Ginger Beef Corporation — Annual Report 2020

Apr 30, 2021

GINGER BEEF CORPORATION CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

Tel: 403 266 5608 BDO Canada LLP Fax: 403 233 7833 903 – 8[th] Avenue SW, Suite 620 www.bdo.ca Calgary AB T2P 0P7 Canada

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Independent Auditor’s Report

To the Shareholders of Ginger Beef Corporation

Opinion

We have audited the consolidated financial statements of Ginger Beef Corporation and its subsidiaries (the Group), which comprise the consolidated statements of financial position as at December 31, 2020 and 2019, and the consolidated statements of net income and comprehensive income, changes in equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2020 and 2019, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRSs).

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Other Information

Management is responsible for the other information. The other information comprises the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities Commissions.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

We obtained the Management’s Discussion & Analysis prior to the date of this auditor’s report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor’s report. We have nothing to report in this regard.

BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the International BDO network of independent member firms.

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Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRSs, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

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• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

The engagement partner on the audit resulting in this independent auditor’s report is John Leavitt.

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Chartered Professional Accountants

Calgary, Alberta April 29, 2021

GINGER BEEF CORPORATION CONSOLIDATED STATEMENTS OF NET INCOME AND COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31

	2020	2019
	$	$
Wholesale Revenue	7,842,002	6,954,059
Royalties and Franchise Fees (Note 10)	244,216	280,541
	8,086,218	7,234,600
Cost of Sales
Purchases	6,141,970	5,437,920
Depreciation of tangibles (Note 7)	193,074	188,580
	6,335,044	5,626,500
Gross Margins	1,751,174	1,608,100
Expenses
Advertising and promotions	52,928	54,616
Depreciation of tangibles (Note 7)	73,357	68,786
General and administrative	870,153	1,017,608
Interest and bank charges	4,464	5,223
Interest on lease liabilities(Note 9)	61,807	72,618
	1,062,709	1,218,851
INCOME FROM OPERATIONS	688,465	389,249
Other Income
Finance income (Note 8)	60,284	69,700
Wage subsidy and Government grant (Note 11 (a) (b))	300,355	-
Commission rebate	35,902	-
Interest income	-	956
	396,541	70,656
Income Before Income Taxes	1,085,006	459,905
Income Taxes
Current income taxes (Note 16)	267,295	28,056
Deferred income taxes(Note 16)	(10,400)	96,600
	256,895	124,656
NET INCOME AND COMPREHENSIVE INCOME	828,111	335,249
Basic and Fully Diluted Income Per Share(Note 15)	0.06	0.03
Weighted average number of shares outstanding(Note 15)	13,361,997	13,361,997

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GINGER BEEF CORPORATION CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS AT DECEMBER 31

AS AT DECEMBER 31
	2020	2019
	$	$
ASSETS
Current Assets
Cash and cash equivalents	1,063,929	686,289
Accounts receivable (Note 4 (c))	1,215,300	747,078
Due from related parties (Note 5)	17,774	82,219
Inventory (Note 6)	294,033	277,042
Goods and services tax recoverable	25,980	28,886
Current portion of sublease receivable (Note 8)	144,140	127,302
Prepaid and deposits	8,143	8,143
	2,769,299	1,956,959
Non-Current Assets
Property, plant and equipment (Note 7, 11(c))	1,480,016	1,640,587
Sublease receivable (Note 8)	551,808	695,948
Due from relatedparties(Note 5)	400,000	52,636
	2,431,824	2,389,171
TOTAL ASSETS	5,201,123	4,346,130
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities (Note 4(d))	540,910	382,471
Wages payable	1,447	127,446
Income tax payable	265,378	25,428
Currentportionof leaseliabilities (Note 9)	159,567	266,775
	967,302	802,120
Non-Current Liabilities
Deferred income (Note 10)	50,001	58,334
Bank loan (Note 11 (a))	40,000	-
Deferred income taxes (Note 16)	52,700	63,100
Leaseliabilities (Note 9)	551,808	711,375
TOTAL LIABILITIES	1,661,811	1,634,929
EQUITY
Share capital (Note 13)	1,422,205	1,422,205
Contributed surplus	108,099	108,099
Retained earnings	2,009,008	1,180,897
	3,539,312	2,711,201
TOTAL LIABILITIES AND EQUITY	5,201,123	4,346,130

Approved on Behalf of the Board

(“signed”) Gilbert Leung

(“signed”) James Leung

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GINGER BEEF CORPORATION CONSOLIDATED STATEMENTS OF CHANGE IN EQUITY FOR THE YEARS ENDED DECEMBER 31

	Share Capital	Contributed Surplus	Retained Earnings	Total Equity
	$	$	$	$
As at January 1, 2020	1,422,205	108,099	1,180,897	2,711,201
Net income for theyear	-	-	828,111	828,111
As at December 31, 2020	1,422,205	108,099	2,009,008	3,539,312
As at January 1, 2019	1,422,205	108,099	845,648	2,375,952
Net income for theyear	-	-	335,249	335,249
As at December 31, 2019	1,422,205	108,099	1,180,897	2,711,201

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GINGER BEEF CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31

	2020 2019 $ $ 828,111335,249 266,431257,366 (8,333) (8,333) (10,400) 96,600 1,075,809680,882 (468,222) (52,941) 117,081(59,125) 2,906(8,343) (16,991) 6,295 -(2,000) 158,439(119,752) (125,999) 6,000 239,950 (59,263) (92,836) (289,129) 982,973391,753 (139,473) (52,785) 40,000 - (99,473) (52,785) (154,642) (349,609) (400,000) - 48,782 - (505,860) (349,609) 377,640(10,641) 686,289696,930 1,063,929686,289
Cash flows from operating activities Net income for the year Items not requiring an outlay of cash: Depreciation of property, plant and equipment Deferred income recognized Deferred income tax
Change in non-cash working capital Accounts receivable Due from related parties Goods and services tax recoverable Inventory Prepaid and deposits Accounts payable and accrued liabilities Wages payable Income taxespayable
Net cash flows from operating activities Cash flows from financing activities Repayment of lease liabilities Bank loan(Note 11)
Net cash flows used in financing activities Cash flows from investing activities Purchase of property, plant and equipment Advance to related parties (Note 5) Governmentgrant onpurchase ofproperty,plant and equipment
Net cash flowsprovided by (used in) investing activities
Net increase(decrease) in cash and cash equivalents Net cash and cash equivalents, beginningofyear
Net cash and cash equivalents, end ofyear

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GINGER BEEF CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

1. NATURE OF OPERATIONS

Ginger Beef Corporation ("the Corporation" or "Ginger Beef") was incorporated under the Business Corporation Act (Alberta) on April 26, 2000 and is listed on TSX Venture Exchange (“TSXV”) under the symbol “GB”.

The Corporation’s operations include Ginger Beef Express Ltd. (“Express”) and its wholly-owned subsidiary Ginger Beef Choice Ltd. (“Choice”). Express is a franchisor of Chinese food restaurants located primarily in Calgary, Alberta and is the holding company for Choice. Express has developed takeout and delivery units, full-service restaurants as well as food court concepts. Choice is a federally inspected manufacturer of fresh and frozen Chinese food items for wholesalers in Canada. Choice was incorporated under the Business Corporation Act (Alberta) on July 22, 1998.

The Corporation’s registered and head office is located at 5521 – 3[rd] Street S.E, Calgary. T2H 1K1.

The Board of Directors approved the financial statements on April 29, 2021.

2. BASIS OF PREPARATION

(a) Statement of compliance

The Corporation’s consolidated financial statements have been prepared in accordance with and using accounting policies in full compliance with the International Financial Reporting Standards (“IFRS”) and International Accounting Standards (“IAS”) issued by the International Accounting Standards Board (“IASB”) and Interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).

(b) Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis except for financial instruments that are measured at fair value through profit and loss. The methods used to measure fair values are disclosed in Note 4.

(c) Functional and presentation currency

These consolidated financial statements are presented in Canadian dollars, which is the Corporation’s functional currency.

(d) Use of estimates and judgments

The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Accounting estimates will, by definition, seldom equal the actual results. Revisions to

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GINGER BEEF CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

accounting estimates are recognized in the period in which the estimates are revised and in any future years affected.

The following discussion sets forth management’s most critical estimates and assumptions in determining the value of assets, liabilities and equity:

• (i) Depreciation and valuation of property, plant and equipment

The amounts recorded for depreciation and amortization of property, plant and equipment are based on estimates. Property, plant and equipment are recorded at cost less related accumulated depreciation and accumulated amortization, respectively.

• (ii) Valuation of accounts receivable

Accounts receivable are regularly assessed for impairment. Impairment is assessed based on the probability of the non-payment of the trade receivable. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for trade accounts receivables. For trade accounts receivables, which are reported net, such provisions are recorded in a separate provision account with the loss being recognized within operating expenses in the statement of net income and comprehensive income.

• (iii) Inventory

The Corporation evaluates its inventory to ensure it is carried at the lower of cost or net realizable value. Allowances are made against obsolete or damaged inventories and charged to cost of sales. The reversal of any write down of inventory arising from an increase in net realizable value would be recognized as a reduction in cost of sales in the period in which the reversal occurred.

• (iv) Income taxes

The amounts recorded for deferred income taxes are based on estimates as to the timing of the reversal of temporary differences and tax rates currently substantively enacted. They are also based on estimates of the probability of the Corporation utilizing certain tax losses in future periods and tax rates applicable to those periods.

• (v) Lease terms and incremental borrowing rate used under IFRS 16

The application of IFRS 16 required the Corporation to make judgements and estimates that affect measurement of right-of-use assets and lease liabilities. In determining the lease term, the Corporation considered all facts and circumstances that create an economic incentive to exercise renewal options. Assessing whether a contract includes a lease also required judgement. Estimates were required to determine the appropriate discount rate used to measure lease liabilities.

3. SIGNIFICANT ACCOUNTING POLICIES

• (a) Basis of consolidation

The consolidated financial statements include the activities of Express, Choice and Crowfoot. Intercompany balances and transactions are eliminated on consolidation.

• (b) Foreign currency translation

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GINGER BEEF CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

The Corporation’s functional currency is the Canadian dollar. Monetary items are translated to Canadian dollars at the rate of exchange in effect at the statements of financial position date. Non-monetary items are translated to Canadian dollars at the rate of exchange in effect when the transactions occurred. Revenue and expenses denominated in foreign currencies are translated at the average exchange rate in effect during the period. Foreign exchange gains and losses on translation are included in income.

• (c) Cash and cash equivalents

Cash and cash equivalents consist of amounts on deposit with banks and term deposits that are readily convertible to cash.

(d) Inventory

Inventory is valued at the lower of cost and net realizable value. Cost includes raw materials on a first in first out basis, other direct manufacturing costs and an allocation of manufacturing overhead.

(e) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and net impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Corporation and the cost can be measured reliably. The carrying amount of a replaced asset is derecognized when replaced. The costs of the day-to-day servicing of property, plant and equipment are recognized as expenses as incurred.

Depreciation of property, plant and equipment and assets under capital lease is provided annually at rates and methods calculated to write-off the assets over their estimated useful lives as follows:

Buildings	4% straight-line method
Leasehold improvements	20% straight-line method
Machinery, equipment, furniture and fixtures 20% diminishing balance method
Franchisee headleases	straight-line method over the term of the lease
Vehicles	30% diminishing balance method

Government grants related to property, plant and equipment are treated as a reduction of the cost of the specific property, plant and equipment acquired.

(f) Impairment:

• a. Financial assets The Corporation recognizes loss allowances for expected credit losses ("ECLs") on its financial assets measured at amortized cost. Due to the nature of its financial assets, The Corporation measures loss allowances at an amount equal to expected lifetime ECLs. Lifetime ECLs are the anticipated ECLs that result from all possible default events over the expected life of a financial asset. ECLs are a probability-weighted estimate of credit loss and are discounted at the effective interest rate of the related financial asset.

• b. Non-financial assets

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GINGER BEEF CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

The carrying amounts of the Corporation’s non-financial assets are reviewed for indicators of impairment at each reporting date. If indicators of impairment exist, the recoverable amount of the asset is estimated. For the purposes of assessing impairment, assets that cannot be tested individually are grouped into cash-generating units (“CGUs”), defined as the lowest levels for which there are separately identifiable independent cash inflows.

The recoverable amount of a CGU is the greater of its fair value less costs to sell and its value in use. Fair value is the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants, at the measurement date. Value in use is determined by estimating the present value of the future net cash flows to be derived from the continued use of the cash-generating unit in its present form. These cash flows are discounted at a rate based on the time value of money and risk specific to the CGU. An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its recoverable value. An impairment loss recognized in respect of a CGU is allocated first to reduce the carrying amount of goodwill, if any, allocated to the CGU and then to reduce the carrying amount of the other assets in the CGU on a pro rata basis. Impairment losses are recognized in net earnings.

Impairment losses recognized in prior years are assessed at each reporting date for any indication that the loss has decreased or no longer exists. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depletion and depreciation or amortization, if no impairment loss had been recognized.

• (g) Provisions and contingent liabilities

Provisions are recognized by the Corporation when it has a legal or constructive obligation as a result of past events, it is probable that an outflow of economic resources will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are stated at the present value of the expenditure expected to settle the obligation. The obligation is not recorded and is disclosed as a contingent liability if it is not probable that an outflow will be required, if the amount cannot be estimated reliably or if the existence of the outflow can only be confirmed by the occurrence of a future event.

• (h) Income taxes

Income tax expense comprises current and deferred tax. Income tax expense is recognized in the statement of income except to the extent that it relates to items recognized directly in equity or other comprehensive income.

Deferred tax is recognized for the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxation profits will be available against those deductible temporary differences can be utilized.

Deferred tax is measured at the rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset, and they relate

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GINGER BEEF CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

to income taxes levied by the same taxation authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

(i) Leases

The Corporation assesses whether a contract is or contains a lease upon the contract’s inception. A contract contains a lease if it conveys the right to control the use of the identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, an assessment is made as to whether: the contract involves the use of an identified asset, the contract provides right to the Corporation to obtain substantially all of the economic benefits throughout the identified assets period of use, and the Corporation has the right to direct the use of the asset.

When the Corporation is a lessee it records a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, consisting of: the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, any initial direct costs incurred, and an estimate of costs to dismantle and remove the underlying asset or restore the site on which it is located, less any lease incentives received.

The right-of-use asset is typically depreciated on a straight-line basis over the lease term unless the Corporation is expected to obtain ownership at the end of the lease.

The lease liability is initially measured at the present value of lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease, or the Corporation’s incremental borrowing rate. The lease liability is subsequently measure at amortized cost using the effective interest method. Lease payments included in the measurement of the lease liability include fixed payments, variable lease payments that depend on an index or rate, any residual value guarantees, and the exercise price of a purchase option when it is reasonably certain to be exercised.

When the Corporation is a lessor, a determination is made at lease inception, whether each lease is a finance lease or an operating lease. In order to classify a lease as either finance or operating, an overall assessment is made of whether the lease transfers to the lessee substantially all of the risks and rewards incidental to ownership of the underlying asset. If it does, the lease is a finance lease; if not, it is an operating lease. When the Corporation is an intermediate lessor, head leases and subleases are accounted for as two separate contracts. The Corporation de-recognizes the leased assets and recognizes a sublease receivable asset. Interest received on subleases is recognized in income on the same basis as the interest paid on the head lease.

(j) Revenue recognition

The Corporation derives revenue from wholesale products sales, franchise fees and royalties.

Identify the contract:

The contractual agreement executed with the customer specifying the quantity and types of wholesale products.

The contractual agreement executed with the franchisee specifying the terms of payment of franchisee payment and percentage of royalties.

Identify distinct performance obligations

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GINGER BEEF CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

The wholesale contract may include a single performance obligation in which relates to the preparation of the wholesale products and delivery to the customer.

The franchise agreement include a single performance obligation in which relates to the Corporation providing the Franchisee the rights to Ginger Beef’s name and sell its products.

Transaction price:

Wholesale’s transaction price is based on the observable stand-alone selling price as stated in the contract and is based on a fees identified by the Corporation.

Franchise’s transaction price is based on the observable stand-alone selling price as stated in the contract and royalties are based on an agreed upon percentage of monthly sales between the parties.

Allocate price to performance obligations:

For both wholesale and franchisee fees/royalties, the transaction price is allocated to each performance obligation linked to customer commitments for each obligation under the contract based on stand-alone selling prices.

Recognize revenue as the performance obligations are satisfied:

Wholesale products are recognized at a point in time once controls passes to the customer and when all significant contractual obligations have been satisfied, collection is probable and the amount of revenue can be estimated reliably.

Franchise fees are recognized over time as the license is being simultaneously received and consumed over the life of the agreement.

Royalties are recognized as the franchisee’s gross monthly sales associated with the franchise agreement have occurred.

(k) Finance income and expenses

Finance income, consisting of interest on sublease receivable is recognized as it accrues in the statements of income (loss) and comprehensive income (loss), using the effective interest method.

Finance expense comprises interest expense on borrowings and impairment losses recognized on financial assets.

Borrowing costs, if incurred for the acquisition or construction of qualifying assets, are capitalized during the period of time that is required to complete and prepare the assets for their intended use. A qualifying asset is one that takes a substantial period of time to get ready for use. To date, the Corporation has not incurred any costs related to the acquisition or construction of any qualifying assets.

(l) Stock-based compensation

The Corporation has a Stock Option Plan as described in Note 14 and stock options granted to directors, officers, employees and consultants of the Corporation are accounted for using the fair value method under which compensation expense is recorded based on the estimated fair value of the options at the grant date using the Black-Scholes option pricing model.

Each tranche in an award is considered a separate award with its own vesting period and grant date fair value. Compensation cost is expensed over the vesting period with a corresponding increase in

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GINGER BEEF CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

contributed surplus. When stock options are exercised, the cash proceeds along with the amount previously recorded as contributed surplus are recorded as share capital. A forfeiture rate is estimated on the grant date and is adjusted to reflect the actual number of options that vest.

• (m) Net income per share

Net income per share is calculated by dividing net and comprehensive income or loss by the weighted average number of common shares outstanding during the period. The Corporation computes the dilutive impact of common shares assuming the proceeds received from the pro forma exercise of in-the-money share options are used to purchase common shares at average market prices.

(n) Government grants

Government grants are recognised in the statement of income (loss) on a systematic basis over the periods in which the Corporation recognises expenses for the related costs for which the grants are intended to compensate. In the case that grants are related to assets purchased, the grant is deducted from the carrying amount of the asset.

(o) Financial instruments

Financial instruments are recognized when the Corporation becomes a party to the contractual provisions of the instrument. Financial assets and liabilities are not offset unless the Corporation has the legal right to offset and intends to settle on a net basis or settle the asset and liability simultaneously.

The Corporation initially measures all financial assets at fair value. Financial assets are subsequently classified as measured at fair value through profit and loss (“FVPL), fair value through other comprehensive income (“FVOCI”), or amortized cost. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

The Corporation’s financial assets are classified into the following categories:

Amortized cost

A financial asset is measured at amortized cost if it is held within a business model of holding financial assets and collecting contractual cash flows and those cash flows are comprised solely of payments of principal and interest. Financial assets classified at amortized cost are initially recorded at fair value and subsequently at amortized cost using the effective interest rate method. The Corporation classifies cash and cash equivalents, accounts receivable, sublease receivable and due from related parties in this category.

Fair value through other comprehensive income

A financial asset is measured at FVTOCI if the financial asset is held within a business model of both collecting contractual cash flows and selling the financial assets or through an irrevocable election for equity instruments that are not held for trading. Financial assets classified as FVTOCI are carried at fair value and any gains or losses are recorded in other comprehensive income in the period which they arise. The Corporation does not hold any instruments in this category.

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GINGER BEEF CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

Fair value through profit and loss

A financial asset is measured at FVTPL unless it is measured at amortized cost or at FVTOCI. Financial assets classified as FVTPL are carried at fair value and any gains or losses are recorded in net income in the period which they arise. The Corporation does not hold any instruments in this category

The Corporation’s financial liabilities are classified into the following categories:

Amortized cost

Financial liabilities measured at amortized cost are initially measured at fair value, and, where applicable, adjusted for transaction costs. Subsequently, financial liabilities are measured at amortized cost using the effective interest method. The Corporation classifies accounts payable and accrued liabilities, wages payable, and lease liabilities at amortized cost.

Fair value through profit and loss

Financial liabilities measured at FVTPL are initially measured at fair value and the subsequently at fair value with gains or losses recognized in net income. The Corporation does not hold any financial liabilities in this category.

• (p) Adoption of new and amended accounting standards

The Corporation has not adopted any changes to material accounting policies during the fiscal year ended December 31, 2020.

4. FINANCIAL INSTRUMENTS AND RISK OVERVIEW

• (a) Risk management overview

The Corporation’s activities expose it to a variety of financial risks including credit risk, liquidity risk and market risk. This note presents information about the Corporation’s exposure to each of the above risks, the Corporation’s objectives, policies and processes for measuring and managing risk, and the Corporation’s management of capital. Further quantitative disclosures are included throughout these consolidated financial statements. The Corporation employs risk management strategies and policies to ensure that any exposures to risk are in compliance with the Corporation’s business objectives and risk tolerance levels. While the Board of Directors has the overall responsibility for the Corporation’s risk management framework, Ginger Beef’s management has the responsibility to administer and monitor these risks.

• (b) Fair value of financial instruments

The fair value of cash and cash equivalents, accounts receivable, due from related parties, accounts payable and accrued liabilities, and wages payable approximate their carrying value due to the short-term maturity of those instruments.

Sublease receivable, and lease liabilities are measured at amortized cost. Fair value of long-term financial instruments is estimated using discounted cash flow analysis based on the borrowing rate for similar borrowing arrangements. The fair value of the Corporation’s long term financial instruments approximates its carrying value as the interest rate is comparable to similar borrowing arrangements.

The significance of inputs used in making fair value measurements are examined and classified according to a fair value hierarchy. Fair values of assets and liabilities included in Level 1 are determined by

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GINGER BEEF CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

reference to quoted prices in active markets for identical assets and liabilities. Assets and liabilities in Level 2 include valuations using inputs other than quoted prices for which all significant outputs are observable, either directly or indirectly, and are based on valuation models and techniques where the inputs are derived from quoted indices. Level 3 valuations are based on inputs that are unobservable to the overall measurement.

(c) Credit risk

Credit risk is the risk of financial loss to the Corporation if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Substantially all of the Corporation’s accounts receivable are due from purchasers of food items and are subject to normal industry credit risk.

The Corporation’s revenues are derived primarily from established grocery retailers. Orders from customers are subject to the Corporation’s credit and collection programs. For sale of franchises, deposits are required prior to the acceptance of the purchase.

The Corporation performs ongoing credit evaluations of its customers and has established an allowance for doubtful accounts based on credit risk applicable to certain accounts, historical trends and other relevant information. The Corporation’s maximum exposure to credit risk is the fair value of financial assets on the consolidated statement of financial position.

Significant changes in economic conditions will increase the risk of not collecting receivables. Management believes the risk is often mitigated by the size and reputation of the companies to which it extends credit.

As at December 31, 2020 and December 31, 2019, the Corporation’s accounts receivable comprised the following:

following:
	2020	2019
	$	$
Current	937,132	627,283
Less than 60 days	274,309	59,351
Greater than 60 days	3,860	60,444
Total trade accountsreceivable	1,215,300	747,078
Total accounts receivable	1,215,300	747,078

The Corporation manages the credit exposure related to cash and cash equivalents by selecting financial institutions with high credit ratings and monitors all short-term deposits to ensure an adequate rate of return. Given these credit ratings, management does not expect any counterparty to fail to meet its obligations.

(d) Liquidity risk

Liquidity risk is the risk that the Corporation will not be able to meet its financial obligations as they are due. The Corporation’s approach to managing liquidity is to ensure it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Corporation’s reputation.

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GINGER BEEF CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

The financial liabilities on the consolidated statement of financial position consist of accounts payable and accrued liabilities, wages payable, and lease liabilities. The Corporation manages this risk through detailed monitoring of budgeted and projected operating results and cash requirements. Formal monthly senior management meetings address levels of firm sales and monitor obligations and customer credit facilities.

The Corporation expects to repay its financial liabilities in the normal course of operations and to fund future operational and capital requirements through operating cash flows, as well as future equity and debt financing. The Corporation also has a credit facility to facilitate the management of liquidity risk. See Note 12 for credit facility disclosure.

The Corporation’s accounts payable and accrued liabilities as at December 31, 2020 and, December 31, 2019 were comprised as follows:

2019 were comprised as follows:
	2020	2019
	$	$
Trade accounts payable	(453,505)	(317,224)
Accrued liabilities	(87,405)	(65,247)
	(540,910)	(382,471)

The Corporation’s contractual commitments are leases. Contractual maturities are stated in Note 9, “Lease liabilities”.

(e) Market risk

Market risk is the risk that changes in market price, foreign exchange rates and interest rates will affect the Corporation’s net earnings or value of financial instruments and are largely outside the control of the Corporation. The objective of the Corporation is to manage and mitigate market risk exposures within acceptable limits, while maximizing returns. Primary market risks are as follows;

Interest rate risk

Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. The Corporation is exposed to interest rate risk to the extent that changes in market interest rates impact its borrowing under the floating rate credit facility. The Corporation is exposed to fair value interest rate on its lease liabilities as the rates are fixed interest rates. The Corporation had no interest rate swaps or financial contracts in place as at or during the year ended December 31, 2020 or December 31, 2019.

(f) Capital management

The Corporation’s capital management policy is to maintain a strong capital base that optimizes the Corporation’s ability to grow, maintain investor and creditor confidence and to provide a platform to create value for its shareholders. The Corporation’s officers are responsible for managing the Corporation’s capital and do so through monthly management meetings and quarterly board meetings including regular reviews of financial information including budgets and forecasts. The Corporation’s directors are responsible for overseeing this process. The Corporation considers its capital structure to include shareholders’ equity and long-term debt.

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GINGER BEEF CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

The Corporation monitors capital based on its available bank line of credit, projected cash flow from operations and anticipated capital expenditures. In order to manage its capital structure, the Corporation prepares annual capital expenditure and operating budgets, which are updated as necessary. The annual and updated budgets are prepared by the Corporation’s management and approved by the Corporation’s Board of Directors. The budget results are regularly reviewed and updated as required.

In order to maintain or adjust the capital structure, the Corporation may issue shares, seek debt financing and adjust its spending to manage its current and projected capital structure. The Corporation’s ability to raise additional debt or equity financing is impacted by external conditions, including the global economic conditions. The Corporation continually monitors economic and general business conditions.

5. RELATED PARTY TRANSACTIONS

Balances and transactions between the Corporation and its subsidiaries, which are related parties of the Corporation, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Corporation and other related parties are disclosed below:

Trading transactions

The following summarize the Corporation’s related party transactions with the franchises owned and/or operated under common management. The following are the transactions for the year ended December 31:

	2020	2019
	$	$
Royalties	54,629	86,990
Product sale	46,070	97,143
Demand loan(a)	400,000	-

The royalties have been included in the royalties and franchise fees and the product sales have been included in wholesale revenue on the statements of net income and comprehensive income.

Due from/to related parties

The following summarized the Corporation’s outstanding balances with the franchises under common management as at December 31:

	2020	2019
	$	$
Companies controlled by an officer and director of the Corporation (a)	408,340	83,995
Franchise amounts receivable	9,434	50,860
	417,774	134,855

The amounts outstanding are unsecured and will be settled in cash.

(a) The Corporation signed a loan agreement with a related company under common control providing the company a demand loan up to $500,000 in total (“Demand Loan”) to open a new franchise to take advantage of lease opportunities that became available due to COVID-19. As at December 31, 2020, $400,000 of the loan has been provided. The loan bears no interest and is due on demand.

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GINGER BEEF CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

Compensation of key management personnel

Key management personnel compensation paid during the year ended December 31, 2020 comprised salaries of $277,200 (2019 - $172,200) and benefits of $ 6,995 (2019 - $6,389). As of December 31, 2020 the outstanding balance owing to key management personnel is $ nil (2019 - $105,000).

6. INVENTORY

Inventory consists of three main classifications:

Inventory consists of three main classifications:
	2020	2019
	$	$
Food	171,218	210,626
Packaging material	75,339	61,865
Cleaningchemicals	47,476	4,551
	294,033	277,042

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GINGER BEEF CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

7. PROPERTY, PLANT AND EQUIPMENT

		Machinery
		Equipment
		Furniture	Right-of-use		Motor	Leasehold
	Land	Building &fixtures	Assets		Vehicle	Improvements	Total
Cost($)
Balance as at
January 1, 2019	140,000 1,632,624 2,684,367			-	2,410	32,119	4,491,520
Adoption of IFRS 16		- - (163,591)	163,591		-	-	-
Additions of right-of-use assets		- - -	131,205		-	-	131,205
Additions of other assets		- - 322,168		-	27,441	-	349,609
Balance as at
December 31, 2019	140,000 1,632,624 2,842,944		294,796		29,851	32,119	4,972,334
Transfer of right-of-use assets		- - 191,735	(191,735)		-	-	-
Additions		- - 105,860		-	-	-	105,860
Balance as at
December 31, 2020	140,000 1,632,624 3,140,539		103,061		29,851	32,119	5,078,194
Accumulated depreciation($)
Balance as at
January 1, 2019		- 1,037,949 2,001,919	-		2,394	32,119	3,074,381
Adoption of IFRS 16		- - (67,600)	67,600		-	-	-
Depreciation of right-of-use assets		- - -	13,930		-	-	13,930
Depreciation of other assets		-65,305 175,483	-		2,648	-	243,436
Balance as at
December 31, 2019		- 1,103,254 2,109,802	81,530		5,042	32,119	3,331,747
Transfer of right-of-use assets		-- 35,020	**(35,020) **		-	-	-
Depreciation of right-of-use assets		- - -	16,509		-	-	16,509
Depreciation of other assets		- 65,305 178,117	-		6,500	-	249,922
Balance as at
December 31, 2020		- 1,168,559 2,322,939	63,019		11,542	32,119	3,598,178
Net Carrying Value($)
At December 31, 2019	140,000 529,370 733,142		213,266		24,809	-	1,640,587
At December 31, 2020	140,000 464,065 817,600		40,042		18,309	-	1,480,016

8. SUBLEASE RECEIVABLE

For certain of its franchise locations the Corporation holds the lease and subsequently subleases the property to the franchisee at cost. The transactions related to lease and sublease are recognized in the consolidated financial statements in accordance with IFRS 16.

The discount rate used for leases recorded in 2019 was 8% and there were no new leases recorded in 2020. Franchisees make the lease payments so movements in sublease receivables and liabilities are non-cash transactions. The Corporation’s subleases receivable are as follows:

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GINGER BEEF CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

	2020	2019
	$	$
Sublease receivable, beginning of year	823,250	940,996
Lease payments by franchisees	(187,586)	(187,446)
Finance income	60,284	69,700
Sublease receivable, end of year	695,948	823,250
Less: current portion	144,140	127,302
Sublease receivable - long term portion	551,808	695,948

Future lease payments by Franchisees are as follows:

	Total	Lease #1	Lease #2	Lease #3	Lease #4	Lease #5
	$	$	$	$	$	$
2021	193,637	41,876	19,060	34,850	26,033	71,817
2022	173,704	40,174	-	34,850	26,400	72,280
2023	118,130	-	-	34,850	11,000	72,280
2024	112,227	-	-	34,850	-	77,377
2025 andafter	278,318	-	-	193,991	-	84,327
	876,015	82,050	19,060	333,391	63,433	378,080
Less: future finance income	(180,067)	(6,289)	(781)	(99,950)	(5,752)	(67,295)
	695,948	75,761	18,279	233,441	57,682	310,785

9. LEASE LIABILITIES

Lease liabilities include equipment leases and franchisee headleases. The discount rate used during the year ended December 31, 2019 for franchisee headleases was 8% and there were no new leases recorded in 2020.

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GINGER BEEF CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

The Corporation’s lease liabilities are as follows:

		Equipment	Equipment	Franchisee
	Total	lease #1	Lease #2	headleases
	$	$	$	$
Balance as at January 1, 2019	1,145,763	73,562	131,205	940,996
Repayments	(240,231)	(31,288)	(21,497)	(187,446)
Interest	72,618	2,918	-	69,700
Balance as at December 31, 2019	978,150	45,192	109,708	823,250
Repayments	(328,582)	(31,288)	(109,708)	(187,586)
Interest	61,807	1,523	-	60,284
Balance as at December 31, 2020	711,375	15,427	-	695,948
Less: currentportion	(159,567)	(15,427)	-	(144,140)
Lease liabilities - long term portion	551,808	-	-	551,808

Equipment lease #1

Finance lease with Royal Bank bearing interest at a fixed rate of 4.80% per annum, repayable in monthly blended payments of $2,607. The loan matures on June 1, 2021 and is secured by equipment with carrying value of $59,280.

Equipment lease #2

Finance lease with Royal Bank bearing interest at a fixed rate of 3.5% per annum, repayable in monthly blended payments of $2,388 other than the downpayment and residual value payment. The loan matured on March 25, 2020, and is secured by equipment with carrying value of $248,753.

Future lease payments are as follows:

	Total	Equipment leases	Franchisee headleases
	$	$	$
2020	-		-
2021	209,064	15,427	193,637
2022	173,704	-	173,704
2023	118,130	-	118,130
2024	112,227	-	112,227
2025 and after	278,318	-	278,318
	891,442	15,427	876,015
Less: Interest expense	(180,067)	-	(180,067)
	711,375	15,427	695,948

10. DEFERRED INCOME

The Corporation collected $100,000 from one of its franchisees in 2014 as fees charged by Express to deal with renovations and relocations on behalf of the franchisee. Since the lease term is twelve years, the

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GINGER BEEF CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

Corporation will recognize the fees charged as revenue over twelve years period starting from 2015. Revenue recognized in 2020 was $8,333 (2019: $8,333) which has been recorded as part of Royalties and franchise fee revenue.

11. COVID-19 FINANCIAL SUPPORTS AND GOVERNMENT GRANT

The Corporation has received various supporting programs during Covid-19 from federal and provincial governments, which include:

(a) Canada Emergency Bank Account (CEBA)

The Canada Emergency Business Account (CEBA) is a loan of up to $60,000 (up to $20, 000 is forgivable). This program is legislated by the Federal Government, administered by Export Development Canada (EDC) and delivered through financial institutions with the intent of helping businesses pay their non-deferrable expenses during the Covid-19 pandemic period. The CEBA has two streams of eligibility: the Payroll stream and the Non-Deferrable Expense stream. The Corporation has applied and received the full amount of $60,000, and recognized the forgivable portion of $20,000 under other income as at December 31, 2020. The loan is interest free until December 31, 2022.

(b) Canada Emergency Wage Subsidy (CEWS)

The Canada Emergency Wage Subsidy (CEWS) is a wage subsidy program offered until June 2021 to qualifying employers who have seen a drop in revenue due to Covid-19. CEWS is meant to prevent more job losses by helping employers keep employees on payroll, enabling them to re hire workers, and facilitating a return to normal operations. The Corporation has applied and received the CEWS in amount of $280,355 as at December 31, 2020, and recorded under other income...

(c) Alberta Agricultural Grants

The Corporation has received Alberta’s government grant in amount of $48,472 which targets projects that enable growth of recipient’s businesses through increased sales related to the development of new products, adoption of state-of-the-art processes, commercialization of products in new markets, and expansion of their business in local, domestic and international markets. The Corporation has deducted the grant in arriving at the carrying amount of the equipment purchased.

12. BANK FACILITY

The Corporation has a demand operating revolving line of credit to a maximum of $300,000 with the Royal Bank of Canada with interest at Royal Bank Prime plus 1.75% secured by a general security agreement. The balance on this facility as at December 31, 2020 was $nil (December 31, 2019 - $nil).

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GINGER BEEF CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

13. SHARE CAPITAL

Authorized: Unlimited number of common shares

Issued:

	Number of Shares	Amount
		$
Balance, January 1, 2019	13,361,997	1,422,205
Redemption of shares	-	-
Balance, December 31, 2019	13,361,997	1,422,205
Redemption of shares	-	-
Balance, December 31, 2020	13,361,997	1,422,205

14. STOCK BASED COMPENSATION PLAN

Pursuant to the Corporation’s stock-based compensation plan, the Board of Directors may allocate nontransferable options to purchase common shares of the Corporation to directors, officers, management consultants and employees of the Corporation and its subsidiaries.

Under the stock-based compensation plan, the aggregate number of shares to be delivered upon exercise of options granted thereunder may not exceed 10% of the issued common shares of the Corporation at the time of granting the options. The aggregate number of shares to be delivered upon exercise of the options granted thereunder to any individual shall not exceed 5% of the issued common shares of the Corporation. The options under the stock-based compensation plan are non-assignable, except in the event of death and are exercisable for a term of four years. Options granted under the stock-based compensation plan terminate within 90 days in the event that the optionee ceased to be an employee, director or officer of the Corporation or within one year after the death of such optionee. The Board of Directors may, at its discretion, determine the timing during which options shall vest and the method of vesting, or that no vesting restriction shall exist.

At December 31, 2020, the Corporation had no outstanding stock options issued to directors, officers, management consultants and employees pursuant to the Corporation’s stock-based compensation plan.

15. NET INCOME PER SHARE

Basic net income per share is calculated by dividing net income by the weighted average number of common – shares outstanding during the year of 13,361,997 (2019 13,361,997). For the years ended December 31, 2020 and 2019, the potential effect of the issuance under the stock option plan was not dilutive. There were no in-the-money options outstanding at either date. No other dilutive securities are outstanding.

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GINGER BEEF CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

16. INCOME TAXES

The income tax provision recorded differs from the income tax obtained by applying the statutory income tax rate of 24% (2019- 26.5%) to the income for the year and is reconciled as follows:

		2020		2019
Income (loss) before income taxes	$	1,085,006	$	459,905
Statutory tax rate		24.00%		26.50%
Expected income tax expense (benefit)		260,401		121,875
Non-deductible items		479		319
Effect of change in tax rates		(5,953)		-
Other		1,967		2,462
		256,895		124,656
Current income tax expense		267,295		28,056
Deferred income tax expense		(10,400)		96,600
Tax expenses	$	256,895	$	124,656

Significant components of the Corporation’s future tax assets and liabilities are as follows:

		2020		2019
Assets
Capital lease obligations	$	136,234	$	201,348
		136,234		201,348
Liabilities
Sublease receivable		132,434		189,348
Book value of capital assets in excess of tax cost		56,500		75,100
		188,934		264,448
Net deferred tax assets/(liabilities)	$	(52,700)	$	(63,100)

• The Corporation and its subsidiaries have losses of approximately $390 (2019 $390) available to reduce future taxable income. These losses expire as follows:

Losses expire as follows:

2033 2034	340 $ 50
	390 $

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GINGER BEEF CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

17. ECONOMIC DEPENDENCE

For the year ended December 31, 2020 and 2019, the Corporation has recorded the following revenues from its major customers:

2020		Revenue	% of total revenue
Customer	1	2,874,464	36.65%
Customer	2	1,836,718	23.42%
Customer	3	1,336,138	17.04%
Customer	4	860,227	10.97%
2019		Revenue	% of total revenue
Customer	1	1,885,628	27.12%
Customer	2	1,800,322	25.89%
Customer	3	1,391,078	20.00%
Customer	4	728,542	10.48%

18. COVID-19

The impact of COVID-19 in Canada and on the global economy continued. Certain risks which may affect the Corporation include:

• Supply chain disruptions

• Dealing with the suspension or termination of contracts

• The introduction of government incentives and aid.

In addition, if the impacts of COVID-19 continue there could be further impact on the entity and its major customers, suppliers and other third-part business associates that could impact the timing and amounts realized on the Company’s assets and future probability. At this time, the impact of COVID-19 on the entity has been decreased franchise fee income and more cleaning costs. The full impact of COVID-19 continues to be assessed by the entity.

19. SUBSEQUENT EVENT

Subsequent to the year-end, the Corporation provided another $100,000 to the related company as part of the Demand Loan (Note 5).

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