PLYZ Plyzer Technologies Inc (CE)

Notes to Consolidated Financial Statements

Plyzer Technologies Inc.

Years ended March 31, 2019 and 2018

Notes to Consolidated Financial Statements

NOTE 1 - BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(D)  Significant Accounting Policies (continued)

Foreign Currency Translation (continued)

Adjustments that arise from translation into the reporting currency are recorded as an exchange gain or loss to be included as other comprehensive gain or loss. For the fiscal year 2019, the average exchange rate for the year was CDN$1= US$0.76 (for the fiscal year 2018: CDN$1=US$0.78) and exchange rate as at March 31, 2019 was CDN$1 = US$0.75 (March 31, 2018 was CDN$1 = US$0.78). Transaction gains and losses are recorded in the earnings in the period of settlement.

Basic and Diluted Loss Per Share

In accordance with ASC Topic 280 - "Earnings Per Share," the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common stock outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if the potential common stock had been issued and if the additional shares of common stock were dilutive.

Potential common stock consists of the incremental common stock issuable upon the exercise of common stock warrants (using the if-converted method). The computation of basic loss per share for the year ended March 31, 2019 excludes potentially dilutive securities of 19,762,867 shares underlying share purchase warrants and convertible notes, because their inclusion would be antidilutive. As a result, the computations of net loss per share for each period presented is the same for both basic and fully diluted.

Potentially dilutive securities outlined in the table below have been excluded from the computation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid investments with original maturity of three months or less to be cash equivalents. As of March 31, 2019, and 2018, the Company had no cash equivalents.

Furniture and Equipment

Furniture and equipment items are stated at cost and depreciated to their estimated residual value over their estimated useful lives, which are presently considered to be three years. When assets are retired or otherwise disposed of, the assets and related accumulated depreciation are relieved from the accounts and the resulting gains or losses are included in the Statements of Operations. Repairs and maintenance costs are expensed as incurred. Depreciation is provided using the straight-line method.

F-8

Plyzer Technologies Inc.

Years ended March 31, 2019 and 2018

Notes to Consolidated Financial Statements

NOTE 1 - BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(D)  Significant Accounting Policies (continued)

Convertible Debts and Derivative Liability

Convertible loan notes issued by the Company have embedded conversion features where principal liability and accrued interest are convertible, at the option of the loan holder, into common shares of the Company, at a price, based on the quoted market price of the Company’s common shares on the date of conversion discounted at an agreed percentage. The derivative liability is segregated and initially carried at fair value and subsequently remeasured on each reporting date at their fair value. The difference is taken to income as derivative gains or losses.

The debt discount is amortized over the period of the loan and charged to interest expense. Loans are stated at net of amortized debt discount amount.

Income Taxes

The Company accounts for income taxes under FASB Codification Topic 740 which requires use of the liability method.  Topic 740 provides that deferred tax assets and liabilities are recorded based on the differences between the tax basis of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences. Deferred tax assets and liabilities at the end of each period are determined using the currently enacted tax rates applied to taxable income in the periods in which the deferred tax assets and liabilities are expected to be settled or realized. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

Share-Based Compensation

FASB ASC 718 “Compensation - Stock Compensation” prescribes accounting and reporting standards for all stock-based payments awarded to employees, including employee stock option, restricted stock, employee stock purchase plans and stock appreciation rights, that may be classified as either equity or liabilities. The Company determines if a present obligation to settle the share-based payment transaction in cash or other assets exists. A present obligation to settle in cash or other assets exists if: (A) the option to settle by issuing equity instruments lacks commercial substance or (B) the present obligation is implied because of an entity’s past practice or stated policies. If a present obligation exists, the transaction should be recognized as a liability; otherwise, the transaction should be recognized as equity.

Fair Value of Financial Instruments

The Company’s balance sheet includes certain financial instruments. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.

FASB Accounting Standards Codification (ASC) topic 820, “Fair Value Measurements and Disclosures”, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

F-9

Plyzer Technologies Inc.

Years ended March 31, 2019 and 2018

Notes to Consolidated Financial Statements

NOTE 1 - BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(D)  Significant Accounting Policies (continued)

Fair Value of Financial Instruments (continued)

ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three-level hierarchy for fair value measurements is defined as follows:

Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets;

Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable of the asset or liability other than quoted prices, either directly or indirectly including inputs in markets that are not considered to be active;

Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The following table provides a summary of the fair value of our derivative liabilities as of March 31, 2019 and March 31, 2018:

NOTE 2 - GOING CONCERN

The Company’s financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The management believes that the beta testing has been successfully completed for the Company’s three projects namely, Plyzer.com, Plyzer Intelligence and CA.NNABIS. These projects are expected to begin generating revenues during the forthcoming fiscal year. However, revenue that may be expected in the next twelve months may not be sufficient to cover its development and operating costs and this raises substantial doubt about the Company’s ability to continue as a going concern.  The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

F-10

Plyzer Technologies Inc.

Years ended March 31, 2019 and 2018

Notes to Consolidated Financial Statements

NOTE 2 - GOING CONCERN (CONTINUED)

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan is to obtain such resources for the Company by obtaining capital from significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. While the Company has so far been successful in raising the required capital through debt and equity financing, management cannot provide any assurances that the Company will continue to be able to raise the funding required to complete its development work and commercial launch of the portal successfully in future.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. As of March 31, 2019, the Company has an accumulated deficit amount of approximately $31 million.

NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS

In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842),” Under this guidance, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. This guidance offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. The Company does not expect the adoption to have a material impact on its consolidated financial statements upon adoption.

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial instruments." The amendments in this update change how companies measure and recognize credit impairment for many financial assets. The new expected credit loss model will require companies to immediately recognize an estimate of credit losses expected to occur over the remaining life of the financial assets (including trade receivables) that are in the scope of the update. The update also made amendments to the current impairment model for held-to-maturity and available-for-sale debt securities and certain guarantees. The guidance will become effective for us on April 1, 2020. Early adoption is permitted for periods beginning on or after April 1, 2019. We are evaluating the effect of ASU 2016-13 on our consolidated financial statements.

In January 2017, the Financial Accounting Standards Board ("FASB") issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”, and ASU No. 2017-04, “Intangibles- Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment”. ASU No. 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. ASU No. 2017-04 eliminates Step 2 of the goodwill impairment test and requires a goodwill impairment to be measured as the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of its goodwill. The ASU is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

F-11

Plyzer Technologies Inc.

Years ended March 31, 2019 and 2018

Notes to Consolidated Financial Statements

NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)

In February 2018, the FASB issued ASU No. 2018-02, “Income Statement-Reporting Comprehensive Income (Topic 220).” ASU 2018-02 addresses the effect of the change in the U.S. federal corporate tax rate on items within accumulated other comprehensive income or loss due to the enactment of the Tax Act on December 22, 2017. The new standard is effective for annual periods, and for interim periods within those annual periods, beginning after December 15, 2018, with early adoption permitted. We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

In June 2018, the FASB issued authoritative guidance regarding Compensation - Stock Compensation, which expands the scope of ASC Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees. The standard will be effective for the Company for its fiscal year beginning April 1, 2019, including interim periods within that fiscal year, with early adoption permitted. The Company expects no material impact on its results of operations or cash flows in the periods after adoption.

In August 2018, the FASB issued authoritative guidance regarding Fair Value Measurement: Disclosure Framework, which eliminates, adds and modifies certain disclosure requirements for fair value measurements. The standard will be effective for the Company for its fiscal year beginning April 1, 2020, including interim periods within that fiscal year, with early adoption permitted. The Company expects no material impact on its results of operations or cash flows in the periods after adoption.

In August 2018, the FASB issued authoritative guidance regarding Intangibles - Goodwill and Other - Internal-Use Software, which aligns the requirements for a customer to capitalize implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The standard will be effective for the Company for its fiscal year beginning April 1, 2020, including interim periods within that fiscal year, with early adoption permitted. The Company is currently evaluating the guidance and assessing its overall impact.

The Company evaluates new pronouncements as issued and evaluates the effect of adoption on the Company at the time. The Company has determined that the adoption of recently adopted accounting pronouncements will not have an impact on the financial statements.

i. Deposits included rent deposit of $2,960 is for leasing of the Toronto office and deposit of $3,421(€3,000) held in Spain as required under the Spanish laws to incorporate a new subsidiary, Plyzer Technologies Spain s.l. The subsidiary was incorporated in April 2019.  

ii. Taxes receivable is harmonized sales tax paid in Canada for which a tax credit is receivable in cash.  

F-12

Plyzer Technologies Inc.

Years ended March 31, 2019 and 2018

Notes to Consolidated Financial Statements

i. During the year ended March 31, 2019, the Company paid off eleven loans in cash for a total amount of $743,049 made up of:  

ii. During the year ended March 31, 2019, the Company entered into convertible notes agreements with independent lenders totaling to $2,040,600. The following is a summary of the main terms of these agreements:  

One loan with a balance of $8,750 was due on March 15, 2019 but remained unpaid on that date. The terms of the loan agreement provides that on default the loan is immediately payable at 150% of the outstanding amount.

F-13

Plyzer Technologies Inc.

Years ended March 31, 2019 and 2018

Notes to Consolidated Financial Statements

Since the convertible loan notes issued during the year have a beneficial conversion feature which is contingent upon future market prices, they did not meet the conditions necessary for equity classification and as a result, the imbedded conversion feature is considered a derivative liability.

The fair value of the derivative relating to the convertible loans notes outstanding at March 31, 2019 was calculated on the issue date and subsequently remeasured on March 31, 2019 using the Black-Scholes valuation technique, using the following assumptions:

NOTE 7 - COMMON STOCK

(i) COMMON STOCK ISSUED AND OUTSTANDING  

Fiscal year 2019

a. On August 10, 2018, Lupama exercised 29,843,335 warrants to convert into equal number of shares at an exercise price of $.0025 for a total of $74,608 ,On September 6, 2018, Lupama exercised an additional 156,665 warrants to convert into an equal number of shares at an exercise price of $.0025 for a total of $392, and on October 2, 2018, Lupama exercised 4 million warrants to convert into equal number of shares at an exercise price of $.0025 for a total of $10,000. Exercise of warrants was off set against amounts payable to Lupama in lieu of cash payment.  

b. On September 6, 2018, Lupama was issued 843,335 shares and on September 27, issued further 999,999 shares. These shares were valued at $0.45 per share, being the market price prevailing on the dates of their issues for a total of $829,500.  

c. During the year ended March 31, 2019 forty-three convertible notes plus accrued interest were converted into 4,404,350 shares for a total value of $838,697.  

d. During the year ended March 31, 2019, the Company raised $345,000 under a private placement, of which $270,000 were subscribed by four subscribers who were issued 900,000 shares at an average price of $0.30 per share while the balance $75,000 were subscribed by two other subscribers at an average price of $0.25 per share who were issued 300,000 shares after March 31, 2019 (See Note 7(ii))  

F-14

Plyzer Technologies Inc.

Years ended March 31, 2019 and 2018

Notes to Consolidated Financial Statements

NOTE 7 - COMMON STOCK (CONTINUED)

Fiscal Year 2018

On May 2, 2017, the Company initiated a private placement of up to 10 million Units at a price of $0.05 per Unit. Each Unit consisted of one common share and one warrant. The warrant is convertible into one share at an exercise price of $0.20 per share and is valid for two years.

During the year to March 31, 2018, the Company issued 5.9 million Units for net proceeds of $295,000.

During the year to March 31, 2018, six convertible notes plus accrued interest were converted into 2,666,795 shares for total value of $229,136.

At March 31, 2019 and March 31, 2018, the Company had 200,000,000 common shares of par value $0.001 common stock authorized.

(ii) COMMON STOCK SUBSCRIBED  

On December 1, 2018, the Company initiated a private placement of up to 6 million units at a price of $.30 per Unit. Each Unit consisted of one common share and one warrant convertible into one common share at a conversion price of $.50 per share. Unit price was subsequently revised to $0.25 per Unit.

900,000 shares were issued before March 31, 2019 against the subscriptions received of $270,000 from four subscribers (see Note 7(i).

Two other subscribers subscribed to 300,000 shares for a total subscription price of $75,000 at $0.25 per share. The shares were not issued until after March 31, 2019.

NOTE 8 - WARRANTS

In May 2017, the Company issued 5.9 million warrants in connection with a private placement. The relative fair value of the 5.9 million warrants issued was estimated at $145,782 using the Black-Scholes valuation technique.

The value of warrants has been included in the paid in capital. Warrants are convertible into equal number of shares and are exercisable at $0.20 per share. Warrants are valid for 2 years from the issued date subject to the closing price of the common shares of Plyzer Technologies on OTC Markets or any other stock exchange where such shares trade is equal to or exceeds $0.50 after six (6) months for twenty (20) consecutive trading days, then the expiry date for the $0.20 warrants shall automatically accelerate to the date which is 30 days following the date of a press release announcing the accelerated expiration date.

On August 1, 2018 and October 1, 2018, the Company issued 30 million warrants and 4 million warrants respectively, to Lupama for services provided in connection with the development of Plyzer projects. These warrants vested immediately on issuance and were valid for three years and convertible into equal number of common shares at an exercise price of $0.0025 per share. The fair value of the 34 million warrants issued was estimated at $20,485,440 using the Black-Scholes valuation technique. The value of warrants has been included in the paid in capital and charged to expenses as stock compensation. All warrants were exercised as explained in Note 7 (i) (a).

F-15

Plyzer Technologies Inc.

Years ended March 31, 2019 and 2018

Notes to Consolidated Financial Statements

On January 15, 2019, the Company issued 900,000 warrants in connection with the private placement as explained in Note 7 (ii). The relative fair value of the 900,000 warrants issued was estimated at $171,000 using the Black-Scholes valuation technique. The value of warrants has been included in the paid in capital.

The following assumptions were used in the valuation of these warrants:

The warrant activity during the year ended March 31, 2019 and 2018 were as follows:

The aforementioned warrants have an average remaining contractual life of approximately 0.57 year as at March 31, 2019 (1.4 year as at March 31, 2018).

As explained in Note 7(ii), the Company received subscriptions for 300,000 Units under a private placement. 300,000 warrants relating to these subscriptions were issued in April 2019.

Funds were advanced from time to time by Mr. Terence Robinson, the CEO and the sole director and a shareholder, Current Capital Corp., which is wholly owned by a brother of the Company’s CEO.

F-16

Plyzer Technologies Inc.

Years ended March 31, 2019 and 2018

Notes to Consolidated Financial Statements

NOTE 9 - RELATED PARTY TRANSACTIONS (CONTINUED)

CONSULTING FEES

Consulting fee includes fee charged by the CEO of $36,000 for the fiscal year 2019. (Fiscal year 2018: $36,000).

DEVELOPMENT COSTS

Development costs include fees of $2,091,338 (Fiscal year 2018: $617,432) charged by Lupama, a company controlled by the CEO of one of the Company’s subsidiaries.

Lupama was issued 34 million warrants valued at $20,485,440 as explained in Note 8, which were fully exercised into equal number of restricted common shares and was also issued 1,843,334 restricted shares valued at $829,500 for services provided during the year ended March 31, 2019.

TRAVEL, MEALS AND PROMOTIONS

Travel and meals costs of $41,076 were charged by the CEO during the fiscal year 2019. (Fiscal year 2018: $43,716).

PAYABLES AND ACCRUALS

Includes $nil due to CEO as at March 31, 2019. (As at March 31, 2018: $55,807)

NOTE 10 - INCOME TAXES

The Company accounts for income taxes under FASB ASC 740-10, which provides for an asset and liability approach of accounting for income taxes. Under this approach, deferred tax assets and liabilities are recognized based on anticipated future tax consequences, using currently enacted tax laws, attributed to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts calculated for income tax purposes.

For the years ended March 31, 2019, and 2018, respectively, the Company produced net operating losses before provision for income taxes of approximately $2.8 million and $980,000 respectively; accordingly, a provision for income taxes of $0 was recorded during the year ended March 31, 2019 and 2018.

The components of the Company’s deferred tax assets as of March 31, 2019 and 2018 are as follows:

F-17

Plyzer Technologies Inc.

Years ended March 31, 2019 and 2018

Notes to Consolidated Financial Statements

As at the year-end the Company had an approximate net tax loss carried forward of $5.24 million (2018: $2.4 million). Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards. On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Tax Act”), which significantly changed U.S. tax law. The Act changed the rules on net operating loss carry forwards. The 20-year limitation was eliminated for losses incurred after January 1, 2018, giving the taxpayer the ability to carry forward losses indefinitely. However, net operating loss carry forwards arising after January 1, 2018 will now be limited to 80 percent of taxable income.

There is a three-year limitation on IRS audit since filing of a tax return. The Company has yet to file its tax returns since the fiscal year 2012. Penalties and interest if any charged are included in general and administrative expenses. No penalty or interest was charged or included during the years ended March 31, 2019 and 2018.

The Company’s subsidiary in Canada is subject to Canadian Federal and Provincial taxes. There is however no tax liability due to losses. At the year end, the Company had approximately net tax losses carried forward of approximately $43,000 (2018: $8,000), which have been fully offset by valuation allowance of the same amount, as their realization is determined not likely to occur.