Quantitative Alpha Trading Inc.
(Formerly known as RTN Stealth Software Inc.)
CONDENSED INTERIM FINANCIAL
STATEMENTS
For the three months ended March 31, 2011
(Unaudited)
UNAUDITED INTERIM FINANCIAL STATEMENTS
In accordance with National Instrument 51-102 released bythe Canadian
Securities Administrators, the Companydiscloses that its auditors have not
reviewed the unaudited consolidated interim financial statementsfor the three
month period ended March 31, 2011.
2
Quantitative Alpha Trading Inc.
(Formerlyknownas RTN StealthSoftware Inc.)
CondensedInterimFinancialStatements
StatementofLossandComprehensiveLoss
For the three months ended March 31, 2011 and 2010
(Unaudited, expressed in Canadian dollars)
March 31,
March 31,
2011
2010
Expenses
Advertising and promotion
-
22,632
Amortization - Equipment
1,978
3,748
Amortization - Intangible
207,744
-
Finance costs
22,173
239
Foreign exchange (gain)
31,373
-
Management,consulting and administrative
60,405
33,600
Office
10,967
3,001
Professionalfees
64,844
30,208
Rent
16,637
12,500
Salary and wages
62,914
–
Share based compensation
1,143,272
1,736,064
Travel
10,194
1,500
Trust and filing fees
11,108
9,805
Loss before the following:
(1,643,609)
(1,853,297)
Interest and other income
-
12
Net loss and comprehensive loss
$ (1,643,609) $ (1,853,285)
Loss per share,basic
(0.01)
(0.02)
Loss per share,fully diluted
(0.01)
(0.02)
Weighted average number of common shares outstanding,basic
135,344,145
99,416,860
Weighted average number of common shares outstanding,fully diluted
135,500,552
99,416,860
3
Quantitative Alpha Trading Inc.
(Formerlyknownas RTN StealthSoftware Inc.)
CondensedInterimFinancialStatements
StatementofFinancialPosition
As at,
March 31
December 31
January 1
(Unaudited - expressed inCanadianDollars)
2011
2010
2010
(Note 11)
(Note 11)
Assets
Current assets
Cash and cash equivalents
$
2,192,098
$
174,530
$
379,284
Marketable securities
–
–
1,448,800
Other receivables
29,393
28,664
242,744
Prepaid expenses (Note 2)
222,135
216,135
10,000
2,443,626
419,329
2,080,828
Equipment (Note 5)
5,906
7,884
3,940
Intangible (Note 6)
7,582,647
7,790,391
–
Prepaid Expenses - long term(Note 2)
234,375
286,458
–
Mineralproperty
–
–
67,185
Oiland gas property
–
–
1
$ 10,266,554
$
8,504,062
$
2,151,954
Liabilities and Shareholders' Equity
Current liabilities
Trade and other payables
$
146,949
$
115,046
$
75,072
Deposit on private placement
–
250,000
–
Notes payable - current portion (Note 7)
–
358,445
–
146,949
723,491
75,072
Note payable -long term
–
2,095,476
–
146,949
2,818,967
75,072
Shareholders' equity
Share capitaland warrants (Note 8)
13,926,529
8,939,599
3,919,865
Contributed surplus
3,497,627
2,406,438
670,374
Accumulated other comprehensive income
–
–
504,770
Deficit
(7,304,551)
(5,660,942)
(3,018,127)
$ 10,266,554
$
8,504,062
$
2,151,954
Approved bythe Audit Committee on behalf of Board of Directors on June 29, 2011
Director
Director
4
Quantitative Alpha Trading Inc.
(Formerlyknownas RTN StealthSoftware Inc.)
CondensedInterimFinancialStatements
StatementofChangesinEquity
For the three months ended March 31, 2011 and 2010
(Unaudited, expressed in Canadian dollars)
Accumulated
other
Share Capital
Contributed
comprehensive
and Warrants
Surplus
Income
Deficit
Total Equity
$
$
$
$
$
As at January 1, 2011
8,939,599
2,406,438
-
(5,660,942)
5,685,095
Loss from continuing operations attributable to
owners of the Company
-
-
-
(1,643,609)
(1,643,609)
Issuance - private placement (Note 8a)
500,000
-
-
-
500,000
Issuance - conversion of notes payable (Note 7)
2,486,930
-
-
-
2,486,930
Issuance - warrant exercise (Note 8a)
2,000,000
-
-
-
2,000,000
Share based compensation (Note 8b)
-
1,091,189
-
-
1,091,189
Asat March 31, 2011
13,926,529
3,497,627
-
(7,304,551)
10,119,605
As at January 1, 2010
3,919,865
670,374
504,770
(3,018,127)
2,076,882
Loss from continuing operations attributable to
owners of the Company
-
-
-
(1,853,285)
(1,853,285)
Issuance - Arrangement Agreement
-
-
-
-
-
Redemption of Class A preferred shares
(1,515,986)
-
(504,770)
504,770
(1,515,986)
Share based compensation
-
1,736,064
-
-
1,736,064
Issuance-acquisition of software license
150,000
-
-
-
150,000
As at March 31, 2010
2,553,879
2,406,438
-
(4,366,642)
593,675
5
Quantitative Alpha Trading Inc.
(Formerlyknownas RTN StealthSoftware Inc.)
CondensedInterimFinancialStatements
CashFlowStatement
For the three months ended March 31, 2011
(Unaudited, expressed in Canadian dollars)
March 31,
March 31,
2011
2010
Cash provided by (used in)
Operating activities
Loss for the period
$
(1,643,609) $ (1,853,285)
Items not involving cash:
Share based compensation
1,143,272
1,736,064
Amortization
209,722
3,748
Accrued interest income
–
(12)
Accrued interest on notes payable
21,631
–
Foreign exchange on notes payable
11,378
–
(257,606)
(113,485)
Net changes in non-cash working capital
Other receivables
(729)
(7,632)
Prepaid expenses
(6,000)
10,000
Trade and other payables
31,903
(10,072)
(232,432)
(121,189)
Investing activities
Purchase of equipment
–
(7,159)
Short term investments
–
(10,000)
–
(17,159)
Financing activities
Common shares issued
2,500,000
–
Share subscription receivable
–
238,000
Deposit on private placement
(250,000)
–
2,250,000
238,000
Increase in cash and cash equivalents
2,017,568
99,652
Cash and cash equivalents, beginning of period
174,530
379,284
Cash and cash equivalents, end of period
$
2,192,098 $
478,936
Supplementary information:
Cash received from interest
$
– $
12
Non-cash transactions:
Conversion of notes payable
$
2,486,930 $
–
Shares distributed as part of corporate restructuring
$
– $ 1,515,986
Acquisiton of Software License
$
– $
150,000
6
Quantitative Alpha Trading Inc.
(Formerlyknownas RTN StealthSoftware Inc.
Notes tothe CondensedInterim Financial Statements
For the three months ended March 31, 2011
(Unaudited, expressed in Canadian Dollars)
1.
Nature of operations and corporate information
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.
Following the Company’s annual general meeting on March 31, 2011 the Company has
approved its continuance from British Columbia into Ontario as its governing jurisdiction, has
adopted a comprehensive new general bylaw and has changed its name to Quantitative Alpha
Trading Inc.
QAT was incorporated by registration of its memorandum and articles under the British
Columbia Company Act on September 15, 1987 under the name “Grand Resources Inc.”. The
head office and registered office of the company is located at 40 Village Centre Place, Suite
300, Mississauga, Ontario, L4Z 1V9.
The Companyis in the business of developing and promoting software for trading purposes.
2.
Acquisition of 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.
On May17, 2010, the Companyexecuted two definitive agreements:
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 “ENAJ transaction”).
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 the acquisition of the RTN-Stealth Software.
7
Quantitative Alpha Trading Inc.
(Formerlyknownas RTN StealthSoftware Inc.
Notes tothe CondensedInterim Financial Statements
For the three months ended March 31, 2011
(Unaudited, expressed in Canadian Dollars)
2.
Acquisition of software (continued)
The details of the four promissorynotes assumed are as follows:
Due date
Interest rate
Other terms
Four promissorynotes
Principal and interest Bank of Canada prime
Senior to anyand all
with the principal totalling
are due on May15,
rate + 1% per annum
other shareholder loans
$2,503,500 at May17,
2012
compoundannually
and shall bepaid in full
2010
prior to repayment by
the Companyto any
and all other
shareholder loans
On March 23, 2011, the promissory notes were converted to common shares as described in
Note 7.
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
commencing 6, 9, 12, and 15 months after May17, 2010.
Details of the two software acquisitions are summarized as follows:
RTN – Stealth Software
Issuance of 20,000,000 common shares of the Companyeach having a market
value of $0.25 per share on May17, 2010
$ 5,000,000
Assumption of four promissorynotes
2,503,500
Issuance of 5,250,000 Class B preferred shares on January19, 2010
150,000
7,653,500
EMC – ALGO Software
Issuance of 2,500,000 common shares of the Companyeach having a
market value of $0.25 per share on May17, 2010
625,000
Finders fees of 125,000 common shares of the Companyhaving a market
value of $0.25 per share on May17, 2010
31,250
$ 8,309,750
8
Quantitative Alpha Trading Inc.
(Formerlyknownas RTN StealthSoftware Inc.
Notes tothe CondensedInterim Financial Statements
For the three months ended March 31, 2011
(Unaudited, expressed in Canadian Dollars)
2.
Acquisition of software (continued)
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
corresponding management fee is deferred and amortized as follows:
Totalconsideration
$
625,000
Expensed in the twelve months ended December 31, 2010
(130,209)
Expensed in the three months ended March 31, 2010
(52,083)
442,708
Less current portion
(208,333)
$
234,375
The current portion of the prepaid expenses in the amount of $222,135 includes the deferred
management fee of $208,333 and other prepaid expenses of $13,802.
3.
Basis of preparation
Going concern assumption
These condensed interim financial statements have been prepared on the basis of accounting
principles applicable to a "going concern," which assumes that the Company will continue in
operation for the foreseeable future and will be able to realize its assets and discharge its
liabilities in the normalcourse 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 anyprofits.
The Company has addressed short term cash flow requirements through the raising of capital
and conversion of notes payable to common shares. 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 working capital requirements may
require that it obtain additionalcapital to continue operations.
9
Quantitative Alpha Trading Inc.
(Formerlyknownas RTN StealthSoftware Inc.
Notes tothe CondensedInterim Financial Statements
For the three months ended March 31, 2011
(Unaudited, expressed in Canadian Dollars)
3.
Basis of preparation (continued)
The Company will depend almost exclusively on outside capital. There can be no assurance
that capital will be available as necessary to meet these continuing operating costs or, if the
capital is available, that it will be on terms acceptable to the Company. Any issuing of additional
equity securities by the Company may result in 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 going concern.
Although management's efforts to raise capital and monetize assets have been successful in
the past, there is no certaintythat theywill be able to do so in the future. The aforementioned
circumstances maycreate significant doubt as to the abilityof the Companyto meets its
obligations as theycome due.
These interim condensed financial statements have been prepared using accounting principles
that are applied to a going concern and do not reflect the adjustments that would be necessary
to the presentation and carrying amounts of the assets and liabilities if the Company were not
able to continue operations. These adjustments and reclassifications maybe material
Statement of Compliance
These condensed interim financial are prepared in accordance with IAS 34, ‘Interim Financial
Reporting’ and are the Company’s first financial statements prepared under IFRS. These
condensed interim financial statements do not include all information required for full annual
financial statements and should be read in conjunction with the financial statements of the
Company as at and for the year ended December 31, 2010. The Company adopted IFRS in
accordance with IFRS 1 First-time Adoption of International Financial Reporting Standards
(“IFRS 1”) with a transition date to IFRS of January 1, 2010. Consequently the comparative
figures for 2010 and the Company’s statement of financial position as at January 1, 2010 have
been restated from accounting principles generally accepted in Canada (“Canadian GAAP”) to
complywith IFRS.
The reconciliations to IFRS from the previously published Canadian GAAP financial statements
are summarized in Note 11.
Functional and presentation currency
These financial statements are presented in Canadian dollars, which is the Company’s
functional currency.
10
Quantitative Alpha Trading Inc.
(Formerlyknownas RTN StealthSoftware Inc.
Notes tothe CondensedInterim Financial Statements
For the three months ended March 31, 2011
(Unaudited, expressed in Canadian Dollars)
4.
Summary of significant accounting policies
These interim financial statements have been prepared on a basis consistent with the audited
financial statements prepared under Canadian generally accepted accounting principles for the
year ended December 31, 2010 except as follows:
(a) Intangible asset
Intangible asset 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’s best
estimate of useful life. The software is available for use and amortization has been recorded
from the date of acquisition. The Company evaluates the reasonableness of the estimated
useful life on an annual basis.
The Company reviews the carrying value of its intangible assets for impairment or whenever
events or circumstances indicate that the carrying value maynot be recoverable.
(b) Use of judgments and critical estimates
The preparation of financial statements in conformity with IFRS 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. Actual results may differ
from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognized in the period in which the estimates are revised and in
anyfuture periods affected.
Significant assumptions about the future and other sources of estimation uncertainty that
management has made that could result in a material adjustment to the carrying amounts of
assets and liabilities, in the event that actual results differ from assumptions made, relate to, but
are not limited to the following:
• The estimated useful lives of equipment which are included in the balance sheet and
the related amortization included in the statement of loss;
• The estimated useful lives of intangible assets which are included in the balance
sheets, the related amortization included in the statement of loss, and the recoverability
of the intangible asset which is dependent on management’s ability to implement its
current business plan. The recoverability analysis of intangible assets on the balance
sheets require the Company to make assumptions about the future. Changes to one
or more assumptions would result in a change in the recoverable amount calculated;
and
• The valuation allowance for future income tax assets.
11
Quantitative Alpha Trading Inc.
(Formerlyknownas RTN StealthSoftware Inc.
Notes tothe CondensedInterim Financial Statements
For the three months ended March 31, 2011
(Unaudited, expressed in Canadian Dollars)
4.
Summary of significant accounting policies (continued)
(c) Share based compensation
Equity-settled share based payments to employees and others providing similar services are
measured at the fair value at the grant date.
The fair value determined at the grant date is expensed on a straight-line basis over the vesting
period, based on the Company’s estimate of the equity instruments that will eventually vest.
Each tranche is an award and is considered a separate grant with its own vesting period and
grant date fair value.
(d) Earnings per share
The Company presents basic and diluted earnings per share (EPS) data for its common
shares. Basic EPS is calculated by dividing the profit or loss attributable to common
shareholders of the Company by the weighted average number of common shares outstanding
during the period. Diluted EPS is determined by adjusting the profit or loss attributable to
common shareholders and the weighted average number of common shares outstanding, for
the effects of all dilutive potential common shares.
(e) Impairment
(i) 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 is considered to be impaired if
objective evidence indicated 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. An impairment loss in respect
of an available-for-sale financial asset is calculated by reference to its fair value.
Individually significant financial assets are tested for impairment on an individual basis.
The remaining financial assets are assessed collectively in groups that share similar risk
characteristics.
(ii) Non-financial assets
The carrying amounts of the Company’s non-financial assets are reviewed each reporting
date to determine whether there is any indication of impairment. If such indication exists,
then the asset’s recoverable amount is estimated.
The recoverable amount of an asset is the greater of its value in use and fair value less
costs to sell. In assessing value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market assessments
of the time value of money and the risk specific to the asset. An impairment loss is
recognized if the carrying amount of an asset exceeds its estimated recoverable amount.
12
Quantitative Alpha Trading Inc.
(Formerlyknownas RTN StealthSoftware Inc.
Notes tothe CondensedInterim Financial Statements
For the three months ended March 31, 2011
(Unaudited, expressed in Canadian Dollars)
4.
Summary of significant accounting policies (continued)
If, after the Corporation has previously recognized an impairment loss, circumstances
indicate that the fair value of the impaired assets is greater than the carrying amount, the
Corporation reverses the impairment loss by the amount the revised fair value exceeds its
carrying amount, to a maximum of the previous impairment loss. In no case shall the
revised carrying amount exceed the original carrying amount, after amortization, that would
have been determined if no impairment loss had been recognized. An impairment loss or a
reversal of an impairment loss is recognized in cost of sales, or general and administration
expense, depending on the nature of the asset
(f) New standards and interpretations not yet adopted
In November 2009, the IASB published IFRS 9, “Financial Instruments” which covers the
classification and measurement of financial assets as part of its project to replace IAS 39,
“Financial Instruments: Recognition and Measurement”. In October 2010, the requirements for
classifying and measuring financial liabilities were added to IFRS 9. Under this guidance,
entities have the option to recognize financial liabilities at fair value through earnings. If this
option is elected, entities would be required to reverse the portion of the fair value change due
to a company’s own credit risk out of earnings and recognize the change in other
comprehensive income. IFRS 9 is effective for the Company on January 1, 2013. Early
adoption is permitted and the standard is required to be applied retrospectively. The Company
is currentlyevaluating the impact of adopting IFRS 9.
5.
Equipment
Office
Computer
Computer
Leasehold
Equipment
Equipment
Software
Improvements
Total
$
$
$
$
$
Cost
At January 1, 2010
3,414
10,348
10,073
2,522
26,357
Additions
-
13,772
400
-
14,172
At December 31, 2010
3,414
24,120
10,473
2,522
40,529
Additions
-
-
-
-
-
At March 31, 2011
3,414
24,120
10,473
2,522
40,529
Accumulated Amortization
At January 1, 2010
1,922
8,000
9,973
2,522
22,417
Additions
403
9,325
500
-
10,228
At December 31, 2010
2,325
17,325
10,473
2,522
32,645
Additions
109
1,869
-
-
1,978
At March 31, 2011
2,434
19,194
10,473
2,522
34,623
Net book value
January 1, 2010
1,492
2,348
100
-
3,940
December 31, 2010
1,089
6,795
-
-
7,884
March 31, 2011
980
4,926
-
-
5,906
13
Quantitative Alpha Trading Inc.
(Formerlyknownas RTN StealthSoftware Inc.
Notes tothe CondensedInterim Financial Statements
For the three months ended March 31, 2011
(Unaudited, expressed in Canadian Dollars)
6.
Intangible
Cost
At January 1, 2010
$
-
Additions
8,309,750
At December 31, 2010
8,309,750
Additions
-
At March 31, 2011
$
8,309,750
Accumulated Amortization
At January 1, 2010
-
Additions
$
519,359
At December 31, 2010
519,359
Additions
207,744
At March 31, 2011
$
727,103
Net book value
January 1, 2010
$
-
December 31, 2010
$
7,790,391
March 31, 2011
$
7,582,647
7.
Notes payable
On March 23, 2011, the notes payable in the amount totalling $2,486,930 including accrued
interest were converted for 47,370,100 common shares or $0.0525 per share.
14
Quantitative Alpha Trading Inc.
(Formerlyknownas RTN StealthSoftware Inc.
Notes tothe CondensedInterim Financial Statements
For the three months ended March 31, 2011
(Unaudited, expressed in Canadian Dollars)
8.
Share capital
a) Authorized and outstanding shares
As at March 31, 2011 the authorized share capital of the Companyconsisted of the following:
Unlimited number of Common Shares with no par value
5,250,000 Class B non-voting Preferred Shares with no par value
(Each Class B Preferred Share is convertible into ten Common Shares when the
cumulative net revenues derived from the license of the RTN-Stealth Software reaches a
total of US $ 20,000,000 as described in Note 2).
Acontinuityof the outstanding share capital is as follows:
Number of common
Number of Class A
Number of Class B
shares
preferred shares
preferred shares
As at January 1, 2011
124,862,860
-
5,250,000
Issuance - private placement
9,523,796
-
-
Issuance - conversion of notes payable (Note 7)
47,370,100
-
-
Issuance - warrant exercise
38,095,238
-
-
Asat March 31, 2011
219,851,994
-
5,250,000
As at January 1, 2010
99,416,860
-
-
Issuance - arrangement agreement
-
99,416,860
-
Issuance - acquisition of software licence
-
-
5,250,000
Cancellation of Class A preferred shares
-
(99,416,860)
-
As at March 31, 2010
99,416,860
-
5,250,000
On January 19, 2011, the Company completed a non-brokered private placement for gross
proceeds to the Companyof $500,000. Pursuant to the private placement, the Company issued
9,523,796 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 Companyof $2,000,000.
As of March 31, 2011, the Company has 337,800 common share purchase warrants
outstanding with a fair value of $33,442 using the Black Scholes model for pricing 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 an expected life of 2 years. These warrants entitled the holder to purchase one
common share of the Companyat a price of $0.40 per share until May12, 2012.
15
Quantitative Alpha Trading Inc.
(Formerlyknownas RTN StealthSoftware Inc.
Notes tothe CondensedInterim Financial Statements
For the three months ended March 31, 2011
(Unaudited, expressed in Canadian Dollars)
8.
Share capital (continued)
b) Stock options
QAT 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’s common shares on the grant date.
On March 30 2011, the Company awarded its directors, officers, employees and consultants a
total of 29,958,701 stock options of which 10,440,144 vest immediately at an exercise price of
$0.10, 9,759,279 vest on the first anniversary of the grant date with an exercise price of $0.16
and 9,759,279 vest on the second anniversaryof the grant date with an exercise price of $0.24.
All options granted have an expiry date of March 30, 2021. The fair value of each option at the
date of grant was estimated at $0.10/option by using the Black-Scholes option pricing model
with the following assumptions:
Risk free interest rate
2.90%
Expected life
8-10 years
Volatility
230%
Expected dividends
nil
The 10,440,144 vested options had a fair value of $1,083,048 at the grant date. The
19,518,558 unvested options had a fair value of $2,018,574 at grant date and is expensed on a
straight-line basis over the vesting period with each tranche being recognized over its own
distinct vesting period resulting in $8,414 in stock based compensation expense. As a result,
the Company recognized $1,091,189 in stock-based compensation expense and credited to
contributed surplus to account for the options. In addition there was $52,083 in stock based
compensation expense relating to the deferred management fees as described in Note 2 for a
total amount of $1,143,272.
During the period, 2,600,000 stock options that were issued in 2010 expired.
The continuityof the outstanding stock options of the Companyis as follows:
Numberof
Weighted
Outstanding
average
options
exercise price
Balance, January1, 2010
-
$
-
Granted
5,650,000
0.32
Balance, December 31, 2010
5,650,000
0.32
Expired
(2,600,000)
0.32
Granted
29,958,701
0.17
Balance, March 31, 2011
33,008,701
$
0.18
16
Quantitative Alpha Trading Inc.
(Formerlyknownas RTN StealthSoftware Inc.
Notes tothe CondensedInterim Financial Statements
For the three months ended March 31, 2011
(Unaudited, expressed in Canadian Dollars)
9.
Related partytransactions
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 accordingly that they are measured at fair value. Related parties include
key management personnel, the Board of Directors, close family members and enterprises
which are controlled bythese individuals.
• During the three months ended March 31, 2011, a company controlled by the CFO
charged the Company $2,000 (2010 - $nil) in rent and received $15,000 (2010 - $nil) in
accounting fees.
• During the three months ended March 31, 2011, stock based compensation in the
amount of $1,143,272 (2010 - $1,736,064) was granted to related parties as described
in Note 8b.
• During the three months ended March 31, 2011, a director of the companyand Chief
TechnologyOfficer has charged the Company$30,000 (2010 - $nil) in consulting fees.
• During the three months ended March 31, 2011, a director and Chairman of the
Companyreceived 9,557,035 common shares of the Companyas part of the Debt
Satisfaction Transaction.
• During the three months ended March 31, 2011, a company related to a director and
Chief Executive Officer of the Company received 5,714,285 common shares of the
Companyas part of the Debt Satisfaction Transaction.
• During the three months ended March 31, 2010, two companies controlled by the
former President charged the Company $14,000 in management and administrative
fees and $12,500 in rental expense.
10. Subsequent events
On March 30, 2011, the shareholders of the Company had authorized the early conversion of
5,250,000 Class B Preferred Shares into common shares, thereby ensuring that all of its issued
and outstanding equity is represented by voting common shares. Each Class B Preferred
Share is convertible into ten common shares at the option of the holder. As at the date of these
Financial Statements, the Company is in the process of completing the Class B Preferred
Share conversion.
17
Quantitative Alpha Trading Inc.
(Formerlyknownas RTN StealthSoftware Inc.
Notes tothe CondensedInterim Financial Statements
For the three months ended March 31, 2011
(Unaudited, expressed in Canadian Dollars)
11. Conversion to IFRS
The condensed interim financial statements for the three months ended March 31, 2011 are the
Company’s first condensed interim financial statements prepared under IFRS. For all
accounting period prior to this, the Company prepared its consolidated financial statements
under Canadian GAAP. In accordance with IFRS 1 ‘First time adoption of IFRS’, certain
disclosures relating to the transition to IFRS are given in this note. These disclosures are
prepared under IFRS as set out in the basis of preparation in Note 3.
IFRS 1 allows first time adopters to IFRS to take advantage of a number of voluntary
exemptions from the general principal of retrospective restatement. The Company has taken
the following exemptions:
a) Elective exemptions
Business Combinations
The Company elected to apply IFRS 3 relating to business combinations prospectively from
January1, 2010.
b) Mandatory exemptions
Estimates
Hindsight is not used to create or revise estimates. The estimates previously made by the
Company under Canadian GAAP were not revised for application of IFRS except where
necessaryto reflect anydifferences in accounting policies.
18
Quantitative Alpha Trading Inc.
(Formerlyknownas RTN StealthSoftware Inc.
Notes tothe CondensedInterim Financial Statements
For the three months ended March 31, 2011
(Unaudited, expressed in Canadian Dollars)
c) Effect of material transition adjustments on the balance sheets, income statements and
statement of comprehensive income:
i) Balance Sheets
December 31,2010
March31,2010
January1,2010
IFRS andCdn.
IFRS andCdn.
Cdn. GAAP
Adj.
IFRS
GAAP
GAAP
Assets
Current assets
Cash and cashequivalents
$
174,530 $
-
$
174,530 $
478,936 $
379,284
Marketable securities
–
–
–
–
1,448,800
Other receivables
28,664
–
28,664
12,375
242,744
Short term investments
–
–
–
10,012
–
Prepaid expenses
216,135
–
216,135
–
10,000
419,329
–
419,329
501,323
2,080,828
Equipment
7,884
–
7,884
7,351
3,940
Intangible (Note 11(d)(i))
8,309,750
(519,359)
7,790,391
–
–
License
–
–
–
150,000
–
Prepaid Expenses - longterm
286,458
–
286,458
–
–
Mineralproperty
–
–
–
–
67,185
Oiland gas property
–
–
–
1
1
$ 9,023,421 $
(519,359) $
8,504,062 $
658,675 $
2,151,954
Liabilities and Shareholders' Equity
Current liabilities
Trade and other payables
$
115,046 $
-
$
115,046 $
65,000 $
75,072
Deposit on private placement
250,000
–
250,000
–
–
Notes payable - current portion
358,445
–
358,445
–
–
723,491
723,491
65,000
75,072
Note payable -longterm
2,095,476
–
2,095,476
–
–
2,818,967
–
2,818,967
65,000
75,072
Shareholders' equity
Share capitalandwarrants
8,939,599
–
8,939,599
2,553,879
3,919,865
Contributed surplus
2,406,438
–
2,406,438
2,406,438
670,374
Accumulated other comprehensive income
–
–
–
–
504,770
Deficit
(5,141,583)
(519,359)
(5,660,942)
(4,366,642)
(3,018,127)
$ 9,023,421 $
(519,359) $
8,504,062 $
658,675 $
2,151,954
19
Quantitative Alpha Trading Inc.
(Formerlyknownas RTN StealthSoftware Inc.
Notes tothe CondensedInterim Financial Statements
For the three months ended March 31, 2011
(Unaudited, expressed in Canadian Dollars)
ii)Interim Statements of loss and comprehensive loss
Year ended
Three months ended
December 31,2010
March 31,2010
IFRS and Cdn.
Cdn GAAP
Adj.
IFRS
GAAP
Expenses
Advertising and promotion
$
51,672 $
-
$
51,672 $
22,632
Amortization - Equipment
12,447
-
12,447
3,748
Amortization - Intangible (Note 11(d)(i)
-
519,359
519,359
-
Finance costs
64,458
-
64,458
239
Foreign exchange (gain)
(108,150)
-
(108,150)
-
Management,consulting and administrative
387,323
-
387,323
33,600
Office
36,344
-
36,344
3,001
Professionalfees
157,584
-
157,584
30,208
Rent
91,961
-
91,961
12,500
Stock-based compensation
1,866,273
-
1,866,273
1,736,064
Travel
17,521
-
17,521
1,500
Trust and filing fees
53,152
-
53,152
9,805
Loss before the following:
(2,630,585)
(519,359)
(3,149,944)
(1,853,297)
Write down of mineraland oiland gas properties
(1)
-
(1)
Interest and other income
2,360
-
2,360
12
Net loss and comprehensive loss
$
(2,628,226) $
(519,359) $ (3,147,585) $
(1,853,285)
d) Explanatory notes
Amortization of intangible
Under Canadian GAAP the software asset was amortized once it has been placed in
use. Under IFRS the software asset has been amortized when the asset is available for
use. As the software asset was available for use upon acquisition, amortization has
been recorded from the date of acquisition. There is no impact for the three months
ended March 31, 2010 and there is an increase in amortization expense of $519,359 and
an equivalent decrease in the software asset for the year ended December 31, 2010.
e) Restatement of Statement of Cash Flows from Canadian GAAP to IFRS
The restatement from Canadian GAAP to IFRS had no significant effect on the reported cash
flows generated by the Company for the three months ended March 31, 2010 or year ended
December 31, 2010. The reconciling items between Canadian GAAP presentation and IFRS
have no significant effect on the cash flows generated.
20
