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Secure Blockchain Development Corp. — Interim / Quarterly Report 2023
Aug 22, 2023
44561_rns_2023-08-22_064d2859-6d4b-4b94-8d9c-94dafab894b6.pdf
Interim / Quarterly Report
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IDENTILLECT TECHNOLOGIES CORP.
Condensed Consolidated Interim Financial Statements (Unaudited – Prepared by Management) (Expressed in US Dollars)
As at and for the three and six months ended June 30, 2023, and 2022
IDENTILLECT TECHNOLOGIES CORP.
(the “Company” or “Identillect”)
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS As at and for the three and six months ended June 30, 2023, and 2022
NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS
The Management of the Company is responsible for the preparation of the accompanying unaudited condensed consolidated interim financial statements. The unaudited condensed consolidated interim financial statements have been prepared using accounting policies in compliance with International Financial Reporting Standards (“IFRS”) for the preparation of condensed consolidated interim financial statements and are in accordance with IAS 34 – Interim Financial Reporting.
The Company’s auditor has not performed a review of these condensed consolidated interim financial statements in accordance with the standards established by the Chartered Professional Accountants of Canada for a review of interim financial statements by an entity’s auditor.
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Identillect Technologies Corp.
Notes to the Condensed Consolidated Interim Statements of Financial Position For the six months ended June 2023, and 2022
(Unaudited – Prepared by Management)
(Expressed in US dollars)
| For the six months ended June 2023, and 2022 (Unaudited – Prepared by Management) (Expressed in US dollars) |
||||
|---|---|---|---|---|
| June 30, | December 31, | |||
| 2023 | 2022 | |||
| Assets | ||||
| Current Assets | ||||
| Cash | $ | 21,862 | $ | 100,957 |
| GST receivable | 91,413 | 84,681 | ||
| Prepaid expenses | 2,531 | 2,531 | ||
| 115,806 | 188,169 | |||
| Propertyand equipment(Note 4) | 648 | 7,494 | ||
| Total Assets | $ | 116,454 | $ | 195,663 |
| Liabilities and Shareholders’ Deficiency | ||||
| Current Liabilities | ||||
| Accounts payable and accrued liabilities (Note 11) | $ | 484,990 | $ | 387,416 |
| Deferred revenue | 239,425 | 273,475 | ||
| Loans payable (Note 6) | 427,235 | 345,012 | ||
| Lease liabilities (Note 8) | - | 5,571 | ||
| Convertible debentures(Note 7) | 112,051 | 105,809 | ||
| Total Liabilities | 1,263,701 | 1,117,283 | ||
| Shareholders’ Deficiency | ||||
| Share capital (Note 10) | 9,907,897 | 9,907,897 | ||
| Share-based payment reserve (Note 10) | 1,086,246 | 1,086,246 | ||
| Warrants reserve (Note 10) | 685,288 | 685,288 | ||
| Equity component of convertible debt (Note 7) | 4,605 | 4,605 | ||
| Accumulated other comprehensive loss | (37,870) | (26,497) | ||
| Deficit | (12,793,413) | (12,579,159) | ||
| Total Shareholders’ Deficiency | (1,147,247) | (921,620) | ||
| Total Liabilities and Shareholders’ Deficiency | $ | 116,454 | $ | 195,663 |
Nature and continuance of operations – Note 1
Approved on behalf of the Board on August 22, 2023:
” Jeff Durno” _”Todd Sexton”_____ Director Director
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
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Identillect Technologies Corp.
Condensed Consolidated Interim Statements of Loss and Comprehensive Loss (Unaudited – Prepared by Management) (Expressed in US dollars)
| (Expressed in US dollars) | ||||||||
|---|---|---|---|---|---|---|---|---|
| For the three | months ended | For the | six | months ended | ||||
| June 30, | June 30, | |||||||
| 2023 | 2022 | 2023 | 2022 | |||||
| Revenues | $ | 167,922 | $ | 156,470 | $ | 333,917 | $ | 314,618 |
| Cost of sales | (6,247) | (7,943) | (13,828) | (13,093) | ||||
| Grossprofit | 161,675 | 148,527 | 320,089 | 301,525 | ||||
| Expenses | ||||||||
| Consulting fees | 25,910 | 14,500 | 46,927 | 27,000 | ||||
| Depreciation (Note 4) | 2,738 | 5,349 | 6,846 | 9,205 | ||||
| Filing fees | 6,902 | 8,779 | 12,331 | 19,683 | ||||
| Finance costs (Notes 6 and 7) | 11,197 | 14,774 | 21,289 | 32,254 | ||||
| General and administrative | 16,802 | 16,330 | 27,499 | 24,321 | ||||
| Operating costs | 23,081 | 29,760 | 49,785 | 57,914 | ||||
| Professional fees (Note 5) | 50,804 | 41,506 | 80,019 | 75,044 | ||||
| Rent (Note 5) | 11,269 | 3,532 | 17,083 | 5,676 | ||||
| Salaries and wages (Note 5) | 124,699 | 123,364 | 259,083 | 271,922 | ||||
| Sales and marketing | 9,081 | 9,752 | 11,052 | 11,127 | ||||
| (282,483) | (267,646) | (531,914) | (534,146) | |||||
| Operating loss | (120,808) | (119,119) | (211,825) | (232,621) | ||||
| Foreign exchange gain (loss) | (2,593) | 5,996 | (2,360) | 10,847 | ||||
| Lease accretion (Note 8) | - | (236) | (69) | (301) | ||||
| Forgiveness of loan(Note 6) | - | 89,485 | - | 89,485 | ||||
| Loss for the period | (123,401) | (23,874) | (214,254) | (132,590) | ||||
| Translation adjustment | (11,068) | 18,556 | (11,373) | 10,273 | ||||
| Comprehensive loss for the | ||||||||
| period | $ | (134,469) | $ | (5,318) | $ | (225,627) | $ | (122,317) |
| Weighted average number of | ||||||||
| shares outstanding – basic and | ||||||||
| diluted | 294,382,627 | 213,882,627 | 294,382,627 | 213,882,627 | ||||
| Basic and diluted lossper share | $ | (0.00) | $ | (0.00) | $ | (0.00) | $ | (0.00) |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
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Identillect Technologies Corp.
Condensed Consolidated Interim Statements of Changes in Shareholders’ Deficiency (Unaudited – Prepared by Management)
(Expressed in US dollars)
| (Expressed in US dollars) |
||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Accumulated | ||||||||||||||
| Number of | Share-based | Equity portion | other | |||||||||||
| Common | Share Capital | Warrant | payment | of convertible | comprehensive | Shareholders’ | ||||||||
| Shares | Amount | reserve | reserve | debt | loss | Deficit | deficiency | |||||||
| Balance, December 31, 2021 | 147,215,961 | $ | 8,534,456 | $ | 685,288 | $ | 1,081,527 | $ | 9,324 |
$ | (62,622) | $ (12,181,212) | $ | (1,933,239) |
| Private placement | 66,666,666 | 788,165 | - | - | - | - | - | 788,165 | ||||||
| Settlement of convertible debentures | - | - | - | 4,340 | (4,340) | - | - | - | ||||||
| Currency translation adjustment | - | - | - | - | - | 10,273 | - | 10,273 | ||||||
| Loss for theperiod | - | - | - | - | - | - | (132,590) | (132,590) | ||||||
| Balance, June 30, 2022 | 213,882,627 | 9,322,621 | 685,288 | 1,085,867 | 4,984 | (52,349) | (12,313,802) | (1,267,391) | ||||||
| Private placement | 80,500,000 | 591,073 | - | - | - | - | - | 591,073 | ||||||
| Share issuance costs | - | (5,797) | - | - | - | - | - | (5,797) | ||||||
| Settlement of convertible debentures | - | - | - | 379 | (379) | - | - | - | ||||||
| Currency translation adjustment | - | - | - | - | - | 25,852 | - | 25,852 | ||||||
| Loss for theperiod | - | - | - | - | - | (265,357) | (265,357) | |||||||
| Balance, December 31, 2022 | 294,382,627 | 9,907,897 | 685,288 | 1,086,246 | 4,605 | (26,497) | (12,579,159) | (921,620) | ||||||
| Currency translation adjustment | - | - | - | - | - | (11,373) | - | (11,373) | ||||||
| Loss for theperiod | - | - | - | - | - | - | (214,254) | (214,254) | ||||||
| Balance, June 30, 2023 | 294,382,627 | $ | 9,907,897 | $ | 685,288 | $ | 1,086,246 | $ | 4,605 | $ | (37,870) | $ (12,793,413) | $ | (1,147,247) |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
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Condensed Consolidated Interim Statements of Cash Flows (Unaudited – Prepared by Management) (Expressed in US dollars)
Identillect Technologies Corp.
| Identillect Technologies Corp. Condensed Consolidated Interim Statements of Cash Flows (Unaudited – Prepared by Management) (Expressed in US dollars) |
|||||
|---|---|---|---|---|---|
| For the six | months ended | ||||
| June 30, | |||||
| 2023 | 2022 | ||||
| Cash provided by (used for): | |||||
| Operating Activities: | |||||
| Loss for the period | $ | (214,254) | $ | (132,590) | |
| Items not affecting cash: | |||||
| Depreciation | 6,846 | 9,205 | |||
| Interest accrued | 21,289 | 32,254 | |||
| Lease accretion | 69 | 301 | |||
| Gain on termination of lease | - | - | |||
| Forgiveness of loan | - | (89,485) | |||
| Foreign exchange | 3,135 | (3,911) | |||
| Changes in non-cash working capital items: | |||||
| Accounts receivable | - | (1,384) | |||
| GST receivable | (4,703) | (4,199) | |||
| Accounts payable and accrued liabilities | 91,381 | (281,040) | |||
| Deferred revenue | (34,050) | (25,410) | |||
| (130,287) | (496,259) | ||||
| Financing Activities: | |||||
| Proceeds from share issuance | - | 788,165 | |||
| Proceeds from loans payable | 84,172 | 92,963 | |||
| Repayment of convertible debentures | - | (117,730) | |||
| Repayment of loans payable | (27,340) | (254,413) | |||
| Payments towards lease liabilities | (5,640) | (8,120) | |||
| 51,192 | 500,865 | ||||
| Change in cash for the period | (79,095) | 4,606 | |||
| Cash, beginning of the period | 100,957 | 41,595 | |||
| Cash, end of the period | $ | 21,862 | $ | 46,201 | |
| Cash paid for interest | $ | - | $ | 40,711 | |
| Cashpaid for taxes | $ | - | $ | - |
Significant non-cash transactions (Note 9)
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
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Identillect Technologies Corp. Notes to the Condensed Consolidated Interim Financial Statements For the six months ended June 30, 2023, and 2022 (Unaudited – Prepared by Management) (Expressed in US dollars)
1. NATURE AND CONTINUANCE OF OPERATIONS
Identillect Technologies Corp. (“Identillect” or the “Company”) is a Canadian public company that is listed on the TSX Venture Exchange (“Exchange”) under the symbol ID. The Company was incorporated under the Canada Corporations Business Act on December 27, 1985, registered extraprovincially under the British Columbia Company Act on July 9, 1987, and effective June 18, 2014, the Company was continued into British Columbia. The Company’s principal address is 1600 – 609 Granville Street, Vancouver, BC V7Y 1C3 and its registered and records office is 2200 – 885 West Georgia Street, Vancouver, BC, V6C 3E8.
Identillect Technologies Inc. is a wholly-owned subsidiary of the Company, which was incorporated under the Nevada Business Corporation Act on August 24, 2010. Identillect Technologies Inc. is a software company that has developed an email encryption software solution. The head office of Identillect Technologies Inc. is located at 34197 Pacific Coast Hwy, Suite 103, Dana Point, CA, 926293801.
These condensed consolidated interim financial statements have been prepared on the assumption that the Company will continue as a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations. Different bases of measurement may be appropriate if the Company was not expected to continue operations for the foreseeable future. As at June 30, 2023, the Company has a working capital deficiency of $1,147,895 (December 31, 2022 - $929,114) and has an accumulated deficit of $12,793,413 (December 31, 2022 – $12,579,159) since inception and expects to incur further losses in the development of its business. This material uncertainty may cast significant doubt about the Company’s ability to continue as a going concern. The Company’s continuation as a going concern is dependent on its ability to attain profitable operations to generate funds and/or its ability to raise equity capital or borrowings sufficient to meet its current and future obligations. Although the Company has been successful in the past in raising funds to continue operations, there is no assurance it will be able to do so in the future.
2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES
a. Statement of compliance with IFRS
These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting (“IAS 34”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).
These condensed consolidated interim financial statements do not include all of the information required for the full annual financial statements and should be read in conjunction with the Company’s most recent audited annual consolidated financial statements for the year ended December 31, 2022. The Company’s condensed consolidated interim financial statements were authorized for issue by the Board of Directors on August 22, 2023.
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Identillect Technologies Corp. Notes to the Condensed Consolidated Interim Financial Statements For the six months ended June 30, 2023, and 2022 (Unaudited – Prepared by Management) (Expressed in US dollars)
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of financial statements in conformity with IFRS requires management to make estimates, judgements and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
a. Critical accounting estimates
Critical accounting estimates are estimates and assumptions made by management that may result in a material adjustment to the carrying amount of assets and liabilities within the next financial year and are, but are not limited to, the following:
i. Share-based payments
The fair value of stock options issued with Canadian dollar exercise prices are subject to the limitation of the Black-Scholes option pricing model that incorporates market data and involves uncertainty in estimates used by management in the assumptions. Because the Black-Scholes option pricing model requires the input of highly subjective assumptions, including the volatility of share price, changes in the subjective input assumptions can materially affect the fair value estimate.
ii. Valuation of financial instruments
The Company is required to determine the valuation of convertible debentures at inception. The convertible notes valuation required discounted cash flow analysis that involved various estimates and assumptions (Note 7).
iii. Deferred income taxes
In assessing the probability of realizing income tax assets recognized, management makes estimates related to expectations of future taxable income, expected timing of reversals of existing temporary differences and the likelihood that tax positions taken will be sustained upon examination by applicable tax authorities. These factors may affect the final amount or the timing of tax payments.
iv.
Useful lives of property and equipment
Management is required to assess the useful economic lives and residual values of the assets. These estimates are based on historical experience and are reviewed annually for changes.
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Identillect Technologies Corp. Notes to the Condensed Consolidated Interim Financial Statements For the six months ended June 30, 2023, and 2022 (Unaudited – Prepared by Management) (Expressed in US dollars)
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
b. Critical accounting judgements
Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the statements are, but are not limited to, the following:
-
i. Determination of functional currency The functional and reporting currency of the Company is the US dollar. The functional currency determination was conducted through an analysis of the consideration factors identified in IAS 21, The Effects of Changes in Foreign Exchange Rates. The determination of functional currency involves certain judgments to determine the primary economic environment and the Company reconsiders the functional currency if there are changes in events and conditions of the factors used in the determination of the primary economic environment.
-
ii. Going Concern
-
The preparation of these financial statements requires management to make judgments regarding the going concern of the Company. As at June 30, 2023, the Company had a working capital deficit of $1,147,895 (December 31, 2022 - $929,114). The Company likely has insufficient funds from which to finance its operating activities for the next 12 months; consequently, the Company remains dependent on external sources of financing until such time as it can internally generate sufficient income from software sales to service its on-going operating cost requirements.
4. PROPERTY AND EQUIPMENT
Costs
| Furniture & | Furniture & | Computer | Right-of- | |||||
|---|---|---|---|---|---|---|---|---|
| Equipment | Equipment | Use Asset | Total | |||||
| Balance, December 31, 2021 | $ | 15,855 | $ | 9,653 |
$ | 17,121 |
$ | 42,629 |
| Additions(Note 8) | - | - | 16,172 | 16,172 | ||||
| Balance, December 31, 2022, and June 30, | ||||||||
| 2023 | $ | 15,855 | $ | 9,653 | $ | 33,293 | $ | 58,801 |
| Accumulated Depreciation | Accumulated Depreciation | Accumulated Depreciation | |||||
|---|---|---|---|---|---|---|---|
| Furniture & | Computer | Right-of- | |||||
| Equipment | Equipment | Use Asset | Total | ||||
| Balance, December 31, 2021 | $ 14,817 |
$ | 9,653 | $ | 10,741 | $ | 35,211 |
| Depreciation | 260 | - | 15,836 | 16,096 | |||
| Balance, December 31, 2022 | 15,077 | 9,653 | 26,577 | 51,307 | |||
| Depreciation | 130 | - | 6,716 | 6,846 | |||
| Balance, June 30, 2023 | $ 15,207 |
$ | 9,653 | $ | 33,293 | $ | 58,153 |
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Identillect Technologies Corp. Notes to the Condensed Consolidated Interim Financial Statements For the six months ended June 30, 2023, and 2022 (Unaudited – Prepared by Management) (Expressed in US dollars)
4. PROPERTY AND EQUIPMENT (continued)
| Net Book Value | Net Book Value | ||||||
|---|---|---|---|---|---|---|---|
| Furniture | Computer | Right-of- | |||||
| Equipment | Equipment | Use Asset | Total | ||||
| Net book value, December 31, 2021 | $ | 778 | $ - |
$ | 6,716 | $ | 7,494 |
| Net book value, June 30, 2023 | $ | 648 | $ - |
$ | - | $ | 648 |
The right-of-use asset consists of leased office premises (Note 8).
5. RELATED PARTY TRANSACTIONS
Key management personnel are the persons responsible for the planning, directing, and controlling the activities of the Company and include both executive and non-executive directors, and entities controlled by such persons. The Company defines key management personnel as directors and officers. The following table summarizes the Company’s activities with key management personnel:
| Type of Service | Nature of Relationship | For the six months | For the six months | ended | |
|---|---|---|---|---|---|
| June | 30, | ||||
| 2023 | 2022 | ||||
| Professional fees | Emprise Capital Corp, a company | ||||
| related to the CFO and a director of the | $ | 57,877 | $ | 62,917 | |
| Company | |||||
| Salaries and wages | Todd Sexton, CEO, and Einar Mykletun, CTO |
102,020 | 98,166 | ||
| Rent | Todd Sexton, CEO | 11,325 | 6,300 | ||
| Legal and share | Cassels Brock & Blackwell LLP, a | ||||
| issuance costs | law firm in which a director of the | 1,110 | 10,348 | ||
| Company is a partner | |||||
| Share-basedpayments | Officers/Directors | - | - | ||
| $ | 172,332 | $ | 177,731 |
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Identillect Technologies Corp. Notes to the Condensed Consolidated Interim Financial Statements For the six months ended June 30, 2023, and 2022 (Unaudited – Prepared by Management) (Expressed in US dollars)
5. RELATED PARTY TRANSACTIONS (continued)
The following represents amounts due to related parties included in liabilities:
| Type of Service | Nature of Relationship | June 30, | December 31, | ||
|---|---|---|---|---|---|
| 2023 | 2022 | ||||
| Included in loans payable | |||||
| Loan payable (Note 6) | The Emprise Special Opportunities Fund | ||||
| (2017) LP, a fund related to the CFO and a | $ | 332,745 | $ | 249,280 |
|
| director of the Company | |||||
| Loan payable (Note 6) | Natgar Capital Corp., a company related to a director of the Company |
28,678 | 26,694 | ||
| Loan payable (Note 6) | Todd Sexton, CEO | - | 6,239 | ||
| Included in convertible debentures | |||||
| Convertible debenture | Natgar Capital Corp., a company related to | ||||
| payable (Note 7) | a director of the Company | 98,171 | 92,703 | ||
| Included in accounts payable | and accrued liabilities | ||||
| Other payables | Emprise Capital Corp, a company related | ||||
| to the CFO and a director of the Company | 212,764 | 163,024 | |||
| Legal Fees payable | Cassels Brock & Blackwell LLP, a law firm in | ||||
| which a director of the Company is a | 5,019 | 7,717 | |||
| partner | |||||
| Legal Fees payable | Anfield Sujir Kennedy & Durno, a law firm | ||||
| in which a director of the Company is a | 11,613 | 11,352 | |||
| partner | |||||
| Salaries and wages | Todd Sexton, CEO | 83,175 | 46,703 | ||
| $ | 772,165 | $ | 603,712 |
Unless otherwise specified, amounts payable to related parties referred to are non-interest bearing, unsecured, payable on demand, and have arisen from the provision of services and expense reimbursements.
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Identillect Technologies Corp. Notes to the Condensed Consolidated Interim Financial Statements For the six months ended June 30, 2023, and 2022 (Unaudited – Prepared by Management) (Expressed in US dollars)
6. LOANS PAYABLE
| Loanspayable | Principal | Accumulated Interest | Accumulated Interest | Total Debt | ||
|---|---|---|---|---|---|---|
| December 31, 2021 | $ | 620,739 | $ | 170,579 | $ | 791,318 |
| Proceeds | 220,339 | - | 220,339 | |||
| Repayments | (396,865) | (209,484) | (606,349) | |||
| Interest accrued | - | 54,411 | 54,411 | |||
| Loan forgiven | (89,485) | - | (89,485) | |||
| Translation adjustment | (21,931) | (3,291) | (25,222) | |||
| December 31, 2022 | 332,797 | 12,215 | 345,012 | |||
| Proceeds | 84,172 | - | 84,172 | |||
| Repayments | (27,340) | - | (27,340) | |||
| Interest accrued | - | 17,544 | 17,544 | |||
| Translation adjustment | 7,289 | 558 | 7,847 | |||
| June 30, 2023 | $ | 396,918 | $ | 30,317 | $ | 427,235 |
Loans payable
As at June 30, 2023, the following loans were owed to related parties:
-
$332,745 (December 31, 2022 - $249,280) is owing to a Company related to the CFO and director of the Company (Note 5). The loans payables are unsecured, bear interest at 10% per annum, and are due on demand. During the period ended June 30, 2023, the Company received additional proceeds of $63,071 (December 31, 2022 - $154,609), repaid $nil (December 31, 2022 - $438,444), recorded $13,304 (December 31, 2022 - $44,447) in interest expense and 7,090 (December 31, 2022 – ($23,118)) in foreign exchange translation.
-
$28,680 (December 31, 2022 - $26,694) is owing to a Company related to a director (Note 5). The loans payable are unsecured, bear interest at 10% per annum, and are due on demand. During the period ended June 30, 2023, the Company recorded $1,347 (December 31, 2022 - $2,615) in interest expense and $639 (December 31, 2022 – ($1,755)) in foreign exchange translation.
-
$nil (December 31, 2022 - $6,239) is owing to a Company related to the CEO of the Company (Note 5). The loans payables payable are unsecured, non-interest bearing, and are due on demand. During the period ended June 30, 2023, the Company received $21,101 (December 31, 2022 - $58,038) in additional proceeds and repaid $27,340 (December 31, 2022 - $51,799).
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Identillect Technologies Corp. Notes to the Condensed Consolidated Interim Financial Statements For the six months ended June 30, 2023, and 2022 (Unaudited – Prepared by Management) (Expressed in US dollars)
6. LOANS PAYABLE (continued)
As at June 30, 2023, the following loans were owed to third parties:
-
The Company owed a third party $60,527 (December 31, 2022 - $57,634). The loans payable are unsecured, bear interest at 10% per annum, and are due on demand. During the period ended June 30, 2023, the Company repaid $nil (December 31, 2022 - $108,414), recorded $2,893 (December 31, 2022 - $7,349) in interest expense and $nil (December 31, 2022 –$6) in foreign exchange translation.
-
The Company owed a third party $5,283 (December 31, 2022 - $5,165). The loan is unsecured, non-interest bearing, and due on demand. During the period ended June 30, 2023, the Company received proceeds of $nil (December 31, 2022 - $ nil) and recorded $118 (December 31, 2022 - $355) in foreign exchange translation.
- Pay check protection plan
During the year ended December 31, 2020, the Company received a paycheck protection loan provided by the U.S. Small Business Administration in the amount of $89,995. The Company met the criteria for loan forgiveness and made an application to have the entire amount forgiven. The application was approved, and the Company wrote the balance of $89,995 off as a gain through the statement of loss and comprehensive loss. During the year ended December 31, 2021, the Company received another paycheck protection loan in the amount of $89,485 which was forgiven during the year ended December 31, 2022.
7. CONVERTIBLE DEBENTURES
| Convertible Debenture | Total Debt | |
|---|---|---|
| Balance, December 31, 2021 | $ | 285,218 |
| Finance expense | 12,839 | |
| Repayments | (180,489) | |
| Translation adjustment | (11,759) | |
| Balance, December 31, 2022 | $ | 105,809 |
| Finance expense | 3,745 | |
| Translation adjustment | 2,497 | |
| Balance, June 30, 2023 | $ | 112,051 |
| Equity component of convertible debentures | $ | 4,605 |
13
Identillect Technologies Corp. Notes to the Condensed Consolidated Interim Financial Statements For the six months ended June 30, 2023, and 2022 (Unaudited – Prepared by Management) (Expressed in US dollars)
7. CONVERTIBLE DEBENTURES (continued)
During the year ended December 31, 2016, the Company issued CDN $580,000 ($429,319) in convertible debentures. The convertible debentures bear interest at 7% per annum and are convertible into common shares, at the option of the holders, at CDN $0.30 per share. The conversion feature was valued at the date of issuance as the residual value of the present value of the principal on the convertible debentures (CDN $580,000) at a discount rate of 10% which is the borrowing rate the Company has achieved for non-convertible instruments with similar terms. The convertible debentures were originally due on November 17, 2018 but the outstanding balances were extended to May 31, 2020. The convertible debentures are currently past due.
During the period ended June 30, 2023, the Company made repayments in the amount of CDN $nil (December 31, 2022 – CDN $235,000), representing repayments of principal of CDN $nil (December 31, 2022 – CDN $146,766) and interest of CDN $nil (December 31, 2022 – CDN $88,234). On settlement, the Company reclassified $nil (December 31, 2022 - $4,719) related to the equity component of convertible debentures to reserves.
8. LEASE LIABILITIES
As at December 31, 2020, the Company did not have any leases outstanding, but $24,028 was recognized as payable to a former lessor. During the year ended December 31, 2021, these payments were forgiven, and the Company recognize a gain of $24,028 to the statement of loss and comprehensive loss.
During the year ended December 31, 2021, the Company entered into a lease with a term of 12.5 months and total lease payments of $17,121. Using a discount rate of 10%, the Company recognized additions to lease liabilities of $15,796. The Company paid a deposit of $1,325 on the lease which will be returned at the end of the lease term. During the period ended June 30, 2023, the Company renewed the lease for a period of twelve months with total payments of $16,920. Using a discount rate of 10%, the Company recognized additions to lease liabilities of $16,172. During the period ended June 30, 2023, the lease matured, and payments continued on a month-to-month basis.
The following is a reconciliation of the changes in the lease liabilities:
| Lease Liability | ||
|---|---|---|
| Balance, December 31, 2021 | 5,235 | |
| Additions | 16,172 | |
| Lease accretion | 744 | |
| Payments | (16,580) | |
| Balance, December 31, 2022 | $ | 5,571 |
| Lease accretion | 69 | |
| Payments | (5,640) | |
| Balance, June 30, 2023 | $ | - |
14
Identillect Technologies Corp. Notes to the Condensed Consolidated Interim Financial Statements For the six months ended June 30, 2023, and 2022 (Unaudited – Prepared by Management) (Expressed in US dollars)
9. SIGNIFICANT NON-CASH TRANSACTIONS
There were no non-cash transactions for the periods ended June 30, 2023 and 2022.
10. SHARE CAPITAL AND RESERVES
- a. Authorized
Unlimited number of common shares without par value Unlimited number of preferred shares without par value
b. Issued and outstanding
For the period ended June 30, 2023:
There were no shares issued during the period ended June 30, 2023.
For the year ended December 31, 2022:
-
a) closed a private placement by issuing 66,666,666 common shares at a price of CDN $0.015 per common share for gross proceeds of CDN $1,000,000 ($788,165). In connection with the financing, the Company incurred share issuance costs of $5,797; and
-
b) closed a private placement by issuing 80,500,000 common shares at a price of CDN $0.01 per common share for gross proceeds of CDN $805,000 ($591,073).
c. Stock options
A summary of the Company’s stock option activity is as follows:
| Weighted Average | ||
|---|---|---|
| Number of Options | Exercise Price(Cdn$) | |
| Balance, December 31, 2021 | 11,750,000 | $0.07 |
| Expired/Cancelled | (2,200,000) | 0.15 |
| Balance, December 31, 2022, and June 30, 2023 | 9,550,000 | $0.05 |
As at June 30, 2023, a summary of stock options outstanding and exercisable is as follows:
| Grant Date | Number of Options Outstanding |
Number of Options Exercisable |
Exercise Price (Cdn$) |
Expiry date |
|---|---|---|---|---|
| February 12, 2021 | 9,550,000 | 9,550,000 | $0.05 | February12,2026 |
| 9,550,000 | 9,550,000 |
15
Identillect Technologies Corp. Notes to the Condensed Consolidated Interim Financial Statements For the six months ended June 30, 2023, and 2022 (Unaudited – Prepared by Management) (Expressed in US dollars)
10. SHARE CAPITAL AND RESERVES (continued)
c. Stock options (continued)
Share-based payments
The Company did not grant any stock options during the period ended June 30, 2023, or the year ended December 31, 2022. Total share-based payments expensed for options granted and vested during the period was $nil (December 31, 2022 - $nil).
d. Broker warrants
A summary of the Company’s broker warrant activity is as follows:
| Weighted average | ||
|---|---|---|
| Number of warrants | exerciseprice(Cdn$) | |
| Balance, December 31, 2021 | 900,000 $ | 0.05 |
| Expired/Cancelled | (900,000) | - |
| Balance, December 31, 2022, and June 30, 2023 | -$ | - |
11. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
a. Fair value of financial instruments
As at June 30, 2023, and 2022, the Company’s financial instruments consist of cash, accounts payable and accrued liabilities, loans payable, and convertible debentures.
Cash is measured at FVTPL using Level 1 fair value inputs.
The Company’s accounts payable and accrued liabilities, loans payable and convertible debentures approximate their carrying values because of their short-term nature and/or the existence of market related interest rates on the instruments.
The Company’s accounts payable and accrued liabilities are comprised of the following:
| June 30, | December 31, | |||
|---|---|---|---|---|
| 2023 | 2022 | |||
| Trade payables | $ | 370,155 | $ | 309,053 |
| Payroll liabilities | 114,835 | 78,363 | ||
| Accountspayable and accrued liabilities | $ | 484,990 | $ | 387,416 |
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Identillect Technologies Corp. Notes to the Condensed Consolidated Interim Financial Statements For the six months ended June 30, 2023, and 2022 (Unaudited – Prepared by Management) (Expressed in US dollars)
11. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)
b. Financial Instrument risk
The Company’s risk exposures and the impact on the Company’s financial instruments are summarized below:
i. Credit risk
Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. The Company places its cash with institutions of highcredit worthiness. Management has assessed there to be a low level of credit risk associated with its cash balances.
As to the period ended June 30, 2023, the Company was not subject to an increased risk as a result of holding cash in a major US financial institution.
ii. Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company has not yet achieved profitable operations and expects to incur further losses in the development of its business. The Company’s objective in managing liquidity risk is to minimize operational costs and to maintain sufficient liquidity in order to meet its operational requirements at any point in time.
The Company manages liquidity risk through the management of its capital structure as outlined in Note 12 of these condensed consolidated interim financial statements.
Until such time as the Company’s operations are profitable and can internally generate sufficient funds to finance its operating costs, the Company remains dependent upon the financial support of its shareholders. If the Company is unable to finance itself through these means, it is possible that the Company will be unable to continue as a going concern.
As at June 30, 2023, the Company has a working capital deficiency of $1,147,895 (December 31, 2022 – $929,114) and the Company has insufficient working capital to fund its operating requirements for the next 12 months.
The Company’s continued operations will remain dependent on external sources of financing until such time as it can internally generate sufficient income from software sales to service its on-going operating cost requirements. Future funding may be obtained by means of issuing share capital, the exercise of warrants, the exercise of stock options or debt financing. Based on these facts, the Company is significantly exposed to liquidity risk.
17
Identillect Technologies Corp. Notes to the Condensed Consolidated Interim Financial Statements For the six months ended June 30, 2023, and 2022 (Unaudited – Prepared by Management) (Expressed in US dollars)
11. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)
b. Financial Instrument risk (continued)
iii. Market risk
Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and commodity and equity prices.
a. Interest rate risk
As at June 30, 2023, the Company did not have any investments in investment-grade short-term deposit certificates, and interest exposure with respect to its cash balances is minimal.
As at June 30, 2023, the Company had loans bearing interest at a fixed rate of 10% and convertible debentures bearing interest at a fixed rate of 7% per annum and as such is not significantly exposed to interest rate fluctuations.
b. Foreign currency risk
As at June 30, 2023, $140,728 (December 31, 2022 - $132,502) of Identillect Technologies Inc.’s liabilities and $597 (December 31, 2022 - $69,851) of its current assets are denominated in Canadian funds. A 10% change in the Canadian/US dollar exchange rate would result in a $1,401 net impact on the Company’s foreign exchange gain or loss. As at June 30, 2023, the Company is moderately exposed to foreign exchange fluctuations.
12. CAPITAL MANAGEMENT
The Company manages its capital structure and makes adjustments to it, based on the funds available to the Company, in order to fund existing operations and thereby provide returns to its shareholders. The Company does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management to sustain the future development of the business. The Company defines capital that it manages as the aggregate of its issued common shares, share-based payments reverses, warrants, and stock options and its cash balances.
The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares, issue debt, acquire or dispose of assets or adjust the amount of cash and investments. The Company requires capital to maintain its operating businesses, sustain corporate operations and repay existing obligations. The Company currently is not able to internally finance on-going operating costs of its businesses and therefore will require additional financing by means of issuing share capital, the sale of assets or debt financing.
18
Identillect Technologies Corp.
Notes to the Condensed Consolidated Interim Financial Statements For the six months ended June 30, 2023, and 2022 (Unaudited – Prepared by Management) (Expressed in US dollars)
12. CAPITAL MANAGEMENT (continued)
There can be no certainty of the Company’s ability to raise any additional financing from any of these sources.
Management reviews its capital management approach on an ongoing basis and believes that this approach given the relative size of the Company is reasonable. The Company is not subject to any externally imposed capital requirements or debt covenants. There was no change to the Company’s approach to capital management during the period ended June 30, 2023.
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