CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended November 30, 2022, 2021 and 2020
(Expressed in Canadian Dollars)
REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM
To the Shareholders and Directors of Plymouth Rock Technologies Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated financial statements of Plymouth Rock Technologies Inc. and its subsidiaries (the "Company"), which comprise the consolidated statement of financial position as at November 30, 2022, and the consolidated statements of loss and comprehensive loss, changes in shareholders' equity (deficiency), and cash flows for the year ended November 30, 2022, and the related notes, including a summary of significant accounting policies and other explanatory information (collectively referred to as the "consolidated financial statements").
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as at November 30, 2022, and its financial performance and its cash flows for the year ended November 30, 2022 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Material Uncertainty Related to Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 1 the Company has not generated revenue or cash flow from operations since inception. As at November 30, 2022, the Company has an accumulated deficit of $16,535,760 and incurred a comprehensive loss of $2,739,060 for the year ended November 30, 2022. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Critical Audit Matter
As described in Note 3 to the consolidated financial statements, the Company acquired 100% of the issued and outstanding ordinary shares of Tetra Drones Ltd. ("Tetra Drones") which resulted in the recognition of an intangible asset related to customer relationships. Management assesses whether any indication of impairment exists at the end of each reporting period with respect to finite life intangible assets. In this assessment, management applies significant judgement to assess the existence of impairment indicators that could give rise to the requirement to conduct a formal impairment test. Due to the judgements and assumptions involved in the making this assessment, we identified this area as critical audit matter.
We have determined that the assessment of existence of impairment indicators for the customer relationships is a critical audit matter primarily due to the application of judgment in assessing specific factors such as (a) the high degree of auditor judgement and subjectivity in performing procedures relating to the assessment of indicators of impairment, (b) significant changes with an adverse effect on the use of the intangible asset and (c) current period cash flow or operating losses, combined with very little history of operations associated with the use of the customer relationships. This led to a high degree of auditor judgment, subjectivity and effort in performing procedures to evaluate audit evidence relating to the judgements made by management in their assessment.
Addressing the critical audit matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. Our audit procedures included amongst others, (a) evaluating the reasonableness of management's assessment of indicators of impairment with respect to the customer relationships, (b) completion of our own assessment of impairment indicators, (c) a review of matters that impact the Company's ability to continue operations, and (d) evaluating whether there were adverse economic changes in the Company's industry by considering external observable market inputs.
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Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
Other Matter
The consolidated financial statements as at November 30, 2021 and for the years ended November 30, 2021 and 2020, which are presented for comparative purposes, were audited by another auditor who expressed an unmodified opinion on those consolidated financial statements on May 2, 2022.
/s/ Reliant CPA PC
CERTIFIED PUBLIC ACCOUNTANTS
Newport Beach, California 6906
March 30, 2023
We have served as the Company's auditor since 2023.
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PLYMOUTH ROCK TECHNOLOGIES INC.
Consolidated Statements of Financial Position
(Expressed in Canadian dollars)
As at | Note | November 30, 2022 | November 30, 2021 | ||||||
ASSETS | |||||||||
Current assets | |||||||||
Cash | $ | 13,127 | $ | 375,046 | |||||
Accounts receivable | 6,870 | 11,848 | |||||||
Sales tax receivable | 9,083 | 56,237 | |||||||
Inventories | 2,175 | 11,086 | |||||||
Prepaid expenses | 4 | 30,947 | 178,321 | ||||||
Total current assets | 62,202 | 632,538 | |||||||
Non-current assets | |||||||||
Equipment | 5 | 24,801 | 294,188 | ||||||
Right of use asset | 17 | 61,198 | 72,734 | ||||||
Intangible assets | 6 | - | 549,679 | ||||||
Total assets | $ | 148,201 | $ | 1,549,139 | |||||
LIABILITIES | |||||||||
Current liabilities | |||||||||
Accounts payable | 7 | $ | 1,063,863 | $ | 608,385 | ||||
Deferred revenue | 8 | 124,918 | - | ||||||
Lease liabilities | 17 | 66,403 | 39,221 | ||||||
Current portion of loans payable | 11 | 127,019 | 6,332 | ||||||
Due to related parties | 9 | 705,672 | 52,728 | ||||||
Total current liabilities | 2,087,875 | 706,666 | |||||||
Non-current liabilities | |||||||||
Lease liabilities | 17 | 9,394 | 47,125 | ||||||
Loan payable | 11 | - | 22,545 | ||||||
Total liabilities | 2,097,269 | 776,336 | |||||||
SHAREHOLDERS' EQUITY (DEFICIT) | |||||||||
Share capital | 13 | 11,851,771 | 11,834,582 | ||||||
Contributed surplus | 9,13 | 2,709,790 | 2,709,790 | ||||||
Accumulated other comprehensive income | 25,131 | 96,393 | |||||||
Deficit | (16,535,760 | ) | (13,867,962 | ) | |||||
Total shareholders' equity (deficit) | (1,949,068 | ) | 772,803 | ||||||
Total liabilities and shareholders' equity (deficit) | $ | 148,201 | $ | 1,549,139 |
Going concern - Note 1
Commitments - Note 16
Subsequent events - Note 22
These consolidated financial statements are authorized for issuance by the Board of Directors on March 28, 2023.
Approved on behalf of the Board:
"Thomas Nash" | "Khalid Al-Ali" |
Thomas Nash, Director | Khalid Al-Ali, Director |
The accompanying notes are an integral part of these consolidated financial statements.
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PLYMOUTH ROCK TECHNOLOGIES INC.
Consolidated Statements of Loss and Comprehensive Loss
(Expressed in Canadian dollars)
Years Ended November 30 | ||||||||||||
Note | 2022 | 2021 | 2020 | |||||||||
Sales | 20 | $ | 607,359 | $ | 184,396 | $ | 70,931 | |||||
Cost of sales | 191,175 | 103,109 | 31,316 | |||||||||
Gross profit | 416,184 | 81,287 | 39,615 | |||||||||
OPERATING EXPENSES | ||||||||||||
General and administrative | 18 | 2,345,980 | 3,320,081 | 1,596,658 | ||||||||
Selling | 18 | 177,428 | 709,010 | 1,081,478 | ||||||||
Research and development | 18 | 233,265 | 985,006 | 386,044 | ||||||||
Total expenses | 2,756,673 | 5,014,097 | 3,064,180 | |||||||||
OTHER INCOME (EXPENSES) | ||||||||||||
Gain on debt forgiveness | 19 | 234,303 | - | - | ||||||||
Impairment loss of intangible asset | 6 | (330,650 | ) | - | - | |||||||
Impairment loss of demo equipment | 5 | (236,677 | ) | - | - | |||||||
Interest income | - | - | 193 | |||||||||
Interest expense | - | - | (165 | ) | ||||||||
Paycheck protection program | 10 | - | - | 100,818 | ||||||||
Other Income | 5,042 | - | - | |||||||||
Foreign exchange loss | 673 | (42,024 | ) | (517 | ) | |||||||
NET LOSS BEFORE INCOME TAX | (2,667,798 | ) | (4,974,834 | ) | (2,924,236 | ) | ||||||
NET LOSS | (2,667,798 | ) | (4,974,834 | ) | (2,924,236 | ) | ||||||
OTHER COMPREHENSIVE INCOME | ||||||||||||
Foreign currency translation gain (loss) | (71,262 | ) | 30,603 | 19,546 | ||||||||
TOTAL COMPREHENSIVE LOSS | $ | (2,739,060 | ) | $ | (4,944,231 | ) | $ | (2,904,690 | ) | |||
LOSS PER SHARE, basic and diluted | $ | (0.05 | ) | $ | (0.09 | ) | $ | (0.08 | ) | |||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, basic and diluted | 59,310,826 | 53,075,143 | 37,525,451 |
The accompanying notes are an integral part of these consolidated financial statements.
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PLYMOUTH ROCK TECHNOLOGIES INC.
Consolidated Statements of Changes in Shareholders' Equity (Deficit)
(Expressed in Canadian dollars)
Accumulated other comprehensive losses | ||||||||||||||||||||||||
Share capital (Note 13) | Shares to be issued (Note 13) | |||||||||||||||||||||||
Number of shares | Amount | Subscriptions received | Contributed Surplus | Deficit | Total | |||||||||||||||||||
Balance, November 30, 2019 | 32,796,600 | $ | 5,676,498 | $ | 22,811 | $ | - | $ | 736,271 | $ | (5,968,892 | ) | $ | 46,244 | $ | 512,932 | ||||||||
Net loss for the year | - | - | - | - | - | (2,924,236 | ) | - | (2,924,236 | ) | ||||||||||||||
Shares issued for warrants exercised | 1,233,334 | 246,667 | - | - | - | - | - | 246,667 | ||||||||||||||||
Private placements | 8,232,330 | 1,367,325 | (22,811 | ) | - | 83,109 | - | - | 1,427,623 | |||||||||||||||
Share issuance costs | - | (38,727 | ) | - | - | - | - | - | (38,727 | ) | ||||||||||||||
Shares issued as compensation | 500,000 | 125,000 | - | - | - | - | - | 125,000 | ||||||||||||||||
Stock-based compensation | - | - | - | - | 479,107 | - | - | 479,107 | ||||||||||||||||
Foreign currency translation | - | - | - | - | - | - | 19,546 | 19,546 | ||||||||||||||||
Balance, November 30, 2020 | 42,762,264 | $ | 7,376,763 | $ | - | $ | - | $ | 1,298,487 | $ | (8,893,128 | ) | $ | 65,790 | $ | (152,088 | ) | |||||||
Net loss for the period | - | - | - | - | - | (4,974,834 | ) | - | (4,974,834 | ) | ||||||||||||||
Foreign currency translation loss | - | - | - | - | - | - | 30,603 | 30,603 | ||||||||||||||||
Shares issued for warrants exercised | 6,129,572 | 1,332,727 | - | - | - | - | - | 1,332,727 | ||||||||||||||||
Fair value of warrants exercised | - | 36,859 | - | - | (36,859 | ) | - | - | - | |||||||||||||||
Shares issued for options exercised | 425,000 | 222,500 | - | - | - | - | - | 222,500 | ||||||||||||||||
Fair value of options exercised | - | 158,106 | - | - | (158,106 | ) | - | - | - | |||||||||||||||
Private placements | 8,930,000 | 2,749,000 | - | - | 287,499 | - | - | 3,036,499 | ||||||||||||||||
Fair value of broker warrants granted | - | (174,427 | ) | - | - | 174,427 | - | - | - | |||||||||||||||
Shares issued to finders | 336,250 | (100,500 | ) | - | - | - | - | - | (100,500 | ) | ||||||||||||||
Finders' fees | - | (74,180 | ) | - | - | - | - | - | (74,180 | ) | ||||||||||||||
Shares issued as compensation | 656,250 | 307,734 | - | - | - | - | - | 307,734 | ||||||||||||||||
Stock-based compensation | - | - | - | - | 1,144,342 | - | - | 1,144,342 | ||||||||||||||||
Balance, November 30, 2021 | 59,239,336 | $ | 11,834,582 | $ | - | $ | - | $ | 2,709,790 | $ | (13,867,962 | ) | $ | 96,393 | $ | 772,803 | ||||||||
Net loss for the period | - | - | - | - | - | (2,667,798 | ) | - | (2,667,798 | ) | ||||||||||||||
Foreign currency translation loss | - | - | - | - | - | - | (71,262 | ) | (71,262 | ) | ||||||||||||||
Shares issued from services | 78,125 | 17,189 | - | - | - | - | - | 17,189 | ||||||||||||||||
Balance, November 30, 2022 | 59,317,461 | 11,851,771 | $ | - | $ | - | $ | 2,709,790 | (16,535,760 | ) | $ | 25,131 | $ | (1,949,068 | ) |
The accompanying notes are an integral part of these consolidated financial statements
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PLYMOUTH ROCK TECHNOLOGIES INC.
Consolidated Statements of Cash Flows
(Expressed in Canadian dollars)
Year ended November 30 | |||||||||
2022 | 2021 | 2020 | |||||||
Cash Provided By (Used In) | |||||||||
Operating Activities | |||||||||
Net loss for the period | $ | (2,667,798 | ) | $ | (4,974,834 | ) | $ | (2,924,236 | ) |
Items not affecting cash: | |||||||||
Stock based compensation | - | 1,144,342 | 479,107 | ||||||
Amortization expense | 286,745 | 143,783 | 41,201 | ||||||
Foreign exchange (gain) loss | (71,262 | ) | - | - | |||||
Interest accretion | 18,877 | 14,760 | 20,449 | ||||||
Impairment of development assets | - | - | 3,576 | ||||||
Impairment of demo equipment | 236,677 | - | - | ||||||
Gain on debt forgiveness | (234,303 | ) | - | - | |||||
Impairment of intangible asset | 330,650 | - | - | ||||||
Shares issued for services | 17,189 | 307,734 | 125,000 | ||||||
Changes in non-cash working capital: | |||||||||
Sales tax receivable | 47,154 | (51,583 | ) | 2,993 | |||||
Accounts receivable | 4,978 | (9,062 | ) | (1,334 | ) | ||||
Inventories | 8,911 | 8,609 | (19,695 | ) | |||||
Prepaid expenses | 147,374 | (140,868 | ) | 77,590 | |||||
Deferred revenue | 124,918 | - | - | ||||||
Due from related parties | - | 2,500 | (22,570 | ) | |||||
Due to related parties | 652,944 | (8,894 | ) | 36,320 | |||||
Accounts payable and accrued liabilities | 682,923 | 122,411 | 67,084 | ||||||
Net cash used in operating activities | (414,023 | ) | (3,441,102 | ) | (2,114,515 | ) | |||
Investing Activities | |||||||||
Purchase of equipment | - | (204,305 | ) | (57,518 | ) | ||||
Development expenses on Intangible assets | - | - | (3,576 | ) | |||||
Acquisition of business | - | (369,038 | ) | - | |||||
Net cash provided by (used in) investing activities | - | (573,343 | ) | (61,094 | ) | ||||
Financing Activities | |||||||||
Common shares issued for cash, options and warrants exercised, net of share issuance costs | - | 4,417,047 | 1,635,564 | ||||||
Lease payments | (34,701 | ) | (48,175 | ) | (48,473 | ) | |||
Loan payable | 105,000 | (42,430 | ) | - | |||||
Net cash provided by financing activities | 70,299 | 4,326,442 | 1,587,091 | ||||||
Increase (decrease) in cash | (343,724 | ) | 311,997 | (588,518 | ) | ||||
Effect of foreign exchange rate changes on cash | (18,195 | ) | 38,336 | 30,112 | |||||
Cash, beginning of the period | 375,046 | 24,713 | 583,119 | ||||||
Cash, end of the period | $ | 13,127 | $ | 375,046 | $ | 24,713 |
Supplemental cash flow information - Note 15
The accompanying notes are an integral part of these consolidated financial statements.
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PLYMOUTH ROCK TECHNOLOGIES INC. |
1. NATURE OF OPERATIONS AND ABILITY TO CONTINUE AS A GOING CONCERN
Plymouth Rock Technologies Inc. (the "Company") was incorporated under the Business Corporations Act of British Columbia on October 17, 2011. The head office, principal address and registered and records office of the Company are located at 700 - 1199 West Hastings Street, Vancouver, B.C., V6E 3T5.
The Company's common shares are listed on the CSE and on Frankfurt Stock Exchange in Germany under the Symbol: 4XA, WKN# - A2N8RH. The Company's common shares are also on the OTC Markets Group ("OTCQB") under the symbol: PLRTF.
The Company's principal business activity through its subsidiary, Plymouth Rock USA ("PRT USA"), focused on developing technologies related to remotely detecting assault firearms and suicide bombs concealed on the person or a carry bag. The Company focuses on detection methods with and without the need for a checkpoint of the suspect who is being screened. The Company's planned products encompass the very latest radar, imaging, and Unmanned Aerial System ("UAS") technologies for quickly detecting, locating and identifying the presence of threats and for search and rescue missions for law enforcement.
On March 26, 2021, the Company incorporated a subsidiary in United Kingdom, Plymouth Rock Technologies UK Limited ("PRT UK"). The purpose of PRT UK is to augment the Company's existing research and development of its drone technologies for the US and EMEA markets.
On June 4, 2021, the Company completed its acquisition of Tetra Drones Limited ("Tetra") (Note 3). The acquisition of Tetra provides the Company with drones production line in the United Kingdom.
Going Concern
These consolidated financial statements are prepared on a going concern basis, which contemplates 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 normal course of business. At present, the Company's operations do not generate cash flows from operations. The Company has incurred losses since inception and has a comprehensive loss of $2,739,060 for the year ended November 30, 2022 (2021 - $4,944,231; 2020 - $2,904,690) and had an accumulated deficit of $16,535,760 (2021 - $13,867,962). The ability of the Company to continue as a going concern is dependent on achieving profitable operations, commercializing its technologies, and obtaining the necessary financing in order to develop these technologies further. The outcome of these matters cannot be predicted at this time. The Company will continue to review the prospects of raising additional debt and equity financing to support its operations until such time that its operations become self-sustaining, to fund its research and development activities and to ensure the realization of its assets and discharge of its liabilities. While the Company is expanding its best efforts to achieve the above plans, there is no assurance that any such activity will generate sufficient funds for future operations. These factors and uncertainty casts significant doubt about the Company's ability to continue as a going concern and therefore it may be unable to realize its assets and discharge its liabilities in the normal course of business.
The Company is not expected to be profitable during the ensuing 12 months, and therefore, must rely on securing additional funds from either issuance of debt or equity financing for cash consideration. During the year ended November 30, 2022, the Company received net cash proceeds of $70,299 (2021 - 4,326,442; 2020 - 1,587,091) pursuant to financing activities. Management has been successful in raising capital through periodic private placements of the Company's common shares in the past, however there is no certainty that financing will be available in the future, or certainty that management's planned actions to address this situation will be successful.
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PLYMOUTH ROCK TECHNOLOGIES INC. |
1. NATURE OF OPERATIONS AND ABILITY TO CONTINUE AS A GOING CONCERN (continued)
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") with the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future rather than a process of forced liquidation. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence. Such adjustments could be material.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
These consolidated financial statements ("Financial Statements") have been prepared in accordance with IFRS as issued by the International Accounting Standard Board ("IASB") and interpretations of the International Financial Reporting Interpretations Committee ("IFRIC").
These Financial Statements are authorized for issue by the Board of Directors on March 28, 2023.
These Financial Statements have been prepared on the historical cost basis. In addition, these Financial Statements have been prepared using the accrual basis of accounting.
These Financial Statements are presented in Canadian dollars, which is the Company's functional currency. The functional currency of PRT USA is U.S. Dollars and the functional currency of PRT UK and Tetra is British Pound Sterling ("£"). The assets and liabilities of PRT USA, PRT UK and Tetra are translated into Canadian dollars at the rate of exchange prevailing at the reporting date and their income and expense items are translated at average exchange rates for the period. Exchange differences arising on the translation are recognized in other comprehensive income.
Significant accounting judgments, estimates and assumptions
The preparation of these Financial Statements in conformity with IFRS requires management to make judgments and estimates and form assumptions that affect the reported amounts of assets and liabilities at the date of the Financial Statements and reported amounts of income and expenses during the period. Actual results could differ from these estimates.
Significant estimates used in preparing the Financial Statements include, but are not limited to the following:
a. Deferred taxes
The calculation of deferred tax is based on the ability of the Company to generate future taxable income, the estimation of which is subject to significant uncertainty as to the amount and timing. The calculation of deferred tax is also based on assumptions, which are subject to uncertainty as to timing and which tax rates are expected to apply when temporary differences reverse. Deferred tax recorded is also subject to uncertainty regarding the magnitude on non-capital losses available for carry forward and of the balances in various tax pools as the corporate tax returns have not been prepared as of the date of financial statement preparation.
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PLYMOUTH ROCK TECHNOLOGIES INC. |
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Significant accounting judgments, estimates and assumptions (continued)
b. Stock-based payments
The fair value of stock options and finders' warrants issued are subject to the limitations of the Black-Scholes option pricing model that incorporates market data and involves uncertainty in estimates used by management in the assumptions. Because the Black-Scholes option pricing model requires the input of highly subjective assumptions, including the expected lift, volatility of share prices, risk-free rate and dividend yield, changes in subjective input assumptions can materially affect the fair value estimate.
c. Impairment of non-financial assets
Impairment exists when the carrying value of an asset or cash generating unit ("CGU") exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from binding sales transactions in an arm's length transaction of similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model.
d. Leases
Management uses estimation in determining the incremental borrowing rate used to measure the lease liability, specific to the asset, underlying currency and geographic location.
Significant judgments used in the preparation of these Financial Statements include, but are not limited to the following:
(i) Going concern
Management has applied judgements in the assessment of the Company's ability to continue as a going concern when preparing its Financial Statements for the year ended November 30, 2022. Management prepares the Financial Statements on a going concern basis unless management either intends to liquidate the entity or to cease trading or has no realistic alternative but to do so.
In assessing whether the going concern assumption is appropriate, management accounts for all available information about the future, which is at least, but is not limited to, twelve months from the end of the reporting period.
(ii) Business combinations
Determination of whether a set of assets acquired and liabilities assumed constitute the acquisition of a business or asset may require the Company to make certain judgments as to whether or not the assets acquired and liabilities assumed include the inputs, processes and outputs necessary to constitute a business as defined in IFRS 3 - Business Combinations. Based on an assessment of the relevant facts and circumstances, the Company concluded that the acquisition disclosed in Note 3 met the criteria for accounting as a business combination.
(iii) Intangible assets
Intangible assets can be capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use or sell the asset. To determine if the future economic benefit is probable depends on the successful commercialization of its technologies and that in turn depends on the management's judgement and knowledge. As at November 30, 2022, the development costs are not capitalized as management was unable to demonstrate the future economic benefits to be generated from the utilization of the associated expenditures.
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PLYMOUTH ROCK TECHNOLOGIES INC. |
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Cash
Cash consists of amounts held in banks and highly liquid investments with limited interest and credit risk.
Consolidation
The Financial Statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany balances, transactions and any unrealized gains and losses arising from intercompany transactions, have been eliminated. The Company's subsidiary is presented in the table below. Plymouth Rock USA was incorporated under the General Corporation Law of the State of Delaware on March 22, 2018. Plymouth Rock UK was incorporated under the General Corporation Law for England and Wales on March 26, 2021.Tetra Drones was incorporated under the General Corporation Law for England and Wales and was acquired by the Company on June 4, 2021.
Entity | Country of Incorporation | Effective Economic Interest |
Plymouth Rock Technologies Inc. ("Plymouth Rock USA") | USA | 100% |
Plymouth Rock Technologies Inc. ("PRT UK") | UK | 100% |
Tetra Drones Ltd. ("Tetra Drones") | UK | 100% |
Intangible assets
Intangible assets that are reflected in the consolidated statements of financial position consist of assets acquired through business combinations. Intangible assets acquired in a business combination are recognized separately from goodwill and are initially recognized at their fair value at the acquisition date (which is regarded as their cost). An intangible asset is regarded as having an indefinite useful life when, based on all relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows. Accordingly, the Company does not amortize these intangible assets, but reviews them for impairment, annually or more frequently if events or changes in circumstances indicate that the assets might be impaired.
Development costs for internally-generated intangible assets are capitalized when all of the following conditions are met:
- technical feasibility can be demonstrated;
- management has the intention to complete the intangible asset and use it;
- management can demonstrate the ability to use the intangible asset;
- it is probable that the intangible asset will generate future economic benefits;
- the Company can demonstrate the availability of adequate technical, financial and other resources to complete the development and to use the intangible asset; and
- costs attributable to the asset can be measured reliably.
The amount initially recognized for internally-generated intangible assets is the sum of the expenditures incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognized, development expenditures are charged to the consolidated statements of loss and comprehensive loss in the period in which they are incurred.
Customer relationships acquired through the acquisition of subsidiary, Tetra Drones, are amortized for a period of three years from acquisition date.
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PLYMOUTH ROCK TECHNOLOGIES INC. |
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Equipment
Recognition and measurement
On initial recognition, equipment is valued at cost, being the purchase price and directly attributable cost of acquisition or construction required to bring the asset to the location and condition necessary to be capable of operating in the manner intended by the Company, including appropriate borrowing costs and the estimated present value of any future unavoidable costs of dismantling and removing the items. The corresponding liability is recognized within provisions.
Equipment is subsequently measured at cost less accumulated depreciation, less any accumulated impairment losses.
When parts of an item of equipment have different useful lives, they are accounted for as separate items (major components) of equipment.
Gains and losses
Gains and losses on disposal of an item of equipment are determined by comparing the proceeds from disposal with the carrying amount and are recognized net within other income in profit or loss.
Depreciation
Half of the normal depreciation is taken in the year of acquisition for equipment with declining balance method. The depreciation rates applicable to each category of property and equipment are as follows:
Computer equipment 55% declining balance | Vehicles 30% declining balance |
Furniture 20% declining balance | Leasehold improvements 30% declining balance |
Demo equipment 20% declining balance |
Inventories
The Company values inventories at the lower of cost and net realizable value. Cost includes the costs of purchases net of vendor allowances plus other costs, such as transportation, that are directly incurred to bring the inventories to their present location and condition.
Business combinations
Business combinations are accounted for using the acquisition method. The cost of the acquisition is measured at the aggregate of the fair values at the date of acquisition, of assets transferred, liabilities incurred or assumed, and equity instruments issued by the Company. The acquiree's identifiable assets and liabilities assumed are recognized at their fair value at the acquisition date. Acquisition-related costs are recognized in profit or loss as incurred. The excess of consideration over the fair value of the net identifiable assets and liabilities acquired is recorded as goodwill. Any gain on a bargain purchase is recorded in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities. Any goodwill that arises is tested annually for impairment.
Share capital
The Company records proceeds from the issuance of its common shares as equity. Proceeds received on the issuance of units, consisting of common shares and warrants, are allocated between the common share and warrant component. The Company has adopted a residual value method with respect to the measurement of shares and warrants issued as private placement units. The residual value method first allocates value to the most easily measurable component based on fair value and then the residual value, if any, to the less easily measurable component.
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PLYMOUTH ROCK TECHNOLOGIES INC. |
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Share capital (continued)
The fair value of the common shares issued in the private placement was determined to be the more easily measurable component and were valued at their fair value, as determined by the closing quoted price on the issuance date. The remaining proceeds, if any, are allocated to the attached warrants. Any fair value attributed to the warrants is recorded as warrant reserve. Management does not expect to record a value to the warrant in most equity issuances as unit private placements are commonly priced at market or at a permitted discount to market. If the warrants are issued as share issuance costs, the fair value of agent's warrants are measured using the Black-Scholes option pricing model and recognized in equity as a deduction from the proceeds.
If the warrants are exercised, the related amount is reclassified as share capital. If the warrants expire unexercised, the related amount remains in warrant reserve.
Incremental costs directly attributable to the issue of new common shares are shown in equity as a deduction, net of tax, from the proceeds. Common shares issued for consideration other than cash are valued based on their market value at the date that shares are issued.
Stock-based payment
The Company recognizes share-based payment expense for the estimated fair value of equity-based instruments granted to both employees and non-employees. Compensation expense is recognized when the options are granted with the same amount being recorded as contributed surplus. The expense is determined using an option pricing model that accounts for the exercise price, the term of the option, the current share price, the expected volatility of the underlying shares, the expected dividend yield, and the risk-free interest rate for the term of the option. If the options are exercised, the contributed surplus will be reduced by the applicable amount. Share-based payment calculations have no effect in the Company's cash position.
Earnings (loss) per share
Basic earnings (loss) per share are calculated using the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share are calculated using the treasury stock method. This method assumes that common shares are issued for the exercise of options, warrants and convertible securities and that the assumed proceeds from the exercise of options, warrants and convertible securities are used to purchase common shares at the average market price during the period. The difference between the number of shares assumed issued and the number of shares assumed purchased is then added to the basic weighted average number of shares outstanding to determine the fully diluted number of common shares outstanding. No exercise or conversion is assumed during the periods in which a net loss is incurred as the effect is anti-dilutive.
Financial instruments
Financial assets
The Company recognizes financial assets when it becomes party to the contractual provisions of the instrument. Financial assets are measured initially at their fair value plus, in the case of financial assets not subsequently measured at fair value through profit or loss, transaction costs that are directly attributable to their acquisition. Transaction costs attributable to the acquisition of financial assets subsequently measured at fair value through profit or loss are expensed in profit or loss when incurred.
Subsequent to initial recognition, all financial assets are classified and subsequently measured at amortized cost. Interest income is calculated using the effective interest method and gains or losses arising from impairment, foreign exchange and derecognition are recognized in profit or loss. Financial assets measured at amortized cost are comprised of cash, accounts receivable and due from related parties.
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PLYMOUTH ROCK TECHNOLOGIES INC. |
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial assets (continued)
The Company reclassifies debt instruments only when its business model for managing those financial assets has changed. Reclassifications are applied prospectively from the reclassification date and any previously recognized gains, losses or interest are not restated.
The Company recognizes a loss allowance for the expected credit losses associated with its financial assets. Expected credit losses are measured to reflect a probability-weighted amount, the time value of money, and reasonable and supportable information regarding past events, current conditions and forecasts of future economic conditions.
The Company applies the simplified approach for accounts receivable that do not contain a significant financing component. Using the simplified approach, the Company records a loss allowance equal to the expected credit losses resulting from all possible default events over the assets' contractual lifetime.
Financial assets are written off when the Company has no reasonable expectations of recovering all or any portion thereof.
The Company derecognizes a financial asset when its contractual rights to the cash flows from the financial asset expire.
Financial liabilities
The Company recognizes a financial liability when it becomes party to the contractual provisions of the instrument. At initial recognition, the Company measures financial liabilities at their fair value plus transaction costs that are directly attributable to their issuance, with the exception of financial liabilities subsequently measured at fair value through profit or loss for which transaction costs are immediately recorded in profit or loss.
Subsequent to initial recognition, all financial liabilities are measured at amortized cost using the effective interest rate method. Interest, gains, and losses relating to a financial liability are recognized in profit or loss. Financial liabilities measured at amortized cost are comprised of accounts payable, lease liability, and due to related parties.
The Company derecognizes a financial liability only when its contractual obligations are discharged, cancelled or expire.
Interest
Interest income and expense are recognized in profit or loss using the effective interest method.
The 'effective interest rate' is the rate that exactly discounts estimated future cash payments over the expected life of the financial instrument to the gross carrying amount of the financial asset or the amortized cost of the financial liability. The effective interest rate is calculated considering all contractual terms of the financial instruments, except for the expected credit losses of financial assets.
The 'amortized cost' of a financial asset or financial liability is the amount at which the instrument is measured on initial recognition minus principal repayments, plus or minus any cumulative amortization using the effective interest method of any difference between the initial amount and maturity amount and adjusted for any expected credit loss allowance. The 'gross carrying amount' of a financial asset is the amortized cost of a financial asset before adjusting for any expected credit losses.
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PLYMOUTH ROCK TECHNOLOGIES INC. |
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Interest (continued)
Interest income and expense is calculated by applying the effective interest rate to the gross carrying amount of the financial asset (when the asset is not credit-impaired) or the amortized cost of the financial liability.
Where a financial asset has become credit-impaired subsequent to initial recognition, interest income is calculated in subsequent periods by applying the effective interest method to the amortized cost of the financial asset. If the asset subsequently ceases to be credit-impaired, calculation of interest income reverts to the gross basis.
Offsetting
Financial assets and financial liabilities are offset, with the net amount presented in the statement of financial position, when, and only when, the Company has a current and legally enforceable right to set off the recognized amounts and intends either to settle on a net basis or realize the asset and settle the liability simultaneously.
Income and expenses are presented on a net basis only when permitted under IFRS, or when arising from a group of similar transactions if the resulting income and expenses are not material.
Revenue recognition
Revenue is recognized by applying the five-step model under IFRS 15. The Company recognizes revenue when, or as the goods or services are transferred to the control of the customer and performance obligations are satisfied. The Company's revenue is comprised of sales of its radar systems, radar components and engineering design and development services. The Company's revenue is recognized when control of the goods has been transferred, being when the goods are delivered to customers and when all performance obligations have been fulfilled. The amounts recognized as revenue represent the fair values of the considerations received or receivable from third parties on the sales of goods to customers, net of goods and services taxes and less returns, and discounts, at which time there are no conditions for the payment to become due other than the passage of time. For its engineering design and development services, revenue is recognized when the service has been rendered.
Government Grants
Government grants are recognized at fair value once there is reasonable assurance that the Company will comply with the conditions attached to the grants and that the grants will be received. Government grants are recognized in profit or loss on a systematic basis over the periods in which the Company recognizes as expenses the related costs for which the grants are intended to compensate. A forgivable loan from government is treated as a government grant when there is reasonable assurance that the entity will meet the terms for forgiveness of the loan.
Income taxes
Income tax is recognized in profit or loss except to the extent that it relates to equity items, in which case it is recognized in equity. Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted at period end, adjusted for amendments to tax payable with regards to previous years. Deferred tax is recorded using the liability method, providing for temporary differences, between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences do not result in deferred tax assets or liabilities: goodwill not deductible for tax purposes; the initial recognition of assets or liabilities that affect neither accounting profit (loss) nor taxable profit (loss); and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the financial position date.
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PLYMOUTH ROCK TECHNOLOGIES INC. |
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Income taxes (continued)
A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.
Related party transactions
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions.
Parties are also considered to be related if they are subject to common control and related parties may be individuals or corporate entities. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.
Leases
The company adopted IFRS 16 effective December 1, 2019. The Company chose to adopt the modified retrospective approach on transition to IFRS 16 and has chosen not to restate comparative information in accordance with the transitional provisions in IFRS 16. As a result, the comparative information continues to be presented in accordance with the Company's previous accounting policies. The adoption of IFRS 16 resulted in the recognition of a right-of-use asset and a lease liability measured at the present value of the future lease payments on the consolidated statements of financial position. An amortization expense on the right-of-use asset and an interest expense on the lease liability has replaced the operating lease expense. IFRS 16 has changed the presentation of cash flows relating to leases in the Company's consolidated statements of cash flows, however, it does not cause a difference in the amount of cash transferred between the parties of the lease.
Accounting standards, amendments and interpretations not yet effective
Certain new standards, interpretations and amendments to existing standards have been issued by the IASB or the IFRIC during the period but are not yet effective. Some updates that are not applicable or are not consequential to the Company may have been excluded from the list below.
IAS 1 - Presentation of Financial Statements ("IAS 1") - Classification of Liabilities as Current or Noncurrent were amended to clarify that the classification of liabilities as current or non-current is based on rights that are in existence at the end of the reporting period, specify that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability, explain that rights are in existence if covenants are complied with at the end of the reporting period, and introduce a definition of 'settlement' to make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services. The amendments are effective for annual reporting periods beginning on or after January 1, 2023. Earlier adoption is permitted.
IAS 16 - Property, Plant and Equipment - Proceeds before Intended Use - The amendments prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced before that asset is available for use, i.e. proceeds while bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Consequently, an entity recognizes such sales proceeds and related costs in profit or loss. The entity measures the cost of those items in accordance with IAS 2 Inventories. The amendments are effective for annual reporting periods beginning on or after January 1, 2022. Earlier adoption is permitted.
These new and amended standards are not expected to have a material impact on the Company's Financial Statements
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PLYMOUTH ROCK TECHNOLOGIES INC. |
3. ACQUISITION
On June 4, 2021, the Company acquired the 100% issued and outstanding ordinary shares of Tetra from two arm's length parties for £350,000. Tetra was a privately held UK-based company which develops custom-made, Unmanned Aircraft Systems ("UAS"). The consideration of £350,000 ($579,682) is payable as follows:
1) An amount of £35,000 ($60,021) within 7 days after the execution and delivery of the definitive agreement by all parties, paid on June 12, 2021;
2) An amount of £35,000 ($60,479) (paid) within 21 days of the initial payment as described in instalment 1 above, paid on July 9, 2021;
3) An amount of £140,000 ($236,411) (paid) within 120 days of the second instalment as described above, paid on November 8, 2021 ("the third payment"); and
4) The remaining balance of £140,000 ($222,771) (see Note 19 - Gain on debt forgiveness) within 120 days of the third payment, forgiven in return of the full release of the leased vehicle and allowing the former sole shareholder of Tetra to continue working within the industry.
The Company applied the optional concentration test permitted under IFRS 3 to the acquisition which resulted in the acquired assets being accounted for as an asset acquisition. As such the purchase price was allocated to the identifiable assets and liabilities based on their fair values at the date of acquisition.
The allocation of the consideration for the purposes of the consolidated statements of financial position is as follows:
Total Consideration | |||
Cash | $ | 579,682 | |
Net assets acquired (liabilities assumed) | |||
Cash indebtedness | $ | (12,127 | ) |
Equipment | 27,799 | ||
Prepaid expenses | 11,131 | ||
Due to a related party | (13,699 | ) | |
Bank loan | (40,447 | ) | |
Accounts payable | (19,210 | ) | |
Vehicle loan | (30,859 | ) | |
Net assets acquired (liabilities assumed) | $ | (77,412 | ) |
Purchase price allocation | |||
Net identifiable assets acquired | $ | (77,412 | ) |
Customer relationships | 657,094 | ||
$ | 579,682 |
As at November 30, 2022 and 2021, the Company's prepaid expenses consist of the following:
November 30, 2022 | November 30, 2021 | |||||
Advertising and promotions | $ | 113 | $ | 127,664 | ||
Rent | 8,247 | 11,211 | ||||
Transfer agent and filing fees | 13,748 | 13,020 | ||||
Insurance | 8,839 | 8,382 | ||||
Others | - | 18,044 | ||||
$ | 30,947 | $ | 178,321 |
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PLYMOUTH ROCK TECHNOLOGIES INC. |
4. PREPAID EXPENSES (continued)
The prepayments for advertising include prepayments for marketing and awareness programs handled by an arms' length parties for a six to twelve-month period.
Others include prepayments for some office expenses.
As at November 30, 2022, others include $Nil prepayment to related parties (2021 - $5,513) (Note 9).
5. EQUIPMENT
Computer | Furniture | Vehicles | Leasehold Improvement | Demo Equipment | Total | |||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||||
Cost: | ||||||||||||||||||
Balance at November 30, 2020 | 1,684 | 12,151 | - | - | 57,518 | 71,353 | ||||||||||||
Additions | 22,664 | 7,244 | 16,243 | 3,881 | 184,484 | 234,516 | ||||||||||||
Foreign currency translation adjustment | (320 | ) | (124 | ) | (229 | ) | (55 | ) | (2,255 | ) | (2,983 | ) | ||||||
Balance at November 30, 2021 | 24,028 | 19,271 | 16,014 | 3,826 | 239,747 | 302,886 | ||||||||||||
Disposal | - | - | (16,243 | ) | - | - | (16,243 | ) | ||||||||||
Foreign currency translation adjustment | (997 | ) | 190 | 229 | (182 | ) | 3,158 | 2,398 | ||||||||||
Balance at November 30, 2022 | 23,031 | 19,461 | - | 3,644 | 242,905 | 289,041 | ||||||||||||
Accumulated Depreciation: | ||||||||||||||||||
Balance at November 30, 2020 | 1,134 | 3,401 | - | - | - | 4,535 | ||||||||||||
Amortization | 561 | 2,055 | 1,201 | 287 | - | 4,104 | ||||||||||||
Foreign currency translation adjustment | 21 | 17 | �� | 17 | 4 | - | 59 | |||||||||||
Balance at November 30, 2021 | 1,716 | 5,473 | 1,218 | 291 | - | 8,698 | ||||||||||||
Amortization | 9,236 | 2,688 | 4,210 | 1,006 | - | 17,140 | ||||||||||||
Disposal | - | - | (5,375 | ) | - | - | (5,375 | ) | ||||||||||
Impairment | 236,677 | 236,677 | ||||||||||||||||
Foreign currency translation adjustment | 642 | 296 | (53 | ) | (13 | ) | 6,228 | 7,100 | ||||||||||
Balance at November 30, 2022 | 11,594 | 8,457 | - | 1,284 | 242,905 | 264,240 | ||||||||||||
Net Book Value: | ||||||||||||||||||
At November 30, 2021 | 22,312 | 13,798 | 14,796 | 3,535 | 239,747 | 294,188 | ||||||||||||
At November 30, 2022 | 11,437 | 11,004 | - | 2,360 | - | 24,801 |
6. INTANGIBLE ASSETS
During the year ended November 30, 2021, the Company acquired Tetra (Note 3).Included in the acquisition is the identifiable intangible asset, customer relationships valued at $657,094.The intangible asset is being amortized over its estimated useful life of three years. For the year ended November 30, 2022, the Company determined that the intangible asset is fully impaired as there is no future economic benefits will derived from this asset.
Cost: | Customer relationship | ||
Balance at November 30, 2020 | $ | - | |
Additions | 657,094 | ||
Balance at November 30, 2021 and November 30, 2022 | 657,094 | ||
Accumulated amortization: | |||
Balance at November 30, 2020 | - | ||
Amortization | (107,415 | ) | |
Balance at November 30, 2021 | (107,415 | ) | |
Amortization | (219,029 | ) | |
Impairment | (330,650 | ) | |
Balance at November 30, 2022 | (657,094 | ) | |
Net book value | |||
Balance at November 30, 2021 | $ | 549,679 | |
Balance at November 30, 2022 | $ | - |
7. ACCOUNTS PAYABLE
As at November 30, 2022 and 2021, the Company's accounts payable consist of the following:
November 30, 2022 | November 30, 2021 | |||||
Professional fees | $ | 382,805 | $ | 92,078 | ||
Funds to be returned to investors | 43,046 | 43,046 | ||||
Due to former shareholder of Tetra (Note 3, 19) | - | 222,771 | ||||
Advertising costs | 34,705 | 42,241 | ||||
Payroll | 268,610 | 33,173 | ||||
Development costs | 168,925 | 123,334 | ||||
Bank overdraft | 16,036 | - | ||||
VAT Payable | 61,262 | 4,735 | ||||
Purchases | 2,121 | - | ||||
Rent | 1,822 | - | ||||
Others | 84,531 | 47,007 | ||||
$ | 1,063,863 | $ | 608,385 |
8. Deferred Revenue
As at November 30, 2022 and 2021, the Company received an advance payment from their customers as consideration for the Company's products and services to be rendered in the future date amounting to $124,918 (2021 - $nil).
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PLYMOUTH ROCK TECHNOLOGIES INC. |
9. RELATED PARTY TRANSACTIONS AND BALANCES
Key management compensation
The amounts due to and from related parties are due to the directors and officers of the Company. The balances are unsecured, non-interest bearing and due on demand. These transactions are in the normal course of operations and have been valued in these consolidated financial statements at the exchange amount, which is the amount of consideration established and agreed to by the related parties. Key management is comprised of directors and officers of the Company
As at November 30, 2022, $Nil (2021 - $5,513) prepayment to directors and officers of the Company.
As at November 30, 2022, $705,672 (2021 - $52,728) was due to directors and officers of the Company:
November 30, 2022 | November 30, 2021 | |||||
Company controlled by the CFO | $ | 67,540 | $ | - | ||
Company controlled by the Corporate Secretary | - | 10,500 | ||||
CEO of the Company | 250,179 | 561 | ||||
Director | 387,953 | 41,667 | ||||
$ | 705,672 | $ | 52,728 |
During the years ended November 30, 2022 and 2021 and 2020, the Company entered into the following transactions with related parties:
November 30, 2022 | November 30, 2021 | November 30, 2020 | |||||||
Management fees | $ | 311,535 | $ | 118,000 | $ | 114,125 | |||
Consulting fees | 135,000 | 307,734 | 166,667 | ||||||
Accounting fees | - | 36,202 | 22,852 | ||||||
Rent | - | 5,000 | 20,000 | ||||||
Share-based payments | - | 410,132 | 271,993 | �� | |||||
Salaries and benefits to CEO | 330,337 | 313,626 | 133,387 | ||||||
$ | 776,872 | $ | 1,190,694 | $ | 729,024 |
Management fees consisted of the following:
November 30, 2022 | November 30, 2021 | November 30, 2020 | |||||||
Company controlled by CEO | $ | 243,387 | $ | 63,000 | $ | 55,125 | |||
Company controlled by the Former CFO | - | 55,000 | 59,000 | ||||||
Company controlled by the CFO | 68,148 | - | - | ||||||
$ | 311,535 | $ | 118,000 | $ | 114,125 |
Consulting fees consisted of the following:
November 30, 2022 | November 30, 2021 | November 30, 2020 | |||||||
Company controlled by the Former Corporate Secretary | $ | 60,000 | $ | - | $ | - | |||
Directors | 75,000 | 307,734 | 166,667 | ||||||
$ | 135,000 | $ | 307,734 | $ | 166,667 |
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PLYMOUTH ROCK TECHNOLOGIES INC. |
9. RELATED PARTY TRANSACTIONS AND BALANCES (continued)
During the year ended November 30, 2022, the Company had 1,650,000 (2021 -1,725,000) stock options held by the CEO, Former CFO, the Former Corporate Secretary, and the Company's directors. The amount recognized as expense for these options for the years ended November 30, 2022, 2021 and 2020 are as follows:
November 30, 2022 | November 30, 2021 | November 30, 2020 | ||||||||||||||||
Number of Options held | Expense for the year (vested) | Number of options held | Expense for the year (vested) | Number of Options held | Expense for the year (vested) | |||||||||||||
CEO | 600,000 | $ | - | 600,000 | $ | 133,275 | 400,000 | $ | 44,455 | |||||||||
Former CFO | 150,000 | - | 150,000 | 33,319 | 100,000 | 11,113 | ||||||||||||
Former Corporate Secretary | 150,000 | - | 150,000 | 33,319 | 100,000 | 11,113 | ||||||||||||
Directors | 750,000 | - | 825,000 | 210,219 | 1,050,000 | 205,312 | ||||||||||||
1,650,000 | $ | - | 1,725,000 | $ | 410,132 | 1,650,000 | $ | 271,993 |
During the year ended November 30, 2022, the Company also issued 78,125 (2021 - 656,250 and 2020- 500,000) common shares as compensation for consulting fees to a director valued at a total of $17,189 (2021 - $307,734 and 2020 - $125,000) (Note 13).
10. GOVERMENT ASSISTANCE RECEIVED
On May 4, 2020, the Company received a CARES Act Paycheck Protection Program Loan ("PPP Loan") of USD$75,000. The PPP Loan bears interest at 1% per annum and is repayable monthly staring on December 4, 2020. The loan is forgivable if PRT USA meets the requirements outlined below.
i) The loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 24-week period after the loan is made; and
ii) Employee and compensation levels are maintained. Payroll costs are capped at $100,000 on an annualized basis for each employee.
During the year ended November 30, 2021, it was determined that the Company met the requirements for loan forgiveness, and Company received notice of loan forgiveness on March 16, 2021, therefore there was no loan recognized. As such, the PPP Loan was treated as a government grant and was offset against operating expenses on the consolidated statement of loss and comprehensive loss for the year ended November 30, 2021.
11. LOANS PAYABLE
Upon acquisition of Tetra Drones (Note 3, 19), the Company assumed the latter's outstanding loan of £13,253 ($21,461) as of November 30, 2022. The collateral of this loan is a vehicle. On October 25, 2022, the loan and the vehicle were released to former shareholder of Tetra Drones in exchange of forgoing the remaining acquisition cost of £140,000 ($222,771). Thus, for the year ended November 30, 2022, the Company's liabilities in the vehicle and the remaining balance in the acquisition cost were extinguished.
For the year ended November 30, 2022, the current loan payable of $127,019 consisted of $75,000 plus interest of $4,019 payable to a third party, which is equal to 12% interest per annum payable on demand. This includes as well the $30,000 plus interest of $3,000, a 10% interest payable to another third party for four calendar months from the date of promissory note. As of the year ended November 30, 2022, the company is now liable to pay total interest of $18,000 including the $3,000 interest as they are considered in default. Total proceeds of $105,000 was received by the Company for these loans.
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PLYMOUTH ROCK TECHNOLOGIES INC. |
12. CAPITAL MANAGEMENT
The Company considers its capital structure to include net residual equity of all assets, less liabilities. The Company's objectives when managing capital are to (i) maintain financial flexibility in order to preserve its ability to meet financial obligations and continue as a going concern; (ii) maintain a capital structure that allows the Company to pursue the development of its projects and products; and (iii) optimize the use of its capital to provide an appropriate investment return to its shareholders commensurate with risk.
The Company's financial strategy is formulated and adapted according to market conditions in order to maintain a flexible capital structure that is consistent with its objectives and the risk characteristics of its underlying assets. The Company manages its capital structure and adjusts it in light of changes in economic conditions and the risk characteristics of its underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares or acquire or dispose of assets.
13. SHARE CAPITAL
(a) Common Shares
Authorized: Unlimited number of common shares without par value
As at November 30, 2022, there were 59,317,461 common shares issued and outstanding
(2021 - 59,239,336).
During the year ended November 30, 2022:
On December 31, 2021, the Company issued 78,125 common shares as compensation for consulting fees to a director valued at a total of $17,189.
During the year ended November 30, 2021:
On August 9, 2021, the Company issued 5,750,000 Units at $0.40 per unit for proceeds of $2,300,000. Each unit comprised one common share and one full non-transferable common share purchase warrant, with each warrant entitling the holder to purchase one additional common share at a price of $0.50 for five years. The Company paid cash of $63,700, issued 166,250 finders' Units with a fair value of $66,500 and 325,750 broker warrants as finder's fees. Each finders' Unit comprised of one common share and one full non-transferable common share purchase warrant, with exercise price of $0.50 per share for five years. The broker warrants are exercisable at $0.50 per share for five years. .
On January 29, 2021, the Company issued 3,180,000 Units at $0.20 per unit for proceeds of $636,000. Each unit comprised one common share and one full non-transferable common share purchase warrant, with each warrant entitling the holder to purchase one additional common share at a price of $0.25 for five years. The Company paid cash of $10,480, issued 170,000 finders' Units with a fair value of $34,000 and 222,400 broker warrants as finder's fees. Each finder's Unit comprised of one common share and one full non-transferable common share purchase warrant with exercise price of $0.25 per share for five years. The broker warrants are exercisable at $0.25 per share for five years.
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PLYMOUTH ROCK TECHNOLOGIES INC. |
13. SHARE CAPITAL (continued)
(a) Common Shares (continued)
During the year ended November 30, 2021, the Company issued 425,000 common shares for gross proceeds of $222,500 from the exercise of 425,000 stock options at $0.50 to $0.60 per share.
During the year ended November 30, 2021, the Company issued 6,129,573 common shares for gross proceeds of $1,332,727 from the exercise of 6,129,573 share purchase warrants at $0.20 to $0.50 per share.
During the year ended November 30, 2021, the Company issued 656,250 common shares with total fair value of $307,734 were issued as compensation for consulting fees to a director (Note 9).
During the year ended November 30, 2020:
On September 30, 2020, the Company issued 50,000 common shares pursuant to the exercise of 50,000 share purchase warrants at $0.20 per share.
On September 30, 2020, the Company issued 250,000 common shares were issued as compensation for consulting fees to a director (Note 9) valued at a total of $62,500.
On September 30, 2020, the Company issued an aggregate of 1,335,165 units at a price of $0.30 per unit for gross proceeds of $400,550. Each Unit consists of one common share and one-half of one non-transferable common share purchase warrant (a "Warrant"). Each whole Warrant entitles the holder to purchase one additional common share at a price of $0.50 for two years until September 30, 2022. The fair value of the warrants is determined to be $40,055.
On September 30, 2020, the Company issued 50,000 units at a fair value of $22,811 pursuant to the binding agreement with Aerowave Corporation. Each Unit consists of one common share and one-half of one non-transferable common share purchase warrant (a "Warrant"). Each whole Warrant entitles the holder to purchase one additional common share at a price of $0.50 for two years until September 30, 2022. The fair value of the warrants is determined to be $1,500.
On September 24, 2020, the Company issued 100,000 common shares pursuant to the exercise of 100,000 share purchase warrants at $0.20 per share.
On September 22, 2020, the Company issued 100,000 common shares pursuant to the exercise of 100,000 share purchase warrants at $0.20 per share.
On August 21, 2020, the Company issued 250,000 common shares were issued as compensation for consulting fees to a Director (Note 9) valued at a total of $62,500.
On August 13, 2020, the Company issued 483,334 common shares pursuant to the exercise of 483,334 share purchase warrants at $0.20 per share.
On July 3, 2020, the Company issued 500,000 common shares pursuant to the exercise of 500,000 share purchase warrants at $0.20 per share.
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PLYMOUTH ROCK TECHNOLOGIES INC. |
13. SHARE CAPITAL (continued)
(a) Common Shares (continued)
On May 15, 2020, the Company issued an aggregate of 3,718,831 units at a price of $0.15 per unit for gross proceeds of $557,825. Each unit consists of one common share in the capital of the Company and one whole transferable common share purchase warrant (a "Warrant"). Each whole Warrant is exercisable to acquire one common share at an exercise price of $0.20 per share until May 15, 2022.
On April 24, 2020, the Company issued an aggregate of 3,128,334 units at a price of $0.15 per unit for gross proceeds of $469,250. Each unit consists of one common share in the capital of the Company and one whole transferable common share purchase warrant (a "Warrant"). Each whole Warrant is exercisable to acquire one common share at an exercise price of $0.20 per share until April 24, 2022.
In connection with the April 24, 2020 and May 15, 2020 private placements, the Company paid $38,727 in share issuance costs.
On February 4, 2020, the Company arranged a non-brokered private placement financing of up to 10,000,000 units of securities at a price of $0.40 per unit for aggregate gross proceeds of up to $4,000,000 (the "Offering"). Each unit will be comprised of one common share and one-half of one non-transferable common share purchase warrant, with each whole warrant entitling the holder to purchase one additional common share at a price of $0.80 for two years from closing of the Offering. On March 16, 2020, due to the instability in the financial markets caused by the COVID-19 pandemic, the Company cancelled this private placement. And paid $4,400 to investors in connection with this cancelled private placement.
(b) Stock Options
The Company maintains an incentive stock option plan (the "Option Plan") which provides that the Board of Directors of the Company may from time to time, in its discretion, and in accordance with the Exchange requirements, grant to directors, officers, employees, and consultants to the Company, non-transferable options to purchase common shares, provided that the number of common shares reserved for issuance will not exceed 10% of the issued and outstanding common shares in the capital of the Company at the time of granting of options.
During the year ended November 30, 2022:
125,000 stock options with an exercise price of $0.50 were cancelled.
75,000 stock options with an exercise price of $0.50 expired unexercised.
During the year ended November 30, 2021:
On June 10, 2021, the Company granted 150,000 incentive stock options to a consultant with an exercise price of $0.50 per share for a period of five years from the date of grant. The fair value was estimated using the Black-Scholes pricing model with estimated, stock price of $0.485, volatility 100%, risk-free rate 0.82%, dividend yield 0%, and expected life of 5 years. With these assumptions, the fair value of options was determined to be $53,677, and the amount was recognized on the consolidated statements of loss and comprehensive loss for the year ended November 30, 2021
On January 21, 2021, the Company granted 1,550,000 incentive stock options to directors, consultants, and employees with an exercise price of $0.75 per share for a period of five years from the date of grant. The fair value was estimated using the Black-Scholes pricing model with estimated, stock price of $0.75, volatility 100%, risk-free rate 0.43%, dividend yield 0%, and expected life of 5 years. With these assumptions, the fair value of options was determined to be $1,022,995, and the amount was recognized on the consolidated statements of loss and comprehensive loss for the year ended November 30, 2021.
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PLYMOUTH ROCK TECHNOLOGIES INC. |
13. SHARE CAPITAL (continued)
(b) Stock Options (continued)
During the year ended November 30, 2020:
During the year ended November 30, 2020, 200,000 (2019 - 150,000) options issued to a director and a consultant were cancelled before vesting.
Stock-based compensation recognized in profit or loss for the year ended November 30, 2022 amounted to
$Nil (2021 - $1,144,342; 2020 - 479,107).
Stock option transactions and the number of stock options outstanding as at November 30, 2022, 2021 and 2020 are summarized as follows:
Number of | Weighted Average | |||||
Options | Exercise Price | |||||
Balance, November 30, 2020 | 2,950,000 | $ | 0.58 | |||
Granted | 1,700,000 | 0.73 | ||||
Exercised | (425,000 | ) | 0.52 | |||
Balance, November 30, 2021 | 4,225,000 | $ | 0.65 | |||
Expired | (75,000 | ) | 0.50 | |||
Cancelled | (125,000 | ) | 0.50 | |||
Balance, November 30, 2022 | 4,025,000 | $ | 0.66 |
The following summarizes the stock options outstanding at November 30, 2022:
Expiry Date | Exercise Price | Numbers of options outstanding | Numbers of options exercisable | Weighted average remaining contractual life (year) | Weighted average exercise price | ||||||||
$ | $ | ||||||||||||
January 15, 2024 | 0.60 | 2,050,000 | 2,050,000 | 0.57 | 0.31 | ||||||||
March 20, 2024 | 0.60 | 150,000 | 150,000 | 0.05 | 0.02 | ||||||||
November 28, 2024 | 0.50 | 125,000 | 125,000 | 0.06 | 0.02 | ||||||||
January 21, 2026 | 0.75 | 1,550,000 | 1,550,000 | 1.21 | 0.29 | ||||||||
June 10, 2026 | 0.50 | 150,000 | 150,000 | 0.13 | 0.02 | ||||||||
4,025,000 | 4,025,000 | 2.03 | 0.66 |
(c) Share purchase warrants
During the year ended November 30, 2022
561,081 warrants with exercise price of $0.20 expired unexercised.
During the year ended November 30, 2021
On August 9, 2021, the Company issued 5,916,250 common share purchase warrants as part of the private placement. Each warrant is exercisable to purchase one common share at an exercise price of $0.50 per share until August 9, 2026.
On August 9, 2021, the Company also granted 325,750 warrants to finder's warrants as described in note 13(a) in connection with the private placement. Each warrant is exercisable to purchase one common share at an exercise price of $0.50 per share until August 9, 2026. The fair value was estimated using the Black-Scholes pricing model with estimated, stock price of $0.35, volatility 100%, risk-free rate 0.88%, dividend yield 0%, and expected life of 5 years. With these assumptions, the fair value of options was determined to be $79,032.
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PLYMOUTH ROCK TECHNOLOGIES INC. |
13. SHARE CAPITAL (continued)
(c) Share purchase warrants (continued)
On January 29, 2021, the Company granted 3,350,000 common share purchase warrants as part of a non-brokered private placement. Each warrant is exercisable to acquire one common share at an exercise price of $0.25 per share until January 29, 2026. During the year ended November 30, 2021, 30,000 warrants were exercised at $0.25 per share.
On January 29, 2021, the Company also granted 222,400 warrants to finders in connection with the private placement. Each warrant is exercisable to acquire one common share at an exercise price of $0.50 per share until August 9, 2026. During the year ended November 30, 2021, 4,240 warrants were exercised at $0.25 per share. The fair value was estimated using the Black-Scholes pricing model with estimated, stock price of $0.52, volatility 100%, risk-free rate 0.43%, dividend yield 0%, and expected life of 5 years. With these assumptions, the fair value of options was determined to be $95,395.
During the year ended November 30, 2020
On September 30, 2020, the Company granted 692,583 common share purchase warrants as part of a non-brokered private placement and binding agreement with Aerowave Corporation. Each warrant is exercisable to acquire one common share at an exercise price of $0.50 per share until September 30, 2022. On February 28, 2021, 292,000 warrants were exercised at $0.50 per share.
On May 15, 2020, the Company granted 3,718,831 common share purchase warrants as part of a non-brokered private placement. Each warrant is exercisable to acquire one common share at an exercise price of $0.20 per share until May 15, 2022. On February 28, 2021, 3,208,333 warrants were exercised at $0.20 per share.
On April 24, 2020, the Company granted 3,128,334 common share purchase warrants as part of a non-brokered private placement. Each warrant is exercisable to acquire one common share at an exercise price of $0.20 per share until April 24, 2022. On February 28, 2021, 2,145,000 warrants were exercised at $0.20 per share.
Share purchase warrant transactions and the number of share purchase warrants outstanding as of November 30, 2022, 2021 and 2020 are summarized as follows:
Number of Warrants | Weighted Average Exercise Price | |||||
Balance, November 30, 2019 | - | $ | - | |||
Warrants granted | 7,539,748 | 0.90 | ||||
Warrants exercised | (1,233,334 | ) | 0.11 | |||
Balance, November 30, 2020 | 6,306,414 | 0.23 | ||||
Warrants granted | 9,814,400 | 0.08 | ||||
Warrants exercised | (6,129,573 | ) | 0.01 | |||
Balance, November 30, 2021 | 9,991,241 | 0.42 | ||||
Warrants expired | (561,081 | ) | 0.20 | |||
Balance, November 30, 2022 | 9,430,160 | $ | 0.41 |
The following summarizes the stock warrants outstanding at November 30, 2022:
Expiry Date | Exercise Price $ | Number of Warrants outstanding and exercisable | Weighted average remaining contractual life (year) | Weighted average exercise price $ | ||||||||
January 29, 2026 | 0.25 | 3,188,160 | 1.07 | 0.08 | ||||||||
August 9, 2026 | 0.50 | 6,242,000 | 2.17 | 0.33 | ||||||||
9,430,160 | 3.17 | 0.41 |
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PLYMOUTH ROCK TECHNOLOGIES INC. |
14. FINANCIAL RISK MANAGEMENT
The Company's financial assets consist of cash, and due from related parties. The estimated fair values of cash, subscription receivable, and due from related parties approximate their respective carrying values due to the short period to maturity.
Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are:
a. Level 1 - unadjusted quoted prices in active markets for identical assets or liabilities;
b. Level 2 - inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and
c. Level 3 - inputs that are not based on observable market data.
For the years ended November 30, 2022, and 2021, the fair value of the cash, accounts receivable, accounts payable, and due to and from related parties approximate the book value due to the short-term nature.
The Company is exposed to a variety of financial instrument-related risks. The Board approves and monitors the risk management processes, inclusive of counterparty limits, controlling and reporting structures. The type of risk exposure and the way in which such exposure is managed is provided as follows:
Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations when they become due. The Company ensures, as far as reasonably possible, it will have sufficient capital in order to meet short-term business requirements, after taking into account cash flows from operations and the Company's holdings of cash. The Company believes that these sources will be sufficient to cover the likely short-term cash requirements.
The Company's cash is currently invested in business accounts which is available on demand by the Company for its operations.
Interest Rate Risk
Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. The Company has no significant interest rate risk due to the short-term nature of its interest generating assets.
Credit Risk
Credit risk is the risk of a loss when a counterparty to a financial instrument fails to meet its contractual obligations. The Company's exposure to credit risk is limited to its cash. The Company limits its exposure to credit risk by holding its cash in deposits with high credit quality Canadian financial institutions.
Foreign Currency Risk
The Company is exposed to foreign currency risk on fluctuations related to cash, leases, due from related parties and accounts payable and accrued liabilities that are denominated in US dollars. 10% fluctuations in the US dollar and UK Sterling Pound against the Canadian dollar have affected comprehensive loss for the year by approximately $81,052 (2021 - $1,200 and 2020 - $7,085).
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PLYMOUTH ROCK TECHNOLOGIES INC. |
15. SUPPLEMENTAL CASH FLOW INFORMATION
During the year ended November 30, 2022, 2021 and 2020, the Company has the following non-cash investing and financing activities:
November 30, 2022 | November 30, 2021 | November 30, 2020 | |||||||
Non-cash financing activities: | |||||||||
Fair value of options exercised | - | 158,106 | - | ||||||
Fair value of warrants granted | - | 174,427 | 83,109 | ||||||
Fair value of warrants exercised | - | 36,859 | - | ||||||
Shares issued for finders | - | 100,500 | - | ||||||
Non-cash investing activities: | |||||||||
Shares to be issued to acquisition of inventory | - | - | 22,800 |
16. COMMITMENTS AND CONTINGENCIES
As at November 30, 2022, the Company has the following commitments:
The Company entered into lease agreement with arm's length party on September 9, 2021. The term commenced on May 1, 2021 and will set to expire on April 30, 2024 and with annual lease fee of £12,000 or £1,000 per month with interest of 4% per annum above Barclays Bank PLC base rate in case of default (Note 17). Further, on the same date, the Company entered into separate agreement with the same arm's length party for drone flying permission over the land without restriction in exchange of £1,500 annual fee. The term commenced on May 1, 2021 and expire on April 30, 2024 as well.
In November 2018, the Company entered into two-year lease agreement for leased premises in Plymouth, Massachusetts, commenced December 1, 2018 and ended on November 30, 2020. On December 31, 2020, the Company renewed this lease agreement to November 30, 2023. The minimum base rent for the remaining lease term are: US$3,188 per month from December 1, 2021 to November 30, 2022; and US$3,284 per month from December 1, 2022 to November 30, 2023 (Note 17).
The Company has certain commitments related to key management compensation for $35,875 per month with no specific expiry of terms (Note 9).
On February 4, 2023, the Company received a disputed claim from former consultant on the unpaid fees for the month of November 2022, December 2022 and January 2023 with an aggregate liability of $30,000. As of the reporting date, the Company is still waiting for the court order and plans to take a legal course of action as well. Management cannot determine the outcome as of the date of this report.
On April 1, 2020 the Company entered into an agreement with a Director of the Company to provide consulting services. In line with this, the Company shall pay $250,000 annually either through cash in 12 monthly installments at the end of each calendar month or through the issuance of 1,000,000 common shares of the Company in four equal quarterly installments, in arrears.
17. RIGHT-OF-USE ASSETS AND LEASE LIABILITY
Right-of-use assets
In November 2018, the Company entered into two-year lease agreement for leased premises in Plymouth, Massachusetts, commencing December 1, 2018 and ending on November 30, 2020. On December 31, 2020, the Company renewed this lease agreement to November 30, 2023. The minimum base rent for the remaining lease term are: USD$3,005 ($3,726) per month from December 1, 2019 to November 01, 2020; USD$3,095 ($3,838) per month from December 1, 2020 to November 30, 2021; USD$3,188 ($3,953) per month from December 1, 2021 to November 30, 2022; and USD$3,284 ($4,072) per month from December 1, 2022 to November 30, 2023 (Note 16).
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PLYMOUTH ROCK TECHNOLOGIES INC. |
17. RIGHT-OF-USE ASSETS AND LEASE LIABILITY (continued)
Right-of-use assets (continued)
On September 9, 2021, the Company entered into lease agreement with arm's length party to use the premises known as The Old Workshop, Estuary Road, King's Lynn, Norfolk from May 1, 2021 and will set to expire on April 30, 2024, with annual lease fee of £12,000 or £1,000 per month with interest of 4% per annum above Barclays Bank PLC base rate in case of default (Note 16).
The following is the continuity of the cost and accumulated depreciation of right-of-use assets, for the year ended November 30, 2022 and 2021:
Balance, November 30, 2020 | $ | 114,648 | |
Amortization expense | (35,654 | ) | |
Cumulative translation adjustment | (6,260 | ) | |
Balance, November 30, 2021 | $ | 72,734 | |
Additions | 38,027 | ||
Amortization expense | (50,571 | ) | |
Cumulative translation adjustment | 1,008 | ||
Balance, November 30, 2022 | $ | 61,198 |
Lease liability
The following is the continuity of lease liability, for the year ended November 30, 2022 and 2021:
Balance, November 30, 2020 | $ | 113,340 | |
Lease payments | (48,175 | ) | |
Interest on lease liability | 14,760 | ||
Cumulative translation adjustment | (5,079 | ) | |
Balance, November 30, 2021 | $ | 86,346 | |
Additions | 38,027 | ||
Lease payments | (72,727 | ) | |
Interest on lease liability | 18,877 | ||
Cumulative translation adjustment | 5,274 | ||
Balance, November 30, 2022 | $ | 75,797 | |
Current Portion | $ | 66,403 | |
Long-term portion | $ | 9,394 |
As at November 30, 2022 and 2021, the minimum lease payments for the lease liabilities are as follows:
November 30, 2022 | November 30, 2021 | |||||
Year ending: | ||||||
2022 | $ | - | $ | 48,943 | ||
2023 | 72,664 | 50,403 | ||||
2024 | 9,716 | - | ||||
82,380 | 99,346 | |||||
Less: Interest expense on lease liabilities | (6,583 | ) | (13,000 | ) | ||
Total present value of minimum lease payments | $ | 75,797 | $ | 86,346 |
18. BREAKDOWN OF EXPENSES
Year ended November 30, | ||||||||||||
General and Administrative Expenses | Note | 2022 | 2021 | 2020 | ||||||||
Accounting and audit fees | 9 | $ | 223,247 | $ | 80,162 | $ | 67,282 | |||||
Amortization | 5, 6, 17 | 286,743 | 143,783 | 41,201 | ||||||||
Consulting fees | 9 | 143,539 | 456,296 | 275,182 | ||||||||
General office expenses | 153,403 | 205,710 | 111,394 | |||||||||
Insurance | 39,007 | 21,837 | 11,928 | |||||||||
Interest and accretion | 17 | 18,877 | 14,760 | 20,449 | ||||||||
Legal fees | 77,011 | 191,686 | 74,528 | |||||||||
Management fees | 9 | 311,535 | 118,000 | 110,125 | ||||||||
Rent | 47,317 | 42,822 | 35,325 | |||||||||
Stock-based compensation | 9, 13 | - | 1,144,342 | 479,107 | ||||||||
Transfer agent and filing fees | 13 | 59,385 | 82,825 | 77,919 | ||||||||
Wages, salaries and benefits | 9 | 985,916 | 817,858 | 292,218 | ||||||||
Total | $ | 2,345,980 | $ | 3,320,081 | $ | 1,596,658 | ||||||
Research and Development | 2022 | 2021 | 2020 | |||||||||
Labor | $ | 182,774 | $ | 930,269 | $ | 386,044 | ||||||
Materials | 50,491 | 54,737 | - | |||||||||
Total | $ | 233,265 | $ | 985,006 | $ | 386,044 |
Selling expenses consist of business development expenses amounting to $177,428 (2021 - $709,010; 2020 - $1,081,478).
19. GAIN ON DEBT FORGIVENESS
For the year ended November 30, 2022, the Company recognized gain on debt forgiveness amounting to $234,303 (2021 - $nil; 2020 - $nil). This composed of remaining £140,000 ($222,771) acquisition cost of Tetra Drones that was forgiven by former shareholder and the £7,155 ($11,532) excess of the net book value of vehicle and related loan released to him (Note 11).
20. SEGMENTED INFORMATION
The Company operates in one business segment, focusing on developing technologies as described in Note 1.
The Company's revenues were generated in the US and UK were mostly composed of sales of engineering design services and radar components to well-known government agencies and prime contractors. All the long-lived assets are located in the US as of November 30, 2022, 2021 and 2020. The following table summarizes the revenue by geographical location:
Canada | USA | UK | Total | ||||||||||
For the year ended November 30, 2022 | |||||||||||||
Revenues | $ | - | $ | 154,625 | $ | 452,734 | $ | 607,359 | |||||
Gross Profit | - | 97,115 | 319,069 | 416,184 | |||||||||
For the year ended November 30, 2021 | |||||||||||||
Revenues | $ | - | $ | 79,795 | $ | 104,601 | $ | 184,396 | |||||
Gross Profit | - | 27,703 | 53,584 | 81,287 | |||||||||
For the year ended November 30, 2020 | |||||||||||||
Revenues | $ | - | $ | 70,931 | $ | - | $ | 70,931 | |||||
Gross Profit | - | 39,615 | - | 39,615 |
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PLYMOUTH ROCK TECHNOLOGIES INC. |
21. INCOME TAXES
The following table reconciles the expected income taxes expense (recovery) at the Canadian statutory income tax rates to the amounts recognized in the statement of operations and comprehensive loss for the years ended November 30, 2022, 2021 and 2020:
2022 | 2021 | 2020 | |||||||
Net loss before tax and comprehensive loss | (2,667,798 | ) | (4,944,231 | ) | $ | (2,924,236 | ) | ||
Combined statutory tax rate | 19% to 27% | 19% to 29.7% | 27.00% | ||||||
Expected income tax (recovery) | $ | (720,000 | ) | $ | (1,278,990 | ) | $ | (789,544 | ) |
Permanent differences | 138,000 | 310,228 | - | ||||||
Non-deductible items and others | 1,618,000 | 19,811 | 44,866 | ||||||
Change in deferred tax assets not recognized | (1,036,000 | ) | 948,951 | 744,678 | |||||
Income tax expense (recovery) | $ | - | $ | - | $ | - |
Significant components of the Company's unrecognized deferred tax assets (liabilities) for the years ended November 30, 2022 and 2021 are shown below:
2022 | 2021 | |||||
Non-capital losses | $ | 1,657,000 | $ | 2,641,159 | ||
Capital losses | 21,000 | 21,062 | ||||
Equipment | - | 1,511 | ||||
Share issuance costs | 48,000 | 29,036 | ||||
Intangible assets | - | 397,156 | ||||
Others | - | 13,498 | ||||
Net deferred tax assets | $ | 1,726,000 | $ | 3,103,422 |
Non-capital losses carryforward
The Company has non-capital loss carryforwards and net operating losses, for which no deferred tax asset has been recognized of approximately $10,971,723 (2021 - $9,703,024) which may be carried forward to apply against future income for Canadian, USA and United Kingdom income tax purposes, subject to the final determination by taxation authorities, expiring in the following years:
Expiry | 2022 | ||
2038 | 675,203 | ||
2039 | 2,350,798 | ||
2040 | 2,443,638 | ||
2041 | 3,591,486 | ||
2042 | 1,910,598 | ||
TOTAL | $ | 10,971,723 |
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PLYMOUTH ROCK TECHNOLOGIES INC. |
22. SUBSEQUENT EVENTS
On February 22, 2023, the Company announced a non-brokered private placement financing of up to 30,000,000 units (the "Units") of securities at a price of $0.05 per Unit for aggregate gross proceeds of up to $1,500,000. Each Unit will be comprised of one common share and one full transferable common share purchase warrant, with each whole warrant entitling the holder to purchase one additional common share at a price of $0.10 for three years from closing of the private placement. On March 30, 2023, the Company completed the first tranche of the private placement by issuing 7,200,000 units for gross proceeds of $360,000.
On March 3, 2022, 2,100,000 share options issued to directors, officers, employees, and consultants were surrendered and cancelled. Further, on March 16, 2023, another 150,000 share options issued to director were surrendered and cancelled.
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