ParcelPal Logistics Inc. — Annual Report 2019

Dec 18, 2020

PARCELPAL TECHNOLOGY INC. (the “Company”) Notice to Reader

The Company is hereby filing these amended and restated audited financial statements for the years ended December 31, 2019, 2018 and 2017 in order to correct certain errors identified subsequent to the periods then ended, in the initial measurement and presentation of the Company’s right-of-use assets and lease liabilities and the classification of amortization expense related to the vehicles leases. Please refer to Notes 2, 6 and 12 for additional information.

PARCELPAL TECHNOLOGY INC.

AMENDED AND RESTATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

For the Years Ended December 31, 2019, 2018, and 2017

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Report of Independent Registered Public Accounting Firm

To the shareholders and the board of directors of ParcelPal Technology Inc.

Opinion on the Financial Statements

We have audited the accompanying statements of financial position of ParcelPal Technology Inc. (the "Company") as of December 31, 2019, 2018 and 2017, the related statements of loss and comprehensive loss, changes in shareholders’ equity, and cash flows for the years ended December 31, 2019, 2018 and 2017, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and its financial performance and its cash flows for the years ended December 31, 2019, 2018 and 2017, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Restatement of Previously Issued Financial Statements

As discussed in Note 2 to the financial statements, the December 31, 2019, 2018 and 2017 financial statements have been restated to correct a misstatement.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred losses and negative operating cash flows since its inception. The Company will require further financing to meet its financial obligations and sustain its operations in the normal course of the business. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in this regard are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting in accordance with the standards of the PCAOB. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion in accordance with the standards of the PCAOB.

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Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

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DALE MATHESON CARR-HILTON LABONTE LLP CHARTERED PROFESSIONAL ACCOUNTANTS

We have served as the Company’s auditor since 2014

Vancouver, Canada

August 4, 2020, except for the effects of the restatement as discussed in Note 2 and right of use assets as discussed in Notes 6 and 12 to the consolidated financial statements, as to which the date is December 7, 2020.

ParcelPal Technology Inc.

Amended and Restated Statements of Financial Position

(Expressed in Canadian Dollars)

December 31, 2019 $ (Restated) December 31, 2018 $ (Restated)	December 31, 2017 $ (Restated)
ASSETS Current assets Cash 295,593 2,079,986 Accounts receivable 3 745,002 605,342 Subscriptions receivable 8 72,875 - Prepaid expenses 3,019 5,392 Loan receivable 4 1,874 62,548	54,887 359,510 - 62,704 -
1,118,363 2,753,268 Intangible asset 7 - 19,100 Right-of-use assets 6 210,257 559,925	477,101 55,200 509,677
Total assets 1,328,620 3,332,293	1,041,978
LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Accounts payable and accrued liabilities 9 589,257 334,661 Sales tax payable 102,597 121,333 Lease obligations - current 12 196,957 306,562	220,239 12,285 125,339
888,811 762,556 Lease obligations 12 5,841 202,798	357,863 280,187
Total liabilities 894,652 965,354	638,050
SHAREHOLDERS’ EQUITY Share capital 8 9,367,691 7,693,401 Subscriptions received in advance Subscriptions receivable 8 100,240 - - (345,140) Contributed surplus 3,020,617 2,462,746 Deficit (12,054,580) (7,444,068)	3,315,693 37,688 - 830,239 (3,779,692)
Total shareholders’ equity 433,968 2,366,939	403,928
Total liabilities and shareholders’ equity 1,328,620 3,332,293	1,041,978

Nature of operations and going concern (Note 1) Commitments (Note 12) Subsequent events (Note 14)

Approved by the Board of Directors

“Rich Wheeless” Director “Brian Storseth” Director

1

ParcelPal Technology Inc.

Amended and Restated Statements of Loss and Comprehensive Loss For the Years Ended December 31, 2019, 2018, and 2017 (Expressed in Canadian Dollars)

		2019	2018	2017
	Notes	$	$	$
		(Restated)	(Restated)	(Restated)
SALES	3	4,782,865	3,369,630	373,655
COST OF SALES		(4,336,556)	(2,883,176)	(305,481)
GROSS PROFIT		446,309	486,454	68,174
EXPENSES
Amortization	6,7	19,100	36,100	36,500
Consulting fees	9	860,248	815,060	557,029
Foreign exchange		12,243	1,029	30
Interest expense	12	29,958	49,669	4,682
Marketing and promotion		1,586,284	470,394	42,028
Management & director fees	9	190,800	108,000	27,500
Office and miscellaneous		994,124	551,313	215,610
Professional fees		124,550	119,713	59,444
Regulatory and filing fees		48,924	27,654	26,053
Salaries		358,074	-	-
Share-based compensation	9	776,962	1,548,784	472,296
Travel and accommodation		62,459	97,328	4,912
		(5,063,726)	(3,825,044)	(1,446,084)
Loss before other items		(4,617,417)	(3,338,590)	(1,377,910)
Other items:
Loss on debt settlement		857	18,334	60,528
Interest income	4	(7,762)	(5,890)	-
Impairment of marketable	5
securities		-	300,000	-
Impairment of loan receivable	4	-	13,342	-
		(6,905)	325,786	60,528
Loss and comprehensive loss for
theyear		(4,610,512)	(3,664,376)	(1,438,438)
Basic and diluted lossper share		(0.06)	(0.06)	(0.05)
Weighted average number of
shares outstanding – basic and
diluted		80,778,869	66,902,789	30,280,099

2

ParcelPal Technology Inc.

Amended and Restated Statements of Changes in Shareholders’ Equity - Restated For the Years Ended December 31, 2019, 2018, and 2017 (Expressed in Canadian Dollars)

For the Years Ended December 31, 2019, (Expressed in Canadian Dollars)	2018, and 2017
					Subscriptions
			Contributed	Subscriptions	received in	Deficit	Total
	Number of	Amount	Surplus	receivable	advance	(Restated)	(Restated)
	shares	$	$	$	$	$	$
Balance, December 31, 2016	28,788,558	2,196,330	335,812	(5,000)	-	(2,341,254)	185,888
Shares issued pursuant to:
Private placement	14,369,000	827,715	-	-	-	-	827,715
Debt settlement	4,197,222	283,028	-	-	-	-	283,028
Warrant exercise	225,500	45,100	-	5,000	-	-	50,100
Option exercise	600,000	52,271	(22,271)	-	-	-	30,000
Issue costs	-	(88,751)	44,402	-	-	-	(44,349)
Share-based compensation	-	-	472,296	-	-	-	472,296
Subscriptions received in advance	-	-	-	-	37,688	-	37,688
Net and comprehensive loss for the year	-	-	-	-	-	(1,438,438)	(1,438,438)
Balance, December 31, 2017	48,180,280	3,315,693	830,239	-	37,688	(3,779,692)	403,928
Shares issued pursuant to:
Private placements	15,577,651	2,686,557	-	(221,590)	(28,688)	-	2,436,279
Warrant exercises	9,546,319	1,492,780	(88,438)	(68,550)	-	-	1,335,792
Option exercises	1,981,000	429,176	(168,111)	(55,000)	-	-	206,065
Debt settlement	549,703	141,334	-	-	(9,000)	-	132,334
In lieu of consulting fees	600,000	180,000	-	-	-		180,000
Issue costs	-	(211,867)	-	-	-	-	(211,867)
Broker warrants	-	(340,272)	340,272	-	-		-
Share-based compensation	-	-	1,548,784	-	-	-	1,548,784
Net and comprehensive loss for the year	-	-	-	-	-	(3,664,376)	(3,664,376)
Balance, December 31, 2018	76,434,953	7,693,401	2,462,746	(345,140)	-	(7,444,068)	2,366,939
Shares issued pursuant to:
Private placements	4,071,353	344,031	2,034	-	-	-	346,065
Warrant exercises	2,958,600	355,287	(15,417)	-	-	-	339,870
Option exercises	1,275,000	461,957	(205,708)	-	-	-	256,249
Debt settlement	614,447	168,857	-	-	-	-	168,857
In lieu of consulting fees	1,590,000	364,600	-	-	-	-	364,600
Issue costs	-	(20,442)	-	-	-	-	(20,442)
Subscriptions received	-	-	-	345,140	100,240	-	445,380
Share-based compensation	-	-	776,962	-	-	-	776,962
Net and comprehensive loss for the year	-	-	-	-	-	(4,610,512)	(4,610,512)
Balance, December 31, 2019	86,944,353	9,367,691	3,020,617	-	100,240	(12,054,580)	433,968

The accompanying notes are an integral part of these financial statements.

3

ParcelPal Technology Inc.

Amended and Restated Statements of Cash Flows For the Years Ended December 31 (Expressed in Canadian Dollars)

2019 $ 2018 $ (Restated) (Restated)	2017 $ (Restated)
Operating activities Loss for the year (4,610,512) (3,664,376) Add non-cash items: Amortization 368,768 351,681 Share-based compensation 776,962 1,548,784 Accrued interest (7,700) (5,890) Impairment of loan receivable - 13,342 Impairment of marketable securities - 300,000 Shares issued in lieu of consulting fees 364,600 180,000 Loss on debt settlement 857 18,334 Changes in non-cash working capital items Sales tax payable (18,736) 97,208 Prepaid expenses 2,373 71,009 Accounts receivable (139,660) (245,832) Accountspayable and accrued liabilities 572,999 237,422	(1,438,438) 55,039 472,296 3,264 - - 9,000 55,528 12,747 (61,298) (340,721) 480,016
Net cash flows used in operatingactivities (2,690,049) (1,098,318)	(752,567)
Investing activities Deposit paid on leased equipment - (34,125) Advances of loans receivable (21,000) (375,000) Repayment of loans receivable 89,374 250,000 Purchase of marketable securities - (245,000)	(116,062) - - -
Net cash flowsprovided by (used in)investingactivities 68,374 (404,125)	(116,062)
Financing activities Proceeds from private placements 273,190 2,427,279 Share issuance costs (20,442) (211,867) Exercise of options 256,249 206,065 Exercise of warrants 339,870 1,335,792 Lease payments (306,562) (229,727) Subscriptions received in advance 100,240 - Subscriptions receivable 194,737 -	719,615 (44,349) 30,000 50,100 (10,354) 28,688 -
Net cash flowsprovided byfinancingactivities 837,282 3,527,542	773,700
Change in cash during the year (1,784,393) 2,025,099 Cash – beginning of theyear 2,079,986 54,887	(94,929) 149,816
Cash – end of theyear 295,593 2,079,986	54,887
Supplemental cash flow Note 13 Income Tax - - Interest paid 29,958 49,669	- 4,682

4

ParcelPal Technology Inc. Amended and Restated Notes to the Financial Statements For the Years Ended December 31, 2019, 2018, and 2017 (Expressed in Canadian Dollars)

1. NATURE OF OPERATIONS AND GOING CONCERN

ParcelPal Technology Inc. (“the Company”) is currently engaged in on-demand local delivery services and the continued development of its on-demand local delivery service application (“ParcelPal”). The Company was incorporated in Alberta on March 10, 1997. On June 22, 2006, the Company moved its incorporation jurisdiction to British Columbia. The Company’s shares are listed on the Canadian Securities Exchange (“CSE”) under the symbol “PKG” and on the Frankfurt Stock Exchange under the symbol “PTO”.

These financial statements have been prepared under the assumption that the Company will continue as a going concern. The going concern basis of presentation assumes that the Company will be able to meet its obligations and continue its operations for the foreseeable future and be able to realize its assets and discharge its liabilities and commitments in the normal course of business. Realization values may be substantially different from the carrying values as shown, and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classifications of assets and liabilities should the Company be unable to continue as a going concern.

The Company has incurred losses and negative operating cash flows since its inception. The Company will require further financing to meet its financial obligations and sustain its operations in the normal course of the business. These factors indicate the existence of a material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern. The Company’s ability to meet its long-term business strategy depends on its ability to obtain additional equity financing and to generate operational cash flow from delivery services revenue.

2. BASIS OF PRESENTATION (Restated)

Statement of Compliance

These financial statements, including comparatives have been prepared using accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Issues Committee (“IFRIC”). These financial statements were approved by the Board of Directors and authorized for issue on December 7, 2020.

Basis of measurements

These financial statements have been prepared on a historical cost basis, except for items measured at fair value. In addition, these financial statements have been prepared using the accrual basis of accounting except for cash flow information. The financial statements are presented in Canadian dollars, unless otherwise noted.

Significant estimates and assumptions

The preparation of financial statements in accordance with IFRS requires the Company to use judgment in applying its accounting policies and make estimates and assumptions about reported amounts at the date of the financial statements and in the future. The Company’s management reviews these estimates and underlying assumptions on an ongoing basis, based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are adjusted for prospectively in the period in which the estimates are revised.

5

ParcelPal Technology Inc. Amended and Restated Notes to the Financial Statements For the Years Ended December 31, 2019, 2018 and 2017 (Expressed in Canadian Dollars)

Estimates and assumptions where there is significant risk of material adjustments to assets and liabilities in ~~future accounting periods include the fair value measurements for financial instruments, estimating allowan~~ ces for doubtful accounts receivable, the recoverability of loans receivable, estimating useful lives of equipment, the recoverability and measurement of deferred tax assets, and estimating the fair value for share-based payment transactions.

Significant judgements

Information about critical judgements in applying accounting policies that have the most significant effect on the amounts recognized in the statements relate to 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 and the classification of financial instruments.

Financial Instruments

Recognition and Classification

The Company recognizes a financial asset or financial liability on the statement of financial position when it becomes party to the contractual provisions of the financial instrument.

The Company classifies its financial instruments in the following categories: at fair value through profit and loss (“FVTPL”), at fair value through other comprehensive income (loss) (“FVTOCI”) or at amortized cost. The Company determines the classification of financial assets at initial recognition. The classification of debt instruments is driven by the Company’s business model for managing the financial assets and their contractual cash flow characteristics.

Equity instruments that are held for trading are classified as FVTPL. For other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument-by-instrument basis) to designate them as at FVTOCI. Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or if the Company has opted to measure them at FVTPL.

The following table shows the classification of its financial assets and liabilities under IFRS 9:

	Classification
	IFRS 9
Cash	Amortized cost
Accounts receivable	Amortized cost
Accounts payable and accrued liabilities	Amortized cost
Marketable securities	FVTPL
Loans receivable	Amortized cost
Lease obligation	Amortized cost

Measurement

Financial assets at FVTOCI

Elected investments in equity instruments at FVTOCI are initially recognized at fair value plus transaction costs. Subsequently they are measured at fair value, with gains and losses recognized in other comprehensive loss.

6

ParcelPal Technology Inc. Amended and Restated Notes to the Financial Statements For the Years Ended December 31, 2019, 2018 and 2017 (Expressed in Canadian Dollars)

Financial assets and liabilities at amortized cost

~~Financial assets and liabilities at amortized cost are initially recognized at fair value plus or minus transacti~~ on costs, respectively, and subsequently carried at amortized cost less any impairment.

Financial assets and liabilities at FVTPL

Financial assets and liabilities carried at FVTPL are initially recorded at fair value and transaction costs are expensed in the statements of comprehensive loss. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are included in the statements of comprehensive loss in the period in which they arise. Where management has opted to recognize a financial liability at FVTPL, any changes associated with the Company’s own credit risk will be recognized in other comprehensive loss.

Impairment of financial assets at amortized cost

The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost.

At each reporting date, the Company measures the loss allowance for the financial asset at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the financial asset has not increased significantly since initial recognition, the Company measures the loss allowance for the financial asset at an amount equal to the twelve month expected credit losses. The Company shall recognize in the statements of comprehensive loss, as an impairment gain or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized.

Derecognition

Financial assets

The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all of the associated risks and rewards of ownership to another entity. Gains and losses on derecognition are generally recognized in the statements of comprehensive loss. However, gains and losses on derecognition of financial assets classified as FVTOCI remain within accumulated other comprehensive loss.

Financial liabilities

The Company derecognizes financial liabilities only when its obligations under the financial liabilities are discharged, cancelled or expired. Generally, the difference between the carrying amount of the financial liability derecognized and the consideration paid and payable, including any non-cash assets.

Leases

At the inception of a contract, the Company assesses whether a contract is or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The rightof-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle or remove the underlying asset.

7

ParcelPal Technology Inc. Amended and Restated Notes to the Financial Statements For the Years Ended December 31, 2019, 2018 and 2017 (Expressed in Canadian Dollars)

The lease liability is initially measured at the present value of the lease payments that are not paid at the ~~commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be read~~ ily determined, the Company’s incremental borrowing rate.

Lease payments included in the measurement of the lease liability comprise the following:

• Fixed payments, including in-substance fixed payments;

• Variable lease payments that depend on an index or rate, initially measured using the index or rate as at the commencement date;

• Amounts expected to be payable under a residual value guarantee; and

• The exercise price under a purchase option that the Company is reasonably certain to exercise, lease payments in an option renewal period if the Company is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Company is reasonably certain not to terminate early.

The lease liability is measured at amortized cost using the effective interest rate method. It is re-measured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or termination option.

When the lease liability is re-measured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in the statement of comprehensive loss if the carrying amount of the right-of-use asset has been reduced to zero.

The Company has elected to not recognize right-of-use assets and lease liabilities for short-term lease of assets that have a lease term of 12 months or less and leases of low-value assets, such as IT equipment. The Company recognizes the lease payments associated with the leases as an expense on a straight-line basis over the lease term.

Revenue from Contracts with Customers

The Company’s revenue is generated from a work contract established with one major customer and from other individual customers on demand. Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue and costs to sell can be reliably measured. Revenues is recognized when services are rendered or delivery of goods is completed.

Performance Obligations

Based on the criteria outlined in IFRS 15, the Company’s primary performance obligation relating to its sales contracts with customers is the delivery of the product or products by an agreed upon time.

Transaction Price

Based on the criteria outlined in IFRS 15, the Company determined that the transaction price is based upon scheduled and on demand or same day rates. As the Company has one primary performance obligation, that is making the required deliveries on time, the entire transaction price is allocated to the completion of deliveries.

Once the Company’s performance obligation of completing the required deliveries on time, the Company’s obligation is met and the Company recognizes revenue.

8

ParcelPal Technology Inc. Amended and Restated Notes to the Financial Statements For the Years Ended December 31, 2019, 2018 and 2017 (Expressed in Canadian Dollars)

Foreign currency translation

~~The functional currency of the Company is determined using the currency of the primary economic environm~~ ent in which the Company operates. The functional and presentation currency, as determined by management, of the Company is the Canadian dollar.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the period-end exchange rate. Nonmonetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.

Exchange differences arising on the translation of monetary items or on settlement of monetary items are recognized in the statements of comprehensive loss in the period in which they arise, except where deferred in equity as a qualifying cash flow or net investment hedge. Exchange differences arising on the translation of nonmonetary items are recognized in other comprehensive loss to the extent that gains and losses arising on those non-monetary items are also recognized in other comprehensive loss. Where the non-monetary gain or loss is recognized in comprehensive loss, the exchange component is also recognized in comprehensive loss.

Loss per share

Basic loss per share is calculated by dividing the loss for the year by the weighted average number of common shares outstanding during the period. Diluted earnings per share is determined by adjusting the net loss for the year and the weighted average number of common shares outstanding for the effects of dilutive instruments such as options granted to employees and warrants outstanding. The weighted average number of diluted shares is calculated in accordance with the treasury stock method. The treasury stock method assumes that the proceeds received from the exercise of all potentially dilutive instruments are used to repurchase common shares at the average market price during the year. Because the Company incurred net losses, the effect of dilutive instruments would be anti-dilutive and therefore diluted loss per share equals basic loss per share.

Income taxes

Income tax expense comprises current and deferred tax. Income tax is recognized in the statement of loss and comprehensive loss, except to the extent that it relates to items recognized in other comprehensive loss or directly in equity. In this case the income tax is also recognized in other comprehensive loss or directly in equity, respectively.

Current income tax

Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date, in the countries where the Company operates and generates taxable income.

Current income tax relating to items recognized directly in other comprehensive loss or equity is recognized in other comprehensive loss or equity and not in comprehensive loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Deferred tax

Deferred tax is recognized on temporary differences at the reporting date arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

9

ParcelPal Technology Inc. Amended and Restated Notes to the Financial Statements For the Years Ended December 31, 2019, 2018 and 2017 (Expressed in Canadian Dollars)

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and recognized only ~~to the extent that it is probable that future taxable income will be available to allow all or part of the tempor~~ ary differences to be utilized. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted and are expected to apply by the end of the reporting period. Deferred tax assets and deferred income tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Equipment

Leased vehicles are recorded at cost and amortized over the estimated term of the lease or the expected life of the asset if the Company has included payments to acquire the asset at the end of the lease. Equipment that is withdrawn from use or has no reasonable prospect of being recovered through use or sale, are regularly identified and written off. Subsequent expenditures relating to an item of equipment are capitalized when it is probable that future economic benefits from the use the assets will be increased. All other subsequent expenditures are recognized as repairs and maintenance.

Intangibles

The Company records internally-generated intangible assets at cost less accumulated amortization and accumulated impairment losses.

Intangible assets in use are amortized on a straight-line basis over their estimated useful life of 3 years. Intangible assets under development and not ready for use are not amortized.

Research and development

Research costs are expensed when incurred. Internally-generated software costs, including personnel costs of the Company’s development group, are capitalized as intangible assets when the Company can demonstrate that the technological feasibility of the project has been established; the Company intends to complete the asset for use or sale and has the ability to do so; the asset can generate probable future economic benefits; the technical and financial resources are available to complete the development; and the Company can reliably measure the expenditure attributable to the intangible asset during its development. After initial recognition, internallygenerated intangible assets are recorded at cost less accumulated amortization and accumulated impairment losses. The Company did not have any development costs that met the capitalization criteria for the year ended December 31, 2019.

Share-based payments

The Company operates a stock option plan. Share-based payments to employees are measured at the fair value of the instruments issued and amortized over the vesting periods. Share-based payments to non-employees are measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The corresponding amount is recorded to the option reserve. The fair value of options is determined using the Black–Scholes option pricing model. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognized for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest.

Any consideration paid by plan participants on the exercise of stock options is credited to share capital.

10

ParcelPal Technology Inc. Amended and Restated Notes to the Financial Statements For the Years Ended December 31, 2019, 2018 and 2017 (Expressed in Canadian Dollars)

Valuation of equity units issued in private placements

~~The Company has adopted a residual value method with respect to the measurement of shares and warra~~ nts issued as private placement units. The residual value method first allocates value to the more easily measurable component based on fair value and then the residual value, if any, to the less easily measurable component. The fair value of common shares issued in private placements was determined to be the more easily measurable component and are valued at their fair value, as determined by the closing quoted bid price on the announcement date. The balance, if any, is allocated to attached warrants. Any fair value attributed to warrants issued in private placements is recorded to reserves.

Impairment of assets

The Company performs impairment tests on its long-lived assets, including intangible assets, when new events or circumstances occur, or when new information becomes available relating to their recoverability. When the recoverable amount of each separately identifiable asset or cash generating unit (“CGU”) is less than its carrying value, the asset or CGU’s assets are written down to their recoverable amount with the impairment loss charged against profit or loss. A reversal of the impairment loss in a subsequent period will be charged against profit or loss if there is a significant reversal of the circumstances that caused the original impairment. The impairment will be reversed up to the amount of the depreciated carrying value that would have otherwise occurred if the impairment loss had not occurred.

The CGU’s recoverable amount is evaluated using the higher of the fair value less costs to sell or value in use. In calculating the recoverable amount, the Company utilizes discounted cash flow techniques to determine fair value when it is not possible to determine fair value from active markets or a written offer to purchase. Management calculates the discounted cash flows based upon its best estimate of a number of economic, operating, engineering, environmental, political and social assumptions. Any changes in the assumptions due to changing circumstances may affect the calculation of the recoverable amount.

Restatement of previously reported financial statements

The Company has determined that its initial application of IFRS 16 Leases was incorrect and resulted in a material misstatement. The Company previously discounted lease payments using the interest rate implicit in the lease to determine the lease liabilities and right-of-use assets. In determining the present value of the lease payments the Company also included non-refundable sales tax as part of the lease payments and residual value guarantees. The Company has determined this was not the appropriate method to determine the present value of the lease payments as the Company was not able to determine the correct interest rate implicit in the lease and should not have included non-refundable sales tax as part of the lease payments. Therefore, the Company has revalued its lease liabilities and right-of-use assets using the Company’s discount rate at the time of the lease and has excluded sales tax from the present value calculation and residual value guarantees based on an expected value of the right-of-use assets. The revised lease liability calculations do not include a residual value guarantee obligation. The Company has used an incremental borrowing rate with a range of 6.88% to 9.75% and an average rate of 8.29% to calculate the present value of the lease payments. The change in measurement has resulted in changes to the right-of-use asset balances at initial measurement, the lease liability balances at initial measurement and depreciation and interest amounts over the fiscal periods being restated.

In addition to the re-measurement of the lease liabilities and right-of-use assets the Company determined that the amortization expense related to the vehicle leases should be included as cost of sales and not as an operating expense.

11

ParcelPal Technology Inc. Amended and Restated Notes to the Financial Statements For the Years Ended December 31, 2019, 2018 and 2017 (Expressed in Canadian Dollars)

The following table summarizes the effect of the adjustment described above on the Company’s statement of financial position:

As at December 31, 2019
	~~Previously~~
	reported	Adjustment	Restated
	$	$	$
Right-of-use asset	182,730	27,527	210,257
Total assets	1,301,093	27,527	1,328,620
Lease obligations - current	207,520	(10,563)	196,957
Lease obligations	11,581	(5,740)	5,841
Total liabilities	910,955	(16,303)	894,652
Deficit	(12,098,410)	43,830	(12,054,580)
Total shareholders’equity	390,138	43,830	433,968
As at December 31, 2018
	Previously reported	Adjustment	Restated
	$	$	$
Right-of-use asset	724,437	(164,512)	559,925
Total assets	3,496,805	(164,512)	3,332,293
Lease obligations - current	212,372	94,190	306,562
Lease obligations	617,614	(414,816)	202,798
Total liabilities	1,285,980	(320,626)	965,354
Deficit	(7,600,182)	156,114	(7,444,068)
Total shareholders’equity	2,210,825	156,114	2,366,939
As at December 31, 2017
	Previously reported	Adjustment	Restated
	$	$	$
Right-of-use asset	564,695	(55,018)	509,677
Total assets	1,096,996	(55,018)	1,041,978
Sales tax payable	12,747	(462)	12,285
Lease obligations - current	123,599	1,740	125,339
Lease obligations	338,520	(58,333)	280,187
Total liabilities	695,105	(57,055)	638,050
Deficit	(3,781,729)	2,037	(3,779,692)
Total shareholders’equity	401,891	2,037	403,928

12

ParcelPal Technology Inc. Amended and Restated Notes to the Financial Statements For the Years Ended December 31, 2019, 2018 and 2017 (Expressed in Canadian Dollars)

The following table summarizes the effect of the adjustment described above on the Company’s statement of loss and comprehensive loss:

	For the year ended December 31, 2019	For the year ended December 31, 2019
		~~Previously reported~~	~~Adjustment~~	~~Restated~~
		$	$	$
Cost of Sales		(3,986,888)	(349,668)	(4,336,556)
Gross margin		795,977	(349,668)	446,309
Amortization		253,735	(234,635)	19,100
Interest		56,812	(26,854)	29,958
Office and	miscellaneous	970,019	24,105	994,124
Operating	expenses	5,301,110	(237,384)	5,063,726
Net Loss		(4,498,228)	(112,284)	(4,610,512)
	For the year ended December 31, 2018
		Previously reported	Adjustment	Restated
		$	$	$
Cost of Sales		(2,567,595)	(315,581)	(2,883,176)
Gross margin		802,035	(315,581)	486,454
Amortization		448,697	(412,597)	36,100
Interest		135,849	(86,180)	49,669
Office and	miscellaneous	522,194	29,119	551,313
Operating	expenses	4,294,702	(469,658)	3,825,044
Net Loss		(3,818,453)	154,077	(3,664,376)
	For the year ended December 31, 2017
		Previously reported	Adjustment	Restated
		$	$	$
Cost of Sales		(286,942)	(18,539)	(305,481)
Gross margin		86,713	(18,539)	68,174
Amortization		55,686	(19,186)	36,500
Interest		6,072	(1,390)	4,682
Operating	expenses	1,466,660	(20,576)	1,446,084
Net Loss		(1,440,475)	2,037	(1,438,438)

13

ParcelPal Technology Inc. Amended and Restated Notes to the Financial Statements For the Years Ended December 31, 2019, 2018 and 2017 (Expressed in Canadian Dollars)

The following table summarizes the effect of the adjustment described above on the Company’s statement of cash flows:

For the year ended December 31, 2019

For the year ended December	31, 2019
	~~Previously reported~~	~~Adjustment~~	~~Restated~~
	$	$	$
Loss for the year	(4,498,228)	(112,284)	(4,610,512)
Amortization	253,735	115,033	368,768
Net cash flows used in operating activities	(2,692,798)	2,749	(2,690,049)
Payment of lease obligation	(303,813)	(2,749)	(306,562)
Net cash flows provided by financing
activities	840,031	(2,749)	837,282
For the year ended December	31, 2018
	Previously reported	Adjustment	Restated
	$	$	$
Loss for the year	(3,818,453)	154,077	(3,664,376)
Amortization	448,697	(97,016)	351,681
Net cash flows used in operating activities	(1,155,379)	57,061	(1,098,318)
Payment of lease obligation	(172,666)	(57,061)	(229,727)
Net cash flows provided by financing
activities	3,584,603	(57,061)	3,527,542
For the year ended December	31, 2017
	Previously reported	Adjustment	Restated
	$	$	$
Loss for the year	(1,440,475)	2,037	(1,438,438)
Amortization	55,686	(647)	55,039
Accrued interest–lease obligation	3,544	(280)	3,264
Net cash flows used in operating activities	(753,677)	1,110	(752,567)
Payment of lease obligation	(9,244)	(1,110)	(10,354)
Net cash flows provided by financing
activities	774,810	(1,110)	773,700

3. ACCOUNTS RECEIVABLE

3. ACCOUNTS RECEIVABLE
	December	31, 2019	December 31, 2018
		$	$
Accounts receivable		745,002	605,342

As at December 31, 2019 all of the Company’s accounts receivable are current, and accordingly no provision for doubtful accounts, was made.

One customer accounted for 98% of accounts receivable at December 31, 2019 (2018 –100% of accounts receivable) and 99% (2018 – 100%) of total revenues during the year ended December 31, 2019.

14

ParcelPal Technology Inc. Amended and Restated Notes to the Financial Statements For the Years Ended December 31, 2019, 2018 and 2017 (Expressed in Canadian Dollars)

4. LOAN RECEIVABLE

On July 29, 2018 the Company entered into a loan agreement with a company related to a director, whereby the Company advanced $60,000 to the vendor. On March 20, 2019, the Company advanced an additional $21,000 ~~to the vendor. The loan is unsecured, bears interest at 10% per annum and is due on demand. During the y~~ ear ended December 31, 2019 $89,374 of the loan was repaid and as at December 31, 2019 $1,874 remains outstanding.

On October 31, 2018, the Company entered into a loan agreement with a company related to a director, whereby the Company advanced $250,000 to the vendor. The loan is unsecured, bears interest at 8% annually and is due on demand. During the year ended December 31, 2018, the Company accrued $3,342 of interest, related to this loan. During the year ended December 31, 2018, the Company received the principal balance in full and the accrued interest was impaired.

During the year ended December 31, 2018, the Company advanced $65,000 to an arm’s length vendor. The Company agreed to partially settle $55,000 of the amount advanced for 1,695,652 shares of 152 Tech Solutions Ltd. (note 5). The advance was unsecured, non-interest bearing and due on demand. During the year ended December 31, 2018, the Company impaired the outstanding balance of $10,000 due to uncertainty of collectability.

5. MARKETABLE SECURITIES

On April 10, 2018, the Company acquired 1,695,652 shares of 152 Tech Solutions Ltd. valued at $300,000 in exchange for the conversion of $55,000 of advances (Note 4) and the payment of $245,000. 152 Tech Solutions Ltd. is a private entity and therefore has no active market for its shares. During the year ended December 31, 2018, the Company impaired the investment to $nil.

6. RIGHT-OF-USE ASSETS (Restated)

Right-of-use assets consists of leased vehicles carried at cost less accumulated depreciation. The Company’s vehicles as at December 31, 2019 and December 31, 2018 are as follows:

	Vehicles
	$
Cost
Balance, December 31, 2017	528,216
Additions	365,830
Balance, December 31, 2018 and 2019	894,046
Accumulated amortization
Balance, December 31, 2017	18,539
Amortization	315,581
Balance, December 31, 2018	334,121
Amortization	349,668
Balance, December 31, 2019	683,789
Net Book Value
Balance, December 31, 2018	559,925
Balance, December 31, 2019	210,257

During the year ended December 31, 2019 $349,668 (2018 - $315,581) of amortization was included in cost of sales.

15

ParcelPal Technology Inc. Amended and Restated Notes to the Financial Statements For the Years Ended December 31, 2019, 2018 and 2017 (Expressed in Canadian Dollars)

7. INTANGIBLE ASSET

	Application software
	$
Cost
Balance, December 31, 2019 and December 31, 2018	110,000
Accumulated amortization
Balance, December 31, 2017	54,800
Amortization	36,100
Balance, December 31, 2018	90,900
Amortization	19,100
Balance, December 31, 2019	110,000
Net Book Value
Balance, December 31, 2018	19,100
Balance, December 31, 2019	-

8. SHARE CAPITAL

Common Shares

Authorized:

The authorized capital of the Company consists of an unlimited number of common shares without par value.

Issued:

During the year ended December 31, 2019:

• a) On January 31, 2019 the Company issued 150,000 common shares to settle debt of $45,000. The shares were fair valued at $45,000 and no gain or loss on debt settlement was recorded.

• b) On March 22, 2019 the Company issued 210,000 common shares in lieu of fees, the shares were fair valued at $79,800.

• c) The Company received $194,737 of subscriptions receivable.

• d) On April 8, 2019, the Company issued 171,427 common shares to its officers, directors and consultants to settle corporate indebtedness of $60,000, the shares were fair valued at $60,857 and a loss on debt settlement of $857 was recorded.

• e) The Company issued 1,275,000 common shares pursuant to exercise of stock options for proceeds of $256,249.

• f) The Company issued 2,958,600 common shares pursuant to exercise of warrants for proceeds of $339,870.

• g) The Company issued 600,000 common shares in lieu of fees, the shares were fair valued at $132,000. h) On September 10, 2019 the Company issued 293,020 common shares to settle debt of $63,000, the shares were fair valued at $63,000 and no gain or loss on debt settlement was recorded.

• i) On July 30, 2019 the Company issued 500,000 common shares in lieu of fees, the shares were fair valued at $115,000.

• j) On September 10, 2019 the Company issued 280,000 common shares in lieu of fees, the shares were fair valued at $37,800.

16

ParcelPal Technology Inc. Amended and Restated Notes to the Financial Statements For the Years Ended December 31, 2019, 2018 and 2017 (Expressed in Canadian Dollars)

• k) On November 22, 2019, the Company closed a non-brokered private placement financing consisting of ~~4,071,353 units at a price of $0.085 per unit for gross proceeds of $346,065. Each unit consists of o~~ ne common share and one-half of one share purchase warrant, with each whole warrant entitling the holder to purchase one additional common share of the Company exercisable at a price of $0.15 per share for a period of 24 months from the date of issuance. The Company incurred cash share issuance costs of $20,442 and issued 48,800 finders’ warrants exercisable at a price of $0.15 per share for a period of 24 months from the date of grant. The fair value of the finders warrants were fair valued at $2,034 using the Black Scholes option pricing model. As at December 31, 2019, the Company had $72,875 in subscriptions receivable relating to the private placement.

During the year ended December 31, 2018:

• a) On January 12, 2018, the Company closed a non-brokered private placement financing consisting of 425,000 units at a price of $0.0675 per unit for gross proceeds of $28,688, which were received during year ended December 31, 2017. Each unit consists of one common share and one-half of one share purchase warrant, with each whole warrant entitling the holder to purchase one additional common share of the Company exercisable at a price of $0.075 per share for a period of 24 months from the date of issuance.

• b) On January 24, 2018, the Company closed a non-brokered private placement financing consisting of 12,304,924 units at a price of $0.135 per unit for gross proceeds of $1,661,165, of which $10,200 was received subsequent to December 31, 2018. Each unit consists of one common share and one share purchase warrant, with each whole warrant entitling the holder to purchase one additional common share of the Company exercisable at a price of $0.20 per share for a period of 24 months from the date of issuance. The Company paid finders’ fees of $125,077 and issued 760,642 finders’ warrants exercisable at a price of $0.20 per share for a period of 24 months from the date of grant. The fair value of the finders warrants were fair valued at $329,286 using the Black Scholes option pricing model.

• c) On June 27, 2018, the Company issued 285,000 shares valued at $59,850 to its officers, directors and a consultant to settle corporate indebtedness of $57,000 resulting in a loss of $2,850.

• d) On September 10, 2018, the Company issued 150,000 shares valued at $46,500 to its officers, directors and a consultant to settle corporate indebtedness of $27,500 resulting in a loss of $19,500.

• e) On October 17, 2018, the Company completed a non-brokered private placement issuing 2,847,727 units at $0.35 for gross proceeds of $996,704, of which $211,390 has been accounted for as subscription receivable. Each unit consists of one common share and one-half share purchase warrant with each full warrant being exercisable by the holder at $0.50 per warrant for common shares of the Company for a period of 24 months from date of issuance. The Company incurred cash issue costs of $86,790 and issued 48,104 finders’ warrants with an exercise price of $0.50, expiring on October 17, 2020. The finders’ warrants were fair valued at $10,986 using the Black Scholes option pricing model.

• f) On October 25, 2018, the Company issued 114,703 common shares valued at $34,984, to its officers, directors and a consultant to settle corporate indebtedness of $39,000 resulting in a gain on debt settlement of $4,016.

• g) On November 13, 2018, the Company issued 600,000 common shares in lieu of consulting fees, the shares were fair valued at $180,000.

17

ParcelPal Technology Inc. Amended and Restated Notes to the Financial Statements For the Years Ended December 31, 2019, 2018 and 2017 (Expressed in Canadian Dollars)

• h) During the year ended December 31, 2018, the Company issued 9,546,319 common shares upon exercise ~~of warrants for proceeds of $1,404,342, of which $68,550 has been accounted as subscription receivab~~ le.

• i) During the year ended December 31, 2018, the Company issued 1,981,000 common shares upon exercise of options for proceeds of $261,065, of which $55,000 has been accounted as subscription receivable.

Stock Options

The Company has adopted an incentive stock option plan, which enables the Board of Directors of the Company from time to time, at its discretion, and in accordance with the CSE requirements to, grant to directors, officers, employees and consultants to the Company, non-transferable stock options to purchase common shares, provided that the number of common shares reserved for issuance will not exceed 20% of the Company’s issued and outstanding common shares. Each stock option permits the holder to purchase one share at the stated exercise price. The options vest at the discretion of the Board of Directors.

The following is a summary of the Company’s stock option activity:

The following is a summary of the Company’s stock	option activity:
	Number of	Weighted Average
	Options	Exercise Price
	#	$
Balance, December 31, 2017	4,535,000	0.12
Granted	8,775,000	0.26
Exercised	(1,981,000)	0.13
Expired	(500,000)	0.13
Balance, December 31, 2018	10,829,000	0.24
Granted	3,400,000	0.15
Exercised	(1,275,000)	0.20
Expired	(655,000)	0.24
Forfeited	(1,925,000)	0.24
Balance, December 31, 2019	10,374,000	0.22
Unvested	(1,900,000)	0.11
Exercisable at December 31, 2019	8,474,000	0.25

Pursuant to the exercise of stock options the Company reallocated $205,708 (2018 - $168,111) of contributed surplus to share capital. Pursuant to the exercise of warrants the Company reallocated $15,417 (2018 - $88,438) of contributed surplus to share capital.

18

ParcelPal Technology Inc. Amended and Restated Notes to the Financial Statements For the Years Ended December 31, 2019, 2018 and 2017 (Expressed in Canadian Dollars)

During the year ended December 31, 2019, the Company recorded share-based payments expense of $776,962 ~~(2018 - $1,548,784) pursuant to the vesting of previously granted options and the granting of options~~ to consultants of the Company. The Company fair values options using the Black-Scholes option pricing model using the following assumptions:

		December 31,		December 31
		2019		2018
Weighted average fair value of options granted	$	0.04	$	0.05
Risk-free interest rate		1.15%-1.8%		1.88%-2.2%
Estimated life		5.00 years		5.00 years
Expected volatility		112%-122%		123%-127%
Expected dividendyield		0.00%		0.00%

As at December 31, 2019 the following options were outstanding and exercisable:

Expiry	Exercise price	Remaining	Options
Date	$	life(years)	outstanding	Unvested	Vested
January 5, 2020	0.20	0.01	100,000	-	100,000
May 5, 2020	0.14	0.35	100,000	-	100,000
June 1, 2020	0.16	0.42	150,000	-	150,000
November 17, 2022	0.16	2.88	150,000	-	150,000
November 28, 2022	0.18	2.91	550,000	-	550,000
December 6, 2022	0.17	2.93	1,100,000	-	1,100,000
January 21, 2023	0.32	3.06	2,049,000	-	2,049,000
May 1, 2023	0.24	3.33	500,000	-	500,000
June 28, 2023	0.20	3.49	225,000	-	225,000
August 15, 2023	0.21	3.62	400,000	-	400,000
August 31, 2023	0.27	3.67	1,100,000	-	1,100,000
November 22, 2023	0.26	3.90	150,000	-	150,000
December 13, 2023	0.25	3.95	750,000	-	750,000
February 14, 2024	0.295	4.13	500,000	-	500,000
May 2, 2024	0.27	4.34	150,000	-	150,000
May 17, 2024	0.245	4.41	200,000	-	200,000
June 17, 2024	0.245	4.47	300,000	-	300,000
October 7, 2024	0.09	4.77	1,000,000	1,000,000	-
October 11, 2024	0.09	4.78	650,000	650,000	-
December 4, 2024	0.09	4.93	250,000	250,000	-
		3.27	10,374,000	1,900,000	8,474,000

Subsequent to December 31, 2019, 1,000,000 options were exercised for gross proceeds of $90,000. At December 31, 2019 this amount was recorded as subscriptions received in advance.

19

ParcelPal Technology Inc. Amended and Restated Notes to the Financial Statements For the Years Ended December 31, 2019, 2018 and 2017 (Expressed in Canadian Dollars)

Warrants

The following is a summary of the Company’s warrant activity:

	Number of	**Weighted Average **
	Options	Exercise Price
	#	$
Balance, December 31, 2017	8,748,114	0.12
Issued	14,820,033	0.23
Exercised	(9,546,319)	0.15
Expired	(143,911)	0.17
Balance, December 31, 2018	13,877,917	0.20
Issued	2,084,476	0.15
Exercised	(2,958,600)	0.11
Expired	(891,480)	0.08
Balance, December 31, 2019	12,112,313	0.23

As of December 31, 2019, the following share purchase warrants were outstanding and exercisable:

	Number	Exercise Price
Expiry Date	Outstanding	$
January 12, 2020	8,555,870	0.20
October 17, 2020	1,471,967	0.50
November 22,2021	2,084,476	0.15
	12,112,313	0.23

Subsequent to December 31, 2019 494,722 warrants expired unexercised.

9. RELATED PARTY TRANSACTIONS

Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. The Company has determined that key management personnel consist of members of the Company's Board of Directors and corporate officers. The remuneration of directors and key management personnel is as follows:

	December 31,	December 31,	December 31,
	2019	2018	2017
	$	$	$
Consulting fees	322,656	98,225	172,987
Management fees	163,800	72,000	17,500
Director fees	-	-	10,000
Software development	66,465	-	-
Share-based compensation	-	276,211	235,055
	552,921	446,436	435,542

20

ParcelPal Technology Inc. Amended and Restated Notes to the Financial Statements For the Years Ended December 31, 2019, 2018 and 2017 (Expressed in Canadian Dollars)

Included in accounts payable as at December 31, 2019, is $64,047 (December 31, 2018 - $43,442, and December ~~31, 2017 - $135) owing to directors and officers. These amounts are non-interest bearing, unsecured and due~~ on demand.

10. INCOME TAXES

The income tax provision differs from expected amounts calculated by applying Canadian combined federal and provincial corporate income tax rates to the Company’s loss before income taxes. The components of these differences are as follows:

	December 31,	December 31,	December 31,
	2019	2018	2017
	$	$	$
Net loss for the year	(4,610,512)	(3,664,376)	(1,438,438)
Statutoryincome tax rate	27%	27%	26%
Expected income tax recovery	(1,244,838)	(989,382)	(373,991)
Permanent differences	205,553	418,172	122,797
Adjustments to prior year versus statutory tax
return	-	(69,594)	(23,040)
Change in unrecognized deferred assets	1,039,285	640,804	274,234
Income tax recovery	-	-	-

Temporary differences that give rise to the following deferred tax assets and liabilities are:

	December 31,	December 31,	December 31,
	2019	2018	2017
	$	$	$
Deferred tax assets
Non-capital tax loss carry forwards	2,260,154	1,203,851	681,783
Other	109,482	123,003	13,699
Share issuance costs	43,527	47,024	37,592
	2,413,163	1,373,878	733,074
Valuation allowance	(2,413,163)	(1,373,878)	(733,074)
	-	-	-

As at December 31, 2019, the Company has approximately $8,433,000 of non-capital losses in Canada that may be used to offset future taxable income, expiring between 2026 and 2039.

11. FINANCIAL INSTRUMENTS

Classification of financial instruments

The Company’s financial instruments consist of cash, accounts receivable, loans receivable, accounts payable and accrued liabilities and lease obligations. The Company classifies cash, accounts receivable and loans receivable as financial assets at amortized cost. Accounts payable and lease obligations are classified as financial liabilities at amortized cost.

The Company examines the various financial instruments and risks to which it is exposed and assesses the impact and likelihood of those risks. These risks include foreign currency risk, interest rate risk, credit risk and liquidity risk. When material, these risks are reviewed and monitored by the Board of Directors.

21

ParcelPal Technology Inc. Amended and Restated Notes to the Financial Statements For the Years Ended December 31, 2019, 2018 and 2017 (Expressed in Canadian Dollars)

There have been no changes in any risk management policies during the year ended December 31, 2019.

Fair value

Financial instruments measured at fair value are classified into one of the three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are:

• Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities;

• Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and

• Level 3 – Inputs that are not based on observable market data.

The carrying value of the Company’s financial assets and liabilities measured at amortized cost approximate their fair value due to their short term to maturity.

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 of financial loss to the Company if the counterparty to a financial instrument fails to meet its contractual obligations. The Company’s accounts receivable includes $728,966 due from one major customer. The customer is of low credit risk and none of the balance is past due. The Company’s cash is held in large Canadian financial institutions and is not exposed to significant credit risk.

Interest 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. The Company is exposed to limited interest rate risk.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its obligations as they fall due. The Company’s ability to continue as a going concern is dependent on management’s ability to raise the required capital through future equity or debt issuances. The Company manages its liquidity risk by forecasting cash flows from operations and anticipating any investing and financing activities. Management and the directors are actively involved in the review, planning, and approval of significant expenditures and commitments.

Foreign exchange risk

The Company’s functional currency is the Canadian Dollar and major transactions are transacted in Canadian Dollars and US Dollars. The Company maintains a US Dollar bank account in Canada to support the cash needs of its operations. Management believes that the foreign exchange risk related to currency conversion is minimal and therefore does not hedge its foreign exchange risk.

Capital Management

The Company defines capital that it manages as its shareholders’ equity. When managing capital, the Company’s objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. The Company manages its capital structure and makes adjustments to it, based on the funds available to the Company, in order to support the development of a social collaborative charting, news and communication platform for traders. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s

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ParcelPal Technology Inc. Amended and Restated Notes to the Financial Statements For the Years Ended December 31, 2019, 2018 and 2017 (Expressed in Canadian Dollars)

management to sustain future development of the business.

Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. There were no changes to the Company’s approach to ~~capital management during the year ended December 31, 2019.~~

12. LEASE OBLIGATIONS (Restated)

During the year ended December 31, 2017 the Company entered into multiple 36-month vehicle lease agreements, the Company present valued the lease payment using its incremental borrowing rate ranging from 9.48% to 9.72%. The Company recorded lease liabilities of $412,525. During the year ended December 31, 2018 the Company entered into additional vehicle lease agreements ranging from 24-36 months in term. The Company present valued the lease payments using incremental borrowing rates ranging from 6.88% to 9.75% and recorded initial lease obligations of $349,286.

The Company’s future minimum lease payments under the lease obligations as at December 31, 2019 and 2018 are as follows:

	December 31, 2019	December 31, 2018
	$	$
Less than 1 year	204,323	336,520
1-5 years	6,013	210,336
5 + years	-	-
Total minimum lease payments	210,336	546,856
Less: Imputed Interest	(7,538)	(37,496)
Total lease obligations	202,798	509,360
Current portion of lease obligations	(196,957)	(306,562)
Non-current portionof lease obligations	5,841	202,798

13. SUPPLEMENTAL CASH FLOW INFORMATION

During the year ended December 31, 2019 the Company issued 614,447 shares valued at $168,856 to settle accounts payable of $168,000 and issued 1,590,000 shares, valued at $364,600, for consulting services.

During the year ended December 31, 2019 the Company had $8,374 (2018 - $nil) in interest relating to loans receivable (note 4).

14. SUBSEQUENT EVENTS

On January 9, 2020 the Company granted 362,222 stock options to a consultant of the Company. The options have an exercise price of $0.14 and expire on January 9, 2021.

On January 14, 2020 the Company issued 600,000 common shares in lieu of fees for consulting services.

On January 30, 2020 the Company granted 250,000 to an employee of the Company, the options have an exercise price of $0.14 and expire on January 30, 2023. The options vest on January 30, 2021.

On January 30, 2020, the World Health Organization declared COVID-19 a global pandemic. This contagious disease outbreak and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, leading to an economic downturn. The pandemic could continue to

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ParcelPal Technology Inc. Amended and Restated Notes to the Financial Statements For the Years Ended December 31, 2019, 2018 and 2017 (Expressed in Canadian Dollars)

have a negative impact on the stock market, including trading prices of the Company’s shares and its ability to raise new capital.

On February 11, 2020 the Company issued 416,667 commons shares to settle debt of $50,000.

On February 21, 2020 1,000,000 stock options were exercised for proceeds of $90,000, which were recorded as subscriptions received in advance at December 31, 2019.

On March 23, 2020 the Company issued 205,556 common shares in lieu of fees to a consultant of the Company.

On April 14, 2020 the Company completed a non-brokered private placement pursuant to which it issued an unsecured convertible note with a face value of up to US$367,500 (the “Note”). The terms of the Note are as follows:

• 1) US$250,000 was advanced to the Company on closing and US$12,500 was retained by the Noteholder as an original issue discount for expenses related to the offering, and the issuance of 300,000 common shares as investment incentive shares;

• 2) Up to US$100,000 upon request by the Company shall be advanced by the Noteholder in such amounts and at such date as the parties mutually agree, plus the prorated 5% original issue discount to the Company on such amounts, and up to an additional 300,000 investment incentive shares assuming the maximum investment of not less than U$100,000 to the Company;

• 3) The Note bears interest at a one-time guaranteed rate of 10% on the principal sum of each funded tranche, and has a maturity date of seven and one-half months from the effective date of each tranche funding.

• 4) The principal amount shall be convertible into common shares of the Company prior to the Maturity Date, at the option of the Noteholder, at a fixed conversion price of US$0.06 per share;

• 5) If the Note is not fully repaid or fully converted on or before the Maturity Date, then the Noteholder has the option to convert the remaining outstanding amount under the Note into common shares at the variable conversion price equal to the lower of (a) US$0.06 per share or (b) 65% of the lowest volume weighted average price of the Company’s common shares during the 10 consecutive trading prior to the date on which the Noteholder elects to convert all or part of the Note, provided that any such discount to the conversion price is in compliance with applicable Canadian securities laws and the policies and rules of the CSE.

• 6) In May 2020, the company funded the second tranche of US$100,000, and the additional incentive shares provided by the terms of the Note.

On May 6, 2020 the Company granted 2,875,000 stock options to directors, officers and consultants of the Company. The options have an exercise price of $0.09 per option and expire on May 6, 2025.

On June 9, 2020, the Company announced that, a private company controlled by a director of the Company, and the Company have mutually agreed to terminate the Business Advisor Services Agreement dated June 20, 2019. The Company has agreed to issue 1,200,000 common shares to corporation in settlement of all amounts due and owing under the agreement. The contract was terminated in or about June 8, 2020, and the shares issued in full at C$0.15 per share.

On June 29, 2020, the Company announced that it has completed a non-brokered private placement (the “Offering”) pursuant to which it issued an unsecured convertible note with a face value of US$210,000 to an arm's length investor

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