Form 6-K 37 CAPITAL INC For: Jul 13

FORM 6-K

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Report Of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

of the Securities Exchange Act of 1934

For the month of July 2020

Commission File No. 000-16353

37 CAPITAL INC.

(Translation of registrant's name into English)

Suite 400, 570 Granville Street, Vancouver, BC, Canada V6C 3P1

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F ☒  Form 40-F ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1) ☐

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

 

SUBMITTED HEREWITH 

Exhibit 31.1	Certification of CEO
Exhibit 31.2	Certification of CFO
Exhibit 99.1	Interim Financial Statements March 31, 2020
Exhibit 99.2	Interim MD&A March 31, 2020

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

37 Capital Inc.

/s/ Jake H. Kalpakian

Jake H. Kalpakian
President

 

July 10, 2020

 

 

 

CERTIFICATION PURSUANT TO

Rule 13a-14(b) and Section 1350 of Chapter 63

of Title18 of the United States Code (18 U.S.C. 1350).

I, Jake H. Kalpakian, certify that:

 

1.

I have reviewed these financial statements for the period ended March 31, 2020 on Form 6-K of 37 Capital Inc.

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

 

4.

The company’s other certifying officer and I, are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide a reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)

Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)      Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the interim report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

 

5.

The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

 

 

Date: July 10, 2020.

 

“Jake H. Kalpakian”

Jake H. Kalpakian

Chief Executive Officer

 

 

 

CERTIFICATION PURSUANT TO

Rule 13a-14(b) and Section 1350 of Chapter 63

of Title18 of the United States Code (18 U.S.C. 1350).

 

I, Neil Spellman, certify that:

 

1.

I have reviewed these financial statements for the period ended March 31, 2020 on Form 6-K of 37 Capital Inc.

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

 

4.

The company’s other certifying officer and I, are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide a reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)

Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)      Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the interim report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

 

5.

The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

 

Date: July 10, 2020.

 

 

“Neil Spellman” 

Neil Spellman

Chief Financial Officer

 

 

 

37 CAPITAL INC.

 

Condensed Interim Financial Statements

Three Months Ended March 31, 2020 and 2019

(Expressed in Canadian Dollars)

(Unaudited)

 

 

 

 

 

Index	Page
Notice of No Auditor Review	2
Condensed Financial Statements
Condensed Balance Sheets	3
Condensed Statements of Comprehensive Loss	4
Condensed Statements of Changes in Stockholders’ Deficiency	5
Condensed Statements of Cash Flows	6
Notes to Condensed Financial Statements	7

 

 

 

 

 

 

Notice of No Auditor Review of Condensed Interim Financial Statements

 

 

In accordance with National Instrument 51-102 released by the Canadian Securities Administrators, the Company discloses that its auditors have not reviewed these unaudited condensed interim financial statements as at March 31, 2020 and for the three months ended March 31, 2020 and 2019.

 

 

 

 

37 CAPITAL INC.

Condensed Balance Sheets

(Expressed in Canadian Dollars)

(Unaudited)

 

		March 31, 2020				December 31, 2019
							(audited)
Assets
Current
Cash		$	21			$	38
GST receivable			448				640
			469				678
Mineral Property Interests (note 5)			32,501				32,501
Investment			1				1
Total Assets		$	32,971			$	33,180
Liabilities and Stockholders’ Deficiency
Current
Accounts payable and accrued liabilities (note 6)		$	205,612			$	204,761
Due to related parties (note 7)			280,662				291,087
Refundable subscriptions (note 8)			30,000				10,000
Loan payable (note 9)			103,924				103,924
Convertible debentures (note 10)			605,441				594,191
Total Liabilities			1,225,639				1,203,963
Stockholders’ Deficiency
Capital stock (note 11)			25,857,450				25,857,450
Equity portion of convertible debentures (note 10)			33,706 (27,083,824				33,706
Deficit			(27,083,824	)			(27,061,939	)
Total Stockholders’ Deficiency			(1,192,668	)			(1,170,783	)
Total Liabilities and Stockholders’ Deficiency		$	32,971			$	33,180

 

Commitments (note 12)

Subsequent events (Note 15)

 

On behalf of the Board:

 

”Jake H. Kalpakian” (signed)

..................................................................... Director

Jake H. Kalpakian

 

“Gregory T. McFarlane” (signed)

..................................................................... Director

Gregory T. McFarlane

 

See notes to the condensed interim financial statements.

 

 

37 CAPITAL INC.

Condensed Interim Statements of Comprehensive Loss

(Expressed in Canadian Dollars)

 

		Three Months Ended March 31, 2020				Three Months Ended March 31, 2019
Expenses
Office (note 7)		$	6,192			$	6,331
Finance and interest (notes 7 and 10)			12,859				12,315
Legal, accounting and audit			—				(1,127	)
Regulatory and transfer fees			2,834				18,926
Consulting			—				879
			21,885				37,324
Net Loss and Comprehensive Loss for the Period		$	(21,885	)		$	(37,324	)
Basic and Diluted Loss per Common Share		$	(0.00	)		$	(0.01	)
Weighted Average Number of Common Shares Outstanding			7,116,819				7,092,709

 

See notes to the condensed interim financial statements.

 

 

37 CAPITAL INC.

Statements of Changes in Stockholders’ Deficiency

(Expressed in Canadian Dollars) 

 

 

		Capital Stock
		Common Shares				Amount				Equity Portion of Convertible Debentures Reserve				Reserves								Deficit				Total Stockholders’ Deficiency
Balance, December 31, 2018			7,092,709				25,849,950				33,706				—								(26,914,802	)		(1,031,146)
Net loss for the period			—				—				—				—								(37,324	)		(37,324)
Balance, March 31, 2019			7,092,709				25,849,950				33,706				—								(26,952,126	)		(1,068,470)
Net loss for the period			—				—				—				—								(109,813	)		(109,813)
Shares issued for mineral property interest			100,000				7,500				—				—								—			7,500
Balance, December 31, 2019			7,192,709				25,857,450				33,706				—								(27,061,939	)		(1,170,783)
Net loss for the period			—				—				—				—								(21,885	)		(21,885)
Balance, March 31, 2020			7,192,709				25,857,450				33,706				—								(27,083,824	)		(1,192,668)

 

See notes to the condensed interim financial statements.

 

 

37 CAPITAL INC.

Condensed Interim Statements of Cash Flows

(Expressed in Canadian Dollars)

 

		Three Months Ended March 31, 2020				Three Months Ended March 31, 2019
Operating Activities
Net loss		$	(21,885	)		$	(37,324	)
Items not involving cash
Interest expense on convertible debentures			11,250				11,250
			(10,635	)			(26,074	)
Changes in non-cash working capital
GST/HST receivable			192				210
Accounts payable and accrued liabilities			20,851				(19,433	)
Due to related parties			(10,425	)			25,121
			10,618				5,898
Cash Provided by (used in) Operating Activities			(17	)			(20,176	)
Net increase (decrease) in cash			(17	)			(20,176	)
Cash, Beginning of Period			38				2,045
Cash, End of Period		$	21			$	(18,131	)

 

See notes to the condensed interim financial statements. 

 

 

37 CAPITAL INC.

Notes to Condensed Interim Financial Statements

Three Months Ended March 31, 2020 and 2019

(Expressed in Canadian Dollars)

 

1.

NATURE OF BUSINESS

 

37 Capital Inc. (“37 Capital” or the “Company”) was incorporated on August 24, 1984 in British Columbia, Canada. The principal business of the Company is the acquisition, exploration, and if warranted, the development of natural resource prospects.

 

The shares of the Company trade on the Canadian Securities Exchange (the “Exchange”) under the symbol “JJJ.X”, and trade on the OTC Pink tier of the OTC markets in the United States of America under the symbol “HHHEF”. The Company’s office is located at 400 – 570 Granville Street, Vancouver, British Columbia, Canada, V6C 3P1 and its registered office is located at 3200-650 West Georgia Street, Vancouver BC V6B 4P7.

 

2.

GOING CONCERN

 

These condensed interim financial statements have been prepared on the basis of accounting principles applicable to a "going concern", which assumes that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations.

 

Several adverse conditions cast substantial doubt on the validity of this assumption. The Company has incurred significant losses over the past three months (March 31, 2020 - $21,885) (March 31, 2019 - $37,324) and has incurred significant operating losses over the past three fiscal years (December 31, 2019 - $147,137; December 31, 2018 - $160,856; December 31, 2017 - $183,934), has a deficit of $27,083,824 as at March 31, 2020, (December 31, 2019 - $27,061,939; December 31, 2018 - $26,914,802), a working capital deficiency of $1,225,170 (December 31, 2019- $1,203,285 (December 31, 2018 - $1,031,148) and is in default of its convertible debentures. As the Company has limited resources and no sources of operating cash flow, there can be no assurances whatsoever that sufficient funding will be available for the Company to continue operations for an extended period of time.

 

The application of the going concern concept is dependent upon the Company’s ability to raise sufficient funding to pay creditors and to satisfy its liabilities as they become due. Management is actively engaged in the review and due diligence on opportunities of merit and is seeking to raise the necessary capital to meet its funding requirements. There can be no assurance whatsoever that management’s plan will be successful.

 

If the going concern assumption were not appropriate for these financial statements then adjustments may be necessary in the carrying value of assets and liabilities, the reported expenses and the balance sheet classifications used. Such adjustments could be material.

 

3.

BASIS OF PRESENTATION

 

(a)

Statement of compliance

 

These condensed interim financial statements are prepared in accordance with the International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”) and interpretations issued by the International Financial Reporting interpretation Committee (“IFRIC”).

 

(b)

Basis of presentation

 

These condensed interim financial statements were prepared in accordance with International Accounting Standard 34 Interim Financial Reporting. They do not include all of the information required for full annual financial statements.

 

37 CAPITAL INC.

Notes to Condensed Interim Financial Statements

Three Months Ended March 31, 2020 and 2019

(Expressed in Canadian Dollars)

 

3.

BASIS OF PRESENTATION (Continued)

 

(b)

Basis of presentation (continued)

 

These condensed interim financial statements have been prepared on a historical cost basis, except for certain financial instruments which are measured at fair value.

 

In addition, these condensed interim financial statements have been prepared on the accrual basis, except for cash flow information. These condensed interim financial statements are presented in Canadian dollars, which is the Company’s functional currency.

 

(c)

Approval of the condensed interim financial statements

 

These condensed interim financial statements were approved and authorized for issue by the Board of Directors on July 10, 2020.

 

(d)

Reclassification

 

Certain prior period amounts in these condensed interim financial statements have been reclassified to conform to current period’s presentation. These reclassifications had no net effect on the results of operations or financial position for any period presented.

 

(e)

Use of estimates and judgments

 

The preparation of the condensed interim financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Accounting estimates will, by definition, seldom equal the actual results. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

 

The key area of judgment applied in the preparation of the condensed interim financial statements that could result in a material adjustment to the carrying amounts of assets and liabilities is as follows:

 

•

assessment of the Company’s ability to continue as a going concern and whether there are events or conditions that give rise to significant uncertainty;

 

•

the classification/allocation of expenses as exploration and evaluation expenditures or operating expenses; and

 

•

the determination whether there have been any events or changes in circumstances that indicate the impairment of its exploration and evaluations assets.

 

The key estimates applied in the preparation of the condensed interim financial statements that could result in a material adjustment to the carrying amounts of assets and liabilities are as follows:

 

•

The recoverability of the carrying value of exploration and evaluation assets;

 

•

The provision for income taxes and recognition of deferred income tax assets and liabilities; and

 

•

The inputs in determining the liability and equity components of the convertible debentures.

 

 

37 CAPITAL INC.

Notes to Condensed Interim Financial Statements

Three Months Ended March 31, 2020 and 2019

(Expressed in Canadian Dollars)

 

4.

SIGNIFICANT ACCOUNTING POLICIES

 

The significant accounting policies of the Company include the following:

 

(a)

Financial instruments

 

(i)

Recognition and classification

 

The Company classifies its financial instruments in the following categories: at fair value through profit and loss (“FVTPL”), at fair value through other comprehensive income (loss) (“FVTOCI”) or at amortized cost. The Company determines the classification of financial assets at initial recognition. The classification of debt instruments is driven by the Company’s business model for managing the financial assets and their contractual cash flow characteristics. Equity instruments that are held for trading are classified as FVTPL. For other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument-by-instrument basis) to designate them as at FVTOCI. Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or if the Company has opted to measure them at FVTPL.

 

(ii)

Measurement

 

Financial assets and liabilities at amortized cost

Financial assets and liabilities at amortized cost are initially recognized at fair value plus or minus transaction costs, respectively, and subsequently carried at amortized cost less any impairment.

 

Financial assets and liabilities at FVTPL

Financial assets and liabilities carried at FVTPL are initially recorded at fair value and transaction costs are expensed in the statements of comprehensive loss. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are included in the statements of comprehensive loss in the period in which they arise.

 

Debt investments at FVTOCI

These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognised in profit or loss. Other net gains and losses are recognised in other comprehensive loss (“OCI”). On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss

 

Equity investments at FVTOCI

These assets are subsequently measured at fair value. Dividends are recognised as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in OCI and are never reclassified to profit or loss.

 

 

37 CAPITAL INC.

Notes to Condensed Interim Financial Statements

Three Months Ended March 31, 2020 and 2019

(Expressed in Canadian Dollars)

 

4.

SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

(a)

Financial instruments (Continued)

 

(iii)

Impairment of financial assets at amortized cost

 

The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost. At each reporting date, the Company measures the loss allowance for the financial asset at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the financial asset has not increased significantly since initial recognition, the Company measures the loss allowance for the financial asset at an amount equal to the twelve month expected credit losses. The Company shall recognize in the statements of comprehensive loss, as an impairment gain or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized.

 

(iv)

Derecognition

 

Financial assets

The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all of the associated risks and rewards of ownership to another entity.

 

Financial liabilities

The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. The Company also derecognizes a financial liability when the terms of the liability are modified such that the terms and / or cash flows of the modified instrument are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.

 

Gains and losses on derecognition are generally recognized in profit or loss.

 

(b)

Mineral property interests

 

Costs directly related to the acquisition, exploration and evaluation of resource properties are capitalized once the legal rights to explore the resource properties are acquired.

 

If it is determined that capitalized acquisition, exploration and evaluation costs are not recoverable, or the property is abandoned or management has determined impairment in value, the property is written down to its recoverable amount.

 

From time to time, the Company acquires or disposes of properties pursuant to the terms of option agreements. Options are exercisable entirely at the discretion of the optionee, and accordingly, are recorded as mineral property costs or recoveries when the payments are made or received. After costs are recovered, the balance of the payments received is recorded as a gain on option or disposition of mineral property.

 

Once the technical feasibility and commercial viability of the extraction of mineral resources are demonstrable, mineral property interests attributable to that area of interest are first tested for impairment and then reclassified to mining property and development assets within property and equipment. To date, none of the Company’s mineral property interests has demonstrated technical feasibility and commercial viability. The recoverability of the carrying amount of any mineral property interests is dependent on successful development and commercial exploitation or, alternatively, sale of the respective areas of interest.

 

37 CAPITAL INC.

Notes to Condensed Interim Financial Statements

Three Months Ended March 31, 2020 and 2019

(Expressed in Canadian Dollars)

 

4.       SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

(c)

Impairment

 

At the end of each reporting period, the Company’s assets are reviewed to determine whether there is any indication that those assets may be impaired. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment. The recoverable amount is the higher of fair value less costs to sell and value in use. Fair value is determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction between knowledgeable and willing parties. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in profit or loss for the period. For an asset that does not generate largely independent cash flows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

 

When an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but to an amount that does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.

 

(d)

Decommissioning liabilities

 

An obligation to incur decommissioning and site rehabilitation costs occurs when environmental disturbance is caused by exploration, evaluation, development or ongoing production.

 

Decommissioning and site rehabilitation costs arising from the installation of plant and other site preparation work, discounted to their net present value, are provided when the obligation to incur such costs arises and are capitalized into the cost of the related asset. These costs are charged against operations through depreciation of the asset and unwinding of the discount on the provision.

 

Depreciation is included in operating costs while the unwinding of the discount is included as a financing cost. Changes in the measurement of a liability relating to the decommissioning or site rehabilitation of plant and other site preparation work are added to, or deducted from, the cost of the related asset. The costs for the restoration of site damage, which arises during production, are provided at their net present values and charged against operations as extraction progresses.

 

Changes in the measurement of a liability, which arise during production, are charged against operating profit. The discount rate used to measure the net present value of the obligations is the pre-tax rate that reflects the current market assessment of the time value of money and the risks specific to the obligation. To date the Company does not have any decommissioning liabilities.

 

(e)

Income taxes

 

Income tax expense consisting of current and deferred tax expense is recognized to profit or loss. Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at period-end, adjusted for amendments to tax payable with regard to previous years.

 

 

37 CAPITAL INC.

Notes to Condensed Interim Financial Statements

Three Months Ended March 31, 2020 and 2019

(Expressed in Canadian Dollars)

  

4.       SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Deferred tax assets and liabilities and the related deferred income tax expense or recovery are recognized for deferred tax consequences attributable to differences between the carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the enacted or substantively enacted tax rates expected to apply when the asset is realized or the liability settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that substantive enactment occurs.

 

A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

 

(f)

Share-based payments

 

The Company grants stock options to directors, officers, employees and consultants of the Company. The fair value of share-based payments to employees is measured at grant date, using the Black-Scholes Option Pricing Model, and is recognized over the vesting period using the graded method. Fair value of share-based payments for non-employees is recognized and measured at the date the goods or services are received based on the fair value of the goods or services received. If it is determined that the fair value of goods and services received cannot be reliably measured, the share-based payment is measured at the fair value of the equity instruments issued using the Black-Scholes Option Pricing Model.

 

For both employees and non-employees, the fair value of share-based payments is recognized as either an expense or as mineral property interests with a corresponding increase in option reserves. The amount to be recognized as expense is adjusted to reflect the number of share options expected to vest. Consideration received on the exercise of stock options is recorded in capital stock and the related share-based payment is transferred from the stock option reserve to capital stock. For unexercised options that expire, the recorded value is transferred to deficit.

 

(g)

Convertible debentures

 

The liability component of convertible debentures is recognized initially at the fair value of a similar liability that does not have a conversion option. The equity component is recognized initially, as the difference between the fair value of the convertible debenture as a whole and the fair value of the liability component. Transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts. Subsequent to initial recognition, the liability component of the convertible debenture is measured at amortized cost using the effective interest method. The equity component is not re-measured subsequent to initial recognition.

 

(h)

Loss per share

 

Loss per share is calculated by dividing net loss attributable to common shares of the Company by the weighted average number of common shares outstanding during the year. The Company uses the treasury stock method for calculating diluted loss per share. Under this method, the dilutive effect on earnings per share is calculated on the use of the proceeds that could be obtained upon exercise of options, warrants and similar instruments. It assumes that the proceeds of such exercise would be used to purchase

 

 

37 CAPITAL INC.

Notes to Condensed Interim Financial Statements

Three Months Ended March 31, 2020 and 2019

(Expressed in Canadian Dollars)

 

4.       SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

common shares at the average market price during the period. However, the calculation of diluted loss per share excludes the effects of various conversions and exercise of options and warrants that would be anti-dilutive.

 

(i)

Capital stock

 

Proceeds from the exercise of stock options and warrants are recorded as capital stock. The proceeds from the issuance of units of the Company are allocated between common shares and warrants based on the residual value method. Under this method, the proceeds are allocated first to capital stock based on the fair value of the common shares at the time the units are issued and any residual value is allocated to the warrants. When the warrants are exercised, the related value is transferred from the warrant reserve to capital stock. For unexercised warrants that expire, the recorded value is transferred from the warrant reserves to deficit.

 

(j)

Foreign currency translation

 

Amounts recorded in foreign currency are translated into Canadian dollars as follows:

 

(i)

Monetary assets and liabilities, at the rate of exchange in effect as at the balance sheet date;

 

(ii)

Non-monetary assets and liabilities, at the exchange rates prevailing at the time of the acquisition of the assets or assumption of the liabilities; and

 

(iii)

Revenues and expenses (excluding amortization, which is translated at the same rate as the related asset), at the rate of exchange on the transaction date.

 

Exchange differences are recognized in profit or loss in the period which they arise.

 

(k)

Adoption of New Standards

 

IFRS 16, Leases

 

Effective January 1, 2019, the Company adopted IFRS 16 which supersedes IAS 17 Leases (“IAS 17”). The Company has applied the new standard using the modified retrospective approach with no restatement of comparative periods. There were no adjustments to retained earnings as a result of adoption. The Company has elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date the Company relied on its previous assessment made under IAS 17 and IFRIC 4 Determining whether an arrangement contains a lease. The definition of a lease under IFRS 16 was applied only to contracts entered into or modified on or after January 1, 2019.

 

The Company applied the following practical expedients in adopting IFRS 16 to leases previously classified as operating leases under IAS 17:

•

Rely on previous assessments on whether leases are onerous; and

•

Apply the exemption to not recognize right-of-use asset and liabilities for leases where the lease term ends within 12 months of the date of initial application.

 

On transition to IFRS 16, the Company did not recognize any lease assets or liabilities as its operating leases had a remaining term of less than 12 months from the date of initial application.

 

 

37 CAPITAL INC.

Notes to Condensed Interim Financial Statements

Three Months Ended March 31, 2020 and 2019

(Expressed in Canadian Dollars)

 

4.       SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

(l)

Accounting standards issued but not yet effective

 

At the date of the approval of the condensed interim financial statements, a number of standards and interpretations were issued but not effective. The Company considers that these new standards and interpretations are either not applicable or are not expected to have a significant impact on the Company’s condensed interim financial statements.

 

5.

MINERAL PROPERTY INTERESTS

 

		Acacia Property				Extra High Property				Total
Balance, December 31, 2017 and 2018		$	—			$	1			$	1
Acquisition costs			7,500				25,000				32,500
Balance, December 31, 2019 and March 31, 2020		$	7,500			$	25,001			$	32,501

 

Acacia Property

 

On September 30, 2019, the Company entered into a property option agreement (the “Option Agreement”) with Eagle Plains Resources Ltd. (“Eagle Plains”) to acquire a 60% interest in the Acacia Property (“Acacia Property”) in Adams Plateau Area of the Province of British Columbia. The following is required to exercise the option:

 

•

Issuance of 100,000 common shares (issued) to Eagle Plains upon receipt of the current Acacia Property NI 43-101 Technical Report;

 

•

Incur of a total of $100,000 in property related expenditures on or before the first anniversary of the Option Agreement;

 

•

Issuance of 50,000 common shares to Eagle Plains and incur a total of $100,000 in property related expenditures on or before the second anniversary of the Option Agreement;

 

•

Issuance of 50,000 common shares to Eagle Plains and incur a total of $300,000 in property related expenditures on or before the third anniversary of the Option Agreement;

 

•

Issuance of 50,000 common shares to Eagle Plains and incur a total of $750,000 in property related expenditures on or before the fourth anniversary of the Option Agreement; and

 

•

Issuance of 50,000 common shares to Eagle Plains and incur a total of $1,250,000 in property related expenditures on or before the fifth anniversary of the Option Agreement.

 

Within a period of 30 days after each annual anniversary of the Option Agreement, the Company shall decide whether or not it wishes to continue with the agreement.

 

Extra High Property

 

Previously the Company held a 33% interest in the Extra High Claims, located in the Kamloops Mining Divisions of the Province of British Columbia (“Extra High Property”).

 

 

37 CAPITAL INC.

Notes to Condensed Interim Financial Statements

Three Months Ended March 31, 2020 and 2019

(Expressed in Canadian Dollars)

 

5.

MINERAL PROPERTY INTERESTS (Continued)

 

On October 31, 2019, as amended on November 4, 2019, the Company entered into an agreement with Colt Resources Inc. (“Colt Resources”) to purchase the remaining 67% right, interest and title in and to the Extra High Property. The following is required to complete the purchase:

 

•

a cash consideration of $100,000 of which $25,000 was paid on the closing date and the remaining balance of $75,000 is payable after eighteen months; and

 

•

a 0.5% NSR from commercial production which may be purchased by the Company at any time by making a payment of $500,000.

 

The Extra High Property claims have been renewed and are to expire on December 25, 2021. The agreement can be terminated by the Company at anytime without any monetary repercussions. As at December 31, 2019, the Company owns a 100% undivided right, interest and title in and to the Extra High Property.

 

The Extra High Property is subject to a 1.5% Net Smelter Royalty (“NSR”) payable to a third party, 50% of which, or 0.75%, can be purchased by the Company at any time by paying $500,000.

 

 

6.

ACCOUNTS PAYABLE AND ACCRUED LIABILITES

 

		March 31, 2020				December 31, 2019
Trade payables		$	171,791			$	170,940
Accrued liabilities			33,821				33,821
		$	205,612			$	204,761

 

7.

RELATED PARTY TRANSACTIONS

 

The amounts due to related parties are unsecured, payable on demand which consist of the following:

 

		March 31, 2020				December 31, 2019
Advances from directors (interest at prime plus 1%)		$	143,916			$	160,643
Entities controlled by directors (non-interest-bearing)			136,746				130,444
		$	280,662			$	291,087

 

Included in convertible debentures and accrued interest is $407,089 (2019 - $399,589) owing to the Chief Executive Officer and to a former director of the Company (note 10).

 

 

37 CAPITAL INC.

Notes to Condensed Interim Financial Statements

Three Months Ended March 31, 2020 and 2019

(Expressed in Canadian Dollars)

 

7.

RELATED PARTY TRANSACTIONS (Continued)

 

During the three months period ended March 31, the following amounts were charged by related parties.

 

		2020				2019
Interest charged on amounts due to related parties		$	1,609			$	1,065
Rent charged by entities with common directors (note 12)			3,000				3,000
Office expenses charged by, and other expenses paid on behalf of the Company by a company with common directors (note 12)			3,000				3,995
		$	7,609			$	8,060

 

The Company, together with Jackpot Digital Inc. (“Jackpot”), a related company with certain common directors, have entered into an office lease agreement with an arm’s length party (Note 12).

 

8.

REFUNDABLE SUBSCRIPTIONS

 

During the year ended December 31, 2016, the Company cancelled subscription agreements of a non-brokered private placement totalling $45,000 and the Company refunded $35,000. As of March 31, 2020, the remaining $10,000 (March 31, 2019 - $10,000) is owing and is due on demand.

 

During the three months ended March 31, 2020, the Company received $20,000 of subscription funds for 400,000 flow-through units at $0.05 per unit in respect to the announced financing. As at March 31, 2020, no securities have been issued.

 

9.

LOAN PAYABLE

 

During the year ended December 31, 2016, the Company entered into an agreement with an arm’s length party whereby the party would pay certain debts owed by the Company. The loan is non-interest bearing, unsecured and due on demand. As of March 31, 2020, the balance payable is $103,924 (March 31, 2019 - $103,924).

 

10.

CONVERTIBLE DEBENTURES FINANCING

 

Convertible Debentures Financing 2015

 

On January 6, 2015, the Company closed a convertible debenture financing with two directors of the Company for the amount of $250,000. The convertible debentures matured on January 6, 2016, and bear interest at the rate of 12% per annum payable on a quarterly basis. The convertible debentures are convertible into common shares of the Company at a conversion price of $0.30 per share. The liability component of the convertible debentures was recognized initially at the fair value of a similar liability with no equity conversion option, which was calculated based on the application of a market interest rate of 25%. On the initial recognition of the convertible debentures, the amount of $222,006 was recorded under convertible debentures and the amount of $27,994 has been recorded under the equity portion of convertible debenture reserve. As of March 31, 2020, the convertible debentures are in default.

 

 

37 CAPITAL INC.

Notes to Condensed Interim Financial Statements

Three Months Ended March 31, 2020 and 2019

(Expressed in Canadian Dollars)

 

10.

CONVERTIBLE DEBENTURES FINANCING (Continued)

 

Convertible Debentures Financing 2013

 

During the year ended December 31, 2013, the Company issued several convertible debentures for a total amount of $975,000. The convertible debentures have a maturity date of 18 months from the date of closing, and bear interest at the rate of 15% per annum payable on a quarterly basis. The convertible debentures are convertible into common shares of the Company at a conversion price of $1.50 per share. The liability component of the convertible debenture was recognized initially at the fair value of a similar liability with no equity conversion option, which was calculated based on the application of a market interest rate of 20%. The difference between the $975,000 face value of the debentures and the fair value of the liability component was recognized in equity. On the initial recognition of the convertible debentures, the amount of $913,072 has been recorded under convertible debentures and the amount of $61,928 has been recorded under the equity portion of convertible debentures.

 

As of March 31, 2020, $100,000 of the convertible notes are outstanding and past due plus accrued interest of $98,352 (December 31, 2019 - $94,602). One convertible debenture is in default and another convertible debenture has been extended indefinitely.

 

The following table reconciles the fair value of the debentures to the carrying amount.

 

		Liability Component				Equity Component				Total
Balance, December 31, 2018		$	549,191			$	33,706			$	582,897
Interest accrued			45,000				—				45,000
Balance, December 31, 2019			594,191				33,706				627,897
Interest accrued			11,250				—				11,250
Balance, March 31, 2020		$	605,441			$	33,706			$	639,147

 

 

11.

CAPITAL STOCK

 

(a)

Authorized

 

Unlimited number of common and preferred shares without par value.

 

As of March 31, 2020, there are no preferred shares issued.

 

(b)

Issued

 

As of March 31, 2020, there are 7,192,709 common shares issued and outstanding.

 

During the year ended December 31, 2019, the Company issued 100,000 common shares at $0.075 per share to Eagle Plains pursuant to the Acacia Property Option Agreement (Note 5).

 

During the year ended December 31, 2018, the Company issued 600,000 common shares pursuant to exercise of share purchase warrants at prices ranging from $0.12 - $0.135 per share for proceeds of $79,500.

 

 

37 CAPITAL INC.

Notes to Condensed Interim Financial Statements

Three Months Ended March 31, 2020 and 2019

(Expressed in Canadian Dollars)

 

11.

CAPITAL STOCK (Continued)

 

During the year ended December 31, 2017, the Company entered into debt settlement agreements with Jackpot, and with Kalpakian Bros., companies related to 37 Capital by certain common directors and shareholders. The Company issued 4,249,985 units of the Company to Jackpot at the price of $0.09 per unit in settlement of the Company’s outstanding debt to Jackpot for the total amount of $382,499 for shared office rent, office support services and miscellaneous office expenses provided by Jackpot to the Company from August 1, 2014 up to September 30, 2017. In respect to the Company’s outstanding debt to Kalpakian Bros. for the total amount of $15,750, the Company issued 175,000 units of the Company at the price of $0.09 per unit in settlement of the Company’s outstanding debt owed to Kalpakian Bros. for unpaid management fees from May 1, 2016 up to July 30, 2016. Each unit consists of one common share and one share purchase warrant. Each warrant is exercisable at the price of $0.12 per share until November 2, 2022.

 

During the year ended December 31, 2019, Jackpot sold 3,400,000 common shares of the Company through the facilities of the Exchange (2018 - sold 800,000 units of the Company to an arm’s length party). As at March 31, 2020, Jackpot owns 49,985 common shares in the capital of the Company representing approximately 0.69% of the Company’s issued and outstanding common shares. In addition, Jackpot owns 3,449,985 share purchase warrants of the Company exercisable at $0.12 per share until November 2, 2022.

 

(c)

Warrants

 

Warrants activity is as follows:

 

		Number of Warrants				Weighted Average Exercise Price
Balance, December 31, 2018			4,824,985			$	0.12
Expired			—				—
Balance, December, 2019 and March 31, 2020			4,824,985			$	0.12

 

As of March 31, 2020 the following warrants were outstanding:

 

Expiry Date		Exercise Price				Number of Warrants Outstanding
January 4, 2021			0.135				500,000
November 2, 2022			0.12				4,324,985
							4,824,985

 

The weighted average remaining contractual life for warrants outstanding at March 31, 2020 is 2.41 years.

 

 

37 CAPITAL INC.

Notes to Condensed Interim Financial Statements

Three Months Ended March 31, 2020 and 2019

(Expressed in Canadian Dollars)

 

11.

CAPITAL STOCK (Continued)

 

(d)       Stock options

 

The Company’s 2015 Stock Option Plan provides that the Board of Directors of the Company may grant to directors, officers, employees and consultants of the Company options to acquire up to 20% of the issued and outstanding common shares of the Company calculated from time to time on a rolling basis. The terms of the options are determined at the date of grant.

 

As of March 31, 2020, there were no stock options outstanding (December 31, 2019: Nil).

 

12.

COMMITMENTS

 

(a)

During April 2017, the Company together with Jackpot, a related company with common directors, entered into an office lease agreement with an arm’s length party (the “Office Lease Agreement”). The Office Lease Agreement has a three-year term with a commencement date of August 1, 2017. The annual basic rent shall be $121,396 plus estimated annual operating costs of approximately $88,000. The Company’s share of the office basic rent and operating costs was $28,800 plus applicable taxes per annum.

 

In respect to the Office Lease Agreement, effective as of May 1, 2018, Jackpot and the Company entered into an amending agreement whereby the Company shall have no further responsibilities, obligations or commitments in respect to the Office Lease Agreement. Under the amending agreement, the Company shall pay a monthly rent of $1,000 plus applicable taxes to Jackpot, and either Jackpot or the Company may terminate this agreement by giving each other a three months’ notice in writing.

 

(b)

Effective as of May 1, 2018, the Company entered into an agreement for office support services with Jackpot for a term of one year. On May 1, 2019, the agreement was extended which expires on April 30, 2020. Under the agreement, the Company is entitled to receive office support services from Jackpot at a monthly rate of $1,000 plus applicable taxes.

 

 

13.

CAPITAL MANAGEMENT

 

The Company considers its capital to be comprised of stockholders’ deficiency and convertible debenture.

 

The Company’s objective when managing capital is to maintain adequate levels of funding to support the acquisition, exploration and, if warranted, the development of mineral properties, to invest in non-mining related projects and to maintain the necessary corporate and administrative functions to facilitate these activities. This is done primarily through equity and debt financing. Future financings are dependent on market conditions and there can be no assurance that the Company will be able to raise funds in the future. There were no changes to the Company’s approach to capital management during the three months ended March 31, 2020. The Company is not subject to externally imposed capital requirements.

 

 

37 CAPITAL INC.

Notes to Condensed Interim Financial Statements

Three Months Ended March 31, 2020 and 2019

(Expressed in Canadian Dollars)

 

14.

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 fair values of cash, accounts payable and accrued liabilities, due to related parties, refundable subscription, loan payable and convertible debentures approximate their

carrying values due to the short-term maturity of these instruments.

 

(b)

Credit risk

 

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations.

 

The financial instruments that potentially subject the Company to a significant concentration of credit risk consist of cash. The Company mitigates its exposure to credit loss associated with cash by placing its cash with a major financial institution.

 

(c)

Liquidity risk

 

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they are due. The Company's approach to managing liquidity is to ensure that it will have sufficient liquidity to meet its liabilities when due.

 

At March 31, 2020, the Company had cash of $21 (December 31, 2019 - $38) available to apply against short-term business requirements and current liabilities of $1,225,639 (December 31, 2019 - $1,203,963). All of the current liabilities, are due within 90 days. Amounts due to related parties are due on demand. As of March 31, 2020, three convertible debentures are in default, and the loan payable and the refundable subscriptions are due on demand.

 

(d)

Market risk

 

Market risk is the risk that changes in market prices, such as interest rates and foreign exchange rates, will affect the Company's net earnings or the value of financial instruments. As at March 31, 2020, the Company is not exposed to significant interest rate risk, currency risk or other price risk on its financial assets and liabilities due to the short-term maturity of its financial liabilities and fixed interest rate on the convertible debentures.

 

37 CAPITAL INC.

Notes to Condensed Interim Financial Statements

Three Months Ended March 31, 2020 and 2019

(Expressed in Canadian Dollars)

 

 

15.

SUBSEQUENT EVENTS

a)

In March 2020, the World Health Organization declared a global pandemic related to the virus known as COVID-19. The expected impacts on global commerce are anticipated to be far reaching. To date there have been significant wide-spread stock market declines and the movement of people and goods has become restricted.

As the Company has no material operating income or cash flows, it is reliant on additional financing to fund ongoing operations. An extended disruption may affect the Company’s ability to obtain additional financing. The impact on the economy and the Company is not yet determinable; however, the Company’s financial position, results of operations and cash flows in future periods may be materially affected. In particular, there may be heightened risk of asset impairment and liquidity or going concern uncertainty. The Company continues to work on revisions to forecasts and plans in light of the current conditions and will use these updated plans, assumptions and forecasts in the measurement of the Company’s assets going forward.

b)

The Company has renewed its office support services agreement with Jackpot for a period of one year at a monthly rate of $1,000 plus applicable taxes.

 

 

 

Form 51-102F1

 

37 CAPITAL INC.

 

Management’s Discussion & Analysis

Condensed Interim Financial Statements for the

Three months ended March 31, 2020

 

The following discussion and analysis of the financial condition and financial position and results of operations of 37 Capital Inc. (the “Company” or “37 Capital”) should be read in conjunction with the condensed interim unaudited financial statements for the three months ended March 31, 2020 and 2019 and the notes thereto, and the audited consolidated financial statements and notes thereto for the years ended December 31, 2019 and 2018. The condensed interim unaudited financial statements and the notes thereto for the three months ended March 31, 2020 and 2019 have not been reviewed by the Company’s auditors.

 

The condensed interim unaudited financial statements, including comparatives, have been prepared using accounting policies in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The Company’s condensed interim unaudited financial statements are expressed in Canadian (CDN) Dollars which is the Company’s functional currency. All amounts in this MD&A are in CDN dollars unless otherwise stated.

 

The following information is prepared as at July 10, 2020.

 

 

Forward-Looking Statements

 

Certain statements contained herein are “forward-looking” and are based on the opinions and estimates of management, or on opinions and estimates provided to and accepted by management. Forward-looking statements may include, among others, statements regarding future plans, costs, projections, objectives, economic performance, or the assumptions underlying any of the foregoing. In this MD&A, words such as “may”, “would”, “could”, “will”, “likely”, “seek”, “project”, “predict”, “potential”, “should”, “might”, “hopeful”, “objective”, “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, “optimistic” and similar words are used to identify forward-looking statements. Forward-looking statements are subject to a variety of significant risks and uncertainties and other factors that could cause actual events or results to differ materially from those expressed or implied. Although management believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, projections and estimations, there can be no assurance that these assumptions, projections or estimations are accurate. Readers, shareholders and investors are therefore cautioned not to place reliance on any forward-looking statements in this MD&A as the plans, assumptions, intentions, estimations, projections, expectations or factors upon which they are based might vary or might not occur. The forward-looking statements contained in this MD&A are made as of the date of this MD&A, and are subject to change after such date. The Company undertakes no obligation to update or revise any forward-looking statements, except in accordance with applicable securities laws.

 

Description of Business

 

The Company is a junior mineral exploration company.

 

The Company was incorporated on August 24, 1984 in British Columbia, Canada. The principal business of the Company is the acquisition, exploration and, if warranted, the development of natural resource prospects.

 

 

37 Capital is a reporting issuer in the Provinces of British Columbia, Alberta, Quebec and Ontario and files all public documents on www.Sedar.com . The Company is a foreign private issuer in the United States of America and in this respect files, on EDGAR, its Annual Report on Form 20-F and other reports on Form 6K. The following link, http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=825171 will give you direct access to the Company’s filings with the United States Securities and Exchange Commission (“U.S. SEC”).

 

In Canada, the common shares of the Company trade on the Canadian Securities Exchange (CSE) under the symbol “JJJ.X”, and in the USA, the Company's common shares trade on the OTC Pink tier of the OTC markets under the trading symbol “HHHEF”. The Cusip number of the Company’s common shares is 88429G102. The Company’s office is located at 400 – 570 Granville Street, Vancouver, British Columbia, Canada, V6C 3P1 and its registered office is located at Suite 3200 - 650 West Georgia Street, Vancouver BC V6B 4P7. The Company’s registrar and transfer agent is Computershare Investor Services Inc. located at 510 Burrard Street, Vancouver, British Columbia, Canada, V6C 3B9.

 

Results of Operations

 

For the three months ended March 31, 2020:

 

•

The Company’s operating expenses were $21,885 as compared to $37,324 for the corresponding period in 2019.

•

The Company recorded a net loss and comprehensive loss of $ 21,885 as compared to a net loss and comprehensive loss of $37,324 during the corresponding period in 2019.

•

The basic and diluted loss per common share was $ 0.00 as compared to basic and diluted loss of $0.01 during the corresponding period in 2019.

•

The Company’s total assets were $32,971 as compared to total assets of $705 during the corresponding period in 2019 (December 31, 2019: $33,180).

•

The Company’s total liabilities were $1,225,639 as compared to $1,069,175 during the corresponding period in 2019 (December 31, 2019: $1,203,963).

•

The Company had a working capital deficiency of $1,225,170 as compared to a working capital definciency of $1,068,472 during the corresponding period in 2019 (December 31, 2019: working capital deficiency of $1,203,285).

 

The Company is presently not a party to any legal proceedings whatsoever.

 

The Company’s Auditors are Dale Matheson Carr-Hilton Labonte LLP, Chartered Professional Accountants, 1500-1140 W. Pender St., Vancouver, BC V6E 4G1. The telefax number is (604) 689-2778.

 

During the year ended December 31, 2017, the Company entered into debt settlement agreements with Jackpot Digital Inc. (“Jackpot”), and with Kalpakian Bros. of B.C. Ltd. (“Kalpakian Bros.”), companies related to 37 Capital by certain common directors. The Company has issued 4,249,985 units of the Company to Jackpot at the price of $0.09 per unit in settlement of the Company’s outstanding debt for the total amount of $382,498.65 for shared office rent, office support services and miscellaneous office expenses provided by Jackpot to the Company from August 1, 2014 up to September 30, 2017. Each unit consists of one common share and one share purchase warrant. Each warrant will be exercisable at a price of $0.12 per share for a period of five years. In respect to the Company’s outstanding debt to Kalpakian Bros. for the total amount of $15,750, the Company has issued 175,000 units of the Company at the price of $0.09 per unit in settlement of the Company’s outstanding debt owed to Kalpakian Bros. for unpaid management fees from May 1, 2016 up to July 30, 2016. Each unit consists of one common share and one share purchase warrant. Each warrant will be exercisable at a price of $0.12 per share for a period of five years. The securities were subject to a hold period which expired on March 3, 2018. During September 2018, Jackpot sold 800,000 units of 37 Capital to JAMCO, an arm’s length party, and during the nine months ended September 30, 2019 Jackpot sold 3,400,000 common shares of 37 Capital through the facilities of the CSE. As at March 31, 2020, Jackpot owns 49,985 common shares in the capital of the Company representing approximately 0.69% of the Company’s issued and outstanding common shares. In addition, Jackpot owns 3,449,985 share purchase warrants of the Company exercisable at $0.12 per share until November 2, 2022.

 

 

At the Company’s Annual General Meeting, which was held on November 18, 2019, the Company’s shareholders passed all the resolutions presented including the re-election of Jake H. Kalpakian, Gregory T. McFarlane, Fred A.C. Tejada and Neil Spellman as Directors of the Company; re-appointed the Company’s Auditor, Dale Matheson Carr-Hilton Labonte LLP, Chartered Professional Accountants for the ensuing year and authorized the Directors to fix the remuneration to be paid to the Auditor; and re-approved the Company’s Stock Option Plan.

 

During June 2019, the Board of Directors of the Company passed resolutions approving the consolidation of the Company’s share capital on a five (5) old shares for one (1) new share basis and the changing of the Company’s name from 37 Capital Inc. to “Bronx Capital Inc.”. As of the date of this MD&A, the share consolidation and the name change of the Company have not taken place.

 

During December 2019, the Company announced that it intends to raise funds for the Company which will consist of up to 4,000,000 flow-through units of the Company at a price of $0.05 per unit for gross proceeds to the Company of $200,000. Each flow-through unit will consist of one flow-through common share of the Company and one non-flow-through share purchase warrant to acquire one non-flow through common share of the Company at a price of $0.10 per share for a period of two years. All securities that may be issued in connection with this financing will be subject to a four-month and a day hold period. This financing is subject to the approval of CSE. The funds raised from this financing will be used towards exploration work expenditures on the Acacia Property, which is located in central British Columbia. During January 2020, the Company received $20,000 of subscription funds for 400,000 flow-through units at $0.05 per unit. As of the date of this MD&A, no securities have been issued.

 

Mineral Properties

 

1.       Extra High Claims

 

Previously the Company held a 33% interest in the Extra High Claims which are located in the Kamloops Mining Divisions of the Province of British Columbia (“Extra High Property”).

 

On October 31, 2019, as amended on November 4, 2019, the Company entered into a Property Purchase Agreement with Colt Resources Inc. (“Colt”) whereby the Company has purchased Colt’s 67% right, interest and title in and to the Extra High Property for a cash consideration of $100,000 of which $25,000 was paid on the closing date of the Property Purchase Agreement and the balance i.e. $75,000 is payable after eighteen months. Additionally, the Company is obligated to pay Colt a 0.5% NSR from commercial production which may be purchased by the Company at any time by making a payment of $500,000. As at December 31, 2019, the Company owns a 100% undivided right, interest and title in and to the Extra High Property which covers an area of 650 hectares.

 

The Company withdrew from its PAC account with the Mineral Titles Office of the Province of British Columbia credits totalling $ 51,920.64 to extend the expiry date of the Extra High Property until December 25, 2021.

 

The Extra High Property is subject to a 1.5% Net Smelter Returns Royalty (“NSR”) payable to a third party, 50% of which, or 0.75%, can be purchased by the Company at any time by paying $500,000.

 

 

2. Ontario Mineral Leases (Lithium)

 

During the year ended December 31, 2008, the Company sold all of its Ontario Mineral Leases (Lithium). In the event that at a future date the Ontario Mineral Leases (Lithium) are placed into commercial production, then the Company is entitled to receive a 0.5% gross receipts royalty after six months from the date of commencement of commercial production from the Ontario Mineral Leases (Lithium).

 

3. Acacia Property

 

On September 30, 2019, the Company entered into and executed a Property Option Agreement with Eagle Plains Resources Inc. (“Eagle Plains”) in respect to the Acacia Property (the “Acacia Property Option Agreement”) whereby the Company shall have the right and option to acquire a 60% interest in the Acacia Property by issuing to Eagle Plains in stages a total of 300,000 common shares in the capital of the Company and by incurring a total amount of $2,500,000 in property related expenditures over a period of five years.

 

During November 2019, the Company issued 100,000 common shares in the capital of the Company to Eagle Plains at the deemed price of $0.075 per share which were subject to a hold period which expired on February 5, 2020.

 

The Acacia Property covers an area of approximately 4,715 hectares and is located in the Adams Plateau area of British Columbia.

 

Investment

 

In April 2013, the Company entered into a purchase and sale agreement with a Mexican gaming company, whereby the Company agreed to purchase a royalty revenue stream of an amount the greater of 10% of the net profits or 5% of the gross revenues of the Mexican land-based casino for a purchase price of $800,000. As of December 31, 2013, the Company invested $800,000 and advanced $49,200 for working capital purposes. The Mexican gaming company repaid the $49,200 advanced and the Company recognized $4,157 in royalty revenue during the year ended December 31, 2014. As at December 31, 2014, the Company assessed the fair value of its investment and recorded impairment of $799,999 on its investment. As of the date of this MD&A, the Company does not expect to recover its investment in the Mexican gaming company.

 

First Quarter (March 31, 2020)

 

•

The Company had a net loss and comprehensive loss of $21,885 or $ 0.00 per share as compared to a net loss and comprehensive loss of $37,324 or $0.01 per share during the same three month [first quarter] ended March 31, 2019.

 

•

The Company’s Operating costs were $21,885 as compared to $37,324 for the same period in 2019.

 

Summary of Quarterly Results

 

For the Quarterly Periods ended:		March 31, 2020				December 31, 2019				September 30, 2019				June 30, 2019
Total Revenues			0				0				0				0
Net loss and comprehensive loss			(21,885	)			(46,782	)			(32,518	)			(30,513	)
Loss per common share			(0.00	)			(0.01	)			(0.00	)			(0.00	)
For the Quarterly Periods ended:			March 31, 2019				December 31, 2018				September 30, 2018				June 30, 2018
Total Revenues			0				0				0				0
Net loss and comprehensive loss			(37,324	)			(45,671	)			(22,660	)			(35,820	)
Loss per common share			(0.01	)			(0.01	)			(0.00	)			(0.01	)

 

The Company’s business is not of a seasonal nature.

 

Risks related to our Business

 

The Company, and the securities of the Company, should be considered a highly speculative investment. The following risk factors should be given special consideration when evaluating an investment in any of the Company's securities:

 

• The Company does not anticipate to generate any revenue in the foreseeable future. In the event that the Company generates any revenues in the future, then the Company intends to retain its earnings in order to finance growth.

 

• There are a number of outstanding securities and agreements pursuant to which common shares of the Company may be issued in the future. This will result in further dilution to the Company's shareholders.

 

• Governmental regulations, including those regulations governing the protection of the environment, taxes, labour standards, occupational health, waste disposal, mine safety and other matters, could have an adverse impact on the Company.

 

• Trading in the common shares of the Company may be halted or suspended or may be subject to cease trade orders at any time and for any reason, including, but not limited to, the failure by the Company to submit documents to the Regulatory Authorities within the required time periods.

 

 

• The exploration of mineral properties involves significant risks which even experience, knowledge and careful evaluation may not be able to avoid. The prices of metals have fluctuated widely, particularly in recent years as it is affected by numerous factors which are beyond the Company’s control including international, economic and political trends, expectations of inflation or deflation, currency exchange fluctuations, interest rate fluctuations, global or regional consumptive patterns, speculative activities and increased production due to new extraction methods. The effect of these factors on the price of metals, and therefore the economic viability of the Company’s interests in mineral exploration properties cannot be accurately predicted. Furthermore, changing conditions in the financial markets, and Canadian Income Tax legislation may have a direct adverse impact on the Company’s ability to raise funds for its interests in mineral exploration properties. A drop in the availability of equity financings will likely impede spending on mineral properties. As a result of all these significant risks, it is quite possible that the Company may lose its investments in the Company’s interest in the Extra High Property and the Acacia Property.

 

• Due to the current difficult market conditions for junior mineral exploration companies, the Company may not be able to raise sufficient funds to meet its ongoing obligations.

 

• The Company has outstanding debts, has working capital deficiency, has no revenues, has incurred operating losses, and has no assurances whatsoever that sufficient funding can be available for the Company to continue its operations uninterruptedly.

 

• In respect to the Company’s investment in the Mexican gaming company, there are no assurances whatsoever that in the future the Company can recover its investment or that the Company can receive any royalty revenues.

 

• The market price of the Company’s common shares has experienced considerable volatility and may continue to fluctuate in the future. Furthermore, there is a limited trading market for the Company’s common shares and as such, the ability of investors to sell their shares cannot be assured.

 

• In March 2020, the World Health Organization declared a global pandemic related to the virus known as COVID-19. The expected impacts on global commerce are anticipated to be far reaching. To date there have been significant wide-spread stock market declines and the movement of people and goods has become restricted.

 

As the Company has no material operating income or cash flows, it is reliant on additional financing to fund ongoing operations. An extended disruption may affect the Company’s ability to obtain additional financing. The impact on the economy and the Company is not yet determinable; however, the Company’s financial position, results of operations and cash flows in future periods may be materially affected. In particular, there may be heightened risk of asset impairment and liquidity or going concern uncertainty. The Company continues to work on revisions to forecasts and plans in light of the current conditions and will use these updated plans, assumptions and forecasts in the measurement of the Company’s assets going forward.

 

Liquidity and Capital Resources

 

The Company has incurred operating losses over the past three fiscal years, has limited resources, and does not have any source of operating cash flow.

 

 

During 2020, the Company shall require at least $300,000 to conduct its operations uninterruptedly. In order to meet this requirement, the Company intends to seek equity and/or debt financings through private placements and/or public offerings and/or loans. In the past, the Company has been successful in securing equity and debt financings in order to conduct its operations uninterruptedly. While the Company does not give any assurances whatsoever that in the future it will continue being successful in securing equity and/or debt financings in order to conduct its operations uninterruptedly, it is the Company’s intention to pursue these methods for future funding of the Company.

 

As at March 31, 2020:

 

•

the Company’s total assets were $32,971 as compared to $705 for the corresponding period in 2019 (December 31, 2019: $33,180).

•

the Company’s total liabilities were $1,225,639 as compared to $1,069,175 for the corresponding period in 2019 (December 31, 2019: $1,203,963).

•

the Company had $21 in cash as compared to $nil in cash for the corresponding period in 2019 (December 31, 2019: $38).

•

the Company had GST/HST receivable in the amount of $448 as compared to $703 for corresponding period in 2019 (December 31, 2019: $640).

 

Shares for Debt Financing

 

During the year ended December 31, 2017, the Company entered into debt settlement agreements with Jackpot and Kalpakian Bros. whereby the Company issued a total number of 4,424,985 units of the Company in settlement of the Company’s outstanding debts totaling $398,249. For further particulars, please see Results of Operations of this MD&A.

 

Private Placement Financing

 

There were no private placement financings during the years ended December 31, 2019 and during the three months ended March 31, 2020.

 

Warrants

 

As at March 31, 2020, a total of 4,824,985 warrants with a weighted average exercise price of $0.12 per warrant share were outstanding.

 

While there are no assurances whatsoever that warrants may be exercised, however if any warrants are

exercised in the future, then any funds received by the Company from the exercising of warrants shall be used for general working capital purposes.

 

Loan 2016

 

The Company has borrowed the sum of $103,924 from an arm’s length party to pay certain amounts that were owed by the Company to some of its creditors. The borrowed amount of $103,924 is non-interest bearing, unsecured and is payable on demand.

 

 

Refundable Subscriptions

 

During the twelve months ended December 31, 2016, the Company cancelled subscription agreements of a non-brokered private placement financing totalling $45,000. The Company has refunded $35,000. As of March 31, 2020, the remaining $10,000 (March 31, 2019 - $10,000) is still owing and is due on demand.

 

During the three months ended March 31, 2020, the Company received $20,000 of subscription funds for 400,000 flow-through units at $0.05 per unit in respect to the announced financing. As at March 31, 2020, no securities have been issued.

 

Convertible Debentures Financing 2015

 

On January 6, 2015, the Company closed a convertible debenture financing with two directors of the Company for the amount of $250,000. The convertible debentures matured on January 6, 2016, and bear interest at the rate of 12% per annum payable on a quarterly basis. The convertible debentures are convertible into common shares of the Company at a conversion price of $0.30 per share. The liability component of the convertible debentures was recognized initially at the fair value of a similar liability with no equity conversion option, which was calculated based on the application of a market interest rate of 20%. On the initial recognition of the convertible debentures, the amount of $222,006 was recorded under convertible debentures and the amount of $27,994 has been recorded under the equity portion of convertible debenture reserve. As of March 31, 2020, the two convertible debentures are in default.

 

Convertible Debentures Financing 2013

 

During the year ended December 31, 2013, the Company issued several convertible debentures for a total amount of $975,000 to several arm’s length parties. The convertible debentures have a maturity date of 18 months from the date of closing, and bear interest at the rate of 15% per annum payable on a quarterly basis. The convertible debentures are convertible into common shares of the Company at a conversion price of $1.50 per share. The liability component of the convertible debenture was recognized initially at the fair value of a similar liability with no equity conversion option, which was calculated based on the application of a market interest rate of 20%. The difference between the $975,000 face value of the debentures and the fair value of the liability component was recognized in equity. On the initial recognition of the convertible debentures, the amount of $913,072 has been recorded under convertible debentures and the amount of $61,928 has been recorded under the equity portion of convertible debentures.

 

Pursuant to the financing, the Company made cash payments of $48,000 and issued 2,000 common shares of the Company and 3,333 agent warrants of the Company with fair value of $8,115 as finders’ fees. Each warrant entitled the holder to purchase one additional common share of the Company at a price of $1.50 per share until July 23, 2018 (expired). The amount of transaction costs directly attributable to the financing of $56,115 were allocated to the liability and equity components of the debenture proportionately at $52,551 and $3,564, respectively. The discount on the debentures is being accreted such that the liability component will equal the face value of the debentures at maturity plus accrued interest.

 

On September 4, 2013, the amount of $858,118 which comprised of certain convertible debentures and their corresponding accrued interest was converted into 610,724 common shares of the Company. The equity portion of the convertible debentures was reduced in the amount of $52,562.

 

As at March 31, 2019, one convertible debenture is in default and another convertible debenture has been extended indefinitely.

 

 

Stock Options

 

As at March 31, 2020, there were no outstanding stock options (December 31, 2019 - Nil).

 

As of the date of this MD&A there are no outstanding stock options.

 

Significant Accounting Policies

 

The condensed interim financial statements for the three months ended March 31, 2020 have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations issued by the International Financial Reporting Interpretation Committee (“IFRIC”).

 

The condensed interim financial statements were prepared in accordance with International Accounting Standard 34 Interim Financial Reporting. They do not include all of the information required for full annual financial statements.

 

The Significant Accounting Policies are detailed in Note 4 of the Company’s condensed interim financial statements for the three months ended March 31, 2020.

 

Effective January 1, 2019, the Company adopted IFRS 16 which supersedes IAS 17 Leases (“IAS 17”). The Company has applied the new standard using the modified retrospective approach with no restatement of comparative periods. There were no adjustments to retained earnings as a result of adoption. The Company has elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date the Company relied on its previous assessment made under IAS 17 and IFRIC 4 Determining whether an arrangement contains a lease. The definition of a lease under IFRS 16 was applied only to contracts entered into or modified on or after January 1, 2019.

 

On transition to IFRS 16, the Company did not recognize any lease assets or liabilities as its operating leases had a remaining term of less than 12 months from the date of initial application.

 

Off-Balance Sheet Arrangements

 

The Company does not have any off-balance sheet arrangements.

 

Trends

 

During the last several years commodity prices have fluctuated significantly, and should this trend continue or should commodity prices remain at current levels, then companies such as 37 Capital will have difficulty in raising funds and/or acquiring mineral properties of merit at reasonable prices.

 

Related Party Transactions

 

The Company shares office space and certain employees with Jackpot, a company related by certain common key management personnel.

 

During April 2017, the Company together with Jackpot entered into an office lease agreement with an arm’s length party (the “Office Lease Agreement”). The Office Lease Agreement has a three-year term with a commencement date of August 1, 2017. The annual basic rent is $121,396 plus estimated annual operating costs of approximately $88,000. The Company’s share of the office basic rent and operating costs was $28,800 plus applicable taxes per annum. In respect to the Office Lease Agreement, effective as of May 1, 2018, Jackpot and the Company entered into an amending agreement whereby the Company shall have no further responsibilities, obligations or commitments in respect to the Office Lease Agreement. Under the amending agreement, the Company shall pay a monthly rent of $1,000 plus applicable taxes to Jackpot, and either Jackpot or the Company may terminate this agreement by giving each other a three months’ notice in writing.

 

 

The amounts due to related parties are unsecured, payable on demand which consist of the following:

 

		March 31, 2020				March 31, 2019
Advances from directors (interest at prime plus 1%)		$	143,916			$	97,356
Entities controlled by directors (non-interest-bearing)			136,746				109,617
		$	280,662			$	206,973

 

Included in convertible debentures is $407,089 (December 31, 2019 - $399,589) owing to the Chief Executive Officer and to a former director of the Company.

 

During the three months period ended March 31, 2020, the following amounts were charged by related parties.

 

		March 31, 2020				March 31, 2019
Interest charged on amounts due to related parties		$	1,609			$	1,065
Rent charged by entities with common directors			3,000				3,000
Office expenses charged by, and other expenses paid on behalf of the Company by a Company with common directors			3,000				3,995
		$	7,609			$	8,060

 

Pursuant to Debt Settlement Agreements with Jackpot and Kalpakian Bros., the Company issued 4,249,985 units of the Company to Jackpot and 175,000 units of the Company to Kalpakian Bros. For further particulars please see Results of Operations of this MD&A.

 

On January 6, 2015, the Company closed convertible debentures financing with two directors of the Company for the Principal amount of $250,000. The Principal amount of $250,000 together with the accrued interest of the convertible debentures became due and payable on January 6, 2016 (the “Due Date”). However, on the Due Date the Company was unable to repay the Principal amount and the accrued interest to the two directors. Effective as of November 15, 2017, Bedo Kalpakian is no longer a director of the Company. As of the date of this MD&A, the Company has not repaid to the Company’s CEO Jake Kalpakian and to its former director Bedo Kalpakian the Principal amount of $250,000 together with the accrued interest.

 

Effective as of May 1, 2018, the Company entered into an agreement for office support services with Jackpot for a term of one year. On May 1, 2019, the agreement was extended which expires on April 30, 2020. Under the agreement, the Company is entitled to receive office support services from Jackpot at a monthly rate of $1,000 plus applicable taxes.

 

 

Jackpot is related to the Company by virtue of the fact that Jackpot has certain directors and officers who are also directors and officers of the Company.

 

During June and July 2019, Jake Kalpakian, through one of his private companies, acquired a total of 2,565,000 common shares of the Company through the facilities of the CSE.

 

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 fair values of cash, accounts payable and accrued liabilities and due to related parties approximate their carrying values due to the short-term maturity of these instruments.

 

(c)

Credit risk

 

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations.

 

The financial instruments that potentially subject the Company to a significant concentration of credit risk consist of cash. The Company mitigates its exposure to credit loss associated with cash by placing its cash with a major financial institution.

 

(d)

Liquidity risk

 

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they are due. The Company's approach to managing liquidity is to ensure that it will have sufficient liquidity to meet its liabilities when due.

 

At March 31, 2020, the Company had cash of $21 (December 31, 2019 - $38) available to apply against short-term business requirements and current liabilities of $1,225,639 (December 31, 2019- $1,203,963). All of the current liabilities are due within 90 days. Amounts due to related parties are due on demand. As of March 31, 2020, three convertible debentures are in default, and the loan payable and the refundable subscriptions are due on demand.

 

 

(e)

Market risk

 

Market risk is the risk that changes in market prices, such as interest rates and foreign exchange rates, will affect the Company's net earnings or the value of financial instruments. As at March 31, 2020, the Company is not exposed to significant interest rate risk, currency risk or other price risk on its financial assets and liabilities due to the short-term maturity of its financial liabilities and fixed interest rate on the convertible debentures.

 

Analysis of expenses

 

For a breakdown of general and administrative expenditures, please refer to the Condensed Interim Statements of Comprehensive Loss in the Company’s Condensed Interim Financial Statements for the three months ended March 31, 2020 and 2019.

 

Capital Stock

 

Authorized share capital:	Unlimited number of common shares without nominal or par value
	Unlimited number of preferred shares without nominal or par value

 

Outstanding Share Data	No. of Common Shares	No. of Preferred Shares	Exercise Price per Share	Expiry Date
Issued and Outstanding as at July 10, 2020	7,192,709	Nil	N/A	N/A
Warrants as at July 10, 2020	500,000 4,324,985	Nil	Cdn $0.135 Cdn $0.12	January 4, 2021 November 2, 2022
Fully Diluted as at July 10, 2020	12,017,694	Nil

 

Director Approval

 

The contents of this MD&A and the sending thereof to the Shareholders of the Company have been approved by the Company’s Board of Directors.

Outlook

 

Management’s efforts are directed towards pursuing opportunities of merit for the Company, and Management is hopeful that, in due course, the Company shall be able to acquire an opportunity of merit. However, there are no assurances whatsoever that Management’s efforts shall succeed.

 

 

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