Exhibit 99.2
RESAAS SERVICES INC.
Interim Consolidated Financial Statements
June 30, 2017
(Expressed in Canadian dollars)
(Unaudited)
NOTICE OF NO AUDITOR REVIEW OF
INTERIM FINANCIAL STATEMENTS
The accompanying unaudited interim financial statements of the Company have been prepared by and are the responsibility of the Company's management. The Company’s independent auditor has not performed a review of these financial statements.
RESAAS SERVICES INC.
Interim Consolidated Statements of Financial Position
(Expressed in Canadian dollars)
| June 30, 2017 $ | December 31, 2016 $ | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | 3,850,715 | 6,056,127 | ||||||
| Amounts receivable | 59,384 | 77,956 | ||||||
| Prepaid expenses | 55,502 | 74,375 | ||||||
| Total current assets | 3,965,601 | 6,208,458 | ||||||
| Non-current assets | ||||||||
| Property and equipment (Note 4) | 55,365 | 60,494 | ||||||
| Website development costs (Note 5) | 1,530,454 | 1,537,274 | ||||||
| Intangible assets (Note 6) | 59,196 | 47,405 | ||||||
| Total non-current assets | 1,645,015 | 1,645,173 | ||||||
| Total assets | 5,610,616 | 7,853,631 | ||||||
| Liabilities and Shareholders’ Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | 349,756 | 385,773 | ||||||
| Deferred revenue | 90,057 | 40,885 | ||||||
| Obligations under finance lease (Note 7) | 3,351 | 5,280 | ||||||
| Total current liabilities | 443,164 | 431,938 | ||||||
| Obligations under finance lease (Note 7) | 5,099 | 6,361 | ||||||
| Total liabilities | 448,263 | 438,299 | ||||||
| Shareholders’ equity | ||||||||
| Common shares | 27,254,440 | 27,071,707 | ||||||
| Share-based payment reserve | 12,808,063 | 11,884,059 | ||||||
| Deficit | (34,900,150 | ) | (31,540,434 | ) | ||||
| Total shareholders’ equity | 5,162,353 | 7,415,332 | ||||||
| Total liabilities and shareholders’ equity | 5,610,616 | 7,853,631 | ||||||
Going concern (Note 2(c))
Commitments and contingencies (Note 13)
Subsequent events (Note 15)
Approved and authorized for issuance by the Board of Directors on August 29, 2017:
| /s/ “Tom Rossiter” | /s/ “Cam Shippit” | |
| Tom Rossiter, Director | Cam Shippit, Director |
(The accompanying notes are an integral part of these interim consolidated financial statements)
1
RESAAS SERVICES INC.
Interim Consolidated Statements of Comprehensive Loss
(Expressed in Canadian dollars except share amounts)
(Unaudited)
| Three Months Ended June 30, 2017 $ | Three Months Ended June 30, 2016 $ | Six Months Ended June 30, 2017 $ | Six Months Ended June 30, 2016 $ | |||||||||||||
| Revenue | 133,747 | 56,729 | 249,840 | 155,110 | ||||||||||||
| Expenses | ||||||||||||||||
| Amortization | 352,864 | 287,593 | 686,530 | 530,151 | ||||||||||||
| Consulting fees | 105,848 | 143,035 | 275,423 | 188,966 | ||||||||||||
| Filing fees | 49,380 | 36,645 | 69,708 | 60,244 | ||||||||||||
| Foreign exchange loss | 5,193 | 5,624 | 4,823 | 20,529 | ||||||||||||
| General and administrative (Note 8) | 578,630 | 436,788 | 1,092,622 | 818,348 | ||||||||||||
| Management fees (Note 8) | 95,351 | 166,228 | 182,967 | 237,697 | ||||||||||||
| Promotion and advertising | 86,290 | 81,188 | 155,639 | 204,510 | ||||||||||||
| Professional fees | 96,846 | 98,852 | 148,061 | 206,010 | ||||||||||||
| Stock-based compensation (Notes 8 and 11) | 807,317 | 2,735,396 | 876,482 | 2,740,620 | ||||||||||||
| Travel | 49,140 | 29,702 | 130,736 | 73,258 | ||||||||||||
| Total operating expenses | 2,226,859 | 4,021,051 | 3,622,991 | 5,080,333 | ||||||||||||
| Loss before other income | (2,093,112 | ) | (3,964,322 | ) | (3,373,151 | ) | (4,925,223 | ) | ||||||||
| Other income | ||||||||||||||||
| Interest income | 5,761 | 7,055 | 13,435 | 14,904 | ||||||||||||
| Net loss and comprehensive loss for the period | (2,087,351 | ) | (3,957,267 | ) | (3,359,716 | ) | (4,910,319 | ) | ||||||||
| Basic and diluted loss per common share | (0.05 | ) | (0.11 | ) | (0.09 | ) | (0.13 | ) | ||||||||
| Weighted average number of common shares outstanding | 39,234,355 | 36,924,271 | 39,264,283 | 36,923,319 | ||||||||||||
(The accompanying notes are an integral part of these interim consolidated financial statements)
2
RESAAS SERVICES INC.
Interim Consolidated Statements of Changes in Shareholders’ Equity
(Expressed in Canadian dollars except share amounts)
(Unaudited)
| Share-based | Total | |||||||||||||||||||
| Common Shares | Payment | Shareholders’ | ||||||||||||||||||
| Amount | Reserve | Deficit | Equity | |||||||||||||||||
| Number | $ | $ | $ | $ | ||||||||||||||||
| Balance, December 31, 2015 | 36,923,480 | 23,252,234 | 7,661,465 | (23,453,697 | ) | 7,460,002 | ||||||||||||||
| Issuance of common shares pursuant to the exercise of warrants at $1.80 per share | 23,989 | 70,082 | (26,902 | ) | — | 43,180 | ||||||||||||||
| Fair value of stock options granted | — | — | 3,374,367 | — | 3,374,367 | |||||||||||||||
| Net loss | — | — | — | (4,910,319 | ) | (4,910,319 | ) | |||||||||||||
| Balance, June 30, 2016 | 36,947,469 | 23,322,316 | 11,008,930 | (28,364,016 | ) | 5,967,230 | ||||||||||||||
| Share-based | Total | |||||||||||||||||||
| Common Shares | Payment | Shareholders’ | ||||||||||||||||||
| Amount | Reserve | Deficit | Equity | |||||||||||||||||
| Number | $ | $ | $ | $ | ||||||||||||||||
| Balance, December 31, 2016 | 39,172,469 | 27,071,707 | 11,884,059 | (31,540,434 | ) | 7,415,332 | ||||||||||||||
| Issuance of common shares to settle accrued liabilities at $1.99 per share | 91,814 | 182,733 | — | — | 182,733 | |||||||||||||||
| Fair value of stock options granted | — | — | 924,004 | — | 924,004 | |||||||||||||||
| Net loss | — | — | — | (3,359,716 | ) | (3,359,716 | ) | |||||||||||||
| Balance, June 30, 2017 | 39,264,283 | 27,254,440 | 12,808,063 | (34,900,150 | ) | 5,162,353 | ||||||||||||||
(The accompanying notes are an integral part of these interim consolidated financial statements)
3
RESAAS SERVICES INC.
Interim Consolidated Statements of Cash Flows
(Expressed in Canadian dollars)
(Unaudited)
| Six Months Ended June 30, 2017 $ | Six Months Ended June 30, 2016 $ | |||||||
| Operating activities | ||||||||
| Net loss | (3,359,716 | ) | (4,910,319 | ) | ||||
| Items not affecting cash: | ||||||||
| Amortization | 686,530 | 530,151 | ||||||
| Stock-based compensation | 876,482 | 2,740,620 | ||||||
| Changes in non-cash operating working capital: | ||||||||
| Amounts receivable | 18,572 | (4,090 | ) | |||||
| Prepaid expenses | 18,873 | (12,916 | ) | |||||
| Accounts payable and accrued liabilities | 49,172 | (219,236 | ) | |||||
| Deferred revenue | 146,716 | 17,013 | ||||||
| Net cash used in operating activities | (1,563,371 | ) | (1,858,777 | ) | ||||
| Investing activities | ||||||||
| Acquisition of intangible assets | (12,841 | ) | (3,175 | ) | ||||
| Purchase of property and equipment | (7,890 | ) | (2,021 | ) | ||||
| Website development costs | (618,119 | ) | (489,125 | ) | ||||
| Net cash used in investing activities | (638,850 | ) | (494,321 | ) | ||||
| Financing activities | ||||||||
| Repayment of finance lease obligations | (3,191 | ) | (1,147 | ) | ||||
| Proceeds from the exercise of options and warrants | — | 43,180 | ||||||
| Net cash (used in) provided by financing activities | (3,191 | ) | 42,033 | |||||
| Increase (decrease) in cash and cash equivalents | (2,205,412 | ) | (2,311,065 | ) | ||||
| Cash and cash equivalents, beginning of period | 6,056,127 | 6,820,022 | ||||||
| Cash and cash equivalents, end of period | 3,850,715 | 4,508,957 | ||||||
| Cash and cash equivalents is comprised of: | ||||||||
| Amounts held in legal trust account | 18,297 | 17,760 | ||||||
| Cash in bank | 3,756,030 | 4,439,976 | ||||||
| Cashable guaranteed investment certificates | 76,388 | 51,221 | ||||||
| Total cash and cash equivalents | 3,850,715 | 4,508,957 | ||||||
| Non-cash investing and financing activities: | ||||||||
| Stock compensation capitalized as website development costs | 47,522 | 633,747 | ||||||
(The accompanying notes are an integral part of these interim consolidated financial statements)
4
RESAAS SERVICES INC.
Notes to the Interim Consolidated Financial Statements
June 30, 2017
(Expressed in Canadian dollars except shares and options)
(Unaudited)
| 1. | Corporate Information |
RESAAS Services Inc. (the “Company”) was incorporated on June 4, 2009 under the Business Corporations Act (British Columbia). The Company is engaged in the development of web and mobile communications software for the real estate industry. The Company’s head office is located at Suite 1550 – 401 W. Georgia St., Vancouver, British Columbia, Canada, V6B 5A1.
| 2. | Basis of Presentation |
| (a) | Statement of Compliance and Principles of Consolidation |
These interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) applicable to the preparation of interim financial statements, including IAS 34, Interim Financial Reporting. The interim consolidated financial statements should be read in conjunction with the annual consolidated financial statements for the year ended December 31, 2016, which have been prepared in accordance with IFRS as issued by the IASB. The Company uses the same accounting policies and methods of computation as in the annual consolidated financial statements.
These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, RESAAS USA Inc., a company incorporated in the state of California in 2012, and The Real Estate Social Network Ltd., a company incorporated in the state of Delaware in 2013. All significant intercompany transactions have been eliminated on consolidation
| (b) | Basis of Measurement |
These interim consolidated financial statements have been prepared on a historical cost basis and are presented in Canadian dollars, which is also the Company’s functional currency.
The preparation of these interim consolidated financial statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses during the period. These estimates are, by their nature, uncertain. The impacts of such estimates are pervasive throughout the financial statements, and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and future periods if the revision affects both current and future periods. These estimates are based on historical experience, current and future economic conditions and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Significant assumptions about the future and other sources of estimation uncertainty that management has made at the reporting date that could result in a material adjustment to the carrying amounts of assets and liabilities include the following;
Significant areas of estimation include:
| i) | The useful life and recoverability of long-lived assets; | |
| ii) | The inputs used in the valuation of share-based payments; | |
| iii) | Recognition of deferred income tax assets; | |
| iv) | Revenue recognition for special contracts and projects. |
Significant areas of judgment include:
| i) | Qualification of costs to capitalize as website development costs; | |
| ii) | Revenue recognition for special contracts and projects; | |
| iii) | Application of the going concern assumption. |
| 5 |
RESAAS SERVICES INC.
Notes to the Interim Consolidated Financial Statements
June 30, 2017
(Expressed in Canadian dollars except shares and options)
(Unaudited)
| 2. | Basis of Presentation (continued) |
| (c) | Going Concern |
These interim consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. As of June 30, 2017, the Company had not yet generated significant revenue or positive cash flow from operations and had an accumulated deficit of $34,900,150. These factors, among others, create substantial doubt as to the ability of the Company to continue as a going concern. Management believes that the proceeds from additional equity financing activities that it is currently pursuing, combined with revenue that the Company expects to generate in subsequent periods, will provide the Company with sufficient working capital to satisfy its liabilities and commitments as they become due for the foreseeable future. There can be no assurances that sufficient equity can be raised on acceptable terms on a timely basis.
These interim consolidated financial statements do not give effect to any adjustments which would be necessary should the Company be unable to continue as a going concern and, therefore, be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in these consolidated financial statements.
| 3. | Recent Accounting Pronouncements |
Certain pronouncements were issued by the IASB or the IFRS Interpretations Committee that are mandatory for annual periods beginning after January 1, 2018 or later periods.
The following new IFRSs that have not been early adopted in these interim consolidated financial statements will not have a material effect on the Company’s future results and financial position:
| i) | IFRS 9,Financial Instruments (New; to replace IAS 39 and IFRIC 9) |
| ii) | IFRS 16, “Leases” |
In addition, IFRS 15,Revenue from Contracts with Customers is effective for annual periods beginning on or after January 1, 2018 with early adoption permitted. The Company intends to adopt IFRS 15 and the clarifications in its consolidated financial statements for the annual period beginning on January 1, 2018. The Company has commenced a preliminary assessment of the transition method and alternatives and the potential impact of IFRS 15 on its consolidated financial statements.
Other accounting standards or amendments to existing accounting standards that have been issued but have future effective dates are either not applicable or are not expected to have a significant impact on the Company’s financial statements.
6
RESAAS SERVICES INC.
Notes to the Interim Consolidated Financial Statements
June 30, 2017
(Expressed in Canadian dollars except shares and options)
(Unaudited)
| 4. | Property and Equipment |
| Furniture $ | Leasehold Improvement $ | Computer Equipment Under Finance Lease $ | Computer Equipment $ | Total $ | |||||||||||||||||
| Cost: | |||||||||||||||||||||
| Balance, December 31, 2016 | 23,057 | 7,130 | 17,701 | 73,894 | 121,782 | ||||||||||||||||
| Additions | 2,441 | — | — | 5,450 | 7,891 | ||||||||||||||||
| Balance, June 30, 2017 | 25,498 | 7,130 | 17,701 | 79,344 | 129,673 | ||||||||||||||||
| Accumulated amortization: | ||||||||||||||||||||
| Balance, December 31, 2016 | 1,132 | 594 | 8,629 | 50,933 | 61,288 | |||||||||||||||
| Additions | 2,347 | 1,188 | 2,475 | 7,010 | 13,020 | |||||||||||||||
| Balance, June 30, 2017 | 3,479 | 1,782 | 11,104 | 57,943 | 74,308 | |||||||||||||||
| Carrying amounts: | ||||||||||||||||||||
| Balance, December 31, 2016 | 21,925 | 6,536 | 9,072 | 22,961 | 60,494 | |||||||||||||||
| Balance, June 30, 2017 | 22,019 | 5,348 | 6,597 | 21,401 | 55,365 | |||||||||||||||
| 5. | Website Development Costs |
| Accumulated | Carrying | ||||||||||||
| Cost | Amortization | Amounts | |||||||||||
| $ | $ | $ | |||||||||||
| Balance, December 31, 2016 | 5,788,885 | 4,251,611 | 1,537,274 | ||||||||||
| Additions | 665,641 | 672,461 | |||||||||||
| Balance, June 30, 2017 | 6454,526 | 4,924,072 | 1,530,454 | ||||||||||
| 6. | Intangible Assets |
| Accumulated | Carrying | ||||||||||||
| Cost | Amortization | Amounts | |||||||||||
| $ | $ | $ | |||||||||||
| Balance, December 31, 2016 | 52,133 | 4,728 | 47,405 | ||||||||||
| Additions | 12,453 | 662 | |||||||||||
| Balance, June 30, 2017 | 64,586 | 5,390 | 59,196 | ||||||||||
7
RESAAS SERVICES INC.
Notes to the Interim Consolidated Financial Statements
June 30, 2017
(Expressed in Canadian dollars except shares and options)
(Unaudited)
| 7. | Obligations Under Finance Lease |
The Company entered into 5 agreements to lease computer equipment for two or three years. The computer equipment leases are classified as finance leases. The interest rates underlying the obligations in the finance leases are 18%, 25%, 1%, 56%, and 4% per annum. The following is a schedule by years of future minimum lease payments under finance leases together with the present value of the net minimum lease payments as of June 30, 2017:
| Fiscal year ending December 31: | ||||
| $2017 | 3,471 | |||
| 2018 | 3,924 | |||
| 2019 | 1,720 | |||
| Net minimum lease payments | 9,115 | |||
| Less: amount representing interest payments | (665 | ) | ||
| Present value of net minimum lease payments | 8,450 | |||
| Less: current portion | (3,351 | ) | ||
| Long-term portion | 5,099 | |||
| 8. | Related Party Transactions |
During the three months ended June 30, 2017, salary of $182,967 (2016 - $237,697) to the Company’s key management is included in management fees.
The following table summarizes the compensation of the Company’s key management:
| Six Months Ended June 30, | ||||||||
| 2017 | 2016 | |||||||
| $ | $ | |||||||
| Management fees | 182,967 | 237,697 | ||||||
| Employee salary and benefits (included in general and administrative) | — | 15,346 | ||||||
| Share based payments to officers and directors | 805,652 | 275,711 | ||||||
| 9. | Share Capital |
Preferred Shares
The Company is authorized to issue an unlimited number of non-voting, non-transferable Class A preferred shares with a par value of $0.01 per share. The Class A preferred shares cannot be issued at a price less than $2.00 per share. Holders of Class A preferred shares are not entitled to receive any dividends. Each issued and outstanding Class A preferred share shall be converted into one fully paid common share immediately prior to the consummation of any “Change of Control Event”.
The Company is authorized to issue an unlimited amount of Class B preferred shares without par value. The Class B preferred shares allow the Board to fix the number of shares in the series and to fix the preferences, special rights and restrictions, privileges, conditions and limitations attached to the shares of that series, before the issuance of shares of any particular series. The Board has the authority to fix, amongst other things, the number of shares constituting any such series, the voting powers, designation, preferences and relative participation, optional or other special rights and qualifications, limitations or restrictions thereof, including the dividend rights and dividend rate, terms of redemption (including sinking fund provisions), redemption price or prices, conversion rights and liquidation preferences of the shares constituting any series, without any further vote or action by the shareholders of the Company.
As at June 30, 2017, there are no Class A or Class B preferred shares issued and outstanding.
8
RESAAS SERVICES INC.
Notes to the Interim Consolidated Financial Statements
June 30, 2017
(Expressed in Canadian dollars except shares and options)
(Unaudited)
| 9. | Share Capital (continued) |
Common Shares
The Company is authorized to issue an unlimited number of common shares without par value.
Share transactions during the six months ended June 30, 2017:
On February 28, 2017, the Company paid performance bonuses by issuing 91,814 common shares to certain directors, officers and employees. As the bonuses were earned during the year ended December 31, 2016, the Company recorded the fair value of the shares of $182,733 in accounts payable and accrued liabilities at December 31, 2016. The Company capitalized $50,104 as website development costs and expensed $132,629 of the performance bonus during the year ended December 31, 2016.
Share transactions during the six months ended June 30, 2016:
In June 2016, the Company issued 23,989 units at a price of $1.80 per unit for proceeds of $43,180 upon the exercise of Agents’ warrants. Each unit consisted of one common share and one share purchase warrant exercisable into one additional common share at a price of $3.00 per share until December 10, 2017. The fair value of the Agents’ warrants of $26,902 was transferred from share-based payment reserve to common shares upon exercise.
| 10. | Share Purchase Warrants |
The following table summarizes the continuity of share purchase warrants:
| Number of Warrants | Weighted Average Exercise Price | ||||||||
| $ | |||||||||
| Balance, December 31, 2016 | 4,971,562 | 2.83 | |||||||
| Issued | — | — | |||||||
| Exercised | — | — | |||||||
| Expired | — | — | |||||||
| Balance, June 30, 2017 | 4,971,562 | 2.83 | |||||||
The following table summarizes information about warrants outstanding and exercisable at June 30, 2017:
| Warrants Outstanding | Exercise Price $ | Expiry Date | ||||||
| 3,630,589 | 3.00 | December 10, 2017 | ||||||
| 228,473 | 1.80 | December 10, 2017 | ||||||
| 967,500 | 2.50 | August 31, 2018 | ||||||
| 145,000 | 2.50 | September 7, 2018 | ||||||
| 4,971,562 | ||||||||
9
RESAAS SERVICES INC.
Notes to the Interim Consolidated Financial Statements
June 30, 2017
(Expressed in Canadian dollars except shares and options)
(Unaudited)
| 11. | Stock Options |
The following table summarizes information about the stock options.
| Six Months Ended June 30, 2017 | Year Ended December 31, 2016 | ||||||||||||||||
| Number of Options | Weighted Average Exercise Price $ | Number of Options | Weighted Average Exercise Price $ | ||||||||||||||
| Outstanding – beginning of period | 4,985,950 | 2.14 | 1,545,000 | 2.57 | |||||||||||||
| Granted | 1,138,250 | 1.50 | 5,059,950 | 2.13 | |||||||||||||
| Cancelled | — | — | (1,080,000 | ) | 2.35 | ||||||||||||
| Expired | (225,000 | ) | 2.50 | (539,000 | ) | 2.88 | |||||||||||
| Exercised | — | — | — | — | |||||||||||||
| Outstanding – end of period | 5,899,200 | 2.00 | 4,985,950 | 2.14 | |||||||||||||
| Exercisable – end of period | 4,854,200 | 1.96 | 3,960,950 | 2.05 | |||||||||||||
The following table summarizes information about stock options outstanding and exercisable as at June 30, 2017.
| Exercise Price $ | Expiry Date | Number of Options Outstanding | Number of Options Exercisable | Weighted Average Remaining Contracted Life (Years) | ||||||||||||
| 2.35 | December 23, 2019 | 205,000 | 205,000 | 2.48 | ||||||||||||
| 2.00 | May 5, 2021 | 2,659,950 | 2,659,950 | 3.84 | ||||||||||||
| 2.50 | May 5, 2021 | 797,000 | 292,000 | 3.84 | ||||||||||||
| 2.00 | December 20, 2021 | 849,000 | 849,000 | 4.48 | ||||||||||||
| 2.50 | December 20, 2021 | 250,000 | 15,000 | 4.48 | ||||||||||||
| 1.50 | May 19, 2022 | 1,138,250 | 833,250 | 4.89 | ||||||||||||
| 5,899,200 | 4,854,200 | 4.08 | ||||||||||||||
The fair value of stock options granted was determined using the Black-Scholes option pricing model.
During the six months ended June 30, 2017, the Company granted stock options with a fair value of $817,352, of which $6,207 was capitalized as website development costs and $811,145 was expensed. During the six months ended June, 2017, the Company capitalized $41,314 as website development costs and expensed $59,130 for the vesting of previously granted stock options.
During the six months ended June 30, 2016, the Company granted stock options with a fair value of $3,366,729, of which $631,333 was capitalized as website development costs and $2,735,396 was expensed. During the six months ended June 30, 2016, the Company capitalized $2,414 as website development costs and expensed $5,224 for the vesting of previously granted stock options.
The weighted average fair value of the options granted during the six months ended June 30, 2017 was $0.96 (2016 - $1.04). No options were exercised during the six months ended June 30, 2017 or June 30, 2016.
10
RESAAS SERVICES INC.
Notes to the Interim Consolidated Financial Statements
June 30, 2017
(Expressed in Canadian dollars except shares and options)
(Unaudited)
| 11. | Stock Options (continued) |
Weighted average assumptions used in calculating the fair value of stock-based compensation expense are as follows:
| 2017 | 2016 | |||||||
| Risk-free rate | 1.84 | % | 1.32 | % | ||||
| Dividend yield | 0 | % | 0 | % | ||||
| Volatility | 95 | % | 100 | % | ||||
| Expected forfeitures | — | — | ||||||
| Weighted average expected life of the options (years) | 5.00 | 5.00 | ||||||
| 12. | Capital Management |
The Company manages its capital to maintain its ability to continue as a going concern and to provide returns to shareholders and benefits to other stakeholders. The capital structure of the Company consists of equity comprised of issued share capital, share-based payment reserve and deficit.
The Company manages its capital structure and makes adjustments to it in light of economic conditions. The Company, upon approval from its board of directors, will balance its overall capital structure through new equity issuances or by undertaking other activities as deemed appropriate under the specific circumstances.
The Company is not subject to externally imposed capital requirements and the Company’s overall strategy with respect to capital risk management remains unchanged from the year ended December 31, 2016.
| 13. | Commitments and Contingencies |
The Company had no significant commitments or contractual obligations with any parties respecting executive compensation, consulting arrangements, or other matters. Management services provided are on a month-to-month basis.
| a) | On August 22, 2016, the Company entered into a lease for the provision of facility space from November 1, 2016 to October 31, 2019 for $10,633 per month. The Company’s future minimum lease payments for the premise lease is as follows: |
| Fiscal year ending December 31, 2017 | $ | 63,800 | |||
| Fiscal year ending December 31, 2018 | 127,600 | ||||
| Fiscal year ending December 31, 2019 | 106,333 | ||||
| Total: | $ | 297,733 |
| b) | The Company has entered into two leases for Company vehicles until October 28, 2018 and September 21, 2019. The Company’s future minimum lease payments for the vehicle leases are as follows: |
| Fiscal year ending December 31, 2017 | 10,107 | ||||
| Fiscal year ending December 31, 2018 | 17,393 | ||||
| Fiscal year ending December 31, 2019 | 5,954 | ||||
| Total: | $ | 33,454 |
| 11 |
RESAAS SERVICES INC.
Notes to the Interim Consolidated Financial Statements
June 30, 2017
(Expressed in Canadian dollars except shares and options)
(Unaudited)
| 14. | Financial Instruments and Risk Management |
The Company is exposed in varying degrees to a variety of financial instrument and related risks. Those risks and management’s approach to mitigating those risks are as follows:
| (a) | Fair Values |
The fair values of financial instruments, which include cash and cash equivalents, amounts receivable, accounts payable and accrued liabilities, and obligations under finance lease approximate their carrying values due to the relatively short-term maturity of these instruments.
| (b) | Credit Risk |
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company’s exposure to credit risk is in its cash and receivables. Cash is held with major banks in Canada and the United States, which are high credit quality financial institutions as determined by rating agencies. The carrying amount of financial assets represents the maximum credit exposure.
Amounts Receivable
Amounts receivable consists of GST refunds which are due from the Government of Canada and at June 30, 2017, $39,642 of trade receivables is owed from eleven customers.
The following table represents the customers that represented 10% or more of total revenue for the six months ended June 30:
| 2017 | 2016 | |||||||
| Customer A | 22 | % | 30 | % | ||||
| Customer B | 32 | % | 51 | % | ||||
| Customer C | 11 | % | 11 | % | ||||
| (c) | Currency Risk |
The Company’s functional currency is the Canadian dollar. Currency risk is the risk that the fair value of the Company’s financial instruments will fluctuate because of changes in foreign currency exchange rates. The Company’s head office and operating expenses are mainly denominated in Canadian dollars. A large portion of the Company’s revenue is denominated in US dollars. If the US dollar depreciates compared to the Canadian dollar revenue would decrease in Canadian dollars. There is an immaterial foreign exchange risk to the Company as the Company still has a minimal amount of revenue.
| (d) | Interest Rate Risk |
The Company’s exposure to interest rate risk relates to its ability to earn interest income on cash balances at variable rates and its short-term term deposits at prescribed market rates. The fair value of the Company’s cash is not significantly affected by changes in short-term interest rates. The income earned from the bank accounts and short-term term deposits is subject to movements in interest rates.
| (e) | Liquidity and Funding Risk |
Liquidity risk arises through the excess of financial obligations over available financial assets due at any point in time. The Company’s objective in managing liquidity risk is to maintain sufficient readily available capital in order to meet its liquidity requirements. Management maintains sufficient cash to satisfy short-term liabilities in highly liquid investments.
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RESAAS SERVICES INC.
Notes to the Interim Consolidated Financial Statements
June 30, 2017
(Expressed in Canadian dollars except shares and options)
(Unaudited)
| 14. | Financial Instruments and Risk Management (continued) |
Funding risk is the risk that market conditions will impact the Company’s ability to raise capital through equity markets under acceptable terms and conditions. A summary of the Company’s obligations is as follows;
| As at June 30, 2017 | Carrying amount $ | Contractual cash flows $ | 1 year or less $ | 1 -5 Years $ | ||||||||||||
| Trade and other payables | 349,756 | 349,756 | 349,756 | — | ||||||||||||
| Obligations under finance lease | 8,450 | 9,115 | 5,782 | 3,333 | ||||||||||||
| 358,206 | 358,871 | 355,538 | 3,333 | |||||||||||||
| 13 |
