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LQWD Technologies Corp. Interim / Quarterly Report 2021
45060_rns_2021-01-29_93b37765-09f5-483d-95ec-9b53930a83b7.pdf
Interim / Quarterly Report
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TSXV: INLA | OTCQB: INLAF
INTERLAPSE TECHNOLOGIES CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS FORM 51-102F1
FOR THE NINE MONTHS ENDED NOVEMBER 30, 2020
Interlapse Technologies Corp. 885 West Georgia St., Suite 2040 Vancouver, BC, Canada, V6C 3E8
Table of Contents
| CURRENT DEVELOPMENTS3 | |
|---|---|
| Corporate3 | |
| Company Overview3 | |
| Overall Performance4 | |
| FINANCIAL RESULTS OF OPERATIONS4 | |
| Summary of Quarterly Results4 | |
| Liquidity and Capital Resources4 | |
| RELATED PARTY TRANSACTIONS5 | |
| SHARE CAPITAL6 | |
| SUBSEQUENT EVENTS6 | |
| CAPITAL MANAGEMENT6 | |
| COMPETITION6 | |
| CRITICAL ACCOUNTING ESTIMATES6 | |
| CHANGES IN ACCOUNTING POLICIES7 | |
| PROPOSED TRANSACTIONS7 | |
| FINANCIAL INSTRUMENTS RISK7 | |
| FINANCIAL INSTRUMENTS8 | |
| RISKS8 | |
| ADDITIONAL INFORMATION9 | |
| FORWARD LOOKING STATEMENTS9 |
The following Management's Discussion and Analysis ("MD&A") is dated January 29, 2021, for the period ended November 30, 2020 and should be read in conjunction with the Interlapse Technologies Corp. ("Interlapse" or the "Company") accompanying condensed consolidated interim financial statements for the period ended November 30, 2020 and the audited consolidated financial statements for the year ended February 29, 2020.
These condensed consolidated interim financial statements for the period ended November 30, 2020 have been prepared in accordance with and comply with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board and its interpretation of the International Financial Reporting Interpretations Committee ("IFRIC"). These condensed consolidated interim financial statements have been prepared on a historical cost basis and have been prepared using the accrual basis of accounting, except for cash flow information. The MD&A supplement does not form part of the unaudited condensed consolidated interim financial statements for the nine month period ended November 30, 2020 or the audited financial statements of the Company and the notes thereto for the year ended February 29, 2020. All amounts are expressed in Canadian dollars unless otherwise indicated. In addition, readers are directed herein to discussions under the headings "Forward-Looking Statements", "Critical Accounting Estimates" and "Risk Factors". Interlapse management is responsible for the integrity of the information contained in this report and for the consistency between the MD&A and the financial statements.
CURRENT DEVELOPMENTS
Corporate
On March 31, 2020, the Company acquired buybitcoincanada.com, a virtual currency brokerage platform from Canadian blockchain company, Bitaccess Inc., in exchange for 233,333 common shares of the Company.
On April 22, 2020, the Company issued 200,000 common shares to two officers of the Company at a price of $0.16 per share in accordance with the terms of the agreement to purchase Skyrun Technology Corp. ("Skyrun").
On June 2, 2020, the Company issued 100,000 common shares to two officers of the Company at a price of $0.17 per share in accordance with the terms of the agreement to purchase Skyrun.
On November 2, 2020, the Company closed a non-brokered private placement offering of 4,904,212 units of the Company (the "Units") at C$0.15 per Unit, for gross proceeds of C$735,632. Each Unit comprises one common share of the Company and one share purchase warrant. Each warrant entitles the holder to subscribe for one additional share at a price of C$0.20 per share for a period of 18 months from the date of issuance.
On November 23, 2020, the Company announced that it had entered into a share exchange agreement with LQwD Financial Corp. ("LQwD") pursuant to which Interlapse will acquire 100% of the issued and outstanding shares of LQwD from its security holders in exchange for common shares of Interlapse having an aggregate deemed value of approximately $6.6 million (the "Transaction"). Interlapse will acquire all of the outstanding shares of LQwD by way of a share exchange, which would result in the issuance of an aggregate of 22,400,001 Interlapse shares at a deemed price of $0.25 per share. In addition, LQWD's outstanding milestone-based performance warrants exercisable to acquire up to 4,000,000 LQwD shares at a price of $0.15 per share until January 2, 2025, upon closing of the Transaction, which will be automatically adjusted to be exercisable into Interlapse shares on a one-to-one basis. Upon completion of the Transaction, LQWD will become a wholly owned subsidiary of Interlapse. The Transaction is subject to a number of terms and conditions, including Interlapse shareholder approval, the completion of a concurrent financing generating minimum proceeds of $3.0 million, and the approval of the TSX Venture Exchange ("TSX-V") and other applicable regulatory authorities.
Company Overview
The Company was incorporated under the Business Corporations Act (British Columbia) and its head office is in Vancouver, British Columbia, Canada. Interlapse is a technology company that is focused on developing various webbased platforms, solutions and applications. The Company's common shares trade on the TSX-V under the symbol "INLA" and on the OTCQB market under the symbol "INLAF" and has 30,683,189 common shares issued and outstanding.
The executive team of the Company is as follows:
- Giuseppe (Pino) Perone CEO, President and Corporate Secretary
- Rod Hsu Chief Operating Officer;
- Barry MacNeil Chief Financial Officer
Overall Performance
The Company's objective has been to allow it to pursue value generating opportunities for the shareholders. The overall performance for the nine-month period ended November 30, 2020, reflected a net loss of $608,983 and working capital of $1,251,079. Interlapse can fund its operations for a further 12 months.
| 2021 | 20212020Q2Q3 | Ninemonths ended November 30, | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Q3 | 2020 | 2019 | ||||||||
| Sales | $22,590( | $ | 31,361( | $ | 19,649) | $ | 91,614( | $32,905( | ||
| Loss for the period | $(230,125) | $ | (207,476) | $ (394,677) | $ | (608,983) | $ | (1,182,697) |
The Company's current quarter loss increased $22,649 from the previous quarter mainly driven by the decrease in revenue of $8,771 from $31,361 to $22,590 and increased expenses from $236,866 to $251,547.
Compared to the same quarter in the previous year the loss decreased $164,552 partially offset by earning revenue of $22,590 compared to $19,649 in the previous year and reducing expenses by $165,007 to $251,547 compared to $416,554 in the previous year. The largest decreases were in share-based compensation and transfer and filing fees of $69,046 and $49,489 respectively.
FINANCIAL RESULTS OF OPERATIONS
Summary of Quarterly Results
| Three MonthsEnded | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| November 30,2020 | August31, | May 31, | February29, | |||||||
| 2020 | 2020 | 2020 | ||||||||
| Sales | $ | 22,590) | $ | 31,361) | $ | 37,663) | $ | 19,726) | ||
| Gross profit | $ | 22,590) | $ | 31,361) | $ | 37,663) | $ | 19,726( | ||
| Lossfor the period | $ | (230,125) | $ | (207,476) | $ | (171,382) | $ | (173,016) | ||
| Lossper share | $ | (0.01) | $ | (0.01) | $ | (0.01) | $ | (0.01) | ||
| November 30, | August31, | May 31, | February 28, | |||||||
| 2019 | 2019 | 2019 | 2019 | |||||||
| Sales | $ | 19,649( | $ | 13,256( | $ | -( | $ | -( | ||
| Gross profit | $ | 19,649( | $ | 13,256( | $ | -) | $ | -) | ||
| Lossforthe period | $ | (394,677) | $ | (519,828) | $ (268,192) | $ | (180,711) | |||
| Losspershare | $ | (0.02) | $ | (0.03) | $ | (0.02) | $ | (0.01) |
The Company's operations for the three months ended November 30, 2020 produced a loss of $230,125 compared to a loss of $394,677 for the same quarter in the previous year. The decrease in loss of $164,552 in the quarter is made up partially by decreases in share-based compensation and transfer and filing fees of $69,046 and $49,489 respectively.
Liquidity and Capital Resources
| 2021 | 20212020 | Ninemonths ended November 30, | ||||||
|---|---|---|---|---|---|---|---|---|
| Q3 | Q2 | Q3 | 2020 | 2019 | ||||
| Cash and cash equivalents | $ 1,274,717 | $731,031 | $792,920 | $1,274,717 | $792,920 | |||
| Working capital | $ 1,251,079 | $746,297 | $773,468 | $ 1,251,079 | $773,468 |
As at the date of this MD&A, the Company has adequate cash and working capital to fund its operations and planned capital expenditures for the next 12 months. Any additional material capital expenditures or commitments may require a source of additional financing, which may come from funds through equity financing.
| Ninemonths ended | ||||||
|---|---|---|---|---|---|---|
| 2021 | 2021 | 2020 | November | 30, | ||
| Q3 | Q2 | Q3 | 2020 | 2019 | ||
| Issued and outstanding shares | 30,683,189 | 25,778,977 | 17,525,644 | 30,683,189 | 17,525,644 | |
| Issued and outstanding shares, fully diluted | 36,497,401 | 26,688,977 | 19,035,644 | 36,497,401 | 19,035,644 |
On March 31, 2020, the Company acquired buybitcoincanada.com, a virtual currency brokerage platform from Canadian blockchain company, Bitaccess Inc., in exchange for 233,333 shares of the Company.
On April 22, 2020, the Company issued 200,000 shares to two officers of the Company at a price of $0.16 per share in accordance with the terms of the agreement to purchase Skyrun.
On June 2, 2020, the Company issued 100,000 common shares to two officers of the Company at a price of $0.17 per share in accordance with the terms of the agreement to purchase Skyrun.
On November 2, 2020, the Company closed a non-brokered private placement offering of 4,904,212 units of the Company (the "Units") at C$0.15 per Unit, for gross proceeds of C$735,632. Each Unit comprises one common share of the Company and one share purchase warrant.
The technology business may affect the Company's ability to raise capital to acquire properties and/or pursue other opportunities in the future.
RELATED PARTY TRANSACTIONS
The aggregate value of transactions and outstanding balances relating to key management personnel were as follows:
| 2021 | 2021 | 2020 | Ninemonths endedNovember 30, | ||||
|---|---|---|---|---|---|---|---|
| Q3 | Q2 | Q3 | 2020 | 2019 | |||
| Business development | $- | $- | $- | $ | - | $ | 75,000 |
| Consultingfees | 64,000 | 39,000 | 15,000 | 133,000 | 90,000 | ||
| Directors fees | 500 | 500 | 500 | 500 | 1,000 | ||
| Share-based compensation | 3,223 | 12,666 | 21,856 | 35,791 | 82,168 | ||
| $ 67,723 | $ 52,166 | $37,356 | $ | 169,291 | $ | 248,168 |
During the nine month period ended November 30, 2020, the Company was charged $24,189 (2019 - $53,641) by a Canadian related company with similar key management personnel for management fees. At November 30, 2020, $nil (2019 - $24,115) is owing to the Canadian related company with similar key management personnel and is included in accounts payable and accrued liabilities.
During the nine month period ended November 30, 2020, the Company issued 300,000 shares (2019 – 120,000 shares) to two officers of the Company at an average price of $0.163 per share (2019 - $0.425 per share) in accordance with the terms of the agreement to purchase Skyrun.
All transactions and balances are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.
SHARE CAPITAL
- a. At November 30, 2020, there were 30,683,189 common shares, 910,000 stock options and 4,904,212 warrants outstanding.
- b. At January 29, 2021, there were 30,683,189 common shares, 910,000 stock options and 4,904,212 warrants outstanding.
The Company has one class of common shares. No class A or class B preference shares have been issued.
SUBSEQUENT EVENTS
None noted.
CAPITAL MANAGEMENT
The Company manages its capital structure and makes adjustments to it, based on the funds available to the Company, in order to support future business opportunities. The Company defines its capital as shareholders' equity, loans and advances payable. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company's management to sustain future development of the business.
COMPETITION
Competitors for acquisition opportunities include well-capitalized companies, independent companies and other companies having financial and other resources far greater than those of Interlapse, thus a degree of competition exists between those engaged in acquiring attractive assets.
CRITICAL ACCOUNTING ESTIMATES
Management is required to make decisions with respect to estimates and assumptions for certain accounting policies that affect the reported amounts of assets, liabilities, revenues and expenses. These accounting policies are discussed below and are included to highlight the critical accounting policies and practices used by the Company. Note the use of different policies and practices could create different results being reported. The Company's management reviews these estimates regularly. New information and changes in circumstance may result in changes to estimated amounts that differ materially from current estimates.
The following assessment of significant accounting policies and associated estimates is not meant to be exhaustive. In the future, the Company might realize different results from the application of new accounting standards issued by regulatory bodies.
To recognize the share-based payment expense, the Company estimates the fair value of stock options granted using assumptions related to interest rates, expected life of the option, volatility of the underlying security and expected dividend yields. These assumptions may vary over time.
The accrual method of accounting requires management to incorporate certain estimates of costs as at a specific reporting date.
CHANGES IN ACCOUNTING POLICIES
None noted.
PROPOSED TRANSACTIONS
The Company has no proposed transactions that have not been disclosed.
FINANCIAL INSTRUMENTS RISK
The Company's financial instruments are exposed to the following risks:
Credit Risk
Credit risk is the risk of financial loss to the Company if counterparties do not fulfill their contractual obligations.
Cash and cash equivalents consist of cash bank balances and short-term deposits. The Company's short-term investments are held with a Canadian chartered bank and are monitored to ensure a stable return. The Company's short-term investments currently consist of term deposits as it is not the Company's policy to utilize complex, higherrisk investment vehicles.
The carrying amount of accounts receivable and cash and cash equivalents represents the maximum credit exposure. The Company does not have an allowance for doubtful accounts. As of November 30, 2020, there were no significant amounts past due or impaired.
Market Risk
Market risk is the risk that changes in foreign exchange rates and interest rates will affect the Company's cash flows, net income and comprehensive income. The objective of market risk management is to manage and control market risk exposures within acceptable limits, while maximizing returns.
Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its purchases and capital commitments, and other financial obligations as they are due. The Company's approach to managing liquidity is to ensure, to the extent possible, that it will have sufficient liquidity to meet its liabilities when due without incurring unacceptable losses or risking harm to the Company's reputation.
The Company's liquidity is dependent upon maintaining its current working capital balances, operating cash flows and ability to raise funds. To forecast and monitor liquidity, the Company prepares operating and capital expenditure budgets which are monitored and updated as considered necessary. Considering these circumstances and the Company's cash balance liquidity risk is assessed as low.
Interest Rate Risk
The Company is exposed to interest rate risk on its cash and cash equivalents. The majority of these deposits have been in discounted instruments with pre-determined fixed yields. Interest rate movements will affect the fair value of these instruments, so the Company manages maturity dates of these instruments to match cash flow needs, enabling realization at no loss in almost all cases.
Fair Value of Financial Instruments
The fair value of the Company's financial assets and liabilities approximates the carrying amount. Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are:
- Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities;
- Level 2 Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and
- Level 3 Inputs that are not based on observable market data.
The fair value classification of the Company's financial instruments are as follows:
| November 30, | 2020 | February 29, 2020 | |||
|---|---|---|---|---|---|
| Fair | Fairvalue | Fair value | |||
| Value | through profit | Amortized | through | Amortized | |
| Level | orloss | cost | profit or loss | cost | |
| $ | $ | $ | $ | ||
| Financial assets: | |||||
| Cash and cash equivalents | 1 | 1,274,717 | - | 985,162 | - |
| Amounts receivable | - | 40,688 | - | 65,455 | |
| Restrictedcash | - | 39,644 | - | 39,688 | |
| 1,274,717 | 80,332 | 985,162 | 105,143 | ||
| Financial liability: | |||||
| Accountspayable andaccrued liabilities | - | 85,009 | - | 76,560 | |
| - | 85,009 | - | 76,560 |
The Company's cash and cash equivalents are classified as level 1. During the nine month period ended November 30, 2020 and the year ended February 29, 2020, there were no transfers between level 1, level 2, and level 3.
FINANCIAL INSTRUMENTS
The Company's financial instruments consist of short-term investments; cheques issued in excess of funds on deposit, accounts payable and accrued liabilities. Terms of the financial instruments, where relevant, are fully disclosed in the Company's financial statements. It is management's opinion that the Company is not exposed to significant currency, or credit risks but is exposed to interest rate cash flow risk arising from its financial instruments and that their fair values approximate their carrying values unless otherwise noted.
RISKS
The Company is a technology business and has adequate cash for its current obligations but may not have sufficient cash to sustain operations indefinitely. With limited financial resources and limited revenue, there is no assurance that future funding will be available to the Company to pursue future endeavours. There is a risk that the Company could be forced to cease operations and become insolvent.
There is no guarantee that the Company will be able to attract interest to participate in an acquisition or another business opportunity. The Company's common shares are now trading on the TSX-V under the symbol "INLA" and on the OTCQB market under the symbol "INLAF". There can be no assurance that the Company's current activity and the liquid market for the Company's securities will develop and shareholders may find it difficult to resell the securities of the Company.
The factors identified above are not intended to represent a complete list of the risks faced by Interlapse. Interlapse's management believes that the foregoing risks and uncertainties are a fair indication of the risks and uncertainties material to Interlapse's business; however, additional risks and uncertainties, including those currently unknown to Interlapse or not considered to be material by Interlapse, may also adversely affect the business of Interlapse.
OFF-BALANCE SHEET ARRANGMENTS
None noted.
ADDITIONAL INFORMATION
Additional information relating to the Company and results of its operations may be found under Interlapse's SEDAR profile at www.sedar.com or on Interlapse's website at www.interlapse.com.
FORWARD LOOKING STATEMENTS
The foregoing information contains forward-looking statements within the meaning of securities laws. Forwardlooking statements are statements that are not historical fact and often, but not always, forward-looking information can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "estimates", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases, or states that certain actions, events or results "may", "could", "would", "should", "might" or "will" be taken, occur or be achieved. Forward-looking information by its nature requires assumptions and involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Interlapse to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information.
Forward-looking statements in this MD&A include, but are not limited to, Interlapse's overall strategic plan for assessing acquisition opportunities. In making the forward-looking statements in this MD&A, Interlapse has applied certain factors and assumptions that are based on information currently available to Interlapse as well as Interlapse's current beliefs and assumptions made by Interlapse, including that Interlapse will maintain its business plan for the near and mid-term range. Although Interlapse considers these beliefs and assumptions to be reasonable based on information currently available to it, they may prove to be incorrect, and the forward-looking statements in this release are subject to numerous risks, uncertainties and other factors that may cause future results to differ materially from those expressed or implied in such forward-looking statements. Such risk factors include, among others, that Interlapse will be unable to fulfill or will experience delays in fulfilling a strategic plan for the near and mid-term range. Additional risk factors are noted under the heading "Risks". The factors identified above and in the "Risks" section of this MD&A are not intended to represent a complete list of the factors that could affect Interlapse. Although Interlapse has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended.
Because forward-looking information addresses future events and conditions, it involves risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking information. These risks and uncertainties include, but are not limited to access to capital, commodity price volatility, well performance and marketability of production, transportation and refining availability and costs.
There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. Interlapse does not undertake to update any forward-looking information, whether as a result of new information, future events or otherwise, except in accordance with applicable securities laws.