UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE FISCAL YEAR ENDED
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM ______ TO ______.
Commission File No.
(Exact name of registrant as specified in its charter) |
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(State or Other Jurisdiction of incorporation or organization) |
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(Address of principal executive offices) (Zip Code)
(Registrant’s telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
Title of Class
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
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:
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).
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☐ | Smaller reporting company | ||
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 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
The aggregate market value of the Common Stock of IGEN Networks Corp. held by non-affiliates as of June 30, 2022, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $
The number of shares of the registrant’s common stock outstanding as of March 15, 2023 was
TABLE OF CONTENTS
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Part I
Item 1. Business
Description of Business
IGEN Networks Corp. (“IGEN”, the “Company”, “we”, “our”) was incorporated in the State of Nevada on November 14, 2006, under the name of Nurse Solutions Inc. On September 19, 2008, the Company changed its name to Sync2 Entertainment Corporation and traded under the symbol SYTO. On September 15, 2008, the Company became a reporting issuer in British Columbia, Canada. On May 26, 2009, the Company changed its name to IGEN Networks Corp. On March 25, 2015, the Company was listed on the Canadian Securities Exchange (CSE) under the trading symbol IGN and the Company became a reporting Venture Issuer in British Columbia and Ontario, Canada.
The Company’s principal business is the development and marketing of software services for the automotive and fleet management industry. The Company works with wireless carriers and distribution partners to provide direct and secure access to information on vehicle assets and driver behavior. The software services are based on AWS Cloud infrastructure created to provide valuable information to its customers over the wireless network and accessible from internet connected devices. The software services are marketed through automotive dealers, financial institutions, and government channels as distinct commercial and consumer brands that include Nimbo Tracking, CU Trak, Medallion GPS and most recently “FamilyShield” sold direct to consumers.
The Company’s head office is located at 31772 Casino Drive, Suite C. Lake Elsinore, CA 92530. Direct line is 855-912-5378.
The Company owns the DTC Patent No. 11,037,378 issued from the U.S. Patent Office as of June 15, 2021 for normalization of driver behavior data for consistent and accurate measurement of driver performance regardless of asset-type or data source. The Company also owns Patent-Pending No.17/850,258 filed on June 27, 2022. The Company has secured trademarks and distribution licenses through increased ownership of privately held technology companies.
The Company is not aware of any government approval or regulations, other than those governing the normal course of business, which will affect its own business. However, the Company is invested in and foresees future investment in, or possible joint ventures with, companies for which local, regional or national regulatory approvals, particularly those pertaining to wireless networks or GPS-based applications, may apply.
The Company is not aware of any significant costs or effects of compliance with environmental laws.
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The Company’s executive management activities are undertaken by Directors of the Company on a contract basis. The Company also relies on subcontractors for product development, finance, legal, and other related professional services. On a consolidated basis, including the Company’s wholly-owned subsidiaries, the Company has 10 or less full time employees.
Item 1A. Risk Factors
For a discussion of risk factors affecting the Company please refer to the Cautionary Note Regarding Forward-looking Statements included in Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Item 1B. Unresolved Staff Comments
As a smaller reporting company, the Company is not required to provide the information required by this item.
Item 2. Properties
The Company owns no plants, mines and other materially important physical properties. The Company’s office locations are specified in Item 1 of this document.
Item 3. Legal Proceedings
The Company currently does not have any open legal proceedings.
Item 4. Mine Safety Disclosures
The Company is not an operator, nor has a subsidiary that is an operator, of a coal or other mine.
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Part II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
The Company’s common shares currently trade on the both the OTC Link OTCQB in the United States under the symbol IGEN, and the Canadian Securities Exchange (CSE) in Canada under the trading symbol IGN.
Holders
As of December 31, 2022, there were 150 registered shareholders of common shares, not including objecting beneficial owners.
Dividend Policy
The Company has paid no cash dividends in the past and as of yet has had no retained earnings from which to do so.
Item 6. Selected Financial Data
As a smaller reporting company, the Company is not required to provide the information required by this item.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) provides information for the year ended December 31, 2022. This MD&A should be read together with our audited consolidated financial statements and the accompanying notes for the year ended December 31, 2022 (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”; |
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| · | Are not promises or guarantees of future performance. They represent our current views and may change significantly; |
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| · | Are based on a number of assumptions, including those listed below, which could prove to be significantly incorrect: |
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| · | Our ability to find viable companies in which to invest; |
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| · | Our ability to successfully manage companies in which we invest; |
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| · | Our ability to successfully raise capital; |
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| · | Our ability to successfully expand and leverage the distribution channels of our portfolio companies; |
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| · | Our ability to develop new distribution partnerships and channels; |
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| · | Expected tax rates and foreign exchange rates. |
| · | 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; |
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| · | price and product competition; |
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| · | changing product mixes; |
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| · | the loss of any significant customers; |
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| · | competition from new or established companies; |
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| · | higher than expected product, service, or operating costs; |
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| · | inability to leverage intellectual property rights; |
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| · | delayed product or service introductions; |
Investors are cautioned not to place undue reliance on these forward-looking statements. No forward-looking statement is a guarantee of future results.
Overview
During fiscal-year 2022, the Company’s automotive dealership channels faced significant supply-chain issues that reduced available inventory and diminished profit margins. Despite these challenges IGEN continued to make progress with creating new opportunities and products in 2022. The Company moved into new offices located in Lake Elsinore in anticipation of significant growth post 2022 challenges. Creating new channels and partnerships in 2022 were key initiatives to secure longer term market share with both our consumer and commercial customers. Product and software innovation was our priority with the recent launch of our Next-Generation Platform and Medallion GPS created for Light-to-Heavy Commercial Fleets, both developed with IGEN’s patented Driver Signature and Behavior algorithms.
For the year ended December 31, 2022, the Company recognized revenues of $318,016 with a gross loss of (1)% and $(4,550) gross loss. Expenses for the year ended December 31, 2022, totaled $864,970, a decrease of $2,708,313, or 76%, from total expenses reported for 2021. Excluding stock-based compensation expense to our directors, operational expenses decreased by 16% year on year.
For the year ended December 31, 2022, the Company saw a net decrease in cash of $64,429. Cash used in operating activities was $978,056, an increase in cash used of 2% from the $962,960 net cash used in 2021. This was offset by net financings of $543,746 raised via private placements. Cash at the end of the year was $0.
Notable highlights of the year ended December 31, 2022 include the following Company achievements:
I) | IGEN established a partnership with Prolog with the integration of technology platforms to better serve the US Government markets IGEN launches Medallion GPS PRO for Medium-to-Heavy Duty Commercial Fleets |
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ii) | IGEN announces an exclusive marketing agreement with the Association of Credit Unions Executives of Puerto Rico |
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iii) | IGEN files Patent-Pending Application for creating real-time driver Telematic Signatures for autonomous vehicles |
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iv) | IGEN receives patent acceptance for its Digital Telematics Signature (DTC) patent for greater accuracy in measuring driver performance |
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v) | IGEN is awarded a contract to provide Fleet Management Services to all New-York State Counties |
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vi) | IGEN reports a net income and profit for the June 30, 2022 reporting period
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CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES
Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements. On an ongoing basis, we evaluate our estimates and judgments. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.
Accounts Receivable
Accounts receivable are recognized and carried at the original invoice amount less an allowance for expected uncollectible amounts. Inherent in the assessment of the allowance for doubtful accounts are certain judgments and estimates including, among others, the customer’s willingness or ability to pay, the Company’s compliance with customer invoicing requirements, the effect of general economic conditions and the ongoing relationship with the customer. Accounts with outstanding balances longer than the payment terms are considered past due. We do not charge interest on past due balances. The Company writes off trade receivables when all reasonable collection efforts have been exhausted. Bad debt expense is reflected as a component of general and administrative expenses in the consolidated statements of operations.
Goodwill
Goodwill represents the excess of the acquisition price over the fair value of identifiable net assets acquired. Goodwill is allocated at the date of the business combination. Goodwill is not amortized, but is tested for impairment annually on December 31 of each year or more frequently if events or changes in circumstances indicate the asset may be impaired. These events and circumstances may include a significant change in legal factors or in the business climate, a significant decline in the Company’s share price, an adverse action of assessment by a regulator, unanticipated competition, a loss of key personnel, significant disposal activity and the testing of recoverability for a significant asset group.
Goodwill impairment is measured as the amount by which a reporting unit’s carrying value exceeds its fair value.
The Company has only one reporting unit. Therefore, all of the Company’s goodwill relates to that reporting unit, and at December 31, 2022 and 2021, the carrying value for that reporting unit is negative.
Fair Value Measurements
In accordance with Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures,” the Company is to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
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The fair values of cash and cash equivalents, accounts and other receivables, restricted cash, and accounts payable and accrued liabilities, approximate their carrying values due to the immediate or short-term maturity of these financial instruments. Foreign currency transactions are primarily undertaken in Canadian dollars. The fair value of cash is determined based on “Level 1” inputs and the fair value of derivative liabilities is determined based on “Level 3” inputs. The recorded values of notes payable, approximate their current fair values because of their nature and respective maturity dates or durations. The financial risk is the risk to the Company’s operations that arise from fluctuations in foreign exchange rates and the degree of volatility to these rates. Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk. Financial instruments that potentially subject the Company to concentrations of credit risk consists of cash. The Company places its cash and cash equivalents in what it believes to be credit-worthy financial institutions.
Revenue Recognition and Deferred Revenue
We recognize revenue in accordance with ASC 606, “Revenue from Contracts with Customers”, using the five-step model, including (1) identify the contract with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue in accordance with U.S. GAAP. Title and risk of loss generally pass to our customers upon delivery, as we have insurance for lost shipments. In limited circumstances where either title or risk of loss pass upon destination or acceptance or when collection is not reasonably assured, we defer revenue recognition until such events occur. We derive substantially all our revenues from the sale of products and services combined into one performance obligation. Product revenue includes the shipment of product according to the agreement with our customers. Service revenue include vehicle tracking services and customer support (technical support), installations and consulting. A contract usually includes both product and services. For these contracts, the Company accounts for individual performance obligations separately if they are distinct. Performance obligations include, but are not limited to, pass-thru harnesses and vehicle tracking services. Almost all of our revenues are derived from customers located in United States of America in the auto industry. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. Standalone selling prices are typically estimated based on observable transactions when these services are not sold on a standalone basis. At contract inception, an assessment of the goods and services promised in the contracts with customers is performed and a performance obligation is identified for each distinct promise to transfer to the customer a good or service (or bundle of goods or services). To identify the performance obligations, the Company considers all of the goods or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. Revenue is recognized when our performance obligation has been met. The Company considers control to have transferred upon delivery because the Company has a present right to payment at that time, the Company has transferred use of the asset, and the customer is able to direct the use of, and obtain substantially all of the remaining benefits from, the asset. For arrangements under which the Company provides vehicle tracking services, the Company satisfies its performance obligations as those services are performed whereby the customer simultaneously receives and consumes the benefits of such services under the agreement. Revenues are recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities.
The Company provides product warranties with varying lengths of time and terms. The product warranties are considered to be assurance-type in nature and do not cover anything beyond ensuring that the product is functioning as intended. Based on the guidance in ASC 606, assurance-type warranties do not represent separate performance obligations. The Company has historically experienced a low rate of product returns under the warranty program.
Management assesses the business environment, customers’ financial condition, historical collection experience, accounts receivable aging, and customer disputes to determine whether collectability is reasonably assured. If collectability is not reasonably assured at the time of sale, the Company does not recognize revenue until collection occurs.
Revenue relating to the sale of service fees on its vehicle tracking and recovery services is recognized over the life of the contact. The service renewal fees are offered in terms ranging from 12 to 36 months and are generally payable upon delivery of the vehicle tracking devices or in full upon renewal.
Deferred revenues are recorded net of contract assets when cash payments are received from customers in advance of the Company’s performance. Contract assets represent the costs of the underlying hardware to enable the Company to perform on its contracts with customers and are amortized using the same method and term as deferred revenues. Any revenue that has been deferred and is expected to be recognized beyond one year is classified as deferred revenue, net of current portion.
Financing Costs and Debt Discount
Financing costs and debt discounts are recorded net of notes payable and convertible debentures in the consolidated balance sheets. Amortization of financing costs and the debt discounts is calculated using the effective interest method over the term of the debt and is recorded as interest expense in the consolidated statement of operations.
Recent Accounting Pronouncements
See the notes to the consolidated financial statements of this Form 10-K for further discussion.
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Capital Resources and Liquidity
Current Assets and Liabilities, Working Capital
As of December 31, 2022, the Company had total current assets of $52,043, a 70% decrease from the end of 2021. This decrease was mostly due to a $122,323 decrease in cash, accounts receivable, and inventory, because of the timing of payments to Nimbo from its customers and a decrease in new sales contracts in Q4 2022.
The Company’s current liabilities as of December 31, 2022, were $1,186,049, a 9% increase over those reported at the end of the 2021. However, $81,066 (or 7%) of the Company’s current liabilities were deferred revenues, net to be recognized in future periods. The increase in current liabilities was mostly due to a $482,408 increase in notes payable as of December 31, 2022.
IGEN ended 2022 with negative working capital of $1,134,006. Adequate working capital remains a core requirement for growth and profitability and to facilitate further acquisitions, and the Company continues to work at improving its working capital position through ongoing equity and debt financing and actively managing the Company’s growth to achieve sustainable positive cash flow.
In 2022, the Company raised an additional $1,070,746 in financings and borrowing on notes payable and converted $437,139 of preferred stock into shares of common stock. These transactions are further disclosed in notes to the consolidated financial statements.
Total Assets and Liabilities, Net Assets
As of December 31, 2022, the Company’s total assets were $616,290, a 19% decrease over the prior year, due primarily to the decrease in current assets previously discussed. The majority of the Company’s assets remain $505,508 in goodwill associated with the acquisition of Nimbo in 2014.
As of December 31, 2022, the Company’s total liabilities were $1,455,515, which reflects $81,632 in long-term deferred revenue, net in addition to the $1,186,049 in current liabilities previously discussed. This long-term deferred revenue is the portion of service contracts signed in previous years for which service, and the associated revenue recognition, occurs beyond 2023. Total liabilities increased by 6% over the previous year, however 11%, or $162,698 of the Company’s year-end total liabilities was deferred revenue, net, compared with $145,485 of deferred revenue, net reported at the end of 2021.
The above resulted in net assets as of December 31, 2022 being ($839,225) and an accumulated deficit of $20,170,140.
The Company is continuing its efforts to increase its asset base, raise funds and improve cashflow to improve its working capital position. As of the date these financial statements were issued, the Company believes it has adequate working capital and projected net revenues and cash flows to maintain existing operations for approximately six months without requiring additional funding. The Company’s business plan is predicated on raising further capital for the purpose of further investment and acquisition of targeted technologies and companies, to fund growth in these technologies and companies, and to expand sales and distribution channels for companies it currently owns or is invested. It is anticipated the Company will continue to raise additional capital through private placements or other means in the both the near and medium term.
The reader is cautioned that the Company’s belief in the adequacy of its working capital, the continuation and growth of future revenue, the ability of the Company to operate any stated period without additional funding, and the ability to successfully raise capital are forward looking statements for which actual results may vary, to the extent that the company may need capital earlier than anticipated and/or may not be able to raise additional capital.
Results of Operations
Revenues and Net Loss
Revenues
For the year ended December 31, 2022, the Company had revenues of $318,016, an 18% increase over the revenues reported for same period in 2021. Increase in revenue was primarily due to the impact of COVID-19 in 2021 on demand for new vehicles at our customers’ franchise dealerships.
Costs of goods sold for 2022 were $322,566, representing an increase of 161% year on year. These costs are primarily mobile hardware and cellular carrier costs.
The resulting gross loss was $4,550, representing a decrease of 103% year on year, and gross margins of (1%).
Though the Company increased revenues, decreased gross profit, and decreased gross margins year on year, we continue to review hardware vendor, inventory, and order fulfillment strategies as well as product and service pricing models to continually improve overall margins.
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Expenses
Expenses for the year ended December 31, 2022, totaled $903,048, a decrease of $2,670,235, or 75%, from total expenses reported for 2021. Excluding stock-based compensation expense to our directors, operational expenses increased by 4% year on year.
Net Loss
For the year ended December 31, 2022, the Company had a net loss of $907,598 (or ($0.00) per basic and diluted share) compared with a net loss of $3,428,937 (or ($0.00) per basic and diluted share) in 2021. Included in the net loss of $907,598, is $301,360 of other income related to the Company’s gain on settlement of debt recognized in 2022.
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, 2022, the Company saw a net decrease in cash of $64,429. Cash used in operating activities was $978,056, an increase in cash used of 2% from the $962,960 net cash used in 2021. This was offset by net financings of $543,746 raised via private placements. Cash at the end of the year was $0.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
As a smaller reporting company, the Company is not required to provide the information required by this item.
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Item 8. Financial Statements and Supplementary Data.
The Company’s consolidated financial statements for the years ended December 31, 2022 and 2021 are included herewith.
IGEN NETWORKS CORP.
Consolidated Financial Statements
For the Years Ended December 31, 2022 and 2021
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of
IGEN Networks Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of IGEN Networks Corp. and subsidiary (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, redeemable convertible preferred stock and stockholders’ deficit, and cash flows for the two years ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the two years ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses and negative cash flows from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Revenue Recognition
Description of the Matter
As described in Note 2 to the financial statements, the Company recognizes revenue in accordance with Accounting Standards Codification 606, Revenues from Contracts with Customers (“ASC 606”). In applying ASC 606 to the Company’s customer contracts, there is significant judgement regarding the identification of the performance obligations, and in particular as it relates to whether hardware is a separate performance obligation or part of the performance obligation that relates to tracking services. In addition, there is also judgement as to the period of the time that revenue should be recognized for certain performance obligations, and for certain transactions there is judgement as to whether a single contract is a single contract with two performance obligations or in substance two separate contracts for accounting purposes. These matters require significant judgement and ultimately affect the timing of revenue recognition, and as a result, we identified revenue recognition as a critical audit matter.
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How We Addressed the Matter in Our Audit
To address the above matters relating to revenue recognition, our audit procedures included reviewing management’s detailed evaluation of the application of ASC 606 as it applies to its various types of customer contracts and verifying that the evaluation properly considered the guidance in ASC 606. Further, our procedures also included reviewing customer contracts, testing the details of a number of transactions, and performing other procedures to verify the appropriateness of the Company’s application of ASC 606.
/s/
We have served as the Company’s auditor since 2021,
April 14, 2023
PCAOB ID:
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IGEN NETWORKS CORP.
Consolidated Balance Sheets
(Expressed in U.S. dollars)
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|
| ||
Total Assets |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Deficit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
| $ |
|
| $ |
| ||
Current portion of deferred revenue, net of contract assets |
|
|
|
|
|
| ||
Notes payable, current portion |
|
|
|
|
|
| ||
Convertible debentures, current portion, net of discount of $ |
|
|
|
|
|
| ||
Derivative liabilities |
|
|
|
|
|
| ||
Total Current Liabilities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Notes payable, net of current portion |
|
|
|
|
|
| ||
Operating lease liability, net of current portion |
|
|
|
|
|
| ||
Deferred revenue, net of contract assets and current portion |
|
|
|
|
|
| ||
Total Liabilities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Commitments and Contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable convertible preferred stock – Series A: |
|
|
|
|
|
|
|
|
Authorized – |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit |
|
|
|
|
|
|
|
|
Series B preferred stock – Authorized – |
|
|
|
|
|
| ||
Common stock: Authorized – |
|
|
|
|
|
| ||
Additional paid-in capital |
|
|
|
|
|
| ||
Accumulated deficit |
|
| ( | ) |
|
| ( | ) |
Total Stockholders’ Deficit |
|
| ( | ) |
|
| ( | ) |
Total Liabilities and Stockholders’ Deficit |
| $ |
|
| $ |
| ||
(The accompanying notes are an integral part of these consolidated financial statements)
| 14 |
| Table of Contents |
IGEN NETWORKS CORP.
Consolidated Statements of Operations
(Expressed in U.S. dollars)
|
| Years ended December 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
|
|
|
|
|
|
| ||
Revenues: |
|
|
|
|
|
| ||
Sales, services |
| $ |
|
| $ |
| ||
Total Revenues |
|
|
|
|
|
| ||
Cost of goods sold |
|
|
|
|
|
| ||
Gross (Loss) Profit |
|
| ( | ) |
|
|
| |
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
|
|
|
|
| ||
Payroll and related |
|
|
|
|
|
| ||
Management and consulting fees |
|
|
|
|
|
| ||
Stock-based director expense |
|
|
|
|
|
| ||
Total Expenses |
|
|
|
|
|
| ||
Loss Before Other Income (Expense) |
|
| ( | ) |
|
| ( | ) |
Other Income (Expense): |
|
|
|
|
|
|
|
|
Accretion of discounts on convertible debentures |
|
| ( | ) |
|
| ( | ) |
Change in fair value of derivative liabilities |
|
| ( | ) |
|
|
| |
Gain on extinguishment of debt, net |
|
|
|
|
|
| ||
Interest expense |
|
| ( | ) |
|
| ( | ) |
Total Other Income (Expense), net |
|
|
|
|
| ( | ) | |
Net Loss before Provision for Income Taxes |
|
| ( | ) |
|
| ( | ) |
Provision for Income Taxes |
|
| ( | ) |
|
| ( | ) |
Net Loss |
|
| ( | ) |
|
| ( | ) |
Accrued and deemed dividend on redeemable convertible preferred stock |
|
| (251,592 | ) |
|
| (371,926 | ) |
Net loss attributable to common stockholders |
|
| ( | ) |
|
| ( | ) |
Basic and Diluted Loss per Common Share |
| $ | ( | ) |
| $ | ( | ) |
Weighted Average Number of Common Shares Outstanding |
|
|
|
|
|
| ||
(The accompanying notes are an integral part of these consolidated financial statements)
| 15 |
| Table of Contents |
IGEN NETWORKS CORP.
Consolidated Statements of Redeemable Convertible Preferred stock and Stockholders’ Deficit
(Expressed in U.S. dollars)
|
| Redeemable Series A Convertible Preferred Stock |
|
| Series B Preferred Stock |
|
| Common Stock |
|
| Additional Paid in |
|
| Accumulated |
|
| Total Stockholders’ Equity |
| ||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| (Deficit) |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Balance, January 1, 2021 |
|
|
|
| $ |
|
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of Series A preferred stock for cash, net of costs and discounts |
|
|
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued dividends on Series A preferred stock |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of Series A preferred shares to common stock |
|
| ( | ) |
|
| ( | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Series B preferred stock |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of common stock issued for cash |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of common stock issued for exercise of convertible note, including fees |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cashless exercise of warrants |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for conversion of payables |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for commitment fee on equity line |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for loan extension |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares to directors |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares for services |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares for cash, net of commitment fees |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cashless exercise of warrants |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of Series A preferred stock for cash, net of costs and discounts |
|
|
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued dividends on Series A preferred stock |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of Series A preferred shares to common stock |
|
| ( | ) |
|
| ( | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of Series B Preferred Stock |
|
| - |
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| - |
|
|
|
|
|
| ( | ) |
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2022 |
|
|
|
| $ |
|
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) | |||||||
(The accompanying notes are an integral part of these consolidated financial statements)
| 16 |
| Table of Contents |
IGEN NETWORKS CORP.
Consolidated Statements of Cash Flows
(Expressed in U.S. dollars)
|
| Years ended December 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Cash Flows from Operating Activities |
|
|
|
|
|
| ||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Accretion of discounts on convertible debentures and preferred stock |
|
|
|
|
|
| ||
Change in fair value of derivative liabilities |
|
|
|
|
| ( | ) | |
Interest charge for derivative liabilities in excess of face amount of debt |
|
|
|
|
|
|
| |
Gain on settlement of debt |
|
| ( | ) |
|
|
| |
Amortization of right of use asset |
|
|
|
|
|
| ||
Stock-based compensation |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts and other receivables |
|
|
|
|
| ( | ) | |
Inventory |
|
|
|
|
| ( | ) | |
Prepaid expenses and deposits |
|
|
|
|
| ( | ) | |
Accounts payable and accrued liabilities |
|
| ( | ) |
|
| ( | ) |
Deferred revenue, net |
|
|
|
|
|
| ||
Net Cash Used in Operating Activities |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
Proceeds from issuance of preferred stock, net of offering costs |
|
|
|
|
|
| ||
Proceeds from notes payable |
|
|
|
|
|
| ||
Repayment of lease liability |
|
| ( | ) |
|
| ( | ) |
Repayment of notes payable |
|
| ( | ) |
|
| ( | ) |
Repurchase of Series B preferred stock |
|
| ( | ) |
|
|
| |
Proceeds from issuance of common stock |
|
|
|
|
|
| ||
Net Cash Provided by Financing Activities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Change in Cash |
|
| ( | ) |
|
|
| |
Cash, Beginning of Year |
|
|
|
|
|
| ||
Cash, End of Year |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Supplemental Disclosures: |
|
|
|
|
|
|
|
|
Interest paid |
| $ |
|
| $ |
| ||
Income taxes paid |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Non-cash Investing and Financing Activities: |
|
|
|
|
|
|
|
|
Conversion of notes payable and accrued interest: |
|
|
|
|
|
|
|
|
Fair value of common shares issued |
| $ |
|
| $ |
| ||
Derecognition of notes payable and accrued interest |
| $ |
|
| $ | ( | ) | |
Derecognition of unamortized discount |
| $ |
|
| $ |
| ||
Derecognition of derivative liabilities |
| $ |
|
| $ | ( | ) | |
Conversion of preferred stock: |
|
|
|
|
|
|
|
|
Fair value of common stock issued |
| $ |
|
| $ |
| ||
Derecognition of preferred stock |
| $ | ( | ) |
| $ | ( | ) |
Derecognition of unamortized discount |
| $ |
|
| $ |
| ||
Derecognition of derivative liabilities |
| $ | ( | ) |
| $ | ( | ) |
Deemed divided |
| $ | ( | ) |
| $ | ( | ) |
Discount related to issuance of preferred stock |
| $ |
|
| $ |
| ||
Deemed dividends on preferred stock (excluding conversions) |
| $ |
|
| $ | ( | ) | |
Cashless exercise of warrants |
| $ |
|
| $ |
| ||
Issuance of common shares for commitment fee on equity line |
| $ |
|
| $ |
| ||
Right of use asset |
| $ |
|
| $ |
| ||
Reclassification of security deposit to accounts payable |
| $ |
|
| $ |
| ||
(The accompanying notes are an integral part of these consolidated financial statements)
| 17 |
| Table of Contents |
IGEN NETWORKS CORP.
Notes to the Consolidated Financial Statements
Years Ended December 31, 2022 and 2021
(Expressed in U.S. dollars)
1. Organization and Description of Business
IGEN Networks Corp. (“IGEN”, the “Company”, “we”, “our”) was incorporated in the State of Nevada on November 14, 2006, under the name of Nurse Solutions Inc. On September 19, 2008, the Company changed its name to Sync2 Entertainment Corporation and traded under the symbol SYTO. On September 15, 2008, the Company became a reporting issuer in British Columbia, Canada. On May 26, 2009, the Company changed its name to IGEN Networks Corp. On March 25, 2015, the Company was listed on the Canadian Securities Exchange (CSE) under the trading symbol IGN and the Company became a reporting Venture Issuer in British Columbia and Ontario, Canada.
The Company’s principal business is the development and marketing of software services for the automotive industry. The Company works with wireless carriers, hardware suppliers and software developers to provide direct and secure access to information on the vehicle and the driver’s behavior. The software services are delivered from the AWS Cloud to the consumer and their families over the wireless networks and accessed from any mobile or desktop device. The software services are marketed to automotive dealers, financial institutions, and direct-to-consumer through various commercial and consumer brands.
Going Concern
The consolidated financial statements as of and for the year ended December 31, 2022 have been prepared assuming that the Company will continue as a going concern. The Company has experienced recurring losses from operations and has negative operating cash flows since inception, has a working capital deficit of $
2. Summary of Significant Accounting Policies
Basic of Presentation and Consolidation
These consolidated financial statements and related notes include the records of the Company and the Company’s wholly-owned subsidiary, Nimbo Tracking LLC, which is based in the USA.
All intercompany transactions and balances have been eliminated. These consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), are expressed in U.S. dollars, and, in management’s opinion, have been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies summarized below.
Use of Estimates
The preparation of these consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to allowance for doubtful accounts, valuation of inventory, the useful life and recoverability of equipment, impairment of goodwill, valuation of notes payable and convertible debentures, fair value of stock-based compensation and derivative liabilities, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with an original maturity of three months or less at the time of acquisition to be cash equivalents.
| 18 |
| Table of Contents |
Accounts Receivable
Accounts receivable are recognized and carried at the original invoice amount less an allowance for expected uncollectible amounts. Inherent in the assessment of the allowance for doubtful accounts are certain judgments and estimates including, among others, the customer’s willingness or ability to pay, the Company’s compliance with customer invoicing requirements, the effect of general economic conditions and the ongoing relationship with the customer. Accounts with outstanding balances longer than the payment terms are considered past due. We do not charge interest on past due balances. The Company writes off trade receivables when all reasonable collection efforts have been exhausted. Bad debt expense is reflected as a component of general and administrative expenses in the consolidated statements of operations. As of December 31, 2022 and 2021, the allowance for doubtful accounts was approximately $
Inventory
Inventory consists of vehicle tracking and recovery devices and is comprised entirely of finished goods that can be resold. Inventory is stated at the lower of cost or net realizable value. Cost is determined on a first-in, first-out (FIFO) basis. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and selling costs. There was no provision for inventory recorded during the years ended December 31, 2022 and 2021.
Equipment
Office equipment, computer equipment, and software are recorded at cost. Depreciation is provided annually at rates and methods over their estimated useful lives. Management reviews the estimates of useful lives of the assets every year and adjusts them on prospective basis, if needed. All equipment was fully depreciated as of December 31, 2022 and 2021. For purposes of computing depreciation, the method of depreciating equipment is as follows:
Computer equipment | |
Office equipment | |
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 on December 31 of each year or more frequently if events or changes in circumstances indicate the asset may be impaired. These events and circumstances may include a significant change in legal factors or in the business climate, a significant decline in the Company’s share price, an adverse action of assessment by a regulator, unanticipated competition, a loss of key personnel, significant disposal activity and the testing of recoverability for a significant asset group.
Goodwill impairment is measured as the amount by which a reporting unit’s carrying value exceeds its fair value.
The Company has only one reporting unit. Therefore, all of the Company’s goodwill relates to that reporting unit, and at December 31, 2022 and 2021, the carrying value for that reporting unit is negative.
Impairment of Long-lived Assets
The Company reviews long-lived assets, such as equipment, for impairment whenever events or changes in the circumstances indicate that the carrying value may not be recoverable. If the total of the estimated undiscounted future cash flows is less than the carrying value of the asset, an impairment loss is recognized for the excess of the carrying value over the fair value of the asset during the year the impairment occurs.
Fair Value Measurements and 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.
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.
| 19 |
| Table of Contents |
See Note 7 for fair value measurement information related to the Company’s derivative liabilities.
The fair values of cash and cash equivalents, accounts and other receivables, restricted cash, and accounts payable and accrued liabilities, approximate their carrying values due to the immediate or short-term maturity of these financial instruments. Foreign currency transactions are primarily undertaken in Canadian dollars. The fair value of cash is determined based on “Level 1” inputs and the fair value of derivative liabilities is determined based on “Level 3” inputs. The recorded values of notes payable, approximate their current fair values because of their nature and respective maturity dates or durations. The financial risk is the risk to the Company’s operations that arise from fluctuations in foreign exchange rates and the degree of volatility to these rates. Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk. Financial instruments that potentially subject the Company to concentrations of credit risk consists of cash and accounts receivable. The Company places its cash and cash equivalents in what it believes to be credit-worthy financial institutions.
Revenue Recognition and Deferred Revenue
We recognize revenue in accordance with ASC 606, “Revenue from Contracts with Customers”, using the five-step model, including (1) identify the contract with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue in accordance with U.S. GAAP. Title and risk of loss generally pass to our customers upon delivery, as we have insurance for lost shipments. In limited circumstances where either title or risk of loss pass upon destination or acceptance or when collection is not reasonably assured, we defer revenue recognition until such events occur. We derive substantially all our revenues from the sale of products and services combined into one performance obligation. Product revenue includes the shipment of product according to the agreement with our customers. Service revenue include vehicle tracking services and customer support (technical support), installations and consulting. A contract usually includes both product and services. For these contracts, the Company accounts for individual performance obligations separately if they are distinct. Performance obligations include, but are not limited to, pass-thru harnesses and vehicle tracking services. Almost all of our revenues are derived from customers located in United States of America in the auto industry. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. Standalone selling prices are typically estimated based on observable transactions when these services are not sold on a standalone basis. At contract inception, an assessment of the goods and services promised in the contracts with customers is performed and a performance obligation is identified for each distinct promise to transfer to the customer a good or service (or bundle of goods or services). To identify the performance obligations, the Company considers all of the goods or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. Revenue is recognized when our performance obligation has been met. The Company has insignificant revenues related to product sales. For these revenues, the Company considers control to have transferred upon delivery because the Company has a present right to payment at that time, the Company has transferred use of the asset, and the customer is able to direct the use of, and obtain substantially all of the remaining benefits from, the asset. For arrangements under which the Company provides vehicle tracking services, which account for the substantial portion of the Company’s revenues, the Company satisfies its performance obligations as those services are performed whereby the customer simultaneously receives and consumes the benefits of such services under the agreement. Revenues are recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities.
The Company provides product warranties with varying lengths of time and terms. The product warranties are considered to be assurance-type in nature and do not cover anything beyond ensuring that the product is functioning as intended. Based on the guidance in ASC 606, assurance-type warranties do not represent separate performance obligations. The Company has historically experienced a low rate of product returns under the warranty program.
Management assesses the business environment, customers’ financial condition, historical collection experience, accounts receivable aging, and customer disputes to determine whether collectability is reasonably assured.
Revenue relating to the sale of service fees on its vehicle tracking and recovery services is recognized over the life of the contact. The service renewal fees are offered in terms ranging from
Deferred revenues are recorded net of contract assets when cash payments are received from customers in advance of the Company’s performance. Contract assets represent the costs of (1) commission costs, (2) installation costs, and (3) the underlying hardware to enable the Company to perform on its contracts with customers and are amortized using the same method and term as deferred revenues. As of December 31, 2022 and 2021, deferred revenues, net of contract assets totaled $
During the year ended December 31, 2022, the Company recorded additions to deferred revenues of $
| 20 |
| Table of Contents |
Financing Costs and Debt Discount
Financing costs and debt discounts are recorded net of notes payable and convertible debentures in the consolidated balance sheets. Amortization of financing costs and the debt discounts is calculated using the effective interest method over the term of the debt and is recorded as interest expense in the consolidated statements of operations.
Income Taxes
Deferred income taxes are provided on the asset and liability method whereby deferred income tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred income tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred income tax assets will not be realized. Deferred income tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Stock-based Compensation
The Company accounts for stock-based payments in accordance with stock-based payment accounting guidance which requires all stock-based payments to be recognized based upon their fair values. The fair value of stock-based awards is estimated at the grant date using the Black-Scholes Option Pricing Model and the portion that is ultimately expected to vest is recognized as compensation cost over the requisite service period. The determination of fair value using the Black-Scholes Option Pricing Model is affected by the Company’s stock price as well as assumptions regarding a number of complex and subjective variables, including expected stock price volatility, risk-free interest rate, expected dividends and projected employee stock option exercise behaviors. The Company accounts for forfeitures of unvested awards as they occur.
Derivative Financial Instruments
The Company classifies as equity any contracts that require physical settlement or net-share settlement or provide us a choice of net cash settlement or settlement in our own shares (physical settlement or net-share settlement) provided that such contracts are indexed to our own stock as defined in ASC Topic 815-40 “Contracts in Entity’s Own Equity.” The Company classifies as assets or liabilities any contracts (including embedded conversion features) that require net-cash settlement including a requirement to net cash settle the contract if an event occurs and if that event is outside our control or give the counterparty a choice of net-cash settlement or settlement in shares. The Company assesses classification of its derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required.
Loss Per Share
Basic earnings (loss) per share are computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted earnings per share give effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, and convertible debentures, using the if-converted method. In computing diluted earnings (loss) per share, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted earnings (loss) per share exclude all potentially issuable shares if their effect is anti-dilutive. Because the effect of conversion of the Company’s dilutive securities is anti-dilutive, diluted loss per share is the same as basic loss per share for the periods presented. As of December 31, 2022 and 2021, the Company has
Recent Accounting Pronouncement
In August 2020, the FASB issued ASU 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815 - 40)” (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU is part of the FASB’s simplification initiative, which aims to reduce unnecessary complexity in U.S. GAAP. The ASU’s amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The Company is currently evaluating the impact ASU 2020-06 will have on its financial statements.
| 21 |
| Table of Contents |
The Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its consolidated financial position or results of operations.
3. Accounts and Other Receivables
|
| December 31, 2022 |
|
| December 31, 2021 |
| ||
Trade accounts receivable |
| $ |
|
| $ |
| ||
Allowance for doubtful accounts |
|
| ( | ) |
|
| ( | ) |
|
| $ |
|
| $ |
| ||
4. Goodwill
As of December 31, 2022 and 2021, the Company had goodwill of $
5. Accounts Payable and Accrued Liabilities
|
| December 31, 2022 |
|
| December 31, 2021 |
| ||
Trade accounts payable |
| $ |
|
| $ |
| ||
Accrued liabilities |
|
|
|
|
|
| ||
Lease liability, current portion |
|
|
|
|
|
| ||
Accrued interest payable |
|
|
|
|
|
| ||
Payroll and commissions payable |
|
|
|
|
|
| ||
Unrecognized tax position |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
| 22 |
| Table of Contents |
6. Convertible Debentures and Notes Payable
On May 17, 2019, the Company entered into a Convertible Promissory Note (“Promissory Note”) with Crown Bridge Partners, LLC (the “Holder”). The Promissory Note bears interest at
The Conversion Price, as defined in the agreement, is the lesser of (i) the lowest Trading Price (as defined below) during the previous 25 trading day period ending on the latest complete trading day prior to the date of this Promissory Note or (ii) the Variable Conversion Price (as defined below). The Variable Conversion Price means the lowest one Trading Price (as defined below) for the common stock during the 25 Trading Day period ending on the last complete Trading Day prior to the Conversion Date. Trading Price means, for any security as of any date, the lesser of the (i) lowest traded price and (ii) lowest closing bid price. Based on the Company’s examination of the conversion feature and the relative accounting guidance, the Company has determined that the conversion feature should be treated as a derivative liability for accounting purposes.
In connection with the Promissory Note, the Company also entered into a Securities Purchase Agreement with the Holder which states that the Company will also issue to the Holder a warrant to purchase an amount of shares of its common stock equal to 50% of the face value of each respective tranche divided by $
Per the terms of the Common Stock Purchase Warrant agreement, on May 17, 2019, the Company issued a warrant to purchase
On June 19, 2020, the Company received $
On July 10, 2020, the Company received $
On May 4, 2020, the Company entered into a Paycheck Protection Program (“PPP”) Loan with a principal amount of $
On July 7, 2020, the Company entered into a secured disaster loan with the SBA with a principal amount of $
On November 2, 2020, the Company received $
On December 13, 2021, the Company received $
During the year ended December 31, 2021, the holders of the convertible notes converted a total of $
| 23 |
| Table of Contents |
During the year ended December 31, 2022, the Company entered into four separate notes with an investor, for total principal of $
As of December 31, 2022 long-term debt matures as follows:
Year Ending |
| Notes Payable |
|
| Convertible Notes |
|
| Total |
| |||
2023 |
| $ |
|
| $ |
|
| $ |
| |||
2024 |
|
|
|
|
|
|
|
|
| |||
2025 |
|
|
|
|
|
|
|
|
| |||
2026 |
|
|
|
|
|
|
|
|
| |||
2027 |
|
|
|
|
|
|
|
|
| |||
Thereafter |
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ |
|
| $ |
|
| $ |
| |||
7. Derivative Liabilities
During the years ended December 31, 2022 and 2021, the Company had outstanding convertible debentures with variable exercise prices based on market rates (see Note 6) and convertible series A preferred stock with variable exercise prices based on market rates (see Note 9). The Company records the fair value of the conversion features with variable exercise prices based on future market rates in accordance with ASC 815. The fair value of the derivative liabilities is revalued on each balance sheet date with corresponding gains and losses recorded in the consolidated statements of operations. The Company uses a multi-nominal lattice model to fair value the derivative liabilities. The following inputs and assumptions were used to value the conversion features outstanding during the years ended December 31, 2022 and 2021, assuming no expected dividends:
|
| 2022 |
|
| 2021 |
| ||
Expected volatility |
|
| % |
|
| % | ||
Risk free interest rate |
|
| % |
|
| % | ||
Expected life (in years) |
|
|
|
|
|
| ||
The following table presents the Company’s embedded conversion features of its convertible debt and preferred stock measured at fair value on a recurring basis as of December 31, 2022 and 2021.
|
| Level 3 Carrying Value as of December 31, 2022 |
|
| Level 3 Carrying Value as of December 31, 2021 |
| ||
Derivative liabilities: |
|
|
|
|
|
| ||
Embedded conversion feature – convertible debt |
| $ |
|
| $ |
| ||
Embedded conversion feature – preferred stock |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
The following table provides a reconciliation of the beginning and ending balances for the Company’s derivative liabilities measured at fair value using Level 3 inputs:
|
| For The Year Ended December 31, 2022 |
|
| For The Year Ended December 31, 2021 |
| ||
Embedded Conversion Features – Debt Instruments |
|
|
|
|
|
| ||
Balances, as of the beginning of the year |
| $ |
|
| $ |
| ||
Derivative liabilities recorded upon issuance of debt instruments |
|
|
|
|
|
| ||
Extinguishment due to conversion of debt instruments |
|
|
|
|
| ( | ) | |
Net changes in fair value included in net loss |
|
| ( | ) |
|
| ( | ) |
Ending balance |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Embedded Conversion Features – Preferred Stock |
|
|
|
|
|
|
|
|
Balances, as of the beginning of the year |
| $ |
|
| $ |
| ||
Derivative liabilities recorded upon issuance of preferred stock |
|
|
|
|
|
| ||
Extinguishment due to conversion of preferred stock |
|
| ( | ) |
|
| ( | ) |
Net changes in fair value included in net loss |
|
|
|
|
| ( | ) | |
Ending balance |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Total ending balance |
| $ |
|
| $ |
| ||
| 24 |
| Table of Contents |
8. Related Party Transactions
(a) | During the years ended December 31, 2022 and 2021, the Company incurred approximately $ |
|
|
(b) | During the years ended December 31, 2022 and 2021, the Company issued |
|
|
(c) | During the year ended December 31, 2022 and 2021, the Company recorded approximately $ |
9. Redeemable Preferred Stock and Stockholders’ Deficit
Preferred Stock
The Company is authorized to issue
On February 1, 2021, the Company entered into a Series A Preferred Stock Purchase Agreement with an investor. The Company issued
On March 1, 2021, the Company entered into a Series A Preferred Stock Purchase Agreements with an investor. The Company issued
On April 5, 2021, the Company entered into a Series A Preferred Stock Purchase Agreements with an investor. The Company issued
On April 30, 2021, the Company entered into a Series A Preferred Stock Purchase Agreements with an investor. The Company issued
On June 17, 2021, the Company entered into a Series A Preferred Stock Purchase Agreements with an investor. The Company issued
On August 11, 2021, the Company entered into a Series A Preferred Stock Purchase Agreements with an investor. The Company issued
On September 13, 2021, the Company entered into a Series A Preferred Stock Purchase Agreements with an investor. The Company issued
On December 27, 2021, the Company entered into a Series A Preferred Stock Purchase Agreement with an investor. The Company issued
On February 2, 2022, the Company entered into a Series A Preferred Stock Purchase Agreement with an investor. The Company issued
On March 24, 2022, the Company entered into a Series A Preferred Stock Purchase Agreement with an investor. The Company issued
On April 26, 2022, the Company entered into a Series A Preferred Stock Purchase Agreement with an investor. The Company issued
On May 20, 2022, the Company entered into a Series A Preferred Stock Purchase Agreement with an investor. The Company issued
On August 23, 2022, the Company entered into a Series A Preferred Stock Purchase Agreement with an investor. The Company issued
On September 26, 2022, the Company entered into a Series A Preferred Stock Purchase Agreement with an investor. The Company issued
On November 2, 2022, the Company entered into a Series A Preferred Stock Purchase Agreement with an investor. The Company issued
On December 14, 2022, the Company entered into a Series A Preferred Stock Purchase Agreement with an investor. The Company issued
Rights and Privileges of the Series A Preferred Stock
| · | Voting – Series A Preferred |
| · | Dividends – |
| · | Liquidation Preference – |
| · | Redemption – Company has the right to redeem the shares from the issuance date through 270 days following the issuance date using the table noted in the Certificate of Designations, Preferences, Rights and Limitations of Series A Convertible Preferred Stock agreement. After 270 days, except for the Mandatory Redemption, the Company does not have the right to redeem the shares. |
| · | Mandatory Redemption – |
| · | Conversion – |
| · | Default Adjustments – Upon the occurrence of any Event of Default, the Stated Value will be increased between 150% and 200%, depending on the Event of Default. |
| 25 |
| Table of Contents |
Based on the terms of the conversion feature, the Company could be required to issue an infinite number of shares of common stock. As such, the Company has determined the conversion feature to be a derivative liability under relevant accounting guidance. The Company estimated the fair value of the conversion feature using the Binomial Lattice Model on the date of issuance, on the date of each conversion notice, and remeasures the fair value at each reporting period. During the year ended December 31, 2022, the Company issued 445,500 shares of series A preferred stock for proceeds of $
During the year ended December 31, 2022, the holder of the Series A preferred stock converted
Rights and Privileges of the Series B Preferred Stock
In February 2021, the Company issued
During the year ended December 31, 2022, the Company repurchased
Common Stock
2022
During the year ended December 31, 2022, the Company issued
During the year ended December 31, 2022, the Company issued
During the year ended December 31, 2022, the Company issued
During the year ended December 31, 2022, the Company issued
During the year ended December 31, 2022, the Company issued
During the year ended December 31, 2022, the Company issued
2021
During the year ended December 31, 2021, the Company sold a total of
During the year ended December 31, 2021, the Company issued a total of
During the year ended December 31, 2021, the Company issued
During the year ended December 31, 2021, the Company issued
During the year ended December 31, 2021, the Company issued
During the year ended December 31, 2021, the Company issued a total of
| 26 |
| Table of Contents |
10. Share Purchase Warrants
The following table summarizes the activity of the Company’s share purchase warrants:
|
| Number of warrants |
|
| Weighted average exercise price |
| ||
|
|
|
|
|
|
| ||
Balance, January 1, 2021 |
|
|
|
| $ |
| ||
Issued |
|
| - |
|
|
|
| |
Adjusted for triggered down-round provisions |
|
|
|
|
|
|
| |
Exercised |
|
|
|
|
|
|
| |
Expired |
|
| ( | ) |
|
|
| |
Balance, December 31, 2021 |
|
|
|
|
|
| ||
Issued |
|
| - |
|
|
|
| |
Adjusted for triggered down-round provisions |
|
| - |
|
|
|
| |
Exercised |
|
| ( | ) |
|
|
| |
Expired |
|
| ( | ) |
|
|
| |
Balance, December 31, 2022 |
|
|
|
| $ |
| ||
As of December 31, 2022, the following share purchase warrants were outstanding:
Number of warrants outstanding |
|
| Exercise price |
|
| Expiration date |
| |
|
| $ |
|
|
| |||
|
| $ |
|
|
| |||
|
|
|
|
|
|
|
| |
During the year ended December 31, 2022, a warrant holder exercised
| 27 |
| Table of Contents |
11. Stock Options
The Company established a stock option plan for directors, officers, employees and consultants of the Company (the “Plan”). The purpose of the Plan is to give to directors, officers, employees and consultants of the Company, as additional compensation, the opportunity to participate in the profitability of the Company by granting to such individuals options, exercisable over periods of up to ten (10) years as determined by the board of directors of the Company, to buy shares of the Company at a price equal to the Market Price (as defined) prevailing on the date the option is granted. As of December 31, 2022, there were
The following table summarizes the activity of the Company’s stock options:
|
| Number of options |
|
| Weighted average exercise price |
|
| Aggregate intrinsic value |
| |||
|
|
|
|
|
|
|
|
|
| |||
Balance, January 1, 2021 |
|
|
|
| $ |
|
|
|
| |||
Granted |
|
| - |
|
|
|
|
|
|
| ||
Exercised |
|
| - |
|
|
|
|
|
|
| ||
Cancelled / forfeited |
|
| ( | ) |
|
|
|
|
|
| ||
Balance, December 31, 2021 |
|
|
|
| $ |
|
| $ |
| |||
Granted |
|
| - |
|
|
|
|
|
|
|
| |
Cancelled / forfeited |
|
| ( | ) |
|
|
|
|
|
|
| |
Balance, December 31, 2022 |
|
|
|
| $ |
|
| $ |
| |||
Vested as of December 31, 2022 |
|
|
|
| $ |
|
| $ |
| |||
Unvested as of December 31, 2022 |
|
| - |
|
| $ |
|
| $ |
| ||
|
|
| 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 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
| $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
| $ |
|
|
|
|
| $ |
| |||||
During the years ended December 31, 2022 and 2021, the Company did not issue any options to employees. As of December 31, 2022, the Company had no unrecognized compensation expense.
| 28 |
| Table of Contents |
12. Segments
The Company has one reportable segment: vehicle tracking and recovery solutions. The Company allocates resources to and assesses the performance of each reportable segment using information about its revenue and operating income (loss). The Company does not evaluate operating segments using discrete asset information.
Segmentation by geographical location is not presented as all revenues are earned in the U.S. Total assets by segment are not presented as that information is not used to allocate resources or assess performance at the segment level and is not reviewed by the Chief Operating Decision Maker of the Company.
13. Risks and Uncertainties
The Company extends credit to customers on an unsecured basis in the normal course of business. The Company’s policy is to perform an analysis of the recoverability of its receivables at the end of each reporting period and to establish allowances where appropriate. The Company analyzes historical bad debts and contract losses, customer concentrations, and customer credit-worthiness when evaluating the adequacy of the allowances.
During the year ended December 31, 2022 and 2021, the Company had four and two customers which accounted for
As of December 31, 2022 and 2021, the Company had three and one customers, respectively, which accounted for
| 29 |
| Table of Contents |
14. Income Taxes
The Company’s income tax provision consists of the following:
|
| 2022 |
|
| 2021 |
| ||
Current: |
|
|
|
|
|
| ||
Federal |
| $ |
|
| $ |
| ||
State |
|
|
|
|
|
| ||
Foreign |
|
|
|
|
|
| ||
Total Current |
|
|
|
|
|
| ||
Deferred: |
|
|
|
|
|
|
|
|
Federal |
|
|
|
|
|
| ||
State |
|
|
|
|
|
| ||
Foreign |
|
|
|
|
|
| ||
Total Deferred |
|
|
|
|
|
| ||
Provision for income taxes |
| $ |
|
| $ |
| ||
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:
|
| 2022 |
|
| 2021 |
| ||
Computed tax benefit at federal statutory rate |
| $ | ( | ) |
| $ |
| |
State taxes |
|
|
|
|
|
| ||
Permanent items |
|
|
|
|
|
| ||
Stock-based compensation |
|
|
|
|
|
| ||
Incentive stock options |
|
|
|
|
|
| ||
Conversion feature derivative liability |
|
|
|
|
|
| ||
Interest expense, derivative liability |
|
|
|
|
|
| ||
Uncertain tax positions |
|
|
|
|
|
| ||
Impact of difference related to foreign earnings |
|
|
|
|
|
| ||
Gain on extinguishment of debt |
|
|
|
|
|
| ||
Change in fair value of derivative liability |
|
|
|
|
|
| ||
Valuation allowance |
|
|
|
|
| ( | ) | |
Provision for income taxes |
| $ |
|
| $ |
| ||
Deferred tax assets and liabilities reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:
|
| 2022 |
|
| 2021 |
| ||
Deferred Tax Assets: |
|
|
|
|
|
| ||
Net operating loss carryforwards |
| $ |
|
| $ |
| ||
Stock-based compensation |
|
|
|
|
|
| ||
Accounts receivable and other timing differences |
|
|
|
|
|
| ||
Basis difference in assets and debt |
|
| ( | ) |
|
| ( | ) |
Total Deferred Tax Asset |
|
|
|
|
|
| ||
Valuation allowance |
|
| ( | ) |
|
| ( | ) |
Net Deferred Tax Asset |
| $ |
|
| $ |
| ||
Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the net deferred tax assets for the U.S. federal and state have been fully offset by a valuation allowance.
As of December 31, 2022, the Company had net operating loss carryforwards for federal and state income tax purposes of $
| 30 |
| Table of Contents |
The Company is required to file US federal and California tax returns, however the Company has not filed its federal or state returns since 2009 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 2007 remain open to examination.
The Company has adopted FASB ASC 740, “Income Taxes” to account for income taxes. ASC 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statement. This standard prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in the tax return. ASC 740 also provides guidance on derecognition of tax benefits, classification on the balance sheet, interest and penalties, accounting in interim periods, disclosure and transaction. In accordance with ASC 740-10-50, the Company is classifying interest and penalties as a component of tax expense.
The Company has a reserve related to unrecognized tax positions of $
|
| Federal and State |
| |
Balance at January 1, 2022 |
| $ |
| |
Additions for tax positions related to current year |
|
|
| |
Additions for tax positions related to prior years |
|
|
| |
Balance at December 31, 2022 |
| $ |
| |
15. Commitments and Contingencies
Withheld Payroll Taxes
Since its inception, the Company has made several payments to employees for wages, net of state and federal income taxes. Due to cash constraints, the Company has not yet remitted all of these withheld amounts to the appropriate government agency. Accordingly, as of December 31, 2022 and 2021 the Company has recorded $
Operating Lease
On September 1, 2021 the Company entered into a lease for office space under an operating lease for approximately
Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease assets represent our right to use an underlying asset and are based upon the operating lease liabilities as adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets. To determine the present value of lease payments not yet paid, the Company estimates incremental secured borrowing rates corresponding to the maturities of the leases.
The Company’s lease contains rent escalations over the lease term. The Company recognizes expense for these leases on a straight-line basis over the lease term. Additionally, tenant incentives used to fund leasehold improvements are recognized when earned and reduce our right-of-use asset related to the lease. These are amortized through the right-of-use asset as reductions of expense over the lease term. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The Company has elected the short-term lease recognition exemption for all applicable classes of underlying assets. Short-term disclosures include only those leases with a term greater than one month and 12 months or less, and expense is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less, that do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise, are not recorded on the consolidated balance sheet.
The components of lease expense were as follows:
|
| Year Ended December 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Operating lease cost |
| $ |
|
| $ |
| ||
| 31 |
| Table of Contents |
Other information related to leases was as follows:
|
| Year Ended December 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Supplemental Cash Flows Information |
|
|
|
|
|
| ||
Cash paid for amounts included in the measurement of lease liability: |
|
|
|
|
|
| ||
Operating cash flows from operating lease |
| $ |
|
| $ |
| ||
Operating lease asset obtained in exchange for lease liability: |
|
|
|
|
|
|
|
|
Operating lease |
| $ |
|
| $ |
| ||
Remaining lease term |
|
|
|
|
|
|
|
|
Operating lease |
|
|
|
| ||||
Discount rate |
|
|
|
|
|
|
|
|
Operating lease |
|
| % |
|
| % | ||
Future payments under noncancelable operating leases having initial or remaining terms of one year or more are as follows for the succeeding fiscal year and thereafter:
|
| For the Years Ended December 31, |
| |
|
|
|
| |
2023 |
| $ |
| |
2024 |
|
|
| |
Total minimum lease payments |
|
|
| |
Less imputed interest |
|
| ( | ) |
Present value of lease liabilities |
|
|
| |
Less current portion of operating lease liability (included in accounts payable and accrued expenses) |
|
| ( | ) |
Non-current operating lease liability |
| $ |
| |
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.
| 32 |
| Table of Contents |
16. Subsequent Events
On February 15, 2023, the Company issued
On February 22, 2023, the Company issued
On March 1, 2023, the Company issued
On March 3, 2023, the Company issued
The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the consolidated financial statements are available to be issued. Any material events that occur between the balance sheet date and the date that the consolidated financial statements were available for issuance are disclosed as subsequent events, while the consolidated financial statements are adjusted to reflect any conditions that existed at the balance sheet date. Based upon this review, except as disclosed within the footnotes or as discussed below, the Company did not identify any subsequent events that require adjustment or disclosure in the consolidated financial statements.
| 33 |
| Table of Contents |
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
No items noted.
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, 2022. 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, 2022, management assessed the effectiveness of our internal control over financial reporting. The Company’s management is responsible for establishing and maintain adequate internal control over financial reporting for the Company. Internal control over financial reporting is a set of processes designed by or under the supervision of the Company’s CEO, COO and CFO (or executives performing equivalent functions) to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:
· | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of our assets; |
|
|
· | provide reasonable assurance our transactions are recorded as necessary to permit preparation of our financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; |
|
|
· | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. In evaluating the effectiveness of our internal control over financial reporting, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013). Based on that evaluation, they concluded that during the period covered by this report, though there are weaknesses in the Company’s internal controls, given the current size of the organization, such internal controls and procedures as were in place were adequately effective to detect the inappropriate application of US GAAP. We did not identify any material weaknesses.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting identified in connection with our evaluation we conducted of the effectiveness of our internal control over financial reporting as of December 31, 2022, 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, 2022, there was no information required to be reported on Form 8-K which was not previously reported.
| 34 |
| Table of Contents |
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Directors and Executive Officers
The following lists the directors and executive officers of the Company as of March 30, 2023:
Name |
| Age |
|
| Position |
| Term of Office |
| |
Robert Nealon |
|
| 67 |
|
| Director, Chairman of the Board |
| July 8, 2010 to present |
|
Neil G. Chan |
|
| 61 |
|
| Director, Chief Executive Officer |
| September 1, 2011 to present |
|
Mark Wells |
|
| 61 |
|
| Director |
| January 17, 2018 to present |
|
Abel I. Sierra |
|
| 50 |
|
| Director, Chief Operating Officer |
| 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. He is also a member of the National Press Club and the Democratic National Club.
Neil G. Chan, Chief Executive Officer & Director
Mr. Chan is a career technologist who has pioneered disruptive technologies in more than 45 countries over the last 30 years. From start-up to $400M in annual revenues, Mr. Chan has led and created the best-in-class sales, marketing, and service organizations during the development of wireless data infrastructure, mobile solutions, Software-as-a-Service for commercial fleets, and Hybrid-Fiber-Cable(HFC) broadband infrastructure and solutions. Mr. Chan led the first technology transfer initiative between Canada and Mainland China on behalf of Spar Aerospace and Gandalf Technologies Inc., along with training, product marketing and sales responsibilities for growing Gandalf’s export markets. During early development of mobile data solutions, Mr. Chan was recruited to Motorola Inc., to lead the product marketing and development of the industry’s first mobile data solutions for public safety, taxi, utility, and field service markets. As Motorola’s Managing Director, Mr Chan lead the expansion of HFC broadband voice and data networks throughout the Asia Pacific region growing to $400M in annual revenues during the first three years of business formation. Along with founding members of the cable modem industry, Mr. Chan joined Airvana Inc., to lead business development for the early adoption of broadband wireless networks, leading to the industry’s first deployment of CDMA-based wireless broadband networks in North America. Most recently, Mr. Chan led worldwide sales and marketing of fleet management services for WebTech Wireless Inc., contributing five years of record growth and industry leadership across government and transportation markets. Mr. Chan has served on the Executive Review Board of Royal Roads University and continues to mentor and support early stage technology companies.
Mark Wells, Director
Mr. Wells is presently the President and CEO of Positioning Universal. During his 25 years of experience in the wireless industry, he has pioneered the development and marketing of wireless products, semiconductor technology, and leading edge wireless services. Mr. Wells co-founded DriveOK, which merged with Procon and eventually became Spireon where he led the company during its growth period in becoming the industry leader of GPS vehicle tracking technologies. Prior to Procon, Mr. Wells was the co-founder and CEO of Zucotto Wireless, where he raised $60M in venture capital to develop wireless semiconductor technologies and secured customers that included Panasonic, Nokia, and Alcatel. Mr. Wells has also held marketing roles with Nokia Mobile Phones where he managed a $10B revenue value of mobile phone products, and later served as Vice President & General Manager at DSP Communications which was eventually sold to Intel for $1.6B. Most recently, Mr. Wells has co-founded and mentored several dozen early-stage technology companies and served as a consultant to Fortune 500 companies.
Abel Sierra, Chief Operating Officer & Director
Mr. Sierra has served as President of the Antelope Valley Hispanic Chamber of Commerce (AVHCC) - the first President elected to a second term in the organization’s 20 year history. AVHCC’s mission is to provide Hispanic entrepreneurship, community growth, and development, by supporting economic programs designed to strengthen and expand the potential of all business. Prior and concurrent to Mr. Sierra’s role with AVHCC was his position as Agency Vice President of HBW Insurance and Financial Services. Mr. Sierra served as an Independent Associate with Legal Shield, Regional Vice President for Primerica Financial Services, marketing Representative for 21 st Century/AIG direct, community Representative for Palmdale School District and Palmdale Head Start. Mr. Sierra also served 14 years as a Counter Intelligence Specialist with the United States Marine Corps.
| 35 |
| Table of Contents |
Code of Ethics
The Company has not yet adopted a complete code of ethics policy as defined in Item 406 of Regulation S-K, however the company has adopted a disclosure policy that applies to all directors, officers and employees of the Company, as part of a program to establish a comprehensive code of ethics. The Company’s disclosure policy is available on its website www.igennetworks.net
Audit Committee and Financial Expert
The Company does not have an audit committee. The functions of an audit committee are done by the board of directors as a whole, as specified in section 3(a)(58)(B) of the Exchange Act. As such, the Company has no audit committee financial expert serving on an audit committee.
Item 11. Executive Compensation.
Summary Compensation Table
Name and principal position |
| Year |
| Salary ($)(1) |
|
| Stock awards ($) |
|
| Option awards ($)(2) |
|
| Total ($) |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Neil G. Chan – CEO & Director |
| 2022 |
|
| 142,000 |
|
|
| 9,000 |
|
|
| 0 |
|
|
| 149,000 |
|
Neil G. Chan – CEO & Director |
| 2021 |
|
| 142,000 |
|
|
| 0 |
|
|
| 0 |
|
|
| 142,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Abel I. Sierra – COO |
| 2022 |
|
| 121,000 |
|
|
| 9,000 |
|
|
| 0 |
|
|
| 130,000 |
|
Abel I. Sierra – COO |
| 2021 |
|
| 121,000 |
|
|
| 0 |
|
|
| 25,000 |
|
|
| 146,000 |
|
_____________
(1) | Salary for services as an executive officer. No compensation for services as a director |
(2) | Valuation of Stock and Option awards are based on the issuance details listed in Note 11 to the Company’s consolidated financial statements for the year ended December 31, 2021. |
Outstanding Equity Awards at Fiscal Year-end –
Name |
| Number of securities underlying unexercised options |
|
| Number of securities underlying unexercised options |
|
| Option exercise price |
|
| Option expiration date | ||||
|
| (#) |
|
| (#) |
|
| ($) |
|
| |||||
|
| exercisable |
|
| un-exercisable |
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Neil Chan, CEO |
|
| 1,000,000 |
|
|
| 0 |
|
| $ | 0.04 |
|
| 15-May-24 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Abel Sierra, COO |
|
| 500,000 |
|
|
| 0 |
|
| $ | 0.04 |
|
| 15-May-24 | |
The Company currently has no unearned or unvested stock awards, or equity incentive plan awards of either options or stock.
Director Compensation 1
Name and principal position |
| Year |
| Salary ($) |
|
| Stock awards ($) |
|
| Option awards ($) |
|
| Total ($) |
| ||||
Robert Nealon |
| 2022 |
|
| 0 |
|
|
| 9,000 |
|
|
| 0 |
|
|
| 9,000 |
|
Neil G. Chan |
| 2022 |
|
| 0 |
|
|
| 9,000 |
|
|
| 0 |
|
|
| 9,000 |
|
Abel Sierra |
| 2022 |
|
| 0 |
|
|
| 9,000 |
|
|
| 0 |
|
|
| 9,000 |
|
Mark Wells |
| 2022 |
|
| 0 |
|
|
| 9,000 |
|
|
| 0 |
|
|
| 9,000 |
|
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.
| 36 |
| Table of Contents |
Discussion of Executive and Director Compensation
Compensation of Directors
Directors received no cash compensation in 2022 but each received 5,000,000 shares of common stock..
Compensation of Executives
The CEO, Neil Chan who is also a director of the Company earned a salary of $142,000 in 2022, same as 2021. In 2019, Mr. Chan was granted another 1,000,000 stock options, resulting in a total of 1,000,000 options as of December 31, 2022.
Mr. Abel Sierra, COO, is paid $121,000 per annum. Mr. Sierra was granted 500,000 stock options during 2019. Mr. Sierra has a total of 500,000 stock options unexercised as of December 31, 2022.
There are currently no long term incentive plans or pension plans for directors or officers of the Company.
The Company does provide indemnity insurance coverage for directors and officers of the Company. Presently assessing alternative coverage.
Compensation Committee Interlocks and Insider Participation
The Company has no compensation committee. The board of directors as a whole acts in the capacity of a compensation committee. All executive officers of the Company are also directors of the Company and as such were and are able to vote on matters of compensation. Though the Company is not legally obligated to establish a compensation committee, we may do so when deemed advisable by the board.
Compensation Committee Report
As a smaller reporting company, the Company is not required to report the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K, and as such there was no review or recommendation as to its inclusion in this report.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following tables list information that is accurate as of December 31, 2022.
Securities authorized for issuance under equity compensation plans
The following details securities authorized for issuance as of December 31, 2022.
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 |
|
| 1,500,000 |
|
|
| 0.04 |
|
|
| 6,515,000 |
|
Equity compensation plans not approved by security holders |
|
| 0 |
|
|
| N/A |
|
|
| 0 |
|
Total |
|
| 1,500,000 |
|
|
| 0.04 |
|
|
| 6,515,000 |
|
| 37 |
| Table of Contents |
Security Ownership of Certain Beneficial Owners and Management
The table below sets forth information regarding the ownership of our common stock, as of December 31, 2022 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 2022 (each, a “named executive officer”), and (iv) all of our directors, director nominees and executive officers as a group. We know of no agreements among our stockholders that relate to voting or investment power over our common stock or any arrangement the operation of which may at a subsequent date result in a change of control of us.
Beneficial ownership is determined in accordance with applicable SEC rules and generally reflects sole or shared voting or investment power over securities. Under these rules, a person is deemed to be the beneficial owner of securities that the person has the right to acquire as of or within 60 days after December 31, 2022, upon the exercise of outstanding stock options or warrants, the conversion of outstanding convertible notes, or the exercise or conversion of any other derivative securities affording the person the right to acquire shares of our common stock. As a result, each person’s percentage ownership set forth in the table below is determined by assuming that all outstanding stock options, warrants or other derivative securities held by such person that are exercisable or convertible as of or within 60 days after December 31, 2022 have been exercised or converted. Except in cases where community property laws apply or as indicated in the footnotes to the table, we believe that each person identified in the table below possesses sole voting and investment power over all shares of common stock shown as beneficially owned by such person. All ownership percentages in the table are based on 2,007,815,097 shares of our common stock outstanding as of March 15, 2023.
|
| Shares Beneficially |
| |||||
|
| Owned |
| |||||
Name and Address of Beneficial Owner: |
| Number |
|
| Percent |
| ||
5% Stockholders: |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Directors and Executive Officers: |
|
|
|
|
|
| ||
Neil Chan(2) |
|
| 55,120,008 |
|
|
| 2.7 | % |
Abel Sierra(3) |
|
| 20,408,170 |
|
|
| 1.0 | % |
Robert Nealon(4) |
|
| 8,316,667 |
|
| * |
| |
Mark Wells |
|
| 5,960,785 |
|
| * |
| |
All executive officers and directors as a group (4 persons) |
|
| 89,805,630 |
|
|
| 4.5 | % |
_________
* | Represents beneficial ownership of less than 1%. |
(1) | not used |
(2) | Represents 1,000,000 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, 2022, and 54,120,008 outstanding shares of Common Stock. |
(3) | Represents 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, 2022, and 19,758,170 outstanding shares of Common Stock. |
(4) | Not used |
(5) | Not used |
| 38 |
| Table of Contents |
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Transactions with related persons, promoters and certain control persons
(a) During the years ended December 31, 2022 and 2021, the Company incurred approximately $145,000 and $147,000, respectively, in management and consulting fees with an officer and an entity controlled by him. As of December 31, 2022 and 2021, the Company owed approximately $5,000 and $9,000, respectively, to directors and officers and a company controlled by a director, which is included in accounts payable and accrued liabilities. The amounts owed are unsecured, non-interest bearing, and due on demand.
(b) During the years ended December 31, 2022 and 2021, the Company issued 0 and 4,608,173 shares of common stock for the conversion of $0 and $24,729, respectively of accrued expenses owed to the CEO and COO.
(c) During the year ended December 31, 2022 and 2021, the Company recorded approximately $0 and $8,000, respectively to the CEO and COO for rent and other office expenses.
Director Independence
In the USA, the Company’s common stock is listed on the OTC Link OTC Pink 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:
2021: $68,000
2022: $56,000
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:
2021: $0
2022: $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:
2021: $0
2022: $0
All Other Fees
Aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported above, are as follows:
2021: $0
2022: $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.
| 39 |
| Table of Contents |
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(1) Financial statements:
- Audited Financial Statements for the year ended December 31, 2022
(2) Financial statement schedules
- none
(3) Exhibits
Exhibit Index
3(i) |
| Articles of Incorporation and amendments |
3(ii) |
| Bylaws |
| ||
| ||
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 |
| 40 |
| Table of Contents |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| IGEN Networks Corp |
| |
|
|
|
|
April 17, 2023 | By: | /s/ Neil Chan |
|
|
| Neil Chan, |
|
|
| Chief Executive Officer and Director (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) |
|
| 41 |