UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
| X | REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
| | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
| ¨ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
PREDICTMEDIX INC.
(Exact Name of the Registrant as Specified in its Charter)
77 King Street W.
Suite 3000
Toronto, ON M5K 1G8
Canada
(Address of Principal Executive Offices and Zip Code)
(647) 889-6916
(Registrant's Telephone Number, Including Area Code)
Title of Each Class
__________________________ Common |
Trading Symbol
_________________________ PMED:CSE PMEDF | Names of Each Exchange on Which Registered
___________________________ Canadian Securities Exchange OTCQB |
Securities to be registered pursuant to Section 12(g) of the Act: Common shares with no par value.
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the registration statement: 101,717,973 common shares as of January 31, 2021.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
☐ Yes ☒ No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
☐ Yes ☐ No
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☐ Yes ☒ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☐ Yes ☒ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] | Accelerated filer [ ] | Non-accelerated filer [X] Emerging growth company [X] |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ☐ | International Financial Reporting Standards as issued | Other ☐ |
| by the International Accounting Standards Board ☒ | |
If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
☐ Item 17 ☐ Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).
☐ Yes ☐ No
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
☐ Yes ☐ No
If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
☐ Item 17 ☐ Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes ☐ No
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
☐ Yes ☐ No
TABLE OF CONTENTS
EXPLANATORY NOTE
Predictmedix Inc. (the "Company" or the "Issuer") was incorporated in the Province of British Columbia and is a reporting issuer in the Canadian Provinces of British Columbia Alberta and Ontario. Shares of the Company's no par value common stock (referred to herein as "Common Shares" or "common shares") are listed for trading on the Canadian Securities Exchange in Canada, under the symbol "PMED:CSE". The common shares are also quoted on the OTCQB® under the symbol "PMEDF." The Company's head office is located at 77 King Street W, Suite 3000, Toronto, Ontario M5K 1G8, Canada.
In this Registration Statement on Form 20-F (this "Registration Statement" or this "Form 20-F), all references to "PredictMedix," "Predictmedix," the "Company," "our," "us" or "we" refer to Predictmedix Inc. and its subsidiaries, unless the context clearly requires otherwise.
We report under International Financial Reporting Standards, as issued by the International Accounting Standards Board ("IFRS"). None of our financial statements were prepared in accordance with generally accepted accounting principles in the United States ("U.S. GAAP").
FORWARD-LOOKING STATEMENTS
This registration statement on Form 20-F contains forward-looking statements that are based on current expectations, estimates, forecasts and projections about us, our future performance, the market in which we operate, our beliefs and our Management's assumptions. In addition, other written or oral statements that constitute forward-looking statements may be made by us or on our behalf. Words such as "expects", "anticipates", "targets", "goals", "projects", "intends", "plans", "believes", "seeks", "estimates", variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict or assess. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Any investment in our common shares involves a high degree of risk. You should carefully consider the information contained in this registration statement before you decide to invest in our common shares. In particular, each of the Risk Factors described in "Item 3.D - Risk Factors" herein may materially and adversely affect our business objectives, plan of operation and financial condition. These risks may cause the market price of our common shares to decline, which may cause you to lose all or a part of the money you invested in our common shares. These risks include factors we cannot control, including:
- raising future equity capital to support our operations,
- obtaining the patent protection we have applied for,
- market acceptance and demand for our products,
- retaining our key personnel, and
- the impact on the world economy of coronavirus ("COVID-19").
Although we believe that the assumptions on which our forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this registration statement should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified in the section entitled "Item 3.D - Risk Factors" and elsewhere in this registration statement. These forward-looking statements apply only as of the date of this registration statement. We assume no duty and do not undertake to update the forward-looking statements.
PART I
Item 1. Identity of Directors, Senior Management and Advisers
A. Directors and senior management.
For the names, business addresses and functions of our directors and senior management, see "Item 6. Directors, Senior Management and Employees - A. Directors and Senior Management" and "Item 6. Directors, Senior Management and Employees - C. Board Practices."
B. Advisers.
We employ Harbourside CPA LLP (formerly named Buckley Dodds LLP) as our auditors in Canada. We employ Fogler, Rubinoff LLP as our legal counsel in Canada.
C. Auditors.
Our auditors for the fiscal years ended January 31, 2019, January 31, 2020, January 31, 2021 were Harbourside CPA LLP (formerly named Buckley Dodds LLP), Vancouver, British Columbia, Canada.
Item 2. Offer Statistics and Expected Timetable
Not applicable.
Item 3. Key Information
A. Selected financial data.
The following table presents the selected consolidated financial information for our company. The selected consolidated statements of comprehensive income data for the fiscal years ended January 31, 2020 and 2021 and the selected consolidated balance sheets data as of January 31, 2020 and 2021 have been derived from our audited consolidated financial statements, which are included in this annual report beginning on page F-1. Our historical results do not necessarily indicate results expected for any future periods. The Company was part of a three-way amalgamation that closed in September, 2019 (See Item 4.A - "History and Development of the Company"). Our financial information for the year ended January 31, 2020 represents the first meaningful financial reporting for the Company as currently constituted. The selected consolidated financial data should be read in conjunction with, and are qualified in their entirety by reference to, our audited consolidated financial statements and related notes and "Item 5. Operating and Financial Review and Prospects" below. Our audited consolidated financial statements are prepared and presented in accordance with International Reporting Standards issued by the International Accounting Standards Board ("IFRS").
| | Year ended January 31, 2021 $ | | | Year ended January 31, 2020 $ | |
Total operating expenses | | (1,930,829 | ) | | (782,829 | ) |
Income (loss) from discontinued operations | | 346,296 | | | (37,992 | ) |
Loss from acquisition of subsidiary | | - | | | (1,490,071 | ) |
Net loss and comprehensive loss | | (1,584,533 | ) | | (2,310,892 | ) |
Loss per common share - basic and diluted | | (0.016 | ) | | (0.024 | ) |
Weighted average number of common shares outstanding | | 101,195,130 | | | 97,820,135 | |
| | | | | | |
The chart below presents the summary financial information of the Company: |
| | | | | | |
| | As at January 31, 2021 $ | | | As at January 31, 2020 $ | |
Current assets | | 747,445 | | | 1,634,379 | |
Non-current assets | | 256,198 | | | 32,383 | |
Total assets | | 1,003,643 | | | 1,666,762 | |
Current liabilities | | 135,354 | | | 79,838 | |
Total long-term liabilities | | - | | | 3,268 | |
Shareholders' equity | | 868,289 | | | 1,583,656 | |
Cash dividends per common share | | - | | | - | |
Exchange Rate
References to "dollars" or "$" in this Form 20-F are to Canadian dollars, unless otherwise specified.
B. Capitalization and indebtedness.
The table below sets forth our total indebtedness and shows the capitalization of the Company as of January 31, 2021. You should read this table in conjunction with our audited and unaudited financial statements, together with the accompanying notes there to.
Total indebtedness Equity | $ |
Share Capital | 4,031,650 |
Reserves | 969,650 |
Deficit | (4,133,011) |
Total Equity | 868,289 |
Total Capitalization | 868,289 |
C. Reasons for the offer and use of proceeds.
Not Applicable
D. Risk Factors
In addition to the other information contained in this Form 20-F, investors should give careful consideration to the following factors, which are qualified in their entirety by reference to, and must be read in conjunction with, the detailed information appearing elsewhere in this registration statement. If any of the following events described as risks or uncertainties actually occurs, the business, prospects, financial condition and operating results of the Company may suffer a material adverse effect. In that event, the market price of the Company's Common Shares could decline and investors could lose all or part of their investment. Additional risks and uncertainties presently unknown, or that are not believed to be material at this time, may, if realized, also impair or have a material adverse effect on the Company's operations. In addition to the risks described elsewhere and the other information contained in herein, prospective investors should carefully consider each of, and the cumulative effect of, all of the following risk factors. There is no assurance that risk management steps taken by the Company will avoid future loss due to the occurrence of the risks described below or other unforeseen risks.
General Venture Company Risks
The common shares must be considered highly speculative due to the nature of the Company's business, the early stage of its deployment, its current financial position and ongoing requirements for capital. An investment in the common shares should only be considered by those persons who can afford a total loss of investment and is not suited to those investors who may need to dispose of their investment in a timely fashion. Investors should consult with their own professional advisors to assess the legal, financial and other aspects of an investment in common shares.
Uncertainty of Revenue Growth
For the twelve-month periods ended January 32, 2021 and 2020, the Company did not generate any revenue from operations. There can be no assurance that the Company can generate substantial revenue growth, or that any revenue growth that is achieved can be sustained. Revenue growth that the Company may achieve, may not be indicative of future operating results. In addition, the Company may increase further its operating expenses in order to fund increases in its sales and marketing efforts and the Company may increase its administrative resources in anticipation of future growth. To the extent that increases in such expenses precede or are not subsequently followed by increased revenues, the Company's business, operating results and financial condition will be materially adversely affected.
Marketing and Distribution Capabilities
In order to commercialize its technology, the Company must either acquire or develop an internal marketing and sales force with technical expertise and with supporting distribution capabilities or arrange for third parties to perform these services. In order to market certain of its products, the Company must either acquire or develop a sales and distribution infrastructure. In order to maximize sales of other products, the Company may determine that it needs to either acquire or develop a sales and distribution infrastructure. The acquisition or development of a sales and distribution infrastructure will require substantial resources.. To the extent that the Company enters into marketing and sales arrangements with other companies, its revenues will depend on the efforts of others. These efforts may not be successful. If the Company fails to develop substantial sales, marketing and distribution channels, or to enter into arrangements with third parties for those purposes, it will experience delays in product sales and incur increased costs.
Rapid Technological Development
The markets for the Company's products and services are characterized by rapidly changing technology and evolving industry standards, which could result in product obsolescence or short product life cycles. Accordingly, the Company's success is dependent upon the performance of its products in the field, its ability to anticipate technological changes in the industries it serves and to successfully identify, obtain, develop and market new products that satisfy evolving industry requirements. There can be no assurance that the Company will successfully develop new products or enhance and improve its existing products or that any new products and enhanced and improved existing products will achieve market acceptance. Further, there can be no assurance that competitors will not market products that have perceived advantages over the Company's products or which render the products currently sold by the Company obsolete or less marketable.
The Company must commit significant resources to developing new products before knowing whether its investments will result in products the market will accept. To remain competitive, the Company may be required to invest significantly greater resources then currently anticipated in research and development and product enhancement efforts and result in increased operating expenses.
Qualified Audit Opinion
Harbourside CPA, LLP, our independent auditor for the fiscal year ended January 31, 2021, has included in its Report and in the footnotes to the financial statements of the Company for the year ended January 31, 2021 (Footnote 2) a statement entitled, "Going Concern Assumption." The footnote is as follows.
These consolidated financial statements have been prepared using IFRS on a going concern basis, which presumes the realization of assets and discharge of liabilities in the normal course of business, for the next fiscal year. At January 31, 2021, the Company had cash of $480,051, working capital of $612,091 and an accumulated deficit of $4,133,011. The continuing operations of the Company are dependent on funding provided by equity investors. The Company intends to finance its future requirements through a combination of equity and/or debt issuance. There is no assurance that the Company will be able to obtain such financings or obtain them on favorable terms.
This uncertainty may cast significant doubt about the ability of the Company to continue as a going concern. These consolidated financial statements do not include any adjustments to the carrying value or presentation of assets or liabilities that might be necessary should the Company be unable to continue as a going concern. These adjustments could be material.
Following the issuance of our January 31, 2021 year-end financial statements which included the above note, on March 5, 2021, the Company closed a non-brokered private placement for gross proceeds of Cdn$1,090,085, thereby increasing the amount of cash available for funding the Company's operations. A total of 3,114,529 units were issued at a price of Cdn$0.35 each. Each unit is comprised of one common share of the Company and one warrant, with each warrant exercisable into a common share at an exercise price of Cdn$0.50 per share for a period of two years.
Conflicts of Interest
Certain Directors and Officers of the Company also serve as Directors and officers of other companies. Consequently, there exists the possibility that such Directors or officers may be in a position of conflict of interest. Any decision made by such Directors or Officers involving the Company are made in accordance with their duties and obligations to deal fairly and in good faith with the Company and such other companies. In addition, such Directors will declare and refrain from voting on, any matter in which such Directors may have a material conflict of interest.
Competition
We are aware of two potential competitors, Cannabix Technologies and Hound Las, both of which are developing breathalyzer devices that detect THC in the breath. The Company expects to experience additional competition from competitors who may introduce new products, services or enhancements that better meet the needs of end-users or changing industry standards, or achieve greater market acceptance due to pricing, sales channels, or other factors.
Intellectual Property
The Company's ability to compete effectively will depend, in part, on its ability to maintain the proprietary nature of its technology. Individuals affiliated with the Company have made applications for patent protection and assigned their patent rights to the Company as further described in Item 4.B "Business Overview." In addition, the Company has adopted procedures to protect its intellectual property and maintain secrecy of its confidential business information and trade secrets. However, there can be no assurance that our patents will be granted or that such confidentiality procedures will afford complete protection for such intellectual property, confidential business information and trade secrets. There can be no assurance that the Company's competitors will not independently develop technologies that are substantially equivalent or superior to the Company's technology.
To protect the Company's intellectual property, it may become involved in litigation, which could result in substantial expenses, divert the attention of its management, cause significant delays and materially disrupt the conduct of its business.
GENERAL RISK FACTORS
Limited Operating History
The Company has a limited operating history upon which an evaluation of the Company and its prospects can be based. The Company is subject to many risks common to venture enterprises, however, the relative novelty of its products and technology means that there is a lack of industry history upon which to evaluate the Company's prospects. There is no assurance that the Company will be successful in achieving a return on shareholders' investment or meeting other metrics of success.
Dividends
To date, the Company has not paid any dividends on its outstanding securities and the Company does not expect to do so in the foreseeable future. Any decision to pay dividends on the Company's Common Shares will be made by the Board of Directors.
Management Dependence on Key Personnel, Contractors and Service Providers
Shareholders of our Company rely on the good faith, experience and judgment of the Company's management and advisors in supervising and providing for the effective management of the business and the operations of the Company. The Company will be dependent on a relatively small number of key persons, the loss of any one of whom could have an adverse effect on the Company. Only two of our employees have contracts with the Company for providing services. For more information, see Item 6.B Directors, Senior Management and Employees-Compensation."
Value of Our Common Shares
The value of the Company's common shares could be subject to significant fluctuations in response to variations in operating results, the granting or denial of our patent applications, the success of the Company's business strategy, competition or the advent of regulations which may affect the business of the Company and other factors.
Impact of Covid-19
Since December 31, 2019, the outbreak of the novel strain of coronavirus, specially identified as "COVID-19" has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures which include the implementation of travel bans, self-imposed quarantine periods and social distancing, have caused material disruption to businesses globally resulting in an economic slowdown. Global equity markets have experienced significant volatility and weakness. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions. It is not possible to reliably estimate the length and severity of these developments and the impact on the financial results and condition of the Company in future periods.
Restrictions on the Reliance of Rule 144 by Shell Companies or Former Shell Companies
We have not registered the re-sale of any of our shares under the Securities Act of 1933, as amended (the "Securities Act"). Historically, the SEC staff has taken the position that Rule 144 under the Securities Act is not available as a safe harbor for the resale of securities initially issued by companies that are or previously were, shell or blank check companies. While we do not believe that the Company is currently a shell company, it may be considered a shell company prior to our having effected a three-way amalgamation in September, 2019 (See Item 4.A - "History and Development of the Company"). As a result, shareholders may not be able to rely on rely on Rule 144 for purposes of re-selling their shares until a period of at least twelve months has elapsed from the date on which this Registration Statement on Form 20-F was filed with the SEC. Until Rule 144 is available, our status as a former "shell company" could interfere with our raising additional funds, engaging consultants, and/or using our securities to fund acquisitions without registering the shares we issue under the securities Act of 1933.
Our stockholders are subject to dilution upon the occurrence of certain events which could result in a decrease in our stock price.
As of January 31, 2021, we had approximately 10,643,000 shares of our common stock reserved or designated for future issuance upon the exercise of outstanding options and warrants. Future issuances of options, warrants or sales of substantial amounts of our common stock into the public market and the issuance of the shares reserved for future issuance in exchange for outstanding options and warrants will be dilutive to our existing stockholders and could result in a decrease in our stock price.
Item 4. Information on the Company
A. History and Development of the Company.
Name, Address, and Incorporation
The Company was incorporated in the Province of British Columbia on September 3, 1987 under the British Columbia Business Corporations Act (the "BCBCA") under the name "Riviera Explorations Ltd." In 1993, the Company changed its name from Riviera Explorations Ltd. to "Kentucky Oil &Gas Inc." In 1994 the Company changed its name from Kentucky Oil &Gas Inc. to "Integrated Card Technologies Inc." In 1997, the Company changed its name from Integrated Card Technologies Inc. to "Rizona Ventures Ltd." As of August 31, 1998, the Company changed its name from Rizona Ventures Ltd. to "Admiral Bay Resources Inc." ("Admiral").
Effective as of September 23, 2019, Admiral was part of a three-way amalgamation among Admiral, 2693980 Ontario Inc. (a wholly owned subsidiary of Admiral) and Cultivar Holdings Ltd. (the "Transaction"). Admiral completed the acquisition of all the issued and outstanding shares of Cultivar Holdings Ltd. by way of such three-way amalgamation, pursuant to which 2693980 Ontario Inc., amalgamated with Cultivar Holdings Ltd. Pursuant to the Transaction, each registered shareholder of Cultivar Holdings Ltd. received one (1) common share in the capital of the Admiral for each common share held, resulting in the issuance of an aggregate of 97,439,900 common shares to Cultivar Holdings Ltd. Shareholders. As part of the Transaction, warrants of Cultivar Holdings Ltd. were replaced with common share purchase warrants of Admiral. In addition, 500,000 Admiral shares were set aside to be issued to members of Cultivar Holdings Ltd. management team upon the final approval of Jamaica's Cannabis Licensing Authority for a license involved in the cultivation, processing, retail and transportation of cannabis. Under IFRS, this was considered a Reverse Merger and Recapitalization (commonly referred to as a Reverse Take Over or "RTO"). The Company issued 6,514,249 shares valued at $0.21 per share, with a total value of $1,367,992 for the acquisition.
At completion of the transaction, Admiral changed its name to Cultivar Holdings Inc. On April 9, 2020, the Company announced that it had changed its name change from "Cultivar Holdings Inc." to "Predictmedix Inc."
The Company's head office is located at 77 King Street W, Suite 3000, Toronto, Ontario, M5K 1GB. The Company's Common Shares are listed for trading on the Canadian Securities Exchange (the "CSE") under the trading symbol "PMED" as well as on the OTCQB under "PMEDF."
Preceding Business
In 2018, the Company held a 49% interest in Cultivar JA Limited ("Cultivar JA"), a Jamaican company whose objective was to grow high quality cannabis in Jamaica. Also in 2018, the Company held 100% of an Ontario company that was organized to develop a CBD product portfolio as well as an artificial intelligence powered technology to detect cannabis impairment. In March of 2020, the Company sold its interest in Cultivar JA and terminated all operations in the cannabis sector. As a result, the Company is focused on its current business of artificial intelligence powered technology to detect disease and impairment. In recognition of the Company's business focus, on April 9, 2020, the Company changed its name to "Predictmedix Inc."
B. Business Overview.
The Company's business is focused on developing artificial intelligence ("AI") powered technologies for general workplace health and safety, and for the health care industry. In particular, the Company has developed technologies for: (1) the identification and detection of infectious diseases (including COVID-19); (2) detection of alcohol and/or cannabis impairment; (3) mental illness diagnostics; and (4) remote patient monitoring and treatment plans. The following is a description of our proprietary services and products.
Infectious Disease Screening
The Company is addressing respiratory illnesses with the focus being on two major infectious diseases - influenza and COVID-19. The COVID-19 pandemic has turned into a threat to global security and economic stability, resulting in unprecedented job losses not seen since the great depression. Identification and tracking of an infectious disease or an outbreak of a global pandemic is a critical element of controlling the spread of disease across geographical areas. Furthermore, infectious diseases such as COVID-19 are likely to return in waves until there is mass vaccination or development of population level immunity. As such, there is a significant urgent need to have mass screening technologies which can identify potential COVID-19 cases without the need for human intervention and can be deployed in places where there is movement of large numbers of people. Some examples are transit hubs, airports, malls, shopping centers, casinos, concerts, arenas and office buildings. We believe that one of the primary factors leading to the outbreak of COVID-19 virus has been the relative lack of rapid screening tools for the general public. The lack of such tools has resulted in a failed containment effort which led to a global pandemic and an unprecedented economic disruption. The Company also anticipates expanding its infectious disease screening capabilities to include screening for influenza.
Our AI powered technology utilizes multispectral imaging with a focus on visual spectral imaging along with infrared thermography to identify individuals exhibiting symptoms associated with infectious diseases. The AI technology monitors and identifies the potential presence of infectious disease symptoms such as fatigue, headache, coughing, sneezing, blood flow, sweat gland activation, metabolism, and fever along with other key biomarkers. The technology can be deployed using multispectral cameras in facilities where there is large movement of people. The data collected is brought into a central server / cloud for analysis and alerts are sent in case of a positive detection. Privacy concerns are addressed by using dedicated servers, access control, no video data storage, and only processing being carried out by our technology. Furthermore, even the summarized frames lack any personal identifiers. Additionally, the information on the camera stays anonymous so we cannot map which camera it is.
The Company has developed a proprietary hardware configuration for its solution in addition to the proprietary artificial intelligence algorithms (patent pending). The end user product which consists of hardware components, assembled and networked within fabricated gateway units, includes multispectral cameras and specialized sensors with processing capabilities that seamlessly communicate to our AI model in the cloud. Upon deployment, individuals pass through the gateway, triggering the system to activate a red or green light indicating who is exhibiting symptoms associated with infectious disease, such as COVID-19.
Functional deployment of the technology occurs in two stages. In the first stage, a technical team assembles the parts within the fabricated gateway unit and works with our engineering team to test that the product meets our standards for live deployment. In the second stage, the gateway is transported to the client location, and run through a series of tests to ensure the system is operating as intended. The Company has successfully deployed the technology at different client sites and is currently commercializing the technology with a strong emphasis on the Canadian, US and South Asian markets.
Cannabis and/or Alcohol Impairment
The Company has developed a technology to detect such symptoms and impairment using proprietary AI technology algorithms with a decision-making ability to identify if infection or impairment is present. The AI algorithms use several unique data points with facial and voice recognition to identify impairment. Applications for detecting drug impairment can range from roadside impairment tests to workplace safety. We believe our patent applications cover the first utilization of AI to detect disease or impairment in this context. We will initially market our software to law enforcement agencies and industries such as manufacturing, mining or aviation, that have heightened concerns about disease infection or impairment in the workplace. The deployment will occur in a similar format as the infectious disease screening solution, with the hardware component comprised of gateways using the proprietary AI software component.
Mental Health Screening
The Company is also developing AI powered technology to assist with diagnosis and management of mental health disorders such as depression, autism, ADHD and dementia.
Remote Patient Monitoring and Treatment
A patient can be critically ill and unable or otherwise not be in a condition to visit the hospital or a medical physician on a regular basis. Such restriction may result in the deterioration of health of the patient. For example, a patient may be bed ridden with a health condition that requires monitoring but may be reluctant to go to the hospital. In another scenario, the patient may be in critical condition and need lifesaving treatment before the patient can reach the hospital.
Our patent-pending technology utilizes the patient's history and real time medical data, such as blood pressure or blood glucose level, to provide patients and their medical professionals with treatment plans for chronic disease management and in some critical case lifesaving management by providing time to the patient to reach the hospital.
Further, when treating disease, whether infectious, non-infectious, heredity and/or other lifestyle diseases, we believe that it is important to motivate the patient to strictly follow the prescribed protocol by a medical expert to maintain good health. In connection with the monitoring, our technology can provide milestones associated with good health. A patient that is compliant and meets these milestone events can be recorded as "reward events" that are converted into points that may redeemed by the patient. Similarly, our system also includes a care provider reward program as an incentive for care providers/partners.
The following patent applications have been submitted to the United States Patent and Trademark Office by individuals affiliated with the Company. The individuals making the application have assigned all of their respective rights in the patent applications and in any patent(s) that may be issued.
Patent Application No. 16/892,369 Published on December 10, 2020 | In June of 2020, principals of the Company filed Patent Application No. 16/892,369 which is related to a provisional patent application filed by sch individuals on June 7, 2019 (Provisional application No. 62/858,422). These applications cover the Company's proprietary system and method for detecting the impairment of an individual. The method involves operating a processor to receive at least one image associated with the individual an identify at least one feature in each image. The method further involves operating the processor to, for each feature: generate an intensity representation for that feature, apply at least one impairment analytical model to the intensity representation to determine a respective impairment likelihood and determine a confidence level for each impairment likelihood based on characteristics associated with at least the applied impairment analytical model and that feature. The method further involves operating the processor to define the impairment of the individual based on at least one impairment likelihood and the respective confidence level. |
Patent Application No. 63012510 | Artificial intelligence driven rapid testing system for infectious diseases. |
Patent Application No. 63048131 | System and Method to automatically recommend and adapt a treatment regime for patients. |
Patent Application No. 63048152 | System and Method to manage a regards program for patient treatment protocols |
Patent Application No. 63058567 | Utilizing healthcare providers network effect to increase compliance for better health outcomes. |
Patent Application No. 63072392 | System and Method to provide product recommendation and sponsored content to patients managed by computerized workflows for treatment protocols. |
Significant Business Developments During the Year ended January 31, 2021
Acquisition of MobileWellbeing.
In July of 2020, the Company entered into an Asset Purchase Agreement (the "MobileWellbeing Purchase Agreement") with Rajv Muradia, as seller (the "Seller"), pursuant to which the Company acquired all of the Seller's interest in MobileWellbeing, a Telemedicine Remote Patient Monitoring platform ("MobileWellbeing"). The consideration for the acquisition was a combination of cash and stock, payable as follows: upon closing of the MobileWellbeing Purchase Agreement, the Company made a $25,000 cash payment to the Seller and issued the Seller 20,000 shares of the Company's common stock, with an additional 30,000 shares issued to the Seller on the 90th day following such closing. In addition, the Mobile Wellbeing Purchase Agreement contemplates that the Seller will receive a 20% commission on net sales of the Company attributable to the MobileWellbeing Platform (which commission is capped at $500,000) and additional stock consideration up to 200,000 shares of the Company's common stock depending on whether certain milestones are met.
In connection with the acquisition of MobileWellbeing, on July 17, 2020 (the "Effective Date") the Company also entered into a consulting agreement with the Seller (the "Consulting Agreement") pursuant to which the Seller shall, among other things, assist the Company with commercializing the MobileWellbeing platform. Under the Consulting Agreement the Seller was granted 80,000 stock purchase options on the effective date and subject to termination provisions, 85,000 options to be granted to the Consultant on each of the first and second anniversary dates of the effective date.. Each stock option is exercisable into one (1) share of the Company's common stock, at a price equal to the then closing price of the Company's common stock on the day immediately prior to the Effective Date.
The Company plans to integrate MobileWellbeing with its Artificial Intelligence driven rapid screening system for infectious diseases, including COVID-19, and its screening modules for impairment and mental illness. Notably, we expect to turn our screening solutions into enterprise solutions with back-end patient or employee return-to-work monitoring. Additionally, we expect that this acquisition will allow Predictmedix to enter the growing markets of telehealth and clinical trials. Further, MobileWellbeing can be used for data collection, transmission, evaluation, notification and intervention at home or through kiosks that might be especially useful in Long Term Care and Retirement Community settings.
Other Developments
The Company is in the process of developing a network of marketing and distributions relationships throughout the world. The results of these relationships will depend on market acceptance and how these initiatives are implemented. These relationships include the following:
1. Max Healthcare, a provider of standardized healthcare services in South Asia;
2. All Canadian Display Company Ltd, d/b/a "Juiceworks" and Juiceworks Exhibits, a full-service design and build company based in Canada that creates brand experiences for leading brands across North America with operations both in Canada and the United States. Juiceworks will explore using the Company's symptom mass screening technology to offer safe indoor/outdoor entry solutions using custom-fabricated temporary structures;
3. Caribbean Digital Media Academy (CDMA), a services integrator company based in Jamaica;
4. Tech Mahindra Ltd, a leading provider of digital consulting and business re-engineering services in India that intends to offer AI-based healthcare solutions which could include joint marketing of the Company's services;
5. Taurus Medical Solutions, a medical distributor based in the United Kingdom which is a supplier to United Kingdom National Health Service;
6. Indian Oil Corporation Ltd, an Indian oil company seeking infectious disease screening solutions for its work force; and
7. Versus Systems, which builds tools for the clinical trials market including programs to promote compliance in testing medical therapies.
Prior Business
Prior to March, 2020, the Company held an investment in a Cannabis company that holds a provisional cannabis cultivation license in Jamaica. This company is Cultivar JA Limited ("Cultivar JA"). We held this interest through a wholly-owned subsidiary, Cultivar Holdings Ltd.
On March 27, 2020, the Company entered into a sale agreement (the "Sale Agreement") with respect to its 49% interest in Cultivar JA. Pursuant to the terms of the Sale Agreement, Cultivar Holdings Ltd. sold its 49% interest in Cultivar JA and all related royalty interests to the principals of Cultivar JA in exchange for the principals of Cultivar JA agreeing to cancel 4,000,000 common shares of the Company then owned by the principals. In addition, the principals also agreed to terminate their right to receive an additional 500,000 common shares of the Company which had been reserved for issuance upon Jamaica's Licensing Authority issuing final approval for Cultivar JA's license. As a result, we no longer have any interest in the cannabis industry.
For financial statement reporting purposes, the divestiture of the interest in Cultivar JA constituted a discontinued operation. A discontinued operation is a component of the Company's business that represents a separate major line of business or a geographical area of operations that has been disposed of or is held for sale. Classification as a discontinued operation occurs upon disposal or earlier, if the operation meets the criteria to be classified as held for sale. When an operation is classified as a discontinued operation the comparative statement of comprehensive loss and cash flow operation is represented as if the operation had been discontinued from the start of the comparative period.
The sale agreement constituted a discontinued operation of the Company effective as of March 27, 2020. As a result, all the assets and liabilities of Cultivar JA have been removed from the statement of financial position of the Company. The cancellation of 4,000,000 shares of the Company was valued at Cdn$540,000, being the fair value of the shares on the date of the sale transaction. The expenses of Cultivar JA have been determined to be a discontinued operation by the Company, and as a result, have been disclosed separately on the statement of income (loss) and comprehensive income (loss).
Segment Information
The Company is in the business of investment in technology to detect if an individual is suffering from an infectious diseases, such as COVID-19, or is under the influence of cannabis or alcohol. In addition, the Company is developing remote treatment and monitoring solutions for the healthcare industry. All assets are located in Canada.
Products and Services
The Company has developed a technology to detect symptoms of disease and impairment using proprietary AI technology algorithms with a decision-making ability to determine if infection or impairment is present. The AI algorithms use several unique data points with facial and voice recognition to identify impairment. Applications for detecting drug impairment can range from roadside impairment tests to workplace safety. PredictMedix also has developed a proprietary hardware configuration for its solution in addition to the proprietary artificial intelligence algorithms (patent pending). The end user product which consists of hardware components, assembled and networked within fabricated gateway units, includes multispectral cameras and specialized sensors with processing capabilities that seamlessly communicate to our AI model in the cloud. Upon deployment, individuals pass through the gateway, triggering the system to activate a red or green light indicating who is exhibiting symptoms associated with infectious disease, such as COVID-19.
The Company also is developing a system that uses artificial intelligence to provide a method of disease management that automatically recommends and adapts a treatment regimen. More specifically, the system and method for an automatic recommendation and treatment regime for a patient involves gathering patient data, patient inputs, and a treatment pathway controller treatment to identify time series events, apply rules for diagnosis of disease, taking an approval from a medical expert, and providing a detailed treatment plan for the patient. The technology developed by Predictmedix provides a novel method and system for management of a reward program for patient treatment programs. More specifically, the system and method of management provides for reward points to motivate the patient to follow the treatment protocol.
With our acquisition of MobileWellbeing in July of 2020, the Company is integrating its products and services with the MobileWellbeing technology with the goal of offering a remote monitoring and interaction capability that will enable the Company to enter the growing area of telehealth and clinical trials.
Item 4A. Unresolved Staff Comments
None.
Item 5. Operating and Financial Review and Prospects
The following discussion and analysis should be read in conjunction with Item 18. "Financial Statements" included below. Operating results are not necessarily indicative of results that may occur in future periods. This discussion and analysis contains forward- looking statements that involve risks, uncertainties and assumptions. The actual results may differ materially from those anticipated in the forward-looking statements as a result of many factors including, but not limited to, those set forth under "Forward-Looking Statements" and "Risk Factors" in Item 3 "Key Information" included above in this Registration Statement on Form 20-F. All forward-looking statements included in this document are based on the information available to the Company on the date of this document and the Company assumes no obligation to update any forward-looking statements contained in this Registration Statement on Form 20-F.
Critical accounting policies
We prepare our financial statements in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). As such, we are required to make certain estimates, judgments, and assumptions that management believes are reasonable based upon the information available. These estimates, judgments and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. The critical accounting policies are summarized in Item 18. "Financial Statements-Note 2-Critical Accounting Policies."
A. Operating results
The following discussion relates to our results of operations, financial condition and capital resources. You should read this discussion in conjunction with our financial statements and the notes thereto contained elsewhere in this report.
A. Operating results.
The following disclosure is in Canadian dollars.
The Fiscal Year Ended January 31, 2021
Expenses and Net Loss
Total operating expenses for the year ended January 31, 2021, were $1,930,829 as compared to operating expenses of $782,829 for the year ended January 31, 2020.
Significant variances
Non-cash share-based compensation of $946,361 for the year ended January 31, 2021 (prior year $10,387), consists of the fair value (Black- Scholes calculation) of the vesting of options to directors, officers and consultants.
On April 6, 2020, the Company granted options to its directors, officers and consultants to purchase up to 9,850,000 common shares. These options were issued at an exercise price of $0.15 per share and have varying vesting periods, with the majority being in equal installments over a quarterly basis throughout the term. These options have a term of one (1) year expiring on April 6, 2021. The Company expensed $742,833 for the vesting of these options during the year ended January 31, 2021 (Prior year: $nil).
On July 17, 2020, the Company granted options to a consultant to purchase up to 80,000 common shares. These options were issued at an exercise price of $1.02 per share and vest one year after date of grant. These options have a term of five (5) years expiring on July 17, 2025. The Company expensed $40,603 for the vesting of these options during the year ended January 31, 2021 (Prior year: $nil).
On September 17, 2020, the Company granted options to a consultant to purchase up to 200,000 common shares. These options were issued at an exercise price of $0.54 per share and vest on date of grant. These options expire on March 30, 2022. The Company expensed $81,979 for the vesting of these options during the year ended January 31, 2021 (Prior year: $nil).
On September 21, 2020, the Company granted options to a consultant to purchase up to 250,000 common shares. These options were issued at an exercise price of $0.59 per share and vest in equal installments over a quarterly basis throughout the term. These options have a term of one (1) year expiring on September 21, 2021. The Company expensed $77,375 for the vesting of these options during the year ended January 31, 2021 (Prior year: $nil).
Research and development costs for $26,300 for the year ended January 31, 2021 (prior year $73,733) are costs incurred by outside research provider for ongoing development of Artificial Intelligence powered facial and voice recognition technology to detect impairment. Certain expenses related to research (i.e. design and architecture that are not expected to provide an economic benefit) are expensed rather than recognized as an intangible asset.
Consulting fees costs for $178,004 for the year ended January 31, 2021 (prior year $135,631) consists primarily of fees paid to consultants to assist with business and investor relations.
Legal fees of $138,879 for the year ended January 31, 2021 (prior year $122,543) consists primarily of legal fees paid to assist the sale of the Company's interests in Cultivar JA and the acquisition of MobileWellbeing.
Transfer agent and filing fees for $57,908 (prior year $25,122) for the year ended January 31, 2021 consists primarily the costs of filing and compliance for the Company's CSE and OTC listing.
Marketing expenses for $221,670 for the year ended January 31, 2021 (prior year $nil) consists primarily of media marketing of the Company and its products.
No cash dividends have been paid by the Company. The Company has no present intention of paying cash dividends on its common shares as it anticipates that all available funds will be invested to finance existing activities.
Analysis of Fourth Quarter
The loss for the three months ended January 31, 2021 was $632,471 as compared to the loss of $324,653 for the three months ended January 31, 2020.
Significant variances
Noncash share-based compensation was $387,436 for the three months ended January 31, 2021 ($1,302 for the three months ended January 31, 2020), consisting of the fair value (Black- Scholes calculation) of the vesting of options to directors, officers and consultants.
Consulting fees were $38,566 for the three months ended January 31, 2021 ($49,157 for the three months ended January 31, 2020), consisting primarily of fees paid to consultants to assist with business and investor relations.
Legal fees were $22,469 for the three months ended January 31, 2021 ($108,113 for the three months ended January 31, 2020), consisting primarily of legal fees paid to assist the sale of the Company's interests in Cultivar JA and the acquisition of MobileWellbeing in the current year.
Transfer agent and filing fees were $15,369 for the three months ended January 31, 2021 ($25,122 for the three months ended January 31, 2020), consisting primarily of filing and compliance costs for the Company's CSE and OTC listing.
Marketing expenses were $63,417 for the three months ended January 31, 2021 ($nil for the three months ended January 31, 2020), consisting primarily of media marketing of the Company and its products.
The Fiscal Years Ended January 31, 2020 and 2019.
Operations in the prior period ended January 31, 2019 were in the early start- up phase of the Company with little activity beyond recognizing management efforts brought into the Company. Therefore, comparisons to the prior year period may not have sizable value.
Expenses and Net loss
Total operating expenses for the year ended January 31, 2020, were $820,821 as compared to operating expenses of $365,961 for the period from December 6, 2017 (date of incorporation) to January 31, 2019.
Management fees for the twelve months ended January 31, 2020 consist of fees paid to senior management or to Companies owned by senior management, and shares issued as compensation to the Company's director including (1) $96,000 (prior period $56,000) paid to the CEO for services, (2) $54,000 (prior period $nil) paid to a director for services, (3) $55,000 (prior period $nil) being management fees issued in shares to a director (4) $20,000 (prior period $nil) paid to the COO for services and (5) $38,066 (prior period $3,955) paid to the CFO for services.
Share-based compensation of $10,387 for the twelve months ended January 31, 2020 (period ended January 31, 2019: $5,535), consists of the fair value (Black- Scholes calculation) of the vesting of options to consultants.
Research and development costs for $73,733 for the year ended January 31, 2020 (prior period: $49,205) are costs incurred by outside research provider for development of Artificial Intelligence powered facial and voice recognition technology to detect cannabis along with alcohol impairment.
Consulting fees costs for $135,631 for the twelve months ended January 31, 2020 (prior period $nil) consists primarily of fees paid to consultants to assist with OTC listing, media marketing, valuations and investor relations, as well as finders' fees for the RTO transaction.
Legal fees for $126,975 for the twelve months ended January 31, 2020 (prior period $86,840) consists primarily of legal fees paid to assist the reverse merger transaction consummated on September 23, 2019.
Audit and accounting fees for $56,647 for the year ended January 31, 2020 is the costs relating to audit and accounting of the consolidated statements for becoming and continuity as a public company. In addition, the Company incurred transfer agent and filing fees for $25,122 during the current year being costs to become and maintain public company status.
No cash dividends were paid by the Company.
The following table summarizes financial information for the three months ended January 31, 2021 and the preceding seven quarters:
| | Q4 2021 | | | Q3 2021 | | | Q2 2021 | | | Q1 2021 | | | Q4 2020 | | | Q3 2020 | | | Q2 2020 | | | Q1 2020 | |
| | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Revenue | | - | | | - | | | - | | | - | | | - | | | - | | | - | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net income (loss) | | (632,471 | ) | | (493,841 | ) | | (473,268 | ) | | 15,047 | | | (324,653 | ) | | (1,681,198 | ) | | (166,197 | ) | | (138,844 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Income (Loss) per share, basic and fully diluted | | (0.006 | ) | | (0.005 | ) | | (0.005 | ) | | 0.0001 | | | (0.003 | ) | | (0.017 | ) | | (0.002 | ) | | (0.002 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Cash dividends for common shares | | - | | | - | | | - | | | - | | | - | | | - | | | - | | | - | |
B. Liquidity and capital resources.
At January 31, 2021, the Company had cash of $480,051 and working capital of $612,091. During the year ended January 31, 2021, the Company received $261,121 from financing activities, used $1,079,637 in operating activities and $195,010 in investing activities.
At January 31, 2020, the Company had cash and cash equivalents of $1,493,577 and working capital of $1,554,541. During the year ended January 31, 2020, the Company received $776,669 from financing activities, used $832,121 in operating activities and $9,920 in investing activities.
The Company has financed its operations from inception to date through the issuance of equity shares.
During the year ended January 31, 2021 the Company had no revenues. Administrative and other expenses may exceed available cash resources and additional funding may be required to further its projects and to meet ongoing requirements for general operations. The ability of the Company to continue as a going concern is dependent on raising additional financing, development of its projects and generation of profitable operations in the future.
Following the issuance of our January 31, 2021 year-end financial statements, on March 5, 2021, the Company closed a non-brokered private placement for gross proceeds of Cdn$1,090,085. A total of 3,114,529 units were issued at a price of Cdn$0.35 each. Each unit is comprised of one common share of the Company and one warrant, with each warrant exercisable into a common share at an exercise price of Cdn$0.50 per share for a period of two years.
The Company believes it has enough cash to maintain itself for the next 12 months.
To manage the capital structure, the Company may adjust its project plans, operating expenditure plans, or issue new common shares. The Company monitors its capital structure using annual forecasted cash flows, expenditure budgets and targets for the year. This is achieved by the Board of Directors' review and acceptance of expenditure budgets that are achievable within existing resources and the timely matching and release of the next stage of expenditures with the resources made available from private placements or other funding.
The Board of Directors relies on the expertise of the Company's management to sustain future development of the business. The Company is not subject to externally imposed capital requirements or covenants.
C. Research and development, patents and licenses, etc.
Since 2019, the Company has been focused on the development and deployment of its AI assisted diagnostic technology, with a emphasis on screening for infectious diseases and cannabis/alcohol impairment. More recently, the Company has expanded to include the development of mental health and wellness diagnostic, monitoring and treatment tools. During the years ended January 31, 2021 and, 2020 we incurred research and development expenditures of $26,300 and$73,733 respectively. For more information regarding out patents, please see Item 4.B "Business Overview."
D. Trend information.
Other than as disclosed elsewhere in this Form 20-F, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material adverse effect on our revenues, income, profitability, liquidity or capital resources, or that would cause the reported financial information in this Form 20-F to be not necessarily indicative of future operating results or financial conditions.
E. Off-balance sheet arrangements.
None.
F. Tabular disclosure of contractual obligations.
| | Payments due by period |
Contractual Obligations | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | |
Long-term debt | - | - | - | - | - | |
Capital Lease Obligations | - | - | - | - | - | |
Operating Lease Obligations | - | - | - | - | - | |
Purchase Obligations | - | - | - | - | - | |
Other Long Term Liabilities | - | - | - | -- | - | |
The Company has no material debts, lease commitments or contractual obligations other than compensation agreements to companies owned and controlled by the CEO and the COO, as described in Item 9.C - "Material Contracts.".
G. Safe harbor.
See "Cautionary Note Regarding Forward-Looking Statements" in the introduction to this Registration Statement.
Item 6. Directors, Senior Management and Employees
A. Directors and senior management.
The following table sets forth the name, province/state and country of residence, date of birth, position held with the Company and principal occupation during the five preceding years of each person who is a director and/or an executive officer of the Company as at the date hereof.
Name, Province or State and Country of Residence, and Title(1)
| Date of Birth | Title | Date Served as Director or Officer Since |
Sheldon Kales(2) | 11/30/1955 | Director, President Chief Executive Officer of the Company | September 23, 2019 |
Dr. Rahul Kushwah | 1/5/1983 | Director and Chief Operating Officer | December 12, 2018 |
Thomas Sipos(2) | 6/10/1962 | Director of the Company | September 23, 2019 |
Ajit Kumar(2) | 4/6/1953 | Director | September 23, 2019 |
Rakesh Malhotra | 12/15/1955 | Chief Financial Officer | September 23, 2019 |
Notes:
(1) | The information as to place of residence, principal occupation and number of Common Shares beneficially owned or over which a director or officer of the Company exercises control or direction, is not within the knowledge of the management of the Company and has been furnished by the respective directors and officers of the Company. |
(2) | Member of the Audit Committee. |
Director and Executive Officer Biographies
Sheldon Kales, Director and Chief Executive Officer
Mr. Kales is a Director and the President and Chief Executive Officer of the Company. Previously, he was the CEO of Chester Gold Corp., a private mining exploration company in northern Ontario. Mr. Kales was also the Founder, CEO and director of Security Devices International Inc., a public company quoted on the OTCBB in the United States from 2005 to 2010. From 2006 to 2008 Mr. Kales served as a director of L.A.M. Pharmaceutical Corp., a company quoted on the OTCBB. He has extensive leadership experience in managing and operating research and development operations of technology companies across the United States, Canada and the Middle East. Mr. Kales is a graduate of the University of Toronto with a Bachelor of Arts degree. Mr. Kales is 65 years old.
Dr. Rahul Kushwah, Director and Chief Operating Officer
Dr. Kushwah is a Director and the Chief Operating Officer of the Company. Previously, he held a faculty appointment with the Faculty of Medicine at the University of Ottawa and was an accomplished federal government scientist with the Human Health Therapeutics branch of the National Research Council of Canada. Additionally, Mr. Kushwah has served as a consulting scientist with the Hospital for Sick Children in Toronto, Ontario, and is a regular speaker at several international speaking engagements. Mr. Kushwah has also authored several publications in medical journals and serves as a reviewer and editor for several journals in the medical field. Mr. Kushwah received his doctorate from the University of Toronto and has been a recipient of the Banting Post-Doctoral Fellowship in Medicine and CIHR Post-Doctoral Fellowship. Dr. Kushwah is 38 years old.
Thomas Sipos, Director
Mr. Sipos is Director of the Company. Additionally, he serves as the founder and managing director of K-Med Limited, one of the largest suppliers of medical equipment and healthcare supplies in the United Kingdom. Prior to that, he was the founder of a health care equipment company (Health Care Equipment Co.) which was later acquired by HCE Medical Group, UK. Mr. Kumar holds a Bachelor and Master of Science from Kanpur University, India and a post-graduate degree in Botany and Environmental Sciences from the Imperial College of London, UK. Mr. Sipos is 59 years old.
Ajit Kumar, Director
Mr. Kumar is a Director of the Company. Additionally, he serves as the founder and managing director of K-Med Limited, one of the largest suppliers of medical equipment and healthcare supplies in the United Kingdom. Prior to that, he was the founder of a health care equipment company (Health Care Equipment Co.) which was later acquired by HCE Medical Group, UK. Mr. Kumar holds a Bachelor and Master of Science from Kanpur University, India and a post-graduate degree in Botany and Environmental Sciences from the Imperial College of London, UK. Mr. Kumar is 68 years old.
Rakesh Malhotra, Chief Financial Officer
Mr. Malhotra is the Chief Financial Officer of the Company. Mr. Malhotra holds CPA licenses in Canada and in Illinois and has over twenty years of experience in the preparation of financial statements, auditing, public company reporting in Canada and the United States, financial management and compliance and risk management. He has knowledge and experience in the application of IFRS, U.S. GAAP and Canadian GAAP. Mr. Malhotra serves as the part-time chief financial officer and as a consultant to multiple publicly reporting companies in Canada. Mr. Malhotra is 64 years old,
Cease Trade Orders, Bankruptcies, Penalties and Sanctions
Other than as set out below, no director or executive officer of the Company, is or was within 10 years before the date of this Form 20-F, a director, chief executive officer or chief financial officer of any company that:
(a) while that person was acting in that capacity, was the subject of a cease trade order or similar order or an order that denied the relevant company access to any exemption under securities legislation for a period of more than 30 consecutive days; or
(b) while that person was acting in that capacity, was subject to an event that resulted, after the director or executive officer ceased to be a director or executive officer, in the company being the subject of a cease trade or similar order or an order that denied the relevant company access to any exemption under securities legislation for a period of more than 30 consecutive days.
No director or executive officer of the Company and no shareholder holding a sufficient number of securities of your company to affect materially the control of the Company is, as at the date of this Form 20-F or has been within the 10 years before the date of the Form 20-F:
(a) a director or executive officer of any company that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets;
(b) become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the director, executive officer or shareholder; or
(c) has been subject to:
(i) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority since December 31, 2000 or before December 31, 2000 the disclosure of which would likely be important to a reasonable security holder in making an investment decision; or
(ii) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable securityholder in making an investment decision.
A cease trade order was issued against the Company (then under different ownership and management) by the BCSC on December 6, 2011 and by the Alberta Securities Commission on March 5, 2012 as a result of the Company's failure to meet filing requirements. The Company since addressed all of the outstanding filing deficiencies and brought its continuous disclosure records on SEDAR up to date. In turn, both cease trade orders were revoked on May 16, 2018. Prior to September, 2019, the Company was owned and controlled by third parties not affiliated with the current ownership or management of the Company. See Item 4.A - "History and development of the Company."
On July 2, 2019, a cease trade order was issued against Rakesh Malhotra under the securities laws of British Columbia in connection with securities of Eyecarrot Innovations Corp., an issuer for which Mr. Malhotra is an insider. Eyecarrot Innovations Corp. addressed all of the outstanding filing deficiencies and the cease trade order was revoked on September 16, 2019.
B. Compensation.
Stock Option Plan
The Company has established a rolling Stock Option Plan (the "Plan") under which the Company may grant stock purchase options to its directors, officers, employees and certain consultants. Under the Plan, the number of shares reserved for issuance may not exceed 10% of the total number of issued and outstanding shares of the Company. Exercise price, vesting and expiry provisions for individual grants shall be determined by the Board of Directors at the date of such grant, provided however, that the exercise price of each option shall not be less than the market price of the Company's shares at the date of grant and the maximum term of each option shall not be greater than 10 years.
Eligibility to Receive Bonuses in the Form of Cash Payments
The Compensation Committee, together with recommendations from management, awards bonuses based on both individual performance and corporate success at various times throughout the year. At this time, the Company does not have any specific milestone criteria for issuing bonuses.
No cash fees are paid to Directors to attend meetings
Named Executive Officers
The Company's principal executive officers (the "Named Executive Officers") are Sheldon Kales, President and Chief Executive Officer, Dr. Rahul Kushwah, Chief Operating Officer and Rakesh Malhotra, Chief Financial Officer.
The following table sets forth particulars of all compensation paid to the Named Executive Officers during the years ended January 31, 2021, 2020, and 2019.
NEO Name And Principal Position | Financial Year ended January 31 | Salary ($) | Share- based awards ($) | Option- based awards ($) | Non-equity incentive plan compensation ($) | Pension value ($) |
All other compensation ($) | Total compensation ($) |
Annual incentive plans | Long- term incentive plans |
Sheldon Kales (1)(President, CEO and Director) | 2021 2020 2019 | 99,500 96,000 56,0000 | | 122,549 - - | | | | 33,500 24,000 19,000 | 255,549 120,000 75,000 |
Dr. Rahul Kushwah (2) (COO) | 2021 2020 2019 | 68,000 36,000 | | 122,549 - - | | | | 10,500 | 201,049 36,000 0 |
Rakesh Malhotra (CFO) | 2021 2020 2019 | 43,550 38,066 3,955 | | 15,083 - - | | | | - - - | 58,633 38,066 3,955 |
(1) Mr. Kales is compensated through a two-year contract dated July 1, 2020 and amended as of September 1, 2020 with Greenacres Medical Corp., a Canadian corporation owned and controlled by Mr. Kales ("Greenacres"). Pursuant to this two year agreement, Mr. Kales is paid monthly compensation of $8,500 for CEO services. In addition, the Company pays Greenacres rent in the amount of $2,000 per month and $1,500 per month for Mr. Kales' vehicle.
(2) Dr. Kushwah is compensated through an Agreement dated July 1, 2020 and amended as of September 1, 2020, and May 1, 2021 between the Company and 2499597 Ontario Inc., a Canadian corporation owned and controlled by Dr. Kushwah. The Agreement has a term of two years and provides for monthly compensation of $8,500 effective May 1, 2021 for COO services. In addition, pursuant to the Agreement, the Company pays $1,500 per month for Dr. Kushwah's vehicle
STATEMENT OF EXECUTIVE COMPENSATION
General
For the purpose of this Statement of Executive Compensation:
"compensation securities" includes stock options, convertible securities, exchangeable securities and similar instruments including stock appreciation rights, deferred share units and restricted stock units granted or issued by the Company or one of its subsidiaries (if any) for services provided or to be provided, directly or indirectly to the Company or any of its subsidiaries (if any);
"NEO" or "Named Executive Officer" means:
(a) each individual who served as CEO of the Company, or who performed functions similar to a CEO, during any part of the most recently completed financial year,
(b) each individual who served as CFO of the Company, or who performed functions similar to a CFO, during any part of the most recently completed financial year,
(c) the most highly compensated executive officer of the Company or any of its subsidiaries (if any) other than individuals identified in paragraphs (a) and (b) at the end of the most recently completed financial year whose total compensation was more than $150,000 , and
(d) each individual who would be a NEO under paragraph (c) but for the fact that the individual was neither an executive officer of the Company or its subsidiaries (if any), nor acting in a similar capacity, at the end of that financial year;
"plan" includes any plan, contract, authorization or arrangement, whether or not set out in any formal document, where cash, compensation securities or any other property may be received, whether for one or more persons; and
"underlying securities" means any securities issuable on conversion, exchange or exercise of compensation securities.
The Company's NEOs for each of the Company's two most recently completed financial years were: Sheldon Kales, President and CEO, Dr. Rahul Kushwah, COO and Rakesh Malhotra, CFO.
Compensation Discussion and Analysis
This section sets out the objectives of the Company's executive compensation arrangements, the Company's executive compensation philosophy and the application of this philosophy to the Company's executive compensation arrangements. It also provides an analysis of the compensation design, and the decisions that the Board made in the fiscal year 2020 with respect to the NEOs. The Company considers the following objectives when determining compensation arrangements for the NEOs: (i) retaining an executive critical to the success of the Company and the enhancement of shareholder value; (ii) providing fair and competitive compensation; (iii) balancing the interests of management and Shareholders; and (iv) rewarding performance, both on an individual basis and with respect to the business in general.
Benchmarking
A variety of factors are considered when designing and establishing, reviewing and making recommendations for executive compensation arrangements for all executive officers of the Company. The Board typically does not position executive pay to reflect a single percentile within the industry for each executive. Rather, in determining the compensation level for each executive, a variety of factors are considered, such as the relative complexity of the executive's role within the organization, the executive's performance and potential for future advancement, the compensation paid by the other companies in comparative industries, and pay equity considerations.
Elements of Named Executive Officer Compensation
The compensation paid to the Company's NEOs generally consists of two primary components: a base salary; and long-term incentives in the form of stock options granted under the Company's stock option plan (the "Option Plan"). The key features of these two primary components of compensation are discussed below:
1. Base Salary
Base salary recognizes the value of an individual to the Company based on his or her role, skill, performance, contributions, leadership and potential. It is critical in attracting and retaining executive talent in the markets in which the Company competes for talent. Base salaries for the NEOs are reviewed annually. Any change in base salary of a NEO is generally determined by an assessment of such executive's performance, a consideration of competitive compensation levels in companies similar to the Company and a review of the performance of the Company as a whole and the role such executive officer played in such corporate performance.
2. Long-Term Incentives
The Company provides long-term incentives to its NEOs in the form stock options granted pursuant to the Option Plan as part of its overall executive compensation strategy. The Company believes that granting stock options serve the Company's executive compensation philosophy in several ways, including: by helping to attract, retain, and motivate talent; aligning the interests of the NEOs with those of Shareholders by linking a specific portion of the officer's total pay opportunity to the share price; and by providing long-term accountability for its NEOs.
Risks Associated with Compensation Policies and Practices
The Company's executive compensation policies and practices are intended to align management incentives with the long-term interests of the Company and its Shareholders. In each case, the Company seeks an appropriate balance of risk and reward. Practices that are designed to avoid inappropriate or excessive risks include: (i) financial controls that provide limits and authorities in areas such as capital and operating expenditures to mitigate risk taking that could affect compensation, (ii) balancing base salary and variable compensation elements, and (iii) spreading compensation across short and long-term programs.
Outstanding Share-Based Awards and Option-Based Awards
The following table sets forth particulars of all outstanding share-based and option-based awards granted to the Directors and the Named Executive Officers and which were outstanding at January 31, 2021, expressed in Canadian dollars:
| Option-based Awards | Share-based Awards |
Name | Number of securities underlying unexercised options | Option exercise price ($) | Option expiration date | Value of unexercised in- the-money options ($) | Number of shares or units of shares that have not vested | Market or payout value of share- based awards that have not vested | Market or payout value of vested share-based awards not paid out or distributed |
Sheldon Kales | 1,625,000 | 0.15 | 4/6/2021 | 186,875 | - | - | - |
Dr. Rahul Kushwah | 1,625,000 | 0.15 | 4/6/2021 | 186,875 | - | - | - |
Thomas Sipos | 200,000 | 0.15 | 4/6/2021 | 23,000 | - | - | - |
Ajit Kumar | 150,000 | 0.15 | 4/6/2021 | 17,250 | - | - | - |
Rakesh Malhotra | 50,000 | 0.15 | 4/6/2021 | 5,750 | - | - | - |
Incentive Plan Awards - Value Vested or Earned During the Year
The following table summarizes, for the Named Executive Officers of the Company, the value of incentive plan awards vested or earned during the year ended January 31, 2021, expressed in Canadian dollars:
NEO Name | Option-based awards - Value vested during the year ($) | Share-based awards - Value vested during the year ($) | Non-equity incentive plan compensation - Value earned during the year ($) |
Sheldon Kales | 122,549 | - | - |
Dr. Rahul Kushwah | 122,549 | - | - |
Thomas Sipos | 15,083 | - | - |
Ajit Kumar | 11,311 | - | - |
Rakesh Malhotra | 15,083 | - | - |
In addition, stock options were granted to the Company's Advisory Committee members during the year ended January 31, 2021. The Advisory Committee consists of the following persons. The table below provides a brief description of their role on the Advisory Committee, their qualifications and the stock options that were granted to each member of the Advisory Committee in the fiscal year ended January 31, 2021. Also see Item 7(c) ("Stock Options") below.
| | Options Received in Year Ended 1/31/2021 |
Kapil Raval | Advisory Committee Chairman. | 500,000 Options at Cnd$0.15 per share |
Nandan Mishra | Artificial Intelligence Lead | 700,000 Options at Cnd$0.15 per share |
Rajiv Muradia | Product Lead | 80,000 Options at Cnd$1.02 per share |
Himanshu Ujjawal Singh | Co- Artificial Intelligence Lead | 300,000 Options at Cnd$0.15 per share |
Praveen Kumar | Data Analytics Lead | 100,000 Options at Cnd$0.15 per share |
Dr. Mike Hart | Advisor | 350,000 Options at Cnd$0.15 per share |
Dr. Alexander D. Bardon, MD | Medical Advisor | 125,000 Options at Cnd$0.15 per share |
Prabhakar Srivastava | Advisor, Business Development | 100,000 Options at Cnd$0.15 per share |
Dr. Deepu Banjeri, MSc, PhD | Advisor | ____ |
Dr. Dawn Decunha, PhD | Advisor | 125,000 Options at Cnd$0.15 per share |
Dr. Navdeep Singh Nanda, MBBS, MS, DNB | Advisor | 250,000 Options at Cnd$0.15 per share |
Dr. Indranil Saha, PhD | Advisor | 100,000 Options at Cnd$0.15 per share |
Dr. Nitin Kadam, MBBS, DHC, MD | Advisor | 250,000 Options at Cnd$0.15 per share |
Kiran Kumari | Advisor | _________ |
Dr. Tally Bodenstein, PhD | Advisor | 500,000 Options at Cnd$0.15 per share |
During the financial year ended January 31, 2021, there were four individuals who served as a director of the Company for either all or a portion of the year. The following table sets forth particulars of all compensation paid to directors who were not named executive officers during the year ended January 31, 2021, expressed in Canadian dollars:
Name | Fees Earned ($) | Share- based Awards ($) | Option-based Awards ($) | Non-equity Incentive Plan Compensation ($) | Pension Value ($) | All other Compensation ($) | Total ($) |
Thomas Sipos | 0 | | 15,083 | | | | 15,083 |
Ajit Kumar | 0 | | 11,311 | | | | 11,311 |
C. Board practices.
Mandate of the Board
The Board has responsibility for stewardship of the Company. The Board is ultimately responsible for supervising the management of our business and affairs. The Board generally discharges its responsibilities either directly or through one or more committees. Specific responsibilities of the Board include:
Appointing Management - including appointments of executive officers;
Strategic Planning - including the review and approval of the Company's business, financial and strategic plans;
Monitoring of Financial Performance and Other Financial Reporting Matters - including review and approval of our audited and interim consolidated financial statements and management's discussion and analysis of financial conditions and results of operations;
Risk Management - including the identification of principal business risks and the implementation of appropriate systems to effectively monitor and manage such risks;
Policies and Procedures - including the approval and monitoring of all policies and procedures including those related to corporate governance, ethics and confidentiality; and
- Communication and Reporting - including timely and accurate disclosure of financial reports and other material corporate developments.
Election of Directors
Each director is elected at the annual meeting of shareholders or appointed pursuant to the provisions of our Articles of Incorporation and applicable law to serve until the next annual meeting or until a successor is elected or appointed, subject to earlier resignation by the director. The start of each director's term of service is set forth in Item 6.A above. No directors have service contracts providing for benefits upon termination of employment.
Audit Committee
Composition of the Audit Committee
The current members of the Audit Committee are Sheldon Kales, Tomas Sipos and Ajit Kumar. Mr. Sipos and Mr. Kumar are independent members of the Audit Committee. Mr. Kales, by virtue of his position as President and Chief Executive Officer of the Company, is not considered independent.
Relevant Education and Experience
All of the members of the Company's Audit Committee are "financially literate." For this purpose, an individual is considered financially literate if he has 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 the Company's financial statements. All of the members of the Audit Committee have an understanding of the accounting principles used by the Company to prepare its financial statements and have an understanding of its internal controls and procedures for financial reporting. In addition to each member's general business experience, the education and experience of each Audit Committee member relevant to the performance of his or her responsibilities as an Audit Committee member is as follows.
Sheldon Kales | Mr. Kales is a serial entrepreneur and a business leader. He has extensive leadership experience in managing and operating research and development operations of technology companies across the United States, Canada and the Middle East. He has also served as a director and/or officer of several publicly listed companies. |
Tomas Sipos | Mr. Sipos has longstanding experience in corporate finance and investment banking and served as a senior executive of several companies including Vice President, Mergers and Acquisitions of Ernst &Young (Toronto) and Managing Director of Investment Banking European Privatization & Investment Corporation and Senior Investment Banker for the International Finance Corporation. Mr. Sipos holds a (Honors) Bachelor of Science in chemical engineering from Queen's University and a MBA from the University of Toronto, Rotman School of Business. |
Ajit Kumar | Mr. Kumar serves as founder and managing director of K-Med Limited, one of the largest suppliers of medical equipment and healthcare supplies in the United Kingdom. Prior to that, he was the founder of a health care equipment company (Health Care Equipment Co.) which was later acquired by HCE Medical Group, UK. |
Audit Committee Oversight
In the fiscal years ended January 31, 2019, January 31, 2021 and 2020 all of the recommendations of the Audit Committee with respect to the external auditor, Harbourside CPA LLP (previously named Buckley Dodds LLP), were adopted by the Board.
Pre-Approval Policies and Procedures
Formal policies and procedures for the engagement of non-audit services have yet to be formulated and adopted. The engagement of non-audit services would be considered by the Board, and where applicable by the Audit Committee, on a case-by-case basis.
Charter
A copy of the Audit Committee's charter is included as an Exhibit to this Registration Statement.
Compensation Committee
The Board itself acts as a compensation committee. Mr. Sipos and Mr. Kumar are considered "independent." Mr. Kales and Dr. Kushwah are not considered "independent."
The Board decides such matters as:
Governance Committee
The Board itself acts as a governance committee. Mr. Sipos and Mr. Kumar are considered "independent." Mr. Kales and Dr. Kushwah are not considered "independent."
The Board decides such matters as:
- developing corporate governance principles applicable to the Company; and
- identifying qualified individuals for nomination to the Board of Directors.
D. Employees.
As of the date of this Form 20-F, the Company has three employees located in its Toronto office.
E. Share ownership.
The number of Common Shares held by Directors and Senior Management as of January 31, 2021 is set forth below.
Name | Number and percentage of Common Shares beneficially owned, or controlled or directed, directly or indirectly |
Sheldon Kales | 29,041,000 (28%) |
Dr. Rahul Kushwah | 8,000,000 (8%) |
Thomas Sipos | 450,000 (0.4%) |
Ajit Kumar | 150,000 (0.1%) |
Rakesh Malhotra | 225,000 (0.2%) |
Item 7. Major Shareholders and Related Party Transactions
A. Major shareholders.
Outstanding Share Data
At January 31, 2021, the Company had 101,717,973 common shares outstanding, 9,095,000 outstanding stock options and 1,548,000 outstanding warrants.
As of January 31, 2021, the Company had the following warrants outstanding:
Outstanding | Exercise Price | Remaining Life (Years) | Expiry Date |
1,548,000 | $0.50 | 0.53 | August 11, 2021 |
Stock Options
The Company has established a stock option plan whereby officers, directors, employees and service providers may be granted options to purchase common shares at a fixed price. Vesting and expiry provisions are determined at the date of grant. The plan provides for the issuance of stock options to acquire up to 10% of the Company's issued and outstanding capital. The plan is a rolling plan as the number of shares reserved for issuance pursuant to the grant of stock options will increase as the Company's issued and outstanding share capital increases.
a) In October 2018, the Company granted options to a consultant to acquire a total of 250,000 common shares. These options were issued at an exercise price of $0.10 per share and vested 75,000 immediately, 37,500 at the date of engineering milestone (vested during the quarter ended July 31, 2019) and balance 137,500 on completion of additional milestones, including 75,000 on model development (vested during the quarter ended October 31, 2019) and 62,500 on project handover with an expiry term of two years. These options expired unexercised in October 2020. The fair value of each option used for the purpose of estimating the stock-based compensation was estimated using the Black-Scholes option pricing model with the following assumptions:
| Risk free rate | | 2.26% | |
| Expected dividends | | 0% | |
| Expected forfeiture rate | | 0% | |
| Expected volatility | | 100% | |
| Expected life | | 2 years | |
| Unvested stock-based compensation expense as of January 31, 2021 | $ | - | |
During the year ended January 31, 2021, the Company expensed $3,311 (2020 - $5,961), resulting in unvested stock-based compensation expense of $nil as of January 31, 2021.
b) In November 2018, the Company granted options to a consultant to acquire a total of 100,000 common shares. These options were issued at an exercise price of $0.10 per share and vested 25,000 immediately, and 25,000 each on April 1, 2019, September 1, 2019 and March 1, 2020 with an expiry term of three years. The fair value of each option used for the purpose of estimating the stock-based compensation is estimated using the Black-Scholes option pricing model with the following assumptions:
| Risk free rate | | 2.30% | |
| Expected dividends | | 0% | |
| Expected forfeiture rate | | 0% | |
| Expected volatility | | 100% | |
| Expected life | | 3 years | |
| Unvested stock-based compensation expense as of January 31, 2021 | $ | - | |
During the year ended January 31, 2021, the Company expensed $260 (2020 - $4,426), resulting in unvested stock-based compensation expense of $nil as of January 31, 2021.
c) On April 6, 2020, the Company granted options to its directors, officers and consultants to purchase up to 9,850,000 common shares. These options were issued at an exercise price of $0.15 per share and have varying vesting periods, with the majority being in equal installments over a quarterly basis throughout the term. These options have a term of one (1) year expiring on April 6, 2021. The fair value of each option used for the purpose of estimating the stock-based compensation is estimated using the Black-Scholes option pricing model with the following assumptions:
| Risk free rate | | 0.47% | |
| Expected dividends | | 0% | |
| Expected forfeiture rate | | 0% | |
| Expected volatility | | 135% | |
| Expected life | | 1 year | |
| Unvested stock-based compensation expense as of January 31, 2021 | $ | - | |
During the year ended January 31, 2021, the Company expensed $742,833 relating to the vesting of options, resulting in unvested stock-based compensation expense of $nil as of January 31, 2021.
d) On July 17, 2020, the Company granted options to a consultant to purchase up to 80,000 common shares. These options were issued at an exercise price of $1.02 per share and vest one year after date of grant. These options have a term of five (5) years expiring on July 17, 2025. The fair value of each option used for the purpose of estimating the stock-based compensation is estimated using the Black-Scholes option pricing model with the following assumptions:
| Risk free rate | | 0.35% | |
| Expected dividends | | 0% | |
| Expected forfeiture rate | | 0% | |
| Expected volatility | | 207% | |
| Expected life | | 5 year | s |
| Unvested stock-based compensation expense as of January 31, 2021 | $ | 34,246 | |
During the year ended January 31, 2021, the Company expensed $40,603 relating to the vesting of options, resulting in unvested stock- based compensation expense of $34,246 as of January 31, 2021.
e) On September 10, 2020, the Company granted options to a consultant to purchase up to 70,000 common shares. These options were issued at an exercise price of $0.54 per share and vest on completion of milestones, including 40,000 upon approval of a McGill University study and 30,000 upon completion of the study. The Company did not record any stock-based compensation on these options, as they have not yet vested as at January 31, 2021.
f) On September 17, 2020, the Company granted options to a consultant to purchase up to 200,000 common shares. These options were issued at an exercise price of $0.54 per share and vest on date of grant. These options expire on March 30, 2022. The fair value of each option used for the purpose of estimating the stock-based compensation is estimated using the Black-Scholes option pricing model with the following assumptions:
| Risk free rate | | 0.26% | |
| Expected dividends | | 0% | |
| Expected forfeiture rate | | 0% | |
| Expected volatility | | 189% | |
| Expected life | | 1.5 years | |
| Unvested stock-based compensation expense as of January 31, 2021 | $ | - | |
During the year ended January 31, 2021, the Company expensed $81,979, relating to the vesting of options, resulting in unvested stock- based compensation expense of $nil as of January 31, 2021.
g) On September 21, 2020, the Company granted options to a consultant to purchase up to 250,000 common shares. These options were issued at an exercise price of $0.59 per share and vest in equal installments over a quarterly basis throughout the term. These options have a term of one (1) year expiring on September 21, 2021. The fair value of each option used for the purpose of estimating the stock-based compensation is estimated using the Black-Scholes option pricing model with the following assumptions:
| Risk free rate | | 0.23% | |
| Expected dividends | | 0% | |
| Expected forfeiture rate | | 0% | |
| Expected volatility | | 188% | |
| Expected life | | 1 year | |
| Unvested stock-based compensation expense as of January 31, 2021 | $ | 18,958 | |
During the year ended January 31, 2021, the Company expensed $77,375 relating to the vesting of options, resulting in unvested stock- based compensation expense of $18,958 as of January 31, 2021.
As of January 31, 2021, there was $53,204 (January 31, 2020: $3,571) of unvested stock-based compensation expense.
Continuity of the Company's options is as follows:
| Number of Options | Weighted Average Exercise Price |
Outstanding, January 31, 2019 and 2020 | 350,000 | $0.10 |
Granted | 10,450,000 | $0.18 |
Expired | (250,000) | $0.10 |
Exercised | (1,455,000) | $0.15 |
Outstanding, January 31, 2021 | 9,095,000 | $0.18 |
As at January 31, 2021, the Company had the following share purchase options outstanding and exercisable:
Outstanding | Exercisable | Exercise Price | Remaining Life (Years) | Expiry Date |
8,495,000 | 8,495,000 | $0.15 | 0.18 | April 6, 2021 |
80,000 | - | $1.02 | 4.46 | July 17, 2025 |
70,000 | - | $0.54 | 1.10 | March 10, 2022 |
200,000 | 200,000 | $0.54 | 1.16 | March 30, 2022 |
250,000 | 125,000 | $0.59 | 0.64 | September 21, 2021 |
9,095,000 | 8,820,000 | $0.18 | 0.26 | |
The following table states the number of Common Shares beneficially owned by each person known to us who beneficially owns more than 5% of our issued and outstanding Common Shares as of January 31, 2021. The persons listed below are deemed to be the beneficial owners of Common Shares underlying options and/or warrants that are exercisable within 60 days from the above date. The percentages shown below are based on an aggregate total of 101,717,973 outstanding Common Shares as of January 31, 2021, plus the number of Common Shares underlying options or warrants that are exercisable within 60 days for the indicated beneficial owner.
Name of Shareholder | Number of Shares Owned | Percentage of Class |
Sheldon Kales | 29,041,000 | 26% |
Rahul Kushwah | 8,000,000 | 7% |
Major Shareholders Voting Rights
Our major shareholders do not have different voting rights from other holders of our Common Shares.
Record Holders
As of June 8, 2021, there are 102 registered shareholders of the Company, 57 of which, holding a total of 135,480 shares, have registered address in the United States. Consequently, approximately 0.1245% of our issued and outstanding common shares is held by United States persons. The foregoing registered share numbers are not representative of the number of beneficial holders of our shares, nor is it representative of where such beneficial holders reside primarily because many of these ordinary shares are held of record by brokers or other nominees.
B. Related party transactions.
Related parties include key management personnel, the Board of Directors, close family members and enterprises that are controlled by these individuals as well as certain persons performing similar functions. Key management of the Company are members of the Board of Directors, the Chief Executive Officer ("CEO"), the Chief Financial Officer ("CFO") and the Chief Operating Officer ("COO").
Transactions with key management personnel not disclosed elsewhere in this Registration Statement include the following:
| | Year ended January 31, 2021 | | Year ended January 31, 2020 |
| | | | |
Management fees to the CEO | $ | 99,500 | $ | 96,000 |
Management fees to a prior director | | 6,000 | | 54,000 |
Management fees (issued in shares) to a director | | - | | 55,000 |
Management fees to the COO | | 68,000 | | 20,000 |
Management fees to the CFO | | 43,550 | | 38,066 |
Total Management fees | $ | 217,050 | $ | 263,066 |
Vehicle expense to the CEO | | 12,000 | | 6,000 |
Vehicle expenses to the COO | | 10,500 | | - |
Rent to the CEO included in rent expense | | 21,500 | | 18,000 |
| $ | 261,050 | $ | 287,066 |
On April 6, 2020, the Company granted options to its directors, officers and consultants to purchase up to 9,850,000 common shares. The Company expensed $286,575 on the vesting of options to directors and officers during the year ended January 31, 2021 (January 31, 2020: $nil)
During the year ended January 31, 2021, the Company paid $61,329 (2020: $nil) being marketing expenses to companies controlled by the children of the CEO.
As of January 31, 2021, there was $nil due to or from related parties (January 31, 2020 - $nil).
Effective July 1, 2020, the Company signed a two-year contract with a corporation owned and controlled by the CEO to pay monthly compensation of $8,500 for CEO services. In addition, the Company is obligated to pay monthly rent for $2,000 and an additional $1,500 for the use of a personal vehicle.
Effective July 1, 2020, the Company signed a two-year contract with a corporation owned and controlled by the COO to pay monthly compensation of $7,000 for COO services. In addition, the Company is obligated to pay an additional $1,500 for the use of a personal vehicle.
C. Interests of experts and counsel.
None
Item 8. Financial Information
A. Consolidated Statements and Other Financial Information.
Financial statements are included in Item 18. "Financial Statements" commencing on page F-1.
Legal proceedings
No legal or arbitration proceeding that can have significant impact on our financial position or profitability is pending or is reasonably expected to be pending.
Dividends
We have not declared or paid any dividends since incorporation and we have no present intention to declare or pay any dividends in the foreseeable future. Any decision to declare or pay dividends on the Common Shares will be made by the board of directors based upon our earnings, financial requirements and other conditions existing at such future time.
B. Significant Changes.
No significant change has occurred since the date of the annual financial statements or the date of the interim financial statements included in this Registration Statement on Form 20-F.
Item 9. The Offer and Listing.
A. Offer and listing details.
No offering is made by this registration Statement, No new listing on an exchange is contemplated as of the date hereof. The Company is a reporting issuer in the Province of Ontario and our Common Shares are listed for trading on the Canadian Securities Exchange in Canada, under the symbol "PMED:CSE". The common shares are also quoted on the OTCQB® under the symbol "PMEDF." Our Common Shares are in registered form and the transfer of our common shares is managed by our transfer agent, National Securities Administrators Ltd.
For additional details regarding our Common Shares, see Item 10.A, "Share Capital".
B. Plan of distribution.
Not applicable.
C. Markets.
See Item 9.A "Offer and listing details."
D. Selling shareholders
Not applicable.
E. Dilution.
Not applicable.
F. Expenses of the issue.
Not applicable.
Item 10. Additional Information.
A. Share capital.
At January 31, 2021, the Company had 101,717,973 common shares outstanding.
At January 31, 2021, the Company had 9,095,000 outstanding stock options and 1,548,000 outstanding warrants.
i. Common shares
The holders of common shares are entitled to receive dividends which are declared from time to time and are entitled to one vote per share at meetings of the Company. All shares are ranked equally with regards to the Company's residual assets.
ii. Share issuances
During the year ended January 31, 2021
The Company cancelled 4,000,000 common shares pursuant to the sale of its interest in Cultivar JA.
1,355,000 shares were issued upon exercise of 1,355,000 options at a price of $0.15 per share and 100,000 shares were issued upon exercise of 100,000 options at a price of $0.10 per share for total gross proceeds of $213,250. An amount of $108,435 was reclassed from share-based payment reserve to share capital.
100,000 shares were issued upon exercise of 100,000 warrants at a price of $0.50 per share for gross proceeds of $50,000. An amount of $7,481 was reclassed from warrant reserve to share capital.
50,000 shares were issued pursuant to the acquisition of MobileWellbeing ("MWB"), an innovative, feature rich, Telemedicine Remote Patient Monitoring platform.
58,824 shares were issued at a price of $0.34 for a total consideration of $20,000. $8,333 was expensed to consulting services during the year ended January 31, 2021, while the remaining $11,667 is included in prepaid expenses as at January 31, 2021.
During the year ended January 31, 2020:
The Company issued 800,000 common shares at $0.10 per share for services. This includes 550,000 common shares issued to a director valued at $55,000.
On August 12, 2019, the Company closed a private placement of 3,296,000 units at $0.25 per unit for a consideration of $824,000. Each unit is comprised of one common share and one-half of one common share purchase warrant (each whole warrant, a "Warrant"), with each Warrant exercisable into a common share of the Company at an exercise price of $0.50 per share for a period of 24 months. In connection with this private placement, the Company issued 66,400 shares as finders' fee, and incurred an additional $95,445 in share issuance costs.
The Company issued 6,514,249 shares in connection with the acquisition.
On January 10, 2020, the Company issued 100,000 shares for financial media marketing and investor services for a total consideration of $25,000, to be provided over the period commencing October 28, 2019 and ending on November 1, 2020.
As at January 31, 2021, the Company had the following warrants outstanding:
Outstanding | Exercise Price | Remaining Life (Years) | Expiry Date |
1,548,000 | $0.50 | 0.53 | August 11, 2021 |
c) Stock Options
See Item 6(c) above.
Stock Option Plan
The Company has established a rolling Stock Option Plan (the "Plan"). Under the Plan, together with any other share compensation arrangement, the number of shares reserved for issuance may not exceed 10% of the total number of issued and outstanding shares and, to any one optionee, may not exceed 5% of the issued shares on a yearly basis. The maximum term of each option shall not be greater than 10 years. The exercise price of each option shall not be less than the market price of the Company's shares at the date of grant. Options granted to Consultants performing investor relations activities shall vest over a minimum of 12 months with no more than 1/4 of such options vesting in any 3‐month period. All other options vest at the discretion of the Board of Directors.
B. Memorandum and Articles of Association.
Incorporation.
The Company was incorporated in the Province of British Columbia on September 3, 1987 under the BCBCA under the name "Riviera Explorations Ltd." In 1993, the Company changed its name from Riviera Explorations Ltd. to "Kentucky Oil &Gas Inc." In 1994 the Company changed its name from Kentucky Oil &Gas Inc. to "Integrated Card Technologies Inc." In 1997, the Company changed its name from Integrated Card Technologies Inc. to "Arizona Ventures Ltd." As of August 31, 1998, the Company changed its name from Rizona Ventures Ltd. to "Admiral Bay Resources Inc." ("Admiral"). Effective as of September 23, 2019, Admiral was part of a three-way amalgamation that resulted in its name being changed to Cultivar Holdings Ltd. On April 9, 2020, the Company changed its name to "Predictmedix Inc."
Objects and Purpose
The Company's Memorandum and Articles of Association ("Articles") do not contain a description of the Company's objects and purposes.
Powers of Directors
Management of the Company's Business
The directors of the Company manage and supervise the management of the affairs and business of the Company and have authority to exercise all such powers of the Company as are not, by the BCBCA or by the Articles, required to be exercised by the Company's shareholders.
Election and Qualification of Directors
Each director holds office until the Company's next annual general meeting or until he or she is removed, dies or his office is earlier vacated in accordance with the Company's Articles or with the provisions of the BCBCA. A director appointed or elected to fill a vacancy on the Company's board holds office until the Company's next annual general meeting.
Under the Company's Articles, a director is not required to shares of the Company as qualification to hold office, but must be qualified as required by the BCBCA to become, act or continue to act as a director.
Remuneration of Directors
The directors are entitled to the remuneration, if any, for acting as directors as the directors may from time to time determine. If the directors so decide, the remuneration of the directors will be determined by the shareholders. That remuneration may be in addition to any salary or other remuneration paid to a director in such director's capacity as an officer or employee of the Company. Directors are also entitled to reimbursement for reasonable expenses incurred in their capacity as a director.
Disclosable Interest
A director may not vote on a proposal, arrangement or contract in which the director is materially interested, unless all the directors have a material interest in same, in which case any or all of those directors may vote on such matter.
Borrowing Powers
The Company's Articles provide that the Company, if authorized by its directors, may:
- borrow money in the manner and amount, on the security, from the sources and on the terms and conditions that the directors consider appropriate;
- issue bonds, debentures and other debt obligations either outright or as security for any liability or obligation of the Company or any other person and at such discounts or premiums and on such other terms as the directors 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 the Company.
Retirement
Our Articles do not set out a mandatory retirement age for our directors.
Special Rights or Restrictions Attached to Shares
Common Shares
The Company has 300,000,000 shares of common stock authorized. The holders of the Common Shares are entitled to dividends, if, as and when declared by the Board of Directors. The Company's shares are not subject to any pre-emptive rights, conversion or exchange rights, redemption, retraction, purchase for cancellation or surrender provisions, sinking or purchase fund provisions, provisions permitting or restricting the issuance of additional securities or provisions requiring a shareholder to contribute additional capital. Holders of Common Shares are entitled to receive notice of meetings of shareholders of the Company, to attend and to cast one vote per Common Share at all such meetings.
Location of Meetings
General meetings of shareholders may be held at a location outside of British Columbia to be determined and approved by a directors' resolution.
Time to Hold Meetings
Unless an annual general meeting is deferred or waived in accordance with the Business Corporations Act, the Company must hold an annual general meeting at least once in each calendar year and not more than 15 months after the last annual reference date at such time and place as may be determined by the directors.
Calling Meetings of Shareholders
The Company's directors may, at any time, call a meeting of shareholders. Under the BCBCA, the holders of not less than 1/20th (5%) of the Company's issued shares that carry the right to vote at a meeting may require the Company's directors to call a meeting of shareholders for the purposes of transacting any business that may be transacted at a general meeting.
Persons Entitled to Attend Shareholder Meetings
Shareholders entitled to vote at meetings are entitled to attend any meeting of shareholders. In addition, the directors, the president, if any, the secretary, if any, the assistant secretary (if any), the auditor of the Company, the lawyers for the Company and any other persons invited by the directors. any lawyer or auditor for the Company are entitled to attend any meeting of shareholders, provided however, that any such attendee is not to be counted in the quorum, and is not entitled to vote at the meeting, unless that person is a shareholder or proxy holder entitled to vote at the meeting.
Quorum for Shareholder Meetings
The number of shareholders that must be present in person or by proxy at a meeting to constitute a quorum is 2. If there is only one shareholder entitled to vote at a meeting of shareholders, then the quorum is one person.
C. Material Contracts.
The following table lists material contracts entered into by the Company for the two years preceding the filing of this registration statement.
Name of Agreement | Description |
July, 2020 Purchase Agreement - MobileWellbeing | In July of 2020, the Company entered into an Asset Purchase Agreement (the "MobileWellbeing Purchase Agreement") with Rajiv Muradia, as seller (the "Seller"), pursuant to which the Company acquired all of the Seller's interest in MobileWellbeing, a Telemedicine Remote Patient Monitoring platform ("MobileWellbeing"). The consideration for the acquisition was a combination of cash and stock, payable as follows: upon closing of the MobileWellbeing Purchase Agreement, the Company made a $25,000 cash payment to the Seller and issued the Seller 20,000 shares of the Company's common stock, with an additional 30,000 shares issued to the Seller on the 90th day following such closing. In addition, the Mobile Wellbeing Purchase Agreement contemplates that the Seller will receive a 20% commission on net sales of the Company attributable to the MobileWellbeing Platform (which commission is capped at $500,000) and additional stock consideration up to 200,000 shares of the Company's common stock depending on whether certain milestones are met. |
July, 2020 Consulting Agreement | In connection with the acquisition of MobileWellbeing, on July 17, 2020 (the "Effective Date") the Company also entered into a consulting agreement with Rajiv Muradia (the "Consulting Agreement") pursuant to which the Mr. Muradia shall, among other things, assist the Company with commercializing the MobileWellbeing platform. Under the Consulting Agreement Mr. Muradia was granted 250,000 stock purchase options, vesting as follows: 80,00 stock options vested immediately, with 85,000 stock options vesting on each of July 17, 2021 and July 17, 2022. Each stock option is exercisable into one (1) share of the Company's common stock, at a price equal to the then closing price of the Company's common stock on the day immediately prior to the Effective Date. |
March, 2020 Sale Agreement - Interest in Cultivar JA Limited Partnership | Sale Agreement with respect to the Company's 49% interest in Cultivar JA Limited ("Cultivar JA"), which holds a provisional cannabis cultivation license in Jamaica. Pursuant to the terms of the Sale Agreement, the Company's wholly-owned subsidiary, Cultivar Holdings Ltd., has agreed to sell its 49% interest in Cultivar JA and all related royalty interests to the principals of Cultivar JA in exchange for the principals of Cultivar JA agreeing to cancel 4,000,000 common shares of the Company owned by the principals. In addition, the principals also agreed to terminate their right to receive an additional 500,000 common shares of the Company which had been reserved for issuance upon Jamaica's Licensing Authority issuing final approval for Cultivar JA's license to cultivate, process, retail and transport cannabis. |
July, 2020 Consulting Agreement | Agreement dated July 1, 2020 and amended as of July 1, 2020 between Greenacres Medical Corp., a Canadian corporation owned and controlled by our Chief Executive Officer, Sheldon Kales ("Greenacres"), to pay monthly compensation of $8,500 for CEO services. In addition, pursuant to the Agreement the Company pays Greenacres rent in the amount of $2,000 per month and $1,500 per month for use of a vehicle. The Agreement has a two-year term. |
July, 2020 Consulting Agreement | Agreement dated July 1, 2020, as amended as of July 1, 2020 and as further amended as of May 1, 2021 between the Company and 2499597 Ontario Inc., a Canadian corporation owned and controlled by our Chief Operating Officer, Dr. Rahul Kushwah. The Agreement has a term of two years and provides for monthly compensation of $6,000 for COO services. In addition, pursuant to the Agreement, the Company pays $1,500 per month for Dr. Kushwah's vehicle. |
July, 2020 Assignment of Patent Rights | "Artificial Intelligence Driven Rapid Testing System For Infectious Diseases" Rahul Kushwah, Sheldon Kales, Nandan Mishra, and Himanshu Ujjawal Singh, Assignors |
July, 2020 Assignment of Patent Rights | "System And Method To Automatically Recommend And Adapt A Treatment Regime For Patients" and "System And Method To Manage A Rewards Program For Patient Treatment Protocols" Rajiv Muridia, Assignor |
Assignment of Patent Rights | "Utilizing Healthcare Providers Network Effect To Increase Compliance For Better Health Outcomes" Rajiv Muridia, Assignor |
D. Exchange controls
There are no governmental laws, decrees or regulations in Canada relating to restrictions on the export or import of capital, or affecting the remittance of interest, dividends or other payments to non-resident holders of the Company's common shares. Any remittances of dividends to United States residents are, however, subject to a 25% withholding tax pursuant to the Income Tax Act (Canada). Provided a United States resident is entitled to the benefit of the reciprocal tax treaty between Canada and the United States, such rate is generally reduced to 15% (5% if the shareholder is a corporation owning at least 10% of the outstanding common shares of the Company).
Except as provided in the Investment Canada Act (the "Act"), there are no limitations under the laws of Canada, the Province of British Columbia or in the charter or any other constituent documents of the Company on the right of foreigners to hold or vote the common shares of the Company.
The following discussion summarizes the principal features of the Investment Canada Act for a non-resident who proposes to acquire the common shares.
The Investment Canada Act generally prohibits implementation of an acquisition of control of a Canadian business that exceeds the applicable financial threshold for review by an individual, government or agency thereof, corporation, partnership, trust or joint venture (each an "entity") that is not a "Canadian" as defined in the Investment Canada Act (a "non- Canadian"), unless after review, the Director of Investments appointed by the minister responsible for the Investment Canada Act is satisfied that the investment is likely to be of net benefit to Canada. The financial thresholds for review vary according to the nationality of the investor, whether the investor is a state-owned enterprise and whether the Canadian business carries on any of the prescribed list of cultural activities set out in the Investment Canada Act. A non-Canadian would acquire control of the Company for the purposes of the Investment Canada Act if the non-Canadian acquired a majority of the common shares. An acquisition resulting in the purchaser holding one third or more, but less than a majority, of the common shares would be presumed to be an acquisition of control of the Company unless it could be established that, on the acquisition, the Company was not controlled in fact by the acquirer through the ownership of the common shares. Certain transactions relating to the common shares would be exempt from the Investment Canada Act, including: (a) an acquisition of the common shares by a person in the ordinary course of that person's business as a trader or dealer in securities; (b) an acquisition of control of the Company in connection with the realization of security granted for a loan or other financial assistance and not for a purpose related to the provisions of the Investment Canada Act; and (c) 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 the common shares, remained unchanged.
E. Taxation
U.S. Taxation
This section describes the material U.S. federal income tax consequences to a U.S. holder (as defined below) of owning ordinary shares. It applies only to ordinary shares that are held as capital assets for tax purposes. This section does not apply to a holder of ordinary shares that is a member of a class of holders subject to special rules, including a financial institution, a dealer or trader in securities, a regulated investment company, a real estate investment trust, a grantor trust, a U.S. expatriate, a tax-exempt organization, an insurance company, a person liable for alternative minimum tax, a person who actually or constructively owns 10% or more of the stock of the Company, a person that holds ordinary shares as part of a straddle or a hedging or conversion transaction, a person that purchases or sells ordinary shares as part of a wash sale for tax purposes, or a person whose functional currency is not the U.S. dollar. Further, this description does not address state, local, non-U.S, or other tax laws, nor does it address the 3.8% U.S. federal Medicare tax on net investment income, the alternative minimum tax or the U.S. federal gift and estate tax consequences of owning and disposing of ordinary shares.
For purposes of this description, a "U.S. holder" is a beneficial owner of ordinary shares who holds such ordinary shares as capital assets within the meaning of the Code and is, for U.S. federal income tax purposes: (i) an individual citizen or resident of the United States; (ii) a corporation created or organized in or under the laws of the United States or any state thereof, including the District of Columbia; (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source; or (iv) a trust that either (a) is subject to the supervision of a court within the United States and has one or more U.S. persons with authority to control all substantial decisions or (b) has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.
If a partnership holds the ordinary shares, the U.S. federal income tax treatment of a partner generally will depend on the status of the partner and the tax treatment of the partnership. A partner in a partnership holding the ordinary shares should consult its tax advisor with regard to the U.S. federal income tax treatment of an investment in the ordinary shares.
Distributions
Subject to the Passive Foreign Investment Company ("PFIC") rules discussed below, U.S. holders generally will include as dividend income the U.S. dollar value of the gross amount of any distributions of cash or property (without deduction for any withholding tax), other than certain pro rata distributions of ordinary shares, with respect to ordinary shares to the extent the distributions are made from our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes. A U.S. holder will include the dividend income on the day actually or constructively received by the holder. We do not intend to maintain calculations of earnings and profits, as determined for U.S. federal income tax purposes. Consequently, any distributions generally will be treated as dividend income.
Dividends paid to a non-corporate U.S. holder on shares will generally be taxable at the preferential rates applicable to long-term capital gains provided (a) that certain holding period requirements are satisfied, (b) (i) the U.S.-Canada income tax treaty ("the Treaty") is a qualified treaty and we are eligible for benefits under the Treaty or (ii) our ordinary shares are readily tradable on a U.S. securities market, and (c) provided that we were not, in the taxable year prior to the year in which the dividend was paid, and are not, in the taxable year in which the dividend is paid, a PFIC. The Treaty has been approved for the purposes of the qualified dividend rules. If the Company is a PFIC, any dividends paid to a noncorporate U.S. holder will not qualify for the preferential tax rates ordinarily applicable to "qualified dividends." In the case of a corporate U.S. holder, dividends on shares are taxed as ordinary income and will not be eligible for the dividends received deduction generally allowed to U.S. corporations in respect of dividends received from other U.S. corporations.
The amount of any cash distribution paid in any foreign currency will be equal to the U.S. dollar value of such currency, calculated by reference to the spot rate in effect on the date such distribution is received by the U.S. holder, regardless of whether and when the foreign currency is in fact converted into U.S. dollars. If the foreign currency is converted into U.S. dollars on the date received, the U.S. holder generally should not recognize foreign currency gain or loss on such conversion. If the foreign currency is not converted into U.S. dollars on the date received, the U.S. holder will have a basis in the foreign currency equal to its U.S. dollar value on the date received, and generally will recognize foreign currency gain or loss on a subsequent conversion or other disposal of such currency. Such foreign currency gain or loss generally will be treated as U.S. source ordinary income or loss for foreign tax credit limitation purposes.
Dividends will be income from sources outside the United States, and generally will be "passive category" income or, for certain taxpayers, "general category" income, which are treated separately from each other for the purpose of computing the foreign tax credit allowable to a U.S. holder. The availability of the foreign tax credit and the application of the limitations on its availability are fact specific and are subject to complex rules. In general, a taxpayer's ability to use foreign tax credits may be limited and is dependent on the particular circumstances. U.S. holders should consult their own tax advisors with respect to these matters.
Sale, Exchange or other Disposition of Ordinary Shares
Subject to the PFIC rules discussed below, a U.S. holder who sells or otherwise disposes of ordinary shares will recognize a capital gain or loss for U.S. federal income tax purposes equal to the difference between the U.S. dollar value of the amount realized and the holder's tax basis, determined in U.S. dollars, in those ordinary shares. The gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes. The capital gain of a non-corporate U.S. holder is generally taxed at preferential rates where the holder has a holding period greater than 12 months in the shares sold. There are limitations on the deductibility of capital losses.
The U.S. dollar value of any foreign currency received upon a sale or other disposition of ordinary shares will be calculated by reference to the spot rate in effect on the date of sale or other disposal (or, in the case of a cash basis or electing accrual basis taxpayer, at the spot rate of exchange on the settlement date). A U.S. holder will have a tax basis in the foreign currency received equal to that U.S. dollar amount, and generally will recognize foreign currency gain or loss on a subsequent conversion or other disposal of the foreign currency. This foreign currency gain or loss generally will be treated as U.S. source ordinary income or loss for foreign tax credit limitation purposes. If such foreign currency is converted into U.S. dollars on the date received by the U.S. holder, a cash basis or electing accrual basis U.S. holder should not recognize any gain or loss on such conversion.
Passive Foreign Investment Company
A non-U.S. corporation will be a PFIC for U.S. federal income tax purposes for any taxable year if either:
| ● | 75% or more of its gross income for such year is "passive income" which for this purpose generally includes dividends, interest, royalties, rents and gains from commodities and securities transactions and gains from assets that produce passive income; or |
| ● | 50% or more of the value of its gross assets (based on an average of the quarterly values of the gross assets) during such year is attributable to assets that produce passive income or are held for the production of passive income. |
Passive income does not include rents and royalties derived from the active conduct of a trade or business. If the stock of a non-U.S. corporation is publicly traded for the taxable year, the asset test is applied using the fair market value of the assets for purposes of measuring such corporation's assets. If we own at least 25% (by value) of the stock of another corporation, we will be treated, for purposes of the PFIC tests, as owning our proportionate share of the other corporation's assets and receiving our proportionate share of the other corporation's income for purposes of the PFIC income and asset tests. If the stock of a non-U.S. corporation is publicly-traded for the taxable year, the asset test is applied using the fair market value of the assets for purposes of measuring such corporation's assets. If we were a PFIC in any year during a U.S. holder's holding period for our ordinary shares, we would ordinarily continue to be treated as a PFIC for each subsequent year during which the U.S. holder owned the ordinary shares. Based on the composition of our assets and income, we believe that we should not be treated as a PFIC for U.S. federal income tax purposes with respect to our 2019 taxable year and we do not intend or anticipate becoming a PFIC for any future taxable year. However, the determination of PFIC status is a factual determination that must be made annually at the close of each taxable year and therefore, there can be no certainty as to our status in this regard until the close of the current or any future taxable year. Changes in the nature of our income or assets or a decrease in the trading price of our ordinary shares may cause us to be considered a PFIC in the current or any subsequent year. Therefore, there can be no assurance that we or any of our subsidiaries will not be classified as a PFIC until the close of the current taxable year or for any future taxable year.
U.S. Information Reporting and Back-up Withholding
Dividend payments with respect to our ordinary shares and proceeds from the sale or other disposition of our ordinary shares may be subject to information reporting to the IRS and possible U.S. backup withholding. Back-up withholding will not apply, however, to a U.S. holder who furnishes a correct taxpayer identification number and makes any other required certification or who is otherwise exempt from back-up withholding. U.S. holders who are required to establish their exempt status may be required to provide such certification on Internal Revenue Service ("IRS") Form W-9. U.S. holders should consult their tax advisors regarding the application of the U.S. information reporting and back-up withholding rules.
Back-up withholding is not an additional tax. Amounts withheld as back-up withholding may be credited against a U.S. holder's U.S. federal income tax liability, and such holder may obtain a refund of any excess amounts withheld under the back-up withholding rules by timely filing the appropriate claim for refund with the IRS and furnishing any required information.
Information With Respect to Foreign Financial Assets
Certain U.S. holders that own "specified foreign financial assets" with an aggregate value in excess of $50,000 are generally required to file an information statement along with their U.S. federal tax returns, currently on IRS Form 8938, with respect to such assets. "Specified foreign financial assets" include any financial accounts held at a non-U.S. financial institution, as well as securities issued by a non-U.S. issuer that are not held in accounts maintained by financial institutions. If a U.S. holder does not include in such holder's gross income an amount relating to one or more specified foreign financial assets, and the amount such U.S. holder omits is more than $5,000, any tax such U.S. holder owes for the tax year can be assessed at any time within 6 years after the filing of such U.S. holder's federal tax return. U.S. holders who fail to report the required information could be subject to substantial penalties. U.S. holders are encouraged to consult with their own tax advisors regarding the possible application of the foregoing or other United States informational reporting requirements to our ordinary shares in light of their particular circumstances.
British Columbia Tax Considerations
Certain Canadian Federal Income Tax Information for United States Residents
The following summarizes the principal Canadian federal income tax considerations generally applicable to the holding and disposition of common shares of the Company by a holder (a) who, for the purposes of the Income Tax Act (Canada) the ("Tax Act") and at all relevant times, is not resident in Canada or deemed to be resident in Canada, deals at arm's length and is not affiliated with the Company, holds the common shares as capital property and does not use or hold the common shares in the course of carrying on, or otherwise in connection with, a business in Canada, and (b) who, for the purposes of the Canada-United States Income Tax Convention (the "Treaty") and at all relevant times, is a resident of the United States, has never been a resident of Canada, has not held or used (and does not hold or use) common shares in connection with a permanent establishment or fixed base in Canada, and who qualifies for the full benefits of the Treaty. The Canada Revenue Agency has introduced special forms to be used in order to substantiate eligibility for Treaty benefits, and affected holders should consult with their own advisers with respect to these forms and all relevant compliance matters.
Holders who meet all such criteria in clauses (a) and (b) above are referred to herein as a "U.S. Holder" or "U.S. Holders", and this summary only addresses such U.S. Holders. The summary does not deal with special situations, such as particular circumstances of traders or dealers, limited liability companies, tax-exempt entities, insurers, financial institutions (including those to which the mark-to-market provisions of the Tax Act apply), entities considered fiscally transparent under applicable law, or otherwise.
This summary is based on the current provisions of the Tax Act and the regulations thereunder, all proposed amendments to the Tax Act and regulations publicly announced by the Minister of Finance (Canada) to the date hereof, the current provisions of the Treaty and our understanding of the current administrative practices of the Canada Revenue Agency. It has been assumed that all currently proposed amendments to the Tax Act and regulations will be enacted as proposed and that there will be no other relevant change in any governing law, the Treaty or administrative policy, although no assurance can be given in these respects. This summary does not take into account provincial, U.S. or other foreign income tax considerations, which may differ significantly from those discussed herein.
This summary is not exhaustive of all possible Canadian income tax consequences. It is not intended as legal or tax advice to any particular U.S. Holder and should not be so construed. The tax consequences to a U.S. Holder will depend on that U.S. Holder's particular circumstances. Accordingly, all U.S. Holders or prospective U.S. Holders should consult their own tax advisers with respect to the tax consequences applicable to them having regard to their own particular circumstances. The discussion below is qualified accordingly.
Dividend
Dividends paid or deemed to be paid or credited by the Company to a U.S. Holder are subject to Canadian withholding tax under Part XIII of the Tax Act. The default rate of withholding tax is 25% of the gross dividend paid to a non-resident of Canada.
Under the Treaty, the rate of withholding tax on dividends paid to a U.S. Holder is generally limited to 15% of the gross dividend. In the case of a U.S. Holder that is a corporation owning at least 10% of the Company's voting shares, the applicable withholding rate is 5% of the gross dividend, provided the U.S. Holder can establish entitlement to the benefits of the Treaty.
The Company is required to withhold Part XIII tax from each dividend, and remit the withheld amount directly to the Receiver General of Canada for the account of the shareholder. U.S. Holders entitled to reduced withholding under the Treaty must provide the Company with certain information to ensure the correct amount of tax is withheld. The Company will provide U.S. Holders with a summary of withholdings annually. U.S. Holders are not required to file a separate income tax return to report dividends received from the Company in a given year.
Disposition
A U.S. Holder is generally not subject to tax under the Tax Act in respect of a capital gain realized on the disposition of a common share in the open market, unless the share is "taxable Canadian property" to the holder thereof and the U.S. Holder is not entitled to relief under the Treaty.
Provided that the Company's common shares are listed on a "designated stock exchange" for purposes of the Tax Act (which currently includes the Canadian Securities Exchange on which the Company's shares trade) at the time of disposition, a common share will generally not constitute taxable Canadian property to a U.S. Holder unless, at any time during the 60 month period ending at the time of disposition, (i) the U.S. Holder, persons with whom the U.S. Holder did not deal at arm's length for purposes of the Tax Act, partnerships in which the U.S. Holder or such persons holds a membership interest directly or indirectly, (or the U.S. Holder together with any such foregoing persons) or partnerships, owned 25% or more of the issued shares of any class or series of the Company AND (ii) more than 50% of the fair market value of the share was derived directly or indirectly from certain types of assets, including real or immoveable property situated in Canada, Canadian resource properties or timber resource properties, and options, interests or rights in respect of any of the foregoing.
Even a common share is taxable Canadian Property to a U.S. Holder, a capital gain resulting of the disposition of that share will not be included in computing the U.S. Holder's taxable income for the purposes of the Tax Act, provided that the share constitutes "treaty-protected property" of such U.S. Holder. Common shares owned by a U.S. Holder will generally be treaty-protected property if the gain from the disposition of such share would, because of the Treaty, be exempt from tax under the Tax Act.
U.S. Holders holding Common shares as taxable Canadian property should consult with the U.S. Holder's own tax advisers in advance of any disposition or deemed disposition thereof under the Tax Act in order to determine whether any relief from tax under the Tax Act may be available by virtue of the Treaty, and any related compliance procedures.
If a U.S. Holder realizes a capital gain or capital loss from the disposition of a common shares that constitutes taxable Canadian property and is not treaty-protected property for the purposes of the Tax Act, the capital gain or capital loss is the amount, if any, by which the U.S. Holder's proceeds of disposition exceed (or are exceeded by, respectively) the aggregate of the U.S. Holder's adjusted cost base of the share and reasonable expenses of disposition as determined under the Tax Act. The capital gain or loss must be computed in Canadian currency using a weighted average cost base for identical properties. Generally, one-half of a capital gain ("taxable capital gain") is included in income form Canadian tax purposes in the year of disposition and one-half of a capital loss ("allowable capital loss") must be deducted from taxable capital gains realized by the U.S. Holder in that year. Allowable capital losses in excess of taxable capital gains for that year may generally be carried back up to three years, or forward indefinitely, and deducted against net taxable capital gains in those years, in the manner permitted under the Tax Act. Reporting and filing requirements will also arise. Such U.S. Holders should consult their own tax advisors.
F. Dividends and paying agents.
Not applicable.
G. Statement by experts.
The audited financial statements of the Company as of and for the years ended January 31, 2021, 2020, and 2019 appearing in this registration statement, have been audited by independent registered public accounting firm, Harbourside CPA LLP (formerly named Buckley Dodds LLP), as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of the firm as experts in accounting and auditing.
H. Documents on display.
The Company files information with the SEC via EDGAR. 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.
Documents concerning the Company which are referred to in this Form 20-F may be inspected at the offices located at 77 King Street W., Suite 3000, Toronto, ON M5K 1G8 Canada. In addition, the Company also files its annual reports and other information with the Canadian Securities Administrators via SEDAR (www.sedar.com).
I. Subsidiary Information.
Cultivar Holdings Ltd. Cultivar Holdings Ltd is an Ontario company that is wholly owned by Predictmedix. This company currently has no operations.
Cann IP Holding is an Ontario company that is wholly owned by Predictmedix. This Company currently has no operations.
Item 11. Quantitative and Qualitative Disclosures About Market Risk.
(a) Quantitative information about market risk.
The Company's activities expose it to a variety of financial risks: credit risk, liquidity risk, and market risk (including interest rate risk, foreign currency risk, and commodity price risk).
The Company thoroughly examines the various financial risks to which it is exposed and assesses the impact and likelihood of those risks. Where material, these risks are reviewed and monitored by the Board of Directors.
Credit risk
Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. The Company is not exposed to significant credit risk.
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 liquidity and operating results may be adversely affected if its access to the capital market is hindered, whether as a result of a downturn in stock market conditions generally or matters specific to the Company. The Company generates cash flows primarily from its financing activities.
The Company manages its liquidity needs by carefully monitoring scheduled costs. Liquidity is measured in various time bands, on day to day and week-to-week basis, as well as on long term liquidity needs over 180-day to 360-day look out periods. Funding for long term liquidity needs is based on the ability of the Company to successfully complete private placements.
As at January 31, 2021, the Company had sufficient cash of $480,051 to settle current liabilities of $135,354.
Market Risk
Market risk is the risk of loss that may arise from changes in market factors such as interest rates, commodity and equity prices, and foreign exchange rates.
(a) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is not exposed to significant interest rate risk.
(b) Price risk
The Company is not exposed to significant price risk as it does not possess investments in publicly traded securities.
(c) Currency risk
Currency risk is the risk that the fair value of future cash flows of a financial instrument denominated in a foreign currency will fluctuate because of changes in foreign exchange rates. Effective sale of the Company's interest in Cultivar JA in March 2020, the Company has no exposure to any currency except Canadian dollars.
Item 12. Description of Securities Other than Equity Securities.
A. Debt Securities.
Not applicable.
B. Warrants and Rights.
Not applicable.
C. Other Securities.
Not applicable.
D. American Depositary Shares.
Not applicable.
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies.
Except for as set forth below, we do not have any material defaults in the payment of principal, interest, or any installments under a sinking or purchase fund:
None.
Item 14. Material Modifications to the Rights of Securities Holders and use of Proceeds
Material Modifications to the Rights of Security Holders
See "Item 10. Additional Information- Articles of Organization -Description of Common Shares" for a description of the rights of securities holders.
Use of Proceeds
Not applicable for this registration statement on Form 20-F.
Item 15. Controls and Procedures.
Not applicable.
Item 16. [Reserved]
Item 16A. Audit committee financial expert.
Not applicable.
Item 16B. Code of Ethics.
Not applicable.
Item 16.C. Principal Accountant Fees and Services
Not applicable.
Item 16.D Exemptions from the Listing Standards for Audit Committees
Not applicable.
Item 16. E Purchases of Equity Securities by the Issuer and Affiliated Purchasers
During the twelve-month period ended January 31, 2021, our CFO, Rakesh Malhotra, exercised 150,000 options to purchase 150,000 common shares and our CEO, Sheldon Kales, purchased 35,000 shares of our common stock in the open market.
Item 16.F. Change in Registrant's Certifying Accountant
There has been no change in Registrant's certifying accountant during the fiscal year ended January 31, 2021.
Item 16.G. Corporate Governance
Not applicable.
Item 16.H. Mine Safety Disclosure
Not applicable.
PART III
Item 17. Financial Statements
See Item 18.
Item 18. Financial Statements
Our consolidated financial statements are included at the end of this registration on Form 20-F, beginning with page F-1.
Item 19. Exhibits
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Exhibit 1.1 | Articles of Incorporation and Amendments |
Exhibit 1.2 | Certificate of Change of Name dated April 9, 2020 |
Exhibit 4.1 | Stock Option Plan and form of Award Agreement |
Exhibit 4.2 | Audit Committee Charter |
Exhibit 4.3 | Asset Purchase Agreement for Mobile Wellbeing Platform |
Exhibit 4.4 | Consulting Agreement related to MobileWellbeing |
Exhibit 4.5 | Sale Agreement dated March 30, 2020 between the Company's wholly-owned subsidiary, Cultivar Holdings Ltd., and the principals of Cultivar JA |
Exhibit 4.6 | Agreement dated July 1, 2020 and amended as of July 1, 2020 between the Company and Greenacres Medical Corp. |
Exhibit 4.7 | Agreement dated July 1, 2020, as amended as of July 1, 2020 and as further amended as of May 1, 2021 between the Company and 2499597 Ontario Inc. |
Exhibit 4.8 | Assignment of Patent Rights dated July 6, 2020 pertaining to the patent application entitled, "Artificial Intelligence Driven Rapid Testing System For Infectious Diseases" |
Exhibit 4.9 | Assignment of Patent Rights dated July 6, 2020 pertaining to the patent applications entitled, "System And Method To Automatically Recommend And Adapt A Treatment Regime For Patients" Filed 05-Jul-2020; And "System And Method To Manage A Rewards Program For Patient Treatment Protocols" filed 05- JUL-2020. |
Exhibit 4.10 | Assignment of Patent Rights [undated] pertaining to the patent application entitled, "Utilizing Healthcare Providers Network Effect to Increase Compliance For Better Health Outcomes" |
Exhibit 15.1 | Consent of Harbourside CPA LLP |
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.
Date: June 11, 2021
PREDICTMEDIX INC.
By: /s/ Sheldon Kales
Sheldon Kales, President and CEO
Predictmedix Inc. (formerly, Cultivar Holdings Inc.)
Consolidated Financial Statements
January 31, 2021
(Expressed in Canadian Dollars)
PREDICTMEDIX INC. (formerly Cultivar Holdings Inc.)
Table of contents
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INDEPENDENT AUDITORS' REPORT
To the Shareholders of Predictmedix Inc. (formerly Cultivar Holdings Inc.):
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of Predictmedix Inc. (the "Company"), which comprise the consolidated statements of financial position as at January 31, 2021 and 2020 and the consolidated statements of loss and comprehensive loss, consolidated statements of changes in shareholders' equity and consolidated statements of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial position of the Company as at January 31, 2021 and 2020, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRS).
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material Uncertainty Related to Going Concern
Without qualifying our opinion, we draw attention to Note 2 to the consolidated financial statements which indicates the existence of a material uncertainty that may cast significant doubt about the Company's ability to continue as a going concern.
Information other than the Consolidated Financial Statements and the Auditor's Report thereon
Management is responsible for the other information. The other information comprises the information, other than the consolidated financial statements and our auditor's report thereon, included in Management's Discussion and Analysis report.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor's report. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting process.
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Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control;
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management;
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern;
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the financial statements.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
The engagement partner on the audit resulting in this independent auditor's report is Mickey Goldstein.
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Vancouver, BC | Harbourside CPA LLP |
May 31, 2021 | Chartered Professional Accountants |
Predictmedix Inc. (formerly Cultivar Holdings Inc.)
Consolidated Statements of Financial Position
(in Canadian dollars)
| | | | | | |
ASSETS | | January 31, 2021 | | | January 31, 2020 | |
CURRENT | | | | | | |
Cash | $ | 480,051 | | $ | 1,493,577 | |
Sales tax receivable | | 111,952 | | | 10,133 | |
Prepaid expenses (Note 6) | | 155,442 | | | 130,669 | |
| | 747,445 | | | 1,634,379 | |
Property and equipment (Note 7) | | 8,188 | | | 20,191 | |
Intangible assets (Note 8) | | 248,010 | | | - | |
Right-of-use asset (Note 9) | | - | | | 12,192 | |
TOTAL ASSETS | $ | 1,003,643 | | $ | 1,666,762 | |
| | | | | | |
LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | |
LIABILITIES | | | | | | |
CURRENT | | | | | | |
Accounts payable and accrued liabilities | | 135,354 | | | 67,917 | |
Lease liability current portion (Note 9) | | - | | | 11,921 | |
| | 135,354 | | | 79,838 | |
| | | | | | |
Lease liability non- current portion (Note 9) | | - | | | 3,268 | |
TOTAL LIABILITIES | | 135,354 | | | 83,106 | |
| | | | | | |
SHAREHOLDERS' EQUITY | | | | | | |
Share Capital (Note 11) | | 4,031,650 | | | 4,119,484 | |
Warrant reserve (Note 11) | | 115,802 | | | 123,283 | |
Share-based payment reserve (Note 10) | | 853,848 | | | 15,922 | |
Accumulated deficit | | (4,133,011 | ) | | (2,611,940 | ) |
| $ | 868,289 | | $ | 1,646,749 | |
Non-controlling interest | | - | | | (63,093 | ) |
TOTAL SHAREHOLDERS' EQUITY | | 868,289 | | | 1,583,656 | |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 1,003,643 | | $ | 1,666,762 | |
Organization and nature of operations (Note 1)
Basis of presentation and going concern (Note 2)
Commitment and contingencies (Note 13)
Subsequent events (Note 18)
Approved on behalf of the Board of Directors:
/Sheldon Kales/
______________________________________
Signed: Sheldon Kales, CEO and Director
/Rahul Kushwah/
______________________________________
Signed: Rahul Kushwah, COO and Director
The accompanying notes are an integral part of these consolidated financial statements
Predictmedix Inc. (formerly Cultivar Holdings Inc.)
Consolidated Statements of Loss and Comprehensive Loss
(in Canadian dollars)
| | | | | | |
| | | | | Year | |
| | Year | | | ended | |
| | ended | | | January 31, | |
| | January 31, | | | 2020 | |
| | 2021 | | | (Note 5) | |
Expenses: | | | | | | |
Administration and general | $ | 13,658 | | $ | 12,210 | |
Amortization (Notes 7) | | 3,509 | | | 1,671 | |
Audit and accounting | | 38,560 | | | 56,647 | |
Consulting fees | | 178,004 | | | 135,631 | |
Legal fees | | 138,879 | | | 122,543 | |
Management fees (Note 12) | | 217,050 | | | 263,066 | |
Marketing expenses | | 221,670 | | | - | |
Patent and trademark expenses | | 13,622 | | | 5,930 | |
Rent expense (Note 12) | | 21,500 | | | 18,000 | |
Research and development | | 26,300 | | | 73,733 | |
Share based compensation (Note10) | | 946,361 | | | 10,387 | |
Transfer agent and filing fees | | 57,908 | | | 25,122 | |
Travel, entertainment and related | | 31,308 | | | 51,889 | |
Vehicle use expenses (Note 12) | | 22,500 | | | 6,000 | |
| | (1,930,829 | ) | | (782,829 | ) |
Income (loss) from discontinued operations (Note 5) | | 346,296 | | | (37,992 | ) |
Loss from acquisition of subsidiary (Note 4) | | - | | | (1,490,071 | ) |
Loss and comprehensive loss | $ | (1,584,533 | ) | $ | (2,310,892 | ) |
| | | | | | |
Loss and comprehensive loss attributable to: | | | | | | |
Shareholders | $ | (1,581,691 | ) | $ | (2,291,517 | ) |
Non-controlling interest | $ | (2,842 | ) | $ | (19,375 | ) |
Loss per share-Basic and Diluted | $ | (0.016 | ) | $ | (0.024 | ) |
Weighted average number of shares outstanding-Basic and Diluted | | 101,195,130 | | | 97,820,135 | |
The accompanying notes are an integral part of these consolidated financial statements
Predictmedix Inc. (formerly Cultivar Holdings Inc.)
Consolidated Statement of Changes in Shareholders' Equity
(in Canadian dollars)
| | Number of | | | | | | | | | | | | | | | | | | | |
| | common shares | | | | | | | | | Share-based | | | Non-controlling | | | | | | | |
| | outstanding | | | Share capital | | | Warrant reserve | | | payment reserve | | | interest | | | Deficit | | | Total | |
| | | | | | | | | | | | | | | | | | | | | |
Balance as at January 31, 2019 | | 93,277,500 | | $ | 2,041,220 | | $ | - | | $ | 5,535 | | $ | (43,718 | ) | $ | (320,423 | ) | $ | 1,682,614 | |
| | | | | | | | | | | | | | | | | | | | | |
Private placement of units | | 3,296,000 | | | 700,717 | | | 123,283 | | | - | | | - | | | - | | | 824,000 | |
| | | | | | | | | | | | | | | | | | | | | |
Shares issued as finders fees | | 66,400 | | | - | | | - | | | - | | | - | | | - | | | - | |
| | | | | | | | | | | | | | | | | | | | | |
Share issuance cost | | - | | | (95,445 | ) | | - | | | - | | | - | | | - | | | (95,445 | ) |
| | | | | | | | | | | | | | | | | | | | | |
Shares issued for services | | 900,000 | | | 105,000 | | | - | | | - | | | - | | | - | | | 105,000 | |
| | | | | | | | | | | | | | | | | | | | | |
Share-based compensation | | - | | | - | | | - | | | 10,387 | | | - | | | - | | | 10,387 | |
| | | | | | | | | | | | | | | | | | | | | |
Reverse takeover of subsidiary (Note 4) | | 6,514,249 | | | 1,367,992 | | | - | | | - | | | - | | | - | | | 1,367,992 | |
| | | | | | | | | | | | | | | | | | | | | |
Net loss for the year | | - | | | - | | | - | | | - | | | (19,375 | ) | | (2,291,517 | ) | | (2,310,892 | ) |
| | | | | | | | | | | | | | | | | | | | | |
Balance as at January 31, 2020 | | 104,054,149 | | | 4,119,484 | | | 123,283 | | | 15,922 | | | (63,093 | ) | $ | (2,611,940 | ) | $ | 1,583,656 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Sale of Cultivar Jamaica (Note 5) | | (4,000,000 | ) | | (540,000 | ) | | - | | | - | | | 65,935 | | | 60,620 | | | (413,445 | ) |
| | | | | | | | | | | | | | | | | | | | | |
Share-based compensation | | - | | | - | | | - | | | 946,361 | | | - | | | - | | | 946,361 | |
| | | | | | | | | | | | | | | | | | | | | |
Shares issued on acquisition of | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
intangible asset | | 50,000 | | | 53,000 | | | - | | | - | | | - | | | - | | | 53,000 | |
| | | | | | | | | | | | | | | | | | | | | |
Exercise of options | | 1,455,000 | | | 321,685 | | | -- | | | (108,435 | ) | | - | | | - | | | 213,250 | |
| | | | | | | | | | | | | | | | | | | | | |
Exercise of warrants | | 100,000 | | | 57,481 | | | (7,481 | ) | | - | | | - | | | - | | | 50,000 | |
| | | | | | | | | | | | | | | | | | | | | |
Shares issued for consulting services | | 58,824 | | | 20,000 | | | - | | | - | | | - | | | - | | | 20,000 | |
| | | | | | | | | | | | | | | | | | | | | |
Net loss for the year | | - | | | - | | | - | | | - | | | (2,842 | ) | | (1,581,691 | ) | | (1,584,533 | ) |
| | | | | | | | | | | | | | | | | | | | | |
Balance as at January 31, 2021 | | 101,717,973 | | $ | 4,031,650 | | $ | 115,802 | | $ | 853,848 | | $ | - | | $ | (4,133,011 | ) | $ | 868,289 | |
The accompanying notes are an integral part of these consolidated financial statements
Predictmedix Inc. (formerly Cultivar Holdings Inc.)
Consolidated Statements of Cash Flows
(in Canadian dollars)
| | For the year ended | | | For the year ended | |
| | January 31, 2021 | | | January 31, 2020 | |
| | | | | | |
OPERATING ACTIVITIES | | | | | | |
Net loss | $ | (1,584,533 | ) | $ | (2,310,892 | ) |
Non-cash items included in net loss and other adjustments: | | | | | | |
Amortization | | 3,509 | | | 1,671 | |
Loss (income) from discontinues operations | | (346,296 | ) | | 37,992 | |
Loss from acquisition of subsidiary | | - | | | 1,490,071 | |
Share-based compensation | | 946,361 | | | 10,387 | |
Shares issued for consulting services | | 8,333 | | | 105,000 | |
Changes in non-cash working capital: | | | | | | |
Sales tax receivable | | (101,819 | ) | | (9,008 | ) |
Prepaid expenses | | (44,965 | ) | | (98,810 | ) |
Loans and advances | | - | | | (38,999 | ) |
Accounts payable and accrued liabilities | | 68,837 | | | 277 | |
Net assets from discontinued operations | | (29,064 | ) | | (19,810 | ) |
CASH USED IN OPERATING ACTIVITIES | | (1,079,637 | ) | | (832,121 | ) |
| | | | | | |
INVESTING ACTIVITIES | | | | | | |
Purchase of property and equipment | | - | | | (13,368 | ) |
Cash acquired on acquisition of subsidiary | | - | | | 3,448 | |
Purchase of intangible assets | | (195,010 | ) | | - | |
CASH USED IN INVESTING ACTIVITIES | | (195,010 | ) | | (9,920 | ) |
| | | | | | |
FINANCING ACTIVITIES | | | | | | |
Proceeds from issuance of shares | | - | | | 824,000 | |
Lease payments made for discontinued operations | | (2,129 | ) | | (13,360 | ) |
Share issue expenses | | - | | | (33,971 | ) |
Proceeds from exercise of warrants | | 50,000 | | | | |
Proceeds from exercise of options | | 213,250 | | | - | |
CASH PROVIDED BY FINANCING ACTIVITIES | | 261,121 | | | 776,669 | |
| | | | | | |
NET CHANGE IN CASH DURING THE PERIOD | | (1,013,526 | ) | | (65,372 | ) |
CASH, BEGINNING OF PERIOD | | 1,493,577 | | | 1,558,949 | |
CASH, END OF PERIOD | $ | 480,051 | | $ | 1,493,577 | |
| | | | | | |
Cash paid for interest and income taxes | $ | - | | $ | - | |
| | | | | | |
Supplemental cash flow information | | | | | | |
| | | | | | |
Non-cash transactions during the year affecting cash flows from financing and investing activities: | | | | | | |
| | | | | | |
Shares issued for acquisition of intangible assets | $ | 53,000 | | $ | - | |
| | | | | | |
Shares issued for prepayment and expense for consulting fees | $ | 20,000 | | $ | 105,000 | |
The accompanying notes are an integral part of these consolidated financial statements
1. Organization and Nature of Operations
Admiral Bay Resources Inc. ("Admiral") was incorporated in British Columbia on September 3, 1987.
Effective September 23, 2019, Admiral was part of a three-cornered amalgamation among Admiral, 2693980 Ontario Inc. (a wholly owned subsidiary of Admiral) and Cultivar Holdings Ltd. (the "Transaction"). Admiral completed the acquisition of all the issued and outstanding shares of Cultivar Holdings Ltd. by way of a three-cornered amalgamation, pursuant to which 2693980 Ontario Inc., amalgamated with Cultivar Holdings Ltd. Pursuant to the Transaction, each registered shareholder of Cultivar Holdings Ltd. received one (1) common share in the capital of the Admiral for each common share held, resulting in the issuance of an aggregate of 97,439,900 common shares to Cultivar Holdings Ltd. Shareholders. As part of the Transaction, warrants of Cultivar Holdings Ltd. were replaced with common share purchase warrants of Admiral.
At completion of the Transaction, Admiral changed its name to Cultivar Holdings Inc. (the "Company").
On April 9, 2020, the Company announced that it has completed its name change from "Cultivar Holdings Inc." to "Predictmedix Inc." (the "Name Change"). The CUSIP number assigned to the Company's common shares following the name change is CUSIP 74040L100 (ISIN CA74040L1004). In connection with the Name Change, the Company's trading symbol, as listed on the CSE and the OTCQB have also been changed from "CULT" to "PMED", and from "CVRHF" to "PMEDF", respectively.
On February 15, 2018, the Company had acquired a 49% interest in a newly incorporated Cultivar JA Limited, ("CJA") a corporation incorporated under the laws of Jamaica. The remaining 51% interest was owned by local Jamaican business partners. On March 27, 2020, the Company sold and discontinued its interests in CJA (Note 5).
On July 16, 2018, the Company had acquired a 100% interest in a newly incorporated CannIP Holdings Inc. (formerly 2639745 Ontario Inc.) ("Cann") a corporation incorporated under the laws of the province of Ontario. Cann is engaged in the development of cosmetic and edible product lines, as well as investment in technology to detect an individual influence of cannabis. The Company did a one for one share exchange with Cann and issued 29,800,000 common shares to the shareholders of Cann.
The Company, through its subsidiaries, is in the business of investment in technology to detect if an individual is under the influence of cannabis and to predict substance addiction. The Company's corporate head office is located at 77 King Street W, Suite 3000, Toronto, Ontario, Canada, M5K 1G8.
2. Basis of Presentation and Going Concern Basis of Preparation
These consolidated financial statements have been prepared on the historical cost basis except for financial instruments recorded at fair value. In addition, these consolidated financial statements have been prepared using the accrual basis of accounting, except for cash flow information. The functional currency of the Company and its subsidiaries is the Canadian dollar, which is also the Company's reporting currency.
Statement of Compliance
The consolidated financial statements have been prepared in accordance with International Accounting Standards ("IAS") 1, "Presentation of Consolidated Financial Statements" using accounting policies consistent with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC").
Basis of Consolidation
These consolidated financial statements include the accounts of the Company and its subsidiaries; Cultivar Holdings Ltd. and Cann from the date of acquisition. The Company has a 100% interest in Cann and in Cultivar Holdings Ltd. The Company had a 49% interest in CJA which was sold on March 27, 2020 (see note 5). All inter-company transactions and balances have been eliminated on consolidation.
Going Concern Assumption
These consolidated financial statements have been prepared using IFRS on a going concern basis, which presumes the realization of assets and discharge of liabilities in the normal course of business, for the next fiscal year. At January 31, 2021, the Company had cash of $480,051, working capital of $612,091 and an accumulated deficit of $4,133,011. The continuing operations of the Company are dependent on funding provided by equity investors. The Company intends to finance its future requirements through a combination of equity and/or debt issuance. There is no assurance that the Company will be able to obtain such financings or obtain them on favorable terms.
This uncertainty may cast significant doubt about the ability of the Company to continue as a going concern. These consolidated financial statements do not include any adjustments to the carrying value or presentation of assets or liabilities that might be necessary should the Company be unable to continue as a going concern. These adjustments could be material.
2. Basis of Presentation and Going Concern (Cont'd) Significant Accounting Judgments and Estimates
The preparation of these consolidated financial statements in compliance with IFRS requires management to make certain critical accounting estimates and assumptions. These estimates and assumptions affect the reported amounts of assets, liabilities, shareholders' equity, and the disclosure of contingent assets and liabilities, as at the date of the financial statements, and expenses for the years reported.
Critical Judgements
The preparation of these consolidated financial statements requires management to make judgements regarding the going concern of the Company (discussed above), as well as the determination of functional currency. The functional currency is the currency of the primary economic environment in which an entity operates and has been determined for each entity within the Company. The functional currency for the Company and its subsidiaries has been determined to be the Canadian dollar.
Key Sources of Estimation Uncertainty
Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates and such differences could be significant.
Significant estimates made by management affecting the consolidated financial statements include: Share-based payments
Estimating fair value for granted stock options requires determining the most appropriate valuation model which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the option, volatility, dividend yield, and rate of forfeitures and making assumptions about them.
Deferred tax assets & liabilities
The estimation of income taxes includes evaluating the recoverability of deferred tax assets and liabilities based on an assessment of the Company's ability to utilize the underlying future tax deductions against future taxable income prior to expiry of those deductions. Management assesses whether it is probable that some or all of the deferred income tax assets and liabilities will not be realized. The ultimate realization of deferred tax assets and liabilities is dependent upon the generation of future taxable income, which in turn is dependent upon the successful discovery, extraction, development and commercialization of mineral reserves. To the extent that management's assessment of the Company's ability to utilize future tax deductions changes, the Company would be required to recognize more or fewer deferred tax assets or liabilities, and deferred income tax provisions or recoveries could be affected.
2. Basis of Presentation and Going Concern (Cont'd)
Significant Accounting Judgments and Estimates (Cont'd)
Key Sources of Estimation Uncertainty (Cont'd)
Useful life of property and equipment
Property and equipment is depreciated over its estimated useful life. Estimated useful lives are determined based on current facts and past experience and takes into consideration the anticipated physical life of the asset, the potential for technological obsolescence, and regulations.
Leases
The Company estimates the lease term by considering the facts and circumstances that can create an economic incentive to exercise an extension option, or not exercise a termination option by assessing relevant factors such as store profitability. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). The assessment of the lease term is reviewed if a significant event or a significant change in circumstance occurs, which affects this assessment and that is within the control of the lessee. The Company estimates the incremental borrowing rate used to measure our lease liability for each lease contract. This includes estimation in determining the asset-specific security impact.
COVID-19 Estimation Uncertainty
In March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, potentially leading to an economic downturn. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company's business or ability to raise funds.
Approval of the consolidated financial statements
These consolidated financial statements were authorized for issuance by the Board of Directors on May 31, 2021.
3. Significant Accounting Policies
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.
Cash
Cash comprises of cash held at banks and amounts held in trust. The majority of the Company's cash is held in trust. The Company does not invest in any asset-backed deposits or investments.
Income taxes
Income tax on profit or loss for the period comprises of current and deferred tax. Current tax is the expected tax paid or payable on the taxable income for the period, using tax rates enacted or substantively enacted at the statement of financial position date, and any adjustment to tax paid or payable in respect of previous periods.
Deferred tax is recorded by providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that
the related tax benefit will be realized. The effect on deferred tax assets and liabilities of a change in income tax rates is recognized in the period that includes the date of the enactment or substantive enactment of the change. Deferred tax assets and liabilities are presented separately except where there is a right of set-off within fiscal jurisdictions
Foreign currency translation
Foreign currency transactions are translated into Canadian dollars as follows:
At the transaction date, each asset, liability, revenue and expense denominated in a foreign currency is translated into Canadian dollars by the use of the exchange rate in effect at that date. At the period- end date, unsettled monetary assets and liabilities are translated into Canadian dollars by using the exchange rate in effect at the year-end date and the related translation differences are recognized in net loss.
Non-monetary assets and liabilities that are measured at historical cost are translated into Canadian dollars by using the exchange rate in effect at the date of the initial transaction and are not subsequently restated. Non-monetary assets and liabilities that are measured at fair value or a revalued amount are translated into Canadian dollars by using the exchange rate in effect at the date the value is determined, and the related translation differences are recognized in net loss or other comprehensive loss consistent with where the gain or loss on the underlying non-monetary asset or liability has been recognized.
3. Significant Accounting Policies (Cont'd)
Share Capital
Common shares and warrants are classified as shareholders' equity. Incremental costs directly attributable to the issue of common shares are recognized as a reduction of shareholders' equity, net of tax.
The Company has adopted a relative fair value method with respect to the measurement of common shares and warrants issued as private placement units. The relative fair value method allocates value to each component on a pro-rata basis, based on the fair value of the components calculated independently of one another. The Company considers the market value of the common shares issued as fair value and measures the fair value of the warrant component of the unit using the Black-Scholes option pricing model. The unit value is then allocated, pro-rata, between the two components, with fair value attributed to the warrants being recorded to the Company's warrant reserve.
Loss per share
Loss per share is computed by dividing the net loss applicable to common shares of the Company by the weighted average number of common shares outstanding for the relevant period.
Diluted loss per common share is computed by dividing the net loss applicable to common shares by the sum of the weighted average number of common shares issued and outstanding and all additional common shares that would have been outstanding, if potentially dilutive instruments were converted.
Share-based payments
The Company grants stock options to buy common shares of the Company to consultants and service providers. The Company recognizes share-based compensation expense based on the estimated fair value of the options. A fair value measurement is made for each vesting instalment within each option grant and is determined using the Black-Scholes option-pricing model. The fair value of the options is recognized over the vesting period of the options granted as both share-based compensation expense and reserves. This includes a forfeiture estimate, which is revised for actual forfeitures in subsequent periods. The reserves account is subsequently reduced if the options are exercised, and the amount initially recorded is then credited to capital stock.
In situations where equity instruments are issued to non-employees and some or all of the goods or services received by the entity as consideration cannot be specifically identified, they are measured at the fair value of the share-based payment. Otherwise, share-based payments are measured at the fair value of the goods or services received.
3. Significant Accounting Policies (Cont'd)
Property and equipment:
Property and equipment is carried at cost, less accumulated amortization and accumulated impairment losses. The cost of the item of property and equipment consists of the purchase price, and any costs directly attributable to bringing the asset to the location and condition necessary for its intended use. An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on disposal of the asset, determined as the difference between the net disposal proceeds and the carrying amount of the asset, is recognized in the consolidated statement of loss and comprehensive loss. The cost of repairs and maintenance is expensed as incurred.
The Company amortizes its property and equipment using the following rates:
Equipment | 30% per annum, declining balance |
Intangible assets
Intangible assets are measured at cost less accumulated amortization and accumulated impairment losses. Amortization is recorded on a straight-line basis over the estimated useful life of the asset acquired, which varies depending on the nature of the intangible asset. Intangible assets are amortized from the date when they are available for use.
The estimated useful life is reviewed at the end of each reporting period with the effect of any changes in estimate being accounted for on a prospective basis. Internally incurred development costs are recognized as intangible assets when the following criteria are met:
a) it is technically feasible to complete the intangible asset so that it will be available for use;
b) management intends to complete the intangible asset and use or sell it;
c) there is an ability to use or sell the intangible asset;
d) it can be demonstrated how the intangible asset will generate probable future economic benefits;
e) adequate technical, financial and other resources to complete the development and to use or sell the intangible asset are available; and
f) the expenditure attributable to the intangible asset during its development can be reliably measured.
Intangible assets may relate to the Company's external development expenditures in relation to intellectual property development. Development expenditures that do not meet these criteria are recognized as an expense as incurred. Intangible assets with definite lives are assessed for impairment whenever there is an indication that the intangible asset may be impaired. These intangible assets will be amortized when they are ready for use. The amortization period and the amortization method are reviewed at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates on a prospective basis.
3. Significant Accounting Policies (Cont'd)
Impairment
The carrying amount of the Company's assets is reviewed for an indication of impairment at the end of each reporting period. If an indication of impairment exists, the Company makes an estimate of the asset's recoverable amount. Individual assets are grouped for impairment assessment purposes at the lowest level at which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets. Recoverable amount of an asset group is the higher of its fair value less costs to sell and its value in use. In assessing value in use, the estimated future cash flows are adjusted for the risks specific to the asset group and are discounted to their present value using a pre- tax discount rate that reflects current market assessments of the time value of money.
Where the carrying amount of an asset group exceeds its recoverable amount, the asset group is considered impaired and is written down to its recoverable amount. Impairment losses are recognized in profit or loss.
An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation, if no impairment loss had been recognized.
Financial Instruments
Financial assets and financial liabilities are recognized on the consolidated statements of financial position when the Company becomes a party to the contractual provisions of the financial instrument.
The following is the Company's accounting policy for financial instruments under IFRS 9:
Classification
The Company classifies its financial instruments in the following categories: at fair value through profit and loss ("FVTPL"), at fair value through other comprehensive income (loss) ("FVTOCI") or at amortized cost. The Company determines the classification of financial assets at initial recognition. The classification of debt instruments is driven by the Company's business model for managing the financial assets and their contractual cash flow characteristics. Equity instruments that are held for trading are classified as FVTPL. For other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument-by-instrument basis) to designate them as at FVTOCI. Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or if the Company has opted to measure them at FVTPL.
3. Significant Accounting Policies (Cont'd)
Financial Instruments (Cont'd)
Measurement
Financial assets and liabilities at amortized cost
Financial assets and liabilities at amortized cost are initially recognized at fair value plus or minus transaction costs, respectively, and subsequently carried at amortized cost less any impairment.
Financial assets and liabilities at FVTPL
Financial assets and liabilities carried at FVTPL are initially recorded at fair value and transaction costs are expensed in the consolidated statements of loss and comprehensive loss. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are included in the consolidated statements of loss and comprehensive loss in the period in which they arise.
Debt investments at FVOCI
These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.
Equity investments at FVOCI
These assets are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in OCI and are never reclassified to profit or loss.
Impairment of financial assets at amortized cost
The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost. At each reporting date, the Company measures the loss allowance for the financial asset at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the financial asset has not increased significantly since initial recognition, the Company measures the loss allowance for the financial asset at an amount equal to the twelve month expected credit losses. The Company shall recognize in the consolidated statements of loss and comprehensive loss, as an impairment gain or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized.
Derecognition
Financial assets
The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all of the associated risks and rewards of ownership to another entity.
3. Significant Accounting Policies (Cont'd) Financial Instruments (Cont'd)
Financial liabilities
The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled or expired. The Company also derecognizes a financial liability when the terms of the liability are modified such that the terms and / or cash flows of the modified instrument are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.
Gains and losses on derecognition are generally recognized in profit or loss.
The Company's financial assets and liabilities are classified as follows:
Asset or Liability | Classification |
Cash | FVTPL |
Loans and advances | Amortized cost |
Accounts payable | Amortized cost |
The Company determines the fair value of financial instruments according to the following hierarchy based on the amount of observable inputs used to value the instrument.
Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2 - Pricing inputs are other than quoted prices in active markets included in Level 1. Prices in Level 2 are either directly or indirectly observable as of the reporting date. Level 2 valuations are based on inputs, including quoted forward prices for commodities, time value and volatility factors, which can be substantially observed or corroborated in the marketplace.
Level 3 - Valuations in this level are those with inputs for the asset or liability that are not based on observable market data.
Cash has been measured at fair value using Level 1 inputs.
Impairment of financial assets
Financial assets are assessed at each reporting date to determine whether there is objective evidence that they are impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.
An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset's original effective interest rate. Losses are recognized in profit or loss and reflected in a separate line item. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.
3. Significant Accounting Policies (Cont'd) Leases and right-of-use assets
All leases are accounted for by recognizing a right-of-use asset and a lease liability except for:
• Leases of low value assets; and
• Leases with a duration of twelve months or less.
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by the incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate.
On initial recognition, the carrying value of the lease liability also includes:
• Amounts expected to be payable under any residual value guarantee;
• The exercise price of any purchase option granted if it is reasonably certain to assess that option;
• Any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised.
Right-of-use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for:
• Lease payments made at or before commencement of the lease;
• Initial direct costs incurred; and
• The amount of any provision recognized where the Company is contractually required to dismantle, remove or restore the leased asset.
Lease liabilities, on initial measurement, increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortized on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if this is judged to be shorter than the lease term.
When the Company revises its estimate of the term of any lease, it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted at the same discount rate that applied on lease commencement. The carrying value of lease liabilities is similarly revised when the variable element of future lease payments dependent on a rate or index is revised. In both cases an equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortized over the remaining (revised) lease term.
3. Significant Accounting Policies (Cont'd)
New standards adopted
Effective February 1, 2020, the Company adopted the amendments that were issued by the International Accounting Standards Board on October 22, 2018, to IFRS 3 Business Combinations, which clarified the classification of whether a transaction results in an asset or a business acquisition. The amendments include an election to use a concentration test. This is a simplified assessment that results in an asset acquisition if substantially all of the fair value of the gross assets is concentrated in a single identifiable asset or a group of similar identifiable assets. If a preparer chooses not to apply the concentration test, or the test is failed, then the assessment focuses on the existence of a substantive process. The adoption of the amendment to IFRS 3 had no impact on the Company's consolidated financial statements for the year ended January 31, 2021.
4. Acquisitions
During the year ended January 31, 2020, the Company completed the following acquisition:
Effective September 23, 2019, the Company was part of a three-cornered amalgamation among the Company, 2693980 Ontario Inc. (a wholly owned subsidiary) and Cultivar Holdings Ltd. (the "Transaction"). The result of the transaction was that Admiral acquired all the issued and outstanding securities of Cultivar Holdings Ltd. on the basis of one share of Admiral for each share of former Cultivar. All outstanding warrants to purchase former Cultivar shares were exchanged, on an equivalent basis, for warrants to purchase shares of the Company. At completion of the transaction, Admiral changed its name to Cultivar Holdings Inc. and former Cultivar was amalgamated into 2693980 Ontario Inc.
Under IFRS, this was considered a Reverse Merger and Recapitalization (commonly referred to as a Reverse Take Over or "RTO"). The Company issued 6,514,249 shares valued at $0.21 per share, with a total value of $1,367,992 for the acquisition.
The fair value of the acquired assets and liabilities assumed is as follows:
| | | |
Assets acquired by the Company: | | | |
Cash | $ | 3,448 | |
Prepaid expenses | | 1,125 | |
Liabilities assumed by the Company: | | | |
Accounts payable and accrued liabilities | | (19,127 | ) |
Loans payable | | (107,525 | ) |
Net liabilities assumed | | (122,079 | ) |
Fair value of shares issued | | (1,367,992 | ) |
Loss on acquisition | $ | (1,490,071 | ) |
5. Sale of interest in Cultivar JA Limited
On March 27, 2020, the Company entered into a sale agreement (the "Sale Agreement") with respect to its 49% interest in Cultivar JA Limited ("Cultivar JA"), which holds a provisional cannabis cultivation license in Jamaica.
Pursuant to the terms of the Sale Agreement, the Company's wholly-owned subsidiary, Cultivar Holdings Ltd., agreed to sell its 49% interest in Cultivar JA and all related royalty interests to the principals of Cultivar JA in exchange for the principals of Cultivar JA agreeing to return and cancel 4,000,000 common shares of the Company owned by the principals. In addition, the principals also agreed to terminate their right to receive an additional 500,000 common shares of the Company which had been reserved for issuance upon Jamaica's Licensing Authority issuing final approval for Cultivar JA's license.
The sale agreement constituted a discontinued operation involving the loss of control of Cultivar JA by the Company. A discontinued operation is a component of the Company's business that represents a separate major line of business or a geographical area of operations that has been disposed of or is held for sale. Classification as a discontinued operation occurs upon disposal or earlier if the operation meets the criteria to be classified as held for sale. When an operation is classified as a discontinued operation the comparative statement of comprehensive loss and cash flow operation is re-presented as if the operation had been discontinued from the start of the comparative period.
The sale agreement constituted a discontinued operation of the Company effective March 27, 2020. As a result, all the assets and liabilities of Cultivar JA have been removed from the statement of financial position of the Company. The cancellation of 4,000,000 shares of the Company have been valued at $540,000, being the fair value of the shares on the date of the sale transaction.
The expenses of Cultivar JA have been determined to be a discontinued operation by the Company, and as a result, have been disclosed separately on the statement of income (loss) and comprehensive income (loss)
| | | | | | |
| | For the | | | For the | |
| | year | | | year | |
| | ended | | | ended | |
| | January 31, 2021 | | | January 31, 2020 | |
Expenses: | | | | | | |
Administration and general | $ | - | | $ | 3,327 | |
Amortization | | 2,871 | | | 17,804 | |
Interest expense | | 687 | | | 4,165 | |
Legal fees | | - | | | 4,432 | |
Samples and testing | | - | | | 260 | |
Travel, entertainment and related | | 2,014 | | | 8,004 | |
Net loss for the period prior to the sale transaction | | (5,572 | ) | | (37,992 | ) |
Gain on divestiture | | 351,868 | | | - | |
Income (loss) from discontinued operations, net of tax | $ | 346,296 | | $ | (37,992 | ) |
5. Sale of interest in Cultivar JA Limited (Cont'd)
Prior year's statement of loss and comprehensive loss was reclassified as follows:
| | January 31, | | | Reclassification | | | January 31, | |
| | 2020 | | | | | | 2020 - | |
| | | | | | | | reclassified | |
Expenses: | | | | | | | | | |
Administration and general | $ | 15,537 | | $ | (3,327 | ) | $ | 12,210 | |
Amortization | | 19,475 | | | (17,804 | ) | | 1,671 | |
Audit and accounting | | 56,647 | | | - | | | 56,647 | |
Consulting fees | | 135,631 | | | - | | | 135,613 | |
Interest expense | | 4,165 | | | (4,165 | ) | | - | |
Legal fees | | 126,975 | | | (4,432 | ) | | 122,543 | |
Management fees | | 263,066 | | | - | | | 263,066 | |
Patent and trademark expenses | | 5,930 | | | - | | | 5,930 | |
Rent expense | | 18,000 | | | - | | | 18,000 | |
Research and development | | 73,733 | | | - | | | 73,733 | |
Samples and testing | | 260 | | | (260 | ) | | - | |
Share based compensation | | 10,387 | | | - | | | 10,387 | |
Transfer agent and filing fees | | 25,122 | | | - | | | 25,122 | |
Travel, entertainment and related | | 59,893 | | | (8,004 | ) | | 51,889 | |
Vehicle use expenses | | 6,000 | | | - | | | 6,000 | |
| | (820,821 | ) | | 37,992 | | | (782,892 | ) |
| | | | | | | | | |
Income (loss) from discontinued operations | | - | | | (37,992 | ) | | (37,992 | ) |
Loss from acquisition of subsidiary | | (1,490,071 | ) | | - | | | (1,490,071 | ) |
Loss on comprehensive loss | $ | (2,310,892 | ) | $ | - | | $ | (2,310,892 | ) |
6. Prepaid Expenses
Prepaid expenses as of January 31, 2021 include $70,060 to conduct a study to further validate its proprietary impairment detection technology for both alcohol and cannabis (January 31, 2020 - $70,060).
7. Property and Equipment
| | Equipment | | | Leasehold Improvement
| | | Total | |
Cost | | | | | | | | | |
Balance as at January 31, 2019 | $ | 8,585 | | $ | 9,916 | | $ | 18,501 | |
Additions | | 13,368 | | | - | | | 13,368 | |
Balance as at January 31, 2020 | $ | 21,953 | | $ | 9,916 | | $ | 31,869 | |
Discontinuance of business (Note 5) | | (8,585 | ) | | (9,916 | ) | | (18,501 | ) |
Balance as at January 31, 2021 | $ | 13,368 | | $ | - | | $ | 13,368 | |
| | | | | | | | | |
Accumulated Amortization | | | | | | | | | |
| | | | | | | | | |
Balance as at January 31, 2019 | $ | 2,146 | | $ | 2,249 | | $ | 4,395 | |
Amortization | | 3,603 | | | 3,680 | | | 7,283 | |
Balance as at January 31, 2020 | $ | 5,749 | | $ | 5,929 | | $ | 11,678 | |
Amortization | | 3,509 | | | - | | | 3,509 | |
Discontinuance of business (Note 5) | | (4,078 | ) | | (5,929 | ) | | (10,007 | ) |
Balance as at January 31, 2021 | $ | 5,180 | | $ | - | | $ | 5,180 | |
| | | | | | | | | |
Net Carrying Amounts | | | | | | | | | |
| | | | | | | | | |
As at January 31, 2020 | $ | 16,204 | | $ | 3,987 | | $ | 20,191 | |
| | | | | | | | | |
As at January 31, 2021 | $ | 8,188 | | $ | - | | $ | 8,188 | |
8. Intangible Assets
a) On July 21, 2020, the Company completed the acquisition of MobileWellbeing ("MWB"), an innovative, feature rich, Telemedicine Remote Patient Monitoring platform that will integrate with the Company's Artificial Intelligence ("AI") driven rapid screening system for infectious diseases, including COVID-19.
The consideration for the purchase was satisfied by payment in cash for $25,000, issuance of 20,000 shares and additional 30,000 shares to be issued on the 90th day of close. Consideration paid in the form of equity instruments is being considered share- based payment within the scope of IFRS 2 Share-based Payment and this asset acquisition is fair valued for a total consideration for $78,000 at the point control was obtained.
The acquisition has contingent considerations and royalty payments on achievement of certain milestones. The Company shall pay royalty of 20 percent of gross sales from the first $2.5 million in sales generated exclusively from the MWB platform. In addition, the Company is obligated to issue an additional 200,000 common shares commencing with the release of the initial version of the MWB platforms to the market and achievement of sales related milestones.
Contingent consideration in an asset acquisition was discussed at the March 2016 IFRS Interpretations Committee (IFRIC) meeting. An accounting policy choice exists, therefore an entity may recognize a liability for the expected variable payments at the time control of the underlying asset is obtained or they may only recognize such a liability as the related activity that gives rise to the variability occurs. The Company has opted to recognize the liability only when the related activity that gives rise to the variability occurs.
8. Intangible Assets (Cont'd)
Consideration | | | |
Cash consideration on closing | $ | 25,000 | |
Issued shares (50,000 shares issued at $1.06/share) | | 53,000 | |
| $ | 78,000 | |
Purchase Price allocation | | | |
Intangible asset- MWB remote patient monitoring platform | $ | 78,000 | |
| $ | 78,000 | |
b) The Company's other intangible asset relates to the development of infectious disease symptom screening solution ("IDSS").
These intangible assets are currently in the development phase and are not in use. Amortization will be recorded on these intangible assets from the date when they are put to use.
The Company's intangible assets are comprised of the following:
| | MWB | | | IDSS | | | Total | |
| | | | | | | | | |
Cost | | | | | | | | | |
| | | | | | | | | |
Balance at January 31, 2020 | $ | - | | $ | - | | $ | - | |
| | | | | | | | | |
Acquisition | | 78,000 | | | - | | | 78,000 | |
| | | | | | | | | |
Additions | | 13,970 | | | 156,040 | | | 170,010 | |
| | | | | | | | | |
Balance at January 31, 2021 | $ | 91,970 | | $ | 156,040 | | $ | 248,010 | |
| | | | | | | | | |
Net Book Value | | | | | | | | | |
| | | | | | | | | |
Balance, January 31, 2020 | $ | - | | $ | - | | $ | - | |
| | | | | | | | | |
Balance, January 31, 2021 | $ | 91,970 | | $ | 156,040 | | $ | 248,010 | |
9. Leases
Right-of-use assets of $nil (January 31, 2020- $12,192) and total lease liability of $nil (January 31, 2020- $15,189) have been removed from the statement of financial position of the Company as of January 31, 2021 on account of the sale of Company's interest in Cultivar JA (Note 5).
Right of use assets
The Company's right of use assets as at January 31, 2020 and 2021 were as follows:
| | | |
Balance at adoption, February 1, 2019 | $ | 24,384 | |
Amortization | | (12,192 | ) |
Balance as at January 31, 2020 | $ | 12,192 | |
Amortization | | (2,871 | ) |
Discontinuance of business (Note 5) | | (9,321 | ) |
As at January 31, 2021 | $ | - | |
Lease liability
At the commencement date of the leases, the lease liability was measured at the present value of the lease payments that were not paid at that date. The lease payments are discounted using an interest rate of 18% which is the Company's incremental borrowing rate.
Lease liability interest expense recognized in profit and loss and lease payments recognized in the financing component of statement of cash flows are as follows:
| | | |
Balance at adoption, February 1, 2019 | $ | 24,384 | |
Interest expense | | 4,165 | |
Lease payments made during the year | | (13,360 | ) |
Balance as at January 31, 2020 | $ | 15,189 | |
Interest expense | | 687 | |
Lease payments made during the year | | (2,129 | ) |
Discontinuance of business (Note 5) | | (13,747 | ) |
As at January 31, 2021 | $ | - | |
The Company's lease liability as at January 31, 2021 and 2020 was as follows:
| | January 31, | | | January | |
| | 2021 | | | 31, 2020 | |
Lease liability - current | $ | - | | $ | 11,921 | |
Lease liability - non- current | | | | | 3,268 | |
Total lease liability | $ | - | | $ | 15,189 | |
10. Stock-based Compensation
The Company has established a stock option plan whereby officers, directors, employees and service providers may be granted options to purchase common shares at a fixed price. Vesting and expiry provisions are determined at the date of grant. The plan provides for the issuance of stock options to acquire up to 10% of the Company's issued and outstanding capital. The plan is a rolling plan as the number of shares reserved for issuance pursuant to the grant of stock options will increase as the Company's issued and outstanding share capital increases.
a) In October 2018, the Company granted options to a consultant to acquire a total of 250,000 common shares. These options were issued at an exercise price of $0.10 per share and vested 75,000 immediately, 37,500 at the date of engineering milestone (vested during the quarter ended July 31, 2019) and balance 137,500 on completion of additional milestones, including 75,000 on model development (vested during the quarter ended October 31, 2019) and 62,500 on project handover with an expiry term of two years. These options expired unexercised in October 2020. The fair value of each option used for the purpose of estimating the stock-based compensation was estimated using the Black-Scholes option pricing model with the following assumptions:
Risk free rate | | 2.26% | |
Expected dividends | | 0% | |
Expected forfeiture rate | | 0% | |
Expected volatility | | 100% | |
Expected life | | 2 years | |
Unvested stock-based compensation expense as of January 31, 2021 | $ | - | |
During the year ended January 31, 2021, the Company expensed $3,311 (2020 - $5,961), resulting in unvested stock-based compensation expense of $nil as of January 31, 2021.
b) In November 2018, the Company granted options to a consultant to acquire a total of 100,000 common shares. These options were issued at an exercise price of $0.10 per share and vested 25,000 immediately, and 25,000 each on April 1, 2019, September 1, 2019 and March 1, 2020 with an expiry term of three years. The fair value of each option used for the purpose of estimating the stock-based compensation is estimated using the Black-Scholes option pricing model with the following assumptions:
Risk free rate | | 2.30% | |
Expected dividends | | 0% | |
Expected forfeiture rate | | 0% | |
Expected volatility | | 100% | |
Expected life | | 3 years | |
Unvested stock-based compensation expense as of January 31, 2021 | $ | - | |
During the year ended January 31, 2021, the Company expensed $260 (2020 - $4,426), resulting in unvested stock-based compensation expense of $nil as of January 31, 2021.
10. Stock-based compensation (Cont'd)
c) On April 6, 2020, the Company granted options to its directors, officers and consultants to purchase up to 9,850,000 common shares. These options were issued at an exercise price of $0.15 per share and have varying vesting periods, with the majority being in equal installments over a quarterly basis throughout the term. These options have a term of one (1) year expiring on April 6, 2021. The fair value of each option used for the purpose of estimating the stock-based compensation is estimated using the Black-Scholes option pricing model with the following assumptions:
Risk free rate | | 0.47% | |
Expected dividends | | 0% | |
Expected forfeiture rate | | 0% | |
Expected volatility | | 135% | |
Expected life | | 1 year | |
Unvested stock-based compensation expense as of January 31, 2021 | $ | - | |
During the year ended January 31, 2021, the Company expensed $742,833 relating to the vesting of options, resulting in unvested stock-based compensation expense of $nil as of January 31, 2021.
d) On July 17, 2020, the Company granted options to a consultant to purchase up to 80,000 common shares. These options were issued at an exercise price of $1.02 per share and vest one year after date of grant. These options have a term of five (5) years expiring on July 17, 2025. The fair value of each option used for the purpose of estimating the stock-based compensation is estimated using the Black-Scholes option pricing model with the following assumptions:
Risk free rate | | 0.35% | |
Expected dividends | | 0% | |
Expected forfeiture rate | | 0% | |
Expected volatility | | 207% | |
Expected life | | 5 years | |
Unvested stock-based compensation expense as of January 31, 2021 | $ | 34,246 | |
During the year ended January 31, 2021, the Company expensed $40,603 relating to the vesting of options, resulting in unvested stock- based compensation expense of $34,246 as of January 31, 2021.
e) On September 10, 2020, the Company granted options to a consultant to purchase up to 70,000 common shares. These options were issued at an exercise price of $0.54 per share and vest on completion of milestones, including 40,000 upon approval of a McGill University study and 30,000 upon completion of the study. The Company did not record any stock-based compensation on these options, as they have not yet vested as at January 31, 2021.
10. Stock-based compensation (Cont'd)
f) On September 17, 2020, the Company granted options to a consultant to purchase up to 200,000 common shares. These options were issued at an exercise price of $0.54 per share and vest on date of grant. These options expire on March 30, 2022. The fair value of each option used for the purpose of estimating the stock-based compensation is estimated using the Black-Scholes option pricing model with the following assumptions:
Risk free rate | | 0.26% | |
Expected dividends | | 0% | |
Expected forfeiture rate | | 0% | |
Expected volatility | | 189% | |
Expected life | | 1.5 years | |
Unvested stock-based compensation expense as of January 31, 2021 | $ | - | |
During the year ended January 31, 2021, the Company expensed $81,979, relating to the vesting of options, resulting in unvested stock- based compensation expense of $nil as of January 31, 2021.
g) On September 21, 2020, the Company granted options to a consultant to purchase up to 250,000 common shares. These options were issued at an exercise price of $0.59 per share and vest in equal installments over a quarterly basis throughout the term. These options have a term of one (1) year expiring on September 21, 2021. The fair value of each option used for the purpose of estimating the stock-based compensation is estimated using the Black-Scholes option pricing model with the following assumptions:
Risk free rate | | 0.23% | |
Expected dividends | | 0% | |
Expected forfeiture rate | | 0% | |
Expected volatility | | 188% | |
Expected life | | 1 year | |
Unvested stock-based compensation expense as of January 31, 2021 | $ | 18,958 | |
During the year ended January 31, 2021, the Company expensed $77,375 relating to the vesting of options, resulting in unvested stock- based compensation expense of $18,958 as of January 31, 2021.
As of January 31, 2021, there was $53,204 (January 31, 2020: $3,571) of unvested stock-based compensation expense.
Continuity of the Company's options is as follows:
| | | | | Weighted Average | |
| | Number of Options | | | Exercise Price | |
Outstanding, January 31, 2019 and 2020 | | 350,000 | | $ | 0.10 | |
Granted | | 10,450,000 | | $ | 0.18 | |
Expired | | (250,000 | ) | $ | 0.10 | |
Exercised | | (1,455,000 | ) | $ | 0.15 | |
Outstanding, January 31, 2021 | | 9,095,000 | | $ | 0.18 | |
10. Stock-based compensation (Cont'd)
As at January 31, 2021, the Company had the following share purchase options outstanding and exercisable:
| | | Remaining Life | |
Outstanding | Exercisable | Exercise Price | (Years) | Expiry Date |
8,495,000 | 8,495,000 | $0.15 | 0.18 | April 6, 2021 |
80,000 | - | $1.02 | 4.46 | July 17, 2025 |
70,000 | - | $0.54 | 1.10 | March 10, 2022 |
200,000 | 200,000 | $0.54 | 1.16 | March 30, 2022 |
250,000 | 125,000 | $0.59 | 0.64 | September 21, 2021 |
9,095,000 | 8,820,000 | $0.18 | 0.26 | |
11. Capital Stock
The Company is authorized to issue the following shares:
• Unlimited number of common shares without par value
a) Common shares
The holders of common shares are entitled to receive dividends which are declared from time to time and are entitled to one vote per share at meetings of the Company. All shares are ranked equally with regards to the Company's residual assets.
At January 31, 2021, the Company has 101,717,973 common shares issued and outstanding.
b) Share issuances
During the year ended January 31, 2021
• The Company cancelled 4,000,000 common shares pursuant to the sale of its interest in Cultivar JA (Note 5).
• 1,355,000 shares were issued upon exercise of 1,355,000 options at a price of $0.15 per share and 100,000 shares were issued upon exercise of 100,000 options at a price of $0.10 per share for total gross proceeds of $213,250. An amount of $108,435 was reclassed from share-based payment reserve to share capital.
• 100,000 shares were issued upon exercise of 100,000 warrants at a price of $0.50 per share for gross proceeds of $50,000. An amount of $7,481 was reclassed from warrant reserve to share capital.
• 50,000 shares were issued pursuant to the acquisition of MobileWellbeing ("MWB"), an innovative, feature rich, Telemedicine Remote Patient Monitoring platform (Note 8)
• 58,824 shares were issued at a price of $0.34 for a total consideration of $20,000. $8,333 was expensed to consulting services during the year ended January 31, 2021, while the remaining $11,667 is included in prepaid expenses as at January 31, 2021.
11. Capital Stock (Cont'd)
b) Share issuances (cont'd)
During the year ended January 31, 2020:
• The Company issued 800,000 common shares at $0.10 for services. This includes 550,000 common shares issued to a director valued at $55,000 (Note 12).
• On August 12, 2019, the Company closed a private placement of 3,296,000 units at $0.25 per unit for a consideration of $824,000. Each unit is comprised of one common share and one-half of one common share purchase warrant (each whole warrant, a "Warrant"), with each Warrant exercisable into a common share of the Company at an exercise price of $0.50 per share for a period of 24 months. The Black-Scholes option pricing model was used to determine the fair value of the warrants using the following weight average assumptions: Expected dividend yield of 0%; risk free interest rate of 1%; expected volatility of 100%; expected life of 2 years. The relative fair value of the warrants has been valued at $123,283 and common shares at $700,717 ($0.21). In connection with this private placement, the Company issued 66,400 shares as finders' fee, and incurred an additional $95,445 in share issuance costs.
• The Company issued 6,514,249 shares in connection with the acquisition discussed in Note 4.
• On January 10, 2020, the Company issued 100,000 shares for financial media marketing and investor services for a total consideration of $25,000, to be provided over the period commencing October 28, 2019 and ending on November 1, 2020 (the "Term").
c) Warrants
Continuity of the Company's warrants is as follows:
| | Number of Warrants | | | Weighted Average Exercise Price | |
Outstanding, January 31, 2019 | | - | | $ | - | |
Issued | | 1,648,000 | | $ | 0.50 | |
Outstanding, January 31, 2020 | | 1,648,000 | | $ | 0.50 | |
Exercised | | (100,000 | ) | $ | 0.50 | |
Outstanding, January 31, 2021 | | 1,548,000 | | $ | 0.50 | |
As at January 31, 2021, the Company had the following warrants outstanding:
Outstanding | Exercise Price | Remaining Life (Years) | Expiry Date |
1,548,000 | $0.50 | 0.53 | August 11, 2021 |
12. Related Party Transactions
Related parties include key management personnel, the Board of Directors, close family members and enterprises that are controlled by these individuals as well as certain persons performing similar functions. Key management of the Company are members of the Board of Directors, the Chief Executive Officer ("CEO"), the Chief Financial Officer ("CFO") and the Chief Operating Officer ("COO").
Transactions with key management personnel not disclosed elsewhere in the financial statements include the following:
| | Year ended | | | Year ended | |
| | January 31, 2021 | | | January 31, 2020 | |
Management fees to the CEO | $ | 99,500 | | $ | 96,000 | |
Management fees to a prior director | | 6,000 | | | 54,000 | |
Management fees (issued in shares) to a director | | - | | | 55,000 | |
Management fees to the COO | | 68,000 | | | 20,000 | |
Management fees to the CFO | | 43,550 | | | 38,066 | |
Total Management fees | $ | 217,050 | | $ | 263,066 | |
Vehicle expense to the CEO | | 12,000 | | | 6,000 | |
Vehicle expenses to the COO | | 10,500 | | | - | |
Rent to the CEO included in rent expense | | 21,500 | | | 18,000 | |
| $ | 261,050 | | $ | 287,066 | |
On April 6, 2020, the Company granted options to its directors, officers and consultants to purchase up to 9,850,000 common shares. The Company expensed $286,575 on the vesting of options to directors and officers during the year ended January 31, 2021 (January 31, 2020: $nil)
During the year ended January 31, 2021, the Company paid $61,329 (2020: $nil) being marketing expenses to companies controlled by the children of the CEO.
As of January 31, 2021, there was $nil due to or from related parties (January 31, 2020 - $nil).
13. Commitments and Contingencies
Effective July 1, 2020, the Company signed a two-year contract with a corporation owned and controlled by the CEO to pay monthly compensation of $8,500 for CEO services. In addition, the Company is obligated to pay monthly rent for $2,000 and an additional $1,500 for the use of a personal vehicle.
Effective July 1, 2020, the Company signed a two-year contract with a corporation owned and controlled by the COO to pay monthly compensation of $7,000 for COO services. In addition, the Company is obligated to pay an additional $1,500 for the use of a personal vehicle.
14. Financial Instruments
The fair value of the Company's accounts payable, approximate carrying value, due to their short-term nature. The Company's cash is measured at fair value under the fair value hierarchy based on level one quoted prices in active markets for identical assets or liabilities.
Financial risk management and objectives
The Company's activities expose it to a variety of financial risks: credit risk, liquidity risk, and market risk (including interest rate risk, foreign currency risk, and commodity price risk).
The Company thoroughly examines the various financial risks to which it is exposed and assesses the impact and likelihood of those risks. Where material, these risks are reviewed and monitored by the Board of Directors.
Credit risk
Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. The Company is not exposed to significant credit risk.
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 liquidity and operating results may be adversely affected if its access to the capital market is hindered, whether as a result of a downturn in stock market conditions generally or matters specific to the Company. The Company generates cash flows primarily from its financing activities.
The Company manages its liquidity needs by carefully monitoring scheduled costs. Liquidity is measured in various time bands, on day to day and week-to-week basis, as well as on long term liquidity needs over 180 day to 360 day look out periods. Funding for long term liquidity needs is based on the ability of the Company to successfully complete private placements.
As at January 31, 2021, the Company had sufficient cash of $480,051 to settle current liabilities of $135,354.
Market Risk
Market risk is the risk of loss that may arise from changes in market factors such as interest rates, commodity and equity prices, and foreign exchange rates.
(a) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is not exposed to significant interest rate risk.
(b) Price risk
The Company is not exposed to significant price risk as it does not possess investments in publicly traded securities.
14. Financial Instruments (Cont'd)
Market Risk (Cont'd)
(c) Currency risk
Currency risk is the risk that the fair value of future cash flows of a financial instrument denominated in a foreign currency will fluctuate because of changes in foreign exchange rates. Effective sale of the Company's interest in Cultivar JA in March 2020, the Company has no exposure to any currency except Canadian dollars.
15. Capital Management
The Company considers its capital to be shareholders' equity, which is comprised of share capital and deficit, which as at January 31, 2021 totaled $868,289. The Company's capital structure is adjusted based on the funds available to the Company such that it may continue to seek new opportunities. The Board of Directors does not establish quantitative return on capital criteria, but rather relies on the expertise of management and other professionals to sustain future development of the business.
The sources of future funds presently available to the Company are through the sale of equity capital or debt of the Company. The ability of the Company to arrange such financing in the future will depend in part upon the prevailing capital market conditions as well as the business performance of the Company. There can be no assurance that the Company will be successful in its efforts to arrange additional financing, if needed, on terms satisfactory to the Company.
Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. The Company is not subject to externally imposed capital restrictions.
16. Segment Information
The Company, through its subsidiaries, is in the business of investment in technology to detect if an individual is under the influence of cannabis and to predict substance addiction. There are no revenues during the period. All assets are located in Canada.
17. Income Taxes
The following is a reconciliation of income taxes attributable to operations computed at the statutory tax rates to income tax recovery.
| | January 31, | | | January 31, | |
| | 2021 | | | 2020 | |
Loss for the period | $ | (1,584,533 | ) | $ | (2,310,892 | ) |
Tax rate | | 27% | | | 26% | |
Expected income tax recoverable at statutory rate | | (428,000 | ) | | (600,832 | ) |
Change due to acquisition, tax rates, and other | | (32,131 | ) | | (1,106,421 | ) |
Non-deductible items | | 166,000 | | | 397,905 | |
Share issuance costs | | (26,000 | ) | | (24,816 | ) |
Expired non-capital losses | | 350,282 | | | - | |
Change in unrecognized deductible temporary differences | | (30,151 | ) | | 1,334,164 | |
Total income tax recovery | $ | - | | $ | - | |
Deferred tax assets
The significant components of the Company's deferred tax assets that have not been included on the consolidated statement of financial position are as follows:
| | January 31, | | | January 31, | |
| | 2021 | | | 2020 | |
Non-capital losses available for future period | $ | 1,381,000 | | $ | 1,410,174 | |
Share issuance costs | | 19,000 | | | 17,941 | |
Property and equipment | | 1,000 | | | 3,036 | |
Total deferred tax assets | | 1,401,000 | | | 1,431,151 | |
Less: Unrecognized deferred tax assets | | (1,401,000 | ) | | (1,431,151 | ) |
Net deferred tax assets | $ | - | | $ | - | |
The significant components of the Company's unrecognized temporary differences and tax losses are as follows:
| | January 31, | | | | | | January 31, | |
| | 2021 | | | Expiry Date | | | 2020 | |
Non-capital losses | $ | 5,116,666 | | | 2027 - 2041 | | | 5,423,746 | |
Share issuance costs | $ | 69,003 | | | 2042 - 2044 | | | 69,003 | |
Property and equipment | $ | 5,180 | | | No expiry | | | 11,678 | |
Tax attributes are subject to review and potential adjustment by tax authorities.
18. Subsequent Events
• On March 5, 2021, the Company announced that it has that it closed a non-brokered private placement for gross proceeds of $1,090,085. A total of 3,114,529 units were issued at a price of $0.35 each. Each unit is comprised of one common share of the Company and one warrant, with each warrant exercisable into a common share at an exercise price of $0.50 per share for a period of two years.
• On March 23, 2021, the Company granted options to a consultant to purchase up to 250,000 common shares. These options were issued at an exercise price of $0.36 per share and vest immediately. These options expire one year from date of grant.
Predictmedix Inc. (formerly, Cultivar Holdings Inc.)
Consolidated Financial Statements
January 31, 2020
(Expressed in Canadian Dollars)
PREDICTMEDIX INC. (formerly Cultivar Holdings Inc.)
Table of contents
![](https://capedge.com/proxy/20FR12G/0001062993-21-005747/form20fr12gxm006.jpg)
INDEPENDENT AUDITORS' REPORT |
To the Shareholders of Predictmedix Inc. (formerly Cultivar Holdings Inc.):
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of Predictmedix Inc. (formerly Cultivar Holdings Inc.) (the "Company"), which comprise the consolidated statements of financial position as at January 31, 2020 and 2019, and the consolidated statements of loss and comprehensive loss, changes in shareholders' deficit and cash flows for the year ended January 31, 2020 and for the period from incorporation on December 6, 2017 to January 31, 2019, and notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of the Company as at January 31, 2020 and 2019, and its financial performance and its cash flows for the year ended January 31, 2020 and for the period from incorporation on December 6, 2017 to January 31, 2019 in accordance with International Financial Reporting Standards.
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Information other than the Consolidated Financial Statements and the Auditor's Report thereon
Management is responsible for the other information. The other information comprises the information, other than the consolidated financial statements and our auditor's report thereon, included in Management's Discussion and Analysis report.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor's report. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting process.
![](https://capedge.com/proxy/20FR12G/0001062993-21-005747/form20fr12gxm007.jpg)
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control;
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management;
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report.
However, future events or conditions may cause the Company to cease to continue as a going concern;
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the financial statements.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
The engagement partner on the audit resulting in this independent auditor's report is Mickey Goldstein.
| ![](https://capedge.com/proxy/20FR12G/0001062993-21-005747/form20fr12gxm004.jpg) |
Vancouver, BC | Buckley Dodds LLP |
June 1, 2020 | Chartered Professional Accountants |
Predictmedix Inc. (formerly Cultivar Holdings Inc.)
Consolidated Statements of Financial Position
(in Canadian dollars)
| | | | | | |
ASSETS | | January 31, 2020 | | | January 31, 2019 | |
CURRENT | | | | | | |
Cash | $ | 1,493,577 | | $ | 1,558,949 | |
Sales tax receivable | | 10,133 | | | - | |
Loans and advances | | - | | | 68,526 | |
Deferred costs | | - | | | 61,474 | |
Prepaid expenses (Note 6) | | 130,669 | | | 26,672 | |
| | 1,634,379 | | | 1,715,621 | |
Property and equipment (Note 7) | | 20,191 | | | 14,106 | |
Right-of-use asset (Note 14) | | 12,192 | | | - | |
TOTAL ASSETS | $ | 1,666,762 | | $ | 1,729,727 | |
| | | | | | |
LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | |
LIABILITIES | | | | | | |
CURRENT | | | | | | |
| | | | | | |
Accounts payable and accrued liabilities | $ | 67,917 | | $ | 47,113 | |
Lease liability current portion (Note 15) | | 11,921 | | | - | |
| | 79,838 | | | 47,113 | |
Lease liability non current portion (Note 15) | | 3,268 | | | - | |
TOTAL LIABILITIES | | 83,106 | | | 47,113 | |
| | | | | | |
SHAREHOLDERS' EQUITY | | | | | | |
Share Capital (Note 9) | | 4,119,484 | | | 2,041,220 | |
Warrant reserve (Note 9) | | 123,283 | | | - | |
Share-based payment reserve (Note 9) | | 15,922 | | | 5,535 | |
Accumulated deficit | | (2,611,940 | ) | | (320,423 | ) |
| $ | 1,646,749 | | $ | 1,726,332 | |
Non-controlling interest | | (63,093 | ) | | (43,718 | ) |
TOTAL SHAREHOLDERS' EQUITY | | 1,583,656 | | | 1,682,614 | |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 1,666,762 | | $ | 1,729,727 | |
Organization and nature of operations (Note 1)
Basis of presentation and going concern (Note 2)
Commitment and contingencies (Note 11)
Subsequent events (Note 18)
Approved on behalf of the Board of Directors:
/Sheldon Kales/
___________________________________________
Signed: Sheldon Kales, CEO and Director
/Rahul Kushwah/
___________________________________________
Signed: Rahul Kushwah, COO and Director
The accompanying notes are an integral part of these consolidated financial statements
Predictmedix Inc. (formerly Cultivar Holdings Inc.)
Consolidated Statements of Loss and Comprehensive Loss
(in Canadian dollars)
| | Year | | | For the period from | |
| | ended | | | incorporation on | |
| | January 31, | | | December 6, 2017 to | |
| | 2020 | | | January 31, 2019 | |
| | | | | | |
Expenses: | | | | | | |
Administration and general | $ | 15,537 | | $ | 33,526 | |
Amortization (Notes 7, 14) | | 19,475 | | | 4,395 | |
Audit and accounting | | 56,647 | | | - | |
Consulting fees | | 135,631 | | | - | |
Interest expense (Note 15) | | 4,165 | | | - | |
Legal fees | | 126,975 | | | 86,840 | |
Management fees (Note 10) | | 263,066 | | | 59,955 | |
Patent and trademark expenses | | 5,930 | | | 17,288 | |
Rent expense (Note 10) | | 18,000 | | | 32,366 | |
Research and development | | 73,733 | | | 49,205 | |
Samples and testing | | 260 | | | 21,886 | |
Share based compensation (Note 8) | | 10,387 | | | 5,535 | |
Taxes and related | | - | | | 2,697 | |
Transfer agent and filing fees | | 25,122 | | | - | |
Travel, entertainment and related | | 59,893 | | | 47,518 | |
Vehicle use expenses (Note 10) | | 6,000 | | | 4,750 | |
| | (820,821 | ) | | (365,961 | ) |
Gain on foreign exchange | | - | | | 1,820 | |
Loss from acquisition of subsidiary (Note 4) | | (1,490,071 | ) | | - | |
Loss and comprehensive loss | $ | (2,310,892 | ) | $ | (364,141 | ) |
| | | | | | |
Loss and comprehensive loss attributable to: | | | | | | |
Shareholders | $ | (2,291,517 | ) | $ | (320,423 | ) |
Non-controlling interest | $ | (19,375 | ) | $ | (43,718 | ) |
Loss per share-Basic and Diluted | $ | (0.024 | ) | $ | (0.006 | ) |
Weighted average number of shares outstanding-Basic and Diluted | | 97,820,135 | | | 57,369,525 | |
The accompanying notes are an integral part of these consolidated financial statements
Predictmedix Inc. (formerly Cultivar Holdings Inc.)
Consolidated Statement of Changes in Shareholders' Equity
(in Canadian dollars)
| | Number of | | | | | | | | | | | | | | | | | | | |
| | common shares | | | | | | | | | Share-based | | | Non-controlling | | | | | | | |
| | outstanding | | | Share capital | | | Warrant reserve | | | payment reserve | | | interest | | | Deficit | | | Total | |
| | | | | | | | | | | | | | | | | | | | | |
Balance, December 6, 2017 | | - | | $ | - | | $ | - | | $ | - | | $ | - | | $ | - | | $ | - | |
Seed Shares issued for cash | | 30,000,000 | | | 30 | | | - | | | - | | | - | | | - | | | 30 | |
Acquisition of CannIP Holdings Inc. | | 29,800,000 | | | 30 | | | - | | | - | | | - | | | - | | | 30 | |
Private placements | | 33,202,500 | | | 2,070,500 | | | - | | | - | | | - | | | - | | | 2,070,500 | |
Shares issued as finders' fees | | 275,000 | | | - | | | - | | | - | | | - | | | - | | | - | |
Share issuance cost | | - | | | (29,340 | ) | | - | | | - | | | - | | | - | | | (29,340 | ) |
Share-based compensation | | - | | | - | | | - | | | 5,535 | | | - | | | - | | | 5,535 | |
Net loss for the period | | - | | | - | | | - | | | - | | | (43,718 | ) | | (320,423 | ) | | (364,141 | ) |
| | | | | | | | | | | | | | | | | | | | | |
Balance as at January 31, 2019 | | 93,277,500 | | $ | 2,041,220 | | $ | - | | $ | 5,535 | | $ | (43,718 | ) | $ | (320,423 | ) | $ | 1,682,614 | |
| | | | | | | | | | | | | | | | | | | | | |
Private placement of units | | 3,296,000 | | | 700,717 | | | 123,283 | | | - | | | - | | | - | | | 824,000 | |
Shares issued as finders fees | | 66,400 | | | - | | | - | | | - | | | - | | | - | | | - | |
Shares issuance cost | | - | | | (95,445 | ) | | - | | | - | | | - | | | - | | | (95,445 | ) |
Shares issued for services | | 900,000 | | | 105,000 | | | - | | | - | | | - | | | - | | | 105,000 | |
Share-based compensation | | - | | | - | | | - | | | 10,387 | | | - | | | - | | | 10,387 | |
Reverse takeover of subsidiary (Note 4) | | 6,514,249 | | | 1,367,992 | | | - | | | - | | | - | | | - | | | 1,367,992 | |
Net loss for the year | | - | | | - | | | - | | | - | | | (19,375 | ) | | (2,291,517 | ) | | (2,310,892 | ) |
| | | | | | | | | | | | | | | | | | | | | |
Balance as at January 31, 2020 | | 104,054,149 | | $ | 4,119,484 | | $ | 123,283 | | $ | 15,922 | | $ | (63,093 | ) | $ | (2,611,940 | ) | $ | 1,583,656 | |
The accompanying notes are an integral part of these consolidated financial statements
Predictmedix Inc. (formerly Cultivar Holdings Inc.)
Consolidated Statements of Cash Flows
(in Canadian dollars)
| | For the year | | | For the period from | |
| | ended January | | | December 6, 2017 | |
| | 31, 2020 | | | to January 31, 2019 | |
OPERATING ACTIVITIES | | | | | | |
Net loss | $ | (2,310,892 | ) | $ | (364,141 | ) |
Non-cash items included in net loss and other adjustments: | | | | | | |
Amortization | | 19,475 | | | 4,395 | |
Interest on lease liability | | 4,165 | | | - | |
Loss from acquisition of subsidiary | | 1,490,071 | | | - | |
Share-based compensation | | 10,387 | | | 5,535 | |
Shares issued for services | | 105,000 | | | - | |
Changes in non-cash working capital: | | | | | | |
Sales tax receivable | | (9,008 | ) | | - | |
Prepaid expenses | | (103,997 | ) | | (26,672 | ) |
Loans and advances | | (38,999 | ) | | (68,526 | ) |
Accounts payable and accrued liabilities | | 1,677 | | | 47,113 | |
CASH USED IN OPERATING ACTIVITIES | | (832,121 | ) | | (402,296 | ) |
| | | | | | |
INVESTING ACTIVITIES | | | | | | |
Purchase of property and equipment | | (13,368 | ) | | (18,501 | ) |
Cash acquired on acquisition of subsidiary | | 3,448 | | | 30 | |
| | | | | | |
CASH USED IN INVESTING ACTIVITIES | | (9,920 | ) | | (18,471 | ) |
| | | | | | |
FINANCING ACTIVITIES | | | | | | |
Issuance of share capital for cash | | 824,000 | | | 2,070,530 | |
Lease payments made | | (13,360 | ) | | - | |
Share issue expenses for cash | | (33,971 | ) | | (29,340 | ) |
Deferred financing costs | | - | | | (61,474 | ) |
CASH PROVIDED BY FINANCING ACTIVITIES | | 776,669 | | | 1,979,716 | |
| | | | | | |
NET CHANGE IN CASH DURING THE PERIOD | | (65,372 | ) | | 1,558,949 | |
CASH, BEGINNING OF PERIOD | | 1,558,949 | | | - | |
| | | | | | |
CASH, END OF PERIOD | $ | 1,493,577 | | $ | 1,558,949 | |
| | | | | | |
Cash paid for interest and income taxes | $ | - | | $ | - | |
The accompanying notes are an integral part of these consolidated financial statements
1. Organization and Nature of Operations
Admiral Bay Resources Inc. ("Admiral") was incorporated in British Columbia on September 3, 1987.
Effective September 23, 2019, Admiral was part of a three-cornered amalgamation among Admiral, 2693980 Ontario Inc. (a wholly owned subsidiary of Admiral) and Cultivar Holdings Ltd. (the "Transaction"). Admiral completed the acquisition of all the issued and outstanding shares of Cultivar Holdings Ltd. by way of a three-cornered amalgamation, pursuant to which 2693980 Ontario Inc., amalgamated with Cultivar Holdings Ltd. Pursuant to the Transaction, each registered shareholder of Cultivar Holdings Ltd. received one (1) common share in the capital of the Admiral for each common share held, resulting in the issuance of an aggregate of 97,439,900 common shares to Cultivar Holdings Ltd. Shareholders. As part of the Transaction, warrants of Cultivar Holdings Ltd. were replaced with common share purchase warrants of Admiral. In addition, 500,000 Admiral shares were set aside to be issued to members of Cultivar Holdings Ltd. management team upon the final approval of Jamaica's Cannabis Licensing Authority for the licences involved in the cultivation, processing, retail and transportation of cannabis.
At completion of the transaction, Admiral changed its name to Cultivar Holdings Inc. (the "Company").
On April 9, 2020, the Company announced that it has completed its name change from "Cultivar Holdings Inc." to "Predictmedix Inc." (the "Name Change"). The CUSIP number assigned to the Company's common shares following the name change is CUSIP 74040L100 (ISIN CA74040L1004). In connection with the Name Change, the Company's trading symbol, as listed on the CSE and the OTCQB have also been changed from "CULT" to "PMED", and from "CVRHF" to "PMEDF", respectively.
The Company, through its subsidiaries, is in the business of development of cosmetic and edible product lines, as well as investment in technology to detect if an individual is under the influence of cannabis and to predict substance addiction. On March 30, 2020, the Company announced that it has sold and discontinued its interests in its marijuana services and products (Note 18).
The Company's corporate head office is located at 77 King Street W, Suite 3000, Toronto, Ontario,
Canada, M5K 1G8.
On February 15, 2018, the Company had acquired a 49% interest in a newly incorporated Cultivar JA
Limited, ("CJA") a corporation incorporated under the laws of Jamaica. The remaining 51% interest is owned by local Jamaican business partners. CJA was applying for a license to grow high quality cannabis in Jamaica. On March 30, 2020, the Company announced that it has entered into a sale agreement with respect to its 49% interest in Cultivar JA Limited and discontinued all interests in its marijuana services and products.
On July 16, 2018 the Company had acquired a 100% interest in a newly incorporated CannIP Holdings
Inc. (formerly 2639745 Ontario Inc.) ("Cann") a corporation incorporated under the laws of the province of Ontario. Cann is engaged in the development of cosmetic and edible product lines, as well as investment in technology to detect an individual influence of cannabis. The Company did a one for one share exchange with Cann and issued 29,800,000 common shares to the shareholders of Cann.
2. Basis of Presentation and Going Concern Basis of Preparation
These consolidated financial statements have been prepared on the historical cost basis except for financial instruments recorded at fair value. In addition, these consolidated financial statements have been prepared using the accrual basis of accounting, except for cash flow information. The functional currency of the Company and its subsidiaries is the Canadian dollar, which is also the Company's reporting currency.
Statement of Compliance
The consolidated financial statements have been prepared in accordance with International
Accounting Standards ("IAS") 1, "Presentation of Consolidated Financial Statements" using accounting policies consistent with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC").
Basis of Consolidation
These consolidated financial statements include the accounts of the Company and its subsidiaries; Cultivar Holdings Ltd., CJA and Cann from the date of acquisition. The Company has a 49% interest in CJA, and 100% interest in Cann and in Cultivar Holdings Ltd. All inter-company transactions and balances have been eliminated on consolidation.
Going Concern Assumption
These consolidated financial statements have been prepared using IFRS on a going concern basis, which presumes the realization of assets and discharge of liabilities in the normal course of business, for the next fiscal year. At January 31, 2020, the Company had cash of $1,493,577, working capital of $1,554,541 and an accumulated deficit of $2,611,940. The continuing operations of the Company are dependent on funding provided by equity investors. The Company intends to finance its future requirements through a combination of equity and/or debt issuance. There is no assurance that the Company will be able to obtain such financings or obtain them on favorable terms.
This uncertainty may cast significant doubt about the ability of the Company to continue as a going concern. These consolidated financial statements do not include any adjustments to the carrying value or presentation of assets or liabilities that might be necessary should the Company be unable to continue as a going concern. These adjustments could be material.
2. Basis of Presentation and Going Concern (Cont'd)
Significant Accounting Judgments and Estimates
The preparation of these consolidated financial statements in compliance with IFRS requires management to make certain critical accounting estimates and assumptions. These estimates and assumptions affect the reported amounts of assets, liabilities, shareholders' equity, and the disclosure of contingent assets and liabilities, as at the date of the financial statements, and expenses for the years reported.
Critical Judgements
The preparation of these consolidated financial statements requires management to make judgements regarding the going concern of the Company (discussed above), as well as the determination of functional currency. The functional currency is the currency of the primary economic environment in which an entity operates and has been determined for each entity within the Company. The functional currency for the Company and its subsidiaries has been determined to be the Canadian dollar.
Key Sources of Estimation Uncertainty
Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates and such differences could be significant.
Significant estimates made by management affecting the consolidated financial statements include: Share-based payments
Estimating fair value for granted stock options requires determining the most appropriate valuation model which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the option, volatility, dividend yield, and rate of forfeitures and making assumptions about them.
Deferred tax assets & liabilities
The estimation of income taxes includes evaluating the recoverability of deferred tax assets and liabilities based on an assessment of the Company's ability to utilize the underlying future tax deductions against future taxable income prior to expiry of those deductions. Management assesses whether it is probable that some or all of the deferred income tax assets and liabilities will not be realized. The ultimate realization of deferred tax assets and liabilities is dependent upon the generation of future taxable income, which in turn is dependent upon the successful discovery, extraction, development and commercialization of mineral reserves. To the extent that management's assessment of the Company's ability to utilize future tax deductions changes, the Company would be required to recognize more or fewer deferred tax assets or liabilities, and deferred income tax provisions or recoveries could be affected.
2. Basis of Presentation and Going Concern (Cont'd)
Significant Accounting Judgments and Estimates (Cont'd)
Key Sources of Estimation Uncertainty (Cont'd)
Useful life of property and equipment
Property and equipment is depreciated over its estimated useful life. Estimated useful lives are determined based on current facts and past experience and takes into consideration the anticipated physical life of the asset, the potential for technological obsolescence, and regulations.
Leases
The Company estimates the lease term by considering the facts and circumstances that can create an economic incentive to exercise an extension option, or not exercise a termination option by assessing relevant factors such as store profitability. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). The assessment of the lease term is reviewed if a significant event or a significant change in circumstance occurs, which affects this assessment and that is within the control of the lessee. The Company estimates the incremental borrowing rate used to measure our lease liability for each lease contract. This includes estimation in determining the asset-specific security impact.
Approval of the consolidated financial statements
These consolidated financial statements were authorized for issuance by the Board of Directors on June 1, 2020.
3. Significant Accounting Policies
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.
Cash
Cash comprises of cash held at banks and amounts held in trust. The majority of the Company's cash is held in trust. The Company does not invest in any asset-backed deposits or investments.
Income taxes
Income tax on profit or loss for the period comprises of current and deferred tax. Current tax is the expected tax paid or payable on the taxable income for the period, using tax rates enacted or substantively enacted at the statement of financial position date, and any adjustment to tax paid or payable in respect of previous periods.
Deferred tax is recorded by providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that
the related tax benefit will be realized. The effect on deferred tax assets and liabilities of a change in income tax rates is recognized in the period that includes the date of the enactment or substantive enactment of the change. Deferred tax assets and liabilities are presented separately except where there is a right of set-off within fiscal jurisdictions
Foreign currency translation
Foreign currency transactions are translated into Canadian dollars as follows:
At the transaction date, each asset, liability, revenue and expense denominated in a foreign currency is translated into Canadian dollars by the use of the exchange rate in effect at that date. At the period- end date, unsettled monetary assets and liabilities are translated into Canadian dollars by using the exchange rate in effect at the year-end date and the related translation differences are recognized in net loss.
Non-monetary assets and liabilities that are measured at historical cost are translated into Canadian dollars by using the exchange rate in effect at the date of the initial transaction and are not subsequently restated. Non-monetary assets and liabilities that are measured at fair value or a revalued amount are translated into Canadian dollars by using the exchange rate in effect at the date the value is determined and the related translation differences are recognized in net loss or other comprehensive loss consistent with where the gain or loss on the underlying non-monetary asset or liability has been recognized.
3. Significant Accounting Policies (Cont'd)
Share Capital
Common shares and warrants are classified as shareholders' equity. Incremental costs directly attributable to the issue of common shares are recognized as a reduction of shareholders' equity, net of tax.
The Company has adopted a relative fair value method with respect to the measurement of common shares and warrants issued as private placement units. The relative fair value method allocates value to each component on a pro-rata basis, based on the fair value of the components calculated independently of one another. The Company considers the market value of the common shares issued as fair value and measures the fair value of the warrant component of the unit using the Black-Scholes option pricing model. The unit value is then allocated, pro-rata, between the two components, with fair value attributed to the warrants being recorded to the Company's warrant reserve.
Loss per share
Loss per share is computed by dividing the net loss applicable to common shares of the Company by the weighted average number of common shares outstanding for the relevant period.
Diluted loss per common share is computed by dividing the net loss applicable to common shares by the sum of the weighted average number of common shares issued and outstanding and all additional common shares that would have been outstanding, if potentially dilutive instruments were converted.
Share-based payments
The Company grants stock options to buy common shares of the Company to consultants and service providers. The Company recognizes share-based compensation expense based on the estimated fair value of the options. A fair value measurement is made for each vesting instalment within each option grant and is determined using the Black-Scholes option-pricing model. The fair value of the options is recognized over the vesting period of the options granted as both share-based compensation expense and reserves. This includes a forfeiture estimate, which is revised for actual forfeitures in subsequent periods. The reserves account is subsequently reduced if the options are exercised and the amount initially recorded is then credited to capital stock.
In situations where equity instruments are issued to non-employees and some or all of the goods or services received by the entity as consideration cannot be specifically identified, they are measured at the fair value of the share-based payment. Otherwise, share-based payments are measured at the fair value of the goods or services received.
3. Significant Accounting Policies (Cont'd)
Property and equipment:
Property and equipment is carried at cost, less accumulated amortization and accumulated impairment losses. The cost of the item of property and equipment consists of the purchase price, and any costs directly attributable to bringing the asset to the location and condition necessary for its intended use. An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on disposal of the asset, determined as the difference between the net disposal proceeds and the carrying amount of the asset, is recognized in the consolidated statement of loss and comprehensive loss. The cost of repairs and maintenance is expensed as incurred.
The Company amortizes its property and equipment using the following rates:
Equipment | 30% per annum, declining balance |
| |
Leasehold improvements | Straight line over the term of the lease |
Impairment
The carrying amount of the Company's assets is reviewed for an indication of impairment at the end of each reporting period. If an indication of impairment exists, the Company makes an estimate of the asset's recoverable amount. Individual assets are grouped for impairment assessment purposes at the lowest level at which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets. Recoverable amount of an asset group is the higher of its fair value less costs to sell and its value in use. In assessing value in use, the estimated future cash flows are adjusted for the risks specific to the asset group and are discounted to their present value using a pre- tax discount rate that reflects current market assessments of the time value of money.
Where the carrying amount of an asset group exceeds its recoverable amount, the asset group is considered impaired and is written down to its recoverable amount. Impairment losses are recognized in profit or loss.
An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation, if no impairment loss had been recognized.
3. Significant Accounting Policies (Cont'd)
Financial Instruments
Financial assets and financial liabilities are recognized on the consolidated statements of financial position when the Company becomes a party to the contractual provisions of the financial instrument.
The following is the Company's accounting policy for financial instruments under IFRS 9: Classification
The Company classifies its financial instruments in the following categories: at fair value through profit and loss ("FVTPL"), at fair value through other comprehensive income (loss) ("FVTOCI") or at amortized cost. The Company determines the classification of financial assets at initial recognition.
The classification of debt instruments is driven by the Company's business model for managing the financial assets and their contractual cash flow characteristics. Equity instruments that are held for trading are classified as FVTPL. For other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument-by-instrument basis) to designate them as at FVTOCI. Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or if the Company has opted to measure them at FVTPL.
Measurement
Financial assets and liabilities at amortized cost
Financial assets and liabilities at amortized cost are initially recognized at fair value plus or minus transaction costs, respectively, and subsequently carried at amortized cost less any impairment.
Financial assets and liabilities at FVTPL
Financial assets and liabilities carried at FVTPL are initially recorded at fair value and transaction costs are expensed in the consolidated statements of loss and comprehensive loss. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are included in the consolidated statements of loss and comprehensive loss in the period in which they arise.
Debt investments at FVOCI
These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.
Equity investments at FVOCI
These assets are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in OCI and are never reclassified to profit or loss.
3. Significant Accounting Policies (Cont'd)
Financial Instruments (Cont'd)
Impairment of financial assets at amortized cost
The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost. At each reporting date, the Company measures the loss allowance for the financial asset at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the financial asset has not increased significantly since initial recognition, the Company measures the loss allowance for the financial asset at an amount equal to the twelve month expected credit losses. The Company shall recognize in the consolidated statements of loss and comprehensive loss, as an impairment gain or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized.
Derecognition
Financial assets
The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all of the associated risks and rewards of ownership to another entity.
Financial liabilities
The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled or expired. The Company also derecognizes a financial liability when the terms of the liability are modified such that the terms and / or cash flows of the modified instrument are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.
Gains and losses on derecognition are generally recognized in profit or loss.
The Company's financial assets and liabilities are classified as follows:
Asset or Liability | Classification |
Cash | FVTPL |
Loans and advances | Amortized cost |
Accounts payable | Amortized cost |
3. Significant Accounting Policies (Cont'd)
Financial Instruments (Cont'd)
The Company determines the fair value of financial instruments according to the following hierarchy based on the amount of observable inputs used to value the instrument.
Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2 - Pricing inputs are other than quoted prices in active markets included in Level 1. Prices in Level 2 are either directly or indirectly observable as of the reporting date. Level 2 valuations are based on inputs, including quoted forward prices for commodities, time value and volatility factors, which can be substantially observed or corroborated in the marketplace.
Level 3 - Valuations in this level are those with inputs for the asset or liability that are not based on observable market data.
Cash has been measured at fair value using Level 1 inputs.
Impairment of financial assets
Financial assets are assessed at each reporting date to determine whether there is objective evidence that they are impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.
An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset's original effective interest rate. Losses are recognized in profit or loss and reflected in a separate line item. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.
3. Significant Accounting Policies (Cont'd)
New standards adopted
(a) Leases and right-of-use assets
In January 2016, the IASB issued IFRS 16 - Leases ("IFRS 16"), replacing IAS 17 - Leases. IFRS 16 provides a single lessee accounting model and requires the lessee to recognize assets and liabilities for all leases on its statement of financial position, providing the reader with greater transparency of an entity's lease obligations.
At February 1, 2019, the Company adopted IFRS 16 using the modified retrospective approach and accordingly the information presented for 2018 has not been restated. It remains as previously reported under IAS 17 and related interpretations.
All leases are accounted for by recognizing a right-of-use asset and a lease liability except for:
- Leases of low value assets; and
- Leases with a duration of twelve months or less.
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by the incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate.
On initial recognition, the carrying value of the lease liability also includes:
- Amounts expected to be payable under any residual value guarantee;
- The exercise price of any purchase option granted if it is reasonably certain to assess that option;
- Any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised.
Right-of-use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for:
- Lease payments made at or before commencement of the lease;
- Initial direct costs incurred; and
- The amount of any provision recognized where the Company is contractually required to dismantle, remove or restore the leased asset.
Lease liabilities, on initial measurement, increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortized on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if this is judged to be shorter than the lease term.
3. Significant Accounting Policies (Cont'd) New standards adopted (Cont'd)
(a) Leases and right-of-use assets (cont'd)
When the Company revises its estimate of the term of any lease, it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted at the same discount rate that applied on lease commencement. The carrying value of lease liabilities is similarly revised when the variable element of future lease payments dependent on a rate or index is revised. In both cases an equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortized over the remaining (revised) lease term. The Company adopted this standard and the impact on the Company's consolidated financial statements are disclosed in notes 14 and 15.
(b) Uncertainty over Income Tax Treatments:
On June 7, 2017, the IASB issued IFRIC Interpretation 23 Uncertainty over Income Tax Treatments. The Interpretation provides guidance on the accounting for current and deferred tax liabilities and assets in circumstances in which there is uncertainty over income tax treatments. The Company adopted this standard at February 1, 2019 and there was no material impact on the Company's unaudited condensed interim consolidated financial statements.
Other accounting standards and amendments to existing accounting standards that have been issued and have future effective dates are not applicable or are not expected to have a significant impact on the Company's financial statements.
4. Acquisitions
During the year ended January 31, 2020, the Company completed the following acquisition:
Effective September 23, 2019, the Company was part of a three-cornered amalgamation among the Company, 2693980 Ontario Inc. (a wholly owned subsidiary) and Cultivar Holdings Ltd. (the "Transaction"). The result of the transaction was that Admiral acquired all the issued and outstanding securities of Cultivar Holdings Ltd. on the basis of one share of Admiral for each share of former Cultivar. All outstanding warrants to purchase former Cultivar shares were exchanged, on an equivalent basis, for warrants to purchase shares of the Company. At completion of the transaction, Admiral changed its name to Cultivar Holdings Inc. and former Cultivar was amalgamated into 2693980 Ontario Inc.
Under IFRS, this was considered a Reverse Merger and Recapitalization (commonly referred to as a Reverse Take Over or "RTO"). The Company issued 6,514,249 shares valued at $0.21 per share, with a total value of $1,367,992 for the acquisition.
The fair value of the acquired assets and liabilities assumed is as follows:
| | | |
Assets acquired by the Company: | | | |
| | | |
Cash | $ | 3,448 | |
| | | |
Prepaid expenses | | 1,125 | |
| | | |
Liabilities assumed by the Company: | | | |
| | | |
Accounts payable and accrued liabilities | | (19,127 | ) |
| | | |
Loans payable | | (107,525 | ) |
| | | |
Net liabilities assumed | | (122,079 | ) |
| | | |
Fair value of shares issued | | (1,367,992 | ) |
| | | |
Loss on acquisition | $ | (1,490,071 | ) |
| | | |
5. Prior Year Acquisitions
On February 15, 2018, the Company acquired a 49% interest in a newly incorporated company, CJA, incorporated under the laws of Jamaica. The remaining 51% interest is owned by local business partners. CJA is currently applying for a license to grow high quality cannabis in Jamaica. No consideration was given for the acquisition.
On July 16, 2018 the Company acquired a 100% interest in a newly incorporated company Cann, incorporated under the laws of the province of Ontario. Cann is engaged in the development of a CBD product portfolio, as well as artificial intelligence powered technology to detect cannabis impairment. The Company did a one for one share exchange with Cann and issued 29,800,000 common shares to the shareholders of Cann, valued at $30. The net assets acquired on the acquisition were determined to be valued at $30, resulting in no gain or loss on the transaction.
6. Prepaid Expenses
As of January 31, 2020, a sum of $31,858 (USD 24,075) is unexpended by CJA, which was advanced to its director for future expenses, and classified as prepaid expenses in the consolidated statement of financial position (January 31, 2019: $26,672). In addition, the Company prepaid $98,811 (January 31, 2019: $nil) including $70,060 to conduct a study to further validate its proprietary impairment detection technology for both alcohol and cannabis.
7. Property and Equipment
| | Equipment | | | Leasehold Improvement | | | Total | |
| | | | | | | | | |
Cost | | | | | | | | | |
Balance as at December 6, 2017 | $ | - | | $ | - | | $ | - | |
Additions | | 8,585 | | | 9,916 | | | 18,501 | |
Balance as at January 31, 2019 | $ | 8,585 | | $ | 9,916 | | $ | 18,501 | |
Additions | | 13,368 | | | - | | | 13,368 | |
Balance as at January 31, 2020 | $ | 21,953 | | $ | 9,916 | | $ | 31,869 | |
| | | | | | | | | |
Accumulated Amortization | | | | | | | | | |
Balance as at December 6, 2017 | $ | - | | $ | - | | $ | - | |
Amortization | | 2,146 | | | 2,249 | | | 4,395 | |
Balance as at January 31, 2019 | $ | 2,146 | | $ | 2,249 | | $ | 4,395 | |
Amortization | | 3,603 | | | 3,680 | | | 7,283 | |
Balance as at January 31, 2020 | $ | 5,749 | | $ | 5,929 | | $ | 11,678 | |
| | | | | | | | | |
Net Carrying Amounts | | | | | | | | | |
| | | | | | | | | |
As at January 31, 2019 | $ | 6,439 | | $ | 7,667 | | $ | 14,106 | |
| | | | | | | | | |
As at January 31, 2020 | $ | 16,204 | | $ | 3,987 | | $ | 20,191 | |
8. Stock-based Compensation
The Company has established a stock option plan whereby officers, directors, employees and service providers may be granted options to purchase common shares at a fixed price. Vesting and expiry provisions are determined at the date of grant. The plan provides for the issuance of stock options to acquire up to 10% of the Company's issued and outstanding capital. The plan is a rolling plan as the number of shares reserved for issuance pursuant to the grant of stock options will increase as the
Company's issued and outstanding share capital increases.
a) In October 2018, the Company granted options to a consultant to acquire a total of 250,000 common shares. These options were issued at an exercise price of $0.10 per share and vested 75,000 immediately, 37,500 at the date of engineering milestone (vested during the quarter ended July 31, 2019) and balance 137,500 on completion of additional milestones, including 75,000 on model development (vested during the quarter ended October 31, 2019) and 62,500 on project handover, with an expiry term of two years. The fair value of each option used for the purpose of estimating the stock-based compensation was estimated using the Black-Scholes option pricing model with the following assumptions:
8. Stock-based compensation (Cont'd)
| Risk free rate | | 2.26% | |
Expected dividends | | 0% | |
| Expected forfeiture rate | | 0% | |
Expected volatility | | 100% | |
| Expected life | | 2 years | |
Unvested stock-based compensation expense as of January 31, 2019 | $ | 3,311 | |
During the year ended January 31, 2020, the Company expensed $5,961 relating to the vesting of 187,500 options, resulting in unvested stock-based compensation expense of $3,311 as of January 31, 2020.
b) In November 2018, the Company granted options to a consultant to acquire a total of 100,000 common shares. These options were issued at an exercise price of $0.10 per share and vested 25,000 immediately, and 25,000 each on April 1, 2019, September 1, 2019 and March 1, 2020 with an expiry term of three years. The fair value of each option used for the purpose of estimating the stock-based compensation is estimated using the Black-Scholes option pricing model with the following assumptions:
Risk free rate | | 2.30% | |
Expected dividends | | 0% | |
Expected forfeiture rate | | 0% | |
Expected volatility | | 100% | |
Expected life | | 3 years | |
Unvested stock-based compensation expense as of January 31, 2020 | $ | 260 | |
During the year ended January 31, 2020, the Company expensed $4,426 relating to the vesting of 75,000 options, resulting in unvested stock- based compensation expense of $260 as of January 31, 2020.
As of January 31, 2020, there was $3,571 (January 31, 2019: $13,958) of unvested stock-based compensation expense.
Continuity of the Company's options is as follows:
| | Number of | | | Weighted Average | |
| | Options | | | Exercise Price | |
| | | | | | |
Outstanding, December 7, 2017 | | - | | $ | - | |
Issued | | 350,000 | | $ | 0.10 | |
Outstanding, January 31, 2019 and January 31, 2020 | | 350,000 | | $ | 0.10 | |
As at January 31, 2020, the Company had the following share purchase options outstanding and exercisable:
Outstanding | Exercisable | Exercise Price | Remaining Life (Years) | Expiry Date |
250,000 | 187,500 | $0.10 | 0.73 | October 25, 2020 |
100,000 | 75,000 | $0.10 | 1.77 | November 8, 2021 |
350,000 | 262,500 | $0.10 | 1.03 | |
9. Capital Stock
The Company is authorized to issue the following shares:
• Unlimited number of common shares without par value
a) Common shares
The holders of common shares are entitled to receive dividends which are declared from time to time and are entitled to one vote per share at meetings of the Company. All shares are ranked equally with regards to the Company's residual assets.
At January 31, 2020, the Company has 104,054,149 common shares issued and outstanding.
b) Share issuances
During the year ended January 31, 2020:
• The Company issued 800,000 common shares at $0.10 for services. This includes 550,000 common shares issued to a director valued at $55,000 (Note 10).
• On August 12, 2019, the Company closed a private placement of 3,296,000 units at $0.25 per unit for a consideration of $824,000. Each unit is comprised of one common share and one-half of one common share purchase warrant (each whole warrant, a "Warrant"), with each Warrant exercisable into a common share of the Company at an exercise price of $0.50 per share for a period of 24 months. The Black-Scholes option pricing model was used to determine the fair value of the warrants using the following weight average assumptions: Expected dividend yield of 0%; risk free interest rate of 1%; expected volatility of 100%; expected life of 2 years. The relative fair value of the warrants has been valued at $123,283 and common shares at $700,717 ($0.21). In connection with this private placement, the Company issued 66,400 shares as finders' fee, and incurred an additional $95,445 in share issuance costs.
• The Company issued 6,514,249 shares in connection with the acquisition discussed in Note 4.
• On January 10, 2020, the Company issued 100,000 shares for financial media marketing and investor services for a total consideration of $25,000, to be provided over the period commencing October 28, 2019 and ending on November 1, 2020 (the "Term")
During the period ended January 31, 2019:
• The Company issued 30,000,000 common shares, as founders' shares, for $30.
• The Company issued 29,800,000 common shares in a share exchange agreement with Cann, valued at $30 (Note 5).
• The Company issued 24,995,000 common shares at $0.05 per share in private placements and raised $1,249,750. The Company issued 275,000 common shares as finders shares.
• The Company issued 8,207,500 common shares at $0.10 per share in private placements and raised $820,750.
In conjunction with the above private placements, the Company incurred cash share issuance costs of $29,340.
9. Capital Stock (Cont'd)
As at January 31, 2020, the Company had the following warrants outstanding:
Outstanding | Exercise Price | Remaining Life (Years) | Expiry Date |
1,648,000 | $0.50 | 1.53 | August 11, 2021 |
10. Related Party Transactions
Related parties include key management personnel, the Board of Directors, close family members and enterprises that are controlled by these individuals as well as certain persons performing similar functions. Key management of the Company are members of the Board of Directors, the Chief
Executive Officer ("CEO"), the Chief Financial Officer ("CFO") and the Chief Operating Officer ("COO").
Transactions with key management personnel not disclosed elsewhere in the financial statements include the following:
| | | | | Period from | |
| | | | | incorporation on | |
| | Year ended | | | December 6, 2017 | |
| | January 31, 2020 | | | to January 31, 2019 | |
| | | | | | |
Management fees to the CEO | $ | 96,000 | | $ | 56,000 | |
Management fees to a director | | 54,000 | | | - | |
Management fees (issued in shares) to a director | | 55,000 | | | - | |
Management fees to the COO | | 20,000 | | | - | |
Management fees to the CFO | | 38,066 | | | 3,955 | |
| | | | | | |
Total Management fees | $ | 263,066 | | $ | 59,955 | |
Vehicle expense to the CEO | | 6,000 | | | 4,750 | |
Rent to the CEO included in rent expense | | 18,000 | | | 14,250 | |
| | | | | | |
| $ | 287,066 | | $ | 78,955 | |
As of January 31, 2020, there was $nil due to any related parties (January 31, 2019 - $17,113 due to the CEO, included in accrued liabilities).
11. Commitments and Contingencies
Effective July 1, 2018, the Company signed a two-year contract with a corporation owned and controlled by the CEO to pay monthly compensation of $8,000 for CEO services. In addition, the Company pays monthly rent for $1,500 and an additional $500 per month for the use of a personal vehicle.
The Company's operations were governed by governmental laws and regulations regarding environmental protection. Environmental consequences are difficult to both predict and identify, in terms of level, impact or timeline. At the present time and to the best knowledge of its management, the Company is in conformity with the laws and regulations in effect. Restoration costs will be accrued in the financial statements only when they will be reasonably estimated and will be charged to the earnings at the time.
12. Financial Instruments
The fair value of the Company's accounts payable, and loans and advances approximate carrying value, due to their short-term nature. The Company's cash is measured at fair value under the fair value hierarchy based on level one quoted prices in active markets for identical assets or liabilities.
Financial risk management and objectives
The Company's activities expose it to a variety of financial risks: credit risk, liquidity risk, and market risk (including interest rate risk, foreign currency risk, and commodity price risk).
The Company thoroughly examines the various financial risks to which it is exposed and assesses the impact and likelihood of those risks. Where material, these risks are reviewed and monitored by the Board of Directors.
Credit risk
Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. The Company is not exposed to significant credit risk.
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 liquidity and operating results may be adversely affected if its access to the capital market is hindered, whether as a result of a downturn in stock market conditions generally or matters specific to the Company. The Company generates cash flows primarily from its financing activities.
The Company manages its liquidity needs by carefully monitoring scheduled costs. Liquidity is measured in various time bands, on day to day and week-to-week basis, as well as on long term liquidity needs over 180 day to 360 day look out periods. Funding for long term liquidity needs is based on the ability of the Company to successfully complete private placements.
As at January 31, 2020, the Company had sufficient cash of $1,493,577 to settle current liabilities of $79,838.
Market Risk
Market risk is the risk of loss that may arise from changes in market factors such as interest rates, commodity and equity prices, and foreign exchange rates.
(a) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is not exposed to significant interest rate risk.
(b) Price risk
The Company is not exposed to significant price risk as it does not possess investments in publicly traded securities.
12. Financial Instruments (Cont'd)
Financial risk management and objectives (Cont'd)
(a) Currency risk
Currency risk is the risk that the fair value of future cash flows of a financial instrument denominated in a foreign currency will fluctuate because of changes in foreign exchange rates. The Company operates internationally, which gives rise to the risk that cash flows may be adversely impacted by exchange rate fluctuations. Amounts subject to currency risk are prepaid expenses held by a Director in US Dollars in a Jamaican bank account as well as operating expenses incurred by CJA in US Dollars and Jamaican Dollars. As at January 31, 2020, the Company had net financial assets denominated in US Dollars of approximately $31,900 (January 31, 2019: $26,700). Therefore, a 10% change in value of the US Dollar versus the Canadian Dollar would give rise to a gain or loss of approximately $3,190 (January 31, 2019: $2,670). The Company has not entered into any foreign exchange contracts to hedge this risk.
13. Capital Management
The Company considers its capital to be shareholders' equity, which is comprised of share capital and deficit, which as at January 31, 2020 totaled $1,583,656. The Company's capital structure is adjusted based on the funds available to the Company such that it may continue to seek new opportunities. The Board of Directors does not establish quantitative return on capital criteria, but rather relies on the expertise of management and other professionals to sustain future development of the business.
The sources of future funds presently available to the Company are through the sale of equity capital or debt of the Company. The ability of the Company to arrange such financing in the future will depend in part upon the prevailing capital market conditions as well as the business performance of the Company. There can be no assurance that the Company will be successful in its efforts to arrange additional financing, if needed, on terms satisfactory to the Company.
Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. The Company is not subject to externally imposed capital restrictions.
14. Right-of-use Asset
The Company's right-of-use assets as at January 31, 2020 are as follows:
Balance at adoption, February 1, 2019 | $ | 24,384 | |
Amortization | | (12,192 | ) |
Balance at year-end, January 31, 2020 | $ | 12,192 | |
15. Lease Liability
At the commencement date of the leases, the lease liability was measured at the present value of the lease payments that were not paid at that date. The lease payments are discounted using an interest
rate of 18% which is the Company's incremental borrowing rate.
Lease liability interest expense recognized in profit and loss and lease payments recognized in the financing component of statement of cash flows are as follows:
Balance at adoption, February 1, 2019 | $ | 24,384 | |
| | | |
Interest expense | | 4,165 | |
| | | |
Lease payments made during the year | | (13,360 | ) |
| | | |
Balance at year-end, January 31, 2020 | $ | 15,189 | |
| | | |
The Company's lease liability as at January 31, 2020 is as follows:
Lease liability current | $ | 11,921 | |
| | | |
Lease liability non current | | 3,268 | |
| | | |
Total lease liability | $ | 15,189 | |
| | | |
16. Segment Information
The Company is a holding company whose subsidiary in Jamaica is in the early stage marijuana services and products, and another subsidiary in Canada is in the early development of a CBD product portfolio, as well as development of artificial intelligence powered technology to identify if someone is under the influence of cannabis and to predict substance addiction.
There are no revenues during the year. All assets are located in Canada except for property and equipment for $8,494 and prepaid expenses for $31,858 which are located in Jamaica.
17. Income Taxes
The following is a reconciliation of income taxes attributable to operations computed at the statutory tax rates to income tax recovery.
| | January 31, | | | January 31, | |
| | 2020 | | | 2019 | |
Loss for the period | $ | (2,310,892 | ) | $ | (364,141 | ) |
Tax rate | | 26% | | | 26.5% | |
Expected income tax recoverable at statutory rate | | (600,832 | ) | | (96,497 | ) |
Change due to acquisition, and other | | (1,106,421 | ) | | 5,818 | |
Non-deductible items | | 397,905 | | | 1,467 | |
Share issuance costs | | (24,816 | ) | | (7,775 | ) |
Change in unrecognized deductible temporary differences | | 1,334,164 | | | 96,987 | |
| | | | | | |
Total income tax recovery | $ | - | | $ | - | |
Deferred tax assets
The significant components of the Company's deferred tax assets that have not been included on the consolidated statement of financial position are as follows:
| | January 31, | | | January 31, | |
| | 2020 | | | 2019 | |
Non-capital losses available for future period | $ | 1,410,174 | | $ | 90,020 | |
Share issuance costs | | 17,941 | | | 5,868 | |
Property and equipment | | 3,036 | | | 1,099 | |
| | | | | | |
Total deferred tax assets | | 1,431,151 | | | 96,987 | |
Less: Unrecognized deferred tax assets | | (1,431,151 | ) | | (96,987 | ) |
| | | | | | |
Net deferred tax assets | $ | - | | $ | - | |
The significant components of the Company's unrecognized temporary differences and tax losses are as follows:
| | January 31, | | | | | | January 31, | |
| | 2020 | | | Expiry Date | | | 2019 | |
Non-capital losses | $ | 5,423,746 | | | 2026 - 2040 | | | 360,079 | |
Share issuance costs | $ | 69,003 | | | 2039 - 2044 | | | 23,472 | |
Property and equipment | $ | 11,678 | | | No expiry | | | 4,395 | |
Tax attributes are subject to review and potential adjustment by tax authorities.
18. Subsequent Events
• On March 30, 2020, the Company announced that it has entered into a sale agreement (the "Sale Agreement") with respect to its 49% interest in Cultivar JA Limited ("Cultivar JA"), which holds a provisional cannabis cultivation license in Jamaica.
Pursuant to the terms of the Sale Agreement, the Company's wholly-owned subsidiary, Cultivar Holdings Ltd., has agreed to sell its 49% interest in Cultivar JA and all related royalty interests to the principals of Cultivar JA in exchange for the principals of Cultivar JA agreeing to cancel 4,000,000 common shares of the Company owned by the principals. In addition, the principals also agreed to terminate their right to receive an additional 500,000 common shares of the Company which had been reserved for issuance upon Jamaica's Licensing Authority issuing final approval for Cultivar JA's license to cultivate, process, retail and transport cannabis.
• On April 6, 2020, the Company granted stock options to its directors, officers and consultants to purchase up to 9,850,000 common shares of the Company at an exercise price of $0.15 per common share. The options have a term of one (1) year expiring on April 6, 2021. These options have varying vesting periods, with the majority being in equal installments over a quarterly basis throughout the term.
• On April 9, 2010, the Company announced that it has completed its name change from "Cultivar Holdings Inc." to "Predictmedix Inc." (the "Name Change"). The CUSIP number assigned to the Company's common shares following the name change is: CUSIP 74040L100 (ISIN CA74040L1004). In connection with the Name Change, the Company's trading symbol, as listed on the CSE and the OTCQB have also been changed from "CULT" to "PMED", and from "CVRHF" to "PMEDF", respectively.
• Since December 31, 2019, the break of the novel strain of coronavirus, specially identified as
"COVID-19" has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures which include the implementation of travel bans, self- imposed quarantine periods and social distancing, have caused material disruption to businesses globally resulting in an economic slowdown. Global equity markets have experienced significant volatility and weakness. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions. The duration and impact of the COVID-19 outbreak is unknown at this time, as is the efficacy of the government and central bank interventions. It is not possible to reliably estimate the length and severity of these developments and the impact on the financial results and condition of the Corporation and its operating subsidiaries in future periods.