Commission File No. 333-20399
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.
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 ☐
The aggregate market value of the voting stock
of the Registrant held by non-affiliates September 24, 2021 was approximately $Nil.
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
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:
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 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.
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Closing Prices (1)
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High
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Low
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FISCAL YEAR ENDED DECEMBER 31, 2020:
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Fourth Quarter
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$
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0.28
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0.17
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Third Quarter
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0.36
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0.246
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Second Quarter
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0.39
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0.123
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First Quarter
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0.21
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0.052
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FISCAL YEAR ENDED DECEMBER 31, 2019:
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Fourth Quarter
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$
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0.13
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0.054
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Third Quarter
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0.15
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0.058
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Second Quarter
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0.13
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0.05
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First Quarter
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0.205
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0.10
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_________________
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(1)
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The above tables set forth the range of high and low closing prices per share of our common stock as per the OTC Markets.
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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.
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2021
|
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2022
|
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|
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Accounts payable and accrued liabilities
|
|
$
|
1,843,780
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|
|
$
|
—
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Notes payable
|
|
|
530,896
|
|
|
|
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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.
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a)
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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).
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b)
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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.
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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:
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•
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Office equipment and furniture – 20% declining balance per year
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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.
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2021
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2022 and after
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|
|
|
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.
The accompanying notes are an integral
part of these consolidated financial statements.
The accompanying notes are an integral
part of these consolidated financial statements.
The accompanying notes are an integral
part of these consolidated financial statements.
The accompanying notes are an
integral part of these consolidated financial statements.
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