UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D. C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR
THE FISCAL YEAR ENDED DECEMBER 31,
2019.
☐ TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE
TRANSITION PERIOD FROM ______ TO ______.
Commission File No.
333-141875
IGEN Networks Corp.
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(Exact name of
registrant as specified in its charter)
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Nevada
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20-5879021
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(State or Other
Jurisdiction of
incorporation or
organization)
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(I.R.S. Employer
Identification No.)
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29970
Technology Drive, Suite 108, Murrieta CA 92563,
USA
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(Address of principal
executive offices) (Zip Code)
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1-844-332-5699
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(Registrant’s telephone
number including area code)
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Securities registered
pursuant to Section 12(b) of the Act: None
Securities registered
pursuant to Section 12(g) of the Act:
Common
Stock
Title of Class
Indicate by check mark
if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes ☐ No
☒
Indicate by check mark
if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes
☐ No ☒
Indicate by check mark
whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days: Yes
☒ No ☐
Indicate by check mark
whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required
to submit and post such files). Yes ☒ No
☐
Indicate by check mark
if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§ 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant’s knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ☒
Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated
filer,” “accelerated filer,” “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated
filer
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☐
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Accelerated filer
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☐
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Non-accelerated
filer
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☐
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Smaller reporting
company
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☒
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Emerging growth
company
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☐
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If an emerging growth
company, indicate by check mark if the registrant has elected not
to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section
13(a) of the Exchange Act. ☐
Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2
of the Act). Yes ☐ No ☒
The aggregate market
value of the Common Stock of IGEN Networks Corp. held by
non-affiliates as of June 28, 2019, the last business day of the
registrant’s most recently completed second fiscal quarter, was
approximately $2,031,000 based on the closing price of the common
stock of $0.03
The number
of shares of the registrant’s common stock outstanding as of May
26, 2020 was 688,173,645.
TABLE OF
CONTENTS
Part I
Item 1.
Business
Description of
Business
IGEN Networks Corp.
(“IGEN”, the “Company”, “we”, “our”) was incorporated in the State
of Nevada on November 14, 2006, under the name of Nurse Solutions
Inc. On September 19, 2008, the Company changed its name to Sync2
Entertainment Corporation and traded under the symbol SYTO. On
September 15, 2008, the Company became a reporting issuer in
British Columbia, Canada. On May 26, 2009, the Company changed its
name to IGEN Networks Corp. On March 25, 2015, the Company was
listed on the Canadian Securities Exchange (CSE) under the trading
symbol IGN and the Company became a reporting Venture Issuer in
British Columbia and Ontario, Canada.
The Company’s principal
business is the development and marketing of software services for
the automotive and fleet management industry. The Company works
with Sprint and its distribution partners to provide direct and
secure access to information on vehicle assets and driver
performance. The software services are based on the AWS Cloud
Infrastructure delivered to customers over the wireless network and
accessed from consumer mobile or desktop devices. The software
services are marketed through automotive dealers, financial
institutions, and government channels as IGEN commercial and
consumer brands: Nimbo Tracking, CU Trak, and Medallion GPS
PRO.
As of
December 31, 2019:
i)
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IGEN had a
100% equity position in Nimbo Tracking LLC, a privately held US
company based in Murrieta, CA
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ii)
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IGEN
appointed Wireless Business Consultants (WBC) Sprint’s Master Agent
for nationwide distribution
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iii)
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IGEN
appointed REMCOOP for distribution and marketing for the Territory
of Puerto Rico
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iv)
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IGEN took
ownership of Digital Telematics Signature (DTC) patent for greater
accuracy in measuring driver performance
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v)
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IGEN
launched Medallion GPS PRO for Light-Commercial Fleets
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vi)
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IGEN had a
software license and hardware supply agreements with Positioning
Universal Inc.
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The Company’s head
office is located at 29970 Technology Drive, Suite 108, Murrieta CA
92563. Direct line is 844-332-5699.
The Company currently
owns the DTC patent for normalization of driver behavior data for
consistent and accurate measurement of driver performance
regardless of asset-type or data source. The Company has secured
trademarks and distribution licenses through increased ownership of
privately held technology companies.
The Company is not
aware of any government approval or regulations, other than those
governing the normal course of business, which will affect its own
business. However, the Company is invested in and foresees future
investment in, or possible joint ventures with, companies for which
local, regional or national regulatory approvals, particularly
those pertaining to wireless networks or GPS-based applications,
may apply.
The Company is not
aware of any significant costs or effects of compliance with
environmental laws.
The Company’s executive
management activities are undertaken by Directors of the Company on
a contract basis. The Company also relies on subcontractors for
product development, finance, legal, and other related professional
services. On a consolidated basis, including the Company’s
wholly-owned subsidiaries, the Company has 10 or less full time
employees.
Item 1A. Risk
Factors
For a discussion of
risk factors affecting the Company please refer to the
Cautionary Note Regarding Forward-looking Statements
included in Item 7 Management’s Discussion and Analysis of
Financial Condition and Results of Operations.
Item 1B. Unresolved Staff
Comments
As a smaller reporting
company, the Company is not required to provide the information
required by this item.
Item 2.
Properties
The Company owns no
plants, mines and other materially important physical properties.
The Company’s office locations are specified in Item 1 of this
document.
Item 3. Legal
Proceedings
IGEN’s wholly-owned
subsidiary Nimbo Tracking LLC., the plaintiff, has filed a lawsuit
against SkyForce Technologies and its principle Mr Jim Kwon for
breach-of-contract and loss of business. Trial date set for
September 2020 with an estimated claim of $1.5M.
Item 4. Mine Safety
Disclosures
The Company is not an
operator, nor has a subsidiary that is an operator, of a coal or
other mine.
Part II
Item 5. Market for
Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
Market
Information
The Company’s common
shares currently trade on the both the OTC Link OTCQB in the United
States under the symbol IGEN, and the Canadian Securities Exchange
(CSE) in Canada under the trading symbol IGN.
Holders
As of December 31,
2019, there were 73 registered shareholders of common shares, not
including objecting beneficial owners.
Dividend
Policy
The Company has paid no
cash dividends in the past and as of yet has had no retained
earnings from which to do so.
Item 6. Selected Financial
Data
As a smaller reporting
company, the Company is not required to provide the information
required by this item.
Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
The following
Management’s Discussion and Analysis of Financial Condition and
Results of Operations (“MD&A”) provides information for the
year ended December 31, 2019. This MD&A should be read together
with our audited consolidated financial statements and the
accompanying notes for the year ended December 31, 2019 (the
“consolidated financial statements”). The consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles in the United States (“U.S. GAAP”). Except
where otherwise specifically indicated, all amounts in this
MD&A are expressed in United States dollars.
Certain statements in
this MD&A constitute forward-looking statements or
forward-looking information within the meaning of applicable
securities laws. You should carefully read the cautionary note in
this MD&A regarding forward-looking statements and should not
place undue reliance on any such forward-looking statements. See
“Cautionary Note Regarding Forward-Looking Statements”.
Additional information
about the Company, including our most recent consolidated financial
statements and our Annual Information Form, is available on our
website at www.igen-networks.com, or on SEDAR at www.sedar.com and
on EDGAR at www.sec.gov .
Cautionary
Note Regarding Forward-looking Statements
Certain statements
and information in this MD&A are not based on historical facts
and constitute forward- looking statements or forward-looking
information within the meaning of the U.S. Private Securities
Litigation Reform Act of 1995 and Canadian securities laws
(“forward-looking statements”), including our business outlook for
the short and longer term and our strategy, plans and future
operating performance. Forward-looking statements are provided to
help you understand our views of our short and longer term
prospects. We caution you that forward-looking statements may not
be appropriate for other purposes. We will not update or revise our
forward-looking statements unless we are required to do so by
securities laws. Forward-looking statements:
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·
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Typically include words
and phrases about the future such as “outlook”, “may”, “estimates”,
“intends”, “believes”, “plans”, “anticipates” and “expects”;
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·
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Are not promises or
guarantees of future performance. They represent our current views
and may change significantly;
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Are based on a number
of assumptions, including those listed below, which could prove to
be significantly incorrect:
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Our ability
to find viable companies in which to invest;
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Our ability
to successfully manage companies in which we invest;
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Our ability
to successfully raise capital;
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Our ability
to successfully expand and leverage the distribution channels of
our portfolio companies;
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Our ability
to develop new distribution partnerships and channels;
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Expected
tax rates and foreign exchange rates.
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·
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Are subject to
substantial known and unknown material risks and uncertainties.
Many factors could cause our actual results, achievements and
developments in our business to differ significantly from those
expressed or implied by our forward-looking statements. Actual
revenues and growth projections of the Company or companies in
which we are invested may be lower than we expect for any reason,
including, without limitation:
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·
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the
continuing uncertain economic conditions;
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price and
product competition;
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changing
product mixes;
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the loss of
any significant customers;
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competition
from new or established companies;
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higher than
expected product, service, or operating costs;
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inability
to leverage intellectual property rights;
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delayed
product or service introductions;
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Investors are
cautioned not to place undue reliance on these forward-looking
statements. No forward-looking statement is a guarantee of future
results.
Overview
During 2019, the
Company continues to focus on initiatives to control costs, grow
revenue, expand its customer base, and develop new channels through
its wholly-owned subsidiary Nimbo Tracking LLC and direct to
customer brands Medallion GPS PRO and CU TRAK, all three brands are
marketed through the Sprint IOT Factory platform.
Notable highlights of
the year ended December 31, 2019 include the following Company
achievements:
The Company achieved $723,819
in revenues at 41% gross profit margin and $295,788 gross
profit.
The Company made significant
progress in cost controls for a net loss of $479,073 compared to
$1,175,320 in the previous year.
The Company appointed new
distributors REMCOOP and Wireless Business Consultants (WBC) to
augment Sprint SMB and Enterprise Sales Channels.
The Company received Sprint
IoT Factory orders to manage Ride-Share leased vehicles in the
Tri-State Area of New York.
The Company launched CU Trak, a
white-labelled product for Sprint targeted for Credit Unions at the
Inclusiv Annual Conference bringing together over 300 Credit Unions
from the continental US, along with securing the first CU Trak
orders from Puerto Rico based Credit Unions and the Organization of
Americas.
The Company took ownership of
DTC patent for measuring and scoring Driver Performance and
Behavior.
CRITICAL
ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND
ESTIMATES
Our management’s
discussion and analysis of our financial condition and results of
operations are based on our consolidated financial statements,
which have been prepared in accordance with accounting principles
generally accepted in the United States (“GAAP”). The preparation
of these consolidated financial statements requires us to make
estimates and judgments that affect the reported amount of assets,
liabilities, and expenses and the disclosure of contingent assets
and liabilities as of the date of the consolidated financial
statements. On an ongoing basis, we evaluate our estimates and
judgments. We base our estimates on historical experience, known
trends and events, and various other factors that are believed to
be reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying value of assets
and liabilities that are not readily apparent from other sources.
Actual results may differ materially from these estimates under
different assumptions or conditions.
Accounts
Receivable
Accounts receivable are
recognized and carried at the original invoice amount less an
allowance for expected uncollectible amounts. Inherent in the
assessment of the allowance for doubtful accounts are certain
judgments and estimates including, among others, the customer’s
willingness or ability to pay, the Company’s compliance with
customer invoicing requirements, the effect of general economic
conditions and the ongoing relationship with the customer. Accounts
with outstanding balances longer than the payment terms are
considered past due. We do not charge interest on past due
balances. The Company writes off trade receivables when all
reasonable collection efforts have been exhausted. Bad debt expense
is reflected as a component of general and administrative expenses
in the consolidated statements of operations.
Inventory
Inventory consists of
vehicle tracking and recovery devices and is comprised entirely of
finished goods that can be resold. Inventory is stated at the lower
of cost or net realizable value. Cost is determined on a first-in,
first-out (FIFO) basis. Net realizable value is the estimated
selling price in the ordinary course of business, less estimated
costs of completion and selling costs.
Goodwill
Goodwill represents the
excess of the acquisition price over the fair value of identifiable
net assets acquired. Goodwill is allocated at the date of the
business combination. Goodwill is not amortized, but is tested for
impairment annually on December 31 of each year or more frequently
if events or changes in circumstances indicate the asset may be
impaired. These events and circumstances may include a significant
change in legal factors or in the business climate, a significant
decline in the Company’s share price, an adverse action of
assessment by a regulator, unanticipated competition, a loss of key
personnel, significant disposal activity and the testing of
recoverability for a significant asset group.
Goodwill impairment is
measured as the amount by which a reporting unit’s carrying value
exceeds its fair value.
The Company has only
one reporting unit. Therefore, all of the Company’s goodwill
relates to that reporting unit, and at December 31, 2019 and 2018,
the carrying value for that reporting unit is negative.
Fair Value
Measurements
In accordance with
Financial Accounting Standard Board (“FASB”) Accounting Standards
Codification (“ASC”) 820, “Fair Value Measurements and
Disclosures,” the Company is to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring
fair value. ASC 820 establishes a fair value hierarchy based on the
level of independent, objective evidence surrounding the inputs
used to measure fair value. A financial instrument’s categorization
within the fair value hierarchy is based upon the lowest level of
input that is significant to the fair value measurement. ASC 820
prioritizes the inputs into three levels that may be used to
measure fair value:
Level 1
Level 1 applies to
assets or liabilities for which there are quoted prices in active
markets for identical assets or liabilities.
Level 2
Level 2 applies to
assets or liabilities for which there are inputs other than quoted
prices that are observable for the asset or liability such as
quoted prices for similar assets or liabilities in active markets;
quoted prices for identical assets or liabilities in markets with
insufficient volume or infrequent transactions (less active
markets); or model-derived valuations in which significant inputs
are observable or can be derived principally from, or corroborated
by, observable market data.
Level 3
Level 3 applies to
assets or liabilities for which there are unobservable inputs to
the valuation methodology that are significant to the measurement
of the fair value of the assets or liabilities.
The fair values of cash
and cash equivalents, accounts and other receivables, restricted
cash, and accounts payable and accrued liabilities, approximate
their carrying values due to the immediate or short-term maturity
of these financial instruments. Foreign currency transactions are
primarily undertaken in Canadian dollars. The fair value of cash is
determined based on “Level 1” inputs and the fair value of
derivative liabilities is determined based on “Level 3” inputs. The
recorded values of notes payable, approximate their current fair
values because of their nature and respective maturity dates or
durations. The financial risk is the risk to the Company’s
operations that arise from fluctuations in foreign exchange rates
and the degree of volatility to these rates. Currently, the Company
does not use derivative instruments to reduce its exposure to
foreign currency risk. Financial instruments that potentially
subject the Company to concentrations of credit risk consists of
cash. The Company places its cash and cash equivalents in what it
believes to be credit-worthy financial institutions.
Revenue
Recognition and Deferred Revenue
We recognize revenue in
accordance with ASC 606, “Revenue from Contracts with Customers”,
using the five-step model, including (1) identify the contract with
the customer, (2) identify the performance obligations in the
contract, (3) determine the transaction price, (4) allocate the
transaction price to the performance obligations in the contract,
and (5) recognize revenue upon the transfer of control of the
products or services. Title and risk of loss generally pass to our
customers upon delivery, as we have insurance for lost shipments.
In limited circumstances where either title or risk of loss pass
upon destination or acceptance or when collection is not reasonably
assured, we defer revenue recognition until such events occur. We
derive revenues from two primary sources: products and services.
Product revenue includes the shipment of product according to the
agreement with our customers and only represent a small percentage
of our revenues, less than 5%. Services include vehicle tracking
services and customer support (technical support), installations
and consulting. A contract may include both product and services.
For these contracts, the Company accounts for individual
performance obligations separately if they are distinct.
Performance obligations include, but are not limited to, pass-thru
harnesses and vehicle tracking services. Almost all of our revenues
are derived from customers located in United States of America in
the auto industry. The transaction price is allocated to the
separate performance obligations on a relative standalone selling
price basis. Standalone selling prices are typically estimated
based on observable transactions when these services are not sold
on a standalone basis. At contract inception, an assessment of the
goods and services promised in the contracts with customers is
performed and a performance obligation is identified for each
distinct promise to transfer to the customer a good or service (or
bundle of goods or services). To identify the performance
obligations, the Company considers all of the goods or services
promised in the contract regardless of whether they are explicitly
stated or are implied by customary business practices. Revenue is
recognized when our performance obligation has been met. The
Company considers control to have transferred upon delivery because
the Company has a present right to payment at that time, the
Company has transferred use of the asset, and the customer is able
to direct the use of, and obtain substantially all of the remaining
benefits from, the asset. For arrangements under which the Company
provides vehicle tracking services, the Company satisfies its
performance obligations as those services are performed whereby the
customer simultaneously receives and consumes the benefits of such
services under the agreement. Revenues are recognized net of any
taxes collected from customers, which are subsequently remitted to
governmental authorities.
The Company provides
product warranties with varying lengths of time and terms. The
product warranties are considered to be assurance-type in nature
and do not cover anything beyond ensuring that the product is
functioning as intended. Based on the guidance in ASC 606,
assurance-type warranties do not represent separate performance
obligations. The Company has historically experienced a low rate of
product returns under the warranty program.
Management assesses the
business environment, customers’ financial condition, historical
collection experience, accounts receivable aging, and customer
disputes to determine whether collectability is reasonably assured.
If collectability is not reasonably assured at the time of sale,
the Company does not recognize revenue until collection occurs.
Revenue relating to the
sale of service fees on its vehicle tracking and recovery services
is recognized over the life of the contract. The service renewal
fees are offered in terms ranging from 12 to 36 months and are
generally payable upon delivery of the vehicle tracking devices or
in full upon renewal.
Deferred revenues are
recorded when cash payments are received from customers in advance
of the Company’s performance.
Any revenue that has
been deferred and is expected to be recognized beyond one year is
classified as deferred revenue, net of current portion.
Deferred revenues are
recorded net of contract assets. Contract assets represent the
costs of the underlying hardware to enable the Company to perform
on its contracts with customers.
Restatements
During 2019, we discovered that
an accounting error had been made related to the Company not
properly recording contract assets as required under the relevant
accounting guidance for revenue recognition. It was
determined that the error is immaterial to the 2018 financial
statements; however, correcting the error in 2019 would materially
misstate the current year financial statements. As such, we
computed the appropriate amounts related to 2018 and recorded such
in the consolidated financial statements (see Note 17 to the
accompanying consolidated financial statements).
Financing
Costs and Debt Discount
Financing costs and
debt discounts are recorded net of notes payable and convertible
debentures in the consolidated balance sheets. Amortization of
financing costs and the debt discounts is calculated using the
effective interest method over the term of the debt and is recorded
as interest expense in the consolidated statement of
operations.
Recent
Accounting Pronouncements
See the
notes to the consolidated financial statements of this Form 10-K
for further discussion
Capital
Resources and Liquidity
Current
Assets and Liabilities, Working Capital
As of December 31,
2019, the Company had total current assets of $26,483, an 82%
decrease from the end of 2018. This decrease was mostly due to a
$113,167 decrease in cash, inventory, and prepaid expenses, because
of the timing of payments to Nimbo from its customers.
The Company’s current
liabilities as of December 31, 2019, were $1,304,367, a 15%
increase over those reported at the end of the 2018. However,
$207,566 (or 16%) of the Company’s current liabilities were
deferred revenues, net to be recognized in future periods. The
increase in current liabilities was mostly due to a $169,676
increase in the accounts payable and accrued expenses as of
December 31, 2019.
IGEN ended 2019 with
negative working capital of $1,277,884. Adequate working capital
remains a core requirement for growth and profitability and to
facilitate further acquisitions, and the Company continues to work
at improving its working capital position through ongoing equity
and debt financing and actively managing the Company’s growth to
achieve sustainable positive cash flow.
In 2019,
the Company raised an additional $600,750 in financings and
converted $86,537 of preferred stock and convertible debentures
into shares of common stock. These transactions are further
disclosed in notes to the consolidated financial statements.
Total
Assets and Liabilities, Net Assets
As of December 31,
2019, the Company’s total assets were $531,991, a 18% decrease over
the prior year, due primarily to the decrease in current assets
previously discussed. The majority of the Company’s assets remain
$505,508 in goodwill associated with the acquisition of Nimbo in
2014.
As of December 31,
2019, the Company’s total liabilities were $1,359,266, which
reflects $54,899 in long-term deferred revenue, net in addition to
the $1,304,367 in current liabilities previously discussed. This
long-term deferred revenue is the portion of service contracts
signed in previous years for which service, and the associated
revenue recognition, occurs beyond 2020. Total liabilities
increased by 12% over the previous year, however 19%, or $262,465
of the Company’s year-end total liabilities was deferred revenue,
net, compared with $394,432 of deferred revenue, net reported at
the end of 2018.
The above
resulted in net assets as of December 31, 2019 being ($859,202) and
an accumulated deficit of $11,630,660.
The Company is
continuing its efforts to increase its asset base, raise funds and
improve cashflow to improve its working capital position. As of the
date these financial statements were issued, the Company believes
it has adequate working capital and projected net revenues and cash
flows to maintain existing operations for approximately six months
without requiring additional funding. The Company’s business plan
is predicated on raising further capital for the purpose of further
investment and acquisition of targeted technologies and companies,
to fund growth in these technologies and companies, and to expand
sales and distribution channels for companies it currently owns or
is invested. It is anticipated the Company will continue to raise
additional capital through private placements or other means in the
both the near and medium term.
The reader is
cautioned that the Company’s belief in the adequacy of its working
capital, the continuation and growth of future revenue, the ability
of the Company to operate any stated period without additional
funding, and the ability to successfully raise capital are forward
looking statements for which actual results may vary, to the extent
that the company may need capital earlier than anticipated and/or
may not be able to raise additional capital.
Results of
Operations
Revenues
and Net Loss
Revenues
For the year ended
December 31, 2019, the Company had revenues of $723,819, a 40%
decrease over the revenues reported for same period in 2018.
Service-only revenues
decreased by 38% to $698,693 and other sales decreased by 67% at
$25,126.
Costs of goods sold for
2019 were $428,031, a 36% decrease over 2018. These costs are
primarily mobile hardware and cellular carrier costs.
The
resulting gross profit was $295,788, representing a decrease of 44%
year on year.
Though the Company
decreased revenues, decreased gross profit, and decreased gross
margins year on year, we continue to review hardware vendor,
inventory, and order fulfillment strategies as well as product and
service pricing models to continually improve overall margins.
Expenses
Expenses
for the year ended December 31, 2019, totaled $1,101,790, a
decrease of $591,016, or 35%, from total expenses reported for
2018.
Net Loss
For the
year ended December 31, 2019, the Company had a net loss of
$479,073 (or ($0.01) per basic and diluted share) compared with a
net loss of $1,175,320 (or ($0.02) per basic and diluted share) in
2018.
The Company continues
to invest in personnel, channels, and product development in order
to drive revenue growth and increase gross profits sufficient to
enable the Company to achieve profitability.
Cash
Flows
For the
year ended December 31, 2019, the Company saw a net decrease in
cash of $56,823. Cash used in operating activities was $657,573, a
decrease of 44% from the $1,174,991 net cash used in 2018. This was
offset by net financings of $600,750 raised via private placements.
Cash at the end of the year was $0.
Item 7A. Quantitative and
Qualitative Disclosures About Market Risk.
As a smaller reporting
company, the Company is not required to provide the information
required by this item.
Item 8. Financial Statements
and Supplementary Data.
The Company’s
consolidated financial statements for the years ended December 31,
2019 and 2018 are included herewith.

IGEN NETWORKS
CORP.
Consolidated Financial
Statements
For the Years Ended
December 31, 2019 and 2018
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and
the board of directors of IGEN Networks Corp.
Opinion on the
Financial Statements
We have audited the
accompanying consolidated balance sheets of IGEN Networks Corp. and
subsidiary (the "Company") as of December 31, 2019 and 2018, the
related consolidated statements of operations and comprehensive
loss, redeemable convertible preferred stock and stockholders’
deficit and cash flows for the years then ended, and the related
notes (collectively referred to as the "financial statements"). In
our opinion, the financial statements present fairly, in all
material respects, the financial position of the Company as of
December 31, 2019 and 2018, and the results of its operations and
its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of
America.
Going
Concern
The accompanying
financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses and
negative cash flows from operations and has a net capital
deficiency that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these
matters are also described in Note 1. The financial statements do
not include any adjustments that might result from the outcome of
this uncertainty.
Basis for
Opinion
These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the Company's financial
statements based on our audits. We are a public accounting firm
registered with the Public Company Accounting Oversight Board
(United States) ("PCAOB") and are required to be independent with
respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits
in accordance with the standards of the PCAOB. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit
of its internal control over financial reporting. As part of our
audits we are required to obtain an understanding of internal
control over financial reporting but not for the purpose of
expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express
no opinion.
Our audits included
performing procedures to assess the risks of material misstatement
of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our
audits provide a reasonable basis for our opinion.
/s/ Hall &
Company
We have served as the
Company’s auditor since 2019.
Irvine, CA
May 28, 2020
IGEN NETWORKS CORP.
Consolidated Balance
Sheets
(Expressed in U.S.
dollars)
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
Cash
|
|
$ |
- |
|
|
$ |
56,823 |
|
Accounts
and other receivables, net
|
|
|
18,136 |
|
|
|
24,553 |
|
Inventory
|
|
|
4,334 |
|
|
|
36,694 |
|
Prepaid
expenses and deposits
|
|
|
4,013 |
|
|
|
27,997 |
|
Total
Current Assets
|
|
|
26,483 |
|
|
|
146,067 |
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
505,508 |
|
|
|
505,508 |
|
Total
Assets
|
|
$ |
531,991 |
|
|
$ |
651,575 |
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$ |
983,358 |
|
|
$ |
813,682 |
|
Current
portion of deferred revenue, net of contract assets
|
|
|
207,566 |
|
|
|
317,070 |
|
Convertible debentures and
accrued interest, net of unamortized discount of $343,398 and $0,
respectively
|
|
|
21,121 |
|
|
|
- |
|
Derivative
liabilities
|
|
|
92,322 |
|
|
|
- |
|
Total Current
Liabilities
|
|
|
1,304,367 |
|
|
|
1,130,752 |
|
|
|
|
|
|
|
|
|
|
Deferred
revenue, net of contract assets
|
|
|
54,899 |
|
|
|
77,362 |
|
Total
Liabilities
|
|
|
1,359,266 |
|
|
|
1,208,411 |
|
|
|
|
|
|
|
|
|
|
Commitments
and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable
convertible preferred stock – Series A:
|
|
|
|
|
|
|
|
|
Authorized
– 1,250,000 shares with $0.001 par value, 160,600 shares and no
shares issued and outstanding as of December 31, 2019 and 2018,
respectively, aggregate liquidation preference of $153,862 as of
December 31, 2019, net of discount of $121,931
|
|
|
31,927 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
Common stock: Authorized -
375,000,000 shares with $0.001 par value issued and outstanding –
74,242,196 and 66,714,970 shares, respectively
|
|
|
74,242 |
|
|
|
66,715 |
|
Additional
paid-in capital
|
|
|
10,697,216 |
|
|
|
10,426,245 |
|
Accumulated
deficit
|
|
|
(11,630,660 |
) |
|
|
(11,049,499 |
) |
Total
Stockholders’ Deficit
|
|
|
(859,202 |
) |
|
|
(556,539 |
) |
Total
Liabilities and Stockholders’ Deficit
|
|
$ |
531,991 |
|
|
$ |
651,575 |
|
(The accompanying notes
are an integral part of these consolidated financial
statements)
IGEN NETWORKS CORP.
Consolidated Statements
of Operations and Comprehensive Loss
(Expressed in U.S.
dollars)
|
|
Years ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
Sales,
services
|
|
$ |
698,693 |
|
|
$ |
1,121,601 |
|
Sales,
other
|
|
|
25,126 |
|
|
|
77,276 |
|
Total
Revenues
|
|
|
723,819 |
|
|
|
1,198,877 |
|
Cost of
revenues
|
|
|
428,031 |
|
|
|
668,664 |
|
Gross
Profit
|
|
|
295,788 |
|
|
|
530,213 |
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
572,297 |
|
|
|
781,473 |
|
Payroll
and related
|
|
|
332,102 |
|
|
|
589,222 |
|
Management and consulting fees
|
|
|
197,391 |
|
|
|
322,111 |
|
Total
Expenses
|
|
|
1,101,790 |
|
|
|
1,692,806 |
|
Loss Before
Other Income (Expense)
|
|
|
(806,002 |
) |
|
|
(1,162,593 |
) |
Other
Income (Expense):
|
|
|
|
|
|
|
|
|
Accretion of discounts on convertible debentures
|
|
|
(212,982 |
) |
|
|
(156,894 |
) |
Change
in fair value of derivative liabilities
|
|
|
572,954 |
|
|
|
57,255 |
|
Gain
(loss) on settlement of redeemable preferred stock
|
|
|
(23,324 |
) |
|
|
105,258 |
|
Interest expense
|
|
|
(9,719 |
) |
|
|
(8,346 |
) |
Total Other
Income (Expense), net
|
|
|
326,929 |
|
|
|
(2,727 |
) |
Net Loss
before Provision for Income Taxes
|
|
|
(479,073 |
) |
|
|
(1,165,320 |
) |
Provision
for Income Taxes
|
|
|
- |
|
|
|
(10,000 |
) |
Net
Loss
|
|
|
(479,073 |
) |
|
|
(1,175,320 |
) |
Other
Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
|
Foreign currency translation gain
|
|
|
- |
|
|
|
60,910 |
|
Comprehensive loss
|
|
$ |
(479,073 |
) |
|
$ |
(1,114,410 |
) |
|
|
|
|
|
|
|
|
|
Net loss
attributable to common stockholders
|
|
|
(479,073 |
) |
|
|
(1,175,320 |
) |
Deemed
dividend on preferred stock
|
|
|
(102,087 |
) |
|
|
- |
|
|
|
$ |
(581,160 |
) |
|
$ |
(1,175,320 |
) |
Basic and
Diluted Loss per Common Share
|
|
$ |
(0.01 |
) |
|
$ |
(0.02 |
) |
Weighted
Average Number of Common Shares Outstanding
|
|
|
68,619,041 |
|
|
|
54,728,006 |
|
(The accompanying notes
are an integral part of these consolidated financial
statements)
IGEN NETWORKS
CORP.
Consolidated Statements
of Redeemable Convertible Preferred stock and Stockholders’
Deficit
(Expressed in U.S.
dollars)
|
|
Redeemable Convertible
Preferred Stock
|
|
|
Common Stock
|
|
|
Additional
Paid
in
|
|
|
Accumulated
Other Comprehensive
|
|
|
Accumulated
|
|
|
Total Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Loss
|
|
|
Deficit
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2018
|
|
|
- |
|
|
$ |
- |
|
|
|
39,214,517 |
|
|
$ |
39,215 |
|
|
$ |
8,854,491 |
|
|
$ |
(60,910 |
) |
|
$ |
(9,874,179 |
) |
|
$ |
(1,041,383 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
8,445 |
|
|
|
- |
|
|
|
- |
|
|
|
8,445 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash
|
|
|
- |
|
|
|
- |
|
|
|
21,597,222 |
|
|
|
21,597 |
|
|
|
1,272,997 |
|
|
|
- |
|
|
|
- |
|
|
|
1,294,594 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for
services
|
|
|
- |
|
|
|
– |
|
|
|
1,524,021 |
|
|
|
1,524 |
|
|
|
75,879 |
|
|
|
- |
|
|
|
- |
|
|
|
77,403 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for debenture
conversion
|
|
|
- |
|
|
|
- |
|
|
|
4,379,210 |
|
|
|
4,379 |
|
|
|
214,433 |
|
|
|
- |
|
|
|
- |
|
|
|
218,812 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Removal of accumulated other
comprehensive loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
60,910 |
|
|
|
- |
|
|
|
60,910 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,175,320 |
) |
|
|
(1,175,320 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2018
|
|
|
- |
|
|
|
- |
|
|
|
66,714,970 |
|
|
|
66,715 |
|
|
|
10,426,245 |
|
|
|
- |
|
|
|
(11,049,499 |
) |
|
|
(556,539 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
- |
|
|
|
- |
|
|
|
150,000 |
|
|
|
150 |
|
|
|
51,061 |
|
|
|
- |
|
|
|
- |
|
|
|
51,211 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash
|
|
|
- |
|
|
|
- |
|
|
|
4,000,000 |
|
|
|
4,000 |
|
|
|
131,000 |
|
|
|
- |
|
|
|
- |
|
|
|
135,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued in connection
with debenture issuance
|
|
|
- |
|
|
|
- |
|
|
|
100,000 |
|
|
|
100 |
|
|
|
4,900 |
|
|
|
- |
|
|
|
- |
|
|
|
5,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for debenture
conversion, including related fees
|
|
|
- |
|
|
|
- |
|
|
|
300,000 |
|
|
|
300 |
|
|
|
6,865 |
|
|
|
- |
|
|
|
- |
|
|
|
7,165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A preferred stock issued
for cash, net of costs and discounts
|
|
|
202,600 |
|
|
|
23,400 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued
dividends and accretion of conversion feature on Series A
preferred stock
|
|
|
- |
|
|
|
46,620 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(46,620 |
) |
|
|
(46,620 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deemed dividends related to
conversion feature of Series A preferred stock
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(55,468 |
) |
|
|
(55,468 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for Series A
preferred stock conversions
|
|
|
(42,000 |
) |
|
|
(38,093 |
) |
|
|
2,977,226 |
|
|
|
2,977 |
|
|
|
77,145 |
|
|
|
- |
|
|
|
- |
|
|
|
80,122 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(479,073 |
) |
|
|
(479,073 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019
|
|
|
160,600 |
|
|
$ |
31,927 |
|
|
|
74,242,196 |
|
|
$ |
74,242 |
|
|
$ |
10,697,216 |
|
|
$ |
- |
|
|
$ |
(11,630,660 |
) |
|
$ |
(859,202 |
) |
(The accompanying notes
are an integral part of these consolidated financial
statements)
IGEN NETWORKS CORP.
Consolidated Statements
of Cash Flows
(Expressed in U.S.
dollars)
|
|
Years ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Cash Flows
from Operating Activities
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(479,073 |
) |
|
$ |
(1,175,320 |
) |
Adjustments
to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Accretion
of discounts on convertible debentures and preferred stock
|
|
|
212,982 |
|
|
|
156,894 |
|
Bad
debts
|
|
|
13,835 |
|
|
|
5,396 |
|
Change in
fair value of derivative liabilities
|
|
|
(572,954 |
) |
|
|
(57,041 |
) |
Depreciation
|
|
|
- |
|
|
|
3,600 |
|
Loss (gain)
on settlement of debt
|
|
|
23,324 |
|
|
|
(105,258 |
) |
Shares
issued for services
|
|
|
6,000 |
|
|
|
45,413 |
|
Stock-based
compensation
|
|
|
64,712 |
|
|
|
8,446 |
|
|
|
|
|
|
|
|
|
|
Changes in
operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
and other receivables
|
|
|
(7,418 |
) |
|
|
24,172 |
|
Inventory
|
|
|
32,360 |
|
|
|
(34,472 |
) |
Prepaid
expenses and deposits
|
|
|
4,484 |
|
|
|
71,618 |
|
Restricted
cash
|
|
|
- |
|
|
|
25,000 |
|
Accounts
payable and accrued liabilities
|
|
|
176,142 |
|
|
|
(69,638 |
) |
Deferred
revenue, net
|
|
|
(131,967 |
) |
|
|
(73,801 |
) |
Net Cash
Used in Operating Activities
|
|
|
(657,573 |
) |
|
|
(1,174,991 |
) |
|
|
|
|
|
|
|
|
|
Cash Flows
from Investing Activities
|
|
|
|
|
|
|
|
|
Purchase of
equipment
|
|
|
- |
|
|
|
(747 |
) |
Net cash
used in Investing Activities
|
|
|
- |
|
|
|
(747 |
) |
|
|
|
|
|
|
|
|
|
Cash Flows
from Financing Activities
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of preferred stock, net of offering costs
|
|
|
175,000 |
|
|
|
- |
|
Repayment
of notes payable
|
|
|
- |
|
|
|
(151,580 |
) |
Proceeds
from convertible debentures, net of offering costs
|
|
|
290,750 |
|
|
|
- |
|
Proceeds
from issuance of common stock
|
|
|
135,000 |
|
|
|
1,294,593 |
|
Net Cash
Provided by Financing Activities
|
|
|
600,750 |
|
|
|
1,143,013 |
|
|
|
|
|
|
|
|
|
|
Effect of
Foreign Exchange Rate Changes on Cash
|
|
|
- |
|
|
|
35,910 |
|
|
|
|
|
|
|
|
|
|
Change in
Cash
|
|
|
(56,823 |
) |
|
|
3,185 |
|
Cash,
Beginning of Year
|
|
|
56,823 |
|
|
|
53,638 |
|
Cash, End
of Year
|
|
$ |
- |
|
|
$ |
56,823 |
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures:
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$ |
- |
|
|
$ |
- |
|
Income
taxes paid
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Non-cash
Investing and Financing Activities:
|
|
|
|
|
|
|
|
|
Deemed
dividend for preferred stock
|
|
$ |
102,088 |
|
|
$ |
- |
|
Original
issue discount on convertible debt
|
|
$ |
68,250 |
|
|
$ |
- |
|
Conversion
of preferred stock and convertible debt
|
|
$ |
92,287 |
|
|
$ |
- |
|
Discounts
on convertible debt and preferred stock
|
|
$ |
690,398 |
|
|
$ |
- |
|
Shares
issued for services
|
|
$ |
- |
|
|
$ |
77,402 |
|
Shares
issued for debenture conversion and accrued interest
|
|
$ |
- |
|
|
$ |
218,812 |
|
Issuance of
embedded conversion derivative liabilities
|
|
$ |
- |
|
|
$ |
6,698 |
|
(The accompanying notes
are an integral part of these consolidated financial
statements)
IGEN NETWORKS CORP.
Notes to the
Consolidated Financial Statements
Years Ended December
31, 2019 and 2018
(Expressed in U.S.
dollars)
1.
Organization and Description of Business
IGEN Networks Corp.
(“IGEN”, the “Company”, “we”, “our”) was incorporated in the State
of Nevada on November 14, 2006, under the name of Nurse Solutions
Inc. On September 19, 2008, the Company changed its name to Sync2
Entertainment Corporation and traded under the symbol SYTO. On
September 15, 2008, the Company became a reporting issuer in
British Columbia, Canada. On May 26, 2009, the Company changed its
name to IGEN Networks Corp. On March 25, 2015, the Company was
listed on the Canadian Securities Exchange (CSE) under the trading
symbol IGN and the Company became a reporting Venture Issuer in
British Columbia and Ontario, Canada.
The Company’s principal
business is the development and marketing of software services for
the automotive industry. The Company works with wireless carriers,
hardware suppliers and software developers to provide direct and
secure access to information on the vehicle and the driver’s
behavior. The software services are delivered from the AWS Cloud to
the consumer and their families over the wireless networks and
accessed from any mobile or desktop device. The software services
are marketed to automotive dealers, financial institutions, and
direct-to-consumer through various commercial and consumer
brands.
Going
Concern
The
consolidated financial statements as of and for the year ended
December 31, 2019 have been prepared assuming that the Company will
continue as a going concern. The Company has experienced recurring
losses from operations and has negative operating cash flows since
inception, has a working capital deficit of $1,277,884 and an
accumulated deficit of $11,630,660 as of December 31, 2019, and is
dependent on its ability to raise capital from stockholders or
other sources to sustain operations. These factors raise
substantial doubt about the Company’s ability to continue as a
going concern. Ultimately, the Company plans to achieve profitable
operations through the increase in revenue base and successfully
grow its operations organically or through acquisitions. The
consolidated financial statements do not include any adjustments
that might result from the outcome of these uncertainties.
2.
Summary of Significant Accounting Policies
Basic of
Presentation and Consolidation
These consolidated
financial statements and related notes include the records of the
Company and the Company’s wholly-owned subsidiary, Nimbo Tracking
LLC, which is based in the USA.
All intercompany
transactions and balances have been eliminated. These consolidated
financial statements are presented in accordance with accounting
principles generally accepted in the United States (“U.S. GAAP”),
are expressed in U.S. dollars, and, in management’s opinion, have
been properly prepared within reasonable limits of materiality and
within the framework of the significant accounting policies
summarized below.
Use of
Estimates
The preparation of
these consolidated financial statements in conformity with U.S.
GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements, and the reported amounts of
revenues and expenses during the reporting period. The Company
regularly evaluates estimates and assumptions related to allowance
for doubtful accounts, valuation of inventory, the useful life and
recoverability of equipment, impairment of goodwill, valuation of
notes payable and convertible debentures, fair value of stock-based
compensation and derivative liabilities, and deferred income tax
asset valuation allowances. The Company bases its estimates and
assumptions on current facts, historical experience and various
other factors that it believes to be reasonable under the
circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities and
the accrual of costs and expenses that are not readily apparent
from other sources. The actual results experienced by the Company
may differ materially and adversely from the Company’s estimates.
To the extent there are material differences between the estimates
and the actual results, future results of operations will be
affected.
Cash and
Cash Equivalents
The Company considers
all highly liquid instruments purchased with an original maturity
of three months or less at the time of acquisition to be cash
equivalents.
Accounts
Receivable
Accounts receivable are
recognized and carried at the original invoice amount less an
allowance for expected uncollectible amounts. Inherent in the
assessment of the allowance for doubtful accounts are certain
judgments and estimates including, among others, the customer’s
willingness or ability to pay, the Company’s compliance with
customer invoicing requirements, the effect of general economic
conditions and the ongoing relationship with the customer. Accounts
with outstanding balances longer than the payment terms are
considered past due. We do not charge interest on past due
balances. The Company writes off trade receivables when all
reasonable collection efforts have been exhausted. Bad debt expense
is reflected as a component of general and administrative expenses
in the consolidated statements of operations.
Inventory
Inventory consists of
vehicle tracking and recovery devices and is comprised entirely of
finished goods that can be resold. Inventory is stated at the lower
of cost or net realizable value. Cost is determined on a first-in,
first-out (FIFO) basis. Net realizable value is the estimated
selling price in the ordinary course of business, less estimated
costs of completion and selling costs. There was no provision for
inventory recorded during the years ended December 31, 2019 and
2018.
Equipment
Office equipment,
computer equipment, and software are recorded at cost. Depreciation
is provided annually at rates and methods over their estimated
useful lives. Management reviews the estimates of useful lives of
the assets every year and adjusts them on prospective basis, if
needed. All equipment was fully depreciated as of December 31, 2019
and 2018. For purposes of computing depreciation, the method of
depreciating equipment is as follows:
Computer equipment
|
3 years
straight-line
|
Office equipment
|
5 years
straight-line
|
Software
|
3 years
straight-line
|
Goodwill
Goodwill represents the
excess of the acquisition price over the fair value of identifiable
net assets acquired. Goodwill is allocated at the date of the
business combination. Goodwill is not amortized, but is tested for
impairment annually on December 31 of each year or more frequently
if events or changes in circumstances indicate the asset may be
impaired. These events and circumstances may include a significant
change in legal factors or in the business climate, a significant
decline in the Company’s share price, an adverse action of
assessment by a regulator, unanticipated competition, a loss of key
personnel, significant disposal activity and the testing of
recoverability for a significant asset group.
Goodwill impairment is
measured as the amount by which a reporting unit's carrying value
exceeds its fair value.
The Company has only
one reporting unit. Therefore, all of the Company’s goodwill
relates to that reporting unit, and at December 31, 2019 and 2018,
the carrying value for that reporting unit is negative.
Impairment
of Long-lived Assets
The Company reviews
long-lived assets, such as equipment, for impairment whenever
events or changes in the circumstances indicate that the carrying
value may not be recoverable. If the total of the estimated
undiscounted future cash flows is less than the carrying value of
the asset, an impairment loss is recognized for the excess of the
carrying value over the fair value of the asset during the year the
impairment occurs.
Fair Value
Measurements
In accordance with
Financial Accounting Standard Board (“FASB”) Accounting Standards
Codification (“ASC”) 820, “Fair Value Measurements and
Disclosures,” the Company is to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring
fair value. ASC 820 establishes a fair value hierarchy based on the
level of independent, objective evidence surrounding the inputs
used to measure fair value. A financial instrument’s categorization
within the fair value hierarchy is based upon the lowest level of
input that is significant to the fair value measurement. ASC 820
prioritizes the inputs into three levels that may be used to
measure fair value:
Level
1
Level 1 applies to
assets or liabilities for which there are quoted prices in active
markets for identical assets or liabilities.
Level
2
Level 2 applies to
assets or liabilities for which there are inputs other than quoted
prices that are observable for the asset or liability such as
quoted prices for similar assets or liabilities in active markets;
quoted prices for identical assets or liabilities in markets with
insufficient volume or infrequent transactions (less active
markets); or model-derived valuations in which significant inputs
are observable or can be derived principally from, or corroborated
by, observable market data.
Level
3
Level 3 applies to
assets or liabilities for which there are unobservable inputs to
the valuation methodology that are significant to the measurement
of the fair value of the assets or liabilities.
See Note 8 for fair
value measurement information related to the Company’s derivative
liabilities.
The fair values of cash
and cash equivalents, accounts and other receivables, restricted
cash, and accounts payable and accrued liabilities, approximate
their carrying values due to the immediate or short-term maturity
of these financial instruments. Foreign currency transactions are
primarily undertaken in Canadian dollars. The fair value of cash is
determined based on “Level 1” inputs and the fair value of
derivative liabilities is determined based on “Level 3” inputs. The
recorded values of notes payable, approximate their current fair
values because of their nature and respective maturity dates or
durations. The financial risk is the risk to the Company’s
operations that arise from fluctuations in foreign exchange rates
and the degree of volatility to these rates. Currently, the Company
does not use derivative instruments to reduce its exposure to
foreign currency risk. Financial instruments that potentially
subject the Company to concentrations of credit risk consists of
cash. The Company places its cash and cash equivalents in what it
believes to be credit-worthy financial institutions.
Revenue
Recognition and Deferred Revenue
We recognize revenue in
accordance with ASC 606, “Revenue from Contracts with Customers”,
using the five-step model, including (1) identify the contract with
the customer, (2) identify the performance obligations in the
contract, (3) determine the transaction price, (4) allocate the
transaction price to the performance obligations in the contract,
and (5) recognize revenue in accordance with U.S. GAAP. Title and
risk of loss generally pass to our customers upon delivery, as we
have insurance for lost shipments. In limited circumstances where
either title or risk of loss pass upon destination or acceptance or
when collection is not reasonably assured, we defer revenue
recognition until such events occur. We derive revenues from two
primary sources: products and services. Product revenue includes
the shipment of product according to the agreement with our
customers and only represents a small percentage of our revenues,
less than 5%. Services include vehicle tracking services and
customer support (technical support), installations and consulting.
A contract may include both product and services. For these
contracts, the Company accounts for individual performance
obligations separately if they are distinct. Performance
obligations include, but are not limited to, pass-thru harnesses
and vehicle tracking services. Almost all of our revenues are
derived from customers located in United States of America in the
auto industry. The transaction price is allocated to the separate
performance obligations on a relative standalone selling price
basis. Standalone selling prices are typically estimated based on
observable transactions when these services are not sold on a
standalone basis. At contract inception, an assessment of the goods
and services promised in the contracts with customers is performed
and a performance obligation is identified for each distinct
promise to transfer to the customer a good or service (or bundle of
goods or services). To identify the performance obligations, the
Company considers all of the goods or services promised in the
contract regardless of whether they are explicitly stated or are
implied by customary business practices. Revenue is recognized when
our performance obligation has been met. The Company considers
control to have transferred upon delivery because the Company has a
present right to payment at that time, the Company has transferred
use of the asset, and the customer is able to direct the use of,
and obtain substantially all of the remaining benefits from, the
asset. For arrangements under which the Company provides vehicle
tracking services, the Company satisfies its performance
obligations as those services are performed whereby the customer
simultaneously receives and consumes the benefits of such services
under the agreement. Revenues are recognized net of any taxes
collected from customers, which are subsequently remitted to
governmental authorities.
The Company provides
product warranties with varying lengths of time and terms. The
product warranties are considered to be assurance-type in nature
and do not cover anything beyond ensuring that the product is
functioning as intended. Based on the guidance in ASC 606,
assurance-type warranties do not represent separate performance
obligations. The Company has historically experienced a low rate of
product returns under the warranty program.
Management assesses the
business environment, customers’ financial condition, historical
collection experience, accounts receivable aging, and customer
disputes to determine whether collectability is reasonably assured.
If collectability is not reasonably assured at the time of sale,
the Company does not recognize revenue until collection occurs.
Revenue relating to the
sale of service fees on its vehicle tracking and recovery services
is recognized over the life of the contact. The service renewal
fees are offered in terms ranging from 12 to 36 months and are
generally payable upon delivery of the vehicle tracking devices or
in full upon renewal.
Deferred
revenues are recorded net of contract assets and when cash payments
are received from customers in advance of the Company’s
performance. Deferred revenues totaled $405,553 and $721,301 as of
December 31, 2019 and 2018, respectively. During the year ended
December 31, 2019, the Company recorded additions to deferred
revenues of $383,984 and recognized total revenues of $699,732
through the amortization of deferred revenues. During the year
ended December 31, 2019, the Company recognized revenues of
$533,950 related to deferred revenues outstanding as of December
31, 2018 as the services were performed. During the year ended
December 31, 2018, the Company recorded total proceeds of
$1,035,713 and recognized total revenues of $1,131,754 through the
amortization of deferred revenues. During the year ended December
31, 2018, the Company recognized revenues of $634,018 related to
deferred revenues outstanding as of December 31, 2017 as the
services were performed.
Any revenue that has
been deferred and is expected to be recognized beyond one year is
classified as deferred revenue, net of current portion.
Deferred revenues are
recorded net of contract assets. Contract assets represent the
costs of the underlying hardware to enable the Company to perform
on its contracts with customers. As of December 31, 2019 and 2018,
the contract asset balance totaled $143,088 and $326,869,
respectively, which have been recorded net of deferred revenues in
the accompanying consolidated balance sheets.
Financing
Costs and Debt Discount
Financing costs and
debt discounts are recorded net of notes payable and convertible
debentures in the consolidated balance sheets. Amortization of
financing costs and the debt discounts is calculated using the
effective interest method over the term of the debt and is recorded
as interest expense in the consolidated statements of
operations.
Income
Taxes
Deferred income taxes
are provided on the asset and liability method whereby deferred
income tax assets are recognized for deductible temporary
differences and operating loss and tax credit carry-forwards and
deferred tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases.
Deferred income tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that
some portion or all of the deferred income tax assets will not be
realized. Deferred income tax assets and liabilities are adjusted
for the effects of changes in tax laws and rates on the date of
enactment.
Foreign Currency
Translation
The Company’s reporting
currency is the U.S. dollar. In 2017, the consolidated financial
statements of the Company were translated to U.S. dollars in
accordance with ASC 830, “Foreign Currency Translation Matters”.
Monetary assets and liabilities denominated in foreign currencies
are translated using the exchange rate prevailing at the balance
sheet date. Non-monetary assets, liabilities and items recorded in
income arising from transactions denominated in foreign currencies
are translated at rates of exchange in effect at the date of the
transaction. Gains and losses arising on translation or settlement
of foreign currency denominated transactions or balances are
included in the determination of income. During 2018, the Company
recorded $60,910 of accumulated other comprehensive income
associated with its Canadian subsidiary that was dissolved.
Stock-based
Compensation
The Company
accounts for stock-based payments in accordance with stock-based
payment accounting guidance which requires all stock-based payments
to be recognized based upon their fair values. The fair value of
stock-based awards is estimated at the grant date using the
Black-Scholes Option Pricing Model and the portion that is
ultimately expected to vest is recognized as compensation cost over
the requisite service period. The determination of fair value using
the Black-Scholes Option Pricing Model is affected by the Company’s
stock price as well as assumptions regarding a number of complex
and subjective variables, including expected stock price
volatility, risk-free interest rate, expected dividends and
projected employee stock option exercise behaviors. The Company
accounts for forfeitures of unvested awards as they occur.
Loss Per
Share
Basic earnings (loss)
per share are computed by dividing net income (loss) available to
common shareholders (numerator) by the weighted average number of
shares outstanding (denominator) during the period. Diluted
earnings per share give effect to all dilutive potential common
shares outstanding during the period including stock options, using
the treasury stock method, and convertible debentures, using the
if-converted method. In computing diluted earnings (loss) per
share, the average stock price for the period is used in
determining the number of shares assumed to be purchased from the
exercise of stock options or warrants. Diluted earnings (loss) per
share exclude all potentially issuable shares if their effect is
anti-dilutive. Because the effect of conversion of the Company’s
dilutive securities is anti-dilutive, diluted loss per share is the
same as basic loss per share for the periods presented. As of
December 31, 2019 and 2018, the Company has 68,247,452 and
8,089,673 potentially dilutive shares outstanding,
respectively.
Comprehensive Income (Loss)
ASC 220, “Comprehensive
Income” establishes standards for the reporting and display of
comprehensive income and its components in the consolidated
financial statements. For the year ended December 31, 2018, other
comprehensive income consists of foreign currency gains related to
the derecognition of a subsidiary. There was no other comprehensive
income (loss) during the year ended December 31, 2019.
Recent
Accounting Pronouncement
In August 2018, the
FASB issued ASU No. 2018-13, "Fair Value Measurement (Topic 820)",
which changes to disclosure requirements for fair value
measurement. The amendments of this update modify the disclosure
requirements on fair value measurements about Topic 820. It applies
to all reporting entities within the scope of the affected
accounting guidance. It will take effect for public companies for
fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2019. The Company is currently
evaluating the new guidance and have not determined the impact this
standard may have on its consolidated financial statements.
In June 2018, the FASB issued ASU
No. 2018-07, Improvements to Nonemployee Share-Based
Payment Accounting, which simplifies several aspects of the
accounting for nonemployee share-based payment transactions by
expanding the scope of the stock-based compensation guidance in ASC
718 to include share-based payment transactions for acquiring goods
and services from non-employees. ASU No. 2018-07 is
effective for annual periods beginning after December 15, 2018,
including interim periods within those annual periods. The
Company’s adoption did not have any material impact on its
consolidated financial statements.
The Company does not
believe that there are any other new accounting pronouncements that
have been issued that might have a material impact on its
consolidated financial position or results of operations.
3.
Accounts and Other Receivables
|
|
December
31,
2019
|
|
|
December
31,
2018
|
|
Trade accounts
receivable
|
|
$ |
39,398 |
|
|
$ |
31,567 |
|
Allowance for doubtful
accounts
|
|
|
(21,262 |
) |
|
|
(7,014 |
) |
|
|
$ |
18,136 |
|
|
$ |
24,553 |
|
4.
Goodwill
As of December 31, 2019
and 2018, the Company had goodwill of $505,508 related to the
acquisition of Nimbo.
5.
Accounts Payable and Accrued Liabilities
|
|
December
31,
2019
|
|
|
December
31,
2018
|
|
Trade accounts
payable
|
|
$ |
744,716 |
|
|
$ |
612,785 |
|
Accrued liabilities
|
|
|
44,162 |
|
|
|
19,862 |
|
Accrued interest
payable
|
|
|
19,064 |
|
|
|
19,064 |
|
Payroll and commissions
payable
|
|
|
85,416 |
|
|
|
71,971 |
|
Unrecognized tax
position
|
|
|
90,000 |
|
|
|
90,000 |
|
|
|
$ |
983,358 |
|
|
$ |
813,682 |
|
6.
Notes Payable
As of January 1, 2018,
the Company had a note payable with a principal balance of $11,952
(Cdn$15,000) owed to a director, which was unsecured, bore interest
at 5% per annum, and was due on October 30, 2017. As of January 1,
2018, the Company had an outstanding accrued interest balance of
$2,386 (Cdn$2,960). During the year ended December 31, 2018, the
Company repaid all amounts related to this note payable.
On March 23, 2017, the
Company entered into a loan agreement with a third party for a
principal amount of $8,695, which included a one-time loan fee of
$695, which was charged to interest expense. The note payable was
unsecured, non-interest bearing, and required minimum payments of
10% of the loan every ninety days from the start date of March 26,
2017. During the year ended December 31, 2018, the Company repaid
all amounts due related to this loan agreement.
7.
Convertible Debentures
2017 Debt Issuances
On March 30, 2017, the
Company issued a convertible debenture to a third party in the
principal amount of $50,000 which was unsecured, bore interest at
12% per annum, calculated monthly, and was due on September 30,
2017. Subject to the approval of the holder of the convertible
debenture, the Company could convert any or all of the principal
and/or interest at any time following the six-month anniversary of
the issuance date of the convertible debenture (September 30, 2017)
into common shares of the Company at a price per share equal to a
20% discount to the fair market value of the Company’s common
stock. The estimated fair value of the derivative liability
resulted in a discount to the convertible debenture of $32,127,
which was accreted over the term of the convertible debenture. As
of January 1, 2018, the carrying value of the convertible debenture
was $50,000. During the year ended December 31, 2018, the Company
converted all amounts due related to this debenture into shares of
common stock.
On August 7, 2017, the
Company issued a convertible debenture to a third party in the
principal amount of $161,250 with an original issuance discount of
$11,250 and incurred $3,500 of financing costs to a third party,
which was unsecured, bore interest at 5% per annum, and was due on
August 7, 2018. The holder could convert any or all of the
principal and/or interest at any time following the six-month
anniversary of the issuance date of the convertible debenture
(February 7, 2018) into common shares of the Company at a price per
share equal to 75% multiplied by the closing price of the Company’s
common stock preceding the trading day that the Company receives a
notice of conversion. The estimated fair value of the derivative
liabilities of $153,827 resulted in a discount to the convertible
debenture, which was amortized over the term of the convertible
debenture. During the year ended December 31, 2018, $106,195 of
amortization expense was recorded. As of January 1, 2018, the
carrying value of the convertible debenture was $55,055. During the
year ended December 31, 2018, the Company repaid $80,000 of
principal in cash and converted $81,250 of principal into shares of
common stock, leaving no amounts due as of December 31, 2018.
On December 18, 2017,
the Company issued a convertible debenture to a third party in the
principal amount of $55,000 with an original issuance discount of
$5,000 and incurred $1,500 of financing costs to a third party,
which was unsecured, bore interest at 2% per annum, and was due on
June 18, 2018. The holder could convert any or all of the principal
and/or interest at any time following the six-month anniversary of
the issuance date of the convertible debenture (June 18, 2018) into
common shares of the Company at a price per share equal to 75%
multiplied by the closing price of the Company’s common stock
preceding the trading day that the Company receives a notice of
conversion. The estimated fair value of the derivative liabilities
of $47,071 resulted in a discount to the convertible debenture,
which was be amortized over the term of the convertible debenture.
During the year ended December 31, 2018, $46,999 of amortization
expense was recorded. As of January 1, 2018, the carrying value of
the convertible debenture was $8,001. On July 5, 2018, the Company
provided an additional principal to the convertible debentures of
$20,000 on the same terms. Related to this increase, the estimated
fair value of the conversion feature was $6,698 and was recorded as
a debt discount, which was amortized in full during the year ended
December 31, 2018. During the year ended December 31, 2018, the
Company repaid $55,000 of principal in cash and converted $20,000
of principal into shares of common stock, leaving no amounts due as
of December 31, 2018.
2019 Debt Issuances
On May 17, 2019, the
Company entered into a Convertible Promissory Note (“Promissory
Note”) with Crown Bridge Partners, LLC (the “Holder”) for a total
principal amount of up to $150,000 with cash proceeds of up to
$124,500, resulting in an original issue discount of up to $25,500.
The Promissory Note bears interest at 7% per annum (with the
understanding that the first 12 months of interest of each tranche
will be guaranteed). The maturity date is 18 months from the
effective date of each payment.
The Conversion Price,
as defined in the agreement, is the lesser of (i) the lowest
Trading Price (as defined below) during the previous 25 trading day
period ending on the latest complete trading day prior to the date
of this Promissory Note or (ii) the Variable Conversion Price (as
defined below). The Variable Conversion Price means the lowest one
Trading Price (as defined below) for the common stock during the 25
Trading Day period ending on the last complete Trading Day prior to
the Conversion Date. Trading Price means, for any security as of
any date, the lesser of the (i) lowest traded price and (ii) lowest
closing bid price. Based on the Company’s examination of the
conversion feature and the relative accounting guidance, the
Company has determined that the conversion feature should be
treated as a derivative liability for accounting purposes.
Additionally, if at any
time while the Promissory Note is outstanding, the Conversion Price
is equal to or lower than $0.025, then an additional $10,000 will
be automatically added to the principal balance of each tranche
funded under the Note. During the quarter ended June 30, 2019,
$10,000 was added to the principal balance for the first
tranche.
In connection with the
Promissory Note, the Company also entered into a Securities
Purchase Agreement with the Holder which states that the Company
will also issue to the Holder a warrant to purchase an amount of
shares of its common stock equal to 50% of the face value of each
respective tranche divided by $0.10 (for illustrative purposes, the
first tranche face value is equal to $50,000, which resulted in the
issuance of a warrant to purchase 250,000 shares of the Company’s
common stock).
Per the terms of the
Common Stock Purchase Warrant agreement, on May 17, 2019, the
Company issued a warrant to purchase 250,000 shares of common stock
with an Exercise Price of $0.10 subject to adjustment (standard
anti-dilution features). If the Market Price of one shares of
common stock is greater than the Exercise Price, the Holder may
elect to receive Warrant Shares pursuant to cashless exercise, in
lieu of cash exercise, per a defined formula in the agreement.
During the quarter
ended June 30, 2019, the Company received $40,000 in net cash
proceeds, after paying $1,500 of direct funding costs. The related
principal amount due for the first tranche (“First Tranche”) was
$50,000. For the first tranche, using the Binomial Lattice Model,
the Company computed the estimated fair value of the embedded
conversion feature to be $100,000 and recorded a related derivative
liability. Related to the derivative liability, the bonus interest,
and the direct financing costs, the Company recorded a full debt
discount of $60,000 for the Promissory Note, which will be
amortized to interest expense over the term of the Promissory Note
using the effective interest method and an additional $50,000
directly to interest expense.
On December
9, 2019, the Holder converted a portion of the Promissory Note into
shares of common stock. The Holder received 300,000 shares of
common stock for the conversion of principal, accrued interest, and
fees totaling $7,165.
During the
quarter ended September 30, 2019, the Company received an aggregate
of $213,250 in net cash proceeds, after paying $6,750 of direct
funding costs, from three note holders under the same terms as the
Promissory Note. The related principal amount due for the
convertible debt instruments entered into during the quarter ended
September 30, 2019 was $255,000. Using the Binomial Lattice Model,
the Company computed the estimated fair value of the embedded
conversion features to be approximately $354,000 and recorded the
related derivative liabilities. Related to the derivative
liabilities, the bonus interest, and the direct financing costs,
the Company recorded full debt discounts totaling approximately
$255,000 for the notes which will be amortized to interest expense
over the term of the notes using the effective interest method and
an additional approximately $106,000 directly to interest expense.
As the Conversion Price fell below $0.025 per share, during the
quarter ended September 30, 2019, $10,000 was added to the
principal balance on one of the notes (per the terms of that
note).
Related to the notes
issued during the quarter ended September 30, 2019, the Company
issued warrants to purchase a total of 525,000 shares of common
stock with an Exercise Price of $0.10 subject to adjustment
(standard anti-dilution features). If the Market Price of one
shares of common stock is greater than the Exercise Price, the
Holder may elect to receive Warrant Shares pursuant to cashless
exercise, in lieu of cash exercise, per a defined formula in the
agreement.
On October 1, 2019, the
Company received $37,500 in net cash proceeds from a note holder
under the same terms as the Promissory Note. The related principal
amount due for the convertible debt instrument was $44,000. In
connection with the note, the Company issued 100,000 shares of
common stock, which were valued at the market price on the date of
issuance of $0.05 per share. Using the Binomial Lattice Model, the
Company computed the estimated fair value of the embedded
conversion feature to be approximately $29,000 and recorded a
related derivative liability. Related to the derivative liability,
the shares issued, the bonus interest, and the direct financing
costs, the Company recorded a debt discount totaling $41,000 for
the note, which will be amortized to interest expense over the term
of the note using the effective interest method.
During the year ended
December 31, 2019, the Company recorded $4,369 of interest expense
related to the amortization of the debt discounts. The Company
expects to record amortization expense of $180,000 during the year
ending December 31, 2020 and expects to record amortization expense
of $164,000 during the year ended December 31, 2021 under the
effective interest method.
8.
Derivative Liabilities
During the years ended
December 31, 2019 and 2018, the Company had outstanding convertible
debentures with variable exercise prices based on market rates (see
Note 7). During the year ended December 31, 2019, the Company also
issued series A preferred stock with variable exercise prices based
on market rates (see Note 10). The Company records the fair value
of the conversion features with variable exercise prices based on
future market rates in accordance with ASC 815. The fair value of
the derivative liabilities is revalued on each balance sheet date
with corresponding gains and losses recorded in the consolidated
statements of operations. The Company uses either the Black-Scholes
Option Pricing Model or a multi-nominal lattice model to fair value
the derivative liabilities. The following inputs and assumptions
were used to value the conversion features outstanding during the
years ended December 31, 2019 and 2018, assuming no expected
dividends:
|
|
2019
|
|
|
2018
|
|
Expected volatility
|
|
|
219% - 264
|
%
|
|
|
334% - 398
|
%
|
Risk free interest
rate
|
|
|
1.55% - 2.34
|
%
|
|
|
1.49% - 1.73
|
%
|
Expected life (in
years)
|
|
|
0.8 – 1.5
|
|
|
|
0.0 – 0.4
|
|
The following table
presents the Company’s embedded conversion features of its
convertible debt and preferred stock measured at fair value on a
recurring basis as of December 31, 2019 and 2018.
|
|
Level
3
Carrying
Value as
of
December
31,
2019
|
|
|
Level
3
Carrying
Value as
of
December
31,
2018
|
|
Derivative
liabilities:
|
|
|
|
|
|
|
Embedded conversion
feature – convertible debt
|
|
$ |
87,571 |
|
|
$ |
- |
|
Embedded conversion
feature – preferred stock
|
|
|
4,751 |
|
|
|
- |
|
|
|
$ |
92,322 |
|
|
$ |
- |
|
The following table
provides a reconciliation of the beginning and ending balances for
the Company’s derivative liabilities measured at fair value using
Level 3 inputs:
|
|
For
The
Year
Ended
December
31,
2019
|
|
|
For
The
Year
Ended
December
31,
2018
|
|
Embedded Conversion
Features – Debt Instruments
|
|
|
|
|
|
|
Balances, as of the
beginning of the year
|
|
$ |
- |
|
|
$ |
227,163 |
|
Derivative liabilities
recorded upon issuance of debt instruments
|
|
|
483,331 |
|
|
|
6,698 |
|
Extinguishment due to
conversion of debt instruments
|
|
|
(3,055 |
) |
|
|
(176,820 |
) |
Net changes in fair
value included in net loss
|
|
|
(392,705 |
) |
|
|
(57,041 |
) |
Ending balance
|
|
$ |
87,571 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Embedded Conversion
Features – Preferred Stock
|
|
|
|
|
|
|
|
|
Balances, as of the
beginning of the year
|
|
$ |
- |
|
|
$ |
- |
|
Derivative liabilities
recorded upon issuance of preferred stock
|
|
|
207,067 |
|
|
|
- |
|
Extinguishment due to
conversion of preferred stock
|
|
|
(22,067 |
) |
|
|
- |
|
Net changes in fair
value included in net loss
|
|
|
(180,249 |
) |
|
|
- |
|
Ending balance
|
|
$ |
4,751 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Total ending
balance
|
|
$ |
92,322 |
|
|
$ |
- |
|
9.
Related Party Transactions
(a)
|
During the years ended December 31, 2019 and
2018, the Company incurred approximately $143,000 and $185,000,
respectively, in management and consulting fees with an officer and
an entity controlled by him. As of December 31, 2019 and 2018, the
Company owed approximately $145,000 and $136,0000, respectively, to
directors and officers and a company controlled by a director,
which is included in accounts payable and accrued liabilities. The
amounts owed are unsecured, non-interest bearing, and due on
demand.
|
|
|
(b)
|
During the years ended
December 31, 2019 and 2018, the Company incurred approximately
$120,000 and $493,000, respectively, in purchases of hardware from
a vendor controlled by a director of the Company. As of December
31, 2019 and 2018, the amounts owed to this related-party vendor
were approximately $45,000 and $102,000 respectively.
|
10.
Redeemable Preferred Stock and
Stockholders’ Deficit
Preferred
Stock
The Company is
authorized to issue 10,000,000 shares of preferred stock with a par
value of $0.001 per share. The Company has designated 1,250,000 of
these shares as Series A Convertible Preferred Stock (“Series A
Preferred Stock”).
On April 9, 2019 and
separately on June 11, 2019, the Company entered into a Series A
Preferred Stock Purchase Agreement with an investor and issued
86,000 shares for net proceeds of $75,000 (after deducting $3,000
of direct legal costs) and on June 11, 2019, the Company issued
58,300 shares for net proceeds of $50,000 (after $3,000 deduction
of direct legal costs).
On September 17, 2019,
the Company entered into a Series A Preferred Stock Purchase
Agreement with an investor. The Company issued 58,300 shares of net
proceeds of $50,000 (after $3,000 deduction of direct legal
costs).
Rights and Privileges of the
Series A Preferred Stock
|
·
|
Voting – Series A Preferred Stock holders
have no voting rights
|
|
·
|
Dividends – 8% cumulative dividend,
compounded daily, payable solely upon redemption, liquidation, or
conversion. (increases to 22% for an event of default)
|
|
·
|
Redemption – Company has the right to
redeem the shares from the issuance date through 270 days following
the issuance date using the table noted in the Certificate of
Designations, Preferences, Rights and Limitations of Series A
Convertible Preferred Stock agreement. After 270 days, except for
the Mandatory Redemption, the Company does not have the right to
redeem the shares.
|
|
·
|
Mandatory
Redemption – 18 months after the Issuance Date or upon
the occurrence of an Event of Default, the Company is required to
redeem all of the shares of Series A Preferred Stock of the Holder.
The Company shall make a cash payment in an amount equal to the
total number of shares of Series A Preferred Stock held by the
Holder multiplied by the then current Stated Value as adjusted
(including but not limited to the addition of any accrued unpaid
dividends and the Default Adjustment
|
|
·
|
Conversion – At any time after 6 months
following the Issuance Date, the Holder may convert all or any part
of the outstanding Series A Preferred Stock into shares of Common
Stock. The Variable Conversion Price is defined as 75% of the
Market Price. The Market Price is defined as the average of the 3
lowest Trading Prices for the Common Stock during the 15 day
Trading Period ending on the last complete Trading Day prior to the
Conversion Date.
|
|
·
|
Default
Adjustments – Upon the occurrence of any Event of
Default, the Stated Value will be increased between 150% and 200%,
depending on the Event of Default.
|
Based on
the terms of the conversion feature, the Company could be required
to issue an infinite number of shares of common stock. As such, the
Company has determined the conversion feature to be a derivative
liability under relevant accounting guidance. The Company estimated
the fair value of the conversion feature using the Binomial Lattice
Model on the date of issuance, on the date of each conversion
notice, and will remeasure the fair value at each reporting period.
On the issuance dates of the series A preferred stock, the combined
estimated fair value of the conversion features were determined to
be $207,000. In connection with the fair value of the derivative
liability, the Company recorded a total discount to the series A
preferred stock of $161,000 and also recorded a deemed distribution
of $55,000. During the year ended December 31, 2019, the Company
recorded accrued dividends of $8,000 and a deemed dividend of
$38,000 related to the accretion of the discount using the
effective interest method. The Company expects to record additional
deemed dividends related to accretion of the discount of $64,000
during the year ending December 31, 2020 and $58,000 for the year
ending December 31, 2021.
During
October 2019 through December 2019, holders converted 42,000 shares
of Series A Preferred stock into 2,977,226 shares of common stock
at the Variable Conversion Price as defined above, resulting in a
loss on extinguishment of $23,000.
Common
Stock
2019
During the year ended
December 31, 2019, the Company sold 4,000,000 shares of common
stock for proceeds of $135,000.
During the year ended
December 31, 2019, the Company issued 150,000 shares of common
stock for services valued at $6,000.
During the year ended
December 31, 2019, the Company issued 100,000 shares of common
stock in connection with the issuance of a convertible debenture
valued at $5,000 (see Note 7).
During the year ended
December 31, 2019, the Company issued 300,000 shares of common
stock in connection with the conversion of principal under a
convertible debenture, along with related fees, valued at $7,165
(see Note 7).
During the year ended
December 31, 2019, the Company issued 2,977,226 shares of common
stock in connection with conversions of Series A Preferred Stock
valued at $80,122 (see Note above).
2018
During the year ended
December 31, 2018, the Company sold 21,597,222 shares of common
stock for proceeds of $1,294,594.
During the year ended
December 31, 2018, the Company issued 1,524,021 shares of common
stock for services valued at $77,403.
During the year ended
December 31, 2018, the Company issued 4,379,210 shares of common
stock in connection with the conversion of principal under
convertible debentures valued at $218,812 (see Note 7).
11.
Share Purchase Warrants
The following table
summarizes the activity of the Company’s share purchase
warrants:
|
|
Number
of
warrants
|
|
|
Weighted
average
exercise
price
|
|
|
|
|
|
|
|
|
Balance, January 1,
2018
|
|
|
4,237,913 |
|
|
$ |
0.19 |
|
Issued
|
|
|
500,000 |
|
|
|
0.12 |
|
Expired
|
|
|
(838,240 |
) |
|
|
0.23 |
|
Balance, December 31,
2018
|
|
|
3,899,673 |
|
|
|
0.20 |
|
Issued
|
|
|
775,000 |
|
|
|
0.10 |
|
Expired
|
|
|
(147,059 |
) |
|
|
0.35 |
|
Balance, December 31,
2019
|
|
|
4,527,614 |
|
|
$ |
0.18 |
|
As of December 31, 2019, the following share
purchase warrants were outstanding:
Number of
warrants outstanding
|
|
|
Exercise
price
|
|
|
Expiration
date
|
|
|
500,000
|
|
|
$ |
0.12 |
|
|
June 1, 2020
|
|
|
2,222,222
|
|
|
$ |
0.23 |
|
|
February 23, 2022
|
|
|
775,000
|
|
|
$ |
0.10 |
|
|
September 23, 2024
|
|
|
980,392
|
|
|
$ |
0.15 |
|
|
December 2, 2021
|
|
|
50,000
|
|
|
$ |
0.20 |
|
|
January 2, 2022
|
|
|
4,527,614
|
|
|
|
|
|
|
|
|
12.
Stock Options
The Company established
a stock option plan for directors, officers, employees and
consultants of the Company (the “Plan”). The purpose of the Plan is
to give to directors, officers, employees and consultants of the
Company, as additional compensation, the opportunity to participate
in the profitability of the Company by granting to such individuals
options, exercisable over periods of up to ten (10) years as
determined by the board of directors of the Company, to buy shares
of the Company at a price equal to the Market Price (as defined)
prevailing on the date the option is granted. As of December 31,
2019, there were 2,325,000 shares available under the Plan.
The following table
summarizes the activity of the Company’s stock options:
|
|
Number
of
options
|
|
|
Weighted average
exercise price
|
|
|
Aggregate
intrinsic
value
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1,
2018
|
|
|
5,175,000 |
|
|
$ |
0.15 |
|
|
|
|
Granted
|
|
|
- |
|
|
|
- |
|
|
|
|
Cancelled /
forfeited
|
|
|
(985,000 |
) |
|
|
0.09 |
|
|
|
|
Balance, December 31,
2018
|
|
|
4,190,000 |
|
|
$ |
0.16 |
|
|
|
|
Granted
|
|
|
1,500,000 |
|
|
|
0.04 |
|
|
|
|
Exercised
|
|
|
- |
|
|
|
- |
|
|
|
|
Cancelled /
forfeited
|
|
|
- |
|
|
|
- |
|
|
|
|
Balance, December 31,
2019
|
|
|
5,690,000 |
|
|
$ |
0.13 |
|
|
$ |
- |
|
|
|
|
Outstanding
|
|
|
Exercisable
|
|
Range
of
exercise
prices
|
|
|
Number
of
shares
|
|
|
Weighted
average
remaining
contractual
life
(years)
|
|
|
Weighted
average
exercise
price
|
|
|
Number
of
shares
|
|
|
Weighted
average
exercise
price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.04
|
|
|
|
1,500,000 |
|
|
|
4.9 |
|
|
|
0.04 |
|
|
|
750,000 |
|
|
|
0.04 |
|
$ |
0.08
|
|
|
|
250,000 |
|
|
|
3.3 |
|
|
|
0.08 |
|
|
|
250,000 |
|
|
|
0.08 |
|
$ |
0.13
|
|
|
|
1,425,000 |
|
|
|
2.9 |
|
|
|
0.13 |
|
|
|
1,425,000 |
|
|
|
0.13 |
|
$ |
0.16
|
|
|
|
225,000 |
|
|
|
1.6 |
|
|
|
0.16 |
|
|
|
225,000 |
|
|
|
0.16 |
|
$ |
0.19
|
|
|
|
2,270,000 |
|
|
|
1.2 |
|
|
|
0.19 |
|
|
|
2,270,000 |
|
|
|
0.19 |
|
Cdn$
|
0.25
|
|
|
|
20,000 |
|
|
|
1.2 |
|
|
Cdn$
|
0.25 |
|
|
|
20,000 |
|
|
Cdn$
|
0.25 |
|
|
|
|
|
|
5,690,000 |
|
|
|
2.4 |
|
|
$ |
0.13 |
|
|
|
4,940,000 |
|
|
$ |
0.14 |
|
2019
During the
year ended December 31, 2019, the Company issued 1,500,000 options
to employees with an estimated fair value per share of $0.04 using
the Black-Scholes Option Pricing Model with the following inputs,
volatility of 243%, risk-free rate of 2.2%, and an expected term of
5 years. The options vest 25% quarterly over 1 year. During the
years ended December 31, 2019 and 2018, the Company recorded
approximately $51,000 and $27,000, respectively, of stock-based
compensation expense related to the vesting of stock option grants.
As of December 31, 2019, the Company had unrecognized compensation
expense of approximately $2,000 which will be recorded to
operations over the next three months.
2018
No stock options were
granted by the Company in 2018.
13.
Segments
The Company has one
reportable segment: vehicle tracking and recovery solutions. The
Company allocates resources to and assesses the performance of each
reportable segment using information about its revenue and
operating income (loss). The Company does not evaluate operating
segments using discrete asset information.
Segmentation by geographical location is not presented as all
revenues are earned in the U.S. Total assets by segment are not
presented as that information is not used to allocate resources or
assess performance at the segment level and is not reviewed by the
Chief Operating Decision Maker of the Company.
14.
Concentration Risk
The Company extends
credit to customers on an unsecured basis in the normal course of
business. The Company’s policy is to perform an analysis of the
recoverability of its receivables at the end of each reporting
period and to establish allowances where appropriate. The Company
analyzes historical bad debts and contract losses, customer
concentrations, and customer credit-worthiness when evaluating the
adequacy of the allowances.
During the years ended
December 31, 2019 and 2018, the Company had two and three customers
which accounted for 69% and 74%, respectively, of total invoiced
amounts, which are recorded as deferred revenues and amortized over
the related service period to revenues.
As of December 31, 2019
and 2018, the Company had four and three customers, respectively,
which accounted for 78% and 93%, respectively, of the gross
accounts receivable balance.
15.
Income Taxes
The Company’s income
tax provision consists of the following:
|
|
2019
|
|
|
2018
|
|
Current:
|
|
|
|
|
|
|
Federal
|
|
$ |
- |
|
|
$ |
10,000 |
|
State
|
|
|
- |
|
|
|
- |
|
Foreign
|
|
|
- |
|
|
|
- |
|
Total Current
|
|
|
- |
|
|
|
10,000 |
|
Deferred:
|
|
|
|
|
|
|
|
|
Federal
|
|
|
- |
|
|
|
- |
|
State
|
|
|
- |
|
|
|
- |
|
Foreign
|
|
|
- |
|
|
|
- |
|
Total Deferred
|
|
|
- |
|
|
|
- |
|
Provision for income
taxes
|
|
$ |
- |
|
|
$ |
10,000 |
|
A reconciliation of income taxes computed by
applying the statutory U.S. income tax rate to the Company’s loss
before income taxes to the income tax provision is as follows:
|
|
2019
|
|
|
2018
|
|
Computed
tax benefit at federal statutory rate
|
|
$ |
(100,605 |
) |
|
$ |
(223,397 |
) |
Permanent
items
|
|
|
11,913 |
|
|
|
6,987 |
|
Stock-based
compensation
|
|
|
1,050 |
|
|
|
11,840 |
|
Incentive
stock options
|
|
|
- |
|
|
|
1,773 |
|
Conversion
feature derivative liability
|
|
|
(37,852 |
) |
|
|
(11,979 |
) |
Interest
expense, derivative liability
|
|
|
36,428 |
|
|
|
- |
|
Uncertain
tax positions
|
|
|
- |
|
|
|
10,000 |
|
Impact of
difference related to foreign earnings
|
|
|
1,469 |
|
|
|
- |
|
Gain on
extinguishment of debt
|
|
|
- |
|
|
|
(22,104 |
) |
Change in
fair value of derivative liability
|
|
|
(42,748 |
) |
|
|
- |
|
Valuation
allowance
|
|
|
130,345 |
|
|
|
236,880 |
|
Provision
for income taxes
|
|
$ |
- |
|
|
$ |
10,000 |
|
Deferred tax assets and
liabilities reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company’s deferred tax
assets are as follows:
|
|
2019
|
|
|
2018
|
|
Deferred Tax
Assets:
|
|
|
|
|
|
|
Net
operating loss carryforwards
|
|
$ |
2,192,000 |
|
|
$ |
1,826,000 |
|
Stock-based compensation
|
|
|
7,000 |
|
|
|
1,000 |
|
Accounts
receivable and other timing differences
|
|
|
197,000 |
|
|
|
317,000 |
|
Basis
difference in assets and debt
|
|
|
(109,000 |
) |
|
|
(42,000 |
) |
Total Deferred Tax
Asset
|
|
|
2,287,000 |
|
|
|
2,102,000 |
|
Valuation allowance
|
|
|
(2,287,000 |
) |
|
|
(2,102,000 |
) |
Net Deferred Tax
Asset
|
|
$ |
- |
|
|
$ |
- |
|
Realization of deferred
tax assets is dependent upon future earnings, if any, the timing
and amount of which are uncertain. Accordingly, the net deferred
tax assets for the U.S. federal and state have been fully offset by
a valuation allowance.
As of December 31,
2019, the Company had net operating loss carryforwards for federal
and state income tax purposes of $7,272,553 and $7,136,214,
respectively, which expire beginning in the year 2029.
The Company is required
to file US federal and California tax returns. Due to the Company’s
loss position the statute remains open for any losses carried over
into the current year which means all years from 2006 remain open
to examination.
The Company has adopted
FASB ASC 740, “Income Taxes” to account for income taxes. ASC 740
clarifies the accounting for uncertainty in income taxes recognized
in an enterprise’s financial statement. This standard prescribes a
recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or
expected to be taken in the tax return. ASC 740 also provides
guidance on derecognition of tax benefits, classification on the
balance sheet, interest and penalties, accounting in interim
periods, disclosure and transaction. In accordance with ASC
740-10-50, the Company is classifying interest and penalties as a
component of tax expense.
The Company has a
reserve related to unrecognized tax positions of $90,000 as of
December 31, 2019, which is presented as part of accounts payable
and accrued liabilities. These unrecognized tax positions, if
recognized, would affect the effective tax rate. A reconciliation
of the change in the unrecognized tax positions for the year ended
December 31, 2019 is as follows:
|
|
Federal
and
State
|
|
Balance at January 1,
2019
|
|
$ |
90,000 |
|
Additions for tax
positions related to current year
|
|
|
- |
|
Additions for tax
positions related to prior years
|
|
|
- |
|
Balance at December 31,
2019
|
|
$ |
90,000 |
|
16.
Commitments and Contingencies
Withheld
Payroll Taxes
Since its inception,
the Company has made several payments to employees for wages, net
of state and federal income taxes. Due to cash constraints, the
Company has not yet remitted all of these withheld amounts to the
appropriate government agency. Accordingly, as of December 31, 2019
and 2018 the Company has recorded $37,984 and $14,878,
respectively, related to this obligation in accounts payable and
accrued liabilities, including estimated penalties and
interest.
Operating
Lease
Rent
expense for the years ended December 31, 2019 and 2018 was
approximately $39,000 and $35,000, respectively. As of December 31,
2019, we are obligated to make minimum lease payments under our
operating lease of approximately $10,000 in 2020. As our
lease is considered short-term under the accounting guidance of ASC
842 as of December 31, 2019, we have not included the related
disclosures required under ASC 842. Our lease was a month-to-month
lease throughout most of 2019, but in March 2020, the lease was
renewed for three months. Our monthly lease expense for this
arrangement is approximately $2,000 per month.
Indemnities
and Guarantees
We have made certain
indemnities and guarantees, under which we may be required to make
payments to a guaranteed or indemnified party, in relation to
certain transactions. We indemnify our officers and directors to
the maximum extent permitted under the laws of the State of Nevada.
The duration of these indemnities and guarantees varies and, in
certain cases, is indefinite. These indemnities and guarantees do
not provide for any limitation of the maximum potential future
payments we could be obligated to make. Historically, we have not
been obligated to make any payments for these obligations and no
liabilities have been recorded for these indemnities and guarantees
in the accompanying consolidated balance sheets.
Legal
Matters
In the ordinary course
of business, we may face various claims brought by third parties
and may, from time to time, make claims or take legal actions to
assert our rights, including intellectual property disputes,
contractual disputes and other commercial disputes. Any of these
claims could subject us to litigation. Management believes there
are currently no claims that are likely to have a material effect
on our consolidated financial position and results of
operations.
17.
Restatements
During 2019, we discovered that
an accounting error had been made related to the Company not
properly recording contract assets as required under the relevant
accounting guidance for revenue recognition. (As discussed in
Note 1 “Revenue Recognition and Deferred Revenue”, contract assets
are netted with deferred revenues for balance sheet presentation
purposes.) It was determined that the error is immaterial to the
2018 consolidated financial statements; however, correcting the
error in 2019 would materially misstate the current year
consolidated financial statements. As such, we computed the
appropriate amounts related to 2018 and recorded such in the
accompanying consolidated financial statements. See below for
a summary of the corrections made for this error:
Account
|
|
Previously
Recorded
Balance
|
|
|
Corrected
Balance
|
|
|
Correction
Made
|
|
Balance Sheet
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$ |
1,359,732 |
|
|
$ |
1,130,752 |
|
|
$ |
228,980 |
|
Total liabilities
|
|
$ |
1,534,983 |
|
|
$ |
1,208,114 |
|
|
$ |
326,869 |
|
Accumulated deficit
|
|
$ |
(11,376,368 |
) |
|
$ |
(11,049,499 |
) |
|
$ |
326,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of
Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
$ |
646,424 |
|
|
$ |
668,664 |
|
|
$ |
22,240 |
|
Net loss
|
|
$ |
(1,153,080 |
) |
|
$ |
(1,175,320 |
) |
|
$ |
22,240 |
|
Loss per share
|
|
$ |
(0.02 |
) |
|
$ |
(0.02 |
) |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Cash
Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenues, net
|
|
$ |
(51,561 |
) |
|
$ |
(73,801 |
) |
|
$ |
(22,240 |
) |
18. Subsequent
Events
The Company evaluates
subsequent events and transactions that occur after the
balance sheet date up to the date that the consolidated financial
statements are available to be issued. Any material events that
occur between the balance sheet date and the date that the
consolidated financial statements were available for issuance are
disclosed as subsequent events, while the consolidated financial
statements are adjusted to reflect any conditions that existed at
the balance sheet date. Based upon this review, except as disclosed
within the footnotes or as discussed below, the Company did not
identify any recognized or non-recognized subsequent events that
would have required adjustment or disclosure in the consolidated
financial statements.
In December 2019, a
novel strain of coronavirus diseases (“COVID-19”) was first
reported in Wuhan, China. Less than four months later, on March 11,
2020, the World Health Organization declared COVID-19 a global
pandemic. The extent of COVID-19’s effect on the Company’s
operational and financial performance will depend on future
developments, including the duration, spread and intensity of the
pandemic, all of which are uncertain and difficult to predict
considered the rapidly evolving landscape. The Company is currently
analyzing the potential impacts to its business. At this time, it
is not possible to determine the magnitude of the overall impact of
COVID-10 on the Company. However, it could have a material adverse
effect on the Company’s business, financial condition, liquidity,
results of operations, and cash flows.
During 2020, through the date of
this filing, we converted an additional $213,000 of principal and
accrued interest of our convertible notes into 387,974,460 shares
of common stock and also have converted an additional 148,200
preferred stock shares and accrued interest, totaling $209,000 into
199,206,989 shares of common stock.
On February 13, 2020 the Company issued
1,750,000 shares of common stock for total cash proceeds of
$20,000, and the conversion of $6,250 of accounts payable.
On March 27, 2020 the Company issued
25,000,000 shares of common stock for total cash proceeds of
$125,000.
On February 18, 2020 the Company launched
Medallion GPS PRO for Light-Commercial Fleets utilizing the DTC
Patent.
On March 2, 2020 the Company announced an
exclusive supply agreement with the County Executives of America
covering more than 700 Counties across the US.
On April 2, 2020, the Company increased its
authorized shares of common stock to 1,490,000,000 shares.
On February 10, 2020, the Company
designated and subsequently issued 1,000,000 shares of its newly
formed Series B Super Voting Preferred Stock. Each share of
Series B preferred stock has voting rights equal to 500 shares of
common stock, is not entitled to receive dividends, are is not
convertible into shares of common stock. If the holder of the
Series B preferred stock ceases to be a Board Member, the Company
will repurchase any Series B preferred stock from the holder for a
price of $0.001 per share. If the holder of the Series B
preferred stock proposes to transfer any shares of Series B
preferred stock, the Company will have 90 days to repurchase the
shares for a price of $0.001 per share.
On February 26, 2020, the Company
issued 47,300 shares of Series A preferred stock for proceeds of
$43,000.
On May 11, 2020, the Company issued 47,300
shares of Series A preferred stock for proceeds of $42,570.
Item 9. Changes in and
Disagreements With Accountants on Accounting and Financial
Disclosure.
On February 8, 2019, we
dismissed Saturna Group Chartered Professional Accountants LLP
(“Saturna”) as our Company’s independent registered public
accounting firm. The reports of Saturna on the Company’s
consolidated financial statements for each of the past two years
did not contain an adverse opinion or a disclaimer of opinion, and
was not qualified or modified as to uncertainty, audit scope, or
accounting principles, except to indicate that there was
substantial doubt about the Company’s ability to continue as a
going concern.
During our Company’s
two most recent fiscal years and the subsequent interim periods
preceding our dismissal of Saturna, there were: (i) no
disagreements with Saturna on any matter of accounting principles
or practices, financial statement disclosure or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction
of Saturna, would have caused it to make reference to the subject
matter of the disagreements in its reports on the consolidated
financial statements of the Company; and (ii) no reportable events
as described in Item 304(a)(1)(v) of Regulation S-K.
On February 8, 2019, we
engaged Hall & Company, Certified Professional Accountants
& Consultants, Inc., an independent certified public accounting
firm, as our principal independent accountant.
Item 9A. Controls and
Procedures.
Disclosure Controls
and Procedures
The Company carried out
an evaluation of the effectiveness of the Company’s disclosure
controls and procedures with the participation of all the Company’s
executives, the effectiveness of the Company’s disclosure controls
and procedures as of December 31, 2019. The conclusions of the
Company’s principal executives was that the controls and procedures
in place were not effective such that the information required to
be disclosed in our SEC reports was a) recorded, processed,
summarized and reported within the time periods specified in SEC
rules and forms, and b) accumulated and communicated to our
management, including our chief executive offer and chief operation
officer, as appropriate to allow timely decisions regarding
required disclosure.
Internal Control
over Financial Reporting
As of December 31,
2019, management assessed the effectiveness of our internal control
over financial reporting. The Company’s management is responsible
for establishing and maintain adequate internal control over
financial reporting for the Company. Internal control over
financial reporting is a set of processes designed by or under the
supervision of the Company’s CEO, COO and CFO (or executives
performing equivalent functions) to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with GAAP and includes those policies and procedures
that:
·
|
pertain to the
maintenance of records that in reasonable detail accurately and
fairly reflect our transactions and dispositions of our assets;
|
|
|
·
|
provide reasonable
assurance our transactions are recorded as necessary to permit
preparation of our financial statements in accordance with GAAP,
and that receipts and expenditures are being made only in
accordance with authorizations of our management and directors;
|
|
|
·
|
provide reasonable
assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of our assets that could have a
material effect on the financial statements.
|
Because of its inherent limitations, internal
control over financial reporting may not prevent or detect
misstatements. Therefore, even those systems determined to be
effective can provide only reasonable assurance of achieving their
control objectives. In evaluating the effectiveness of our internal
control over financial reporting, our management used the criteria
set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in Internal Control – Integrated
Framework (2013). Based on that evaluation, they concluded
that during the period covered by this report, though there are
weaknesses in the Company’s internal controls, given the current
size of the organization, such internal controls and procedures as
were in place were not adequately effective to detect the
inappropriate application of US GAAP. We identified the
following material weaknesses:
·
|
Our
discovery of an error that was corrected in 2019, to properly
account for our contract assets in accordance with relevant
accounting guidance for revenue recognition; and
|
|
|
·
|
We did not
properly value our derivative instruments and share-based
compensation amounts using the appropriate valuation models to
determine reasonable estimates of fair value.
|
As additional resources become available, we
will work to remediate these identified material weaknesses.
Changes in Internal Control over
Financial Reporting
There has been no
change in our internal control over financial reporting identified
in connection with our evaluation we conducted of the effectiveness
of our internal control over financial reporting as of December 31,
2019, that occurred during our fourth fiscal quarter that has
materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.
This annual report does
not include an attestation report of the Company’s independent
registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to
attestation by the Company’s independent registered public
accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit our company to provide only
management’s report in this annual report.
Item 9B. Other
Information.
During the fourth
quarter of the fiscal year ended December 31, 2019, there was no
information required to be reported on Form 8-K which was not
previously reported.
PART III
Item 10. Directors,
Executive Officers and Corporate Governance.
Directors and
Executive Officers
The following lists the
directors and executive officers of the Company as of May 10,
2020:
Name
|
|
Age
|
|
Position
|
|
Term of
Office
|
Robert Nealon
|
|
63
|
|
Director, Chairman of
the Board
|
|
July 8, 2010 to
present
|
Neil G. Chan
|
|
57
|
|
Director, Chief
Executive Officer
|
|
September 1, 2011 to
present
|
Mark Wells
|
|
57
|
|
Director
|
|
January 17, 2018 to
present
|
Abel I. Sierra
|
|
47
|
|
Executive Officer,
VP&GM
|
|
September 15, 2017 to
present
|
Robert Friedman
|
|
|
|
Director
|
|
March 17, 2020 to
present
|
Business
Experience
The following are brief
backgrounds on the Directors and Officers of the Company
Robert
Nealon, Chairman of the Board & Director
Mr. Nealon is the
Principal Attorney in Nealon & Associates, P.C., and a
Washington, D.C. based law and government relations firm. He has
been practicing law for twenty-seven years and has achieved an AV
rating from Martindale-Hubbell, the leading rating bureau for the
legal profession. Mr. Nealon has a B.A. from University of
Rochester (1977) and M.B.A. from Rochester Institute of Technology
(1978). He received his Juris Doctorate, magna cum laude, from the
University of Bridgeport in 1982 and his Masters of Law in Taxation
(L.L.M.) degree from Georgetown University in 1984. He is a member
of the bar associations of New York State and Virginia, the
American Bar Association and the Federal Bar Association. Mr.
Nealon served as Adjunct Instructor of Corporate Law, George
Washington University from 1985 until 2005. Mr. Nealon has been
lead counsel on hundreds of commercial trials, including
multi-million dollar derivative action lawsuits, security fraud and
government contract fraud. He has been counsel to hundreds of
corporations, including insurance affinity marketing, manufacturing
and multiple financial institutions. Mr. Nealon has been active
over the years in national politics and government relations.
Mr. Nealon was
appointed to the Virginia Small Business Advisory Board by former
Virginia Governor Warner and was reappointed to this state board by
Governor Kaine through 2010 as its Chairman. Mr. Nealon is also a
current appointee to the George Mason University Advisory Board for
the Institute for Conflict Analysis and Resolution in Arlington. He
is also a member of the National Press Club and the Democratic
National Club.
Neil G.
Chan, Chief Executive Officer & Director
Mr. Chan is a career
technologist who has pioneered disruptive technologies in more than
45 countries over the last 30 years. From start-up to $400M in
annual revenues, Mr. Chan has led and created the best-in-class
sales, marketing, and service organizations during the development
of wireless data infrastructure, mobile solutions,
Software-as-a-Service for commercial fleets, and
Hybrid-Fiber-Cable(HFC) broadband infrastructure and solutions. Mr.
Chan led the first technology transfer initiative between Canada
and Mainland China on behalf of Spar Aerospace and Gandalf
Technologies Inc., along with training, product marketing and sales
responsibilities for growing Gandalf’s export markets. During early
development of mobile data solutions, Mr. Chan was recruited to
Motorola Inc., to lead the product marketing and development of the
industry’s first mobile data solutions for public safety, taxi,
utility, and field service markets. As Motorola’s Managing
Director, Mr Chan lead the expansion of HFC broadband voice and
data networks throughout the Asia Pacific region growing to $400M
in annual revenues during the first three years of business
formation. Along with founding members of the cable modem industry,
Mr. Chan joined Airvana Inc., to lead business development for the
early adoption of broadband wireless networks, leading to the
industry’s first deployment of CDMA-based wireless broadband
networks in North America. Most recently, Mr. Chan led worldwide
sales and marketing of fleet management services for WebTech
Wireless Inc., contributing five years of record growth and
industry leadership across government and transportation markets.
Mr. Chan has served on the Executive Review Board of Royal Roads
University and continues to mentor and support early stage
technology companies.
Mark Wells,
Director
Mr. Wells is presently
the President and CEO of Positioning Universal. During his 25 years
of experience in the wireless industry, he has pioneered the
development and marketing of wireless products, semiconductor
technology, and leading edge wireless services. Mr. Wells
co-founded DriveOK, which merged with Procon and eventually became
Spireon where he led the company during its growth period in
becoming the industry leader of GPS vehicle tracking technologies.
Prior to Procon, Mr. Wells was the co-founder and CEO of Zucotto
Wireless, where he raised $60M in venture capital to develop
wireless semiconductor technologies and secured customers that
included Panasonic, Nokia, and Alcatel. Mr. Wells has also held
marketing roles with Nokia Mobile Phones where he managed a $10B
revenue value of mobile phone products, and later served as Vice
President & General Manager at DSP Communications which was
eventually sold to Intel for $1.6B. Most recently, Mr. Wells has
co-founded and mentored several dozen early-stage technology
companies and served as a consultant to Fortune 500 companies.
Robert
Friedman, Director
Robert Friedman has been actively engaged in
the real estate business since 1970. In 1996, he started York
Resources, LLC., where he actively participates in the acquisition,
financing and development of their real estate holdings, in
addition to practicing transactional real estate law for private
clients. At present, Robert and his brother Bernard own 34
properties, most of which are located in Manhattan and which
consist of about 120,000 square feet of retail and office space,
300+ parking spaces, rental apartment units and luxury
single-family homes. Recently, the Friedman's developed, built and
presently own a 28-story Pod Hotel located at 42nd Street and Ninth
Avenue consisting of 665 hotel rooms, 45 residential apartment and
retail spaces. Robert Friedman and his brother are currently
developing a national family amusement theme park anchored by the
world's largest rollercoaster to be located in Orlando, Florida.
Prior to joining the family business, Robert Friedman was a Senior
Partner and transactional real estate attorney in New York City for
over 20 years.
Abel Sierra,
Company Officer VP & GM
Mr. Sierra has served
as President of the Antelope Valley Hispanic Chamber of Commerce
(AVHCC) - the first President elected to a second term in the
organization’s 20 year history. AVHCC’s mission is to provide
Hispanic entrepreneurship, community growth, and development, by
supporting economic programs designed to strengthen and expand the
potential of all business. Prior and concurrent to Mr. Sierra’s
role with AVHCC was his position as Agency Vice President of HBW
Insurance and Financial Services. Mr. Sierra served as an
Independent Associate with Legal Shield, Regional Vice President
for Primerica Financial Services, marketing Representative for 21
st Century/AIG direct, community Representative for
Palmdale School District and Palmdale Head Start. Mr. Sierra also
served 14 years as a Counter Intelligence Specialist with the
United States Marine Corps.
Code of
Ethics
The Company has not yet
adopted a complete code of ethics policy as defined in Item 406 of
Regulation S-K, however the company has adopted a disclosure policy
that applies to all directors, officers and employees of the
Company, as part of a program to establish a comprehensive code of
ethics. The Company’s disclosure policy is available on its website
www.igennetworks.net
Audit Committee
and Financial Expert
The Company does not
have an audit committee. The functions of an audit committee are
done by the board of directors as a whole, as specified in section
3(a)(58)(B) of the Exchange Act. As such, the Company has no audit
committee financial expert serving on an audit committee.
Item 11. Executive
Compensation.
Summary
Compensation Table
Name and
principal position
|
|
Year
|
|
Salary
($)(1)
|
|
|
Stock
awards
($)
|
|
|
Option
awards
($)(2)
|
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Neil G. Chan – CEO
& Director
|
|
2018
|
|
|
138,000 |
|
|
|
0 |
|
|
|
0 |
|
|
|
138,000 |
|
|
|
2019
|
|
|
138,000 |
|
|
|
0 |
|
|
|
30,000 |
|
|
|
168,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Abel I. Sierra – VP
& GM
|
|
2018
|
|
|
121,000 |
|
|
|
0 |
|
|
|
0 |
|
|
|
121,000 |
|
|
|
2019
|
|
|
121,000 |
|
|
|
0 |
|
|
|
15,000 |
|
|
|
136,000 |
|
_____________
(1)
|
Salary for services as
an executive officer. No compensation for services as a
director
|
(2)
|
Valuation of Stock and
Option awards are based on the issuance details listed in Note 12
to the Company’s consolidated financial statements for the year
ended December 31, 2019.
|
Outstanding
Equity Awards at Fiscal Year-end –
Name
|
|
Number of
securities underlying
unexercised
options
|
|
|
Number of
securities underlying
unexercised
options
|
|
|
Option
exercise
price
|
|
|
Option
expiration
date
|
|
|
|
(#)
|
|
|
(#)
|
|
|
($)
|
|
|
|
|
|
|
exercisable
|
|
|
un-exercisable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Neil Chan, CEO
|
|
|
1,000,000 |
|
|
|
0 |
|
|
$ |
0.19 |
|
|
21-Sep-20
|
|
|
|
|
500,000 |
|
|
|
0 |
|
|
$ |
0.13 |
|
|
11-May22
|
|
|
|
|
500,000 |
|
|
|
250,000 |
|
|
$ |
0.04 |
|
|
15-May-24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Abel Sierra,
VP&GM
|
|
|
150,000 |
|
|
|
0 |
|
|
$ |
0.16 |
|
|
1-Nov-20
|
|
|
|
|
150,000 |
|
|
|
0 |
|
|
$ |
0.13 |
|
|
11-May22
|
|
|
|
|
250,000 |
|
|
|
125,000 |
|
|
$ |
0.04 |
|
|
15-May-24
|
|
The Company
currently has 375,000 unearned or unvested stock awards, or equity
incentive plan awards of either options or stock.
Director
Compensation 1
Name and
principal position
|
|
Year
|
|
Salary
($)
|
|
|
Stock
awards
($)
|
|
|
Option
awards
($)
|
|
|
Total
($)
|
|
Robert Nealon
|
|
2019
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
Jackie Kimzey
|
|
2019
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
Mark Wells
|
|
2019
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
1 Provides
information on Directors not serving as executive officers only.
Compensation for directors also servicing as executive officers is
listed in the summary compensation table at the beginning of this
Item.
Discussion of
Executive and Director Compensation
Compensation of
Directors
Directors
received no compensation in 2019. Directors with the
exception of the CEO were paid in stock equivalent to $25,000
retainer in 2018. In 2013, Robert Nealon, Director and
Chairman of the Board, was awarded 150,000 stock options, all of
which vested in 2013 and none of which were exercised. In 2015, Mr.
Nealon was awarded 250,000 stock options, all of which vested in
2015 and none of which were exercised. Mr. Nealon has 250,000
options expiring on September 21, 2020.
Compensation of
Executives
The CEO,
Neil Chan who is also a director of the Company earned a salary of
$138,000 in 2019, same as 2018. In 2013, the CEO, was granted
825,000 stock options, all of which vested in 2013, and 769,444 of
which were exercised, leaving 55,556 vested and unexercised as of
December 31, 2014. In 2015, Mr. Chan was granted a further
1,000,000 stock options all of which vested in 2015 and 55,556
options were exercised in January 2016. In 2017, Mr. Chan was
granted another 500,000 stock options. In 2019, Mr. Chan was
granted another 1,000,000 stock options, resulting in a total of
2,500,000 options as of December 31, 2019.
Mr. Abel Sierra, VP and
General Manager, is paid $121,000 per annum excluding sales
commissions. Mr. Sierra was granted 500,000 stock options during
2019. Mr. Sierra has a total of 800,000 stock options unexercised
as of December 31, 2019.
There are currently no
long term incentive plans or pension plans for directors or
officers of the Company.
The Company does
provide indemnity insurance coverage for directors and officers of
the Company. Presently assessing alternative coverage.
Compensation
Committee Interlocks and Insider Participation
The Company has no
compensation committee. The board of directors as a whole acts in
the capacity of a compensation committee. All executive officers of
the Company are also directors of the Company and as such were and
are able to vote on matters of compensation. Though the Company is
not legally obligated to establish a compensation committee, we may
do so when deemed advisable by the board.
Compensation
Committee Report
As a smaller reporting
company, the Company is not required to report the Compensation
Discussion and Analysis required by Item 402(b) of Regulation S-K,
and as such there was no review or recommendation as to its
inclusion in this report.
Item 12. Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
The following tables
list information that is accurate as of December 31, 2019.
Securities
authorized for issuance under equity compensation plans
The following details
securities authorized for issuance as of December 31 2019.
Equity
Compensation Plan Information
Plan
category
|
|
Number of
securities to
be issued upon
exercise of
outstanding
options, warrants and rights
|
|
|
Weighted-average
exercise
price of
outstanding options, warrants and rights
|
|
|
Number of
securities remaining
available for
future issuance under equity
compensation
plans (excluding securities reflected in column (a))
|
|
|
|
(a)
|
|
|
(a)
|
|
|
(a)
|
|
Equity compensation
plans approved by security holders
|
|
|
5,690,000 |
|
|
|
0.13 |
|
|
|
2,325,000 |
|
Equity compensation
plans not approved by security holders
|
|
|
0 |
|
|
|
N/A |
|
|
|
0 |
|
Total
|
|
|
5,690,000 |
|
|
|
0.13 |
|
|
|
2,325,000 |
|
Security
Ownership of Certain Beneficial Owners and Management
The table below sets
forth information regarding the ownership of our common stock, as
of December 31, 2019 unless otherwise indicated in the footnotes to
the table, by (i) all persons known by us to beneficially own more
than 5% of our common stock, (ii) each of our current directors and
director nominees, (iii) our principal executive officer and our
other executive officers who were serving as such at the end of
Fiscal 2019 (each, a “named executive officer”), and (iv) all of
our directors, director nominees and executive officers as a group.
We know of no agreements among our stockholders that relate to
voting or investment power over our common stock or any arrangement
the operation of which may at a subsequent date result in a change
of control of us.
Beneficial
ownership is determined in accordance with applicable SEC rules and
generally reflects sole or shared voting or investment power over
securities. Under these rules, a person is deemed to be the
beneficial owner of securities that the person has the right to
acquire as of or within 60 days after December 31, 2019, upon the
exercise of outstanding stock options or warrants, the conversion
of outstanding convertible notes, or the exercise or conversion of
any other derivative securities affording the person the right to
acquire shares of our common stock. As a result, each person’s
percentage ownership set forth in the table below is determined by
assuming that all outstanding stock options, warrants or other
derivative securities held by such person that are exercisable or
convertible as of or within 60 days after December 31, 2019 have
been exercised or converted. Except in cases where community
property laws apply or as indicated in the footnotes to the table,
we believe that each person identified in the table below possesses
sole voting and investment power over all shares of common stock
shown as beneficially owned by such person. All ownership
percentages in the table are based on 688,173,645 shares of our
common stock outstanding as of May 26, 2020.
|
|
Shares
Beneficially
|
|
|
|
Owned
|
|
Name and
Address of Beneficial Owner:
|
|
Number
|
|
|
Percent
|
|
5%
Stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors and
Executive Officers:
|
|
|
|
|
|
|
Robert Friedman
|
|
|
32,395,833 |
|
|
|
4.7 |
% |
Neil Chan(2)
|
|
|
16,466,255 |
|
|
|
2.4 |
% |
Abel Sierra(3)
|
|
|
800,000 |
|
|
*
|
|
Robert Nealon(4)
|
|
|
2,666,667 |
|
|
*
|
|
Mark Wells
|
|
|
710,785 |
|
|
*
|
|
All executive officers
and directors as a group (5 persons)
|
|
|
53,039,540 |
|
|
|
7.7 |
% |
_________
*
|
Represents beneficial
ownership of less than 1%.
|
|
|
(1)
|
not used
|
|
|
(2)
|
Represents 2,500,000 shares of common stock
issuable upon the exercise of stock options that are or will be
vested and exercisable within 60 days after December 31, 2019, and
13,966,255 outstanding shares of common stock.
|
(3)
|
Represents 650,000 shares of common stock
issuable upon the exercise of stock options that are or will be
vested and exercisable within 60 days after December 31, 2019, and
150,000 outstanding shares of common stock.
|
|
|
(4)
|
Represents 400,000
shares of common stock issuable upon the exercise of stock options
that are or will be vested and exercisable within 60 days after
December 31, 2019, and 2,266,667 outstanding shares of common
stock.
|
|
|
(5)
|
not used
|
Item 13. Certain
Relationships and Related Transactions, and Director
Independence.
Transactions with
related persons, promoters and certain control persons
During the years ended
December 31, 2019 and 2018, the Company incurred approximately
$143,000 and $185,000, respectively, in management and consulting
fees with an officer and an entity controlled by him. As of
December 31, 2019 and 2018, the Company owed approximately $190,000
and $136,000, respectively, to directors and officers and a company
controlled by a director, which is included in accounts payable and
accrued liabilities. The amounts owed are unsecured, non-interest
bearing, and due on demand.
During the years ended December 31, 2019 and
2018, the Company incurred approximately $120,000 and $493,000,
respectively, in purchases of hardware from a vendor controlled by
a director of the Company. As of December 31, 2019 and 2018, the
amounts owed to this related-party vendor were approximately
$45,000 and $102,000, respectively.
Director
Independence
In the USA, the
Company’s common stock is listed on the OTC Link OTCQB inter-dealer
quotation system, and in Canada on the CSE, neither of which have
director independence requirements.
Item 14. Principal
Accounting Fees and Services.
Audit Fees
Aggregate fees billed
for professional services rendered by the Company’s principal
accountant for the audit of the Company’s annual financial
statements, review of financial statements in quarterly filings, or
services associated with statutory and regulatory filings for the
last two fiscal years are as follows:
2019:
$75,000
2018: $66,500
Audit Related
Fees
Aggregate fees billed
in the last two fiscal years for assurance and related services by
the Company’s principal accountant that are reasonably related to
the performance of the audit or review of the registrant’s
financial statements and are not reported above are as follows:
2019:
$0
2018: $0
Tax Fees
Aggregate fees billed
in each of the last two fiscal years for professional services
rendered by the Company’s principal accountant for tax compliance,
tax advice, and tax planning are as follows:
2019:
$0
2018:
$0
All Other
Fees
Aggregate fees billed
in each of the last two fiscal years for products and services
provided by the principal accountant, other than the services
reported above, are as follows:
2019:
$0
2018:
$0
Audit Committee’s
Pre-Approval Policies and Procedures
The Company does not at
this time have an audit committee and no formal pre-approval
policies or procedures have yet been implemented. The board of
directors acting in lieu of an audit committee is required to
pre-approve the engagement of the Company’s principle accountant
for non-auditing services.
PART IV
Item 15. Exhibits,
Financial Statement Schedules.
(1) Financial
statements:
- Audited Financial
Statements for the year ended December 31, 2019
(2) Financial statement
schedules
- none
(3) Exhibits
Exhibit
Index
SIGNATURES
Pursuant to the
requirements of Section 13 or 15(d) 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.
|
IGEN Networks
Corp
|
|
|
|
|
|
May 29, 2020
|
By:
|
/s/ Neil
Chan
|
|
|
|
Neil Chan,
|
|
|
|
Chief Executive Officer
and Director
(Principal Executive
Officer,
Principal Financial
Officer and
Principal Accounting
Officer)
|
|
iGen Networks (QB) (USOTC:IGEN)
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