digaf_ex992
DIGATRADE FINANCIAL CORPORATION
Management’s Discussion and Analysis of Financial
Conditions
And Results of Operations (“MD&A”)
For the Three and Nine Months Ending September 30,
2020
DIGATRADE FINANCIAL CORPORATION
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
(“MD&A”)
For the Three and Nine Months Ending September 30,
2020
This
report is dated November 18, 2020
The
following discussion and analysis prepared as at November 18, 2020,
explains trends in the financial condition and results of
operations of Digatrade Financial Corporation.
(“Digatrade” or “the Company”) for the
three and nine months ended September 30, 2020 as compared to the
same period in 2019. This discussion and analysis of the results of
operations and financial condition of the Company should be read in
conjunction with the consolidated financial statements of the
Company for the year ended December 31, 2019. The Company’s
critical accounting estimates, significant accounting policies and
risk factors have remained substantially unchanged and are still
applicable to the Company unless otherwise indicated. The financial
statements have been prepared in accordance with International
Financial Reporting Standards (IFRS). All financial statement
figures are reported in Canadian dollars unless explicitly stated
otherwise.
Caution on Forward-Looking Information
This
report contains certain statements that constitute forward-looking
information. These forward-looking statements are not descriptive
of historical matters and may refer to management’s
expectation or plans. These statements include, but are not limited
to statements concerning our business objectives and plans and
future trends in our industry. Inherent in forward-looking
statements are risks and uncertainties beyond management’s
ability to predict or control including risks that may affect
Digatrade’s operating or capital plans. Actual results and
developments are likely to differ, and may differ materially, from
those expressed or implied by the forward-looking statements in
this discussion and analysis as well as contained in other
components of the annual report. Such statements are based upon a
number of assumptions that may prove incorrect, including but not
limited to, the following assumptions: that there is no material
deterioration in general business and economic conditions; that
there are no unanticipated fluctuations in interest or exchange
rates; that there is no cancellation or unfavorable variation to
its current major contracts; that if required, Digatrade is able to
finance future acquisitions on reasonable terms; and that Digatrade
maintains its ongoing relations with its business partners. We
caution you that the foregoing list of important factors and
assumptions is not exhaustive. You should also carefully consider
matters discussed under “Risk and Uncertainties”
contained elsewhere in this discussion. Digatrade undertakes no
obligation to update publicly or otherwise revise any
forward-looking statements or the list of factors, whether as a
result of new information or future events or otherwise, except as
may be required under applicable laws.
Overview
The
Company is a British Columbia corporation, incorporated on December
28, 2000. The registered and corporate office is at 1500 West
Georgia Street, Suite 1300, Vancouver, British Columbia, Canada,
V6C 2Z6. The Company does not have an agent in the United
States.
Digatrade Financial Corp. is a financial technology (FinTech)
services company. The Company has been focused on the financial
technology industry since 2015. During that time, the Company has
pursued several different areas of business including blockchain
development services, transaction services for crypto-currencies
(e.g. Bitcoin) and other related financial services
technologies.
In March 2015, the Company entered into an agreement with Mega
Ideas Holdings Limited, dba ANX (“ANXPRO and ANX
International”), a company incorporated and existing under
the laws of Hong Kong. ANX owns a proprietary trading platform and
provides operational support specializing in blockchain development
services and exchange and transaction services for
crypto-currencies e.g. Bitcoin and other digital assets. Effective
October 17, 2018 the Company closed its online retail trading
platform but will continue to evaluate opportunities and continue
with research in digital-asset trading for prospective
institutional customers while continuing to seek new opportunities
within the blockchain and the financial technology services
(non-trading) sector.
DIGATRADE FINANCIAL CORPORATION
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
(“MD&A”)
For the Three and Nine Months Ending September 30,
2020
On
February 28, 2019 the Company executed
a Definitive Agreement with Securter Inc., a private Canadian
Corporation that is developing a proprietary, patent-pending credit
card payment platform to significantly increase the security of
online credit card payment processing. Securter technology reduces
immense losses by financial institutions and merchants that arise
from fraudulent credit card use and protects cardholder privacy by
eliminating the distribution of personal information to third
parties. With the current worldwide surge in online commerce
expected to continue for years to come, the problem of credit card
security is large and growing. The Definitive Agreement with
Securter sets out that Securter’s technology will be launched
and commercialized as a Digatrade subsidiary. The Company
was incorporated under the name Black Diamond Holdings Corporation.
On June 26, 2007, the Company changed its name from Black Diamond
Holdings Corporation to Black Diamond Brands Corporation. On
November 21, 2008 the Company changed its name to Rainchief Energy
Inc. and on February 19, 2015 to Bit-X Financial Corporation. On
October 27, 2015, the Company changed its name to Digatrade
Financial Corporation.
The
Company is listed as a fully reporting issuer on the FINRA OTC
bulletin board and trades under the symbol
“DIGAF”.
Prior
to the change of name on February 19, 2015, the Company was an
energy exploration company focused on the identification and
evaluation for acquisition of energy assets.
Organization Structure
As of
the date of this report the Company has three wholly owned
subsidiaries, Digatrade Limited (a British Columbia corporation),
Digatrade Limited (a Nevada corporation), Digatrade (UK) Limited (a
United Kingdom corporation). The Company had voting control of
Securter Inc., (an Ontario corporation) from its incorporation to
September 8, 2020.
The
Company’s former wholly owned subsidiaries Jaydoc Capital
Corporation and Rainchief Renewable-1 SRL were de-registered during
the year ended December 31, 2015.
Recent corporate developments
During
the period commencing on January 1, 2020, until the date of the
report, the Company experienced the following corporate
developments:
Entry
into the secure mobile application for Card Not Present transaction
business
On
February 5, 2019 the company entered into a Letter of Intent with
Securter Inc. (“Securter”), a private Canadian
Corporation that is developing a proprietary, patent-pending credit
card payment platform to significantly increase the security of
online credit card payment processing. The purpose is to reduce
financial losses being experienced by financial institutions and
merchants from fraudulent credit card use, while also better
protecting cardholder privacy. The Letter of Intent sets out that
the new technology will be launched and commercialized through a
Digatrade subsidiary.
On
February 26, 2019, the Company entered into a definitive agreement
with Securter Inc., in terms of which a newly formed corporation,
Securter Systems Inc. (“SSI”) would acquire all the
assets and liabilities of Securter Inc. Upon incorporation, SSI
issued 25,937,594 Class A common shares to the shareholders of
Securter Inc. and 100,000 Class B common shares to the Company.
Each Class B common share is non-participating and carries 1,000
votes. The Company shall have the right to purchase up to 30.3%
Class A common shares of SSI at a price of US$0.23 for a total
purchase consideration of up to US$3,000,000.
On
September 8, 2020, SSI effected reorganization of its share
structure. All the Class A Common Shares were cancelled, and
19,767,000 Class A Common Shares were issued from Treasury, of
which 3,817,000 were issued to the Company at a price of $0.07. in
addition, all the Class B common shares, by which the Company
exercised voting control over SSI, were cancelled. The Company
recognized a gain of $13,148 on the reorganization of
SSI.
DIGATRADE FINANCIAL CORPORATION
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
(“MD&A”)
For the Three and Nine Months Ending September 30,
2020
Convertible
Promissory Notes Issued
During
the period to November 16, 2020, the Company issued further
convertible promissory notes raising net proceeds of $339,024
(US$260,895).
The
notes are unsecured, bear interest at between 10% and 12% per annum
from the date of issuance and mature between nine months and one
year after the date of issuance.
Any
amount of interest or principal that is not paid on the maturity
date bears interest at 22% to 24% per annum from the maturity date
to the date of payment. Any amount of principal and/or interest
that is unpaid may be converted, at the option of the holder, in
whole or in part into common share of the Company at a price equal
to 61% of the lowest closing bid price for the Company’s
stock as reported on the OTC during the fifteen trading days prior
to a Notice of Conversion. The Company may prepay the principal and
all accrued interest at any time between the date of issuance and
the maturity date, together with a prepayment premium of between
15% and 40% of the amount prepaid, determined by reference to the
date of repayment.
Conversion
of Convertible Promissory Notes
During
the period to November 16, 2020, certain Convertible Promissory
Notes with a face value of US$254,203 were converted into
690,210,266 Common Shares of the Company with a fair value of
$878,535.
Issuance
of Class B Common shares
On
April 14, 2020, the Company passed a resolution to increase the
authorized number of Class “B” common shares from
1,100,000 to 2,100,000. On the same day, the Company issued
1,000,000 Class “B” common shares at $0.0001 per share
for total proceeds of $100 to a shareholder who is also a Director
and Officer of the Company.
COVID-19
Pandemic
The
outbreak of the COVID-19 virus and the worldwide pandemic has
impacted the Company’s plans and activities. The Company may
face disruption to operations, supply chain delays, travel and
trade restrictions, and impacts on economic activity in affected
countries or regions can be expected and are difficult to quantify.
Regional disease outbreaks and pandemics represent a serious threat
to hiring and maintaining a skilled workforce and could be a major
health-care challenge for the Company. There can be no assurance
that the Company’s personnel will not be impacted by these
regional disease outbreaks and pandemics and ultimately that the
Company would see its workforce productivity reduced or incur
increased medical costs and insurance premiums as a result of these
health risks.
In
addition, the pandemic has created a dramatic slowdown in the
global economy. The duration of the outbreak and the resulting
travel restrictions, social distancing recommendations, government
response actions, business disruptions and business closures may
have an impact on the Company’s operations and access to
capital. There can be no assurance that the Company will not be
impacted by adverse consequences that may be brought about by the
pandemic’s impact on global industrial and financial markets
which may reduce share prices and financial liquidity thereby
severely limiting access to essential capital.
DIGATRADE FINANCIAL CORPORATION
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
(“MD&A”)
For the Three and Nine Months Ending September 30,
2020
Selected
Annual Information
The
following table provides a brief summary of the Company’s
annual financial data for the latest three fiscal years ended
December 31, 2019:
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Net
loss
|
(674,520)
|
(522,963)
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(2,094,253)
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Basic and diluted
loss per share
(post-share
consolidation)
|
(0.01)
|
(0.01)
|
(0.01)
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Total
assets
|
960,108
|
1,478,985
|
304,423
|
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Total
liabilities
|
2,030,117
|
1,097,913
|
735,326
|
Results of Operations
For the three and nine months ended September 30, 2020 the Company
had a net profit of $245,820 and a net loss of $912,646,
respectively as compared with losses of $250,354 and $874,951,
respectively, for the three and nine months ended September 30,
2019.
Accounting, Audit and Legal expenses amounted to $12,469 for the
three months ended September 30, 2020, and $84,393 for the nine
months ended on that date, respectively, as compared with $24,842
for the three months and $123,206 for the nine months ended on
September 30, 2019.
Accounting expenses decreased by $1,881 for the three months ended
September 30, 2020 as compared with the same period in 2019, and
but increase $25,119 for the nine months ended on September 30,
2020 as compared with the same period in 2019. The increased
expenditure during the nine months ended September 30, 2020
resulted from significant additional accounting work required to
complete the 2019 annual audit examination and ongoing additional
accounting requirements.
Legal expenses in connection with the Securter business amounted to
$1,106 nine months ended September 30, 2020; compared with $65,038
incurred during the corresponding period in 2019. During the three
and nine months ended September 30, 2019, the Company incurred
$7,961 and $39,311, respectively, in connection with the issuance
of convertible promissory notes. The company did not incur any
legal expenses in connection with the issuance of convertible
promissory notes in the corresponding periods in 2020.
DIGATRADE FINANCIAL CORPORATION
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
(“MD&A”)
For the Three and Nine Months Ending September 30,
2020
Finders Fees incurred in connection with the issuance of
Convertible Promissory Notes amounted to $54,746 for the nine
months ended September 30, 2019. The Company did not incur any
Finders Fees during the three and nine months ended September 30,
2020.
Consulting Expense decreased by $48,444 to $43,026 for the three
months ended September 30, 2020 as compared with $91470 incurred
during the three months ended September 30, 2019; and by $130,700
from $296,512 for the nine months ended September 30, 2019, to
$165,812 for the nine months ended September 30, 2020. The decrease
resulted from reduced consulting services procured by the Company
during the three and nine months ended September 30,
2020.
During the nine months ended September 30, 2020 the Company
incurred $4,039 in marketing expenses, as compared with $32,228 for
the three months ended on September 30, 2019, and $63,161 for the
nine months ended on that date. The decrease in marketing
expenditure resulted from a reduction of marketing efforts during
the period under review because of the Covid-19
pandemic.
The Company did not incur any investor relations expenses during
the three and nine months ended September 30, 2020, as compared
with $20,096 incurred during the nine months ended September 30,
2019.
The Company incurred $3,673 in Filing and Transfer Agents Expenses
during the three months ended September 30, 2020 as compared with
$4,989 during the three months ended September 30, 2019, a decrease
of $1,225. Filing and Transfer Agents Expenses for the nine months
ended September 30, 2020 amounted to $16,245, a decrease of $3,313
as compared with $19,558 expensed during the nine months ended
September 30, 2019.The decreases in this expenditure resulted from
reduced corporate activity during the three and nine months ended
September 30, 2020 as compared with the same periods in
2019.
Management fees for the three and nine months ended September 30
2020 amounted to $43,026 and $165,812, respectively, a decrease of
$48,444 as compared with $91,470 expensed during the three months
ended September 30, 2019, and a decrease of $130,700 as compared
with $296,515 expensed during the nine months ended September 30,
2019. The decreases during the three and nine months ended
September 30, 2020 resulted from the deferral of bonusses due in
the quarter.
During the nine months ended September 30, 2019 the Company granted
incentive options with a fair market value of $60,000 to Directors,
Officers and Consultants. The Company did not grant any further
incentive options during the nine months ended September 30,
2020
The Company incurred $13,788 in Project Development Costs during
the nine months ended September in connection with the development
of the Securter application. The Company did not incur any Project
Development Costs during the three and six months ended June 30,
2019, as a result of the termination of the ANX management contract
on October 17, 2018
During the three and nine months ended September 30, 2020, the
Company incurred $699 and $1,620, respectively on travel and
administration expenses as compared with $1,600 and 25872 incurred
during the three and nine months ended September 30, 2019. The
expenditures on travel expenses incurred in connection with the
acquisition of Securter during the nine months ended September 30,
2019 did not reoccur in the periods under review, resulting in
decreases in expenditure of $901 and $24,252,
respectively,
DIGATRADE FINANCIAL CORPORATION
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
(“MD&A”)
For the Three and Nine Months Ending September 30,
2020
The Company realized gains in foreign exchange of $10,778 and
$20,500 for the three and nine months ended September 30, 2020, as
compared with a gain on foreign exchange of $14,043 and a loss of
$5,638, for the three and nine months ended September 30, 2019,
respectively. The gains and loss resulted from changes in the
foreign currency exchange rate between the Canadian and US
Dollars.
The Company realized Accretion Expense in the amount of $5,957 and
a loss on Changes in Fair Value of Derivative Instruments of
$328,183 during the three months ended September 30, 2020. During
the nine months ended on that date, the Company realized Accretion
expenses of $101,900 and a gain in Changes in Fair Value of
Derivative Instruments in the amount of $356,128. The Company did
not recognize Accretion Expense or Change in Value of Embedded
Derivatives during the three and nine months ended September 30,
2019.
During the three months ended September 30, 2020, the Company
recovered $3,199 in Interest Expense related to Convertible
Promissory Notes as compared with $18,115 incurred during the
corresponding period in 2019. Interest related to the Convertible
Promissory Notes for the nine months ended September 30, 2020
amounted to $10,699 as compared with $52,531 incurred during the
nine months ended September 30, 2019.
Financial position
As at September 30, 2020, the Company had a working capital
deficiency of $565,779 as compared with a working capital
deficiency of $457,664 as at December 31, 2019, an increase of
$108,115. The increase in working capital deficiency during the
nine months ended September 30, 2020 is due to decreases in Cash of
$113,156 GST Receivable of $2,623 and increases in Trade and Other
Payables of $68,944, Derivative Liabilities of $125,189 and
Convertible Notes of $9,908; offset by increases in Deferred Losses
on Derivatives of $180,718, Promissory Notes of $4,300 and minority
Shareholder Loans of $26,565.
Liquidity and Capital Resources
As the
Company has historically generated nominal revenues from our
operations, the Company no internal sources of funds and are
reliant upon investors and lenders to fund its operations to
continue to further develop its products. The Company has funded
its operations to date principally from the sale of convertible
promissory notes and, to a lesser extent, sale of equity
securities. Management believes that the Company will continue to
be reliant upon debt and equity financing to fund continuing
operations until the business plan is fully implemented. The
Company has incurred losses since inception and have incurred
negative cash flows from operations from inception through
September 30, 2020.
During the nine months ended September 30, 2020 the Company raised
$339,360 by the issuance of Convertible Promissory Notes (nine
months ended September 30, 2019 - $610,699), and $100 in proceeds
on the issuance of Class B Common Shares (nine months ended
September 30, 2019 - $100). During the nine months ended September
30, 2019, the Company re-paid a Convertible Promissory Note in the
amount of $33,596 and received $86 in advances from Minority
Shareholders.
Changes in working capital accounts during the nine months ended
September 30, 2020 generated $71,567 (nine months ended September
30, 2019 - consumed $ 20,835).
During the nine months ended September 30, 2020, the Company used
cash in the amount of $452,494 to fund the Company's continuing
operations (nine months ended September 30, 2019 –
$781,250).
DIGATRADE FINANCIAL CORPORATION
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
(“MD&A”)
For the Three and Nine Months Ending September 30,
2020
Quarterly Disclosure – Eight Quarters Preceding the Most
Recently Completed Financial Year
The following table sets forth selected unaudited financial
information prepared by management of the Company.
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$
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$
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$
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$
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Revenues
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-
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-
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Net profit
(loss)
|
(343,337)
|
(324,739)
|
(833,727)
|
245,820
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Basic and Diluted
profit (loss) per share (post-share consolidation)
|
(0.001)
|
(0.0005)
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$(0.0009)
|
$0.0002
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$
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$
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$
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$
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Revenues
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-
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-
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-
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-
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Net profit
(loss)
|
97,444
|
(367,875)
|
(1,130,932)
|
(252,109)
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Basic and Diluted
profit (loss) per share
(post-share
consolidation)
|
(0.005)
|
(0.002)
|
(0.004)
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(0.001)
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Earnings Information
The
Company has not paid any dividends on its common shares. The
Company has no present intention of paying dividends on its common
shares as it anticipates that all available funds will be invested
to finance the growth of its business.
DIGATRADE FINANCIAL CORPORATION
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
(“MD&A”)
For the Three and Nine Months Ending September 30,
2020
Transactions with Related Parties
As reported in the unaudited consolidated financial statements for
the three and six months ended June 30, 2020, the Company was
involved in certain transactions with related parties:
The
Company incurred management fees for services provided by key
management personnel for the three months ended September 30, 2020
and 2019 as described below.
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Three Months
ended
September 30,
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Nine months
Ended
September 30,
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$
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$
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$
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$
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Management
Fees
|
44,656
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62,968
|
150,222
|
164,478
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Stock-based
Compensation
|
-
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-
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-
|
30,000
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44,656
|
62,968
|
150,222
|
194,478
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Significant Accounting Policies
The Company’s critical accounting estimates are described in
the Company’s 2019 Consolidated Annual Financial
Statements.
New Accounting Standards Not Yet Adopted
The
accounting standard, amendment, and interpretation listed below is
issued but not yet effective up to the date of issuance of the
Company’s consolidated financial statements. The
Company intends to adopt the following standard and interpretation,
if applicable, when it becomes effective. The Company has not
yet determined the impact of this standard on its consolidated
financial statements.
IFRS
16 – Leases
IFRS 16
Leases replaces IAS 17 – Leases and requires lessees to
account for leases on the statement of financial position by
recognizing a right to use asset and lease liability. The standard
is effective for annual period beginning on or after January 1,
2019, with earlier adoption permitted.
The
Company anticipates that the application of this standard,
amendments, revisions and interpretations will not have a material
impact on the results and financial position of the
Company.
DIGATRADE FINANCIAL CORPORATION
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
(“MD&A”)
For the Three and Nine Months Ending September 30,
2020
Off Balance Sheet Arrangements
The Company has not entered into any material off-balance sheet
arrangements such as guarantee contracts, contingent interests in
assets transferred to unconsolidated entities, derivative financial
obligations, or with respect to any obligations under a variable
interest equity arrangement.
Financial Instruments
The
financial instrument guidelines require all financial assets,
except those held to maturity and derivative financial instruments,
to be measured at fair market value. All financial liabilities are
measured at fair value if they are held for trading. Other
financial liabilities are measured at amortized cost.
The
Company classifies its financial instruments into one of the
following balance sheet categories:
●
Held-for-trading
financial assets and liabilities that are initially measured at
fair value and where subsequent changes in fair value are
recognized in the statement of operations;
●
Available-for-sale
financial assets that are initially measured at fair value and
where subsequent changes in fair value are recorded in other
comprehensive income until the investment is derecognized or
impaired at which time the amounts are transferred to and recorded
in net income; and
●
Held-to-maturity
investments, loans and receivables, or other financial liabilities
– all of which are initially measured at cost and where
subsequent changes in cost are amortized using the effective
interest rate method.
Accordingly, the
Company has classified its financial instruments as
follows:
●
Cash is classified
as financial assets at fair value through profit or loss and
accordingly carried at its fair value;
●
Bank indebtedness
is classified as financial liabilities at fair value through profit
or loss and accordingly carried at its fair value; and
●
Trade and other
payables and promissory notes are classified as other financial
liabilities and are currently carried at their amortized
cost.
The
Company undertakes certain transactions in foreign currencies
denominated in U.S. dollars and as such is subject to risk due to
fluctuations in exchange rates. The Company does not use derivative
instruments to hedge exposure to foreign exchange rate
risk.
DIGATRADE FINANCIAL CORPORATION
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
(“MD&A”)
For the Three and Nine Months Ending September 30,
2020
Internal Control over Financial Reporting
As at the date of this report, management is not aware of any
change in the Company’s internal control over financial
reporting that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over
financial reporting.
Outstanding Share Data
Authorized
Unlimited
number of common shares, participating, voting (voting right of 1
vote per share), and no par value.
2,100,000
Class “B” Common Shares, non-participating, voting
(voting right of 1,000 votes per share) and no par
value.
Issued and outstanding as at September 30, 2020
1,272,775,192
Common Shares for a net consideration
of $8,338,493.
2,100,000
Class B Common Shares for a net consideration of $300
Outstanding
stock options as at September 30, 2020
Number of Options
Outstanding: 10,000,000
Exercise
Price US$0.006
Expiry February
14, 2027
(c)
Share Purchase Warrants
Outstanding
share purchase warrants as at September 30, 2020
Nil
DIGATRADE FINANCIAL CORPORATION
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
(“MD&A”)
For the Three and Nine Months Ending September 30,
2020
Risk Factors.
Risks Related to the Business
Risks Related to the Business
We have a history of operating losses and need additional capital
to implement our business plan.
For the
three and nine months ended September 30, 2020, we recorded a net
profit of $245,820 and losses from operations of $912,646,
respectively, as compared to net losses of $195,418 and $832,209,
for the three and nine months ended September 30, 2019. The
financial statements have been prepared using IFRS principles
applicable to a going concern. However, as shown in note 1 to the
unaudited consolidated financial statements for the three and nine
months ended September 30, 2020, our ability to continue operations
is uncertain.
We
continue to incur operating losses and have a consolidated deficit
of $8,705,9789 as at September 30, 2020. Operations for the three
months ended September 30, 2020 have been funded primarily from the
issuance of share capital, debt financing and the continued support
of creditors. Historically, we have met working capital needs
primarily by selling equity to Canadian residents, raising debt
finance and from loans (including loans from relatives of principal
shareholders).
We
estimate that we will require at least US$500,000 to further fund
the development and marketing of a proprietary, patent-pending
credit card payment platform in South America to significantly
increase the security of online credit card payment processing,
reducing financial losses being experienced by financial
institutions and merchants from fraudulent credit card use, while
also better protecting cardholder privacy. A full implementation of
our business plan will be delayed until the necessary capital is
raised.
We cannot predict when or if we will produce revenues.
We have
not generated any revenue to date from operations. In order for us
to continue with our plans and open our business, we must raise
capital. The timing of the completion of the milestones needed to
commence operations and generate revenues is contingent on the
success of this raise. There can be no assurance that we will
generate revenues or that revenues will be sufficient to maintain
our business.
Our South American entry into the development of a secure mobile
application for card not present “CNP” transaction
business may not be successful and there are risks attendant on
these activities.
The
Financial Technology “FinTech” business is extremely
competitive. There are many companies, large and small entering the
market with the capital to develop and create new innovative
applications resulting in a highly competitive and fast-moving
environment. Even with capital and technical expertise, industry,
political and compliance risks are significant. Regulatory
compliance and the overall ecosystem for secure online payments is
extremely complex and not yet fully defined by governments and
financial institutions worldwide. We may not be able to finance our
business plan and marketing plan, there is no assurance that our
entry into this business will be successful.
DIGATRADE FINANCIAL CORPORATION
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
(“MD&A”)
For the Three and Nine Months Ending September 30,
2020
Cybersecurity risks associated with the FinTech industry are
becoming increasingly challenging and we may be unable to meet
future regulatory requirements related to data protection and
privacy.
Cybersecurity
is becoming increasingly challenging with the growth in the number
of hackers and financial stalkers seeking opportunities to disrupt
operations and/or extort funds from persons or companies whose
cybersecurity measures were unable to prevent malicious data
harvesting and misuse. We cannot guarantee that all such attempts
shall be defeated, nor that our intellectual property shall remain
beyond the reach of parties seeking proprietary insights. Data
protection and privacy is never absolute, regardless of method(s)
used. Independent of any 3rd party malicious intent referred to
above, there is a risk that despite best efforts our data
protection and privacy shall not meet a future regulatory
definition of a reasonable standard, if it is imposed or
“expected” retroactively. Information at risk may or
may not be financial in nature and may or may not be our own
information. We do not have sufficient resources to evaluate all
possible outcomes, or all possible measures that we could take now,
or could have taken in the past, to attain an even higher level of
diligence and care than we are taking presently.
Regulatory compliance in the FinTech sector is
evolving.
We are
unable to guarantee that we will be able to proceed with all
desired plans if the regulatory environment changes in a manner
that undermines existing business plans. Such regulations have an
impact in every country in which we will be deriving revenue from
licensing or by any other commercial mechanism.
We may be unable to meet growth Open Source technology trends which
could have a detrimental impact on our business.
Open
source software compliance and vulnerability management has become
an area of risk due to the expanding scope of this realm of
software. We cannot ensure that we will at all times fully
understand the state-of-the-art standing of every aspect of our own
development goals until such time that a sufficient expenditure of
time, money and effort has been made to understand all open source
material and trends, and their relevance to our own
interests.
Customers may not adapt to our new technology which may affect our
ability to generate revenues in the future.
Culture
risk emerges when our organization interfaces with financial
institutions as our customers. We do not know in advance whether
all our customers will be willing to make changes, if necessary, to
accommodate protocols that arise from the adoption of our
technology, or incompatibility that may arise from the nature of
our software development methods, including our approach to FinTech
problem solving.
Reliance on systems governance on third party transactions may risk
compliance issues.
Governance
for intelligent automation is of increasing importance in business
activity that is characterized by a large number of
small-dollar-value transactions. Our revenue model requires sharing
of transaction fees for commerce that, in aggregate, may represent
millions or even hundreds of millions of consumer transactions. We
may therefore need to rely upon systems-governance more than
individual situational oversight where third party transactions are
concerned. This may mean that non-compliance of some type may come
to light too late to remedy in the immediate tense and may
therefore only be correctable with systemic adjustment for the
future.
DIGATRADE FINANCIAL CORPORATION
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
(“MD&A”)
For the Three and Nine Months Ending September 30,
2020
FinTech is an emerging industry that may be subject to changes in
accounting standards in the future the adoption of which may
require time for our business to adjust.
New
accounting standards in the category of FinTech sector businesses
may be introduced over time and have a bearing on our planning,
execution and reporting in respect of issues that have hitherto
been satisfactory and understood, but may require a period of
transition to grasp implications at the strategic level and
communicate same to shareholders effectively.
Use of data and analytics in our internal audit may become more
complex as metadata becomes increasingly important to our
analyses.
It is
not known whether the effect upon our internal practices of new
analytics will remain permissible from the perspective of
third-party audits occurring after-the-fact.
Our use of Cloud computing, data storage and/or cloud collaboration
may not conform to future operational “best
practices.”
Transitioning
to and operating “in the cloud” is a matter whose risks
and rewards are subject to conflicting strategies even amongst
companies who otherwise are considered to have best practices,
operationally. It is not knowable in advance whether our own
policies regarding the use of cloud computing, cloud data storage
or cloud collaboration in our use of information, our sharing of
information and our design of proprietary information assets will
conform to a future interpretation of “best practices”,
after cloud eco-system techniques and their implications are better
understood.
We rely on third party service providers which we may not be able
to control. This subjects us to risks for failure of performance in
development of our business plan.
We will
at all times in the pursuit of our goals rely on at least some
expertise that is external to our company. Despite best efforts to
vet the competency of service providers, it will not be possible to
fully appreciate the quality of their contribution until
after-the-fact, which may in some instances require second
attempts, corrections or new directions. We shall always seek to
mitigate our risk and liability arising from any failures of
performance that may arise; however, it is not possible to quantify
this in financial terms or predict it in operational terms. The
risk in our development work is inherently high and does not
diminish over time as we will continually focus on customer
problems that require new solutions yet to be created.
The loss of key personnel or the inability of replacements to
quickly and successfully perform in their new roles could adversely
affect our business.
We
depend on the leadership and experience of our key executive and
chairman, Brad Moynes. Mr. Moynes functions as our chairman and
executive officer, and as such, we are heavily dependent upon him
to conduct our operations. In 2018, the Company added two
additional directors which now brings the board to four directors.
We do not have key man insurance. If Mr. Moynes resigns or dies,
there could be a substantial negative impact upon our operations.
If that should occur, until we find other qualified candidates to
become officers and/or directors to conduct our operations, we may
have to suspend our operations or cease operating entirely. In that
event, it is possible you could lose your entire
investment.
DIGATRADE FINANCIAL CORPORATION
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
(“MD&A”)
For the Three and Nine Months Ending September 30,
2020
Our business may suffer from the severity or longevity of the
COVID-19 Global Outbreak.
The
COVID-19 is currently impacting countries, communities, supply
chains and markets, as well as the global financial markets. To
date, COVID-19 has not had a material impact on the Company, other
than as set forth elsewhere in this document. However, the Company
cannot predict whether COVID- 19 will have a material impact on our
financial condition and results of operations due to understaffing,
disruptions in government spending, among other factors. In
addition, at this time we cannot predict the impact of COVID-19 on
our ability to obtain financing necessary for the Company to fund
its working capital requirements. In most respects, it is too early
in the COVID-19 pandemic to be able to quantify or qualify the
longer-term ramifications on our business, our customers and/or our
potential investors.
Risks Relating to Intellectual Property
If we are unable to protect our intellectual property rights,
including those related to Securter technology, our competitive
position could be harmed or we could be required to incur
significant expenses to enforce our rights.
Our
ability to compete effectively is dependent in part upon our
ability to protect our proprietary technology. We rely on patents,
trademarks, trade secret laws, confidentiality procedures and
licensing arrangements to protect our intellectual property rights.
There can be no assurance these protections will be available in
all cases or will be adequate to prevent our competitors from
copying, reverse engineering or otherwise obtaining and using our
technology, proprietary rights or products. For example, the laws
of certain countries in which our products may be licensed may not
protect our proprietary rights to the same extent as the laws of
Canada or the United States. In addition, third parties may seek to
challenge, invalidate or circumvent our intellectual property, or
applications for same. There can be no assurance that our
competitors will not independently develop technologies that are
substantially equivalent or superior to our technology or design
around our proprietary rights. In each case, our ability to compete
could be significantly impaired. To prevent substantial
unauthorized use of our intellectual property rights, it may be
necessary to prosecute actions for infringement and/or
misappropriation of our proprietary rights against third parties.
Any such action could result in significant costs and diversion of
our resources and management’s attention, and there can be no
assurance we will be successful in such action. Furthermore, many
of our current and potential competitors have the ability to
dedicate substantially greater resources to enforce their
intellectual property rights than we do. Accordingly, despite our
efforts, we may not be able to prevent third parties from
infringing upon or misappropriating our intellectual
property.
Claims by others that we infringe their intellectual property
rights could harm our business.
Our
industry is characterized by vigorous protection and pursuit of
intellectual property rights, which has resulted in protracted and
expensive litigation for many companies. Third parties may in the
future assert claims of infringement of intellectual property
rights against us or against our customers for which we may be
liable. As the number of service providers and competitors in our
market increases and overlaps occur, infringement claims may
increase.
Intellectual
property claims against us, and any resulting lawsuits, may result
in our incurring significant expenses and could subject us to
significant liability for damages and invalidate what we currently
believe are our proprietary rights. Our involvement in any patent
dispute or other intellectual property dispute or action to protect
trade secrets and know-how could have a material adverse effect on
our business. Adverse determinations in any litigation could
subject us to significant liabilities to third parties, require us
to seek licenses from third parties and prevent us from developing
and selling our products. Any of these situations could have a
material adverse effect on our business.
These
claims, regardless of their merits or outcome, would likely be time
consuming and expensive to resolve and could divert
management’s time and attention.
DIGATRADE FINANCIAL CORPORATION
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
(“MD&A”)
For the Three and Nine Months Ending September 30,
2020
We are generally obligated to indemnify our end-customers for
certain expenses and liabilities resulting from intellectual
property infringement claims regarding our software products, which
could force us to incur substantial costs.
We have
agreed, and expect to continue to agree, to indemnify our
end-customers for certain intellectual property infringement claims
regarding our software products. As a result, in the case of
infringement claims against these end-customers, we could be
required to indemnify them for losses resulting from such claims or
to refund amounts they have paid to us. Our end-customers in the
future may seek indemnification from us in connection with
infringement claims brought against them. We will evaluate each
such request on a case-by-case basis and we may not succeed in
refuting all such claims. If an end-customer elects to invest
resources in enforcing a claim for indemnification against us, we
could incur significant costs disputing it. If we do not succeed in
disputing it, we could face substantial liability.
Risks Related to this Offering and Our Stock
The market price of our shares may fluctuate
significantly.
The
market price and liquidity of the market for shares may be
significantly affected by numerous factors, some of which are
beyond our control and may not be directly related to our operating
performance. Some of the factors that could negatively affect the
market price of our shares include:
●
our actual or
projected operating results, financial condition, cash flows and
liquidity, or changes in business strategy or
prospects;
●
equity issuances by
us, or share resales by our stockholders, or the perception that
such issuances or resales may occur;
●
loss of a major
funding source;
●
actual or
anticipated accounting problems;
●
changes in market
valuations of similar companies;
●
adverse market
reaction to any indebtedness we incur in the future;
●
speculation in the
press or investment community;
●
price and volume
fluctuations in the overall stock market from time to
time;
DIGATRADE FINANCIAL CORPORATION
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
(“MD&A”)
For the Three and Nine Months Ending September 30,
2020
●
general market and
economic conditions, and trends including inflationary concerns,
the current state of the credit and capital markets;
●
significant
volatility in the market price and trading volume of securities of
companies in our sector, which are not necessarily related to the
operating performance of these companies;
●
changes in law,
regulatory policies or tax guidelines, or interpretations
thereof;
●
operating
performance of companies comparable to us; and
●
short-selling
pressure with respect to shares of our shares
generally.
As
noted above, market factors unrelated to our performance could also
negatively impact the market price of our shares. One of the
factors that investors may consider in deciding whether to buy or
sell our shares is our distribution rate as a percentage of our
share price relative to market interest rates. If market interest
rates increase, prospective investors may demand a higher
distribution rate or seek alternative investments paying higher
dividends or interest. As a result, interest rate fluctuations and
conditions in the capital markets can affect the market value of
our shares. For instance, if interest rates rise, it is likely that
the market price of our shares will decrease as market rates on
interest-bearing securities increase.
We have broad discretion in the use of the net proceeds from this
offering and may not use them effectively.
Our
management will have broad discretion in the application of the net
proceeds from this offering and could spend the proceeds in ways
that do not improve our results of operations or enhance the value
of our common stock. The failure by our management to apply these
funds effectively could result in financial losses that could have
a material adverse effect on our business, cause the price of our
common stock to decline and delay the development of our products
and services.
If we have to raise capital by selling securities in the future,
your rights and the value of your investment in the Company could
be reduced.
If we
issue debt securities, the lenders would have a claim to our assets
that would be superior to the stockholder rights. Interest on the
debt would increase costs and negatively impact operating results.
If we issue more common stock or any preferred stock, your
percentage ownership will decrease and your stock may experience
additional dilution, and the holders of preferred stock (called
preference securities in Canada) may have rights, preferences and
privileges which are superior to (more favorable) the rights of
holders of the common stock. It is likely the Company will sell
securities in the future. The terms of such future transactions
presently are not determinable.
If the market for our common stock is illiquid in the future, you
could encounter difficulty if you try to sell your
stock.
Our
stock trades on the OTC "Pink" Marketplace but it is not actively
traded. If there is no active trading market, you may not be able
to resell your shares at any price, if at all. It is possible that
the trading market in the future will continue to be "thin" or
"illiquid," which could result in increased price volatility.
Prices may be influenced by investors' perceptions of us and
general economic conditions, as well as the market for energy
generally. Until our financial performance indicates substantial
success in executing our business plan, it is unlikely that there
will be coverage by stock market analysts will be extended. Without
such coverage, institutional investors are not likely to buy the
stock. Until such time, if ever, as such coverage by analysts and
wider market interest develops, the market may have a limited
capacity to absorb significant amounts of trading. As the stock is
a “penny stock,” there are additional constraints on
the development of an active trading market – see the next
risk factor.
DIGATRADE FINANCIAL CORPORATION
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
(“MD&A”)
For the Three and Nine Months Ending September 30,
2020
The penny stock rule operates to limit the range of customers to
whom broker-dealers may sell our stock in the market.
In
general, "penny stock" (as defined in the SEC’s rule 3a51-1
under the Securities Exchange Act of 1934) includes securities of
companies which are not listed on the principal stock exchanges, or
the Nasdaq National Market or the Nasdaq Capital Market, and which
have a bid price in the market of less than US$5.00; and companies
with net tangible assets of less than $2 million ($5 million if the
issuer has been in continuous operation for less than three years),
or which has recorded revenues of less than $6 million in the last
three years.
As a
"penny stock" our stock therefore is subject to the SEC’s
rule 15g-9, which imposes additional sales practice requirements on
broker-dealers which sell such securities to persons other than
established customers and "accredited investors" (generally,
individuals with net worth in excess of US$1 million or annual
incomes exceeding US$200,000, or US$300,000 together with their
spouses, or individuals who are the officers or directors of the
issuer of the securities). For transactions covered by rule 15g-9,
a broker-dealer must make a special suitability determination for
the purchaser and have received the purchaser's written consent to
the transaction prior to sale. This rule may adversely affect the
ability of broker-dealers to sell our stock, and therefore may
adversely affect our stockholders' ability to sell the stock in the
public market.
Your legal recourse as a United States investor could be
limited.
The
Company is incorporated under the laws of British Columbia. Most of
the assets now are located in Canada. Our directors and officers
and the audit firm are residents of Canada. As a result, if any of
our shareholders were to bring a lawsuit in the United States
against the officers, directors or experts in the United States, it
may be difficult to effect service of legal process on those people
who reside in Canada, based on civil liability under the Securities
Act of 1933 or the Securities Exchange Act of 1934. In addition, we
have been advised that a judgment of a United States court based
solely upon civil liability under these laws would probably be
enforceable in Canada, but only if the U.S. court in which the
judgment were obtained had a basis for jurisdiction in the matter.
We also have been advised that there is substantial doubt whether
an action could be brought successfully in Canada in the first
instance on the basis of liability predicated solely upon the
United States' securities laws.
.
Approval
The
Board of Directors of Digatrade Financial Corporation has approved
the disclosures in this MD&A.
Additional Information
Additional information relating to the Company is available on
SEDAR at www.sedar.com
or EDGAR at www.sec.gov
