Exhibit 99.312
Condensed Consolidated Interim Financial Statements of
NexTech AR Solutions Corp.
Three months ended March 31, 2021 and 2020
(Expressed in Canadian Dollars)
(Unaudited)
NexTech AR Solutions Corp.
Condensed Consolidated Interim Statements of Financial Position
(Expressed in Canadian dollars)
(Unaudited)
As at
| | | March 31,
2021 | | | December 31,
2020 | |
| Assets | | | | | | |
| Current assets | | | | | | |
| Cash | | $ | 7,900,016 | | | $ | 10,684,952 | |
| Digital Assets (Note 4) | | | - | | | | 2,546,035 | |
| Receivables (Note 5) | | | 2,095,953 | | | | 1,312,548 | |
| Contract Asset (Note 14) | | | 360,060 | | | | 244,478 | |
| Prepaid expenses (Note 6) | | | 1,744,576 | | | | 1,354,369 | |
| Inventory (Note 7) | | | 4,673,895 | | | | 3,211,675 | |
| | | | 16,774,500 | | | | 19,354,057 | |
| Non-current assets | | | | | | | | |
| Equipment (Note 8) | | | 337,036 | | | | 300,558 | |
| Right-of-use asset (Note 9) | | | 992,298 | | | | 1,034,724 | |
| Intangible assets (Note 10) | | | 3,090,162 | | | | 3,500,041 | |
| Goodwill (Note 10) | | | 4,847,750 | | | | 4,886,513 | |
| Total assets | | $ | 26,041,746 | | | $ | 29,075,893 | |
| Liabilities and Shareholders’ Equity | | | | | | | | |
| Current liabilities | | | | | | | | |
| Accounts payable and accrued liabilities (Note 11) | | $ | 3,976,397 | | | $ | 2,527,437 | |
| Deferred revenue (Note 14) | | | 1,193,069 | | | | 383,022 | |
| Lease liability (Note 9) | | | 147,750 | | | | 150,662 | |
| Contingent consideration (Note 3) | | | 2,489,557 | | | | 2,717,859 | |
| | | | 7,806,773 | | | | 5,778,980 | |
| Non-current liabilities | | | | | | | | |
| Lease liability (Note 9) | | | 836,323 | | | | 877,978 | |
| Total liabilities | | | 8,643,096 | | | | 6,656,958 | |
| Shareholders’ Equity | | | | | | | | |
| Share capital (Note 12) | | | 43,775,485 | | | | 41,968,520 | |
| Reserves | | | 9,113,625 | | | | 6,757,098 | |
| Deficit | | | (35,490,460 | ) | | | (26,306,683 | ) |
| | | | 17,398,650 | | | | 22,418,935 | |
| Total liabilities and shareholders’ equity | | $ | 26,041,746 | | | $ | 29,075,893 | |
Nature of Operations (Note 1)
Subsequent Event (Note 19)
See accompanying notes to condensed consolidated interim financial statements.
Approved by the Board of Directors
| “Evan Gappelberg” | , Director | “Paul Duffy” | , Director |
NexTech AR Solutions Corp.
Condensed Consolidated Interim Statements of Comprehensive Loss
(Expressed in Canadian dollars)
(Unaudited)
| | | Three months ended | | | Three months ended | |
| | | March 31, 2021 | | | March 31, 2020 | |
| Revenue (Note 14) | | $ | 7,726,703 | | | $ | 2,491,985 | |
| Cost of sales (Note 15) | | | (4,412,278 | ) | | | (1,144,136 | ) |
| Gross profit | | | 3,314,425 | | | | 1,347,849 | |
| Operating expenses: | | | | | | | | |
| Sales and marketing (Note 15) | | | 4,640,087 | | | | 1,418,833 | |
| General and administrative (Note 15) | | | 3,747,723 | | | | 709,427 | |
| Research and development (Note 15) | | | 1,793,479 | | | | 239,193 | |
| | | | 10,181,289 | | | | 2,367,453 | |
| Other income (expense) | | | | | | | | |
| Stock-based compensation (Note 12) | | | 2,402,628 | | | | 268,275 | |
| Amortization (Note 10) | | | 380,220 | | | | 88,253 | |
| Gain on digital assets (Note 4) | | | (219,321 | ) | | | - | |
| Depreciation (Note 8) | | | 27,950 | | | | 9,849 | |
| Foreign exchange gain | | | (274,564 | ) | | | 1,694 | |
| Financing expense | | | - | | | | - | |
| | | | 2,316,913 | | | | 368,071 | |
| Loss before income taxes | | | (9,183,777 | ) | | | (1,387,675 | ) |
| Deferred income tax recovery | | | - | | | | 24,239 | |
| Net loss | | $ | (9,183,777 | ) | | $ | (1,363,436 | ) |
| Other comprehensive income (loss) | | | | | | | | |
| Exchange differences on translating foreign operations | | | (52,401 | ) | | | 488,316 | |
| Total comprehensive loss | | $ | (9,236,178 | ) | | $ | (875,120 | ) |
| Loss per common share | | | | | | | | |
| Basic and diluted loss per common share | | | (0.12 | ) | | | (0.02 | ) |
| Weighted average number of common shares outstanding | | | | | | | | |
| Basic and diluted | | | 77,489,618 | | | | 61,378,508 | |
See accompanying notes to condensed consolidated interim financial statements.
NexTech AR Solutions Corp.
Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity
(Expressed in Canadian dollars)
(Unaudited)
| | | Number of shares | | | Share capital | | | Equity portion of convertible debenture | | | Reserves | | | Deficit | | | Total | |
| Balance as at December 31, 2019 | | | 60,509,250 | | | $ | 15,210,041 | | | $ | 1,025,595 | | | $ | 1,407,330 | | | $ | (10,576,761 | ) | | $ | 7,066,205 | |
| Convertible debentures | | | 347,663 | | | | 208,597 | | | | (189,765 | ) | | | - | | | | (18,832 | ) | | | - | |
| Shares issued for exercise of warrants | | | 513,305 | | | | 406,764 | | | | - | | | | - | | | | - | | | | 406,764 | |
| Shares issued for exercise of options | | | 1,007,500 | | | | 305,675 | | | | - | | | | - | | | | - | | | | 305,675 | |
| Shares issued to settle related party liability | | | 47,799 | | | | 38,239 | | | | - | | | | - | | | | - | | | | 38,239 | |
| Stock-based compensation | | | 478,341 | | | | 382,673 | | | | - | | | | 268,273 | | | | - | | | | 650,946 | |
| Total other comprehensive loss | | | - | | | | - | | | | - | | | | 488,316 | | | | - | | | | 488,316 | |
| Total comprehensive loss | | | - | | | | - | | | | - | | | | - | | | | (1,363,436 | ) | | | (1,363,436 | ) |
| Balance as at March 31, 2020 | | | 62,903,858 | | | $ | 16,551,989 | | | $ | 835,830 | | | $ | 2,163,919 | | | $ | (11,959,029 | ) | | $ | 7,592,709 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance as at December 31, 2020 | | | 77,111,864 | | | $ | 41,968,520 | | | $ | - | | | $ | 6,757,098 | | | $ | (26,306,683 | ) | | $ | 22,418,935 | |
| Shares issued for exercise of warrants | | | 529,000 | | | | 440,220 | | | | - | | | | - | | | | - | | | | 440,220 | |
| Shares issued for exercise of option | | | 45,000 | | | | 66,900 | | | | - | | | | 6,300 | | | | - | | | | 73,200 | |
| Share-based payment | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| Shares for services | | | 195,445 | | | | 1,299,845 | | | | - | | | | - | | | | - | | | | 1,299,845 | |
| Stock-based compensation | | | - | | | | - | | | | - | | | | 2,402,628 | | | | - | | | | 2,402,628 | |
| Share issuance costs | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| Total other comprehensive loss | | | - | | | | - | | | | - | | | | (52,401 | ) | | | - | | | | (52,401 | ) |
| Total comprehensive loss | | | - | | | | - | | | | - | | | | - | | | | (9,183,777 | ) | | | (9,183,777 | ) |
| Balance as at March 31, 2021 | | | 77,881,309 | | | $ | 43,775,485 | | | $ | - | | | $ | 9,113,625 | | | $ | (35,490,460 | ) | | $ | 17,398,650 | |
See accompanying notes to condensed consolidated interim financial statements.
NexTech AR Solutions Corp.
Condensed Consolidated Interim Statements of Cash Flows
(Expressed in Canadian dollars)
(Unaudited)
| | | Three months ended | | | Three months ended | |
| | | March 31, 2021 | | | March 31, 2020 | |
| Cashflows from operating activities | | | | | | |
| Net loss | | $ | (9,183,777 | ) | | $ | (1,363,436 | ) |
| Items not affecting cash | | | | | | | | |
| Amortization of intangible assets | | | 380,220 | | | | 88,253 | |
| Amortization of right to use asset | | | 34,311 | | | | - | |
| Gain on sale of bitcoin | | | (219,321 | ) | | | (24,239 | ) |
| Depreciation of property and equipment | | | 27,950 | | | | 9,849 | |
| Shares issued for services | | | 1,299,845 | | | | 38,239 | |
| Stock-based compensation | | | 2,402,628 | | | | - | |
| Share-based payments | | | 22,156 | | | | 650,946 | |
| Shares issued for exercise of options | | | 6,300 | | | | - | |
| Changes in non-cash working capital balances | | | | | | | | |
| Receivables | | | (783,405 | ) | | | (217,245 | ) |
| Contract Asset | | | (115,582 | ) | | | | |
| Prepaid expenses | | | (390,207 | ) | | | (19,075 | ) |
| Bitcoin | | | 2,546,035 | | | | - | |
| Inventory | | | (1,462,220 | ) | | | (244,810 | ) |
| Accounts payable and accrued liabilities | | | 1,448,960 | | | | (325,523 | ) |
| Deferred revenue | | | 810,047 | | | | - | |
| Net cash used in operating activities | | $ | (3,176,060 | ) | | $ | (1,407,041 | ) |
| Cashflows from investing activities | | | | | | | | |
| Sale of Bitcoin | | | 219,321 | | | | - | |
| Purchase of equipment | | | (50,414 | ) | | | - | |
| Net cash used in investing activities | | $ | 168,907 | | | $ | - | |
| Cashflows from financing activities | | | | | | | | |
| Proceeds from exercise of options and warrants | | | 486,464 | | | | 712,439 | |
| Payment of lease obligations | | | (44,567 | ) | | | - | |
| Net cash provided by financing activities | | $ | 441,897 | | | $ | 712,439 | |
| Change in cash during the period | | | (2,565,256 | ) | | | (694,602 | ) |
| Cash, beginning of period | | | 10,684,952 | | | | 2,849,344 | |
| Effects of foreign exchange on cash | | | (219,680 | ) | | | 154,914 | |
| | | | | | | | | |
| Cash, end of period | | $ | 7,900,016 | | | $ | 2,309,656 | |
| Supplemental cash flow information | | | | | | | | |
| Taxes paid | | | - | | | | - | |
| Interest Paid | | | 1,261 | | | | - | |
| Interest received | | | 9,298 | | | | - | |
See accompanying notes to condensed consolidated interim financial statements.
NexTech AR Solutions Corp.
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2020 and 2019
(Expressed in Canadian dollars)
(Unaudited)
NexTech AR Solutions Corp. (“NexTech” or the “Company”) develops and acquires augmented reality technology solutions, owns and operates eCommerce businesses where the Company use technology solutions to sells goods online through their websites and various third-party channels and provides augmented reality solutions in video hosted learning and event platforms. The Company was incorporated in the province of British Columbia, Canada on January 12, 2018. The Company’s registered and head office is located at 1200-750 West Pender Street, Vancouver, British Columbia, Canada V6C 2T8.
The Company’s shares trade in Canada on the NEO Exchange and Canadian Securities Exchange under the trading symbol “NTAR” and in the United States of America on the OTCQB under the trading symbol “NEXCF”.
| 2. | SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION |
Basis of Presentation
These unaudited condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”). They do not include all the information required for a complete set of financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) and should be read in conjunction with the annual consolidated financial statements of the Company for the year ended December 31, 2020. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Company’s financial position and performance since the last annual consolidated financial statements as at and for the year ended December 31, 2020.
These condensed consolidated interim financial statements have been prepared on a historical cost basis. The preparation of these condensed consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of the accounting policies and reported amounts of assets, liabilities, revenue and expenses. Actual results may differ from these estimates.
These condensed consolidated interim financial statements have been prepared in accordance with the same accounting policies and methods of application as the most recent audited consolidated financial statements for the period ended December 31, 2020. The unaudited condensed consolidated interim financial statements were authorized for issue by the Board of Directors on May 12, 2021.
Basis of Consolidation
These consolidated financial statements include the financial statements of the Company and the entities controlled by the Company. Control occurs when the Company is exposed to, or has right to, variable return from its involvements with an investee and has the ability to affect those returns through its power over the investee. Subsidiaries are fully consolidated from the date on which control is obtained by the Company and are deconsolidated from the date that control ceases. All intercompany transactions and balances have been eliminated.
The Company’s wholly owned subsidiaries are NexTech AR Solutions USA LLC, AR Ecommerce LLC, and Jolokia Corporation.
NexTech AR Solutions Corp.
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2020 and 2019
(Expressed in Canadian dollars)
(Unaudited)
Jolokia Corporation
On April 30, 2020, the Company acquired 100% of the outstanding voting shares of Jolokia Corporation (“Jolokia”) in exchange for 1,000,000 of the Company’s common shares and contingent consideration. Jolokia provides a video hosted learning and events platform with live streaming capabilities. The Company incurred acquisition related costs of $72,033 which have been recorded in general and administrative expense.
The purchase price consists of 1,000,000 common shares of the Company (A) (Note 13), of which 100,000 were issued to the Company and held in treasury for the repayment of liabilities assumed in the transaction (B), cash and contingent consideration with an initial estimated fair value as noted below (C). The contingent consideration payable is measured at the estimated fair value at each reporting date and is expected to be settled in full within a year. The contingent consideration arrangement consists of an additional payment for attainment of specific revenue metrics in the year following the acquisition. The potential undiscounted amount of all future payments that the Company could be required to make under this arrangement is between US$200,000 and US$4,000,000 payable in common shares of the Company.
| Share consideration (A) | | $ | 1,326,125 | |
| Indebtedness shares (B) | | | (165,765 | ) |
| Earn-out payment (contingent) (C) | | | 2,224,001 | |
| Total Consideration | | $ | 3,384,361 | |
The following table presents the purchase priced allocation at the acquisition date:
| Tangible Liabilities | | | |
| Other receivable | | | 1,114 | |
| Equipment | | | 118,165 | |
| Accounts payable and accrued liabilities | | | (51,627 | ) |
| Line of credit | | | (171,290 | ) |
| | | | (103,638 | ) |
| Intangible assets | | | | |
| Customer relationships (Note 10) | | | 943,098 | |
| Brand (Note 10) | | | 44,512 | |
| Technology (Note 10) | | | 225,342 | |
| | | | 1,212,952 | |
| Goodwill (Note 10) | | | 2,275,047 | |
| Total Consideration | | $ | 3,384,361 | |
The goodwill is mainly attributable to the work force and the synergies expected to the achieved from integrating Jolokia business with the Company’s technology and services.
NexTech AR Solutions Corp.
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2020 and 2019
(Expressed in Canadian dollars)
(Unaudited)
| 3. | BUSINESS COMBINATIONS (continued) |
Map Dynamics
On November 20, 2020, the Company acquired 100% of the assets of Tiger Web Media (“Map Dynamics”). Map Dynamics is a software platform that assists customers in event management and floorplan booth sales for in-person, virtual, and hybrid events.
The purchase price consists of cash (A) and contingent consideration with an initial estimated fair value as noted below (B). The contingent consideration payable is measured at the estimated fair value at each reporting date and is expected to be settled in full within a year. The contingent consideration arrangement consists of an additional payment for attainment of specific revenue metrics in the year following the acquisition. The potential undiscounted amount of all future payments that the Company could be required to make under this arrangement is between US$200,000 and US$400,000 payable in common shares of the Company.
| Cash consideration (A) | | $ | 777,900 | |
| Earn-out payment (contingent) (B) | | | 493,858 | |
| Total Consideration | | $ | 1,271,758 | |
The following table presents the purchase price allocation at the acquisition date:
| Tangible Assets | | | | |
| Trade receivable | | $ | 23,985 | |
| Intangible assets | | | | |
| Customer relationships (Note 10) | | | 342,276 | |
| Brand (Note 10) | | | 80,383 | |
| Technology (Note 10) | | | 228,184 | |
| | | | 650,843 | |
| Goodwill (Note 10) | | | 596,929 | |
| Total Consideration | | $ | 1,271,758 | |
On December 31, 2020, the Company purchased 69.2 bitcoins for $2,546,035 in cash. On January 27, 2021 the Company sold the bitcoins for a gain of $219,321.
| | | March 31,
2021 | | | December 31,
2020 | |
| Trade receivables | | $ | 2,029,140 | | | $ | 1,184,681 | |
| GST receivable | | | 66,813 | | | | 127,867 | |
| | | $ | 2,095,953 | | | $ | 1,312,548 | |
NexTech AR Solutions Corp.
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2020 and 2019
(Expressed in Canadian dollars)
(Unaudited)
| | | March 31,
2021 | | | December 31,
2020 | |
| Prepaid Inventory | | $ | 285,531 | | | $ | 1,088,887 | |
| Prepaid expenses | | | 1,445,909 | | | | 252,241 | |
| Deposits | | | 13,136 | | | | 13,241 | |
| | | $ | 1,744,576 | | | $ | 1,354,369 | |
As at March 31, 2021 the inventory balance is $4,673,895 (2020 - $3,211,675). Inventory consists solely of finished goods. Inventory is valued at the lower of cost and net realizable value.
NexTech AR Solutions Corp.
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2020 and 2019
(Expressed in Canadian dollars)
(Unaudited)
| | | Computer
Equipment | | | Trade show
Equipment | | | Office Furniture and Equipment | | | Total | |
| Costs | | | | | | | | | | | | |
| December 31, 2019 | | $ | 50,128 | | | $ | 16,440 | | | $ | 129,956 | | | $ | 196,524 | |
| Additions | | | 84,575 | | | | - | | | | 44,048 | | | | 128,623 | |
| Acquisition of Jolokia Corp (Note 3) | | | 83,657 | | | | - | | | | 34,508 | | | | 118,165 | |
| Effects of movement in exchange rates | | | (9,127 | ) | | | - | | | | (4,328 | ) | | | (13,455 | ) |
| December 31, 2020 | | $ | 209,233 | | | $ | 16,440 | | | $ | 204,184 | | | $ | 429,857 | |
| Additions | | | 50,414 | | | | - | | | | - | | | | 50,414 | |
| Effects of movement in exchange rates | | | (4,119 | ) | | | - | | | | 11,882 | | | | 7,763 | |
| March 31, 2021 | | $ | 255,528 | | | $ | 16,440 | | | $ | 216,066 | | | $ | 488,034 | |
| Accumulated depreciation | | | | | | | | | | | | | | | | |
| December 31, 2019 | | $ | 9,478 | | | $ | 5,755 | | | $ | 34,979 | | | $ | 50,212 | |
| Additions | | | 31,271 | | | | 3,288 | | | | 48,424 | | | | 82,983 | |
| Effects of movement in exchange rates | | | - | | | | - | | | | (3,896 | ) | | | (3,896 | ) |
| December 31, 2020 | | $ | 40,749 | | | $ | 9,043 | | | $ | 79,507 | | | $ | 129,299 | |
| Additions | | | 15,949 | | | | 822 | | | | 11,179 | | | | 27,950 | |
| Effects of movement in exchange rates | | | 1,354 | | | | - | | | | (7,605 | ) | | | (6,251 | ) |
| March 31, 2021 | | $ | 58,052 | | | $ | 9,865 | | | $ | 83,081 | | | $ | 150,998 | |
| Net book value | | | | | | | | | | | | | | | | |
| December 31, 2020 | | $ | 168,484 | | | $ | 7,397 | | | $ | 124,677 | | | $ | 300,558 | |
| March 31, 2021 | | $ | 197,476 | | | $ | 6,575 | | | $ | 132,985 | | | $ | 337,036 | |
NexTech AR Solutions Corp.
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2020 and 2019
(Expressed in Canadian dollars)
(Unaudited)
The company entered into a long-term lease agreement related to warehouse space. The lease term is 8 years commencing July 1, 2020. The present value of future lease payments were measured using an incremental borrowing rate of 6% annum as of January 1, 2020. The right of use asset is as follows:
Right of use assets
| | | Total | |
| Balance, December 31, 2019 | | $ | - | |
| Additions | | | 1,103,706 | |
| Depreciation | | | (68,982 | ) |
| At December 31, 2020 | | $ | 1,034,724 | |
| Additions | | | - | |
| Depreciation | | | (34,311 | ) |
| Effects of movement in exchange rates | | | (8,115 | ) |
| At March 31, 2021 | | $ | 992,298 | |
Lease obligations
| | | Total | |
| Balance, December 31, 2019 | | $ | - | |
| Additions | | | 1,103,706 | |
| Interest expense | | | 1,318 | |
| Lease payments | | | (76,384 | ) |
| At December 31, 2020 | | $ | 1,028,640 | |
| Additions | | | - | |
| Interest expense | | | (1,486 | ) |
| Lease payments | | | (37,993 | ) |
| Effects of movement in exchange rates | | | (5,088 | ) |
| At March 31, 2021 | | $ | 984,073 | |
The maturity analysis of the lease liabilities as at March 31, 2021 is as follows:
| Maturity Analysis | | March 31, 2020 | |
| Less than one year | | $ | 159,662 | |
| One to five years | | | 881,384 | |
| Over five years | | | 240,931 | |
| Total undiscounted lease liabilities | | $ | 1,281,977 | |
| Amount representing implicit interest | | | (297,904 | ) |
| Balance at March 31, 2021 | | $ | 984,073 | |
Interest expense for the three months ended March 31, 2021 was $1,486 (2020 - $Nil).
NexTech AR Solutions Corp.
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2020 and 2019
(Expressed in Canadian dollars)
(Unaudited)
| | | Websites | | | Customer relationship | | | Supplier relationship | | | Brand | | | Technology | | | Goodwill | | | Total | |
| Costs | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2019 | | $ | 85,664 | | | $ | 243,695 | | | $ | 321,072 | | | $ | 1,042,812 | | | $ | - | | | $ | 2,262,527 | | | $ | 3,955,770 | |
| Acquisition of Jolokia (Note 3) | | | - | | | | 943,098 | | | | - | | | | 44,512 | | | | 225,342 | | | | 2,275,047 | | | | 3,487,999 | |
| Acquisition of Map Dynamics (Note 3) | | | - | | | | 342,276 | | | | - | | | | 80,383 | | | | 228,184 | | | | 596,929 | | | | 1,247,772 | |
| Impairment of Hootview | | | (85,664 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (85,664 | ) |
| Additions | | | - | | | | - | | | | - | | | | 2,891 | | | | 1,100,446 | | | | - | | | | 1,103,337 | |
| Effects of movement in exchange rates | | | - | | | | (90,822 | ) | | | (6,328 | ) | | | (25,769 | ) | | | (23,185 | ) | | | (247,990 | ) | | | (394,094 | ) |
| December 31, 2020 | | $ | - | | | $ | 1,438,247 | | | $ | 314,744 | | | $ | 1,144,829 | | | $ | 1,530,787 | | | $ | 4,886,513 | | | $ | 9,315,120 | |
| Effects of movement in exchange rates | | | - | | | | (11,410 | ) | | | (2,497 | ) | | | (6,784 | ) | | | (8,968 | ) | | | (38,763 | ) | | | (68,422 | ) |
| March 31, 2021 | | $ | - | | | $ | 1,426,837 | | | $ | 312,247 | | | $ | 1,138,045 | | | $ | 1,521,819 | | | $ | 4,847,750 | | | $ | 9,246,698 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Accumulated depreciation | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2019 | | $ | 7,674 | | | $ | 17,696 | | | $ | 31,779 | | | $ | 215,542 | | | $ | - | | | $ | - | | | $ | 272,691 | |
| Impairment of Hootview | | | (16,241 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (16,241 | ) |
| Additions | | | 8,567 | | | | 168,480 | | | | 31,475 | | | | 383,522 | | | | 80,072 | | | | - | | | | 672,116 | |
| December 31, 2020 | | $ | - | | | $ | 186,176 | | | $ | 63,254 | | | $ | 599,064 | | | $ | 80,072 | | | $ | - | | | $ | 928,566 | |
| Additions | | | | | | | 131,593 | | | | 7,807 | | | | 74,544 | | | | 166,276 | | | | - | | | | 380,220 | |
| March 31, 2021 | | $ | - | | | $ | 317,769 | | | $ | 71,061 | | | $ | 673,608 | | | $ | 246,348 | | | $ | - | | | $ | 1,308,786 | |
| Net book value | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 | | $ | - | | | $ | 1,252,071 | | | $ | 251,490 | | | $ | 545,765 | | | $ | 1,450,715 | | | $ | 4,886,513 | | | $ | 8,386,554 | |
| March 31, 2021 | | $ | - | | | $ | 1,109,068 | | | $ | 241,186 | | | $ | 464,437 | | | $ | 1,275,471 | | | $ | 4,847,750 | | | $ | 7,937,912 | |
NexTech AR Solutions Corp.
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2020 and 2019
(Expressed in Canadian dollars)
(Unaudited)
| 10. | INTANGIBLE ASSETS (continued) |
Website
On February 6, 2019, the Company acquired 100% of HootView for $85,554 (US$65,000), which included a domain name. The website was written down on December 31, 2020.
Technology
On August 27, 2020, the Company acquired certain assets from Next Level Ninjas LLC with the consideration of a cash payment of $737,825 (US$550,000). The acquisition of such assets did not constitute a business under IFRS 3; therefore, the transaction was accounted for as an asset acquisition. .
On October 1, 2020, the Company acquired the AiR Show application, which allows consumers to view and interact with human holograms for application such as virtual concerts, conferences, and other events. The fair cost of the application on acquisition date was $400,186. The total consideration paid for the Air Show application included 37,500 common shares of the Company with a fair value of $200,625 and cash of $199,571.
Goodwill
In January 2019, the Company acquired a 100% interest in AR Ecommerce LLC, which included goodwill, valued at $929,680, at the time of acquisition. In April 2019, the Company acquired a 100% interest Infinite Pet Life, which included goodwill, valued at $1,397,670, at the time of acquisition. In the year ended 2020, the Company acquired a 100% interest in Jolokia and Map Dynamics, which included goodwill, valued at $2,275,047 and $596,929 respectively.
The goodwill balance, as at March 31, 2021, consists of the goodwill acquired from acquisitions noted above and includes the currency translation adjustment for the three months ended March 31, 2021 of $738,763 (2020 - $194,457). The Company estimated the recoverable amount based on the value-in-use method of the cash-generating units that the goodwill contributes to was higher than the carrying value at December 31, 2020.
The key assumptions used in the calculations of the recoverable amounts include sales growth per year, changes in cost of sales and capital expenditures based on internal forecasts. Cash flows were projected out 5 years and a terminal value was calculated using a long-term steady growth of 3%. The discount rate of 20 - 25% was used.
| 11. | ACCOUNTS PAYABLE AND ACCRUED LIABILITIES |
| | | March 31,
2021 | | | December 31,
2020 | |
| Accounts payable | | $ | 3,130,504 | | | $ | 1,835,236 | |
| Accrued liabilities | | | 845,893 | | | | 692,201 | |
| | | $ | 3,976,397 | | | $ | 2,527,437 | |
NexTech AR Solutions Corp.
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2020 and 2019
(Expressed in Canadian dollars)
(Unaudited)
| 12. | SHARE CAPITAL (continued) |
Authorized
As at March 31, 2021 the authorized share capital of the Company was an unlimited number of common shares.
Share Capital
During the period ended March 31, 2021, the Company had the following share transactions:
| ● | repurchased 4,555 shares with a fair value of $22,156 as part of shares issued for services |
| | | |
| ● | issued 200,000 shares with a fair value of $1,322,000 for shares for services |
| | | |
| ● | issued 45,000 shares for the exercise of options for proceeds of $73,200. |
| | | |
| ● | issued 529,000 shares for the exercise of warrants for proceeds of $440,220. |
Share purchase warrants
| | | Number | | Weighted
Average
Exercise Price | |
| Balance, as at December 31, 2019 | | | 6,967,340 | | $ | 0.83 | |
| Granted | | | 2,760,401 | | | 1.04 | |
| Exercised | | | (6,387,850 | ) | | (5.74 | ) |
| Balance, as at December 31, 2020 | | | 3,339,891 | | $ | 3.23 | |
| Granted | | | - | | | - | |
| Exercised | | | (529,000 | ) | | (0.83 | ) |
| Balance, as at March 31, 2021 | | | 2,810,891 | | $ | 3.68 | |
The weighted average remaining life on the warrants is 0.91 years. No additional broker warrants were granted for the three months ended March 31, 2021. The broker warrants have been valued at an aggregate $925,925 (2020 - $925,925) using the Black-Scholes option pricing model with the following assumptions:
| | | Three months ended | |
| Weighted average | | March 31,
2021 | |
| Risk free interest rate | | | 0.83 | % |
| Expected life of warrants in years | | | 2 years | |
| Expected dividend yield | | | 0 | % |
| Expected stock volatility | | | 126 | % |
| Fair value per warrant | | $ | 2.65 | |
NexTech AR Solutions Corp.
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2020 and 2019
(Expressed in Canadian dollars)
(Unaudited)
| 12. | SHARE CAPITAL (continued) |
| | | | | | Weighted | |
| | | | | | Average | |
| | | Number | | | Exercise Price | |
| Balance, as at December 31, 2019 | | | 4,479,000 | | | $ | 0.52 | |
| Granted | | | 5,183,000 | | | | 4.26 | |
| Cancelled | | | (261,667 | ) | | | (0.62 | ) |
| Exercised | | | (2,354,000 | ) | | | (0.54 | ) |
| Forfeited | | | (1,178,333 | ) | | | (1.86 | ) |
| Balance, as at December 31, 2020 | | | 5,868,000 | | | $ | 3.55 | |
| Granted | | | 292,000 | | | | 6.56 | |
| Cancelled | | | (465,000 | ) | | | (4.78 | ) |
| Exercised | | | (45,000 | ) | | | (1.63 | ) |
| Forfeited | | | - | | | | - | |
| Balance, as at March 31, 2021 | | | 5,650,000 | | | $ | 3.54 | |
The weighted average remaining life of the outstanding stock options is 2.07 years.
The fair value of all options granted is estimated on the grant date using the Black-Scholes option pricing model. During the three months ended March 31, 2021, $2,402,628 (2020 - $268,275) was recognized as stock based compensation.
The weighted average assumptions used in calculating the fair values are as follows:
| | | Three months ended | | | Year
ended | |
| Weighted average | | March 31,
2021 | | | December 31,
2020 | |
| Risk free interest rate | | | 1.32 | % | | | 1.39 | % |
| Expected life of options in years | | | 2 | | | | 3 | |
| Expected dividend yield | | | 0 | % | | | 0 | % |
| Expected stock option volatility | | | 144 | % | | | 150 | % |
| Fair value per option | | $ | 1.78 | | | $ | 1.83 | |
The weighted trading average price of the Company’s shares on the date the options were exercised is $6.06.
NexTech AR Solutions Corp.
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2020 and 2019
(Expressed in Canadian dollars)
(Unaudited)
| 12. | SHARE CAPITAL (continued) |
The following table presents the stock-based compensation expense by function:
| | | Three months ended | | | Year
ended | |
| | | March 31,
2021 | | | December 31,
2020 | |
| General and administrative | | $ | 192,210 | | | $ | 453,204 | |
| Research and development | | | 1,249,367 | | | | 2,945,825 | |
| Sales and marketing | | | 961,051 | | | | 2,266,021 | |
| | | $ | 2,402,628 | | | $ | 5,665,051 | |
On December 5, 2019, the Company entered share-based payment arrangements with consultants for services. The weighted average grant date fair value of the equity instruments granted during the three months ended March 31, 2021 was $0.80. The arrangement dictates that the instruments are vested as services are delivered by the consultants. As at March 31, 2021, 1,353,947 units (2020 - 1,353,947) were vested and 454,850 units (2020 – 454,850) were outstanding.
| 13. | RELATED PARTY TRANSACTIONS AND BALANCES |
The Company entered into a number of transactions with key management personnel. The Company considers the executive officers and directors as the key management of the Company. The remuneration of key management personnel includes those persons having the authority and responsibility for the planning, directing and controlling of the activities of the Company are as follows:
| | | Three months ended | | | Year
ended | |
| | | March 31,
2021 | | | December 31,
2020 | |
| Remuneration for services | | $ | 279,811 | | | $ | 432,958 | |
| Share-based payments | | | - | | | | 893,789 | |
| | | $ | 279,811 | | | $ | 1,326,747 | |
Amounts due to and from related parties as at March 31, 2021 and December 31, 2020 are as follows:
| Related party assets (liabilities) | | March 31,
2021 | | | December 31,
2020 | |
| Key management personnel | | $ | 76,062 | | | $ | (5,388 | ) |
The amounts owed from the related parties as described above are non-secured, non-interest bearing, with no specific terms of repayment.
NexTech AR Solutions Corp.
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2020 and 2019
(Expressed in Canadian dollars)
(Unaudited)
| 14. | REVENUE FROM CONTRACTS WITH CUSTOMERS |
The following table presents a disaggregation of revenue by service:
| | | Three months ended | | | Three months ended | |
| | | March 31, 2021 | | | March 31, 2020 | |
| Product sales | | $ | 6,009,259 | | | $ | 2,445,921 | |
| Technology services | | | 1,350,066 | | | | 46,064 | |
| Renewable software licenses | | | 367,378 | | | | - | |
| | | $ | 7,726,703 | | | $ | 2,491,985 | |
The product sales are recognized at a point in time and the technology services and renewable software licenses revenue is recognized over time.
Contract assets
Contract liabilities represent customer payments received for services to be provided subsequent to the reporting date. Significant changes in contract liabilities are as follows:
| | | Three months ended | | | Year
ended | |
| | | March 31, 2021 | | | December 31,
2020 | |
| Contract liabilities, beginning | | $ | 383,022 | | | $ | - | |
| Addition to deferred revenue - acquisition | | | 1,916,013 | | | | 105,000 | |
| Revenue recognized that was included in contract liabilities | | | (208,816 | ) | | | (105,000 | ) |
| Amount received for revenue unearned | | | (897,150 | ) | | | 383,022 | |
| Contract liabilities, ending | | $ | 1,193,069 | | | $ | 383,022 | |
| Current | | | 1,193,069 | | | | 383,022 | |
| Non-current | | | - | | | | - | |
| Contract liabilities, ending | | $ | 1,193,069 | | | $ | 383,022 | |
| Contract assets | | | | | | |
| | | | | | | |
| | | Three months ended | | | Year
ended | |
| | | March 31, 2021 | | | December 31,
2020 | |
| Contract assets, beginning | | $ | 244,478 | | | $ | - | |
| Contract assets, billed over the period | | | (198,330 | ) | | | | |
| Contract assets additions related to technology services | | | 313,912 | | | | 244,478 | |
| Contract assets, ending | | $ | 360,060 | | | $ | 244,478 | |
| Current | | | 360,060 | | | | 244,478 | |
| Non-current | | | - | | | | - | |
| Contract assets, ending | | $ | 360,060 | | | $ | 244,478 | |
NexTech AR Solutions Corp.
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2020 and 2019
(Expressed in Canadian dollars)
(Unaudited)
| 14. | REVENUE FROM CONTRACTS WITH CUSTOMERS (continued) |
The following is a breakdown of the Company’s revenues from external customers attributed to the entity’s countries of domicile (Canada and the United States) and foreign countries. Revenues are attributed based on the country that the signing customer’s head office is located in.
| | | Three months ended | | | Three months ended | |
| | | March 31, 2021 | | | March 31, 2020 | |
| Countries of domicile | | $ | 7,641,782 | | | $ | 2,491,985 | |
| Foreign countries | | | 84,921 | | | | - | |
| | | $ | 7,726,703 | | | $ | 2,491,985 | |
The Company has no non-current assets held in foreign countries.
The Company presents operating expenses by function with the exception of amortization, depreciation and foreign exchange loss. The following presents operating expenses by nature:
Cost of Sales
| | | Three months ended | | | Three months ended | |
| Cost of sales | | March 31, 2021 | | | March 31, 2020 | |
| Cost of products/services | | $ | 3,147,193 | | | $ | 1,144,136 | |
| Salaries and wages | | | 221,275 | | | | - | |
| Consulting fees | | | 1,043,810 | | | | - | |
| | | $ | 4,412,278 | | | $ | 1,144,136 | |
Sales and marketing
| | | Three months ended | | | Three months ended | |
| Sales and marketing | | March 31, 2021 | | | March 31, 2020 | |
| Advertising | | $ | 1,360,805 | | | $ | 1,234,205 | |
| Consultant fees | | | 2,095,871 | | | | 8,568 | |
| Salaries, wages, and commissions | | | 653,373 | | | | 17,060 | |
| Investor relations | | | 480,038 | | | | - | |
| Management fees | | | 50,000 | | | | 159,000 | |
| | | $ | 4,640,087 | | | $ | 1,418,833 | |
NexTech AR Solutions Corp.
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2020 and 2019
(Expressed in Canadian dollars)
(Unaudited)
| 15. | EXPENSES BY NATURE (continued) |
General and administrative
| | | Three months ended | | | Three months ended | |
| General and administrative | | March 31, 2021 | | | March 31, 2020 | |
| Compliance fees | | $ | 87,419 | | | $ | 20,203 | |
| Salaries and wages | | | 1,583,019 | | | | 137,423 | |
| Consultant fees | | | 134,413 | | | | 36,150 | |
| Employee benefit | | | 70,844 | | | | 25,850 | |
| Management fees | | | 155,167 | | | | 60,000 | |
| Office, general, and other | | | 619,466 | | | | 261,049 | |
| Equipment, repairs, and maintenance | | | 111,778 | | | | 56,805 | |
| Professional fees | | | 411,314 | | | | 67,833 | |
| Shipping and warehouse costs | | | 574,303 | | | | 44,114 | |
| | | $ | 3,747,723 | | | $ | 709,427 | |
Research and Development
| | | Three months ended | | | Three months ended | |
| Research and development | | March 31,
2021 | | | March 31,
2020 | |
| Salaries | | $ | 964,804 | | | $ | - | |
| Consultant fees | | | 644,233 | | | | 239,193 | |
| Platform, maintenance, and other | | | 184,442 | | | | - | |
| | | $ | 1,793,479 | | | $ | 239,193 | |
NexTech AR Solutions Corp.
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2020 and 2019
(Expressed in Canadian dollars)
(Unaudited)
For the three months ended March 31, 2021, the Company has two reportable segments:
| ● | The operation of eCommerce platforms which generates revenue from online sales channels, market places, and direct sales through websites |
| | | |
| ● | The provision of technology services for eCommerce, virtual events, higher education and advertising. |
The above reportable segments are the way the Company reports information regarding segment performance, including net profit (loss) for the three months ended March 31, 2021.
The following is summarized financial information of the Company’s reportable segments for the three months ended March 31, 2021 and March 31, 2020.
| 2021 | | eCommerce | | | Technology Services | | | Corporate | | | Total | |
| Revenue | | $ | 6,009,259 | | | $ | 1,717,444 | | | $ | - | | | $ | 7,726,703 | |
| Amortization | | $ | 169,881 | | | $ | 210,339 | | | $ | - | | | $ | 380,220 | |
| Net loss | | $ | (715,245 | ) | | $ | (4,725,864 | ) | | $ | (3,795,067 | ) | | $ | (9,236,177 | ) |
| 2020 | | eCommerce | | | Technology Services | | | Corporate | | | Total | |
| Revenue | | $ | 2,445,921 | | | $ | 46,064 | | | $ | - | | | $ | 2,491,985 | |
| Amortization | | $ | 88,253 | | | $ | - | | | $ | - | | | $ | 88,253 | |
| Net loss | | $ | (70,714 | ) | | $ | (414,430 | ) | | $ | (389,976 | ) | | $ | (875,120 | ) |
The following is summarized financial information of the Company’s reportable segments for March 31, 2021 and December 31, 2020.
| 2021 | | eCommerce | | | Technology Services | | | Corporate | | | Total | |
| Total asset | | $ | 11,015,963 | | | $ | 15,025,783 | | | $ | - | | | $ | 26,041,746 | |
| Total liablities | | $ | (2,405,693 | ) | | $ | (3,747,846 | ) | | $ | (2,489,557 | ) | | | (8,643,096 | ) |
| Net assets | | $ | 8,610,271 | | | $ | 11,277,937 | | | $ | (2,489,557 | ) | | $ | 17,398,650 | |
| 2020 | | eCommerce | | | Technology Services | | | Corporate | | | Total | |
| Total asset | | $ | 891,182 | | | $ | - | | | $ | 7,745,682 | | | $ | 8,636,864 | |
| Total liablities | | $ | (727,199 | ) | | $ | - | | | $ | (843,459 | ) | | | (1,570,658 | ) |
| Net assets | | $ | 163,983 | | | $ | - | | | $ | 6,902,223 | | | $ | 7,066,206 | |
NexTech AR Solutions Corp.
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2020 and 2019
(Expressed in Canadian dollars)
(Unaudited)
| 17. | FINANCIAL AND CAPITAL RISK MANAGEMENT |
Financial Risk Management
The Company’s financial instruments are exposed to certain financial risks, which include credit risk, liquidity risk, currency risk, and interest rate risk.
Credit Risk
Credit risk arises from cash as well as credit exposures to counterparties of outstanding receivables and committed transactions. There is no significant concentration of credit risk other than cash deposits and receivables. The Company’s cash deposits are primarily held with a Canadian chartered bank and receivables are due from the distributors of the company’s products and customers.
Liquidity Risk
Liquidity risk is the risk that the Company will not have sufficient cash resources to meet its financial obligations as they come due. The Company’s main source of cash resources is through equity financing. The Company’s financial obligations are limited to its current liabilities which have contractual maturities of less than one year. The Company manages liquidity risk as part of its overall “Management of Capital” as described below.
Currency Risk
The Company is exposed to the financial risk related to the fluctuation of foreign exchange rates. The Company operates in Canada and a portion of the Company’s expenses are incurred in U.S. dollars (“USD”). A significant change in the currency exchange rates between the Canadian dollar relative to the USD could affect the Company’s results of operations, financial position or cash flows. The Company has not hedged its exposure to currency fluctuations. As at March 31, 2021, the Company is exposed to currency risk through cash, accounts receivable and accounts payable denominated in USD. A 10% change in exchange rate could increase/decrease the Company’s net loss by $83,545.
Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market interest rates. We believe that interest rate risk is low for our financial assets as the majority of investments are made in highly liquid instruments. We do have interest rate risk related to our credit facilities. Our operating line of credit is not utilized but our rates are variable tied to Royal Bank prime rate and Royal Bank base rate.
Fair Values
The Company’s financial instruments consist of cash, receivables, and accounts payable. Financial instruments are initially recognized at fair value with subsequent measurement depending on classification as described below. Classification of financial instruments depends on the purpose for which the financial instruments were acquired or issued, their characteristics, and the Company’s designation of such instruments. As at March 31, 2021, the Company’s financial instruments were classified as at amortized at cost. The carrying values of cash, receivables, and accounts payable and accrued liabilities approximate their fair value because of the short-term nature of these instruments.
During the year ended December 31, 2020, the Company has received a legal claim against the Company in respect of the acceleration term on the right to exercise certain warrants. As at March 31, 2021, the claim remains at the preliminary stage. It is premature to determine the outcome of this claim.
On April 8, 2021, the Company issued 2,801,500 units and 100,000 warrants for proceeds of $14,061,790 ($12,844,838 net of share issuance costs). Each unit is comprised of one common share and one-half warrant. Each warrant is exercisable into one common share at a price of $6 for 2 years, subject to an accelerated expiry if certain conditions are met.
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