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

Financial instruments and risk management

v3.23.1
Financial instruments and risk management
12 Months Ended
Dec. 31, 2022
Financial instruments and risk management  
Financial instruments and risk management

16.Financial instruments and risk management

The Company’s financial instruments consist of cash and cash equivalents, accounts payable and accrued liabilities, lease obligation, and derivative warrant liability. The fair values of cash and cash equivalents and accounts payable and accrued liabilities approximate their carrying values at December 31, 2022, due to their short-term nature. The lease liability is classified as level 2 in the fair value hierarchy as the fair value is determined based on market interest rates.

The following table presents the Company’s financial instruments, measured at fair value on the consolidated statements of financial position as at December 31, 2022 and 2021 and categorized into levels of the fair value hierarchy:

    

    

December 31, 2022

    

December 31, 2021

Estimated 

Estimated 

    

Level

    

Carrying Value

    

Fair Value

    

Carrying Value

    

Fair Value

FVTPL

  

$

$

$

$

Cash and cash equivalents

 

1

 

14,125,522

 

14,125,522

 

18,851,244

 

18,851,244

Financial liabilities at amortized cost

 

  

 

  

 

  

 

  

 

  

Accounts payable and accrued liabilities

 

1

 

1,960,745

 

1,960,745

 

700,999

 

700,999

Lease liability

 

2

 

105,105

 

105,105

 

 

FVTPL

 

  

 

  

 

  

 

  

 

  

Derivative warrant liability

 

3

 

5,220,649

 

5,220,649

 

4,597,332

 

4,597,332

There were no transfers for levels of change in the fair value measurements of financial instruments for the years ended December 31, 2022 and 2021.

16.Financial instruments and risk management (continued)

Risk management is carried out by the Company’s management team with guidance from the Board of Directors. The Company’s risk exposures and their impact on the Company’s financial instruments were as follows:

a)Credit risk

Credit risk is the risk of financial loss to the Company if a customer of counterparty to a financial instrument fails to meet its obligations. The Company’s maximum exposure to credit risk at the financial position date under its financial instruments is summarized as follows:

    

December 31, 

    

December 31, 

2022

2021

$

$

Cash and cash equivalents

 

14,125,522

 

18,851,244

All of the Company’s cash is held with major financial institutions in Canada and management believes the exposure to credit risk with such institutions is minimal. The Company considers the risk of material loss to be significantly mitigated due to the financial strength of the major financial institutions where cash is held. The Company has no exposure to the ongoing banking crisis. The Company’s maximum exposure to credit risk as at December 31, 2022 and 2021 is the carrying value of its financial assets.

b)Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its obligations associated with financial liabilities. The Company has a planning and budgeting process in place by which it anticipates and determines the funds required to support normal operation requirements as well as the growth and development of its intellectual property portfolio.

The Company’s financial assets are comprised of its cash and cash equivalents, and the financial liabilities are comprised of its accounts payable and accrued liabilities, lease liability and derivative warrant liability.

The contractual maturities of these financial liabilities as at December 31, 2022 and 2021 are summarized below:

    

Payments due by period as of December 31, 2022

Between 3 

Less than 

 months and 

    

Total

    

3 months

    

1 year

    

1-3 years

$

$

$

$

Accounts payable and accrued liabilities

 

1,960,745

 

1,960,745

 

 

Lease liability

 

105,105

 

22,379

 

67,138

 

15,588

 

2,065,850

 

1,983,124

 

67,138

 

15,588

Payments due by period as of December 31, 2021

Between 3 

Less than 

months and 

    

Total

    

3 months

    

1 year

    

1-3 years

$

$

$

$

Accounts payable and accrued liabilities

 

700,999

 

700,999

 

 

 

700,999

 

700,999

 

 

16.Financial instruments and risk management (continued)

b)Market risk

i) Interest Rate Risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate due to changes in market interest rates. The Company’s bank accounts bear interest. Management believes that the credit risk concentration with respect to financial instruments included in cash and cash equivalents is minimal.

ii) Foreign Currency Risk

As at December 31, 2022, the Company is exposed to currency risk on the following financial assets and liabilities denominated in US Dollars (“USD”), British Pounds (“GBP”), and European Euro (“EUR”). The sensitivity of the Company’s net earnings due to changes in the exchange rate between the USD, GBP and EUR against the Canadian dollar is included in the table below in Canadian dollar equivalents:

    

USD

    

GBP 
amount

    

EUR

    

Total

$

$

$

$

Cash

12,907,255

 

 

 

12,907,255

Accounts payable and accrued liabilities

(1,466,309)

 

(45,755)

 

(11,747)

 

(1,523,811)

Net exposure

11,440,946

 

(45,755)

 

(11,747)

 

11,383,444

Effect of +/- 10% change in currency

1,144,095

 

(4,576)

 

(1,175)

 

  

The Company thoroughly examines the various financial instruments and risks to which it is exposed and assesses the impact and likelihood of those risks. These risks include foreign currency risk, interest rate risk, market risk, credit risk, and liquidity risk. Where material, these risks are reviewed and monitored by the Board of Directors

There have been no changes in any risk management policies since December 31, 2022.