UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
_________________________________________
WASHINGTON,
Washington, D.C. 20549
FORM 20-F
(Mark One)
[ ]REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
☐ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
[ ]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended __________
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 |
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ |
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of event requiring this shell company report _____________ |
For the transition period from _________________________________ to __________
OR
[ X ]SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report: January 12, 2017_________________________
Commission file number 000-55103
_________________________________________
TOWER ONE WIRELESS CORP.
(Exact name of registrant as specified in its charter)
N/A
(Translation of registrant’sregistrant's name into English)
British Columbia, Canada
(Jurisdiction of incorporation or organization)
600-535 Howe Street, Vancouver, BC V6C 2Z4 Canada
(Address of principal executive offices)
Robert "Nick" Horsley
Director
600-535 Howe Street, Vancouver, BC
V6C 2Z4 Canada
Tel: 604-559-8051
Tel:Email: nick@toweronewireless.com604-559-8051
(Name, Telephone, E-Mail and/or Facsimile Number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
NONE
Securities registered or to be registered pursuant to Section 12(g) of the Act:
| |
Title of each class: | Name of each exchange on which registered: |
Title of each class:
| |
CLASS A COMMON SHARES, | Canadian Securities Exchange |
NO PAR VALUE | |
_________________________________________
CLASS A COMMON SHARES,
NO PAR VALUE
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
NONE
Indicate the number of outstanding shares of each of the Company’sCompany's classes of capital or common stock as of the close of the period covered by the annual report:
6,735,885 94,101,782 Class A Common Shares, no par value as of December 31, 2016.2020.
Indicate by check mark if the registrant is a well-known seasoned Company, as defined in Rule 405 of the Securities Act.
YES [ ]☐ NO [ X ]☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
YES [ ]☐ NO [ X ]☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES [ X ]☒ NO [ ]☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site: www.toweronewireless.com, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YES [ ]☐ NO [ X ]☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.filer, or an emerging growth company. See definition of “accelerated"large accelerated filer," "accelerated filer," and large accelerated filer”"emerging growth company" in Rule 12b-2 inof the Exchange Act. (Check one):
| | |
Large Accelerated Filer [ ] | Accelerated Filer [ ] | Non-Accelerated Filer [ X ] |
Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒
Emerging growth company ☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
†The term "new or revised financial accounting standard" refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has fi led a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
☒ | International Financial Reporting Standards as issued by the International Accounting Standards Board |
☐ | [ ] U.S. GAAP
[ X ] International Financial Reporting Standards as issued by the International Accounting Standards Board
[ ] Other
|
If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:
[ ]☐ Item 17 [ ]☐ Item 18
If this is an annual report indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act:
YES [ ]☐ NO [ ]☒
Part I
References in this Shell CompanyAnnual Report on Form 20-F to “we,” “our”"we," "our" and the “Company”"Company" refer to Tower One Wireless Corp. and its predecessor, as applicable, individually and collectively with its subsidiaries as the context requires.
Brief Introduction
Tower One Wireless Corp. is a British Columbia, Canada corporation,We are incorporated under the Business Corporations Act (British Columbia) on September 12, 2005, under the British Columbia Business Corporations Act (“BCBCA”). It is2005. We are a reporting Companycompany in both British Columbia and Ontario, and itsour common shares are listed for trading on the Canadian Securities Exchange (“CSE”("CSE"), the Frankfort Stock Exchange and are quoted on the OTCQB Venture Market..
The Company was initially incorporated as “Pacific Therapeutics Ltd.” On January 12, 2017, in connection with the completion of the Tower Three Transaction (defined below) the Company changed its name to “Tower One Wireless Corp.”
Before the completion of the Tower Three Transaction, the Company was a development stage specialty pharmaceutical company focused on developing late stage clinical therapies and in-licensed novel compounds for fibrosis, erectile dysfunction (ED) and other conditions. On July 24, 2015 the Company entered into a purchase and sale agreement (the “Forge Agreement”) with Forge Therapeutics Inc. (“Forge”) of Wyoming, pursuant to which the Company agreed to sell certain of its technology assets (related to fibrosis and erectile dysfunction) to Forge in return for 15,000,000 common shares of Forge. The Company also entered into a 50-50 joint-venture with Truevita Supplements in March 2016 to develop an early stage immune boosting herbal supplement, known as BP120. This herbal supplement is aimed at the treatment of immune deficiency and hypertension.
On March 6, 2016, the company incorporated Cabbay Holdings Corp. (“Cabbay”) as a wholly-owned subsidiary. The Company entered into an arrangement agreement with Cabbay, dated April 18, 2016 and amended on April 21, 2016 (the “Arrangement Agreement”) in order to effect a plan of arrangement (the “Arrangement”) under the BCBCA. As part of the Arrangement, Cabbay issued its common shares in exchange for a special class of reorganization shares of the Company held by shareholders of the Company, which were subsequently redeemed by the Company in exchange for the assignment of the Forge Agreement and $1,000. The Arrangement Agreement and the Arrangement were approved by the Company’s shareholders on May 20, 2016 and approved by the British Columbia Supreme Court on May 31, 2016. Upon completion of the Arrangement, Cabbay was no longer a subsidiary of the Company. The Arrangement effectively resulted in the spin out of Cabbay to the Company’s shareholders and the transfer of the Forge Agreement to Cabbay. In connection with the restructuring, $440,549 of the Company’s debt in the form of accounts payable, convertible note and amounts due to related parties was assigned to Cabbay.
On January 12, 2017, the Company completed a “fundamental change” transaction (the “Tower Three Transaction”), with Tower Three, a limited liability company formed under the laws of the Republic of Colombia, pursuant to a share exchange agreement made effective as of October 19, 2016, as amended (the “Acquisition Agreement”) among the Company, Tower Three and the shareholders of Tower Three (the “Selling Shareholders”), whereby the Company acquired 100% of the securities of Tower Three from the Selling Shareholders, by issuing 30,000,000 common shares of the Company to the Selling Shareholders on a pro-rata basis. Following the completion of the Tower Three Transaction, Tower Three became a wholly-owned subsidiary of the Company, and the Company began conducting the principal business of Tower Three.
The Company was a shell company prior to the Tower Three Transaction. Since, as a result of the Tower Three Transaction, the Company ceased to be a shell company, the Company is required pursuant to Rule 13a-19 under the Securities Exchange Act of 1934 (the “Exchange Act”) to disclose the information in this Form 20-F that would be required to be disclosed if it were registering securities under the Exchange Act within four days following the consummation of the Tower Three Transaction.
Item 1. Identity of Directors, Senior Management and Advisers
A.Directors and Senior Management
The Company’s board of directors (the Board”) was reconstituted in conjunction with the closing of the Tower Three Transaction.Not applicable.
Immediately prior to the Tower Three Transaction, the Company’s directors and senior management included the following individuals:
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| | |
Name | Function | Business Address |
Brian Gusko | Director | 600-535 Howe Street, Vancouver, BC V6C 2Z4 Canada |
Robert Horsley | Director and Chief Executive Officer | 600-535 Howe Street, Vancouver, BC V6C 2Z4 Canada |
Christine Mah | Director | 600-535 Howe Street, Vancouver, BC V6C 2Z4 Canada |
Derick Sinclair | Director and Chief Financial Officer | 600-535 Howe Street, Vancouver, BC V6C 2Z4 Canada |
Upon closing the Tower Three Transaction, the directors and officers of the Company who were either not continuing with the Company or who were continuing with the Company in a different capacity delivered their resignations, and the new directors and senior management were appointed and remain in office as set forth below:
| | |
Name | Function | Business Address |
Alejandro Ochoa | Director, President and Chief Executive Officer | 5301 NW 74th Ave, Miami, FL, 33166, USA |
Fabio Alexander Vasquez | Director | 5301 NW 74th Ave, Miami, FL, 33166, USA |
Robert Horsley | Director | 600-535 Howe Street, Vancouver, BC V6C 2Z4 Canada |
Brian Gusko | Director | 600-535 Howe Street, Vancouver, BC V6C 2Z4 Canada |
Abbey Abdiye | Chief Financial Officer | 600-535 Howe Street, Vancouver, BC V6C 2Z4 Canada |
Octavio De La Espriella | Chief Operating Officer | 5301 NW 74th Ave, Miami, FL, 33166, USA |
B.Advisers.
The Company’s legal counsel in the United States is Davis Wright Tremaine LLP, 865 South Figueroa Street, Suite 2400, Los Angeles, CA 90017.
C.Auditors.
The Company’s auditor is Manning Elliott LLP, 1100 - 1050 W Pender St, Vancouver, British Columbia, Canada, V6E 3S. The former auditor, Davidson & Company LLP, 1200-609 Granville Street, Vancouver, British Columbia, Canada V7Y 1G6,of Vancouver, British Columbia. served as the Company’s auditor from April 2015 until they resigned on March 9, 2017, at which time Manning Elliott LLP was appointed auditor of the Company.
Item 2. Offer Statistics and Expected Timetable
Not applicable
Item 3. Key Information
A.Selected financial data
Selected financial data for Tower One
The following selected information should be read in conjunction with the Company’sCompany's financial statements, and notes, filed with this Form 20-F. This information, and all other financial information in this Form 20-F, is stated in Canadian dollars unless otherwise noted.
The financial information is presented on the basis of International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board.Board ("IASB").
On March 15, 2016, the Company completed a share consolidation on the basis of thirty30 pre-consolidation common shares for each post consolidation common share. As such, all current and comparative share amounts have been restated to account
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for the 30 to 1 common share consolidation.
| | Period ended | FYE 2016
(IFRS) | FYE 2015
(IFRS) | FYE 2014
(IFRS) | FYE 2013
(IFRS | FYE 2012
(IFRS) | FYE 2020 (IFRS) | FYE 2019 (IFRS) | FYE 2018 (IFRS) | FYE 2017 (IFRS)** | FYE 2016 (IFRS)** | FYE 2015 (IFRS)** |
| Total Revenues | $Nil | $9,126,082 | $5,413,594 | $1,556,742 | $200,498 | $19,403 | $Nil |
| Net loss and Comprehensive Loss | ($452,288) | $179,673 | ($693,645) | ($740,846) | ($605,468) | |
Net income(loss) | | ($3,674,304) | ($8,147,268) | ($9,131,285) | ($9,863,677) | ($292,004) | ($21,151) |
Net income(loss) attributable to shareholders | | ($2,364,633) | ($4,977,237) | ($9,112,971) | ($9,583,550) | ($292,004) | ($21,151) |
Net income (loss) and Comprehensive Loss* | | ($3,165,858) | ($8,302,415) | ($9,458,213) | ($9,881,797) | ($301,183) | ($21,151) |
| Basic and diluted loss per share | (0.09) | $0.13 | ($0.56) | ($0.81) | ($0.84) | ($0.05) | ($0.13) | ($0.10) | ($0.16) | ($29.20) | ($2.12) |
| Weighted average shares | 5,175,946 | 1,351,500 | 1,248,561 | 918,732 | 721,240 | 93,867,588 | 63,389,446 | 88,307,259 | 58,115,156 | 10,000 | 10,000 |
Year ended | FYE 2020 (IFRS) | FYE 2019 (IFRS) | FYE 2018 (IFRS) | FYE 2017 (IFRS)** | FYE 2016 (IFRS)** | FYE 2015 (IFRS)** |
Total assets | $11,109,460 | $16,001,049 | $12,581,840 | $5,301.044 | $372,374 | $4,300 |
Net Assets(liabilities) | ($11,443,589) | ($8,302,017) | (265,588) | $2,414,922 | ($318,034) | ($16,851) |
Share capital | $16,900,668 | $16,876,382 | $16,876,382 | $10,635,886 | $4,300 | ($4,300) |
Contributed surplus | $1,706,089 | $2,303,721 | $2,089,462 | $1,344,884 | $Nil | $Nil |
Deficit accumulated | ($25,352,460) | ($23,585,459) | ($19,009,676) | ($9,896,705) | ($313,155) | ($21,151) |
Common Shares Issued and Outstanding | 94,103,732 | 93,389,446 | 93,389,446 | 70,125,698 | 10,000 | 10,000 |
Dividends | $Nil | $Nil | $Nil | $Nil | $Nil | $Nil |
| | | | | |
| Year ended | FYE 2016
(IFRS) | FYE 2015
(IFRS) | FYE 2014
(IFRS) | FYE 2013
(IFRS) | FYE 2012
(IFRS) |
| Total assets | $1,608,280 | $14,696 | $67,315 | $287,004 | $206,533 |
| Net Assets | 1,468,473 | (609,410) | ($875,761) | ($440,144) | ($430,990) |
| Share capital | $3,292,175 | $2,800,010 | $2,760,010 | $2,669,210 | $1,995,716 |
| Shares committed for issuance | $Nil | $4,800 | $Nil | $Nil | $Nil |
| Equity component of convertible note | $Nil | $1,080 | $Nil | $Nil | $Nil |
| Share subscriptions received | $1,602,257 | $Nil | $30,000 | $Nil | $30,000 |
| Contributed surplus | $563,568 | $121,939 | $289,766 | $123,704 | $206,212 |
| Deficit accumulated | ($3,989,527) | ($3,537,239) | ($3,955,537) | ($3,263,058) | ($2,662,918) |
Common Shares Issued and Outstanding | 6,735,885 | 1,365,887 | 1,299,221 | 1,248,554 | 761,894 |
| Dividends | $Nil | $Nil | $Nil | $Nil | $Nil |
Selected financial data for Tower Three* Net income (loss) and comprehensive loss is the sum of Net income (loss) and foreign exchange translation adjustments.
The following selected information should be read in conjunction** In accordance with the financial statements, and notes forIFRS rules Tower Three filed with this Form 20-F. This information,was considered for accounting purposes to be the successor company upon the completion of the Tower Three Transaction and all otherconsequently the Company reports the financial informationresults of Tower Three as the Company's historical financial results for the fiscal years ended December 31, 2016 and 2015 in this Form 20-F, is stated in Canadian dollars unless otherwise noted.the Company's financial statements. Since Tower Three was incorporated on December 30,in 2015, underno financial results exist for the Business Corporation Act of Colombia.
The financial information is presented on the basis of International Financial Reporting Standards as issued by the International Accounting Standards Board.2014 fiscal year.
| | |
| Year ended | FYE 2016 | FYE 2015 |
| | (IFRS) | (IFRS) |
| Current Assets | | |
| Cash | $9,864 | $Nil |
| Due from related parties | $Nil | $4,300 |
| Prepaid expenses and deposits | $114,032 | $Nil |
| | $123,896 | $4,300 |
| Equipment | $248,478 | $Nil |
| | $372,374 | $4,300 |
| Current Liabilities | | |
| Accounts payable and accrued liabilities | $70,406 | $Nil |
| Deferred revenue | $4,480 | $Nil |
| Due to related parties | $615,522 | $21,151 |
| | $690,408 | $21,151 |
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| | |
| Shareholders’ Deficiency | | |
| Chare capital | $4,300 | $4,300 |
| Deficit | $(313,155) | $21,151 |
| Accumulated other comprehensive loss | $(9,179) | Nil |
| | $(318,034) | $(16,851) |
| | $372,374 | $4,300 |
Currency
The following table sets out exchange rates, based on the noon buying rates in New York City, for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York, referred to as the "Noon Buying Rate", for the conversion of dollars to Canadian dollars in effect at the end of the following periods, the average exchange rates during these periods (based on daily Noon Buying Rates) and the range of high and low exchange rates for the periods indicated:
| | | Years Ended December 31, | Years Ended December 31, |
| | 2016 | | 2015 | | 2014 | | 2013 | | 2012 | 2020 | 2019 | | 2018 | | 2017 | | 2016 | | 2015 |
| | | | | | ($/C$) | | | | | | ($/C$) |
| End of period | 0.7448 | �� | 0.7226 | | 0.8620 | | 0.9401 | | 1.0042 | 0.7822 | 0.7699 | | 0.7329 | | 0.7989 | | 0.7448 | | 0.7226 |
| High for period | 0.6853 | | 0.7148 | | 0.8588 | | 0.9348 | | 0.9600 | 0.7822 | 0.7332 | | 0.7326 | | 0.7278 | | 0.6853 | | 0.7148 |
| Low for period | 0.7972 | | 0.8529 | | 0.9423 | | 1.0164 | | 1.0299 | 0.7084 | 0.7699 | | 0.8143 | | 0.8243 | | 0.7972 | | 0.8529 |
| Average for period | 0.7558 | | 0.7830 | | 0.9060 | | 0.9712 | | 1.0007 | 0.7462 | 0.7537 | | 0.7722 | | 0.7710 | | 0.7558 | | 0.7830 |
The most recent weekly publication ofOn April 26, 2021, the Noon Buying Rate before the date that the Tower Three Transaction was completed reported that, as of January 12, 2017, the Noon Buying Rate for the conversion of dollars to Canadian dollars was $0.7616 per Canadian dollar.
The most recent weekly publication of the Noon Buying Rate before the date of this Form 20-F was filed reported that, as of October 20, 2017,April 23, 2021, the Noon Buying Rate for the conversion of dollars to Canadian dollars was $0.7925$0.8003 per Canadian dollar.
B.B. Capitalization and indebtedness.
The Company’s audited financial statements for fiscal year ended December 31, 2016 as required under Item 18 are attached hereto starting on page F-1 of this Form 20-F. All of the financial information is presented herein in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board.Not Applicable.
Below is a statement of the capitalization and indebtedness (including indirect and contingent indebtedness) of the Company as at December 31, 2016, showing the company’s capitalization on a pro forma basis as if the Tower Three Transaction had been completed as of that date (expressed in Canadian dollars). It is important that you read this table together with, and it is qualified by reference to, our audited consolidated financial statements and the Tower Three audited financial statements attached hereto starting on page F-1 of this Form 20-F.
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| | | |
| | | As at December 31, 2016 | |
| | Pacific Therapeutics | Tower Three | Pro Forma |
| | | ($/C$) | |
| Current Assets | | | |
| Cash | 1,378,183 | 9,864 | 1,388,047 |
| Amounts receivable | 14,439 | — | 14,439 |
| Due from related parties | 189,468 | — | 189,468 |
| Prepaid expenses and deposits | 26,190 | 114,032 | 140,222 |
| | 1,608,280 | 123,896 | 1,732,176 |
| Equipment | — | 248,478 | 248,478 |
| | — | 372,374 | 372,374 |
| Current liabilities | | | |
| Accounts payable and accrued liabilities | 133,507 | 70,406 | 203,913 |
| Deferred revenue | — | 4,480 | 4,480 |
| Due to related parties | 6,300 | 615,522 | 621,822 |
| | 139,807 | 690,408 | 830,215 |
| Shareholders’ Equity (Deficiency) | | | |
| Share capital | 3,292,175 | 4,300 | 3,296,475 |
| Share subscriptions received | 1,602,257 | — | 1,602,257 |
| Contributed surplus | 563,568 | — | 563,568 |
| Deficit | (3,989,527) | (313,155) | (4,302,682) |
| Accumulated other comprehensive loss | — | (9,179) | (9,179) |
| | 1,468,473 | (318,034) | 1,150,439 |
| | 1,608,280 | 372,374 | 1,980,654 |
C.C. Reasons for the offer and use of proceeds.
Not Applicable.
D.D. Forward-Looking Statement and Risk factors.
Forward-Looking Statements
This Form 20-F and the documents incorporated herein by reference contain forward-looking statements. We base these forward-looking statements on our expectations and projections about future events, which we derive from the information currently available to us. Such forward-looking statements relate to future events or our future performance. You can identify forward-looking statements by those that are not historical in nature, particularly those that use terminology such as “may,” “will,” “should,” “expects,” “anticipates,” “contemplates,” “estimates,” “believes,” “plans,” “projected,” “predicts,” “potential”"may," "will," "should," "expects," "anticipates," "contemplates," "estimates," "believes," "plans," "projected," "predicts," "potential" or “continue”"continue" or the negative of these or similar terms.
In evaluating these forward-looking statements, you should consider the following factors, as well as those described in “Risk Factors”"Risk Factors" below:
• changes to existing or new tax laws or methodologies impacting the Company’sCompany's international operations, fees directed specifically at the ownership and operation of communications sites or international acquisitions, any of which may be applied or enforced retroactively, or failure to obtain an expected tax status for which the Company has applied;
• laws or regulations that tax or otherwise restrict repatriation of earnings or other funds or otherwise limit distributions of capital;
• changes in a specific country’scountry's or region’sregion's political or economic conditions, including inflation or currency devaluation;
• changes to zoning regulations or construction laws, which could be applied retroactively to existing communications sites;
• expropriation or governmental regulation restricting foreign ownership or requiring reversion or divestiture;
• actions restricting or revoking the Company’s customers’Company's customers' spectrum licenses or suspending or terminating business under prior licenses;
• failure to comply with anti-bribery laws or similar local anti-bribery laws;
• material site security issues;
• significant increase in or implementation of new license surcharges on the Company’sCompany's revenue;
• price setting or other similar laws or regulations for the sharing of passive infrastructure;
• uncertain or inconsistent laws, regulations, rulings or results from legal or judicial systems, which may be enforced
5
These and other factors may cause our actual results to differ materially from any forward-looking statement. Forward-looking statements are only predictions. The forward-looking events discussed in this Form 20-F and the documents incorporated by reference herein may not occur, and actual events and results may differ materially and are subject to risks, uncertainties and assumptions about us. Unless required by applicable law, we undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Risk Factors
An investment in the Common Shares of the Company must be considered highly speculative due to the nature of the Company’sCompany's business. The risk and uncertainties below are not the only risks and uncertainties the Company may have. Additional risks and uncertainties not presently known to the Company or that the Company currently considers immaterial may also impair the business, operations and future prospects of the Company and cause the price of the Common Shares to decline. If any of the following risks actually occur, the business of the Company may be harmed and its financial condition and results of operations may suffer significantly. In addition to the risks described elsewhere and the other information in this Form 20-F, the Company notes the following risk factors:
Company Risks
The Company’sCompany's business depends on the demand for wireless communication services and wireless infrastructure, and it may be adversely affected by any slowdown in such demand. Additionally, a reduction in carrier network investment may materially and adversely affect the Company’sCompany's business (including reducing demand for new tenant additions or network services).
Demand for the Company’sCompany's wireless infrastructure depends on the demand for antenna space from its customers, which, in turn, depends on the demand for wireless communication services by their customers. The willingness of the Company’sCompany's customers to utilize its wireless infrastructure, or renew or extend existing leases on its wireless infrastructure, is affected by numerous factors, including:
• consumer demand for wireless connectivity;
• availability or capacity of wireless infrastructure or associated land interests;
• location of wireless infrastructure;
• financial condition of customers, including their profitability and availability or cost of capital;
• willingness of customers to maintain or increase their network investment or changes in their capital allocation strategy;
• availability and cost of spectrum for commercial use;
• increased use of network sharing, roaming, joint development, or resale agreements by customers;
• mergers or consolidations among customers;
• changes in, or success of, customers’customers' business models;
• governmental regulations, including local or state restrictions on the proliferation of wireless infrastructure;
• cost of constructing wireless infrastructure;
• technological changes, including those (1) affecting the number or type of wireless infrastructure needed to provide wireless connectivity to a given geographic area or which may otherwise serve as substitute or alternative to wireless infrastructure or (2) resulting in the obsolescence or decommissioning of certain existing wireless networks; or
• the ability to efficiently satisfy customers’customers' service requirements.
A slowdown in demand for wireless connectivity or wireless infrastructure may negatively impact the Company’sCompany's growth or otherwise have a material adverse effect on the Company. If the Company’sCompany's customers or potential customers are unable to raise adequate capital to fund their business plans, as a result of disruptions in the financial and credit markets or otherwise, they may reduce their spending, which could adversely affect the Company’sCompany's anticipated growth or the demand for the Company’sCompany's wireless infrastructure or network services. The amount, timing, and mix of the Company’s customers’Company's customers' network investment is variable and can be significantly impacted by the various matters described in these risk factors. Changes in carrier network investment typically impact the demand for its wireless infrastructure. As a result, changes in carrier plans such as delays in the implementation of new systems, new technologies (including small cells), or plans to expand coverage or capacity may reduce demand for its wireless infrastructure. Furthermore, the wireless industry could experience a slowdown or slowing growth rates as a result of numerous factors, including a reduction in consumer demand for wireless connectivity or general economic conditions. There can be no assurances that weakness or uncertainty in the economic
6
environment will not adversely impact the wireless industry, which may materially and adversely affect the Company’sCompany's business, including by reducing demand for its wireless infrastructure or network services. In addition, a slowdown may increase competition for site rental customers or network services. A wireless industry slowdown or a reduction in carrier network investment may materially and adversely affect the Company’sCompany's business.
New technologies may reduce demand for wireless infrastructure or negatively impact revenues.
Improvements in the efficiency, architecture, and design of wireless networks may reduce the demand for the Company’sCompany's wireless infrastructure. For example, new technologies that may promote network sharing, joint development, or resale agreements by its customers, such as signal combining technologies or network functions virtualization, may reduce the need for the Company’sCompany's wireless infrastructure. In addition, other technologies, such as WiFi, DAS, femtocells, other small cells, or satellite (such as low earth orbiting) and mesh transmission systems may, in the future, serve as substitutes for, or alternatives to, leasing that might otherwise be anticipated or expected on wireless infrastructure had such technologies not existed. In addition, new technologies that enhance the range, efficiency, and capacity of wireless equipment could reduce demand for the Company’sCompany's wireless infrastructure. Any significant reduction in demand for the Company’sCompany's wireless infrastructure resulting from the new technologies may negatively impact the Company’sCompany's revenues or otherwise have a material adverse effect on the Company.
The expansion or development of the Company’sCompany's business, including through acquisitions, increased product offerings or other strategic growth opportunities, may cause disruptions in the Company’sCompany's business, which may have an adverse effect on the Company’sCompany's operations or financial results.
The Company may seek to expand and develop its business, including through acquisitions, increased product offerings, (such as small cells and fiber), or other strategic growth opportunities. In the ordinary course of business, the Company may review, analyze, and evaluate various potential transactions or other activities in which it may engage. Such transactions or activities could cause disruptions in, increase risk or otherwise negatively impact its business. Among other things, such transactions and activities may:
• disrupt the Company’sCompany's business relationships with its customers, depending on the nature of or counterparty to such transactions and activities;
• direct the time or attention of management away from other business operations;
• fail to achieve revenue or margin targets, operational synergies or other benefits contemplated;
• increase operational risk or volatility in the Company’sCompany's business; or
• result in current or prospective employees experiencing uncertainty about their future roles with the Company, which might adversely affect the Company’sCompany's ability to retain or attract key managers or other employees.
If the Company fails to retain rights to its wireless infrastructure, including the land interests, the Company’sCompany's business may be adversely affected. The property interests on which the Company’sCompany's wireless infrastructure resides, including the land interests under its towers, consist of leasehold interests. A loss of these interests may interfere with the Company’sCompany's ability to conduct its business or generate revenues. For various reasons, the Company may not always have the ability to access, analyze, or verify all information regarding titles or other issues prior to purchasing wireless infrastructure. Further, the Company may not be able to renew ground leases on commercially viable terms. The Company’sCompany's ability to retain rights to the land interests on which its towers reside depends on its ability to purchase such land, including fee interests and perpetual easements, or renegotiate or extend the terms of the leases relating to such land. If the Company is unable to retain rights to the property interests on which its wireless infrastructure resides, its business may be adversely affected.
Political, economic and other uncertainties in countries where the Company operates could negatively effectaffect the company’s business.company's business
The Company’sCompany's business operations are currently located in Colombia.Colombia, Mexico and Argentina. Although Colombia has a long-standing tradition of respecting the rule of law, which has been bolstered in recent years by the present government’sgovernment's policies and programs, no assurance can be given that the Company’sCompany's plans and operations will not be adversely affected by future developments in Colombia. The Company’sCompany's existing assets and proposed activities in Colombia are subject to political, economic and other uncertainties, including the risk of expropriation, nationalization, renegotiation or nullification of existing contracts, licenses and permits or other agreements, changes in laws or taxation policies, currency exchange restrictions, changing political conditions, and international monetary fluctuations. Future government actions concerning the economy, taxation, or the operation and regulation of nationally important facilities such as communications could have a significant effect on the Company. Any changes in regulations or shifts in political attitudes are beyond the Company’sCompany's control and may adversely affect its business. The Company’sCompany's business may be affected in varying degrees by government regulations with respect to restrictions on future expansion, price controls, export controls, foreign exchange controls, earnings repatriation, income
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and/or business taxes or expropriations.
In particular, operating in ColombiaColombia. Mexico and Argentina presents the following unique risks to the Company’sCompany's business and operations:
Legal System
As a civil law jurisdiction, Colombia has ajurisdictions, each of Colombia. Mexico and Argentina have legal systemsystems that are different from the common law jurisdictions of Canada and the United States. There can be no assurance that licenses, permits, applications or other legal arrangements will not be adversely affected by changes in governments, the actions of government authorities or others, or the effectiveness and enforcement of such arrangements.
Permits and Licenses
The Company’sCompany's business activities in Colombia, Mexico and Argentina are each dependent on receipt of government approvals or permits to develop its business. Any delays in receiving government approvals or permits or no objection certificates may delay the Company’sCompany's operations or may affect the status of the Company’sCompany's contractual arrangements or its ability to meet its contractual obligations.
Repatriation of Earnings
Currently there are no restrictions on the repatriation from Colombia and Mexico of capital and distribution of earnings from Colombia, Mexico to foreign entities. However, there can be no assurance that restrictions on repatriation of capital or distributions of earnings from Colombia will not be imposed in the future. In the case of Argentina, even though the Company is entitled to distribute earnings to the parent entity, the amount must not exceed the 30% of the foreign investment received in that entity.
Foreign Currency Fluctuations
The Company’sCompany's current and proposed business operations in Colombia, Mexico and Argentina render it subject to foreign currency fluctuations, which may materially affect its financial position. The Company holds Canadian and U.S. dollars and sends funds to Colombia, Mexico or Argentina in U.S. dollars, which are then converted into Colombian pesos.pesos, Mexican pesos or Argentinian pesos, as applicable. The important exchange rates for the Company are those for the U.S. dollar, Canadian dollar Colombian peso, Mexican peso and Colombianthe Argentinian peso. While the Company is funding operations in Colombia, Mexico and Argentina, its results could be impaired by adverse changes in the U.S. dollar and Canadian dollar relative to each of the Colombian peso, exchange rate.Mexican peso and Argentinian peso. Prior and future equity financings result in the generation of Canadian dollar proceeds to fund the Company’sCompany's activities, which are mostly incurred in U.S. dollars, Colombian pesos, Mexican pesos or ColombianArgentinian pesos. To the extent funds from such financings are maintained in Canadian dollars, the Company’sCompany's results can be significantly impacted by adverse changes in exchange rates between the Canadian dollar, the U.S. dollar, the Mexican peso, the Argentinian peso and the Colombian peso.
The Company’sCompany's operations may also be adversely affected by laws and policies of Canada affecting foreign trade, taxation and investment. In the event of a dispute arising in connection with the Company’sCompany's operations in Colombia, Mexico and Argentina, the Company may be subject to the exclusive jurisdiction of foreign courts or tribunals, or may not be successful in subjecting foreign persons to the jurisdictions of the courts of Canada or enforcing Canadian judgments in such other jurisdictions. The Company may also be hindered or prevented from enforcing its rights with respect to a governmental body because of the doctrine of sovereign immunity. Accordingly, the Company’s business activities in Colombia could be substantially affected.
Security and guerrilla activity in Colombia could negatively impact the Company’s business.Company's business
Colombia has had a publicized history of security problems associated with certain narcotics crime organizations and other terrorist groups. A 40-year armed conflict between the government forces of Colombia and anti-government insurgent groups and illegal paramilitary groups, both thought to be funded by the drug trade, continues in Colombia. Insurgents continue to attack civilians and violent guerrilla activity continues in many parts of the country.
There have been peace negotiations between the government and the Fuerzas Armadas Revolucionarias de Colombia (FARC) guerrillas for many years. A recent settlement has been reached to end the conflict, which is intended to bring further institutional strengthening and development, particularly to rural regions. The government’sgovernment's biggest challenge is to maintain a lasting peace and that demobilized members of the FARC rejoin civilian life, rather than regrouping in criminal bands.
Continuing attempts to reduce or prevent guerrilla activity may disrupt the Company’sCompany's operations in the future. The Company may not be able to establish or maintain the safety of its operations and personnel in Colombia and this violence may affect its operations in the future. Any increase in kidnapping and/or terrorist activity in Colombia generally may disrupt supply chains and discourage qualified individuals from being involved in the Company’sCompany's operations. Additionally, the perception that matters have not improved in Colombia may hinder the Company’sCompany's ability to access capital in a timely or cost effective
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manner.
Devaluation of the Argentinian peso may adversely affect our results of operations, our capital expenditure program and the ability to service our liabilities and transfer funds abroad.
Since we generate a significant portion of our revenues in Argentinian pesos through our operations in that country, any devaluation may negatively affect the value of our earnings in that country"
The Argentine Peso has been subject to significant devaluation against the U.S. dollar in the past and may be subject to fluctuations in the future. According to the exchange rate published by the Banco de la Nación Argentina, in the year ended December 31, 2020 the devaluation of the peso against the U.S. dollar was 41.67% (compared to 63.21% and 104.23% in the years ended December 31, 2019 and 2018, respectively). The Argentine Peso lost 8.96% of its value against the U.S. dollar in the first three months of 2021.
Given the economic and political conditions in Argentina, we cannot predict whether, and to what extent, the value of the Argentinian peso may depreciate or appreciate against the U.S. dollar, the Canadian dollar or other foreign currencies. We cannot predict whether the Argentine government will further modify its monetary, fiscal, and exchange rate policy. If any of these changes takes place we cannot anticipate the impact these could have on the value of the peso and, accordingly, on our financial condition, results of operations and cash flows, and on our ability to transfer funds abroad in order to comply with commercial or financial obligations or dividend payments to shareholders located abroad.
Inflation could accelerate, causing adverse effects on the economy and negatively impacting our margins.
In the past, Argentina has experienced periods of high inflation. Inflation has increased since 2005 and has remained relatively high since then. There can be no assurance that inflation rates will not be higher in the future.
On January 2014, a new consumer price index, the National Urban Consumer Price Index (Indice de Precios al Consumidor Nacional Urbano, or "IPCNu") was published with the aim of improving the accuracy of measurements of the evolution of prices in the Argentine economy. The IPCNu integrates a set of price indexes which allows for the monitoring of the change in several prices in the economy (wholesale, commodities and construction costs, among others) by considering the price information from all the provinces in Argentina. The IPCNu increased by 11.9% over the period from January to October 2015 (according to last available data); and by 23.9% in 2014. In the past, there has been a substantial disparity between the inflation indexes published by the INDEC and the higher inflation indexes estimated by private consulting firms. The INDEC estimated that the Argentine wholesale price index increased by 13.1% in 2012, 14.8% in 2013, 28.3% in 2014 and 10.6% in the period of January to October 2015 (according to the last available data because INDEC has not disclosed figures for November and December 2015). The INDEC resumed publication of the wholesale price index for full year since 2016, the Argentine Wholesale Price Index increased by 34.6% in 2016, 18.8% in 2017, 48.6% in 2018 and 50.6% in 2019 on a year-over-year comparison.
On January 8, 2016, the previous administration issued Decree No. 55/2016 declaring a state of administrative emergency with respect to the national statistical system and the INDEC until December 31, 2016 (which was not extended). During this state of emergency, the INDEC had suspended publication of certain statistical data (regarding prices, poverty, unemployment and GDP) until it completed a reorganization of its technical and administrative structure capable of producing sufficient and reliable statistical information. As of the date of this Annual Report, INDEC has resumed publication of mentioned statistical data, although for some indicators it has not disclosed or provided re-estimated figures for certain time periods.
As a consequence of the aforementioned events, the full year 2015 inflation measure for IPCNu index was not disclosed, and according to last available data (from October 2015) the IPCNu registered an increase of 11.9% over the January to October 2015 period. As alternative guidance to IPCNu, the authorities suggested that other measures should be observed, such as those published by the statistical entity of the Autonomous City of Buenos Aires (IPC CABA) and the San Luis Province that registered an annual increase of 26.9% and 31.6% in 2015, respectively. IPCNu publication was resumed in June 2016 disclosing May 2016 monthly inflation figures, while data for the months in the period January to April 2016 remains unavailable. Taking this into account, IPCNu variation from May to December 2016 was 16.9% and, as alternative guidance, the indexes published by the Province of San Luis and the Autonomous City of Buenos Aires from January to April 2016 represented an increase of 13.9% and 19.2%, respectively. During 2017, the INDEC published monthly IPC index regularly, registering an increase of 24.8% on a year-over-year comparison. The cumulative IPC variation for 2020 was 36.1%. Despite of the recession caused by the COVID-19 pandemic, the Argentine economy continues to experience high levels of inflation. If the value of the peso cannot be stabilized through fiscal and monetary policies, an increase in inflation rates could be expected.
Since a portion of our revenues are denominated in Argentinian pesos, any further increase in the rate of inflation not accompanied by a parallel increase in our prices would decrease our revenues in real terms and adversely affect our results of operations.
Future policies of the Argentine government may affect the economy as well as the operations of the telecommunications industry in Argentina.
The Argentine government has historically exercised significant influence over the economy, and telecommunications companies in particular have operated in a highly regulated environment. In the past, the Argentine government promulgated numerous, far-reaching regulations affecting the economy and telecommunications companies in particular. In addition, local municipalities in the regions where we operate have also introduced regulations and proposed various taxes and fees for the installation of infrastructure. Provinces have increased their tax rates, particularly the turnover tax rates.
Since assuming office on December 10, 2019, President Fernandez has been devoted to renegotiate the Argentinian debt and trying to solve the short term economic problem. After a few months the priority moves to the COVID-19 pandemic, based on these facts we cannot confirm the course of the measures that can be adopted and will impact the telecommunication sector.
We cannot assure you that the Argentine government will not adopt other policies that could adversely affect the Argentine economy or our business, financial condition or results of operations. In addition, we cannot assure you that future economic, regulatory, social and political developments in Argentina will not impair our business, financial condition or results of operations, or cause the market value of our common shares to decline.
Argentina's economy may contract in the future due to international and domestic conditions which may adversely affect our operations.
The effects of the global economic and financial crisis in recent years and the general weakness in the global economy may negatively affect emerging economies like Argentina's. Global financial instability may impact the Argentine economy and cause a slowdown in Argentina's growth rate or could lead to a recession with consequences in the trade and fiscal balances and in the unemployment level.
Moreover, Argentine economic growth might be negatively affected by several domestic factors such as an appreciation of the real exchange rate which could affect its competitiveness, reductions and even reversion of a positive trade balance, which, combined with capital outflows could reduce the levels of consumption and investment resulting in greater exchange rate pressure. Additionally, abrupt changes in monetary and fiscal policies or foreign exchange regime could rapidly affect local economic output, while lack of appropriate levels of investment in certain economy sectors could reduce long-term growth. Access to the international financial markets could be limited. Consequently, an increase in public spending not correlated with an increase in public revenues could affect the Argentina's fiscal results and generate uncertainties that might affect the economy's level of growth.
Moreover, several trading partners of Argentina (such as Brazil, Europe and China) are experiencing significant slowdowns or recession periods in their economies. This may impact the demand for products coming from Argentina and hence affect its economy.
If international and domestic economic conditions for Argentina were to worsen, the Argentine economy could be negatively affected as a result of lower international demand and lower prices for its products and services, higher international interest rates, lower capital inflows and higher risk aversion, which may also adversely affect our business, results of operations, financial condition and cash flows.
A portion of our operations, properties and customers are located in Argentina, and, as a result, our business is, to a large extent, dependent upon economic and legal conditions prevailing in Argentina. If economic and legal conditions in Argentina were to deteriorate, they could have an adverse effect on our financial condition, results of operations and cash flows.
Economic and legal conditions in Argentina remain uncertain which may affect our financial condition, results of operations and cash flows.
Although general economic conditions have shown improvement in the last decade, and political protests and social disturbances have diminished considerably since the economic crisis of 2001 and 2002, the nature of the changes in the Argentine political, economic and legal environment over the past several years has given rise to uncertainties about the country's business environment.
In the event of any economic, social or political crisis, companies operating in Argentina may face the risk of strikes, expropriation, nationalization, forced modification of existing contracts, and changes in taxation policies including tax increases and retroactive tax claims. In addition, Argentine courts have issued rulings changing the existing case law on labor matters and requiring companies to assume greater responsibility for, and assumption of costs and risks associated with, sub-contracted labor and the calculation of salaries, severance payments and social security contributions. Since we operate in a context in which the governing law and applicable regulations change frequently, it is difficult to predict if and how our activities will be affected by such changes.
Social Disruptions and Instability in Colombia could disrupt the Company’s Operations.Company's Operations
Generally, companies operating in the telecommunications industry in Colombia have experienced various degrees of interruptions to their operations as a result of social instability. This uncertainty may affect operations in unpredictable ways, including disruptions of access of the Company’sCompany's operators to the Company’sCompany's towers. There can be no assurance that the Company will be successful in protecting itself against these risks and the related financial consequences. Further, these risks may not in any part be insurable in the event the Company does suffer damage.
Political Risk, Social Disruptions and Instability in Mexico
The Company does much of its business in Mexico. As such, the Company is subject to certain risks specific to doing business in Mexico, including currency fluctuations and possible political, social or economic instability. Further, the Company's activities may be affected in varying degrees by political stability and government regulations relating to the industry in which it operates. Operating in Mexico exposes the Company to various levels of political, economic and other risks and uncertainties which could result in work stoppages, blockades of the Company's business activities and appropriation of assets. Some of the Company's assets may be located in areas where Mexican drug cartels operate. These risks and uncertainties vary from region to region and include, but are not limited to, terrorism; hostage taking; local drug gang activities; military repression; expropriation; extreme fluctuations in currency exchange rates; high rates of inflation; labor unrest; the risks of war or civil unrest; renegotiation or nullification of existing concessions, licenses, permits and contracts; changes in taxation policies; restrictions on foreign exchange and repatriation; and changing political conditions, currency controls and governmental regulations that favor or require the awarding of contracts to local contractors or require foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction. The Company cannot provide assurances that this type of social instability or labor disruption will not be experienced in future. The potential impact of future social instability, labor disruptions and any lack of public order in Mexico, and on the Company's operations in particular, is not known at this time. This uncertainty may affect operations in unpredictable ways, including disruptions of supplies and markets, ability to move equipment from site to site, or disruption of infrastructure facilities, including public roads, could be targets or experience collateral damage as a result of social instability, labor disputes or protests. The Company may be required to incur significant costs in the future to safeguard the Company's assets against such activities, incur standby charges on stranded or idled equipment or to remediate potential damage to the Company's assets. There can be no assurance that the Company will be successful in protecting itself against these risks and the related financial consequences. Further, these risks may not in any part be insurable in the event the Company does suffer damage.
The application of anti-bribery or corruption laws could impact the Company’s operations.Company's operations
The Company’sCompany's operations are governed by the laws of many jurisdictions, which generally prohibit bribery and other forms of corruption. It is possible that the Company, or some of its subsidiaries, employees or contractors, could be charged with bribery or corruption as a result of the unauthorized actions of its employees or contractors. If the Company is found guilty of such a violation, which could include a failure to take effective steps to prevent or address corruption by its employees or contractors, the Company could be subject to onerous penalties and reputational damage. A mere investigation itself could lead to significant corporate disruption, high legal costs and forced settlements (such as the imposition of an internal monitor). In addition, bribery allegations or bribery orand corruption convictions could impair the Company’sCompany's ability to work with governments or nongovernmental organizations. Such convictions or allegations could result in the formal exclusion of the Company from a country or area, national or international lawsuits, government sanctions or fines, project suspension or delays, reduced market capitalization and increased investor concern.
If the Company fails to comply with laws or regulations which regulate its business and which may change at any time, the Company may be fined or even lose its right to conduct some of its business.
A variety of laws and regulations apply to the Company’sCompany's business, including the laws of Colombia.Colombia, Mexico and Argentina. Failure to comply with applicable requirements may lead to civil penalties or require the Company to assume indemnification obligations or breach contractual provisions. The Company cannot guarantee that existing or future laws or regulations will not adversely affect its business or result in additional costs. These factors may have a material adverse effect on the Company.
The Company’sCompany's industry is heavily regulated and thus the Company is subject to substantial regulatory risks.risks
The activities of the Company are subject to intense regulation by governmental authorities. Achievement of the Company’sCompany's business objectives are contingent, in part, upon compliance with regulatory requirements enacted by these governmental authorities and obtaining all regulatory approvals. The Company cannot predict the time required to secure all appropriate regulatory approvals for its products, or the extent of testing and documentation that may be required by governmental authorities. Any delays in obtaining, or failure to obtain regulatory approvals could have a material adverse effect on the business, results of operations and financial condition of the Company. The business of the Company is subject to rapid regulatory changes. Failure to keep up with such changes may adversely affect the business of the Company and have a detrimental impact on the Company’sCompany's business.
Changes in current or future laws or regulations could restrict its ability to operate its business as it currently does.does
The Company’sCompany's business and that of its tenants are subject to various laws and regulations. In certain jurisdictions, these regulations could be applied or enforced retroactively, which could require that the Company modify or dismantle existing towers. Since the Company’sCompany has operating subsidiary, Tower Three SAS (“Tower Three”), issubsidiaries that are incorporated in each of Colombia, Mexico and Argentina it is thus subject to the laws of such jurisdiction. Thejurisdictions. For example, the Colombian Ministry of Communications has a protocol aimed to explain to local authorities and communities the existence of environmental impacts and negative effects on the health of the people. Zoning authorities and community organizations are often opposed to construction of communications sites in their communities, which can delay, prevent or increase the cost of new tower construction, modifications, additions of new antennas to a site or site upgrades, thereby limiting the Company’sCompany's ability to respond to tenant demands. The regulations about distance of cell towers to schools, hospitals, and residences, depend on local authorities, as in Colombia the mayors of municipalities have the power to regulate in an autonomous way the matters related to telecommunication infrastructure. Existing regulatory policies may materially and adversely affect the timing or cost of construction projects associated with the Company’sCompany's communications sites and new regulations may be adopted that increase delays or result in additional costs to the Company, or that prevent such projects in certain locations, and noncompliance could result in the imposition of fines or an award of damages to private litigants. In certain jurisdictions, there may be changes to zoning regulations or construction laws based on site location, which may result in increased costs to modify certain of the Company’sCompany's existing towers or decreased revenue due to the removal of certain towers to ensure compliance with such changes. These factors could materially and adversely
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affect the Company’sCompany's business, results of operations or financial condition.
Changes to the tax laws in Colombia, Mexico or Argentina could negatively impact the Company’sCompany's business and operations.
The introduction of new tax laws, regulations or rules, or changes to, or differing interpretation of, or application of, existing tax laws, regulations or rules in Colombia, Mexico or Argentina, could result in an increase in the Company’sCompany's taxes, or other governmental charges, duties or impositions. No assurance can be given that new tax laws, regulations or rules will not be enacted or that existing tax laws, regulations or rules will not be changed, interpreted or applied in a manner which could result in any of the Company’sCompany's profits being subject to additional taxation or which could otherwise have a material adverse effect on the Company.
If radio frequency emissions from wireless handsets or equipment on wireless infrastructure are demonstrated to cause negative health effects, potential future claims could adversely affect the Company’sCompany's operations, costs or revenues.
The potential connection between radio frequency emissions and certain negative health effects, including some forms of cancer, has been the subject of substantial study by the scientific community in recent years. The Company cannot guarantee that claims relating to radio frequency emissions will not arise in the future or that the results of such studies will not be adverse to the Company. Public perception of possible health risks associated with cellular or other wireless connectivity services may slow or diminish the growth of wireless companies, which may in turn slow or diminish the Company’sCompany's growth. In particular, negative public perception of, and regulations regarding these perceived health risks may slow or diminish the market acceptance of wireless services. If a connection between radio frequency emissions and possible negative health effects were established, the Company’sCompany's operations, costs, or revenues may be materially and adversely affected. The Company currently does not maintain any significant insurance with respect to these matters.
The Company may be vulnerable to security breaches that could adversely affect its operations, business, operations, and reputation.
The Company’sCompany's wireless infrastructure may be vulnerable to damage, disruptions, or shutdowns due to unauthorized access, computer viruses, cyber-attacks, and other security breaches. An attack attempt or security breach could potentially result in (1) interruption or cessation of certain of the Company’sCompany's services to its customers, (2) the Company’sCompany's inability to meet expected levels of service, or (3) data transmitted over the Company’s customers’Company's customers' networks being compromised. The Company cannot guarantee that its security measures will not be circumvented, resulting in customer network failures or interruptions that could impact its customers’customers' network availability and have a material adverse effect on its business, financial condition, or operational results. The Company may be required to expend significant resources to protect against or recover from such threats. If an actual or perceived breach of its security occurs, the market perception of the effectiveness of its security measures could be harmed, and the Company could lose customers. Further, the perpetrators of cyber-attacks are not restricted to particular groups or persons. These attacks may be committed by the Company’sCompany's employees, contractors or external actors operating in any geography. Any such events could result in legal claims or penalties, disruption in operations, misappropriation of sensitive data, damage to the Company’sCompany's reputation, negative market perception, or costly response measures, which could adversely affect its business.
If the Company is unable to protect its rights to the land under its towers, its business and operating results would be adversely effected.affected.
The Company’sCompany's real property interests relating to its towers consist primarily of leasehold and sub-leasehold interests. A loss of these interests at a particular tower site may interfere with the Company’sCompany's ability to operate tower sites and generate revenues. For various reasons, the Company may not always have the ability to access, analyze and verify all information regarding titles and other issues prior to completing an acquisition of communications sites, which can affect its rights to access and operate a site. From time to time the Company may also experience disputes with landowners regarding the terms of ground agreements for land under towers, which may affect the Company’sCompany's ability to access and operate tower sites. Further, for various reasons, landowners may not want to renew their ground agreements with the Company, they may lose their rights to the land, or they may transfer their land interests to third parties, including ground lease aggregators, which could affect the Company’sCompany's ability to renew ground agreements on commercially viable terms. The Company’sCompany's inability to protect its rights to the land under its towers may have a material adverse effect on its business and operating results.
The Company could have liability under environmental and occupational safety and health laws.
The Company’sCompany's operations are subject to the requirements of environmental and occupational safety and health laws and regulations, including municipal zoning regulations and height restrictions imposed by the Colombian DAAC-FAN (Colombia’s(Colombia's FAA). Many of these laws and regulations contain information reporting and record keeping requirements. The
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Company may not be at all times in compliance with all environmental requirements. The Company may be subject to potentially significant fines or penalties if it failfails to comply with any of these requirements. The requirements of these laws and regulations are complex, change frequently and could become more stringent in the future. In certain jurisdictions these laws and regulations could be applied or enforced retroactively. It is possible that these requirements will change or that liabilities will arise in the future in a manner that could have a material adverse effect on the Company’sCompany's business, results of operations or financial condition.
The Company’sCompany's towers, data centers or computer systems may be affected by natural disasters and other unforeseen events for which the Company’sCompany's insurance may not provide adequate coverage.
The Company’sCompany's towers are subject to risks associated with natural disasters, such as ice and wind storms, tornadoes, floods, hurricanes and earthquakes, as well as other unforeseen events, such as acts of terrorism. Any damage or destruction to, or inability to access, its towers or data centers may impact its ability to provide services to its tenants and lead to tenant loss, which could have a material adverse effect on its business, results of operations or financial condition.
As part of the Company’sCompany's normal business activities, it relies on information technology and other computer resources to carry out important operational, reporting and compliance activities and to maintain its business records. The Company’sCompany's computer systems could fail on their own accord and are subject to interruption or damage from power outages, computer and telecommunications failures, computer viruses, security breaches (including through cyber-attack and data theft), usage errors, catastrophic events such as natural disasters and other events beyond its control. AlthoughIf the Company has disaster recovery programs and security measures in place, if the Company’sCompany's computer systems and its backup systems are compromised, degraded, damaged, or breached, or otherwise cease to function properly, it could suffer interruptions in its operations or unintentionally allow misappropriation of proprietary or confidential information (including information about its tenants or landlords), which could damage the Company’sCompany's reputation and require the Company to incur significant costs to remediate or otherwise resolve these issues.
The Company may not have adequate insurance to cover the associated costs of repair or reconstruction for a major future event. Further, the Company may be liable for damage caused by towers that collapse for any number of reasons including structural deficiencies, which could harm the Company’sCompany's reputation and require it to incur costs for which it may not have adequate insurance coverage.
The Company’sCompany's operations are primarily in jurisdictions outside of Canada or the United States and consequently the Company is subject to the risks of foreign operations generally.
Currently the Company’sCompany's operations are conducted in foreign jurisdictions including, but not limited to Colombia.Colombia, Mexico or Argentina. The Company expects that receivables with respect to foreign sales will continue to account for a significant portion of its total accounts and receivables outstanding. As such, the Company’sCompany's operations may be adversely affected by changes in foreign government policies and legislation or social instability and other factors which are not within the control of the Company including, but not limited to, recessions in foreign economies, expropriation, nationalization and limitation or restriction on repatriation of earnings, longer receivables collection periods and greater difficulty in collecting accounts receivable, changes in consumer tastes and trends, renegotiation or nullification of existing contracts or licenses, regulatory requirements or the personnel administering them, currency fluctuations and devaluations, exchange controls, economic sanctions and royalty and tax increases, risk of terrorist activities, revolution, border disputes, implementation of tariffs and other trade barriers and protectionist practices, taxation policies, including royalty and tax increases and retroactive tax claims, volatility of financial markets and fluctuations in foreign exchange rates, difficulties in the protection of intellectual property, labor disputes and other risks arising out of foreign governmental sovereignty over the areas in which the Company’sCompany's operations are conducted. The Company’sCompany's operations may also be adversely affected by social, political and economic instability and by laws and policies of such foreign jurisdictions affecting foreign trade, taxation and investment. If the Company’sCompany's operations are disrupted and/or the economic integrity of its contracts is threatened for unexpected reasons, its business may be harmed.
In the event of a dispute arising in connection with the Company’sCompany's operations in a foreign jurisdiction where the Company conducts its business, the Company may be subject to the exclusive jurisdiction of foreign courts or may not be successful in subjecting foreign persons to the jurisdictions of the courts of Canada or enforcing Canadian judgments in such other jurisdictions. The Company may also be hindered or prevented from enforcing its rights with respect to a governmental instrumentality because of the doctrine of sovereign immunity. Accordingly, the Company’sCompany's activities in foreign jurisdictions could be substantially affected by factors beyond the Company’sCompany's control, any of which could have a material adverse effect on the Company.
Some countries in which the Company may operate may be considered politically and economically unstable and, in some cases, failure to follow certain formalities or obtain relevant evidence may call into question the validity of the entity or the
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actions taken by the Company. Management of the Company is unable to predict the effect of additional corporate and regulatory formalities which may be adopted in the future including whether any such laws or regulations would materially increase the Company’sCompany's cost of doing business or affect its operations in any area.
The Company may in the future enter into agreements and conduct activities outside of the jurisdictions where it currently carries on business, which expansion may present challenges and risks that the Company has not faced in the past, any of which could adversely affect the results of operations and/or financial condition of the Company.
The Company has a limited operating history.
The Company will be subject to all of the business risks and uncertainties associated with any new business enterprise, including under-capitalization, cash shortages, limitations with respect to personnel, financial and other resources, lack of revenue and the risk that it will not achieve its growth objective. There can be no assurance that the Company’sCompany's operations will be profitable in the future or will generate sufficient cash flow to satisfy its working capital requirements. Even if the Company does achieve profitability, it cannot predict the level of such profitability. If the Company sustains losses over an extended period of time, it may be unable to continue its business.
A substantial portion of our revenue is derived from our relationship with one tenant.
A substantial portion of our total operating revenues is derived from our leasing agreements with Millicom International Cellular SA. If they are unwilling or unable to perform their obligations under our agreements with them, our revenues, results of operations, financial condition and liquidity would be materially and adversely affected. Additionally, due to the long-term nature of our tenant leases with Millicom International Cellular SA, we depend on theirthe continued financial strength.strength of them. If our current tenant or any future tenants are unable to raise adequate capital to fund their business plans, they may reduce their spending, which could materially and adversely affect demand for our communications sites and our services business. If, as a result of a prolonged economic downturn or otherwise, one or more of our significant tenants experiences financial difficulties or files for bankruptcy, it could result in uncollectible accounts receivable. The loss of our current tenant, or the loss of all or a portion of our anticipated lease revenues from this tenant or future tenants, could have a material adverse effect on our business, results of operations or financial condition.
The Company is reliant on its management and key personnel.
The success of the Company is dependent upon the ability, expertise, judgment, discretion and good faith of its senior management. While employment agreements are customarily used as a primary method of retaining the services of key employees, these agreements cannot assure the continued services of such employees. The Company attempts to enhance its management and technical expertise by recruiting qualified individuals who possess desired skills and experience in certain targeted areas. The Company’sCompany's inability to retain employees and attract and retain sufficient additional employees as well as, engineering, and technical support resources could have a material adverse impact on the Company’sCompany's financial condition and results of operation. Any loss of the services of such individuals could have a material adverse effect on the Company’sCompany's business, operating results or financial condition.
The Company conducts business in countries with a history of corruption and transactions with foreign governments and doing so increases the risks associated with our international activities.
As we operate internationally, we are subject to the United States’States' Foreign Corrupt Practices Act of 1977 and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by the United States and other business entities that have securities registered in the United States for the purpose of obtaining or retaining business. We have operations and agreements with third parties in countries known to experience corruption. Further international expansion may involve more exposure to such practices. Our activities in these countries create the risk of unauthorized payments or offers of payments by our employees or consultants that could be in violation of various laws including the Foreign Corrupt Practices Act of 1977, even though these parties are not always subject to our control. It is our policy to implement safeguards to discourage these practices by our employees and consultants. However, our existing safeguards and any future improvements may prove to be less than effective and our employees or consultants may engage in conduct for which we might be held responsible. Violations of the Foreign Corrupt Practices Act of 1977 may result in criminal or civil sanctions and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition.
As a foreign private issuer, we are not subject to U.S. proxy rules and are exempt from filing certain reports under the Securities Exchange Act of 1934.
As a foreign private issuer, we are exempt from the rules and regulations under the Securities Exchange Act of 1934, as amended (the "Exchange Act") related to the furnishing and content of proxy statements, and our officers, directors, and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not be required under the Exchange Act to file annual and current reports and financial statements with the United States Securities and Exchange Commission (the "SEC") as frequently or as promptly as domestic companies whose securities are registered under the Exchange Act, and we are generally exempt from filing quarterly reports with the SEC under the Exchange Act.
If we were to lose our foreign private issuer status, we will be required to file periodic reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. We would have to present our financial statements under US GAAP and may also be required to modify certain of our policies to comply with corporate governance practices applicable to U.S. domestic issuers. Such conversion and modifications will involve additional costs.
If we were a "passive foreign investment company" for U.S. federal income tax purposes for any taxable year, U.S. Holders of Common Shares could be subject to adverse U.S. federal income tax consequences.
If we were a "passive foreign investment company" ("PFIC") within the meaning of Section 1297 of the U.S. Internal Revenue Code, as amended, for any taxable year during which a U.S. Holder held Common Shares, certain adverse U.S. federal income tax consequences may apply to the U.S. Holder. We do not believe we have been a PFIC and do not expect to be a PFIC for U.S. federal income tax purposes for our current taxable year or the reasonably foreseeable future, although there can be no assurance that the U.S. Internal Revenue Service ("IRS") will not challenge our determination in this regard or that we will not be a PFIC for the current taxable year or any subsequent taxable year. Our possible status as a PFIC must be determined annually and therefore may be subject to change. This determination will depend on the composition of our income and assets, the market valuation of our assets (including, among others, our goodwill) from time to time, and our spending schedule for cash balances and the proceeds of any offering, as well as on the application of complex statutory and regulatory rules that are subject to potentially varying or changing interpretations. Accordingly, there can be no assurance that we will not be a PFIC for any taxable year. If we were a PFIC, U.S. Holders of Common Shares may be subject to adverse U.S. federal income tax consequences, such as taxation at the highest ordinary income tax rate on gains recognized from the disposition of Common Shares and on certain actual or deemed distributions with respect to Common Shares, interest charges on certain taxes treated as deferred, and additional reporting requirements.
The Company has never paid dividends and has no intention of paying dividends.
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The Company has no earnings or dividend record and does not anticipate paying any dividends on the common shares in the foreseeable future. Dividends paid by the Company would be subject to tax and, potentially, withholdings. The payment of future cash dividends, if any, will be reviewed periodically by the Company’sCompany's board of directors and will depend upon, among other things, conditions then existing including earnings, financial condition and capital requirements, restrictions in financing agreements, business opportunities and conditions and other factors.
The Company is subject to a going-concern risk.
The Company’sCompany's financial statements have been prepared on a going concern basis under which an entity is considered to be able to realize its assets and satisfy its liabilities in the ordinary course of business. The Company’sCompany's future operations are dependent upon the identification and successful completion of equity or debt financing and the achievement of profitable operations at an indeterminate time in the future. There can be no assurances that the Company will be successful in completing an equity or debt financing or in achieving profitability. The financial statements do not give effect to any adjustments relating to the carrying values and classification of assets and liabilities that would be necessary should the Company be unable to continue as a going concern.
Global and national health concerns, including the outbreak of pandemic or contagious diseases, such as the recent COVID-19 (coronavirus), may adversely affect the business and operations of the Company
The outbreak of the COVID-19 pandemic has resulted in governments and businesses worldwide adopting emergency measures to combat the spread of the coronavirus while seeking to maintain essential services. These measures have included, without limitation, social distancing, the temporary closure of non-essential businesses, stay-at-home and work-from-home policies, self-imposed quarantine periods, border closures and travel bans or restrictions. These measures have significantly disrupted retail and commercial activities in most sectors of the economy and created extreme volatility in financial markets. This has resulted in a sharp economic downturn marked by rising levels of unemployment, as most businesses have reduced or ceased business operations, and reduced consumer spending. These adverse economic conditions are expected to continue for as long as the measures taken to contain the spread of COVID-19 persist and certain of such conditions could continue even upon the gradual removal of such measures and thereafter, especially given that a certain segment of the general public, including certain of our customers and employees, may voluntarily choose to continue to apply such measures due to health concerns regarding COVID-19.
These measures and conditions may adversely affect our business, financial condition, liquidity and financial results for as long as the measures adopted in response to the COVID-19 pandemic remain in place or are re-introduced and potentially upon their gradual or complete removal, including, without limitation, as follows, and such adverse effect could be material:
- access to capital may be affected;
- access to refinancing may be limited;
- cost of capital may increase;
- liquidity may be affected by customers delaying the payment of our invoices;
- cost of construction of towers may increase; and
- ability to construct towers on areas under lock down may be affected.
Item 4. Information on the Company
A.A. History and Development of the Company
Name and Incorporation
The Company was incorporated under the Business Corporations Act (British Columbia) (hereinafter, the "BCBCA") on September 12, 2005 as “Pacific"Pacific Therapeutics Ltd.”" On January 12, 2017, in connection with the completion of the Tower Three Transaction (defined(as defined below) the Company changed its name to “Tower"Tower One Wireless Corp.”"
The head office and registered and records office of the Company is located at Suite 600-535 Howe Street, Vancouver, BC V6C 2Z4 Canada. The Company’sCompany's phone number is (604) 559-8051,(917) 546-3016 and its web site is www.toweronewireless.com.www.toweronewireless.com. The information on our website does not form a part of this Form 20-F.
The Company is a reporting Company in British Columbia and Ontario and its common shares are listed for trading on the Canadian Securities Exchange ("CSE and"), the Frankfort Stock Exchange and are quoted on the OTCQB Venture Market.Pink Open Market operated by the OTC Markets Group.
General Development of Business
Before the completion of the Tower Three Transaction (defined below), the Company was a development stage specialty pharmaceutical company focused on developing late stage clinical therapies and in-licensed novel compounds for fibrosis, erectile dysfunction (ED) and other conditions. On July 24, 2015 the Company entered into a purchase and sale agreement (the “Forge Agreement”) with Forge Therapeutics Inc. (“Forge”) of Wyoming, pursuant to which the Company agreed to sell certain of its technology assets (related to fibrosis and erectile dysfunction) to Forge in return for 15,000,000 common shares of Forge. The Company also entered into a 50-50 joint-venture with Truevita Supplements in March 2016 to develop an early stage immune boosting herbal supplement, known as BP120. This herbal supplement is aimed at the treatment of immune deficiency and hypertension.indications
Significant Acquisitions, Dispositions and Dispositionsother Events
On March 6, 2016, the company incorporated Cabbay Holdings Corp. (“Cabbay”) as a wholly-owned subsidiary. The Company entered into an arrangement agreement with Cabbay, dated April 18, 2016 and amended on April 21, 2016 (the “Arrangement Agreement”) in order to effect a plan of arrangement (the “Arrangement”) under the BCBCA. As part of the Arrangement, Cabbay issued its common shares in exchange for a special class of reorganization shares of the Company held by shareholders of the Company, which were subsequently redeemed by the Company in exchange for the assignment of the Forge Agreement and $1,000. The Arrangement Agreement and the Arrangement were approved by the Company’s shareholders on May 20, 2016 and approved by the British Columbia Supreme Court on May 31, 2016. Upon completion of the Arrangement, Cabbay was no longer a subsidiary of the Company. The Arrangement effectively resulted in the spin out of Cabbay to the Company’s shareholders and the transfer of the Forge Agreement to Cabbay. In connection with the restructuring, $440,549 of the Company’s debt in the form of accounts payable, convertible note and amounts due to related parties was assigned to Cabbay.
The Tower Three Transaction
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On January 12, 2017, the Company completed a “fundamental change”"fundamental change" transaction (the “Tower"Tower Three Transaction”Transaction"), with Tower Three SAS, a limited liability company formed under the laws of the Republic of Colombia on December 30, 2015 ("Tower Three"), pursuant to a share exchange agreement made effective as of October 19, 2016, as amended (the “Acquisition Agreement”"Acquisition Agreement") among the Company, Tower Three and the shareholders of Tower Three (the “Selling Shareholders”"Selling Shareholders"), whereby the Company acquired 100% of the securities of Tower Three from the Selling Shareholders, by issuing 30,000,000 common shares of the Company to the Selling Shareholders on a pro-rata basis, following the completion of which, Tower Three is now a wholly-owned subsidiary of the Company. The Company’s common shares issued to the Selling Shareholders in the Tower Three Transaction were to be held in escrow pursuant to the terms of an escrow agreement which provided they were to subject to the following escrow restrictions: (i) restrictions based on certain performance milestones; (ii) time-based release restrictions prescribed under Canadian securities laws, and (iii) voluntary escrow restrictions. The preceding description of the Acquisition Agreement is not complete and you should refer to the actual Acquisition Agreement which is filed as an exhibit to this Form 20-F. Following the completion of the Tower Three Transaction, the Company ceased to be a “shell company” as defined under applicable United States securities laws as the Company began conducting the principal business of Tower Three.in Colombia, Argentina and USA.
The Company’sCompany's board of directors (the Board”"Board") was reconstituted in conjunction with the closing of the Tower Three Transaction. The Board is now comprised of four (4)three (3) members, being Alejandro Ochoa, Fabio Alexander Vasquez and Robert Horsley, and Brian Gusko.Horsley. The Company’sCompany's senior management now consists of Alejandro Ochoa (President and Chief Executive Officer), Abbey Abdiye (ChiefOfficer, Interim Chief Financial Officer), and Octavio De La EspriellaLuis Parra (Chief Operating Officer). See “Directors"Directors and Officers”Officers" below for further information.
Inter-Corporate RelationshipsInnervision Transaction
UponAs at December 31, 2018, the Company owned 90% of Innervision S.A.S. ("Innervision"), a private company incorporated under the laws of Colombia, through its wholly owned subsidiary Tower Three S.A.S ("Tower Three").
In October 2019, the Company completed the acquisition of the remaining common shares of Innervision not previously owned by Tower Three. The Company acquired the remaining 10% interest for total purchase price of $2,685 ($7,000,000 Colombian Peso). As the Company previously controlled Innervision, the transaction resulted in a change to the Company's ownership stake and was accounted for as an equity transaction. The difference between the non-controlling interest and the fair value of consideration paid was recognized directly in deficit.
Acquisition of Evolution Technology SA
On March 30, 2017, the Company entered into a Share Purchase Offer Agreement with the shareholders of Evolution Technology SA ("Evotech") to acquire 65% ownership interest in Evotech. Evotech is a private company incorporated under the laws of Argentina. Since its incorporation on March 10, 2016, Evotech has obtained various permits for constructing cellular towers and also has two master lease agreements with two major telecom carrier in Argentina. To obtain the 65% ownership interest in Evotech, the Company paid US$350,000 to the original shareholders of Evotech and transferred US$400,000 to Evotech for operating expenses. The Company also issued 1,500,000 common shares with a fair value of $480,000 to the shareholders of Evotech. In addition, the Company is committed to contribute the funds necessary for Evotech to construct 50 towers, or a lower number of towers to be agreed between the parties, for up to a total maximum amount of US$3,500,000.
Acquisition of Tower Construction & Technical Services Inc.
On October 18, 2017, the Company entered into an escrow agreement with the shareholders of Construction &Technical Services, Inc. ("TCTS") to acquire a 70% ownership interest in TCTS. To obtain this 70% ownership interest in TCTS the Company committed to operate TCTS's business and financial affairs and no cash or equity consideration was provided for this acquisition. TCTS is a Florida company, headquartered in Miami, Florida and established in 2010 that provides its customers with comprehensive telecommunications services including turnkey solutions covering all aspects of tower erecting needs including: wireless infrastructure, tower building solutions and fiber to home. TCTS as active master services agreements with multiple large companies including T-Mobile, Ericsson, Signfox.
On March 1, 2019, the Company entered into an agreement to acquire the remaining 30% ownership interest of TCTS for total purchase price of $106,121 (US$80,000). As the Company previously controlled TCTS, the transaction resulted in a change to the Company ownership stake and was accounted for as an equity transaction. The $106,990 difference between the acquisition of $869 non-controlling interest and $106,121 fair value of consideration paid was recognized directly in deficit.
On August 1, 2019, the Company entered into a Joint Venture Agreement with a third party, Enervisa US LLC ("Enervisa") and sold 50% of outstanding shares of TCTS for $330,397 (US$250,000) to fund the operation of TCTS. The Company determines that the sale of the 50% of TCTS shares did not constitute a loss of control. The issuance of the shares is accounted for an equity transaction and resulting a non-controlling interest of $698,030. The non-controlling interest consists of $519,983 of Enervisa's share of TCTS's net loss for the period from January 1, 2019 to August 1, 2019 which is included in net attributable to non-controlling interests on the consolidated statement of changes in equity (deficiency). As at December 31, 2020, the Company has received the full amount for the for the sale of 50% of the outstanding shares of TCTS ($330,397 - US$250,000)
Master Lease Agreement with Claro
On October 24, 2017, Tower Three signed a master lease agreement with Claro Colombia, which allows Tower Three to lease tower sites in Colombia to Claro. Claro is believed to be the largest provider of mobile phone services in Colombia with an estimated 60% of the market share in that country.
Expansion into Mexico
On April 3, 2018, the Company entered into an acquisition agreement with Comercializadora Mexmaken, SA de CV, a Mexican-based private tower company. In consideration for the acquisition, the Company issued 7,500,000 common shares of the Company at $0.185 per share for an aggregate value of $1,387,500. Following completion of the Tower Three Transaction, Tower Threeacquisition, the Company own 90% of the issued and outstanding share capital of Comercializadora Mexmaken, SA de CV, which became a wholly-owned subsidiary of the Company. Comercializadora Mexmaken, SA de CV, owns, builds and leases cellular towers to the telecom industry in Mexico, has a master lease agreement with AT&T. This transaction was successfully completed on May 18, 2018.
During 2018, Comercializadora Mexmaken, SA de CV obtained a new Master Service Agreement with Redes Altan. Under this new agreement, the Company has constructed 36 towers in Mexico as of the date of this report.
On February 2020, the Company changed the name of Comercializadora Mexmaken, SA de CV to Tower One Wireless Mexico, SA de CV.
Acquisition of Innervision S.A.S.
As at December 31, 2018, the Company owned 90% of Innervision, a private company incorporated under the laws of Colombia, through its wholly owned subsidiary Tower Three.
In October 2019, the Company entered into a Share Purchase Agreement with Innervision to complete the acquisition of the remaining common shares of Innervision not previously owned by Tower Three. The Company acquired the remaining 10% interest for total purchase price of $2,685 ($7,000,000 Colombian Peso). As the Company previously controlled Innervision, the transaction resulted in a change to the Company's ownership stake and was accounted for as an equity transaction. The difference between the non-controlling interest and the fair value of consideration paid was recognized directly in deficit.
Intercorporate Relationships
The following table identifies the material intercorporate relationships of the Company:
Subsidiary | Place of
Incorporation | Percentage of Voting Securities Beneficially Owned, or Controlled or Directed, directly or indirectly, by Tower One |
| | |
Tower Three SA | Buenos Aires, Argentina | 100% |
Tower Two SA | Buenos Aires, Argentina | 100% |
Evolution Technology SA(1) | Buenos Aires, Argentina | 65% |
Tower Three SAS | Bogota, Colombia | 100% |
Commercialzadora Mexmaken Sa De Cv | Mexico City, Mexico | 90% |
Tower Construction & Technical Services, Inc. | Miami, FL, USA | 50% |
Innervision S.A.S(2) | Bogota, Colombia | 100% |
Notes:
(1) The Company currently holds a 65% interest in Evolution Technology SA ("Evotech"). 50.7% of the Company's interest in Evotech is held by the Company's wholly-owned subsidiary, Tower Three also has a wholly-owned subsidiary, Fundacion Communicar Para Educar” (“FCPE”), a Colombia Foundation, whichSA. The remaining 14.3% is a non-profit initiative established withheld directly by the goal of creating and distributing educational devices for the developing world.
Additionally, in February 2017,Company. As the Company incorporated a wholly-owned subsidiarycontributes more capital to build towers in Argentina, calledthe Company's ownership in Evotech will continue to increase.
(2) The Company currently hold a 100% interest in Innervision S.A.S ("Innervision") indirectly through its wholly owned subsidiary Tower Three SAS, and in March 2017, the Company incorporated a subsidiary in Colombia called Tower Two SAS, which is intended to purchase and own the real estate on which the Company’s planned cellular towers in Colombia will be built.Three.
Private PlacementPlacements
Concurrent with the closing of the Tower Three Transaction, the Company completed a private placement (the “Private Placement”"Private Placement") of units (the “Units”"Units"), at a price of $0.15 (Cdn) per Unit for gross proceeds of $2,322,737 (Cdn).$2,322,737. Each Unit consisted of one share of the Company’sCompany's common stock ( a “Common Share”"Common Share") and one transferable Common Share purchase warrant ( a “Warrant”"Warrant"), with each whole Warrant entitling the holder to purchase, for a period of 12 months from the date of issue, one additional Common Share at an exercise price of $0.40 (Cdn) per Common Share. The Warrants also have an acceleration clause whereby if the closing price of the Common Shares is greater than $0.60 (Cdn) per Common Share for a period of ten (10) consecutive trading days, the Company will have the right to accelerate the expiry of the Warrants by giving notice to the holders of the Warrants by news release or other form of notice permitted by the certificate representing the Warrants that the Warrants will expire at 4:30 p.m. (Vancouver time) on a date that is not less than ten (10) days from the date notice is given. As compensation for raising proceeds under the Private Placement, eligible finders and brokers received cash commission of 8% of the gross proceeds raised in the Private Placement and compensation Warrants (the “Financing Warrants”"Financing Warrants") entitling the finder or broker to purchase Common Shares up to 8% of the number of Placement Units sold in the Private Placement, exercisable at a price of $0.40(Cdn)$0.40 per Common Share for a period of 12 months from the date of issuance of the Financing Warrants, subject to an acceleration provision. There are no Warrants outstanding from this Private Placement.
B. Business OverviewWarrant Incentive Programs
Current Operations
UponAfter the closingcompletion of the Tower Three Transaction, Tower Three becamePrivate Placement, the Company instituted an incentive program, whereby holders of Warrants were granted incentive warrants (the "Incentive Warrants") that were exercisable at $0.50 per share within 12 months of issuance if they exercised their Warrants from June 21, 2017 to July 21, 2017. As a wholly-owned subsidiaryresult of this incentive program, 3,774,466 Warrants were exercised with total proceeds of $1,132,340 and 3,774,466 Incentive Warrants were issued.
The Company instituted a second incentive program that provided for the following: (i) that the expiration date of the Company.Warrants was extended to March 30, 2018, (ii) the exercise price of the Warrants and the Incentive Warrants was reduced to $0.25 per share, and (iii) additional warrants with an exercise price of $0.40 per share were issued to current holders of Warrants and Incentive Warrants in consideration for such Warrants or Incentive Warrants to be exercised prior to March 30, 2018. The primary businessdeadline for this incentive program was extended to April 6, 2018, and on such date a total of 8,665,201 Warrants and Incentive Warrants were exercised to acquire 8,665,201 Common Shares at a price of $0.25, which resulted in $2,166,300 in gross proceeds for the Company.
The Company utilized these funds to continue to build wireless cellular towers, predominately in Argentina as well as for general corporate purposes.
Other Warrant Issuances
June 2018 Offering
In June, 2018, the Company issued secured convertible debentures for gross proceeds of $1,000,000 under the following terms:
- a term of one year;
- an interest rate of 1% per month, payable monthly; and
- Convertible into common shares of the Company at $0.20 per common share, until June 12, 2019, subject to adjustment in certain events.
In connection with the convertible debentures, the Company also issued 5,000,000 share purchase warrants to the holders exercisable at a price of $0.25 per common share for a period of one year. The Company also incurred cash debt issuance costs of $76,791.
In November, 2018, the terms of these convertible debentures were modified as follows:
- the conversion price was reduced to $0.10 per common share;
- the expiry date of the original warrants was extended to November 13, 2019;
- the exercise price of the share purchase warrants was reduced to $0.125 per common share; and
- the Company issued 5,000,000 additional common share purchase warrants to the purchasers exercisable at a price of $0.125 per common share, subject to certain adjustments in certain events with an expiry date of November 13, 2019.
The convertible debentures are secured against the assets of the Company and its subsidiaries pursuant to the terms of a general security agreement of the Company issued in favor of the holders.
November 2018 Offering
In November, 2018, the Company issued secured convertible debentures for gross proceeds of $500,000 under the following terms:
- a term of seven months;
- an interest rate of 1% per month, payable monthly; and
- convertible into common shares of the Company at $0.10 per common share, until June 12, 2019, subject to adjustment in certain events.
In connection with the convertible debentures, the Company also issued 5,000,000 share purchase warrants to the purchasers exercisable at a price of $0.125 per common share for a period of one year until November 13, 2019. The Company also incurred cash debt issuance costs of $46,295.
The convertible debentures are secured against the assets of the Company and its subsidiaries pursuant to the terms of a general security agreement of the Company issued in favor of the holders.
In June 2019, the terms of the convertible debentures were modified as follows:
- The conversion price was reduced to $0.09 per Common Share;
- The expiry date of the original warrants was extended to November 13, 2020;
- The Company issued new common share purchase warrants (the "New Warrants") to each holder of the original warrants, resulting in an aggregate of 15,000,000 new warrants being issued. Each New Warrant entitles the holder thereof to acquire one Common Share of the Company at an exercise price of $0.09 per Common Share, with each new warrant set to expire on November 13, 2020; and
- The Company has the right to repurchase all of the original warrants and New Warrants for $300,000.00 in aggregate at any time before their respective expiry dates.
In September 2019, the Company further extended the term with the existing lenders.
In consideration for the extension of financing terms with existing lenders, the Company reached an agreement with such lenders to pay a 10% penalty on the total outstanding amounts under the principal. During the year ended December 31, 2019, the Company paid the penalty of $75,000 and recorded the penalty as interest expense in the consolidated statements of comprehensive loss.
In December 2019, the Company further extended the term with the existing lenders.
In consideration for the extension of financing terms with existing lenders, the Company reached an agreement with such lenders to pay a 1% penalty on the total outstanding amounts under the principal, as well as an additional 2% penalty on the total outstanding amounts under the principal to be added to the principal if the outstanding amounts are not repaid by January 14, 2020.
During the year ended December 31, 2019, the Company paid the penalty of $7,500 and recorded the penalty as interest expense in the consolidated statements of comprehensive loss.
On April 30, 2020 the Company announced that it has issued 714,286 common shares of the Company at a deemed price of $0.07 per share to the lenders of the convertible debentures pursuant to a Settlement and Release Agreement. The Settlement Agreement was entered into to address outstanding obligations of the Company relating to the convertible debentures facility
In June of 2020 the Company completed full repayment of the remaining outstanding indebtedness under the convertible debentures. With this repayment, the Company has fully repaid all amounts advanced under the convertible debentures facility and is nowauthorized to discharge all security interests registered thereunder.
Principal Capital Expenditures
The Company's principal capital expenditures are the businessacquisition of Tower Three,wireless tower sites and the development of cellular towers on such sites. The Company funds these capital investments primarily through funds received through capital market raises such as the Private Placement, the Incentive Warrant Convertible Debenture facility, the three year term bond program, the financial debt from third parties and from cash generated from the operating activities.
As of February 28, 2021 there are 67 towers currently under construction, 2 of which are in Argentina, 62 of which are in Colombia and 3 of which are in Mexico.
Internet Availability and Additional Information
The SEC maintains an internet site at www.sec.gov that contains our current and periodic reports, including our proxy and information statements and other information regarding issuers such as the company that file electronically with the SEC. Our web address is: https://www.toweronewireless.com.
All websites referred to herein are inactive textual references only, meaning that the information contained on such websites is to develop, ownnot incorporated by reference herein and operateyou should not consider information contained on such websites as part of this document unless expressly specified.
B.Business Overview
The Company is a pure-play, Build-to-Suit ("BTS") tower owner, operator and developer of multitenant communications real estate primarily in Latin America. Tower Three was founded in 2015 as a Colombian corporation with a mission to own and operate cellular network infrastructure sites in specific Latin and South American markets that Tower Three believes are experiencing strong usage growth. Tower Three currently has six (6) cellular towers with four (4) located in Velledupar, Colombia, one (1) in Soledad, Colombia, and one (1) in Bogota, Colombia. Tower Three focuses primarily on
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building towers in municipalities where thereestate. The Company's primary business is limited or no cellular coverage and is currently focused on 4G LTE infrastructure expansion in Colombia.
The Company’s revenues primarily come from the leasing of space on its communications sites to mobile network operators ("MNOs") in countries it services with lease terms of over 10 years. Each tower is built with an initial anchor tenant commitment and space for an additional 1-3 tenants, or collocations. The Company does not build any towers without an anchor tenant in place. The Company offers tower-related services in the largest Spanish speaking countries in Latin America: Argentina, Colombia and Mexico. These tower-related services include site acquisition, zoning and permitting, structural analysis, and construction which primarily supports the Company's site leasing business, including the addition of new tenants and equipment on its sites. BTS is a process where a long-term lease is secured with a tenant prior to the construction of a tower. Terms are outlined in master lease agreements ("MLAs") with tenants. As of December 31, 2020, the Company had a total of 10 signed MLA agreements with major MNOs in Argentina, Colombia and Mexico and a total backlog of over 200 sites.
The Telecommunications Tower Industry
The telecommunications tower industry leases different structure types (monopole, self-supporting, guyed, and rooftop) to MNOs to create a cell site. A cell site is an area within an MNO's wireless service providers, radionetwork which is serviced by an antenna array. The Company can host multiple MNO tenants on a single tower with marginal incremental cost. Each additional tenant is referred to as a "collocation".
The process of building a tower for an MNO starts with the MNO issuing "search rings" to the tower company. A search ring represents a radius around a specific global positioning system or "GPS" coordinate and television broadcast companies, wireless data providers, government agencies and municipalities and tenants in a number of other industries. Tower Three has established a business relationship with Millicom International Cellular SA (“Millicom”) a large international telecommunications and media company, whereby Millicom has agreedheight requirement for the MNO. A cell site within this search ring is critical for the MNO to rent eachprovide quality cellular coverage to its customers. Mostly due to the critical nature of the Company’s six cellularcell site's location, little migration occurs among MNOs once a cell site is in place. After issuing a search ring, the Company looks for places to construct a tower. This process is called "site acquisition" and takes anywhere from 1 to 90 days. Following completion of the site acquisition process, or in many cases concurrently with completion, the Company seeks permitting from local authorities as well as the Aeronautica Civil (Colombia), ANAC (Argentina) or Directorate General of Civil Aviation (Mexico). The final step is construction of the tower, which typically takes less than 30 days. From start to finish, on average an individual MNO tower site takes approximately 180 days to be placed in service.
The process of site acquisition, permitting and construction are also outsourced to specialized third party companies that focus on these services. The Company has internal groups, including legal, site acquisition, engineering and construction supervision that supervise these areas and manage the time, quality and service received.
Terms of the tenant lease are set forth in an MLA between the Company and tenant which include length of contract, rent by structure type, colocation rates and annual price increases to adjust for local inflation.
The Company's Tower Portfolio
Through its subsidiaries, and as of February 28, 2021, the Company has 118 constructed towers, with 45 located in Argentina, 66 located in Colombia and 7 located in Mexico. Thirty eight (38) of the Company's 118 in-service towers have a second tenant collocating, representing 1.32 tenants per in-service tower. Further, as of February 28, 2021 there are 67 towers currently under construction, 2 of which are in Argentina, 62 of which are in Colombia and 3 of which are in Mexico.
See below for a periodsummary of 13 years. Since the rental contracts are non-exclusive, Tower Three can enter into additional rental agreements for eachCompany's tower so that multiple service providers can rent space on the same tower, thereby increasing the revenue generated per tower.portfolio:
| Country | Constructed
Towers | Collocations | Tenants | Towers Under
Construction |
| Argentina | 45 | 15 | 60 | 2 |
| Colombia | 66 | 23 | 89 | 62 |
| Mexico | 7 | - | 7 | 3 |
| Total | 118 | 38 | 156 | 67 |
The Company also operates FCPE,above summary reflects the Company's sale of 22 towers in Colombia in 2018 to a wholly-owned subsidiarythird party for $2,516,354 (USD), the sale of Tower Three, which is10 towers in Argentina in 2019 to a non-profit initiative established withthird party for approximately $1,500,000 (USD), and the goalsale of creating37 towers in Mexico between June and distributing educational devicesDecember 2020 for the developing world.approximately $3,800,000 (USD).
Products and Services
OurThe Company's revenue is primarily derived from tenant leases on the six cellular towers we ownit owns and operateoperates in Colombia.Argentina, Colombia and Mexico. The lease terms of each structure type are outlined in the MLAs, and these agreements include information about lease amounts by structure type, annual increases and adjustments for local inflation, collocation terms, and minimum infrastructure design requirements. The lease payment amount depends on a number of factors including tower location, height and amount of rental payments we receive from these towers depend upon tower location, amount, type and position of tenant equipment on the tower. Expenses at the tower ground space required by the tenantsite include insurance and remaining tower capacity. Our costs typically include groundmaintenance expenses, and in certain cases, property taxes. Ground rent and power and fuel costs some or all of which may beare passed through to ourthe Company's tenants. In the tower industry, tower level cash flow ("TCF") is defined as leasing revenue from the tenants as well as property taxesless the expenses at the tower site. The Company also received revenue for the sale of certain towers.
The Company's operations are concentrated in Colombia, Argentina, Mexico and repairs and maintenance expenses. We currently have leased each of our six towers to Millicom under separate 13the United States. During the year leases, which expire in 2029. Under the terms of each of these leases Millicom pays a monthly $1,000 (USD) per tower fee to Tower Three to use the towers by installing antennas on such towers.
Currently, all of the Company’s operating revenues are derived from Tower Three’s operations in Colombia.
Business Strategy
Tower Development
After the completion of the Tower Three Transaction,ended December 31, 2020, the Company now focuses primarily on building cellular towers in municipalities where there is limited or no cellular coverage and is currently focused on 4G LTE infrastructure expansion in Colombia. The Company currently intends to complete the construction of arecorded total of 15 cellular towers at a total cost $800,000 byrevenues of $2,190,420, $564,857, $5,398,169, and $346,317 in Argentina, Colombia, Mexico and the end of December 2017. Tower Three works with local and regional government departments to ensure that its locations and properties can be licensed quickly and effectively by carriers and operators or even shared. Tower Three’s objective is to build each site within thirty days and have the operator hopefully up and running within sixty days. Tower Three’s towers and sites will be home to cellular and wireless, radio and television broadcast, microwave and two-way radio communications equipment.
Tower Three has identified the coverage needs of a variety of Colombia-based cellular operators, and intends to develop cellular site plans in several target cities in Colombia including the following:
Cali;
Cartagena;
Santa Marta;
Bucaramanga; and
Cucuta / Barranquilla.
The Company intends to use the proceeds from the Private Placement for tower construction, sales and marketing and general working capital. This funding is expected to enable Tower Three to hire full time employees and consultants immediately and over the next 12 months.
Vertical Partnerships
We believe that demand for our communication services is primarily driven by incumbent wireless service providers investing in existing voice networks to improve or expand their coverage and increase capacity and increasing the availability of lower cost smartphones. It is our belief that in order to invest in the coverage, quality and capacity of their networks, wireless carriers in Latin America will continue to outsource their communications site infrastructure needs as a means to accelerate network development, rather than construct and operate their own communications sites.
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The Company plans to continue to build joint venture “market vertical” partners with wireless service providers such as Millicom. The Company intends to leverage its relationship with Millicom, which has operations throughout the world, and other wireless carriers so as to enable them to deploy 4G LTE networks in Colombia as quickly and cost-effectively as possible.
Community Involvement
In addition, it is the intention ofUnited States respectively, while the Company that every Tower Three tower will offerrecorded total assets of $4,133,098, $4,414,051, $1,038,787 and $53,216, in Argentina, Colombia, Mexico and the local community free WiFi and help to create community websites so as to enhance community well-being and integration. Integral to Tower Three’s business penetration strategy is its planned role as being a leading corporate citizen helping local markets. Consequently, Tower Three attempts to combine social and community efforts (free Wifi, programs, prizes, etc.) with its current business operations in local cities and towns so as to bolster its reputation and community involvement.United States respectively.
| Argentina $ | Colombia $ | Mexico $ | United States of America $ | Total $ |
December 31, 2020 | | | | | |
Tower rental revenue | 945,647 | 550,418 | 278,281 | - | 1,774,346 |
Service revenue | - | - | | 346,317 | 972,636 |
Sales revenue | 1,244,773 | 14,439 | 5,119,888 | - | 6,379,100 |
Total Revenues | 2,190,420 | 564,857 | 5,398,169 | 346,317 | 9,126,082 |
| | | | | |
December 31, 2019 | | | | | |
Tower rental revenue | 1,102,810 | 292,848 | 244,978 | - | 1,640,636 |
Service revenue | - | - | - | 561,759 | 561,759 |
Sales revenue | - | 3,069,670 | 141,529 | - | 3,211,199 |
Total Revenues | 1,102,810 | 3,362,518 | 386,507 | 561,759 | 5,413,594 |
| | | | | |
The Telecommunications Market in Latin America
General
Despite considerable progress in building out mobile broadband networks in Latin America over recent years (there are currentlyestimated to be over 160,000 towers in Latin America), approximately 10% of the population, or approximately 64 million people, still have no access to a mobile broadband network in the region. Latin America is characterized by densely populated and sprawling cities, but also by vast, sparsely populated areas, mountain ranges, rainforests and islands. Although most people live in urban or suburban areas, it is the small proportion of people living in rural areas (20% of the population) that are most likely to currently be without access to mobile broadband.
Although the business model utilized by mobile carriersnetwork operators has so far proven effective in expanding coverage to current levels, the Company believes that moving further into remote areas through traditional network deployment is a much greater challenge, owing to the sparsely populated unconnected areas, the difficult economic situation in many Latin American countries, the high cost of investment with limited potential for return, and a challenging market environment that often makes coverage expansion uneconomical. As a result, mobile network operators are increasingly adopting alternative methods, notably infrastructure sharing and partnerships with other ecosystem players, to complement traditional network deployments. In addition, they want to focus on their core business by deploying more cell sites and spending money on sales and marketing.
The Company believes that governments in the region want to make access to and use of mobile broadband universal, a goal shared by mobile operators, which thenetwork operators. The Company expects this will require a multidimensional approach and collaboration between governments and the mobile industry, with the former supporting industry-led initiatives with policies and programs that create the right incentives and an enabling environment for extending connectivity to underserved areas. The Company also believes that in many cases mobile operators’network operators' efforts to improve coverage are hampered by inefficient and arduous regulation from governments and policymakers, including onerous coverage obligations, strict quality-of-service (“QoS”("QoS") expectations, and restrictive planning laws around new infrastructure deployment which, together, make for a challenging regulatory environment. In many markets, this continues to be less of the case and as these markets mature they adopt many programs such as strict timelines for licensing and the utilization of government properties to enhance deployment speeds.
Additionally, of the 90% of the population of Latin America who have access to mobile broadband services, just over 160 million people, or approximately a quarter of the population, subscribed to such services. This means that three-quarters of the population do not currently subscribe to mobile broadband services, primarily due to affordability and/or consumer challenges.
Mobile network operators in Latin America face a tough balancing act in allocating capital across multiple divergent needs: investing in network expansion projects to meet coverage obligations, or boosting network capacity in existing service areas to address QoS expectations (most countries in Latin America have more than 3,500 connectionsusers (subscribers) per base station,cell site, compared to around 1,000 or fewer in the US and other developed markets). The Company believes that this puts an additional burden on mobile network operators and inadvertently weakens the business case for investment in coverage expansion. We believeThe Company believes that tower firms –like Tower Three –companies - like the Company - have a role to play in creating and sustaining an enabling environment for effective investment in infrastructure deployment for carriers and operators. Tower Three’s
The Company's infrastructure sharing is intended to enable mobile network operators to deploy networks more efficiently, optimize asset utilization and reduce runningoperating costs compared with standalone deployment by the carrier.mobile network operator. It is also designed to minimizesminimize duplication of infrastructure, which has come under the spotlight in many countries due to growing environmental and public safety concerns.
The Focus Markets: Argentina, Colombia and Mexico
The Company operates in the three largest Spanish-speaking countries in Latin America: Argentina, Colombia and Mexico. The Company's focus markets have an estimated total population of approximately 220 million people.
Source: The World Factbook
The Company estimates there are currently over 60,000 tower sites in these markets with over 3,500 subscribers per tower. This figure differs substantially from the U.S. average of approximately 1,200 subscribers per cell site, which the Company believes points to the need for more towers in the region. Furthermore, the Company believes a key driver for further cell site growth in these markets is the substantial increase in mobile data consumption per user. Mobile data consumption per user in Latin America was 0.9 GB per month in 2016 and is projected to grow roughly 6 times that to 5.4 GB per month by 2021 per the GSMA Association ("GMSA").
Demand Figures | Argentina | Colombia | Mexico | Total
Markets | U.S. |
Subscribers per Cell Site | 3,777 | 3,626 | 3,535 | approx. 3,600 | approx. 1,200 |
Towers Sites | 16,150 | 15,553 | 30,349 | 62,052 | approx. 300,000 |
Annual Towers Needed | 1,400+ | 1,400+ | 4,900+ | 7,700 | n.a |
MNO CapEx ('16-'20) | C$12B | C$8B | C$14B | C$34B | n.a |
Source: TowerXchange, GSMA, Management Estimates
The Argentine Market
Argentina has a population of 44 million and GDP per capita of approximately $26,910. There are two broad formsan estimated 16,150 towers in Argentina as of infrastructure sharing: passive and active. With passive infrastructure sharing, tower firms allow operators to share physical components of aOctober 2018 with approximately 3,777 subscribers per cell site, (e.g., installing multiple antennasaccording to TowerXchange. The Company believes over 1,400 towers annually are needed in Argentina to meet demand and we believe that MNOs are planning to spend approximately $12 billion from 2016 through 2020 on capital expenditures, per GSMA. Major MNOs include Claro Argentina, Telecom Argentina SA and Telefonica. Claro and Telecom make up over 65% of the market and are tenants of the Company.
The Company believes that Argentina market has many positive characteristics with regard to its potential for tower companies - with three sizeable, competitive mobile operators vying for market share, high penetration yet potential for subscriber growth, and a single tower)burgeoning 4G mobile market. Significant tower infrastructure will be required to meet coverage targets and to cater to mobile data growth in large population centers. With active infrastructure sharing,The latest political and economic events are still being assessed to understand the effects on the mobile operators tower firms enable operatorsconstruction growth.
The Colombian Market
Colombia has a population of 48 million and GDP per capita of approximately $18,850. There are 15,553 towers in Colombia as of October 2018 with approximately 3,626 subscribers per cell site, according to shareTowerXchange. The Company believes over 1,400 towers annually are needed in Colombia to meet demand and we believe that MNOs are planning to spend approximately $8 billion from 2016 through 2020 on capital expenditures, per GSMA. Major MNOs include Avantel, Claro Colombia, Telefonica and Tigo. The Company works with the radio accessfour major carriers in Colombia and has MLAs with Telefonica, Claro, and Avantel. The Company has 21 towers with Tigo, and is working on getting an MLA in place. The Company believes further demand drivers of future cell sites include a pro-infrastructure political climate, carrier LTE deployments and a planned network (RAN) or, atinvestment of over $300 million by Tigo.
In December 2019, the government made an auction of the 700MHz spectrum and the MNOs that participated, were awarded with more than 3000 locations that should receive telecommunications services in the upcoming 4 years. This commitment is mandatory for the MNOs and this is the base to, strongly believe, that the growth for the tower's companies in Colombia will be constant and robust.
The Mexican Market
Mexico has a more advanced level,population of 125 million and GDP per capita of $25,350. There are 30,349 towers in Mexico as of October 2018 with approximately 3,535 subscribers per cell site, according to TowerXchange. Management projects over 4,900 towers annually are needed in Mexico to meet demand and we believe that MNOs are planning to spend approximately C$14 billion from 2016 through 2020 on capital expenditures, per GSMA. Major MNOs include Altan Redes, AT&T Mexico, TelCel and Telefonica. Altan, AT&T and Telefonica make up over 30% of the core network. Tower Three engages in
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both typesmarket and are customers of infrastructure sharing.the Company. The Company believes further demand drivers of future cell sites include a recent high-profile spectrum auction, a countrywide wholesale wireless broadband initiative by Altan and increased mobile data consumption.
Competition
The Company operates in a very competitive industry, with a number of competitors whoindustry. Competitors vary in size from very small private organizations to large publicpublicly-traded companies. We believeThe Company believes that price, network density, speed of service, access to capital, quality and site location and capacityacquisition strategies are the primary competitive factors affecting companies in ourits industry. Although some of the Company’s competitors, such as American Tower Corp. (“AMT”), have invested large amounts of money in telecommunications infrastructure in Latin America (AMT has 3,500 towers in
In Colombia, there are less than eight tower companies; Argentina, less than five tower companies; and moreMexico, less than 12,000 across Latin America), the Company’s management12 tower companies. The Company believes there is ample room for its business to serve clients in certain districts of Colombia and Latin America where local issues and situations make Tower Three’s locations more suitable than our competitors.these countries.
Seasonality
Not Applicable
Legal Proceedings
We are not currently a party to any material legal proceeding. From time to time, we may bring against others or be subject to various claims and legal actions arising in the ordinary course of business.
C. Organizational structure
The Company hasfollowing are the following wholly-owned subsidiaries:Company's subsidiaries along with the percentage ownership and jurisdiction of incorporation:
Tower Three SAS (Argentina); andTower Two SAS (Colombia)Subsidiary | Place of
Incorporation | Percentage of Voting Securities Beneficially Owned, or Controlled or Directed, directly or indirectly, by Tower One |
Tower Three SA | Buenos Aires, Argentina | 100% |
Tower Two SA | Buenos Aires, Argentina | 100% |
Evolution Technology SA(1) | Buenos Aires, Argentina | 65.00% |
Tower Three SAS | Bogota, Colombia | 100% |
Commercialzadora Mexmaken Sa De Cv | Mexico City, Mexico | 90% |
Tower Construction & Technical Services, Inc. | Miami, FL, USA | 50% |
Innervision S.A.S(2) | Bogota, Colombia | 100% |
D. Property, plant and equipment.
As of February 28, 2020 the Company has 118 towers built as of the date of this report, and another 67 under construction. In Argentina, the Company has 45 constructed towers with 15 collocations and 2 under construction. In Colombia, the Company has 66 constructed towers with 23 collocations and 62 under construction. In Mexico, the Company has 7 constructed towers and 3 under construction.
The Company has six cellular towers with four located in Valledupar, Colombia, one in Soledad, Colombia, and one in Bogota, Colombia.
OurCompany's interests in our communications sitesits towers are comprised of a variety of ownership interests, including leases created by long-term ground lease agreements, easements, licenses or rights-of-way granted by government entities. A typical tower site consists of a compound enclosing the tower site, a tower structure and one or more equipment shelters that house a variety of transmitting, receiving and switching equipment. In addition, ourthe Company's sites typically include backup or auxiliary power generators and batteries.
The principal structure types of ourthe Company's towers are guyedmonopole towers, self-supported towers and monopole towers.rooftops. A guyed tower includes a series of cables attaching separate levels of the tower to anchor foundations in the ground and can reach heights of up to 2,000 feet. A guyed tower site for a typical broadcast tower can consist of a tract of land of up to 20 acres, while a monopole tower is a tubular structure that is used primarily to address space constraints or aesthetic concerns. MonopolesMonopole towers typically have heights ranging from 50100 to 200 feet. A monopole tower site used in metropolitan areas for a typical wireless communications tower site can consist of a tractplot of land of fewer than 2,5001,000 square feet. A self-supported tower ("SST") is a stem-pattern tower which is compiled and connected to form a self-supporting frame without any other subvention. SST towers have a conventional form of tower frame which is designed to withstand wind pressure and the geographic condition at the tower's location. The height of the SST can be anywhere between 100 to 400 feet. A rooftop lease usually requires only a fraction of the space, as a mobile network operator may require as little as 50 square feet for each cell site installation.
Our head office is located at 600-535 Howe Street, Vancouver, BC V6C 2Z4 Canada. We currently lease this office location.
We also maintain regional offices in Colombia at: 8A #99-22 Unit 903,302 Torre Andina P.H, AV 82 # 12-24 Bogota, Colombia, and in Argentina at: 555 TTe. Gral Juan Domingo Peron, Piso 2, Buenos Aires, Argentina.in Mexico at: Lago Nargis 34 Piso 3-A, Colonia Granada, CDMX C.P 11520 and in USA at: 1110 Brickell Avenue, Suite 803, Miami, FL, 33131 We currently lease these office locations.
Item 4A. Unresolved Staff Comments
Not applicable.
Item 5.Operating and Financial Review and Prospects
A. Operating Results
The following discussion of our financial condition and results of operations is based upon and should be read in conjunction with our financial statements for each of the fiscal years ended December 31, 2016,2020, December 31, 20152019 and December 31, 2014, and
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2018 have been prepared in accordance with International Financial Reporting Standards (“IFRS”).IFRS. This discussion contains forward-looking statements that involve certain risks and uncertainties. We caution you that our businesses and financial performance are subject to substantial risks and uncertainties. See Item 3.D, “Key"Key Information —- Risk Factors”Factors".
General
PriorThe Company is a pure-play, BTS tower owner, operator and developer of multitenant communications real estate. The Company's primary business is the leasing of space on communications sites to MNOs.. The Company offers tower-related services in the Completionlargest Spanish speaking countries in Latin America: Argentina, Colombia and Mexico. These tower-related services include site acquisition, zoning and permitting, structural analysis, and construction which primarily supports the Company's site leasing business, including the addition of the Tower Three Transaction,new tenants and equipment on its sites. BTS is where a long-term site lease is in hand with a tenant prior to undergoing construction. As of December 31, 2020, the Company washad a development stage specialty pharmaceuticaltotal of ten (11) signed MLA agreements with major MNOs in Argentina, Colombia and Mexico.
Corporate Highlights
The Company's highlights during the year ended December 31, 2020 and the interim period up until the date of this report include:
- The Company has signed 2 new MLAs, in Colombia.
- A total of 21 new towers were constructed during this year, and 17 new collocations were signed.
- As of December 31, 2020, an additional 210 sites were in different stages of Work in Progress (23 in Argentina, 169 in Colombia and 18 in Mexico).
- The Company announced that during the year 37 towers were sold in Mexico and 10 in Argentina.
- The Company announced a comprehensive update on recent company
focusedmilestones throughout Argentina, Colombia, and Mexico. The Company now has a total ninety (90) completed wireless towers throughout Argentina, Colombia and Mexico, with thirty six (36) collocations. Tower One has a backlog of over two hundred and forty sites awarded for Build To Suit "BTS" tower construction and intends to aggressively expand its portfolio of completed and tenanted towers throughout 2021. - In the second quarter of 2020, the Company repaid the outstanding balance the convertible debentures.
- Management continued to actively focus on
developing late stage clinical therapiescapital raising to support the Company's tower business and in-licensed novel compounds for Fibrosis, Erectile Dysfunction (ED) and other conditions. The Company’s lead compound for Fibrosis, PTL-202 is a combination of already approved drugs which have well established safety profiles. PTL-202 had completed a phase 1 drug/ drug interaction clinical trial. The Company’s previous lead product for Erectile Dysfunction PTL-2015 was an oral dissolving version of a top selling therapy for ED. PTL-2015 had completed a pilot bioavailability study in humans. Forge has committed to issue to the Company.general working capital. As discussed above, as a result of this effort, the sale of its technology assets pursuantcompany was able to the Forge Agreement and the acquisitions of Tower Three’s assets in the Tower Three Transaction, the Company now focuses primarily on building cellular towers in municipalities where there is limited or no cellular coverage and is currently focused on 4G LTE infrastructure expansion in Colombia. The Company currently has six (6) cellular towers with four (4) located in Velledupar, Colombia, one (1) in Soledad, Colombia, and one (1) in Bogota, Colombia and currently intends to complete the construction of a total of 15 cellular towers at a total cost $800,000 by the end of December 2017. The Company’s current revenue is primarily derived from tenant leases on the six cellular towers they own and operate in Colombia (the Company currently has leased each of its six towers to Millicom under separate 13 year leases, which expire in 2029).
Corporate Highlights
During the twelve months of 2016 the Issuer accomplished the following:
On February 1, 2016 the Company announced it appointed Robert “Nick” Horsley to the Company’s Board of Directors.
On March 7, 2016 the Company announced it enteredenter into a joint-venture to develop an early stage immune boosting herbal supplementloan agreement, with TrueVita Supplements.
Ona prestigious financial institution, as a subsequent event in March 15, 2016, the Company completed a share consolidation on the basis of thirty pre-consolidation shares of common stock for each post consolidation common share. Following such consolidation, the Company had approximately 1,379,887 common shares issued and outstanding, and continued to trade on the CSE under the existing symbol “PT”.
On March 30, 2016, the Company completed a private placement of 4,089,332 shares at $0.06 per share for gross proceeds of $245,360.
On March 30, 2016, the Company appointed Robert “Nick” Horsley as the chief executive officer, replacing Derick Sinclair who remained a director and the Company’s chief financial officer.
On July 26, 2016, the Company entered into a letter of intent (the “LOI”) with Tower Three to acquire all of the issued and outstanding membership interests of Tower Three.
On October 14, 2016, the Company announced that the previously announced Arrangement with Cabbay was completed. In connection with the Arrangement, $440,549 of indebtedness was assigned to and assumed by Cabbay.
On October 20, 2016, the Company announced that it has entered into a definitive agreement in connection with the Tower Three Transaction.
On January 12, 2017, the Company completed the Tower Three Transaction.
2021.
Results of Operations
The following table sets forth certain selected operating results and other financial information for each of the years ended December 31, 2016, 20152020, 2019 and 2014:2018:
| 2020 | 2019 | Change from 2019 to 2020 | 2018 | Change from 2018 to 2019 |
$ | $ | $ | $ | $ |
Revenue | 9,126,082 | 5,413,594 | 3,712,488 | 1,556,742 | 3,856,852 |
Wages and Benefits | 1,888,110 | 1,217,674 | 670,436 | 529,837 | 687,837 |
Professional Fees and Consulting | $2,395,170 | 2,366,030 | 29,140 | 1,834,575 | (686,219) |
Advertising and Promotion | 133,726 | 46,789 | 86,937 | 1,403,270 | (1,356,481) |
Share Based Compensation | 0 | 0 | 0 | 1,913,692 | (1,913,692) |
Travel | 154,043 | 214,065 | (60,022) | 201,888 | 12,177 |
Office and Miscellaneous | 869,732 | 949,670 | (79,938) | 675,553 | 274,117 |
Interest, Financing Charges and accretion | 1,205,657 | 1,912,553 | (706,896) | 769,322 | 1,143,231 |
Total Other Income (Expenses) | (122,633) | 114,378 | (237,011) | (1,448,193) | 1,562,571 |
Net Comprehensive income (loss) | (3,165,858) | (8,474,964) | 5,309,106 | (9,458,213) | 1,155,798 |
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| | | | | |
| Gain on debt forgiveness | - | 535,077 | (535,077) | - | 535,077 |
| Wages and Benefits | - | 106,667 | (106,667) | 160,947 | (54,280) |
| Professional Fees | 307,414 | 85,486 | 221,928 | 168,490 | (83,004) |
| Advertising and Promotion | - | 22,386 | (22,386) | 67,923 | (45,537) |
| Share based Payments | 75,505 | 11,998 | 63,507 | 152,028 | (140,030) |
| Insurance | 19,631 | 9,707 | 9,924 | 30,194 | (20,488) |
| Rent and Occupancy | - | 3,172 | (3,172) | 14,543 | (11,371) |
| Bank Charges and Interest Expense | 766 | 4,077 | (3,311) | 10,047 | (5,970) |
| Total Other Income (Expenses) | 521 | 464,536 | 464,015 | (2,612) | 467,148 |
| Net and Comprehensive income (loss) | (452,288) | 179,673 | (631,961) | (693,645) | 873,318 |
The Company’sCompany's net comprehensive loss for the year ended December 31, 2016,2020, totaled $452,288$3,165,858 or $0.09$0.05 per shareCommon Share compared to net incomecomprehensive loss of $179,673$8,302,415 or $0.13 per shareCommon Share for the year ended December 31, 20152019 and a net comprehensive loss of $693,645$9,458,213 or $0.56$0.10 per shareCommon Share for the year ended December 31, 2014.2018. The decrease in net income in 2016 from 2015 (and the increase in net income in 2015 compared to 2014) was primarily the result of the Company assigning a significant amount of its debt to Forge, which resulted in income recognized by a one-time $535,077 forgiveness of debt in 2015.
Revenues
The Company has not generated any revenue from the sale of drug therapies. The Company has not recognized any revenue since inception through December 31, 2016. As a result of the Tower Three Transaction, the Company expects to generate revenues in 2017 mostly through monthly fees paid by Millicom in connection with the six towers currently leased to Millicom, as well as from similar lease agreementscomprehensive loss for other towers the Company plans to construct in 2017.
Expenses
Prior to the completion of the Tower Three Transaction, the Company’s expenses consisted primarily of general and administrative costs such as personnel related costs, non-intellectual property related legal costs, accounting costs and other professional and administrative costs associated with general corporate activities.
During the year ended December 31, 2016, total expenses for the Company were $452,809 as compared to the year ended December 31, 2015 where total expenses were $284,863. The increased expenses in 2016 compared to the prior year was mainly the result of increased professional fees of $221,928, increased office and miscellaneous expenses of $30,509 and share based payments of $63,507, being partially offset by reduced wages and benefits of $106,667 during the current year compared to 2015. Expenses incurred from share based payments in 2016 primarily resulted from the issuance of 500,000 stock options to employees in August 2016, while the increase in professional fees in 2016 compared to the prior year was mainly the result of increased, financial, accounting and legal fees incurred by the Company in connection with the Tower Three Transaction, the Arrangement and the Private Placement. The increase in office and miscellaneous expenses in 20162020 compared to the prior year was primarily the result of expensesincreased revenues, mainly for tower sales in Mexico and Argentina that was partially offset by increased operating related to permitsthose sales, and a reduction of the interest, financing charges and accretion.. The decrease in net comprehensive loss for the year ended December 31, 2019 compared to the prior year was primarily the result of increased revenues and decreased other expenses being partially offset by increased operating related expenses, mostly in connection with the buildinggrowth of the Company’sCompany's operations in 2019 compared to the prior year. The decrease in net comprehensive loss in 2018 from 2017 was primarily the result of increased revenues and decreased other expenses being partially offset by increased operating related expenses, mostly in connection with the growth of the Company's operations in 2018 compared to the prior year.
Revenues
2020 compared to 2019
Total revenue increased to $9,126,082 for the year ended December 31, 2020 compared to $5,413,594 as of December 31, 2019, primarily as a result of the towers sold in Mexico (37) and Argentina (10), in addition the service revenue was increased by $544,587 due to the new towers that were finished during this period. The Company expects to generate revenues in 2021 mostly from monthly lease payments by MNOs on existing and future tower sites.
2019 compared to 2018
Total revenue increased to $5,413,594 for the year ended December 31, 2019 compared to $1,556,742 as of December 31, 2018, primarily as a result of BTS towers coming into service during the 2019 and the sale of 22 towers in 2016.Colombia. The Company expects to generate revenues in 2020 mostly from monthly lease payments by MNOs on existing and future tower sites.
Expenses
2020 compared to 2019
Professional fees increased to $2,395,170during the year ended December 31, 2020 compared to $2,366,030 in the previous year primarily due to an increase in consulting fees. During the year ended December 31, 2014, total2020, office and miscellaneous expenses decreased to $869,732 compared to $949,670 for the year ended December 31, 2019 mainly due to the decrease in the operations for Argentina. During the year ended December 31, 2020, advertising and promotion increased to $133,726 compared to $46,789 for the year ended December 31, 2019 mainly due to a change on the marketing strategy decided by the management of the Company. During the year ended December 31, 2020, the Company were $691,033, whichincurred travel expense in the amount of $154,043 (December 31, 2019 - $214,065). The main reason for the decrease was $406,170 higher than the total expensesisolation due to COVID-19 The Company incurred $1,205,657 in interest, financing charges and bank charges during the year ended December 31, 2015. Expenses decreased in 20152019 compared to 2014 primarily$1,912,553 in the prior year due to a decrease in share based payments of $140,030 in 2015 compared to 2014, a decrease in professional fees of $83,004 in 2015 compared to 2014 and a decrease in wages in benefits of $54,280 in 2015 compared to 2014. These decreases in expenses were mostly the result of a reduction in the Company’srates applied during 2020. During the year ended December 31, 2020, maintenance and operation expenses decreased to $942,370 from $1,001,161 compared to December 31, 2019 mainly due to the efficiencies achieved by the Company incurring operating activitiescosts in 2015, primarilyorder to generate revenue. During the resultyear ended December 31, 2020, the Company recorded $1,829,944 in unrealized foreign exchange gain due to differences in functional and presentation currency which has been booked to accumulated other comprehensive loss. The Company's presentation currency is the Canadian Dollar. The functional currency of each of the sale of certain ofentities included in the Company’s technological assets to Forge during that year.
Intellectual Property and Intangible Assets
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All license and option fees paid to licensors for intellectual property licenses are capitalized to intangible assets onconsolidated group is as follows: Tower One Wireless Corp. is the Company’s financial statements. In addition, any expenses for intellectual property protection including patent lawyers services fees and any filing fees with government agencies or the World Intellectual Property Organization are accrued to intangible assets. Since all of the Company’s patents were assigned to Forge, and the Company completed theCanadian Dollar; Tower Three Transaction,and Innervisions is the Colombian Peso; Evolution Technology S.A. and Tower 3 is the Argentina Peso; TCTS is the US Dollar; and Mexmaken is the Mexican Peso. The Company does not anticipate patent costsrecords a cumulative translation adjustment due to be a significant expensethe changes resulting from the fluctuation of foreign exchange rates.
2019 compared to 2018
Professional fees increased to $2,366,030 during the year ended December 31, 2019 compared to $1,834,575 in the previous year primarily due to an increase in third party consulting services mostly related to increased corporate and operational activities of the Company moving forward.in 2019 compared to 2018. Professional fees include consulting services, legal fees and related expenses. Office and miscellaneous expenses increased to $949,670 in the 2019 compared to $675,553 for the year ended December 31, 2018 mainly due to increased operational activities in Colombia, Mexico and Argentina. Advertising and promotion expenses decreased to $46,789 in 2019 compared to $1,403,269 in 2018 mainly due to a change on the marketing strategy defined by the management in 2019 compared to the prior year. Travel expenses increased to $214,065 in 2019 compared to $201,888 in 2018 mostly as a result of more travel throughout Colombia, Mexico and Argentina to find out optimal locations for cellphone towers in 2019. Transfer agent fees decreased to $13,790 during 2019 compared to $44,983 in 2018 mainly due to a decreased on the exercise of options and warrants in 2019. The Company incurred $1,912,553 in interest, financing charges and bank charges during 2019 compared to $769,322 in the prior year mostly due to interest and penalties for the previous and existing loans, bank fees and transfer charges in Colombia, Mexico and Argentina. Maintenance and operation expenses decreased to $1,001,161 in 2019 from $1,517,698 in 2018 mainly due to the Company being more efficient managing the operating costs in connection with the generation of revenue. During the year ended December 31, 2019, the Company recorded $327,696 in unrealized foreign exchange loss to its cumulative translation account. The Company's functional currency reporting is the Canadian Dollar, while Tower Three reports in the Colombian Peso, Evotech reports in the Argentina Peso, and Comercializadora Mexmaken reports in the Mexican Peso. The Company records a cumulative translation adjustment due to the changes resulting from the fluctuation of foreign exchange rates.
Interest Income
Interest income consists of interest earned on the Company’sCompany's cash and cash equivalents. There wasThe Company has no interest income in 2016 of $Nil (2015- $Nil, 2014 – $Nil).for the years ended December 31, 2020, 2019 and 2018.
Impact of Inflation
WeIn May 2018, the Argentinean Peso underwent a severe devaluation resulting in Argentina's three-year cumulative inflation exceeding 100% in 2018, and consequently for the years ended December 31, 2018, 2019 and 2020, the Company determined that Argentina was in a state of hyperinflation. In 2020 the inflation was 36.1% compared to 2019.The Company's subsidiary, Evotech, operates in Argentina and the functional currency of Evotech is the Argentinian Peso.
Although we do not believe that inflation has had a material impact on our revenues or income over the past two fiscal years. However,years, the hyperinflationary situation in Argentina helped contribute to a gain on net monetary position of $318,659 in 2020 compared to the $2,087,881 reported for 2019 and further increases in inflation in Argentina or the other markets in which we operate could result in increases in our expenses, which may not be readily recoverable in the price of goods or services provided to our clients. To the extent that inflation results in rising interest rates and has other adverse effects on capital markets, it could adversely affect our financial position and profitability.
Foreign Currency Fluctuations
Foreign exchangeThe Company generates revenues and incurs expenses and capital expenditures primarily in Colombia, Argentina and Mexico and is exposed to the resulting risk is the risk arising from changes in foreign currency fluctuations. Foreignexchange rates. Some administrative and head office related expenses are incurred in Canada and the United States. In addition, the Company holds financial assets and liabilities in foreign currencies that expose the Company to foreign exchange risks. A significant change in the currency exchange rates between the Canadian dollar relative to the Colombia Peso, the Mexico Peso or the Argentina Peso could have an effect on the Company's results of operations, financial position and/or cash flows.
The Company recorded $508,446 in gains related to foreign exchange translation adjustments in 2020 compared to a loss of $327,696 in 2019 and a loss of $480,132 in 2018. The foreign exchange translation loss in 2020 was primarily the result of the hyperinflationary situation in Argentina. The Company's functional currency is the Canadian dollar, while Tower Three conducts business in Colombia with the Colombian Peso and Evotech conducts business in Argentina with the Argentinian Peso and Comercializadora Mexmaken conducts business in Mexico with the Mexican Peso. At December 31, 2020, the Company had the following financial instruments denominated in foreign currencies:
| | | Argentine
Pesos | | | Colombian
Pesos | | | Mexican Pesos | | | United States
Dollars | | | Total | |
| | | $ | | | $ | | | $ | | | $ | | | $ | |
| Cash | | 34,531 | | | 28,218 | | | 31,611 | | | (4,454 | ) | | 89,907 | |
| Amounts receivable | | 90,045 | | | 144,491 | | | 364,285 | | | - | | | 598,821 | |
| Accounts payable and accrued liabilities | | (442,629 | ) | | (981,541 | ) | | (665,231 | ) | | (913,195 | ) | | (3,002,597 | ) |
| Interest payable | | - | | | (5,539 | ) | | - | | | - | | | (5,539 | ) |
| Lease liability | | (576,868 | ) | | (1,006,160 | ) | | (102,650 | ) | | - | | | (1,685,678 | ) |
| Loans payable | | - | | | (1,614,063 | ) | | (148,245 | ) | | - | | | (1,762,308 | ) |
| Loans from related parties | | - | | | (18,546 | ) | | - | | | - | | | (18,546 | ) |
| Net | | (894,921 | ) | | (3,453,141 | ) | | (520,229 | ) | | (917,649 | ) | | (5,785,940 | ) |
Despite the increase in foreign exchange translation losses in 2020, foreign currency fluctuations have not previously had a material impact on the Company’sCompany's financial results. Consequently, the Company does not use any derivative instruments to reduce its exposure to fluctuations in foreign currency rates.rates and therefore does not hedge its exposure to currency fluctuations. It is the opinion of management that the foreign exchange risk to which the Company is exposed is currently minimal.
not material. However, with the completion of the Tower Three Transaction, the Company anticipates that the fluctuations of the Colombian PesoMexican and Argentinian Pesos may impact the Company’sCompany's financial results moving forward. The Company intends to monitor such potential impact and will possibly develop a hedging policy if such fluctuations become material.
Critical Accounting Estimates
The Company’sCompany's accounting policies are presented in Note 3 of the audited financial statements for the years ended December 31, 20162020 and 2015.2019. The preparation of financial statements in accordance with International Financial Reporting Standards (IFRS) requires management to select accounting policies and make estimates. Such estimates may have a significant impact on the financial statements. Actual amounts could differ materially from the estimates used and, accordingly, affect the results of the operations. These include:
• the assumptions used for the valuation of listing expense;
• the assumptions used for the determination of the impairment of intangible assets;
• the assumptions used for the determination of the useful life of equipment;
• the assumptions used for the determination of the useful life of intangible assets; and
• the assumptions used for the determination of the value share based payments and compensation.
Regulation
Colombia
Our tower leasing business in Colombia is subject to Colombian national, state and local regulatory requirements with respect to the construction, registration, marking and maintenance of our towers. Colombia is divided into 32 departments and one capital district, which is treated as a department (Bogotá also serves as the capital of the department of Cundinamarca). Departments are subdivided into municipalities, each of which is assigned a municipal seat, and municipalities are in turn subdivided into corregimientos in rural areas and into comunas in urban areas. Each department has a local government with a governor and assembly directly elected to four-year terms, and each municipality is headed by a mayor and council. There is a popularly elected local administrative board in each of the corregimientos or comunas. In addition to the capital four other cities have been designated districts (in effect special municipalities), on the basis of special distinguishing features. These are Barranquilla, Cartagena, Santa Marta and Buenaventura. Some departments have local administrative subdivisions, where towns have a large concentration of population and municipalities are near each other (for example in Antioquia and Cundinamarca). Where departments have a low population (for example Amazonas, Vaupés and Vichada), special administrative divisions are employed, such as “department corregimientos”"department corregimientos", which are a hybrid of a municipality and a corregimiento. The majority of existing infrastructure in remote areas, including buildings, open spaces such as parks and squares, legacy fixed-line telecoms infrastructure and public utilities, is owned by governments and public institutions.
For infrastructure deployment and antenna siting, mobile operators and tower companies need to obtain local approvals from
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municipalities for each antenna or tower site. The absence of a clear national policy can lead to each municipality adopting its own policy and procedures that are sometimes in conflict with the technical requirements of deploying mobile networks.
Argentina
Since assuming office on December 10, 2019, President Fernandez has been devoted to renegotiate the Argentinian debt and trying to solve the short term economic's problem. After a few months the priority moves to the COVID-19 pandemic, based on these facts we cannot confirm the course of the measures that can be adopted and will impact the Telecomunications sector. As of today, the National Communications Agency (Ente Nacional de Comunicaciones, or "Enacom") is the main telecommunications regulatory authority in Argentina and became operational in 2016. The Company's operations in Argentina are regulated by Enacom, which in early 2018, established new testing standards for cellular towers in Argentina. In accordance with this new Enacom policy, all now must be tested in Argentina under these new Enacom standards in order to obtain a certificate of homologation.
All telecommunications providers in Argentina must contribute approximately 1.0% of their monthly revenues to finance the provision of telecommunications services in underserved areas and to underserved persons. All providers must also meet certain quality-of-service requirements.
B. Liquidity and Capital Resources.
Overview
The Company is a development stage company and prior to the completion of the Tower Three Transaction in 2017 had no regular cash inflows. Selected financial data pertaining to liquidity and capital resources for the fiscal years ended December 31, 2016, 20152020, 2019 and 20142018 is presented below.
Comparison of Years Ended December 31, 2016, 20152020, 2019 and 20142018
| | | 2016 | 2015 | | 2014 | | |
| Period ended | | $ Change | | $ Change | | | Change between 2020 and 2019 | | Change between 2019 and 2018 |
| | | between | | between 2015 | |
| | $ | 2016 and | $ | and 2014 | |
| | | 2015 | | |
Period ended | | 2020 | 2019 | Change between 2020 and 2019 | 2018 | Change between 2019 and 2018 |
| $ | $ | $ |
| 1,378,183 | Nil | td,378,183 | 1,513 | (1,513) | 122,759 | 56,629 | 346,103 |
| Current Assets | 1,608,280 | 14,695 | 1,593,585 | 2,825 | 11,871 | 1,691,241 | 2,959,907 | (1,268,666) | 2,224,656 | 735,251 |
| Current Liabilities | 139,807 | 624,106 | (484,299) | 943,076 | (318,970) | 20,815,824 | 20,018,665 | 797,159 | 11,659,202 | 8,359,463 |
| Working Capital | 1,468,473 | (609,411) | 2,077,883 | (940,251) | 330,841 | (19,124,583) | (17,058,758) | (2,065,825) | (9,434,546) | (7,624,212) |
| Accumulated deficit | 3,989,527 | 3,537,239 | 452,288 | 3,955,537 | (418,298) | (25,352,460) | (23,585,459) | (1,767,001) | (19,009,676) | (4,575,783) |
| Cash used in operations | 396,259 | 161,460 | 234,799 | 366,769 | (205,309) | 398,219 | 3,119,626 | (2,721,407) | (1,202,203) | 4,321,829 |
| Cash flows from financing Activities | 1,774,582 | 165,376 | 1,609,206 | 197,785 | (32,409) | 1,048,786 | 74,684 | 972,102 | 9,682,278 | (9,607,594) |
| Interest Income | Nil | Nil | Nil | Nil | Nil |
As of December 31, 2016,2020, the Company had cash and cash equivalents of $1,378,183$122,759 (compared with $nil$56,629 for fiscal year 20152019 and $1,513$346,103 for fiscal year 2014)2017) and working capital of $1,468,473($19,124,583) (compared with ($609,410)17,058,758) for fiscal year 20152019 and ($940,251)9,434,546) for fiscal year 2014)2018). Working capital is calculated as current assets less current liabilities.
Since prior to the completion of the Tower Three Transaction the Company had not generated cash from its operations, the Company’s cash inflows primarily resulted from financing activities that included cash proceeds from the issuance of shares of our common stock, cash subscriptions received for shares of our common stock, the repayment of a convertible note, a new convertible note and amounts loaned to the Company from the Company’s shareholders. Cash and cash equivalents increased by $1,378,183 in fiscal year 2016 compared to 2015 primarily due to cash subscriptions received combined with the cash proceeds received from the issuance of shares of our common stock during 2016 in connection with several private placements of our shares of common stock we completed in 2016. Cash and cash equivalents decreased slightlyby $66,130 in 2015fiscal year 2020 compared to 2014.2019.
In 2020, the Company received cash in the amount of $3,247,125 in proceeds from new loans.
During the year ended December 31, 2020, the Company spent $1,451,604 primarily on building towers for continuing operations, compared to $3,482,264 in December 31, 2019.
Working Capital increaseddecreased by $2,077,883$(2,065,825) in fiscal year 20162020 compared to fiscal year 20152019 primarily due to cash received through share subscriptions receivedthe decrease for the accounts receivable balance ($641K), asset held for sale due to the dispositions ($720K), the increase for the accounts payable and shares issuedaccrue liabilities ($332K) and the increase for cash during 2016. Working capitalthe interest payable ($292K). .
Current liabilities increased by $330,841 in 2015 compared to 2014 mainly as a result of a decrease in current liabilities in 2015 compared to the prior year. Current liabilities decreased by $484,299$797,159 for the fiscal year ended December 31, 2016 when2020 compared to the current liabilities for the fiscal year ended December 31, 20152019 primarily due to the assignment of $440,549increase of the Company’s debtloans, including the reclassification from non-current to Cabbay as partcurrent for the bonds payable that was partially offset by the reduction of the Arrangement. Current liabilities decreased in 2015 compared to 2014 by $318,970, mainly as a result of the forgiveness of certain debts owed by the Companycustomer deposits due to the Company’s Chief Financial Officer and former Chief Executive Officer in 2015.towers sold during the year.
Contributed Surplus
Contributed Surplus, which arises from the recognition of the estimated fair value of stock options and warrants, was $563,568$1,706,089 in 2020 compared to $2,303,721 for fiscal year 2016, compared with $121,939 for fiscal year 2015 and $289,766 for fiscal year 2014. The increase in contributed surplus in 2016 from the prior year periods was primarily due to $440,549 in debt forgiveness being recorded in 2016 mostly in connection with the assignment of the Company’s debt to Cabbay as part of the Arrangement, being partially offset by the exercise of options during the year. Additionally, in 2015 contributed surplus was reduced by $238,625 in connection with the expiration of unexercised options and warrants during the year.
Convertible Notes
On September 11, 2014, the Company issued a convertible note for $50,000 due on September 11, 2015 with an interest rate of 1% per month payable quarterly. On September 11, 2015, the Company was unable to repay the amount owing consisting of principal of $50,000 and unpaid interest of $6,000. The note holder and the Company agreed to accept a penalty of $5,000 bringing the total owing to $61,000. On September 11, 2015 the Company issued an unsecured convertible note in the amount of $61,000 due on September 11, 2016 convertible at the option of the holder into shares of the Company’s common stock at $1.50 per share with the same term.2019. During the year ended December 31, 2016, the Company repaid $5,000 to the note holder. The remaining balance2020, a total of 31,293,653 warrants expired unexercised. Upon expiry of the notewarrants, $597,632 was assignedreversed from contributed surplus to Cabbay as partdeficit. The decrease in contributed surplus in 2020 compared to 2019 was primarily due to expiry of the Arrangement.warrants.
Share Capital
At December 31, 2016,2020, the Company’sCompany's share capital was $3,292,175$16,900,668 comprising 6,735,88594,103,732 issued and outstanding common shares and NilCommon Shares. (2019 - $16,876,382 comprising 93,389,446 issued and outstanding preferred shares (FYE 2015 - $2,800,010 comprising 1,365,887Common Shares). On April 30, 2020, the Company issued and outstanding714,286 common shares and Nil issued and outstanding preferred shares).as a penalty to the holders of the convertible debentures, with a fair value of $24,286. The fair value of the penalty was not readily determinable, as such, the common shares were valued at the fair value of common shares on grant date.
Operating Activities
Cash provided by operating activities during fiscal year 2020 was $398,219 (compared with $3,119,626 for fiscal year 2019 and $1,202,203 utilized for fiscal year 2018). The decrease in cash utilized in operating activities during fiscal year 2016 was $396,259 (compared with $161,460 for fiscal year 2015 and $366,769 for fiscal year 2014). The increase in cash utilized in operations during fiscal year 20162020 as compared to fiscal year 20152019 was primarily due to an increase in professional fees mostly related to the Company the completion of several significant transactions during that year, being partially offset by reductions in cash used in connection with the Company’s ongoing operation functions such as wages and benefits, travel, research and development, as well as computer expenses, mostly as a result of the sale of the Company’s technology assets in Forge in 2015.reduced net loss. The decrease in cash utilized in operationsoperating activities during 2015fiscal year 2019 as compared to 2014fiscal year 2018 was primarily due to a decrease in advertising and promotion, investor relations and professional fees in 2015. This decrease was partially offset by anthe result of the increase in expenses for insurance and transfer agent feescustomer deposits during 20152019 compared to thewith prior yearyear.
Investing Activities
Investing activities primarily include additions to fixed assets and intangible assets. Net cash used in investing activities was $Nil, $5,570,$1,379,208, $3,482,264, and $10,195$8,418,197, in fiscal year ended December 31, 2016, 20152020, 2019 and 2014,2018, respectively. Cash used in investing activities in 2020 primarily included cash used for the construction of cellular towers that was partially offset with the cash received from the sale of towers during 2020. The main reason for the decrease from 2018 until now was the decrease on the financing activities, as we were not able to close a long term loan that will allow the company to build more sites.
Financing Activities
The Company’sCompany's cash inflows from financing activities was $1,774,582$1,048,786 in 2020 which was primarily the result the compensation of all the of repayments of debt and comprised proceeds from issuances of our shares of common stock and cash share subscriptions received in several private placementsthe new debt incurred during the year, as well as stock options exercises for cash. Cash flowsyear. The Company's cash inflows from financing activities was $74,684 in 20152019 which was primarily the result of the compensation of all the repayments of debt and 2014 was $165,376 and $197,785, respectively, and mostly consisted of cash received in connection with related party transactionsthe new debt incurred during those years.the year.
Capital Expenditures
There wasThe Company incurred capital expenditures of $2,656,546, $3,634,144, and $8,436,633 in 2020, 2019 and 2018 respectively. The expense in capital expenditures over the years is primarily due to cellular tower construction.
Borrowings
Outstanding Loans
As of December 31, 2020, there were an aggregate of $3,584,587 in loans outstanding. The details of such loans are as follows:
Balance, December 31, | | |
2020 | 2019 | Currency | Terms |
CAD $ | CAD $ | | |
1,505,038 | 731,606 | USD | Unsecured, due on demand |
1,817,141 | 148,158 | Colombian Pesos | Unsecured, due on demand |
79,567 | - | Colombian Pesos | Unsecured, repayable monthly until May 2023 |
150,984 | - | Colombian Pesos | Unsecured, repayable monthly until December 2023 |
31,857 | 32,545 | Argentine Pesos | Unsecured, due on demand |
- | 350,746 | Argentine Pesos | Unsecured, due January 2020 |
3,584,587 | 1,263,055 | | |
| | | |
3,440,732 | 1,263,055 | Current portion of loans payable |
143,855 | - | Long term portion of loans payable |
3,584,587 | 1,263,055 | | |
During the year ended December 31, 2020, the Company has incurred interest expense of $144,473 (US$113,018) on the loans payable, of which $88,018 (US$64,725) remains payable and has been recorded within interest payable on the consolidated statement of financial position.
Bonds
During the year ended December 31, 2020, no capital expenditure incurred in 2016, 2015bonds were issued by the Company. In the year ended December 31, 2019, the Company issued a total of 9,880 bonds (2018 - 9,663) at a price of $100 each for gross proceeds of $988,000 (2018 - $966,300). The bonds are secured against all present and 2014.after-acquired personal property of the Company, incur interest at a rate of 10% paid monthly, and mature September 21, 2021. In connection with the bonds issued, the Company paid cash debt issuance costs to an agent of $128,440 (2018 - $77,304) and issued 921,780 (2018 - 740,240) share purchase warrants to the agent with a fair value of $33,545 (2018 - $28,514). The share purchase warrants are exercisable at prices ranging from $0.08 to $0.14 per common share for a period of two years.
Future Liquidity
Prior toAt December 31, 2020, the completionCompany had an accumulated deficit of $25,352,460, which is funded primarily by the Tower Three Transaction,raising of equity funding, loans and customer deposits. Consequently, the Company’sCompany's ongoing operations did not generate cash inflows and its financial success wasare dependent on management’sthe Company's ability to continue to obtaingenerate sufficient funding to sustain operations throughrevenues in the development stagefuture, receive continued financial support and successfully bring the Company’s technologies to the point that theycomplete equity financings. The Company may not be out licensed. As a result of the Tower three Transaction, the Company now expectsable to generate revenuessufficient cash flows from its operations while also incurring additional costs in connection with the foreseeable future to support its working capital needs and may have to rely on funding through future equity issuances and short term borrowings to finance ongoing operations and the construction of Tower Three.
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cellular towers. Based upon the current level of our operations and our current expectations for future periods in light of the current economic environment, we believe that cash flow from our operations and available cash, together with available borrowings, will not be adequate to finance the capital requirements for our business during the next 12 months. Inmonths without additional funding through future equity issuances and short term borrowings, which will depend on market conditions. Additionally, in the future we may make acquisitions of businesses or assets or commitments to additional capital projects. To achieve the long-term goals of expanding our assets and earnings, including through acquisitions, additional capital resources will be required. Depending on the size of a transaction, the capital resources that will be required can be substantial. The necessary resources will be generated from cash flow from operations, cash on hand, borrowing against our assets or the issuance of securities.
In order to finance the Company’sCompany's future operations and to cover administrative and overhead expenses the Company may raise money through equity sales. Many factors influence the Company’sCompany's ability to raise funds, including the Company’sCompany's track record, and the experience and caliber of its management. Actual funding requirements may vary from those planned due to a number of factors. Management believes it will be able to raise equity capital as required in the long term, but recognizes there will be risks involved that may be beyond their control. Should those risks fully materialize, it may not be able to raise adequate funds to continue its operations.
C. Research & Development, Patents and Licenses.development, patents and licenses, etc.
PriorResearch and development activities are not material to the Tower Three Transaction,Company's business or operations and consequently, the Company had no research and development expense consisted primarilypolicies during of salaries for management of research contracts and research contracts for pre-clinical studies, clinical studies and assay development as well as the development of clinical trial protocols and application to government agencies to conduct clinical trials, including consulting services fees related to regulatory issues and business development expenses related to the identification and evaluation of new drug candidates. Research and development costs are expensed as they are incurred.last three years
Comparison of Years Ended December 31, 2016, 2015 and 2014
The Company incurred total expenses in the development of its intellectual property in the years ended December 31, 2016, 2015, and 2014 as follows:
| | | |
| Year ended | Year ended | Year ended |
| December 31, 2016 | December 31, 2015 | December 31, 2014 |
Research and Development Expenses | | | |
Personnel, Consulting, and Stock-based Compensation | $Nil | $Nil | $Nil |
License Fees and Subcontract research | $Nil | $Nil | $Nil |
Facilities and Operations | $Nil | $Nil | $Nil |
Less: Government contributions | $Nil | $Nil | $Nil |
Total | $Nil | $Nil | $Nil |
D. Trend Information
Other than as disclosed elsewhere in this Form 20-F, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material adverse effect on our revenues, income, profitability, liquidity or capital resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.
E. Off Balance Sheet Arrangements
The Company is not a party to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on the Company’sCompany's financial condition, changes in financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.
F. Tabular Disclosure of Contractual Obligations
The Company has no knownOther than as disclosed below, we do not have any contractual obligations specified in Item 5.F.1 as of theDecember 31, 2020 relating to long-term debt obligations, capital (finance) lease obligations, operating lease obligations, purchase obligations or other long-term liabilities reflected on our latest fiscal year end balance sheet date.sheet. The payments in the table below include estimated future principal and interest payments on our contractual obligations.
| | | | | | | | | Payments due by period | |
| Contractual Obligations | | Carrying
amount | | | Contractual cash flows | | | Less than 1 year | | | 1 - 3 years | | | 4 - 5 years | | | After 5 years | |
| | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
| Accounts payable and accrued liabilities | | 4,368,281 | | | 4,368,218 | | | 4,368,281 | | | - | | | - | | | - | |
| Interest payable | | 650,278 | | | 650,278 | | | 650,278 | | | - | | | - | | | - | |
| Loans payable | | 3,588,352 | | | 3,588,352 | | | 3,444,497 | | | 143,855 | | | - | | | - | |
| Loans from related parties | | 3,866,983 | | | 3,866,983 | | | 3,866,983 | | | - | | | - | | | - | |
| Bonds payable | | 1,882,750 | | | 1,882,750 | | | 1,882,750 | | | - | | | - | | | - | |
| Lease liability | | 1,685,678 | | | 3,313,033 | | | 507,403 | | | 1,160,875 | | | 773,033 | | | 871,722 | |
| Total | | 16,042,322 | | | 17,669,677 | | | 14,720,192 | | | 1,304,730 | | | 773,033 | | | 871,722 | |
Item 6.Directors, Senior Management and Employees
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Directors and Senior Management
The following table sets forth certain information relating to our directors and executive officers:
Name and Position | Principal Occupation for Past Five Years | Date of Appointment to Office | Common Shares Held | Percentage of Common Shares Outstanding(1) |
Alejandro Ochoa Interim Chief Financial Officer, Interim Secretary, President, Chief Executive Officer& Director | Founder and CEO of Tower Three SAS; and consultant to Mackie Research Capital Corporation's investment banking practice with a Latin American focus | January 12, 2017 | 12,000,000 | 12.75% |
Luis Parra Chief Operating Officer | Partner and co-founder of QMC Colombia: Partner and co-founder of Ingeant SA. | August 15, 2017 | Nil | Nil |
Fabio Alexander Vasquez Director | Co-founder of Tower Three, and has been engaged in the Florida aviation business for over 25 years. | January 12, 2017 | 12,000,000 | 12.75% |
Robert Nicholas Horsley Director | Director of Evolving Gold Corp (Since March 4, 2014) Owner of Marksman Geological Ltd Owner of Cervus Business Management Inc. Partner in Howe And Bay Financial Corp Former Chief Executive Officer of the Company. | February 1, 2016 | Nil | Nil |
Hugo Ochoa Director | Owner and operator of SAP Truck & Auto Parts Corporation. Owns and operates commercial Real Estate properties in Colombia | September 9, 2020 | 8,000,000 | 8.50% |
(1) | Figures as of October 28, 2017.
|
(2) | As of October 28, 2017 we had 67,825,698 shares of common stock(1) As of December 31, 2020 we had 94,103,732 Common Shares outstanding.
|
Each of our directors will serve until the next annual meeting of our shareholders. None of our directors have service contracts with the Company or any of its subsidiaries providing for benefits upon termination of employment.
The Company’sCompany's Audit Committee consists of Alejandro Ochoa, FabioVasquez and Robert Horsley, and Brian Gusko.
The Company’s Compensation Committee consists of Robert Horsley, Brian Gusko and Fabio Alexander Vasquez.Horsley.
Set forth below is certain biographical information furnished to us by our directors and executive officer. There are no family relationships among any of our current directors or executive officers. No director or executive officer was appointed as a director or officer of the Company pursuant to any arrangement or understanding with any major shareholder, customer, supplier or other person.
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Alejandro Ochoa –- President & Chief Executive Officer and Director (Age: 36)41)
Mr. Ochoa has over 18 years of experience working within the financial services industry. He has worked with such firms as Morgan Stanley, Prudential Securities and Raymond James. Mr. Ochoa currently servesserved as consultantconsultant/shareholder to Mackie Research Capital Corporation’sCorporation's Investment Banking Practice with a Latin America focus. Mr. Ochoa is fluent in Spanish and has an understanding of the South American capital markets.
Dedicated to Latin America, his areas of expertise include mining and energy transactions, in advisory, capital raisings and strategic assetsasset sales with Latin American transactions ina focus on Colombia, Mexica,Mexico, and Peru. He has also covered telecom infrastructure companies from the United States, Argentina, and Colombia. Mr. Ochoa has a Bachelors in Science with a focus in Finance from Florida International University. Mr. Ochoa is a citizenthe son of Colombia who decadesone of experience working in Colombiaour directors, Hugo Ochoa.
Abbey Abdiye, Chief Financial Officer and Corporate SecretaryLuis Parra (Age: 42)51)
Mr. Abdiye has extensiveParra is an executive with more than 25 years of professional experience within oil & gas, constructions and telecommunications corporations.
Prior to joining the Company, Mr. Parra worked as Country Manager at the multinational QMC Telecom, before that he co-founded Ingeant S.A. a company dedicated to construction in different industries, mainly Oil & Gas and Telecommunications.
Mr. Parra holds a Civil Engineer degree from Universidad Nacional de Colombia with post graduate education in the financial sector in both publicfields of corporate finance, project management and private companies. He is currently the chief financial officer of the following Canadian public companies: Ceylon Graphite Corp. (since January 20, 2017), Biomark Diagnostics Inc. (since October 30, 2014), and Fortify Resources Inc. (since November 15, 2016) He is also a Chartered Professional Accountant (CPA). As the Company’s Chief Financial Officer, Mr. Abdiye provides leadership and coordination in the administrative, business planning, reporting, and budgeting efforts of the Company. He oversees the Company’s financial reporting, internal controls, corporate governance management systems, annual audit and regulatory compliance matters. Mr. Abdiye is also on the board of directors of Lomiko Metals (since October 2012) a TSX-V listed company. He obtained Bachelor of Business Administration degree from Simon Fraser University and a Co-op Education certificate.project evaluation.
Fabio Alexander Vasquez, Director (Age: 50)55)
Mr. Vasquez, a co-founder of Tower Three and has been engaged in the Florida aviation business for over 25 years. He has been instrumental in the development and expansion of Miami Executive Aviation, a successful luxury charter aviation business which services Latin American clients. Mr. Vasquez is a citizen of Colombia who has decades of experience working in Colombia.
Robert Horsley, Director (Age: 35)40)
Mr. Robert “Nick”"Nick" Horsley has over 10 years of public markets experience focused in finance, investor relations, marketing management and merger & acquisitions. Mr. Horsley has served as a director and a consultant to several public and private companies and has worked in a variety of industries including:including consumer goods, energy, mining, oil & gas, nutraceuticals & pharmaceuticals, and technology. He is also a director of Evolving Gold Corp. (since March 15, 2015) and is the chief executive officer of Fortify Resources Inc. (since November 15, 2015), each a CSE listed company.
Brian Gusko, DirectorHugo Ochoa (Age: 50)67)
Mr. GuskoHugo Ochoa is a self-made entrepreneur who has significanta proven track record in operating international telecommunicationoperations in his commercial Truck/Auto parts business, experience at the highest level. His international experience includes working in Corporate Planning with a Mitsubishi group company in Tokyo, Product Management at a Vodafone spin-off in the Netherlands, and being Managing DirectorSAP Truck & Auto Parts Corp. He has successfully run his Truck/Auto parts business for over 40 years. As CEO of Palm’s South African wireless affiliate; he helped launched wireless data services in Africa for Palm’s new smart phones. He also was a research associate with the U.S. Department of Commerce at an embassy posting, researching telecom and technology companies. Mr. Gusko held management positions at Telus Advanced Communications, and Telus Planet Internet in Alberta Canada where his portfolio was responsible for the majority of TELUS web hosting and internet traffic, respectively. He is also currently on the Board of Directors of Lomiko Metals and Cloud Nine Education Group, Ltd. PreviouslySAP, he has served onsecured distribution of numerous global automotive companies and created the boards of Robix Alternative Fuels, Inc. (from February 2014company's individual brands manufactured in China and distributed globally. In addition to February 2015), Vodis Pharmaceuticals Inc. (from July 2014 to September 2014)SAP, Mr. Ochoa owns and Arco Resources (from June 2015 to May 2016) . Previously he has served as chief financial officer of the following Canadian public companies: UC Resources Ltd. (from August 2007 to August 2009), Vodis Pharmaceuticals Inc. (from July 2014 to November 2015), and First Choice Products Inc. from September 2015 to November 2015).
Octavio De La Espriella, Chief Operating Officer (Age: 50)
operates commercial real estate in Colombia. Mr. De La EspriellaOchoa is the father of our Alejandro Ochoa, our President, Chief OperatingExecutive Officer, of Tower Three. He was formerly theinterim Chief OperatingFinancial Officer of Continental Towers Company where he helped expand the portfolio to over 200 towers in a two-year period. His role today is the interface of Tower Three with the four principal carriers/operators within Colombia (i.e., Claro, Tigo, Avantel, and
25
Movistar). He has a Bachelor of Science degree in Finance from Colegio de Estudios Superiores de Administración CESA. Director
B. Compensation.
Remuneration and Borrowing
The Company’sCompany's Board of Directors (the “Board”"Board") may determine remuneration to be paid to the directors.directors and officers. The Compensation Committee of the Board (the “Compensation Committee”"Compensation Committee") assists the Board in reviewing and approving the compensation structure for the directors. The Board may exercise all the powers of the Company to borrow moneydirectors and to mortgage or charge its undertaking, property and uncalled capital, and to issue debentures or other securities whether outright or as security for any debt obligations of the Company or of any third party.officers.
Compensation of Directors and Executive Officers, excluding Compensation Securities
In 2016, weThe following table sets forth all direct and indirect compensation paid, aggregate cash compensation of approximately $nilpayable, awarded, granted, given or otherwise provided, directly or indirectly, by the Company thereof to our directors andeach named executive officers and each director of the Company, in any capacity, including, for greater certainty, all plan and non-plan compensation, direct and indirect pay, remuneration, economic or financial award, reward, benefit, gift or perquisite paid, payable, awarded, granted, given or otherwise provided to the named executive officer or director for services provided and for services to be provided, directly or indirectly, to the Company:
Name and Position | Fiscal Year Ended | Salary, Consulting Fee, Retainer or Commission ($) | Bonus ($) | Committee or Meeting Fees ($) | Value of Perquisites ($) | Value of all other Compensation ($) | Total Compensation
($) |
Alejandro Ochoa, Director, President, CEO, Interim CFO and Interim Corporate Secretary | 2020
2019 | 468,300
204,000 | Nil
Nil | Nil
Nil | Nil
Nil | Nil
Nil | 468,300
204,000 |
Santiago Rossi, Former CFO | 2020
2019 | 336,300
170,000 | Nil
Nil | Nil
Nil | Nil
Nil | Nil
Nil | 336,300
170,000 |
Luis Parra, COO | 2020
2019 | 320,300
204,000 | Nil
Nil | Nil
Nil | Nil
Nil | Nil
Nil | 320,300
204,000 |
Fabio Alexander Fasquez, Director | 2020
2019 | Nil
Nil | Nil
Nil | Nil
Nil | Nil
Nil | Nil
Nil | Nil
Nil |
Robert Horsely, Director | 2020
2019 | Nil
Nil | Nil
Nil | Nil
Nil | Nil
Nil | Nil
Nil | Nil
Nil |
Hugo Ochoa Director | 2020
2019 | Nil
Nil | Nil
Nil | Nil
Nil | Nil
Nil | Nil
Nil | Nil
Nil |
Abbey Abdiye, Former CFO | 2020
2019 | Nil
92,100 | Nil
Nil | Nil
Nil | Nil
Nil | Nil
Nil | Nil
92,100 |
(1) Alejandro Ochoa was appointed as the President, CEO and a director of the Company on January 12, 2017. In addition, on January 31, 2021, Alejandro Ochoa was appointed as the Interim CFO and Interim Corporate Secretary.
(2) Santiago Rossi was appointed as the CFO of the Company on March 1, 2019 and subsequently resigned on January 31, 2021.
(3) Luis Parra was appointed as the COO of the Company on August 15, 2017.
(4) Fabio Alexander Fasquez was appointed as a group. director of the Company on January 12, 2017.
(5) Robert Horsely was appointed as a director of the Company on February 2, 2016.
(6) Hugo Ochoa was appointed as a director of the Company on September 9, 2020.
(7) Abbey Abdiye was appointed the CFO of the Company on January 12, 2017 and subsequently resigned on March 1, 2019.
We do not pay or set aside any amounts for pension, retirement or other benefits for our officers and directors.
We provide directors and officer’sofficer's liability and company reimbursement insurance to cover all of our directors and officers against losses arising from claims we indemnify for. Our current insurance coverage is scheduled to expired on January 24, 2018,1, 2021, however, we intend to renew the insurance.
Stock Options and we renewedOther Compensation Securities
The following table sets out all compensation securities granted or issued to each director and named executive officer by the insurance upon its expirationCompany or any subsidiary thereof in the year ended December 31, 2020 for services provided, or to be provided, directly or indirectly, to the Company or any subsidiary thereof:
Compensation Securities |
Name and Position | Type of Compensation Security | Number of Compensation Securities, Number of Underlying Securities and Percentage of Class | Date of Issue or Grant | Issue, Conversion or Exercise Price
($) | Closing Price of Security or Underlying Security on Date of Grant | Closing Price of Security or Underlying Security at Year End | Expiry Date |
Alejandro Ochoa, Director, President, CEO, Interim CFO and Interim Corporate Secretary | Stock Options | N/A | Nil | Nil | Nil | Nil | Nil |
Santiago Rossi, Former CFO | Stock Options | N/A | Nil | Nil | Nil | Nil | Nil |
Luis Parra, COO | Stock Options | N/A | Nil | Nil | Nil | Nil | Nil |
Fabio Alexander Fasquez, Director | Stock Options | N/A | Nil | Nil | Nil | Nil | Nil |
Robert Horsely, Director | Stock Options | N/A | Nil | Nil | Nil | Nil | Nil |
Hugo Ochoa, Director | Stock Options | N/A | Nil | Nil | Nil | Nil | Nil |
Abbey Abdiye, Former CFO | Stock Options | N/A | Nil | Nil | Nil | Nil | Nil |
Exercise of Compensation Securities by Directors and Named Executive Officers
The following table sets out each exercise by a director or named executive officers of compensation securities during the year ended December 31, 2020:
Name and Position | Type of Compensation Security | Number of Underlying Securities Exercised
(#) | Exercise Price per Security
($) | Date of Exercise | Closing Price per Security on Date of Exercise
($) | Difference between Exercise Price and Closing Price on Date of Exercise
($) | Total Value on Exercise Date
($) |
Alejandro Ochoa, Director, President, CEO, Interim CFO and Interim Corporate Secretary | Stock Options | N/A | Nil | Nil | Nil | Nil | Nil |
Santiago Rossi, Former CFO | Stock Options | N/A | Nil | Nil | Nil | Nil | Nil |
Luis Parra, COO | Stock Options | N/A | Nil | Nil | Nil | Nil | Nil |
Fabio Alexander Vasquez, Director | Stock Options | N/A | Nil | Nil | Nil | Nil | Nil |
Robert Horsely, Director | Stock Options | N/A | Nil | Nil | Nil | Nil | Nil |
Hugo Ochoa, Director | Stock Options | N/A | Nil | Nil | Nil | Nil | Nil |
Abbey Abdiye, Former CFO | Stock Options | N/A | Nil | Nil | Nil | Nil | Nil |
Equity Compensation Plan Information as of December 31, 2020
Plan Category | Column (a) Number of securities to be issued upon exercise of outstanding options(1) | Column (b) Weighted-average exercise price of outstanding options | Column (c) Number of securities remaining available for future issuance under equity compensation plans |
Equity compensation plans approved by security holders | 1,275,000 | $0.30 | 8,063,944 |
Equity compensation plans not approved by security holders | N/A | N/A | N/A |
Total | 1,275,000 | $0.30 | 8,063,944 |
(1) The Company does not have any warrants or rights outstanding under any equity compensation plans.
(2) Based on the Company's issued and outstanding common shares of 94,103,732 as at December 31, 2020.
The Company does not have any equity compensation plans that were not approved by shareholders.
2016 Stock Option Plan
The Board adopted a stock option plan (the “Option Plan”"Option Plan"), which was approved by shareholders on May 20, 2016 at the Company’sCompany's Annual General Meeting. The purpose of the Option Plan is to provide incentives to attract, retain and motivate executive officers, directors and employees whose present and future contributions are important to the Company. The maximum number of the Company’sCompany's shares of common stock reserved for issuance pursuant to stock options granted under the Option Plan will, at any time, be 10% of the number of the Company’sCompany's shares of common stock then outstanding. The number of the Company’sCompany's shares of common stock that may be issued to any one person shall not exceed 5% of the Company’sCompany's total issued and outstanding shares of common stock on a non-diluted basis. The price at which the Company’sCompany's shares may be issued under the stock option plan will be determined from time to time by the Board in compliance with the rules and policies of any stock exchange upon which the Company’sCompany's shares of common stock are listed. The vesting of options granted under the Option Plan will be determined by the Board at the time of the grant. Options granted under the Option Plan may be exercisable over a maximum period of five years. They will generally have a term of 5 years and vest over four years, 25% on each of the first four anniversaries of the date of grant, provided the optionee is in continuous service to the Company. The Board may amend the terms of the Option Plan from time to time, to the extent permitted by the Option Plan and any rules and policies of any stock exchange on which the Company’sCompany's shares of common stock are listed, or terminate it at any time. If the Company accepts any offer to amalgamate, merge or consolidate with any other company (other than a wholly-owned subsidiary) or if holders of greater than 50% of the Company’sCompany's shares of commons stock accept an offer made to all or substantially all of the holders of the Company’sCompany's shares of common stock to purchase in excess of 50% of our current issued and outstanding shares of commons stock, any then-unvested options will automatically vest in full.
2018 Stock Option Plan
During the 2018 Annual General Meeting of the Company's shareholders held on February 5, 2019, the Company's shareholders ratified and renewed the Option Plan Informationpursuant to the rules of the CSE (the "2018 Option Plan"). Under the 2018 Option Plan, the total number of Common Shares that may be reserved for issuance will be 10% of the issued and outstanding Common Shares at the time of grant, less any common shares reserved for issuance pursuant to the grant of stock options under any other share compensation arrangements. Additionally, the 2018 Option Plan provides for the following:
- The options granted under the 2018 Stock Option Plan are non-assignable and non-transferable (except that the optionee's heirs or administrators can exercise any portion of the outstanding option, up to 180 days from the optionee's death);
- that the 2018 Option Plan, together with all other previously established or proposed share compensation arrangements may not, during any 12 month period, result in:
- the number of options granted to any one person exceeding 5% of the issued shares of the Company; or
- the number of options granted to any one consultant exceeding 2% of the issued shares of the Company.
- The exercise price of an option may not be set at less than the greater of the closing market price
of the Common Shares on (a) the trading day immediately prior to the date of grant of the options; and (b) the date of grant of the options as permitted by the rules of the Canadian Securities Exchange;
- The options may be exercisable for a period of up to 5 years (subject to extension where the expiry date falls within a "blackout period"); and
- Any options granted to any optionee who is a director, employee, consultant or management company employee must expire within 90 days following the date the optionee ceases to be in that role.
Employment Agreements
For the year ended December 31, 2016
| | | |
Plan Category | Column (a) | Column (b) | Column (c) |
| Number of securities to | Weighted-average | Number of securities remaining |
| be issued upon exercise | exercise price of | available for future issuance |
| of outstanding options | outstanding options | under equity compensation plans |
Equity compensation plans approved by security holders | Nil | Nil | 673,588 |
Equity compensation plans not approved by security holders | N/A | N/A | N/A |
Total | Nil | Nil | 673,588 |
Employment Agreements
The2019, other than as set forth below, the Company currently does not have any employment, consulting or management agreements or arrangements with any of its executive officers.the Company's current NEOs or directors.
26The Company entered into an employment agreement with Mr. Alejandro Ochoa effective October 31, 2018 with regards to his employment as the President and Chief Executive Officer of the Company. The agreement is for an indefinite term and will continue until such time unless earlier terminated. Pursuant to the agreement, the Company has agreed to pay Mr. Ochoa a base salary of $240,000 annually. Mr. Ochoa is also eligible, on each anniversary of the agreement, commencing on January 1, 2019, to (a) the equivalent of one (1%) percent of the total issued common shares of the Company, or (b) two (2%) percent of the total issued common shares of the Company, for any complete year that the Company (including Affiliates) has three hundred (300) or more Co-location Tenants (as that term is defined in the employment agreement).
The Company entered into an employment agreement with Mr. Luis Parra effective October 31, 2018 with regards to his employment as the Chief Operating Officer of the Company. The agreement is for an indefinite term and will continue until such time unless earlier terminated. Pursuant to the agreement, the Company has agreed to pay Mr. Parra a base salary of $180,000 annually. Mr. Parra is also eligible to earn a cash bonus for each completed tower and Co-location Tenants (as that term is defined in the employment agreement) that are in place as at December 31st each year. In addition, on each anniversary of the agreement, commencing on January 1, 2019, Mr. Parra is eligible to earn the equivalent of one (1%) percent of the total issued common shares of the Company.
The Company entered into an employment agreement with Mr. Santiago Rossi on October 31, 2018 and effective March 31, 2019 with regards to his employment as the Chief Financial Officer of the Company. Pursuant to the agreement, the Company agreed to pay Mr. Rossi a base salary of $180,000 annually. Mr. Rossi was also eligible to earn a cash bonus for each completed tower and Co-location Tenants (as that term is defined in the employment agreement) that were in place as at December 31st each year. In addition, on each anniversary of the agreement, commencing on January 1, 2019, Mr. Rossi was eligible to earn the equivalent of one (1%) percent of the total issued common shares of the Company. The agreement, which was for an indefinite term, was terminated in February, 2021.
Corporate Governance
Composition of the Board
The Board facilitatesIn order to attempt to facilitate its exercise of independent supervision over management, by ensuringthe Company's board of directors (the "Board") has established a goal that the Board isbe composed of a majority of independent directors. However, because of the Company's size and limited operating history the Board has not been able to recruit enough candidates for the Board in order to meet this goal. Directors are considered to be independent if they have no direct or indirect material relationship with the Company. A “material relationship”"material relationship" is a relationship which could, in the view of the Board, be reasonably expected to interfere with the exercise of a director’sdirector's independent judgment. In establishing the standard for what qualifies as an independent director, the Board has adopted the independence standard outlined in National Instrument 58-101 - Disclosure of Corporate Governance Practices, which is applicable to Canadian public companies. The Board currently has four directors,three directors. As defined in NI 52-110, Mr. Ochoa, the Company's Chief Executive Officer and President, is not "independent", as he is an executive officer of which Mr. Gusko is considered to be independent for the purposes of NI 58-101.Company, and Messrs. Horsley and Vasquez are independent.
The mandate of the Board is to act in the best interests of the Company and to supervise management. The Board is responsible for approving long-term strategic plans and annual operating budgets recommended by management. Board consideration and approval is also required for material contracts and business transactions, and all debt and equity financing transactions. Any responsibility which is not delegated to management or to the committees of the Board remains with the Board. The Board meets on a regular basis consistent with the state of the Company’sCompany's affairs and also from time to time as deemed necessary to enable it to fulfill its responsibilities.
The Chairman of the Board is Brian Gusko,Mr. Alejandro Ochoa, who is not an independent director.director as he is interim Chief Financial Officer, Chief Executive Officer and President.
Duties of Directors
Under British Columbia law, our directors have a duty of loyalty to act honestly in good faith with a view to our best interest. Our directors also have a duty to exercise the care, diligence and skills that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to us, our directors must ensure compliance with our amended and restated memorandum and articles of association.the Company's articles. A shareholder has the right to seek damages if a duty owed by our directors is breached.
The functions and powers of our Board include, among others:
• convening shareholders’shareholders' annual general meetings and reporting its work to shareholders at such meetings;
• issuing authorized but unissued shares of common stockCommon Shares and redeeming or purchasing outstanding shares of common stock of our Company;Common Shares;
• declaring dividends and distributions;
• appointing officers and determining the term of office and compensation of officers;
• exercising the borrowing powers of our Company and mortgaging the property of our Company; and
• approving the transfer of shares of common stock of our company,Common Shares, including the registering of such shares of common stockCommon Shares in our share register.
Position Descriptions
The Board has not developed written position descriptions for the chair or the chair of any Board committees or for the CEO. Given the size of the Company and the existence of only a small number of officers, the Board does not feel that it is necessary at this time to formalize position descriptions in order to delineate their respective responsibilities.
Nomination of Directors
The Company does not have a formal process or committee for proposing new nominees for election to the Board. The nominees are generally the result of recruitment efforts by the Board members, including both formal and informal discussions among Board members.
Qualification
There is no shareholding qualification for directors.
Orientation and Continuing Education
When new directors are appointed, they receive orientation, commensurate with their previous experience, on the Company’sCompany's technologies, business and industry and on the responsibilities of directors. New directors also receive historical public information about the Company and the mandates of the committees of the Board. Board meetings may also include presentations by the Company’sCompany's management and employees to give the directors additional insight into the Company’sCompany's business. In addition, new directors are encouraged to visit and meet with management on a regular basis and to pursue
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continuing education opportunities where appropriate.
Assessments
The Board regularly assesses its own effectiveness and the effectiveness and contribution of each Board committee member and director.
Interested Transactions
A director may vote with respect to any contract or transaction in which he or she is interested, provided that the nature of the interest of any director in such contract or transaction is disclosed by him or her at or prior to its consideration and any vote in that matter.
Board Committees
Our Board has established an Audit Committee andaudit committee but does not currently have a Compensation Committee.compensation committee.
Audit Committee
The Audit Committee has various responsibilities as set forth in Multilateral Instrument 52-110 (“("MI 52-110”52-110"). The Audit Committee oversees the accounting and financial reporting practices and procedures of the Company and the audits of the Company’sCompany's financial statements. The principal responsibilities of the Audit Committee include: (i) overseeing the quality, integrity and appropriateness of the internal controls and accounting procedures of the Company, including reviewing the Company’sCompany's procedures for internal control with the Company’sCompany's auditors and Interim Chief Financial Officer; (ii) reviewing and assessing the quality and integrity of the Company’sCompany's internal and external reporting processes, its annual and quarterly financial statements and related management discussion and analysis, and all other material continuous disclosure documents; (iii) establishing separate reviews with management and external auditors of significant changes in procedures or financial and accounting practices, difficulties encountered during auditing, and significant judgments made in management's preparation of financial statements; (iv) monitoring compliance with legal and regulatory requirements related to financial reporting; (v) reviewing and pre-approving the engagement of the auditor of the Company and independent audit fees; and (vi) assessing the Company’sCompany's accounting policies, and considering, approving, and monitoring significant changes in accounting principles and practices recommended by management and the auditor.
Audit Committee Charter
The Audit Committee Charter is filed as an exhibit to this Form 20-F.
Composition of the Audit Committee
As noted above, the members of the Audit Committee are Alejandro Ochoa, Fabio Vasquez and Robert Horsley, and Brian Gusko, all of whom are considered independent pursuant to NI 52-110, except for Mr. Ochoa.Horsley. All members of the Audit Committee are considered to be financially literate.
A member of the Audit Committee isindependentif the member has no direct or indirect material relationship with the Company. A material relationship means a relationship which could, in the view of the Board, reasonably interfere with the exercise of a member’smember's independent judgment.
A member of the Audit Committee is consideredfinancially literateif he or she has the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Company.
Relevant Education and Experience
Please see above for the biographies of Alejandro Ochoa and Robert Horsley and Brian Gusko.
Pre-Approval Policies on Certain Exemptions
The Audit Committee has not adopted specific policies and procedures for the engagement of non-audit services. The Company’sCompany's auditors have not provided any material non-audit services.
Compensation Committee
The Company current does not currently have a compensation committee as the Board performs the functions that a compensation committee would normally perform.
D. Employees
As of December 31, 20162020, the Company employed 33 individuals in the following countries:
Country | Employee Head Count |
Colombia | 14 |
Argentina | 7 |
Mexico | 9 |
USA | 3 |
The Company outsources site acquisition, tower manufacturing and civil works to third parties. As of December 31, 2020, the Company had the following number of employees and contractors:
| | |
| Location | Full Time Employees | Contractors |
| Vancouver, British Columbia | 0 | 2 |
The Company has previously utilized consultants and contractors to carry on many of its activities and,28 third parties outsourced in particular, to supervise and conduct pre-clinical scientific experiments, assay development and validation. Other functions the Company have previously decided to outsource include assay development, formulation, clinical trials and manufacturing. As the Company expands its activities, it is probable that it will hire additional employees, especially in connection with its operations upon completioneach of the Tower three Transaction. .above categories as follows:
Outsourced Services | Site Acquisition | Tower Manufacture | Civil Works |
Colombia | 10 | 5 | 5 |
Argentina | 0 | 0 | 0 |
Mexico | 2 | 3 | 3 |
E. Share Ownership.
The following table sets forth, as of October 28, 2017:December 31, 2020: (a) the names of each beneficial owner of more than five percent (5%) of our common stockCommon Shares known to us, the number of shares of common stock beneficially owned by each such person, and (b) the names of each director and officer, the number of shares our common stock beneficially owned, and the percentage of our common stock so owned, by each such person, and by all of our directors and executive officers as a group. Each person has sole voting and investment power with respect to the shares of our common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated. Individual beneficial ownership also includes
Name and Position | Common Shares Held | Percentage of Common Shares Outstanding(1) | Percentage of Votes Held |
Alejandro Ochoa President, Chief Executive Officer, Interim Chief Financial Officer, Interim Corporate Secretary & Director | 12,000,000 | 12.75% | 12.86% |
Luis Parra, Chief Operating Officer | Nil | Nil | Nil |
Fabio Alexander Vasquez Director | 12,000,000 | 12.86% | 12.86% |
Robert Nicholas Horsley Director | Nil | Nil | Nil |
Hugo Ochoa | 8,000,000 | 8.57% | 8.57% |
(1) Based on 94,103,732 Common Shares outstanding on May 11, 2021..
As at February 28, 2021 the registrar and transfer agent for our company reported that there were 94,103,732 common shares of common stock thatour company issued and outstanding. Of these, 49,585,357 were registered to Canadian residents, including 45,982,347 shares registered to CDS & Co., which is a person has the right to acquire within 60 days from October 28, 2017. Unless otherwise indicated, the addressnominee of the person’s belowCanadian Depository for Securities Limited. The 49,585,357 shares were registered to 85 shareholders in Canada, one of which is CDS & Co. 44,511,944 of our shares were registered to residents of the Company’s address at 600-535 Howe Street, Vancouver, BC V6C 2Z4 Canada.United States, including 12,289,876 shares registered to CEDE & Co., which is a nominee of Depository Trust Company. The 44,511,944 shares were registered to 9 shareholders in the United States, one of which is CEDE & Co. 6,431 of our shares were registered to residents of other foreign countries (1 shareholder).
(1) | Figures as of October 28, 2017.
|
(2) | Based on 67,825,698 shares of common stock outstanding on October 28, 2017.
|
Item 7.Major Shareholders and Related Party Transactions
A . Major Shareholders.
Please refer to Item 6.E, “Share Ownership”"Share Ownership".
29
B. Related Party Transactions.
Other than as disclosed herein, toThe following section outlines the best of our knowledge, in the years ended December 31, 2016, 2015 and 2014, there were no material transactions or loans between our companyCompany and: (a) enterprises that directly or indirectly through one or more intermediaries control or are controlled by, or are under common control with, our company;Company; (b) associates; (c) individuals owning, directly or indirectly, an interest in the voting power of our companyCompany that gives them significant influence over our company,Company, and close members of any such individual’sindividual's family; (d) key management personnel of our company,Company, including directors and senior management of our companyCompany and close members of such individuals’individuals' families; or (e) enterprises in which a substantial interest in the voting power is owned, directly or indirectly, by any person described in (c) or (d) or over which such a person is able to exercise significant influence.
InLoans payable to related parties include loans and advances received from related individuals and companies. As at December 31, 2020 and December 31, 2019, the normal course of operations, we enter into transactionsCompany had the following loan balances with related parties, which include, among others, affiliates whereby we have a significant equity interest (10% or more) in the affiliates or have the ability to influence the affiliates’ or our operating and financing policies through significant shareholding, representation on the board of directors, corporate charter and/or bylaws. The affiliates also includeparties:
| | | | |
| | | |
Balance, December 31, | | | | |
2020 | Currency | Lender | Rate | Terms |
CAD $ | | | % | |
1,927,683 | USD | Hugo Ochoa | 12% | Unsecured, due on demand |
830,744 | USD | Executive Business | 12% | Unsecured, due on demand |
266,697 | USD | Luis Parra | 18% - 24% | Unsecured, due on demand |
289,027 | USD | HLG Investments | 12% | Unsecured, due on demand |
231,117 | USD | SAEF | 12% | Unsecured, due on demand |
127,812 | USD | 1200 Brickell Holdings | 18% - 24% | Unsecured, due on demand |
175,356 | USD | Diana Aguilar | 18% - 24% | Unsecured, due on demand |
18,546 | COP | Alexandra Ricardo | - | |
In connection with certain of our directors, President and Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and their close family members.
Payments or accruals for related party services provided toloans, the Company duringincurred monthly penalty fees of 10% until June 30, 2018 once the years ended December 31, 2016, 2015 and 2014 were:
| | | | | | |
| | 2016 | | 2015 | | 2014 | |
| | $ | | $ | | $ | |
| Salary paid to a former chief executive officer and director | - | | 106,667 | | 160,000 | |
| Consulting fees paid to a Director or to a company controlled by a director | 78,571 | | 24,000 | | 39,121 | |
| Accounting fees paid to a company controlled by the CFO | 15,714 | | 7,500 | | 6,000 | |
| Legal fees paid to a director | - | | 1,334 | | 3,121 | |
| Share-based payments for options issued to a director | - | | 4,500 | | 67,835 | |
| | 94,285 | | 144,001 | | | |
The consulting fees described above were paid to Howe and Bay Financial Corp., (“Howe and Bay”) a related party of the Company, of which Brian Gusko and Robert Horsley are directors in connection with services provided to the Company from Howe and Bay consisting of corporate communication advice and office services management.
The Company incurred legal fees from a consultant and director of the Company in the amount of $3,121 forloans reached their initial maturity dates. During the year ended December 31, 2014.2018, the Company paid finance expenses of $528,132 (US$407,500) in connection with these monthly penalties.
TheAs at December 31, 2018, the Company had advanced $224,976 to related parties in connection with costs to be incurred salaries, directors’ fees and other benefits relating to directors and officerson behalf of the company inCompany. This amount was included within other receivables on the amountconsolidated statement of $205,121 forfinancial position. The amounts advanced are unsecured, non-interest bearing and due on demand. During the year ended December 31, 2014.2019, the Company deemed these amounts to be uncollectable and wrote off the balance.
During the year ended December 31, 20142020, the Company issued 1,000,000 common shares and warrants to settle $50,000has incurred interest expense of outstanding debt owing to a director of the Company.
During the year ended December 31, 2015, the Company assigned certain loans from related parties to Cabbay pursuant to the Arrangement.
The Issuer incurred legal fees from a consultant and director of the Issuer in the amount of $1,334 for the year ended December 31, 2015.
During the year ended December 31, 2015, the Company issued 39,333 common shares and warrants to settle $59,000 of outstanding debt owing to officers and directors of the Company.
During the year ended December 31, 2015, the Company entered into debt settlement agreements with officers and directors of the Company, through which an aggregate of $535,077 due to related parties was forgiven.
On March 21, 2016 the Company entered settlement agreements with related parties that included as well as other parties whereby the Company would issue Common Shares at a deemed price of $0.06 per Common Share for the settlement amounts owing to such creditors. Pursuant to these settlement agreements, $43,000 would be settled and a total of approximately 716,666 Common Shares would be issued to these creditors. Of the 716,666 Common Shares to be issued$352,439 (US$262,994) (2019 -$492,729; 2018 - $311,102) in connection with the debt settlement, 666,666 Common Shares were issued to Howe and Bay. The indebtedness settled or
30
released related to consulting services and money owed to the Creditors. The disinterested directors of the Company approved this debt settlement with the related party.
party loans noted above. As at December 31, 2016,2020, $562,260 (2019 - $252,144) of unpaid interest and loan penalties have been included within interest payable on the only balancesconsolidated statement of financial position.
January 2019
In January 2019, the Company hadrenegotiated the loans with related parties were $189,468 due from Tower Three. These balances reflected short term loans to Tower Three bythree of the related parties in orderparty lenders to fundextend the constructionmaturity date of Tower Three’s towers.These short termthe loans.
In consideration for the extension of the maturity date of the loans, the Company agreed to incur total penalties of $212,312 (US$160,000) which were all unsecured, non-interest bearingadded to the principal balance of the loans. In addition, the Company agreed to add the interest accrued as of the date of renegotiation of $539,236 (US$395,259) to the principal balance of the loans. The renegotiation of the loans was deemed to be an extinguishment of the original liabilities and payable$212,312 was recorded as a loss on demand. As of March 31, 2017, thoseextinguishment.
September 2019
In September 2019, the Company consolidated loan balances were all $nil. There are no further proposedwith certain related party transactions.lenders and extended the maturity date of these amounts to March 30, 2020.
There are no amounts dueIn consideration for the extension of the maturity date of the loans, the Company agreed to issue 2,381,301 share purchase warrants to the Company from companies thatholders with a fair value of $180,714. The share purchase warrants are exercisable at a price of $0.09 per common share for a period of five years. As at December 31, 2020, these warrants have directors in common with the Company or have a partner who is a directornot yet been issued. The fair value of the Company.obligation to issue the share purchase warrants was calculated using the Black-Scholes model and the following weighted average assumptions:
| |
Share price at date of grant | $0.08 |
Exercise price | $0.09 |
Expected life | 5 years |
Expected volatility | 174.99% |
Risk free interest rate | 1.49% |
Expected dividend yield | 0% |
Expected forfeiture rate | 0% |
The consolidation of the loans and the issuance of the warrants was deemed to be an extinguishment of the original liabilities and $180,714 was recorded as a loss on extinguishment.
C . Interests of Experts and Counsel.
Not applicable.
Item 8.Financial Information
A. Consolidated Statements and Other Financial Information
The consolidated financial statements of the Company included with this Form 20-F have been prepared in compliance with International Financial Reporting Standards, as adopted by the International Accounting Standards Board. See “Item"Item 18: Financial Statements”Statements".
Legal Proceedings
We are not involved in any legal actions or claims and to our knowledge no such actions or claims are pending.
Dividend Distributions
We did not declare or pay any dividends to our shareholders in 2016.2020. The actual timing, payment and amount of dividends paid on our shares of common stockCommon Shares is determined by our Board, based upon things such as our cash flow, results of operations and financial condition, the need for funds to finance ongoing operations and such other business considerations as our Board considers relevant.
B. Significant Changes
Please refer to “Item 4: Information onThere have been no significant changes since the Company – A. History and Development of the Company” for a discussion of significant events that have occurred after December 31, 2016.financial statements.
Item 9.The Offer and Listing
A. Offer and Listing Details
The Company’s capital consists of an unlimited number of Class A common shares without par value, of which 67,825,698 were issued and outstanding as of October 28, 2017.
On January 12, 2017, the Company completed a “fundamental change” transaction (the “Tower Three Transaction”), with Tower Three, a limited liability company formed under the laws of the Republic of Colombia on December 30, 2015, pursuant to a share exchange agreement made effective as of October 19, 2016, as amended (the “Acquisition Agreement”) among the Company, Tower Three and the shareholders of Tower Three (the “Selling Shareholders”), whereby the Company acquired 100% of the securities of Tower Three from the Selling Shareholders, by issuing 30,000,000 common shares of the Company to the Selling Shareholders on a pro-rata basis at a deemed issuance price of $0.10 per common share, following the completion of which, Tower Three is now a wholly-owned subsidiary of the Company.
The common shares issued to the Selling Shareholders that were outside the United States were issued in “offshore transactions” (as such term is defined in Regulation S under the U.S. Securities Act) in reliance on Regulation S under the U.S. Securities Act, and the common shares issued to the Selling Shareholders that were in the United States were issued to
31
Accredited Investors in reliance on Rule 506(b) of Regulation D under the U.S. Securities Act. The common shares issued to Selling Shareholders in the United States in connection with the Tower Three Transaction were “restricted securities” within the meaning of Rule 144(a)(3) under the U.S. Securities Act.
Following the completion of the Tower Three Transaction, the Company began conducting the principal business of Tower Three.
The Company’sCompany's Common Shares are listed for trading on the CSE under the symbol of “TO”.
The high"TO", the Frankfort Stock Exchange under the symbol "1PSN" and low sale pricesare quoted on the CSE of our Common Shares for the five most recent full financial years:
| | |
| Year Ended | High Sales Price | Low Sales Price |
| 2012 | $0.17 | $0.03 |
| 2013 | $0.16 | $0.04 |
| 2014 | $0.08 | $0.02 |
| 2015 | $0.04 | $0.01 |
| 2016 | $0.44 | $0.01 |
The quarterly high and low sales prices on the CSE for our Common Shares for the two most recently completed full financial years and any subsequent quarters are:
| | |
| Quarters Ended | High Sales Price | Low Sales Price |
| March 31, 2015 | $ 0.03 | $ 0.01 |
| June 30, 2015 | $ 0.02 | $ 0.01 |
| September 30, 2015 | $ 0.02 | $ 0.01 |
| December 31, 2015 | $ 0.01 | $ 0.01 |
| March 31, 2016 | $ 0.10 | $ 0.10 |
| June 30, 2016 | $ 0.16 | $ 0.16 |
| September 30, 2016 | $ 0.32 | $ 0.32 |
| December 31, 2016 | $ 0.40 | $ 0.40 |
| March 31, 2017 | $ 0.51 | $ 0.33 |
| June 30, 2017 | $ 0.42 | $ 0.19 |
| September 30, 2017 | $ 0.30 | $ 0.19 |
The monthly high and low sales prices on the CSE of our Common Shares for the six most recent months are:
| | |
| Month | High Sales Price | Low Sales Price |
| May 2017 | $ 0.29 | $ 0.19 |
| June 2017 | $ 0.34 | $ 0.22 |
| July 2017 | $ 0.28 | $ 0.23 |
| August 2017 | $ 0.24 | $ 0.19 |
| September 2017 | $ 0.30 | $ 0.21 |
| October 2017 | $ 0.38 | $ 0.26 |
On October 31, 2017, the closing price of our Common Shares was $0.34 per share
The transfer of our shares of common stock is managed by our transfer agent, Computershare Trust Company of Canada.
Restrictions on Transfer
Note that shares issued in the Tower Three Transaction are, unless registered for resale, subject to restrictions on transfer, in accordance with the securities laws of the United States.
Dividends
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The Company has no earnings or dividend record, and does not anticipate paying any dividends on the common shares in the foreseeable future. Dividends paidPink Open Market operated by the Company would be subject to tax and, potentially, withholdings. The payment of future cash dividends, if any, will be reviewed periodically byOTC Markets Group under the Company’s board of directors and will depend upon, among other things, conditions then existing including earnings, financial condition and capital requirements, restrictions in financing agreements, business opportunities and conditions and other factors.symbol "TOWTF".
B. Plan of Distribution
Not applicable.
C. Markets
The Company’s shares ofCompany's Common StockShares are currently traded on the CSE under the symbol “TO”"TO", the Frankfort Stock Exchange under the symbol “1PSN”"1PSN" and are quoted on the OTCQB VenturePink Open Market operated by the OTC Markets Group under the symbol “TOWTF”"TOWTF".
D. Selling Shareholders
Not applicable.
E. Dilution
Not Applicable.
F. Expense of the Issue
Not Applicable.
Item 10.Additional Information
A. Share Capital
As of December 31, 2016, the Company has the following shares authorized and issued:Not applicable.
| | |
Class of Share | Number of Authorized Shares | Number of Issued Shares |
Class A common shares without par value | Unlimited | 6,735,885 |
As of October 28, 2017, the Company had 67,825,698 Common Shares outstanding, 16,070,029 warrants outstanding and 919,565 stock options outstanding.
The Company has financed its operations through the issuance of Common Shares through private placement, the exercise of warrants issued in the private placements, and the exercise of stock options. The changes in the Company’s share capital during the last 3 fiscal years are as follows:
On January 6, 2014, the Company extended the expiry date of 224,333 share purchase warrants exercisable to purchase one Common Share of the Company at an exercise price of $4.50 per share from the original expiry date of January 31, 2014 to July 31, 2014;
On January 6, 2014, the Company extended the expiry date of 600,000 share purchase warrants exercisable to purchase one Common Share of the Company at an exercise price of $0.15 per share from the original expiry date of May 16, 2014 to November 16, 2014;
On January 6, 2014, the Company extended the expiry date 2,000 share purchase warrants exercisable to purchase one Common Share of the Company at an exercise price of $7.50 per share from the original expiry date of February 28, 2014 to August 28, 2014;
On January 10, 2014, the Company granted 13,333 stock options to advisors and consultants of the Company to purchase Common Shares of the Company for proceeds of $0.10 per common share expiring January 10, 2017;
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On March 7, 2014 the Company issued 525,000 stock options to directors, officers, advisors and consultants of the Company to purchase common shares of the Company for proceeds of $3.00 per common share expiring March 7, 2019;
On May 7, 2014 the Company announced that it had entered into an advisory agreement with TriPoint Global Equities LLC (“TriPoint”) and issued to TriPoint warrants to purchase 23,333 shares at a price of $3.00 per share.
The warrants expire on February 28, 2016;
On June 14, 2014 the Company issued 16,667 options to purchase Common Shares to a director and officer. The options may be exercised at a price of $1.80 per share for a period of one (1) year;
On October 2, 2014 the Company closed the first tranche of a non-brokered private placement and issued 50,667 units for gross proceeds of $76,000 (including $6,000 in cash proceeds and $70,000 to settle outstanding accounts payable). 50,667 warrants were issued with an expiration date of October 3, 2015. Each unit is comprised of one Common Share and one share purchase warrant, each warrant being exercisable for one common share at an exercise price of $0.15;
On October 28, 2014 the Company issued to consultants a total of 16,667 stock options to purchase Common Shares with an exercise price of $3.00, 6,667 of the options will expire on October 28, 2015; 3,333 of the options will expire on October 28, 2018; and 6,667 will expire October 28, 2020;
On February 2, 2015, the Company issued a total of 13,333 stock options to purchase Common Shares to a director and a consultant;
On March 20, 2015 the Company closed the second tranche of a non-brokered private placement and issued 66,666 units at $1.50 per unit for cash proceeds of $41,000 (of which $30,000 was received in 2014 and $11,000 received in 2015) and to retire debts totaling $59,000. Each unit is comprise of one common share and one share purchase warrant exercisable for one common share at an exercise price of $4.50 until March 20, 2016;
On April 1, 2015, the Company received regulatory approval to re-price its warrants outstanding as at March 30, 2015 to an exercise price of $0.90 for a period of 30 days;
On May 20, 2015, the Company received $3,600 for the exercise of 4,000 warrants at an exercise price of $0.90. The shares were not issued until after December 31, 2015;
On February 16, 2016, the Company issued 4,000 Common Shares in connection with the exercise of warrants for $0.90 per share for gross proceeds of $3,600;
On March 4, 2016, the Company issued 10,000 Common Shares at price of $0.45 per share pursuant to an agreement with an unrelated third party that was not pursued;
On March 30, 2016, the Company completed a private placement of 4,855,998 Common Shares at $0.06 per share for gross proceeds of $291,360 (including $245,360 in cash proceeds and $46,000 to settle outstanding debt);
In September 2016, the Company issued 500,000 Common Shares in connection with the exercise of stock options at $0.25 per share for gross proceeds of $120,000;
During the year ended December 31, 2016 13,333 stock options and 458,333 warrants outstanding were cancelled;
On January 9, 2017, in connection with the Tower Three Transaction, the Company completed a private placement of 15,484,912 Units at a price of $0.15 per Unit for gross proceeds of $2,322,737. Each Unit consisted of one Common Share and one warrant with each whole warrant entitling the holder to purchase, for a period of 12 months from the date of issue, one additional Common Share at an exercise price of $0.40 per Common Share. The Company paid finders and brokers cash commissions of $87,767 and issued 585,177 broker warrants;
On January 11, 2017, the Company issued 30,000,000 Common Shares in connection with the Tower Three Transaction;
On March 17, 2017, the Company issued a total of 700,000 stock options to directors, officers and consultants of the Company with an expiry of five years and an exercise price of $0.45 per share;
34
On April 18, 2017, the Company issued 500,000 Common Shares pursuant to an agreement with an unrelated company to take assignment of the company’s assets, trade secrets and receivables;
On May 4, 2017, the Company issued a total of 1,050,000 stock options to consultants and an officer of the Company with an expiry date of five years and an exercise price of $0.23 per share;
On June 13, 2017, the Company issued a total of 4,000,000 stock options to consultants of the Company with an expiry date of five years and an exercise price of $0.23 per share;
On June 19, 2017, the Company issued 1,500,000 Common Shares to consultants of the Company who assisted in the transaction with Evolution Technology SA;
On June 21, 2017, the Company issued 1,000,000 Common Shares to a consultant of the Company to settle outstanding debt of $230,000;
From May to July 2017, the Company issued 4,980,435 Common Shares for the exercise of stock options at an exercise price of $0.24 and for total proceeds of $1,145,450; and
In July 2017, the Company issued 3,494,466 Common Shares for the exercise of warrants at an exercise price of $0.30 and for total proceeds of $1,048,340.
Stock Options:
As at December 31, 2016 and 2015 the following stock options were outstanding and exercisable:
| | | | | | | | |
| | December 31, 2016 | | December 31, 2015 | |
| | | | Weighted | | | | Weighted | |
| | Underlying | | Average Exercise | | Underlying | | Average Exercise | |
| | Shares | | Price | | Shares | | Price | |
| | | | $ | | | | $ | |
| Stock options outstanding, beginning | 13,333 | | 3.00 | | 122,500 | | 3.36 | |
| Granted | 500,000 | | 0.24 | | 13,333 | | 3.00 | |
| Exercised | (500,000) | | 0.24 | | - | | - | |
| Expired / Cancelled | (13,333) | | 3.00 | | (122,500) | | (3.66) | |
| Stock options outstanding, ending | - | | - | | 13,333 | | 3.00 | |
Warrants
As at December 31, 2016 and 2015 the following share purchase warrants were issued and outstanding:
| | | | | | | | |
| | December 31, 2016 | | December 31, 2015 | |
| | | | Weighted | | | | Weighted | |
| | Underlying | | Average Exercise | | Underlying | | Average Exercise | |
| | Shares | | Price | | Shares | | Price | |
| | | | $ | | | | $ | |
| Warrants outstanding, beginning | 458,333 | | 3.22 | | 519,000 | | 3.68 | |
| Issued | - | | - | | 66,667 | | 4.50 | |
| Exercised | - | | - | | (4,000) | | 4.50 | |
| Expired / Cancelled | (458,333) | | (3.22) | | (123,334) | | 5.24 | |
| Warrants outstanding, ending | - | | - | | 458,333 | | 3.22 | |
B. Memorandum and Articles of Association
We are organized under the laws of the Province of British Columbia, Canada and have been assigned the number BC1056802.
Our Articles do not contain a description of our objects and purposes.
Our Articles do not restrict a director’sdirector's power to vote on a proposal, arrangement or contract in which the director is materially interested, vote on compensation to themselves or any other members of their body in the absence of an
35
independent quorum or exercise borrowing powers. There is no mandatory retirement age for our directors and our directors are not required to own securities of our company in order to serve as directors.
Our Articles provide that the Board may exercise all the powers of the Company to borrow money and to mortgage or charge its undertaking, property and uncalled capital, and to issue debentures or other securities whether outright or as security for any debt obligations of the Company or of any third party.
Our authorized capital consists of an unlimited number of Class A common shares without par value. The holders of Common Shares are entitled to vote at all meetings of the Company’sCompany's shareholders, to receive dividends, if, as and when declared by the Board, and, subject to the rights of holders of any shares ranking in priority to, or on parity with the Common Shares, to participate ratably in any distribution of property or assets upon the liquidation, winding-up, or other dissolution of the Company. The Common Shares are not subject to any future call or assessments and do not have any pre-emptive rights or redemption rights.
There are no limitations specific to the rights of non-Canadians to hold or vote our common shares under the laws of Canada or British Columbia, or in our charter documents.
Our Articles provide for the election of directors at each annual general meeting. Each director holds office until the next annual general meeting of our shareholders or until his successor is elected or appointed, unless his office is earlier vacated in accordance with our Articles or with the provisions of the BCBCA.
An annual meeting of shareholders must be held at such time in each year that is not later than 15 months after the last preceding annual meeting and at such place as our Board may from time to time determine. The quorum for the transaction of business at any meeting of shareholders is two persons who are entitled to vote at the meeting in person or by proxy and who hold in aggregate at least 5% of the issued shares entitled to be voted at the meeting. Only persons entitled to vote, our directors and auditors and others who, although not entitled to vote, are otherwise entitled or required to be present, are entitled to be present at a meeting of shareholders.
Other than not specifically providing a mechanism for shareholders to call a special meeting, our Articles do Articlesnot contain any provisions that would have an effect of delaying, deferring or preventing a change in control of our Company. Our Articles also do not contain any provisions that would operate only with respect to a merger, acquisition or corporate restructuring of our Company.
Our Articles do not contain any provisions governing the ownership threshold above which shareholder ownership must be disclosed.
Our Articles are not significantly different from the requirements of the BCBCA and the conditions imposed by our Articles governing changes in capital are not more stringent than what is required by the BCBCA.
C. Material Contracts
Except for contracts entered into by the Company in the ordinary course of business, the only material contracts entered into by the Company in the previous two years are the following:
(a) | On October 19, 2016, the Company entered into the Tower Three Agreement to acquire all of the issued and outstanding securities of Tower Three. Pursuant to the terms of the Tower Three Agreement, the Company would acquire 100% of the securities of Tower Three from the shareholders of Tower Three, by issuing 30,000,000 Common Shares to the shareholders of Tower Three on a pro rate basis. These Common Shares were to be held in escrow pursuant to the terms of an escrow agreement which provided they were to subject to the following escrow restrictions: (i) restrictions based on certain performance milestones; (ii) time-based release restrictions prescribed under Canadian securities laws, and (iii) voluntary escrow restrictions.
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| |
(b) | On April 18, 2016, the Company entered the Arrangement Agreement (as amended on April 21, 2016) in order to effect the Arrangement under the BCBCA. The Arrangement Agreement provided that Cabbay was to issue, 379,887 common shares to the Company’s shareholders on a pro-rata basis in exchange for a special class of reorganization shares of the Company held by shareholders of the Company. Agreement, the transfer of the Forge Agreement to Cabbay and the assignment of $435,360 of the Company’s debt to Cabbay.
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(c) | On July 24, 2015 the Company entered into the Forge Agreement pursuant to which the Company agreed to sell certain of its technology assets (related to fibrosis and erectile dysfunction) to Forge in return for 15,000,000 common shares of Forge.
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(d) | On March 21, 2016, the Company entered a settlement agreement with Howe and Bay Financial Corp. (“Howe”)
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36(a) On June 12, 2018 the Company entered into two secured convertible debentures (the "Debentures") with KW Capital Partners Limited and Plazacorp Investments Ltd (the "Debentureholders") in the aggregate amount of $1,000,000 with a maturity date of June 12, 2019 and bearing an interest rate of 1% per month, payable in cash on the first business day of each month. The outstanding principal amount under the Debentures was convertible, in whole or in part, at any time before maturity and at the option of the Debentureholder, into common shares of the Company (the "Shares") at a conversion price of $0.10CAD per Share. The Company's obligations under the Debentures were secured by a first ranking security interest over all of the assets of the Company and its subsidiaries. If any Shares of the Company were sold or issued for a price less than $0.20 CAD per Share prior to conversion or repayment of the Debentures, the conversion price of the Debentures would be adjusted downward to the price of such financing. Concurrent with the issuance of the Debentures, the Company also issued to each Debentureholder, common share purchase warrants (the "Warrants") such that each subscriber received one Warrant for each $0.20CAD original principal amount of its Debenture, resulting in 5,000,000 Warrants being issued. Each Warrant entitled the holder thereof to acquire one Share at an exercise price of $0.25 CAD per Share for a period of one year from the date of issuance of the Warrants.
(b) On November 13, 2018 the Company and the Debentureholders entered amendment agreements in respect of the Debentures and Warrants pursuant to which 666,666 Commonthe conversion price reduced from $0.20 to $0.10 and the Warrant exercise price reduced from $0.25 to $0.12 and the exercise term of the Warrants was extended from June 12, 2019 to Nov 13, 2019.
(c) On November 28, 2018 the Company entered into two more secured convertible debentures (the "Second Debentures") on a private placement basis for aggregate principal amount of $500,000.00CAD. In connection with the closing of the Second Debentures, the Company paid $15,000 in placement fees. The Debentures carried applicable interest at a rate of 1% per month, payable in cash on the first business day of each month, and a maturity date of June 12, 2019. The outstanding principal amount under the Debentures was convertible, in whole or in part, at any time before maturity and at the option of the Debentureholder, into Shares at a conversion price of $0.10CAD per Share. The Company's obligations under the Debentures were secured by a first ranking security interest over all of the assets of the Company and its subsidiaries. If any Shares of the Company were sold or issued for a price less than $0.10CAD per Share prior to conversion or repayment of the Debentures, the conversion price of the Debentures would be adjusted downward to the price of such financing. Concurrent with the issuance of the Debentures, the Company also issued to each Debentureholder, Warrants for each $0.10CAD original principal amount of its Debenture, resulting in 5,000,000 Warrants being issued to the Debentureholders. Each Warrant entitled the holder thereof to acquire one Share at an exercise price of $0.125CAD per Share for a period of one year from the date of issuance of the Warrants.
(d) On April 4, 2019, the Company entered into a development agreement to develop 150 tower sites in Colombia and Mexico. Under the terms of this confidential agreement, Tower One will handle all steps of completing the built to suit towers
(e) On May 16, 2029 the Company entered into a settlement agreement with the Debentureholders and agreed to pay any consideration from disposition of its tower prior to June 12, 2019; payable as credit to amount under the Debentures. The exercise price of Warrants was reduced to $0.09 and the Company agreed to issue 15,000,000 additional special Warrants to the Debentureholders at an exercise price of $0.09 and expiring until November 13, 2019
(f) On June 12, 2019, the Company entered into an amending agreement with the Debentureholders where 50% of the total outstanding under Debentures, being CAD$750,000, plus interest and fees, was payable one (1) day after receipt of proceeds of sale of towers of the Company or June 30, 2019. The remaining amount under the Debentures was to be repaid no later than September 14, 2019. The expiry of the Warrants was further extended to November 13, 2020 and the Company was entitled to repurchase the Warrants at any time for a price of CAD$300, 000.
(g) On June 28, 2019, the Company entered into two MLAs with DirecTV Colombia and DirecTV Argentina to allow the Company to be awarded "cellular search rings", which are the desired coordinates for BTS cellular towers and for collocations.
(h) On September 17, 2019, the Company and the Debentureholders entered into a second amending agreement whereby the Company would pay a 10% penalty of the total outstanding amounts owing under the Debentures, being $750,000 CAD, plus applicable fees and taxes, on or before September 27, 2019. The remaining balancewas to be paid by no later than December 20, 2019.
(i) On August 1, 2019, the Company entered into a Joint Venture Agreement with a third party, Enervisa US LLC ("Enervisa") and sold 50% of outstanding shares of TCTS for $330,397 (US$250,000) to fund the operation of TCTS. The Company determines that the sale of the 50% of TCTS shares did not constitute a loss of control. The issuance of the shares is accounted for an equity transaction and resulting a non-controlling interest of $698,030. The non-controlling interest consists of $519,983 of Enervisa's share of TCTS's net loss for the period from January 1, 2019 to August 1, 2019 which is included in net attributable to non-controlling interests on the consolidated statement of changes in equity (deficiency). As at December 31, 2020, the Company has received the full amount for the for the sale of 50% of the outstanding shares of TCTS ($330,397 - US$250,000)
(j) On December 30, 2019 the Company and the Debentureholders entered into a third amending agreement with interest in the amount of $15,000 to be paid on or before December 31, 2019 and legal fees of $1,130 to be paid on or before January 10 2020. In addition, a; 1% penalty of the total outstanding amounts owing under the Debentures, being a penalty of CAD$7,500 was due on or before January 10, 2020. The remaining balance owing under the Debentures of CAD$750,000 CAD, plus interest, was to be paid no later than February 28, 2020. In the event the remaining balance owing under the Debentures was not fully repaid by January 14, 2020, an addition 2% penalty of the total outstanding amounts (CAD$15,000) shall be added to the principal amount of the Debentures, to be included in the payment on or before February 28, 2020.
(k) On March 19, 2020 the Company and the Debentureholders entered into a fourth amending agreement such that amounts owing under the Debenture were to be issuedrepaid as follows: $50,000 penalty - issuance of 714,286 shares at $0.07 per share; Remaining balance of CDN$226,000, plus remaining balance owed on prior penalties of $1,000 plus any interest, be paid no later than March 31, 2020.
(l) On April 30, 2020 the Company and the Debentureholders entered into a fifth amending agreement and agreed that the issuance of securities during term of 60 days thereafter would not trigger adjustment pursuant to Howe in exchange forsection 5.1 of Warrants. Also, the release of monies owing to Howe for consulting services previously provided by HoweCompany agreed to the Company.issuance of 714,286 Shares to the Debentureholders at a deemed price of $0.07 per Share.
(m) On June 30, 2020, the Company entered into a mutual release agreement pursuant to which it completed full repayment of the remaining outstanding indebtedness of CAD$235,040 under the Debentures. With the repayment, the Company fully repaid all amounts advanced under the Debentures and is authorized to discharge all security interests registered thereunder. To repay the outstanding amounts under the Debentures, the Company used proceeds from a short-term unsecured raise from two arm's length lenders in the amount of US$ 160,000 and funds from operating activities.
D. Exchange Controls
There are no laws, decrees or regulations in Canada relating to restrictions on the export or import of capital, or affecting the remittance of interest, dividends or other payments to non-resident holders of our shares of Common Stock.Shares.
E. Taxation
Canada
Canadian Federal Income Tax Information for United States Residents
The following is a discussion of material Canadian federal income tax considerations generally applicable to holders of our common shares who, for purposes of the Income Tax Act (Canada) and the regulations thereunder, or the Canadian Tax Act:
deal at arm’sarm's length and are not affiliated with us;
hold such shares as capital property;
do not use or hold (and will not use or hold) and are not deemed to use or hold our common shares, in or in the course of carrying on business in Canada;
have not been at any time residents of Canada; and
are, at all relevant times, residents of the United States, or U.S. Residents, under the Canada-United States Income Tax Convention (1980), or the Convention.
TAX MATTERS ARE VERY COMPLICATED AND THE CANADIAN FEDERAL INCOME TAX CONSEQUENCES OF PURCHASING, OWNING AND DISPOSING OF OUR COMMON SHARES WILL DEPEND UPON THE STOCKHOLDER’SSTOCKHOLDER'S PARTICULAR SITUATION. THE SUMMARY OF MATERIAL CANADIAN FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW IS INTENDED TO PROVIDE ONLY A GENERAL SUMMARY AND IS NOT INTENDED TO BE A COMPLETE ANALYSIS OR DESCRIPTION OF ALL POTENTIAL CANADIAN FEDERAL INCOME TAX CONSEQUENCES.
THIS DISCUSSION DOES NOT INCLUDE A DESCRIPTION OF THE TAX LAWS OF ANY PROVINCE OR TERRITORY WITHIN CANADA. ACCORDINGLY, HOLDERS AND PROSPECTIVE HOLDERS OF OUR COMMON SHARES ARE ENCOURAGED TO CONSULT WITH THEIR OWN TAX ADVISERS ABOUT THE TAX CONSEQUENCES TO THEM HAVING REGARD TO THEIR OWN PARTICULAR CIRCUMSTANCES, INCLUDING ANY CONSEQUENCES OF PURCHASING, OWNING OR DISPOSING OF OUR COMMON SHARES ARISING UNDER CANADIAN FEDERAL, CANADIAN PROVINCIAL OR TERRITORIAL, U.S. FEDERAL, U.S. STATE OR LOCAL TAX LAWS OR TAX LAWS OF JURISDICTIONS OUTSIDE THE UNITED STATES OR CANADA.
This summary is based on the current provisions of the Canadian Income Tax Act, proposed amendments to the Canadian Income Tax Act publicly announced by the Minister of Finance (Canada) prior to the date hereof (the “Proposed Amendments”"Proposed Amendments"), and the provisions of the Convention as in effect on the date hereof. No assurance can be given that the Proposed Amendments will be entered into law in the manner proposed, or at all. No advance income tax ruling has been requested or obtained from the Canada Revenue Agency to confirm the tax consequences of any of the transactions described herein.
This summary is not exhaustive of all possible Canadian federal income tax consequences for U.S. Residents, and other than the Proposed Amendments, does not take into account or anticipate any changes in law, whether by legislative, administrative, governmental or judicial decision or action, nor does it take into account Canadian provincial, U.S. or foreign tax considerations which may differ significantly from those discussed herein. No assurances can be given that subsequent changes in law or administrative policy will not affect or modify the opinions expressed herein.
A U.S. Resident will not be subject to tax under the Canadian Tax Act in respect of any capital gain on a disposition of our common shares unless such shares constitute “taxable"taxable Canadian property”property", as defined in the Canadian Tax Act, of the U.S. Resident and the U.S. Resident is not eligible for relief pursuant to the Convention. Our common shares will not constitute “taxable"taxable Canadian property”property" for a U.S. Resident if at any timeall times during the 60-month period immediately preceding the disposition of the common shares the U.S. Resident, persons with whom the U.S. Resident did not deal at arm’sarm's length, or the U.S. Resident together with all such persons, did not own 25% or more of the issued shares of any class or series of shares of
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our capital stock. In addition,stock, or if at all times during the Convention generally will exempt a U.S. Resident who would otherwise be liable to pay Canadian income tax in respect of any capital gain realized by the U.S. Resident on60-month period immediately preceding the disposition of ourthe common shares from such liability provided thatnot more than 50% of the fair market value of our common shares is notwas derived principally from one or any combination of real property situated in Canada, Canadian Resource Property and Canadian Timber Resource Property. However, where the US resident and purchaser are related the purchaser must generally report the transaction to theresource property situated in Canada, Revenue Agency within 30 daystimber resource property situated in Canada, or options or interests in any of the transaction date to benefit from the Convention. The Convention may not be available to a U.S. Resident that is a U.S. LLC which is not subject to tax in the U.S.foregoing.
Amounts in respect of our common shares paid or credited or deemed to be paid or credited as, on account or in lieu of payment of, or in satisfaction of, dividends to a U.S. Resident will generally be subject to Canadian non-resident withholding tax at the rate of 25%. Currently under the Convention the rate of Canadian non-resident withholding tax will generally be reduced to:
5% of the gross amount of dividends if the beneficial owner is a company that is resident in the U.S. and that owns at least 10% of our voting shares; or
15% of the gross amount of dividends if the beneficial owner is some other resident of the U.S.
Generally, the Convention does not apply to US resident LLC’sLLC's that are fiscally transparent. However, the Convention may apply to afford reduced withholding tax rates on dividends attributed to a US resident member of a US resident fiscally transparent LLC to the extent of the dividend being consider to have been received by that member.
United States Federal Income Tax Information for United States Holders.
The following is a general discussion of material U.S. federal income tax consequences of the ownership and disposition of our Common Shares by U.S. Holders (as defined below). This discussion is based on the United StatesU.S. Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations (whether final, temporary or proposed) promulgated thereunder, and judicial and administrative interpretations thereof, all as in effect at the date hereof and all of which are subject to change, possibly with retroactive effect. This discussion only addresses the tax consequences for U.S. Holders that will hold their common sharesCommon Shares as a “capital asset”"capital asset" within the meaning of Code Section 1221 (generally, property held for investment purposes) and does not address U.S. federal income tax consequences that may be relevant to particular U.S. Holders in light of their individual circumstances or U.S. Holders that are subject to special treatment under certain U.S. federal income tax laws, such as:
tax-exempt organizations, and pension plans;
qualified retirement plans, individual retirement accounts or other tax-deferred accounts;persons subject to the alternative minimum tax;
banks, and other financial institutions;
institutions or regulated investment companies;insurance companies;
partnerships and other pass-through entities (as determined for United States federal income tax purposes);
dealers in securities or currencies or traders that elect to apply a mark-to-market accounting method;broker-dealers;
persons who hold their common sharesCommon Shares as a hedge or as part of a straddle, constructive sale, conversion transaction, andor other risk management transaction; and
persons that have a "functional currency" other than the U.S. dollar;
- persons subject to Code Section 451(b);
- persons who acquired their
common sharesCommon Shares through the exercise of employee stock options or otherwise as compensation.compensation; - persons who are U.S. expatriates or former long-term residents of the United States;
- persons that own (directly, indirectly or by attribution) 10% or more of the total combined voting power or value of the outstanding shares of the Company; or
- corporations that accumulate earnings to avoid U.S. federal income tax.
If an entity that is classified as a partnership (or other "pass-through" entity) for U.S. federal income tax purposes holds Common Shares, the U.S. federal income tax consequences to such partnership (or other "pass-through" entity) and the partners of such partnership (or owners of such other "pass-through" entity) generally will depend on the activities of the partnership (or other "pass-through" entity) and the status of such partners (or owners). This summary does not address the U.S. federal income tax consequences for any such partner or partnership (or other "pass-through" entity or owner). Partners of entities that are classified as partnerships (or owners of other "pass-through" entities) for U.S. federal income tax purposes should consult their own tax advisors regarding the U.S. federal tax consequences of the ownership and disposition of Common Shares.
This summary does not address the U.S. state and local, U.S. federal estate and gift, U.S. Medicare contribution, or non-U.S. tax consequences to U.S. Holders of the ownership and disposition of Common Shares. Each U.S. Holder should consult its own tax advisor regarding the U.S. state and local, U.S. federal estate and gift, U.S. Medicare contribution, and non-U.S. tax consequences of the ownership and disposition of Common Shares.
As used herein, the term “U.S. Holder”"U.S. Holder" means a beneficial owner of our common sharesCommon Shares that, for U.S. federal income tax purposes, is:
an individual citizen or resident of the United States;
a corporation, a partnership or any other entity treatedclassified as a corporation or partnership for U.S. federal income tax purposes, that is created or organized in or under the laws of the United States, any state in the United States, or any political subdivision thereof;
the District of Columbia;an estate the income of which is subject to U.S. federal income taxation regardless of its source; and
ora trust if both:(i) such trust has validly elected to be treated as a United StatesU.S. person for U.S. federal income tax purposes or (ii) a U.S. court is able to exercise primary supervision over the administration of the trust;such trust and one or more United StatesU.S. persons have the authority to control all substantial decisions of thesuch trust.
TAX MATTERS ARE VERY COMPLICATED AND THE UNITED STATESU.S. FEDERAL INCOME TAX CONSEQUENCES OF PURCHASING, OWNING AND DISPOSING OF OUR COMMON SHARES WILL DEPEND UPON THE STOCKHOLDER’SU.S. HOLDER'S PARTICULAR SITUATION. THE SUMMARY OF MATERIAL UNITED STATESU.S. FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW IS INTENDED TO PROVIDE ONLY A GENERAL SUMMARY AND IS NOT INTENDED TO BE A COMPLETE ANALYSIS OR DESCRIPTION OF ALL POTENTIAL UNITED STATESU.S. FEDERAL INCOME TAX CONSEQUENCES.
NOTECONSEQUENCES THAT MAY APPLY TO A U.S. HOLDER AS A RESULT OF OWNING OR DISPOSING OF COMMON SHARES. ACCORDINGLY, THIS DISCUSSION DOESSUMMARY IS NOT INCLUDE A DESCRIPTION OF THEINTENDED TO BE, AND SHOULD NOT BE CONSTRUED AS, LEGAL OR U.S. FEDERAL INCOME TAX LAWS OFADVICE WITH RESPECT TO ANY
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STATE OR LOCAL GOVERNMENT WITHIN THE UNITED STATES. ACCORDINGLY, HOLDERS AND PROSPECTIVE HOLDERS OF OUR COMMON SHARES ARE ENCOURAGED TO PARTICULAR U.S. HOLDER. EACH U.S. HOLDER SHOULD CONSULT THEIRITS OWN TAX ADVISORS ABOUTADVISOR REGARDING THE U.S. FEDERAL, U.S. STATE AND LOCAL AND FOREIGNNON-U.S. TAX CONSEQUENCES OF PURCHASING, OWNINGTHE OWNERSHIP AND DISPOSINGDISPOSITION OF OUR COMMON SHARES.
Ownership of Common Shares
TheSubject to the PFIC rules discussed below, the gross amount of any distribution received by a U.S. Holder with respect to our common sharesCommon Shares generally will be included in the U.S. Holder’sHolder's gross income as a dividend (without reduction for any Canadian income tax withheld from such distribution) to the extent attributable to our current and accumulated earnings"earnings and profitsprofits" (as determined under U.S. federal income tax principles). To the extent a distribution received by a U.S. Holder is not a dividend because it exceeds the U.S. Holder’s pro rata share ofdistributions exceed our current and accumulated earnings and profits, it will be treated first as a tax-free return of capital to the extent of the U.S. Holder's adjusted tax basis in the U.S. Holder's Common Shares and reduce (but not below zero) the adjusted tax basis of the U.S. Holder’s shares.Holder's Common Shares. To the extent the distribution exceeds the adjusted tax basis of the U.S. Holder’s shares,Holder's Common Shares, the remainderdistribution will be taxedtreated as capital gain (the taxationfrom the sale or exchange of capital gain is discussedthe U.S. Holder's Common Shares (See more detailed discussion under the heading “Sale"Sale of Shares”Common Shares," below). We may not maintain calculations of earnings and profits in accordance with U.S. federal income tax principles, and each U.S. Holder should therefore assume that any distribution by the Company with respect to Common Shares will constitute a dividend.
For taxable years beginning before January 1, 2009, dividendsDividends received by a non-corporate U.S. HoldersHolder from a qualified"qualified foreign corporationcorporation" (as defined below) are taxed at the same preferential rates that apply to long-term capital gains.gains if the shares with respect to which the dividends are paid have been held for at least 61 days during the 121-day period beginning 60 days before the "ex-dividend date." A foreign corporation is a “qualified"qualified foreign corporation”corporation" if it is eligible for the benefits of a comprehensive income tax treaty with the United States (the income tax treaty between Canada and the United States is such a treaty) or the shares with respect to which such dividend is paid isare readily tradable on an established securities market in the United States (such as the Nasdaq Capital Market).States. Notwithstanding satisfaction of one or both of these conditions, a foreign corporation is not a qualified foreign corporation if it is a passive foreign investment company (“PFIC”)PFIC for the taxable year of the corporation in which the dividend is paid or the preceding taxable year. (Whether a foreign corporation is a PFIC is discussed below under the heading “Passive"Passive Foreign Investment Companies”Companies"). A foreign corporation that is a PFIC for any taxable year within a U.S. person’s holding period generally is treated as a PFIC for all subsequent years in the U.S. person’s holding period. Although we have not been, are not now, and do not expect to be a PFIC, and we don’t expect to pay dividends, you should be aware of the following matters in the event that we do become a PFIC and do pay dividends.
If we were to become a PFIC, then U.S. Holders who acquire our common shares may be treated as holding shares of a PFIC throughout their holding period for the purpose of determining whether dividends received from us are dividends fromnot a qualified foreign corporation. Ascorporation, subject to the PFIC rules discussed below, a consequence, dividends receiveddividend paid by the Company to a U.S. Holders mayHolder, including a U.S. Holder that is an individual, estate, or trust, generally will be taxed at ordinary income tax rates (and not be eligible for taxation at the preferential tax rates applicable to long-term capital gains.gains). The dividend rules are complex, and each U.S. Holder should consult its own tax advisor regarding the dividend rules.
If we make a distribution is paid in Canadian dollars, the U.S. dollar value of such distribution based on the exchange rate on the date of receipt is generally used to determine the amount of the distribution received by a U.S. Holder. A U.S. Holder who continues to hold such Canadian dollars after the date on which they are received may recognize gain or loss upon their disposition due to exchange rate fluctuations. Generally such gains and losses will be ordinary income or loss from U.S. sources.
U.S. Holders may deduct Canadian tax withheld from distributions they receive for the purpose of computing their U.S. federal taxable income (or alternatively a credit may be claimed against the U.S. Holder’s U.S. federal income tax liability as discussed below under the heading “Foreign Tax Credit”). Corporate U.S. Holders generally will not be allowed a dividendeligible for the "dividends received deductiondeduction" with respect to dividends they receive from us.
Foreign Tax CreditSale of Common Shares
Generally,Subject to the dividend portionPFIC rules discussed below, a U.S. Holder will recognize capital gain or loss upon the sale or other taxable disposition of a distributionCommon Shares equal to the difference, if any, between: (a) the amount of cash plus the fair market value of any property received and (b) the U.S. Holder's adjusted tax basis in such Common Shares. This gain or loss will be long-term capital gain or loss if the U.S. Holder held such Common Shares for more than one year at the time of sale or other taxable disposition. Gain or loss recognized by a U.S. Holder on the sale or other taxable disposition of Common Shares generally will be treated as income in"U.S. source" for purposes of applying the passive income category forU.S. foreign tax credit purposes. rules.
Generally, the long-term capital gains of a non-corporate U.S. Holder are subject to taxation at preferential tax rates. There are currently no preferential tax rates for long-term capital gains of a U.S. Holder that is a corporation. The deductibility of capital losses is subject to significant limitations under the Code.
The amount realized on a sale or other taxable disposition of Common Shares for an amount in foreign currency will generally be the U.S. dollar value of this amount on the date of sale or disposition. On the settlement date, the U.S. Holder will recognize U.S. source foreign currency gain or loss (taxable as ordinary income or loss) equal to the difference (if any) between the U.S. dollar value of the amount received based on the exchange rates in effect on the date of sale or other disposition and the settlement date.
Foreign Tax Credit
Subject to a number of limitations, a U.S. Holder that pays (whether directly or through withholding) Canadian income tax with respect to dividends paid on Common Shares or gain from the sale or other taxable disposition of Common Shares may generally elect to claim a credit against itsor a deduction for such Canadian income tax paid. Generally, a credit will reduce a U.S. Holder's U.S. federal income tax liability (in lieuon a dollar-for-dollar basis, whereas a deduction will reduce a U.S. Holder's income subject to U.S. federal income tax. This election is made on a year-by-year basis and applies to all foreign taxes paid (whether directly or through withholding) by a U.S. Holder during a year.
Complex limitations apply to the foreign tax credit, including the general limitation that the credit cannot exceed the proportionate share of a deduction) for Canadian withholding tax deducted from its distributions. The credit may be claimed only againstU.S. Holder's U.S. federal income tax attributableliability that such U.S. Holder's "foreign source" taxable income bears to such U.S. Holder's worldwide taxable income. In applying this limitation, a U.S. Holder’s passiveHolder's various items of income thatand deduction must be classified, under complex rules, as either "foreign source" or "U.S. source." In addition, this limitation is from foreign sources.
If we were to become a qualified foreign corporationcalculated separately with respect to a non-corporate U.S. Holder, dividends receivedspecific categories of income. Dividends paid by such U.S. Holderthe Company generally will qualify for taxation at the same preferential rates that apply to long-term capital gains. In such case, the dividend amount that would otherwiseconstitute "foreign source" income and generally will be from foreign sources is reduced by multiplying the dividend amount by a fraction, the numerator of which is the U.S. Holder’s preferential capital gains tax rate and the denominator of which is the U.S. Holder’s ordinary income tax rate. The effect is to reduce the dividend amount from foreign sources, thereby reducing the U.S. federal income tax attributable to foreign source income against which the credit may be claimed. Canadian withholding taxes that cannot be claimedcategorized as a credit in the year paid may be carried back to the preceding year and then forward 10 years and claimed as a credit in those years, subject to the same limitations referred to above."passive income."
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The rules relating to the determination of the foreign tax credit are very complex. U.S. Holders and prospective U.S. Holders should consult their own tax advisors to determine whether and to what extent they would be entitled to claim a foreign tax credit.
Sale of SharesPassive Foreign Investment Companies
Subject toIf the discussion of the “passive foreign investment company” rules below,Company is or becomes a PFIC, or a U.S. Holder generally will recognize capital gain or loss uponheld Common Shares while the saleCompany was a PFIC, the preceding sections of our shares equal to the difference between: (a) the amount of cash plus the fair market value of any property received; and (b)this summary may not describe the U.S. Holder’s adjustedfederal income tax basis in such shares. This gain or loss generally will be capital gain or loss fromconsequences to U.S. sources,Holders of the ownership and will be long-term capital gain or loss if the U.S. Holder held its shares for more than 12 months. Generally, the net long-term capital gaindisposition of a non-corporate U.S. Holder from the sale of shares is subject to taxation at a top marginal rate of 15%. A Capital gain that is not long-term capital gain is taxed at ordinary income rates. The deductibility of capital losses is subject to certain limitations.
Passive Foreign Investment CompaniesCommon Shares.
We will be a PFIC if, in any taxable year either: (a) 75% or more of our gross income consists of passive income;income ("income test"); or (b) on average for such taxable year, 50% or more of the value of our assets is attributable to assets that produce, or are held for the production of, passive income.income ("asset test"). Subject to certain limited exceptions, if we meet the gross income test or the asset test for a particular taxable year, our sharesthe Common Shares held by a U.S. Holder in that year will be treated as shares of a PFIC for that year and all subsequent years in the U.S. Holder’sHolder's holding period, even if we fail to meet either test in a subsequent year.
If we wereFor purposes of the income test and asset test, if the Company owns, directly or indirectly, 25% or more of the total value of the outstanding shares of another corporation, the Company will be treated as if it (a) held a proportionate share of the assets of such other corporation and (b) received directly a proportionate share of the income of such other corporation. In addition, if the Company is a PFIC inand owns shares of another foreign corporation that also is a PFIC ("subsidiary PFIC"), a disposition of the future, gain realizedshares of the subsidiary PFIC by the Company or a distribution received by the Company from the subsidiary PFIC generally will be treated as an indirect disposition by a U.S. Holder fromor an indirect distribution received by a U.S. Holder, subject to the saleexcess distribution regime discussed below. Accordingly, U.S. Holders should be aware that they could be subject to tax even if no distributions are received and no redemptions or other dispositions of PFICCommon Shares and certain dividendsare made. To the extent that gain recognized on the actual disposition by a U.S. Holder of Common Shares or income recognized by a U.S. Holder on an actual distribution received on Common Shares was previously subject to U.S. federal income tax under these indirect ownership rules, such sharesamount generally should not be subject to U.S. federal income tax again.
If the Company is currently a PFIC, or a U.S. Holder held Common Shares while the Company was a PFIC in prior years, the U.S. federal income tax consequences to a U.S. Holder of the ownership and disposition of Common Shares will depend on whether such U.S. Holder makes an election to treat the Company and any subsidiary PFIC as a "qualified electing fund" or "QEF" under Code Section 1295 (a "QEF Election") or a mark-to-market election for the Company under Code Section 1296 (a "Mark-to-Market Election"). A U.S. Holder that does not make either a QEF Election or a Mark-to-Market Election is referred to in this summary as a "Non-Electing U.S. Holder."
A Non-Electing U.S. Holder would be subject to tax under the excess distribution regime, unless the U.S. Holder made one of the elections discussed below.regime. Under the excess distribution regime, federal income tax on a U.S. Holder’sHolder's gain from the sale or other taxable disposition of PFICCommon Shares would be calculated by allocating the gain ratably to each day the U.S. Holder held its shares.Common Shares. Gain allocated to years preceding the first year in which we were a PFIC in the U.S. Holder’sHolder's holding period, if any, and gain allocated to the year of disposition would be treated as gain arising in the year of disposition and taxed as ordinary income. GainThe amount of any gain allocated to all other years generally would be taxedsubject to U.S. federal income tax in the current year at the highest tax rate applicable to ordinary income in effecteach such prior year, and a Non-Electing U.S. Holder would be required to pay interest on the resulting tax liability for each of those years. Interest for the late payment of tax would besuch prior year, calculated and added to the tax due for each of the PFIC Years, as if thesuch tax wasliability had been due and payable with the tax return filed for thatin each such prior year. A distribution that exceeds 125% of the average distributions received on PFICCommon Shares by a U.S. Holder during the 3three preceding taxable years (or, if shorter, the portion of the U.S. Holder’sHolder's holding period before the taxable year) (referred to as an "excess distribution") would be taxed in a similar manner.
A U.S. Holder may avoid taxation under the excess distribution regime by making a qualified electing fund (“QEF”) election. ForQEF Election. If a QEF Election is made, for each year that we would meetmet the PFIC gross income test or asset test, an electing U.S. Holder would be required to include in gross income its pro rata share of our net ordinary incomeearnings and net capital gains, if any. The U.S. Holder’sHolder's adjusted tax basis in our sharesits Common Shares would be increased by the amount of such income inclusions. An actual distribution to the U.S. Holder out of such income generally would not be treated as a dividend for U.S. tax purposes and would decrease the U.S. Holder’sHolder's adjusted tax basis in our shares.its Common Shares. Gain realized from the sale of our shares covered byCommon Shares subject to a QEF election would generally be taxed as a capital gain. U.S. Holders will be eligible to make QEF elections only if we agree to provide to the U.S. Holders which we do, the information they will need to comply with the QEF rules. Generally,Each U.S. Holder should consult its own tax advisor regarding the availability and desirability of, and procedure for, making a timely and effective QEF election should be made by the due date of the U.S. Holder’s tax returnElection for the first taxable year in which the U.S. Holder held our shares that includes the close of our taxable year for which we met the PFIC gross income test or asset test. A QEF election is made on IRS Form 8621.Company and any subsidiary PFIC.
A U.S. Holder may also avoid taxation under the excess distribution regime by timely making a mark-to-market election.Mark-to-Market Election. A U.S. Holder may make a Mark-to-Market Election only if Common Shares are "marketable stock" (as defined in Code Section 1296(e)). An electing U.S. Holder would include in gross income, the increase in the value of its PFIC Shares during each of its taxable years and deduct from gross income the decrease in the value of its PFIC Shares during each of its taxable years. Amounts included in gross income or deducted from gross income by an electing U.S. Holder are treated as ordinary income, and ordinary deductions from U.S. sources. Deductions for anyeach taxable year are limitedin which the Company met the income test or asset test, an amount equal to the excess, if any, of (a) the fair market value of the Common Shares as of the close of such taxable year over (b) such U.S. Holder's tax basis in such Common Shares. A U.S. Holder that makes a Mark-to-Market Election will, subject to certain limitations, be allowed a deduction in an amount by whichequal to the income inclusionsexcess, if any, of prior years’ exceed(a) such U.S. Holder's adjusted tax basis in the income deductionsCommon Shares over (b) the fair market value of prior years.such Common Shares as of the close of such taxable year. Gain from the sale or other taxable disposition of PFICCommon Shares covered by an electiona Mark-to-Market Election generally is treated as ordinary income from U.S. sources while a loss is generally treated as an ordinary deductionloss from U.S. sources but only to the extent of prior income inclusions. Losses in excess of such prior income inclusions are treated as capital losses from U.S. sources. Capital losses are subject to significant limitations under the Code. A mark-to-market electionMark-to-Market Election may not be made with respect to the stock of any subsidiary PFIC because such stock is not "marketable stock." Hence, a Mark-to-Market Election will not be effective to eliminate the application of the excess distribution regime, described above, with respect to deemed dispositions of subsidiary PFIC stock or excess distributions with respect to a subsidiary PFIC. Each U.S. Holder should consult its own tax advisor regarding the availability and desirability of, and procedure for, making a timely ifand effective Mark-to-Market Election with respect to Common Shares.
The Company does not believe that it ishas been a PFIC, and, based on current operations and financial projections, does not expect that it will be a PFIC for the taxable year ending December 31, 2020. The determination of whether the Company was, or will be, a PFIC for a taxable year depends, in part, on the application of complex U.S. federal income tax rules, which are subject to differing interpretations. In addition, whether the Company will be a PFIC for the taxable year ending December 31, 2020 and each subsequent taxable year depends on the assets and income of the Company over the course of each such taxable year and, as a result, cannot be predicted with certainty as of the date of this Annual Report. Accordingly, there can be no assurance that the IRS will not challenge the determination made by the due date ofCompany concerning its PFIC status or that the U.S. Holder’s tax returnCompany was not, or will not be, a PFIC for any taxable year.
If the first taxable year in whichCompany meets the U.S. Holder held our shares that includes the close of our taxable year for which we met the PFIC gross income test or asset test. A mark-to-market election is also made on IRS Form 8621.
As noted above, a PFIC is not a qualified foreign corporation and hence dividends received from a PFIC are not eligibletest for taxation at preferential long-term capital gain tax rates. Similarly, ordinary income included in the gross income ofany taxable year during which a U.S. Holder who has madeowns Common Shares, the Company will be treated as a QEF election or a market-to-market election, and dividends received from corporations subject
40
PFIC with respect to such election, are not eligibleU.S. Holder for taxation at preferential long-term capitalthat taxable year and for all subsequent taxable years, regardless of whether the Company meets the income test or asset test for such subsequent taxable years, unless the U.S. Holder elects to recognize any unrealized gain rates. in the Common Shares or makes a timely and effective QEF Election or Mark-to-Market Election.
The PFIC rules are extremely complex, and could, if they apply, have significant, adverse effects on the taxation of dividends received and gains realized by aeach U.S. Holder. Accordingly, prospective U.S. Holders are strongly urged toHolder should consult their tax adviser concerning the potential application of these rules to their particular circumstances.
Controlled Foreign Corporation
Special rules apply to certain U.S. Holders thatits own stock in a foreign corporation that is classified as a “controlled foreign corporation” (“CFC”). We do not expect to be classified as a CFC. However, future ownership changes could cause us to become a CFC. Prospective U.S. Holders are urged to consult their tax advisor concerningregarding the potential applicationPFIC rules and how the PFIC rules may affect the U.S. federal income tax consequences of the CFC rules to their particular circumstances.ownership and disposition of Common Shares.
Information Reporting and Backup Withholding
United States information reporting and backup withholding, requirementscurrently at the rate of 24%, may apply to distributions received with respect to, distributions to U.S. Holders, or the payment of proceeds from the sale or other taxable disposition of, shares,Common Shares, unless the U.S. Holder: (a) is an exempt recipient (including a corporation);, (b) complies with certain requirements, including applicable certification requirements;requirements, or (c) is described in certain other categories of exempt persons. The backupBackup withholding tax rate is currently 28%.not an additional tax. Any amounts withheld from a payment to a U.S. Holder under the backup withholding rules may be credited against any U.S. federal income tax liability of the U.S. Holder and may entitle the U.S. Holder to a refund.refund if required information is furnished to the IRS in a timely manner.
THE ABOVE SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL U.S. FEDERAL INCOME TAX CONSIDERATIONS APPLICABLE TO U.S. HOLDERS WITH RESPECT TO THE OWNERSHIP AND DISPOSITION OF COMMON SHARES. U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX CONSIDERATIONS APPLICABLE TO THEM IN THEIR PARTICULAR CIRCUMSTANCES.
F. Dividends and Paying Agents
Not applicable.
G. Statements by Experts
Not applicable.
H. Documents on Display
Not applicable.You may read and copy any reports or other information that we file through the Electronic Data Gathering, Analysis and Retrieval system through the SEC's website on the Internet at http://www.sec.gov.
I. Subsidiary Information
Not applicable
Item 11.Quantitative and Qualitative Disclosures about Market Risk
Market risk is the risk of loss related to changes in market prices, including interest rates and foreign exchange rates, of financial instruments that may adversely impact our consolidated financial position, results of operations or cash flows.
Inflation-related risks
WeIn May 2018, the Argentinean Peso underwent a severe devaluation resulting in Argentina's three-year cumulative inflation exceeding 100% in 2018, and consequently for the year ended December 31, 2018 and 2019, the Company determined that Argentina was in a state of hyperinflation. The Company's subsidiary, Evotech, operates in Argentina and the functional currency of Evotech is the Argentinian Peso.
Although we do not believe that inflation has had a material impact on our revenues or income over the past two fiscal years. However,years, the hyperinflationary situation in Argentina helped contribute to a foreign exchange translation loss of C$327,696 in 2019 and further increases in inflation in Argentina or the other markets in which we operate could result in increases in our expenses, which may not be readily recoverable in the price of goods or services provided to our clients. To the extent that inflation results in rising interest rates and has other adverse effects on capital markets, it could adversely affect our financial position and profitability.
Foreign currency exchange riskFinancial Instruments and Risk
Foreign exchangeFair values
The Company's financial instruments include cash, amounts receivable, bank indebtedness, accounts payable, due to related parties and loans payable. The carrying amounts of these financial instruments are a reasonable estimate of their fair values because of their current nature.
The following table summarizes the carrying values of the Company's financial instruments:
| 2020 | 2019 |
| $ | $ |
Financial assets at fair value through profit or loss (i) | 122,759 | 56,629 |
Loans and receivables (ii) | 1,166,502 | 1,808,397 |
Other financial liabilities (iii) | 11,679,761 | 9,359,225 |
(i) Cash
(ii) Amounts receivable.
(iii) Bank indebtedness, accounts payable, due to related parties and loans payable
The Company provides information about financial instruments that are measured at fair value, grouped into Level 1 to 3 based on the degree to which the inputs used to determine the fair value are observable.
- Level 1 fair value measurements are those derived from quoted prices in active markets for identical assets or liabilities.
- Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1, that are observable either directly or indirectly.
- Level 3 fair value measurements are those derived from valuation techniques that include inputs that are not based on observable market data.
The Company's cash is measured using Level 1 fair value measurements.
Credit Risk
Credit risk is the risk arisingof financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. To minimize the credit risk the Company places cash with a high credit quality financial institution.
With respect to its accounts receivable, the Company assesses the credit rating of all customers and maintains provisions for potential credit losses, and any such losses to date have been within management's expectations. The Company's credit risk with respect to accounts receivable and maximum exposure thereto is $1,166,502 (2019 - $1,808,397). Accounts receivable are shown net of provision of credit losses of $$36,381 (2019 - $179,868).
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's objective in managing liquidity risk is to ensure that it has sufficient liquidity available to meet its liabilities when due. The Company uses cash to settle its financial obligations as they fall due. The ability to do this relies on the Company's ability to collect its revenue in a timely manner, continuous support from shareholders and investors and maintain sufficient cash on hand. To the extent that the Company does not believe it has sufficient liquidity to meet its current obligations, the Board of Directors considers securing additional funds through issuances of equity and debt or partnering transactions.
The Company monitors its risk of shortage of funds by monitoring the maturity dates of existing trade and other accounts payable. The following table summarizes the maturities of the Company's financial liabilities as at December 31, 2020 based on the undiscounted contractual cash flows:
| | |
Carrying
amount | | |
Contractual
cash flows | | |
Less than
1 year | | |
1 - 3
years | | |
4 - 5
years | | |
After 5
years | |
| | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
| Accounts payable and accrued liabilities | | 4,368,281 | | | 4,368,218 | | | 4,368,281 | | | - | | | - | | | - | |
| Interest payable | | 650,278 | | | 650,278 | | | 650,278 | | | - | | | - | | | - | |
| Loans payable | | 3,588,352 | | | 3,588,352 | | | 3,444,497 | | | 143,855 | | | - | | | - | |
| Loans from related parties | | 3,866,983 | | | 3,866,983 | | | 3,866,983 | | | - | | | - | | | - | |
| Bonds payable | | 1,882,750 | | | 1,882,750 | | | 1,882,750 | | | - | | | - | | | - | |
| Lease liability | | 1,685,678 | | | 3,313,033 | | | 507,403 | | | 1,160,875 | | | 773,033 | | | 871,722 | |
| Total | | 16,042,322 | | | 17,669,614 | | | 14,720,192 | | | 1,304,730 | | | 773,033 | | | 871,722 | |
The Company has a working capital deficiency as of December 31, 2020 of $19,124,583. Customer deposits consist of funds received from customers in advance of towers sold. As of December 31, 2020, the Company received $5,621,307 (2019 - $8,526,085) in customer deposits.
Currency Risk
The Company generates revenues and incurs expenses and capital expenditures primarily in Canada, Colombia, Argentina, USA and Mexico and is exposed to the resulting risk from changes in foreign currency fluctuations. Foreign currency fluctuations have not previously had a material impact on the Company’s financial results. Consequently,exchange rates. Some administrative and head office related expenses are incurred in Canada. In addition, the Company doesholds financial assets and liabilities in foreign currencies that expose the Company to foreign exchange risks. Assuming all other variables remain constant, a 15% weakening or strengthening of the Colombia Peso, Argentina Peso, US dollar and Mexican Peso against the Canadian dollar would result in approximately $470,007 foreign exchange loss or gain in the consolidated statement of comprehensive loss.
The Company has not use any derivative instruments to reducehedged its exposure to fluctuationscurrency fluctuations. At December 31, 2020, the Company had the following financial instruments denominated in foreign currency rates. Itcurrencies:
| | | Argentine
Pesos | | | Colombian
Pesos | | | Mexican Pesos | | | United States
Dollars | | | Total | |
| | | $ | | | $ | | | $ | | | $ | | | $ | |
| Cash | | 34,531 | | | 28,218 | | | 31,611 | | | (4,454 | ) | | 89,907 | |
| Amounts receivable | | 90,045 | | | 144,491 | | | 364,285 | | | - | | | 598,821 | |
| Accounts payable and accrued liabilities | | (442,629 | ) | | (981,541 | ) | | (665,231 | ) | | (913,195 | ) | | (3,002,597 | ) |
| Interest payable | | - | | | (5,539 | ) | | - | | | - | | | (5,539 | ) |
| Lease liability | | (576,868 | ) | | (1,006,160 | ) | | (102,650 | ) | | - | | | (1,685,678 | ) |
| Loans payable | | - | | | (1,614,063 | ) | | (148,245 | ) | | - | | | (1,762,308 | ) |
| Loans from related parties | | - | | | (18,546 | ) | | - | | | - | | | (18,546 | ) |
| Net | | (894,921 | ) | | (3,453,141 | ) | | (520,229 | ) | | (917,649 | ) | | (5,785,940 | ) |
Interest Rate Risk
Interest rate risk is the opinionrisk that future cash flows of management that the foreign exchange riskCompany's assets and liabilities can change due to which thea change in interest rates. Loans payable have a fixed interest rate between 12% and 18%, and cash earns interest at a nominal rate. The Company is not exposed is currently minimal.to significant interest rate risk.
However, with the completion of the Tower Three Transaction, the Company anticipates that the fluctuations of the Colombian Peso may impact the Company’s financial results moving forward. Other Price Risk
The Company intendsis not subject to monitor such potential impact and will possibly develop a hedging policy if such fluctuations become material.other price risk.
41
Item 12.Description of Securities Other Than Equity Securities
Not applicable.
Part II
Item 13.Defaults, Dividend Arrearages and Delinquencies
Not applicable.None.
Item 14.Material Modifications to the Rights of Security Holders and Use of Proceeds
Not applicable.None.
Item 15.Controls and Procedures
Not applicable.Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
As of December 31, 2020, the end of the period covered by this annual report, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) under the Securities Exchange Act of 1934). Our principal executive and financial officers supervised and participated in this evaluation. Based on this evaluation, our principal executive and financial officers each concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report. The design of any system of controls is based in part upon various assumptions about the likelihood of future events, and there can be no assurance that any of our plans, products, services or procedures will succeed in achieving their intended goals under future conditions.
Changes in Internal Control
There were no changes in the Company's internal control over financial reporting (as defined in Rule 13a-15f and 15d-15(f) of the Securities Exchange Act of 1934) that occurred during the period covered by this report that have materially affected, or are likely to materially affect, the Company's internal control over financial reporting.
Management's Report on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining internal control over financial reporting as defined in Rules 13a-15(f) and 15(d)-15(f) of the Securities Exchange Act of 1934. The Company's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of Company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate. Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2020. In making this assessment management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated Framework. Based on our assessment and the criteria discussed above, management believes that, as of December 31, 2020, the Company's internal control over financial reporting was effective.
Item 16A.Audit Committee Financial Experts
Not applicable.The Board has determined that Fabio Alexander Vazquez qualifies as an "audit committee financial expert" and is "independent", as such term is used in Nasdaq Marketplace Rule 5605(a)(2).
Item 16B.Code of Ethics
Not applicable.The Board has approved a Code of Business Conduct and Ethics (the "Code"), which is filed herewith as an exhibit to this Form 20-F to be followed by the Company's directors, officers, employees and principal consultants and those of its subsidiaries. The Code is also to be followed, where appropriate, by the Company's agents and representatives, including consultants where specifically required. The purpose of the Code is to, among other things, promote honest and ethical conduct, avoid conflicts of interest, protect confidential or proprietary information and comply with the applicable government laws and securities rules and regulations. The Board does not actively monitor compliance with the Code, but requires prompt notification of apparent or actual breaches so that it may investigate and take action. The Code has been circulated to all employees.
The Company has not granted a waiver, including an implicit waiver, from a provision the Code during the last fiscal year.
Item 16C.Principal Accountant Fees and Services
Not applicable.The following table presents fees for professional audit services for the audit of the Company's annual financial statements by Smythe LLP for the fiscal years 2020 and 2019 and fees billed for other services rendered during 2020 and 2019. On March 9, 2020 Manning Elliott LLP resigned as the auditors of the Company and Smythe LLP was appointed as the auditors of the Company. Smythe LLP was engaged as auditors for the fiscal year 2019 and going forward are the auditors for the Company.
| Fiscal 2020 | | Fiscal 2019 | |
| | | | |
Type of Service/Fee | | | | |
| | | | |
Audit Fees (1) | $ 267,115 | | $ 290,751 | |
Audit Related Fees (2) | $ - | | $ - | |
Tax Fees (3) | $ - | | $ - | |
All Other Fees | $ - | | $ - | |
(1) Audit Fees consist of fees for professional services rendered for the audit of the company's consolidated financial statements included in its Annual Report on 20-F, the review of the interim financial statements included in its reports filed with the Canadian securities regulators, and for the services that are normally provided in connection with regulatory filings or engagements.
(2) Includes fees associated with assurance and related services that are reasonably related to the performance of the audit or review of the Company's financial statements. This category includes fees related to consultation regarding generally accepted accounting principles.
(3) Tax Fees consist of fees for tax compliance, tax advice and tax planning. The fee includes the preparation of the Company's income tax returns, franchise tax reports, and other tax filings.
Although our Audit Committee currently does not have a formal policy in place to pre-approve all audit and non-audit services provided by our independent auditor and the fees for such non-audit services, the Company's audit committee has adopted a policy to review on an annual basis the performance, objectivity and independence of our independent auditor.
Item 16D.Exemptions from the Listing Standards for Audit Committees
Not applicable.
Item 16E.Purchases of Equity Securities by the Company and Affiliated Purchasers
None.
Item 16F.Change in Registrant’sRegistrant's Certifying Accountant
Not applicable.
Item 16G.Corporate Governance
Not applicable.
Item 16G. Corporate Governance16H.Mine Safety Disclosure
Not applicable.
Part III
Item 17. Financial Statements
In lieu of responding to this item, we have responded to Item 18 of this shell companyannual report.
Item 18. Financial Statements
The Company's audited financial statements for the Company and for Tower Three for the fiscal year ended December 31, 2016, and the condensed interim consolidated financial statements of the Company for the six month period ended June 30, 2017,2020 as required under Item 18 are attached hereto starting on page F-1 of this Form 20-F. All of the financial information is presented herein in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board.
Item 19. Exhibits
Exhibit Number | |
Exhibit | Description of Exhibit |
Number1.1 | |
1.1 | Articles of the Company.* |
1.21.3 | Certificate of Change of Name dated December 28, 2016.** |
| 4.1 | Stock Option Plan.*** |
| 4.2 | Asset Purchase Agreement between Forge Therapeutics Inc. and the Company, dated July 23, 2015.* |
| 4.3 | The Arrangement Agreement between the Company and Cabbay Holdings Corp. dated April 18, 2016 and amended on April 21, 2016.** |
4.34.4 | Share Exchange Agreement dated October 19, 2016, between the Company, Tower Three SAS, and the shareholders of Tower Three SAS.** |
8.14.5 | Loan Agreement dated March 3, 2017.* |
| 4.6 | Share Purchase Offer Agreement dated March 30, 2017, between Tower One Wireless Corp. and Evolution Technology SA.* |
| 4.7 | Loan Agreement dated September 28, 2017.* |
| 4.8 | Loan Agreement dated October 10, 2017.* |
| 4.9 | Loan Agreement dated October 12, 2017.* |
| 4.10 | Escrow Agreement dated October 18, 2017 between Tower One Wireless Corp. and certain shareholders of Tower Construction & Technical Services, Inc.* |
| 4.11 | Acquisition Agreement dated April 3, 2018*. |
| 8.1 | List of significant subsidiaries of the Company as of June 1, 2017.Company.** |
| 11.1 | Code of Business Conduct and Ethics.* |
15.112.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.** |
| 12.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.** |
| 13.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.** |
| 13.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.** |
| 15.2 | Audit Committee Charter* |
| 101.INS** | XBRL Instance Document |
| 101.SCH** | XBRL Taxonomy Extension Schema |
| 101.CAL** | XBRL Taxonomy Extension Calculation Linkbase |
| 101.DEF** | XBRL Taxonomy Extension Definition Linkbase |
| 101.LAB** | XBRL Taxonomy Extension Label Linkbase |
| 101.PRE** | XBRL Taxonomy Extension Presentation Linkbase |
* Incorporated by reference to our registration statement pursuant to section 12(b) or (g) of the Exchange Act onFiled with previous Form 20-F (No. 001-35970) filed on June 17, 2013.
20-Fs
** Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2016 (No. 000-55103), as amended, filed on September 12, 2017.
*** Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2015 (No. 000-55103), as amended, filed on September 12, 2017.Filed herewith.
SIGNATURE
The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this registration statement on its behalf.
| |
| TOWER ONE WIRELESS CORP. |
| | |
Date: November 3, 2017June 21, 2021 | By: | /s/ Alejandro Ochoa |
| Name: Alejandro Ochoa |
| Title: Chief Executive Officer |
| |
| By:/s/ Abbey Abdiye |
| Name: Abbey Abdiye |
| Title: and Interim Chief Financial Officer |
Amended
TOWER ONE WIRELESS CORP.
(Formerly PACIFIC THERAPEUTICS LTD.)
AMENDED CONSOLIDATED FINANCIAL STATEMENTS
Years Ended
For the years ended December 31, 2016, 20152020, 2019 and 2014
(Expressed2018 (Expressed in Canadian Dollars)
 |
INDEPENDENT AUDITORS’ REPORTAmended |
ToREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE SHAREHOLDERS AND DIRECTORS OF TOWER ONE WIRELESS CORP.
Opinion on the Shareholders of
Tower One Wireless Corp. (formerly Pacific Therapeutics Ltd.)Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial statementsposition of Tower One Wireless Corp. which comprise the statement(the "Company") as of financial position as at December 31, 2016,2020 and 2019, and the related consolidated statements of comprehensive income (loss),loss, changes in equity (deficiency) and cash flows for the yearyears then ended, and the related notes comprising a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for(collectively referred to as the Financial Statements
Management is responsible for the preparation and fair presentation of these"consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States)statements"). Those standards require that we comply with ethical requirements, and plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained based on our audit is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Tower One Wireless Corp. as at December 31, 2016, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Emphasis of Matter
Without qualifying our opinion, we draw attention to Note 1 in the financial statements which indicates the existence of a material uncertainty that may cast significant doubt on the ability ofTower One Wireless Corp.to continue as a going concern.
Other Matter
The financial statements of Tower One Wireless Corp. 20F filing for the years ended December 31, 2015 and 2014 were audited by another auditor who expressed unmodified opinions on those statements on April 4, 2016 and April 30, 2015 respectively.
/s/ Manning Elliot LLP
CHARTERED PROFESSIONAL ACCOUNTANTS
Vancouver, British Columbia
August 23, 2017
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Directors of
Tower One Wireless Corp. (formerly Pacific Therapeutics Ltd.)
We have audited the accompanying financial statements of Tower One Wireless Corp. (formerly Pacific Therapeutics Ltd.), which comprise the statements of financial positionCompany as of December 31, 20152020 and 2014,2019, and the related statementsresults of comprehensive income (loss), changes in shareholders’ deficiency, and cash flows for the years then ended, and a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, these financial statements present fairly, in all material respects, the financial position of Tower One Wireless Corp. (formerly Pacific Therapeutics Ltd.) as at December 31, 2015 and 2014 and its financial performanceoperations and its cash flows for the years then ended, in accordanceconformity with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board.
Emphasis of MatterMaterial Uncertainty Related to Going Concern
Without qualifying our opinion, we draw attention toThe accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 into the consolidated financial statements, which indicates that Tower One Wireless Corp. (formerly Pacific Therapeutics Ltd.)the Company has suffered recurring losses from operations, and has a net working capital deficiency. These matters, along with the other matters set forth in Note 1, indicate the existence of material uncertaintiesdeficiency, and may not be able to amend, refinance, or pay off its debt, that raisesraise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
“DAVIDSON & COMPANY LLP”Other Matter
The consolidated financial statements of the Company for the year ended December 31, 2018 were audited by another auditor who expressed an unmodified opinion on those consolidated financial statements on May 13, 2019.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
F-2
 | Amended |
Emphasis of Matter - Amended Financial Statements
We draw attention to Note 26 to the consolidated financial statements, which describes that the financial statements that we originally reported on April 28, 2021 have been amended and describes the matter that gave rise to the amendment of the financial statements. Our opinion is not modified in respect of this matter.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Impairment of property and equipment
As discussed in note 10, the Company's carrying amount of property and equipment, which is substantially its tower equipment, as of December 31, 2020 amounts to $6,175,128. The Company considers both external and internal sources of information in assessing whether there are any indications of impairment. External sources of information include changes in the market, economic, and legal environment in which the Company operates that are not within its control. Internal sources of information include indications of economic performance. When events or circumstances exist that indicate the property and equipment may not be recoverable, the recoverable amount is estimated as the greater of its value in use and its fair value less costs of disposal. An impairment loss is recognized if the carrying amount exceeds its estimated recoverable amount. Indicators of impairment were identified for certain property and equipment assets and a recoverable value assessment was required resulting in an impairment loss of $441,292.
We identified the impairment assessment of property and equipment as a critical audit matter when determining recoverable amount because of the significant estimates and assumptions management uses in evaluating the recoverable value of the cash generating unit, which encompasses the property and equipment. This in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures to evaluate audit evidence relating to the estimates and judgments made by management in determining the recoverable values.
The primary audit procedures we performed to address this critical audit matter included, among others, the following:
• We evaluated management's assessment of indicators of impairment and assessed the completeness of external factors, including COVID-19, and internal factors, including financial performance that could be considered as indicators of impairment of the Company's property and equipment, including consideration of evidence obtained in other areas of the audit;
• We ensured the Company had the necessary rights and permits for construction and operation of towers in place, and ensured the towers were not subject to litigation or claims, or, if litigation or claims existed, that the probability of an adverse resolution is low; and
• As impairment indicators were identified, a recoverable value assessment was performed by management where we reviewed for reasonableness, including assessing the estimates of costs to dismantle and estimates of salvage values of the property and equipment.
Chartered Professional Accountants
We have served as the Company's auditor since 2020.
/s/ Smythe LLP
Vancouver, Canada
September 7, 2017June 07, 2021
F-3
Amended
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
To the Shareholders and the Board of Directors of
Tower One Wireless Corp.
Opinion on the Consolidated Financial Statements
We have audited, before the effects of the adjustments described in Notes 8, 14 and 16 to recast comparative information to correct losses attributable to non-controlling interests and foreign exchange expenses, the accompanying consolidated statements of operations and comprehensive loss, changes in equity and cash flows of Tower One Wireless Corp. and its subsidiaries (the "Company"), and the related notes (collectively referred to as the "consolidated financial statements") for the year ended December 31, 2018.
In our opinion, the consolidated statements of operations and comprehensive loss, changes in equity and cash flows, before the effects of the adjustments described in Notes 8, 14 and 16, for the year ended December 31, 2018, present fairly, in all material respects, the financial performance and cash flows of the Company for the year ended December 31, 2018 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
We were not engaged to audit, review, or apply any procedures to the adjustments described in Notes 8, 14 and 16, and accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied. These adjustments were audited by Smythe LLP.
Explanatory Paragraph - Going Concern
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has a working capital deficit and has accumulated losses since inception. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also discussed in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement, whether due to fraud or error. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.
We believe that the audit evidence we have obtained in our audit is sufficient and appropriate to provide a reasonable basis for our audit opinion.
/s/ Manning Elliott LLP
CHARTERED PROFESSIONAL ACCOUNTANTS
Vancouver, British Columbia
September 2, 2020
We have served as the Company's auditor since 2016.
TOWER ONE WIRELESS CORP. |
(formerly PACIFIC THERAPEUTICS LTD.) |
Consolidated Statements of Financial Position |
As at December 31, 20162020 and 2015 |
2019
(Expressed in Canadian Dollars) | Amended |
| | | | | | | | | |
| | | Note | | | 2016 | | | 2015 | |
| | | | | | $ | | | $ | |
| | | | | | | | | | |
| Current Assets | | | | | | | | | |
| Cash | | | | | 1,378,183 | | | - | |
| Amounts receivable | | | | | 14,439 | | | 1,744 | |
| Due from related parties | | 7 | | | 189,468 | | | - | |
| Prepaid expenses and deposits | | | | | 26,190 | | | 12,951 | |
| | | | | | 1,608,280 | | | 14,695 | |
| Other receivable | | 5 | | | - | | | 1 | |
| | | | | | 1,608,280 | | | 14,696 | |
| | | | | | | | | | |
| Current Liabilities | | | | | | | | | |
| Bank overdraft | | | | | - | | | 141 | |
| Accounts payable and accrued liabilities | | | | | 133,507 | | | 333,034 | |
| Convertible note | | 6 | | | - | | | 62,460 | |
| Due to related parties | | 7 | | | 6,300 | | | 228,472 | |
| | | | | | 139,807 | | | 624,106 | |
| | | | | | | | | | |
| Shareholders’ Equity (Deficiency) | | | | | | | | | |
| Share capital | | 8 | | | 3,292,175 | | | 2,800,010 | |
| Shares committed for issuance | | 8 | | | - | | | 4,800 | |
| Shares subscriptions received | | 13(b) | | | 1,602,257 | | | - | |
| Equity component of convertible note | | 6 | | | - | | | 1,080 | |
| Contributed surplus | | | | | 563,568 | | | 121,939 | |
| Deficit | | | | | (3,989,527 | ) | | (3,537,239 | ) |
| | | | | | 1,468,473 | | | (609,410 | ) |
| | | | | | 1,608,280 | | | 14,696 | |
Nature of operations and going concern (Note 1)
Subsequent events (Note 13)
| | Note | | 2020 | | | 2019 | |
| | | | $ | | | $ | |
| ASSETS (NOTES 13 and 15) | |
| Current Assets | | | | | | | |
| Cash | | | 122,759 | | | 56,629 | |
| Amounts receivable | | | 1,166,502 | | | 1,808,397 | |
| Prepaid expenses and deposits | | | 371,013 | | | 234,091 | |
| Unbilled revenues | | | - | | | 109,064 | |
| Assets held for sale | 12 | | 30,967 | | | 751,726 | |
| | | | 1,691,241 | | | 2,959,907 | |
| Intangible assets | 9 | | 1,357,658 | | | 1,602,728 | |
| Right-of-use assets | 11 | | 1,885,433 | | | 2,706,368 | |
| Property and equipment | 10 | | 6,175,128 | | | 8,732,046 | |
| Total Assets | | | 11,109,460 | | | 16,001,049 | |
| LIABILITIES AND SHAREHOLDERS' DEFICIENCY | |
| Current Liabilities | | | | | | | |
| Accounts payable and accrued liabilities | 16 | | 4,368,281 | | | 4,035,983 | |
| Income tax payable | 24 | | 610,977 | | | 380,863 | |
| Interest payable | 13,14,15,16 | | 650,278 | | | 357,913 | |
| Deferred revenue | | | 278,443 | | | 443,500 | |
| Customer deposits | 19 | | 5,621,307 | | | 8,526,085 | |
| Current portion of lease liabilities | 11 | | 92,308 | | | 206,079 | |
| Convertible debentures | 13 | | - | | | 745,000 | |
| Current portion of loans payable | 14 | | 3,440,732 | | | 1,263,055 | |
| Loans from related parties | 16 | | 3,870,748 | | | 4,060,187 | |
| Bonds payable | 15 | | 1,882,750 | | | - | |
| | | | 20,815,824 | | | 20,018,665 | |
| Long-term portion of lease liabilities | 11 | | 1,593,370 | | | 2,497,050 | |
| Bonds payable | 15 | | - | | | 1,787,351 | |
| Long-term portion of loans payable | 14 | | 143,855 | | | - | |
| Total Liabilities | | | 22,553,049 | | | 24,303,066 | |
| Shareholders' Deficiency | | | | | | | |
| Share capital | 17 | | 16,900,668 | | | 16,876,382 | |
| Share subscriptions | | | (30,000 | ) | | (30,000 | ) |
| Contributed surplus | 17 | | 1,706,089 | | | 2,303,721 | |
| Non-controlling interest | 8 | | (4,532,457 | ) | | (3,357,287 | ) |
| Deficit | | | (25,352,460 | ) | | (23,585,459 | ) |
| Accumulated other comprehensive loss | | | (135,429 | ) | | (509,374 | ) |
| Total Shareholders' Deficiency | | | (11,443,589 | ) | | (8,302,017 | ) |
| Total Equity and Liabilities | | | 11,109,460 | | | 16,001,049 | |
Approved on behalf of the Board of Directors:
| | |
“"Alejandro Ochoa”Ochoa" | "Robert Nicholas Peter Horsley" | “Brian Gusko” |
The accompanying notes are an integral part of these consolidated financial statements.
|
TOWER ONE WIRELESS CORP. |
(formerly PACIFIC THERAPEUTICS LTD.) |
Consolidated Statements of Comprehensive Income (Loss) |
Loss
For the Years Ended December 31, 2016, 20152020, 2019 and 2014 |
2018
(Expressed in Canadian Dollars) | Amended |
| | | | | | | | | | | | |
| | | Note | | | 2016 | | | 2015 | | | 2014 | |
| | | | | | $ | | | $ | | | $ | |
| Expenses | | | | | | | | | | | | |
| Advertising and promotion | | | | | - | | | 22,386 | | | 67,923 | |
| Amortization of property and equipment | | | | | - | | | - | | | 1,216 | |
| Amortization of intangible assets | | | | | - | | | 2,993 | | | 5,618 | |
| Bank charges and interest | | | | | 766 | | | 4,077 | | | 10,047 | |
| Donation | | | | | - | | | - | | | 500 | |
| Insurance | | | | | 19,631 | | | 9,707 | | | 30,194 | |
| Interest accretion | | 6 | | | - | | | 25,503 | | | 11,005 | |
| Investor relations | | | | | - | | | - | | | 25,075 | |
| Office and miscellaneous | | | | | 32,175 | | | 1,666 | | | 5,428 | |
| Professional fees | | | | | 307,414 | | | 85,486 | | | 168,490 | |
| Rent and occupancy costs | | | | | - | | | 3,172 | | | 14,543 | |
| Share-based payments | | 8 | | | 75,505 | | | 11,998 | | | 152,028 | |
| Telephone and utilities | | | | | - | | | 1,516 | | | 2,006 | |
| Transfer agent | | | | | 17,318 | | | 9,462 | | | 24,107 | |
| Travel | | | | | - | | | 230 | | | 11,906 | |
| Wages and benefits | | | | | - | | | 106,667 | | | 160,947 | |
| | | | | | (452,809 | ) | | (284,863 | ) | | (691,033 | ) |
| Other Income (Expenses) | | | | | | | | | | | | |
| Foreign exchange | | | | | 5,711 | | | (28,269 | ) | | 440 | |
| Gain on debt settlement | | 7 | | | - | | | 535,077 | | | - | |
| Gain on derivative liability | | | | | - | | | 36,188 | | | - | |
| Impairment of intangible assets | | | | | - | | | (67,065 | ) | | - | |
| Interest on convertible notes | | 6 | | | (5,190 | ) | | (6,395 | ) | | (1,825 | ) |
| Loss on retirement assets | | 6 | | | - | | | - | | | (1,227 | ) |
| Loss on settlement of convertible note | | 6 | | | - | | | (5,000 | ) | | - | |
| | | | | | 521 | | | 464,536 | | | (2,612 | ) |
| | | | | | | | | | | |
| Net income (loss) and comprehensive income (loss) | | | (452,288 | ) | | 179,673 | | | (693,645 | ) |
| | | | | | | | | | | |
| Income (loss) per common share – basic and diluted | | | (0.09 | ) | | 0.13 | | | (0.56 | ) |
| | | | | | | | | | | | | |
| Weighted average number of common shares | | | | | 5,175,946 | | | 1,351,500 | | | 1,248,561 | |
| | Note | | 2020 | | | 2019 | | | 2018 | |
| | | | $ | | | $ | | | $ | |
| Revenues | 21 | | 9,126,082 | | | 5,413,594 | | | 1,556,742 | |
| Cost of sales | | | 4,951,013 | | | 2,879,546 | | | - | |
| | | | 4,175,069 | | | 2,534,048 | | | 1,556,742 | |
| Expenses | | | | | | | | | | |
| Advertising and promotion | | | 133,726 | | | 46,789 | | | 1,403,270 | |
| Amortization | 9, 10, 11 | | 1,260,439 | | | 1,261,964 | | | 436,902 | |
| Bad debts | | | 38,410 | | | 150,551 | | | - | |
| Foreign exchange | | | 540,633 | | | 21,576 | | | 754,999 | |
| Interest, financing charges and accretion | 11, 13, 14, 15, 16 | | 1,205,657 | | | 1,912,553 | | | 769,322 | |
| | | | | | | | | | | |
| Maintenance and operations | | | 942,370 | | | 1,001,161 | | | 1,517,698 | |
| Office and miscellaneous | | | 869,732 | | | 949,670 | | | 675,553 | |
| Professional fees and consulting | 16 | | 2,395,170 | | | 2,366,030 | | | 1,834,575 | |
| Share-based compensation | 16, 17 | | - | | | - | | | 1,913,692 | |
| Transfer agent and filing fees | | | - | | | 13,790 | | | 44,983 | |
| Travel | | | 154,043 | | | 214,065 | | | 201,888 | |
| | | | 7,540,180 | | | 7,938,149 | | | 9,552,882 | |
| | | | | | | | | | | |
| Loss before other items | | | (3,365,111 | ) | | (5,404,101 | ) | | (7,996,140 | ) |
| Other items | | | | | | | | | | |
| Loss on extinguishment of debt | 16 | | - | | | (393,026 | ) | | - | |
| Impairment | 7, 9, 10 | | (441,292 | ) | | (1,306,767 | ) | | (2,132,942 | ) |
| Impairment of advances and loans receivable | 16 | | - | | | (224,975 | ) | | (225,732 | ) |
| Write-off of VAT receivable | | | - | | | (48,735 | ) | | (13,859 | ) |
| Gain (loss) on net monetary position | 4 | | 318,659 | | | (711,090 | ) | | 924,340 | |
| | | | (122,633 | ) | | (2,684,593 | ) | | (1,448,193 | ) |
| Net loss before income taxes | | | (3,487,744 | ) | | (8,088,694 | ) | | (9,444,333 | ) |
| Current income tax expense | 24 | | (186,560 | ) | | (380,863 | ) | | - | |
| Deferred income tax recovery | 24 | | - | | | 322,289 | | | 313,048 | |
| Net loss | | | (3,674,304 | ) | | (8,147,268 | ) | | (9,131,285 | ) |
| Other comprehensive loss: | | | | | | | | | | |
| Item that will be reclassified to profit or loss | | | | | | | | | | |
| Foreign exchange translation adjustment | | | 508,446 | | | (327,696 | ) | | (480,132 | ) |
| Comprehensive loss | | | (3,165,858 | ) | | (8,474,964 | ) | | (9,611,417 | ) |
| Net loss attributable to: | | | | | | | | | | |
| Shareholders of the Company | | | (2,364,633 | ) | | (4,977,237 | ) | | (9,112,971 | ) |
| Non-controlling interest | | | (1,309,671 | ) | | (3,170,031 | ) | | (18,314 | ) |
| Net loss | | | (3,674,304 | ) | | (8,147,268 | ) | | (9,131,285 | ) |
| Other comprehensive income (loss) attributable to: | | | | | | | | | | |
| Shareholders of the Company | | | 373,945 | | | (155,147 | ) | | (326,928 | ) |
| Non-controlling interest | | | 134,501 | | | (172,549 | ) | | (153,204 | ) |
| Other comprehensive income (loss) | | | 508,446 | | | (327,696 | ) | | (480,132 | ) |
| | | | | | | | | | | |
| Loss per common share - basic and diluted | | | (0.04 | ) | | (0.13 | ) | | (0.10 | ) |
| Weighted average common shares outstanding | | | 93,867,588 | | | 63,389,446 | | | 88,307,259 | |
The accompanying notes are an integral part of these consolidated financial statements.
|
| TOWER ONE WIRELESS CORP. |
(formerly PACIFIC THERAPEUTICS LTD.) |
Statement
Consolidated Statements of Changes in Equity |
(Deficiency)
(Expressed in Canadian Dollars) | Amended |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Shares | | | Equity | | | | | | | | | | |
| | | Number of | | | | | | Share | | | committed | | | component | | | | | | | | | | |
| | | Common | | | Share | | | subscriptions | | | for | | | of convertible | | | Contributed | | | | | | | |
| | | shares | | | capital | | | received | | | issuance | | | note | | | surplus | | | Deficit | | | Total | |
| | | | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2013 | | 1,248,554 | | | 2,699,210 | | | - | | | - | | | - | | | 123,704 | | | (3,263,058 | ) | | (440,144 | ) |
| Shares issued for cash | | 4,000 | | | 4,800 | | | - | | | - | | | - | | | 1,200 | | | - | | | 6,000 | |
| Shares exchanged for debt | | 46,667 | | | 56,000 | | | - | | | - | | | - | | | 14,000 | | | - | | | 70,000 | |
| Subscription received for shares | | - | | | - | | | 30,000 | | | - | | | - | | | - | | | - | | | 30,000 | |
| Share-based payments | | - | | | - | | | - | | | - | | | - | | | 152,028 | | | - | | | 152,028 | |
| Options expired unexercised | | - | | | - | | | - | | | - | | | - | | | (1,166 | ) | | 1,166 | | | - | |
| Comprehensive loss | | - | | | - | | | - | | | - | | | - | | | - | | | (693,645 | ) | | (693,645 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2014 | | 1,299,221 | | | 2,760,010 | | | 30,000 | | | - | | | - | | | 289,766 | | | (3,955,537 | ) | | (875,761 | ) |
| Units issued for debt @$1.50 | | 39,333 | | | 23,600 | | | - | | | - | | | - | | | 35,400 | | | - | | | 59,000 | |
| Units issued for cash @$1.50 | | 27,333 | | | 16,400 | | | (30,000 | ) | | - | | | - | | | 24.600 | | | - | | | 11,000 | |
| Shares committed for issuance on exercise of warrants | | - | | | - | | | - | | | 4,800 | | | - | | | (1,200 | ) | | - | | | 3,600 | |
| Share-based payments | | - | | | - | | | - | | | - | | | - | | | 11,998 | | | - | | | 11,998 | |
| Fair value of conversion feature on convertible note | | - | | | - | | | - | | | - | | | 1,080 | | | - | | | - | | | 1,080 | |
| Options and warrants expired and unexercised | | - | | | - | | | - | | | - | | | - | | | (238,625 | ) | | 238,625 | | | - | |
| Comprehensive income | | - | | | - | | | - | | | - | | | - | | | - | | | 179,673 | | | 179,673 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2015 | | 1,365,887 | | | 2,800,010 | | | - | | | 4,800 | | | 1,080 | | | 121,939 | | | (3,537,239 | ) | | (609,410 | ) |
| Shares issued for cash @$0.06 | | 4,089,332 | | | 245,360 | | | - | | | - | | | - | | | - | | | - | | | 245,360 | |
| Shares issued for debt settlement | | 766,666 | | | 46,000 | | | - | | | - | | | - | | | - | | | - | | | 46,000 | |
| Exercise of warrants | | 4,000 | | | 4,800 | | | - | | | (4,800 | ) | | - | | | - | | | - | | | - | |
| Shares issued to True Vita | | 10,000 | | | 500 | | | - | | | - | | | - | | | - | | | - | | | 500 | |
| Exercise of options | | 500,000 | | | 195,505 | | | - | | | - | | | - | | | (75,505 | ) | | - | | | 120,000 | |
| Share-based payments | | - | | | - | | | - | | | - | | | - | | | 75,505 | | | - | | | 75,505 | |
| Subscriptions received | | - | | | - | | | 1,602,257 | | | - | | | - | | | - | | | - | | | 1,602,257 | |
| Transfer of convertible note | | - | | | - | | | - | | | - | | | (1,080 | ) | | 1,080 | | | - | | | - | |
| Debt forgiveness | | - | | | - | | | - | | | - | | | - | | | 440,549 | | | - | | | 440,549 | |
| Comprehensive loss | | - | | | - | | | - | | | - | | | - | | | - | | | (452,288 | ) | | (452,288 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2016 | | 6,735,885 | | | 3,292,175 | | | 1,602,257 | | | - | | | - | | | 563,568 | | | (3,989,527 | ) | | 1,468,473 | |
| | |
Number of
Common
Shares | | |
Share Capital | | |
Subscriptions
Received | | |
Contributed
Surplus | | |
Deficit | | |
Accumulated
Other
Comprehensive
Income | | |
Deficiency
Attributable to
Shareholders of
the Company | | |
Non-
controlling
Interest | | |
Total | |
| | | | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
| Balance, December 31, 2017 | | 70,125,698 | | | 10,635,886 | | | 170,000 | | | 1,344,884 | | | (9,896,705 | ) | | (27,299 | ) | | 2,226,766 | | | 188,156 | | | 2,414,922 | |
| Exercise of stock options | | 5,600,000 | | | 2,460,301 | | | (200,000 | ) | | (1,200,301 | ) | | - | | | - | | | 1,060,000 | | | - | | | 1,060,000 | |
| Exercise of warrants | | 8,665,201 | | | 2,166,300 | | | - | | | - | | | - | | | - | | | 2,166,300 | | | - | | | 2,166,300 | |
| Shares issued for services | | 525,690 | | | 110,395 | | | - | | | - | | | - | | | - | | | 110,395 | | | - | | | 110,395 | |
| Shares issued for subscriptions received | | 142,857 | | | 30,000 | | | (30,000 | ) | | - | | | - | | | - | | | - | | | - | | | - | |
| Shares issued for debt | | 780,000 | | | 156,000 | | | - | | | - | | | - | | | - | | | 156,000 | | | - | | | 156,000 | |
| Shares issued for acquisition of Mexmaken | | 7,500,000 | | | 1,312,500 | | | - | | | - | | | - | | | - | | | 1,312,500 | | | 145,833 | | | 1,458,333 | |
| Share-based compensation | | - | | | - | | | - | | | 1,913,692 | | | - | | | - | | | 1,913,692 | | | - | | | 1,913,692 | |
| Subscriptions received | | - | | | - | | | 30,000 | | | - | | | - | | | - | | | 30,000 | | | - | | | 30,000 | |
| Shares issued | | 50,000 | | | 5,000 | | | - | | | - | | | - | | | - | | | 5,000 | | | - | | | 5,000 | |
| Fair value of warrants issued for bond issuance cost | | - | | | - | | | - | | | 28,514 | | | - | | | - | | | 28,514 | | | - | | | 28,514 | |
| Equity portion of convertible debentures | | - | | | - | | | - | | | 2,673 | | | - | | | - | | | 2,673 | | | - | | | 2,673 | |
| Net loss | | - | | | - | | | - | | | - | | | (9,112,971 | ) | | - | | | (9,112,971 | ) | | (18,314 | ) | | (9,131,285 | ) |
| Other comprehensive loss | | - | | | - | | | - | | | - | | | - | | | (326,928 | ) | | (326,928 | ) | | (153,204 | ) | | (480,132 | ) |
| Balance, December 31, 2018 | | 93,389,446 | | | 16,876,382 | | | (30,000 | ) | | 2,089,462 | | | (19,009,676 | ) | | (354,227 | ) | | (428,059 | ) | | 162,471 | | | (265,588 | ) |
| Warrants issued | | - | | | - | | | - | | | 608,440 | | | - | | | - | | | 608,440 | | | - | | | 608,440 | |
| Obligation to issue warrants | | - | | | - | | | - | | | 180,714 | | | - | | | - | | | 180,714 | | | - | | | 180,714 | |
| Extinguishment of convertible debenture | | - | | | - | | | - | | | (574,895 | ) | | - | | | - | | | (574,895 | ) | | - | | | (574,895 | ) |
Adjustment on acquisition of
controlled subsidiary | | - | | | - | | | - | | | - | | | (106,990 | ) | | - | | | (106,990 | ) | | 869 | | | (106,121 | ) |
| Adjustment on disposition of controlled subsidiary | | - | | | - | | | - | | | - | | | 508,444 | | | - | | | 508,444 | | | (178,047 | ) | | 330,397 | |
| Net loss | | - | | | - | | | - | | | - | | | (4,977,237 | ) | | - | | | (4,977,237 | ) | | (3,170,031 | ) | | (8,147,268 | ) |
| Other comprehensive loss | | - | | | - | | | - | | | - | | | - | | | (155,147 | ) | | (155,147 | ) | | (172,549 | ) | | (327,696 | ) |
| Balance, December 31, 2019 | | 93,389,446 | | | 16,876,382 | | | (30,000 | ) | | 2,303,721 | | | (23,585,459 | ) | | (509,374 | ) | | (4,944,730 | ) | | (3,357,287 | ) | | (8,302,017 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
|
| TOWER ONE WIRELESS CORP. |
(formerly PACIFIC THERAPEUTICS LTD.) |
Consolidated Statements of Cash Flows |
For the Years Ended December 31, 2016, 2015 and 2014 |
Changes in Equity (Deficiency)
(Expressed in Canadian Dollars) | Amended |
| | | | | | | | | |
| | | 2016 | | | 2015 | | | 2014 | |
| | | $ | | | $ | | | $ | |
| | | | | | | | | | |
| Cash flows from operating activities | | | | | | | | | |
| Net (loss) income | | (452,288 | ) | | 179,673 | | | (693,645 | ) |
| Items not affection cash: | | | | | | | | | |
Amortization of property and equipment | | - | | | - | | | 1,216 | |
Amortization of intangible assets | | - | | | 2,993 | | | 5,618 | |
Accretion | | - | | | 25,503 | | | 11,005 | |
Interest expense on convertible note | | 3,730 | | | 6,395 | | | 1,825 | |
Gain on derivative liability | | - | | | (36,188 | ) | | - | |
Share-based payments | | 75,505 | | | 11,998 | | | 152,028 | |
Impairment of intangible assets | | - | | | 67,065 | | | - | |
Gain on forgiveness of debt | | - | | | (535,077 | ) | | - | |
Loss on investment | | 500 | | | - | | | - | |
Loss on retirement of assets | | - | | | - | | | 1,227 | |
Loss on settlement of convertible note | | - | | | 5,000 | | | - | |
| | | (372,553 | ) | | (272,638 | ) | | (520,726 | ) |
| | | | | | | | | | |
| Changes in non-cash working capital item: | | | | | | | | | |
Amounts receivable | | (12,695 | ) | | (432 | ) | | 6,079 | |
Prepaid expenses | | (13,239 | ) | | (12,951 | ) | | 36,605 | |
Accounts payable and accrued liabilities | | 2,228 | | | 124,561 | | | 111,273 | |
| | | (396,259 | ) | | (161,460 | ) | | (366,769 | ) |
| | | | | | | | | | |
| Cash flows from investing activity | | | | | | | | | |
Additions to intangible assets | | - | | | (5,570 | ) | | (10,195 | ) |
| | | | | | | | | | |
| Cash flows from financing activities | | | | | | | | | |
Advances from (to) related parties | | (188,035 | ) | | 150,776 | | | 142,685 | |
Exercise of stock options | | 120,000 | | | - | | | - | |
Repayment of convertible note | | (5,000 | ) | | - | | | - | |
Shares issued for cash | | 245,360 | | | 14,600 | | | 6,000 | |
Subscriptions received | | 1,602,257 | | | - | | | 30,000 | |
Convertible note | | - | | | - | | | 50,000 | |
Repayment of convertible note | | - | | | - | | | (30,900 | ) |
| | | 1,774,582 | | | 165,376 | | | 197,785 | |
| | | | | | | | | | |
| Change in cash and cash equivalents | | 1,378,324 | | | (1,654 | ) | | (179,179 | ) |
| Cash and cash equivalents (bank overdraft), beginning | | (141 | ) | | 1,513 | | | 180,692 | |
| | | | | | | | | | |
| Cash and cash equivalents (bank overdraft), ending | | 1,378,183 | | | (141 | ) | | 1,513 | |
| | | | | | | | | | |
| Supplemental disclosure of cash flow information: | | | | | | | | | |
Cash paid for interest | | - | | | - | | | - | |
Cash paid for income taxes | | - | | | - | | | - | |
Supplemental Cash Flow Information (Note 12)
| | |
Number of
Common
Shares | | |
Share Capital | | |
Subscriptions
Received | | |
Contributed
Surplus | | |
Deficit | | |
Accumulated
Other
Comprehensive
Income | | |
Deficiency
Attributable to
Shareholders of
the Company | | |
Non-
controlling
Interest | | |
Total | |
| | | | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
| Balance, December 31, 2019 | | 93,389,446 | | | 16,876,382 | | | (30,000 | ) | | 2,303,721 | | | (23,585,459 | ) | | (509,374 | ) | | (4,944,730 | ) | | (3,357,287 | ) | | (8,302,017 | ) |
| Warrants expired | | - | | | - | | | - | | | (597,632 | ) | | 597,632 | | | - | | | - | | | - | | | - | |
| Shares issued as penalty to the convertible debt lenders | | 714,286 | | | 24,286 | | | - | | | - | | | - | | | - | | | 24,286 | | | - | | | 24,286 | |
| Net loss | | - | | | - | | | - | | | - | | | (2,364,633 | ) | | - | | | (2,364,633 | ) | | (1,309,671 | ) | | (3,674,304 | ) |
| Other comprehensive income | | - | | | - | | | - | | | - | | | - | | | 373,945 | | | 373,945 | | | 134,501 | | | 508,446 | |
| Balance, December 31, 2020 | | 94,103,732 | | | 16,900,668 | | | (30,000 | ) | | 1,706,089 | | | (25,352,460 | ) | | (135,429 | ) | | (6,911,132 | ) | | (4,532,457 | ) | | (11,443,589 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
| | | 2020 | | | 2019 | | | 2018 | |
| | | $ | | | $ | | | $ | |
| Cash flows from operating activities | | | | | | | | | |
| Net loss | | (3,674,304 | ) | | (8,147,268 | ) | | (9,131,285 | ) |
| Items not affecting cash: | | | | | | | | | |
| Accretion | | - | | | 107,376 | | | 70,341 | |
| Accrued interest | | 493,901 | | | 583,883 | | | - | |
| Amortization | | 1,260,439 | | | 1,261,964 | | | 436,902 | |
| Allowance for VAT | | - | | | 48,735 | | | 13,859 | |
| Gain on sale of towers | | (453,216 | ) | | (664,446 | ) | | - | |
| Deferred income tax recovery | | - | | | (322,289 | ) | | (313,048 | ) |
| Foreign exchange | | 962,181 | | | 2,719,037 | | | 2,131,449 | |
| Gain on net monetary position | | (1,323,265 | ) | | (1,921,376 | ) | | (924,340 | ) |
| Impairment | | 441,292 | | | 1,306,767 | | | 2,358,674 | |
| Impairment of advances and loans receivable | | - | | | 224,975 | | | - | |
| Loss on extinguishment of debt | | - | | | 393,026 | | | - | |
| Share-based compensation | | - | | | - | | | 1,913,692 | |
| Shares issued for services | | - | | | - | | | 110,395 | |
| | | | | | | | | | |
| Changes in non-cash working capital items (Note 22) | | 2,691,191 | | | 7,529,242 | | | 2,131,158 | |
| Cash provided by (used in) operating activities | | 398,219 | | | 3,119,626 | | | (1,202,203 | ) |
| | | | | | | | | | |
| Cash flows from investing activities | | | | | | | | | |
| Cash received from acquisitions | | - | | | - | | | 18,436 | |
| Cash paid for acquisitions | | - | | | (106,121 | ) | | - | |
| Cash received from disposition | | 72,396 | | | 258,001 | | | - | |
| Cash received on sale of towers | | 1,204,942 | | | - | | | - | |
| Additions of property and equipment | | (2,656,546 | ) | | (3,634,144 | ) | | (8,436,633 | ) |
| Cash used in investing activities | | (1,379,208 | ) | | (3,482,264 | ) | | (8,418,197 | ) |
| | | | | | | | | | |
| Cash flows from financing activities | | | | | | | | | |
| Shares issued for cash, net | | - | | | - | | | 30,000 | |
| Exercise of stock options and warrants | | - | | | - | | | 3,226,300 | |
| Proceeds from convertible debts, net | | - | | | - | | | 1,376,914 | |
| Repayment of convertible debts | | (745,000 | ) | | (750,000 | ) | | - | |
| Proceeds from bonds payable, net | | - | | | 859,560 | | | 888,996 | |
| Loans received | | 2,533,479 | | | 1,173,953 | | | 1,756,309 | |
| Repayment of loans | | (66,258 | ) | | (1,467,004 | ) | | (156,819 | ) |
| Loans from related parties | | 713,646 | | | 1,969,187 | | | 1,366,710 | |
| Repayment of loans from related parties | | (833,951 | ) | | (1,140,500 | ) | | (534,612 | ) |
| Lease payments | | (553,130 | ) | | (570,512 | ) | | - | |
| Promissory note received | | - | | | - | | | 1,728,480 | |
| Cash provided by financing activities | | 1,048,786 | | | 74,684 | | | 9,682,278 | |
| Foreign exchange on cash | | (1,667 | ) | | (1,520 | ) | | - | |
| | | | | | | | | | |
| Change in cash | | 66,130 | | | (289,474 | ) | | 61,878 | |
| Cash, beginning | | 56,629 | | | 346,103 | | | 284,225 | |
| | | | | | | | | | |
| Cash, ending | | 122,759 | | | 56,629 | | | 346,103 | |
| | | | | | | | | | |
| Property and equipment additions in accounts payable and accrued liabilities | | 901,653 | | | 1,019,581 | | | - | |
| Cash paid for interest | | 368,390 | | | 635,717 | | | 50,000 | |
| Cash paid for income taxes | | - | | | - | | | - | |
The accompanying notes are an integral part of these consolidated financial statements.
1.NATURE OF OPERATIONS AND GOING CONCERN
1. | NATURE OF OPERATIONS AND GOING CONCERN
|
Tower One Wireless Corp. (formerly Pacific Therapeutics Ltd.("Tower One" or the "Company") (the “Company"is a pure-play, build-to-suit ("BTS") tower owner, operator and developer of multitenant communications structures. The Company's primary business is the leasing of space on communications sites to mobile network operators ("MNOs"). The Company offers tower-related services in the largest Spanish speaking countries in Latin America: Argentina, Colombia and Mexico. These tower-related services include site acquisition, zoning and permitting, structural analysis, and construction which primarily supports the Company's site leasing business, including the addition of new tenants and equipment on its sites. A long -term site lease is in hand with a tenant prior to undergoing construction.
Tower One was incorporated under the laws of the Province of British Columbia, Canada on September 12, 2005. On October 14, 2011, the Company became a reporting company in British Columbia and was approved by the Canadian Securities Exchange (“CSE”("CSE") and commenced trading on November 16, 2011. The Company’sCompany's registered office is located at Suite 605, 815 Hornby Street, Vancouver, BC, Canada V6Z 2E6.
On March 6, 2016, the Company incorporated Cabbay Holdings Corp. (“Cabbay”), a wholly owned subsidiary. On April 21, 2016, the Company entered into a plan of arrangement (“Arrangement”) with Cabbay and its shareholders. Under the Arrangement, Cabbay issued its common shares in exchange for special Class of reorganization shares of the Company held by the shareholders of the Company. The Company then redeemed the special Class of reorganization shares held by Cabbay in exchange for the Asset Purchase Agreement with Forge Therapeutics Inc., described in Note 5 and $1,000. The Arrangement was approved by the Company’s shareholders on May 20, 2016 and by the Supreme Court of British Columbia on May 31, 2016. Upon completion of the Arrangement, Cabbay was no longer a subsidiary of the Company. In connection with the restructuring, $440,549 of the Company’s debt in the form of accounts payable, convertible note and amounts due to related parties was assigned to Cabbay. As a result of the assignment and the Arrangement, the Company recorded $440,549 in contributed surplus for the year ended December 31, 2016.
These consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern, and accordingly, do not purport to give effect to adjustments which may be required should the Company be unable to achieve the objectives above as a going concern. The net realizable value of the Company’sCompany's assets may be materially less than the amounts recorded in these consolidated financial statements should the Company be unable to realize its assets and discharge its liabilities in the normal course of business. At December 31, 2016,2020, the Company had a working capital deficiency of $19,124,583 (2019 - $17,058,758) and an accumulated deficit of $3,989,527$25,352,460 (2019 - $23,585,459) which has been funded primarily by the issuance of equity.loans from related parties. Ongoing operations of the Company are dependent upon the Company’sCompany's ability to generate sufficient revenues in the future, receive continued financial support and complete equity financings and ultimately the generation profitable operations in the future.financings. These factors raise significantsubstantial doubt about the Company’sCompany's ability to continue as a going concern.
These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Such adjustments could be material.
The outbreak of the novel strain of coronavirus ("COVID-19") has resulted in governments worldwide enacting emergency measures to constrain the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods, self-isolation, physical and social distancing and the closure of non-essential businesses, have caused significant disruption to businesses globally, which has resulted in an uncertain and challenging economic environment. The duration and impact of the COVID-19 pandemic are unknown at this time. COVID-19 did not have a significant impact on the Company's site leasing business and tower sales. Moreover, COVID-19 did not have any impact on the Company's ability to collect receivables from its customers.
Entity | Country | Percentage
of ownership | Functional
currency |
Tower One Wireless Corp. ("Tower One") | Canada | Parent | Canadian dollar |
Tower Two SAS ("Tower Two") | Argentina | 100% | Argentine Peso |
Tower Three SAS ("Tower Three") | Colombia | 100% | Colombian Peso |
Tower 3 SA ("Tower 3") | Argentina | 100% | Argentine Peso |
Innervision SAS ("Innervision") | Colombia | 100% | Colombian Peso |
Evolution Technology SA ("Evolution") | Argentina | 65% | Argentine Peso |
Tower Construction & Technical Services, LLC ("TCTS") | USA | 50% | US dollar |
Tower One Wireless Mexico S.A. de C.V. ("Mexmaken") | Mexico | 90% | Mexican Peso |
All significant inter-company balances and transactions have been eliminated on consolidation. Subsidiaries are entities controlled by the Company. Control is based on whether an investor has power over the investee, exposure or rights to variable returns from its involvement with the investee, and the ability to use its power over the investee to affect the amount of returns. Non-controlling interests in the net assets are identified separately from the Company's deficiency. The non-controlling interest consists of the non-controlling interest as at the date of the original acquisition plus the noncontrolling interest's share of changes in equity or deficiency since the date of acquisition.
2.STATEMENT OF COMPLIANCE AND BASIS OF PRESENTATION (CONTINUED) (c) Use of Estimates and Judgments
2. | STATEMENT OF COMPLIANCE AND BASIS OF PRESENTATION(CONTINUED)
|
| |
The Company makes estimates and assumptions about the future that affect the reported amounts of assets and liabilities. Actual results may differ from these estimates and assumptions. Estimates and judgments are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from theseRevisions to accounting estimates and assumptions.
The effect of a change in an accounting estimate isare recognized prospectively by including it in comprehensive income in the period ofin which the change,estimates are revised if the changerevision affects only that period only, or in the period of the changerevision and futurefurther periods if the changereview affects both.both current and future periods. Significant assumptions aboutareas requiring the future and other sourcesuse of estimation uncertainty that management has made atestimates include the statement of financial position date, that could resultfollowing:
(i) Intangible Assets - useful lives
The Company records intangible assets purchased in a material adjustment to the carrying amounts of assets and liabilities, in the event that actual results differ from assumptions that have been made that relate to the following key estimates:
Intangible Assets – impairment
The application of the Company’s accounting policy for intangible assets expenditures requires judgment in determining whether it is likely that future economic benefits will flow to the Company, which may be based on assumptions about future events or circumstances. Estimates and assumptions may change if new information becomes available. If, after expenditures are capitalized, information becomes available suggesting that the recovery of expenditures is unlikely, the amount capitalized is written off in profit or loss in the period the new information becomes available.
Intangible Assets – useful lives
business combination at their fair value. Following initial recognition, the Company carries the value of intangible assets at cost less accumulated amortization and any accumulated impairment losses. Amortization is recorded on a straight-line basis based upon management’smanagement's estimate of the useful life and residual value. The estimates are reviewed at least annually and are updated if expectations change as a result of technical obsolescence or legal and other limits to use. A change in the useful life or residual value will impact the reported carrying value of the intangible assets resulting in a change in related amortization expense.
Share-based payments and compensation(ii) Inputs into Black-Scholes model
The Company has applied estimates with respect to the valuation of shares issued for non-cash consideration. Shares are valued first at the fair value of goods or services received, and if this not readily determinable, at the fair value of the equity instruments granted at the date the Company receives the goods or services.
The Company measures the cost of equity-settled transactions with employees by reference toat the fair value of the equity instruments aton the date at which they are granted. Estimating fair value for share-based paymentcompensation transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the fair value of the underlying common shares, the expected life of the share option, volatility and dividend yield and making assumptions about them.yield. The fair value of the underlying common shares is assessed as the most recent issuancequoted market price per common share for cash proceeds.on grant date. The assumptions and models used for estimating fair value for share-based paymentcompensation transactions are discussed in Note 8.17.
2.STATEMENT OF COMPLIANCE AND BASIS OF PRESENTATION (CONTINUED)
(c) Use of Estimates and Judgments (Continued)
(iii) Property and Equipment - useful lives
Amortization is recorded on a declining balance basis based upon management's estimate of the useful life and residual value. The estimates are reviewed at least annually and are updated if expectations change as a result of the physical condition, technical obsolescence or legal and other limits to use. A change in the useful life or residual value will impact the reported carrying value of towers and equipment resulting in a change in related amortization expense.
(iv) Incremental borrowing rate
The Company uses estimation in determining the incremental borrowing rate used to measure the lease liabilities. This rate represents the rate that the Company would incur to obtain the funds necessary to purchase the asset of a similar value, with similar payment terms and security in a similar economic environment.
(v) Allowance for credit losses
The Company provides for doubtful debts by analyzing the historical default experience and current information available about a customer's credit worthiness on an account by account basis. Uncertainty relates to the actual collectability of customer balances that can vary from the Company's estimation. At December 31, 2020, the Company has an allowance for doubtful accounts of $36,381 (2019 - $179,868).
(vi) Recoverability of asset carrying values
Determining the amount of impairment of goodwill, intangible assets, and property and equipment requires an estimation of the recoverable amount, which is defined as the higher of fair value less the cost of disposal or value in use. Many factors used in assessing recoverable amounts are outside of the control of management and it is reasonably likely that assumptions and estimates will change from period to period.
2.STATEMENT OF COMPLIANCE AND BASIS OF PRESENTATION (CONTINUED)
(c) Use of Estimates and Judgments (Continued)
Use of Judgments
Critical accounting judgments are accounting policies that have been identified as being complex or involving subjective judgments or assessments with a significant risk of material adjustment in the year:
(i) Going concern
The assessment of whether the going concern assumption is appropriate requires management to take into account all available information about the future, which is at least, but not limited to, twelve months from the end of the reporting period. The Company is aware that material uncertainties related to events or conditions that raise substantial doubt upon the Company's ability to continue as a going concern. Further information regarding going concern is outlined in Note 1.
(ii) Income taxes
The measurement of income taxes payable and deferred income tax assets and liabilities requires management to make judgments in the interpretation and application of the relevant tax laws. The actual amount of income taxes only becomes final upon filing and acceptance of the tax return by the relevant tax authorities, which occurs subsequent to the issuance of the consolidated financial statements.
2.STATEMENT OF COMPLIANCE AND BASIS OF PRESENTATION (CONTINUED)
(c) Use of Estimates and Judgments (Continued)
(iii) Compound financial instruments
In accordance with the substance of the contractual arrangement, convertible debentures are compound financial instruments that are accounted for separately by their components: a financial liability and an equity instrument.
The identification of convertible debenture components is based on interpretations of the substance of the contractual arrangement and therefore requires judgment from management. The separation of the components affects the initial recognition of the convertible debenture at issuance and the subsequent recognition of interest on the liability component. The determination of the fair value of the liability is also based on a number of assumptions, including contractual future cash flows, discount factors and the presence of any derivative financial instruments.
(iv) Asset held-for-sale and discontinued operations
Judgment is required in determining whether an asset meets the criteria for classification as "assets held for sale" in the consolidated statements of financial position. Criteria considered by management include the existence of and commitment to a plan to dispose of the assets, the expected selling price of the assets, the expected time frame of the completion of the anticipated sale and the period of time any amounts have been classified within assets held for sale. The Company reviews the criteria for assets held for sale each period and reclassifies such assets to or from this financial position category as appropriate. In addition, there is a requirement to periodically evaluate and record assets held for sale at the lower of their carrying value and fair value less costs to sell.
Judgment is applied in determining whether disposal groups represent a component of the entity, the results of which should be recorded as discontinued operations in the consolidated statements of comprehensive loss.
(v) Property and equipment and intangibles - impairment
At the end of each reporting period, management makes a judgment whether there are any indications of impairment of its property and equipment and intangibles. If there are indications of impairment, management performs an impairment test on a cash-generating unit basis. The impairment test compares the recoverable amount of the asset to its carrying amount. The recoverable amount is the higher of the asset's value in use (present value of the estimated future cash flows) and its estimated fair value less costs of disposal.
(vi) Determination of functional currency and hyperinflationary economies
The determination of the functional currency for the Company and its subsidiaries was based on management's judgment of the underlying transactions, events and conditions relevant to each entity. The determination of whether an entity operates in a hyperinflationary economy was based on management's judgment of the underlying economic condition of the country the entity operates in.
(vii) Leases
The Company applies judgment in determining whether the contract contains an identified asset, whether the Company has the right to control the asset, and the lease term. The lease term is based on considering facts and circumstances, both qualitative and quantitative, that can create economic incentive to exercise renewal options.
2.STATEMENT OF COMPLIANCE AND BASIS OF PRESENTATION (CONTINUED)
(c) Use of Estimates and Judgments (Continued)
(viii) Modification versus extinguishment of financial liability
Judgment is required in applying IFRS 9 Financial Instruments to determine whether the terms of the loan agreement is a substantial modification of an existing financial liability and whether it should be accounted for as an extinguishment of the original financial liabilities.
3.SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies used in the preparation of these consolidated financial statements:
(a) | Cash and cash equivalents
|
Cash and cash equivalents are comprised of cash on hand, deposits in banks and highly liquid investments having original terms to maturity of 90 days or less.
Basic incomeloss per share is computed by dividing the net loss for the period by the weighted average number of common shares outstanding during the period. To compute diluted loss per share, adjustments are made to common shares outstanding. The weighted average number of common shares outstanding is adjusted to include the number of additional common shares that would be outstanding if, at the beginning of the period or at time of issuance, all options and warrants were exercised. The proceeds from exercise are assumed to be used to purchase the Company’sCompany's common shares at their average market price during the period. For the periodsyears presented, this calculation proved to be anti-dilutive.
Technology licenses acquiredRevenue recognition
The Company generates revenues from third parties that include licensesthe supply of various goods and services.
(i) Leasing revenue is derived from lease arrangements to obtain rights to technologiesuse the Company's equipment.
Leases in which a significant portion of the risks and rewards of ownership are initiallyretained by the Company are classified as operating leases. Assets under operating leases are included in property and equipment. Leasing revenue from operating leases is recognized as the leasing services are provided.
(ii) Tower sales revenue is recognized when the control over the tower is transferred to the customer. The Company recognizes revenue after: the contract is identified; performance obligations are identified; the transaction price is determined; the transaction price is allocated to the various performance obligations (if multiple performance obligations are identified); and ultimately, once the performance obligation is satisfied.
(iii) Revenues from consulting, installation, technical and maintenance services are recognized when the services are completed. Unbilled revenues represents services performed but not yet billed.
3.SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Foreign currency translation
The results and financial position of a subsidiary whose functional currency is not the currency of a hyperinflationary economy is translated into the presentation currency using the following procedures:
i. Assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of the statement of financial position;
ii. Income and expenses for each statement presenting profit or loss and other comprehensive income are translated at exchange rates at the dates of the transactions; and
iii. All resulting exchange differences are recognized in other comprehensive income.
For practical reasons, a rate that approximates the exchange rates at the dates of the transactions, for example an average rate for the period, is often used to translate income and expense items.
For the year ended December 31, 2020, an unrealized foreign exchange translation gain of $508,446 (2019 - loss of $327,696; 2018 - loss of $480,132) was recorded under accumulated other comprehensive loss as a result of changes in the value of the Colombian Peso, Argentine Peso, Mexican Peso and US dollars with respect to the Canadian dollar.
The results and financial position of a subsidiary whose functional currency is the currency of a hyperinflationary economy are translated into the presentation currency using the following procedures:
i. All amounts (i.e. assets, liabilities, equity items, income and expenses, including comparatives) are translated at fairthe closing rate at the date of the statement of financial position, except that
ii. When amounts are translated into a non-hyperinflationary presentation currency (i.e., CAD), comparative amounts remain unchanged from those reported in the prior periods.
When an entity's functional currency is the currency of a hyperinflationary economy, the entity shall restate its financial statements in accordance with IAS 29 Financial Reporting in Hyperinflationary Economies before applying the translation method described above. When the economy ceases to be hyperinflationary and the entity no longer restates its financial statements in accordance with IAS 29, it shall use as the historical costs for translation into the presentation currency the amounts restated to the price level at the date the entity ceased restating its financial statements.
3.SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property and equipment
Property and equipment is stated at cost less accumulated amortization and accumulated impairment loss. Amortization expense for towers begins in the month of transfer of each tower from construction in progress to towers. Costs not clearly related to the procurement, manufacturing and implementation are expensed as incurred.
Towers represent cellular towers owned by the Company. The towers are operated at various sites and under contractual license agreements.
• Amortization of the towers is calculated on the declining-balance basis over the agreement or lease terms
• Furniture and equipment - between 10% and 33.3% declining balance
Costs of assets in the course of construction are capitalized as construction in progress. Upon completion, the cost of construction is transferred to the appropriate category of property and equipment and amortization commences when the asset is available for its intended use.
An asset's residual value, baseduseful life and amortization method are reviewed at each financial year end and adjusted if appropriate. When parts of an item of equipment have different useful lives, they are accounted for as separate items (major components) of equipment.
Gains and losses on consideration paiddisposal of an item of equipment are determined by comparing the proceeds from disposal with the carrying amount of the equipment and are recognized in profit or loss.
Intangible assets
Intangible assets consist of master lease agreement acquired by the Company. Acquired lease agreements are carried at cost less accumulated amortization and impairment losses. Intangible assets with indefinite lives are not amortized but are tested annually for impairment. Any impairment of intangible assets is recognized in the consolidated statement of comprehensive loss but increases in intangible asset values are not recognized subsequently.
Amortization expense for intangible assets is calculated on athe straight-line basis over its estimated useful life. Estimated useful lives of intangible assets are the estimatedshorter of the economic life and the period the right is legally enforceable. The assets' useful lives are reviewed, and adjusted if appropriate, at each statement of financial position date. The useful life of the underlying technologies.
Patent costs associated with the preparation, filing, and obtainingCompany's intangible assets, consisting of patents are capitalized and amortized on a straight-line basis over the useful lives of the underlying technologies and patents, usually for a period not exceeding 15master lease agreements, is estimated to be 10 years.
3.SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
3. | SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)
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Non-financial assets are tested for impairment whenever events or changes in circumstances indicate that an asset’sasset's carrying amount may be less than its recoverable amount. Management uses its judgment to estimate these inputs and any changes to these inputs could have a material impact on the impairment calculation. For impairment testing, non-financial assets that do not generate independent cash flows are grouped together into cash-generating units (CGUs),CGU, which represent the levels at which largely independent cash flows are generated. An impairment loss is recognized in earnings to the extent that the carrying value of an asset, CGU or group of CGU’sCGU's exceeds its estimated recoverable amount. The recoverable amount of an asset, CGU or group of CGU’sCGU's is the greater of its value in use and its fair value less cost to sell. Value in use is calculated as the present value of the estimated future cash flows discounted at appropriate pre -tax discount rates. An impairment loss relating to a specific asset reduces the carrying value of the asset. An impairment loss relating to a group of CGU’sCGU's is allocated on a pro-rata basis to reduce the carrying value of the assets in the units comprising the group. A previously recognized impairment loss related to non-financialnon- financial assets is assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss related to non-financial assets is reversed if there is a subsequent increase in the recoverable amount. An impairment loss is reversed only to the extent that the asset’sasset's carrying value does not exceed the carrying value that would have been determined, net of depreciation or amortization, if no loss had been recognized.
Common shares are classified as equity. Transaction costs directly attributable to the issue of common shares and share options are recognized as a deduction from equity, net of any tax effects. Common shares issued for consideration other than cash, are valued based on their market value at the date the shares are issued.
The Company has adopted aapplies the residual value method with respect to the measurement of shares and warrants issued as private placement units. The residual value method first allocates value to the more easily measurable component based on fair value and then the residual value, if any, to the less easily measurable component. The Company considers the fair value of common shares issued in a private placement to be the more easily measurable component and the common shares are valued at their fair value, as determined by the closing quoted bid price on the announcement date. The balance, if any, is allocated to the attached warrants. Any fair value attributed to the warrants is recorded as reserves.contributed surplus.
Share-based paymentscompensation
Share-based compensation to employees are measured at the fair value of the instruments issued and amortized over the vesting periods. Share-based paymentscompensation to non-employees are measured at the fair value of the goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The amount recognized as an expense is adjusted to reflect the number of awards expected to vest. The offset to the recorded cost is to warrants and options reserve.contributed surplus. Consideration received on the exercise of stock options is recorded as share capital and the related amount in warrants and options reservecontributed surplus is transferred to share capital. Charges for options that are forfeited before vesting are reversed from share-based payments reserve.contributed surplus. For those options that expire or are forfeited after vesting, the recorded value is transferred to deficit.
3.SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
3. | SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)
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The Company usesIncome taxes
Income tax expense consisting of current and deferred tax expense is recognized in the asset and liability methodconsolidated statement of accountingcomprehensive loss. Current tax expense is the expected tax payable on the taxable income for income taxes. Under this method, deferredthe year, using tax rates enacted or substantively enacted at period-end, adjusted for amendments to tax payable with regard to previous years.
Deferred tax assets and liabilities and the related deferred income tax expense or recovery are recognized for the futuredeferred tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the enacted or substantively enacted tax rates expected to apply to taxablewhen the asset is realized or the liability settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the years in which those temporary differences are expected to be recovered or settled. Deferred income tax assets result from unused loss carry-forwards, resource related pools and other deductions. period that substantive enactment occurs.
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which theythe asset can be utilized.
To the extent that the Company does not consider it probable that a deferred tax asset will be recovered, the deferred tax asset is reduced. Deferred tax assets and liabilities are reviewed at each reporting dateoffset when there is a legally enforceable right to set off current tax assets against current tax liabilities and are reducedwhen they relate to income taxes levied by the extent that it is no longer probable thatsame taxation authority and the relatedCompany intends to settle its current tax benefit will be realized.assets and liabilities on a net basis.
Provisions are recorded when a present legal or constructive obligation exists as a result of past events where it is probable that an outflow of resourcedresources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the statement of financial position date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount receivable can be measured reliably.
(i) | Financial instruments Financial assets - Classification |
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The Company classifies its financial assets in the following categories: held-to-maturity,
• Those to be measured subsequently at fair value (either through Other Comprehensive Income ("OCI"), or through profit or loss), and
• Those to be measured at amortized cost.
The classification depends on the Company's business model for managing the financial assets and the contractual terms of the cash flows. For assets measured at fair value, gains and losses are either recorded in profit or loss or OCI.
Financial assets - Measurement
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (“FVTPL”("FVTPL"), loanstransaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVTPL are expensed in profit or loss. Financial assets are considered in their entirety when determining whether their cash flows are solely payment of principal and receivables, and available-for-sale (“AFS”). The classificationinterest.
3.SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial instruments (Continued)
Subsequent measurement of financial assets depends on their classification.
• Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. A gain or loss that is subsequently measured at amortized cost is recognized in profit or loss when the purpose for which theasset is derecognized or impaired. Interest income from these financial assets were acquired. The Company's accounting policy for each category is included as follows:finance income using the effective interest rate method.
• Fair value through profit or loss
This category comprises derivatives, or assets acquired or incurred principally for the purpose of selling or repurchasing it in the near term. They are carried in the statement ofOCI ("FVOCI"): A financial positionasset measured at FVOCI is measured at fair value with changes in fair value included as "financial asset at fair value through other comprehensive income" in other comprehensive income. Accumulated gains or losses recognized through other comprehensive income remain in OCI when the financial instrument is derecognized or its fair value substantially decreases.
• Fair value through profit or loss: Assets that do not meet the criteria for amortized cost or FVOCI are measured at FVTPL. A gain or loss on an investment that is subsequently measured at FVTPL is recognized in profit or loss in the period in which it arises.
The Company has classified its cash and amounts receivables as FVTPL. Financial liabilities
The Company classifies its financial liabilities into the following categories:
• Financial liabilities at FVTPL; and
• Amortized cost.
A financial liability is classified as at FVTPL if it is classified as held-for-trading or is designated as such on initial recognition. Directly attributable transaction costs are recognized in profit or loss as incurred. The fair value changes to financial liabilities at FVTPL are presented as follows:
• the amount of change in the fair value that is attributable to changes in the credit risk of the liability is presented in OCI; and
• the remaining amount of the change in the fair value is presented in profit or loss.
Loans and receivablesThe Company does not designate any financial liabilities at FVTPL.
These assets areOther non-derivative financial assets with fixed or determinable payments thatliabilities are not quoted in an active market. They are carriedinitially measured at amortized costfair value less any provision for impairment. Individually significant receivables are considered for impairment when they are past due or when other objective evidence is received that a specific counterparty will default.
11
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TOWER ONE WIRELESS CORP. |
(formerly PACIFIC THERAPEUTICS LTD.) |
Notes to Financial Statements |
Years Ended December 31, 2016, 2015 and 2014 |
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3. | SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)
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(i) | Financial instruments(continued)
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| (a) | Financial assets (continued)
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Held-to-maturity
These assets are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Company's management has the positive intention and abilitydirectly attributable transaction costs. Subsequent to hold to maturity. These assetsinitial recognition, these liabilities are measured at amortized cost using the effective interest method. If there is objective evidence that the investment is impaired, determined by reference to external credit ratings and other relevant indicators, the financial asset is measured at the present value of estimated future cash flows. Any changes to the carrying amount of the investment, including impairment losses, are recognized through profit or loss.
Available-for-sale
Non-derivative financial assets not included in the above categories are classified as available-for- sale. They are carried at fair value with changes in fair value recognized directly in equity. Where a decline in the fair value of an available-for-sale financial asset constitutes objective evidence of impairment, the amount of the loss is removed from equity and recognized through other comprehensive income (loss).
The Company has classified its cashaccounts payable and cash equivalents at fair value through profit or loss. The Company’s dueaccrued liabilities, interest payable, convertible debentures, loans payable, loans from related parties, customer deposits, bonds payable and lease liability as amortized cost.
3.SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial instruments (Continued)
Convertible debentures
The component parts of compound instruments (convertible debentures) issued by the Company are classified separately as loansfinancial liabilities and receivables.
Impairmentequity in accordance with the substance of financial assets
A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset could be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.
An impairment loss in respectcontractual arrangements and the definitions of a financial liability and an equity instrument.
Conversion option that will be settled by the exchange of a fixed amount of cash or another financial asset measured atfor a fixed number of the Company's own equity instruments is an equity instrument.
At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible instruments. This amount is recorded as a liability on an amortized cost basis using the effective interest method until extinguished upon conversion.
The conversion option classified as equity is calculateddetermined by deducting the fair value of the liability component from the face value of the compound instrument as a whole. This is recognized and included in equity, net of income tax effects, and is not subsequently remeasured. In addition, the difference between itsconversion option classified as equity will remain in equity until the conversion option is exercised, in which case, the balance recognized in equity will be transferred to share capital. When the conversion option remains unexercised at the maturity date of the convertible note, the balance recognized in equity will be transferred to deficit. No gain or loss is recognized in the profit or loss upon conversion or expiration of the conversion option.
Transaction costs that relate to the issue of the convertible notes are allocated to the liability and equity components in proportion to the allocation of the gross proceeds. Transaction costs relating to the equity component are recognized directly in equity. Transaction costs relating to the liability component are included in the carrying amount of the liability component and are amortized over the lives of the convertible notes using the effective interest method.
Substantial modification of convertible debentures
Modification is deemed to be substantial if the net present value of the estimated future cash flows under the modified terms, including any fees paid or received, is a least 10 percent different from the net present value of the remaining cash flows of the liability prior to the modification, both discounted at the original effective interest rate.rate of the liability prior to the modification. A substantial modification of the terms of an existing financial liability is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability.
Individually significant financial assetsThe consideration paid, represented by the fair value of the modified convertible debentures are tested for impairment on an individual basis.allocated to the liability and equity components of the original convertible debentures at the date of the extinguishment. The remaining financial assets are assessed collectivelymethod used in groupsallocating the consideration paid and transaction costs to the separate components of the original convertible debentures is consistent with that share similar credit risk characteristics.used in the original allocation to the separate components of the original convertible debentures of the proceeds received by the Company when the original convertible debentures were issued.
An impairmentOnce the allocation of the consideration is made, any resulting gain or loss is reversed iftreated as follows:
• the reversal can be related objectivelyamount of gain or loss relating to an event occurring after the impairment loss was recognized. For financial assets measured at amortized cost, this reversaloriginal liability component is recognized in profit or loss.loss; and
12• the amount of consideration relating to the original equity component is recognized in equity in contributed surplus. The amount recognized in convertible debentures equity reserve attributable to the extinguished convertible debentures is also transferred to contributed surplus.
3.SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
3. | SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)
Leases At inception, the Company assesses whether a contract contains an embedded lease. A contract contains a lease when the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration. |
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(i) | Financial instruments(continued)
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| (b) | Financial liabilities
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The Company, classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was acquired. The Company's accounting policy for each category is as follows:
Fair value through profit or loss- This category comprises derivatives, or liabilities acquired or incurred principally for the purpose of selling or repurchasing it in the near term. They are carried in the statement of financial position at fair value with changes in fair value recognized through profit or loss.
Other financial liabilities:This category consists of liabilities carried at amortized cost using the effective interest method.
The Company’s accounts payable, convertible note and due to related parties are classified as other financial liabilities. The Company’s derivative liability component of the convertible note is classified as fair value through profit or loss.
(j) | Adoption of new pronouncements
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The Company did not adopt any new or amended accounting standards during the year ended December 31, 2016 which had a significant impact on the Financial Statements.
4. | RECENT ACCOUNTING PRONOUNCEMENTS
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Certain new standards, interpretations and amendments to existing standards have been issued by the IASB that are mandatory for future accounting periods. Some updates that are not applicable or are not consequential to the Company may have been excluded from the list below.
Standard effective for annual periods beginning on or after January 1, 2018
IFRS 9Financial Instruments- In November 2009, as part of the IASB project to replace IAS 39Financial Instruments: Recognition and Measurement, the IASB issued the first phase of IFRS 9, that introduces new requirements for the classification and measurement of financial assets. The standard was revised in October 2010 to include requirements regarding classification and measurement of financial liabilities. In November 2013 the standard was revised to add the new general hedge accounting requirements. The standard was finalized in July 2014 and was revised to add a new expected loss impairment model and amends the classification and measurement model for financial assets by adding a new fair value through other comprehensive income (“FVOTCI”) category for certain debt instruments and additional guidance on how to apply the business model and contractual cash flow characteristics test.
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TOWER ONE WIRELESS CORP. |
(formerly PACIFIC THERAPEUTICS LTD.) |
Notes to Financial Statements |
Years Ended December 31, 2016, 2015 and 2014 |
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4. | RECENT ACCOUNTING PRONOUNCEMENTS(CONTINUED)
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IFRS 15 -Revenue from Contracts with Customers-On May 28, 2014 the IASB issued IFRS 15, “Revenue from contracts with customers”. IFRS 15 will replace IAS 11, “Construction contracts”, IAS 18, “Revenue”, IFRIC 13, “Customer loyalty programmes”, IFRIC 15, “Agreements for the construction of real estate”, IFRIC 18, “Transfers of assets from customers” and SIC 31, “Revenue – barter transactions involving advertising services”. The standard contains a single model that applies to contracts with customers and two approaches to recognizing revenue: at a point in time; or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognized. New estimates and judgmental thresholds have been introduced, which may affect the amount and/or timing of revenue recognized. The new standard applies to contracts with customers. It does not apply to insurance contracts, financial instruments or lease contracts, which fall in the scope of other IFRSs.
Standard effective for annual periods beginning on or after January 1, 2019
IFRS 16– Leases-On January 13, 2016 the IASB issued IFRS 16, “Leases”. This standard introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee, is required to recognize a right-of-use asset ("ROU asset"), representing its right to use the underlying asset, and a lease liability, representing its obligation to make lease payments. This standard substantially carries forward
The Company recognizes a ROU asset and a lease liability at the lessor accounting requirementscommencement of IAS 17, while requiring enhanced disclosures to be provided by lessors. Other areasthe lease. The ROU asset is initially measured based on the present value of lease payments, plus initial direct cost, less any incentives received. It is subsequently measured at cost less accumulated amortization, impairment losses and adjusted for certain remeasurements of the lease accounting modelliability. The ROU asset is amortized from the commencement date over the shorter of the lease term or the useful life of the underlying asset. The ROU asset is subject to testing for impairment if there is an indicator of impairment.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by the interest rate implicit in the lease, or if that rate cannot be readily determined, the incremental borrowing rate. The incremental borrowing rate is the rate which the operation would have been impacted,to pay to borrow over a similar term and with similar security, the funds necessary to obtain an asset of similar value to the ROU asset in a similar economic environment.
Lease payments included in the measurement of the lease liability are comprised of:
• fixed payments, including in-substance fixed payments;
• variable lease payments that depend on an index or a rate, initially measured using the definitionindex or rate as at the commencement date;
• amounts expected to be payable under a residual value guarantee;
• the exercise price under a purchase option that the Company is reasonably certain to exercise;
• lease payments in an optional renewal period if the Company is reasonably certain to exercise an extension option;
• penalties for early termination of a lease.lease unless the Company is reasonably certain not to terminate early; and
• restoration costs that will incur at the end of the lease term.
The new standardlease liability is effective for annual periods beginningsubsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future lease payments arising from a change in an index or after January 1, 2019. Earlier application is permitted for entities that apply IFRS 15, “Revenue from contracts with customers” at or beforea rate, a change in the date of initial adoption of IFRS 16.
The extentestimate of the impactamount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of adoptionwhether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.
Variable lease payments that do not depend on an index or a rate not included in the initial measurement of these above standards on the ROU asset and lease liability are recognized as an expense in profit or loss in the period in which they are incurred.
4.HYPERINFLATION
In July 2018, the Argentine three-year cumulative rate of inflation for consumer prices and wholesale prices reached a level in excess of 100%. As a result, in accordance with IAS 29, Financial Reporting in Hyperinflationary Economies ("IAS 29") Argentina was considered a hyperinflationary economy, effective July 1, 2018. Accordingly, the presentation of the Company's consolidated financial statements includes adjustments and reclassifications for the changes in the general purchasing power of the Argentine peso.
On the application of IAS 29, the Company used the conversion coefficient derived from the combination of the "IPC Nacional and the IPIM" (the national consumer price index and the national wholesale price index) published by the National Statistics and Census Institution in Argentina. Furthermore, a formal resolution (number 539/018) from de "FACPCE" (Federación Argentina de Consejos Profesionales de Ciencias Económicas) was issued and has been followed in the calculations.
As the consolidated financial statements of the Company hashave been previously presented in Canadian dollars, a stable currency, the comparative period amounts do not yet been determined.require restatement.
The level of the IPC at December 31, 2020 was 385.76 (2019 - 283.44), which represents an increase of 36.1% over the IPC at December 31, 2019.
Monetary assets and liabilities are not restated because they are already expressed in terms of the monetary unit current as at December 31, 2020. Non-monetary assets, liabilities, equity, and expenses (items that are not already expressed in terms of the monetary unit as at December 31, 2020) are restated by applying the index at the end of the reporting period. The effect of inflation on the Argentine subsidiary's net monetary position is included in the consolidated statements of loss as a gain on net monetary position.
The application of IAS 29 results in the adjustment for the loss of purchasing power of the Argentine peso recorded in the consolidated statements of comprehensive loss. In a period of inflation, an entity holding an excess of monetary assets over monetary liabilities loses purchasing power, which results in a loss on the net monetary position. This loss/gain is derived as the difference resulting from the restatement of non-monetary assets, liabilities and equity.
As per IAS 21, The Effects of Changes in Foreign Exchange Rates , all amounts (i.e. assets, liabilities, equity and expenses) are translated at the closing foreign exchange rate at the date of the most recent consolidated statement of financial position, except that comparative amounts are not adjusted for subsequent changes in the price level or subsequent changes in exchange rates. Similarly, in the period during which the functional currency of a foreign subsidiary becomes hyperinflationary and applies IAS 29 for the first time, the parent's consolidated financial statements for the comparative period are not restated for the effects of hyperinflation.
As a result of the change in the conversion coefficient during the year ended December 31, 2020, the Company recognized a net monetary gain of $318,659 (2019 - loss of $711,090; 2018 - $924,340) to adjust transactions recorded during the period into a measuring unit current as of December 31, 2020. For the year ended December 31, 2019, $2,798,971 was reclassified from net gain (loss) from net monetary position to foreign exchange for comparative purpose.
5.TOWER CONSTRUCTION & TECHNICAL SERVICES, INC.
On July 24, 2015 (effective onOctober 18, 2017, the Company entered into an Escrow Agreement with the shareholders of Tower Construction & Technical Services, Inc. ("TCTS") to acquire 70% ownership interest in TCTS.
On March 1, 2019, the Company entered into an agreement to acquire the remaining 30% ownership interest of TCTS for total purchase price of $106,121 (US$80,000). As the Company previously controlled TCTS, the transaction resulted in a change to the Company ownership stake and was accounted for as an equity transaction. The $106,990 difference between the acquisition of $869 non-controlling interest and $106,121 fair value of consideration paid was recognized directly in deficit.
On August 25, 2015 with shareholder approval)1, 2019, the Company entered into a definitive agreement (the “Agreement”Joint Venture Agreement with a third party, Enervisa US LLC ("Enervisa") with Forge Therapeutics Inc. ("Forge") - a private US company -to selland sold 50% of outstanding shares of TCTS for $330,397 (US$250,000) to fund the Company’s patents inoperation of TCTS. The Company determines that the areasale of the development50% of therapies for fibrosis and erectile dysfunction. Proceeds from the sale wereTCTS shares did not constitute a commitment by Forge to issue 15,000,000 common shares.
Subject to the termsloss of the Agreement, if the 15,000,000 shares are not issued to the Company within 3 years, then the Company may trigger thecontrol. The issuance of the shares is accounted for an equity transaction and if at the endresulting a non-controlling interest of 5 years the shares have not been issued then Forge must return the assets to the Company. In the event$698,030. The non-controlling interest consists of a sale by Forge to a third party$519,983 of the assets purchased under the Agreement, the Company will receive 6%Enervisa's share of the value of that transaction, subject to certain conditions. The Company has assessed that the fair value of the right to receive the shares from Forge is not determinable and accordingly has recorded a nominal value of $1. As a result of the disposal, the Company recognized impairment on its intangible assets in the amount of $67,065TCTS's net loss for the year ended December 31, 2015.
A conditionperiod from January 1, 2019 to August 1, 2019 which is included in net loss attributable to non-controlling interests on the consolidated statement of the sale was that Forge will pay to the Company an annual maintenance fee of $50,000. In the Company’s judgement, no portion of this amount will be recognized until collection can be assured.changes in equity (deficiency). During the year ended December 31, 2016, no maintenance fee was collected. This Agreement has been assigned to Cabbay upon the Arrangement as described in Note 1.
14
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TOWER ONE WIRELESS CORP. |
(formerly PACIFIC THERAPEUTICS LTD.) |
Notes to Financial Statements |
Years Ended December 31, 2016, 2015 and 2014 |
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6. | CONVERTIBLE NOTES AND DERIVATIVE LIABILITY
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On September 11, 2014,2020, the Company issued a convertible notereceived $72,396 (2019 - $258,001) for $50,000 due on September 11, 2015 with an interest ratethe sale of 1% per month payable quarterly. On September 11, 2015, the Company was unable to repay the amount owing consisting of principal of $50,000 and unpaid interest of $6,000. The note holder and the Company agreed to accept a penalty of $5,000 bringing the total owing to $61,000. On September 11, 2015 the Company issued an unsecured convertible note in the amount of $61,000 due on September 11, 2016 convertible at the option50% of the holder into commonoutstanding shares at $1.50 per share with the same term. The fair value of the conversion feature was classified as equity and valued at $1,080. The present value of the debenture was assessed as $59,920 based on the face value of $61,000, term of 1 year, interest of 12% per annum and the discount rate of 14%.TCTS.
During the year ended December 31, 2016, the Company repaid $5,000 to the note holder. The remaining balance of the note was assigned to Cabbay as part of the Arrangement described in Note 1. At December 31, 2016 and 2015 the Company’s convertible notes were valued as follows:
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| | | 2016 | | | 2015 | |
| | | $ | | | $ | |
| Opening balance | | 62,460 | | | 26,642 | |
| Accrued interest | | 5,190 | | | 6,395 | |
| Repayment | | (5,000 | ) | | - | |
| Penalty on settlement of convertible note | | - | | | 5,000 | |
| Amount transferred on Arrangement Agreement | | (62,560 | ) | | - | |
| Equity component | | - | | | (1,080 | ) |
| Accretion | | - | | | 25,503 | |
| Ending balance | | - | | | 62,460 | |
7. | RELATED PARTY TRANSACTIONS AND BALANCES
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Due from (to) related Parties
Due from (to) related parties consists of short term amounts loaned, services rendered and expenses paid on behalf of the Company by shareholders of the Company that are unsecured, non-interest bearing, and payable on demand. As at December 31, 2016 and 2015, the Company has the following balances with related parties:
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| | | 2016 | | | 2015 | |
| Due to related parties: | | $ | | | $ | |
| Amounts owing to the CFO and director | | (6,300 | ) | | (23,986 | ) |
| Amounts owing to former directors | | - | | | (31,328 | ) |
| Amounts owing to a former CEO and director | | - | | | (173,157 | ) |
| | | (6,300 | ) | | (228,471 | ) |
| Due from related party: | | | | | | |
| Tower Three SAS | | 189,468 | | | - | |
Included in prepaid expense was the prepaid consulting fee to a company controlled by a director.
15
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TOWER ONE WIRELESS CORP. |
(formerly PACIFIC THERAPEUTICS LTD.6.ACQUISITION OF INNERVISION TELECOM S.A.S ("INNERVISION") |
Notes to Financial Statements |
Years Ended December 31, 2016, 2015 and 2014 |
|
7. | RELATED PARTY TRANSACTIONS AND BALANCES
|
Related Party Transactions and Key Management and Personnel Compensation
Payment or accruals for related party services provided to the company were:
| | | | | | | | | |
| | | 2016 | | | 2015 | | | 2014 | |
| | | $ | | | $ | | | $ | |
| Salary paid to a former CEO and director | | - | | | 106,667 | | | 160,000 | |
| Consulting fees paid to a company controlled by a director | | 78,571 | | | 24,000 | | | 36,000 | |
| Accounting fees paid to a company controlled by the CFO | | 15,714 | | | 7,500 | | | 6,000 | |
| Legal fees paid to a director | | - | | | 1,334 | | | 3,121 | |
| Share-based payments for options issued to a director | | - | | | 4,500 | | | 67,835 | |
| | | 94,285 | | | 144,001 | | | 272,956 | |
During the year ended December 31, 2015, the Company assigned certain loans from related parties to Cabbay. See Note 1.
During the year ended December 31, 2015, the Company entered into debt settlement agreements with officers and directors of the Company through which $535,077 in due to related parties was forgiven.
Authorized:
| | |
| Unlimited | Class A common shares without par value |
| 1,500,000 | Class B Series I preferred shares without par value |
| 1,000,000 | Class B Series II preferred shares without par value |
Issued and outstanding during 2016 and 2015:
During the year ended December 31, 2016, the Company issued the following common shares:
(a) | On March 15, 2016, the Company completed a share consolidation on the basis of thirty pre- consolidation common shares for each post consolidation common share. As such, all current and comparative share amounts have been restated to account for the 30 to 1 common share consolidation.
|
| |
(b) | In September 2016, 500,000 common shares were issued for the exercise of stock options at $0.25 per option for total proceeds of $120,000. $75,505 was also reversed from contributed surplus.
|
| |
(c) | On March 30, 2016, the Company completed a private placement of 4,089,332 common shares at $0.06 per share for gross proceeds of $245,360. In addition 766,666 common shares were issued to settle debt of $46,000.
|
| |
(d) | The Company entered into a Joint Venture agreement dated March 4, 2016 with 0829489 B.C. Ltd. (“Truevita”). In connection with the agreement, the Company issued 10,000 common shares of the Company. The value of the shares was $500 and was included in office and miscellaneous expense. There was no activity associated with the Joint Venture and the agreement terminated during the year ended December 31, 2016.
|
16
|
TOWER ONE WIRELESS CORP. |
(formerly PACIFIC THERAPEUTICS LTD.) |
Notes to Financial Statements |
Years Ended December 31, 2016, 2015 and 2014 |
|
8. | SHARE CAPITAL(CONTINUED)
|
Issued and outstanding during 2016 and 2015(continued):
(e) | On February 16, 2016, 4,000 common shares were issued for exercise of warrants at $0.90 per warrant for total proceeds of $3,600. Contributed surplus in the amount of $1,200 was adjusted in 2015 for this exercise of warrants.
|
During the year ended December 31, 2015, the Company issued the following common shares:
(f) | On March 20, 2015 the Company closed the second tranche of a non-brokered private placement and issued 66,666 units at $1.50 per unit for cash proceeds of $41,000 (of which $30,000 was received in 2014 and $11,000 received in 2015) and to retire debts totaling $59,000. Each unit is comprised of one common share and one share purchase warrant exercisable for one common share at an exercise price of $4.50 until March 20, 2016. Each share purchase warrant included was assessed a value of $0.90 based on the residual value method. As such, a total of $60,000 was allocated to warrant reserves.
|
Stock options and share based payments:
The Company has a Stock Option Plan (the “Plan) which provides that the number of options granted may not exceed 10% of the issued and outstanding shares. Options granted under the Plan generally have a five-year term and are granted at a price no lower than the market price of the common shares at the time of the grant.
On August 12, 2016, the Company granted 500,000 stock options to employees. All options vested immediately upon grant. Share-based compensation of $75,505 was recorded (2015 - $11,998). All these options were exercised in September 2016.
During the year ended December 31, 2015, the Company granted a total of 13,333 options to a former director of the Company. The Company also cancelled 93,333 options due to termination of consulting agreements with various consultants. In addition, 29,167 options were expired unexercised.
The fair value of share based awards is determined using the Black-Scholes Option Pricing model. The model utilizes certain subjective assumptions including the expected life of the option and expected future stock price volatility. Changes in these assumptions can materially affect the estimated fair value of the Company’s stock options. The fair value of the stock options granted during 2016 and 2015 was determined using the Black-Scholes option pricing model with the following weighted average assumptions:
| | | | | | |
| | | 2016 | | | 2015 | |
| Grant date fair value per option | | $0.15 | | | $1.50 - $2.40 | |
| Risk-free interest rate | | 0.53% | | | 0.78% - 1.63% | |
| Expected dividend yield | | 0% | | | 0% | |
| Forfeiture rate | | 0% | | | 4% | |
| Expected option life | | 1 year | | | 5 years | |
| Expected stock price volatility | | 179% | | | 299%-308% | |
17
|
TOWER ONE WIRELESS CORP. |
(formerly PACIFIC THERAPEUTICS LTD.) |
Notes to Financial Statements |
Years Ended December 31, 2016, 2015 and 2014 |
|
8. | SHARE CAPITAL(CONTINUED)
|
Stock options and share based payments(continued):
As at December 31, 20162018, the Company owned 90% of Innervision through its wholly owned subsidiary Tower Three S.A.S ("Tower Three").
In October 2019, the Company completed the acquisition of the remaining common shares of Innervision not previously owned by Tower Three. The Company acquired the remaining 10% interest for total purchase price of $2,685 ($7,000,000 Colombian Peso). As the Company previously controlled Innervision, the transaction resulted in a change to the Company's ownership stake and 2015was accounted for as an equity transaction. The difference between the following stock options were outstandingnon-controlling interest and exercisable:the fair value of consideration paid was recognized directly in deficit.
The following table summarizes the stock options outstanding and exercisable at December 31, 2015:
| | | | | | | | | | |
| | | | | | | Weighted Average | | | | |
| Number of Options | | | | | | Remaining Life of | | | | |
| Outstanding and Exercisable | | | Exercise Price | | | Options | | | Expiry Date | |
| | | $ | | | | | | | |
| 833 | | | 3.00 | | | 0.03 | | | July 3, 2017 | |
| 5,000 | | | 3.00 | | | 0.36 | | | December 21, 2017 | |
| 3,333 | | | 3.00 | | | 0.31 | | | April 4, 2018 | |
| 4,167 | | | 3.00 | | | 0.68 | | | March 7, 2019 | |
| 13,333 | | | | | | 1.72 | | | | |
Warrants:
As at December 31, 2016 and 2015 the following share purchase warrants were issued and outstanding:
| | | | | | | | | | | | |
| | | December 31, 2016 | | | December 31, 2015 | |
| | | | | | Weighted | | | | | | Weighted | |
| | | Underlying | | | Average | | | Underlying | | | Average | |
| | | Shares | | | Exercise Price | | | Shares | | | Exercise Price | |
| | | | | | $ | | | | | | $ | |
| Warrants outstanding, beginning | | 458,333 | | | 3.22 | | | 519,000 | | | 3.68 | |
| Issued | | - | | | - | | | 66,667 | | | 4.50 | |
| Exercised | | - | | | - | | | (4,000 | ) | | 4.50 | |
| Expired / Cancelled | | (458,333 | ) | | (3.22 | ) | | (123,334 | ) | | 5.24 | |
| Warrants outstanding, ending | | - | | | - | | | 458,333 | | | 3.22 | |
18F-25
2018
Deferred taxes are recognized for the future income tax consequences attributable to differences between the carrying values of assets and liabilities and their respective income tax bases. Deferred tax assets are evaluated periodically and if realization is not considered likely, a valuation allowance is provided.
The reconciliation of income tax attributable to continuing operations computed at the statutory tax rate of 26% (2015 – 26%) to income tax expense is:
| | | | | | | | | |
| | | 2016 | | | 2015 | | | 2014 | |
| Canadian statutory income tax rate | | 26% | | | 26% | | | 26% | |
| | | $ | | | $ | | | $ | |
Income tax recovery at statutory rate | | (117,000 | ) | | 47,000 | | | (180,000 | ) |
Effect on income taxes of: | | | | | | | | | |
Change in income tax rate | | - | | | 8,000 | | | (24,000 | ) |
Permanent differences | | 53,000 | | | (147,000 | ) | | 40,000 | |
Losses not recognized | | 64,000 | | | 92,000 | | | 164,000 | |
| Income taxes recoverable | | - | | | - | | | - | |
The nature and effect of the Company’s unrecognized deferred tax assets is as follows:
| | | | | | |
| | | 2016 | | | 2015 | |
| | | $ | | | $ | |
| Equipment | | 1,000 | | | 1,000 | |
| Non-capital losses carried forward | | 1,062,000 | | | 995,000 | |
| Capital losses carried forward | | 8,000 | | | 8,000 | |
| Share issue costs | | 2,000 | | | 5,000 | |
| | | 1,073,000 | | | 1,009,000 | |
As at December 31, 2016, the Company had non-capital losses carried forward of approximately $4,084,000 (2015 - $3,827,000) which may be applied to reduce future years’ taxable income, expiring as follows:
| | | |
| | $ | |
| 2027 | 451,000 | |
| 2028 | 245,000 | |
| 2029 | 254,000 | |
| 2030 | 283,000 | |
| 2031 | 402,000 | |
| 2032 | 436,000 | |
| 2033 | 743,000 | |
| 2034 | 553,000 | |
| 2035 | 331,000 | |
| 2036 | 386,000 | |
| | 4,084,000 | |
19
|
TOWER ONE WIRELESS CORP. |
(formerly PACIFIC THERAPEUTICS LTD.) |
Notes to Financial Statements |
Years Ended December 31, 2016, 2015 and 2014 |
|
The Company considers its capital under management to be comprised of shareholders’ equity and any debt that it may issue. The Company’s objectives when managing capital are to continue as a going concern and to maximize returns for shareholders over the long term. The Company is not subject to any capital restrictions. There has been no change in the Company’s objectives in managing its capital.
11. | FINANCIAL INSTRUMENTS AND RISK
|
As at December 31, 2016, the Company’s financial instruments consist of cash, accounts payable and due from (to) related parties. The carrying value of these financial instruments approximates their fair values because of the short term nature of these instruments.
Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. To minimize the credit risk the Company places these instruments with a high credit quality financial institution.
Liquidity Risk
Liquidity risk is the risk that the Company will not meet its obligations associated with its financial liabilities as they fall due. The Company manages liquidity risk through the management of its capital structure and financial leverage, as outlined in Note 10. Management closely monitors the liquidity position and expects to have adequate sources of funding to finance the Company’s projects and operations. As at December 31, 2016, the Company had a working capital surplus of $1,515,974. All of the Company’s financial liabilities are classified as current.
Foreign Exchange Risk
The Company is not exposed to foreign exchange risk on its financial instruments.
Interest Rate Risk
Interest rate risk is the risk that future cash flows of the Company’s assets and liabilities can change due to a change in interest rates. The Company is not exposed to interest rate risk as no financial instruments are interest-bearing. It is management's opinion that the Company is not exposed to significant interest, currency or credit risk arising from the financial statements.
Fair Value
The Company provides information about financial instruments that are measured at fair value, grouped into Level 1 to 3 based on the degree to which the inputs used to determine the fair value are observable.
Level 1 fair value measurements are those derived from quoted prices in active markets for identical assets or liabilities.
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1, that are observable either directly or indirectly.
Level 3 fair value measurements are those derived from valuation techniques that include inputs that are not based on observable market data.
Cash and cash equivalents and due from related parties are measured using level 1 fair value inputs.
20
|
TOWER ONE WIRELESS CORP. |
(formerly PACIFIC THERAPEUTICS LTD.) |
Notes to Financial Statements |
Years Ended December 31, 2016, 2015 and 2014 |
|
12. | SUPPLEMENTAL CASH FLOW INFORMATION
|
During the year ended December 31, 2016, the Company had the following non-cash transactions:
During the year ended December 31, 2015 the Company had the following non-cash transactions:
Issuance of 39,333 units to retire $59,000 in debt to related parties (Note 8).
Recognition of an equity component of $1,080 on issuance of a convertible note.
(a) | On January 25, 2017, the Company acquired 100% of Tower Three SAS (“Tower Three”) by issuing 30,000,000 common shares of the Company to the Tower Three shareholders. The common shares will be subject to an escrow agreement and released from escrow based on certain performance conditions. Tower Three is a privately held limited liability company formed under the laws of Colombia. Tower Three focuses primarily on building towers in municipalities where there is limited or no cellular coverage in Latin and South American markets. The transaction will result in a reverse take-over for accounting purposes and Tower Three will be the continuing entity. Concurrent with this transaction, the Company changed its name from Pacific Therapeutics Ltd. to Tower One Wireless Corp., and effected a change in directors, management and business. On January 26, 2017, its common shares resumed trading on the Canadian Securities Exchange under the symbol “TO”.
|
| |
(b) | On January 9, 2017, the Company closed a non-brokered private placement and issued 15,484,912 units at $0.15 per unit for gross proceeds of $2,322,737. Each unit is comprised of one common share and one share purchase warrant exercisable for one common share at an exercise price of $0.40 for 12 months following the transaction. If the share price trades at $0.60 for 10 consecutive trading days then the warrant holders will receive notice from the Company to accelerate the exercise of the warrants within 10 days or they will expire. The Company paid finders and brokers cash commissions of $87,767 and issued 585,117 broker warrants with the same terms as the warrants in the private placement. As at December 31, 2016, the Company received shares subscriptions in the amount of $1,602,257 for this private placement.
|
| |
(c) | In February, 2017, the Company incorporated a 100% owned subsidiary in Argentina.
|
| |
(d) | On February 2, 2017, the Company entered into an agreement with an unrelated company whereby for the issuance of 500,000 Common Shares, the Company has taken assignment of all the company’s assets, trade secrets and receivables.
|
| |
(e) | On March 15, 2017, the Company incorporated a subsidiary in Columbia called Tower Two SAS which will purchase and own the real estate on which its cellular towers will be built.
|
21
|
TOWER ONE WIRELESS CORP. |
(formerly PACIFIC THERAPEUTICS LTD.) |
Notes to Financial Statements |
Years Ended December 31, 2016, 2015 and 2014 |
|
13. | SUBSEQUENT EVENTS(CONTINUED)
|
| |
(f) | On March 31, 2017, the Company signed a share purchase agreement with Evolution Technology S.A. (“Evotech”) whereby the Company purchased sixty-five percent of the issued and outstanding shares of Evotech. As consideration the Company paid US$350,000 and transferred an additional US$400,000 for operating expenses and advances of work. The Company also agreed to transfer an additional US$250,000 no later than April 17, 2017 and took on the responsibility to negotiate an outstanding debt Evotech has with a third-party. In connection with the transaction the Company issued 1,500,000 common shares to consultants of the Company.
|
| |
(g) | On June 19, 2016, the Company announced a warrant price reduction and exercise incentive program. Under the incentive program, the exercise price of the warrants will be reduced to $0.30 if exercised prior to July 21, 2017 and one Incentive Warrant will be granted for each warrant exercised. Each Incentive Warrant will be exercisable to acquire one common share at a price of $0.50 for one year. In July 2017, 3,774,466 warrants were exercised under this program and as a result, 3,774,466 Incentive Warrants were issued. As of August 23, 2017, proceeds of $1,048,340 were received for the exercise of warrants.
|
| |
(h) | On June 21, 2017, the Company granted 1,000,000 Common Shares to a third party consultant to settle an outstanding debt balance of $230,000.
|
| |
(i) | Subsequent to the year ended December 31, 2016, the Company granted a total of 5,750,000 stock options to directors, officers and consultants of the Company of which 5,050,000 are exercisable at $0.23 and 700,000 are exercisable at $0.45. All stock options granted have a term of five years.
|
| |
(j) | Subsequent to the year ended December 31, 2016, the Company issued 4,780,435 common shares for the exercise of stock options at $0.23 for total proceeds of $1,099,500.
|
22
TOWER THREE SAS
FINANCIAL STATEMENTS
Year Ended December 31, 2016 and
Period from Incorporation on December 30, 2015 to December 31, 2015
(Expressed in Canadian Dollars)
|
INDEPENDENT AUDITORS’ REPORT |
To the Directors of
Tower Three SAS
We have audited the accompanying financial statements of Tower Three SAS which comprise the statement of financial position as at December 31, 2016 and 2015, and the statements of comprehensive loss, changes in deficiency and cash flows for the year ended December 31, 2016 and for the period from incorporation on December 30, 2015 to December 31, 2015, and the related notes comprising a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with ethical requirements and plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained based on our audits is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of Tower Three SAS as at December 31, 2016 and 2015, and its financial performance and its cash flows for the year ended December 31, 2016 and for the period from incorporation on December 30, 2015 to December 31, 2015 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Emphasis of Matter
Without qualifying our opinion, we draw attention to Note 1 in the financial statements which indicates the existence of a material uncertainty that may cast significant doubt on the ability ofTower Three SASto continue as a going concern.
CHARTERED PROFESSIONAL ACCOUNTANTS
Vancouver, British Columbia
November 2, 2017
|
TOWER THREE SAS |
Statements of Financial Position |
As at December 31, 2016 and 2015Amended |
| (Expressed in Canadian Dollars) |
| | | | | | | | | |
| | | Note | | | 2016 | | | 2015 | |
| | | | | | $ | | | $ | |
| Current Assets | | | | | | | | | |
| Cash | | | | | 9,864 | | | - | |
| Due from related parties | | 5 | | | - | | | 4,300 | |
| Prepaid expenses and deposits | | | | | 114,032 | | | - | |
| | | | | | 123,896 | | | 4,300 | |
| Equipment | | 6 | | | 248,478 | | | - | |
| | | | | | 372,374 | | | 4,300 | |
| | | | | | | | | | |
| Current Liabilities | | | | | | | | | |
| Accounts payable and accrued liabilities | | | | | 70,406 | | | - | |
| Deferred revenue | | | | | 4,480 | | | - | |
| Due to related parties | | 5 | | | 615,522 | | | 21,151 | |
| | | | | | 690,408 | | | 21,151 | |
| | | | | | | | | | |
| Shareholders’ Deficiency | | | | | | | | | |
| Share capital | | 7 | | | 4,300 | | | 4,300 | |
| Deficit | | | | | (313,155 | ) | | (21,151 | ) |
| Accumulated other comprehensive loss | | | | | (9,179 | ) | | - | |
| | | | | | (318,034 | ) | | (16,851 | ) |
| | | | | | 372,374 | | | 4,300 | |
Nature of operations and going concern (Note 1)
Subsequent event (Note 12)
Approved on behalf of the Board of Directors:
| | |
“Robert Horsley” | | “Brian Gusko” |
The accompanying notes are an integral part of these financial statements.
|
TOWER THREE SAS |
Statements of Comprehensive Loss |
(Expressed in Canadian Dollars) |
| | | | | | |
| | | | | | Period from | |
| | | | | | incorporation on | |
| | | | | | December 30, | |
| | | Year Ended | | | 2015 to | |
| | | December 31, | | | December 31, | |
| | | 2016 | | | 2015 | |
| | | $ | | | $ | |
| Revenues | | 19,403 | | | - | |
| | | | | | | |
| Expenses | | | | | | |
| Amortization | | 3,440 | | | - | |
| Bank charges and interest | | 4,491 | | | - | |
| Commission | | 7,125 | | | - | |
| Insurance | | 1,081 | | | - | |
| Lease | | 1,911 | | | - | |
| Office and miscellaneous | | 54,472 | | | - | |
| Permits and licenses | | 2,046 | | | - | |
| Professional fees | | 204,561 | | | 21,151 | |
| Telephone and utilities | | 2,649 | | | - | |
| Travel | | 29,631 | | | - | |
| | | | | | | |
| | | 311,407 | | | 21,151 | |
| | | | | | | |
| Net loss | | (292,004 | ) | | (21,151 | ) |
| | | | | | | |
| Other comprehensive loss | | | | | | |
| Item that will not be reclassified to profit or loss: | | | | | | |
| Foreign exchange translation adjustment | | (9,179 | ) | | - | |
| | | | | | | |
| Comprehensive loss | | (301,183 | ) | | (21,151 | ) |
| | | | | | | |
| Loss per common share – basic and diluted | | (29.20 | ) | | (2.12 | ) |
| | | | | | | |
| Weighted average number of common shares outstanding | | 10,000 | | | 10,000 | |
The accompanying notes are an integral part of these financial statements.
|
TOWER THREE SAS |
Statement of Changes in Deficiency |
(Expressed in Canadian Dollars) |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | Accumulated | | | | |
| | | Number of | | | | | | | | | other | | | | |
| | | Common | | | | | | | | | comprehensive | | | | |
| | | shares | | | Share capital | | | Deficit | | | income | | | Total | |
| | | | | | $ | | | $ | | | $ | | | $ | |
| Balance at December 30, 2015 | | - | | | - | | | - | | | - | | | - | |
| Shares issued on incorporation | | 10,000 | | | 4,300 | | | - | | | - | | | 4,300 | |
| Comprehensive loss | | - | | | - | | | (21,151 | ) | | - | | | (21,151 | ) |
| | | | | | | | | | | | | | | | |
| Balance at December 31, 2015 | | 10,000 | | | 4,300 | | | (21,151 | ) | | - | | | (16,851 | ) |
| | | | | | | | | | | | | | | | |
| Net loss | | - | | | - | | | (292,004 | ) | | - | | | (292,004 | ) |
| Comprehensive loss | | - | | | - | | | - | | | (9,179 | ) | | (9,179 | ) |
| | | | | | | | | | | | | | | | |
| Balance at December 31, 2016 | | 10,000 | | | 4,300 | | | (313,155 | ) | | (9,179 | ) | | (318,034 | ) |
The accompanying notes are an integral part of these financial statements.
|
TOWER THREE SAS |
Statements of Cash Flows |
(Expressed in Canadian Dollars) |
| | | | | | |
| | | | | | Period from | |
| | | | | | incorporation on | |
| | | | | | December 30, | |
| | | | | | 2015 to | |
| | | Year Ended | | | December 31, | |
| | | December 31, 2016 | | | 2015 | |
| | | $ | | | $ | |
| Cash flows from operating activities | | | | | | |
| | | | | | | |
| Net loss | | (292,004 | ) | | (21,151 | ) |
| Item not affection cash: | | | | | | |
Amortization of intangible assets | | 3,440 | | | - | |
| | | (288,564 | ) | | (21,151 | ) |
| | | | | | | |
| Changes in non-cash working capital items: | | | | | | |
Prepaid expenses | | (110,723 | ) | | - | |
Accounts payable and accrued liabilities | | 68,363 | | | - | |
Deferred revenue | | 4,350 | | | - | |
Due to related parties | | (32,841 | ) | | 21,151 | |
| | | (359,415 | ) | | - | |
| | | | | | | |
| Cash flows from investing activities | | | | | | |
Equipment | | (244,708 | ) | | - | |
Loans payable | | 34,800 | | | - | |
| | | (209,908 | ) | | - | |
| | | | | | | |
| Cash flows from financing activities | | | | | | |
Advances from (to) related parties | | 578,901 | | | - | |
| | | | | | | |
| Effect of changes in exchange rates on cash | | 286 | | | - | |
| | | | | | | |
| Change in cash | | 9,864 | | | - | |
| Cash, beginning | | - | | | - | |
| | | | | | | |
| Cash, ending | | 9,864 | | | - | |
| | | | | | | |
| Supplemental disclosure of cash flow information: | | | | | | |
Cash paid for interest | | - | | | - | |
Cash paid for income taxes | | - | | | - | |
The accompanying notes are an integral part of these financial statements.
|
TOWER THREE SAS |
Notes to Financial Statements |
Year Ended December 31, 2016 and period from |
incorporation on December 30, 2015 to December 31, 2015 |
(Expressed in Canadian Dollars) |
| |
1.7.ACQUISITION OF COMERCIALIZADORA MEXMAKEN, S.A. DE C.V. | NATURE OF OPERATIONS AND GOING CONCERN
|
Tower Three SAS (the “Company") was incorporated on December 30, 2015 under the Business Corporation Act of Colombia. The Company’s head office is located at Carrera 8A #99-22 Unit 903, Bogota, Colombia.
Tower Three has secured 4G LTE cellular tower development contracts in Colombia. The Company focuses primarily on building cellular towers in municipalities where there currently is very limited or no cellular coverage, which enhances the probability of multiple carriers sharing the tower and minimizes competitive risk.
These financial statements have been prepared on the basis of accounting principles applicable to a going concern, and accordingly, do not purport to give effect to adjustments which may be required should the Company be unable to achieve the objectives above as a going concern. The net realizable value of the Company’s assets may be materially less than the amounts recorded in these financial statements should the Company be unable to realize its assets and discharge its liabilities in the normal course of business. At December 31, 2016, the Company had an accumulated deficit of $313,155 which has been funded primarily by the funding from related parties. Ongoing operations of the Company are dependent upon the Company’s ability to receive continued financial support, complete equity financings and ultimately the generation profitable operations in the future. These factors raise significant doubt about the Company’s ability to continue as a going concern.
2. | STATEMENT OF COMPLIANCE AND BASIS OF PRESENTATION
|
| |
(a) | Statement of Compliance
|
These financial statements of the Company for the year ended December 31, 2016 have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
These financial statements were approved and authorized for issue by the Board of Directors on November 2, 2017.
These financial statements were prepared on a historical cost basis, except for financial instruments classified as fair value through profit or loss. In addition, these financial statements have been prepared using the accrual basis of accounting, except for cash flow information. The financial statements are presented in Canadian dollars. The Company’s functional currency is the Colombian Peso.
7
|
TOWER THREE SAS |
Notes to Financial Statements |
Year Ended December 31, 2016 and period from |
incorporation on December 30, 2015 to December 31, 2015 |
(Expressed in Canadian Dollars) |
|
2. | STATEMENT OF COMPLIANCE AND BASIS OF PRESENTATION(CONTINUED)
|
| |
The preparation of these financial statements in accordance with IFRS requires management to make estimates and assumptions about the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities, and the results of operations. Significant areas requiring the use of management estimates include the recognition of revenue, useful lives and impairment of long-lived assets, deferred income tax assets and liabilities. Actual results could differ from the estimates made.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates is revised if the revision affects only that period or in the period of the revision and further periods if the review affects both current and future periods.
Use of judgements
Critical accounting judgements are accounting policies that have been identified as being complex or involving subjective judgements or assessments with a significant risk of material adjustment in the year:
The assessment of the Company’s ability to execute its strategy by effectively operating the Company involves judgement. Management closely monitors the operations and cash flows in the Company. Further information regarding going concern is outlined in Note 1.
Management exercises judgment to determine the extent to which deferred tax assets are recoverable, and can therefore be recognized in the statements of financial position and comprehensive income or loss.
3. | SIGNIFICANT ACCOUNTING POLICIES
|
The following is a summary of significant accounting policies used in the preparation of these financial statements:
Basic loss per share is computed by dividing the net loss for the period by the weighted average number of common shares outstanding during the period. To compute diluted loss per share, adjustments are made to common shares outstanding. The weighted average number of common shares outstanding is adjusted to include the number of additional common shares that would be outstanding if, at the beginning of the period or at time of issuance, all options and warrants were exercised. The proceeds from exercise are assumed to be used to purchase the Company’s common shares at their average market price during the period. For the periods presented, this calculation proved to be anti-dilutive.
8
|
TOWER THREE SAS |
Notes to Financial Statements |
Year Ended December 31, 2016 and period from |
incorporation on December 30, 2015 to December 31, 2015 |
(Expressed in Canadian Dollars) |
|
3. | SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)
|
| |
The Company’s revenue is derived from leasing of towers to various telecommunication companies. Leasing revenue is recognized on a straight-line basis over the terms of the leases. The term of existing lease agreements is between five to thirteen years.
(c) | Foreign currency translation
|
The reporting currency of the Company is the Canadian dollar. The functional currency of the Company is Columbian Peso.
Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (the "functional currency"). Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities not denominated in the functional currency of an entity are recognized in the profit or loss.
Assets and liabilities of entities with functional currencies other than Canadian dollars are translated at the year end rates of exchange, and the results of their operations are translated at average rates of exchange for the year. The resulting translation adjustments are included in accumulated other comprehensive income in shareholders' equity.
For the year ended December 31, 2016, an unrealized foreign exchange translation loss of $9,179 was recorded under accumulated other comprehensive loss as a result of changes in the value of the Columbian Peso with respect to the Canadian dollar.
Non-financial assets are tested for impairment whenever events or changes in circumstances indicate that an asset’s carrying amount may be less than its recoverable amount. Management uses judgment to estimate these inputs and any changes to these inputs could have a material impact on the impairment calculation. For impairment testing, non-financial assets that do not generate independent cash flows are grouped together into cash-generating units (CGUs), which represent the levels at which largely independent cash flows are generated. An impairment loss is recognized in earnings to the extent that the carrying value of an asset, CGU or group of CGU’s exceeds its estimated recoverable amount. The recoverable amount of an asset, CGU or group of CGU’s is the greater of its value in use and its fair value less cost to sell. Value in use is calculated as the present value of the estimated future cash flows discounted at appropriate pre-tax discount rates. An impairment loss relating to a specific asset reduces the carrying value of the asset. An impairment loss relating to a group of CGU’s is allocated on a pro-rata basis to reduce the carrying value of the assets in the units comprising the group. A previously recognized impairment loss related to non-financial assets is assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss related to non-financial assets is reversed if there is a subsequent increase in the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying value does not exceed the carrying value that would have been determined, net of depreciation or amortization, if no loss had been recognized.
9
|
TOWER THREE SAS |
Notes to Financial Statements |
Year Ended December 31, 2016 and period from |
incorporation on December 30, 2015 to December 31, 2015 |
(Expressed in Canadian Dollars) |
|
3. | SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)
|
| |
Common shares are classified as equity. Transaction costs directly attributable to the issue of common shares and share options are recognized as a deduction from equity, net of any tax effects. Common shares issued for consideration other than cash, are valued based on their market value at the date the shares are issued.
The Company has adopted a residual value method with respect to the measurement of shares and warrants issued as private placement units. The residual value method first allocates value to the more easily measurable component based on fair value and then the residual value, if any, to the less easily measurable component. The Company considers the fair value of common shares issued in a private placement to be the more easily measurable component and the common shares are valued at their fair value, as determined by the closing quoted bid price on the announcement date. The balance, if any, is allocated to the attached warrants. Any fair value attributed to the warrants is recorded as reserves.
Share-based payments to employees are measured at the fair value of the instruments issued and amortized over the vesting periods. Share-based payments to non-employees are measured at the fair value of the goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The amount recognized as an expense is adjusted to reflect the number of awards expected to vest. The offset to the recorded cost is to warrants and options reserve. Consideration received on the exercise of stock options is recorded as share capital and the related amount in warrants and options reserve is transferred to share capital. Charges for options that are forfeited before vesting are reversed from share-based payments reserve. For those options that expire or are forfeited after vesting, the recorded value is transferred to deficit.
The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using substantively enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred income tax assets result from unused loss carry-forwards, resource related pools and other deductions. A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilized.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Long-lived assets are stated at cost which includes the acquisition price and any direct costs to bring the asset into productive use at its intended location.
Amortization for equipment is recognized using the straight line method over their estimated useful lives at a rate of 5% per year.
10
|
TOWER THREE SAS |
Notes to Financial Statements |
Year Ended December 31, 2016 and period from |
incorporation on December 30, 2015 to December 31, 2015 |
(Expressed in Canadian Dollars) |
|
3. | SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)
|
| |
Provisions are recorded when a present legal or constructive obligation exists as a result of past events where it is probable that an outflow of resourced embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the statement of financial position date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount receivable can be measured reliably.
The Company classifies its financial assets in the following categories: held-to-maturity, fair value through profit or loss (“FVTPL”), loans and receivables, and available-for-sale (“AFS”). The classification depends on the purpose for which the financial assets were acquired. The Company's accounting policy for each category is as follows:
Fair value through profit or loss
This category comprises derivatives, or assets acquired or incurred principally for the purpose of selling or repurchasing it in the near term. They are carried in the statement of financial position at fair value with changes in fair value recognized through profit or loss.
Loans and receivables
These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are carried at amortized cost less any provision for impairment. Individually significant receivables are considered for impairment when they are past due or when other objective evidence is received that a specific counterparty will default.
These assets are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Company's management has the positive intention and ability to hold to maturity. These assets are measured at amortized cost using the effective interest method. If there is objective evidence that the investment is impaired, determined by reference to external credit ratings and other relevant indicators, the financial asset is measured at the present value of estimated future cash flows. Any changes to the carrying amount of the investment, including impairment losses, are recognized through profit or loss.
Available-for-sale
Non-derivative financial assets not included in the above categories are classified as available-for- sale. They are carried at fair value with changes in fair value recognized directly in other comprehensive income (loss). Where a decline in the fair value of an available-for-sale financial asset constitutes objective evidence of impairment, the amount of the loss is removed from other comprehensive income (loss) and recognized in profit or loss.
The Company has classified its cash at fair value through profit or loss. The Company’s due from related parties are classified as loans and receivables.
11
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TOWER THREE SAS |
Notes to Financial Statements |
Year Ended December 31, 2016 and period from |
incorporation on December 30, 2015 to December 31, 2015 |
(Expressed in Canadian Dollars) |
|
3. | SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)
|
| |
(j) | Financial instruments(continued)
|
| |
| (a) | Financial assets (continued)
|
Impairment of financial assets
A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset could be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.
An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows, discounted at the original effective interest rate.
Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized. For financial assets measured at amortized cost, this reversal is recognized in profit or loss.
| (b) | Financial liabilities
|
The Company classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was acquired. The Company's accounting policy for each category is as follows:
Fair value through profit or loss- This category comprises derivatives, or liabilities acquired or incurred principally for the purpose of selling or repurchasing it in the near term. They are carried in the statement of financial position at fair value with changes in fair value recognized through profit or loss.
Other financial liabilities:This category consists of liabilities carried at amortized cost using the effective interest method.
The Company’s accounts payable and due to related parties are classified as other financial liabilities.
(k) | Adoption of new pronouncements
|
The Company did not adopt any new or amended accounting standards during the year ended December 31, 2016 which had a significant impact on the Financial Statements.
12
|
TOWER THREE SAS |
Notes to Financial Statements |
Year Ended December 31, 2016 and period from |
incorporation on December 30, 2015 to December 31, 2015 |
(Expressed in Canadian Dollars) |
|
4. | RECENT ACCOUNTING PRONOUNCEMENTS
|
Certain new standards, interpretations and amendments to existing standards have been issued by the IASB that are mandatory for future accounting periods. Some updates that are not applicable or are not consequential to the Company may have been excluded from the list below.
Standard effective for annual periods beginning on or after January 1, 2018
IFRS 9Financial Instruments- In November 2009, as part of the IASB project to replace IAS 39Financial Instruments: Recognition and Measurement, the IASB issued the first phase of IFRS 9, that introduces new requirements for the classification and measurement of financial assets. The standard was revised in October 2010 to include requirements regarding classification and measurement of financial liabilities. In November 2013 the standard was revised to add the new general hedge accounting requirements. The standard was finalized in July 2014 and was revised to add a new expected loss impairment model and amends the classification and measurement model for financial assets by adding a new fair value through other comprehensive income (“FVOTCI”) category for certain debt instruments and additional guidance on how to apply the business model and contractual cash flow characteristics test.
IFRS 15 -Revenue from Contracts with Customers-On May 28, 2014 the IASB issued IFRS 15, “Revenue from contracts with customers”. IFRS 15 will replace IAS 11, “Construction contracts”, IAS 18, “Revenue”, IFRIC 13, “Customer loyalty programmes”, IFRIC 15, “Agreements for the construction of real estate”, IFRIC 18, “Transfers of assets from customers” and SIC 31, “Revenue – barter transactions involving advertising services”. The standard contains a single model that applies to contracts with customers and two approaches to recognizing revenue: at a point in time; or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognized. New estimates and judgmental thresholds have been introduced, which may affect the amount and/or timing of revenue recognized. The new standard applies to contracts with customers. It does not apply to insurance contracts, financial instruments or lease contracts, which fall in the scope of other IFRSs.
Standard effective for annual periods beginning on or after January 1, 2019
IFRS 16– Leases-On January 13, 2016 the IASB issued IFRS 16, “Leases”. This standard introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognize a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. This standard substantially carries forward the lessor accounting requirements of IAS 17, while requiring enhanced disclosures to be provided by lessors. Other areas of the lease accounting model have been impacted, including the definition of a lease.
The new standard is effective for annual periods beginning on or after January 1, 2019. Earlier application is permitted for entities that apply IFRS 15, “Revenue from contracts with customers” at or before the date of initial adoption of IFRS 16.
The extent of the impact of adoption of these above standards on the financial statements of the Company has not yet been determined.
13
|
TOWER THREE SAS |
Notes to Financial Statements |
Year Ended December 31, 2016 and period from |
incorporation on December 30, 2015 to December 31, 2015 |
(Expressed in Canadian Dollars) |
|
5. | RELATED PARTY TRANSACTIONS AND BALANCES
|
Due from (to) related Parties
Due from (to) related parties consists of short term amounts advanced to, services rendered and expenses paid on behalf of the Company by shareholders of the Company. These amounts are unsecured, non-interest bearing, and payable on demand. As at December 31, 2016 and 2015, the Company has the following balances with related parties:
| | | | | | |
| | | 2016 | | | 2015 | |
| Due to related parties: | | $ | | | $ | |
| Tower One Wireless Corp. | | 189,589 | | | - | |
| Amounts owing to a company controlled by a director | | 356,268 | | | 21,151 | |
| Amounts owing to the parent of the CEO | | 69,665 | | | - | |
| | | 615,522 | | | 21,151 | |
Included in accounts payable was the commission payables in the amount of $6,531 to the officers of the company (2015 - $nil).
As at December 31, 2015, there was $4,300 due fro related parties for the issuance of common shares..
Related Party Transactions and Key Management and Personnel Compensation
During the year ended December 31, 2016, legal fees of $nil (2015 - $21,151) was paid to a director of the company.
| | | |
| | $ | |
Cost | | | |
December 31, 2015 | | - | |
Construction | | 244,708 | |
Foreign exchange movement | | 7,313 | |
| | | |
December 31, 2016 | | 252,021 | |
| | | |
Accumulated amortization | | | |
| | | |
December 31, 2015 | | - | |
Additions | | 3,440 | |
Foreign exchange movement | | 103 | |
| | | |
December 31, 2016 | | 3,543 | |
| | | |
Net book value | | | |
December 31, 2015 | | - | |
December 31, 2016 | | 248,478 | |
14
|
TOWER THREE SAS |
Notes to Financial Statements |
Year Ended December 31, 2016 and period from |
incorporation on December 30, 2015 to December 31, 2015 |
(Expressed in Canadian Dollars) |
|
Authorized:
10,000 common shares with a par value at COP$1,000 per common share.
Issued and outstanding:
On December 30, 2015April 3, 2018, the Company issued 10,000 common shares at COP$1,000 ($0.43) per share for gross proceeds of COP$10,000,000 ($4,300). The proceeds were included in due from related parties at December 31, 2015 and 2016.
Deferred taxes are recognized for the future income tax consequences attributable to differences between the carrying values of assets and liabilities and their respective income tax bases. Deferred tax assets are evaluated periodically and if realization is not considered likely, a valuation allowance is provided.
The reconciliation of income tax attributable to continuing operations computed at the statutory tax rate of 25% (2015 – 25%) to income tax expense is:
| | | | | | |
| | | For the years ended December 31, | |
| | | 2016 | | | 2015 | |
| Colombia statutory income tax rate | | 25 | % | | 25% | |
| | | $ | | | $ | |
Income tax recovery at statutory rate | | 73,000 | | | 5,000 | |
Effect on income taxes of: | | | | | | |
Losses not recognized | | (73,000 | ) | | (5000 | ) |
| Income taxes recoverable | | - | | | - | |
The nature and effect of the Company’s unrecognized deferred tax assets is as follows:
| | | | | | |
| | | 2016 | | | 2015 | |
| | | $ | | | $ | |
| Non-capital losses carried forward | | 78,000 | | | 5,000 | |
As at December 31, 2016, the Company had non-capital losses carried forward of approximately $313,000 (2015 - $21,000) which may be applied to reduce future years’ taxable income.
The Company considers its capital under management to be comprised of shareholders’ equity and any debt that it may issue. The Company’s objectives when managing capital are to continue as a going concern and to maximize returns for shareholders over the long term. The Company is not subject to any capital restrictions. There has been no change in the Company’s objectives in managing its capital.
15
|
TOWER THREE SAS |
Notes to Financial Statements |
Year Ended December 31, 2016 and period from |
incorporation on December 30, 2015 to December 31, 2015 |
(Expressed in Canadian Dollars) |
|
10. | FINANCIAL INSTRUMENTS AND RISK
|
As at December 31, 2016, the Company’s financial instruments consist of cash, accounts payable and due to related parties. The carrying value of these financial instruments approximates their fair values because of the short term nature of these instruments.
Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. To minimize the credit risk the Company places cash with a high credit quality financial institution.
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's objective in managing liquidity risk is to ensure that it has sufficient liquidity available to meet its liabilities when due. The Company uses cash to settle its financial obligations as they fall due. The ability to do this relies on the Company’s ability to collect its revenue in a timely manner and maintain sufficient cash on hand.
Currency Risk
The Company generates revenues and incurs expenses and capital expenditures primarily in Colombia and is exposed to the resulting risk from changes in foreign currency exchange rates. Some administrative and head office related expenses are incurred in Canada. In addition, the Company holds financial assets and liabilities in foreign currencies that expose the Company to foreign exchange risks. A significant change in the currency exchange rates between the Canadian dollar relative to the Colombia Peso could have an effect on the Company's results of operations, financial position and/or cash flows. The Company has not hedged its exposure to currency fluctuations.
Interest Rate Risk
Interest rate risk is the risk that future cash flows of the Company’s assets and liabilities can change due to a change in interest rates. The Company is not exposed to interest rate risk as no financial instruments are interest-bearing. It is management's opinion that the Company is not exposed to significant interest, currency or credit risk arising from the financial statements.
Fair Value
The Company provides information about financial instruments that are measured at fair value, grouped into Level 1 to 3 based on the degree to which the inputs used to determine the fair value are observable.
Level 1 fair value measurements are those derived from quoted prices in active markets for identical assets or liabilities.
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1, that are observable either directly or indirectly.
Level 3 fair value measurements are those derived from valuation techniques that include inputs that are not based on observable market data.
Cash is measured using level 1 fair value inputs.
16
|
TOWER THREE SAS |
Notes to Financial Statements |
Year Ended December 31, 2016 and period from |
incorporation on December 30, 2015 to December 31, 2015 |
(Expressed in Canadian Dollars) |
|
For the year ended December 31, 2016, all the sales were generated by one customer. The loss of this customer could have a material adverse effect on the Company’s financial position and results of operations.
On January 25, 2017, the Company was acquired by Tower One Wireless Corp. (“Tower One”), a Company incorporated under the Province of British Columbia, Canada and listed on the Canadian Securities Exchange (“CSE”). As the consideration for the acquisition, Tower One will issue 30,000,000 common shares to the Tower Three shareholders. The transaction will result in a reverse take-over for accounting purposes and Tower Three will be the continuing entity, Tower One effected a change in directors, management and business whereby the shareholders of the Company will be the controlling shareholders. On January 26, 2017, its common shares resumed trading in Canadian Securities Exchange under the symbol “TO”.
17
Exhibit 99.23
TOWER ONE WIRELESS CORP.
(Formerly Pacific Therapeutics Ltd.)
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the Three and Six Months Ended
June 30, 2017 and 2016
(Unaudited)
(Expressed in Canadian Dollars)
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 condensed consolidated interim financial statements, they must be accompanied by a notice to this effect.
The accompanying unaudited condensed consolidated interim financial statements have been prepared by management of the Company. Management have compiled the condensed consolidated interim statement of financial position of Tower One Wireless Corp. as at June 30, 2017, the condensed consolidated interim statements of comprehensive loss for the three and six months ended June 30, 2017 and 2016, the condensed consolidated interim statement of changes in equity as at June 30, 2017 and 2016, and the condensed consolidated interim statement of cash flows for the six months ended June 30, 2017 and 2016. The Company's independent auditors have not audited, reviewed or otherwise attempted to verify the accuracy or completeness of the June 30, 2017 and 2016 condensed consolidated interim financial statements. Readers are cautioned that these statements may not be appropriate for their intended purposes.
TOWER ONE WIRELESS CORP.
Condensed Consolidated Statements of Financial Position
(Expressed in Canadian Dollars)
| | | | | |
| | Note | June 30, 2017 | | December 31, 2016 | |
| | | (Unaudited) | | (Audited) | |
| | | $ | | $ | |
| Current Assets | | | | | |
| Cash | | 514,955 | | 9,864 | |
| Amounts receivable | | 193,296 | | - | |
| Advances and deposits | | 88,397 | | - | |
| Due from related parties | 7 | 246,325 | | | |
| Prepaid expenses and deposits | | 157,588 | | 114,032 | |
| | | 1,200,561 | | 123,896 | |
| Equipment | 8 | 620,343 | | 248,478 | |
| | | 1,820,904 | | 372,374 | |
| | | | | | |
| Current Liabilities | | | | | |
| Accounts payable and accrued liabilities | | 155,126 | | 70,406 | |
| Deferred revenue | | 4,270 | | 4,480 | |
| Due to related parties | 7 | - | | 615,522 | |
| | | 159,396 | | 690,408 | |
| | | | | | |
| Shareholders’ Deficiency | | | | | |
| Share capital | 9 | 6,219,253 | | 4,300 | |
| Subscriptions received | 9 | 776,840 | | - | |
| Contributed surplus | | 531,793 | | - | |
| Non-controlling interest | 10 | (56,774 | ) | - | |
| Deficit | | (5,834,801 | ) | (313,155 | ) |
| Accumulated other comprehensive loss | | 25,197 | | (9,179 | ) |
| | | 1,661,508 | | (318,034 | ) |
| | | 1,820,904 | | 372,374 | |
Nature of operations and going concern (Note 1)
Commitment (Note 14)
Subsequent event (Note 15)
Approved on behalf of the Board of Directors:
| |
“Alejandro Ochoa” | “Brian Gusko” |
The accompanying notes are an integral part of these condensed consolidated financial statements.
TOWER ONE WIRELESS CORP.
Condensed Consolidated Statements of Comprehensive Loss
(Expressed in Canadian Dollars)
(Unaudited)
| | | | | | | | | |
| | | Three months ended | | Six months ended | |
| | | June 30, | | June 30, | | June 30, | | June 30, | |
| | | 2017 | | 2016 | | 2017 | | 2016 | |
| | Note | $ | | $ | | $ | | $ | |
| Revenues | | 22,553 | | 782 | | 45,402 | | 1,564 | |
| | | | | | | | | | |
| Expenses | | | | | | | | | |
| Advertising and promotion | | 767,251 | | - | | 872,231 | | - | |
| Amortization | | 3,175 | | - | | 6,542 | | - | |
| Insurance | | 2,629 | | 166 | | 4,344 | | 331 | |
| Office and miscellaneous | | 345,667 | | 24,366 | | 423,449 | | 48,732 | |
| Permits and licenses | | 2,463 | | - | | 9,753 | | - | |
| Professional fees | | 446,709 | | 38,184 | | 703,243 | | 76,367 | |
| Share-based compensation | 9(c) | 1,406,893 | | - | | 1,406,893 | | - | |
| Transfer agent and filing fees | | 7,714 | | - | | 17,104 | | - | |
| Travel | | 55,763 | | 8,346 | | 85,833 | | 16,693 | |
| Wages and benefits | | 83,383 | | - | | 83,383 | | - | |
| | | 3,121,647 | | 71,062 | | 3,612,775 | | 142,123 | |
| Loss before other expense | | 3,099,094 | | (70,280 | ) | (3,567,373 | ) | (140,559 | ) |
| | | | | | | | | | |
| Other expenses | | - | | | | | | | |
| Listing expense | 3 | - | | - | | (1,144,167 | ) | - | |
| Impairment of goodwill | 4 | (783,708 | ) | - | | (783,708 | ) | - | |
| Impairment of investments | 9(a) | (175,000 | ) | - | | (175,000 | ) | - | |
| | | (958,708 | ) | - | | (2,102,875 | ) | - | |
| | | | | | | | | | |
| Net loss | | (4,057,802 | ) | (70,280 | ) | (5,670,248 | ) | (140,559 | ) |
| | | | | | | | | | |
| Other comprehensive income (loss) | | | | | | | | | |
| Item that will not be reclassified to profit or loss | | | | | | | | |
| Foreign exchange translation adjustment | | 47,719 | | (3,059 | ) | 38,676 | | (6,118 | ) |
| Comprehensive loss | | (4,010,082 | ) | (73,339 | ) | (5,631,572 | ) | (146,677 | ) |
| | | | | | | | | | |
| Net loss attributable to: | | | | | | | | | |
| Shareholders of the Company | | (3,909,200 | ) | (70,280 | ) | (5,521,646 | ) | (140,559 | ) |
| Non-controlling interest | | (148,602 | ) | - | | (148,602 | ) | - | |
| | | (4,057,802 | ) | (70,280 | ) | (5,670,248 | ) | (140,559 | ) |
| | | | | | | | | | |
| Other comprehensive income (loss) attributable to: | | | | | | | | |
| Shareholders of the Company | | 43,419 | | (3,059 | ) | 34,376 | | (6,118 | ) |
| Non-controlling interest | | 4,300 | | - | | 4,300 | | - | |
| | | 47,719 | | (3,059 | ) | 38,676 | | (6,118 | ) |
| Loss per common share - basic and diluted | | (0.07 | ) | (7.03 | ) | (0.11 | ) | (14.06 | ) |
| Weighted average number of common shares outstanding | | 53,731,093 | | 10,000 | | 49,775,284 | | 10,000 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
TOWER ONE WIRELESS CORP.
Condensed Consolidated Statement of Changes in Deficiency
(Expressed in Canadian Dollars)
(Unaudited)
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Deficiency | | | | | |
| | | | | | | | | | | | | | Attributable | | | | | |
| | | | | | | | | | | | Accumulated | | to Equity | | | | | |
| | Number of | | | | | | | | | | other | | Shareholder | | Non- | | | |
| | Common | | Share | | Subscriptions | | Contributed | | | | comprehensive | | s of the | | controlling | | | |
| | shares | | capital | | Received | | Surplus | | Deficit | | income | | Company | | Interest | | Total | |
| | | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | |
| | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2015 | 10,000 | | 4,300 | | - | | - | | (21,151 | ) | - | | (16,851 | ) | - | | (16,851 | ) |
| Comprehensive loss | - | | - | | - | | - | | (140,559 | ) | (6,118 | ) | (146,677 | ) | - | | (146,677 | ) |
| | | | | | | | | | | | | | | | | | | |
| Balance at June 30, 2016 | 10,000 | | 4,300 | | - | | - | | (161,710 | ) | (6,118 | ) | (163,528 | ) | - | | (163,528 | ) |
| | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2016 | 10,000 | | 4,300 | | - | | - | | (313,155 | ) | (9,179 | ) | (318,034 | ) | - | | (318,034 | ) |
| Derecognition of Tower Three shares | (10,000 | ) | - | | - | | - | | - | | - | | - | | - | | - | |
| Shares issuance to Tower Three shareholders | 30,000,000 | | - | | - | | - | | - | | - | | - | | - | | - | |
| Recognition of shares issued to Tower One shareholders | 6,735,885 | | 1,010,383 | | - | | - | | - | | - | | 1,010,383 | | - | | 1,010,383 | |
| Shares issued for cash, net | 15,484,912 | | 2,026,759 | | - | | 208,211 | | - | | - | | 2,234,970 | | - | | 2,234,970 | |
| Subscriptions received | - | | - | | 776,840 | | - | | - | | - | | 776,840 | | - | | 776,840 | |
| Shares issued to Rojo (Note 9(a)) | 500,000 | | 175,000 | | - | | - | | - | | - | | 175,000 | | - | | 175,000 | |
| Stock options granted | - | | - | | - | | 1,406,893 | | - | | - | | 1,406,893 | | - | | 1,406,893 | |
| Share issued for Evotech | 1,500,000 | | 480,000 | | - | | - | | - | | - | | 480,000 | | | | 480,000 | |
| Share issued for debt settlement | 1,000,000 | | 340,000 | | - | | - | | - | | - | | 340,000 | | - | | 340,000 | |
| Share issued for stock options | 4,780,435 | | 2,182,811 | | - | | (1,083,311 | ) | - | | - | | 1,099,500 | | | | 1,099,500 | |
| Acquisition of Evotech | - | | - | | - | | - | | - | | - | | - | | 87,528 | | 87,528 | |
| Net loss | - | | - | | - | | - | | (5,521,646 | ) | - | | (5,521,646 | ) | (148,602 | ) | (5,670,248 | ) |
| Other comprehensive loss | - | | - | | - | | - | | - | | 34,376 | | 34,376 | | 4,300 | | 38,676 | |
| Balance at June 30, 2017 | 60,001,232 | | 6,219,253 | | 776,840 | | 531,793 | | (5,834,801 | ) | 25,197 | | 1,718,282 | | (56,774 | ) | 1,661,508 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
TOWER ONE WIRELESS CORP.
Condensed Consolidated Statements of Cash Flows
(Expressed in Canadian Dollars)
(Unaudited)
| | | | |
| | Six Months Ended | |
| | June 30, 2017 | | June 30, 2016 | |
| | $ | | $ | |
| Cash flows from operating activities | | | | |
| | | | | |
| Net loss | (5,670,248 | ) | (140,559 | ) |
| Item not affection cash: | | | | |
Amortization | 6,542 | | - | |
Impairment of goodwill | 783,708 | | - | |
Impairment of investments | 175,000 | | - | |
Listing expense | 1,144,167 | | - | |
Share-based compensation | 1,406,893 | | - | |
Shares issued for services | 340,000 | | - | |
Unrealized foreign exchange gain | - | | 1,712 | |
| | (1,813,938 | ) | (138,847 | ) |
| Changes in non-cash working capital items: | | | | |
Amounts receivable | (150,181 | ) | (221 | ) |
Prepaid expenses | (25,147 | ) | - | |
Accounts payable and accrued liabilities | (44,910 | ) | (659 | ) |
Due to related parties | - | | (15,934 | ) |
| | (2,034,176 | ) | (155,661 | ) |
| | | | | |
| Cash flows from investing activities | | | | |
Cash received from reverse acquisition | 1,378,183 | | - | |
Cash paid for acquisition of Evotech | (466,260 | ) | - | |
Cash in Evotech upon acquisition | 4,676 | | - | |
Advances and deposits | (88,397 | ) | - | |
Equipment | (223,365 | ) | - | |
| | 604,837 | | - | |
| | | | | |
| Cash flows from financing activities | | | | |
Shares issued for cash, net | 632,713 | | - | |
Subscriptions received | 776,840 | | - | |
Exercise of options | 1,099,500 | | - | |
Advances to related parties | (566,032 | ) | 214,268 | |
| | 1,943,021 | | 214,268 | |
| | | | | |
| Effect of changes in exchange rates on cash | (8,591 | ) | (7,830 | ) |
| | | | | |
| Change in cash | 505,091 | | 50,777 | |
| Cash, beginning | 9,864 | | - | |
| | | | | |
| Cash, ending | 514,955 | | 50,777 | |
| | | | | |
| Supplemental disclosure of cash flow information: | | | | |
Cash paid for interest | 24,399 | | - | |
Cash paid for income taxes | - | | - | |
| | | | | |
| Non-cash transactions: | | | | |
Shares issued for services (Note 9(a)) | 340,000 | | - | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
|
TOWER ONE WIRELESS CORP. |
Notes to Condensed Consolidated Interim Financial Statements |
For the Three and Six Months Ended June 30, 2017 and 2016 |
(Expressed in Canadian Dollars) |
(Unaudited) |
|
1. NATURE OF OPERATIONS AND GOING CONCERN
Tower One Wireless Corp. (formerly Pacific Therapeutics Ltd.) (“Tower One” or the “Company") was incorporated under the laws of the Province of British Columbia, Canada on September 12, 2005. On October 14, 2011, the Company became a reporting company in British Columbia and was approved by the Canadian Securities Exchange (“CSE”) and commenced trading on November 16, 2011. The Company’s registered office is located at Suite 605, 815 Hornby Street, Vancouver, BC, Canada V6Z 2E6.
On October 19, 2016, Tower One completed a Share Exchange Agreement (the “Agreement”) with Tower Three SAS (“Tower Three”) and the shareholders of Tower Three SAS. According to the Agreement, Tower One acquired Tower Three by issuing shares which resulted in the shareholders of Tower Three obtaining control of the Company (the “Acquisition”). Accordingly, this transaction was recorded as a reverse acquisition for accounting purposes, with Tower Three being identified as the accounting acquirer. These condensed consolidated interim financial statements are a continuation of the financial statements of Tower Three while the capital structure is that of the Company. The historical operation assets and liabilities of Tower Three are included in this condensed consolidated interim financial statements and the comparative figures as at and for the period ended June 30, 2016 are those of Tower Three.
Tower Three SAS was incorporated on December 30, 2015 under the Business Corporation Act of Colombia. Tower Three has secured 4G LTE cellular tower development contracts in Colombia. The Company focuses primarily on building cellular towers in municipalities where there currently is very limited or no cellular coverage, which enhances the probability of multiple carriers sharing the tower and minimizes competitive risk.
On March 30, 2017, the Company acquired entered into a Share Purchase Offer Agreement with the shareholders of Evolution Technology SAComercializadora Mexmaken, S.A. de C.V. ("Evotech"Mexmaken") to acquire 65%a 90% ownership interest. Since its incorporation on September 9, 2015, Mexmaken has obtained two Master Lease Agreement ("MLA") with major Mexican telecom operators, one of which was acquired prior to the Company's acquisition of Mexmaken.
To obtain the 90% ownership interest, in Evotech. Evotech is a private company incorporated under the laws of Argentina. Evotech's intended business is to obtain rights and permits for approval of constructing the towers in various locations in Argentina. See Note 4
These condensed consolidated interim financial statements have been prepared on the basis of accounting principles applicable to a going concern, and accordingly, do not purport to give effect to adjustments which may be required should the Company be unable to achieve the objectives above asissued 7,500,000 common shares with a going concern. The net realizablefair value of the Company’s assets may be materially less than the amounts recorded in these condensed consolidated interim financial statements should the Company be unable to realize its assets and discharge its liabilities in the normal course of business. At June 30, 2017, the Company had an accumulated deficit of $5,834,801 which has been funded primarily by the raising equity funding. Ongoing operations of the Company are dependent upon the Company’s ability to generate sufficient revenues in the future, receive continued financial support and complete equity financings. These factors raise significant doubt about the Company’s ability to continue as a going concern.
2. STATEMENT OF COMPLIANCE AND BASIS OF PRESENTATION
These condensed consolidated interim financial statements should be read in conjunction with the Company’s annual financial statements and accompanying notes for the year ended December 31, 2016. These condensed interim financial statements have been prepared using the same accounting policies and judgments and estimates as described in the Company’s December 31, 2016 annual financial statements.
7
|
TOWER ONE WIRELESS CORP. |
Notes to Condensed Consolidated Interim Financial Statements |
For the Three and Six Months Ended June 30, 2017 and 2016 |
(Expressed in Canadian Dollars) |
(Unaudited) |
|
2. STATEMENT OF COMPLIANCE AND BASIS OF PRESENTATION(CONTINUED)
(a) Statement of Compliance
These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting (“IAS 34”) using accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and Interpretations of the IFRS Interpretations Committee (“IFRIC”). These condensed consolidated interim financial statements were approved and authorized for issue by the Board of Directors on August 29, 2017.
(b) Basis of Presentation
These condensed consolidated interim financial statements were prepared on a historical cost basis, except for financial instruments classified as fair value through profit or loss. In addition, these financial statements have been prepared using the accrual basis of accounting, except for cash flow information. Thefinancial statements are presented in Canadian dollars. The functional currency of Tower One is Canadian, Tower Three is Colombian Peso and Evotech is Argentina Peso.
(c) Basis of Consolidation
These condensed consolidated interim financial statements include the assets and operations of the Tower One, its 100% wholly owned Columbia subsidiary Tower Three and its 65% Argentina subsidiary Evotech since April 2017.
For the year ended December 31, 2016 and three months ended March 31, 2017, the financial statements include Tower One and Tower Three only.
All significant inter-company balances and transactions have been eliminated on consolidation.
(d) Use of Estimates
The preparation of these condensed consolidated interim financial statements in accordance with IFRS requires management to make estimates and assumptions about the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities, and the results of operations. Significant areas requiring the use of management estimates include the valuation of listing expense, recognition of revenue, useful lives and impairment of long-lived assets, impairment of investments, deferred income tax assets and liabilities and share-based payment calculations. Actual results could differ from the estimates made.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates is revised if the revision affects only that period or in the period of the revision and further periods if the review affects both current and future periods.
Use of Judgments
Critical accounting judgments are accounting policies that have been identified as being complex or involving subjective judgments or assessments with a significant risk of material adjustment in the year:
(i) Going concern
The assessment of the Company’s ability to execute its strategy by effectively operating the Company involves judgement. Management closely monitors the operations and cash flows in the Company. Further information regarding going concern is outlined in Note 1.
8
|
TOWER ONE WIRELESS CORP. |
Notes to Condensed Consolidated Interim Financial Statements |
For the Three and Six Months Ended June 30, 2017 and 2016 |
(Expressed in Canadian Dollars) |
(Unaudited) |
|
2. STATEMENT OF COMPLIANCE AND BASIS OF PRESENTATION(CONTINUED) (d) Use of Judgments
(ii) Income taxes
Management exercises judgment to determine the extent to which deferred tax assets are recoverable, and can therefore be recognized in the statements of financial position and comprehensive income or loss.
(iii) Accounting for long-term investments
The accounting for long-term investments involves judgment in the determination of control and power held by the Company.
3. REVERSE ACQUISITION AND LISTING EXPENSE
On January 12, 2017, the Company completed the transactions described in Note 1 by issuing 30,000,000 common shares$1,312,500 to the shareholders of Tower Three. For accounting purposes,Mexmaken. As part of the Acquisition is consideredacquisition of Mexmaken, the Company also issued common shares to be outsidea related party, who was a controlling shareholder of Mexmaken.
The Company determined that the scopeacquisition of IFRS 3Business Combinationssince Tower One was not considered asMexmaken constituted a business prior tocombination as Mexmaken has inputs, processes and outputs. As such the Acquisition and were limited toCompany applied the managementacquisition method of cash resources and the maintenance of its listing and accordingly did not constitute a business. The Acquisition is accounted for in accordance with IFRS 2Share-based Paymentwhereby Tower Three is deemed to have issued shares in exchange for the net assets or liabilities of Tower One together with its listing status at the fair valueaccounting. As part of the consideration received by Tower Three.
Since the share and share based consideration allocated to the former shareholdersacquisition of the Company on closing the Acquisition is considered within the scope of IFRS 2, and the Company cannot identify specifically some or all of the goods or service received in return for the allocation of the shares, the value in excess of the net identifiable assets or obligations plus liabilities assumed byMexmaken, the Company acquired on closingMexmaken's MLA, which was expensed in the statement of comprehensive lossrecorded as listing expense.
The share based compensation in the amount of $1,010,383 included in the listing expense is comprised of the fair value of the existing shares prior to the Acquisition at $0.15 per share retained by the former shareholders of the Company. The $0.15 value for the above-mentioned shares was based on the fair value from the concurrent private placement.
The fair value of all the consideration given and charged to listing expense was comprised of:
| | |
| $ | |
Fair value of share based consideration allocated: | | |
Deemed share issuance
| 1,010,383 | |
| | |
Identifiable net obligations assumed: | | |
Cash and cash equivalent
| (1,378,183 | ) |
Subscriptions received for private placement
| 1,602,257 | |
Other assets
| (230,097 | ) |
Liabilities
| 139,807 | |
| 133,784 | |
| | |
Total listing expense | 1,144,167 | |
9
|
TOWER ONE WIRELESS CORP. |
Notes to Condensed Consolidated Interim Financial Statements |
For the Three and Six Months Ended June 30, 2017 and 2016 |
(Expressed in Canadian Dollars) |
(Unaudited) |
|
4. ACQUISITION OF EVOLUTION TECHNOLOGY SA
On March 30, 2017, the Company entered into an Share Purchase Offer Agreement with the shareholders of Evotech to acquire 65% ownership interest in Evotech. Since its incorporation on March 10, 2016, it has obtained various permits for constructing the towers for cellular coverage. The purpose and business scope of Evotech includes constructing towers for the telecommunication services.
To obtain the 65% ownership interest, the Company paid US$350,000 to the original shareholders of Evotech and transferred US$400,000 to Evotech for operating expenses. The Company also issued 1,500,000 common shares at fair value of $480,000 to the consultants for this transaction. In addition, the Company committed to contribute the funds necessary for Evotech to construct 50 towers, or a lower number of towers to be agreed between the parties, for up to a total maximum amount of US$3,500,000. Sellers have the options to exchange all and not less than all of the remaining 35% ownership interest for 7,000,000 common shares of the Company, subject to the option is exercised on or before June 30, 2018 and by the time of exercise, Evotech has constructed 50 towers.intangible asset.
The following table presents the allocation of the purchase price to the assets acquired and liabilities assumed based on their estimated fair values, which is the same as the carrying values, at the date of acquisition:acquisition and resulting goodwill:
| | $ | |
| Fair value of common shares issued | | 1,312,500 | |
| Total consideration | | 1,312,500 | |
| | $ | | |
CashAssets acquired: | 4,676 | | |
Other receivables Cash | 43,042 | 18,436 | |
Due from shareholders Amounts receivable and prepaid expenses | 6,490 | 20,463 | |
| Construction in progress | 203,312 | 91,339 | |
| Furniture and equipment | | 2,741 | |
| Intangible assets | | 428,000 | |
| Goodwill | 1,205,705 | 1,315,258 | |
| | | |
| Less: liabilities assumed | | | |
| Accounts payable | | (7,440356,404 | ) |
| Deferred income tax liability | | (61,500 | ) |
| | | |
Net assets of EvotechMexmaken | 1,455,785 | 1,458,333 | |
| Net assets attributed to non-controlling interest | | (509,525145,833 | ) |
Total consideration | 946,260 | | |
| Net assets acquired | | 1,312,500 | |
As at December 31, 2018, the Company completed an impairment analysis in accordance with IAS 36, Impairment of June 30, 2017, Evotech was stillAssets, and determined that the carrying value of the Mexmaken CGU exceeded its fair value based on its value in the progress of constructing the towers as required in the acquisition agreements.use. As a result, the Company determined to fully impaired asrecognized impairment of $2,132,942, including $1,315,258 of goodwill, $461,597 of property and equipment, $417,587 of intangible asset, and recorded a recovery of deferred income taxes of $61,500.
During the indication of generating revenue is uncertain.
5. SIGNIFICANT ACCOUNTING POLICIES
Loss per share
Basic loss per share is computed by dividingyears ended December 31, 2020 and 2019, the net loss for the period by the weighted average number of common shares outstanding during the period. To compute diluted loss per share, adjustments are made to common shares outstanding. The weighted average number of common shares outstanding is adjusted to include the number of additional common shares that would be outstanding if,Company's ownership on Mexmaken remains at the beginning of the period or at time of issuance, all options and warrants were exercised. The proceeds from exercise are assumed to be used to purchase the Company’s common shares at their average market price during the period. For the periods presented, this calculation proved to be anti-dilutive.90%.
5. SIGNIFICANT ACCOUNTING POLICIES8.(CONTINUED)
Revenue recognitionNON-CONTROLLING INTEREST (NCI)
The Company’s revenue is derived from leasingfollowing table presents the summarized financial information for Evolution, TCTS and Mexmaken, the Company's subsidiaries which have NCI's. This information represents amounts before intercompany eliminations.
| | | December 31,
2020 | | | December 31,
2019 | |
| | | $ | | | $ | |
| Current assets | | 1,145,246 | | | 3,466,115 | |
| Non-current assets | | 4,079,106 | | | 9,463,080 | |
| Current liabilities | | 14,046,168 | | | 18,306,038 | |
| Non-current liabilities | | 898,146 | | | 1,691,801 | |
| Revenues for the year ended | | 7,934,906 | | | 2,263,370 | |
| Net loss for the year ended | | (1,150,056 | ) | | (6,225,672 | ) |
| The net change in non-controlling interest is as follows: | | Total | |
| | $ | |
| Balance, December 31, 2018 | | 162,471 | |
| Change in ownership interest | | (177,178 | ) |
| Share of loss for the year | | (3,170,031 | ) |
| Currency translation adjustment | | (172,549 | ) |
| Balance, December 31, 2019 | | (3,357,287 | ) |
| Share of loss for the year | | (1,309,671 | ) |
| Currency translation adjustment | | 134,501 | |
| Balance, December 31, 2020 | | (4,532,457 | ) |
As of towersDecember 31, 2020 and 2019, the Company held a 50% ownership in TCTS, 90% ownership in Mexmaken and 65% ownership in Evolution with $953,706, $791,573 and $2,787,178 (2019 - $919,976, $111,962 and $2,325,349) NCI balance, respectively.
The Company has recasted comparative information as at December 31, 2018 for the non-controlling interest, to various telecommunication companies. Leasing revenue is recognized oncorrect losses attributed to non-controlling interests during the year ended December 31, 2018. As a straight-line basis overresult, the termsdeficiency attributable to shareholders of the leases. The term of existing lease agreements is between fiveCompany decreased by $223,612 and the non-controlling interest increased by the same amount. There was no impact to thirteen years.
Foreign currency translation
The functional currencies of Tower Three is Columbian Peso and Evotech is Argentina Peso.
Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (the "functional currency"). Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities not denominated in the functional currency of an entity are recognized in theCompany's cash flows or profit or loss.
Assets and liabilities of entities with functional currencies other than Canadian dollars are translated atloss for the year end rates of exchange, and the results of their operations are translated at average rates of exchange for the year. The resulting translation adjustments are included in accumulated other comprehensive income in shareholders' equity.
For the period ended June 30, 2017, an unrealized foreign exchange translation gain of $47,719 was recorded under accumulated other comprehensive loss as a result of changes in the value of the Columbian Peso and Argentina Peso with respect to the Canadian dollar.December 31, 2018.
5. SIGNIFICANT ACCOUNTING POLICIES9.(CONTINUED)INTANGIBLE ASSETS
| | Master lease
agreements | |
| Cost | | $ | |
| Balance, December 31, 2018, 2019 and 2020 | | 1,982,354 | |
| | | |
| Accumulated amortization | | | |
| Balance, December 31, 2018 | | 138,765 | |
| Additions | | 240,861 | |
| Balance, December 31, 2019 | | 379,626 | |
| Additions | | 245,070 | |
| Balance, December 31, 2020 | | 624,696 | |
| | | |
| Net book value | | | |
| December 31, 2019 | | 1,602,728 | |
| December 31, 2020 | | 1,357,658 | |
10.PROPERTY AND EQUIPMENT
Share capital
Common shares are classified as equity. Transaction costs directly attributableDuring the years ended December 31, 2020 and 2019, due primarily to the issuecancellation of common sharestenant lease agreements, an indicator of impairment existed resulting in a test of recoverable amount of the assets and share options are recognizedrecognition of an impairment loss of $441,292 and $1,306,767, respectively. A value in use calculation is not applicable as a deductionthe Company does not have any expected cash flows from equity, netusing the assets. In estimating the fair value less costs of any tax effects. Common shares issued for consideration otherdisposal, management did not have observable or unobservable inputs to estimate the recoverable amount greater than cash, are valued based on their market$nil. As this valuation technique requires management's judgment and estimates of the recoverable amount, it is classified within Level 3 of the fair value at the date the shares are issued.hierarchy.
10.PROPERTY AND EQUIPMENT (CONTINUED)
| | | Towers | | | Construction in progress | | | Furniture and equipment | | | Total | |
| Cost | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Balance, December 31, 2018 | | 4,767,745 | | | 3,652,130 | | | 68,797 | | | 8,488,672 | |
| Monetary adjustment for hyperinflationary economy | | 1,301,174 | | | 68,942 | | | 180,070 | | | 1,550,186 | |
| Additions | | 71,929 | | | 4,405,289 | | | 176,507 | | | 4,653,725 | |
| Transfer from CIP to towers | | 6,031,951 | | | (6,031,951 | ) | | - | | | - | |
| Reclassification to assets held for sale | | (845,737 | ) | | - | | | - | | | (845,737 | ) |
| Towers sold | | - | | | (167,896 | ) | | - | | | (167,896 | ) |
| Impaired/cancelled towers | | (500,764 | ) | | (786,617 | ) | | (19,386 | ) | | (1,306,767 | ) |
| Foreign exchange movement | | (2,180,040 | ) | | (654,677 | ) | | (24,580 | ) | | (2,859,297 | ) |
| | | | | | | | | | | | | |
| Balance, December 31, 2019 | | 8,646,258 | | | 485,220 | | | 381,408 | | | 9,512,886 | |
| Monetary adjustment for hyperinflationary economy | | 701,648 | | | 644,005 | | | (101,325 | ) | | 1,244,328 | |
| Additions | | - | | | 2,502,896 | | | 35,722 | | | 2,538,618 | |
| Transfer from CIP to towers | | 1,574,686 | | | (1,574,686 | ) | | - | | | - | |
| Reclassification to assets held for sale | | - | | | (30,967 | ) | | - | | | (30,967 | ) |
| Towers sold | | (3,888,708 | ) | | - | | | - | | | (3,888,708 | ) |
| Impaired/cancelled towers/equipment | | - | | | (416,588 | ) | | (24,704 | ) | | (441,292 | ) |
| Foreign exchange movement | | (1,518,126 | ) | | (15,623 | ) | | (79,364 | ) | | (1,613,113 | ) |
| | | | | | | | | | | | | |
| Balance, December 31, 2020 | | 5,515,758 | | | 1,594,257 | | | 211,737 | | | 7,321,752 | |
| | | | | | | | | | | | | |
| Accumulated Amortization | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Balance, December 31, 2018 | | 254,314 | | | - | | | 12,881 | | | 267,195 | |
| Monetary adjustment for hyperinflationary economy | | 71,970 | | | - | | | 1,778 | | | 73,748 | |
| Additions | | 673,106 | | | - | | | 30,789 | | | 703,895 | |
| Reclassification to assets held for sale | | (94,011 | ) | | - | | | - | | | (94,011 | ) |
| Impairment/cancelled towers | | - | | | - | | | (4,151 | ) | | (4,151 | ) |
| Foreign exchange movement | | (164,131 | ) | | - | | | (1,705 | ) | | (165,836 | ) |
| | | | | | | | | | | | | |
| Balance, December 31, 2019 | | 741,248 | | | - | | | 39,592 | | | 780,840 | |
| Monetary adjustment for hyperinflationary economy | | 116,704 | | | - | | | 6,292 | | | 122,996 | |
| Additions | | 708,546 | | | - | | | 44,283 | | | 752,829 | |
| Tower sold | | (322,512 | ) | | - | | | (9,730 | ) | | (332,242 | ) |
| Foreign exchange movement | | (165,439 | ) | | - | | | (12,360 | ) | | (177,799 | ) |
| | | | | | | | | | | | | |
| Balance, December 31, 2020 | | 1,078,547 | | | - | | | 68,077 | | | 1,146,624 | |
| | | | | | | | | | | | | |
| Net book value | | | | | | | | | | | | |
| December 31, 2019 | | 7,905,010 | | | 485,220 | | | 341,816 | | | 8,732,046 | |
| December 31, 2020 | | 4,437,211 | | | 1,594,257 | | | 143,660 | | | 6,175,128 | |
11.RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
The Company has adopted a residuallease agreement for its land lease. The continuity of the ROU asset and lease liability for the years ended December 31, 2020 and 2019 are as follows:
| Right-of-use asset | | | |
| As at December 31, 2018 | $ | 1,374,800 | |
| Additions | | 1,721,936 | |
| Depreciation | | (317,208 | ) |
| Impact of foreign exchange | | (370,602 | ) |
| Monetary adjustment for hyperinflationary economy | | 297,442 | |
| As at December 31, 2019 | $ | 2,706,368 | |
| Additions | | 702,473 | |
| Cancellation | | (1,086,971 | ) |
| Depreciation | | (262,540 | ) |
| Impact of foreign exchange | | (375,830 | ) |
| Monetary adjustment for hyperinflationary economy | | 201,933 | |
| As at December 31, 2020 | $ | 1,885,433 | |
| | | | |
| Lease liability | | | |
| As at January 1, 2019 | $ | 1,374,800 | |
| Additions | | 1,721,936 | |
| Lease payments | | (570,512 | ) |
| Lease interest | | 488,484 | |
| Impact of foreign exchange | | (311,579 | ) |
| As at December 31, 2019 | $ | 2,703,129 | |
| Additions | | 702,473 | |
| Cancellation | | (1,199,643 | ) |
| Lease payments | | (553,130 | ) |
| Lease interest | | 374,216 | |
| Impact of foreign exchange | | (341,367 | ) |
| As at December 31, 2020 | $ | 1,685,678 | |
| | | | |
| Current portion | $ | 92,308 | |
| Long-term portion | | 1,593,370 | |
| | $ | 1,685,678 | |
12.ASSETS HELD FOR SALE
During the year ended December 31, 2020, the Company entered into an asset purchase agreement with a third party whereby the Company agreed to sell certain towers in Argentina. The sale was not completed as of December 31, 2020, and accordingly the Company has reclassified the towers from property and equipment to assets held for sale on the consolidated statement of financial position. The carrying value methodreported represents the lower of the net book value and fair value less costs to sell. Subsequent to year ended December 31, 2020, the Company sold the assets held for sale towers of $30,967 for $36,961.
During the year ended December 31, 2019, the Company entered into an asset purchase agreement with respecta third party whereby the Company agreed to sell certain towers in Argentina. The sale was not completed as of December 31, 2019, and accordingly the Company has reclassified the towers from property and equipment to assets held for sale on the consolidated statement of financial position. The carrying value reported represents the lower of the net book value and fair value less costs to sell. Subsequent to year ended December 31, 2019, the Company sold the assets held for sale towers of $751,726 for proceeds of $1,204,942.
13.CONVERTIBLE DEBENTURES
June 2018 Convertible Debenture
In June 2018, the Company issued secured convertible debentures to a third party for gross proceeds of $1,000,000 under the following terms:
• A term of one year;
• An interest rate of 1% per month, payable monthly; and
• Convertible into common shares of the Company at $0.20 per common share, subject to adjustment in certain events.
In connection with the convertible debentures, the Company also issued 5,000,000 share purchase warrants to the measurementholders exercisable at a price of shares$0.25 per common share for a period of one year. The Company also incurred cash debt issuance costs of $76,791.
In November 2018, the terms of these convertible debentures were modified as follows:
• The conversion price was reduced to $0.10 per common share;
• The expiry date of the original warrants was extended to November 13, 2019;
• The exercise price of the share purchase warrants was reduced to $0.125 per common share; and
• The Company issued 5,000,000 additional share purchase warrants issued as private placement units. The residual value method first allocates value to the more easily measurable component based on fair valuepurchasers exercisable at a price of $0.125 per common share, subject to certain adjustments in certain events with an expiry date of November 13, 2019.
The convertible debentures are secured against the assets of the Company and thenits subsidiaries pursuant to the terms of a general security agreement of the Company issued in favor of the holders.
November 2018 Convertible Debenture
In November 2018, the Company issued secured convertible debentures to a third party for gross proceeds of $500,000 under the following terms:
• A term of seven months;
• An interest rate of 1% per month, payable monthly; and
• Convertible into common shares of the Company at $0.10 per common share, until June 12, 2019, subject to adjustments in certain events.
In connection with the convertible debentures, the Company also issued 5,000,000 share purchase warrants to the purchasers exercisable at a price of $0.125 per common share for a period of one year until November 13, 2019. The Company also incurred cash debt issuance costs of $46,295.
The convertible debentures are secured against the assets of the Company and its subsidiaries pursuant to the terms of a general security agreement of the Company issued in favor of the holders.
For accounting purposes, the convertible debentures are separated into their liability and equity components using the residual value, if any, to the less easily measurable component.method. The Company considers the fair value of common shares issued in a private placement to be the more easily measurableliability component andat the common shares are valued at their fairtime of issue was determined based on an estimated discount rate of 17% for debentures. The value of the equity component was determined as determined by the closing quoted bid price ondifference between the announcement date. The balance, if any, is allocated toface value of the attached warrants. Any fair value attributed to the warrants is recorded as reserves.
Share-based payments
Share-based payments to employees are measured atconvertible debenture and the fair value of the instruments issuedliability component. After initial recognition the liability component is carried on an amortized cost basis and amortizedis accreted to its face value over the vesting periods. Share-based paymentsterm to non-employees are measuredmaturity of the convertible debentures at the fair valueeffective rate of 25%.
13.CONVERTIBLE DEBENTURES (CONTINUED)
During the goods or services received oryear ended December 31, 2018, the Company determined the fair value of the equity instrumentscomponent of the convertible debentures to be $53,583, offset by transaction costs of $4,397 and a deferred tax liability of $46,513.
June 2019
In June 2019, the Company repaid $750,000 of the convertible debentures and extended the term with the existing lenders to November 2019.
In consideration for the extension of financing terms with existing lenders, the Company reached an agreement with such lenders to amend existing warrants (the "Amended Warrants") that were issued if it is determinedto such lenders on (i) June 12, 2018 (as previously amended on November 13, 2018) and (ii) November 13, 2018. The Amended Warrants were amended as follows:
• The exercise price of the Amended Warrants was amended from $0.125 to $0.09; and
• The expiry date of the Amended Warrants was extended from November 13, 2019 to November 13, 2020.
Concurrent with the Amended Warrants, the Company also issued new common share purchase warrants (the "New Warrants") to each holder of the Amended Warrants, resulting in an aggregate of 15,000,000 New Warrants being issued. Each New Warrant entitles the holder thereof to acquire one common share of the Company at an exercise price of $0.09 per common share, with each New Warrant set to expire on November 13, 2020. The fair value of the goods or services cannotNew Warrants is $287,272.
The fair value of the share purchase warrants was calculated using the Black-Scholes model and the following weighted average assumptions:
| |
Share price at date of grant | $0.08 |
Exercise price | $0.09 |
Expected life | 1.42 years |
Expected volatility | 58.15% |
Risk free interest rate | 1.49% |
Expected dividend yield | 0% |
Expected forfeiture rate | 0% |
The Company has the right to repurchase all of the Amended Warrants and New Warrants for $300,000 in aggregate at any time before their respective expiry dates.
The amendment of the convertible debenture was deemed to be reliably measured,an extinguishment of the original liabilities. As such, the equity portion of the original convertible debentures of $2,673 was derecognized and are recordedthe Amended Warrants were revalued at the extinguishment date using the Black-Scholes model and the weighted average assumptions disclosed above. The fair value of the Amended Warrants at the date of extinguishment was determined to be $287,623. Consequently, $572,222 was recorded as a loss on extinguishment to contributed surplus.
September 2019
In September 2019, the goods or services are received. The amount recognized asCompany further extended the term with the existing lenders to December 2019.
In consideration for the extension of financing terms with existing lenders, the Company reached an expense is adjustedagreement with such lenders to reflect the number of awards expected to vest. The offset to the recorded cost is to warrants and options reserve. Consideration receivedpay a 10% penalty on the exercise of stock options is recorded as share capital and the related amount in warrants and options reserve is transferred to share capital. Charges for options that are forfeited before vesting are reversed from share-based payments reserve. For those options that expire or are forfeited after vesting, the recorded value is transferred to deficit.
Income taxes
The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carryingtotal outstanding amounts of existing assetsthe principal. During the year ended December 31, 2019, the Company paid the penalty of $75,000 and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using substantively enacted tax rates expected to apply to taxable incomerecorded the penalty as interest expense in the years in which those temporary differences are expected to be recovered or settled. Deferred income tax assets result from unused loss carry-forwards, resource related pools and other deductions. A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilized.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Long-lived assets
Long-lived assets are stated at cost which includes the acquisition price and any direct costs to bring the asset into productive use at its intended location.
Amortization for equipment is recognized using the straight line method over their estimated useful lives at a rateconsolidated statement of 5% per year.comprehensive loss.
5. SIGNIFICANT ACCOUNTING POLICIES13.CONVERTIBLE DEBENTURES (CONTINUED)
ProvisionsDecember 2019
Provisions are recorded whenIn December 2019, the Company further extended the term with the existing lenders to February 2020.
In consideration for the extension of financing terms with existing lenders, the Company reached an agreement with such lenders to pay a present legal or constructive obligation exists as a result of past events where it is probable that an outflow of resourced embodying economic benefits will be required to settle1% penalty on the obligation, and a reliable estimatetotal outstanding amounts of the amountprincipal, as well as an additional 2% penalty on the total outstanding amounts of the obligation canprincipal to be made. The amount recognizedadded to the principal if the outstanding amounts are not repaid by January 14, 2020.
During the year ended December 31, 2019, the Company paid the penalty of $7,500 and recorded the penalty as interest expense in the consolidated statement of comprehensive loss.
March 2020
In March 2020, the Company further extended the term with the existing lenders to June 2020.
In consideration for the extension of financing terms with existing lenders, the Company reached an agreement with such lenders to pay a provision ispenalty to be satisfied by issuing 714,286 common shares.
During the best estimateyear ended December 31, 2020, the Company issued the 714,286 common shares, with a fair value of $24,286, and recorded the penalty as interest expense in the consolidated statement of comprehensive loss.
June 2020
In June 2020, the Company repaid the convertible debenture balance of $745,000 in full.
With this repayment, the Company repaid in full the convertible debenture loan balance and discharged the security interest associated with the loan.
A reconciliation of the consideration required to settleconvertible debentures is as follows:
| Balance at December 31, 2018 | $ | 1,387,624 | |
| Cash items | | | |
| Repayment of convertible debt | | | |
| Non-cash items | | (750,000 | ) |
| Accreted interest | | 107,376 | |
| Extinguishment of debt | | (745,000 | ) |
| Issuance of debt | | 745,000 | |
| Balance at December 31, 2019 | $ | 745,000 | |
| Cash items | | | |
| Repayment of convertible debt | | (745,000 | ) |
| Balance at December 31, 2020 | $ | - | |
During the present obligation atyear ended December 31, 2020, the Company has incurred interest expense of $19,280 (2019 - $127,500; 2018 - $71,836) on the convertible debentures, of which $nil (2019 - $15,000) remains payable and has been recorded within interest payable on the consolidated statement of financial position date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount receivable can be measured reliably.position.
5. SIGNIFICANT ACCOUNTING POLICIES14.(CONTINUED)LOANS PAYABLE
Financial instruments (continued)(a) Financial assets (continued)As at December 31, 2020 and 2019, the loans payable are summarized as follows:
| | | Balance, December 31, | | | | | |
| | | 2020 | | | 2019 | | | Currency | | Terms |
| | | CAD $ | | | CAD $ | | | | | |
| | | 1,505,038 | | | 731,606 | | | USD | | Unsecured, due on demand |
| | | 1,817,141 | | | 148,158 | | | Colombian Pesos | | Unsecured, due on demand |
| | | 79,567 | | | - | | | Colombian Pesos | | Unsecured, repayable monthly until Colombian Pesos May 2023 |
| | | 150,984 | | | - | | | Colombian Pesos | | Unsecured, repayable monthly until December 2023 |
| | | 31,857 | | | 32,545 | | | Argentine Pesos | | Unsecured, due on demand |
| | | - | | | 350,746 | | | Argentine Pesos | | Unsecured, due January 2020 |
| | | 3,584,587 | | | 1,263,055 | | | | | |
| | | | | | | | | | | |
| | | 3,440,732 | | | 1,263,055 | | | Current portion of loans payable | | |
| | | 143,855 | | | - | | | Long term portion of loans payable | | |
| | | 3,584,587 | | | 1,263,055 | | | | | |
ImpairmentDuring the year ended December 31, 2020, the interest rates on the loans payable ranged from 0% to 41% (2019 - 0% to 61%).
The Company has recasted comparative information as at December 31, 2018 for the loans payable, to correct balances received during the year ended December 31, 2018. As a result, the loans payable and foreign exchange expense increased by $431,708. The recast of comparative information had no impact on cash flows.
During the year ended December 31, 2020, the Company has incurred interest expense of $144,473 (2019 - $336,817, 2018 - $20,052) on the loans payable, of which $88,018 (US$64,725) (2019 - $73,615) remains payable and has been recorded within interest payable on the consolidated statement of financial assetsposition.
A financial asset is assessed15.BONDS PAYABLE
During the year ended December 31, 2019, the Company issued a total of 9,880 (2018 - 9,663) bonds at a price of $100 each reporting datefor gross proceeds of $988,000 (2018 - $966,300). The bonds are secured against all present and after-acquired personal property of the Company, incur interest at a rate of 10% paid monthly, and mature September 21, 2021. In connection with the issuance of bonds, the Company paid cash debt issuance costs to determine whether there is any objective evidence that it is impaired. A financial asset could be impaired if objective evidence indicates that one or more events have hadan agent of $128,440 and issued 921,780 share purchase warrants to the agent with a negative effect on the estimated future cash flowsfair value of that asset.$33,545. The share purchase warrants are exercisable at prices ranging from $0.08 to $0.14 per common share for a period of two years. No bonds were issued in 2020.
An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the presentThe fair value of the estimated futureshare purchase warrants was calculated using the Black-Scholes model using the following weighted average assumptions:
| | | 2020 | | | 2019 | |
| Share price at date of grant | | - | | $ | 0.09 | |
| Exercise price | | - | | $ | 0.09 | |
| Expected life | | - | | | 2 years | |
| Expected volatility | | - | | | 76.65% | |
| Risk free interest rate | | - | | | 1.68% | |
| Expected dividend yield | | - | | | 0% | |
| Expected forfeiture rate | | - | | | 0% | |
The cash flows, discounted at the original effective interest rate.
Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized. For financial assets measured at amortized cost, this reversal is recognized in profit or loss.
(b) Financial liabilities
The Company classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was acquired. The Company's accounting policy for each category is as follows:
Fair value through profit or loss- This category comprises derivatives, or liabilities acquired or incurred principally for the purpose of selling or repurchasing it in the near term. They are carried in the statement of financial position atdebt issuance costs and fair value with changes in fairof the share purchase warrants were applied against the carrying value recognized through profit or loss.
Other financial liabilities:This category consists of liabilities carried at amortized cost using the effective interest method.
The Company’s accounts payable is classified as other financial liabilities.
Adoptionbond. During the year ended December 31, 2020, the Company recorded an amortization expense related to the debt issuance costs of new pronouncements$95,399 (2019 - $95,399).
6. RECENT ACCOUNTING PRONOUNCEMENTS15.BONDS PAYABLE (CONTINUED)
Certain new standards, interpretations and amendments to existing standards have been issued byAs at December 31, 2020, the IASB thatcarrying value of the bonds are mandatory for future accounting periods. Some updates that are not applicable or are not consequential to$1,882,750 (2018 - $1,787,351). During the year ended December 31, 2020, the Company may havehas incurred interest expense of $195,973 (2019 - $177,005; 2018 - $15,038) on the bonds payable, of which $nil (2019 - $16,599) remains payable and has been excludedrecorded within interest payable on the consolidated statement of financial position.
16.RELATED PARTY TRANSACTIONS AND BALANCES
Loans payable to related parties include loans and advances received from the list below.
Standard effective for annual periods beginning on or after January 1, 2018
IFRS 9Financial Instruments- In November 2009, as partrelated individuals and companies related to directors and officers of the IASB projectCompany. As at December 31, 2020 and 2019, the Company has the following loan balances with related parties:
| Balance, December 31, | | | |
2020 | 2019 | Currency | Rate | Terms |
CAD $ | CAD $ | | % | |
| | | | | |
3,839,459 | 4,047,119 | USD | 12% -18% | Unsecured, due on demand |
| | | | | |
18,546 | - | Colombian Pesos | 0% | Unsecured, due on demand |
| | | | | |
12,743 | 13,068 | Argentine Pesos | 18% | Unsecured, due on demand |
3,870,748 | 4,060,187 | | | |
In connection with certain related party loans, the Company incurred monthly penalty fees of 10% until June 30, 2018 once the loans reached their initial maturity dates. During the year ended December 31, 2018, the Company paid finance expenses of $528,132 (US$407,500) in connection with these monthly penalties.
As at December 31, 2018, the Company had advanced $224,976 to replace IAS 39Financial Instruments: Recognition and Measurement,related parties in connection with costs to be incurred on behalf of the IASB issuedCompany. This amount was included within other receivables on the first phase of IFRS 9, that introduces new requirements for the classification and measurementconsolidated statement of financial assets.position. The standard was revised in October 2010 to include requirements regarding classificationamounts advanced are unsecured, non-interest bearing and measurement of financial liabilities. In November 2013due on demand. During the standard was revised to addyear ended December 31, 2019, the new general hedge accounting requirements. The standard was finalized in July 2014 and was revised to add a new expected loss impairment model and amends the classification and measurement model for financial assets by adding a new fair value through other comprehensive income (“FVOTCI”) category for certain debt instruments and additional guidance on how to apply the business model and contractual cash flow characteristics test.
IFRS 15 -Revenue from Contracts with Customers -On May 28, 2014 the IASB issued IFRS 15, “Revenue from contracts with customers”. IFRS 15 will replace IAS 11, “Construction contracts”, IAS 18, “Revenue”, IFRIC 13, “Customer loyalty programmes”, IFRIC 15, “Agreements for the construction of real estate”, IFRIC 18, “Transfers of assets from customers” and SIC 31, “Revenue – barter transactions involving advertising services”. The standard contains a single model that applies to contracts with customers and two approaches to recognizing revenue: at a point in time; or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognized. New estimates and judgmental thresholds have been introduced, which may affect the amount and/or timing of revenue recognized. The new standard applies to contracts with customers. It does not apply to insurance contracts, financial instruments or lease contracts, which fall in the scope of other IFRSs. The Company’s preliminary assessment is that the standard is not expected to have a significant impact on the recognition or measurement of revenue. As facts and circumstances may change during the period leading up to the initial date of recognition, the Company’s assessment of the potential impact is subject to change.
Standard effective for annual periods beginning on or after January 1, 2019
IFRS 16– Leases-On January 13, 2016 the IASB issued IFRS 16, “Leases”. This standard introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognize a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. This standard substantially carries forward the lessor accounting requirements of IAS 17, while requiring enhanced disclosuresCompany deemed these amounts to be provided by lessors. Other areas ofuncollectable and wrote off the lease accounting model have been impacted, including the definition of a lease.
The new standard is effective for annual periods beginning on or after January 1, 2019. Earlier application is permitted for entities that apply IFRS 15, “Revenue from contracts with customers” at or before the date of initial adoption of IFRS 16.balance.
The Company has not early adopted these standards, amendmentsrecasted comparative information as at December 31, 2018 for the loans from related parties, to correct balances received during the year ended December 31, 2018. As a result, the loans from related parties increased by $506,804, the interest payable decreased by $494,934 and interpretations and anticipates that the applicationforeign exchange expense increased by $11,870. The recast of these standards, amendments and interpretations will not have a materialcomparative information had no impact on cash flows.
During the year ended December 31, 2020, the Company has incurred interest expense of $352,439 (US$262,994) (2019 -$492,729; 2018 - $311,102) in connection with the related party loans noted above. As at December 31, 2020, $562,260 (2019 - $252,144) of unpaid interest and loan penalties have been included within interest payable on the consolidated statement of financial position and financial performanceposition.
January 2019
In January 2019, the Company renegotiated the loans with three of the Company.related party lenders to extend the maturity date of the loans.
15In consideration for the extension of the maturity date of the loans, the Company agreed to incur total penalties of $212,312 (US$160,000) which were added to the principal balance of the loans. In addition, the Company agreed to add the interest accrued as of the date of renegotiation of $539,236 (US$395,259) to the principal balance of the loans. The renegotiation of the loans was deemed to be an extinguishment of the original liabilities and $212,312 was recorded as a loss on extinguishment.
7. 16.RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)
DueSeptember 2019
In September 2019, the Company consolidated loan balances with certain related party lenders and extended the maturity date of these amounts to related parties consists of short term amounts advanced to, services rendered and expenses paid on behalfMarch 30, 2020.
In consideration for the extension of the Company by shareholdersmaturity date of the Company. These amountsloans, the Company agreed to issue 2,381,301 share purchase warrants to the holders with a fair value of $180,714. The share purchase warrants are unsecured, non-interest bearing, and payable on demand.exercisable at a price of $0.09 per common share for a period of five years. As at June 30, 2017 and December 31, 2016,2020, these warrants have not yet been issued. The fair value of the Company hasobligation to issue the share purchase warrants was calculated using the Black-Scholes model and the following balances with related parties:weighted average assumptions:
| | | |
| | June 30, | December | |
| | 2017 | 31, 2016 | |
| Due from (to) related parties: | $ | $ | |
Tower One Wireless Corp. | - | (189,589 | ) |
Amounts owing to a director or a company controlled by the director | 240,249 | (356,268 | ) |
Amounts owing to the parent of the CEO | - | (69,665 | ) |
Amounts owing from shareholders | 5,896 | - | |
| | 246,325 | (615,522 | ) |
| |
| |
| Share price at date of grant | $0.08 |
| Exercise price | $0.09 |
| Expected life | 5 years |
| Expected volatility | 174.99% |
| Risk free interest rate | 1.49% |
| Expected dividend yield | 0% |
| Expected forfeiture rate | 0% |
DuringThe consolidation of the period ended June 30, 2017,loans and the Company granted 275,000 stock optionsissuance of the warrants was deemed to directorsbe an extinguishment of the original liabilities and officers and$180,714 was recorded share-based compensation of $43,843.as a loss on extinguishment.
Key management personnel receive compensation in the form of short-term employee benefits, share-based payments,compensation, and post-employment benefits. Key management personnel include the Chief Executive Officer, Chief Financial Officer, and directors of the Company.Chief Operating Officer. The remuneration of key management is as follows:follows (expressed in USD):
| | | 2020 | | | 2019 | | | 2018 | |
| | | $ | | | $ | | | $ | |
| Consulting fees paid to the CEO | | 468,300 | | | 204,000 | | | 165,605 | |
| Consulting fees paid to the COO | | 320,300 | | | 204,000 | | | 114,546 | |
| Consulting fees paid to the CFO | | 336,300 | | | 262,100 | | | 99,092 | |
| | | 1,124,900 | | | 670,100 | | | 379,243 | |
The remuneration of the CEO/COO/CFO are included in professional fees and consulting in the consolidated statements of comprehensive loss.
During the year ended December 31, 2018 the Company granted stock options to directors and officers resulting in share-based compensation of $1,913,692.
As at December 31, 2020, $692,100 (2019 - 147,631) of related party payables are included in accounts payable and accrued liabilities in the consolidated statement of financial position.
8. EQUIPMENT
| | |
| $ | |
Cost | | |
December 31, 2015 | - | |
Construction | 244,708 | |
Foreign exchange movement | 7,313 | |
December 31, 2016 | 252,021 | |
Construction | 424,750 | |
Foreign exchange movement | (47,004 | ) |
June 30, 2017 | 629,767 | |
| | |
Accumulated amortization | | |
December 31, 2015 | - | |
Additions | 3,440 | |
Foreign exchange movement | 103 | |
December 31, 2016 | 3,543 | |
Additions | 6,500 | |
Foreign exchange movement | (619 | ) |
June 30, 2017 | 9,424 | |
| | |
Net book value | | |
December 31, 2016 | 248,478 | |
June 30, 2017 | 620,343 | |
16
|
TOWER ONE WIRELESS CORP. |
Notes to Condensed Consolidated Interim Financial Statements |
For the ThreeYears Ended December 31, 2020, 2019 and Six Months Ended June 30, 2017 and 20162018 | Amended |
| (Expressed in Canadian Dollars) |
(Unaudited) |
| |
9.17. SHARE CAPITAL
a) Authorized:
| |
Unlimited | Class A common shares without par value |
1,500,000 | Class B Series I preferred shares without par value |
1,000,000 | Class B Series II preferred shares without par value |
Unlimited Class A common shares without par value
1,500,000 Class B Series I preferred shares without par value
1,000,000 Class B Series II preferred shares without par value
As at December 31, 2020 and 2019, there were no preferred shares outstanding.
b) Issued and outstanding:
During the year ended December 31, 2020:
• On January 12, 2017,April 30, 2020, the Company closedissued 714,286 common shares as a non-brokered private placement andpenalty to the holders of the convertible debentures, with a fair value of $24,286. The fair value of the penalty was not readily determinable, as such, the common shares were valued at the fair value of common shares on grant date.
No shares were issued 15,484,912 units at $0.15 per unitduring the year ended December 31, 2019.
During the year ended December 31, 2018:
• On April 3, 2018, the Company issued 7,500,000 common shares for acquisition Mexmaken as described in Note 7.
• On April 3, 2018, the Company issued 780,000 common shares to the parent of the CEO for interest payment of $156,000 (USD$120,000).
• The Company issued 50,000 common shares pursuant to the exercise of the conversion option of certain convertible debentures as described in Note 14.
• The Company issued 5,600,000 common shares for gross proceeds of $2,322,737.$1,260,000 pursuant to the exercise of stock options. In connection with the exercise of stock options, $1,200,301 was transferred from contributed surplus to share capital.
• The Company issued 525,690 units for services with a fair value of $110,395. Each unit is comprised of one common share and one share purchase warrant exercisable for one common share at an exercise price of $0.40$0.25 for 12 months following the transaction. If the share price trades at $0.60 for 10 consecutive trading days then the warrant holders will receive notice from the Company to accelerate the exercisea period of six months. The fair value of the warrants within 10 days or they will expire. The Company paid finders and brokers cash commissions of $87,767 and issued 585,117 broker warrants withservices received was not readily determinable, as such, the same terms as the warrants in the private placement. The broker warrants have the same terms as those issued as part of the units.
On April 18, 2017, the Company issued 500,000 common shares to Rojo Resources Ltd. (Rojo). Under the Assignment Agreement, the Company has taken assignment of all the Company’s assets, trade secrets and receivables for a consideration of issuing 500,000 common shares to Rojo. This Assignment Agreement was subsequently terminated and as a result,were valued at the fair value of common shares on grant date. No value has been allocated to the investmentwarrants.
• The Company issued 142,857 units for the subscriptions received in 2017 in the amount of $175,000 was fully written off.$30,000. Each unit has the same term as above. Each unit is comprised of one common share and one share purchase warrant exercisable for one common share at an exercise price of $0.25 for a period of six months.
17. SHARE CAPITAL (CONTINUED)
b) Issued and outstanding (continued):
• On June 19, 2016,January 8, 2018, the Company extended the expiry date of existing warrants from January 12, 2018 to July 21, 2018. The modification of warrants incurred a share-based compensation of $10,410. The Company also announced warrant price reduction and exercise incentive program. Under the incentive program, the exercise price of all the warrants reduced to $0.30$0.25 if exerciseexercised prior to July 21, 2017 and oneMarch 30, 2018, which was further extended to April 6, 2018. One Incentive Warrant will bewas granted for each warrant exercised. Each Incentive Warrant will bewas exercisable to acquire one common share at a price of $0.50$0.40 for six months. The Company engaged an agent to provide services in connection with the incentive program. The Company issued the agent such number of new warrants as was equal to 8% of the exercised warrants in this program, entitling the agent to acquire units of the Company at an exercise price of $0.25 per unit, with each unit being comprised of one common share and one non-transferable share purchase warrants entitling the agent to acquire an additional common share of the Company at a price of $0.40 per share for one year. Subsequent to the quarter ended June 30, 2017, 3,941,133
8,665,201 warrants were exercised under this program and as a result, 3,941,133consequently, 8,665,201 Incentive Warrants were issued. As of June 30, 2017,The Company received proceeds of $746,840 were received$2,166,300 for the exercise of warrants. In addition, the Company received $30,000 for exercise of warrants which the Company has not issued the shares as of June 30, 2017.
During the period ended June 30, 2017, the Company received $1,099,500 for exercise of 4,780,435 stock options. Fair value of $531,793 was transferred from contributed surplus to share capital.c) Escrowed shares:
On June 19, 2017, the Company issued 1,500,000 common shares as consulting fees for the Evotech transaction at a fair value of $480,000.
On June 21, 2017, the Company issued a total of 1,000,000 common shares to settle accounts payable of $340,000. As the fair value of the shares was $340,000, no gain or loss on debt settlement has been recorded by the Company.
b) Escrowed shares
(i) Pursuant to an escrow agreement dated January 26, 2017, the 30,000,000 common shares issued pursuant to the Acquisitionacquisition of TCTS (Note 5) are subject to escrow restrictions. The escrow shares will be released based on certain performance conditions. At June 30, 2017, allDuring the 30,000,000year ended December 31, 2020, the escrow shares were released upon achieving the performance obligations. As at December 31, 2020, no common shares remain in escrow.escrow (2019 - 30,000,000 common shares).
9. SHARE CAPITAL(CONTINUED)
(ii) In addition, thepursuant to an Assignment Agreement from 2017, 500,000 common shares issued to Rojo Resources Ltd. are subject to escrow restrictions. These escrow shares will be released 10% on the issuance date, with the remaining to be released 15% every six months. As of June 30, 2017,December 31, 2020, there were 450,000are no common shares remainremaining in escrow.escrow (2019 - 75,000 common shares).
17d) Warrants:
On January 8, 2018, the Company modified the expiry date of all existing warrants to July 21, 2018. Share-based compensation of $10,410 was recorded on the agents warrants, based on the following assumptions:
Exercise price | $0.40 |
Expected life | 0.5 years |
Expected volatility | 81% |
Risk free interest rate | 1.32% |
Expected dividend yield | 0% |
Expected forfeiture rate | 0% |
During the year ended December 31, 2020, a total of 31,293,653 warrants expired unexercised. Upon expiry of the warrants, $597,632 was reversed from contributed surplus to deficit.
c)
17. SHARE CAPITAL (CONTINUED)
d) Warrants (continued)
As partA continuity of the January 12, 2017 private placement, the Company issued 15,484,912 warrants. Each warrant allows the holder of the unit to acquire one additional Common Share until January 12, 2018 at an exercise price of $0.40. In addition, the Company issued 585,117 agent warrants as part of the share issue costs. The fair value of the warrants was determined to be $208,211 or $0.36 per warrant using the Black-Scholes option pricing model, which requires management to make estimates that are subjective and may not be representative of the actual results. Changes in assumptions can materially affect estimates of fair value. The following assumptions were used for the calculation:years ended December 31, 2020 and 2019 is as follows:
| |
Risk free interest rate | 0.76% |
Expected life (in years) | 2 years |
Expected volatility | 225% |
Expected dividend yield | 0% |
Expected forfeiture rate | 0% |
Information regarding the Company’s outstanding warrants is summarized below:
| | | | | | |
| | Expiry date | | Number | | Exercise price | |
| | | | | | | |
| Balance, December 31, 2016 | - | | - | | - | |
| Granted | January 12, 2018 | | 16,070,029 | $ | 0.40 | |
| | | | | | | |
| Balance, June 30, 2017 | | | 16,070,029 | $ | 0.40 | |
| | | Number | | | Weighted
average
exercise price | |
| | | | | | $ | |
| Balance, December 31, 2018 | | 16,290,573 | | | 0.12 | |
| Granted | | 15,924,860 | | | 0.09 | |
| Balance, December 31, 2019 | | 32,215,433 | | | 0.11 | |
| Expired | | (31,293,653 | ) | | 0.11 | |
| Balance, December 31, 2020 | | 921,780 | | | 0.09 | |
The following table summarizes the share purchase warrants outstanding and exercisable as at June 30, 2017:December 31, 2020:
| | | |
| | | Remaining contractual | |
| Warrants outstanding | Exercise price | life (years) | Expiry date |
| 16,070,029 | $0.40 | 0.79 | January 12, 2018 |
| Number of warrants outstanding | Exercise price
$ | Expiry date |
| | | |
| 921,780 | 0.09 | October 1, 2021 |
c)
As at December 31, 2020, the warrants outstanding have a weighted average life remaining of 0.75 years (2019 - 0.89 years).
17. SHARE CAPITAL (CONTINUED)
e) Stock options
The Company has established a stock option plan for directors, employees, and consultants. Under the Company's stock option plan, the exercise price of each option is determined by the Board, subject to the Discounted Market Price policies of the Canadian Stock Exchange. The aggregate number of shares issuable pursuant to options granted under the plan is limited to 10% of the Company's issued shares at the time the options are granted. The aggregate number of options granted to any one optionee in a 12 month12-month period is limited to 5% of the issued shares of the Company. The options vest on the date of grant.
18
|
TOWER ONE WIRELESS CORP. |
Notes to Condensed Consolidated Interim Financial Statements |
For the Three and Six Months Ended June 30, 2017 and 2016 |
(Expressed in Canadian Dollars) |
(Unaudited) |
|
9. SHARE CAPITAL(CONTINUED)
c) Stock options (continued)
As at June 30, 2017, the following optionsThere were outstanding and exercisable:
| | | | |
| Options | Options | Exercise | Remaining life | Expiry |
| outstanding | exercisable | price | (years) | date |
| 475,000 | 475,000 | $0.45 | 4.72 | March 17, 2022 |
| 225,000 | - | $0.45 | 4.72 | March 17, 2022 |
| 269,565 | 269,565 | $0.23 | 4.85 | May 4, 2022 |
| 969,565 | 744,565 | | | |
A summary of changes ofno stock options outstanding is as follows:
| | | | |
| | | | Weighted average | |
| | Options | | exercise price | |
| | | | | |
| Balance, December 31, 2015 and 2016 | - | | - | |
| Granted, March 17, 2017 | 700,000 | | $0.45 | |
| Granted, May 4, 2017 | 1,050,000 | | $0.23 | |
| Granted, June 13, 2017 | 4,000,000 | | $0.23 | |
| Exercised | (4,780,435 | ) | $0.23 | |
| | | | | |
| Balance outstanding, June 30, 2017 | 969,565 | | $0.39 | |
These options entitlegranted during the holder thereofyears ended December 31, 2020 and 2019. During the right to acquire one common share for each option held. The weighted average remaining life of outstanding options is 4.75 years.
On March 17, 2017, the Board of Directors ofyear ended December 31, 2018, the Company approved the issuance 475,000granted stock options to variouscertain directors, officers and consultants at an exercise price of $0.45. These options were granted for a period of five years and vest upon issuance. The estimated fair value, $229,870, was calculated using the Black-Scholes option pricing model based on the following assumptions: risk-free interest rate of 1.24%, no annual dividends, expected volatility of 221% and a market price of shares at grant date $0.49.
On March 17, 2017, the Board of Directors of the Company approved the issuance 225,000 stock options to various directors and management at an exercise price of $0.45. These options were granted for a period of five years and vest 25% every 6 months. The estimated fair value for the period ended June 30, 2017 was $32,487, calculated using the Black-Scholes option pricing model based on the following assumptions: risk-free interest rate of 1.24%, no annual dividends, expected volatility of 221% and a market price of shares at grant date $0.49.
19
|
TOWER ONE WIRELESS CORP. |
Notes to Condensed Consolidated Interim Financial Statements |
For the Three and Six Months Ended June 30, 2017 and 2016 |
(Expressed in Canadian Dollars) |
(Unaudited) |
|
9. SHARE CAPITAL(CONTINUED)
c) Stock options (continued)
On May 4, 2017, the Board of Directors of the Company approved the issuance 1,050,000 stock options to various consultants at an exercise price of $0.23. These options were granted for a period of five years and vest upon issuance. The estimated fair value, $238,485, was calculated using the Black-Scholes option pricing model based on the following assumptions: risk-free interest rate of 1.24%, no annual dividends, expected volatility of 222% and a market price of shares at grant date $0.23.
On June 13, 2017, the Board of Directors of the Company approved the issuance 4,000,000 stock options to a consultant at an exercise price of $0.23. These options were granted for a period of five years and vest upon issuance. The estimated fair value, $906,051, was calculated using the Black-Scholes option pricing model based on the following assumptions: risk-free interest rate of 1.24%, forfeiture rate of 0%, no annual dividends, expected volatility of 216% and a market price of shares at grant date $0.23.
Company. The weighted average fair value of the stock options at grant dateduring the year ended December 31, 2018 was $0.26.determined to be $1.50 using the Black-Scholes option pricing model. The following weighted average assumptions were used for the calculation:
| | | 2020 | | | 2019 | | | 2018 | |
| Share price at grant date | | - | | | - | | $ | 0.22 | |
| Exercise price | | - | | | - | | $ | 0.23 | |
| Expected life (in years) | | - | | | - | | | 5 | |
| Expected volatility | | - | | | - | | | 202% | |
| Risk free interest rate | | - | | | - | | | 2.07% | |
| Expected dividend yield | | - | | | - | | | 0% | |
| Expected forfeiture rate | | - | | | - | | | 0% | |
10. NON-CONTROLLING INTEREST
TheA continuity of stock options for the non-controlling interestyears ended December 31, 2020 and 2019 is comprised as follows:
| | |
| June 30, | |
| 2017 | |
| $ | |
Balance, beginning | 87,528 | |
Allocation of interest in net loss | (148,602 | ) |
Allocation of other comprehensive income | 4,300 | |
| (56,774 | ) |
| | | Number | | | Weighted average
exercise price | |
| | | | | | $ | |
| Balance, December 31, 2018, 2019 and 2020 | | 1,275,000 | | | 0.30 | |
The Company has 65% equity interest of Evotech, which
As at December 31, 2020, the remaining 35% is holding by the non-controlling interest. The following summarized the financial information of Evotech at 100% prior to elimination upon consolidation:stock options were outstanding and exercisable:
Options
Outstanding | Options
exercisable | Exercise
price | Remaining life
(years) | Expiry date |
| | | $ | | |
| 325,000 | 325,000 | 0.45 | 1.21 | March 17, 2022 |
| 950,000 | 950,000 | 0.25 | 2.13 | February 17, 2023 |
| 1,275,000 | 1,275,000 | 0.30 | 1.90 | |
20
|
TOWER ONE WIRELESS CORP. |
Notes to Condensed Consolidated Interim Financial Statements |
For the ThreeYears Ended December 31, 2020, 2019 and Six Months Ended June 30, 2017 and 20162018 | Amended |
| (Expressed in Canadian Dollars) |
(Unaudited) |
| |
10. NON-CONTROLLING INTEREST18.(CONTINUED)
| | |
Revenue | - | |
Expenses | 424,577 | |
Net loss | (424,577 | ) |
Other comprehensive income | 12,285 | |
Comprehensive loss | (412,292 | ) |
| | |
Cash flows from operating activities | (360,535 | ) |
Cash flows from investing activities | (222,945 | ) |
Cash flows from financing activities | 585,091 | |
Effect of changes in exchange rates on cash | (555 | ) |
Change in cash | 1,056 | |
Cash, beginning | 4,676 | |
Cash, ending | 5,732 | |
11. CAPITAL DISCLOSURE
The Company considersmanages its capital under management to be comprised of shareholders’ equityshareholders' deficiency, loans and any debt that it may issue.convertible debts as capital. The Company’s objectivesCompany's objective when managing capital areis to safeguard the Company's ability to continue as a going concern in order to pursue the development of its assets and to maximize returns for shareholders overmaintain a flexible capital structure which optimizes the long term.cost of capital at an acceptable risk. The Company manages the capital structure and adjusts it considering 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 or acquire or dispose of assets. In order to facilitate the management of its capital requirements, the Company prepares expenditure budgets that are updated as necessary depending on various factors, including successful capital deployment and general industry conditions. As at December 31, 2020, the shareholders' deficiency was $25,352,460 (2019 - $23,585,459). The Company is not subject to any externally imposed capital restrictions. There has been norequirements. The Company did not change inits approach to capital management during the Company’s objectives in managing its capital.year ended December 31, 2020.
12. FINANCIAL INSTRUMENTS AND RISK
Fair values
The Company’s financial instruments include cash, accounts receivable, due from a related parties and accounts payable. The carrying amounts of these financial instruments are a reasonable estimate of their fair values because of their current nature.
The following table summarizes the carrying values of the Company’s financial instruments:
| | | | |
| | June 30, | | December 31, | |
| | 2017 | | 2016 | |
| | $ | | $ | |
| Financial assets at fair value through profit or loss (i) | 514,955 | | 9,864 | |
| Loans and receivables (ii) | 255,422 | | - | |
| Other financial liabilities (iii) | 155,126 | | 70,406 | |
(i) Cash
(ii) Accounts receivable and due from related parties
(iii) Accounts payable
21
|
TOWER ONE WIRELESS CORP. |
Notes to Condensed Consolidated Interim Financial Statements |
For the Three and Six Months Ended June 30, 2017 and 2016 |
(Expressed in Canadian Dollars) |
(Unaudited) |
|
12. 19.FINANCIAL INSTRUMENTS AND RISK(CONTINUED)
As at December 31, 2020, the Company's financial instruments consist of cash, amounts receivable, accounts payable and accrued liabilities, customer deposits, interest payable, convertible debentures, loans payable, loans from related parties, bonds payable and lease liabilities.
The Company provides information about financial instruments that are measured at fair value, grouped into Level 1 to 3 based on the degree to which the inputs used to determine the fair value are observable.
a. Level 1 fair value measurements are those derived from quoted prices in active markets for identical assets or liabilities.
b. Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1, that are observable either directly or indirectly.
c. Level 3 fair value measurements are those derived from valuation techniques that include inputs that are not based on observable market data.
Cash is measured using level 1 fair value inputs. The carrying values of the amounts receivable, accounts payable and accrued liabilities, customer deposits, interest payable, convertible debentures and loans from related parties approximate their fair values because of the short-term nature of these instruments. The bond payable, loan payable and lease liabilities is classified as level 3.
The Company is exposed in varying degrees to a variety of financial instrument related risks. The Board of Directors approves and monitors the risk management processes, inclusive of documented investment policies, counterparty limits, and controlling and reporting structures. The type of risk exposure and the way in which such exposure is managed is provided as follows:
Credit Risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. To minimize the credit risk the Company places cash with a high credit quality financial institution.
With respect to its accounts receivable, the Company assesses the credit rating of all customers and maintains provisions for potential credit losses, and any such losses to date have been within management's expectations. The Company's credit risk with respect to accounts receivable and maximum exposure thereto is $1,166,502 (2019 - $1,808,397). Accounts receivable are shown net of provision of credit losses of $36,381 (2019 - $179,868).
19.FINANCIAL INSTRUMENTS AND RISK (CONTINUED)
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's objective in managing liquidity risk is to ensure that it has sufficient liquidity available to meet its liabilities when due. The Company uses cash to settle its financial obligations as they fall due. The ability to do this relies on the Company’sCompany's ability to collect its revenue in a timely manner, continuous support from shareholders and investors and maintain sufficient cash on hand. To the extent that the Company does not believe it has sufficient liquidity to meet its current obligations, the Board of Directors considers securing additional funds through issuances of equity and debt or partnering transactions.
The Company monitors its risk of shortage of funds by monitoring the maturity dates of existing trade and other accounts payable. The following table summarizes the maturities of the Company's financial liabilities as at December 31, 2020 based on the undiscounted contractual cash flows:
| | | Carrying
amount | | | Contractual
cash flows | | | Less than
1 year | | | 1 - 3
years | | | 4 - 5
years | | | After 5
years | |
| | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
| Accounts payable and accrued liabilities | | 4,368,281 | | | 4,368,218 | | | 4,368,281 | | | - | | | - | | | - | |
| Interest payable | | 650,278 | | | 650,278 | | | 650,278 | | | - | | | - | | | - | |
| Loans payable | | 3,588,352 | | | 3,588,352 | | | 3,444,497 | | | 143,855 | | | - | | | - | |
| Loans from related parties | | 3,866,983 | | | 3,866,983 | | | 3,866,983 | | | - | | | - | | | - | |
| Bonds payable | | 1,882,750 | | | 1,882,750 | | | 1,882,750 | | | - | | | - | | | - | |
| Lease liability | | 1,685,678 | | | 3,313,033 | | | 507,403 | | | 1,160,875 | | | 773,033 | | | 871,722 | |
| Total | | 16,042,322 | | | 17,669,614 | | | 14,720,192 | | | 1,304,730 | | | 773,033 | | | 871,722 | |
The Company has a working capital deficiency as of December 31, 2020 of $19,124,583. Customer deposits consist of funds received from customers in advance of towers sold. As of December 31, 2020, the Company received $5,621,307 (2019 - $8,526,085) in customer deposits.
Currency Risk
The Company generates revenues and incurs expenses and capital expenditures primarily in Canada, Colombia, Argentina, USA and ArgentinaMexico and is exposed to the resulting risk from changes in foreign currency exchange rates. Some administrative and head office related expenses are incurred in Canada. In addition, the Company holds financial assets and liabilities in foreign currencies that expose the Company to foreign exchange risks. A significant change inAssuming all other variables remain constant, a 17% ( 2019 - 15%) weakening or strengthening of the currency exchange rates betweenColombia Peso, Argentine Peso, US dollar and Mexican Peso against the Canadian dollar relative towould result in approximately $470,007 (2019 - $1,021,871) foreign exchange loss or gain in the Colombia Peso or Argentina Peso could have an effect on the Company's resultsconsolidated statement of operations, financial position and/or cash flows.comprehensive loss. The Company has not hedged its exposure to currency fluctuations.
19.FINANCIAL INSTRUMENTS AND RISK (CONTINUED)
At June 30, 2017, through Tower Three,December 31, 2020, the Company had cash of $101,801, accounts receivable of $9,097, due to related parties of $240,249 and accounts payable of $43,696, all of which werethe following financial instruments denominated in Colombia Peso. In addition, through Evotech, the Company had cash of $5,732, due from related party of $5,896 and accounts payable of $109,205, all of which were denominated in Argentina Peso.foreign currencies:
| | | Argentine Pesos | | | Colombian
Pesos | | | Mexican
Pesos | | | United States
Dollars | | | Total | |
| | | $ | | | $ | | | $ | | | $ | | | $ | |
| Cash | | 34,531 | | | 28,218 | | | 31,611 | | | (4,454 | ) | | 89,907 | |
| Amounts receivable | | 90,045 | | | 144,491 | | | 364,285 | | | - | | | 598,821 | |
| Accounts payable and accrued liabilities | | (442,629 | ) | | (981,541 | ) | | (665,231 | ) | | (913,195 | ) | | (3,002,597 | ) |
| Interest payable | | - | | | (5,539 | ) | | - | | | - | | | (5,539 | ) |
| Lease liability | | (576,868 | ) | | (1,006,160 | ) | | (102,650 | ) | | - | | | (1,685,678 | ) |
| Loans payable | | - | | | (1,614,063 | ) | | (148,245 | ) | | - | | | (1,762,308 | ) |
| Loans from related parties | | - | | | (18,546 | ) | | - | | | - | | | (18,546 | ) |
| Net | | (894,921 | ) | | (3,453,141 | ) | | (520,229 | ) | | (917,649 | ) | | (5,785,940 | ) |
Interest Rate Risk
Interest rate risk is the risk that future cash flows of the Company’sCompany's assets and liabilities can change due to a change in interest rates. The Company is not exposed toLoans payable have a fixed interest rate risk as no financial instruments are interest-bearing. It is management's opinion that thebetween 12% and 18%, and cash earns interest at a nominal rate. The Company is not exposed to significant interest currency or credit risk arising from therate risk.
Fair value estimates of financial statements.instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair values.
22
|
TOWER ONE WIRELESS CORP. |
Notes to Condensed Consolidated Interim Financial Statements |
For the Three and Six Months Ended June 30, 2017 and 2016 |
(Expressed in Canadian Dollars) |
(Unaudited) |
|
13. 20.ECONOMIC DEPENDENCE
For the periodyear ended June 30, 2017, all the salesDecember 31, 2020, 75% of total revenues were generated by one customer.with two major customers (2019 - 70% with two major customers). The loss of this customerone or more of these customers could have a material adverse effect on the Company’sCompany's financial position and results of operations.
14. COMMITMENTThe following table represents sales to individual customers exceeding 10% of the Company's annual revenues:
| | | December 31, | |
| | | 2020 | |
| Customer A | $ | 5,134,327 | |
| Customer B | $ | 1,871,092 | |
| | | December 31, | |
| | | 2019 | |
| Customer A | $ | 3,069,670 | |
| Customer B | $ | 736,959 | |
21.SEGMENTED INFORMATION
The Company has three operating segments, which are the locations in which the Company operates. The reportable segments are the Company's Argentinian, Colombian, American and Mexican operations. A breakdown of revenues, short-term assets, long-term assets and net income for each reportable segment as at and for the years ended December 31, 2020 and 2019 is reported below.
| | | Argentina | | | Colombia | | | Mexico | | | United States of
America | | | Other | | | Total | |
| | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
| December 31, 2020: | | | | | | | | | | | | | | | | | | |
| Current assets | | 679,144 | | | 448,193 | | | 465,316 | | | 1,938 | | | 96,650 | | | 1,691,241 | |
| Property and equipment | | 2,680,675 | | | 2,989,580 | | | 437,596 | | | 51,278 | | | 15,999 | | | 6,175,128 | |
| Other non-current assets | | 773,279 | | | 976,278 | | | 135,876 | | | - | | | 1,357,658 | | | 3,243,091 | |
| Total assets | | 4,133,098 | | | 4,414,051 | | | 1,038,787 | | | 53,216 | | | 1,470,307 | | | 11,109,460 | |
| Revenues: | | | | | | | | | | | | | | | | | | |
| Tower rental revenue | | 945,647 | | | 550,418 | | | 278,281 | | | - | | | - | | | 1,774,346 | |
| Service revenue | | - | | | - | | | - | | | 346,317 | | | 626,319 | | | 972,636 | |
| Sales revenue | | 1,244,773 | | | 14,439 | | | 5,119,888 | | | - | | | - | | | 6,379,100 | |
| Total revenues | | 2,190,420 | | | 564,857 | | | 5,398,169 | | | 346,317 | | | 626,319 | | | 9,126,082 | |
| Net income (loss) | | (2,388,551 | ) | | 328,258 | | | 1,078,190 | | | 1,261,084 | | | (3,953,285 | ) | | (3,674,304 | ) |
| | | | | | | | | | | | United States of | | | | | | | |
| | | Argentina | | | Colombia | | | Mexico | | | America | | | Other | | | Total | |
| | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |
| December 31, 2019: | | | | | | | | | | | | | | | | | | |
| Current assets | | 1,846,046 | | | 532,959 | | | 298,605 | | | 268,518 | | | 13,779 | | | 2,959,907 | |
| Property and equipment | | 3,390,632 | | | 1,997,048 | | | 3,243,634 | | | 85,612 | | | 15,120 | | | 8,732,046 | |
| Other non-current assets | | 669,687 | | | 808,973 | | | 1,204,380 | | | 5,328 | | | 1,620,728 | | | 4,309,096 | |
| Total assets | | 5,930,365 | | | 3,338,980 | | | 4,746,619 | | | 359,458 | | | 1,649,627 | | | 16,001,049 | |
| Revenues: | | | | | | | | | | | | | | | | | | |
| Tower rental revenue | | 1,102,810 | | | 292,848 | | | 244,978 | | | - | | | - | | | 1,640,636 | |
| Service revenue | | - | | | - | | | - | | | 561,759 | | | - | | | 561,759 | |
| Sales revenue | | - | | | 3,069,670 | | | 141,529 | | | - | | | - | | | 3,211,199 | |
| Total revenues | | 1,102,810 | | | 3,362,518 | | | 386,507 | | | 561,759 | | | - | | | 5,413,594 | |
| Net income (loss) | | (4,042,521 | ) | | 1,249,291 | | | (994,550 | ) | | (1,322,940 | ) | | (3,036,548 | ) | | (8,147,268 | ) |
22.SUPPLEMENTAL CASH FLOW INFORMATION
| | | 2020 | | | 2019 | | | 2018 | |
| | | $ | | | $ | | | $ | |
| Changes in non-cash working capital items: | | | | | | | | | |
| Amounts receivable | | 542,054 | | | (1,341,845 | ) | | (356,479 | ) |
| Prepaid expenses and deposits | | (131,697 | ) | | 83,535 | | | (186,290 | ) |
| Unbilled revenues | | 111,845 | | | (107,099 | ) | | - | |
| Other receivable | | - | | | 67,143 | | | (277,682 | ) |
| Bank indebtedness | | - | | | (39,464 | ) | | (8,632 | ) |
| Accounts payable and accrued liabilities | | 612,050 | | | (725,292 | ) | | 2,380,469 | |
| Interest payable | | 292,365 | | | 488,997 | | | 401,104 | |
| Deferred revenue | | (167,096 | ) | | 259,182 | | | 178,668 | |
| Customer deposits | | 1,184,170 | | | 8,470,889 | | | - | |
| Income tax payable | | 247,500 | | | 373,196 | | | - | |
| | | 2,691,191 | | | 7,529,242 | | | 2,131,158 | |
23.LEGAL DISCLOSURE
The cities of Quilmes, Bolivar and San Rafael filed claims against Evolution for dismantling towers in the respective cities. Quilmes is claiming a fine of $29,780 (1,489,005 Argentine Pesos). The fines have been accrued by the Company. The outcome of these legal proceeding cannot be determined at December 31, 2020 and no additional amounts have been accrued.
24.INCOME TAXES
The tax effect (computed by applying the federal and provincial/state statutory rates in the jurisdictions the Company and its subsidiary operate) of the significant temporary differences, which comprise deferred income tax assets and liabilities, are as follows:
| | | 2020 | | | 2019 | | | 2018 | |
| | | $ | | | $ | | | $ | |
| Net loss before income taxes | | (3,674,304 | ) | | (8,147,268 | ) | | (9,131,285 | ) |
| Statutory income tax rate | | 27% | | | 27% | | | 32% | |
| Income tax recovery | | (992,062 | ) | | (2,199,762 | ) | | (2,922,011 | ) |
| Differences between Canadian and foreign tax rates | | (95,362 | ) | | (113,858 | ) | | - | |
| Permanent differences and others | | (76,522 | ) | | (706,889 | ) | | (303,048 | ) |
| Impact of foreign exchange | | 142,767 | | | 509,162 | | | - | |
| Under provided in prior years | | | | | | | | | |
| | | 363,357 | | | - | | | - | |
| Effect of change in income tax rates | | 164,204 | | | - | | | (37,000 | ) |
| Temporary differences | | 316,758 | | | 466,969 | | | 57,000 | |
| Change in unrecognized losses | | 363,420 | | | 2,102,952 | | | 2,892,011 | |
| Income tax expense (recovery) | | 186,560 | | | 58,574 | | | (313,048 | ) |
| Current income tax expense | | 186,560 | | | 380,863 | | | - | |
| Deferred income tax recovery | | - | | | (322,289 | ) | | (313,048 | ) |
| | | 186,560 | | | 58,574 | | | (313,048 | ) |
24.INCOME TAXES (CONTINUED)
The tax effected items that give rise to significant portions of the deferred income tax assets and deferred income tax liabilities at December 31, 2020 and 2019 are as follows:
| | | 2020 | | | 2019 | |
| Deferred income tax assets | | | | | | |
| Non-capital loss carry-forwards | $ | 487,721 | | $ | 607,610 | |
| Lease liabilities | | 501,470 | | | 824,005 | |
| | | | | | | |
| Deferred income tax assets | $ | 989,191 | | $ | 1,431,615 | |
| | | | | | | |
| Excess of carrying value over tax value of right-of-use assets | $ | (561,508 | ) | $ | (852,881 | ) |
| Excess of carrying value over tax value of intangible assets | | (389,728 | ) | | (560,756 | ) |
| Excess of carrying value over tax value of bonds payable | | (19,317 | ) | | (17,978 | ) |
| Excess of carrying value over property and equipment | | (18,638 | ) | | - | |
| | | | | | | |
| Deferred income tax liability | $ | (989,191 | ) | $ | (1,431,615 | ) |
| | | | | | | |
| Net deferred tax asset (liability) | $ | - | | $ | - | |
Significant unrecognized tax benefits and unused taxes for which no deferred tax assets are recognized as of December 31, 2020 and 2019 are as follows:
| | | 2020 | | | 2019 | |
| Non-capital losses carried forward | $ | 24,441,678 | | $ | 19,451,150 | |
| Property and equipment | | 7,337 | | | 15,068 | |
| Share issuance costs | | 17,556 | | | 35,107 | |
| Capital losses carried forward | | 3,294,836 | | | 3,294,836 | |
| Lease liabilities | | 36,157 | | | 36,157 | |
| Unrecognized deductible temporary differences | $ | 27,797,564 | | $ | 22,832,318 | |
As at December 31, 2020, the Company has non-capital losses carried forward of approximately $26,814,000 (2019 - $24,633,000) including $19,956,000 (2019 - $16,364,000) in Canada, $4,012,000 (2019 - $5,016,000) in Argentina, $nil (2019 - $1,453,000) in Mexico and $2,846,000 (2019 - $1,800,000) in the United States of America. These losses begin expiring in 2022.
25. SUBSEQUENT EVENTS
The following events occurred subsequent to December 31, 2020,
1) On March 11, 2021, the Company entered into a loan agreement with a commercial bank for up to $11 million (Colombian Peso $31,632,000,000). Under the agreement, the Company would incur costs for taxes and commission of 1.47% payable on any loan advances. The Company received gross $1.5 million (Colombian Peso $4,400,000,000) on March 17, 2021 on which they paid commission fees and taxes of $187,000 (Colombian Peso $ 533,000,000). On April 12, 2021, the Company received gross COP $3,182,000,000 on April 12, 2021 (CAD $1.1M). This amount was not subject to any amounts withheld.
2) On April 6, 2021, the Company and a third party Commerk ("Commerk") entered into an agreement with a 7 year term for construction projects the first one being the construction of 220 towers. Commerk is committed to construct 50 towersspend 25% of the construction cost. The spending made by Commerk will be treated as a debt and will accrue interests at 6.2%.
26.AMENDMENTS TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company has made amendments to notes 8, 14 and 16 in Argentina as described in Note 4.
15. SUBSEQUENT EVENT
Subsequentthe consolidated financial statements to include certain disclosures regarding the recast of certain 2018 figures. There are no other impacts to the period ended June 30, 2017, the Company issued 3,774,466 common shares for the exercise of warrants. As at August 29, 2017, proceeds of $1,048,340 has been received. As described in Note 9, 3,774,466 Incentive Warrants were issued as a result of exercising the warrants.consolidated financial statements.