of $209,186, comprised mainly of share-based compensation of $100,000, consulting fees of $30,000, professional fees of $32,273, and office and general expense of $9,681. The Company closed the acquisition of Red Water Acquisition Corp. on June 29, 2023 increasing the total net assets by $2,991,133. This acquisition increased current liability by $2,824,018.
During the three months ended October 31, 2023, the Company earned revenue of $nil, and incurred operating expenses of $194,137 comprised mainly of consulting fees of $30,000, management fees of $45,000, professional fees of $45,244, and office and general admin of $4,244.
During the three months ended January 31, 2024, the Company earned revenue of $nil, and incurred operating expenses of $187,767, comprised mainly of professional fees of $99,999, consulting fees of $30,216, management fees of $30,000, share based compensation of $82,060, office and general expense of $40,843. This was offset by a recovery of $93,917 of amortization due to the write-off of BMS Technology License Intangible Asset. The professional fees were predominantly related to legal and audit fees. On Nov 17, 2023, the Company entered into an agreement with Crypto Green to acquire technology that increased the total asset by $763,666 as at January 31, 2024.
During the three months ended April 30, 2024, the Company earned revenue of $nil, and incurred operating expenses of $207,878, comprised mainly of management fees of $30,000 further described in transactions with related parties, consulting fees of $30,896 related to accounting services, professional fees of $36,024 predominately for legal services, advertising expense of $22,939, interest expense of $12,303, office and general expense of $11,744.
During the three months ended July 31, 2024, the Company earned revenue of $nil, and incurred operating expenses of $247,979, comprised mainly of amortization of $50,000 on an intangible asset, management fees of $30,000 further described in transactions with related parties, consulting fees of $31,784 related to accounting services, professional fees of $43,524 predominately for legal services, interest expense of $12,303, office and general expense of $33,803, and $46,918 share-based compensation further described in transactions with related parties.
During the three months ended October 31, 2024, the Company earned revenue of $nil, and incurred operating expenses of $171,738 comprised mainly of amortization of $50,000 on an intangible asset, management fees of $30,000 further described in transactions with related parties, consulting fees of $12,088 related to accounting services, professional fees of $29,882 predominately for legal services, interest expense of $17,123, office and general expense of $3,482, and $28,539 share-based compensation further described in transactions with related parties.
CASH AND WORKING CAPITAL
The Company requires additional working capital to meet its primary business objectives over the next 12 months. As at October 31, 2024, the Company had working capital of $78,517. The Company has not pledged any of its assets as security for loans, or otherwise and is not subject to any debt covenants.
The Company may not be able to generate cash from its operations in the foreseeable future. The Company will have to rely on collections from outstanding receivables and loans, or raise funding through future equity issuances and through short-term borrowing in order to fund ongoing operations and to meet its obligations. The ability of the Company to raise capital will depend on market conditions and it may not be possible for the Company to issue shares on acceptable terms or at all.
Working capital includes a deposit of $1.9M to Daymak Inc. for the Spiritus Prototype and Spiritus Ultimate Prototype Cabrio made when part of the Company's focus was on the development of electric vehicles. Management is currently evaluating strategies to monetize this deposit given that its focus is no longer on the development of electric vehicles and anticipates these funds will be used for the development of the Crypto Green asset. A $150,000 deposit was paid to OJF Capital Ltd., a Company that sources crypto mining locations, for a deposit of a site that will house a future crypto mining operation.
Cash used in operating activities during the nine months ended October 31, 2024 totaled $287,794 (2023 - $17,611). The changes in non-cash working capital were $96,640 (2023 - $362,269).
Cash generated from financing activities during the nine months ended October 31, 2024 totaled $297,750 (2023 - $nil). The Company received $223,000 loan from Xlabs Therapeutics (ONT) Inc. in the amount of $215,000 over various advances and $8,000 from 1437160 BC Ltd. These loans accrue interest of 18% compounded annually until their maturity date after one year.
8
LIQUIDITY
As at October 31, 2024, the Company held assets totaling $7,024,162 consisting of $12,584 in cash, $281,216 in loan receivable, $398,389 in GST/HST receivable, $2,050,000 in deposits and prepaid expense, $1,725,484 in investment in securities.
As at October 31, 2024, the Company had total liabilities of $4,389,156 comprised of $1,216,921 of obligation to issue shares, $1,250,518 of accounts payable and accrued liabilities, $1,607,322 liability on purchase contract, $47,063 of due to related parties, $4,332 income tax payable, and $263,000 loan payable.
As at October 31, 2024, the Company had working capital of $78,517 as compared to working capital of $310,833 at January 31, 2024.
Readers are cautioned that a number of factors beyond the control of the Company could result in the Company not being able to sustain its current position. Such factors could include adverse economic conditions, political and regulatory concerns and key individual staffing problems amongst others.
CAPITAL RESOURCES
The Company defines capital as the components of shareholders' equity. The Company's objectives when managing capital are to support further advancement of the Company's business objectives, as well as to ensure that the Company is able to meet its financial obligations as they come due. The Company manages its capital structure to maximize its financial flexibility making adjustments to it in response to changes in economic conditions and the risk characteristics of the underlying assets and business opportunities. The Company relies on the expertise of the Company's management to sustain the future development of the business. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. There were no changes in the Company's approach to capital management during the nine months ended October 31, 2024, and the Company is not subject to externally imposed capital requirements.
The Company has not issued dividends to date and has no plans to pay dividends in the foreseeable future.
TRANSACTIONS WITH RELATED PARTIES
The Company has identified the directors and senior officers as key management personnel.
As at October 31, 2024, the Company owed a balance of $47,063 to the CEO (January 31, 2024 - $75,000). During the nine months ended October 31, 2024, the Company expensed $90,000 in management fees for the CEO (October 31, 2024 - $45,000). On March 11, 2024, the company issued 54,545 shares at the value per share of $0.55 for total consideration for $30,000 for CEO debt conversion.
On October 30, 2024, the Company issued 2,000,000 restricted share units ("RSUs") with market price of $0.175 per unit to CEO of the Company that vest as follows: (i) 25% to vest four (4) months from issuance; (ii) 25% to vest eight (8) months from issuance; (iii) 25% to vest twelve (12) months from issuance; and (iv) 25% to vest sixteen (16) months from issuance. During the three months ended October 31, 2024, the Company incurred an expense of $1,502.
On January 24, 2024, the Company granted stock options to the officers and directors of the company at an exercise price of $0.065 for a term of five years. The options vest over a schedule of three years starting with 25% immediately and 12.5% after each six months, totally 100% vesting in three years. The fair value of the stock options calculated using the Black-Scholes model was $0.055 per stock option.
a) The CEO and director received 2,500,000 stock options. During the nine months ended October 31, 2024, the Company expensed $53,906 through the statement of loss and comprehensive loss for vesting stock options.
b) The CFO received 250,000 stock options. During the nine months ended October 31, 2024, the Company expensed $5,391 through the statement of loss and comprehensive loss for vesting stock options.
c) The other directors received 100,000 stock options each for a total of 200,000 stock options. During the nine months ended October 31, 2024, the Company expensed $4,312 through the statement of loss and comprehensive loss for vesting stock options.
On June 16, 2023, Bryson Goodwin resigned as Chief Executive Officer and director of the Company. The Company appointed Taryn Stemp as its Interim Chief Executive Officer. On June 16, 2023, the Company appointed Akshay Sood to its board of directors. On August 4, 2023, the Company appointed Akshay Sood as its CEO. On August 25, 2023, Taryn Stemp resigned as director. On August 25, 2023, the Company appointed Rahim Teja to its board of directors.
On June 9, 2023, the Company incurred $100,000 director and officer fees by way of a common share issuance of 7,142,856 common shares. The shares were priced at $0.014 per share based on a 20-day volume weighted average price, resulting in a total transaction value of $100,000.
As at October 31, 2024, the directors of the Company were Akshay Sood, Rahim Teja, and Victor Hiu-Fai Ho.
SHARE DATA
Capitalization as of October 31 2024, and December 30, 2024:
The Company is authorized to issue an unlimited number of common shares.
On November 1, 2023, the Company completed a 10:1 consolidation of its total issued and outstanding shares. No fractional shares were issued. All fractional shares that resulted from the consolidation were rounded up or down to the nearest whole number. All share figures and references have been retroactively adjusted to reflect the share consolidation.
During the nine months ended October 31, 2024
a) On March 11, 2024, the company issued 54,545 shares at the value per share of $0.55 for total consideration for $30,000 for CEO debt conversion.
b) On March 11, 2024, the company issued 54,545 shares at the value per share of $0.55 for total consideration for $30,000 for a consultant debt conversion.
c) On August 1, 2024, the Company issued 25,000 shares for stock options were exercised at an exercise price of $0.065 per stock option for total proceeds of $1,625 and fair value of $1,375.
d) On August 2, 2024, the Company issued 93,750 shares for stock options were exercised at an exercise price of $0.065 per stock option for total proceeds of $6,094 and fair value of $5,156.
e) On August 12, 2024, the Company issued 93,750 shares for stock options were exercised at an exercise price of $0.065 per stock option for total proceeds of $6,094 and fair value of $5,156.
f) On August 20, 2024, the Company issued 937,500 shares for stock options were exercised at an exercise price of $0.065 per stock option for total proceeds of $6,938 and fair value of $51,563.
g) On October 30, 2024, the Company issued 5,000,000 restricted share units ("RSUs") with market price of $0.175 per unit, 2,000,000 to CEO and 3,000,000 to two consultants of the Company, that vest as follows: (i) 25% to vest four (4) months from issuance; (ii) 25% to vest eight (8) months from issuance; (iii) 25% to vest twelve (12) months from issuance; and (iv) 25% to vest sixteen (16) months from issuance. During the three months ended October 31, 2024, the Company incurred an expense of $3,756.
During the year ended January 31, 2024
a) On June 12, 2023, the Company issued 714,286 common shares at a price of $0.14 for a deemed transaction value of $100,000 to the directors and officer of the Company for directors' fees for the year ended January 31, 2023.
b) On June 29, 2023, the Company issued 11,828,080 common shares at a fair value of $0.15 to Redwater shareholders for total consideration of $1,774,212 as part of consideration of Red Water acquisition.
c) On November 20, 2023, the Company has entered into a patent license agreement with Crypto Green Tech Inc., ("Crypto Green") and a finders fees for 42,800,000 common shares at a fair value of $0.025 per common share for a total consideration of $1,070,000.
As at October 31, 2024, and December 30, 2024, the common shares issued and outstanding is 110,464,600 and 122,014,600 respectively.
Stock Options
As at October 31, 2024 and December 30, 2024, there are 4,393,750 stock options outstanding.
Share Purchase Warrants
As at October 31, 2024 and December 30, 2024, there are 450,000 share purchase warrants outstanding.
OFF-BALANCE SHEET ARRANGEMENTS
The Company has no off-balance sheet arrangements that would require disclosure.
COMMITMENTS AND CONTINGENCIES
As a result of a Temporary Order issued on November 26, 2018, issued by the B.C. Securities Commission against certain consultants, the Company is reviewing a private placement that closed in June 2018. The Order cites improper use of the "consultant's exemption" contained in section 2.24 of National Instrument 45-106 and the payment of consulting fees to the persons named in the Order. The June 2018 private placement involved multiple consultants named in the Order. Following completion of the private placement, the Company paid consulting fees to these consultants. There is a risk that the Commission in its review may view the private placement to the consultants and the use of proceeds, as an improper use of s.2.24 and an illegal distribution of shares. If such is adjudicated to be the case, the Company may be required to take remedial action. Such action, if required, cannot at this time be determined.
On July 11, 2019, two individuals filed a Notice of Civil Claim in the Supreme Court of British Columbia seeking certification for a class action against the Company and numerous other parties. Management is not able to quantify the impact of this action.
CRITICAL ACCOUNTING ESTIMATES
For information on material accounting policies and changes in accounting policies, please refer to Note 1 of the financial statements for the year ended January 31, 2024. As at October 31, 2024, there has been no changes.
FINANCIAL AND OTHER INSTRUMENTS
The Board of Directors has overall responsibility for the establishment and oversight of the Company's risk management framework. The Company's risk management activities include the preservation of its capital by minimizing risk related to its cash. The Company does not trade financial instruments for speculative purposes. The Company does not have a risk management committee nor written risk management policies. The Company is exposed in varying degrees to a variety of financial instrument and related risks. Those risks and management's approach to mitigating those risks are as follows:
(a) Fair Values
Assets and liabilities measured at fair value on a recurring basis were presented on the Company's consolidated statement of financial position as at October 31, 2024, as follows:
The fair values of other financial instruments, which include accounts receivable, investments in securities, accounts payable, loans payable, liability on purchase contracts, obligation to issue shares, and amounts due to related parties, approximate their carrying values due to the relatively short-term maturity of these instruments.
The investment in Modern Battery Solutions Inc. (Modern) is an investment in a private company valued at fair value. The acquisition of this investment was between two arm's length parties and occurred on January 2, 2024, for consideration of $1,725,483.
(b) Credit Risk
Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash and accounts receivable. The Company limits exposure to credit loss by placing its cash with high credit quality financial institutions. The Company performs ongoing credit evaluations, does not require collateral and establishes an allowance for doubtful accounts based on the age of the receivable and the specific identification of receivables the Company considers at risk. The carrying amount of financial assets represents the maximum credit exposure.
(c) Foreign Exchange Rate Risk
Foreign exchange rate risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company has exposure to currency risk from assets and liabilities denominated in US dollars. The Company does not use derivative instruments to hedge exposure to foreign exchange rate risk. However, management believes that the risk from fluctuations in foreign exchange rates is not significant.
(d) Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company currently settles its financial obligations with cash. The ability to do this relies on the Company raising debt or equity financing in a timely manner and by maintaining sufficient cash in excess of anticipated needs. Liquidity risk is assessed as high.
(e) Classification of financial instruments
Financial assets and liabilities included in the consolidated statement of financial position are as follows:
| October 31, 2024 | January 31, 2024 | |
|---|---|---|
| $ | $ | |
| Financial assets classified as fair value through profit or loss: | ||
| Cash | 12,584 | 3,276 |
Non-derivative financial liabilities:
| Trade payables | 1,250,518 | 1,200,933 |
|---|---|---|
| Income tax payable | 4,332 | 4,332 |
| Due to related parties | 47,063 | 75,000 |
| Loan Payable (Note 9) | 263,000 | 40,000 |
| Liability on purchase contracts | 1,607,322 | 1,607,322 |
| Obligation to issue shares | 1,216,921 | 1,216,921 |
| 4,389,156 | 4,144,508 |
SUBSEQUENT EVENTS
a) On November 13, 2024, the Company completed an asset purchase agreement with 1001038815 Ontario Inc. to purchase five (5) IceRiver KS3 Kaspa mining units. Following the closing of this transaction, the Company and the Vendor have entered into a Management Services Agreement (the "MSA") to provide for the hosting, set up, operations and ongoing maintenance, of the Miners by the Vendor. As consideration for the Agreement, the Company has issued 11,000,000 common shares at a deemed price of $0.10 per share for a deemed transaction value of $1,100,000. The Company also paid a finder's fee of 550,000 common shares at a deemed price of $0.10 per share, for total consideration of $55,000.
b) On November 22, 2024, the Company received $22,500 one-year term loan from Baiocchi Ventures Inc. at an interest rate of 18% payable on maturity.
c) On December 2, 2024, the Company entered into a Securities Exchange Agreement to acquire 100% of Kaspa Mining Limited. Kaspa Mining currently owns and operates twenty-five (25) Bitmain KS5 Pro Kaspa miners. This transaction is not closed as of the date of this report.
ADDITIONAL DISCLOSURE FOR VENTURE ISSUERS WITHOUT SIGNIFICANT REVENUE
During the three and nine months ended October 31, 2024, the Company generated revenue of $nil from operations.
During the three and nine months ended October 31, 2024, the Company incurred professional fees of $29,882 and $137,634; consulting fees of $12,088 and $74,768; share-based compensation of $28,539 and $122,829; management fees of $30,000 and $90,000; interest expense of $17,123 and $32,659; and office and general expense of $3,482 and $46,678; respectively.
DISCLOSURE OF INTERNAL CONTROLS
In connection with National Instrument ("NI") 52-109 (Certification of Disclosure in Issuer's Annual and Interim Filings) adopted in December 2008 by each of the securities commissions across Canada, the Chief Executive Officer and Chief Financial Officer of the Company will file a Venture Issuer Basic Certificate with respect to the financial information contained in the audited consolidated financial statements and respective accompanying Management's Discussion and Analysis. The Venture Issuer Basic Certification does not include representations relating to the establishment and maintenance of disclosure controls and procedures and internal control over financial reporting, as defined in NI 52-109.
RISK FACTORS
The risk factors disclosed in the annual MD&A for the year ended January 31, 2024 have not changed and apply to the nine months ended October 31, 2024.