UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
20-F
☐
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended December 31, 2020
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from to _____________
OR
☐
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
Date
of event requiring this shell company report: _______
Commission
file number 016353
37
CAPITAL INC.
(Exact
name of Registrant as specified in its charter)
British
Columbia, Canada
(Jurisdiction
of Incorporation or organization)
Suite
400, 570 Granville Street, Vancouver, British Columbia, Canada V6C 3P1
(Address
of principal executive offices)
Securities
to be registered pursuant to Section 12(b) of the Act:
None
Securities
registered or to be registered pursuant to Section 12 (g) of the Act:
Common
Stock, Fully Paid and Non-Assessable Common Shares Without Par Value
(Title
of Class)
Securities
for which there is reporting obligation pursuant to Section 15(d) of the Act: None
Indicate
the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period
covered by the annual report: 7,292,709 common shares as of December 31, 2020. No preferred shares issued and outstanding.
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☒
If
this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes ☐ No ☒
Note-
Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 from their obligations under those Sections.
Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past ninety days.
Yes ☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition
of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☐
|
Accelerated filer ☐
|
Non-accelerated filer ☒
|
Indicate
by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ☐
|
International Fiancial Reporting Standards as issued By the International Accounting Standards Board ☒
|
Other ☐
|
If
“Other” has been checked in response to the previous question, indicate by check mark which financial statement item
the registrant has elected to follow.
If
this is an Annual Report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act.)
Yes ☐ No ☒
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (s 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ☐ No ☒
37
CAPITAL INC.
FORM
20-F ANNUAL REPORT 2019
TABLE
OF CONTENTS
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
|
3
|
|
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
|
3
|
|
ITEM 3. KEY INFORMATION
|
3
|
|
ITEM 4. INFORMATION ON THE COMPANY
|
7
|
|
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
|
16
|
|
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
|
24
|
|
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
|
28
|
|
ITEM 8. FINANCIAL INFORMATION
|
31
|
|
ITEM 9. THE OFFER & LISTING
|
32
|
|
ITEM 10. ADDITIONAL INFORMATION
|
35
|
|
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
45
|
|
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
|
46
|
|
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
|
46
|
|
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
|
47
|
|
ITEM 15. CONTROLS AND PROCEDURES
|
47
|
|
ITEM 16. AUDIT COMMITTEE, CODE OF ETHICS, ACCOUNTANT FEES.
|
48
|
|
ITEM 17. FINANCIAL STATEMENTS
|
49
|
|
ITEM 18. FINANCIAL STATEMENTS
|
50
|
|
ITEM 19. LIST OF EXHIBITS
|
50
|
|
Exhibit 99.2*
|
87
|
|
Exhibit 99.3*
|
88
|
|
Exhibit 11.1
|
89
|
|
Exhibit 31.1
|
90
|
|
Exhibit 32.1
|
92
|
|
SIGNATURE PAGE
|
93
|
|
ITEM
1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Name of Directors and/or Officers of the Issuer
|
Position Held as at the date of this Annual Report
|
Jacob H. Kalpakian Vancouver, British Columbia, Canada
|
President, CEO and Director
|
Neil Spellman* Carlsbad, CA, USA
|
CFO & Director
|
Gregory T. McFarlane* Las Vegas, Nevada, USA
|
Director
|
Fred A. C. Tejada*1 Surrey, British Columbia, Canada
|
Director
|
Maria P. Arenas Surrey, British Columbia, Canada
|
Corporate Secretary
|
*Members
of the Audit Committee
1
Effective May 1, 2021, Fred Tejada tendered his resignation from the Board of Directors.
ITEM
2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not
applicable.
ITEM
3. KEY INFORMATION
Item
3.A. Selected Financial Data
The
selected financial data in Table I has been derived from the audited consolidated financial statements of 37 Capital Inc. (hereinafter
referred to as the “Company” or the “Registrant” or “37 Capital”). The financial data under
2020, 2019, 2018, 2017 and 2016 have been prepared in accordance with International Financial Reporting Standards (“IFRS”)
as issued by the International Accounting Standards Board (“IASB”). The information should be read in conjunction
with the Registrant's consolidated financial statements and notes thereto included in Item 17 of this Annual Report.
All
financial figures presented herein and throughout this Annual Report are expressed in Canadian dollars (Cdn$) unless otherwise
specified.
TABLE
I
The
financial data under the tables 2019, 2018, 2017, 2016 and 2015 have been prepared in accordance with IFRS.
|
|
Year Ended December 31, 2020
|
|
Year Ended December 31, 2019
|
|
Year Ended December 31, 2018
|
|
Year Ended December 31, 2017
|
|
Year Ended December 31, 2016
|
Operating Revenue
|
|
$
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Interest Income
|
|
$
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Comprehensive loss
|
|
$
|
(133,379
|
)
|
|
|
(147,137
|
)
|
|
|
(160,856
|
)
|
|
|
(183,934
|
)
|
|
|
(347,963
|
)
|
Basic and diluted loss per common share before other items
|
|
$
|
(0.02
|
)
|
|
|
(0.02
|
)
|
|
|
(0.02
|
)
|
|
|
(0.07
|
)
|
|
|
(0.17
|
)
|
Total Assets
|
|
$
|
40,573
|
|
|
|
33,180
|
|
|
|
2,960
|
|
|
|
3,012
|
|
|
|
5,922
|
|
Capital Stock
|
|
$
|
25,864,950
|
|
|
|
25,857,450
|
|
|
|
25,849,950
|
|
|
|
25,770,450
|
|
|
|
25,372,201
|
|
Number of common shares at year-end
|
|
$
|
7,292,709
|
|
|
|
7,192,709
|
|
|
|
7,092,709
|
|
|
|
6,492,709
|
|
|
|
2,067,724
|
|
Long-term obligations
|
|
$
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Cash dividends
|
|
$
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Bank
of Canada Exchange Rates
|
|
Monthly High ($)(1)
|
|
Monthly Low ($)(1)
|
July 2020
|
|
|
|
0.7485
|
|
|
|
0.7344
|
|
August 2020
|
|
|
|
0.7668
|
|
|
|
0.7476
|
|
September 2020
|
|
|
|
0.7660
|
|
|
|
0.7465
|
|
October 2020
|
|
|
|
0.7621
|
|
|
|
0.7491
|
|
November 2020
|
|
|
|
0.7713
|
|
|
|
0.7543
|
|
December 2020
|
|
|
|
0.7863
|
|
|
|
0.7721
|
|
(1)
The high and low exchange rates have been calculated using the rates of the Bank of Canada.
|
|
For Year Ended December 31, 2020
|
|
For Year Ended December 31, 2019
|
|
For Year Ended December 31, 2018
|
|
For Year Ended December 31, 2017
|
|
For Year Ended December 31, 2016
|
Average
rate ($)(2)
|
|
|
|
0.7461
|
|
|
|
0.7560
|
|
|
|
0.7446
|
|
|
|
0.7708
|
|
|
|
0.7499
|
|
High ($)(3)
|
|
|
|
0.7863
|
|
|
|
0.7699
|
|
|
|
0.7581
|
|
|
|
0.8245
|
|
|
|
0.7972
|
|
Low ($)(3)
|
|
|
|
0.6898
|
|
|
|
0.7393
|
|
|
|
0.7330
|
|
|
|
0.7276
|
|
|
|
0.6854
|
|
(2)The
average exchange rate for the period has been calculated using the yearly rate of the Bank of Canada.
(3)The
high and low exchange rates in each period were determined from the yearly rate of the Bank of Canada.
All
of the amounts in the Exchange rates tables above are stated in U.S. currency. Accordingly, at the closing on December 31, 2020,
the US $1.00 was equal to Cdn $1.2732.
Item
3.D. Risk Factors
The
Company and the Securities of the Company, should be considered a highly speculative investment. The following risk factors should
be given special consideration when evaluating an investment in any of the Company's Securities:
1).
RISKS RELATED TO THE COMPANY’S BUSINESS
-
Regulations: 37 Capital’s proposed mineral exploration programs, are subject to extensive federal, provincial
and local laws and regulations governing such exploration, development and operation of mining activities as well as the protection
of the environment, including laws and regulations relating to obtaining permits to mine, protection of air and water quality,
hazardous waste management, mine reclamation and the protection of endangered or threatened species.
-
Exploration and Development: The resource properties in which the Company has an interest are in the exploration stages
only and do not have a known body of commercial ore. Exploration and development of natural resource properties involve a high
degree of risk and few properties which are explored are ultimately developed into producing properties. Substantial expenditures
are required to establish reserves through drilling, to develop processes to extract the resources and, in the case of new properties,
to develop the extraction and processing facilities and infrastructure at any site chosen for extraction. Although substantial
benefits may be derived from the discovery of a major deposit, no assurance can be given that resources will be discovered in
sufficient quantities or grades to justify commercial operations or that the funds required for development can be obtained on
a timely basis.
-
Operating Hazards and Risks: Exploration for natural resources involves many risks, which even a combination of experience,
knowledge and careful evaluation may not be able to overcome. Operations in which the Company has a direct or indirect interest
will be subject to all the hazards and risks normally incidental to exploration, development and production of resources, any
of which could result in work stoppages, damages to persons or property and possible environmental damages. Although the Company
may obtain liability insurance in an amount which it considers adequate, the nature of these risks is such that liabilities might
exceed policy limits, the liabilities and hazards might not be insurable against, or the Company might not elect to insure itself
against such liabilities due to high premium costs or other reasons, in which event the Company could incur significant costs
that could have a material adverse effect upon its financial condition.
-
Fluctuating Metal Prices: The prices of those commodities have fluctuated widely, particularly in recent years, and
are affected by numerous factors beyond the Company's control including international, economic and political trends, expectations
of inflation or deflation, currency exchange rate fluctuations, interest rates fluctuations, global or regional consumptive patterns,
speculative activities and increased production due to new extraction developments and improved extraction and production methods.
The effect of these factors on the prices of metals, and therefore the economic viability of the Company's interest in exploration
projects, cannot be accurately predicted.
-
Environmental Factors: Should the Company decide to conduct any mineral exploration works then all phases of the Company's
mineral exploration works shall be subject to environmental regulations. Environmental legislation is evolving in a manner which
will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental
assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees.
-
Competition: The resource industry is intensely competitive in all of its respective phases, and the Company competes
with many companies possessing much greater financial resources and technical facilities than the Company. As such, competition
is adversely affecting the Company's ability to acquire suitable mineral exploration properties at reasonable prices.
-
Management: The Company is dependent on a relatively small number of key employees, the loss of any of whom could have
an adverse effect on the Company.
-
Dilution: There are a number of outstanding securities and agreements pursuant to which common shares of the Company
may be issued in the future. This will result in further dilution to the Company's shareholders.
-
Revenues and Dividends: The Company does not anticipate to generate any revenue in the future and has not recognized
any revenue in fiscal 2016, 2017, 2018, 2019 and 2020. In the event that the Company generates any revenues in the future, then
the Company intends to retain its earnings in order to finance growth. Furthermore, apart from the Arrangement Agreement, the
Company has not paid any dividends in the past and does not expect to pay any dividends in the future.
-
Requirement of New Capital: As a company without any revenues, the Company typically needs more capital than it has
available to it or can expect to generate through the sale of its assets. In the past, the Company has had to raise, by way of
debt and equity financings, considerable funds to meet its capital needs. There is no assurance that the Company will be able
to continue to raise funds needed for its business. Failure to raise the necessary funds in a timely fashion will limit the Company's
growth or may jeopardize the Company’s ability to continue as a going concern. The Company has outstanding debts, has working
capital deficiency, has no revenues, has incurred operating losses, and has no assurances that sufficient funding will be available
to the Company to continue its operations for an extended period of time.
-
U.S. Federal Income Tax Considerations: The Company is classified as a Passive Foreign Investment Company ("PFIC")
for U.S. Federal Income Tax purposes. Classification as a PFIC will create U.S. Tax consequences to a U.S. shareholder of the
Company that are unique to the PFIC provisions and that are not encountered in other investments. Prospective investors are advised
to consult their own tax advisors with respect to the tax consequences of an investment in the common shares of the Company.
-
Penny Stock: The Company's securities are deemed to be Penny Stocks and are therefore subject to Penny Stock
rules as defined in Rule 3a(51)(1) of the 1934 Exchange Act. The Penny Stock disclosure requirements may have the effect of reducing
the level of trading activity of the Company's securities in the secondary market. Penny Stocks are low-priced shares of small
companies not traded on a U.S. national exchange or quoted on Nasdaq. The Company's securities were quoted for trading on the
OTCQB tier of the OTC Markets Group (“OTCQB”) until June 1, 2020. Presently, the Company’s securities are quoted
on the PINK Sheets on the OTC market. Penny Stocks, such as the Company's securities, can be very risky. Prices of Penny Stocks
are often not available. Investors in Penny Stocks are often unable to sell stock back to the dealer that sold them the stock.
Investors may lose all their investment in Penny Stocks. There is no guaranteed rate of return on Penny Stocks. Before an investor
purchases any Penny Stock, U.S. Federal law requires a salesperson to tell the investor the "offer" and the "bid"
on the Penny Stock, and the "compensation" the salesperson and the firm receive for the trade. The firm also
must mail a confirmation of these prices to the investor after the trade. The Investor's Broker-dealer is required to obtain the
investor's signature to show that the investor has received the statement titled "Important Information on Penny Stocks"
before the investor first trades in a Penny Stock. This Statement is required by the U.S. Securities and Exchange Commission ("SEC")
and contains important information on Penny Stocks. Furthermore, under penalty of Federal Law the Investor's brokerage firm must
tell the investor at two different times - before the investor agrees to buy or sell a Penny Stock, and after the trade, by written
confirmation the following: 1) the bid and offer price quotes for the Penny Stock, and the number of shares to which the quoted
prices apply, 2) the brokerage firm's compensation for the trade, 3) the compensation received by the brokerage firm's salesperson
for the trade. In addition, to these items listed above the investor's brokerage firm must send the investor monthly account statements
and a written statement of the investor's financial situation and investment goals as required by the Securities Enforcement and
Penny Stock Reform Act of 1990.
-
Disruption in Trading: Trading in the common shares of the Company may be halted or suspended or may be subject
to cease trade order at any time for certain reasons, including, but not limited to, the failure by the Company to submit documents
to the Regulatory Authorities within the required time periods.
-
Market Price Volatility: The market price of the Company’s common shares has experienced considerable volatility
and may continue to fluctuate in the future. Furthermore, there is a limited trading market for the Company’s common shares
and as such, the ability of investors to sell their shares cannot be assured.
-
Covid-19 Pandemic - In March 2020, the World Health Organization declared a global pandemic related to the coronavirus
known as COVID-19. The expected impacts on global commerce are anticipated to be far reaching. To date there have been significant
wide-spread adverse financial impact globally, and the movement of people and goods has become restricted. As the Company has
no material operating income or cash flows, it is reliant on additional financing to fund ongoing operations. An extended disruption
may affect the Company’s ability to obtain additional financing. As such, the Company may not be able to raise the required
funds and may not be able to conduct exploration works on its mineral property interests in a timely manner. The impact on the
economy and the Company is not yet determinable; however, the Company’s financial position, results of operations and cash
flows in future periods may be materially affected. In particular, there may be heightened risk of asset impairment and liquidity
thus creating further going concern uncertainty.
-
Tax Considerations – Persons considering the purchase of the Company’s common shares should consult their
tax advisors with regard to the application of Canadian, U.S. and other tax laws to their particular situation.
-
Investment in Mexican Gaming Company: The Company does not expect that it will recover its investment in the Mexican
gaming company.
-
The Company’s investment in its mineral exploration properties: Changing conditions in the financial markets,
and Canadian Income Tax legislation may have a direct adverse impact on the Company’s ability to raise funds for its interests
in mineral exploration properties. A drop in the availability of equity financings will likely impede spending on mineral properties.
As a result of all these significant risks, it is quite possible that the Company may lose its investments in the Company’s
interest in the Extra High Property and the Acacia Property.
ITEM
4. INFORMATION ON THE COMPANY
Item
4.A. History and Development of the Company
The
legal and commercial name of the company is 37 CAPITAL INC. (“37 Capital”).
The
Company was incorporated by memorandum under the Company Act of the Province of British Columbia, Canada on August 24, 1984 (Exhibit
3.1 – Incorporated by reference) and was registered extra-provincially in the Province of Ontario, Canada on October 19,
1984. On May 31, 1988, the Company adopted as the French form of its name "Ressources Armeno Inc.". On May 25, 1992,
the name of the Company was changed to Ag Armeno Mines and Minerals Inc. in the English form, and "Les Mines et Mineraux
Ag Armeno Inc." in the French form. On April 25, 2000, the name of the Company was changed from Ag Armeno Mines and Minerals
Inc. in the English form, and "Les Mines et Mineraux Ag Armeno Inc.", in the French form, to Golden Nugget Exploration
Inc. On May 2, 2002, the name of the Company was changed from Golden Nugget Exploration Inc. to Lucky 1 Enterprises Inc. On January
17, 2005, the name of the Company was changed from Lucky 1 Enterprises Inc. to Bronx Ventures Inc. and the Company adopted new
Articles (Exhibit 3.2 - Incorporated by reference). On March 19, 2007, the Company changed its name to Zab Resources Inc. On April
16, 2009, the Company changed its name from Zab Resources Inc. to Kokomo Enterprises Inc. On August 31, 2012, the Company changed
its name from Kokomo Enterprises Inc. to High 5 Ventures Inc. (Exhibit 3.5 – Incorporated by reference). On July 7, 2014,
the Company changed its name to 37 Capital Inc. (see Exhibit 3.6 – Incorporated by reference).
On
April 4, 1985, the Company's common shares were listed and posted for trading on the Vancouver Stock Exchange, on the Montreal
Exchange on January 15, 1988 and, on the Nasdaq SmallCap Market on May 11, 1988. On July 12, 1991, the Company voluntarily de-listed
its common shares from the Montreal Exchange, and, on October 3, 1994, the Company's shares were delisted from the Nasdaq SmallCap
Market. Effective October 4, 1994, the Company's shares have been listed for trading on the OTC Bulletin Board and were listed
for trading on the OTCQB tier of the OTC Markets Group Inc. (“OTCQB) until June 1, 2020. Presently, the Company’s
shares are listed for trading on the PINK Sheets on the OTC market. Effective November 29, 1999 the Vancouver Stock Exchange became
known as the Canadian Venture Exchange (hereinafter referred to as the “CDNX”) as a result of the merger between the
Vancouver Stock Exchange and the Alberta Stock Exchange. On July 5, 2001, the Company made a formal application to the CDNX requesting
the voluntary delisting of the Company’s common shares from trading on the CDNX, as a result of which, the common shares
of the Company were delisted from trading on the CDNX effective at the close of trading on July 31, 2001.
On
July 30, 1986, the Company's share capital split on the basis of one-old-for-two-new common shares. On May 25, 1992, the Company's
share capital was consolidated on the basis of ten-old-for-one-new common share. On April 25, 2000, the Company’s share
capital was consolidated on the basis of fifteen-old-for-one-new common share. On May 2, 2002, the Company’s share capital
was consolidated on the basis of five-old-for-one-new common share and its authorized share capital was subsequently increased
to 200,000,000 common shares without par value. On January 17, 2005, the Company’s share capital was consolidated on the
basis of thirty-five-old-for-one-new common share and its authorized share capital was increased to an unlimited number of common
and preferred shares without par value. On March 19, 2007, the Company subdivided its capital stock on a 1 (old) share for 50
(new) shares basis. As a result, the shares of Bronx Ventures Inc. were de-listed from trading and the shares of Zab Resources
Inc. (“Zab”) commenced trading on March 22, 2007 on the OTC Bulletin Board in the USA under the symbol “ZABRF”.
As
of November 28, 2007, the common shares of the Company have been listed for trading on the Canadian Securities Exchange (“CSE”)
(formerly known as the Canadian National Stock Exchange (CNSX)) under the trading symbol “ZABK”. On October 17, 2008,
the Company’s trading symbol on the CSE was changed to “ZAB” pursuant to the CSE adopting a three character
symbol format.
On
April 16, 2009, the Company’s share capital was consolidated on the basis of 25 (old) shares for 1 (new) share and the Company
changed its name to Kokomo Enterprises Inc. (“Kokomo”). As a result, the shares of Zab were de-listed from trading
and the shares of Kokomo commenced trading in Canada on the CSE under the symbol “KKO”, and in the U.S.A. the shares
of Kokomo commenced trading on the OTC Bulletin Board under the symbol “KKOEF”.
On
August 31, 2012, the Company’s share capital was consolidated on the basis of 15 (old) common shares for 1 (new) common
share and the Company changed its name to High 5 Ventures Inc. (“High 5”). As a result, the shares of Kokomo were
de-listed from trading and the shares of High 5 commenced trading in Canada on the CSE under the symbol “HHH”, and
in the U.S.A. the shares of High 5 traded on the OTCQB under the symbol “HHHEF”. The Cusip number of the Company’s
common shares is 42966V105.
On
April 8, 2013, the Company entered into a purchase and sale agreement with a Mexican gaming company, whereby the Company agreed
to purchase a royalty revenue stream of an amount the greater of 10% of the net profits or 5% of the gross revenues of the Mexican
land-based casino for a purchase price of $800,000. As of December 31, 2013, the Company invested $800,000 and advanced $49,200
for working capital purposes. The Mexican gaming company repaid the $49,200 advanced and the Company recognized $4,157 in royalty
revenue during the year ended December 31, 2014. As at December 31, 2014, the Company assessed the fair value of the investment
and recorded impairment of $799,999 on the investment due to nominal royalty payments received.
On
July 7, 2014, the Company’s share capital was consolidated on the basis of 6 (old) common shares for 1 (new) common share
and the Company changed its name to 37 Capital Inc. (“37 Capital”). As a result, the shares of High 5 were de-listed
from trading and the shares of 37 Capital commenced trading in Canada on the CSE under the symbol “JJJ”, and in the
U.S.A. the shares of 37 Capital trade on the OTCQB under the symbol “HHHEF”. The Cusip number of the Company’s
common shares is 88429G102.
On
June 21, 2019 the CSE deemed that the Company is inactive pursuant to the policies of the CSE, as a result the CSE changed the
Company’s trading symbol to “JJJ.X”. The Company's common shares traded on the OTCQB tier of the OTC markets
under the trading symbol “HHHEF” until June 1, 2020. Presently, the Company’s common shares are listed for trading
on the PINK Sheets on the OTC market under the same trading symbol “HHHEF”.
Since
its incorporation, the Company has been engaged primarily in the identification, acquisition, exploration and, if warranted, the
development of natural resource properties and, for a brief period of time from 1991 to 1994, the Company, through its formerly
owned Ecuadorean subsidiary, Armenonic del Ecuador S.A. (“Armenonic”) operated the San Bartolome lead/zinc/silver
mine in Ecuador.
37
Capital is a junior mineral exploration company. The Company has a 100% undivided interest in the Extra High Claims located in
the Province of British Columbia, and the Company has a one-half percent (1/2%) gross receipts royalty interest in certain lithium
mineral properties located in the Province of Ontario. Furthermore, the Company has entered into a Property Option Agreement in
respect to the Acacia Property in British Columbia, Canada whereby the Company shall have the right and option to acquire a 60%
interest in the subject property on certain terms and conditions (see Item 4.D II). The principal business of 37 Capital is in
mineral exploration. The Company's ability to pursue its stated primary business and to meet its obligations as they come due
is dependent upon the ability of management to obtain the necessary financings either through private placements or by means of
public offerings of the Company's securities or through the exercise of incentive stock options or warrants or through debt financings
or through the sale of its assets.
Arrangement
Agreement
On
February 26, 2015, the Company incorporated two wholly-owned subsidiaries, 27 Red Capital Inc. (“27 Red”) and 4 Touchdowns
Capital Inc. (“4 Touchdowns”).
On
April 30, 2015, the Company entered into an arrangement agreement (the “Arrangement Agreement”) (see Exhibit 12 –
Incorporated by reference) with 27 Red (“Spinco1”) and 4 Touchdowns (“Spinco2”).
At
the Company’s annual and special meeting which was held on June 4, 2015 (see Exhibit 12 - Incorporated by reference),
the Company’s shareholders passed all the resolutions presented including the re-election of the board of directors, re-appointment
of the Company’s auditor, approval of the Company’s stock option plan, and the proposed Plan of Arrangement with 27
Red and 4 Touchdowns.
In
respect to the plan of arrangement, the Company applied for an Interim Order which was granted on May 6, 2015 by the Supreme Court
of British Columbia, and on June 12, 2015 the Company received the final court approval for the Plan of Arrangement.
The
Company completed the Plan of Arrangement with 27 Red (Spinco 1) and 4 Touchdowns (Spinco 2). The effective date of the Arrangement
was on February 12, 2016 (the “Effective Date”). Shareholders of record on the Effective Date received one new common
share, one Class 1 Reorganization Share and one Class 2 Reorganization Share of the Company. On the Effective Date, and pursuant
to the Arrangement, all of the Class 1 Reorganization Shares were automatically transferred by Shareholders to Spinco1 in exchange
for 2,067,724 common shares of Spinco1 and issued to Shareholders on a pro rata basis (resulting in one common share of Spinco1
being issued for every one Class 1 Reorganization Share). Immediately following this, the Company redeemed all of the Class 1
Reorganization Shares by the transfer to Spinco1 of $20,677 and a promissory note in the principal amount of $20,677. The promissory
note was non-interest bearing, unsecured and due on demand. The redemption of shares was distributed to the shareholders’
of 27 Red as a capital distribution and recorded as a dividend.
Furthermore
on the Effective Date, all of the Class 2 Reorganization Shares were automatically transferred by Shareholders to Spinco2 in exchange
for 2,067,724 common shares of Spinco2 and issued to Shareholders on a pro rata basis (resulting in one common share of Spinco2
being issued for every one Class 2 Reorganization Share). Immediately following this, the Company redeemed all of the Class 2
Reorganization Shares by the transfer to Spinco2 of $20,677 and a promissory note in the principal amount of $20,677. The promissory
note was non-interest bearing, unsecured and due on demand. The redemption of shares was distributed to the shareholders’
of 4 Touchdowns as a capital distribution and recorded as a dividend.
A
copy of the Arrangement Agreement is available on www.SEDAR.com.
As
a result of the completion of the Arrangement, 27 Red and 4 Touchdowns are independent entities and are no longer subsidiaries
of the Company.
On
September 12, 2017, the Company entered into a Consulting Agreement with 27 Red whereby the Company provided certain consultancy
and advisory services to 27 Red for a three month period (the “Term of the Agreement”). The fee paid by 27 Red to
the Company was $18,188.65 for the Term of the Agreement (see Exhibit 10.16 – Incorporated by reference).
On
October 12, 2017, the Company entered into a Consulting Agreement with 4 Touchdowns whereby the Company provided certain consultancy
and advisory services to 4 Touchdowns for a three month period (the “Term of the Agreement”). The fee paid by 4 Touchdowns
to the Company was $18,188.65 for the Term of the Agreement (see Exhibit 10.17 – Incorporated by reference).
Company
Information
On
August 23, 2016, Mr. Neil Spellman of Carlsbad, California, joined the Board of Directors of the Company. Mr. Spellman was appointed
as the CFO of the Company effective as of April 1, 2017.
Effective
as of August 15, 2017, the Company’s office is located at Suite 400, 570 Granville Street, Vancouver, British Columbia,
Canada, V6C 3P1. The telephone number is (604) 681-1519 (ext. 6105) and the telefax number is (604) 681-9428. The contact person
is Jake H. Kalpakian.
The
Company's registered office and records office is located at Suite 3200-650 West Georgia Street
Vancouver
BC V6B 4P7. The telefax number is (604) 669 9385.
The
Registrar and Transfer Agent of the Company is Computershare Investor Services Inc., 510 Burrard Street, Vancouver, BC, Canada
V6C 3B9. The telefax number is (604) 661-9407.
The
Company’s Board of Directors decided to change the Company’s auditors. Effective as of March 28, 2017, the Company’s
Auditors are Dale Matheson Carr-Hilton Labonte LLP, Chartered Professional Accountants, 1500-1140 W. Pender St., Vancouver, BC
V6E 4G1. The telefax number is (604) 689-2778. The former Auditors of the Company were Smythe LLP, Chartered Professional Accountants,
475 Howe Street #1700, Vancouver, BC, V6C 2B3. The telefax number is (604) 688-4675.
Item
4.B. Business Overview
Summary
37
Capital is a junior mineral exploration company. The Company has a 100% undivided interest in the Extra High Claims located in
the Province of British Columbia, and the Company is entitled to receive a one-half percent (1/2%) gross receipts royalty interest
from certain lithium mineral properties located in the Province of Ontario after six months from the date of commencement of commercial
production. Furthermore, the Company has entered into a Property Option Agreement in respect to the Acacia Property in British
Columbia, Canada whereby the Company shall have the right and option to acquire a 60% interest in the subject property on certain
terms and conditions (see Item 4.D II). The principal business of 37 Capital is in mineral exploration. However, the Company has
a minority investment in a non-mining related project located in Mexico. As of the date of this Annual Report, the Company does
not expect to recover its investment in the non-mining related project located in Mexico.
37
Capital is a reporting issuer in the Provinces of British Columbia, Alberta, Quebec and Ontario and files all public documents
on www.Sedar.com . The Company is a foreign private issuer in the United States of America and in this respect files, on EDGAR,
its Annual Report on Form 20-F and other reports on Form 6K. The following link, http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000825171&owner=exclude&count=40
will give you direct access to the Company’s filings.
Presently,
37 Capital is seeking opportunities of merit to get involved in. It should be noted that there are no assurances that 37 Capital
shall be successful in its attempts of seeking opportunities of merit to get involved in.
Item
4. C. Organizational Structure
Arrangement
Agreement
On
February 26, 2015, the Company incorporated two wholly-owned subsidiaries, 27 Red Capital Inc. (“27 Red”) and 4 Touchdowns
Capital Inc. (“4 Touchdowns”).
On
April 30, 2015, the Company entered into an arrangement agreement (the “Arrangement Agreement”) (see Exhibit 12 –
Incorporated by reference) with 27 Red (“Spinco1”) and 4 Touchdowns (“Spinco2”).
At
the Company’s annual and special meeting which was held on June 4, 2015 (see Exhibit 12 - Incorporated by reference),
the Company’s shareholders passed all the resolutions presented including the re-election of the board of directors, re-appointment
of the Company’s auditor, approval of the Company’s stock option plan, and the proposed Plan of Arrangement with 27
Red and 4 Touchdowns.
In
respect to the plan of arrangement, the Company applied for an Interim Order which was granted on May 6, 2015 by the Supreme Court
of British Columbia, and on June 12, 2015 the Company received the final court approval for the Plan of Arrangement.
The
Company completed the Plan of Arrangement with 27 Red (Spinco 1) and 4 Touchdowns (Spinco 2). The effective date of the Arrangement
was on February 12, 2016 (the “Effective Date”). Shareholders of record on the Effective Date received one new common
share, one Class 1 Reorganization Share and one Class 2 Reorganization Share of the Company. On the Effective Date, and pursuant
to the Arrangement, all of the Class 1 Reorganization Shares were automatically transferred by Shareholders to Spinco1 in exchange
for 2,067,724 common shares of Spinco1 and issued to Shareholders on a pro rata basis (resulting in one common share of Spinco1
being issued for every one Class 1 Reorganization Share). Immediately following this, the Company redeemed all of the Class 1
Reorganization Shares by the transfer to Spinco1 of $20,677 and a promissory note in the principal amount of $20,677. The promissory
note was non-interest bearing, unsecured and due on demand. The redemption of shares was distributed to the shareholders’
of 27 Red as a capital distribution and recorded as a dividend.
Furthermore
on the Effective Date, all of the Class 2 Reorganization Shares were automatically transferred by Shareholders to Spinco2 in exchange
for 2,067,724 common shares of Spinco2 and issued to Shareholders on a pro rata basis (resulting in one common share of Spinco2
being issued for every one Class 2 Reorganization Share). Immediately following this, the Company redeemed all of the Class 2
Reorganization Shares by the transfer to Spinco2 of $20,677 and a promissory note in the principal amount of $20,677. The promissory
note was non-interest bearing, unsecured and due on demand. The redemption of shares was distributed to the shareholders’
of 4 Touchdowns as a capital distribution and recorded as a dividend.
A
copy of the Arrangement Agreement is available on www.SEDAR.com.
As
a result of the completion of the Arrangement, 27 Red and 4 Touchdowns are independent entities and are no longer subsidiaries
of the Company.
On
September 12, 2017, the Company entered into a Consulting Agreement with 27 Red whereby the Company provided certain consultancy
and advisory services to 27 Red for a three month period (the “Term of the Agreement”). The fee paid by 27 Red to
the Company was $18,188.65 for the Term of the Agreement (see Exhibit 10.16 – Incorporated by reference).
On
October 12, 2017, the Company entered into a Consulting Agreement with 4 Touchdowns whereby the Company provided certain consultancy
and advisory services to 4 Touchdowns for a three month period (the “Term of the Agreement”). The fee paid by 4 Touchdowns
to the Company was $18,188.65 for the Term of the Agreement (see Exhibit 10.17 – Incorporated by reference).
Item
4.D. Property, Plants and Equipment
I.
Extra High Claims, Kamloops Mining Division, British Columbia, Canada
On
March 26, 2004, the Company entered into an Option Agreement (Exhibit 10.5 – Incorporated by reference) with an arm’s
length party (the “Arm’s Length Party”) in respect to certain mineral claims, which are situated in the Kamloops
Mining Division in British Columbia (the “Extra High Claims”). Pursuant to the terms of the Option Agreement as amended
on March 8, 2005, the Company obtained the right to acquire a 100% undivided interest in the Extra High Claims, subject to a 1.5%
net smelter returns royalty (the “Arm’s Length Royalty”), by making staged cash payments totalling $150,000
and incurring exploration expenditures on the Extra High Claims totalling $500,000 over a period of three years. Upon the Company
earning a 100% undivided interest in the Extra High Claims, the Company obtained the right to purchase at any time 50% of the
Arm’s Length Royalty by paying to the Arm’s Length Party the sum of $500,000 leaving the Arm’s Length Party
with a 0.75% NSR royalty.
In
the spring of 2004, the Company commissioned an independent review of the Extra High Mineral Property by Erik Ostensoe, P. Geo.,
who prepared a report, dated the 22nd day of April, 2004 titled “National Policy 43-101 Report, Extra High Mineral
Property, Kamloops Mining Division, British Columbia”. The report recommended exploration work programs be carried out on
the Extra High Mineral Property in order to evaluate the mineral potential of the Extra High Mineral Property. This report has
been filed on www.Sedar.com by the Company.
From
May, 2005 up to December, 2005, the Company conducted its exploration program on the Extra High Claims. The exploration program
consisted of soil sampling, geological mapping, trenching and diamond drilling. A total of 1,874.3 metres of NQ diamond drilling
and 455 lineal metres of trenching were completed while 194 soil samples were collected over 4 areas on the Extra High Mineral
Property. The exploration work program was conducted by, and was under the direct supervision of, J.W. Murton, P. Eng, a qualified
person as defined by National Instrument 43-101. At the time, Mr. J.W. Murton was a director of the Company. Mr. J. W. Murton
has recommended a two phase exploration program on the Extra High Mineral Property due to the positive results obtained from the
2005 exploration program. Mr. J. W. Murton has prepared for the Company a Technical Report (NI 43-101) on the Extra High Claims
(2005 Exploration Program) dated February 28, 2006 which has been filed by the Company on www.Sedar.com, and on the Company’s
corporate website, www.37capitalinc.com. For further particulars about the Extra High Mineral Property and the 2005 Exploration
Program, please visit either www.sedar.com or www.37capitalinc.com. Mr. J.W. Murton is no longer a director of the Company.
On
September 8, 2006, the Company entered into an Option Agreement (Exhibit 10.11 – Incorporated by reference) with Colt Resources
Inc. (“Colt”), a company formerly related by certain directors and officers, whereby Colt obtained the right to acquire
a 50% undivided interest, subject to the Arm’s Length Royalty, in the Extra High Claims by incurring exploration expenditures
of $240,000 on the Extra High Claims by no later than February 28, 2007 and by making cash payments to the Company totalling
$133,770 by no later than March 26, 2007.
On
September 12, 2006, the Company and the Arm’s Length Party amended the Option Agreement (Exhibit 10.5.1 – Incorporated
by reference) by entering into an Amending Agreement whereby the Company was granted an extension period until June 26, 2007 to
make the balance of cash payments to the Arm’s Length Party and incur the remaining exploration expenditures on the Extra
High Claims.
On
October 31, 2006, the Company and Colt entered into an Amending Agreement (Exhibit 10.11.2 – Incorporated by reference)
whereby Colt was granted an extension period until June 26, 2007 to incur exploration expenditures on the Extra High Claims and
to make the cash payments to the Company.
On
April 16, 2007, the Company and the Arm’s Length Party amended the Option Agreement (Exhibit 10.5.2 – Incorporated
by reference) by entering into an Amending Agreement whereby the Company was released of the requirement to incur the remaining
exploration expenditures but instead was required to make a cash payment of $60,000 (paid) to the Arm’s Length Party.
On
June 14, 2007, the Company amended its Option Agreement with Colt whereby Colt would have the right to acquire a 34% interest
in the Extra High Claims by making cash payments to the Company totalling $193,770 by no later than June 26, 2007. The Amending
Agreement released Colt of the requirement to incur $240,000 in exploration expenditures on the Extra High Claims.
On
June 26, 2007, the Company made its final payment to the Arm’s Length Party thereby earning a 100% undivided interest in
the Extra High Claims subject only to the Arm’s Length Royalty. Colt made its final payment to the Company and earned its
34% interest in the Extra High Claims, thus reducing the Company’s interest to 66%.
During
2007, the Company and its joint venture partner Colt conducted a diamond drilling program on the Extra High Claims. A total of
1,293.59 metres were drilled in 8 NQ diamond drill holes. The diamond drilling program was targeted at expanding the previously
indicated mineralization in the K7 lens and was successful in revealing the potential for larger zones of lower grade mineralization
lying adjacent to the massive sulphide mineralization indicated in earlier work. The diamond drilling program was conducted by
and was under the direct supervision of J. W. Murton, P. Eng., a qualified person as defined by National Instrument 43-101. At
the time, Mr. J. W. Murton was a director of the Company. For further particulars about the diamond drilling program please see
the report on the 2007 Diamond Drilling Program dated February 28, 2008 that was prepared for the Company and Colt by J. W. Murton,
P. Eng. which has been filed by the Company on its corporate website www.37capitalinc.com. As of December 10, 2009, J.W. Murton
resigned as a director of the Company.
At
December 31, 2007, the Company held a 66% interest in the Extra High Claims.
On
January 21, 2008, the Company entered into an Option Agreement (the “2008 Option Agreement”) (Exhibit 10.11.3
- Incorporated by reference) with Colt whereby Colt was granted the right and option to acquire, in two separate equal tranches,
the Company’s 66% undivided interest in the Extra High Claims. Pursuant to the 2008 Option Agreement, Colt exercised the
first tranche of the option by making a cash payment of $250,000 to the Company thus acquiring from the Company a 33% undivided
interest in the Extra High Claims. As a result of Colt exercising the first tranche of the option, Colt increased its undivided
interest in the Extra High Claims to 67% and Colt became the operator of the Extra High Claims.
In
order to exercise the second tranche of the option, Colt was required to make a cash payment of $250,000 to the Company on or
before December 31, 2008. Colt did not exercise the second tranche of the option. Consequently, Colt held a 67% undivided interest
in the Extra High Claims and the Company held a 33% undivided interest in the Extra High Claims. Pursuant to the Joint Venture
which the Company and Colt had formed, each party were required to contribute its proportionate share of property related expenditures.
If any party fails to contribute its share of future property related expenditures, then its interest will be diluted on a straight-line
basis. If any party’s interest is diluted to less than 10%, then that party’s interest in the Extra High Claims will
be converted into a 0.5% net smelter returns royalty.
Neither
the Company nor the operator of the Extra High Claims had incurred any meaningful exploration or evaluation expenditures in recent
years with respect to the Extra High Claims. Accordingly, during the fiscal year-ended 2011 the Company recognized an impairment
provision of $151,339 to reduce the carrying amount to $1. If there is an indication in the future that the impairment loss recognized
no longer exists or has decreased, the recoverable amount will be estimated and the carrying value of the property will be increased
to its recoverable amount. The Company did not incur any expenditures on the Extra High Claims during the years 2017, 2018, 2019
and 2020, however during 2016 the Company transferred from its PAC account with the Mineral Titles Office of the Province of British
Columbia credits totalling $4,096 to Colt’s PAC account to enable Colt to use the credits towards assessment filing on the
Extra High Claims.
Pursuant
to the March 30, 2016 Amending Agreement (Exhibit 10.11.4 – Incorporated by reference), Colt and the Company agreed
to reduce the size of the Extra High Claims from 1,077 hectares to 650 hectares by abandoning certain claims.
On
March 31, 2016, the Company together with Colt have extended to December 25, 2019 the expiry date of certain mineral claims totalling
650 hectares which comprise the Extra High Claims. During 2016, the Company together with Colt have abandoned a total of 427 hectares
of mineral claims which were previously part of the Extra High Claims. A 2016 Assessment Report on Preliminary Metallurgical Testing
on the Extra High Claims was prepared by J.W. Murton on May 20, 2016 on behalf of Colt.
As
at December 31, 2018, the Company held a 33% undivided interest in the Extra High Claims.
On
October 31, 2019, as amended on November 4, 2019, the Company entered into a Property Purchase Agreement with Colt whereby the
Company has purchased Colt’s 67% right, interest and title in and to the Extra High Property for a cash consideration of
$100,000 of which $25,000 was paid on the closing date of the Property Purchase Agreement and the balance i.e. $75,000 is payable
after eighteen months from the closing date. Additionally, the Company is obligated to pay Colt a 0.5% NSR from commercial production
which may be purchased by the Company at any time by making a payment of $500,000 (see Exhibit 10.11.5 – Incorporated by
reference). As at December 31, 2019, the Company owns a 100% undivided right, interest and title in and to the Extra High Property
which covers an area of 650 hectares.
The
Company withdrew from its PAC account with the Mineral Titles Office of the Province of British Columbia credits totalling $ 51,920.64
to extend the expiry date of the Extra High Property until December 25, 2021.
In
addition to the 0.5% NSR Royalty payable to Colt, the Extra High Property is subject to a 1.5% Net Smelter Returns Royalty (“NSR”)
payable to a third party, 50% of which, or 0.75%, can be purchased by the Company at any time by paying $500,000.
As
of the date of this Annual Report, the Company holds a 100% undivided interest in the Extra High Claims.
The
Extra High Claims are located on Samatosum Mountain, immediately south of the formerly producing Samatosum Mine, 60 km northeast
of Kamloops, British Columbia.
Legal
Description
The
Extra High Mineral Claims tenures are as follows:
TENURE NUMBER
|
|
NAME OF CLAIM
|
|
Property Size (in hectares)
|
|
CONVERSION DATE OR DATE STAKED
|
|
BC MAP #
|
|
EXPIRY DATE
|
|
509949
|
|
|
Extra High
|
|
|
60.829
|
|
|
|
2005/MAR/31
|
|
|
082M
|
|
|
|
2021/DEC/25
|
|
509961
|
|
|
Extra High
|
|
|
121.664
|
|
|
|
2005/MAR/31
|
|
|
082M
|
|
|
|
2021/DEC/25
|
|
509969
|
|
|
Extra High
|
|
|
344.834
|
|
|
|
2005/MAR/31
|
|
|
082M
|
|
|
|
2021/DEC/25
|
|
510214
|
|
|
Extra High
|
|
|
40.557
|
|
|
|
2005/APR/05
|
|
|
082M
|
|
|
|
2021/DEC/25
|
|
510215
|
|
|
Extra High
|
|
|
81.124
|
|
|
|
2005/APR/05
|
|
|
082M
|
|
|
|
2021/DEC/25
|
|
Total:
|
|
|
|
|
|
650
|
|
|
|
|
|
|
|
|
|
|
|
During
2016, the Company together with Colt abandoned the following mineral claims totaling 427 hectares which were previously part of
the Extra High Claims:
TENURE NUMBER
|
|
NAME OF
CLAIM
|
|
Property Size (in hectares)
|
|
CONVERSION DATE OR DATE STAKED
|
|
BC MAP #
|
|
EXPIRY DATE
|
|
509956
|
|
|
Extra High
|
|
|
182.52
|
|
|
|
2005/MAR/31
|
|
|
082M
|
|
|
|
2016/APR/02
|
|
509963
|
|
|
Extra High
|
|
|
40.569
|
|
|
|
2005/MAR/31
|
|
|
082M
|
|
|
|
2016/APR/02
|
|
510213
|
|
|
Extra High
|
|
|
20.289
|
|
|
|
2005/APR/05
|
|
|
082M
|
|
|
|
2016/APR/02
|
|
510306
|
|
|
Extra High
|
|
|
60.857
|
|
|
|
2005/APR/05
|
|
|
082M
|
|
|
|
2016/APR/02
|
|
509952
|
|
|
Super High#1
|
|
|
60.824
|
|
|
|
2005/MAR/31
|
|
|
082M
|
|
|
|
2016/MAR/31
|
|
520184
|
|
|
Super High#2
|
|
|
20.275
|
|
|
|
2005/SEP/20
|
|
|
082M
|
|
|
|
2016/SEP/20
|
|
520186
|
|
|
Super High#3
|
|
|
40.544
|
|
|
|
2005/SEP/20
|
|
|
082M
|
|
|
|
2016/SEP/20
|
|
II.
|
Acacia
Property, Adams Plateau, British Columbia
|
On
September 30, 2019, the Company entered into and executed a Property Option Agreement with Eagle Plains Resources Inc. of Cranbrook,
BC (“Eagle Plains”) in respect to the Acacia Property whereby the Company has the right and option to acquire a 60%
interest in the Acacia Property by issuing to Eagle Plains in stages a total of 300,000 common shares in the capital of the Company
and by incurring a total amount of $2,500,000 in property related expenditures over a period of five years (see Exhibit 10.19
- Incorporated by reference).
During
November 2019, the Company issued 100,000 common shares in the capital of the Company to Eagle Plains at the deemed price of $0.075
per share.
On
October 15, 2020 the Company entered into an Amendment Agreement to the Acacia Property Option Agreement with Eagle Plains whereby
the Company a) shall issue to Eagle Plains 50,000 common shares in lieu of not having incurred the required $100,000 in property
related expenditures during the 1st Anniversary of the Acacia Property Option Agreement, b) shall issue to Eagle Plains an additional
50,000 common shares in order to continue with the 2nd Period of the Acacia Property Option Agreement and c) has made
a firm commitment to incur a total amount of $200,000 in property related expenditures during the 2nd Period of the Acacia Property
Option Agreement (see Exhibit 10.19.1* Attached). All the other terms and conditions of the Acacia Property Option Agreement
shall remain unchanged and shall be in full force and effect. Consequently, on October 16, 2020, the Company issued the 100,000
common shares to Eagle Plains. As of the date of this Annual Report, the Company has not incurred the required property related
expenditures.
The
Acacia Property covers an area of approximately 4,715 hectares and is located in the Adams Plateau area of British Columbia, about
60 kms northeast of Kamloops and 22 kms east of the town of Barriere.
|
III.
|
Ontario,
Canada Lithium Properties (Mineral Leases)
|
These
Mineral Leases were previously written off at the end of fiscal 2000. During the year ended December 31, 2008, the Company sold
all of its Mineral Leases for gross proceeds of $54,500. However, in the event that at a future date the Mineral Leases are placed
into commercial production, then the Company is entitled to receive a 0.50% gross receipts royalty after six months from the date
of commencement of commercial production.
|
IV.
|
Investment
in Mexican Gaming Company
|
In
April 2013, the Company entered into a purchase and sale agreement with a Mexican gaming company, whereby the Company agreed to
purchase a royalty revenue stream of an amount the greater of 10% of the net profits or 5% of the gross revenues of the Mexican
land-based casino for a purchase price of $800,000. As of December 31, 2013, the Company invested $800,000 and advanced $49,200
for working capital purposes. The Mexican gaming company repaid the $49,200 advanced and the Company recognized $4,157 in royalty
revenue during the year ended December 31, 2014. As at December 31, 2014, the Company assessed the fair value of its investment
in Mexico and recorded impairment of $799,999 on the investment due to nominal royalty payments received (see Exhibit 10.13 –
Incorporated by reference). As of the date of this Annual Report, the Company does not expect to recover its investment
in the Mexican gaming company.
ITEM
5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Item.
5.A. Results of Operations
The
following table contains selected annual information for the three years ended December 31, 2020, 2019 and 2018 which are in accordance
with IFRS:
|
|
Year Ended December 31, 2020
|
|
Year Ended December 31, 2019
|
|
Year Ended December 31, 2018
|
Revenue
|
|
$
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Interest income
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Expenses
|
|
|
(133,379
|
)
|
|
|
(147,137
|
)
|
|
|
(160,856
|
)
|
Basic and diluted loss per common share before other items
|
|
|
(0.02
|
)
|
|
|
(0.02
|
)
|
|
|
(0.02
|
)
|
Comprehensive loss
|
|
|
(133,379
|
)
|
|
|
(147,137
|
)
|
|
|
(160,856
|
)
|
Total assets
|
|
|
40,573
|
|
|
|
33,180
|
|
|
|
2,960
|
|
Long-term financial obligations
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Cash dividends
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
All
financial figures presented herein are expressed in Canadian Dollars (CDN$) unless otherwise specified.
In
Canada, the common shares of the Company trade on the Canadian Securities Exchange (CSE) under the symbol “JJJ.X”,
and in the USA, the Company's common shares traded on the OTCQB tier of the OTC markets under the trading symbol “HHHEF”
until June 1, 2020. Presently, the Company’s common shares are listed for trading on the PINK Sheets on the OTC market.
The Cusip number of the Company’s common shares is 88429G102. The Company’s office is located at 400 – 570 Granville
Street, Vancouver, British Columbia, Canada, V6C 3P1 and its registered office is located at Suite 3200-650 West Georgia Street,
Vancouver BC V6B 4P7. The Company’s registrar and transfer agent is Computershare Investor Services Inc. located at 510
Burrard Street, Vancouver, British Columbia, Canada, V6C 3B9.
For
the year ended December 31, 2020:
|
•
|
The
Company’s operating expenses were $133,379 as compared to $147,137 for the corresponding period in 2019 and as compared
to $160,856 for the corresponding period in 2018.
|
|
•
|
The
Company recorded a comprehensive loss of $133,379 as compared to a comprehensive loss of $147,137 during the corresponding
period in 2019 and as compared to a comprehensive loss of $160,856 during the corresponding period in 2018.
|
|
•
|
The
Company’s basic and diluted loss per common share was $0.02 as compared to a basic and diluted loss of $0.02 during
the corresponding period of 2019 and as compared to a basic and diluted loss of $0.02 during the corresponding period in 2018.
|
|
•
|
The
Company’s total assets were $40,573 as compared to $33,180 during the corresponding period in 2019 and as compared to
$2,960 during the corresponding period in 2018.
|
|
•
|
The
Company’s total liabilities were $1,337,235 as compared $1,203,963 during the corresponding period in 2019 and as compared
to $1,034,106 during the corresponding period in 2018.
|
|
•
|
The
Company had a working capital deficiency of $1,336,664 as compared to a working capital deficiency of $1,203,285 during the
corresponding period in 2019 and as compared to a working capital deficiency of $1,031,148 during the corresponding period
in 2018.
|
The
Company is presently not a party to any legal proceedings whatsoever.
Plan
of Arrangement
On
February 26, 2015, the Company incorporated two wholly-owned private British Columbia subsidiaries, 27 Red Capital Inc. (“27
Red”) and 4 Touchdowns Capital Inc. (“4 Touchdowns”). On April 30, 2015, the Company entered into an arrangement
agreement (the “Arrangement Agreement”) with 27 Red and 4 Touchdowns. A copy of the Arrangement Agreement is available
on SEDAR.
In
respect to the Plan of Arrangement, the Company applied for an Interim Order which was granted on May 6, 2015 by the Supreme Court
of British Columbia, and on June 12, 2015 the Company received the final court approval for the Plan of Arrangement.
At
the Company’s annual and special meeting which was held on June 4, 2015, the Company’s shareholders passed all the
resolutions presented including the re-election of the board of directors, re-appointment of the Company’s auditor, approval
of the Company’s stock option plan, and the proposed Plan of Arrangement with 27 Red and 4 Touchdowns.
The
Company completed the Plan of Arrangement with 27 Red (Spinco 1) and 4 Touchdowns (Spinco 2). The effective date of the Arrangement
was on February 12, 2016 (the “Effective Date”). Shareholders of record on the Effective Date received one new common
share, one Class 1 Reorganization Share and one Class 2 Reorganization Share of the Company. On the Effective Date, and pursuant
to the Arrangement, all of the Class 1 Reorganization Shares were automatically transferred by Shareholders to Spinco1 in exchange
for 2,067,724 common shares of Spinco1 and issued to Shareholders on a pro rata basis (resulting in one common share of Spinco1
being issued for every one Class 1 Reorganization Share). Immediately following this, the Company redeemed all of the Class 1
Reorganization Shares by the transfer to Spinco1 of $20,677 and a promissory note in the principal amount of $20,677. The promissory
note was non-interest bearing, unsecured and due on demand. The redemption of shares was distributed to the shareholders’
of 27 Red as a capital distribution and recorded as a dividend.
Furthermore
on the Effective Date, all of the Class 2 Reorganization Shares were automatically transferred by Shareholders to Spinco2 in exchange
for 2,067,724 common shares of Spinco2 and issued to Shareholders on a pro rata basis (resulting in one common share of Spinco2
being issued for every one Class 2 Reorganization Share). Immediately following this, the Company redeemed all of the Class 2
Reorganization Shares by the transfer to Spinco2 of $20,677 and a promissory note in the principal amount of $20,677. The promissory
note was non-interest bearing, unsecured and due on demand. The redemption of shares was distributed to the shareholders’
of 4 Touchdowns as a capital distribution and recorded as a dividend.
As
a result of the completion of the Arrangement, 27 Red and 4 Touchdowns are independent entities and are no longer subsidiaries
of the Company.
On
September 12, 2017, the Company entered into a Consulting Agreement with 27 Red whereby the Company provided certain consultancy
and advisory services to 27 Red for a three month period (the “Term of the Agreement”). The fee paid by 27 Red to
the Company was $18,188.65 for the Term of the Agreement (see Exhibit 10.16 - Incorporated by reference).
On
October 12, 2017, the Company entered into a Consulting Agreement with 4 Touchdowns whereby the Company provided certain consultancy
and advisory services to 4 Touchdowns for a three month period (the “Term of the Agreement”). The fee paid by 4 Touchdowns
to the Company was $18,188.65 for the Term of the Agreement (see Exhibit 10.17 – Incorporated by reference).
On
January 13, 2017, a Notice of Civil Claim was filed in the Supreme Court of British Columbia by 310047 B.C. Ltd. against the Company
for the sum of $53,024.40 being monies due by the Company to 310047 B.C. Ltd. pursuant to an assignment by the Company’s
solicitor Clark Wilson LLP. On February 21, 2017, an Assignment of Debt Agreement was entered into between Clark Wilson LLP, and
310047 B.C. Ltd., and JAMCO Capital Partners Inc. (“JAMCO”) whereby the outstanding debt in the amount of $53,024.40
was assigned to JAMCO. The Company has acknowledged this assignment to JAMCO and has agreed to adjust the Company’s financial
accounts and records to reflect this assignment. JAMCO is an arm’s length party to the Company. As a result of this Assignment
of Debt Agreement, a Notice of Discontinuance was filed in the Supreme Court of British Columbia on March 21, 2017 by 310047 B.C.
Ltd. and Clark Wilson LLP whereby the Civil Claim that was filed by 310047 B.C. Ltd. against the Company has been discontinued.
Effective
as of April 1, 2017, Mr. Bedo H. Kalpakian has stepped down as the Company’s President, CEO & CFO. In replacement to
Mr. Bedo H. Kalpakian, effective as of April 1, 2017 Mr. Jacob H. Kalpakian has become the President & CEO of the Company,
and Mr. Neil Spellman has become the CFO of the Company.
The
Company’s Board of Directors decided to change the Company’s auditors. Effective as of March 28, 2017, the Company’s
Auditors are Dale Matheson Carr-Hilton Labonte LLP, Chartered Professional Accountants, 1500-1140 W. Pender St., Vancouver, BC
V6E 4G1. The telefax number is (604) 689-2778. The former Auditors of the Company were Smythe LLP, Chartered Professional Accountants,
1700-475 Howe Street, Vancouver, British Columbia, Canada V6C 2B3. The telefax number is (604) 688-4675.
During
the year ended December 31, 2017, the Company has entered into debt settlement agreements with Jackpot Digital Inc. (“Jackpot”),
and with Kalpakian Bros. of B.C. Ltd. (“Kalpakian Bros.”), companies related to 37 Capital by certain common directors.
The Company has issued 4,249,985 units of the Company to Jackpot at the price of $0.09 per unit in settlement of the Company’s
outstanding debt for the total amount of $382,498.65 for shared office rent, office support services and miscellaneous office
expenses provided by Jackpot to the Company from August 1, 2014 up to September 30, 2017. In respect to the Company’s outstanding
debt to Kalpakian Bros. for the total amount of $15,750, the Company has issued 175,000 units of the Company at the price of $0.09
per unit in settlement of the Company’s outstanding debt owed to Kalpakian Bros. for unpaid management fees from May 1,
2016 up to July 30, 2016. Each unit consists of one common share and one share purchase warrant. Each warrant is exercisable at
a price of $0.12 per share for a period of five years. The securities were subject to a hold period which expired on March 3,
2018 (see Exhibit 10.18- Incorporated by reference). During September 2018, Jackpot sold 800,000 units of 37 Capital to JAMCO,
an arm’s length party. As at December 31, 2018 Jackpot owned 3,449,985 common shares in the capital of the Company representing
approximately 48.64% of the Company’s issued and outstanding common shares. During the nine months ended September 30, 2019
Jackpot sold 3,400,000 common shares of 37 Capital through the facilities of the Canadian Securities Exchange (CSE). As at December
31, 2019 Jackpot owned 49,985 common shares in the capital of the Company representing approximately 0.69% of the Company’s
issued and outstanding common shares. In addition, Jackpot owns 3,449,985 share purchase warrants of the Company exercisable at
$0.12 per share until November 2, 2022.
At
the Company’s Annual General Meeting which was held on November 15, 2017 Mr. Bedo Kalpakian did not stand for re-election.
At the Company’s Annual General Meetings which were held on November 16, 2018, November 18, 2019 and November 20, 2020,
the Company’s shareholders passed all the resolutions presented including the re-election of Jacob H. Kalpakian, Gregory
T. McFarlane, Fred A.C. Tejada and Neil Spellman as Directors of the Company; re-appointed the Company’s Auditor, Dale Matheson
Carr-Hilton Labonte LLP, Chartered Professional Accountants for the ensuing year and authorized the Directors to fix the remuneration
to be paid to the Auditor; and re-approved the Company’s Stock Option Plan.
Effective
as of May 1, 2021, Fred A.C. Tejada resigned as a director of the Company.
During
December 2019, the Company had intended to issue up to 4,000,000 flow-through units of the Company at a price of $0.05 per unit
for gross proceeds to the Company of $200,000 in order to use the proceeds of this financing towards mineral exploration work
expenditures located in the Province of British Columbia. However, due to the Covid-19 pandemic the Company has only been able
to raise the amount of $20,000 which the Company intends to incur towards mineral exploration work expenditures during the Company’s
2021 fiscal year. As such, the Company has issued 400,000 flow-through units. Each flow-through unit consists of one flow-through
common share of the Company and one non-flow-through share purchase warrant to acquire one non-flow-through common share of the
Company at a price of $0.10 for a period of two years. All securities issued in connection with this financing are subject to
a hold period expiring on May 16, 2021.
The
Company is presently not a party to any legal proceedings whatsoever.
Summary
of Quarterly Results
For
the Quarterly Periods ended:
|
|
December
31, 2020
|
|
September
30, 2020
|
|
June
30, 2020
|
|
March
31, 2020
|
Total
Revenues
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Net
loss and comprehensive loss
|
|
|
(45,030
|
)
|
|
|
(26,138
|
)
|
|
|
(40,326
|
)
|
|
|
(21,885
|
)
|
Loss
per common share
|
|
|
(0.01
|
)
|
|
|
(0.00
|
)
|
|
|
(0.01
|
)
|
|
|
(0.00
|
)
|
For
the Quarterly Periods ended:
|
|
December
31, 2019
|
|
September
30, 2019
|
|
June
30, 2019
|
|
March
31, 2019
|
Total
Revenues
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Net
loss and comprehensive loss
|
|
|
(46,782
|
)
|
|
|
(32,518
|
)
|
|
|
(30,513
|
)
|
|
|
(37,324
|
)
|
Loss
per common share
|
|
|
(0.01
|
)
|
|
|
(0.00
|
)
|
|
|
(0.00
|
)
|
|
|
(0.01
|
)
|
The
Company’s business is not of a seasonal nature.
Item
5.B. Liquidity and Capital Resources
Liquidity
and Capital Resources
The
Company has incurred significant operating losses over the past three fiscal years, has limited resources, and no sources of operating
cash flow.
During
2021, the Company shall require at least $400,000 so as to conduct its operations uninterruptedly. In order to meet this requirement,
the Company intends to seek equity and/or debt financings through private placements and/or public offerings and/or loans. In
the past, the Company has been successful in securing equity and debt financings in order to conduct its operations uninterruptedly.
While the Company does not give any assurances whatsoever that in the future it will continue being successful in securing equity
and/or debt financings in order to conduct its operations uninterruptedly, it is the Company’s intention to pursue these
methods for future funding of the Company.
As
of December 31, 2020:
•
|
|
the
Company’s total assets were $40,573 as compared to $33,180 for the year ended December 31, 2019 and as compared to $2,960
for the year ended December 31, 2018.
|
•
|
|
the
Company’s total liabilities were $1,337,235 as compared to $1,203,963 for the period ended December 31, 2019 and as
compared to $1,034,106 for the year ended December 31, 2018.
|
•
|
|
the
Company had $9 in cash as compared to $38 in cash for the year ended December 31, 2019 and as compared to $2,045 in cash for
the year ended December 31, 2018.
|
•
|
|
the
Company had GST receivable in the amount of $562 as compared to $640 for the year ended December 31, 2019 and as compared
to $913 for the year ended December 31, 2018.
|
Shares
for Debt Financing
Pursuant
to debt settlement agreements dated December 11, 2020 totaling the amount of $739,351.50 between the Company and certain creditors,
on January 25, 2021 (see Exhibit 10.20*-Attached), the Company issued 14,787,030 common shares of the Company (the “Debt
Settlement Shares of the Company”) at a deemed price of $0.05 per common share in settlement of debts totaling the amount
of $739,351.50 to certain creditors, including to a related party and a director and officer of the Company. The Debt Settlement
Shares of the Company are subject to a hold period which expires on May 26, 2021.
Private
Placement Financing
There
were no private placement financings during the year ended December 31, 2020, 2019 and 2018.
Subsequent
to the year-ended December 31, 2020, the Company issued 400,000 flow-through units of the Company. Each flow-through unit consists
of one flow-through common share of the Company and one non-flow-through share purchase warrant to acquire one non-flow-through
common share of the Company at a price of $0.10 for a period of two years. All securities issued in connection with this financing
are subject to a hold period expiring on May 16, 2021.
Warrants
As
at December 31, 2020, a total of 4,324,985 warrants with exercise price of $0.12 per warrant share and 500,000 warrants with exercise
price of $0.135 per warrant share were outstanding. Subsequent to the year-ended December 31, 2020, a total of 500,000 warrants
exercisable at the price of $0.135 per warrant share expired unexercised, and a total of 400,000 warrants exercisable for a period
of two years at the price of $0.10 per warrant were issued.
While
there are no assurances whatsoever that warrants may be exercised, however if any warrants are exercised in the future, then any
funds received by the Company from the exercising of warrants shall be used for general working capital purposes.
Loan
2016
The
Company had borrowed the sum of $103,924 from an arm’s length party to pay certain amounts that were owed by the Company
to some of its creditors. The borrowed amount of $103,924 was non-interest bearing, unsecured and was payable on demand. Pursuant
to a debt settlement agreement dated December 11, 2020 with the Company and the arm’s length party, on January 25, 2021
the Company issued a total of 2,078,484 common shares of the Company at a deemed price of $0.05 per share in full settlement of
the debt (the “Debt Settlement Shares of the Company”). The Debt Settlement Shares of the Company are subject to a
hold period expiring on May 26, 2021.
Refundable
Subscription
During
the twelve months ended December 31, 2016, the Company cancelled subscription agreements of a non-brokered private placement financing
totalling $45,000. The Company had refunded $35,000. As of December 31, 2020, the remaining $10,000 (2019 - $10,000) was still
owing and was due on demand. Pursuant to a debt settlement agreement dated December 11, 2020 with the Company and the arm’s
length party, on January 25, 2021 the Company issued a total of 200,000 common shares of the Company at a deemed price of $0.05
per share in full settlement of the $10,000 refundable subscription (the “Debt Settlement Shares of the Company”).
The Debt Settlement Shares of the Company are subject to a hold period expiring on May 26, 2021.
During
the year ended December 31, 2020, the Company received $20,000 of subscription funds for 400,000 flow-through units of the Company
at $0.05 per unit in respect to the Company’s announced financing. Subsequent to the year ended December 31, 2020, the Company
issued 400,000 flow-through units. Each flow-through unit consists of one flow-through common share of the Company and one non-flow-through
share purchase warrant to acquire one non-flow-through common share of the Company at a price of $0.10 for a period of two years.
The securities issued are subject to a hold period expiring on May 16, 2021.
Convertible
Debentures Financing 2015
On
January 6, 2015, the Company closed a convertible debenture financing with two directors of the Company for the amount of $250,000.
The convertible debentures matured on January 6, 2016, and bear interest at the rate of 12% per annum payable on a quarterly basis.
The convertible debentures are convertible into common shares of the Company at a conversion price of $0.30 per share. The liability
component of the convertible debentures was recognized initially at the fair value of a similar liability with no equity conversion
option, which was calculated based on the application of a market interest rate of 20%. On the initial recognition of the convertible
debentures, the amount of $222,006 was recorded under convertible debentures and the amount of $27,994 has been recorded under
the equity portion of convertible debenture reserve.
During
the year ended December 31, 2020, the Company recorded interest expense of $30,000 (2019 - $30,000) (2018-$30,000). As of December
31, 2020, $250,000 of the convertible debentures are outstanding and are past due plus accrued interest of $179,589 (2019 - $149,589)
(2018-$119,589). As of December 31, 2020, the two convertible debentures are in default.
Convertible
Debentures Financing 2013
During
the year ended December 31, 2013, the Company issued several convertible debentures for a total amount of $975,000 to several
arm’s length parties. The convertible debentures have a maturity date of 18 months from the date of closing, and bear interest
at the rate of 15% per annum payable on a quarterly basis. The convertible debentures are convertible into common shares of the
Company at a conversion price of $1.50 per share. The liability component of the convertible debenture was recognized initially
at the fair value of a similar liability with no equity conversion option, which was calculated based on the application of a
market interest rate of 20%. The difference between the $975,000 face value of the debentures and the fair value of the liability
component was recognized in equity. On the initial recognition of the convertible debentures, the amount of $913,072 has been
recorded under convertible debentures and the amount of $61,928 has been recorded under the equity portion of convertible debentures.
Pursuant
to the financing, the Company made cash payments of $48,000 and issued 2,000 common shares of the Company and 3,333 agent warrants
of the Company with fair value of $8,115 as finders’ fees. Each warrant entitled the holder to purchase one additional common
share of the Company at a price of $1.50 per share until July 23, 2018 (expired). The amount of transaction costs directly attributable
to the financing of $56,115 were allocated to the liability and equity components of the debenture proportionately at $52,551
and $3,564, respectively. The discount on the debentures is being accreted such that the liability component will equal the face
value of the debentures at maturity plus accrued interest.
On
September 4, 2013, the amount of $858,118 which comprised of certain convertible debentures and their corresponding accrued interest
was converted into 610,724 common shares of the Company. The equity portion of the convertible debentures was reduced in the amount
of $52,562.
During
the year ended December 31, 2020, the Company recorded interest expense of $15,000 (2019 - $15,000) (2018 - $15,00). As of December
31, 2020, $100,000 of the convertible debentures are outstanding and are past due plus accrued interest of $109,602 (2019 - $94,602)
(2018 - $79,602). One convertible debenture in the amount of $100,000 was in default and another convertible debenture was extended
indefinitely. Pursuant to debt settlement agreements dated December 11, 2020 with the Company and the two debenture holders, on
January 25, 2021, the Company issued a total of 4,167,044 common shares of the Company to the two debenture holders in full settlement
of debts totalling the amount of $208,352.20 (the “Debt Settlement Shares of the Company”). The Debt Settlement Shares
of the Company are subject to a hold period expiring on May 26, 2021.
Stock
Options
As
at December 31, 2020, there were no outstanding stock options (December 31, 2019 - Nil) (December 31, 2018 – Nil). As of
the date of this Annual Report, there are no outstanding stock options.
Item
5.C. Research and development, patents and licences
The
Company does not have a research and development department nor does it have any patents or licenses.
Item
5.D. Trend Information
During
the last several years commodity prices have fluctuated significantly, and should this trend continue or should commodity prices
remain at current levels, then companies such as 37 Capital will have difficulty in raising funds and/or acquiring mineral properties
of merit at reasonable prices.
Item
5.E. Off balance sheets arrangements.
The
Company has no off balance sheets arrangements and the Company’s financial information including its balance sheets and
statements of comprehensive loss have been fairly represented in accordance with IFRS.
Item
5.F. Tabular disclosure of contractual obligations
The
Company has four convertible debentures totalling $350,000 plus accrued interest, three of the convertible debentures have matured
and are payable on demand and one convertible debenture has been extended indefinitely (see Exhibits 10.14 & 10.15–
Incorporated by reference). The Company has no Capital Lease Obligations or Purchase Lease Obligations reflected on the Company’s
Balance Sheets, however the Company has Obligations pursuant to the 2015 and 2013 Convertible Debentures Financing (see Exhibit
10.15 – Incorporated by reference). Subsequent to the year ended December 31, 2020, the Company entered into Debt Settlements
Agreements to settle certain outstanding debts and loans (see Exhibit 10.20*-Attached).
Furthermore,
pursuant to the Property Purchase Agreement with Colt, the Company is obligated to pay $75,000 to Colt within eighteen months
from the closing date of the Property Option Agreement (see Exhibit 10.11.5 – Incorporated by reference).
In
addition, pursuant to the Option Agreement with Eagle Plains, the Company is required to incur a total of $200,000 in property
related expenditures on or before the second anniversary of the Option Agreement.
In
respect to information covered by Items 5.E. and 5.F., all financial information and statements have been fairly represented in
accordance with IFRS.
Item
5.G. Safe Harbour
Special
Note regarding Forward-Looking Statements
We
make certain forward looking-statements in this Form 20-F within the meaning of Section 27A of the Securities Act 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended, relating to our financial condition, profitability, liquidity,
resources, business outlook, proposed acquisitions, market forces, corporate strategies, contractual commitments, capital requirements
and other matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbour for forward-looking statements.
To comply with the terms of the safe harbour, we note that a variety of factors could cause our actual results and experience
to differ substantially from the anticipated results or other expectations expressed in our forward-looking statements. When words
and expressions such as: “believes,” “expects,” “anticipates,” “estimates,” “plans,”
“intends,” “objectives,” “goals,” “aims,” “projects,” “forecasts,”
“possible,” “seeks,” “may,” “could,” “should,” “might,”
“likely,” “enable” or similar words or expressions are used in this Form 20-F, as well as statements containing
phrases such as “in our view,” “there can be no assurances,” “although no assurances can be given,”
or “there is no way to anticipate with certainty,” forward-looking statements are being made. These forward-looking
statements speak as of the date of this Form 20-F.
The
forward-looking statements are not guarantees of future performance and involve risk and uncertainties. These risks and uncertainties
may affect the operation, performance, development and results of our business and could cause future outcomes to differ materially
from those set forth in our forward-looking statements. These statements are based on our current beliefs as to the outcome projected
or implied in the forward-looking statements. Furthermore, some forward-looking statements are based upon assumptions of future
events which may not prove to be accurate. The forward-looking statements involve risks and uncertainties including, but not limited
to, the risks and uncertainties referred to in “Item 3.D. RISK FACTORS,” and elsewhere within the document and in
other of our filings with the Securities and Exchange Commission.
New
risk factors emerge from time to time and it is not possible for us to predict all such risk factors which can cause actual results
to differ significantly from those forecast in any forward-looking statements. Given these risks and uncertainties, investors
should not overly rely or attach undue weight to forward-looking statements as an indication of our actual future results.
ITEM
6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
As
of December 31, 2020, the name, municipality of residence and the principal occupation of the directors and officers of the Company
are the following:
Name
and municipality of residence
|
Position
with the Registrant
|
Date
of Birth
|
Principal
occupation
|
Term
of Office with the Registrant
|
Jacob H. Kalpakian(1)
Vancouver, B.C. Canada
|
President, CEO and Director
|
October 18, 1968
|
President & CEO Vice President of Registrant;
President of Jackpot Digital Inc. (“Jackpot”)
CEO of Jackpot
|
April 2017 to Present 1991 to April 2017
1991 to Present
2004 to Present
|
Neil Spellman*(2)
Carlsbad, CA, USA
|
CFO & Director
|
January 24, 1953
|
Director of the Registrant CFO of the Registrant
Director of Jackpot
Senior Vice President of DB Financial
|
Aug 2016 to Present
April 2017 to Present
2002 to Present
2001 to Present
|
Gregory T. McFarlane*
Las Vegas, NV, USA
|
Director
|
November 13, 1968
|
Director of the Registrant Director of Jackpot Principal of McFarlane Media, LLC (2005)
|
1992 to Present 1992 to Present 2005 to Present
|
Fred A.C. Tejada* (3)
Surrey, B.C. Canada
|
Director
|
August 1, 1958
|
Director of the Registrant
CEO of European Electric Metals Inc.
President of European Electric Metals Inc.
Vice President Operations and Exploration of European Electric Metals Inc.
|
December 2009 to Present
July 2017 to Present
October 2011 to July 2017
June 2011 to October 2011
|
Maria P. Arenas
Surrey, B.C. Canada
|
Corporate Secretary
|
September 29, 1969
|
Corporate Secretary of the Registrant
Corporate Secretary of Jackpot
|
2008 to Present
2008 to Present
|
*Members
of the Company’s audit committee.
(1)
Upon Bedo Kalpakian stepping down as President & CEO, as of April 1, 2017, Mr. Jacob H. Kalpakian has been appointed as
President
& CEO.
(2)
Upon Bedo Kalpakian stepping down as CFO, as of April 1, 2017, Mr. Neil Spellman has been appointed as CFO.
(3)
Effective May 1, 2021, Fred Tejada tendered his resignation from the Board of Directors.
All
directors serve for a term of one year until the next annual general meeting or until the date of their resignation, whichever
occurs first.
There
are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any person referred
to above was selected as a director or member of senior management.
Item
6.B. Compensation
On
August 1, 2016, the Management Services Agreement with Kalpakian Bros. of B.C. Ltd. (“Kalpakian Bros.”) was terminated
by mutual consent (Exhibits 10.4, 10.4.1, 10.4.2, 10.4.3, 10.4.4, 10.4.5, 10.4.5.6 - Incorporated by reference). The principal
of Kalpakian Bros. is Jacob H. Kalpakian, the President, CEO and director of the Company. Bedo H. Kalpakian, former President,
CEO, CFO and director of the Company was a principal of Kalpakian Bros. until December 31, 2019.
Pursuant
to indemnity agreements dated April 1, 1993, January 7, 2008, December 18, 2009 and August 2 2016, between the Company and each
of Bedo H. Kalpakian, Jacob H. Kalpakian, Gregory T. McFarlane, Maria P. Arenas, Fred A.C. Tejada and Neil Spellman (collectively
“the directors and officers”), the Company agreed to indemnify and save the directors and officers, their heirs and
personal representatives harmless from and against all costs, charges and expenses arising out of their association with the Registrant.
These costs, charges and expenses include any amounts paid to settle an action or to satisfy a judgement brought or found against
the directors and/or officers and any amounts paid to settle an administrative action or proceeding provided that the indemnified
party has acted in good faith and in the best interests of the Company. The Company Act requires a Court Order to be obtained
prior to the Company making payment under the indemnity agreements. To date, the Company has not made any payments under the indemnity
agreements.
During
2020, 2019 and 2018, there were no stock options granted to Directors, Officers and Employees.
The
Company has no long-term incentive plans in place and, has not granted any stock appreciation rights.
Item
6.C. Board Practices
6.C.1.
Directors’ Terms of service.
All
directors are elected annually by the Company’s shareholders to serve for a term of one year until the next annual general
meeting of the shareholders. All directors may be annually re-elected by the Company’s shareholders at the annual general
meeting of the shareholders for additional one year terms. Jacob H. Kalpakian has served as a director since 1991; Gregory T.
McFarlane has served as a director since 1992; Fred A.C. Tejada has served as a director since December 2009 and Neil Spellman
has served as a director since August 2016.
6.C.2.
Details of Directors’ Service Contracts.
On
August 1, 2016, the Management Services Agreement with Kalpakian Bros. of B.C. Ltd. (“Kalpakian Bros.”) was terminated
by mutual consent (Exhibits 10.4, 10.4.1, 10.4.2, 10.4.3, 10.4.4, 10.4.5, 10.4.5.6 - Incorporated by reference). The principal
of Kalpakian Bros. is Jacob H. Kalpakian, the President, CEO and director of the Company. Bedo H. Kalpakian, former President,
CEO, CFO and director of the Company was a principal of Kalpakian Bros. until December 31, 2019.
6.C.3.
Details relating to the Company’s audit committee and remuneration committee.
All
directors are elected annually by the Company’s shareholders to act as directors of the Company for a term of one year.
The Company’s audit committee is appointed on an annual basis by the Company’s directors. Presently, the Company’s
audit committee consists of the following directors; Neil Spellman, Gregory T. McFarlane and Fred A.C. Tejada. The majority of
the members of the audit committee must be made up of directors who are not officers of the Company. The audit committee is also
responsible to monitor compliance of the Company’s Code of Ethics (see item 14.1).
Pursuant
to Canadian National Policy (52-110) with respect to Audit Committee Disclosure, the charter of the Company’s Audit Committee
and other information required to be disclosed have been disclosed in the Company’s Annual Information Circular with respect
to the Company’s Annual General Shareholder’s meeting which was held on November 20, 2020. The Company’s 2020
Annual Information Circular (see Exhibit 13.4* - Attached) includes the Company’s Audit Committee Disclosure under
Form 52-110F2.
The
Company does not have a remuneration committee or an executive committee largely due to its size.
Item
6.D. Employees
The
Company’s employees are not represented by a union or other collective bargaining organization and the Company has not experienced
any work stoppage by its employees. The Company believes that its employee relations are good.
Item
6.E. Share Ownership
The
number of common shares beneficially owned (directly and indirectly) by officers and directors of the Company as of December
31, 2020 are as follows:
Name of Director/Officer and Municipality
|
|
Number of Issued Shares
|
|
Percentage of the total Issued Share Capital*
|
Jacob H. Kalpakian Vancouver, BC, Canada
|
|
|
113,220
|
(1)
|
|
|
1.55
|
%
|
Gregory T. McFarlane Las Vegas, Nevada, USA
|
|
|
126 direct
|
|
|
|
0.002
|
%
|
Fred A.C. Tejada Surrey, BC, Canada
|
|
|
0
|
|
|
|
0.00
|
%
|
Neil Spellman Carlsbad, CA, USA
|
|
|
3
|
|
|
|
0.00
|
%
|
Maria P. Arenas Surrey, BC, Canada
|
|
|
572 direct
|
|
|
|
0.008
|
%
|
Notes:
*Based on 7,292,709 issued and outstanding common shares as of December 31, 2020.
(1) Of these common shares, 65,000 are held by 30 Rock Management Inc., 10,020 are held by Kalpakian Bros.and 14,156 are held by a family member.
(2)
Kalpakian Bros. and 30 Rock Management Inc. are private companies controlled by Jacob H. Kalpakian.
The
number of common shares beneficially owned (directly and indirectly) by officers and directors of the Company as of December
31, 2019 are as follows:
Name of Director/Officer and Municipality
|
|
Number of Issued Shares
|
|
Percentage of the total Issued Share Capital*
|
Jacob H. Kalpakian Vancouver, BC, Canada
|
|
|
2,516,220
|
(1)
|
|
|
34.98
|
%
|
Gregory T. McFarlane Las Vegas, Nevada, USA
|
|
|
126 direct
|
|
|
|
0.002
|
%
|
Fred A.C. Tejada Surrey, BC, Canada
|
|
|
0
|
|
|
|
0.00
|
%
|
Neil Spellman Carlsbad, CA, USA
|
|
|
3
|
|
|
|
0.00
|
%
|
Maria P. Arenas Surrey, BC, Canada
|
|
|
572 direct
|
|
|
|
0.008
|
%
|
Notes:
*Based on 7,192,709 issued and outstanding common shares as of December 31, 2019.
(1)
Of these common shares, 2,468,000 are held by 30 Rock Management Inc., 10,020 are held by Kalpakian Bros. and 14,156 are held
by a family member.
(2)
Kalpakian Bros. and 30 Rock Management Inc. are private companies controlled by Jacob H. Kalpakian.
The
number of common shares beneficially owned (directly and indirectly) by officers and directors of the Company as of December
31, 2018 are as follows:
Name of Director/Officer and Municipality
|
|
Number of Issued Shares
|
|
Percentage of the total Issued Share Capital*
|
Jacob H. Kalpakian Vancouver, BC, Canada
|
|
|
51,220
|
(1)
|
|
|
0.72
|
%
|
Gregory T. McFarlane Las Vegas, Nevada, USA
|
|
|
126 direct
|
|
|
|
0.002
|
%
|
Fred A.C. Tejada Surrey, BC, Canada
|
|
|
0
|
|
|
|
0.00
|
%
|
Neil Spellman Carlsbad, CA, USA
|
|
|
3
|
|
|
|
0.00
|
%
|
Maria P. Arenas Surrey, BC, Canada
|
|
|
572 direct
|
|
|
|
0.008
|
%
|
Notes:
*Based on 7,092,709 issued and outstanding common shares as of December 31, 2018.
(1) Of these common shares, 10,020 are held by Kalpakian Bros. of B.C. Ltd., 3,000 are held by 30 Rock
Management
Inc. and 14,156 are held by a family member.
(2)
Kalpakian Bros. of B.C. Ltd. Is a private company controlled by and in which Bedo H. Kalpakian (former director
of
the Company) and Jacob H. Kalpakian (President & CEO of the Company) are the principal shareholders.
(3)
30 Rock Management Inc. is a private company controlled by Jacob H. Kalpakian.
Item
6.E.2. Stock Options for Employees
From
time to time the Company grants Incentive Stock Options to its directors, officers, employees and consultants. The incentive stock
options entitle the holders to acquire common shares of the Company from treasury. The incentive stock options are a means of
rewarding future services provided to the Company and are not intended as a substitute for salaries or wages, or as a means of
compensation for past services rendered.
At
the Company’s Annual General Meeting of shareholders held on April 30, 2004, the shareholders of the Company approved the
Company’s 2004 Stock Option Plan (Exhibit 10.7 – Incorporated by reference). Shareholders of the Company adopted and
approved the 2015 Stock Option Plan at the Company’s Annual and Special General Meeting of Shareholders which took place
on June 4, 2015 (see Exhibit 12 – Incorporated by reference) and was re-approved by the Shareholders of the Company at the
Annual General Meeting of Shareholders which took place on Wednesday, November 18, 2019 see Exhibit 13.3 – Incorporated
by reference) and at the last Annual General Meeting of Shareholders which took place on Friday, November 20, 2020 (see Exhibit
13.4* - Attached).
The
Company’s 2015 Stock Option Plan reserves for granting to directors, officers, employees and consultants up to 20% of the
issued and outstanding common shares of the Company calculated from time to time on a rolling basis. The terms of the options
are determined at the date of grant.
During
2020, 2019 and 2018 there were no stock options granted to Directors, Officers, Employees and Consultants.
ITEM
7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
7.A.1.
The Company is a publicly-owned corporation, the common shares of which are owned by Canadian residents, U.S. residents, and
residents of other countries. The Company is not directly or indirectly controlled by any foreign government. However, Jackpot
owned 48.64% of the Company’s issued and outstanding common shares as at December 31, 2018. During the twelve months ended
December 31, 2019, Jackpot sold a total of 3,400,000 of the Company’s common shares. As at December 31, 2019 and 2020, Jackpot
owns 49,985 common shares of the Company. In addition, Jackpot owns 3,449,985 share purchase warrants of the Company exercisable
at $0.12 per share until November 2, 2022. Subsequent to the year-ended December 31, 2020, Jackpot acquired 2,986,900 additional
shares pursuant to a debt settlement agreement (see Exhibit 10.20*-Attached).
As
at December 31, 2020, the following persons or corporations beneficially own, directly or indirectly, or exercise control
over shares carrying more than 5% of the issued and outstanding shares of the Company:
Name of Shareholder and Municipality
|
|
Number of Issued Capital
|
|
Percentage of the Total Issued Share Capital*
|
Bedo H. Kalpakian, Delta, BC and Jacob H. Kalpakian Vancouver, BC and Isabel Kalpakian Vancouver, BC
|
|
|
1,492,575
|
(1)
|
|
|
20.47
|
%
|
Kape Family Holdings Inc. (formerly 87 Capital Inc. & JAMCO Capital Partners Inc.)
|
|
|
800,000
|
|
|
|
10.97
|
%
|
(1) Of these shares, 703,931 common shares are held by Bedo H. Kalpakian directly, 24,044 common shares are held by Jacob H. Kalpakian directly, 737,424 common shares are held by Isabel Kalpakian, 2,478,020 common shares are held by private companies which are controlled by Jacob H. Kalpakian, and 14,156 common shares are held by a family member of Jacob H. Kalpakian.
*
Based on 7,292,709, issued and outstanding common shares as of December 31, 2020.
As
at December 31, 2019, the following persons or corporations beneficially own, directly or indirectly, or exercise control
over shares carrying more than 5% of the issued and outstanding shares of the Company:
Name of Shareholder and Municipality
|
|
Number of Issued Capital
|
|
Percentage of the Total Issued Share Capital*
|
Bedo H. Kalpakian, Delta, BC and Jacob H. Kalpakian Vancouver, BC and Isabel Kalpakian Vancouver, BC
|
|
|
3,957,575
|
(1)
|
|
|
55.02
|
%
|
Kape Family Holdings Inc. (formerly 87 Capital Inc. & JAMCO Capital Partners Inc.)
|
|
|
800,000
|
|
|
|
11.12
|
%
|
(2) Of these shares, 703,931 common shares are held by Bedo H. Kalpakian directly, 24,044 common shares are held by Jacob H. Kalpakian directly, 737,424 common shares are held by Isabel Kalpakian, 2,478,020 common shares are held by private companies which are controlled by Jacob H. Kalpakian, and 14,156 common shares are held by a family member of Jacob H. Kalpakian.
*
Based on 7,192,709, issued and outstanding common shares as of December 31, 2019.
As
at December 31, 2018, the following persons or corporations beneficially own, directly or indirectly, or exercise control
over shares carrying more than 5% of the issued and outstanding shares of the Company:
Name of Shareholder and Municipality
|
|
Number of Issued Capital
|
|
Percentage of the Total Issued Share Capital*
|
Jackpot Digital Inc., Vancouver, BC (TSXV listed company)
|
|
|
3,449,985
|
|
|
|
48.64
|
%
|
Bedo H. Kalpakian, Delta, BC and Jacob H. Kalpakian Vancouver, BC and Isabel Kalpakian Vancouver, BC
|
|
|
1,579,575
|
(1)
|
|
|
22.27
|
%
|
(1) Of these shares, 703,931 common shares are held by Bedo H. Kalpakian directly, 24,044 common shares are held by Jacob H. Kalpakian directly, 824,424 common shares are held by Isabel Kalpakian, 10,020 common shares are held by private companies which are controlled by and in which Bedo H. Kalpakian and Jacob H. Kalpakian are the principal shareholders, 3,000 are held by a private company controlled by Jacob H. Kalpakian and 14,156 common shares are held by a family member of Jacob H. Kalpakian.
*
Based on 7,092,709, issued and outstanding common shares as of December 31, 2018.
7.A.1.(c)
All shareholders of the Company have equal voting rights. Holders of common shares of the Company are entitled to one vote
per share at all meetings of shareholders, to receive dividends as and when declared by the Directors, and to receive a pro-rata
share of the assets of the Company available for distribution to common shareholders in the event of the liquidation, dissolution
or winding up of the Company. There are no pre-emptive, conversion or surrender rights attached to the common shares of the Company.
7.A.2.
As of December 31, 2020, the Company had 7,292,709 issued and outstanding common shares. The number of outstanding common
shares of the Company held in the United States and the number of registered holders thereof were 4,601 outstanding common shares
and 6 registered shareholders (which include depository trusts which hold shares on behalf of non-registered shareholders).
7.A.3.
To the best of the Company’s knowledge the Company is not controlled directly or indirectly by any foreign government
or by any natural or legal person severally or jointly other than as disclosed in 7.A.1. in this Annual Report.
7.A.4.
To the best of the Company’s knowledge, there are no known arrangements which may at a subsequent date result in a change
of control of the Company.
Item
7.B. Related Party Transactions
The
Company shares office space and certain employees with Jackpot, a company related by certain common key management personnel.
During
April 2017, the Company together with Jackpot, a related company with common directors, entered into an office lease agreement
with an arm’s length party (the “Office Lease Agreement”). The Office Lease Agreement had a three-year term
with a commencement date of August 1, 2017. The Company’s share of the office basic rent and operating costs was $28,800
plus applicable taxes per annum.
As
at December 31, 2020 and 2019, the amounts due to related parties are unsecured, payable on demand which consist of the following:
|
|
2020
|
|
2019
|
Advances from directors (interest at prime plus 1%)
|
|
$
|
153,291
|
|
|
$
|
160,643
|
|
Entities controlled by directors (non-interest-bearing)
|
|
|
155,645
|
|
|
|
130,444
|
|
|
|
$
|
308,936
|
|
|
$
|
291,087
|
|
Included
in convertible debentures and accrued interest is $429,589 (2019 - $399,589) owing to the Chief Executive Officer and to a former
director of the Company.
During
the years ended December 31, 2020, 2019 and 2018, the following amounts were charged by related parties.
|
|
2020
|
|
2019
|
|
2018
|
Interest charged on amounts due to related parties
|
|
$
|
4,733
|
|
|
$
|
5,452
|
|
|
$
|
4,312
|
|
Interest on convertible debentures
|
|
|
30,000
|
|
|
|
30,000
|
|
|
|
30,000
|
|
Rent charged by entities with common directors
|
|
|
12,000
|
|
|
|
12,000
|
|
|
|
17,600
|
|
Office expenses charged by, and other expenses paid on behalf of the Company by a company with common directors
|
|
|
12,000
|
|
|
|
28,784
|
|
|
|
38,279
|
|
|
|
$
|
58,733
|
|
|
$
|
76,236
|
|
|
$
|
90,191
|
|
The
Company, together with Jackpot Digital Inc. (“Jackpot”), a related company with certain common directors, have entered
into an office lease agreement with an arm’s length party.
On
January 6, 2015, the Company closed convertible debentures financing with two directors of the Company for the Principal amount
of $250,000. The convertible debentures have a maturity date of twelve months from the date of closing, and bear interest at the
rate of 12% per annum payable on a quarterly basis. The convertible debentures are convertible into common shares of the Company
at a conversion price of $0.30 per share. The liability component of the convertible debentures was recognized initially at the
fair value of a similar liability that does not have an equity conversion option, which was calculated based on the application
of a market interest rate of 20%. The amount of $222,006 has been recorded under convertible debentures and the amount of $27,994
has been recorded under the equity portion of convertible debenture reserve. The Principal amount of $250,000 together with the
accrued interest of the convertible debentures became due and payable on January 6, 2016 (the “Due Date”). However,
on the Due Date the Company was unable to repay the Principal amount and the accrued interest to the two directors. As of the
date of this Annual Report, the Company has not repaid to the Company’s CEO Jacob Kalpakian and to its former director Bedo
Kalpakian the Principal amount of $250,000 together with the accrued interest. The convertible debentures are in default, however,
the Company has not been served with a default notice.
During
the year ended December 31, 2017, the Company has entered into debt settlement agreements with Jackpot, and with Kalpakian Bros.,
companies related to 37 Capital by certain common directors (see Exhibit 10.18 – Incorporated by reference). The
Company issued 4,249,985 units of the Company to Jackpot at the price of $0.09 per unit in settlement of the Company’s outstanding
debt to Jackpot for the total amount of $382,498.65 for shared office rent, office support services and miscellaneous office expenses
provided by Jackpot to the Company from August 1, 2014 up to September 30, 2017. In respect to the Company’s outstanding
debt to Kalpakian Bros. for the total amount of $15,750, the Company issued 175,000 units of the Company at the price of $0.09
per unit in settlement of the Company’s outstanding debt owed to Kalpakian Bros. for unpaid management fees from May 1,
2016 up to July 30, 2016. Each unit consists of one common share and one share purchase warrant. Each warrant is exercisable at
the price of $0.12 per share until November 2, 2022. The securities issued were subject to a hold period in accordance with applicable
securities laws. During September 2018, Jackpot sold 800,000 units of 37 Capital to JAMCO, an arm’s length party and during
2019 Jackpot sold 3,400,000 common shares of 37 Capital through the facilities of the Canadian Securities Exchange (CSE). As at
December 31, 2020, Jackpot owns 49,985 common shares in the capital of the Company representing approximately 0.69% of the Company’s
issued and outstanding common shares. In addition, Jackpot owns 3,449,985 share purchase warrants of the Company exercisable at
$0.12 per share until November 2, 2022. Subsequent to the year ended December 31, 2020, Jackpot acquired 2,986,900 additional
shares pursuant to a debt settlement agreement (see Exhibit 10.20*-Attached).
Jackpot
is related to the Company by virtue of the fact that Jackpot’s CEO and President, namely Jacob H. Kalpakian, is the President
& CEO of the Company. Furthermore, Gregory T. McFarlane and Neil Spellman are directors of both the Company and Jackpot.
The
Company had an agreement for office support services with Jackpot. Under the agreement, the Company was entitled to receive office
support services from Jackpot at a monthly rate of $7,000 plus applicable taxes. This agreement expired on April 30, 2018.
Effective as of May 1, 2018 the Company entered into a new agreement for office support services with Jackpot for a term of one
year. Under the agreement, the Company was entitled to receive office support services from Jackpot at a monthly rate of $1,000
plus applicable taxes. The agreement expired on April 30, 2019. On May 1, 2020, the Company and Jackpot renewed the office
support services agreement. The agreement has been further renewed which expires on April 30, 2022.
Previously,
the Company had a Management Services Agreement with Kalpakian Bros. which was terminated by mutual consent on August 1, 2016.
Previously,
the Company hired the services of J.W. Murton & Associates to provide geological services. J.W. Murton & Associates is
a private company owned by J.W. Murton, a former director of the Company.
Colt
was previously related to the Company by virtue of the fact that Bedo H. Kalpakian was the President and CEO of Colt and was the
former President, CEO and CFO of the Company, and Jacob H. Kalpakian was the Vice President and Director of Colt and is the President,
CEO and Director of the Company. Furthermore, J. Wayne Murton was a former Director of the Company and was a director of Colt.
The
Company is or was related to the following companies by common management and/or directors and/or officers:
-
|
|
Jackpot
Digital Inc. (“Jackpot”), a public company listed on the TSX Venture Exchange, also quoted in the U.S.A. on the OTCQB
of the OTC Markets Group and on the Berlin & Frankfurt Stock Exchanges. Jacob H. Kalpakian is an officer, director and shareholders
of Jackpot and Gregory T. McFarlane and Neil Spellman are directors of Jackpot. Bedo H. Kalpakian was a director and officer of
the Company and was an officer and director of Jackpot.
|
-
|
|
Kalpakian
Bros. of B.C. Ltd., a private company incorporated under the laws of the Province of British Columbia, the principal shareholder
is Jacob H. Kalpakian, director of the Company;
|
-
|
|
BHK Management
Inc., a private company incorporated under the laws of the Province of British Columbia, the principal shareholder of which is
Bedo H. Kalpakian, a former director of the Company;
|
-
|
|
30 Rock
Management Inc., a private company incorporated under the laws of the Province of British Columbia, the principal shareholder
of which is Jacob H. Kalpakian, a director of the Company;
|
-
|
|
Colt Resources
Inc. (“Colt”), is a public company. Colt was formerly related to the Company by certain directors and officers as
more particularly described in this Annual Report;
|
-
|
|
J.W. Murton
& Associates, a private company incorporated under the laws of the Province of British Columbia, the principal shareholder
of which is J. Wayne Murton, a former director of the Company;
|
-
|
|
Green Arrow
Resources Inc. (“Green Arrow”) is a public company listed on the TSX Venture Exchange. Jacob H. Kalpakian was a former
President and director of Green Arrow from April 2012 until November 2017. Neil Spellman and Bedo Kalpakian were also former directors
of Green Arrow until March 14, 2017 and November 30, 2017, respectively.
|
-
|
|
27 Red Capital
Inc., a reporting issuer incorporated under the laws of the Province of British Columbia. Jacob Kalpakian was a former officer
and director. Bedo H. Kalpakian and Neil Spellman were former directors of 27 Red Capital Inc.
|
-
|
|
4 Touchdowns
Capital Inc., a reporting issuer incorporated under the laws of the Province of British Columbia. Jacob Kalpakian was a former
officer and director. Bedo H. Kalpakian and Neil Spellman were former directors of 4 Touchdowns Capital Inc.
|
Item
7.C. Interests of Experts and Counsel
Not
Applicable.
ITEM
8. FINANCIAL INFORMATION
Item
8.A. Financial Statements and Other Information
The
Company’s Audited Consolidated Financial Statements together with the Management’s Discussion & Analysis for the
year ended December 31, 2020, are included in Item 17 of this Annual Report.
Item
8.A.7. Legal Proceedings
On
January 17, 2017 a Notice of Civil Claim was filed in the Supreme Court of British Columbia by 310047 B.C. Ltd. Against the Company
for the sum of $53,024.40 being monies due by the Company to 310047 B.C. Ltd. Pursuant to an assignment by the Company’s
solicitor Clark Wilson LLP.
On
February 21, 2017 an Assignment of Debt Agreement was entered into between Clark Wilson LLP, and 310047 B.C. Ltd., and JAMCO Capital
Partners Inc. (“JAMCO”) whereby the outstanding debt in the amount of $53,024.40 was assigned to JAMCO. The Company
has acknowledged this assignment to JAMCO and has agreed to adjust the Company’s financial accounts and records to reflect
this assignment. JAMCO is an arm’s length party to the Company. As a result of this Assignment of Debt Agreement, a Notice
of Discontinuance was filed in the Supreme Court of British Columbia on March 21, 2017 by 310047 B.C. Ltd. And Clark Wilson LLP
whereby the Civil Claim that was filed by 310047 B.C. Ltd. Against the Company has been discontinued. Subsequent to the year ended
December 31, 2020, the Company issued 1,060,488 common shares to JAMCO in settlement of the $53,023.40 pursuant to a debt settlement
agreement (see Exhibit 10.20*-Attached).
The
Company’s corporate legal counsels are: Harper Grey LLP, (Attention: Michael Kennedy), Suite 3200-650 West Georgia Street,
Vancouver BC V6B 4P7. The telefax number is (604) 669-9385.
Item
8.A.8. Dividends
The
Company entered into an Arrangement Agreement. For further particulars, please see Item 4. C. Organizational Structure.
Item
8. B. Significant Changes
As
a result of the completion of the Arrangement, 27 Red and 4 Touchdowns are independent entities and are no longer subsidiaries
of the Company.
During
2018, Jackpot owned 3,449,985 common shares of the Company which represented 48.64% of the Company’s then issued and outstanding
common shares as at December 31, 2018. As such, Jackpot had direct control of the Company. During the year ended December 31,
2019, Jackpot sold 3,400,000 common shares of the Company. As at December 31, 2020, Jackpot owns 49,985 common shares in the capital
of the Company representing approximately 0.69% of the Company’s issued and outstanding common shares. In addition, Jackpot
owns 3,449,985 share purchase warrants of the Company exercisable at $0.12 per share until November 2, 2022. Subsequent to the
year ended December 31, 2020, Jackpot acquired additional 2,986,900 shares pursuant to a debt settlement agreement (see Exhibit
10.20*-Attached).
ITEM
9. THE OFFER & LISTING
Item
9.A. (4) Listing Details
On
April 4, 1985, the Company’s common shares were listed and posted for trading on the Vancouver Stock Exchange, on the Montreal
Exchange on January 15, 1988 and, on the Nasdaq SmallCap Market on May 11, 1988. On July 12, 1991, the Company voluntarily de-listed
its common shares from the Montreal Exchange, and, on October 3, 1994, the Company’s shares were delisted from the Nasdaq
SmallCap Market. Effective October 4, 1994, the Company’s shares have been listed for trading on the OTC Bulletin Board,
and were listed on the OTCQB tier of the OTC Markets Group (“OTCQB”) until June 1, 2020. Presently, the Company’s
common shares are listed for trading on the PINK Sheets on the OTC market. Effective on November 29, 1999 the Vancouver Stock
Exchange became known as the CDNX as a result of the merger between the Vancouver Stock Exchange and the Alberta Stock Exchange.
On July 5, 2001, the Company made a formal application to the CDNX requesting the voluntary delisting of the Company’s common
shares from trading on the CDNX, as a result of which, the common shares of the Company were de-listed from trading on the CDNX
effective at the close of trading on July 31, 2001. The trading symbol of the Company’s common shares when they were listed
on the CDNX was “GGG”. During the period commencing from January, 2001, up to July 31, 2001, a total of 24,873 common
shares of the Company traded on the CDNX at prices ranging from a high of $6.00 to a low of $3.30.
On
July 30, 1986, the Company’s share capital split on the basis of one-old-for-two-new common shares. On May 25, 1992, the
Company’s share capital was consolidated on the basis of ten-old-for-one-new common share. On April 25, 2000, the Company’s
share capital was consolidated on the basis of fifteen-old-for-one-new common share. On May 2, 2002, the Company’s name
was changed to Lucky 1 Enterprises Inc. and its share capital was consolidated on the basis of five-old-for-one-new common share
and its authorized share capital was subsequently increased to 200,000,000 common shares without par value. On January 17, 2005,
the Company’s name was changed to Bronx Ventures Inc. and its share capital was consolidated on the basis of thirty-five-old-for-one-new-common
share, and its authorized share capital was subsequently increased to an unlimited number of common and preferred shares without
par value. Effective at the opening of business on January 24, 2005, the common shares of Lucky 1 Enterprises Inc. were de-listed,
and the common shares of Bronx Ventures Inc. commenced trading on the OTC Bulletin Board and were listed on the OTC Bulletin Board
in the U.S.A. under the trading symbol “BRXVF”. On March 19, 2007, the Company changed its name to Zab Resources Inc.
and subdivided its stock on a one (1) old for 50 (new) shares basis. As a result, the shares of Bronx Ventures Inc. were de-listed
from trading and the shares of Zab Resources Inc. commenced trading on the OTC Bulletin Board and were listed on the OTC Bulletin
Board in the USA under the symbol “ZABRF” on March 22, 2007.
Effective
November 28, 2007, the common shares of the Company have been listed for trading on the Canadian Securities Exchange (“CSE”)
(formerly Canadian National Stock Exchange) under the trading symbol “ZABK”. On October 17, 2008, the Company’s
CSE symbol was changed to “ZAB” pursuant to the CSE adopting a three character symbol format.
On
April 16, 2009, the Company changed its name from Zab Resources Inc. (“Zab”) to Kokomo Enterprises Inc. (“Kokomo”)
and the Company’s share capital was consolidated on the basis of 25 (old) shares of Zab for 1 (new) share of Kokomo. As
a result, the shares of Zab were de-listed from trading and the shares of Kokomo commenced trading in Canada on the CSE under
the symbol “KKO”, and in the U.S.A. the shares of Kokomo commenced trading on the OTCQB under the symbol “KKOEF”.
The Cusip number of the Company’s common shares was 500323100.
On
August 31, 2012, the Company changed its name from Kokomo Enterprises Inc. (“Kokomo”) to High 5 Ventures Inc. (“High
5”) and the Company’s share capital was consolidated on the basis of 15 (old) shares of Kokomo for 1 (new) share of
High 5. As a result, the shares of Kokomo were de-listed from trading and the shares of High 5 commenced trading in Canada on
the CSE under the symbol “HHH” and in the USA, the shares of High 5 commenced trading on the OTCQB under the symbol
“HHHEF”. The Cusip number of the Company’s common shares is 42966V105.
On
July 7, 2014, the Company’s share capital was consolidated on the basis of 6 (old) common shares for 1 (new) common share
and the Company changed its name to 37 Capital Inc. (“37 Capital”). As a result, the shares of High 5 were de-listed
from trading and the shares of 37 Capital commenced trading in Canada on the CSE under the symbol “JJJ”, and in the
U.S.A. the trading symbol of the Company’s shares remains unchanged on the OTCQB and trade under the symbol “HHHEF”.
The Cusip number of the Company’s common shares is 88429G102.
On
June 21, 2019 the CSE deemed that the Company is inactive pursuant to the policies of the CSE, as a result the CSE changed the
Company’s trading symbol to “JJJ.X”. The Company's common shares traded on the OTCQB tier of the OTC markets
under the trading symbol “HHHEF” until June 1, 2020. Presently, the Company’s common shares are listed for trading
on the PINK Sheets on the OTC market under the same trading symbol “HHHEF”.
The
following tables set forth the market price range and trading volumes of the common shares of the Company on the OTCQB, Pink Sheets
and on the CSE for the periods indicated.
OTCQB/Pink
Sheets – OTC Markets Group
Trading
Range
Five Most Recent Financial Years
|
|
U.S.$ High
|
|
U.S.$ Low
|
|
Volume
|
2016
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
2017
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
2018
|
|
|
0.52
|
|
|
|
0.10
|
|
|
|
13,691
|
|
2019
|
|
|
0.152
|
|
|
|
0.05
|
|
|
|
10,922
|
|
2020
|
|
|
0.0561
|
|
|
|
0.0241
|
|
|
|
8,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Two Most Recent Financial Years
|
|
|
|
|
|
|
|
|
|
|
|
|
Year 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Jan 1 – Mar 31
|
|
|
0.119
|
|
|
|
0.073
|
|
|
|
4,191
|
|
Apr 1 – Jun 30
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0
|
|
Jul 1 – Sept 30
|
|
|
0.152
|
|
|
|
0.08
|
|
|
|
1,345
|
|
Oct 1 – Dec 31
|
|
|
0.119
|
|
|
|
0.05
|
|
|
|
5,386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Jan 1 – Mar 31
|
|
|
0.0378
|
|
|
|
0.0287
|
|
|
|
3,158
|
|
Apr 1 – Jun 30
|
|
|
0.05
|
|
|
|
0.0241
|
|
|
|
4,000
|
|
Jul 1 – Sept 30
|
|
|
0.0561
|
|
|
|
0.05
|
|
|
|
717
|
|
Oct 1 – Dec 31
|
|
|
0.0421
|
|
|
|
0.0421
|
|
|
|
150
|
|
CSE
Canadian
Stock Exchange
(formerly
Canadian National Stock Exchange)
Trading
Range
|
|
Cdn $ High
|
|
Cdn $ Low
|
|
Volume
|
Five Most Recent Financial Years
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
0.20
|
|
|
|
0.025
|
|
|
|
800,620
|
|
2017
|
|
|
0.20
|
|
|
|
0.12
|
|
|
|
3,500
|
|
2018
|
|
|
0.30
|
|
|
|
0.10
|
|
|
|
575,157
|
|
2019
|
|
|
0.29
|
|
|
|
0.01
|
|
|
|
4,463,333
|
|
2020
|
|
|
0.06
|
|
|
|
0.01
|
|
|
|
1,431,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Two Most Recent Financial Years
|
|
|
|
|
|
|
|
|
|
|
|
|
Year 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Jan 1 – Mar 31
|
|
|
0.29
|
|
|
|
.09
|
|
|
|
299,833
|
|
Apr 1 – Jun 30
|
|
|
0.135
|
|
|
|
0.05
|
|
|
|
2,304,000
|
|
Jul 1 – Sep 30
|
|
|
0.10
|
|
|
|
0.02
|
|
|
|
1,472,000
|
|
Oct 1 – Dec 31
|
|
|
0.07
|
|
|
|
0.01
|
|
|
|
387,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Jan 1 – Mar 31
|
|
|
0.05
|
|
|
|
0.01
|
|
|
|
884,091
|
|
Apr 1 – Jun 30
|
|
|
0.05
|
|
|
|
0.03
|
|
|
|
37,500
|
|
Jul 1 – Sep 30
|
|
|
0.15
|
|
|
|
0.05
|
|
|
|
449,345
|
|
Oct 1 – Dec 31
|
|
|
0.06
|
|
|
|
0.05
|
|
|
|
60,787
|
|
Item
9.C. Markets
On
April 4, 1985, the Company’s common shares were listed and posted for trading on the Vancouver Stock Exchange, on the Montreal
Exchange on January 15, 1988 and, on the Nasdaq SmallCap Market on May 11, 1988. On July 12, 1991, the Company voluntarily de-listed
its common shares from the Montreal Exchange, and, on October 3, 1994, the Company’s shares were de-listed from the Nasdaq
SmallCap Market. On October 4, 1994, the Company’s shares were listed for trading on the OTC Bulletin Board. On November
29, 1999 the Vancouver Stock Exchange became known as the CDNX as a result of the merger between the Vancouver Stock Exchange
and the Alberta Stock Exchange. On July 5, 2001, the Company made a formal application to the CDNX requesting the voluntary delisting
of the Company’s common shares from trading on the CDNX, as a result of which, the common shares of the Company were de-listed
from trading on the CDNX effective at the close of trading on July 31, 2001.
On
November 28, 2007, the common shares of the Company were listed for trading on the Canadian Stock Exchange (“CSE”)
(formerly Canadian National Stock Exchange) under the trading symbol “ZABK”. On October 17, 2008, the Company’s
CSE symbol was changed to “ZAB” pursuant to the CSE adopting a three-character symbol format.
On
April 16, 2009, the Company changed its name from Zab Resources Inc. (“Zab”) to Kokomo Enterprises Inc. (“Kokomo”),
and the Company consolidated its capital stock on the basis of 25 (old) shares of Zab for 1 (new) share of Kokomo. As a result,
the shares of Zab were de-listed from trading and the shares of Kokomo commenced trading in Canada on the CSE under the symbol
“KKO”, and in the U.S.A. the shares of Kokomo commenced trading on the OTCQB under the symbol “KKOEF”.
The Cusip number of the Company’s common shares was 500323100.
On
August 31, 2012, the Company changed its name from Kokomo Enterprises Inc. (“Kokomo”) to High 5 Ventures Inc. (“High
5”) and the Company’s share capital was consolidated on the basis of 15 (old) shares of Kokomo for 1 (new) share of
High 5. As a result, the shares of Kokomo were de-listed from trading and the shares of High 5 commenced trading in Canada on
the CSE under the symbol “HHH” and in the USA, the shares of High 5 commenced trading on the OTCQB under the symbol
“HHHEF”. The Cusip number of the Company’s common shares is 42966V105.
On
July 7, 2014, the Company changed its name from High 5 Ventures Inc. (“High 5”) to 37 Capital Inc. (“37 Capital”)
and consolidated its share capital on the basis of one new 37 Capital common share for every six old High 5 common shares (1:6).
As a result, the Company’s trading symbol on the CSE is “JJJ” and in the USA, the trading symbol of the Company’s
shares remains unchanged on the OTCQB and trade under the symbol “HHHEF”. The Cusip number of the Company’s
common shares is 88429G102.
On
June 21, 2019 the CSE deemed that the Company is inactive pursuant to the policies of the CSE, as a result the CSE changed the
Company’s trading symbol to “JJJ.X”. The Company's common shares traded on the OTCQB tier of the OTC markets
under the trading symbol “HHHEF” until June 1, 2020. Presently, the Company’s common shares are listed for trading
on the PINK Sheets on the OTC market under the same trading symbol “HHHEF”.
ITEM
10. ADDITIONAL INFORMATION
Item
10. A. Share Capital
Effective
July 7, 2014, the Company’s name was changed to 37 Capital Inc. (“37 Capital”), its share capital was consolidated
on the basis of 6 (old) shares of High 5 for 1 (new) share of 37 Capital.
At
the Company’s 2005 Special General Meeting held on January 10, 2005, the shareholders approved the deletion of the Pre-Existing
Company Provisions in the notice of Articles of the Company and approved the alteration of the Company’s Notice of Articles.
The shareholders approved the increase of the Company’s authorized capital to an unlimited number of Common and Preferred
Shares, both without par value, approved the adoption of new articles in substitution for the old articles of the Company (Exhibit
3.2 – Incorporated by reference).
The
authorized share capital of the Company consists of an unlimited number of common and preferred shares without par value of which
7,292,709 common shares are issued and outstanding as of December 31, 2020. No preferred shares have been issued.
Holders
of common shares of the Company are entitled to one vote per share at all meetings of shareholders of the Company, to receive
dividends as and when declared by the Directors, and to receive a pro-rata share of the assets of the Company available for distribution
to common shareholders in the event of the liquidation, dissolution or winding up of the Company. There are no pre-emptive, conversion
or surrender rights attached to the common shares of the Company.
All
shares have been issued pursuant to resolutions of the Board of Directors of the Company.
Outstanding Share Data
|
|
No. of Common Shares
|
|
No. of Preferred Shares
|
|
Exercise Price per Share
|
|
Expiry Date
|
Issued and Outstanding as at April 30, 2021
|
|
|
22,479,739
|
|
|
|
Nil
|
|
|
N/A
|
|
N/A
|
Warrants as at April 30, 2021
|
|
|
4,324,985
400,000
|
|
|
|
Nil
|
|
|
Cdn $0.12
Cdn $0.10
|
|
November 2, 2022
January 15, 2023
|
Fully Diluted as at April 30, 2021
|
|
|
27,204,724
|
|
|
|
Nil
|
|
|
|
|
|
Item
10.A.4. Warrants
All
warrants have been issued pursuant to resolutions of the Board of Directors of the Company.
The
following summarizes the warrants that have been granted, exercised, cancelled or expired during the years ended December 31,
2020, 2019 and 2018:
Warrants
activity for the years ended December 31, 2020, 2019 and 2018 are as follows:
|
|
Number of Warrants
|
|
Weighted Average Exercise Price
|
Balance, December 31, 2017
|
|
|
5,428,318
|
|
|
$
|
0.12
|
|
Issued
|
|
|
3,333
|
|
|
$
|
1.50
|
|
Exercised
|
|
|
(600,000
|
)
|
|
|
0.13
|
|
Balance, December 31, 2018
|
|
|
4,824,985
|
|
|
$
|
0.12
|
|
Balance, December 31, 2019 and 2020
|
|
|
4,824,985
|
|
|
$
|
0.12
|
|
As
of December 31, 2020, the following warrants were outstanding:
Expiry Date
|
|
Exercise Price
|
|
Number of
Warrants Outstanding
|
January 4, 2021
|
|
|
0.135
|
|
|
|
500,000
|
|
November 2, 2022
|
|
|
0.12
|
|
|
|
4,324,985
|
|
|
|
|
|
|
|
|
4,824,985
|
|
The
weighted average remaining contractual life for warrants outstanding at December 31, 2020 is 1.65 years (2019 – 2.65
years).
Item
10.A.5. Stock Options
From
time to time, the Company grants stock options to its directors, employees and consultants on terms and conditions acceptable
to the Regulatory Authorities. The stock options entitle the holders to acquire common shares of the Company from treasury (see
Exhibit 13.3 – Incorporated by reference).
The
2015 Stock Option Plan was re-approved by the Shareholders at the Company’s Annual General Meeting held on November 20,
2020. The Company’s 2015 Stock Option Plan provides that the Board of Directors of the Company may grant to directors, officers,
employees and consultants of the Company options to acquire up to 20% of the issued and outstanding common shares of the Company
calculated from time to time on a rolling basis. The terms of the options are determined at the date of grant (see Exhibit
13.4* Attached).
As
of December 31, 2020, there were no stock options outstanding (December 31, 2019: Nil) (December 31, 2018: Nil).
Item
10. A.6. History of Share Capital
There
are no special voting rights attached to any of the Company’s issued and outstanding shares. All shares which were issued
from the Company’s Treasury were issued for cash or in the case of Finder’s Fees for services rendered or shares for
debt in the case of outstanding debts.
CAPITAL
STOCK
Authorized:
Unlimited number of Common and Preferred shares without par value. No preferred shares have been issued.
|
|
|
Capital Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares
|
|
|
|
Amount
|
|
|
|
Equity Portion of Convertible Debentures Reserve
|
|
|
|
Deficit
|
|
|
|
Total Stockholders’ Deficiency
|
|
Balance, December 31, 2018
|
|
|
7,092,709
|
|
|
$
|
25,849,950
|
|
|
$
|
33,706
|
|
|
$
|
(26,914,802
|
)
|
|
$
|
(1,031,146
|
)
|
Net loss for the year
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(147,137
|
)
|
|
|
(147,137
|
)
|
Shares issued for mineral property interest
|
|
|
100,000
|
|
|
|
7,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,500
|
|
Balance, December 31, 2019
|
|
|
7,192,709
|
|
|
|
25,857,450
|
|
|
|
33,706
|
|
|
|
(27,061,939
|
)
|
|
|
(1,170,783
|
)
|
Net loss for the year
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(133,379
|
)
|
|
|
(133,379
|
)
|
Shares issued for mineral property interest
|
|
|
100,000
|
|
|
|
7,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,500
|
|
Balance, December 31, 2020
|
|
|
7,292,709
|
|
|
$
|
25,864,950
|
|
|
$
|
33,706
|
|
|
$
|
(27,195,318
|
)
|
|
$
|
(1,296,662
|
)
|
Item
10.B. Articles of Association
The
Company’s shareholders considered and approved a special resolution to adopt new Articles for the Company at the Company’s
Special Meeting which was held on January 10, 2005, (Exhibit 3.2 – Incorporated by reference). On September 18, 2014, the
Company’s shareholders considered and approved a resolution to adopt an Amendment to the Articles for the implementation
of the Advance Notice Provisions (see Exhibit 3 – Incorporated by reference).
Item
10. C. Material Contracts
On
March 26, 2004, the Company entered into an Option Agreement (Exhibit 10.5 – Incorporated by reference) with an arm’s
length party (the “Arm’s Length Party”) in respect to certain mineral claims, which are situated in the Kamloops
Mining Division in British Columbia (the “Extra High Claims”). Pursuant to the terms of the Option Agreement as amended
on March 8, 2005, the Company obtained the right to acquire a 100% undivided interest in the Extra High Claims, subject to a 1.5%
net smelter returns royalty (the “Arm’s Length Royalty”), by making staged cash payments totalling $150,000
and incurring exploration expenditures on the Extra High Claims totalling $500,000 over a period of three years. Upon the Company
earning a 100% undivided interest in the Extra High Claims, the Company obtained the right to purchase at any time 50% of the
Arm’s Length Royalty by paying to the Arm’s Length Party the sum of $500,000 leaving the Arm’s Length Party
with a 0.75% NSR royalty.
On
September 8, 2006, the Company entered into an Option Agreement (Exhibit 10.11 – Incorporated by reference) with Colt Resources
Inc. (“Colt”) whereby Colt obtained the right to acquire a 50% undivided interest, subject to the Arm’s Length
Royalty, in the Extra High Claims by incurring exploration expenditures of $240,000 on the Extra High Claims by no later than
February 28, 2007 and by making cash payments to the Company totaling $133,770 by no later than March 26, 2007.
On September 12, 2006, the Company and the Arm’s Length Party amended the Option Agreement (Exhibit 10.5.1 – Incorporated
by reference) by entering into an Amending Agreement whereby the Company was granted an extension period until June 26, 2007 to
make the balance of cash payments to the Arm’s Length Party and incur the remaining exploration expenditures on the Extra
High Claims. On October 31, 2006, the Company and Colt entered into an Amending Agreement (Exhibit 10.11.2 – Incorporated
by reference) whereby Colt was granted an extension period until June 26, 2007 to incur exploration expenditures on the Extra
High Claims and to make the cash payments to the Company. Upon Colt earning its 50% undivided interest in the Extra High Claims,
the Company and Colt would thereafter equally contribute to all future exploration costs. If any party would fail to contribute
its share of future exploration costs, then its respective interest would be diluted on a straight-line basis. If any party’s
interest would be diluted to less than a 10% interest, then that party’s interest in the Extra High Claims would be converted
into a 0.5% NSR royalty. On April 16, 2007, the Company and the Arm’s Length Party amended the Option Agreement (Exhibit
10.5.2 – Incorporated by reference) by entering into an Amending Agreement whereby the Company was released of the requirement
to incur the remaining exploration expenditures but instead was required to make a cash payment of $60,000 (paid) to the Arm’s
Length Party.
On
June 14, 2007, the Company amended its Option Agreement with Colt whereby Colt would have the right to acquire a 34% interest
in the Extra High Claims by making cash payments to the Company totalling $193,770 by no later than June 26, 2007. The Amending
Agreement released Colt of the requirement to incur $240,000 in exploration expenditures on the Extra High Claims. On June 26,
2007, the Company made its final payment to the Arm’s Length Party thereby earning a 100% undivided interest in the Extra
High Claims subject only to the Arm’s Length Royalty. Colt made its final payment to the Company and earned its 34% interest
in the Extra High Claims, thus reducing the Company’s interest to 66%.
On
January 21, 2008, the Company entered into an Option Agreement (the “2008 Option Agreement”) (see Exhibit 10.11.3
– Incorporated by reference) with Colt whereby Colt was granted the right and option to acquire, in two separate equal tranches,
the Company’s 66% undivided interest in the Extra High Claims. Pursuant to the 2008 Option Agreement, Colt exercised the
first tranche of the option by making a cash payment of $250,000 to the Company thus acquiring from the Company a 33% undivided
interest in the Extra High Claims. Colt did not exercise the second tranche of the option. As a result of exercising the first
tranche of the option, Colt held a 67% undivided interest in the Extra High Claims and became the operator of the Extra High Claims,
and the Company held a 33% undivided interest in the Extra High Claims.
On
October 31, 2019, as amended on November 4, 2019, the Company entered into a Property Purchase Agreement with Colt Resources Inc.
(“Colt”) whereby the Company has purchased Colt’s 67% right, interest and title in and to the Extra High Property
for a cash consideration of $100,000 of which $25,000 was paid on the closing date of the Property Purchase Agreement and the
balance i.e. $75,000 is payable after eighteen months from the closing date. Additionally, the Company is obligated to pay Colt
a 0.5% NSR from commercial production which may be purchased by the Company at any time by making a payment of $500,000 (see Exhibit
10.11.5 – Incorporated by reference). As at December 31, 2019, the Company owns a 100% undivided right, interest and title
in and to the Extra High Property which covers an area of 650 hectares.
During
the year ended December 31, 2008, the Company sold all of its Ontario Lithium Properties to an arm’s length party for gross
proceeds of $54,500 consisting of $50,000 cash payment and marketable securities of $4,500 valued at the quoted market price at
receipt (see Exhibit 10.12 – Incorporated by reference). Furthermore, the arm’s length party is obligated to pay to
the Company one-half percent (1/2%) gross receipts royalty after six months from the date of commencement of commercial production
from the Ontario Lithium Properties. These properties were previously written-off at the end of fiscal year 2000.
On
September 30, 2019, the Company entered into and executed a Property Option Agreement with Eagle Plains Resources Inc. of Cranbrook,
BC (“Eagle Plains”) in respect to the Acacia Property whereby the Company has the right and option to acquire a 60%
interest in the Acacia Property by issuing to Eagle Plains in stages a total of 300,000 common shares in the capital of the Company
and by incurring a total amount of $2,500,000 in property related expenditures over a period of five years (see Exhibit
10.19 – Incorporated by reference).
On
October 15, 2020, the Company entered into an Amendment Agreement to the Acacia Property Option Agreement with Eagle Plains Resources
Inc. (“Eagle Plains”) whereby the Company a) shall issue to Eagle Plains 50,000 common shares in lieu of not having
incurred the required $100,000 in property related expenditures during the 1st Anniversary of the Acacia Property Option Agreement,
b) shall issue to Eagle Plains an additional 50,000 common shares in order to continue with the 2nd Period of the Acacia Property
Option Agreement and c) has made a firm commitment to incur a total amount of $200,000 in property related expenditures during
the 2nd Period of the Acacia Property Option Agreement. All the other terms and conditions of the Acacia Property Option Agreement
shall remain unchanged and shall be in full force and effect. Consequently, on October 16, 2020, the Company issued 100,000 common
shares in the capital of the Company to Eagle Plains at the deemed price of $0.075 per share which were subject to a hold period
which expired on February 17, 2021.
On
August 1, 2016, the Management Services Agreement with Kalpakian Bros. of B.C. Ltd. (“Kalpakian Bros.”) was terminated
by mutual consent (Exhibits 10.4, 10.4.1, 10.4.2, 10.4.3, 10.4.4, 10.4.5, 10.4.5.6 - Incorporated by reference). The principal
of Kalpakian Bros. is Jacob H. Kalpakian, the President, CEO and director of the Company. Bedo H. Kalpakian, former President,
CEO, CFO and director of the Company was a principal of Kalpakian Bros. until December 31, 2019.
On
September 12, 2017, the Company entered into a Consulting Agreement with 27 Red whereby the Company provided certain consultancy
and advisory services to 27 Red for a three month period (the “Term of the Agreement”). The fee paid by 27 Red to
the Company was $18,188.65 for the Term of the Agreement (see Exhibit 10.16 – Incorporated by reference).
On
October 12, 2017, the Company entered into a Consulting Agreement with 4 Touchdowns whereby the Company provided certain consultancy
and advisory services to 4 Touchdowns for a three month period (the “Term of the Agreement”). The fee paid by 4 Touchdowns
to the Company was $18,188.65 for the Term of the Agreement (see Exhibit 10.17 – Incorporated by reference).
The
Company has entered into debt settlement agreements with Jackpot, and with Kalpakian Bros., companies related to 37 Capital by
certain common directors (see Exhibit 10.18 Incorporated by reference). The Company has issued 4,249,985 units of the Company
to Jackpot at the price of $0.09 per unit in settlement of the Company’s outstanding debt to Jackpot for the total amount
of $382,498.65 for shared office rent, office support services and miscellaneous office expenses provided by Jackpot to the Company
from August 1, 2014 up to September 30, 2017. In respect to the Company’s outstanding debt to Kalpakian Bros. for the total
amount of $15,750, the Company has issued 175,000 units of the Company at the price of $0.09 per unit in settlement of the Company’s
outstanding debt owed to Kalpakian Bros. for unpaid management fees from May 1, 2016 up to July 30, 2016. Each unit consists of
one common share and one share purchase warrant. Each warrant is exercisable at the price of $0.12 per share until November 2,
2022. The securities issued were subject to a hold period in accordance with applicable securities laws. During September 2018,
Jackpot sold 800,000 units of 37 Capital to an arm’s length party, and during the year ended December 31, 2019, Jackpot
sold 3,400,000 common shares of the Company. As at December 31, 2020, Jackpot owns 49,985 common shares in the capital of the
Company representing approximately 0.69% of the Company’s issued and outstanding common shares. In addition, Jackpot owns
3,449,985 share purchase warrants of the Company exercisable at $0.12 per share until November 2, 2022.
On
December 11, 2020, the Company entered into debt settlement agreements with certain creditors (the “Company’s Creditors”)
whereby the Company’s Creditors agreed to accept common shares in the capital of the Company as full and final settlement
of amounts owing to the Company’s Creditors. Pursuant to the debt settlement agreements, on January 25, 2021, the Company
issued 14,787,030 common shares of the Company (the “Debt Settlement”) at a deemed price of $0.05 per common share
to certain creditors, including to a related party and a director and officer of the Company (the “Creditors”) (see
Exhibit 10.20*-Attached).
Item
10. D. Exchange Controls
|
(a)
|
No
governmental laws, decrees or regulations in the Province of British Columbia, Canada,
restrict export or import of capital, including, but not limited to, foreign exchange
controls, or affect the remittance of dividends, interest or other payments to non-resident
holders of the Registrant’s securities.
|
|
(b)
|
There
are no limitations on the right of non-resident or foreign owners to hold or vote such
securities imposed by foreign law or by the charter or other constituent document of
the Registrant.
|
Item
10.E. Taxation
General
The
following comments summarize the material Canadian and U.S. Federal Income Tax consequences for a shareholder of the Registrant
who is a non-resident of Canada and who is a resident of the United States subject to taxation under the laws of the United States.
The
following is based upon the current provisions of the Income Tax Act (Canada) (the “Tax Act”) and regulations thereunder,
the U.S. Internal Revenue Code of 1986 (the “Code”) and regulations thereunder, the Canada-United States Income Tax
Convention, 1980 (the “Convention”), the current administrative policies and practices published by Canada Revenue
Agency or by the U.S. Internal Revenue Service and all specific proposals to amend the Tax Act and regulations thereunder that
have been publicly announced by the Minister of Finance (Canada) prior to the date hereof, and judicial decisions, all of which
are subject to change. The following does not take into account the tax laws of the various provinces or territories of Canada
or the tax laws of the various state and local jurisdictions of the United States or foreign jurisdictions.
The
following is intended to be a general description of the Canadian and U.S. Federal income tax considerations material to a purchase
of the common shares and is not intended to be, nor should it be construed to be, legal or tax advice to any prospective holders.
The following does not address consequences peculiar to any holder subject to special provision of Canadian or U.S. income tax
law. Therefore, prospective holders are urged to consult their own tax advisors with respect to the tax consequences of an investment
in the common shares of 37 Capital Inc.
CANADIAN
FEDERAL INCOME TAX CONSIDERATIONS
Dividends
on Common Stock
Under
the Tax Act, a non-resident of Canada is subject to withholding tax at the rate of 25% on dividends from a corporation resident
in Canada. The Convention reduces this rate to 15% for a shareholder resident in the United States. Withholding tax is further
reduced to 5% if the United States resident shareholder is a corporation that beneficially owns at least 10% of the voting stock
of the corporation paying the dividend.
Exemptions
from Withholding Tax
The
Convention provides exemption from Canadian income tax on dividends paid to religious, scientific, literary, educational or charitable
organizations or to an organization constituted and operated exclusively to administer or provide benefits under one or more pension,
retirement or employee benefit funds or plans. To qualify for exemption such organizations must be resident in the United States
and be exempt from income tax under the laws of the United States.
Dispositions
of Common Stock
The
following comments apply only to a shareholder whose Common stock constitutes capital property to him/her for purposes of the
Income Tax Act.
Common
stock will generally constitute capital property unless the holder is a trader or dealer in securities or is engaged in a venture
in the nature of trade in respect of Common Stock.
Common
stock of a resident public corporation will constitute taxable Canadian property of a shareholder at a particular time if at any
time in the preceding five (5) years, 25% or more of the issued shares of any class of the capital stock of the Registrant belonged
to the non-resident shareholder, persons with whom the non-resident did not deal at arm’s length, or to the non-resident
shareholder and persons with whom the non-resident shareholder did not deal at arm’s length.
Under
the Tax Act, a non-resident of Canada is subject to Canadian tax on taxable capital gains from dispositions of taxable Canadian
property and may deduct allowable capital losses from dispositions of taxable Canadian property. If the shares are considered
taxable Canadian property, the vendor may be required to withhold tax pursuant to section 116 of the Tax Act.
Upon
disposal of capital property the amount, if any, by which a taxpayer’s proceeds of disposition exceed or are exceeded by
the adjusted cost base of the capital property (including expenses of disposition) represent the capital gain (or loss) on disposition
of the capital property. One half of the gain (the “taxable capital gain”) is brought into income and taxed at normal
rates. One half of the loss (the “allowable capital loss”) can be deducted from taxable capital gains realized in
the same year. Pursuant to the Federal Budget which was announced on February 28, 2000, the taxable capital gain and allowable
capital loss inclusion rate was reduced from three-fourths to two-thirds for dispositions after February 27, 2000. On October
18, 2000, the Federal Budget further reduced the inclusion rate from two-thirds to one-half for dispositions after October 17,
2000. For dispositions of taxable Canadian property any excess of allowable capital losses over taxable capital gains becomes
a “net capital loss” which can be carried to other years to reduce taxable capital gains from the disposition of such
property.
The
Convention gives protection to United States residents from Canadian tax on certain gains derived from the alienation of property.
There is no protection for a gain on a disposition of shares the value of which is derived principally from real property in Canada.
Protection under the Convention will be available as long as the Registrant remains a Canadian public corporation or its shares
continue to be listed on a prescribed stock exchange.
Canada
Revenue Agency has indicated that it considers the protection of the Convention with respect to capital gains extend to a “deemed
disposition” under the Tax Act, including the “deemed disposition” arising upon the death of a taxpayer.
U.S.
FEDERAL INCOME TAX CONSIDERATIONS
37
CAPITAL INC. (“37 Capital”) is classified as a Passive Foreign Investment company (“PFIC”) for U.S. federal
income tax purposes since the following conditions have applied for at least one taxable year since 1986:
1)
75% or more of its gross income has been passive;
2)
The average percentage of its assets producing passive income is at least 50%.
The
following is intended to be a general description of the U.S. Federal income tax considerations material to a purchase of the
common shares and is not intended to be, nor should it be construed to be, legal or tax advice to any prospective holders. Prospective
holders are urged to consult their own tax advisors with respect to the tax consequences of an investment in the common shares
of 37 Capital.
Since
37 Capital has satisfied the PFIC criteria for at least one taxable year since 1986, while a shareholder holds shares in 37 Capital,
it remains a PFIC as to that shareholder even if it no longer meets the income or asset test. Classification as a PFIC will create
U.S. tax consequences to a U.S. Shareholder that are unique to the PFIC provisions and that are not encountered in other investments.
Generally,
a U.S. shareholder will realize ordinary income on the receipt of cash dividends or property distributions from an investment
in the shares of a foreign corporation to the extent such dividends are paid out of the foreign company’s current accumulated
earnings and profits. To the extent of any withholding taxes, both individual and corporate investors must include such taxes
in income and, in turn, claim a foreign tax credit. Certain corporate investors are also entitled to gross up the underlying foreign
corporate income taxes and claim a foreign tax credit.
Thus,
under the general rule, no U.S. federal income tax consequences occur until an actual dividend is paid. Although this general
rule can apply in a PFIC investment, there are significant deviations from this general rule and many elections available to a
U.S. shareholder that can alter the U.S. federal income tax consequences. Such consequences will be unique to each U.S. shareholder.
In
the absence of any PFIC elections, a U.S. shareholder of a PFIC, will be taxed under the excess distribution method. Under this
method, where a current year dividend exceeds 125% of the average of dividends during the preceding three taxable years, the excess
must be allocated rateably to each day in the taxpayer’s holding period.
The
amount of the excess allocated to the current year and to years when the corporation was not a PFIC is included in the shareholder’s
gross income for the year of the distribution. The remainder of the excess is not included in gross income, but the U.S. shareholder
must pay a deferred tax amount by allocating the remaining excess to all PFIC years, re-computing the tax for each PFIC year and
computing and paying the resultant interest on the recomputed tax for each PFIC year. As indicated above, foreign tax credit relief
is available for withholding taxes for both individual and corporate investors. Relief for underlying corporate tax is only available
for certain corporate investors.
Under
the excess distribution method, gain on the disposition of PFIC shares results in the same allocation process; gross income inclusion;
tax re-computation; and interest charges as an excess distribution.
In
lieu of the excess distribution method, a U.S. shareholder may elect to treat a PFIC as a Qualified Electing Fund (“QEF”)
and be taxed under the QEF method. If that election is made, the U.S. shareholder will be taxed currently on its pro-rata share
of the earnings of the QEF. The current income inclusion eliminates the interest charge under the excess distribution method.
Thus, unlike the excess distribution method that requires the receipt of cash from an actual dividend or sale, the QEF method
invokes taxation without the receipt of cash.
Shareholders,
who make a QEF election may, or may not, remain subject to tax under the excess distribution method. If the U.S. shareholder makes
the QEF election for the foreign corporation’s first tax year as a PFIC that is included in the shareholder’s holding
period, the excess distribution will not apply to the shareholder. Thus, this type of shareholder will include its pro-rata share
of PFIC earnings as a dividend, claim the appropriate foreign tax credit, and not face any interest charge.
If
the shareholder makes the QEF election at a later time, in the absence of any other PFIC election, current taxation under the
QEF method will apply prospectively. However, the excess distribution method continues to apply prior to the effective date of
the QEF election.
If
the shareholder makes the QEF election at a later time, the shareholder has an additional option to make a purging election. If
a purging election is made, the PFIC stock would be treated as if it were sold and the gain treated as an excess distribution
requiring: a gross income inclusion; allocation to PFIC years in the shareholder’s holding period, a tax re-computation
for PFIC years in the shareholder’s holding period; and an interest charge payment. As a result of the purging election,
thereafter the excess distribution method would not apply to that shareholder.
Under
the QEF method, the U.S. shareholder has another option. In lieu of paying the tax on its pro-rata share of PFIC earnings, the
U.S. shareholder in a QEF on the last day of the QEF’s tax year may elect to extend the time for payment of any of its undistributed
PFIC earnings tax liability for the tax year. If the election is made, the election is treated as an extension of time to pay
tax and, thus, the U.S. shareholder is liable for interest.
In
lieu of any of the above-described methods, since 37 Capital is regularly traded on a national securities exchange, U.S. shareholders
may wish to make an election to mark to market.
A
U.S. shareholder of a PFIC may make a mark to market election for marketable PFIC stock. If the election is made, the shareholder
includes in income each year an amount equal to the excess, if any, of the fair market value of the PFIC stock as of the close
of the tax year over the shareholder’s adjusted basis in the stock. Decreases in market value are allowed as deductions,
within certain prescribed limits.
Generally,
under the mark to market election, the general PFIC rules under the excess distribution method and QEF method do not apply. However,
if the mark to market election is made after a U.S. shareholder has maintained its investment, there are provisions that ensure
that the interest charge on amounts attributable to periods before the election is not avoided.
PERSONS
CONSIDERING THE PURCHASE OF THE COMPANY’S COMMON SHARES SHOULD CONSULT THEIR TAX ADVISORS WITH REGARD TO THE APPLICATION
OF CANADIAN, U.S. AND OTHER TAX LAWS TO THEIR PARTICULAR SITUATION.
Item
10. F. Dividends and Paying Agents.
The
Company’s registrar and transfer agent is Computershare Investor Services Inc. located at 510 Burrard Street, Vancouver,
British Columbia, Canada, V6C 3B9. The telefax number is (604) 661-9407.
Item
10. G. Statement by Experts
Not
Applicable.
Item
10. H. Documents on Display.
We
have filed this 2020 Annual Report on Form 20-F with the Securities and Exchange Commission under the Securities Exchange Act
of 1934. Statements made in this Annual Report as to the contents of any contract, agreement or other document referred to are
not necessarily complete. With respect to each such contract, agreement or other document filed as an exhibit to this Annual Report,
reference is made to the exhibit for a more complete description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference.
We
are subject to the informational requirements of the Securities Exchange Act and file reports and other information with the Securities
and Exchange Commission. Reports and other information which we file with the Securities and Exchange Commission, including this
Annual Report on Form 20-F, may be inspected at the public reference facilities of the Securities and Exchange Commission at:
450 Fifth Street N.W., Room 1024, Washington, D.C. 20549. Additionally, copies of this material may also be obtained from the
Securities and Exchange Commission’s Investor Site at http://www.sec.gov . The Commission’s telephone number is 1-800-SEC-0330.
Item
10. I Subsidiary Information
On
February 26, 2015, the Company incorporated two wholly-owned subsidiaries, 27 Red Capital Inc. (“27 Red”) and 4 Touchdowns
Capital Inc. (“4 Touchdowns”).
On
April 30, 2015, the Company entered into an arrangement agreement (the “Arrangement Agreement”) (see Exhibit 12 –
Incorporated by reference) with 27 Red (“Spinco1”) and 4 Touchdowns (“Spinco2”).
At
the Company’s annual and special meeting which was held on June 4, 2015 (see Exhibit 12 - Incorporated by reference),
the Company’s shareholders passed all the resolutions presented including the re-election of the board of directors, re-appointment
of the Company’s auditor, approval of the Company’s stock option plan, and the proposed Plan of Arrangement with 27
Red and 4 Touchdowns.
In
respect to the Plan of Arrangement, the Company applied for an Interim Order which was granted on May 6, 2015 by the Supreme Court
of British Columbia, and on June 12, 2015 the Company received the final court approval for the Plan of Arrangement.
The
Company completed the Plan of Arrangement with 27 Red (Spinco 1) and 4 Touchdowns (Spinco 2). The effective date of the Arrangement
was on February 12, 2016 (the “Effective Date”). Shareholders of record on the Effective Date received one new common
share, one Class 1 Reorganization Share and one Class 2 Reorganization Share of the Company. On the Effective Date, and pursuant
to the Arrangement, all of the Class 1 Reorganization Shares were automatically transferred by Shareholders to Spinco1 in exchange
for 2,067,724 common shares of Spinco1 and issued to Shareholders on a pro rata basis (resulting in one common share of Spinco1
being issued for every one Class 1 Reorganization Share). Immediately following this, the Company redeemed all of the Class 1
Reorganization Shares by the transfer to Spinco1 of $20,677 and a promissory note in the principal amount of $20,677. The promissory
note was non-interest bearing, unsecured and due on demand. The redemption of shares was distributed to the shareholders’
of 27 Red as a capital distribution and recorded as a dividend.
Furthermore
on the Effective Date, all of the Class 2 Reorganization Shares were automatically transferred by Shareholders to Spinco2 in exchange
for 2,067,724 common shares of Spinco2 and issued to Shareholders on a pro rata basis (resulting in one common share of Spinco2
being issued for every one Class 2 Reorganization Share). Immediately following this, the Company redeemed all of the Class 2
Reorganization Shares by the transfer to Spinco2 of $20,677 and a promissory note in the principal amount of $20,677. The promissory
note was non-interest bearing, unsecured and due on demand. The redemption of shares was distributed to the shareholders’
of 4 Touchdowns as a capital distribution and recorded as a dividend.
A
copy of the Arrangement Agreement is available on www.SEDAR.com.
As
a result of the completion of the Arrangement, 27 Red and 4 Touchdowns are independent entities and are no longer subsidiaries
of the Company.
On
September 12, 2017, the Company entered into a Consulting Agreement with 27 Red whereby the Company provided certain consultancy
and advisory services to 27 Red for a three month period (the “Term of the Agreement”). The fee paid by 27 Red to
the Company was $18,188.65 for the Term of the Agreement (see Exhibit 10.16 – Incorporated by reference).
On
October 12, 2017, the Company entered into a Consulting Agreement with 4 Touchdowns whereby the Company provided certain consultancy
and advisory services to 4 Touchdowns for a three month period (the “Term of the Agreement”). The fee paid by 4 Touchdowns
to the Company was $18,188.65 for the Term of the Agreement (see Exhibit 10.17 – Incorporated by reference).
ITEM
11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FINANCIAL
INSTRUMENTS AND RISK MANAGEMENT
|
(a)
|
Risk
management overview
|
The
Company's activities expose it to a variety of financial risks including credit risk, liquidity risk and market risk. This note
presents information about the Company's exposure to each of the above risks, the Company's objectives, policies and processes
for measuring and managing risk, and the Company's management of capital. The Company employs risk management strategies and policies
to ensure that any exposure to risk is in compliance with the Company's business objectives and risk tolerance levels. While the
Board of Directors has the overall responsibility for the Company's risk management framework, the Company's management has the
responsibility to administer and monitor these risks.
|
(b)
|
Fair
value of financial instruments
|
The
fair values of cash, accounts payable and accrued liabilities, due to related parties, refundable subscription, loan payable and
convertible debentures approximate their carrying values due to the short-term maturity of these instruments.
IFRS
establishes a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value
hierarchy has the following levels:
Level
1 – quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level
2 – inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices); and
Level
3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Credit
risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual
obligations. The financial instruments that potentially subject the Company to a significant concentration of credit risk consist
of cash. The Company mitigates its exposure to credit loss associated with cash by placing its cash with a major financial institution.
Liquidity
risk is the risk that the Company will not be able to meet its financial obligations as they are due. The Company's approach to
managing liquidity is to ensure that it will have sufficient liquidity to meet its liabilities when due.
At
December 31, 2020, the Company had cash of $9 (2019 - $38) available to apply against short-term business requirements and
current liabilities of $1,337,235 (2019 - $1,203,963). All of the current liabilities, are due within 90 days. Amounts due to
related parties are due on demand. As of December 31, 2020, three convertible debentures are in default, and the loan payable
and the refundable subscription are due on demand. Liquidity risk is assessed as high.
Market
risk is the risk that changes in market prices, such as interest rates and foreign exchange rates, will affect the Company's net
earnings or the value of financial instruments. As at December 31, 2020, the Company is not exposed to significant interest
rate risk, currency risk or other price risk on its financial assets and liabilities due to the short-term maturity of its financial
liabilities and fixed interest rate on the convertible debentures.
ITEM
12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
As
at the date of this Annual Report, the Company has three Convertible Debentures totalling the principal amount of $300,000 plus
accrued interest which have matured and are payable on demand, and one Convertible Debenture in the amount of $50,000 which has
been extended indefinitely (see Exhibits 10.14 & 10.15 – Incorporated by reference). Subsequent to the year ended December
31, 2020, the amount of $50,000 was settled pursuant to a shares for debt agreement (see Exhibit 10.20*-Attached).
ITEM
13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
Except
for outstanding loans, accounts payable, accrued liabilities and three convertible debentures totalling the principal amount of
$300,000 plus accrued interest which have matured and are payable on demand, and one Convertible Debenture in the amount of $50,000
which has been extended indefinitely, the Company is not in default in the payment of principal, interest, sinking fund instalment
or any other default with respect to any other indebtedness of the Company. Subsequent to the year ended December 31, 2020, the
convertible debenture in the amount of $50,000 was settled pursuant to a shares for debt agreement (see Exhibit 10.20*-Attached).
ITEM
14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
There
have been no changes in the constituent instruments defining the rights of holders of common stock and no issuance of any other
securities that has modified the rights of holders of common stock.
Use
of Proceeds from Offering
Not
Applicable.
ITEM
15. CONTROLS AND PROCEDURES
|
a)
|
EVALUATION
OF DISCLOSURE CONTROLS AND PROCEDURES. Our Chief Executive Officer and Chief Financial
Officer have evaluated the effectiveness of our disclosure controls and procedures [(as
defined in Rules 13a-15(d) and 15d -15(e) under the Securities Exchange Act of 1934 (“Exchange
Act”)] as of the end of the period covered by this Annual Report on Form 20-F.
Based on such evaluation, they have concluded that as of such date, our disclosure controls
and procedures are effective and designed to ensure that information required to be disclosed
by us in reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in applicable SEC rules and
forms.
|
|
b)
|
MANAGEMENT’S
ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING. Our management, under the
supervision of our Chief Executive Officer and Chief Financial Officer, is responsible
for establishing and maintaining adequate internal control over financial reporting as
defined in Rule 13a-15(f) and Rule 15d-15(f) of the Exchange Act. Our internal control
system was designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation and fair presentation of our financial statements for external
purposes in accordance with generally accepted accounting principles. Our Chief Executive
Officer and Chief Financial Officer assessed the effectiveness of our internal control
over financial reporting as of December 31, 2020. In making this assessment, they used
the criteria established in the 2013 Internal Control-Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on
this assessment, our Chief Executive Officer and Chief Financial Officer have concluded
that, as of December 31, 2020, our internal control over financial reporting is effective
based on those criteria. Notwithstanding the foregoing, all internal control systems,
no matter how well designed, have inherent limitations. Therefore, even those systems
determined to be effective may not prevent or detect misstatements and can provide only
reasonable assurance with respect to financial statement preparation and presentation.
Also, projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
|
This
Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal
control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public
accounting firm pursuant to the rules of the SEC that permit the Company to provide only management’s report in this Annual
Report.
|
c)
|
CHANGES
IN INTERNAL CONTROLS. There were no changes in our internal controls or in other factors
that could affect these controls subsequent to the date of evaluation by our Chief Executive
Officer and Chief Financial Officer
|
[Exhibit
31.1* – Attached herewith]
ITEM
16. AUDIT COMMITTEE, CODE OF ETHICS, ACCOUNTANT FEES.
16.A.
Audit Committee Financial Expert
The
financial experience of Neil Spellman (Chairman of the Audit Committee), including his experience as a member of the audit committee
of another public company determines that he is an audit committee financial expert within the meaning of the U.S. Sarbanes-Oxley
Act of 2002. (See Item 6.C.3. in this Annual Report for further details on the Audit Committee.)
16.B.
Code of Ethics
On
May 31, 2004, the Company’s Board of Directors adopted a Code of Ethics (the “Code”) for the Company’s
Chief Executive Officer and Chief Financial Officer and its principal accounting officer or controller, or persons performing
similar function (the “Senior Financial Officers”) to deter wrongdoing and promote honest and ethical conduct in the
practice of financial management, full, fair, accurate, timely and understandable disclosure; and compliance with all applicable
laws and regulations. These Senior Financial Officers are expected to abide by this Code as well as by all of the Company’s
other applicable business policies, standards and guidelines. (Exhibit 14.1 –Incorporated by reference).
The
Code of Ethics can be accessed electronically at http://www.37capitalinc.com.
Item
16.C. Auditor’s Fees & Services
|
(a)
|
Audit
Fees: The aggregate fees billed for each of the last three fiscal years by the Company’s
Auditors were (2020: $17,000) (2019: $17,000) and (2018: $11,500).
|
|
(b)
|
Audit
Related Fees were (2020: $Nil) (2019: $Nil) and (2018: $Nil).
|
|
(c)
|
Tax
Fees: Tax fees were (2020: $1,000) (2019: $1,000) and (2018: $ 1,000).
|
|
(d)
|
All
other Fees were (2020: $Nil) (2019: $Nil) and (2018: $Nil).
|
Further
details with respect to the Audit Committee’s Charter is included in the Company’s Management Information Circular
dated November 18, 2019 (see Exhibit 13.3 – Incorporated by reference) and Management Information Circular dated November
20, 2020 (see Exhibit 13.4*-Attached).
The
Audit Committee’s pre-approval policies and procedures: The Audit Committee has adopted procedures to pre-approve audit
services and all non-audit related services to be rendered by the Company’s external auditors. The Chairman of the Audit
Committee has been delegated authority to pre-approve audit services up to a maximum cost of $30,000 and individual assignments
up to a maximum cost of $5,000. All other assignments must be pre-approved by the Audit Committee. All amounts which exceed the
authorized amounts require further approval from the Audit Committee.
ITEM
17. FINANCIAL STATEMENTS
The
Company’s Audited Consolidated Financial Statements for the year ended December 31, 2020 and 2019, together with the report
of the auditors, Dale Matheson Carr-Hilton Labonte LLP, Chartered Professional Accountants, are filed as part of this Annual Report.
The Company’s consolidated financial statements are stated in Canadian dollars (Cdn $).
A) Index to Financial Statements
|
Page
|
i) Financial Statements
|
|
Report of Independent Registered Public Accounting Firm to the Shareholders
|
52
|
Consolidated Balance Sheets as at December 31, 2020 and 2019
|
53
|
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2020, 2019 and
2018
|
54
|
Consolidated Statements of Changes in Stockholders’ Deficiency for the years ended December
31, 2020, 2019 and 2018
|
55
|
Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018
|
56
|
Notes to the Consolidated Financial Statements
|
57 - 72
|
ii) Management’s Discussion & Analysis for the year ended December 31, 2020
|
73 - 85
|
ITEM
18. FINANCIAL STATEMENTS
The
Company's consolidated financial statements which are required to be filed hereunder are listed in Item 17 and are specifically
incorporated herein by this reference. The Company's consolidated financial statements are stated in Canadian dollars (Cdn $)
and are prepared in accordance with the International Financial Reporting Standards as issued By the International Accounting
Standards Board.
ITEM
19. LIST OF EXHIBITS
3.1
|
Certificate
of Incorporation and Memorandum and Articles (Incorporated by reference – Previously filed on Registration Statement
on Form 20-F, May 1988)
|
3.2
|
New
Articles (Incorporated by reference) –Static Copy of British Columbia Business Corporations Act (BCBCA). Previously
filed on Form 20-F 2004 (SEC Accession No. 0000945234-05-000483) http://www.sec.gov/Archives/edgar/data/825171/000094523405000483/o17223exv3w2.htm
|
3
|
Amendment
to the Articles for the implementation of Advance Notice Provisions. SECAccessionNo.0001607062-15-000191 http://www.sec.gov/Archives/edgar/data/825171/000160706215000191/ex3.htm
|
3.4
|
Certificate
of Name Change to Kokomo Enterprises Inc. SEC Accession No. 0001137171-09-000478 http://www.sec.gov/Archives/edgar/data/825171/000113717109000478/ex0304.htm
|
3.5
|
Certificate
of Name Change to High 5 Ventures Inc. SECAccessionNo.0001137171-13-000179 http://www.sec.gov/Archives/edgar/data/825171/000113717113000179/cert.htm
|
3.6
|
Certificate
of Name Change to 37 Capital Inc. http://www.sec.gov/Archives/edgar/data/825171/000160706215000191/ex3_6.htm
|
10.1
|
2003
Stock Option Plan (Incorporated by reference previously filed on Form 20-F/A, June 2003) http://www.sec.gov/Archives/edgar/data/825171/000113717103000199/form20f2002bcl.htm
|
10.4
|
Management
Services Agreement, (Incorporated by reference - previously filed on Form 20-F, 2001 as amended on August 14, 2003 and July
1, 2005) http://www.sec.gov/Archives/edgar/data/825171/999999999702037711/9999999997-02-037711.txt
|
10.4.1
|
Addendum
to the Management Services Agreement dated July 31, 2005 – Previously filed on Form 20F 2005)(US Sec Accession No. 0001137171-06-001515)
http://www.sec.gov/Archives/edgar/data/825171/000113717106001515/ex1041.htm
|
10.4.2
|
Addendum
to the Management Services Agreement dated November 1, 2010. SEC Accession No. 0001137171-11-000333 http://www.sec.gov/Archives/edgar/data/825171/000113717111000333/ex1042.htm
|
10.4.3
|
Addendum
to the Management Services Agreement dated February 16, 2012. SEC Accession No. 0001137171-12-000177 http://www.sec.gov/Archives/edgar/data/825171/000113717112000177/ex10_43.htm
|
10.4.4
|
Addendum
to the Management Services Agreement dated March 28, 2012. SEC Accession No. 0001137171-12-000177 http://www.sec.gov/Archives/edgar/data/825171/000113717112000177/ex10_44.htm
|
10.4.5
|
Addendum
to the Management Services Agreement dated September 14, 2012. SECAccessionNo.0001137171-13-000179 http://www.sec.gov/Archives/edgar/data/825171/000113717113000179/managmentagreement.htm
|
10.4.6
|
Addendum
to the Management Services Agreement dated July 17, 2014. SECAccessionNo.0001607062-14-000048 http://www.sec.gov/Archives/edgar/data/825171/000160706214000048/hhh73114adden.htm
|
10.5
|
Property
Option Agreement – Previously filed on Form 20-F 2003. (SEC Accession No. 0001137171-04-000850) http://www.sec.gov/Archives/edgar/data/825171/000113717104000850/option.htm
|
10.5.1
|
Amendment
to the Property Option Agreement dated September 12, 2006 – (SEC Accession No.0001137171-07-000906) http://www.sec.gov/Archives/edgar/data/825171/000113717107000906/ex1005a.htm
|
10.5.2
|
Amendment
to the Property Option Agreement dated April 17, 2007 – (SEC Accession No. 0001137171-07-000906) http://www.sec.gov/Archives/edgar/data/825171/000113717107000906/ex1005b.htm
|
10.7
|
2004
Stock Option Plan - Previously filed on Form 20-F 2003. (SEC Accession No. 0001137171-04-000850)http://www.sec.gov/Archives/edgar/data/825171/000113717104000850/ex93.htm
http://www.sec.gov/Archives/edgar/data/825171/000113717104000850/debtsettlement2.htm
|
10.9.1
|
Debt
Settlement Agreements dated July 12, 2007 – (SEC Accession No. 0001137171-08-000659) http://www.sec.gov/Archives/edgar/data/825171/000113717108000659/ex100901.htm
|
10.11
|
Property
Option Agreement with Colt Capital Corp. dated September 8, 2006 – (SEC Accession No. 0001137171-07-000906) http://www.sec.gov/Archives/edgar/data/825171/000113717107000906/ex1011.htm
|
10.11.1
|
First
Amendment dated September 22, 2006 to the Property Option Agreement(SEC Accession No. 0001137171-07-000906)http://www.sec.gov/Archives/edgar/data/825171/000113717107000906/ex1011a.htm
|
10.11.2
|
Second
Amendment dated October 31, 2006 to the Property Option Agreement(SEC Accession No. 0001137171-07-000906) http://www.sec.gov/Archives/edgar/data/825171/000113717107000906/ex1011b.htm
|
10.11.3
|
Option
Agreement with Colt Resources Inc. dated January 21, 2008 – (SEC Accession No. 0001137171-08-000659) http://www.sec.gov/Archives/edgar/data/825171/000113717108000659/ex101103.htm
|
10.11.4
|
Amending
Agreement dated March 30, 2016 with Colt Resources Inc. – (SECAccessionNo.0001607062-16-000823) https://www.sec.gov/Archives/edgar/data/825171/000160706216000823/ex10_114.htm
|
10.11.5
|
Property
Purchase Agreement with Colt Resources Inc. dated October 31, 2019, as amended on November 29, 2019 - SEC Accession No. 0001607062-20-000146
https://www.sec.gov/Archives/edgar/data/825171/000160706220000146/ex10_1115.htm
|
10.12
|
Property
Purchase Agreement with James Bay Midarctic Developments Inc. dated July 31, 2008 –(SEC Accession No. 0001137171-09-000478)
http://www.sec.gov/Archives/edgar/data/825171/000113717109000478/ex1012.htm
|
10.13
|
Purchase
and Sale Agreement with Grand Odyssey Casino, S.A. De C.V. dated April 8, 2013. SECAccessionNo.0001607062-14-000003 http://www.sec.gov/Archives/edgar/data/825171/000160706214000003/hhhef123113form20fex10_13.htm
|
10.14
|
2013
Convertible Debenture Financing SECAccessionNo.0001607062-14-000003 http://www.sec.gov/Archives/edgar/data/825171/000160706214000003/hhhef123113form20fex10_14.htm
|
10.15
|
2015
Convertible Debenture Financing http://www.sec.gov/Archives/edgar/data/825171/000160706215000191/ex10_15.htm
|
10.16
|
Consulting
Agreement entered into with 27 Red Capital Inc. https://www.sec.gov/Archives/edgar/data/825171/000160706218000160/ex10_16.htm
|
10.17
|
Consulting
Agreement entered into with 4 Touchdowns Capital Inc. https://www.sec.gov/Archives/edgar/data/825171/000160706218000160/ex10_17.htm
|
10.18
|
Debt
settlement agreements entered into with Jackpot Digital Inc. and Kalpakian Bros. of BC Ltd. https://www.sec.gov/Archives/edgar/data/825171/000160706218000160/ex10_18a.htm
https://www.sec.gov/Archives/edgar/data/825171/000160706218000160/ex10_18b.htm
|
10.19
|
Property
Option Agreement with Eagle Plains Resources Inc. dated September 30, 2019 SEC Accession No. 0001607062-20-000146 https://www.sec.gov/Archives/edgar/data/825171/000160706220000146/ex10_19.htm
|
10.19.1*
|
Amendment
to the Property Option Agreement with Eagle Plains Resources Inc. dated October 15, 2020
|
10.20*
|
Debt
Settlement Agreements dated December 11, 2020 with various Creditors.
|
11.1*
|
Statement
explaining in reasonable detail how earnings/loss per share is calculated
|
12
|
Notice
of Annual General and Special Meeting 2015 and Management Proxy Materials. http://www.sec.gov/Archives/edgar/data/825171/000160706215000199/ex20_1.htm
|
13
|
Notice
of Annual General Meeting 2016 and Management Proxy Materials. https://www.sec.gov/Archives/edgar/data/825171/000160706217000193/ex13.htm
|
13.1
|
Notice
of Annual General Meeting 2017 and Management Proxy Materials. https://www.sec.gov/Archives/edgar/data/825171/000160706218000160/ex13_1.htm
|
13.2
|
Notice
of Annual General Meeting 2018 and Management Proxy Materials https://www.sec.gov/Archives/edgar/data/825171/000160706218000375/ex99_2.htm
|
13.3
|
Notice
of Annual General Meeting 2019 and Management Proxy Materials https://www.sec.gov/Archives/edgar/data/825171/000160706219000400/ex99_2.htm
|
13.4*
|
Notice
of Annual General Meeting 2020 and Management Proxy Materials
|
14
|
Notice
of Annual General Meeting 2014 and Management Proxy Materials. https://www.sec.gov/Archives/edgar/data/825171/000160706214000089/jjj082914exh99_3.htm
|
14.1
|
Code
of Ethics - Previously filed on Form 20-F 2003. (SEC Accession No.0001137171-04-000850)http://www.sec.gov/Archives/edgar/data/825171/000113717104000850/ex96.htm
|
15
|
Notice
of Annual General Meeting 2013 and Management Proxy Materials. SECAccessionNo.0001607062-14-000003 http://www.sec.gov/Archives/edgar/data/825171/000160706214000003/hhhef123113form20fex15.htm
|
16
|
Notice
of Annual General Meeting 2012 and Management Proxy Materials. (SEC Accession No. 0001137171-12-000249) http://www.sec.gov/Archives/edgar/data/825171/000113717112000249/infocircular.htm
|
17
|
Notice
of Annual General Meeting 2011 and Management Proxy Materials. (SEC Accession No. 0001137171-11-000333) http://www.sec.gov/Archives/edgar/data/825171/000113717111000333/ex17.htm
|
18
|
Notice
of Annual General Meeting, 2010 and Management Proxy Materials (Incorporated by reference- SEC Accession No. 0001137171-10-000418)
|
19
|
Notice
of Annual General Meeting, 2009 and Management Proxy Materials (Incorporated by reference – previously filed on Form
6K for the month of May, 2009 (SEC Accession No. 0001137171-09-000424) http://www.sec.gov/Archives/edgar/data/825171/000113717109000424/ex992.htm
|
20
|
Notice
of Annual General Meeting, 2008 and Management Proxy Materials (Incorporated by reference – previously filed on Form
6K June 16, 2008 (SEC Accession No. 0001137171-08-000573) http://www.sec.gov/Archives/edgar/data/825171/000113717108000573/ex992.htm
|
20.1
|
Notice
of Annual General Meeting, 2007 and Management Proxy Materials (Incorporated by reference – previously filed on Form
6K May 31, 2007 (Accession Number 0001137171-07-000842) http://www.sec.gov/Archives/edgar/data/825171/000113717107000842/0001137171-07-000842-index.htm
|
20.4
|
Notice
of Special General Meeting, 2005 and Management Proxy Materials (Incorporated by reference - previously filed on Form 6-K
December 3, 2004) http://www.sec.gov/Archives/edgar/data/825171/000113717104001556/ex2.htm
|
|
|
*
Filed Herewith (Attached)
|
|
|
Page
|
31.1*
|
Sarbanes Oxley Act Section 302, Certified by Jacob H. Kalpakian, President & C.E.O. (Attached)
|
90
|
32.2*
|
Sarbanes Oxley Act Section 906, Certified by Neil Spellman, C.F.O. (Attached)
|
92
|
99. *
|
Financial Exhibits: – (unaudited)
|
|
99.1*
|
Schedules I - Marketable Securities - Other Investments
|
86
|
99.2*
|
Schedules II - Amounts Receivable from Related Parties and Underwriters, Promoters and Employees other than Related Parties
|
87
|
99.3*
|
Schedules III & IV - Property, Plant and Equipment and Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equipment
|
88
|
|
|
|
* Filed Herewith
|
|
37
CAPITAL INC.
Audited
Financial Statements
December 31,
2020 and 2019
(Expressed
in Canadian Dollars)
Report
of Independent Registered Public Accounting Firm
|
52
|
Financial
Statements
|
|
Balance
Sheets
|
53
|
Statements
of Comprehensive Loss
|
54
|
Statements
of Changes in Stockholders’ Deficiency
|
55
|
Statements
of Cash Flows
|
56
|
Notes
to Financial Statements
|
57
- 72
|
Report
of Independent Registered Public Accounting Firm
To
the shareholders and the board of directors of -37 Capital Inc.
Opinion
on the Financial Statements
We
have audited the accompanying balance sheets of 37 Capital Inc. (the "Company") as of December 31, 2020 and 2019, the
statements of comprehensive loss, changes in stockholders’ deficiency and cash flows, for the years ended December
31, 2020, 2019 and 2018, and the related notes (collectively referred to as the "financial statements"). In our
opinion, the financial statements present fairly, in all material respects, the financial position of the Company as December
31, 2020 and 2019, and its financial performance and its cash flows for the years ended December 31, 2020, 2019 and 2018, in conformity
with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Going
Concern
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 2 to the financial statements, the Company has not generated revenues since inception, has incurred losses in developing
its business, and further losses are anticipated. The Company requires additional funds to meet its obligations and the costs
of its operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s
plans in this regard are described in Note 2. The financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Basis
for Opinion
These
financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting in accordance with the standards of the PCAOB. As part of our audits we are required to obtain an understanding of internal
control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal
control over financial reporting. Accordingly, we express no such opinion in accordance with the standards of the PCAOB.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audits provide a reasonable basis for our opinion.
Critical
Audit Matter
The
critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was
communicated or required to be communicated to the audit committee and: (1) relates to accounts or disclosures that are material
to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of
critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by
communicating the critical audit matters below, providing separate opinions on the critical audit matter or on the accounts or
disclosures to which it relates.
Critical
Audit Matter
|
How
the Matter was Addressed in the Audit
|
Assessment
of Mineral property interests for potential impairment indicators
As
described in Note 4 to the financial statements, management reviews and evaluates the net carrying value of mineral property
interests for impairment upon the occurrence of events or changes in circumstances that indicate that the related carrying
amounts may not be recoverable. If deemed necessary based on this review and evaluation, management performs a test for
impairment.
In
its review and evaluation, management determined that there were no indicators that the carrying amount of mineral property
interests, which has a carrying value of $40,001 as of December 31, 2020, may not be recoverable.
We
identified the assessment of unproved mineral properties for potential impairment indicators as a critical audit matter
due to the materiality of the balance, the high degree of auditor judgment and an increased level of effort when performing
audit procedures to evaluate the reasonableness of management’s assumptions in determining whether indicators of
impairment are present.
|
The
primary procedures we performed to address this critical audit matter included:
•
Evaluation of the Company’s identification of significant events or changes in circumstances.
•
Discussion with management of future business plans for the mineral property interests.
•
Ensuring key assumptions were consistent with evidence obtained in other areas of the audit.
|
/s/
DMCL
DALE
MATHESON CARR-HILTON LABONTE LLP
CHARTERED
PROFESSIONAL ACCOUNTANTS
We
have served as the Company’s auditor since 2016
Vancouver,
Canada
April
30, 2021
37
CAPITAL INC.
Balance
Sheets
December
31,
(Expressed
in Canadian Dollars)
As at
|
|
2020
|
|
2019
|
Assets
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
9
|
|
|
$
|
38
|
|
GST receivable
|
|
|
562
|
|
|
|
640
|
|
|
|
|
571
|
|
|
|
678
|
|
Mineral Property Interests (note 5)
|
|
|
40,001
|
|
|
|
32,501
|
|
Investment
|
|
|
1
|
|
|
|
1
|
|
Total Assets
|
|
$
|
40,573
|
|
|
$
|
33,180
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Deficiency
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities (note 6)
|
|
$
|
255,184
|
|
|
$
|
204,761
|
|
Due to related parties (note 7)
|
|
|
308,936
|
|
|
|
291,087
|
|
Refundable subscription (note 8)
|
|
|
30,000
|
|
|
|
10,000
|
|
Loan payable (note 9)
|
|
|
103,924
|
|
|
|
103,924
|
|
Convertible debentures (note 10)
|
|
|
639,191
|
|
|
|
594,191
|
|
Total Liabilities
|
|
|
1,337,235
|
|
|
|
1,203,963
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Deficiency
|
|
|
|
|
|
|
|
|
Capital stock (note 11)
|
|
|
25,864,950
|
|
|
|
25,857,450
|
|
Equity portion of convertible debentures (note 10)
|
|
|
33,706
|
|
|
|
33,706
|
|
Deficit
|
|
|
(27,195,318
|
)
|
|
|
(27,061,939
|
)
|
Total Stockholders’ Deficiency
|
|
|
(1,296,662
|
)
|
|
|
(1,170,783
|
)
|
Total Liabilities and Stockholders’ Deficiency
|
|
$
|
40,573
|
|
|
$
|
33,180
|
|
Going
Concern (note 2)
Commitments
(note 14)
Subsequent
events (Note 17)
The
accompanying notes form an integral part of these financial statements.
37
CAPITAL INC.
Statements
of Comprehensive Loss
Years
Ended December 31,
(Expressed
in Canadian Dollars)
|
|
2020
|
|
2019
|
|
2018
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Office (note 7)
|
|
$
|
27,847
|
|
|
$
|
44,058
|
|
|
$
|
63,515
|
|
Finance and interest (notes 7 and 10)
|
|
|
54,618
|
|
|
|
55,265
|
|
|
|
54,339
|
|
Legal, accounting and audit
|
|
|
31,702
|
|
|
|
27,204
|
|
|
|
18,090
|
|
Rent (note 7)
|
|
|
12,000
|
|
|
|
12,000
|
|
|
|
17,600
|
|
Regulatory and transfer fees
|
|
|
3,340
|
|
|
|
4,596
|
|
|
|
5,440
|
|
Consulting
|
|
|
—
|
|
|
|
879
|
|
|
|
509
|
|
Shareholder communication
|
|
|
3,872
|
|
|
|
3,135
|
|
|
|
1,363
|
|
|
|
|
(133,379
|
)
|
|
|
(147,137
|
)
|
|
|
(160,856
|
)
|
Net and comprehensive Loss
|
|
$
|
(133,379
|
)
|
|
$
|
(147,137
|
)
|
|
$
|
(160,856
|
)
|
Basic and Diluted Loss per Common Share
|
|
$
|
(0.02
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.02
|
)
|
Weighted Average Number of Common Shares Outstanding
|
|
|
7,137,857
|
|
|
|
7,116,819
|
|
|
|
6,889,421
|
|
The
accompanying notes are an integral part of these financial statements.
37
CAPITAL INC.
Statements
of Changes in Stockholders’ Deficiency
(Expressed
in Canadian Dollars)
|
|
|
Capital
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Shares
|
|
|
|
Amount
|
|
|
|
Equity
Portion of Convertible Debentures Reserve
|
|
|
|
Deficit
|
|
|
|
Total
Stockholders’ Deficiency
|
|
Balance,
December 31, 2018
|
|
|
7,092,709
|
|
|
$
|
25,849,950
|
|
|
$
|
33,706
|
|
|
$
|
(26,914,802
|
)
|
|
$
|
(1,031,146
|
)
|
Net
loss for the year
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(147,137
|
)
|
|
|
(147,137
|
)
|
Shares
issued for mineral property interest
|
|
|
100,000
|
|
|
|
7,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,500
|
|
Balance,
December 31, 2019
|
|
|
7,192,709
|
|
|
|
25,857,450
|
|
|
|
33,706
|
|
|
|
(27,061,939
|
)
|
|
|
(1,170,783
|
)
|
Net
loss for the year
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(133,379
|
)
|
|
|
(133,379
|
)
|
Shares
issued for mineral property interest
|
|
|
100,000
|
|
|
|
7,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,500
|
|
Balance,
December 31, 2020
|
|
|
7,292,709
|
|
|
$
|
25,864,950
|
|
|
$
|
33,706
|
|
|
$
|
(27,195,318
|
)
|
|
$
|
(1,296,662
|
)
|
The
accompanying notes are an integral part of these financial statements.
37
CAPITAL INC.
Statements
of Cash Flows
Years
Ended December 31,
(Expressed
in Canadian Dollars)
|
|
2020
|
|
2019
|
|
2018
|
Operating
Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(133,379
|
)
|
|
$
|
(147,137
|
)
|
|
$
|
(160,856
|
)
|
Items
not involving cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense on convertible debentures
|
|
|
45,000
|
|
|
|
45,000
|
|
|
|
45,000
|
|
|
|
|
(88,379
|
)
|
|
|
(102,137
|
)
|
|
|
(115,856
|
)
|
Changes
in non-cash working capital (note 12)
|
|
|
88,350
|
|
|
|
125,130
|
|
|
|
37,510
|
|
Cash
provided by (used in) operating activities
|
|
|
(29
|
)
|
|
|
22,993
|
|
|
|
(78,346
|
)
|
Investing
Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of mineral property interest
|
|
|
—
|
|
|
|
(25,000
|
)
|
|
|
—
|
|
Cash
used in investing activities
|
|
|
—
|
|
|
|
(25,000
|
)
|
|
|
—
|
|
Financing
Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
79,500
|
|
Cash
provided by financing activities
|
|
|
—
|
|
|
|
—
|
|
|
|
79,500
|
|
Net
increase (decrease) in cash
|
|
|
(29
|
)
|
|
|
(2,007
|
)
|
|
|
1,154
|
|
Cash,
beginning
|
|
|
38
|
|
|
|
2,045
|
|
|
|
891
|
|
Cash,
ending
|
|
$
|
9
|
|
|
$
|
38
|
|
|
$
|
2,045
|
|
Supplemental
information (note 12)
The
accompanying notes are an integral part of these financial statements.
37
CAPITAL INC.
|
|
Notes
to Financial Statements
|
|
Years
Ended December 31, 2020 and 2019
|
|
(Expressed
in Canadian Dollars)
|
|
1.
NATURE OF BUSINESS
37
Capital Inc. (“37 Capital” or the “Company”) was incorporated on August 24, 1984 in British Columbia,
Canada. The principal business of the Company is the acquisition and exploration of exploration and evaluation assets.
The
shares of the Company trade on the Canadian Securities Exchange (the “Exchange”) under the symbol “JJJ.X”,
and trade on the OTC Pink tier of the OTC markets in the United States of America under the symbol “HHHEF”. The Company’s
office is located at 400 – 570 Granville Street, Vancouver, British Columbia, Canada, V6C 3P1 and its registered office
is located at 3200-650 West Georgia Street, Vancouver BC V6B 4P7.
On March 2020, the World Health Organization declared a global pandemic related to the coronavirus known as COVID-19. The expected
impacts on global commerce are anticipated to be far reaching. To date there have been significant wide-spread adverse financial
impact globally, and the movement of people and goods has become restricted. As the Company has no material operating income or
cash flows, it is reliant on additional financing to fund ongoing operations. An extended disruption may affect the Company’s
ability to obtain additional financing. As such, the Company may not be able to raise the required funds and may not be able to
conduct exploration works on its mineral property interests in a timely manner. The impact on the economy and the Company is not
yet determinable; however, the Company’s financial position, results of operations and cash flows in future periods may
be materially affected. In particular, there may be heightened risk of asset impairment and liquidity thus creating further going
concern uncertainty.
2.
GOING CONCERN
These
financial statements have been prepared on the basis of accounting principles applicable to a "going concern", which
assumes that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge
its liabilities in the normal course of operations.
Several
adverse conditions cast substantial doubt on the validity of this assumption. The Company has incurred significant losses over
the past three fiscal years. As of December 31, 2020, the Company has an accumulated deficit of $27,195,318 a working capital
deficiency of $1,336,664 and is in default of its convertible debentures. As the Company has limited resources and no sources
of operating cash flow, there can be no assurances whatsoever that sufficient funding will be available for the Company to continue
operations for an extended period of time.
The
application of the going concern concept is dependent upon the Company’s ability to raise sufficient funding to pay creditors
and to satisfy its liabilities as they become due. Management is actively engaged in the review and due diligence on opportunities
of merit and is seeking to raise the necessary capital to meet its funding requirements. There can be no assurance whatsoever
that management’s plan will be successful.
If
the going concern assumption were not appropriate for these financial statements then adjustments may be necessary in the carrying
value of assets and liabilities, the reported expenses and the balance sheet classifications used. Such adjustments could be material.
37
CAPITAL INC.
|
|
Notes
to Financial Statements
|
|
Years
Ended December 31, 2020 and 2019
|
|
(Expressed
in Canadian Dollars)
|
|
3.
BASIS OF PRESENTATION
|
(a)
|
Statement
of compliance
|
These
financial statements are prepared in accordance with the International Financial Reporting Standards (“IFRS”), as
issued by the International Accounting Standards Board (“IASB”) and interpretations issued by the International Financial
Reporting Interpretation Committee (“IFRIC”).
|
(b)
|
Basis
of presentation
|
These
financial statements have been prepared on a historical cost basis, except for certain financial instruments which are measured
at fair value.
In
addition, these financial statements have been prepared on the accrual basis, except for cash flow information. These financial
statements are presented in Canadian dollars, which is the Company’s functional currency.
|
(c)
|
Approval
of the financial statements
|
These
financial statements were approved and authorized for issue by the Board of Directors on April 30, 2021.
Certain
prior period amounts in these financial statements have been reclassified to conform to current period’s presentation. These
reclassifications had no net effect on the results of operations or financial position for any period presented.
|
(e)
|
Use
of estimates and judgments
|
The
preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that
affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results
may differ from these estimates.
Estimates
and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances. Accounting estimates will, by definition, seldom equal the
actual results. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future
periods affected.
The
key area of judgment applied in the preparation of the financial statements that could result in a material adjustment to the
carrying amounts of assets and liabilities is as follows:
|
•
|
assessment
of the Company’s ability to continue as a going concern and whether there are events or conditions that give rise to
significant uncertainty;
|
|
•
|
classification/allocation
of expenses as exploration and evaluation expenditures or operating expenses; and
|
|
•
|
determination
whether there have been any events or changes in circumstances that indicate the impairment of its exploration and evaluations
assets.
|
37
CAPITAL INC.
|
|
Notes
to Financial Statements
|
|
Years
Ended December 31, 2020 and 2019
|
|
(Expressed
in Canadian Dollars)
|
|
3.
BASIS OF PRESENTATION (Continued)
The
key estimates applied in the preparation of the financial statements that could result in a material adjustment to the carrying
amounts of assets and liabilities are as follows:
|
•
|
The
recoverability of the carrying value of exploration and evaluation assets;
|
|
•
|
The
provision for income taxes and recognition of deferred income tax assets and liabilities; and
|
|
•
|
The
inputs in determining the liability and equity components of the convertible debentures.
|
4.
SIGNIFICANT ACCOUNTING POLICIES
The
significant accounting policies of the Company include the following:
|
(a)
|
Financial
instruments
|
|
(i)
|
Recognition
and classification
|
The
Company classifies its financial instruments in the following categories:
|
•
|
At
fair value through profit and loss (“FVTPL”): cash
|
|
•
|
At
fair value through other comprehensive income (loss) (“FVTOCI”)
|
|
•
|
Amortized
cost: accounts payable and accrued liabilities, due to related parties, refundable subscription, loan payable and convertible
debentures
|
The
Company determines the classification of financial assets at initial recognition. The classification of debt instruments is driven
by the Company’s business model for managing the financial assets and their contractual cash flow characteristics. Equity
instruments that are held for trading are classified as FVTPL. For other equity instruments, on the day of acquisition the Company
can make an irrevocable election (on an instrument-by-instrument basis) to designate them as at FVTOCI. Financial liabilities
are measured at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives)
or if the Company has opted to measure them at FVTPL.
Financial
assets and liabilities at amortized cost
Financial
assets and liabilities at amortized cost are initially recognized at fair value plus or minus transaction costs, respectively,
and subsequently carried at amortized cost less any impairment.
Financial
assets and liabilities at FVTPL
Financial
assets and liabilities carried at FVTPL are initially recorded at fair value and transaction costs are expensed in the statements
of comprehensive loss. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets
and liabilities held at FVTPL are included in the statements of comprehensive loss in the period in which they arise.
37
CAPITAL INC.
|
|
Notes
to Financial Statements
|
|
Years
Ended December 31, 2020 and 2019
|
|
(Expressed
in Canadian Dollars)
|
|
4.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Debt
investments at FVTOCI
These
assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange
gains and losses and impairment are recognised in profit or loss. Other net gains and losses are recognised in other comprehensive
loss (“OCI”). On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.
Equity
investments at FVTOCI
These
assets are subsequently measured at fair value. Dividends are recognised as income in profit or loss unless the dividend clearly
represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in OCI and are never reclassified
to profit or loss.
|
(iii)
|
Impairment
of financial assets at amortized cost
|
The
Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost. At each
reporting date, the Company measures the loss allowance for the financial asset at an amount equal to the lifetime expected credit
losses if the credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date,
the financial asset has not increased significantly since initial recognition, the Company measures the loss allowance for the
financial asset at an amount equal to the twelve month expected credit losses. The Company shall recognize in the statements of
comprehensive loss, as an impairment gain or loss, the amount of expected credit losses (or reversal) that is required to adjust
the loss allowance at the reporting date to the amount that is required to be recognized.
Financial
assets
The
Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when
it transfers the financial assets and substantially all of the associated risks and rewards of ownership to another entity.
Financial
liabilities
The
Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. The Company
also derecognizes a financial liability when the terms of the liability are modified such that the terms and / or cash flows of
the modified instrument are substantially different, in which case a new financial liability based on the modified terms is recognized
at fair value.
Gains
and losses on derecognition are generally recognized in profit or loss.
|
(b)
|
Mineral
property interests
|
Costs
directly related to the acquisition, exploration and evaluation of resource properties are capitalized once the legal rights to
explore the resource properties are acquired.
If
it is determined that capitalized acquisition, exploration and evaluation costs are not recoverable, or the property is abandoned
or management has determined impairment in value, the property is written down to its recoverable amount.
37
CAPITAL INC.
|
|
Notes
to Financial Statements
|
|
Years
Ended December 31, 2020 and 2019
|
|
(Expressed
in Canadian Dollars)
|
|
4.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
From
time to time, the Company acquires or disposes of properties pursuant to the terms of option agreements. Options are exercisable
entirely at the discretion of the optionee, and accordingly, are recorded as mineral property costs or recoveries when the payments
are made or received. After costs are recovered, the balance of the payments received is recorded as a gain on option or disposition
of mineral property.
Once
the technical feasibility and commercial viability of the extraction of mineral resources are demonstrable, mineral property interests
attributable to that area of interest are first tested for impairment and then reclassified to mining property and development
assets within property and equipment. To date, none of the Company’s mineral property interests has demonstrated technical
feasibility and commercial viability. The recoverability of the carrying amount of any mineral property interests is dependent
on successful development and commercial exploitation or, alternatively, sale of the respective areas of interest.
At
the end of each reporting period, the Company’s assets are reviewed to determine whether there is any indication that those
assets may be impaired. If such indication exists, the recoverable amount of the asset is estimated in order to determine the
extent of the impairment. The recoverable amount is the higher of fair value less costs to sell and value in use. Fair value is
determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction between knowledgeable
and willing parties. In assessing value in use, the estimated future cash flows are discounted 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.
If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced
to its recoverable amount and the impairment loss is recognized in profit or loss for the period. For an asset that does not generate
largely independent cash flows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
When
an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised
estimate of its recoverable amount, but to an amount that does not exceed the carrying amount that would have been determined
had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss
is recognized immediately in profit or loss.
|
(d)
|
Decommissioning
liabilities
|
An
obligation to incur decommissioning and site rehabilitation costs occurs when environmental disturbance is caused by exploration,
evaluation, development or ongoing production.
Decommissioning
and site rehabilitation costs arising from the installation of plant and other site preparation work, discounted to their net
present value, are provided when the obligation to incur such costs arises and are capitalized into the cost of the related asset.
These costs are charged against operations through depreciation of the asset and unwinding of the discount on the provision.
Depreciation
is included in operating costs while the unwinding of the discount is included as a financing cost. Changes in the measurement
of a liability relating to the decommissioning or site rehabilitation of plant and other site preparation work are added to, or
deducted from, the cost of the related asset. The costs for the restoration of site damage, which arises during production, are
provided at their net present values and charged against operations as extraction progresses.
37
CAPITAL INC.
|
|
Notes
to Financial Statements
|
|
Years
Ended December 31, 2020 and 2019
|
|
(Expressed
in Canadian Dollars)
|
|
4.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Changes
in the measurement of a liability, which arise during production, are charged against operating profit. The discount rate used
to measure the net present value of the obligations is the pre-tax rate that reflects the current market assessment of the time
value of money and the risks specific to the obligation. To date the Company does not have any decommissioning liabilities.
Income
tax expense consisting of current and deferred tax expense is recognized to profit or loss. Current tax expense is the expected
tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at period-end, adjusted for amendments
to tax payable with regard to previous years.
Deferred
tax assets and liabilities and the related deferred income tax expense or recovery are recognized for deferred tax consequences
attributable to differences between the carrying amounts of existing assets and liabilities and their respective tax basis. Deferred
tax assets and liabilities are measured using the enacted or substantively enacted tax rates expected to apply when the asset
is realized or the liability settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that substantive enactment occurs.
A
deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which
the asset can be utilized. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off
current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority
and the Company intends to settle its current tax assets and liabilities on a net basis.
The
Company grants stock options to directors, officers, employees and consultants of the Company. The fair value of share-based payments
to employees is measured at grant date, using the Black-Scholes Option Pricing Model, and is recognized over the vesting period
using the graded method. Fair value of share-based payments for non-employees is recognized and measured at the date the goods
or services are received based on the fair value of the goods or services received. If it is determined that the fair value of
goods and services received cannot be reliably measured, the share-based payment is measured at the fair value of the equity instruments
issued using the Black-Scholes Option Pricing Model.
For
both employees and non-employees, the fair value of share-based payments is recognized as either an expense or as mineral property
interests with a corresponding increase in option reserves. The amount to be recognized as expense is adjusted to reflect the
number of share options expected to vest. Consideration received on the exercise of stock options is recorded in capital stock
and the related share-based payment is transferred from the stock option reserve to capital stock. For unexercised options that
expire, the recorded value is transferred to deficit.
|
(g)
|
Convertible
debentures
|
The
liability component of convertible debentures is recognized initially at the fair value of a similar liability that does not have
a conversion option. The equity component is recognized initially, as the difference between the fair value of the convertible
debenture as a whole and the fair value of the liability component. Transaction costs are allocated to
37
CAPITAL INC.
|
|
Notes
to Financial Statements
|
|
Years
Ended December 31, 2020 and 2019
|
|
(Expressed
in Canadian Dollars)
|
|
4.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
the
liability and equity components in proportion to their initial carrying amounts. Subsequent to initial recognition, the liability
component of the convertible debenture is measured at amortized cost using the effective interest method. The equity component
is not re-measured subsequent to initial recognition.
Loss
per share is calculated by dividing net loss attributable to common shares of the Company by the weighted average number of common
shares outstanding during the year. The Company uses the treasury stock method for calculating diluted loss per share. Under this
method, the dilutive effect on earnings per share is calculated on the use of the proceeds that could be obtained upon exercise
of options, warrants and similar instruments. It assumes that the proceeds of such exercise would be used to purchase common shares
at the average market price during the period. However, the calculation of diluted loss per share excludes the effects of various
conversions and exercise of options and warrants that would be anti-dilutive.
Proceeds
from the exercise of stock options and warrants are recorded as capital stock. The proceeds from the issuance of units of the
Company are allocated between common shares and warrants based on the residual value method. Under this method, the proceeds are
allocated first to capital stock based on the fair value of the common shares at the time the units are issued and any residual
value is allocated to the warrants. When the warrants are exercised, the related value is transferred from the warrant reserve
to capital stock. For unexercised warrants that expire, the recorded value is transferred from the warrant reserves to deficit.
|
(j)
|
Foreign
currency translation
|
Amounts
recorded in foreign currency are translated into Canadian dollars as follows:
|
(i)
|
Monetary
assets and liabilities, at the rate of exchange in effect as at the balance sheet date;
|
|
(ii)
|
Non-monetary
assets and liabilities, at the exchange rates prevailing at the time of the acquisition of the assets or assumption of the
liabilities; and
|
|
(iii)
|
Revenues
and expenses (excluding amortization, which is translated at the same rate as the related asset), at the rate of exchange
on the transaction date.
|
Exchange
differences are recognized in profit or loss in the period which they arise.
|
(k)
|
Accounting
standards issued but not yet effective
|
At
the date of the approval of the financial statements, a number of standards and interpretations were issued but not effective.
The Company considers that these new standards and interpretations are either not applicable or are not expected to have a significant
impact on the Company’s financial statements.
37
CAPITAL INC.
|
|
Notes
to Financial Statements
|
|
Years
Ended December 31, 2020 and 2019
|
|
(Expressed
in Canadian Dollars)
|
|
5.
MINERAL PROPERTY INTERESTS
|
|
Acacia Property
|
|
Extra High Property
|
|
Total
|
Balance, December 31, 2018
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
1
|
|
Acquisition costs
|
|
|
7,500
|
|
|
|
25,000
|
|
|
|
32,500
|
|
Balance, December 31, 2019
|
|
$
|
7,500
|
|
|
$
|
25,001
|
|
|
$
|
32,501
|
|
Acquisition costs
|
|
|
7,500
|
|
|
|
—
|
|
|
|
7,500
|
|
Balance, December 31, 2020
|
|
$
|
15,000
|
|
|
$
|
25,001
|
|
|
$
|
40,001
|
|
Acacia
Property
On
September 30, 2019, the Company entered into a property option agreement (the “Option Agreement”) with Eagle Plains
Resources ltd. (“Eagle Plains”) to acquire a 60% interest in the Acacia Property (“Acacia Property”) in
Adams Plateau Area of the Province of British Columbia. The following is required to exercise the option:
|
•
|
Issuance
of 100,000 common shares (issued) to Eagle Plains upon receipt of the current Acacia Property NI 43-101 Technical Report;
|
|
•
|
Incur
of a total of $100,000 in property related expenditures on or before the first anniversary of the Option Agreement;
|
|
•
|
Issuance
of 50,000 common shares to Eagle Plains and incur a total of $100,000 in property related expenditures on or before the second
anniversary of the Option Agreement;
|
|
•
|
Issuance
of 50,000 common shares to Eagle Plains and incur a total of $300,000 in property related expenditures on or before the third
anniversary of the Option Agreement;
|
|
•
|
Issuance
of 50,000 common shares to Eagle Plains and incur a total of $750,000 in property related expenditures on or before the fourth
anniversary of the Option Agreement; and
|
|
•
|
Issuance
of 50,000 common shares to Eagle Plains and incur a total of $1,250,000 in property related expenditures on or before the
fifth anniversary of the Option Agreement.
|
Within
a period of 30 days after each annual anniversary of the Option Agreement, the Company shall decide whether or not it wishes to
continue with the agreement.
On
October 15, 2020, the Company entered into an amendment on the Option Agreement with Eagle Plains as the Company was not able
to incur the required amount of $100,000 in property related expenditure during the 1st Anniversary. The following
are the amendments which required to exercise the option:
|
•
|
Issuance
of 100,000 common shares (issued) to Eagle Plans.
|
|
•
|
Commitment
to incur $200,000 in property related expenditures during the 2nd period of the agreement.
|
37
CAPITAL INC.
|
|
Notes
to Financial Statements
|
|
Years
Ended December 31, 2020 and 2019
|
|
(Expressed
in Canadian Dollars)
|
|
5.
MINERAL PROPERTY INTERESTS (Continued)
Extra
High Property
Previously
the Company held a 33% interest in the Extra High Claims, located in the Kamloops Mining Division of the Province of British Columbia
(“Extra High Property”).
On
October 31, 2019, as amended on November 4, 2019, the Company entered into an agreement with Colt Resources Inc. (“Colt
Resources”) to purchase the remaining 67% right, interest and title in and to the Extra High Property. The following is
required to complete the purchase:
|
•
|
a
cash consideration of $100,000 of which $25,000 was paid on the closing date and the remaining balance of $75,000 is payable
after eighteen months; and
|
|
•
|
a
0.5% NSR from commercial production which may be purchased by the Company at any time by making a payment of $500,000.
|
The
Extra High Property claims have been renewed and are to expire on December 25, 2021. The agreement can be terminated by the Company
at anytime without any monetary repercussions. As at December 31, 2020, the Company owns a 100% undivided right, interest and
title in and to the Extra High Property.
The
Extra High Property is subject to a 1.5% Net Smelter Royalty (“NSR”) payable to a third party, 50% of which, or 0.7%,
can be purchased by the Company at any time by paying $500,000.
6.
ACCOUNTS PAYABLE AND ACCRUED LIABILITES
|
|
December 31, 2020
|
|
December 31, 2019
|
Trade payables
|
|
$
|
306,737
|
|
|
$
|
170,940
|
|
Accrued liabilities
|
|
|
104,091
|
|
|
|
33,821
|
|
|
|
$
|
410,828
|
|
|
$
|
204,761
|
|
7.
RELATED PARTY TRANSACTIONS
As
at December 31, 2020 and 2019, the amounts due to related parties are unsecured, payable on demand which consist of the following:
|
|
2020
|
|
2019
|
Advances from directors (interest at prime plus 1%)
|
|
$
|
153,291
|
|
|
$
|
160,643
|
|
Entities controlled by directors (non-interest-bearing)
|
|
|
155,645
|
|
|
|
130,444
|
|
|
|
$
|
308,936
|
|
|
$
|
291,087
|
|
Included
in convertible debentures and accrued interest is $429,589 (2019 - $399,589) owing to the Chief Executive Officer and to a former
director of the Company (note 10).
During
the years ended December 31, 2020, 2019 and 2018, the following amounts were charged by related parties.
37
CAPITAL INC.
|
|
Notes
to Financial Statements
|
|
Years
Ended December 31, 2020 and 2019
|
|
(Expressed
in Canadian Dollars)
|
|
7.
RELATED PARTY TRANSACTIONS (Continued)
|
|
2020
|
|
2019
|
|
2018
|
Interest
charged on amounts due to related parties
|
|
$
|
4,733
|
|
|
$
|
5,452
|
|
|
$
|
4,312
|
|
Interest
on convertible debentures
|
|
|
30,000
|
|
|
|
30,000
|
|
|
|
30,000
|
|
Rent
charged by entities with common directors (note 14)
|
|
|
12,000
|
|
|
|
12,000
|
|
|
|
17,600
|
|
Office
expenses charged by, and other expenses paid on behalf of the Company by a company with common directors (note 14)
|
|
|
12,000
|
|
|
|
28,784
|
|
|
|
38,279
|
|
|
|
$
|
58,733
|
|
|
$
|
76,236
|
|
|
$
|
90,191
|
|
The
Company, together with Jackpot Digital Inc. (“Jackpot”), a related company with certain common directors, have entered
into an office lease agreement with an arm’s length party (Note 14).
8.
REFUNDABLE SUBSCRIPTION
During
the year ended December 31, 2016, the Company cancelled subscription agreements of a non-brokered private placement totalling
$45,000 and the Company refunded $35,000. As of December 31, 2020, the remaining $10,000 (2019 - $10,000) is owing and is due
on demand.
During
the year ended December 31, 2020, the Company received $20,000 of subscription funds for 400,000 flow-through units of the Company
at $0.05 per unit in respect to the Company’s announced financing for mineral exploration work expenditures located in the
Province of British Columbia. Each unit shall consist of one common share and one share purchase warrant exercisable at $0.10
per share for two years. As at December 31, 2020, no securities have been issued.
9.
LOAN PAYABLE
During
the year ended December 31, 2016, the Company entered into an agreement with an arm’s length party whereby the party would
pay certain debts owed by the Company. The loan is non-interest bearing, unsecured and due on demand. As of December 31, 2020,
the balance payable is $103,924 (2019 - $103,924).
10.
CONVERTIBLE DEBENTURES FINANCING
Convertible
Debentures Financing 2015
On
January 6, 2015, the Company closed a convertible debenture financing with two directors of the Company for the amount of $250,000.
The convertible debentures matured on January 6, 2016, and bear interest at the rate of 12% per annum payable on a quarterly basis.
The convertible debentures are convertible into common shares of the Company at a conversion price of $0.30 per share. The liability
component of the convertible debentures was recognized initially at the fair value of a similar liability with no equity conversion
option, which was calculated based on the application of a market interest rate of 25%. On the initial recognition of the convertible
debentures, the amount of $222,006 was recorded under convertible debentures and the amount of $27,994 has been recorded under
the equity portion of convertible debenture reserve.
37
CAPITAL INC.
|
|
Notes
to Financial Statements
|
|
Years
Ended December 31, 2020 and 2019
|
|
(Expressed
in Canadian Dollars)
|
|
10.
CONVERTIBLE DEBENTURES FINANCING (Continued)
During
the year ended December 31, 2020, the Company recorded interest expense of $30,000 (2019 - $30,000). As of December 31, 2020,
$250,000 of the convertible debentures are outstanding and are past due plus accrued interest of $179,589 (2019 - $149,589). These
convertible debentures are in default.
Convertible
Debentures Financing 2013
During
the year ended December 31, 2013, the Company issued several convertible debentures for a total amount of $975,000. The convertible
debentures have a maturity date of 18 months from the date of closing, and bear interest at the rate of 15% per annum payable
on a quarterly basis. The convertible debentures are convertible into common shares of the Company at a conversion price of $1.50
per share. The liability component of the convertible debenture was recognized initially at the fair value of a similar liability
with no equity conversion option, which was calculated based on the application of a market interest rate of 20%. The difference
between the $975,000 face value of the debentures and the fair value of the liability component was recognized in equity. On the
initial recognition of the convertible debentures, the amount of $913,072 has been recorded under convertible debentures and the
amount of $61,928 has been recorded under the equity portion of convertible debentures.
During
the year ended December 31, 2020, the Company recorded interest expense of $15,000 (2019 - $15,000). As of December 31, 2020,
$100,000 of the convertible debentures are outstanding and are past due plus accrued interest of $109,602 (2019 - $94,602). One
convertible debenture is in default and another convertible debenture has been extended indefinitely.
The
following table reconciles the fair value of the debentures to the carrying amount.
|
|
Liability
Component
|
|
Equity
Component
|
|
Total
|
Balance,
December 31, 2018
|
|
$
|
549,191
|
|
|
$
|
33,706
|
|
|
$
|
582,897
|
|
Interest
accrued
|
|
|
45,000
|
|
|
|
—
|
|
|
|
45,000
|
|
Balance,
December 31, 2019
|
|
|
594,191
|
|
|
|
33,706
|
|
|
|
627,897
|
|
Interest
accrued
|
|
|
45,000
|
|
|
|
—
|
|
|
|
45,000
|
|
Balance,
December 31, 2020
|
|
$
|
639,191
|
|
|
$
|
33,706
|
|
|
$
|
672,897
|
|
11.
CAPITAL STOCK
Unlimited
number of common and preferred shares without par value.
As
of December 31, 2020, there are no preferred shares issued.
As
of December 31, 2020, there are 7,292,709 common shares issued and outstanding.
During
the year ended December 31, 2020, the Company issued 100,000 common shares at $0.075 per share to Eagle Plain pursuant to the
Acacia Property Option Agreement (Note 5).
37
CAPITAL INC.
|
|
Notes
to Financial Statements
|
|
Years
Ended December 31, 2020 and 2019
|
|
(Expressed
in Canadian Dollars)
|
|
11.
CAPITAL STOCK (Continued)
During
the year ended December 31, 2019, the Company issued 100,000 common shares at $0.075 per share to Eagle Plains pursuant to the
Acacia Property Option Agreement (Note 5).
During
the year ended December 31, 2019, Jackpot sold 3,400,000 common shares of the Company through the facilities of the Exchange.
As at December 31, 2020, Jackpot owns 49,985 common shares in the capital of the Company representing approximately 0.69% of the
Company’s issued and outstanding common shares. In addition, Jackpot owns 3,449,985 share purchase warrants of the Company
exercisable at $0.12 per share until November 2, 2022.
Warrants
activity is as follows:
|
|
Number
of Warrants
|
|
Weighted
Average Exercise Price
|
Balance,
December 31, 2017
|
|
|
5,428,318
|
|
|
$
|
0.12
|
|
Issued
|
|
|
3,333
|
|
|
$
|
1.50
|
|
Exercised
|
|
|
(600,000
|
)
|
|
|
0.13
|
|
Balance,
December 31, 2018
|
|
|
4,824,985
|
|
|
$
|
0.12
|
|
Balance,
December, 2019 and 2020
|
|
|
4,824,985
|
|
|
$
|
0.12
|
|
As
of December 31, 2020, the following warrants were outstanding:
Expiry
Date
|
|
Exercise
Price
|
|
Number
of Warrants Outstanding
|
January
4, 2021
|
|
|
0.135
|
|
|
|
500,000
|
|
November
2, 2022
|
|
|
0.12
|
|
|
|
4,324,985
|
|
4,824,985
The
weighted average remaining contractual life for warrants outstanding at December 31, 2020 is 1.65 years (2019 – 2.65
years).
(d) Stock
options
The
Company’s 2015 Stock Option Plan provides that the Board of Directors of the Company may grant to directors, officers, employees
and consultants of the Company options to acquire up to 20% of the issued and outstanding common shares of the Company calculated
from time to time on a rolling basis. The terms of the options are determined at the date of grant.
As
of December 31, 2020, there were no stock options outstanding (2019 – Nil).
37
CAPITAL INC.
|
|
Notes
to Financial Statements
|
|
Years
Ended December 31, 2020 and 2019
|
|
(Expressed
in Canadian Dollars)
|
|
12.
CHANGES IN NON-CASH WORKING CAPITAL
|
|
2020
|
|
2019
|
|
2018
|
GST
receivable
|
|
$
|
78
|
|
|
$
|
273
|
|
|
$
|
1,206
|
|
Accounts
payable and accrued liabilities
|
|
|
226,068
|
|
|
|
15,622
|
|
|
|
(11,261
|
)
|
Due
to related parties
|
|
|
137,796
|
|
|
|
109,235
|
|
|
|
47,565
|
|
|
|
$
|
88,350
|
|
|
$
|
125,130
|
|
|
$
|
37,510
|
|
Supplemental
information
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash
items
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense included in convertible debt
|
|
$
|
45,000
|
|
|
$
|
45,000
|
|
|
$
|
45,000
|
|
Interest
expense included in due to related parties
|
|
$
|
3,961
|
|
|
$
|
5,452
|
|
|
$
|
4,312
|
|
Shares
issued for mineral property interests
|
|
$
|
7,500
|
|
|
$
|
7,500
|
|
|
$
|
—
|
|
13.
INCOME TAXES
Income
tax expense differs from the amount that would be computed by applying the Canadian statutory income tax rates of 27.00% and 26.00%
to income before income taxes.
For
the years ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Loss
before income taxes
|
|
$
|
133,379
|
|
|
$
|
147,137
|
|
|
$
|
160,856
|
|
Statutory
income tax rate
|
|
|
27.00
|
%
|
|
|
27.00
|
%
|
|
|
26.00
|
%
|
Expected
income tax benefit
|
|
|
36,012
|
|
|
|
39,727
|
|
|
|
43,431
|
|
Items
not deductible for income tax purposes
|
|
|
—
|
|
|
|
(8
|
)
|
|
|
(82
|
)
|
Effect
of change in tax rates
|
|
|
—
|
|
|
|
—
|
|
|
|
80,776
|
|
Underprovided
in prior years
|
|
|
97,367
|
|
|
|
107,695
|
|
|
|
13,017
|
|
Unrecognized
benefit of deferred tax assets
|
|
|
(133,379
|
)
|
|
|
(147,414
|
)
|
|
|
(137,142
|
)
|
Income
tax expense
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
The
Company recognizes tax benefits on losses or other deductible amounts where it is probable the Company will generate sufficient
taxable income to utilize deferred tax assets. The Company’s unrecognized deductible temporary differences and unused tax
losses for which no deferred tax asset is recognized consist of the following amounts:
For
the years ended December 31,
|
|
2020
|
|
2019
|
Excess
of unused exploration expenditures over carrying value of mineral property interests
|
|
$
|
2,656,168
|
|
|
$
|
2,656,168
|
|
Excess
of undepreciated capital cost over carrying value of fixed assets
|
|
|
698,593
|
|
|
|
698,593
|
|
Non-refundable
mining investment tax credits
|
|
|
247
|
|
|
|
247
|
|
Non-capital
losses carried forward
|
|
|
4,218,481
|
|
|
|
4,085,102
|
|
Capital
losses carried forward
|
|
|
993,649
|
|
|
|
999,649
|
|
Unrecognized
deductible temporary differences
|
|
$
|
8,567,138
|
|
|
$
|
8,439,759
|
|
37
CAPITAL INC.
|
|
Notes
to Financial Statements
|
|
Years
Ended December 31, 2020 and 2019
|
|
(Expressed
in Canadian Dollars)
|
|
13.
INCOME TAXES (Continued)
At
December 31, 2020, the Company has non-capital losses of $4,218,000 (2019 - $4,085,000), that have not been recognized and may
be carried forward and applied against Canadian taxable income of future years. The non-capital losses have expiry dates as follows:
2027
|
|
$
|
590,000
|
|
|
$
|
590,000
|
|
2028
|
|
|
306,000
|
|
|
|
306,000
|
|
2029
|
|
|
487,000
|
|
|
|
487,000
|
|
2030
|
|
|
454,000
|
|
|
|
454,000
|
|
2031
|
|
|
336,000
|
|
|
|
336,000
|
|
2032
|
|
|
122,000
|
|
|
|
122,000
|
|
2033
|
|
|
213,000
|
|
|
|
213,000
|
|
2034
|
|
|
457,000
|
|
|
|
457,000
|
|
2035
|
|
|
344,000
|
|
|
|
344,000
|
|
2036
|
|
|
284,000
|
|
|
|
284,000
|
|
2037
|
|
|
184,000
|
|
|
|
184,000
|
|
2038
|
|
|
161,000
|
|
|
|
161,000
|
|
2039
|
|
|
147,000
|
|
|
|
147,000
|
|
2040
|
|
|
133,000
|
|
|
|
—
|
|
|
|
$
|
4,218,000
|
|
|
$
|
4,085,000
|
|
The
Company has available approximate net capital losses of $994,000 that may be carried forward indefinitely. The Company has available
resource-related deductions of approximately $2,656,000 that may be carried forward indefinitely.
14.
COMMITMENTS
|
(a)
|
During
April 2017, the Company together with Jackpot, a related company with common directors, entered into an office lease agreement
with an arm’s length party (the “Office Lease Agreement”). The Office Lease Agreement had a three-year term
with a commencement date of August 1, 2017. The Company’s share of the office basic rent and operating costs was $28,800
plus applicable taxes per annum.
|
In
respect to the Office Lease Agreement, effective as of May 1, 2018, Jackpot and the Company entered into an amending agreement
whereby the Company shall have no further responsibilities, obligations or commitments in respect to the Office Lease Agreement.
Under the amending agreement, the Company is required to pay a monthly rent of $1,000 plus applicable taxes to Jackpot, and either
Jackpot or the Company may terminate this agreement by giving each other a three months’ notice in writing.
|
(b)
|
The
Company had an agreement for office support services with Jackpot, a company with common directors. Under the agreement, the
Company was entitled to receive office support services from Jackpot at a monthly rate of $7,000 plus applicable taxes. This
agreement expired on April 30, 2018.
|
Effective
as of May 1, 2018, the Company entered into an agreement for office support services with Jackpot for a term of one year. On May
1, 2019 the agreement was extended for a period of one year and subsequently on May 1, 2020, the agreement was further extended
which expires on April 30, 2021. Under the agreement, the Company is entitled to receive office support services from Jackpot
at a monthly rate of $1,000 plus applicable taxes.
37
CAPITAL INC.
|
|
Notes
to Financial Statements
|
|
Years
Ended December 31, 2020 and 2019
|
|
(Expressed
in Canadian Dollars)
|
|
15.
CAPITAL MANAGEMENT
The
Company considers its capital to be comprised of stockholders’ deficiency and convertible debenture.
The
Company’s objective when managing capital is to maintain adequate levels of funding to support the acquisition, exploration
and, if warranted, the development of mineral properties, to invest in non-mining related projects and to maintain the necessary
corporate and administrative functions to facilitate these activities. This is done primarily through equity and debt financing.
Future financings are dependent on market conditions and there can be no assurance that the Company will be able to raise funds
in the future. There were no changes to the Company’s approach to capital management during the year ended December 31,
2020. The Company is not subject to externally imposed capital requirements.
16.
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
|
(a)
|
Risk
management overview
|
The
Company's activities expose it to a variety of financial risks including credit risk, liquidity risk and market risk. This note
presents information about the Company's exposure to each of the above risks, the Company's objectives, policies and processes
for measuring and managing risk, and the Company's management of capital. The Company employs risk management strategies and policies
to ensure that any exposure to risk is in compliance with the Company's business objectives and risk tolerance levels. While the
Board of Directors has the overall responsibility for the Company's risk management framework, the Company's management has the
responsibility to administer and monitor these risks.
|
(b)
|
Fair
value of financial instruments
|
The
fair values of cash, accounts payable and accrued liabilities, due to related parties, refundable subscription, loan payable and
convertible debentures approximate their
carrying
values due to the short-term maturity of these instruments.
IFRS
establishes a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value
hierarchy has the following levels:
Level
1 – quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level
2 – inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices); and
Level
3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Credit
risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual
obligations. The financial instruments that potentially subject the Company to a significant concentration of credit risk consist
of cash. The Company mitigates its exposure to credit loss associated with cash by placing its cash with a major financial institution.
37
CAPITAL INC.
|
|
Notes
to Financial Statements
|
|
Years
Ended December 31, 2020 and 2019
|
|
(Expressed
in Canadian Dollars)
|
|
16.
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (Continued)
Liquidity
risk is the risk that the Company will not be able to meet its financial obligations as they are due. The Company's approach to
managing liquidity is to ensure that it will have sufficient liquidity to meet its liabilities when due.
At
December 31, 2020, the Company had cash of $9 (2019 - $38) available to apply against short-term business requirements and
current liabilities of $1,337,235 (2019 - $1,203,963). All of the current liabilities, are due within 90 days. Amounts due to
related parties are due on demand. As of December 31, 2020, three convertible debentures are in default, and the loan payable
and the refundable subscription are due on demand. Liquidity risk is assessed as high.
Market
risk is the risk that changes in market prices, such as interest rates and foreign exchange rates, will affect the Company's net
earnings or the value of financial instruments. As at December 31, 2020, the Company is not exposed to significant interest
rate risk, currency risk or other price risk on its financial assets and liabilities due to the short-term maturity of its financial
liabilities and fixed interest rate on the convertible debentures.
17.
SUBSEQUENT EVENTS
|
(a)
|
On
January 4, 2021, a total of 500,000 share purchase warrants exercisable at $0.135 per share expired unexercised (Note 11).
|
|
(b)
|
On
January 15, 2021, Company issued 400,000 flow-through units for proceed of $200,000. Each flow-through unit consists of one
flow-through common share of the Company and one non-flow-through share purchase warrant to acquire one non-flow-through common
share of the Company at a price of $0.10 for a period of two years.
|
|
(c)
|
On
January 25, 2021, the Company issued 14,787,030 common shares of the Company at a deemed price of $0.05 per common share in
settlement of debts totaling the amount of $739,351.50 to certain creditors, including to a related party and a director and
officer of the Company.
|
Form
51-102F1
37
CAPITAL INC.
Management’s
Discussion & Analysis
Audited
Financial Statements for the
Year
ended December 31, 2020
The
following discussion and analysis of the financial condition and financial position and results of operations of 37 Capital Inc.
(the “Company” or “37 Capital”) should be read in conjunction with the annual audited financial statements
for the years ended December 31, 2020 and 2019 and the notes thereto.
The
financial statements, including comparatives, have been prepared using accounting policies in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The Company’s
financial statements are expressed in Canadian (CDN) Dollars which is the Company’s functional currency. All amounts in
this MD&A are in CDN dollars unless otherwise stated.
The
following information is prepared as at April 30, 2021.
Forward-Looking
Statements
Certain
statements contained herein are “forward-looking” and are based on the opinions and estimates of management, or on
opinions and estimates provided to and accepted by management. Forward-looking statements may include, among others, statements
regarding future plans, costs, projections, objectives, economic performance, or the assumptions underlying any of the foregoing.
In this MD&A, words such as “may”, “would”, “could”, “will”, “likely”,
“seek”, “project”, “predict”, “potential”, “should”, “might”,
“hopeful”, “objective”, “believe”, “expect”, “anticipate”, “intend”,
“plan”, “estimate”, “optimistic” and similar words are used to identify forward-looking statements.
Forward-looking statements are subject to a variety of significant risks and uncertainties and other factors that could cause
actual events or results to differ materially from those expressed or implied. Although management believes that the expectations
reflected in such forward-looking statements are based on reasonable assumptions, projections and estimations, there can be no
assurance that these assumptions, projections or estimations are accurate. Readers, shareholders and investors are therefore cautioned
not to place reliance on any forward-looking statements in this MD&A as the plans, assumptions, intentions, estimations, projections,
expectations or factors upon which they are based might vary or might not occur. The forward-looking statements contained in this
MD&A are made as of the date of this MD&A, and are subject to change after such date. The Company undertakes no obligation
to update or revise any forward-looking statements, except in accordance with applicable securities laws.
Description
of Business
The
Company is a junior mineral exploration company.
The
Company was incorporated on August 24, 1984 in British Columbia, Canada. The principal business of the Company is the acquisition,
exploration and, if warranted, the development of natural resource properties.
37
Capital is a reporting issuer in the Provinces of British Columbia, Alberta, Quebec and Ontario and files all public documents
on www.Sedar.com . The Company is a foreign private issuer in the United States of America and in this respect files, on EDGAR,
its Annual Report on Form 20-F and other reports on Form 6K. The following link, http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=825171
will give you direct access to the Company’s filings with the United States Securities and Exchange Commission (“U.S.
SEC”).
In
Canada, the common shares of the Company trade on the Canadian Securities Exchange (CSE) under the symbol “JJJ.X”,
and in the USA, the Company's common shares trade on the OTC Pink tier of the OTC markets under the trading symbol “HHHEF”.
The Cusip number of the Company’s common shares is 88429G102. The Company’s office is located at 400 – 570 Granville
Street, Vancouver, British Columbia, Canada, V6C 3P1 and its registered office is located at Suite 3200 - 650 West Georgia Street,
Vancouver BC V6B 4P7. The Company’s registrar and transfer agent is Computershare Investor Services Inc. located at 510
Burrard Street, Vancouver, British Columbia, Canada, V6C 3B9. The Company’s Auditors are Dale Matheson Carr-Hilton Labonte
LLP, Chartered Professional Accountants, 1500-1140 W. Pender St., Vancouver, BC V6E 4G1. The telefax number is (604) 689-2778.
Pursuant
to the policies of the Canadian Securities Exchange, the Company has been deemed to be inactive, and as a result, the Company’s
current trading symbol is “JJJ.X”.
Selected
Annual Information
Selected
annual information from the financial statements (audited) for the three years ended December 31, 2020, 2019 and 2018 is shown
in the following table:
|
|
Year
Ended December 31, 2020
|
|
Year
Ended December 31, 2019
|
|
Year
Ended December 31, 2018
|
Revenue
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Interest
income
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Expenses
|
|
|
(133,379
|
)
|
|
|
(147,137
|
)
|
|
|
(160,856
|
)
|
Basic
and diluted loss per common share before other items
|
|
|
(0.02
|
)
|
|
|
(0.02
|
)
|
|
|
(0.02
|
)
|
Comprehensive
loss
|
|
|
(133,379
|
)
|
|
|
(147,137
|
)
|
|
|
(160,856
|
)
|
Total
assets
|
|
|
40,573
|
|
|
|
33,180
|
|
|
|
2,960
|
|
Long-term
financial obligations
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Cash
dividends
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Results
of Operations
For
the year ended December 31, 2020:
|
•
|
The
Company’s operating expenses were $133,379 as compared to $147,137 for the corresponding period in 2019 and as compared
to $160,856 for the corresponding period in 2018.
|
|
•
|
The
Company recorded a comprehensive loss of $133,379 as compared to a comprehensive loss of $147,137 during the corresponding
period in 2019 and as compared to a comprehensive loss of $160,856 during the corresponding period in 2018.
|
|
•
|
The
Company’s basic and diluted loss per common share was $0.02 as compared to a basic and diluted loss of $0.02 during
the corresponding period of 2019 and as compared to a basic and diluted loss of $0.02 during the corresponding period in 2018.
|
|
•
|
The
Company’s total assets were $40,573 as compared to $33,180 during the corresponding period in 2019 and as compared to
$2,960 during the corresponding period in 2018..
|
|
•
|
The
Company’s total liabilities were $1,337,235 as compared $1,203,963 during the corresponding period in 2019 and as compared
to $1,034,106 during the corresponding period in 2018.
|
|
•
|
The
Company had a working capital deficiency of $1,336,664 as compared to a working capital deficiency of $1,203,285 during the
corresponding period in 2019 and as compared to a working capital deficiency of $1,031,148 during the corresponding period
in 2018.
|
The
Company is presently not a party to any legal proceedings whatsoever.
During
the year ended December 31, 2017, the Company entered into debt settlement agreements with Jackpot Digital Inc. (“Jackpot”),
and with Kalpakian Bros. of B.C. Ltd. (“Kalpakian Bros.”), companies related to 37 Capital by certain common directors.
The Company issued 4,249,985 units of the Company to Jackpot at the price of $0.09 per unit in settlement of the Company’s
outstanding debt for the total amount of $382,498.65 for shared office rent, office support services and miscellaneous office
expenses provided by Jackpot to the Company from August 1, 2014 up to September 30, 2017. Each unit consists of one common share
and one share purchase warrant. Each warrant will be exercisable at a price of $0.12 per share for a period of five years. In
respect to the Company’s outstanding debt to Kalpakian Bros. for the total amount of $15,750, the Company issued 175,000
units of the Company at the price of $0.09 per unit in settlement of the Company’s outstanding debt owed to Kalpakian Bros.
for unpaid management fees from May 1, 2016 up to July 30, 2016. Each unit consists of one common share and one share purchase
warrant. Each warrant will be exercisable at a price of $0.12 per share for a period of five years. The securities were subject
to a hold period which expired on March 3, 2018. During September 2018, Jackpot sold 800,000 units of 37 Capital to JAMCO, an
arm’s length party, and during the nine months ended September 30, 2019 Jackpot sold 3,400,000 common shares of 37 Capital
through the facilities of the Canadian Securities Exchange (CSE). As at December 31, 2020 Jackpot owned 49,985 common shares in
the capital of the Company representing approximately 0.69% of the Company’s issued and outstanding common shares. In addition,
Jackpot owns 3,449,985 share purchase warrants of the Company exercisable at $0.12 per share until November 2, 2022. Pursuant
to debt settlement agreements dated December 11, 2020 totaling the sum of $739,351.50 between the Company and certain creditors,
including Jackpot and the Company’s President and CEO, on January 25, 2021 the Company issued 14,787,030 common shares of
the Company at a deemed price of $0.05 per common share (the “Debt Settlement Shares of the Company”). On January
25, 2021, Jackpot acquired 2,986,900 Debt Settlement Shares of the Company and the Company’s President and CEO acquired
a total of 3,076,975 Debt Settlement Shares of the Company. As of the date of this MD&A, Jackpot owns 3,036,885 commons shares
of the Company representing 13.51% of the Company’s issued and outstanding common shares, and the Company’s President
& CEO owns directly and indirectly 3,190,195 commons shares of the Company representing 14.19% of the Company’s issued
and outstanding common shares. The Debt Settlement Shares of the Company are subject to a hold period expiring on May 26, 2021.
At
the Company’s Annual General Meeting, which was held on November 20, 2020, the Company’s shareholders passed all the
resolutions presented including the re-election of Jake H. Kalpakian, Gregory T. McFarlane, Fred A.C. Tejada and Neil Spellman
as Directors of the Company; re-appointed the Company’s Auditor, Dale Matheson Carr-Hilton Labonte LLP, Chartered Professional
Accountants for the ensuing year and authorized the Directors to fix the remuneration to be paid to the Auditor; and re-approved
the Company’s Stock Option Plan.
During
June 2019, the Board of Directors of the Company passed resolutions approving the consolidation of the Company’s share capital
on a five (5) old shares for one (1) new share basis and the changing of the Company’s name from 37 Capital Inc. to “Bronx
Capital Inc.”. As of the date of this MD&A, the share consolidation and the name change of the Company have not taken
place.
During
2019 the Company had intended to issue up to 4,000,000 flow-through units of the Company at a price of $0.05 per unit for gross
proceeds to the Company of $200,000 in order to use the proceeds of this financing towards mineral exploration work expenditures
located in the Province of British Columbia. However, due to the Covid-19 pandemic the Company was able to raise only the amount
of $20,000 which the Company intends to incur towards mineral exploration work expenditures in the Province of British Columbia
during the Company’s 2021 fiscal year. As such, the Company has issued 400,000 flow-through units of the Company. Each flow-through
unit consists of one flow-through common share of the Company and one non-flow-through share purchase warrant to acquire one non-flow-through
common share of the Company at a price of $0.10 for a period of two years. All securities issued in connection with this financing
are subject to a hold period expiring on May 16, 2021.
Mineral
Properties
1.
Extra High Claims
Previously
the Company held a 33% interest in the Extra High Claims which are located in the Kamloops Mining Division of the Province of
British Columbia (“Extra High Property”).
On
October 31, 2019, as amended on November 4, 2019, the Company entered into a Property Purchase Agreement with Colt Resources Inc.
(“Colt”) whereby the Company has purchased Colt’s 67% right, interest and title in and to the Extra High Property
for a cash consideration of $100,000 of which $25,000 was paid on the closing date of the Property Purchase Agreement and the
balance i.e. $75,000 is payable after eighteen months. Additionally, the Company is obligated to pay Colt a 0.5% NSR from commercial
production which may be purchased by the Company at any time by making a payment of $500,000. As at the date of this MD&A,
the Company owns a 100% undivided right, interest and title in and to the Extra High Property which covers an area of 650 hectares.
The
Company withdrew from its PAC account with the Mineral Titles Office of the Province of British Columbia credits totalling $ 51,920.64
to extend the expiry date of the Extra High Property until December 25, 2021.
The
Extra High Property is subject to a 1.5% Net Smelter Returns Royalty (“NSR”) payable to a third party, 50% of which,
or 0.75%, can be purchased by the Company at any time by paying $500,000.
2.
Ontario Mineral Leases (Lithium)
During
the year ended December 31, 2008, the Company sold all of its Ontario Mineral Leases (Lithium). In the event that at a future
date the Ontario Mineral Leases (Lithium) are placed into commercial production, then the Company is entitled to receive a 0.5%
gross receipts royalty after six months from the date of commencement of commercial production from the Ontario Mineral Leases
(Lithium).
3.
Acacia Property
On
September 30, 2019, the Company entered into and has executed a Property Option Agreement with Eagle Plains Resources Inc. (“Eagle
Plains”) in respect to the Acacia Property (the “Acacia Property Option Agreement”) whereby the Company has
the right and option to acquire a 60% interest in the Acacia Property by issuing to Eagle Plains in stages a total of 300,000
common shares in the capital of the Company and by incurring a total amount of $2,500,000 in property related expenditures over
a period of five years.
During
November 2019, the Company issued 100,000 common shares in the capital of the Company to Eagle Plains at the deemed price of $0.075
per share which were subject to a hold period which expired on February 5, 2020.
On
October 15, 2020, the Company entered into an Amendment Agreement to the Acacia Property Option Agreement with Eagle Plains Resources
Inc. (“Eagle Plains”) whereby the Company a) shall issue to Eagle Plains 50,000 common shares in lieu of not having
incurred the required $100,000 in property related expenditures during the 1st Anniversary of the Acacia Property Option Agreement,
b) shall issue to Eagle Plains an additional 50,000 common shares in order to continue with the 2nd Period of the Acacia Property
Option Agreement and c) has made a firm commitment to incur a total amount of $200,000 in property related expenditures during
the 2nd Period of the Acacia Property Option Agreement. All the other terms and conditions of the Acacia Property Option Agreement
shall remain unchanged and shall be in full force and effect. Consequently, on October 16, 2020, the Company issued 100,000 common
shares in the capital of the Company to Eagle Plains at the deemed price of $0.075 per share which were subject to a hold period
which expired on February 17, 2021.
The
Acacia Property covers an area of approximately 4,715 hectares and is located in the Adams Plateau area of British Columbia, about
60 kms northeast of Kamloops and 22 kms east of the town of Barriere.
Investment
In
April 2013, the Company entered into a purchase and sale agreement with a Mexican gaming company, whereby the Company agreed to
purchase a royalty revenue stream of an amount the greater of 10% of the net profits or 5% of the gross revenues of the Mexican
land-based casino for a purchase price of $800,000. As of December 31, 2013, the Company invested $800,000 and advanced $49,200
for working capital purposes. The Mexican gaming company repaid the $49,200 advanced and the Company recognized $4,157 in royalty
revenue during the year ended December 31, 2014. As at December 31, 2014, the Company assessed the fair value of its investment
and recorded impairment of $799,999 on its investment due to nominal royalty payments received by the Company. As of the date
of this MD&A, the Company does not expect to recover its investment in the Mexican gaming company.
Fourth
Quarter (December 31, 2020)
During
the three months [fourth quarter] period ended December 31, 2020:
|
•
|
The
Company had a comprehensive loss of $45,030 or $0.01 per share as compared to comprehensive loss of $46,782 or $ 0.01 per
share during the same three-month period (fourth period) ended December 31, 2019 and as compared to a comprehensive loss of
$45,671 or $0.01 per share during the same three-month period (fourth period) ended December 31, 2018.
|
|
•
|
The
Company’s Operating costs were $45,030 as compared to $46,782 for the same period in 2019 and as compared to $45,671
for the same period in 2018.
|
Summary
of Quarterly Results
For
the Quarterly Periods ended:
|
|
December
31, 2020
|
|
September
30, 2020
|
|
June
30, 2020
|
|
March
31, 2020
|
Total
Revenues
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Net
loss and comprehensive loss
|
|
|
(45,030
|
)
|
|
|
(26,138
|
)
|
|
|
(40,326
|
)
|
|
|
(21,885
|
)
|
Loss
per common share
|
|
|
(0.01
|
)
|
|
|
(0.00
|
)
|
|
|
(0.01
|
)
|
|
|
(0.00
|
)
|
For
the Quarterly Periods ended:
|
|
December
31, 2019
|
|
September
30, 2019
|
|
June
30, 2019
|
|
March
31, 2019
|
Total
Revenues
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Net
loss and comprehensive loss
|
|
|
(46,782
|
)
|
|
|
(32,518
|
)
|
|
|
(30,513
|
)
|
|
|
(37,324
|
)
|
Loss
per common share
|
|
|
(0.01
|
)
|
|
|
(0.00
|
)
|
|
|
(0.00
|
)
|
|
|
(0.01
|
)
|
The
Company’s business is not of a seasonal nature.
Risks
related to our Business
The
Company, and the securities of the Company, should be considered a highly speculative investment. The following risk factors should
be given special consideration when evaluating an investment in any of the Company's securities:
-
The
Company does not anticipate to generate any revenue in the foreseeable future. In the event that the Company generates any revenues
in the future, then the Company intends to retain its earnings in order to finance growth.
-
There
are a number of outstanding securities and agreements pursuant to which common shares of the Company may be issued in the future.
This will result in further dilution to the Company's shareholders.
-
Governmental
regulations, including those regulations governing the protection of the environment, taxes, labour standards, occupational health,
waste disposal, mine safety and other matters, could have an adverse impact on the Company.
-
Trading
in the common shares of the Company may be halted or suspended or may be subject to cease trade orders at any time and for any
reason, including, but not limited to, the failure by the Company to submit documents to the Regulatory Authorities within the
required time periods.
-
The
exploration of mineral properties involves significant risks which even experience, knowledge and careful evaluation may not be
able to avoid. The prices of metals have fluctuated widely, particularly in recent years as it is affected by numerous factors
which are beyond the Company’s control including international, economic and political trends, expectations of inflation
or deflation, currency exchange fluctuations, interest rate fluctuations, global or regional consumptive patterns, speculative
activities and increased production due to new extraction methods. The effect of these factors on the price of metals, and therefore
the economic viability of the Company’s interests in mineral exploration properties cannot be accurately predicted. Furthermore,
changing conditions in the financial markets, and Canadian Income Tax legislation may have a direct adverse impact on the Company’s
ability to raise funds for its interests in mineral exploration properties. A drop in the availability of equity financings will
likely impede spending on mineral properties. As a result of all these significant risks, it is quite possible that the Company
may lose its investments in the Company’s interest in the Extra High Property and the Acacia Property.
-
Due
to the current difficult market conditions for junior mineral exploration companies, the Company may not be able to raise sufficient
funds to meet its ongoing obligations.
-
The
Company has outstanding debts, has working capital deficiency, has no revenues, has incurred operating losses, and has no assurances
whatsoever that sufficient funding can be available for the Company to continue its operations uninterruptedly.
-
In
respect to the Company’s investment in the Mexican gaming company, there are no assurances whatsoever that in the future
the Company can recover its investment or that the Company can receive any royalty revenues.
-
The
market price of the Company’s common shares has experienced considerable volatility and may continue to fluctuate in the
future. Furthermore, there is a limited trading market for the Company’s common shares and as such, the ability of investors
to sell their shares cannot be assured.
-
In
March 2020, the World Health Organization declared a global pandemic related to the coronavirus known as COVID-19. The expected
impacts on global commerce are anticipated to be far reaching. To date there have been significant wide-spread adverse financial
impact globally, and the movement of people and goods has become restricted. As the Company has no material operating income or
cash flows, it is reliant on additional financing to fund ongoing operations. An extended disruption may affect the Company’s
ability to obtain additional financing. As such, the Company may not be able to raise the required funds and may not be able to
conduct exploration works on its mineral property interests in a timely manner. The impact on the economy and the Company is not
yet determinable; however, the Company’s financial position, results of operations and cash flows in future periods may
be materially affected. In particular, there may be heightened risk of asset impairment and liquidity thus creating further going
concern uncertainty.
Liquidity
and Capital Resources
The
Company has incurred operating losses over the past three fiscal years, has limited resources, and does not have any source of
operating cash flow.
During
2021, the Company shall require at least $400,000 to conduct its operations uninterruptedly. In order to meet this requirement,
the Company intends to seek equity and/or debt financings through private placements and/or public offerings and/or loans. In
the past, the Company has been successful in securing equity and debt financings in order to conduct its operations uninterruptedly.
While the Company does not give any assurances whatsoever that in the future it will continue being successful in securing equity
and/or debt financings in order to conduct its operations uninterruptedly, it is the Company’s intention to pursue these
methods for future funding of the Company.
As
of December 31, 2020:
•
|
|
the
Company’s total assets were $40,573 as compared to $33,180 for the year ended December 31, 2019 and as compared to $2,960
for the year ended December 31, 2018.
|
•
|
|
the
Company’s total liabilities were $1,337,235 as compared to $1,203,963 for the period ended December 31, 2019 and as
compared to $1,034,106 for the year ended December 31, 2018.
|
•
|
|
the
Company had $9 in cash as compared to $38 in cash for the year ended December 31, 2019 and as compared to $2,045 in cash for
the year ended December 31, 2018.
|
•
|
|
the
Company had GST receivable in the amount of $562 as compared to $640 for the year ended December 31, 2019 and as compared
to $913 for the year ended December 31, 2018.
|
Shares
for Debt Financing
Pursuant
to debt settlement agreements dated December 11, 2020 totaling the amount of $739,351.50 between the Company and certain creditors,
on January 25, 2021, the Company issued 14,787,030 common shares of the Company (the “Debt Settlement Shares of the Company”)
at a deemed price of $0.05 per common share in settlement of debts totaling the amount of $739,351.50 to certain creditors, including
to a related party and a director and officer of the Company. The Debt Settlement Shares of the Company are subject to a hold
period which expires on May 26, 2021.
Private
Placement Financing
There
were no private placement financings during the year ended December 31, 2020, 2019 and 2018.
Subsequent
to the year-ended December 31, 2020, the Company issued 400,000 flow-through units of the Company. Each flow-through unit consists
of one flow-through common share of the Company and one non-flow-through share purchase warrant to acquire one non-flow-through
common share of the Company at a price of $0.10 for a period of two years. All securities issued in connection with this financing
are subject to a hold period expiring on May 16, 2021.
Warrants
As
at December 31, 2020, a total of 4,324,985 warrants with exercise price of $0.12 per warrant share and 500,000 warrants with exercise
price of $0.135 per warrant share were outstanding. Subsequent to the year-ended December 31, 2020, a total of 500,000 warrants
exercisable at the price of $0.135 per warrant share expired unexercised, and a total of 400,000 warrants exercisable for a period
of two years at the price of $0.10 per warrant were issued.
While
there are no assurances whatsoever that warrants may be exercised, however if any warrants are exercised in the future, then any
funds received by the Company from the exercising of warrants shall be used for general working capital purposes.
Loan
2016
The
Company had borrowed the sum of $103,924 from an arm’s length party to pay certain amounts that were owed by the Company
to some of its creditors. The borrowed amount of $103,924 was non-interest bearing, unsecured and was payable on demand. Pursuant
to a debt settlement agreement dated December 11, 2020 with the Company and the arm’s length party, on January 25, 2021
the Company issued a total of 2,078,484 common shares of the Company at a deemed price of $0.05 per shares in full settlement
of the debt (the “Debt Settlement Shares of the Company”). The Debt Settlement Shares of the Company are subject to
a hold period expiring on May 26, 2021.
Refundable
Subscription
During
the twelve months ended December 31, 2016, the Company cancelled subscription agreements of a non-brokered private placement financing
totalling $45,000. The Company had refunded $35,000. As of December 31, 2020, the remaining $10,000 (2019 - $10,000) was still
owing and was due on demand. Pursuant to a debt settlement agreement dated December 11, 2020 with the Company and the arm’s
length party, on January 25, 2021 the Company issued a total of 200,000 common shares of the Company at a deemed price of $0.05
per shares in full settlement of the $10,000 refundable subscription (the “Debt Settlement Shares of the Company”).
The Debt Settlement Shares of the Company are subject to a hold period expiring on May 26, 2021.
During
the year ended December 31, 2020, the Company received $20,000 of subscription funds for 400,000 flow-through units of the Company
at $0.05 per unit in respect to the Company’s announced financing. Subsequent to the year ended December 31, 2020, the Company
issued 400,000 flow-through units. Each flow-through unit consists of one flow-through common share of the Company and one non-flow-through
share purchase warrant to acquire one non-flow-through common share of the Company at a price of $0.10 for a period of two years.
The securities issued are subject to a hold period expiring on May 16, 2021.
Convertible
Debentures Financing 2015
On
January 6, 2015, the Company closed a convertible debenture financing with two directors of the Company for the amount of $250,000.
The convertible debentures matured on January 6, 2016, and bear interest at the rate of 12% per annum payable on a quarterly basis.
The convertible debentures are convertible into common shares of the Company at a conversion price of $0.30 per share. The liability
component of the convertible debentures was recognized initially at the fair value of a similar liability with no equity conversion
option, which was calculated based on the application of a market interest rate of 20%. On the initial recognition of the convertible
debentures, the amount of $222,006 was recorded under convertible debentures and the amount of $27,994 has been recorded under
the equity portion of convertible debenture reserve.
During
the year ended December 31, 2020, the Company recorded interest expense of $30,000 (2019 - $30,000) (2018-$30,000). As of December
31, 2020, $250,000 of the convertible debentures are outstanding and are past due plus accrued interest of $179,589 (2019 - $149,589)
(2018-$119,589). As of December 31, 2020 and as of the date of this MD&A, the two convertible debentures are in default.
Convertible
Debentures Financing 2013
During
the year ended December 31, 2013, the Company issued several convertible debentures for a total amount of $975,000 to several
arm’s length parties. The convertible debentures have a maturity date of 18 months from the date of closing, and bear interest
at the rate of 15% per annum payable on a quarterly basis. The convertible debentures are convertible into common shares of the
Company at a conversion price of $1.50 per share. The liability component of the convertible debenture was recognized initially
at the fair value of a similar liability with no equity conversion option, which was calculated based on the application of a
market interest rate of 20%. The difference between the $975,000 face value of the debentures and the fair value of the liability
component was recognized in equity. On the initial recognition of the convertible debentures, the amount of $913,072 has been
recorded under convertible debentures and the amount of $61,928 has been recorded under the equity portion of convertible debentures.
Pursuant
to the financing, the Company made cash payments of $48,000 and issued 2,000 common shares of the Company and 3,333 agent warrants
of the Company with fair value of $8,115 as finders’ fees. Each warrant entitled the holder to purchase one additional common
share of the Company at a price of $1.50 per share until July 23, 2018 (expired). The amount of transaction costs directly attributable
to the financing of $56,115 were allocated to the liability and equity components of the debenture proportionately at $52,551
and $3,564, respectively. The discount on the debentures is being accreted such that the liability component will equal the face
value of the debentures at maturity plus accrued interest.
On
September 4, 2013, the amount of $858,118 which comprised of certain convertible debentures and their corresponding accrued interest
was converted into 610,724 common shares of the Company. The equity portion of the convertible debentures was reduced in the amount
of $52,562.
During
the year ended December 31, 2020, the Company recorded interest expense of $15,000 (2019 - $15,000) (2018 - $15,00). As of December
31, 2020, $100,000 of the convertible debentures are outstanding and are past due plus accrued interest of $109,602 (2019 - $94,602)
(2018 - $79,602). One convertible debenture in the amount of $100,000 was in default and another convertible debenture was extended
indefinitely. Pursuant to debt settlement agreements dated December 11, 2020 with the Company and the two debenture holders, on
January 25, 2021, the Company issued a total of 4,167,044 common shares of the Company to the two debenture holders in full settlement
of debts totalling the amount of $208,352.20 (the “Debt Settlement Shares of the Company”). The Debt Settlement Shares
of the Company are subject to a hold period expiring on May 26, 2021.
Stock
Options
As
at December 31, 2020, there were no outstanding stock options (December 31, 2019 – Nil) (December 31, 2018 – Nil).
As
of the date of this MD&A there are no outstanding stock options.
Significant
Accounting Policies
The
Annual Audited Financial Statements for the year ended December 31, 2020 have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations
issued by the International Financial Reporting Interpretation Committee (“IFRIC”).
The
Significant Accounting Policies are detailed in Note 4 of the Company’s Annual Audited Financial Statements for the year
ended December 31, 2020.
Effective
January 1, 2019, the Company adopted IFRS 16 which supersedes IAS 17 Leases (“IAS 17”). The Company has applied the
new standard using the modified retrospective approach with no restatement of comparative periods. There were no adjustments to
retained earnings as a result of adoption. The Company has elected not to reassess whether a contract is, or contains a lease
at the date of initial application. Instead, for contracts entered into before the transition date the Company relied on its previous
assessment made under IAS 17 and IFRIC 4 Determining whether an arrangement contains a lease. The definition of a lease under
IFRS 16 was applied only to contracts entered into or modified on or after January 1, 2019.
On
transition to IFRS 16, the Company did not recognize any lease assets or liabilities as its operating leases had a remaining term
of less than 12 months from the date of initial application.
Off-Balance
Sheet Arrangements
The
Company does not have any off-balance sheet arrangements.
Trends
During
the last several years commodity prices have fluctuated significantly, and should this trend continue or should commodity prices
remain at current levels, then companies such as 37 Capital will have difficulty in raising funds and/or acquiring mineral properties
of merit at reasonable prices.
Related
Party Transactions
The
Company shares office space and certain employees with Jackpot, a company related by certain common key management personnel.
During
April 2017, the Company together with Jackpot, a related company with common directors, entered into an office lease agreement
with an arm’s length party (the “Office Lease Agreement”). The Office Lease Agreement had a three-year term
with a commencement date of August 1, 2017. The Company’s share of the office basic rent and operating costs was $28,800
plus applicable taxes per annum. In respect to the Office Lease Agreement, effective as of May 1, 2018, Jackpot and the Company
entered into an amending agreement whereby the Company shall have no further responsibilities, obligations or commitments in respect
to the Office Lease Agreement. Under the amending agreement, the Company is required to pay a monthly rent of $1,000 plus applicable
taxes to Jackpot, and either Jackpot or the Company may terminate this agreement by giving each other a three months’ notice
in writing.
As
at December 31, 2020, 2019 and 2018, the amounts due to related parties are unsecured, payable on demand which consist of
the following:
|
|
2020
|
|
2019
|
|
2018
|
Advances
from directors (interest at prime plus 1%)
|
|
$
|
153,290
|
|
|
$
|
160,643
|
|
|
$
|
93,391
|
|
Entities
controlled by directors (non-interest-bearing)
|
|
|
155,646
|
|
|
|
130,444
|
|
|
|
88,461
|
|
|
|
$
|
308,936
|
|
|
$
|
291,087
|
|
|
$
|
181,852
|
|
Included
in convertible debentures and accrued interest is $429,589 (2019 - $399,589) (2018 - $369,589) owing to the Chief Executive Officer
and to a former director of the Company.
During
the years ended December 31, 2020, 2019 and 2018, the following amounts were charged by related parties.
|
|
2020
|
|
2019
|
|
2018
|
Interest
charged on amounts due to related parties
|
|
$
|
3,961
|
|
|
$
|
5,452
|
|
|
$
|
4,312
|
|
Interest
on convertible debentures
|
|
|
30,000
|
|
|
|
30,000
|
|
|
|
30,000
|
|
Rent
charged by entities with common directors
|
|
|
12,000
|
|
|
|
12,000
|
|
|
|
17,600
|
|
Office
expenses charged by, and other expenses paid on behalf of the Company by a company with common directors
|
|
|
12,000
|
|
|
|
28,784
|
|
|
|
38,279
|
|
|
|
$
|
57,961
|
|
|
$
|
76,236
|
|
|
$
|
90,191
|
|
Pursuant
to Debt Settlement Agreements dated December 11, 2020 with Jackpot, Jake Kalpakian, Kalpakian Bros. and 30 Rock Management Inc.
(“30 Rock”), a private company controlled by Jake Kalpakian, during January 2021 the Company issued 2,986,900 common
shares of the Company to Jackpot; 419,896 common shares to Jake Kalpakian; 1,508,261 common shares to Kalpakian Bros. and 1,148,818
common shares of the Company to 30 Rock (collectively the “Debt Settlement Shares of the Company”). The Debt Settlement
Shares of the Company are subject to a hold period expiring on May 26, 2021.
On
January 6, 2015, the Company closed convertible debentures financing with two directors of the Company for the Principal amount
of $250,000. The convertible debentures have a maturity date of twelve months from the date of closing, and bear interest at the
rate of 12% per annum payable on a quarterly basis. The convertible debentures are convertible into common shares of the Company
at a conversion price of $0.30 per share. The liability component of the convertible debentures was recognized initially at the
fair value of a similar liability that does not have an equity conversion option, which was calculated based on the application
of a market interest rate of 20%. The amount of $222,006 has been recorded under convertible debentures and the amount of $27,994
has been recorded under the equity portion of convertible debenture reserve. The Principal amount of $250,000 together with the
accrued interest of the convertible debentures became due and payable on January 6, 2016 (the “Due Date”). However,
on the Due Date the Company was unable to repay the Principal amount and the accrued interest to the two directors. Effective
as of November 15, 2017, Bedo Kalpakian is no longer a director of the Company. As of the date of this MD&A, the Company has
not repaid to the Company’s CEO Jake Kalpakian and to its former director Bedo Kalpakian the Principal amount of $250,000
together with the accrued interest.
The
Company had an agreement for office support services with Jackpot. Under the agreement, the Company was entitled to receive office
support services from Jackpot at a monthly rate of $7,000 plus applicable taxes. This agreement expired on April 30, 2018.
Effective as of May 1, 2018 the Company entered into a new agreement for office support services with Jackpot for a term of one
year. Under the agreement, the Company was entitled to receive office support services from Jackpot at a monthly rate of $1,000
plus applicable taxes. The agreement expired on April 30, 2019. On May 1, 2019, the Company and Jackpot renewed the office
support services agreement, and as of the date of this MD&A, the agreement has been further renewed for a period of one year
which expires on April 30, 2021.
Jackpot is related to the Company by virtue of the fact that Jackpot has certain directors and officers who are also directors
and officers of the Company.
FINANCIAL
INSTRUMENTS AND RISK MANAGEMENT
|
(a)
|
Risk
management overview
|
The
Company's activities expose it to a variety of financial risks including credit risk, liquidity risk and market risk. This note
presents information about the Company's exposure to each of the above risks, the Company's objectives, policies and processes
for measuring and managing risk, and the Company's management of capital. The Company employs risk management strategies and policies
to ensure that any exposure to risk is in compliance with the Company's business objectives and risk tolerance levels. While the
Board of Directors has the overall responsibility for the Company's risk management framework, the Company's management has the
responsibility to administer and monitor these risks.
|
(b)
|
Fair
value of financial instruments
|
The
fair values of cash, accounts payable and accrued liabilities and due to related parties approximate their carrying values due
to the short-term maturity of these instruments.
Credit
risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual
obligations.
The
financial instruments that potentially subject the Company to a significant concentration of credit risk consist of cash. The
Company mitigates its exposure to credit loss associated with cash by placing its cash with a major financial institution.
Liquidity
risk is the risk that the Company will not be able to meet its financial obligations as they are due. The Company's approach to
managing liquidity is to ensure that it will have sufficient liquidity to meet its liabilities when due.
At
December 31, 2020, the Company had cash of $9 (2019 - $38) (2018 -$2,045) available to apply against short-term business requirements
and current liabilities of $1,337,235 (2019 - $1,203,963) (2018 - $1,034,106). All of the current liabilities, are due within
90 days. Amounts due to related parties are due on demand. As of the date of this MD&A, two convertible debentures are in
default.
Market
risk is the risk that changes in market prices, such as interest rates and foreign exchange rates, will affect the Company's net
earnings or the value of financial instruments. As at December 31, 2020, the Company is not exposed to significant interest rate
risk, currency risk or other price risk on its financial assets and liabilities due to the short-term maturity of its financial
liabilities and fixed interest rate on the convertible debentures.
Analysis
of expenses
For
a breakdown of general and administrative expenditures, please refer to the Statements of Comprehensive Loss in the Company’s
Annual Audited Financial Statements for the years ended December 31, 2020 and 2019.
Capital
Stock
Authorized
share capital: Unlimited number of common shares without nominal or par value
Unlimited
number of preferred shares without nominal or par value
Outstanding Share Data
|
|
No. of Common Shares
|
|
No. of Preferred Shares
|
|
Exercise Price per Share
|
|
Expiry Date
|
|
Issued and Outstanding as at April 30, 2021
|
|
|
|
22,479,739
|
|
|
|
Nil
|
|
|
N/A
|
|
N/A
|
|
Warrants as at April 30, 2021
|
|
|
|
4,324,985
400,000
|
|
|
|
Nil
|
|
|
Cdn $0.12
Cdn $0.10
|
|
November 2, 2022 January 15, 2023
|
|
Fully Diluted as at April 30, 2021
|
|
|
|
27,204,724
|
|
|
|
Nil
|
|
|
|
|
|
Director
Approval
The
contents of this MD&A and the sending thereof to the Shareholders of the Company have been approved by the Company’s
Board of Directors.
Outlook
Management’s
efforts are directed towards pursuing opportunities of merit for the Company, and Management is hopeful that, in due course, the
Company shall be able to acquire an opportunity of merit. However, there are no assurances whatsoever that Management’s
efforts shall succeed.
Exhibit
99.1*
37
CAPITAL INC.
MARKETABLE
SECURITIES - OTHER INVESTMENTS
Schedule
I
December
31, 2020
Name of Issuer and Title of Issuer
|
|
Number of Shares/Principal Amount of Bonds
|
|
|
Costs
|
|
|
|
Market Value
|
|
|
Amount at Which The Portfolio is Carried in the Books
|
Nil
|
|
Nil
|
|
|
Nil
|
|
|
|
Nil
|
|
|
Nil
|
Exhibit
99.2*
37
CAPITAL INC.
AMOUNTS
RECEIVABLE/(PAYABLE) FROM RELATED PARTIES AND UNDERWRITERS
PROMOTERS
AND EMPLOYEES OTHER THAN RELATED PARTIES
Schedule
II
Name of Debtor
|
|
Balance Beginning of Period
|
|
Additions
|
|
(Collected)/ Paid
|
|
Amount Written off
|
|
Balance End of Period Receivable (Payable)
|
2020
|
|
|
|
|
|
|
|
|
|
|
Jackpot Digital Inc.
|
|
$
|
(130,444
|
)
|
|
|
(25,200
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
(155,644
|
)
|
Jacob H. Kalpakian
|
|
|
(160,643
|
)
|
|
|
0
|
|
|
|
7,353
|
|
|
|
0
|
|
|
|
(153,290
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jackpot Digital Inc.
|
|
$
|
(88,461
|
)
|
|
|
(41,983
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
(130,444
|
)
|
Jacob H. Kalpakian
|
|
|
(93,391
|
)
|
|
|
(67,252
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
(160,643
|
)
|
Kalpakian Bros. of B.C. Ltd.
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jackpot Digital Inc.
|
|
$
|
(29,852
|
)
|
|
|
(58,609
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
(88,461
|
)
|
Jacob H. Kalpakian
|
|
|
(104,435
|
)
|
|
|
(21,962
|
)
|
|
|
33,006
|
|
|
|
0
|
|
|
|
(93,391
|
)
|
Kalpakian Bros. of B.C. Ltd.
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Exhibit
99.3*
37
CAPITAL INC.
PROPERTY,
PLANT AND EQUIPMENT AND
ACCUMULATED
AMORTIZATION (DEPRECIATION AND DEPLETION) THEREOF
Schedules
III and IV
|
|
Balance Beginning of Period
|
|
Additions
|
|
Disposals and Retirements
|
|
Other Charges
|
|
Balance, End of Period
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant & equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Machinery & equipment
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Accumulated amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Machinery and equipment
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant & equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Machinery & equipment
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Accumulated amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Machinery and equipment
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant & equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Machinery & equipment
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Accumulated amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Machinery and equipment
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Exhibit
11.1
Explanation
of how earnings/loss per (weighted average) share is calculated
Earnings
and Loss per share are calculated by dividing the net loss or profit by the total weighted average number of common shares outstanding.
The weighted average number of common shares outstanding is obtained as follows:-
Whenever
the Company issues shares from its treasury during a specific reporting period, the number of common shares issued is pro-rated
over the remaining months of the year, and such number is added to the December 31st closing balance of the previous
year.
Exhibit
31.1
CERTIFICATION
PURSUANT TO
Rule
13a-14(b) and Section 1350 of Chapter 63
of
Title18 of the United States Code (18 U.S.C. 1350).
I,
Jacob H. Kalpakian, certify that:
1. I have reviewed this Annual Report on Form 20-F (2020) of 37 Capital Inc.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
a)
|
|
Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared;
|
b)
|
|
Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide a reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
|
Evaluated
the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
|
d)
|
|
Disclosed
in this report any change in the company’s internal control over financial reporting that occurred during the period covered
by the Annual Report that has materially affected, or is reasonably likely to materially affect, the company’s internal
control over financial reporting; and
|
5.
The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors
(or persons performing the equivalent functions):
a)
|
|
All significant
deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information;
and
|
b)
|
|
Any fraud,
whether or not material, that involves management or other employees who have a significant role in the company’s
internal control over financial reporting.
|
Date:
May 15, 2021
“Jacob
H. Kalpakian”
Jacob
H. Kalpakian,
Chief
Executive Officer
Exhibit
31.2
CERTIFICATION
PURSUANT TO
Rule
13a-14(b) and Section 1350 of Chapter 63
of
Title18 of the United States Code (18 U.S.C. 1350).
I,
Neil Spellman, certify that:
1. I have reviewed this Annual Report on Form 20-F (2020) of 37 Capital Inc.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
a)
|
|
Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared;
|
b)
|
|
Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide a reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
|
Evaluated
the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
|
d)
|
|
Disclosed
in this report any change in the company’s internal control over financial reporting that occurred during the period covered
by the Annual Report that has materially affected, or is reasonably likely to materially affect, the company’s internal
control over financial reporting; and
|
5.
The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors
(or persons performing the equivalent functions):
a)
|
|
All significant
deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information;
and
|
b)
|
|
Any fraud,
whether or not material, that involves management or other employees who have a significant role in the company’s
internal control over financial reporting.
|
Date:
May 15, 2021.
“Neil
Spellman”
Neil
Spellman
Chief
Financial Officer
Exhibit
32.1
CERTIFICATION
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Annual Report of 37 Capital Inc., (the "Company") on Form 20-F for the year ended December 31, 2020,
as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jacob H. Kalpakian, President
and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of
the Sarbanes-Oxley Act of 2002, that to my knowledge:
|
(1)
|
the
Report fully complies with the requirements of section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
|
|
(2)
|
the
information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
|
Signed
this 15th day of May, 2021.
37
Capital Inc.
“Jacob
H. Kalpakian”
Jacob
H. Kalpakian,
President
& Chief Executive Officer
SIGNATURE
PAGE
Pursuant
to the requirements of Section 13 of the Securities Exchange Act of 1934, the Registrant certifies that it meets all of the requirements
for filing on Form 20-F (2020) and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto
duly authorized.
37
CAPITAL INC.
“Jacob H. Kalpakian”
Jacob H. Kalpakian
President
& Chief Executive
Dated
this 15th day of May, 2021.
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