Trailbreaker Resources Ltd. — Interim / Quarterly Report 2021

Nov 26, 2021

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ANB Canada Inc.

Interim Condensed Financial Statements

For the nine-month period ended September 30, 2021 and 2020

(Expressed in Canadian Dollars)

(Unaudited)

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

1

ANB Canada Inc.

For the three and nine-month period ended September 30, 2021 and 2020

TABLE OF CONTENTS

Management’s Responsibility for Financial Reporting ................................................................................................................................ 3 Interim Condensed Statements of Financial Position ................................................................................................................................. 4 Interim Condensed Statements of (Loss) Income and Comprehensive (Loss) Income .............................................................................. 5 Interim Condensed Statements of Changes in Shareholders’ Equity ......................................................................................................... 6 Interim Condensed Statements of Cash Flows .......................................................................................................................................... 7 Notes to the Interim Condensed Financial Statements ......................................................................................................................... 8-13

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

2

ANB Canada Inc.

For the three and nine-month period ended September 30, 2021 and 2020 (Unaudited)

MANAGEMENT’S RESPONSIBILITY FOR INTERIM FINANCIAL REPORTING

The accompanying unaudited interim condensed financial statements of ANB Canada Inc. (“ANB Canada” or the “Company”) are the responsibility of management and have been approved by the Board of Directors of the Company.

The unaudited interim condensed financial statements have been prepared by management, on behalf of the Board of Directors, in accordance with International Accounting Standard 34 – Interim Financial Reporting, using accounting policies consist with International Financial Reporting Standards, as disclosed in the notes to the unaudited interim condensed financial statements. Where necessary, management has made judgments and estimates in accounting for transactions, which were not complete at the unaudited interim condensed statement of financial position date. In the opinion of management, the unaudited interim condensed financial statements have been prepared within acceptable limits of materiality and are in accordance with International Financial Reporting Standards.

Management has established systems of internal control over the financial reporting process, which are designed to provide reasonable assurance that relevant and reliable financial information is produced.

The Board of Directors is responsible for reviewing and approving the unaudited interim condensed financial statements together with other financial information of the Company and for ensuring that management fulfils its financial reporting responsibilities. An Audit Committee assists the Board of Directors in fulfilling this responsibility. The Audit Committee meets with management to review the financial reporting process and the unaudited interim condensed financial statements together with other financial information of the Company. The Audit Committee reports its findings to the Board of Directors for consideration in approving the unaudited financial statements together with other financial information of the Company for the issuance to the shareholders.

Management recognizes its responsibility for conducting the Company’s affairs in compliance with established financial standards, and applicable laws and regulations, and for maintaining proper standards of conduct for its activities.

NOTICE TO READER

Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the interim condensed financial statements, they must be accompanied by a notice indicating that the interim condensed financial statements have not been reviewed by an independent auditor. The accompanying unaudited interim condensed financial statements of ANB Canada have been prepared by and are the responsibility of management.

ANB Canada’s independent auditor has not performed a review of these unaudited interim condensed financial statements.

“Brent Larkan” “Alick Fernandes” Brent Larkan Alick Fernandes Chief Executive Officer and Director Chief Financial Officer

November 25, 2021

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

3

ANB Canada Inc.

Interim Condensed Statements of Financial Position

(Expressed in Canadian Dollars) (Unaudited)

(Expressed in Canadian Dollars) (Unaudited)
As at	Note	September 30, 2021	December 31, 2020
		$	$
Assets
Current
Accounts receivable		15,187,096	12,913,861
Inventories		22,435,967	8,889,101
Prepaid expenses and deposits		91,170	102,922
		37,714,233	21,905,884
Property and equipment		62,488	90,267
Right-of-use assets		299,130	321,402
Intangible assets	3	8,316,626	9,094,957
Goodwill	3	4,645,406	4,645,406
Total assets		51,037,881	36,057,916
Liabilities
Current
Accounts payable and accrued liabilities		25,683,168	8,904,053
Line of credit	4	2,529,614	3,218,969
Current portion of long-term debt	5	886,393	5,727,349
Current portion of lease liabilities		126,577	119,682
Distributionpayable		402,780	100,695
		29,628,532	18,070,748
Lease liabilities		177,744	207,518
Long-term debt	5	9,177,515	4,568,621
Preferred shares	7	3,885,083	3,885,083
Deferred tax liabilities	6	1,227,192	1,521,468
Total liabilities		44,096,067	28,253,438
Shareholders' Equity
Common shares	8	7,967,760	7,967,760
Contributed surplus		1,142,138	887,978
(Deficit)/ Surplus		(2,168,082)	(1,051,260)
Total shareholders' equity		6,941,815	7,804,478
Total liabilities and shareholders' equity		51,037,881	36,057,916

Approved on behalf of the Board of Directors:

(signed) Brent Larkan (signed) Maurice Levesque Director Director

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

4

ANB Canada Inc.

Interim Condensed Statements of (loss) Income and Comprehensive (loss) Income

(Expressed in Canadian Dollars) (Unaudited)

		Three-month period ended	Three-month period ended	Nine-month period ended	Nine-month period ended
		September 30,		September 30,
	Note	2021	2020	2021	2020
		$	$	$	$
Sales		19,181,281	19,480,685	57,346,276	49,295,747
Cost of sales	10	16,781,579	16,679,583	51,407,234	42,327,986
Gross margin		2,399,702	2,801,102	5,939,042	6,967,761
Operating expenses
Selling, general and administrative	10	2,068,216	1,695,817	5,866,503	4,903,785
Other expenses / (income)
Finance costs		361,405	509,683	1,139,219	1,448,946
Foreign exchange (gain) loss		606,588	(10,996)	344,418	188,430
Other expense(recovery)		-	-	-	-
		967,994	498,687	1,483,638	1,637,376
Income(loss) before income taxes		(636,507)	606,598	(1,411,098)	426,600
Income taxes
Deferred income tax expense	6	(92,161)	215,767	(294,276)	318,340
		(92,161)	215,767	(294,276)	318,340
Net income(loss) and comprehensive income(loss)		(544,346)	390,831	(1,116,822)	108,260
Basic and diluted income(loss) per share	9	(0.005)	0.003	(0.010)	0.001

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

5

ANB Canada Inc.

Interim Condensed Statements of Changes in Shareholders’ Equity

For the three and nine-month period ended September 30, 2021 and 2020

(Expressed in Canadian Dollars) (Unaudited)

					Total
		Share	Contributed		shareholders'
	Note	capital	surplus	(Deficit)	equity
		$	$	$	$
January1,2021		7,967,760	887,978	(1,051,260)	7,804,478
Net loss and comprehensive loss for the year		-	-	(1,116,822)	(1,116,822)
Stock-based compensation		-	254,161	-	254,161
September 30, 2021		7,967,760	1,142,139	(2,168,082)	6,941,815
					Total
		Share	Contributed	(Deficit)/	shareholders'
	Note	capital	surplus	Surplus	equity
		$	$	$	$
January1,2020		7,967,760	548,007	(854,482)	7,661,285
Net loss and comprehensive loss for the year		-	-	108,260	108,260
Stock-based compensation		-	255,666	-	255,666
September 30, 2020		7,967,760	803,673	(746,222)	8,025,211

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

6

ANB Canada Inc.

Interim condensed Statements of Cash Flows

(Expressed in Canadian Dollars) (Unaudited)

		2021	2020
For the nine months ended September 30,	Note
		$	$
Cash flows provided by (used in)
Operating
Net income (loss) and comprehensive income (loss)		(1,116,822)	108,260
Items not affecting cash:
Unrealized foreign exchange loss (gain)		344,418	188,430
Stock-based compensation		254,161	255,666
Depreciation and amortization		907,231	929,827
Deferred income taxes		(294,276)	318,340
Financingcosts		1,139,219	1,448,946
		1,233,931	3,249,469
Net changes in non-cash working capital:
Accounts receivable		(2,273,235)	(7,739,447)
Inventories		(13,546,866)	1,757,026
Prepaid expenses and deposits		11,752	(35,188)
Accounts payable and accrued liabilities		15,976,509	2,594,037
Interestpaid		(483,553)	(611,731)
		918,539	(785,833)
Financing
Interest portion of rent paid on lease liabilities		(4,029)	(18,286)
Principal portion of rent paid on lease liabilities		(101,727)	(87,236)
Repayment of long term debts		(123,427)	(242,911)
Proceeds from long term debts		-	1,250,000
Proceeds/(Repayment)of credit facilty	4	(689,355)	(115,734)
		(918,539)	785,833
Net change in cash		-	-
Cash, beginning ofperiod		-	-
Cash, end ofperiod		-	-

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

7

ANB Canada Inc.

Notes to the Interim condensed Financial Statements

For the three and nine-month periods ended September 30, 2021 and 2020

(Expressed in Canadian Dollars) (Unaudited)

1. NATURE OF OPERATIONS

Griffin Skye Corporation (“Griffin Skye” or the “Company”) (formerly known as NorRock Realty Corporation) was formed on December 21, 2007 as a mutual fund corporation under the laws of the province of Ontario. On August 4, 2016, Griffin Skye announced that it entered into a share purchase agreement dated July 29, 2016, through a series of transactions, to acquire all the issued and outstanding shares of Associated National Brokerage Inc. (“Associated National Brokerage”). On September 27, 2016, Griffin Skye obtained shareholder approval to voluntarily delist its Class A shares from the NEX Board of the TSX Venture Exchange (the “Exchange”). The Exchange approved Griffin Skye’s delisting and Class A shares were delisted effective at the close of trading on September 28, 2016. Griffin Skye filed articles of amendment effective September 30, 2016, to change its name to ANB Canada Inc. (“ANB Canada” or the “Company”). On October 1, 2016, immediately after the acquisition of Associated National Brokerage, the Company amalgamated and continues to operate as an over-the-counter seller and distributor to retailers and end users in Canada. The address of the Company’s registered office is 25 Millard Avenue West, Unit #1, Newmarket, Ontario, L3Y 7R5.

2. BASIS OF PREPARATION

(a) Statement of compliance and basis of presentation

These interim condensed financial statements have been prepared in accordance with IAS 34 – Interim Financial Reporting.

The interim condensed financial statements do not include all the information and disclosures required in the Company’s annual financial statements and should be read in conjunction with the December 31, 2020 audited financial statements and notes thereto.

The Board of Directors approved these financial statements on November 25, 2021. The interim condensed financial statements have been prepared on a going concern basis using the historical cost basis, except for financial instruments which are measured at fair value. The significant accounting policies used in preparing these interim condensed financial statements are unchanged and are set out in note 3 as described in the December 31, 2020 audited financial statements.

(b) Critical judgments and estimates

The preparation of the Company’s interim condensed financial statements in conformity with IFRS requires management to use judgments and estimates. Critical judgments are those made by management in applying the Company’s accounting policies that have a significant effect on the amounts recognized in the interim condensed financial statements. Estimates are made by management based on circumstances that existed at the interim condensed statement of financial position date, accordingly actual results may differ from these estimates.

The critical judgments and estimates applied in the interim condensed financial statements were the same as those set out in note 2(b) as described in the December 31, 2020 audited financial statements. The only addition is the estimate of income tax liabilities, which is determined in the interim condensed financial statements using the estimated average annual effective income tax rate applied to the pre-tax income for the interim period.

(c) Future accounting changes

IAS 1, Presentation of Financial Statements The amendments to IAS 1 provide a more general approach to the classification of liabilities based on the contractual arrangements in place at the reporting date. The amendments clarify that the classification of liabilities as current or noncurrent should be based on rights that are in existence at the end of the reporting period and align the wording in all affected paragraphs to refer to the right to defer settlement by at least twelve months and make explicit that only rights in place at the end of the reporting period should affect the classification of a liability. The amendments are effective for annual reporting periods beginning on or after January 1, 2022 and are to be applied retrospectively. The Company is still assessing the impact of adopting these amendments on its financial statements.

8

ANB Canada Inc.

Notes to the Interim condensed Financial Statements

For the three and nine-month periods ended September 30, 2021 and 2020

(Expressed in Canadian Dollars) (Unaudited)

3. GOODWILL AND INTANGIBLE ASSETS

At January 01, 2021 Cost Accumulated Amortization Net book value Period ended September 30, 2021 Opening net book value Additions Amortization Closing net book value At September 30, 2021 Cost Accumulated Amortization Net book value	Customer relationships Trademarks Non-compete arrangements Product Licenses Capitalized Software Total Intangible assets Goodwill $ $ $ $ $ $ $ 9,800,000 2,220,000 600,000 180,000 515,542 13,315,542 4,645,406 (3,477,101) - (511,500) - (231,984) (4,220,585) -
	6,322,899 2,220,000 88,500 180,000 283,558 9,094,957 4,645,406
	6,322,899 2,220,000 88,500 180,000 283,558 9,094,957 4,645,406 - - - - - - - (612,500) - (88,500) - (77,331) (778,331) -
	5,710,399 2,220,000 - 180,000 206,227 8,316,626 4,645,406
	9,800,000 2,220,000 600,000 180,000 515,542 13,315,542 4,645,406 (4,089,601) - (600,000) - (309,315) (4,998,916) -
	5,710,399 2,220,000 - 180,000 206,227 8,316,626 4,645,406

Amortization of intangible assets is presented within selling, general and administrative expenses (note 10) on the interim condensed statements of income (loss) and comprehensive income (loss).

There were no goodwill impairment indicators as at September 30, 2021. The goodwill impairment analysis performed by the Company concluded there was no impairment to goodwill as at December 31, 2020, as the recoverable value of its CGU exceeded its carrying value.

4. LINE OF CREDIT

At September 30, 2021, the Company had drawn $2,529,614 of the demand revolving loan (December 31, 2020 – $3,218,969). The Credit Facilities are secured by a first charge general security agreement covering all assets of the Company and a personal guarantee from an officer and director of the Company.

The due-on-demand revolving loan is subject to margin requirements based on total assets and bears interest at the chartered bank’s prime rate plus a spread based on a financial ratio that takes the Company’s debt level and financial results into account.

The credit facility agreement imposes certain financial covenants to earnings before interest, income taxes, Stock-based compensation, unrealized foreign exchanges gains(losses), IFRS 16 (Leases), depreciation and amortization (“EBITDA”). During the nine-month period September 30, 2021, the Company was in compliance with these financial covenants. Amounts are repayable on demand, subject to an excess cash flow sweep at certain senior funded debt ratio and certain long-term debt of the Company. Amounts can be borrowed and repaid early without penalty. Borrowings are available on a revolving basis allowing the amounts reimbursed early to be redrawn, up to the maximum availment.

9

ANB Canada Inc.

Notes to the Interim condensed Financial Statements

For the three and nine-month periods ended September 30, 2021 and 2020

(Expressed in Canadian Dollars) (Unaudited)

5. LONG-TERM DEBT

As at	Note	September 30, 2021	December 31,2020
		$	$
Loan payable		6,737,336	7,195,950
Promissorynotepayable		3,355,421	3,160,743
		10,092,757	10,356,693
Less: Deferred financing costs, classified as non-current		28,849	60,723
Less: Currentportion		886,393	5,727,349
Non-current portion		9,177,515	4,568,621

6. INCOME TAXES

Income tax expense is recognized based on management’s best estimate of the annual effective income tax rate for the interim period applied to the pre-tax income of the interim period. The Company’s tax rate in respect of operations for the three and nine months ended September 30, 2021 was 26.5% (September 30, 2020 - 26.5%).

7. PREFERRED SHARES

As part of the private placements in 2016, the Company issued 146,712 and 14,400 preferred shares, respectively, for gross proceeds of $3,667,800 and $360,000, respectively and net of share issuance costs of $143,006. Preferred shares have a maturity date of 7 years from issuance, redeemable at $25 per share. At the option of the Company, the preferred shares are redeemable prior to the maturity date at $27 per share. Each preferred share is cumulative at 10% payable annually. Dividends on these securities are recorded as financing costs. These preferred shares are classified as liabilities on the statements of financial position.

8. SHARE CAPITAL

Authorized

ANB Canada is authorized to issue unlimited number of voting class A common shares and non-voting series 1 preferred shares of the Company. Dividends are payable at the discretion of the Board of Directors. The series 1 preferred shares rank both with regards to dividends and return of capital in priority of the holders of the class A common shares.

	Number of Common
	shares	Amount
		$
Balance, as at January 1, 2021	114,768,220	7,967,760
Balance, as at September 30, 2021	114,768,220	7,967,760

10

ANB Canada Inc.

Notes to the Interim condensed Financial Statements

For the three and nine-month periods ended September 30, 2021 and 2020

(Expressed in Canadian Dollars) (Unaudited)

8. SHARE CAPITAL CONT’D

Stock option plan

The Company has a stock option plan in place under which the Board of Directors may grant options to acquire common shares of the Company to qualified directors, officers and employees. The stock options vest according to the provisions of the underlying directors’ resolution approving the issuance. The number of authorized but unissued class A shares that may be issued upon exercise of options granted under the stock option plan at any time shall not exceed 10% of the number of issued and outstanding class A shares on a nondiluted basis. As at September 30, 2021, the number of options outstanding were 8,900,000 (September 30, 2020 – 8,900,000) at a weighted average exercise price of $0.13 (September 30, 2020 - $0.13)

Warrants

During the three-month period September 30, 2021, no warrants were exercised for Class A shares (2020 – nil). As at September 30, 2021, no brokers warrants were outstanding (September 30, 2020 – 253,750).

9. LOSS PER SHARE

Basic and diluted (loss) income per share has been calculated as follows:

		Three-month period	ended	September 30,	Nine-month period	Nine-month period	ended	September 30,
As At September 30,2021		2021		2020		2021		2020
Basic and diluted income (loss) per share
Income (loss) available to common shareholders	$	(544,346)	$	390,831	$	(1,116,822)	$	108,260
Weighted average common shares outstanding		114,768,220		114,768,220		114,768,220		114,768,220
Weighted average common shares outstanding- dilutive		117,993,220		114,768,220		117,993,220		114,768,220
Basic and diluted income (loss) per common share	$	(0.005)	$	0.003	$	(0.010)	$	0.001

11

ANB Canada Inc.

Notes to the Interim condensed Financial Statements

For the three and nine-month periods ended September 30, 2021 and 2020

(Expressed in Canadian Dollars) (Unaudited)

10. EXPENSES BY NATURE INCLUDED IN STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

	Three-month period ended	Three-month period ended	September 30,	Nine-month period ended	September 30,
		2021	2020	2021	2020
		$	$	$	$
Direct costs	$	14,700,305	15,277,686	44,631,434	38,539,491
Logistics and warehousing	$	1,916,419	1,360,810	5,749,242	3,338,490
Other	$	164,855	41,087	1,026,558	450,005
Total cost of sales		16,781,579	16,679,583	51,407,234	42,327,986

	Three-month period ended	Three-month period ended	September 30,	Nine-month period ended	September 30,
		2021	2020	2021	2020
		$	$	$	$
Salaries and benefits	$	966,337	708,857	2,589,530	2,120,795
Office and general	$	421,897	376,426	1,297,875	1,032,656
Professional fees	$	86,479	120,630	243,785	201,666
Depreciation and amortization	$	308,369	308,456	907,231	929,827
Advertising and promotion	$	125,882	(25,812)	361,142	199,225
Bad debts	$	72,489	120,593	198,746	128,521
Travel and automotive	$	2,041	1,947	14,034	35,429
Stock-based compensation	$	84,720	84,720	254,160	255,666
Total selling, general and administrative		2,068,216	1,695,817	5,866,503	4,903,785

11. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The Company has classified the majority of its financial assets and financial liabilities as subsequently measured under amortized cost under IFRS 9 .

The Company records its financial instruments at their carrying amounts, which approximates their fair value, unless otherwise disclosed in the financial statements.

The carrying amounts approximate the fair values due to the short-term maturities, except for preferred shares and long-term debt, where carrying value approximates fair values due to set terms at market rates .

12. PROVISIONS AND CONTINGENCIES

Legal

With respect to litigation the Company becomes involved with, the Company has and will continue to consider all its options for resolution and vigorously assert all appropriate defenses. There are no material claims outstanding against the Company at September 30, 2021. However, where a liability is reasonably possible and may be material, such matters have been disclosed. The Company may enter into discussions regarding settlement of these matters, and may enter into settlement agreements, if it believes settlement is in the best interest of the Company and its shareholders.

12

ANB Canada Inc.

Notes to the Interim condensed Financial Statements

For the three and nine-month periods ended September 30, 2021 and 2020

(Expressed in Canadian Dollars) (Unaudited)

13. CAPITAL MANAGEMENT

ANB Canada’s defined capital as its common shares, preferred shares, line of credit and long-term debt. The Company’s objective when managing capital is to: (i) safeguard the ability to continue as a going concern, so that it can continue to provide returns to shareholders and benefits to other stakeholders; and (ii) to provide adequate return to shareholders by obtaining an appropriate amount of debt commensurate with the level of risk, to reduce after-tax cost of capital.

The Company sets the amount of capital in proportion to the risk. ANB Canada manages the capital structure and makes adjustments in light of changes to the economic conditions and the characteristic risk of underlying assets. In order to maintain or adjust capital structure, the Company may repurchase shares, return capital to shareholders, or issue new shares to reduce debt. ANB Canada’s objective is met by retaining adequate liquidity to provide for the possibility that cash flows from assets will not be sufficient to meet future cash flow requirements.

The Company was compliant with its debt covenant obligations for the nine-month period ended September 30, 2021.

14. ECONOMIC DEPENDENCE

ANB Canada’s revenue is derived mainly from the sales and distribution to four customers. The revenues from the sale of goods to these companies amounted to 58% (nine-month period ended September 30, 2020 – 54%) of total revenues.

13