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LQWD Technologies Corp. — Management Reports 2025
Jan 29, 2025
45060_rns_2025-01-29_a21c42c5-24a8-4aab-a414-aa1338b1c10c.pdf
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LQWD A LIGHTNING NETWORK COMPANY
TSXV: LQWD | OTCQX: LQWDF
LQWD TECHNOLOGIES CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FORM 51-102F1
FOR THE NINE MONTHS ENDED NOVEMBER 30, 2024
LQWD Technologies Corp.
1050 W. Pender St., Suite 1710
Vancouver, BC, Canada V6E 3S7
Table of Contents
CURRENT DEVELOPMENTS ... 3
CORPORATE ... 3
COMPANY OVERVIEW ... 4
OVERALL PERFORMANCE ... 5
FINANCIAL RESULTS OF OPERATIONS ... 5
SUMMARY OF QUARTERLY RESULTS ... 5
LIQUIDITY AND CAPITAL RESOURCES ... 9
RELATED PARTY TRANSACTIONS ... 10
SHARE CAPITAL ... 10
SUBSEQUENT EVENTS ... 10
CAPITAL MANAGEMENT ... 11
COMPETITION ... 11
CRITICAL ACCOUNTING ESTIMATES ... 11
PROPOSED TRANSACTIONS ... 11
FINANCIAL INSTRUMENTS RISK ... 11
FINANCIAL INSTRUMENTS ... 13
DIGITAL CURRENCY AND RISK MANAGEMENT ... 13
RISKS ... 13
OFF-BALANCE SHEET ARRANGMENTS ... 14
ADDITIONAL INFORMATION ... 14
FORWARD LOOKING STATEMENTS ... 14
The following Management's Discussion and Analysis ("MD&A") is dated January 29, 2025, for the period ended November 30, 2024 and should be read in conjunction with LQWD Technologies Corp. ("LQWD" or the "Company") accompanying audited consolidated financial statements for the years ended February 29, 2024 and February 28, 2023.
These condensed consolidated financial statements for the period ended November 30, 2024 have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting as issued by the International Accounting Standards Board ("IASB"). These consolidated 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, 2024 or the audited financial statements of the Company and the notes thereto for the year ended February 29, 2024. 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".
LQWD 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.
LQWD TECHNOLOGIES CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
CURRENT DEVELOPMENTS
CORPORATE
On January 21, 2025, the Company announced that it had qualified to trade on the OTCQX Best Market from the OTCQB Venture Market.
Between January 14, 2025, to January 28, 2025, the Company announced that it had acquired an additional ~20 Bitcoin. With these recent purchases, LQWD holds ~161 Bitcoin, representing 16.1 billion Satoshi’s (Sats).
On December 23, 2024, the Company closed its non-brokered private placement, issuing 2,000,000 units at a price of $1.50 per unit for gross proceeds of $3,000,000. Each unit consists of one common share of the Company and one-half of one common share purchase warrant. Each full warrant is exercisable into one common share at an exercise price of $2.00 per share at any time up to 18 months following the closing date of the private placement.
On November 13, 2024, the Company announced that it had acquired an additional ~5 Bitcoin. These purchases brought LQWD’s total to ~141 Bitcoin, representing 14.1 billion Satoshi’s (Sats).
On November 7, 2024, the Company closed the second tranche of a non-brokered private placement, issuing 2,307,692 units at a price of $0.65 per unit for gross proceeds of $1,500,000. Each unit consists of one common share of the Company and one-half of one common share purchase warrant. Each full warrant is exercisable into one common share at an exercise price of $0.90 per share at any time up to 18 months following the closing date of the private placement. In connection with the second tranche of the private placement, the Company issued to the finder $27,875 in cash and 30,972 share purchase warrants.
On October 27, 2024, the Company granted 500,000 stock options that are exercisable for a period of 5 years at a price of $1.152 per share to various directors, officers, and staff members. The stock options will vest over a period of 12 months.
On October 25, 2024, the Company announced that it had acquired an additional ~16 Bitcoin and on October 29, 2024, the Company announced that it had acquired an additional ~5 Bitcoin. These purchases brought LQWD’s total to ~136 Bitcoin, representing 13.6 billion Satoshi’s (Sats), equating to 839 Satoshi’s per LQWD share.
On October 9, 2024, the Company closed the first tranche of a non-brokered private placement, issuing 3,200,000 units at a price of $0.70 per unit for gross proceeds of $2,240,000. Each unit consists of one common share of the Company and one common share purchase warrant. Each warrant will entitle the holder to purchase one common share for a period of 5 years following the closing date with exercise prices as follows: 1/5th of the warrants will have an exercise price of $1.00 per share; 1/5th of the warrants will have an exercise price of $1.25 per share; 1/5th of the warrants will have an exercise price of $1.50 per share; 1/5th of the warrants will have an exercise price of $1.75 per share; and the remaining 1/5th of the warrants will have an exercise price of $2.00 per share. In connection with the first tranche of the private placement, the Company issued to the finder $112,000 in cash and 160,000 share purchase warrants.
On June 6, 2024, the Company cancelled 208,000 common shares held by a service provider. This cancellation was part of a settlement agreement dated November 29, 2023. Previously, on March 3, 2022, the Company had terminated its service agreement with the provider and requested repayment of $740,000, which had been advanced for services that were not rendered. In accordance with the settlement agreement, the parties agreed that instead of returning the consideration paid, the service provider would relinquish 208,000 common shares, which had been issued for the same value. As a result, the shares were cancelled, effectively settling the outstanding amount.
LQWD TECHNOLOGIES CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
On April 16, 2024, the Company filed a final short form base shelf prospectus with the securities commissions in each of the provinces and territories of Canada, except Quebec. This allows the Company to offer and issue up to $50 million of common shares, warrants, subscription receipts, units, debt securities or any combination of such securities during the 25-month period that the final shelf prospectus is effective.
On January 22, 2024, the Company closed a non-brokered private placement of 1,625,000 units of the Company at a price of $0.40 per unit for aggregate gross proceeds of $650,000. Each unit consists of one common share of the Company and one warrant exercisable into one common share at a price of $0.60 per share at any time up to 24 months following the closing date of the private placement.
On July 28, 2023, the Company changed its name from "LQWD Fintech Corp." to "LQWD Technologies Corp."
On June 8, 2023, LQWD closed a non-brokered private placement financing of $882,000. Under the private placement, LQWD issued 1,356,846 units of the Company at a price of $0.65 per unit. Each unit is comprised of one common share of the Company and one common share purchase warrant, with each warrant being exercisable for one common share at a price of $0.85 per common share at any time up to 24 months following the closing date of the private placement.
On April 26, 2023, LQWD announced it closed a non-brokered private placement financing of $300,000. Under the private placement, LQWD issued 468,750 units of the Company at a price of $0.64 per unit. Each unit is comprised of one common share of the Company and one common share purchase warrant, with each warrant being exercisable for one common share at an exercise price of $0.85 per common share at any time up to 36 months following the closing date of the private placement.
On April 5, 2023, LQWD announced the appointment of Alex Guidi as an independent director of the Company.
COMPANY OVERVIEW
The Company was incorporated under the Business Corporations Act (British Columbia) and its head office is in Vancouver, British Columbia, Canada. LQWD is a technology company that is focused on developing various web-based platforms, solutions and applications. The Company's common shares trade on the TSX Venture Exchange (the "TSX-V") under the symbol "LQWD" and on the OTCQX market under the symbol "LQWDF" and as at November 30, 2024, had 18,632,718 common shares issued and outstanding.
LQWD operates a global network of Bitcoin Lightning Network routing nodes. Since the Company launched its first node in November 2021, node activity and LN presence has increased substantially, routing over 883BTC and over 1,029,373 transactions. LQWD's node network currently charges nominal fees, however, fees could potentially increase substantially over time, based on further adoption of the Lightning Network, which is growing at a rapid rate.
The executive team of the Company is as follows:
- Shone Anstey – Chief Executive Officer
- Barry MacNeil – Chief Financial Officer
- Aziz Pulatov – Chief Technology Officer
- Giuseppe (Pino) Perone – Corporate Secretary
LQWD TECHNOLOGIES CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERALL PERFORMANCE
The Company's objective has been to pursue value generating opportunities for shareholders. The Company ended the period with $1,306,499 in cash and cash equivalents. Coincurve operations were put on hold May 20, 2022, so that the Company can allocate more resources to the Lightning Network platform, which management feels will have more impact on shareholder value. The Company recorded revenue of $4,005 from transaction fees from its routing nodes for the nine month period. The company is adding LSP services and is actively seeking out other entities interested in utilising this service to enhance their operations while generating fee revenue for LQWD.
The largest cash expenditures incurred by the Company during the three month period ended November 30, 2024, included research and development of $65,402, consulting of $54,288, and salaries and benefits of $50,140. The Company recorded total non-cash expenses of $138,508 for share-based compensation, amortization of intangible assets, and amortization of property and equipment.
The largest cash expenditures incurred by the Company during the nine month period ended November 30, 2024, included research and development of $199,028, salaries and benefits of $150,418, and marketing of $132,709. The Company recorded total non-cash expenses of $380,414 for share-based compensation, amortization of intangible assets, and amortization of property and equipment.
For the three month period ended November 30, 2024, the Company had working capital of $20,455,758 and recorded a net loss of $408,639. LQWD can fund its operations for a further 12 months.
| 2025 Q3 | 2024 Q3 | Nine months ended November 30, | ||
|---|---|---|---|---|
| 2024 | 2023 | |||
| Revenue | $ 2,739 | $ - | $ 4,005 | $ - |
| (Loss) income for the period | $ (408,639) | $ 1,368,517 | $ (1,199,456) | $ 576,152 |
FINANCIAL RESULTS OF OPERATIONS
SUMMARY OF QUARTERLY RESULTS
| Three Months Ended | ||||
|---|---|---|---|---|
| November 30, 2024 | August 31, 2024 | May 31, 2024 | February 29, 2024 | |
| Revenue | $ 2,736 | $ 909 | $ 360 | $ 506 |
| Gross profit | $ 2,736 | $ 909 | $ 360 | $ 506 |
| Loss for the period | $ (408,639) | $ (389,374) | $ (401,443) | $ (2,597,866) |
| Loss per share | $ (0.03) | $ (0.03) | $ (0.03) | $ (0.23) |
| November 30, 2023 | August 31, 2023 | May 31, 2023 | February 28, 2023 | |
| Revenue | $ - | $ - | $ - | $ - |
| Gross profit | $ - | $ - | $ - | $ - |
| (Loss) gain for the period | $ 1,368,517 | $ (698,444) | $ (93,921) | $ (1,884,946) |
| (Loss) gain per share | $ 0.12 | $ (0.06) | $ (0.01) | $ (0.19) |
The Company's operations for the three months ended November 30, 2024, produced a loss of $408,639 compared to income of $1,368,517 for the same quarter in the previous year. The losses in the last three quarters have leveled
LQWD TECHNOLOGIES CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
off and we have not been affected by gains or losses on digital currencies' as we have been buying Bitcoin and have not sold any in those quarters.
The loss in the current quarter of $408,639 reflects the Company's stage in development where it is trying to establish a new market for fee-based transaction and provisions of liquidity on the Lightning Network, a derivative of the Bitcoin blockchain. The Company has developed a new product to earn fees based on the volume of transactions and the amount of Bitcoin added to the channels to facilitate transactions. During this initial stage the company has kept the fees low to increase volume and gain market information. The success of the new product depends on the adoption of the Lightning Network as a payment channel and the continued rise in the price of Bitcoin to allow the liquidity in the network to increase to handle growing volumes of transactions. In the current year, the Company has focused on automating the onboarding process to the Lightning Network, specifically by streamlining the setup of nodes, creation of channels, and liquidity management. The goal is to develop a universally accessible solution that enables a seamless, standardized onboarding experience without the need for custom solutions for each user. The results of each of the last eight quarters is shown in the above table and is comprised of three components, Revenue, General and Administrative Expenses and Other items. The breakdown of each is as follows:
| Three Months Ended | ||||
|---|---|---|---|---|
| November 30, 2024 | August 31, 2024 | May 31, 2024 | February 29, 2024 | |
| Revenue | $ 2,736 | $ 909 | $ 360 | $ 506 |
| Expenses | $ 429,984 | $ 388,845 | $ 404,247 | $ 538,172 |
| Other items | ||||
| Foreign exchange | $ 17,840 | $ (2,536) | $ 1,656 | $ (352) |
| Intangible asset impairment | $ - | $ - | $ - | $ (2,987,286) |
| Interest and accretion income | $ 769 | $ 1,098 | $ 788 | $ 790 |
| Gain (loss) on revaluation of digital currencies | $ - | $ - | $ - | $ 986,318 |
| Gain (loss) on sale of digital currencies | $ - | $ - | $ - | $ 77,182 |
| Derecognition of sales tax receivable | $ - | $ - | $ - | $ (136,852) |
| Three Months Ended | ||||
| --- | --- | --- | --- | --- |
| November 30, 2023 | August 31, 2023 | May 31, 2023 | February 28, 2023 | |
| Revenue | $ - | $ - | $ - | $ - |
| Expenses (1) | $ 483,286 | $ 549,724 | $ 564,831 | $ 751,164 |
| Other items | ||||
| Foreign exchange | $ 1,226 | $ (2,129) | $ (1,903) | $ 3,695 |
| Goodwill impairment | $ - | $ - | $ - | $ (2,838,279) |
| Interest and accretion income | $ 789 | $ 776 | $ 757 | $ 1,301 |
| Gain on lease modification | $ - | $ - | $ 472,056 | $ - |
| Gain (loss) on revaluation of digital currencies | $ 1,849,788 | $ (147,367) | $ - | $ 1,062,573 |
| Gain (loss) on sale of digital currencies | $ - | $ - | $ - | $ (6,723) |
(1) The above amounts have been adjusted to reflect the change to expenses where the amortization of intangible assets has been changed to reflect amortization of $257,965 per quarter instead of $0 for Q4 2023, $43,171 for Q3 2023, $686,457 for Q2 2023 and $687,916 for Q1 2023.
LQWD TECHNOLOGIES CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
The sales revenue remains below the projections used to value the Goodwill and Intangible assets over the eight quarters and reflects a slower than projected uptake in the adoption of the Lightning Network and the less than projected increase in the value of Bitcoin. The current quarter has witnessed a significant increase in Bitcoin price and may lead to higher adoption on the network but may take some time. The Company is closely monitoring the uptake and adoption of Bitcoin and the lightning network and is working to expand its penetration in the market and is working to help spread awareness of our products and its utility. The sales revenue for the quarter is nominal and the Company is working to improve that and with greater adoption of the network the Company feels it will increase proportionately.
The price sensitivity to transaction fees is also an area that the Company is continuing to test to determine the amount that will affect the volume drawn to the network which have been lower than projected. The level of expenses has been declining on average over the last eight quarters and been relatively flat the last four quarters. The expenses for the current quarter are on track with that trend and the Company will try to keep the expenses at these levels until there is a rise in the revenue. There were minor amounts for foreign exchange and interest and accretion income for the current quarter. Overall, in the last eight quarters other items include a few impairments, gains and losses and revaluations of Bitcoin because of the operations and lower than expected results compared to projections. The two largest items are the goodwill and intangible asset that negatively affected income are impairments of $2,838,279 and $2,987,286 respectively and result from the NPV of the projected cashflow from operations related to their cash generating unit not being greater than their carrying value, resulting in the impairment. These cashflows may correct and increase in value, but with the current results the impairment was necessary. The gain (loss) on revaluation of digital currencies results from increases and decreases in the price of Bitcoin in Canadian dollar equivalents. At the end of each quarter the number of Bitcoin held will be multiplied by the conversion rate to Canadian dollars on the end date of each quarter. The resulting revaluation will create either a gain or loss for each quarter which will have a positive or negative impact on earnings for the quarter. Over the last eight quarters the price of Bitcoin troughed for the year ended February 2023 and started to rise which resulted in losses of $3,160,795 and increased in price for the year ended February 2024 resulting in gains of $3,160,795. The value of bitcoin has increased from February 2023 and continues into the current quarter. Once the gain in value exceeds the previous losses recorded the excess is treated as other comprehensive income. The Company sold some Bitcoin in the last eight quarters which resulted in gains and losses in a few of the quarters and has began purchasing recently. The gains are recorded when the selling price exceeds the purchase price and conversely when we sell Bitcoin for less than the purchase price, we record a loss.
During Q4 in 2024 the Company was audited by CRA for GST compliance and was found to be GST exempt and had its inputs credits disallowed causing a reduction in receivables recorded of $136,852.
The following table outlines the proposed use of the proceeds of the offering completed on June 8, 2023, along with the amounts expended:
| Activity or Nature of Expenditure | Proposed use of Net Proceeds | Approximate proceeds used as of November 30, 2024 | Variance | Comments |
|---|---|---|---|---|
| Development of the Lightning Network | The Company is on track with expected development spending. | |||
| Platform | $ 300,000 | $ 300,000 | $ - | |
| General and administrative expenses | $ 450,000 | $ 450,000 | $ - | The Company is on track with expected G&A spending. |
| Unallocated Working Capital | $ 132,000 | $ 132,000 | $ - | |
| Total | $ 882,000 | $ 882,000 | $ - |
LQWD TECHNOLOGIES CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following table outlines the proposed use of the proceeds of the offering completed on January 22, 2024, along with the amounts expended:
| Activity or Nature of Expenditure | Proposed use of Net Proceeds | Approximate proceeds used as of November 30, 2024 | Variance | Comments |
|---|---|---|---|---|
| Development of the Lightning Network | The Company is on track with expected development spending. | |||
| Platform | $ 350,000 | $ 107,000 | $ 243,000 | |
| General and administrative expenses | $ 300,000 | $ 300,000 | $ - | The Company is on track with expected G&A spending. |
| Total | $ 650,000 | $ 407,000 | $ 243,000 |
The following table outlines the proposed use of the proceeds of the offering completed on October 9, 2024, along with the amounts expended:
| Activity or Nature of Expenditure | Proposed use of Net Proceeds | Approximate proceeds used as of November 30, 2024 | Variance | Comments |
|---|---|---|---|---|
| Development of the Lightning Network | The Company is on track with expected development spending. | |||
| Platform | $ 100,000 | $ - | $ 100,000 | |
| General and administrative expenses | $ 188,000 | $ 188,000 | $ - | The Company is on track with expected G&A spending. |
| Purchase BTC | $ 2,000,000 | $ 2,000,000 | $ - | The Company purchased ~21 BTC. |
| Share issuance | $ 112,000 | $ 112,000 | $ - | Finder’s fees paid. |
| Total | $ 2,400,000 | $ 2,300,000 | $ 100,000 |
The following table outlines the proposed use of the proceeds of the offering completed on November 7, 2024, along with the amounts expended:
| Activity or Nature of Expenditure | Proposed use of Net Proceeds | Approximate proceeds used as of November 30, 2024 | Variance | Comments |
|---|---|---|---|---|
| Development of the Lightning Network | The Company is on track with expected development spending. | |||
| Platform | $ 195,000 | $ - | $ 195,000 | |
| General and administrative expenses | $ 700,000 | $ 109,000 | $ 591,000 | The Company is on track with expected G&A spending. |
| Purchase BTC | $ 575,000 | $ 575,000 | $ - | The Company purchased ~5 BTC. |
| Share issuance | $ 30,000 | $ 30,000 | $ - | Finder’s fees paid. |
| Total | $ 1,500,000 | $ 714,000 | $ 786,000 |
LQWD TECHNOLOGIES CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following table shows the current quarter's loss/earning by each company in the consolidated group to better illustrate the change in the organization.
| LQWD Technologies | Three months ended November 30, 2024 | ||||
|---|---|---|---|---|---|
| LQwD Financial | Skyrun | Other | Total | ||
| Loss for the period | $ 291,121 | $ 113,614 | $ 3,710 | $ 194 | $408,639 |
LIQUIDITY AND CAPITAL RESOURCES
| 2025 Q3 | 2024 Q3 | Nine months ended November 30, | ||
|---|---|---|---|---|
| 2024 | 2023 | |||
| Cash and cash equivalents | $ 1,306,499 | $ 914,975 | $ 1,306,499 | $ 914,975 |
| Working capital | $20,455,758 | $ 6,689,065 | $20,455,758 | $ 6,689,065 |
As at the date of this report, 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.
| 2025 Q3 | 2024 Q3 | Nine months ended November 30, | ||
|---|---|---|---|---|
| 2024 | 2023 | |||
| Issued and outstanding shares | 18,632,718 | 11,603,026 | 18,632,718 | 11,603,026 |
| Issued and outstanding shares, fully diluted | 28,053,132 | 14,325,622 | 28,053,132 | 14,325,622 |
During the nine-month period ended November 30, 2024, no stock options were exercised.
In November 2024, 105,000 warrants, redeemable for $0.85 per share, were exercised for gross proceeds of $89,250.
On November 7, 2024, the Company issued 2,307,692 common shares for proceeds of $1,500,000.
On October 9, 2024, the Company issued 3,200,000 common shares for proceeds of $2,240,000.
On June 6, 2024, the Company cancelled 208,000 common shares held by a service provider. These common shares were cancelled pursuant to a settlement agreement dated November 29, 2023, between the parties. More specifically, on March 3, 2022, LQWD terminated the service agreement with the service provider, and requested the return of the funds paid for services not provided. The parties later agreed, in accordance with the settlement agreement, that in lieu of returning the funds the service provider would cancel their LQWD shares of a similar value.
On January 22, 2024, the Company issued 1,625,000 common shares for proceeds of $650,000.
On April 26, 2023, the Company issued 468,750 common shares for proceeds of $300,000.
On June 8, 2023, the Company issued 1,356,846 common shares for proceeds of $882,000.
The technology business may affect the Company's ability to raise capital, to acquire properties and/or to pursue other opportunities in the future.
LQWD TECHNOLOGIES CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RELATED PARTY TRANSACTIONS
The aggregate value of transactions and outstanding balances relating to key management personnel were as follows:
| 2025 Q3 | 2024 Q3 | Nine months ended November 30, | ||
|---|---|---|---|---|
| 2024 | 2023 | |||
| Research and development | $ 30,000 | $ 30,000 | $ 90,000 | $ 90,000 |
| Salaries | 36,000 | 36,000 | 108,000 | 108,000 |
| Stock-based compensation | 63,441 | 7,461 | 117,572 | 105,708 |
| $ 129,441 | $ 73,461 | $ 315,572 | $ 303,708 |
The breakdown for the related party transactions during the three months ended November 30, 2024 are as follows:
| Related Party | Role | Research and development | Salaries | Share-based compensation | Total |
|---|---|---|---|---|---|
| Barry MacNeil | CFO | $ - | $ 10,500 | $ 10,513 | $ 21,013 |
| Aziz Pulatov | CTO | 30,000 | - | 14,078 | 44,078 |
| Giuseppe (Pino) Perone | Corporate Secretary | - | 10,500 | 17,643 | 28,143 |
| Ashley Garnot | Director | - | 15,000 | 17,643 | 32,643 |
| Kim Evans | Director | - | - | 3,564 | 3,564 |
| $ 30,000 | $ 36,000 | $ 63,441 | $ 129,441 |
At November 30, 2024, $nil (2023 - $45) is owing to key management personnel and is included in accounts payable and accrued liabilities.
During the period ended November 30, 2024, the Company was charged $10,318 (2023 - $9,000) by TAG Oil Ltd., a Canadian related company with similar key management personnel for office rent and IT support. At November 30, 2024, $868 (2023 - $nil) is owing to the Canadian related company with similar key management personnel and is included in accounts payable and accrued liabilities.
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, 2024, there were 18,632,718 common shares, 1,330,000 stock options, 7,890,414 warrants, and 200,000 performance-based warrants outstanding.
b. At January 29, 2025, there were 20,982,718 common shares, 1,330,000 stock options, and 8,740,414 warrants.
The Company has one class of common shares. No class A or class B preference shares have been issued.
SUBSEQUENT EVENTS
On December 23, 2024, the Company closed its non-brokered private placement, issuing 2,000,000 units at a price of $1.50 per unit for gross proceeds of $3,000,000. Each unit consists of one common share of the Company and one-half of one common share purchase warrant. Each full warrant is exercisable into one common share at an exercise price of $2.00 per share at any time up to 18 months following the closing date of the private placement.
LQWD TECHNOLOGIES CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
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 LQWD, 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 stock-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.
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, higher-risk investment vehicles.
LQWD TECHNOLOGIES CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
The carrying amount of accounts receivable, cash and cash equivalents, and restricted cash represents the maximum credit exposure. The Company does not have an allowance for doubtful accounts. As of November 30, 2024, 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.
As at November 30, 2024, the contractual maturities of financial liabilities were as follows:
| Carrying Amount | Contractual Cash Flows | Within 1 Year | 1 to 2 Year | 2 to 3 Year | 3 to 4 Years | + 4 Years | |
|---|---|---|---|---|---|---|---|
| Trade payable and accrued liabilities | $61,178 | $61,178 | $61,178 | - | - | - | - |
| Total | $61,178 | $61,178 | $61,178 | - | - | - | - |
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.
LQWD TECHNOLOGIES CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
The fair value classification of the Company's financial instruments are as follows:
| Fair Value Level | November 30, 2024 | February 29, 2024 | |
|---|---|---|---|
| $ | $ | ||
| Financial assets: | |||
| Digital currencies | 2 | 19,092,295 | 9,612,743 |
The Company's digital currencies are classified as level 2. During the three-month period ended November 30, 2024, and year ended February 29, 2024, 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.
DIGITAL CURRENCY AND RISK MANAGEMENT
Digital currencies are measured based on their fair values, determined using the daily weighted close price for the digital currency on coinmarketcap.com.
Digital currency prices are affected by various forces including global supply and demand, interest rates, exchange rates, inflation or deflation and the global political and economic conditions. The profitability of the Company is affected by the current and future market price of digital currencies; in addition, the Company may not be able to liquidate its inventory of digital currencies at its desired price if required. A decline in the market prices for digital currencies could negatively impact the Company's future operations. The Company from time to time converts its digital currency but has not entered into any hedge transactions.
Digital currencies have a limited history, and the fair value historically has been very volatile. Historical performances of digital currencies are not indicative of their future price performance. The Company's digital currencies consist primarily of Bitcoin. The impact of a 25% variance in the price of this digital currency on the Company's earnings before tax, based on their closing prices on November 30, 2024, would be $4,773,074.
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 "LQWD" and on the OTCQX market under the symbol "LQWDF". 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.
LQWD TECHNOLOGIES CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
The factors identified above are not intended to represent a complete list of the risks faced by LQWD. LQWD's management believes that the foregoing risks and uncertainties are a fair indication of the risks and uncertainties material to LQWD's business; however, additional risks and uncertainties, including those currently unknown to LQWD or not considered to be material by LQWD, may also adversely affect the business of LQWD.
OFF-BALANCE SHEET ARRANGMENTS
None noted.
ADDITIONAL INFORMATION
Additional information relating to the Company and results of its operations may be found under LQWD's SEDAR+ profile at www.sedarplus.ca or on LQWD's website at www.lqwdtech.com.
FORWARD LOOKING STATEMENTS
The foregoing information contains forward-looking statements within the meaning of securities laws. Forward-looking 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 LQWD 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, LQWD's overall strategic plan for assessing acquisition opportunities. In making the forward-looking statements in this MD&A, LQWD has applied certain factors and assumptions that are based on information currently available to LQWD as well as LQWD's current beliefs and assumptions made by LQWD, including that LQWD will maintain its business plan for the near and mid-term range. Although LQWD 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 LQWD 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 LQWD. Although LQWD 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.
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. LQWD 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.
LQWD TECHNOLOGIES CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS