An offering statement pursuant to Regulation A relating to these
securities has been filed with the Securities and Exchange
Commission. Information contained in this Preliminary Offering
Circular is subject to completion or amendment. These securities
may not be sold nor may offers to buy be accepted before the
offering statement filed with the Commission is qualified. This
Preliminary Offering Circular shall not constitute an offer to sell
or the solicitation of an offer to buy nor may there be any sales
of these securities in any state in which such offer, solicitation,
or sale would be unlawful before registration or qualification
under the laws of any such state.
PRELIMINARY OFFERING CIRCULAR
SUBJECT TO COMPLETION, DATED MAY 30,
2019
DIGATRADE FINANCIAL CORP.
Up to 100,000,000 Shares
of Common Stock
US $1,000,000
Digatrade
Financial Corp., a British Columbia corporation (the
“Company,” “we,” “us,” and
“our”), is offering up to 100,000,000 shares of common
stock for $0.01 per share, for gross proceeds to the Company of up
to $1,000,000, before deduction of offering expenses, assuming all
shares are sold. There is no minimum aggregate offering amount, but
we will impose a minimum purchase requirement of $10,000 per
investor to participate in the offering, unless such minimum is
waived by the Company in its sole discretion, which may be done on
a case-by-case basis. We may sell significantly fewer shares of
common stock than the maximum amount offered hereby. At a closing,
the proceeds will be distributed to the Company and the associated
shares will be issued to investors. If there are no closings, the
investments for this offering will be promptly returned to
investors, without deduction and without interest.
All
shares will be offered on a “best efforts” basis. As
there is no minimum offering, upon the approval of any subscription
to this offering, the Company may immediately conduct a closing,
deposit said proceeds into the bank account of the Company, as
applicable, and use the proceeds of such closing in accordance with
the “Use of Proceeds” on page 15 and “Securities
Being Offered” on page 27.
Shares
offered by the Company will be sold by our directors and executive
officers on behalf of the Company. We may also elect to engage
licensed broker-dealers to act as sales agents in this offering. No
sales agents have yet been engaged to sell shares. All shares will
be offered on a “best-efforts” basis.
We
expect to commence the offering on the date on which the offering
statement of which this offering circular is a part is qualified by
the Securities and Exchange Commission (“SEC”) and will
terminate one year thereafter or once all offered securities are
sold, whichever occurs first. Notwithstanding the foregoing, the
Company may extend the offering by an additional 90 days or
terminate the offering at any time.
Our
common stock is not now listed on any U.S. national securities
exchange; however, our stock is quoted on the OTC Markets Group
Inc.’s OTC "Pink" marketplace under the trading
symbol “DIGAF”. There is currently only a limited
market for our securities. There is no guarantee that our
securities will ever trade on any listed exchange.
This
offering is being made pursuant to Tier 1 of Regulation A following
the “Offering Circular” disclosure format.
(1)We
may offer shares through registered broker dealers, although at
this time, we have not determined if we will require these
services, and therefore have not selected such a selling
agent.
(2)We
estimate that our total expenses for this offering will be
$100,000. See “Plan of
Distribution.”
Generally, no sale may be made to you in this offering if the
aggregate purchase price you pay is more than 10% of the greater of
your annual income or net worth. Different rules apply to
accredited investors and non-natural persons. Before making any
representation that your investment does not exceed applicable
thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of
Regulation A. For general information on investing, we encourage
you to refer to www.investor.gov.
This offering is highly speculative and these securities involve a
high degree of risk and should be considered only by persons who
can afford the loss of their entire investment. See “Risk
Factors” on page 5.
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS
UPON THE MERITS OF OR GIVE ITS APPROVAL TO ANY SECURITIES OFFERED
OR THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR
COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SOLICITATION
MATERIALS. THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION
FROM REGISTRATION WITH THE COMMISSION; HOWEVER, THE COMMISSION HAS
NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED
ARE EXEMPT FROM REGISTRATION.
1500
West Georgia Street, Suite 1300
Vancouver,
British Columbia, Canada, V6C 2Z6
+1(604)
200-0071
www.digatradefinancial.com
Offering
Circular Date: May 30, 2019
TABLE
OF CONTENTS
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30
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31
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34
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59
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SIGNATURES
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60
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CAUTIONARY STATEMENT
REGARDING FORWARD-LOOKING STATEMENTS
Some of
the statements under “Summary Information,” “Risk
Factors,” “Management’s Discussion and Analysis
of Financial Condition and Results of Operations,”
“Business” and elsewhere in this offering circular
constitute forward-looking statements. Forward-looking
statements relate to expectations, beliefs, projections, future
plans and strategies, anticipated events or trends and similar
matters that are not historical facts. In some cases, you can
identify forward-looking statements by terms such as
“anticipate,” “believe,”
“could,” “estimate,” “expect,”
“intend,” “may,” “plan,”
“potential,” “should,” “will”
and “would” or the negatives of these terms or other
comparable terminology. You should not place undue reliance on
forward looking statements. The cautionary statements set
forth in this offering circular, including in “Risk
Factors” and elsewhere,
identify important factors which you should consider in evaluating
our forward-looking statements.
Although
the forward-looking statements in this offering circular are based
on our beliefs, assumptions and expectations, taking into account
all information currently available to us, we cannot guarantee
future transactions, results, performance, achievements or
outcomes. No assurance can be made to any investor by anyone that
the expectations reflected in our forward-looking statements will
be attained, or that deviations from them will not be material and
adverse. We undertake no obligation, other than as may be required
by law, to re-issue this offering circular or otherwise make public
statements updating our forward-looking statements.
SUMMARY INFORMATION
This summary highlights some of the information in this offering
circular. It is not complete and may not contain all of the
information that you may want to consider. To understand this
offering fully, you should carefully read the entire offering
circular, including the section entitled “Risk
Factors,” before making a decision to invest in our
securities. Unless otherwise noted or unless the context otherwise
requires, the terms “we,” “us,”
“our,” the “Company,” refer to Digatrade
Financial Corp.
The Company
Digatrade Financial
Corp., a British Columbia corporation, is a financial technology
(FinTech) services company. The Company has been focused on the
financial technology industry since 2015. During that time, the
Company has pursued several different areas of business including
blockchain development services, transaction services for
crypto-currencies (e.g. Bitcoin) and other related financial
services technologies. Effective October 17, 2018 the Company
closed its online retail trading platform but will continue to
evaluate opportunities and continue with research in digital-asset
trading for prospective institutional customers while continuing to
seek new opportunities within the blockchain and the financial
technology services (non-trading) sector. See “Corporate
History” below for a discussion of historical
operations.
On February 26,
2019, the Company executed a
definitive agreement (the “Securter Agreement”) with
Securter Inc., a private Canadian Corporation
(“Securter”) that is developing a proprietary,
patent-pending credit card payment platform to significantly
increase the security of online credit card payment processing.
Securter technology reduces immense losses by financial
institutions and merchants that arise from fraudulent credit card
use and protects cardholder privacy by eliminating the distribution
of personal information to third parties. With the current
worldwide surge in online commerce expected to continue for years
to come, the problem of credit card security is large and
growing.
Pursuant
to the terms of the Securter Agreement, the parties agreed to form
a subsidiary of Digatrade, Securter Systems, Inc. (“Securter
Systems”), and assign all of the assets and intellectual
property of Securter into Securter Systems. Securter Systems has
been created to launch and commercialize the Securter technology
under Digatrade.
The
Securter Agreement with Securter sets out that Securter’s
technology will be launched and commercialized under Securter
Systems as a Digatrade subsidiary. The consummation of the Securter
Agreement is subject to certain milestone events, including the
contribution of capital by Digatrade to Securter Systems which it
plans to raise in this offering.
Securter
Systems
Securter Systems is
a newly-formed subsidiary of Digatrade. The name Securter describes
both the technology itself and Securter Systems that is developing
a proprietary payment platform that increases the security of
credit card holder information and enhances the authentication of
online credit card purchases. These enhancements help online
merchants and banks significantly reduce Card-Not-Present
(“CNP”) fraud. CNP Fraud losses are estimated at over
$6 Billion annually in North America.
Securter Systems
can also reduce the costs associated with PCI DSS compliance, a
payments industry processing protocol. Securter Systems technology,
which is now patent pending, focuses on cardholder identification
for transaction verification.
Following EMV (a
credit card cooperative association) technology migration to reduce
counterfeit fraud at “point of sale” (POS), criminals
are currently able to steal credit card information from personal
computers & open public networks. Securter Systems has
researched and is developing the software and hardware of a next
generation of online user authentication that is based on remote
processing of EMV/smart credit/debit cards. Securter Systems’
payment platform adapts and extends conventional and existing
methods, by going beyond the most reliable EMV technology
(currently intended for physical Point of Sales / POS) to secure
EMV online payments as well.
The research and
development is related to the cyber-security field, in order to
provide robust system architecture without dependence upon any kind
of personal computer vulnerabilities. This is possible because all
operations are performed on two trusted sides – the bank side
and a smart-card secured microprocessor. This eliminates the need
for costly risk management by intermediate servers (that is the
norm today).
Corporate
History
The Company was
originally incorporated under the name Black Diamond Holdings
Corporation on December 28, 2000. On June 26, 2007, the Company
changed its name from Black Diamond Holdings Corporation to Black
Diamond Brands Corporation. On November 21, 2008 the Company
changed its name to Rainchief Energy Inc. and on February 19, 2015
to Bit-X Financial Corporation. On October 27, 2015 the Company
changed its name to Digatrade Financial
Corporation.
On March 31, 2015,
the Company entered into an agreement with Mega Ideas Holdings
Limited, dba ANX (“ANXPRO and ANX International”), a
company incorporated and existing under the laws of Hong Kong. ANX
owns a proprietary trading platform and provides operational
support specializing in blockchain development services and
exchange and transaction services for crypto-currencies e.g.
Bitcoin and other digital assets. Effective October 17, 2018 the
Company closed the online retail trading platform and shared
liquidity order book with ANX International owing to low
transaction volumes. The Company will continue to evaluate
opportunities and continue with research and development related
services in the digital-asset industry for prospective
institutional customers while continuing to seek new opportunities
within the blockchain and the financial technology sector unrelated
to facilitating trading activities.
Organizational
Structure
As of the date of
this report the Company has four wholly-owned subsidiaries,
Digatrade Limited (a British Columbia corporation), Digatrade
Limited (a Nevada corporation), Digatrade (UK) Limited (a United
Kingdom corporation) and Securter Systems Inc., (a Canadian Federal
Corporation).
Corporate Information
Our
principal executive offices are located at 1500 West Georgia
Street, Suite 1300, Vancouver, British Columbia, Canada, V6C 2Z6.
Our telephone is +1(604) 200-0071. The address of our website is
www.digatradefinancial.com. Information contained on or accessible
through our website is not a part of this offering circular and
should not be relied upon in determining whether to make an
investment decision.
The
Company is currently authorized to issue an unlimited number of
shares of common stock without par value and 1,100,000 Class
“B” Common Shares which are non-participating, voting
(voting right of 1,000 votes per share) without par value. As of
May 30, 2019, the Company had 279,760,526
shares of common stock and 1,100,000 shares of Class
“B” Common Shares issued and outstanding.
The
Company’s securities are currently quoted on the OTC Markets
Group Inc.’s OTC "Pink" marketplace under the
symbol “DIGAF.” The Company is a reporting issuer under
Form 20-F (Foreign Private Issuer).
The Offering
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Issuer in this Offering:
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Digatrade
Financial Corp.
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Securities offered:
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Common
stock
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Common Stock to be outstanding before this Offering:
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279,760,526
shares
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Common Stock to be outstanding after this Offering:
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379,760,526
shares, assuming the maximum amount of shares are
sold.
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Price per share:
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$0.01
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Maximum Offering amount:
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$1,000,000,
assuming the maximum amount of shares are sold by the Company. The
minimum investment established for each investor is $10,000, unless
such minimum is waived by the Company in its sole discretion, which
may be done on a case-by-case basis. There is no minimum aggregate
offering amount, and we may sell significantly fewer shares than
the maximum amount offered hereby.
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Use of proceeds:
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We
estimate that the net proceeds to us from this offering, after
deducting fees and estimated offering expenses, will be
approximately $900,000, assuming the maximum amount of
shares offered by us are sold.
We
intend to use substantially all of such net proceeds from this
offering for general working capital purposes, as described in this
offering circular. Our management will have broad discretion over
how these proceeds are used. For additional information, see
“Use of Proceeds.”
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Dividend policy:
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Holders
of our common stock are only entitled to receive dividends when, as
and if declared by our board of directors out of funds legally
available for dividends. We do not intend to pay dividends for the
foreseeable future. Our ability to pay dividends to our
stockholders in the future will depend on regulatory restrictions,
liquidity and capital requirements, our earnings and financial
condition, the general economic climate, contractual restrictions,
our ability to service any equity or debt obligations senior to our
common stock and other factors deemed relevant by our board of
directors. For additional information, see “Dividend
Policy.”
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Risk factors:
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Investing
in our common stock involves risks. See “Risk Factors”
for a discussion of certain factors that you should carefully
consider before making an investment decision.
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RISK FACTORS
In
addition to the other information provided in this offering
circular, we are subject to a number of risks, including risks that
may prevent us from achieving our business objectives or that may
adversely affect our business, financial condition, results of
operations, cash flows and prospects. You should carefully
consider the risks discussed in this section in evaluating our
business and before purchasing any of our common
stock.
Risks Related to the Business
We have a history of operating losses and need additional capital
to implement our business plan.
For the year ended
December 31, 2018, we recorded a net loss of from operations of
$1,122,820 as compared to a net loss of $674,520 for the year ended
December 31, 2017. The financial statements have been prepared
using IFRS principles applicable to a going concern. However, as
shown in note 1 to the consolidated financial statements for the
year ended December 31, 2018, our ability to continue operations is
uncertain.
We continue to
incur operating losses, and have a consolidated deficit of
$6,298,938 as at December 31, 2018. Operations for the year ended
December 31, 2018 have been funded primarily from the issuance of
share capital, debt financing and the continued support of
creditors. Historically, we have met working capital needs
primarily by selling equity to Canadian residents, raising debt
finance and from loans (including loans from relatives of principal
shareholders).
We estimate that we
will require at least $500,000 to further fund the development of a
proprietary, patent-pending credit card payment platform to
significantly increase the security of online credit card payment
processing, reducing financial losses being experienced by
financial institutions and merchants from fraudulent credit card
use, while also better protecting cardholder privacy. A full
implementation of our business plan will be delayed until the
necessary capital is raised.
We cannot predict when or if we will produce revenues.
We have
not generated any revenue to date from operations. In order for us
to continue with our plans and open our business, we must raise
capital. The timing of the completion of the milestones needed to
commence operations and generate revenues is contingent on the
success of this raise. There can be no assurance that we will
generate revenues or that revenues will be sufficient to maintain
our business.
Our entry into the development of a secure mobile application for
card not present “CNP” transaction business may not be
successful and there are risks attendant on these
activities.
The Financial Technology
“FinTech” business is extremely
competitive. There are many companies, large and small entering the
market with the capital to develop and create new innovative
applications resulting in a highly competitive and fast-moving
environment. Even with capital and technical expertise, industry,
political and compliance risks are significant. Regulatory
compliance and the overall ecosystem for secure online payments is
extremely complex and not yet fully defined by governments and
financial institutions worldwide. We may not be able to finance our
business plan and marketing plan, there is no assurance that our
entry into this business will be successful.
Cybersecurity risks associated with the FinTech industry are
becoming increasingly challenging and we may be unable to meet
future regulatory requirements related to data protection and
privacy.
Cybersecurity is
becoming increasingly challenging with the growth in the number of
hackers and financial stalkers seeking opportunities to disrupt
operations and/or extort funds from persons or companies whose
cybersecurity measures were unable to prevent malicious data
harvesting and misuse. We cannot guarantee that all such
attempts shall be defeated, nor that our intellectual property
shall remain beyond the reach of parties seeking proprietary
insights. Data protection and
privacy is never absolute, regardless of method(s) used.
Independent of any 3rd party malicious intent referred to above,
there is a risk that despite best efforts our data protection and
privacy shall not meet a future regulatory definition of a
reasonable standard, if it is imposed or “expected”
retroactively. Information at risk may or may not be
financial in nature and may or may not be our own
information. We do not have sufficient resources to evaluate
all possible outcomes, or all possible measures that we could take
now, or could have taken in the past, to attain an even higher
level of diligence and care than we are taking
presently.
Regulatory
compliance in the FinTech sector is evolving. We are unable
to guarantee that we will be able to proceed with all desired plans
if the regulatory environment changes in a manner that undermines
existing business plans. Such regulations have an impact in
every country in which we will be deriving revenue from licencing
or by any other commercial mechanism.
We may be unable to meet growth Open Source technology trends which
could have a detrimental impact on our
business.
Open source
software compliance and vulnerability management has become an area
of risk due to the expanding scope of this realm of software.
We cannot ensure that we will at all times fully understand
the state-of-the-art standing of every aspect of our own
development goals until such time that a sufficient expenditure of
time, money and effort has been made to understand all open source
material and trends, and their relevance to our own
interests.
Customers may not adapt to our new technology which may affect our
ability to generate revenues in the future.
Culture risk
emerges when our organization interfaces with financial
institutions as our customers. We do not know in advance
whether all our customers will be willing to make changes, if
necessary, to accommodate protocols that arise from the adoption of
our technology, or incompatibility that may arise from the nature
of our software development methods, including our approach to
FinTech problem solving.
Reliance on systems governance on third party transactions may risk
compliance issues.
Governance for
intelligent automation is of increasing importance in business
activity that is characterized by a large number of
small-dollar-value transactions. Our revenue model requires
sharing of transaction fees for commerce that, in aggregate, may
represent millions or even hundreds of millions of consumer
transactions. We may therefore need to rely upon
systems-governance more than individual situational oversight where
third party transactions are concerned. This may mean that
non-compliance of some type may come to light too late to remedy in
the immediate tense and may therefore only be correctable with
systemic adjustment for the future.
FinTech is an emerging industry that may be subject to changes in
accounting standards in the future the adoption of which may
require time for our business to adjust.
New accounting
standards in the category of FinTech sector businesses may be
introduced over time and have a bearing on our planning, execution
and reporting in respect of issues that have hitherto been
satisfactory and understood, but may require a period of transition
to grasp implications at the strategic level and communicate same
to shareholders effectively.
Use of data and
analytics in our internal audit may become more complex as metadata
becomes increasingly important to our analyses. It is not
known whether the effect upon our internal practices of new
analytics will remain permissible from the perspective of
third-party audits occurring after-the-fact.
Our use of Cloud computing, data storage and/or cloud collaboration
may not conform to future operational “best
practices.”
Transitioning to
and operating “in the cloud” is a matter whose risks
and rewards are subject to conflicting strategies even amongst
companies who otherwise are considered to have best practices,
operationally. It is not knowable in advance whether our own
policies regarding the use of cloud computing, cloud data storage
or cloud collaboration in our use of information, our sharing of
information and our design of proprietary information assets will
conform to a future interpretation of “best practices”,
after cloud eco-system techniques and their implications are better
understood.
We rely on third party service providers which we may not be able
to control. This subjects us to risks for failure of performance in
development of our business plan.
We will at all
times in the pursuit of our goals rely on at least some expertise
that is external to our company. Despite best efforts to vet
the competency of service providers, it will not be possible to
fully appreciate the quality of their contribution until
after-the-fact, which may in some instances require second
attempts, corrections or new directions. We shall always seek
to mitigate our risk and liability arising from any failures of
performance that may arise; however, it is not possible to quantify
this in financial terms or predict it in operational terms.
The risk in our development work is inherently high and does
not diminish over time as we will continually focus on customer
problems that require new solutions yet to be created.
The loss of key personnel or the inability of replacements to
quickly and successfully perform in their new roles could adversely
affect our business.
We
depend on the leadership and experience of our key executive and
chairman, Brad Moynes. Mr. Moynes functions as our chairman and
executive officer, and as such, we are heavily dependent upon him
to conduct our operations. In 2018, the Company added two
additional directors which now brings the board to four directors.
We do not have key man insurance. If Mr. Moynes resigns or dies,
there could be a substantial negative impact upon our operations.
If that should occur, until we find other qualified candidates to
become officers and/or directors to conduct our operations, we may
have to suspend our operations or cease operating entirely. In that
event, it is possible you could lose your entire
investment.
Risks Related to this Offering and Our Stock
The market price of our shares may fluctuate
significantly.
The
market price and liquidity of the market for shares may be
significantly affected by numerous factors, some of which are
beyond our control and may not be directly related to our operating
performance. Some of the factors that could negatively affect the
market price of our shares include:
●
our
actual or projected operating results, financial condition, cash
flows and liquidity, or changes in business strategy or
prospects;
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equity
issuances by us, or share resales by our stockholders, or the
perception that such issuances or resales may occur;
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loss of
a major funding source;
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actual
or anticipated accounting problems;
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changes
in market valuations of similar companies;
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adverse
market reaction to any indebtedness we incur in the
future;
●
speculation in the
press or investment community;
●
price
and volume fluctuations in the overall stock market from time to
time;
●
general
market and economic conditions, and trends including inflationary
concerns, the current state of the credit and capital
markets;
●
significant
volatility in the market price and trading volume of securities of
companies in our sector, which are not necessarily related to the
operating performance of these companies;
●
changes
in law, regulatory policies or tax guidelines, or interpretations
thereof;
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operating
performance of companies comparable to us; and
●
short-selling
pressure with respect to shares of our shares
generally.
As
noted above, market factors unrelated to our performance could also
negatively impact the market price of our shares. One of the
factors that investors may consider in deciding whether to buy or
sell our shares is our distribution rate as a percentage of our
share price relative to market interest rates. If market interest
rates increase, prospective investors may demand a higher
distribution rate or seek alternative investments paying higher
dividends or interest. As a result, interest rate fluctuations and
conditions in the capital markets can affect the market value of
our shares. For instance, if interest rates rise, it is likely that
the market price of our shares will decrease as market rates on
interest-bearing securities increase.
We have broad discretion in the use of the net proceeds from this
offering and may not use them effectively.
Our
management will have broad discretion in the application of the net
proceeds from this offering and could spend the proceeds in ways
that do not improve our results of operations or enhance the value
of our common stock. The failure by our management to apply these
funds effectively could result in financial losses that could have
a material adverse effect on our business, cause the price of our
common stock to decline and delay the development of our products
and services.
If we have to raise capital by selling securities in the future,
your rights and the value of your investment in the Company could
be reduced.
If we issue debt securities, the lenders would have a claim to our
assets that would be superior to the stockholder rights. Interest
on the debt would increase costs and negatively impact operating
results. If we issue more common stock or any preferred stock, your
percentage ownership will decrease and your stock may experience
additional dilution, and the holders of preferred stock (called
preference securities in Canada) may have rights, preferences and
privileges which are superior to (more favorable) the rights of
holders of the common stock. It is likely the Company will sell
securities in the future. The terms of such future transactions
presently are not determinable.
If the market for
our common stock is illiquid in the future, you could encounter
difficulty if you try to sell your stock.
Our stock trades on the OTC "Pink" Marketplace but it
is not actively traded. If there is no active trading market, you
may not be able to resell your shares at any price, if at all. It
is possible that the trading market in the future will continue to
be "thin" or "illiquid," which could result in increased price
volatility. Prices may be influenced by investors' perceptions of
us and general economic conditions, as well as the market for
energy generally. Until our financial performance indicates
substantial success in executing our business plan, it is unlikely
that there will be coverage by stock market analysts will be
extended. Without such coverage, institutional investors are not
likely to buy the stock. Until such time, if ever, as such coverage
by analysts and wider market interest develops, the market may have
a limited capacity to absorb significant amounts of trading. As the
stock is a “penny stock,” there are additional
constraints on the development of an active trading market –
see the next risk factor.
The penny stock
rule operates to limit the range of customers to whom
broker-dealers may sell our stock in the market.
In general, "penny stock" (as defined in the SEC’s rule
3a51-1 under the Securities Exchange Act of 1934) includes
securities of companies which are not listed on the principal stock
exchanges, or the Nasdaq National Market or the Nasdaq Capital
Market, and which have a bid price in the market of less than
$5.00; and companies with net tangible assets of less than $2
million ($5 million if the issuer has been in continuous operation
for less than three years), or which has recorded revenues of less
than $6 million in the last three years.
As a "penny stock" our stock therefore is subject to the
SEC’s rule 15g-9, which imposes additional sales practice
requirements on broker-dealers which sell such securities to
persons other than established customers and "accredited investors"
(generally, individuals with net worth in excess of $1 million or
annual incomes exceeding $200,000, or $300,000 together with their
spouses, or individuals who are the officers or directors of the
issuer of the securities). For transactions covered by rule 15g-9,
a broker-dealer must make a special suitability determination for
the purchaser and have received the purchaser's written consent to
the transaction prior to sale. This rule may adversely affect the
ability of broker-dealers to sell our stock, and therefore may
adversely affect our stockholders' ability to sell the stock in the
public market.
Your legal recourse as a United
States investor could be limited.
The
Company is incorporated under the laws of British Columbia. Most of
the assets now are located in Canada. Our directors and officers
and the audit firm are residents of Canada. As a result, if any of
our shareholders were to bring a lawsuit in the United States
against the officers, directors or experts in the United States, it
may be difficult to effect service of legal process on those people
who reside in Canada, based on civil liability under the Securities
Act of 1933 or the Securities Exchange Act of 1934. In addition, we
have been advised that a judgment of a United States court based
solely upon civil liability under these laws would probably be
enforceable in Canada, but only if the U.S. court in which the
judgment were obtained had a basis for jurisdiction in the matter.
We also have been advised that there is substantial doubt whether
an action could be brought successfully in Canada in the first
instance on the basis of liability predicated solely upon the
United States' securities laws.
Because the risk factors referred to above, as well as other risks
not mentioned above, could cause actual results or outcomes to
differ materially from those expressed in any forward-looking
statements made by us, you should not place undue reliance on any
such forward-looking statements. Further, any forward-looking
statement speaks only as of the date on which it is made. We
undertake no obligation to update any forward-looking statement to
reflect events or circumstances after the date on which such
statement is made or reflect the occurrence of unanticipated
events. New factors emerge from time to time, and it is not
possible for us to predict which ones will arise. In addition, we
cannot assess the impact of each factor on our business or the
extent to which any factor, or combination of factors, may cause
actual results to differ materially from those contained in any
forward-looking statements.
DILUTION
The Company, for business purposes, may from time to time issue
additional shares, which may result in dilution of existing
shareholders. Dilution is a reduction in the percentage of a stock
caused by the issuance of new stock. Dilution can also occur when
holders of stock options (such as company employees) or holders of
other optionable securities exercise their options. When the number
of shares outstanding increases, each existing stockholder will own
a smaller, or diluted, percentage of the Company, making each share
less valuable. Dilution may also reduce the value of existing
shares by reducing the stock’s earnings per share. There is
no guarantee that dilution of the Common Stock will not occur in
the future.
PLAN OF DISTRIBUTION
We are
offering up to 100,000,000 shares of our common stock for $0.01 per
share, for a total of up to $1,000,000 in gross offering proceeds,
assuming all shares of common stock are sold. The minimum
investment for any investor is $10,000, unless such minimum is
waived by the Company, which may be done in its sole discretion on
a case-by-case basis. There is no minimum offering amount, and we
may sell significantly fewer shares of common stock than those
offered hereby. In fact, there can be no assurances that the
Company will sell any or all of the offered shares. At a closing,
the proceeds will be distributed to the Company and the associated
shares will be issued to investors. All proceeds we receive from
the offering will be available to us for uses set forth in the
“Use of Proceeds” section of this offering circular. If
there are no closings, the investments for this offering will be
promptly returned to investors, without deduction and without
interest.
We
believe that the total expenses of this offering will be
$100,000, regardless of the number of shares of common
stock that are sold.
Our
common stock is not now listed on any U.S. national securities
exchange; however, our stock is quoted on the OTC Markets Group
Inc.’s OTC "Pink" marketplace under the trading
symbol “DIGAF”. There is currently only a limited
market for our securities and there is no guarantee that a more
substantial or active trading market will develop in the future.
There is also no guarantee that our securities will ever trade on
any listed exchange. Accordingly, our shares should be considered
highly illiquid, which inhibits investors’ ability to resell
their shares.
Upon
this offering circular being qualified by the SEC, the Company may
offer and sell shares from time to time until all of the shares
registered are sold; however, this offering will terminate one year
from the initial qualification date of this offering circular,
unless extended or terminated by the Company. The Company may
terminate this offering at any time and may also extend the
offering term by 90 days.
Currently,
we plan to have our director and executive officers sell the shares
offered hereby on behalf of the Company on a
“best-efforts” basis. They will receive no discounts or
commissions. Our director and executive officers will deliver this
offering circular to those persons who they believe might have
interest in purchasing all or a part of this offering. The Company
may generally solicit investors; however, it must abide by the
“blue sky” regulations relating to investor
solicitation in the states where it will solicit
investors.
Our
directors and officers will not register as broker-dealers under
Section 15 of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) in reliance upon Rule 3a4-1. Rule 3a4-1
sets forth those conditions under which a person associated with an
issuer may participate in the offering of the issuer’s
securities and not be deemed to be a broker-dealer. The conditions
are that:
●
the
person is not statutorily disqualified, as that term is defined in
Section 3(a)(39) of the Securities Act, at the time of his
participation;
●
the
person is not at the time of their participation an associated
person of a broker-dealer; and
●
the
person meets the conditions of paragraph (a)(4)(ii) of Rule 3a4-1
of the Exchange Act, in that he (i) primarily performs, or is
intended primarily to perform at the end of the offering,
substantial duties for or on behalf of the issuer otherwise than in
connection with transactions in securities; and (ii) is not a
broker or dealer, or an associated person of a broker or dealer,
within the preceding 12 months; and (iii) does not participate in
selling and offering of securities for any issuer more than once
every 12 months other than in reliance on paragraphs (a)(4)(i) or
(a)(4)(iii) of Rule 3a4-1 of the Exchange Act.
Our
officers and directors are not statutorily disqualified, are not
being compensated, and are not associated with a broker-dealer.
They are and will continue to hold their positions as officers or
directors following the completion of the offering and have not
been during the past 12 months and are currently not brokers or
dealers or associated with brokers or dealers. They have not nor
will they participate in the sale of securities of any issuer more
than once every 12 months.
As of
the date of this offering circular, we have not entered into any
arrangements with any selling agents for the sale of the
securities; however, we may engage one or more selling agents to
sell the securities in the future. If we elect to do so, we will
supplement this offering circular as appropriate.
All
subscription agreements and wire transfers received by the Company
for the purchase of shares are irrevocable until accepted or
rejected by the Company and should be delivered to the Company as
provided in the subscription agreement. A subscription agreement
executed by a subscriber is not binding on the Company until it is
accepted on our behalf by the Company’s Chief Executive
Officer or by specific resolution of our board of directors. Any
subscription not accepted within 30 days will be automatically
deemed rejected. Once accepted, the Company will arrange the
delivery of the shares electronically via DWAC to the purchaser
within five days upon receipt of the funds from the purchaser;
otherwise purchasers’ shares will be issued and held in
book-entry format at the Company’s Transfer Agent until
further instruction are provided by the purchaser.
Investment Limitations
Generally,
no sale may be made to you in this offering if the aggregate
purchase price you pay is more than 10% of the greater of your
annual income or net worth (please see below on how to calculate
your net worth). Different rules apply to accredited investors and
non-natural persons. Before making any representation that your
investment does not exceed applicable thresholds, we encourage you
to review Rule 251(d)(2)(i)(C) of Regulation A. For general
information on investing, we encourage you to refer to
www.investor.gov.
Because
this is a Tier 1, Regulation A Offering, most investors must comply
with the 10% limitation on investment in the offering. The only
investor in this offering exempt from this limitation is an
“accredited investor” as defined under Rule 501 of
Regulation D under the Securities Act (an “Accredited
Investor”). If you meet one of the following tests you should
qualify as an Accredited Investor:
●
You are
a natural person who has had individual income in excess of
$200,000 in each of the two most recent years, or joint income with
your spouse in excess of $300,000 in each of these years, and have
a reasonable expectation of reaching the same income level in the
current year;
●
You are
a natural person and your individual net worth, or joint net worth
with your spouse, exceeds $1,000,000 at the time you purchase
shares in this offering (please see below on how to calculate your
net worth);
●
You are
an executive officer or general partner of the issuer or a manager
or executive officer of the general partner of the
issuer;
●
You are
an organization described in Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended, or the Code, a corporation, a
Massachusetts or similar business trust or a partnership, not
formed for the specific purpose of acquiring the shares in this
offering, with total assets in excess of $5,000,000;
●
You are
a bank or a savings and loan association or other institution as
defined in the Securities Act, a broker or dealer registered
pursuant to Section 15 of the Exchange Act, an insurance company as
defined by the Securities Act, an investment company registered
under the Investment Company Act of 1940, or a business development
company as defined in that act, any Small Business Investment
Company licensed by the Small Business Investment Act of 1958 or a
private business development company as defined in the Investment
Advisers Act of 1940;
●
You are
an entity (including an Individual Retirement Account trust) in
which each equity owner is an accredited investor;
●
You are
a trust with total assets in excess of $5,000,000, your purchase of
shares in this offering is directed by a person who either alone or
with his purchaser representative(s) (as defined in Regulation D
promulgated under the Securities Act) has such knowledge and
experience in financial and business matters that he is capable of
evaluating the merits and risks of the prospective investment, and
you were not formed for the specific purpose of investing in the
shares in this offering; or
●
You are
a plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, if such
plan has assets in excess of $5,000,000.
In
various states, the securities may not be sold unless these
securities have been registered or qualified for sale in such state
or an exemption from registration or qualification is available and
is complied with. We have not yet applied for “blue
sky” registration in any state, and there can be no assurance
that we will be able to apply, or that our application will be
approved and our securities will be registered, in any state in the
U.S. We intend to sell the shares only in the states in which this
offering has been qualified or an exemption from the registration
requirements is available, and purchases of shares may be made only
in those states.
Should
any fundamental change occur regarding the status of this offering
or other matters concerning the Company, we will file an amendment
to this offering circular disclosing such matters.
OTC Markets Considerations
The OTC
Markets Group Inc. is separate and distinct from the New York Stock
Exchange and Nasdaq stock market or other national exchange.
Neither the New York Stock Exchange or Nasdaq has a business
relationship with issuers of securities quoted on the OTC Markets.
The SEC’s order handling rules, which apply to New York Stock
Exchange and Nasdaq-listed securities, do not apply to securities
quoted on the OTC Markets.
Although
other national stock markets have rigorous listing standards to
ensure the high quality of their issuers, and can delist issuers
for not meeting those standards; the OTC Markets Group Inc. has
limited listing standards. Rather, it is the market maker who
chooses to quote a security on the system, files the application,
and is obligated to comply with keeping information about the
issuer in its files.
Investors
may have greater difficulty in getting orders filled than if we
were on Nasdaq or other exchanges. Trading activity in general is
not conducted as efficiently and effectively on OTC Markets as with
exchange-listed securities. Also, because OTC Markets stocks are
usually not followed by analysts, there may be lower trading volume
than New York Stock Exchange and Nasdaq-listed
securities.
How to Subscribe
US
investors who participate in this offering will be required to
transmit their funds as instructed by the Company, and then used to
complete securities purchases, or returned if this offering fails
to close.
Non-US
investors who participate in this offering will be required to
transmit their funds as instructed by the Company, and then used to
complete securities purchases, or returned if this offering fails
to close.
After
we receive your complete, executed subscription agreement and the
funds required under the subscription agreement have been
transferred to our account, we have the right to review and accept
or reject your subscription in whole or in part, for any reason or
for no reason. We will return all monies from rejected
subscriptions immediately to you, without interest or
deduction.
Upon
our acceptance of a subscription agreement, we will countersign the
subscription agreement and issue the shares subscribed at closing.
Once you submit the subscription agreement and it is accepted, you
may not revoke or change your subscription or request your
subscription funds. All accepted subscription agreements are
irrevocable.
USE OF PROCEEDS
The Company seeks to raise gross proceeds of $1,000,000 from the
sale of Securities in this Offering. The Company intends to apply
these proceeds substantially as set forth herein, subject only to
reallocation by Company Management in the best interests of the
Company. All proceeds from this offering will become
immediately available to us and may be used as they are
accepted.
|
Percentage
of Offering Sold
|
100%
|
75%
|
50%
|
25%
|
|
Gross Offering
Proceeds
|
$1,000,000
|
$750,000
|
$500,000
|
$250,000
|
|
Use
of Proceeds:
|
|
|
|
|
|
General Working
Capital (1)
|
$800,000
|
$655,000
|
$430,000
|
$230,000
|
|
Legal
Fees
|
$75,000
|
$15,000
|
$15,000
|
$15,000
|
|
Accounting
Fees
|
$25,000
|
$5,000
|
$5,000
|
$5,000
|
|
Reserve/contingency
|
$100,000
|
$75,000
|
$50,000
|
$0
|
|
TOTAL
|
$1,000,000
|
$750,000
|
$500,000
|
$250,000
|
(1) As it relates to general working capital, use of proceeds will
be for research and development of the Securter patent pending
application that will enable FinTech to be more secure
with online payments for Card not Present “CNP”
transactions. The Securter Agreement is attached to this Offering
Statement as Exhibit 6.4. The anticipated technology
development costs and key personnel hires in year-one will be
approximately US$1.14m. The Securter Systems team will consist of
one full-time CTO, CINO or VP of R&D, three full-time company
developers, scientific adviser, one full-time technical support
person, web programmer, web designer, 3rd party software
development company and HW development company. Additional PCI and
EMV L2 certifications will be approximately
US$190k.
In
the event that the Offering is less than fully subscribed, the
Company plans to raise capital from other financial instruments to
fund operations related to Securter Systems and/or reduce planned
staffing/hires which may delay implementation of the proposed
business plan.
DESCRIPTION OF
BUSINESS
Overview
The
Company is a British Columbia corporation, incorporated on December
28, 2000.
The
Company was incorporated under the name Black Diamond Holdings
Corporation. On June 26, 2007, the Company changed its name from
Black Diamond Holdings Corporation to Black Diamond Brands
Corporation. On November 21, 2008 the Company changed its name to
Rainchief Energy Inc. and on February 19, 2015 to Bit-X Financial
Corporation. On October 27, 2015 the Company changed its name to
Digatrade Financial Corporation. The
Company is listed as a fully reporting issuer on the FINRA OTC
Bulletin Board and trades under the symbol
“DIGAF”.
On February 26,
2019, the Company executed a
definitive agreement (the “Securter Agreement”) with
Securter Inc., a private Canadian Corporation
(“Securter”) that is developing a proprietary,
patent-pending credit card payment platform to significantly
increase the security of online credit card payment processing.
Securter technology reduces immense losses by financial
institutions and merchants that arise from fraudulent credit card
use and protects cardholder privacy by eliminating the distribution
of personal information to third parties. With the current
worldwide surge in online commerce expected to continue for years
to come, the problem of credit card security is large and
growing.
Pursuant
to the terms of the Securter Agreement, the parties agreed to form
a subsidiary of Digatrade, Securter Systems, Inc. (“Securter
Systems”), and assign all of the assets and intellectual
property of Securter into Securter Systems. Securter Systems has
been created to launch and commercialize the Securter technology
under Digatrade.
The
Securter Agreement with Securter sets out that Securter’s
technology will be launched and commercialized under Securter
Systems as a Digatrade subsidiary. The consummation of the Securter
Agreement is subject to certain milestone events, including the
contribution of capital by Digatrade to Securter Systems which it
plans to raise in this offering.
Securter
Systems
Overview
Securter Systems is
a newly-formed subsidiary of Digatrade. The name Securter describes
both the technology itself and Securter Systems that is developing
a proprietary payment platform that increases the security of
credit card holder information and enhances the authentication of
online credit card purchases. These enhancements help online
merchants and banks significantly reduce Card-Not-Present
(“CNP”) fraud. CNP Fraud losses are estimated at over
$6 Billion annually in North America.
Securter Systems
can also reduce the costs associated with PCI DSS compliance, a
payments industry processing protocol. Securter Systems technology,
which is now patent pending, focuses on cardholder identification
for transaction verification.
Following EMV (a
credit card cooperative association) technology migration to reduce
counterfeit fraud at “point of sale” (POS), criminals
are currently able to steal credit card information from personal
computers & open public networks. Securter Systems has
researched and is developing the software and hardware of a next
generation of online user authentication that is based on remote
processing of EMV/smart credit/debit cards. Securter Systems’
payment platform adapts and extends conventional and existing
methods, by going beyond the most reliable EMV technology
(currently intended for physical Point of Sales / POS) to secure
EMV online payments as well.
The research and
development is related to the cyber-security field, in order to
provide robust system architecture without dependence upon any kind
of personal computer vulnerabilities. This is possible because all
operations are performed on two trusted sides – the bank side
and a smart-card secured microprocessor. This eliminates the need
for costly risk management by intermediate servers (that is the
norm today).
Vision
Our belief is that
enormous resources are being wasted on fraudulent Card-Not-Present
(CNP) transactions. We aim to bring a convenient, more affordable
and safer solution to cardholders, merchants and financial
institutions. We intend to innovate the payment space by
collaborating with financial institution stakeholders. Our revenue
model is to share in the resulting transaction fees, by being an
integral part of the transaction processing.
History
The initial
technology idea was introduced by Securter’s founders. In
2013 an agreement was signed by them with Mr. Steve Epstein, now
serving as CEO of Securter, to develop a business plan and to find
ways to adapt the technology to the marketplace. Since 2013
Securter‘s founders have achieved Technology Readiness Level
(TRL) 6 - which includes a working prototype tested in the lab
environment. On February 26th 2019 Securter’s founders
approved the Securter Agreement with us. This was reported by SEC
Form 6-K, which filing included a copy of the agreement. The
Securter Agreement called for the formation of a new Digatrade
subsidiary (Securter Systems Inc) to receive and hold all the
Securter founders’ technology related assets and intellectual
property, including existing and future patent
rights.
Under the
agreement, Digatrade will fund our new subsidiary up to US $3
Million in operational financing. This will enable the subsidiary
to make its technology market-ready for launch through alliances
with established payment service providers and other FinTech
industry channels.
Previously,
Securter’s founders, through their predecessor company,
Securter Inc., submitted a provisional patent under PCT rules
(Patent Community Treaty), and received letters of intent for
partnership / collaboration with companies specializing in
cyber-security and ASIC design & development, and had been
accepted into the IBM Global Entrepreneur
Program.
The Market
Online shopping is
a thriving sector within world commerce. Retail e-commerce sales
worldwide are on-track to nearly double between 2016 and 2020.
Internet-savvy buyers are determined to spend time researching
products online and reading online reviews in order to get the best
deal possible. Around 42 percent of U.S. consumers have searched
and purchased products or services online, while 14 percent prefer
searching online and buying in store. Retail sales from worldwide
electronic commerce are expected to grow from $2.3 trillion U.S.
dollars in 2017 to almost $4.9 trillion in
2021.
Technical and Commercial objectives
Securter will
proceed further with the development of its online payments system
to become fully ready for demonstrations in an operational
environment and field testing by 2020.
Securter Systems
currently has a functional “Alpha” prototype and will
proceed with the development of its online payments system that
will be available for demonstrations in an operational environment
and field testing.
Projected
timetable: Securter Systems will proceed in the 8 months post
Regulation A funding (Phase 1) with the Payment Card Industry Data
Security Standard (PCI DSS) Compliance that applies to companies
that process and transmit cardholder data; Payment Service Provider
(PSP) integration; Mobile Application development; Server Side
(Back End) and Website (Front End) development. By the end of this
phase, Securter will start a real-world pilot with on-line
merchants. We already have interested prospective implementation
partners. This is why we believe that our transaction fee revenue
sharing model is realistic.
In Phase 2,
Securter Systems will make improvements based on Phase 1 tests and
demonstrations (developmental testing and evaluation of whether the
Securter platform meets operational requirements) and testing
actual applications of the technology in its final form under
real-life conditions.
Costs of Development
Approximately
$30,000 in costs have incurred to date and thousands of working
hours in R&D and business development.
The anticipated
technology development costs and key personnel hires in year-one
will be approximately US$1.14m. The Subsidiary team will consist of
one full-time CTO, CINO or VP of R&D, three full-time company
developers, scientific adviser, one full-time technical support
person, web programmer, web designer, 3rd party software
development company and HW development company. Additional PCI and
EMV L2 certifications will be approximately
US$190k.
Securter
Agreement
Structure
On March 20, 2019,
Digatrade incorporated Securter
Systems Inc. as a wholly owned
subsidiary.
On
April 8, 2019, Securter Systems received a transfer of Intellectual
Property, including Patents and Trademarks from Securter Inc.
Subject to the terms and conditions of the Agreement with Securter
Inc., Securter Systems will issue to shareholders 30,000,000 Class
“A” Voting Shares “Shares” and Digatrade
has the option to purchase via subscription up to 12,900,000 Shares
at a price of US$0.23, for a total investment of up to US$3.0m. As
of the date of this letter no shares have been
issued.
Board of Directors
As
per terms of the Digatrade and Securter agreement the board of
directors of Securter Systems shall initially be the following
three (3) members:
(a)
One
third (1/3) of the Board must be represented by Digatrade nominees,
which individual shall initially be James D.
Romano;
(b)
One
third (1/3) of the Board must be represented by Securter nominees,
which individual shall initially be Steve Epstein;
and
(c)
One
third (1/3) of the Board must be represented by an independent
nominee mutually acceptable to both Digatrade and Securter, which
individual shall initially be Andrei Grenader.
Termination
Should
Digatrade fail to purchase Shares in Securter Systems within 120
days from the date of the Agreement and 90 days from the date of
the any previous purchase then Digatrade’s right to purchase
Common Stock in Securter Systems shall be terminated. Digatrade
will retain all shares purchased regardless of
termination.
Technology Rights
All
developments, rights to the technology will be the exclusive
property of Securter Systems and it will have sole discretion and
responsibility to deal with developments.
Historical
Operations
Prior to the
Securter Agreement with Securter Inc., on March 31, 2015, the
Company entered into an agreement with Mega Ideas Holdings Limited,
dba ANX (“ANXPRO and ANX International”), a company
incorporated and existing under the laws of Hong Kong. ANX owns a
proprietary trading platform and provides operational support
specializing in blockchain development services and exchange and
transaction services for crypto-currencies e.g. Bitcoin and other
digital assets. Effective October 17, 2018 the Company closed the
online retail trading platform and shared liquidity order book with
ANX International owing to low transaction volumes. The Company
will continue to evaluate opportunities and continue with research
and development related services in the digital-asset industry for
prospective institutional customers while continuing to seek new
opportunities within the blockchain and the financial technology
sector unrelated to facilitating trading
activities.
Employees
The
Company currently has two officers and no employees. Employees will
be added as required.
Legal Proceedings
We are
not currently a party to any material legal proceedings. Although
we are not currently a party any material legal proceedings, from
time to time, we may be subject to various other legal proceedings
and claims that are routine and incidental to our business.
Although some of these proceedings may result in adverse decisions
or settlements, management believes that the final disposition of
such matters will not have a material adverse effect on our
business, financial position, results of operations or cash
flows.
DESCRIPTION OF PROPERTY
The
Company does not own any real estate. The Company’s address
is 1500 West Georgia Street, Suite 1300, Vancouver, British
Columbia, Canada, V6C 2Z6. The Company currently has no policy with
respect to investments or interests in real estate, real estate
mortgages or securities of, or interests in, persons primarily
engaged in real estate activities.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
The
Company is a British Columbia corporation, incorporated on December
28, 2000. The registered and corporate office is at 1500 West
Georgia Street, Suite 1300, Vancouver, British Columbia, Canada,
V6C 2Z6. The Company does not have an agent in the United
States.
The
Company was incorporated under the name Black Diamond Holdings
Corporation. On June 26, 2007, the Company changed its name from
Black Diamond Holdings Corporation to Black Diamond Brands
Corporation. On November 21, 2008 the Company changed its name to
Rainchief Energy Inc. and on February 19, 2015 to Bit-X Financial
Corporation. On October 27, 2015 the Company changed its name to
Digatrade Financial Corporation.
The
Company is listed as a fully reporting issuer on the FINRA OTC
Bulletin Board and trades under the
symbol “DIGAF”.
The Company is introducing the
next-generation of security and efficiency to
the world’s credit card payment processing
system for online purchases. This patent-pending
technology can dramatically reduce financial losses experienced by
financial institutions and merchants due to unauthorized or
fraudulent use of credit cards for online purchases.
Organization
Structure
As of the date of
this report the Company has four wholly-owned subsidiaries,
Digatrade Limited (a British Columbia corporation), Digatrade
Limited (a Nevada corporation), Digatrade (UK) Limited (a United
Kingdom corporation) and Securter Systems Inc., (a Canadian Federal
Corporation).
Recent
corporate developments
During the period
commencing on January 1, 2018, the Company experienced the
following corporate developments:
Discontinuance
of trading platform
In March 2015, the
Company entered into an agreement with Mega Ideas Holdings Limited,
dba ANX (“ANX”), a company incorporated and existing
under the laws of Hong Kong. ANX owns a proprietary trading
platform and provides operational support specializing in
blockchain development services and exchange and transaction
services for crypto-currencies. Effective October 17, 2018 the
Company closed the online retail trading platform and shared
liquidity order book with ANX International owing to low
transaction volumes. The Company will continue to evaluate
opportunities and continue with research and development related
services in the digital-asset industry for prospective
institutional customers while continuing to seek new opportunities
within the blockchain and the financial technology sector unrelated
to facilitating trading activities.
On February 5, 2019
the company entered into a Letter of Intent with Securter Inc.
(“Securter”), a private Canadian Corporation that is
developing a proprietary, patent-pending credit card payment
platform to significantly increase the security of online credit
card payment processing. The purpose is to reduce financial losses
being experienced by financial institutions and merchants from
fraudulent credit card use, while also better protecting cardholder
privacy. The Letter of Intent sets out that the new technology will
be launched and commercialized through a Digatrade
subsidiary.
On February 26,
2019 the Company executed a Definitive Agreement with Securter. The
Definitive Agreement with Securter sets out that Securter’s
technology will be launched and commercialized as Securter Systems
Inc, a Digatrade subsidiary, a company incorporated in the Province
of Ontario.
Convertible
Promissory Notes
During 2018 the
Company issued Convertible Promissory Notes totaling $730,226
(US$564,000).
During the three
months ended March 31, 2019, the Company issued Convertible
Promissory Notes totalling $242,685
(US$183,000).
The notes are
unsecured, bear interest at between 10% and 12% per annum from the
date of issuance and mature between six months and one year after
the date of issuance.
Any amount of
interest or principal that is not paid on the maturity date bears
interest at 22% to 24% per annum from the maturity date to the date
of payment. Any amount of principal and/or interest that is unpaid
may be converted, at the option of the holder, in whole or in part
into common share of the Company at a price equal to 61% of the
lowest closing bid price for the Company’s stock as reported
on the OTC during the fifteen trading days prior to a Notice of
Conversion. The Company may prepay the principal and all accrued
interest at any time between the date of issuance and the maturity
date, together with a prepayment premium of between 15% and 40% of
the amount prepaid, determined by reference to the date of
repayment.
On June 1, 2018 the
Company issued a Convertible Promissory Note in the amount of
$64,820 (US$50,000) pursuant to a consulting
contact.
The note is
unsecured and matured on December 2, 2018. The note may be
converted into common shares of the Company in whole or in part at
the option of the holder upon terms to be determined by the Company
either ten days prior to repayment of the note or the maturity
date, whichever shall occur first. The note becomes immediately
payable should the Company complete financing in excess of
US$5,000,000 prior to the maturity date, and bears interest at 3%
per annum compounded annually should the Company default on the
note. During 2018 the Company repaid $31,761 (US$24,500) of this
Note. The remaining portion ($US 25,500) was repaid subsequent to
year-end.
Issuance
of common shares on Conversion of Convertible Promissory
Notes
During 2018 the
Company converted Convertible Promissory Notes totaling $1,722,633
(US$1,358,101) into 176,150,754 common shares of the
Company.
Appointment
of Directors
On October 24, 2018
the Company appointed Mr. James Romano to the Board of
Directors.
On November 20,
2018 the Company appointed Mr. Timothy Delaney to the Board of
Directors.
Consulting
Contracts
On February 1, 2018
the Company entered into two consulting agreements for the
provision of business strategy and compliance services. The Company
issued 600,000 common shares valued at $7,373.
Issuance
of Common Series B Shares
On January 2, 2019,
the Company passed a resolution to increase the authorized number
of Class “B” common shares from 100,000 to
1,100,000.
On the same day,
the Company issued 1,000,000 Class “B” common shares at
$0.0001 per share for total proceeds of $100 to a shareholder who
is also a Director and Officer of the Company.
Grants
of Options
On February 14,
2019, the Company granted 5,750,000 options to directors of the
Company and 4,250,000 options to consultants. All grants of options
were made under the Company’s Stock Option
Plan.
Selected
Annual Information
The following table
provides a brief summary of the Company’s annual financial
data for the latest three fiscal years ended December 31,
2016:
|
|
Years ended
December 31,
|
||
|
|
2016
|
2017
|
2018
|
|
|
|
|
|
|
Net
loss
|
(172,969)
|
(674,520)
|
(1,122,820)
|
|
Basic and diluted
loss per share (post-share consolidation)
|
(0.01)
|
(0.01)
|
(0.01)
|
|
|
|
|
|
|
Total
assets
|
138,725
|
960,108
|
527,193
|
|
Total
liabilities
|
659,889
|
2,030,117
|
778,132
|
Results of Operations
For
the years ended December 31, 2018, 2017, and 2016, the Company had
net losses of $1,122,820, $674,520 and $172,969,
respectively.
Accounting,
Audit and Legal expenses decreased by $5,508 from $105,652 for the
year ended December 31, 2017 to $100,144 for the year ended
December 31, 2018. Accounting and audit fees increased by $2,559;
legal expenses in connection with the issuance of Convertible
Promissory Notes increased by $4,359 and general corporate legal
expenses decreased by $12,426.
Accounting,
Audit and Legal expenses increased by $59,130 to $105,562 for the
year ended December 31, 2017 from $46,523 for the year ended
December 31, 2016. Accounting and audit fees increased by $789;
legal expenses in connection with the issuance of Convertible
Promissory Notes increased by $32,295 and general corporate legal
expenses increased by $26,049.
Consulting
expense for the year ended December 31, 2018 increased by $169,210
to $307,402 as compared with $138,192 for the year ended December
31, 2017, and by $52,043 as compared with $86,149 for the year
ended December 31, 2016, as a result of increased corporate
activity during the respective periods.
During
the year ended December 31, 2018 the Company incurred Filing and
Transfer Agents Expenses in the amount of $26,331 as compared with
$7,866 incurred during the year ended December 31, 2017, a increase
of $18,465, as a result of increased filing activity during the
period. Filing and Transfer Agents Fees for the year ended December
31, 2017 decreased by $4,950 from $12,816 for the year ended
December 31, 2016 to $7,866 for the year ended December 31, 2017 as
a result of decreased corporate activity during that
year.
During
the year ended December 31, 2018 the Company incurred $189,376 in
interest expense on Convertible Promissory Notes and bank Charges
expense as compared with $30,669 and $29,559 for the years ended
December 31, 2017 and 2016, respectively.
The
Company did not incur any Investor Relations expenses during the
years ended December 31, 2018 and 2016. During the year ended
December 31, 2017, the Company entered into investor relations
contracts for a total cost of $107,103.
Management
fees for the year ended December 31, 2018 amount to $241,950 as
compared with $105,000 for the year ended December 31, 2017, and
$60,000 for the year ended December 31, 2016. The increased
expenditure during the years ended December 31, 2018 and 2017
resulted from increased corporate activities during the periods
under review.
The
Company incurred Exchange Platform Development Costs in the amount
of $102,683 during the year ending December 31, 2018, as compared
with $104,591 incurred during the year ended December 31, 2017 and
$111,734 incurred during the year ended December 31, 2016. The
reduction in these costs resulted from the renegotiation of the
agreement with the platform provider during 2017 and costs related
to certain development projects in 2015 which were not continued in
2016 and 2017. The Company will not incur further development
expenditures as a consequence of the termination of the exchange
trading platform agreement with ANX.
The
Company incurred $12,281 in Administrative expenses during the year
ended December 31, 2018 as compared with $7,137 during the year
ended December 31, 2017, and increase of $5,144. The Company did
not incur Administrative expenses for the years ended December 31,
2016. Administrative expenditure is comprised of travel, office and
website development expenses.
The
Company incurred Finders Fees in the amounts of $123,101 and
$109,033 in connection with the issuance of convertible promissory
notes during the years ended December 31, 2018 and 2017,
respectively.
The
Company incurred a loss on foreign exchange of $26,711 for the year
ended December 31, 2018, as compared with gains on foreign exchange
of $40,723 and $13,238 for the years ended December 31, 2017 and
2016, respectively. The losses and gain resulted from changes in
the foreign currency exchange rates between the Canadian and US
Dollars.
During
the year ended December 31, 2016 the Company earned $119,600 in
Coin Development Fees in connection with the joint venture
agreement to develop a diamond-backed digital
currency.
During
the years ended December 31, 2016, the Company realized net gains
on the settlement of certain debts in the amounts of $41,406. The
Company did not realize net gains or incur net losses on settlement
of debts in the years ending December 31, 2018 and
2017, respectively.
Financial position
As
at December 31, 2018, the Company had a working capital deficiency
of $257,432 as compared with a working capital deficiency of
$782,107 as at December 31, 2017, a decrease of $524,675. The
decrease in working capital deficiency during the year ended
December 31, 2018 is due to decreases in Cash of $633, Accounts
Receivable of 297,309 and Prepaid Expenses of $137,10; offset by
decreases in Trade and Other Payables of $20,934, Liabilities to
Customers of $297,309 and Current portion of Convertible Notes
Payable of $639,347, and an increase in of $2,128 in GST
Recoverable.
Liquidity and Capital Resources
During
the year ended December 31, 2018 the Company raised
$686,590 by the issuance of Convertible Promissory
Notes (year ended December 31, 2017
-$1,642,122) and re-paid a convertible Promissory
Notes in the amount of 31,762 (year ended December
31.
Changes
in working capital accounts during the year ended December 31,
2018 consumed $104,828 (year
ended December 31, 2015 provided
$258,322).
During
the year ended December 31, 2018, the Company used
cash in the amount of $760,289 to fund the Company's
continuing operations (year ended December 31, 2017
– $693,347).
Quarterly Disclosure – Eight Quarters Preceding the Most
Recently Completed Financial Year
The
following table sets forth selected unaudited financial information
prepared by management of the Company.
|
|
Three months ended
|
|||
|
|
March 31,
2018
|
June 30,
2018
|
September 30,
2018
|
December 31,
2018
|
|
|
|
|
|
|
|
Revenues
|
-
|
-
|
-
|
-
|
|
Net
profit (loss)
|
297,323
|
267,777
|
85,572
|
472,150
|
|
Basic
and Diluted profit (loss) per share (post-share
consolidation)
|
(0.01)
|
(0.006)
|
(0.001)
|
(0.005)
|
Earnings Information
The Company has not
paid any dividends on its common shares. The Company has no present
intention of paying dividends on its common shares as it
anticipates that all available funds will be invested to finance
the growth of its business.
Transactions with Related Parties
As
reported in the audited consolidated financial statements for the
year ended December 31, 2018, the Company was involved in certain
transactions with related parties:
The Company
incurred management fees for services provided by key management
personnel for the years ended December 31, 2018, 2017 and 2016, as
described below.
|
|
2018
|
2017
|
2016
|
|
|
$
|
$
|
$
|
|
|
|
|
|
|
Management
Fees
|
241,950
|
105,000
|
60,000
|
During the year
ended December 31, 2018, the Company incurred consulting fees for
services provided by Directors of the Company in the amount of
$12,900 (2017 - $11,296).
Significant Accounting Policies
The
Company’s critical accounting estimates are described in the
Company’s 2018 Consolidated Annual Financial
Statements.
New Accounting Standards Not Yet Adopted
The
accounting standard, amendment, and interpretation listed below is
issued but not yet effective up to the date of issuance of the
Company’s consolidated financial statements. The Company
intends to adopt the following standard and interpretation, if
applicable, when it becomes effective. The Company has not yet
determined the impact of this standard on its consolidated
financial statements.
IFRS
16 – Leases
IFRS 16 Leases
replaces IAS 17 – Leases and requires lessees to account for
leases on the statement of financial position by recognizing a
right to use asset and lease liability. The standard is effective
for annual period beginning on or after January 1, 2019, with
earlier adoption permitted.
The Company
anticipates that the application of this standard, amendments,
revisions and interpretations will not have a material impact on
the results and financial position of the
Company.
Off Balance Sheet Arrangements
The
Company has not entered into any material off-balance sheet
arrangements such as guarantee contracts, contingent interests in
assets transferred to unconsolidated entities, derivative financial
obligations, or with respect to any obligations under a variable
interest equity arrangement.
Financial Instruments
a)
Financial Instruments
The
financial instrument guidelines require all financial assets,
except those held to maturity and derivative financial instruments,
to be measured at fair market value. All financial liabilities are
measured at fair value if they are held for trading. Other
financial liabilities are measured at amortized
cost.
The
Company classifies its financial instruments into one of the
following balance sheet categories:
●
Held-for-trading
financial assets and liabilities that are initially measured at
fair value and where subsequent changes in fair value are
recognized in the statement of operations;
●
Available-for-sale
financial assets that are initially measured at fair value and
where subsequent changes in fair value are recorded in other
comprehensive income until the investment is derecognized or
impaired at which time the amounts are transferred to and recorded
in net income; and
●
Held-to-maturity
investments, loans and receivables, or other financial liabilities
– all of which are initially measured at cost and where
subsequent changes in cost are amortized using the effective
interest rate method.
Accordingly,
the Company has classified its financial instruments as
follows:
●
Cash
is classified as financial assets at fair value through profit or
loss and accordingly carried at its fair value;
●
Bank
indebtedness is classified as financial liabilities at fair value
through profit or loss and accordingly carried at its fair value;
and
●
Trade
and other payables and promissory notes are classified as other
financial liabilities and are currently carried at their amortized
cost.
The
Company undertakes certain transactions in foreign currencies
denominated in U.S. dollars and as such is subject to risk due to
fluctuations in exchange rates. The Company does not use derivative
instruments to hedge exposure to foreign exchange rate
risk.
Internal Control over Financial Reporting
As
at the date of this report, management is not aware of any change
in the Company’s internal control over financial reporting
that has materially affected, or is reasonably likely to materially
affect, the Company’s internal control over financial
reporting.
Outstanding Share Data
(a)
Common shares
Authorized
Unlimited
number of common shares, participating, voting (voting right of 1
vote per share), and no par value.
1,100,000
Class “B” Common Shares, non-participating, voting
(voting right of 1,000 votes per share) and no par
value.
Issued and outstanding as at December 31, 2018
226,411,904
Common Shares for a net consideration of
$6,047,899.
100,000
Class B Common Shares for a net consideration of
$100
(b)
Stock Options
Outstanding
stock options as at December 31, 2018 –
Nil.
Share Purchase
Warrants
(c)
Outstanding
share purchase warrants as at December 31, 2018 -
Nil:
DIRECTORS, EXECUTIVE
OFFICERS AND SIGNIFICANT EMPLOYEES
Our
directors and executive officers are as follows:
|
Name
|
Position
|
Age
|
Term of
Office
|
|
Brad J.
Moynes
|
President,
Chief Executive Officer and Chairman of the Board
|
49
|
December
2000-Present
|
|
Tyrone
Docherty
|
Director
|
58
|
July
10, 2016-Present
|
|
Timothy
Delaney
|
Director
|
65
|
November
20, 2018 - Present
|
Brad J. Moynes: Mr. Moynes has worked in the public
markets and business management since 2000 offering services to
private and public companies in sectors including Financial
Technology, Internet Commerce, Online Security, Payment Processing,
Software Development, Mining & Energy. Mr. Moynes has
held titles including CEO, President & Director.
Currently the President & CEO of Digatrade Financial Corp (a
company developing more secure FinTech
for online payments including card not present "CNP"
transactions). Areas of expertise include corporate finance
with funding mechanisms successfully raising over
$25.0m.
Tyrone Docherty: Current CEO of Deer Horn Capital
“DHC” and former President & CEO of Quinto Mining
Inc., where with limited resources in a difficult market he raised
more than $30 million and advanced a Quebec iron ore property to a
viable project. Sold Quinto to Consolidated Thompson Iron Mines in
June 2008 for a share value equal to $175M. Consolidated Thompson
eventually sold to Cliffs Resources for $4.9B. From 2012 to 2018,
Tyrone was Director and Chairman of Mason Graphite Inc. Mr.
Docherty has worked in the financial and minerals markets for over
30 years.
Timothy G. Delaney: Mr. Delaney graduated with a B. Comm
(1979) from the University of British Columbia. He has been active
in commercial real estate in both sales and development. He also
has extensive experience in corporate filings and due diligence of
public companies. From 2003 to 2014 he was the founder, principal,
and managing partner for the day to day operations of a retail
company with sales in excess of $6,000,000.
Family Relationships
There
are no family relationships among and between the issuer’s
directors, officers, persons nominated or chosen by the issuer to
become directors or officers, or beneficial owners of more than ten
percent of any class of the issuer’s equity
securities.
Legal Proceedings
No
officer, director, or persons nominated for such positions,
promoter, control person or significant employee has been involved
in the last five years in any of the following:
●
Any
bankruptcy petition filed by or against any business of which such
person was a general partner or executive officer either at the
time of the bankruptcy or within two years prior to that
time,
●
Any
conviction in a criminal proceeding or being subject to a pending
criminal proceeding (excluding traffic violations and other minor
offenses),
●
Being
subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of
business, securities or banking activities,
●
Being
found by a court of competent jurisdiction (in a civil action), the
Securities Exchange Commission or the Commodity Futures Trading
Commission to have violated a federal or state securities or
commodities law, and the judgment has not been reversed, suspended,
or vacated,
●
Having
any government agency, administrative agency, or administrative
court impose an administrative finding, order, decree, or sanction
against them as a result of their involvement in any type of
business, securities, or banking activity,
●
Being
the subject of a pending administrative proceeding related to their
involvement in any type of business, securities, or banking
activity, or
●
Administrative
proceedings related to their involvement in any type of business,
securities, or banking activity.
COMPENSATION OF
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the compensation paid to the
executive officers of the Company in each of the years ended
December 31, 2018, 2017 and
2016. The table includes compensation paid
for service by such persons to subsidiaries. All amounts are stated
in US dollars.
Executive Compensation Plans and Employment Agreements
Management Agreements
No management agreements were entered into for the period
commencing January 1, 2018 to December 31,
2018.
Equity Compensation Plans; Outstanding Equity Awards
Effective December 31, 2010, our Board of Directors adopted the
2010 Stock Option Incentive Plan (“the Stock Option
Plan”). The purpose of the Stock Option Plan is to enhance
the long-term stockholder value of the Company by offering
opportunities to directors, officers, key employees and eligible
consultants of the Company to acquire and maintain stock ownership
in the Company, in order to give these persons the opportunity to
participate in the Company's growth and success, and to encourage
them to remain in the service of the Company. A maximum of 10% of
the issued and outstanding shares of common stock are available for
issuance under the Stock Option Plan. As of May 30,
2019, 10,000,000 stock options were outstanding with an exercise
price of US$0.006.
Director Compensation
During the most recently completed fiscal year, there are no
arrangements (standard or otherwise) under which directors of the
Company were compensated by the Company or its subsidiaries for
services rendered in their capacity as directors, nor were any
amounts paid to the directors for committee participation or
special assignments. There were no arrangements under
which the directors would receive compensation or benefits in the
event of the termination of that office.
SECURITY OWNERSHIP OF
MANAGEMENT AND CERTAIN SECURITYHOLDERS
The
following tables set forth the ownership, as of May
30, 2019, of our shares of stock by each person known by us
to be the beneficial owner of more than 10% of our outstanding
voting stock, our executive officers and director as a group. To
the best of our knowledge, the persons named have sole voting and
investment power with respect to such shares, except as otherwise
noted. There are not any pending or anticipated arrangements that
may cause a change in control.
The
information presented below regarding beneficial ownership of our
voting securities has been presented in accordance with the rules
of the SEC and is not necessarily indicative of ownership for any
other purpose. Under these rules, a person is deemed to be a
“beneficial owner” of a security if that person has or
shares the power to vote or direct the voting of the security or
the power to dispose or direct the disposition of the security. A
person is deemed to own beneficially any security as to which such
person has the right to acquire sole or shared voting or investment
power within 60 days through the conversion or exercise of any
convertible security, warrant, option or other right. More than one
person may be deemed to be a beneficial owner of the same
securities.
Except
as otherwise indicated below and under applicable community
property laws, we believe that the beneficial owners of our common
stock listed below have sole voting and investment power with
respect to the shares shown.
|
Name
|
No. of Shares of
Common Stock
|
Percentage of
outstanding (1)
|
|
Brad J.
Moynes
|
22,504,000
|
8.04%
|
|
Tyrone
Docherty
|
250,000
|
0.001%
|
|
Timothy
Delaney
|
0
|
0%
|
|
All Officers and
Directors as a Group (3 persons)
|
22,754,000
|
8.05%
|
|
Name
|
No. of Shares of
Class B Common Stock
|
Percentage of
outstanding(1)
|
|
Brad
Moynes
|
1,100,000
|
100%
|
(1)
Based on 279,760,526 shares of common stock and
1,100,000 shares of Class B common stock as at May 30,
2019.
INTEREST OF MANAGEMENT AND
OTHERS IN CERTAIN TRANSACTIONS
Except
as described within the section entitled “Executive
Compensation of Directors and Officers” in this offering
circular, the Company had the following transactions
with “Related Persons,” as that term is
defined in item 404 of Regulation SK, which includes, but is not
limited to:
●
any of our
directors or officers;
●
any person who
beneficially owns, directly or indirectly, shares carrying more
than 10% of the voting rights attached to our outstanding shares of
common stock; or
●
any member of the
immediate family (including spouse, parents, children, siblings and
in- laws) of any of the above persons.
Management fees paid in advance to a Company Controlled by Director
and Officer
As at December 31, 2018, the Company had $55,573 in
prepaid management fee to a Director and Officer of the
Company–
Brad Moynes.
Trade and Other Payables
As at December 31, 2018, the Company had
$129,279
(2017 - $150,213) in trade and other payables owed to
key management personnel. The amounts owed to key management
personnel arose from outstanding management fees and are
non-interest bearing, unsecured, and have no specified terms of
repayment.
Promissory Notes
During 2018 the
Company issued Convertible Promissory Notes totaling $730,226
(US$564,000).
During the three
months ended March 31, 2019, the Company issued Convertible
Promissory Notes totaling $242,685
(US$183,000).
The notes are
unsecured, bear interest at between 10% and 12% per annum from the
date of issuance and mature between six months and one year after
the date of issuance.
Any amount of
interest or principal that is not paid on the maturity date bears
interest at 22% to 24% per annum from the maturity date to the date
of payment. Any amount of principal and/or interest that is unpaid
may be converted, at the option of the holder, in whole or in part
into common share of the Company at a price equal to 61% of the
lowest closing bid price for the Company’s stock as reported
on the OTC during the fifteen trading days prior to a Notice of
Conversion. The Company may prepay the principal and all accrued
interest at any time between the date of issuance and the maturity
date, together with a prepayment premium of between 15% and 40% of
the amount prepaid, determined by reference to the date of
repayment.
On June 1, 2018 the
Company issued a Convertible Promissory Note in the amount of
$64,820 (US$50,000) pursuant to a consulting
contact.
The note is
unsecured and matured on December 2, 2018. The note may be
converted into common shares of the Company in whole or in part at
the option of the holder upon terms to be determined by the Company
either ten days prior to repayment of the note or the maturity
date, whichever shall occur first. The note becomes immediately
payable should the Company complete financing in excess of
US$5,000,000 prior to the maturity date, and bears interest at 3%
per annum compounded annually should the Company default on the
note. During 2018 the Company repaid $31,761 (US$24,500) of this
Note. The remaining portion ($US 25,500) was repaid subsequent to
year-end.
Issuance
of common shares on Conversion of Convertible Promissory
Notes
During 2018 the
Company converted Convertible Promissory Notes totaling $1,722,633
(US$1,358,101) into 176,150,754 common shares of the
Company.
Appointment
of Directors
On October 24, 2018
the Company appointed Mr. James Romano to the Board of
Directors.
On November 20,
2018 the Company appointed Mr. Timothy Delaney to the Board of
Directors.
Consulting
Contracts
On February 1, 2018
the Company entered into two consulting agreements for the
provision of business strategy and compliance services. The Company
issued 600,000 common shares valued at $7,373.
Issuance
of Common Series B Shares
On January 2, 2019,
the Company passed a resolution to increase the authorized number
of Class “B” common shares from 100,000 to
1,100,000.
On the same day,
the Company issued 1,000,000 Class “B” common shares at
$0.0001 per share for total proceeds of $100 to a shareholder who
is also a Director and Officer of the Company.
Grants
of Options
On February 14,
2019, the Company granted 5,750,000 options to directors of the
Company and 4,250,000 options to consultants. All grants of options
were made under the Company’s Stock Option
Plan.
Management
fees for the year ended December 31, 2018 amount to $241,950 as
compared with $105,000 for the year ended December 31, 2017, and
$60,000 for the year ended December 31, 2016. The increased
expenditure during the years ended December 31, 2018 and 2017
resulted from increased corporate activities during the periods
under review.
SECURITIES BEING OFFERED
This
offering circular relates to the sale of up to 100,000,000 shares
of our common stock by the Company at a price of $0.01 per share,
for total offering proceeds to the Company of up to $1,000,000 if
all offered shares are sold. There is no minimum offering amount.
The minimum amount established for investors is $10,000, unless
such minimum is waived by the Company, in its sole discretion. All
funds raised by the Company from this offering will be immediately
available for the Company’s use.
The
Company is currently authorized to issue an unlimited number of
shares of common stock without par value and 1,100,000 Class
“B” Common Shares which are non-participating, voting
(voting right of 1,000 votes per share) without par value. As of
May 30, 2019, the Company had 279,760,526
shares of common stock and 1,100,000 shares of Class
“B” Common Shares issued and outstanding.
Except as it relates to Class “B” Common Shares, all
holders of common stock have equal voting rights, equal rights to
dividends when and if declared, and equal rights to share in assets
upon liquidation of the corporation. The common shares
are not subject to any redemption or sinking fund
provisions. Directors serve from year to year, there
being no provision for a staggered board; cumulative voting for
directors is not allowed. Between annual general
meetings, the existing board can appoint one or more additional
directors to serve until the next annual general meeting, but the
number of additional directors shall not at any time exceed
one-third of the number of directors who held office at the
expiration of the last annual meeting. All issued and
outstanding shares are fully paid and non-assessable
securities.
In order to change the rights of the holders of common stock, the
passing of a special resolution by such shareholders is required,
being the affirmative vote of not less than 2/3 of the votes cast
in person or by proxy at a duly called meeting of
shareholders.
An annual meeting of shareholders must be called by the board of
directors not later than 15 months after the last annual
meeting. The board at any time may call a special
meeting of shareholders. Notice of any meeting must be
sent not less than 21 and not more than 50 days before the meeting,
to every shareholder entitled to vote at the
meeting. All shareholders entitled to vote are entitled
to be present at a shareholders meeting. A quorum is the
presence in person or by proxy of the holders of at least 5% of the
issued and outstanding shares of common stock.
Except under the Investment Canada Act, there are no limitations
specific to the rights of non-Canadians to hold or vote our shares
under the laws of Canada or our charter documents. The
Investment Canada Act ("ICA") requires a non-Canadian making an
investment which would result in the acquisition of control of a
Canadian business, the gross value of the assets of which exceed
certain threshold levels or the business activity of which is
related to Canada's cultural heritage or national identity, to
either notify, or file an application for review with, Investment
Canada, the federal agency created by the ICA. The
notification procedure involves a brief statement of information
about the investment on a prescribed form which is required to be
filed with Investment Canada by the investor at any time up to 30
days after implementation of the investment. It is
intended that investments requiring only notification will proceed
without intervention by government unless the investment is in a
specific type of business related to the scope of the
ICA. If an investment is reviewable under the ICA, an
application for review in the prescribed form normally is required
to be filed with Investment Canada before the investment is made
and it cannot be implemented until completion of review and
Investment Canada has determined that the investment is likely to
be of net benefit to Canada. If the agency is not so
satisfied, the investment cannot be implemented if not made, or if
made, it must be unwound.
Market Price, Dividends, and Related Stockholder
Matters
Our
securities are not traded on a national exchange, but are quoted on
the OTC Markets Group, Inc.’s OTC "Pink"
marketplace. There is only a limited market for our
securities.
The
last sale price of the Company’s common stock on May
29, 2019 was $0.0134 per share.
The Company has approximately 1059 beneficial
shareholders of record at May 30, 2019. The
number of shareholders holding securities beneficially through
street name nominees, as reflected in the record position of Cede
& Co. and other intermediaries, is approximately
86.48%
On
February 14, 2019, we entered into an agreement with Pikeminnow
Funding LLC, a Colorado limited liability company, which allows
Pikeminnow Funding, LLC to purchase up to $1.0 million of our
common stock, subject to the qualification of this offering.
As such, none of our securities have been sold under such
agreement to date.On
May 10, 2019 all agreements between the Company and Pikeminnow
Funding LLC were rescinded.
Effective December 31, 2010, our Board of Directors adopted the
2010 Stock Option Incentive Plan (“the Stock Option
Plan”). The purpose of the Stock Option Plan is to enhance
the long-term stockholder value of the Company by offering
opportunities to directors, officers, key employees and eligible
consultants of the Company to acquire and maintain stock ownership
in the Company, in order to give these persons the opportunity to
participate in the Company's growth and success, and to encourage
them to remain in the service of the Company. A maximum of 10% of
the issued and outstanding shares of common stock are available for
issuance under the Stock Option Plan. As of May 30,
2019, 10,000,000 stock options were outstanding with an exercise
price of US$0.006.
The
Company has not paid any dividends on its common shares. The
Company has no present intention of paying dividends on its common
shares as it anticipates that all available funds will be invested
to finance the growth of its business.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES LIABILITIES
Our
charter documents contain provisions which allow the Company to
indemnify any person against liabilities and other expenses
incurred as the result of defending or administering any pending or
anticipated legal issue in connection with service to us if it is
determined that person acted in good faith and in a manner which he
reasonably believed was in the best interest of the Company.
Insofar as indemnification for liabilities arising under the
Securities Act, may be permitted to our directors, officers and
controlling persons, we have been advised that in the opinion of
the SEC, such indemnification is against public policy as expressed
in the Securities Act, and is, therefore,
unenforceable.
DIGATRADE FINANCIAL CORP.
CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 2018 and 2017
(Expressed in
Canadian Dollars)
|
|
Page
|
|
|
|
|
Management’s
Responsibility for Financial Reporting
|
35
|
|
|
|
|
Independent
Auditors’ Report
|
36
|
|
|
|
|
Consolidated
Statements of Financial Position
|
38
|
|
|
|
|
Consolidated
Statements of Changes in Shareholders’
Deficiency
|
39
|
|
|
|
|
Consolidated
Statements of Comprehensive Loss
|
40
|
|
|
|
|
Consolidated
Statements of Cash Flows
|
41
|
|
|
|
|
Notes
to the Consolidated Financial Statements
|
42
|
Management’s Responsibility for Financial
Reporting
These consolidated financial statements have been prepared by and
are the responsibility of the management of the Company. The
consolidated financial statements have been prepared in accordance
with International Financial Reporting Standards, using
management’s best estimates and judgments based on currently
available information. When alternative accounting methods exist,
management has chosen those it considers most appropriate in the
circumstances.
The Company maintains an appropriate system of internal controls to
provide reasonable assurance that financial information is accurate
and reliable and that the Company’s assets are appropriately
accounted for and adequately safeguarded.
The Company’s independent auditors, WDM Chartered
Professional Accountants, were appointed by the shareholders to
conduct an audit in accordance with generally accepted auditing
standards in Canada and the Public Company Accounting Oversight
Board (United States) and their report follows.
“Brad J. Moynes”
President,
CEO and Director
“Tyrone Docherty”
Director
Report
of Independent Registered Public Accounting
Firm
To the Shareholders
and Board of Directors of:
DIGATRADE
FINANCIAL CORP.
Opinion
on the Financial Statements
We have audited the
accompanying consolidated financial statements of Digatrade
Financial Corp. and its subsidiaries (the “Company”),
which comprise which comprise the consolidated statements of
financial position as at December 31, 2018 and 2017 and the
consolidated statements of changes in shareholders’
deficiency, comprehensive loss, and cash flows for the years then
ended, and notes to the financial statements, including a summary
of significant accounting policies.
In our opinion, the
accompanying consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at
December 31, 2018 and 2017, and its consolidated financial
performance and its consolidated cash flows for the years then
ended in accordance with International Financial Reporting
Standards as issued by the International Accounting Standards Board
(“IFRS”).
Basis
for Opinion
The Company's
management is responsible for these consolidated financial
statements, and for maintaining effective internal control over
financial reporting. Our responsibility is to express opinions on
the company’s consolidated financial statements based on our
audits.
Our
responsibilities under those standards are further described in the
Auditor’s Responsibilities for the Audit of the Consolidated
financial statements section of our report. We are independent of
the Company in accordance with the ethical requirements and laws
that are relevant to our audit of the consolidated financial
statements in Canada and we have fulfilled our other ethical
responsibilities in accordance with these requirements. In
addition, we are a public accounting firm registered with the
Public Company Accounting Oversight Board (United States)
(“PCAOB”) and are required to be independent with
respect to the company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the
PCAOB.
We conducted our
audits in accordance with Canadian generally accepted auditing
standards and the standards of the PCAOB. Those standards require
that we plan and perform the audits to obtain reasonable assurance
about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud, and whether
effective internal control over financial reporting was maintained
in all material respects. 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 consolidated financial statements, which indicates
that the Company incurred a net loss of $1,122,820 during the year
ended December 31, 2018, and as of that date, had accumulated
losses since inception of $6,298,936. As stated in Note 1, these
events or conditions, along with other matters as set forth in Note
1, indicate that a material uncertainty exists that may 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
consolidated financial statements does not cover the other
information and will not express any form of assurance conclusion
thereon.
In connection with
our audit of the consolidated financial statements, our
responsibility is to read the other information identified above
and, in doing so, consider whether the other information is
materially inconsistent with the consolidated financial statements
or our knowledge obtained in the audit, or otherwise appears to be
materially misstated.
The
Management’s Discussion and Analysis is expected to be made
available to us after the date of auditor’s report. If, based
on the work we will perform on this other information, we conclude
that there is a material misstatement of this other information, we
are required to report that fact to those charged with
governance.
Responsibilities
of Management and Those Charged with Governance for the
Consolidated Financial Statements
Management is
responsible for the preparation and fair presentation of the
consolidated financial statements in accordance with IFRS, and for
such internal control as management determines is necessary to
enable the preparation of consolidated financial statements that
are free from material misstatement, whether due to fraud or
error.
In preparing the
consolidated financial statements, management is responsible for
assessing the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless
management either intends to liquidate the Company or to cease
operations, or has no realistic alternative but to do
so.
Those charged with
governance are responsible for overseeing the Company’s
financial reporting process.
Auditor’s
Responsibilities for the Audit of the Consolidated Financial
Statements
Our objectives are
to obtain reasonable assurance about whether the consolidated
financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with Canadian generally accepted auditing
standards will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic decisions of
users taken on the basis of these consolidated financial
statements.
As part of an audit
in accordance with Canadian generally accepted auditing and PCAOB
standards, we exercise professional judgment and maintain
professional skepticism throughout the audit. We
also:
●
Identify and assess
the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal
control.
●
Obtain an
understanding of internal control relevant to the audit in order to
design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the
effectiveness of the Company's internal
control.
●
Evaluate the
appropriateness of accounting policies used and the reasonableness
of accounting estimates and related disclosures made by
management.
●
Conclude on the
appropriateness of management's use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a
material uncertainty exists related to events or conditions that
may cast significant doubt on the Company's ability to continue as
a going concern. If we conclude that a material uncertainty exists,
we are required to draw attention in our auditor's report to the
related disclosures in the consolidated financial statements or, if
such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date
of our auditor's report. However, future events or conditions may
cause the Company to cease to continue as a going
concern.
●
Evaluate the
overall presentation, structure and content of the consolidated
financial statements, including the disclosures, and whether the
consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair
presentation.
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.
The engagement
partner on the audit resulting in this independent auditor’s
report is Mike Kao.
WDM
Chartered
Professional Accountants
We have served as
the Company’s auditor since 2001.
Vancouver,
B.C.
April 19,
2019
DIGATRADE FINANCIAL CORP.
Consolidated Statements of Financial Position
(Expressed in Canadian Dollars)
Nature and Continuance of Operations (Note 1)
Subsequent Events (Note 17)
The accompanying notes are an integral part of these consolidated
financial statements.
Approved on behalf of the Board:
|
“Brad J. Moynes”
|
|
“Tyrone Docherty”
|
|
President,
Chief Executive Officer and Director
|
|
Director
|
DIGATRADE FINANCIAL CORP.
Consolidated Statements of Changes in Shareholders’
Deficiency
For the Years Ended December 31, 2018,
2017, and 2016
(Expressed in Canadian Dollars)
|
|
Note
|
Number of Common Shares
|
Number of Class “B” Common Shares
|
Share
Capital
|
Share Subscriptions
Received
|
Deficit
|
Total Shareholders’ Deficiency
|
|
|
|
|
|
$
|
$
|
$
|
$
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2015
|
|
1,661,150
|
-
|
3,358,848
|
25,998
|
(4,328,627)
|
(943,781)
|
|
|
|
|
|
|
|
|
|
|
Shares
Issued to Settle Debts
|
10(b)(i)
|
41,000,000
|
-
|
276,983
|
-
|
-
|
276,983
|
|
Shares
Issued for Services
|
10(c)(i)
|
250,000
|
-
|
15,000
|
-
|
-
|
15,000
|
|
Shares
Held in Escrow and Returned to Treasury
|
10(e)
|
(1,500)
|
-
|
(5,374)
|
-
|
-
|
(5,374)
|
|
Shares
Subscriptions Received, Net of Issuance Costs
|
10(b)(ii)
|
-
|
-
|
-
|
308,977
|
-
|
308,977
|
|
Net Comprehensive
Loss
|
|
-
|
-
|
-
|
-
|
(172,969)
|
(172,969)
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2016
|
|
42,909,650
|
-
|
3,645,457
|
334,975
|
(4,501,596)
|
(521,164)
|
|
|
|
|
|
|
|
|
|
|
Shares
Issued
|
10(b)(ii)
|
2,500,000
|
-
|
334,975
|
(334,975)
|
-
|
-
|
|
Shares
Issued to Settle Debts
|
10(b)(iii),(vi)
|
4,000,000
|
-
|
103,779
|
-
|
-
|
103,779
|
|
Shares Issued for
Cash
|
10(b)(iv)
|
-
|
100,000
|
100
|
-
|
-
|
100
|
|
Shares Issued for
Services
|
10(c)(ii)
|
250,000
|
-
|
21,896
|
-
|
-
|
21,896
|
|
Shares Held in
Trust
|
10(e)
|
1,500
|
-
|
-
|
-
|
-
|
-
|
|
Net Comprehensive
Loss
|
|
-
|
-
|
-
|
-
|
(674,520)
|
(674,520)
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2017
|
|
49,661,150
|
100,000
|
4,106,207
|
-
|
(5,176,116)
|
(1,069,909)
|
|
|
|
|
|
|
|
|
|
|
Shares Issued for
Services
|
10(c)(iii)
|
600,000
|
-
|
7,373
|
-
|
-
|
7,373
|
|
Shares issued
Conversion Convertible Promissory Notes
|
|
176,150,754
|
-
|
1,934,419
|
-
|
-
|
1,934,419
|
|
Net Comprehensive
Loss
|
|
-
|
-
|
-
|
-
|
(1,122,820)
|
(1,122,820)
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2018
|
|
226,411,904
|
100,000
|
6,047,999
|
-
|
(6,298,936)
|
(250,937)
|
Authorized Share Capital (Note 10(a))
The accompanying notes are an integral part of these consolidated
financial statements.
DIGATRADE FINANCIAL CORP.
Consolidated Statements of Comprehensive Loss
For the Years Ended December 31, 2018, 2016, and
2016
(Expressed
in Canadian Dollars)
The accompanying
notes are an integral part of these consolidated financial
statements.
DIGATRADE FINANCIAL CORP.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2018,
2017, and 2016
(Expressed in Canadian Dollars)
Supplemental Cash Flow Information (Note 12)
The accompanying notes are an integral part of these consolidated
financial statements.
DIGATRADE FINANCIAL CORP.
Notes
to the Consolidated Financial Statements
December 31, 2017 and 2016
(Expressed in Canadian Dollars)
NOTE 1 – NATURE AND CONTINUANCE OF OPERATIONS
Digatrade Financial Corp. (the
“Company”) is governed by the Business Corporations Act
(British Columbia). The head office, principal address, and records
office of the Company are located at 1500 West Georgia Street,
Suite 1300, Vancouver, British Columbia, Canada, V6C 2Z6. The
Company's common shares are listed on the NASDAQ Over-the-Counter
Board (“OTCB”) exchange under the symbol
"DIGAF".
In March 2015, the
Company entered into an agreement with Mega Ideas Holdings Limited,
dba ANX (“ANX”), a company incorporated and existing
under the laws of Hong Kong. ANX owns a proprietary trading
platform and provides operational support specializing in
blockchain development services and exchange and transaction
services for crypto-currencies. Effective October 17, 2018 the
Company closed the online retail trading platform and shared
liquidity order book with ANX International owing to low
transaction volumes. The Company will continue to evaluate
opportunities and continue with research and development related
services in the digital-asset industry for prospective
institutional customers while continuing to seek new opportunities
within the blockchain and the financial technology sector unrelated
to facilitating trading activities.
In February 2019,
the Company entered into a Definitive
Agreement with Securter Inc. (“Securter”), a
private Canadian corporation that is developing a proprietary,
patent-pending credit card payment platform to significantly
increase the security of online credit card payment processing
(Note 17(e)).
These consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards on the
basis that the Company is a going concern and will be able to meet
its obligations and continue its operations for its next fiscal
year. Several conditions as set out below cast uncertainties on the
Company’s ability to continue as a going
concern.
The
Company’s ability to continue as a going concern is dependent
upon the financial support from its creditors, shareholders, and
related parties, its ability to obtain financing for its
development projects, and upon the attainment of future profitable
operations.
The Company has not yet achieved profitable operations and has
accumulated losses of $6,298,936
since inception and working capital
deficiency of $238,976 as at December 31, 2018.
Accordingly, the Company will need to raise additional
funds through future issuance of securities or debt financing.
Although the Company has raised funds in the past, there can be no
assurance the Company will be able to raise sufficient funds in the
future, in which case the Company may be unable to meet its
obligations as they come due in the normal course of business. It
is not possible to predict whether financing efforts will be
successful or if the Company will attain a profitable level of
operations.
The
current cash resources are not adequate to pay the Company’s
accounts payable and to meet its minimum commitments at the date of
these consolidated financial statements, including planned
corporate and administrative expenses, and other project
implementation costs, accordingly, there is significant doubt about
the Company’s ability to continue as a going concern. These
consolidated financial statements do not give effect to adjustments
that would be necessary to the carrying amounts and classifications
of assets and liabilities should the Company be unable to continue
as a going concern.
NOTE 2
– SIGNIFICANT ACCOUNTING POLICIES
a)
Basis
of Presentation
These
consolidated financial statements have been prepared on a
historical cost basis except for financial instruments classified
as available-for-sale that have been measured at fair value. Cost
is the fair value of the consideration given in exchange for net
assets.
b)
Statement
of Compliance
These
consolidated financial statements have been prepared in accordance
with International Financial Reporting Standards
(“IFRS”) as issued by the International Accounting
Standards Board (“IASB”).
These
consolidated financial statements were approved and authorized for
issue by the Board of Directors on April 19,
2019.
c)
Basis
of Consolidation
These
consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries (collectively, the
“Company”). Intercompany balances and transactions are
eliminated in preparing the consolidated financial statements. The
following companies have been consolidated within these
consolidated financial statements:
|
Entity
|
Country of
Incorporation
|
Holding
|
Functional
Currency
|
|
|
|
|
|
|
Digatrade
Financial Corp.
|
Canada
|
Parent
Company
|
Canadian
Dollar
|
|
Digatrade
Limited
|
Canada
|
100%
|
Canadian
Dollar
|
|
Digatrade
(UK) Limited
|
United
Kingdom
|
100%
|
Pounds
Sterling
|
|
Digatrade
Limited
|
USA
|
100%
|
US
Dollar
|
d)
Foreign
Currency
These
consolidated financial statements are presented in Canadian
dollars, which is also the functional currency of the parent
company. Each subsidiary determines its own functional currency
(Note 2(c)) and items included in the financial statements of each
subsidiary are measured using that functional
currency.
i)
Transactions
and Balances in Foreign Currencies
Foreign
currency transactions are translated into the functional currency
of the respective entity using the exchange rates prevailing at the
dates of the transactions. Foreign exchange gains and losses
resulting from the settlement of such transactions and from the
re-measurement of monetary items at year-end exchange rates are
recognized in profit or loss.
Non-monetary
items measured at historical cost are translated using the exchange
rate at the date of the transaction and are not retranslated.
Non-monetary items measured at fair value are translated using the
exchange rate at the date when fair value was
determined.
ii)
Foreign
Operations
On
consolidation, the assets and liabilities of foreign operations are
translated into Canadian dollars at the exchange rate prevailing at
the reporting date and their revenues and expenses are translated
at exchange rates prevailing at the dates of the transactions. The
exchange differences arising on the translation are recognized in
other comprehensive income and accumulated in the currency
translation reserve in equity. On disposal of a foreign operation,
the component of other comprehensive income relating to that
particular foreign operation is recognized in earnings and
recognized as part of the gain or loss on disposal.
NOTE 2
– SIGNIFICANT ACCOUNTING POLICIES
(Continued)
e)
Financing
and Finder’s Fees
Financing
and finder’s fees relating to financial instruments with a
term of one year or less are expensed in the period incurred. For
financial instruments with a term of over one year, the fees are
netted against the financial instruments and amortized over the
term of the financial instruments.
f)
Share
Capital
The
Company records proceeds from share issuances, net of commissions
and issuance costs. Shares issued for other than cash
consideration are valued at either:
(i) the fair value of the asset acquired or the fair value of the
liability extinguished at the measurement date under current market
conditions, or (ii) the quoted price on the
Over-the-Counter Bulletin Board in the United States based on the
earliest of: the date the shares are issued, or the
date the agreement to issue the shares is reached.
e)
Loss per Share
Basic
loss per share is calculated by dividing net loss by the weighted
average number of common shares issued and outstanding during the
reporting period. Diluted loss per share is the same as basic loss
per share, as the issuance of shares on the exercise of stock
options and share purchase warrants is
anti-dilutive.
h)
Share-Based
Payments
The
fair value method of accounting is used for share-based payment
transactions. Under this method, the cost of stock options and
other share-based payments is recorded based on the estimated fair
value using the Black-Scholes option-pricing model at the grant
date and charged to profit over the vesting period. The amount
recognized as an expense is adjusted to reflect the number of
equity instruments expected to vest.
Upon
the exercise of stock options and other share-based payments,
consideration received on the exercise of these equity instruments
is recorded as share capital and the related share-based payment
reserve is transferred to share capital. The fair value of
unexercised equity instruments are transferred from reserve to
retained earnings upon expiry.
i)
Income Taxes
Tax
expense recognized in profit or loss comprises the sum of deferred
tax and current tax not recognized in other comprehensive income or
directly in equity.
i)
Current
Income Tax
Current
income tax assets and liabilities comprise those claims from, or
obligations to, fiscal authorities relating to the current or prior
reporting periods that are unpaid at the reporting date. Current
tax is payable on taxable profit, which differs from profit or loss
in the consolidated financial statements. Calculation of current
tax is based on tax rates and tax laws that have been enacted or
substantively enacted by the end of the reporting
period.
NOTE 2
– SIGNIFICANT ACCOUNTING POLICIES
(Continued)
ii)
Deferred
Income Tax
Deferred
income taxes are calculated using the liability method on temporary
differences between the carrying amounts of assets and liabilities
and their tax bases. Deferred tax assets and liabilities are
calculated, without discounting, at tax rates that are expected to
apply to their respective period of realization, provided they are
enacted or substantively enacted by the end of the reporting
period. Deferred tax liabilities are always provided for in
full.
Deferred
tax assets are recognized to the extent that it is probable that
they will be able to be utilized against future taxable income.
Deferred tax assets and liabilities are offset only when the
Company has a right and intention to offset current tax assets and
liabilities from the same taxation authority.
Changes
in deferred tax assets or liabilities are recognized as a component
of tax income or expense in profit or loss, except where they
relate to items that are recognized in other comprehensive income
or directly in equity, in which case the related deferred tax is
also recognized in other comprehensive income or equity,
respectively.
j)
Revenue
Recognition
Revenue is
comprised of consulting fees and digital asset advisory service
fees. Consulting fee income and digital asset trading advisory
services is recognized as the services are provided. As the company
is pre-revenue, consulting & advisory fees earned have been
accounted for as a recovery of development costs
incurred.
k)
Financial
Instruments
Financial
assets and financial liabilities are recognized when the Company
becomes a party to the contractual provisions of the financial
instrument.
Financial
assets and financial liabilities are initially measured at fair
value. Transaction costs that are directly attributable to the
acquisition or issue of financial assets and financial liabilities
(other than financial assets and financial liabilities classified
at fair value through profit or loss) are added to, or deducted
from, the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction
costs directly attributable to the acquisition of financial assets
or financial liabilities classified at fair value through profit or
loss are recognized immediately in profit or loss.
Financial
assets and financial liabilities are measured subsequently as
described below. The Company does not have any derivative financial
instruments.
i)
Financial
Assets
For
the purpose of subsequent measurement, financial assets other than
those designated and effective as hedging instruments are
classified into the following categories upon initial
recognition:
●
Financial assets at
fair value through profit or loss;
●
Loans and
receivables;
●
Held-to-maturity
investments; and
●
Available-for-sale
financial assets.
NOTE 2
– SIGNIFICANT ACCOUNTING POLICIES
(Continued)
k)
Financial Instruments (Continued)
i)
Financial
Assets (Continued)
The
category determines subsequent measurement and whether any
resulting income and expense is recognized in profit or loss or in
other comprehensive income.
All
financial assets except for those at fair value through profit or
loss are subject to review for impairment at least at each
reporting date. Financial assets are impaired when there is any
objective evidence that a financial asset or a group of financial
assets is impaired. Different criteria to determine impairment are
applied for each category of financial assets, which are described
below.
●
Financial assets at fair
value through profit or loss – Financial assets at
fair value through profit or loss include financial assets that are
either classified as held for trading or that meet certain
conditions and are designated at fair value through profit or loss
upon initial recognition. All derivative financial instruments fall
into this category, except for those designated and effective as
hedging instruments. Assets in this category are measured at fair
value with gains or losses recognized in profit or loss. The
Company’s cash falls into this category of financial
instruments.
●
Loans and
receivables – Loans and receivables are non-derivative
financial assets with fixed or determinable payments that are not
quoted in an active market. After initial recognition, these are
measured at amortized cost using the effective interest method less
any provision for impairment. Discounting is omitted where the
effect of discounting is immaterial. The Company’s accounts
receivable falls into this category of financial
instruments.
●
Held-to-maturity
investments – Held-to-maturity investments are
non-derivative financial assets with fixed or determinable payments
and fixed maturity, other than loans and receivables. Investments
are classified as held-to-maturity if the Company has the intention
and ability to hold them until maturity. The Company currently does
not hold financial assets in this category.
Held-to-maturity
investments are measured subsequently at amortized cost using the
effective interest method. If there is objective evidence that the
investment is impaired as determined by reference to external
credit ratings, then the financial asset is measured at the present
value of estimated future cash flows. Any changes to the carrying
amount of the investment, including impairment losses, are
recognized in profit or loss.
●
Available-for-sale
financial assets – Available-for-sale financial assets
are non-derivative financial assets that are either designated to
this category or do not qualify for inclusion in any of the other
categories of financial assets. The Company currently does not hold
financial assets in this category. Available-for-sale financial
assets are measured at fair value. Gains and losses are recognized
in other comprehensive income and reported within the
available-for-sale reserve within equity, except for impairment
losses and foreign exchange differences on monetary assets, which
are recognized in profit or loss. When the asset is disposed of or
is determined to be impaired, the cumulative gain or loss
recognized in other comprehensive income is reclassified from the
equity reserve to profit or loss, and presented as a
reclassification adjustment within other comprehensive
income.
For
financial assets measured at amortized cost, 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, then the previously recognized
impairment loss is reversed through profit or loss to the extent
that the carrying amount of the investment at the date the
impairment is reversed does not exceed what the amortized cost
would have been had the impairment not been
recognized.
In
respect of available-for-sale financial assets, impairment losses
previously recognized in profit or loss are not reversed through
profit or loss. Any increase in fair value subsequent to an
impairment loss is recognized in other comprehensive income and
accumulated in the revaluation reserve.
Financial
assets are derecognized when the contractual rights to the cash
flows from the financial asset expire, or when the financial asset
and all substantial risks and rewards are transferred.
NOTE 2
– SIGNIFICANT ACCOUNTING POLICIES
(Continued)
ii)
Financial Liabilities
For
the purpose of subsequent measurement, financial liabilities are
classified as either financial liabilities at fair value through
profit or loss, or other financial liabilities upon initial
recognition.
●
Financial liabilities at
fair value through profit or loss – Financial
liabilities at fair value through profit or loss include financial
liabilities that are either classified as held for trading or that
meet certain conditions and are designated at fair value through
profit or loss upon initial recognition. Liabilities in this
category are measured at fair value with gains or losses recognized
in profit or loss. The Company does not hold financial liabilities
in this category.
●
Other financial
liabilities – Other financial liabilities are
subsequently measured at amortized cost using the effective
interest method. Gains and losses are recognized in the income
statement when the liabilities are derecognized as well as through
the effective interest rate method amortization process. The
Company’s trade and other payables, liabilities to customers,
and promissory notes payable fall into this category of financial
instruments.
A
financial liability is derecognized when it is extinguished,
discharged, cancelled or expired.
NOTE 3 – SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND
ASSUMPTIONS
In the application of the Company’s accounting policies which
are described in Note 2, management is required to make judgments,
estimates, and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognized in the
period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods, if the revision affects both current and future
periods.
Significant judgments, estimates, and assumptions that have the
most significant effect on the amounts recognized in the
consolidated financial statements are described below.
Deferred Tax Assets
Deferred tax assets, including those arising from unutilized tax
losses, require management to assess the likelihood that the
Company will generate sufficient taxable earnings in future periods
in order to utilize recognized deferred tax assets. Assumptions
about the generation of future taxable profits depend on
management’s estimates of future cash flows. In addition,
future changes in tax laws could limit the ability of the Company
to obtain tax deductions in future periods. To the extent that
future cash flows and taxable income differ significantly from
estimates, the ability of the Company to realize the net deferred
tax assets recorded at the reporting date could be
impacted.
NOTE 4 – ACCOUNTING STANDARDS ISSUED BUT NOT YET
EFFECTIVE
A number of new accounting standards, amendments to standards, and interpretations have been issued
but not yet effective as of December 31,
2018. The Company is assessing the impact of these new standards,
but does not expect them to have a significant effect on the
consolidated financial statements. Pronouncements that are not
applicable
IFRS
16 – Leases
IFRS
16 provides a single lessee accounting model, requiring the
recognition of assets and liabilities for all leases, unless the
lease term is 12 months or less or the underlying
asset has a low value. Lessor accounting remains largely unchanged
from IAS 17 "Leases", and the distinction between
operating and finance leases is retained. The standard is effective
for annual period beginning on or after January 1, 2019.
The
Company has not yet determined the impact of this standard on its
consolidated financial statements.
NOTE 5 – ACCOUNTS RECEIVABLE
As at December 31, 2018 and 2017, the
Company had the following amounts due from arm’s length
parties:
NOTE 6 – PREPAID EXPENSES
As at December 31, 2018 and 2017, the
Company had the following prepaid expenses:
|
Market Registration
Fees
|
8,751
|
7,685
|
|
Legal
Retainer
|
13,460
|
-
|
|
Deposit
with ANX
|
-
|
70,029
|
|
Prepaid
Consulting Fees
|
-
|
26,025
|
|
Prepaid
Management Fees (Note 13(a)(i))
|
-
|
55,573
|
|
|
|
|
|
|
22,211
|
159,312
|
NOTE 7 – TRADE AND OTHER PAYABLES
As at December 31, 2018 and 2017, the
Company had the following amounts due to creditors:
|
Trade
Payables
|
63,279
|
119,013
|
|
Accrued
Liabilities
|
66,000
|
31,200
|
|
|
|
|
|
|
129,279
|
150,213
|
NOTE 8 – LIABILITY TO CUSTOMERS
As at
December 31, 2018, the Company had a liability to
customers trading on the Company’s exchange platform in the
amount of $Nil (2017 - $297,309). Effective October 17, 2018,
all customer fiat and cryptocurrency assets were withdrawn
from the platform.
NOTE 9 – CONVERTIBLE PROMISSORY NOTES
|
|
$
|
|
|
|
|
Balance,
December 31, 2016
|
395,373
|
|
|
|
|
Issuances (Net of
Transaction Costs)
|
1,391,759
|
|
Repayments
|
(130,498)
|
|
Conversions
(Principal)
|
(102,128)
|
|
Interest
Accrual
|
27,989
|
|
|
|
|
Balance,
December 31, 2017
|
1,582,495
|
|
|
|
|
Issuances (Net of
Transaction Costs)
|
795,046
|
|
Repayments
|
(31,762)
|
|
Conversions
(Principal)
|
(1,707,293)
|
|
Interest
Accrual
|
10,365
|
|
|
|
|
Balance,
December 31, 2018
|
648,851
|
a)
During 2017, the
Company issued convertible promissory notes in the amount of
$304,239 (US$220,000). The notes are non-interest bearing,
unsecured, and mature on December 31, 2021. The notes may be
converted into common shares of the Company in whole or in part at
the option of the holder upon terms to be determined by the Company
either 10 days prior to repayment of the note or the maturity date,
whichever shall occur first. The notes become immediately payable
should the Company complete financing in excess of US$5,000,000
prior to the maturity date, and bear interest at 3% per annum
compounded annually should the Company default on the
note.
During 2018, all of
these promissory notes, totalling US$220,000, were converted into
2,500,000 common shares of the Company.
b)
During 2017, the
Company issued convertible promissory notes in the amount of
$1,053,647 (US$860,500). The notes are unsecured, bear interest at
between 10% and 12% per annum from the date of issuance, and mature
between 6 months and one year after the date of issuance. Any
amount of interest or principal that is not paid on the maturity
date bears interest at 22% to 24% per annum from the maturity date
to the date of payment. Any amount of principal and/or interest
that is unpaid may be converted, at the option of the holder, in
whole or in part into common share of the Company at a price equal
to 61% of the lowest closing bid price for the Company’s
stock as reported on the OTC during the fifteen trading days prior
to a Notice of Conversion. The Company may prepay the principal and
all accrued interest at any time between the date of issuance and
the maturity date, together with a prepayment premium of between
15% and 40% of the amount prepaid, determined by reference to the
date of repayment.
During 2018, all
these promissory notes, totaling US$860,500, were converted into
124,111,859 common shares of the Company.
NOTE 9 – CONVERTIBLE PROMISSORY NOTES
(Continued)
c)
During 2017, the
Company entered into a consulting agreement with an unrelated party
for the provision of advertising services. In consideration for the
services the Company issued a convertible promissory note in the
amount of $37,692 (US$30,000). The convertible promissory note is
unsecured, bears interest at 3% per annum, and matured on January
10, 2018.
During 2018, this
promissory note in the amount of US$30,000 was converted into
355,450 common shares of the Company.
d)
During 2018, the
Company issued convertible promissory notes totaling $730,226
(US$564,000). The notes are unsecured, bear interest at between 10%
and 12% per annum from the date of issuance and mature between six
months and one year after the date of issuance. Any amount of
interest or principal that is not paid on the maturity date bears
interest at 22% to 24% per annum from the maturity date to the date
of payment. Any amount of principal and/or interest that is unpaid
may be converted, at the option of the holder, in whole or in part
into common share of the Company at a price equal to 61% of the
lowest closing bid price for the Company’s stock as reported
on the OTC during the fifteen trading days prior to a Notice of
Conversion. The Company may prepay the principal and all accrued
interest at any time between the date of issuance and the maturity
date, together with a prepayment premium of between 15% and 40% of
the amount prepaid, determined by reference to the date of
repayment.
During 2018,
promissory notes totaling US$247,600 were converted into 49,183,445
common shares of the Company.
e)
On June 1, 2018,
the Company issued a convertible promissory note in the amount of
$64,820 (US$50,000) pursuant to a consulting contact. The note is
unsecured and matured on December 2, 2018. As of December 31, 2018,
the Company repaid $31,761 (US$24,500) of this note. The remaining
balance (US$25,500) was repaid subsequent to year-end. (Note
17(b))
f)
During 2018, the
Company converted convertible promissory notes totaling $1,707,293
(US$1,358,100), and interest expense and finders fees owed, into
176,150,754 common shares of the Company.
NOTE 10 – SHARE CAPITAL
a)
Authorized
Capital
Unlimited
number of common shares, participating, voting (voting right of 1
vote per share), with no par value.
100,000
Class “B” common shares, non-participating, voting
(voting right of 1,000 votes per share), with no par
value.
b)
Issued
and Outstanding Common Shares
i)
On July 15, 2016,
the Company entered into a debt settlement agreement with a company
controlled by a Director and Officer of the Company to settle
outstanding accounts payable of $25,000. The Company agreed to
issue 25,000,000 shares with a fair value equal to the value of the
underlying debt settled
On August 15, 2016,
the Company entered into an assignment of creditors and settlement
of debt agreement with certain arm’s length parties. The
Company settled certain promissory notes totalling $118,204
(US$91,475) by the issuance of 8,000,000 shares with a fair value
equal to the value of the underlying debt settled (Note
9(b)).
On December 20,
2016, the Company entered into an assignment of creditors and
settlement of debt agreement with certain arm’s length
parties. The Company settled promissory notes totalling $175,185
(including US$65,550) by the issuance of 8,000,000 shares with a
fair value of $133,779. A gain of $41,406 on the settlement of
debts was recognized.
ii)
On December 12,
2016, the Company completed a private placement of 500,000 shares
at US$0.50 per share, raising gross proceeds of $308,977
(US$250,000). The shares were not issued by December 31, 2016 and
on September 20, 2017, the Company re-priced the subscription share
price to US$0.10 per share and issued 2,500,000 common shares to
the subscribers.
NOTE 10 – SHARE CAPITAL (Continued)
b)
Issued
and Outstanding Common Shares (Continued)
iii)
On June 12, 2017,
the Company settled convertible promissory notes totalling $32,700
by the issuance of 2,000,000 common shares with a fair value equal
to the value of the underlying debt settled.
On September 21,
2017, the Company settled a convertible promissory note owed to a
company controlled by a former Officer and Director of the Company
in the amount of $61,694 (US$50,000) by the issuance of 1,000,000
common shares with a fair value equal to the value of the
underlying debt settled.
iv).
On October 10,
2018, the Company passed a resolution authorizing the creation of a
new 100,000 Class “B” common shares with the following
characteristics: non-participating, no par value, and with the
voting right of 1,000 votes per share.
On the same day,
the Company issued 100,000 Class “B” common shares at
$0.001 per share for total proceeds of $100 to a shareholder who is
also a Director and Officer of the Company.
NOTE 10 – SHARE CAPITAL (Continued)
c)
Share-Based
Payments
i.
During the year
ended December 31, 2016, the Company issued 250,000 shares at a
fair value of $0.06 per share to a related party for consulting
services rendered. Share-based compensation of $15,000 was recorded
(Note 14(b)(iii)).
ii.
During the year
ended December 31, 2017, the Company entered into a consulting
agreement for the provision of business strategy and compliance
services. The Company issued 250,000 common shares valued at
$21,896.
iii.
During the year
ended December 31, 2018, the Company entered into a consulting
agreement for the provision of business strategy and compliance
services. The Company issued 600,000 common shares valued at
$7,373.
d)
Share
Purchase Warrants
The
Company had no share purchase warrants outstanding for the years
ended December 31, 2018, 2017, and
2016.
e)
Escrow
Shares
On
September 19, 2014, the Company entered into an escrow agreement
with a creditor. The Company agreed to pay the creditor $2,500 upon
signing of the agreement and to issue 1,500 shares to
be held in escrow. The Company was obligated to pay the creditor a
further $7,334 (US$6,687) forty five days after the Company’s
stock becomes DWAC-eligible. On December 22, 2016, the Company paid
$5,374 (US$4,000) and the creditor agreed to release these shares
from escrow.
As
of December 31, 2018, the 1,500 shares were held in
trust by the corporate lawyer and have not been returned to the
Company’s Treasury.
NOTE 11 – COMMITMENTS
a)
Crypto
Currency Deposit and Exchange Services
On
March 31, 2015, the Company entered into an agreement with Mega
Idea Holdings Limited, dba ANX (“ANX”), to provide
Crypto-currency deposit and exchange services. Pursuant to the
terms of the agreement, the Company is required to pay monthly
maintenance fees of US$10,000 for maintenance and support of the
exchange platform. The agreement with ANX is for a term of three
years.
On
April 7, 2017 (the “effective date”), the Company
entered into a revised agreement with ANX. Pursuant to the terms of
the revised agreement, the Company was
required to pay monthly maintenance fees of US$1,500 for the first
six months commencing the first month after the effective date, and
US$5,000 thereafter. The revised agreement with ANX
was for a term of two years.
On
October 15, 2018, the Company and ANX agreed to terminate the
Crypto Currency Deposit and Exchange Services Agreement. The
Company paid ANX $32,770 (US$25,000) in full settlement of all
outstanding liabilities and realized a gain of $7,158 on the
termination of the agreement
b)
Finder’s
Fee Agreement
The
Company has entered into various finder’s fee agreements
whereby the Company is required to pay cash finder’s fee of
10% of all monies raised through certain parties. The
terms of these agreements are for periods of one year.
c)
Consulting
Contracts
i.
On June 1, 2018 the
Company entered into a consulting agreement for the provision of
strategic business advisory services for a period of one year. The
Company agreed to issue a convertible promissory note in the amount
of US$50,000 and pay the consultant US$10,000 per month. (Notes
9(e)).
ii.
On October 22,
2018, the Company entered into a consulting contract with a
Director for the provision of strategic business advisory services
for a period of four months. The Company agreed to pay the Director
$2,500 per month.
NOTE 12 – SUPPLEMENTAL CASH FLOW INFORMATION
|
|
|
2018
|
2017
|
2016
|
|
|
|
$
|
$
|
$
|
|
a)
|
Change
in Non-Cash Working Capital Accounts
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
Receivable
|
297,309
|
(281,445)
|
35,155
|
|
|
GST
Recoverable
|
(2,128)
|
(6,672)
|
566
|
|
|
Prepaid
Expenses
|
(18,608)
|
(153,311)
|
(3,087)
|
|
|
Trade and Other
Payables
|
125,564
|
(103,884)
|
(76,175)
|
|
|
Liabilities to
Customers
|
(297,309)
|
286,990
|
(32,428)
|
|
|
|
|
|
|
|
|
|
104,828
|
(258,322)
|
(75,969)
|
|
|
|
|
|
|
|
b)
|
Significant
Non-Cash Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
Shares Issued in
Settlement of Debts
|
-
|
103,689
|
276,983
|
|
|
Shares Issued for
Services
|
7,373
|
21,986
|
15,000
|
|
|
Shares Issued
Conversion Convertible Promissory Notes
|
1,934,419
|
-
|
-
|
|
|
Expenses Paid by An
Arm’s Length Party
|
-
|
-
|
8,569
|
|
|
|
|
|
|
|
|
|
1,941,792
|
125,675
|
300,552
|
|
|
|
|
|
|
|
c)
|
Other
Information
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Paid
|
186,128
|
16
|
28,974
|
|
|
Income Taxes
Paid
|
-
|
-
|
-
|
NOTE
13 – INCOME TAX
a)
Deferred
Tax Assets and Liabilities
The Company’s
unrecognized deductible temporary differences and unused tax losses
for which no deferred tax asset is recognized consists of the
following amounts:
|
|
2018
|
2017
|
|
|
$
|
$
|
|
|
|
|
|
Non-Capital
Losses
|
6,168,981
|
5,046,141
|
|
Capital
Losses
|
29,628
|
29,628
|
|
Property and
Equipment
|
100,490
|
100,490
|
|
|
|
|
|
|
6,299,099
|
5,176,259
|
As at December 31,
2018, the Company has non-capital losses of approximately
$6,131,800 which may be applied to reduce Canadian taxable income
of future years. These non-capital losses expire as
follows:
|
|
$
|
|
|
|
|
2026
|
313,100
|
|
2027
|
515,300
|
|
2028
|
367,400
|
|
2029
|
1,157,900
|
|
2030
|
307,400
|
|
2031
|
301,400
|
|
2032 to
2038
|
3,206,400
|
|
|
|
|
|
6,168,900
|
b)
Income
Tax Expense
The income tax
expense of the Company is reconciled to the net loss for the year
as reported in the consolidated statement of comprehensive loss as
follows:
NOTE 14 – RELATED PARTIES
TRANSACTIONS
Balances and transactions between the Company and its subsidiaries,
which are related parties of the Company, have been eliminated on
consolidation and are not disclosed. Details of transactions
between the Company and other related parties, in addition to those
transactions disclosed elsewhere in these consolidated financial
statements, are described below. All related party transactions
were in the ordinary course of business and were measured at their
exchange amounts.
a)
Related Party Balances
i.
Promissory
Notes
During the year
ended December 31, 2017, the Company repaid promissory notes in the
amount of $90,529, (including US$31,200) to a company controlled by
a Director (also an officer) of the Company. Included in
convertible promissory notes as at December 31, 2018, was $Nil
(2017 – $89,364 including US$31,200) owed to this
company.
During the year
ended December 31, 2017, the Company settled a promissory note owed
to a company controlled by a former officer of the Company in the
amount $69,205 (US$50,000) by the issuance of 1,000,000 common
shares. Included in convertible promissory notes as at December 31,
2018, was $Nil (2017 – $67,135 including US$50,000) owed to
this company.
b)
Compensation
of Key Management Personnel
i.
The Company
incurred management fees for services provided by key management
personnel for the years ended December 31, 2018, 2017 and 2016, as
described below.
|
|
2018
|
2017
|
2016
|
|
|
$
|
$
|
$
|
|
|
|
|
|
|
Management
Fees
|
241,950
|
105,000
|
60,000
|
ii.
During the year
ended December 31, 2018, the Company incurred consulting fees for
services provided by Directors of the Company in the amount of
$12,900 (2017 - $11,296).
iii.
During the year
ended December 31, 2016, the Company incurred consulting fees for
services provided by a Director of the Company. The fees were
settled by the issuance of 250,000 post-consolidation shares at
$0.06 per share (Note 10(c)(ii)) and a cash payment of $6,699
(US$5,000).
NOTE 15 – FINANCIAL RISK MANAGEMENT OBJECTIVES AND
POLICIES
The Company is exposed to various risks in relation to financial
instruments. The Company’s financial assets and liabilities
by category are summarized in Note 2(k). The Company’s risk
management is coordinated in close co-operation with the board of
directors and focuses on actively securing the Company’s
short to medium-term cash flows and raising finances for the
Company’s capital expenditure program. The Company does not
actively engage in the trading of financial assets for speculative
purposes.
The most significant financial risks to which the Company is
exposed are as follows:
a)
Liquidity
risk
Liquidity risk is the risk that the Company will
not be able to meet its financial obligations as they fall due. The
Company is dependent upon the availability of credit from its
suppliers and its ability to generate sufficient funds from equity
and debt financing to meet current and future obligations. The
Company has a working capital deficiency of
$238,976 as at December 31, 2018. There can be
no assurance that such debt or equity financing will
be available to the Company.
b)
Interest
Rate Risk
Interest
rate risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market
interest rates. The Company is not exposed to significant interest
rate risk as the interest rates associated with the
convertible promissory notes are
fixed.
c)
Credit
Risk
Credit
risk is the risk of loss associated with a counter party’s
inability to fulfill its payment obligations. As the
Company is in the development stage and has not yet commenced
commercial production or sales, it is not exposed to
significant credit risk.
d)
Foreign
Exchange Risk
Foreign
exchange risk is the risk that the fair value or future cash flows
of a financial instrument will fluctuate because of changes in
foreign exchange rates. The Company is exposed to foreign exchange
risk to the extent it incurs currency exchange platform service and
development expenditures and operating costs in foreign currencies
including the U.S. Dollar. The Company does not hedge its exposure
to fluctuations in the related foreign exchange rates.
NOTE 15 – FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
(Continued)
e)
Fair
Values
The
Company uses the following hierarchy for determining fair value
measurements:
Level
1: Quoted prices in active markets for identical assets or
liabilities.
Level
2: Other techniques for which all inputs which have a significant
effect on the recorded fair value are observable, either directly
or indirectly.
Level
3: Techniques which use inputs that have a significant effect on
the recorded fair value that are not based on observable market
data.
The
level within which the financial asset or liability is classified
is determined based on the lowest level of significant input to the
fair value measurement. The Company’s financial instruments
were measured at fair value use Level 1 valuation technique during
the years ended December 31, 2018 and
2017. The carrying values of the Company’s
financial assets and liabilities approximate their fair
values.
NOTE 16 – CAPITAL MANAGEMENT
The Company’s objective for managing its capital structure is
to safeguard the Company’s ability to continue as a going
concern and to ensure it has the financial capacity, liquidity and
flexibility to fund its ongoing operations and capital
expenditures.
The Company manages its share capital as capital, which as at
December 31, 2018, amounted to
$6,047,999. At this time, the Company’s access
to the debt market is limited and it relies on equity issuances and
the support of shareholders to fund the development of its trading
platform. The Company monitors capital to maintain a sufficient
working capital position to fund annualized administrative expenses
and capital investments.
As at December 31, 2018, the Company had working
capital deficiency of $238,976. The Company will issue shares and may from time
to time adjust its capital spending to maintain or adjust the
capital structure. There can be no assurance that the Company will
be able to obtain debt or equity capital in the case of operating
cash deficits.
The Company’s share capital is not subject to external
restrictions. The Company has not paid or declared any dividends
since the date of incorporation, nor are any contemplated in the
foreseeable future. There were no changes in the Company’s
approach to capital management during the year ended December 31,
2018.
NOTE 17 – SUBSEQUENT EVENTS
a)
Issuance
of Convertible Promissory Notes
On January 29,
2019, the Company issued a convertible promissory note in the
amount of US$44,000. The note is unsecured, bears interest at 10%
per annum from the date of issuance and matures on January 29,
2020.
On January 29,
2019, the Company issued a convertible promissory note in the
amount of US$43,000. The note is unsecured, bears interest at 12%
per annum from the date of issuance and matures on November 15,
2019.
On March 5, 2019,
the Company issued a convertible promissory note in the amount of
US$53,000. The note is unsecured, bears interest at 12% per annum
from the date of issuance and matures on January 15,
2020.
On March 28, 2019,
the Company issued a convertible promissory note in the amount of
US$43,000. The note is unsecured, bears interest at 12% per annum
from the date of issuance and matures on January 30,
2020.
Any amount of
interest or principal that is not paid on the maturity date bears
interest at 22% to 24% per annum from the maturity date to the date
of payment. Any amount of principal and/or interest that is unpaid
may be converted, at the option of the holder, in whole or in part
into common share of the Company at a price equal to 61% of the
lowest closing bid price for the Company’s stock as reported
on the OTC during the fifteen trading days prior to a Notice of
Conversion. The Company may prepay the principal and all accrued
interest at any time between the date of issuance and the maturity
date, together with a prepayment premium of between 15% and 40% of
the amount prepaid, determined by reference to the date of
repayment.
b)
Repayment
of Convertible Promissory Note
On January 31,
2019, the Company repaid US$25,500, being the outstanding balance
of a convertible promissory note issued to a consultant during
2018. (Note 9(e))
c)
Issuance
of Common Series B Shares
On January 2, 2019,
the Company passed a resolution to increase the authorized number
of Class “B” common shares from 100,000 to 1,100,000.
On the same day, the Company issued 1,000,000 Class “B”
common shares at $0.0001 per share for total proceeds of $100 to a
shareholder who is also a Director and Officer of the
Company.
d)
Grants
of Stock Options
On February 14,
2019, the Company granted 5,750,000 stock options to directors of
the Company and 4,250,000 stock options to consultants. The options
have an exercise price of US$0.006 and expire on February 14,
2027.
e)
Definitive
Agreement
On February 26,
2019, the Company entered into a Definitive Agreement with Securter
Inc. (“Securter”), a private Canadian corporation that
is developing a proprietary, patent-pending credit card payment
platform to significantly increase the security of online credit
card payment processing. A new Canadian corporation was
incorporated (Securter Systems Inc.) which will receive, by way of
legal title transfer, all assets and rights held by
Securter.
The Company’s
percentage of ownership will be determined by the amount of
capitalization it provides to the new company. Under the terms of
the agreement, the Company will fund Securter Systems Inc. up to
US$3 Million in operational financing which will allow the Company
to own approximately 30% of this company.
EXHIBITS
The
following exhibits are filed with this offering
circular:
|
Exhibit No.
|
|
Description of Exhibit
|
|
|
Articles
of Incorporation (Notice of Articles and Transition
Application)
|
|
|
|
By-laws
(Schedule “A”)
|
|
|
|
Management
Agreement of January 1, 2008 (Bradley James Moynes)
|
|
|
|
Agreement
with Pikeminnow Funding LLC dated February 14, 2019
|
|
|
|
Agreement
with Securter, Inc. dated February 26, 2019
|
|
|
|
Item 6 Unregistered Securities
Issued or Sold Within One Year
|
|
|
6.6*
|
|
Rescission
Letter by and among Carden Capital LLC, Pikeminnow Funding LLC and
the Company, dated as of May 10,
2019
|
|
6.7*
|
|
Agreement
with Mega Ideas Holding Limited dated as of March 31,
2015
|
|
11.1*
|
|
Consent
of Independent Auditors
|
|
12.1**
|
|
Opinion
of Procopio, Cory, Hargreaves & Savitch LLP
|
|
14.1**
|
|
Per
Form 1-A, a Canadian issuer must file a Form F-X.
|
* Filed
herewith
** To
be filed by amendment
(1)
Incorporated by reference to the Company’s Registration
Statement on Form 20-F filed with the Commission on July 21,
2006.
(2)
Incorporated by reference to the Company’s Annual Report on
Form 20-F filed with the Commission on August 13,
2008.
(3) Incorporated
by reference to the Company’s Offering Statement on Form 1-A
filed with the Commission on April 2, 2019
SIGNATURES
Pursuant to the requirements of Regulation A, the issuer certifies
that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form 1-A and has duly caused this
offering statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in Vancouver, British Columbia, on
May 30, 2019.
|
|
DIGATRADE FINANCIAL CORP.
|
|
|
|
|
|
By: /s/
Brad J. Moynes
|
|
|
Brad J.
Moynes
|
|
|
Chairman,
President and Chief Executive Officer
|
Pursuant to the requirements of the Securities Act, this offering
statement has been signed by the following persons in the
capacities and on the date indicated.
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
/s/ Brad J. Moynes
|
|
Chairman,
President, Chief Executive Officer,
|
|
May
30, 2019
|
|
Brad J.
Moynes
|
|
Principal
Executive, Financial and Accounting
Officer
|
|
|
|
|
|
|
|
|
|
/s/ Tyrone Docherty
|
|
Director
|
|
May
30, 2019
|
|
Tyrone
Docherty
|
|
|
|
|
|
/s/ Timothy Delaney
|
|
Director
|
|
May
30, 2019
|
|
Timothy
Delaney
|
|
|
|
|
60
