1. | Financial Statements. Receive and consider the audited consolidated financial statements as at and for the fiscal year ended December 31, 2019, together with the report of the auditor thereon, and the unaudited interim financial statements as at and for the nine-month period ended September 30, 2020; |
2. | Auditor Appointment. Appoint McGovern Hurley LLP as auditor of the Corporation; |
3. | Elect Directors. Consider and elect the directors for the ensuing year; |
4. | Stock Option Plan. Consider and re-approve the Corporation’s rolling stock option plan (the “Stock Option Plan”); |
5. | Name Change. Consider and approve the Corporation’s name change to “DeFi Technologies Inc.” and |
6. | Other Business. Consider other business as may properly come before the Meeting or any postponement(s) or adjournment(s) thereof. |
President and Chief Executive Officer
Name and principal position | Year Ended | Salary ($)(1) | Share awards ($) | Option awards ($) | Non-equity incentive plan compensation ($) | All other compensation ($) | Total compensation ($) | |
Annual incentive plans | Long-term incentive plans | |||||||
Daniyal Baizak(2) Chief Executive Officer and Director | 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
James Lanthier(2) Former Chief Executive Officer and Director | 2019 | 30,000 | N/A | N/A | N/A | N/A | N/A | 30,000 |
2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
Vikram Pathak (2) Former President, CEO and Director | 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
2018 | 140,699 | N/A | Nil | N/A | N/A | Nil | 140,699 | |
2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
Fred Leigh (2) Former President, CEO and Director | 2019 | 90,000 | N/A | Nil | N/A | N/A | Nil | 90,000 |
2018 | 30,000 | N/A | Nil | N/A | N/A | Nil | 30,000 | |
2017 | 120,000 | N/A | Nil | N/A | N/A | Nil | 120,000 | |
Ryan Ptolemy Chief Financial Officer | 2019 | 30,000 | N/A | Nil | N/A | N/A | Nil | 30,000 |
2018 | 30,000 | N/A | Nil | N/A | N/A | Nil | 30,000 | |
2017 | 30,000 | N/A | Nil | N/A | N/A | Nil | 30,000 |
(1) | Compensation has been paid as consulting fees under the independent contractor agreement with the Named Executive Officer as described under the heading “Executive Compensation – Termination of Employment, Change in Responsibilities and Employment Contracts” of this Circular. |
(2) | On March 14, 2018, Mr. Leigh resigned as President, CEO and Director and was replaced by Mr. Pathak. Mr. Pathak was appointed to the Board on December 11, 2017. Mr. Pathak resigned as President, CEO and director on December 21, 2018 and was replaced by Mr. Leigh. On October 9, 2019, Mr. Lanthier was appointed as Chief Executive Officer and a director following the resignation of Mr. Leigh. On March 10, 2020, Mr. Leigh was appointed as Chief Executive Officer and a director following the resignation of Mr. Lanthier. On September 11, 2020, Mr. Baizak was appointed as Chief Executive Officer and a director following the resignation of Mr. Leigh. |
Option-Based Awards | Share-Based Awards | ||||||
Name | Number of securities underlying unexercised options (#) | Option exercise price ($) | Option expiration date | Value of unexercis ed in-the- money options ($)(1) (2) | Number of shares or units of shares that have not vested (#) | Market or payout value of share awards that have not vested ($) | Market or payout value of vested share-based awards not paid out or distributed ($) |
James Lanthier Former President and CEO | Nil | N/A | N/A | N/A | N/A | N/A | N/A |
Ryan Ptolemy Chief Financial Officer | 200,000 | 200,000 options at $0.11 | September 29, 2021 | Nil | N/A | N/A | N/A |
• | Notes: |
• | (1) Based on the closing market price of $0.04 of the Common Shares on December 31, 2019 and subtracting the exercise price of the options. |
• | (2) These options have not been, and may never be, exercised and actual gains, if any, on exercise will depend on the value of the Common Shares on the date of exercise. |
Name | Termination Notice Period | Monthly Fees | Severance on Termination | Severance on Change of Control(1) |
Daniyal Baizak Chief Executive Officer and Director | 30 days | $5,000 | 3 months’ fees | N/A |
Ryan Ptolemy, Chief Financial Officer | 30 days | $5,000 | 6 months’ fees | 24 months base fees plus aggregate cash bonuses paid in the 24 months prior to the Change of Control. |
Named Executive Officer | Termination not for Cause ($) | Value of Unvested Options ($) upon termination not for cause | Termination on a Change of Control ($) | Value of Unvested Options Vested ($) upon Change in Control |
Daniyal Baizak | ||||
Salary and Quantified Benefits | 15,000 | Nil | 15,000 | Nil |
Bonus | Nil | Nil | Nil | Nil |
Total | 15,000 | Nil | 15,000 | Nil |
Ryan Ptolemy | ||||
Salary and Quantified Benefits | 30,000 | Nil | 120,000 | Nil |
Bonus | Nil | Nil | Nil | Nil |
Total | 30,000 | Nil | 120,000 | Nil |
Name | Fees earned ($) | Share awards ($) | Option awards ($) | Non-equity incentive plan compensation ($)(1) | All other compensation ($)(2) | Total ($) |
James Lanthier(1) | Nil | Nil | Nil | Nil | Nil | Nil |
Fred Leigh(1) | Nil | Nil | Nil | Nil | Nil | Nil |
Tito Ghandi | Nil | Nil | Nil | Nil | Nil | Nil |
Willam C. Steers | Nil | Nil | Nil | Nil | Nil | Nil |
TOTALS | Nil | Nil | Nil | Nil | Nil | Nil |
(1) | On October 9, 2019, Mr. Lanthier was appointed as Chief Executive Officer and a director following the resignation of Mr. Leigh. On March 10, 2020, Mr. Leigh was appointed as Chief Executive Officer and a director following the resignation of Mr. Lanthier. |
Option-Based Awards | Share-Based Awards | ||||||
Name | Number of securities underlying unexercised options (#) | Option exercise price ($) | Option expiration date | Value of unexercised in-the-money options ($)(1) (2) | Number of shares or units of shares that have not vested (#) | Market or payout value of share awards that have not vested ($) | Market or payout value of vested share-based awards not paid out or distributed |
James Lanthier(1) | Nil | N/A | N/A | N/A | N/A | N/A | N/A |
Fred Leigh(1) | 250,000 | 250,000 options at $0.11 | September 29, 2021 | nil | 0 | 0 | 0 |
Tito Ghandi | 200,000 | 200,000 options at $0.11 | September 29, 2021 | nil | 0 | 0 | 0 |
Willam C. Steers | Nil | N/A | N/A | N/A | N/A | N/A | N/A |
(1) | Based on the closing market price of $0.04 of the Common Shares on December 31, 2019 and subtracting the exercise price of the options. |
(2) | These options have not been, and may never be, exercised and actual gains, if any, on exercise will depend on the value of the Common Shares on the date of exercise. |
Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available under equity compensation plans (excluding securities reflected in column (a)) | |
Plan Category | (a) | (b) | (c) |
Equity compensation plans approved by security holders | 5,480,000 | $ | 4,950,467 |
Equity compensation plans not approved by security holders | NIL | NIL | NIL |
TOTAL | 5,480,000 | $ | 4,950,467 |
Director | Reporting Issuer |
Daniyal Baizak | Medivolve Inc. |
Tito Ghandi | Q-Gold Resources Ltd. |
William C. Steers | Lara Exploration Ltd Jade Power Trust ARHT Media Inc. Sulliden Mining Capital |
Bernard Wilson | Aberdeen International Inc. Flora Growth Corp. |
• | the strategic planning process of the Corporation; |
• | identifying the principal risks of the Corporation’s business and ensuring the implementation of appropriate systems to manage these risks; |
• | succession planning, including appointing, training and monitoring senior management; |
• | a communications policy for the Corporation to facilitate communications with investors and other interested parties; and |
• | the integrity of the Corporation’s internal control and management information systems. |
Year | Audit Fees ($) | Audit Related Fees | Tax Fees ($) | All Other Fees |
2019 | 40,000 | Nil | 3,200 | Nil |
2018 | 40,000 | Nil | 3,000 | Nil |
Name and Municipality of Residence | Principal Occupation | Director Since | Number of Common Shares Beneficially Owned or Over which Control is Exercised(1) |
Daniyal Baizak Toronto, Ontario Age:25 | President and Chief Executive Officer of the Corporation | December 21, 2018 | Nil |
Tito Gandhi(2) Caledon East, Ontario Age:66 | President and Chief Executive Officer of Genesis Casinos Ltd. | August 11, 2016 | Nil |
William Steers(2) Toronto, Ontario Age:68 | International Business Consultant | March 14, 2018 | Nil |
Bernard Wilson(2) Toronto, Ontario Age:78 | Financial Professional | January 19, 2021 | NIL |
(1) | The Corporation has relied exclusively on the respective Nominee for this information. |
(2) | Member of the Audit Committee and the Compensation, Nomination and Governance Committee.. |
1. | the Stock Option Plan of the Corporation, as described in the management information circular of the Corporation dated January 29, 2021 is hereby approved; and |
2. | any director or officer of the Corporation is hereby authorized to execute (whether under the corporate seal of the Corporation or otherwise) and deliver all such documents and to do all such other acts and things as such director or officer may determine to be necessary or advisable to give effect to the true intent of these resolutions.” |
1. | subject to the Corporation first receiving all required regulatory and the NEO Exchange approvals, the name of the Corporation be changed to “DeFi Technologies Inc.” or such other name as may be approved by the directors of the Corporation and applicable regulatory authorities; |
2. | the articles of the Corporation be amended to reflect the foregoing; |
3. | the Board be and are authorized to file articles of amendment and all other requisite documents with all applicable regulatory authorities in order to give effect to the name change; |
4. | notwithstanding the passage of this resolution by the shareholders of the Corporation, the Board of the Corporation may, without any further notice or approval of the shareholders of the Corporation, decide not to proceed with the name change or to otherwise give effect to this resolution at any time prior to the sale becoming effective and may revoke this resolution without further approval of the shareholders at any time prior to the completion of the transactions authorized by this resolution; and |
5. | any one or more of the directors or officers of the Corporation is hereby authorized and directed, acting for, in the name of and on behalf of the Corporation, to execute or cause to be executed, under the seal of the Corporation or otherwise, and to deliver or cause to be delivered, such other documents and instruments, and to do or cause to be done all such other acts and things, as may in the opinion of such director or officer of the Corporation be necessary or desirable to carry out the intent of the foregoing resolution, the execution of any such document or the doing of any such other act or thing by any director or officer of the Corporation being conclusive evidence of such determination.” |
(a) | Review and update this Charter annually. |
(b) | Review the Company’s financial statements, management discussion and analysis (“MD&A”) and any annual and interim earnings, press releases before the Company publicly discloses this information and any reports or other financial information (including quarterly financial statements), which are submitted to any governmental body, or to the public, including any certification, report, opinion or review rendered by the external auditors. |
(a) | Review annually the performance of the external auditors who shall be ultimately accountable to the board of directors and the Committee as representatives of the shareholders of the Company. |
(b) | Obtain annually a formal written statement of the external auditors setting forth all relationships between the external auditors and the Company, consistent with Independence Standards Board Standard 1. |
(c) | Review and discuss with the external auditors any disclosed relationships or services that may impact the objectivity and independence of the external auditors. |
(d) | Take or recommend that the full board of directors take appropriate action to oversee the independence of the external auditors. |
(e) | Recommend to the board of directors the selection and, where applicable, the replacement of the external auditors nominated annually for shareholder approval. |
(f) | At each meeting, consult with the external auditors, without the presence of management, about the quality of the Company’s accounting principles, internal controls and the completeness and accuracy of the Company’s financial statements. |
(g) | Review and approve the Company’s hiring policies regarding partners, employees and former partners and employees of the present and former external auditors of the Company. |
(h) | Review with management and the external auditors the audit plan for the year-end financial statements and intended template for such statements. |
(i) | Review and pre-approve all audit and audit-related services and the fees and other compensation related thereto, and any non-audit services, provided by the Company’s external auditors. The pre-approval requirement is waived with respect to the provision of non-audit services if: |
(i) | the aggregate amount of all such non-audit services provided to the Company constitutes not more than 5% of the total amount of revenues paid by the Company to its external auditors during the fiscal year in which the non-audit services are provided; |
(ii) | such services were not recognized by the Company at the time of the engagement to be non-audit services; and |
(iii) | such services are promptly brought to the attention of the Committee by the Company and approved prior to the completion of the audit by the Committee or by one or more members of the Committee who are members of the board of directors to whom authority to grant such approvals has been delegated by the Committee. |
(a) | In consultation with the external auditors, review with management the integrity of the Company’s financial reporting process, both internal and external. |
(b) | Consider the external auditor’s judgments about the quality and appropriateness of the Company’s accounting principles as applied in its financial reporting. |
(c) | Consider and approve, if appropriate, changes to the Company’s auditing and accounting principles and practices as suggested by the external auditors and management. |
(d) | Review significant judgments made by management in the preparation of the financial statements and the view of the external auditors as to appropriateness of such judgments. |
(e) | Following completion of the annual audit, review separately with management and the external auditors any significant difficulties encountered during the course of the audit, including any restrictions on the scope of work or access to required information. |
(f) | Review any significant disagreement among management and the external auditors in connection with the preparation of the financial statements. |
(g) | Review with the external auditors and management the extent to which changes and improvements in financial or accounting practices have been implemented. |
(h) | Review any complaints or concerns about any questionable accounting, internal accounting controls or auditing matters. |
(a) | Review certification process. |
(b) | Establish a procedure for the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters. |
1. | STATEMENT OF PURPOSE |
1.1 | Principal Purposes – The principal purposes of the Plan are to provide the Corporation with the advantages of the incentive inherent in share ownership on the part of employees, officers, directors and consultants responsible for the continued success of the Corporation; to create in such individuals a proprietary interest in, and a greater concern for, the welfare and success of the Corporation; to encourage such individuals to remain with the Corporation; and to attract new employees, officers, directors and consultants to the Corporation. |
1.2 | Benefit to Shareholders – The Plan is expected to benefit shareholders by enabling the Corporation to attract and retain skilled and motivated personnel by offering such personnel an opportunity to share in any increase in value of the Shares resulting from their efforts. |
2. | INTERPRETATION |
2.1 | Defined Terms – For the purposes of this Plan, the following terms shall have the following meanings: |
(a) | “Act” means the Securities Act (Ontario), as amended from time to time; |
(b) | “Associate” shall have the meaning ascribed to such term in the Act; |
(c) | “Board” means the Board of Directors of the Corporation; |
(d) | “Change in Control” means: |
(i) | a takeover bid (as defined in the Act), which is successful in acquiring Shares, |
(ii) | the change of control of the Board resulting from the election by the members of the Corporation of less than a majority of the persons nominated for election by management of the Corporation, |
(iii) | the sale of all or substantially all the assets of the Corporation, |
(iv) | the sale, exchange or other disposition of a majority of the outstanding Shares in a single transaction or series of related transactions, |
(v) | the dissolution of the Corporation’s business or the liquidation of its assets, |
(vi) | a merger, amalgamation or arrangement of the Corporation in a transaction or series of transactions in which the Corporation’s shareholders receive less than 51% of the outstanding shares of the new or continuing corporation, or |
(vii) | the acquisition, directly or indirectly, through one transaction or a series of transactions, by any Person, of an aggregate of more than 50% of the outstanding Shares; |
(e) | “Committee” means a committee of the Board appointed in accordance with this Plan, or if no such committee is appointed, the Board itself; |
(f) | “Corporation” means Routemaster Capital Inc. a company incorporated under the Business Corporations Act (Ontario); |
(g) | “Consultant” means an individual, other than an Employee, senior officer or director of the Corporation or a Subsidiary Corporation, or a Consultant Corporation, who; |
(i) | provides ongoing consulting, technical, management or other services to the Corporation or a Subsidiary Corporation, other than services provided in relation to a distribution of the Corporation’s securities, |
(ii) | provides the services under a written contract between the Corporation or a Subsidiary Corporation and the individual or Consultant Corporation, |
(iii) | in the reasonable opinion of the Corporation spends or will spend a significant amount of time and attention on the affairs and business of the Corporation or a Subsidiary Corporation, and |
(iv) | has a relationship with the Corporation or a Subsidiary Corporation that enables the individual or Consultant Corporation to be knowledgeable about the business and affairs of the Corporation; |
(h) | “Consultant Corporation” means, for an individual Consultant, a company of which the individual is an employee or shareholder, or a partnership of which the individual is an employee or partner; |
(i) | “Date of Grant” means the date specified in the Option Agreement as the date on which the Option is effectively granted; |
(j) | “Disability” means any disability with respect to an Optionee which the Board, in its sole and unfettered discretion, considers likely to prevent permanently the Optionee from: |
(i) | being employed or engaged by the Corporation, a Subsidiary Corporation or another employer, in a position the same as or similar to that in which he was last employed or engaged by the Corporation or a Subsidiary Corporation; or |
(ii) | acting as a director or officer of the Corporation or a Subsidiary Corporation; |
(k) | “Disinterested Shareholder Approval” means an ordinary resolution approved by a majority of the votes cast by members of the Corporation at a shareholders’ meeting, excluding votes attaching to Shares beneficially owned by Insiders to whom Options may be granted and Associates of those persons; |
(l) | “Effective Date” means the effective date of this Plan, which is the later of the day of its approval by the shareholders of the Corporation and the day of its acceptance for filing by the Exchange if such acceptance for filing is required under the rules or policies of the Exchange; |
(m) | “Eligible Person” means: |
(i) | an Employee, senior officer or director of the Corporation or any Subsidiary Corporation, |
(ii) | a Consultant, |
(iii) | an individual providing Investor Relations Activities for the Corporation; and |
(iv) | a company, all of the voting securities of which are beneficially owned by one or more of the persons referred to in (i), (ii) or (iii) above; |
(n) | “Employee” means: |
(i) | an individual who is considered an employee under the Income Tax Act (Canada) (i.e. for whom income tax, employment insurance and CPP deductions must be made at source), |
(ii) | an individual who works full-time for the Corporation or a Subsidiary Corporation providing services normally provided by an employee and who is subject to the same control and direction by the Corporation or a Subsidiary Corporation over the details and methods of work as an employee of the Corporation or a Subsidiary Corporation, but for whom income tax deductions are not made at source, and |
(iii) | an individual who works for the Corporation or a Subsidiary Corporation, on a continuing and regular basis for a minimum amount of time per week, providing services normally provided by an employee and who is subject to the same control and direction by the Corporation or a Subsidiary Corporation over the details and methods of work as an employee of the Corporation or a Subsidiary Corporation, but for whom income tax deductions are not made at source; |
(o) | “Exchange” means the stock exchange or over the counter market on which the Shares are listed; |
(p) | “Exchange Act” means the United States Securities Exchange Act of 1934, as amended; |
(q) | “Fair Market Value” means, where the Shares are listed for trading on an Exchange, the last closing price of the Shares before the Date of Grant on the Exchange which is the principal trading market for the Shares, as may be determined for such purpose by the Committee, provided that, so long as the Shares are listed only on the NEO, the “Fair Market Value” shall not be lower than the last closing price of the Shares before the Date of Grant; |
(r) | “Guardian” means the guardian, if any, appointed for an Optionee; |
(s) | “Insider” shall have the meaning ascribed to such term in the Act; |
(t) | “Investor Relations Activities” means any activities or oral or written communications, by or on behalf of the Corporation or a shareholder of the Corporation that promote or reasonably could be expected to promote the purchase or sale of securities of the Corporation, but does not include: |
(i) | the dissemination of information provided, or records prepared, in the ordinary course of business of the Corporation |
(A) | to promote the sale of products or services of the Corporation, or |
(B) | to raise public awareness of the Corporation, |
(ii) | activities or communications necessary to comply with the requirements of |
(A) | applicable securities laws, |
(B) | the rules and policies of the NEO, if the Shares are listed only on the NEO, or the by-laws, rules or other regulatory instruments of any other self-regulatory body or exchange having jurisdiction over the Corporation, |
(iii) | communications by a publisher of, or writer for, a newspaper, magazine or business or financial publication, that is of general and regular paid circulation, distributed only to subscribers to it for value or to purchasers of it, if |
(A) | the communication is only through the newspaper, magazine or publication, and |
(B) | the publisher or writer receives no commission or other consideration other than for acting in the capacity of publisher or writer, or |
(iv) | activities or communications that may be otherwise specified by the NEO, if the Shares are listed only on the NEO; |
(u) | “NEO” means the Neo Exchange Inc. |
(v) | “Option” means an option to purchase unissued Shares granted pursuant to the terms of this Plan; |
(w) | “Option Agreement” means a written agreement between the Corporation and an Optionee specifying the terms of the Option being granted to the Optionee under the Plan; |
(x) | “Option Price” means the exercise price per Share specified in an Option Agreement, adjusted from time to time in accordance with the provisions of Sections 6.3 and 10; |
(y) | “Optionee” means an Eligible Person to whom an Option has been granted; |
(z) | “Person” means a natural person, company, government or political subdivision or agency of a government; and where two or more Persons act as a partnership, limited partnership, syndicate or other group for the purpose of acquiring, holding or disposing of securities of an issuer, such syndicate or group shall be deemed to be a Person; |
3. | ADMINISTRATION |
3.1 | Board or Committee – The Plan shall be administered by the Board or by a Committee appointed in accordance with Section 3.2. |
3.2 | Appointment of Committee – The Board may at any time appoint a Committee, consisting of not less than three of its members, to administer the Plan on behalf of the Board in accordance with such terms and conditions as the Board may prescribe, consistent with this Plan. Once appointed, the Committee shall continue to serve until otherwise directed by the Board. From time to time, the Board may increase the size of the Committee and appoint additional members, remove members (with or without cause) and appoint new members in their place, fill vacancies however caused, or remove all members of the Committee and thereafter directly administer the Plan. In the absence of the appointment of a Committee by the Board, the Board shall administer the Plan. |
3.3 | Quorum and Voting – A majority of the members of the Committee shall constitute a quorum, and, subject to the limitations in this Section 3, all actions of the Committee shall require the affirmative vote of members who constitute a majority of such quorum. No member of the Committee who is a director to whom an Option may be granted may participate in the decision to grant such Option (but any such member may be counted in determining the existence of a quorum at any meeting of the Committee in which action is to be taken with respect to the granting of an Option to him). |
3.4 | Powers of Board and Committee – The Board shall from time to time authorize and approve the grant by the Corporation of Options under this Plan, and any Committee appointed under Section 3.2 shall have the authority to review the following matters in relation to the Plan and to make recommendations thereon to the Board; |
(a) | administration of the Plan in accordance with its terms, |
(b) | determination of all questions arising in connection with the administration, interpretation and application of the Plan, including all questions relating to the value of the Shares, |
(c) | correction of any defect, supply of any information or reconciliation of any inconsistency in the Plan in such manner and to such extent as shall be deemed necessary or advisable to carry out the purposes of the Plan, |
(d) | prescription, amendment and rescission of the rules and regulations relating to the administration of the Plan; |
(e) | determination of the duration and purpose of leaves of absence from employment which may be granted to Optionees without constituting a termination of employment for purposes of the Plan, |
(f) | with respect to the granting of Options: |
(i) | determination of the Employees, officers, directors or Consultants to whom Options will be granted, based on the eligibility criteria set out in this Plan, |
(ii) | determination of the terms and provisions of the Option Agreement which shall be entered into with each Optionee (which need not be identical with the terms of any other Option Agreement) and which shall not be inconsistent with the terms of this Plan, |
(iii) | amendment of the terms and provisions of an Option Agreement, provided the Board obtains: |
(A) | the consent of the Optionee, and |
(B) | if required, the approval of any stock exchange on which the Shares are listed, |
(iv) | determination of when Options will be granted, |
(v) | determination of the number of Shares subject to each Option, |
(vi) | determination of the vesting schedule, if any, for the exercise of each |
(g) | other determinations necessary or advisable for administration of the Plan. |
3.5 | Obtain Approvals – The Board will seek to obtain any regulatory, Exchange or shareholder approvals which may be required pursuant to applicable securities laws or Exchange rules. |
3.6 | Administration by Committee – The Committee shall have all powers necessary or appropriate to accomplish its duties under this Plan. In addition, the Committee’s administration of the Plan shall in all respects be consistent with the Exchange policies and rules. |
4. | ELIGIBILITY |
4.1 | Eligibility for Options – Options may be granted to any Eligible Person. |
4.2 | Insider Eligibility for Options – Notwithstanding Section 4.1, if the Shares are listed only on the NEO, grants of Options to Insiders shall be subject to the policies of the NEO. |
4.3 | No Violation of Securities Laws – No Option shall be granted to any Optionee unless the Committee has determined that the grant of such Option and the exercise thereof by the Optionee will not violate the securities law of the jurisdiction in which the Optionee resides. |
5. | SHARES SUBJECT TO THE PLAN |
5.1 | Number of Shares – The maximum number of Shares issuable from time to time under the Plan is that number of Shares as is equal to 10% of the number of issued Shares at the Date of Grant of an Option. The maximum number of Shares issuable under the Plan shall be adjusted, where necessary, to take account of the events referred to in Section 10. |
5.2 | Expiry of Option – If an Option expires or terminates for any reason without having been exercised in full, the unpurchased Shares subject thereto shall again be available for the purposes of the Plan. |
5.3 | Reservation of Shares – The Corporation will at all times reserve for issuance and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. |
6. | OPTION TERMS |
6.1 | Option Agreement – Each Option granted to an Optionee shall be confirmed by the execution and delivery of an Option Agreement and the Board shall specify the following terms in each such Option Agreement: |
(a) | the number of Shares subject to option pursuant to such Option, subject to the following limitations if the Shares are listed only on the NEO: |
(i) | the number of Shares reserved for issuance pursuant to Options to any one Optionee shall not exceed 5% of the issued Shares in any 12-month period, |
(ii) | the number of Shares reserved for issuance pursuant to Options to any one Consultant shall not exceed 2% of the issued Shares in any 12- month period, and |
(iii) | the aggregate number of Shares reserved for issuance pursuant to Options to Employees and those individuals conducting Investor Relations Activities shall not exceed 2% of the issued Shares in any 12- month period; |
(b) | the Date of Grant; |
(c) | the Term, provided that, if the Shares are listed only on the NEO, the length of the Term shall in no event be greater than five years following the Date of Grant for all Optionees; |
(d) | the Option Price, provided that the Option Price shall not be less than the Fair Market Value of the Shares on the Date of Grant; |
(e) | subject to Section 6.2 below, any vesting schedule upon which the exercise of an Option is contingent; |
(f) | if the Optionee is an Employee, Consultant or an individual providing Investor Relations Activities for the Corporation, a representation by the Corporation and the Optionee that the Optionee is a bona fide Employee, Consultant or an individual providing Investor Relations Activities for the Corporation, as the case may be, of the Corporation or a Subsidiary Corporation; and |
(g) | such other terms and conditions as the Board deems advisable and are consistent with the purposes of this Plan. |
6.2 | Vesting Schedule – The Board, as applicable, shall have complete discretion to set the terms of any vesting schedule of each Option granted, including, without limitation, discretion to: |
(a) | permit partial vesting in stated percentage amounts based on the Term of such Option; and Grant. |
(b) | permit full vesting after a stated period of time has passed from the Date of |
6.3 | Amendments to Options – Amendments to the terms of previously granted Options are subject to regulatory approval, if required. If required by the Exchange, Disinterested Shareholder Approval shall be required for any reduction in the Option Price of a previously granted Option if the Optionee is an Insider of the Company at the time of the proposed reduction in the Option Price. |
6.4 | Uniformity – Except as expressly provided herein, nothing contained in this Plan shall require that the terms and conditions of Options granted under the Plan be uniform. |
7. | EXERCISE OF OPTION |
7.1 | Method of Exercise – Subject to any limitations or conditions imposed upon an Optionee pursuant to the Option Agreement or Section 6 hereof, an Optionee may exercise an Option by giving written notice thereof, specifying the number of Shares in respect of which the Option is exercised, to the Corporation at its principal place of business at any time after the Date of Grant until 4:00 p.m. (Toronto time) on the last day of the Term, such notice to be accompanied by full payment of the aggregate Option Price to the extent the Option is so exercised and an indication as to suitable arrangements made with the Corporation, in accordance with Section 15.7, for the receipt by the Corporation of an amount sufficient to satisfy any withholding tax requirements under applicable tax legislation in respect of the exercise of an Option (the "Withholding Obligations"). Such amounts shall be in lawful money (Canadian funds) by cash, cheque, bank draft or wire transfer. Payment by cheque made payable to the Corporation in the amount of the aggregate Option Price shall constitute payment of such Option Price unless the cheque is not honoured upon presentation, in which case the Option shall not have been validly exercised. |
7.2 | Issuance of Certificates – Not later than the third business day after exercise of an Option in accordance with Section 7.1, the Corporation shall issue and deliver to the Optionee a certificate or certificates evidencing the Shares with respect to which the Option has been exercised. Until the issuance of such certificate or certificates, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to such Shares, notwithstanding the exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the certificate is issued, except as provided by Section 10 hereof. |
7.3 | Compliance with U.S. Securities Laws – As a condition to the exercise of an Option, the Board may require the Optionee to represent and warrant in writing at the time of such exercise that the Shares are being purchased only for investment and without any then-present intention to sell or distribute such Shares. At the option of the Board, a stop-transfer order against such Shares may be placed on the stock books and records of the Corporation and a legend, indicating that the stock may not be pledged, sold or otherwise transferred unless an opinion of counsel is provided stating that such transfer is not in violation of any applicable law or regulation, may be stamped on the certificates representing such Shares in order to assure an exemption from registration. The Board may also require such other documentation as may from time to time be necessary to comply with United States’ federal and state securities laws. The Corporation has no obligation to undertake registration of Options or the Shares issuable upon the exercise of the Options. |
8. | TRANSFERABILITY OF OPTIONS |
8.1 | Non-Transferable – Except as permitted by applicable securities laws and the policies of the Exchange, and as provided otherwise in this Section 8, Options are non-assignable and non- transferable. |
8.2 | Death of Optionee – Subject to Section 8.3, if the employment of an Optionee as an Employee of, or the services of a Consultant providing services to, the Corporation or any Subsidiary Corporation, or the employment of an Optionee as an individual providing Investor Relations Activities, or the position of the Optionee as a director or senior officer of the Corporation or any Subsidiary Corporation, terminates as a result of such Optionee’s death, any Options held by such Optionee shall pass to the Qualified Successor of the Optionee and shall be exercisable by such Qualified Successor until the earlier of a period of not more than one year following the date of such death and the expiry of the Term of the Option. |
8.3 | Disability of Optionee – If the employment of an Optionee as an Employee of, or the services of a Consultant providing services to, the Corporation or any Subsidiary Corporation, or the employment of an Optionee as an individual providing Investor Relations Activities for the Corporation, or the position of the Optionee as a director or senior officer of the Corporation or any Subsidiary Corporation, is terminated by reason of such Optionee’s Disability, any Options held by such Optionee that could have been exercised immediately prior to such termination of employment or service shall be exercisable by such Optionee, or by his Guardian, for a period of not more than one year following the date of such following the termination of employment or service of such Optionee. If such Optionee dies within that period of not more than one year, any Option held by such Optionee that could have been exercised immediately prior to his or her death shall pass to the Qualified Successor of such Optionee, and shall be exercisable by the Qualified Successor until the earlier of a period of not more than one year following the death of such Optionee and the expiry of the Term of the Option. |
8.4 | Vesting – Options held by a Qualified Successor or exercisable by a Guardian shall, during the period prior to their termination, continue to vest in accordance with any vesting schedule to which such Options are subject. |
8.5 | Deemed Non-Interruption of Employment – Employment shall be deemed to continue intact during any military or sick leave or other bona fide leave of absence if the period of such leave does not exceed 90 days or, if longer, for so long as the Optionee’s right to reemployment with the Corporation or any Subsidiary Corporation is guaranteed either by statute or by contract. If the period of such leave exceeds 90 days and the Optionee’s reemployment is not so guaranteed, then the Optionee’s employment shall be deemed to have terminated on the ninety- first day of such leave. |
9. | TERMINATION OF OPTIONS |
9.1 | Termination of Options – To the extent not earlier exercised or terminated in accordance with Section 8, an Option shall terminate at the earliest of the following dates: |
(a) | the termination date specified for such Option in the Option Agreement; |
(b) | where the Optionee’s position as an Employee, a Consultant, a director or a senior officer of the Corporation or any Subsidiary Corporation, or an individual providing Investor Relations Activities for the Corporation, is terminated for cause, the date of such termination for cause; |
(c) | where the Optionee’s position as an Employee, a Consultant, a director or a senior officer of the Corporation or any Subsidiary Corporation or an individual providing Investor Relations Activities for the Corporation terminates for a reason other than the Optionee’s Disability or death or for cause, not more than 90 days after such date of termination or, if the Shares are listed only on the NEO, not more than 30 days after such person ceases to be employed to provide Investor Relations Activities; PROVIDED that if an Optionee’s position changes from one of the said categories to another category, such change shall not constitute termination or cessation for the purpose of this Subsection 9.1(c); and |
(d) | the date of any sale, transfer, assignment or hypothecation, or any attempted sale, transfer, assignment or hypothecation, of such Option in violation of Section 8.1. |
9.2 | Lapsed Options – If Options are surrendered, terminate or expire without being exercised in whole or in part, new Options may be granted covering the Shares not purchased under such lapsed Options. If an Option has been surrendered in connection with the regranting of a new Option to the same Optionee on different terms than the original Option granted to such Optionee, then, if required, the new Option is subject to approval of the Exchange. |
9.3 | Exclusion From Severance Allowance, Retirement Allowance or Termination Settlement – If the Optionee retires, resigns or is terminated from employment or engagement with the Corporation or any Subsidiary Corporation, the loss or limitation, if any, pursuant to the Option Agreement with respect to the right to purchase Option Shares which were not vested at that time or which, if vested, were cancelled, shall not give rise to any right to damages and shall not be included in the calculation of nor form any part of any severance allowance, retiring allowance or termination settlement of any kind whatsoever in respect of such Optionee. |
10. | ADJUSTMENTS TO OPTIONS |
10.1 | Alteration in Capital Structure – If there is any change in the Shares through or by means of a declaration of stock dividends of the Shares or consolidations, subdivisions or reclassifications of the Shares, or otherwise, the number of Shares available under the Plan, the Shares subject to any Option and the Option Price therefor shall be adjusted proportionately by the Board and, if required, approved by the Exchange, and such adjustment shall be effective and binding for all purposes of the Plan. |
10.2 | Effect of Amalgamation, Merger or Arrangement – If the Corporation amalgamates, merges or enters into a plan of arrangement with or into another corporation, any Shares receivable on the exercise of an Option shall be converted into the securities, property or cash which the Optionee would have received upon such amalgamation, merger or arrangement if the Optionee had exercised the Option immediately prior to the record date applicable to such amalgamation, merger or arrangement, and the exercise price shall be adjusted proportionately by the Board and such adjustment shall be binding for all purposes of the Plan. |
10.3 | Acceleration on Change in Control – Upon a Change in Control, all Options shall become immediately exercisable, notwithstanding any contingent vesting provisions to which such Options may have otherwise been subject. |
10.4 | Acceleration of Date of Exercise – Subject to the approval of the Exchange, if required, the Board shall have the right to accelerate the date of vesting of any portion of any Option which remains unvested. |
10.5 | Determinations to be Binding – If any questions arise at any time with respect to the Option Price or exercise price or number of Option Shares or other property deliverable upon exercise of an Option following an event referred to in this Section 10, such questions shall be conclusively determined by the Board, whose decisions shall be final and binding. |
10.6 | Effect of a Take-Over – If a bona fide offer (the “Offer”) for Shares is made to an Optionee or to shareholders generally or to a class of shareholders which includes the Optionee, which Offer constitutes a take-over bid within the meaning of the Act, the Corporation shall, immediately upon receipt of notice of the Offer, notify each Optionee of full particulars of the Offer, whereupon any Option held by an Optionee may be exercised in whole or in part, notwithstanding any contingent vesting provisions to which such Options may have otherwise been subject, by the Optionee so as to permit the Optionee to tender the Shares received upon such exercise (the “Optioned Shares”) to the Offer. If: |
(a) | the Offer is not completed within the time specified therein; or |
(b) | all of the Optioned Shares tendered by the Optionee pursuant to the Offer are not taken up and paid for by the offeror pursuant thereto; |
11. | APPROVAL, TERMINATION AND AMENDMENT OF PLAN |
11.1 | Shareholder Approval – This Plan, if the Shares are listed only on the NEO, is subject to Shareholder Approval every three years. |
11.2 | Power of Board to Terminate or Amend Plan – Subject to the approval of the Exchange, if required, the Board may terminate, suspend or discontinue the Plan at any time or amend or revise the terms of the Plan; provided, however, that, except as provided in Section 10, the Board may not do any of the following without obtaining, within 12 months either before or after the Board’s adoption of a resolution authorizing such action, approval by the Corporation’s shareholders at a meeting duly held in accordance with the applicable corporate laws: |
(a) | increase the maximum number of Shares which may be issued under the Plan; |
(b) | materially modify the requirements as to eligibility for participation in the Plan; or |
(c) | materially increase the benefits accruing to participants under the Plan; |
11.3 | No Grant During Suspension of Plan – No Option may be granted during any suspension, or after termination, of the Plan. Amendment, suspension or termination of the Plan shall not, without the consent of the Optionee, alter or impair any rights or obligations under any Option previously granted. |
12. | CONDITIONS PRECEDENT TO ISSUANCE OF SHARES |
12.1 | Compliance with Laws – Shares shall not be issued with respect to an Option unless the exercise of such Option and the issuance and delivery of such shares shall comply with all relevant provisions of law, including, without limitation, any applicable United States’ state securities laws, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations thereunder and the requirements of any Exchange or automated interdealer quotation system of a registered national securities association upon which such Shares may then be listed or quoted, and such issuance shall be further subject to the approval of counsel for the Corporation with respect to such compliance, including the availability of an exemption from registration for the issuance and sale of such Shares. The inability of the Corporation to obtain from any regulatory body the authority deemed by the Corporation to be necessary for the lawful issuance and sale of any Shares under this Plan, or the unavailability of an exemption from registration for the issuance and sale of any Shares under this Plan, shall relieve the Corporation of any liability with respect to the non-issuance or sale of such Shares other than with respect to a refund of any Option Price paid. |
13. | USE OF PROCEEDS |
13.1 | Use of Proceeds – Proceeds from the sale of Shares pursuant to the Options granted and exercised under the Plan shall constitute general funds of the Corporation and shall be used for general corporate purposes, or as the Board otherwise determines. |
14. | NOTICES |
14.1 | Notices – All notices, requests, demands and other communications required or permitted to be given under this Plan and the Options granted under this Plan shall be in writing and shall be either delivered personally to the party to whom notice is to be given, in which case notice shall be deemed to have been duly given on the date of such personal delivery; telecopied, in which case notice shall be deemed to have been duly given on the date the telecopy is sent; or mailed to the party to whom notice is to be given, by first class mail, registered or certified, return receipt requested, postage prepaid, and addressed to the party at his or its most recent known address, in which case such notice shall be deemed to have been duly given on the tenth postal delivery day following the date of such mailing. |
15. | MISCELLANEOUS PROVISIONS |
15.1 | No Obligations to Exercise – Optionees shall be under no obligation to exercise Options granted under this Plan. |
15.2 | No Obligation to Retain Optionee – Nothing contained in this Plan shall obligate the Corporation or any Subsidiary Corporation to retain an Optionee as an Employee, officer, director or Consultant for any period, nor shall this Plan interfere in any way with the right of the Corporation or any Subsidiary Corporation to reduce such Optionee’s compensation. |
15.3 | Binding Agreement – The provisions of this Plan and of each Option Agreement with an Optionee shall be binding upon such Optionee and the Qualified Successor or Guardian of such Optionee. |
15.4 | Use of Terms – Where the context so requires, references herein to the singular shall include the plural, and vice versa, and references to a particular gender shall include either or both genders. |
15.5 | Headings – The headings used in this Plan are for convenience of reference only and shall not in any way affect or be used in interpreting any of the provisions of this Plan. |
15.6 | No Representation or Warranty – The Corporation makes no representation or warranty as to the future value of any Shares issued in accordance with the provisions of this Plan. |
15.7 | Income Taxes – Upon the exercise of an Option by an Optionee, the Corporation shall have the right to require the Optionee to remit to the Corporation an amount sufficient to satisfy any Withholding Obligations relating thereto under applicable tax legislation. Unless otherwise prohibited by the Board or by applicable law, satisfaction of the amount of the Withholding Obligations (the "Withholding Amount") may be accomplished by any of the following methods or by a combination of such methods as determined by the Corporation in its sole discretion: |
(a) | the tendering by the Optionee of cash payment to the Corporation in an amount less than or equal to the Withholding Amount; or |
(b) | the withholding by the Corporation from the Shares otherwise due to the Optionee such number of Shares as it determines are required to be sold by the Corporation, as trustee, to satisfy the Withholding Amount (net of selling costs). By executing and delivering the Option Agreement, the Optionee shall be deemed to have consented to such sale and have granted to the Corporation an irrevocable power of attorney to effect the sale of such Shares and to have acknowledged and agreed that the Corporation does not accept responsibility for the price obtained on the sale of such Shares; or |
(c) | the withholding by the Corporation from any cash payment otherwise due by the Corporation to the Optionee, including salaries, directors fees, consulting fees and any other forms of remuneration, such amount of cash as is required to pay and satisfy the Withholding Amount; |
• | provided, however, in all cases, that the sum of any cash so paid or withheld and the fair market value of any Shares so withheld is sufficient to satisfy the Withholding Amount. |
• | The provisions of the Option Agreement shall provide that the Optionee (or their beneficiaries) shall be responsible for all taxes with respect to any Options granted under the Option Plan and an acknowledgement that neither the Board nor the Corporation shall make any representations or warranties of any nature or kind whatsoever to any person regarding the tax treatment of Options or payments on account of the Withholding Amount made under the Option Plan and none of the Board, the Corporation, nor any of its employees or representatives shall have any liability to an Optionee (or its beneficiaries) with respect thereto. |
15.8 | Compliance with Applicable Law – If any provision of the Plan or any Option Agreement contravenes any law or any order, policy, by-law or regulation of any regulatory body or stock exchange or over the counter market having authority over the Corporation or the Plan, then such provision shall be deemed to be amended to the extent required to bring such provision into compliance therewith. |
15.9 | Conflict – In the event of any conflict between the provisions of this Plan and an Option Agreement, the provisions of this Plan shall govern. |
15.10 | Governing Law – This Plan and each Option Agreement issued pursuant to this Plan shall be governed by the laws of the Province of Ontario. |
15.11 | Time of Essence – Time is of the essence of this Plan and of each Option Agreement. No extension of time will be deemed to be, or to operate as, a waiver of the essentiality of time. |
15.12 | Entire Agreement – This Plan and the Option Agreement sets out the entire agreement between the Corporation and the Optionees relative to the subject matter hereof and supersedes all prior agreements, undertakings and understandings, whether oral or written. |
16. | EFFECTIVE DATE OF PLAN |
16.1 | Effective Date of Plan – This Plan shall be effective on the later of the day of its approval by the shareholders of the Corporation given by way of ordinary resolution and the day of its acceptance for filing by the Exchange. |
FINANCIAL STATEMENTS
For the years ended December 31, 2019 and 2018
(expressed in Canadian dollars)
Independent Auditor’s Report
To the Shareholders of Routemaster Capital Inc.
Opinion
We have audited the financial statements of Routemaster Capital Inc. (the “Company”), which comprise the statements of financial position as at December 31, 2019 and 2018, and the statements of operations and comprehensive (loss), statements of cash flows, and statements of changes in equity (deficiency) for the years then ended, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2019 and 2018, and its financial performance and its 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 financial statements in Canada. 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
We draw attention to Note 1 in the financial statements, which indicates that the Company incurred a net loss of $1,507,338 during the year ended December 31, 2019 and, as of that date, the Company’s current liabilities exceeded its current assets by $1,165,565. As stated in Note 1, these events or conditions, along with other matters as set forth in Note 1, indicate that material uncertainties exist that cast significant doubt on the Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.
Other information
Management is responsible for the other information. The other information comprises Management’s Discussion and Analysis.
Our opinion on the 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 financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. 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 IFRS, 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 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.
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 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 judgement and maintain professional skepticism throughout the audit. We also:
● | Identify and assess the risks of material misstatement of the 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 risks 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 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 financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. |
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 of the audit resulting in this independent auditor’s report is Chris Milios.
McGovern Hurley LLP
Chartered Professional Accountants
Licensed Public Accountants
Toronto, Ontario
February 26, 2020
Routemaster Capital Inc.
Table of Contents
Statements of financial position | 6 | |
Statements of operations and comprehensive (loss) | 7 | |
Statements of cash flows | 8 | |
Statements of changes in equity (deficiency) | 9 | |
Notes to the financial statements | 10-29 |
5
Routemaster Capital Inc. | |||||||||||
Statements of Financial Position | |||||||||||
(Expressed in Canadian dollars) | |||||||||||
Note | December 31, | December 31, | |||||||||
2019 | 2018 | ||||||||||
$ | $ | ||||||||||
Assets | |||||||||||
Cash | 12 | 4,762 | 11,103 | ||||||||
Public investments, at fair value through profit and loss | 3,12,14 | 623,275 | 1,648,119 | ||||||||
Amounts receivable | 4,12 | - | 123,194 | ||||||||
Prepaid expenses and deposits | 5,12 | 8,422 | 12,825 | ||||||||
Private investments, at fair value through profit and loss | 3,12,14 | - | 151,454 | ||||||||
Total assets | 636,459 | 1,946,695 | |||||||||
Liabilities | |||||||||||
Accounts payable and accrued liabilities | 8,12,14 | 1,802,024 | 1,604,922 | ||||||||
Total liabilities | 1,802,024 | 1,604,922 | |||||||||
(Deficiency) Equity | |||||||||||
Common shares | 10(b) | 18,820,850 | 18,820,850 | ||||||||
Preferred shares | 10(c) | 4,321,350 | 4,321,350 | ||||||||
Share-based payments reserves | 11 | 359,408 | 474,180 | ||||||||
(Deficit) | (24,667,173 | ) | (23,274,607 | ) | |||||||
Total (deficiency) equity | (1,165,565 | ) | 341,773 | ||||||||
Total liabilities and equity | 636,459 | 1,946,695 | |||||||||
Nature of operations and going concern | 1 | ||||||||||
Commitments and contingencies | 15 |
Approved on behalf of the Directors: | ||
“Tito Gandhi” | “James Lanthier” | |
Director | Director |
See accompanying notes to these financial statements
6
Routemaster Capital Inc. | |||||||||||
Statements of Operations and Comprehensive (Loss) | |||||||||||
(Expressed in Canadian dollars) | |||||||||||
Note | Years ended December 31, | ||||||||||
2019 | 2018 | ||||||||||
$ | $ | ||||||||||
Revenues | |||||||||||
Realized (loss) gain on investments, net | (708,793 | ) | 395,635 | ||||||||
Unrealized (loss) on investments, net | (124,807 | ) | (6,592,146 | ) | |||||||
Interest income | 2,040 | 11,387 | |||||||||
Total revenue | (831,560 | ) | (6,185,124 | ) | |||||||
Expenses | |||||||||||
Operating, general and administration | 9 | 794,647 | 1,474,544 | ||||||||
Transaction costs | 3,739 | 30,971 | |||||||||
Foreign exchange (gain) | (4,125 | ) | (25,212 | ) | |||||||
Total expenses | 794,261 | 1,480,303 | |||||||||
(Loss) before other items | (1,625,821 | ) | (7,665,427 | ) | |||||||
Other items | |||||||||||
Gain on settlement of payable | 14 | 118,483 | - | ||||||||
(Impairment) of loan receivable | 6 | - | (1,083,640 | ) | |||||||
(Impairment) of royalty interest | 7 | - | (1,045,000 | ) | |||||||
Total other items | 118,483 | (2,128,640 | ) | ||||||||
Net (loss) and comprehensive (loss) for the year | (1,507,338 | ) | (9,794,067 | ) | |||||||
(Loss) per share | |||||||||||
Basic and diluted | (0.04 | ) | (0.24 | ) | |||||||
Weighted average number of shares outstanding: | |||||||||||
Basic and diluted | 41,513,631 | 41,513,631 |
See accompanying notes to these financial statements
7
Routemaster Capital Inc. | |||||||||||
Statements of Cash Flows | |||||||||||
(Expressed in Canadian dollars) | |||||||||||
Note | Year ended December 31, | ||||||||||
2019 | 2018 | ||||||||||
$ | $ | ||||||||||
Cash (used in) provided by operations: | |||||||||||
Net loss for the year | (1,507,338 | ) | (9,794,067 | ) | |||||||
Adjustments to reconcile net income to cash (used in) operating activities: | |||||||||||
Interest income | - | (9,063 | ) | ||||||||
Realized loss (gain) on investments, net | 708,793 | (395,635 | ) | ||||||||
Unrealized loss on investments, net | 124,807 | 6,592,146 | |||||||||
Unrealized (gain) on foreign exchange | (4,146 | ) | (32,369 | ) | |||||||
Gain on settlement of payable | (118,483 | ) | - | ||||||||
Impairment of loan receivable | - | 1,083,640 | |||||||||
Impairment of royalty interest | - | 1,045,000 | |||||||||
(796,367 | ) | (1,510,348 | ) | ||||||||
Adjustment for: | |||||||||||
Purchase of investments | - | (884,000 | ) | ||||||||
Disposal of investments | 458,383 | 2,361,045 | |||||||||
Loan provided | - | (848,571 | ) | ||||||||
Change in receivables | 7,534 | (68,933 | ) | ||||||||
Change in prepaid expenses and deposits | 4,403 | 73,836 | |||||||||
Change in accounts payable and accrued liabilities | 320,336 | 201,322 | |||||||||
Net cash (used in) operating activities | (5,711 | ) | (675,649 | ) | |||||||
Effect of exchange rate changes on cash | (630 | ) | 951 | ||||||||
Change in cash | (6,341 | ) | (674,698 | ) | |||||||
Cash, beginning of year | 11,103 | 685,801 | |||||||||
Cash, end of year | 4,762 | 11,103 |
See accompanying notes to these financial statements
8
Routemaster Capital Inc.
Statements of Changes in Equity (Deficiency)
(Expressed in Canadian dollars)
Number of Common | Common | Number of Preferred | Preferred | Share-based payments | Share-based Payments | Retained Earnings | |||||||||||||||||||||||||||||
Shares | Shares | Shares | Shares | Options | Warrants | Reserve | (Deficit) | Total | |||||||||||||||||||||||||||
Balance, December 31, 2018 | 41,513,631 | $ | 18,820,850 | 4,500,000 | $ | 4,321,350 | $ | 233,641 | $ | 240,539 | $ | 474,180 | $ | (23,274,607 | ) | $ | 341,773 | ||||||||||||||||||
Expiration of options | - | - | - | - | (34,672 | ) | - | (34,672 | ) | 34,672 | - | ||||||||||||||||||||||||
Expiration of warrants | - | - | - | - | - | (80,100 | ) | (80,100 | ) | 80,100 | - | ||||||||||||||||||||||||
Net (loss) for the year | - | - | - | - | - | - | - | (1,507,338 | ) | (1,507,338 | ) | ||||||||||||||||||||||||
Balance, December 31, 2019 | 41,513,631 | $ | 18,820,850 | 4,500,000 | $ | 4,321,350 | $ | 198,969 | $ | 160,439 | $ | 359,408 | $ | (24,667,173 | ) | $ | (1,165,565 | ) | |||||||||||||||||
Balance, December 31, 2017 | 41,513,631 | $ | 18,820,850 | 4,500,000 | $ | 4,321,350 | $ | 409,442 | $ | 240,539 | $ | 649,981 | $ | (13,656,341 | ) | $ | 10,135,840 | ||||||||||||||||||
Expiration of options | - | - | - | - | (175,801 | ) | - | (175,801 | ) | 175,801 | - | ||||||||||||||||||||||||
Net (loss) for the year | - | - | - | - | - | - | - | (9,794,067 | ) | (9,794,067 | ) | ||||||||||||||||||||||||
Balance, December 31, 2018 | 41,513,631 | $ | 18,820,850 | $ | 4,500,000 | $ | 4,321,350 | $ | 233,641 | $ | 240,539 | $ | 474,180 | $ | (23,274,607 | ) | $ | 341,773 |
See accompanying notes to these financial statements
9
Routemaster Capital Inc.
Notes to the Financial Statements
Years ended December 31, 2019 and 2018
(Expressed in Canadian dollars unless otherwise noted)
1. | Nature of operations and going concern |
Routemaster Capital Inc. (the “Company” or “Routemaster”), is a publicly listed company incorporated in the Province of British Columbia and continued under the laws of the Province of Ontario. The Company’s shares are listed on the TSX Venture Exchange (“TSXV”). The Company sold its sole subsidiary on December 29, 2015 and completed a change of business (“COB”) to a tier 2 investment issuer under the rules of the TSXV on September 16, 2016. The Company’s head office is located at 65 Queen Street West, 8th Floor, Toronto, Ontario, Canada, M5H 2M5.
These financial statements were prepared on a going concern basis of presentation, which contemplates the realization of assets and settlement of liabilities as they become due in the normal course of operations for the next fiscal year. For the year ended December 31, 2019, the Company incurred a net loss of $1,507,338 and as at December 31, 2019, reported an accumulated deficit of $24,667,173 and working capital deficiency of $1,165,565, including $4,762 in cash. The Company’s current source of operating cash flow is dependent on the marketability of its investments, and there can be no assurances that sufficient funding, including adequate financing, will be available to cover the general and administrative expenses necessary for the maintenance of a public company. The Company’s status as a going concern is contingent upon raising the necessary funds through the selling of investments and issuance of equity or debt. Management believes its working capital will be sufficient to support activities for the next twelve months and expects to raise additional funds when required and available. There can be no assurance that funds will be available to the Company with acceptable terms or at all. These matters constitute material uncertainties that cast significant doubt about the ability of the Company to continue as a going concern.
2. | Significant accounting policies |
(a) | Statement of compliance |
These financial statements of the Company were prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”). The policies as set out below were consistently applied to all the periods presented unless otherwise noted.
These financial statements of the Company were approved for issue by the Board of Directors on February 26, 2020.
(b) | Basis of preparation |
The Company’s functional and presentation currency is the Canadian dollar (“$”). Transactions in currencies other than the entity’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Gains and losses are included in operations.
(c) | Significant accounting judgements, estimates and assumptions |
The preparation of these financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Such estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual outcomes can differ from these estimates. The impacts of such estimates are pervasive throughout the financial statements and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised, and the revision affects both current and future periods.
10
Routemaster Capital Inc.
Notes to the Financial Statements
Years ended December 31, 2019 and 2018
(Expressed in Canadian dollars unless otherwise noted)
2. | Significant accounting policies (continued) |
(c) | Significant accounting judgements, estimates and assumptions (continued) |
Information about critical judgments and estimates in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements are as follows:
(i) | Fair value of financial derivatives |
Investments in options and warrants which are not traded on a recognized securities exchange do not have a readily available market value. When there are sufficient and reliable observable market inputs, a valuation technique is used; if no such market inputs are available, the warrants and options are valued at intrinsic value. Refer to Notes 3 and 12 for further details.
(ii) | Fair value of investment in securities not quoted in an active market or private company investments |
Where the fair values of financial assets and financial liabilities recorded on the statement of financial position cannot be derived from active markets, they are determined using a variety of valuation techniques. The inputs to these models are derived from observable market data where possible, but where observable market data are not available, judgment is required to establish fair values. Refer to Notes 3 and 12 for further details.
(iii) | Share-based payments |
The Company uses the Black-Scholes option pricing model to fair value options in order to calculate share-based compensation expense. The Black-Scholes model involves six key inputs to determine the fair value of an option: risk-free interest rate, exercise price, market price of the Company’s shares at date of issue, expected dividend yield, expected life, and expected volatility. Certain of the inputs are estimates which involve considerable judgment and are, or could be, affected by significant factors that are out of the Company’s control. The Company is also required to estimate the future forfeiture rate of options based on historical information in its calculation of share-based compensation expense. Refer to Note 11 for more details.
(iv) | Investment entity |
Management has determined that the Company qualifies for the exemption from consolidation given that the Company has the following typical characteristics of an investment entity:
(a) | obtains funds from one or more investors for the purpose of providing those investor(s) with investment management services; |
(b) | commits to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and |
(c) | measures and evaluates the performance of substantially all of its investments on a fair value basis. |
(v) | Contingencies (See Note 15 for details) |
(d) | Financial instruments |
Financial assets and financial liabilities are recognized on the Company’s statement of financial position when the Company has become a party to the contractual provisions of the instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. The Company’s financial instruments consist of cash, amounts receivable, public investments, private investments, accounts payable and accrued liabilities.
11
Routemaster Capital Inc.
Notes to the Financial Statements
Years ended December 31, 2019 and 2018
(Expressed in Canadian dollars unless otherwise noted)
2. | Significant accounting policies (continued) |
(d) | Financial instruments (continued) |
(i) | Investments |
Purchases and sales of investments are recognized on a trade date basis. Public and private investments at fair value through profit or loss are initially recognized at fair value, with changes in fair value reported in profit (loss).
At each financial reporting period, the Company’s management estimates the fair value of its investments based on the criteria below and reflects such valuations in the financial statements.
Transaction costs are expensed as incurred in the statements of loss. The determination of fair value requires judgment and is based on market information where available and appropriate. At the end of each financial reporting period, the Company’s management estimates the fair value of investments based on the criteria below and reflects such changes in valuations in the statements of loss. The Company is also required to present its investments (and other financial assets and liabilities reported at fair value) into three hierarchy levels (Level 1, 2, or 3) based on the transparency of inputs used in measuring the fair value, and to provide additional disclosure in connection therewith (see Note 12, “Financial instruments”). The three levels are defined as follows:
Level 1 – investment with quoted market price;
Level 2 – investment which valuation technique is based on observable market inputs; and
Level 3 – investment which valuation technique is based on non-observable market inputs.
Publicly-traded investments:
1. Securities, including shares, options, and warrants which are traded on a recognized securities exchange and for which no sales restrictions apply are recorded at fair values based on quoted closing prices at the statement of financial position date or the closing price on the last day the security traded if there were no trades at the statement of financial position date. These are included in Level 1 as disclosed in Note 12.
2. Securities which are traded on a recognized securities exchange but which are escrowed or otherwise restricted as to sale or transfer are recorded at amounts discounted from market value. Shares that are received as part of a private placement that are subject to a standard four-month hold period are not discounted. In determining the discount for such investments, the Company considers the nature and length of the restriction, business risk of the investee corporation, relative trading volume and price volatility and any other factors that may be relevant to the ongoing and realizable value of the investments. These are included in Level 2 in Note 12.
3. Warrants or options of publicly-traded securities which do not have a quoted price are carried at an estimated fair value calculated using the Black-Scholes option pricing model if sufficient and reliable observable market inputs are available. If no such market inputs are available or reliable, the warrants and options are valued at intrinsic value. These are included in Level 2 as disclosed in Note 12.
The amounts at which the Company’s publicly-traded investments could be disposed of may differ from carrying values based on market quotes, as the value at which significant ownership positions are sold is often different than the quoted market price due to a variety of factors such as premiums paid for large blocks or discounts due to illiquidity. Such differences could be material.
12
Routemaster Capital Inc.
Notes to the Financial Statements
Years ended December 31, 2019 and 2018
(Expressed in Canadian dollars unless otherwise noted)
2. | Significant accounting policies (continued) |
(d) | Financial instruments (continued) |
(i) | Investments (continued) |
Privately-held investments:
1. Securities in privately-held companies (other than options and warrants) are initially recorded at cost, being the fair value at the time of acquisition. At the end of each financial reporting period, the Company’s management estimates the fair value of investments based on the criteria below and reflects such valuations in the financial statements. These are included in Level 3 as disclosed in Note 12. Options and warrants of private companies are carried at their intrinsic value.
With respect to valuation, the financial information of private companies in which the Company has investments may not always be available, or such information may be limited and/or unreliable. Use of the valuation approach described below may involve uncertainties and determinations based on the Company’s judgment and any value estimated from these may not be realized or realizable. In addition to the events described below, which may affect a specific investment, the Company will take into account general market conditions when valuing the privately-held investments in its portfolio. In the absence of occurrence of any of these events or any significant change in general market conditions indicates generally that the fair value of the investment has not materially changed.
2. An upward adjustment is considered appropriate and supported by pervasive and objective evidence such as a significant subsequent equity financing by an unrelated investor at a transaction price higher than the Company’s carrying value; or if there have been significant corporate, political or operating events affecting the investee company that, in management’s opinion, have a positive impact on the investee company’s prospects and therefore its fair value. In these circumstances, the adjustment to the fair value of the investment will be based on management’s judgment and any value estimated may not be realized or realizable. Such events include, without limitation:
● | political changes in a country in which the investee company operates which, for example, reduce the corporate tax burden, permit mining where, or to an extent that, it was not previously allowed, or reduce or eliminate the need for permitting or approvals; |
● | receipt by the investee company of environmental, mining, aboriginal or similar approvals, which allow the investee company to proceed with its project(s); |
● | filing by the investee company of a National Instrument 43-101 technical report in respect of a previously non-compliant resource; |
● | release by the investee company of positive exploration results, which either proves or expands their resource prospects; and |
● | important positive management changes by the investee company that the Company’s management believes will have a very positive impact on the investee company’s ability to achieve its objectives and build value for shareholders. |
3. Downward adjustments to carrying values are made when there is evidence of a decline in value as indicated by the assessment of the financial condition of the investment based on third party financing, operational results, forecasts, and other developments since acquisition, or if there have been significant corporate, political or operating events affecting the investee company that, in management’s opinion, have a negative impact on the investee company’s prospects and therefore its fair value. The amount of the change to the fair value of the investment is based on management’s judgment and any value estimated may not be realized or realizable. Such events include, without limitation:
● | political changes in a country in which the investee company operates which increases the tax burden on companies, which prohibit mining where it was previously allowed, which increases the need for permitting or approvals, etc.; |
● | denial of the investee company’s application for environmental, mining, aboriginal or similar approvals which prohibit the investee company from proceeding with its projects; |
● | the investee company releases negative exploration results; |
13
Routemaster Capital Inc.
Notes to the Financial Statements
Years ended December 31, 2019 and 2018
(Expressed in Canadian dollars unless otherwise noted)
2. | Significant accounting policies (continued) |
(d) | Financial instruments (continued) |
(i) | Investments (continued) |
Privately-held investments: (continued)
● | changes to the management of the investee company take place which the Company believes will have a negative impact on the investee company’s ability to achieve its objectives and build value for shareholders; |
● | the investee company is placed into receivership or bankruptcy; and |
● | based on financial information received from the investee company, it is apparent to the Company that the investee company is unlikely to be able to continue as a going concern. |
The resulting values may differ from values that would be realized had a ready market existed. The amounts at which the Company’s privately-held investments could be disposed of may differ from the carrying value assigned. Such differences could be material.
(ii) | Financial assets other than investments at fair value and liabilities |
Financial assets
Initial recognition and measurement
Non-derivative financial assets within the scope of IFRS 9 are classified and measured as “financial assets at fair value”, as either FVPL or FVOCI, and “financial assets at amortized costs”, as appropriate. The Company determines the classification of financial assets at the time of initial recognition based on the Company’s business model and the contractual terms of the cash flows.
All financial assets are recognized initially at fair value plus, in the case of financial assets not at FVPL, directly attributable transaction costs on the trade date at which the Company becomes a party to the contractual provisions of the instrument.
Financial assets with embedded derivatives are considered in their entirety when determining their classification at FVPL or at amortized cost. The Company has classified accounts receivable on provisionally priced sales as financial assets measured at FVPL. Other accounts receivable held for collection of contractual cash flows are measured at amortized cost.
Subsequent measurement – financial assets at amortized cost
After initial recognition, financial assets measured at amortized cost are subsequently measured at the end of each reporting period at amortized cost using the Effective Interest Rate (“EIR”) method. Amortized cost is calculated by taking into account any discount or premium on acquisition and any fees or costs that are an integral part of the EIR.
Subsequent measurement – financial assets at FVPL
Financial assets measured at FVPL include financial assets management intends to sell in the short term and any derivative financial instrument that is not designated as a hedging instrument in a hedge relationship. Financial assets measured at FVPL are carried at fair value in the statements of financial position with changes in fair value recognized in other income or expense in the statements of earnings (loss). The Company’s investments are classified as financial assets at FVPL.
Subsequent measurement – financial assets at FVOCI
Financial assets measured at FVOCI are non-derivative financial assets that are not held for trading and the Company has made an irrevocable election at the time of initial recognition to measure the assets at FVOCI. The Company does not measure any financial assets at FVOCI.
After initial measurement, investments measured at FVOCI are subsequently measured at fair value with unrealized gains or losses recognized in other comprehensive income or loss in the statements of comprehensive income (loss). When the investment is sold, the cumulative gain or loss remains in accumulated other comprehensive income or loss and is not reclassified to profit or loss.
14
Routemaster Capital Inc.
Notes to the Financial Statements
Years ended December 31, 2019 and 2018
(Expressed in Canadian dollars unless otherwise noted)
2. | Significant accounting policies (continued) |
(d) | Financial instruments (continued) |
(ii) | Financial assets and liabilities (continued) |
Financial assets (continued)
Dividends from such investments are recognized in other income in the statements of earnings (loss) when the right to receive payments is established.
Derecognition
A financial asset is derecognized when the contractual rights to the cash flows from the asset expire, or the Company no longer retains substantially all the risks and rewards of ownership.
Impairment of financial assets
The Company’s only financial assets subject to impairment are other accounts receivable, which are measured at amortized cost. The Company has elected to apply the simplified approach to impairment as permitted by IFRS 9, which requires the expected lifetime loss to be recognized at the time of initial recognition of the receivable. To measure estimated credit losses, accounts receivable have been grouped based on shared credit risk characteristics, including the number of days past due. An impairment loss is reversed in subsequent periods if the amount of the expected loss decreases and the decrease can be objectively related to an event occurring after the initial impairment was recognized.
Financial liabilities
Initial recognition and measurement
Financial liabilities are measured at amortized cost, unless they are required to be measured at FVPL as is the case for held for trading or derivative instruments, or the Company has opted to measure the financial liability at FVPL. The Company’s financial liabilities include accounts payable and accrued liabilities, which are measured at amortized cost. All financial liabilities are recognized initially at fair value and in the case of long-term debt, net of directly attributable transaction costs.
Subsequent measurement – financial liabilities at amortized cost
After initial recognition, financial liabilities measured at amortized cost are subsequently measured at the end of each reporting period at amortized cost using the EIR method. Amortized cost is calculated by taking into account any discount or premium on acquisition and any fees or costs that are an integral part of the EIR.
Derecognition
A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expires with any associated gain or loss recognized in other income or expense in the statements of earnings (loss).
(e) | Cash |
Cash is comprised of cash on hand and deposits that generally mature within 90 days from the date of acquisition. Deposits are held in Canadian chartered banks or in a financial institution controlled by a Canadian chartered bank.
(f) | Revenue recognition |
Revenue is recognised only when it is probable that the economic benefits associated with the transaction will flow to the entity. However, when an uncertainty arises about the collectability of an amount already included in revenue, the uncollectible amount, or the amount in respect of which recovery has ceased to be probable, is recognised as an expense, rather than as an adjustment of the amount of revenue originally recognised.
Realized gains and losses on the disposal of investments and unrealized gains and losses in the value of investments are reflected in the statement of loss on a trade date basis. Upon disposal of an investment, previously recognized unrealized gains or losses are reversed, so as to recognize the full realized gain or loss in the period of disposition. All transaction costs are expensed as incurred.
15
Routemaster Capital Inc.
Notes to the Financial Statements
Years ended December 31, 2019 and 2018
(Expressed in Canadian dollars unless otherwise noted)
2. | Significant accounting policies (continued) |
(g) | Income (loss) per share |
Basic income (loss) per share is calculated by dividing the net income (loss) by the weighted-average number of the Company’s common shares outstanding during the period. Diluted income (loss) per share is calculated by dividing the applicable net income (loss) by the sum of the weighted-average number of common shares outstanding if dilutive common shares had been issued during the period. The calculation of diluted income (loss) per share assumes that outstanding stock options and warrants with an average exercise price below market price of the underlying shares are exercised and the assumed proceeds are used to repurchase common shares of the Company at the average market price for the period. Diluted (loss) per share for the periods presented does not include the effect of stock options and warrants as they are anti-dilutive.
(h) | Income taxes |
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
(i) | Share-based payments |
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. Fair value is measured at grant date and each tranche is recognized on a graded-vesting basis over the period in which options vest. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognized in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity reserve.
Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service. For options that expire unexercised, the recorded value is transferred to deficit.
(j) | Royalty interests on mineral properties |
The Company holds royalty interests in exploration stage mineral properties. Royalty interests are recorded at cost and capitalized as tangible assets with finite lives. The carrying value of royalty interests are depleted using the unit-of-production method over the life of the property to which the royalty interest relates, which is estimated using available estimates of proven and probable reserves specifically associated with the mineral properties. Royalty interest on exploration stage mineral properties, where there are no estimated reserves, are not amortized.
16
Routemaster Capital Inc.
Notes to the Financial Statements
Years ended December 31, 2019 and 2018
(Expressed in Canadian dollars unless otherwise noted)
2. | Significant accounting policies (continued) |
(j) | Royalty interests on mineral properties (continued) |
The Company evaluates its royalty interests on mineral properties for impairment whenever events or changes in circumstances, which may include significant changes in commodity prices and publicly available information from operators of the assets, indicate that the related carrying value of the royalty interests may not be recoverable. The recoverability of royalty interests is evaluated based upon estimated future undiscounted net cash flows from each royalty interest property using estimates of proven and probable reserves. Impairments in the carrying value of each property are measured and recorded to the extent that the carrying value of each property exceeds its recoverable amount, which is the higher of fair value less costs to sell or value in use, which is generally calculated using estimated discounted future cash flows.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through the statement of income (loss) to the extent that the carrying amount of the financial asset at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized. Estimates of gold prices, operator’s estimates of proven and probable reserves related to the royalty properties, and the operator’s production profile are subject to certain risks and uncertainties which may affect the recoverability of the Company’s investment in these royalty interests in mineral properties. Although the Company has made its best assessment of these factors based on current conditions, it is possible that changes could occur, which could adversely affect the net cash flows expected to be generated from these royalty interests.
(k) | New accounting change |
During the year ended December 31, 2019, the Company adopted the following new IFRS standards, interpretations, amendments and improvements of existing standards.
IFRS 16 – Leases (“IFRS 16”) was issued in January 2016 and replaces IAS 17 – Leases as well as some lease related interpretations. With certain exceptions for leases under twelve months in length or for assets of low value, IFRS 16 states that upon lease commencement a lessee recognises a right-of-use asset and a lease liability. The right-of-use asset is initially measured at the amount of the liability plus any initial direct costs. After lease commencement, the lessee shall measure the right-of-use asset at cost less accumulated depreciation and accumulated impairment. A lessee shall either apply IFRS 16 with full retrospective effect or alternatively not restate comparative information but recognise the cumulative effect of initially applying IFRS 16 as an adjustment to opening equity at the date of initial application. IFRS 16 requires that lessors classify each lease as an operating lease or a finance lease. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset. Otherwise it is an operating lease. The adoption of this new standard did not have any material impact on the Company’s financial statements.
(l) | Future accounting change |
Certain pronouncements were issued by the IASB or the IFRIC that are mandatory for accounting periods commencing on or after January 1, 2020. Many are not applicable or do not have a significant impact to the Company and have been excluded. The following have not yet been adopted and are being evaluated to determine their impact on the Company.
IAS 1 – Presentation of Financial Statements (“IAS 1”) and IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors (“IAS 8”) were amended in October 2018 to refine the definition of materiality and clarify its characteristics. The revised definition focuses on the idea that information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements. The amendments are effective for annual reporting periods beginning on or after January 1, 2020.
17
Routemaster Capital Inc.
Notes to the Financial Statements
Years ended December 31, 2019 and 2018
(Expressed in Canadian dollars unless otherwise noted)
3. | Investments, at fair value through profit and loss |
At December 31, 2019 the Company’s investment portfolio consisted of four publicly traded investments for a total fair value of $623,275.
At December 31, 2018 the Company’s investment portfolio consisted of seven publicly-traded investments and two privately-held investments for a total fair value of $1,799,573.
Public Investments
At December 31, 2019 the Company’s four publicly traded investments for a total estimated fair value of $623,275.
Public Issuer | Note | Security description | Cost | Estimated Fair | % | ||
Value | of FV | ||||||
ARHT Media Inc. | 125,000 warrants expire Feb 1, 2020 | $ | 14,318 | $ | - | 0.0% | |
Fura Gems Inc. | (i) | 780,000 common shares | 253,400 | 128,700 | 20.6% | ||
Sulliden Mining Capital Inc. | (i,ii) | 8,091,500 common shares | 2,612,252 | 404,575 | 65.0% | ||
Yukoterre Resources Inc. | (i) | 1,000,000 common shares | 50,000 | 90,000 | 14.4% | ||
Total public investments | $ | 2,929,970 | $ | 623,275 | 100.0% |
(i) | An insider and a former officer of the Company is a director and officer of the investee corporation as at December 31, 2019. |
(ii) | The Company has filed a Section 62-103 report pursuant to the Securities Act (Ontario) for this investment and has filed an early warning report on SEDAR. |
At December 31, 2018 the Company’s seven publicly traded investments had a total estimated fair value of $1,648,119.
Estimated Fair | % | ||||||
Public Issuer | Note | Security description | Cost | Value | of FV | ||
Aberdeen International Inc. | (i) | 3,471,000 common shares | $ | 451,230 | $ | 208,260 | 12.6% |
ARHT Media Inc. | 125,000 warrants expire Feb 1, 2020 | 14,318 | 1,413 | 0.1% | |||
Fura Gems Inc. | (i) | 1,580,000 common shares | 549,015 | 461,100 | 28.0% | ||
500,000 warrants expire May 5, 2019 | |||||||
Pacific Rim Cobalt Corp. | 457,143 warrants expire Oct 23, 2019 | 48,255 | 6,309 | 0.4% | |||
QMX Gold Corporation | 577,000 warrants expire Oct 5, 2019 | 68,288 | 57 | 0.0% | |||
Trigon Metals Inc. | 325,000 warrants expire Sept 16, 2019 | 88,255 | - | 0.0% | |||
Sulliden Mining Capital Inc. | (i,ii) | 8,091,500 common shares | 2,612,252 | 970,980 | 58.9% | ||
Total public investments | $ | 3,831,613 | $ | 1,648,119 | 100.0% |
(i) | An insider and/or off icer of the Company is a director and officer of the investee corporation as at December 31, 2018. |
(ii) | The Company has f iled a Section 62-103 report pursuant to the Securities Act (Ontario) for this investment and has filed an early w arning report on SEDAR. |
Private Investments
At December 31, 2019, the Company had no private investments.
At December 31, 2018, the Company’s two private investments had a total estimated fair value of $151,454.
Estimated Fair | % | ||||||
Private Issuer | Note | Security description | Cost | Value | of FV | ||
Yukoterre Resources Inc.* | 1,000,000 common shares | $ | 50,000 | $ | 50,000 | 33.0% | |
GF Comstock II LP | Limited partnership | 99,848 | 101,454 | 67.0% | |||
Total private investments | $ | 149,848 | $ | 151,454 | 100.0% |
* | Formerly 2560344 Ontario Inc. |
18
Routemaster Capital Inc.
Notes to the Financial Statements
Years ended December 31, 2019 and 2018
(Expressed in Canadian dollars unless otherwise noted)
4. | Amounts receivable |
31-Dec-19 | 31-Dec-18 | |||||
Interest receivable | $ | - | $ | 3,624 | ||
Investment receivable | - | 110,000 | ||||
HST receivable | - | 9,570 | ||||
$ | - | $ | 123,194 |
5. | Prepaid expenses and deposits |
31-Dec-19 | 31-Dec-18 | |||||
Prepaid insurance | $ | 8,422 | $ | 12,825 | ||
$ | 8,422 | $ | 12,825 |
6. | Loan receivable |
On October 5, 2018, the Company entered into an amended and restated cooperation agreement (the “Cooperation Agreement”) with GEAR Blockchain Inc. (“GEAR”), which amends and restates the cooperation agreement entered into on February 26, 2018 between GEAR. Pursuant to the Cooperation Agreement, the Company provided an unsecured loan to fund GEAR’s expenses related to GEAR’s initial coin offering and its launch of tokens up to a maximum loan amount of US$2 million. The Cooperation Agreement stipulates that the Company shall not participate in any offering, distribution or sale of tokens of GEAR. The Company will also assist GEAR in identifying green energy projects to power its crypto-mining business. The loan is repayable on or before April 5, 2019. The Company has the option to be repaid in full or to receive 10% of the tokens issued by GEAR in lieu of payment.
During the year ended December 31, 2018, the Company provided $1,083,640 to GEAR pursuant to the agreement. Vikram Pathak, a former director and officer of the Company, is also an officer of GEAR. Forbes & Manhattan Inc. (“Forbes”), an insider of the Company, is also an advisor to GEAR.
Routemaster has no assurance that it will receive any return on this investment. As at December 31, 2018, the Company has reviewed the collectability of the loan and made a provision of $1,083,640 due to the overall Blockchain market downturn.
7. | Royalty Interests |
Quebec gold royalty
On August 18, 2017, the Company completed its acquisition of a 2.0% net smelter return royalty covering former producing gold mines in the Province of Quebec. In consideration for this royalty, the Company issued to Forbes a total of 11,000,000 common shares in aggregate value of $1,045,000, which represents approximately 26.5% of the outstanding shares of the Company.
The Quebec gold royalty is a 2.0% net smelter returns royalty in the Val d’Or region of Quebec (the “Quebec Gold Royalty”).
The Company has also obtained a 24-month right of first refusal to acquire additional royalties and streaming interests held by Forbes. Through this right of first refusal and Forbes significant shareholding, the Company believes it has secured access to the Forbes’ network thereby providing the Company’s shareholders with a potential pipeline of accretive investments.
As at December 31, 2018, as a result of a review of development plans at its Quebec Gold Royalty, the Company recorded an impairment of $1,045,000. The Company will continue to review the project’s development and reassess the carrying value at that time.
As at December 31, 2019, there has been no changes to the carrying value.
19
Routemaster Capital Inc.
Notes to the Financial Statements
Years ended December 31, 2019 and 2018
(Expressed in Canadian dollars unless otherwise noted)
8. | Accounts payable and accrued liabilities |
31-Dec-19 | 31-Dec-18 | |||||||
Corporate payables | $ | 1,131,098 | $ | 1,008,121 | ||||
Related party payable (Note 14) | 670,926 | 596,801 | ||||||
$ | 1,802,024 | $ | 1,604,922 |
9. | Expense by nature |
Years ended December 31, 2019 | ||||||||
2019 | 2018 | |||||||
Management and consulting fees | $ | 578,017 | $ | 711,890 | ||||
Travel and promotion | 69,319 | 577,922 | ||||||
Office and rent | 77,891 | 58,101 | ||||||
Accounting and legal | 51,272 | 102,774 | ||||||
Regulatory and transfer agent | 18,148 | 23,857 | ||||||
$ | 794,647 | $ | 1,474,544 |
10. | Share Capital |
a) | As at December 31, 2019, the Company is authorized to issue: |
I. | Unlimited number of common shares with no par value; |
II. | 20,000,000 preferred shares, 9% cumulative dividends, non-voting, non-participating, non-redeemable, non- retractable, and non-convertible by the holder. The preferred shares are redeemable by the Company in certain circumstances. |
b) | Issued and outstanding common shares |
Number of Common Shares | Amount | |||||||
Balance, December 31, 2017 to 2019 | 41,513,631 | $ | 18,820,850 |
c) | Issued and outstanding preferred shares |
Number of Preferred Shares | Amount | |||||||
Balance, December 31, 2017 to 2019 | 4,500,000 | $ | 4,321,350 |
Subject to the discretion of the board of directors, holders of the preferred shares are entitled to receive a 9% cumulative, preferential cash dividend, payable annually on the last day of January following the relevant completed fiscal year, ending December 31.
20
Routemaster Capital Inc.
Notes to the Financial Statements
Years ended December 31, 2019 and 2018
(Expressed in Canadian dollars unless otherwise noted)
11. | Share-based payments reserves |
Options | Warrants | ||||||||||||||||||||||||||||
Number of Options | Weighted average exercise prices | Value of options | Number of warrants | Weighted average exercise prices | Value of warrants | Total Value | |||||||||||||||||||||||
December 31, 2017 | 3,040,000 | $ | 0.23 | $ | 409,442 | 4,446,153 | $ | 0.19 | $ | 240,539 | $ | 649,981 | |||||||||||||||||
Expired | (815,000 | ) | 0.35 | (175,801 | ) | - | - | - | (175,801 | ) | |||||||||||||||||||
December 31, 2018 | 2,225,000 | $ | 0.18 | $ | 233,641 | 4,446,153 | $ | 0.19 | $ | 240,539 | $ | 474,180 | |||||||||||||||||
Expired | (160,000 | ) | 0.35 | (34,672 | ) | (600,000 | ) | 0.10 | (80,100 | ) | (114,772 | ) | |||||||||||||||||
December 31, 2019 | 2,065,000 | $ | 0.17 | $ | 198,969 | 3,846,153 | $ | 0.20 | $ | 160,439 | $ | 359,408 |
The Company recorded $Nil (2018 - $Nil) of share-based payments during the years ended December 31, 2019 and 2018.
The following share-based payment arrangements were in existence at December 31, 2019:
Expected | Risk-free | |||||||||||||||||||||||||||||||||||||||
Number | Number | Grant | Expiry | Exercise | Fair value at | Grant date | Expected | Expected | dividend | interest | ||||||||||||||||||||||||||||||
outstanding | exercisable | date | date | price | grant date | share price | volatility | life (yrs) | yield | rate | ||||||||||||||||||||||||||||||
1,535,000 | 1,535,000 | 29-Sep-16 | 29-Sep-21 | $ | 0.11 | $ | 84,118 | $ | 0.11 | 59 | % | 5 | 0 | % | 0.57 | % | ||||||||||||||||||||||||
530,000 | 530,000 | 18-Dec-17 | 18-Dec-22 | $ | 0.35 | $ | 114,851 | $ | 0.35 | 76 | % | 5 | 0 | % | 1.70 | % | ||||||||||||||||||||||||
2,065,000 | 2,065,000 | $ | 198,969 |
The weighted average remaining contractual life of the options exercisable at December 31, 2019 was 2.06 years (December 31, 2018 – 3.13 years).
The following warrants were in existence at December 31, 2019:
Expected | Risk-free | |||||||||||||||||||||||||||||||||||||||
Number | Number | Grant | Expiry | Exercise | Fair value at | Grant date | Expected | Expected | dividend | interest | ||||||||||||||||||||||||||||||
outstanding | exercisable | date | date | price | grant date | share price | volatility | life (yrs) | yield | rate | ||||||||||||||||||||||||||||||
3,846,153 | 3,846,153 | 12-Jun-17 | 12-Jun-22 | $ | 0.20 | $ | 161,789 | $ | 0.12 | 79.9 | % | 5 | 0 | % | 1.04 | % | ||||||||||||||||||||||||
Warrant issue costs | $ | (1,350 | ) | |||||||||||||||||||||||||||||||||||||
3,846,153 | 3,846,153 | $ | 160,439 |
12. | Financial instruments |
Financial assets and financial liabilities as at December 31, 2019 and 2018 are as follows:
Loans, receivables and (other financial liabilities) | Assets /(liabilities) at fair value through profit/(loss) | Total | ||||||||||
December 31, 2019 | ||||||||||||
Cash | $ | 4,762 | $ | - | $ | 4,762 | ||||||
Public investments | - | 623,275 | 623,275 | |||||||||
Accounts payable and accrued liabilities | (1,802,024 | ) | - | (1,802,024 | ) |
21
Routemaster Capital Inc.
Notes to the Financial Statements
Years ended December 31, 2019 and 2018
(Expressed in Canadian dollars unless otherwise noted)
12. | Financial instruments (continued) |
Loans, receivables and (other financial liabilities) | Assets /(liabilities) at fair value through profit/(loss) | Total | ||||||||||
December 31, 2018 | ||||||||||||
Cash | $ | 11,103 | $ | - | $ | 11,103 | ||||||
Public investments | - | 1,648,119 | 1,648,119 | |||||||||
Receivables | 3,624 | 110,000 | 113,624 | |||||||||
Private investments | - | 151,454 | 151,454 | |||||||||
Accounts payable and accrued liabilities | (1,604,922 | ) | - | $ | (1,604,922 | ) |
Routemaster’s operations involve the purchase and sale of securities. Accordingly, the majority of the Company’s assets are currently comprised of financial instruments which can expose it to several risks, including market, liquidity, credit and currency risks. There have been no significant changes in the risks, objectives, policies and procedures from the previous year. A discussion of the Company’s use of financial instruments and their associated risks is provided below:
Credit risk
Credit risk arises from the non-performance by counterparties of contractual financial obligations. The Company’s primary counterparty related to its cash carries an investment grade rating as assessed by external rating agencies. The Company maintains all or substantially all of its cash with a major financial institution domiciled in Canada. Deposits held with this institution may exceed the amount of insurance provided on such deposits.
Financial instruments included in receivables consist of interest and amounts receivable of $Nil at December 31, 2019 (December 31, 2018 - $113,624).
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 the Company’s access to the capital markets is hindered, whether as a result of a downturn in stock market conditions generally or related to matters specific to the Company, or if the value of the Company’s investments declines, resulting in losses upon disposition. In addition, some of the investments the Company holds are lightly traded public corporations or not publicly traded and may not be easily liquidated. The Company generates cash flow from proceeds from the disposition of its investments. There can be no assurances that sufficient funding, including adequate financing, will be available to cover the general and administrative expenses necessary for the maintenance of a public company. All of the Company’s assets, liabilities and obligations are due within one to three years.
The Company manages liquidity risk by maintaining adequate cash balances. The Company continuously monitors and reviews both actual and forecasted cash flows, and also matches the maturity profile of financial assets and liabilities. As at December 31, 2019, the Company had assets of $636,459 (December 31, 2018 - $1,946,695) to settle current liabilities of $1,802,024 (December 31, 2018 - $1,604,922).
The following table shows the Company’s source of liquidity by assets as at December 31, 2019 and 2018.
December 31, 2019 | ||||||||||||
Total | Less than 1 year | 1-3 years | ||||||||||
Cash | $ | 4,762 | $ | 4,762 | $ | - | ||||||
Public investments | 623,275 | 623,275 | - | |||||||||
Prepaid expenses | 8,422 | 8,422 | - | |||||||||
Total assets - December 31, 2019 | $ | 636,459 | $ | 636,459 | $ | - |
22
Routemaster Capital Inc.
Notes to the Financial Statements
Years ended December 31, 2019 and 2018
(Expressed in Canadian dollars unless otherwise noted)
12. | Financial instruments (continued) |
Liquidity risk (continued)
December 31, 2018 | ||||||||||||
Total | Less than 1 year | 1-3 years | ||||||||||
Cash | $ | 11,103 | $ | 11,103 | $ | - | ||||||
Public investments | 1,648,119 | 1,648,119 | - | |||||||||
Receivables | 123,194 | 113,624 | 9,570 | |||||||||
Prepaid expenses | 12,825 | 12,825 | - | |||||||||
Private investments | 151,454 | - | 151,454 | |||||||||
Total assets - December 31, 2018 | $ | 1,946,695 | $ | 1,785,671 | $ | 161,024 |
Market risk
Market risk is the risk that the fair value of, or future cash flows from, the Company’s financial instruments will significantly fluctuate because of changes in market prices.
(a) | Price and concentration risk |
The Company is exposed to market risk in trading its investments and unfavourable market conditions could result in dispositions of investments at less than favorable prices. In addition, most of the Company’s investments are in the resource sector. At December 31, 2019, one investment made up approximately 64% (December 31, 2018 – 50%) of the total assets of the Company.
For the year ended December 31, 2019, a 10% decrease in the closing price of this concentrated position would result in an estimated increase in net loss of $0.04 million, or $0.001 per share.
For the year ended December 31, 2019, a 10% decrease (increase) in the closing prices of its portfolio investments would result in an estimated increase (decrease) in net loss of $0.06 million, or $0.002 per share. This estimated impact on the statement of loss includes the estimated value of the non-traded warrants held, as determined using the Black-Scholes option pricing model.
(b) | Interest rate risk |
The Company’s cash is subject to interest rate cash flow risk as it carries variable rates of interest. The Company’s interest rate risk management policy is to purchase highly liquid investments with a term to maturity of one year or less on the date of purchase. Based on cash balances on hand at December 31, 2019, a 1% change in interest rates could result in a corresponding nominal change in net loss.
(c) | Currency risk |
Currency risk is the risk that the fair value of, or future cash flows from, the Company’s financial instruments will fluctuate because of changes in foreign exchange rates. The Company’s operations are exposed to foreign exchange fluctuations, which could have a significant adverse effect on its results of operations from time to time. The Company’s foreign currency risk arises primarily with respect to United States dollar and British Pound. Fluctuations in the exchange rates between this currency and the Canadian dollar could have a material effect on the Company’s business, financial condition and results of operations. The Company does not engage in any hedging activity to mitigate this risk. The Company reduces its currency risk by maintaining minimal cash balances held in foreign currency.
23
Routemaster Capital Inc.
Notes to the Financial Statements
Years ended December 31, 2019 and 2018
(Expressed in Canadian dollars unless otherwise noted)
12. | Financial instruments (continued) |
(c) | Currency risk (continued) |
As at December 31, 2019, the Company had the following financial assets and liabilities, (amounts posted in Canadian dollars) denominated in foreign currencies:
December 31, 2019 | ||||||||
United States Dollars | British Pound | |||||||
Cash | $ | 129 | $ | - | ||||
Accounts payable and accrued liabilities | (58,446 | ) | (75,957 | ) | ||||
Net assets (liabilities) | $ | (58,317 | ) | $ | (75,957 | ) | ||
December 31, 2018 | ||||||||
United States Dollars | British Pound | |||||||
Cash | $ | 75 | $ | - | ||||
Interest receivable | 3,624 | - | ||||||
Private investment | 101,454 | - | ||||||
Accounts payable and accrued liabilities | (84,126 | ) | (77,129 | ) | ||||
Net assets (liabilities) | $ | 21,027 | $ | (77,129 | ) |
A 10% increase (decrease) in the value of the Canadian dollar against all foreign currencies in which the Company held financial instruments as of December 31, 2019 would result in an estimated increase (decrease) of approximately ($13,400). (December 31, 2018 - $5,600).
Fair value of financial instruments
The Company has determined the carrying values of its financial instruments as follows:
i. | The carrying values of cash, amounts receivable, accounts payable and accrued liabilities approximate their fair values due to the short-term nature of these instruments. |
ii. | Public and private investments are carried at amounts in accordance with the Company’s accounting policies as set out in Note 2 of the Company audited financial statements. |
iii. | Prior to maturity, the outstanding loans receivable are carried at their discounted value. Following their maturity, loans receivables are carried at their estimated realizable value. |
The following table illustrates the classification and hierarchy of the Company’s financial instruments, measured at fair value in the statements of financial position as at December 31, 2019.
Level 1 | Level 2 | Level 3 | ||||||||||||||
(Valuation | (Valuation | |||||||||||||||
technique - | technique - | |||||||||||||||
(Quoted Market | observable | non-observable | ||||||||||||||
Investments, fair value | price) | market Inputs) | market inputs) | Total | ||||||||||||
Publicly traded investments | $ | 623,275 | $ | - | $ | - | $ | 623,275 | ||||||||
December 31, 2019 | $ | 623,275 | $ | - | $ | - | $ | 623,275 |
24
Routemaster Capital Inc.
Notes to the Financial Statements
Years ended December 31, 2019 and 2018
(Expressed in Canadian dollars unless otherwise noted)
12. | Financial instruments (continued) |
Fair value of financial instruments (continued)
Level 1 | Level 2 | Level 3 | ||||||||||||||
(Valuation | (Valuation | |||||||||||||||
technique - | technique - | |||||||||||||||
(Quoted Market | observable | non-observable | ||||||||||||||
Investments, fair value | price) | market Inputs) | market inputs) | Total | ||||||||||||
Publicly traded investments | $ | 1,621,640 | $ | - | $ | - | $ | 1,621,640 | ||||||||
Non-trading warrants on public investments | - | 26,479 | - | 26,479 | ||||||||||||
Private investment | - | 101,454 | 50,000 | 151,454 | ||||||||||||
December 31, 2018 | $ | 1,621,640 | $ | 127,933 | $ | 50,000 | $ | 1,799,573 |
Level 2 Hierarchy
During the year ended December 31, 2019, the 500,000 EarthRenew Inc. (“ERTH”) common shares had a hold period until May 10, 2019. These shares were transferred from Level 2 to Level 1 as the hold period expired and were subsequently sold.
During the year ended December 31, 2018, the common shares of QMX Gold Corporation, Pacific Rim Cobalt Corp. and ARHT Media Inc. were transferred from Level 2 to Level 1 after the 4-month hold period and were sold during the year ended December 31, 2019.
Level 3 Hierarchy
The following table presents the changes in fair value measurements of financial instruments classified as Level 3 during the year ended December 31, 2019 and 2018. These financial instruments are measured at fair value utilizing non- observable market inputs. The net realized losses and net unrealized gains are recognized in the statements of loss.
Investments, fair value for the years ended | December 31, 2019 | December 31, 2018 | ||||||
Balance, beginning of year | $ | 50,000 | $ | 960,000 | ||||
Transferred to Level 1 | (50,000 | ) | (910,000 | ) | ||||
Balance, end of year | $ | - | $ | 50,000 |
On September 20, 2019, Yukoterre Resources Inc. successfully completed an Initial Public Offering and commenced trading on the Canadian Securities Exchange. As of December 31, 2019, the Company had no private investments.
Within Level 3, the Company includes private company investments that are not quoted on an exchange. The key assumptions used in the valuation of these instruments include (but are not limited to) the value at which a recent financing was done by the investee, company-specific information, trends in general market conditions and the share performance of comparable publicly-traded companies. The following table presents the fair value, categorized by key valuation techniques and the unobservable inputs used within Level 3 as at December 31, 2018.
Range of | ||||||||||||||
Significant | significant | |||||||||||||
Valuation | unobservable | unobservable | ||||||||||||
Description | Fair vaue | technique | input(s) | input(s) | ||||||||||
Yukoterre Resources Inc. | $ | 50,000 | Recent financing | Marketability of shares | 0% discount |
25
Routemaster Capital Inc.
Notes to the Financial Statements
Years ended December 31, 2019 and 2018
(Expressed in Canadian dollars unless otherwise noted)
12. | Financial instruments (continued) |
Fair value of financial instruments (continued)
Level 3 Hierarchy (continued)
Yukoterre Resources Inc. (Formerly 2560344 Ontario Inc.)
On April 26, 2017, the Company invested in Yukoterre Resources Inc., a private company with a coal project in Yukon, along with other arms-length investors. The valuation is based on the most recent financing and management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at December 31, 2018. As at December 31, 2018, a +/- 10% change in the fair value of Yukoterre Resources Inc. will result in a corresponding +/- $5,000 (December 31, 2017: +/- $5,000) change in the carrying amount. While this illustrates the overall effect of changing the values of the unobservable inputs by a set percentage, the significance of the impact and the range of reasonably possible alternative assumptions may differ significantly between investments, given their different terms and circumstances.
13. | Capital management |
The Company considers its capital to consist of share capital, share based payments reserves and deficit. The Company’s objectives when managing capital are:
a) | to allow the Company to respond to changes in economic and/or marketplace conditions by maintaining the Company’s ability to purchase new investments; |
b) | to give shareholders sustained growth in value by increasing shareholders’ equity; while |
c) | taking a conservative approach towards financial leverage and management of financial risks. |
The Company’s management reviews its capital structure on an on-going basis and makes adjustments to it in light of changes in economic conditions and the risk characteristics of its underlying investments. The Company’s current capital is composed of its shareholders’ equity and, to-date, has adjusted or maintained its level of capital by:
a) | raising capital through equity financings; and |
b) | realizing proceeds from the disposition of its investments |
The Company is not subject to any externally imposed capital requirements other than of the TSXV which has certain working capital and financial resource requirements to be available to maintain operations and cover general and administration expenses. TSXV will consider, among other things, the listed issuer’s ability to meet its obligations as they come due, as well as its working capital position, quick asset position, total assets, capitalization, cash flow and earnings in the financial statements regarding the listed issuer’s ability to continue as a going concern. There were no changes to the Company’s capital management during the year ended December 31, 2019. As of December 31, 2019, the Company may not be compliant with the policies of the TSXV. The impact of any such violation is not known and is ultimately dependent on the discretion of the TSXV.
26
Routemaster Capital Inc.
Notes to the Financial Statements
Years ended December 31, 2019 and 2018
(Expressed in Canadian dollars unless otherwise noted)
14. | Related party disclosures |
a) | The Company’s directors and officers may have investments in and hold management and/or director and officer positions in some of the investments that the Company holds. The following is a list of total investments and the nature of the relationship of the Company’s directors or officers with the investment as of December 31, 2019 and 2018. |
Investment | Nature of relationship | Estimated Fair value | % of FV | |||||||
Fura Gems Inc. | Officer (Ryan Ptolemy), and common shareholders / warrant holders | $ | 128,700 | 20.6 | % | |||||
Sulliden Mining Capital Inc. | Director (Stan Bharti), and common shareholders / warrant holders | 404,575 | 65.0 | % | ||||||
Yukoterre Resources Inc. | Former Director and Officer (Fred Leigh), Officer (Kenny Choi) and common shareholders | 90,000 | 14.4 | % | ||||||
Total investment - December 31, 2019 | $ | 623,275 | 100.0 | % |
Investment | Nature of relationship | Estimated Fair value | % of FV | |||||||
Aberdeen International Inc. | Director and officer (Stan Bharti), Officer (Ryan Ptolemy), and common shareholders / warrant holders | $ | 208,260 | 12.3 | % | |||||
Fura Gems Inc. | Officer (Ryan Ptolemy), and common shareholders / warrant holders | 461,100 | 27.2 | % | ||||||
Sulliden Mining Capital Inc. | Director (Stan Bharti), and common shareholders / warrant holders | 970,980 | 57.1 | % | ||||||
Total other five investments | Common shareholders / warrant holders | 57,779 | 3.4 | % | ||||||
Total investment - December 31, 2018 | $ | 1,698,119 | 100.0 | % |
The Company has a diversified base of investors. To the Company’s knowledge, Forbes & Manhattan Inc. holds more than 10% of the Company’s common shares as at December 31, 2019 and 2018.
b) | During the year ended December 31, 2019 and 2018, the Company entered into the following transactions in the ordinary course of business with related parties that are not subsidiaries of the Company. |
Purchases of goods/services Years ended December 31, | ||||||||
2019 | 2018 | |||||||
2227929 Ontario Inc. | $ | 120,000 | $ | 228,289 | ||||
Forbes & Manhattan Inc. | 120,071 | 120,000 | ||||||
$ | 240,071 | $ | 348,289 |
The Company shares office space with other companies who may have common officers and directors. The costs associated with the use of this space, including the provision of office equipment and supplies, are administered by 2227929 Ontario Inc. to whom the Company pays a fee. As at December 31, 2019, the Company had a payable balance of $439,007 (December 31, 2018 - $340,250) with 2227929 Ontario Inc. to cover shared expenses. The amounts outstanding are unsecured with no fixed terms of repayment. Fred Leigh, a former Director and Officer of the Company, is also a director of 2227929 Ontario Inc.
27
Routemaster Capital Inc.
Notes to the Financial Statements
Years ended December 31, 2019 and 2018
(Expressed in Canadian dollars unless otherwise noted)
14. | Related party disclosures (continued) |
In August 2017, Forbes became an insider of the Company owning approximately 34.9% (approximately 27.9 % at December 31, 2019 and 2018) outstanding shares of the Company through acquisition of Quebec Gold royalty interests. The Company is also part of the Forbes Group of Companies and continue to receive the benefits of such membership, including access to mining professionals, advice from Stan Bharti, the Executive Chairman of Forbes and strategic advice from the Forbes Board of Advisors. An administration fee of $10,000 per month is charged by Forbes pursuant to a consulting agreement. As at December 31, 2019 the Company had a payable balance of $135,680 (December 31, 2018 - $45,200). Such amounts are unsecured, with no fixed terms of repayment.
Included in accounts payable and accrued liabilities was $Nil (December 31, 2018 - $118,483) reimbursable expenses owed to Brazil Potash Crop. (“BPC”). During the year ended December 31, 2019, the payables were forgiven by BPC. Stan Bharti, executive chairman of Forbes, is an insider of Routemaster, is also a director of BPC. Ryan Ptolemy, an officer of Routemaster, is also an officer of BPC.
Included in accounts payable and accrued liabilities were expenses of GBP44,228 ($75,957) (December 31, 2018 - $77,129) expenses owed to Vik Pathak, a former director and officer of Routemaster.
Included in amounts receivable was $Nil (2017 - $110,000) pertaining to a subscription of common shares of ERTH. Ryan Ptolemy, an officer of Routemaster, is also an officer of ERTH.
c) | Compensation of key management personnel of the Company: |
The remuneration of directors and other members of key management personnel during the years ended December 31, 2019 and 2018 were as follows:
Years ended December 31, | ||||||||
2019 | 2018 | |||||||
Short-term benefits | $ | 190,248 | $ | 232,842 | ||||
$ | 190,248 | $ | 232,842 |
At December 31, 2019, the Company had $96,239 (December 31, 2018 - $Nil) owing to its current key management, and $655,296 (December 31, 2018 - $679,333) owing to its former key management. Such amounts are unsecured, non- interest bearing, with no fixed terms of payment or “due on demand”.
In accordance with IAS 24, key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company directly or indirectly, including any directors (executive and non- executive) of the Company.
The remuneration of directors and key executives is determined by the remuneration committee having regard to the performance of individuals and market trends.
15. | Commitments and contingencies |
The Company is party to certain management contracts. These contracts require that additional payments of up to approximately $912,000 be made upon the occurrence of certain events such as a change of control. As a triggering event has not taken place, the contingent payments have not been reflected in these financial statements. Minimum commitments remaining under these contracts were approximately $289,405, all due within one year.
The Company is, from time to time, involved in various claims and legal proceedings. The Company cannot reasonably predict the likelihood or outcome of these activities. The Company does not believe that adverse decisions in any ending or threatened proceedings related to any matter, or any amount which may be required to be paid by reasons thereof, will have a material effect on the financial condition or future results of operations.
A former officer of the Company has initiated a legal action seeking approximately $450,000 for fees owed plus interest. The Company intends to defend the matter and is currently reviewing its options with regards to this action.
28
Routemaster Capital Inc.
Notes to the Financial Statements
Years ended December 31, 2019 and 2018
(Expressed in Canadian dollars unless otherwise noted)
16. | Income taxes |
a) | Provision for Income Taxes |
Major items causing the Company’s income tax rate to differ from the Canadian federal and provincial statutory rate of 26.5% (2018 – 26.5%) were as follows:
2019 $ | 2018 $ | |||||||
(Loss) before income taxes | (1,507,338 | ) | (9,794,067 | ) | ||||
Expected income tax recovery based on statutory rate | (399,000 | ) | (2,595,000 | ) | ||||
Adjustment to expected income tax benefit: | ||||||||
Change in foreign exchange rates | (1,000 | ) | (7,000 | ) | ||||
Provision to return adjustment | 7,000 | 9,000 | ||||||
Other | (580,000 | ) | 1,757,000 | |||||
Change in unrecorded tax benefits | 973,000 | 836,000 | ||||||
Deferred income tax provision (recovery) | - | - |
b) | Deferred income tax |
Deferred income tax assets have not been recognized in respect of the following deductible temporary differences in Canada:
2019 $ | 2018 $ | |||||||
Non-capital loss carry-forwards | 19,461,000 | 17,967,000 | ||||||
Share issue costs | 28,000 | 43,000 | ||||||
Exploration and evaluation assets | 5,957,000 | 5,957,000 | ||||||
Investments | 2,307,000 | - | ||||||
Capital losses carried forward | 23,073,000 | 23,073,000 |
The Company has approximately $19,461,000 of non-capital loss carry-forwards in Canada which may be used to reduce the taxable income of future years. These losses expire from 2026 to 2039.
29
➢ | inherent value of its assets; |
➢ | proven management, clearly-defined management objectives and strong technical and professional support; |
➢ | future capital requirements to develop the full potential of its business and the expected ability to raise the necessary capital; |
➢ | anticipated rate of return and the level of risk; and |
�� | financial performance, including consistency of positive cash flow. |
➢ | The Company may invest in securities of both public and private companies or other entities that the Company believes have the potential for superior investment returns. |
➢ | The Company will maintain a flexible position with respect to the form of investment taken and may employ a wide range of investment instruments, including equity, bridge loans, secured loans, unsecured loans, convertible debentures, warrants, options, royalties, net profit interests and other hybrid instruments. |
➢ | The Company will not invest in physical commodities, derivatives, “short” sales or other similar transactions (except that the Company may sell call options to purchase securities owned by the Company as a means of locking in gains or avoiding future losses). |
➢ | The Company will not be precluded from investing in any particular industry. The Company’s management and the Board have experience and expertise in a wide range of industry sectors and will pursue opportunities in those sectors that the Company believes from time to time offer the best opportunities for the creation of enhanced value for the Company’s shareholders. Similarly, there are no restrictions on the size or market capitalization of companies or other entities in which the Company may invest, subject to the provisions hereof. |
➢ | The Company has no specific policy with respect to investment diversification. Each investment will be assessed on its own merits and based upon its potential to generate above market gains for the Company. |
➢ | Immediate liquidity shall not be a requirement. |
➢ | The Company may, from time to time and in appropriate circumstances, seek a more active role in regards to investment situations and investee companies where the involvement of the Company is expected to make a significant difference to the success of the Company’s investment. In appropriate circumstances, this may involve the Company, either alone or jointly with other shareholders, seeking to influence the governance of public or private issuers by seeking board seats, launching proxy contests or taking other actions to enhance shareholder value, or becoming actively involved in the management or board oversight of investee companies. |
➢ | The Company may also make investments in special situations, including event-driven situations such as corporate restructurings, mergers, spin-offs, friendly or hostile takeovers, bankruptcies or leveraged buyouts. Such special situations may include, without limitation, investments in one or more public companies, by takeover bid or otherwise, where there is an opportunity to invest to gain control over the strategic direction of such public companies, whether using the shares of the Company as currency or otherwise. Such situations may also involve the Company lending money, directly or indirectly. |
➢ | Depending upon market conditions and applicable laws, the Company may seek to sell any or all of its investments when it concludes that those investments no longer offer the potential to generate appropriate gains for the Company, or when other investment opportunities reasonably available to the Company are expected to offer superior returns. This may include the disposition of any or all of the Company’s investments in a particular sector or of a particular nature, or any or all of the Company’s investments more generally, without prior notice to the Company’s shareholders. |
➢ | Subject to applicable laws and regulatory requirements, the Company may also from time to time seek to utilize its capital to repurchase shares of the Company. |
➢ | The Company may, from time to time, use borrowed funds to purchase or make investments, or to fund working capital requirements, or may make investments jointly with third parties. |
➢ | Depending upon the Company’s assessment of market conditions and investment opportunities, the Company may, from time to time, be fully invested, partially invested or entirely uninvested such that the Company is holding only cash or cash-equivalent balances while the Company actively seeks to redeploy such cash or cash-equivalent balances in suitable investment opportunities. Funds that are not invested or expected to be invested in the near-term, while the Company actively seeks to redeploy such funds in one or more suitable investment opportunities, may, from time to time as appropriate, be placed into high quality money market investments. |
➢ | All investments shall be made in compliance with applicable laws in relevant jurisdictions, and shall be made in accordance with the rules and policies of any applicable regulatory authorities. From time to time, the board of directors of the Company may authorize such additional or other investments outside of the guidelines described herein as it sees fit for the benefit of the Company and its shareholders. |
Three months ended December 31, | Twelve months ended December 31, | |||||||||||||||
Operating Results | 2019 | 2018 | 2019 | 2018 | ||||||||||||
$ | $ | $ | $ | |||||||||||||
Realized (loss) gain on investments, net | (162,982 | ) | (213,720 | ) | (708,793 | ) | 395,635 | |||||||||
Unrealized (loss) on investments, net | (27,756 | ) | (539,563 | ) | (124,807 | ) | (6,592,146 | ) | ||||||||
Interest income | 3 | 589 | 2,040 | 11,387 | ||||||||||||
Net (loss) and comprehensive (loss) | (269,147 | ) | (3,223,787 | ) | (1,507,338 | ) | (9,794,067 | ) | ||||||||
Basic and dilute (loss) per share | (0.01 | ) | (0.08 | ) | (0.04 | ) | (0.24 | ) |
December 31, 2019 | December 31, 2018 | |||||||
Investments Total equities, at fair value | $ | 623,275 | $ | 1,799,573 | ||||
Total investments | 623,275 | 1,799,573 | ||||||
Shareholders' (deficiency) equity | (1,165,565 | ) | 341,773 |
Public Issuer | Note Security description | Cost | Estimated Fair Value | % of FV | |
ARHT Media Inc. | 125,000 warrants expire Feb 1, 2020 | $14,318 | $ - | 0.0% | |
Fura Gems Inc. | (i) | 780,000 common shares | 253,400 | 128,700 | 20.6% |
Sulliden Mining Capital Inc. | (i,ii) | 8,091,500 common shares | 2,612,252 | 404,575 | 65.0% |
Yukoterre Resources Inc. | (i) | 1,000,000 common shares | 50,000 | 90,000 | 14.4% |
Total public investments | $2,929,970 | $ 623,275 | 100.0% |
(i) | An insider and a former officer of the Company is a director and officer of the investee corporation as at December 31, 2019. |
(ii) | The Company has filed a Section 62-103 report pursuant to the Securities Act (Ontario) for this investment and has filed an early warning report on SEDAR. |
Public Issuer | Note Security description | Cost | Estimated Fair Value | % of FV | |
Aberdeen International Inc. | (i) | 3,471,000 common shares | $451,230 | $ 208,260 | 12.6% |
ARHT Media Inc. | 125,000 warrants expire Feb 1, 2020 | 14,318 | 1,413 | 0.1% | |
Fura Gems Inc. | (i) | 1,580,000 common shares | 549,015 | 461,100 | 28.0% |
500,000 warrants expire May 5, 2019 | |||||
Pacific Rim Cobalt Corp. | 457,143 warrants expire Oct 23, 2019 | 48,255 | 6,309 | 0.4% | |
QMX Gold Corporation | 577,000 warrants expire Oct 5, 2019 | 68,288 | 57 | 0.0% | |
Trigon Metals Inc. | 325,000 warrants expire Sept 16, 2019 | 88,255 | - | 0.0% | |
Sulliden Mining Capital Inc. | (i,ii) | 8,091,500 common shares | 2,612,252 | 970,980 | 58.9% |
Total public investments | $3,831,613 | $ 1,648,119 | 100.0% |
(i) | An insider and/or officer of the Company is a director and officer of the investee corporation as at December 31, 2018. |
(ii) | The Company has filed a Section 62-103 report pursuant to the Securities Act (Ontario) for this investment and has filed an early warning report on SEDAR. |
Private Issuer | Note Security description | Cost | Estimated Fair Value | % of FV |
Yukoterre Resources Inc.* | 1,000,000 common shares | $ 50,000 | 101,454 | 33.0% |
GF Comstock II LP | Limited partnership | 99,848 | 67.0% | |
Total private investments | $ 149,848 | $ 151,454 | 100.0% |
Three months ended December 31, | ||||||||
2019 | 2018 | |||||||
Net (loss) | $ | (269,147 | ) | $ | (3,223,787 | ) | ||
Realized (loss) on investments, net | (162,982 | ) | (213,720 | ) | ||||
Unrealized (loss) on investments, net | (27,756 | ) | (539,563 | ) | ||||
Other revenue | - | (20,464 | ) | |||||
Interest income | 3 | 589 | ||||||
Management and consulting fees | 140,978 | 180,335 | ||||||
Travel and promotion | 21,938 | 129,674 | ||||||
Office and rent | 18,456 | 10,729 | ||||||
Accounting and legal | 9,678 | 36,952 | ||||||
Regulatory and transfer agent | 2,572 | 599 | ||||||
Transaction costs | 525 | 2,357 | ||||||
Foreign exchange (loss) gain | (2,748 | ) | 38,657 | |||||
Gain on settlement of payable | 118,483 | - | ||||||
Recovery (Impairment) of loan receivable | - | (1,083,640 | ) | |||||
(Impairment) of royalty interest | - | (1,045,000 | ) |
Twelve Months ended December 31, | ||||||||
2019 | 2018 | |||||||
Net (loss) | $ | (1,507,338 | ) | $ | (9,794,067 | ) | ||
Realized (loss) gain on investments, net | (708,793 | ) | 395,635 | |||||
Unrealized (loss) on investments, net | (124,807 | ) | (6,592,146 | ) | ||||
Interest income | 2,040 | 11,387 | ||||||
Management and consulting fees | 578,017 | 711,890 | ||||||
Travel and promotion | 69,319 | 577,922 | ||||||
Office and rent | 77,891 | 58,101 | ||||||
Accounting and legal | 51,272 | 102,774 | ||||||
Regulatory and transfer agent | 18,148 | 23,857 | ||||||
Transaction costs | 3,739 | 30,971 | ||||||
Foreign exchange gain | 4,125 | 25,212 | ||||||
Foreign exchange gain | 118,483 | - | ||||||
Recovery (Impairment) of loan receivable | - | (1,083,640 | ) | |||||
(Impairment) of royalty interest | - | (1,045,000 | ) |
United States Dollars | British Pound | |||||||
Cash | $ | 129 | - | |||||
Accounts payable and accrued liabilities | $ | (58,446 | ) | (75,957 | ) | |||
Net assets | $ | (57,317 | ) | (75,957 | ) |
United States Dollars | British Pound | |||||||
Cash | $ | 75 | $ | - | ||||
Interest receivable | 3,624 | - | ||||||
Private investment | 101,454 | - | ||||||
Accounts payable and accrued liabilities | (84,126 | ) | (77,129 | ) | ||||
Net assets (liabilities) | $ | 21,027 | $ | (77,129 | ) |
a) | to allow the Company to respond to changes in economic and/or marketplace conditions by maintaining the Company’s ability to purchase new investments; |
b) | to give shareholders sustained growth in value by increasing shareholders’ equity; while |
c) | taking a conservative approach towards financial leverage and management of financial risks. |
a) | raising capital through equity financings; and |
b) | realizing proceeds from the disposition of its investments |
31-Dec | 30-Sep | 30-Jun | 31-Mar | 31-Dec | 30-Sep | 30-Jun | 31-Mar | |||||||||||||||||||||||||
2019 | 2019 | 2019 | 2019 | 2018 | 2018 | 2018 | 2018 | |||||||||||||||||||||||||
Revenue | $ | (190,735 | ) | $ | 107,411 | $ | (450,120 | ) | $ | (298,116 | ) | $ | (773,158 | ) | $ | (1,273,106 | ) | $ | (2,480,947 | ) | $ | (1,657,913 | ) | |||||||||
Net (loss) income | $ | (269,147 | ) | $ | (92,534 | ) | $ | (643,996 | ) | $ | (501,661 | ) | $ | (3,223,787 | ) | $ | (1,584,911 | ) | $ | (2,798,068 | ) | $ | (2,187,301 | ) | ||||||||
(Loss) per Share - basic | $ | (0.01 | ) | $ | (0.00 | ) | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.08 | ) | $ | (0.04 | ) | $ | (0.07 | ) | $ | (0.05 | ) | ||||||||
(Loss) per Share - diluted | $ | (0.01 | ) | $ | (0.00 | ) | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.08 | ) | $ | (0.04 | ) | $ | (0.07 | ) | $ | (0.05 | ) | ||||||||
Total Assets | $ | 636,459 | $ | 898,625 | $ | 901,094 | $ | 1,453,913 | $ | 1,946,695 | $ | 4,716,392 | $ | 6,188,312 | $ | 9,081,813 | ||||||||||||||||
Total Long Term Liabilities | $Nil | $Nil | $Nil | $Nil | $Nil | $Nil | $Nil | $Nil |
31-Dec-19 | 31-Dec-18 | 31-Dec-17 | ||||||||||
(a) Net Sales | - | - | - | |||||||||
(b) Net Income (Loss) and Comprehensive Income (Loss) | ||||||||||||
(i) Total income (loss) | $ | (1,507,338 | ) | $ | (9,794,067 | ) | $ | 4,089,673 | ||||
(ii) (Loss) income per share – basic and diluted | $ | (0.04 | ) | $ | (0.24 | ) | $ | 0.17 | ||||
(c) Total Assets | $ | 636,459 | $ | 1,946,695 | $ | 11,335,002 | ||||||
(d) Total Liabilities | $ | 1,802,024 | $ | 1,604,922 | $ | 1,199,162 | ||||||
Investment | Nature of relationship | Estimated Fair Value | % of FV | ||||||
ARTH Media Inc. | Director (William Steers), and common shareholders /warrant holders | $ | - | 0.0 | % | ||||
Fura Gems Inc. | Officer (Ryan Ptolemy), and common shareholders /warrant holders | 128,700 | 20.6 | % | |||||
Sulliden Mining Capital Inc. | Director (Stan Bharti), and common shareholders / warrant holders | 404,575 | 65 | % | |||||
Yukoterre Resources Inc. | Former Director and Officer (Fred Leigh), Officer (Kenny Choi) and common shareholders | 90,000 | 14.4 | % | |||||
Total investment - December 31, 2019 | $ | 623,275 | 100.0 | % |
Investment | Nature of relationship | Estimated Fair Value | % of FV | ||||||
Aberdeen International Inc. | Director and officer (Stan Bharti), Officer (Ryan Ptolemy), and common shareholders /warrant holders | $ | 208,260 | 12.3 | % | ||||
Fura Gems Inc. | Officer (Ryan Ptolemy), and common shareholders /warrant holders | 461,100 | 27.2 | % | |||||
Sulliden Mining Capital Inc. | Director (Stan Bharti), and common shareholders / warrant holders | 970,980 | 57.1 | % | |||||
Total other five investments | Common shareholders/warrant holders | 57,779 | 3.4 | % | |||||
Total investment - December 31, 2018 | $ | 1,698,119 | 100.0 | % |
• | The Company incurred $120,000 (2018 - $228,289) of expenses for its proportionate share of shared office costs with other corporations that may have common directors and officers. The costs associated with this space are administered by 2227929 Ontario Inc. As at December 31, 2019, the Company had a payable balance of $439,007 (December 31, 2018 - $340,250) with 2227929 Ontario Inc. to cover shared expenses. Such amounts are unsecured, non-interest bearing, with no fixed terms of payment and due on demand. Fred Leigh, a former officer and director of the Company, is also a director of 2227929 Ontario Inc. |
• | The Company incurred $120,071 (2018 - $120,000) for administration costs with Forbes. In August 2017, Forbes became an insider of the Company owning approximately 34.9%, at the time, (approximately 27.9% at December 31, 2019) outstanding shares of the Company through an acquisition of Quebec Gold royalty interests. The Company is also part of the Forbes Group of Companies and continue to receive the benefits of such membership, including access to mining professionals, advice from Stan Bharti, the Executive Chairman of Forbes and strategic advice from the Forbes Board of Advisors. An administration fee of $10,000 per month is charged by Forbes pursuant to a consulting agreement. As at December 31, 2019, the Company had a payable balance of $135,680 (December 31, 2018 - $45,200) with Forbes. Such amounts are unsecured, non-interest bearing, with no fixed terms of payment and due on demand. |
• | At December 31, 2019, the Company had accounts payable and accrued liabilities of $Nil (December 31, 2018 - $118,483) for reimbursable expenses owed to Brazil Potash Crop. (“BPC”). During the year ended December 31, 2019, the payables were forgiven by BPC. Stan Bharti, executive chairman of Forbes, is an insider of Routemaster, is also a director of BPC. Ryan Ptolemy, an officer of Routemaster, is also an officer of BPC. |
• | Included in accounts payable and accrued liabilities were expenses of GBP44,228 ($75,957) (December 31, 2018 - $77,129) expenses owed to Vik Pathak, a former director and officer of Routemaster. |
• | Included in amounts receivable was $Nil (2017 - $110,000) pertaining to a subscription of common shares of EarthRenew Inc. (“EarthRenew”). Ryan Ptolemy, an officer of Routemaster, is also an officer of EarthRenew |
i. | The carrying values of cash, amounts receivable, accounts payable and accrual liabilities approximate their fair values due to the short-term nature of these instruments. |
ii. | Public and private investments are carried at amounts in accordance with the Company’s accounting policies as set out in Note 2 of the Company’s audited financial statements. |
iii. | Prior to maturity, the outstanding loans receivable are carried at their discounted value. Following their maturity, loans receivable are carried at their estimated realizable value. |
Investments, fair value | Level 1 (Quoted Market price) | Level 2 (Valuation technique - observable market Inputs) | Level 3 (Valuation technique - non-observable market inputs) | Total |
$ | $ | $ | $ | |
Publicly traded investments | 623,275 | - | - | 623,275 |
December 31, 2019 | 623,275 | - | - | 623,275 |
Publicly traded investments | 1,621,640 | - | - | 1,621,640 |
Non-trading warrants on public investments | - | 26,479 | - | 26,479 |
Private investment | - | 101,454 | 50,000 | 151,454 |
December 31, 2018 | 1,621,640 | 127,933 | 50,000 | 1,799,573 |
Investments, fair value for the years ended | December 31, 2019 | December 31, 2018 | ||||||
Balance, beginning of year | $ | 50,000 | $ | 960,000 | ||||
Transferred to Level 1 | (50,000 | ) | (910,000 | ) | ||||
Balance, end of year | $ | - | $ | 50,000 |
Description | Fair value | Valuation technique | Significant unobservable input(s) | Range of significant unobservable input(s) | |||
Yukoterre Resources Inc. | $ | 50,000 | Recent financing | Marketability of shares | 0% discount |
(a) | obtains funds from one or more investors for the purpose of providing those investor(s) with investment management services; |
(b) | commits to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and |
(c) | measures and evaluates the performance of substantially all of its investments on a fair value basis. |
CONDENSED INTERIM FINANCIAL STATEMENTS
For the three and nine months ended September 30, 2020 and 2019
(expressed in Canadian dollars)
ROUTEMASTER CAPITAL INC.
NOTICE OF NO AUDITOR REVIEW OF
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Under National Instrument 51-102, Part 4, subsection 4.3(3) (a), if an auditor has not performed a review of the condensed interim financial statements, they must be accompanied by a notice indicating that the interim financial statements have not been reviewed by an auditor.
The accompanying unaudited condensed interim financial statements of the Company have been prepared by and are the responsibility of the Company’s management.
The Company’s independent auditor has not performed a review of these condensed interim financial statements in accordance with standards established by the Chartered Professional Accountants of Canada (CPA Canada) for a review of interim financial statements by an entity’s auditor.
2
Routemaster Capital Inc.
Table of Contents
Condensed interim statements of financial position | 4 |
Condensed interim statements of operations and comprehensive income (loss) | 5 |
Condensed interim statements of cash flows | 6 |
Condensed interim statements of changes in equity | 7 |
Notes to the condensed interim financial statements | 8-19 |
3
Routemaster Capital Inc.
Condensed Interim Statements of Financial Position | |||
(Expressed in Canadian dollars - unaudited) |
Note | September 30, | December 31, | ||||||||
2020 $ | 2019 $ | |||||||||
Assets | ||||||||||
Cash | 10 | 7,907 | 4,762 | |||||||
Public investments, at fair value through profit and loss | 3,10 | 744,555 | 623,275 | |||||||
Prepaid expenses and deposits | 4,10 | 443 | 8,422 | |||||||
Private investments, at fair value through profit and loss | 3,6 | 3,032,788 | - | |||||||
Total assets | 3,785,693 | 636,459 | ||||||||
Liabilities | ||||||||||
Accounts payable and accrued liabilities | 5,10,12 | 1,514,790 | 1,802,024 | |||||||
Total liabilities | 1,514,790 | 1,802,024 | ||||||||
Equity (Deficiency) | ||||||||||
Common shares | 8 | 19,303,598 | 18,820,850 | |||||||
Preferred shares | 4,321,350 | 4,321,350 | ||||||||
Share-based payments reserves | 9 | 469,272 | 359,408 | |||||||
(Deficit) | (21,823,317 | ) | (24,667,173 | ) | ||||||
Total equity (deficiency) | 2,270,903 | (1,165,565 | ) | |||||||
Total liabilities and equity (deficiency) | 3,785,693 | 636,459 | ||||||||
Nature of operations and going concern | 1 | |||||||||
Commitments and contingencies | 13 | |||||||||
Subsequent events | 14 |
Approved on behalf of the Directors:
“Tito Gandhi” | “Daniyal Baizak” | |
Director | Director |
See accompanying notes to these condensed interim financial statements
4
Routemaster Capital Inc.
Condensed Interim Statements of Operations and Comprehensive Income (Loss)
(Expressed in Canadian dollars - unaudited)
Three months ended | Nine months ended | |||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||
Note | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||
$ | $ | $ | $ | |||||||||||||||||
Revenues | ||||||||||||||||||||
Realized (loss) on investments, net | - | (141,455 | ) | (197,863 | ) | (545,811 | ) | |||||||||||||
Unrealized gain (loss) on investments, net | 81,894 | 248,866 | 368,059 | (97,051 | ) | |||||||||||||||
Gain on sale of royalties | 6 | 2,998,002 | - | 2,998,002 | - | |||||||||||||||
Interest income | - | - | - | 2,037 | ||||||||||||||||
Total revenue | 3,079,896 | 107,411 | 3,168,198 | (640,825 | ) | |||||||||||||||
Expenses | ||||||||||||||||||||
Operating, general and administration | 7 | 119,902 | 199,562 | 321,063 | 601,025 | |||||||||||||||
Transaction costs | - | 1,108 | 1,592 | 3,214 | ||||||||||||||||
Foreign exchange loss (gain) | 326 | (725 | ) | 1,687 | (6,873 | ) | ||||||||||||||
Total expenses | 120,228 | 199,945 | 324,342 | 597,366 | ||||||||||||||||
Net income (loss) and comprehensive income (loss) for the period | 2,959,668 | (92,534 | ) | 2,843,856 | (1,238,191 | ) | ||||||||||||||
Income (loss) per share | ||||||||||||||||||||
Basic | 0.05 | (0.00 | ) | 0.06 | (0.03 | ) | ||||||||||||||
Diluted | 0.05 | (0.00 | ) | 0.06 | (0.03 | ) | ||||||||||||||
Weighted average number of shares outstanding: | ||||||||||||||||||||
Basic | 61,513,693 | 41,513,631 | 48,520,993 | 41,513,631 | ||||||||||||||||
Diluted | 63,435,981 | 41,513,631 | 50,310,158 | 41,513,631 |
See accompanying notes to these condensed interim financial statements
5
Routemaster Capital Inc.
Condensed Interim Statements of Cash Flows
(Expressed in Canadian dollars - unaudited)
Note | Nine months ended September 30, | |||||||||||
2020 $ | 2019 $ | |||||||||||
Cash (used in) provided by operations: | ||||||||||||
Net loss for the year | 2,843,856 | (1,238,191 | ) | |||||||||
Adjustments to reconcile net income to cash (used in) operating activities: | ||||||||||||
Gain on sale of royalties | 6 | (2,998,002 | ) | - | ||||||||
Realized loss on investments, net | 197,863 | 545,811 | ||||||||||
Unrealized (gain) loss on investments, net | (368,059 | ) | 97,051 | |||||||||
Unrealized loss (gain) on foreign exchange | 1,687 | (6,862 | ) | |||||||||
(322,655 | ) | (602,191 | ) | |||||||||
Adjustment for: | ||||||||||||
Purchase of investments | (65,000 | ) | - | |||||||||
Disposal of investments | 79,130 | 407,360 | ||||||||||
Change in receivables | - | (736 | ) | |||||||||
Change in prepaid expenses and deposits | 7,979 | 1,512 | ||||||||||
Change in accounts payable and accrued liabilities | (288,924 | ) | 197,587 | |||||||||
Net cash (used in) provided from operating activities | (589,470 | ) | 3,532 | |||||||||
Financing activities | ||||||||||||
Proceeds from issuance of shares/units | 8 | 600,000 | - | |||||||||
Share issuance costs | 8 | (7,388 | ) | - | ||||||||
Net cash provided by financing activities | 592,612 | - | ||||||||||
�� | ||||||||||||
Effect of exchange rate changes on cash | 3 | (628 | ) | |||||||||
Change in cash | 3,145 | 2,904 | ||||||||||
Cash, beginning of period | 4,762 | 11,103 | ||||||||||
Cash, end of period | 7,907 | 14,007 | ||||||||||
Supplimental information: | ||||||||||||
Investments received through sale of royalties | $ | 2,998,002 | $ | - |
See accompanying notes to these condensed interim financial statements
6
Routemaster Capital Inc.
Condensed Interim Statements of Changes in Equity (Deficiency)
(Expressed in Canadian dollars - unaudited)
Share-based payments | ||||||||||||||||||||||||||||||||||||
Number of Common Shares | Common Shares | Number of Preferred Shares | Preferred Shares | Options | Warrants | Share-based Payments Reserve | Retained Earnings (Deficit) | Total | ||||||||||||||||||||||||||||
Balance, December 31, 2019 | 41,513,631 | $ | 18,820,850 | 4,500,000 | $ | 4,321,350 | $ | 198,969 | $ | 160,439 | $ | 359,408 | $ | (24,667,173 | ) | $ | (1,165,565 | ) | ||||||||||||||||||
Private Placement | 20,000,000 | 600,000 | - | - | - | - | - | - | 600,000 | |||||||||||||||||||||||||||
Warrants issued | - | (109,953 | ) | - | - | - | 109,953 | 109,953 | - | - | ||||||||||||||||||||||||||
Broker warrants issued | - | - | - | - | - | 1,548 | 1,548 | - | 1,548 | |||||||||||||||||||||||||||
Share and warrant issue costs | - | (7,299 | ) | - | - | - | (1,637 | ) | (1,637 | ) | - | (8,936 | ) | |||||||||||||||||||||||
Net income for the period | - | - | - | - | - | - | - | 2,843,857 | 2,843,857 | |||||||||||||||||||||||||||
Balance, September 30, 2020 | 61,513,631 | $ | 19,303,598 | 4,500,000 | $ | 4,321,350 | $ | 198,969 | $ | 270,303 | $ | 469,272 | $ | (21,823,316 | ) | $ | 2,270,904 | |||||||||||||||||||
Balance, December 31, 2018 | 41,513,631 | $ | 18,820,850 | 4,500,000 | $ | 4,321,350 | $ | 233,641 | $ | 240,539 | $ | 474,180 | $ | (23,274,607 | ) | $ | 341,773 | |||||||||||||||||||
Expiration of options | - | - | - | - | (34,672 | ) | - | (34,672 | ) | 34,672 | - | |||||||||||||||||||||||||
Net (loss) for the period | - | - | - | - | - | - | - | (1,238,191 | ) | (1,238,191 | ) | |||||||||||||||||||||||||
Balance, September 30, 2019 | 41,513,631 | $ | 18,820,850 | $ | 4,500,000 | $ | 4,321,350 | $ | 198,969 | $ | 240,539 | $ | 439,508 | $ | (24,478,126 | ) | $ | (896,418 | ) |
See accompanying notes to these condensed interim financial statements
7
Routemaster Capital Inc.
Notes to the Condensed Interim financial statements
Three and nine months ended September 30, 2020 and 2019
(Expressed in Canadian dollars unless otherwise noted - unaudited)
1. | Nature of operations and going concern |
Routemaster Capital Inc. (the “Company” or “Routemaster”), is a publicly listed company incorporated in the Province of British Columbia and continued under the laws of the Province of Ontario. The Company’s shares are listed on the TSX Venture Exchange (“TSXV”). The Company sold its sole subsidiary on December 29, 2015 and completed a change of business (“COB”) to a tier 2 investment issuer under the rules of the TSXV on September 16, 2016. The Company’s head office is located at 65 Queen Street West, 8th Floor, Toronto, Ontario, Canada, M5H 2M5.
These condensed interim financial statements were prepared on a going concern basis of presentation, which contemplates the realization of assets and settlement of liabilities as they become due in the normal course of operations for the next fiscal year. For the nine months ended September 30, 2020, the Company incurred net income of $2,843,856 and as at September 30, 2020, reported an accumulated deficit of $21,823,317 and working capital of $2,270,903 including $7,907 in cash. The Company’s current source of operating cash flow is dependent on the marketability of its investments, and there can be no assurances that sufficient funding, including adequate financing, will be available to cover the general and administrative expenses necessary for the maintenance of a public company. The Company’s status as a going concern is contingent upon raising the necessary funds through the selling of investments and issuance of equity or debt. Management believes its working capital will be sufficient to support activities for the next twelve months and expects to raise additional funds when required and available. There can be no assurance that funds will be available to the Company with acceptable terms or at all. These matters constitute material uncertainties that cast significant doubt about the ability of the Company to continue as a going concern.
Novel Coronavirus (“COVID-19”)
The Company’s operations could be significantly adversely affected by the effects of a widespread global outbreak of a contagious disease, including the recent outbreak of respiratory illness caused by COVID-19. The Company cannot accurately predict the impact COVID-19 will have on its operations and the ability of others to meet their obligations with the Company, including uncertainties relating to the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak, and the length of travel and quarantine restrictions imposed by governments of affected countries. In addition, a significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could further affect the Company’s operations and ability to finance its operations.
2. | Significant accounting policies |
(a) | Statement of compliance |
These condensed interim financial statements of the Company were prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB) applicable to the preparation of interim financial statements, including IAS 34 – Interim Financial Reporting. These condensed interim financial statements should be read in conjunction with the annual audited financial statements for the years ended December 31, 2019 and 2018, which was prepared in accordance with IFRS as issued by the IASB.
These condensed interim financial statements of the Company were approved for issue by the Board of Directors on October 30, 2020.
(b) | Basis of preparation |
The Company’s functional and presentation currency is the Canadian dollar (“$”). Transactions in currencies other than the entity’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Gains and losses are included in operations.
8
Routemaster Capital Inc.
Notes to the Condensed Interim financial statements
Three and nine months ended September 30, 2020 and 2019
(Expressed in Canadian dollars unless otherwise noted - unaudited)
2. | Significant accounting policies (continued) |
(c) | Significant accounting judgements, estimates and assumptions |
The preparation of these condensed interim financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the condensed interim financial statements and reported amounts of revenues and expenses during the reporting period. Such estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual outcomes can differ from these estimates. The impacts of such estimates are pervasive throughout the condensed interim financial statements and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised, and the revision affects both current and future periods.
Information about critical judgments and estimates in applying accounting policies that have the most significant effect on the amounts recognized in the condensed interim financial statements are as follows:
(i) | Fair value of financial derivatives |
Investments in options and warrants which are not traded on a recognized securities exchange do not have a readily available market value. When there are sufficient and reliable observable market inputs, a valuation technique is used; if no such market inputs are available, the warrants and options are valued at intrinsic value. Refer to Notes 3 and 10 for further details.
(ii) | Fair value of investment in securities not quoted in an active market or private company investments |
Where the fair values of financial assets and financial liabilities recorded on the statement of financial position cannot be derived from active markets, they are determined using a variety of valuation techniques. The inputs to these models are derived from observable market data where possible, but where observable market data are not available, judgment is required to establish fair values. Refer to Notes 3 and 10 for further details.
(iii) | Share-based payments |
The Company uses the Black-Scholes option pricing model to fair value options in order to calculate share-based compensation expense. The Black-Scholes model involves six key inputs to determine the fair value of an option: risk- free interest rate, exercise price, market price of the Company’s shares at date of issue, expected dividend yield, expected life, and expected volatility. Certain of the inputs are estimates which involve considerable judgment and are, or could be, affected by significant factors that are out of the Company’s control. The Company is also required to estimate the future forfeiture rate of options based on historical information in its calculation of share-based compensation expense.
(iv) | Investment entity |
Management has determined that the Company qualifies for the exemption from consolidation given that the Company has the following typical characteristics of an investment entity:
(a) | obtains funds from one or more investors for the purpose of providing those investor(s) with investment management services; | |
(b) | commits to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and | |
(c) | measures and evaluates the performance of substantially all of its investments on a fair value basis. |
(v) | Contingencies (See Note 13 for details) |
9
Routemaster Capital Inc.
Notes to the Condensed Interim financial statements
Three and nine months ended September 30, 2020 and 2019
(Expressed in Canadian dollars unless otherwise noted - unaudited)
2. | Significant accounting policies (continued) |
(d) | New accounting change |
Certain pronouncements were issued by the IASB or the IFRIC that are mandatory for accounting periods commencing on or after January 1, 2020. Many are not applicable or do not have a significant impact to the Company and have been excluded. The following have not yet been adopted and are being evaluated to determine their impact on the Company.
During the nine months ended September 30, 2020, the Company adopted IAS 1. The adoption of this new standard did not have any material impact on the Company’s condensed interim financial statements.
3. | Investments, at fair value through profit and loss |
At September 30, 2020, the Company’s investment portfolio consisted of three publicly traded investments and two private investments for a total estimated fair value of $3,777,343 (December 31, 2019 – four publicly traded investment and zero private investments at a total estimated fair value of $623,275)
Public Investments
At September 30, 2020, the Company’s three publicly traded investments had a total fair value of $744,555.
Public Issuer | Note | Security description | Cost | Estimated Fair Value | % of FV | |||||||||||||
QuestCap Inc. | (i) | 55,000 common shares | 6,600 | 9,900 | 1.3 | % | ||||||||||||
Sulliden Mining Capital Inc. | (i,ii) | 9,091,500 common shares | 2,662,252 | 636,405 | 85.5 | % | ||||||||||||
Yukoterre Resources Inc. | (i) | 982,500 common shares | 49,125 | 98,250 | 13.2 | % | ||||||||||||
Total public investments | $ | 2,717,977 | $ | 744,555 | 100.0 | % |
(i) | An insider and an officer of the Company is a director and officer of the investee corporation as at September 30, 2020 | |
(ii) | The Company has filed a Section 62-103 report pursuant to the Securities Act (Ontario) for this investment and has filed an early warning report on SEDAR. |
At December 31, 2019, the Company’s four publicly traded investments had a total fair value of $623,275.
Public Issuer | Note | Security description | Cost | Estimated Fair Value | % of FV | |||||||||||||
ARHT Media Inc. | 125,000 warrants expire Feb 1, 2020 | $ | 14,318 | $ | - | 0.0 | % | |||||||||||
Fura Gems Inc. | (i) | 780,000 common shares | 253,400 | 128,700 | 20.6 | % | ||||||||||||
Sulliden Mining Capital Inc. | (i,ii) | 8,091,500 common shares | 2,612,252 | 404,575 | 65.0 | % | ||||||||||||
Yukoterre Resources Inc. | (i) | 1,000,000 common shares | 50,000 | 90,000 | 14.4 | % | ||||||||||||
Total public investments | $ | 2,929,970 | $ | 623,275 | 100.0 | % |
(i) | An insider and a former officer of the Company is a director and officer of the investee corporation as at December 31, 2019. | |
(ii) | The Company has filed a Section 62-103 report pursuant to the Securities Act (Ontario) for this investment and has filed an early warning report on SEDAR. |
Private Investments
At September 30, 2020, the Company’s two private investments had a total fair value of $3,032,343.
Private Issuer | Note | Security description | Cost | Estimated Fair Value | % of FV | |||||||||||||
Brazil Potash Corp. | (i) | 404,200 common shares | $ | 1,998,668 | $ | 2,021,859 | 66.7 | % | ||||||||||
Flora Growth Corp. | (i) | 1,010,500 common shares | 999,334 | 1,010,929 | 33.3 | % | ||||||||||||
Total private investments | $ | 2,998,002 | $ | 3,032,788 | 100.0 | % |
(i) | An insider and an officer of the Company is a director and officer of the investee corporation as at September 30, 2020 |
10
Routemaster Capital Inc.
Notes to the Condensed Interim financial statements
Three and nine months ended September 30, 2020 and 2019
(Expressed in Canadian dollars unless otherwise noted - unaudited)
4. | Prepaid expenses and deposits |
30-Sep-20 | 31-Dec-19 | |||||||
Prepaid insurance | $ | 443 | $ | 8,422 | ||||
$ | 443 | $ | 8,422 |
5. | Accounts payable and accrued liabilities |
30-Sep-20 | 31-Dec-19 | |||||||
Corporate payables | $ | 858,069 | $ | 1,131,098 | ||||
Related party payable (Note 12) | 656,721 | 670,926 | ||||||
$ | 1,514,790 | $ | 1,802,024 |
6. | Royalties |
On September 11, 2020, the Company entered into a royalty purchase agreement with 2776234 Ontario Inc. to sell the 1.0% net smelter returns royalty granted by Potasio Y Litio de Argentina S.A. with respect to the Sal de los Angeles lithium project (the “Lithium NSR Royalty”) and the 2.0% net smelter returns royalty granted by QMX Gold Corporation with respect to its Quebec mineral properties (the “QC NSR Royalty” and, together with the Lithium NSR Royalty, the “Royalties”) (the “Transaction”).
As consideration for the Royalties, the Company received 404,200 common shares of Brazil Potash Corp. at a price per share of US$3.75 and 1,010,500 common shares of Flora Growth Corp. at a price per share of US$0.75 per share. The Company recognized a gain on the sale of royalties of US$2,273,625 (C$2,998,002).
The Transaction is considered an Exempt Transaction in accordance with the policies of the TSX Venture Exchange and the purchaser is a non arms length party of Routemaster.
7. | Expense by nature |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2019 | 2018 | 2020 | 2019 | |||||||||||||
Management and consulting fees | $ | 83,572 | $ | 144,790 | $ | 196,035 | $ | 437,039 | ||||||||
Travel and promotion | 6,746 | 25,510 | 16,481 | 47,381 | ||||||||||||
Office and rent | 20,417 | 18,400 | 61,047 | 59,435 | ||||||||||||
Accounting and legal | 7,700 | 7,500 | 39,375 | 41,594 | ||||||||||||
Regulatory and transfer agent | 1,467 | 3,362 | 8,125 | 15,576 | ||||||||||||
�� | $ | 119,902 | $ | 199,562 | $ | 321,063 | $ | 601,025 |
8. | Share Capital |
Issued and outstanding shares
Number of | ||||||||
Common Shares | Amount | |||||||
Balance, December 31, 2017 to 2019 | 41,513,631 | $ | 18,820,850 | |||||
Private placement financing | 20,000,000 | 600,000 | ||||||
Warrants issued | - | (109,953 | ) | |||||
Share issuance costs allocated to shares | - | (7,299 | ) | |||||
Balance, September 30, 2020 | 61,513,631 | $ | 19,303,598 |
11
Routemaster Capital Inc.
Notes to the Condensed Interim financial statements
Three and nine months ended September 30, 2020 and 2019
(Expressed in Canadian dollars unless otherwise noted - unaudited)
8. | Share Capital (Continued) |
On June 26, 2020, the Company closed a non-brokered private placement financing and issued 20,000,000 units for gross proceeds of $600,000. Each unit consists of one common share of the Company and one half common share purchase warrant. Each warrant entitling the holder to acquire one additional common share of the Company at an exercise price of $0.05 for a period of 24 months from issuance. In connection with the closing of the Offering, the Company has paid finder’s fees of $3,150 in cash and 105,000 finder’s warrants to certain finders. Each Finder Warrant will entitle the holder thereof to purchase one common share at a price of $0.05 for a period of 24 months from the date of the closing of the Offering. The issue date fair value of the warrants and broker warrants was estimated at $109,953 and $1,548 using the Black Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility based on the Company’s historical volatility of 118.1%; risk-free interest rate of 0.29% and an expected life of 2 years. The Company also paid additional share and warrant issue costs of $4,238.
Of the total subscriptions, 7,771,940 units were acquired by companies controlled by an insider of the Company, a company controlled by a director and officer of the Company and by a director and officer of the Company. Each such placement to those persons constitutes a “related party transaction” within the meaning of TSX Venture Exchange Policy 5.9 and Multilateral Instrument 61-101 -Protection of Minority Security Holders in Special Transactions (“MI 61-101”) adopted in the Policy. The Company has relied on exemptions from the formal valuation and minority shareholder approval requirements of MI 61-101 contained in sections 5.5(a) and 5.7(1)(a) of MI 61-101 in respect of related party participation in the placements as neither the fair market value (as determined under MI 61-101) of the subject matter of, nor the fair market value of the consideration for, the transaction, insofar as it involved the related parties, exceeded 25% of the Company’s market capitalization (as determined under MI 61-101). Further details will be included in a material change report to be filed by the Company.
9. | Share-based payments reserves |
Options | Warrants | |||||||||||||||||||||||||||
Number of Options | Weighted average exercise prices | Value of options | Number of warrants | Weighted average exercise prices | Value of warrants | Total Value | ||||||||||||||||||||||
December 31, 2018 | 2,225,000 | $ | 0.18 | $ | 233,641 | 4,446,153 | $ | 0.19 | $ | 240,539 | $ | 474,180 | ||||||||||||||||
Expired | (160,000 | ) | 0.35 | (34,672 | ) | (600,000 | ) | 0.10 | (80,100 | ) | (114,772 | ) | ||||||||||||||||
December 31, 2019 | 2,065,000 | $ | 0.17 | $ | 198,969 | 3,846,153 | $ | 0.20 | $ | 160,439 | $ | 359,408 | ||||||||||||||||
Granted | - | - | - | 10,105,000 | 0.05 | 111,501 | 111,501 | |||||||||||||||||||||
Warrant issued costs | - | - | - | - | - | (1,637 | ) | (1,637 | ) | |||||||||||||||||||
September 30, 2020 | 2,065,000 | $ | 0.17 | $ | 198,969 | 13,951,153 | $ | 0.09 | $ | 270,303 | $ | 469,272 |
As at September 30, 2020, the Company had share purchase warrants outstanding as follows:
Number outstanding & exercisable | Grant date | Expiry date | Exercise price | Fair value at grant date | Grant date share price | Expected volatility | Expected life (yrs) | Expected dividend yield | Risk-free interest rate | |||||||||||||||||||||||||||
Warrants | 3,846,153 | 12-Jun-17 | 12-Jun-22 | $ | 0.20 | $ | 161,789 | $ | 0.12 | 79.9 | % | 5 | 0 | % | 1.04 | % | ||||||||||||||||||||
Warrants | 10,000,000 | 26-Jun-20 | 26-Jun-22 | $ | 0.05 | $ | 109,953 | $ | 0.03 | 118.1 | % | 2 | 0 | % | 0.29 | % | ||||||||||||||||||||
Broker warrants | 105,000 | 26-Jun-20 | 26-Jun-22 | $ | 0.05 | $ | 1,548 | $ | 0.03 | 118.1 | % | 2 | 0 | % | 0.29 | % | ||||||||||||||||||||
Warrant issue costs | $ | (2,987 | ) | |||||||||||||||||||||||||||||||||
13,951,153 | $ | 0.09 | $ | 270,303 |
12
Routemaster Capital Inc.
Notes to the Condensed Interim financial statements
Three and nine months ended September 30, 2020 and 2019
(Expressed in Canadian dollars unless otherwise noted - unaudited)
10. | Financial instruments |
Financial assets and financial liabilities as at September 30, 2020 are as follows:
Loans, receivables and (other financial liabilities) | Assets /(liabilities) at fair value through profit/(loss) | Total | ||||||||||
September 30, 2020 | ||||||||||||
Cash | $ | 7,907 | $ | - | $ | 7,907 | ||||||
Public investments | - | 744,555 | 744,555 | |||||||||
Private investments | - | 3,032,788 | 3,032,788 | |||||||||
Accounts payable and accrued liabilities | (1,514,790 | ) | - | (1,514,790 | ) |
Routemaster’s operations involve the purchase and sale of securities. Accordingly, the majority of the Company’s assets are currently comprised of financial instruments which can expose it to several risks, including market, liquidity, credit and currency risks. There have been no significant changes in the risks, objectives, policies and procedures from the previous year. A discussion of the Company’s use of financial instruments and their associated risks is provided below:
Credit risk
Credit risk arises from the non-performance by counterparties of contractual financial obligations. The Company’s primary counterparty related to its cash carries an investment grade rating as assessed by external rating agencies. The Company maintains all or substantially all of its cash with a major financial institution domiciled in Canada. Deposits held with this institution may exceed the amount of insurance provided on such deposits. Financial instruments included in receivables consist of interest and amounts receivable of $Nil at September 30, 2020 (December 31, 2019 - $nil).
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 the Company’s access to the capital markets is hindered, whether as a result of a downturn in stock market conditions generally or related to matters specific to the Company, or if the value of the Company’s investments declines, resulting in losses upon disposition. In addition, some of the investments the Company holds are lightly traded public corporations or not publicly traded and may not be easily liquidated. The Company generates cash flow from proceeds from the disposition of its investments. There can be no assurances that sufficient funding, including adequate financing, will be available to cover the general and administrative expenses necessary for the maintenance of a public company. All of the Company’s assets, liabilities and obligations are due within one to three years.
The Company manages liquidity risk by maintaining adequate cash balances. The Company continuously monitors and reviews both actual and forecasted cash flows, and also matches the maturity profile of financial assets and liabilities. As at September 30, 2020, the Company had assets of $3,785,693 (December 31, 2019 - $636,459) to settle current liabilities of $1,514,790 (December 31, 2019 - $1,802,024).
The following table shows the Company’s source of liquidity by assets as at September 30, 2020.
September 30, 2020 | ||||||||||||
Total | Less than 1 year | 1-3 years | ||||||||||
Cash | $ | 7,907 | $ | 7,907 | $ | - | ||||||
Public investments | 744,555 | 744,555 | - | |||||||||
Private investments | 3,032,788 | - | 3,032,788 | |||||||||
Prepaid expenses | 443 | 443 | - | |||||||||
Total assets - September 30, 2020 | $ | 3,785,693 | $ | 752,905 | $ | 3,032,788 |
13
Routemaster Capital Inc.
Notes to the Condensed Interim financial statements
Three and nine months ended September 30, 2020 and 2019
(Expressed in Canadian dollars unless otherwise noted - unaudited)
10. | Financial instruments (Continued) |
Market risk
Market risk is the risk that the fair value of, or future cash flows from, the Company’s financial instruments will significantly fluctuate because of changes in market prices.
(a) | Price and concentration risk |
The Company is exposed to market risk in trading its investments and unfavourable market conditions could result in dispositions of investments at less than favorable prices. In addition, most of the Company’s investments are in the resource sector. At September 30, 2020, two investments made up approximately 80% (December 31, 2019 – one investment of 64%) of the total assets of the Company.
For the nine months ended September 30, 2020, a 10% decrease in the closing price of this concentrated position would result in an estimated increase in net loss of $0.3 million, or $0.005 per share.
For the nine months ended September 30, 2020, a 10% decrease (increase) in the closing prices of its portfolio investments would result in an estimated increase (decrease) in net loss of $0.38 million, or $0.006 per share.
(b) | Interest rate risk |
The Company’s cash is subject to interest rate cash flow risk as it carries variable rates of interest. The Company’s interest rate risk management policy is to purchase highly liquid investments with a term to maturity of one year or less on the date of purchase. Based on cash balances on hand at September 30, 2020, a 1% change in interest rates could result in a corresponding nominal change in net loss.
(c) | Currency risk |
Currency risk is the risk that the fair value of, or future cash flows from, the Company’s financial instruments will fluctuate because of changes in foreign exchange rates. The Company’s operations are exposed to foreign exchange fluctuations, which could have a significant adverse effect on its results of operations from time to time. The Company’s foreign currency risk arises primarily with respect to United States dollar and British Pound. Fluctuations in the exchange rates between this currency and the Canadian dollar could have a material effect on the Company’s business, financial condition and results of operations. The Company does not engage in any hedging activity to mitigate this risk. The Company reduces its currency risk by maintaining minimal cash balances held in foreign currency.
As at September 30, 2020, the Company had the following financial assets and liabilities, (amounts posted in Canadian dollars) denominated in foreign currencies:
September 30, 2020 | ||||||||
United States Dollars | British Pound | |||||||
Cash | $ | 132 | $ | - | ||||
Accounts payable and accrued liabilities | (60,026 | ) | (76,068 | ) | ||||
Net assets (liabilities) | $ | (59,894 | ) | $ | (76,068 | ) |
A 10% increase (decrease) in the value of the Canadian dollar against all foreign currencies in which the Company held financial instruments as of September 30, 2020 would result in an estimated increase (decrease) of approximately ($13,600). (December 31, 2019 - $(13,400)).
14
Routemaster Capital Inc.
Notes to the Condensed Interim financial statements
Three and nine months ended September 30, 2020 and 2019
(Expressed in Canadian dollars unless otherwise noted - unaudited)
10. | Financial instruments (continued) |
Fair value of financial instruments
The Company has determined the carrying values of its financial instruments as follows:
i. | The carrying values of cash, amounts receivable, accounts payable and accrued liabilities approximate their fair values due to the short-term nature of these instruments. | |
ii. | Public and private investments are carried at amounts in accordance with the Company’s accounting policies as set out in Note 2 of the Company audited financial statements for the years ended December 31, 2019 and 2018. | |
iii. | Prior to maturity, the outstanding loans receivable are carried at their discounted value. Following their maturity, loans receivables are carried at their estimated realizable value. |
The following table illustrates the classification and hierarchy of the Company’s financial instruments, measured at fair value in the statements of financial position as at September 30, 2020.
Level 1 | Level 2 | Level 3 | ||||||||||||||
Investments, fair value | (Quoted Market price) | (Valuation technique -observable market Inputs) | (Valuation technique - non-observable market inputs) | Total | ||||||||||||
Publicly traded investments | $ | 744,555 | $ | - | $ | 3,032,788 | $ | 3,777,343 | ||||||||
September 30, 2020 | $ | 744,555 | $ | - | $ | 3,032,788 | $ | 3,777,343 |
Level 3 Hierarchy
The following table presents the changes in fair value measurements of financial instruments classified as Level 3 during the nine months ended September 30, 2020 and year ended December 31, 2019. These financial instruments are measured at fair value utilizing non-observable market inputs. The net realized losses and net unrealized gains are recognized in the statements of loss.
September 30, | December 31, | |||||||
Investments, fair value for the period ended | 2020 | 2019 | ||||||
Balance, beginning of year | $ | - | $ | 50,000 | ||||
Purchases | 2,998,002 | - | ||||||
Transferred to Leval 1 | - | (50,000 | ) | |||||
Realized and unrealized gain/(loss) net | 34,786 | - | ||||||
Balance, end of period | $ | 3,032,788 | $ | - |
Within Level 3, the Company includes private company investments that are not quoted on an exchange. The key assumptions used in the valuation of these instruments include (but are not limited to) the value at which a recent financing was done by the investee, company-specific information, trends in general market conditions and the share performance of comparable publicly-traded companies.
As valuations of investments for which market quotations are not readily available, are inherently uncertain, may fluctuate within short periods of time and are based on estimates, determination of fair value may differ materially from the values that would have resulted if a ready market existed for the investments. Given the size of the private investment portfolio, such changes may have a significant impact on the Company’s financial condition or operating results.
The following table presents the fair value, categorized by key valuation techniques and the unobservable inputs used within Level 3 as at September 30, 2020.
15
Routemaster Capital Inc.
Notes to the Condensed Interim financial statements
Three and nine months ended September 30, 2020 and 2019
(Expressed in Canadian dollars unless otherwise noted - unaudited)
10. | Financial instruments (continued) |
Description | Fair vaue | Valuation technique | Significant unobservable input(s) | Range of significant unobservable input(s) | ||||||
Brazil Potash Corp. | $ | 2,021,859 | Recent financing | Marketability of shares | 0% discount | |||||
Flora Growth Corp. | $ | 1,010,929 | Recent financing | Marketability of shares | 0% discount | |||||
$ | 3,032,788 |
Brazil Potash Corp. (“BPC”)
On September 11, 2020, the Company received 404,200 common shares of BPC as consideration of selling the Company’s Royalties to a non arms length party of the Company (see Note 6 for details). As at September 30, 2020, the valuation of BPC was based on the most recent financing which is indicative of being the fair market value of the Transaction closed.
Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at September 30, 2020. As at September 30, 2020, a +/- 10% change in the fair value of BPC will result in a corresponding +/- $202,186 change in the carrying amount.
Flora Growth Corp. (“FGC”)
On September 11, 2020, the Company received 1,010,500 common shares of FGC as consideration of selling the Company’s Royalties to a non arms length party of the Company (see Note 6 for details). As at September 30, 2020, the valuation of FGC was based on the most recent financing which is indicative of being the fair market value of the Transaction closed. Management has determined that there are no reasonably possible alternative assumptions that would change the fair value significantly as at September 30, 2020. As at September 30, 2020, a +/- 10% change in the fair value of FGC will result in a corresponding +/- $101,093 change in the carrying amount.
11. | Capital management |
The Company considers its capital to consist of share capital, share based payments reserves and deficit. The Company’s objectives when managing capital are:
a) | to allow the Company to respond to changes in economic and/or marketplace conditions by maintaining the Company’s ability to purchase new investments; | |
b) | to give shareholders sustained growth in value by increasing shareholders’ equity; while | |
c) | taking a conservative approach towards financial leverage and management of financial risks. |
The Company’s management reviews its capital structure on an on-going basis and makes adjustments to it in light of changes in economic conditions and the risk characteristics of its underlying investments. The Company’s current capital is composed of its shareholders’ equity and, to-date, has adjusted or maintained its level of capital by:
a) | raising capital through equity financings; and | |
b) | realizing proceeds from the disposition of its investments |
The Company is not subject to any externally imposed capital requirements other than of the TSXV which has certain working capital and financial resource requirements to be available to maintain operations and cover general and administration expenses. TSXV will consider, among other things, the listed issuer’s ability to meet its obligations as they come due, as well as its working capital position, quick asset position, total assets, capitalization, cash flow and earnings in the condensed interim financial statements regarding the listed issuer’s ability to continue as a going concern. There were no changes to the Company’s capital management during the night months ended September 30, 2020.
16
Routemaster Capital Inc.
Notes to the Condensed Interim financial statements
Three and nine months ended September 30, 2020 and 2019
(Expressed in Canadian dollars unless otherwise noted - unaudited)
12. | Related party disclosures |
a) | The Company’s directors and officers may have investments in and hold management and/or director and officer positions in some of the investments that the Company holds. The following is a list of total investments and the nature of the relationship of the Company’s directors or officers with the investment as of September 30, 2020 and December 31, 2019. |
Investment | Nature of relationship | Estimated Fair value | % of FV | |||||||
Brazil Potash Corp.* | Director (Stan Bharti), officer (Ryan Ptolemy) and common | $ | 2,021,859 | 53.5 | % | |||||
shareholders | ||||||||||
Flora Growth Corp.* | Directors (Stan Bharti, William Steers), and common shareholders | 1,010,929 | 26.8 | % | ||||||
QuestCap Inc. | Former director (Stan Bharti), director (Daniyal Baizak), and | 9,900 | 0.3 | % | ||||||
common shareholders | ||||||||||
Sulliden Mining Capital Inc. | Director (Stan Bharti), officer (Ryan Ptolemy) and | 636,405 | 16.8 | % | ||||||
Yukoterre Resources Inc. | Former Director and Officer (Fred Leigh), Officer | 98,250 | 2.6 | % | ||||||
(Kenny Choi) and common shareholders | ||||||||||
Total investment - September 30, 2020 | $ | 3,777,343 | 100.0 | % |
* Private companies
Investment | Nature of relationship | Estimated Fair value | % of FV | |||||||
ARTH Media Inc. | Director (William Steers), and common shareholders / | $ | - | 0.0 | % | |||||
warrant holders | ||||||||||
Fura Gems Inc. | Officer (Ryan Ptolemy), and common shareholders / | 128,700 | 20.6 | % | ||||||
warrant holders | ||||||||||
Sulliden Mining Capital Inc. | Director (Stan Bharti), and common shareholders / | 404,575 | 65.0 | % | ||||||
warrant holders | ||||||||||
Yukoterre Resources Inc. | Former Director and Officer (Fred Leigh), Officer | 90,000 | 14.4 | % | ||||||
(Kenny Choi) and common shareholders | ||||||||||
Total investment - December 31, 2019 | $ | 623,275 | 100.0 | % |
The Company has a diversified base of investors. To the Company’s knowledge, Forbes, Fred Leigh with Siwash Holdings Inc. and 2227929 Ontario Inc., companies Fred Leigh controls, holds more than 10% of the Company’s shares on a basic share and partially diluted share basis and Tali Flying LP holds 10% of the Company’s shares on a partially diluted basis as at September 30, 2020,
b) | During the nine months ended September 30, 2020 and 2019, the Company entered into the following transactions in the ordinary course of business with related parties that are not subsidiaries of the Company. |
Purchases of goods/services | ||||||||
Nine months ended September 30, | ||||||||
2020 | 2019 | |||||||
2227929 Ontario Inc. | $ | 90,000 | $ | 90,000 | ||||
Forbes & Manhattan Inc. | 90,000 | 90,071 | ||||||
$ | 180,000 | $ | 180,071 |
The Company shares office space with other companies who may have common officers and directors. The costs associated with the use of this space, including the provision of office equipment and supplies, are administered by 2227929 Ontario Inc. to whom the Company pays a fee. As at September 30, 2020, the Company had a payable balance of $517,608 (December 31, 2019 - $439,007) with 2227929 Ontario Inc. to cover shared expenses. The amounts outstanding are unsecured with no fixed terms of repayment. 2227929 Ontario Inc. participated in the Company’s June 2020 private placement financing and subscribed 822,617 units for gross proceeds of $24,679. Fred Leigh, a former director and officer of the Company, is also a director of 2227929 Ontario Inc.
17
Routemaster Capital Inc.
Notes to the Condensed Interim financial statements
Three and nine months ended September 30, 2020 and 2019
(Expressed in Canadian dollars unless otherwise noted - unaudited)
12. | Related party disclosures (continued) |
12. | In August 2017, Forbes became an insider of the Company owning approximately 34.9% (approximately 27.9% at December 31, 2019) outstanding shares of the Company through acquisition of Quebec Gold royalty interests. The Company is also part of the Forbes Group of Companies and continue to receive the benefits of such membership, including access to mining professionals, advice from Stan Bharti, the Executive Chairman of Forbes and strategic advice from the Forbes Board of Advisors. An administration fee of $10,000 per month is charged by Forbes pursuant to a consulting agreement. As at September 30, 2020 the Company had a payable balance of $79,100 (December 31, 2019- $135,680). Such amounts are unsecured, with no fixed terms of repayment. Forbes participated in the Company’s June 2020 private placement financing and subscribed an aggregate 5,275,989 units for gross proceeds of $158,280 owning approximately 27.4 % of the Company as at September, 2020. |
Included in accounts payable and accrued liabilities were expenses of GBP44,228 ($76,068) (December 31, 2019 - $75,957) expenses owed to Vik Pathak, a former director and officer of Routemaster.
c) | Compensation of key management personnel of the Company: |
The remuneration of directors and other members of key management personnel during the nine months ended September 30 30, 2020 and 2019 were as follows:
Nine months ended September 30, | ||||||||
2020 | 2019 | |||||||
Short-term benefits | $ | 44,500 | $ | 139,500 | ||||
$ | 44,500 | $ | 139,500 |
At September 30, 2020, the Company had $60,012 (December 31, 2019 - $96,239) owing to its current key management, and $731,364 (December 31, 2019 - $655,296) owing to its former key management. Such amounts are unsecured, non- interest bearing, with no fixed terms of payment or “due on demand”.
In connection with the June 2020 private placement financing, a former director and officer subscribed 1,506,667 units through a Company under his control for gross proceeds of $45,200. In addition, an officer subscribed 166,667 units for gross proceeds of $5,000.
In accordance with IAS 24, key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company directly or indirectly, including any directors (executive and non- executive) of the Company.
The remuneration of directors and key executives is determined by the remuneration committee having regard to the performance of individuals and market trends.
13. | Commitments and contingencies |
The Company is party to certain management contracts. These contracts require that additional payments of up to approximately $564,000 be made upon the occurrence of certain events such as a change of control. As a triggering event has not taken place, the contingent payments have not been reflected in these condensed interim financial statements. Minimum commitments remaining under these contracts were approximately $126,000, all due within one year.
The Company is, from time to time, involved in various claims and legal proceedings. The Company cannot reasonably predict the likelihood or outcome of these activities. The Company does not believe that adverse decisions in any ending or threatened proceedings related to any matter, or any amount which may be required to be paid by reasons thereof, will have a material effect on the financial condition or future results of operations.
A former officer of the Company has initiated a legal action seeking approximately $450,000 for fees owed plus interest. The Company intends to defend the matter and is currently reviewing its options with regards to this action.
18
Routemaster Capital Inc.
Notes to the Condensed Interim financial statements
Three and nine months ended September 30, 2020 and 2019
(Expressed in Canadian dollars unless otherwise noted - unaudited)
14. | Subsequent events |
On October 6, 2020, the Company announced it has entered into a binding Letter of Intent to acquire a 49% equity interest in DeFi Holdings Inc. The LOI contemplates that the Company and DeFi Holdings will promptly negotiate and enter into a definitive agreement together with such other documents that may be required in order to formalize and execute the terms of the Acquisition as outlined in the LOI.
In consideration for the Acquisition, the Company shall upon closing issue 20,000,000 common shares of the ompany at a deemed price of $0.055 per share to the shareholders of Defi Holdings in exchange for 49% of the common shares in the capital of Defi Holdings. Additional information in connection with the Acquisition will be provided by the Company in subsequent press releases.
The completion of the Acquisition is subject to the receipt of all necessary approvals, including without limitation, negotiation and execution of a Definitive Agreement, shareholder and board approval of each of DeFi Holdings and the Company, as necessary, completion of due diligence and the satisfaction of all conditions (unless waived in writing) to be set out in the Definitive Agreement.
DeFi Holdings is a company focused on investing, incubating and managing trading technologies associated with the fastgrowing decentralised finance market. Decentralized finance could be considered the next wave of financial innovation on the blockchain. It refers to digital assets, financial smart contracts, protocols, and decentralized applications (DApps) built on Ethereum and other blockchains. In simpler terms, it is financial software built on the blockchain. Decentralized finance’s core selling point is the removal of intermediaries in transactions which in traditional finance provide the “trust” layer (i.e. banks and brokers) in a transaction between two parties. With decentralized finance, users can access the network directly, so there is no need for intermediaries.
19
➢ | inherent value of its assets; |
➢ | proven management, clearly-defined management objectives and strong technical and professional support; |
➢ | future capital requirements to develop the full potential of its business and the expected ability to raise the necessary capital; |
➢ | anticipated rate of return and the level of risk; and |
➢ | financial performance, including consistency of positive cash flow. |
➢ | The Company may invest in securities of both public and private companies or other entities that the Company believes have the potential for superior investment returns. |
➢ | The Company will maintain a flexible position with respect to the form of investment taken and may employ a wide range of investment instruments, including equity, bridge loans, secured loans, unsecured loans, convertible debentures, warrants, options, royalties, net profit interests and other hybrid instruments. |
➢ | The Company will not invest in physical commodities, derivatives, “short” sales or other similar transactions (except that the Company may sell call options to purchase securities owned by the Company as a means of locking in gains or avoiding future losses). |
➢ | The Company will not be precluded from investing in any particular industry. The Company’s management and the Board have experience and expertise in a wide range of industry sectors and will pursue opportunities in those sectors that the Company believes from time to time offer the best opportunities for the creation of enhanced value for the Company’s shareholders. Similarly, there are no restrictions on the size or market capitalization of companies or other entities in which the Company may invest, subject to the provisions hereof. |
➢ | The Company has no specific policy with respect to investment diversification. Each investment will be assessed on its own merits and based upon its potential to generate above market gains for the Company. |
➢ | Immediate liquidity shall not be a requirement. |
➢ | The Company may, from time to time and in appropriate circumstances, seek a more active role in regards to investment situations and investee companies where the involvement of the Company is expected to make a significant difference to the success of the Company’s investment. In appropriate circumstances, this may involve the Company, either alone or jointly with other shareholders, seeking to influence the governance of public or private issuers by seeking board seats, launching proxy contests or taking other actions to enhance shareholder value, or becoming actively involved in the management or board oversight of investee companies. |
➢ | The Company may also make investments in special situations, including event-driven situations such as corporate restructurings, mergers, spin-offs, friendly or hostile takeovers, bankruptcies or leveraged buyouts. Such special situations may include, without limitation, investments in one or more public companies, by takeover bid or otherwise, where there is an opportunity to invest to gain control over the strategic direction of such public companies, whether using the shares of the Company as currency or otherwise. Such situations may also involve the Company lending money, directly or indirectly. |
➢ | Depending upon market conditions and applicable laws, the Company may seek to sell any or all of its investments when it concludes that those investments no longer offer the potential to generate appropriate gains for the Company, or when other investment opportunities reasonably available to the Company are expected to offer superior returns. This may include the disposition of any or all of the Company’s investments in a particular sector or of a particular nature, or any or all of the Company’s investments more generally, without prior notice to the Company’s shareholders. |
➢ | Subject to applicable laws and regulatory requirements, the Company may also from time to time seek to utilize its capital to repurchase shares of the Company. |
➢ | The Company may, from time to time, use borrowed funds to purchase or make investments, or to fund working capital requirements, or may make investments jointly with third parties. |
➢ | Depending upon the Company’s assessment of market conditions and investment opportunities, the Company may, from time to time, be fully invested, partially invested or entirely uninvested such that the Company is holding only cash or cash-equivalent balances while the Company actively seeks to redeploy such cash or cash-equivalent balances in suitable investment opportunities. Funds that are not invested or expected to be invested in the near-term, while the Company actively seeks to redeploy such funds in one or more suitable investment opportunities, may, from time to time as appropriate, be placed into high quality money market investments. |
➢ | All investments shall be made in compliance with applicable laws in relevant jurisdictions, and shall be made in accordance with the rules and policies of any applicable regulatory authorities. From time to time, the board of directors of the Company may authorize such additional or other investments outside of the guidelines described herein as it sees fit for the benefit of the Company and its shareholders. |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
Operating Results | 2020 | 2019 | 2020 | 2019 | ||||||||||||
$ | $ | $ | $ | |||||||||||||
Realized (loss) on investments, net | - | (141,455 | ) | (197,863 | ) | (545,811 | ) | |||||||||
Unrealized gain (loss) on investments, net | 81,894 | 248,866 | 368,059 | (97,051 | ) | |||||||||||
Gain on sale of royalties | 2,998,002 | - | 2,998,002 | - | ||||||||||||
Interest income | - | - | - | 2,037 | ||||||||||||
Net income (loss) and comprehensive income (loss) | 2,959,668 | (92,534 | ) | 2,843,856 | (1,238,191 | ) | ||||||||||
Basic and dilute income (loss) per share | 0.05 | (0.00 | ) | 0.06 | (0.03 | ) |
September 30, 2020 | December 31, 2019 | |||||||
Investments Total equities, at fair value | $ | 3,777,343 | $ | 623,275 | ||||
Total investments | 3,777,343 | 623,275 | ||||||
Shareholders' equity (deficiency) | 2,270,903 | (1,165,565 | ) |
Public Issuer | Note Security description | Cost | Estimated Fair Value | % of FV | |
QuestCap Inc. | (i) | 55,000 common shares | 6,600 | 9,900 | 1.3% |
Sulliden Mining Capital Inc. | (i,ii) | 9,091,500 common shares | 2,662,252 | 636,405 | 85.5% |
Yukoterre Resources Inc. | (i) | 982,500 common shares | 49,125 | 49,125 | 13.2% |
Total public investments | $ 2,717,977 | $744,555 | 100.0% |
(i) | An insider and an officer of the Company is a director and officer of the investee corporation as at September 30, 2020 |
(ii) | The Company has filed a Section 62-103 report pursuant to the Securities Act (Ontario) for this investment and has filed an early warning report on SEDAR. |
Public Issuer | Note Security description | Cost | Estimated Fair Value | % of FV | |
ARHT Media Inc. | 125,000 warrants expire Feb 1, 2020 | $ 14,318 | $ - | 0.0% | |
Fura Gems Inc. | (i) | 780,000 common shares | 253,400 | 128,700 | 20.6% |
Sulliden Mining Capital Inc. | (i,ii) | 8,091,500 common shares | 2,612,252 | 404,575 | 65.0% |
Yukoterre Resources Inc. | (i) | 1,000,000 common shares | 50,000 | 90,000 | 14.4% |
Total public investments | $ 2,929,970 | $ 623,275 | 100.0% |
(i) | An insider and a former officer of the Company is a director and officer of the investee corporation as at December 31, 2019. |
(ii) | The Company has filed a Section 62-103 report pursuant to the Securities Act (Ontario) for this investment and has filed an early warning report on SEDAR. |
Private Issuer | Note Security description | Cost | Estimated Fair Value | % of FV | |
Brazil Potash Corp. | (i) | 404,200 common shares | $ 1,998,668 | $ 2,021,859 | 66.7% |
Flora Growth Corp. | (i) | 1,010,500 common shares | 999,334 | 1,010,929 | 33.3% |
Total private investments | $ 2,998,002 | $ 3,032,788 | 100.0% |
(i) | An insider and an officer of the Company is a director and officer of the investee corporation as at September 30, 2020 |
Three months ended September 30, | ||||||||
2020 | 2019 | |||||||
Net income (loss) | $ | 2,959,668 | $ | (92,534 | ) | |||
Realized gain (loss) on investments, net | - | (141,455 | ) | |||||
Unrealized gain (loss) on investments, net | 81,894 | 248,866 | ||||||
Gain on sale of royalties | 2,998,002 | - | ||||||
Management and consulting fees | 83,572 | 144,790 | ||||||
Travel and promotion | 6,746 | 25,510 | ||||||
Office and rent | 20,417 | 18,400 | ||||||
Accounting and legal | 7,700 | 7,500 | ||||||
Regulatory and transfer agent | 1,467 | 3,362 | ||||||
Transaction costs | - | 1,108 | ||||||
Foreign exchange (loss) gain | (326 | ) | 725 | |||||
Recovery (Impairment) of loan receivable | - | - | ||||||
(Impairment) of royalty interest | - | - |
Nine months ended September 30, | ||||||||
2020 | 2019 | |||||||
Net income (loss) | $ | 2,843,856 | $ | (1,238,191 | ) | |||
Realized (loss) on investments, net | (197,863 | ) | (545,811 | ) | ||||
Unrealized gain (loss) on investments, net | 368,059 | (97,051 | ) | |||||
Gain on sale of royalties | 2,998,002 | - | ||||||
Interest income | - | 2,037 | ||||||
Management and consulting fees | 196,035 | 437,039 | ||||||
Travel and promotion | 16,481 | 47,381 | ||||||
Office and rent | 61,047 | 59,435 | ||||||
Accounting and legal | 39,375 | 41,594 | ||||||
Regulatory and transfer agent | 8,125 | 15,576 | ||||||
Transaction costs | 1,592 | 3,214 | ||||||
Foreign exchange (loss) gain | (1,687 | ) | 6,873 |
United States Dollars | British Pound | |||||||
Cash | $ | 132 | - | |||||
Accounts payable and accrued liabilities | $ | (60,026 | ) | (76,068 | ) | |||
Net assets | $ | (59,894 | ) | (76,068 | ) |
a) | to allow the Company to respond to changes in economic and/or marketplace conditions by maintaining the Company’s ability to purchase new investments; |
b) | to give shareholders sustained growth in value by increasing shareholders’ equity; while |
c) | taking a conservative approach towards financial leverage and management of financial risks. |
a) | raising capital through equity financings; and |
b) | realizing proceeds from the disposition of its investments |
30-Sep | 30-Jun | 31-Mar | 31-Dec | 30-Sep | 30-Jun | 31-Mar | 31-Dec | 30-Sep | |
2020 | 2020 | 2020 | 2019 | 2019 | 2019 | 2019 | 2018 | 2018 | |
Revenue | $3,079,896 | $283,910 | ($195,608) | ($190,735) | $107,411 | ($450,120) | ($298,116) | ($773,158) | ($1,273,106) |
Net income (loss) | $2,959,668 | $215,140 | ($330,952) | ($269,147) | ($92,534) | ($643,996) | ($501,661) | ($3,223,787) | ($1,584,911) |
Income (loss) per Share - basic | $0.05 | $0.01 | ($0.01) | ($0.01) | ($0.00) | ($0.02) | ($0.01) | ($0.08) | ($0.04) |
Income (loss) per Share - diluted | $0.05 | $0.01 | ($0.01) | ($0.01) | ($0.00) | ($0.02) | ($0.01) | ($0.08) | ($0.04) |
Total Assets | $3,785,693 | $740,725 | $432,597 | $636,459 | $898,625 | $901,094 | $1,453,913 | $1,946,695 | $4,716,392 |
Total Long Term Liabilities | $Nil | $Nil | $Nil | $Nil | $Nil | $Nil | $Nil | $Nil | $Nil |
31-Dec-19 | 31-Dec-18 | 31-Dec-17 | ||||||||||
(a) Net Sales | - | - | - | |||||||||
(b) Net Income (Loss) and Comprehensive Income (Loss) | ||||||||||||
(i) Total income (loss) | $ | (1,507,338 | ) | $ | (9,794,067 | ) | $ | 4,089,673 | ||||
(ii) (Loss) income per share – basic and diluted | $ | (0.04 | ) | $ | (0.24 | ) | $ | 0.17 | ||||
(c) Total Assets | $ | 636,459 | $ | 1,946,695 | $ | 11,335,002 | ||||||
(d) Total Liabilities | $ | 1,802,024 | $ | 1,604,922 | $ | 1,199,162 | ||||||
Investment | Nature of relationship | Estimated Fair Value | % of FV | ||||||
| |||||||||
Brazil Potash Corp. * | Director (Stan Bharti), officer (Ryan Ptolemy) and common shareholders | $ | 2,021,859 | 53.5 | % | ||||
Flora Growth Corp. * | Directors (Stan Bharti, William Steers), and common shareholders | 1,010,929 | 26.8 | % | |||||
QuestCap Inc. | Former director (Stan Bharti), director (Daniyal Baizak), and common shareholders | 9,900 | 0.3 | % | |||||
Sulliden Mining Capital Inc. | Director (Stan Bharti), officer (Ryan Ptolemy) and common shareholders | 636,405 | 16.8 | % | |||||
Yukoterre Resources Inc. | Former Director and Officer (Fred Leigh), Officer (Kenny Choi) and common shareholders | 98,250 | 2.6 | % | |||||
Total investment - June 30, 2020 | $ | 3,777,343 | 100.0 | % |
* Private companies |
Investment | Nature of relationship | Estimated Fair Value | % of FV | ||||||
ARTH Media Inc. | Director (William Steers), and common shareholders /warrant holders | $ | - | 0.0 | % | ||||
Fura Gems Inc. | Officer (Ryan Ptolemy), and common shareholders /warrant holders | 128,700 | 20.6 | % | |||||
Sulliden Mining Capital Inc. | Director (Stan Bharti), and common shareholders / warrant holders | 404,575 | 65 | % | |||||
Yukoterre Resources Inc. | Former Director and Officer (Fred Leigh), Officer (Kenny Choi) and common shareholders | 90,000 | 14.4 | % | |||||
Total investment - December 31, 2019 | $ | 623,275 | 100.0 | % |
• | The Company incurred $90,000 (2019 - $90,000) of expenses for its proportionate share of shared office costs with other corporations that may have common directors and officers. The costs associated with this space are administered by 2227929 Ontario Inc. As at September 30, 2020, the Company had a payable balance of $517,608 (December 31, 2019 - $439,007) with 2227929 Ontario Inc. to cover shared expenses. Such amounts are unsecured, non-interest bearing, with no fixed terms of payment and due on demand. 2227929 Ontario Inc. participated in the Company’s June 2020 private placement financing and subscribed 822,617 units for gross proceeds of $24,679. Fred Leigh, an officer and director of the Company, is also a director of 2227929 Ontario Inc. |
• | The Company incurred $90,000 (2019 - $90,071) for administration costs with Forbes. In August 2017, Forbes became an insider of the Company owning approximately 34.9%, at the time, (approximately 27.9% at December 31, 2019) outstanding shares of the Company through an acquisition of Quebec Gold royalty interests. The Company is also part of the Forbes Group of Companies and continue to receive the benefits of such membership, including access to mining professionals, advice from Stan Bharti, the Executive Chairman of Forbes and strategic advice from the Forbes Board of Advisors. An administration fee of $10,000 per month is charged by Forbes pursuant to a consulting agreement. As at September 30, 2020, the Company had a payable balance of $79,100 (December 31, 2019 - $135,680) with Forbes. Such amounts are unsecured, non-interest bearing, with no fixed terms of payment and due on demand. Forbes participated in the Company’s June 2020 private placement financing and subscribed an aggregate 5,275,989 units for gross proceeds of $158,280 owning approximately 27.4% of the Company as at September 30, 2020. |
• | Included in accounts payable and accrued liabilities were expenses of GBP44,228 ($76,068) (December 31, 2019 - $75,957) expenses owed to Vik Pathak, a former director and officer of Routemaster. |
• | In connection with the June 2020 private placement financing, a director and officer subscribed 1,506,667 units through a Company under his control for gross proceeds of $45,200. In addition, an officer subscribed 166,667 units for gross proceeds of $5,000. |
i. | The carrying values of cash, amounts receivable, accounts payable and accrual liabilities approximate their fair values due to the short-term nature of these instruments. |
ii. | Public and private investments are carried at amounts in accordance with the Company’s accounting policies as set out in Note 2 of the Company’s audited financial statements for the years ended December 31, 2019 and 2018. |
iii. | Prior to maturity, the outstanding loans receivable are carried at their discounted value. Following their maturity, loans receivable are carried at their estimated realizable value. |
Investments, fair value | Level 1 (Quoted Market price) | Level 2 (Valuation technique - observable market Inputs) | Level 3 (Valuation technique - non-observable market inputs) | Total |
$ | $ | $ | $ | |
Publicly traded investments | 744,555 | - | 3,032,788 | 3,777,343 |
September 30, 2020 | 744,555 | - | 3,032,788 | 3,777,343 |
Publicly traded investments | 623,275 | - | - | 623,275 |
December 31, 2019 | 623,275 | - | - | 623,275 |
Investments, fair value for the period ended | September 30, 2020 | December 31, 2019 | ||||||
Balance, beginning of year | $ | - | $ | 50,000 | ||||
Purchases | 2,998,002 | - | ||||||
Transferred to Leval 1 | - | (50,000 | ) | |||||
Realized and unrealized gain/(loss) net | 34,786 | - | ||||||
Balance, end of period | $ | 3,032,788 | $ | - |
Description | Fair vaue | Valuation technique | Significant unobservable input(s) | Range of significant unobservable input(s) |
Brazil Potash Corp. | $ 2,021,859 | Recent financing | Marketability of shares | 0% discount |
Flora Growth Corp. | $ 1,010,929 | Recent financing | Marketability of shares | 0% discount |
$ 3,032,788 | ||||
Brazil Potash Corp. (“BPC”) |
Stock Options:
(a) | obtains funds from one or more investors for the purpose of providing those investor(s) with investment management services; |
(b) | commits to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and |
(c) | measures and evaluates the performance of substantially all of its investments on a fair value basis. |