Polar Wireless Corporation
Interim Condensed Financial Statements
(Unaudited)
January 31, 2011
Polar Wireless Corporation
Condensed Balance Sheet
(Stated in US Dollars)
| | | As at January 31 2011 (Unaudited) | | | As at April 30 2010 (Audited) | |
| Assets | | | | | | |
| Current | | | | | | |
| Cash | | $ | 513,238 | | | $ | - | |
| Inventory | | | 191,078 | | | | | |
| Prepaid expenses and deposits | | | 43,805 | | | | 224,161 | |
| Other taxes receivable | | | 168,723 | | | | - | |
| Due from related party (Note 4) | | | 75,017 | | | | | |
| | | | 991,861 | | | | 224,161 | |
| Non-current | | | | | | | | |
| Equipment (Note 3) | | | 649,963 | | | | 39,192 | |
| | | | 649,963 | | | | 39,192 | |
| | | $ | 1,641,824 | | | $ | 263,353 | |
| Liabilities | | | | | | | | |
| Current | | | | | | | | |
| Loans payable (Note 5) | | $ | 3,914,873 | | | $ | 605,440 | |
| Accounts payable and accrued liabilities | | | 695,346 | | | | 61,178 | |
| | | | 4,610,219 | | | | 666,618 | |
| Shareholder’s Deficiency | | | | | | | | |
| Share capital (Note 6) | | | 1 | | | | 1 | |
| Deficit | | | (2,968,396 | ) | | | (403,266 | ) |
| | | | (2,968,396 | ) | | | (403,266 | ) |
| | | $ | 1,641,824 | | | $ | 263,353 | |
Approved on behalf of the Board
Director
See accompanying notes to the financial statements
Polar Wireless Corporation
Interim Condensed Statement of Changes in Shareholder’s Deficiency
(Stated in US Dollars)
| | | Number of shares | | | Share capital | | | Deficit | | | Total | |
| Common stock issued at inception | | | 1 | | | $ | 1 | | | | - | | | | 1 | |
| Net loss for the period ended, April 30, 2010 | | | - | | | | - | | | $ | (403,266 | ) | | $ | (403,266 | ) |
| Balance, April 30, 2010 | | | - | | | | - | | | | (403,266 | ) | | | (403,265 | ) |
| Net loss for the 9 months ended January 31, 2011 | | | - | | | | - | | | $ | (2,565,130 | ) | | $ | (2,565,130 | ) |
| Balance, at January 31, 2011 | | | 1 | | | $ | 1 | | | $ | (2,968,396 | ) | | $ | (2,968,395 | ) |
See accompanying notes to the financial statements
Polar Wireless Corporation
Interim Condensed Statement of Comprehensive Loss
(Stated in US Dollars)
| | | 9 months period ended January 31 2011 (Unaudited) | | | Period from January 22, 2010 (Incorporation date) to April 30 2010 (Audited) | |
| Revenue | | $ | - | | | | |
| Expenses | | | | | | | |
| Software and hardware development | | | 1,319,394 | | | | 246,303 | |
| Professional fees | | | 563,320 | | | | 108,690 | |
| Office and general | | | 338,225 | | | | 20,261 | |
| Interest | | | 113,397 | | | | 545 | |
| Advertising and promotion | | | 50,370 | | | | 549 | |
| Telephone | | | 26,892 | | | | 3,961 | |
| Travel | | | 22,055 | | | | - | |
| Occupancy costs | | | 11,402 | | | | 10,500 | |
| Foreign exchange | | | 4,025 | | | | 5,274 | |
| Insurance | | | 255 | | | | 888 | |
| Depreciation | | | 115,795 | | | | 6,295 | |
| | | | 2,565,130 | | | | 403,266 | |
| Net loss and comprehensive loss for the period | | $ | (2,565,130 | ) | | $ | (403,266 | ) |
| Basic and diluted loss per common share | | | (2,565,130 | ) | | | (403,266 | ) |
| Weighted average common shares outstanding Basic and diluted | | | 1 | | | | 1 | |
See accompanying notes to the financial statements
Polar Wireless Corporation
Interim Condensed Statement of Cash Flows
(Stated in US Dollars)
| | | 9 months period ended January 31 2011 | | | Period from January 22, 2010 (Incorporation date) to April 30 2010 | |
| Cash flows provided by (used in): | | | | | | |
| Operating activities | | | | | | |
| Net loss | | $ | (2,565,130 | ) | | $ | (403,266 | ) |
| Adjustment for non-cash items: | | | | | | | | |
| Depreciation | | | 115,795 | | | | 6,295 | |
| | | | (2,449,335 | ) | | | (396,971 | ) |
| Changes in non-cash working capital items (Note 7) | | | 454,723 | | | | (162,983 | ) |
| | | | (1,994,612 | ) | | | (559,954 | ) |
| Financing activities | | | | | | | | |
| Loan advances received | | | 3,309,433 | | | | 605,440 | |
| Proceeds from issuance of shares | | | - | | | | 1 | |
| | | | 3,309,433 | | | | 605,441 | |
| Investing activities | | | | | | | | |
| Acquisition of equipment | | | (726,566 | ) | | | (45,487 | ) |
| Advances to related party | | | (75,017 | ) | | | - | |
| | | | (801,583 | ) | | | (45,487 | ) |
| Increase in cash for the period | | | 513,238 | | | | - | |
| Cash, beginning of period | | | - | | | | - | |
| Cash, end of period | | $ | 513,238 | | | $ | - | |
See accompanying notes to the financial statements
Polar Wireless Corporation
Notes to Interim Condensed Financial Statements
(Stated in US Dollars)
| 1. | Statutes of incorporation and nature of activities |
Polar Wireless Corporation (the “Company”) was incorporated under the Ontario Business Corporations Act on January 22, 2010. Its primary business activities include the creation of open source network wireless software.
| 2. | Significant accounting policies |
The interim condensed financial statmeents for the nine months ended January 31, 2011 are unaudited and have been prepared in accordance with IAS34 - Interim Financial Reporting.
The unaudited interim condensed financial statements follow the same accounting policies and methods of their application as the April 30, 2010 annual financial statements and should be read in conjunction with the annual financial statements for the year ended April 30, 2010.
Inventory is valued at the lower of cost and net realizable value with cost determined on a first-in, first-out basis, and including an appropriate allocation of fixed and variable overheads.
| (c) | Accounting standards issued but not yet effective |
| (i) | Related party disclosures |
IAS 24, Related party disclosures, will provide clarification of the definiton of a related party. This standard is effective for interim and annual fmancial statements relating to fiscal years beginning on or after January 1, 2011.
| (ii) | Financial Instruments |
IFRS 9, Financial Instruments (new) - partial replacement of IAS 39. All of IAS 39 is expected to be replaced in its entirely by the end of 2010 This standard is effective for interim and annual fmancial statements relating to fiscal years beginning on or after January 1, 2013.
The Company has not early adopted these revised standards and is currently assessing the impact that these standards will have on the financial statements
Polar Wireless Corporation
Notes to Interim Condensed Financial Statements
(Stated in US Dollars)
Equipment consist of the following:
| | | Computer equipment | | | Office furniture and equipment | | | Leaseholds | | | Total | |
| Cost | | | | | | | | | | | | |
| Balance at April 30, 2010 | | $ | 34,957 | | | $ | 3,785 | | | $ | 6,745 | | | $ | 45,487 | |
| Additions during the period | | | 643,878 | | | | 42,492 | | | | 40,196 | | | | 726,566 | |
| Balance at January 31, 2011 | | | 678,835 | | | | 46,277 | | | | 46,941 | | | | 772,053 | |
| Accumulated Depreciation and impairment | | | | | | | | | | | | | | | | |
| Balance at April 30, 2010 | | $ | 5,243 | | | $ | 378 | | | $ | 674 | | | $ | 6,295 | |
| Depreciation for the period | | | 105,495 | | | | 4,931 | | | | 5,369 | | | | 115,795 | |
| Balance at January 31, 2011 | | | 110,738 | | | | 5,309 | | | | 6,043 | | | | 122,090 | |
| Net book values | | | | | | | | | | | | | | | | |
| At January 31, 2011 | | $ | 568,097 | | | $ | 40,968 | | | $ | 40,898 | | | $ | 649,963 | |
| At April 30, 2010 | | $ | 29,714 | | | $ | 3,407 | | | $ | 6,071 | | | $ | 39,192 | |
| 4. | Due from related party |
The advance is to a related party by virtue of common shareholders. This amount is non-interest bearing, unsecured, and due on demand.
These loans are interest bearing (between 8% p.a. to 25% p.a.), due on demand and are unsecured. The fair value of the loans payable approximate the carrying values which is estimated using the present value of future cash flows based on current interest rates for loans with similar conditions to maturity.
| | Unlimited number of common shares |
| | Issued capital stock consists of the following: |
| | | As at April 30, 2010 and January 31, 2011 |
| Issued and oustanding | | | |
| 1 | Common share | | $ 1 |
Polar Wireless Corporation
Notes to Interim Condensed Financial Statements
(Stated in US Dollars)
| 7. | Changes in non-cash working capital items |
Cash flows provided by (used in):
| | | 9 months period ended January 31 2011 | | | Period from January 22, 2010 (Incorporation date) to April 30 2010 | |
| | | | | | | |
| Inventory | | $ | (191,078 | ) | | $ | - | |
| Prepaid expenses and deposits | | | 180,356 | | | | (224,161 | ) |
| Accounts payable and accrued liabilities | | | 634,168 | | | | 61,178 | |
| Other taxes receivable | | | (168,723 | ) | | | - | |
| | | $ | 454,723 | | | $ | (162,983 | ) |
The Company has long-term agreements with unrelated parties for rent. Future minimum lease payments during the next six years are as follow:
| Within one year | | $ | 23,735 | |
| Over one year and within five years | | | 504,195 | |
| Over five years | | | 60,417 | |
| | | $ | 588,347 | |
Polar Wireless Corporation (the “Company”), Polar Wireless Corp., a corporation existing under the laws of the US state of Nevada, and 2230354 Ontario Limited, a corporation existing under the laws of the Province of Ontario, executed a binding letter of intent which provides for the amalgamation of 2230354 Ontario Limited, with and into Polar Wireless Corporation. Also, Polar Wireless Corp. is acquiring the Company.
Polar Wireless Corporation
Notes to Interim Condensed Financial Statements
(Stated in US Dollars)
| 10. | Financial instruments and risk management |
The Company’s financial instruments consist of cash, due from related party, accounts payable and accrued liabilities, and loans payable. The Company is exposed to the following risk related to its financial assets and liabilities:
Foreign currency risk
The Company is exposed to currency risk as a significant volume of its transactions are denominated in U.S. dollars. Unfavourable changes in the applicable exchange rate may impact earnings and loans payable.
The Company has not entered into any currency hedging contracts.
Liquidity risk
Liquidity risk is the risk that the Company is not able to meet its fmancial obligations as they mature. The Company’s growth is financed through loans payable. One of management’s primary goals is to maintain an optimal level of liquidity through the active management of the assets and liabilities as well as the cash flows.
At January 31, 2011, the Company’s working capital deficieny is approximately $3,700,000.
Interest rate risk
The Company is exposed to interest rate risk on its loans payable and does not currently hold any financial instruments that mitigate this risk.
Fair value
The fair values of the Company’s financial instruments is estimated based on the amount at which these instruments could be exchanged in a transaction between knowledgeable and willing parties. As these estimates are subjective in nature, involving uncertainties and matter of judgement, they cannot be determined with precision. Changes in assumptions can affect estimated fair values.
The carrying value of accounts payable and accrued liabilities approximate their fair values because of the short term nature of these instruments. The carrying value of loan payable is assumed to approximate its fair value due to its short term nature. The fair value estimates for due from related party cannot be determined with sufficient reliability, as no active market exists.
| 11. | Capital risk management |
The Corporation’s objectives when managing capital is to maintain its ability to continue as a going concern in order to meet its long-term debt obligation and provide benefits for stakeholders.
The Company includes in the definition of capital: equity, comprised of issued common shares and retained earnings. The deficit in retained earnings is financed through a series of loans.
The Corporation is not subject to externally imposed capital requirements. There has been no change with respect to the overall capital risk management strategy during the period ended January 31, 2011.
