SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
Amendment No. 1
xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR
THE FISCAL YEAR ENDED DECEMBER 31, 20152017.
¨ .
FOR THE TRANSITION PERIOD FROM ______ TO ______.
Commission File No. 333-141875
IGEN Networks Corp. |
(Exact name of registrant as specified in its charter) |
Nevada | 20-5879021 | |
(State or Other Jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
1075 St. David Street, |
(Address of principal executive offices) (Zip Code) |
1-844-332-5699 ( |
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
Title of Class
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.YesAct. Yes o¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.YesAct. Yes o¨ No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes x No o¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated | ¨ | Accelerated | ¨ | |
Non-accelerated | ¨ | |||
(Do not check if a smaller reporting company) | Smaller reporting company | x | ||
Emerging growth company | ¨ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o¨ No x
The aggregate market value of the Common Stock of IGEN Networks Corp. held by non-affiliates as of April 13, 2016June 30, 2017 was $4,649,463$3,300,180 based on the closing price of the common stock of $0.16
The number of shares of the registrant'sregistrant’s common stock outstanding as of December 31, 2015April 13, 2018 was 28,215,349.
EXPLANATORY NOTE
We are filing this Amendment No. 1 on Form 10-K/A (the “Amendment”) to our Annual Report on Form 10-K for the year ended December 31, 2017 (the “Form 10-K”), filed with the United States Securities and Exchange Commission on April 17, 2018 (the “Original Filing Date”), solely to furnish the Interactive Data File exhibits required by Item 601(b)(101) of Regulation S-K. These exhibits were inadvertently not included with our Form 10-K filing. Exhibit 101 consists of the following materials from our Form 10-K, formatted in XBRL (eXtensible Business Reporting Language):
101.INS | XBRL Instance Document | |
101.SCG | XBRL Taxonomy Schema | |
101.CAL | XBRL Taxonomy Calculation LinkBase | |
101.DEF | XBRL Taxonomy Definition Linkbase | |
101.LAB | XBRL Taxonomy Label Linkbase | |
101.PRE | XBRL Taxonomy Presentation Linkbase |
No other changes have been made to the Form 10-K. This Amendment speaks as of the Original Filing Date and does not reflect events that may have occurred subsequent to the Original Filing Date, and does not modify or update in any way the disclosures made in the Form 10-K.
As set forth in Item 15 of Part IV, the XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
Page | |||||
3 | |||||
4 | |||||
4 | |||||
4 | |||||
4 | |||||
4 | |||||
5 | |||||
8 | |||||
8 | |||||
12 | |||||
13 | |||||
14 | |||||
14 | |||||
14 | |||||
15 | |||||
16 | |||||
17 | |||||
19 | |||||
19 | |||||
21 | |||||
22 |
| 2 | ||
Item 1. Business
Description of Business
IGEN Networks Corp. (“IGEN”, the “Company”, “we”, “our”) was incorporated in the State of Nevada on November 14, 2006, under the name of Nurse Solutions Inc. On September 19, 2008, the Company changed its name to Sync2 Entertainment Corporation and traded under the symbol SYTO. On September 15, 2008, the Company became a reporting issuer in British Columbia, Canada. On May 26, 2009, the Company changed its name to IGEN Networks Corp., the Company’s common stock was assigned 45172B 10 2 as its new Cusip number, and the Company’s trading symbol was changed to IGEN effective June 30, 2009. On November 4, 2011, IGEN Business Solutions Inc., a wholly owned Canadian subsidiary of IGEN Networks Corp., was incorporated. On March 25, 2015, the Company was listed on the Canadian Securities Exchange (CSE) under the trading symbol IGN and the Company became a reporting Venture Issuer in British Columbia and Ontario, Canada.
The Company’s principal business is investing in or acquiring operating high tech companiesthe development and playing an active role inmarketing of software services for the management of these companies to mitigate risk and maximize their revenue growth.automotive industry. The Company defines itself as an “invasive” business accelerator. Through ownership of IGEN shares,works with wireless carriers, hardware suppliers and software developers to provide direct and secure access to information on the general public has an opportunityvehicle and the driver’s behavior. The software services are delivered from the AWS Cloud to participate in the consumer and their families over the wireless networks and accessed from any mobile or desktop device. The software services are marketed to automotive dealers, financial growthinstitutions, and any liquidity events of these privately-helddirect-to-consumer through various commercial and IGEN-managed technology companies. The Company has primarily targeted companies with technologies or solutions in three specific areas: Machine to Machine (M2M) applications and technologies, Cloud-based software-as-a-service (SaaS) business applications, and specialized wireless broadband communications infrastructure. A secondary part of IGEN’s business is negotiating distribution agreements with organizations, typically in the above industries, and selling their products and services through the distribution channels of our portfolio companies, or newly developed global IGEN sales channels.
As of December 31, 20152017 the Company had:
| i) | A 100% equity position in Nimbo LLC, a privately held US company acquired in 2014; |
| ii) | Equity positions and distribution agreements with two Canadian privately held companies: Gogiro Internet Group, and Machlink Inc., in which it has 30.44% and 2.15% equity positions respectively; |
| iii) | A global distribution agreement with Star Solutions Inc., a privately held Canadian company; and |
| iv) | A software license and hardware supply agreement with GPS Holdings Ltd (GHD), a privately held US Company. |
| v) | A software license and hardware supply agreement with Position Universal Inc. |
The Company has offices in the United States and Canada. The U.S.Company’s head office is located at 119 North Henry Street, Alexandria, Virginia 22314. The Canadian office29970 Technology Drive, Suite 108, Murrieta CA 92563. Direct line is located at Suite 1025, 1185 Georgia Street, Vancouver BC, Canada, V6E 4E6. The Company’s phone number is 1-888-244-3650.
The Company itself currently owns no patents. The Company is in the process of securinghas secured trademarks and distribution licenses through increased ownership of privately held technology companies.
The Company is not aware of any government approval or regulations, other than those governing the normal course of business, which will affect its own business. However, the Company is invested in and foresees future investment in, or possible joint ventures with, companies for which local, regional or national regulatory approvals, particularly those pertaining to wireless networks or GPS-based applications, may apply.
The Company is not aware of any significant costs or effects of compliance with environmental laws.
The Company currently has 2 full-time employees and one part-time employee. AllCompany’s executive management activities are currently undertaken by Directors of the Company and theon a contract basis. The Company also relies on subcontractors for a number of professional services.
| 3 |
| Table of Contents |
Item 1A. Risk Factors
For a discussion of risk factors affecting the Company please refer to the Cautionary Note Regarding Forward-looking Statements included in Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Item 1B. Unresolved Staff Comments
As a smaller reporting company, the Company is not required to provide the information required by this item.
Item 2. Properties
The Company owns no plants, mines and other materially important physical properties. The Company’s office locations are specified in Item 1 of this document.
Item 3. Legal Proceedings
The Company is not party to any legal proceedings.
Item 4. Mine Safety Disclosures
The Company is not an operator, nor has a subsidiary that is an operator, of a coal or other mine.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Principal Markets
The Company’s common shares currently trade on the both the OTC marketLink OTCQB in the United States and are quoted on the OTCQB under the symbol IGEN.
High and Low Sales Prices
| Quarter Ended | High | Low | ||||||
2014 | ||||||||
March 31, 2014 | $ | 0.26 | $ | 0.04 | ||||
June 30, 2014 | $ | 0.33 | $ | 0.15 | ||||
September 30, 2014 | $ | 0.26 | $ | 0.11 | ||||
December 31, 2014 | $ | 0.29 | $ | 0.16 | ||||
2015 | ||||||||
March 31, 2015 | $ | 0.23 | $ | 0.17 | ||||
June 30, 2015 | $ | 0.26 | $ | 0.21 | ||||
September 30, 2015 | $ | 0.26 | $ | 0.18 | ||||
December 31, 2015 | $ | 0.25 | $ | 0.14 | ||||
Quarter Ended |
| High |
|
| Low |
| ||
2016 |
|
|
|
|
|
| ||
March 31, 2016 |
| $ | 0.19 |
|
| $ | 0.16 |
|
June 30, 2016 |
| $ | 0.19 |
|
| $ | 0.14 |
|
September 30, 2016 |
| $ | 0.17 |
|
| $ | 0.08 |
|
December 31, 2016 |
| $ | 0.13 |
|
| $ | 0.05 |
|
2017 |
|
|
|
|
|
|
|
|
March 31, 2017 |
| $ | 0.14 |
|
| $ | 0.06 |
|
June 30, 2017 |
| $ | 0.14 |
|
| $ | 0.08 |
|
September 30, 2017 |
| $ | 0.10 |
|
| $ | 0.05 |
|
December 31, 2017 |
| $ | 0.12 |
|
| $ | 0.06 |
|
Holders
As of December 31, 2015,2017, there were 35270 registered shareholders of common shares.
Dividends
The Company has paid no cash dividends in the past and as of yet has had no retained earnings from which to do so.
Securities authorized for issuance under equity compensation plans
The following table summarizes information about stock options outstanding and exercisable at December 31, 2015:
Number of Options | Weighted average exercise price $ | ||||
Options outstanding – December 31, 2013 | 1,090,556 | 0.09 | |||
Option granted (April 28, 2014) | 50,000 | 0.17 | |||
Options granted (June 5, 2014) | 450,000 | 0.18 | |||
Options outstanding, December 31, 2014 | 1,590,556 | 0.12 | |||
Options exercised | 100,000 | 0.09 | |||
Options granted | 2,590,000 | 0.19 | |||
Options outstanding, December 31, 2015 | 4,080,556 | * | 0.16 | ||
|
|
| Outstanding |
|
| Exercisable |
| |||||||||||||||
Range of exercise prices |
|
| Number of |
|
| Weighted average remaining contractual life (years) |
|
| Weighted average exercise price |
|
| Number of |
|
| Weighted average exercise price |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
| $ | 0.07 |
|
|
| 75,000 |
|
|
| 0.3 |
|
| $ | 0.07 |
|
|
| 75,000 |
|
| $ | 0.07 |
|
| $ | 0.08 |
|
|
| 250,000 |
|
|
| 4.8 |
|
|
| 0.08 |
|
|
| 250,000 |
|
|
| 0.08 |
|
| $ | 0.09 |
|
|
| 910,000 |
|
|
| 0.3 |
|
|
| 0.09 |
|
|
| 910,000 |
|
|
| 0.09 |
|
| $ | 0.13 |
|
|
| 1,425,000 |
|
|
| 4.4 |
|
|
| 0.13 |
|
|
| 1,100,000 |
|
|
| 0.13 |
|
| $ | 0.16 |
|
|
| 225,000 |
|
|
| 3.1 |
|
|
| 0.16 |
|
|
| 112,500 |
|
|
| 0.16 |
|
| $ | 0.19 |
|
|
| 2,270,000 |
|
|
| 2.7 |
|
|
| 0.19 |
|
|
| 2,270,000 |
|
|
| 0.19 |
|
Cdn$0.25 |
|
|
| 20,000 |
|
|
| 2.7 |
|
| Cdn$0.25 |
|
|
| 20,000 |
|
| Cdn$0.25 |
| |||
|
|
|
|
| 5,175,000 |
|
|
| 2.8 |
|
| $ | 0.15 |
|
|
| 4,737,500 |
|
| $ | 0.15 |
|
| Table of |
On March 25, 2013, via Board of Directors Consent Resolution, the Company ratified and adopted a Stock Option Plan, created an option pool of 4,000,000 options. As of December 31, 2014, 2,585,000 options had been granted, leaving 1,415,000 options remaining for future
grants.On August 31, 2015, via Board of Director’s Consent Resolution, the Company depleted the 2013 option pool and replenished the option pool to 5,000,000 options, representing 18% of outstanding shares at that time. As of
During the year ended December 31, 2105, 2,550,0002015 2,540,000 options of the 2015option pool had beenwere granted, leaving 3,815,0003,875,000 options available for future grants.
During the year ended December 31, 2017, 1,800,000 options of the option pool were granted, leaving 1,350,000 options remaining for future grants.
Performance Graph
As a smaller reporting company, the Company is not required to provide the information required by this item.
Recent sales of unregistered securities
2016
During the twelve monthsyear ended December 31, 2011,2016, the companyCompany issued the following shares under the Securities Act of 1933 exemption Rule 144:
On January 28, 2014March 29, 2016, the Company issued 843,750588,240 units (“Unit A”) for $67,500 ($0.08/share)cash proceeds of $76,029 (Cdn$100,000). Each Unit A consisted of one common share and one share purchase warrant, each warrant entitling the holder to purchase one share at an exercise price of $0.20 per share for one year.
On May 4, 2016, the Company issued 250,000 units for cash proceeds of $22,770 (Cdn$30,000). Each unit is comprised of one common share and one share purchase warrant. Each warrant is exercisable into one common share at $0.15 per share before May 4, 2018.
On June 9, 2016, the Company issued 312,500 units for cash proceeds of $39,283 (Cdn$50,000). Each unit is comprised of one common share and one share purchase warrant. Each warrant is exercisable into one common share at $0.20 per share before June 9, 2017.
On October 12, 2016, the Company issued 357,143 units for cash proceeds of $37,659 (Cdn$50,000). Each unit is comprised of one common share and one share purchase warrant. Each warrant is exercisable into one common share at $0.18 per share before October 12, 2017. There were $3,542 (Cdn$4,000) in finder’s fees paid to a periodnon-related party and recorded as share issuance costs in relation to this financing.
On December 5, 2016, the Company issued 980,392 units for cash proceeds of $100,000. Each unit is comprised of one common share and one share purchase warrant. Each warrant is exercisable into one common share at $0.15 per share before December 5, 2017.
On December 13, 2016, the Company issued 588,235 units for cash proceeds of $50,000. Each unit is comprised of one common share and one share purchase warrant. Each warrant is exercisable into one common share at $0.15 per share before December 13, 2017.
During the year ended December 31, 2016, the Company also issued the following common shares:
On January 7, 2016, the Company issued 55,556 common shares for exercise of options at $0.09 per share for total proceeds of $5,000.
On October 12, 2016, the Company issued 50,000 common shares with a fair value of $7,500 for the settlement of debt of $6,000. The Company recorded a loss on settlement of debt of $1,500 in connection with this debt settlement.
| 6 |
| Table of Contents |
On October 12, 2016, the Company issued 512,880 common shares for the conversion of two years fromconvertible debentures totaling $79,065 (Cdn$73,855) including interest.
During the issuance. These warrants are also subject atyear ended December 31, 2016, the Company’s option, to an acceleration of their expiry if the weighted average closing price of the Company’sCompany issued 479,290 common shares on Canadian Stock Exchange is greater than CAD$0.60with the fair value of $60,480 in exchange for twenty consecutive trading days.
As of December 11,31, 2016 and 2015, the Company issued 294,118received subscriptions proceeds of $25,000 for issuance of units (“Unit Z”) for $50,000.at $0.17 per unit. Each Unit Z includesunit consists of one common share and one share purchase warrant enabling the holder to purchase one additional commonexercisable at $0.35 per share of the Company at a price of US$0.35 for a period expiring 2two years from their date of issuance. These warrants are also subjectAs of the date of this report, the Company has not issued the units for this subscription.
2017
During the year ended December 31, 2017, the Company issued the following shares/units pursuant to non-brokerage private placements:
On March 2, 2017, the Company issued 2,222,222 units at $0.09 per unit for proceeds of $200,000. Each unit consisted of one share of common stock and one share purchase warrant exercisable until March 2, 2019. The share purchase warrant is exercisable at $0.18 per share for the first year and $0.23 per share thereafter.
On March 2, 2017, the Company issued 56,000 shares of common stock with a fair value of $5,640 for consulting services rendered by a company controlled by the Vice President of Finance of the Company. The fair value of common shares was determined based on the end of day trading price of the Company’s option,common stock on the date of issuance.
On April 20, 2017, the Company issued 49,020 shares of common stock with a fair value of $5,392 for consulting services rendered. The fair value of common shares was determined based on the end of day trading price of the Company’s common stock on the date of issuance.
On June 23, 2017, the Company issued 147,059 units at $0.17 per unit for proceeds of $25,000 which was received as of December 31, 2016. Each unit consisted of one common share and one share purchase warrant exercisable at $0.35 per share for a period of two years from their date of issuance.
On July 1, 2017, the Company issued 49,020 shares of common stock with a fair value of $4,902 for consulting services rendered. The fair value of common shares was determined based on the end of day trading price of the Company’s common stock on the date of issuance.
On August 29, 2017, the Company issued 1,875,000 shares of common stock at $0.08 per share for proceeds of $150,000.
On September 7, 2017, the Company issued 49,020 shares of common stock with a fair value of $3,922 for consulting services rendered. The fair value of common shares was determined based on the end of day trading price of the Company’s common stock on the date of issuance.
On October 1, 2017, the Company issued 75,000 shares of common stock with a fair value of $6,000 for consulting services rendered. The fair value of common shares was determined based on the end of day trading price of the Company’s common stock on the date of issuance.
On October 5, 2017, the Company issued 50,000 shares of common stock with a fair value of $4,000 for consulting services rendered. The fair value of common shares was determined based on the end of day trading price of the Company’s common stock on the date of issuance.
On October 17, 2017, the Company issued 150,000 shares of common stock with a fair value of $12,000 for consulting services rendered. The fair value of common shares was determined based on the end of day trading price of the Company’s common stock on the date of issuance.
On November 1, 2017, the Company issued 625,000 shares of common stock for the conversion of two convertible notes payable with an aggregate value of $50,000 at $0.08 per share.
On November 6, 2017, the Company entered into a subscription agreement with an accredited investor to an accelerationsell 1,428,571 shares of their expiry ifcommon stock at $0.07 per share for proceeds of $100,000.
On December 31, 2017, the weighted averageCompany issued 49,020 shares of common stock with a fair value of $4,902 based on the closing price of the Company’s common shares on Canadian Stock Exchange is greater than $0.50stock for ten consecutive trading days.
| 7 |
| Table of Contents |
Item 6. Selected Financial Data
As a smaller reporting company, the Company is not required to provide the information required by this item.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) provides information for the year ended December 31, 2015.2017. This MD&A should be read together with our audited consolidated financial statements and the accompanying notes for the year ended December 31, 20152017 (the “consolidated financial statements”). The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). Except where otherwise specifically indicated, all amounts in this MD&A are expressed in United States dollars.
Certain statements in this MD&A constitute forward-looking statements or forward-looking information within the meaning of applicable securities laws. You should carefully read the cautionary note in this MD&A regarding forward-looking statements and should not place undue reliance on any such forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements”.
Additional information about the Company, including our most recent consolidated financial statements and our Annual Information Form, is available on our website at www.igen-networks.com, or on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
Cautionary Note Regarding Forward-looking Statements
Certain statements and information in this MD&A are not based on historical facts and constitute forward- looking statements or forward-looking information within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Canadian securities laws (“forward-looking statements”), including our business outlook for the short and longer term and our strategy, plans and future operating performance. Forward-looking statements are provided to help you understand our views of our short and longer term prospects. We caution you that forward-looking statements may not be appropriate for other purposes. We will not update or revise our forward-looking statements unless we are required to do so by securities laws. Forward-looking statements:
| Typically include words and phrases about the future such as “outlook”, “may”, “estimates”, “intends”, “believes”, “plans”, “anticipates” and “expects”; |
| · | Are not promises or guarantees of future performance. They represent our current views and may change significantly; |
| · | Are based on a number of assumptions, including those listed below, which could prove to be significantly incorrect: |
| Our ability to find viable companies in which to invest |
| · | Our ability successfully manage companies in which we invest |
| · | Our ability to successfully raise capital |
| · | Our ability to successfully expand and leverage the distribution channels of our portfolio companies; |
| · | Our ability to develop new distribution partnerships and channels |
| · | Expected tax rates and foreign exchange rates. |
| Are subject to substantial known and unknown material risks and uncertainties. Many factors could cause our actual results, achievements and developments in our business to differ significantly from those expressed or implied by our forward-looking statements. Actual revenues and growth projections of the Company or companies in which we are invested may be lower than we expect for any reason, including, without limitation: |
| the continuing uncertain economic conditions |
| · | price and product competition |
| · | changing product mixes, |
| · | the loss of any significant customers, |
| · | competition from new or established companies, |
| · | higher than expected product, service, or operating costs, |
| · | inability to leverage intellectual property rights, |
| · | delayed product or service introductions |
Investors are cautioned not to place undue reliance on these forward-looking statements. No forward-looking statement is a guarantee of future results.
| 8 |
| Table of Contents |
Overview
In 20152017, the Company continued to focus on initiatives to grow revenue, expand its efforts on generating more revenues, increasing shareholder value through increased investment or acquisitioncustomer base, and develop new revenue streams. New car franchise dealerships continue to expand in portfolio companies, and managing growthSouthern California along with the recent launch of our invested companies.IGEN’s direct-to-consumer brand “Medallion GPS”, targeted at the pre-owned automotive industry. Highlights for the year include:
· | On |
· | On |
· | On | |
· | On April 24, 2017, the Company secured a | |
· | On May 22, 2017, the Company sponsored the 7th Annual Agent Summit, the largest gathering of sales representatives and | |
· | On June 15, 2017, the Company activated its first 1,000 activations with | |
· | On September 26, 2017, the Company engages Darrow & Associates to |
· | On October |
· | As of 3Q2017 subscriber base has reached 31,000 subscribers representing an annualized growth rate of 264% over the last 9 months. | |
· | The Company as of December 31, 2017 finished its fiscal year with $95,395 in backlog orders. | |
· | Financial metrics at fiscal year-end December 31, 2017: |
Record recognized revenues of |
| · | Record |
| · | Gross Margins increased from 35% to 36% year on year. | |
| · | Net loss for the current year was $1,297,660 including $234,122 of |
| Table of |
Financial Condition and Results of Operations
Capital Resources and Liquidity
Current Assets and Liabilities, Working Capital
As of December 31, 2015,2017, the Company had total current assets of $175,544,$132,194, a 48% decrease of $236,860 from the end of 2016. This decrease was mostly due to a $102,581 decrease in trade accounts receivable because of the year previous, due primarily to the Company writing off current receivables totaling $186,190 owed by Gogiro Internet Group for which the Company believed collectability was adequately uncertain, and therefore merited taking a provision (see Note 6 to the consolidated financial statements). The remaining accounts receivables are primarily Nimbo LLC receivables which consisttiming of monies owedpayments to Nimbo by customers for products and services sold. A significant increase in pre-paid expenses was due to pre-payment in 2015, via share issuances, for services contracted to be provided through July 2017.
The Company’s current liabilities as of December 31, 20152017 were $712,407,$1,847,471, a significant23% increase of $252,327 over those reported at the end of the 2014,2016. However $622,766 (or 34%) of the most significant contributors being an increase of $176,225Company’s current liabilities, were deferred revenues for sales made in accounts payable due primarily2017 which will eventually convert to increased hardware purchases, and anrevenue in 2018. The increase in Notes Payable of $63,646current liabilities was mostly due to a $199,233 increase in the derivative liabilities due to the impact of a $95,000 promissory note previously recorded as long-term liability becoming current. Nimbo LLC payables, which make up 70% of the Company’s consolidated payables, remain primarily monies owed for cellular carrier services and device hardware. The remaining payables are made up of contractor fees, legal fees, auditing fees, accounting fees, and management and consulting fees owed to the Company’s executive officers.
IGEN ended 20152017 with a significant negative working capital of ($536,683).
In 2017, the Company raised an additional $450,000 in equity financing and converted $50,000 of convertible debentures into shares. These transactions are further disclosed in notes to the consolidated financial statements.
Total Assets and Liabilities, Net Assets
As of December 31, 20152017, the Company’s total assets were $698,695,$640,555, a 16% decrease of $485,248 fromover the prior year, end prior. $236,860 of this reduction is due primarily to the reductiondecrease in current assets discussed above. The bulk of the remaining reduction is due to the company writing off the recorded value of its investment in Gogiro Internet Group. Though Gogiro continues to grow its top line and report nominal annual profit, the Company felt recoverability of the investment was questionable enough to justify recording impairment charges of $227,957 (see Note 4 to the financial statements).previously discussed. The majority of the Company’s assets remain $505,508 in goodwill associated with the acquisition of Nimbo LLC in 2014. The Company continues to evaluate the assets and liabilities assumed in this acquisition, and may record adjustments to the purchase price allocation in the future.
As of December 31, 20152017, the Company’s total liabilities were $746,389, up from $540,494 reported$2,031,047, which reflects the year prior. This increase was duesole addition of $183,576 in long-term deferred revenue to the increase$1,847,471 in current liabilities previously discussed, plusdiscussed. This long-term deferred revenue is the additionportion of derivativeservice contracts signed in 2017 for which service, and the associated revenue recognition, occurs beyond 2018. Total liabilities increased by 29% over the previous year, however 40%, or $817,342 of $33,982 primarily associatedthe Company’s year-end total liabilities was deferred revenue, compared with accounting for foreign exchange risk for stock based compensation that was issued in foreign currency.
The above resulted in net assets as of December 31, 20152017 being ($47,694)
The companyCompany is continuing in its efforts to increase its asset base, and raise funds, and improve cashflow to improve its working capital position.
The reader is cautioned that the Company’s belief in the adequacy of its working capital, the continuation and growth of future revenue, the ability of the Company to operate any stated period without additional funding, and the ability to successfully raise capital are forward looking statements for which actual results may vary, to the extent that the company may need capital earlier than anticipated and/or may not be able to raise additional capital.
| 10 |
| Table of Contents |
Results of Operations
Revenues and Net Income (Loss)
Revenues
For the year ended December 31, 2015,2017, the Company had revenues of 1,035,820,$1,347,059, a 43%record for the Company, and an 18% increase over the revenue reported for 2014. same period in 2016. However, this is not reflective of the actual total sales growth of the Company, as $817,342 of the Company’s 2017 revenue was deferred (compared with only $726,471 in 2016). Including new deferred revenues the Company saw total sales growth year on year of 15%.
Service-only revenues more than doubledincreased by 58% to $130,683,$375,344 and hardware-only and hardware/software bundled sales grew 50%increased by 7% at $971,715.
Increased revenue deferrals for services contracts in 2017 are due to
Costs of goods sold for 20152017 were $716,911, an$863,827, a 15% increase of $290,722, reflecting increased sales volumes, though at lower margins (see below).over 2016. These costs are primarily mobile hardware and cellular carrier costs.
The resulting annual gross profit was $318,909,$483,232, a record for the Company, representing growth of 7%22% year on year. Gross margins of 31% were a reduction of 10%margin percentage for the year on year, reflective of increasing volumes of lower margin product in 2015.
Though the Company was able to increase revenues, gross profit, and gross profitmargins year on year, gross margins remain lower than plan. The Company continueswe continue to review hardware vendor, inventory, and order fulfillment strategies as well as product and service pricing models to try tocontinually improve overall margins. The Company also continues to work at increasing margins through increased service-only revenues.
Expenses
Expenses as offor the year ended December 31, 20152017 totaled $1,681,519,$1,609,725, an increase of $762,660 over the previous year. However, 63% of this increase was one-time non-cash based expenses of $480,178 associated with the granting and vesting of stock options to officers, directors, and consultants of the Company (see note 7 to the financial statements). A further 24% of this increase was a one-time write-down of $186,190 in receivables and debt owed by Gogiro Internet Group that the Company deemed likely irrecoverable (see note 6 to the financial statements and the MD&A comments on current assets above). The company saw a significant reduction of $151,756 in consulting and professional fees, however this was offset by an increase of $239,231 in salaries and management fees.
| 11 |
| Table of Contents |
Net Loss
For the year ended December 31, 2017, the Company had a net loss of $1,613,130$1,297,660 (or $0.06($0.04) per basic &and diluted share). This loss however, in addition to including the one-time non-cash and debt write-down expenses previously discussed, also includes the write off of $227,957 in impairment of the Company’s investment in Gogiro Internet Group (see previous MD&A discussion on Net Assets and Note 4 to the Financial Statements).
The Company continues to invest in personnel, channels, and product development in order to drive revenue growth and increase gross profits sufficient to enable the Company to achieve profitability.
Cash Flows
For the year ended December 31, 20152017, the Company saw a net decrease in cash of ($22,757). The primary source of cash remained net proceeds from financing activities of $312,163 (compared with $431,192, in 2014).$11,385. Cash used in operating activities was $683,826, an increase of $327,647 was a reduction of 23%124% from the $424,439 in$305,353 net cash used in 2014.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
As a smaller reporting company, the Company is not required to provide the information required by this item.
| 12 |
| Table of Contents |
Item 8. Financial Statements and Supplementary Data.
The Company’s consolidated financial statements for the yearyears ended December 31, 20152017 and 2016 are included herewith.
IGEN NETWORKS CORP.
Consolidated Financial Statements
For the year endedYears Ended December 31, 2015
To the Board of Directors and Stockholders of
IGEN Networks Corp.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of IGEN Networks Corp. (the “Company”) as of December 31, 20152017 and 2014,2016, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity (deficit), and cash flows for the years then ended December 31, 2015 and 2014. These consolidatedrelated notes (collectively, the “consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
Explanatory Paragraph Regarding Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has a working capital deficit, and has incurred significant operating losses in developing its business, and further losses are anticipated. Thenegative cash flows from operations since inception. As at December 31, 2017, the Company requires additional funds to meet its obligationshas a working capital deficit of $1,715,277 and the costsan accumulated deficit of its operations.$10,223,288. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in this regard to these matters are describedalso discussed in Note 1.1 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Restatement of Comparative Figures
As disclosed in Note 18 of the consolidated financial statements, the 2016 consolidated financial statements have been restated to correct a misstatement.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company LLP”
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal controls over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal controls over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ SATURNA GROUP CHARTERED PROFESSIONAL ACCOUNTANTS LLP
Saturna Group Chartered Professional Accountants
We have served as the Company’s auditor since 2017
Vancouver, Canada
April 14, 2016
| F-1 |
| Table of Contents |
IGEN NETWORKS CORP.
Consolidated Balance Sheets
(Expressed in U.S. dollars)
| Note | December 31, 2015 | December 31, 2014 | |||||||||
| $ | $ | ||||||||||
| Assets | |||||||||||
| Current | |||||||||||
| Cash | 33,590 | 56,347 | |||||||||
| Accounts receivable | 6 | 45,182 | 299,422 | ||||||||
| GST receivable | 5,661 | 17,021 | |||||||||
| Due from equity investee | 6 | - | 20,578 | ||||||||
| Inventories | 3(j) | 29,643 | 14,102 | ||||||||
| Prepaid expenses | 61,468 | 4,934 | |||||||||
| 175,544 | 412,404 | ||||||||||
| Investment in an associate | 4 | - | 227,075 | ||||||||
| Equipment | 5 | 17,643 | 33,458 | ||||||||
| Goodwill | 2 | 505,508 | 505,508 | ||||||||
| Security deposit | - | 5,498 | |||||||||
| Total Assets | 698,695 | 1,183,943 | |||||||||
| Liabilities and Shareholders' Equity | |||||||||||
| Current | |||||||||||
| Accounts payable | 6 | 461,008 | 284,783 | ||||||||
| Accrued liabilities | 78,361 | 68,221 | |||||||||
| Deferred revenue | 3(k) | 56,800 | 54,484 | ||||||||
| Notes payable | 6, 8 | 116,238 | 52,592 | ||||||||
| 712,407 | 460,080 | ||||||||||
| Non-current | |||||||||||
| Derivative liabilities | 33,982 | - | |||||||||
| Note payable | 8 | - | 80,414 | ||||||||
| Total liabilities | 746,389 | 540,494 | |||||||||
| Shareholders’ Equity | |||||||||||
Capital Stock: Authorized - 375,000,000 common shares with $0.001 par value Issued and outstanding -28,215,349 and 25,815,273 respectively | 7 | 28,215 | 25,815 | ||||||||
| Additional paid-in capital | 7 | 7,586,514 | 6,697,680 | ||||||||
| Subscription received | 25,000 | - | |||||||||
| Accumulated other comprehensive loss | (11,871 | ) | (17,624 | ) | |||||||
| Deficit accumulated | (7,675,552 | ) | (6,062,422 | ) | |||||||
| Shareholders' Equity | (47,694 | ) | 643,449 | ||||||||
| Total Liabilities and Shareholders' Equity | 698,695 | 1,183,943 | |||||||||
|
| December 31, 2017 |
|
| December 31, 2016 |
| ||
|
|
|
|
| (Restated) |
| ||
Assets |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Current Assets |
|
|
|
|
|
| ||
Cash |
| $ | 28,638 |
|
| $ | 40,023 |
|
Accounts and other receivables |
|
| 54,121 |
|
|
| 162,429 |
|
Inventory |
|
| 2,222 |
|
|
| 17,226 |
|
Prepaid expenses and deposits |
|
| 22,213 |
|
|
| 18,811 |
|
Restricted cash |
|
| 25,000 |
|
|
| 15,000 |
|
Total Current Assets |
|
| 132,194 |
|
|
| 253,489 |
|
|
|
|
|
|
|
|
|
|
Equipment |
|
| 2,853 |
|
|
| 7,385 |
|
Goodwill |
|
| 505,508 |
|
|
| 505,508 |
|
Total Assets |
|
| 640,555 |
|
|
| 766,382 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Deficit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
|
| 858,908 |
|
|
| 742,876 |
|
Current portion of deferred revenue |
|
| 633,766 |
|
|
| 652,486 |
|
Notes payable |
|
| 14,578 |
|
|
| 79,998 |
|
Convertible debentures, net of unamortized discount of $153,194 and $0, respectively |
|
| 113,056 |
|
|
| - |
|
Derivative liabilities |
|
| 227,163 |
|
|
| 27,930 |
|
Total Current Liabilities |
|
| 1,847,471 |
|
|
| 1,503,290 |
|
|
|
|
|
|
|
|
|
|
Deferred revenue |
|
| 183,576 |
|
|
| 73,985 |
|
Total Liabilities |
|
| 2,031,047 |
|
|
| 1,577,275 |
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit |
|
|
|
|
|
|
|
|
Common stock: Authorized - 375,000,000 shares with $0.001 par value Issued and outstanding – 39,214,517 and 32,389,585 shares, respectively |
|
| 39,215 |
|
|
| 32,390 |
|
Share subscriptions received |
|
| - |
|
|
| 25,000 |
|
Additional paid-in capital |
|
| 8,854,491 |
|
|
| 8,109,286 |
|
Deferred compensation |
|
| - |
|
|
| (19,592 | ) |
Accumulated other comprehensive loss |
|
| (60,910 | ) |
|
| (32,349 | ) |
Deficit |
|
| (10,223,288 | ) |
|
| (8,925,628 | ) |
Total Stockholders’ Deficit |
|
| (1,390,492 | ) |
|
| (810,893 | ) |
Total Liabilities and Stockholders’ Deficit |
| $ | 640,555 |
|
| $ | 766,382 |
|
(Expressed in U.S. dollars)
| Year ended December 31, | |||||||||||
| Note | 2015 | 2014 | |||||||||
| $ | $ | ||||||||||
| Revenue | |||||||||||
| Management services | 6 | - | 12,140 | ||||||||
| Commission fees | 6 | - | 31,133 | ||||||||
| Sales, hardware | 905,137 | 620,621 | |||||||||
| Sales, services | 130,683 | 60,730 | |||||||||
| Revenue, total | 1,035,820 | 724,624 | |||||||||
| Cost of goods sold | 716,911 | 426,189 | |||||||||
| Gross profit | 318,909 | 298,435 | |||||||||
| Expenses | |||||||||||
| Advertising and selling expenses | 6 | 39,535 | 30,605 | ||||||||
| Bad debt | 186,190 | - | |||||||||
| Consulting and business development fees | 110,083 | 157,310 | |||||||||
| Depreciation | 18,407 | 17,418 | |||||||||
| General and administrative | 6 | 156,795 | 157,351 | ||||||||
| Interest expense | 43,495 | 12,574 | |||||||||
| Management fees | 184,797 | 65,232 | |||||||||
| Professional fees | 45,969 | 150,498 | |||||||||
| Salaries | 331,383 | 211,657 | |||||||||
| Stock-based compensation | 7 | 480,178 | 49,625 | ||||||||
| Transfer agent & filing fees | 48,062 | 12,698 | |||||||||
| Travel and accommodation | 36,625 | 53,891 | |||||||||
| Total | 1,681,519 | 918,859 | |||||||||
| Loss before the others: | (1,362,610 | ) | (620,424 | ) | |||||||
| Accretion | (6,824 | ) | (63,995 | ) | |||||||
| Change in derivative liabilities | (28,267 | ) | 98,992 | ||||||||
| Change in fair value of convertible debenture | 1,467 | ||||||||||
| Gain from accounts payable settlement | 10,577 | - | |||||||||
| Impairment - investment | (227,957 | ) | (150,000 | ) | |||||||
| Other income | 1,069 | - | |||||||||
| Share of income (losses) from investment in an associate | 4 | 882 | (14,263 | ) | |||||||
| Net loss | (1,613,130 | ) | (748,223 | ) | |||||||
| Other comprehensive Loss: | |||||||||||
Net loss for the year | (1,613,130 | ) | (748,223 | ) | |||||||
| Foreign currency translation adjustment | 5,753 | (15,028 | ) | ||||||||
| Total comprehensive loss | (1,607,377 | ) | (763,251 | ) | |||||||
| Net Loss per share, basic and diluted | (0.06 | ) | (0.03 | ) | |||||||
| Weighted Average Number of Common Shares Outstanding | 26,957,166 | 23,104,796 | |||||||||
| F-2 |
| Table of Contents |
IGEN NETWORKS CORP.
Consolidated Statements of Cash Flows
(Expressed in U.S. dollars)
| Year ended December 31, | |||||||||||
| Note | 2015 | 2014 | |||||||||
| Cash Flows from Operating Activities | |||||||||||
Net loss | (1,613,130 | ) | (748,223 | ) | |||||||
Items not affecting cash: | |||||||||||
Accretion | 6,824 | 63,995 | |||||||||
Accrued interest | 2,822 | - | |||||||||
Bad debt | 186,190 | - | |||||||||
Change in derivative liabilities | 28,267 | (98,992 | ) | ||||||||
Change in fair value, convertible debenture | (1,467 | ) | |||||||||
Depreciation | 18,407 | 17,418 | |||||||||
Impairment - investment in equity investee | 227,957 | 150,000 | |||||||||
Share of (income) losses from investment in an associate | (882 | ) | 14,263 | ||||||||
Share issued for services | 53,194 | ||||||||||
Stock-based compensation | 480,178 | 49,625 | |||||||||
Gain from Accounts Payable Settlement | (10,577 | ) | - | ||||||||
Other, including net changes in other non-cash balances: | |||||||||||
Accounts receivable | 99,062 | (13,973 | ) | ||||||||
Due from an equity investee | - | (20,578 | ) | ||||||||
GST receivable | 11,360 | (11,750 | ) | ||||||||
Inventory | (15,541 | ) | 7,210 | ||||||||
Prepaid and deposit | 3,714 | (1,562 | ) | ||||||||
Accounts payable, accrued liabilities, accrued interest, and deferred revenue | 194,508 | 169,595 | |||||||||
Net cash used in operating activities | (327,647 | ) | (424,439 | ) | |||||||
Cash Flows from Investing Activities | |||||||||||
Acquisition of equipment | (2,763 | ) | (2,381 | ) | |||||||
Acquisition of cash, business combination | 7 | 42,672 | |||||||||
Due from investee | (10,434 | ) | |||||||||
(13,197 | ) | 40,291 | |||||||||
Cash Flows from Financing Activities | |||||||||||
Note payable | 29,000 | ||||||||||
Proceeds from share subscription received | 25,000 | ||||||||||
Proceeds from issuance of units, private placement | 7 | 258,163 | 431,192 | ||||||||
312,163 | 431,192 | ||||||||||
Effect of exchange rate on cash | 5,924 | (2,381 | ) | ||||||||
Net increase (decrease) in cash | (22,757 | ) | 44,663 | ||||||||
Cash, beginning of year | 56,347 | 11,684 | |||||||||
Cash, end of year | 33,590 | 56,347 | |||||||||
|
| Years ended December 31, |
| |||||
|
| 2017 |
|
| 2016 |
| ||
|
|
|
|
|
|
| ||
Revenues: |
|
|
|
|
|
| ||
Sales, hardware and accessories |
| $ | 971,715 |
|
| $ | 906,235 |
|
Sales, services |
|
| 375,344 |
|
|
| 236,882 |
|
Total Revenues |
|
| 1,347,059 |
|
|
| 1,143,117 |
|
Cost of goods sold |
|
| 863,827 |
|
|
| 748,378 |
|
Gross Profit |
|
| 483,232 |
|
|
| 394,739 |
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
| 649,704 |
|
|
| 407,394 |
|
Payroll and related |
|
| 589,798 |
|
|
| 388,625 |
|
Management and consulting fees |
|
| 370,223 |
|
|
| 401,459 |
|
Total Expenses |
|
| 1,609,725 |
|
|
| 1,197,478 |
|
Loss Before Other Income (Expense) |
|
| (1,126,493 | ) |
|
| (802,739 | ) |
Other Income (Expense): |
|
|
|
|
|
|
|
|
Accretion of discounts on convertible debentures |
|
| (125,231 | ) |
|
| (34,064 | ) |
Change in fair value of derivative liabilities |
|
| 27,482 |
|
|
| 10,317 |
|
Gain (loss) on settlement of debt |
|
| 39,210 |
|
|
| (1,500 | ) |
Interest expense |
|
| (32,628 | ) |
|
| (8,772 | ) |
Total Other Income (Expense), net |
|
| (91,167 | ) |
|
| (34,019 | ) |
Net Loss before Provision for Income Taxes |
|
| (1,217,660 | ) |
|
| (836,758 | ) |
Provision for Income Taxes |
|
| (80,000 | ) |
|
| - |
|
Net Loss |
|
| (1,297,660 | ) |
|
| (836,758 | ) |
Other Comprehensive Income (Loss): |
|
|
|
|
|
|
|
|
Foreign currency translation loss |
|
| (28,561 | ) |
|
| (20,478 | ) |
Comprehensive Loss |
| $ | (1,326,221 | ) |
| $ | (857,236 | ) |
Basic and Diluted Loss per Common Share |
| $ | (0.04 | ) |
| $ | (0.03 | ) |
Weighted Average Number of Common Shares Outstanding |
|
| 35,454,849 |
|
|
| 31,120,930 |
|
(The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
| Table of Contents |
IGEN NETWORKS CORP.
Consolidated StatementStatements of Stockholders' Equity (Deficit)
(Expressed in U.S. dollars)
| Accumulated | |||||||||||||||||||||||||||||||
| Additional | Other | Total | |||||||||||||||||||||||||||||
| Common Stock | Paid-in | Subscription | Comprehensive | Stockholders’ | |||||||||||||||||||||||||||
| Note | Shares | Amount | Capital | received | Loss | Deficit | Equity | ||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
| Balance, December 31, 2013 | 18,771,669 | 18,771 | 5,537,261 | - | (2,596 | ) | (5,314,199 | ) | 239,237 | ||||||||||||||||||||||
| Units issued for cash at $0.08/unit | 7 | 843,750 | 844 | 66,656 | - | - | - | 67,500 | |||||||||||||||||||||||
| Shares issued for cash at $0.08/share | 7 | 625,000 | 625 | 49,375 | - | - | - | 50,000 | |||||||||||||||||||||||
| Shares issued for cash at $0.15/share | 7 | 333,333 | 333 | 49,667 | - | - | - | 50,000 | |||||||||||||||||||||||
| Units issued for cash at $0.13/unit | 7 | 384,616 | 385 | 49,615 | - | - | - | 50,000 | |||||||||||||||||||||||
| Shares issued for acquisition of Nimbo | 2 | 2,500,000 | 2,500 | 472,500 | - | - | - | 475,000 | |||||||||||||||||||||||
| Shares issued for services | 7 | 529,722 | 530 | 102,420 | - | - | - | 102,950 | |||||||||||||||||||||||
| Shares issued for cash at $0.168/share | 7 | 297,619 | 297 | 49,703 | - | - | - | 50,000 | |||||||||||||||||||||||
| Units issued for cash at $0.17/unit | 7 | 147,059 | 147 | 24,853 | - | - | - | 25,000 | |||||||||||||||||||||||
| Share issued for cash at $0.18/share | 7 | 770,510 | 771 | 137,921 | - | - | - | 138,692 | |||||||||||||||||||||||
| Shares issuance, convertible debenture conversion | 7 | 611,995 | 612 | 91,921 | - | - | - | 92,533 | |||||||||||||||||||||||
| Stock based compensation | 7 | - | - | 49,625 | - | - | - | 49,625 | |||||||||||||||||||||||
| Issuance of promissory note on discount | 9 | - | - | 16,163 | - | - | - | 16,163 | |||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | (15,028 | ) | - | (15,028 | ) | ||||||||||||||||||||||
| Net loss for the year | - | - | - | - | - | (748,223 | ) | (748,223 | ) | ||||||||||||||||||||||
| Balance, December 31, 2014 | 25,815,273 | 25,815 | 6,697,680 | - | (17,624 | ) | (6,062,422 | ) | 643,449 | ||||||||||||||||||||||
| Subscription received | 7 | - | - | - | 25,000 | - | - | 25,000 | |||||||||||||||||||||||
| Stock based compensation | 7 | - | - | 474,463 | - | - | - | 474,463 | |||||||||||||||||||||||
| Share issuance for cash | 7 | 1,590,957 | 1,591 | 256,572 | - | - | - | 258,163 | |||||||||||||||||||||||
| Shares issuance for services and prepayment | 7 | 498,801 | 499 | 107,445 | - | - | - | 107,944 | |||||||||||||||||||||||
| Share issuance for debt settlement | 7 | 310,318 | 310 | 50,354 | - | - | - | 50,664 | |||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | 5,753 | - | 5,753 | ||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | - | (1,613,130 | ) | (1,613,130 | ) | ||||||||||||||||||||||
| Balance, December 31, 2015 | 28,215,349 | 28,215 | 7,586,514 | 25,000 | (11,871 | ) | (7,675,552 | ) | (47,694 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
| Total |
| ||||||||||||||
|
|
|
|
|
| Share |
|
| Additional |
|
|
|
| Other |
|
|
|
| Stockholders’ |
| ||||||||||||
|
| Common Stock |
|
| Subscriptions |
|
| Paid-in |
|
| Deferred |
|
| Comprehensive |
|
|
|
| Equity |
| ||||||||||||
|
| Shares |
|
| Amount |
|
| Received |
|
| Capital |
|
| Compensation |
|
| Loss |
|
| Deficit |
|
| (Deficit) |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| (Restated) |
|
| (Restated) |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance, December 31, 2015 |
|
| 28,215,349 |
|
| $ | 28,215 |
|
| $ | 25,000 |
|
| $ | 7,586,514 |
|
| $ | (54,570 | ) |
| $ | (11,871 | ) |
| $ | (7,675,552 | ) |
| $ | (102,264 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 52,702 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 52,702 |
|
Shares issued for cash |
|
| 3,076,510 |
|
|
| 3,077 |
|
|
| - |
|
|
| 322,665 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 325,742 |
|
Shares issued for services |
|
| 479,290 |
|
|
| 479 |
|
|
| - |
|
|
| 60,001 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 60,480 |
|
Shares issued for exercise of options |
|
| 55,556 |
|
|
| 56 |
|
|
| - |
|
|
| 4,944 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 5,000 |
|
Share issued for debt settlement |
|
| 50,000 |
|
|
| 50 |
|
|
| - |
|
|
| 7,450 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 7,500 |
|
Shares issued for debenture conversion |
|
| 512,880 |
|
|
| 513 |
|
|
| - |
|
|
| 78,552 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 79,065 |
|
Shares issuance cost |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (3,542 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (3,542 | ) |
Deferred compensation charged to operations |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 34,978 |
|
|
| - |
|
|
| - |
|
|
| 34,978 |
|
Foreign currency translation loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (20,478 | ) |
|
| - |
|
|
| (20,478 | ) |
Adjustment to accumulated deficit (see Note 18) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (413,318 | ) |
|
| (413,318 | ) |
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (836,758 | ) |
|
| (836,758 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2016, as restated |
|
| 32,389,585 |
|
|
| 32,390 |
|
|
| 25,000 |
|
|
| 8,109,286 |
|
|
| (19,592 | ) |
|
| (32,349 | ) |
|
| (8,925,628 | ) |
|
| (810,893 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 167,772 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 167,772 |
|
Shares issued for cash and share subscriptions |
|
| 5,672,852 |
|
|
| 5,673 |
|
|
| (25,000 | ) |
|
| 469,327 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 450,000 |
|
Shares issued for services |
|
| 527,080 |
|
|
| 527 |
|
|
| - |
|
|
| 46,231 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 46,758 |
|
Shares issued for debenture conversion |
|
| 625,000 |
|
|
| 625 |
|
|
| - |
|
|
| 61,875 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 62,500 |
|
Deferred compensation charged to operations |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 19,592 |
|
|
| - |
|
|
| - |
|
|
| 19,592 |
|
Foreign currency translation loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (28,561 | ) |
|
| - |
|
|
| (28,561 | ) |
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (1,297,660 | ) |
|
| (1,297,660 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2017 |
|
| 39,214,517 |
|
|
| 39,215 |
|
|
| - |
|
|
| 8,854,491 |
|
|
| - |
|
|
| (60,910 | ) |
|
| (10,223,288 | ) |
|
| (1,390,492 | ) |
(The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
| Table of Contents |
IGEN NETWORKS CORP.
Consolidated Statements of Cash Flows
(Expressed in U.S. dollars)
|
| Years ended December 31, |
| |||||
|
| 2017 |
|
| 2016 |
| ||
Cash Flows from Operating Activities |
|
|
|
|
|
| ||
Net loss |
| $ | (1,297,660 | ) |
| $ | (836,758 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Accretion of discounts on convertible debentures |
|
| 125,231 |
|
|
| 34,064 |
|
Bad debts |
|
| 1,996 |
|
|
| 2,123 |
|
Change in fair value of derivative liabilities |
|
| (27,482 | ) |
|
| (10,317 | ) |
Depreciation |
|
| 4,360 |
|
|
| 10,279 |
|
Loss (gain) on settlement of debt |
|
| (39,210 | ) |
|
| 1,500 |
|
Shares issued for services |
|
| 66,350 |
|
|
| 95,458 |
|
Stock-based compensation |
|
| 167,772 |
|
|
| 52,702 |
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts and other receivables |
|
| 106,312 |
|
|
| (113,709 | ) |
Inventory |
|
| 15,004 |
|
|
| 12,417 |
|
Prepaid expenses and deposits |
|
| (3,402 | ) |
|
| (11,913 | ) |
Restricted cash |
|
| (10,000 | ) |
|
| (15,000 | ) |
Accounts payable and accrued liabilities |
|
| 116,032 |
|
|
| 217,448 |
|
Deferred revenue |
|
| 90,871 |
|
|
| 256,353 |
|
Net Cash Used in Operating Activities |
|
| (683,826 | ) |
|
| (305,353 | ) |
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
Proceeds from notes payable |
|
| 13,000 |
|
|
| - |
|
Repayment of notes payable |
|
| (80,678 | ) |
|
| (45,369 | ) |
Proceeds from convertible debentures |
|
| 316,250 |
|
|
| 54,087 |
|
Proceeds from issuance of common stock |
|
| 450,000 |
|
|
| 325,742 |
|
Share issuance costs |
|
| - |
|
|
| (3,542 | ) |
Net Cash Provided by Financing Activities |
|
| 698,572 |
|
|
| 330,918 |
|
|
|
|
|
|
|
|
|
|
Effect of Foreign Exchange Rate Changes on Cash |
|
| (26,131 | ) |
|
| (19,132 | ) |
|
|
|
|
|
|
|
|
|
Change in Cash |
|
| (11,385 | ) |
|
| 6,433 |
|
Cash, Beginning of Year |
|
| 40,023 |
|
|
| 33,590 |
|
Cash, End of Year |
| $ | 28,638 |
|
| $ | 40,023 |
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures: |
|
|
|
|
|
|
|
|
Interest paid |
| $ | - |
|
| $ | - |
|
Income taxes paid |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Non-cash Investing and Financing Activities: |
|
|
|
|
|
|
|
|
Conversion option derivative liabilities recorded as debt discounts |
| $ | 278,425 |
|
| $ | - |
|
Shares issued for subscription receivable |
| $ | 25,000 |
|
| $ | - |
|
Shares issued for debt settlement |
| $ | - |
|
| $ | 7,500 |
|
Shares issued for debenture conversion |
| $ | 62,500 |
|
| $ | 79,065 |
|
Shares issued for options exercise included in accounts payable |
| $ | - |
|
| $ | 5,000 |
|
(The accompanying notes are an integral part of these consolidated financial statements)
| F-5 |
| Table of Contents |
IGEN NETWORKS CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2015
(Expressed in U.S. dollars)
1.
IGEN Networks Corp, (“IGEN”, or the “Company”) was incorporated in the State of Nevada on November 14, 2006. IGEN has three lines of businesses: (i) investing in and managing for growth private high-tech companies that offer products and services in the domains of wireless broadband;broadband and machine-to-machine communications and applications; (ii) negotiating distribution agreements with relevant organizations and selling their products and services through the distribution channels of IGEN; and commencing May 5, 2014, the Company was also in the business of(iii) providing vehiclelot inventory management, asset tracking, and stolen vehicle recovery solutions to the automotive dealership industry and power sport industries after the acquisition ofits customers through its wholly-owned subsidiary, Nimbo, LLC (Note 2)(“Nimbo”).
Going Concern
The consolidated financial statements as of and for the year ended December 31, 2017 have been prepared on a going concern basis, which implyassuming that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The continuation of the Company as a going concernconcern. The Company has experienced recurring losses from operations, has negative operating cash flows during the years ended December 31, 2017 and 2016, has a working capital deficit of $1,715,277 and an accumulated deficit of $10,223,288 as of December 31, 2017, and is dependent upon the continued financial support from its shareholders, on the ability of the company to grow its revenue base, on its ability to successfully grow the companies in which it is invested, and on the ability of the Companyraise capital from stockholders or other sources to obtain necessary equity financing to both support the latter objectives and to invest in and grow new companies. The Company has recurring losses since inception and had accumulated losses of $7,675,552 as at December 31, 2015.sustain operations. These factors raise substantial doubt regardingabout the Company’s ability to continue as a going concern. Although there are no assurances that management’s plans will be realized, management believes thatUltimately, the Company will be ableplans to continueachieve profitable operations intothrough the future. Theseincrease in revenue base and successfully grow its operations organically or through acquisitions. The consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary shouldresult from the Company be unable to continue as a going concern.
| Assets acquired | ||||
| Cash | $ | 42,672 | ||
| Accounts receivable (net of $9,258 provision for uncollectable) | 117,727 | |||
| Inventory | 21,312 | |||
| Prepaid | 4,170 | |||
| Equipment | 45,035 | |||
| Goodwill | 505,508 | |||
| Total | 736,424 | |||
| Less liabilities assumed: | ||||
| Accounts payable, accrued liabilities, and deferred revenue | 261,424 | |||
| Fair value of assets acquired, net of liabilities assumed | $ | 475,000 | ||
2.
| Revenue | Net loss | |||||||
$ | $ | |||||||
| The actual result of Nimbo for the year ended: | ||||||||
May 5 to December 31, 2014 | 681,351 | (116,161 | ) | |||||
| December 31, 2015 | 1,035,820 | (312,077 | ) | |||||
Basic of Presentation and Consolidation
These consolidated financial statements and related notes include the records of IGEN Networks Corp., its wholly owned subsidiary,the Company and the Company’s wholly-owned subsidiaries, Nimbo, which is formed in the USA, and IGEN Business Solutions, Inc (incorporatedInc. (“IBS”), which was incorporated in Canada) and Nimbo, LLC (incorporated in USA)Canada (see below).
All intercompany transactions and balances have been eliminated. These condensed consolidated interim financial statements are presented in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), are expressed in USU.S. dollars, and, in management’s opinion, have been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies summarized as in the following:
Use of Estimates
The preparation of these consolidated financial statements in conformity with U.S. generally accepted accounting principlesGAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to donated expenses,allowance for doubtful accounts, valuation of inventory, the useful life and recoverability of equipment, impairment of goodwill, valuation of notes payable and convertible debentures, fair value of derivative liabilities, fair value of stock-based compensation, and deferred income tax asset valuations.valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with an original maturity of three months or less at the weighted average numbertime of shares outstanding (denominator) during the period. Diluted earnings per share give effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, and convertible preferred stock, using the if-converted method. In computing diluted earnings (loss) per share, the average stock price for the period is used in determining the number of shares assumedacquisition to be purchased fromcash equivalents.
Accounts Receivable
Accounts receivable are recognized and carried at the exerciseoriginal invoice amount less an allowance for expected uncollectible amounts. Inherent in the assessment of stock optionsthe allowance for doubtful accounts are certain judgments and estimates including, among others, the customer’s willingness or warrants. Diluted earnings (loss) per share exclude all dilutive potential shares if their effect is anti-dilutive.
| F-6 |
| Table of Contents |
Inventory
Inventory consists of vehicle tracking and recovery devices and is anti-dilutive, diluted loss per sharecomprised entirely of finished goods that can be resold. Inventory is stated at the lower of cost or net realizable value. Cost is determined on a first-in, first-out (FIFO) basis. Net realizable value is the same as basic loss per shareestimated selling price in the ordinary course of business, less estimated costs of completion and selling costs. There was no provision for inventory recorded during the periods presented.
Equipment
Office equipment, computer equipment, and computersoftware are recorded at cost. Amortization is provided annually at rates and methods over their estimated useful lives as follows, except in the year of acquisition when one half of the rate is used.lives. Management reviews the estimates of useful lives of the assets every year and adjustadjusts them on prospective basis, if needed.
Computer equipment | 55% declining balance |
Office equipment | 20% declining balance |
Software | |
3 years |
Goodwill
Goodwill represents the excess of the acquisition price over the fair value of identifiable net assets acquired. Goodwill is allocated at the date of the business combination. Goodwill is not amortized, but is tested for impairment annually, during the fourth quarter, or more frequently if events or changes in circumstances indicate the asset may be impaired. These events and equipmentcircumstances may include a significant change in legal factors or in the business climate, a significant decline in the Company’s share price, an adverse action of assessment by a regulator, unanticipated competition, a loss of key personnel, significant disposal activity and the testing of recoverability for a significant asset group.
The impairment testing is carried out in two steps. In the first step, the carrying amount of the reporting unit including goodwill is compared with its fair value. When the carrying amount of a reporting unit exceeds its fair value, goodwill of the reporting unit is considered to be impaired and the second step is necessary.
If the total of the expected undiscounted future cash flows is less than the carrying amount of the goodwill, a loss is recognized for the excess of the carrying amount over the fair value of the goodwill. Establishing an implied fair value of goodwill requires the Company to make estimates for key inputs into complex valuation models and to apply significant judgment in the selection of estimates, assumptions and methodologies required to complete the analysis. Areas of judgment include, but are reviewednot limited to, development of multi-year business cash flow forecasts, the selection of discount rates, and the identification and valuation of unrecorded assets.
Impairment of Long-lived Assets
The Company reviews long-lived assets, such as equipment, for impairment whenever events or changes in the circumstances indicate that the carrying value may not be recoverable. If the total of the estimated undiscounted future cash flows is less than the carrying value of the asset, an impairment loss is recognized for the excess of the carrying value over the fair value of the asset during the year the impairment occurs. Subsequent expenditure relating to an item of office equipment is capitalized when it is probable that future economic benefits from the use of the assets will be increased.
Financial Instruments
In accordance with Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures,” the Company is to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
| F-7 |
| Table of Contents |
Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The fair values of cash, accounts and other receivables, restricted cash, and accounts payable and accrued liabilities, approximate their carrying values due to the immediate or short-term maturity of these financial instruments. Foreign currency transactions are primarily undertaken in Canadian dollars. The fair value of cash is determined based on “Level 1” inputs and the fair value of derivative liabilities is determined based on “Level 3” inputs. The recorded values of notes payable, approximate their current fair values because of their nature and respective maturity dates or durations. The financial risk is the risk to the Company’s operations that arise from fluctuations in foreign exchange rates and the degree of volatility to these rates. Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk. Financial instruments that potentially subject the Company to concentrations of credit risk consists of cash. The Company recognizesplaces its cash in what it believes to be credit-worthy financial institutions.
Revenue Recognition and Deferred Revenue
The Company derives revenue when earned, specificallyfrom the sale of devices and services provided in relation to vehicle tracking and recovery. In accordance with ASC 605, “Revenue Recognition”, revenue is recognized when all the following conditions are met:
| · | There is clear evidence that an arrangement exists; | |
| · | Services are provided or products are delivered to customers; | |
| · | Amounts are fixed or can be determined; | |
| · | The ability to collect is reasonably assured; | |
| · | There is no significant obligation for future performance; and | |
| · | The amount of future returns can be reasonably estimated. |
Management assesses the business environment, customers’ financial condition, historical collection experience, accounts receivable aging, and customer disputes to determine whether collectability is reasonably assured. If collectability is not considered reasonably assured at the time of sale, the Company does not recognize revenue until collection occurs.
The Company has determined that the sale of our vehicle tracking device and related service is considered one unit of accounting and the revenue related to the sale is deferred and recognized over the service term, typically one year.
Revenue relating to the sale of service renewal fees on its vehicle tracking and recovery services is recognized over the life of the contract. The service renewal fees are offered in terms ranging from 12 to 36 months and are generally payable in full upon renewal.
Any revenue that has been deferred and is expected to be recognized beyond one year is classified as long-term deferred revenue.
Financing Costs and Debt Discount
Financing costs and debt discounts are recorded net of notes payable and convertible debentures in the consolidated balances sheet. Amortization of financing costs and the debt discounts is calculated using the effective interest method over the term of the debt and is recorded as interest expense in the consolidated statement of operations.
Income Taxes
Deferred income taxes are provided on the asset and liability method whereby deferred income tax assets are recognized for deductible temporary differences and operating loss and tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred income tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or productsall of the deferred income tax assets will not be realized. Deferred income tax assets and liabilities are delivered to customers.
| Table of Contents |
Foreign Currency Translation
The Company’s reporting currency is the U.S. dollar. The consolidated financial statements of the Company are translated to U.S. dollars in accordance with ASC 830, Foreign“Foreign Currency Translation Matters,Matters”. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets, liabilities and items recorded in income arising from transactions denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.
Assets and liabilities of the Company’s Canadian subsidiary are translated into U.S. dollars at the year-end exchange rates, and revenue and expenses are translated at the average exchange rates during the period. Exchange differences arising on translation are disclosed as a separate component of stockholders’ equity.
Our accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the guidance of ASC 718, “Compensation – Stock Compensation”, using the fair value method.. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.
Loss Per Share
Basic earnings (loss) per share are computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted earnings per share give effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, and projected employeeconvertible debentures, using the if-converted method. In computing diluted earnings (loss) per share, the average stock optionprice for the period is used in determining the number of shares assumed to be purchased from the exercise behaviors. The valueof stock options or warrants. Diluted earnings (loss) per share exclude all potentially issuable shares if their effect is anti-dilutive. Because the effect of conversion of the portionCompany’s dilutive securities is anti-dilutive, diluted loss per share is the same as basic loss per share for the periods presented. As of December 31, 2017 and 2016, the award that is ultimately expected to vest is recognized as an expenseCompany has 13,021,952 and 8,055,294 potentially dilutive shares outstanding, respectively.
Comprehensive Income (Loss)
ASC 220, “Comprehensive Income” establishes standards for the reporting and display of comprehensive income and its components in the consolidated statement of operations overfinancial statements. For the requisite service period.
Reclassifications
Certain reclassifications have been made to the prior year’s consolidated financial statements to conform to the current year’s presentation.
Recent Accounting Pronouncements
In May 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-09, "Revenue from Contracts with Customers". This new standard will replace most of the existing revenue recognition guidance in U.S. GAAP when it becomes effective and December 31, 2015
| F-9 |
| Table of Contents |
In February 2016, the FASB issued new lease accounting policies since it most recentguidance in ASU No. 2016-02, “Leases”. This new guidance was initiated as a joint project with the International Accounting Standards Board to simplify lease accounting and improve the quality of and comparability of financial information for users. This new guidance would eliminate the concept of off-balance sheet treatment for “operating leases” for lessees for the vast majority of lease contracts. Under ASU No. 2016-02, at inception, a lessee must classify all leases with a term of over one year endedas either finance or operating, with both classifications resulting in the recognition of a defined “right-of-use” asset and a lease liability on the balance sheet. However, recognition in the income statement will differ depending on the lease classification, with finance leases recognizing the amortization of the right-of-use asset separate from the interest on the lease liability and operating leases recognizing a single total lease expense. Lessor accounting under ASU No. 2016-02 would be substantially unchanged from the previous lease requirements under GAAP. ASU No. 2016-02 will take effect for public companies in fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted and for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, lessees and lessors must apply a modified retrospective transition approach. The Company is currently evaluating the new guidance and have not determined the impact this standard may have on the consolidated financial statements.
In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows: Classification of Restricted Cash”, which updates the guidance as to how restricted cash should be presented and classified. The updates are intended to reduce diversity in practice. The amendments are effective for fiscal years beginning after December 15, 2017, including interim periods within those annual periods, with early adoption permitted. The Company expects the implementation of this standard to have an impact on the Company’s consolidated financial statements and related disclosures as the Company had restricted cash on our consolidated balance sheet of $25,000 as of December 31, 2014. 2017, and currently do not present the amount as a cash equivalent in our consolidated statements of cash flows.
In January 2017, the FASB issued ASU No. 2017-04, “Intangibles – Goodwill and Other”. ASU 2017-04 simplifies the subsequent measurement of goodwill by removing the second step of the two-step impairment test. The amendment requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value but the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The amendment should be applied on a prospective basis and is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company does not expect ASU 2017-04 to have a material effect on the Company’s consolidated financial position, results of operations and cash flows.
The Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its consolidated financial position or results of operations.
| F-10 |
| Table of Contents |
6.Accounts Payable and Investment
|
| December 31, 2017 |
|
| December 31, 2016 |
| ||
Trade accounts payable |
|
| 623,375 |
|
| $ | 652,537 |
|
Accrued liabilities |
|
| 49,696 |
|
|
| 39,035 |
|
Accrued interest payable |
|
| 17,057 |
|
|
| 12,862 |
|
Payroll and commissions payable |
|
| 84,299 |
|
|
| 32,063 |
|
Unrecognized tax position |
|
| 80,000 |
|
|
| - |
|
Taxes payable |
|
| 4,481 |
|
|
| 6,379 |
|
|
|
| 858,908 |
|
| $ | 742,876 |
|
7.Notes Payable
| (a) | On September 30, 2014, the Company issued a note payable with principal of $95,000 in exchange for settlement of accounts payable of the same amount. The note payable was unsecured, bore interest at 5% per annum, and was due on demand. The note payable was accounted for at amortized cost using the effective interest rate method with the effective interest rate of 14% per annum. The Company recorded a debt discount of $16,163 to the note payable, which was amortized in full as of December 31, 2016, and a corresponding amount to additional paid-in capital at issuance. During the year ended December 31, 2016, the Company amortized $7,762 of the debt discount to interest expense. During the year ended December 31, 2016, the Company repaid $30,000 of the principal. During the year ended December 31, 2017, the Company repaid the remaining balance of $65,000 of the principal and $7,000 of accrued interest. As of December 31, 2017 and 2016, the carrying value of the note payable was $0 and $65,000, respectively, and the Company had an outstanding accrued interest balance of $0 and $10,711, respectively, which has been included in accounts payable and accrued liabilities. |
| (b) | As of December 31, 2017 and 2016, the Company had a note payable with a principal balance of $11,952 (Cdn$15,000) and $14,998 (Cdn$20,000), respectively, owed to a director, which is unsecured, bears interest at 5% per annum, and was due on October 30, 2017, and is now due on demand. As of December 31, 2017 and 2016, the Company had an outstanding accrued interest balance of $2,386 (Cdn$2,960) and $2,151 (Cdn$2,373), respectively, which has been included in accounts payable and accrued liabilities. |
| (c) | On March 23, 2017, the Company entered into a loan agreement with a third party for a principal amount of $8,695, which includes a one-time loan fee of $695, which was charged to interest expense. The note payable is unsecured, non-interest bearing, and requires minimum payments of 10% of the loan every ninety days from the start date of March 26, 2017. 25% of all funds processed through the Company’s PayPal account will be used to pay off the loan until the loan is repaid in full. As of December 31, 2017 and 2016, the balance of the note payable was $2,626 and $0, respectively. |
8.Convertible Debentures
| (a) | On June 1, 2016, the Company issued two convertible debentures in the principal amounts of $37,577 (Cdn$50,000) and $15,031 (Cdn$20,000), respectively. Under the terms of the debentures, the amounts were unsecured, bore interest at 15% per annum, payable monthly or at term, and were due on the four month anniversary of the closing dates of June 8, 2016 (i.e. October 8, 2016). Subject to the approval of the holder of the convertible debentures, the Company may convert any or all of the principal and/or interest at any time following the four month anniversary of the issuance date of the convertible debentures into common shares of the Company at a price per share equal to a 20% discount to the fair market value of the Company’s common stock. |
The Company analyzed the conversion option under ASC 815, “Accounting for Derivative Instruments and Hedging Activities” (“ASC 815”), and determined that the conversion feature should be classified as a liability and recorded at fair value due to there being no explicit limit to the number of shares to be delivered upon settlement of the conversion option. In accordance with ASC 815, the Company recognized the estimated fair value of the embedded conversion feature of $26,306. On October 8, 2016, the note became convertible resulting in the Company recording a derivative liability of $26,306 with a corresponding adjustment to loss on change in fair value of derivative liabilities. On October 13, 2016, the Company issued 512,880 shares of common stock for the full conversion of $54,087 (Cdn$70,000) of these debentures and $2,941 (Cdn$3,855) of accrued interest (see Note 11). During the year ended December 31, 2016, the Company amortized $26,306 of the debt discount to accretion of discount on convertible debentures expense. |
| (b) | On March 30, 2017, the Company issued a convertible debenture to a third party in the principal amount of $50,000 which is unsecured, bears interest at 12% per annum, calculated monthly, and was due on September 30, 2017, and is now due on demand. Subject to the approval of the holder of the convertible debenture, the Company may convert any or all of the principal and/or interest at any time following the six month anniversary of the issuance date of the convertible debenture (September 30, 2017) into common shares of the Company at a price per share equal to a 20% discount to the fair market value of the Company’s common stock. The estimated fair value of the derivative liability resulted in a discount to the convertible debenture of $32,127, which was accreted over the term of the convertible debenture. During the years ended December 31, 2017 and 2016, $32,127 and $0, respectively, of amortization expense was recorded. As of December 31, 2017 and 2016, the carrying value of the convertible debenture is $50,000 and $0, respectively. |
| F-11 |
| Table of Contents |
| (c) | On May 1, 2017, the Company issued two convertible debentures for aggregate proceeds of $50,000 which were unsecured, bore interest at 12% per annum, calculated monthly, and were due on May 1, 2019. Subject to the approval of the holder of the convertible debenture, the Company may convert any or all of the principal and/or interest at any time following the six month anniversary of the issuance date of the convertible debenture (November 1, 2017) into common shares of the Company at a price per share equal to a 20% discount to the fair market value of the Company’s common stock. The estimated fair value of the derivative liabilities resulted in a discount to the convertible debentures of $45,400, which was accreted over the term of the convertible debenture. On November 1, 2017, the Company issued 625,000 shares of common stock for the full conversion of these debentures. The discount was amortized in full as a result of the conversion. During the years ended December 31, 2017 and 2016, $45,400 and $0, respectively, of accretion expense was recorded. |
| (d) | On August 7, 2017, the Company issued a convertible debenture to a third party in the principal amount of $161,250 with an original issuance discount of $11,250 and incurred $3,500 of financing costs to a third party, which is unsecured, bears interest at 5% per annum, and is due on August 7, 2018. The holder may convert any or all of the principal and/or interest at any time following the six month anniversary of the issuance date of the convertible debenture (February 7, 2018) into common shares of the Company at a price per share equal to 75% multiplied by the closing price of the Company’s common stock preceding the trading day that the Company receives a notice of conversion. The estimated fair value of the derivative liabilities of $153,827 resulted in a discount to the convertible debenture, which will be amortized over the term of the convertible debenture. During the years ended December 31, 2017 and 2016, $47,632 and $0, respectively, of amortization expense was recorded. As of December 31, 2017 and 2016, the carrying value of the convertible debenture is $55,055 and $0, respectively. |
| (e) | On December 18, 2017, the Company issued a convertible debenture to a third party in the principal amount of $55,000 with an original issuance discount of $5,000 and incurred $1,500 of financing costs to a third party, which is unsecured, bears interest at 2% per annum, and is due on June 18, 2018. The holder may convert any or all of the principal and/or interest at any time following the six month anniversary of the issuance date of the convertible debenture (June 18, 2018) into common shares of the Company at a price per share equal to 75% multiplied by the closing price of the Company’s common stock preceding the trading day that the Company receives a notice of conversion. The estimated fair value of the derivative liabilities of $47,071 resulted in a discount to the convertible debenture, which will be amortized over the term of the convertible debenture. During the year ended December 31, 2017 and 2016, $72 and $0, respectively, of amortization expense was recorded. As of December 31, 2017 and 2016, the carrying value of the convertible debenture is $8,001 and $0, respectively. |
9.Derivative Liabilities
During the year ended December 31, 2014, this investment was fully written off2016, the Company issued share purchase warrants as management determinedpart of private placements with exercise prices denominated in Canadian dollars, which differs from the investmentCompany’s functional currency of U.S. dollars (Note 12) and cannot be recoveredconsidered to be indexed to the Company’s own stock. The Company records the fair value of its share purchase warrants with a Cdn$ exercise price in accordance with ASC 815. The fair value of the derivative liabilities is revalued on each balance sheet date with corresponding gains and losses recorded in the consolidated statements of operations. As of December 31, 2017 and 2016, the Company recorded an impairment losshad a derivative liability of $150,000$7,642 and $27,930, respectively, relating to the share purchase warrants. The Company uses a multi-nominal lattice model to fair value the derivative liabilities. The following inputs and assumptions were used to value the share purchase warrants denominated in Canadian dollars during the yearyears ended December 31, 2014.
| 2017 |
| 2016 |
| ||||
Expected volatility |
| 195% - 196 | % |
| 148% - 233 | % | ||
Risk free interest rate |
| 1.06% - 1.39 | % |
| 0.44% - 0.85 | % | ||
Expected life (in years) |
| 0.25 – 0.50 |
| 0.40 - 1.20 | ||||
During the years ended December 31, 2017 and 2016, the Company incurred $50,000 and $50,000 (totaling $100,000) to acquire 200,000 and 200,000 (totaling 400,000) common shares of Gogiro Internet Group (“Gogiro”), a private Canadianissued convertible debentures with variable exercise prices based on market rates (see Note 8). The Company on November 23, 2011 and October 17, 2012 respectively.
Number of Gogiro shares owned | Amount ($) | |||||||
| Balance, December 31, 2013 | 2,478,080 | 241,338 | ||||||
| Share of Gogiro’s loss during fiscal 2014 December 31, 2014 (30.44%) | - | (14,263 | ) | |||||
| Balance, December 31, 2014 | 2,478,080 | 227,075 | ||||||
| Share of Gogiro’s income during nine months ended December 31, 2015 (30.37%) | - | 882 | ||||||
| Impairment on investment | (227,957 | ) | ||||||
| 2,478,080 | - | |||||||
| 2017 |
| 2016 |
| ||||
Expected volatility |
| 187% - 225 | % |
| 175 - 233 | % | ||
Risk free interest rate |
| 1.22% - 1.62 | % |
| 0.26 | % | ||
Expected life (in years) |
| 0.16 – 1.50 |
| 0.10 | ||||
| F-12 |
| Table of Contents |
The following table summarizes Gogiro's revenue, expensesprovides a reconciliation of the beginning and net loss on an aggregate basis without adjustingending balances for IGEN's proportionate interest:
2015 $ | 2014 $ | |||||||
| Revenue | 141,517 | 203,259 | ||||||
| Expense | (138,612 | ) | (197,296 | ) | ||||
| Net income (loss) | 2,905 | 5,963 | ||||||
| Net Book Value | ||||||||||||||||||||
| Cost | Accumulated Amortization | Effect of foreign change | 2015/12/31/ | 2014/12/31 | ||||||||||||||||
| Office equipment | $ | 1,603 | $ | 965 | $ | - | $ | 638 | $ | 799 | ||||||||||
| Computer | 51,375 | 36577 | (172 | ) | 14,626 | 28,276 | ||||||||||||||
| Software | 6,012 | 3633 | 2,379 | 4,383 | ||||||||||||||||
| TOTAL | $ | 58,999 | $ | 41,175 | $ | (172 | ) | $ | 17,643 | $ | 33,458 | |||||||||
|
| 2017 |
|
| 2016 |
| ||
Balance at January 1, |
| $ | 27,930 |
|
| $ | 33,982 |
|
Issuance of embedded conversion derivative liabilities |
|
| 278,425 |
|
|
| 26,306 |
|
Extinguishment due to conversion of convertible debentures |
|
| (51,710 | ) |
|
| (22,041 | ) |
Change in fair value |
|
| (27,482 | ) |
|
| (10,317 | ) |
Total |
| $ | 227,163 |
|
| $ | 27,930 |
|
10.Related Party Transactions
| (a) | During the years ended December 31, 2017 and 2016, the Company incurred $227,080 and $250,200, respectively, in management and consulting fees to two officers and a Company controlled by a director. |
| (b) | As of December 31, 2017 and 2016, the Company owed $133,535 and $132,053, respectively, to directors and officers and a company controlled by a director, which is included in accounts payable and accrued liabilities. The amounts owed are unsecured, non-interest bearing, and due on demand. |
11.Stockholders’ Deficit
Preferred Stock
On January 17, 2018, a new class of preferred stock consisting of 10,000,000 shares, with rights and privileges to be determined by the year ended December 31, 2015,Board of Directors at a later date, was approved by the Company incurred $184,797 in management and consulting fees to two officers and a Company controlled by a director (2014 - $119,592).
Common Stock
2017
| On |
| (b) | |
| (c) | On April 20, 2017, the Company issued 49,020 shares of common stock with a fair value of $5,392 based on the closing price of the Company’s common stock for consulting services rendered. |
| (d) | On June 23, 2017, the Company issued 147,059 units at $0.17 per unit for |
| (e) | On July 1, 2017, the Company issued 49,020 shares of common stock with a fair value of $4,902 based on the closing |
| (f) | On August 29, 2017, the Company issued 1,875,000 shares of common stock at $0.08 per share for | |
| (g) | On September 7, 2017, the Company issued 49,020 shares of common stock with a fair value of $3,922 based on the closing price of the Company’s common stock for consulting services rendered. | |
| (h) | On October 1, 2017, the Company issued 75,000 shares of common stock with a fair value of $6,000 based on the closing price of the Company’s common stock for consulting services rendered. | |
| (i) | On October 5, 2017, the Company issued 50,000 shares of common stock with a fair value of $4,000 based on the closing price of the Company’s common stock for consulting services rendered. |
| (j) | On October 17, 2017, the Company issued 150,000 shares of common stock to an employee with a fair value of $12,000 based on the closing price of the Company’s common stock for a bonus. |
| (k) | On November 1, 2017, the Company issued 625,000 shares of common stock with a fair value of $62,500 based on the closing price of the Company’s common stock for the conversion of two convertible notes payable with an aggregate value of $50,000 and derivative liabilities of $51,710. The Company recorded a gain on settlement of debt of $39,210 in connection with this debt settlement. |
| (l) | On November 6, 2017, the Company issued 1,428,571 shares of common stock at $0.07 per share for proceeds of $100,000. |
| (m) | On December 31, 2017, the Company issued 49,020 shares of common stock with a fair value of $4,902 based on the closing price of the Company’s common stock for consulting services rendered. |
| (n) | During the year ended December 31, 2015, the Company issued 498,801 shares of common stock with a fair value of $107,944 based on the closing price of the Company’s common stock for services. Of this amount, $70,300 relates to services to be rendered, which was recorded as deferred compensation. During the year ended December 31, 2017, the Company expensed $19,592 (2016 - $34,978) of the deferred compensation as consulting fees, which reflects the pro-rata portion of the services provided through July 24, 2017. The services have been fully earned as of July 24, 2017. |
2016
| (o) | On January 7, 2016, the Company issued 55,556 shares of common stock for proceeds of $5,000 pursuant to the exercise of options. |
| (p) | On March 29, 2016, the Company issued 588,240 units for proceeds of $76,029 (Cdn$100,000). Each unit consisted of one share of common stock and one share purchase |
| (q) | On May 4, 2016, the Company issued 250,000 units for proceeds of $22,770 (Cdn$30,000). Each unit consisted of one share of common stock and one share purchase warrant exercisable at $0.15 per share until May 4, 2018. |
| (r) | On June 9, 2016, the Company issued 312,500 units for proceeds of $39,283 (Cdn$50,000). Each unit consisted of one share of common stock and one share purchase warrant exercisable at $0.20 per share until June 9, 2017. |
| (s) | On October 12, 2016, the Company issued 357,143 units for proceeds of $37,659 (Cdn$50,000). Each unit consisted of one share of common stock and one share purchase warrant exercisable at $0.18 per share until October 12, 2017. In relation to this financing, the Company paid finder’s fees of $3,542, which was recorded as share issuance costs. |
| (t) | On October 12, 2016, the Company issued 50,000 shares of common stock with a fair value of $7,500 based on the closing price of the Company’s common stock for the settlement of debt of $6,000. There Company recorded a loss on settlement of debt of $1,500 in connection with this debt settlement. |
| (u) | On October 12, 2016, the Company issued 512,880 shares of common stock upon the conversion of two convertible debentures and accrued interest totaling $79,065. |
| (v) | On December 5, 2016, the Company issued 980,392 units for proceeds of $100,000. Each unit consisted of one share of common stock and one share purchase warrant exercisable at $0.15 per share until December 5, 2017. |
| (w) | On December 13, 2016, the Company issued 588,235 units for proceeds of $50,000. Each unit consisted of one share of common stock and one share purchase warrant exercisable at $0.12 per share until December 13, 2017. |
| (x) | During the year ended December 31, 2016, the Company issued 479,290 shares of common stock with the fair value of $60,480 based on the closing price of the Company’s common stock for consulting services rendered by external consultants. |
12.Share Purchase Warrants
The Continuityfollowing table summarizes the continuity schedule of the Company’s share purchase warrant is as follows:
| December 31, 2014 | exercise price | expiry date | Expired | Issuance | December 31, 2015 | ||||||||||||||
281,250 | $ | 0.20 | 28-Jan-15 | 281,250 | - | ||||||||||||||
562,500 | $ | 0.20 | 28-Jan-15 | 562,500 | - | ||||||||||||||
192,308 | $ | 0.26 | 27-Apr-15 | 192,308 | - | ||||||||||||||
192,308 | $ | 0.26 | 27-Apr-15 | 192,308 | - | ||||||||||||||
147,059 | $ | 0.40 | 30-Sep-16 | - | - | 147,059 | |||||||||||||
- | $ | 0.35 | 22-Apr-17 | - | 66,667 | 66,666 | |||||||||||||
- | C$ | 0.35 | 17-May-15 | - | 600,000 | 600,000 | |||||||||||||
- | C$ | 0.35 | 13-Aug-17 | - | 18,000 | 18,000 | |||||||||||||
- | $ | 0.35 | 17-Dec-17 | - | 294,118 | 294,118 | |||||||||||||
1,375,425 | 1,228,366 | 684,667 | 1,125,843 | ||||||||||||||||
|
| Number of warrants |
|
| Weighted average exercise price |
| ||
|
|
|
|
|
|
| ||
Balance, December 31, 2015 |
|
| 1,125,843 |
|
| $ | 0.30 |
|
Issued |
|
| 3,076,510 |
|
|
| 0.17 |
|
Expired |
|
| (147,059 | ) |
|
| 0.40 |
|
Balance, December 31, 2016 |
|
| 4,055,294 |
|
|
| 0.20 |
|
Issued |
|
| 2,419,281 |
|
|
| 0.17 |
|
Expired |
|
| (2,236,662 | ) |
|
| 0.22 |
|
Balance, December 31, 2017 |
|
| 4,237,913 |
|
| $ | 0.19 |
|
| F-14 |
| Table of Contents |
As of outstanding warrants as at December 31, 2015 and2017, the following share purchase warrants were outstanding:
Number of warrants outstanding |
|
| Exercise price |
|
| Expiration date | |||
| 588,240 |
|
| Cdn$0.34 |
|
| March 29, 2018 | ||
| 250,000 |
|
| $ | 0.15 |
|
| May 4, 2018 | |
| 2,222,222 |
|
| $ | 0.18 |
|
| March 2, 2019 | |
| 147,059 |
|
| $ | 0.35 |
|
| June 23, 2019 | |
| 980,392 |
|
| $ | 0.15 |
|
| December 2, 2021 | |
| 50,000 |
|
| $ | 0.20 |
|
| January 2, 2022 | |
| 4,237,913 |
|
|
|
|
|
|
| |
During the year ended December 31, 20142017, the Company issued 50,000 share purchase warrants with a fair value of $2,185 as contract fees to a third party for future financing, which was 1,125,843recorded as stock-based compensation expense. The Company uses the Black-Scholes option pricing model to establish the fair value of share purchase warrants issued, assuming no expected dividends or forfeitures, volatility of 173%, risk-free rate of 1.14%, and 1,375,425 respectively. As at December 31, 2015, the weighted average exercise price and weight average remainingan expected life of the warrants was $0.30/share (2014/12/31 -$0.24/share) and 1.44 years (2014/12/31 - 0.32 years).
13.Stock Options
The following table summarizes information aboutthe continuity schedule of the Company’s stock options:
|
| Number of options |
|
| Weighted average exercise price |
|
| Aggregate intrinsic value |
| |||
|
|
|
|
|
|
|
|
|
| |||
Balance, December 31, 2015 |
|
| 4,080,556 |
|
| $ | 0.12 |
|
|
|
| |
Granted |
|
| 675,000 |
|
|
| 0.13 |
|
|
|
| |
Exercised |
|
| (55,556 | ) |
|
| 0.09 |
|
|
|
| |
Cancelled / forfeited |
|
| (700,000 | ) |
|
| 0.18 |
|
|
|
| |
Balance, December 31, 2016 |
|
| 4,000,000 |
|
|
| 0.16 |
|
|
|
| |
Granted |
|
| 1,800,000 |
|
|
| 0.12 |
|
|
|
| |
Cancelled / forfeited |
|
| (625,000 | ) |
|
| 0.14 |
|
|
|
| |
Balance, December 31, 2017 |
|
| 5,175,000 |
|
| $ | 0.15 |
|
| $ | 11,350 |
|
|
|
| Outstanding |
|
| Exercisable |
| |||||||||||||||
Range of exercise prices |
|
| Number of shares |
|
| Weighted average remaining contractual life (years) |
|
| Weighted average exercise price |
|
| Number of shares |
|
| Weighted average exercise price |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
| $ | 0.07 |
|
|
| 75,000 |
|
|
| 0.3 |
|
| $ | 0.07 |
|
|
| 75,000 |
|
| $ | 0.07 |
|
| $ | 0.08 |
|
|
| 250,000 |
|
|
| 4.8 |
|
|
| 0.08 |
|
|
| 250,000 |
|
|
| 0.08 |
|
| $ | 0.09 |
|
|
| 910,000 |
|
|
| 0.3 |
|
|
| 0.09 |
|
|
| 910,000 |
|
|
| 0.09 |
|
| $ | 0.13 |
|
|
| 1,425,000 |
|
|
| 4.4 |
|
|
| 0.13 |
|
|
| 1,100,000 |
|
|
| 0.13 |
|
| $ | 0.16 |
|
|
| 225,000 |
|
|
| 3.1 |
|
|
| 0.16 |
|
|
| 112,500 |
|
|
| 0.16 |
|
| $ | 0.19 |
|
|
| 2,270,000 |
|
|
| 2.7 |
|
|
| 0.19 |
|
|
| 2,270,000 |
|
|
| 0.19 |
|
Cdn$0.25 |
|
|
| 20,000 |
|
|
| 2.7 |
|
| Cdn$0.25 |
|
|
| 20,000 |
|
| Cdn$0.25 |
| |||
|
|
|
|
| 5,175,000 |
|
|
| 2.8 |
|
| $ | 0.15 |
|
|
| 4,737,500 |
|
| $ | 0.15 |
|
2017
On May 11, 2017, the Company granted 1,550,000 stock options outstandingto officers, directors, employees, and consultants of the Company, which are exercisable at $0.13 per share and expire on May 11, 2022. Of this amount, 1,150,000 stock options vested on the date of grant, 50,000 stock options vested on October 21, 2017, 50,000 stock options vested on November 11, 2017, and the remaining 300,000 stock options are scheduled to vest on May 11, 2018. During the year ended December 31, 2015:
Number of Options | Weighted average exercise price $ | ||||
Options outstanding – December 31, 2013 | 1,140,556 | 0.09 | |||
Option granted (April 28, 2014) | 50,000 | 0.17 | |||
Options granted (June 5, 2014) | 450,000 | 0.18 | |||
Options outstanding, December 31, 2014 | 1,640,556 | 0.12 | |||
Options exercised | 100,000 | 0.09 | |||
Options granted | 2,540,000 | 0.19 | |||
Options outstanding, December 31, 2015 | 4,080,556 | * | 0.16 | ||
On October 6, 2017, the Company granted 250,000 stock options to a consultant, which are exercisable at $0.08 per share, expire on October 6, 2022 and vested immediately.
| Table of |
2016
On April 28, 2014,18, 2016, the Company granted 200,000 stock options to an employee with an exercise price of $0.14 per share with an expiry date of April 18, 2020. The options vest 25% on July 18, 2016, 25% on October 18, 2016, and 50% on April 18, 2017.
On July 21, 2016, the Company granted 150,000 stock options to an employee with an exercise price of $0.16 per share with an expiry date of November 1, 2020. The options vest 50% on November 1, 2016 and 50% on November 1, 2017.
On July 21, 2016, the Company granted 25,000 stock options to an employee with an exercise price of $0.16 per share with an expiry date of July 21, 2021. The options vest 50% on July 21, 2017 and 50% on July 21, 2018.
On October 3, 2016, the Company granted 50,000 stock options to a consultant attwo consultants with an exercise price of $0.17/share. These$0.16 per share with an expiry date of October 3, 2021. The options will expirevest 50% on April 1, 2019,August 9, 2017 and 50% of these 50,000 options will be vested on August 9, 2018.
On October 1, 2014 and April 1, 2015 respectively.
The fair values of stock options granted are amortized over the vesting period where applicable. During 2015,the years ended December 31, 2017 and 2016, the Company recorded $480,178 (2014 - $49,625)$165,587 and $52,702, respectively, in stock-based compensation in connection with the vesting of options granted. The Company uses the Black-Scholes option pricing model to establish the fair value of options granted withassuming no expected dividends or forfeitures and the following weighted average assumptions:
| 2014 | 2015 | |||||||
| Expected dividend yield | 0 | % | 0 | % | ||||
| Volatility | 230 | % | 170 | % | ||||
| Risk free interest rate | 1.52 | % | 1.52 | % | ||||
| Expected option life | 5 years | 5 years | ||||||
| Forfeiture rate | 0 | % | 0 | % | ||||
2015 $ | 2014 $ | |||||||
| Beginning balance | - | - | ||||||
| Issuance of warrants | 28,267 | - | ||||||
| Stock options granted | 5,715 | - | ||||||
| Ending balance | 33,982 | - | ||||||
|
| 2017 |
|
| 2016 |
| ||
Expected volatility |
|
| 136 | % |
|
| 124 | % |
Risk free interest rate |
|
| 1.80 | % |
|
| 1.16 | % |
Expected life (in years) |
|
| 4.8 |
|
|
| 4.0 |
|
14.Segments
The Company settled this promissory notehas one reportable segment: vehicle tracking and accrued interest totaling of $50,644 (CAD$65,667) by issuance of 310,318 common shares in 2015.
Segmentation by geographical location is not presented as all revenues are earned in U.S. Total assets by segment are not presented as that information is not used to allocate resources or assess performance at the segment level and is not reviewed by the Chief Operating Decision Maker of the Company.
15.Concentration Risk
The Company has cash balances and no interest bearing debt.extends credit to customers on an unsecured basis in the normal course of business. The Company’s current policy is to invest excess cash in high yield term depositsperform an analysis of the recoverability of its receivables at the end of each reporting period and bankers’ acceptance.to establish allowances where appropriate. The Company regularly monitors its cash management policy. As a result, interest rate risk is considered not significant.
During the years ended December 31, 2015,2017 and 2016, the Company had a working capital deficiencytwo customers which accounted for 74% and 66%, respectively, of ($536,863) (Decembertotal invoiced amounts, which are recorded as deferred revenues and amortized over the related service period to revenues.
As of December 31, 2014 – working capital of $32,676). The2017 and 2016, the Company intends to have more equity financing and/or long term debt financing in order to eliminate the working capital deficiencyhad three and to the operationstwo customers, respectively, which accounted for 100% and 90%, respectively, of the Company.
| 2015 | 2014 | |||||||
| Cash paid for interest | $ | - | $ | 5,341 | ||||
| Cash paid for income taxes | - | - | ||||||
| 310,318 shares issued for debt settlement | 50,664 | - | ||||||
| 498,801 shares issued for services rendered and yet to rendered | 107,944 | - | ||||||
16.Income taxes
The Company’s income tax expenses areprovision consists of the following:
|
| 2017 |
|
| 2016 |
| ||
Current: |
|
|
|
|
|
| ||
Federal |
| $ | 80,000 |
|
| $ | - |
|
State |
|
| - |
|
|
| - |
|
Foreign |
|
| - |
|
|
| - |
|
Total Current |
|
| 80,000 |
|
|
| - |
|
Deferred: |
|
|
|
|
|
|
|
|
Federal |
|
| - |
|
|
| - |
|
State |
|
| - |
|
|
| - |
|
Foreign |
|
| - |
|
|
| - |
|
Total Deferred |
|
| - |
|
|
| - |
|
Provision for income taxes |
| $ | 80,000 |
|
| $ | - |
|
| F-16 |
| Table of Contents |
A reconciliation of income taxes computed by applying the statutory U.S. income tax rate to the Company's loss before income taxes to the income tax provision is as follows:
| Dec 31, 2015 | Dec 31, 2014 | |||||||
| Loss for the year | $ | (1,613,130 | ) | $ | (748,223 | ) | ||
| Expected income tax recovery at statutory rates (2015 -35; 2014 - 35%) | (564,595 | ) | (261,878 | ) | ||||
| Non-deductible item | 360,873 | 62,606 | ||||||
| Change in tax rate | 27,166 | 24,454 | ||||||
| Increase in valuation allowance | 176,556 | 174,818 | ||||||
| $ | - | $ | - | |||||
|
| 2017 |
|
| 2016 |
| ||
Computed tax benefit at federal statutory rate |
| $ | (441,204 | ) |
| $ | (334,703 | ) |
Permanent items |
|
| (4,016 | ) |
|
| 78,459 |
|
Stock-based compensation |
|
| 21,635 |
|
|
| - |
|
Incentive stock options |
|
| 57,042 |
|
|
| - |
|
Conversion feature derivative liability |
|
| 16,785 |
|
|
| - |
|
Impact of tax law change in rate |
|
| 720,057 |
|
|
| - |
|
Change in tax rates and true up |
|
| - |
|
|
| (262,355 | ) |
Uncertain tax positions |
|
| 80,000 |
|
|
| - |
|
Impact of difference related to foreign earnings |
|
| - |
|
|
| 33,247 |
|
Valuation allowance |
|
| (370,299 | ) |
|
| 485,352 |
|
Provision for income taxes |
| $ | 80,000 |
|
| $ | - |
|
Deferred tax assets and liabilities reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of future incomethe Company's deferred tax assets are as follows:
| Dec 31, 2015 | Dec 31, 2014 | |||||||
| Future income tax assets | ||||||||
| Non-capital losses carried forward and others | $ | 1,771,239 | $ | 1,589,431 | ||||
| Less: Valuation allowance | (1,771,239 | ) | $ | (1,589,431 | ) | |||
| Net future income tax assets | $ | - | $ | - | ||||
|
| 2017 |
|
| 2016 |
| ||
Deferred Tax Assets: |
|
|
|
|
|
| ||
Net operating loss carryforwards |
| $ | 1,798,000 |
|
| $ | 2,236,248 |
|
Stock-based compensation |
|
| 1,000 |
|
|
| - |
|
Accounts receivable and other timing differences |
|
| 121,000 |
|
|
| - |
|
Basis difference in assets and debt |
|
| 61,000 |
|
|
| - |
|
Equipment |
|
| - |
|
|
| 19,367 |
|
Share issuance costs |
|
| - |
|
|
| 976 |
|
Total Deferred Tax Asset |
|
| 1,981,000 |
|
|
| 2,256,591 |
|
Valuation allowance |
|
| (1,981,000 | ) |
|
| (2,256,591 | ) |
Net Deferred Tax Asset |
| $ | - |
|
| $ | - |
|
Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the net deferred tax assets for the U.S. federal, state, and Canada have been fully offset by a valuation allowance.
As of December 31, 2017 and 2016, the Company had net operating loss carryforwards for federal and state income tax purposes of $5,299,849 and $5,954,978, respectively, which expire beginning in the year 2029. As of December 31, 2017, the Company had net operating loss carryforwards for foreign income tax purposes of $1,046,761 which expire beginning in the year 2032.
The Company is required to file US federal, California, and Canadian tax returns. Due to the Company's loss position the statute remains open for any losses carried over into the current year which means all years from 2006 remain open to examination.
The Company has adopted FASB ASC 740-10740, “Income Taxes” to account for income taxes. ASC 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statement. This standard prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in the tax return. ASC 740 also provides guidance on derecognition of tax benefits, classification on the balance sheet, interest and penalties, accounting in interim periods, disclosure and transaction. In accordance with ASC 740-10-50, the Company is classifying interest and penalties as a component of tax expense.
| F-17 |
| Table of Contents |
The Company currently has no issues creating timing differences that would mandate deferreda reserve related to unrecognized tax expense. Net operating losses would create possible tax assets in future years. Due to the uncertaintypositions of the utilization of net operating loss carry forwards, an evaluation allowance has been made to the extent of any tax benefit that net operating losses may generate. A provision for income taxes has not been made due to net operating loss carry-forwards of $5,228,000 and $4,664,000$80,000 as of December 31, 20152017, which is presented as part of accounts payable and December 31, 2014, respectively, which may be offset against future taxable income through to 2035.
Federal and State | ||||
Balance at December 31, 2016 | $ | - | ||
Additions for tax positions related to current year | 10,000 | |||
Additions for tax positions related to prior years | 70,000 | |||
Balance at December 31, 2017 | 80,000 | |||
On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (the "Act"). The Act amends the Internal Revenue Code to reduce tax rates and modify policies, credits, and deductions for individuals and businesses. For businesses, the Act reduces the corporate tax rate from a maximum of 35% to a flat 21% rate. The rate reduction is effective on January 1, 2018. As a result of the rate reduction, the Company has reduced the deferred tax asset balance as of December 31, 2017 by $720,057. Due to the Company's full valuation allowance position, there was no net impact on the Company's income tax provision at December 31, 2017 as the reduction in the deferred tax asset balance was fully offset by a corresponding decrease in the valuation allowance.
In conjunction with the Tax Act, the SEC staff issued Staff Accounting Bulletin No. 118 to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. The Company has recognized the provisional tax impacts related to the revaluation of deferred tax assets and liabilities at December 31, 2017. There was no net impact on the Company's consolidated financial statements for the year ended December 31, 2017 as the corresponding adjustment was made to the valuation allowance. The ultimate impact may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the total amountCompany may take as a result of unrecognized tax benefits will significantly increase or decrease within the next 12 months.
17.Commitments and Contingencies
Operating Lease
In April 2017, we entered into non-cancelable operating lease amendment for 2,119 square feet of office space through April 2019.
Rent expense for the years ended December 31, 2015, 2014, 2013, 20122017 and 2011.
Year ending December 31, |
| Lease Payments |
| |
2018 |
| $ | 38,900 |
|
2019 |
|
| 13,100 |
|
Total |
| $ | 52,000 |
|
Investor Relations Agreement
In September 2017, we entered into an investor relations agreement with a consultant commencing in October 2017 for a period of one year. Per the terms of the agreement, the Company is to provide to the year-endedconsultant the following: cash fee of $2,500 per month; shares of common stock valued at $7,500 (75,000 shares) for the first three months of service; shares of common stock valued at $22,500 (225,000 shares) for months four through twelve.
Indemnities and Guarantees
We have made certain indemnities and guarantees, under which we may be required to make payments to a guaranteed or indemnified party, in relation to certain transactions. We indemnify our officers and directors to the maximum extent permitted under the laws of the State of Nevada. The duration of these indemnities and guarantees varies and, in certain cases, is indefinite. These indemnities and guarantees do not provide for any limitation of the maximum potential future payments we could be obligated to make. Historically, we have not been obligated to make any payments for these obligations and no liabilities have been recorded for these indemnities and guarantees in the accompanying consolidated balance sheets.
Legal Matters
In the ordinary course of business, we may face various claims brought by third parties and may, from time to time, make claims or take legal actions to assert our rights, including intellectual property disputes, contractual disputes and other commercial disputes. Any of these claims could subject us to litigation. Management believes there are currently no claims that are likely to have a material effect on our consolidated financial position and results of operations.
| F-18 |
| Table of Contents |
18. Restatement
In connection with the audit of the Company’s consolidated financial statements for the fiscal year ended December 31, 2015,2017, management of the Company conducted an analysis of the Company’s sales contracts related to its vehicle tracking device and service (“Sales Contracts”) and concluded they should be considered one unit of accounting and the revenue related to the sale should be deferred and recognized over the service term, typically one year. The Company determined that the original accounting for the Sales Contracts failed to appropriately record the sales proceeds as deferred revenue upon collection and recognized over the service term.
As a result of this analysis, the Company concluded that it was necessary to restate its previously filed consolidated financial statements for the year ended December 31, 2016 in the consolidated financial statements for the year ended December 31, 2017. The need to restate the Company’s consolidated financial statements is primarily due to the incorrect application of U.S. GAAP. The restatement is required to properly reflect the Company’s consolidated financial position as of December 31, 2016.
The effect on the consolidated balance sheet for the year ended December 31, 2016 is due to the recording of the Sales Contracts in accordance with U.S. GAAP. Accordingly, the consolidated balance sheet and statement of stockholders’ equity (deficit) for the year ended December 31, 2016 has been retroactively adjusted by $413,318 with no impact on net loss.
19.Subsequent Events
On January 1, 2018, the Company issued a total of 843,796 common274,020 shares of common stock to consultants for services provided.
On January 22, 2018, the Company
On January 29, 2018, the Company issued 5,000,000 shares of common stock at $0.08 per share for proceeds of $400,000.
On February 28, 2018, the Company issued 806,916 shares of common stock for the conversion of $50,000 in principal and $6,000 in accrued interest of a convertible debenture. Refer to Note 8(b).
On March 6, 2018, the Company formed Medallion GPS, LLC, for future business opportunities.
In February and March 2018, the Company issued 554,954 shares of common stock for the conversion of $23,250 in principal of a convertible debenture. Refer to Note 8(d).
| F-19 |
| Table of Contents |
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures
The Company carried out an evaluation of the effectiveness of the Company’s disclosure controls and procedures with the participation of all the Company’s executives, the effectiveness of the Company’s disclosure controls and procedures as of December 31, 2015.2017. The conclusions of the Company’s principal executives was that the controls and procedures in place were effective such that the information required to be disclosed in our SEC reports was a) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and b) accumulated and communicated to our management, including our chief executive offer and chief operation officer, as appropriate to allow timely decisions regarding required disclosure.
Internal Control over Financial Reporting
As of December 31, 2015,2017, management assessed the effectiveness of our internal control over financial reporting. The Company’s management is responsible for establishing and maintain adequate internal control over financial reporting for the Company. Internal control over financial reporting is a set of processes designed by or under the supervision of the Company’s CEO, COO and CFO (or executives performing equivalent functions) to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:
| pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of our assets; |
| · | provide reasonable assurance our transactions are recorded as necessary to permit preparation of our financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; |
| · | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. In evaluating the effectiveness of our internal control over financial reporting, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework.Framework (2013). Based on that evaluation, they concluded that during the period covered by this report, though there are weaknesses in the Company’s internal controls, given the current size of the organization, such internal controls and procedures as were in place were adequately effective to detect the inappropriate application of US GAAP.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting identified in connection with our evaluation we conducted of the effectiveness of our internal control over financial reporting as of December 31, 2017, that occurred during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit our company to provide only management’s report in this annual report.
Item 9B. Other Information.
During the fourth quarter of the fiscal year ended December 31, 20152017, there was no information required to be reported on Form 8K8-K which was not previously reported.
Item 10. Directors, Executive Officers and Corporate Governance.
Directors and Executive Officers
The following lists the directors and executive officers of the Company as of December 31, 2014:
Name | Age | Position | Term of Office | |||
Robert Nealon | 61 | Director, Chairman of the Board | July 8, | |||
Neil G. Chan | 55 | Director, Chief Executive Officer | September 1, | |||
Mark Wells | 55 | Director | January 17, 2018 to present | |||
Abel I. Sierra | 45 | Vice President and General Manager | September 15, 2017 to present |
Business Experience
The following are brief backgrounds on the Directors and Officers of the Company
Robert Nealon, Chairman of the Board & Director
Mr. Nealon is the Principal Attorney in Nealon & Associates, P.C., and a Washington, D.C. based law and government relations firm. He has been practicing law for twenty-seven years and has achieved an AV rating from Martindale-Hubbell, the leading rating bureau for the legal profession. Mr. Nealon has a B.A. from University of Rochester (1977) and M.B.A. from Rochester Institute of Technology (1978). He received his Juris Doctorate, magna cum laude, from the University of Bridgeport in 1982 and his Masters of Law in Taxation (L.L.M.) degree from Georgetown University in 1984. He is a member of the bar associations of New York State and Virginia, the American Bar Association and the Federal Bar Association. Mr. Nealon served as Adjunct Instructor of Corporate Law, George Washington University from 1985 until 2005. Mr. Nealon has been lead counsel on hundreds of commercial trials, including multi-million dollar derivative action lawsuits, security fraud and government contract fraud. He has been counsel to hundreds of corporations, including insurance affinity marketing, manufacturing and multiple financial institutions. Mr. Nealon has been active over the years in national politics and government relations.
Mr. Nealon was appointed to the Virginia Small Business Advisory Board by former Virginia Governor Warner and was reappointed to this state board by Governor Kaine through 2010 as its Chairman. Mr. Nealon is also a current appointee to the George Mason University Advisory Board for the Institute for Conflict Analysis and Resolution in Arlington, Virginia. He is a Director of the Alexandria Small Business Development Corporation.Arlington. He is also an activea member of the National Press Club and the Democratic National Club.
Neil G. Chan, Chief Executive Officer & Director
Mr. Chan is a career technologist who has pioneered the early adoption of disruptive technologies in more than 45 countries over the last 30 years. From start-up to $400M in annual revenues, Mr. Chan has led and created the best-in-class sales, marketing, and service organizations during the development of wireless data infrastructure, mobile content, Software-as-a-Service for commercial fleets, and HFC broadband infrastructure. Mr. Chan led the first technology transfer initiative between Canada and Mainland China on behalf of Spar Aerospace and Gandalf Technologies Inc., during the mid-1980s along with training, product marketing and sales responsibilities for growing Gandalf'sGandalf’s export markets; shortly after Mr. Chan was recruited to Motorola Inc., to lead the product marketing of the industry'sindustry’s first mobile data solutions for public safety, taxi, utility, and field service markets. Mr. Chan led Motorola'sMotorola’s initiative to expand into public data networks throughout the Asia Pacific region during the 1990s and subsequently was promoted to Managing Director to lead the expansion of HFC data and voice broadband networks throughout the region. In the spring of 2000, Mr. Chan joined Airvana Inc., to lead business development for the early adoption of CDMA-based broadband wireless networks which today continue to serve millions of users throughout North America and Latin America. Most recently, Mr. Chan led worldwide sales and marketing of fleet management services for WebTech Wireless Inc., which contributed five years of record growth and industry leadership across government and transportation markets. Mr. Chan has served on the Executive Review Board of Royal Roads University and continues to mentor and support early stage technology companies.
| 15 |
| Table of Contents |
Abel I. Sierra, Vice President and General Manager
Mr. Sierra has served as President of the organization,Antelope Valley Hispanic Chamber of Commerce (AVHCC) - the first President elected to a second term in the organization's 20 year history. AVHCC's mission is to provide Hispanic entrepreneurship, community growth, and development, by supporting ongoing 60% annual growth in shipmentseconomic programs designed to strengthen and software-as-a-service revenues,expand the potential of all business. As President of AVHCC, Mr. Sierra has been officially commended by Arnold Schwarzenegger, Ex-Governor of California, James C. Ledford, Mayor of the City of Palmdale, and R. Rex Parris, Mayor of Lancaster for his efforts on behalf of fellow Californians. Prior and concurrent to Mr. Sierra's role with AVHCC was his position as Agency Vice President of HBW Insurance and Financial Services. Mr. Sierra served as an Independent Associate with Legal Shield, Regional Vice President for Primerica Financial Services, marketing Representative for 21st Century/AIG direct, community Representative for Palmdale School District and Palmdale Head Start. Mr. Sierra also served 14 years as a tripling of personnel, five-fold growth in corporate and manufacturing facilities and infrastructure, andCounter Intelligence Specialist with the successful implementation of many multiple multi-million dollar projects.
Code of Ethics
The Company has not yet adopted a complete code of ethics policy as defined in Item 406 of Regulation S-K, however the company has adopted a disclosure policy that applies to all directors, officers and employees of the Company, as part of a program to establish a comprehensive code of ethics. The Company’s disclosure policy is available on its website www.igen-networks.com.
Audit Committee and Financial Expert
The Company does not have an audit committee. The Company is still small and the functions of an audit committee are done by the board of directors as a whole, as specified in section 3(a)(58)(B) of the Exchange Act. As such, the companyCompany has no audit committee financial expert serving on an audit committee. The board of directors however is confident in its ability as a whole to perform the functions required of an audit committee.
Item 11. Executive Compensation.
Summary Compensation Table
| Name and principal position | Year | Salary ($)1 | Stock awards ($) | Option awards ($)2 | Total ($) | ||||||||||||
Neil G. Chan - Director, President & CEO | 2015 | 98,257 | 189,900 | 288,157 | |||||||||||||
2014 | 74,360 | 74,360 | |||||||||||||||
Richard Freeman - Director, COO | 2015 | 86,540 | 189,900 | 276,440 | |||||||||||||
2014 | 65,230 | 65,230 | |||||||||||||||
Name and principal position |
| Year |
| Salary ($)(1) |
| Stock awards ($) |
| Option awards ($)(2) |
| Total ($) |
| |||||||
Neil G. Chan - Director, President & CEO |
| 2017 |
| 126,000 |
| 0 |
| 57,000 |
| 183,000 | ||||||||
| 2016 |
| 120,600 |
| 0 |
| 0 |
| 120,600 |
| ||||||||
Richard Freeman – Former Director & COO (3) |
| 2017 |
| 89,250 |
| 0 |
| 57,000 |
| 146,250 | ||||||||
| 2016 |
| 120,600 |
| 0 |
| 0 |
| 120,600 |
| ||||||||
Abel I. Sierra – VP Business Development |
| 2017 |
| 121,000 |
| 12,000 |
| 10,500 |
| 143,500 | ||||||||
_________
| (1) | Salary for services as an executive officer. No compensation for services as a director received in 2015, 2016 or 2017. |
| (2) | Valuation of Stock and Option awards are based on the issuance details listed in Note 13 to the Company’s consolidated financial statements for the year ended December 31, 2017. |
| (3) | Mr. Freeman served as COO until September 15, 2017 and Director until January 17, 2018 |
Outstanding Equity Awards at Fiscal Year-end
| Name | Number of securities underlying unexercised options | Number of securities underlying unexercised options | Option exercise price | Option expiration date | |||||
| (#) | (#) | ($) | |||||||
| exercisable | un-exercisable | ||||||||
Neil Chan, CEO | 55,556 | 0 | $0.09 | 31-Mar-18 | |||||
1,000,000 | 0 | $0.19 | 21-Sep-20 | ||||||
Richard Freeman, COO | 275,000 | 0 | $0.09 | 31-Mar-18 | |||||
1,000,000 | 0 | $0.19 | 21-Sep-20 | ||||||
Name |
| Number of securities underlying unexercised options |
|
| Number of securities underlying unexercised options |
|
| Option exercise price |
|
| Option expiration date | ||||
|
| (#) |
|
| (#) |
|
| ($) |
|
|
| ||||
|
| exercisable |
|
| un-exercisable |
|
|
|
|
| |||||
Neil Chan, CEO |
|
| 1,000,000 |
|
|
| 0 |
|
| $ | 0.19 |
|
| 21-Sep-20 | |
|
|
| 500,000 |
|
|
| 0 |
|
| $ | 0.13 |
|
| 11-May-22 | |
Richard Freeman, Former COO |
|
| 275,000 |
|
|
| 0 |
|
| $ | 0.09 |
|
| 31-Mar-18 | |
|
|
| 1,000,000 |
|
|
| 0 |
|
| $ | 0.19 |
|
| 21-Sep-20 | |
|
|
| 500,000 |
|
|
| 0 |
|
| $ | 0.13 |
|
| 11-May-22 | |
Abel Sierra, VP |
|
| 150,000 |
|
|
| 0 |
|
| $ | 0.16 |
|
| 1-Nov-20 | |
|
|
| 0 |
|
|
| 150,000 |
|
| $ | 0.13 |
|
| 11-May-22 | |
| 16 |
| Table of Contents |
The companyCompany currently has no unearned or unvested stock awards, or equity incentive plan awards of either options or stock.
Director Compensation1
Name and principal position |
| Year |
| Salary ($) |
|
| Stock awards ($) |
|
| Option awards ($) |
|
| Total ($) |
| ||||
Robert Nealon |
| 2017 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Director, COB |
| 2016 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
_________
1
Provides information on Directors not serving as executive officers only. Compensation for directors also servicing as executive officers is listed in the summary compensation table at the beginning of this Item.Discussion of Executive and Director Compensation
Compensation of Directors
Directors are currently not paid any standard compensation for acting as directors. In 2013, Robert Nealon, Director and Chairman of the Board, was awarded 150,000 stock options, all of which vested in 2013 and none of which were exercised. In 2015, Mr. Nealon was awarded 250,000 stock options, all of which vested in 2015 and none of which were exercised. Mr. Nealon had 400,000 options vested and unexercised as of December 31, 2015.
Compensation of Executives
The CEO, who is also a director of the Company, and former COO (through September 15, 2017) of the Company, who are also directorswas a director of the Company until January 17, 2018, are paid CDN$120,000a total of $126,000 per annum, including $30,000 per annum charged to Nimbo, as compensation for services in their respective capacities as executive officers of the Company. They are also paid US$30,000 per annum for services as executive offers of Nimbo LLC. In 2013, the CEO, Neil Chan, was granted 825,000 stock options, all of which vested in 2013, and 769,444 of which were exercised, leaving 55,556 vested and unexercised as of December 31, 2014. In 2015, MrMr. Chan was granted a further 1,000,000 stock options all of which vested in 2015 and none of which55,556 options were exercised leavingin January 2016. In 2017, Mr. Chan was granted another 500,000 stock options, which vested immediately, resulting in a total of 1,055,5561,500,000 options vested and unexercised as of December 31,2015.31, 2017. In 2013, the former COO, Richard Freeman, was granted 500,000 stock options, all of which vested in 2013, and of which 225,000 were exercised, leaving 275,000 vested and unexercised as of December 31, 2014. In 2015, Mr. Freeman was granted a further 1,000,000 stock options all of which vested in 2015 and none of which were exercised, leaving a total of 1,275,000 options vested and unexercised as of December 31,2015.
Mr. Abel Sierra, VP and General Manager, is paid $121,000 per annum. Mr. Sierra was granted 150,000 stock options which vest on May 11, 2018 as a signing bonus for his promotion. Mr. Sierra has a total of 300,000 stock options unexercised as of December 31, 2017.
There are currently no long term incentive plans or pension plans for directors or officers of the Company.
The companyCompany does not currently provide indemnity insurance coverage for directors and officers of the Company.
Compensation Committee Interlocks and Insider Participation
The Company is small and has no compensation committee. The board of directors as a whole acts in the capacity of a compensation committee. All executive officers of the Company are also directors of the Company and as such were and are able to vote on matters of compensation. Though the companyCompany is not legally obligated to establish a compensation committee, we may do so when the company reaches a critical mass and/or when deemed advisable by the board.
Compensation Committee Report
As a smaller reporting company, the Company is not required to report the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K, and as such there was no review or recommendation as to its inclusion in this report.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following tables list information that is accurate as of December 31, 2015.
| 17 |
| Table of Contents |
Securities authorized for issuance under equity compensation plans
The following details securities authorized for issuance as of December 31 2015.
Equity Compensation Plan Information
Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||||
| (a) | (a) | (a) | ||||||||||
Equity compensation plans approved by security holders | 4,080,556 | 0.16 | 998,206 | |||||||||
Equity compensation plans not approved by security holders | 0 | N/A | 0 | |||||||||
Total | 4,080,556 | 0.16 | 998,206 | |||||||||
Plan category |
| Number of securities to be issued upon exercise of outstanding options, warrants and rights |
|
| Weighted-average exercise price of outstanding options, warrants and rights |
|
| Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
| |||
|
| (a) |
|
| (a) |
|
| (a) |
| |||
Equity compensation plans approved by security holders |
|
| 5,175,000 |
|
|
| 0.15 |
|
|
| 655,125 |
|
Equity compensation plans not approved by security holders |
|
| 0 |
|
|
| N/A |
|
|
| 0 |
|
Total |
|
| 5,175,000 |
|
|
| 0.16 |
|
|
| 655,125 |
|
Security Ownership of certainCertain Beneficial Owners and Management
The table below sets forth information regarding the ownership of our common stock, as of December 31, 2017 unless otherwise indicated in the footnotes to the table, by (i) all persons known by us to beneficially own more than 5% of our common stock, (ii) each of our current directors and director nominees, (iii) our principal executive officer and our other executive officers who were serving as such at the end of Fiscal 2017 (each, a “named executive officer”), and (iv) all of our directors, director nominees and executive officers as a group. We know of no agreements among our stockholders that relate to voting or investment power over our common stock or any arrangement the operation of which may at a subsequent date result in a change of control of us.
Beneficial ownership is determined in accordance with applicable SEC rules and generally reflects sole or shared voting or investment power over securities. Under these rules, a person is deemed to be the beneficial owners
| (1) Title of class | (2) Name and address of beneficial owner | (3) Amount and nature of beneficial ownership | (4) Percent of class | ||||||
Common Shares | John Stull 27244 Via Industria Temecula, CA, USA 92590 | 2,500,000 | 8.86 | % | |||||
| (1) Title of class | (2) Name and address of beneficial owner | (3) Amount and nature of beneficial ownership | (4) Percent of class | ||||||
Common Shares | Robert Nealon Director, COB | 521,571 | 1.85 | % | |||||
Common Shares | Neil G. Chan Director, President & CEO | 2,332,611 | 8.27 | % | |||||
Common Shares | Richard Freeman Director, COO | 474,900 | 1.68 | % | |||||
|
| Shares Beneficially |
| |||||
|
| Owned |
| |||||
Name and Address of Beneficial Owner: |
| Number |
|
| Percent |
| ||
5% Stockholders: |
|
|
|
|
|
| ||
David Bellet |
|
| 3,230,043 |
|
|
| 8.25 | % |
Bernard Friedman |
|
| 2,048,611 |
|
|
| 5.23 | % |
Robert Friedman |
|
| 2,048,611 |
|
|
| 5.23 | % |
Directors and Executive Officers: |
|
|
|
|
|
|
|
|
Neil Chan(1) |
|
| 3,936,111 |
|
|
| 9.68 | % |
Abel Sierra(2) |
|
| 300,000 |
|
| * |
| |
Robert Nealon(3) |
|
| 900,000 |
|
|
| 2.27 | % |
Richard Freeman(4) |
|
| 2,000,000 |
|
|
| 4.89 | % |
All executive officers and directors as a group (4 persons)(5) |
|
| 7,136,111 |
|
|
| 16.60 | % |
_________
* Represents beneficial ownership of less than 1%.
(1) | Represents 1,500,000 shares of common stock issuable upon the exercise of stock options that are or will be vested and exercisable within 60 days after December 31, 2017, and 2,436,111 outstanding shares of common stock. |
| 18 |
| Table of Contents |
(2) | Represents 150,000 shares of common stock issuable upon the exercise of stock options that are or will be vested and exercisable within 60 days after December 31, 2017, and 150,000 outstanding shares of common stock. | |
(3) | Represents 400,000 shares of common stock issuable upon the exercise of stock options that are or will be vested and exercisable within 60 days after December 31, 2017, and 500,000 outstanding shares of common stock. | |
(4) | Represents 1,775,000 shares of common stock issuable upon the exercise of stock options that are or will be vested and exercisable within 60 days after December 31, 2017, and 225,000 outstanding shares of common stock. |
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Transactions with related persons, promoters and certain control persons
During the years ended December 31, 2017 and 2016, the Company incurred $227,080 and $250,200, respectively, in management and consulting fees to two officers and a Company controlled by a director.
As of December 31, 2017 and 2016, the Company owed $133,535 and $132,053, respectively, to directors and officers and a company controlled by a director, which is included in accounts payable and accrued liabilities. The amounts owed are unsecured, non-interest bearing, and due on demand.
Director Independence
In the USA the Company’s common stock is listed on the OTC Link OTCQB inter-dealer quotation system, and in Canada on the CSE, neither of which have director independence requirements.
Item 14. Principal Accounting Fees and Services.
Audit Fees
Aggregate fees billed for professional services rendered by the Company’s principal accountant for the audit of the Company’s annual financial statements, review of financial statements in quarterly filings, or services associated with statutory and regulatory filings for the last two fiscal years are as follows:
2016: $25,000
2017: $50,600
Audit Related Fees
Aggregate fees billed in the last two fiscal years for assurance and related services by the Company’s principal accountant that are reasonably related to the performance of the audit or review of the registrant’s financial statements and are not reported above are as follows:
2016: $0
2017: $0
Tax Fees
Aggregate fees billed in each of the last two fiscal years for professional services rendered by the Company’s principal accountant for tax compliance, tax advice, and tax planning are as follows:
2016: $0
Aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported above, are as follows:
2016: $0
2017: $0
Audit Committee’s Pre-Approval Policies and Procedures
The Company does not at this time have an audit committee and no formal pre-approval policies or procedures have yet been implemented. The board of directors acting in lieu of an audit committee is required to pre-approve the engagement of the Company’s principle accountant for non-auditing services.
Item 15. Exhibits, Financial Statement Schedules.
(1)Financial statements:
- Audited Financial Statements for the year ended December 31, 2015
(2) Financial statement schedules
- none
(3) Exhibits
Exhibit Index
31.2 | Certification – Rule 13(a)-14(a)/15d-14(a) - COO | ||
32.2 | Certification – Section 1350 – COO | ||
101.INS | XBRL Instance Document | ||
101.SCH | XBRL Taxonomy Extension Schema Document | ||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | ||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | ||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | ||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
| 21 |
| Table of Contents |
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
IGEN Networks Corp | |||
April | By: | /s/ Neil Chan | |
Neil Chan, | |||
Chief Executive Officer and Director (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) | |||
22 | |||