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Mission Ready Solutions Inc. — Interim / Quarterly Report 2021
May 27, 2021
46550_rns_2021-05-26_aaa63860-4766-4ab0-bd20-74511a0f1d23.pdf
Interim / Quarterly Report
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MISSION READY SOLUTIONS INC.
Management Discussion and Analysis
For the three months ended March 31, 2021
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MISSION READY SOLUTIONS INC. Management’s Discussion and Analysis For the Three Months Ended March 31, 2021
Introduction
The following management discussion and analysis (“ MD&A ”), prepared as of May 26, 2021, is a review of the operations, current financial position and outlook for Mission Ready Solutions Inc. and should be read in conjunction with the Company’s most recently issued audited consolidated financial statements for the year ended December 31, 2020 and the unaudited condensed consolidated interim financial statements for the three months ended March 31, 2021, copies of which are filed on the SEDAR website: www.sedar.com.
The Company prepares its consolidated financial statements in accordance with International Financial Reporting Standards (“ IFRS ”). All dollar figures included herein and in the following discussion and analysis are quoted in Canadian dollars unless otherwise noted.
Management is responsible for the information contained in this MD&A and its consistency with information presented to the Audit Committee and Board of Directors. All information in this document has been reviewed and approved by the Audit Committee and Board of Directors. This review was performed by management with information available as of May 26, 2021.
The financial information in this MD&A is derived from the Company’s consolidated financial statements prepared in accordance with IFRS. This MD&A may contain forward looking statements based on assumptions and judgments of management regarding events or results that may prove to be inaccurate as a result of risk factors beyond its control. Actual results may differ materially from the expected results.
Forward-Looking Information
This MD&A may include certain “forward-looking statements” within the meaning of applicable Canadian securities legislation. Other than statements of historical facts, all statements included in this MD&A that address activities, events or developments that the Company expects or anticipates will or may occur in the future, including such things as future business strategy, competition, strengths, goals, expansion and growth of the Company’s businesses, operations, plans and other such matters are forward looking statements. When used in this MD&A, the words “estimate”, “plan”, "anticipate", “expect”, “intend”, "believe", “pipeline”, and similar expressions are intended to identify forward-looking statements. Forwardlooking information is based in part, on assumptions that may change, thus causing actual results or anticipated events to differ materially from those expressed or implied in any forward-looking information. Such assumptions include the stability or improvement of general economic conditions. These statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward statements are made as of the date of this MD&A and are expressly qualified in their entirety by this cautionary statement. Subject to applicable securities laws, the Company does not assume any obligation to update or revise them to reflect new events or circumstances. Such factors include, among others, risks related to unavailability of financing, unfavorable market conditions and other factors. Although the Company has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements 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 statements.
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MISSION READY SOLUTIONS INC. Management’s Discussion and Analysis For the Three Months Ended March 31, 2021
Description of the Company’s Business
Mission Ready serves to prevent injuries and enhance the performance of military personnel, first-responders and all those serving on the front lines by equipping them with the next generation of personal protective equipment (“ PPE ”).
Mission Ready Solutions Inc. (“ Mission Ready ”) specializes in providing personal protective solutions to the global defense, security and first-responder markets as a product manufacturer and an experienced government contractor. Mission Ready leverages its privileged access to valuable federal procurement vehicles including the Multiple Award Schedule (“ MAS ”) contracts administered by the US General Services Administration (“ GSA ”).
Mission Ready trades on the TSX Venture Exchange under the symbol MRS and OTCQX Best Market under the symbol MSNVF.
Mission Ready’s operations are conducted through its wholly-owned subsidiaries including Mission Ready Holdings Ltd., Mission Ready Holdings USA Inc., 10-20 Services Inc. Protect The Force, Inc., No-Contact LLC (dba PTF Innovations), PTF Manufacturing Inc. and Unifire, Inc. (collectively, the “ Company ”).
As at March 31, 2021, the Company had a corporate office in Vancouver, British Columbia, Canada, a manufacturing facility in Jacksboro, Tennessee, USA, and a Unifire, Inc. office in Spokane, Washington, USA.
DISCUSSION OF OPERATIONS
Unifire, Inc. (“Unifire”)
Founded in 1987 and headquartered in Spokane, Washington, Unifire is a designated Small Business that distributes fire, military, emergency, and law enforcement products through established relationships with over 500 vendors representing approximately 1.5 million products. As a Prime Contractor with extensive knowledge and experience in providing solutions to the US Federal Government, Unifire utilizes its highly-efficient, scalable technology infrastructure to provide procurement solutions for program managers, military and federal contracting offices, base supply centers, and other governmental supply agencies.
Protect the Force Inc. (“PTF”)
PTF brings innovative products, manufacturing and entrepreneurial expertise together into one unified business with a focus on developing and sustaining strong relationships within the protective products industry. Developing, manufacturing and fielding premier protective innovations to government and industry clients, PTF is led by a team with over a century of combined experience in management, production, operations, research and development, marketing and product sales. Protect the Force – Protection is in our DNA™.
PTF Manufacturing Inc. (“PTFM”)
PTFM is headquartered in Jacksboro Tennessee and serves as the Company’s manufacturing headquarters to develop and grow its product lines for introduction to the marketplace. Offering a full range of products dedicated to the tactical and defense industry, PTFM’s portfolio of products include tactical outerwear, canine armor, bomb suits/blankets, riot control protection, carriers, textiles with integrated electronics and ballistic panels. Prospective Clients/Markets include the Department of Defense, State Department, General Services Administration, Department of Homeland Security, law enforcement agencies, fire & rescue, tactical distributors/dealers, private security, and GSA support companies.
No-Contact LLC (dba “PTF Innovations”)
PTF Innovations pioneers new and advanced technologies to meet the needs of the global defense, security and personal protection markets. PTF Innovations’ team of subject matter experts create leading, tech-centric solutions within the protective services sphere, and utilize their patented technologies – including Flex9Armor and No-Contact – to redefine the standards of tactical protection and performance.
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MISSION READY SOLUTIONS INC. Management’s Discussion and Analysis For the Three Months Ended March 31, 2021
10-20 Services Inc. (“10-20 Services”)
As part of the Company’s mandate to redirect resources to its growing government contracting and distribution division, during the period, management decided to wind down its decontamination and repair business operated by 10-20 Services. The Company intends to liquidate the remaining assets at the cleaning and repair facility in Fayetteville, North Carolina, USA.
Corporate Overview
Mission Ready manufactures and distributes leading defense and tactical solutions to prevent injuries and enhance the performance of military personnel, first-responders and all who serve on the front lines by equipping them with the next generation of personal protective technologies. Mission Ready consists of a diverse team of industry veterans with a united vision to establish the Company as a leader in government contracting, manufacturing and distributing personal protective solutions.
SUMMARY OF RECENT EVENTS
2020 Annual Financial Results
In April 2021, the Company filed it’s 2020 fourth quarter and full-year financial results reflecting annual revenues of $105.1 million.
OTCQX Listing and DTC Eligibility
In April 2021, the Company announced that its common shares had commenced trading on the OTCQX Best Market (the “ OTCQX ”) under the symbol MSNVF. The Company subsequently announced that its common shares had become eligible for electronic clearing and settlement through the Depository Trust Company in the United States.
Stock Option Grant
In March 2021, the Company announced that it had granted incentive stock options (the “ Options ”), pursuant to its stock option plan (the “ Plan ”), for a total of 4,400,000 common shares of the Company, to certain directors, officers, employees and consultants of the Company. The Options, subject to the terms of the Plan and the corresponding option agreements, are exercisable at a price of CAD $0.70 per share for a period of up to 5 years.
OTCQB Listing
In March 2021, the Company announced that its common shares had been approved to commence trading on the OTCQB® Venture Market (“ OTCQB ”) under the symbol MSNVF.
Officer Change
In February 2021, the Company announced the resignation of Marcus Treiber as the Company’s Chief Operating Officer.
SOE TLS Contract
In February 2021, the Company reported that, further to its October 8, 2020 news release announcing that Unifire had filed a Notice of Appeal in response to a September 24, 2020 decision by the U.S. Court of Federal Claims (“ COFC ”) denying Unifire’s challenge to a December 2019 decision by the U.S. Defense Logistics Agency to exclude Unifire’s proposal from the competition under SPE8EJ-18-R-0001 (Special Operational Equipment (“ SOE ”) Tailored Logistics Support Program), the United States Court of Appeals for the Federal Circuit had entered a judgment denying Unifire’s appeal and affirming the judgment of the COFC.
Corporate Rebranding and Marketing Strategy
In February 2021, the Company announced that it had engaged Victory Media as a marketing partner to perform a comprehensive refresh and integration of its intercompany brands, websites, and logos as part of a new, cohesive brand design that seamlessly incorporates each of the Company’s business segments.
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MISSION READY SOLUTIONS INC. Management’s Discussion and Analysis For the Three Months Ended March 31, 2021
RESULTS OF OPERATIONS
Results of Operations for the Three Months Ended March 31, 2021
The Company’s gross revenues for the three months ended March 31, 2021 were $66.73 million, an increase of $51.64 million from the $15.09 million realized in the same period in 2020, a 342% increase. This is primarily attributable to the Company’s performance in fulfilling contract awards received through its government contracting division, Unifire. The Company recorded a cost of goods sold of $58.49 million for the three months ended March 31, 2021 compared to $14.28 million in 2020. The gross margin was 12.34% for the period.
Total operating expenses expressed in dollars were lower during the three months ended March 31, 2021 as compared to the same period in 2020. Relative to total revenues, operating expenses were reduced to 3% for the period ended March 31, 2021 as compared to 20% for the same period in 2020. This demonstrates the Company’s focus on expense management. The decrease in total expenses can be attributed to significant reduction in interest expense related to settling certain note payables in the prior year and stock-based compensation related to granting and vesting of stock options.
The Company’s corporate head office costs decreased by $2.39 million, mainly due to a decrease in stock-based compensation of $1.49 million and a gain on settlement of debts of $1.14 million related to the Company entering into an agreement to defer payments with one of the former shareholders of Unifire.
Net income for three months ended March 31, 2021 was $6.42 million, an increase of $7.71 million from a net loss of $1.29 million in the prior period. The increase in net income is mainly due to an increase in revenue and gross profit from the Unifire operations and a gain on the settlement of debt as discussed above. In addition, the Company recognized current income tax expense of $1.52 million as a result of the Unifire operations for the three months ended March 31, 2021. In addition, adjusted EBITDA, consisting of earnings before interest, taxes, depreciation, amortization and stock-based compensation, for the three months ended March 31, 2021 was $8.33 million, an increase of $7.92 million from an adjusted EBITDA of $0.41 million in the prior period. This increase in adjusted EBITDA is mainly due to the positive results from the Unifire operations and focus on reducing operating expenditures.
The Company derives approximately 97% of its revenues from customers and clients where the end customer is the US Department of Defense, law enforcement or private security.
SUMMARY OF QUARTERLY FINANCIAL RESULTS
The following table provides a summary of the Company’s eight quarterly results ending on March 31, 2021:
| March 31, | December 31, | September 30, | June 30, | |
|---|---|---|---|---|
| 2021 | 2020 | 2020 | 2020 | |
| $ | $ | $ | $ | |
| Revenue | 66,726,040 | 42,627,964 | 20,145,225 | 27,210,102 |
| Net comprehensive income (loss) | 6,440,018 | 1,582,284 | (655,000) | 52,034 |
| Basic and diluted earnings (loss) per share | 0.03 | (0.01) | (0.00) | (0.00) |
| March 31, | December 31, | September 30, | June 30, | |
| 2020 | 2019 | 2019 | 2019 | |
| $ | $ | $ | ||
| Revenue | 15,086,440 | 13,471,754 | 4,956,622 | 2,271,698 |
| Net comprehensive loss | (1,994,519) | (2,454,010) | (3,325,892) | (1,198,683) |
| Basic and diluted net loss per share | (0.01) | (0.01) | (0.02) | (0.01) |
During the three months ended December 31, 2019, the Company recognized a write-down of inventory of $1,260,167 resulting in a lower net comprehensive loss for the period.
During the three months ended March 31, 2020, the Company recognized a gain on settlement of debts of $949,285 related to the issuance of 14,604,387 common shares to settle balances outstanding to certain creditors of $2,190,658, resulting in a lower net comprehensive loss for the period.
During the three months ended June 30, 2020, the Company recognized foreign currency translation adjustments of $405,686 included in other comprehensive income related to the translation of the Company’s US operations into Canadian dollars for consolidation purposes, resulting in a higher net comprehensive income for the period.
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MISSION READY SOLUTIONS INC. Management’s Discussion and Analysis For the Three Months Ended March 31, 2021
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2021, the Company had working capital deficit of $4,565,116 (December 31, 2021 – working capital deficit of $13,789,221) including cash and cash equivalents of $3,474,978 (December 31, 2021 - $1,631,390). The Company’s working capital deficit decreased mainly due to a decrease in notes payables related to the Company entering into an agreement to defer payments with one of the former shareholders of Unifire and increase in cash related to the exercise of 1,600,000 options and 2,323,645 warrants for total gross proceeds of $692,547.
FINANCIAL INSTRUMENTS
Classification of financial instruments
| Classification of financial instruments | ||
|---|---|---|
| March 31, | December 31, | |
| 2021 | 2020 | |
| $ | $ | |
| FVTPL financial asset | 3,474,978 | 1,631,390 |
| Financial assets at amortized costs | 23,142,154 | 6,513,954 |
| Financial liabilities at amortized costs | 36,237,288 | 27,031,021 |
The fair value of the Company’s financial assets and liabilities approximates the carrying amount.
Management of Industry and Financial Risk
The Company’s financial instruments are exposed to certain financial risks, which include the following:
Credit risk
Credit risk is the risk of loss associated with a counterparty’s inability to fulfil its payment obligations. The Company limits its exposure to credit loss for cash by placing its cash with high quality financial institutions and for trade receivables by performing standard credit checks. The credit risk for cash and trade receivables is considered negligible since the counterparties are reputable banks with high quality external credit ratings and customers with no history of default.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations when they become due. The Company ensures, as far as reasonably possible, that it will have sufficient capital to meet short-term business requirements, after taking into account cash flows from operations and the Company’s holdings of cash. The Company had a working capital deficit of $4,565,116 as of March 31, 2021, which is a significant improvement from the Company’s working capital deficit of $13,789,221 at December 31, 2020.
Foreign exchange risk
The Company operates internationally and is exposed to foreign currency risk arising from currency exposures to Canadian dollars. The main currency to which the Company has an exposure is the U.S. dollar. The Company is exposed to currency risk to the extent of its cash, trade and other payables, purchase agreements payable, and loan payable that are denominated in U.S. dollars. The Company does not hedge its exposure to fluctuations in the related foreign exchange rates. The Company’s exposure to currency risk is currently considered insignificant.
Interest Rate Risk
Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. Interests on the Company’s promissory notes payable and loan payable are based on fixed rates, and as such, the Company is not exposed to significant interest rate risk.
Capital Management
The Company's policy is to maintain a strong capital base to maintain investor and creditor confidence and to sustain future development of the business. The capital structure of the Company consists of equity, net of cash and cash equivalents. 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.
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MISSION READY SOLUTIONS INC. Management’s Discussion and Analysis For the Three Months Ended March 31, 2021
OFF-BALANCE SHEET ARRANGEMENTS
The Company has no off-balance sheet arrangements.
TRANSACTIONS WITH RELATED PARTIES
Compensation of Key Management Personnel
The compensation paid or payable to directors and key management personnel, including consulting and professional fees for administrative, management, accounting, and legal services provided by these related parties, during the three months ended March 31, 2021 and 2020 are as follows:
nded March 31, 2021 and 2020 are as follows: |
||
|---|---|---|
| 2021 | 2020 | |
| $ | $ | |
| Salaries and other short-term employee benefits | 220,083 | 242,838 |
| Director fees | 75,960 | 18,000 |
| Stock-based compensation | 188,151 | - |
| 484,194 | 260,838 |
All related party transactions were in the ordinary course of business and were measured at their exchange amount as agreed between the related parties.
During the three months ended March 31, 2021, the Company paid or accrued wages and benefits of $75,960 (2020 - $Nil) and director fees of $11,394 (2020 - $Nil) to Buck Marshall, Chief Executive Officer and a Director of the Company.
During the three months ended March 31, 2021, the Company paid or accrued consulting fees of $15,000 (2020 - $15,000) to Dong Shim, Chief Financial Officer of the Company.
During the three months ended March 31, 2021, the Company paid or accrued wages and benefits of $65,823 (2020 - $84,943) and director fees of $11,394 (2020 - $Nil) to Terrace Nixon, Chief Compliance Officer and a Director of the Company.
During the three months ended March 31, 2021, the Company paid or accrued wages and benefits of $63,300 (2020 - $67,245) and director fees of $11,394 (2020 - $Nil) to Daniel Raczykowski, a Director of the Company.
During the three months ended March 31, 2021, the Company paid or accrued director fees of $11,394 (2020 - $6,000) to Paul Litchfield, a Director of the Company.
During the three months ended March 31, 2021, the Company paid or accrued director fees of $18,990 (2020 - $6,000) to James Marks, a Director of the Company.
During the three months ended March 31, 2021, the Company paid or accrued director fees of $11,394 (2020 - $Nil) and consulting fees of $Nil (2020 - $Nil) to William Bratton, a Director of the Company.
During the three months ended March 31, 2021, the Company paid or accrued wages and benefits of $Nil (2020 - $75,650) to Jeffery Schwartz, former Chief Executive Officer of the Company.
During the three months ended March 31, 2021, the Company recognized stock-based compensation to officers and directors of the Company in the amount of $188,151 (2020 - $Nil) related to the granting and vesting of stock options during the year.
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MISSION READY SOLUTIONS INC. Management’s Discussion and Analysis For the Three Months Ended March 31, 2021
Related Party Balances
As of March 31, 2021 and December 31, 2020, the Company had the following amounts owed to related parties that are noninterest bearing, unsecured, and have no specified terms of repayment.
| March 31, | December 31, | |
|---|---|---|
| 2021 | 2020 | |
| $ | $ | |
| Option pricing differential payable | 115,000 | 707,500 |
| Director fees payable | 89,450 | 100,753 |
| Due to officers and former officers | 62,498 | 166,953 |
| 266,948 | 975,206 |
As of March 31, 2021, the Company owed $11,318 (December 31, 2020 – $7,639) to Buck Marshall, Chief Executive Officer and a Director of the Company.
As of March 31, 2021, the Company owed $Nil (December 31, 2020 – $103,813) to Jeffery Schwartz, former Chief Executive Officer of the Company.
As of March 31, 2021, the Company owed $Nil (December 31, 2020 – $643) to Dong Shim, Chief Financial Officer of the Company.
As of March 31, 2021, the Company owed $73,814 (December 31, 2020 – $70,137) to Terrace Nixon, Chief Compliance Officer of the Company.
As of March 31, 2021, the Company owed $11,318 (December 31, 2020 – $11,459) to Paul Litchfield, a Director of the Company.
As of March 31, 2021, the Company owed $18,862 (December 31, 2020 – $25,097) to James Marks, a Director of the Company.
As of March 31, 2021, the Company owed $11,318 (December 31, 2020 – $11,459) to William Bratton, a Director of the Company.
As of March 31, 2021, the Company owed $11,318 (December 31, 2020 – $23,459) to Daniel Raczykowski, a Director of the Company.
As of March 31, 2021, the Company owed $14,000 (December 31, 2020 – $14,000) to Anthony Walton, a former Director of the Company.
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MISSION READY SOLUTIONS INC. Management’s Discussion and Analysis For the Three Months Ended March 31, 2021
OUTSTANDING SHARE DATA
The following share capital data is current as of the date of this MD&A:
| Balance | |
|---|---|
| Shares issued and outstanding | 195,374,006 |
| Stock options | 22,100,000 |
| FullyDiluted | 217,474,006 |
Incentive Stock Option Grants
On July 28, 2020, the Company granted 400,000 stock options at an exercise price of $0.15 per share for a period of five years to a director and officer of the Company.
On October 9, 2020, the Company granted 1,000,000 stock options at an exercise price of $0.20 per share for a period of five years to an officer of the Company.
On December 14, 2020, the Company granted 850,000 stock options at an exercise price of $0.15 per share for a period of five years to certain directors and employees of the Company.
On March 18, 2021, the Company granted 4,400,000 stock options at an exercise price of $0.70 per share for a period of five years to certain directors, officers, officers and consultants of the Company.
Critical Accounting Estimates
The preparation of these consolidated financial statements requires management to make judgments and estimates that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Actual outcomes could differ from these judgments and estimates. The financial statements include judgments and estimates that, by their nature, are uncertain. The impacts of such judgments and estimates are pervasive throughout the financial statements and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised, and the revision affects both current and future periods.
Significant assumptions about the future and other sources of judgments and estimates that management has made at the statement of financial position date that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event that actual results differ from assumptions made, relate to, but are not limited to, the following:
Impairment
At the end of each reporting period, the Company’s assets are reviewed to determine whether there is any indication that those assets may be impaired. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. The recoverable amount is the higher of fair value less costs to sell and value in use. Fair value is determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction between knowledgeable and willing parties. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in the profit of loss for the period. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset belongs.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash- generating unit) is increased to the revised estimate of its recoverable amount, but to an amount that does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.
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MISSION READY SOLUTIONS INC. Management’s Discussion and Analysis For the Three Months Ended March 31, 2021
Fair value of financial instruments
Management uses valuation techniques in measuring the fair value of financial instruments, where active market quotes are not available. Details of the assumptions used are provided in the notes regarding financial assets and liabilities.
In applying the valuation techniques, management makes maximum use of market inputs wherever possible, and uses estimates and assumptions that are, as far as possible, consistent with observable data that market participants would use in pricing the instrument. Where applicable data is not observable, management uses its best estimate about the assumptions that market participants would make. Such estimates include liquidity risk, credit risk, and volatility may vary from the actual prices that would be achieved in an arm’s length transaction at the reporting date.
CONTINGENCY
During the year ended December 31, 2018, Company settled a whistleblower reprisal complaint filed under Title 10, United States Code, Section 2409, “Contractor employees: protection from reprisal for disclosure of certain information,” implemented by Defense Federal Acquisition Regulation Supplement, Subpart 203.9, “Whistleblower Protections for Contractor Employees”. As of March 31, 2021, the Company accrued $56,588 (USD $45,000) related to this settlement and is included in trade and other payables. Subsequent to March 31, 2021, this amount has been fully repaid.
The Company is party to litigation (the “Claim”) filed by a former 10-20 Services employee who worked at the Company’s Barstow, California location until the facility was closed due to the lease expiry and finalization of a service contract. During the year ended December 31, 2018, the Company settled the Claim for US$75,000. During the three months ended March 31, 2021, the Company and former 10-20 Services employee entered into a general release and settlement agreement to settle and fully release all claims against the Company in the amount of US$88,620. As of March 31, 2021, the Company has a remaining balance outstanding of $55,720 (US$44,310) related to this Claim, included in trade and other payables, and will be paid in equal monthly installments during the year ended December 31, 2021. Subsequent to March 31, 2021, this amount has been fully repaid.
As of March 31, 2021, the Company accrued $8,928,250 (US$7,100,000) as accounts payable pending the outcome of a claim currently in dispute. Product Source Group, LLC and J.D. United Manufacturing Co. Ltd. filed a lawsuit against Unifire in New York Supreme Court, Monroe County, Index No. E2020010244 alleging failure to pay for the purchase of isolation gowns. Unifire removed the case to the U.S. District Court for the Western District of New York, Case No. 6:21-cv-06272, and moved to dismiss for lack of personal jurisdiction. The motion to dismiss is pending. The parties have exchanged settlement offers. On May 14, 2021, the plaintiffs filed an amended complaint adding Mission Ready and three current or former officers of Unifire or Mission Ready as defendants. The Company plans to vigorously contest this matter.
CRITICAL RISKS AND UNCERTAINTIES
Operating History
The Company reported all-time high revenue of $66.7 million, net income of $6.4 million and overall positive cash flows from operations during the first quarter ended March 31, 2021 which represents a positive upward trend that began in late 2019 (see “Summary of Quarterly Financial Results”).
Competition
The earnings of the Company depend upon the Company’s ability to locate suitable opportunities and to bring to market the proprietary products being developed by its research and development division. Competition may restrict the Company’s share of the market, reduce rates of return and/or may reduce profit margins.
Coronavirus Global Pandemic Risk
In March 2020, the World Health Organization declared a global pandemic related to the virus known as COVID-19. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, potentially leading to an economic downturn. It has also disrupted the normal operations of many businesses, including the Company’s. This outbreak could decrease spending, adversely affect demand for the Company’s products and harm the Company’s business and results of operations. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s business or results of operations at this time.
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MISSION READY SOLUTIONS INC. Management’s Discussion and Analysis For the Three Months Ended March 31, 2021
With employees, partners and customers across multiple geographies, the Company’s management continue to closely monitor developments surrounding the COVID-19 pandemic. The Company’s focus is on the safety and well-being of its employees, customers, and partners, and is taking precautions to minimize the spread of COVID-19 in alignment with local government policies and national and international agency recommendations. To help combat the pandemic, the Company has formed an independent COVID-19 response team consisting of 15 select inside and outside Company representatives working in cooperation to source and supply mission critical product and service solutions including PPE, shelters, and thirdparty logistics services. Based on the current guidance and timelines provided by government health authorities, the increased demand for critical life-saving equipment is likely to extend through, at minimum, December 2021. In consideration of this, interim arrangements have been made to ensure the maintenance of the Company’s core operations despite the temporary reassignment of certain sales and contracting personnel.
FINANCIAL AND DISCLOSURE CONTROLS AND PROCEDURES
During the three months ended March 31, 2021, there has been no significant change in the Company’s internal control over financial reporting since last reporting period.
The Chief Executive Officer and Chief Financial Officer of the Company are responsible for establishing and maintaining appropriate information systems, procedures and controls to ensure that information used internally and disclosed externally is complete, reliable and timely. They are also responsible for establishing adequate internal controls over financial reporting to provide sufficient knowledge to support the representations made in this MD&A and the Company’s financial statements for the three months ended March 31, 2021 (together the “ Interim Filings ”).
The Chief Executive Officer and Chief Financial Officer of the Company have filed the Venture Issuer Basic Certificate with the Interim Filings on SEDAR at www.sedar.com.
In contrast to the certificate required for non-venture issuers under National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (“ NI 52-109 ”), the venture issuer basic certificate does not include representations relating to the establishment and maintenance of disclosure controls and procedures (“ DC&P ”) and internal control over financial reporting (“ ICFR ”), as defined in NI 52-109. Investors should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design and implement on a cost-effective basis DC&P and ICFR as defined in NI 52-109 may result in additional risks to the quality, reliability, transparency, and timeliness of interim and annual filings and other reports provided under securities legislation.
ADDITIONAL INFORMATION
Additional disclosure of the Company’s, material change reports, new releases, and other information can be obtained on SEDAR at www.sedar.com, or by requesting further information from the Company’s head office in Vancouver, BC, Canada.
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