FORM 5
QUARTERLY LISTING STATEMENT
Name of Listed Issuer:
Velocity Data Inc._______________________________________ (the “Issuer”).
Trading Symbol: VCT
This Quarterly Listing Statement must be posted on or before the day on which the
Issuer’s unaudited interim financial statements are to be filed under the Securities Act,
or, if no interim statements are required to be filed for the quarter, within 60 days of the
end of the Issuer’s first, second and third fiscal quarters. This statement is not intended
to replace the Issuer’s obligation to separately report material information forthwith upon
the information becoming known to management or to post the forms required by the
Exchange Policies. If material information became known and was reported during the
preceding quarter to which this statement relates, management is encouraged to also
make reference in this statement to the material information, the news release date and
the posting date on the Exchange website.
General Instructions
(a)
Prepare this Quarterly Listing Statement using the format set out below. The
sequence of questions must not be altered nor should questions be omitted or
left unanswered. The answers to the following items must be in narrative form.
When the answer to any item is negative or not applicable to the Issuer, state it in
a sentence. The title to each item must precede the answer.
(b)
The term “Issuer” includes the Listed Issuer and any of its subsidiaries.
(c)
Terms used and not defined in this form are defined or interpreted in Policy 1 –
Interpretation and General Provisions.
There are three schedules which must be attached to this report as follows:
SCHEDULE A: FINANCIAL STATEMENTS
Financial statements are required as follows:
For the first, second and third financial quarters interim financial statements prepared in
accordance with the requirements under Ontario securities law must be attached.
If the Issuer is exempt from filing certain interim financial statements, give the date of
the exempting order.
1
SCHEDULE B: SUPPLEMENTARY INFORMATION
The supplementary information set out below must be provided when not
included in Schedule A.
1.
Related party transactions
Provide disclosure of all transactions with a Related Person, including those
previously disclosed on Form 10. Include in the disclosure the following
information about the transactions with Related Persons:
(a)
(b)
(c)
(d)
(e)
(f)
2.
A description of the relationship between the transacting parties. Be as
precise as possible in this description of the relationship. Terms such as
affiliate, associate or related company without further clarifying details are
not sufficient.
A description of the transaction(s), including those for which no amount
has been recorded.
The recorded amount of the transactions classified by financial statement
category.
The amounts due to or from Related Persons and the terms and
conditions relating thereto.
Contractual obligations with Related Persons, separate from other
contractual obligations.
Contingencies involving Related Persons, separate from other
contingencies.
Summary of securities issued and options granted during the period.
Provide the following information for the period beginning on the date of the last
Listing Statement (Form 2A):
(a)
summary of securities issued during the period,
2
Date of
Issue
Type of
Security
(common
shares,
convertible
debentures,
etc.)
1/5/15
Common
(b)
Date
Number
3.
Type of
Issue
(private
placement,
public
offering,
exercise of
warrants,
etc.)
Number
Total
Proceeds
Pri
ce
Type of
Consideration
(cash,
property, etc.)
Describe
relationship
of Person
with Issuer
(indicate if
Related
Person)
1,055,556
Commission
Paid
$81,197
summary of options granted during the period,
Name of Optionee
if Related Person
and relationship
Generic description
of other Optionees
Exercise Price
Expiry Date
Market
Price on
date of
Grant
Summary of securities as at the end of the reporting period.
Provide the following information in tabular format as at the end of the reporting
period:
4.
(a)
description of authorized share capital including number of shares for
each class, dividend rates on preferred shares and whether or not
cumulative, redemption and conversion provisions,
(b)
number and recorded value for shares issued and outstanding,
(c)
description of options, warrants and convertible securities outstanding,
including number or amount, exercise or conversion price and expiry date,
and any recorded value, and
(d)
number of shares in each class of shares subject to escrow or pooling
agreements or any other restriction on transfer.
List the names of the directors and officers, with an indication of the
position(s) held, as at the date this report is signed and filed.
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SCHEDULE C: MANAGEMENT DISCUSSION AND ANALYSIS
Provide Interim MD&A if required by applicable securities legislation.
Certificate Of Compliance
The undersigned hereby certifies that:
1.
The undersigned is a director and/or senior officer of the Issuer and has been
duly authorized by a resolution of the board of directors of the Issuer to sign
this Quarterly Listing Statement.
2.
As of the date hereof there is no material information concerning the Issuer
which has not been publicly disclosed.
3.
The undersigned hereby certifies to the Exchange that the Issuer is in
compliance with the requirements of applicable securities legislation (as such
term is defined in National Instrument 14-101) and all Exchange
Requirements (as defined in CNSX Policy 1).
4.
All of the information in this Form 5 Quarterly Listing Statement is true.
Dated 9/8/15
.
Robert Bates
Name of Director or Senior Officer
Signature
CFO
Official Capacity
4
Issuer Details
Name of Issuer
For Quarter
Ended
Date of Report
YY/MM/D
City/Province/Postal Code
Issuer Fax No.
( )
Issuer Telephone No.
( )
Contact Name
Contact Position
Contact Telephone No.
Contact Email Address
Web Site Address
Issuer Address
Velocity Data Inc.
(formerly GTO Resources Inc.)
Form 52-109FV2
Certification of Interim
Filings Venture Issuer
Basic Certificate
I, Adam Radly, Chief Executive Officer of Velocity Data Inc. (formerly GTO Resources, Inc),
certify the following:
1.
Review: I have reviewed the interim financial report and interim MD&A (together,
the “interim filings”) of Velocity Data Inc. (the “issuer”) for the interim period
ended July 31, 2015.
2.
No misrepresentations: Based on my knowledge, having exercised reasonable
diligence, the interim filings do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated or that is necessary to make a
statement not misleading in light of the circumstances under which it was made, with
respect to the period covered by the interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable
diligence, the interim financial report together with the other financial
information included in the interim filings fairly present in all material respects
the financial condition, financial performance and cash flows of the issuer, as of the
date of and for the periods presented in the interim filings.
Date: September 8, 2015
Signed “Adam Radly”
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Adam Radly
Chief Executive
Officer
NOTE TO READER
In contrast to the certificate required for non-venture issuers under National Instrument 52-109 Certification of
Disclosure in Issuers’ Annual and Interim Filings (NI 52-109), this Venture Issuer Basic Certificate does not include
representations relating to the establishment and maintenance of disclosure controls and procedures (DC&P) and
internal control over financial reporting (ICFR), as defined in NI 52-109. In particular, the certifying officers filing
this certificate are not making any representations relating to the establishment and maintenance of
i)
controls and other procedures designed to provide reasonable assurance that information required to be
disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under securities
legislation is recorded, processed, summarized and reported within the time periods specified in securities
legislation; and
ii)
a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with the issuer’s GAAP.
The issuer’s certifying officers are responsible for ensuring that processes are in place to provide them with
sufficient knowledge to support the representations they are making in this certificate. Investors should be aware
that inherent limitations on the ability of certifying officers of a venture issuer to design and implement on a cost
effective basis DC&P and ICFR as defined in NI 52-109 may result in additional risks to the quality, reliability,
transparency and timeliness of interim and annual filings and other reports provided under securities legislation.
Velocity Data Inc.
(formerly GTO Resources Inc.)
Form 52-109FV2
Certification of Interim
Filings Venture Issuer
Basic Certificate
I, Bob Bates, Chief Financial Officer of Velocity Data Inc. (formerly GTO Resources Inc.),
certify the following:
1.
Review: I have reviewed the interim financial report and interim MD&A (together,
the “interim filings”) of Velocity Data Inc. (the “issuer”) for the interim period
ended July 31, 2015.
2.
No misrepresentations: Based on my knowledge, having exercised reasonable
diligence, the interim filings do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated or that is necessary to make a
statement not misleading in light of the circumstances under which it was made, with
respect to the period covered by the interim filings.
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3. Fair presentation: Based on my knowledge, having exercised reasonable
diligence, the interim financial report together with the other financial
information included in the interim filings fairly present in all material respects
the financial condition, financial performance and cash flows of the issuer, as of the
date of and for the periods presented in the interim filings.
Date: September 8, 2015
Signed “Bob Bates”
Bob Bates
Chief Financial Officer
NOTE TO READER
In contrast to the certificate required for non-venture issuers under National Instrument 52-109 Certification of
Disclosure in Issuers’ Annual and Interim Filings (NI 52-109), this Venture Issuer Basic Certificate does not include
representations relating to the establishment and maintenance of disclosure controls and procedures (DC&P) and
internal control over financial reporting (ICFR), as defined in NI 52-109. In particular, the certifying officers filing
this certificate are not making any representations relating to the establishment and maintenance of
i)
controls and other procedures designed to provide reasonable assurance that information required to be
disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under securities
legislation is recorded, processed, summarized and reported within the time periods specified in securities
legislation; and
ii)
a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with the issuer’s GAAP.
The issuer’s certifying officers are responsible for ensuring that processes are in place to provide them with
sufficient knowledge to support the representations they are making in this certificate. Investors should be aware
that inherent limitations on the ability of certifying officers of a venture issuer to design and implement on a cost
effective basis DC&P and ICFR as defined in NI 52-109 may result in additional risks to the quality, reliability,
transparency and timeliness of interim and annual filings and other reports provided under securities legislation.
VELOCITY DATA INC.
(formerly GTO Resources Inc.)
(the “Company”)
FORM 51-102F1
MANAGEMENT DISCUSSION AND ANALYSIS
THREE AND NINE MONTH PERIODS ENDED JULY 31, 2015
The following Management’s Discussion and Analysis (this “MD&A”), prepared as of September 8, 2015, should
be read together with the condensed interim consolidated financial statements of the Company for the three and nine
month periods ended July 31, 2015 and the related notes attached thereto. Those condensed interim consolidated
financial statements and this MD&A include the results of operations and cash flows for the nine month period
ended July 31, 2015 and readers must be aware that historical results are not necessarily indicative of the future
7
performance. Readers are also encouraged to refer to the Company’s audited consolidated financial statements for
the year ended October 31, 2014 and the related notes attached thereto. All amounts are reported in U.S. dollars. The
aforementioned documents can be accessed on the SEDAR web site www.sedar.com.
Unless otherwise stated, financial results are being reported in accordance with International Financial Reporting
Standards (“IFRS”).
The Company’s determination of cash flow from operating activities may not be comparable to that reported by
other companies. The reconciliation between profit or loss and cash flows from operating activities can be found in
the consolidated statements of cash flows.
Certain statements contained in this MD&A may contain words such as “could”, “should”, “expect”, “believe”,
“will” and similar expressions and statements relating to matters that are not historical facts but are forward-looking
statements. Such forward-looking statements are subject to both known and unknown risks and uncertainties which
may cause the actual results, performances or achievements of the Company to be materially different from any
future results, performances or achievements expressed or implied by such forward-looking statements. Such factors
include, among other things, the receipt of required regulatory approvals, the availability of sufficient capital, the
estimated cost and availability of funding for development of the Company's prospects, political and economic
conditions and other factors.
Description of Business
The Company was incorporated as GTO Resources Inc. on May 10, 2011 under the Business Corporations Act
(British Columbia). Pursuant to an arrangement agreement between Firebird Resources Inc. (“Firebird”) and the
Company dated May 12, 2011, the Company acquired all of Firebird’s interest in and to the Robert Creelman
Property and the Hyman Porter Property located in Ontario (the “Properties”), in exchange for common shares of the
Company (the “Arrangement”). Pursuant to the terms of the agreement on July 27, 2011, being the effective date of
the Arrangement, each Firebird shareholder received one new common share in the capital of Firebird and one half
of a common share of the Company for each Firebird common share then held. Pursuant to the Arrangement, each
whole warrant issued had (i) an exercise price equal to the existing exercise price of the Firebird warrants
exchanged, and (ii) a term equal to the term remaining on the Firebird warrants exchanged. The common shares of
the Company commenced trading on the TSX Venture Exchange under the stock symbol “GTR” effective July 28,
2011.
On July 22, 2014, the Company completed the acquisition of ACL Computers & Software, Inc. (“ACL”) pursuant to
a share exchange agreement (the “Share Exchange Agreement”) with ACL and the holders of all the issued and
outstanding common shares of ACL dated May 23, 2014. As a result of this transaction, the Company acquired
100% of the issued and outstanding common shares of ACL in exchange for the issuance of 72,000,000 common
shares of the Company. As part of this transaction, the Company spun out its interest in the Properties through the
distribution of shares of Hyman Porter Resources Inc. and RCU Resources Inc., both former wholly owned
subsidiaries of the Company, to existing shareholders.
On July 25, 2014, the Company’s common shares were listed for trading on the Canadian Securities Exchange and
were delisted from TSX Venture Exchange. On August 13, 2014, the Company changed its name to Velocity Data
Inc. and its shares began trading under the symbol “VCT”.
The Company’s registered office is located at Suite 600 – 1285 West Broadway, Vancouver, BC V6H 3X8. The
Company’s Board of Directors is comprised of Robert Bates, Carlo Argila and Adam Radly.
Founded in 1989, ACL is a leading reseller of computer hardware software and peripherals primarily to defense
contractors and some United States federal government end-users. ACL is strategically located in close proximity to
major government facilities in Maryland, Washington, D.C. and Virginia. Most of ACL’s sales are made to the
United States government through prime contractors such as Lockheed Martin, General Dynamics, Boeing,
ManTech, Northrop, etc.; some sales are made directly to the government. ACL has excellent relations with its
customer base, having earned their loyalty with consistently strong service. ACL’s consistent and rapid response
8
service has garnered the company numerous awards, including Lockheed Martin’s Small Business of the Year
Award three times and Boeing’s Performance Excellence Award three times.
Sales are made pursuant to a variety of vehicles such as multi-year contracts, blanket purchase orders and individual
orders from existing or new customers. ACL sells products from over 400 vendors and has valuable vendor partner
relationships with many major vendors including Apple, Cisco, Dell, IBM, Intel, HP, McAfee, Microsoft, Sony, and
Symantec. ACL purchases product for resale from one of three distributors with whom the company has long-term
relationships or directly from the manufacturers themselves. In either instance, ACL’s authorized reseller or partner
status assures that it receives the best possible pricing. Virtually all sales are drop-shipped as ACL almost never
touches the merchandise.
ACL’s ability to provide its customers with computer products competitively, smoothly, and without delay has been
the core of its success. The company is able to help its customers with all of their needs in the information
technology space. ACL’s hands-on professionals can help with any needs from peripherals to notebooks and custom
configured personal computers to enterprise-wide network equipment and servers. ACL’s staff is trained and
certified by many leading manufacturers and is well-versed in both current and emerging technologies. ACL focuses
on providing leading-edge technologies and excellent customer support for solutions that fit its clients’ broad
business objectives. The company is uniquely capable of understanding its customers’ needs and is able to deliver
high-performance, cost-effective solutions drawn from the full spectrum of products and services available. ACL is
committed to its role as a resource and business partner.
In 2013, Apple Computers dramatically reduced its number of authorized Government Resellers of Apple products from approximately 3500 to approximately 30. These 30 were given a new designation: “Tier 1 Government
Resellers”. Because of its excellent track record with Apple, ACL was one of the chosen 30. The 30 Tier 1
Government Resellers are now the only companies authorized to buy Apple products directly from the manufacturer
or distributor and sell those products to the United States federal government. Additionally, Apple chose 50 resellers
to be classified as Tier 2 Indirect Government Resellers. These resellers are authorized to sell to the federal
government, but they are required to purchase directly from an Apple Tier 1 reseller such as ACL.
Overall Performance and Results of Operations
The following discussion of the Company’s financial performance is based on the condensed interim consolidated
financial statements for the three and nine month periods ended July 31, 2015:
Overall Performance
At July 31, 2015, the Company reported total assets of $8,016,303 (October 31, 2014 - $5,864,346), including cash
of $1,908,519 (October 31, 2014 - $1,026,125) and accounts receivable of $4,950,917 (October 31, 2014 $3,475,320). The overall increase in total assets is attributed to the increased revenues of the Company, which was
the result of new contracts/orders, primarily with existing customers, increased U.S. government spending and
further developed relationships, with existing and new customers.
At July 31, 2015, the Company had liabilities of $9,729,289 (October 31, 2014 - $6,512,014), all of which were
short term liabilities. The increase is primarily attributed to an increase in secured borrowings, which totaled
$4,005,179 at July 31, 2015 (October 31, 2014 - $2,092,755).
Results of Operations
The Company recorded net loss of $1,172,348 and $89,030 for the nine month periods ended July 31, 2015 and
2014, respectively. During the nine month periods ended July 30, 2015 and 2014 the Company incurred selling,
general and administrative expenses of $2,067,285 and $1,312,753, respectively. The increase in the Company’s net
loss, as well as the increase in selling, general and administrative expenses was primarily due to increased financing
costs associated with changing lenders and obtaining new financing, as well as expenses related to carrying out the
Company’s continuous disclosure obligations under applicable securities laws.
9
The Company recorded net loss of $446,842 and $179,345 for the three month periods ended July 31, 2015 and
2014, respectively. During the three month periods ended July 30, 2015 and 2014 the Company incurred selling,
general and administrative expenses of $828,821 and $523,862, respectively.
The Company’s condensed interim consolidated financial statements have been prepared on a going concern basis,
which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of
business. The financial statements do not include any adjustments, which could be material in nature, relating to the
recoverability and classification of recorded asset amounts and the classification of liabilities that might be
necessary should the Company be unable to continue as a going concern.
Liquidity and Capital Resources
As of July 31, 2015, the Company had a cash balance of $1,908,519, a working capital deficit of $2,837,419 and
negative operating cash flows of $1,273,720. The Company is confident that it can meet its financial requirements
for the next fiscal year. This may require the management of the Company to secure additional debt or equity
financing.
Selected Financial Information
The following tables provide a brief summary of the Company's financial operations. For more detailed information,
refer to the Company’s financial statements which can be found on SEDAR. This information has been prepared in
accordance with IFRS and is presented in U.S. Dollars, which is the functional currency of the Company.
EBITDA, or earnings before interest, taxes, depreciation and amortization, is a non-GAAP financial measure that
does not have any standardized meaning prescribed by IFRS and is therefore unlikely to be comparable to similar
measures presented by other issuers. Regardless, management believes EBITDA provides a useful financial measure
of the Company’s performance because several items included in GAAP net income are related to interest.
Management considers these items to be unrelated to operating income from the Company’s core business.
However there is a limitation in using EBITDA in that some companies may use a different definition of EBITDA
or not use it at all, therefore rendering the measure difficult to use for comparison purposes. For example, the
Company might use different add-backs to net income than its competitors, thus making it more difficult to compare
the two entities. The Company compensates for this by regularly including EBITDA measures in its continuous
disclosure filings so that performance can be measured over time.
Management therefore advises readers to refer to the Company’s financial statements as the format of those is
standardized and uniform in comparison with any other Canadian public company. In these, net income is presented
as ($1,172,348) and ($89,030) for the nine months ending July 31, 2015 and 2014, respectively. In addition, working
capital ratio and other liquidity measures, total debt and debt/equity ratio are common measures used by companies
to measure performance. EBITDA amounts are not opined to by the Company’s auditors but serve as an important
management tool.
EBITDA was ($524,475) and $313,777 for the nine months ended July 31, 2015 and 2014, respectively.
9 months ended July 31,
2015
2014
Total Revenue
Net income (loss) before other exp
Net income (loss) for the period
Basic and diluted (loss)
Total assets
Total liabilities
EBITDA
$ 30,763,330
(525,304)
(1,172,348)
(0.01)
8,016,303
9,729,289
$
(524,475)
$ 28,236,854
312,502
(89,030)
(0.00)
5,134,057
5,095,841
$
313,777
1
0
EBITDA Calculation
9 months ended July 31,
2015
Net income (loss) (1,172,348)
+ Depr/Aport
830
+ Interest
647,043
EBITDA
(524,475)
2014
(89,030)
1,275
401,532
313,777
Summary of Quarterly Results
Revenue
Net loss for the period
Basic and diluted loss per share
Revenue
Net loss for the period
Basic and diluted loss per share
July 31,
2015
$
11,185,489
(373,000)
(0.00)
July 31,
2014
$
11,247,775
(103,284)
(0.00)
April 30,
2015
$
10,680,152
(470,333)
(0.01)
April 30,
2014
$
8,519,073
(114,200)
0.00
January 31,
2015
$
8,897,689
(318,447)
(0.00)
January 31,
2014
$
8,470,006
92,993
0.00
October 31,
2014
$
12,788,787
(345,428)
(0.00)
October 31,
2013
$
9,590,230
(358,786)
0.00
Share Capital
Authorized:
Unlimited voting common shares without par value
Unlimited preferred shares without par value
On May 23, 2014, the Company entered into the Share Exchange Agreement with ACL and the holders of all of the
issued and outstanding common shares of ACL. On July 22, 2014, the Company completed the acquisition of ACL
pursuant to the Share Exchange Agreement in exchange for the issuance of 72,000,000 common shares of the
Company.
In October 2014, the Company issued 4,200,000 common shares upon the exercise of warrants for net proceeds of
$209,985.
In January 2015, the Company issued 6,800,000 common shares upon the exercise of warrants for net proceeds of
$322,000.
During the three months ended April 30, 2015, the Company issued 5,748,114 common shares to a company
controlled by one of the directors for consulting/advisory and financing services.
In May 2015, the Company issued 1,055,556 common shares to a company controlled by one of the directors for
consulting/advisory and financing services.
At July 31, 2015 the Company had 113,605,577 common shares outstanding.
Share Purchase Warrants
During the year ended October 31, 2014, the Company issued 4,200,000 common shares upon the exercise of
warrants for net proceeds of $209,985. During the nine months ended July 31, 2015, the Company issued 6,800,000
common shares upon the exercise of warrants for net proceeds of $322,000 and 5,125,000 share purchase warrants
expired unexercised.
The following table summarizes the continuity of share purchase warrants:
Balance, October 31, 2014
Exercised
Expired
Balance, July 31, 2015
Number of Warrants
11,925,000
(6,800,000)
(5,125,000)
0
1
1
Weighted Average Exercise Price
0.05
0.05
0.05
Stock Options
On January 30, 2015, the Company granted options to purchase an aggregate of 4,272,076 common shares to certain
officers and directors, exercisable at a price of $0.10 per share until December 15, 2019.
The Company does not have any other options, rights or other derivatives outstanding as of July 31, 2015.
Accounting Policies and Estimates
The significant accounting policies of the Company are disclosed in Note 2 to the condensed interim consolidated
financial statements. Certain accounting policies require that management make appropriate decisions with respect
to the formulation of estimates and assumptions that affect the reported amounts of assets, liabilities, and revenues
and expenses. The Company’s management reviews its estimates regularly.
Revenue Recognition
Revenue from product sales is measured at the fair value, net of estimated customer returns and allowances at
the time of recognition. The estimates of fair value are based on the Company’s historical experience with each
customer and the specifics of each arrangement.
Revenue from product sales is recognized when the risks and rewards of ownership have been transferred to the
buyer (which generally occurs upon shipment) and collectability of the related receivables is reasonably
assured. Revenue is recognized when (a) it can be measured reliably; (b) it is probable that the economic
benefits associated with the transaction will flow to the Company; and (c) the costs incurred or to be incurred
can be measured reliably.
Goodwill and Intangible Assets
Goodwill represents the excess of the cost of an acquired business over the fair value of the identifiable assets
acquired and liabilities assumed. Goodwill is tested for impairment on an annual basis or whenever facts or
circumstances indicate that the carrying amount may exceed its recoverable amount.
Intangible assets other than goodwill are amortized on a straight-line basis over a period of three years.
1
2
Financial Instruments
(a) Fair Values
The fair values of other financial instruments, which include cash and cash equivalents, accounts receivable,
accounts payable and accrued liabilities and secured borrowings approximate their carrying values due to the
relatively short-term maturity of these instruments.
Credit risk
Credit risk refers to the possibility that a customer or counterparty will fail to fulfill its obligations under a
contract and, as a result create a financial loss for the Company. The Company establishes an allowance for
doubtful accounts as determined by management based on its assessment of collection; therefore, the carrying
amount of accounts receivable generally represents the maximum credit exposure. As of July 31, 2015, the
Company has determined that no allowance for doubtful accounts is required. The provision for doubtful
accounts, if any, is included in selling, general and administrative expenses in the consolidated statements of
earnings (loss), and is net of any recoveries that were provided for in prior years.
Credit risks also exists in cash and cash equivalents. The Company limits its exposure to credit loss by placing
its cash and cash equivalents with high credit quality financial institutions.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations
as they fall due. The Company currently settles its financial obligations out of cash. The
ability to do this relies on the Company raising debt or equity financing in a timely
manner and by maintaining sufficient cash in excess of anticipated needs.
Market risk
Market risk is the risk that financial instruments fair values and the Company’s future cash
flows will fluctuate due to changes in market prices. The Company is exposed to currency
risk but it does not have any significant foreign exchange rate risk.
Related Party Transactions
In connection with the application of push down accounting, the Company recorded a liability to
ACLH, LLC, the former sole shareholder of ACL (“ACLH”), of $485,941 of which $247,260
was paid during the year ended October 31, 2014 and $248,862 during the nine months ended
July 31, 2015. The amount outstanding from this liability as of July 31, 2015 amounted to $Nil.
ACLH is an entity controlled by the Company’s CEO. ACLH is the holder of the 72,000,000
common shares of the Company.
Capital Management
The Company manages its capital to maintain its ability to continue as a going concern and to provide returns to
shareholders and benefits to other stakeholders. The capital structure of the Company consists of cash and cash
equivalents, secured borrowings and equity comprised of issued share capital and accumulated deficit.
The Company manages its capital structure and makes adjustments to it in light of economic conditions. The
Company, upon approval from its Board of Directors, will balance its overall capital structure through new share
1
3
issues or by undertaking other activities as deemed appropriate under the specific circumstances. The Company is
not subject to externally imposed capital requirements.
The Company is not subject to externally imposed capital requirements and the Company’s overall strategy with
respect to capital risk management remains unchanged for the period ended July 31, 2015.
Legal Proceedings
The Company is not involved in any legal proceedings.
Management’s Report on Internal Controls over Financial Reporting
In connection with National Instrument 52-109 Certification of Disclosure in Issuer’s Annual and Interim Filings
adopted in December 2008 by each of the securities commissions across Canada (“NI 52-109”), the Chief Executive
Officer and Chief Financial Officer of the Company will file a Venture Issuer Basic Certificate with respect to the
financial information contained in the Company’s condensed interim consolidated financial statements and this
MD&A.
The Venture Issuer Basic Certification does not include representations relating to the establishment and
maintenance of disclosure controls and procedures and internal control over financial reporting, as defined in NI 52109. For further information, refer to the Venture Issuer Basic Certificates filed by the Company with the
aforementioned filings on SEDAR at www.sedar.com.
VELOCITY DATA INC.
(FORMERLY GTO RESOURCES INC.)
Condensed Interim Financial Statements
For the three and nine month periods ended July 31, 2015
Unaudited
(Expressed in United States dollars)
1
4
VELOCITY DATA INC. (FORMERLY GTO RESOURCES INC.)
NOTICE OF NO AUDITOR REVIEW OF CONDENSED INTERIM FINANCIAL
STATEMENTS
Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a
review of the condensed interim financial statements, they must be accompanied by a notice
indicating that the condensed interim financial statements have not been reviewed by an auditor.
The accompanying unaudited condensed interim financial statements of the Company have been
prepared by management and approved by the Audit Committee and Board of Directors of the
Company.
The Company’s independent auditors have not performed a review of these condensed interim
financial statements in accordance with the standards established by the Canadian Institute of
Chartered Accountants for a review of condensed interim financial statements by an entity’s
auditors.
September 8, 2015
1
5
VELOCITY DATA INC.
(FORMERLY GTO RESOURCES INC.)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Expressed in United States dollars)
July 31,
2015
unaudited
$
October 31,
2014
audited
$
Assets
Current assets
Cash and cash equivalents
Accounts receivable
Inventory
Prepayments and other current assets
Total current assets
1,908,519
4,950,917
28,588
3,846
6,891,870
1,026,125
3,475,320
122,544
115,094
4,739,083
Non-current assets
Property and equipment, Net
Intangibles, net
Goodwill
Total assets
14,097
422,284
688,052
8,016,303
14,927
422,284
688,052
5,864,346
Liabilities and shareholders' equity (deficit)
Current liabilities and total liabilities
Accounts payable and accrued liabilities
Due to related party
Borrowings
Secured borrowings
Current liabilities and total liabilities
4,825,410
898,700
4,005,179
9,729,289
4,180,578
238,681
2,092,755
6,512,014
Shareholders' equity (deficit)
Share capital
Additional Paid in Capital
Accumulated Deficit
Total shareholder's equity
690,363
(748,897)
(1,654,452)
(1,712,986)
Total liabilities and shareholder's equity (deficit)
8,016,303
(154,996)
(492,672)
(647,668)
5,864,346
The accompanying notes are an integral part of these unaudited consolidated financial statements
Approved and authorized for issue by the Board of Directors on September 8, 2015
/s/ “Adam Radly”
Adam Radly, Director
/s/ “Robert Bates”
Robert Bates, Director
16
VELOCITY DATA INC.
(FORMERLY GTO RESOURCES INC.)
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
(Expressed in United States dollars)
(unaudited)
For the three months ended
For the nine months ended,
July 31,
July 31,
July 31,
July 31,
2015
2014
2015
2014
$
$
$
$
Revenues
11,185,489
11,247,775
30,763,330
28,236,854
Cost of sales
10,626,706
10,677,178
29,221,350
26,611,600
558,782
570,597
1,541,980
1,625,255
2,067,285
1,312,753
Gross Profit
Selling, general and administrative expenses
828,821
523,862
(270,039)
46,735
(525,304)
176,803
226,080
647,043
Net earnings (loss) for the period
(446,842)
(179,345)
(1,172,348)
(89,030)
Net comprehensive income (loss) for the period
(446,842)
(179,345)
(1,172,348)
(89,030)
(0.00)
(0.00)
(0.01)
(0.00)
Operating earnings (loss)
Financial expenses
Interest Expense and other, net
Basic and diluted earnings (loss) per share
Weighted average shares outstanding
312,502
-
112,550,021
72,000,000
107,975,964
401,532
72,000,000
The accompanying notes are an intergral part of these unaudited consolidated financial statements
17
VELOCITY DATA INC.
(FORMERLY GTO RESOURCES INC.)
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
(Expressed in United States dollars)
(unaudited)
Share Capital
Number of
shares
Amount
$
Balance, October 31, 2013
Shares issued due to reverse merger
Impact of push down accounting
Shares issued due to exercise of warrants
Net loss for the year
23,801,907
72,000,000
-
Balance, July 31, 2014
95,801,907
856,569
Balance, October, 31, 2014
Impact of push down accounting
Shares issued due to exercise of warrants
Shares issued for services
Net loss for the year
100,001,907
(154,996)
Balance July 31, 2015
113,605,577
706,569
150,000
-
-
Accumulated
deficit
$
Additional
Paid in
Capital
$
(22,753)
(1,125,313)
683,816
150,000
(1,125,313)
(1,148,066)
(291,497)
(492,672)
(738,330)
6,800,000
6,803,670
322,000
523,359
(1,172,348)
690,363
(1,665,020)
(738,330)
The accompanying notes are an integral part of these unaudited consolidated financial statements
18
Total
shareholders'
equity
$
(647,668)
(738,330)
322,000
523,359
(1,172,348)
(1,712,986)
VELOCITY DATA INC.
(FORMERLY GTO RESOURCES INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in United States dollars)
(unaudited)
For the nine months ended,
July 31,
July 31,
2015
2014
$
$
Operating activities
Net earnings (loss) for the year
Adjustments to reconcile net earnings (loss) to cash flows
Depreciation and amortization
Stock-based compensation
Changes in working capital items
Accounts receivable
Inventory
Prepaid expenses and other current assets
Accounts payable and accrued expenses
Net cash flows from (used in) operating activities
(1,172,348)
830
523,359
(89,030)
1,275
(1,475,597)
93,956
111,248
644,832
672,125
10,929
(253,648)
1,364,514
(1,273,720)
1,706,165
Goodwill
-
(1,254,359)
Net cash flows from investing activities
-
(1,254,359)
Financing activities
Proceeds from secured borrowings, net
Proceeds from borrowings, net
Repayments of related party debt
Capital contributions
Advances from (payments to), related parties
Shares issued due to exercise of warrants
Net cash flows from financing activities
1,912,424
898,700
(738,329)
(238,681)
322,000
2,156,114
430,000
(689,029)
(259,029)
Net increase (decrease) in cash during the period
Cash, beginning of period
882,394
1,026,125
192,777
440,528
Cash, end of period
1,908,519
633,305
The accompanying notes are an intergral part of these unaudited consolidated financial statements
FORM 5 – QUARTERLY LISTING STATEMENT
January 2015
Page 1
VELOCITY DATA INC.
(FORMERLY GTO RESOURCES INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine month periods ended July 31, 2015
(Expressed in United States dollars)
(unaudited)
1. Nature of Operations and Going Concern
Velocity Data Inc. (the “Company”, “we”, “our”) was incorporated as GTO Resources, Inc.
on May 10, 2011 under the Business Corporations Act (British Columbia). The Company
changed its name to Velocity Data Inc. on August 7, 2014 and is engaged in the business of
selling computer systems and related components, particularly to government contractors and
federal government end-users.
The Company’s registered office is located at Suite 600 – 1285 West Broadway, Vancouver,
BC V6H 3X8.
On May 23, 2014, the Company entered into a share exchange agreement with ACL
Computers and Software, Inc. (“ACL”) and the sole shareholder of ACL to acquire all of the
issued and outstanding common shares of ACL in exchange for 72,000,000 common shares
of the Company. The agreement closed on July 22, 2014, at which time ACL became a
wholly-owned subsidiary of the Company.
For accounting purposes, this transaction is being accounted for as a reverse merger and has
been treated as a recapitalization of the Company, where ACL is considered the accounting
acquirer, and the financial statements of the accounting acquirer became the financial
statements of the legal acquirer. The historical consolidated financial statements include the
operations of the accounting acquirer for all periods presented. The Company has reported
net losses for the nine months ended July 31, 2015 of $1,161,780 and has a cumulative
deficit of $1,654,452 and working capital deficit of $2,837,419 as at July 31, 2015. The
ability of the Company to continue as a going concern is dependent upon future profitable
operations. When the Company can attain profitability and positive working capital is
uncertain. The Company will closely monitor its cash on a regular basis and take the
necessary measures to preserve cash such as increase sales and seek additional sources of
financing. There is no assurance that these initiatives will be successful. Until the Company
can achieve profitable operations, the Company may require additional debt or equity
financing and should it not be able to continue as a going concern, adjustments to the
recorded amounts and classifications of assets, liabilities, revenues and expenses would be
required. Any adjustments that may be required could be material.
2. Significant Accounting Policies
FORM 5 – QUARTERLY LISTING STATEMENT
January 2015
Page 2
The principal accounting policies applied in the preparation of the unaudited consolidated financial statements
are set out below. These policies have been consistently applied to all periods presented, unless otherwise
stated.
(a)
Statement of Compliance
Interim financial statements must not be described as complying with IFRS unless they comply with all the
requirements of IFRS. Thus, in the case of condensed interim financial statements such as these illustrative
financial statements, the Company is not claiming compliance with IFRS as such, but rather, with the
requirements of IAS 34.
The unaudited consolidated financial statements have been prepared in accordance with International
Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board and
interpretations of the International Financial Reporting Interpretations Committee.
FORM 5 – QUARTERLY LISTING STATEMENT
January 2015
Page 3
,VELOCITY DATA INC.
(FORMERLY GTO RESOURCES INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine month periods ended July 31, 2015
(Expressed in United States dollars)
(Unaudited)
2.
Significant Accounting Policies (continued)
(b)
Basis of Presentation and Principles of Consolidation
The unaudited consolidated financial statements have been prepared on a historical cost basis. The
unaudited consolidated financial statements are presented in United States dollars, which is the Company’s
functional currency.
(c)
Use of Estimates and Judgments
The preparation of the financial statements in conformity with IFRS requires the
Company’s management to make judgments, estimates and assumptions that affect the
application of accounting policies and reported amounts of assets, liabilities, revenues
and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognized in the period in which the estimate is revised and in
any future periods affected.
Significant areas requiring the use of estimates include, but are not limited to, receivable
allowances, impairment of intangible assets and goodwill, and deferred income tax asset
valuation allowances. There are no judgments made by management in the application of
IFRS that have a significant effect on the financial statements and estimates with a
significant risk of material adjustment in the current and following years.
(d)
Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity of three months or
less at the time of issuance, are readily convertible to known amounts of cash, and are
subject to an insignificant risk of changes in fair value to be cash equivalents.
(e)
Inventory
Inventory for resale are stated at the lower of cost or market, cost being determined on a
first-in, first-out basis.
(f)
Property and Equipment, net
FORM 5 – QUARTERLY LISTING STATEMENT
January 2015
Page 4
Depreciation of property and equipment is provided using the straight-line and
accelerated methods over the estimated useful lives ranging from 5 to 15 years.
Expenditures for major renewals and betterments that extend the useful lives of property
and equipment are capitalized. Expenditures for maintenance and repairs are charged to
expense as incurred.
FORM 5 – QUARTERLY LISTING STATEMENT
January 2015
Page 5
VELOCITY DATA INC.
(FORMERLY GTO RESOURCES INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine month periods ended July 31, 2015
(Expressed in United States dollars)
(unaudited)
2.
Significant Accounting Policies (continued)
(g)
Goodwill and Intangible Assets
Goodwill represents the excess of the cost of an acquired business over the fair value of
the identifiable assets acquired and liabilities assumed. Goodwill is tested for impairment
on an annual basis or whenever facts or circumstances indicate that the carrying amount
may exceed its recoverable amount.
Intangible assets other than goodwill are amortized on a straight-line basis over a period of three years.
(h)
Impairment of Non-Financial Assets
Impairment of goodwill
For the purposes of assessing impairment, assets are grouped at the lowest levels for
which there are largely independent cash inflows. As a result, some assets are tested
individually for impairment and some are tested at the cash-generating unit (“CGU”)
level. Goodwill is allocated to CGUs or groups of CGUs for impairment testing purposes
based on the level at which management monitors it, which is not higher than an
operating segment. The allocation is made to those CGUs or group of CGUs that are
expected to benefit from synergies of the related business combination in which the
goodwill arises.
Impairment of other non-financial assets
Non-financial assets with finite lives are tested for impairment whenever events or changes in
circumstances indicate that their carrying amounts may not be recoverable. In addition, non-financial assets
that are not amortized are subject to an annual impairment assessment. Any impairment loss is recognized
for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of an asset’s fair value less costs to sell and value in use. For the purpose of assessing
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows
(CGUs). The Company evaluates impairment losses for potential reversals, other than goodwill
impairment, when events or changes in circumstances warrant such consideration.
(i)
Financial Instruments
i. Non-derivative financial assets
The Company initially recognizes loans and receivables and deposits on the date that
they are originated. All other financial assets (including assets designated at fair value
through profit or loss) are recognized initially on the trade date at which the Company
becomes a party to the contractual provisions of the instrument.
FORM 5 – QUARTERLY LISTING STATEMENT
January 2015
Page 6
The Company derecognizes a financial asset when the contractual rights to the cash
flows from the asset expire, or it transfers the rights to receive the contractual cash
flows on the financial asset in a transaction in which substantially all the risk and
rewards of ownership of the financial asset are transferred. Any interest in transferred
financial assets that is created or retained by the Company is recognized as a separate
asset or liability.
FORM 5 – QUARTERLY LISTING STATEMENT
January 2015
Page 7
VELOCITY DATA INC.
(FORMERLY GTO RESOURCES INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine month periods ended July 31, 2015
(Expressed in United States dollars)
(unaudited)
2.
Significant Accounting Policies (continued)
(i) Financial Instruments (continued)
i. Non-derivative financial assets (continued)
Financial assets and liabilities are offset and the net amount presented in the
statement of financial position when, and only when, the Company has a legal right to
offset the amounts and intends either to settle on a net basis or to realize the asset and
settle the liability simultaneously.
Financial assets at fair value through profit or loss
Financial assets are classified as fair value through profit or loss when the financial
asset is held for trading or it is designated as fair value through profit or loss. A
financial asset is classified as held for trading if: (i) it has been acquired principally
for the purpose of selling in the near future; (ii) it is a part of an identified portfolio of
financial instruments that the Company manages and has an actual pattern of shortterm profit taking; or (iii) it is a derivative that is not designated and effective as a
hedging instrument.
Financial assets classified as fair value through profit or loss is stated at fair value
with any gain or loss recognized in profit or loss. The net gain or loss recognized
incorporates any dividend or interest earned on the financial asset. Cash and cash
equivalents are classified as fair value through profit or loss.
Held-to-maturity investments
Held-to-maturity investments are recognized on a trade-date basis and are initially
measured at fair value, including transaction costs. The Company does not have any
assets classified as held-to-maturity investments.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are
designated as available-for-sale and that are not classified in any of the previous
categories. Subsequent to initial recognition, they are measured at fair value and
changes therein, other than impairment losses and foreign currency differences on
available-for-sale equity instruments, are recognized in other comprehensive income
and presented within equity in the fair value reserve. When an investment is
derecognized, the cumulative gain or loss in other comprehensive income is
FORM 5 – QUARTERLY LISTING STATEMENT
January 2015
Page 8
transferred to profit or loss. The Company does not have any available-for-sale
financial assets.
Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that
are not quoted in an active market. Such assets are initially recognized at fair value
plus any directly attributable transaction costs. Subsequent to initial recognition loans
and receivables are measured at amortized cost using the effective interest method,
less any impairment losses. Loans and receivables are comprised of accounts
receivable.
FORM 5 – QUARTERLY LISTING STATEMENT
January 2015
Page 9
VELOCITY DATA INC.
(FORMERLY GTO RESOURCES INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine month periods ended July 31, 2015
(Expressed in United States dollars)
(unaudited)
2.
Significant Accounting Policies (continued)
(i) Financial Instruments (continued)
i. Non-derivative financial assets (continued)
Impairment of financial assets
When an available-for-sale financial asset is considered to be impaired, cumulative
gains or losses previously recognized in other comprehensive income or loss are
reclassified to profit or loss in the period. Financial assets are assessed for indicators
of impairment at the end of each reporting period. Financial assets are impaired when
there is objective evidence that, as a result of one or more events that occurred after
the initial recognition of the financial assets, the estimated future cash flows of the
investments have been impacted. For marketable securities classified as available-forsale, a significant or prolonged decline in the fair value of the securities below their
cost is considered to be objective evidence of impairment. For all other financial
assets objective evidence of impairment could include:
a) significant financial difficulty of the issuer or counterparty; or
b) default or delinquency in interest or principal payments; or
c) it becoming probable that the borrower will enter bankruptcy or financial reorganization.
For certain categories of financial assets, such as accounts receivable, assets that are
assessed not to be impaired individually are subsequently assessed for impairment on
a collective basis. The carrying amount of financial assets is reduced by the
impairment loss directly for all financial assets with the exception of amounts
receivable, where the carrying amount is reduced through the use of an allowance
account. When an amount receivable is considered uncollectible, it is written off
against the allowance account. Subsequent recoveries of amounts previously written
off are credited against the allowance account. Changes in the carrying amount of the
allowance account are recognized in profit or loss.
With the exception of available-for-sale equity instruments, if, in a subsequent period,
the amount of the impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment was recognized, the previously
recognized impairment loss is reversed through profit or loss to the extent that the
carrying amount of the investment at the date the impairment is reversed does not
FORM 5 – QUARTERLY LISTING STATEMENT
January 2015
Page 10
exceed what the amortized cost would have been had the impairment not been
recognized. In respect of available-for-sale equity securities, impairment losses
previously recognized through profit or loss are not reversed through profit or loss.
Any increase in fair value subsequent to an impairment loss is recognized directly in
equity.
FORM 5 – QUARTERLY LISTING STATEMENT
January 2015
Page 11
VELOCITY DATA INC.
(FORMERLY GTO RESOURCES INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine month periods ended July 31, 2015
(Expressed in United States dollars)
(unaudited)
2.
Significant Accounting Policies (continued)
(i) Financial Instruments (continued)
ii. Non-derivative financial liabilities
The Company initially recognizes debt securities issued on the date that they are
originated. All other financial liabilities (including liabilities designated at fair value
through profit or loss) are recognized initially on the trade at which the Company
becomes a party to the contractual provisions of the instrument.
The Company derecognizes a financial liability when its contractual obligations are
discharged or cancelled or expire.
Financial assets and liabilities are offset and the net amount presented in the
statement of financial position when, and only when, the Company has a legal right to
offset the amounts and intends either to settle on a net basis or to realize the asset and
settle the liability simultaneously.
The Company has the following non-derivative financial liabilities: accounts payable
and accrued liabilities, unsecured borrowings and secured borrowings.
Financial liabilities are measured at amortized cost using the effective interest method, except for
financial liabilities held for trading or designated at fair value through profit or loss, which are carried
subsequently at fair value with gains or losses recognized in net earnings (loss).
iii. Share capital
Common shares are classified as equity. Transaction costs directly attributable to the
issue of common shares and stock options are recognized as a deduction from equity,
net of any tax effects.
(j)
Foreign Currency Translation
The Company’s functional and reporting currency is the United States dollar.
Transactions denominated in foreign currencies are translated using the exchange rate in
effect on the transaction date or at an average rate. Monetary assets and liabilities
denominated in foreign currencies are translated at the rate of exchange in effect at the
statement of financial position date. Non-monetary items are translated using the
historical rate on the date of the transaction. Foreign exchange gains and losses are
included in profit or loss.
FORM 5 – QUARTERLY LISTING STATEMENT
January 2015
Page 12
FORM 5 – QUARTERLY LISTING STATEMENT
January 2015
Page 13
VELOCITY DATA INC.
(FORMERLY GTO RESOURCES INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine month periods ended July 31, 2015
(Expressed in United States dollars)
(unaudited)
2.
Significant Accounting Policies (continued)
(k)
Revenue Recognition
Revenue from product sales is measured at the fair value, net of estimated customer returns and allowances
at the time of recognition. The estimates of fair value are based on the Company’s historical experience
with each customer and the specifics of each arrangement.
Revenue from product sales is recognized when the risks and rewards of ownership have been transferred
to the buyer (which generally occurs upon shipment) and collectability of the related receivables is
reasonably assured. Revenue is recognized when (a) it can be measured reliably; (b) it is probable that the
economic benefits associated with the transaction will flow to the Company; and (c) the costs incurred or to
be incurred can be measured reliably.
(l)
Income Taxes
Current income tax
Current income tax assets and liabilities for the current period are measured at the amount
expected to be recovered from or paid to the taxation authorities. The tax rates and tax
laws used to compute the amount are those that are enacted or substantively enacted, at
the reporting date. Current income tax relating to items recognized directly in other
comprehensive income or equity is recognized in other comprehensive income or equity
and not in profit or loss. Management periodically evaluates positions taken in the tax
returns with respect to situations in which applicable tax regulations are subject to
interpretation and establishes provisions where appropriate.
Deferred income tax
Deferred income tax is provided using the balance sheet method on temporary differences
at the reporting date between the tax bases of assets and liabilities and their carrying
amounts for financial reporting purposes. The carrying amount of deferred income tax
assets is reviewed at the end of each reporting period and recognized only to the extent
that it is probable that sufficient taxable profit will be available to allow all or part of the
deferred income tax asset to be utilized. Deferred income tax assets and liabilities are
measured at the tax rates that are expected to apply to the year when the asset is realized
or the liability is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted by the end of the reporting period. Deferred income tax assets and
deferred income tax liabilities are offset if a legally enforceable right exists to set off
current tax assets against current income tax liabilities and the deferred income taxes
relate to the same taxable entity and the same taxation authority.
FORM 5 – QUARTERLY LISTING STATEMENT
January 2015
Page 14
VELOCITY DATA INC.
(FORMERLY GTO RESOURCES INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine month periods ended July 31, 2015
(Expressed in United States dollars)
(unaudited)
2.
Significant Accounting Policies (continued)
(m) Loss
Per Share
Basic loss per share is computed using the weighted average number of common shares
outstanding during the period. The treasury stock method is used for the calculation of
diluted loss per share, whereby all “in the money” stock options and share purchase
warrants are assumed to have been exercised at the beginning of the period and the
proceeds from their exercise are assumed to have been used to purchase common shares
at the average market price during the period. When a loss is incurred during the period,
basic and diluted loss per share are the same as the exercise of stock options and share
purchase warrants is considered to be anti-dilutive. At July 31, 2015, the Company had
113,605,577 shares outstanding with 4,272,076 unexercised or unexpired shares
outstanding.
(n)
Recent Accounting Pronouncements
The International Accounting Standards Board (“IASB”) issued a number of new and revised International
Accounting Standards, International Financial Reporting Standards, amendments and related interpretations
which are effective for the Company’s financial year beginning on or after November 1, 2014. Many are
not applicable or do not have a significant impact on the Company and so have been excluded from the list
below. The following have not yet been adopted and are being evaluated to determine their impact on the
Company.
(a) IFRS 9 Financial Instruments was issued by the IASB in October 2010 and will replace IAS
39 – Financial Instruments: Recognition and Measurement. IFRS 9 uses a single approach to
determine whether a financial asset is measured at amortized cost or fair value, replacing the
multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its
financial instruments in the context of its business model and the contractual cash flow
characteristics of the financial assets. Most of the requirements in IAS 39 for classification
and measurement of financial liabilities were carried forward unchanged to IFRS 9. The new
standard also requires a single impairment method to be used, replacing the multiple
impairment methods in IAS 39. IFRS 9 is effective for annual periods beginning on or after
January 1, 2018.
(b) In May 2014, the IASB issued IFRS 15 which replaces IAS 18 – Revenues, and covers
principles for reporting about the nature, amount, timing and uncertainty of revenue and cash
flows arising from contracts with customers. IFRS 15 is effective for annual periods
beginning on or after January 1, 2017.
FORM 5 – QUARTERLY LISTING STATEMENT
January 2015
Page 15
VELOCITY DATA INC.
(FORMERLY GTO RESOURCES INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine month periods ended July 31, 2015
(Expressed in United States dollars)
(unaudited)
3. Acquisition and Push Down Accounting
On February 2, 2014, ACL entered into a stock purchase agreement with ACLH, LLC (“ACLH”) wherein the
latter acquired a 100% interest in ACL for an initial purchase price of $2,256,181. Of the total purchase price,
$2,006,181 was paid in cash and the balance of $250,000 through the issuance of a note by ACLH to the sole
shareholder of ACL. The note is subject to annual interest of 6% and payable in equal quarterly installments
over a period of 2 years. The note was fully settled during the year ended October 31, 2014 through the payment
of $225,156. The balance of $24,844 was forgiven and was accounted for as a reduction of the purchase price
resulting in a final purchase price of $2,231,337.
Under the acquisition method of accounting, the total estimated purchase price paid by ACLH is allocated to
ACL’s tangible and intangible assets and liabilities based on their estimated fair values at the date of the
completion of the acquisition.
The estimated fair values of the assets acquired and the liabilities assumed by ACLH at February 2, 2014 are as
follows:
Purchase price
$
Cash and cash equivalents
Acounts receivable
Inventory
Prepayments and other current assets
Property plant and equipment
Accounts payable and accrued liabilities
2,231,337
411,167
2,636,591
68,938
59,722
16,202
(2,212,380)
Net assets
$
Excess of purchase price over net assets acquired
Allocated to:
Customer list
Goodwill
980,240
1,251,097
563,045
688,052
The acquisition was accounted for as an acquisition of a business and ACLH elected to push down the purchase
price to ACL’s financial statements in accordance with the Financial Accounting Standards Board’s Business
Combinations (Topic 805). The purchase price paid plus related purchase accounting adjustments have been
reflected in the Company’s consolidated financial statements for the year ended October 31, 2014. This resulted
in a new basis of accounting that reflects the estimated fair value of the Company’s assets and liabilities. ACLH
also pushed down secured borrowings of $1,833,318 to ACL which was charged to share capital.
FORM 5 – QUARTERLY LISTING STATEMENT
January 2015
Page 16
VELOCITY DATA INC.
(FORMERLY GTO RESOURCES INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine month periods ended July 31, 2015
(Expressed in United States dollars)
(unaudited)
4. Secured Borrowings
On January 21, 2014, ACL entered into a financing agreement with a third party for a period of 1 year, wherein
the latter shall advance 85% of the net face amount of ACL’s trade receivables and retain the remaining 15% to
cover for various fees related to the line of credit. These fees include the interest fee and maintenance fee of 1%
and 1.28%, respectively, of the net funds advanced. The Company received net proceeds of $1,912,424 for the
nine months ended July 31, 2015. As of July 31, 2015, the amount outstanding under this financing agreement
was $4,005,719.
5. Borrowings
In July 2015, the Company entered into financing agreements with third parties for periods of
between 6-12 months, wherein the latter advanced an aggregate of $898,700 to the Company. These
advances are not characterized as loans by the third parties but if they were would carry interest of
48% on an annual basis.
6. Related Party Transactions
In connection with the application of push down accounting, the Company recorded a
liability to ACLH of $485,941 of which $247,260 was paid during the year ended October
31, 2014 and $248,862 during the nine months ended July 31, 2015. As of July 31, 2015, the
amount outstanding from this liability amounted to $(0). ACLH is an entity controlled by the
Company’s CEO. ACLH is the holder of the 72,000,000 common shares of the Company
issued pursuant to the share exchange transaction described in Note 1.
7. Share Capital
Authorized:
Unlimited number of voting common shares
Unlimited number of preferred shares
During the three months ended January 31, 2015, the Company issued 6,800,000 common shares upon the
exercise of warrants for net proceeds of $322,000.
During the three months ended April 30, 2015, the Company issued 5,748,114 common shares to a company
controlled by one of the directors for consulting/advisory and financing services. The shares were valued at fair
value and stock based compensation in the amount of $444,932 was recorded
FORM 5 – QUARTERLY LISTING STATEMENT
January 2015
Page 17
In May 2015, the Company issued 1,055,556 common shares to a company controlled by one of the directors
for consulting/advisory and financing services. The shares were valued at fair value and stock based
compensation in the amount of $81,197 was recorded.
FORM 5 – QUARTERLY LISTING STATEMENT
January 2015
Page 18
VELOCITY DATA INC.
(FORMERLY GTO RESOURCES INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine month periods ended July 31, 2015
(Expressed in United States dollars)
(unaudited)
8. Share Purchase Warrants
The following table summarizes the continuity of share purchase warrants:
Number of Weighted
warrants average
exercise
price
$
11,925,000
0.05
(6,800,000)
0.05
(5,125,000)
-
Balance, October 31, 2014
Exercised
Expired
Balance, July 31, 2015
9. Stock Options
On January 30, 2015, the Company granted an aggregate of 4,272,076 stock
options to certain officers and directors, exercisable at a price of $0.10 per share
until December 15, 2019. As of July 31, 2015, none of the options have been
exercised.
10.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 carrying value of cash and cash equivalents, accounts receivable, accounts payables and accrued
liabilities and secured borrowings approximate fair value due to the short term nature of those instruments.
FORM 5 – QUARTERLY LISTING STATEMENT
January 2015
Page 19
FORM 5 – QUARTERLY LISTING STATEMENT
January 2015
Page 20
VELOCITY DATA INC.
(FORMERLY GTO RESOURCES INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine month periods ended July 31, 2015
(Expressed in United States dollars)
(unaudited)
10. Financial Instruments and Risk Management (continued)
(c) Credit risk
Credit risk refers to the possibility that a customer or counterparty will fail to fulfill its obligations under a
contract and, as a result create a financial loss for the Company. The Company establishes an allowance for
doubtful accounts as determined by management based on its assessment of collection; therefore, the
carrying amount of accounts receivable generally represents the maximum credit exposure. As at July 31,
2015 and October 31, 2014, the Company has determined that no allowance for doubtful accounts is
required. The provision for doubtful accounts, if any, is included in selling, general and administrative
expenses in the consolidated statements of earnings (loss), and is net of any recoveries that were provided
for in prior years. Credit risks also exists in cash and cash equivalents. The Company limits its exposure to
credit loss by placing its cash and cash equivalents with high credit quality financial institutions.
(d) Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial
obligations as they fall due. The Company currently settles its financial obligations out of
cash. The ability to do this relies on the Company raising debt or equity financing in a
timely manner and by maintaining sufficient cash in excess of anticipated needs.
(e) Market risk
Market risk is the risk that financial instruments fair values and the Company’s future
cash flows will fluctuate due to changes in market prices. The Company is exposed to
currency risk but it does not have any significant foreign exchange rate risk.
11.Capital Management
The Company manages its capital to maintain its ability to continue as a going concern and to
provide returns to shareholders and benefits to other stakeholders. The capital structure of the
Company consists of cash and cash equivalents and equity comprised of issued share capital,
share-based payment reserve, equity component of convertible debt, and deficit.
The Company manages its capital structure and makes adjustments to it in light of economic
conditions. The Company, upon approval from its Board of Directors, will balance its overall
capital structure through new share issues or by undertaking other activities as deemed
appropriate under the specific circumstances.
FORM 5 – QUARTERLY LISTING STATEMENT
January 2015
Page 21
The Company is not subject to externally imposed capital requirements and the Company’s
overall strategy with respect to capital risk management remains unchanged during the three
month and nine month periods ended July 31, 2015.
FORM 5 – QUARTERLY LISTING STATEMENT
January 2015
Page 22