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Rivalry Corp. Management Reports 2024
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Management Reports
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RIVALRY CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30 2024 AND 2023
R
RIVALRY
NOVEMBER 29, 2024
Rivalry Corp.
Management Discussion and Analysis
For the Three and Nine Months Ended September 30, 2024 and 2023
RIVALRY CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
The following Management Discussion and Analysis ("MD&A") should be read in conjunction with Rivalry Corp.'s (the "Company" or "Rivalry" or "we") consolidated financial statements and notes for the three- and nine-month periods ended September 30, 2024 and 2023 (the "Financial Statements"). This MD&A was prepared with reference to the MD&A disclosure requirements set out by National Instrument 51-102 – Continuous Disclosure Obligations. The Financial Statements, together with this MD&A are intended to provide investors with a reasonable basis for assessing the financial performance of the Company as well as forward-looking statements relating to future performance. Results are reported in Canadian dollars unless otherwise noted. All references to "US$" refer to United States dollars. The Financial Statements are prepared in accordance with the International Financial Reporting Standards ("IFRS"). Information contained herein is presented as at November 29, 2024, unless otherwise indicated. Additional information regarding the Company is available on SEDAR+ at www.sedarplus.ca.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This MD&A contains forward-looking statements and forward-looking information (collectively referred to herein as "forward-looking statements") within the meaning of applicable Canadian securities laws. Such forward-looking statements relate to the Company's current expectations and views of future events or future performance. All statements other than statements of historical fact may be forward-looking statements. The forward-looking statements included in this MD&A are made only as of the date of this MD&A.
In some cases, these forward-looking statements can be identified by words or phrases such as "may", "might", "will", "expect", "anticipate", "estimate", "intend", "plan", "indicate", "seek", "believe", "predict" or "likely", or the negative of these terms, or other similar expressions intended to identify forward-looking statements. Forward-looking statements include estimates, plans, expectations, opinions, forecasts, projections, targets, guidance, or other statements that are not statements of fact. These statements involve known and unknown risks, uncertainties and other factors, including those risk factors identified in the Company's MD&A for the year ended December 31, 2023, dated April 30, 2024 under the heading "Risk Factors", that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Company has based these forward-looking statements on its current expectations and projections about future events and financial trends that it believes might affect its financial condition, results of operations, business strategy and financial needs.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate and are subject to risks and uncertainties. Although we believe that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and we cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. Whether actual results, performance or achievements will conform to the Company's expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under the heading "Risk Factors" in the Company's MD&A for the year ended December 31, 2023, dated April 30, 2024. Except as required by law, the Company does not have any obligation to advise any person if it becomes aware of any inaccuracy in or omission of any forward-looking statement, nor does it intend, or assume any obligation, to update or revise these forward-looking statements to reflect new events or circumstances.
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Rivalry Corp.
Management Discussion and Analysis
For the Three and Nine Months Ended September 30, 2024 and 2023
TRADEMARKS, TRADE NAMES AND SERVICE MARKS
This MD&A includes certain trademarks, trade names and service marks which are protected under applicable intellectual property laws and are the property of the Company. Solely for convenience, the Company’s trademarks, such as Rushlane, may appear without the ® or ™ symbol, but such references are not intended to indicate, in any way, that the Company will not assert its rights to these trademarks, trade names and service marks to the fullest extent under applicable law. Trademarks used in this MD&A, other than those that belong to the Company, are the property of their respective owners.
DESCRIPTION OF BUSINESS
The Company was incorporated on October 28, 2016 under the Business Corporations Act (Ontario) as “PMML Corp.”. The registered head office is located at 116 Spadina Avenue, Suite 701, Toronto, ON M5V 2K6, Canada. On September 20, 2021, PMML Corp. filed articles of amendment to, inter alia, change its name to “Rivalry Corp.” and consolidate its share capital on the basis of 4.5 pre-consolidation shares for every 1 post-consolidation share (the “Consolidation”) and reorganize its share capital (the “Reorganization”). Effective October 5, 2021, the Company’s subordinate voting shares (the “Subordinate Voting Shares”) began trading on the TSX Venture Exchange (the “TSXV”) under the symbol RVLY. The Subordinate Voting Shares are also traded on the Frankfurt Stock Exchange under the symbol 9VK and the OTCQX Best Market under the symbol RVLCF. Unless otherwise indicated, all references to the share capital of the Company contemplated herein shall be on a post-Consolidation and post-Reorganization basis notwithstanding that such event may have occurred prior to September 20, 2021.
Rivalry is an internationally licensed gambling company offering regulated online wagering on esports, sports and casino for an emerging demographic of Gen Z and digitally native bettors. Rivalry has developed an in-house technology platform offering fixed odds sports betting, in addition to originally developed (e.g. Cash and Dash) and third-party casino gaming products (e.g. Aviator). As sports betting is a regulated industry, on January 19, 2018, Rivalry Limited, a wholly owned subsidiary of the Company, was granted an Isle of Man licence (“IOM licence”) to operate by the Gambling Supervision Commission, pursuant to the Online Gambling Regulation Act 2001. The IOM Licence allows Rivalry to offer multiple forms of sports betting such as esports, traditional sports, and casino games. On April 4, 2022, the Company officially launched internet gaming in the Province of Ontario (“Ontario licence”) as one of the first fully registered operators of internet gaming and sports betting in Ontario.
Rivalry’s overall strategic vision is to market and grow the existing sportsbook and casino gaming segments and build Rivalry into a positive cash flow business. The Company views its strategy in three broad pillars: continued market-leading product innovation; ongoing expansion into new jurisdictions under the Company’s existing IOM Licence and regulated market licences such as its Ontario licence; and developing best-in-class marketing properties to create global brand resonance for Rivalry and its portfolio of intellectual property such as independently branded content series and originally developed on-site products, including its native crypto token NUTZ and exclusive casino games.
The Company will continue to apply for additional licences to further expand its active legal betting markets. The Company will ensure that when seeking licences, it understands the requirements in each market it operates in and will maintain and develop protocols to address compliance. Finally, the Company endeavors to develop and maintain the appropriate financial processes to provide transparency to shareholders.
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Rivalry Corp.
Management Discussion and Analysis
For the Three and Nine Months Ended September 30, 2024 and 2023
Together with its management team, the Company continues to work towards delivering a profitable betting business. The Company seeks to identify strategic investments and partnerships to expand its total addressable market and overall customer engagement. The Company is continually reviewing potential acquisitions, strategic partnerships and joint ventures, and it is in the normal course of the Company's business to routinely consider and evaluate offers on assets or acquisitions that fit within its business model.
The Company believes that the available funds together with cash flow from operations will be sufficient to achieve the Company's objectives over the next twelve months. Management of the Company will provide operational, marketing and administrative expertise to all operating subsidiaries.
QUARTERLY HIGHLIGHTS
Crypto Token Faucet
In August, Rivalry released a web-based complement product for NUTZ, previously known as Rivalry Token, called a 'faucet.' The product offers customers daily, randomized rewards to drive connected digital wallets and acquire new players.
NUTZ Generates $3.0 million in Deferred Revenue
In the third quarter NUTZ delivered $3.0 million in deferred revenue to accelerate Rivalry's crypto expansion efforts. See "Deferred Revenue"
Enhanced User Experience
In July, Rivalry adjusted its risk profiles while maintaining compliance, resulting in reduced friction for higher value players on Rivalry, creating more success for these players, in line with the Company's efforts to better serve its VIP player base.
BASIS OF PRESENTATION
Financial Statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board.
FINANCIAL HIGHLIGHTS
The following table sets forth a summary of our highlighted financial data as indicated in our Financial Statements:
| Three Months Ended | Nine Months Ended | |||
|---|---|---|---|---|
| September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | |
| $ | $ | $ | $ | |
| Gross Gaming Revenue² | 5,664,957 | 8,739,830 | $ 20,816,625 | $ 29,204,752 |
| Net Revenue | 2,952,574 | 3,964,477 | 12,111,863 | 13,232,879 |
| Net Loss | (5,888,507) | (5,642,183) | (16,460,170) | (15,218,513) |
| Net Loss per Share - Basic and Diluted | (0.09) | (0.09) | (0.25) | (0.25) |
| Total Comprehensive Loss | (6,093,196) | (6,005,317) | (17,583,606) | (16,652,954) |
| Total Comprehensive Loss per Share - Basic and Diluted | (0.09) | (0.10) | (0.27) | (0.27) |
| Total Assets | 3,578,379 | 9,081,845 | 3,578,379 | 9,081,845 |
| Total Non-Current liabilities | 11,559,014 | 195,611 | 11,559,014 | 195,611 |
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Rivalry Corp.
Management Discussion and Analysis
For the Three and Nine Months Ended September 30, 2024 and 2023
RESULTS OF OPERATIONS
Net Revenue and Segment Information
Gross gaming revenue (GGR) is comprised of sportsbook GGR, consisting of wagering on sports, and gaming GGR which currently contains casino products. Further adjustments as operational deductions are made for cancellations, corrections, and promotional expenses to arrive at net revenue. Gross gaming revenue and operational deductions are used as Non-IFRS measures to represent the amounts from the most directly comparable IFRS measure (Net Revenue). The Company recognized gross gaming revenue of $5,664,957 and $8,739,830 for the three-month periods ended September 30, 2024, and 2023, respectively, and $20,816,625 and $29,204,752 for the nine-month periods ended September 30, 2024, and 2023. The Company generated $79,960,147 and $105,731,192 in Handle¹ for the three-month periods ended September 30, 2024, and 2023, respectively, and $262,519,887 and $338,097,172 for the nine-month periods ended September 30, 2024, and 2023.
For the three- and nine-month periods ended September 30, 2024, and 2023, the gross gaming revenue breakdown by operating segment is detailed below:
| Three Months Ended | Nine Months Ended | |||
|---|---|---|---|---|
| September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | |
| Sportsbook GGR | 4,085,993 | 7,225,344 | 15,992,010 | 24,332,671 |
| Gaming GGR | 1,578,963 | 1,514,486 | 4,824,615 | 4,872,081 |
| Gross Gaming Revenue | 5,664,957 | 8,739,830 | 20,816,625 | 29,204,752 |
Sportsbook GGR decreased by $3,139,351 for the three-month period ended September 30, 2024, in comparison to the three-month period ended September 30, 2023. Sportsbook GGR decreased by $8,340,661 for the nine-month period ended September 30, 2024, in comparison to the nine-month period ended September 30, 2023.
Sportsbook handle for the three-month periods ended September 30, 2024, and 2023 was $30,038,240 and $55,284,522 respectively, and $103,655,463 and $168,796,562 for the nine-month periods ended September 30, 2024, and 2023.
Gaming GGR was $1,578,963 and $1,514,486 for the three-month periods ended September 30, 2024, and 2023, respectively, and $4,824,615 and $4,872,081 for the nine-month periods ended September 30, 2024, and 2023. Gaming handle was $49,921,908 for the three-month period ended September 30, 2024, and $50,446,670 for the three-month period ended September 30, 2023. Gaming handle was $158,864,424 for the nine-month period ended September 30, 2024, and $169,300,609 for the nine-month period ended September 30, 2023.
¹ The Company defines “Betting Handle” or “Handle” as the total dollar value accepted in wagers, adjusted for cancellations and corrections.
² The Company defines “Gross gaming revenue” as total wagers less payouts to winning bettors. Gross gaming revenue is a non-IFRS measure. Please refer to the section entitled "Non-IFRS Financial Measures".
³ Operational deductions is a non-IFRS measure. Please refer to the section entitled "Non-IFRS Financial Measures".
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Rivalry Corp.
Management Discussion and Analysis
For the Three and Nine Months Ended September 30, 2024 and 2023
The decrease in sportsbook GGR was driven by a combination of seasonal gyrations within the esports calendar and lowered marketing spend. Conversely, there was a larger adoption by users in the gaming segment resulting in a 4% increase in gross gaming revenue for the three-months ended September 30, 2024.
| Three Months Ended | Nine Months Ended | |||
|---|---|---|---|---|
| September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | |
| Gross Gaming Revenue | $ 5,664,957 | $ 8,739,830 | $ 20,816,625 | $ 29,204,752 |
| Operational Deductions | (2,712,382) | (4,775,353) | (8,704,762) | (15,971,873) |
| Net Revenue | 2,952,574 | 3,964,477 | 12,111,863 | 13,232,879 |
Operational Deductions
Operational Deductions³ decreased by $2,062,971 to $2,712,382 for the three-month period ended September 30, 2024, when compared to the three-month period ended September 30, 2023. Operational Deductions³ decreased by $7,267,111 to $8,704,762 for the nine-month period ended September 30, 2024, when compared to the nine-month period ended September 30, 2023. This is due to operating leverage realized and the release of higher-margin products, resulting in a higher net revenue margin. Operational deductions were previously referred to as Cost of Revenues.
Net Revenue
The Company's net revenue is recognized as wagers less payouts to winning bettors, adjusted for cancellations, corrections and promotional expenses. Net revenue was previously referred to as gross profit. Net revenue decreased by $1,011,903 to $2,952,574 in comparison to the three-month period ended September 30, 2023. Net revenue decreased by $1,121,016 to $12,111,863 in comparison to the nine-month period ended September 30, 2023. This decrease was due to a material drawdown in active marketing spend as Rivalry underwent a significant organizational overhaul and strategic repositioning throughout the third quarter. As the third quarter represented the key transitional quarter as part of this overhaul, it negatively impacted net revenue in a pronounced way.
Operating Expenses
The Company incurred total operating expenses of $8,471,542 and $9,234,332 for the three-month periods ended September 30, 2024, and 2023 respectively, and $27,539,873 and $28,248,532 for the nine-month periods ended September 30, 2024, and 2023 respectively. The breakdown is provided below with commentary on all variances above 10% or greater than $100,000.
| Three Months Ended | Nine Months Ended | |||||
|---|---|---|---|---|---|---|
| September 30, 2024 | September 30, 2023 | $ Change | September 30, 2024 | September 30, 2023 | $ Change | |
| General and Administration | $ 4,237,464 | $ 4,738,396 | $ (500,932) | $ 13,301,989 | $ 14,181,746 | $ (879,757) |
| Marketing, advertising and promotio | 2,114,851 | 3,053,917 | (939,066) | 8,943,045 | 9,119,157 | $ (176,112) |
| Technology and content | 1,864,861 | 1,060,977 | 803,884 | 4,292,335 | 3,658,218 | 634,117 |
| Share based compensation | 168,010 | 324,244 | (156,234) | 749,157 | 1,081,873 | (332,716) |
| Depreciation and amortization | 86,356 | 56,797 | 29,559 | 253,349 | 168,208 | 85,141 |
| Miscellaneous expenses | - | - | - | - | 39,331 | (39,331) |
| Total Operating Expenses | $ 8,471,542 | $ 9,234,332 | $ (762,790) | $ 27,539,873 | $ 28,248,532 | $ (708,658) |
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Rivalry Corp.
Management Discussion and Analysis
For the Three and Nine Months Ended September 30, 2024 and 2023
General and Administration
General and Administration expenses declined by $500,932 to $4,237,464 for the three-month period ending September 30, 2024, compared to the same period in 2023. For the nine-month period ending September 30, 2024, these expenses decreased by $879,757, reaching $13,301,989, compared to the prior year. The higher costs in the previous period were primarily due to initial legal and professional fees associated with expanding into additional licensed regions, which were one-time expenses not recurring in the current period. Additionally, there were further savings achieved through reductions in salary-related costs.
Marketing, advertising, and promotion
Marketing, advertising, and promotion expenses decreased by $939,066 to $2,114,851 for the three-month period ended September 30, 2024, in comparison to the previous year. These expenses also decreased by $176,112 to $8,943,045 in the nine-month period ended September 30, 2024, when compared with the same period in 2023. The reduction in marketing, advertising, and promotion expenses reflects the benefits of prior investments in brand building and audience acquisition. Additionally, Rivalry scaled back marketing expenditure in the third quarter to preserve resources and align them with ongoing product, brand, and campaign development initiatives.
Technology and content
Technology and content expenses increased by $803,884 to $1,864,861 for the three-month period ended September 30, 2024, when compared to the three-month period ended September 30, 2023. These expenses increased by $634,117 to $4,292,335 in the nine-month period ended September 30, 2024, when compared to the same period in 2023. These expenses contain fees paid to odds providers, gaming provider support and costs associated with additional technology vendors which are required to maintain the betting and gaming platform.
Share-based compensation
Share-based compensation decreased by $156,234 to $168,010 for the three-month period ended September 30, 2024 when compared to the previous year. These expenses decreased by $332,716 in the nine-month period ended September 30, 2024, when compared to the same period in 2023. This was due to the vesting schedules of previously issued security-based compensation under the Company's equity incentive plan (the "Equity Incentive Plan"). As at September 30, 2024, 5,022,651 stock options and 7,639 restricted share units were outstanding in comparison to the 3,895,924 stock options and 98,481 restricted share units outstanding as of September 30, 2023.
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Rivalry Corp.
Management Discussion and Analysis
For the Three and Nine Months Ended September 30, 2024 and 2023
CONSOLIDATED SUMMARY OF QUARTERLY RESULTS
The following shows the summary of quarterly financial data for the preceding eight quarters, inclusive of the quarter ended September 30, 2024:
| Quarterly Results | Gross Gaming Revenue^{2} | Net Revenue | Net Loss | Loss per share - Basic and Diluted |
|---|---|---|---|---|
| September 30, 2024 | $ 5,664,957 | 2,952,574 | (5,888,507) | (0.09) |
| June 30, 2024 | $ 7,446,790 | 4,653,200 | (5,369,517) | (0.08) |
| March 31, 2024 | $ 7,704,879 | 4,506,088 | (5,202,147) | (0.08) |
| December 31, 2023 | $ 6,459,657 | 3,004,771 | (8,577,984) | (0.14) |
| September 30, 2023 | $ 8,739,830 | 3,964,447 | (5,647,897) | (0.09) |
| June 30, 2023 | $ 8,496,692 | 3,821,558 | (6,311,869) | (0.10) |
| March 31, 2023 | $ 11,968,230 | 5,446,844 | (3,258,747) | (0.05) |
| December 31, 2022 | $ 9,430,534 | 4,988,274 | (12,349,716) | (0.21) |
LIQUIDITY AND CAPITAL RESOURCES
The Company continues to demonstrate its ability to generate sufficient cash flows to support its operational needs, fund development activities, and maintain its capacity to execute on planned initiatives. While challenges in the broader economic environment persist, the Company remains focused on prudent cash management and optimizing available resources to meet its short-term and long-term obligations.
Ongoing operational efficiencies and strategic financial planning have positioned the Company to navigate fluctuations in liquidity effectively, ensuring that it can sustain operating expenses and invest in future growth opportunities. For additional insights into the Company's liquidity and funding arrangements, including measures taken to bolster its financial position, refer to the Subsequent Events section of this MD&A.
Convertible Debentures
On November 14, 2023, the Company raised net proceeds of $13,768,262 through the issuance of secured convertible debentures through a non-brokered private placement.
The debentures will mature on November 14, 2027, and bear interest at 10% per annum. Interest is payable quarterly on March 30, June 30, September 30, and December 30 of each year commencing December 30, 2025.
The entire principal of the convertible debentures may be converted at the election of the holder into Subordinate Voting Shares of the Company at a conversion price of $1.40 per share at any time before the close of business on the last business day immediately preceding the maturity date of the debentures. In connection with the offering, the Company incurred $235,754 in transaction costs which were recorded pro rata against the liability ($165,824) and equity components ($70,930).
The fair value of the convertible debentures was determined to be $9,905,422 measured using a market rate of 21.53% less transaction costs for a similar secured debt without the conversion feature.
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Rivalry Corp.
Management Discussion and Analysis
For the Three and Nine Months Ended September 30, 2024 and 2023
The remaining value of $4,131,533, net of tax of $1,094,856, was allocated to the equity component as the difference between the face value of the debenture and the fair value of the liability component. As at September 30, 2024, the Company recognized $1,560,478 of interest expense and elected to accrue unpaid interest of $1,248,333 to the principal outstanding on the convertible debenture. No payments have been made.
Cash Flows
The following table summarizes our cash flows for the periods indicated:
| For the Nine Months Ended | ||
|---|---|---|
| September 30, 2024 | September 30, 2023 | |
| Cash used in operating activities | $ (8,874,302) | $ (13,867,070) |
| Cash used in investing | (108,559) | (71,879) |
| Cash provided by/used in financing activities | (109,454) | 6,890,567 |
| Net increase (decrease) in cash and cash equivalents | (9,092,315) | (7,048,381) |
| Exchange rate differences on translation of foreign operations | (1,309,192) | (1,415,597) |
| Cash and cash equivalents at beginning of period | 10,540,613 | 12,191,521 |
| Cash and cash equivalents at end of period | $ 139,107 | $ 3,727,543 |
Operating Activities
Cash used in operating activities includes the impact of changes in accounts receivable and payables and share-based compensation. Cash used in operating activities for the nine-month period ended September 30, 2024, decreased by $4,992,768 when compared to the nine-month period ended September 30, 2023. The difference is mainly attributed to the decrease in net loss as well as fluctuations in accounts receivable and restricted cash.
Investing Activities
The amounts impacting cash used in investing activities increased by $36.680 when compared to the nine-month period ended September 30, 2023.
Financing Activities
The cash provided by financing activities decreased by $7,000,021 when compared to the nine-month period ended September 30, 2023 which is due to the private placement that took place in May 2023, where the Company raised a total of $7,033,652.
OFF BALANCE SHEET ARRANGEMENTS
As of the date of this MD&A, the Company has no off-balance sheet arrangements or long-term obligations.
DEFERRED REVENUE
The Company receives prepayments from third-party customers under agreements whereby the customers pay in advance for utility tokens that the Company intends to develop and issue at a future date. These prepayments are recorded as Deferred Revenue under liabilities on the balance sheet until the utility tokens are developed and issued, at which point Revenue will be recognized.
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Rivalry Corp.
Management Discussion and Analysis
For the Three and Nine Months Ended September 30, 2024 and 2023
In accordance with IFRS 15, Revenue from Contracts with Customers, the Company has assessed that these transactions constitute a contract with customers. As the utility tokens have not yet been developed or issued, the Company has an obligation to transfer goods or services in the future.
As of 30 September 2024, the Company has recorded $3M as Deferred Revenue, representing prepayments for utility tokens. Therefore, the consideration received is classified as a liability until the performance obligation is satisfied.
RELATED PARTY DISCLOSURES
The remuneration of directors and key management personnel during the three- and nine-month period ended September 30, 2024 included management fees of $253,645 and $925,056, respectively. The remuneration of directors and key management personnel during the three- and nine-month period ended September 30, 2023 included management fees of $314,351 and $974,593, respectively, and share-based compensation of $227,256 and $681,768 respectively, which is included in share-based compensation expense. These transactions are in the normal course of operations and are measured at the exchange amount which is the amount of consideration established and agreed to by both parties.
Starting in February 2022, a related party, Cheesan Chew, provided services to the Company in relation to consulting and project planning. The amount paid during the three- and nine-month period ended September 30, 2024, were $nil. The amount paid during the three- and nine-month period ended September 30, 2023, were $15,434 and $60,278, respectively and is included in general and administration expenses. The Company will continue to assess the services provided on a monthly basis.
On April 17, 2022 the Company entered into a secured demand loan (the "Loan") with Kevin Wimer, the Chief Operating Officer and a Director of the Company. Pursuant to the terms of the Loan, the Company loaned Mr. Wimer $484,917 (USD $385,000) which amount bears interest at 3.2% per annum and is repayable on demand by the Company and in any event by April 17, 2026. The Loan is due on demand; however, the Company does not expect to demand repayment in the near future. The Loan was entered into to assist Mr. Wimer with the funding of certain tax obligations and is secured by a pledge of Mr. Wimer's Subordinate Voting Shares of the Company. The Loan was approved by the non-interested directors of the Company. As of September 30, 2024, the carrying amount of the receivable was $549,801 interest receivable of $64,884.
OUTSTANDING SHARE DATA
| Description | As at the date of this MD&A |
|---|---|
| Subordinate Voting Shares | 65,035,352 |
| Multiple Voting Shares | 2,222,220 |
| Options | 5,022,651 |
| Restricted Share Units | 7,639 |
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Rivalry Corp.
Management Discussion and Analysis
For the Three and Nine Months Ended September 30, 2024 and 2023
USE OF PROCEEDS
There have been no material variances in the estimated use of proceeds from the net proceeds of the Subordinate Voting Shares issued on May 5, 2023, or May 23, 2023, or the net proceeds from the Convertible Debentures issued in connection with the Offering.
CRITICAL ACCOUNTING ESTIMATES AND KEY SOURCES OF ESTIMATION UNCERTAINTIES
The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates are based on management's best knowledge of current events and actions that the Company may undertake in the future. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Details regarding these critical accounting policies and estimates have been included in discussing share-based compensation, Expected credit losses (ECL), Incremental borrowing rate for leases, going concern, income tax, fair value and depreciation and amortization expense.
Right-of-Use Assets and Lease Liabilities
At inception of a contract, the Company assesses whether a contract is, or contains, a lease based on whether 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 right-of-use asset is initially measured based on the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, less any lease incentives received.
The right-of-use assets are depreciated to the earlier of the end of the useful life of the right-of-use asset or the lease term using the straight-line method. The lease term includes periods covered by an option to extend if the Company is reasonably certain to exercise that option. In addition, the right-of-use asset can be periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. 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 readily determined, the Company's incremental borrowing rate.
Short-term lease payments, payments for leases of low-value assets and variable lease payments not included in the measurement of lease liabilities are recognized in the consolidated statements of operations and comprehensive loss.
Incremental borrowing rates
The Company's incremental borrowing rate is used to estimate the initial value of the lease liability and associated right of use asset. The Company's incremental borrowing rate is determined with reference to the borrowing rate for a similar asset within a country for a similar lease term. For determination of the applicable lease term, management takes into consideration any options for lease extensions, as well as contractually agreed break clauses within each lease.
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Rivalry Corp.
Management Discussion and Analysis
For the Three and Nine Months Ended September 30, 2024 and 2023
Share-Based Payments
The estimation of share-based payments requires the selection of an appropriate valuation model and consideration as to the inputs necessary for the valuation model chosen. The model used by the Company is the Black-Scholes valuation model at the date of the grant. The Company makes estimates as to the volatility, the expected life, dividend yield and the time of exercise, as applicable. The expected volatility is based on the average volatility of share prices of similar companies over the period of the expected life of the applicable warrants and stock options. The expected life is based on historical data. These estimates may not necessarily be indicative of future actual patterns.
Loss per Share
Basic loss per share is calculated by dividing the net loss attributable to shareholders by the weighted average number of Subordinate Voting Shares outstanding during each of the years presented. Contingently issuable shares (including shares held in escrow) are not considered outstanding Subordinate Voting Shares and consequently are not included in the loss per share calculations. Diluted loss per share is calculated by adjusting the weighted average number of Subordinate Voting Shares outstanding to assume conversion of all dilutive potential Subordinate Voting Shares. The Company has four categories of dilutive potential Subordinate Voting Shares: Multiple Voting shares, warrants, stock options, and restricted share units. In order to determine diluted loss per share, it is assumed that any proceeds from the exercise of dilutive stock options would be used to repurchase Subordinate Voting Shares at the average market price during the period. The diluted loss per share calculation excludes any potential conversion of options or warrants that would increase earnings per share or decrease loss per share.
On September 30, 2024, and September 30, 2023, the multiple voting shares, warrants, stock options, convertible debentures and restricted share units as described in Notes 6, 7, 8 and 9 are anti-dilutive.
Expected Credit Loss Provision
The Company performs impairment testing annually for accounts receivable in accordance with IFRS 9. The Expected Credit Loss ("ECL") model requires considerable judgment, including consideration of how changes in economic factors affect ECLs, which are determined on a probability-weighted basis. IFRS 9 outlines a three-stage approach to recognizing ECLs which is intended to reflect the increase in credit risks of a financial instrument based on 1) 12-month expected credit losses or 2) lifetime expected credit losses. The Company measures provision for ECLs at an amount equal to lifetime ECLs. The Company applies the simplified approach to determine ECLs on trade receivables by using a provision matrix based on historical credit loss experiences. The historical results were used to calculate the run rates of default which were then applied over the expected life of the trade receivables, adjusted for forward looking estimates.
NON-IFRS FINANCIAL MEASURES
Non-IFRS measures are not recognized measures under IFRS Accounting Standards and do not have a standardized meaning prescribed by IFRS Accounting Standards. These measures are defined with reference to the nearest comparable IFRS Accounting Standards measure such that a reconciliation to the nearest comparable IFRS Accounting Standards measure can be completed. Accordingly, these measures may not be comparable to similar measures presented by other companies. Rivalry uses non-IFRS measures in order to provide additional financial information to complement the closest IFRS Accounting Standards measures in order to provide investors with a further understanding of the Company's operations from management's perspective. Investors should not consider that these non-IFRS measures are a substitute for analyses of the financial information that Rivalry reports under IFRS Accounting Standards. Rivalry uses
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Rivalry Corp.
Management Discussion and Analysis
For the Three and Nine Months Ended September 30, 2024 and 2023
these non-IFRS measures in order to provide investors with a supplemental measure of its operating performance and thus highlight trends in the Company’s business that may not otherwise be apparent when relying solely on IFRS Accounting Standards measures.
FINANCIAL INSTRUMENTS AND OTHER INSTRUMENTS
As at September 30, 2024, the Company’s significant foreign exchange currency exposure on its financial instruments expressed in Canadian dollars was as follows:
| EUR | GBP | USD | |
|---|---|---|---|
| Cash & cash equivalents | $ 90,433 | $ 3,301 | $ 5,106 |
| Restricted cash | $ 52,244 | $ 44,241 | $ 107,550 |
| Accounts payable and accrued liabilities | $ - | $ - | $ 778,595 |
| Net exposure | $ 142,677 | $ 47,542 | $ 891,253 |
| Effect of +/- 10% change in currency | $ 14,268 | $ 4,754 | $ 89,125 |
Based on the above net exposures at September 30, 2024, a 10% depreciation or appreciation of the foreign currencies against the Canadian dollar would result in an increase or decrease, respectively, in the Company’s loss by $108,147.
At September 30, 2024 and 2023, the Company had no hedging agreements in place with respect to foreign exchange rates. The Company has not entered into any agreements or purchased any instruments to hedge possible currency risks at this time.
SUBSEQUENT EVENTS
On 26 November 2024, the Company closed the initial tranche of its non-brokered private placement for aggregate gross proceeds of $1,939,606. The Company issued an aggregate of 12,930,707 units (“Units”) at a price of $0.15 per Unit. Each Unit was comprised of one (1) Subordinate voting Share and one-half of one (1/2) Subordinate Voting Share purchase warrant (each whole warrant, a "Warrant"). Each Warrant is exercisable into one Subordinate Voting Share in the capital of the Company (each, a "Warrant Share") at a price of $0.25 per Warrant Share for a period of 12 months from closing, subject to the Company's right to accelerate the expiry date of the Warrants upon 30 days' notice in the event that the closing price of the
Subordinate Voting Shares is equal to or exceeds $0.50 on the TSX Venture Exchange (or such other recognized Canadian stock exchange as the Subordinate Voting Shares are primarily traded on) for a period of 10 consecutive trading days.
On 28 November 2024, the Company closed the second tranche of its non-brokered private placement for aggregate gross proceeds of $1,047,734. The Company issued an aggregate of 6,984,891 Units.
ADDITIONAL INFORMATION
Additional information relating to the Company is available on SEDAR at www.sedarplus.ca.
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