Volatus Aerospace Corp. — Management Reports 2021

Feb 5, 2021

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MANAGEMENT’S DISCUSSION AND ANALYSIS – FISCAL 2020

1. General

The following Partner Jet Corp. (the "Company") management’s discussion and analysis (“MD&A”), of operating results and financial position for the year ended November 30, 2020, is supplementary to, and should be read in conjunction with the audited consolidated financial statements for the year, which have been audited by the Company’s independent auditor. The consolidated financial statements (“financial statement”) have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and all amounts, unless otherwise indicated, are expressed in Canadian dollars. The audited consolidated financial statements and management’s discussion and analysis for the year ended November 30, 2020 were reviewed and approved by the Company’s Audit Committee and the Board of Directors. This discussion covers the last completed fiscal year and the subsequent period up to the date of the filing of this MD&A. This MD&A is dated February 05, 2021.

Additional information on the Company can be found on the Company’s website at www.partnerjet.com and through the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com.

2. Forward Looking Statements

This management’s discussion and analysis contains statements about expected future events and financial and operating results of Partner Jet Corp. that are forward looking. By their nature, forward looking statements require the Company to make assumptions and are subject to inherent risks and uncertainties. These forward looking statements are based on the current estimates and opinions of management. There is substantial risk that forward looking statements will not prove to be accurate. Readers are cautioned not to place undue reliance on the Company’s forward looking statements as a number of factors including economic conditions, the effect of the ongoing COVID19 pandemic, industry change, technological change, regulatory change, and competitive factors, could cause actual future results, conditions, actions or events to differ materially from targets, expectations, estimates or intentions expressed in the forward looking statements; many of which are beyond the Company’s control. A significant risk factor identified by the Company which could cause actual results to differ materially from the current expectations is the retention of the existing contracts with independent corporations for the care, custody and control of their aircraft. The Company mitigates these risks and uncertainties by focusing its sales energies on securing additional customer contracts and exploring for new related revenue streams. Readers are cautioned that forward-looking statements are not guarantees of future performance.

3. Overview

Partner Jet Corp. is incorporated under the laws of Ontario and its shares are currently posted for trading on the TSX Venture Exchange (PJT:TSX-V). The Company, through its subsidiary Partner Jet Inc., carries on the business of a full service aircraft management, private aircraft charter sales and flight support services capable of operating a wide range of corporate aircraft. The Company’s revenue is generated through aircraft management contracts, charter and sub-charter activities, and aircraft maintenance contracts.

2450 Derry Road East, Hangar 9, Mississauga, ON, L5S 1B2 Tel: 905-676-0092 Fax: 905-676-0192 www.partnerjet.com

3. Overview (Continued)

Essential to the management contracts are the CAR Part 604, 703 and 704 private and commercial licenses granted by Transport Canada to Partner Jet Inc. These licenses permit Partner Jet Inc. to operate private flights on behalf of aircraft owners, and commercial flights under a domestic and international air taxi service authority utilizing small turboprop and jet aircraft. This service is offered for transportation within Canada and to international destinations.

Partner Jet Corp. and its subsidiary are located at one centralized location at 2450 Derry Road East, Hangar #9, Mississauga, Ontario. These facilities house activities that include: sales, reservations, dispatch, maintenance, administration and accounting.

The Company’s overall financial performance for the year ended November 30, 2020 declined from the previous fiscal year. The result of this performance was a net loss after income taxes for the year ended November 30, 2020 of ($963,785), compared to the year ended November 30, 2019 net loss after income taxes of ($65,831). The loss per share for the fiscal 2020 was ($0.1062) compared to the fiscal 2019 loss per share of ($0.0073).

The Company’s working capital of $527,579 as at November 30, 2020 decreased by $2,148,258 from the November 30, 2019 amount of $2,675,837. This decrease is due to the purchase of an aircraft for revenue generating charter activities and loss from operations, offset by appropriate cash management, monitoring of accounts receivables, and control over prepaid expenses, accounts payables and accrued liabilities. Correspondingly, while the Company has a long-term debt relating to the acquisition of the aircraft, it is able to fund all capital requirements and all operations with internally generated cash flow and working capital.

The Company’s intention is to continue to grow by marketing its product mix throughout the Canadian marketplace while exploring for possible opportunities for expansion into related product offerings.

4. Discussions of Operations

The Company’s operations consist of revenues generated from the management, chartering of excess capacity, and maintenance of aircraft owned by independent corporations. The results of operations for the three and twelve months ended November 30, 2020 and November 30, 2019 are as follows:

Aircraft Management	Revenue	Expense	Margin	Margin
	$	$	$	%
Fiscal 2020 4th Quarter	567,866	464,097	103,769	18.3%
Fiscal 2019 4th Quarter	1,135,208	925,490	209,718	18.5%
Fiscal 2020	3,222,186	2,742,365	479,821	14.9%
Fiscal 2019	4,586,876	3,905,563	681,313	14.9%

Aircraft management revenue for the quarter ended November 30, 2020 was $567,866, a decrease of $567,342 (a decrease of 49.97%) from the same period in fiscal 2019. The decreased volume was primarily due to the decreased aircraft flying activity directly as a result of the COVID-19 pandemic.

The aircraft operating cost for the quarter ended November 30, 2020 was $464,097, a decrease of $461,393 (a decrease of 49.85%) from the same period in fiscal 2019. This decrease in aircraft operating cost was due to the proportionate decrease in aircraft flying activities as noted above.

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4. Discussions of Operations (Continued)

The net result of these changes was a positive fourth quarter margin contribution from aircraft management services of $103,769.

Aircraft management revenue for the twelve months ended November 30, 2020 was $3,222,186, a decrease of $1,364,690 (a decrease of 29.75%) from the same period in fiscal 2019. The decreased revenue was primarily due to the decreased aircraft flying activities due to the COVID19 pandemic.

The aircraft operating cost for the twelve months ended November 30, 2020 was $2,742,365, a decrease of $1,163,198 (a decrease of 29.78%) from the same period in fiscal 2019. This proportionate decrease in aircraft operating cost was due to the decrease in aircraft flying activities as noted above.

The net result of these changes was a positive fiscal 2020 margin contribution from aircraft management services of $479,821.

Charter Activities	Revenue	Expense	Margin	Margin
	$	$	$	%
Fiscal 2020 4th Quarter	658,887	798,666	(139,779)	(21.2%)
Fiscal 2019 4th Quarter	619,487	544,880	74,607	12.0%
Fiscal 2020	1,924,730	2,454,730	(530,000)	(27.5%)
Fiscal 2019	2,276,144	2,075,541	200,603	8.8%

The charter rates per hour charged by the Company for each of the aircraft managed by the Company remain unchanged for fiscal 2020, fixed by the long-term contracts with the aircraft owners.

The revenue from charter activities for the fourth quarter of fiscal 2020 was $658,887, an increase of $39,400 (an increase of 6.36%) from the same period in fiscal 2019. The increase was attributed to the increased flight volumes from our charter customers.

The cost from charter activities for the fourth quarter of fiscal 2020 was $798,666, an increase of $253,786 (an increase of 46.58%) from the same period in fiscal 2019. This proportionate increase was due to non-recurring start-up costs associated with the introduction of the newly acquired Citation X aircraft into dedicated charter service and the increase in flight volumes as noted above.

The charter activities made a ($139,779) negative contribution to the operating margin in the fourth quarter of fiscal 2020, compared to $74,607 for the same period in fiscal 2019.

The revenue from charter activities for the twelve months ended November 30, 2020 was $1,924,730, a decrease of $351,414 (a decrease of 15.44%) from the same period in fiscal 2019. The decrease was attributable to the impact of the Covid-19 pandemic. The overall private aircraft charter market was significantly affected during the period March to October 2020. Partner Jet’s charter flight volumes temporarily halted during this period and started to recover only in November 2020.

The cost from charter activities for the twelve months ended November 30, 2020 was $2,454,730, an increase of $379,189 (an increase of 18.27%) from the same period in fiscal 2019. This proportionate increase was due to non-recurring start-up costs associated with the introduction of a Citation X aircraft into dedicated charter service offset by the decrease in flight volumes as noted above.

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4. Discussions of Operations (Continued)

The charter activities made a ($530,000) negative contribution to the operating margin in the twelve months ended November 30, 2020, compared to $200,603 for the same period in fiscal 2019.

Aircraft Maintenance	Revenue	Expense	Margin	Margin
	$	$	$	%
Fiscal 2020 4th Quarter	94,302	92,280	2,022	2.1%
Fiscal 2019 4th Quarter	311,036	308,553	2,483	0.8%
Fiscal 2020	1,583,214	1,536,476	46,738	3.0%
Fiscal 2019	2,047,248	2,016,975	30,273	1.5%

Controlling customer costs are basic to the Company’s fleet growth. Scaled maintenance support has been subcontracted to established aircraft maintenance organizations (AMO) licensed to support all aircraft types operated by the Company and able to supply services on demand. This has significantly reduced costs while improving dispatch performance, work quality and customer satisfaction. Sustained cost control remains critical to attracting and retaining management customers. Aircraft maintenance revenue for the quarter ended November 30, 2020 was $94,302, a decrease of $216,734 (a decrease of 69.68%) from the same period in fiscal 2019. The decrease in maintenance revenue was related to the lower levels of scheduled maintenance as a result of reduced flying activity. As noted above this was the result of the impact of the Covid-19 pandemic.

Aircraft maintenance cost for the quarter ended November 30, 2020 was $92,280, a decrease of $216,273 (a decrease of 70.09%) from the same period in fiscal 2019. The decrease was directly related to the low levels of scheduled maintenance as noted above.

The maintenance activities made a $2,022 contribution to the operating margin in the quarter ended November 30, 2020 as compared to $2,483 for the same period in fiscal 2019.

Aircraft maintenance revenue for the twelve months ended November 30, 2020 was $1,583,214, a decrease of $464,034 (a decrease of 22.67%) from the same period in fiscal 2019. The decrease in maintenance revenue was related to the lower levels of scheduled maintenance in fiscal 2020.

Aircraft maintenance cost for the twelve months ended November 30, 2020 was $1,536,476, a decrease of $480,499 (a decrease of 23.82%) from the same period in fiscal 2019. The decrease was directly related to the lower levels of scheduled maintenance as noted above.

The maintenance activities made a $46,783 contribution to the operating margin in the twelve months ended November 30, 2020 as compared to $30,273 for the same period in fiscal 2019.

Fiscal 2020 4th Quarter Fiscal 2019 4th Quarter Fiscal 2020 Fiscal 2019	Expense $
	458,821 308,469 1,369,292 1,175,031

The expense from general operations for the fourth quarter of fiscal 2020 was $458,821, an increase of $150,352 (an increase of 48.74%) from the same period in fiscal 2019. This increase in costs was related to the increased amortization expenses in the fourth quarter of fiscal 2020.

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4. Discussions of Operations (Continued)

The expense from general operations for the twelve months of fiscal 2020 was $1,369,292, an increase of $194,261 (an increase of 15.14%) from the same period in fiscal 2019. This increase was related to the increased amortization expenses offset by decreased office rent expense and consulting fees in fiscal 2020.

Overall Performance

Fiscal 2020 incurred a net loss after income taxes of ($702,407) compared to a net loss after income taxes of ($65,831). in fiscal 2019, which reflects the decreased profitability due to the factors discussed above, including the decreased aircraft flying activities, start-up costs associated with the introduction of the Citation X aircraft into dedicated charter service, the decrease in flight volumes from our charter customers and the increased expenses from general operations offset by the increased maintenance operating margin.

5. Summary of Quarterly Results

The following table shows selected consolidated financial information for the Company, prepared in accordance with IFRS, for the eight most recently completed quarters (unaudited):

	Nov-20	Aug-20	May-20	Feb-20	Nov-19	Aug-19	May-19	Feb-19
	$	$	$	$	$	$	$	$
Operations:
Total revenue	1,321,055	1,614,630	1,311,197	2,483,248	2,065,731	2,291,061	2,473,822	2,079,654
(Loss) Income before taxes	(400,833)	(181,674)	(348,433)	(55,393)	154,120	(131,277)	(126,455)	16,551
Net (loss) income	(139,455)	(159,126)	(348,433)	(55,393)	175,632	(131,559)	(122,069)	12,165
Basic (loss) earnings per share	(.0154)	(.0175)	(.0384)	(.0061)	.0193	(.0145)	(.0134)	.0013
Fully diluted (loss) earnings per	(.0154)	(.0175)	(.0384)	(.0061)	.0193	(.0145)	(.0134)	.0013
Financial Position:
Total assets	5,871,291	5,622,531	3,396,032	4,050,063	3,865,937	3,393,064	3,686,333	3,516,917
Shareholders' Equity	2,020,022	2,130,223	2,289,349	2,637,782	2,693,175	2,517,543	2,649,102	2,771,171

6. Liquidity and Capital Resources

The Company’s working capital of $527,579 as at November 30, 2020 is comprised of highly liquid assets which are sufficient to fund the Company’s operations in the foreseeable future. The Company’s revenue streams and resulting cash flow are also anticipated to be sufficient in the foreseeable future. Partner Jet has no immediate material capital acquisition needs that cannot be funded from cash flows generated from ongoing operations. The Company has no immediate plans to generate capital by issuing shares.

Working Capital as at	November 30,2020	November 30,2019
Current Assets
Cash and cash equivalents	$ 1,283,035	$ 1,889,330
Trade and other receivable	317,553	1,740,804
Income taxes receivable	261,378	26,262
Prepaid expenses	52,536	192,203
Current Liabilities
Trade payables and accrued liabilities	$ 1,079,973	$ 771,397
Unearned revenue	141,971	401,365
Current portion of lease liability	40,457	-
Currentportion ofpromissorynotepayable	124,522	-
WorkingCapital	$527,579	$2,675,837

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6. Liquidity and Capital Resources (Continued)

	Year ended	Year ended
	November 30	November 30
	2020	2019
Operating Activities
Net and comprehensive (loss) for the year	(702,407) $	(65,831) $
Non-cash items:
Stock-based compensation	29,254	-
Amortization on PPE	145,341	4,870
Amortization on right of use asset	45,132	-
	(482,680)	(60,961)
Changes in non-cash working capital balances:
Trade and other receivables	1,423,251	411,333
Income taxes receivable	(235,116)	(26,262)
Prepaid expenses	139,667	72,760
Trade payables and accrued liabilities	308,576	441,228
Income taxes payable	-	(12,102)
Unearned revenues	(259,394)	118,663
Cash provided by (used in) operating activities	894,304	944,659
Financing Activities
CEBA Loan	80,000
Promissory notes payable	2,366,114
Lease payments	(34,063)	-
Cash provided by investing activities	2,412,051	-
Investing Activities
Purchase of property, plant and equipment	(3,912,650)	-
Cash provided by investing activities	(3,912,650)	-
Increase (Decrease) in cash and cash equivalents	(606,295)	944,659
Cash and cash equivalents, beginning	1,889,330	944,671
Cash and cash equivalents, ending	1,283,035 $	1,889,330 $
Comprised of:	1,264,353 $ 1,870,788 $ 18,682 $ 18,542 $
Cash
Cash Equivalents
Total:	1,283,035 $	1,889,330 $

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6. Liquidity and Capital Resources (Continued)

Capital Stock

Authorized:

Unlimited number of Class B preference shares, redeemable non-participating and entitled to one vote per share Unlimited number of Class C preference shares, issuable in series, and entitled to one vote per share Unlimited number of common shares Stated: 9,078,774 common shares $1,102,694 Number Amount Balance as at November 30, 2020 and November 30, 2019 9,078,774 $1,102,694

The Company has an incentive stock option plan in place for its directors, officers, employees and consultants. Options may be granted for a period not exceeding five years at an option price not less than the market price of the shares at the time the option is granted subject to a minimum price of $0.10. The maximum number of common shares which may be set aside for issuance under the plan is 907,877. From time to time, such number may be increased subject to approval of the shareholders of the Company. The maximum number of common shares that may be reserved for issuance to any one person under the plan is 5% (2% with respect to consultants) of the common shares outstanding at the time of the grant, less the number of shares reserved for issuance to such person.

On October 08, 2020, the Company granted 125,000 options to a total of five directors to purchase common shares exercisable at a price of $0.10125 per common share with an expiry date of October 08, 2025. These stock options vest immediately upon issuance. In addition, the Company granted 450,000 options to its President and CEO to purchase common shares exercisable at a price of $0.10125 per common share with an expiry date of October 08, 2025. The stock options shall vest in three tranches of 150,000 each, with the first tranche vested immediately and the two subsequent tranches to be vested on July 01, 2021 and July 01, 2022 respectively. The total fair value of $29,254 was estimated for 275,000 options vested immediately, using the Black-Scholes option pricing model assuming, a risk-free interest rate of 0.37%, an expected volatility of 103.25% and an expected life of 5 years. The granting of these options resulted in a stock-based compensation expense of $29,254 being recorded during the year ended November 30, 2020.

There were no options granted in the year ended November 30, 2019.

Stock Options Activity

Balance, beginning of period Granted Exercised Cancelled Balance, end of period	November 30, 2020 November 30, 2019 Number of Weighted average Number of Weighted average Options Exercise price Options Exercise price
	200,000 $ 0.40000 200,000 $ 0.4000 575,000 $ 0.10125 0 $ 0.0000 0 $ 0.00000 0 $ 0.0000 0 $ 0.00000 0 $ 0.0000
	775,000 $0.17835 200,000 $0.4000

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6. Liquidity and Capital Resources (Continued)

For the year ended November 30, 2020:

Exercise Price	Options outstanding Options exercisable
	Number of Options Weighted average remaining contractual life (years) Weighted average exercise price Number of Options Weighted average exercise price
$ 0.40000 $ 0.10125 $ 0.10125 $0.10125	200,000 0.18 $ 0.40000 200,000 $ 0.40000 275,000 4.86 $ 0.10125 275,000 $ 0.10125 150,000 5.58 $ 0.10125 150,000 6.58 $0.10125

For the year ended November 30, 2019:

Exercise Price	Options outstanding Options exercisable
	Number of Options Weighted average remaining contractual life (years) Weighted average exercise price Number of Options Weighted average exercise price
$ 0.40	200,000 1.18 $ 0.40 200,000 $ 0.40

The Company had no comprehensive income transactions, other than its net income, presented in the consolidated statement of Income and comprehensive income, nor has the Company accumulated other comprehensive income during the reporting periods.

7. Commitments

One of the Company’s subsidiaries is committed to the following minimum payments under operating leases for office and aircraft hangar space:

	Minimum Payments
Not later than one year	$ 53,660
Later than one year and not later than five years	160,142
Total	$ 213,802

8. Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements or obligations other than the operating leases disclosed above.

9. Related Party Transactions

Related parties include members of the Board of Directors, shareholders and enterprises which are controlled by these individuals.

Pursuant to arrangements between the Company and Flight Solutions & Services Inc. (“FSS”) and its subsidiaries (collectively “Related Companies”), the Related Companies provide a range of services to the Company, including administrative, technical, regulatory, systems and support services (collectively, the “Services”). In addition, the Related Companies receives services from the Company. Each of the Related Companies is 100% owned and controlled by Ian McDougall, the Executive Vice Chairman of the board of directors of the Company. Mr. McDougall, through FSS, is also a significant shareholder of the Company. As such, the Related Companies are each related parties of the Company.

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9. Related Party Transactions (Continued)

Effective cost control remains crucial to preserving customer loyalty and sustaining growth. Through these arrangements, the Company is able to leverage the Related Companies’ existing commercial arrangements to obtain labour, fuel and insurance at a discount to prevailing market prices. In particular, FSS provides operational services and fuel supplies. The Related Companies have supplied overload staff and administrative services to the Company from time to time as required on a scalable basis to permit the Company to limit fixed staff commitments. In each case, the Services provided are services that are required for the Company to operate its business. The purpose of obtaining the Services from the Related Companies is that the Company is able to obtain these services on terms superior to those that would otherwise be available to the Company if the Services were contracted from a third party.

During fiscal 2019, the Company maintained an arrangement with MX Aerospace Inc., an aircraft maintenance service provider 100% owned and controlled by Ian McDougall as reported in prior Management Discussion and Analysis Reports. Such services have been provided by a third-party maintenance provider throughout fiscal year 2020 and have not been the subject of a Related Party transaction.

The following table summarizes the Company’s related party transactions for the years ended:

	November 30	November 30
	2020	2019
Aircraft management revenues:
Revenue from a company controlled by a Director	$210,079	$460,520
Maintenance revenues:
Revenue from a company controlled by a Director	228,937	-
Aircraft operating expenses:
Purchases from companies controlled by a Director	$563,477	$1,214,472
Charter expenses:
Purchases from companies controlled by a Director	$374,215	$283,685
Maintenance expenses:
Purchases from a company controlled by a Director	-	$1,822,096
General and administrative expenses:
Directors fees and related director expenses	$37,500	$26,686
Stock-based compensation expense for directors	$13,297	-
Administrative services from a company controlled by a Director	$114,000	$228,000
Office expenses paid by companies controlled by a Director	$2,185	$80,255

The remuneration of the key management personnel during the years was as follows:

	Years ended	Years ended
	November 30,2020	November 30,2019
Short-term benefits	$244,750	$184,564
Stock-based compensation	15,957	-
Total remuneration	$260,707	$184,564

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9. Related Party Transactions (Continued)

The following table summarizes the Company’s receivables and payables from related parties as at:

at:
	November 30	November 30
	2020	2019
Trade and other receivables:
Receivable from companies controlled bya Director	$7,030	$1,153,109
Prepayments:
Prepaid to a companycontrolled bya Director	-	162,200
Tradepayables and accrued liabilities:
Payable to companies controlled bya Director	601,160	279,077
Current portion of promissory notes payable to companies controlled bya Director	124,522	-
Non-current liabilities:
Promissory notes payable to companies controlled by a Director	$ 2,241,592	-

These transactions were in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties. The costs of these transactions are market competitive. Through these transactions, the Company has generated cost-savings over a wide range of items as a result and the benefits of these reductions have been passed to the Company's customers.

The related party transactions are reviewed by the Audit Committee which is made up exclusively of independent directors. Material includes competitive standards and quotes and identifiable gain for Partner Jet in terms of costs and revenues.

10. Critical Accounting Estimates

The preparation of these condensed consolidated interim financial statements in conformity with IFRS requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting periods. Actual outcomes could differ from these estimates.

Reported amounts which require management to make significant estimates and assumptions include allowance for doubtful accounts, share based payments, property, plant and equipment, and deferred taxes. These items are discussed below.

The 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.

Allowance for doubtful accounts

The Company reviews the age of accounts receivables, the credit history of the customers, and the financial strength of the customers to evaluate the collectability of the accounts receivables and provide for an allowance for doubtful accounts, if necessary, based on management’s best estimates.

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10. Critical Accounting Estimates

Share based payments

The Company measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in Note 6.

Property, plant and equipment

Certain costs incurred are capitalized and amortized over the estimated useful lives of the respective assets. The carrying value of the assets depends on the estimated useful life, which is the period over which the assets are written off. If the estimated useful lives of these assets were materially incorrect, the Company would experience increased or decreased changes to amortization charges in the future, which in turn would result in material changes to the net income.

Deferred taxes

Deferred tax assets are only recognized to the extent that it is probable that there will be sufficient taxable income against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future. The Company reviews the carrying amount of deferred tax assets at the end of each reporting period which is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

11. Accounting Policy Developments

Application of new International Financial Reporting Standards (“IFRS”)

The following standards have been adopted on December 1, 2019:

IFRS 16 Leases (“IFRS 16”): This standard replaces IAS 17 Leases (“IAS 17”). This standard introduces a single lease accounting model for lessees that will result in the recognition of a rightof-use asset, as well as a lease liability reflecting the present value of future lease payments. Depreciation expense on the right-of-use asset and interest expense on the lease liability will replace the operating lease expenses that were recognized under IAS 17. This new pronouncement is effective for the period on or after January 1, 2019.

The Company adopted this standard effective December 1, 2019. Upon lease commencement, a right of use asset and lease liability is recognized. The right of use asset is initially measured at the amount of lease liability plus any initial direct costs incurred by the lessee. After lease commencement, the right-of-use asset is measured at cost less accumulated amortization. The lease liability is initially measured at the present value of the lease payments payable over the lease term, discounted at the rate implicit in the lease. Subsequently, the lease liability is measured on an amortized cost basis using an effective interest method.

12. Financial Instruments and Risk Factors

Financial Assets and Liabilities

The Company has classified cash and cash equivalents and short-term investments as financial assets, and measured at fair value through profit or loss. Trade and other receivables are classified as financial assets, and measured at amortized cost. Trade payables and accrued liabilities are classified as financial liabilities, and measured at amortized cost.

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12. Financial Instruments and Risk Factors (Continued)

Financial Assets and Liabilities (continued)

The carrying values and fair values of financial assets and liabilities as at November 30, 2020 and November 30, 2019 are summarized as follows:

Fair Values

The carrying values of the Company’s financial instruments consisting of cash and cash equivalents, short-term investments, trade and other receivables, and trade payables and accrued liabilities approximate the fair value due to their short-term maturity.

Risk Management

The Company is exposed to risks that arise from its use of financial instruments. The Company’s financial instruments consist of cash and cash equivalents, short-term investments, trade and other receivables, and trade payable and accrued liabilities. Disclosures relating to exposure to risks, in particular credit risk, foreign currency risk, concentration risk, market risk and liquidity risk are provided below.

a) Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents, and trade and other receivables. The maximum exposure to credit risk of these items is the carrying amount as reported on the financial statements. Cash and cash equivalents are maintained at a major financial institution. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and are maintained with financial institutions of reputable credit and therefore bear minimal risk. Credit risk on trade and other receivables are minimized as a result of the constant review and evaluation of the account balances. The Company also maintains an allowance for credit losses at an estimated amount, allocating sufficient protection against losses resulting from collecting less than full payments from its receivables. There is no indication, as at this date, that the debtors will not meet their obligations, except as has been provided for as bad debts during the reporting periods. The Company manages its credit risk relating to its trade receivables through credit approval and monitoring procedures, including senior management prior approval of all sales. Such approvals are based on trade information, payment history, credit rating and financial analysis, where possible.

b) Foreign Currency Risk

The Company is exposed to currency risk due to certain operating activities which are transacted in US dollars, resulting in the holding of related financial instruments in US dollars. At the statement date, the Company had financial instruments denominated in US currency as shown below. The Company has not deemed it necessary to use derivative financial instruments to reduce exposure to foreign exchange risk.

In US Dollars	November 30, 2020	November 30, 2019
Cash and cash equivalents	$31,764	$184,838
Trade payables and accrued liabilities	(317,521)	(134,433)
Net US Dollar (liabilities) assets	($285,757)	$50,405

The amounts were translated at the US Dollar / Canadian Dollar exchange rate of 1.2965 as at November 30, 2020 (1.3289 as at November 30, 2019).

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12. Financial Instruments and Risk Factors (Continued)

Risk Management (continued)

c) Concentration Risk

The Company is exposed to customer concentration risk as the Company’s ability to continue its operations depends heavily on the retention of the existing contracts with independent corporations for the care, custody and control of their aircraft. The Company mitigates these risks and uncertainties by focusing its sales energies on securing additional customer contracts and exploring new related revenue streams.

d) Market Risk

The Company’s investments are exposed to market risk arising from uncertainties about future values of the investments. The Company manages the market risk through diversification and investing only in blue-chip equities with a history of stable return listed on various public stock exchanges. Senior management reviews the equity portfolio on a regular basis.

e) Liquidity Risk

The Company is exposed to liquidity risk to the extent that it is required to meet its financial obligations as these become due. The Company’s approach to managing liquidity risk is to ensure that it has sufficient cash and other current financial assets to meet its obligations when due, without incurring unacceptable losses or damage to the Company’s reputation. Management forecasts cash flows to identify financing requirements. These requirements are then addressed through a combination of cash management and access to additional capital.

f) Sensitivity Analysis

Based on management’s knowledge and experience of the financial markets, the Company believes that a 10% movement in interest rates and foreign exchange rates that may reasonably be expected to occur over the next twelve months period will not have a significant impact on the Company.

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Reclassifications

Certain comparative amounts have been reclassified to conform to the current year presentation. Net income and shareholders’ equity were not affected by these reclassifications.

14. Subsequent Events

The Canadian economy continues to be affected by the impact of the COVID-19 pandemic and significant uncertainties remain. Air travel both with commercial scheduled and private aviation service has severely been impacted. This uncertainty in the economy has and will continue to pose a major challenge to the ongoing operations of all travel related companies. The Company cannot fully anticipate all the impacts of COVID-19 on it operations and results, or precisely when the situation will improve. The Company has implemented a series of operational, commercial and financial measures, including cost reduction, aimed at preserving its cash. The volatile effect of this COVID19 pandemic on the economy and the Company is not currently determinable but will pose a major business risk on a go forward basis.

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