Annual and transition report of foreign private issuers pursuant to Section 13 or 15(d)

Financial Instruments and Risk Management

Financial Instruments and Risk Management
12 Months Ended
Dec. 31, 2020
Disclosure of financial risk management [text block] [Abstract]  

Financial risk management

Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are:

  Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities;
  Level 2 Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and
  Level 3 Inputs that are not based on observable market data.

The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Company’s financial instruments consist of cash, receivables, restricted deposit, accounts payable and accrued liabilities and notes payable.

The fair value of cash, receivables, accounts payable and accrued liabilities approximate their book values because of the short-term nature of these instruments. The fair value of notes payable approximates its book value as it was discounted using a market rate of interest.

Credit risk

Credit risk is the risk of financial loss to the Company if a counterparty to a financial instrument fails to meet its payment obligations. The Company has no material counterparties to its financial instruments with the exception of the financial institutions which hold its cash. The Company manages its credit risk by ensuring that its cash is placed with a major financial institution with strong investment grade ratings by a primary ratings agency. The Company’s receivables consist of goods and services tax due from the government.

Financial instrument risk exposure

The Company is exposed in varying degrees to a variety of financial instrument related risks. The Board approves and monitors the risk management processes.

Liquidity risk

The Company’s cash is invested in business accounts which are available on demand, The Company has raised additional capital subsequent to December 31, 2020 (Note 19). Accordingly, the Company’ cash position is not sufficient to meet all financial liabilities currently outstanding and expected to be incurred over the next twelve months.

Interest rate risk

The Company’s bank account earns interest income at variable rates and the notes payable bear interest at the prime lending rate. A 1% change in interest rates would have no significant impact on profit or loss for the year ended December 31, 2020.

Foreign exchange risk

Foreign currency exchange rate risk is the risk that the fair value of financial instruments or future cash flows will fluctuate because of changes in foreign exchange rates. The Company operates in Canada and the United States.

The Company was exposed to the following foreign currency risk as of December 31, 2020, December 31, 2019, and December 31, 2018:


December 31,



December 31,


    December 31, 2018   
    (US$)     (US$)     (US$)  
Cash     86,800       72,097       25,689  
Lease obligations     (741,868 )     (768,563 )     -  
Accounts payable and accrued liabilities     (1,092,402 )     (445,660 )     (543,790 )
      (1,747,470 )     (1,142,126 )     (518,101 )

As of December 31, 2020, with other variables unchanged, a +/- 10% change in the United States dollar to Canadian dollar exchange rate would impact the Company’s profit or loss by $220,000 (December 31, 2019 - $148,000; December 31, 2018 - $71,000).