IGEN

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-K

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2021.

FOR THE TRANSITION PERIOD FROM ______ TO ______.

Commission File No. 333-141875

31772 Casino Drive, Suite C. Lake Elsinore, CA 92530 

(Address of principal executive offices) (Zip Code) 

1-855-912-5378

(Registrant’s telephone number including area code) 

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.

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 30, 2021, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $9,670,041 based on the closing price of the common stock of $0.0079.

The number of shares of the registrant’s common stock outstanding as of March 15, 2022 was 1,515,716,857

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 Wireless Carriers and distribution partners to provide direct and secure access to information on vehicle assets and driver behavior. The software services are based on AWS Cloud infrastructure created to provide valuable information to its customers over the wireless network and accessible from internet connected devices. The software services are marketed through automotive dealers, financial institutions, and government channels as distinct commercial and consumer brands that include Nimbo Tracking, CU Trak, Medallion GPS and most recently “FamilyShield” sold direct to consumers through Amazon.com.

The Company’s head office is located at 31772 Casino Drive, Suite C. Lake Elsinore, CA 92530. Direct line is 855-912-5378.

The Company owns the DTC Patent No. 11,037,378 issued from the U.S. Patent Office as of June 15, 2021 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

The Company currently does not have any open legal proceedings.

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, 2021, there were 147 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, 2021. This MD&A should be read together with our audited consolidated financial statements and the accompanying notes for the year ended December 31, 2021 (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:

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 fiscal-year 2021, the Company faced significant challenges from the pandemic and supply chain issues within the automotive industry. Despite these challenges IGEN continued to make progress with creating new opportunities and products in 2021. The Company moved into new offices located in Lake Elsinore in anticipation of significant growth post 2021 challenges. Creating new channels and partnerships in 2021 were key initiatives to secure longer term market share with both our consumer and commercial customers. Product and software innovation was our priority with the recent launch of our Next-Generation Platform and Medallion GPS created for Light-Commercial Fleets, both developed with IGEN’s patented Driver Signature and Behavior algorithms.

For the year ended December 31, 2021, the Company recognized revenues of $268,947 with a gross margin of 54% and $145,154 gross profit. Expenses for the year ended December 31, 2021, totaled $3,594,091, an increase of $837,975, or 31%, from total expenses reported for 2020. Excluding $2,590,040 of stock-based compensation expense to our directors, operational expenses increased by 14% year on year.

For the year ended December 31, 2021, the Company saw a net increase in cash of $37,698. Cash used in operating activities was $962,960, an increase of 10% from the $874,261 net cash used in 2020. This was offset by net financings of $1,092,246 raised via private placements. Cash at the end of the year was $64,429.

Notable highlights of the year ended December 31, 2021 include the following Company achievements:

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.

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, 2021 and 2020, 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 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 substantially all our revenues from the sale of products and services combined into one performance obligation. Product revenue includes the shipment of product according to the agreement with our customers. Service revenue include vehicle tracking services and customer support (technical support), installations and consulting. A contract usually includes 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 when cash payments are received from customers in advance of the Company’s performance. Contract assets represent the costs of the underlying hardware to enable the Company to perform on its contracts with customers and are amortized using the same method and term as deferred revenues. Any revenue that has been deferred and is expected to be recognized beyond one year is classified as deferred revenue, net of current portion.

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, 2021, the Company had total current assets of $174,366, an 113% increase from the end of 2020. This increase was mostly due to a $92,349 increase in cash, accounts receivable, and inventory, because of the timing of payments to Nimbo from its customers and an increase in new sales contracts in Q4 2020.

The Company’s current liabilities as of December 31, 2021, were $1,084,366, a 6% decrease over those reported at the end of the 2020. However, $65,715 (or 6%) of the Company’s current liabilities were deferred revenues, net to be recognized in future periods. The decrease in current liabilities was mostly due to a $252,339 decrease in accounts payable, accrued expenses, derivative liability, and current portion of deferred revenues as of December 31, 2021.

IGEN ended 2021 with negative working capital of $910,000. 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 2021, the Company raised an additional $1,142,211 in financings and converted $472,810 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, 2021, the Company’s total assets were $761,826, a 30% increase over the prior year, due primarily to the increase in current assets previously discussed and the new operating lease asset. The majority of the Company’s assets remain $505,508 in goodwill associated with the acquisition of Nimbo in 2014.

As of December 31, 2021, the Company’s total liabilities were $1,371,494, which reflects $79,770 in long-term deferred revenue, net in addition to the $1,084,366 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 2022. Total liabilities decreased by 6% over the previous year, however 11%, or $145,485 of the Company’s year-end total liabilities was deferred revenue, net, compared with $138,812 of deferred revenue, net reported at the end of 2020.

The above resulted in net assets as of December 31, 2021 being ($609,668) and an accumulated deficit of $19,076,522.

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, 2021, the Company had revenues of $268,947, a 27% decrease over the revenues reported for same period in 2020. Decrease in revenue was primarily due to the impact of COVID-19 on demand for new vehicles at our customers’ franchise dealerships. Several of our customers’ dealerships were closed as a result of localized infections amongst their staff and sales management.

Costs of goods sold for 2021 were $123,793, representing a decrease of 54% year on year. These costs are primarily mobile hardware and cellular carrier costs.

The resulting gross profit was $145,154, representing an increase of 50% year on year, and gross margins of 54%.

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, 2021, totaled $3,574,091, an increase of $837,975, or 31%, from total expenses reported for 2020. Excluding $2,590,040 of stock-based compensation expense to our directors, operational expenses increased by 14% year on year.

Net Loss

For the year ended December 31, 2021, the Company had a net loss of $3,428,937 (or ($0.00) per basic and diluted share) compared with a net loss of $2,639,472 (or ($0.00) per basic and diluted share) in 2020. Included in the net loss of $3,428,937, is $82,198 of other expenses related to the Company’s convertible debt and derivative liabilities recognized in 2021.

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, 2021, the Company saw a net increase in cash of $37,698. Cash used in operating activities was $962,960, an increase of 10% from the $874,261 net cash used in 2020. This was offset by net financings of $1,092,246 raised via private placements. Cash at the end of the year was $64,429.

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, 2021 and 2020 are included herewith.

IGEN NETWORKS CORP.

Consolidated Financial Statements

For the Years Ended December 31, 2021 and 2020

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of

IGEN Networks Corp.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of IGEN Networks Corp. and subsidiary (the “Company”) as of December 31, 2021, the related consolidated statements of operations, redeemable convertible preferred stock and stockholders’ deficit, and cash flows for the year 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, 2021, and the results of its operations and its cash flows for the year 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 such 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.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition

Description of the Matter

As described in Note 2 to the financial statements, the Company recognizes revenue in accordance with Accounting Standards Codification 606, Revenues from Contracts with Customers (“ASC 606”). In applying ASC 606 to the Company’s customer contracts, there is significant judgement regarding the identification of the performance obligations, and in particular as it relates to whether hardware is a separate performance obligation or part of the performance obligation that relates to tracking services. In addition, there is also judgement as to the period of the time that revenue should be recognized for certain performance obligations, and for certain transactions there is judgement as to whether a single contract is a single contract with two performance obligations or in substance two separate contracts for accounting purposes. These matters require significant judgement and ultimately affect the timing of revenue recognition, and as a result, we identified revenue recognition as a critical audit matter.

How We Addressed the Matter in Our Audit

To address the above matters relating to revenue recognition, our audit procedures included reviewing management’s detailed evaluation of the application of ASC 606 as it applies to its various types of customer contracts and verifying that the evaluation properly considered the guidance in ASC 606. Further, our procedures also included reviewing customer contracts, testing the details of a number of transactions, and performing other procedures to verify the appropriateness of the Company’s application of ASC 606.

/s/ GreenGrowthCPAs

We have served as the Company’s auditor since 2021,

March 30, 2022

Los Angeles, California

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 sheet of IGEN Networks Corp. and subsidiary (the “Company”) as of December 31, 2020, the related consolidated statements of operations, redeemable convertible preferred stock and stockholders’ deficit, and cash flows for the year 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, 2020, and the results of its operations and its cash flows for the year 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 audit. 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 audit 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 audit 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 audit 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 audit 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 audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition

Description of the Matter

As described in Note 2 to the financial statements, the Company recognizes revenue in accordance with Accounting Standards Codification 606, Revenues from Contracts with Customers (“ASC 606”). In applying ASC 606 to the Company’s customer contracts, there is significant judgement regarding the identification of the performance obligations, and in particular as it relates to whether hardware is a separate performance obligation or part of the performance obligation that relates to tracking services. In addition, there is also judgement as to the period of the time that revenue should be recognized for certain performance obligations, and for certain transactions there is judgement as to whether a single contract is a single contract with two performance obligations or in substance two separate contracts for accounting purposes. These matters require significant judgement and ultimately affect the timing of revenue recognition, and as a result, we identified revenue recognition as a critical audit matter.

How We Addressed the Matter in Our Audit

To address the above matters relating to revenue recognition, our audit procedures included reviewing management’s detailed evaluation of the application of ASC 606 as it applies to its various types of customer contracts and verifying that the evaluation properly considered the guidance in ASC 606. Further, our procedures also included reviewing customer contracts, testing the details of a number of transactions, and performing other procedures to verify the appropriateness of the Company’s application of ASC 606.

Valuation of derivative liabilities

Description of the Matter

As described in Note 2 to the financial statements, the Company has determined that the conversion features of certain debt and equity instruments it holds should be accounted for as derivatives. The accounting for these derivative liabilities require that they be recorded at fair value and that the fair value is remeasured at the end of each reporting period with the change in the fair value being a charge or credit to earnings. In determining the fair value of these derivatives, the Company uses a mutli-nominal lattice model which requires a number of assumptions as inputs, including expected volatility, risk-free rate and expected life. Considering there is judgement as to the appropriateness of the model used and that there is judgement regarding the assumptions that are significant to the model, we identified the valuation of derivative liabilities as critical audit matter.

How We Addressed the Matter in Our Audit

To test the valuation of the derivative liabilities, our audit procedures included, among others, reviewing the terms of the underlying instruments, evaluating the methodologies used in the valuation model and testing the significant assumptions. For example, we tested the reasonableness of the Company’s conversion terms and compared the forecasted volatility of the Company’s common stock price to its historical volatility. We also assessed the completeness and accuracy of the underlying data. We involved our valuation specialist to assist in our evaluation of the significant assumptions and methodologies used by the Company. We have also evaluated the Company financial statement disclosures related to these matters included in Note 7 to the Consolidated Financial Statements.

/s/ Macias Gini & O’Connell LLP

Irvine, CA

March 31, 2021

Auditor Firm ID  - 6580

IGEN NETWORKS CORP.

Consolidated Balance Sheets

(Expressed in U.S. dollars)

(The accompanying notes are an integral part of these consolidated financial statements)

IGEN NETWORKS CORP.

Consolidated Statements of Operations

(Expressed in U.S. dollars)

(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)