Quantitative Alpha TradingInc.
(Formerlyknownas RTNStealthSoftware Inc.)
ConsolidatedStatementsofOperationsandDeficit
Year Ended December 31
2010
2009
Expenses
Advertising and promotion
$
51,672
$
2,041
Amortization
12,447
4,480
Bank charges andinterest
64,458
999
Foreign exchange gain
(108,150)
(548)
Management, consulting and administrative(Note 13)
387,323
112,205
Office
36,344
3,252
Professional fees
157,584
73,491
Rent (Note 13)
91,961
60,000
Research and property costs(Note 13)
-
74,169
Stock-based compensation
1,866,273
47,360
Travel
17,521
14,702
Trust andfilingfees
53,152
37,755
Wagesand benefitsand directors’fees(Note 13)
-
9,000
(2,630,585)
(438,906)
Loss beforethefollowing:
(2,630,585)
(438,906)
Interestincome
2,360
29,528
Write down of mineral andoil andgas
properties(Note 1)
(1)
(378,426)
Gain on redemption of shortterm investments
-
188,333
(2,628,226)
(160,565)
Netloss
$ (2,628,226) $
(599,471)
Loss per share, basic and diluted
$
(0.02) $
(0.01)
Weighted average number of sharesoutstanding
115,167,175
74,685,353
Deficit, beginning of year
$ (3,018,127) $ (2,418,656)
Increase in retainedearningsasa result of thecancellation
504,770
-
of Class A preferred shares(Note 2)
Netloss
(2,628,226)
(599,471)
Deficit, end of year
$ (5,141,583) $ (3,018,127)
See accompanying notestotheconsolidatedfinancial statements.
3
Quantitative Alpha TradingInc.
(Formerlyknownas RTNStealthSoftware Inc. )
ConsolidatedStatementsofComprehensive(Loss)Income
Year Ended December 31
2010
2009
Netloss
$ (2,628,226) $
(599,471)
Other comprehensiveincome (Note 6)
-
504,770
Total comprehensivelossfortheyear
$ (2,628,226) $
(94,701)
See accompanying notestotheconsolidatedfinancial statements.
4
Quantitative Alpha TradingInc.
(Formerlyknownas RTNStealthSoftware Inc.)
ConsolidatedBalanceSheets
Year Ended December 31
2010
2009
Assets
Current
Cash and cash equivalents
$
174,530
$
379,284
Marketable securities(Note 6)
-
1,448,800
Accountsreceivable
28,664
242,744
Prepaid expenses(Note 3)
216,135
10,000
419,329
2,080,828
Equipment (Note 7)
7,884
3,940
Software (Note 3)
8,309,750
-
Prepaid expenses –longterm (Note 3)
286,458
-
Mineral properties(Note 8)
-
67,185
Oil and gasproperty(Note 9)
-
1
$ 9,023,421
$ 2,151,954
LiabilitiesandShareholders’ Equity
Current
Accountspayable and accruedliabilities
$
115,046
$
75,072
Deposit on private placement
250,000
-
Notes payable –current portion (Notes 10 and 17)
358,445
-
723,491
75,072
Notes payable –longterm (Notes10 and 17)
2,095,476
-
2,818,967
75,072
Shareholders'Equity
Share capital and warrants(Note 11)
8,939,599
3,919,865
Contributed surplus(Note 11)
2,406,438
670,374
Accumulated other comprehensiveincome
-
504,770
Deficit
(5,141,583)
(3,018,127)
6,204,454
2,076,882
$ 9,023,421
$ 2,151,954
Natureof operationsandgoingconcern (Note 1)
Measurement uncertainty (Note 4)
Subsequent events(Note17)
On behalf of theBoard of Directors
Director
Director
See accompanying notestotheconsolidatedfinancial statements.
5
Quantitative Alpha TradingInc.
(Formerlyknownas RTNStealthSoftware Inc.)
ConsolidatedStatementsofCashFlows
Year Ended December 31
2010
2009
Increase (decrease)in cash and cash equivalents
Operating
Netloss
$ (2,628,226) $
(599,471)
Itemsnotinvolving cash:
Accruedinterest income
-
8,333
Amortization
12,447
4,480
Stock-based compensation
1,866,273
47,360
Accruedinterest on notespayable
58,571
-
Foreign exchange gain on notes payable
(108,150)
-
Write down of mineral andoil andgas
properties
1
378,426
Marketvalue adjustmentforAvailable-For-Sale
financial instrument
-
(188,333)
(799,084)
(349,205)
Netchangesin non-cash working capital
Accountsreceivable
(23,920)
(3,391)
Prepaid expenses
2,198
8,655
Dueto (from) relatedparties
-
(73,500)
Accountspayable and accruedliabilities
39,973
72,978
(780,833)
(344,463)
Investing
Purchase of equipment
(16,391)
(1,163)
Marketable securities
-
(944,030)
Short-term investments
-
500,000
Spinning off of assetsto a subsidiaryin exchange
for itsshares
-
(100,000)
(16,391)
(545,193)
Financing
Common sharesissuedforcash net of issuance
costs
104,470
1,407,574
Deposit on private placement
250,000
-
Share subscriptionreceivable
238,000
(238,000)
592,470
1,169,574
Increase in cash and cash equivalents
(204,754)
279,918
Cash and cash equivalents, beginning of year
379,284
99,366
Cash and cash equivalents, end of year
$
174,530
$
379,284
Supplemental cashflowinformation (Note 16)
See accompanying notestotheconsolidatedfinancial statements.
6
Quantitative Alpha TradingInc.
(Formerlyknownas RTNStealthSoftware Inc.
Notes to the Consolidated Financial Statements
December 31, 2010
1.
Nature ofoperations andgoing concern
Quantitative Alpha Trading Inc. (formerly known as RTN Stealth Software Inc.) herein after
referred to as “Company” or “QAT” is a public company incorporated in the Province of British
Columbia, Canada.
On December 21, 2009, the Company changed its name from Arris Resources Inc. to RTN
StealthSoftwareInc.
Nature ofoperations
During the year ended December 31, 2010, the Company transferred its interests in five
mineral claims in British Columbia, Canada, its agreement with a British Columbia
manufacturing company to distribute its earthquake sensor products in India, and its
marketable securities to its three subsidiaries to complete the spin-off of its three former
subsidiariesasdescribedin Note 2. Duringtheyear,theCompany enteredintothe businessof
software sales and executed a definitive agreement in January 2010 to acquire an exclusive
and perpetual license for security trading software: the Market Navigation, Trade Execution,
and Market Timing Software. The Company subsequently acquired this security trading
software in May, 2010 as described in Note 3. Management also decided to abandon its
remaining interest ($1) in the oil and gas properties and recorded a write off expense of $1 in
June, 2010. After this series of corporate restructuring and acquisitions, the Company is solely
inthe business of developing and promoting softwarefortrading purposes.
Going concern
These consolidated financial statements have been prepared on the basis of accounting
principles applicable to a "going concern," which assume that the Company will continue in
operation for the foreseeable future and will be able to realize its assets and discharge its
liabilitiesinthe normal course of operations.
The ability of the Company to continue to operate as a going concern is dependent upon its
ability to ultimately operate its business at a profit. To date, the Company has not generated
any revenues from operations and will most likely require additional funds to meet its
obligations and the costs of its operations. As a result, further losses are anticipated prior to the
generation of any profits.
The Company has addressed short term cash flow requirements through the raising of capital
and conversion of notes payable to common shares subsequent to year-end as described in
Note 17. The Company's continued existence is dependent upon its ability to attain profitable
operations and obtain financing from its shareholders or external sources as required. The
Company’s future capital requirements will depend on many factors, including the costs of
operating the software business. The Company’s anticipated operating losses and increasing
workingcapital requirementsmay requirethatit obtain additional capital to continue operations.
7
Quantitative Alpha TradingInc.
(Formerlyknownas RTNStealthSoftware Inc.)
Notes to the Consolidated Financial Statements
December 31, 2010
1.
Nature ofoperations andgoing concern(continued)
Going concern(continued)
The Company will depend almost exclusively on outside capital. Such outside capital is
anticipated to include the sale of additional shares. There can be no assurance that capital will
be available asnecessarytomeet these continuing operating costsor,if the capital isavailable,
thatit will be on termsacceptable tothe Company. Any issuing of additional equity securitiesby
the Company may result in significant dilution to the equity interests of its current shareholders.
Obtaining commercial loans, assuming those loans would be available, will increase the
Company’s liabilities and future cash commitments. If the Company is unable to obtain
financing in the amounts and on terms deemed acceptable, the business and future success
may be adversely affected, thus giving rise to doubt about the Company’s ability to continue as
a goingconcern.
Thefinancial statements do not reflect adjustmentsto the carryingvalues of assets, liabilities or
reported results should the Company be unable to continue as a going concern. If the going
concern assumption were not appropriate for these financial statements, then adjustments
would be necessary to the carrying values of assets and liabilities, the reported expenses and
the balance sheetclassifications. Such adjustments would bematerial.
2.
Corporate restructuring
On November 2, 2009, the Company and its three former wholly owned subsidiaries Arris
Holdings Inc. (“AHI”), CLI Resources Inc. (“CLI”) and QMI Seismic Inc. (“QMI”), collectively
known as the “Parties”, entered into a plan of arrangement (the “Arrangement Agreement”)
whereby the Company would execute a spin-out transaction of its three former subsidiaries,
each becoming a reporting issuer and each acquiring an asset from the Company in exchange
for common shares(the“DistributedShares”) of the respective subsidiary.
The change in corporate structure was effective on January 5, 2010 with the sequence of
eventsas summarized below:
i.
The identifying name of the Company’s Common Shares was altered to Class A
Common Shareswithout parvalue, being the RTN Class A CommonShares.
ii.
A class consisting of an unlimited number of Common Shares without par value (the “
Common Shares’’) and a class consisting of Class A Preference Shares (the ‘RTN
Class APreferredShare’) was created.
iii.
Each issued RTN Class A Common Share was exchanged for one Common Share
and one RTN Class A Preferred Share (with no par value). The RTN Class A Common
Shares were then eliminated uponthecompletion of theArrangement Agreement.
8
Quantitative Alpha TradingInc.
(Formerlyknownas RTNStealthSoftware Inc.)
Notes to the Consolidated Financial Statements
December 31, 2010
2.
Corporate restructuring (continued)
iv.
The Company transferred its interest in five mineral claims in Atlin, British Columbia
(the Mineral Properties) to CLI; an agreement with a British Columbia manufacturing
company to distribute its earthquake sensor products in India (the “Distribution
Agreement”) to QMI; and all of the Company’s marketable securities (the “Equity
Portfolio”) to AHI in the consideration for 17,583,372 common shares of each of CLI,
QMI, and AHI (collectively known as “Distributed Shares”) issued by the three former
subsidiariesrespectively.
v.
The Company redeemed the issued RTN Class A Preferred Shares for consideration
consisting solely of the Distributed Shares. Each shareholder of record as of the close
of business on November 5, 2009, being the share distribution record date, of the
Company, has received its pro-rata share of the Distributed Shares. RTN Class A
Preferred Shares were then eliminated upon the completion of the Arrangement
Agreement.
The Arrangement Agreement resulted in the transfer of the Mineral Properties, the Distribution
Agreement, and the Equity Portfolio (collectively the “Transferred Assets’) from the Company to
CLI,QMI, and AHI respectively. The Transferred Assetsat carryingvalue tothe Company were
asfollows:
Carryingvalue of the
TransferredAssetson
January 5, 2010
Mineral Properties
Fivemineral claimsin the areaslocated nearGladys
LakeMolybdenum occurrencesin the Atlin Mining
District, British Columbia
$
67,185
Distribution Agreement
Distribution agreement witha British Columbia private
companyto distributeits seismic sensorsinIndia
$
1
Carryingvalue of the
Number of
TransferredAssetson
Equity Portfolio
shares
January 5, 2010
Publicly traded common shares
DesertGoldVenturesInc.
300,000
$
240,000
Ona PowerCorp.
2,800,000
509,600
MaxtechVenturesInc.
440,000
228,800
Share purchase warrants of publiclytraded shares
Ona PowerCorp.
2,800,000
470,400
$ 1,448,800
9
Quantitative Alpha TradingInc.
(Formerlyknownas RTNStealthSoftware Inc.)
Notes to the Consolidated Financial Statements
December 31, 2010
2.
Corporate restructuring (continued)
Subsequent to the above described transfers, the Company redeemed the RTN Class A
Preferred Shares by distributing to the shareholders the controlling interests in the common
shares of CLI, QMI, and AHI, on a pro rata basis. The above described reorganization and
redemption of the preference shares is considered a capital transaction and accordingly the
Company reclassified the accumulated other comprehensive income of $504,770 recorded in
fiscal 2009 to account for the unrealized gain from the appreciation in the market value of the
Equity Portfolio from “other comprehensive income” to retained earnings when the Equity
Portfolio wastransferredto AHIuponthe completion of the ArrangementAgreement.
3.
Acquisitionof software
On January 19, 2010, the Company executed a definitive agreement with privately owned
Market Guidance Systems Inc. (“MGS”) whereby the Company acquired an exclusive and
perpetual license to the Market Navigation, Trade Execution and Market Timing Software (the
“RTN-Stealth Software”).
As consideration for the above, the Company issued 5,000,000 Class B preferred shares to the
shareholders of MGS. In connection with the acquisition, the Company paid a company
controlled by a director of the Company a transaction advisory fee of 250,000 Class B
Preferred Shares. Each Class B Preferred share is convertible into ten common shares of the
Company when the cumulative net revenues derived from the license of the RTN-Stealth
Software reach a total of US$20,000,000.
OnMay 17, 2010, the Company executedtwo definitiveagreements:
a. The Company acquired the RTN-Stealth Software from MGS (the “MGS transaction”),
and
b. the Company purchased the EMC-ALGO Software Suite from ENAJ Mercantile
Corporation (the “ENAJtransaction”).
As part of the MGS transaction, the Company issued 20,000,000 common shares of the
Company to MGS shareholders which are escrowed to be released in four equal tranches at 6,
9, 12, and 15 months, and has assumed four promissory notes, in an amount totalling
$2,503,500, owed by MGS, as the consideration of the acquisition. In addition, the exclusive
and perpetual license to market the RTN-Stealth Software that was acquired in January 2010
was cancelled upon the completion of theacquisition of the RTN-Stealth Software.
Thedetailsof thefour promissory notesassumed are asfollows:
Duedate
Interestrate
Otherterms
Four promissorynotes
Principal andinterest Bankof Canada prime
Seniorto anyandall
withtheprincipal totalling
aredueon May15,
rate+ 1%perannum
other shareholderloans
$2,503,500 at May17,
2012
compoundannually
and shall bepaidinfull
2010
priortorepaymentby
the Companytoany
and all other
shareholderloans
10
Quantitative Alpha TradingInc.
(Formerlyknownas RTNStealthSoftware Inc.)
Notes to the Consolidated Financial Statements
December 31, 2010
3.
Acquisitionof software (continued)
As part of the ENAJ transaction, the Company issued 2,500,000 common shares as
consideration for the acquisition of the EMC-ALGO Software Suite from ENAJ. The 2,500,000
common shares were issued to ENAJ and are escrowed to be released in four equal tranches
at 6, 9, 12, and 15months.
Detailsof the two software acquisitionsare summarizedasfollows:
RTN – Stealth Software
Issuance of 20,000,000 common sharesof the Company each having amarket
valueof $0.25 per share onMay17, 2010
$ 5,000,000
Assumption of four promissorynotes
2,503,500
Issuance of 5,250,000 ClassB preferred sharesonJanuary 19, 2010
150,000
Findersfeesof 125,000 common sharesof the Company having amarket
valueof $0.25 per share onMay17, 2010
31,250
7,684,750
EMC – ALGOSoftware
Issuance of 2,500,000 common sharesof the Companyeach having a
marketvalue of $0.25 per share onMay17, 2010
625,000
$ 8,309,750
Furthermore, the Company entered into a management agreement with Mr. Michael Boulter,
the founder and chief technology officer of ENAJ in exchange for two million five hundred
thousand (2,500,000) common shares of the Company as compensation. The management
agreement has a three (3) year term and grants the titles of President and Chief Operating
Officer of the Company. The 2,500,000 million common shares of the Company are vested in
three equal tranches at 12, 24, and 36 months from May 17, 2010. As a result, the
correspondingmanagementfeeisdeferred and amortized asfollows:
Total consideration
$
625,000
Expensedinthetwelvemonthsended December 31, 2010
(130,209)
494,791
Less current portion
(208,333)
$
286,458
The current portion of the prepaid expenses on the balance sheet include the deferred
managementfee of $208,333 and other prepaid expenses of $7,802.
11
Quantitative Alpha TradingInc.
(Formerlyknownas RTNStealthSoftware Inc.)
Notes to the Consolidated Financial Statements
December 31, 2010
4.
Measurementuncertainty
Therecoverability of the software asset of $8,309,750isdependent onmanagement’sabilityto
implement itscurrent business plans. Thecurrent business plansincludesvarious
assumptionsaboutfuturecashflows to be derivedfrom usingthe software. As aresult, the
recoverabilityof the software asset issubjecttomeasurement uncertainty.
5.
Summaryof significant accountingpolicies
(a) Basisofpresentation andprinciplesof consolidation
These consolidated financial statements have been prepared in accordance with Canadian
generally accepted accounting principles (“Canadian GAAP”). These consolidated financial
statements include the accounts of QAT and its wholly owned subsidiaries: Arris Holdings Inc.
(“AHI”), CLI Resources Inc. (“CLI”) and QMI Seismic Inc. (“QMI”) up to the date that the
subsidiarieswere spun-off asdescribed in Note 2.
All significant inter-company transactions and balances have been eliminated upon
consolidation.
(b) Cash and cash equivalents
Cash and cash equivalents consists of highly liquid instruments with an original maturity of less
than 90 daysatissuance.
(c) Financialinstruments- recognition andmeasurement
All financial instruments, including derivatives, are included on the Company’s balance sheet
and measured either at fairvalue or amortized cost. Changesinfairvalue are recognized inthe
statementsof operationsor other comprehensiveincome, depending ontheclassification of the
related instruments.
All financial assets and liabilities are recognized when the entity becomes a party to the
contract creating the asset or liability. All financial instruments are classified into one of the
following categories: held for trading, held-to-maturity,loans and receivables, available-for-sale,
or other financial liabilities. Initial and subsequent measurement and recognition of changes in
thevalue of financial instrumentsdepends on their initial classification:
• Held-to-maturityinvestments,loansandreceivables, and otherfinancial liabilitiesare
initiallymeasured at fairvalue and subsequentlymeasured atamortizedcost.Amortization
of premiumsor discountsandlossesduetoimpairmentareincludedincurrent period net
earnings(loss).
• Available-for-sale financial assets aremeasured atfairvalue. Changesinfairvalue are
includedin othercomprehensiveincome(loss) until thegain or lossisrealized andthenit
isrecognizedin net earnings(loss) orif impairmentis determinedto be otherthan
temporary.
12
Quantitative Alpha TradingInc.
(Formerlyknownas RTNStealthSoftware Inc.)
Notes to the Consolidated Financial Statements
December 31, 2010
5.
Summaryof significant accountingpolicies(continued)
(c) Financialinstruments- recognition andmeasurement (continued)
• All derivativefinancial instrumentsaremeasured atfairvalue. Changesinfairvalue are
includedin net earnings(loss) in the periodin whichthey arise.
TheCompany hasclassified itsfinancial instrumentsasfollows:
Financial Instrument
Classification
Measurement
Cash and cash equivalents
Heldfortrading
Fairvalue
Accountsreceivable
Loansandreceivables
Amortizedcost
Accountspayable and accruedliabilities
Otherfinancial liabilities
Amortizedcost
Notes payable
Loansandreceivables
Amortizedcost
The Company has provided quantitative and qualitative information that it believes will enable
users to evaluate the significance of financial instruments on the Company’s financial
performance, and the nature and extent of risks arising from financial instruments to which the
Company is exposed during the year and at the balance sheet date. In addition, the Company
discloses management’s objectives, policies and procedures for managing these risks. These
disclosures are presentedin Note 15.
(d) Financialinstruments- disclosures
CICA Handbook Section 3862, “Financial Instruments – Disclosures” was amended to require
disclosure about the inputs used in making fair value measurements, including their
classification within a hierarchy that prioritizes their significance. The three levels of the fair
valuehierarchy are:
Level 1 – Unadjusted quoted pricesin activemarketsforidentical assets orliabilities
Level 2 – Inputs other than quoted prices that are observable for the asset or liability either
directly orindirectly
Level 3 – Inputsthat are not based on observablemarket data
(e) Equipment
Equipment isrecordedinitially at cost and subsequentlyamortized on a declining-balance basis
at an annual rate of 55% for computer equipment, 100% for computer software and 20% for
officefurniture.
13
Quantitative Alpha TradingInc.
(Formerlyknownas RTNStealthSoftware Inc.)
Notes to the Consolidated Financial Statements
December 31, 2010
5.
Summaryof significant accountingpolicies(continued)
(f) Software
Software is an intangible asset and consists of acquired software initially recorded at fair value.
The software will be amortized on a straight-line basis over 10 years which represents
management’sbest estimate of useful life. Asof December 31, 2010,the softwareisnotin use
and no amortization has been recorded. The Company evaluates the reasonableness of the
estimated useful lifeon an annual basis.
The Company reviews the carrying value of its intangible assets for impairment or whenever
eventsor circumstancesindicate thatthecarryingvaluemay not be recoverable. Ifthecarrying
value exceedsthe amount recoverable, based on undiscounted estimated future cashflows, an
impairment charge is recorded in the consolidated statement of operations and ismeasured as
the amount by whichthe carryingvalue exceedsitsrecoverable amount.
(g) Useof estimates
The preparation of financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting year. Significant areas requiring the
use of management estimates relate to the recoverability of the software, equipment, valuation
allowancesfor futureincometax assetsanddepreciation and amortization.
(h) Mineralproperties
The cost of unproven mineral rights and their related direct exploration costs are deferred until
the properties are placed into production, sold or abandoned. These deferred costs will be
amortized on the unit-of-production basis following the commencement of production, or
written-off if the propertiesare sold, allowed tolapse or abandoned.
Cost includes any cash consideration and the fair market value of any shares issued on the
acquisition of mineral right interests. Properties acquired under option agreements, whereby
payments are made at the sole discretion of the Company, are recorded in the accounts when
the payments are made. The recorded amounts of property acquisition costs and their related
deferred exploration costs represent actual expenditures incurred and are not intended to
reflectpresent orfuturevalues.
The Company reviews capitalized costs on its mineral rights on a periodic basis and will
recognize impairment in value based upon current exploration results and upon management’s
assessment of the future probability of profitable revenues from the property or from the sale of
the property. Management’sassessment of the property’sestimated currentfairmarketvalueis
also based upon a review of other property transactions that have occurred in the same
geographic area as that of the property under review. Administrative costs are expensed as
incurred.
14
Quantitative Alpha TradingInc.
(Formerlyknownas RTNStealthSoftware Inc.)
Notes to the Consolidated Financial Statements
December 31, 2010
5.
Summaryof significant accountingpolicies(continued)
(i) Oil andgasproperties
Oil and natural gas properties are accounted for using the successful efforts method of
accounting. Geological and geophysical costs are expensed in the period in which they are
incurred and costs of drilling an unsuccessful well are expensed when it becomes known the
well did not result in a discovery of proven reserves or where one year has elapsed since the
completion of drilling and effortsto establish proved reservesare not practical. All other costsof
exploring and developing proven reservesare capitalized asoil and gasproperties.
Oil and gas properties are depleted using the unit-of-production method. Unit-of-production
rates are based on proven developed reserves, which are reserves estimated to be recovered
from existing facilities using current operating methods. Unproved properties are not subject to
depletion.
Oil and gaspropertiesareassessed, atleast annually,forimpairment to ensure that the
carryingvalueof the property onthebalance sheetisrecoverable.If a property'scarryingvalue
exceedsthe sum of undiscountedfuture cash flowsresultingfrom itsuse and eventual
disposition, itsvalueisimpaired.Animpairmentlossisrecognizedfortheamount by whichthe
carryingvalueexceedsitsrecoverable amount. Thislossischarged to depletion expense.
(j) Impairment oflong-lived assets
Long-lived assets, including mineral property interests and plant and equipment, are reviewed
for impairment whenever events or changesin circumstancesindicate that the carrying amount
of an asset may not be recoverable. Recoverability of assets to be held and used ismeasured
by a comparison of the carrying amount of an asset to estimated undiscounted future cash
flows expected to be generated by the asset. If the carrying amount of an asset exceeds its
estimated future cash flows, an impairment charge is recognized in the amount by which the
carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are
separately presented in the balance sheet and reported at the lower of the carrying amount and
thefairvalueless coststo sell, and are nolonger amortized.
(k) Stock-based compensation
The Company records all stock-based payments using the fair value method. Under the fair
value method, stock-based payments are measured at the fair value of the consideration
received or the fair value of the equity instruments issued or liabilities incurred, whichever is
more reliably measurable, and are charged to operations over the vesting period. The offset is
credited to contributed surplus. Consideration received on the exercise of stock options is
recorded as sharecapital andtherelated contributed surplusistransferredto sharecapital.
Share capital issued for non-monetary consideration is recorded at its fair market value based
on its trading price on the Canadian National Stock Exchange on the date the agreement to
issuethe shares was enteredinto asdetermined bytheBoard of Directorsof the Company.
15
Quantitative Alpha TradingInc.
(Formerlyknownas RTNStealthSoftware Inc.)
Notes to the Consolidated Financial Statements
December 31, 2010
5.
Summaryof significant accountingpolicies(continued)
(l) Income taxes
TheCompany usesthe asset and liabilitymethod of accountingforincome taxes. Underthis
method,futureincometax assetsandliabilities arecomputed based on differences between
thecarrying amounts of assets andliabilitiesonthe balance sheet and their corresponding tax
values, generallyusing the substantively enacted or enactedincometax ratesexpectedto
applytotaxableincomeintheyearsin whichthosetemporary differencesare expected to be
recoveredor settled.Futureincometax assetsalso resultfrom unusedlosscarryforwards,
resource-related pools, and other deductions.Futuretax assetsare recognizedtothe extent
thatthey are consideredmore likelythan notto berealized.Thevaluationof futureincometax
assetsisadjusted,if necessary, bytheuse of avaluation allowance to reflectthe estimated
realizable amount.
(m)Functional currency and foreign currency translations
The Company’s functional currency is the Canadian dollar as the Canadian dollar is the
currency of the primary economic environment in which the Company operates. All of the
business operations of the Company are located in Canada. The majority of the Company’s
financingsarein Canadian dollars.
Foreign currency monetary assets and liabilities are translated into Canadian dollars at the
exchange rate in effect at the balance sheet date. Non-monetary assets, liabilities, revenues
and expenses are translated into Canadian dollars at the rate of exchange prevailing on the
respective dates of the transactions. Foreign exchange gains and losses are included in net
earnings.
(n) Earnings (loss)per common share
Earnings (loss) per share is calculated based on the weighted average number of common
sharesissued and outstanding duringthe year.Thecompanyfollowsthetreasury stockmethod
in the calculation of diluted earnings per share for the current year. Under this method, the
weighted average number of common shares included the potential net issuance of common
shares of “in-the-money” options and warrants assuming the proceeds are used to repurchase
common sharesat the averagemarket price duringtheperiod. The effect of potential issuances
of shares under options and warrants would be anti-dilutive if a loss is reported and, therefore
basic anddilutedloss per shareisthe same.
(o) Segmentdisclosures
The Company operates in a single reportable operating segment, security trading software
segment, within the geographic area of Ontario, Canada.
16
Quantitative Alpha TradingInc.
(Formerlyknownas RTNStealthSoftware Inc.)
Notes to the Consolidated Financial Statements
December 31, 2010
5.
Summaryof significant accountingpolicies(continued)
(p) Future accountingpolicies:
InternationalFinancial Reporting Standards ("IFRS")
The AcSB has announced its decision to replace Canadian generally accepted accounting
principles (“Canadian GAAP”) IFRS for all Canadian publicly-listed companies. The AcSB
announced thatthechangeover date will commencefor interim and annual financial statements
relating to fiscal years beginning on or after January 1, 2011. The transition date for the
Company to changeover to IFRS will be January 1, 2010. Therefore, the IFRS adoption will
require the restatement for comparative purposes of amounts reported by the Company for the
year ending December 31, 2010. The Company has assessed the adoption of IFRS for 2011
and hasdisclosed itsassessmentinitsManagement Discussion andAnalysis.
6.
Marketable securities
As at December 31, 2009
Unrealized
Cost
gain (loss)
Fairvalue
DessertGold VenturesInc. – common shares $
303,515 $
(63,515) $
240,000
MaxtechVenturesInc. –common shares
220,515
8,285
228,800
Ona PowerCorporation – security units
420,000
560,000
980,000
$
944,030 $
504,770 $ 1,448,800
The Company subscribed for 2,800,000 security units of Ona Power Corp. (“Ona”) through a
private placement on August 20, 2009. Each security unit consists of one common share and
one common share purchase warrant (the “Warrant”). Each Warrant entitles the Company to
acquire one common share of Onaat aprice of $0.20 per sharefor a period of two years.
The Company allocated $218,400 to Ona common shares and $201,600 to Ona warrants at
date of acquisition. The allocation was calculated by valuing the common shares and warrants
separately and adjusting the resulting amounts on a pro-rata basis so the sum of the amounts
allocated to the common share and the warrants equal to the amount of cash investment. The
assumptions used in valuing the fair value of the warrants by using the Black-Scholes Option
Pricing Model are: Risk-free interest rate of 1.5%, dividend yield of 0%, expected volatility of
188% and expected life of 2 years. The fair value adjustments to the Ona common shares and
the warrantsasat December 31, 2009 were based on the same pro-rata basisascalculated on
date of acquisition and resulted an adjustment to the common shares component of $291,200
and an adjustment to the warrants component of $268,800 for a total fair value adjustments of
$560,000.
On January 5, 2010, the Company transferred of all its marketable securities as described in
Note 2.
17
Quantitative Alpha TradingInc.
(Formerlyknownas RTNStealthSoftware Inc.)
Notes to the Consolidated Financial Statements
December 31, 2010
7.
Equipment
2010
2009
Accumulated
Net
Net
Cost
Amortization
Book Value
Book Value
Office equipment
$
3,414 $
2,325 $
1,089 $
1,492
Computerequipment
24,120
17,325
6,795
2,348
Computer software
10,473
10,473
-
100
Leaseholdimprovements
2,522
2,522
-
-
$
40,529 $
32,645 $
7,884 $
3,940
8.
Mineralproperties
Moly Project -Atlin, BC
In October 2008, the Company entered into an agreement with TJJ Holdings Inc., whereby TJJ
Holdings Inc. agreed to sell to the Company all the interest in the mineral claims. Twenty two
mineral claims cover approximately 15,000 acres that are located near Gladys Lake
molybdenum occurrences were acquired for $295,612. On September 9, 2009, the Company
utilized its consulting geologists and mining engineers to complete its evaluation of the twenty
two mineral claims and determined the feasibility for further development of the claims. As a
result, 17 molly claims previously acquired have been allowed to expire and the Company
intended to maintain the remaining 5 claims. For the year ended December 31, 2009, the
mineral claimshave been written down to $67,185 accordingly.
Option Agreement inGuinea
On October 15, 2009, the Company entered into an option agreement, whereby the Company
can earn up to an undivided 70% interest in the Forecariah Copper Concession (225 sq. Km).
The Company decided not to proceed further and let the option agreement expires after the
technical informationin connection withthe Concessionwasfurther reviewed by management.
On January 5, 2010, the Company transferred all of its mineral properties as described in Note
2.
9.
Oil andgasproperty
AlexanderProspect, Alberta
In February 2007, the Company entered into an agreement with Arctos Petroleum Corp.
(“Arctos”) whereby Arctos agreed to sell to the Company an interest in the Alexander property
in consideration for $150,000.The Company holds a 30% working interest in 64 gross hectares
(19.2 Net Ha) of rights in this property which includes the producing Ellerslie/Wabamun oil well
at 6-7-57-1W5 and a 40% interest in an oil battery at 3-7-57-1W5. The Company did not
contributetowardsthisproject andisin a non-participation penalty position on boththe well and
battery. As a result, the Company has written down the investment to $1 for the year ended
December 31, 2009.The $1 bookvalue was written off in 2010.
18
Quantitative Alpha TradingInc.
(Formerlyknownas RTNStealthSoftware Inc.)
Notes to the Consolidated Financial Statements
December 31, 2010
10. Notespayable
The notes payable represent four promissory notes, in the amount totalling $2,453,921 (US
equivalent $2,103,921 and C$350,000) including accrued interest, that were assumed as part
of the software acquisition as described in Note 3. The notes accrue interest at the prime rate,
as determined by the Bank of Canada, plus 1% per annum. The notes are due May 15, 2012
except for $350,000 which is due on demand. The $350,000 note is also secured by a general
security agreement over the assetsof the Company.
The notes payable were converted to common shares subsequent to the year end, as
describedinNote 17.
11. Share capital
a) Authorized and outstanding shares
As at December 31, 2010 the authorized share capital of the Company consisted of the
following:
Unlimited number of CommonShareswith no parvalue
5,250,000ClassB non-votingPreferredShares with noparvalue
(Each Class BPreferredShareisconvertibleintoten Common Shares whenthe
cumulative netrevenuesderivedfrom the license of theRTN-StealthSoftwarereachesa
total of US $ 20,000,000 as describedin Note 3).
Common Shares(renamed asClassA Common onJanuary 5, 2010)
2010
2009
Number
Number
of shares
$
of shares
$
Balance,beginning ofyear
99,416,860
3,919,865
-
-
Issuanceof newclassof common
shares
-
-
75,416,860
2,806,956
Cancellation atJanuary 5,2010
Arrangement Agreementwith
AHI, CLI,QMI(Note2)
(99,416,860)
(3,919,865)
-
-
Exerciseofoptions
-
-
6,050,000
190,575
Fairvalueofshareoptionsallocated
to sharesissued on exercise
-
-
-
45,845
Privateplacements net ofshare
issuancecosts
-
-
17,500,000
876,489
Sharesissuedforprivateplacement
finders’fees
-
-
450,000
-
Balance, endof year
-
-
99,416,860
3,919,865
19
Quantitative Alpha TradingInc.
(Formerlyknownas RTNStealthSoftware Inc.)
Notes to the Consolidated Financial Statements
December 31, 2010
11. Share capital (continued)
Common Shares(created on January 5, 2010)
2010
2009
Number
Number
of shares
$
of shares
$
Balance,beginning ofyear
-
-
-
-
IssuanceonJanuary 5,2010 –
Arrangement Agreementwith
AHI, CLI,QMI(Note2)
99,416,860
2,403,879
-
-
Issuance– acquisitionof RTN
StealthSoftware(Note3)
20,000,000
5,000,000
-
-
Issuance–managementagreement
with ENAJ(Note3)
2,500,000
625,000
-
-
Issuance– acquisitionof ENAJ
softwareare(Note3)
2,500,000
625,000
-
-
Privateplacementnetof share
issuancecosts
321,000
71,028
-
-
SharesissuedforENAJfinders
Fees (Note3)
125,000
31,250
-
-
Balance, endof year
124,862,860
8,756,157
-
-
TheCompany completed a private placement inOctober of 2010 andissued atotal of 321,000
unitsat a price of $0.35 per unit for gross proceedsof $112,350. Cost of issuancetotalled
$7,880. Each unit consists of acommon share and acommon share purchase warrant.Each
common sharepurchase warrant entitlestheholderto purchase, upto March 12, 2012, an
additional common share at an exerciseprice of $0.40. TheCompanyissued 16,800 warrants
asfinderfeesforthisprivate placement.
Warrants
2010
2009
Number
Number
of warrants
$ of warrants
$
Balance,beginning ofyear
-
-
-
-
Issuance– privateplacement
376,800
33,442
-
-
Balance, endof year
376,800
33,442
-
-
The fair value of the 337,800 common share purchase warrants issued in 2010, have been
estimated at $33,442 usingthe Black Scholesmodel forpricing options. The weighted average
fair value per warrant of $0.099 was calculated using the following weighted average
assumptions: dividend yield of 0%, expected volatility of 161%, risk-free interest rate of 1.7%
and expected life of 2 years. These warrants entitled the holder to purchase one common
share of the Companyat aprice of $0.40 per share untilMay 12, 2012.
20
Quantitative Alpha TradingInc.
(Formerlyknownas RTNStealthSoftware Inc.)
Notes to the Consolidated Financial Statements
December 31, 2010
11. Share capital
Class APreferredShares(created onJanuary 5, 2010)
2010
2009
Number
Number
of shares
$
of shares
$
Balance,beginning ofyear
-
-
-
-
Issuance– Arrangement
Agreement(Note2)
99,416,860
1,515,986
-
-
Redemption– Arrangement
Agreement(Note2)
(99,416,860)
(1,515,986)
-
-
Balance, endof year
-
-
-
-
TheClassA Preference shares wereredeemed onJanuary 5, 2010.
Class BPreferredShares(created onJanuary 19, 2010)
2010
2009
Number
Number
of shares
$
of shares
$
Balance,beginning ofyear
-
-
-
-
Issuance– acquisitionof RTN
StealthSoftware(Note3)
5,250,000
150,000
-
-
Balance, endof year
5,250,000
150,000
-
-
On May 19, 2009, the Company entered into an Arrangement Agreement with Incan
Investments Inc. (“Incana”), its former wholly own subsidiary to proceed with a corporate
restructuring by way of statutory plan to transfer cash of $100,000 and assign the Property
Contract to Incana. The corporate restructuring was completed on October 2, 2009 with the
sequence of eventsillustratedin a chronological order asfollows:
i) On May 21, 2009, the Company registered the Arrangement Agreement with the
Supreme Court of British Columbia. Pursuant to the registered Arrangement
Agreement, thefollowingtransactionsoccurredin chronological sequence:
1)
The Company transferred $100,000 in cash and assigned the Property
Contract to Incana in exchange for 15,043,372 Incana Shares (the “Distributed
IncanaShares”).
2)
TheCompany changedits authorized sharecapital by:
•
altering the identifying name of the then existing common shares to class A
common shares without par value, being the “Arris Resources Class A
Shares”;
•
creating a class consisting of an unlimited number of common shares without
parvalue beingthe “CommonShares”, and
•
creating a class consisting of an unlimited number of Class A preferred shares
without parvalue, beingthe“ArrisResourcesClassA Preferred Shares”.
21
Quantitative Alpha TradingInc.
(Formerlyknownas RTNStealthSoftware Inc.)
Notes to the Consolidated Financial Statements
December 31, 2010
11. Share capital
3)
Each issued Arris Resources Class A Shares were exchanged for one
Common Share and oneArrisResources Class APreferredShares.
4)
The Company then redeemed the issued Arris Resources Class A Preferred
Shares for consideration consisting solely of the Distributed Incana Shares
such that each holder of ArrisResourcesClassA Preferred Shareswill receive
that number of Incana Shares that is equal to the number of Arris Resources
Class APreferredShares.
The continuity of the issued and outstanding shares of the Company as at December 31, 2010
isasfollows:
Issued and outstanding:
ArrisResourcesClass A Common Shares
2010
2009
Number
Number
of shares
$
of shares
$
Balance,beginning ofyear
-
-
62,716,860
2,563,490
Exerciseofoptions
-
-
200,000
6,451
Fairvalueofshareoptionsallocated
to sharesissued on exercise
-
-
-
1,515
Exerciseof warrants
-
-
12,500,000
335,500
Cancellation ofClass A Common
- (75,416,860)
(2,906,956)
Balance, endof year
-
-
-
-
ArrisResourcesClass APreferredShares
2010
2009
Number
Number
of shares
$
of shares
$
Balance,beginning ofyear
-
-
-
-
Issuanceof newclassof
preferred shares
-
-
75,416,860
100,000
Redemptionof newclass
of preferredshares
-
-(75,416,860)
(100,000)
Balance, endof year
-
-
-
-
The Company completed a private placement in April of 2009 and issued a total of 12,500,000
unitsat a price of $0.024 (US$0.02) per unitfor gross proceeds of $302,277. Each unit consists
of a common share and a common share purchase warrant. Each common share purchase
warrant entitles the holder to purchase, for a period of two years, an additional common share
at an exercise price of $0.0312 (US$0.026). The Company paid $27,229 finder fees in cash for
thisprivate placement.
The Company completed a private placement in December of 2009 and issued a total of
5,000,000 shares at a price of $0.12 per share for gross proceeds of $600,000. The Company
issued 450,000 broker shares at a fair value of $0.12 per share as finder’s fees with respect to
thisprivate placement.
22
Quantitative Alpha TradingInc.
(Formerlyknownas RTNStealthSoftware Inc.)
Notes to the Consolidated Financial Statements
December 31, 2010
11. Share capital (continued)
b) Stock options
RTN has an incentive stock option plan authorizing the Company to issue incentive stock
options to directors, officers, employees and consultants of the Company. No specific vesting
terms are required. The option price shall not be less than the fair market value of the
Company’scommon shares on the grant date.
In 2010, the Company awarded its directors, officers, employees and consultants a total of
5,650,000 stock options at an exercise price of $0.32 with the expiry date of February 24, 2015.
The fair value of each option at the date of grant was estimated at $0.31/option by using the
Black-Scholesoption pricingmodel withthefollowing assumptions:
Riskfreeinterest rate
3.25%
Expected life
5 years
Volatility
232%
Expected dividends
nil
The 5,650,000 granted options had a fair value of $1,736,064 at the grant date and all the
granted options were vested immediately on issuance. As a result, the Company recognized
$1,736,064 in stock-based compensation expense and credited to contributed surplus to
account for the vesting of the options. Subsequent to year-end 2,600,000 stock options
expired.
In 2009, the Company awarded its directors, officers, employees and consultants a total of
6,250,000 stock options that were exercised during the year. The fair value of each option at
the date of grant was estimated at $0.01/option by using the Black-Scholes option pricing
model withthefollowing assumptions:
Riskfreeinterest rate
1.6%
Expected life
5 years
Volatility
258%
Expected dividends
nil
Thecontinuityof the outstanding stock optionsof the Companyisasfollows:
Numberof
Weighted
outstanding
average
option
exercise price
Balance, December 31, 2008
-
$
-
Granted
6,250,000
0.04
Exercised
(6,250,000)
(0.04)
Balance, December 31, 2009
-
-
Granted
5,650,000
0.32
Balance, December 31, 2010
5,650,000
$
0.32
23
Quantitative Alpha TradingInc.
(Formerlyknownas RTNStealthSoftware Inc.)
Notes to the Consolidated Financial Statements
December 31, 2010
11. Share capital (continued)
c) Contributedsurplus
Thecontinuityof the contributed surplusisasfollows:
Balance, December 31, 2008
$
670,374
Stock options granted
47,360
Stock options exercised
(47,360)
Balance, December 31, 2009
670,374
Stock optionsgranted
1,736,064
Balance, December 31, 2010
$ 2,406,438
12.
Income taxes
A reconciliation of incometaxesat statutoryratesisasfollows:
2010
2009
Netloss beforeincometaxes
$ (2,628,226) $
(599,471)
Expected income tax recovery at 28.5%(2009 – 30%)
(749,044)
(179,841)
Change in substantively enacted rates
11,738
-
Netadjustment for non-deductibleamounts
493,032
66,261
Changesinvaluation allowance
244,274
113,580
Total income taxes
$
-
$
-
The significant componentsof the Company’sfutureincometax assetsare asfollows:
2010
2009
Futureincometax assets:
Equipment tax basein excess of carryingvalue
$
16,000
$
11,159
Non-capital losscarry forwardsand shareissue costs
519,125
344,017
Oil and gasandmineral properties
-
87,106
Marketable securities andinvestmenttaxable temporary
difference
-
(151,431)
535,125
290,851
Valuation allowance
(535,125)
(290,851)
Netfuturetax assets
$
-
$
-
24
Quantitative Alpha TradingInc.
(Formerlyknownas RTNStealthSoftware Inc.)
Notes to the Consolidated Financial Statements
December 31, 2010
12.
Income taxes(continued)
TheCompany hasaccumulated non-capital losses of $1,992,797 which expireasfollows:
2014
$
275,873
2015
159,848
2026
110,450
2027
28,576
2028
114,863
2029
404,898
2030
898,289
$ 1,992,797
13. Relatedpartytransactions
All transactions with related parties have occurred in the normal course of operations and in
management’s opinion have been transacted on a basis consistent with those involving
unrelated parties, and accordinglythatthey are measured atfairvalue.
• During the year ended December 31, 2010, a company controlled by the former
President charged the Company $26,000 (2009 - $61,750) in consulting and
administrative fees and $27,500 (2009 - $60,000) in rental expenses. Another
Company controlled by the former President of Arris Resources also charged the
Company $nil (2009 - $50,000)in propertyresearchcharges.
• During the year ended December 31, 2010, two companies related to a former director
charged the Company $nil (2009 - $45,000) management fees and $nil (2009 -
$48,229)finders’feesas shareissuance costsrespectively.
• During the year ended December 31, 2010, a director of the company and chief
programmer haschargedthe Company $122,000in consultingfees.
25
Quantitative Alpha TradingInc.
(Formerlyknownas RTNStealthSoftware Inc.)
Notes to the Consolidated Financial Statements
December 31, 2010
14. Capital management
The Company's primary objectives when managing capital are to safeguard the Company's
ability to continue as a going concern, so that it can continue to provide returns for
shareholders, andto have sufficientliquidity available tofund suitable businessopportunitiesas
they arise.
The capital of the Company consists of shareholders' equity and debt obligations, net of cash
and cash equivalents. The Companymanagesitscapital structure andmakesadjustmentstoit
in light of changes in economic conditions and the risk characteristics of the underlying assets.
In order to maintain or adjust the capital structure, the Company may issue equity, sell assets,
or returncapital to shareholdersas well asissue or repay debt.
TheCompany hasnot attained profitable operationsand asa result hasrelied onthe equity
marketstofunditsactivities.
In order to facilitate the management of its capital requirements, management reviews the
requirement on an ongoing and regular basis and believes thatthis approach, giventhe relative
small size of theCompany,isreasonable.
As described in Notes 1, 2 and 3 the Company changed its operations to the business of
developing and promoting software for trading purposes, acquired software, issued shares and
obtained new management. As a result, the capital structure and capital management of the
Company have been altered accordingly.
15. Financial risk management
a) Carrying amounts andfair values of financialinstruments
Financial instruments disclosures require the Company to provide information about: a) the
significance of financial instruments to the Company’s financial position and performance and,
b) the nature and extent of risks arising from financial instruments to which the Company is
exposed during the period and at the balance sheet date, and how the Company manages
thoserisks.
26
Quantitative Alpha TradingInc.
(Formerlyknownas RTNStealthSoftware Inc.)
Notes to the Consolidated Financial Statements
December 31, 2010
15. Financial risk management (continued)
Financialinstruments –Fair values
Following is a table which sets out the fair values of recognized financial instruments using the
valuationmethodsand assumptions described below:
2010
2009
Carrying
Fair
Carrying
Fair
Value
Value
Value
Value
Financial assets
Cash and cash equivalents
$
174,530 $
174,530 $
379,284 $
379,284
Accountsreceivable
28,664
28,664
242,744
242,744
Marketable securities
-
-
1,448,800
1,448,800
Financialliabilities
Accountspayables and accrued
liabilities
115,046
115,046
75,072
75,072
Deposit on private placement
250,000
250,000
-
-
The carrying value of cash and cash equivalents, accounts receivable, accounts payable and
accrued liabilities and the deposit on private placement approximate their fair value due to the
shortterm nature of theseinstruments.
The fair value of the notes payable is not readily determinable with sufficient reliability due to
the uncertainty around the maturities and the future cash flows associated with the promissory
note. As described in Note 17, subsequent to year end, the notes payable were converted to
common shares.
Thefairvaluehierarchyforfinancial instrumentsmeasured atfairvalueisLevel 1for cash and
cash equivalents andmarketable securities. The Company does nothaveLevel 2 or Level 3
inputs(Note 5).
27
Quantitative Alpha TradingInc.
(Formerlyknownas RTNStealthSoftware Inc.)
Notes to the Consolidated Financial Statements
December 31, 2010
15. Financial risk management (continued)
b) Financialinstrument risk exposure and risk management
The Company is exposed in varying degrees of financial instrument related risks. The Board
approves and monitors the risk management processes, including treasury policies,
counterpartylimits, controlling and reporting structures. Thetypesof risk exposure and the way
in which such exposureismanaged are provided asfollows:
1) Credit risk
The Company is exposed to credit risk with respect to its cash and cash equivalents and
accounts receivable. Accounts receivable are primarily amounts owing from government
agencies.
The Company estimates its maximum exposure to be the carrying value of the cash and cash
equivalents, and accountsreceivable.
The Company manages credit risk by maintaining bank accounts with Schedule 1 Canadian
banks and investing only in Guaranteed Investment Certificates. The Company’s cash is not
subjectto any external limitations.
2) Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as
theyfall due. The Companymanagesliquidity bymaintaining sufficient cash balances.
Thefollowing arethe principal contractual maturitiesof financial liabilities:
Contractual
Over 3
As at December 31, 2010
Obligations
2011
2012
2013
years
Accountspayable and
accruedliabilities
$ 115,046 $ 115,046 $
- $
- $
-
Deposit on private placement
250,000
250,000
-
-
-
Notes payable
2,453,921
- 2,453,921
-
-
Total liabilities
$ 2,818,967 $ 317,796 $2,453,921 $
- $
-
Contractual
Over 3
As at December 31, 2009
Obligations
2010
2011
2012
years
Accountspayable and
accruedliabilities
$
75,072 $ 75,072 $
- $
- $
-
Total liabilities
$
75,072 $ 75,072 $
- $
- $
-
28
Quantitative Alpha TradingInc.
(Formerlyknownas RTNStealthSoftware Inc.)
Notes to the Consolidated Financial Statements
December 31, 2010
15. Financial risk management (continued)
3) Market risk
Foreign exchangerisk
The Company’s foreign currency transactions make it subject to foreign currency fluctuations
and inflationary pressures which may adversely affect the Company’s financial position, results
of operations, and cash flows. The Company is affected by changes in exchange rates
between the Canadian Dollar and US Dollar. During the fiscal year 2010, the Company
attempted to transact its business predominantly in Canadian Dollars to mitigate the foreign
exchange risk.
As at December 31, 2010 the financial assets and liabilities of the Company are all held in
Canadian dollarsexcept forthe notes payable balance as described in Note 10.
If the US dollar had increased or decreased against the Canadian dollar by 5%, the net loss
and deficit would haveincreased or decreased by $106,000.
4) Interest rate risk
Interestraterisk consistsof two components:
i.
To the extent that paymentsmade or received on the Company’smonetary assets
and liabilities are affected by changes in the prevailing market interest rate, the
Company isexposedtointerest rate cashflowrisk.
ii.
To the extent that changes in prevailing market interest rates differs from the
interest rates attached to the Company’s monetary assets and liabilities, the
Company isexposedtointerest rate pricerisk.
The Company is exposed to interest rate risk on its floating rate notes payable as described in
Note 10.
If interest rates had increased or decreased by 1%, the net loss and deficit would have
increased or decreased by$15,000.
29
Quantitative Alpha TradingInc.
(Formerlyknownas RTNStealthSoftware Inc.)
Notes to the Consolidated Financial Statements
December 31, 2010
16. Supplemental cashflow information
Cash receivedfrom interest
$
-
$
29,528
Non-cash transactions:
Common shareissuedfor the acquisition of software (Note 3) $ 5,806,250
$
-
Common sharesissuedformanagement agreement(Note 3) $
625,000
$
-
Sharesdistributed as part of corporate restructuring(Note 2) $ 1,515,986
$
-
Fairvalue adjustmentof marketable securities
$
-
$
504,770
Fairvalue of stock options exercised allocated
to share capital
$
-
$
47,360
Broker sharesissued asfinders’ fees
$
-
$
54,000
Redemption of preferred shares by disposing
of a subsidiary’s shares
$
-
$
100,000
30
Quantitative Alpha TradingInc.
(Formerlyknownas RTNStealthSoftware Inc.)
Notes to the Consolidated Financial Statements
December 31, 2010
17. Subsequent events
i.
On January 19, 2011, the Company completed a non-brokered private placement for
gross proceeds to the Company of approximately $500,000. Pursuant to the private
placement, the Company issued 9,523,809 units at a purchase price of $0.0525 per
unit. Each unit consists of one common share of the Company and four common share
purchase warrants. Each whole warrant entitles its holder to purchase one additional
Common Share at an exercise price of $0.0525. These warrants were exercised prior
to their expiry on March 31, 2011 resulting in additional gross proceeds to the
Company of approximately$2,000,000.
ii.
Following the Company’s annual general meeting on March 31, 2011, the following
subsequent events occurred:
• In order to position itself for an improved and upgraded listing profile over the coming
months, the Company has approved its continuance from British Columbia into Ontario
as its governing jurisdiction, has adopted a comprehensive new general bylaw and has
changeditsname toQuantitativeAlpha TradingInc.
• In order to simplify and streamline its capital structure, the shareholders have
authorized the early conversion of 5,250,000 special Class B preferred Shares into
52,500,000 common shares, thereby ensuring that all of its issued and outstanding
equity is represented by voting common shares. In addition, the Company has
streamlined and normalized its capital structure by eliminating all special classes of
sharesinfavour of common shares with only one authorizedclass of preferred shares.
• In full and final satisfaction of the principal and interest owing under the notes payable,
theCompany hasissued 47,370,100common shares.
iii.
On April 1, 2011, the Company announced the granting of 30,639,581 stock options of
common shares to members of the Board, management and senior consultants. The
options granted are equal to 11.25% of the issued and outstanding common shares of
theCompany.
31
![[exhibit998001.jpg]](https://capedge.com/proxy/6-K/0001273511-11-000160/exhibit998001.jpg)
![[exhibit998002.jpg]](https://capedge.com/proxy/6-K/0001273511-11-000160/exhibit998002.jpg)
![[exhibit998003.jpg]](https://capedge.com/proxy/6-K/0001273511-11-000160/exhibit998003.jpg)
![[exhibit998004.jpg]](https://capedge.com/proxy/6-K/0001273511-11-000160/exhibit998004.jpg)