Spara Acquisition One Corp. (A Capital Pool Company) Financial Statements. December 31, 2012

Transcription

1 Financial Statements December 31, 2012

2 Table of Contents December 31, 2012 Independent Auditor's Report 1-2 Financial Statements Statements of Financial Position 3 Statements of Loss and Comprehensive Loss 4 Statements of Changes in Equity 5 Statements of Cash Flows 6 Notes to Financial Statements 7-15 Page

3 Independent Auditor's Report To the Shareholders of Spara Acquisition One Corp. Report on the Financial Statements We have audited the accompanying financial statements of Spara Acquisition One Corp., which comprise the statements of financial position as at December 31, 2012 and 2011, and the statements of loss and comprehensive loss, changes in equity and cash flows for the year ended December 31, 2012 and for the period from March 10, 2011 (date of incorporation) to December 31, 2011, and a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 1

4 Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Spara Acquisition One Corp. as at December 31, 2012 and 2011, and its financial performance and its cash flows for the year ended December 31, 2012 and for the period from March 10, 2011 (date of incorporation) to December 31, 2011, in accordance with International Financial Reporting Standards. Emphasis of matter Without modifying our opinion, we draw attention to Note 1 in the financial statements which describes the uncertainty about whether the Company will complete a Qualifying Transaction within the time prescribed by the TSX Venture Exchange. Signed: "MSCM LLP" Toronto, Ontario April 30, 2013 Chartered Accountants Licensed Public Accountants 2

5 Statements of Financial Position December 31, Assets Current assets Cash $ 566,444 $ 1,009,094 $ 566,444 $ 1,009,094 Liabilities Current liabilities Accounts payable and accrued liabilities (note 6) $ 16,696 $ 12,796 Shareholders' equity Share capital (notes 3 and 6) 1,051,586 1,014,771 Contributed surplus (note 3) 162, ,490 Deficit (664,328) (180,963) Nature of operations (note 1) Subsequent event (note 9) The accompanying notes are an integral part of these financial statements. 549, ,298 $ 566,444 $ 1,009,094 Approved by the Board Signed Scott Dexter Signed Jason Sparaga Director Director 3

6 Statements of Loss and Comprehensive Loss for the year ended December 31, 2012 and for the period from March 10, 2011 (date of incorporation) to December 31, Expenses Professional fees (note 6) $ 416,253 $ 21,327 Rent (note 6) 40,680 27,120 Incorporation costs and filing fees 17,176 6,251 Office supplies 4, Travel 4,517 - Bank charges Stock based compensation (note 3) - 126,020 Net loss and comprehensive loss for the period $ (483,365) $ (180,963) Net loss and comprehensive loss per share - basic and diluted $ (0.03) $ (0.02) Weighted average shares outstanding 17,055,475 9,922,559 The accompanying notes are an integral part of these financial statements. 4

7 Statements of Changes in Equity Share Capital Number of Contributed Shareholders' shares Amount Surplus Deficit Equity Balance, March 10, 2011 (date of incorporation) - $ - $ - $ - $ - Issuance of common shares, net of share issue costs 17,000,000 1,014,771 36,470-1,051,241 Issuance of stock options , ,020 Net loss and comprehensive loss, for the period (180,963) (180,963) Balance, December 31, ,000,000 1,014, ,490 (180,963) 996,298 Issuance of common shares, net of share issue costs 368,153 36, ,815 Net loss and comprehensive loss, for the year (483,365) (483,365) Balance, December 31, ,368,153 $ 1,051,586 $ 162,490 $ (664,328) $ 549,748 The accompanying notes are an integral part of these financial statements. 5

8 Statements of Cash Flows for the year ended December 31, 2012 and for the period from March 10, 2011 (date of incorporation) to December 31, Cash flow from operating activities Net loss for the period $ (483,365) $ (180,963) Items not affecting cash Stock based compensation - 126,020 Net change in non-cash working capital Accounts payable and accrued liabilities 3,900 12,796 (479,465) (42,147) Cash flow from financing activities Proceeds from issuance of shares, net of share issue costs 36,815 1,051,241 Net change in cash (442,650) 1,009,094 Cash, beginning of period 1,009,094 - Cash, end of period $ 566,444 $ 1,009,094 The accompanying notes are an integral part of these financial statements. 6

9 Notes to Financial Statements for the year ended December 31, 2012 and for the period from March 10, 2011 (date of incorporation) to December 31, Nature of Operations Spara Acquisition One Corp. (a Capital Pool Company) (the "Company") was incorporated pursuant to the provisions of the Canada Business Corporations Act on March 10, 2011 and is classified as a Capital Pool Corporation as defined in Policy 2.4 of the TSX Venture Exchange (the "Exchange"). The Company s continuing operations are dependent upon its ability to identify, evaluate and negotiate an agreement to acquire an interest in a material asset or business within the time prescribed by the Exchange. Where an acquisition or participation (the "Qualifying Transaction") is warranted, additional funding may be required. The ability of the Company to fund its potential future operations and commitments is dependent upon its ability to obtain additional financing. There is no assurance that the Company will be able to complete a Qualifying Transaction within the prescribed time or that it will be able to secure the necessary financing to complete a Qualifying Transaction. The Exchange may suspend or de-list the Company's shares from trading should it not meet these requirements. These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") with the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business rather than through a process of forced liquidation. The financial statements do not include adjustments to amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue operations. The Company s head office address is 1315 North Service Road East, Suite 300, Oakville, Ontario, Canada L6H 1A7. These financial statements were authorized for issue by the Board of Directors on April 30, Summary of Significant Accounting Policies Basis of Presentation These financial statements have been prepared in accordance with International Financial Reporting Standards ( IFRS ) issued by the International Accounting Standards Board ( IASB ). The financial statements have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. The financial statements are presented in Canadian dollars, which is the Company s functional and presentation currency. Use of Estimates and Judgements The preparation of these financial statements in conformity with IFRS requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities. Estimates and assumptions are continuously evaluated and are based on management s experience and other factors that are believed to be reasonable under the circumstances. Actual results could differ from these estimates. 7

10 Notes to Financial Statements for the year ended December 31, 2012 and for the period from March 10, 2011 (date of incorporation) to December 31, 2011 Cash Cash includes funds in a corporate bank account which are proceeds from the issuance of share capital. 2. Summary of Significant Accounting Policies - continued Income Taxes Income tax comprises current and deferred tax. Income tax is recognized in profit or loss except to the extent that it relates to items recognized directly in equity or other comprehensive income, in which case the income tax is also recognized directly in equity or other comprehensive loss. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted, or substantively enacted, at the end of the reporting period, and any adjustment to tax payable in respect of previous years. Current tax assets and current tax liabilities are only offset if a legally enforceable right exists to set off the amounts, and the Company intends to settle on a net basis, or to realize the asset and settle the liability simultaneously. Deferred tax is recognized in respect of all qualifying temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined on a non-discounted basis using tax rates and laws that have been enacted or substantively enacted at the end of the reporting period and are expected to apply when the deferred tax asset or liability is settled. Deferred tax assets are recognized to the extent that it is probable that the assets can be recovered. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Share Capital Common shares are classified as equity. Incremental costs directly attributable to the issuance of shares are recognized as a deduction from equity. Basic and Diluted Loss per Share Basic loss per share is computed by dividing the net loss applicable to common shares by the weighted average number of common shares outstanding for the relevant period. Diluted loss per share is computed by dividing the net loss applicable to common shares by the sum of the weighted average number of common shares issued and outstanding and all additional common shares that would have been outstanding if potentially dilutive instruments were converted. Stock-based Compensation Equity-settled share based payments for directors, officers, employees, and consultants are measured at fair value at the date of grant and recorded as compensation expense in the financial statements. The fair value determined at the grant date of the equity-settled share based payments is expensed over the vesting period based on the Company s estimate of shares that will eventually vest. Any consideration paid by directors, officers, employees and consultants on exercise of equity-settled share based payments is credited to share capital. Shares are issued from treasury upon the exercise of equity-settled share based instruments. 8

11 Notes to Financial Statements for the year ended December 31, 2012 and for the period from March 10, 2011 (date of incorporation) to December 31, Summary of Significant Accounting Policies - continued Financial Instruments Financial assets The Company classifies its financial assets in the following categories, depending on the purpose for which the asset was acquired. The Company's accounting policy for each category is as follows: Fair value through profit or loss - This category comprises derivatives, or assets acquired principally for the purpose of being resold in the near term. They are carried on the statement of financial position at fair value with changes in fair value recognized in the statement of loss and comprehensive loss. Loans and receivables - These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are carried at cost less any provision for impairment. Individually significant receivables are considered for impairment when they are past due or when other objective evidence is received that a specific counterparty will default. Held-to-maturity investments - These assets are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Company's management has the intention and ability to hold to maturity. These assets are measured at amortized cost using the effective interest method. If there is objective evidence that the investment is impaired, determined by reference to external credit ratings and other relevant indicators, the financial asset is measured at the present value of estimated future cash flows. Any changes to the carrying amount of the investment, including impairment losses, are recognized in the statement of loss and comprehensive loss. Available-for-sale - Non-derivative financial assets not included in the above categories are classified as available for-sale. They are carried at fair value with changes in fair value recognized directly in equity. Where a decline in the fair value of an available-for-sale financial asset constitutes objective evidence of impairment, the amount of the loss is removed from equity and recognized in the statement of loss and comprehensive loss. All financial assets except for those at fair value through profit or loss are subject to review for impairment at least at each reporting date. Financial assets are impaired when there is any objective evidence that a financial asset or a group of financial assets is impaired. Different criteria to determine impairment are applied for each category of financial assets described above. The Company has classified its cash as financial assets at fair value through profit and loss. Financial liabilities The Company's accounting policy for each category of financial liability is as follows: Fair value through profit or loss - This category comprises derivatives, or liabilities acquired or incurred principally for the purpose of selling or repurchasing in the near term. They are carried on the statements of financial position at fair value with changes in fair value recognized in the statement of loss and comprehensive loss. Other financial liabilities - This category includes accounts payables and accrued liabilities which are recognized at amortized cost. The Company s accounts payable and accrued liabilities are classified as other financial liabilities. 9

12 Notes to Financial Statements for the year ended December 31, 2012 and for the period from March 10, 2011 (date of incorporation) to December 31, Summary of Significant Accounting Policies - continued Financial Instruments - continued IFRS 7 establishes a fair value hierarchy that prioritizes the input to valuation techniques used to measure fair value as follows: Level 1 - valuation based on quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 - valuation techniques based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and Level 3 - valuation techniques using inputs for the asset or liability that are not based on observable market data (unobservable inputs). Cash is measured at fair value and is classified within Level 1 of the fair value hierarchy in the statement of financial position. Accounting standards issued but not yet applied Certain new standards, interpretations, amendments and improvements to existing standards were issued by the IASB or IFRS Interpretations Committee ( IFRIC ) that are mandatory for accounting periods beginning in later periods. These new standards, which have not been applied within these financial statements, will or may have an effect on the Company s future financial statements: IFRS 9, Financial Instruments: Classification and Measurement, issued in November 2009, effective for annual periods beginning on or after January 1, 2015, with early adoption permitted, introduces new requirements for the classification and measurements of financial instruments. IFRS 10, 11, 12 and 13 were all issued in May 2011 and are effective for annual periods beginning January 1, 2013, with early adoption allowed. IFRS 10, Consolidated Financial Statements, replaces the consolidation guidance in IAS 27, Consolidated and Separate Financial Statements, and SIC-12, Consolidation - Special Purpose Entities, by introducing a single consolidation model for all entities based on control, irrespective of the nature of the investee. IFRS 11, Joint Arrangements, introduces new accounting requirements for joint arrangements, replacing IAS 31, Interests in Joint Ventures. It eliminates the option of accounting for jointly controlled entities by proportionate consolidation. IFRS 12, Disclosure of Interests in Other Entities, requires enhanced disclosures about both consolidated entities and unconsolidated entities in which an entity has involvement. IFRS 13, Fair Value Measurement, replaces the guidance on fair value measurement in existing IFRS accounting literature with a single standard. It defines and provides guidance on determining fair value and requires disclosures about fair value measurements, but does not change the requirements regarding which items are measured or disclosed at fair value. The Company has reviewed these new and revised accounting pronouncements and in the current circumstances, it does not expect any of these to have a material impact on the financial statements. 10

13 Notes to Financial Statements for the year ended December 31, 2012 and for the period from March 10, 2011 (date of incorporation) to December 31, Share Capital (a) Authorized Unlimited number of common shares without par value. (b) Shares issued and outstanding On March 10, 2011, the Company issued 1,000,000 common shares at a price of $0.05 per share for gross proceeds of $50,000. On April 29, 2011, the Company issued 9,000,000 common shares at a price of $0.05 per share for gross proceeds of $450,000. The Company incurred costs of $3,650 related to these common share issuances. Subject to an Escrow Agreement pursuant to the requirements of the Exchange, all of the above shares issued will be held in escrow. Under the terms of the Escrow Agreement, these shares will be released as to 10% thereof on the completion of the Company's Qualifying Transaction, as defined in the policies of the TSX Venture, and as to 15% thereof on each of the 6th, 12th, 18th, 24th, 30th and 36th months following the initial release. All common shares acquired on exercise of stock options granted to directors and officers prior to the completion of a Qualifying Transaction must also be deposited in escrow until the Final Exchange Bulletin is issued. All common shares of the Company acquired in the secondary market prior to the completion of a Qualifying Transaction by a Control Person, as defined in the policies of the TSX Venture, are required to be deposited in escrow. Subject to certain permitted exemptions, all securities of the Company held by principals of the resulting issuer will also be escrowed. On November 1, 2011 the Company completed its Initial Public Offering ("IPO") via issuance of 7,000,000 common shares at a price of $0.10 per common share for proceeds of $700,000. In addition, the Company granted the agents of the offering the option to acquire 700,000 common shares, valued at $36,470 and classified as share issuance costs, at a price of $0.10 per share for a period of 24 months following the IPO. The agent options were valued using the Black-Scholes option-pricing model using the following assumptions: expected life of two years, risk free rate of 0.92%, expected dividend yield of 0% and expected volatility of 100%. In addition to the agent options the Company incurred $145,109 in costs related to its IPO. On November 6, 2012, the Company completed a private placement in which it issued 368,153 common shares at a price of $0.10 per share for gross proceeds of $36,

14 Notes to Financial Statements for the year ended December 31, 2012 and for the period from March 10, 2011 (date of incorporation) to December 31, Share Capital - continued (d) Stock options The Company has established a stock option plan for its officers, directors, consultants and employees pursuant to which the Company may grant options to acquire a maximum number of common shares equal to 10% of the total issued and outstanding common shares of the Company exercisable for a period of up to 10 years from the date of grant. On August 19, 2011, the directors and officers of the Company were granted an aggregate of 1,000,000 options at an exercise price of $0.10 per share. The options vested immediately upon grant and are exercisable until the later of (i) 3 months after the termination of the appointment of the option holder to the board and/or as an officer of the Company or (ii) one year after the closing of a Qualified Transaction. The stock options were valued at $61,900 using the Black- Scholes option-pricing model using the following assumptions: expected life of three years, risk free rate of 0.92%, expected dividend yield of 0%, and expected volatility of 100%. On November 1, 2011, the directors and officers of the Company were granted an aggregate of 700,000 options at an exercise price of $0.10 per share. The options vested immediately upon grant and are exercisable until the later of (i) 3 months after the termination of the appointment of the option holder to the board and/or as an officer of the Company or (ii) one year after the closing of a Qualified Transaction. The stock options were valued at $64,120 using the Black- Scholes option-pricing model using the following assumptions: expected life of three years, risk free rate of 0.92%, expected dividend yield of 0%, and expected volatility of 100%. 4. Financial Instruments Fair Values At December 31, 2012, the Company's financial instruments consist of cash and accounts payable. The carrying amount of accounts payable and accrued liabilities approximates their fair value because of the short-term maturities of these items. Credit risk Credit risk is the risk of loss associated with the counterparty's inability to fulfill its payment obligations. Financial instruments that potentially subject the Company to concentrations of credit risks consist principally of cash. To minimize the credit risk the Company places these instruments with a high credit quality financial institution. Interest Rate Risk The Company is not exposed to any significant interest rate risk. Liquidity Risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company currently settles its financial obligations out of cash. The ability to do this relies on the Company raising equity financing in a timely manner and by maintaining sufficient cash in excess of anticipated needs. 12

15 Notes to Financial Statements for the year ended December 31, 2012 and for the period from March 10, 2011 (date of incorporation) to December 31, Capital Management The Company's capital currently consists of share capital. Its principal source of cash is from the issuance of common shares. The Company's capital management objectives are to safeguard its ability to continue as a going concern and to have sufficient capital to be able to identify, evaluate and then acquire an interest in a business or assets. The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares. Under the policies of the Exchange the proceeds raised from the issuance of capital stock may only be used to identify and evaluate assets or businesses for future investments, with the exception that not more than the lesser of 30% of the gross proceeds from the sale of all securities issued by the Company or $210,000 may be used to cover prescribed costs of issuing the common shares or administrative and general expenditures of the Company. These restrictions apply until completion of a Qualifying Transaction by the Company as defined under the policies of the Exchange. 6. Related Party Transactions Fees in the amount of $40,680 ( $27,120) were billed by Spara Capital Partners Inc. for rent and overhead costs (recorded in rent) and fees in the amount of $22,600 ( $nil) were billed by Spara Capital Partners Inc. for accounting and administrative services (recorded in professional fees). An owner of Spara Capital Partners Inc. is also a director and investor of Spara Acquisition One Corp. The Company incurred $177,489 ( $30,137) in legal fees for services provided by a law firm whose partner is an officer of the Company. Of the total amount incurred for the year ended December 31, 2012 the full amount of $177,489 has been recorded in professional fees. Of the total amount incurred for the period ending December 31, 2011, $28,250 is in respect of the issuance of common shares which has been recorded in share capital as share issuance costs and $1,887 has been recorded in professional fees. As at December 31, 2012 the Company's accounts payable and accrued liabilities includes $3,522 ( $1,887) due to this firm. There were no other transactions with related parties and no remuneration was paid to key management personnel during either year. 13

16 Notes to Financial Statements for the year ended December 31, 2012 and for the period from March 10, 2011 (date of incorporation) to December 31, Income Taxes The following table reconciles the expected income tax recovery at the Canadian Federal and Provincial statutory rate of 26.5% ( %) to the amount recognized in the statements of loss and comprehensive loss: Period from March 10, 2011 (date of For the year incorporation) ended December 31, to December 31, Net loss before recovery of income taxes $ (483,365) $ (180,963) Expected income tax recovery $ (128,092) $ (51,122) Non-deductible items 49 35,601 Tax rate changes and other adjustments (3,589) 7,806 Share issue costs - (52,327) Unrecognized deductible temporary differences 131,632 60,042 Income taxes recovery $ - $ - Unrecognized deferred tax assets Deferred income taxes are provided as a result of temporary differences that arise due to the differences between the income tax values and the carrying amount of assets and liabilities. Deferred income tax assets have not been recognized in respect of the following deductible temporary differences: Non-capital loss carry forward $ 605,115 $ 91,789 Undeducted share issue costs $ 118,039 $ 148,183 Other $ 150 $ 200 The non-capital losses can be carried forward to be applied against future taxable income. The losses expire, to the extent unutilized against future taxable income, in 2031 and Share issue costs expire from 2013 to Deferred tax assets have not been recognized in respect of these items because it is not probable that future taxable profit will be available against which the Company can utilize the benefits therefrom. 14

17 Notes to Financial Statements for the year ended December 31, 2012 and for the period from March 10, 2011 (date of incorporation) to December 31, Attempted Qualifying Transaction On March 13, 2012 the Company announced that it had entered into a non-binding letter of intent with STE (Clean Recycling and Energy) plc ( STE ) which outlines the general terms and conditions of a proposed transaction pursuant to which the Company would acquire all of the issued and outstanding shares of STE in exchange for common shares of the Company (the Transaction ). On May 29, 2012 SAO Special Finance Corp. ("Finco"), a corporation that was established for the purpose of facilitating a private placement in connection with the Transaction, completed a private placement. The offering involved the sale by Finco of subscription receipts at $2.25 per subscription receipt. On September 19, 2012 the Company announced that it will not be proceeding with an offer for STE. The Company determined that applicable closing conditions could not be satisfied and that this could not be resolved through further negotiation. As a result of the termination of the Transaction, the proceeds of the subscription receipt offering completed in May 2012 by Finco were returned to subscribers pursuant to the terms of the offering. 9. Subsequent Event On March 20, 2013 the Company announced that it had entered into a non-binding letter of intent with Digital Shelf Space Corp. ( DSS ) which outlines the general terms and conditions of a proposed transaction pursuant to which the Company will subscribe for common shares and warrants of DSS (the Proposed Transaction ). Closing of the Proposed Transaction will constitute the Company's Qualifying Transaction. Under the proposed terms of the Proposed Transaction, the Company will invest all of its available cash reserves, which are estimated to be approximately $500,000 net of expenses associated with the Proposed Transaction, in exchange for DSS units (the "Units") at a price of $0.05 per Unit (subject to adjustment under certain circumstances). Each Unit shall be comprised of one DSS common share (a "DSS Share") and one DSS warrant (a DSS Warrant ) exercisable to acquire a DSS Share for three years at an exercise price of $0.10. Upon completion of the Proposed Transaction, the Company intends to distribute the DSS Shares and DSS Warrants held by it to the Company s shareholders on a pro-rata basis as a return of capital. The shareholders of the Company at a record date to be determined by the Board of Directors will be eligible to receive the DSS Shares and DSS Warrants, in proportion to the number of Company common shares held by them on such record date. As soon as practicable after the return of capital described above, the Company expects to de-list the Company s common shares from trading on the TSX Venture Exchange and complete the voluntary dissolution of the Company in accordance with subsection 210(3) of the Canada Business Corporations Act. Completion of the Proposed Transaction, the return of capital and dissolution of the Company are subject to approval by the Company s shareholders and the TSX Venture Exchange. 15

18 Management Discussion and Analysis For the Year Ending December 31, 2012 DATE OF REPORT: April 29, 2013 This Management Discussion and Analysis ( MD&A ) should be read in conjunction with the financial statements of Spara Acquisition One Corp. (the Company ) for the year ended December 31, 2012 and from the period from March 10, 2011 to December 31, 2011 (the financial statements ) which are available at and the final prospectus dated September 28, 2011 including all notes, risk factors and information contained therein. The financial statements are presented in Canadian dollars unless otherwise stated. References to notes are with reference to the financial statements. DESCRIPTION OF BUSINESS The Company was incorporated under the Canada Business Corporations Act on March 10, 2011 with the intention of being classified as a Capital Pool Company as defined in Policy 2.4 (the CPC Policy ) of the TSX Venture Exchange (the Exchange ) Corporate Finance Manual. The Company has no assets other than cash, and proposes to identify and evaluate potential acquisitions or businesses, and once identified and evaluated, to negotiate an acquisition or participation subject to receipt of, if required, shareholders approval. The Company operates from its Head office in Oakville, Ontario, Canada. Its registered office is located at 515 Legget Drive, Ottawa, Ontario, K2K 3G4. OVERALL PERFORMANCE During the year, the Company had not commenced any commercial operations nor did it conduct any business other than identifying and evaluating assets of businesses for acquisition with a view to completing a Qualifying Transaction as defined by the CPC Policy. RESULTS OF OPERATIONS The Company reported net losses of $192,468 and $483,365 for the three month period and year ended December 31, 2012, respectively. The significant items comprising these net losses for the three month period and year are summarized as follows: Rent of $10,169 and $40,680. Professional fees for accounting and legal fees of $182,462 and $416,253. Incorporation costs and filing fees of $nil and $17,176. Travel costs of $4,517 for the year. Office and administrative costs of $nil and $4,711. During the year, the Company s cash decreased by a net amount of $442,650. SELECTED ANNUAL INFORMATION Year Ended December 31, 2012 $ Period Ended December 31, 2011 $ Total Revenue Nil Nil Net Loss (483,365) (180,963) Basic and diluted loss per share (0.03) (0.02) basis Total Assets 566,444 1,009,094 Total non-current financial liabilities Nil Nil Distributions or cash dividends declared per share Nil Nil

19 SUMMARY OF QUARTERLY RESULTS Period March 10, 2011 (date of incorporation) to March 31, 2011 ($) April 1, 2011 to June 30, 2011 ($) July 1, 2011 to September 30, 2011 ($) October 1, 2011 to December 31, 2011 ($) January 1, 2012 to March 31, 2012 ($) April 1, 2012 to June 30, 2012 ($) July 1, 2012 to Sept 30, 2012 ($) October 1, 2012 to December 30, 2012 ($) Revenue Nil Nil Nil Nil Nil Nil Nil Nil Net loss for the period Basic and diluted loss per share Nil (23,779) (18,257) (138,927) (25,117) (219,606) (46,175) (192,467) (0.00) (0.00) (0.003) (0.01) (0.00) (0.01) (0.00) (0.03) Existing stock options have not been included in the computation of diluted loss per share because to do so would be anti-dilutive. LIQUIDITY AND CAPITAL RESOURCES As at December 31, 2012, the Company had cash of $566,444 and working capital of $549,748. The Company does not currently conduct any business operations and to date the Company has relied entirely upon the sale of common shares to provide working capital to fund administration and overhead costs. This Company is only suitable to investors who are willing to rely solely on management of the Company and who can afford to lose their entire investment. Those investors who are not prepared to do so should not invest in the common shares. TRANSACTIONS WITH RELATED PARTIES During the year ended December 31, 2012, the Company undertook the following transactions with related parties: An amount of $40,680 was billed by Spara Capital Partners Inc., a Company controlled by a Director and Officer of the Company, based on a $3,000 per month charge plus applicable taxes, for rent and overhead throughout the year. An amount of $22,600 was billed by Spara Capital Partners Inc. for accounting and administrative services during the period and is recorded in professional fees. Travel costs incurred during the period were paid by Spara Capital Partners Inc. in the amount of $4,517. The Company received legal services in the amount of $177,489 provided by a law firm whose partner is an officer of the Company. On November 6, 2012 the Company completed a private placement of 368,153 common shares for gross proceeds of $36,815.30, of which 150,000 shares were acquired by an officer of the Company. These transactions were made in the normal course of operations and were recorded at the exchange amount. There were no other transactions conducted with related parties and no remuneration was paid to key management personnel during the fiscal year.

20 ATTEMPTED QUALIFYING TRANSACTION On March 13, 2012 the Company announced that it had entered into a non-binding letter of intent with STE (Clean Recycling and Energy) plc ( STE ) which outlined the general terms and conditions of a proposed transaction pursuant to which the Company would acquire all of the issued and outstanding shares of STE in exchange for common shares of the Company (the Transaction ). On May 29, 2012 SAO Special Finance Corp. ("Finco"), a corporation that was established for the purpose of facilitating a private placement in connection with the Transaction, completed a private placement. The offering involved the sale by Finco of subscription receipts at $2.25 per subscription receipt. On September 19, 2012 the Company announced that it will not be proceeding with an offer for STE. The Company determined that applicable closing conditions could not be satisfied and that this could not be resolved through further negotiation. As a result of the termination of the Transaction, the proceeds of the subscription receipt offering completed in May 2012 by Finco were returned to subscribers pursuant to the terms of the offering. The majority of the expenses incurred by the Company during the year ended December 31, 2012 were related to the proposed Transaction. SUBSEQUENT EVENT On March 20, 2013 the Company announced that it had entered into a non-binding letter of intent with Digital Shelf Space Corp. ( DSS ) which outlines the general terms and conditions of a proposed transaction pursuant to which the Company will subscribe for common shares and warrants of DSS (the Proposed Transaction ). Closing of the Proposed Transaction will constitute the Company's Qualifying Transaction. Under the proposed terms of the Proposed Transaction, the Company will invest all of its available cash reserves, which are estimated to be approximately $500,000 net of expenses associated with the Proposed Transaction, in exchange for DSS units (the "Units") at a price of $0.05 per Unit (subject to adjustment under certain circumstances). Each Unit shall be comprised of one DSS common share (a "DSS Share") and one DSS warrant (a DSS Warrant ) exercisable to acquire a DSS Share for three years at an exercise price of $0.10. Upon completion of the Proposed Transaction, the Company intends to distribute the DSS Shares and DSS Warrants held by it to the Company s shareholders on a pro-rata basis as a return of capital. The shareholders of the Company at a record date to be determined by the Board of Directors will be eligible to receive the DSS Shares and DSS Warrants, in proportion to the number of Company common shares held by them on such record date. As soon as practicable after the return of capital described above, the Company expects to de-list the Company s common shares from trading on the TSX Venture Exchange and complete the voluntary dissolution of the Company in accordance with subsection 210(3) of the Canada Business Corporations Act. Completion of the Proposed Transaction, the return of capital and dissolution of the Company are subject to approval by the Company s shareholders and the TSX Venture Exchange. RISKS AND UNCERTAINTIES The Company has been established to become a CPC under the policies of the Exchange. Investment in the common shares of the Company must be regarded as highly speculative due to the proposed nature of the Company s business and its present stage of development. The following is a non-exhaustive list of the risk factors associated with the Company: (a) the Company was only recently incorporated, has not commenced commercial operations and has no assets other than cash. It has no history of earnings, and shall not generate earnings or pay dividends until at least after completion of the Qualifying Transaction; (b) investment in the common shares is highly speculative given the proposed nature of the Company s business and its present stage of development;

21 (c) the directors and officers of the Company will only devote a portion of their time to the business and affairs of the Company and some of them are or will be engaged in other projects or businesses such that conflicts of interest may arise from time to time; (d) there can be no assurance that an active and liquid market for the Company s common shares will develop and an investor may find it difficult to resell its common shares; (e) until completion of a Qualifying Transaction, the Company is not permitted to carry on any business other than the identification and evaluation of potential Qualifying Transactions; (f) the Company has only limited funds with which to identify and evaluate potential Qualifying Transactions and there can be no assurance that the Company will be able to identify a suitable Qualifying Transaction; (g) Although a proposed Qualifying Transaction has been identified, there can be no assurance that the Company will be able to successfully complete the transaction; (h) completion of a Qualifying Transaction is subject to a number of conditions including acceptance by the Exchange and in the case of a Non Arm s Length Qualifying Transaction, Majority of the Minority Approval (as such terms are defined in the CPC Policy); (i) unless the shareholder has the right to dissent and be paid fair value in accordance with applicable corporate or other law, a shareholder who votes against a proposed Non Arm s Length Qualifying Transaction for which Majority of the Minority Approval by shareholders has been given, will have no rights of dissent and no entitlement to payment by the Company of fair value for the common shares; (j) upon public announcement of a proposed Qualifying Transaction, trading in the common shares of the Company will be halted and will remain halted for an indefinite period of time, typically until a Sponsor (as such term is defined in the CPC Policy) has been retained and certain preliminary reviews have been conducted. The common shares of the Company will be reinstated to trading before the Exchange has reviewed the transaction and before the Sponsor has completed its full review. Reinstatement to trading provides no assurance with respect to the merits of the transaction or the likelihood of the Company completing the proposed Qualifying Transaction; (k) trading in the common shares of the Company may be halted at other times for other reasons, including for failure by the Company to submit documents to the Exchange in the time periods required; (l) the Exchange will generally suspend trading in the Company s common shares or delist the Company in the event that the Exchange has not issued a Final Exchange Bulletin (as such term is defined in the CPC Policy) within 24 months from the date of listing; (m) neither the Exchange nor any securities regulatory authority passes upon the merits of the proposed Qualifying Transaction; (n) in the event that management of the Company resides outside of Canada or the Company identifies a foreign business as a proposed Qualifying Transaction, investors may find it difficult or impossible to effect service or notice to commence legal proceedings upon any management resident outside of Canada or upon the foreign business and may find it difficult or impossible to enforce against such persons, judgments obtained in Canadian courts; (o) the Qualifying Transaction may be financed in whole or in part by the issuance of additional securities by the Company and this may result in further dilution to the investor, which dilution may be significant and which may also result in a change of control of the Company; and (p) subject to prior Exchange acceptance, the Company may be permitted to loan or advance up to an aggregate of $250,000 of its proceeds to a target business without requiring shareholder approval and there can be no assurance that the Company will be able to recover that loan.

22 As a result of these factors, investment in the Company is only suitable to investors who are willing to rely solely on management of the Company and who can afford to lose their entire investment. Those investors who are not prepared to do so should not invest in the common shares. FINANCIAL INSTRUMENTS The Board of Directors has overall responsibility for the establishment and oversight of the Company s risk management framework. As at December 31, 2012, the Company had cash totalling $566,444 and accounts payable totalling $16,696. As at December 31, 2012 the Company was not exposed to any significant credit, liquidity or market risks associated with its financial instruments. The Company does not use derivative instruments or hedges to manage risks because the Company s exposure to credit risk, interest rate risk and currency risk is small. Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Company is exposed to credit risk through its cash which is held in a large Canadian financial institution. The Company believes this credit risk is insignificant. Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to short-term interest rates through the interest earned on cash balances; however, management does not believe this exposure is significant. Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. The Company s accrued liabilities and accounts payable are all current. The Company ensures that it has sufficient capital to meet short-term financial obligations after taking into account its administrative obligations. USE OF ESTIMATES AND JUDGEMENTS The preparation of these financial statements in conformity with IFRS requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities. Estimates and assumptions are continuously evaluated and are based on management s experience and other factors that are believed to be reasonable under the circumstances. Actual results could differ from these estimates. OTHER MD&A REQUIREMENTS Summary of Securities as at the date hereof Authorized Capital: Issued and Outstanding: unlimited common shares 17,368,153 common shares. Summary of Escrow Shares as at the date hereof Subject to an Escrow Agreement pursuant to the requirements of the Exchange, 10,000,000 of the above shares are held in escrow. Under the terms of the Escrow Agreement, these shares will be released as to 10% thereof on the completion of the Company s Qualifying Transaction, as defined in the policies of the Exchange, and as 15% thereof on each of the 6 th, 12 th, 18 th, 24 th, 30 th and 36 th months following the initial release. All common shares acquire on exercise of stock options granted to directors and officers prior to the completion of a Qualifying Transaction must also be deposited in escrow until the Final Exchange Bulletin is issued. All common shares of the Company acquired in the secondary market prior to completion of a Qualifying Transaction by a Control Person as defined in the policies of the Exchange, are required to be deposited in escrow.

23 Subject to certain permitted exemptions, all securities of the Company by principals of the resulting issuer will also be escrowed. Summary of Options Granted as at the date hereof As at the date hereof, options to acquire an aggregate of 1,700,000 common shares were issued and outstanding at an exercise price of $0.10 per common share. The options were fully vested on the date of grant and are exercisable until the later of (i) three months after termination of the appointment of the option holder to the board and/or as an officer of the Company or (ii) one year after the closing of a Qualifying Transaction as defined by the CPC Policy. The contractual life of these options is ten years. Fin-XO Securities Inc., which acted as the Company s Agent in respect of its initial public offering (the IPO ) holds an option to acquire an aggregate of 700,000 common shares for a period of 24 months from the date of listing at an exercise price of $0.10 per share. Fin-XO agreed that, upon exercise, no more than 350,000 of these share might be sold prior to completion of a Qualifying Transaction. Forward Looking Statements Certain statements contained in this MD&A may constitute forward-looking statements. These statements relate to future events or the Company s future performance. All statements, other than statements of historical fact, may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as seek, anticipate, plan, continue, estimate, expect, may, will, project, predict, propose, potential, targeting, intend, could, might, should, believe and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Company believes that the expectations reflected in those forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this MD&A should not be unduly relied upon by investors as actual results may vary. These statements speak only as of the date of this MD&A and are expressly qualified, in their entirety, by this cautionary statement. The Company s actual results could differ materially from those anticipated in these forward-looking statements as a result of various risk factors. Additional information relating to the Company is available on SEDAR at