The accompanying notes are an integral part of these condensed interim consolidated financial statements.
|
ParcelPal Logistics Inc.
Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity
For the Three and Nine Months Ended September 30, 2023 and 2022
(Unaudited - expressed in Canadian Dollars)
|
| |
|
Number of
shares
|
|
|
Amount
$
|
|
|
Contributed
Surplus
$
|
|
|
Deficit
$
|
|
|
AOCI
$
|
|
|
Total
$
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2021
|
|
|
156,338,733
|
|
|
|
17,622,777
|
|
|
|
3,620,300
|
|
|
|
(21,031,270
|
)
|
|
|
(4,202
|
)
|
|
|
207,605
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued pursuant to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible note
|
|
|
25,312,500
|
|
|
|
1,000,813
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,000,813
|
|
|
In lieu of consulting fees
|
|
|
1,250,000
|
|
|
|
35,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
35,000
|
|
|
Acquisition of customer contract
|
|
|
13,473,358
|
|
|
|
269,467
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
269,467
|
|
|
Share-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
44,246
|
|
|
|
-
|
|
|
|
-
|
|
|
|
44,246
|
|
|
Net and comprehensive loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,990,452
|
)
|
|
|
273,139
|
|
|
|
(2,717,313
|
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2022
|
|
|
196,374,591
|
|
|
|
18,928,057
|
|
|
|
3,664,546
|
|
|
|
(24,021,722
|
)
|
|
|
268,937
|
|
|
|
(1,160,182
|
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2022
|
|
|
196,374,591
|
|
|
|
18,928,057
|
|
|
|
3,664,546
|
|
|
|
(24,557,267
|
)
|
|
|
197,980
|
|
|
|
(1,766,684
|
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued pursuant to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private placement
|
|
|
25,218,144
|
|
|
|
406,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
406,000
|
|
|
Issue costs
|
|
|
-
|
|
|
|
(9,853
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(9,853
|
)
|
|
Broker warrants
|
|
|
-
|
|
|
|
(9,593
|
)
|
|
|
9,593
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Bonus shares
|
|
|
6,500,000
|
|
|
|
227,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
227,500
|
|
|
Consulting shares
|
|
|
5,060,000
|
|
|
|
144,700
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
144,700
|
|
|
Share-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
39,544
|
|
|
|
-
|
|
|
|
-
|
|
|
|
39,544
|
|
|
Net and comprehensive loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,181,384
|
)
|
|
|
(115,677
|
)
|
|
|
(1,297,061
|
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2023
|
|
|
233,152,735
|
|
|
|
19,686,811
|
|
|
|
3,713,683
|
|
|
|
(25,738,651
|
)
|
|
|
82,303
|
|
|
|
(2,255,854
|
)
|
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
|
ParcelPal Logistics Inc.
Condensed Interim Consolidated Statements of Cash Flows
For the Three and Nine Months Ended September 30, 2023 and 2022
(Unaudited - expressed in Canadian Dollars)
|
| |
|
2023
$
|
|
|
2022
$
|
|
|
Operating activities
|
|
|
|
|
|
|
|
Loss for the period
|
|
|
(1,181,384
|
)
|
|
|
(2,990,452
|
)
|
|
Add non-cash items:
|
|
|
|
|
|
|
|
|
|
Amortization
|
|
|
782,564
|
|
|
|
1,017,376
|
|
|
Share-based compensation
|
|
|
39,544
|
|
|
|
44,246
|
|
|
Accrued interest
|
|
|
-
|
|
|
|
322,935
|
|
|
Shares issued in lieu of fees
|
|
|
372,200
|
|
|
|
35,000
|
|
|
(Gain) / Loss on debt settlement
|
|
|
-
|
|
|
|
(273,247
|
)
|
|
Unrealized foreign exchange loss (gain)
|
|
|
(36,398
|
)
|
|
|
145,035
|
|
|
Fair value of derivative
|
|
|
-
|
|
|
|
(206,726
|
)
|
|
Gain on disposal of asset
|
|
|
-
|
|
|
|
(266,901
|
)
|
|
Changes in non-cash working capital items
|
|
|
|
|
|
|
|
|
|
Sales tax payable
|
|
|
(62,969
|
)
|
|
|
148,237
|
|
|
Prepaid expenses
|
|
|
(27,808
|
)
|
|
|
111,728
|
|
|
Accounts receivable
|
|
|
142,739
|
|
|
|
(51,000
|
)
|
|
Accounts payable and accrued liabilities
|
|
|
248,627
|
|
|
|
798,622
|
|
|
Net cash flows provided (used) in operating activities
|
|
|
277,115
|
|
|
|
(1,165,147
|
)
|
| |
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
Acquisition of Web-to-door
|
|
|
(165,861
|
)
|
|
|
-
|
|
|
Sale of vehicles
|
|
|
-
|
|
|
|
410,500
|
|
|
Purchase of vehicles
|
|
|
-
|
|
|
|
(37,150
|
)
|
|
Net cash flows provided (used) by investing activity
|
|
|
(165,861
|
)
|
|
|
373,350
|
|
| |
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
Private placement
|
|
|
406,000
|
|
|
|
-
|
|
|
Issue costs
|
|
|
(9,853
|
)
|
|
|
-
|
|
|
Loan repayments
|
|
|
(197,072
|
)
|
|
|
(75,389
|
)
|
|
Loan proceeds
|
|
|
-
|
|
|
|
548,280
|
|
|
Lease payments
|
|
|
(5,184
|
)
|
|
|
(159,734
|
)
|
|
Net cash flows provided (used) by financing activities
|
|
|
193,891
|
|
|
|
313,157
|
|
| |
|
|
|
|
|
|
|
|
|
Foreign exchange on cash
|
|
|
(99,572
|
)
|
|
|
(27,254
|
)
|
|
Change in cash during the period
|
|
|
205,573
|
|
|
|
(505,894
|
)
|
|
Cash – beginning of the period
|
|
|
76,661
|
|
|
|
551,961
|
|
|
Cash – end of the period
|
|
|
282,234
|
|
|
|
46,067
|
|
|
Supplemental cash flow information:
Income taxes paid
|
|
|
|
|
|
|
-
|
|
|
Interest paid
|
|
|
|
|
|
|
23,231
|
|
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
|
1.
|
NATURE OF OPERATIONS AND GOING CONCERN
|
ParcelPal Logistics Inc. (“the Company” or “ParcelPal”) is a Vancouver, British Columbia based company that specializes in last-mile delivery service and logistics
solutions, providing businesses with a smart, reliable and affordable delivery service powered by the Company’s licensed technology platform. The Company was incorporated in Alberta on March 10, 1997. On June 22, 2006, the Company moved its
incorporation jurisdiction to British Columbia. The Company’s shares are listed on the Canadian Securities Exchange (“CSE”) under the symbol “PKG”, on the OTCQB (over-the-counter) Market in the United States under the symbol PTNYF and on the
Frankfurt Stock Exchange under the symbol “PT0A”.
These condensed interim consolidated financial statements have been prepared under the assumption that the Company will continue as a going concern. The going concern
basis of presentation assumes that the Company will be able to meet its obligations and continue its operations for the foreseeable future and be able to realize its assets and discharge its liabilities and commitments in the normal course of
business. Realization values may be substantially different from the carrying values as shown, and these condensed interim consolidated financial statements do not give effect to adjustments that would be necessary to the carrying values and
classifications of assets and liabilities should the Company be unable to continue as a going concern.
The Company has incurred losses and negative operating cash flows since its inception. The Company will require further financing to meet its financial obligations and
sustain its operations in the normal course of the business. These factors indicate the existence of a material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern. The Company’s ability to meet
its long-term business strategy depends on its ability to obtain additional equity financing and to generate operational cash flow from delivery services revenue.
These condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by
International Accounting Standards Board (“IASB”) applicable to the preparation of interim financial statements, including IAS 34, Interim Financial Reporting. The condensed consolidated interim financial statements should be read in conjunction
with the annual financial statements for the year ended December 31, 2022, which have been prepared in accordance with IFRS as issued by IASB.
The Company uses the same accounting policies and methods of computation as in financial statements for the year ended December 31, 2022, with the exception of the
following:
Basis of Consolidation
The condensed interim financial statements include the financial statements of the Company and its 95% owned subsidiary Web-to-door Trucking Corp. (“Trucking”) (2022 –
95%) and its 100% owned subsidiary ParcelPal Logistics USA, Inc. (2022 – 100%)
Use of estimates and judgements
The Company’s significant estimates and judgments are as per the audited financial statements ended December 31, 2022.
These condensed interim consolidated financial statements were approved by the board of directors for use on November 29, 2023.
On June 1, 2022, the Company entered into an asset purchase agreement (the “Asset Acquisition”) with Delta Express Delivery, Inc. (“Delta”) whereby the Company,
through ParcelPal USA, acquired a customer contract between Delta and FedEx Ground Package System, Inc. (“FedEx”) (the “FedEx Contract”) making ParcelPal USA an independent service provider for FedEx. In addition to the FedEx Contract, the Company
also acquired 12 delivery vehicles from Delta. The acquisition of the FedEx Contract and the vehicles was treated as an asset acquisition. The Company issued 13,473,358 common shares, fair valued at $269,467 (US $209,107) and will make two payments
of US $336,834 by November 1, 2022, as at December 31, 2022 the amount was still outstanding. The allocation of the purchase price is as follows:
|
Purchase price consideration
|
|
|
$
|
|
|
Consideration – cash
|
|
|
868,129
|
|
|
Consideration – shares
|
|
|
269,467
|
|
|
Fair value of consideration
|
|
|
1,137,596
|
|
| |
|
|
|
|
|
Vehicles
|
|
|
452,343
|
|
|
Customer contract
|
|
|
685,253
|
|
|
Total net assets acquired
|
|
|
1,137,596
|
|
On completion of the Asset Acquisition the Company, through ParcelPal USA, began generating revenue from the FedEx Contract and as at December 31, 2022 the Company had generated $1,141,965
in revenue from the FedEx Contract.
As at September 30, 2023, the Company’s purchase obligation outstanding is $910,766 (2022 - $912,416). Also included in purchase obligation is $535,063 (2022 -
$704,288) due for the acquisition of Trucking.
|
4.
|
VEHICLES AND RIGHT-OF-USE ASSETS
|
Right-of-use assets consists of leased vehicles and a leased warehouse carried at cost less accumulated depreciation. The Company’s vehicles as at September 30, 2023
and December 31, 2022 are as follows:
| |
|
Vehicles
$
|
|
|
ROU Assets
$
|
|
|
Total
$
|
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2021
|
|
|
198,745
|
|
|
|
839,699
|
|
|
|
1,038,444
|
|
|
Additions
|
|
|
452,323
|
|
|
|
-
|
|
|
|
452,323
|
|
|
Disposal
|
|
|
(198,745
|
)
|
|
|
(633,671
|
)
|
|
|
(832,416
|
)
|
|
Foreign exchange
|
|
|
23,097
|
|
|
|
-
|
|
|
|
23,097
|
|
|
Balance, December 31, 2022
|
|
|
475,420
|
|
|
|
206,028
|
|
|
|
681,448
|
|
|
Disposal
|
|
|
-
|
|
|
|
(206,028
|
)
|
|
|
(206,028
|
)
|
|
Foreign exchange
|
|
|
(842
|
)
|
|
|
-
|
|
|
|
(842
|
)
|
|
Balance, September 30, 2023
|
|
|
474,578
|
|
|
|
-
|
|
|
|
474,578
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2021
|
|
|
93,217
|
|
|
|
292,874
|
|
|
|
386,091
|
|
|
Amortization
|
|
|
25,817
|
|
|
|
158,253
|
|
|
|
184,070
|
|
|
Disposal
|
|
|
(93,217
|
)
|
|
|
(303,759
|
)
|
|
|
(396,976
|
)
|
|
Foreign exchange
|
|
|
594
|
|
|
|
-
|
|
|
|
594
|
|
|
Balance, December 31, 2022
|
|
|
26,411
|
|
|
|
147,368
|
|
|
|
173,779
|
|
|
Amortization
|
|
|
39,366
|
|
|
|
-
|
|
|
|
39,366
|
|
|
Disposal
|
|
|
-
|
|
|
|
(147,368
|
)
|
|
|
(147,368
|
)
|
|
Foreign exchange
|
|
|
139
|
|
|
|
-
|
|
|
|
139
|
|
|
Balance, September 30, 2023
|
|
|
65,915
|
|
|
|
-
|
|
|
|
65,915
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2021
|
|
|
105,528
|
|
|
|
546,825
|
|
|
|
652,353
|
|
|
Balance, December 31, 2022
|
|
|
449,009
|
|
|
|
58,660
|
|
|
|
507,669
|
|
|
Balance, September 30, 2023
|
|
|
408,662
|
|
|
|
-
|
|
|
|
408,662
|
|
During the three and nine months ended September 30, 2023, the Company included $13,083 (2022 - $47,335) and $39,366 (2022- $143,265) of amortization in cost of sales.
During the nine months ended September 30, 2022, the Company purchased 14 previously leased vehicles for $37,150. The Company also sold 33 vehicles for gross proceeds
of $410,000. The vehicles had a net book value of $128,313 and the Company recorded a gain on sale of $266,901. The Company also wrote off 4 vehicles which were valued at $14,786.
Upon completion of the acquisition of Trucking and the Asset Acquisition, the Company acquired customer contracts. The customer contracts are amortized using the straight-line method over
the useful life of 5 years.
The change in customer contract during the period ended September 30, 2023, is as follows:
| |
|
|
$
|
|
| |
|
|
|
|
|
Balance, December 31, 2020
|
|
|
-
|
|
|
Additions
|
|
|
3,901,442
|
|
|
Foreign exchange
|
|
|
31,686
|
|
|
Balance, December 31, 2021
|
|
|
3,933,128
|
|
|
Additions
|
|
|
685,253
|
|
|
Amortization
|
|
|
(1,126,818
|
)
|
|
Foreign exchange
|
|
|
215,573
|
|
|
Balance, December 31, 2022
|
|
|
3,707,137
|
|
|
Amortization
|
|
|
(743,198
|
)
|
|
Foreign exchange
|
|
|
(10,049
|
)
|
|
Balance, September 30, 2023
|
|
|
2,953,890
|
|
On July 25, 2022, the Company received a short-term loan for US$400,000 due on May 25, 2023. Per the terms of the loan the Company is required to make 40 payments of
US$14,200 to settle the debt. As part of the loan agreement the Company paid a US$8,000 processing fee and US$24,000 finders’ fee, as the loan is short term in nature the fair value of the loan was determined to match the book value of the loan.
The processing fee and finders’ fee were recorded as interest expense.
On October 4, 2022, the Company received an additional short-term loan for US$100,000 due on August 4, 2023. Per the terms of the loan the Company is required to make
40 payments of US$3,550 to settle the debt. As part of the loan agreement the Company paid a US$4,298 processing fee which was recorded as interest expense. As the loan is short term in nature the fair value of the loan was determined to match the
book value of the loan.
A schedule of the changes in the loans is as follows:
| |
|
|
$
|
|
|
Balance, December 31, 2021
|
|
|
-
|
|
|
Additions
|
|
|
677,200
|
|
|
Interest
|
|
|
105,706
|
|
|
Payments
|
|
|
(357,323
|
)
|
|
Foreign exchange
|
|
|
(29,382
|
)
|
|
Balance, December 31, 2022
|
|
|
396,201
|
|
|
Interest
|
|
|
111,532
|
|
|
Payments
|
|
|
(308,604
|
)
|
|
Foreign exchange
|
|
|
14,577
|
|
|
Balance, September 30, 2023
|
|
|
213,706
|
|
Common Shares
Authorized:
The authorized capital of the Company consists of an unlimited number of common shares without par value.
Issued:
During the nine months ended September 30, 2023:
| |
a)
|
On March 14, 2023, the Company issued 20,944,640 units, consisting of one common share of the Company and one share purchase warrants, at a price of $0.017
per Unit for gross proceeds of $356,000. The Company also issued 4,273,503 units consisting of one common share of the Company and one-half share purchase warrant, at a price of $0.012 for gross proceeds of $50,000. The warrants expire on
March 14, 2025 and are exercisable at $0.05 per warrant. The warrants were fair valued at $nil. The Company incurred cash issue costs of $18,593 and issued 579,600 broker warrants on the same terms as the warrants contained in the units.
The broker warrants were fair valued at $9,593 using the Black-Scholes Option Pricing Model using the following assumptions: Risk free rate – 3.5%, expected volatility – 128%, expected forfeiture rate – nil, expected dividends – nil,
expected life – 2 years.
|
| |
b)
|
On March 16, 2023, the Company issued 1,800,000 common shares, valued at $63,000, for advertising and promotion expense.
|
| |
c)
|
On March 22, 2023, the Company issued 6,500,000 bonus shares to the officers and directors of the Company. The shares were fair valued at $227,5000.
|
| |
d)
|
On April 6, 2023, the Company issued 1,100,000 common shares to a consultant in lieu of cash, the shares were valued at $38,500.
|
| |
e)
|
On September 14, 2023, the Company issued 2,160,000 common shares to a consultant in lieu of cash, the shares were valued at $43,200.
|
During the year ended December 31, 2022:
| |
a)
|
On January 1, 2022, the Company issued 2,500,000 common shares pursuant to the settlement of US$100,000 convertible debt, the shares were fair valued at
$125,000.
|
| |
b)
|
On January 20, 2022, the Company issued 5,000,000 common shares pursuant to the settlement of US$200,000 convertible debt, the shares were fair valued at
$250,000.
|
| |
c)
|
On February 15, 2022, the Company issued 7,625,000 common shares pursuant to the settlement of US$305,000 convertible debt, the shares were fair valued at
$343,125.
|
| |
d)
|
On May 4, 2022, the Company issued 337,500 common shares pursuant to the settlement of US$13,500 convertible debt, the shares were fair valued at $11,813.
|
| |
e)
|
On May 9, 2022, the Company issued 9,850,000 common shares pursuant to the settlement of US$394,000 convertible debt, the shares were fair valued at
$270,875.
|
| |
f)
|
On May 13, 2022, the Company issued 1,000,000 common shares in lieu of consulting fees, the shares were fair valued at $30,000.
|
| |
g)
|
On June 30, 2022, the Company issued 250,000 common shares in lieu of consulting fees, the shares were fair valued at $5,000.
|
| |
h)
|
On June 30, 2022, the Company issued 13,473,358 common shares pursuant to the Asset Acquisition, the shares were fair valued at $269,467.
|
Stock Options
The Company has adopted an incentive stock option plan, which enables the Board of Directors of the Company from time to time, at its discretion, and in accordance
with the CSE requirements to, grant to directors, officers, employees and consultants to the Company, non-transferable stock options to purchase common shares, provided that the number of common shares reserved for issuance will not exceed 20% of
the Company’s issued and outstanding common shares. Each stock option permits the holder to purchase one share at the stated exercise price. The options vest at the discretion of the Board of Directors.
The following is a summary of the Company’s stock option activity:
| |
|
Number of
Options
#
|
|
|
Weighted Average
Exercise Price
$
|
|
| |
|
|
|
|
|
|
|
Balance, December 31, 2021
|
|
|
11,175,000
|
|
|
|
0.15
|
|
|
Granted
|
|
|
1,500,000
|
|
|
|
0.05
|
|
|
Expired
|
|
|
(700,000
|
)
|
|
|
0.18
|
|
| |
|
|
|
|
|
|
|
|
|
Balance, December 31, 2022
|
|
|
11,975,000
|
|
|
|
0.13
|
|
|
Granted
|
|
|
1,250,000
|
|
|
|
0.05
|
|
|
Forfeited
|
|
|
(5,350,000
|
)
|
|
|
0.13
|
|
|
Expired
|
|
|
(1,450,000
|
)
|
|
|
0.26
|
|
| |
|
|
|
|
|
|
|
|
|
Balance, September 30, 2023
|
|
|
6,425,000
|
|
|
|
0.11
|
|
On April 6, 2023, the Company granted 1,250,000 options to a consultant of the Company, the options vested immediately and expire on April 6, 2028. The options were
fair valued at $39,544 using the Black-Scholes Option Pricing Model using the following assumptions: risk free rate – 3.73%; forfeiture rate – nil; expected volatility – 152.17%; dividend rate – nil; expected life – 5 years.
As at September 30, 2023 the following options were outstanding and exercisable:
|
Expiry
Date
|
|
Exercise price
$
|
|
|
Remaining
life (years)
|
|
|
Options
outstanding
|
|
|
November 22, 2023
|
|
|
0.26
|
|
|
|
0.15
|
|
|
|
100,000
|
|
|
May 2, 2024
|
|
|
0.27
|
|
|
|
0.59
|
|
|
|
150,000
|
|
|
May 17, 2024
|
|
|
0.245
|
|
|
|
0.66
|
|
|
|
200,000
|
|
|
June 17, 2024
|
|
|
0.245
|
|
|
|
0.72
|
|
|
|
300,000
|
|
|
May 6, 2025
|
|
|
0.09
|
|
|
|
1.60
|
|
|
|
1,675,000
|
|
|
July 22, 2025
|
|
|
0.09
|
|
|
|
1.81
|
|
|
|
100,000
|
|
|
November 12, 2025
|
|
|
0.075
|
|
|
|
2.12
|
|
|
|
1,300,000
|
|
|
January 22, 2026
|
|
|
0.145
|
|
|
|
2.32
|
|
|
|
1,250,000
|
|
|
June 2, 2026
|
|
|
0.12
|
|
|
|
2.67
|
|
|
|
200,000
|
|
|
April 6, 2028
|
|
|
0.05
|
|
|
|
4.52
|
|
|
|
1,250,000
|
|
| |
|
|
|
|
|
|
|
|
|
|
6,425,000
|
|
Warrants
The following is a summary of the Company’s warrant activity:
| |
|
Number of
Options
#
|
|
|
Weighted Average
Exercise Price
$
|
|
| |
|
|
|
|
|
|
|
Balance, December 31, 2022
|
|
|
-
|
|
|
|
-
|
|
|
Issued
|
|
|
23,660,992
|
|
|
|
0.05
|
|
| |
|
|
|
|
|
|
|
|
|
Balance, September 30, 2023
|
|
|
23,660,992
|
|
|
|
0.05
|
|
As at September 30, 2023, 23,660,992 warrants are outstanding and they expire on March 14, 2025.
|
8.
|
RELATED PARTY TRANSACTIONS
|
Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole.
The Company has determined that key management personnel consist of members of the Company's Board of Directors and corporate officers. The remuneration of directors and key management personnel is as follows:
| |
|
Three months ended September
30,
|
|
|
Nine months ended September
30,
|
|
| |
|
2023
$
|
|
|
2022
$
|
|
|
2023
$
|
|
|
2022
$
|
|
|
Management fees
|
|
|
160,571
|
|
|
|
129,596
|
|
|
|
484,424
|
|
|
|
578,291
|
|
|
Salaries and wages
|
|
|
-
|
|
|
|
18,750
|
|
|
|
37,500
|
|
|
|
56,250
|
|
| |
|
|
160,571
|
|
|
|
148,346
|
|
|
|
521,924
|
|
|
|
634,541
|
|
Included in accounts payable as at September 30, 2023, is $744,740 (December 31, 2022 - $576,942) owing to related parties. These amounts are non-interest bearing,
unsecured and due on demand.
As at September 30, 2023 the Company had one reportable segment, being last-mile delivery service and logistics solutions, and had operations in two geographical
areas: Canada and the USA.
Geographic Segments
| |
|
Three months ended September 30,
|
|
|
Nine months ended September 30,
|
|
| |
|
2023
|
|
|
2022
|
|
|
2023
|
|
|
2022
|
|
| |
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Net gain (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada
|
|
|
(508,398
|
)
|
|
|
(707,697
|
)
|
|
|
(1,986,593
|
)
|
|
|
(1,831,329
|
)
|
|
USA
|
|
|
404,713
|
|
|
|
(484,892
|
)
|
|
|
805,209
|
|
|
|
(1,159,123
|
)
|
| |
|
|
(103,685
|
)
|
|
|
(1,192,589
|
)
|
|
|
(1,181,384
|
)
|
|
|
(2,990,452
|
)
|
| |
|
September 30, 2023
|
|
|
December 31, 2022
|
|
| |
|
|
$
|
|
|
|
$
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Canada
|
|
|
386,760
|
|
|
|
291,183
|
|
|
USA
|
|
|
3,412,459
|
|
|
|
4,269,648
|
|
| |
|
|
3,799,219
|
|
|
|
4,560,831
|
|
|
10.
|
FINANCIAL INSTRUMENTS
|
Classification of financial instruments
The Company’s financial instruments consist of cash, accounts receivable, loans receivable, accounts payable and accrued liabilities and lease obligations. The Company
classifies cash, accounts receivable and loans receivable as financial assets at amortized cost. Accounts payable and lease obligations are classified as financial liabilities at amortized cost.
The Company examines the various financial instruments and risks to which it is exposed and assesses the impact and likelihood of those risks. These risks include
foreign currency risk, interest rate risk, credit risk and liquidity risk. When material, these risks are reviewed and monitored by the Board of Directors.
There have been no changes in any risk management policies during the period ended September 30, 2023.
Fair value
Financial instruments measured at fair value are classified into one of the three levels in the fair value hierarchy according to the relative reliability of the
inputs used to estimate the fair values. The three levels of the fair value hierarchy are:
| |
•
|
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities;
|
| |
•
|
Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and
|
| |
•
|
Level 3 – Inputs that are not based on observable market data.
|
The carrying value of the Company’s financial assets and liabilities measured at amortized cost approximate their fair value due to their short term to maturity.
The Company is exposed in varying degrees to a variety of financial instrument related risks. The Board of Directors approves and monitors the risk management
processes, inclusive of documented investment policies, counterparty limits, and controlling and reporting structures.
The type of risk exposure and the way in which such exposure is managed is provided as follows:
Credit risk
Credit risk is the risk of financial loss to the Company if the counterparty to a financial instrument fails to meet its contractual obligations. The Company’s cash is
held in large Canadian financial institutions and is not exposed to significant credit risk.
Interest risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The
Company is exposed to limited interest rate risk.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its obligations as they fall due. The Company’s ability to continue as a going concern is
dependent on management’s ability to raise the required capital through future equity or debt issuances. The Company manages its liquidity risk by forecasting cash flows from operations and anticipating any investing and financing activities.
Management and the directors are actively involved in the review, planning, and approval of significant expenditures and commitments. In December 2020, the Company entered into an agreement pursuant to which it received access to a US $5,000,000
equity line of credit for a period of three years. As at September 30, 2023, the Company has not accessed the equity line of credit.
Foreign exchange risk
The Company’s functional currency is the Canadian Dollar and major transactions are transacted in Canadian Dollars and US Dollars. The Company maintains a US Dollar
bank account in Canada to support the cash needs of its operations. Management believes that the foreign exchange risk related to currency conversion is minimal and therefore does not hedge its foreign exchange risk.
Capital Management
The Company defines capital that it manages as its shareholders’ equity. When managing capital, the Company’s objective is to ensure the entity continues as a going
concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. The Company manages its capital structure and makes adjustments to it, based on the funds available to the Company, in order to support the
development of a social collaborative charting, news and communication platform for traders. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s
management to sustain future development of the business.
Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. There
were no changes to the Company’s approach to capital management during the period ended September 30, 2023.
The Company’s lease obligations at September 30, 2023 and December 31, 2022 and the changes for the periods then ended are as follows:
| |
|
|
$
|
|
|
Balance, December 31, 2021
|
|
|
563,330
|
|
|
Interest expense
|
|
|
40,792
|
|
|
Lease termination
|
|
|
(342,936
|
)
|
|
Payments
|
|
|
(192,854
|
)
|
|
Balance, December 31, 2022
|
|
|
68,332
|
|
|
Payments
|
|
|
(5,182
|
)
|
|
Lease termination
|
|
|
(63,150
|
)
|
|
Balance, September 30, 2023
|
|
|
-
|
|
During the period ended September 30, 2023, the Company terminated its vehicle leases.
|
12.
|
CONVERTIBLE PROMISSORY NOTE
|
During the year ended December 31, 2021, and 2020, the Company entered into multiple US dollar denominated convertible note agreements, with each convertible note
containing a guaranteed interest rate between 5% and 10%, a 5% original issue discount on the principal of the convertible note, incentive common shares of the Company and the right to convert at a fixed price of US $0.06 to US $0.08 per share. As
the convertible note and embedded conversion feature are denominated in US dollars and the Company has a Canadian dollar functional currency, they are within the scope of IAS 32 – Financial Instruments:
Presentation, the value of the conversion feature is subject to changes in value based on the prevailing market price, resulting in a derivative liability. On initial recognition, the Company used the residual value method to allocate the
principal amount of the convertible note between the derivative liability and host debt components. The derivative liability was valued first using the Black Scholes option pricing model and the residual was allocated to the host debt component. As
the fair value of the debt, when discounted using the Company’s discount rate of 11.31% was greater than the total consideration received, the incentive shares were allocated a value of $nil.
The convertible notes issued are as follows:
On April 13, 2021, the Company issued a convertible note for US$341,250 (CAD - $427,873) with a guaranteed interest rate of 5% and an original issue discount of
US$16,250. The note matures on October 10, 2021 and can be converted into common shares of the Company at a conversion price of US$0.13 per common share. The conversion option was fair valued at $10,817 and the loan was valued at $396,681. The loan
is amortized to maturity using an effective interest rate of 4.88%. On December 7, 2021 and December 29, 2021, the Company issued 417,196 and 2,500,000 common shares to settle US $116,500 of the loan, the shares were fair valued at $31,290 and
$137,500 respectively. During the year ended December 31, 2022, the derivative was revalued at $nil and a gain on fair value of derivative liability of $66,928 was recorded. The remainder of the convertible note was settled pursuant to the issuance
of 6,045,325 common shares fair valued at $302,500. The Company recorded a gain on settlement of $19,005.
On May 27, 2021, the Company issued a convertible note for US$341,250 (CAD - $412,479) with a guaranteed interest rate of 5% and an original issue discount of
US$16,250. The note matured on November 23, 2021 and can be converted into common shares of the Company at a conversion price of US$0.13 per common share. The conversion option was fair valued at $18,356 and the loan was valued at $374,481. The
loan is amortized to maturity using an effective interest rate of 5.98%. During the year ended December 31, 2022, the derivative was fair valued at $nil and the Company recorded a gain on derivative liability of $94,980. The remainder of the
convertible note was settled pursuant to the issuance of 8,957,800 common shares fair valued at $408,763, the Company recorded a gain on debt settlement of $47,503.
On closing of the Trucking acquisition, the Company issued a convertible note with face value of up to US$2,300,000 receivable in four tranches. Each of the first
three funded tranches will carry a 5% Original Issue Discount (or “OID”). As consideration of the convertible note, the Company shall issue 500,000 common shares to the noteholder for each of the first three funded tranches. As at September 30,
2023, the first tranche of US $735,000 and the second tranche of US $672,000 had been funded and 1,000,000 common shares were issued to the noteholder, valued at $nil.
The first tranche had a guaranteed interest rate of 8% and an original issue discount for US $35,000. The note matured on March 14, 2022, and can be converted into
common shares of the Company at a conversion price of US $0.09 per common share. The conversion option was fair valued at $110,301 and the loan was fair valued at $776,844. The loan is amortized to maturity using an effective interest rate of
20.087%. During the year ended December 31, 2022, the Company fair valued the derivative liability at $nil and recorded a gain on fair value of derivative liability of $11,534. The Company settled $456,265 of the loan pursuant to the issuance of
10,309,375 common shares fair valued at $289,550 and recorded a gain on debt settlement of $206,740. As at September 30, 2023, the outstanding balance of the convertible note is $516,660 (December 31, 2022 - $553,169).
The second tranche had a guaranteed interest rate of 8% and an original issue discount for US $32,000. The note matures on May 23, 2022 and can be converted into
common shares of the Company at a conversion price of US $0.09 per common share. The conversion option was fair valued at $140,643 and the loan was fair valued at $670,204. The loan is amortized to maturity using an effective interest rate of
25.55%. As at December 31, 2022, the derivative was fair valued at $nil and the Company recorded a gain on fair value of derivative liability of $33,285. As at September 30, 2023, the outstanding balance of the convertible note was $983,080
(December 31, 2022 - $982,970).
The changes in the fair value of the derivative and loan balances were as follows:
| |
|
Convertible Debt
$
|
|
|
Derivative Liability
$
|
|
| |
|
|
|
|
|
|
|
Balance, December 31, 2021
|
|
|
2,429,227
|
|
|
|
206,726
|
|
|
Interest expense
|
|
|
88,778
|
|
|
|
-
|
|
|
Accretion
|
|
|
200,497
|
|
|
|
-
|
|
|
Change in fair value of derivative liability
|
|
|
-
|
|
|
|
(206,726
|
)
|
|
Conversion of convertible debt
|
|
|
(1,274,060
|
)
|
|
|
-
|
|
|
Foreign exchange on loan
|
|
|
91,697
|
|
|
|
-
|
|
|
Balance, December 31, 2022
|
|
|
1,536,139
|
|
|
|
-
|
|
| |
|
|
|
|
|
|
|
|
|
Foreign exchange on loan
|
|
|
(36,398
|
)
|
|
|
-
|
|
|
Balance, September 30, 2023
|
|
|
1,499,741
|
|
|
|
-
|
|
For the nine months ended September 30, 2023 and 2022 cost of sales consists of the following:
| |
|
Three months ended September 30,
|
|
|
Nine months ended September 30,
|
|
| |
|
2023
$
|
|
|
2022
$
|
|
|
2023
$
|
|
|
2022
$
|
|
|
Amortization of vehicles
|
|
|
13,083
|
|
|
|
47,335
|
|
|
|
39,366
|
|
|
|
143,265
|
|
|
Fuel
|
|
|
170,714
|
|
|
|
69,769
|
|
|
|
751,371
|
|
|
|
96,631
|
|
|
Short term vehicle rentals
|
|
|
30,979
|
|
|
|
276,961
|
|
|
|
134,899
|
|
|
|
1,045,760
|
|
|
Salaries and wages
|
|
|
1,987,465
|
|
|
|
1,912,966
|
|
|
|
6,018,653
|
|
|
|
5,201,207
|
|
| |
|
|
2,202,241
|
|
|
|
2,307,031
|
|
|
|
6,944,289
|
|
|
|
6,486,863
|
|
During the nine months ended September 30, 2023, the Company received USD$700,000 (CAD - $908,500) in Employee Retention Credit (“ERC”) funding. The ERC is refundable
payroll tax credit serving as a reimbursement for a portion of payroll taxes incurred in the United States.
On October 17, 2023, the Company announced it will be shifting a significant amount of its focus and resources on its growing U.S. operations, entering into new
profitable contracts primarily in the United States and shedding any money losing business units and/or contracts immediately. To this end, we have terminated our largest Canadian contract on a mutually agreeable basis with our customer.
On November 14, 2023, the Company announced that it has extended its contract with its second largest customer for at least another year. This customer accounts for
approximately 20% of the Company's topline revenue and is growing with us. Additionally, the terms of the renewed contract are more favorable for ParcelPal with increasing rates on deliveries and higher package counts.
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