Metasphere Labs Inc. — Interim / Quarterly Report 2021

Jun 30, 2021

BLUKNIGHT AQUAFARMS INC.

Condensed Interim Financial Statements Nine-month period ended April 30, 2021 (Unaudited)

Expressed in Canadian Dollars

NOTICE OF NO AUDITOR REVIEW OF CONDENSED INTERIM FINANCIAL STATEMENTS

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

The accompanying unaudited condensed interim financial statements of Bluknight Aquafarms Inc. (the “Company”) have been prepared by and are the responsibility of the Company’s management.

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

2

BluKnight Aquafarms Inc. Condensed Interim Statements of Financial Position

(Expressed in Canadian Dollars - Unaudited)

			April 30,		July 31,
	Note		2021		2020
ASSETS
Current assets
Cash		$	2,460	$	14,660
TOTAL ASSETS		$	2,460	$	14,660
LIABILITIES AND SHAREHOLDERS’ DEFICIENCY
Current liabilities
Accounts payable and accrued liabilities		$	31,232	$	4,465
Loans payable	4		105,000		105,000
			136,232		109,465
SHAREHOLDERS’ DEFICIENCY
Share capital	5		435,422		507,422
Accumulated deficit			(569,194)		(602,227)
TOTAL SHAREHOLDERS’EQUITY/DEFICIENCY			(133,772)		(94,805)
TOTAL LIABILITIES AND SHAREHOLDERS’
EQUITY/DEFICIENCY		$	2,460	$	14,660

Nature and continuance of operations (Note 1)

Approved by the board of directors and authorized for issue on June 29, 2021:

“Eugene Beukman” “Gregory Baron” Eugene Beukman, Director Gregory Baron, Director

See accompanying notes to the condensed interim financial statements

3

BluKnight Aquafarms Inc.

Condensed Interim Statements of Loss (Income) and Comprehensive Loss (Income) (Expressed in Canadian Dollars - Unaudited)

Expressed in Canadian Dollars - Unaudited)
	For the three-month				For the nine-month
	Period	ended			Period	ended
	April 30,	April 30,			April 30,		April 30,
	2021		2020		2021		2020
Expenses
Consulting and management fees	$ 5,512	$	5,512	$	16,642	$	29,034
Office and miscellaneous	18		18		68		131
Professional fees	5,513		6,513		21,762		18,256
Rent	-		-		-		725
Transfer agent and filing fees	-		525		495		2,426
Net loss and comprehensive loss for the period	$ 11,043	$	12,568	$	38,967	$	50,572
Loss and comprehensive loss
per share– basic and diluted	$ 0.00	$	0.00	$ 0.00		$	0.00
Weighted average number of common shares
outstanding	34,545,601	38,365,601		36,132,586		38,365,601

See accompanying notes to the condensed interim financial statements

4

BluKnight Aquafarms Inc.

Statements of Changes in Shareholders’ Deficiency (Expressed in Canadian Dollars - Unaudited)

	Share capital Number of shares Amount Deficit Total
Balance at July 31, 2019 Loss for the period	38,365,601 $ 507,422 $ (541,769) $ (34,347) - - (49,149) (49,149)
Balance at April 30, 2020	38,365,601 $ 507,422 $ (590,918) (83,496)
Balance at July 31, 2020 Return to treasury Loss for the period	38,365,601 $ 507,422 $ (602,227) $ (94,805) (3,820,000) (72,000) 72,000 - - - (38,967) (38,967)
Balance at April 30, 2021	34,545,601 $ 435,422 $ (569,194) $ (133,772)

See accompanying notes to the condensed interim financial statements

5

BluKnight Aquafarms Inc. Statements of Cash Flows

(Expressed in Canadian Dollars - Unaudited)

		Nine-month period ended	Nine-month period ended
		April 30,		April 30,
		2021		2020
Operating activities
Loss for the period	$	(38,967)	$	(49,149)
Changes in non-cash working capital items:
Amounts receivable		-		4,072
Accounts payable and accrued liabilities		26,767		(34,434)
Net cash flows used in operating activities		(12,200)		(79,511)
Financing activities
Loans received		-		92,500
Loans repaid		-		(12,500)
Net cash flows provided by financing activities		-		80,000
Change in cash		(12,200)		489
Cash, beginning		14,660		361
Cash, ending	$	2,460	$	850

See accompanying notes to the condensed interim financial statements

6

BluKnight Aquafarms Inc. Notes to the Condensed Interim Financial Statements For the nine-month period ended April 30, 2021 and 2020 (Expressed in Canadian Dollars - Unaudited)

1. Nature and continuance of operations

BluKnight Aquafarms Inc. (the “Company”) was incorporated on June 19, 2015, under the laws of the province of British Columbia, Canada. The Company changed its name to Bluknight Aquafarms Inc. on July 12, 2017. The Company is a business development services company. It provides business development services to new and emerging businesses, including making introductions to accountants, lawyers, brokers, transfer agents, and various other professionals and service providers to assist companies in raising capital and going public.

The head office, principal address, records office and registered address of the Company are located at 810 – 789 West Pender Street, Vancouver BC.

2. Basis of presentation

Statement of compliance

These condensed interim financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), and in accordance with IAS 34 – Interim Financial Reporting. The condensed interim financial statements do not include all the information required for annual financial statements and should be read in conjunction with the Company's audited financial statements for the year ended July 31, 2020. These condensed interim financial statements have been prepared following the same accounting policies as the Company’s audited financial statements for the year ended July 31, 2020.

The Board of Directors approved these condensed interim financial statements on June 29, 2021.

Going Concern

These condensed interim financial statements have been prepared on the assumption that the Company will continue as a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations. At April 30, 2021, the Company had not yet achieved profitable operations, had accumulated losses of $569,194 (July 31, 2020 - $602,227) since its inception, and has working capital deficit of $133,772 (July 31, 2020 – $94,805). The Company expects to incur further losses in the development of its business, all of which casts significant doubt about the Company’s ability to continue as a going concern. Different bases of measurement may be appropriate if the Company is not expected to continue operations for the foreseeable future. The Company’s continuation as a going concern is dependent upon the successful results from its business activities and its ability to attain profitable operations and generate funds there from and/or raise equity capital or borrowings sufficient to meet current and future obligations. Management intends to finance operating costs over the next twelve months with loans from directors and companies controlled by directors and or profits from its business activities.

During the quarter ended April 30, 2021 and during the year ended July 31, 2020, several measures have been implemented in Canada and the rest of the world in response to the increased impact from novel coronavirus (COVID-19). The Company continues to operate its business at this time. While the impact of COVID-19 is expected to be temporary, the current circumstances are dynamic and the impacts of COVID19 on business operations cannot be reasonably estimated at this time. The Company anticipates this could have an adverse impact on its business, results of operations, financial position and cash flows in 2020 and beyond.

7

BluKnight Aquafarms Inc. Notes to the Condensed Interim Financial Statements For the nine-month period ended April 30, 2021 and 2020 (Expressed in Canadian Dollars - Unaudited)

2. Basis of presentation (cont’d)

Basis of presentation

The condensed interim financial statements have been prepared on a historical cost basis except for certain financial assets that are measured at fair value. All dollar amounts presented are in Canadian dollars unless otherwise specified.

Significant estimates and assumptions

The preparation of the Company’s condensed interim financial statements in conformity with IFRS requires management to make estimates and assumptions concerning the future. Estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, actual outcomes can differ from these estimates.

Areas requiring a significant degree of estimation relate to the fair value measurements for financial instruments and stock-based compensation and other equity-based payments, and the recoverability and measurement of deferred tax assets and liabilities. Actual results may differ from those estimates.

Estimates and assumptions where there are significant risks of material adjustments to assets and liabilities in future accounting periods include the fair value measurements for financial instruments and the recoverability of deferred tax assets. Actual results may differ from those estimates and judgments.

Significant judgments

The preparation of condensed interim financial statements in accordance with IFRS requires the Company to make judgments, apart from those involving estimates, in applying accounting policies. The most significant judgments in applying the Company’s condensed interim financial statements is the assessment of the Company’s ability to continue as a going concern and whether there are events or conditions that may give rise to significant uncertainty.

Foreign currency translation

The functional currency of each entity is measured using the currency of the primary economic environment in which that entity operates. The condensed interim financial statements are presented in Canadian dollars which is the company’s functional and presentation currency.

Gain/Loss per share

Basic gain/loss per share is calculated by dividing the gain/loss attributable to common shareholders by the weighted average number of common shares outstanding in the period. For all periods presented, the gain/loss attributable to common shareholders equals the reported gain/loss attributable to owners of the Company. Diluted gain/loss per share is calculated by the treasury stock method. Under the treasury stock method, the weighted average number of common shares outstanding for the calculation of diluted gain/loss per share assumes that the proceeds to be received on the exercise of dilutive share options and warrants are used to repurchase common shares at the average market price during the period.

8

BluKnight Aquafarms Inc. Notes to the Condensed Interim Financial Statements For the nine-month period ended April 30, 2021 and 2020 (Expressed in Canadian Dollars - Unaudited)

3. Significant accounting policies

Foreign currency translation

The results and financial position of subsidiaries whose functional currency differs from that of the parent company (“foreign operations”) are translated into the Canadian dollar presentation currency as follows: (i) assets and liabilities are translated at the closing rate as at the reporting date, and (ii) income and expenses are translated at the average exchange rate of transactions for the period. All resulting exchange differences are recognized as other comprehensive income (loss).

A foreign currency translation is a transaction denominated or requiring settlement in a foreign currency and is initially recorded in the functional currency of the subsidiary by applying the spot exchange rate on the date of the transaction. At the end of each reporting period, these balances are translated as: (i) foreign currency monetary assets and liabilities are translated using the prevailing exchange rate at the balance sheet date; (ii) non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rate at the date of the transaction; (iii) non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rate when the fair value was measured; and (iv) income statement items denominated in foreign currencies are translated using the average monthly exchange rates, except for depreciation which is translated at historical exchange rates.

Income taxes

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in net income except to the extent that it relates to a business combination or items recognized directly in equity or in other comprehensive income (loss).

Current income taxes are recognized for the estimated income taxes payable or receivable on taxable income or loss for the current year and any adjustment to income taxes payable in respect of previous years. Current income taxes are determined using tax rates and tax laws that have been enacted or substantively enacted by the year-end date.

Deferred tax assets and liabilities are recognized where the carrying amount of an asset or liability differs from its tax base, except for taxable temporary differences arising on the initial recognition of goodwill and temporary differences arising on the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting nor taxable profit or loss.

Recognition of deferred tax assets for unused tax losses, tax credits and deductible temporary differences is restricted to those instances where it is probable that future taxable profit will be available against which the deferred tax asset can be utilized. At the end of each reporting year the Company reassesses unrecognized deferred tax assets. The Company recognizes a previously unrecognized deferred tax asset to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Financial instruments

Financial assets

Financial instruments are measured on initial recognition at fair value, plus, in the case of financial instruments other than those classified at FVTPL, directly attributable transaction costs. Measurement of financial assets in subsequent periods depends on whether the financial instrument has been classified and measured at:

9

BluKnight Aquafarms Inc. Notes to the Condensed Interim Financial Statements For the nine-month period ended April 30, 2021 and 2020 (Expressed in Canadian Dollars - Unaudited)

3. Significant accounting policies (continued)

Financial instruments (Continued)

Financial assets (continued)

(i)amortized cost; (ii) fair value through other comprehensive income (“FVOCI”); or (iii) fair value through profit or loss (“FVTPL). All financial assets not classified and measured at amortized cost or FVOCI are measured at FVTPL. On initial recognition of an equity instrument that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’s fair value in OCI. The classification determines the method by which financial assets are carried on the balance sheet subsequent to inception and how changes in value are recorded. Cash and cash equivalents, and accounts receivable are measured at amortized cost with subsequent impairments recognized in the statements of operations and comprehensive loss.

Financial liabilities

Financial liabilities are designated as either: (i) fair value through profit or loss; or (ii) other financial liabilities. Financial liabilities, other than financial liabilities classified as FVTPL, are measured in subsequent periods at amortized cost using the effective interest method. Accounts payable and accrued liabilities and long‐term debt are classified as other financial liabilities and carried on the balance sheet at amortized cost.

Impairment of financial assets

The Company assesses at each reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset is considered impaired if objective evidence that can be estimated reliably indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. If a financial asset measured at amortized cost is impaired, an amount equal to the difference between its carrying value and the present value of the estimated future cash flows discounted at the original effective interest rate is recognized as an impairment loss in the consolidated statement of operations. If it has been determined that the impairment has reversed, the carrying amount of the asset is increased to its recoverable amount to a maximum of the carrying amount that would have been determined had no impairment charge been recognized in prior periods. Reversals of impairment charges are recognized in the consolidated statements of operations and comprehensive loss in the period in which they occur.

- Impairment of non financial assets

The carrying amounts of non-financial assets are reviewed for impairment at each reporting date, or whenever events or changes in circumstances indicate the carrying amounts may not be recoverable. If there are indicators of impairment, a review is undertaken to determine whether the carrying amounts are in excess of their recoverable amounts. Reviews are undertaken on an asset-by-asset basis. If the carrying amount of a non-financial asset exceeds the recoverable amount, being the higher of its fair value less costs to sell and its value-in-use, an impairment loss is recognized in net earnings as the excess of the carrying amount over the recoverable amount.

Where the recoverable amount is assessed using discounted cash flow techniques, the resulting estimates are based on detailed production plans. The mine plan is the basis for forecasting production output in each future year and for forecasting production costs. For value-in-use calculations, production costs and output may be revised to reflect the continued use of the asset in its present form.

10

BluKnight Aquafarms Inc. Notes to the Condensed Interim Financial Statements For the nine-month period ended April 30, 2021 and 2020 (Expressed in Canadian Dollars - Unaudited)

3. Significant accounting policies (continued)

Share-based payments

The fair value of equity settled stock options awarded to employees (i.e. employees for legal and tax purpose, directors and certain consultants), determined as of the date of grant, and awarded to non-employees, as of the date of delivery of service, is recognized as share-based compensation expense, included in general and administrative expenses in the Consolidated Statements of Comprehensive Income (Loss), over the vesting period of the stock options based on the estimated number of options expected to vest, with a corresponding increase to equity. The fair value of stock options is determined using the Black-Scholes option pricing model with market related inputs as of the date of grant or the date of delivery of service. Stock options with graded vesting schedules are accounted for as separate grants with different vesting periods and fair values. Changes to the estimated number of awards that will eventually vest are accounted for prospectively.

Basic and diluted loss per share

Basic earnings or loss per share represents the income or loss for the period, divided by the weighted average number of common shares outstanding during the period. Diluted earnings or loss per share represents the income or loss for the period, divided by the weighted average number of common shares outstanding during the period plus the weighted average number of dilutive shares resulting from the exercise of stock options, warrants and other similar instruments where the inclusion of these would not be anti-dilutive.

4. Loans payable

During the year ended July 31, 2020, the Company received loans of $117,500 from a private company controlled by a director (Note 6). The loans were unsecured, non-interest bearing and due on demand. During the same year, the Company repaid $12,500.

At April 30, 2021, $105,000 in loans payable remain outstanding.

5. Share capital

Authorized share capital

Unlimited number of common shares without par value.

Issued share capital

At April 30, 2021 there were 34,545,601 (July 31, 2020 – 38,365,601) issued and fully paid common shares outstanding.

On November 22, 2020, shareholders returned 3,820,000 common shares with fair value of $72,000 to treasury. A fair value adjustment of $72,000 was made to retained earnings.

Share issuances

During the nine-month period ending April 30, 2021 and during the year ending July 31, 2020, the Company did not issue any shares.

11

BluKnight Aquafarms Inc. Notes to the Condensed Interim Financial Statements For the nine-month period ended April 30, 2021 and 2020 (Expressed in Canadian Dollars - Unaudited)

5. Share capital (continued)

Warrants

The following table summarizes the continuity of the Company’s share purchase warrants:

	Warrants
	outstanding	Exercise price	Expiry date
	#	$
Balance,
July 31, 2019	37,969,000	0.05	September 21, 2019
Expired	(37,969,000)	0.05	-
Balance,
July 31, 2020 and April 30, 2021	-	-	-

Stock options

The Company has not issued any stock options and no stock options are outstanding as at April 30, 2021 and July 31, 2020.

Share-based payment reserve

The share-based payment reserve records items recognized as stock-based compensation expense and other share-based payments until such time that the stock options or warrants are exercised, at which time the corresponding amount will be transferred to share capital.

6. Related parties

Related party balances

Amounts due to related parties:

The following amounts due to related parties are included in trade payables and accrued liabilities:

	April 30,		July 31,
	2021		2020
A private company controlled by a director of the Company	$ 25,851	$	-
The following amounts are included in loans payable by the Company (Note 4):
	April 30,		July 31,
	2021		2020
A private company controlled by a director of the Company	$ 105,000	$	105,000

The following amounts are included in loans payable by the Company (Note 4):

The loans are unsecured, non-interest bearing and due on demand.

During the nine-month period ended April 30, 2021, the Company paid and/or accrued accounting, management and consulting fees of $31,430 (2020 - $27,922) to companies controlled by a director of the Company.

12

BluKnight Aquafarms Inc. Notes to the Condensed Interim Financial Statements For the nine-month period ended April 30, 2021 and 2020 (Expressed in Canadian Dollars - Unaudited)

7. Financial risk and capital management

The Company is exposed in varying degrees to a variety of financial instrument related risks. The Board of Directors approves and monitors the risk management processes, inclusive of documented investment policies, counterparty limits, and controlling and reporting structures. The type of risk exposure and the way in which such exposure is managed is provided as follows:

Credit risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company’s primary exposure to credit risk is on its cash held in bank accounts. The majority of cash is deposited in bank accounts held with a major bank in Canada. As most of the Company’s cash is held by one bank there is a concentration of credit risk. This risk is managed by using major banks that are high credit quality financial institutions as determined by rating agencies. The Company’s secondary exposure to risk is on its GST receivable. This risk is minimal as receivables consist of refundable government general sales taxes.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company has a planning and budgeting process in place to help determine the funds required to support the Company’s normal operating requirements on an ongoing basis. The Company ensures that there are sufficient funds to meet its short-term business requirements, taking into account its anticipated cash flows from operations and its holdings of cash.

Historically, the Company's sole source of funding has been the issuance of equity securities for cash, primarily through private placements. The Company’s access to financing is always uncertain. There can be no assurance of continued access to significant equity funding.

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. As at April 30, 2021, the Company did not have any cash equivalents or interest-bearing debt and is not subject to interest rate risk.

Capital Management

The Company's policy is to maintain a strong capital base so as to maintain investor and creditor confidence and to sustain future development of the business. The capital structure of the Company consists of equity and cash. There were no changes in the Company's approach to capital management during the period. The Company is not subject to any externally imposed capital requirements.

13

BluKnight Aquafarms Inc. Notes to the Condensed Interim Financial Statements For the nine-month period ended April 30, 2021 and 2020 (Expressed in Canadian Dollars - Unaudited)

7. Financial risk and capital management (continued)

Classification of financial instruments

Financial assets included in the interim statement of financial position are as follows:

		April 30,		July 31,
		2021		2020
Cash	$	2,460	$	14,660
Financial liabilities included in the statement of financial position are as follows:
		April 30,		July 31,
		2021		2020
Non-derivative financial liabilities:
Trade payables	$	31,232	$	4,465
Loans payable		105,000		105,000
	$	136,232	$	109,465

8. Segmented information

The Company operates in a single reportable operating segment – business development services in Canada.

14