PARCELPAL LOGISTICS INC.
(Formerly, ParcelPal Technology Inc.)

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited - expressed in Canadian Dollars)
For the Nine months Ended September 30, 2021 and 2020

 
1

NOTICE OF NO AUDITOR REVIEW OF

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS


Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.

The accompanying unaudited condensed consolidated interim financial statements have been prepared by and are the responsibility of the management.

The Company's independent auditor has not performed a review of these financial statements in accordance with the standards established by the Chartered Professional Accountants of Canada for a review of condensed consolidated interim financial statements by an entity's auditor.

2

ParcelPal Logistics Inc.
(Formerly ParcelPal Technology Inc.)
Condensed consolidated interim Statements of Financial Position
(Unaudited - expressed in Canadian Dollars)

   
Notes
   
September 30,
2021
$
   
December 31,
2020
$
 
                   
ASSETS
                 
Current assets
                 
Cash
         
166,258
     
255,668
 
Accounts receivable
   
4
     
354,010
     
363,653
 
Prepaid expenses
           
223,323
     
34,344
 
Loan receivable
   
5
     
-
     
1,874
 
             
743,591
     
655,539
 
                         
Customer contract
            3,916,504       -  
Vehicles and Right-of-use assets
   
6
     
756,115
     
343,699
 
                         
Total assets
           
5,416,210
     
999,238
 
                         
LIABILITIES AND SHAREHOLDERS’ EQUITY
                       
Current liabilities
                       
Accounts payable and accrued liabilities
   
8
     
947,541
     
1,053,012
 
Purchase obligation
            1,476,216       -  
Convertible Note
   
11
     
1,954,099
     
766,070
 
Derivative liability
   
11
     
139,426
     
794,631
 
Sales tax payable
           
438,827
     
300,903
 
Short-term loan payable
           
66,306
     
28,051
 
Lease obligations - current
   
10
     
201,785
     
92,736
 
             
5,224,200
     
3,035,403
 
                         
Lease obligations
   
10
     
437,256
     
120,167
 
                         
Total liabilities
           
5,661,456
     
3,155,570
 
                         
SHAREHOLDERS’ (DEFICIT) EQUITY
                       
Share capital
   
7
     
17,112,987
     
11,408,737
 
Contributed surplus
           
3,620,300
     
3,363,593
 
Accumulated other comprehensive income
            (20,416 )     -  
Deficit
           
(20,958,117
)
   
(16,928,662
)
Total shareholders’ (deficit) equity
           
(245,246
)
   
(2,156,332
)
                         
Total liabilities and shareholders’ equity
           
5,416,210
     
999,238
 

Nature of operations and going concern (Note 1)
Commitments (Note 10)
Subsequent events (Note 13)

Approved by the Board of Directors

            “Rich Wheeless”             Director 
            “Brian Storseth”             Director

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

3

ParcelPal Logistics Inc.
(Formerly ParcelPal Technology Inc.)
Condensed consolidated interim Statements of Loss and Comprehensive Loss
For the Three and Nine Months Ended September 30, 2021 and 2020
(Unaudited - expressed in Canadian Dollars)

         
Three months Ended
September 30,
   
Nine months Ended
September 30,
 
   
Notes
   
2021
$
   
2020
$
   
2021
$
   
2020
$
 
                               
SALES
   
4
     
1,736,770
     
1,466,528
     
4,247,242
     
4,012,441
 
                                         
COST OF SALES
   
12
     
(1,528,059
)
   
(1,427,432
)
   
(3,866,936
)
   
(3,910,809
)
                                         
GROSS PROFIT
           
208,711
     
39,096
     
380,306
     
101,632
 
                                         
EXPENSES
                                       
Consulting fees
   
8
     
35,356
     
39,295
     
91,067
     
446,372
 
Marketing and promotion
           
317
     
19,655
     
101,534
     
60,850
 
Management and director fees
   
8
     
1,492,536
     
223,542
     
1,745,195
     
277,542
 
Office and miscellaneous
           
208,418
     
369,831
     
563,480
     
942,269
 
Professional fees
           
165,642
     
159,976
     
331,813
     
231,192
 
Regulatory and filing fees
           
32,038
     
502
     
74,741
     
30,598
 
Salaries
           
177,576
     
265,624
     
468,370
     
687,624
 
Share-based compensation
   
7
     
-
     
34,827
     
263,672
     
192,514
 
Travel and accommodation
           
41,813
     
13,846
     
84,992
     
24,902
 
             
(2,153,696
)
   
(1,127,098
)
   
(3,724,864
)
   
(2,893,863
)
                                         
Loss before other items
           
(1,944,985
)
   
(1,088,002
)
   
(3,344,558
)
   
(2,792,231
)
                                         
Other items:
                                       
Derivative liability
           
39,986
     
-
     
94,779
     
-
 
Foreign exchange
           
42,336
     
(19,840
)
   
29,853
     
(18,461
)
Interest expense
   
10, 11
     
155,110
     
27,242
     
550,862
     
43,940
 
Write-off of asset
           
-
     
-
     
9,403
     
-
 
                                         
                                         
Loss and comprehensive loss for the period
           
(2,182,417
)
   
(1,095,404
)
   
(4,029,455
)
   
(2,817,710
)
                                         
Basic and diluted loss per share
           
(0.02
)
   
(0.01
)
   
(0.03
)
   
(0.03
)
                                         
Weighted average number of shares outstanding – basic and diluted
           
121,824,560
     
93,850,887
     
115,947,094
     
90,598,903
 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

4

ParcelPal Logistics Inc.
(Formerly ParcelPal Technology Inc.)
Condensed consolidated interim Statements of Changes in Shareholders’ Equity
For the Nine Months Ended September 30, 2021 and 2020
(Unaudited - expressed in Canadian Dollars)

   
Number of
shares
   
Amount
$
   
Contributed
Surplus
$
   
Subscriptions
received in
advance
$
   
Deficit
$
   
Total
$
 
                                     
Balance, December 31, 2019
   
86,944,353
     
9,367,691
     
3,020,617
     
100,240
     
(12,054,580
)
   
433,968
 
                                                 
Shares issued pursuant to:
                                               
Option exercises
   
1,000,000
     
162,218
     
(72,218
)
   
(90,000
)
   
-
     
-
 
Convertible note
   
1,633,333
     
162,500
     
(110,119
)
                   
(52,391
)
Debt settlement
   
416,667
     
50,000
     
-
     
-
     
-
     
50,000
 
In lieu of consulting fees
   
4,875,556
     
428,000
     
-
     
-
     
-
     
428,800
 
Share based compensation
   
-
     
-
     
192,514
     
-
     
-
     
192,514
 
Net and comprehensive loss for the period
   
-
     
-
     
-
     
-
     
(2,817,710
)
   
(2,817,710
)
Balance, September 30, 2020
   
94,869,909
     
10,170,409
     
3,030,794
     
10,240
     
(14,872,290
)
   
(1,660,847
)
                                                 
Shares issued pursuant to:
                                               
Option exercises
   
1,000,000
     
147,909
     
(57,909
)
   
-
     
-
     
90,000
 
Warrant exercises
   
200,000
     
30,000
     
-
     
-
     
-
     
30,000
 
Convertible note
   
4,521,564
     
594,419
     
110,119
     
-
     
-
     
704,538
 
Debt settlement
   
2,370,000
     
384,000
     
-
     
-
     
-
     
384,000
 
In lieu of consulting fees
   
(7,500
)
   
82,000
     
-
     
-
     
-
     
82,000
 
Write-off subscriptions receivable
   
-
     
-
     
-
     
(10,240
)
   
-
     
(10,240
)
Share-based compensation
   
-
     
-
     
280,589
     
-
     
-
     
280,589
 
Net and comprehensive loss for the period
   
-
     
-
     
-
     
-
     
(2,056,372
)
   
(2,056,372
)
Balance, December 31, 2020
   
102,953,973
     
11,408,737
     
3,363,593
     
-
     
(16,928,662
)
   
(2,156,332
)
                                                 
Shares issued pursuant to:
                                               
Convertible note
   
17,565,497
     
2,457,047
     
-
     
-
     
-
     
2,457,047
 
In lieu of consulting fees
   
13,833,333
     
1,521,667
     
-
     
-
     
-
     
1,521,667
 
Warrant exercises
   
657,000
     
98,550
     
-
     
-
     
-
     
98,550
 
Option exercises
   
100,000
     
15,965
     
(6,965
)
   
-
     
-
     
9,000
 
Share-based compensation
   
-
     
-
     
263,672
     
-
     
-
     
263,672
 
Net loss for the period
   
-
     
-
     
-
     
-
     
(4,029,455
)
   
(4,029,455
)
                                                 
Balance, September 30, 2021
   
148,887,581
     
17,112,987
     
3,620,300
     
-
     
(20,958,117
)
   
(245,246
)

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

5

ParcelPal Logistics Inc.
(Formerly ParcelPal Technology Inc.)
Condensed consolidated interim Statements of Cash Flows
For the Nine Months Ended September 30, 2021 and 2020
(Unaudited - expressed in Canadian Dollars)

   
2021
$
   
2020
$
 
             
Operating activities
           
Loss for the period
   
(4,029,455
)
   
(2,817,710
)
Add non-cash items:
               
Amortization
   
242,770
     
290,925
 
Share-based compensation
   
263,672
     
192,514
 
Accrued interest
   
526,348
     
18,489
 
Shares issued in lieu of consulting fees
   
1,521,667
     
428,000
 
Unrealized foreign exchange gain
   
21,915
     
-
 
Impairment of asset
   
9,404
     
-
 
Fair value of derivative
   
94,779
     
-
 
Changes in non-cash working capital items
               
Sales tax payable
   
139,736
     
128,568
 
Prepaid expenses
   
(214,921
)
   
(16,776
)
Accounts receivable
   
9,643
     
351,729
 
Accounts payable and accrued liabilities
   
(162,608
)
   
373,452
 
Net cash flows used in operating activities
   
(1,577,050
)
   
(1,050,809
)
                 
Investing activity
               
Acquisition of Trucking
   
(882,569
)
   
-
 
Cash acquired on business combination
    149,386       -  
Purchase of vehicles
    (43,038 )     -  
Net cash flows provided by investing activity
   
(776,221
)
   
-
 
                 
Financing activities
               
Convertible note
   
2,346,829
     
982,280
 
Exercise of options
   
9,000
     
-
 
Exercise of warrants
   
98,550
     
-
 
Lease payments
   
(195,352
)
   
(266,443
)
Advances of loans receivable
   
(28,051
)
   
-
 
Subscriptions received
   
-
     
58,650
 
Net cash flows provided by financing activities
   
2,230,976
     
774,487
 
                 
Foreign exchange on cash
    32,885       -  
                 
Change in cash during the period
   
(89,410
)
   
(276,322
)
                 
Cash – beginning of the period
   
255,668
     
295,593
 
                 
Cash – end of the period
   
166,258
     
19,271
 
                 
Supplemental cash flow information:                
Income taxes paid
    -
      -
 
Interest paid
   
25,598
     
25,451
 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

6

ParcelPal Logistics Inc.
(Formerly ParcelPal Technology Inc.)
Notes to the Condensed consolidated interim Financial Statements
For the Nine months Ended September 30, 2021 and 2020
(Unaudited - expressed in Canadian Dollars)

1.
NATURE OF OPERATIONS AND GOING CONCERN


ParcelPal Logistics Inc. (formerly ParcelPal Technology Inc.) (“the Company” or “ParcelPal”) is a Vancouver, British Columbia based company that specializes in last-mile delivery service and logistics solutions, providing businesses with a smart, reliable and affordable delivery service powered by the Company’s licensed technology platform.  The Company operates in major Canadian cities including Vancouver, Calgary, and Toronto, and now in the western region of the United States.  The Company was incorporated in Alberta on March 10, 1997.  On June 22, 2006, the Company moved its incorporation jurisdiction to British Columbia.  The Company’s shares are listed on the Canadian Securities Exchange (“CSE”) under the symbol “PKG”, on the OTCQB (over-the-counter) Market in the United States under the symbol PTNYF and on the Frankfurt Stock Exchange under the symbol “PTO”.



On September 15, 2021, the Company purchased 95% of the outstanding shares of Web to Door Trucking Corp. (“Trucking”), a United States delivery service company incorporated in Nevada.  The acquisition of Trucking is being accounted for as a business combination under IFRS 3 as operations of Trucking meet the definition of a business (the “Trucking Acquisition”) (Note 3).



These condensed consolidated interim financial statements have been prepared under the assumption that the Company will continue as a going concern.  The going concern basis of presentation assumes that the Company will be able to meet its obligations and continue its operations for the foreseeable future and be able to realize its assets and discharge its liabilities and commitments in the normal course of business.  Realization values may be substantially different from the carrying values as shown, and these condensed consolidated interim financial statements do not give effect to adjustments that would be necessary to the carrying values and classifications of assets and liabilities should the Company be unable to continue as a going concern.



The Company has incurred losses and negative operating cash flows since its inception. The Company will require further financing to meet its financial obligations and sustain its operations in the normal course of the business.  These factors indicate the existence of a material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern. The Company’s ability to meet its long-term business strategy depends on its ability to obtain additional equity financing and to generate operational cash flow from delivery services revenue.



On March 11, 2020, the World Health Organization characterized the outbreak of a strain of the novel coronavirus (“COVID-19”) as a pandemic which has resulted in a series of public health and emergency measures that have been put in place to combat the spread of the virus. The duration and impact of COVID-19 is unknown at this time and it is not possible to reliably estimate the impact that the length and severity of these developments will have on the financial results and condition of the Company in future periods, including the possible impact on future financing opportunities.

2.
BASIS OF PRESENTATION


These condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by International Accounting Standards Board (“IASB”) applicable to the preparation of interim financial statements, including IAS 34, Interim Financial Reporting. The condensed consolidated interim financial statements should be read in conjunction with the annual financial statements for the year ended December 31, 2020, which have been prepared in accordance with IFRS as issued by IASB.
7

ParcelPal Logistics Inc.
(Formerly ParcelPal Technology Inc.)
Notes to the Condensed consolidated interim Financial Statements
For the Nine months Ended September 30, 2021 and 2020
(Unaudited - expressed in Canadian Dollars)



The Company uses the same accounting policies and methods of computation as in financial statements for the year ended December 31, 2020 with the exception of the following:



Basis of Consolidation



The condensed interim financial statements include the financial statements of the Company and its 95% owned subsidiary Web-to-door Trucking (2020 – Nil)



Business combination



Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Company, liabilities incurred by the Company to the former owners of the acquiree and the equity interests issued by the Company in exchange for control of the acquiree. Acquisition-related costs are generally recognized in profit or loss as incurred.

  
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their fair value at the acquisition date. Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any), the excess is recognized immediately in profit or loss as a bargain purchase gain.



When the consideration transferred by the Company in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.


The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with IAS 39, Financial Instruments: Recognition and Measurement or IAS 37, Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss being recognized in profit or loss.



Use of estimates and judgements



The Company’s significant estimates and judgments are as per the audited financial statements ended December 31, 2020 with the exception of the following:



The acquisition of Web-to-Door Trucking was accounted for as a business combination at fair value in accordance with IFRS 3, Business Combinations. The acquired assets and assumed liabilities were adjusted to their fair values assigned through completion of a preliminary purchase price allocation. The purchase price allocation process resulting from a business combination requires management to estimate the fair value of identifiable assets acquired including intangible assets and liabilities assumed. The Company uses valuation techniques which are generally based on forecasted future net cash flows discounted to present value, and also relies on work performed by third-party valuation specialists. These valuations are closely linked to the assumptions used by management on the future performance of the related assets.
8

ParcelPal Logistics Inc.
(Formerly ParcelPal Technology Inc.)
Notes to the Condensed consolidated interim Financial Statements
For the Nine months Ended September 30, 2021 and 2020
(Unaudited - expressed in Canadian Dollars)



These condensed consolidated interim financial statements were approved by the board of directors for use on November 29, 2021.

3.
TRUCKING ACQUISITION

On September 15, 2021, the Company acquired 95% of the issued and outstanding shares of Trucking for a purchase price of USD $3,100,000, consisting of 60% cash and 40% payable in restricted shares of ParcelPal’s common stock. The cash portion of the purchase price will be paid in three tranches, beginning on the closing date of the transaction. The 5% minority shareholding is not eligible for any share of the Company’s profits or net loss, there is no allocation of value to non-controlling interest.

Concurrently with the acquisition, the Company completed a non-brokered private placement (the “Offering”), pursuant to which it issued an unsecured multi-tranche convertible note with a face value of up to US$2,300,000 (the “Consideration”) to an arm’s length investor (the “Note”). Each of the first three funded tranches will carry a 5% Original Issue Discount (or “OID”) (Note 11).

Each tranche to be funded as follows:


USD $700,000 on closing (paid)

USD $640,000 will be advanced 45 days from the closing date (paid subsequent to September 30, 2021)

USD $520,000 will be advanced 90 days from the closing date

USD $325,000 will be advanced upon mutual agreement by the Company and noteholder at 120 days from the closing date, together with the prorated 5% OID

The transaction was accounted for as a business combination, as the operations of Trucking meet the definition of a business. As the transaction was accounted for as a business combination, transaction costs were expensed.

The fair value of the consideration transferred has been determined on a preliminary basis. The consideration has been allocated to the assets acquired and liabilities assumed on a preliminary basis based on their estimated fair values at the date of acquisition. The Company has allocated goodwill to customer contracts on a preliminary basis but will require additional information to allocate the fair values to the net assets acquired. The determination of the fair value of the net assets acquired will be revised by the Company as additional information is received.  The Company has estimated the allocation of the purchase price as follows:
       
Purchase price consideration
 
US $
 
Consideration – cash
   
1,860,000
 
Consideration – shares
   
1,240,000
 
Fair value of consideration
   
3,100,000
 
         
Cash
   
117,321
 
Prepaid expenses
   
20,440
 
Loans payable
   
(52,042
)
Accounts payable and accrued liabilities
   
(59,657
)
Customer contract
   
3,073,938
 
Total net assets acquired and liabilities assumed
   
3,100,000
 

9

ParcelPal Logistics Inc.
(Formerly ParcelPal Technology Inc.)
Notes to the Condensed consolidated interim Financial Statements
For the Nine months Ended September 30, 2021 and 2020
(Unaudited - expressed in Canadian Dollars)
Upon completing the acquisition of Trucking on September 15, 2021, the operating results for Trucking have been recognized in the consolidated statement of comprehensive loss. During the period ended September 30, 2021, the Company recorded revenues of $117,979 and net loss of $136,193 related to Trucking.

4.
ACCOUNTS RECEIVABLE

   
September 30, 2021
$
   
December 31, 2020
$
 
             
Accounts receivable
   
354,010
     
363,653
 

As at September 30, 2021, 97% (December 31, 2020 – 95%) of the Company’s accounts receivable are current, and accordingly no provision for doubtful accounts was made.

One customer accounted for 62% of accounts receivable at September 30, 2021 (2020 – 91% of accounts receivable) and 94% (2020 – 97%) of total revenues during the nine months ended September 30, 2021.

5.
LOAN RECEIVABLE

On July 29, 2018, the Company entered into a loan agreement with a company related to a director, whereby the Company advanced $60,000 to the vendor. On March 20, 2019, the Company advanced an additional $21,000 to the vendor. The loan is unsecured, bears interest at 10% per annum and is due on demand. During the year ended December 31, 2019, $89,374 of the loan was repaid and during the nine months ended September 30, 2021, the Company wrote-off the remaining $1,874 as uncollectible.

10

ParcelPal Logistics Inc.
(Formerly ParcelPal Technology Inc.)
Notes to the Condensed consolidated interim Financial Statements
For the Nine months Ended September 30, 2021 and 2020
(Unaudited - expressed in Canadian Dollars)
6.
RIGHT-OF-USE ASSETS

Right-of-use assets consists of leased vehicles and a leased warehouse carried at cost less accumulated depreciation. The Company’s vehicles as at September 30, 2021 and December 31, 2020 are as follows:

   
Vehicles
$
   
ROU Assets
$
   
Total
$
 
Cost
                 
Balance, December 31, 2019
   
-
     
894,046
     
894,046
 
Additions
   
166,501
     
358,423
     
524,924
 
Disposal
   
-
     
(881,676
)
   
(881,676
)
Balance, December 31, 2020
   
166,501
     
370,793
     
537,294
 
Additions
   
58,352
     
619,678
     
678,030
 
Disposal
   
(26,108
)
   
(150,772
)
   
(176,880
)
Balance, September 30, 2021
   
198,745
     
839,699
     
1,038,444
 
                         
Accumulated amortization
                       
Balance, December 31, 2019
   
-
     
683,789
     
683,789
 
Amortization
   
16,559
     
372,300
     
388,859
 
Disposal
   
-
     
(879,053
)
   
(879,053
)
Balance, December 31, 2020
   
16,559
     
177,036
     
193,595
 
Amortization
   
57,510
     
185,259
     
242,769
 
Disposal
   
(3,264
)
   
(150,771
)
   
(154,035
)
Balance, September 30, 2021
   
70,805
     
211,524
     
282,329
 
                         
Net Book Value
                       
Balance, December 31, 2020
   
149,942
     
193,757
     
343,699
 
Balance, September 30, 2021
   
127,940
     
628,175
     
756,115
 

During the nine months ended September 30, 2021, the Company included $242,770 (2020 - $279,923) of amortization in cost of sales.

On October 1, 2020, the Company purchased vehicles for $132,466 to increase its delivery capacity. The Company paid $77,999 in cash and financed the remaining $54,467 via short term loans. The loans were non-interest bearing and repaid during the period ended September 30, 2021.

On December 31, 2020, upon expiration of certain vehicle leases the Company purchased the previously leased vehicles for $34,035.

During the nine months ended September 30, 2021, the Company disposed of two vehicles and received $15,314 and recorded a write-off of asset of $7,530.


7.
SHARE CAPITAL



Common Shares



Authorized:

The authorized capital of the Company consists of an unlimited number of common shares without par value.
11

ParcelPal Logistics Inc.
(Formerly ParcelPal Technology Inc.)
Notes to the Condensed consolidated interim Financial Statements
For the Nine months Ended September 30, 2021 and 2020
(Unaudited - expressed in Canadian Dollars)

Issued:



During the nine months ended September 30, 2021:

a)
On January 7, 2021, the Company issued 1,975,822 common shares pursuant to the settlement of US$118,549 convertible debt, the shares were fair valued at $316,133.

b)
On January 13, 2021, the Company issued 2,756,250 common shares pursuant to the settlement of US$220,500 convertible debt, the shares were fair valued at $468,563.

c)
On January 15, 2021, Company issued 175,000 incentive shares pursuant to the issuance of a convertible note of US$175,000.

d)
On February 2, 2021, the Company issued 2,756,250 common shares pursuant to the settlement of US$165,375 convertible debt, the shares were fair valued at $385,875.

e)
On February 17, 2021, the Company issued 1,378,125 common shares pursuant to the settlement of US$82,688 convertible debt, the shares were fair valued at $323,859.

f)
On March 15, 2021, the Company issued 300,000 incentive shares pursuant to the issuance of a convertible note of US$367,500.

g)
On May 20, 2021, the Company issued 5,053,125 common shares pursuant to the settlement of US$303,188 convertible debt, the shares were fair valued at $682,172.

h)
On June 2, 2021, the Company issued 833,333 common shares in lieu of fees to a consultant of the Company. The share were fair valued at $91,667.

i)
On September 15, 2021, the Company issued 13,777,778 common shares as part of the Trucking Acquisition, the shares were fair valued at $1,611,020. The Company also issued 500,000 incentive shares pursuant to the issuance of a convertible note.

j)
On September 22, 2021, the Company issued 2,670,925 common shares pursuant to the settlement of US $184,000 convertible debt, the shares were fair valued at $280,447.

k)
On September 30, 2021, the Company issued 13,000,000 common shares in lieu of fees to directors and officers of the Company, the shares were fair valued at $1,430,000.

l)
The Company issued 657,000 shares pursuant to the exercise of 657,000 warrants for gross proceeds of $98,550.

m)
The Company issued 100,000 shares pursuant to the exercise of 100,000 stock options for gross proceeds of $9,000.



Stock Options



The Company has adopted an incentive stock option plan, which enables the Board of Directors of the Company from time to time, at its discretion, and in accordance with the CSE requirements to, grant to directors, officers, employees and consultants to the Company, non-transferable stock options to purchase common shares, provided that the number of common shares reserved for issuance will not exceed 20% of the Company’s issued and outstanding common shares. Each stock option permits the holder to purchase one share at the stated exercise price. The options vest at the discretion of the Board of Directors.
12

ParcelPal Logistics Inc.
(Formerly ParcelPal Technology Inc.)
Notes to the Condensed consolidated interim Financial Statements
For the Nine months Ended September 30, 2021 and 2020
(Unaudited - expressed in Canadian Dollars)


The following is a summary of the Company’s stock option activity:
   
Number of
Options
#
   
Weighted Average Exercise Price
$
 
             
Balance, December 31, 2019
   
10,374,000
     
0.22
 
Granted
   
6,725,000
     
0.09
 
Exercised
   
(2,000,000
)
   
0.09
 
Expired
   
(200,000
)
   
0.17
 
Forfeited
   
(5,099,000
)
   
0.20
 
Balance, December 31, 2020
   
9,800,000
     
0.15
 
Granted
   
2,500,000
     
0.14
 
Exercised
   
(100,000
)
   
0.09
 
Cancelled
   
(1,025,000
)
   
0.16
 
                 
Balance, September 30, 2021
   
11,175,000
     
0.15
 



Pursuant to the exercise of stock options the Company reallocated $6,965 (2020 - $72,218) of contributed surplus to share capital.



During the nine months ended September 30, 2021, the Company recorded share-based payments expense of $263,672 (2020 - $192,514) pursuant to the vesting of previously granted options and the granting of 2,500,000 stock options to the directors of the Company. The Company fair values options using the Black-Scholes option pricing model using the following assumptions:


   
September 30,
2021
   
December 31, 2020
 
             
Weighted average fair value of options granted
 
$
0.11
   
$
0.06
 
                 
Risk-free interest rate
   
0.440.90
%
   
0.441.51
%
Estimated life
 
5 years
   
15 years
 
Expected volatility
   
102% - 107
%
   
106% - 119
%
Expected dividend yield
   
0.00
%
   
0.00
%
13

ParcelPal Logistics Inc.
(Formerly ParcelPal Technology Inc.)
Notes to the Condensed consolidated interim Financial Statements
For the Nine months Ended September 30, 2021 and 2020
(Unaudited - expressed in Canadian Dollars)



As at September 30, 2021 the following options were outstanding and exercisable:


Expiry
Date
 
Exercise price
$
   
Remaining life (years)
   
Options outstanding
 
November 17, 2022
   
0.16
     
1.13
     
150,000
 
November 28, 2022
   
0.18
     
1.16
     
550,000
 
January 21, 2023
   
0.32
     
1.31
     
450,000
 
May 1, 2023
   
0.24
     
1.58
     
500,000
 
August 15, 2023
   
0.21
     
1.87
     
300,000
 
August 31, 2023
   
0.27
     
1.92
     
200,000
 
November 22, 2023
   
0.26
     
2.15
     
100,000
 
December 13, 2023
   
0.25
     
2.20
     
750,000
 
May 2, 2024
   
0.27
     
2.59
     
150,000
 
May 17, 2024
   
0.245
     
2.66
     
200,000
 
June 17, 2024
   
0.245
     
2.72
     
300,000
 
May 6, 2025
   
0.09
     
3.60
     
2,475,000
 
June 1, 2025
   
0.14
     
3.67
     
250,000
 
July 22, 2025
   
0.09
     
3.81
     
400,000
 
November 12, 2025
   
0.075
     
4.12
     
2,100,000
 
January 22, 2026
   
0.145
     
4.32
     
2,000,000
 
June 2, 2026
   
0.12
     
4.67
     
500,000
 
             
3.31
     
11,175,000
 



Warrants



The following is a summary of the Company’s warrant activity:


   
Number of
Options
#
   
Weighted Average Exercise Price
$
 
             
Balance, December 31, 2019
   
12,112,313
     
0.23
 
                 
Exercised
   
(200,000
)
   
0.15
 
Expired
   
(10,027,836
)
   
0.29
 
Balance, December 31, 2020
   
1,884,477
     
0.15
 
Exercised
   
(657,000
)
   
0.15
 
                 
Balance, September 30, 2021
   
1,227,477
     
0.15
 
14

ParcelPal Logistics Inc.
(Formerly ParcelPal Technology Inc.)
Notes to the Condensed consolidated interim Financial Statements
For the Nine months Ended September 30, 2021 and 2020
(Unaudited - expressed in Canadian Dollars)



As of September 30, 2021, the following share purchase warrants were outstanding and exercisable:


Expiry Date
 
Number
Outstanding
   
Exercise Price
$
 
             
November 22, 2021
   
1,227,477
     
0.15
 
     
1,227,477
     
0.15
 



Subsequent to September 30, 2021, the remaining warrants expired unexercised.

8.
RELATED PARTY TRANSACTIONS

Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. The Company has determined that key management personnel consist of members of the Company's Board of Directors and corporate officers. The remuneration of directors and key management personnel is as follows:

   
Three months ended
September 30,
   
Nine months ended
September 30,
 
   
2021
$
   
2020
$
   
2021
$
   
2020
$
 
Consulting fees
   
-
     
-
     
-
     
67,840
 
Management fees
   
1,492,536
     
223,542
     
1,745,195
     
277,542
 
Salaries and wages
   
19,688
      -      
59,063
      -  
Software development
   
-
     
-
     
-
     
28,272
 
Share-based compensation
   
-
     
-
     
231,016
     
96,000
 
     
1,512,224
     
223,542
     
2,035,274
     
469,654
 

Included in accounts payable as at September 30, 2021 is $53,186 (December 31, 2020 - $85,669) owing to directors and officers. These amounts are non-interest bearing, unsecured and due on demand.

9.
FINANCIAL INSTRUMENTS

Classification of financial instruments

The Company’s financial instruments consist of cash, accounts receivable, loans receivable, accounts payable and accrued liabilities and lease obligations. The Company classifies cash, accounts receivable and loans receivable as financial assets at amortized cost. Accounts payable and lease obligations are classified as financial liabilities at amortized cost.

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

There have been no changes in any risk management policies during the nine months ended September 30, 2021.

15

ParcelPal Logistics Inc.
(Formerly ParcelPal Technology Inc.)
Notes to the Condensed consolidated interim Financial Statements
For the Nine months Ended September 30, 2021 and 2020
(Unaudited - expressed in Canadian Dollars)

Fair value

Financial instruments measured at fair value are classified into one of the three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are:


Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and

Level 3 – Inputs that are not based on observable market data.

The carrying value of the Company’s financial assets and liabilities measured at amortized cost approximate their fair value due to their short term to maturity.

The Company is exposed in varying degrees to a variety of financial instrument related risks. The Board of Directors approves and monitors the risk management processes, inclusive of documented investment policies, counterparty limits, and controlling and reporting structures.

The type of risk exposure and the way in which such exposure is managed is provided as follows:

Credit risk

Credit risk is the risk of financial loss to the Company if the counterparty to a financial instrument fails to meet its contractual obligations. The Company’s accounts receivable includes $219,791 due from one major customer. The customer is of low credit risk and none of the balance is past due. The Company’s cash is held in large Canadian financial institutions and is not exposed to significant credit risk.

Interest risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to limited interest rate risk.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its obligations as they fall due. The Company’s ability to continue as a going concern is dependent on management’s ability to raise the required capital through future equity or debt issuances. The Company manages its liquidity risk by forecasting cash flows from operations and anticipating any investing and financing activities. Management and the directors are actively involved in the review, planning, and approval of significant expenditures and commitments. In December 2020, the Company entered into an agreement pursuant to which it received