UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
ZOOMPASS HOLDINGS,
INC.
(Exact name of registrant as specified in its charter)
(Mark One)
☒ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2020
☐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. 333-20399
Nevada |
30-0796392 |
(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer Identification
No.) |
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2075 Kennedy Rd, Suite 404
Toronto, Ontario Canada, M1T 3V3
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(Address of principal executive offices, including Zip Code)
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416-862-5257
(Registrant's telephone number, including area code)
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Securities Registered Pursuant to Section 12(b) of the Exchange
Act: None
Securities Registered Pursuant to Section 12(g) of the Exchange
Act:
Common Stock, $0.0001 per share par value
Indicate by check mark if registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act. Yes
☐
No☒.
Indicate by check mark if registrant is not required to file
reports pursuant to Section 13 or 15(d) of the Exchange
Act. Yes ☐ No
☒
.
Indicate by check mark whether the registrant: (1) filed all
reports required to be filed by Section 13 or 15(d) of the Exchange
Act during the past 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 (Section 232.405 of this chapter)
during the preceding 12 months or such shorter period that the
registrant was required to submit and post such files. Yes
☐
No ☒
Check if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained
herein to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
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 |
☐ |
Accelerated
filer |
☐ |
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Non-accelerated
filer |
☐ |
Smaller reporting
company |
☒ |
(Do not check if a smaller
reporting company) |
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Emerging growth company
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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 7(a)(2)(B) of the Securities
Act ☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act) : Yes ☐ No ☒
The aggregate market value of the voting stock of the Registrant
held by non-affiliates September 24, 2021 was approximately
$Nil.
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class |
Outstanding as of September 24, 2021 |
Common
stock, $0.0001 par value |
110,976,094 |
EXPLANATORY NOTE
The sole purpose of this Amendment No. 1 to the Annual Report on
Form 10-K for the year ended December 31, 2020 of Zoompass
Holdings, Inc. (the “Company”) filed with the Securities and
Exchange Commission on September 27, 2021 (the “Form
10-K”) is to correct the name and signature of the Chief Financial
Officer.
No other changes have been made to the Form 10-K. This Amendment
No. 1 to the Form 10-K speaks as of the original filing date
of the Form 10-K, does not reflect events that may have
occurred subsequent to the original filing date, and does not
modify or update in any way disclosures made in the original Form
10-K.
ZOOMPASS HOLDINGS, INC.
TABLE OF CONTENTS
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PART I |
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Item
1. |
Business |
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4 |
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Item 1A. |
Risk Factors |
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5 |
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Item 1B. |
Unresolved Staff
Comments |
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12 |
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Item 2. |
Properties |
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12 |
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Item 3. |
Legal Proceedings |
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12 |
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Item 4. |
Mine Safety
Disclosures |
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12 |
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PART II |
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Item
5. |
Market for Registrant's Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity
Securities |
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13 |
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Item 6. |
Selected Financial
Data |
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16 |
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Item 7. |
Management's Discussion and
Analysis of Financial Condition and Results of
Operations |
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17 |
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Item 7A. |
Quantitative and Qualitative
Disclosures About Market Risk` |
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28 |
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Item 8. |
Financial Statements and
Supplementary Data |
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29 |
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Item 9. |
Changes in and Disagreements
With Accountants on Accounting and Financial Disclosure |
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29 |
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Item 9A. |
Controls and
Procedures |
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30 |
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Item 9B. |
Other Information |
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31 |
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PART III |
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Item 10. |
Directors, Executive Officers
and Corporate Governance |
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32 |
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Item 11. |
Executive
Compensation |
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35 |
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Item
12. |
Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters |
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38 |
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Item 13. |
Certain Relationships and
Related Transactions, and Director Independence |
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39 |
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Item 14. |
Principal Accounting Fees and
Services |
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39 |
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PART IV |
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Item 15. |
Exhibits, Financial Statement
Schedules |
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40 |
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SIGNATURES |
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41 |
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Statements contained in this annual report include "forward-looking
statements" within the meaning of such term in Section 27A of the
Securities Act and Section 21E of the Exchange Act. Forward-looking
statements involve known and unknown risks, uncertainties and other
factors which could cause actual financial or operating results,
performances or achievements expressed or implied by such
forward-looking statements not to occur or be realized.
Forward-looking statements made in this annual report generally are
based on our best estimates of future results, performances or
achievements, predicated upon current conditions and the most
recent results of the companies involved and their respective
industries. Forward-looking statements may be identified by the use
of forward-looking terminology such as "may", "will", "could",
"should", "project", "expect", "believe", "estimate", "anticipate",
"intend", "continue", "potential", "opportunity" or similar terms,
variations of those terms or the negative of those terms or other
variations of those terms or comparable words or expressions.
Potential risks and uncertainties include, among other things, such
factors as:
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concentration of our customer base and
fulfillment of existing customer contracts; |
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our
ability to maintain pricing; |
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deterioration of the credit markets; |
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competition within our industry; |
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asset
impairment and other charges; |
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our
identifying, making and integrating acquisitions; |
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loss
of key executives; |
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the
ability to employ skilled and qualified workers; |
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inadequacy of insurance coverage for certain
losses or liabilities; |
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federal legislation and state legislative and
regulatory initiatives relating to our industry; |
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future legislative and regulatory
developments; |
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our
beliefs regarding the future of our competitors; |
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our
expectation that the demand for our products services will
eventually increase; and |
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our
expectation that we will be able to raise capital when we need
it. |
These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks in the
section entitled "Risk Factors" set forth in this Annual Report on
Form 10-K for the year ended December 31, 2020, any of which may
cause our company's or our industry's actual results, levels of
activity, performance or achievements to be materially different
from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking
statements. These risks may cause the Zoompass Holdings, Inc. or
its industry's actual results, levels of activity or performance to
be materially different from any future results, levels of activity
or performance expressed or implied by these forward-looking
statements.
Readers are urged to carefully review and consider the various
disclosures made by us in this report and in our other reports
filed with the Securities and Exchange Commission. We undertake no
obligation to update or revise forward-looking statements to
reflect changed assumptions, the occurrence of unanticipated events
or changes in the future operating results over time except as
required by law. We believe that our assumptions are based upon
reasonable data derived from and known about our business and
operations. No assurances are made that actual results of
operations or the results of our future activities will not differ
materially from our assumptions.
As used in this Annual Report on Form 10-K and unless otherwise
indicated, the terms "we," "us," "our," or the "Company" refer to
Zoompass Holdings, Inc. and our subsidiaries. Unless
otherwise specified, all dollar amounts are expressed in United
States dollars.
PART I
ITEM 1. BUSINESS
Overview of Our Business
Recent Developments
UVIC, Inc., was incorporated in Nevada on August 21, 2013.
On May 8, 2015, UVIC, Inc., filed a registration statement with the
Securities and Exchange Commission Form S-1 to register 7,000,000
shares of our common stock at a per share price of $0.01 on behalf
of selling shareholders. The SEC file number of the registration
statement is 333-203997. The Form S-1 was declared effective
by the SEC on August 7, 2015.
Prior to the transaction described below, UVIC., Inc., had limited
operating and development activities.
Effective August 22, 2016, the Company entered into an Agreement
for the Exchange of Stock (the "Agreement") with Zoompass, Inc., an
Ontario, Canada corporation ("Zoompass") that was incorporated
under the laws of Ontario on June 8, 2016. Pursuant to
the Agreement, the Company agreed to issue 8,050,784 shares of its
restricted common stock to Zoompass' shareholders ("Zoompass'
shareholders") in exchange for all the shares of Zoompass Inc.
owned by the Zoompass Inc.'s Shareholders. At the Closing
Date, Rob Lee, a significant shareholder of the Company agreed to
cancel 7,000,000 shares of the Company's common stock, which shares
constituted the control shares of the Company. Other than
this one significant shareholder, shareholders of the Company held
2,670,000 shares. As a result of the Agreement, Zoompass is now a
wholly owned subsidiary of the Company. The Company has
amended its Articles of Incorporation to change its name to
Zoompass Holdings, Inc. and the appropriate forms were filed with
FINRA and the SEC to change its name, address and symbol and
complete a 3.5-1 forward split, which was consented to by the
majority of shareholders on September 7, 2016 and approved in
February 2017, for shareholders of record on September 7, 2016.
All share figures have been retroactively stated to reflect the
stock split approved by shareholders, unless otherwise
indicated. Additionally, the Company's shareholders consented
to an increase of the shares authorized to 500,000,000 and a
revision of the par value to $0.0001.
As the former Zoompass shareholders ended up owning the majority of
the Company, the transaction does not constitute a business
combination and was deemed to be a recapitalization of the Company
with Zoompass being the accounting acquirer, accordingly the
accounting and disclosure information is that of Zoompass going
forward.
Effective March 6, 2018 (the "Closing Date"), Zoompass Holdings,
Inc.'s (the "Company") Canadian operating subsidiary, Zoompass,
Inc., entered into an Asset Purchase Agreement (the "Agreement")
for the sale of its Prepaid Card Business ("Prepaid Business") to
Fintech Holdings North America Inc., or its designee. The aggregate
purchase price of the Prepaid Business was C$400,000. The
transaction was completed on March 26, 2018.
During the first quarter of 2018, the Company implemented a plan to
abandon the mobility solution operation. The Company has determined
that the mobility solution operation represents a component and a
reportable segment of the Company. According to the plan of
abandonment, the Company gradually ceased accepting any new
business during first quarter of 2018 and settled all the remaining
orders and obligations from mobility solution by end of March
2018.
On October 16, 2018, the Company reached an Asset Purchase
Agreement and purchased certain business assets that represents a
business from Virtublock Global Corp. (“Virtublock”, “VGC”) in
return the Company issued 44,911,724 shares to Virtublock and
pursuant to the issuance of shares Virtublock ended up owning 45%
of total outstanding common shares of the Company.
Zoompass Inc., was incorporated under the laws of Ontario on June
8, 2016. On October 17, 2018, pursuant to an asset purchase
agreement with Virtublock, certain net assets were acquired by the
Company in exchange for shares of the Company. The net assets
primarily consisted of certain technology IP related to
cryptocurrency exchange/wallet, certain strategic partnerships and
customer contracts. On March 25, 2019, the name of the company was
changed from Zoompass Inc. to Virtublock Canada Inc. (“VCI”).
On February 27, 2020, the Company cancelled 44,911,724 shares of
the common stock which were issued in connection with the asset
purchase agreement dated October 17, 2018 with Virtublock Global
Corp. Pursuant to a General Release agreement dated November 29,
2019, the asset purchase agreement dated October 17, 2018 with
Virtublock Global Corp. was deemed cancelled and each party
acknowledged and agreed that no party has or shall have any claim
with respect to intellectual property, software or other assets
owned by any other party and that no agreements exist or remain
unsatisfied with respect to the transfer of any asset from a
releasing party to any other party, and Virtublock Global Corp.
assigned and tendered the 44,911,724 shares of common stock of the
Company to the Company for cancellation. As the share cancellation
occurred on February 27, 2020, the accounting recognition of this
transaction, consisting of a transfer of $4,492 from common stock
to additional paid-in capital and related reduction in the number
of common shares outstanding, will be reflected in the consolidated
financial statements for the first quarter ended March 31,
2020.
On May 31, 2020, the Company closed a Share Exchange Agreement (the
"Share Exchange Agreement") by and among the Company, Blockgration
Global Corp., an Ontario corporation and its subsidiaries ("BGC"),
and the shareholders of BGC (the "BGC Shareholders"). This
acquisition gives the Company controlling interest in BGC’s
subsidiaries in Canada and India which is engaged in the business
of digital wallet deployments, prepaid card platform, blockchain
and mobile apps deployment.
On September 30, 2020, the Company cancelled 9,330,000 shares of
the common stock and 14,845,000 share purchase warrants which was
allocated in connection with acquisition of MSS that was a 70%
subsidiary of BGC on May 31, 2020. Refer to note 10 and 14 of the
consolidated financial statements.
The Company has incurred recurring losses from operations and as of
December 31, 2020 had a net working capital deficiency and an
accumulated deficit. The Company’s continued existence is dependent
upon its ability to continue to execute its operating plan and to
obtain additional debt or equity financing. These conditions raise
substantial doubt about the Company’s ability to continue as a
going concern. There can be no assurance that the necessary debt or
equity financing will be available, or will be available on terms
acceptable to the Company, in which case the Company may be unable
to meet its obligations. Should the Company be unable to realize
its assets and discharge its liabilities in the normal course of
business, the net realizable value of its assets may be materially
less than the amounts recorded in the consolidated financial
statements. The consolidated financial statements do not include
any adjustments relating to the recoverability of recorded asset
amounts that might be necessary should the Company be unable to
continue in existence.
During the three months period ended March 31, 2021, the Company
completed a private placement for the sale of non-registered shares
of the Company's common stock. As a result of the private placement
3,614,685 non-registered shares of the Company's common stock was
issued for gross proceeds of $298,355.
In August 2021, the Company completed a private placement for the
sale of non-registered shares of the Company's common stock. As a
result of the private placement 1,200,000 non-registered shares of
the Company's common stock was issued for gross proceeds of
$96,000.
There is no certainty that the Company will be successful in
generating sufficient cash flow from operations or achieving and
maintaining profitable operations in the future to enable it to
meet its obligations as they come due and consequently continue as
a going concern. The Company will require additional financing in
the future to fund its operations and it is currently working on
securing this funding through corporate collaborations, public or
private equity offerings or debt financings. Issuance of additional
equity securities by the Company would result in the dilution of
the interests of existing shareholders. There can be no assurance
that financing will be available when required.
Beginning in March 2020, the Governments of Canada and the United
States, as well as other foreign governments instituted emergency
measures as a result of the COVID-19 virus outbreak. The virus has
had a major impact on North America and international securities,
currency markets and consumer activity which may impact the
Company's financial position, its results of future operations and
its future cash flows significantly. Given the daily evolution of
the COVID-19 outbreak and the global responses to curb its spread,
the Company is not able to estimate the effects of the COVID-19
outbreak on its results of future operations, financial position,
and liquidity in fiscal year 2021.
The Company is actively seeking opportunities to enter into
partnership or acquire third parties with existing revenue streams.
The company is well positioned to achieve this objective and will
continue to pursue such opportunities going forward.
The Company will remain a Fintech company and continue to develop
and acquire software platforms and services to sell to customers
globally with a focus on leading edge technologies and software as
a service.
ITEM 1A. RISK FACTORS
Global Economic Conditions
The unprecedented events in global financial markets in the past
several years have had a profound impact on the global economy.
Many industries have been impacted by these market conditions.
Market events and conditions, including volatility in the
international credit markets and other financial systems and the
deterioration of global economic conditions, could impede the
Company's access to capital or increase the cost of capital and may
adversely affect the Company's operations. The Company is also
exposed to liquidity risks in meeting its operating and capital
expenditure requirements in instances where the Company's cash
position is unable to be maintained or appropriate financing is
unavailable. These factors may impact the Company's ability to
obtain capital on terms favourable to it or at all. Increased
market volatility may impact the Company's operations which could
adversely affect the trading price of the Common Shares.
Operating and Capital Requirements
The Company competes for financing and personnel with other
financial technology companies. There can be no assurance that
additional capital or other types of financing will be available,
when needed, or that, if available, the terms of such financing
will be favourable to the Company. The Company may need to make
significant expenditures in connection with the development of its
platform or other lines of business. There is no assurance
that any such funds will be available for operations and the
ability of the Company to raise such capital will depend, in part,
upon conditions in the capital markets at the time and its
historical business performance. If additional capital is raised by
the issuance of shares from the treasury of the Company,
shareholders may suffer dilution. Future borrowings by the Company
or its subsidiaries may increase the level of financial and
interest rate risk to the Company as the Company will be required
to service future indebtedness. Further, failure to obtain
additional financing on a timely basis could cause the Company to
reduce, suspend, or terminate its proposed operations.
Dependence on Highly Skilled Personnel
The Company's prospects depend in part on the services of key
executives and other highly skilled and experienced personnel
focused on managing the Company's interests, in addition to the
identification of new opportunities for growth and funding. The
loss of these persons or the Company's inability to attract and
retain additional highly skilled employees required for the
Company's activities may have a material adverse effect on its
business or future operations. The Company does not currently
maintain "key person" life insurance on any of its key
employees.
Negative Operating Cash Flow
The Company has negative operating cash flow and may continue to
have negative operating cash flow in future periods. To the extent
that the Company has negative operating cash flow, the Company will
need to continue to deploy a portion of its cash reserves to fund
such negative operating cash flow.
Limited operating history of the Company's new direction; No
assurance of profitability; anticipated losses.
The Company has a limited operating history and, accordingly, has a
limited operating history on which to base an evaluation of our
business. Our business must be considered in light of the risks,
expenses and problems frequently encountered by companies in their
early stages of development, particularly companies in new and
rapidly evolving markets which involve technology. The
in-development operations are subject to all of the risks inherent
in the establishment of a new business enterprise. Accordingly, the
likelihood of our success must be considered in the light of the
problems, expenses, difficulties, complications, and delays
frequently encountered in connection with the starting and
expansion of a business and the relatively competitive environment
in which we will operate. Unanticipated delays, expenses and other
problems such as setbacks in launch and development, product
sourcing manufacturing, and market acceptance are frequently
encountered in establishing a new business such as the Company`s.
There can be no assurance that the Company will be successful in
addressing such risks, and any failure to do so could have a
material adverse effect on the Company's business, results of
operations and financial condition.
Because of the Company`s limited operating history, the Company has
limited historical financial data on which to base planned
operating expenses. Accordingly, our expense levels, which are, to
a large extent, variable, will be based in part on our expectations
of future revenues. As a result of the variable nature of many of
our expenses, we may be unable to adjust spending in a timely
manner to compensate for any unexpected delays in the development
and
marketing of our products or any subsequent revenue shortfall. Any
such delays or shortfalls will have an immediate adverse impact on
our business, operating results and financial condition.
The Company has not achieved profitability to date. To the extent
that net revenue does not grow at anticipated rates or that
increases in its operating expenses precede or are not subsequently
followed by commensurate increases in net revenue, or that the
Company is unable to adjust operating expense levels accordingly,
the Company's business, results of operations and financial
condition will be materially and adversely affected. There can be
no assurance that the Company's operating losses will not increase
in the future or that the Company will ever achieve or sustain
profitability.
Regulatory Risk
Although the Company follows certain laws and regulations and
receives the requisite approvals to operate in the lines of
business it currently or intends to operate in there is no
guarantee that these laws, regulations and approvals will not be
challenged or impugned. Further changing regulatory regimes may
subject the Company to new laws and regulations. Changes in
the regulatory environment the Company operates in can have a
material adverse effect on operations.
Demand for our products and services may not develop as
expected our projected revenues and profits will be
affected.
Future profits are influenced by many factors, including economics,
and will be predicated on a stable and/or growing market and the
purchase and consumption of our products and services. The
Company believes, and our growth expectations assume, that the
markets for our suite of products and services will continue to
grow, that the Company will increase its penetration of these
markets and that our anticipated revenue from selling into this
market will continue to increase. If the Company's expectations as
to the size of these markets and its ability to sell our products
and services in this market are not correct, our revenue may not
materialize, and our business will be harmed.
Operating results may fluctuate and may fall below
expectations in any fiscal quarter.
Our operating results are difficult to predict and are expected to
fluctuate from quarter to quarter due to a variety of factors, many
of which are outside of our control. As a result, comparing our
operating results on a period-to-period basis may not be
meaningful, and you should not rely on our past results or future
predictions prepared by the Company as an indication of our future
performance. If our revenue or operating results fall in any
period, the value of our common stock would likely decline.
Factors that may cause our operating results to fluctuate
include:
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our ability to arrange potential
financing or generate operating cash flows; |
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our ability to acquire products to resell to our
customers; |
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changes in federal, state and local
government; |
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availability and costs of labor and
equipment; |
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the addition of new customers or the loss of
existing customers; |
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our ability to control costs, including operating
expenses; |
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changes in the mix of our products and
services; |
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the length of our sales cycle; |
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the productivity and growth of our sales
force; |
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the timing of opening of new offices or making
other significant investments in the growth of our business, as the
revenue we hope to generate from those expenses often lags several
quarters behind those expenses: |
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changes in pricing by us or our
competitors; |
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costs related to the acquisition and integration
of companies or assets; |
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general economic trends, including changes in
geopolitical events such as war or incidents of terrorism;
and |
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future accounting pronouncements and changes in
accounting policies. |
The Company operates in a highly competitive industry and
competitors may compete more effectively.
Many of our competitors have longer operating histories and greater
resources than us, and could focus their substantial financial
resources to develop a competing business model, develop products
or services that are more attractive to potential customers than
what we offer or convince our potential customers that they should
require financing arrangements that would be impractical for
smaller companies to offer. Our competitors may also offer
products and services at prices below cost and/or devote
significant sales forces to competing with us or attempt to recruit
our key personnel by increasing compensation, any of which could
improve their competitive positions. Any of these competitive
factors could make it more difficult for us to attract and retain
customers; cause us to lower our prices in order to compete, and
reduce our market share and revenue, any of which could have a
material adverse effect on our financial condition and operating
results. We can provide no assurance that we will continue to
effectively compete against our current competitors or additional
companies that may enter our markets.
International operations could expose business to additional
risks
The Company expects to generate a portion of sales outside of
Canada in the future. Operating internationally is one of our
growth strategies, and we expect our revenue and operations outside
of North America will expand in the future. These operations will
be subject to a variety of risks that we do not face currently:
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establishing and managing highly experienced
foreign suppliers, distributors and relationships and overseeing
and ensuring the performance of foreign subcontractors; |
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increased travel, infrastructure and legal and
compliance costs associated with multiple international
locations; |
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additional withholding taxes or other taxes on
our foreign income, and tariffs or other restrictions on foreign
trade or investment; |
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imposition of, or unexpected
adverse changes in, foreign laws or regulatory requirements, many
of which differ from those which the Company currently operates
in; |
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increased exposure to foreign
currency exchange rate risk; |
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longer payment cycles for sales in some foreign
countries and potential difficulties in enforcing contracts and
collecting accounts receivable; |
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difficulties in repatriating overseas
earnings; |
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general economic conditions in the countries in
which we operate; and |
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political unrest, war, incidents of terrorism or
responses to such events. |
Our overall success in international markets will depend, in part,
on our ability to succeed in differing legal, regulatory, economic,
social and political conditions. We may not be successful in
developing and implementing policies and strategies that will be
effective in managing these risks in each country where we do
business. Our failure to manage these risks successfully could harm
our international operations, reduce our international sales and
increase our costs, thus adversely affecting our business,
financial condition and operating results.
The Company relies on outside consultants, service providers
and suppliers
We will rely on the experience of consultants, service providers
and suppliers. In the event that one or more of these consultants
or terminates its relationship with the Company, or becomes
unavailable, suitable replacements will need to be obtained and
there is no assurance that such consultants, service providers and
suppliers could be obtained under conditions favorable to
us.
We rely on strategic relationships to promote our
products
The Company relies on strategic partnerships with outside companies
and individuals to promote and supply certain of our products and
services, thus making the future success of our business
particularly contingent on the efforts of other parties. An
important part of our strategy is to promote acceptance of our
products through with certain service providers who we feel could
assist us with our promotion strategies. Our dependence raises
potential risks with respect to the future success of our business.
Our success is dependent on the successful completion and
commercial deployment of our products and services and on the
future commitment of our distributors to our products and
technology.
Reliance on our suppliers
The Company relies vendors and suppliers to provide power, as well
as high quality products and services on a consistent basis.
The future success of the Company is contingent on the efforts and
performance of these suppliers. The Company may have difficulty in
locating or using alternative resources should supply problems
arise with the current suppliers. An interruption or reduction in
the source of supply of or an unanticipated increase in vendor
prices, could materially affect our operating results and damage
customer relationships as well as our business.
Future growth could strain resources, and if the Company is
unable to manage growth, it may not be able to successfully
implement our business plan.
The Company hopes to experience rapid growth in operations, which
will place a significant strain on our management, administrative,
operational and financial infrastructure. Our future success will
depend in part upon the ability of our executive officers to manage
growth effectively. This will require that we hire and train
additional personnel to manage our expanding operations. In
addition, we must continue to improve our operational, financial
and management controls and our reporting systems and procedures.
If we fail to successfully manage our growth, we may be unable to
execute upon our business plan.
Failure to protect intellectual property, our planned
business could be adversely affected.
Despite efforts to protect and ensure the Company has proprietary
rights, parties may attempt to copy aspects of our products,
obtain, claim and use information that we regard as proprietary.
Unauthorized use of our proprietary technology could harm our
business. Litigation to protect our intellectual property rights
can be costly and time-consuming to prosecute, and there can be no
assurance that we will have the financial or other resources
necessary to enforce or defend a patent infringement or proprietary
rights violation action.
Unforeseen Liabilities from Past
Acquisitions
There may be liabilities and claims that the Company has failed to
discover or has underestimated in connection with previous
acquisitions. In addition, there may be expenditure requirements
that the Company has failed to discover or underestimated in
connection with these acquisitions, which amounts may be material.
Any such liabilities or expenditure requirements could have a
material adverse effect on the Company's business, financial
condition or future prospects.
Conflicts of Interest
Certain of the directors and officers of the Corporation also serve
as directors and/or officers of other companies there exists the
possibility for such directors and officers to be in a position of
conflict. Any decision made by any of such directors and officers
will be made in accordance with their duties and obligations to
deal fairly and in good faith with a view to the best interests of
the Company and its shareholders. In addition, each director is
required to declare and refrain from voting on any matter in which
such director may have a conflict of interest.
If we issue additional shares in the future, it will result
in the dilution of our existing stockholders.
Our articles of incorporation authorize the issuance of up to
500,000,000 shares of our common stock, with a par value of $0.0001
per share. Our board of directors may choose to issue some or all
of such shares to acquire one or more companies or products and to
fund our overhead and general operating requirements. The issuance
of any such shares will reduce the book value per share and may
contribute to a reduction in the market price of the outstanding
shares of our common stock. If we issue any such additional shares,
such issuance will reduce the proportionate ownership and voting
power of all current stockholders. Further, such issuance may
result in a change of control of our company.
Trading of our stock is restricted by the Securities Exchange
Commission's penny stock regulations, which may limit a
stockholder's ability to buy and sell our common
stock.
The Securities and Exchange Commission has adopted regulations
which generally define "penny stock" to be any equity security that
has a market price (as defined) less than $5.00 per share or an
exercise price of less than $5.00 per share, subject to certain
exceptions. Our securities are covered by the penny stock rules,
which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers
and "accredited investors". The term "accredited investor" refers
generally to institutions with assets in excess of $5,000,000 or
individuals with a net worth in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 jointly with their spouse.
The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules,
to deliver a standardized risk disclosure document in a form
prepared by the Securities and Exchange Commission, which provides
information about penny stocks and the nature and level of risks in
the penny stock market. The broker-dealer also must provide the
customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the
transaction and monthly account statements showing the market value
of each penny stock held in the customer's account. The bid and
offer quotations, and the broker-dealer and salesperson
compensation information, must be given to the customer orally or
in writing prior to effecting the transaction and must be given to
the customer in writing before or with the customer's confirmation.
In addition, the penny stock rules require that prior to a
transaction in a penny stock not otherwise exempt from these rules,
the broker-dealer must make a special written determination that
the penny stock is a suitable investment for the purchaser and
receive the purchaser's written agreement to the transaction. These
disclosure requirements may have the effect of reducing the level
of trading activity in the secondary market for the stock that is
subject to these penny stock rules. Consequently, these penny stock
rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage
investor interest in and limit the marketability of our common
stock.
FINRA sales practice requirements may also limit a
stockholder's ability to buy and sell our stock.
In addition to the "penny stock" rules described above, the
Financial Industry Regulatory Authority ("FINRA") has adopted rules
that require that in recommending an investment to a customer, a
broker-dealer must have reasonable grounds for believing that the
investment is suitable for that customer. Prior to recommending
speculative low-priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain
information about the customer's financial status, tax status,
investment objectives and other information. Under interpretations
of these rules, FINRA believes that there is a high probability
that speculative low-priced securities will not be suitable for at
least some customers. FINRA requirements make it more difficult for
broker-dealers to recommend that their customers buy our common
stock, which may limit your ability to buy and sell our stock and
have an adverse effect on the market for our stock.
The price of our common stock may be negatively impacted by
factors that are unrelated to our operations.
Although our common stock is currently listed for quotation on the
OTC Markets and a market is established and trading has begun,
trading through the OTCQB is frequently thin and highly volatile.
There is no assurance that a sufficient market will continue in our
stock, in which case it could be difficult for stockholders to sell
their stock. The market price of our common stock could fluctuate
substantially due to a variety of factors, including market
perception of our ability to achieve our planned growth, quarterly
operating results of our competitors, trading volume in our common
stock, changes in general conditions in the economy and the
financial markets or other developments affecting our competitors
or us. In addition, the stock market is subject to extreme price
and volume fluctuations. This volatility has had a significant
effect on the market price of securities issued by many companies
for reasons unrelated to their operating performance and could have
the same effect on our common stock.
We do not intend to pay dividends on any investment in the
shares of stock of our company.
We have never paid any cash dividends, and currently do not intend
to pay any dividends for the foreseeable future. Because we do not
intend to declare dividends, any gain on an investment in our
company will need to come through an increase in the stock's price.
This may never happen, and investors may lose all of their
investment in our company.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
We maintain our head office at 2075 Kennedy Rd, Suite 404, Toronto,
ON M1T 3V3, Canada.
ITEM 3. LEGAL PROCEEDINGS
From time to time, we may become involved in various lawsuits and
legal proceedings, which arise in the ordinary course of business.
However, litigation is subject to inherent uncertainties, and an
adverse result in these, or other matters, may arise from time to
time that may harm our business.
During the year ended December 31, 2017, the Company learned that a
class action complaint (the “Class Action Complaint”) had been
filed against the Company, its Chief Executive Officer and its
Chief Financial Officer in the United States District Court for the
District of New Jersey. The Class Action Complaint alleges,
inter alia, that defendants violated the federal securities laws
by, among other things, failing to disclose that the Company was
engaged in an unlawful scheme to promote its stock. The
Company has been served with the Class Action Complaint. The
Company has analyzed the Class Action Complaint and, based on that
analysis, has concluded that it is legally deficient and otherwise
without merit. The Company intends to vigorously defend
against these claims.
On August 7, 2018, the United States District Court for the
District of New Jersey dismissed the Class Action Complaint.
Additionally, subsequent to the year end on August 21, 2018, the
Company was served with the Second Amended Complaint in the
District of New Jersey. The Company filed a motion to dismiss
the Second Amended Complaint on September 18, 2018. On
January 23, 2019, the United States District Court for the District
of New Jersey dismissed the Second Amended Complaint with
prejudice. Plaintiff filed a motion for reconsideration of
the dismissal order on February 7, 2019. On May 14, 2019, the
Plaintiff’s motion to reconsider was denied. On June 10, 2019, the
plaintiffs filed an appeal with United States Court of Appeals for
the Third Circuit. As of May 27, 2020, the Class Action Complaints,
including applicable appeals, have been settled or dismissed by the
parties and the applicable courts.
Also during the year ended December 31, 2017, the Company learned
that two derivative complaints (the “Derivative Complaints”) on
behalf of the Company have been filed against the Company’s
Directors and Chief Executive Officer, President, Corporate
Secretary, and Chief Financial Officer, and nominally against the
Company, in Nevada state and federal court. The state court
action subsequently was removed to federal court. The
Derivative Complaints allege, inter alia, that the Company’s
officers and directors directed the Company to undertake an
unlawful scheme to promote its stock. The Company has been
served with the Derivative Complaints. The Company has
analyzed them and, based on its analysis, has concluded that the
Derivative Complaints are legally deficient and otherwise without
merit. As of May 27, 2020, the Derivative Complaints,
including applicable appeals, have been settled or dismissed by the
parties and the applicable courts.
The Company was also served with a third derivative action, which
was filed March 23, 2018, against the Company’s Directors and Chief
Executive Officer, President, and Corporate Secretary, and
nominally against the Company, in Nevada state court.
Subsequently, this case was removed to federal court. As of May 27,
2020, the Derivative Complaint, including applicable appeals, have
been settled or dismissed by the parties and the applicable
courts.
ITEM 4. MINE SAFETY DISCLOSURES
Not
applicable.
PART II
ITEM 5. Market for Registrant's Common Equity,
Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market for Our Common Stock
Since November 2016, our common stock has been quoted on the OTCQB,
which is part of the OTC Market Group's quotation system. We were
initially traded under the symbol "UVVC" but beginning in January
2017, our stock began trading under the symbol "ZPAS".
The following table sets forth, for the periods indicated, the high
and low closing prices of our common stock. These prices reflect
inter-dealer prices, without retail mark-up, mark-down or
commission, and may not represent actual transactions.
|
|
|
Closing Prices
(1) |
|
|
|
|
High |
|
|
|
Low |
|
FISCAL YEAR ENDED DECEMBER 31,
2020: |
|
|
|
|
|
|
|
|
Fourth Quarter |
|
$ |
0.28 |
|
|
|
0.17 |
|
Third
Quarter |
|
|
0.36 |
|
|
|
0.246 |
|
Second
Quarter |
|
|
0.39 |
|
|
|
0.123 |
|
First
Quarter |
|
|
0.21 |
|
|
|
0.052 |
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR ENDED DECEMBER 31,
2019: |
|
|
|
|
|
|
|
|
Fourth
Quarter |
|
$ |
0.13 |
|
|
|
0.054 |
|
Third
Quarter |
|
|
0.15 |
|
|
|
0.058 |
|
Second
Quarter |
|
|
0.13 |
|
|
|
0.05 |
|
First
Quarter |
|
|
0.205 |
|
|
|
0.10 |
|
_________________
|
(1) |
The
above tables set forth the range of high and low closing prices per
share of our common stock as per the OTC Markets. |
Approximate Number of Holders of Our Common Stock
As of September 24, 2021, the Company had 155 active stockholders
of record and 110,976,094 shares of common stock were issued and
outstanding. Because some of our common stock is held by brokers
and other institutions on behalf of stockholders, we are unable to
estimate the total number of stockholders represented by these
record holders.
Our registrar and transfer agent for our common stock is VStock
Transfer. Their address is 18 Lafayette Place, Woodmere, NY 11598
and their telephone number and facsimile are +1 (646) 536-3179 and
+1 (212) 828-8436, respectively.
Dividend Policy
The Company has not declared any dividends since incorporation and
does not anticipate doing so in the foreseeable future. We
currently intend to retain most, if not all, of our available funds
and any future earnings to operate and expand our business.
Our board of directors has discretion on whether to pay dividends
unless the distribution would render us unable to repay our debts
as they become due. Even if our board of directors decides to pay
dividends, the form, frequency and amount will depend upon our
future operations and earnings, capital requirements and surplus,
general financial condition, contractual restrictions and other
factors that the board of directors may deem relevant.
Securities Authorized for Issuance Under Equity Compensation
Plans
See Item 12 - Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters, "Securities
Authorized for Issuance Under Equity Compensation
Plans".
Recent Sales of Unregistered Securities
Recent Sales of Unregistered Securities
During January 2018, the Company completed a private placement for
the sale of non-registered shares of the Company's common stock. As
a result of the private placement 200,000 non-registered shares of
the Company's common stock was issued for proceeds of $40,671.
During April 2018, the Company completed several private placements
for the sale of non-registered shares of the Company's common
stock. As a result of these private placements 687,500
non-registered shares of the Company's common stock was issued for
proceeds of $39,672.
On April 11, 2018, the company issued 1,500,000 shares of the
common stock to a corporation controlled by an officer of the
company as compensation for services rendered, and on April 14,
2018, the company issued 1,000,000 shares of the common stock to a
current officer of the company who at that time was an arm’s length
consultant, as compensation for services rendered. The fair value
of these shares was determined by using the market price of the
common stock as at the date of issuance.
On September 10, 2018, the Company issued 8,370,000 shares of the
common stock to various arm’s length third parties upon settlement
of promissory notes.
On October 17, 2018, the Company issued 44,911,724 shares of the
common stock in respect of the assets purchase from Virtublock
Global Corp.
During the months of November and December 2018, the Company
completed several private placements for the sale of non-registered
shares of the Company's common stock. As a result of these private
placements 5,450,000 non-registered shares of the Company's common
stock was issued for proceeds of $399,483.
On January 20, 2019, the company issued 1,000,000 shares of the
common stock to a consultant as compensation for services rendered,
and on April 20, 2019, the company issued 500,000 shares of the
common stock to a consultant as compensation for services rendered.
The fair value of these shares was determined by using the market
price of the common stock as at the date of issuance.
In May 2019, the Company completed several private placements for
the sale of non-registered shares of the Company's common stock. As
a result of these private placements 1,038,461 non-registered
shares of the Company's common stock was issued for proceeds of
C$135,000.
In July 2019, the Company completed a private placement for the
sale of non-registered shares of the Company's common stock. As a
result of the private placement 500,000 non-registered shares of
the Company's common stock was issued for proceeds of C$55,000.
In August 2019, the Company completed a private placement for the
sale of non-registered shares of the Company's common stock. As a
result of the private placement 500,000 non-registered shares of
the Company's common stock was issued for proceeds of
$50,000.
In December 2019, the Company completed a private placement for the
sale of non-registered shares of the Company's common stock. As a
result of the private placement 757,575 non-registered shares of
the Company's common stock was issued for proceeds of
$39,041.
In January 2020, the Company issued 757,575 non-registered shares
of the Company's common stock. The net proceeds in amount of
$34,091 was received in December 31, 2019.
In January 2020, the Company completed a private placement for the
sale of non-registered shares of the Company's common stock. As a
result of the private placement 3,030,300 non-registered shares of
the Company's common stock was issued for gross proceeds of
$151,515.
In January 2020, the Company issued 3,319,162 shares of the common
stock to settle a debt owed by the company in amount $265,533. The
$265,533 debt was owed to a corporation controlled by a former
Chief Executive Officer of the company. The fair value of these
shares was determined by using the market price of the common stock
as at the date of issuance.
In March 2020, the company issued 1,160,000 shares of the common
stock to as compensation for services rendered. The fair value of
these shares was determined by using the market price of the common
stock as at the date of issuance.
In March 2020, the Company completed a private placement for the
sale of non-registered shares of the Company's common stock. As a
result of the private placement 300,000 non-registered shares of
the Company's common stock will be issued for gross proceeds of
$15,000.
In April 2020, the Company issued 2,000,000 shares of the common
stock to as compensation for services. The fair value of these
shares, in amount of $250,000, was determined by using the market
price of the common stock as at the date of issuance.
In
June 2020, the Company issued total of 551,394 non-registered
shares of common stock for net proceeds in the amount of
$137,002.
In
August 2020, the Company issued total of 400,000 non-registered
shares of common stock for net proceeds in the amount of
$100,000.
In August 2020, the Company issued 2,000,000 shares of the common
stock to as compensation for services rendered. The fair value of
these shares, in the amount of $644,000, was determined by using
the market price of the common stock as at the date of
issuance.
In September 2020, the Company issued 4,000,000 shares of the
common stock in respect of the assets purchase from Moxie Holdings
Private Ltd.
In September 2020, the Company issued 20,656,715 shares of the
common stock upon closing the share exchange agreement with
Blockgration Global Corp. and its subsidiaries.
In October 2020, the Company issued 1,000,000 shares of common
stock to as compensation for services. The fair value of these
shares in the amount of $202,000 was determined by using the market
price of the common stock as at the date of issuance.
Purchases of Our Equity Securities
No repurchases of our common stock were made during our fiscal year
ended December 31, 2020.
ITEM 6. Selected financial data
Smaller reporting companies are 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 should be
read in conjunction with our consolidated financial statements and
the notes thereto and the other financial information appearing
elsewhere in this annual report. In addition to historical
information, the following discussion contains certain
forward-looking information. See "Special Note Regarding
Forward-Looking Statements" above for certain information
concerning those forward looking statements. Our financial
statements are prepared in U.S. dollars and in accordance with U.S.
GAAP. References in this Report to a particular "fiscal" year are
to our fiscal year ended on December 31.
Nature of Operations
Zoompass Holdings, Inc. formerly known as UVIC. Inc. ("Zoompass
Holdings" or the "Company") was incorporated under the laws of the
State of Nevada on August 21, 2013. Effective August 22, 2016, the
Company entered into an Agreement for the Exchange of Stock (the
"Agreement") with Zoompass, Inc., an Ontario, Canada corporation
("Zoompass"). Pursuant to the Agreement, the Company agreed to
issue 8,050,784 shares of its restricted common stock to Zoompass'
shareholders ("Zoompass' shareholders") in exchange for all the
shares of Zoompass Inc. owned by the Zoompass Inc.'s Shareholders.
At the Closing Date, Rob Lee, a significant shareholder of the
Company agreed to cancel 7,000,000 shares of the Company's common
stock, which shares constituted the control shares of the Company.
Other than this one significant shareholder, shareholders of the
Company held 2,670,000 shares. As a result of the Agreement,
Zoompass is now a wholly owned subsidiary of the Company. The
Company has amended its Articles of Incorporation to change its
name to Zoompass Holdings, Inc. and the appropriate forms were
filed with FINRA and the SEC to change its name, address and symbol
and complete a 3.5-1 forward split, which was consented to by the
majority of shareholders on September 7, 2016 and approved in
February 2017, for shareholders of record on September 7, 2016.
All share figures have been retroactively stated to reflect the
stock split approved by shareholders, unless otherwise indicated.
Additionally, the Company's shareholders consented to an increase
of the shares authorized to 500,000,000 and a revision of the par
value to $0.0001.
As the former Zoompass shareholders ended up owning the majority of
the Company, the transaction does not constitute a business
combination and was deemed to be a recapitalization of the Company
with Zoompass being the accounting acquirer, accordingly the
accounting and disclosure information is that of Zoompass going
forward.
Effective March 6, 2018 (the "Closing Date"), Zoompass Holdings,
Inc.'s (the "Company") Canadian operating subsidiary, Zoompass,
Inc., entered into an Asset Purchase Agreement (the "Agreement")
for the sale of its Prepaid Card Business ("Prepaid Business") to
Fintech Holdings North America Inc., or its designee. The aggregate
purchase price of the Prepaid Business was C$400,000. The
transaction was completed on March 26, 2018.
During the first fiscal quarter of 2018, the Company implemented a
plan to abandon the mobility solution operation. The Company has
determined that the mobility solution operation represents a
component and a reportable segment of the Company. According to the
plan of abandonment, the Company gradually ceased accepting any new
business during first fiscal quarter of 2018 and settled all the
remaining orders and obligations from mobility solution by end of
March 2018.
On October 17, 2018, the Company reached an Asset Purchase
Agreement and purchased certain business assets that represents a
business from Virtublock Global Corp. (“Virtublock”, “VGC”) in
return the Company issued 44,911,724 shares to Virtublock and
pursuant to the issuance of shares Virtublock ended up owning 45%
of total outstanding common shares of the Company.
Zoompass Inc., was incorporated under the laws of Ontario on June
8, 2016. On October 17, 2018, pursuant to an asset purchase
agreement with Virtublock, certain net assets were acquired by the
Company in exchange for shares of the Company. The net assets
primarily consisted of certain technology IP related to
cryptocurrency exchange/wallet, certain strategic partnerships and
customer contracts. On March 25, 2019, the name of the company was
changed from Zoompass Inc. to Virtublock Canada Inc. (“VCI”).
On February 27, 2020, the Company cancelled 44,911,724 shares of
the common stock which were issued in connection with the asset
purchase agreement dated October 17, 2018 with Virtublock Global
Corp. Pursuant to a General Release agreement dated November 29,
2019, the asset purchase agreement dated October 17, 2018 with
Virtublock Global Corp. was deemed cancelled and each party
acknowledged and agreed that no party has or shall have any claim
with respect to intellectual property, software or other assets
owned by any other party and that no agreements exist or remain
unsatisfied with respect to the transfer of any asset from a
releasing party to any other party, and Virtublock Global Corp.
assigned and tendered the 44,911,724 shares of common stock of the
Company to the Company for cancellation. As the share cancellation
occurred on February 27, 2020, the accounting recognition of this
transaction, consisting of a transfer of $4,492 from common stock
to additional paid-in capital and related reduction in the number
of common shares outstanding, will be reflected in the consolidated
financial statements for the first quarter ended March 31,
2020.
On May 31, 2020, the Company closed a Share Exchange Agreement (the
"Share Exchange Agreement") by and among the Company, Blockgration
Global Corp., an Ontario corporation and its subsidiaries ("BGC"),
and the shareholders of BGC (the "BGC Shareholders"). This
acquisition gives the Company controlling interest in BGC’s
subsidiaries in Canada and India which is engaged in the business
of digital wallet deployments, prepaid card platform, blockchain
and mobile apps deployment.
On September 30, 2020, the Company cancelled 9,330,000 shares of
the common stock and 14,845,000 share purchase warrants which was
allocated in connection with acquisition of MSS that was a 70%
subsidiary of BGC on May 31, 2020. Refer to note 10 and 14 of the
consolidated financial statements.
The Company is actively seeking opportunities to enter into
partnership or acquire third parties with existing revenue streams.
The company is well positioned to achieve this objective and will
continue to pursue such opportunities going forward.
The Company will remain a Fintech company and continue to develop
and acquire software platforms and services to sell to customers
globally with a focus on leading edge technologies and software as
a service.
The Company has incurred recurring losses from operations and as of
December 31, 2020 had a net working capital deficiency and an
accumulated deficit. The Company’s continued existence is dependent
upon its ability to continue to execute its operating plan and to
obtain additional debt or equity financing. These conditions raise
substantial doubt about the Company’s ability to continue as a
going concern. There can be no assurance that the necessary debt or
equity financing will be available, or will be available on terms
acceptable to the Company, in which case the Company may be unable
to meet its obligations. Should the Company be unable to realize
its assets and discharge its liabilities in the normal course of
business, the net realizable value of its assets may be materially
less than the amounts recorded in the consolidated financial
statements. The consolidated financial statements do not include
any adjustments relating to the recoverability of recorded asset
amounts that might be necessary should the Company be unable to
continue in existence.
During the three months period ended March 31, 2021, the Company
completed a private placement for the sale of non-registered shares
of the Company's common stock. As a result of the private placement
3,614,685 non-registered shares of the Company's common stock was
issued for gross proceeds of $298,355.
In August 2021, the Company completed a private placement for the
sale of non-registered shares of the Company's common stock. As a
result of the private placement 1,200,000 non-registered shares of
the Company's common stock was issued for gross proceeds of
$96,000.
There is no certainty that the Company will be successful in
generating sufficient cash flow from operations or achieving and
maintaining profitable operations in the future to enable it to
meet its obligations as they come due and consequently continue as
a going concern. The Company will require additional financing in
the future to fund its operations and it is currently working on
securing this funding through corporate collaborations, public or
private equity offerings or debt financings. Sales of additional
equity securities by the Company would result in the dilution of
the interests of existing shareholders. There can be no assurance
that financing will be available when required.
The Company expects the forgoing, or a combination thereof, to meet
the Company's anticipated cash requirements for the next 12 months;
however, these conditions raise substantial doubt about the
Company's ability to continue as a going concern.
These consolidated financial statements have been prepared on the
basis that the Company will continue as a going concern, which
presumes that it will be able to realize its assets and discharge
its liabilities in the normal course of business as they come due.
These consolidated financial statements do not reflect the
adjustments to the carrying values of assets and liabilities and
the reported expenses and consolidated statement of balance sheet
classifications that would be necessary if the Company were unable
to realize its assets and settle its liabilities as a going concern
in the normal course of operations. Such adjustments could be
material.
For the year ended December 31, 2020, the Company incurred a net
loss of $19,214,889 (2019 - $ 615,256).
The Company may incur additional operating losses for the 2021
fiscal year.
Beginning in March 2020, the Governments of Canada and the United
States, as well as other foreign governments instituted emergency
measures as a result of the COVID-19 virus outbreak. The virus has
had a major impact on North America and international securities,
currency markets and consumer activity which may impact the
Company's financial position, its results of future operations and
its future cash flows significantly. Given the daily evolution of
the COVID-19 outbreak and the global responses to curb its spread,
the Company is not able to estimate the effects of the COVID-19
outbreak on its results of future operations, financial position,
and liquidity in fiscal year 2021.
Results of operations for the years ended December 31, 2020 and
December 31, 2019
Revenue and cost of sales
During the year ended December 31, 2019, the Company has not
generated revenue and incurred no cost of sales.
During the year ended December 31, 2020, the Company generated
revenue of $872,465 and cost of sales of $665,881. On May 31, 2020,
the Company completed acquisition of Blockgration Global Corp.
(“BGC”) and its subsidiaries that was engaged in the business of
digital wallet deployments, prepaid card platform, blockchain and
mobile apps deployment. The total revenues and cost of sales also
included revenue of $148,701 and cost of sales of $45,539 from
Msewa Software Solutions (“MSS”) that was a 70% subsidiary of BGC
and the agreement with MSS was terminated as of September 30,
2020.
General and administrative and other expenses
For the year ended December 31, 2020, the Company incurred $696,650
in salaries and consultant costs. For the year ended December 31,
2019, the Company incurred $266,433 in salaries and consultant
costs. The increase was due to the increase of the Company’s
headcount during the year 2020 as a result of the acquisition of
BGC and its subsidiaries.
Share-based payment expense was $1,549,762 for the year ended
December 31, 2020, compared with $227,000 for the year ended
December 31, 2019. The increase was due to increased level of
activity in 2020 and issuance of stock options and shares as
compensation when compared with December 2019.
Insurance expense was $111,754 for the year ended December 31,
2020, compared with $NIL for the year ended December 31, 2019 due
to premium on the directors and officers’ insurance policy.
Depreciation and amortization expenses from the tangible and
intangible assets acquired from BGC and its subsidiaries was
$437,128 for the year ended December 31, 2020 compared with $NIL
for the year ended December 31, 2019.
For the year ended December 31, 2020 the Company incurred $200,637
in professional fees compared with $168,429 due to a reduction in
legal costs during 2020.
Filing fees and regulatory costs were $43,877 for the year ended
December 31, 2020 compared with $4,892 year ended December 31,
2019.
Bad debt expenses for the year ended December 31, 2020 was $330,886
from uncollectable receivables compared to $NIL for the year ended
December 31, 2019.
Net Interest and bank charges for the year ended December 31, 2020
were $126,783 compared with $1,323 for the year ended December 31,
2019 as a result of interest accretion of $113,067 on long-term
debt payable for the purchase of IP Technology asset in 2020.
For the year ended December 31, 2020, the Company incurred a net
loss of $2,971,119 from operations compared with a net loss of
$615,256 for 2019.
For year ended December 31, 2020, the impairment provision related
to goodwill and intangible assets from the acquisition of BGC and
its subsidiaries was $13,030,124 and $6,551,870 respectively
compared to $NIL for the year ended December 31, 2019. The Company
believes that the intangible assets have value and will be able to
generate revenues, however due to the current economic downturn,
management has taken a conservative approach to impair goodwill and
intangible assets.
For the year ended December 31, 2020, the change in fair value of
contingent consideration payable on acquisition of BGC and its
subsidiaries was $387,356 and a gain of $3,574,368 was recognized
on settlement of contingent consideration.
The loss per share from operations is 0.2073 and 0.006 for year
ended December 31, 2020 and 2019 respectively.
Liquidity and Capital Resources
As at December 31, 2020, the Company had $64,412 in cash and cash
equivalents compared with $21,477 as at December 31, 2019.
Operations for the year ended December 31, 2020 were primarily
financed through the issuance of shares in the common stock of the
Company and advances from related party corporations. Operations
for the year ended December 2019 were primarily financed through
the issuance of shares in the common stock of the Company, and the
issuance of promissory notes.
There is no certainty that we will be successful in generating
sufficient cash flow from operations or achieving and maintaining
profitable operations in the future to enable us to meet our
obligations as they come due and consequently continue as a going
concern. The Company may require additional funds to further
develop our expanded business plan. The Company may require
additional financing this year to fund our operations and is
examining possible sources of funding beyond the existing cash
generated from operations. Sales of additional equity
securities would result in the dilution of the interests of
existing stockholders. There can be no assurance that financing
will be available when required. In the event that the necessary
additional financing is not obtained, the Company would reduce its
discretionary overhead costs substantially, or otherwise curtail
operations.
Net Cash Used in Operating Activities
During the years ended December 31, 2020 and 2019, $545,580 and
$538,609 in cash, respectively, was used for
operations.
Net Cash Used in Investing Activities
During the year ended December 31, 2019, the Company generated $nil
from investing activities compared with cash used in investing
activities of $114,153 for year ended December 31, 2020.
Net Cash Provided by Financing Activities
For the year ended December 31, 2020 the Company raised $883,715
from financing activities that included $388,586 from the issuance
of shares of its common stock, proceeds from note payable and debt
of $365,068 and $75,600 respectively.
For the year ended December 31, 2019 the Company raised $264,337
from the issuances of shares of its common stock and received
advances in amount of $286,188 from related party corporations.
Commitments
There were no commitments as of December 31, 2020 and December 31,
2019.
Financial instruments and risk factors
The Company has exposure to liquidity risk and foreign currency
risk. The Company's risk management objective is to preserve
and redeploy the existing treasury as appropriate, ultimately to
protect shareholder value. Risk management strategies, as
discussed below, are designed and implemented to ensure the
Company's risks and the related exposure are consistent with the
business objectives and risk tolerance.
Liquidity Risk: Liquidity risk is the risk that the Company will
not be able to meet its financial obligations as they come
due. The Company manages its liquidity by ensuring that there
is sufficient capital to meet short and long-term business
requirements, after taking into account cash requirements from
operations and the Company's holdings of cash and cash equivalents.
The Company also strives to maintain sufficient financial liquidity
at all times in order to participate in investment opportunities as
they arise, as well as to withstand sudden adverse changes in
economic circumstances.
Management forecasts cash flows for its current and subsequent
fiscal years to predict future financing requirements. Future
requirements may be met through a combination of credit and access
to capital markets. The Company's cash requirements are
dependent on the level of operating activity, a large portion of
which is discretionary. Should management decide to increase
its operating activity, more funds than what is currently in place
would be required. It is not possible to predict whether
financing efforts will be successful or sufficient in the future.
At December 31, 2020, the Company had $64,412 in cash and
cash equivalents (December 31, 2019 - $21,477).
The following are the maturities, excluding interest payments,
reflecting undiscounted future cash disbursements of the Company's
financial liabilities based on the period year ended December 31,
2020.
|
|
2021 |
|
2022 |
|
|
|
|
|
Accounts
payable and accrued liabilities |
|
$ |
1,843,780 |
|
|
$ |
— |
|
Notes payable |
|
|
530,896 |
|
|
|
|
|
Due to related party
corporations |
|
|
65,020 |
|
|
|
|
|
Long-term debt |
|
|
353,498 |
|
|
|
762,147 |
|
|
|
$ |
2,793,194 |
|
|
$ |
762,147 |
|
Currency risk: The Company's expenditures are incurred in Canadian
and US dollars. The results of the Company's operations are
subject to currency translation risk. The Company mitigates
foreign exchange risk through forecasting its foreign currency
denominated expenditures and maintaining an appropriate balance of
cash in each currency to meet the expenditures. As the
Company's reporting currency is the US dollar, fluctuations in US
dollar will affect the results of the Company.
Credit risk: Credit risk is the risk of loss associated with a
counterparty's inability to fulfill its payment obligations. As at
December 31, 2020, the Company's credit risk is primarily
attributable to cash and cash equivalents, and accounts receivable.
At December 31, 2020, the Company's cash and cash equivalents were
held with reputable Canadian chartered banks. At December 31,
2020, the Company had an allowance for doubtful accounts of $NIL
(December 31, 2019 - $NIL) as a result of a review of
collectability of the amount outstanding and the duration of time
it was outstanding.
Interest rate risk: Interest rate risk is the risk borne by an
interest-bearing asset or liability as a result of fluctuations in
interest rates. Financial assets and financial liabilities
with variable interest rates expose the Company to cash flow
interest rate risk. The Company's does not have significant
interest rate risk as the promissory note have been settled during
the year.
Fair values: The carrying amounts reported in the
consolidated balance sheet for cash and cash equivalents, accounts
receivables, accounts payable and accrued liabilities approximate
fair value because of the short period of time between the
origination of such instruments and their expected
realization.
Related Party Transactions
The balances of due to related party corporations on December 31,
2020 represent advances and payment from related party corporations
which is non-interest bearing, unsecured and due on demand. The
amount of $100,201 that is recorded as due to related parties as of
December 31, 2019 are eliminated upon consolidation of these
related parties in year 2020, pursuant to the acquisition
transaction in 2020, became inter-company.
The due to related parties on December 31, 2020 of $65,020
(December 31, 2019 - $100,201) is comprised of $53,882 (December
31, 2019 $Nil) representing amount due to the company under
significant influence of a shareholder of the Company. It also
includes an amount of $11,138 (December 31, 2019 - $Nil) paid to a
shareholder of the Company. These amounts were made to provide
working capital and are due on demand and have no set repayment
terms.
The total amount owing to the former directors and officers of the
Company and corporations controlled by the former directors and
officers, in relation to the services they provided to the Company
in their capacity as Officers and service provider on December 31,
2020 was $54,436 (December 31, 2019 - $319,969) which includes
expense reimbursements. This amount is reflected in accounts
payable and is further described below.
|
a) |
As of December 31, 2020, the Company
had an amount owing to an entity owned and controlled by the former
Chief Executive Officer of the Company of $Nil (December 31, 2019 -
$265,533). The amount owing relates to services provided by the
former Chief Executive Officer and expense reimbursements. During
the six months period ended June 30, 2020, the Company issued
3,319,162 shares of the common stock to settle a debt owed by the
company in amount $265,533. The $265,533 debt was owed to a
corporation controlled by a former Chief Executive Officer of the
company. The fair value of these shares, in amount of 232,342, was
determined by using the market price of the common stock as at the
date of issuance. The Company recognized a Gain on settlement of
debt in amount of $33,191 in statement of operations. (Note
10). |
|
b) |
As of December 31, 2020, the Company
had an amount owing to an entity owned and controlled by the former
Secretary of the Company of $54,436 (December 31, 2019 - $54,436).
The amount owing relates to services provided by the then Secretary
and expense reimbursements. |
During the year ended December 31, 2020, $982,176 (Issuance of
shares for service – $838,400, stock options expenses - $143,776)
was recognized for share-based payment expense to directors and
officers of the Company. No expense for share based payments to
directors and officers was recognized during the year ended
December 31, 2019.
As of December 31, 2020, the Company had an amount owing to the
Chief Executive Officer for $78,540 (December 31, 2019 - $Nil),
included in Accounts payable and accrued liabilities. The amount
owing relates to services provided and is recorded as consulting
expenses.
As of December 31, 2020, the Company had an amount owing to the
Chief Financial Officer for $30,909 (December 31, 2019 - $Nil),
included in Accounts payable and accrued liabilities. The amount
owing relates to services provided and is recorded as consulting
expenses.
Subsequent events
During the three months period ended March 31, 2021, the Company
completed a private placement for the sale of non-registered shares
of the Company's common stock. As a result of the private placement
3,614,685 non-registered shares of the Company's common stock was
issued for gross proceeds of $298,355.
In March 2021, the Company announced that its subsidiary, BGC,
signed a strategic partnership agreement to provide Business-to
Business (B2B) solutions. Under the terms of the agreement the
Company will receive a one-time customization and implementation
fee of US$350,000.
In August 2021, the Company completed a private placement for the
sale of non-registered shares of the Company's common stock. As a
result of the private placement 1,200,000 non-registered shares of
the Company's common stock was issued for gross proceeds of
$96,000.
The payment of all the Notes payable amounts disclosed in the
consolidated financial statements as of December 31, 2020 has been
extended based on the same terms. Subsequent to December 31, 2020,
the Company’s received an additional CD$30,000 from a shareholder
for payment of operating expenses. The loan does not bear any
interest and is unsecured.
Subsequent to December 31, 2020, the Company received CD$300,000
from a Convertible Debenture offering of 1,000 units. Each unit is
comprised of one (1) debenture in the principal amount of CD$1,000
per unit with a term of three (3) years from the date of issuance
and bearing interest at the rate of 12% per annum. The whole or any
part of the principal amount of the Debenture plus any accrued and
unpaid interest may be convertible at the option of the debenture
holder into common shares of the Company at a price equal to
US$0.20 per share at any time up to the maturity date. The right of
conversion in the Debenture may be accelerated by the Company if
the closing price of the Company’s common shares exceeds 200% of
the Conversion price for a period of 20 trading days in a 30 day
period at any time up to the maturity date as more specifically set
out in the Debenture agreement.
Subsequent to the year ended December 31, 2020, the Company repaid
a long-term debt due to Moxies, an amount of $353,498
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that
have or are reasonably likely to have a current or future effect on
our financial condition, changes in financial condition, revenues
or expenses, results of operations, liquidity, capital expenditures
or capital resources that are material to our investors.
Critical Accounting Policies
Basis of presentation
The consolidated financial statements have been prepared pursuant
to the rules and regulations of the Securities and Exchange
Commission, in accordance with accounting principles generally
accepted in the United States of America ("US GAAP"). The
consolidated financial statements reflect all adjustments,
consisting of normal recurring adjustments, which, in the opinion
of management, are necessary to present a fair statement of the
results for the year.
Translation of foreign currencies
The functional currency of the Company, PM and ZTI is the US dollar. The Company
has determined that the functional currency of ZM, BGC and ZMG is
the Canadian dollar. (references to which are denoted "C$"), for
BSP and MSS is the Indian Rupees and for VO is the Euro. The
reporting currency of the Company is US Dollar.
Transactions in currencies other than the functional currency are
recorded at the rates of the exchange prevailing on dates of
transactions. At each balance sheet reporting date, monetary assets
and liabilities that are denominated in foreign currencies are
translated at the rates prevailing at each reporting date.
Non-monetary items that are measured in terms of historical cost in
a foreign currency are translated at the exchange rate at the
historical date of the transaction. The impact from the translation
of foreign currency denominated items are reflected in the
statement of operations and comprehensive loss.
Translation of functional currencies to reporting currencies for
assets and liabilities is done using the exchange rates at each
balance sheet date; revenue and expenses are translated at average
rates prevailing during the reporting period or at the date of the
transaction; shareholders' equity is translated at historical
rates. Adjustments resulting from translating the consolidated
financial statements into the US Dollar are recorded as a separate
component of accumulated other comprehensive income in the
statement of changes in stockholders’ deficiency.
Revenue recognition
The Company's revenue recognition policy follows ASC
606, Revenue from Contracts with Customers, which
provides guidance on the recognition, presentation and disclosure
of revenue from contracts with customers in consolidated financial
statements.
Revenue is measured based on the consideration specified in a
contract with a customer. Once the Company determines a contract's
performance obligations and the transaction price, including an
estimate of any variable consideration, the Company allocates the
transaction price to each performance obligation in the contract
using a stand-alone selling price. The Company recognizes revenue
when it satisfies a performance obligation by transferring control
of a product or service to a customer. Revenue is recognized net of
any taxes collected from customers, which are subsequently remitted
to governmental authorities.
Nature of performance obligations
At contract inception, the Company assesses the services promised
in the contract with a customer and identifies a performance
obligation for each promise to transfer to the customer a service
(or bundle of services) that is distinct. To identify the
performance obligations, the Company considers all the services
promised in the contract regardless of whether they are explicitly
stated or implied.
The
following is a description of the Company's principal revenue
generating activities.
Revenue is principally derived from time basis billing for IT
professional services provided to customers. Professional services
in these contracts are primarily considered a single performance
obligation. Revenue for these contracts is recognized over time for
the amount which the Company has right to consideration. The
Company also derived revenue from enabling various payment
transactions which is recognized on a fixed fees per transaction
basis at a point in time as services are rendered. Deferred revenue
is recognized for transactions arising during the current reporting
period when it receives consideration from a customer before
achieving certain criteria that must be met for revenue to be
recognized. Deferred revenue is a liability as of the reporting
period related to revenue producing activity for which revenue has
not yet been recognized.
Financial instruments
ASC Topic 820 defines fair value, establishes a framework for
measuring fair value, and expands disclosures about fair value
measurements. Included in the ASC Topic 820 framework is a three
level valuation inputs hierarchy with Level 1 being inputs and
transactions that can be effectively fully observed by market
participants spanning to Level 3 where estimates are unobservable
by market participants outside of the Company and must be estimated
using assumptions developed by the Company. The Company discloses
the lowest level input significant to each category of asset or
liability valued within the scope of ASC Topic 820 and the
valuation method as exchange, income or use. The Company uses
inputs which are as observable as possible and the methods most
applicable to the specific situation of each company or valued
item.
The carrying amounts reported in the consolidated balance sheets
for cash and cash equivalents, cash in trust and customer deposits,
accounts receivables and due from related party corporations, net
of any allowances for doubtful accounts, accounts payable and
accrued liabilities, promissory note, due to related party
corporations, and client funds approximate fair value because of
the short period of time between the origination of such
instruments and their expected realization. The allowance for
doubtful accounts is reflected in "Office and Sundry" expenses on
the statement of operations and comprehensive loss. Per ASC
Topic 820 framework these are considered Level 2 inputs where
inputs other than Level 1 that are observable, either directly or
indirectly, such as quoted prices in active markets for similar
assets or liabilities, quoted prices for identical or similar
assets or liabilities in markets that are not active, or other
inputs that are observable or can be corroborated by observable
market data for substantially the full term of the assets or
liabilities.
The Company's policy is to recognize transfers into and out of
Level 3 as of the date of the event or change in the circumstances
that caused the transfer. There were no such transfers during the
year.
Basic and diluted loss per share
Basic and diluted loss per share has been determined by dividing
the net loss available to shareholders for the applicable period by
the basic and diluted weighted average number of shares
outstanding, respectively. The diluted weighted average number of
shares outstanding is calculated as if all dilutive options had
been exercised or vested at the later of the beginning of the
reporting period or date of grant, using the treasury stock
method.
Loss per common share is computed by dividing the net loss by the
weighted average number of shares of common shares outstanding
during the period. Common share equivalents, options and warrants
are excluded from the computation of diluted loss per share when
their effect as anti-dilutive.
Segment reporting
ASC 280-10, "Disclosures about Segments of an Enterprise and
Related Information", establishes standards for the way that public
business enterprises report information about operating segments in
the Company's consolidated financial statements. Operating segments
are components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and
in assessing performance. Significantly all of the assets of the
Company are located in, all revenues are currently earned in Canada
and the Company’s research, development and strategical planning
operations are carried out and served as an integral part of the
Company’s business. The Company’s reportable segments and operating
segments include rendering of professional services.
Cash and cash equivalents
Cash and cash equivalents include demand deposits held with banks
and highly liquid investments with original maturities of ninety
days or less at acquisition date. For purposes of reporting cash
flows, the Company considers all cash accounts that are not subject
to withdrawal restrictions or penalties to be cash and cash
equivalents. Cash in trust and customer deposits are amounts held
by the Company at various financial institutions for settlement of
clients' funds payable.
Property and Equipment
Equipment is stated at historic cost. The Company has the following
sub-categories of property and equipment with useful lives and
depreciation methods as follows:
|
• |
Office equipment and furniture – 20%
declining balance per year |
The cost of assets sold, retired, or otherwise disposed of and the
related accumulated depreciation are eliminated from the accounts.
Expenditures for maintenance and repairs are charged to expense as
incurred.
The Company follows the ASC Topic 360, which requires that
long-lived assets be reviewed annually for impairment whenever
events or changes in circumstances indicate that the assets'
carrying amounts may not be recoverable.
In performing the review for recoverability, if future undiscounted
cash flows (excluding interest charges) from the use and ultimate
disposition of the assets are less than their carrying values, an
impairment loss represented by the difference between its fair
value and carrying value, is recognized. When properties are
classified as held for sale they are recorded at the lower of the
carrying amount or the expected sales price less costs to sell.
Goodwill
Goodwill represents the excess purchase price over the estimated
fair value of net assets acquired by the Company in business
combinations. Business acquisitions are accounted for using the
acquisition method whereby acquired assets and liabilities are
recorded at fair value as of the date of acquisition with the
excess of the acquisition amount over such fair value being
recorded as goodwill and allocated to reporting units ("RU").
RUs are the smallest identifiable group of assets, liabilities and
associated goodwill that generate cash inflows that are largely
independent of the cash inflows from other assets or groups of
assets. Given how the Company is structured and managed, the
Company has one RU. Goodwill arises principally because of
the following factors among other things: (1) the going concern
value of the Company's capacity to sustain and grow revenues
through securing additional contracts and customers,; (2) the
undeserved market of consumers looking for financial transactional
alternatives; (3) technological and mobile capabilities beyond
acquired lines of business to capture buyer specific synergies
arising upon a transaction and (4) the requirement to record a
deferred tax liability for the difference between the assigned
values and the tax bases of the assets acquired and liabilities
assumed in a business combination, if any.
Intangibles
The Company has applied the provisions of ASC topic 350 –
Intangibles – goodwill and other, in accounting for its intangible
assets. Intangible assets subject to amortization are amortized on
a straight-line method on the basis over the useful life of the
respective intangibles. The following useful lives are used in the
calculation of amortization:
Trademark – 8 years
Customer base – 5 years
Intellectual property/Technology – 10 years
Impairment goodwill and indefinite-lived intangible assets
and intangible assets with definite lives
The Company accounts for goodwill and intangible assets in
accordance with ASC No. 350, Intangibles-Goodwill and Other ("ASC
350"). ASC 350 requires that goodwill and other intangibles with
indefinite lives be tested for impairment annually or on an interim
basis if events or circumstances indicate that the fair value of an
asset has decreased below its carrying value. In addition, ASC 350
requires that goodwill be tested for impairment at the reporting
unit level (operating segment or one level below an operating
segment) on an annual basis and between annual tests when
circumstances indicate that the recoverability of the carrying
amount of goodwill may be in doubt. Application of the goodwill
impairment test requires judgment, including the identification of
reporting units; assigning assets and liabilities to reporting
units, assigning goodwill to reporting units, and determining the
fair value. Significant judgments required to estimate the fair
value of reporting units include estimating future cash flows,
determining appropriate discount rates and other assumptions.
Changes in these estimates and assumptions or the occurrence of one
or more confirming events in future periods could cause the actual
results or outcomes to materially differ from such estimates and
could also affect the determination of fair value and/or goodwill
impairment at future reporting dates.
The Company assesses the carrying value of goodwill,
indefinite-lived intangible assets and intangible assets with
definite lives, such as Trademark, Technology platform, customer
base and other intangible assets for potential impairment annually
as of December 31, or more frequently if events or changes in
circumstances indicate such assets might be impaired.
When assessing goodwill for impairment the Company elects to first
perform a qualitative assessment for a reporting unit to determine
if the quantitative impairment test is necessary. If we do not
perform a qualitative assessment, or if the qualitative assessment
indicates it is more likely than not that the fair value of the
reporting units, is less than its carrying amount, the Company
performs a quantitative test. The Company recognizes an impairment
charge for the amount by which the carrying amount exceeds the
reporting unit’s fair value; however, the loss recognized would not
exceed the total amount of goodwill allocated to that reporting
unit. The Company estimates fair value using the income approach,
to estimate the future undiscounted cash flows (excluding interest
charges) from the use and ultimate disposition of the
assets.
Income taxes
Deferred tax is recognized using the asset and liability method, on
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used
for tax purposes. However, the deferred tax is not recognized if it
arises from initial recognition of an asset or liability in a
transaction other than a business combination that at the time of
the transaction affects neither accounting nor taxable profit or
loss. Deferred taxes determined using tax rates (and laws) that
have been enacted by the reporting date and are expected to apply
when the related deferred taxation asset is realized, or the
deferred taxation liability is settled. Deferred tax assets and
liabilities are offset if there is a legally enforceable right to
offset current tax liabilities and assets, and they relate to
income taxes levied by the same tax authority on the same taxable
entity, or on different tax entities, but they intend to settle
current tax liabilities and assets on a net basis or their tax
assets and liabilities will be realized simultaneously.
A deferred tax asset is recognized to the extent that it is
probable that future taxable profits will be available against
which the temporary difference can be utilized. Deferred tax assets
are reviewed at each reporting date and are reduced to the extent
that it is no longer probable that the related tax benefit will be
realized.
Share-based payment expense
The Company follows the fair value method of accounting for stock
awards granted to employees, directors, officers and consultants.
Share-based awards to employees are measured at the fair value of
the related share-based awards. Share-based payments to others are
valued based on the related services rendered or goods received or
if this cannot be reliably measured, on the fair value of the
instruments issued. Issuances of shares are valued using the fair
value of the shares at the time of grant; issuances of warrants and
other share-based awards are valued using the Black-Scholes model
with assumptions based on historical experience and future
expectations. All issuances of share-based payments have been
fully-vested, otherwise the Company recognizes such awards over the
vesting period based on expectations of the number of awards
expected to vest over that period on a straight-line basis.
Business combinations
A business combination is a transaction or other event in which
control over one or more businesses is obtained. A business is an
integrated set of activities and assets that is capable of being
conducted and managed for the purpose of providing a return in the
form of dividends, lower costs or other economic benefits. A
business consists of inputs and processes applied to those inputs
that have the ability to create outputs that provide a return to
the Company and its shareholders. A business need not include all
of the inputs and processes that were used by the acquiree to
produce outputs if the business can be integrated with the inputs
and processes of the Company to continue to produce outputs. The
Company considers several factors to determine whether the set of
activities and assets is a business.
Business acquisitions are accounted for using the acquisition
method whereby acquired assets and liabilities are recorded at fair
value as of the date of acquisition with the excess of the purchase
consideration over such fair value being recorded as goodwill and
allocated to reporting units (“RUs”). If the fair value of the net
assets acquired exceeds the purchase consideration, the difference
is recognized immediately as a gain in the consolidated statement
of operations. Acquisition related costs are expensed during the
period in which they are incurred, except for the cost of debt or
equity instruments issued in relation to the acquisition which is
included in the carrying amount of the related instrument. Certain
fair values may be estimated at the acquisition date pending
confirmation or completion of the valuation process. Where
provisional values are used in accounting for a business
combination, they are adjusted retrospectively in subsequent
periods. However, the measurement period will not exceed one year
from the acquisition date. If the assets acquired are not a
business, the transaction is accounted for as an asset
acquisition.
Leases
On January 1, 2019, the Company adopted Accounting Standards
Codification Topic 842, “Leases” (“ASC 842”) to replace existing
lease accounting guidance. This pronouncement is intended to
provide enhanced transparency and comparability by requiring
lessees to record right-of-use assets and corresponding lease
liabilities on the balance sheet for most leases. Expenses
associated with leases will continue to be recognized in a manner
similar to previous accounting guidance. The Company adopted ASC
842 utilizing the transition practical expedient added by the
Financial Accounting Standards Board (“FASB”), which eliminates the
requirement that entities apply the new lease standard to the
comparative periods presented in the year of adoption.
The Company is the lessee in a lease contract when the Company
obtains the right to use the asset. Operating leases are included
in the line items right-of-use asset, lease obligation, current,
and lease obligation, long-term in the consolidated balance sheet.
Right-of-use (“ROU”) asset represents the Company’s right to use an
underlying asset for the lease term and lease obligations represent
the Company’s obligations to make lease payments arising from the
lease, both of which are recognized based on the present value of
the future minimum lease payments over the lease term at the
commencement date. Leases with a lease term of 12 months or less at
inception are not recorded on the consolidated balance sheet and
are expensed on a straight-line basis over the lease term in our
consolidated statement of income. The Company determines the lease
term by agreement with lessor.
As our current operating lease of office space, at the
commencement, has a term of less than 12 months, we elect not to
apply the recognition requirements of ASC 842 to the short-term
lease, instead lease payments are recognized in statement of
operations on a straight-line basis over the lease term.
Use of estimates
The preparation of the consolidated financial statements in
conformity with US 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.
Actual results could differ from these estimates.
The areas where management has made significant judgments include,
but are not limited to:
Accounting for acquisitions: The accounting for acquisitions
requires judgement to determine if an acquisition meets the
definition of a business combination under ASC 805. Further,
management is required to use judgement to determine the fair value
of the consideration provided and the net assets and liabilities
acquired.
Assessment of Impairment: The Company has certain assets for which
a determination of an impairment, if any, requires significant
judgement to determine if the carrying amount of any assets are
impaired. Management uses judgement in determining among
other things, whether or not an indicator of impairment has
occurred, future cash flows, time horizons, and likelihood of
recoverability. The assets where management has assessed the
recoverability the carrying amount includes accounts receivable,
equipment, intangibles and goodwill.
Deferred taxes: The Company recognizes the deferred tax benefit
related to deferred income tax assets to the extent recovery is
probable. Assessing the recoverability of deferred income tax
assets requires management to make significant estimates of future
taxable profit and the income tax rate at which the future tax
assets will be realized. To the extent that future cash
flows, taxable profit and income tax rates differ significantly
from estimates, the ability of the Company to realize deferred tax
assets could be impacted. In addition, future changes in tax
laws could limit the ability of the Company to obtain tax
deductions in future periods from deferred income tax assets.
Share-based payment expense: The calculation of
share-based payment expense requires management to use significant
judgment in determining the fair value of share-based payment
expense. Additionally, the management is required to make certain
assumptions in arriving at the fair value of share-based payment
expense.
Derivative financial instruments: The Company does not use
derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks.
The Company reviews the terms of equity instruments and other
financing arrangements, if any, to determine whether there are
embedded derivative instruments, including embedded conversion
options that are required to be bifurcated and accounted for
separately as a derivative financial instrument. Also, in
connection with the issuance of financing instruments, the Company
may issue freestanding options or warrants to employees and
non-employees in connection with consulting or other services.
These options or warrants may, depending on their terms, be
accounted for as derivative instrument liabilities, rather than as
equity.
Derivative financial instruments are initially measured at their
fair value. For derivative financial instruments that are accounted
for as liabilities, the derivative instrument is initially recorded
at its fair value and is then re-valued at each reporting date,
with changes in the fair value reported as charges or credits to
income. To the extent that the initial fair values of the
freestanding and/or bifurcated derivative instrument liabilities
exceed the total proceeds received an immediate charge to income is
recognized in order to initially record the derivative instrument
liabilities at their fair value.
The classification of derivative instruments, including whether
such instruments should be recorded as liabilities or as equity, is
reassessed at the end of each reporting period. If reclassification
is required, the fair value of the derivative instrument, as of the
determination date, is reclassified. Any previous charges or
credits to income for changes in the fair value of the derivative
instrument are not reversed. Derivative instrument liabilities are
classified in the balance sheet as current or non-current based on
whether or not net-cash settlement of the derivative instrument
could be required within twelve months of the balance sheet
date.
NEWLY ADOPTED AND RECENTLY ISSUED ACCOUNTING
PRONOUNCEMENTS
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate
Reform (Topic 848): Facilitation of the Effects of Reference Rate
Reform on Financial Reporting, which provides optional expedients
and exceptions for applying generally accepted accounting
principles (GAAP) to contracts, hedging relationships, and other
transactions affected by reference rate reform if certain criteria
are met. The amendments apply only to contracts, hedging
relationships, and other transactions that reference LIBOR or
another reference rate expected to be discontinued because of
reference rate reform. The amendments are effective for all
entities as of March 12, 2020 through December 31, 2022. We are
currently evaluating the impact this guidance may have on our
consolidated financial statements and related disclosures.
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate
Reform (Topic 848): Facilitation of the Effects of Reference Rate
Reform on Financial Reporting, which provides optional expedients
and exceptions for applying generally accepted accounting
principles (GAAP) to contracts, hedging relationships, and other
transactions affected by reference rate reform if certain criteria
are met. The amendments apply only to contracts, hedging
relationships, and other transactions that reference LIBOR or
another reference rate expected to be discontinued because of
reference rate reform. The amendments are effective for all
entities as of March 12, 2020 through December 31, 2022. We are
currently evaluating the impact this guidance may have on our
consolidated financial statements and related disclosures.
In June 2018, the FASB issued an accounting pronouncement (FASB ASU
2018-07) to expand the scope of ASC Topic 718, Compensation - Stock
Compensation, to include share-based payment transactions for
acquiring goods and services from nonemployees. The pronouncement
is effective for fiscal years, and for interim periods within those
fiscal years, beginning after December 15, 2018, with early
adoption permitted. The Company adopted this pronouncement and such
adoption did not have a material impact on our financial position
and/or results of operations.
On January 1, 2018, the Company adopted the accounting
pronouncement issued by the Financial Accounting Standards Board
(“FASB”) Accounting Standards Update No. 2014-09 (“ASU”), Revenue
from Contracts with Customers (Topic 606) to clarify existing
guidance on revenue recognition. This guidance includes the
required steps to achieve the core principle that a company should
recognize revenue when it transfers promised goods or services to
customers in an amount that reflects the consideration to which the
company expects to be entitled in exchange for those goods or
services. The Company adopted this pronouncement on a modified
retrospective and such adoption did not have a material impact on
our financial position and/or results of operations.
On January 1, 2018, the Company adopted the accounting
pronouncement issued by the FASB to clarify how entities should
present restricted cash and restricted cash equivalents in the
statement of cash flows. This guidance requires entities to show
changes in the total of cash, cash equivalents and restricted cash
in the combined statement of cash flows. This guidance was adopted
on a retrospective basis, and such adoption did not have a material
impact on combined financial position and/or results of
operations.
On January 1, 2019, the Company adopted Accounting Standards
Codification Topic 842, “Leases” (“ASC 842”) to replace existing
lease accounting guidance. This pronouncement is intended to
provide enhanced transparency and comparability by requiring
lessees to record right-of-use assets and corresponding lease
liabilities on the balance sheet for most leases. Expenses
associated with leases will continue to be recognized in a manner
similar to previous accounting guidance. The Company adopted ASC
842 utilizing the transition practical expedient added by the
Financial Accounting Standards Board (“FASB”), which eliminates the
requirement that entities apply the new lease standard to the
comparative periods presented in the year of adoption. The Company
is the lessee in a lease contract when the Company obtains the
right to use the asset. Operating leases are included in the line
items right-of-use asset, lease obligation, current, and lease
obligation, long-term in the consolidated balance sheet.
Right-of-use (“ROU”) asset represents the Company’s right to use an
underlying asset for the lease term and lease obligations represent
the Company’s obligations to make lease payments arising from the
lease, both of which are recognized based on the present value of
the future minimum lease payments over the lease term at the
commencement date. Leases with a lease term of 12 months or less at
inception are not recorded on the consolidated balance sheet and
are expensed on a straight-line basis over the lease term in our
consolidated statement of income. The Company determines the lease
term by agreement with lessor. As our current operating lease of
office space, at the commencement, has a term of less than 12
months, we elect not to apply the recognition requirements of ASC
842 to the short-term lease, instead lease payments are recognized
in statement of operations on a straight-line basis over the lease
term.
ITEM 7A. Quantitative and Qualitative Disclosures About
Market Risk
The follow discussion about our market risk disclosures involves
forward-looking statements. Actual results could differ from those
projected in the forward-looking statements. We are exposed to
market risk related to changes in interest rates and foreign
currency exchange rates. We do not use derivative financial
instruments for speculative or trading purposes.
Financial instruments and risk factors
Management forecasts cash flows for its current and subsequent
fiscal years to predict future financing requirements. Future
requirements may be met through a combination of credit and access
to capital markets. The Company's cash requirements are
dependent on the level of operating activity, a large portion of
which is discretionary. Should management decide to increase
its operating activity, more funds than what is currently in place
would be required. It is not possible to predict whether
financing efforts will be successful or sufficient in the future.
At December 31, 2020, the Company had $64,412 in cash and
cash equivalents (December 31, 2019 - $21,477).
The following are the maturities, excluding interest payments,
reflecting undiscounted future cash disbursements of the Company's
financial liabilities based on the period year ended December 31,
2020.
|
|
2021 |
|
2022 and after |
|
|
|
|
|
Accounts
payable and accrued liabilities |
|
$ |
1,843,780 |
|
|
$ |
— |
|
Notes payable |
|
|
530,896 |
|
|
|
|
|
Due to related party
corporations |
|
|
65,020 |
|
|
|
|
|
Long-term debt |
|
|
353,498 |
|
|
|
762,147 |
|
|
|
$ |
2,793,194 |
|
|
$ |
762,147 |
|
Currency risk: The Company's expenditures are
incurred in Canadian and US dollars. The results of the
Company's operations are subject to currency translation
risk. The Company mitigates foreign exchange risk through
forecasting its foreign currency denominated expenditures and
maintaining an appropriate balance of cash in each currency to meet
the expenditures. As the Company's reporting currency is the
US dollar, fluctuations in US dollar will affect the results of the
Company.
Credit risk: Credit risk is the risk of loss associated
with a counterparty's inability to fulfill its payment obligations.
As at December 31, 2020, the Company's credit risk is primarily
attributable to cash and cash equivalents, and accounts receivable.
At December 31, 2020, the Company's cash and cash equivalents were
held with reputable Canadian chartered banks. At December 31,
2020, the Company had an allowance for doubtful accounts of $NIL
(December 31, 2019 - $NIL) as a result of a review of
collectability of the amount outstanding and the duration of time
it was outstanding.
Interest rate risk: Interest rate risk is the risk
borne by an interest-bearing asset or liability as a result of
fluctuations in interest rates. Financial assets and
financial liabilities with variable interest rates expose the
Company to cash flow interest rate risk. The Company's does
not have significant interest rate risk as the promissory note have
been settled during the year.
Fair values: The carrying amounts reported in the
consolidated balance sheet for cash and cash equivalents, accounts
receivables, accounts payable and accrued liabilities approximate
fair value because of the short period of time between the
origination of such instruments and their expected
realization.
ITEM 8 Financial Statements and Supplementary Data
Consolidated Financial Statements
The
financial statements required by this item begin on page F-1
hereof.
ITEM 9 Changes in and Disagreements with Accountants and
Accounting and Financial Disclosure
On November 10, 2016, our board of directors approved the
engagement of MNP, LLP ("MNP"), as the Company's new independent
registered public accounting firm.
On June 19, 2019, our board of directors approved the engagement of
SRCO Professional Corporation ("SRCO"), as the Company's new
independent registered public accounting firm.
During the fiscal years ended December 31, 2014 and 2015, and the
subsequent interim period prior to the engagement of MNP, the
Company has not consulted MNP regarding (i) the application of
accounting principles to any specified transaction, either
completed or proposed; (ii) the type of audit opinion that might be
rendered on the Company's financial statements, and either a
written report was provided to the registrant or oral advice was
provided that the new accountant concluded was an important factor
considered by the registrant in reaching a decision as to the
accounting, auditing or financial reporting issue; or (iii) any
matter that was either the subject of a disagreement (as defined in
Item 304(o)(1)(iv)) or a reportable event (as defined in Item
304(a)(1)(v)).
ITEM 9A Controls and Procedures
Our management is responsible for establishing and maintaining a
system of disclosure controls and procedures designed to ensure
that information required to be disclosed by us in the reports it
files or submitted under the Securities Exchange Act of 1934, as
amended (Exchange Act), is recorded, processed, summarized, and
reported within the time periods specified in the rules and forms
of the SEC. Our disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that
information required to be disclosed by us in the reports it files
or submitted under the Exchange Act is accumulated and communicated
to management, including the principal executive officer and
principal financial officer, or persons performing similar
functions, as appropriate, to allow timely decisions regarding
required disclosure. Because of inherent limitations, disclosure
controls and procedures, as well as internal control over financial
reporting, may not prevent or detect all inaccurate statements or
omissions.
Our management, with the supervision and participation of our Chief
Executive Officer and Chief Financial Officer, evaluated the
effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934 (the "Exchange Act").
Based upon that evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and
procedures as of December 31, 2020, were effective such that the
information required to be disclosed by us in reports filed under
the Securities Exchange Act of 1934 is (i) recorded, processed,
summarized and reported within the time periods specified in the
SEC's rules and forms and (ii) accumulated and communicated to our
management to allow timely decisions regarding disclosure. A
controls system cannot provide absolute assurance, however, that
the objectives of the controls system are met, and no evaluation of
controls can provide absolute assurance that all control issues and
instances of fraud, if any, within a company have been
detected.
Inherent Limitations Over Internal Controls
Our internal control over financial reporting is designed to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with U.S. generally accepted accounting
principles ("GAAP"). Our internal control over financial reporting
includes those policies and procedures that:
(i) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and
dispositions of our assets;
(ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with GAAP, and that our receipts and expenditures are
being made only in accordance with authorizations of our management
and directors; and
(iii) 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.
Management, including our Chief Executive Officer and Chief
Financial Officer, does not expect that our internal controls will
prevent or detect all errors and all fraud. A control system, no
matter how well designed and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system
are met. Further, the design of a control system must reflect the
fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of
internal controls can provide absolute assurance that all control
issues and instances of fraud, if any, have been detected. Also,
any evaluation of the effectiveness of controls in future periods
are subject to the risk that those internal controls may become
inadequate because of changes in business conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.
Management's Annual Report on Internal Control Over Financial
Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting (as defined in
Rule 13a-15(f) under the Exchange Act). Management conducted an
assessment of the effectiveness of the Company's internal control
over financial reporting based on the criteria set forth in
Internal Control – Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (1992
framework). Based on the Company's assessment, management has
concluded that its internal control over financial reporting was
ineffective as of December 31, 2020, to provide e reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements in accordance with GAAP.
We have assessed the effectiveness of our internal control over
financial reporting as of December 31, 2020, the period covered by
this Annual Report on Form 10-K, as discussed above. In making this
assessment, we used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in
Internal Control—Integrated Framework. Based upon this evaluation, our chief
executive officer and chief financial officer concluded that our
internal control over financial reporting as of the end of December
31, 2020, were ineffective due to the following: lack of
segregation of duties, due to limited administrative and financial
personnel and related resources.
Changes In Internal Control Over Financial Reporting
During the year ended December 31, 2020, there were no changes in
our internal controls over financial reporting that materially
affected, or is reasonably likely to have a materially affect, on
our internal control over financial reporting.
Item 9B. Other Information
None.
Where You Can Find More Information
We file annual, quarterly and current reports, proxy statements and
other information with the Securities and Exchange Commission (the
"Commission"). Our Commission filings are available to the public
over the Internet at the Commission's website
at http://www.sec.gov. The public may also read and
copy any document we file with the Commission at its Public
Reference Room at 100 F Street, N.E., Washington, D.C. 20549, on
official business days during the hours of 10:00 am to 3:00 pm. The
public may obtain information on the operation of the Public
Reference Room by calling the Commission at 1-800-SEC-0330. We
maintain a website at http://www. yappn.com (which website is
expressly not incorporated by reference into this filing).
Information contained on our website is not part of this report on
Form 10-K.
PART III
ITEM 10 Directors, Executive Officers and Corporate
Governance
Directors and Executive Officers
The following table sets forth the names, ages and positions held
with respect to each Director and Executive Officer of the Company
as of the date of this Annual Report.
Name |
Age |
Position |
Appointed/Elected |
|
|
|
|
Emanuel (Manny)
Bettencourt |
|
Director and Chief Executive Officer |
March
1, 2020 |
Steven Roberts |
|
Director |
November 2019 |
Mahendra Naik |
|
Director |
March
1, 2020 |
Shibu Abraham |
|
Chief
Financial Officer |
June
3, 2020 |
Bharat Vivek |
|
Chief
Operating Officer, Blockchain |
July
16, 2020 |
Pankaj Kumar** |
|
Chief
Operating Officer, Payment Technologies |
July
16, 2020 |
**Mr. Kumar has resigned as Chief Operating Officer of the Company
effective July 26, 2021.
The former officers and directors for the period ended December 31,
2020 were as follows:
Name |
Age |
Position |
Appointed/
Elected
|
Served till |
|
|
|
|
|
Roger Charles Connors |
|
Director |
December 2018 |
October 2019 |
Mahmoud Hashem |
|
Director and Chief Executive Officer |
September 2018 |
November 2019 |
Manish Grigo |
|
Director and Chief Financial Officer |
July
2019 |
November 2019 |
Each Director serves until the next annual stockholders meeting and
until their respective successors are duly elected
and qualified or earlier resignation or removal.
Mr. Bettencourt has been the Chairman & CEO of Sensor
Technologies Inc. since December 2019. He has also been the
Executive Chairman of W2E technology Corp. since January 2018, and
Managing Director of First Principles Group Inc. since May 2002.
From January 2018 until November 2018, Mr. Bettencourt was CEO and
CO-Founder of Demand Power Group Inc. Mr. Bettencourt is a graduate
of the University of Toronto at Mississauga (B.COMM 1995) and holds
both a CPA, CA designation.
Mr. Roberts has been the CEO of Epic NRG LLC from 2018 to present.
He served as President for Zoompass Inc. from September 2016
through September 2018. From December 2013 through 2016, Mr.
Roberts was the Vice President of Mobility for Ingram Micro. Mr.
Roberts earned his Bachelors of Arts Degree in 1991 from the
University of Guelph, in Guelph, Ontario.
Mr. Naik has been Director of IAMGOLD Corporation, a TSX and NYSE
listed company from 1990 to present. Since 2006, Mr. Naik has been
Chairman and Director of Fortune Minerals Limited, a TSX listed
company. From 2003 to date, Mr. Naik has been a Director of
Goldmoney Inc, a TSX listed financial services company specializing
in precious metals. From 2012 to 2017, Mr. Naik was a Director of
FirstGlobal Data Limited. Mr. Naik earned his Bachelor of Commerce
Degree in 1981 from University of Toronto and holds a CPA, CA
designation.
Mr. Hashem Founded . in July 2018 and has served as the Chief
Executive Officer since inception. Mr. Hashem also founded
ZeroWire Group in January 2009 and has served Managing Director
since inception. Mr. Hashem graduated from Ain Shams University in
July 1996 with a Bachelor of Engineering - Electronics &
Communication Department, Cairo, Egypt.
Mr. Grigo has spent over ten years as a Technology Analyst with
various boutique investment banking firms in Toronto; where he
covered a wide range of technology sectors ranging from Gaming,
FinTech and Telcos. Since 2017 he has been working as an
independent consultant and advising companies on their capital
markets strategies. Mr. Hashem on behalf of the board appointed Mr.
Grigo as a Director effective July 25, 2019.
Mr. Connors has been the President and Director of Southern Sky
Resources Corp. in Toronto, Canada since 2011. Mr. Connors earned a
Bachelor of Business Administration from Acadia University in
Wolfville, Canada in 1992. Mr. Connors resigned as Director
effective October 15, 2019.
Mr. Abraham has over 20 years of experience in senior management
and leadership skills combined with in-depth Canadian and US
regulatory and technical accounting knowledge. He was most recently
head of Shibu Abraham Professional Corporation and prior to that he
was partner at Abraham Chan LLP. He is a Chartered Professional
Accountant in Canada, Chartered Accountant in India and Certified
Public Accountant is the USA (Illinois).
Mr. Vivek is currently CEO of Blockline Solutions Private Limited
and has been in this role since the inception of the company. Prior
to that he served in various roles culminating in Engagement
Manager with PwC (2012 to 2019). Mr. Vivek is an accomplished
business leader and entrepreneur with more than 15 years of
experience in the financial services, payment, retail, healthcare,
telecom, energy and utilities sector. He also serves as CEO of
Moxie Holdings Private Ltd., which manages technology focused
companies in various sectors. Mr. Vivek earned his Master of
Business Administration from York University, Schulich School of
Business in Toronto in 2012.
Mr. Kumar is an experienced and successful business founder with a
demonstrated history of working in the financial services and
technology industry. Mr. Kumar is the CEO of MSS Payments since
June 2014, a company that deploys digital payment platforms for
financial institutions, remittance companies and NBFC’s. Mr. Kumar
earned his MBA from the James Cook University in Australia in
2008.
Family Relationships
There are no family relationships between any directors or officers
of the Company.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive
officers has, during the past ten years:
1. had any bankruptcy
petition filed by or against any business of which such person was
a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that time; except for (i)
Mr Bettencourt served as CFO of Distinct Infrastructure Group Inc.
between Aug 2015 and December 2017; subsequent to his departure the
company was placed into receivership in March 2019 ;
2. been convicted in a
criminal proceeding or is a named subject to a pending criminal
(excluding traffic violations and other minor offenses);
3. been subject to any
order, judgment, or decree, not subsequently reversed, suspended or
vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining, barring, suspending or otherwise limiting
his involvement in any type of business, securities, futures,
commodities or banking activities; or
4. been found by a court
of competent jurisdiction (in a civil action), the Securities and
Exchange Commission or the Commodity Futures Trading
Commission to have violated a federal or state securities or
commodities law, and the judgment has not been reversed, suspended,
or vacated.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires our executive officers, directors and beneficial owner of
more than 10% of a registered class of our equity securities to
file with the Securities and Exchange Commission statements of
ownership and changes in ownership. The same persons are required
to furnish us with copies of all Section 16(a) forms they file. We
believe that, during fiscal 2020, all of our executive officers,
directors and beneficial owner of more than 10% of a registered
class of our equity securities complied with the applicable filing
requirements.
In making these statements, we have relied upon examination of the
copies of all Section 16(a) forms provided to us and the written
representations of our executive officers, directors and beneficial
owner of more than 10% of a registered class of our equity
securities.
Code of Business Conduct and Ethics
A Code of Business Conduct and Ethics is a written standard
designed to deter wrongdoing and to promote (a) honest and ethical
conduct, (b) full, fair, accurate, timely and understandable
disclosure in regulatory filings and public statements, (c)
compliance with applicable laws, rules and regulations, (d) prompt
reporting of violations of the code to an appropriate person
and (e) accountability for adherence to the Code. We are not
currently subject to any law, rule or regulation requiring that we
adopt a Code of Business Conduct and Ethics. However, the Company
is in the process of preparing a code of business conduct and
ethics policy during 2021.
Committees of Board of Directors
There are currently no committees of the Board of Directors. Our
board of directors is of the view that it is appropriate for us not
to have a standing nominating, audit or compensation committee
because the current size of our board of directors does not
facilitate the establishment of a separate committee. Our board of
directors has performed, and will perform adequately, the functions
of any specific committee.
Board Oversight of Risk
Our Board of Directors recognizes that, although risk management is
a primary responsibility of the Company's management, the Board
plays a critical role in oversight of risk. The Board, in order to
more specifically carry out this responsibility, has assigned
certain task focusing on reviewing different areas including
strategic, operational, financial and reporting, compensation,
compliance, corporate governance and other risks to the relevant
Board Committees as summarized above. Each Committee then reports
to the full Board ensuring the Board's full involvement in carrying
out its responsibility for risk management.
ITEM 11. EXECUTIVE COMPENSATION
Persons Covered
As of December 31, 2020, there was the following Named Executive
Officers:
Name |
Position |
Emanuel
(Manny) Bettencourt |
|
Director and
Chief Executive Officer |
|
Shibu Abraham |
|
Chief Financial
Officer |
|
Bharat Vivek |
|
Chief Operating Officer,
Blockchain |
|
Pankaj Kumar |
|
Chief Operating Officer, Payment
Technologies |
|
Compensation Discussion and Analysis
Overview
The Company's executive compensation program is generally designed
to align the interests of executives with the interests of
shareholders and to reward executives for achieving the Company's
objectives. The executive compensation program is also designed to
attract and retain the services of qualified executives.
The Board of Directors shall determine all compensation
packages.
Executive compensation generally consists of base salary or fees,
bonuses and long-term incentive equity compensation such as
stock grants or additional options to purchase shares of the
Company's common stock as well as various health and welfare
benefits. The Board has determined that both the base salary or
fees and long-term incentive equity compensation should be the
principal component of executive compensation. The Board has not
adopted a formal bonus plan, and all bonuses are discretionary.
Elements of Compensation
The executive compensation for the Named Executive Officers) for
the period ended December 31, 2019, primarily consisted of
base salary or fees, long term incentive equity compensation, and
other compensation and benefit programs generally available to
other employees,
Base Salary. The Board establishes base salaries or fees for
the Company's Named Executive Officers based on the scope of their
responsibilities, taking into account competitive market
compensation paid by other companies in the Company's peer group
for similar positions. Generally, the Board believes that executive
base salaries or fees should be in-line with similar
responsibilities at comparable companies in line with our
compensation philosophy.
Base salaries are reviewed annually, and may be adjusted to realign
salaries with market levels after taking into account individual
responsibilities, performance and experience.
Bonuses. Bonuses are intended to compensate the Named
Executive Officers for achieving the Company's financial
performance and other objectives established by the Board each
year. The Board currently does not adopt a formal bonus plan and
all bonuses are discretionary.
Long-Term Incentive Equity Compensation. The Board believes
that stock-based awards promote the long-term growth and
profitability of the Company by providing executive officers with
incentives to improve shareholder value and contribute to the
success of the Company and by enabling the Company to attract,
retain and reward the best available persons for executive officer
positions. The Named Executive Officers were eligible to receive
certain number of shares of common stock of the Company. The
Company cannot currently determine the number or type of additional
awards that may be granted to eligible participants under the
long-term incentive equity compensation plan in the future. Such
determination will be made from time to time by the Board.
Change-In-Control and Termination Arrangements. The Company
is in the process of formalizing Change-In-Control and Termination
Arrangements that would be consistent with all officers of the
Company.
Summary Compensation Table
The
following table sets forth information concerning all compensation
awarded to, earned by or paid during fiscal years 2020 and 2019, to
the Named Executive Officers:
Name |
Principal
position
|
Year |
Salary
or fees
|
Bonus |
Deferred stock
Units/ shares(8)
|
Option
awards
|
Total |
|
|
|
|
|
|
|
|
Emanuel (Manny)
Bettencourt(1)
|
Chief
Executive Officer |
2020 |
$78,540 |
Nil |
$636,400 |
$19,131 |
$734,071 |
|
|
2019 |
Nil |
Nil |
Nil |
Nil |
Nil |
|
|
|
|
|
|
|
|
Mahmoud Hashem(2) |
Chief
Executive Officer |
2020 |
Nil |
Nil |
Nil |
Nil |
Nil |
|
|
2019 |
$19,158 |
Nil |
Nil |
Nil |
$19,158 |
|
|
|
|
|
|
|
|
Nayeem Saleem Alli(3) |
Chief
Executive Officer |
2020 |
Nil |
Nil |
Nil |
Nil |
Nil |
|
|
2019 |
$21,101 |
Nil |
Nil |
Nil |
$21,101 |
|
|
|
|
|
|
|
|
Steve
Roberts(4) |
Chief
Executive Officer |
2020 |
$26,460 |
Nil |
Nil |
$55,272 |
$81,732 |
|
|
2019 |
$2,412 |
Nil |
Nil |
Nil |
$2,412 |
|
|
|
|
|
|
|
|
Shibu
Abraham(5) |
Chief
Financial Officer |
2020 |
$30,909 |
Nil |
$202,000 |
$14,102 |
$247,011 |
|
|
2019 |
Nil |
Nil |
Nil |
Nil |
Nil |
|
|
|
|
|
|
|
|
Manish Grigo(6) |
Chief
Financial Officer |
2020 |
Nil |
Nil |
Nil |
Nil |
Nil |
|
|
2019 |
$2,668 |
Nil |
Nil |
Nil |
$2,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Emanuel (Manny) Bettencourt joined the Company as Director and CEO
on March 1, 2020. Under his consulting agreement Mr. Bettencourt
was compensated Cdn$10,000 per month plus certain travel related
expenses as required by his duties as CEO. As at December 31,
2020, the fees noted above remain unpaid.
|
(2) |
Mahmoud Hashem joined the Company as COO in September 2018 and in
December 2018 was appointed as CEO. Under his consulting
agreement Mr. Hashem was compensated Cdn$15,000 per month plus
certain travel related expenses as required by his duties as
President. Mr. Hashem resigned from the Company in November
2019.
|
(3) |
Nayeem Alli became CEO in September 2018 and resigned effective
December 12, 2018. Mr. Alli resigned from the Company in December
2018.
|
(4) |
Steve Roberts joined the Company as President in September
2016. Under his employment agreement Mr. Roberts was
compensated Cdn$10,000 per month plus certain travel related
expenses as required by his duties as President. Effective
January 2017, this was increased to Cdn$15,000 per month. In
September 2018 Mr. Roberts resigned from the Company. In November
2019, Mr. Roberts was appointed became CEO of the company with
compensation of Cdn$10,000 per month. He resigned as CEO on March
1, 2020.
|
(5)
(6)
|
Shibu Abraham joined as Chief Financial Officer in May 2020.
Under his employment agreement Mr. Abraham was compensated
Cdn$5,000 per month. As at December 31, 2020, the fees noted above
remain unpaid.
Manish Grigo joined as Chief Financial Officer in September
2018. For 2018, fees were paid to a company owned and
controlled by Manish Grigo for the time incurred. Effective
January 2019, Mr. Grigo earned a salary of Cdn $7,000 per
month. Mr. Grigo resigned from the Company in November 2019.
|
(7) |
As
required by SEC rules, amounts in the column "Stock Awards" present
the aggregate grant date fair value of awards made each year
computed in accordance with Financial Accounting Standards Board
("FASB") Accounting Standards Codification™ 718 Compensation—Stock
Compensation ("FASB ASC 718"). The grant date fair value of each of
the executives' award is measured based on the closing price of our
common stock on the date of grant. These amounts do not reflect
whether the recipient has actually realized or will realize a
financial benefit from the awards. Under generally accepted
accounting principles, compensation expense with respect to stock
awards granted to our employees, executives and directors is
generally recognized over the requisite services period. The SEC's
disclosure rules previously required that we present stock award
information based on the amount recognized during the corresponding
year for financial statement reporting purposes with respect to
these awards. However, the recent changes in the SEC's disclosure
rules require that we now present stock award amounts using the
grant date fair value of the awards granted during the
corresponding year. |
Outstanding Equity Awards as of December 31, 2020
Outstanding stock options granted to Named Executive Officers
("NEO's") and Directors as at December 31, 2020 are as follows:
Name |
|
Type of
instrument
|
|
No. of securities underlying
unexercised instrument available |
|
|
No. of securities underlying
unexercised instrument exercisable |
|
|
Exercise
price(1)
|
|
Expiration
date
|
Steven
Roberts |
|
Options |
|
|
2,000,000 |
|
|
|
611,150 |
|
|
|
0.10 |
|
3/1/2027 |
Emanuel (Manny)
Bettencourt |
|
Options |
|
|
1,000,000 |
|
|
|
333,352 |
|
|
|
0.10 |
|
1/15/2027 |
Mahendra Naik |
|
Options |
|
|
1,000,000 |
|
|
|
277,798 |
|
|
|
0.10 |
|
3/1/2027 |
Shibu Abraham |
|
Options |
|
|
1,000,000 |
|
|
|
83,359 |
|
|
|
0.20 |
|
10/22/2027 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
_____________
(1) In US dollars
(2) No fees were paid to
directors during the year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Securities Authorized for Issuance Under Equity Compensation
Plans
In December 2018, the Company's Board of Directors approved and the
majority of shareholders consented to the adoption of an
equity-based compensation plan. The total instruments
convertible into common stock of the Company cannot exceed
20,000,000 options to purchase shares at any one point in
time. The maximum awards to any one grantee is subject to
certain restrictions.
On December 14, 2018, the Company issued 5,400,000 stock options to
directors, officers, employees and consultants of the Company and
have a life of five years from date of grant. All of them
vest immediately and must be exercised by the recipient.
During year ended December 31, 2019 the Company cancelled the
5,400,000 stock options issued on December 14, 2018.
On January 15, 2020, the Company issued 3,000,000 common stock
purchase options at an exercise price of $0.10 to directors,
officers and consultants of the Company. 83,415 of these options
vested immediately and are exercisable for seven years from the
grant date. Remaining options were exercisable for seven years from
the grant date at an exercise price of $0.10 and would vest ratably
over a three-year period from the date of grant.
On March 11, 2020, the Company granted 2,000,000 common stock
purchase options at an exercise price of $0.10 to two directors of
the Company. 55,610 of these options vested immediately and are
exercisable for seven years from the grant date. Remaining options
were exercisable for seven years from the grant date at an exercise
price of $0.10 and would vest ratably over a three-year period from
the date of grant.
On October 22, 2020, the Company granted 1,000,000 common stock
purchase options at an exercise price of $0.20 to an Officer of the
Company. 27,805 of these options vested immediately and are
exercisable for seven years from the grant date. Remaining options
were exercisable for seven years from the grant date at an exercise
price of $0.20 and would vest ratably over a three-year period from
the date of grant.
Security Ownership of Certain Beneficial Owners and
Management
The following tables set forth information as of September 24,
2021, regarding the beneficial ownership of our common stock (a) by
each stockholder who is known by the Company to own beneficially in
excess of 5% of our outstanding common stock; (b) by each of the
Company's officers and directors; (c) and by the Company's officers
and directors as a group. Except as otherwise indicated, all
persons listed below have (i) sole voting power and investment
power with respect to their shares of common stock, except to the
extent that authority is shared by spouses under applicable law,
and (ii) record and beneficial ownership with respect to their
shares of stock. Unless otherwise identified, the address of the
directors and officers of the Company listed above is 2455 Cawthra
Rd, Unit 75 Mississauga, Ontario Canada, L5A3P1.
Title of Class |
|
Name
of Beneficial Owner |
|
Office, if
any |
|
Amount of
shares
controlled |
|
Percent
of
class |
Common Stock |
|
2425287 Ontario Inc. |
|
|
|
|
|
|
6,335,612 |
|
|
|
5.71 |
% |
Common Stock |
|
Jose Nieves |
|
|
|
|
|
|
5,650,000 |
|
|
|
5.098 |
% |
Common Stock |
|
Rob Lee |
|
|
|
|
|
|
11,773,368 |
|
|
|
10.62 |
% |
(1) Beneficial ownership is determined in
accordance with the rules of the SEC and generally includes voting
or investment power with respect to securities
Changes in Control
There are no arrangements known to us, including any pledge by any
person of our securities, the operation of which may at a
subsequent date result in a change in control of the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
AND DIRECTOR INDEPENDENCE
Other than as noted in Section 11 and mentioned in other items in
the form, there are no related party transactions.
Promoters and Certain Control Persons
We did not have any promoters at any time during the past five
fiscal years.
Our executive officers and directors from time to time may serve on
the board of directors executive officers of other companies.
However, none of our executive officer or directors serve as
executive officers or directors or on the compensation committee of
another company that has any executive officer serving on our Board
of Directors (or Board of Directors acting as the Compensation
Committee).
No person who served on our Board of Directors (or Board of
Directors acting as the Compensation Committee) had any
relationship requiring disclosure under Item 404 of Regulation
S-K.
Director Independence
Steven Roberts and Mahendra Naik was deemed to be an "independent
director", as that term is defined by the listing standards of the
national exchanges and SEC rules during the period ended December
31, 2020.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND
SERVICES
SRCO Professional Corporation is our Principal Independent
Registered Public Accountants engaged to audit our financial
statements for the period ended December 31, 2020. The following
table shows the fees that we paid or accrued for the audit for the
year ended December 31, 2020 and December 31, 2019.
Fee Category |
|
December 31, 2020 |
|
December 31, 2019 |
Audit Fees and
quarterly review |
|
$ |
85,000 |
|
|
$ |
60,000 |
|
Audit-Related Fees |
|
$ |
— |
|
|
$ |
— |
|
Tax Fees |
|
$ |
— |
|
|
$ |
— |
|
All Other Fees |
|
$ |
— |
|
|
$ |
— |
|
Audit Fees
This category consists of fees for professional services rendered
by our principal independent registered public accountant for the
audit of our annual financial statements, review of financial
statements included in our quarterly reports and services that are
normally provided by the independent registered public accounting
firms in connection with statutory and regulatory filings or
engagements for those fiscal years.
Audit-Related Fees
This category consists of fees for assurance and related services
by our principal independent registered public accountant that are
reasonably related to the performance of the audit or review of our
financial statements and are not reported above under "Audit Fees".
The services for the fees disclosed under this category include
consultations concerning financial accounting and reporting
standards.
Tax Fees
This category consists of fees for professional services rendered
by our principal independent registered public accountant for tax
compliance, tax advice, and tax planning.
All Other Fees
This
category consists of fees for services provided by our principal
independent registered public accountant other than the services
described above.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
The
following exhibits are filed as part of this Form 10-K:
*Previously filed
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized on September 28, 2021.
|
|
ZOOMPASS HOLDINGS, INC.
|
September 28, 2021
|
|
By:
/s/ Emanuel (Manny) Bettencourt
|
|
|
Emanuel (Manny) Bettencourt
Chief Executive Officer
|
|
|
|
|
|
By: Shibu Abraham |
|
|
Shibu Abraham
Chief Financial Officer
|
|
|
|

ZOOMPASS HOLDINGS INC.
Consolidated Financial Statements
Year Ended December 31, 2020 and 2019
(Expressed in US
Dollars)


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Zoompass Holdings,
Inc.:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of
Zoompass Holdings, Inc. and subsidiaries (the “Company”) as of
December 31, 2020 and 2019, and the related consolidated statements
of operations and comprehensive loss, stockholders’ deficiency, and
cash flows for each of the years in the two year-period ended
December 31, 2020, and the related notes (collectively referred to
as the consolidated financial statements). In our opinion, the
consolidated financial statements present fairly, in all material
respects, the financial position of the Company as at December 31,
2020 and 2019, and the results of its operations and its cash flows
for each of the years in the two year-period ended December 31,
2020, in conformity with accounting principles generally accepted
in the United States of America (US GAAP).
Material Uncertainty Related to Going Concern
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. As discussed in Note 1 to the consolidated financial
statements, the Company has incurred recurring losses from
operations and has a net working capital deficiency and an
accumulated deficit 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 consolidated
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of
the Company’s management. Our responsibility is to express an
opinion on the Company’s consolidated 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 consolidated
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 consolidated 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
consolidated 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 consolidated financial statements. We believe that our
audits provide a reasonable basis for our opinion.
Critical Audit Matters
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 consolidated financial statements and (2) involved our
especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way
our opinion on the consolidated 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.
Business Combination
Description of the Critical Audit Matter
Auditing business combination was complex and highly judgmental due
to the justification of business and significant estimation
required to determine the fair value of assets acquired /
liabilities assumed, the purchase consideration conveyed and the
resulting goodwill recognized, and the significant judgment by
management when estimating the fair value of the acquisition
related contingent consideration liability.
How the Critical Audit Matter Was Addressed in the Audit
To audit the accounting of the business combination transactions,
we evaluated the justification of business acquisition from
management to ensure the compliance with U.S. GAAP; and we reviewed
the fair value calculation of assets acquired / liabilities
assumed, the purchase consideration conveyed and the resulting
goodwill recognized to agreements and valuation expert’s report
that included methodology and assumptions used and assessed those
inputs to be reasonable, testing management’s process for
determining the fair value of the acquisition related contingent
consideration liability, and testing the completeness and accuracy
of the underlying data used in the fair value calculation.
Impairment of Intangible Assets and Goodwill
Description of the Critical Audit Matter
As discussed in Note 5 to the consolidated financial statements,
the Company recorded impairment charges on goodwill and intangible
assets during the year ended December 31, 2020.
Auditing management's goodwill and intangible assets impairment
test was complex and highly judgmental due to the significant
estimation required to determine the fair value of the goodwill and
intangible assets and underlying reporting unit. In particular, the
fair value estimate was sensitive to significant assumptions, such
as the Company’s financial forecast, discount rate, and operating
costs, which are impacted by expectations about future market and
economic conditions.
How the Critical Audit Matter Was Addressed in the Audit
To test the estimated fair value of the Company’s goodwill and
intangible assets and underlying reporting unit, we performed audit
procedures that included, among other things, assessing
methodologies and testing the significant assumptions discussed
above and the underlying data used by the Company in its analysis.
In addition, we assessed the current financial forecast in light of
management’s current plans, and we assessed the historical basis of
management’s estimates based on its current operating results that
would result from changes in the assumptions.
Deemed disposition of a partially owned
subsidiary
Description of the Critical Audit Matter
As discussed in Note 14 to the consolidated financial statements,
effective September 30, 2020, the Company terminated the
acquisition agreement as management lost control over the
operations of MSS. Pursuant to the deemed disposition, the Company
deconsolidated the subsidiary as of that date.
Auditing disposition of a partially owned subsidiary was complex
due to the significant estimation of fair value of assets and
liabilities disposed, the accrued liabilities resulted from
disposition, justification of loss of control and consideration of
the disposition.
How the Critical Audit Matter Was Addressed in the Audit
To audit the accounting of the disposition of partially owned
subsidiary, we evaluated management’s assessment of loss of
control, accounting for disposition in accordance with U.S. GAAP;
we verified the fair value of assets and liabilities disposed, the
consideration of disposition, the resulting impact on income
statement, the accrued liabilities resulting from the disposition,
and the cancellation of equity instruments and the adjusted
contingent consideration liability.
We have
served as the Company’s auditor since 2018
Richmond Hill, Ontario, Canada
September 24, 2021
|
/s/ SRCO Professional Corporation
CHARTERED PROFESSIONAL ACCOUNTANTS
Authorized to practice public accounting by the
Chartered Professional Accountants of Ontario
|
Zoompass Holdings Inc.
Consolidated Balance Sheets
(Expressed in US Dollars)
|
|
|
|
December 31, |
|
December 31, |
As At, |
|
Note |
|
2020 |
|
2019 |
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
$ |
64,412 |
|
|
$ |
21,477 |
|
Accounts receivable |
|
|
|
|
|
|
467,383 |
|
|
|
— |
|
Other current assets |
|
|
|
|
|
|
35,179 |
|
|
|
10,563 |
|
Total current
assets |
|
|
|
|
|
|
566,974 |
|
|
|
32,040 |
|
Non-current
assets |
|
|
|
|
|
|
|
|
|
|
|
|
Equipment, net |
|
|
4 |
|
|
|
7,407 |
|
|
|
— |
|
Goodwill |
|
|
3 |
|
|
|
— |
|
|
|
— |
|
Intangible assets, net |
|
|
5 |
|
|
|
— |
|
|
|
— |
|
Right-of-use asset, net |
|
|
6 |
|
|
|
25,402 |
|
|
|
— |
|
Deposit |
|
|
|
|
|
|
1,878 |
|
|
|
— |
|
Total non-current assets |
|
|
|
|
|
|
34,687 |
|
|
|
— |
|
Total assets |
|
|
|
|
|
$ |
601,661 |
|
|
$ |
32,040 |
|
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued
liabilities |
|
|
9 |
|
|
$ |
1,843,780 |
|
|
$ |
710,430 |
|
Notes payable |
|
|
7 |
|
|
|
530,896 |
|
|
|
— |
|
Deferred revenue |
|
|
|
|
|
|
59,533 |
|
|
|
38,570 |
|
Due
to related parties |
|
|
9 |
|
|
|
65,020 |
|
|
|
100,201 |
|
Deferred grants – current portion |
|
|
8 |
|
|
|
6,382 |
|
|
|
— |
|
Lease obligation - current portion |
|
|
6 |
|
|
|
25,815 |
|
|
|
— |
|
Long-term debt - current portion |
|
|
8 |
|
|
|
209,282 |
|
|
|
— |
|
Total current liabilities |
|
|
|
|
|
|
2,740,708 |
|
|
|
849,201 |
|
Non-current
liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred grants – long term portion |
|
|
8 |
|
|
|
19,147 |
|
|
|
— |
|
Long-term debt |
|
|
8 |
|
|
|
651,041 |
|
|
|
— |
|
Total liabilities |
|
|
|
|
|
|
3,410,896 |
|
|
|
849,201 |
|
Shareholders' Deficiency
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares, $0.0001 par value, authorized -
500,000,000 issued and outstanding – 104,009,458 (December 31, 2019
- 109,746,036) |
|
|
10 |
|
|
|
10,402 |
|
|
|
10,975 |
|
Shares to be issued / cancelled |
|
|
10 |
|
|
|
8,622,459 |
|
|
|
34,091 |
|
Additional paid in capital |
|
|
10 |
|
|
|
35,559,692 |
|
|
|
27,104,864 |
|
Cumulative translation adjustment |
|
|
|
|
|
|
(162,379 |
) |
|
|
186,874 |
|
Accumulated deficit |
|
|
|
|
|
|
(46,840,154 |
) |
|
|
(28,153,965 |
|
Total shareholders' deficiency attributed to
owners |
|
|
|
|
|
|
(2,809,980 |
) |
|
|
(817,161 |
) |
Non-controlling interest |
|
|
|
|
|
|
745 |
|
|
|
— |
|
Total shareholders' deficiency |
|
|
|
|
|
|
(2,809,235 |
) |
|
|
(817,161 |
) |
Total liabilities and shareholders'
deficiency |
|
|
|
|
|
$ |
601,661 |
|
|
$ |
32,040 |
|
Nature
of operations and going concern (note 1); Subsequent events (note
16)
The
accompanying notes are an integral part of these consolidated
financial statements.
Zoompass Holdings Inc.
Consolidated Statements of Operations and Comprehensive
Loss
(Expressed in US Dollars)
|
|
Year ended December 31, 2020 |
|
Year ended December 31, 2019 |
Revenue from services rendered |
|
$ |
872,465 |
|
|
$ |
— |
|
Cost
of revenue |
|
|
665,881 |
|
|
|
— |
|
Gross profit |
|
|
206,584 |
|
|
|
— |
|
Expenses
Salaries and consulting fees
|
|
|
696,650 |
|
|
|
266,433 |
|
Professional fees |
|
|
200,637 |
|
|
|
168,429 |
|
Insurance |
|
|
111,754 |
|
|
|
— |
|
Filing
fees and regulatory costs |
|
|
43,877 |
|
|
|
4,892 |
|
Rent
expense |
|
|
102,387 |
|
|
|
15,740 |
|
Office
and sundry expenses and reversal of impairment on related
parties |
|
|
15,619 |
|
|
|
(110,767 |
) |
Depreciation and amortization (notes 4 and 5) |
|
|
437,128 |
|
|
|
— |
|
Software
development costs |
|
|
15,604 |
|
|
|
81,122 |
|
Share-based payments (note 11) |
|
|
1,549,762 |
|
|
|
227,000 |
|
Travel
expense |
|
|
8,272 |
|
|
|
— |
|
Provision for bad and doubtful debts |
|
|
330,886 |
|
|
|
— |
|
Interest
and bank charges |
|
|
126,783 |
|
|
|
1,323 |
|
(Gain)
on settlement/revaluation of debt (notes 8, 10) |
|
|
(318,581 |
) |
|
|
— |
|
Foreign exchange gain |
|
|
(143,075 |
) |
|
|
(38,916 |
) |
|
|
|
3,177,703 |
|
|
|
615,256 |
|
Loss from operations |
|
|
(2,971,119 |
) |
|
|
(615,256 |
) |
Other
income (expense)
Impairment of goodwill (note 3) |
|
|
(13,030,124 |
) |
|
|
— |
|
Impairment of intangible assets (note 5) |
|
|
(6,551,870 |
) |
|
|
— |
|
Net loss
due to change in fair value of contingent consideration |
|
|
(387,356 |
) |
|
|
— |
|
Amortization of deferred grants (note 8) |
|
|
6,382 |
|
|
|
— |
|
Gain
from deemed disposal of subsidiary (note 14) |
|
|
144,969 |
|
|
|
— |
|
Gain on settlement of contingent consideration (note 10) |
|
|
3,574,368 |
|
|
|
— |
|
|
|
|
(16,243,631 |
) |
|
|
— |
|
Loss before taxes |
|
|
(19,214,750 |
) |
|
|
(615,256 |
) |
Income taxes
Current expense (note 15)
|
|
|
(139 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(19,214,889 |
) |
|
$ |
(615,256 |
) |
Less: net loss attributable to non-controlling interest |
|
|
(528,700 |
) |
|
|
— |
|
Net loss attributable to the Company |
|
$ |
(18,686,189 |
) |
|
$ |
(615,256 |
) |
Other comprehensive loss
Loss on foreign
currency translation
|
|
|
(348,790 |
) |
|
|
(62,585 |
) |
Less: Other comprehensive loss attributable to non-controlling
interest |
|
|
463 |
|
|
|
— |
|
Total comprehensive loss |
|
$ |
(19,563,679 |
) |
|
$ |
(677,841 |
) |
Basic and diluted net loss per share |
|
$ |
(0.2073 |
) |
|
$ |
(0.006 |
) |
Weighted average number of
common shares outstanding - basic and diluted
|
|
|
90,154,546 |
|
|
|
107,848,952 |
|
The
accompanying notes are an integral part of these consolidated
financial statements.
Zoompass Holdings Inc.
Consolidated Statements of Changes in Shareholders’
Deficiency
(Expressed in US Dollars)
|
Common shares |
|
Shares to be issued /
cancelled |
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
Number of |
|
|
|
|
Additional paid in |
|
Cumulative translation |
|
|
|
|
|
|
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
capital |
|
adjustment |
|
Deficit |
|
NCI |
|
Total |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
Balance, December 31, 2019 |
|
|
109,746,036 |
|
|
|
10,975 |
|
|
|
757,575 |
|
|
|
34,091 |
|
|
|
27,104,864 |
|
|
|
186,874 |
|
|
|
(28,153,965 |
) |
|
|
— |
|
|
|
(817,161 |
) |
Share issuance for private placement |
|
|
5,039,269 |
|
|
|
504 |
|
|
|
(757,575 |
) |
|
|
(34,091 |
) |
|
|
422,173 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
388,586 |
|
Shares issued on conversion of debt |
|
|
3,319,162 |
|
|
|
332 |
|
|
|
— |
|
|
|
— |
|
|
|
232,010 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
232,342 |
|
Share-based payment expense - issuance of shares
for services |
|
|
6,160,000 |
|
|
|
616 |
|
|
|
— |
|
|
|
— |
|
|
|
1,240,384 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,241,000 |
|
Cancellation of shares |
|
|
(44,911,724 |
) |
|
|
(4,491 |
) |
|
|
— |
|
|
|
— |
|
|
|
4,491 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Share-based payment expense |
|
|
— |
|
|
|
— |
|
|
|
1,500,000 |
|
|
|
165,000 |
|
|
|
143,762 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
308,762 |
|
Shares granted on business
combination |
|
|
— |
|
|
|
— |
|
|
|
41,313,430 |
|
|
|
15,713,308 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15,713,308 |
|
Shares issued on business combination |
|
|
20,656,715 |
|
|
|
2,066 |
|
|
|
(20,656,715 |
) |
|
|
(6,197,015 |
) |
|
|
6,194,949 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Fair
value of warrants on business combination |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,058,834 |
) |
|
|
1,058,834 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancellation of shares and warrants pursuant to
disposition of subsidiary (note 10) |
|
|
— |
|
|
|
— |
|
|
|
(9,330,000 |
) |
|
|
— |
|
|
|
(2,799,295 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,799,295 |
) |
Shares issued on asset purchase |
|
|
4,000,000 |
|
|
|
400 |
|
|
|
— |
|
|
|
— |
|
|
|
1,359,600 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,360,000 |
|
Warrants issued on asset purchase |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
597,920 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
597,920 |
|
Non-controlling interest upon
acquisition |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
528,982 |
|
|
|
528,
982 |
|
Foreign currency translation
adjustment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(349,253 |
) |
|
|
— |
|
|
|
463 |
|
|
|
(348,790 |
) |
Net loss for the year |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
(18,686,189 |
) |
|
|
(528,700 |
) |
|
|
(19,214,889 |
) |
Balance, December 31, 2020 |
|
|
104,009,458 |
|
|
|
10,402 |
|
|
|
12,826,715 |
|
|
|
8,622,459 |
|
|
|
35,559,692 |
|
|
|
(162,379 |
) |
|
|
(46,840,154 |
) |
|
|
745 |
|
|
|
(2,809,235 |
) |
|
Common shares |
|
Shares to be issued |
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
Number of |
|
|
|
|
Additional paid in |
|
Cumulative translation |
|
|
|
|
|
|
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
capital |
|
adjustment |
|
Deficit |
|
NCI |
|
Total |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
Balance, December 31, 2018 |
|
|
105,450,000 |
|
|
|
10,545 |
|
|
|
— |
|
|
|
— |
|
|
|
26,648,048 |
|
|
|
249,459 |
|
|
|
(27,538,709 |
) |
|
|
— |
|
|
|
(630,657 |
) |
Share-based payment expense - shares issued for
services |
|
|
1,500,000 |
|
|
|
150 |
|
|
|
— |
|
|
|
— |
|
|
|
226,850 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
227,000 |
|
Shares issued for cash |
|
|
2,796,036 |
|
|
|
280 |
|
|
|
757,575 |
|
|
|
34,091 |
|
|
|
229,966 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
264,337 |
|
Foreign currency translation
adjustment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(62,585 |
) |
|
|
— |
|
|
|
— |
|
|
|
(62,585 |
) |
Net loss for the year |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(615,256 |
) |
|
|
— |
|
|
|
(615,256 |
) |
Balance, December 31,
2019 |
|
|
109,746,036 |
|
|
|
10,975 |
|
|
|
757,575 |
|
|
|
34,091 |
|
|
|
27,104,864 |
|
|
|
186,874 |
|
|
|
(28,153,965 |
) |
|
|
— |
|
|
|
(817,161 |
) |
The accompanying notes are an integral part of these consolidated
financial statements.
Zoompass Holdings Inc.
Consolidated Statements of Cash Flows
(Expressed in US Dollars)
|
|
Years Ended December 31, |
|
|
2020 |
|
2019 |
Cash flows used in operating activities |
|
|
|
|
|
|
|
|
Net loss
for the year |
|
$ |
(19,214,889 |
) |
|
$ |
(615,256 |
) |
Adjustments to
reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and
amortization |
|
|
437,128 |
|
|
|
— |
|
Amortization of deferred grants |
|
|
(6,382 |
) |
|
|
— |
|
Provision for bad and doubtful debts |
|
|
330,886 |
|
|
|
— |
|
Shares
issued for services |
|
|
1,549,762 |
|
|
|
227,000 |
|
Foreign
exchange (gain) |
|
|
(143,075 |
) |
|
|
(38,916 |
) |
Interest expenses on debt
valuation |
|
|
113,067 |
|
|
|
— |
|
Gain on
settlement of debt |
|
|
(318,580 |
) |
|
|
— |
|
Impairment of goodwill and reversal |
|
|
13,030,124 |
|
|
|
(163,872 |
) |
Impairment of intangible assets |
|
|
6,551,870 |
|
|
|
— |
|
Change
in fair value of contingent consideration |
|
|
387,356 |
|
|
|
— |
|
Gain from deemed disposal of
subsidiary |
|
|
(144,969 |
) |
|
|
— |
|
Gain on
settlement of contingent consideration |
|
|
(3,574,368 |
) |
|
|
— |
|
(Increase) decrease in: |
|
|
|
|
|
|
|
|
Accounts
receivable |
|
|
(379,393 |
) |
|
|
— |
|
Other
current assets |
|
|
(94,676 |
) |
|
|
(2,722 |
) |
Accounts
payable and accrued liabilities |
|
|
909,596 |
|
|
|
55,157 |
|
|
|
|
|
|
|
|
|
|
Deferred revenue |
|
|
20,963 |
|
|
|
— |
|
Net cash used in operating activities |
|
|
(545,581 |
) |
|
|
(538,609 |
) |
|
|
|
|
|
|
|
|
|
Cash flows used in investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash acquired from
BGC. |
|
|
48,742 |
|
|
|
— |
|
Cash paid on intangible asset acquired |
|
|
(162,895 |
) |
|
|
— |
|
Net cash used in investing activities |
|
|
(114,153 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Cash flows provided by financing activities |
|
|
|
|
|
|
|
|
Proceeds from note
payable |
|
|
365,068 |
|
|
|
— |
|
Proceeds from shares
issued |
|
|
388,586 |
|
|
|
264,337 |
|
Proceeds from
debt |
|
|
75,600 |
|
|
|
— |
|
Proceeds from related parties |
|
|
63,096 |
|
|
|
286,188 |
|
Net cash provided by financing activities |
|
|
892,350 |
|
|
|
550,525 |
|
Net change in cash |
|
|
232,616 |
|
|
|
11,916 |
|
Effect of exchange
rate changes on cash held in foreign currencies |
|
|
(189,681 |
) |
|
|
(26,514 |
) |
Cash, beginning of year |
|
|
21,477 |
|
|
|
36,075 |
|
Cash, end of year |
|
$ |
64,412 |
|
|
$ |
21,477 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash investing and financing
activities: |
|
|
|
|
|
|
|
|
Purchase of
intangible assets |
|
$ |
1,957,920 |
|
|
$ |
— |
|
The
accompanying notes are an integral part of these consolidated
financial statements.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
NOTE 1 — NATURE OF OPERATIONS AND GOING CONCERN
Zoompass Holdings, Inc. formerly known as UVIC. Inc. ("Zoompass
Holdings" or the "Company") was incorporated under the laws of the
State of Nevada on August 21, 2013. The Company is a software
fintech company with focus on leading edge technologies and
software as a service. The Company is actively seeking
opportunities to acquire software companies with existing revenue
streams.
In
February 2017, the Company completed a 3.5-1 forward split, which
was approved by shareholders of record on September 7, 2016. All
share figures have been retroactively stated to reflect the stock
split approved by the shareholders, unless otherwise indicated.
Effective March 6, 2018, the Company’s Canadian operating
subsidiary, Zoompass, Inc., entered into an Asset Purchase
Agreement (the "Agreement") for the sale of its Prepaid Card
Business ("Prepaid Business") to Fintech Holdings North America
Inc., or its designee. The aggregate purchase price of the Prepaid
Business was C$400,000 (US$314,160). The transaction was completed
on March 26, 2018.
On
October 16, 2018, the Company purchased certain business assets
that represents a business from Virtublock Global Corp.
(“Virtublock”, “VGC”) in return the Company issued 44,911,724
shares to Virtublock and pursuant to the issuance of shares
Virtublock ended up owning 45% of total outstanding common shares
of the Company.
On
February 27, 2020, the Company cancelled 44,911,724 shares of the
common stock which were issued in connection with the asset
purchase agreement dated October 17, 2018 with Virtublock (note 3).
Pursuant to a General Release agreement dated November 29, 2019,
the asset purchase agreement dated October 17, 2018 with Virtublock
was deemed cancelled and each party acknowledged and agreed that no
party has or shall have any claim with respect to intellectual
property, software or other assets owned by any other party and
that no agreements exist or remain unsatisfied with respect to the
transfer of any asset from a releasing party to any other party,
and Virtublock assigned and tendered the 44,911,724 shares of
common stock of the Company to the Company for cancellation. As the
share cancellation occurred on February 27, 2020, the accounting
recognition of this transaction, consisting of a transfer of $4,492
from common stock to additional paid-in capital and related
reduction in the number of common shares outstanding, were
reflected in the consolidated financial statements for the year
ended December 31, 2020.
On May 31, 2020, the Company closed a Share Exchange Agreement (the
"Share Exchange Agreement") by and among the Company, Blockgration
Global Corp., an Ontario corporation, and its subsidiaries,
(Blockline Solutions Private Ltd, Msewa Software Solutions, Zuum
Global Services Inc.) ("BGC"), and the shareholders of BGC (the
"BGC Shareholders"). This acquisition gives the Company controlling
interest in BGC’s subsidiaries in Canada and India which are
engaged in the business of digital wallet deployments, prepaid card
platform, blockchain and mobile apps deployment.
On September 30, 2020, the Company
cancelled 9,330,000 shares of
the common stock and 14,845,000 share purchase warrants which were
allocated in connection with the acquisition of MSS, that was a 70%
subsidiary of BGC on May 31, 2020. See (note 3, 10 and
14).
The Company has incurred recurring losses from operations and as of
December 31, 2020, and December 31, 2019, and had net working
capital deficiency and an accumulated deficit. The Company’s
continued existence is dependent upon its ability to continue to
execute its operating plan and to obtain additional debt or equity
financing. These conditions raise substantial doubt about the
Company’s ability to continue as a going concern. There can be no
assurance that the necessary debt or equity financing will be
available or will be available on terms acceptable to the Company,
in which case the Company may be unable to meet its obligations.
Should the Company be unable to realize its assets and discharge
its liabilities in the normal course of business, the net
realizable value of its assets may be materially less than the
amounts recorded in the consolidated financial statements.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
There is no certainty that the Company will be successful in
generating sufficient cash flow from operations or achieving and
maintaining profitable operations in the future to enable it to
meet its obligations as they come due and consequently continue as
a going concern. The Company will require additional financing to
fund its operations and it is currently working on securing this
funding through corporate collaborations, public or private equity
offerings or debt financings. Subsequent to year-end the Company
raised approximately $400,000 in additional financing. See (note
16) Sale of additional equity securities by the Company would
result in the dilution of the interests of existing shareholders.
There can be no assurance that financing will be available when
required.
These consolidated
financial statements have been prepared on the basis that the
Company will continue as a going concern, which presumes that it
will be able to realize its assets and discharge its liabilities in
the normal course of business
as they come due. These consolidated financial statements do
not reflect the adjustments to the carrying values of assets and liabilities
and the reported expenses and consolidated balance sheets
classifications that would be necessary if the Company were unable
to realize its assets and settle its liabilities as a going concern
in the normal course of operations. Such adjustments could be
material.
In December 2019, a novel strain of coronavirus (COVID-19) emerged.
While initially the outbreak was largely concentrated in China and
caused significant disruptions to its economy, it has now spread to
several other countries and infections have been reported
globally.
During 2020, as a
result of COVID-19 infections having been reported throughout the
United States, Canada, India and countries in Europe, certain
national, provincial, state and local governmental issued
proclamations and/or directives aimed at minimizing the spread of
COVID-19. Due to the disruption of the COVID-19 crisis, the
Company’s business activities might be subject to certain level of
adverse impact. To the date of the issuance of these consolidated
financial statements, the Company is still assessing the impact on
its business, results of operations, financial position and cash
flows, which will be accounted for when the reliable estimates will
become available.
Basis of presentation
The accompanying
consolidated financial statements have been prepared pursuant to
the rules and regulations of the Securities and Exchange
Commission, in accordance with accounting principles generally
accepted in the United States (“US GAAP”).
The consolidated financial statements reflect all adjustments,
consisting of normal recurring adjustments, which, in the opinion
of management, are necessary to present a fair statement of the
results for the year.
Basis of consolidation:
The
consolidated financial statements comprise the accounts of Zoompass
Holdings Inc., the legal parent company, and its subsidiaries. The
accounts of the subsidiaries are prepared for the same reporting
period as the parent entity, using consistent accounting policies.
All significant inter-company balances and transactions, unrealized
gains or losses on transactions between the entities have been
eliminated upon consolidation.
Legal Entity |
|
Location |
|
Ownership Interest |
Zoompass Inc. (“ZM”)! |
|
|
Canada |
|
|
|
100 |
% |
Paymobile Inc. (“PM”)! |
|
|
USA |
|
|
|
100 |
% |
Zoompass Technologies Inc. (formerly
Mobility Fintech Solutions USA Inc.) (“ZTI”) |
|
|
USA |
|
|
|
100 |
% |
Blockgration Global Corp.
(“BGC”)* |
|
|
Canada |
|
|
|
100 |
% |
Virtublock OU (“VO”)* |
|
|
Estonia |
|
|
|
100 |
% |
Blockline Solutions Private Ltd
(“BSP”)* |
|
|
India |
|
|
|
100 |
% |
Msewa Software Solutions (“MSS”)* |
|
|
India |
|
|
|
70 |
% |
Zuum Global Services Inc.
(“ZMG”)* |
|
|
Canada |
|
|
|
70 |
% |
|
|
|
|
|
|
|
|
|
*Those entities became subsidiaries of the Company pursuant
to the acquisition transaction completed on May 31, 2020. The
transaction with MSS was cancelled as of September 30, 2020 and has
been accounted for as deemed disposal of subsidiary.
! No changes in the shareholding since December 31, 2018 (Note
3)
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
Subsidiaries are all entities (including special purpose entities)
over which the Company, either directly or indirectly, has the
power to govern the financial and operating policies generally
accompanying a shareholding of more than one half of the voting
rights. Where the group does not directly hold more than one half
of the voting rights, significant judgment is used to determine
whether control exists. These significant judgments include
assessing whether the group can control the operating policies
through the group's ability to appoint most directors to the board.
The existence and effect of potential voting rights that are
currently exercisable or convertible are considered when assessing
whether the group controls another entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the
group until the date on which control ceases.
NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING
PRONOUNCEMENTS
SIGNIFICANT ACCOUNTING POLICIES
Translation of foreign currencies
The
functional currency of the Company, PM and ZTI is the US dollar.
The Company has determined that the functional currency of ZM, BGC
and ZMG is the Canadian dollar (references to which are denoted
"C$"), for BSP and MSS is the Indian Rupees and for VO is the Euro.
The reporting currency of the Company is US Dollar.
Transactions in currencies other than the functional currency are
recorded at the rates of the exchange prevailing on dates of
transactions. At each balance sheet reporting date, monetary assets
and liabilities that are denominated in foreign currencies are
translated at the rates prevailing at each reporting date.
Non-monetary items that are measured in terms of historical cost in
a foreign currency are translated at the exchange rate at the
historical date of the transaction. The impact from the translation
of foreign currency denominated items is reflected in the statement
of operations and comprehensive loss.
Translation of functional currencies to reporting currencies for
assets and liabilities is done using the exchange rates at each balance sheet date; revenue
and expenses are translated at average rates prevailing
during the reporting period or at the date of the transaction;
shareholders' equity is translated at historical rates. Adjustments
resulting from translating the consolidated financial statements
into the US Dollar are recorded as a separate component of
accumulated other comprehensive income in the statement of changes
in stockholders’ deficiency.
Revenue recognition
The Company's revenue recognition policy follows ASC
606, Revenue from Contracts with Customers, which
provides guidance on the recognition, presentation and disclosure
of revenue from contracts with customers in consolidated financial
statements.
Revenue is measured based on the consideration specified in a
contract with a customer. Once the Company determines a contract's
performance obligations and the transaction price, including an
estimate of any variable consideration, the Company allocates the
transaction price to each performance obligation in the contract
using a stand-alone selling price. The Company recognizes revenue
when it satisfies a performance obligation by transferring control
of a product or service to a customer. Revenue is recognized net of
any taxes collected from customers, which are subsequently remitted
to governmental authorities.
Nature of performance obligations
At contract inception, the Company assesses the services promised
in the contract with a customer and identifies a performance
obligation for each promise to transfer to the customer a service
(or bundle of services) that is distinct. To identify the
performance obligations, the Company considers all the services
promised in the contract regardless of whether they are explicitly
stated or implied.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
The
following is a description of the Company's principal revenue
generating activities.
Revenue is principally derived from time basis billing for IT
professional services provided to customers. Professional services
in these contracts are primarily considered a single performance
obligation. Revenue for these contracts is recognized over time for
the amount which the Company has right to consideration. The
Company also derived revenue from enabling various payment
transactions which is recognized on a fixed fees per transaction
basis at a point in time as services are rendered.
Deferred revenue is recognized for transactions arising during the
current reporting period when it receives consideration from a
customer before achieving certain criteria that must be met for
revenue to be recognized. Deferred revenue is a liability as of the
reporting period related to revenue producing activity for which
revenue has not yet been recognized.
Leases
On
January 1, 2019, the Company adopted Accounting Standards
Codification Topic 842, “Leases” (“ASC 842”) to replace existing
lease accounting guidance. This pronouncement is intended to
provide enhanced transparency and comparability by requiring
lessees to record right-of-use assets and corresponding lease
liabilities on the balance sheet for most leases. Expenses
associated with leases will continue to be recognized in a manner
like previous accounting guidance. The Company adopted ASC 842
utilizing the transition practical expedient added by the FASB,
which eliminates the requirement that entities apply the new lease
standard to the comparative periods presented in the year of
adoption.
The
Company is the lessee in a lease contract when the Company obtains
the right to use the asset. Leases are included in the line items
right-of-use asset, lease obligation, current, and lease
obligation, long-term in the consolidated balance sheet.
Right-of-use (“ROU”) asset represents the Company’s right to use an
underlying asset for the lease term and lease obligations represent
the Company’s obligations to make lease payments arising from the
lease, both of which are recognized based on the present value of
the future minimum lease payments over the lease term at the
commencement date. Leases with a lease term of 12 months or less at
inception are not recorded on the consolidated balance sheet and
are expensed on a straight-line basis over the lease term in the
consolidated statement of Operation. The Company determines the
lease term by agreement with lessor.
As the Company’s current
operating lease of office space on January 1, 2019 had a
term of less than 12 months, the Company elected not to apply the
recognition requirements of ASC 842 to the short-term lease,
instead lease payments were recognized in statement of operations
on a straight-line basis over the lease term.
Goodwill
Goodwill represents the excess purchase price over the estimated
fair value of net assets acquired by the Company in business
combinations. Business acquisitions are accounted for using the
acquisition method whereby acquired assets and liabilities are
recorded at fair value as of the date of acquisition with the
excess of the acquisition amount over such fair value being
recorded as goodwill and allocated to reporting units ("RU"). RUs
are the smallest identifiable group of assets, liabilities and
associated goodwill that generate cash inflows that are largely
independent of the cash inflows from other assets or groups of
assets. Given how the Company is structured and managed, the
Company has one RU. Goodwill arises principally because of the
following factors among other things: (1) the going concern value
of the Company's capacity to sustain and grow revenues through
securing additional contracts and customers,; (2) the undeserved
market of consumers looking for financial transactional
alternatives; (3) technological and mobile capabilities beyond
acquired lines of business to capture buyer specific synergies
arising upon a transaction and (4) the requirement to record a
deferred tax liability for the difference between the assigned
values and the tax bases of the assets acquired and liabilities
assumed in a business combination, if any.
Business combinations
A
business combination is a transaction or other event in which
control over one or more businesses is obtained. A business is an
integrated set of activities and assets that is capable of being
conducted and managed for the purpose of providing a return in the
form of dividends, lower costs or other economic benefits. A
business consists
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
of inputs and processes applied to those inputs that can create
outputs that provide a return to the Company and its shareholders.
A business need not include all the inputs and processes that were
used by the acquiree to produce outputs if the business can be
integrated with the inputs and processes of the Company to continue
to produce outputs. The Company considers several factors to
determine whether the set of activities and assets is a
business.
Business acquisitions are accounted for using the acquisition
method whereby acquired assets and liabilities are recorded at fair
value as of the date of acquisition with the excess of the purchase
consideration over such fair value being recorded as goodwill and
allocated to RUs. If the fair value of the net assets acquired
exceeds the purchase consideration, the difference is recognized
immediately as a gain in the consolidated statement of operations.
Acquisition related costs are expensed during the period in which
they are incurred, except for the cost of debt or equity
instruments issued in relation to the acquisition which is included
in the carrying amount of the related instrument. Certain fair
values may be estimated at the acquisition date pending
confirmation or completion of the valuation process. Where
provisional values are used in accounting for a business
combination, they are adjusted retrospectively in subsequent
periods. However, the measurement period will not exceed one year
from the acquisition date. If the assets acquired are not a
business, the transaction is accounted for as an asset
acquisition.
Cash and cash equivalents
Cash and cash equivalents include demand deposits held with banks
and highly liquid investments with original maturities of ninety
days or less at acquisition date. For purposes of reporting cash
flows, the Company considers all cash accounts that are not subject
to withdrawal restrictions or penalties to be cash and cash
equivalents. Cash in trust and customer deposits are amounts held
by the Company at various financial institutions for settlement of
clients' funds payable.
Equipment
Equipment is stated at historic cost. The Company has the following
sub-categories of equipment with useful lives and depreciation
methods as follows:
• |
Office equipment and furniture – 20%
declining balance per year |
The
cost of assets sold, retired, or otherwise disposed of and the
related accumulated depreciation are eliminated from the accounts.
Expenditures for maintenance and repairs are charged to expense as
incurred.
The
Company follows the ASC Topic 360, which requires that long-lived
assets be reviewed annually for impairment whenever events or
changes in circumstances indicate that the assets' carrying amounts
may not be recoverable.
In
performing the review for recoverability, if future undiscounted
cash flows (excluding interest charges) from the use and ultimate
disposition of the assets are less than their carrying values, an
impairment loss represented by the difference between its fair
value and carrying value, is recognized. When properties are
classified as held for sale, they are recorded at the lower of the
carrying amount or the expected sales price less costs to sell.
Intangibles
The
Company has applied the provisions of ASC topic 350 – Intangibles –
goodwill and other, in accounting for its intangible assets.
Intangible assets subject to amortization are amortized on a
straight-line method on the basis over the useful life of the
respective intangibles. The following useful lives are used in the
calculation of amortization:
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
Trademark – 8 years
Customer base – 5 years
Intellectual property/Technology – 10 years
Impairment goodwill and indefinite-lived intangible assets and
intangible assets with definite lives
The Company accounts for goodwill and intangible assets in
accordance with ASC No. 350, Intangibles-Goodwill and Other ("ASC
350"). ASC 350 requires that goodwill and other intangibles with
indefinite lives be tested for impairment annually or on an interim
basis if events or circumstances indicate that the fair value of an
asset has decreased below its carrying value. In addition, ASC 350
requires that goodwill be tested for impairment at the reporting
unit level (operating segment or one level below an operating
segment) on an annual basis and between annual tests when
circumstances indicate that the recoverability of the carrying
amount of goodwill may be in doubt. Application of the goodwill
impairment test requires judgment, including the identification of
reporting units; assigning assets and liabilities to reporting
units, assigning goodwill to reporting units, and determining the
fair value. Significant judgments required to estimate the fair
value of reporting units include estimating future cash flows,
determining appropriate discount rates and other assumptions.
Changes in these estimates and assumptions or the occurrence of one
or more confirming events in future periods could cause the actual
results or outcomes to materially differ from such estimates and
could also affect the determination of fair value and/or goodwill
impairment at future reporting dates.
The Company assesses the carrying value of goodwill,
indefinite-lived intangible assets and intangible assets with
definite lives, such as Trademark, Intellectual
property/Technology, and customer base for potential impairment
annually as of December 31, or more frequently if events or changes
in circumstances indicate such assets might be impaired.
When assessing goodwill for impairment the Company elects to first
perform a qualitative assessment for a reporting unit to determine
if the quantitative impairment test is necessary. If we do not
perform a qualitative assessment, or if the qualitative assessment
indicates it is more likely than not that the fair value of the
reporting units, is less than its carrying amount, the Company
performs a quantitative test. The Company recognizes an impairment
charge for the amount by which the carrying amount exceeds the
reporting unit’s fair value; however, the loss recognized would not
exceed the total amount of goodwill allocated to that reporting
unit. The Company estimates fair value using the income approach,
to estimate the future undiscounted cash flows (excluding interest
charges) from the use and ultimate disposition of the assets.
Income taxes
Deferred tax is recognized using the asset and liability method, on
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used
for tax purposes. However, the deferred tax is not recognized if it
arises from initial recognition of an asset or liability in a
transaction other than a business combination that at the time of
the transaction affects neither accounting nor taxable profit or
loss. Deferred taxes determined using tax rates (and laws) that
have been enacted by the reporting date and are expected to apply
when the related deferred taxation asset is realized, or the
deferred taxation liability is settled. Deferred tax assets and
liabilities are offset if there is a legally enforceable right to
offset current tax liabilities and assets, and they relate to
income taxes levied by the same tax authority on the same taxable
entity, or on different tax entities, but they intend to settle
current tax liabilities and assets on a net basis or their tax
assets and liabilities will be realized simultaneously.
A deferred tax asset is recognized to the extent that it is
probable that future taxable profits will be available against
which the temporary difference can be utilized. Deferred tax assets
are reviewed at each reporting date and are reduced to the extent
that it is no longer probable that the related tax benefit will be
realized.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
Share-based payment expense
The Company follows the fair value method of accounting for stock
awards granted to employees, directors, officers and consultants.
Share-based awards to employees are measured at the fair value of
the related share-based awards. Share-based payments to others are
valued based on the related services rendered or goods received or
if this cannot be reliably measured, on the fair value of the
instruments issued. Issuances of shares are valued using the fair
value of the shares at the time of grant; issuances of warrants and
other share-based awards are valued using the Black-Scholes model
with assumptions based on historical experience and future
expectations. All issuances of share-based payments have been
fully-vested, otherwise the Company recognizes such awards over the
vesting period based on expectations of the number of awards
expected to vest over that period on a straight- line basis.
Basic and diluted loss per share
Basic and diluted loss per share has been determined by dividing
the net loss available to shareholders for the applicable period by
the basic and diluted weighted average number of shares
outstanding, respectively. The diluted weighted average number of
shares outstanding is calculated as if all dilutive options had
been exercised or vested at the later of the beginning of the
reporting period or date of grant, using the treasury stock
method.
Loss per common share is computed by dividing the net loss by the
weighted average number of shares of common shares outstanding
during the period. Common share equivalents, options and warrants
are excluded from the computation of diluted loss per share when
their effect as anti-dilutive.
Segment reporting
ASC 280-10, "Disclosures about Segments of an Enterprise and
Related Information", establishes standards for the way that public
business enterprises report information about operating segments in
the Company's consolidated financial statements. Operating segments
are components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and
in assessing performance. Significantly all of the assets of the
Company are located in, all revenues are currently earned in India
and the Company’s research, development and strategical planning
operations are carried out and served as an integral part of the
Company’s business. The Company’s reportable segments and operating
segments include rendering of professional services.
Use of estimates
The preparation of the consolidated financial statements in
conformity with US 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.
Actual results could differ from these estimates.
The areas where management has made significant judgments include,
but are not limited to:
Accounting for acquisitions and disposal: The accounting for
acquisitions requires judgement to determine if an acquisition
meets the definition of a business combination under ASC 805.
Further, management is required to use judgement to determine the
fair value of the consideration provided and the net assets and
liabilities acquired while in case of disposal management is
required to use judgement to determine if the Company continues to
exercise control over a subsidiary or is it a deemed disposal.
Assessment of Impairment: The Company has certain assets for
which a determination of an impairment, if any, requires
significant judgement to determine if the carrying amount of any
assets are impaired. Management uses judgement in determining among
other things, whether or not an indicator of impairment has
occurred, future cash flows, time horizons, and likelihood of
recoverability. The assets where management has assessed the
recoverability the carrying amount includes accounts receivable,
equipment, intangibles and goodwill.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
Deferred taxes: The Company recognizes the deferred tax
benefit related to deferred income tax assets to the extent
recovery is probable. Assessing the recoverability of deferred
income tax assets requires management to make significant estimates
of future taxable profit and the income tax rate at which the
future tax assets will be realized. To the extent that future cash
flows, taxable profit and income tax rates differ
significantly from estimates, the ability of the Company to realize
deferred tax assets could be impacted. In addition, future changes
in tax laws could limit the ability of the Company to obtain tax
deductions in future periods from deferred income tax assets.
Share-based payment expense: The calculation of
share-based payment expense requires management to use significant
judgment in determining the fair value of share-based payment
expense. Additionally, the management is required to make certain
assumptions in arriving at the fair value of share-based payment
expense.
RECENTLY ISSUED AND NEWLY ADOPTED ACCOUNTING PRONOUNCEMENTS
In March 2020, the FASB
issued ASU No. 2020-04, Reference Rate Reform (Topic 848):
Facilitation of the Effects of Reference Rate Reform on Financial
Reporting, which provides optional expedients and exceptions
for applying GAAP to
contracts, hedging relationships, and other transactions
affected by reference rate reform if certain criteria are met. The
amendments apply only to contracts, hedging relationships, and
other transactions that reference LIBOR or another reference rate
expected to be discontinued because of reference rate reform. The
amendments are effective for
all entities as of March 12, 2020 through December 31, 2022.
The Company is currently evaluating the impact this guidance may
have on our consolidated financial statements and related
disclosures.
In June 2016, the Financial Accounting Standards Board (“FASB”)
issued Accounting Standards Update (ASU) 2016-13, “Financial
Instruments - Credit Losses (Topic 326) - Measurement of Credit
Losses on Financial Instruments.” This pronouncement, along with
subsequent ASUs issued to clarify provisions of ASU 2016-13,
changes the impairment model for most financial assets and will
require the use of an “expected loss” model for instruments
measured at amortized cost. Under this model, entities will be
required to estimate the lifetime expected credit loss (current
expected credit loss – CECL) on such instruments and record an
allowance to offset the amortized cost basis of the financial
asset, resulting in a net presentation of the amount expected to be
collected on the financial asset. In developing the estimate for
lifetime expected credit loss, entities must incorporate historical
experience, current conditions, and reasonable and supportable
forecasts. This pronouncement is effective for fiscal years, and
for interim periods within those fiscal years, beginning after
December 15, 2019. On November 15, 2019, FASB issued ASU No.
2019-10 and finalized various effective date delays for private
companies, not-for-profit organizations, and smaller reporting
companies applying the CECL, and the effective date of CECL
implementation date has been delayed to January 2023. As the new
CECL model requires changes to the Company's process of estimating
expected credit losses on trade receivables, the Company is in a
process to identify and update existing internal controls and
procedures to ensure compliance with the new guidance once it
becomes effective.
In August 2018, the FASB issued ASU 2018-13, “Disclosure
Framework—Changes to the Disclosure Requirements for Fair Value
Measurement,” which removes, modifies and adds certain disclosure
requirements in ASC Topic 820, Fair Value Measurement. This ASU is
effective for annual and interim reporting periods beginning after
December 15, 2019. Certain amendments must be applied prospectively
while others are to be applied on a retrospective basis to all
periods presented. The Company adopted ASU 2018-13 in 2020 and has
updated disclosures in this report. See Note 16 for additional
information.
In December 2019, the FASB issued ASU 2019-12, “Simplifying the
Accounting for Income Taxes,” which will simplify the accounting
for income taxes by removing certain exceptions to the general
principles in income tax accounting and improve consistent
application of and simplify GAAP for other areas of income tax
accounting by clarifying and amending existing guidance. The new
guidance is effective for fiscal years beginning after December 15,
2020, including interim periods within those fiscal years. The
Company evaluated the impact ASU
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
2019-12 will have on its consolidated financial statements and does
not expect a material impact upon adoption in
2021.
On January 1, 2019, the Company adopted ASC 842, “Leases” (“ASC
842”) to replace existing lease accounting guidance. This
pronouncement is intended to provide enhanced transparency and
comparability by requiring lessees to record right-of-use assets
and corresponding lease liabilities on the balance sheet for most
leases. Expenses associated with leases will continue to be
recognized in a manner like previous accounting guidance. The
Company adopted ASC 842 utilizing the transition practical
expedient added by the FASB, which eliminates the requirement that
entities apply the new lease standard to the comparative periods
presented in the year of adoption. The Company is the lessee in a
lease contract when the Company obtains the right to use the asset.
Operating leases are included in the line items right-of-use asset,
lease obligation, current, and lease obligation, long-term in the
consolidated balance sheet. Right-of-use (“ROU”) asset represents
the Company’s right to use an underlying asset for the lease term
and lease obligations represent the Company’s obligations to make
lease payments arising from the lease, both of which are recognized
based on the present value of the future minimum lease payments
over the lease term at the commencement date. Leases with a lease
term of 12 months or less at inception are not recorded on the
consolidated balance sheet and are expensed on a straight-line
basis over the lease term in our consolidated statement of income.
The Company determines the lease term by agreement with lessor. As
our current operating lease of office space, at the commencement,
has a term of less than 12 months, the Company elects not to apply
the recognition requirements of ASC 842 to the short-term lease,
instead lease payments are recognized in statement of operations on
a straight-line basis over the lease term.
NOTE 3 – ACQUISITIONS OF BUSINESS AND ACQUISITION OF ASSET
Acquisition of Virtublock Global Corp. (VGC):
On October 16, 2018, the Company entered into an agreement with
VGC, a corporation incorporated in Ontario Canada, to acquire
assets and intellectual property of VGC. Based on an examination of
the net assets acquired, the acquisition of the net assets was
determined to be a business as defined under ASC 805.
Pursuant to the agreement, the Company issued 44,911,724 shares of
its common stock to VGC as purchase consideration. The fair value
of the shares issued was determined to be $3,458,203 based on the
market value of the common stock as the date of issuance. The
following table sets forth the allocation of the purchase
consideration to the fair value of the net assets acquired. The
acquired goodwill is primarily related to the value attributed to a
company that was expected to experience accelerated growth.
Management tested goodwill and intangibles for impairment and
determined them to be impaired. The main cause of the impairment
was Company’s inability to secure the required financing and
customer contracts in order to operationalize the new acquisition
of VGC. As a result, the carrying amounts of intangibles and
goodwill could not be supported.
Impairment of goodwill and intangible assets:
Management used the income approach to estimate the value of the
Company’s intangible assets based on projections (adjusted for
multiple scenarios and weighted probabilities) of future cash
flows.
Impairment regarding goodwill
The fair value of the business unit based on the discounted cash
flow analysis and net asset valuations of the reporting unit do not
exceed the carrying amount, therefore goodwill was considered
impaired.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
Impairment regarding intangibles
The
undiscounted (pre-tax) cash flows of the reporting unit using
projections do not exceed its’s carrying value, and therefore
intangibles were considered impaired.
Common shares
issued |
|
$ |
3,458,203 |
|
|
|
|
|
|
Net assets acquired |
|
|
|
|
Customer base |
|
|
— |
|
Trade name – Virtublock (note 5) |
|
|
6,600 |
|
Intellectual property / Technology
(note 5) |
|
|
11,200 |
|
Non-compete agreements |
|
|
— |
|
Goodwill (note
5) |
|
$ |
3,440,403 |
|
Total net assets acquired |
|
|
3,458,203 |
|
Impairment at December 31, 2018
(note 5) |
|
|
(3,458,203 |
) |
|
|
$ |
— |
|
On February 27, 2020, the Company terminated the agreement with
Virtublock and cancelled 44,911,724 shares of the common stock
which were issued in connection with the asset purchase agreement.
Pursuant to a General Release agreement, each party acknowledged
and agreed that no party has or shall have any claim with respect
to intellectual property, software or other assets owned by any
other party and that no agreements exist or remain unsatisfied with
respect to the transfer of any asset from a releasing party to any
other party.
Acquisition of Blockgration Global Corp. (BGC):
On May 31, 2020, the Company closed a share exchange agreement with
BGC and its subsidiaries, wherein the Company acquired all of the
outstanding shares of common stock of BGC, a company incorporated
in Ontario, Canada, that is in the business of rendering IT
professional services, for an aggregate purchase price of
$9,000,000. The consideration was to be paid by issue of common
shares and share purchase warrants in the Company as follows:
i) |
41,313,430 newly issued common shares
in the Company at market price of $0.30 per share |
ii) |
56,186,560 share purchase warrants at
an exercise price of $0.25, valid for 3 years |
Subsequent to the year-end the Company decided to cancel the both
the 2020 and 2021 bonus shares and warrants. Due to the publicly
traded nature of the Company’s shares, the equity issuance of the
shares was considered to be a more reliable measurement of fair
market value of the transaction compared to having a separate
valuation of the net assets.
Further, the Company was also to issue bonus shares and share
purchase warrants on a pro rata basis after the end of each
applicable fiscal year, upon achievement of certain operational
milestones within a defined time period.
a) |
2020 Bonus shares – 5,000,000 shares
and 5,000,000 warrants |
b) |
2021 Bonus shares – 5,000,000 shares
and 5,000,000 warrants |
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
Under the acquisition method of accounting, the total purchase
price reflects the tangible and intangible assets and liabilities
based on their estimated fair values at the date of the completion
of the acquisition. The following table summarizes the allocation
of the purchase price of BGC, and its subsidiaries:
Consideration |
|
|
Common shares/warrants |
|
$ |
7,255,849 |
|
Contingent shares/warrants (recorded
as contingent consideration payable) |
|
|
11,644,471 |
|
|
|
|
18,900,320 |
|
|
|
|
|
|
Net assets acquired |
|
|
|
|
Cash and cash equivalents |
|
$ |
52,795 |
|
Accounts receivable |
|
|
220,213 |
|
Inventory |
|
|
5,838 |
|
Right-of-use asset |
|
|
39,922 |
|
Other assets |
|
|
53,083 |
|
Equipment |
|
|
17,674 |
|
Goodwill |
|
|
16,711,559 |
|
Intangible assets |
|
|
4,385,000 |
|
Accounts payable and accrued
liabilities |
|
|
(516,88 |
) |
Note and debt payable |
|
|
(263,639 |
) |
Other liabilities |
|
|
(76,658 |
) |
Non-controlling
interest |
|
|
(1,728,679 |
) |
Total net assets acquired |
|
$ |
18,900,320 |
|
Acquisition of Assets:
On July 15, 2020, the Company entered into certain Intellectual
Property Rights Purchase and Transfer Agreement with Moxie Holdings
Private Ltd. (Moxies) an Indian corporation for:
(i) |
cash consideration of $1,200,000 to
be paid in installments, |
(ii) |
four million (4,000,000) newly issued
shares of common stock, and |
(iii) |
warrants to purchase two million (2,000,000) shares of common stock
at an exercise price of $0.50 per
share
valid for three years.
|
The Asset was included in intangible assets as IP technology under
development and the fair value for total consideration was
determined on the date of acquisition as $3,106,831, see note 5.
The fair value of consideration paid was allocated as follows (i)
cash consideration at net present value of $1,148,911, (ii)
consideration in common stock was valued at $1,360,000, and (iii)
consideration in warrants was valued at $597,920.
The repayment terms for the cash consideration were modified on
September 28, 2020 as follows:
|
Payment due October 30, 2020 |
|
|
$ |
400,000 |
|
|
Payment
due December 31, 2020 |
|
|
|
350,000 |
|
|
Payment
due March 31, 2021 |
|
|
|
200,000 |
|
|
Payment
due March 31, 2022 |
|
|
|
250,000 |
|
The
net present value of the future payments before modification of
payment terms was determined using a weighted average cost of
capital of 24.70% and was determined to be $1,158,632. The net
present value of the future payments upon modification of payment
terms was determined using a weighted average cost of capital of
24.70% and was determined to be $1,032,256, with a gain of $126,376
recognized and included in the statement of operations, see note
8.
The Company has not been able to make the payments as per the
modified due dates as a result of cash flow shortage and is
continuing to make the payments when funds become available.
In October 2020, repayment terms were further modified to extend
the last payment date to 2023. The net present value of the future
payments before the second modification of payment terms was
determined using a weighted average cost of capital of 24.70% and
was determined to be $937,140. The net present value of the future
payments upon second modification of payment terms was determined
using a weighted average cost of capital of 24.70% and was
determined to be $778,127, with a gain of $159,013 recognized and
included in the statement of operation, see note 8.
During the year ended December 31,
2020, a total of $162,895 including a payment on initial stage of
the asset acquisition in the amount of $50,000 was paid. Subsequent
to the year ended December 31, 2020, an additional $353,498 has
been paid. The Company has not been able to make the payments as
per the modified due dates as a result of cash flow shortage and is
continuing to make the payments when funds become
available.

ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
NOTE 4 – EQUIPMENT
Cost |
|
Office equipment |
Balance at December 31, 2019 |
|
|
— |
|
Additions on acquisition
of subsidiaries (note 3) |
|
|
26,773 |
|
Additions |
|
|
12,564 |
|
Deduction for MSS cancellation (note
14) |
|
|
(21,535 |
) |
Foreign
exchange |
|
|
1,238 |
|
Balance at December 31, 2020 |
|
|
19,040 |
|
Accumulated depreciation
|
|
Office Equipment
|
Balance at December 31, 2019 |
|
— |
Additions on acquisition
of subsidiaries (note 3) |
|
|
9,099 |
|
Depreciation for the year |
|
|
6,988 |
|
Deduction for MSS
cancellation (note 14) |
|
|
(4,454 |
) |
Balance at December 31, 2020 |
|
|
11,633 |
|
|
|
|
|
|
Balance at December 31, 2019 |
|
|
— |
|
Balance at December 31, 2020 |
|
|
7,407 |
|
NOTE 5 – INTANGIBLE ASSETS, GOODWILL AND IMPAIRMENT
Cost
|
|
Tradenames
|
|
Intellectual Property
|
|
Customer base |
|
IP
Technology
under development
|
|
Total
|
Balance at December 31, 2019 |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Additions
on acquisition of subsidiaries (note 3) |
|
|
418,000 |
|
|
|
768,000 |
|
|
|
3,199,000 |
|
|
|
|
|
|
|
4,385,000 |
|
Additions for the
year (note 10) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,106,831 |
|
|
|
3,106,831 |
|
Deduction for MSS
deemed disposal
(note 14) |
|
|
(33,000 |
) |
|
|
(73,000 |
) |
|
|
(310,000 |
) |
|
|
|
|
|
|
(416,000 |
) |
Impairment of intangible
assets |
|
|
(378,400 |
) |
|
|
(682,873 |
) |
|
|
(2,838,488 |
) |
|
|
(3,057,774 |
) |
|
|
(6,957,535 |
) |
Foreign exchange |
|
|
(6,600 |
) |
|
|
(12,127 |
) |
|
|
(50,512 |
) |
|
|
(49,057 |
) |
|
|
(118,296 |
) |
Balance
at December 31, 2020 |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Accumulated Amortization
|
|
Tradenames
|
|
Intellectual Property
|
|
Customer base
|
|
IP
Technology under
development
|
|
Total
|
Balance at December 31, 2019 |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Additions (note
3) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
Amortization |
|
|
29,448 |
|
|
|
42,975 |
|
|
|
357,717 |
|
|
|
— |
|
|
|
430,140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
Deduction
for MSS cancellation
(note 14) |
|
|
(1,375 |
) |
|
|
(2,433 |
) |
|
|
(20,667 |
) |
|
|
|
|
|
|
(24,475 |
) |
Impairment of
intangible assets |
|
|
(28,073 |
) |
|
|
(40,542 |
) |
|
|
(337,050 |
) |
|
|
|
|
|
|
(405,665 |
) |
Foreign exchange |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
Balance
at December 31, 2020 |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2019 |
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
$ |
— |
|
|
$ |
— |
|
Balance
at December 31, 2020 |
|
$ |
— |
|
|
|
$ |
|
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
Goodwill |
|
Total |
|
|
|
$ |
|
Balance at
December 31, 2019 |
|
|
— |
|
Acquisition (note 3) |
|
|
16,711,559 |
|
Disposition of
subsidiary |
|
|
(3,581,168 |
) |
Impairment in 2020 |
|
|
(13,030,124 |
) |
Foreign exchange |
|
|
(100,267 |
) |
Balance
at December 31, 2020 |
|
|
— |
|
We test goodwill for impairment at the reporting level
annually and more often if an event occurs or circumstances change
that indicate the fair value of a reporting unit is below its
carrying amount. The qualitative factors we considered include,
general macroeconomic conditions, industry and market conditions,
cost factors, events or changes affecting the composition or
carrying amount of the net assets of our reporting unit, volatility
in our share price and other relevant entity-specific events.
During the year, the Company acquired BGC, triggering a substantial
event.
During the year the Company identified circumstances which would
call for evaluation of goodwill impairment and therefore impaired $13,243,071
reducing the goodwill related to the acquisition to
$3,263,210. As at December 31, 2020, the Company identified
additional circumstances including actual results compared to the
projection which would call for evaluation of goodwill impairment
and therefore impaired the remaining balance of goodwill related to
the acquisition to $nil.”
NOTE 6 – RIGHT-OF-USE ASSET
The right-of-use assets
consist of the operating lease for the Company's subsidiary
BGC’s office facility in Toronto and office lease facility for one
of the Company’s subsidiaries, MSS, which are amortized over the
remaining term of the lease of 33 and 36 months, respectively. The
right-of-use assets also consists of a finance leased vehicle for
one of the Company’s subsidiary, MSS. The leases from MSS have been
removed as a result of deemed disposition of MSS.
The Company adopted ASC 842 – Leases using the modified
retrospective cumulative catch-up approach. Under this approach,
the Company did not restate its comparative amounts and recognized
a right-of-use asset equal to the present value of future lease
payments. The Company elected to apply the practical expedient to
only transition contracts which were previously identified as
leases and elected to not recognize right-of-use assets and lease
obligation for leases of low value assets.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
|
|
|
Right-of-use
assets |
|
$ |
Balance at June 1, 2020 (see note 3) |
|
|
39,922 |
|
Additions |
|
|
191,639 |
|
Amortization |
|
|
(37,261 |
) |
Deduction of MSS asset from cancellation (note
14) |
|
|
(178,966 |
) |
Foreign exchange |
|
|
10,068 |
|
Balance at December 31, 2020 |
|
|
25,402 |
|
Lease
obligation |
|
|
|
|
|
|
|
$ |
|
Balance at June 1, 2020 |
|
|
40,303 |
|
Additions |
|
|
190,294 |
|
Repayment of interest accretion |
|
|
(13,017 |
) |
Deduction of MSS obligation from cancellation
(note 14) |
|
|
(200,152 |
) |
Foreign exchange |
|
|
8,387 |
|
Balance at December 31, 2020 |
|
|
25,815 |
|
|
|
|
|
|
Current portion of operating lease
obligation |
|
|
25,815 |
|
The operating lease expense was $63,835 for the year ended December
31, 2020 ($Nil – December 31, 2019) and included in rent expense.
At the commencement date of the lease, the lease liability was
measured at the present value of the lease payments that were not
paid at that date. The lease payments are discounted using an
interest rate of 10.8% for the Company and 17% for the Company’s
subsidiary, which is the estimated incremental borrowing rate. The
balance at June 1, 2020 relates to the subsidiaries acquired during
the year.
NOTE 7 – NOTES PAYABLE
In July 2018, the Company’s
subsidiary BGC obtained an unsecured loan of $36,650 (C$50,000)
from an unrelated party shareholder for payment of operating
expenses for an original term of two years, with option to renew
bearing no interest and repayable on demand. The balance of the
loan on December 31, 2020 is $39,270 (December 31, 2019 - $Nil).
The loan has been extended on the same terms.
In September 2019 and
July 2020, the Company’s subsidiary BGC and ZM, respectively,
obtained unsecured loans of $23,142 (C$30,000) and $7,437
(C$10,000), respectively, from an unrelated third party for payment
of operating expenses for an
original term of one year bearing no interest and repayable
on demand. The balance of the loan on December 31, 2020 was $23,562
and $7,854 respectively. (December 31, 2019 - $Nil). The loan has
been extended on the same terms.
In February 2020 and April 2020, the
Company’s subsidiary BGC obtained unsecured loans of $60,264
(C$75,000) and $22,014 (C$30,000), respectively, from a shareholder
(an unrelated party)
for payment of operating expenses for
an original term of one year bearing no interest and repayable on
demand. The balance of the loans on December 31, 2020 was $82,467
(December 31, 2019 - $Nil). The loan has been extended on the same
terms.
In October 2020, the Company’s subsidiary ZM obtained an unsecured
loan of $241,559 (C$318,903) from unrelated third parties for
payment of operating expenses for an original term of one year
bearing no interest and repayable on demand. The balance of the loans on December
31, 2020 was $250,467 (December 31, 2019 - $Nil). The loan has been
extended on the same terms.
During the year 2020, the Company’s subsidiary BSP obtained an
unsecured loan of $127,276 (INR 9,298,521) from an unrelated third
parties for payment of operating expenses for a term of one year
bearing no interest and repayable on demand. The balance of the
loans on December 31, 2020 was $127,277 (December 31, 2019 -
$Nil).
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
NOTE 8– LONG TERM DEBT
On
December 31, 2020, long term debt consisted of the following:
a) |
During the year ended December 31, 2020, two subsidiaries of the
Company received Canada Emergency Business Account loan for
COVID-19 relief amounting to $78,540 (C$100,000), unsecured and
non-interest bearing, repayable by December 31, 2022. The present
value of the loan at December 31, 2020 was $50,508. Repayment of
the loan balance on or before December 31, 2022 will result in a
loan forgiveness of $10,000. As at January 1st, 2023, the Company
will have the option to extend the repayment of the capital for 3
years, and will benefit from an interest rate of 5%. The loan was
initially recorded at a fair value of $78,540, considering the
grant, the interest-free loan and the reimbursement on December 31,
2022. An effective rate of 24.7% was used, taking into account the
rate that the Company would have obtained for a similar loan. The
residual value of $31,911 was recorded as a deferred government
grant in the statement of financial position and will be recognized
in the statement of loss at the same time as the underlying
expenses in general and administrative. As at December 31, 2020, an
amortization of $6,382 was recognized in the statement of
operations.
|
The
reconciliation of CEBA loans is as follows:
Opening
balance |
|
$ |
78,540 |
|
Recognition of
deferred grants |
|
|
(31,911 |
) |
Interest
accretion during the year |
|
|
3,879 |
|
Balance at
December 31, 2020 |
|
$ |
50,508 |
|
Less:
current portion |
|
|
— |
|
Long term
portion |
|
$ |
50,508 |
|
The
reconciliation of deferred grants is as follows:
Opening
balance |
|
$ |
— |
Recognition of
deferred grants |
|
|
31,911 |
|
Amortization of
deferred grants during the year |
|
|
(6,382 |
) |
Balance at
December 31, 2020 |
|
$ |
25,529 |
|
Less:
current portion |
|
|
6,382 |
|
Long term
portion |
|
$ |
19,147 |
|
b) |
During the year, the Company acquired IP Technology asset, see
notes 3 and 5.
During the year, the Company amended the payment terms in September
and October 2020, and recognized extinguishment gain of $126,375
and $159,014, respectively. The accretion of interest expenses was
$109,188 and was included in statement of operations.
The
reconciliation of present value of debt payable from the date of
completion of the agreement is as follows:
|
Value of debt upon closing of the asset purchase (note 3) |
|
$ |
1,148,911 |
|
Less: Payment
made until December 31, 202 |
|
|
(162,895 |
) |
Add: Interest accretion
until December 31, 2020 |
|
|
109,188 |
|
Present value of debt-pre amendment
of payment terms (note 3) |
|
$ |
1,095,204 |
|
Present value of debt-post amendment of payment terms (note 3) |
|
|
809,815 |
|
Gain
on revaluation of present value for amended terms (note 3) |
|
$ |
285,389 |
|
Total long-term debt (a and b) |
|
$ |
860,323 |
|
Less:
current portion |
|
|
(209,282 |
) |
Long
term debt, net of current portion |
|
$ |
651,041 |
|
The future commitments for long term debt on an undiscounted basis
are as follows:
Year
ended |
|
|
|
2021 |
|
|
$ |
353,498 |
|
|
2022 |
|
|
|
512,147 |
|
|
2023 |
|
|
|
250,000 |
|
|
Total |
|
|
$ |
1,115,645 |
|
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
NOTE 9 – RELATED PARTY TRANSACTIONS AND BALANCES
The balances of due to related party
corporations on December 31, 2020 represent advances and payment
from related party corporations which are non-interest bearing,
unsecured and due on demand. The amount of $100,201 that is
recorded as due to related parties as of December 31, 2019 was
eliminated upon consolidation of these related parties in
2020, pursuant to the
acquisition transaction in 2020, became inter-company.
The amount due to related parties on December 31, 2020 of $65,020
(December 31, 2019 - $100,201) is comprised of $53,882 (December
31, 2019 $Nil) representing amount due to the company under common
management of a shareholder of the Company. It also includes an
amount of $11,138 (December 31, 2019 - $Nil) paid to a shareholder
of the Company. The amount represents working capital financing and
is non-interest bearing, unsecured, due on demand and have no set
repayment terms.
The total amount owing to the former directors and officers of the
Company and corporations controlled by the former directors and
officers, in relation to the services they provided to the Company
in their capacity as Officers and service provider on December 31,
2020 was $54,436 (December 31, 2019 - $319,969) which includes
expense reimbursements. This amount is reflected in accounts
payable and is further described below.
a) |
As of December 31, 2020, the Company
had an amount owing to an entity owned and controlled by the former
Chief Executive Officer of the Company of $Nil (December 31, 2019 -
$265,533). The amount owing relates to services provided by the
former Chief Executive Officer and expense reimbursements. During
the year ended December 31, 2020, the Company issued 3,319,162
shares of the common stock to settle a debt owed by the company in
amount $265,533. The fair value of these shares, in amount of
$232,342, was determined by using the market price of the common
stock as at the date of issuance. The Company recognized a gain on
settlement of debt in amount of $33,191 in the consolidated
statements of operations and comprehensive loss (Note
10). |
b) |
As of December 31, 2020, the Company
had an amount owing to an entity owned and controlled by the former
Secretary of the Company of $54,436 (December 31, 2019 - $54,436).
The amount owing relates to services provided by the then Secretary
and expense reimbursements. |
During the year ended December 31, 2020, $982,176 (issuance of
shares for service – $838,400, stock options expenses - $143,776)
was recognized for share-based payment expense to directors and
officers of the Company. No expense for share based payments to
directors and officers was recognized during the year ended
December 31, 2019.
As of December 31, 2020, the Company had an amount owing to the
Chief Executive Officer for $78,540 (December 31, 2019 - $Nil),
included in accounts payable and accrued liabilities. The amount
owing relates to services provided and is recorded as consulting
expenses.
As of December 31, 2020, the Company had an amount owing to the
Chief Financial Officer for $30,909 (December 31, 2019 - $Nil),
included in Accounts payable and accrued liabilities. The amount
owing relates to services provided and is recorded as consulting
expenses.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
NOTE 10 – COMMON STOCK AND COMMON SHARE PURCHASE WARRANTS
Common Stock
The Company is authorized to issue 500,000,000 common stocks with a
par value of $0.0001.
Shares issued on private placement:
In January 2020, the Company issued 757,575 non-registered shares
of the Company's common stock. The net proceeds in amount of
$34,091 was received in advance on December 31, 2019.
In January 2020, the Company completed a private placement for the
sale of non-registered shares of the Company's common stock. As a
result of the private placement 3,030,300 non-registered shares of
the Company's common stock was issued for gross proceeds of
$136,584.
In March 2020, the
Company completed a private placement for the sale of
non-registered shares of the Company's common stock. As a result of
the private placement 300,000 non-registered shares of the
Company's common stock was issued in April 2020 for gross proceeds
of $15,000.
In
June 2020, the Company issued total of 551,394 non-registered
shares of common stock for net proceeds in the amount of
$137,002.
In August 2020, the Company issued total of 400,000 non-registered
shares of common stock for net proceeds in the amount of $100,000.
The subscriber will also be issued one warrant for every share
subscribed at an exercise price of $0.50 over the next three years
from the date of subscription.
Shares issued on conversion of debt:
In January 2020, the Company issued 3,319,162 shares of the common
stock to settle debts owed by the company in the amount
$265,533.
The $265,533 debt was owed to a corporation controlled by a former
Chief Executive Officer of the company (note 9(a)). The fair value
of these shares, in amount of $232,342, was determined by using the
market price of the common stock as at the date of issuance. The
Company recognized a Gain on settlement of debt in amount of
$33,191 in statement of operations.
Cancellation of shares:
On February 27, 2020, the Company cancelled 44,911,724 shares of
the common stock which were issued in connection with the asset
purchase agreement dated October 17, 2018 with Virtublock Global
Corp. (note 1). Pursuant to a General Release agreement dated
November 29, 2019, the asset purchase agreement dated October 17,
2018 with Virtublock Global Corp. was deemed cancelled and each
party acknowledged and agreed that no party has or shall have any
claim with respect to intellectual property, software or other
assets owned by any other party and that no agreements exist or
remain unsatisfied with respect to the transfer of any asset from a
releasing party to any other party, and Virtublock Global Corp.
assigned and tendered the 44,911,724 shares of common stock of the
Company to the Company for cancellation. As the share cancellation
occurred on February 27, 2020, the accounting recognition of this
transaction, consisted of a transfer of $4,491 from common stock to
additional paid-in capital and related reduction in the number of
common shares outstanding.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
On September 30, 2020, the Company cancelled 9,330,000 shares of
the common stock and 14,845,000 share purchase warrants which was
allocated in connection with acquisition of MSS that was a 70%
subsidiary of BGC on May 31, 2020. During the period September 30,
2020, 4,665,000 shares of common stock, 1,237,034 share purchase
warrants and contingent consideration that were valued at $519,473,
$88,758 and $2,191,064 respectively was recorded as common stock
and additional paid-in capital. Pursuant to the deemed disposition
of MSS, a debit in the amount of $2,799,295 were recorded in
additional paid in capital to reflect the cancellation of common
shares and share purchase warrants.
Shares issued for services:
In March 2020, the company issued 1,160,000 shares of the common
stock to arm’s length third parties as compensation for services
rendered. The fair value of these shares, in amount of $145,000,
was determined by using the market price of the common stock as at
the date of decision to issue and charged to statement of
operations.
In April 2020 and August 2020, the Company issued 2,000,000 and
1,200,000, respectively, shares of the common stock to Chief
Executive of the Company as compensation for services. The fair
value of these shares, in amount of $250,000 and $386,400, was
determined by using the market price of the common stock as
at the date of decision to issue and charged to statement of
operations.
In August 2020, the Company issued 800,000 shares of the common
stock to an arm’s length third party as compensation for services
rendered. The fair value of these shares, in the amount of
$257,600, was determined by using the market price of the common
stock as at the date of decision to issue and charged to statement
of operations.
In October 2020, the Company issued 1,000,000 shares of common
stock to the Chief Financial Officer as compensation for services.
The fair value of these shares in the amount of $202,000 was
determined by using the market price of the common stock as at the
date of decision to issue and charged to statement of
operations.
Shares issued on Asset purchase:
On July 15, 2020, the Company entered into certain Intellectual
Property Rights Purchase and Transfer Agreement with Moxie Holdings
Private Ltd., an Indian corporation for (i) cash consideration of
$1.2 million to be paid in installments, see (note 3) (ii) four
million (4,000,000) newly issued shares of common stock, and (iii)
warrants to purchase two million (2,000,000) shares of common stock
at an exercise price of $0.50 per share valid for three years. The
Asset was included in intangible assets as IP Technology under
development for total consideration of $3,106,831. The fair value of
consideration paid was allocated as follows (i) cash consideration
at net present value of $1,148,911, using weighted average cost of
capital of 24.64% (ii) consideration in common stock was valued at
$1,360,000 based on fair value of the Company’s stock of common
share on acquisition date of $0.34 per share, and (iii)
consideration in warrants was valued at $597,920 using
Black-Scholes pricing model with Risk free interest rate of 0.19%,
expected volatility of 189.8%, exercise price of $0.50 per share
and expected life of 3 years.
Shares issued in year 2019:
On January 20, 2019 and April 20, 2019, the company issued
1,000,000 and 500,000 shares of the common stock, respectively, to
an arm’s length third party as compensation for services rendered.
The fair value of these shares, in amount of $177,000 and $50,000
respectively, was determined by using the market price of the
common stock as at the date of issuance and charged to statement of
operations.
In May 2019, the Company completed various private placements for
the sale of non-registered shares of the Company’s common stock. As
a result of these private placements 1,038,461 non-registered
shares of the Company’s common stock was issued for proceeds of
$103,846.
During July and August 2019, the Company completed private
placements for the sale of non-registered shares of the Company’s
common stock. As a result of these private placements 1,000,000
non-registered shares of the Company’s common stock was issued for
proceeds of $92,308.
In December 2019, the Company completed a private placement for the
sale of non-registered shares of the Company’s common stock. As a
result of the private placement 757,575 non-registered shares of
the Company’s common stock was issued for proceeds of $34,091.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
Shares to be issued
On acquisition of BGC:
On April 20, 2020, the Company and
its shareholders entered into a Share Exchange Agreement with BGC.
Pursuant to the Share Exchange Agreement, the Company agreed to
exchange 100% of the outstanding equity stock of BGC held by its
shareholders for shares of common stock of the Company.
Under the terms of the amended agreement, the Company will issue
41,313,400 newly issued shares of the common stock and 56,186,560
share purchase warrants to the shareholders of the Company. Each
warrant is exercisable into one common share of the Company at an
exercise price of $0.25 within three years of the issue
date.
On September 30, 2020, the Company cancelled 9,330,000 shares of
the common stock and 14,845,000 share purchase warrants which was
allocated in connection with acquisition of MSS that was a 70%
subsidiary of BGC on May 31, 2020. At December 31, 2020 the fair
value of 31,983,430 common shares at $0.18650 per share was
determined to be $5,964,910 and the fair value of the 41,341,560
share purchase warrants at $0.1681 per share was determined to be
$6,949,103. The fair value of the share purchase warrants was based
on a Black-Scholes analysis and the projected payout dates
discounted at the cost of equity of 28.49% for an exercise price of
$0.25 per share and expected life of 3 years.
The shares to be issued for this acquisition was calculated using
the market price of the shares of the Company on May 31, 2020, the
date of closing of the transaction. The value of the contingent
consideration common shares and warrants to be issued for this
acquisition was calculated using the Black-Scholes pricing model
and the projected earnout dates discounted at the cost of equity.
The total price was determined to be $18,900,320. The amount of
contingent consideration on the date of acquisition was
$11,644,471. This was revalued regularly and the change in fair
value loss of $387,356 was recorded in the consolidated statement
of operations.
On May 31, 2020, common shares of
20,656,715 and warrants of 4,682,026 was issued and held in escrow
by the Company. The common shares were assigned a value of
$6,197,015 and the warrants $1,058,834, total amounting to
$7,255,849 was recorded as issued and outstanding during the year
ended December 31, 2020. On September 30, 2020, as a result of
cancellation of common shares and share purchase warrants allocated to
MSS the shares to be issued were reduced by 4,665,000 shares
of common stock with fair value of $2,799,295, which also
includes the fair value of share purchase warrants.
Reconciliation of contingent
consideration payable
is as follows:
Contingent consideration on date of acquisition of BGC |
|
$ |
11,644,471 |
|
Change in
fair value during the year |
|
|
387,356 |
|
Contingent recognized as shares to be issued during the year |
|
|
(8,457,459 |
) |
Gain on
waiver of 2021 and 2022 revenue targets by the Board |
|
|
(3,574,368 |
) |
Contingent
consideration as at December 31, 2020 |
|
|
— |
|
The Company has provided for share-based payments of $165,000 for
1,500,000 common shares to be issued at fair market price of $0.11
per share pursuant to a General Release Agreement with certain
former consultants.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
Common share Purchase Warrants
On May 31, 2020, up on closing of the acquisition of BGC the
Company has issued 4,682,026 warrants at an exercise price of $0.25
per warrant within a period of three years. The fair value of the
warrants was determined to be $1,058,834 using the Black-Scholes
analysis and discounted at cost of equity of 28.45%.
On July 15, 2020, the Company issued 2,000,000 warrants at an
exercise price of $0.50 per warrant within a period of three years
pursuant to the acquisition of asset transaction, see note 3. The
fair value of the warrants was determined as $597,920 using the
Black-Scholes pricing model with the assumption for volatility of
189.8%, risk- free interest rate of 0.19% and stock price of
$0.34.
On August 5, 2020, the Company issued 400,000 warrants at an
exercise price of $0.50 per warrant within a period of three years.
The fair value of the warrants was determined to be $94,400 using
the Black-Scholes pricing model with the assumption for volatility
of 150.44%, risk-free interest rate of 0.27% and stock price of
$0.31.
NOTE 11 – SHARE-BASED PAYMENTS
On January 15, 2020, the Company
issued 3,000,000 common stock purchase options at an exercise price
of $0.10 to directors, officers and consultants of the Company.
83,415 of these options vested immediately and are exercisable for
seven years from the grant date. Remaining options were exercisable
for seven years from the grant date at an exercise price of $0.10
and would vest ratably over a three-year period from the date of
grant. The 3,000,000 stock options were assigned a fair value of
$172,168 using the Black-Scholes pricing model. The following
assumptions were used: Risk free interest rate of – 1.54%; expected
volatility of 124%; expected dividend yield – nil; expected life of
7 years. For the year ended December 31, 2020, 1,000,056 options
vested and the fair value of those vested options, in amount of
$57,379, was charged to
statement of operations with a credit in additional paid-in
capital. (Note 9)
On March 1, 2020, the Company decided to issue 2,000,000 shares of
the common stock to Chief Executive of the Company as compensation
for services. The fair value of these shares, in amount of
$250,000, was determined by using the market price of the common
stock as at the date of decision of issuance and charged to
statement of operations. The
shares were subsequently issued in April 2020.
In August 2020, the Company
issued 1,200,000 shares of the common stock as compensation for services. The fair value of $386,400 determined by using the market price of the common stock was charged to
statement of operations. (Note 9 and 10)
On March 1, 2020 and August
13, 2020, respectively, the Company issued 1,160,000 and
800,000 shares of the common stock to arm’s length third parties as
compensation for services rendered. The fair value of these shares,
in amount of $145,000 and $257,600, was determined by using the
market price of the common stock as at the date of issuance.
On March 11, 2020, the Company granted 2,000,000 common stock
purchase options at an exercise price of $0.10 to two directors of
the Company. 55,610 of these options vested immediately and are
exercisable for seven years from the grant date. Remaining options
were exercisable for seven years from the grant date at an exercise
price of $0.10 and would vest ratably over a three-year period from
the date of grant. The 2,000,000 stock options were assigned a fair
value of $260,195 using the Black-Scholes pricing model. The
following assumptions were used: Risk free interest rate of –
0.57%; expected volatility of 130%; expected dividend yield – nil;
expected life of 7 years. For the year ended December 31, 2020,
555,596 options vested and the fair value of those vested options,
in amount of $72,281, was charged to statement of operations with a
credit in additional paid-in capital. (Note 9)
On
October 22, 2020, the Company granted 1,000,000 common stock
purchase options at an exercise price of $0.20 to the Chief
Financial Officer of the Company. 27,805 of these options vested
immediately and are exercisable for seven years from the rant date.
Remaining options were exercisable for seven years from the grant
date at an exercise price of $0.20 and would vest ratably over a
three-year period from the date of grant. The
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
1,000,000 stock options were assigned a fair value of $169,167
using the Black-Scholes pricing model. The following assumptions
were used: Risk free interest rate of – 0.39%; expected volatility
of 127%; expected dividend yield – nil; expected life of 7 years.
For the year ended December 31, 2020, 83,359 options vested and the
fair value of those vested options, in amount of $14,102, was
charged to statement of operations with a credit in additional
paid-in capital. (Note 9)
On October 22, 2020, the Company decided to issue 1,000,000 shares
of the common stock to Chief Financial Officer of the Company as
compensation for services. The fair value of these shares, in
amount of $202,000, was determined by using the market price of the
common stock as at the date of decision of issuance and charged to
statement of operations.
On January 20, 2019, the Company issued 1,000,000 shares of the
common stock to an arm’s length third party as compensation for
services rendered. The fair value of these shares, in amount of
$177,000, was determined by using the market price of the common
stock as at the date of issuance.
On April 20, 2019, the Company issued 500,000 shares of the common
stock to an arm’s length third party as compensation for services
rendered. The fair value of these shares, in amount of $50,000, was
determined by using the market price of the common stock as at the
date of issuance.
The components of share-based payments expense are detailed in the
table below.
|
|
Date of grant |
|
Contractual life |
|
Number |
|
Exercise
price
($)
|
|
Year
ended Dec 31, 2020
($)
|
|
Year
ended Dec 31, 2019
($)
|
|
Share price ($) |
|
Risk- free rate |
|
Volatility |
|
Dividend yield |
|
Expected life (years) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share issued for services |
|
|
January 20,
2019
|
|
|
N/A |
|
|
1,000,000 |
|
|
|
N/A
|
|
|
|
— |
|
|
|
177,000 |
|
|
|
0.177 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Stock options for services |
|
|
April 20, 2019 |
|
|
N/A |
|
|
500,000 |
|
|
|
N/A |
|
|
|
|
|
|
|
50,000 |
|
|
|
0.10 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Stock options |
|
|
January 15,
2020
|
|
|
7 years |
|
|
3,000,000 |
|
|
|
0.10 |
|
|
|
57,379 |
|
|
|
— |
|
|
|
0.07 |
|
|
|
1.54 |
% |
|
|
124 |
% |
|
|
Nil
|
|
|
|
6.79 |
|
Share issued for services |
|
|
March 1,
2020
|
|
|
N/A |
|
|
1,160,000 |
|
|
|
N/A
|
|
|
|
145,000 |
|
|
|
— |
|
|
|
0.12 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Share issued for services |
|
|
March 1,
2020
|
|
|
N/A |
|
|
2,000,000 |
|
|
|
N/A
|
|
|
|
250,000 |
|
|
|
— |
|
|
|
0.11 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Stock options |
|
|
March 11,
2020
|
|
|
7 years |
|
|
2,000,000 |
|
|
|
0.10 |
|
|
|
72,281 |
|
|
|
— |
|
|
|
0.14 |
|
|
|
0.57 |
% |
|
|
130 |
% |
|
|
Nil
|
|
|
|
6.95 |
|
Share issued
for services |
|
|
August 13,
2020
|
|
|
N/A |
|
|
2,000,000 |
|
|
|
N/A
|
|
|
|
644,000 |
|
|
|
— |
|
|
|
0.43 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Stock options |
|
|
October 22,
2020
|
|
|
7 years |
|
|
1,000,000 |
|
|
|
0.20 |
|
|
|
14,102 |
|
|
|
— |
|
|
|
0.202 |
|
|
|
0.39 |
% |
|
|
127 |
% |
|
|
Nil
|
|
|
|
6.75 |
|
Shares issued for
services |
|
|
October 22, 2020 |
|
|
N/A |
|
|
1,000,000 |
|
|
|
N/A |
|
|
|
202,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,384,762 |
|
|
$ |
227,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at December 31, 2020, the Company has the following stock
options:
|
|
|
|
Contractual
|
|
|
|
Number
of units
|
|
Weighted
Average Exercise
Price
|
Grant date |
|
Fair Value |
|
Life (years) |
|
Units |
|
vested |
|
(C$) |
January
15,
2020
|
|
|
172,168 |
|
|
|
5.92 |
|
|
|
3,000,000 |
|
|
|
1,000,056 |
|
|
|
0.10 |
|
March 11,
2020 |
|
|
260,195 |
|
|
|
6.20 |
|
|
|
2,000,000 |
|
|
|
555,596 |
|
|
|
0.10 |
|
October
22,
2020
|
|
|
169,167 |
|
|
|
6.75 |
|
|
|
1,000,000 |
|
|
|
83,359 |
|
|
|
0.20 |
|
Total |
|
|
601,530 |
|
|
|
|
|
|
|
6,000,000 |
|
|
|
1,639,011 |
|
|
|
|
|
Information with respect to Company’s stock options is presented
below:
|
|
2020 |
|
2019 |
|
|
Number of
stock options |
|
Weighted
average exercise price |
|
Number of
stock options |
|
Weighted
average exercise price |
Balance, beginning of year |
|
|
500,000 |
|
|
|
0.10 |
|
|
|
— |
|
|
|
— |
|
Options
issued |
|
|
6,000,000 |
|
|
|
0.12 |
|
|
|
500,000 |
|
|
|
0.10 |
|
Options cancelled |
|
|
(500,000 |
) |
|
|
|
|
|
|
— |
|
|
|
— |
|
Balance, end of year |
|
|
6,000,000 |
|
|
|
0.12 |
|
|
|
500,000 |
|
|
|
0.10 |
|
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
NOTE 12 – FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company has exposure to liquidity risk and foreign currency
risk. The Company's risk management objective is to preserve and
redeploy the existing treasury as appropriate, ultimately to
protect shareholder value. Risk management strategies, as discussed
below, are designed and implemented to ensure the Company's risks
and the related exposure are consistent with the business
objectives and risk tolerance.
Liquidity Risk: Liquidity risk is the risk that the Company
will not be able to meet its financial obligations as they come
due. The Company manages its liquidity by ensuring that there is
sufficient capital to meet short and long-term business requirements, after
considering cash requirements from operations and the
Company's holdings of cash and cash equivalents. The Company also
always strives to maintain sufficient financial liquidity in order
to participate in investment
opportunities as they arise, as well as to withstand sudden
adverse changes in economic circumstances.
Management forecasts cash flows for its current and subsequent
fiscal years to predict future financing requirements. Future
requirements may be met through a combination of credit and access
to capital markets. The Company's cash requirements are dependent
on the level of operating activity, a large portion of which is
discretionary. Should management decide to increase its operating
activity, more funds than what is currently in place would be
required. It is not possible to predict whether financing efforts
will be successful or sufficient in the future. On December 31,
2020, the Company had $64,412 in cash and cash equivalents
(December 31, 2019 - $21,477). Subsequent to December 31, 2020, the
Company raised approximately $400,000 in financing. See (note
16)
Currency risk: Zoompass Holdings, its Indian subsidiaries
and Canadian subsidiaries transactions are in US dollars and Indian
Rupees, Canadian dollars, respectively. The results of the
Company's operations are subject to currency translation risk. The
Company mitigates foreign exchange risk through forecasting its
foreign currency denominated expenditures and maintaining an
appropriate balance of cash in each currency to meet the
expenditures. As the Company's reporting currency is the US dollar,
fluctuations in US dollar will affect the results of the
Company.
Credit risk: Credit risk is the risk of loss associated with
a counterparty's inability to fulfill its payment obligations. As
of December 31, 2020, the Company's credit risk is primarily
attributable to cash and cash equivalents and accounts receivable.
On December 31, 2020, most of the Company's cash and cash
equivalents were held with reputable Canadian chartered banks. The
nature of Company’s diverse customer base ensures that there is no
concentration of credit risk. Based on accounts receivable amounts
that are past due, historical trends and available information
there is no indication that a customer could be experiencing
liquidity or going concern problems.
Interest rate risk: Interest rate risk is the risk borne by
an interest-bearing asset or liability because of fluctuations in
interest rates. Financial assets and financial liabilities with
variable interest rates expose the Company to cash flow interest
rate risk. The Company's does not have significant interest rate
risk.
Fair values: The carrying amounts reported in the
consolidated balance sheet for cash and cash equivalents, accounts
receivables, accounts payable and accrued liabilities and notes
payable approximate fair value because of the short period of time
between the origination of such instruments and their expected
realization.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
NOTE 13 – COMMITMENTS AND CONTINGENCIES
Commitment
There were no commitments as of December 31, 2020 and December 31,
2019 other than those disclosed in these consolidated financial
statements.
Contingencies
a) |
During the year ended December 31, 2017, the Company learned that a
class action complaint (the “Class Action Complaint”) had been
filed against the Company, its Chief Executive Officer and its
Chief Financial Officer in the United States District Court for the
District of New Jersey. The Class Action Complaint alleges, inter
alia, that defendants violated the federal securities laws by,
among other things, failing to disclose that the Company was
engaged in an unlawful scheme to promote its stock. The Company has
been served with the Class Action Complaint. The Company has
analyzed the Class Action Complaint and based on that analysis, has
concluded that it is legally deficient and otherwise without merit.
The Company intends to vigorously defend against these claims.
|
On August 7, 2018, the United States District Court for the
District of New Jersey dismissed the Class Action Complaint.
Additionally, after the year end on August 21, 2018, the Company
was served with the Second Amended Complaint in the District of New
Jersey. The Company filed a motion to dismiss the Second Amended
Complaint on September 18, 2018. On January 23, 2019, the
United States District
Court for the District of New Jersey dismissed the Second Amended
Complaint with prejudice. Plaintiff filed a motion for
reconsideration of the dismissal order on February 7, 2019. On May
14, 2019, the Plaintiff’s motion to reconsider was denied. On June
10, 2019, the plaintiffs filed an appeal with United States Court
of Appeals for the Third Circuit. As of May 27, 2020, the Class
Action Complaints, including applicable appeals, have been settled
or dismissed by the parties and the applicable courts.
b) |
Also, during the year ended December 31, 2017, the Company learned
that two derivative complaints (the “Derivative Complaints”) on
behalf of the Company have been filed against the Company’s
Directors and Chief Executive Officer, President, Corporate
Secretary, and Chief Financial Officer, and nominally against the
Company, in Nevada state and federal court. The state court action
subsequently was removed to federal court. The Derivative
Complaints allege, inter alia, that the Company’s officers and
directors directed the Company to undertake an unlawful scheme to
promote its stock. The Company has been served with the Derivative
Complaints. The Company has analyzed them and based on its
analysis, has concluded that the Derivative Complaints are legally
deficient and otherwise without merit. As of May 27, 2020, the
Derivative Complaints, including applicable appeals, have been
settled or dismissed by the parties and the applicable courts.
|
The Company was also
served with a third derivative action, which was filed March 23,
2018, against the Company’s Directors and Chief Executive Officer,
President, and Corporate Secretary, and nominally against the
Company, in Nevada state court. Subsequently, this case was removed
to federal court. As
of May 27, 2020, the Derivative Complaint, including applicable
appeals, have been settled or dismissed by the parties and the
applicable courts.
As
of December 31, 2020, there are no legal proceedings involving the
Company.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
NOTE 14 – DEEMED DISPOSAL OF A SUBSIDIARY
The Company decided to terminate the agreement with MSS, as
management lost control over the operations as of September 30,
2020 (deemed disposal). MSS was acquired by the Company on May 31,
2020 (See Note 3) as a 70% subsidiary of BGC. The assessment of
fair value on the consideration allocated to MSS by way of common
shares and share purchase warrants were cancelled as of September
30, 2020. Under the acquisition method of accounting, the
preliminary allocation of purchase price to MSS based on the
estimated fair value at the date of completion of the acquisition
was as follows:
Common shares |
|
|
519,472 |
|
Fair value of warrants |
|
|
88,758 |
|
Contingent
shares/warrants - contingent consideration |
|
|
2,191,064 |
|
Total
consideration |
|
|
2,799,294 |
|
Net assets acquired
|
|
|
|
|
Cash and cash equivalents |
|
|
13,835 |
|
Accounts receivable |
|
|
145,011 |
|
Inventory |
|
|
5,838 |
|
Right-of-use asset |
|
|
|
|
Other assets |
|
|
39,158 |
|
Equipment |
|
|
16,463 |
|
Goodwill |
|
|
3,581,168 |
|
Intangible assets |
|
|
416,000 |
|
Accounts payable and accrued
liabilities |
|
|
(61,583 |
) |
Note and debt payable |
|
|
(126,626 |
) |
Tax provision |
|
|
|
|
Other liabilities |
|
|
(30,432 |
) |
Non-controlling
interest |
|
|
(1,199,538 |
) |
Total net
assets acquired |
|
|
2,799,294 |
|
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
At September 30, 2020 the assets and liabilities related to
MSS are as follows:
|
|
|
|
|
|
|
Note |
|
September 30, 2020 |
Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
|
4,053 |
|
Accounts receivable |
|
|
|
|
|
|
129,669 |
|
Inventory |
|
|
|
|
|
|
5,678 |
|
Other current assets |
|
|
|
|
|
|
27,863 |
|
Total current
assets |
|
|
|
|
|
|
167,263 |
|
Non-current assets |
|
|
|
|
|
|
|
|
Equipment, net |
|
|
4 |
|
|
|
17,081 |
|
Right-of-use asset |
|
|
6 |
|
|
|
178,966 |
|
Total non-current
assets |
|
|
|
|
|
|
196,047 |
|
Total assets |
|
|
|
|
|
|
363,310 |
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued
liabilities |
|
|
|
|
|
|
121,325 |
|
Due to related parties |
|
|
|
|
|
|
78,272 |
|
Lease obligation - current portion |
|
|
6 |
|
|
|
41,010 |
|
Long-term debt - current
portion |
|
|
14(a) |
|
|
|
17,330 |
|
Total current
liabilities |
|
|
|
|
|
|
257,937 |
|
Non-current
liabilities |
|
|
|
|
|
|
|
|
Lease obligation - long term portion |
|
|
6 |
|
|
|
159,142 |
|
Long-term debt |
|
|
14(a) |
|
|
|
91,200 |
|
Total non-current
liabilities |
|
|
|
|
|
|
250,342 |
|
Total liabilities |
|
|
|
|
|
|
508,279 |
|
|
|
|
|
|
|
|
|
|
Net assets |
|
|
|
|
|
|
(144,969 |
) |
The
operating results of MSS for the period from June 1, 2020 to
September 30, 2020 included in the consolidated statement of
operations and comprehensive loss, as follows:
Note |
|
From June 1,
2020 to
September 30,
2020 |
|
|
|
Revenue
from services rendered |
|
|
148,701 |
|
Cost of revenue |
|
|
45,539 |
|
Gross Profit |
|
|
103,162 |
|
Expenses |
|
|
|
|
Salaries and consulting fees |
|
|
139,403 |
|
Professional fees |
|
|
1,394 |
|
Rent expenses |
|
|
37,042 |
|
Office and sundry expenses |
|
|
6,356 |
|
Depreciation and amortization |
|
|
28,930 |
|
Travel expense |
|
|
1,807 |
|
Bad debts |
|
|
45,905 |
|
Interest and bank charges |
|
|
13,435 |
|
|
|
|
274,272 |
|
Net Loss |
|
|
(171,110 |
|
|
|
|
|
|
Less: net loss attributable to non-controlling interest |
|
|
51,113 |
|
Net loss attributable to the Company |
|
|
(119,777 |
|
Other Comprehensive
income |
|
|
Gain on foreign currency translation |
|
|
14,767 |
|
Less: Other comprehensive income attributable to non-controlling
interest |
|
|
(4,430 |
) |
Total Comprehensive loss |
|
|
156,343 |
|
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
(a)
Long-term debt
On
September 30, 2020, long term debt consisted of the following:
a) |
On November 30, 2019, MSS
obtained an unsecured loan from Tata Capital in the amount
of $26,677 (Indian Rupees 2,015,000) repayable over a period of 40
months at interest rate of 17.99%. The balance of the loan on September
30, 2020 was
$29,601.
|
b) |
On January 30, 2020, MSS obtained an unsecured loan from ICICI Bank
in the amount of $33,098 (Indian Rupees 2,500,000) repayable over a
period of 40 months at interest rate of 17%. The balance of the
loan on September 30, 2020 was $33,747. On August 13, 2020, an
additional loan for $6,796 (Indian Rupees 500,000) was obtained
that is repayable over a period of 48 months. The balance of the
loan on September 30, 2020 was $10,412.
|
c) |
On January 30, 2020, MSS obtained an unsecured loan from IDFC First
Bank Limited in the amount of $33,760 (Indian Rupees 2,550,000)
repayable over a period of 36 months at interest rate of 17%. The
balance of the loan on September 30, 2020 was $34,770.
|
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
As
of September 30, 2020, the statement of cash flows related to MSS
are as follow:
Cash flows provided
by (used in) operating activities |
|
|
Net loss
from deemed disposition |
|
|
(171,110 |
)) |
Adjustments to
reconcile net loss to net cash used in operating activities |
|
|
|
|
Depreciation and
amortization |
|
|
28,930 |
|
Provision for bad and
doubtful debts |
|
|
45,905 |
|
Interest expense |
|
|
13,435 |
|
|
|
|
|
|
(Increase) Decrease in: |
|
|
Account
receivable |
|
|
(15,342 |
) |
Inventory |
|
|
(160 |
) |
Other assets |
|
|
(11,295 |
) |
Increase (Decrease)
in: |
|
|
|
|
Accounts payable and
accrued liabilities |
|
|
59,742 |
|
Other liabilities |
|
|
(30,432 |
) |
Net cash used in operating activities |
|
|
(80,327 |
) |
Cash flows provided by (used in) financing activities |
|
|
|
|
Proceeds from note
payable |
|
|
|
|
Repayment of debt |
|
|
(18,096 |
) |
Due to related party |
|
|
78,272 |
|
Net cash provided by financing activities |
|
|
60,176 |
|
Net change in cash |
|
|
(20,151 |
) |
Effect of exchange rate changes |
|
|
10,369 |
|
Cash, beginning of period |
|
|
13,835 |
|
Cash, end of period |
|
|
4,053 |
|
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
NOTE 15 – INCOME TAXES
The following table reconciles the expected income tax expense
(recovery) for different jurisdictions at the Company’s effective
combined tax rate of 21%.
|
|
2020 |
|
2019 |
Net loss before income taxes |
|
|
(19,214,750 |
) |
|
|
(615,256 |
) |
Expected income
tax expense (recovery) at statutory rate of 21% (2019 - 35%) |
|
|
(4,035,097 |
) |
|
|
(215,341 |
) |
Impact of
tax rate differences in foreign jurisdictions |
|
|
(46,890 |
) |
|
|
64,800 |
|
Tax rate changes and
other adjustments |
|
|
148,783 |
|
|
|
(4,693 |
) |
Permanent
difference |
|
|
3,733,812 |
|
|
|
47,736 |
|
Change in valuation allowance |
|
|
199,531 |
|
|
|
107,498 |
|
Income tax expense (recovery) |
|
|
139 |
|
|
|
0 |
|
Unrecognized deferred tax assets:
The
following table reflects the gross unused tax losses and deductible
temporary differences for which deferred tax assets have not been
recognized in the financial statements:
|
|
2020 |
|
2019 |
Non-capital loss
carry-forward for Canadian purposes |
|
|
1,575,636 |
|
|
|
1,376,244 |
|
Net operating loss carryforward
US |
|
|
166,516 |
|
|
|
166,516 |
|
Valuation
allowance |
|
|
(1,742,291 |
) |
|
|
(1,542,760 |
) |
The Company’s non-capital losses expires as follows:
|
|
|
|
|
Canada Losses |
|
|
|
USA Losses |
|
|
Year |
|
|
|
Balance |
|
|
|
Expiry |
|
|
|
Balance |
|
|
|
Expiry |
|
|
2020 |
|
|
|
752,424 |
|
|
|
2040 |
|
|
|
— |
|
|
|
2040 |
|
|
2019 |
|
|
|
387,685 |
|
|
|
2039 |
|
|
|
322 |
|
|
|
2039 |
|
|
2018 |
|
|
|
1,634,662 |
|
|
|
2038 |
|
|
|
214,173 |
|
|
|
2038 |
|
|
2017 |
|
|
|
2,258,953 |
|
|
|
2037 |
|
|
|
440,437 |
|
|
|
2037 |
|
|
2016 |
|
|
|
912,072 |
|
|
|
2036 |
|
|
|
138,001 |
|
|
|
2036 |
|
|
|
|
|
|
5,945,796 |
|
|
|
|
|
|
|
792,933 |
|
|
|
|
|
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
NOTE 16 – SUBSEQUENT EVENTS
The Company’s management has evaluated subsequent events up to
September 24, 2021, the date the consolidated financial statements
were issued, pursuant to the requirements of ASC 855 and has
determined the following material subsequent events:
During the three
months period ended March 31, 2021, the Company completed a private
placement for the sale of non-registered shares of the Company's
common stock. As a result of the private placement 3,614,685 non-
registered shares of the Company's common stock was issued for
gross proceeds of $298,355.
In March 2021, the Company announced that its subsidiary, BGC,
signed a strategic partnership agreement to provide
Business-to-Business (B2B) solutions. Under the terms of the
agreement the Company will receive a one-time customization and
implementation fee of US$350,000.
In August 2021, the Company
completed a private placement for the sale of non-registered
shares of the Company's common stock. As a result of the private
placement 1,200,000 non-registered shares of the Company's common
stock was issued for gross proceeds of $96,000.
The payment of all the Notes payable amounts disclosed in the
consolidated financial statements as of December 31, 2020 has been
extended based on the same terms (note 7). Subsequent to December
31, 2020, the Company’s received an additional $23,630 (CD$30,000)
from a shareholder for payment of operating expenses. The loan does
not bear any interest and is unsecured.
Subsequent to December 31, 2020, the Company received CD$300,000
from a Convertible Debenture offering of 3,000 units. Each unit is
comprised of one (1) debenture in the principal amount of CD$1,000
per unit with a term of three (3) years from the date of issuance
and bearing interest at the rate of 12% per annum. The whole or any
part of the principal amount of the Debenture plus any accrued and
unpaid interest may be convertible at the option of the debenture
holder into common shares of the Company at a price equal to
US$0.20 per share at any time up to the maturity date. The right of
conversion in the Debenture may be accelerated by the Company if
the closing price of the Company’s common shares exceeds 200% of
the Conversion price for a period of 20 trading days in a 30-day
period at any time up to the maturity date as more specifically set
out in the Debenture agreement.
Subsequent to the year ended December 31, 2020, the Company repaid
a long-term debt due to Moxies, an amount of $353,498 (note 8).
F-36
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