EXHIBIT 10.1

 

 

 

 

Share Exchange Agreement

 

 

BETWEEN

 

 

PLAYBOX (US), INC.

 

 

 

– and –

 

 

MOUNTAIN SHARE TRANSFER LLC

 

 

– and –

 

 

HYDRO POWER TECHNOLOGIES INC.

 

 

– and –

 

 

THE SHAREHOLDERS OF

HYDRO POWER TECHNOLOGIES INC.

LISTED IN APPENDIX “A” HERETO

 

 

 

 

 

 

 

DECEMBER 31, 2019

 

 

 

 

 

TABLE OF CONTENTS

  Page Article 1 - RECITALS AND INTERPRETATION 2 1.1   Appendix and Recitals 2
1.2   Definitions 2 1.3   Certain Rules of Interpretation 7 1.4   Governing Law
7 1.5   Entire Agreement 7 Article 2 - PURCHASE AND SALE 8 2.1   Agreement of
Purchase and Sale 8 2.2   Purchase Price 8 2.3   Payment of Purchase Price 8
2.4   Price Adjustment Clause 8 2.5   Directors and Officers of PlayBox 9
ARTICLE 3 - HPT TRANSFER AND BUSINESS CONTINUATION 9 3.1   HPT Transfer and
Business Continuation 9 Article 4 - REPRESENTATIONS AND WARRANTIES 9
4.1   Representations Relating to the Trustee 9 4.2   Representations Relating
to PlayBox. 10 4.3   Representations Relating to the HPT Shareholders 13
4.4   Representations Relating to HPT 14 Article 5 - COVENANTS 17 5.1   Delivery
of Books and Records 17 5.2   Tax Elections 17 Article 6 - CLOSING CONDITIONS 17
6.1   Conditions for the Benefit of the Trustee 17 6.2   Conditions for the
Benefit of the HPT Shareholders 18 Article 7 - CLOSING ARRANGEMENTS 19
7.1   Closing 19 7.2   Closing Deliveries 19 ARTICLE 8 - TERMINATION 19
8.1   Termination Rights 19 8.2   Effect of Termination 20 Article 9 - GENERAL
20 9.1   Time of Essence 20 9.2   Notices 20

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EXECUTION VERSION 

 

TABLE OF CONTENTS

(continued)

 

  Page 9.3   Severability 21 9.4   Submission to Jurisdiction 22 9.5   Amendment
and Waiver 22 9.6   Further Assurances 22 9.7   Assignment and Enurement 22
9.8   Counterparts and Electronic Delivery 22 9.9   Costs and Expenses 22
9.10   Tender 23 9.11   Public Announcements 23 9.12   Equitable Remedies 23
9.13   No Contra Proferentem 23 9.14   Independent Legal Advice 23

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EXECUTION VERSION 

SHARE exchange AGREEMENT

THIS AGREEMENT (the “Agreement”) is dated as of December 31, 2019

BETWEEN:

PLAYBOX (US), INC., a corporation incorporated

under the laws of Wyoming, U.S.A.

 

(“PlayBox”)

 

-And -

 

MOUNTAIN SHARE TRANSFER LLC

 

(the “Trustee”)

 

-And -

 

HYDRO POWER TECHNOLOGIES INC., a company incorporated

under the laws of Ontario

 

(“HPT”)

 

-And -

 

THOSE SHAREHOLDERS OF HPT LISTED IN

APPENDIX “A” HERETO

 

(the “HPT Shareholders”)

 

Recitals:

A.PlayBox has an authorized share structure consisting of 5,000,000,000 shares
of common shares (“Common Shares”), 1,000,000 series A preferred shares (“Series
A Preferred Shares”), 20,000,000 series B preferred shares, 10,000,000 series C
preferred shares, 30,000,000 series D preferred shares, 30,000,000 series E
preferred shares (“Series E Preferred Shares”), and 10,000,000 series F
preferred shares, of which only 1,056,592,936 Common Shares, 110 Series A
Preferred Shares, and 4,054,879 Series E Preferred Shares are currently issued
and outstanding.

 

B.The Trustee is the registered owner of 1,000,000,000 restricted Common Shares.

 

C.HPT has an authorized share structure consisting of an unlimited number of
common shares of which 109,920,000 common shares (the “HPT Shares”) are
currently issued and outstanding.

 

D.           The HPT Shareholders are the registered and beneficial owner of the
HPT Shares.

 

E.            The HPT Shareholders wish to sell and the Trustee wishes to
purchase from the HPT Shareholders, the HPT Shares, the purchase price of which
shall be satisfied by the Trustee through the transfer of 120,912,000 restricted
Common Shares (“Consideration Shares”)

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EXECUTION VERSION 

owned by them to the HPT Shareholders (the “Share Exchange”), full details of
which are set forth in Appendix “B” to this Agreement.

 

THEREFORE, the Parties agree as follows:

 

 

Article 1
RECITALS AND INTERPRETATION

 

1.1Appendix and Recitals

 

The Parties to this Agreement acknowledge that each Appendix and the foregoing
Recitals to the Agreement are true and correct and hereby incorporated by
reference and made part of this Agreement.

 

1.2Definitions

 

In this Agreement, the following terms have the following meanings:

 

1.2.1“Books and Records” means all books, ledgers, files, lists, reports, plans,
logs, deeds, surveys, correspondence, operating records, Tax Returns and other
data and information, including all data and information stored on
computer-related or other electronic media, of and related to PlayBox or the
Business of HPT.

 

1.2.2“Business” means with respect to HPT, the business of developing new
innovative green hydropower technology options to utility providers throughout
the world, and with respect to PlayBox, the business of providing software
applications that provide artists and content owners with a range of services
which incorporate multimedia music formats accessible through the internet.

1.2.3“Business Day” means any day excluding a Saturday, Sunday or statutory
holiday in the Province of Ontario.

1.2.4“Claim” means any claim, demand, action, cause of action, suit,
arbitration, investigation, proceeding, complaint, grievance, charge,
prosecution, assessment or reassessment, including any appeal or application for
review.

1.2.5“Closing” means the completion of the sale to and purchase by the Trustee
of the HPT Shares, and the transfer of the Consideration Shares to the HPT
Shareholders, under the terms of this Agreement.

1.2.6“Closing Date” means any date that the Parties may agree to complete the
Closing is the date upon which the Closing will take place.

1.2.7“Closing Time” means any time (Eastern time) on the Closing Date or any
other time on the Closing Date as may be agreed by the Parties.

1.2.8“Communication” means any notice, demand, request, consent, approval or
other communication which is required or permitted by this Agreement to be given
or made by a Party.

1.2.9“Contract” means any agreement, understanding, undertaking, commitment,
licence or lease, whether written or oral.

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EXECUTION VERSION 

1.2.10“CRA” means the Canada Revenue Agency.

1.2.11“Encumbrance” means any security interest, mortgage, charge, pledge,
hypothec, lien, encumbrance, restriction, option, adverse claim or other
encumbrance of any kind.

1.2.12“Exchange Act” means the United States Securities Exchange Act of 1934, as
amended.

1.2.13“Financial Statements” means HPT’s two-year unaudited financial statements
as at September 30, 2019 attached to this Agreement as Appendix “D”.

1.2.14“Governmental Authority” means:

1.2.14.1any federal, provincial, state, local, municipal, regional, territorial,
aboriginal, or other government, governmental or public department, branch,
ministry, or court, domestic or foreign, including any district, agency,
commission, board, arbitration panel or authority and any subdivision of any of
them exercising or entitled to exercise any administrative, executive, judicial,
ministerial, prerogative, legislative, regulatory, or taxing authority or power
of any nature; and

1.2.14.2any quasi-governmental or private body exercising any regulatory,
expropriation or taxing authority under or for the account of any of them, and
any subdivision of any of them.

1.2.15“Government Official” means:

1.2.15.1Any official, officer, employee, or representative of, or any person
acting in an official capacity for or on behalf of, any Government Authority;

1.2.15.2Any salaried political party official, elected member of political
office or candidate for political office; or

1.2.15.3Any company, business, enterprise or other entity owned or controlled by
any person described in the foregoing clauses.

1.2.16“HPT Constating Documents” means the certificate and articles of
incorporation of HPT dated December 4, 2013, the certificate and articles of
amendment dated May 1, 2014, and the certificate and articles of amendment dated
March 1, 2017.

1.2.17“HPT Leased Premises” means any premises leased by HPT.

1.2.18“Intellectual Property” means all trade-marks and trade-mark applications,
trade names, certification marks, patents and patent applications, copyrights,
domain names, industrial designs, trade secrets, know-how, formulae, processes,
inventions, technical expertise, research data and other similar property, owned
by or licensed to HPT or PlayBox, including all associated registrations and
applications for registration, and all associated rights, including moral
rights.

1.2.19“IRS” means the Internal Revenue Service.

1.2.20“ITA” means the Income Tax Act (Canada).

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EXECUTION VERSION 

1.2.21“Knowledge of PlayBox” means the knowledge that Aldo Rotondi either has,
or would have obtained, after having made or caused to be made all reasonable
inquiries necessary to obtain informed knowledge, including inquiries of the
records and of management who are reasonably likely to have knowledge of the
relevant matter.

1.2.22“Knowledge of HPT” means the knowledge that Michael Shamber has, or would
have obtained, after having made or caused to be made all reasonable inquiries
necessary to obtain informed knowledge, including inquiries of the records and
of management who are reasonably likely to have knowledge of the relevant
matter.

1.2.23“Law” or “Laws” means any domestic or foreign statute, law, ordinance,
rule, regulation, treaty, or regulatory policy, guideline, code, by-law or order
that applies in whole or part to the applicable services, situations or events
under this Agreement.

1.2.24“Loss” means any loss, liability, damage, cost, expense, charge, fine,
penalty or assessment, including:

1.2.24.1the reasonable costs and expenses of any action, suit, proceeding,
demand, assessment, judgment, settlement or compromise; and

1.2.24.2all interest, fines and penalties.

1.2.25“Material Adverse Effect” means an effect resulting from any change,
event, occurrence or state of facts, either individually or in the aggregate,
that:

1.2.25.1is, or would reasonably be expected to be, material and adverse to the
business, condition (financial or otherwise), properties, assets (tangible or
intangible), liabilities (whether absolute, accrued, conditional, contingent or
otherwise), capitalization, operations or results of operations of either
PlayBox or HPT;

except that:

1.2.25.2any change, event, occurrence or state of facts relating to:

1.2.25.2.1conditions affecting the hydro power industry generally in
jurisdictions in which HPT carries on business, including changes generally
accepted accounting principles, Laws or Taxes;

1.2.25.2.2general economic conditions, or financial, credit, currency exchange,
securities or commodities markets in general; or

1.2.25.2.3war, armed hostilities or acts of terrorism,

will not result in a Material Adverse Effect unless it relates primarily to (or
has the effect of relating primarily to) either PlayBox or HPT, or adversely
affects either PlayBox or HPT, disproportionately, compared to other businesses
of similar size operating in the same industry as either PlayBox or HPT;

1.2.25.3the failure of PlayBox or HPT to meet any internal or published
projections or estimates of revenues, cash flow or earnings, in and of itself,
will not constitute or result in a Material Adverse Effect (but the state of
facts underlying that failure may

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EXECUTION VERSION 

be considered to determine whether that state of facts results in a Material
Adverse Effect); and

1.2.25.4any action taken (or not taken) by PlayBox or HPT that is required to be
taken (or not taken) under this Agreement or that is consented to by PlayBox or
HPT in writing will not result in a Material Adverse Effect.

1.2.26“Material Contract” means a Contract to which PlayBox or HPT is a party or
is bound that:

1.2.26.1involves or may result in the payment of money or money’s worth by or to
PlayBox or HPT in an amount in excess of $50,000;

1.2.26.2has an unexpired term of more than two years (including renewals);

1.2.26.3cannot be terminated by PlayBox or HPT without penalty upon less than 90
days’ notice; or

1.2.26.4the termination of which, or under which the loss of rights, would have
a material and adverse effect on the business, condition (financial or
otherwise), properties, assets (tangible or intangible), liabilities (whether
absolute, accrued, conditional, contingent or otherwise), capitalization,
operations or results of operations of PlayBox or HPT.

1.2.27“Parties” means PlayBox, HPT, the Trustee and the HPT Shareholders,
collectively, and “Party” means any one of them.

1.2.28“Permits” has the meaning set out in Sections 4.2.23 and 4.4.22.

1.2.29“Permitted Encumbrances” means:

1.2.29.1unregistered liens for municipal Taxes, assessments or similar charges
incurred by PlayBox or HPT in the ordinary course of its Business that are not
yet due and payable;

1.2.29.2inchoate mechanic’s, construction and carrier’s liens and other similar
liens arising by operation of law or statute in the ordinary course of PlayBox’s
or HPT’s Business for obligations which are not delinquent and will be paid or
discharged in the ordinary course of PlayBox’s or HPT’s Business, as applicable;

1.2.29.3unregistered Encumbrances of any nature claimed or held by any
Governmental Authority under any applicable Law, except for unregistered liens
for unpaid realty Taxes, assessments and public utilities;

1.2.29.4title defects which are of a minor nature and in the aggregate, do not
materially impair the value or use of any of the PlayBox Leased Premises or HPT
Leased Premises;

1.2.29.5any right of expropriation conferred upon, reserved to or vested in any
Governmental Authority under any applicable Law;

1.2.29.6zoning restrictions, easements and rights of way or other similar
Encumbrances or privileges in respect of real property which in the aggregate,
do not materially

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EXECUTION VERSION 

impair the value or use of any of the PlayBox Leased Premises or HPT Leased
Premises;

1.2.29.7Encumbrances created by others upon other lands over which there are
easements, rights-of-way, licences or other rights of user in favour of the
PlayBox Leased Premises or the HPT Leased Premises and which do not materially
impede the use of the easements, rights-of-way, licences or other rights of user
for the purposes for which they are held; and

1.2.29.8any Encumbrance which the Parties have expressly agreed in writing to
assume or accept under this Agreement.

1.2.30“Person” will be broadly interpreted and includes:

1.2.30.1a natural person, whether acting in his or her own capacity, or in his
or her capacity as executor, administrator, estate trustee, trustee or personal
or legal representative, and the heirs, executors, administrators, estate
trustees, trustees or other personal or legal representatives of a natural
person;

1.2.30.2a corporation or a company of any kind, a partnership of any kind, a
sole proprietorship, a trust, a joint venture, an association, an unincorporated
association, an unincorporated syndicate, an unincorporated organization or any
other association, organization or entity of any kind; and

1.2.30.3a Governmental Authority.

1.2.31“PlayBox Constating Documents” means the certificate and articles of
incorporation of PlayBox dated April 1, 2005, the certificate of amendment dated
April 12, 2006, the certificate of amendment dated April 26, 2010, the
certificate of amendment dated May 13, 2010, the articles of domestication dated
September 15, 2010, and the articles of amendment dated July 27, 2011.

1.2.32“PlayBox Leased Premises” means any premises leased by PlayBox.

1.2.33“Purchase Price” is defined in Section 0.

1.2.34“SEC” means the United States Securities and Exchange Commission.

1.2.35“Securities Act” means the United States Securities Act of 1933, as
amended.

1.2.36“Successors” means, as applicable, the heirs, executors, administrators,
estate trustees, trustees, personal or legal representatives, successors and
permitted assigns of a Person.

1.2.37“Tax” or “Taxes” means all taxes, duties, fees, premiums, assessments,
imposts, levies, rates, withholdings, dues, government contributions and other
charges of any kind imposed by any Governmental Authority, whether direct or
indirect, together with all interest, penalties, fines, additions to tax or
other additional amounts imposed in respect thereof.

1.2.38“Tax Law” means any Law that imposes Taxes or that deals with the
administration or enforcement of liabilities for Taxes.

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EXECUTION VERSION 

1.2.39“Tax Return” means any return, report, declaration, designation, election,
undertaking, waiver, notice, filing, information return, statement, form,
certificate or any other document or materials relating to Taxes, including any
related or supporting information with respect to any of those documents or
materials listed above in this Section 1.2.39, filed or to be filed with any
Governmental Authority in connection with the determination, assessment,
collection or administration of Taxes.

 

1.3Certain Rules of Interpretation

 

1.3.1Gender, etc. In this Agreement, words signifying the singular number
include the plural and vice versa, and words signifying gender include all
genders.

 

1.3.2Including. Every use of the words “including” or “includes” in this
Agreement is to be construed as meaning “including, without limitation” or
“includes, without limitation”, respectively.

1.3.3Division and Headings. The division of this Agreement into Articles and
Sections, the insertion of headings and the inclusion of a table of contents are
for convenience of reference only and do not affect the construction or
interpretation of this Agreement.

1.3.4Articles, Sections, etc. References in this Agreement to an Article,
Section or Exhibit are to be construed as references to an Article, Section or
Exhibit of this Agreement unless otherwise specified.

1.3.5Time Periods. Unless otherwise specified in this Agreement, time periods
within which or following which any calculation or payment is to be made, or
action is to be taken, will be calculated by excluding the day on which the
period begins and including the day on which the period ends. If the last day of
a time period is not a Business Day, the time period will end on the next
Business Day.

1.3.6Statutory Instruments. Unless otherwise specified, any reference in this
Agreement to any statute includes all regulations and subordinate legislation
made under or in connection with that statute at any time, and is to be
construed as a reference to that statute as amended, restated, supplemented,
extended, re-enacted, replaced or superseded at any time.

1.3.7Currency. All references to currency referred to in this Agreement are in
U.S. dollars, unless expressly stated otherwise.

 

1.4Governing Law

 

This Agreement is governed by, and is to be construed and interpreted in
accordance with, the Laws of the Province of Ontario and the Laws of Canada
applicable in that Province.

 

1.5Entire Agreement

 

This Agreement constitutes the entire agreement between the Parties pertaining
to the subject matter of this Agreement and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the
Parties, and there are no representations, warranties or other agreements
between the Parties, express or implied, in connection with the subject matter
of this Agreement except as specifically set out in this Agreement. No Party has
been induced to enter into this Agreement in reliance on, and there will be no
liability assessed, either in tort or contract, with respect to, any warranty,

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EXECUTION VERSION 

representation, opinion, advice or assertion of fact, except to the extent it
has been reduced to writing and included as a term in this Agreement.

 

 

Article 2
PURCHASE AND SALE

 

2.1Agreement of Purchase and Sale

 

As at the Closing Time, the HPT Shareholders shall sell, transfer, assign and
convey to the Trustee all of their right, title and interest in and to the HPT
Shares on the terms and subject to the conditions set out in this Agreement, and
the Trustee shall buy the HPT Shares from the HPT Shareholders on those terms
and subject to those conditions.

 

2.2Purchase Price

 

The purchase price for the HPT Shares shall be equal to the fair market value of
the HPT Shares (the “Purchase Price”).

 

2.3Payment of Purchase Price

 

The Purchase Price shall be paid and satisfied by the Trustee by transferring,
assigning, and conveying the Consideration Shares to the HPT Shareholders, full
details of which are set forth in Appendix “B” to this Agreement.

2.4Price Adjustment Clause

The intention of the Parties is that the fair market value of the consideration
for the HPT Shares is to be equal to the fair market value of the Consideration
Shares on the Closing Date. If, at a subsequent time, the fair market value of
the HPT Shares is determined for any reason, including without limitation:

2.4.1by agreement by the Parties;

2.4.2under a settlement approved by the Parties and either the CRA or IRS, as
applicable; or

2.4.3under a determination by the either the CRA or the IRS, or a court of
competent jurisdiction (beyond the time for any right of further appeal, or by
the expiry or waiver of the time for the right to appeal that determination),

to be different from the fair market value of the consideration given by the
Trustee to the HPT Shareholders pursuant to this Agreement for the HPT Shares,
then:

2.4.4the HPT Shareholders and the Trustee will make the appropriate adjustments
so that the fair market value of the consideration given by them to the HPT
Shareholders for the HPT Shares is equal to the fair market value of the HPT
Shares as on the Closing Date (as re-determined and approved by the HPT
Shareholders and the Trustee in accordance with this Section 2.4) by adjusting
the amount of the consideration given by them under Section 0, or otherwise as
the Parties see fit; and

2.4.5any adjustment under this Section 2.4 will be made effective as of the
Closing Date.

 

 

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EXECUTION VERSION 

2.5Directors and Officers of PlayBox

 

From and after the Closing Time, the directors and officers of PlayBox shall be
those directors and officers set forth on Appendix “C” herein.

 

 

Article 3 

HPT TRANSFER AND BUSINESS CONTINUATION

 

3.1                  HPT Transfer and Business Continuation

 

Simultaneously with the completion of the Share Exchange:

 

3.1.1HPT shall transfer to PlayBox, and PlayBox shall agree to accept, all of
HPT’s property, including Intellectual Property, rights, interests, liabilities,
and obligations on an “as-is” “where-is” basis; and

 

3.1.2The Business formerly conducted by HPT shall be continued by PlayBox.

 

 

Article 4
REPRESENTATIONS AND WARRANTIES

 

4.1Representations Relating to the Trustee

 

The Trustee represents and warrants to HPT and the HPT Shareholders as follows,
and acknowledges that HPT and the HPT Shareholders are relying upon these
representations and warranties in connection with the sale of the HPT Shares to
the Trustee and receipt of the Consideration Shares:

 

4.1.1Capacity and Authority. The Trustee has all necessary corporate power,
authority and capacity to enter into and perform its obligations under this
Agreement.

4.1.2Binding Obligation. This Agreement has been duly executed and delivered by
the Trustee and constitutes a valid and binding obligation of the Trustee,
enforceable against them in accordance with its terms, subject to applicable
bankruptcy, insolvency and other Laws of general application limiting the
enforcement of creditors’ rights generally and to the fact that equitable
remedies, including specific performance, are discretionary and may not be
ordered in respect of certain defaults.

4.1.3Title to Consideration Shares. The Trustee is the legal and beneficial
owner of the Consideration Shares and has good title to them, free and clear of
any Encumbrance. At Closing, the Trustee will have the absolute and exclusive
right to sell those Consideration Shares to the HPT Shareholders as contemplated
by this Agreement.

4.1.4Absence of Conflict. None of the execution and delivery of this Agreement
by the Trustee, the performance of the Trustee’s obligations under this
Agreement, or the completion by them of the transactions contemplated by this
Agreement will:

4.1.4.1result in or constitute a breach of any term or provision of, or
constitute a default under, any Contract to which the Trustee is a party or
which affects the Consideration Shares owned by the Trustee;

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EXECUTION VERSION 

4.1.4.2contravene any applicable Law; or

4.1.4.3contravene any judgment, order, writ, injunction or decree of any
Governmental Authority.

 

4.2Representations Relating to PlayBox.

 

PlayBox represents and warrants to HPT and the HPT Shareholders as follows, and
acknowledges that the HPT Shareholders are relying upon these representations
and warranties in connection with the sale of the HPT Shares to the Trustee and
receipt of the Consideration Shares:

 

4.2.1Capacity and Authority. PlayBox has all necessary corporate power,
authority and capacity to enter into and perform its obligations under this
Agreement.

4.2.2Binding Obligation. This Agreement has been duly executed and delivered by
PlayBox and constitutes a valid and binding obligation of PlayBox, enforceable
against PlayBox in accordance with its terms, subject to applicable bankruptcy,
insolvency and other Laws of general application limiting the enforcement of
creditors’ rights generally and to the fact that equitable remedies, including
specific performance, are discretionary and may not be ordered in respect of
certain defaults.

4.2.3Restrictive Covenants. PlayBox is not a party to, or bound or affected by,
any Contract containing any covenant expressly limiting its ability to compete
in any line of business, or limiting its ability to transfer or move any of its
assets or operations, or any covenant which could reasonably be expected to have
a Material Adverse Effect.

4.2.4Absence of Conflict. None of the execution and delivery of this Agreement
by PlayBox, the performance of PlayBox’s obligations under this Agreement, or
the completion by PlayBox of the transactions contemplated by this Agreement
will:

4.2.4.1result in or constitute a breach of any term or provision of, or
constitute a default under, the PlayBox Constating Documents;

4.2.4.2result in or constitute a breach of any term or provision of, or
constitute a default under, any Contract to which PlayBox is a party or which
affects the Consideration Shares;

4.2.4.3result in the creation or imposition of any Encumbrance on the
Consideration Shares;

4.2.4.4contravene any applicable Law; or

4.2.4.5contravene any judgment, order, writ, injunction or decree of any
Governmental Authority.

4.2.5Consents. PlayBox has obtained all consents, approvals or waivers required
under any Material Contract in order to complete the transactions contemplated
by this Agreement.

4.2.6Regulatory Approvals. No authorization, approval, order or consent of, or
filing with, any Governmental Authority is required on the part of PlayBox in
connection with the execution, delivery and performance of this Agreement or any
other documents and agreements to be delivered under this Agreement.

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EXECUTION VERSION 

4.2.7Subsidiary. PlayBox has no subsidiaries.

4.2.8Corporate Existence of PlayBox. PlayBox has been duly incorporated and
organized, and is validly existing and in good standing under the State Laws of
Wyoming, U.S.A. No proceedings have been taken or authorized by PlayBox in
respect of the bankruptcy, insolvency, liquidation, dissolution or winding up of
PlayBox.

4.2.9PlayBox Constating Documents. The PlayBox Constating Documents include all
of the charter documents of PlayBox and are in full force and effect. No action
has been taken to amend the PlayBox Constating Documents.

4.2.10Capacity and Powers of PlayBox. PlayBox has all necessary corporate power,
authority and capacity to own or lease its assets and to carry on its Business
as currently being conducted.

4.2.11No Purchase Rights. Accept as disclosed in this Agreement, no Person has
any written or oral agreement or option or any right or privilege (whether by
Law, pre-emptive, contractual or otherwise) capable of becoming an agreement or
option, for:

4.2.11.1the purchase of any Common Shares; or

4.2.11.2the purchase of any of the assets of PlayBox, other than in the ordinary
course of its Business.

 

4.2.12Authorized and Issued Capital. PlayBox has an authorized share structure
consisting of 5,000,000,000 Common Shares, 1,000,000 Series A Preferred Shares,
20,000,000 series B preferred shares, 10,000,000 series C preferred shares,
30,000,000 series D preferred shares, 30,000,000 Series E Preferred Shares, and
10,000,000 series F preferred shares, of which only 1,056,592,936 Common Shares,
110 Series A Preferred Shares, and 4,054,879 Series E Preferred Shares are
currently issued and outstanding as fully paid shares with good title, free and
clear of any Encumbrance.

 

4.2.13Tax Matters. To the Knowledge of PlayBox, PlayBox has filed all Tax
Returns, has paid all Taxes, and has deducted, withheld or collected, and
remitted, all amounts to be deducted, withheld, collected or remitted, with
respect to any Taxes, as required under all applicable Tax Laws. There are no
Claims either in progress or pending, or, to the Knowledge of PlayBox,
threatened against PlayBox, in connection with any Taxes.

 

4.2.14Absence of Undisclosed Liabilities. PlayBox does not have any material
outstanding indebtedness or any liabilities or obligations (whether accrued,
absolute, contingent or otherwise, including under any guarantee of any debt)
which are not properly reflected or reserved against in PlayBox’s most recent
financial statements. For the purposes of this Section 4.2.17 only, “material”
shall be defined as any indebtedness, liabilities or obligations owing to any
third party in excess of $50,000.

4.2.15Material Adverse Effect. Since the date of PlayBox’s most recent financial
statements, PlayBox has carried on business in the ordinary course and there has
not been any change that has had, or could be reasonably expected to have, a
Material Adverse Effect on the Business or financial position, condition, assets
or properties.

4.2.16Title to Assets. PlayBox owns, possesses and has good and marketable title
to all of its undertakings, property and assets not otherwise the subject of
specific representations and

11 

EXECUTION VERSION 

warranties in this Section 4.2, free and clear of all Encumbrances other than
Permitted Encumbrances. The undertakings, property and assets of PlayBox
comprise all of the undertakings, property and assets necessary to carry on its
Business as it is currently operated.

4.2.17Real Property. PlayBox does not own any lands or premises.

4.2.18Intellectual Property. All necessary legal steps have been taken by
PlayBox to preserve their rights to their Intellectual Property. The
Intellectual Property that is owned by PlayBox is owned free and clear of any
Encumbrances, other than Permitted Encumbrances. The use by PlayBox of any
Intellectual Property owned by third parties is valid, and PlayBox is not in
default or breach of any licence agreement relating to that Intellectual
Property, and there exists no state of facts which, after notice or lapse of
time or both, would constitute a default or breach under that Intellectual
Property. To the Knowledge of PlayBox, the conduct by PlayBox of its Business
does not infringe the Intellectual Property of any Person.

4.2.19Compliance with Laws. PlayBox is conducting its Business in compliance
with all applicable Laws, and PlayBox has not received notice of any violation
by PlayBox of any Laws.

4.2.20Permits.

4.2.20.1PlayBox has obtained and is in compliance with all material licences,
permits, approvals, certificates, consents, orders, grants, procedures and
standards and other authorizations of or from any Governmental Authority that
are applicable to PlayBox, or are necessary to conduct the Business as it is now
being conducted (collectively, the “Permits” for this Section 4.2.23).

4.2.20.2PlayBox has, or has had on its behalf, filed, declared, obtained,
maintained or submitted all reports, documents, forms, notices, applications,
records, claims, submissions and supplements or amendments as required by any
Laws to keep the Permits in good standing and all such reports, documents,
forms, notices, applications, records, claims, submissions and supplements or
amendments were materially complete and correct on the date filed (or were
corrected or supplemented by a subsequent submission).

4.2.20.3All of the Permits are in full force and effect and there has not
occurred since incorporation any violation of, or any default under, or any
event or claim giving rise to or potentially giving rise to any right of
termination, revocation, adverse modification, non-renewal, suspension, or
cancellation of any Permit, no application or proceeding is pending or, to the
Knowledge of PlayBox, threatened with respect to any of the foregoing and no
Governmental Authority has provided PlayBox with notice of any of the foregoing,
except for any such violation, default or event as would not be reasonably
expected to have, individually or in the aggregate, a Material Adverse Effect.

4.2.21Environmental Conditions. To the Knowledge of PlayBox, PlayBox has
conducted its operations and has used its facilities (both those now occupied
and those, if any, previously occupied) at all times in conformity with all
applicable environmental and occupational health and safety laws, regulations,
permits, licences and certificates relating to environmental protection
(including laws relating to the use, manufacture, refinement, treatment,
storage, handling, transportation, processing and disposition of hazardous
substances) and occupational safety and health.

12 

EXECUTION VERSION 

4.2.22Employees and Consultants. PlayBox does not have any employees or
consultants other than those disclosed in writing to HPT.

4.2.23Litigation. There are no Claims, whether or not purportedly on behalf of
or against PlayBox, pending, commenced, or, to the Knowledge of PlayBox,
threatened, that might reasonably be expected to have a Material Adverse Effect
or that might result in an Encumbrance against the undertakings, property or
assets of PlayBox.

4.2.24OTC Markets Reports. PlayBox has filed all disclosures and reports with
the OTC Markets Group which are required to be marked PINK Current
(collectively, the “PlayBox OTC Markets Reports”). Of those filings which were
made, PlayBox warrants that the PlayBox OTC Markets Reports (a) complied as to
form in all material respects with the applicable requirements of the SEC, the
Securities Act, and/or the Exchange Act, and (b) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading.

 

4.3Representations Relating to the HPT Shareholders

 

The HPT Shareholders represent and warrant to the Trustee, and PlayBox as
follows, and acknowledge that the Trustee and PlayBox are relying upon these
representations and warranties in connection with the purchase of the HPT Shares
by the Trustee:

 

4.3.1Binding Obligation. This Agreement has been duly executed and delivered by
the HPT Shareholders and constitutes a valid and binding obligation of the HPT
Shareholders, enforceable against the HPT Shareholders in accordance with its
terms, subject to applicable bankruptcy, insolvency and other Laws of general
application limiting the enforcement of creditors’ rights generally and to the
fact that equitable remedies, including specific performance, are discretionary
and may not be ordered in respect of certain defaults.

 

4.3.2Title to HPT Shares. The HPT Shareholders are the legal and beneficial
owners of the HPT Shares set forth opposite their names in Appendix “A” attached
hereto, and have good title to them, free and clear of any Encumbrance. At
Closing, the HPT Shareholders will have the absolute and exclusive right to sell
the HPT Shares to the Trustee as contemplated by this Agreement.

4.3.3Absence of Conflict. None of the execution and delivery of this Agreement
by the HPT Shareholders, the performance of the HPT Shareholders’ obligations
under this Agreement, or the completion by the HPT Shareholders of the
transactions contemplated by this Agreement will:

4.3.3.1result in or constitute a breach of any term or provision of, or
constitute a default under, any Contract to which the HPT Shareholders are a
party or which affects the HPT Shares owned by the HPT Shareholders;

4.3.3.2contravene any applicable Law; or

4.3.3.3contravene any judgment, order, writ, injunction or decree of any
Governmental Authority.

 

 

13 

EXECUTION VERSION 

4.4Representations Relating to HPT

 

HPT represents and warrants to the Trustee and PlayBox as follows, and
acknowledges that the Trustee and PlayBox are relying upon these representations
and warranties in connection with the purchase of the HPT Shares by the Trustee:

 

4.4.1Capacity and Authority. HPT has all necessary corporate power, authority
and capacity to enter into and perform its obligations under this Agreement.

4.4.2Binding Obligation. This Agreement has been duly executed and delivered by
HPT and constitutes a valid and binding obligation of HPT, enforceable against
HPT in accordance with its terms, subject to applicable bankruptcy, insolvency
and other Laws of general application limiting the enforcement of creditors’
rights generally and to the fact that equitable remedies, including specific
performance, are discretionary and may not be ordered in respect of certain
defaults.

4.4.3Restrictive Covenants. HPT is not a party to, or bound or affected by, any
Contract containing any covenant expressly limiting its ability to compete in
any line of business, or limiting its ability to transfer or move any of its
assets or operations, or any covenant which could reasonably be expected to have
a Material Adverse Effect.

4.4.4Absence of Conflict. None of the execution and delivery of this Agreement
by HPT, the performance of HPT’s obligations under this Agreement, or the
completion by HPT of the transactions contemplated by this Agreement will:

4.4.4.1result in or constitute a breach of any term or provision of, or
constitute a default under, the HPT Constating Documents;

4.4.4.2result in or constitute a breach of any term or provision of, or
constitute a default under, any Contract to which HPT is a party or which
affects the HPT Shares;

4.4.4.3result in the creation or imposition of any Encumbrance on the HPT
Shares;

4.4.4.4contravene any applicable Law; or

4.4.4.5contravene any judgment, order, writ, injunction or decree of any
Governmental Authority.

4.4.5Consents. HPT has obtained all consents, approvals or waivers required
under any Material Contract in order to complete the transactions contemplated
by this Agreement.

4.4.6Regulatory Approvals. No authorization, approval, order or consent of, or
filing with, any Governmental Authority is required on the part of HPT in
connection with the execution, delivery and performance of this Agreement or any
other documents and agreements to be delivered under this Agreement.

4.4.7Competition Act. HPT has assets in Canada with an aggregate value of less
than $92,000,000 and the annual gross revenues from sales in or from Canada
generated from those assets is less than $92,000,000, in each case as determined
in accordance with the Competition Act.

4.4.8Subsidiary. HPT has no subsidiaries.

14 

EXECUTION VERSION 

4.4.9Corporate Existence of HPT. HPT has been duly incorporated and organized,
and is validly existing and in good standing under the Business Corporations Act
(Ontario). No proceedings have been taken or authorized by HPT in respect of the
bankruptcy, insolvency, liquidation, dissolution or winding up of HPT.

4.4.10HPT Constating Documents. The HPT Constating Documents include all of the
charter documents of HPT and are in full force and effect. No action has been
taken to amend the HPT Constating Documents.

4.4.11Capacity and Powers of HPT. HPT has all necessary corporate power,
authority and capacity to own or lease its assets and to carry on its Business
as currently being conducted.

4.4.12Authorized and Issued Capital. The authorized capital of HPT consists of
an unlimited number of HPT Shares of which 109,920,000 HPT Shares are issued and
outstanding as fully paid shares with good title, free and clear of any
Encumbrances.

4.4.13Holders of HPT Shares. The HPT Shareholders own all of the issued and
outstanding HPT Shares. A true and complete list of all HPT Shareholders with
the number of HPT Shares owned by each HPT Shareholder is set out in Appendix
“A” herein.

4.4.14No Purchase Rights. Except as disclosed in the Agreement, no Person has
any written or oral agreement or option or any right or privilege (whether by
Law, pre-emptive, contractual or otherwise) capable of becoming an agreement or
option, including HPT Shares, warrants or convertible obligations of any kind,
for:

4.4.14.1the purchase of any HPT Shares of HPT; or

4.4.14.2other than PlayBox, the purchase of any of the assets of HPT, other than
in the ordinary course of its Business.

4.4.15Tax Matters. To the Knowledge of HPT, HPT has filed all Tax Returns, has
paid all Taxes, and has deducted, withheld or collected, and remitted, all
amounts to be deducted, withheld, collected or remitted, with respect to any
Taxes, as required under all applicable Tax Laws. There are no Claims either in
progress or pending, or, to the Knowledge of the HPT, threatened against HPT, in
connection with any Taxes.

4.4.16Absence of Undisclosed Liabilities. HPT does not have any material
outstanding indebtedness or any liabilities or obligations (whether accrued,
absolute, contingent or otherwise, including under any guarantee of any debt)
which are not properly reflected or reserved against HPT’s Financial Statements
which are attached hereto as Appendix “D”. For the purposes of this
Section 4.4.16 only, “material” shall be defined as any indebtedness,
liabilities or obligations owing to any third party in excess of $10,000.

4.4.17Material Adverse Effect. Since the date of HPT’s Financial Statements, HPT
has carried on business in the ordinary course and there has not been any change
that has had, or could be reasonably expected to have, a Material Adverse Effect
on the Business or financial position, condition, assets or properties.

4.4.18Title to Assets. HPT possesses and has good and marketable title to all of
its undertakings, property and assets not otherwise the subject of specific
representations and warranties in this Section 4.4, free and clear of all
Encumbrances other than Permitted Encumbrances.

15 

EXECUTION VERSION 

The undertakings, property and assets of HPT comprise all of the undertakings,
property and assets necessary to carry on its Business as it is currently
operated.

4.4.19Intellectual Property. All necessary legal steps have been taken by HPT to
preserve its rights to its Intellectual Property. The Intellectual Property that
is owned by HPT is owned free and clear of any Encumbrances, other than
Permitted Encumbrances. The use by HPT of any Intellectual Property owned by
third parties is valid, and HPT is not in default or breach of any licence
agreement relating to that Intellectual Property, and there exists no state of
facts which, after notice or lapse of time or both, would constitute a default
or breach under that Intellectual Property. To the Knowledge of the HPT, the
conduct by HPT of its Business does not infringe the Intellectual Property of
any Person.

4.4.20Real Property. HPT does not own any lands or premises.

4.4.21Compliance with Laws. HPT is conducting its Business in compliance with
all applicable Laws, and HPT has not received notice of any violation of any
Laws.

4.4.22Permits.

4.4.22.1HPT has obtained and is in compliance with all material licences,
permits, approvals, certificates, consents, orders, grants, procedures and
standards and other authorizations of or from any Governmental Authority that
are applicable to HPT, or are necessary to conduct the Business as it is now
being conducted (collectively, the “Permits” for this Section 4.4.22).

4.4.22.2HPT has, or have has on its behalf, filed, declared, obtained,
maintained or submitted all reports, documents, forms, notices, applications,
records, claims, submissions and supplements or amendments as required by any
Laws to keep the Permits in good standing and all such reports, documents,
forms, notices, applications, records, claims, submissions and supplements or
amendments were materially complete and correct on the date filed (or were
corrected or supplemented by a subsequent submission).

4.4.22.3All of the Permits are in full force and effect and there has not
occurred since incorporation any violation of, or any default under, or any
event or claim giving rise to or potentially giving rise to any right of
termination, revocation, adverse modification, non-renewal, suspension, or
cancellation of any Permit, no application or proceeding is pending or, to the
Knowledge of HPT, threatened with respect to any of the foregoing and no
Governmental Authority has provided HPT with notice of any of the foregoing
except for any such violation, default or event as would not be reasonably
expected to have, individually or in the aggregate, a Material Adverse Effect.

4.4.23Environmental Conditions. To the Knowledge of HPT, HPT has conducted its
operations and has used its facilities (both those now occupied and those, if
any, previously occupied) at all times in conformity with all applicable
environmental and occupational health and safety laws, regulations, permits,
licences and certificates relating to environmental protection (including laws
relating to the use, manufacture, refinement, treatment, storage, handling,
transportation, processing and disposition of hazardous substances) and
occupational safety and health.

16 

EXECUTION VERSION 

4.4.24Litigation. There are no Claims, whether or not purportedly on behalf of
or against HPT, pending, commenced, or, to the Knowledge of HPT , threatened,
that might reasonably be expected to have a Material Adverse Effect or that
might result in an Encumbrance against the undertakings, property or assets of
HPT.

 

 

Article 5
COVENANTS

 

5.1Delivery of Books and Records

 

On the Closing Date, HPT will cause to be delivered to PlayBox all of the Books
and Records. PlayBox agrees that it will preserve the Books and Records so
delivered to it for a period of seven years after the Closing Date, or for any
longer period required by any applicable Law.

 

5.2Tax Elections

 

PlayBox agrees that, at the request of the HPT Shareholders, it shall sign and
execute all forms (each, a “Form”) prepared by the HPT Shareholders for the
purpose of making necessary tax elections with respect to the transfer of the
HPT Shares. It shall be the responsibility of the HPT Shareholders to prepare
and file such Forms with the CRA. PlayBox shall not be liable for any damages
arising to the HPT Shareholders for any errors or omissions made to or late
filing of any Form.

 

 

Article 6
CLOSING CONDITIONS

 

6.1Conditions for the Benefit of the Trustee

 

The obligation of the Trustee to complete the purchase of the HPT Shares, and
the issuance of the Consideration Shares is subject to the satisfaction, or
waiver by the Trustee, at or before the Closing Time, of the following
conditions, which are for the sole benefit of the Trustee and which may be
waived, in whole or in part, by the Trustee at any time without prejudice to the
Trustee’s right to rely on any other condition precedent.

 

6.1.1Covenants. HPT and the HPT Shareholders will have performed in all material
respects its obligations required to be performed on or before the Closing Date
under this Agreement.

6.1.2Consents. All filings with, notifications to and consents from Governmental
Authorities and third parties will have been made, given or obtained on terms
acceptable to the Trustee, acting reasonably, so that the transactions
contemplated by this Agreement may be completed without resulting in the breach
of, or any default, termination, amendment or acceleration of any obligation
under, any Permit or any licence of, or affecting the Business of, HPT.

17 

EXECUTION VERSION 

6.1.3Due Diligence. All legal, financial, business and technical due diligence
on HPT will be completed to the satisfaction of the Trustee.

6.1.4Deliveries. The HPT Shareholders will have delivered, or cause to be
delivered, to the Trustee the following in form and substance satisfactory to
them:

6.1.4.1original share certificates representing the HPT Shares, duly endorsed by
an effective endorsement for transfer to the Trustee;

6.1.4.2certified copies of resolutions of the directors of HPT authorizing the
transfer of the HPT Shares to the Trustee;

6.1.4.3share certificates in the name of the Trustee for the HPT Shares
transferred hereby;

6.1.4.4the Books and Records; and

6.1.4.5all other documentation and evidence reasonably requested by the Trustee
in order to establish the due authorization and completion by HPT and the HPT
Shareholders of the transactions contemplated by this Agreement, including the
taking of all corporate proceedings by HPT required to effectively carry out its
obligations under this Agreement.

 

6.2Conditions for the Benefit of the HPT Shareholders

 

The obligation of the HPT Shareholders to complete the sale of the HPT Shares is
subject to the satisfaction, or waiver by the HPT Shareholders, at or before the
Closing Time, of the following conditions, which are for the sole benefit of the
HPT Shareholders and which may be waived, in whole or in part, by the HPT
Shareholders at any time without prejudice to the HPT Shareholders’ right to
rely on any other condition precedent.

 

6.2.1Covenants. The Trustee and PlayBox will have performed in all material
respects its obligations required to be performed on or before the Closing Date
under this Agreement.

6.2.2Consents. All filings with, notifications to and consents from Governmental
Authorities and third parties will have been made, given or obtained on terms
acceptable to the HPT Shareholders, acting reasonably, so that the transactions
contemplated by this Agreement may be completed without resulting in the breach
of, or any default, termination, amendment or acceleration of any obligation
under, any Permit or any licence of, or affecting the Business of, PlayBox.

6.2.3No Trading Suspension. Trading in the Common Shares shall not have been
suspended by any trading market.

6.2.4Due Diligence. All legal, financial, business and technical due diligence
on PlayBox will be completed to the satisfaction of the HPT Shareholders.

6.2.5OTC Market Filings. All required OTC Markets filings to document the Share
Exchange shall have been agreed to in draft form by the Parties.

6.2.6Deliveries. The Trustee will have delivered to the HPT Shareholders the
following in form and substance satisfactory to the HPT Shareholders:

18 

EXECUTION VERSION 

6.2.6.1Electronic share certificates representing the Consideration Shares
issued in the name of the HPT Shareholders or as the HPT Shareholders shall
direct in writing to the Trustee;

6.2.6.2certified copies of resolutions of the directors of the Trustee and
PlayBox authorizing: (i) the assignment and transfer of the Consideration Shares
to the HPT Shareholders, and (ii) all other transactions contemplated by this
Agreement including, but not limited to, the Post-Closing Share Exchanges; and

6.2.6.3all documentation and other evidence reasonably requested by the HPT
Shareholders in order to establish the due authorization and completion by the
Trustee of the transactions contemplated by this Agreement, including the taking
of all corporate proceedings by the board of directors and the shareholders of
PlayBox required to effectively carry out the obligations of the Trustee under
this Agreement.

 

 

Article 7
CLOSING ARRANGEMENTS

 

7.1Closing

 

The Closing may take place at the Closing Time. All required documents may be
delivered as originals or may be delivered by electronic transmission.

 

7.2Closing Deliveries

 

At the Closing Time:

 

7.2.1the HPT Shareholders will deliver or cause to be delivered to the Trustee
the documents set out in Section 6.1.4 (Deliveries), including the original
share certificates representing the HPT Shares in fully transferable form.

 

7.2.2The Trustee will deliver or cause to be delivered to the HPT Shareholders
the documents set out in Section 6.2.5 (Deliveries), including electronic share
certificates representing the Consideration Shares.

 

 

Article 8 

TERMINATION

 

8.1Termination Rights

 

This Agreement may be terminated at any time before the Closing to take place:

 

8.1.1by mutual written consent of the Trustee and the HPT Shareholders;

 

8.1.2by the Trustee, upon written notice to the other Parties (specifying in
reasonable detail the circumstances giving rise to the Trustee’s right to
terminate):

 

19 

EXECUTION VERSION 

8.1.2.1if any of the conditions set out in Section 6.1 (Conditions for the
Benefit of the Trustee) which has not been waived by them is not satisfied at or
before the Closing Time,

 

provided that the failure to satisfy that condition is not the result, directly
or indirectly, of the Trustee’s breach of this Agreement;

 

8.1.3by the HPT Shareholders, upon written notice to the other Parties
(specifying in reasonable detail the circumstances giving rise to the HPT
Shareholders’ right to terminate):

 

8.1.3.1if any of the conditions set out in Section 6.2 (Conditions for the
Benefit of the HPT Shareholders) which have not been waived by the HPT
Shareholders is not satisfied at or before the Closing Time,

 

provided that the failure to satisfy that condition is not the result, directly
or indirectly, of the breach of this Agreement by the HPT Shareholders or HPT.

 

8.2Effect of Termination

 

If this Agreement is terminated in accordance with Section 0, the Parties will
be released from all of their obligations under this Agreement, except that the
termination of this Agreement at any time before the Closing to take place will
not relieve any Party from any liability arising before that termination.

 

 

Article 9
GENERAL

 

9.1Time of Essence

 

Time is of the essence in all respects of this Agreement.

 

9.2Notices

 

Any Communication must be in writing and either:

 

9.2.1delivered personally or by courier;

9.2.2sent by prepaid registered mail; or

9.2.3transmitted by e-mail or functionally equivalent electronic means of
transmission, charges (if any) prepaid.

Any Communication must be sent to the intended recipient at its address as
follows:

to PlayBox at:

5500 North Service Road, Suite 301

Burlington, Ontario L7L 6W6

 

Attention: Michael Shamber
Tel. No.: 905-218-3593
E-mail: mshamber@hydropowertechnologies.com

20 

EXECUTION VERSION 

to the Trustee at:

2030 Powers Ferry Rd. SE

Suite # 212

Atlanta Ga. 30339

 

Attention: Erik Nelson

Tel. No.: (404)-474-3110
E-mail: esn@mountainsharetransfer.com

 

to HPT and the HPT Shareholders at:

4200 Morris Drive, Unit B

Burlington, ON

L7L 5L6

 

Attention: Michael Shamber
Tel. No.: 905-218-3593
E-mail: mshamber@hydropowertechnologies.com

 

or at any other address as any Party may at any time advise the others by
Communication given or made in accordance with this Section 9.2. Any
Communication delivered to the Party to whom it is addressed will be deemed to
have been given or made and received on the day it is delivered at that Party’s
address, provided that if that day is not a Business Day then the Communication
will be deemed to have been given or made and received on the next Business Day.
Any Communication sent by prepaid registered mail will be deemed to have been
given or made and received on the fifth Business Day after which it is mailed.
If a strike or lockout of postal employees is then in effect, or generally known
to be impending, every Communication must be delivered personally or by courier
or transmitted by facsimile, e-mail or functionally equivalent electronic means
of transmission. Any Communication transmitted by e-mail or other functionally
equivalent electronic means of transmission will be deemed to have been given or
made and received on the day on which it is transmitted; but if the
Communication is transmitted on a day which is not a Business Day or after 4:00
p.m.(local time of the recipient), the Communication will be deemed to have been
given or made and received on the next Business Day.

9.3Severability

Each Section of this Agreement is distinct and severable. If any Section of this
Agreement, in whole or in part, is or becomes illegal, invalid, void, voidable
or unenforceable in any jurisdiction by any court of competent jurisdiction, the
illegality, invalidity or unenforceability of that Section, in whole or in part,
will not affect:

9.3.1the legality, validity or enforceability of the remaining Sections of this
Agreement, in whole or in part; or

9.3.2the legality, validity or enforceability of that Section, in whole or in
part, in any other jurisdiction.

 

 

 

 

21 

EXECUTION VERSION 

9.4Submission to Jurisdiction

 

Each of the Parties irrevocably and unconditionally submits and attorns to the
exclusive jurisdiction of the courts of the Province of Ontario to determine all
issues, whether at law or in equity, arising from this Agreement. To the extent
permitted by applicable Law, each of the Parties:

 

9.4.1irrevocably waives any objection, including any claim of inconvenient
forum, that it may now or in the future have to the venue of any legal
proceeding arising out of or relating to this Agreement in the courts of that
Province, or that the subject matter of this Agreement may not be enforced in
those courts;

 

9.4.2irrevocably agrees not to seek, and waives any right to, judicial review by
any court which may be called upon to enforce the judgment of the courts
referred to in this Section 9.4, of the substantive merits of any suit, action
or proceeding; and

9.4.3to the extent that Party has or may acquire any immunity from the
jurisdiction of any court or from any legal process, whether through service or
notice, attachment before judgment, attachment in aid of execution, execution or
otherwise, with respect to itself or its property, irrevocably waives that
immunity in respect of its obligations under this Agreement.

 

9.5Amendment and Waiver

 

No amendment, discharge, restatement, supplement, termination or waiver of this
Agreement or any Section of this Agreement is binding unless it is in writing
and executed by the Party to be bound. No waiver of, failure to exercise or
delay in exercising, any Section of this Agreement constitutes a waiver of any
other Section (whether or not similar) nor does any waiver constitute a
continuing waiver unless otherwise expressly provided.

 

9.6Further Assurances

 

Each Party will, at the requesting Party’s expense, execute and deliver any
further agreements and documents and provide any further assurances,
undertakings and information as may be reasonably required by the requesting
Party to give effect to this Agreement.

 

9.7Assignment and Enurement

 

Neither this Agreement nor any right or obligation under this Agreement may be
assigned by any Party without the prior written consent of the other Parties.
This Agreement enures to the benefit of and is binding upon the Parties and
their respective Successors.

 

9.8Counterparts and Electronic Delivery

 

This Agreement may be executed and delivered by the Parties in counterparts,
each of which will be an original, and each of which may be delivered by e-mail
or other functionally equivalent electronic means of transmission, and those
counterparts will together constitute one and the same instrument.

 

9.9Costs and Expenses

 

Except as otherwise specified in this Agreement, all costs and expenses
(including the fees and disbursements of accountants, financial advisors, legal
counsel and other professional advisers) incurred in connection with the
negotiation and settlement of this Agreement, and the completion of the

22 

EXECUTION VERSION 

transactions contemplated by this Agreement, are to be paid by the Party
incurring those costs and expenses.

9.10Tender

Any tender of documents or money to the Parties under this Agreement may be made
upon the Parties or their respective counsel.

9.11Public Announcements

 

All public announcements, press releases and publicity concerning this
Agreement, or the transactions contemplated by this Agreement, must be jointly
planned and co-ordinated by PlayBox, the Trustee, HPT, and the HPT Shareholders
and no Party will act unilaterally in this regard without the prior consent of
the other Parties. Nothing in this Section 9.10 will limit the ability of a
Party to make any announcements to employees, clients or other Persons having
business relations with a Party to the extent the Party, after consultation with
the other Parties, reasonably determines in good faith that the announcement is
necessary or advisable.

 

9.12Equitable Remedies

 

The Parties acknowledge that the failure to comply with a covenant or obligation
contained in this Agreement may give rise to irreparable injury to a Party,
inadequately compensable in damages. Accordingly, a Party may seek to enforce
the performance of this Agreement by injunction or specific performance upon
application to a court of competent jurisdiction without proof of actual damage
(and without the requirement of posting bond or other security).

 

9.13No Contra Proferentem

 

This Agreement has been reviewed by each Party’s professional advisors, and
revised during the course of negotiations between the Parties. Each Party
acknowledges that this Agreement is the product of their joint efforts, that it
expresses their agreement, and that, if there is any ambiguity in any of its
provisions, no rule of interpretation favouring one Party over another based on
authorship will apply.

 

9.14Independent Legal Advice

 

Each of the Parties acknowledges that it has read and understands the terms and
conditions of this Agreement and acknowledges and agrees that it has had the
opportunity to seek, and was not prevented or discouraged by any other Party
from seeking, any independent legal advice which it considered necessary before
the execution and delivery of this Agreement and that, if it did not avail
itself of that opportunity before signing this Agreement, it did so voluntarily
without any undue pressure, and agrees that its failure to obtain independent
legal advice will not be used by it as a defence to the enforcement of its
obligations under this Agreement.

 

 

REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK

23 

EXECUTION VERSION 

Each of the Parties has executed and delivered this Agreement as of the date
noted at the beginning of this Agreement.

MOUNTAIN SHARE TRANSFER LLC

 

 

Per: /s/ Erik Nelson

________________________________

Name: Erik Nelson

Title: President

 

 

PLAYBOX (US), INC.

 

 

Per: /s/ Michael Shamber

________________________________

Name: Michael Shamber
Title: President

 

 

HYDROPOWER TECHNOLOGIES INC.

 

 

Per: /s/ Michael Shamber

_______________________________

Name: Michael Shamber
Title: President

 

 

HYDROPOWER TECHNOLOGIES INC. by and on behalf of the hpt shareholders

 

Per: /s/ Michael Shamber

_______________________________

Name: Michael Shamber
Title: President

24 

EXECUTION VERSION 

 

APPENDIX “A”

 

HPT SHAREHOLDERS

 

 

Name of HPT Shareholder

 

# of HPT Shares

 

2119340 Ontario Inc. 1,050,000 A.P.E. Ventures No. 6 Ltd. 1,600,000 Samer Alabed
100,000 Alrae Investments Inc. 400,000 Hans Auer 60,000 Katharina Auer 10,000
BAS Holding Corp. 150,000 Tatyana Bakun 300,000 Doug Baskott 20,000 Shayne
Baskott 20,000 Susan Bennett 100,000 Darrell Bishop 100,000 Mike Bouchard 50,000
Warren Bravo 100,000 Doug Cameron 40,000 Centaure Capital Holdings Corp.
1,600,000 Chuck Caruana 300,000 Kelly Clairmont 100,000 Rob Clairmont 100,000
Dave Cliff 100,000 Des Cobble 3,000,000 Dale Conacher 40,000 Mike Deboer 80,000
Robert Dickenson 1,000,000 Derek Downes 510,000 Fortune Capital Management Inc.
500,000 Stacy Finch 400,000 Al Foster 40,000 Ken Fox 40,000 G&S Holdings Inc.
825,000 Joan Proudfoot 50,000 Vito Galloro 3,150,000 Allan Greenspoon 200,000
Loren Greenspoon 1,000,000 Karen Hauser 150,000 Mackenzie Hauser 100,000
Hillcore Capital Markets Ltd. 4,800,000 Paul Hosack 150,000 Michael Hubbs 25,000
Innil Systems Inc. 200,000 Jeff Inrig 50,000 John Jarego 100,000 Craig Jarvis
150,000 Java International Investments Corp. 1,250,000 John and Jackie Versfelt
Joint Partner in Trust 500,000 Jeries Kakish 150,000 Karim Kanji 3,000,000

25 

EXECUTION VERSION 

 

Shammit Kapur 325,000 John Kennedy 150,000 Ewa Kopij 20,000 Dariusz Kochanowski
30,000 Khaled Lababidi 50,000 Steven Leblanc 4,100,000 Jason Lewis 300,000
Graeme Lilley 780,000 Vince Lombardo 150,000 Justin Loncaric 100,000 Cal
Lucyshyn 250,000 Albert Maringer 900,000 David Montgomery 3,000,000 Kevin Morgan
300,000 Jamie Myers 300,000 Janice Newman 100,000 Susan Nielsen 5,000 Nicole
Nitschkie 200,000 Natasha Novikow Bowman 300,000 Chrissy Novikow 300,000 Jeanne
Novikow 21,385,000 Justin Novikow 300,000 Jim O’Donnell 50,000 Noreen Oldfield
200,000 David Pahl 750,000 Marty Perusini 100,000 William Pfieffer 14,080,000
Krishnan Puri 25,000 Michael John Ross 10,000 Stan Ross 1,480,000 Edward
Roundpoint 5,000,000 Marta Rozniatowska 34,000 Calvin Russell 150,000 Grant F.
Sanders 15,868,500 Rodney Schluter 1,010,000 Raiya Shamber 100,000 Emerson
Shamber 100,000 Michael Shamber 4,035,000 Jamie Sinclair 50,000 Alex Smolyarenko
7,500 Glen Sprague 400,000 Cliff Stewart 100,000 1498419 Ontario Inc. 140,000
Gary Summers 50,000 Miroslav Svraka 100,000 Darren Timmer 250,000 Tracey Tobin
100,000 Bob Turan 240,000 Mark Upsdell 1,400,000 Vince Macdonald Enterprises
Ltd. 1,200,000 Tracey Walters 100,000 Wayne Macdonald Auctions 425,000 John
Wilson 170,000 Edward Wenger 25,000

26 

EXECUTION VERSION 

 

Murray Wood 450,000 Woodside Investments Corp. 215,000 Martin Van Sloun 400,000
  109,920,000

 

 

 

 

 

27 

EXECUTION VERSION 

 

APPENDIX “B”

 

SHARE EXCHANGE

 

 

 

Name of HPT Shareholder

 

HPT Shares:

To the Trustee

 

 

Consideration Shares:

To HPT Shareholders

2119340 Ontario Inc. 1,050,000 1,155,000 A.P.E. Ventures No. 6 Ltd. 1,600,000
1,760,000 Samer Alabed 100,000 110,000 Alrae Investments Inc. 400,000 440,000
Hans Auer 60,000 66,000 Katharina Auer 10,000 11,000 BAS Holding Corp. 150,000
165,000 Tatyana Bakun 300,000 330,000 Doug Baskott 20,000 22,000 Shayne Baskott
20,000 22,000 Susan Bennett 100,000 110,000 Darrell Bishop 100,000 110,000 Mike
Bouchard 50,000 55,000 Warren Bravo 100,000 110,000 Doug Cameron 40,000 44,000
Centaure Capital Holdings Corp. 1,600,000 1,760,000 Chuck Caruana 300,000
330,000 Kelly Clairmont 100,000 110,000 Rob Clairmont 100,000 110,000 Dave Cliff
100,000 110,000 Des Cobble 3,000,000 3,300,000 Dale Conacher 40,000 44,000 Mike
Deboer 80,000 88,000 Robert Dickenson 1,000,000 1,100,000 Derek Downes 510,000
561,000 Fortune Capital Management Inc. 500,000 550,000 Stacy Finch 400,000
440,000 Al Foster 40,000 44,000 Ken Fox 40,000 44,000 G&S Holdings Inc. 825,000
907,500 Joan Proudfoot 50,000 55,000 Vito Galloro 3,150,000 3,465,000 Allan
Greenspoon 200,000 220,000 Loren Greenspoon 1,000,000 1,100,000 Karen Hauser
150,000 165,000 Mackenzie Hauser 100,000 110,000 Hillcore Capital Markets Ltd.
4,800,000 5,280,000 Paul Hosack 150,000 165,000 Michael Hubbs 25,000 27,500
Innil Systems Inc. 200,000 220,000 Jeff Inrig 50,000 55,000 John Jarego 100,000
110,000 Craig Jarvis 150,000 165,000 Java International Investments Corp.
1,250,000 1,375,000 John and Jackie Versfelt Joint Partner in Trust 500,000
550,000

28 

EXECUTION VERSION 

 

Jeries Kakish 150,000 165,000 Karim Kanji 3,000,000 3,300,000 Shammit Kapur
325,000 357,500 John Kennedy 150,000 165,000 Ewa Kopij 20,000 22,000 Dariusz
Kochanowski 30,000 33,000 Khaled Lababidi 50,000 55,000 Steven Leblanc 4,100,000
4,510,000 Jason Lewis 300,000 330,000 Graeme Lilley 780,000 858,000 Vince
Lombardo 150,000 165,000 Justin Loncaric 100,000 110,000 Cal Lucyshyn 250,000
275,000 Albert Maringer 900,000 990,000 David Montgomery 3,000,000 3,300,000
Kevin Morgan 300,000 330,000 Jamie Myers 300,000 330,000 Janice Newman 100,000
110,000 Susan Nielsen 5,000 5,500 Nicole Nitschkie 200,000 220,000 Natasha
Novikow Bowman 300,000 330,000 Chrissy Novikow 300,000 330,000 Jeanne Novikow
21,385,000 23,523,500 Justin Novikow 300,000 330,000 Jim O’Donnell 50,000 55,000
Noreen Oldfield 200,000 220,000 David Pahl 750,000 825,000 Marty Perusini
100,000 110,000 William Pfieffer 14,080,000 15,488,000 Krishnan Puri 25,000
27,500 Michael John Ross 10,000 11,000 Stan Ross 1,480,000 1,628,000 Edward
Roundpoint 5,000,000 5,500,000 Marta Rozniatowska 34,000 37,400 Calvin Russell
150,000 165,000 Grant F. Sanders 15,868,500 17,455,350 Rodney Schluter 1,010,000
1,111,000 Raiya Shamber 100,000 110,000 Emerson Shamber 100,000 110,000 Michael
Shamber 4,035,000 4,438,500 Jamie Sinclair 50,000 55,000 Alex Smolyarenko 7,500
8,250 Glen Sprague 400,000 440,000 Cliff Stewart 100,000 110,000 1498419 Ontario
Inc. 140,000 154,000 Gary Summers 50,000 55,000 Miroslav Svraka 100,000 110,000
Darren Timmer 250,000 275,000 Tracey Tobin 100,000 110,000 Bob Turan 240,000
264,000 Mark Upsdell 1,400,000 1,540,000 Vince Macdonald Enterprises Ltd.
1,200,000 1,320,000 Tracey Walters 100,000 110,000 Wayne Macdonald Auctions
425,000 467,500

29 

EXECUTION VERSION 

 

John Wilson 170,000 187,000 Edward Wenger 25,000 27,500 Murray Wood 450,000
495,000 Woodside Investments Corp. 215,000 236,500 Martin Van Sloun 400,000
440,000   109,920,000 120,912,000

 

 

 

30 

EXECUTION VERSION 

 

APPENDIX “C”

 

DIRECTORS AND OFFICERS

Name Title Michael Shamber

President

Director

Darren Tmmer Secretary Cal Lucyshyn Chief Financial Officer John Versfelt
Director

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31 

EXECUTION VERSION 

APPENDIX “D”

 

HPT FINANCIAL STATEMENTS

 

 

 

32 

EXECUTION VERSION 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HYDRO POWER TECHNOLOGIES INC.

 

FINANCIAL STATEMENTS

 

FOR THE YEARS ENDED JUNE 30, 2018 AND 2017

(Expressed in Canadian Dollars)

 

 

 

33 

 

HYDRO POWER TECHNOLOGIES INC.

 

STATEMENTS OF FINANCIAL POSITION

(Expressed in Canadian dollars)

 

 

 

   AS AT
JUNE 30, 2018  AS AT
JUNE 30, 2017 ASSETS           Current Assets           Cash  $—     $521  HST
Receivable   36,419    34,997  Prepaid expenses and deposits   5,547    5,547 
Due from shareholder (Note 5)   —      —                Total Current Assets 
 41,965    41,065              Non-Current Assets           Equipment, net of
accumulated depreciation   2,004    2,676  Deferred development costs (Note 4) 
 1,036,418    1,036,418  TOTAL ASSETS  $1,080,388   $1,080,159             
LIABILITIES           Current Liabilities           Accounts payable and accrued
liabilities   191,130    188,386  Shareholder Loan (Note 5)   724,387  
 703,680  Total Current Liabilities   915,517    892,066              EQUITY 
         Share capital (Note 6)   1,060,505    1,060,505  Share subscriptions
receivable (Note 6)   (10,505)   (10,505) Deficit   (885,129)   (861,907) TOTAL
EQUITY   164,871    188,093  TOTAL LIABILITIES AND EQUITY  $1,080,388  
$1,080,159              Going Concern (Note 1)          

 

On behalf of the Board of Directors:

 

 

      Grant Sanders - Director   Michael Shamber - Director

 

See accompanying notes to the financial statements.

 

 

34 

 

HYDRO POWER TECHNOLOGIES INC.

 

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Expressed in Canadian dollars)

 

 

 

   Year ended June 30,    2018  2017 Expenses       Consulting fees (Note 7) 
$—     $42,500  Depreciation   672    839  Foreign exchange (gain) loss   —    
 —    Insurance   —      —    Office and miscellaneous   1,167    4,061 
Professional fees   16,920    75,171  Rent   4,463    7,437              Net
Loss and Comprehensive Loss For The Year  $(23,222)  $(130,008)

 

 

 See accompanying notes to financial statements.

 

35 

 

HYDRO POWER TECHNOLOGIES INC.

 

STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED JUNE 30, 2018 and 2017

(Expressed in Canadian dollars)

 

 

   SHARE CAPITAL                              NUMBER OF CLASS A COMMON SHARES 
AMOUNT  SHARE SUBSCRIPTIONS RECEIVABLE  DEFICIT  TOTAL EQUITY                 
Balance at June 30, 2016   106,420,001   $1,060,505   $(10,505)  $(731,899) 
$318,101  Net loss for the year   —      —      —      (130,008)   (130,008)   
                        Balance at June 30, 2017   106,420,001   $1,060,505  
$(10,505)  $(861,907)  $188,093  Net loss for the year   —      —      —    
 (23,222)   (23,222)                            Balance at June 30, 2018 
 106,420,001   $1,060,505   $(10,505)  $(885,129)  $164,871 

 

 

 

 

 

See accompanying notes to financial statements.

 

 

36 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED June 30, 2018 and 2017

(Expressed in Canadian dollars)

 

 

 

   Year

ended

June 30,

   2018  2017 Operating Activities           Net loss for the period  $(23,222) 
$(130,008) Adjustments for non-cash items:           Depreciation   672    839 
Changes in non-cash working capital items:                    (5,547) Prepaid
expenses   —                     HST Receivable   (1,422)   (12,460) Accounts
payable and accrued liabilities   2,744    121,069  Net Cash Flows Used In
Operating Activities   (21,228)   (26,107)             Investing Activities 
         Deferred development costs   —      (315,981) Purchase of equipment 
 —      —    Net Cash Flows Used In Investing Activities   —      (315,981)   
         Financing Activities           Advances from shareholder   20,707  
 342,026  Repayments to shareholder   —      —    Shares issued for cash   —    
 —    Net Cash Flows From Financing Activities   20,707    342,026             
(Decrease) Increase In Cash   (521)   (62) Cash, Beginning of the year   521  
 583  Cash, End of the year  $—     $521 

 

 

 

 

 

37 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED June 30, 2018 and 2017

(Expressed in Canadian dollars)

 

 

1.       NATURE OF OPERATIONS AND GOING CONCERN

 

Hydro Power Technologies Inc. (the “Company”) was incorporated on December 4,
2013, under the laws of the province of Ontario, Canada, and its principal
activity is the development of a technology that increases power output
generated from hydro-electric turbines. The address of the Company’s corporate
office and principal place of business is 5330 Mainway Drive, Burlington,
Ontario, L7L 6A4

 

These financial statements have been prepared in accordance with International
Financial Reporting Standards ("IFRS") applicable to a going concern, which
assumes the realization of assets and discharge of liabilities in the normal
course of business for the foreseeable future. The Company has incurred losses
from inception of $885,129. The Company needs to raise sufficient capital to
fund its planned operations, administration expenses and future acquisitions.
The Company’s ability to continue as a going concern is dependent upon its
ability to attain future profitable operations and to obtain the necessary
financing to meet its obligations and repay its liabilities arising from normal
business operations when they come due. As at June 30, 2017, the Company had not
yet achieved profitable operations and expects to incur further losses in the
development of its business plan, all of which may cast significant doubt about
the Company’s ability to continue as a going concern. These financial statements
do not include any adjustments to the amounts and classification of assets and
liabilities that might be necessary should the Company not be able to continue
as a going concern.

 

2.       BASIS OF PRESENTATION

 

The financial statements were authorized for issue on January 20, 2019, by the
directors of the Company.

 

Statement of Compliance

 

The financial statements of the Company have been prepared in accordance with
International Financial Reporting Standards (“IFRS”) as issued by the
International Accounting Standards Board (“IASB”) and interpretations of the
International Financial Reporting Interpretations Committee (“IFRIC”).

 

Basis of Measurement

 

These financial statements have been prepared on a historical cost basis. In
addition, these financial statements have been prepared using the accrual basis
of accounting, except for cash flow information.

 

3.       SIGNIFICANT ACCOUNTING POLICIES

 

a) Critical Accounting Judgments and Estimates

 

The preparation of these financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and reported amounts of
expenses during the reporting period. Actual outcomes could differ from these
estimates. The financial statements include estimates which, by their nature,
are uncertain. The impacts of such estimates are pervasive throughout the
financial statements, and may require accounting adjustments based on future
occurrences. Revisions to accounting estimates are recognized in the period in
which the estimate is revised and may affect both the period of revision and
future periods.

 

 

 

38 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED June 30, 2018 and 2017

(Expressed in Canadian dollars)

 

 

3.       SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

a) Critical Accounting Judgments and Estimates (Continued)

 

Significant assumptions about the future and other sources of estimation
uncertainty that management has made at the statement of financial position
date, that could result in a material adjustment to the carrying amounts of
assets and liabilities, in the event that actual results differ from assumptions
made, relate to, but are not limited to, the following:

 

Judgments:

·The inputs used in assessing the recoverability of deferred income tax assets
to the extent that the deductible temporary differences will reverse in the
foreseeable future and that the company will have future taxable income; and
 ·The determination of the going concern assumption.

 

Estimates:

·The carrying value of deferred development costs and allocation of expenditures
to deferred development costs

 

b) Financial Instruments

 

A financial instrument is any contract that gives rise to a financial asset of
one entity and a financial liability or equity instrument to another entity.
Financial assets and financial liabilities are recognized on the statements of
financial position at the time the Company becomes a party to the contractual
provisions of the financial instrument.

 

Financial instruments are initially measured at fair value. Measurement in
subsequent periods is dependent on the classification of the financial
instrument. The Company classifies its financial instruments in the following
categories: at fair value through profit or loss, loans and receivables,
held-to-maturity, available-for-sale, and other financial liabilities.

 

i)       Financial Assets and Liabilities at Fair Value Through Profit or Loss

 

Financial assets and liabilities at fair value through profit or loss are either
‘held-for-trading’ or classified at fair value through profit or loss. They are
initially and subsequently recorded at fair value and changes in fair value are
recognized in profit or loss for the period.

 

The Company has designated its cash and cash equivalents as financial assets at
fair value through profit or loss.

 

ii) Loans and Receivables

 

Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. Such assets are
recognized initially at fair value and subsequently on an amortized cost basis
using the effective interest method, less any impairment losses. They are
included in current assets, except for maturities greater than 12 months after
the end of the reporting period, which are classified as non-current assets.

 

The Company does not have any financial instruments designated as loans and
receivables.

 

39 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED June 30, 2018 and 2017

(Expressed in Canadian dollars)

 

 

3.       SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

b) Financial Instruments (Continued)

 

iii) Held-to-Maturity

 

Held-to-maturity investments are non-derivative financial assets that have fixed
maturities and fixed or determinable payments, and it is the Company’s intention
to hold these investments to maturity. They are initially recorded at fair value
and subsequently measured at amortized cost.

 

The Company does not have any held-to-maturity financial assets.

 

iv) Available-For-Sale

 

Available-for-sale financial assets are non-derivative financial assets that are
designated as available-for-sale or are not classified in any other financial
asset categories. They are initially and subsequently measured at fair value and
the changes in fair value, other than impairment losses are recognized in other
comprehensive income (loss) and presented in the fair value reserve in
shareholders’ equity. When the financial assets are sold or an impairment
write-down is required, losses accumulated in the fair value reserve recognized
in shareholders’ equity are included in profit or loss.

 

The Company does not have any available-for-sale financial assets.

 

v) Other Financial Liabilities

 

Other financial liabilities are recognized initially at fair value plus any
directly attributable transaction costs on the date at which the Company becomes
a party to the contractual provisions of the instrument. Subsequent to initial
recognition, the Company’s financial liabilities are measured at amortized cost
using the effective interest method. The Company derecognizes a financial
liability when its contractual obligations are discharged, cancelled, or
expired.

 

The Company’s non-derivative financial liabilities are its accounts payable and
accrued liabilities and convertible loan, which are designated as other
liabilities.

 

c) Cash and Cash Equivalents

 

Cash and cash equivalents include cash on hand, deposits held at call with banks
and other short-term highly liquid investments with original maturities of three
months or less. As at June 30, 2018 and June 30, 2017, the Company had no cash
equivalents.

 

d) Income Taxes

 

Current income tax

 

Current income tax assets and liabilities for the current period are measured at
the amount expected to be recovered from or paid to the Canadian taxation
authorities. The tax rates and tax laws used to compute the amount are those
that are enacted or substantively enacted, at the reporting date.

 

Current tax is recognized in net income except to the extent that it relates to
a business combination or items recognized directly in equity or in other
comprehensive income or loss.

 

 

40 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED June 30, 2018 and 2017

(Expressed in Canadian dollars)

 

 

3.       SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

d) Income Taxes (Continued)

 

Management periodically evaluates positions taken in the tax returns with
respect to situations in which applicable tax regulations are subject to
interpretation and establishes provisions where appropriate.

 

Deferred income tax

 

Deferred income tax is provided using the balance sheet method on temporary
differences at the reporting date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes.

 

Deferred tax is recognized in net income except to the extent that it relates to
a business combination or items recognized directly in equity or in other
comprehensive income or loss.

 

The carrying amount of deferred income tax assets is reviewed at the end of each
reporting period and recognized only to the extent that it is probable that
sufficient taxable profit will be available to allow all or part of the deferred
income tax asset to be utilized.

 

Deferred income tax assets and liabilities are measured at the tax rates that
are expected to apply to the year when the asset is realized or the liability is
settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted by the end of the reporting period.

 

Deferred income tax assets and deferred income tax liabilities are offset, if a
legally enforceable right exists to set off current tax assets against current
income tax liabilities and the deferred income taxes relate to the same taxable
entity and the same taxation authority.

 

e) Equipment

 

Equipment is stated at historical cost less accumulated depreciation and
accumulated impairment losses. Equipment is depreciated over its estimated
useful lives. The cost of an item includes the purchase price and directly
attributable costs to bring the asset to the location and condition necessary
for it to be capable of operating in the manner intended by management. Where an
item of equipment comprises major components with different useful lives, the
components are accounted for as separate items of equipment.

 

Subsequent costs are included in the asset’s carrying amount or recognized as a
separate asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the Company and the cost of the
item can be measured reliably. The carrying amount of the replaced part is
derecognized. All other repairs and maintenance are charged to the statement of
income and comprehensive income during the financial period in which they are
incurred.

 

Gains and losses on disposals are determined by comparing the proceeds with the
carrying amount and are recognized in profit or loss.

 

 

 

41 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED June 30, 2018 and 2017

(Expressed in Canadian dollars)

 

 

3.       SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

e) Equipment (Continued)

 

Depreciation is recognized using the following rate and method:

 

   Depreciation rate Computer equipment  30% declining balance Furniture  20%
declining balance

 

 

Depreciation methods, useful lives and residual values are reviewed at each
financial year end and are adjusted if appropriate.

 

f)       Research and Development

 

Research costs are expensed when incurred. Development costs are expensed when
incurred prior to the establishment of technical feasibility. Subsequent to the
establishment of technical feasibility and probable future benefits, the costs
associated with the development of a commercial product for which adequate
resources exist to market the product are capitalized as deferred development
costs. Capitalization of development costs ceases when the product is available
for general release to customers. Deferred development costs are amortized,
commencing when the product in question is commercially available for sale.

 

g) Impairment of non-financial assets

 

The Company reviews the carrying value of its non-financial assets, which
include equipment and deferred development costs at each reporting date to
dertermine whether events or changed circumstances indicate that the carrying
value may not be recoverable.

 

For the purpose of impairment testing, assets that cannot be tested individually
are grouped together into the smallest group of assets that generates cash
inflows from continuing use that are largely independent of the cash inflows of
other assets or groups of assets (a “cash-generating unit” or “CGU”).

 

The recoverable amount of an asset or cash-generating unit is the greater of its
value in use and its fair value less costs to sell. In assessing value in use,
the estimated future cash flows are discontinued to their present value using a
pre-tax discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset. An impairment loss is recognized
if the carrying value of a non-financial asset exceeds the recoverable amount.
Impairment losses are recognized in pofit or loss. Impairment losses recognized
in respect of the CGUs are allocated first to reduce the carrying amount of any
goodwill allocated to the unit, and then to reduce the carrying amounts of the
other assets in the CGU on a pro rata basis.

 

Impairment losses recognized in prior periods are assessed at each reporting
date for any indications that the loss has decreased or no longer exists. An
impairment loss is reversed if there has been a change in the estimates used to
determine the recoverable amount. An impairment loss is reversed only to the
extent that the asset’s carrying amount does not exceed the carrying amount that
would have been determined, net of amortization, if no impairment loss has been
recognized.

42 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED June 30, 2018 and 2017

(Expressed in Canadian dollars)

 

 

 

3.       SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

h) Accounting Standards Issued But Not Yet Adopted

 

The Company has assessed the impact of these new standards on its financial
statements and has determined that the application of these standards will not
have a material impact on the results and financial position of the Company.

 

New Standard IFRS 9 “Financial Instruments”

 

This new standard is a partial replacement of IAS 39 “Financial Instruments:
Recognition and Measurement”. IFRS 9 uses a single approach to determine whether
a financial asset is measured at amortized cost or fair value, replacing the
multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity
manages its financial instruments in the context of its business model and the
contractual cash flow characteristics of the financial assets.

 

The new standard also requires a single impairment method to be used, replacing
the multiple impairment methods in IAS 39. IFRS 9 is effective for annual
periods beginning on or after January 1, 2018.

 

New Standard IFRS 13 “Fair Value Measurement”

 

This new standard replaces the fair value measurement guidance currently
included in various other IFRS standards with a single definition of fair value
and extensive application guidance. IFRS 13 provides guidance on how to measure
fair value and does not introduce new requirements for when fair value is
required or permitted. It also establishes disclosure requirements to provide
users of the financial statements with more information about fair value
measurements.

 

Amended Standard IAS 1 “Presentation of Financial Statements”

 

This standard provides extensive guidance on determining fair value for
measurement or disclosure purposes.

 

 

 

43 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED June 30, 2018 and 2017

(Expressed in Canadian dollars)

 

4.       DEFERRED DEVELOPMENT COSTS

 

The following is a summary of activity for deferred development costs.

 

     Balance June 30, 2014  $321,181         Additions:      Consulting (Note
7)  $115,278  Engineering   60,767  Professional fees   19,936  Rent   12,167 
Travel   2,218      210,366  Balance June 30, 2015  $531,547         Additions: 
    Consulting (Note 7)  $110,750  Engineering   66,206  Rent   11,934    
 188,890  Balance June 30, 2016  $720,437         Additions:      Consulting
(Note 7)  $314,668  Rent   1,116      315,784  Balance June 30, 2018 and June
30, 2017  $1,036,418 

 

 

5.       SHAREHOLDER LOAN

 

The Company received advances from a shareholder in order to help fund
operations. These amounts are secured by the intellectual property of the
Company, have no repayment terms, and bear interest at 5% per annum of which
both the lender, and the Company have agreed to waive the interest.

 

     Balance, receivable as at June 30, 2015, included in "Due from
Shareholder"   (73,252)        Shareholder advances during the year   487,411 
Repayments during the year   (52,505) Balance payable as at June 30, 2016 
$361,654         Shareholder advances during the period   342,026  Balance
payable as at June 30, 2017  $703,680         Shareholder advances during the
period   20,707  Balance payable as at June 30, 2018  $724,387        

 

44 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED June 30, 2018 and 2017

(Expressed in Canadian dollars)

 

6.       SHARE CAPITAL

 

a) Authorized Share Capital

 

-Unlimited number of voting Class A common shares without par value.

-Unlimited number of non-voting Class B common shares without par value – None
issued

-Unlimited number of non-cumulative, voting, redeemable, retractable, Class A
special shares without par value – None issued

-Unlimited number of non-cumulative, non-voting, redeemable, retractable, Class
B special shares without par value – None issued

 

b) Issued capital

 

Shares Issued in the years ended June 30, 2018 and June 30, 2017:

 

None issued

 

Shares Issued in the period from incorporation on December 4, 2013 to June 30,
2016:

 

On the incorporation date of December 4, 2013, the Company issued founder’s
shares consisting of 100,650,000 common shares with a total deemed value of
$10,065. This amount has not been collected and is reflected in the statement of
financial position as share subscriptions receivable.

 

On January 1, 2014, the Company issued 4,400,001 Class A common shares for cash
proceeds of $440. This amount has not been collected and is reflected in the
statement of financial position as share subscriptions receivable.

 

On February 14, 2014, the Company issued 650,000 Class A common shares for cash
proceeds of $350,000.

 

On March 14, 2014, the Company issued 200,000 Class A common shares for cash
proceeds of $200,000.

 

On April 8, 2014, the Company issued 50,000 Class A common shares for cash
proceeds of $50,000.

 

On June 15, 2014, The Company issued 300,000 Class A common shares for cash
proceeds of $150,000.

 

On September 30, 2014, the Company issued 170,000 class A common shares for cash
proceeds of $300,000.

 

 

45 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED June 30, 2018 and 2017

(Expressed in Canadian dollars)

 

 

7.       RELATED PARTY TRANSACTIONS

 

All related party transactions have been recorded at amounts agreed to by the
transacting parties. Amounts due to and due from related parties do not bear
interest, are unsecured, have no fixed payment terms, and are due on demand.

 

Key Management Compensation:

 

Key management personnel include those persons having authority and
responsibility for planning, directing and controlling the activities of the
Company as a whole. The Company has determined that key management personnel
consist of executive and non-executive members of the Company’s Board of
Directors and corporate officers.

 

 

8.       FINANCIAL RISK MANAGEMENT

 

a)       Fair Value of Financial Instruments

 

The Company’s financial instruments consist of cash and cash equivalents, trade
payables and other accrued liabilities and shareholder’s advances. The carrying
values of these financial instruments approximate their fair values because of
their short term nature and/or the existence of market related interest rates on
the instruments.

 

IFRS requires disclosures about the inputs to fair value measurements, including
their classification within a hierarchy that prioritizes the inputs to fair
value measurement. The three levels of hierarchy are:

 

· Level 1 – Unadjusted quoted prices in active markets for identical assets or
liabilities;

· Level 2 – Inputs other than quoted prices that are observable for the asset or
liability, either directly or indirectly; and

· Level 3 – Inputs for the asset or liability that are not based on observable
market data.

 

b)       Financial Instruments Risk

 

The Company is exposed in varying degrees to a variety of financial instrument
related risks as follows:

 

Credit risk

 

Credit risk is the risk that one party to a financial instrument will fail to
discharge an obligation and cause the other party to incur a financial loss. The
Company’s primary exposure to credit risk is on its bank accounts. The Company’s
bank accounts are held with a major bank in Canada. As all of the Company’s cash
and cash equivalents are held by one bank in Canada, there is a concentration of
credit risk. This risk is managed by using a major bank that is a high credit
quality financial institution as determined by rating agencies.

 

 

 

46 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED June 30, 2018 and 2017

(Expressed in Canadian dollars)

 

8.       FINANCIAL RISK MANAGEMENT (Continued)

 

a) Financial Instruments Risk (Continued)

 

Liquidity risk

 

Liquidity risk arises through the excess of financial obligations over available
financial assets due at any point in time. The Company’s objective in managing
liquidity risk is to maintain sufficient readily available reserves in order to
meet its liquidity requirements at any point in time. The Company is dependent
on the availability of credit from its suppliers and its ability to generate
sufficient funds from its equity and debt financing to meet current and future
obligations. There is no guarantee that such financing will be available on
terms acceptable to the Company (Note 1).

 

Market risk

 

Market risk is the risk that changes in market factors, such as foreign exchange
rates, commodity prices, and interest rates will affect the Company’s net
earnings or the value of financial instruments. The objective of market risk
management is to manage and control market risk exposures within acceptable
limits, while maximizing returns. Management has determined this risk to be
minimal at this stage.

 

Foreign currency exchange rate risk and commodity price risk

 

Foreign exchange risk is the risk that the fair value of future cash flows of a
financial instrument will fluctuate because of changes in foreign exchange
rates. Commodity price risk is the risk that market values and future incomes
will fluctuate because of changes in commodity prices. The Company does not have
any direct exposure to foreign currency exchange rate risk or commodity price
risk. The Company had no forward exchange rate contracts or commodity price
contracts in place as at June 30, 2018 or 2017.

 

Interest rate risk

 

Interest rate risk is the risk that future cash flows will fluctuate as a result
of changes in market interest rates. As at June 30, 2018 and 2017, the Company
did not have any significant interest rate risk.

 

c)       Capital Management

 

The Company defines capital that it manages as shareholders' equity that is
expected to be realized in cash. The Company raises capital through private
share offerings and related party loans and advances. Capital is managed in a
manner consistent with the risk criteria and policies provided by the board of
directors and followed by management. All sources of financing and major
expenditures are analyzed by management and approved by the board of directors.

 

The Company’s primary objectives when managing capital is to safeguard and
maintain the Company’s financial resources for continued operations and to fund
programs to further advance their hydro power technology. The Company is meeting
its objective of managing capital through detailed review and the preparation of
short-term and long-term cash flow analysis to maintain sufficient resources.

 

47 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED June 30, 2018 and 2017

(Expressed in Canadian dollars)

 

 

8.       FINANCIAL RISK MANAGEMENT (Continued)

 

c) Capital Management (Continued)

 

The Company is able to scale its expenditure programs and the use of capital to
address market conditions by reducing expenditures and the scope of operations
during periods of economic downturn.

 

There were no changes in the Company's approach to capital management during the
periods ended June 30, 2018 and 2017. The Company is not subject to any
externally imposed capital requirements.

 

 

9.       QUALIFYING TRANSACTION

 

On December 30, 2013, the Company signed a non-binding letter of intent with
Credent Capital Corp. (“Credent Capital”), a corporation existing under the laws
of British Columbia, Canada, which outlines the general terms and conditions
pursuant to which the Company and Credent Capital will be willing to complete a
transaction that will effectively result in the acquisition by Credent Capital
of the shares of the Company, and a reverse take-over of Credent Capital by the
shareholders of the Company.

 

 

 

 

 

 

 

 

48 

 

 

 

 

 

 

 

 

 

 

 

 

 

HYDRO POWER TECHNOLOGIES INC.

 

FINANCIAL STATEMENTS

 

FOR THE YEARS ENDED JUNE 30, 2019 AND 2018

(Expressed in Canadian Dollars)

 

 

 

49 

 

HYDRO POWER TECHNOLOGIES INC.

 

STATEMENTS OF FINANCIAL POSITION

(Expressed in Canadian dollars)

 

 

   AS AT
JUNE 30, 2019  AS AT
JUNE 30, 2018 ASSETS           Current Assets           Cash  $—     $—    HST
Receivable   36,419    36,419  Prepaid expenses and deposits   5,547    5,547 
Total Current Assets   41,965    41,965              Non-Current Assets      
    Equipment, net of accumulated depreciation   1,332    2,004  Deferred
development costs (Note 4)   1,036,418    1,036,418  TOTAL ASSETS  $1,079,716  
$1,080,388              LIABILITIES           Current Liabilities          
Accounts payable and accrued liabilities   191,130    191,130  Shareholder Loan
(Note 5)   724,387    724,387  Total Current Liabilities   915,517    915,517 
            EQUITY           Share capital (Note 6)   1,060,505    1,060,505 
Share subscriptions receivable (Note 6)   (10,505)   (10,505) Deficit 
 (885,801)   (885,129) TOTAL EQUITY   164,199    164,871  TOTAL LIABILITIES AND
EQUITY  $1,079,716   $1,080,388              Going Concern (Note 1)          

 

On behalf of the Board of Directors:

 

 

      Grant Sanders - Director   Michael Shamber - Director

 

See accompanying notes to the financial statements.

 

 

 

 

50 

 

HYDRO POWER TECHNOLOGIES INC.

 

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Expressed in Canadian dollars)

 

 

   Year ended June 30,    2019  2018 Expenses       Consulting fees (Note 7) 
$—     $—    Depreciation   672    672  Foreign exchange (gain) loss   —    
 —    Insurance   —      —    Office and miscellaneous   —      1,167 
Professional fees   —      16,920  Rent   —      4,463              Net Loss and
Comprehensive Loss For The Year  $(672)  $(23,222)

 

 

 See accompanying notes to financial statements.

 

 

51 

 

HYDRO POWER TECHNOLOGIES INC.

 

STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED JUNE 30, 2019 AND 2018

(Expressed in Canadian dollars)

 

   SHARE CAPITAL                              NUMBER OF CLASS A COMMON SHARES 
AMOUNT  SHARE SUBSCRIPTIONS RECEIVABLE  DEFICIT  TOTAL EQUITY                 
Balance at June 30, 2017   106,420,001   $1,060,505   $(10,505)  $(861,907) 
$188,093  Net loss for the year   —      —      —      (23,222)   (23,222)   
                        Balance at June 30, 2018   106,420,001   $1,060,505  
$(10,505)  $(885,129)  $164,871  Net loss for the year   —      —      —    
 (672)   (672)                            Balance at June 30, 2019 
 106,420,001   $1,060,505   $(10,505)  $(885,801)  $164,199 

 

 

 

 

 

See accompanying notes to financial statements.

 

 

 

52 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED June 30, 2019 and 2018

(Expressed in Canadian dollars)

 

   Year

ended

June 30,

   2019  2018 Operating Activities           Net loss for the period  $(672) 
$(23,222) Adjustments for non-cash items:           Depreciation   672    672 
Changes in non-cash working capital items:                       Prepaid
expenses   —      —                HST Receivable   —      (1,422) Accounts
payable and accrued liabilities   —      2,744  Net Cash Flows Used In Operating
Activities   —      (21,228)             Investing Activities           Deferred
development costs   —      —    Purchase of equipment   —      —    Net Cash
Flows Used In Investing Activities   —      —                Financing
Activities           Advances from shareholder   —      20,707  Repayments to
shareholder   —      —    Shares issued for cash   —      —    Net Cash Flows
From Financing Activities   —      20,707              (Decrease) Increase In
Cash   —      (521) Cash, Beginning of the year   —      521  Cash, End of the
year  $—     $—   

 

 

 

 

53 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED June 30, 2019 and 2018

(Expressed in Canadian dollars)

 

1.       NATURE OF OPERATIONS AND GOING CONCERN

 

Hydro Power Technologies Inc. (the “Company”) was incorporated on December 4,
2013, under the laws of the province of Ontario, Canada, and its principal
activity is the development of a technology that increases power output
generated from hydro-electric turbines. The address of the Company’s corporate
office and principal place of business is 5330 Mainway Drive, Burlington,
Ontario, L7L 6A4

 

These financial statements have been prepared in accordance with International
Financial Reporting Standards ("IFRS") applicable to a going concern, which
assumes the realization of assets and discharge of liabilities in the normal
course of business for the foreseeable future. The Company has incurred losses
from inception of $885,801. The Company needs to raise sufficient capital to
fund its planned operations, administration expenses and future acquisitions.
The Company’s ability to continue as a going concern is dependent upon its
ability to attain future profitable operations and to obtain the necessary
financing to meet its obligations and repay its liabilities arising from normal
business operations when they come due. As at June 30, 2017, the Company had not
yet achieved profitable operations and expects to incur further losses in the
development of its business plan, all of which may cast significant doubt about
the Company’s ability to continue as a going concern. These financial statements
do not include any adjustments to the amounts and classification of assets and
liabilities that might be necessary should the Company not be able to continue
as a going concern.

 

2.       BASIS OF PRESENTATION

 

The financial statements were authorized for issue on January 20, 2020, by the
directors of the Company.

 

Statement of Compliance

 

The financial statements of the Company have been prepared in accordance with
International Financial Reporting Standards (“IFRS”) as issued by the
International Accounting Standards Board (“IASB”) and interpretations of the
International Financial Reporting Interpretations Committee (“IFRIC”).

 

Basis of Measurement

 

These financial statements have been prepared on a historical cost basis. In
addition, these financial statements have been prepared using the accrual basis
of accounting, except for cash flow information.

 

3.       SIGNIFICANT ACCOUNTING POLICIES

 

a) Critical Accounting Judgments and Estimates

 

The preparation of these financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and reported amounts of
expenses during the reporting period. Actual outcomes could differ from these
estimates. The financial statements include estimates which, by their nature,
are uncertain. The impacts of such estimates are pervasive throughout the
financial statements, and may require accounting adjustments based on future
occurrences. Revisions to accounting estimates are recognized in the period in
which the estimate is revised and may affect both the period of revision and
future periods.

 

54 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED June 30, 2019 and 2018

(Expressed in Canadian dollars)

 

3.       SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

a) Critical Accounting Judgments and Estimates (Continued)

 

Significant assumptions about the future and other sources of estimation
uncertainty that management has made at the statement of financial position
date, that could result in a material adjustment to the carrying amounts of
assets and liabilities, in the event that actual results differ from assumptions
made, relate to, but are not limited to, the following:

 

Judgments:

·The inputs used in assessing the recoverability of deferred income tax assets
to the extent that the deductible temporary differences will reverse in the
foreseeable future and that the company will have future taxable income; and
 ·The determination of the going concern assumption.

 

Estimates:

·The carrying value of deferred development costs and allocation of expenditures
to deferred development costs

 

b) Financial Instruments

 

A financial instrument is any contract that gives rise to a financial asset of
one entity and a financial liability or equity instrument to another entity.
Financial assets and financial liabilities are recognized on the statements of
financial position at the time the Company becomes a party to the contractual
provisions of the financial instrument.

 

Financial instruments are initially measured at fair value. Measurement in
subsequent periods is dependent on the classification of the financial
instrument. The Company classifies its financial instruments in the following
categories: at fair value through profit or loss, loans and receivables,
held-to-maturity, available-for-sale, and other financial liabilities.

 

i)       Financial Assets and Liabilities at Fair Value Through Profit or Loss

 

Financial assets and liabilities at fair value through profit or loss are either
‘held-for-trading’ or classified at fair value through profit or loss. They are
initially and subsequently recorded at fair value and changes in fair value are
recognized in profit or loss for the period.

 

The Company has designated its cash and cash equivalents as financial assets at
fair value through profit or loss.

 

ii) Loans and Receivables

 

Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. Such assets are
recognized initially at fair value and subsequently on an amortized cost basis
using the effective interest method, less any impairment losses. They are
included in current assets, except for maturities greater than 12 months after
the end of the reporting period, which are classified as non-current assets.

 

The Company does not have any financial instruments designated as loans and
receivables.

 

 

55 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED June 30, 2019 and 2018

(Expressed in Canadian dollars)

 

3.       SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

b) Financial Instruments (Continued)

 

iii) Held-to-Maturity

 

Held-to-maturity investments are non-derivative financial assets that have fixed
maturities and fixed or determinable payments, and it is the Company’s intention
to hold these investments to maturity. They are initially recorded at fair value
and subsequently measured at amortized cost.

 

The Company does not have any held-to-maturity financial assets.

 

iv) Available-For-Sale

 

Available-for-sale financial assets are non-derivative financial assets that are
designated as available-for-sale or are not classified in any other financial
asset categories. They are initially and subsequently measured at fair value and
the changes in fair value, other than impairment losses are recognized in other
comprehensive income (loss) and presented in the fair value reserve in
shareholders’ equity. When the financial assets are sold or an impairment
write-down is required, losses accumulated in the fair value reserve recognized
in shareholders’ equity are included in profit or loss.

 

The Company does not have any available-for-sale financial assets.

 

v) Other Financial Liabilities

 

Other financial liabilities are recognized initially at fair value plus any
directly attributable transaction costs on the date at which the Company becomes
a party to the contractual provisions of the instrument. Subsequent to initial
recognition, the Company’s financial liabilities are measured at amortized cost
using the effective interest method. The Company derecognizes a financial
liability when its contractual obligations are discharged, cancelled, or
expired.

 

The Company’s non-derivative financial liabilities are its accounts payable and
accrued liabilities and convertible loan, which are designated as other
liabilities.

 

c) Cash and Cash Equivalents

 

Cash and cash equivalents include cash on hand, deposits held at call with banks
and other short-term highly liquid investments with original maturities of three
months or less. As at June 30, 2019 and June 30, 2018, the Company had no cash
equivalents.

 

d) Income Taxes

 

Current income tax

 

Current income tax assets and liabilities for the current period are measured at
the amount expected to be recovered from or paid to the Canadian taxation
authorities. The tax rates and tax laws used to compute the amount are those
that are enacted or substantively enacted, at the reporting date.

 

Current tax is recognized in net income except to the extent that it relates to
a business combination or items recognized directly in equity or in other
comprehensive income or loss.

 

56 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED June 30, 2019 and 2018

(Expressed in Canadian dollars)

 

3.       SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

d) Income Taxes (Continued)

 

Management periodically evaluates positions taken in the tax returns with
respect to situations in which applicable tax regulations are subject to
interpretation and establishes provisions where appropriate.

 

Deferred income tax

 

Deferred income tax is provided using the balance sheet method on temporary
differences at the reporting date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes.

 

Deferred tax is recognized in net income except to the extent that it relates to
a business combination or items recognized directly in equity or in other
comprehensive income or loss.

 

The carrying amount of deferred income tax assets is reviewed at the end of each
reporting period and recognized only to the extent that it is probable that
sufficient taxable profit will be available to allow all or part of the deferred
income tax asset to be utilized.

 

Deferred income tax assets and liabilities are measured at the tax rates that
are expected to apply to the year when the asset is realized or the liability is
settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted by the end of the reporting period.

 

Deferred income tax assets and deferred income tax liabilities are offset, if a
legally enforceable right exists to set off current tax assets against current
income tax liabilities and the deferred income taxes relate to the same taxable
entity and the same taxation authority.

 

e) Equipment

 

Equipment is stated at historical cost less accumulated depreciation and
accumulated impairment losses. Equipment is depreciated over its estimated
useful lives. The cost of an item includes the purchase price and directly
attributable costs to bring the asset to the location and condition necessary
for it to be capable of operating in the manner intended by management. Where an
item of equipment comprises major components with different useful lives, the
components are accounted for as separate items of equipment.

 

Subsequent costs are included in the asset’s carrying amount or recognized as a
separate asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the Company and the cost of the
item can be measured reliably. The carrying amount of the replaced part is
derecognized. All other repairs and maintenance are charged to the statement of
income and comprehensive income during the financial period in which they are
incurred.

 

Gains and losses on disposals are determined by comparing the proceeds with the
carrying amount and are recognized in profit or loss.

 

 

 

57 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED June 30, 2019 and 2018

(Expressed in Canadian dollars)

 

3.       SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

e) Equipment (Continued)

 

Depreciation is recognized using the following rate and method:

   Depreciation rate Computer equipment  30% declining balance Furniture  20%
declining balance

 

Depreciation methods, useful lives and residual values are reviewed at each
financial year end and are adjusted if appropriate.

 

f)       Research and Development

 

Research costs are expensed when incurred. Development costs are expensed when
incurred prior to the establishment of technical feasibility. Subsequent to the
establishment of technical feasibility and probable future benefits, the costs
associated with the development of a commercial product for which adequate
resources exist to market the product are capitalized as deferred development
costs. Capitalization of development costs ceases when the product is available
for general release to customers. Deferred development costs are amortized,
commencing when the product in question is commercially available for sale.

 

g) Impairment of non-financial assets

 

The Company reviews the carrying value of its non-financial assets, which
include equipment and deferred development costs at each reporting date to
dertermine whether events or changed circumstances indicate that the carrying
value may not be recoverable.

 

For the purpose of impairment testing, assets that cannot be tested individually
are grouped together into the smallest group of assets that generates cash
inflows from continuing use that are largely independent of the cash inflows of
other assets or groups of assets (a “cash-generating unit” or “CGU”).

 

The recoverable amount of an asset or cash-generating unit is the greater of its
value in use and its fair value less costs to sell. In assessing value in use,
the estimated future cash flows are discontinued to their present value using a
pre-tax discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset. An impairment loss is recognized
if the carrying value of a non-financial asset exceeds the recoverable amount.
Impairment losses are recognized in pofit or loss. Impairment losses recognized
in respect of the CGUs are allocated first to reduce the carrying amount of any
goodwill allocated to the unit, and then to reduce the carrying amounts of the
other assets in the CGU on a pro rata basis.

 

Impairment losses recognized in prior periods are assessed at each reporting
date for any indications that the loss has decreased or no longer exists. An
impairment loss is reversed if there has been a change in the estimates used to
determine the recoverable amount. An impairment loss is reversed only to the
extent that the asset’s carrying amount does not exceed the carrying amount that
would have been determined, net of amortization, if no impairment loss has been
recognized.

 

58 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED June 30, 2019 and 2018

(Expressed in Canadian dollars)

 

 

3.       SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

h) Accounting Standards Issued But Not Yet Adopted

 

The Company has assessed the impact of these new standards on its financial
statements and has determined that the application of these standards will not
have a material impact on the results and financial position of the Company.

 

New Standard IFRS 9 “Financial Instruments”

 

This new standard is a partial replacement of IAS 39 “Financial Instruments:
Recognition and Measurement”. IFRS 9 uses a single approach to determine whether
a financial asset is measured at amortized cost or fair value, replacing the
multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity
manages its financial instruments in the context of its business model and the
contractual cash flow characteristics of the financial assets.

 

The new standard also requires a single impairment method to be used, replacing
the multiple impairment methods in IAS 39. IFRS 9 is effective for annual
periods beginning on or after January 1, 2018.

 

New Standard IFRS 13 “Fair Value Measurement”

 

This new standard replaces the fair value measurement guidance currently
included in various other IFRS standards with a single definition of fair value
and extensive application guidance. IFRS 13 provides guidance on how to measure
fair value and does not introduce new requirements for when fair value is
required or permitted. It also establishes disclosure requirements to provide
users of the financial statements with more information about fair value
measurements.

 

Amended Standard IAS 1 “Presentation of Financial Statements”

 

This standard provides extensive guidance on determining fair value for
measurement or disclosure purposes.

 

 

 

 

 

59 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED June 30, 2019 and 2018

(Expressed in Canadian dollars)

 

4.       DEFERRED DEVELOPMENT COSTS

 

The following is a summary of activity for deferred development costs.

 

     Balance June 30, 2014  $321,181         Additions:      Consulting (Note
7)  $115,278  Engineering   60,767  Professional fees   19,936  Rent   12,167 
Travel   2,218      210,366  Balance June 30, 2015  $531,547         Additions: 
    Consulting (Note 7)  $110,750  Engineering   66,206  Rent   11,934    
 188,890  Balance June 30, 2016  $720,437         Additions:      Consulting
(Note 7)  $314,668  Rent   1,116      315,784  Balance June 30, 2019 and June
30, 2018  $1,036,418 

 

 

5.       SHAREHOLDER LOAN

 

The Company received advances from a shareholder in order to help fund
operations. These amounts are secured by the intellectual property of the
Company, have no repayment terms, and bear interest at 5% per annum of which
both the lender, and the Company have agreed to waive the interest.

     Balance, receivable as at June 30, 2015, included in "Due from
Shareholder"   (73,252)        Shareholder advances during the year   487,411 
Repayments during the year   (52,505) Balance payable as at June 30, 2016 
$361,654         Shareholder advances during the period   342,026  Balance
payable as at June 30, 2017  $703,680         Shareholder advances during the
period   20,707  Balance payable as at June 30, 2018  $724,397        
Shareholder advances during the period   —    Balance payable as at June 30,
2019  $724,387 

 

 

60 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED June 30, 2019 and 2018

(Expressed in Canadian dollars)

 

6.       SHARE CAPITAL

 

a) Authorized Share Capital

 

-Unlimited number of voting Class A common shares without par value.

-Unlimited number of non-voting Class B common shares without par value – None
issued

-Unlimited number of non-cumulative, voting, redeemable, retractable, Class A
special shares without par value – None issued

-Unlimited number of non-cumulative, non-voting, redeemable, retractable, Class
B special shares without par value – None issued

 

b) Issued capital

 

Shares Issued in the years ended June 30, 2019 and June 30, 2018:

 

None issued

 

Shares Issued in the period from incorporation on December 4, 2013 to June 30,
2017:

 

On the incorporation date of December 4, 2013, the Company issued founder’s
shares consisting of 100,650,000 common shares with a total deemed value of
$10,065. This amount has not been collected and is reflected in the statement of
financial position as share subscriptions receivable.

 

On January 1, 2014, the Company issued 4,400,001 Class A common shares for cash
proceeds of $440. This amount has not been collected and is reflected in the
statement of financial position as share subscriptions receivable.

 

On February 14, 2014, the Company issued 650,000 Class A common shares for cash
proceeds of $350,000.

 

On March 14, 2014, the Company issued 200,000 Class A common shares for cash
proceeds of $200,000.

 

On April 8, 2014, the Company issued 50,000 Class A common shares for cash
proceeds of $50,000.

 

On June 15, 2014, The Company issued 300,000 Class A common shares for cash
proceeds of $150,000.

 

On September 30, 2014, the Company issued 170,000 class A common shares for cash
proceeds of $300,000.

 

 

 

 

61 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED June 30, 2019 and 2018

(Expressed in Canadian dollars)

 

 

7.       RELATED PARTY TRANSACTIONS

 

All related party transactions have been recorded at amounts agreed to by the
transacting parties. Amounts due to and due from related parties do not bear
interest, are unsecured, have no fixed payment terms, and are due on demand.

 

Key Management Compensation:

 

Key management personnel include those persons having authority and
responsibility for planning, directing and controlling the activities of the
Company as a whole. The Company has determined that key management personnel
consist of executive and non-executive members of the Company’s Board of
Directors and corporate officers.

 

 

8.       FINANCIAL RISK MANAGEMENT

 

a)       Fair Value of Financial Instruments

 

The Company’s financial instruments consist of cash and cash equivalents, trade
payables and other accrued liabilities and shareholder’s advances. The carrying
values of these financial instruments approximate their fair values because of
their short term nature and/or the existence of market related interest rates on
the instruments.

 

IFRS requires disclosures about the inputs to fair value measurements, including
their classification within a hierarchy that prioritizes the inputs to fair
value measurement. The three levels of hierarchy are:

 

· Level 1 – Unadjusted quoted prices in active markets for identical assets or
liabilities;

· Level 2 – Inputs other than quoted prices that are observable for the asset or
liability, either directly or indirectly; and

· Level 3 – Inputs for the asset or liability that are not based on observable
market data.

 

b)       Financial Instruments Risk

 

The Company is exposed in varying degrees to a variety of financial instrument
related risks as follows:

 

Credit risk

 

Credit risk is the risk that one party to a financial instrument will fail to
discharge an obligation and cause the other party to incur a financial loss. The
Company’s primary exposure to credit risk is on its bank accounts. The Company’s
bank accounts are held with a major bank in Canada. As all of the Company’s cash
and cash equivalents are held by one bank in Canada, there is a concentration of
credit risk. This risk is managed by using a major bank that is a high credit
quality financial institution as determined by rating agencies.

 

 

 

 

62 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED June 30, 2019 and 2018

(Expressed in Canadian dollars)

 

8.       FINANCIAL RISK MANAGEMENT (Continued)

 

a) Financial Instruments Risk (Continued)

 

Liquidity risk

 

Liquidity risk arises through the excess of financial obligations over available
financial assets due at any point in time. The Company’s objective in managing
liquidity risk is to maintain sufficient readily available reserves in order to
meet its liquidity requirements at any point in time. The Company is dependent
on the availability of credit from its suppliers and its ability to generate
sufficient funds from its equity and debt financing to meet current and future
obligations. There is no guarantee that such financing will be available on
terms acceptable to the Company (Note 1).

 

Market risk

 

Market risk is the risk that changes in market factors, such as foreign exchange
rates, commodity prices, and interest rates will affect the Company’s net
earnings or the value of financial instruments. The objective of market risk
management is to manage and control market risk exposures within acceptable
limits, while maximizing returns. Management has determined this risk to be
minimal at this stage.

 

Foreign currency exchange rate risk and commodity price risk

 

Foreign exchange risk is the risk that the fair value of future cash flows of a
financial instrument will fluctuate because of changes in foreign exchange
rates. Commodity price risk is the risk that market values and future incomes
will fluctuate because of changes in commodity prices. The Company does not have
any direct exposure to foreign currency exchange rate risk or commodity price
risk. The Company had no forward exchange rate contracts or commodity price
contracts in place as at June 30, 2019 or 2018.

 

Interest rate risk

 

Interest rate risk is the risk that future cash flows will fluctuate as a result
of changes in market interest rates. As at June 30, 2019 and 2018, the Company
did not have any significant interest rate risk.

 

c)       Capital Management

 

The Company defines capital that it manages as shareholders' equity that is
expected to be realized in cash. The Company raises capital through private
share offerings and related party loans and advances. Capital is managed in a
manner consistent with the risk criteria and policies provided by the board of
directors and followed by management. All sources of financing and major
expenditures are analyzed by management and approved by the board of directors.

 

The Company’s primary objectives when managing capital is to safeguard and
maintain the Company’s financial resources for continued operations and to fund
programs to further advance their hydro power technology. The Company is meeting
its objective of managing capital through detailed review and the preparation of
short-term and long-term cash flow analysis to maintain sufficient resources.

 

63 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED June 30, 2019 and 2018

(Expressed in Canadian dollars)

 

8.       FINANCIAL RISK MANAGEMENT (Continued)

 

c) Capital Management (Continued)

 

The Company is able to scale its expenditure programs and the use of capital to
address market conditions by reducing expenditures and the scope of operations
during periods of economic downturn.

 

There were no changes in the Company's approach to capital management during the
periods ended June 30, 2019 and 2018. The Company is not subject to any
externally imposed capital requirements.

 

 

9.       QUALIFYING TRANSACTION

 

On December 30, 2013, the Company signed a non-binding letter of intent with
Credent Capital Corp. (“Credent Capital”), a corporation existing under the laws
of British Columbia, Canada, which outlines the general terms and conditions
pursuant to which the Company and Credent Capital will be willing to complete a
transaction that will effectively result in the acquisition by Credent Capital
of the shares of the Company, and a reverse take-over of Credent Capital by the
shareholders of the Company.

 

 

 

 

 

 

 

 

 

64 

 

 

 

 

 

 

 

 

 

 

 

 

 

HYDRO POWER TECHNOLOGIES INC.

 

FINANCIAL STATEMENTS

 

FOR THE PERIOD ENDED SEPTEMBER 30, 2019

(Expressed in Canadian Dollars)

 

 

 

 

 

 

 

 

 

65 

 

HYDRO POWER TECHNOLOGIES INC.

STATEMENTS OF FINANCIAL POSITION

(Expressed in Canadian dollars)

 

 

   AS AT SEPTEMBER 30, 2019  AS AT JUNE 30, 2019 ASSETS           Current
Assets           Cash  $—     $—    HST Receivable   36,419    36,419  Prepaid
expenses and deposits   5,547    5,547              Total Current Assets 
 41,965    41,965              Non-Current Assets           Equipment, net of
accumulated depreciation   1,164    1,332  Deferred development costs (Note 4) 
 1,036,418    1,036,418  TOTAL ASSETS  $1,079,548   $1,079,716             
LIABILITIES           Current Liabilities           Accounts payable and accrued
liabilities   191,130    191,130  Shareholder Loan (Note 5)   724,387  
 724,387  Total Current Liabilities   915,517    915,517              EQUITY 
         Share capital (Note 6)   1,060,505    1,060,505  Share subscriptions
receivable (Note 6)   (10,505)   (10,505) Deficit   (885,969)   (885,801) TOTAL
EQUITY   164,031    164,199  TOTAL LIABILITIES AND EQUITY  $1,079,548  
$1,079,716              Going Concern (Note 1)          

 

On behalf of the Board of Directors:

 

 

      Grant Sanders - Director   Michael Shamber - Director

 

See accompanying notes to the financial statements. 

 

66 

 

HYDRO POWER TECHNOLOGIES INC.

 

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Expressed in Canadian dollars)

 

   For the Quarter Ended
September 30,    2019  2018 Expenses       Consulting fees (Note 7)   $—    
$ —    Depreciation  168   168  Foreign exchange (gain) loss   —      —   
Insurance   —      —    Office and miscellaneous   —      —    Professional
fees   —      —    Rent   —      —                Net Loss and Comprehensive
Loss For The Period  $(168)  $(168)

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

 

67 

 

HYDRO POWER TECHNOLOGIES INC.

 

STATEMENTS OF CHANGES IN EQUITY

FOR THE QUARTERS ENDED SEPTEMBER 30, 2019 and 2018

(Expressed in Canadian dollars)

 

   SHARE CAPITAL                              NUMBER OF CLASS A COMMON SHARES 
AMOUNT  SHARE SUBSCRIPTIONS RECEIVABLE  DEFICIT  TOTAL EQUITY                 
Balance at June 30, 2018   106,420,001   $1,060,505   $(10,505)  $(8,885,129) 
$164,871  Net loss for the period   —      —      —      (168)   (168)        
                   Balance at September 30, 2018   106,420,001   $1,060,505  
$(10,505)  $885,297   $164,703                             Balance at June 30,
2019   106,420,001   $1,060,505   $(10,505)  $(885,801)  $164,199  Net loss for
the period   —      —      —      (168)   (168)                           
Balance at September 30, 2019   106,420,001   $1,060,505   $(10,505) 
$(885,969)  $164,031 

 

 

 

 

 

See accompanying notes to financial statements.

 

68 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED SEPTMEMBER 30, 2019 and 2018

(Expressed in Canadian dollars)

 

  

For the period ended

September 30,

   2019  2018 Operating Activities           Net loss for the period  $(168) 
$(168) Adjustments for non-cash items:           Depreciation   168    168 
Changes in non-cash working capital items:                       Prepaid
expenses   —                     HST Receivable   —         Accounts payable and
accrued liabilities   —         Net Cash Flows Used In Operating Activities 
 —                     Investing Activities           Deferred development
costs   —      —    Purchase of equipment   —      —    Net Cash Flows Used In
Investing Activities   —      —                Financing Activities          
Advances from shareholder   —         Repayments to shareholder   —        
Shares issued for cash   —         Net Cash Flows From Financing Activities 
 —                     (Decrease) Increase In Cash   —         Cash, Beginning
of the period   —         Cash, End of the period  $—     $—   

 

 

 

 

69 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED SEPTMEMBER 30, 2019 and 2018

(Expressed in Canadian dollars)

 

1.       NATURE OF OPERATIONS AND GOING CONCERN

 

Hydro Power Technologies Inc. (the “Company”) was incorporated on December 4,
2013, under the laws of the province of Ontario, Canada, and its principal
activity is the development of a technology that increases power output
generated from hydro-electric turbines. The address of the Company’s orporate
office and principal place of business is 5330 Mainway Drive, Burlington,
Ontario, L7L 6A4

 

These financial statements have been prepared in accordance with International
Financial Reporting Standards ("IFRS") applicable to a going concern, which
assumes the realization of assets and discharge of liabilities in the normal
course of business for the foreseeable future. The Company has incurred losses
from inception of $885,969. The Company needs to raise sufficient capital to
fund its planned operations, administration expenses and future acquisitions.
The Company’s ability to continue as a going concern is dependent upon its
ability to attain future profitable operations and to obtain the necessary
financing to meet its obligations and repay its liabilities arising from normal
business operations when they come due. As at September 30, 2019, the Company
had not yet achieved profitable operations and expects to incur further losses
in the development of its business plan, all of which may cast significant doubt
about the Company’s ability to continue as a going concern. These financial
statements do not include any adjustments to the amounts and classification of
assets and liabilities that might be necessary should the Company not be able to
continue as a going concern.

 

2.       BASIS OF PRESENTATION

 

The financial statements were authorized for issue on January 22, 2020 by the
directors of the Company.

 

Statement of Compliance

 

The financial statements of the Company have been prepared in accordance with
International Financial Reporting Standards (“IFRS”) as issued by the
International Accounting Standards Board (“IASB”) and interpretations of the
International Financial Reporting Interpretations Committee (“IFRIC”).

 

Basis of Measurement

 

These financial statements have been prepared on a historical cost basis. In
addition, these financial statements have been prepared using the accrual basis
of accounting, except for cash flow information.

 

3.       SIGNIFICANT ACCOUNTING POLICIES

 

a) Critical Accounting Judgments and Estimates

 

The preparation of these financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and reported amounts of
expenses during the reporting period. Actual outcomes could differ from these
estimates. The financial statements include estimates which, by their nature,
are uncertain. The impacts of such estimates are pervasive throughout the
financial statements, and may require accounting adjustments based on future
occurrences. Revisions to accounting estimates are recognized in the period in
which the estimate is revised and may affect both the period of revision and
future periods.

 

70 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED SEPTMEMBER 30, 2019 and 2018

(Expressed in Canadian dollars)

 

3.       SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

a) Critical Accounting Judgments and Estimates (Continued)

 

Significant assumptions about the future and other sources of estimation
uncertainty that management has made at the statement of financial position
date, that could result in a material adjustment to the carrying amounts of
assets and liabilities, in the event that actual results differ from assumptions
made, relate to, but are not limited to, the following:

 

Judgments:

·The inputs used in assessing the recoverability of deferred income tax assets
to the extent that the deductible temporary differences will reverse in the
foreseeable future and that the company will have future taxable income; and
  ·The determination of the going concern assumption.

Estimates:

·The carrying value of deferred development costs and allocation of expenditures
to deferred development costs

 

b) Financial Instruments

 

A financial instrument is any contract that gives rise to a financial asset of
one entity and a financial liability or equity instrument to another entity.
Financial assets and financial liabilities are recognized on the statements of
financial position at the time the Company becomes a party to the contractual
provisions of the financial instrument.

 

Financial instruments are initially measured at fair value. Measurement in
subsequent periods is dependent on the classification of the financial
instrument. The Company classifies its financial instruments in the following
categories: at fair value through profit or loss, loans and receivables,
held-to-maturity, available-for-sale, and other financial liabilities.

 

i)       Financial Assets and Liabilities at Fair Value Through Profit or Loss

 

Financial assets and liabilities at fair value through profit or loss are either
‘held-for-trading’ or classified at fair value through profit or loss. They are
initially and subsequently recorded at fair value and changes in fair value are
recognized in profit or loss for the period.

 

The Company has designated its cash and cash equivalents as financial assets at
fair value through profit or loss.

 

ii) Loans and Receivables

 

Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. Such assets are
recognized initially at fair value and subsequently on an amortized cost basis
using the effective interest method, less any impairment losses. They are
included in current assets, except for maturities greater than 12 months after
the end of the reporting period, which are classified as non-current assets.

 

The Company does not have any financial instruments designated as loans and
receivables.

 

 

71 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED SEPTMEMBER 30, 2019 and 2018

(Expressed in Canadian dollars)

 

3.       SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

b) Financial Instruments (Continued)

 

iii) Held-to-Maturity

 

Held-to-maturity investments are non-derivative financial assets that have fixed
maturities and fixed or determinable payments, and it is the Company’s intention
to hold these investments to maturity. They are initially recorded at fair value
and subsequently measured at amortized cost.

 

The Company does not have any held-to-maturity financial assets.

 

iv) Available-For-Sale

 

Available-for-sale financial assets are non-derivative financial assets that are
designated as available-for-sale or are not classified in any other financial
asset categories. They are initially and subsequently measured at fair value and
the changes in fair value, other than impairment losses are recognized in other
comprehensive income (loss) and presented in the fair value reserve in
shareholders’ equity. When the financial assets are sold or an impairment
write-down is required, losses accumulated in the fair value reserve recognized
in shareholders’ equity are included in profit or loss.

 

The Company does not have any available-for-sale financial assets.

 

v) Other Financial Liabilities

 

Other financial liabilities are recognized initially at fair value plus any
directly attributable transaction costs on the date at which the Company becomes
a party to the contractual provisions of the instrument. Subsequent to initial
recognition, the Company’s financial liabilities are measured at amortized cost
using the effective interest method. The Company derecognizes a financial
liability when its contractual obligations are discharged, cancelled, or
expired.

 

The Company’s non-derivative financial liabilities are its accounts payable and
accrued liabilities and convertible loan, which are designated as other
liabilities.

 

c) Cash and Cash Equivalents

 

Cash and cash equivalents include cash on hand, deposits held at call with banks
and other short-term highly liquid investments with original maturities of three
months or less. As at September 30, 2019 and September 30, 2018, the Company had
no cash equivalents.

 

d) Income Taxes

 

Current income tax

 

Current income tax assets and liabilities for the current period are measured at
the amount expected to be recovered from or paid to the Canadian taxation
authorities. The tax rates and tax laws used to compute the amount are those
that are enacted or substantively enacted, at the reporting date.

 

Current tax is recognized in net income except to the extent that it relates to
a business combination or items recognized directly in equity or in other
comprehensive income or loss.

 

72 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED SEPTMEMBER 30, 2019 and 2018

(Expressed in Canadian dollars)

 

3.       SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

d) Income Taxes (Continued)

 

Management periodically evaluates positions taken in the tax returns with
respect to situations in which applicable tax regulations are subject to
interpretation and establishes provisions where appropriate.

 

Deferred income tax

 

Deferred income tax is provided using the balance sheet method on temporary
differences at the reporting date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes.

 

Deferred tax is recognized in net income except to the extent that it relates to
a business combination or items recognized directly in equity or in other
comprehensive income or loss.

 

The carrying amount of deferred income tax assets is reviewed at the end of each
reporting period and recognized only to the extent that it is probable that
sufficient taxable profit will be available to allow all or part of the deferred
income tax asset to be utilized.

 

Deferred income tax assets and liabilities are measured at the tax rates that
are expected to apply to the year when the asset is realized or the liability is
settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted by the end of the reporting period.

 

Deferred income tax assets and deferred income tax liabilities are offset, if a
legally enforceable right exists to set off current tax assets against current
income tax liabilities and the deferred income taxes relate to the same taxable
entity and the same taxation authority.

 

e) Equipment

 

Equipment is stated at historical cost less accumulated depreciation and
accumulated impairment losses. Equipment is depreciated over its estimated
useful lives. The cost of an item includes the purchase price and directly
attributable costs to bring the asset to the location and condition necessary
for it to be capable of operating in the manner intended by management. Where an
item of equipment comprises major components with different useful lives, the
components are accounted for as separate items of equipment.

 

Subsequent costs are included in the asset’s carrying amount or recognized as a
separate asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the Company and the cost of the
item can be measured reliably. The carrying amount of the replaced part is
derecognized. All other repairs and maintenance are charged to the statement of
income and comprehensive income during the financial period in which they are
incurred.

 

Gains and losses on disposals are determined by comparing the proceeds with the
carrying amount and are recognized in profit or loss.

 

 

73 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED SEPTMEMBER 30, 2019 and 2018

(Expressed in Canadian dollars)

 

3.       SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

e) Equipment (Continued)

 

Depreciation is recognized using the following rate and method:

 

 

   Depreciation rate Computer equipment  30% declining balance Furniture  20%
declining balance

 

Depreciation methods, useful lives and residual values are reviewed at each
financial year end and are adjusted if appropriate.

 

f)       Research and Development

 

Research costs are expensed when incurred. Development costs are expensed when
incurred prior to the establishment of technical feasibility. Subsequent to the
establishment of technical feasibility and probable future benefits, the costs
associated with the development of a commercial product for which adequate
resources exist to market the product are capitalized as deferred development
costs. Capitalization of development costs ceases when the product is available
for general release to customers. Deferred development costs are amortized,
commencing when the product in question is commercially available for sale.

 

g) Impairment of non-financial assets

 

The Company reviews the carrying value of its non-financial assets, which
include equipment and deferred development costs at each reporting date to
dertermine whether events or changed circumstances indicate that the carrying
value may not be recoverable.

 

For the purpose of impairment testing, assets that cannot be tested individually
are grouped together into the smallest group of assets that generates cash
inflows from continuing use that are largely independent of the cash inflows of
other assets or groups of assets (a “cash-generating unit” or “CGU”).

 

The recoverable amount of an asset or cash-generating unit is the greater of its
value in use and its fair value less costs to sell. In assessing value in use,
the estimated future cash flows are discontinued to their present value using a
pre-tax discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset. An impairment loss is recognized
if the carrying value of a non-financial asset exceeds the recoverable amount.
Impairment losses are recognized in pofit or loss. Impairment losses recognized
in respect of the CGUs are allocated first to reduce the carrying amount of any
goodwill allocated to the unit, and then to reduce the carrying amounts of the
other assets in the CGU on a pro rata basis.

 

Impairment losses recognized in prior periods are assessed at each reporting
date for any indications that the loss has decreased or no longer exists. An
impairment loss is reversed if there has been a change in the estimates used to
determine the recoverable amount. An impairment loss is reversed only to the
extent that the asset’s carrying amount does not exceed the carrying amount that
would have been determined, net of amortization, if no impairment loss has been
recognized.

 

74 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED SEPTMEMBER 30, 2019 and 2018

(Expressed in Canadian dollars)

 

3.       SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

h) Accounting Standards Issued But Not Yet Adopted

 

The Company has assessed the impact of these new standards on its financial
statements and has determined that the application of these standards will not
have a material impact on the results and financial position of the Company.

 

New Standard IFRS 9 “Financial Instruments”

 

This new standard is a partial replacement of IAS 39 “Financial Instruments:
Recognition and Measurement”. IFRS 9 uses a single approach to determine whether
a financial asset is measured at amortized cost or fair value, replacing the
multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity
manages its financial instruments in the context of its business model and the
contractual cash flow characteristics of the financial assets.

 

The new standard also requires a single impairment method to be used, replacing
the multiple impairment methods in IAS 39. IFRS 9 is effective for annual
periods beginning on or after January 1, 2018.

 

New Standard IFRS 13 “Fair Value Measurement”

 

This new standard replaces the fair value measurement guidance currently
included in various other IFRS standards with a single definition of fair value
and extensive application guidance. IFRS 13 provides guidance on how to measure
fair value and does not introduce new requirements for when fair value is
required or permitted. It also establishes disclosure requirements to provide
users of the financial statements with more information about fair value
measurements.

 

Amended Standard IAS 1 “Presentation of Financial Statements”

 

This standard provides extensive guidance on determining fair value for
measurement or disclosure purposes.

 

 

 

 

75 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED SEPTMEMBER 30, 2019 and 2018

(Expressed in Canadian dollars)

 

4.       DEFERRED DEVELOPMENT COSTS

 

The following is a summary of activity for deferred development costs.

 

          Balance June 30, 2014  $321,181         Additions:      Consulting
(Note 7)  $115,278  Engineering   60,767  Professional fees   19,936  Rent 
 12,167  Travel   2,218      210,366  Balance June 30, 2015  $531,547        
Additions:      Consulting (Note 7)  $110,750  Engineering   66,206  Rent 
 11,934      188,890  Balance June 30, 2016  $720,437         Additions:     
Consulting (Note 7)  $314,668  Rent   1,116      315,784  Balance September 30,
2019 and June 30, 2019  $1,036,418 

 

5.       SHAREHOLDER LOAN

 

 The Company received advances from a shareholder in order to help fund
operations. These amounts are secured by the intellectual property of the
Company, have no repayment terms, and bear interest at 5% per annum of which
both the lender, and the Company have agreed to waive the interest.  

     Balance, receivable as at June 30, 2015, included in "Due from
Shareholder"   (73,252)        Shareholder advances during the year   487,411 
Repayments during the year   (52,505) Balance payable as at June 30, 2016 
$361,654         Shareholder advances during the period   342,026  Balance
payable as at June 30, 2017  $703,680         Shareholder advances during the
period   20,707  Balance payable as at June 30, 2018  $724,397        
Shareholder advances during the period   —    Balance payable as at June 30,
2019  $724,387 

 

No change during the quarter ended September 30, 2019 

 

76 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED SEPTMEMBER 30, 2019 and 2018

(Expressed in Canadian dollars)

 

6.       SHARE CAPITAL

 

a) Authorized Share Capital

 

-Unlimited number of voting Class A common shares without par value.

-Unlimited number of non-voting Class B common shares without par value – None
issued

-Unlimited number of non-cumulative, voting, redeemable, retractable, Class A
special shares without par value – None issued

-Unlimited number of non-cumulative, non-voting, redeemable, retractable, Class
B special shares without par value – None issued

 

b) Issued capital

 

Shares Issued in the period ended September 30, 2019:

 

None issued

 

Shares Issued in the years ended June 30, 2019 and June 30, 2018:

 

None issued

 

Shares Issued in the period from incorporation on December 4, 2013 to June 30,
2017:

 

On the incorporation date of December 4, 2013, the Company issued founder’s
shares consisting of 100,650,000 common shares with a total deemed value of
$10,065. This amount has not been collected and is reflected in the statement of
financial position as share subscriptions receivable.

 

On January 1, 2014, the Company issued 4,400,001 Class A common shares for cash
proceeds of $440. This amount has not been collected and is reflected in the
statement of financial position as share subscriptions receivable.

 

On February 14, 2014, the Company issued 650,000 Class A common shares for cash
proceeds of $350,000.

 

On March 14, 2014, the Company issued 200,000 Class A common shares for cash
proceeds of $200,000.

 

On April 8, 2014, the Company issued 50,000 Class A common shares for cash
proceeds of $50,000.

 

On June 15, 2014, The Company issued 300,000 Class A common shares for cash
proceeds of $150,000.

 

On September 30, 2014, the Company issued 170,000 class A common shares for cash
proceeds of $300,000.

 

 

77 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED SEPTMEMBER 30, 2019 and 2018

(Expressed in Canadian dollars)

 

7.       RELATED PARTY TRANSACTIONS

 

All related party transactions have been recorded at amounts agreed to by the
transacting parties. Amounts due to and due from related parties do not bear
interest, are unsecured, have no fixed payment terms, and are due on demand.

 

Key Management Compensation:

 

Key management personnel include those persons having authority and
responsibility for planning, directing and controlling the activities of the
Company as a whole. The Company has determined that key management personnel
consist of executive and non-executive members of the Company’s Board of
Directors and corporate officers.

 

 

8.       FINANCIAL RISK MANAGEMENT

 

a)       Fair Value of Financial Instruments

 

The Company’s financial instruments consist of cash and cash equivalents, trade
payables and other accrued liabilities and shareholder’s advances. The carrying
values of these financial instruments approximate their fair values because of
their short term nature and/or the existence of market related interest rates on
the instruments.

 

IFRS requires disclosures about the inputs to fair value measurements, including
their classification within a hierarchy that prioritizes the inputs to fair
value measurement. The three levels of hierarchy are:

 

· Level 1 – Unadjusted quoted prices in active markets for identical assets or
liabilities;

· Level 2 – Inputs other than quoted prices that are observable for the asset or
liability, either directly or indirectly; and

· Level 3 – Inputs for the asset or liability that are not based on observable
market data.

 

b)       Financial Instruments Risk

 

The Company is exposed in varying degrees to a variety of financial instrument
related risks as follows:

 

Credit risk

 

Credit risk is the risk that one party to a financial instrument will fail to
discharge an obligation and cause the other party to incur a financial loss. The
Company’s primary exposure to credit risk is on its bank accounts. The Company’s
bank accounts are held with a major bank in Canada. As all of the Company’s cash
and cash equivalents are held by one bank in Canada, there is a concentration of
credit risk. This risk is managed by using a major bank that is a high credit
quality financial institution as determined by rating agencies.

 

 

78 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED SEPTMEMBER 30, 2019 and 2018

(Expressed in Canadian dollars)

 

8.       FINANCIAL RISK MANAGEMENT (Continued)

 

a) Financial Instruments Risk (Continued)

 

Liquidity risk

 

Liquidity risk arises through the excess of financial obligations over available
financial assets due at any point in time. The Company’s objective in managing
liquidity risk is to maintain sufficient readily available reserves in order to
meet its liquidity requirements at any point in time. The Company is dependent
on the availability of credit from its suppliers and its ability to generate
sufficient funds from its equity and debt financing to meet current and future
obligations. There is no guarantee that such financing will be available on
terms acceptable to the Company (Note 1).

 

Market risk

 

Market risk is the risk that changes in market factors, such as foreign exchange
rates, commodity prices, and interest rates will affect the Company’s net
earnings or the value of financial instruments. The objective of market risk
management is to manage and control market risk exposures within acceptable
limits, while maximizing returns. Management has determined this risk to be
minimal at this stage.

 

Foreign currency exchange rate risk and commodity price risk

 

Foreign exchange risk is the risk that the fair value of future cash flows of a
financial instrument will fluctuate because of changes in foreign exchange
rates. Commodity price risk is the risk that market values and future incomes
will fluctuate because of changes in commodity prices. The Company does not have
any direct exposure to foreign currency exchange rate risk or commodity price
risk. The Company had no forward exchange rate contracts or commodity price
contracts in place as at September 30, 2019 or June 30, 2019.

 

Interest rate risk

 

Interest rate risk is the risk that future cash flows will fluctuate as a result
of changes in market interest rates. As at September 30, 2019, the Company did
not have any significant interest rate risk.

 

c)       Capital Management

 

The Company defines capital that it manages as shareholders' equity that is
expected to be realized in cash. The Company raises capital through private
share offerings and related party loans and advances. Capital is managed in a
manner consistent with the risk criteria and policies provided by the board of
directors and followed by management. All sources of financing and major
expenditures are analyzed by management and approved by the board of directors.

 

The Company’s primary objectives when managing capital is to safeguard and
maintain the Company’s financial resources for continued operations and to fund
programs to further advance their hydro power technology. The Company is meeting
its objective of managing capital through detailed review and the preparation of
short-term and long-term cash flow analysis to maintain sufficient resources.

 

 

79 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED SEPTMEMBER 30, 2019 and 2018

(Expressed in Canadian dollars)

 

8.       FINANCIAL RISK MANAGEMENT (Continued)

 

c) Capital Management (Continued)

 

The Company is able to scale its expenditure programs and the use of capital to
address market conditions by reducing expenditures and the scope of operations
during periods of economic downturn.

 

There were no changes in the Company's approach to capital management during the
period ended September 30, 2019. The Company is not subject to any externally
imposed capital requirements.

 

 

9.       QUALIFYING TRANSACTION

 

On December 30, 2013, the Company signed a non-binding letter of intent with
Credent Capital Corp. (“Credent Capital”), a corporation existing under the laws
of British Columbia, Canada, which outlines the general terms and conditions
pursuant to which the Company and Credent Capital will be willing to complete a
transaction that will effectively result in the acquisition by Credent Capital
of the shares of the Company, and a reverse take-over of Credent Capital by the
shareholders of the Company.

 

 

 

 

 

 

 

 

80 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HYDRO POWER TECHNOLOGIES INC.

 

FINANCIAL STATEMENTS

 

FOR THE PERIOD ENDED DECEMBER 31, 2019

(Expressed in Canadian Dollars)

 

 

81 

 

HYDRO POWER TECHNOLOGIES INC.

 

STATEMENTS OF FINANCIAL POSITION

(Expressed in Canadian dollars)

 

 

   AS AT DECEMBER 31, 2019  AS AT
JUNE 30, 2019 ASSETS           Current Assets           Cash  $2,852   $—    HST
Receivable   36,419    36,419  Prepaid expenses and deposits   5,547    5,547 
Total Current Assets   44,818    41,965              Non-Current Assets      
    Equipment, net of accumulated depreciation   996    1,332  Deferred
development costs (Note 4)   1,036,418    1,036,418  TOTAL ASSETS   1,082,232  
$1,079,716              LIABILITIES           Current Liabilities          
Accounts payable and accrued liabilities   191,130    191,130  Shareholder Loan
(Note 5)   727,037    724,387  Total Current Liabilities   918,167    915,517 
            EQUITY           Share capital (Note 6)   1,060,855    1,060,505 
Share subscriptions receivable (Note 6)   (10,505)   (10,505) Deficit 
 (886,285)   (885,801) TOTAL EQUITY   164,065    164,199  TOTAL LIABILITIES AND
EQUITY   1,082,232   $1,079,716              Going Concern (Note 1)          

 

On behalf of the Board of Directors:

 

 

      Grant Sanders - Director   Michael Shamber - Director

 

See accompanying notes to the financial statements.

 

 

82 

 

HYDRO POWER TECHNOLOGIES INC.

 

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Expressed in Canadian dollars)

 

 

   For the Six Months ended December 31,  For the Six Months ended December 31,
   2019  2018 Expenses           Consulting fees (Note 7)  $—     $—   
Depreciation   336    336  Foreign exchange (gain) loss        —    Insurance 
      —    Office and miscellaneous        —    Professional fees   148    —   
Rent   —      —        —      —    Net Loss and Comprehensive Loss For The
Period  $(484)  $(336)

 

 

 See accompanying notes to financial statements.

 

83 

 

HYDRO POWER TECHNOLOGIES INC.

 

STATEMENTS OF CHANGES IN EQUITY

FOR THE QUARTERS ENDED DECEMBER 31, 2019 and 2018

(Expressed in Canadian dollars)

 

 

   SHARE CAPITAL                              NUMBER OF CLASS A COMMON SHARES 
AMOUNT  SHARE SUBSCRIPTIONS RECEIVABLE  DEFICIT  TOTAL EQUITY                 
Balance at June 30, 2018   106,420,001   $1,060,505   $(10,505)  $(861,907) 
$188,093  Net loss for the period   —      —      —      (23,222)   (23,222)   
                        Balance at December 31, 2018   106,420,001  
$1,060,505   $(10,505)  $(885,129)  $164,871                             Balance
at June 30, 2019   106,420,001    1,060,505    (10,505)   (885,801)   164,199 
Shares issued   3,500,000    350    —           350  Net loss for the period 
 —                (484)   (484)                            Balance at December
31, 2019   109,920,001   $1,060,855   $10,505   $(886,285)  $164,065 

 

 

 

 

 

See accompanying notes to financial statements.

 

 

 

 

 

 

84 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED DECEMBER 31, 2019 and 2018

(Expressed in Canadian dollars)

 

 

   For the year ended
December 31,    2019  2018 Operating Activities           Net loss for the
period  $(316)  $(168) Adjustments for non-cash items:           Depreciation 
 168    168  Changes in non-cash working capital items:                      
Prepaid expenses   —      —                HST Receivable   —      —    Accounts
payable and accrued liabilities        —    Net Cash Flows Used In Operating
Activities   (148)   —                Investing Activities           Deferred
development costs   —      —    Purchase of equipment   —      —    Net Cash
Flows Used In Investing Activities   —      —                Financing
Activities           Advances from shareholder   —      2,650  Repayments to
shareholder   —      —    Shares issued for cash   —      —    Net Cash Flows
From Financing Activities   350    —             3,000  (Decrease) Increase In
Cash           Cash, Beginning of the period           Cash, End of the period 
      —       $2,852   $—   

 

 

85 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED DECEMBER 31, 2019 and 2018

(Expressed in Canadian dollars)

 

1.       NATURE OF OPERATIONS AND GOING CONCERN

 

Hydro Power Technologies Inc. (the “Company”) was incorporated on December 4,
2013, under the laws of the province of Ontario, Canada, and its principal
activity is the development of a technology that increases power output
generated from hydro-electric turbines. The address of the Company’s corporate
office and principal place of business is 5330 Mainway Drive, Burlington,
Ontario, L7L 6A4.

 

These financial statements have been prepared in accordance with International
Financial Reporting Standards ("IFRS") applicable to a going concern, which
assumes the realization of assets and discharge of liabilities in the normal
course of business for the foreseeable future. The Company has incurred losses
from inception of $886,285. The Company needs to raise sufficient capital to
fund its planned operations, administration expenses and future acquisitions.
The Company’s ability to continue as a going concern is dependent upon its
ability to attain future profitable operations and to obtain the necessary
financing to meet its obligations and repay its liabilities arising from normal
business operations when they come due. As at December 31, 2019, the Company had
not yet achieved profitable operations and expects to incur further losses in
the development of its business plan, all of which may cast significant doubt
about the Company’s ability to continue as a going concern. These financial
statements do not include any adjustments to the amounts and classification of
assets and liabilities that might be necessary should the Company not be able to
continue as a going concern.

 

2.       BASIS OF PRESENTATION

 

The financial statements were authorized for issue on February 29, 2020, by the
directors of the Company.

 

Statement of Compliance

 

The financial statements of the Company have been prepared in accordance with
International Financial Reporting Standards (“IFRS”) as issued by the
International Accounting Standards Board (“IASB”) and interpretations of the
International Financial Reporting Interpretations Committee (“IFRIC”).

 

Basis of Measurement

 

These financial statements have been prepared on a historical cost basis. In
addition, these financial statements have been prepared using the accrual basis
of accounting, except for cash flow information.

 

3.       SIGNIFICANT ACCOUNTING POLICIES

 

a) Critical Accounting Judgments and Estimates

 

The preparation of these financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and reported amounts of
expenses during the reporting period. Actual outcomes could differ from these
estimates. The financial statements include estimates which, by their nature,
are uncertain. The impacts of such estimates are pervasive throughout the
financial statements, and may require accounting adjustments based on future
occurrences. Revisions to accounting estimates are recognized in the period in
which the estimate is revised and may affect both the period of revision and
future periods.

 

86 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED DECEMBER 31, 2019 and 2018

(Expressed in Canadian dollars)

 

3.       SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

a) Critical Accounting Judgments and Estimates (Continued)

 

Significant assumptions about the future and other sources of estimation
uncertainty that managementhasmadeatthestatementof
financialpositiondate,thatcould resultin a material adjustmentto the carrying
amounts ofassets and liabilities,in the eventthatactualresults differ from
assumptions made, relate to, but are not limited to, the following:

 

Judgments:

·The inputs used in assessing the recoverability of deferred income tax assets
to the extent that the deductible temporary differences will reverse in the
foreseeable future and that the company will have future taxable income; and
 ·The determination of the going concern assumption.

 

Estimates:

·The carrying value of deferred development costs and allocation of expenditures
to deferred development costs

 

b) Financial Instruments

 

A financial instrument is any contract that gives rise to a financial asset of
one entity and a financial liability or equity instrument to another entity.
Financial assets and financial liabilities are recognized on the statements of
financial position at the time the Company becomes a party to the contractual
provisions of the financial instrument.

 

Financial instruments are initially measured at fair value. Measurement in
subsequent periods is dependent on the classification of the financial
instrument. The Company classifies its financial instruments in the following
categories: at fair value through profit or loss, loans and receivables,
held-to-maturity, available-for-sale, and other financial liabilities.

 

i)       Financial Assets and Liabilities at Fair Value Through Profit or Loss

 

Financial assets and liabilities at fair value through profit or loss are either
‘held-for-trading’ or classified atfairvalue through profitorloss. They are
initially and subsequently recorded at fair value and changes in fair value are
recognized in profit or loss for the period.

 

The Company has designated its cash and cash equivalents as financial assets at
fair value through profit or loss.

 

ii) Loans and Receivables

 

Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. Such assets are
recognized initially at fair value and subsequently on an amortized cost basis
using the effective interest method, less any impairment losses. They are
included in current assets, except for maturities greater than 12 months after
the end of the reporting period, which are classified as non-current assets.

 

The Company does not have any financial instruments designated as loans and
receivables.

 

87 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED DECEMBER 31, 2019 and 2018

(Expressed in Canadian dollars)

 

3.       SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

b) Financial Instruments (Continued)

 

iii) Held-to-Maturity

 

Held-to-maturity investments are non-derivative financial assets that have fixed
maturities and fixed or determinable payments, and it is the Company’s intention
to hold these investments to maturity. They are initially recorded at fair value
and subsequently measured at amortized cost.

 

The Company does not have any held-to-maturity financial assets.

 

iv) Available-For-Sale

 

Available-for-sale financial assets are non-derivative financial assets that are
designated as available-for-sale or are not classified in any other financial
asset categories. They are initially and subsequently measured at fair value and
the changes in fair value, other than impairment losses are recognized in other
comprehensive income (loss) and presented in the fair value reserve in
shareholders’ equity. When the financial assets are sold or an
impairmentwrite-down is required, losses accumulated in the fair value reserve
recognized in shareholders’ equity are included in profit or loss.

 

The Company does not have any available-for-sale financial assets.

 

v) Other Financial Liabilities

 

Other financial liabilities are recognized initially at fair value plus any
directly attributable transaction costs on the date at which the Company becomes
a party to the contractual provisions of the instrument. Subsequent to initial
recognition, the Company’s financial liabilities are measured at amortized cost
using the effective interest method. The Company derecognizes a financial
liability when its contractual obligations are discharged, cancelled, or
expired.

 

The Company’s non-derivative financial liabilities are its accounts payable and
accrued liabilities and convertible loan, which are designated as other
liabilities.

 

c) Cash and Cash Equivalents

 

Cash and cash equivalents include cash on hand, deposits held at call with banks
and other short-term highly liquid investments with original maturities of three
months or less. As at December 31, 2019, the Company had $2,852 cash equivalents
(Nil at December 31, 2018).

 

d) Income Taxes

 

Current income tax

 

Current income tax assets and liabilities for the current period are measured at
the amount expected to be recovered from or paid to the Canadian taxation
authorities. The tax rates and tax laws used to compute the amount are those
that are enacted or substantively enacted, at the reporting date.

 

Current tax is recognized in net income except to the extent that it relates to
a business combination or items recognized directly in equity or in other
comprehensive income or loss.

 

88 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED DECEMBER 31, 2019 and 2018

(Expressed in Canadian dollars)

 

3.       SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

d) Income Taxes (Continued)

 

Management periodically evaluates positions taken in the tax returns with
respect to situations in which applicable tax regulations are subject to
interpretation and establishes provisions where appropriate.

 

Deferred income tax

 

Deferred income tax is provided using the balance sheet method on temporary
differences at the reporting date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes.

 

Deferred tax is recognized in net income except to the extent that it relates to
a business combination or items recognized directly in equity or in other
comprehensive income or loss.

 

The carrying amount of deferred income tax assets is reviewed at the end of each
reporting period and recognized only to the extent that it is probable that
sufficient taxable profit will be available to allow all or part of the deferred
income tax asset to be utilized.

 

Deferred income tax assets and liabilities are measured at the tax rates that
are expected to apply to the year when the asset is realized or the liability is
settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted by the end of the reporting period.

 

Deferredincometaxassetsanddeferredincometaxliabilitiesareoffset,ifalegallyenforceable
right exists to set off current tax assets against current income tax
liabilities and the deferred income taxes relate to the same taxable entity and
the same taxation authority.

 

e) Equipment

 

Equipment is stated at historical cost less accumulated depreciation and
accumulated impairment losses. Equipment is depreciated over its estimated
useful lives. The cost of an item includes the purchase price and directly
attributable costs to bring the asset to the location and condition necessary
for it to be capable of operating in the manner intended by management. Where an
item of equipment comprises major components with different useful lives, the
components are accounted for as separate items of equipment.

 

Subsequent costs are included in the asset’s carrying amount or recognized as a
separate asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the Company and the cost of the
item can be measured reliably. The carrying amount of the replaced part is
derecognized. All other repairs and maintenance are charged to the statement of
income and comprehensive income during the financial period in which they are
incurred.

 

Gains and losses on disposals are determined by comparing the proceeds with the
carrying amount and are recognized in profit or loss.

 

89 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED DECEMBER 31, 2019 and 2018

(Expressed in Canadian dollars)

 

3.       SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

e) Equipment (Continued)

 

Depreciation is recognized using the following rate and method:

 

   Depreciation rate Computer equipment  30% declining balance Furniture  20%
declining balance

 

Depreciation methods, useful lives and residual values are reviewed at each
financial year end and are adjusted if appropriate.

 

f)       Research and Development

 

Research costs are expensed when incurred. Development costs are expensed when
incurred prior to the establishment of technical feasibility. Subsequent to the
establishment of technical feasibility and probable future benefits, the costs
associated with the development of a commercial product for which adequate
resources exist to market the product are capitalized as deferred development
costs. Capitalization of development costs ceases when the product is available
for general release to customers. Deferred development costs are amortized,
commencing when the product in question is commercially available for sale.

 

g) Impairment of non-financial assets

 

The Company reviews the carrying value of its non-financial assets, which
include equipment and deferred development costs at each reporting date to
dertermine whether events or changed circumstances indicate that the carrying
value may not be recoverable.

 

For the purpose of impairment testing, assets that cannot be tested individually
are grouped together into the smallest group of assets that generates cash
inflows from continuing use that are largely independent of the cash inflows of
other assets or groups of assets (a “cash-generating unit” or “CGU”).

 

The recoverable amount of an asset or cash-generating unit is the greater of its
value in use and its fair value less costs to sell. In assessing value in use,
the estimated future cash flows are discontinued to their present value using a
pre-tax discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset. An impairment loss is recognized
if the carrying value of a non-financial asset exceeds the recoverable amount.
Impairment losses are recognized in pofit or loss. Impairment losses recognized
in respect of the CGUs are allocated first to reduce the carrying amount of any
goodwill allocated to the unit, and then to reduce the carrying amounts of the
other assets in the CGU on a pro rata basis.

 

Impairment losses recognized in prior periods are assessed at each reporting
date for any indications that the loss has decreased or no longer exists. An
impairment loss is reversed if there has been a change in the estimates used to
determine the recoverable amount. An impairment loss is reversed only to the
extent that the asset’s carrying amount does not exceed the carrying amount that
would have been determined, net of amortization, if no impairment loss has been
recognized.

 

 

90 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED DECEMBER 31, 2019 and 2018

(Expressed in Canadian dollars)

 

3.       SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

h) Accounting Standards Issued But Not Yet Adopted

 

The Company has assessed the impact of these new standards on its financial
statements and has determined that the application of these standards will not
have a material impact on the results and financial position of the Company.

 

New Standard IFRS 9 “Financial Instruments”

 

This new standard is a partial replacement of IAS 39 “Financial Instruments:
Recognition and Measurement”. IFRS 9 uses a single approach to determine whether
a financial asset is measured at amortized cost or fair value, replacing the
multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity
manages its financial instruments in the context of its business model and the
contractual cash flow characteristics of the financial assets.

 

The new standard also requires a single impairment method to be used, replacing
the multiple impairment methods in IAS 39. IFRS 9 is effective for annual
periods beginning on or after January 1, 2018.

 

New Standard IFRS 13 “Fair Value Measurement”

 

This new standard replaces the fair value measurement guidance currently
included in various other IFRS standards with a single definition of fair value
and extensive application guidance. IFRS 13 provides guidance on how to measure
fair value and does not introduce new requirements for when fair value is
required or permitted. It also establishes disclosure requirements
toprovideusers of thefinancial statements withmoreinformationabout fair value
measurements.

 

Amended Standard IAS 1 “Presentation of Financial Statements”

 

This standard provides extensive guidance on determining fair value for
measurement or disclosure purposes.

 

 

 

 

 

91 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED DECEMBER 31, 2019 and 2018

(Expressed in Canadian dollars)

 

4.       DEFERRED DEVELOPMENT COSTS

 

The following is a summary of activity for deferred development costs.

 

     Balance June 30, 2014  $321,181         Additions:      Consulting (Note
7)  $115,278  Engineering   60,767  Professional fees   19,936  Rent   12,167 
Travel   2,218      210,366  Balance June 30, 2015  $531,547         Additions: 
    Consulting (Note 7)  $110,750  Engineering   66,206  Rent   11,934    
 188,890  Balance June 30, 2016  $720,437         Additions:      Consulting
(Note 7)  $314,668  Rent   1,116      315,784  Balance December 31, 2019 and
June 30, 2019  $1,036,418 

 

5.       SHAREHOLDER LOAN

 

The Company received advances from a shareholder in order to help fund
operations. These amounts are secured by the intellectual property of the
Company, have no repayment terms, and bear interest at 5% per annum of which
both the lender, and the Company have agreed to waive the interest.

     Balance, receivable as at June 30, 2015, included in "Due from
Shareholder"   (73,252)        Shareholder advances during the year   487,411 
Repayments during the year   (52,505) Balance payable as at June 30, 2016 
$361,654         Shareholder advances during the period   342,026  Balance
payable as at June 30, 2017  $703,680         Shareholder advances during the
period   20,707  Balance payable as at June 30, 2018  $724,397        
Shareholder advances during the period   —    Balance payable as at June 30,
2019  $724,387         Shareholder advances during the period   2,650  Balance
payable as at December 31, 2019  $727,037 

 

 

92 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED DECEMBER 31, 2019 and 2018

(Expressed in Canadian dollars)

 

6.       SHARE CAPITAL

 

a) Authorized Share Capital

 

-Unlimited number of voting Class A common shares without par value.

-Unlimited number of non-voting Class B common shares without par value – None
issued

-Unlimited number of non-cumulative, voting, redeemable, retractable, Class A
special shares without par value – None issued

-Unlimited number of non-cumulative, non-voting, redeemable, retractable, Class
B special shares without par value – None issued

 

b) Issued capital

 

Shares Issued in the period ended December 31, 2019:

 

On October 28, 2019, the Company issued 3,500,000 Class A common shares for cash
proceeds of $350.

 

Shares Issued in the years ended June 30, 2019 and June 30, 2018:

 

None issued

 

Shares Issued in the period from incorporation on December 4, 2013 to June 30,
2017:

 

On the incorporation date of December 4, 2013, the Company issued founder’s
shares consisting of 100,650,000 common shares with a total deemed value of
$10,065. This amount has not been collected and is reflected in the statement of
financial position as share subscriptions receivable.

 

On January 1, 2014, the Company issued 4,400,001 Class A common shares for cash
proceeds of $440. This amount has not been collected and is reflected in the
statement of financial position as share subscriptions receivable.

 

On February 14, 2014, the Company issued 650,000 Class A common shares for cash
proceeds of $350,000.

 

On March 14, 2014, the Company issued 200,000 Class A common shares for cash
proceeds of $200,000.

 

On April 8, 2014, the Company issued 50,000 Class A common shares for cash
proceeds of $50,000.

 

On June 15, 2014, The Company issued 300,000 Class A common shares for cash
proceeds of $150,000.

 

On September 30, 2014, the Company issued 170,000 class A common shares for cash
proceeds of $300,000.

 

93 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED DECEMBER 31, 2019 and 2018

(Expressed in Canadian dollars)

 

7.       RELATED PARTY TRANSACTIONS

 

All related party transactions have been recorded at amounts agreed to by the
transacting parties. Amounts due to and due from related parties do not bear
interest, are unsecured, have no fixed payment terms, and are due on demand.

 

Key Management Compensation:

 

Key management personnel include those persons having authority and
responsibility for planning, directing and controlling the activities of the
Company as a whole. The Company has determined that key management personnel
consist of executive and non-executive members of the Company’s Board of
Directors and corporate officers.

 

 

8.       FINANCIAL RISK MANAGEMENT

 

a)       Fair Value of Financial Instruments

 

The Company’s financial instruments consist of cash and cash equivalents, trade
payables and other accrued liabilities and shareholder’s advances. The carrying
values of these financial instruments approximate their fair values because of
their short term nature and/or the existence of market related interest rates on
the instruments.

 

IFRS requires disclosures about the inputs to fair value measurements, including
their classification within a hierarchy thatprioritizes the inputs to fairvalue
measurement. The three levels of hierarchy are:

 

· Level 1 – Unadjusted quoted prices in active markets for identical assets or
liabilities;

· Level 2 – Inputs other than quoted prices that are observable for the asset or
liability, either directly or indirectly; and

· Level 3 – Inputs for the asset or liability that are not based on observable
market data.

 

b)       Financial Instruments Risk

 

The Company is exposed in varying degrees to a variety of financial instrument
related risks as follows:

 

Credit risk

 

Credit risk is the risk that one party to a financial instrument will fail to
discharge an obligation and cause the other party to incur a financial loss. The
Company’s primary exposure to credit risk is on its bank accounts. The Company’s
bank accounts are held with a major bank in Canada. As all of the Company’s cash
and cash equivalents are held by one bank in Canada, there is a concentration of
credit risk. This risk is managed by using a major bank that is a high credit
quality financial institution as determined by rating agencies.

 

 

 

94 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED DECEMBER 31, 2019 and 2018

(Expressed in Canadian dollars)

 

8.       FINANCIAL RISK MANAGEMENT (Continued)

 

a) Financial Instruments Risk (Continued)

 

Liquidity risk

 

Liquidity risk arises through the excess of financial obligations over available
financial assets due at any point in time. The Company’s objective in managing
liquidity risk is to maintain sufficient readily available reserves in order to
meet its liquidity requirements at any point in time. The Company is dependent
on the availability of credit from its suppliers and its ability to generate
sufficient funds from its equity and debt financing to meet current and future
obligations. There is no guarantee that such financing will be available on
terms acceptable to the Company (Note 1).

 

Market risk

 

Market risk is the risk that changes in market factors, such as foreign exchange
rates, commodity prices, and interest rates will affect the Company’s net
earnings or the value of financial instruments. The objective of market risk
management is to manage and control market risk exposures within acceptable
limits, while maximizing returns. Management has determined this risk to be
minimal at this stage.

 

Foreign currency exchange rate risk and commodity price risk

 

Foreignexchangeriskistheriskthat thefair valueof futurecashflowsof
afinancialinstrument will fluctuate because of changes in foreign exchange
rates. Commodity price risk is the risk that market values and future incomes
will fluctuate because of changes in commodity prices. The Company does not have
any direct exposure to foreign currency exchange rate risk or commodity price
risk. The Company had no forward exchange rate contracts or commodity price
contracts in place as at December 31, 2019 or June 30, 2019.

 

Interest rate risk

 

Interest rate risk is the risk that future cash flows will fluctuate as a result
of changes in market interest rates. As at December 31, 2019, the Company did
not have any significant interest rate risk.

 

c)       Capital Management

 

The Company defines capital that it manages as shareholders' equity that is
expected to be realized in cash. The Company raises capital through private
share offerings and related party loans and advances. Capital is managed in a
manner consistent with the risk criteria and policies provided by the board of
directors and followed by management. All sources of financing and major
expenditures are analyzed by management and approved by the board of directors.

 

The Company’s primary objectives when managing capital is to safeguard and
maintain the Company’s financial resources for continued operations and to fund
programs to further advance their hydro power technology. The Company is meeting
its objective of managing capital through detailed review and the preparation of
short-term and long-term cash flow analysis to maintain sufficient resources.

 

 

95 

 

HYDRO POWER TECHNOLOGIES INC.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED DECEMBER 31, 2019 and 2018

(Expressed in Canadian dollars)

 

8.       FINANCIAL RISK MANAGEMENT (Continued)

 

c) Capital Management (Continued)

 

The Company is able to scale its expenditure programs and the use of capital to
address market conditions by reducing expenditures and the scope of operations
during periods of economic downturn.

 

There were no changes in the Company's approach to capital management during the
period ended December 31, 2019. The Company is not subject to any externally
imposed capital requirements.

 

 

9.       QUALIFYING TRANSACTION

 

On December 30, 2013, the Company signed a non-binding letter of intent with
Credent Capital Corp. (“Credent Capital”), a corporation existing under the laws
of British Columbia, Canada, which outlines the general terms and conditions
pursuant to which the Company and Credent Capital will be willing to complete a
transaction that will effectively result in the acquisition by Credent Capital
of the shares of the Company, and a reverse take-over of Credent Capital by the
shareholders of the Company.

 

 

 

 

 

 

 

 

96