SEAHAWK VENTURES INC.
(FORMERLY BRABEIA INC.)
FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
FOR THE YEAR ENDED MAY 31, 2017
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
Seahawk Ventures Inc. (formerly Brabeia Inc.)
We have audited the accompanying financial statements of Seahawk Ventures Inc. (formerly Brabeia Inc.), which comprise the statements of financial position as at May 31, 2017 and 2016, and the statements of loss and comprehensive loss, changes in shareholders’ equity (deficiency), and cash flows for the years then ended, and a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, these financial statements present fairly, in all material respects, the financial position of Seahawk Ventures Inc. (formerly Brabeia Inc.) as at May 31, 2017 and 2016 and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards.
Emphasis of Matter
Without qualifying our opinion, we draw attention to Note 1 in the financial statements which describes conditions and matters that indicate the existence of a material uncertainty that may cast significant doubt about Seahawk Ventures Inc. (formerly Brabeia Inc.)’s ability to continue as a going concern.
“DAVIDSON & COMPANY LLP”
Vancouver, CanadaChartered Professional Accountants
August 3, 2017
SEAHAWK VENTURES INC.
(FORMERLY BRABEIA INC.)
STATEMENTS OF FINANCIAL POSITION
(Expressed in Canadian Dollars)
As at May 31,
2017 / 2016ASSETS
Current
Cash / $ 23,450 / $ 21,626Receivables / 3,943 / 6,663
Advances receivable (Note 4) / - / 100,000
Total current assets / 27,393 / 128,289
Exploration and evaluation assets (Note 5) / 46,457 / 31,652
Total assets / $ 73,850 / $ 159,941
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIENCY)
CurrentAccounts payable and accrued liabilities / $ 67,748 / $ 126,776
Due to related parties (Note 8) / 145,802 / 30,000
Loan payable to related party (Note 6) / 25,000 / 25,000
Total current liabilities / 238,550 / 181,776
Shareholders’ equity (deficiency)
Share capital (Note 7) / 4,824,692 / 5,011,534Shares receivable (Notes 4 and 7) / - / (195,842)
Reserves (Note 7) / 1,956,941 / 1,956,941
Deficit / (6,946,333) / (6,794,468)
(164,700) / (21,835)
Total liabilities and shareholders’ equity (deficiency) / $ 73,850 / $ 159,941
Nature and continuance of operations (Note 1)
Events subsequent to the reporting period (Note 12)
Approved and authorized on behalf of the Board on August 3, 2017:“Giovanni Gasbarro” / Director / “Bruno Gasbarro” / Director
The accompanying notes are an integral part of these financial statements.
SEAHAWK VENTURES INC.
(FORMERLY BRABEIA INC.)
STATEMENTS OFLOSS AND COMPREHENSIVE LOSS
(Expressed in Canadian Dollars)
For the years ended May 31,
2017 / 2016OPERATING EXPENSES
Interest and bank charges (Note 6) / $ 1,397 / $ -Loss on disposal of investment in 096 (Note 4) / - / 578,158
Management fees (Note 8) / 102,000 / 28,500
Office and miscellaneous / 1,869 / 3,653
Professional fees / 54,836 30,33630,336 / 212,499 30,33630,336
Rent (Note 8) / 15,500 / 8,875
Share-based compensation (Notes 7 and 8) / - / 265,637
Transfer agent and filing fees / 28,100 / 20,418
Write-off of accounts payable / (51,837) / -
Write-off of loan and advances to 096 (Note 4) / - / 729,935
Loss and comprehensive loss for the year / $ (151,865) / $ (1,847,675)
Basic and diluted loss per common share / $ (0.01) / $ (0.09)
Weighted average number of common shares outstanding / 21,795,481 / 21,117,727
The accompanying notes are an integral part of these financial statements.
SEAHAWK VENTURES INC.
(FORMERLY BRABEIA INC.)
STATEMENTS OF CASH FLOWS
(Expressed in Canadian Dollars)
For the years ended May 31,
2017 / 2016CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the year / $ (151,865) / $ (1,847,675)
Items not involving cash:
Share-based compensation / - / 265,637
Write-off of accounts payable / (51,837) / -
Write-off of loan and advances to 096 / - / 729,935
Loss on disposal of investment in 096 / - / 578,158
Changes in non-cash working capital items:
Receivables / 2,720 / (4,285)
Accounts payable and accrued liabilities / (7,191) / 87,046
Due to related parties / 115,802 / (20,000)
Net cash used in operating activities / (92,371) / (211,184)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of exploration and evaluation assets / - / (31,652)
Exploration and evaluation asset expenditures / (5,805) / -
Cash advanced to 096 / - / (774,259)
Partial repayment received from 096 / 100,000 / 44,324
Net cash provided by (used in) investing activities / 94,195 / (761,587)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from private placement / - / 923,450
Share issue costs / - / (37,966)
Loan proceeds from related party / - / 25,000
Net cash provided by financing activities / - / 910,484
Change in cash for the year / 1,824 / (62,287)
Cash, beginning of year / 21,626 / 83,913
Cash, end of year / $ 23,450 / $ 21,626
Supplemental disclosure with respect to cash flows (Note 9)
The accompanying notes are an integral part of these financial statements.
1
SEAHAWK VENTURES INC.
(FORMERLY BRABEIA INC.)
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIENCY)
(Expressed in Canadian Dollars)
Numberof Common
Shares / Share Capital Amount / Number of Shares Receivable / Shares Receivable / Reserves / Deficit / Total
Balance, May 31, 2015 / 16,727,236 / $ 3,352,050 / - / $ - / $ 1,691,304 / $ (4,946,793) / $ 96,561
Shares issued for investment in 096 / 2,580,001 / 774,000 / - / - / - / - / 774,000
Escrowed shares issued for investment in 096
– contingently cancellable / 23,219,980 / - / - / - / - / - / -
Shares receivable on disposal of investment in 096 / - / - / 652,808 / (195,842) / - / - / (195,842)
Escrowed shares receivable at disposal of investment in 096 / - / - / 15,002,364 / - / - / - / -
Private placement – unit offering completed / 3,078,167 / 923,450 / - / - / - / - / 923,450
Share issue costs - cash / - / (37,966) / - / - / - / - / (37,966)
Share-based compensation / - / - / - / - / 265,637 / - / 265,637
Loss for the year / - / - / - / - / - / (1,847,675) / (1,847,675)
Balance, May 31, 2016 / 45,605,384 / 5,011,534 / 15,655,172 / (195,842) / 1,956,941 / (6,794,468) / (21,835)
Shares receivable on disposal of investment in
096 – received and cancelled / (652,808) / (195,842) / (652,808) / 195,842 / - / - / -
Escrowed shares received and cancelled / (19,702,804) / - / (15,002,364) / - / - / - / -
Shares issued for exploration and evaluation
assets / 75,000 / 9,000 / - / - / - / - / 9,000
Loss for the year / - / - / - / - / - / (151,865) / (151,865)
Balance, May 31, 2017 / 25,324,772 / $ 4,824,692 / - / $ - / $ 1,956,941 / $ (6,946,333) / $ (164,700)
The accompanying notes are an integral part of these financial statements.
6
SEAHAWK VENTURES INC.
(FORMERLY BRABEIA INC.)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
FOR THE YEAR ENDED MAY 31, 2017
1.NATURE AND CONTINUANCE OF OPERATIONS
Seahawk Ventures Inc. (formerly Brabeia Inc., formerly Scavo Resource Corp.) (the “Company”) was incorporated under the Business Corporations Act (British Columbia) on January 16, 2007.
On August 21, 2015, the Company entered into a share exchange agreementwith the shareholders of 0969607 BC Ltd. (“096”)to acquire all of the issued and outstanding shares of 096 in return for 25,799,981 common shares of the Company (the “Share Exchange”).096 provides a fully interactive contest-marketing platform which offers a suite of tools that customers can use tocreate, launch, promote and manage contests and sweepstakes as well as social media marketing and webdesign services.After the Share Exchange, the Company changed its name to “Brabeia Inc.”Tracy Wattie (“Wattie”), President and CEO of 096, became the President and CEO of the Company, and joined the board ofdirectors of the Company. On February 10, 2016, the Company entered into an agreement(the “096 Sale Agreement”, amended on March 15, 2016) with Wattie to sell its interest in 096 to her effective February 1, 2016 (Note 4). The Company changed its name to Seahawk Ventures Inc. after the disposal of 096.
The Company's registered and records office is located at suite 1700 – 666 Burrard Street, Vancouver, BC V6C 2X8 and its head office is located at 909 Bowron Street, Coquitlam, BC V3J 7W3.
These financial statements have been prepared with the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of operations rather than through a process of forced liquidation. The Company has incurred operating losses over the past several years and does not have a current source of revenue or sufficient financial resources to sustain operations in the long term. The Company’s ability to continue as a going concern is dependent upon it ability to attain profitable operations, and to continue to raise funds or obtain borrowing from third parties sufficient to meet current and future obligations and/or restructure the existing debt and payables.
While management intends to pursue additional financings and the Company has been successful in obtaining its required financing in the past, there is no assurance that such financing will be available or be available on favorable terms. An inability to raise additional financing may impact the future assessment of the Company as a going concern. The financial statements do not include adjustments to amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue operations.
These material uncertainties may cast significant doubt upon the Company’s ability to continue as a going concern.
2.BASIS OF PREPARATION
Statement of compliance
These financial statements, including comparatives, have been prepared in accordance with International Accounting Standards (“IAS”) using accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and Interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”).
2.BASIS OF PREPARATION(cont’d…)
Basis of measurement and presentation currency
These financial statements have been prepared on a historical cost basis except for certain financial assets measured at fair value. In addition, these financial statements have been prepared using the accrual basis of accounting, except for cash flow information.
These financial statements are presented in Canadian dollars, which is also the functional currency of the Company.
Use of estimates and critical judgments
The preparation of thesefinancial statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported revenues and expenses during the year.
Although management uses historical experience and its best knowledge of the amount, events or actions to form the basis for judgments and estimates, actual results may differ from these estimates.
Significant assumptions about the future and other sources of estimation uncertainty that management has made at the end of the reporting period, that could result in a material adjustment to the carrying amounts of assets and liabilities in the event that actual results differ from assumptions made, relate to, but are not limited to, the following:
a) Impairment of non-financial assets
Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is thehigher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on availabledata from binding sales transactions in an arm’s length transaction of similar assets or observable market prices lessincremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model. Thecash flows are derived from the budget for the next five years and do not include restructuring activities that the Company isnot yet committed to or significant future investments that will enhance the asset’s performance of the cash generating unitbeing tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as wellas the expected future cash inflows and the growth rate used for extrapolation purposes.
b) Taxes
Provisions for taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessmentof all relevant factors. The Company reviews the adequacy of these provisions at the end of the reporting period. However,it is possible that at some future date an additional liability could result from audits by taxing authorities. Where the finaloutcome of these tax-related matters is different from the amounts that were initially recorded, such differences will affectthe tax provisions in the period in which such determination is made.
2.BASIS OF PREPARATION(cont’d…)
Use of estimates and critical judgments (cont’d…)
c) Accounting for the Share Exchange and 096 Sale Agreement
The Company hasassessed whether it hada controlling financial interest in 096 in accordance with the provisions of IFRS 10“Consolidated Financial Statements”.This standard requires the Company to assess if it had:
i) power over the entity;
ii) exposure, or rights, to variable returns from its involvement with the entity; and
iii) power to affect the amount of theentity’s return.
The Company thenfurther assessed whether it hadsignificant influence in 096 in accordance with the provisions of IAS28“Investments in Associates and Joint Ventures”.This standard requires the Company to assess if it had power to participate in the financial and operating policy decisions of the entity, without having direct control or joint control of those polices.
Each of these factors requires the Company to make significant judgments as to the extent of itsinvolvement with the entity and whether it is required to consolidate the operations of the entity or record the investment in accordance with the equity method of accounting.
For the transactions with the shareholders of 096, the Company concluded that it had not obtained control or significant influence of the entity and therefore should record the value of the investment as an available for sale investment and the advances as a financial asset at amortized cost, with a loss being recognized on a subsequent impairment write-off of advances made (Note 4).
3.SIGNIFICANT ACCOUNTING POLICIES
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and short-term highly liquid investments with original maturities of 90days or less that are readily convertible into known amounts of cash and which are subject to an insignificant risk of change in value. As at May 31, 2017 and 2016, the Company did not hold any cash equivalents.
Share capital
Financial instruments issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. The Company’s common shares are classified as equity instruments.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
The Company has adopted a residual value method with respect to the measurement of shares and warrants issued as private placement units. The residual value method first allocates value to the more easily measurable component based on fair value and then the residual value, if any, to the less easily measurable component.
The fair value of the common shares issued in the private placements was determined to be the more easily measurable component and were valued at their fair value, as determined by the closing quoted bid price on the announcement date. The balance, if any, was allocated to the attached warrants. Warrants that are issued as payment for an agency fee or other transaction costs are accounted for as share-based payments.
3.SIGNIFICANT ACCOUNTING POLICIES (cont’d…)
Share-based payments
The Company grants stock options to buy common shares of the Company to directors, officers, employees and consultants. The fair value of the options is recognized as an expense with a corresponding increase in equity.
The fair value of stock options is measured on the date of grant, using the Black-Scholes option pricing model, taking into account the terms and conditions upon which the options were granted, and is recognized over the vesting period on a graded basis. The share-based payments are recorded as an operating expense with an offset to equity reserves. When options are exercised the consideration received is recorded as share capital. In addition, the related share-based payments originally recorded as equity reserves are transferred to share capital.
In situations where equity instruments are issued to non-employees and some or all of the goods or services received by the entity as consideration cannot be specifically identified, they are measured at the fair value of the share-based payment. Otherwise, share-based payments are measured at the fair value of goods or services received.
Loss per share
Basic loss per share is computed by dividing loss available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted loss per share is computed similar to basic loss per share except that the weighted average number of common shares outstanding is increased to include additional shares for the assumed exercise of stock options and warrants, if dilutive. The number of additional shares is calculated by assuming that outstanding stock options and warrants were exercised and that the proceeds from such exercises were used to acquire common stock at the average market price during the reporting periods.
Shares that are contingently cancellable are not included in the calculation of basic or diluted loss per share.
Income taxes
Tax expense is comprised of current and deferred tax. Tax expense is recognized in profit or loss except to the extent thatthe tax arises from a transaction or event which is recognized either in other comprehensive income or directly in equity.
Current tax expense is based on the results for the year as adjusted for items that are not taxable or not deductible. Currenttax is calculated using rates enacted or substantially enacted at the year end, and includes any adjustments to tax payablein respect of previous years.
3.SIGNIFICANT ACCOUNTING POLICIES (cont’d…)