TABLE OF CONTENTS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This annual report on Form 20-F ("Annual Report") contains forward-looking statements, meaning statements that reflect our current expectations and views of future events and future financial performance. These forward-looking statements are made under the applicable safe-harbor provisions of United States and Canadian securities laws. In some cases, you can identify forward-looking statements by terminology such as "estimate", "project", "believe", "anticipate", "intend", "expect", "plan", "predict", "may", "should", "potential", or "continue", the negative thereof or other variations thereon or comparable terminology.
These forward-looking statements include, but are not limited to, statements about:
- our strategies for the development of our technology, software and hardware;
- our future business development, financial conditions and results of operations;
- the expected growth of the industry that we operate in;
- our expectations regarding demand for and market acceptance of our products and services;
- competition in our industry;
- our expectations regarding our ability to design, develop, manufacture and deliver our products in fulfilment of our contractual commitments;
- our expectations regarding our relationships with distributors, customers, component suppliers, strategic partners and other stakeholders; and
- assumptions underlying or related to any of the foregoing.
Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of our Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. There can be no assurance that the forward-looking statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements.
Known and unknown risks, uncertainties and other factors include, but are not limited to:
- our plans and ability to develop and commercialize product candidates and the timing of these development programs;
- our establishment and maintenance of intellectual property rights, including licenses involving third-parties, in connection with our product candidates;
- our need for additional financing and our estimates regarding our capital requirements and future revenues and profitability;
- our ability to achieve strategic goals from acquisitions of businesses and the risks associated with the integration of such businesses; and
- differences in anticipated and actual program performance
Accordingly, shareholders and prospective investors should not place undue reliance on forward-looking statements. The forward-looking statements in this Annual Report speak only as to the date hereof. Except as required by applicable law, including the securities laws of the United States and Canada, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
REPORTING CURRENCY
In this Annual Report, unless otherwise stated, all dollar amounts are expressed in Canadian dollars. The financial statements and summaries of financial information contained in this Annual Report are also reported in Canadian dollars unless otherwise stated.
IMPORTANT INFORMATION ABOUT IFRS AND NON-IFRS FINANCIAL MEASURES
Our financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board, unless expressly stated otherwise. The Company makes references to certain non-IFRS measures, including Adjusted EBITDA. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing a further understanding of the Company's results of operations from management's perspective. Accordingly, they should not be considered in isolation nor as a substitute for the analysis of the Company's financial information reported under IFRS.
FREQUENTLY USED TERMS
As used in this Annual Report, unless the context otherwise requires or indicates otherwise, references to "we", "us", "our", "our Company" and "the Company" refer to Aether Global Innovations Corp., a British Columbia corporation.
In this Annual Report:
"AI" means artificial intelligence.
"BCBCA" means British Columbia Business Corporations Act.
"CSE" means the Canadian Securities Exchange.
"Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended.
"FCPA" means the U.S. Foreign Corrupt Practices Act.
"IASB" means the International Accounting Standards Board.
"IFRS" means International Financial Reporting Standards.
"IRS" means the U.S. Internal Revenue Service.
"Investment Act" means the Investment Canada Act.
"JOBS Act" Refers to the Jumpstart Our Business Startups Act.
"NASA" means the U.S. National Aeronautics and Space Administration.
"NASDAQ" means National Association of Securities Dealers Automated Quotations. NASDAQ System refers to a sophisticated electronic marketplace and trading system that facilitates the buying and selling of securities, including stocks, options, and other financial instruments.
"non-resident holder" means a holder of our common shares who is a resident of the United States, who is not, will not be and will not be deemed to be a resident of Canada for purposes of the Canadian Income Tax Act and any applicable tax treaty and who does not use or hold, and is not deemed to use or hold, his, her or its common shares in the capital of our Company in connection with carrying on a business in Canada.
"OTCQB" means the OTCQB Venture Market electronic quotation facility operated by OTC Markets Group.
"QEF" means a "qualified electing fund" in which case the U.S. Holder would be taxed currently, for each taxable year that we are a PFIC, on its pro rata share of our ordinary earnings and net capital gain (subject to a separate election to defer payment of taxes, which deferral is subject to an interest charge).
"PCAOB" means the U.S. Public Company Accounting Oversight Board.
"PFIC" means a passive foreign investment company.
"SEC" means the U.S. Securities and Exchange Commission.
"Securities Act" means the U.S. Securities Act of 1933, as amended.
"SSCI" means Scientific Systems Company Inc.
"TSXV" means the TSX Venture Exchange.
"Treaty" means the Canada-United States Tax Convention as amended by the Protocols thereto.
"UAS" means unmanned aircraft systems.
"UAVs" means unmanned aerial vehicles.
"WTO" means the World Trade Organization.
References to "USD" and "US$" are to U.S. dollars, references to "CAD" and "$" are to Canadian dollars, and references to "GBP" and "£" are to the British pound.
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
Not applicable to Form 20-F filed as an annual report.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable to Form 20-F filed as an annual report.
ITEM 3. KEY INFORMATION
A. [Reserved]
B. Capitalization and Indebtedness
Not applicable to Form 20-F filed as an annual report.
C. Reason for the Offer and Use of Proceeds
Not applicable to Form 20-F filed as an annual report.
D. Risk Factors
An investment in our securities carries a significant degree of risk. In addition to the other information presented in this Annual Report, the following should be considered carefully in evaluating our Company and its business, including our consolidated financial statements and related notes included herein, in connection with your ownership our securities. This Annual Report contains forward-looking statements and information within the meaning of U.S. and Canadian securities laws that involve risks and uncertainties. The Company's actual results may differ materially from the results discussed in the forward-looking statements and information. Factors that might cause such differences include those discussed below and elsewhere in this Annual Report.
If any of the events described below occur, our business and financial results could be materially adversely affected. This could cause the trading price of our securities to decline, perhaps significantly, and you therefore may lose all or part of your investment. The risks set out below are not exhaustive and do not comprise all of the risks associated with an investment in the Company. Additional risks and uncertainties not currently known to us or which we currently deem immaterial may also have a material adverse effect on our business, financial condition and results of operations.
Summary of Risk Factors
The following summarizes some, but not all, of the risks provided below. Please carefully consider all of the information discussed in this Item 3.D. "Risk Factors" for a more thorough description of these and other risks:
Risks Associated with Our Business
- The Company has limited operating history.
- The Company has to raise substantial amount of capital to maintain liquidity.
- The Company is subject to a number of regulatory requirements.
- Due to the Company's limited capital base, the shareholders are subject to potential dilution in case of financing through equity.
- As a drone management and automation company, we are subject to a lot of competition in the market.
- Due to the development of new software, we are subject to the risk of losing intellectual property rights over our asset.
- Failure to comply with applicable regulatory requirements may have a material adverse impact on the business, financial condition and operating results of the Company.
- Any deterioration of our relationship with our strategic business partners could have a material adverse effect on our operating results
- Conflicts of interest may arise as a result of our directors and officers being directors and officers of other technology companies.
Risks Associated with our Common Shares
- If our Company's business is unsuccessful, our shareholders may lose their entire investment.
- The price of our common shares has been and may continue to be volatile.
- If we fail to implement and maintain an effective system of internal controls to remediate our material weaknesses over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud, and investor confidence in our Company and the market price of our common shares may be materially and adversely affected.
- As a "foreign private issuer", our Company is exempt from certain sections of the Exchange Act which results in shareholders having less complete and timely data than if the Company were a domestic U.S. issuer.
- We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.
- We will incur increased costs after we cease to qualify as an "emerging growth company."
- Investors' interests in our Company will be diluted and investors may suffer dilution in their net book value per share if our Company issues additional shares or raises funds through the sale of equity securities.
- Our Company does not intend to pay dividends on any investment in our common shares.
- The risks associated with penny stock classification could affect the marketability of our common shares and shareholders could find it difficult to sell their shares.
Risks Relating to Management
- We depend on key personnel to operate our business effectively in the competitive Aerospace & Defense and UAV/ UAS Industries.
- Since certain of our officers and directors are located in Canada, it may be difficult to enforce any United States judgment for claims brought against such officers and directors.
- Our management is free to devote time to other ventures and shareholders may not agree with their allocation of time.
Risks Associated with Our Business
Limited Operating History
The Company has only started generating revenues in the prior year. The Company was incorporated on October 17, 2011 and has yet to generate a profit from its activities. The Company is subject to all of the business risks and uncertainties associated with any new business enterprise, including the risk that it will not achieve its growth objective. The Company anticipates that it may take several years to achieve positive cash flow from operations. However, it is optimistic due to new direction and strategy specifically around investment into new technologies and global growth opportunities through strategic partnerships.
Substantial Capital Requirements and Liquidity
Substantial additional funds for the establishment of the Company's current and planned operations will be required. However, the Company has reduced costs significantly in order to preserve capital and reach its new goals and milestones. No assurances can be given that the Company will be able to raise the additional funding that may be required for such activities, should such funding not be fully generated from operations. Revenues, taxes, transportation costs, capital expenditures, operating expenses and development costs are all factors which will have an impact on the amount of additional capital that may be required. To meet such funding requirements, the Company may be required to undertake additional equity financing, which would be dilutive to shareholders. Debt financing, if available, may also involve restrictions on financing and operating activities. There is no assurance that additional financing will be available on terms acceptable to the Company or at all. If the Company is unable to obtain additional financing as needed, it may be required to reduce the scope of its operations or anticipated expansion and pursue only those development plans that can be funded through cash flows generated from its existing operations.
Regulatory Requirements
The current or future operations of the Company require permits from various governmental authorities, and such operations are and will be governed by laws and regulations governing development, production, taxes, labour standards, occupational health, waste disposal, toxic substances, land use, environmental protection, site safety and other matters. There can be no assurance that all permits which the Company may require for the facilities and conduct of operations will be obtainable on reasonable terms or that such laws and regulation would not have an adverse effect on any development project which the Company might undertake.
Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment or remedial actions. Parties engaged in operations may be required to compensate those suffering losses or damages and may have civil or criminal fines or penalties imposed upon them for violation of applicable laws or regulations. Amendments to current laws, regulation and permits governing operations and activities of companies, or more stringent implementation thereof, could have a material adverse impact on the Company and cause increases in capital expenditures or development costs or require abandonment or delays in the development of new projects.
Financing Risks and Dilution to Shareholders
The Company will have limited financial resources, no operations and hardly have revenues. There can be no assurance that the Company will be able to obtain adequate financing in the future or that such financing will be available on favorable terms or at all. It is likely such additional capital will be raised through the issuance of additional equity, which will result in dilution to the Company's shareholders.
Competition
The global market for Aerospace & Defense is highly fragmented and intensely competitive. We compete principally in the market for UAV / UAS. Some of our competitors potential competitors have greater research, financial and personnel resources, including governmental support, as well as established greater penetration into certain vertical markets or geographical market segments. We cannot assure you that we will be able to compete effectively relative to our competitors or continue to develop and market new products effectively. Continued competitive pressures could cause us to lose significant market share or erode profitability margins.
The Company is focused on both drone automation and research that reflects requirements for drones for various applications. Our main competition had been Chinese made drones, however many of these solutions are now being restricted from use in the US and Canada. We have identified partners that produce drones which do not utilise any Chinese made component and or Chinese drone, which will give us an advantage in the market. Our docking station is drone agnostic, which in turn allows us to integrate non Chinese made solutions.
Reliance on Management and Dependence on Key Personnel
The success of the Company will be largely dependent upon the performance of the directors and officers and the ability to attract and retain key personnel. The loss of the services of these persons may have a material adverse effect on the Company's business and prospects. The Company will compete with numerous other companies for the recruitment and retention of qualified employees and contractors. There is no assurance that the Company can maintain the service of its directors and officers, or other qualified personnel required to operate its business. Failure to do so could have a material adverse effect on the Company and its prospects.
Governmental Regulations and Processing Licenses and Permits
The activities of the Company are subject to various government approvals, various laws governing prospecting, development, land resumptions, production taxes, labor standards and occupational health, toxic substances, and other matters. Although the Company believes that its activities are currently carried out in accordance with all applicable rules and regulations, no assurance can be given that new rules and regulations will not be enacted or that existing rules and regulations will not be applied in a manner, which could limit or curtail production or development. Amendments to current laws and regulations governing operations and activities, or more stringent implementation thereof, could have a material adverse impact on the business, operations and financial performance of the Company. Further, the licenses and permits issued in respect of its projects may be subject to conditions that, if not satisfied, may lead to the revocation of such licenses.
Conflicts of Interest
Certain of the directors and officers of the Company will be engaged in, and will continue to engage in, other business activities on their own behalf and on behalf of other companies and, as a result of these and other activities, such directors and officers of the Company may become subject to conflicts of interest. The British Columbia Business Corporations Act ("BCBCA") provides that in the event that a director or senior officer has a material interest in a contract or proposed contract or agreement that is material to the issuer, the director or senior officer must disclose his interest in such contract or agreement. A director who has a material interest in a contract or proposed contract or agreement that is material to the issuer must refrain from voting on any matter in respect of such contract or agreement, subject to and in accordance with the BCBCA. To the extent that conflicts of interest arise, such conflicts will be resolved in accordance with the provisions of the BCBCA. We cannot assure you that such conflicts will resolve in our favor.
We have granted, and may continue to grant, stock options under our stock option plan, which may result in increased share-based compensation expenses.
We adopted a stock option plan in 2016 (the "2016 Plan"), to incentivize our employees, directors and consultants and align their interests with ours. We recognize expenses in our consolidated statement of loss in accordance with IFRS. Under the 2016 Plan, we were authorized to grant stock options to purchase up to 10% of our Company's issued and outstanding common shares. As of November 30, 2023, there were 3,575,000 stock options outstanding. As of November 30, 2023, our unrecognized share-based compensation expenses relating to unvested awards, amounted to $Nil.
On October 17, 2022 we adopted a long-term equity incentive plan (the "2022 Plan") which replaced the 2016 Plan. All options granted under the 2016 Plan remain in full force and effect. The 2022 Plan provides for the grant of Awards with Awards including options to purchase shares, deferred share units, restricted share units, stock appreciation rights and other share-based awards that may be granted pursuant to the 2022 Plan. The aggregate number of common shares to be reserved for issuance upon the exercise or redemption of all Awards granted under the 2022 Plan is ten percent (10%) of the issued and outstanding common shares at the time of granting of Awards (on a non-diluted basis).
We believe the granting of share-based awards is of significant importance to our ability to attract and retain key personnel and employees, and we will continue to grant share-based awards to employees in the future. However, the number of shares reserved for issuance under our share incentive plan may not be sufficient to recruit new employees and to compensate existing employees. Furthermore, prospective candidates and existing employees often consider the value of the equity awards they receive in connection with their employment. Thus, our ability to attract or retain highly skilled employees may be adversely affected by declines in the perceived value of our equity or equity awards. To attract and retain qualified employees, our expenses associated with share-based compensation may increase, which may have an adverse effect on our results of operations.
Litigation
The Company and/or its directors may be subject to a variety of civil or other legal proceedings, with or without merit. We may be the subject of complaints or litigation from customers, employees or other third parties for various actions. The damages sought against us in some of these litigation proceedings could be substantial. We cannot assure you that we will always have meritorious defenses to the plaintiffs' claims. While the ultimate effect of these legal actions cannot be predicted with certainty, our reputation and the result of operations could be negatively impacted. The proceedings we may be involved in from time to time could incur substantial judgments, fines, legal fees or other costs and have a material adverse effect on our business, financial condition, results of operations and cash flows.
Risks Relating to the Common Shares
If our Company's business is unsuccessful, our shareholders may lose their entire investment.
Although shareholders will not be bound by or be personally liable for our Company's expenses, liabilities or obligations beyond their total original capital contributions, should our Company suffer a deficiency in funds with which to meet our obligations, the shareholders as a whole may lose their entire investment in our Company.
The price of our common shares has been and may continue to be volatile.
The trading price for our common stock on the CSE (where our stock has traded since March 10, 2016) has been and is likely to continue to be highly volatile. Although our common shares are currently quoted on the OTCQB, there is no active market for our common shares, and no significant U.S. market may develop. If such a market develops, prices on that market are also likely to be highly volatile. As a result, an investor may find it difficult to sell, or to obtain accurate quotations of the price of our common shares.
Factors that could adversely affect the price of our common shares include:
- fluctuations in our operating results;
- changes to governmental regulation;
- litigation;
- general stock market and economic conditions;
- number of shares available for trading (float); and
- inclusion in or dropping from stock indexes.
If we fail to implement and maintain an effective system of internal controls to remediate our material weaknesses over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud, and investor confidence in our Company and the market price of our common shares may be materially and adversely affected.
Prior to the public listing of our common shares, we were a private company with limited accounting and financial reporting personnel and other resources to address our internal control over financial reporting. In connection with the audit of our consolidated financial statements as of and for the year ended November 30, 2023, we and our independent registered public accounting firm identified two material weaknesses in our internal control over financial reporting. As defined in the standards established by the PCAOB, a "material weakness" is a deficiency, or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
The material weaknesses that have been identified relate to our lack of sufficient accounting and financial reporting personnel with requisite knowledge of and experience in application of IFRS rules, and lack of financial reporting policies and procedures that are commensurate with IFRS and SEC reporting and compliance requirements. We are in the process of implementing a number of measures to address the material weaknesses and deficiencies that have been identified. See "Item 15. Controls and Procedures." However, we cannot assure you that these measures may fully address the material weaknesses and deficiencies in our internal control over financial reporting or that we may conclude that they have been fully remediated.
We are subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act, or Section 404, requires that we include a report from management on the effectiveness of our internal control over financial reporting in our annual report on Form 20-F. In addition, once we cease to be an "emerging growth company" as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue an adverse opinion on the effectiveness of internal control over financial reporting because of the existence of a material weakness if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, after we become a public company, our reporting obligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation.
During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify other weaknesses and deficiencies in our internal control over financial reporting. If we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. Generally speaking, if we fail to achieve and maintain an effective internal control environment, it could result in material misstatements in our financial statements and could also impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis. As a result, our businesses, financial condition, results of operations and prospects, as well as the trading price of our common shares, may be materially and adversely affected. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be required to restate our financial statements from prior periods.
As a "foreign private issuer", our Company is exempt from certain sections of the Exchange Act which results in shareholders having less complete and timely data than if the Company were a domestic U.S. issuer.
Because we are a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including:
- the rules under the Exchange Act requiring the filing of quarterly reports on Form 10-Q or current reports on Form 8-K with the SEC;
- the sections of the Exchange Act, including Section 14, regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act;
- the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and
- the selective disclosure rules by issuers of material nonpublic information under Regulation FD.
We are required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we publish our material events through press releases, distributed pursuant to the rules and regulations of the CSE. Press releases relating to material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information which would be made available to you were you investing in a U.S. domestic issuer.
In addition, due to the Company's status as a foreign private issuer, the officers, directors and principal shareholders of our Company are exempt from the short-swing insider disclosure and profit recovery provisions of Section 16 of the Exchange Act. Therefore, these officers, directors and principal shareholders are exempt from short-swing profits which apply to insiders of U.S. issuers. The foregoing exemption results in shareholders having less data in this regard than is available with respect to U.S. issuers.
We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.
We are an "emerging growth company," as defined in the JOBS Act, and we may take advantage of certain exemptions from requirements applicable to other public companies that are not emerging growth companies including, most significantly, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 for so long as we remain an emerging growth company. As a result, if we elect not to comply with such auditor attestation requirements, our investors may not have access to certain information they may deem important.
The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards.
We will incur increased costs after we cease to qualify as an "emerging growth company."
We are a public company and continue to incur significant legal, accounting and other expenses and costs associated with our public company reporting obligations. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC, impose various requirements on the corporate governance practices of public companies. As a company with less than US$1.07 billion in revenues for our last fiscal year, we qualify as an "emerging growth company" pursuant to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002 in the assessment of the emerging growth company's internal control over financial reporting.
We may be disqualified from being considered as an emerging growth company pursuant to the JOBS Act if we no longer meet the definition of an emerging growth company based on our total annual gross revenues. Specifically, we will cease to be an emerging growth company as of the end of the fiscal year in which we exceed $1.07 billion in total annual gross revenues. After we are no longer an "emerging growth company," we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the other rules and regulations of the SEC. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.
Investors' interests in our Company will be diluted and investors may suffer dilution in their net book value per share if our Company issues additional shares or raise funds through the sale of equity securities.
Our constating documents currently authorize the issuance of an unlimited number of common shares without par value. If we are required to issue any additional shares or enter into private placements to raise financing through the sale of equity securities, investors' interests in our Company will be diluted and investors may suffer dilution in their net book value per share depending on the price at which such securities are sold. If we issue any such additional shares, such issuances also will cause a reduction in the proportionate ownership and voting power of all other shareholders. Further, any such issuance may result in a change in control of our Company.
Our Company does not intend to pay dividends on any investment in our common shares.
We have never paid any cash dividends and currently do not intend to pay any dividends for the foreseeable future. To the extent that we require additional funding currently not provided for in our financing plan, our funding sources may prohibit the payment of a dividend. Because we do not intend to declare dividends, any gain on an investment in our Company will need to come through an increase in the market price of our common shares. This may never happen, and investors may lose all of their investment in our Company.
The risks associated with penny stock classification could affect the marketability of our common shares and shareholders could find it difficult to sell their shares.
Our common shares are subject to "penny stock" rules as defined in Rule 3a51-1 of the Exchange Act. The SEC adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Transaction costs associated with purchases and sales of penny stocks are likely to be higher than those for other securities. Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system).
The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation.
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from such rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for our common shares in the United States and shareholders may find it more difficult to sell their shares.
Risks Relating to Management
We depend on key personnel to operate our business effectively in the competitive Aerospace & Defense and UAV / UAS technology industries.
Our success largely depends upon on the performance of the directors and officers and our continuing ability to attract and retain highly qualified personnel. The loss of the services of these persons, or the failure to attract highly qualified personnel in the future, may have a material adverse effect on our business and prospects. Moreover, our competitors may hire and gain access to the expertise of our former employees, or our former employees may compete with us. There is no assurance that we will be successful in attracting, integrating, motivating, and retaining key personnel or that former employees will not compete with in the future. If we are unable to retain our key personnel and attract additional qualified personnel as and when needed, our business may be adversely affected.
Since certain of our officers and directors are located in Canada, it may be difficult to enforce any United States judgment for claims brought against such officers and directors.
Our Company is organized under the laws of the Province of British Columbia, Canada and certain of our officers and directors are residents of Canada. While a cross border treaty exists between the United States and Canada relating to the enforcement of foreign judgments, the enforcement process is cumbersome and, in some cases, has prevented the enforcement of judgments. As a result, while actions may be brought in Canada, it may be impossible to affect service of process within the United States on the Company's officers and directors or to enforce against these persons any judgments in civil and commercial matters, including judgments under United States federal securities laws. In addition, a Canadian court may not permit an original action in Canada or enforce in Canada a judgment of a United States court based on civil liability provisions of United States federal securities laws.
Our management is free to devote time to other ventures and shareholders may not agree with their allocation of time.
Our officers and directors devote a substantial amount of their time to the management and operation of the Company's business. Management is not however, contractually required to manage or direct the Company as their sole and exclusive function and they may have other business interests and engage in other activities in addition to those relating to the Company. This includes rendering advice or services of any kind to and creating or managing other businesses, including other businesses in the fiber optic industry. Our officers and directors are required by law to act honestly and in good faith with a view to the best interests of the Company and to disclose any interests, which they may have in any project or opportunity of the Company. If a conflict of interest arises, at a meeting of the board of directors of our Company, any director with a conflict is required to disclose their interest in the matter and to abstain from voting on such matter.
As certain of the Company's officers have other outside business activities and, thus, may not be in a position to devote all of their professional time to the Company, the Company's operations may be sporadic, which may result in periodic interruptions or suspensions.
ITEM 4. INFORMATION ON THE COMPANY
A. History and Development of the Company
The Company was incorporated under the BCBCA on October 17, 2011. The head office, principal address and registered and records office of the Company are located at Suite 700 - 1199 West Hastings Street, Vancouver, British Columbia V6E 3T5.
On July 31, 2023, the Company changed its name to Aether Global Innovations Corp. from Plymouth Rock Technologies Inc.
The Company's common shares are listed on the CSE under the symbol "AETH", on the Frankfurt Stock Exchange under the symbol "4XA" or WKN# "A3ESD0" and on the OTCQB under the symbol: "AETHF".
The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. Our website address is www.aethergic.com.
Through strategic partnerships and direct investment into drone companies, we have created an ecosystem and incubator for unmanned aerial vehicles and automation to work together in a holistic manner. Our incubator creates a consortium of industry partners working on the future of drone deployment and AI.
Drones have seen a remarkable rise in adoption, with applications ranging from domestic to defense scenarios. As we look towards the future, we firmly believe that automation and AI will continue to play a pivotal role in enhancing the capabilities and services provided by drones. Our partnerships vary from defense and commercial applications with a strong focus around R&D, which in turn attracts government and defense support through grant applications and offset transactions.
At Aether, we concentrate on three core service areas for UAV/Drone management and surveillance solutions:
(1) UAV/Drone Design & Development: We are dedicated to creating innovative and state-of-the-art unmanned aerial vehicles. As a drone incubator, we focus on attracting key partnerships and equity positions that support our research and development programs and attracting both government and research grants.
(2) Automation & Integrations: Embracing the power of automation, we streamline drone operations and integrate them seamlessly with existing systems. This synergy ensures maximum efficiency and effectiveness in every mission.
(3) Drone Base Station Technologies: We are at the forefront of advancing drone base station technologies, optimizing connectivity and communication to enhance the performance of UAV fleet.
Historical Development of our Business
Discontinued operations- loss of control
During first two quarters of fiscal year ending November 30, 2023, the Company did a full review on UK Operations (PRT UK and Tetra Drones) to mitigate further losses on these subsidiaries. After months of discussion, the Board decided that to protect the interest of shareholders, the Company would be better off putting the UK subsidiaries under liquidation. Therefor on June 16, 2023, the Company announced its decision to close down previously controlled subsidiaries, PRT UK and Tetra Drones as a result of the move towards a drone management and monitoring solutions business. On July 6, 2023, a special resolution was passed at a meeting of the members of PRT UK that PRT UK be wound up voluntarily, and liquidators were appointed in the UK for the purposes of such winding up. On September 4, 2023, pursuant to a special resolution by its members, Tetra Drones was also put into liquidation.
Similarly, due to lack of oversight and difficulty in obtaining complete and accurate books and records, resignation of key management personnel in the US Subsidiary, on July 20, 2023, the Company announced that it had also ceased operations with its U.S. Subsidiary, Plymouth Rock Technologies Inc. ("PRT USA").
During the third quarter of fiscal year ending November 30, 2023, the Company determined that based on its decision to put PRT UK and Tetra Drones into liquidation and to cease operations with PRT USA, the Company no longer has control over the operations of the said subsidiaries and there is no intent from management to continue operating these businesses. The Company assessed the date of loss of control and determined it be December 1, 2022 as no reliable financial records and supporting documents were accessible from the three subsidiaries for financial reporting purposes subsequent to November 30, 2022.
As a result of loss of control, the Company considered its PRT UK, PRT USA and Tetra Drones operations to have met the definition of discontinued operations and as such, assets, liabilities and results of operations that can be distinguished operationally and for financial reporting purposes from the rest of the Company have been terminated and reported separately in the financial statements.
A discontinued operation is a component of the Company that either has been abandoned, disposed of, or is classified as held for sale, and: (i) represents a separate major line of business or geographical area of operation; (ii) is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operation; or (iii) is a subsidiary acquired exclusively with a view to resell.
During the year ended November 30, 2023, the gain (loss) from discontinued operations - loss of control presented in the statement of loss and comprehensive loss is broken down as follows:
| | | Year ended November 30 | |
| | | 2023 | | | 2022 | | | 2021 | |
Net Gain (Loss) from discontinued operations
- loss of control | $ | 995,142 | | $ | (1,949,330 | ) | $ | (2,191,326 | ) |
The results of operations of PRT USA, PRT UK and Tetra Drones for the years ended November 30, 2023, 2022 and 2021 were presented separately as loss from discontinued operations of subsidiaries - loss of control in the consolidated statements of loss and comprehensive loss. The amounts are broken down as follows:
| | | For the years ended November 30 | |
| | | 2023 | | | 2022 | | | 2021 | |
| Sales | $ | - | | $ | 607,359 | | $ | 184,396 | |
| Cost of sales | | - | | | (191,175 | ) | | (103,109 | ) |
| Gross Profit | | - | | | 416,184 | | | 81,287 | |
| OPERATING EXPENSES | | | | | | | | | |
| General and administrative | | - | | | 1,519,539 | | | 1,074,492 | |
| Business development | | - | | | 62,763 | | | 200,465 | |
| Research and development | | - | | | 233,264 | | | 985,006 | |
| Total expenses | | - | | | 1,815,566 | | | 2,259,963 | |
| OTHER INCOME (EXPENSES) | | | | | | | | | |
| Impairment loss on Demo Equipment | | - | | | (236,677 | ) | | - | |
| Impairment of intangible asset | | - | | | (330,650 | ) | | - | |
| Other Income | | - | | | 5,042 | | | - | |
| Gain on debt forgiveness | | - | | | 11,532 | | | - | |
| Foreign exchange gain (loss) | | - | | | 805 | | | (12,650 | ) |
| Total other income (expense) | | - | | | (549,948 | ) | | (12,650 | ) |
| Loss from discontinued operations | $ | - | | $ | (1,949,330 | ) | $ | (2,191,326 | ) |
After the loss of control, the Company also deconsolidated the net liabilities of the previously controlled subsidiaries for financial reporting purposes. The Company did not receive anything from the disposal of its investments. This then resulted in a gain from loss of control of subsidiaries for the year ended November 30, 2023.
Gain from loss of control of subsidiaries
The resulting gain from the loss of control of subsidiaries for the year ended November 30, 2023, is broken down as follows:
| | | PRT USA | | | PRT UK | | | Tetra Drones | | | Total | |
| Net liabilities before loss of control of subsidiaries | $ | 4,870,623 | | $ | 1,481,194 | | $ | 227,907 | | $ | 6,579,724 | |
| Foreign currency translation adjustments | | (123,484 | ) | | 25,310 | | | 3,023 | | | (95,151 | ) |
| Less: Receivables from subsidiaries | | (4,248,018 | ) | | (1,120,913 | ) | | (120,500 | ) | | (5,489,431 | ) |
| Gain from loss of control of subsidiaries | $ | 499,121 | | $ | 385,591 | | $ | 110,430 | | $ | 995,142 | |
B. Business Overview
Our Company
We are a company that collaborates with industry partners and academia as part of a consortium. Our primary goal is to revolutionize the drone technology market by providing cutting-edge automation and development solutions. Our focus over the past few years has been solely around research and identifying projects that are at a technology readiness level that is close to commercialization. We are then able to help fund some of that research and commercialize the product. To date, we have helped to fund Idrone Images, which will be an equity partner and generate future sales for Aether.
Drones have seen a remarkable rise in adoption, with applications ranging from domestic to defense scenarios. As we look towards the future, we firmly believe that automation and AI will continue to play a pivotal role in enhancing the capabilities and services provided by drones. It is, however, critical that we stay ahead of requirements. The latest development is the slow, but gradual move away from any Chinese products. Fortunately, due to our industry expertise and network, we are able to adapt our Company so that we fall in line with new requirements.
Our focus lies in serving large property and critical infrastructure owners, operators, and their management teams. By delivering bespoke services, we empower them to make well-informed decisions that can significantly impact their operations. Again, this has been in the form of research and development to integrate new drone technology with our equity partners docking station. Automation can provide an immediate return on investment with regard to reduction in full time employees and immediate data gathering, which in turn can prevent future delays in operation.
Funds raised so far have been focused on positioning ourselves as equity partners and R&D, which in turn will provide us with a commercialized product within the next 6-12 months.
Our Strategy
The Company's objective is to maximize the value of the Company for our shareholders, and our strategy to obtain this result is to focus on project evaluations and project generation. By way of example, one project we are currently evaluating is a long range fixed wing solution which allows for vertical take-off and land and border security applications. In conjunction with this, we have engaged with another Government entity to discuss protection of their three main borders and how the long range solution would be applicable. To proceed with this strategy, additional financings may be required during the current fiscal year.
Our Industry
We operate in the Aerospace & Defense and Unmanned Aerial Vehicle (UAV) / Unmanned Aircraft Systems (UAS) industries. The UAV Market is projected to grow from USD $26.2 billion in 2022 to USD $38.3 Billion by 2027, at a CAR of 7.9% from 2022 to 2027.
The use of UAVs has been prevalent among defense forces worldwide for a long time. However, in recent times, several investments have been made by public and private sector organizations to develop new and sophisticated UAVs according to their requirements. The potential of UAVs to be used in several prospective applications in the civil and commercial sectors has led to advancements in them. The civil & commercial application segment of the UAV market is projected to grow significantly in the next 10 years.1
Our Technologies
iDroneImages Ltd. (“IDI”)
On April 11, 2023, the Company signed a Memorandum of Understanding (“MOU”) for a Strategic Partnership with IDI. The Company views this as a strategic partnership addressing 3 core strategic focus areas for the Company - management and monitoring, automation, and drone infrastructure (i.e. docking stations). Our reasoning behind signing an MOU and strategic partnership is to enhance our research and development capability both for drone integration with the docking station (drone agnostic) and additional AI capability. Aether is still engaged with IDI, especially now that there have been significant restrictions on Chinese made drones. The IDI docking station is drone agnostic, so we are in the process of introducing a company that does not utilize any Chinese components for integration.
Management and Monitoring: Drones have become an increasingly popular tool for use with critical infrastructure, such as oil and gas facilities and pipeline, large mining and construction sites, and government facilities.
Automation: It will be a critical focus area, as pre-determined flight paths with seamless operations will be important for infrastructure monitoring and management.
Drone's infrastructure (the Docking Stations): The Strategic Partnership with IDI, provides a leading-edge drone in the box solution, which helps address these specific and important focus areas.
On May 7-12, 2023, the Company together with IDI and Watchdog Equipment showcased the integration of a self-operating drone-in-the-box technology from IDI with the mobile renewable power platform from Watchdog Equipment in the Governor’s Hurricane Conference in Palm Beach, Florida, USA. The Company’s goal is to offer a three-pronged solution – Drone Management and Monitoring, Automation and Integration and a Drone Base Station Infrastructure and Technology.
On May 30, 2023, the Company signed an MOU for a Strategic Partnership with Protegimus Protection Ltd (“Protegimus”). The MOU is non-binding until finalized and will focus initially on Collaborative Business Development efforts specifically focused on critical infrastructure and security applications for remote monitoring (DiaB), this includes, (i) establishing key strategic objectives and client programs for new regions, specifically Asia Pacific and the Middle East and (ii) identifying additional services and capabilities for fixed and mobile aerial support operation center (ASOC) services, which are all of mutual interests to the Company and Protegimus.
On August 15, 2023, the Company signed an MOU for a strategic partnership with Grupo Senseta Inc. a deep tech, AI and big data-driven cybersecurity and intelligent drone services company. The Strategic Partnership MOU is non-binding until finalized and will focus initially on collaborative product development focused on critical infrastructure and security applications for monitoring, surveillance and data collection of government facilities, critical infrastructure and pipelines, electrical grids and waterways.
On August 16, 2023 the Company and IDI signed an MOU for a strategic partnership with Limitless Integration LLC, an integration solutions and deployment service provider for safety and security communications and surveillance technologies. The Strategic Partnership MOU is non-binding until finalized and will focus initially on collaborative product integrations and deployment with a focused around large-scale facilities and critical infrastructure operations.
In addition to IDI, we are creating a drone AI incubator through strategic investments and or partnerships. One example of that is with Idrone Images, who we invested in as they provide a fully automated drone base station. The base station, which is drone agnostic, provides the ability to provide automated mission planning applicable for commercial and or border patrol solutions. We chose this company due to its ability to integrate with some of our other partners' drones.
On August 30, 2023, the Company signed a Strategic Joint Venture Partnership MOU with Ruf Diamond LLC., a distributor and retrofitter of all-terrain vehicles and equipment built to withstand the harshest of conditions. The joint venture will look to identify business opportunities to exploit the development, integration and deployment of an automated drone solution from Ruf Diamond's retrofitted all-terrain FatTruck vehicle platforms.
On September 18, 2023, the Company announced that it had signed a strategic partnership MOU with STA QSTP LLC ("STA"), a bespoke technology solutions provider. STA has expertise in aerial solutions that feature rugged UAVs with intelligent control systems and enhanced safety and security features. The technology firm offers smart UAV solutions and applications with mission critical sensors and payloads that offer bespoke intelligent aerial solutions for each client's particular needs.
1 See: https://www.marketsandmarkets.com/Market-Reports/unmanned-aerial-vehicles-uav-market-662.html
On August 22, 2024 the Company signed an LOI to acquire 1401068 BC Ltd. in an all-share deal. 1401068 BC Ltd. is in the business of investing in early-stage technology ventures in both Canada and the United States, and is currently completing an earn-in arrangement with an early stage drone development company. The LOI is non-binding until finalized and focuses on joining the two companies together.
During the financial year ended November 30, 2023, the Company shifted its focus from developing XV Unmanned Aerial Systems to becoming a drone management and solutions business. While continuing to be involved in UAV/drone design and development, the Company also became involved in two core service areas for UAV/drone management and surveillance solutions, namely 1) automation and integrations, which involved streamlining of drone operations through automation and integrate them seamlessly with existing systems and 2) drone base station technologies.
During the financial year ended November 30, 2022, the Company's focus was on XV Unmanned Aerial Systems as its main technology. The Wi-Ti, SS-1 Shoescanner and CODA threat detection radar technology development were put on hold.
During the financial year ended November 30, 2021, the Company's technologies focused on security and threat detection, with its main technologies including (1) Wi-Ti - Wireless Threat Indication; (2) Shoe Scanner - SS1 Footwear Imaging Radar; (3) MiRIAD - Millimeter Remote Imaging from Airborne Drone; (4) X1 and XV Unmanned Aerial Systems; and (5) CODA - Cognitive Object Detection Apparatus.
Principal Markets
The Company's business focuses mainly on the North American and UK markets. Due to the recent conflict in Ukraine, we have now aligned with European drone companies that do not use Chinese components. This is in keeping with the requirements for providing UAV capability to the US and Canadian Defense Departments. This will also be a requirement for any law enforcement and or additional government entity.
Our focus with regard to providing long range border security applications will allow us to explore additional opportunities overseas of which we intend to invest in a long-range drone application that we expect will in turn attract offset transactions with major defense primes that have offset obligations in Canada.
Because of this, we have also started to engage with foreign government agencies. Furthermore, we have partnered with SSCI that provides additional AI and software and payload capability that is applicable for commercial applications such as fisheries and monitoring forest fires.
Seasonality
The Company's business is not affected by seasonality.
Sources and Availability of Raw Materials
We do not require or anticipate requiring any uncommon raw materials for manufacturing of our planned products. Our planned products will rely on common electronic components and materials which are not subject to significant price volatility.
Marketing Channels
The Company has a consultative sales model. Our philosophy is rooted in building a relationship. We develop a holistic and nuanced understanding of our clients' needs and aim to fulfill those needs with a customized solution.
Compliance with Government Regulation
Our business is subject to laws and regulations governing the production, sale and use of UAV, UAS, surveillance, threat detection and security technology, including but not limited to regulation regarding public safety, personal privacy, public transportation, criminal law, consumer protection, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, environmental protection, and other matters. Legislation such as the U.S. Airport Security Federalization Act, the U.S. Aviation and Transportation Security Act and the Canadian Aviation Security Act and their respective associated regulations, and all other applicable Federal, State, Provincial and municipal laws. The testing, marketing, and sale of our current and future products may require permissions or permits from various governmental and nongovernmental authorities. There can be no assurance, however, that all permissions or permits will be obtainable or achievable on reasonable terms or that compliance with such laws and regulations would not have an adverse effect on the profitability of any product that we may develop or seek to market.
In the U.S., the Federal Aviation Administration, or the FAA, one of several modal organizations within the Department of Transportation, or the DOT, is the regulatory agency with authority to oversee the safety of aircraft operations in the national airspace system of the United States, or the NAS. By statute, the U.S. Congress has vested the FAA with authority to regulate airspace use, management and efficiency, air traffic control, safety, navigational facilities, and aircraft. By contrast, the DOT retains regulatory control over all economic authority granted to commercial operations of aircraft. Thus, in addition to any FAA approvals and authorization required for operation of aircraft within the NAS, each aircraft operator conducting commercial operations must also be issued and hold economic authority (or an exemption) from the DOT. UAS are considered a category of aircraft for purposes of regulation by the FAA and the DOT. Our UAS and their operations are therefore subject to the approval by both the FAA and the DOT.
With respect to UAS operations in the NAS, the FAA currently has the authority to promulgate and enforce restrictions regarding (i) the types of flights that may be conducted; (ii) the equipment that may be used to conduct those flights; and (iii) the training required. The regulatory framework applicable to a particular UAS operation is determined by whether (a) the UAS is used by a government agency, for commercial purposes, or as a model aircraft; and (b) whether at takeoff the UAS (including any attachments) weighs less than 55 pounds (Small UAS), or equal to or more than 55 pounds (Large UAS). As a result of this regulation, commercial use and delivery of our UAS is and in the near future is expected to continue to be subject to an uncertain or lengthy approval process. We are unable to estimate the average length of time required to obtain the applicable regulatory approvals due to the nascent nature of UAS regulations and the lack of relevant precedents. We cannot predict when these regulations will change, and any new regulations may impose onerous requirements and restrictions.
Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing the marketing, sale, or use of our products to be curtailed.
Amendments to current laws, regulations and permits governing the intended use of our technologies, or more stringent implementation thereof, could have a material adverse impact on our business and cause increases in capital expenditures or production costs, or require abandonment or delays in development of new products.
We are committed to complying with and are, to our knowledge, in compliance with, all governmental regulations applicable to our Company and our planned products.
C. Organizational Structure
As of the date of this Annual Report, the Company does not have any significant subsidiaries and is operating as a single entity. Operations have been centralised in order to concentrate efforts in the US and Canada. See Exhibit 8.1 to this Form 20-F for a list of the Company's subsidiaries, none of which are significant as defined in rule 1-02(w) of Regulation S-X. See "Discontinued operations - loss of control" under Item 4.A. "History and Development of the Company" above for more information regarding the status of the Company's non-significant subsidiaries.
D. Property, Plant and Equipment
The Company has equipment such as various computers, furniture, vehicles, leasehold improvements, and demo equipment used by the previously controlled subsidiaries, in the ordinary course of business.
In connection with loss of control of its subsidiaries, the Company derecognized property, plant, and equipment with a net book value of $22,817.
ITEM 4A. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion and analysis of our financial condition and results of operations for the fiscal year ended November 30, 2023, should be read in conjunction with our financial statements and related notes included in this Annual Report in accordance with "Item 8 - Financial Information"). Our financial statements for the fiscal year ended November 30, 2023, were prepared in accordance with IFRS and are expressed in Canadian Dollars.
A. Operating Results
Years Ended November 30, 2023 and 2022
During the year ended November 30, 2023, the Company had a comprehensive loss of $634,059 compared to a comprehensive loss of $2,739,060 for the year ended November 30, 2022. The decrease in comprehensive losses were primarily driven by the following:
- Accounting and audit fees of $92,723 (November 30, 2022 - $192,403). The amount decreased in the current period due to a lower cost charged by new auditors for the 2022 year-end financial audit. Year end 2021 audit fee final billing spilled over through the first two quarters of the year 2022. The higher audit fees resulted from the difficulty in getting complete records from the UK subsidiaries - PRT UK and Tetra Drones which also caused the Company to go under an MCTO.
- Business development expenses of $386,991 (November 30, 2022 - $114,665) increased due to the new direction taken by the Company. The Company has engaged a team of experienced consultants who aids in building strategies and helps introduce the Company to new key partners that will help the Company grow.
- Consulting fees of $136,475 (November 30, 2022 - $138,523) slightly decreased from last year due to the cancellation of the consulting fees contract with a director during the current year. The consulting fees were previously paid in shares.
- Investor relations of $261,908 (November 30, 2022 - $Nil) were paid to a consultant for advisory services. The services generally relate to capital markets advice and assistance in dealing with strategic investors for the Company.
- General office expenses of $20,209 (November 30, 2022 - $31,160) decreased as no new development on the website was done for the company during this period.
- Insurance of $11,180 (November 30, 2022 - $16,065) decreased due to decrease in rate of insurance provider by the supplier.
- Rent of $6,000 (November 30, 2022 - $6,963) decreased due to the lower fixed rent fees in the current year.
- Legal fees of $224,140 (November 30, 2022 - $51,603) increased due to compliance related to the change of board and retention of legal counsel for advisory services regarding the discontinued subsidiaries.
- Management fees of $92,127 (November 30, 2022 - $Nil) increased from last year's as management fee was accounted under "loss from discontinued operations".
- Transfer agent and filing fees of $63,912 (November 30, 2022 - $59,385) increased due to an increase in the fees charged by the service providers.
- Travel expenses of $8,212 (November 30, 2022 - $Nil) was spent for business trips to attend conferences for the current year.
- Stock-based compensation of $99,588 (November 30, 2022 - $Nil) refers to a portion of the value of the stock options granted by the Company which are expensed during the period.
- Impairment loss of $209,702 (November 30, 2022 - $Nil) was recognized due to uncertainty surrounding collectability of the long-term receivable.
B. Liquidity and Capital Resources
The Company's approach to managing its liquidity is to ensure that it has sufficient resources to meet its liabilities as they come due and have sufficient working capital to fund operations for the ensuing fiscal year. Financing of operations has been achieved solely by equity financing. The Company anticipates that it will require significant funds from either equity or debt financing for the development of its technologies and to support general administrative expenses.
As at November 30, 2023, the Company had $228,253 in current assets (November 30, 2022 - $62,202) and $497,776 in current liabilities (November 30, 2022 - $2,087,875) for a working capital deficit of $269,523 compared to a working capital deficit of $2,025,673 as at November 30, 2022. The reduction of the working capital deficit is mostly driven by discontinuance of subsidiaries.
As at November 30, 2023, the Company had a share capital balance of $13,916,448 (November 30, 2022 - $11,851,771) and an accumulated deficit of $17,144,688 (November 30, 2022 - $16,535,760). The increase in share capital is due to private placement closing in March 2023, private placement closing in July 2023 and shares issued for investor relations services during the period.
Financing of operations has been achieved solely by loans and equity financing. However, the Company expects to generate profitable revenue in the coming years with adequate investment to support adding experienced manufacturing personnel and capital equipment. Currently the Company is primarily reliant upon the sale of equity securities, loans and some product sales in order to fund future operations. Since inception, the Company has funded limited operations through the issuance of equity securities on a private placement basis. The Company's ability to raise funds through the issuance of equity will depend on economic, market and commodity prices at the time of financing.
The Company expects to generate similar losses quarter over quarter for the next fiscal year in relation to the Company's development, administration, and promotion of its technologies. As of report date, management anticipates that the funds raised to date will be sufficient to sustain operations and the development of the Companies technologies for the next fiscal year.
Detailed discussions related to the Company's cash flows during the year ended November 30, 2023
Cash balances increased by a total of $25,428 during the year ended November 30, 2023 (November 30, 2022 - decreased by $343,725). During the current year, the cash increase is mainly due to proceeds from private placement financing offset by the increased costs of operations.
During the year ended November 30, 2023, cash used in operating activities was $2,726,009 compared to cash used in operating activities of $414,024 during the year ended November 30, 2022. Most of the cash outflows were for payments of operating costs as well as the outflows from the operations of previously controlled subsidiaries.
Cash inflow in investing activities during the year ended November 30, 2023, was $785,439 (November 30, 2022 - provided by investing activities $Nil). Positive cash inflow from investing activity is mainly due to the discontinued operations. In the current year, the Company has loaned $209,703 (£120,000 plus accrued interest) to IDI to fund the latter's new and existing business opportunities.
Cash inflow in financing activities during the year ended November 30, 2023, was $1,965,998 compared to cash inflow by financing activities of $70,299 during the year ended November 30, 2022. During the current year, the Company has received subscription money of $2,278,420 (2022 - $Nil) in private placements closed during the current period and paid $233,403 share issuance cost. The Company has also repaid loans payable amounting to $79,019.
The effect of foreign exchange rates on cash during the year ended November 30, 2023 amounted to a gain of $nil (November 30, 2022 gain - $18,194).
C. Research and Development, Patents and Licenses
The Company has no patents, research and development and licenses for the year ended November 30, 2023.
D. Trend Information
Other than as disclosed elsewhere in this Annual Report and specifically in "Item 4.B. Business Overview," we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our net revenues, income from operations, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial condition.
The following table summarizes selected financial data for our Company for the fiscal years ended November 30, 2023, 2022, 2021, 2020 and 2019, respectively, prepared in accordance with IFRS as issued by the IASB. The information in the table is expressed in Canadian Dollars was extracted from the detailed financial statements and related notes included in this Annual Report and should be read in conjunction with such financial statements.
Selected Financial Data
(CAD$)
Consolidated Statements of
(Loss)
Income Data | Year Ended
November 30 |
2023
(audited)
($) | 2022
(audited)
($) | 2021
(audited)
($) | 2020
(audited)
($) | 2019
(audited)
($) |
| Revenues | - | - | - | 70,931 | 28,257 |
| Operating Expenses | (1,457,565) | (941,104) | (2,440,508) | (3,064,180) | (3,044,810) |
| Comprehensive Loss | (634,059) | (2,739,060) | (4,944,231) | (2,904,690) | (4,320,563) |
| Loss Per Share Basic and | (0.02) | (0.05) | (0.09) | (0.08) | (0.14) |
| Common Shares Outstanding | 105,504,461 | 59,317,461 | 59,239,336 | 42,762,264 | 32,796,600 |
Consolidated Statements of
Financial Position Data | As at November 30 |
2023
(audited)
($) | 2022
(audited)
($) | 2021
(audited)
($) | 2020
(audited)
($) | 2019
(audited)
($) |
| Current Assets | 228,253 | 62,202 | 632,538 | 79,919 | 727,526 |
| Current Liabilities | 497,776 | 2,087,875 | 706,666 | 322,738 | 227,058 |
| Working Capital (Deficit) | (269,523) | (2,025,673) | (74,128) | (242,819) | 500,468 |
| Total Liabilities and Shareholders' Equity | 228,254 | 148,201 | 1,549,139 | 261,385 | 739,990 |
| Deficit | (17,144,688) | (16,535,760) | (13,867,962) | (8,893,128) | (5,968,892) |
E. Critical Accounting Estimates
The Company's financial statements included in this Annual Report were prepared in accordance with IFRS and as issued by the IASB. For a description of critical accounting estimates and other significant accounting policies please refer to the notes to the Company's audited financial statements included under Item 18 Financial Statements in this Annual Report.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A.Directors and senior management
The following table sets forth our current directors and senior management as well as our directors and senior management as at financial year-end November 30, 2023:
| Name | Position(s) Held with Company | Principal Business Activities and Other
Principal Directorships |
| Philip Lancaster | Director (since June 6, 2022)
CEO and President (since May 10, 2023) and Secretary (from February 3, 2023 to May 20, 2023)
| Director West Riding Consultancy 2020. 2016-2020 SVP Patriot One Technologies. |
| Douglas Smith | Chairman (since May 12, 2020) and Director (since April 29, 2020) | Managing Director at Kent Strategies LLC and Executive Vice President for MWW Group LLC. In the past he occupied the position of Managing Partner at T-Street Capital LLC and Assistant Secretary at United States Homeland Security Council. Douglas A. Smith received an undergraduate degree from Beloit College and an undergraduate degree from SIT Graduate Institute. |
| Al Treddenick | Director (since May 30, 2023) | Alan has been involved as an Advisor on Government Relations for a number of public safety start-up companies and currently serves on the Advisory Board for TIGIR Solutions, a disruptive Canadian AI technology start-up in the Threat and Risk Analysis space, J3 Global Solutions, a global risk and crisis management company, Kirsch Group, a global security and investigation company, as well as with M-Sec Enterprises, a Canadian tactical solutions provider in the public safety, security, and defense sectors. |
| Nancy Boufeas | Corporate Secretary (since October 17, 2023), Interim Chief Financial Officer (since September 6, 2024) | Corporate Secretary of Company from October 17, 2023 to present. Interim Chief Financial Officer of the Company since September 6, 2024. |
| Zara Kanji | Director (from April 10, 2023 to August 21, 2024) and Chief Financial Officer (from January 15, 2018 to November 9, 2021) | Chief Financial Officer from January 15, 2018 to November 9, 2021. Director and AC chair from April 10, 2023 to August 21, 2024. Zara is a founder of Zara Kanji & Associates, CPA. (est. 2004). Zara has over 25 years of experience and has served as executive management and board member for numerous listed companies. |
| Name | Position(s) Held with Company | Principal Business Activities and Other
Principal Directorships |
| Karen Mae Parren | Chief Financial Officer (from May 15, 2023 to July 31, 2024) Secretary (from May 20, 2023 to October 17, 2023) | Chief Financial Officer of the Company from May 15, 2023 to July 31, 2024. |
| Khalid M. Al-Ali | Director (from July 8, 2020 to January 31, 2024) | Founder of Grupo Senseta, Inc. and Silicon Valley Space Business Roundtable, Khalid Al-Ali is Executive Chairman for Grupo Senseta, Inc. and Chairman for Silicon Valley Space Business Roundtable. |
Philip Lancaster - Director, President and CEO (Age: 54)
Philip Lancaster has been a director of the Company since June 6, 2022, and has also been President since February 3, 2023 and CEO since May 10, 2023.
Phil Lancaster brings several years of public company experience from his several years of tenure as SVP Business Development & Government Relations at Patriot One Technologies. Prior to this role Phil worked internationally as a British Police Officer in VIP close protection, as well as international service in British Overseas Territories. Throughout his career, Phil received several notable awards for his efforts in the UK and overseas. Through Phil's work in diplomatic protection, and Patriot One Technologies, he has established an extensive global network of contacts that range from government to law enforcement agencies. Phil has written several journal articles focused on the future of soft target hardening and innovation. In addition to his role as a director, Phil will also be taking a management role, assisting in the commercial exploitation of the company's technologies to law enforcement and state security agencies.
Douglas Smith - Chairman, Director (Age: 55)
Douglas Smith has been a director of the Company since April 29, 2020, and Chairman of the Board of Directors since May 12, 2020. The Honorable Douglas Smith has spent the last 30 years serving at the highest levels of government in national security and the private sector, and is a serial entrepreneur. Douglas currently leads Global Affairs for Orchard Global, where he leads the firm's engagements with national security work, private equity, and international governments. Douglas is a recognized global expert in national security and its impact on business, and role in preventing and managing crises, frequently invited to speak in international conferences and regularly appearing in global media.
Before joining Orchard, Douglas was appointed by President Barack Obama to serve as the Assistant Secretary for the Private Sector at the U.S. Department of Homeland Security (DHS). In this role, Douglas advised the Secretary on the impact of the Department's policies, regulations, and processes globally on millions of private sector companies, universities, and not-for-profits institutions. Douglas was responsible for coordinating seamless private sector engagement across all 22 of DHS's divisions including the Secret Service, Coast Guard, Customs and Boarder Protection and Immigration and Customs Enforcement.
Alan Treddenick - Director (Age: 65)
Alan has been a director of the Company since May 30, 2023. Alan is the CEO of ATNOH Group, a Global Public Safety and Risk Consultancy. Prior to founding the company, Alan spent 32 years with the Canadian Security Intelligence Service (CSIS) and the Royal Canadian Mounted Police (RCMP), involved in extensive counter-terrorism operations within Canada and abroad. Alan then joined BlackBerry's Government Relations division and established a team to lead BlackBerry's strategic relationships with law enforcement, intelligence, and security agencies around the globe on national security, sensitive investigations, and other regulatory issues focused on lawful access and market access concerns. Recently Alan has been involved in First Responder and Intelligence / Security Professional wellness and mental health issues.
Alan is a graduate of Queen's University, the RCMP Training Academy, and the Canadian Police College. He continues as a member of the Canadian Association of Chiefs of Police (CACP) serving on a number of committees. He maintains membership in the International Association of Chiefs of Police (IACP), ASIS, Royal Canadian Military Institute, Chatham House (UK), as well as formerly being on the Advisory Board at the Sheffield Hallam University's Centre of Excellence in Terrorism, Resilience, Intelligence and Organized Crime Research (CENTRIC). Alan has been involved as a Senior Strategic Advisor on Government Relations and Regulatory Affairs for a number of public safety start-up companies and currently serves on the Advisory Board for TIGIR Solutions, a disruptive Canadian AI technology start-up in the Threat and Risk Analysis space, J3 Global Solutions, a global risk and crisis management company, Kirsch Group, a global security and investigation company, as well as with M-Sec Enterprises, a Canadian tactical solutions provider in the public safety, security, and defence sectors.
Nancy Boufeas - Corporate Secretary and Interim Chief Financial Officer (Age 53)
Nancy Boufeas has been Corporate Secretary of the Company since October 17, 2023 and interim Chief Financial Officer since September 6, 2024. Nancy is a Corporate Paralegal with more than 25 years legal experience in Civil Litigation and Corporate/Business law. Having obtained her paralegal designation in 2002, she manages over 200 private companies and provides administration services for several public companies trading on the CSE and TSX-V.
Zara Kanji - Former Director (Age: 53)
Zara Kanji was a director of the Company from April 10, 2023 to August 21, 2024 and prior to that Chief Financial Officer from January 15, 2018 to November 9, 2021. Zara is a founder of Zara Kanji & Associates. (established 2004). Zara is experienced in financial reporting compliance for junior listed companies, taxation, general accounting, financial reporting and value-added advisory services for individuals, private and public companies.
In addition to providing business advisory and compliance services to private and public entities, Zara has served as director and officer for several listed issuers and has been a part of teams that have facilitated financings and acquisition transactions.
Zara is passionate about financial literacy and regularly provides presentations for entrepreneurs, start-ups, women's groups and new Canadians. She is also a Member of the Chartered Professional Accountants of BC and Canada (previously the Certified General Accountants Association) since August 2003. Ms. Kanji holds a Bachelor of Technology in Accounting (Honors) and a Diploma in Corporate Finance (Honors) from the British Columbia Institute of Technology.
Karen Mae Parrin - Former Chief Financial Officer (Age 34)
Karen Mae Parrin was the Chief Financial Officer of the Company from May 15, 2023 to July 31, 2024 and was Corporate Secretary from May 20, 2023 to October 17, 2023. Karen specializes in Corporate Finance; primarily focused on public companies with a concentration on consolidation, cross-border transactions, and compliance. Karen's industry experience includes mining, manufacturing, renewable energy power generation, real estate, construction, software, and technology. She is a Certified Public Accountant in the Philippines and holds a Chartered Professional Accountant (CPA) designation in BC, Canada. Karen holds a Master of Science in Finance (2017) and Bachelor of Science in Business Administration and Accountancy (2011) from the University of the Philippines.
Khalid M. Al-Ali - Former Director (Age: 52)
Dr. Khalid M. Al-Ali was a director of the Company from July 8, 2020 to January 31, 2024. Dr. Al-Ali brought deep experience and expertise to his roles in various organizations, having spent much of his career in Silicon Valley. He is the Co-Founder and Executive Chairman of Senseta, a world leader in mission-critical big data fusion, artificial intelligence and drone-powered deep technologies. He is the Co-Founder and Chairman of the Silicon Valley Space Business Roundtable. He was the Executive Director of the University of California Office for NASA Partnerships and the University Affiliated Research Center. Dr. Al-Ali was the advisor to the Board of Directors of Qatar Foundation and CEO of the Qatar Science and Technology Park Project. He was a founding member of both Qatar's Information Technology and Communication Committee and the Steering Committee of the Information Technology and Communication Project. Dr. Al-Ali is the principal inventor of U.S. and worldwide-patented technologies, along with a multitude of disclosed inventions not yet patented. He holds a Ph.D. in Mechanical and Electrical Engineering from the University of California at Berkeley and dual B.S. degrees in Mechanical and Aerospace Engineering from the University of Colorado at Boulder.
Family Relationships
There are no family relationships among any of our directors and senior management listed above.
B. Compensation
During the years ended November 30, 2023 and November 30, 2022, compensation was paid (which includes contingent or deferred compensation accrued for the year, even if the compensation is payable at a later date) to our directors and officers as follows:
COMPENSATION TABLE |
Name
and Principal
Position | Year | Salary
($) | Bonus
($) | Stock
Awards
($) | Option
Awards
($) | Non-Equity
Incentive
Plan
Compensa-
tion
($) | Change in
Pension
Value and
Nonqualified
Deferred
Compensa-
tion
Earnings
($) | All
Other
Compensa-
tion
($) | Total
($) |
Philip Lancaster President and CEO, former Secretary, and Director (1) | 2023 2022 | 82,500 75,000 | Nil Nil | Nil Nil | 24,834 Nil | Nil Nil | Nil Nil | (62,500)(1) Nil | 44,834 75,000 |
Douglas Smith Chairman and Director | 2023 2022 | Nil Nil | Nil Nil | Nil 17,189(12) | 6,209 Nil | Nil Nil | Nil Nil | Nil Nil | 6,209 17,189 |
Alan Treddenick Director (2) | 2023 2022 | Nil N/A | Nil N/A | Nil N/A | 3,103 N/A | Nil N/A | Nil N/A | Nil N/A | 3,103 N/A |
Nancy Boufeas Corporate Secretary (3) | 2023 2022 | 10,429 N/A | Nil N/A | Nil N/A | 1,552 N/A | Nil N/A | Nil N/A | Nil Nil | 11,981 N/A |
Zara Kanji Former Director and former Chief Financial Officer(4) | 2023 2022 | Nil Nil | Nil Nil | Nil Nil | $9,312 Nil | Nil Nil | Nil Nil | 63,844 Nil | 73,156 Nil |
Karen Mae Parrin Former Chief Financial Officer(5) | 2023 2022 | 31,000 Nil | Nil Nil | Nil Nil | 6,208 Nil | Nil Nil | Nil Nil | Nil Nil | 37,209 Nil |
Khalid M. Al-Ali Former Director (6) | 2023 2022 | Nil Nil | Nil Nil | Nil Nil | 6,208 Nil | Nil Nil | Nil Nil | Nil Nil | Nil Nil |
COMPENSATION TABLE |
Name
and Principal
Position | Year | Salary
($) | Bonus
($) | Stock
Awards
($) | Option
Awards
($) | Non-Equity
Incentive
Plan
Compensa-
tion
($) | Change in
Pension
Value and
Nonqualified
Deferred
Compensa-
tion
Earnings
($) | All
Other
Compensa-
tion
($) | Total
($) |
Dana Wheeler
Former Director, President and CEO(7) | 2023
2022
| 54,100
330,337
| Nil
Nil
| Nil
Nil
| Nil
Nil | Nil
Nil
| Nil
Nil | Nil
Nil | 54,100
330,337
|
| Susan J Gardner Former Chief Financial Officer(8) | 2023
2022
| Nil
Nil
| Nil
Nil | Nil
Nil | Nil
Nil
| Nil
Nil | Nil
Nil | Nil
Nil | Nil
Nil
|
Carl Cagliarini
Former Interim CEO and Director(9) | 2023
2022 | 27,127
Nil
| Nil
Nil
| Nil
Nil
| Nil
Nil
| Nil
Nil
| Nil
Nil | Nil
Nil | 27,127
Nil
|
Thomas Nash
Former Director(10) | 2023
2022 | Nil
Nil | Nil
Nil | Nil
Nil | Nil
Nil | Nil
Nil | Nil
Nil | Nil
Nil | Nil
Nil |
Vivian Katsuris
Former Secretary and Director(11) | 2023
2022
| N/A
60,000
| N/A
Nil | N/A
Nil | N/A
Nil | N/A
Nil | N/A
Nil | N/A
Nil | N/A
60,000 |
Notes:
(1) Philip Lancaster was appointed as President and Secretary effective February 3, 2023 and ceased to be Secretary on May 20, 2023. Philip was appointed CEO on June 6, 2022. He was paid or accrued $35,000 in management fees (2022 - $Nil) and $47,500 in consulting fees (2022 - $75,000) and he has forgiven $62,500 of it in the fiscal year ended November 30, 2023.
(2) Alan Treddenick was appointed as a director on May 30, 2023.
(3) Nancy Boufeas was appointed as Corporate Secretary on October 17, 2023.
(4) Zara Kanji ceased to be Chief Financial Officer on November 9, 2021. Ms. Kanji was appointed as a director effective April 10, 2023. She ceased to be a director on August 21, 2024.
(5) Karen Mae Parrin was appointed Chief Financial Officer May 15, 2023 and ceased to be Chief Financial Officer on July 31, 2024. Ms. Parrin was Corporate Secretary from May 20, 2023 to October 17, 2023.
(6) Khalid Al-Ali ceased to be a director on January 31, 2024.
(7) Dana Wheeler ceased to be President and Chief Executive Officer on February 3, 2023 and ceased to be director on May 19, 2023.
(8) Susan Gardner ceased to be the Chief Financial Officer on May 12, 2023.
(9) Carl Cagliarini ceased to be interim CEO and a director on May 10, 2023.
(10) Thomas Nash ceased to be a director on March 31, 2023.
(11) Vivian Katsuris previously acted as interim CFO for the Company from November 9, 2021, to January 13, 2022, and was a director from January 13, 2022 to March 16, 2022.
(12) This refers to 78,125 shares issued to Douglas Smith with a fair value of $17,188 as payment to his consulting services rendered for the fiscal year ended November 30, 2022.
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. Our directors and executive officers may receive share options at the discretion of our board of directors in the future. We do not have any material bonus or profit-sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that share options may be granted at the discretion of our board of directors.
Written Management Agreements
Philip Lancaster, Director, President, and CEO is party to a consulting agreement with the Company dated June 1, 2022, as amended March 1, 2023, for compensation of $5,000 per month with a 45-day notice of termination.
Vivian Katsuris, former Secretary, has a consulting agreement with the Company for compensation of $2,625 per month with a 30-day notice of termination. Until February 28, 2023, compensation payable under the agreement was $5,250 per month. As of March 1, 2023, the amount of compensation payable was reduced to $2,625 per month.
Nancy Boufeas, Corporate Secretary and interim CFO, is party to a consulting agreement with the Company dated September 6, 2024 for compensation of $2,500 per month for corporate and administrative services and $2,000 per month for acting as the Company's interim CFO, with a 30-day notice of termination. The agreement replaces a previous consulting agreement between Ms. Boufeas and the Company dated July 24, 2023 for compensation of $1,500 per month.
Karen Mae Parrin, former Chief Financial Officer, has a consulting agreement with the Company dated May 1, 2023 for compensation of $5,000 per month with an in-writing termination clause. The Agreement was terminated upon her resignation on July 31, 2024.
Zara Kanji & Associates, a Company controlled by Zara Kanji, former director, has an agreement with the Company for accounting services for $5,000 per month with an in-writing termination clause. The agreement remained in place even after her resignation as a director.
Long-Term Equity Incentive Plan: On October 17, 2022 we adopted a long-term equity incentive plan (the "2022 Plan") which replaced our 2016 stock option plan. All options granted under our 2016 stock option plan remain in full force and effect.
The purpose of our 2022 Plan is to attract and motivate directors, senior officers, employees, management company employees, consultants and others providing services to our Company and its subsidiaries, and thereby advance our interests, by affording such persons with an opportunity to acquire an equity interest in our Company through the grant of Awards. Awards as defined in the 2022 Plan include options to purchase shares, deferred share units, restricted share units, stock appreciation rights and other share-based awards that may be granted pursuant to the 2022 Plan.
Our 2022 Plan is a "rolling" plan whereby 10% of the issued and outstanding common shares of the Company at the time of granting of Awards (on a non-diluted basis) may be reserved for issuance upon the exercise or redemption of all Awards granted under the 2022 Plan.
The following is a summary of some of our 2022 Plan's provisions:
• the 2022 Plan shall not, together with all other security-based compensation arrangements of the Company, result, at any time, in (a) the number of common shares issuable to insiders exceeding ten percent (10%) of the issued and outstanding common shares (on a non-diluted basis); or (b) the issuance to insiders, within a one-year period, of a number of common shares exceeding ten percent (10%) of the issued and outstanding common shares (on a non-diluted basis) excluding common shares issued to such insider under the 2022 Plan or any other share compensation arrangement over the preceding one year period; or (c) the issuance to any one insider and such insider's associates within a one year period, of a number of common shares exceeding five percent (5%) of the issued and outstanding common shares (on a non-diluted basis), excluding common shares issued to such insider under the 2022 Plan or any other share compensation arrangement over the preceding one year period;
• the maximum number of Awards which may be reserved for issuance to any one person under the 2022 Plan in any 12 month period shall be 5% of the common shares outstanding at the time of the grant (on a non-diluted basis) less the aggregate number of common shares reserved for issuance to such person under any other option to purchase common shares from treasury granted as a compensation or incentive mechanism.
• the number of options granted to any one consultant, or to persons involved in investor relations activities in a 12 month period under the 2022 Plan shall not exceed 2% of the common shares outstanding at the time of grant (on a non-diluted basis), less the aggregate number of common shares reserved for issuance to consultants or such persons pursuant to any other share compensation arrangement, unless the consent of the applicable stock exchange is first obtained;
• an Award is personal to the participant and is non-assignable and non-transferable, except with the prior written consent of the Company and any required consent of the applicable stock exchange and any other applicable regulatory authority;
• Awards may only be granted to employees, officers, director, management company employees or consultants of the Company or of any affiliate;
• Awards are subject to specific termination provisions including upon the participant ceasing to be eligible or in the event of the death of a participant;
• the term of an option to purchase shares shall be five (5) years from the date of the grant;
• other than options to purchase shares granted to consultants providing investor relations services, options to purchase shares shall vest in instalments, with 1/3 of such options exercisable in whole or in part on or after the first anniversary following the grant of the option, and a further 1/3 vesting and becoming exercisable on each of the second and third anniversaries following the grant of the option;
• options to purchase shares granted to consultants providing investor relations services shall vest at a minimum over a period of 12 months with no more than 1/4 of such options vesting in any three (3) month period;
Our 2022 Plan is listed as Exhibit 4.2 to this Form 20-F and is incorporated by reference to our Form 20-F filed on May 11, 2023.
Option-Based Awards
During the year ended November 30, 2023, the Company granted 3,450,000 stock options to officers and directors. No stock options were exercised.
As at November 30, 2023, 1,850,000 options were held by the CEO, former CFO, former Corporate Secretary, Chairman, and the Company's directors, current and former. During the year ended November 30, 2023, the Company recognized $57,425 (2022 - $Nil) related to the options held by the officers and directors.
The following table sets forth the option-based awards for each of the directors and officers of the Company as at November 30, 2023 which were outstanding as at November 30, 2023.
| Name | Option Based Awards |
Number of
securities
underlying
unexercised
options
(#) | Option exercise
price
($) | Option expiration
date | Value of
unexercised
in-the-money
options
($)(1) |
Philip Lancaster
President, CEO and Director | 800,000(2) | .05 | August 18, 2026 | Nil |
| Douglas Smith Director | 200,000 | .05 | August 18, 2026 | Nil |
| Al Treddenick Director | 100,000 | .05 | August 18, 2026 | Nil |
| Name | Option Based Awards |
Number of
securities
underlying
unexercised
options
(#) | Option exercise
price
($) | Option expiration
date | Value of
unexercised
in-the-money
options
($)(1) |
Nancy Boufeas
Corporate Secretary and Interim CFO(3) | 50,000 | .05 | August 18, 2026 | Nil |
Karen Mae Parrin
Former CFO(4) | 200,000 | .05 | August 18, 2026 | Nil |
Zara Kanji
Former Director(5) | 300,000 | .05 | August 18, 2026 | Nil |
Khalid M. Al-Ali
Former Director (6) | 200,000 | .05 | August 18, 2026 | Nil |
Notes:
(1) Value is calculated based on the difference between the market value of the securities underlying the options as at November 30, 2023, being $0.035, and the exercise price of the option.
(2) Options were granted to Mr. Lancaster's company, 1274677 B.C. Ltd.
(3) Nancy Boufeas was appointed as Corporate Secretary on October 17, 2023 and as interim Chief Financial Officer on September 6, 2024.
(4) Karen Mae Parrin was appointed Chief Financial Officer May 15, 2023 and ceased to be Chief Financial Officer on July 31, 2024. Ms. Parrin was Corporate Secretary from May 20, 2023 to October 17, 2023.
(5) Zara Kanji was appointed as a director effective April 10, 2023 and ceased to be a director on August 21, 2024.
(6) Khalid Al-Ali ceased to be a director on January 31, 2024.
Termination and Change of Control Benefits
Except as previously disclosed, we have no plans or arrangements in respect of remuneration received or that may be received by our directors and senior management in respect of compensating such person in the event of termination of employment (as a result of resignation, retirement, change of control, etc.) or a change in responsibilities.
Pension, Retirement or Similar Benefits
We have not set aside or accrued any amounts to provide pension, retirement or similar benefit for our directors or senior management during the fiscal year ended November 30, 2023.
C. Board Practices
Term of Office
Each director of our Company holds office until the next annual general meeting of our Company or until his successor is elected or appointed, unless his office is earlier vacated in accordance with the articles of our Company or the provisions of the BCBCA. Each member of our senior management is appointed to serve at the discretion of our Board, subject to the terms of the employment agreements described above.
Service Contracts
Other than as disclosed herein, we do not have any service contracts with directors which provide for benefits upon termination of employment.
Committees
The audit committee is our only committee at this time. Our Company does not have a remuneration committee.
Audit Committee
The members of our audit committee are Philip Lancaster and Alan Treddenick. All members are financially literate, meaning that they have the ability to read and understand a set of financial statements that present a breadth of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by our financial statements.
We have adopted a charter for our audit committee, which is listed as Exhibit 11.1 to this Form 20-F and is incorporated by reference to our Form 20-F filed on March 31, 2021. The audit committee is responsible for review of both interim and annual financial statements for our Company. For the purposes of performing their duties, the members of the audit committee have the right at all times, to inspect all the books and financial records of our Company and any subsidiaries and to discuss with management and the external auditors of our Company any accounts, records and matters relating to the financial statements of our Company. The audit committee members meet periodically with management and annually with the external auditors. Our audit committee has the overall duties and responsibilities to:
- review the financial reporting process to ensure the accuracy of the financial statements of our Company;
- assist the Board to properly and fully discharge its responsibilities;
- strengthen the role of the Board by facilitating in depth discussions between directors, management and external auditors;
- evaluate the independent auditor's qualifications, performance and independence;
- facilitate the independence of the independent auditor;
- assess the processes relating to the determination and mitigation of risks and the maintenance of an effective control environment; and
- review the processes to monitor compliance with laws and regulations.
D. Employees
As of November 30, 2023, the Company has no employees.
We engage contractors from time to time to consult with us on specific corporate affairs or to perform specific tasks in connection with the development of our products.
E. Share Ownership
As at November 4, 2024, our directors and senior management beneficially owned the following common shares and stock options of our Company:
| Name and Office Held | Number of Common Shares Owned
and
Percent of Total Outstanding Common Shares | Options(2)Owned |
| # of Shares | % of Class(1) |
Philip Lancaster
President, CEO and Director(3) | 1,000,000(13) | .95% | 800,000
|
Douglas Smith
Chairman and Director | 1,204,975 | 1.14% | 200,000
|
Alan Treddenick
Director(4) | Nil | Nil | 100,000 |
Nancy Boufeas
Corporate Secretary and Interim CFO (5) | Nil | Nil | 50,000
|
Karen Mae Parrin
Former CFO(6) | See note (14) | See note (14) | 200,000
|
Zara Kanji
Former Director(7) | See note (14) | See note (14) | 300,000 |
Khalid M. Al-Ali
Former Director(8) | See note (14) | See note (14) | Nil |
Dana Wheeler
Former Director, President and CEO(9) | See note (14) | See note (14) | Nil |
| Susan J Gardner Former Chief Financial Officer(10) | See note (14) | See note (14) | Nil |
Carl Cagliarini
Former Interim CEO and Director(11) | See note (14) | See note (14) | Nil |
Thomas Nash
Former Director(12) | See note (14) | See note (14) | Nil |
Notes:
(1) Based on 105,604,461 common shares issued and outstanding as at November 4, 2024.
(2) Options are exercisable into common shares on a one-for-one basis. Options vest on the grant date unless otherwise resolved by the directors when granting options.
(3) Philip Lancaster was appointed as President and Secretary effective February 3, 2023 and ceased to be Secretary on May 20, 2023. Philip was appointed CEO on June 6, 2022.
(4) Alan Treddenick was appointed as a director on May 30, 2023.
(5) Nancy Boufeas was appointed as Corporate Secretary on October 17, 2023 and as Interim Chief Financial Officer on September 6, 2024.
(6) Karen Mae Parrin was appointed as Chief Financial Officer May 15, 2023 and ceased to be Chief Financial Officer on July 31, 2024. Ms. Parrin was Corporate Secretary from May 20, 2023 to October 17, 2023.
(7) Zara Kanji was appointed as a director effective April 10, 2023. She ceased to be a director on August 21, 2024.
(8) Khalid M. Al-Ali ceased to be a director on January 31, 2024.
(9) Held indirectly through 1274677 B.C. Ltd.
(10) Former directors and former senior officers are not required to file insider reports in Canada after they cease to be a director or senior officer of a Canadian reporting issuer. As a result, no current information as to shareholdings by former directors and former senior officers is available to the Company.
The voting rights attached to the common shares owned by our directors and senior management do not differ from those voting rights attached to shares owned by people who are not directors or senior management of our Company.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major Shareholders
To the best of our knowledge, there are no persons or companies who beneficially own, directly or indirectly, or exercise control or direction over, securities carrying more than 5% of the voting rights attached to any class of voting securities of the Company.
Major Shareholder Voting Rights
The voting rights of our major shareholders do not differ from the voting rights of holders of our common shares who are not our major shareholders.
Residency of Shareholders
As at October 31, 2024, the registrar and transfer agent for our Company reported that there were 105,604,461 common shares of our Company issued and outstanding. Of the 105,604,461 common shares issued and outstanding, 98,752,605 were registered to Canadian residents (9 recorded shareholders), 4,363,356 were registered to residents of the United States (38 recorded shareholders), and 2,488,500 were registered to non-United States or Canadian residents (8 recorded shareholders).
As of October 31, 2024, our shareholder register indicates that our common shares are held as follows:
Location | Number of Common
Shares | Percentage of Total
Common Shares | Number of Registered
Shareholders of
Record |
United States | 4,363,356 | 69.09% | 38 |
Canada | 98,752,605 | 16.36% | 9 |
Other | 2,488,500 | 14.55% | 8 |
Total | 105,604,461 | 100% | 55 |
Control and Control Arrangements
To the best of our knowledge, our Company is not directly or indirectly owned or controlled by another corporation, by any foreign government or by any other natural or legal person severally or jointly, except as disclosed in the above table regarding our major shareholders.
There are no arrangements known to us, the operation of which may at a subsequent date result in a change in control of our Company.
B. Related Party Transactions
The Company recorded the following transactions with related parties during the period from the beginning of the Company's last financial year up to November 30, 2023.
The amounts due to 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 financial statements at the exchange amount, which is the amount of consideration established and agreed to by the related parties.
As at November 30, 2023, $372,650 (November 30, 2022 - $705,672) was due to directors and officers of the Company:
| | | November 30, 2023 | | | November 30, 2022 | |
| Former CFO of the Company- Susan Gardner | $ | - | | $ | 67,540 | |
| Former interim CEO of the Company - Carl Cagliarini | | - | | | 250,179 | |
| Company controlled by the President and CEO- Philip Lancaster | | 6,077 | | | 78,750 | |
| Former CEO and Director - Dana Wheeler | | 361,573 | | | 307,472 | |
| Director and Chairman - Douglas Smith | | - | | | 1,731 | |
| Company controlled by a then Director - Zara Kanji | | 5,000 | | | - | |
| | $ | 372,650 | | $ | 705,672 | |
During the year ended November 30, 2023 and 2022 and 2021, the Company entered into the following transactions with related parties:
| | | November 30, 2023 | | | November 30, 2022 | | | November 30, 2021 | |
| Management fees | $ | 92,127 | | $ | - | | $ | 55,000 | |
| Consulting fees | | 47,500 | | | 135,000 | | | 307,734 | |
| Accounting fees | | 63,844 | | | - | | | 36,202 | |
| Professional fees | | 10,429 | | | - | | | - | |
| Stock-based compensation | | 57,425 | | | - | | | 410,132 | |
| Salaries and benefits | | 54,100 | | | 330,337 | | | 313,626 | |
| Others | | 7,144 | | | - | | | 5,000 | |
| | $ | 332,569 | | $ | 465,337 | | $ | 1,127,694 | |
Management fees consisted of the following:
| | | November 30, 2023 | | | November 30, 2022 | | | November 30, 2021 | |
| Company controlled by the President and CEO | $ | 35,000 | | $ | - | | $ | - | |
| CFO | | 30,000 | | | - | | | - | |
| Former Interim CEO - Carl Cagliarini | | 27,127 | | | - | | | - | |
| Former Corporate Secretary - Vivian Katsuris | | - | | | - | | | - | |
| Company controlled by a then Director and Former CFO - Zara Kanji | | - | | | - | | | 55,000 | |
| | $ | 92,127 | | $ | - | | $ | 55,000 | |
Consulting fees consisted of the following:
| | | November 30,
2023 | | | November 30,
2022 | | | November 30,
2021 | |
| Director and Chairman - Douglas Smith | $ | - | | $ | - | | $ | 307,734 | |
| Company controlled by the President and CEO - Philip Lancaster | | 47,500 | | | 75,000 | | | - | |
| Company controlled by the Former Corporate Secretary- Vivian Katsuris | | - | | | 60,000 | | | - | |
| | $ | 47,500 | | $ | 135,000 | | $ | 307,734 | |
Accounting fees of $63,844 (2022 - $Nil and 2021 - $36,202) were paid or accrued to a company controlled by a director at the time - Zara Kanji.
During the year ended November 30, 2023, the Company had below stock options held by the Company's former and current directors and officers. The amount recognized as expense for these options for the year ended November 30, 2023, and 2022 are as follows:
| | | November 30, 2023 | | | November 30, 2022 | |
| | | Number of
options held | | | Expense for the
period (vested) | | | Number of
options held | | | Expense for the
period (vested) | |
| | | | | | | | | | | | | |
| Philip Lancaster, CEO | | 800,000 | | $ | 24,834 | | | - | | $ | - | |
| Karen Mae Parrin, then CFO | | 200,000 | | | 6,208 | | | - | | | - | |
| Douglas Smith, Director and Chairman | | 200,000 | | | 6,208 | | | 300,000 | | | - | |
| Zara Kanji, then Director | | 300,000 | | | 9,312 | | | 150,000 | | | - | |
| Dr. Khalid Al-Ali, then Director | | 200,000** | | | 6,208 | | | 150,000 | | | - | |
| Al Treddenick, Director | | 100,000 | | | 3,103 | | | - | | | - | |
| Nancy Boufeas, Company Secretary | | 50,000 | | | 1,552 | | | - | | | - | |
| Dana Wheeler, Former Director | | - | | | - | | | 600,000 | | | - | |
| Vivian Katsuris, Former Corporate Secretary | | - | | | - | | | 150,000 | | | - | |
| Angelos Kostopoulos, Former Director | | - | | | - | | | 150,000 | | | - | |
| Thomas Nash, Former Director | | - | | | - | | | 150,000 | | | - | |
| | | 1,850,000 | | $ | 57,425 | | | 1,650,000* | | $ | - | |
*During the year ended November 30, 2023, 1,650,000 stock options held by the former directors and officers were cancelled due to resignation from their position.
**Subsequent to the year ended November 30, 2023, during the period ended May 31, 2024, 200,000 stock options held by Dr. Khalid Al-Ali were cancelled due to his resignation from his position.
Salaries of $54,100 (2022- $330,337 and 2021 - $313,626) were paid or accrued to the Former CEO - Dana Wheeler. Others consisted of: (1) Travel of $3,467 (2022 - $Nil and 2021 - $Nil) paid or accrued to a company controlled by a CEO; (2) Office and general expenses $3,677 (2022 - $Nil and 2021 - $Nil) paid or accrued to a company controlled by the CEO; and (3) Rent of $Nil (2022 - $Nil and 2021 - $5,000) were paid or accrued to a company controlled by a director - Zara Kanji.
Gain on debt forgiveness of $62,500 (2022 - $Nil and 2021 - $Nil) is the consulting fees forgiven by the company controlled by the President and CEO. The amount is recognized in the statement of loss and comprehensive loss as the consulting fees were approved by the Board and the CEO is not a primary shareholder of the Company.
As at August 31, 2024, $495,027 (November 30, 2023– $372,650) was due to directors and officers of the Company:
| | | August 31, 2024 | | | November 30, 2023 | |
| | | | | | | |
| Company controlled by the President and CEO | $ | 45,442 | | $ | 6,077 | |
Former CFO | | 15,794 | | | - | |
Company controlled by the Corporate Secretary and Interim CFO | | 21,138 | | | - | |
| Chairman of the Board | | 9,196 | | | - | |
Company controlled by a Former Director | | 41,884 | | | 5,000 | |
| Former CEO and Director | | 361,573 | | | 361,573 | |
| | $ | 495,027 | | $ | 372,650 | |
During the periods ended August 31, 2024 and 2023 and 2022, the Company entered into the following transactions with related parties:
| | | August 31, 2024 | | | August 31, 2023 | | | August 31, 2022 | |
| Management fees | $ | 85,000 | | $ | 77,127 | | $ | - | |
| Consulting fees | | - | | | 32,500 | | | 236,022 | |
| Professional fees | | 22,500 | | | - | | | - | |
| Salaries and benefits | | - | | | - | | | 233,631 | |
Share-based payments | | - | | | 57,708 | | | - | |
| Accounting fees | | 36,333 | | | 41,844 | | | - | |
| | $ | 143,833 | | $ | 209,179 | | $ | 469,653 | |
Management fees consisted of the following:
| | | August 31, 2024 | | | August 31, 2023 | | | August 31, 2022 | |
| Company controlled by the President and CEO | $ | 45,000 | | $ | 35,000 | | $ | - | |
Former CFO | | 40,000 | | | 15,000 | | | - | |
Former Interim CEO and Director | | | | | 27,127 | | | - | |
| Company controlled by the Former Corporate Secretary | | - | | | - | | | - | |
| Former CFO of the Company | | - | | | - | | | - | |
| | $ | 85,000 | | $ | 77,157 | | $ | - | |
Consulting fees consisted of the following:
| | | August 31, 2024 | | | August 31, 2023 | | | August 31, 2022 | |
Company controlled by the President and CEO | $ | - | | $ | 32,500 | | $ | 37,500 | |
Corporate Secretary | | - | | | - | | | 35,500 | |
Directors | | - | | | - | | | 163,022 | |
| | $ | - | | $ | 32,500 | | $ | 236,022 | |
Professional fees of $22,500 (2023 - $Nil and 2022 - $Nil) were paid or accrued to a company controlled by the Corporate Secretary. Accounting fees of $36,333 (2023 - $41,844 and 2022 - $Nil) were paid or accrued to a company controlled by a director.
During the year ended November 30, 2023, the Company entered into a loan agreement with the CEO for $6,000 and an interest of 10%. The loan was repaid within the year and all accrued interest was forgiven.
On December 20, 2023, the Company entered into a loan agreement with a director amounting to $5,000 with interest of 10% per annum (Notes 8 and 16).
On April 11, 2024, the Company entered into a loan agreement with its Chairman of the Board amounting to $9,361 (US $7,000) with interest of 10% per annum.
Compensation
For information regarding compensation for our directors and senior management, see Item 6.B - Compensation.
C. Interests of Experts and Counsel
Not applicable
ITEM 8. FINANCIAL INFORMATION
A. Financial Statements and Other Financial Information
Our financial statements (included as Item 18 of this Form 20-F) are stated in Canadian dollars and are prepared in accordance with IFRS, as issued by the IASB.
The following financial statements and notes thereto are filed with and incorporated herein as part of this Annual Report:
| (a) | Audited consolidated financial statements for the years ended November 30, 2023 and November 30, 2022, including: report of independent registered accounting firm by Reliant CPA PC ((PCAOB ID: 6906), consolidated statements of financial position, consolidated statements of Income (Loss) and Comprehensive Income (Loss), Consolidate statements of Cash flows and Consolidated statements of Changes in shareholders' equity (deficit), and notes to consolidated financial statements. |
These financial statements can be found under "Item 18 - Financial Statements" below.
Legal Proceedings
There have not been any legal or arbitration proceedings, including those relating to bankruptcy, receivership or similar proceedings, those involving any third party, and governmental proceedings pending or known to be contemplated, which may have, or have had in the recent past, significant effect our financial position or profitability.
There have been no material proceedings in which any director, any member of senior management, or any of our affiliates is either a party adverse to our Company or our subsidiaries or has a material interest adverse to our Company or our subsidiaries.
Policy on Dividend Distributions
We have not declared any dividends since our inception and do not anticipate that we will do so in the foreseeable future. We currently intend to retain future earnings, if any, to finance the development of our business. Any future payment of dividends or distributions will be determined by our Board on the basis of our earnings, financial requirements and other relevant factors.
B. Significant Changes
We are not aware of any significant change that has occurred since November 30, 2023, and that has not been disclosed elsewhere in this Annual Report.
ITEM 9. THE OFFER AND LISTING
A. Offer and Listing Details
Our common shares are listed for trading on the CSE under the symbol "AETH", on the OTCQB under the symbol "AETHF" and on the Frankfurt Stock Exchange under the symbol "4XA".
B. Plan of Distribution
Not applicable to Form 20-F filed as an annual report.
C. Markets
Our common shares are traded on the CSE under the symbol "AETH", on the OTCQB under the symbol "AETHF" and on the Frankfurt Stock Exchange under the symbol "4XA".
D. Selling Shareholders
Not applicable to Form 20-F filed as an annual report.
E. Dilution
Not applicable to Form 20-F filed as an annual report.
F. Expenses of the Issue
Not applicable to Form 20-F filed as an annual report.
ITEM 10. ADDITIONAL INFORMATION
A. Share Capital
Not applicable to Form 20-F filed as an annual report.
B. Memorandum and Articles of Association
Incorporation
We are incorporated under the BCBCA. Our British Columbia incorporation number is BC0922905.
Objects and Purposes of Our Company
Our articles do not contain a description of our objects and purposes.
Voting on Proposals. Arrangements, Contracts or Compensation by Directors
Other than as disclosed below, our articles do not restrict directors' power to (a) vote on a proposal, arrangement or contract in which the directors are materially interested or (b) to vote compensation to themselves or any other members of their body in the absence of an independent quorum.
The BCBCA does, however, contain restrictions in this regard. The BCBCA provides that a director who holds a disclosable interest in a contract or transaction into which we have entered or proposes to enter is not entitled to vote on any directors' resolution to approve that contract or transaction, unless all the directors have a disclosable interest in that contract or transaction, in which case any or all of those directors may vote on such resolution. A director who holds a disclosable interest in a contract or transaction into which we have entered or proposes to enter and who is present at the meeting of directors at which the contract or transaction is considered for approval may be counted in the quorum at the meeting whether or not the director votes on any or all of the resolutions considered at the meeting. A director or senior officer generally holds a disclosable interest in a contract or transaction if (a) the contract or transaction is material to our Company; (b) we have entered, or proposed to enter, into the contract or transaction, and (c) either (i) the director or senior officer has a material interest in the contract or transaction or (ii) the director or senior officer is a director or senior officer of, or has a material interest in, a person who has a material interest in the contract or transaction. A director or senior officer does not hold a disclosable interest in a contract or transaction merely because the contract or transaction relates to the remuneration of the director or senior officer in that person's capacity as director, officer, employee or agent of our Company or of an affiliate of our Company.
Borrowing Powers of Directors
Our articles provide that we, if authorized by our directors, may:
- borrow money in the manner and amount, on the security, from the sources and on the terms and conditions that they consider appropriate;
- issue bonds, debentures and other debt obligations either outright or as security for any liability or obligation of our Company or any other person and at such discounts or premiums and on such other terms as they consider appropriate;
- guarantee the repayment of money by any other person or the performance of any obligation of any other person; and
- mortgage, charge, whether by way of specific or floating charge, grant a security interest in, or give other security on, the whole or any part of the present and future assets and undertaking of our Company.
Qualifications of Directors
Under our articles, a director is not required to hold a share in the capital of the Company as qualification for his or her office but must be qualified as required by the BCBCA to become, act or continue to act as a director.
Share Rights
All holders of common shares are entitled to receive dividends out of assets legally available therefore at such times and in such amounts as the board of directors may from time to time determine. All holders of common shares will share equally on a per share basis in any dividend declared by the board of directors. The dividend entitlement time limit will be fixed by the board of directors at the time any such dividend is declared. Each outstanding common share is entitled to one vote on all matters submitted to a vote of our shareholders in general meeting. There are no cumulative voting rights attached to any of our shares and, accordingly, the holders of more than half of the shares represented at a general meeting can elect all of the directors to be elected in a general meeting. All directors stand for re-election annually. Upon any liquidation, dissolution or winding up, all common shareholders are entitled to share ratably in all net assets available for distribution after payment to creditors. The common shares are not convertible or redeemable and have no preemptive, subscription or conversion rights. In the event of a merger or consolidation, all common shareholders will be entitled to receive the same per share consideration.
Procedures to Change the Rights of Shareholders
Our articles state that the Company may by resolution of its directors or Company shareholders: (a) create one or more classes or series of shares or, if none of the shares of a class or series of shares are allotted or issued, eliminate that class or series of shares; (b) increase, reduce or eliminate the maximum number of shares that the Company is authorized to issue out of any class or series of shares or establish a maximum number of shares that the Company is authorized to issue out of any class or series of shares for which no maximum is established; (c) if the Company is authorized to issue shares of a class of shares with par value: (i) decrease the par value of those shares, (ii) if none of the shares of that class of shares are allotted or issued, increase the par value of those shares, (iii) subdivide all or any of its unissued or fully paid issued shares with par value into shares of smaller par value, or (iv) consolidate all or any of its unissued or fully paid issued shares with par value into shares of larger par value; (d) subdivide all or any of its unissued or fully paid issued shares without par value; (e) change all or any of its unissued or fully paid issued shares with par value into shares without par value or all or any of its unissued shares without par value into shares with par value; (f) alter the identifying name of any of its shares; (g) consolidate all or any of its unissued or fully paid issued shares without par value; (h) create special rights or restrictions for, and attach those special rights or restrictions to, the shares of any class or series of shares, whether or not any or all of those shares have been issued; (i) vary or delete any special rights or restrictions attached to the shares of any class or series of shares, whether or not any or all of those shares have been issued; (j) change the name of the Company; or (k) otherwise alter its shares or authorized share structure when required or permitted to do so by the BCBCA.
An amendment of our articles by shareholders would require the approval of holders of two-thirds of the votes of the Company's common shares cast at a duly called special meeting.
Meetings
Each director holds office until our next annual general meeting or until his office is earlier vacated in accordance with our articles or with the provisions of the BCBCA. A director appointed or elected to fill a vacancy on our board also holds office until our next annual general meeting.
Our articles and the BCBCA provide that our annual meetings of shareholders must be held at such time in each calendar year and not more than 15 months after the last annual general meeting and at such place as our Board may from time to time determine. Our directors may, at any time, call a meeting of our shareholders.
The holders of not less than five percent of our issued shares that carry the right to vote at a meeting may requisition our directors to call a meeting of shareholders for the purposes stated in the requisition.
Under our articles, the quorum for the transaction of business at a meeting of our shareholders is one or more persons who are, present in person or by proxy, shareholders who, in the aggregate hold at least 1% of the issued shares entitled to be voted at the meeting.
Our articles state that in addition to those persons who are entitled to vote at a meeting of our shareholders, the only other persons entitled to be present at the meeting are the directors, the president (if any), the secretary (if any), any lawyer or auditor for our Company, any persons invited to be present at the meeting by our directors or by the chair of the meeting and any person entitled or required under the BCBCA or our articles to be present at the meeting.
Limitations on Ownership of Securities
No share may be issued until it is fully paid.
Neither Canadian law nor our articles limit the right of a non-resident to hold or vote common shares of the Company, other than as provided in the Canadian Investment Act, as amended by the Canadian WTO Act. The purpose of the Canadian Investment Act is to provide for the review of significant investments in Canada by non-Canadians in a manner that encourages investment, economic growth and employment opportunities in Canada and to provide for the review of investments in Canada by non-Canadians that could be injurious to national security. The Canadian Investment Act generally prohibits implementation of a direct reviewable investment (based on certain thresholds) by an individual, government or agency thereof, corporation, partnership, trust or joint venture that is not a "Canadian," as defined in the Investment Act, unless, after review, the minister responsible for the Investment Act is satisfied that the investment is likely to be of net benefit to Canada. An investment in common shares of the Company by a WTO investor (or by a non-Canadian other than a WTO investor if, immediately prior to the implementation of the investment the Company was controlled by WTO investors) would be reviewable under the Canadian Investment Act if it were an investment to acquire direct control of the Company and the value of the assets of the Company equaled or exceeded certain threshold amounts determined on an annual basis.
The threshold for a pre-closing net benefit review depends on whether the purchaser is: (a) controlled by a person or entity from a member of the WTO; (b) a state-owned enterprise; or (c) from a country considered a "Trade Agreement Investor" under the Canadian Investment Act. A different threshold also applies if the Canadian business carries on a cultural business. The 2021 threshold for WTO investors that are state-owned enterprises is $415 million based on the book value of the Canadian business' assets. The 2021 thresholds for review for direct acquisitions of control of Canadian businesses by private sector investor WTO investors that are not state-owned enterprises is $1 billion (unless the WTO member is a party to one of a list of certain free trade agreements, in which case the amount is $1.5 billion), also based on the "enterprise value" of the Canadian business being acquired.
A non-Canadian, whether a WTO investor or otherwise, would be deemed to acquire control of the Company for purposes of the Canadian Investment Act if he or she acquired a majority of the common shares of the Company. The acquisition of less than a majority, but at least one-third of the shares, would be presumed to be an acquisition of control of the Company, unless it could be established that the Company is not controlled in fact by the acquirer through the ownership of the shares. In general, an individual is a WTO investor if he or she is a "national" of a country (other than Canada) that is a member of the WTOor has a right of permanent residence in a country (other than Canada) that is a member of the WTO. A corporation or other entity will be a "WTO investor" if it is a "WTO investor-controlled entity," pursuant to detailed rules set out in the Canadian Investment Act. The U.S. is a WTO member. Certain transactions involving our common shares would be exempt from the Canadian Investment Act, including:
- an acquisition of the shares if the acquisition were made in the ordinary course of that person's business as a trader or dealer in securities;
- an acquisition of control of the Company in connection with the realization of a security interest granted for a loan or other financial assistance and not for any purpose related to the provisions of the Investment Act; and
- an acquisition of control of the Company by reason of an amalgamation, merger, consolidation or corporate reorganization, following which the ultimate direct or indirect control in fact of the Company, through the ownership of voting interests, remains unchanged.
Change in Control
There are no provisions in our articles or in the BCBCA that would have the effect of delaying, deferring, or preventing a change in control of our Company, and that would operate only with respect to a merger, acquisition or corporate restructuring involving our Company or our subsidiaries.
Ownership Threshold
Our articles or the BCBCA do not contain any provisions governing the ownership threshold above which shareholder ownership must be disclosed. Securities legislation in Canada, however, requires every person or company who acquires beneficial ownership of, or control or direction over, voting or our common shares (or securities convertible into such securities) which, together with the acquiror's previously acquired securities, represents 10% or more of the outstanding securities of that class to file, subject to certain exceptions, a press release and an early warning report, each of which contain certain prescribed information (including the acquiror's identity, intention and extent of holdings). In addition, such acquiror must make further disclosures where:
| (i) | such acquiror or any person acting jointly or in concert with such acquiror, acquires or disposes beneficial ownership of, or acquires or ceases to have control or direction over securities (or securities convertible into such securities) in an amount equal to 2% or more of the outstanding securities of the class of securities that was the subject of such acquiror's most recent early warning report; |
| | |
| (ii) | such acquiror's beneficial ownership of, or control or direction over, the outstanding securities of the class of securities that was the subject of the acquiror's most recent early warning report decreases to less than 10%; or |
| | |
| (iii) | there is a change in a material fact contained in the acquiror's most recent early warning report. |
Securities legislation in Canada also requires insiders of the Company to file reports disclosing information about transactions involving securities of the Company (or related financial instruments) held by such insider. Insiders of the Company include, among others, the Chief Executive Officer, Chief Financial Officer and Chief Operating Officer of the Company, directors of the Company and persons or companies that have beneficial ownership of, or control or direction over (or a combination thereof), whether direct or indirect, common shares of the Company carrying more than 10% of the voting rights attached to all of the Company's outstanding voting securities. This threshold is higher than the 5% threshold under U.S. securities legislation at which shareholders must report their share ownership.
C. Material Contracts
Except for contracts entered into by the Company in the ordinary course of business, no material contracts were entered into by the Company in the two years preceding the date of this Form 20-F.
D. Exchange Controls
There are no government laws, decrees or regulations in Canada which restrict the export or import of capital or which affect the remittance of dividends, interest or other payments to non-resident holders of our common shares. Any remittances of dividends to United States residents and to other non-residents are, however, subject to withholding tax. See "Taxation" below.
E. Taxation
Certain Canadian Federal Income Taxation
We consider that the following general summary fairly describes the principal Canadian federal income tax consequences applicable to a non-resident holder. This summary is based upon the current provisions of the Canadian Income Tax Act, the regulations thereunder, the current publicly announced administrative and assessing policies of the Canada Revenue Agency and the Treaty. This summary also takes into account the amendments to the Canadian Income Tax Act and the regulations publicly announced by the Canadian Minister of Finance prior to the date hereof and assumes that all such amendments or regulations will be enacted in their present form. However, no assurances can be given that such amendments or regulations will be enacted in the form proposed, or at all. This summary is not exhaustive of all possible Canadian federal income tax consequences applicable to a holder of our common shares and, except for the foregoing, this summary does not take into account or anticipate any changes in law, whether by legislative, administrative or judicial decision or action, nor does it take into account provincial, territorial or foreign income tax legislation or considerations, which may differ from the Canadian federal income tax consequences described herein.
This summary is of a general nature only and is not intended to be, and should not be construed to be, legal, business or tax advice to any particular holder or prospective holder of our common shares, and no opinion or representation with respect to the tax consequences to any holder or prospective holder of our common shares is made. Accordingly, holders and prospective holders of our common shares should consult their own tax advisors with respect to the income tax consequences of purchasing, owning and disposing of our common shares in their particular circumstances.
Dividends
Dividends paid on our common shares to a non-resident holder will be subject under the Canadian Income Tax Act to withholding tax at a rate of 25% subject to a reduction under the provisions of an applicable tax treaty, which tax is deducted at source by our Company. The Treaty provides that the Canadian Income Tax Act standard 25% withholding tax rate is reduced to 15% on dividends paid on shares of a corporation resident in Canada (such as our Company) to residents of the United States, and also provides for a further reduction of this rate to 5% where the beneficial owner of the dividends is a corporation resident in the United States that owns at least 10% of the voting shares of the corporation paying the dividend.
Capital Gains
A non-resident holder is not subject to tax under the Canadian Income Tax Act in respect of a capital gain realized upon the disposition of a common share of our Company unless such share represents "taxable Canadian property", as defined in the Canadian Income Tax Act, to the holder thereof. Our common shares generally will be considered taxable Canadian property to a non-resident holder if:
- the non-resident holder;
- persons with whom the non-resident holder did not deal at arm's length; or
- the non-resident holder and persons with whom such non-resident holder did not deal at arm's length,
owned, or had an interest in an option in respect of, not less than 25% of the issued shares of any class of our capital stock at any time during the 60-month period immediately preceding the disposition of such shares. In the case of a non-resident holder to whom shares of our Company represent taxable Canadian property and who is resident in the United States, no Canadian taxes will generally be payable on a capital gain realized on such shares by reason of the Treaty unless the value of such shares is derived principally from real property situated in Canada.
United States Federal Income Taxation
The following is a general discussion of certain material United States federal foreign income tax matters under current law, generally applicable to a U.S. Holder (as defined below) of our common shares who holds such shares as capital assets. This discussion does not address all aspects of United States federal income tax matters and does not address consequences peculiar to persons subject to special provisions of federal income tax law, such as those described below as excluded from the definition of a U.S. Holder. In addition, this discussion does not cover any state, local or foreign tax consequences. See "Certain Canadian Federal Income Tax Consequences" above.
The following discussion is based upon the Internal Revenue Code of 1986, as amended, U.S. Department of the Treasury regulations, published IRS rulings, published administrative positions of the IRS and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possibly on a retroactive basis, at any time. In addition, this discussion does not consider the potential effects, both adverse and beneficial, of any recently proposed legislation which, if enacted, could be applied, possibly on a retroactive basis, at any time. No assurance can be given that the IRS will agree with such statements and conclusions, or will not take, or a court will not adopt, a position contrary to any position taken herein.
Holders and prospective holders of common shares should consult their own tax advisors with respect to federal, state, local, and foreign tax consequences of purchasing, owning and disposing of our common shares.
U.S. Holders
As used herein, a "U.S. Holder" includes a holder of less than 10% of our common shares who is a citizen or resident of the United States, a corporation created or organized in or under the laws of the United States or of any political subdivision thereof, any entity which is taxable as a corporation for U.S. tax purposes and any other person or entity whose ownership of our common shares is effectively connected with the conduct of a trade or business in the United States. A U.S. Holder does not include persons subject to special provisions of federal income tax law, such as tax-exempt organizations, qualified retirement plans, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers, non-resident alien individuals or foreign corporations whose ownership of our common shares is not effectively connected with the conduct of a trade or business in the United States and shareholders who acquired their shares through the exercise of employee stock options or otherwise as compensation.
Distributions
The gross amount of a distribution paid to a U.S. Holder will generally be taxable as dividend income to the U.S. Holder for U.S. federal income tax purposes to the extent paid out of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions which are taxable dividends and which meet certain requirements will be "unqualified dividend income" and taxed to U.S. Holders at a maximum U.S. federal rate of 15%. Distributions in excess of our current and accumulated earnings and profits will be treated first as a tax-free return of capital to the extent of the U.S. Holder's tax basis in the common shares and, to the extent in excess of such tax basis, will be treated as a gain from a sale or exchange of such shares.
Capital Gains
In general, upon a sale, exchange or other disposition of common shares, a U.S. Holder will generally recognize a capital gain or loss for U.S. federal income tax purposes in an amount equal to the difference between the amount realized on the sale or other distribution and the U.S. Holder's adjusted tax basis in such shares. Such gain or loss will be U.S. source gain or loss and will be treated as a long-term capital gain or loss if the U.S. Holder's holding period of the shares exceeds one year. If the U.S. Holder is an individual, any capital gain will generally be subject to U.S. federal income tax at preferential rates if specified minimum holding periods are met. The deductibility of capital losses is subject to significant limitations.
Foreign Tax Credit
A U.S. Holder who pays (or has had withheld from distributions) Canadian income tax with respect to the ownership of our common shares may be entitled, at the option of the U.S. Holder, to either a deduction or a tax credit for such foreign tax paid or withheld. Generally, it will be more advantageous to claim a credit because a credit reduces United States federal income taxes on a dollar-for-dollar basis, while a deduction merely reduces the taxpayer's income subject to tax. This election is made on a year-by-year basis and generally applies to all foreign income taxes paid by (or withheld from) the U.S. Holder during that year. There are significant and complex limitations which apply to the tax credit, among which are an ownership period requirement and the general limitation that the credit cannot exceed the proportionate share of the U.S. Holder's United States income tax liability that the U.S. Holder's foreign source income bears to his or its worldwide taxable income. In determining the application of this limitation, the various items of income and deduction must be classified into foreign and domestic sources. Complex rules govern this classification process. There are further limitations on the foreign tax credit for certain types of income such as "passive income", "high withholding tax interest", "financial services income", "shipping income", and certain other classifications of income. The availability of the foreign tax credit and the application of these complex limitations on the tax credit are fact specific and holders and prospective holders of our common shares should consult their own tax advisors regarding their individual circumstances.
Passive Foreign Investment Company Status
We would be a PFIC if (taking into account certain "look-through" rules with respect to the income and assets of our corporate subsidiaries in which we own 25 percent (by value) of the stock) either (i) 75 percent or more of our gross income for the taxable year was passive income or (ii) the average percentage (by value) of our total assets that are passive assets during the taxable year was at least 50 percent.
If we were a PFIC, each U.S. Holder would (unless it made one of the elections discussed below on a timely basis) be taxable on gain recognized from the disposition of our common shares (including gain deemed recognized if the common shares are used as security for a loan) and upon receipt of certain "excess distributions" (generally, distributions that exceed 125% of the average amount of distributions in respect to such common shares received during the preceding three taxable years or, if shorter, during the U.S. Holder's holding period prior to the distribution year) with respect to our common shares as if such income had been recognized ratably over the U.S. Holder's holding period for the common shares. The U.S. Holder's income for the current taxable year would include (as ordinary income) amounts allocated to the current taxable year and to any taxable year period prior to the first day of the first taxable year for which we were a PFIC. Tax would also be computed at the highest ordinary income tax rate in effect for each other taxable year period to which income is allocated, and an interest charge on the tax as so computed would also apply. Additionally, if we were a PFIC, U.S. Holders who acquire our common shares from decedents (other than non-resident aliens) would be denied the normally available step-up in basis for such shares to fair market value at the date of death and, instead, would have a tax basis in such shares equal to the decedent's basis, if lower.
As an alternative to the tax treatment described above, a U.S. Holder could elect to treat us as a "qualified electing fund", in which case the U.S. Holder would be taxed currently, for each taxable year that we are a PFIC, on its pro rata share of our ordinary earnings and net capital gain (subject to a separate election to defer payment of taxes, which deferral is subject to an interest charge). Special rules apply if a U.S. Holder makes a QEF election after the first taxable year in its holding period in which we are a PFIC. In the event that we conclude that we will be classified as a PFIC, we will make a determination at such time as to whether we will be able to provide U.S. Holders with the information that is necessary to make a QEF election. Amounts includable in income as a result of a QEF election will be determined without regard to our prior year losses or the amount of cash distributions, if any, received from us. A U.S. Holder's basis in its common shares will increase by any amount included in income and decrease by any amounts not included in income when distributed because such amounts were previously taxed under the QEF rules. So long as a U.S. Holder's QEF election is in effect with respect to the entire holding period for its common shares, any gain or loss realized by such holder on the disposition of its common shares held as a capital asset ordinarily will be capital gain or loss. Such capital gain or loss ordinarily would be long-term if such U.S. Holder had held such common shares for more than one year at the time of the disposition. For non-corporate U.S. Holders, long-term capital gain is generally subject to a maximum U.S. federal income tax rate of 15% for taxable years beginning on or before November 30, 2012. The QEF election is made on a shareholder-by-shareholder basis, applies to all common shares held or subsequently acquired by an electing U.S. Holder and can be revoked only with the consent of the IRS.
As an alternative to making the QEF election, a U.S. Holder of PFIC stock which is publicly traded may in certain circumstances avoid certain of the tax consequences generally applicable to holders of a PFIC by electing to mark the stock to market and recognizing as ordinary income or loss, each taxable year that we are a PFIC, an amount equal to the difference as of the close of the taxable year between the fair market value of the PFIC stock and the U.S. Holder's adjusted tax basis in the PFIC stock. Special rules apply if a U.S. Holder makes a mark-to-market election after the first taxable year in its holding period in which we are a PFIC. Losses would be allowed only to the extent of net mark-to-market gain previously included by the U.S. Holder under the election for prior taxable years. This election is available for so long as the Company's common shares constitute "marketable stock," which includes stock of a PFIC that is "regularly traded" on a "qualified exchange or other market." Generally, a "qualified exchange or other market" includes a national market system established pursuant to Section 11A of the Exchange Act, or a foreign securities exchange that is regulated or supervised by a governmental authority of the country in which the market is located and that has certain characteristics. A class of stock that is traded on one or more qualified exchanges or other markets is "regularly traded" on an exchange or market for any calendar year during which that class of stock is traded, other than in de minimis quantities, on at least 15 days during each calendar quarter, subject to special rules relating to an initial public offering. It is not entirely clear whether either the OTCQB or TSXV are qualified exchanges or other markets, or whether there will be sufficient trading volume with respect to the Company's common shares, and accordingly, whether the common shares will be "marketable stock" for these purposes. Furthermore, there can be no assurances that the Company's common shares will continue to trade on any of the exchanges listed above.
We believe we were not a PFIC for the year ending November 30, 2022, and do not expect to be classified as a PFIC for the year ending November 30, 2022. However, PFIC status is determined as of the end of each taxable year and is dependent on a number of factors, including the value of our passive assets, the amount and type of our gross income, and our market capitalization. Therefore, there can be no assurance that we will not become a PFIC for the current taxable year ending November 30, 2023, or in a future taxable year. We will notify U.S. Holders in the event we conclude that we will be treated as a PFIC for any taxable year.
F. Dividends and Paying Agents
There is no dividend restriction; however, we have not declared any dividends since our inception and do not anticipate that we will do so in the foreseeable future. We currently intend to retain future earnings, if any, to finance the development of our business. Any future payment of dividends or distributions will be determined by our Board on the basis of our earnings, financial requirements and other relevant factors. There is no special procedure for nonresident holders to claim dividends. Any remittances of dividends to United States residents and to other nonresidents are, however, subject to withholding tax. See "Taxation" above.
G. Statements by Experts
The financial statements of our Company for the year ended November 30, 2023 included in this Annual Report have been audited by Reliant CPA PC, Certified Public Accountants, with a business address at 895 Dove Street, Suite 300, #300180, New Port Beach, CA 92660 US, as stated in their report appearing in this Annual Report and have been so included in reliance upon the reports of such firm given their authority as experts in accounting and auditing.
H. Documents on Display
We are subject to the informational requirements of the Exchange Act, and we file reports and other information with the Securities and Exchange Commission. You may read and copy any of our reports and other information at, and obtain copies upon payment of prescribed fees from, the Public Reference Room maintained by the SEC at 100 F Street, N.E., Room 1024, Washington, DC, 20549. In addition, the Securities and Exchange Commission maintains a web site that contains reports and other information regarding registrants that file electronically with the Securities and Exchange Commission at http://www.sec.gov. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
The documents concerning our Company referred to in this Form 20-F may be viewed at our offices, 700 - 1199 West Hastings Street, Vancouver, British Columbia V6E 3T5, or you may request them by calling our office at 604-729-2500. Copies of our financial statements and other continuous disclosure documents required under securities rules are available for viewing on the internet at www.sedarplus.ca.
I. Subsidiary Information
Refer to the notes to the consolidated financial statements under Item 18.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Financial instruments are agreements between two parties that result in promises to pay or receive cash or equity instruments. The Company classifies its financial instruments as follows: cash and short-term investments are classified as a financial asset at FVTPL, other receivables are classified as loans and receivables, and accounts payable is classified as other financial liabilities, which are measured at amortized cost. The carrying value of these instruments approximates their fair values due to their short term to maturity.
The Company has exposure to the following risks from its use of financial instruments:
- Credit risk;
- Liquidity risk; and
- Interest rate risk.
Credit Risk
Credit risk is the risk of financial loss to our Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Our Company reduces its credit risk on cash by placing these instruments with institutions of high credit worthiness.
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. As at November 30, 2023, the Company has cash balance of $38,555 (November 30, 2022 - $ 13,127) to settle current liabilities of $497,776 (November 30, 2022 - $2,087,875). The Company's future financial success will be dependent upon the ability to monetize its technologies or obtain necessary financing to meet its contractual obligations.
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 is exposed to risks associated with the effects of fluctuations in the prevailing levels of market interest rates. The Company has no significant interest rate risk.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable to Form 20-F filed as an annual report.
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
Not applicable.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Not applicable.
ITEM 15. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The phrase "disclosure controls and procedures" refers to controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act, such as this Annual Report, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the U.S. Securities and Exchange Commission, or SEC. Disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to our management, including our chief executive officer, or CEO, and chief financial officer, or CFO, as appropriate to allow timely decision regarding required disclosure.
Our management, with the participation of our CEO and CFO, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of November 30, 2023, the end of the period covered by this Annual Report. Based on such evaluation, our CEO and CFO have concluded that as of November 30, 2023, our disclosure controls and procedures were designed at a reasonable assurance level and were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Management's Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles.
Our management, with the participation of our CEO and CFO, has assessed the effectiveness of the internal control over financial reporting as of November 30, 2023. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013 Framework). Based on this evaluation, our management has concluded that the internal control over financial reporting has the following material weakness and significant deficiency in internal controls as of November 30, 2023:
1) The Company does not have a formal policy on closing the general ledger at fiscal year-end which resulted into cut-off errors in the expenses and accounts payable balances.
2) The Company does not have proper review in place to ensure all the significant transactions and balances are accounted for in the financial statements, in accordance with IFRS, including revenues, asset impairment, and the deferred tax balance.
3) The Company, due to its size, lacks proper segregation of duties in the accounting department.
4) The Company does not maintain proper corporate records regarding the minutes for Board of Director meetings.
This Annual Report does not include an attestation report of our registered public accounting firm on our internal control over financial reporting due to an exemption established by the JOBS Act for "emerging growth companies."
As a result of the material weakness and significant deficiency noted above, the Company will adopt the following measures:
1) The Company will develop formal closing procedures that should include a checklist to document who will perform each procedure, when completion of each procedure is due, and when it was accomplished.
2) The Company will develop formal review processes related to the accounting treatment for the significant non-routine transactions to ensure all the transactions are properly accounted for in accordance with IFRS.
3) The Company will undertake a review to ensure that it has compensating controls where possible. The Company will also adopt formal review procedures by management to reduce the risk of errors.
4) The Company will document the minutes of director meetings in writing.
Attestation Report of the Registered Accounting Firm
This Annual Report does not include an attestation report of our registered public accounting firm on our internal control over financial reporting. Management's report is not subject to attestation by the Company's registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this Annual Report.
Changes in Internal Controls over Financial Reporting
During the period ended November 30, 2023, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
The members of our audit committee are Philip Lancaster and Alan Treddenick. All members are financially literate, meaning that they have the ability to read and understand a set of financial statements that present a breadth of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by our financial statements.
We have adopted a charter for our audit committee. The audit committee is responsible for review of both interim and annual financial statements for our Company. For the purposes of performing their duties, the members of the audit committee have the right at all times, to inspect all the books and financial records of our Company and any subsidiaries and to discuss with management and the external auditors of our Company any accounts, records and matters relating to the financial statements of our Company. The audit committee members meet periodically with management and annually with the external auditors. Our audit committee has the overall duties and responsibilities to:
- review the financial reporting process to ensure the accuracy of the financial statements of our Company;
- assist the Board to properly and fully discharge its responsibilities;
- strengthen the role of the Board by facilitating in depth discussions between directors, management and external auditors;
- evaluate the independent auditor's qualifications, performance and independence;
- facilitate the independence of the independent auditor;
- assess the processes relating to the determination and mitigation of risks and the maintenance of an effective control environment; and
- review the processes to monitor compliance with laws and regulations.
The Board of Directors has determined that Alan Treddenick, an independent director, and Philip Lancaster, who is not an independent director, are audit committee financial experts as such term is defined in the SEC rules implementing the Sarbanes-Oxley Act of 2002.
ITEM 16B. CODE OF ETHICS
Our Company has not adopted a Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions because we do not believe that, given our small size and limited operations, a code of ethics is warranted. As our Company grows, we may adopt a Code of Ethics in the future.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
The following table sets forth the fees billed by Reliant CPA PC, Certified Public Accountants, for professional audit services for the audit of the Company's annual financial statements for the fiscal years ended November 30, 2023 and November 30, 2022, and for other services rendered during the fiscal years 2023 and 2022.
| | Fiscal 2023 | Fiscal 2022 |
| Audit Fees | $149,405 | $40,587 |
| Audit Related Fees (1) | Nil | Nil |
| Tax Fees (2) | Nil | Nil |
| All Other Fees | Nil | Nil |
| Total | $149,405 | $40,587 |
Notes:
(1) Includes fees associated with assurance and related services that are reasonably related to the performance of the audit or review of the Company's financial statement. This category includes fees related to consultation regarding generally accepted accounting principles.
(2) Tax Fees consist of fees for tax compliance, tax advice and tax planning. The fee includes the preparation of the Company's income tax returns, franchise tax reports, and other tax filings.
Our audit committee pre-approves all audit and non-audit services provided to the Company.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not Applicable.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Not Applicable.
ITEM 16F. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
The disclosure called for by paragraph (a) of this Item 16F was previously reported, as that term is defined in Rule 12b-2 under the Exchange Act, in "Item 16F - Change in Registrant's Certifying Accountant" of our Annual Report on Form 20-F for the fiscal year ended November 30, 2022 filed with the SEC on May 11, 2023.
PART III
ITEM 17. FINANCIAL STATEMENTS
See "Item 18 - Financial Statements".
ITEM 18. FINANCIAL STATEMENTS
Our financial statements are stated in Canadian dollars and are prepared in accordance with IFRS, as issued by the IASB.
The following financial statements and notes thereto are filed with and incorporated herein as part of this Annual Report:
| (a) | Audited consolidated financial statements for the years ended November 30, 2023, and November 30, 2022, including: report of independent registered accounting firm by Reliant CPA PC (PCAOB ID: 6906), consolidated statements of financial position, consolidated statements of income (loss) and comprehensive income (loss), consolidated statements of cash flows and consolidated statements of changes in shareholders' equity (deficit), and notes to consolidated financial statements. |
AETHER GLOBAL INNOVATIONS CORP.
(formerly Plymouth Rock Technologies Inc.)
MANAGEMENT'S DISCUSSION AND ANALYSIS
For the Years Ended November 30, 2023, 2022 and 2021
INTRODUCTION
The following information should be read in conjunction with the audited consolidated financial statements of Aether Global Innovations Corp. (formerly Plymouth Rock Technologies Inc.) ("the Company" or "Aether" or "AETH") for the year ended November 30, 2023, as well as the audited consolidated financial statements of the Company for the year ended November 30, 2022 ("Financial Statements"); including the notes thereto. The Financial Statements and financial data contained in this discussion and analysis are presented in accordance with International Financial Reporting Standards ("IFRS"). The reporting currency is the Canadian dollar.
The following discussion and analysis provide information that management believes is relevant to the assessment and understanding of the Company's results of operations and financial condition. Certain statements herein contain forward-looking statements relating to the operations or to the environment in which we operate, which are based on our operations, forecasts, and projections. Forward-looking statements are not guaranteed of future performance. They involve risks, uncertainties and assumptions; and actual results may differ materially from those anticipated in these forward-looking statements. The risks include those outlined under the "Risk Factors" section of this management discussion and analysis ("MD&A") and elsewhere in the Company's public disclosure documents. This MD&A has been approved by the Company's Board of Directors ("Board") as at May 15, 2024,
BUSINESS OVERVIEW AND OVERALL PERFORMANCE
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.
On August 1, 2023, the Company changed its name to Aether Global Innovation Corp from Plymouth Rock Technologies Inc.
The Company's common shares are listed on the CSE under the symbol "AETH", on the Frankfurt Stock Exchange under the Symbol: 4XA, WKN# - A2N8RH and on the OTC Markets Group ("OTCQB") under the symbol: AETHF.
Aether is a pioneering company that takes great pride in collaborating with industry partners and academia as part of a consortium. Our primary goal is to revolutionize the drone technology market by providing cutting-edge automation and development solutions. Through our services, we strive to offer clients real-time critical reports and updates, empowered by the latest software and data gathering capabilities.
Drones have seen a remarkable rise in adoption, with applications ranging from domestic to defense scenarios. As we look towards the future, we firmly believe that automation and AI will continue to play a pivotal role in enhancing the capabilities and services provided by drones.
Our focus lies in serving large property and critical infrastructure owners, operators, and their management teams. By delivering bespoke services, we empower them to make well-informed decisions that can significantly impact their operations.
At Aether, we concentrate on three core service areas for UAV/Drone management and surveillance solutions:
UAV/Drone Design & Development: We are dedicated to creating innovative and state-of-the-art unmanned aerial vehicles. Our team of experts works tirelessly to design drones that meet the specific needs of our clients.Automation & Integrations: Embracing the power of automation, we streamline drone operations and integrate them seamlessly with existing systems. This synergy ensures maximum efficiency and effectiveness in every mission.
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Drone Base Station Technologies: We are at the forefront of advancing drone base station technologies, optimizing connectivity and communication to enhance the performance of UAV fleet.
With a commitment to excellence and a vision for the future of drone technology, Aether is poised to shape the landscape of automation and data gathering, setting new standards for the industry.
On March 31, 2022, the British Columbia Securities Commission ("BCSC") issued a temporary management cease trade order ("MCTO") under National Policy 12-203 Management Cease Trade Orders, made at the request of the Company. This MCTO (citation: 2022 BCSECOM 103) prohibited the Company's insiders from trading in the securities of the Company until such time as the annual audited financial statements for the year ended November 30, 2021, the management's discussion and analysis, and the related Chief Executive Officer and Chief Financial Officer certificates ("the Required Filings") and all continuous disclosure requirements have been filed by the Company, and the MCTO has been lifted. The Company's inability to file the Required Filings before the required March 30, 2022, filing deadline is a result of Covid-19 related and other delays in obtaining information with respect to a U.K. subsidiary acquired during the fiscal period. The Company has applied for and has been granted a MCTO by the BCSC.
On May 13, 2022, the Company filed the Required Filings1 and the BCSC lifted the MCTO on May 16, 2022.
The British Columbia Securities Commission issued a cease trade order affecting the Company on November 4, 2022, for failure to file the following required disclosure:
1. Interim financial report for the period ended August 31, 2022,
2. Interim management's discussion and analysis for the period ended August 31, 2022,
3. Certification of interim filings for the period ended August 31, 2022.
The cease trade order was rescinded on December 19, 2022.
During the February to May 2023, the Company has pivoted its direction towards a drone management and solutions business. Together with a new set of management and Board of Directors (see DIRECTORS), the Company is exploring opportunities with new key partners for success.
In March 2023, the Company completed a non-brokered private placement for aggregate gross proceeds of $1,684,000 (see LIQUIDITY and CAPITAL RESOURCES).
On April 11, 2023, the Company signed a Memorandum of Understanding ("MOU") for a Strategic Partnership with iDroneImages Ltd. ("IDI"). Aether views this as a strategic partnership addressing 3 core strategic focus areas for the company - management and monitoring, automation, and drone infrastructure (i.e. docking stations). (See Recent Business Updates)
Management and Monitoring: Drones have become an increasingly popular tool for use with critical infrastructure, such as oil and gas facilities and pipeline, large mining and construction sites, and government facilities.
Automation: It will be a critical focus area, as pre-determined flight paths with seamless operations will be important for infrastructure monitoring and management.
___________________________________
1 Required Filings include financial statements for the period ended and Management's Discussion and Analysis
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Drone's infrastructure (the Docking Stations): The Strategic Partnership with IDI, provides a leading-edge drone in the box solution, which helps address these specific and important focus areas. (See Recent Business Updates)
On May 7-12, 2023, the Company together with IDI and Watchdog Equipment showcased the integration of a self-operating drone-in-the-box technology from IDI with the mobile renewable power platform from Watchdog Equipment in the Governor's Hurricane Conference in Palm Beach, Florida, USA. The Company's goal is to offer a three-pronged solution - Drone Management and Monitoring, Automation and Integration and a Drone Base Station Infrastructure and Technology. (See Recent Business Updates)
In June 2023, the Company has initiated the liquidation and closing of its UK subsidiaries, Plymouth Rock Technologies UK Limited ("PRT UK") and Tetra Drones Limited ("Tetra Drones"). In July 2023, the Company has also divested from its US subsidiary, Plymouth Rock Technologies USA ("PRT USA") (See RESULTS OF OPERATIONS - Discontinued Operations - Loss of Control).
On July 19, 2023, Aether signed an MOU for a Strategic Partnership with Protegimus Protection Ltd ("Protegimus"). The MOU is non-binding until finalized and will focus initially on Collaborative Business Development efforts specifically focused on critical infrastructure and security applications for remote monitoring (DiaB), this includes, (i) establishing key strategic objectives and client programs for new regions, specifically Asia Pacific and the Middle East and (ii) identifying additional services and capabilities for fixed and mobile aerial support operation center (ASOC) services, which are all of mutual interests to Aether and Protegimus.
In July 2023, the Company completed a non-brokered private placement for aggregate gross proceeds of $594,420 (see LIQUIDITY and CAPITAL RESOURCES).
On August 16, 2023, the Company signed an MOU for a strategic partnership with Grupo Senseta Inc., a deep tech, AI and big data-driven cybersecurity and intelligent drone services company. The Strategic Partnership MOU is non-binding until finalized and will focus initially on collaborative product development focused on critical infrastructure and security applications for monitoring, surveillance and data collection of government facilities, critical infrastructure and pipelines, electrical grids and waterways.
On August 21, 2023, the Company and IDI signed an MOU for a strategic partnership with Limitless Integration LLC, an integration solutions and deployment service provider for safety and security communications and surveillance technologies. The Strategic Partnership MOU is non-binding until finalized and will focus initially on collaborative product integrations and deployment with a focus around large-scale facilities and critical infrastructure operations. (See Recent Business Updates)
On April 3, 2024, the British Columbia Securities Commission ("BCSC") issued a temporary management cease trade order ("MCTO") under National Policy 12-203 Management Cease Trade Orders, made at the request of the Company. This MCTO (citation: 2022 BCSECOM 103) prohibited the Company's insiders from trading in the securities of the Company until such time as the annual audited financial statements for the year ended November 30, 2023, the management's discussion and analysis, and the related Chief Executive Officer and Chief Financial Officer certificates ("the Required Filings") and all continuous disclosure requirements have been filed by the Company, and the MCTO has been lifted. The Company's inability to file the Required Filings before the required April 2, 2024, filing deadline is a result of delay in completion of audit procedures related to the quantification of losses incurred by subsidiary corporations which are no longer controlled by the Company. The Company has applied for and has been granted a MCTO by the BCSC.
Partnership with IDI
During the year ended November 30, 2023, the Company provided facility agreements with a third party to fund the latter's new and existing business opportunities. This solidifies the Company's commitment to further its partnership with IDI and the move towards autonomous drone applications through further development of a dedicated drone docking station.
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On May 29, 2023, further to the MOU signed by the Company and IDI, the Company signed a facility agreement with IDI wherein the Company will provide a total of £50,000 ($84,929). The agreement provides for a 5% annual interest rate and the Company has the option to convert the full amount to 5% of the diluted share capital of the third party and no conversion was made to date.
On July 6, 2023, the Company signed a Profit and Intellectual Property Share Agreement with IDI. The agreement is broken into two parts.
a) Profit sharing: profit sharing on all IDI's NeXus and NeXusPlus Drone-in-a-Box (Diab) sales from date of the signed agreement. Aether will assist IDI in its business development, marketing and sales of its DiaB product line by tapping into the Company's global network of business and security leaders. The Company will provide new customer and industry research, marketing support, client prospecting and sales negotiations, and customer experience (CX) feedback from buyers. Aether will receive 25% percent of the profits earned for the sales of the IDIPLOYER's DiaB solutions.
b) Software Intellectual Property Sharing: joint ownership of all intellectual property (IP) software co-development from date of the signed agreement. Aether will hire a software engineer to work directly with IDIPLOYER to design and develop DiaB software solutions to meet individual client's needs, which will help secure sales of IDIPLOYER's DiaB product line. Each company will own 50% of the IP software developed.
On July 25, 2023, the Company signed another facility agreement with IDI to provide £35,000 for general corporate purposes and it has sent a total of $60,151 (£35,000). The agreement provides for a 5% annual interest rate and the Company has the option to convert the full amount to 3.5% of the diluted share capital of the third party.
On August 11, 2023, the Company signed another facility agreement with IDI to provide £15,000 for general corporate purposes and it has sent a total of $26,017 (£15,000). The agreement provides for a 5% annual interest rate and the Company has the option to convert the full amount to 1.5% of the diluted share capital of the third party.
On September 30, 2023, the Company signed another facility agreement with IDI to provide £10,000 for general corporate purposes and it has sent a total of $17,093 (£10,000). The agreement provides for a 5% annual interest rate and the Company has the option to convert the full amount to 1% of the diluted share capital of the third party.
On November 24, 2023, the Company signed another facility agreement with IDI to provide £10,000 for general corporate purposes and it has sent a total of $17,748 (£10,000). The agreement provides for a 5% annual interest rate and the Company has the option to convert the full amount to 1% of the diluted share capital of the third party.
At the time of the drafting of this year-end 2023 MD&A, the Company has begun negotiations with IDI surrounding the conversion rate of the loan to equity in their company. The Company expects these negotiations to be completed in time to update the marketplace within the fiscal year 2024.
In light of the above, as at year end November 30, 2023, the Company has loaned a total of $212,299 (£120,000 plus accrued interest). On March 5, 2024, pursuant to the facility agreements, the Company issued a conversion notice to IDI requiring the latter to convert the principal plus accrued interest as at the date of such notice into fully paid ordinary shares in the capital of IDI. As of the date of this report, the shares have not been issued and the previously agreed upon conversion rate is still under negotiations with IDI.
| 5 |
The Technology
IDI's Drone-in-a-Box ("DiaB") Solution provides users with the system that can support their needs while being cost-effective. The drone in a box solution provides organizations the ability to make critical decisions based on real time data being provided by autonomous drones. This solution has a myriad of applications for critical infrastructure monitoring, oil and gas and agriculture.
On August 30, 2023, signed Strategic Joint Venture Partnership MOU with Ruf Diamond LLC (RufDiamond)., a distributor and retrofitter of all-terrain vehicles and equipment built to withstand the harshest of conditions. The joint venture will look to identify business opportunities to exploit the development, integration and deployment of an automated drone solution from RufDiamond's retrofitted all-terrain FatTruck vehicle platforms.
On September 18, 2023, the company signed a MOU with STA QSTP LLC ("STA"), a cutting edge, innovative and bespoke technology solutions provider. STA has deep expertise in aerial solutions that feature rugged UAVs with intelligent control systems and enhanced safety and security features. The technology firm offers smart UAV solutions and applications with mission critical sensors and payloads that offer bespoke intelligent aerial solutions for each client's particular needs.
Recent Business Updates
Regarding the above transactions with IDI, the Company is still in the process of negotiating the terms and conditions with the former to further their partnership towards the development of the drone docking station. As of the date of this report, the shares have not been issued and the previously agreed upon conversion rate is still under negotiations with IDI.
RESULTS OF OPERATIONS
Years ended November 30, 2023, and 2022.
During the year ended November 30, 2023, the Company had a comprehensive loss of $634,059 compared to a comprehensive loss of $2,739,060 for the year ended November 30, 2022. The decrease in comprehensive losses were primarily driven by the following:
| • | Accounting and audit fees of $92,723 (November 30, 2022 - $192,403). The amount decreased in the current period due to a lower cost charged by new auditors for the 2022 year-end financial audit. Year end 2021 audit fee final billing spilled over through the first two quarters of the year 2022. The higher audit fees resulted from the difficulty in getting complete records from the UK subsidiaries - PRT UK and Tetra Drones which also caused the Company to go under an MCTO. |
• | Business development expenses of $386,991 (November 30, 2022 - $114,665) increased due to the new direction taken by the Company. The Company has engaged a team of experienced consultants who aids in building strategies and helps introduce the Company to new key partners that will help the Company grow. |
• | Consulting fees of $136,475 (November 30, 2022 - $138,523) slightly decreased from last year due to the cancellation of the consulting fees contract with a director during the current year (see Transaction with Related Parties). The consulting fees were previously paid in shares. |
• | Investor relations of $261,908 (November 30, 2022 - $Nil) were paid to a consultant for advisory services. The services generally relate to capital markets advice and assistance in dealing with strategic investors for the Company. |
• | General office expenses of $20,209 (November 30, 2022 - $31,160) decreased as no new development on the website was done for the company during this period. |
| 6 |
| • | Insurance of $11,180 (November 30, 2022 - $16,065) decreased due to decrease in rate of insurance provider by the supplier. |
• | Rent of $6,000 (November 30, 2022 - $6,963) decreased due to the lower fixed rent fees in the current year. |
• | Legal fees of $224,140 (November 30, 2022 - $51,603) increased due to compliance related to the change of board and retention of legal counsel for advisory services regarding the discontinued subsidiaries. |
• | Management fees of $92,127 (November 30, 2022 - $Nil) increased from last year's as management fee was accounted under "loss from discontinued operations". (See Transactions with Related Parties). |
• | Transfer agent and filing fees of $63,912 (November 30, 2022 - $59,385) increased due to an increase in the fees charged by the service providers. |
• | Travel expenses of $8,212 (November 30, 2022 - $Nil) was spent for business trips to attend conferences for the current year. |
• | Stock-based compensation of $99,588 (November 30, 2022 - $Nil) refers to a portion of the value of the stock options granted by the Company which are expensed during the period (See Capital Stock). |
• | Impairment loss of $209,702 (November 30, 2022 - $Nil) was recognized due to uncertainty surrounding collectability of the long-term receivable. |
Fourth quarter ended November 30, 2023, and 2022
During the quarter ended November 30, 2023, the Company had a comprehensive loss of $588,795 compared to a comprehensive loss of $874,897 for the quarter ended November 30, 2022. The decrease in comprehensive losses were primarily driven by the following:
| • | Accounting and audit fees of $28,509 (November 30, 2022 - $18,851) increased as compared to the previous period due to the increase in number of transactions. |
• | Business development expenses of $57,277 (November 30, 2022 - $7,500) increased due to the new direction taken by the Company. The Company has engaged a team of experienced consultants who aids in building strategies and helps introduce the Company to new key partners that will help the Company grow. |
• | Investor relations of $25,000 (November 30, 2022 - $Nil) were paid to a consultant for advisory services. The services generally relate to capital markets advice and assistance in dealing with strategic investors for the Company. |
• | Consulting fees of $31,151 (November 30, 2022 - $31,534) decreased slightly from last year due to decrease in consultancy fees. (see Transaction with Related Parties). |
• | Insurance of $3,750 (November 30, 2022 - $6,212) decreased due to decrease in rate of insurance provider by the supplier. |
• | General office expenses of $4,789 (November 30, 2022 - $23,566) decreased as no new development on the website was done for the company during this period. |
• | Legal fees of $84,431 (November 30, 2022 - $2,680) increased due to additional costs related to advisory services on the discontinued subsidiaries as well as consultation for new businesses. |
• | Management fees of $30,000 (November 30, 2022 - $Nil) increased due to payment of management fees paid or accrued to the CEO and CFO in the current year (See Transactions with Related Parties). In previous years, the Former CEO was paid in salaries and the CFO fees were recognized under loss from discontinued operations for the previous year. |
• | Rent of $1,500 (November 30, 2022 - $975) decreased due to the lower fixed rent fees in the current year. |
• | Transfer agent and filing fees of $16,391 (November 30, 2022 - $9,017) increased due to increase in the fees charged by the service providers. |
• | Travel expenses of $4,745 (November 30, 2022 - $Nil) was spent for business trips to attend conferences for the quarter. |
• | Impairment loss of $209,702 (November 30, 2022 - $Nil) was recognized due to uncertainty surrounding collectability of the long-term receivable. |
| 7 |
• | Stock-based compensation of $39,803 (November 30, 2022 - $Nil) refers to a portion of the value of the stock options granted by the Company which are expensed during the period (See Capital Stock). |
Discontinued Operations - Loss of Control
During the first two quarters of fiscal year ending November 30, 2023, the Company did a full review on UK Operations (PRT UK and Tetra Drones) to mitigate further losses on these subsidiaries. After months of discussion, the Board decided that to protect the interest of shareholders, the Company will be better off putting the UK subsidiaries under liquidation. Therefore, on June 16, 2023, the Company announced its decision to close down previously controlled subsidiaries, PRT UK and Tetra Drones as a result of the move towards a drone management and monitoring solutions business. On July 6, 2023, pursuant to a special resolution by its Directors, PRT UK was wound up voluntarily and appointed liquidators in the UK for the purposes of such winding up. On September 4, 2023, pursuant to a special resolution by its Directors, Tetra Drones was also put into liquidation.
Similarly, due to lack of oversight and difficulty in obtaining complete and accurate books and records, resignation of key management personnel in the US Subsidiary, on July 20, 2023, the Company announced that it has also ceased operations with its U.S. Subsidiary, PRT USA.
During the third quarter of fiscal year ending November 30, 2023, the Company determined that due to having PRT UK and Tetra Drones put into liquidation and ceasing operations with PRT USA, that it no longer has control over the operations of the said subsidiaries and there is no intent from management to continue operating these businesses. The Company assessed the date of loss of control and determined it be December 1, 2022 as no reliable financial records and supporting documents were accessible for financial reporting purposes subsequent to November 30, 2022.
As a result of loss of control, the Company considered its PRT UK, PRT USA and Tetra Drones operations to have met the definition of discontinued operations and as such, assets, liabilities and results of operations that can be distinguished operationally and for financial reporting purposes from the rest of the Company have been terminated and reported separately in the financial statements.
A discontinued operation is a component of the Company that either has been abandoned, disposed of, or is classified as held for sale, and: (i) represents a separate major line of business or geographical area of operation; (ii) is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operation; or (iii) is a subsidiary acquired exclusively with a view to resell.
During the year ended November 30, 2023, the gain (loss) from discontinued operations - loss of control presented in the statement of loss and comprehensive loss is broken down as follows:
| | | Year ended November 30 | |
| | | 2023 | | | 2022 | | | 2021 | |
| Net Gain (Loss) from discontinued operations - loss of control | $ | 995,142 | | $ | (1,949,330 | ) | $ | (2,191,326 | ) |
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SUMMARY OF QUARTERLY RESULTS
The following table sets out selected financial data in respect of the last eight quarters of the Company. The data is derived from the financial statements of the Company prepared in accordance with IFRS.
| | Qtr4
November
30, 2023 | Qtr3
August
31, 2023 | Qtr2
May
31, 2023 | Qtr1
February
28, 2023 |
| Total Revenues, including interest income | $ - | $ - | $ - | $ - |
| Net loss/(gain) | (588,795) | (427,435) | (485,011) | 892,313 |
Basic and diluted loss
per share from continuing operations | (0.01) | (0.01) | (0.02) | (0.00) |
| Basic and diluted loss per share from discontinued operations | 0.00 | 0.00 | 0.00 | 0.03 |
| | Qtr4
November
30,2022 | Qtr3
August
31,2022 | Qtr2
May
31, 2022 | Qtr1
February
28, 2022 |
| Total Revenues, including interest income | $ - | $ - | $ - | $ - |
| Net loss | (661,445) | (778,398) | (479,969) | (747,986) |
Basic and diluted loss
per share from continuing operations | (0.05) | (0.03) | (0.01) |
(0.01) |
| Basic and Diluted loss per share from discontinued operations - loss of control | (0.01) | (0.01) | (0.00) |
(0.01) |
The net loss in the quarter ended November 30, 2023, compared with the third quarter of 2023 was primarily due to the impairment loss on the loan receivable as well as recognition of salaries of a previous officer during the last quarter of the year. From quarter two ended May 31, 2023 to quarter three ended August 31, 2023, the decrease was mostly due to lower investor relations expenses partially offset by the stock-based compensation for options issued in August 2023. The net income in the first quarter of 2023 compared with the net losses in 2022 quarters was primarily due to recognition of gain from loss of control of subsidiaries during that quarter.
| 9 |
LIQUIDITY AND CAPITAL RESOURCES
The Company's approach to managing its liquidity is to ensure that it has sufficient resources to meet its liabilities as they come due and have sufficient working capital to fund operations for the ensuing fiscal year. Financing of operations has been achieved solely by equity financing. The Company anticipates that it will require significant funds from either equity or debt financing for the development of its technologies and to support general administrative expenses.
As at November 30, 2023, the Company had $228,253 in current assets (November 30, 2022 - $62,202) and $497,776 in current liabilities (November 30, 2022 - $2,087,875) for a working capital deficit of $269,523 compared to a working capital deficit of $2,025,673 as at November 30, 2022. The reduction of the working capital deficit is mostly driven by discontinuance of subsidiaries.
As at November 30, 2023, the Company had a share capital balance of $13,916,448 (November 30, 2022 - $11,851,771) and an accumulated deficit of $17,144,688 (November 30, 2022 - $16,535,760). The increase in share capital is due to private placement closing in March 2023, private placement closing in July 2023 and shares issued for investor relations services during the period.
Financing of operations has been achieved solely by sales loans and equity financing. However, the Company expects to generate profitable revenue in the coming years with adequate investment to support adding experienced manufacturing personnel and capital equipment. Currently the Company is primarily reliant upon the sale of equity securities, loans and some product sales in order to fund future operations. Since inception, the Company has funded limited operations through the issuance of equity securities on a private placement basis. The Company's ability to raise funds through the issuance of equity will depend on economic, market and commodity prices at the time of financing.
The Company expects to generate similar losses quarter over quarter for the next fiscal year in relation to the Company's development, administration and promotion of its technologies. As of report date, management anticipates that the funds raised to date will be sufficient to sustain operations and the development of the Companies technologies for the next fiscal year. The management plans to continue reviewing 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 cast 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.
Detailed discussions related to the Company's cash flows during the year ended November 30, 2023
Cash balances increased by a total of $25,428 during the year ended November 30, 2023 (November 30, 2022 - decreased by $343,725). During the current year, the cash increase is mainly due to proceeds from private placement financing offset by the increased costs of operations.
During the year ended November 30, 2023, cash used in operating activities was $2,726,009 compared to cash used in operating activities of $414,024 during the year ended November 30, 2022. Most of the cash outflows were for payments of operating costs as well as the outflows from the operations of previously controlled subsidiaries.
Cash inflow in investing activities during the year ended November 30, 2023, was $785,439 (November 30, 2022 - provided by investing activities $Nil). Positive cash inflow from investing activity is mainly due to the discontinued operations. In the current year, the Company has loaned $209,703 (£120,000 plus accrued interest) to IDI to fund the latter's new and existing business opportunities.
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Cash inflow in financing activities during the year ended November 30, 2023, was $1,965,998 compared to cash inflow by financing activities of $70,299 during the year ended November 30, 2022. During the current year, the Company has received subscription money of $2,278,420 (2022 - $Nil) in private placements closed during the current period and paid $233,403 share issuance cost. The Company has also repaid loans payable amounting to $79,019.
PROPOSED TRANSACTIONS
As at the date of this report, the Company has no proposed transactions.
OFF-BALANCE SHEET ARRANGEMENTS
To the best of the Management's knowledge, there are no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the results of operations or financial condition of the Company.
TRANSACTIONS WITH RELATED PARTIES
The amounts due to 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 financial statements at the exchange amount, which is the amount of consideration established and agreed to by the related parties.
As at November 30, 2023, $372,650 (November 30, 2022 - $705,672) was due to directors and officers of the Company:
| | | November 30, 2023 | | | November 30, 2022 | |
| Former CFO of the Company- Susan Gardner | $ | - | | $ | 67,540 | |
| Former interim CEO of the Company - Carl Cagliarini | | - | | | 250,179 | |
| President and CEO- Philip Lancaster | | 6,077 | | | 78,750 | |
| Former CEO and Director - Dana Wheeler | | 361,573 | | | 307,472 | |
| Director and Chairman - Douglas Smith | | - | | | 1,731 | |
| Company controlled by a director - Zara Kanji | | 5,000 | | | - | |
| | $ | 372,650 | | $ | 705,672 | |
During the year ended November 30, 2023, and 2022 and 2021, the Company entered into the following transactions with related parties:
| | | November 30, 2023 | | | November 30, 2022 | | | November 30, 2021 | |
| Management fees | $ | 92,127 | | $ | - | | $ | 55,000 | |
| Consulting fees | | 47,500 | | | 135,000 | | | 307,734 | |
| Accounting fees | | 63,844 | | | - | | | 36,202 | |
| Professional fees | | 10,429 | | | - | | | - | |
| Others | | 7144 | | | - | | | 5,000 | |
| Stock-based compensation | | 57,425 | | | - | | | 410,132 | |
| Salaries and benefits | | 54,100 | | | 330,337 | | | 313,626 | |
| | $ | 332,570 | | $ | 465,337 | | $ | 1,127,694 | |
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Management fees consisted of the following:
| | | November 30, 2023 | | | November 30, 2022 | | | November 30, 2021 | |
| Company controlled by the President and CEO | $ | 35,000 | | $ | - | | $ | - | |
| CFO | | 30,000 | | | - | | | - | |
| Former Interim CEO - Carl Cagliarini | | 27,127 | | | - | | | - | |
| Company controlled by a Director and Former CFO - Zara Kanji | | - | | | - | | | 55,000 | |
| | $ | 92,127 | | $ | - | | $ | 55,000 | |
Consulting fees consisted of the following:
| | | November 30, 2023 | | | November 30, 2022 | | | November 30, 2021 | |
| Director and Chairman - Douglas Smith | $ | - | | $ | - | | $ | 307,734 | |
| Company controlled by the President and CEO - Philip Lancaster | | 47,500 | | | 75,000 | | | - | |
| Company controlled by the Former Corporate Secretary- Vivian Katsuris | | - | | | 60,000 | | | - | |
| | $ | 47,500 | | $ | 135,000 | | $ | 307,734 | |
Accounting fees of $63,844 (2022 - $Nil and 2021 - $36,202) were paid or accrued to a company controlled by a director - Zara Kanji.
During the year ended November 30, 2023, the Company entered into a loan agreement with the CEO for $6,000 and an interest of 10%. The loan was repaid within the year and all accrued interest was forgiven (Note 10).
During the year ended November 30, 2023, the Company had below stock options held by the Company's former and current directors and officers. The amount recognized as expense for these options for the year ended November 30, 2023, and 2022 are as follows:
| | | November 30, 2023 | | | November 30, 2022 | |
| | | Number of
options held | | | Expense for the
period (vested) | | | Number of
options held | | | Expense for the
period (vested) | |
| | | | | | | | | | | | | |
| Philip Lancaster, CEO | | 800,000 | | $ | 24,834 | | | - | | $ | - | |
| Karen Mae Parrin, CFO | | 200,000 | | | 6,208 | | | - | | | - | |
| Douglas Smith, Director and Chairman | | 200,000 | | | 6,208 | | | 300,000 | | | - | |
| Zara Kanji, Director | | 300,000 | | | 9,312 | | | 150,000 | | | - | |
| Dr. Khalid Al-Ali, Director | | 200,000 | | | 6,208 | | | 150,000 | | | - | |
| Al Treddenick, Director | | 100,000 | | | 3,103 | | | | | | | |
| Nancy Boufeas, Company Secretary | | 50,000 | | | 1,552 | | | - | | | - | |
| Dana Wheeler, Former Director | | - | | | - | | | 600,000 | | | - | |
| Vivian Katsuris, Former Corporate Secretary | | - | | | - | | | 150,000 | | | - | |
| Angelos Kostopoulos, Former Director | | - | | | - | | | 150,000 | | | - | |
| Thomas Nash, Former Director | | - | | | - | | | 150,000 | | | - | |
| | | 1,850,000 | | $ | 57,425 | | | 1,650,000* | | $ | - | |
*During the year ended November 30, 2023, 1,650,000 stock options held by the former Directors and Officers were cancelled due to resignation from their position
| 12 |
Salaries of $54,100 (2022- $330,337 and 2021 - $313,626) were paid or accrued to the Former CEO - Dana Wheeler. Others consisted of: (1) Travel of $3,467 (2022 - $Nil and 2021 - $Nil) paid or accrued to a company controlled by a CEO; (2) Office and general expenses $3,677 (2022 - $Nil and 2021 - $Nil) paid or accrued to a company controlled by the CEO; and (3) Rent of $Nil (2022 - $Nil and 2021 - $5,000) were paid or accrued to a company controlled by a director- Zara Kanji.
Gain on debt forgiveness of $62,500 (2022 - $Nil and 2021 - $Nil) is the consulting fees forgiven by the company controlled by the President and CEO. The amount is recognized in the statement of loss and comprehensive loss as the consulting fees were approved by the Board and the CEO is not a primary shareholder of the Company.
On December 20, 2023, the Company entered into a 60-day loan agreement with a Director - Zara Kanji amounting to $5,000 with interest of 10% per annum.
On April 11, 2024, the Company entered into a 60-day loan agreement with its Chairman of the Board amounting to $9,636 (US $7,000) with interest of 10% per annum.
MATERIAL ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES
All significant accounting policies and critical accounting estimates are fully disclosed in Note 2 of the Financial Statements for the period ended November 30, 2023, that are available on SEDAR+ at www.sedarplus.ca.
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 for the year ended November 30, 2023, and November 30, 2022, the fair value of the cash, accounts receivable, accounts payable, and due 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. As at November 30, 2023, the Company has cash balance of $38,555 (November 30, 2022 - $ 13,127) to settle current liabilities of $497,776 (November 30, 2022 - $2,087,875). The Company's future financial success will be dependent upon the ability to monetize its technologies or obtain necessary financing to meet its contractual obligations.
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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 to a counterparty to a financial instrument when it 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, due from related parties and accounts payable and accrued liabilities that are denominated in US dollars. 10% fluctuations in the US dollar against the Canadian dollar have affected comprehensive loss for the period by approximately 39,997 (2022 - $81,052 and 2021 - $1,200).
CAPITAL STOCK
The authorized capital of the Company consists of an unlimited number of common shares without par value. As at November 30, 2023, and report date, the following table summarizes the outstanding share capital, stock options, and share purchase warrants of the Company:
| | | As at | | | | |
| | | November 30, 2023 | | | Report Date | |
| Common shares | | 105,504,461 | | | 105,504,461 | |
| Stock Options | | 3,575,000 | | | 3,375,000 | |
| Share Purchase Warrants | | 56,855,860 | | | 56,855,860 | |
Subsequent to the year ended November 30, 2023
On March 14, 2024, the Company announced a non-brokered private placement financing of up to 10,000,000 units (the "Units") of securities at a price of $0.05 per Unit for aggregate gross proceeds of up to $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 December 1, 2023, the Company entered into a consulting service agreement with third party requiring the latter to render business advisory and consulting services of up to 50 hours per month with monthly compensation of $3,500 and 1,560,000 Free trading Restricted Stock Units (RSUs) over the course of 6 months issued at the market price on the contract signing date.
During the year ended November 30, 2023
On July 24, 2023, the Company closed a non-brokered private placement and issued 9,907,000 common shares at a price of $0.06 per unit for gross proceeds of $594,420. Each Unit is comprised of one (1) common share and one (1) common share purchase warrant, with each whole warrant entitling the holder to purchase one additional common share at a price of $0.10 for five (5) years from the closing of the Offering. The company has paid cash finders fees of $59,442, legal fees of $8,082 and 990,700 finders' b-warrants were paid on a portion of the Offering. Each finder's b-warrant entitles the holder to purchase one additional common share at a price of $0.10 for five (5) years from closing of the Offering.
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Each finder's b-warrant entitles the holder to purchase one additional common share at a price of $0.10 for five (5) years from the closing of the Offering.
On May 30, 2023, the Company issued 2,600,000 common shares as compensation for Investor relations to an arm's length party valued at a total of $169,000.
On March 30, 2023, the Company closed a non-brokered private placement and issued 26,480,000 common shares at a price of $0.05 per unit for gross proceeds of $1,324,000. Each Unit is comprised of one (1) common share and one (1) 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 (3) years from the closing of the Offering. The company has paid cash finders fees of $95,900 and legal fees of $17,500 and and 2,648,000 finders' b-warrants were paid on a portion of the Offering. Each finder's b-warrant entitles the holder to purchase one additional common share at a price of $0.10 for three (3) years from the closing of the Offering.
On March 27, 2023, the Company closed a non-brokered private placement and issued 7,200,000 common shares at a price of $0.05 per unit for gross proceeds of $360,000. Each Unit is comprised of one (1) common share and one (1) 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 (3) years from the closing of the Offering. The company has paid cash finders fees of $46,500 and legal fees of $6,000 and 200,000 finders' b-warrants were paid on a portion of the Offering. Each finder's b-warrant entitles the holder to purchase one additional common share at a price of $0.10 for three (3) years from the closing of the Offering.
During the year ended November 30, 2022:
On December 31, 2021, the Company issued 78,125 common shares were issued as compensation for consulting fees to a director valued at a total of $17,189.
During the year ended November 30, 2021:
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 6,129,572 common shares for gross proceeds of $1,332,727 from the exercise of 6,129,572 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).
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 an exercise price of $0.50 per share for five years. The broker warrants are exercisable at $0.50 per share for five years.
| 15 |
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 is 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.
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.
Subsequent to the year ended November 30, 2023
On April 30, 2024, 200,000 stock options with exercise price of $0.05 were cancelled.
During the year ended November 30, 2023:
On October 19, 2023, the Company granted 1,000,000 incentive stock options vesting immediately to a consultant with an exercise price of $0.05 per share for a period of three years from the date of grant. The fair value was estimated using the Black-Scholes pricing model with estimated stock price of $0.02351, volatility 91%, risk-free rate 4.91%, dividend yield 0%, and expected life of 5 years. With these assumptions, the fair value of options was determined to be $23,540.
On August 18, 2023, the Company granted 2,450,000 incentive stock options to Directors, Officers and consultants with an exercise price of $0.05 per share for a period of three years from the date of grant. The fair value was estimated using the Black-Scholes pricing model with estimated, stock price of $0.03104, volatility 96%, risk-free rate 4.51%, dividend yield 0%, and expected life of 3 years. With these assumptions, the fair value of options was determined to be $76,048. 1,800,000 stock options issued to Directors and Officers vest immediately and 650,000 stock options issued to consultants vests in 4 months.
During the year ended November 30, 2023, 2,200,000 options, 1,550,000 options and 150,000 options with exercise prices of $0.60, 0.75 and 0.50, respectively, were cancelled.
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:
During the year ended November 30, 2021, 100,000 options were exercised at $0.60 per share and 325,000 options were exercised at $0.50 per share.
On June 10, 2021, the Company granted 150,000 incentive stock options to a consultant, options vested on grant date and 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 $53,682 and the amount was recognized on the consolidated statements of loss and comprehensive loss for the year ended November 30, 2021.
| 16 |
On January 21, 2021, the Company granted 1,550,000 incentive stock options to directors, consultants, and employees, options vested on grant date and 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 estimated 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.
Stock option transactions and the number of stock options outstanding as at November 30, 2023, November 30, 2022, and November 30, 2021, are summarized as follows:
| | | Number of | | | Weighted Average | |
| | Options | | | Exercise Price | |
| Balance, November 30, 2021 | | 4,225,000 | | $ | 0.64 | |
| Expired | | (75,000 | ) | | 0.50 | |
| Cancelled | | (125,000 | ) | | 0.50 | |
| Balance, November 30, 2022 | | 4,025,000 | | $ | 0.66 | |
| Cancelled | | (3,900,000 | ) | | 0.66 | |
| Granted | | 3,450,000 | | | 0.04 | |
| Balance, November 30, 2023 | | 3,575,000 | | $ | 0.06 | |
| Expiry Date | Exercise
Price | | Numbers of
options
outstanding | | | Numbers of options
exercisable | | | Weighted
average
remaining
contractual
life (year) | | | Weighted
average
exercise
price | |
| | $ | | | | | | | | | | | $ | |
| November 28, 2024 | 0.50 | | 125,000 | | | 125,000 | | | 0.03 | | | 0.02 | |
| August 16, 2026 | 0.05 | | 2,450,000 | | | 2,357,917 | | | 1.86 | | | 0.03 | |
| October 19, 2028 | 0.05 | | 1,000,000 | | | 1,000,000 | | | 1.37 | | | 0.01 | |
| | | | 3,575,000 | | | 3,482,917 | | | 3.26 | | | 0.06 | |
Share Purchase Warrants
During the year ended November 30, 2023:
On July 24, 2023, pursuant to the closing of the private placement, the Company issued 9,907,000 common share purchase warrants. Each warrant entitles its holder to acquire one common share of the Company at a price of $0.10 per share for a period of 5 years following the date of the issuance. The Company has allocated 100% proceeds to common share and $Nil to share purchase warrants by adopting the residual approach.
On July 24, 2023, pursuant to the finder's agreement in relation to the Offering, the Company issued 990,700 share warrants to the agent with an exercise price of $0.10 for a period of 5 years from the date of issuance. The share warrants were valued at $45,364 using Black-Scholes Option Pricing model with the following assumptions: average risk-free rate - 3.9%; expected life - 5 years; expected volatility - 100%; forfeiture rate - Nil and expected dividends - $Nil.
| 17 |
On March 30, 2023, the Company issued 26,480,000 common share purchase warrants as part of the private placement. Each warrant is exercisable to purchase one common share at an exercise price of $0.10 for three from closing of the offering.
On March 30, 2023, pursuant to the closing of the private placement, the Company issued 26,480,000 common share purchase warrants as part of the private placement. Each warrant is exercisable to purchase one common share at an exercise price of $0.10 for three (3) years from the closing of the Offering. The Company has allocated 100% proceeds to common share and $Nil to share purchase warrants by adopting the residual approach.
On March 30, 2023, pursuant to the agency agreement in relation to the Offering, the Company issued 2,648,000 share warrants to the agent with an exercise price of $0.10 for a period of 3 years from the date of issuance. The share warrants were valued at $94,537 using Black-Scholes Option Pricing model with the following assumptions: average risk-free rate - 3.53%; expected life - 3 years; expected volatility - 100%; forfeiture rate - Nil and expected dividends - $Nil.
On March 27, 2023, pursuant to the closing of the private placement, the Company issued 7,200,000 common share purchase warrants as part of the private placement. Each warrant is exercisable to purchase one common share at an exercise price of $0.10 for three (3) years from closing of the Offering. The Company has allocated 100% proceeds to common share and $Nil to share purchase warrants by adopting the residual approach.
On March 27, 2023, pursuant to the agency agreement in relation to the Offering, the Company issued 200,000 share warrants to the agent with an exercise price of $0.10 for a period of 3 years from the date of issuance. The share warrants were valued at $9,439 using Black-Scholes Option Pricing model with the following assumptions: average risk-free rate - 3.9%; expected life - 5 years; expected volatility - 100%; forfeiture rate - Nil and expected dividends - $Nil.
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 granted 5,916,250 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 $0.50 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 12(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.
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.
| 18 |
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.
Share purchase warrant transactions and the number of share purchase warrants outstanding as at November 30, 2023, November 30, 2022, and November 30, 2021, are summarized as follows:
| | | Number of Warrants | | | Weighted Average Exercise Price | |
| Balance, November 30, 2021 | | 9,991,241 | | $ | 0.42 | |
| Warrants expired | | (561,081 | ) | | 0.20 | |
| Balance, November 30, 2022 | | 9,430,160 | | $ | 0.42 | |
| Warrants issued | | 47,425,700 | | | 0.10 | |
| Balance, November 30, 2023 | | 56,855,860 | | $ | 0.14 | |
The following summarizes the stock warrants outstanding as at November 30, 2023:
| 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 | | | 0.12 | | | 0.01 | |
| March 27, 2026 | 0.10 | | 7,400,000 | | | 0.30 | | | 0.01 | |
| March 30, 2026 | 0.10 | | 29,128,000 | | | 1.19 | | | 0.05 | |
| August 9, 2026 | 0.50 | | 6,242,000 | | | 0.30 | | | 0.05 | |
| July 24, 2028 | 0.10 | | 10,897,700 | | | 0.89 | | | 0.02 | |
| | | | 56,855,860 | | | 2.80 | | | 0.14 | |
COMMITMENTS AND CONTINGENCIES
The Company has certain commitments related to key management compensation (management fees) for $10,000 per month with no specific expiry of terms.
On December 1, 2023, the Company entered into a consulting service agreement with third party requiring the latter to render business advisory and consulting services of up to 50 hours per month with monthly compensation of $3,500 and 1,560,000 Free trading Restricted Stock Units (RSUs) over the course of 6 months issued at the market price on the contract signing date.
During the year ended November 30, 2023, the Company, entered into joint venture agreements ("JVA") with third parties for the purpose of exploring opportunities to incorporate unmanned aerial vehicles/drones and docking stations with a software and with the vehicle-mounted solution. To the date of this report, the JVAs have yet to produce a product under these agreements, and agreements and are under negotiation. Hence, no material transactions have been recognized in relation to these JVAs in the financial statements. One of the third parties initially cancelled the agreements on February 16, 2024. Subsequently, the Company and the said third party have been in discussions surrounding all existing agreements. As of report date, there is no conclusion yet on the negotiations between the parties. (See Recent Business Updates)
| 19 |
RISKS RELATED TO OUR BUSINESS
The Company believes that the following risks and uncertainties may materially affect its success.
Limited Operating History
The Company has not yet generated revenues. The Company was incorporated on October 17, 2011, and has yet to generate a profit from its activities. The Company is subject to all of the business risks and uncertainties associated with any new business enterprise, including the risk that it will not achieve its growth objective. The Company anticipates that it may take several years to achieve positive cash flow from operations. However, it is optimistic due to new direction and strategy specifically around investment into new technologies and global growth opportunities through strategic partnerships.
Substantial Capital Requirements and Liquidity
Substantial additional funds for the establishment of the Company's current and planned operations will be required. However, the company has reduced costs significantly in order to preserve capital and reach its new goals and milestones. No assurances can be given that the Company will be able to raise the additional funding that may be required for such activities, should such funding not be fully generated from operations. Revenues, taxes, transportation costs, capital expenditures, operating expenses and development costs are all factors which will have an impact on the amount of additional capital that may be required. To meet such funding requirements, the Company may be required to undertake additional equity financing, which would be dilutive to shareholders. Debt financing, if available, may also involve restrictions on financing and operating activities. There is no assurance that additional financing will be available on terms acceptable to the Company or at all. If the Company is unable to obtain additional financing as needed, it may be required to reduce the scope of its operations or anticipated expansion and pursue only those development plans that can be funded through cash flows generated from its existing operations.
Regulatory Requirements
The current or future operations of the Company require permits from various governmental authorities, and such operations are and will be governed by laws and regulations governing development, production, taxes, labour standards, occupational health, waste disposal, toxic substances, land use, environmental protection, site safety and other matters. There can be no assurance that all permits which the Company may require for the facilities and conduct of operations will be obtainable on reasonable terms or that such laws and regulation would not have an adverse effect on any development project which the Company might undertake.
Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment or remedial actions. Parties engaged in operations may be required to compensate those suffering losses or damages and may have civil or criminal fines or penalties imposed upon them for violation of applicable laws or regulations. Amendments to current laws, regulation and permits governing operations and activities of companies, or more stringent implementation thereof, could have a material adverse impact on the Company and cause increases in capital expenditures or development costs or require abandonment or delays in the development of new projects.
Financing Risks and Dilution to Shareholders
The Company will have limited financial resources, no operations and hardly have revenues. There can be no assurance that the Company will be able to obtain adequate financing in the future or that such financing will be available on favorable terms or at all. It is likely such additional capital will be raised through the issuance of additional equity, which will result in dilution to the Company's shareholders.
| 20 |
Competition
The Company has defined their objectives and has explored what was and what was not working within the organization. Aether now has a clear disciplined direction that involves new focus around drone automation and development. The competition in this area only validates the company's decision to move in the direction described.
Intellectual Property
The company is now engaged in creating additional value through the development of API's that will in turn result in ownership around valuable IP. This will also result in additional AI capability and future IP.
Reliance on Management and Dependence on Key Personnel
The success of the Company will be largely dependent upon the performance of the directors and officers and the ability to attract and retain key personnel. The loss of the services of these persons may have a material adverse effect on the Company's business and prospects. The Company will compete with numerous other companies for the recruitment and retention of qualified employees and contractors. There is no assurance that the Company can maintain the service of its directors and officers, or other qualified personnel required to operate its business. Failure to do so could have a material adverse effect on the Company and its prospects.
Governmental Regulations and Processing Licenses and Permits
The activities of the Company are subject to various government approvals, various laws governing prospecting, development, land resumptions, production taxes, labor standards and occupational health, toxic substances, and other matters. Although the Company believes that its activities are currently carried out in accordance with all applicable rules and regulations, no assurance can be given that new rules and regulations will not be enacted or that existing rules and regulations will not be applied in a manner, which could limit or curtail production or development. Amendments to current laws and regulations governing operations and activities, or more stringent implementation thereof, could have a material adverse impact on the business, operations and financial performance of the Company. Further, the licenses and permits issued in respect of its projects may be subject to conditions that, if not satisfied, may lead to the revocation of such licenses.
Conflicts of Interest
Certain of the directors and officers of the Company will be engaged in, and will continue to engage in, other business activities on their own behalf and on behalf of other companies and, as a result of these and other activities, such directors and officers of the Company may become subject to conflicts of interest. The British Columbia Business Corporations Act ("BCBCA") provides that in the event that a director has a material interest in a contract or proposed contract or agreement that is material to the issuer, the director must disclose his interest in such contract or agreement and refrain from voting on any matter in respect of such contract or agreement, subject to and in accordance with the BCBCA. To the extent that conflicts of interest arise, such conflicts will be resolved in accordance with the provisions of the BCBCA.
Litigation
The Company and/or its directors may be subject to a variety of civil or other legal proceedings, with or without merit.
| 21 |
As certain of the Company's officers have other outside business activities and, thus, may not be in a position to devote all of their professional time to the Company, the Company's operations may be sporadic, which may result in periodic interruptions or suspensions.
FORWARD-LOOKING STATEMENTS
This MD&A may include certain "forward-looking statements" within the meaning of applicable securities legislation. All statements, other than statements of historical facts, included in this MD&A that address activities, events or developments that the Company expects or anticipates will or may occur in the future, including such things as future business strategies competitive strengths, goals, expansion and growth of the Company's businesses, operations, plans and other such matters are forward-looking statements. When used in this MD&A, the words "estimate", "plan", "anticipate", "expect", ''intend'', "believe" and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, risks that actual results of current exploration activities will differ, changes in project parameters as plans continue to be refined, unavailability of financing, fluctuations in precious and/or base metals prices and other factors, as outlined in the Company's preliminary long form prospectus filed on SEDAR. Although the Company has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.
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 makes adjustments to 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.
DIRECTORS
Certain directors of the Company are also directors, officers and/or shareholders of other companies that may be engaged in the similar business of developing technologies. Such associations may give rise to conflicts of interest from time to time. The directors of the Company are required to act in good faith with a view to the best interests of the Company and to disclose any interest they may have in any project opportunity of the Company. If a conflict of interest arises at a meeting of the board of directors, any director in a conflict will disclose his/her interest and abstain from voting in the matter(s). In determining whether or not the Company will participate in any project or opportunity, the directors will primarily consider the degree of risk to which the Company may be exposed and its financial position at the time.
On January 13, 2022, the company appointed Susan Gardner as the CFO.
On January 13, 2022, Tim Crowhurst resigned as a Director of the Company. On January 13, 2022, Carl Cagliarini and Vivian Katsuris were appointed as Directors of the Company.
On March 16, 2022, Vivian Katsuris resigned as a Director and Corporate Secretary of the Company.
| 22 |
On June 9, 2022, the Company appointed Philip Lancaster to its Board of Directors.
On July 19, 2022, Angelos Kostopoulos resigned as a Director of the Company.
On February 3, 2023, the Company appointed Philip Lancaster as President and Corporate Secretary, replacing Dana Wheeler as President.
On February 3, 2023, the Company appointed Carl Cagliarini as interim CEO, replacing Dana Wheeler. Dana Wheeler remained as a Director.
On March 31, 2023, Thomas Nash resigned as a Director of the Company.
On April 10, 2023, the Company appointed Zara Kanji as Director of the Company.
On May 10, 2023, the Company appointed Philip Lancaster as the CEO of the Company.
On May 10, 2023, Carl Cagliarini resigned as a Director of the Company.
On May 12, 2023, Susan Gardner resigned as the CFO of the Company.
On May 15, 2023, the Company appointed Karen Mae Parrin as CFO of the Company and on May 20, 2023, as the Corporate Secretary, replacing Philip Lancaster.
On May 19, 2023, Dana Wheeler resigned as a Director of the Company.
On May 30, 2023, the company appointed Alan Treddenick as Director of the Company.
On October 17, 2023, Karen Mae Parrin resigned as Corporate Secretary and was replaced by Nancy Boufeas.
On January 30, 2024, Dr. Khalid Al-ali resigned as a Director of the Company.
As at the date of this MD&A, the Current Directors and Officers of the Company are as follows:
Philip Lancaster, President and CEO
Karen Mae Parrin, CFO
Nancy Boufeas, Corporate Secretary
Douglas Smith, Director and Chairman
Zara Kanji, Director
Alan Treddenick, Director
OUTLOOK
The Company's objective is to maximize the value of the Company for our shareholders, and our strategy to obtain this result is to focus on project evaluations and project generation. To proceed with this strategy, additional financing may be required during the current fiscal year.
ADDITIONAL INFORMATION
Additional information relating to the Company can also be found on SEDAR+ at www.sedarplus.ca
| 23 |
ITEM 19. EXHIBITS
| Exhibit No. | Exhibit |
| (3) | Articles of Incorporation and Bylaws |
| 3.1 | Certificate of Incorporation (incorporated by reference to the Registrant's Form 20FR12G furnished to the Commission on September 11, 2015) |
| 3.2 | Notice of Articles (incorporated by reference to the Registrant's Form 20FR12G furnished to the Commission on September 11, 2015) |
| 3.3 | Articles (incorporated by reference to the Registrant's Form 20FR12G furnished to the Commission on September 11, 2015) |
| 3.4 | Certificate of Change of Name dated October 30, 2018 (incorporated by reference to the Registrant's Form 20-F filed on March 31, 2021) |
| 3.5** | Certificate of Change of Name dated July 31, 2023 |
| (4) | Material Contracts |
| 4.1 | Option Agreement dated February 17, 2014 between Eastland Management Ltd. and Alexandra Capital Corp. (incorporated by reference to the Registrant's Form 20FR12G furnished to the Commission on September 11, 2015) |
| 4.2 | Long-Term Employee Incentive Plan dated October 17, 2022 (incorporated by reference to Form 20-F filed on May 11, 2023) |
| 4.3 | Amending Letter dated August 15, 2015 between Eastland Management Ltd. and Alexandra Capital Corp. (incorporated by reference to the Registrant's Form 20FR12G furnished to the Commission on November 19, 2015) |
| 4.4 | Share Purchase Agreement dated June 21, 2018 with Plymouth Rock USA and the Selling Shareholders of Plymouth Rock USA (incorporated by reference to Form 20-F filed on April 13, 2020) |
| 4.5 | Assignment Agreement dated March 5, 2019 with Manchester Metropolitan University (incorporated by reference to Form 20-F filed on April 13, 2020) |
| 4.6 | Memorandum of understanding with Abicom International Ltd. dated February 12, 2019 (incorporated by reference to Form 20-F filed on April 13, 2020) |
| 4.7 | Letter agreement with Aerowave Corporation dated October 17, 2019 (incorporated by reference to Form 20-F filed on April 13, 2020) |
| 4.8 | Consulting Agreement dated April 1, 2020 with Douglas Smith (incorporated by reference to Form 20-F filed on March 31, 2021) |
| 4.9 | Acquisition agreement with Tetra Drones Limited dated June 6, 2021 (incorporated by reference to Form 20-F filed om June 3, 2022) |
| 8.1** | List of Significant Subsidiaries of the Company |
| 11.1 | Audit Committee Charter (incorporated by reference to Form 20-F filed on March 31, 2021) |
| 12.1** | Section 302 Certification under Sarbanes-Oxley Act of 2002 for Philip Lancaster |
| 12.2** | Section 302 Certification under Sarbanes-Oxley Act of 2002 for Nancy Boufeas |
| 13.1** | Section 906 Certification under Sarbanes-Oxley Act of 2002 for Philip Lancaster |
| 13.2** | Section 906 Certification under Sarbanes-Oxley Act of 2002 for Nancy Boufeas |
| 101.INS** | Inline XBRL Instance Document–the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document |
| 101.SCH** | Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL** | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF** | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB** | Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE** | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104** | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
** Filed herewith.
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.
Aether Global Innovations Corp.
(Registrant)
| /s/Philip Lancaster |
| Philip Lancaster |
| Chief Executive Officer |
| (Principal Executive Officer) |
| |
| /s/Nancy Boufeas |
| Nancy Boufeas |
| Interim Chief Financial Officer |
| (Principal Financial Officer) |
Date: November 4, 2024
