EX-99.111 112 exhibit99-111.htm EXHIBIT 99.111 Peak Fintech Group Inc.: Exhibit 99.111 - Filed by newsfilecorp.com

 

 

 

Peak Fintech Group Inc. (Formerly Peak

Positioning Technologies Inc.)

Condensed Interim Consolidated Financial

Statements (Unaudited)

For the three and nine-month periods ended
September 30, 2020 and 2019

 

 

 

Financial Statements

 
   
Consolidated Statements of Comprehensive Loss 2
   
Consolidated Statements of Changes in Equity 3
   
Consolidated Statements of Cash Flows 4
   
Consolidated Statements of Financial Position 5
   
Notes to Interim Consolidated Financial Statements 6 - 31

Note to reader: The Interim Consolidated Financial Statements have not been reviewed by the auditor

2

PEAK FINTECH GROUP INC.

(Formerly Peak Positioning Technologies Inc.)

Interim Consolidated Statements of Comprehensive Loss

For the three and nine-month periods ended September 30, 2020 and 2019

(In Canadian dollars, except weighted average number of outstanding shares)
(Unaudited)

      Three-month period ended     Nine-month period ended  
  Note         September 30           September 30  
      2020     2019     2020     2019  
      $     $     $     $  
Revenues                          
Sales     15,116,369     4,499,953     26,329,268     7,351,186  
                           
Expenses                          
Outsourcing services     13,385,347     2,619,916     20,912,490     2,619,916  
Salaries and fringe benefits     386,676     401,598     1,099,606     1,233,238  
Service fees     208,741     32,132     479,205     443,967  
Royalty on software     47,469     30,427     104,370     30,427  
Board remuneration     29,062     19,179     51,405     53,562  
Consulting fees     508,902     33,427     1,361,903     287,296  
Management fees     15,729     29,878     55,261     105,266  
Professional fees     154,345     132,386     340,879     217,492  
Administrative and indirect cost     (16,246 )   47,269     221,582     195,210  
Public relations and press releases     88,207     44,689     140,112     111,601  
Office supplies, software and utilities     26,777     52,035     129,088     150,054  
Lease expenses     11,570     8,447     34,673     33,390  
Depreciation of right-of-use assets 8   137,209     115,522     370,207     289,027  
Insurance     10,112     6,279     31,890     21,557  
Finance costs 15   280,584     267,283     800,934     755,251  
Expected credit loss     451     176,103     616,056     213,146  
Travel and entertainment     55,943     70,717     138,200     274,778  
Stock exchange and transfer agent costs     65,857     12,138     101,973     38,384  
Translation cost and others     6,676     3,734     20,618     30,744  
Provision for loss on deposit     -     43,583     -     43,583  
Depreciation of property and equipment 8   21,495     10,382     64,649     29,918  
Impairment of intangible asset     -     584,189     -     584,189  
Amortization of intangible assets 9   67,616     230,675     231,896     621,596  
Expiration of deferred finance cost     -     -     353,377     -  
Amortization of financing initial costs     10,441     9,090     11,137     27,299  
Loss (gain) on foreign exchange     2,776     17,289     13,825     37,333  
      15,505,739     4,998,367     27,685,336     8,448,224  
Loss before income taxes     (389,370 )   (498,414 )   (1,356,068 )   (1,097,038 )
Income tax (recoverable)     123,504     278,902     501,404     545,044  
Net loss     (512,874 )   (777,316 )   (1,857,471 )   (1,642,082 )
                           
Net (loss) profit attributable to:                          
Non-controlling interest     350,015     165,756     615,079     488,772  
Owners of the parent     (862,889 )   (943,072 )   (2,472,550 )   (2,130,854 )
      (512,874 )   (777,316 )   (1,857,471 )   (1,642,082 )
                           
Item that will be reclassified subsequently to profit or loss                        
Currency translation adjustment     (472,282 )   1,027,084     (1,192,475 )   1,471,694  
Total comprehensive loss     (40,592 )   (1,804,400 )   (664,996 )   (3,113,776 )
                           
                           
Net loss and total comprehensive loss attributable to:                        
Non-controlling interest     446,671     (315,578 )   880,821     (414,461 )
Owners of the parent     (487,263 )   (1,488,822 )   (1,545,817 )   (2,699,315 )
      (40,592 )   (1,804,400 )   (664,996 )   (3,113,776 )
                           
Weighted average number of outstanding shares     86,648,682     68,996,496     78,634,088     68,094,616  
                           
Basic and diluted loss per share     (0.010 )   (0.014 )   (0.031 )   (0.031 )
                           

The accompanying notes are an integral part of these interim consolidated financial statements.

3

PEAK FINTECH GROUP INC.

(Formerly Peak Positioning Technologies Inc.)

Interim Consolidated Statements of Changes in Equity

For the nine-month periods ended September 30, 2020 and 2019
(In Canadian dollars)

(Unaudited)
  Note   Capital stock                                                  
                              Equity     Accumulated           Total              
                              component of     other           attributable     Non     Shareholders'  
      Number of           Equity to     Contributed     convertible     comprehensive           to owners of     Controlling     equity  
      common shares 31     Amount     issue     surplus     debentures     income     Deficit     parent     interest     (deficiency)  
      (number of shares-                                                        
      see note 15)                                                        
            $     $     $     $     $     $     $     $     $  
Balance as of January 1, 2020     72,059,214     24,234,623     493,414     9,580,333     47,891     (1,054,211 )   (23,623,950 )   9,678,100     10,441,584     20,119,684  
Issuance of shares 15   23,495,812     3,047,338           2,314,807                       5,362,145           5,362,145  
Shares to be issued                                               -           -  
Exercise of warrants 15   1,340,000     730,963           (132,865 )                     598,098           598,098  
Equity components of convertible debenture 12                           6,468                 6,468           6,468  
Conversion of convertible debenture     100,000     50,678                                   50,678           50,678  
Issuance costs           (226,554 )                                 (226,554 )         (226,554 )
Share-based compensation 16                     260,412                       260,412           260,412  
Transactions with owners     96,995,026     27,837,048     493,414     12,022,687     54,359     (1,054,211 )   (23,623,950 )   15,729,347     10,441,584     26,170,931  
Net loss                                         (2,472,550 )   (2,472,550 )   615,079     (1,857,471 )
Other comprehensive loss                                   926,733           926,733     265,742     1,192,475  
Total comprehensive loss for the year     -     -     -     -     -     926,733     (2,472,550 )   (1,545,817 )   880,821     (664,996 )
Balance as of September 30, 2020     96,995,026     27,837,048     493,414     12,022,687     54,359     (127,478 )   (26,096,500 )   14,183,530     11,322,405     25,505,935  
                                                               
Balance as of January 1, 2019     67,514,214     22,759,673           7,747,316     93,940     (189,449 )   (20,914,779 )   9,496,701     9,989,774     19,486,475  
Issuance of shares     250,000     125,000           25,424                       150,424           150,424  
Equity components of convertible debenture                             31,707                 31,707           31,707  
Issuance costs                                               -           -  
Share-based compensation                       163,120                       163,120           163,120  
Transactions with owners     67,764,214     22,884,673           7,935,860     125,647     (189,449 )   (20,914,779 )   9,841,952     9,989,774     19,831,726  
Net loss                                         (1,187,782 )   (1,187,782 )   323,016     (864,766 )
Other comprehensive loss                                   (444,610 )         (22,711 )   (421,899 )   (444,610 )
Total comprehensive loss for the year     -     -           -     -     (444,610 )   (1,187,782 )   (1,210,493 )   (98,883 )   (1,309,376 )
Balance as of September 30, 2019     67,764,214     22,884,673           7,935,860     125,647     (634,059 )   (22,102,561 )   8,209,560     9,890,891     18,100,451  
                                                               

The accompanying notes are an integral part of these interim consolidated financial statements.

4

PEAK FINTECH GROUP INC.

(Formerly Peak Positioning Technologies Inc.)

Interim Consolidated Statements of Cash Flows

For the three and nine-month periods ended September 30, 2020 and 2019

(In Canadian dollars)
(Unaudited)
      Three-month period ended     Nine-month period ended  
  Note         September 30           September 30  
      2020     2019     2020     2019  
OPERATING ACTIVITIES     $     $     $     $  
Net loss     (512,874 )   (777,316 )   (1,857,471 )   (1,642,082 )
Non-cash items                          
Depreciation of property and equipment 8   21,495     10,382     64,649     29,918  
Issuance of shares for settlement of debt     702,798     85,000     1,115,977     210,000  
Expected credit loss     451     176,103     616,056     213,146  
Amortization of intangible assets     67,616     230,676     231,896     621,596  
Amortization of initial cost debenture     10,441     -     11,137     -  
Depreciation of right-of-use assets 8   137,209     289,027     370,207     289,027  
Impairment of intangible assets           584,189           584,189  
Share-based compensation 16   112,920     105,343     260,412     268,463  
Accretion of convertible debentures 12   147,475     154,836     426,153     433,328  
Expiration of deferred financing cost     -     -     353,377     -  
Loans receivable maturing in more than 12 months     925,704     851,459     5,477,969     944,047  
Net changes in working capital items                          
Income tax payable     135,870     276,122     390,589     493,499  
Account receivable     (11,830,148 )   (2,464,875 )   (15,512,369 )   (3,332,818 )
Loans receivable maturing in less than 12 months     (771,742 )   (96,224 )   (4,242,301 )   (2,284,819 )
Lease liabilities     -     (234,614 )   -     372,708  
Prepaid expenses     95,999     (140,930 )   331,106     (105,944 )
Other current financial liabilities     10,732,424     2,429,963     11,653,588     3,725,033  
Cash flows from operating activities     (24,362 )   1,479,141     (309,025 )   819,291  
                           
INVESTING ACTIVITIES                          
Intangible asset 9   (345,740 )   447,018     (899,955 )   (1,773,342 )
Property and equipment 8   (3,630 )   (9,275 )   (21,552 )   (27,513 )
Right-of-use-asset           (863,430 )         (863,430 )
Debtors 7   (342,862 )   (76,038 )   45,694     (11,248 )
Cash flows from investing activities     (692,232 )   (501,725 )   (875,813 )   (2,675,533 )
FINANCING ACTIVITIES                          
Debenture subscription received     -     -     (110,000 )   250,000  
Issuance of debenture 12   -     -     160,000     280,000  
Issuance of Bond, net of issuance cost 13   -     -     288,159     -  
CEBA Loan 14   -     -     40,000     -  
Contingent compensation     -     -     -     1,430,000  
Advance from third parties     -     -     1,889,053     -  
Advance from a director     -     -     21,920     -  
Repayment of lease liabilities     (101,198 )   147,117     (348,093 )   147,117  
Non-controlling interest     446,671     (315,578 )   880,821     (414,461 )
Issuance of shares     2,843,384     640,000     3,726,384     640,000  
Cash flows from financing activities     3,188,857     471,539     6,548,244     2,332,656  
IMPACT OF FOREIGN EXCHANGE     122,267     (289,607 )   311,654     (767,625 )
Net increase(decrease) in cash     2,594,530     1,159,348     5,675,060     (291,211 )
Cash, beginning of period     4,798,040     276,244     1,717,509     2,016,410  
Cash, end of period     7,392,570     1,435,592     7,392,569     1,725,199  
                           

The accompanying notes are an integral part of these interim consolidated financial statements.

5

PEAK FINTECH GROUP INC.

(Formerly Peak Positioning Technologies Inc.)

Consolidated Statements of Financial Position

September 30, 2020 and December 31, 2019 (In Canadian dollars)

(Unaudited)
  Note   2020-09-30     2019-12-31  
      $     $  
ASSETS              
Current              
Cash     7,392,570     1,717,509  
Loans receivable 6   14,819,332     11,193,087  
Debtors 7   19,617,346     3,931,981  
Prepaid expenses     499,556     830,662  
Deferred financing cost     -     353,377  
      42,328,804     18,026,616  
Loans receivable 6   2,718,580     8,196,549  
Property and equipment 8   609,713     734,443  
Intangible assets 9   3,030,444     2,399,410  
      48,687,541     29,357,018  
               
LIABILITIES              
Current              
Accounts payable, advances and accrued liabilities 11   18,044,249     4,629,122  
Lease liabilities 10   239,307     402,954  
Current tax liabilities     907,035     517,756  
Debentures 12   3,271,888     3,221,281  
Conversion option     24,423     24,423  
Contingent compensation payable 5   254,586     254,586  
      22,741,488     9,050,122  
Debentures 12   -     137,638  
Bonds 13   241,067     -  
CEBA Loan 14   40,000     -  
Lease liabilities 10   159,052     49,574  
      23,181,606     9,237,334  
SHAREHOLDERS' DEFICIENCY              
Capital stock     27,837,048     24,234,623  
Shares to be issued     493,414     493,414  
Contributed surplus     12,022,687     9,580,333  
Equity component of convertible debentures     54,359     47,891  
Accumulated other comprehensive income     (127,478 )   (1,054,211 )
Deficit     (26,096,500 )   (23,623,950 )
Shareholders' equity attributable to owners of the parent     14,183,530     9,678,100  
Non-controlling interest     11,322,405     10,441,584  
Total shareholders' equity     25,505,935     20,119,684  
      48,687,541     29,357,018  

The accompanying notes are an integral part of these interim consolidated financial statements.

On behalf of the Board,

 

 

/S/ Johnson Joseph

 

/S/ Charles-André Tessier

Director

 

Director

 

6

PEAK FINTECH GROUP INC.        
(Formerly Peak Positioning Technologies Inc.)
Notes to Interim Consolidated Financial Statements

for the three and nine-month ended September 30, 2020 and 2019

(In Canadian dollars)
(Unaudited)

 

 

1 - GOVERNING STATUTES, NATURE OF OPERATIONS AND GENERAL INFORMATION

Peak Fintech Group Inc. (hereinafter the ''Peak'' or the "Company") was incorporated pursuant to the provisions of the Business Corporations Act (Alberta) on May 13, 2008, and continued under the Canada Business Corporations Act on April 4, 2011. Peak Fintech Group Inc.'s

executive offices are located at 550 Sherbrooke Street West, Suite 265, Montréal, Quebec, Canada. Its shares are traded on the Canadian Stock Exchange (CSE) under the symbol "PKK".

Its shares are quoted in the U.S. on the OTC Market's Groups (OTCQX) under the symbol ''PKKFF''.

Peak is the parent company of a group of innovative financial technology (Fintech) subsidiaries operating in China's commercial lending industry. Peak's subsidiaries use technology, analytics and artificial intelligence to create an ecosystem of lenders, borrowers and other participants in China's commercial lending space where lending operations are conducted rapidly, safely, efficiently and with the utmost transparency.

The unaudited interim consolidated financial statements include the accounts of Peak Positioning Technologies Inc. and all of its subsidiaries.

The Company attributes total comprehensive income or loss of the subsidiary between the owners of the parent company and the non-controlling interests based on their respective ownership interests.

The following entities have been consolidated within these consolidated financial statements:

          % of ownership     Principal     Functional  
Entities   Registered     and voting right     activity     Currency  
Peak Fintech Group Inc.   Canada           Holding and parent company     Canadian dollar  
                         
Asia Synergy Limited   Hong Kong     100%     Holding     Renminbi  
                         
Asia Synergy Holdings   China     100%     Holding     Renminbi  
                         
Asia Synergy Technologies Ltd.   China     100%     Technology based product procurement facilitator     Renminbi  
                         
Asia Synergy Data Solutions Ltd.   China     100%     Fintech     Renminbi  
                         
Asia Synergy Credit Solutions Ltd   China     100%     Credit outsourcing services     Renminbi  
                         
Asia Synergy Supply Chain Ltd (1)   China     51%     Supply Chain services     Renminbi  
                         
Wuxi Aorong Ltd.   China     100%     Holding     Renminbi  
                         
Asia Synergy Financial Capital Ltd   China     51%     Financial institution     Renminbi  

(1): Creation of a new subsidiary

In June 2019, the Company created a new subsidiary called Asia Synergy Supply Chain ("ASSC") whereby the wholly owned subsidiary of the Company, Asia Synergy Data Solutions (" ASDS"), contributed a royalty-free licence of the Cubeler Lending Hub platform to ASSC in exchange for a 51% equity interest and where Jiangsu Zhongpu Jinrong Outsourcing Services Co. Ltd ("Zhongpu ") contributed its supply chain network for a 49% equity interest. As a result, Zhongpu owns a 49% non-controlling interest in ASSC.

 

7

PEAK FINTECH GROUP INC.        
(Formerly Peak Positioning Technologies Inc.)
Notes to Interim Consolidated Financial Statements

for the three and nine-month ended September 30, 2020 and 2019

(In Canadian dollars)
(Unaudited)

 

 

1 - GOVERNING STATUTES, NATURE OF OPERATIONS AND GENERAL INFORMATION (cont'd)

The unaudited interim condensed consolidated financial statements (the ''consolidated interim financial statements'') are in compliance with the International Accounting Standard 34, Interim Financial Reporting (''IAS 34''). Since they are condensed financial statements, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with International Financial Reporting Standards (''IFRS'') as issued by the International Accounting Standards Board (''IASB''), have been voluntarily omitted or summarized.

The preparation of financial statements in accordance with IAS 34 requires the use of certain accounting estimates. It also requires management to exercise judgment in applying the Company's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements have been set out in note 5 of the Company's consolidated financial statements for the year ended December 31, 2019. There has not been any significant change in judgments, estimates or assumptions since then. These consolidated interim financial statements should be read in conjunction with the Company's consolidated financial statements for the year ended December 31, 2019.

The consolidated interim financial statements were prepared using the same accounting policies and methods as those used in the Company's consolidated financial statements for the year ended December 31, 2019.

The interim consolidated financial statements for the three and nine-month periods ended September 30, 2020 (including comparative figures) were approved by the Board of Directors on November 26, 2020.

2 - GOING CONCERN ASSESSMENT and COVID-19

These interim consolidated financial statements have been prepared on the basis of the going concern assumption meaning the Company will be able to realize its assets and discharge its liabilities in the normal course of operations.

The level of revenue currently being generated is not presently sufficient to meet the working capital requirements. The Company's ability to continue as a going concern is dependent upon its ability to raise additional financing. Even if the Company has been successful in the past in doing so, there is no assurance that it will manage to obtain additional financing in the future. Also, the

Company incurred a net loss of $1,857,471 for the nine-month period ended September 30, 2020 ($1,642,082 for 2019), it has an accumulated deficit of $26,096,500 as at September 30, 2020 ($23,623,950 as at December 31, 2019) and it has not yet generated positive cash flows from operations on a regular basis. Until that happens, the company will continue to assess its working capital needs and undertake whatever initiative it deems necessary to ensure that it continues to be in a position to meet its financial

obligations. These material uncertainties cast significant doubt regarding the Company's ability to continue as a going concern.

The World Health Organization declared the COVID-19 outbreak as a global pandemic in March 2020. Since that time, businesses all over the world from a wide swath of industries have seen their operations negatively impacted by the health and safety measures, including limitations on the movement of goods and individuals, put into place by local governments to help control the spread of the outbreak. Although those measures have been relaxed in recent months, which has allowed many businesses, including the Company, to slowly resume their operations, there still remains a great deal of uncertainty as to the extent and duration of the future impact of COVID-19 on global commerce and the Company's business.

The interim consolidated financial statements do not include any adjustments or disclosures that may be necessary should the Company not be able to continue as a going concern. If this were the case, these adjustments could be material.

 

8

PEAK FINTECH GROUP INC.        
(Formerly Peak Positioning Technologies Inc.)
Notes to Interim Consolidated Financial Statements

for the three and nine-month ended September 30, 2020 and 2019

(In Canadian dollars)
(Unaudited)

 

 

3. CHANGES IN ACCOUNTING POLICIES

3.1 New Standards adopted as at January 1, 2020

Some accounting pronouncements which have become effective from January 1, 2020, and have therefore been adopted do not have a significant impact on the Company financial results or position.

4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The unaudited interim consolidated statements have been prepared in accordance with the accounting policies adopted by the Company most recent audited statements for the year ended December 31, 2019.

5 - BUSINESS COMBINATION

On January 1, 2019, the Company through its subsidiary called Asia Synergy Credit Solutions ("ASCS") transferred certain assets and personnel from Wuxi Wenyi Financial Services Co.. Wenyi offers turn-key credit outsourcing services to banks and other lending institutions in China. The asset transfer was made to enhance the Company position in the commercial lending market in China. The assets acquired are intangible assets consisting of loan-servicing agreements. The assets acquired were determined to constitute a business combination and, accordingly, the acquisition will be accounted for using the acquisition method of accounting.

The maximum purchase price for this acquisition was estimated at $2,000,000, and the fair value of the consideration transferred at $489,000. The purchase price will be settled with the issuance of a maximum of 2,000,000 shares of the Company if certain financial performance of ASCS is achieved during the first 21 months (1) of operations. In the event that 2,000,000 shares are issued after the 21-month period and the listed common shared price of the Company is less than $1.00 at that time, the Company will issue additional shares to obtain an aggregate consideration value of $2,000,000.

The financial performance measure of ASCS was originally after an 18-month period. To take in consideration the Covid19 effect on business performance, it was mutually agreed to add three months to the original agreement to compare the performance targets with the target and determine final share issuance.

The fair value of the consideration transferred was estimated at $489,000, based on management financial projection of ASCS over the first 21 months of operations. The Company used a probability-weighted estimate to determined the number of shares to be issued based on certain financial performance targets. The number of shares estimated to be issued represents management estimate of an 80% probability that the financial performance will be achieved.

The market price ($0.30) at which the share will be issued used in the model was estimated using the average historical price from the 6 months prior to the acquisition and the historical volatility over the payment term. The payment was then discounted using the Chinese risk-free rate (4.8%). The Company consider that the risk of the projection being realized than already taken into account through the probability-weighted estimated result.

 

9

PEAK FINTECH GROUP INC.        
(Formerly Peak Positioning Technologies Inc.)
Notes to Interim Consolidated Financial Statements

for the three and nine-month ended September 30, 2020 and 2019

(In Canadian dollars)
(Unaudited)

 

 

5 - BUSINESS COMBINATION (cont'd)

Fair value of consideration transferred      
Issuance between 14,000,000 and 17,000,000 shares of the Company at a market price ranging from $0.30 to $0.60   489,000  
Total consideration transferred (conditional compensation)   489,000  
       
Gain on bargain purchase to profit and loss   941,000  
    1,430,000  
Identifiable net assets acquired      
Loan servicing agreements   1,430,000  
Liabilities assumed   -  
Identifiable total net assets   1,430,000  
Goodwill on acquisition   -  
    1,430,000  

At acquisition, the Company recognized a gain on bargain purchase of $941,000 for the difference between the value of the identified assets acquired and the fair value of the consideration transferred

As at December 31, 2019, the Company revised its estimation of the fair value of the contingent compensation. The re-evaluation process performed after the first year of operations of ASCS indicates that the financial performance criteria were achieved at 77.1% of the agreed target. As per the asset transfer agreement, the Company should have issued a total of 1,232,861 shares as a purchase price in 2019. Following administrative delay, it was agreed by both parties to postpone the issuance of the shares to 2020. Management initial financial projections for 2020 were maintained, based on the results obtained in 2019. The market share price used for the estimation of the fair value as at December 31, 2019 was established at $0.50 based on the current market price and the historical volatility of the Company.

The initial conditional compensation liability of $489,000 was re-evaluated on December 31, 2019, at a fair value of $748,000 considering the past performance, forecasted results and projected market share price at issuance. The difference of $259,000 between the re-evaluated fair value of the remaining conditional compensation and the previously accounted amount was recognized as a change in fair value of the contingent compensation payable in the consolidated statements of comprehensive loss of the period.

The contingent liability relating to the 2019 shares that should have been issued, was classified as shares to be issued in the consolidated statements of changes in equity. The value of those shares was determined by using the

market price as at December 31, 2019. The difference of $254,586 between the value of shares to be issued ($493,414) and the fair value of the contingent liability ($748,000) is presented as a short-term liability in the

consolidated statements of financial position.

The Company's valuation of intangible assets has identified loan servicing agreements which are amortized on a straight-line basis with a useful life of 10 years. Significant assumptions used in the determination of intangible assets, as defined by management, include month over month loan renewals, discount rate and operating income before depreciation and amortization margin.

There were acquisition-related costs which amounted approximately to $10,000 with respect to consulting and professional fees. These costs were not included as part of the consideration transferred and have been recognized as an expense in the consolidated statements of comprehensive loss for the year ended December 31, 2019.

 

10

PEAK FINTECH GROUP INC.        
(Formerly Peak Positioning Technologies Inc.)
Notes to Interim Consolidated Financial Statements

for the three and nine-month ended September 30, 2020 and 2019

(In Canadian dollars)
(Unaudited)

 

 

6 - LOANS RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES

In May 2018 the Company established a licensed financial services' subsidiary in China named Asia Synergy Financial Capital ("ASFC") to provide various financial services to small and medium size enterprise and entrepreneurs. Those services include loans, which for the most part, are guaranteed by a third party and/or collateral assets. Interest revenue from the loans is accounted for as earned.

For the majority of loans granted, principal and interest are payable by the borrower on a monthly basis.

Loans receivables are described as follows :

    2020-09-30     2019-12-31  
    $     $  
Principal balance loans receivables   18,526,607     19,789,583  
Less expected credit loss (ECL)   (988,695 )   (399,947 )
Loan receivables net   17,537,912     19,389,636  
             
Loans receivables maturing in less than 12 months   14,819,332     11,193,087  
Loans receivables maturing in more than 12 months   2,718,580     8,196,549  
 Total loans   17,537,912     19,389,636  

Impaired loans and allowances for credit loss

 

The Company performed a three-stage forward looking impairment approach to its loan portfolio to measure the expected credit loss as described in detail in note 4.10 of the Company Consolidated Financial Statement as of December 31, 2019.

Credit quality of loans

The following table presents the gross carrying amount of loans receivables at September 30, 2020 , according to credit quality and ECL impairment stages

ECL is calculated on loan value at the period end that are not insured by a third party with an assumption of a credit loss allocation provision applied as follows :

            Credit loss     Credit loss  
            allocation     allocation  
      Provision %     applied -
Auto		     applied -
Residential		  
Stage 1 : 1%     1.0%     1.0%     1.0%  
Stage 2: 30%     30.0%     1.0%     1.0%  
Stage 3 :100%     100.0%     26.0%     1.0%  
                     
September 30, 2020 %   Gross Carrying     Allowance for     Net Carrying  
      $     $     $  
Stage 1 Not overdue <= 30 Days 68.1%   12,615,806     (484 )   12,615,322  
Stage 2 Overdue 30-90 days 10.9%   2,010,182     (6,031 )   2,004,151  
Stage 3 Overdue> 90 days 21.1%   3,900,619     (982,180 )   2,918,439  
Total 100.0%   18,526,607     (988,695 )   17,537,912  
                     
December 31, 2019 %   Gross Carrying     Allowance for     Net Carrying  
      $     $     $  
Stage 1 Not overdue <= 30 Days 88.5%   17,509,277     (11,615 )   17,497,662  
Stage 2 Overdue 30-90 days 6.4%   1,266,596     (25,382 )   1,241,214  
Stage 3 Overdue> 90 days 5.1%   1,013,710     (362,950 )   650,760  
Total 100.0%   19,789,583     (399,947 )   19,389,636  

 

 

 

11

PEAK FINTECH GROUP INC.        
(Formerly Peak Positioning Technologies Inc.)
Notes to Interim Consolidated Financial Statements

for the three and nine-month ended September 30, 2020 and 2019

(In Canadian dollars)
(Unaudited)

 

 

7 - DEBTORS

    2020-09-30     2019-12-31  
    $     $  
Sales tax receivable   26,353     27,663  
Advances to companies, 1.55% to 1.7% per month (1,55% to 1.7% in 2019), payable on demand.   414,193     392,210  
Advance to a company   -     466,622  
Accounts receivable   18,563,025     2,657,029  
Safety deposits with guarantor (1)   398,055     370,699  
Subscription receivable   220,000        
Advance to an affiliated company (note 20)   (4,280 )   17,758  
    19,617,346     3,931,981  

Considering the low number of individual items, evaluation of expected credit loss for debtors are performed

at each period end based on past experience, credit default evidence and payment habit. At September 30, 2020 an amount of $88,335 ($83,925 at December 31, 2019) was registered for expected credit loss for debtors.

(1) As per an agreement with certain loan insurance provider, ASCS, a subsidiary of the Company must maintain a deposit with a loan insurance provider representing 10% of the value of loans serviced by ASCS on behalf of the certain Commercial Bank guaranteed by loan insurer providers. ASCS third party financial partners and the Company's ASFC subsidiary have a three-way agreement in place with ASCS under which third party financial partner and ASFC are jointly responsible for providing and maintaining the 10% safety deposit with a loan insurance provider on behalf of ASCS in exchange for a service fee representing a percentage of the amount of the safety deposit provided. The agreement indicates that in case of default by the borrowers, ASCS will retrieve all the rights to realize the collateral.

8 - PROPERTY AND EQUIPMENT

    Right-of-use     Office              
    assets     equipment     Vehicles     Total  
          $     $     $  
Gross carrying amount                        
Balance as at January 1,2020   897,453     106,196     205,358     1,209,007  
Acquisition   249,219     3,862     -     253,080  
Balance as at September 30, 2020   1,146,672     110,058     205,358     1,462,087  
                         
Accumulated amortization                        
Balance as at January 1, 2020   415,644     36,546     22,374     474,564  
Amortization   369,271     27,614     37,971     434,856  
Exchange differences   (43,770 )   (3,659 )   (9,614 )   (57,043 )
Balance as at June 30, 2020   741,145     60,501     50,731     852,377  
Net carrying amount as at September 30, 2020   405,527     49,557     154,627     609,713  
                         
Gross carrying amount                        
Balance as at January 1, 2019   -     71,224     47,592     118,816  
Adjustment on transition to IFRS 16   313,283                 313,283  
Acquisition   584,170     34,972     157,766     776,908  
Balance as at December 31, 2019   897,453     106,196     205,358     1,209,007  
                         
Accumulated amortization                        
Balance as at January 1, 2019   -     3,194     2,826     6,020  
Amortization   407,611     30,673     16,875     455,159  
Exchange differences   8,033     2,679     2,673     13,385  
Balance as at December 31, 2019   415,644     36,546     22,374     474,564  
Net carrying amount as at December 31, 2019   481,809     69,651     182,984     734,443  

 

12

PEAK FINTECH GROUP INC.        
(Formerly Peak Positioning Technologies Inc.)
Notes to Interim Consolidated Financial Statements

for the three and nine-month ended September 30, 2020 and 2019

(In Canadian dollars)
(Unaudited)

 

 


 

13

PEAK FINTECH GROUP INC.        
(Formerly Peak Positioning Technologies Inc.)
Notes to Interim Consolidated Financial Statements

for the three and nine-month ended September 30, 2020 and 2019

(In Canadian dollars)
(Unaudited)

 

 

9 - INTANGIBLE ASSETS

    Loan     Gold     Cubeler        
    agreement     River     Interface     Total  
    $     $     $     $  
Gross carrying amount                        
Balance as at January 1, 2020   1,430,000     2,461,348     1,354,774     5,246,122  
Acquisition         -     820,723     820,723  
Balance as at September 30, 2020   1,430,000     2,461,348     2,175,497     6,066,845  
                         
Accumulated amortization                        
Balance as at January 1, 2020   143,000     2,461,348     242,364     2,846,712  
Amortization   107,250     -     124,646     231,896  
                         
Exchange differences   -           (42,206 )   (42,206 )
Balance as at September 30, 2020   250,250     2,461,348     324,803     3,036,401  
Net carrying amount as at September 30, 2020   1,179,750     (0 )   1,850,694     3,030,444  
                         
Gross carrying amount                        
Balance as at January 1, 2019   -     2,461,348     747,940     3,209,288  
Acquisition         -     606,834     606,834  
Business acquisition (a)   1,430,000     -     -     1,430,000  
Balance as at December 31, 2019   1,430,000     2,461,348     1,354,774     5,246,122  
                         
Accumulated amortization                        
Balance as at January 1, 2019   -     1,578,607     51,812     1,630,419  
Amortization   143,000     298,552     153,527     595,079  
Impairment loss (b)         584,189           584,189  
Exchange differences   -           37,025     37,025  
Balance as at December 31, 2019   143,000     2,461,348     242,364     2,846,712  
Net carrying amount as at December 31, 2019   1,287,000     (0 )   1,112,410     2,399,410  

(a) Business acquisition, as describe in note 5, was unpaid as at September 30, 2020. This acquisition was a non-cash transaction and thus are excluded from the consolidated statement of cash-flows.

(b) An impairment loss of $ Nil at September 30, 2020 ($584,189 at December 31, 2019) was recognized for the Gold River platform. The recoverable amount of the asset is $Nil at September 30, 2020, and December 31, 2019, determined using management expectation of the actual value of the future cash-flows generated by the platform. There is no evidence of predictable cash-flow from the platform at September 30, 2020.

 

14

PEAK FINTECH GROUP INC.        
(Formerly Peak Positioning Technologies Inc.)
Notes to Interim Consolidated Financial Statements

for the three and nine-month ended September 30, 2020 and 2019

(In Canadian dollars)
(Unaudited)

 

 

10 - LEASE LIABILITIES

On January 1st, 2019 new lease liabilities have been recognized. The Company lease office space. The Company measured lease liabilities at the present value of the lease payments that are not paid at that date. The present value recognized for the lease liabilities was $313,283. The present value is increased to reflect the interest on the lease liabilities and reduced to reflect the lease payments made.

    2020-09-30     2019-12-31  
    $     $  
Balance - beginning of year   452,528     313,283  
Additions   249,219     584,170  
Accretion interest   25,781     44,868  
Lease payments   (385,596 )   (460,361 )
Effect of exchange rate change on obligation   56,427     (29,432 )
Balance - end of period   398,359     452,528  
Current Portion   239,307     402,954  
    159,052     49,574  

Following is a summary of the Company's obligations regarding lease payments:

    Payment due by period  
    1 year     2-5 years     Beyond 5 years     Total  
    $     $     $     $  
As at September 30, 2020                        
Lease payments   245,036     162,860     -     407,896  
                         
As at December 31, 2019                        
Lease payments   417,620     50,579     -     468,199  

11 - ACCOUNTS PAYABLE, ADVANCES AND ACCRUED LIABILITIES

    2020-09-30     2019-12-31  
    $     $  
Trade accounts payable and accruals   13,778,458     2,158,064  
Advance from third party, annual interest 10%   1,532,931     1,880,146  
Advance from a director, no interest (note 16)   314,080     298,400  
Advance from third party, no interest   2,418,780     182,512  
New debentures to be issued   -     110,000  
    18,044,249     4,629,122  

 

15

PEAK FINTECH GROUP INC.        
(Formerly Peak Positioning Technologies Inc.)
Notes to Interim Consolidated Financial Statements

for the three and nine-month ended September 30, 2020 and 2019

(In Canadian dollars)
(Unaudited)

 

 

12 - DEBENTURES

12 a) i) Debenture issuance of December 15, 2017

On December 15, 2017, the Company has placed a total of 1,200 units of debentures at $10,000 par unit for gross proceeds of $12,000,000. Each unit sold is comprised of $10,000 face value debentures plus 20,000 common share purchase warrants.

Debentures are secured by a pledge on the aggregate assets of the Company, maturing on December 15, 2019, bearing interest at a nominal rate of 8% payable monthly. The Company used the residual value method to allocate the principal amount of the debenture between the liability and the contributed surplus. Under this method, an amount of $2,721,260 (net of transaction costs) related to the warrants issued was applied to the contributed surplus. The fair value of the liability component was $9,005,148 computed as the present value of future principal and interest payments discounted at a rate of 25%. The debentures allow their subscribers to surrender part or all of the amount invested in the debentures to exercise their warrants and purchase common shares of the Company any time prior to maturity, subject to certain terms and conditions, at a price of $0.50 per common share. The units contain a ''forced warrant conversion'' feature under which 50% of the face value of the debenture will automatically be surrendered to exercise 50% of the warrants if the Company common shares trade at $1.50 or more for 3 consecutive trading days, and 100% if the Company's common shares trade at $2.00 or more for 3 consecutive days.

    2019-12-15     2018-12-31  
    $     $  
Balance, beginning of year   3,343,820     4,263,913  
Accretion of debentures   475,159     453,471  
Surrendering of debentures for exercise of warrants (1)   (264,200 )   -  
Surrendering of debentures paid in cash   (40,000 )   (1,410,356 )
Issuance cost (2)   25,221     36,792  
Balance, end of year   3,540,000     3,343,820  

1) At the issuance date, a total of 24,000,000 warrants were included as part of the unit's debenture. 19,100,000 warrants were transferred from existing warrant holders to the debentures' subscribers, for which the original warrants holders received 250,000 stock options as compensation, and 4,900,000 additional warrants were newly issued. On the same date the debentures were issued, some debenture subscribers surrendered their debentures for a total face value of $6,350,000 to exercise 12,700,000 warrants at a price of $0.50.

During the year 2018, 3,600,000 warrants were exercised at a price of $0.50 following surrendering of debentures for a total face value of $1,800,000.

During the year 2019, 540,000 warrants were exercised at a price of $0.50 following surrendering of debentures for a total face value of $ 270,000.

2) Issuance costs are related to legal expenses, broker commissions and stock options value to directors and officers

 

16

PEAK FINTECH GROUP INC.        
(Formerly Peak Positioning Technologies Inc.)
Notes to Interim Consolidated Financial Statements

for the three and nine-month ended September 30, 2020 and 2019

(In Canadian dollars)
(Unaudited)

 

 

 

12 a) ii) Debenture issuance of December 15, 2017, extended to December 2020

On or before the maturity date of December 15, 2019, the company reached an agreement with holders of the debenture to extend the maturity of the debenture on December 15, 2020, at the same terms and conditions. At that time, the remaining face value of debentures was $3,540,000.

The remaining 7,800,000 remaining warrants at maturity accompanying the debenture were replaced by new warrants with the same attributes, except that they will expire on December 15, 2020, to coincide with the new maturity date of the debenture. For each warrant that is tied to the debenture, debenture holders will also receive an additional warrant that will allow them to acquire common shares of the Company at a price of $0.80 per share at any time for a period of 24 months from their date of issuance.

An exchange between an existing borrower and lender of debt instruments with substantially different terms shall be accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, a substantial modification of the terms of an existing financial liability or a part of it (whether or not attributable to the financial difficulty of the debtor) shall be accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability.

The renegotiation created a debt extinction for accounting purposes. The initial debt was derecognized and a new debt recognized at fair value, creating a loss on extinction of debt of $816,793.

The Company used the residual value method to allocate the principal amount of the debenture between the liability and the equity component. Under this method, an amount of $1,388,688 related to the conversion features and the warrants issued were applied to contributed surplus only as the debenture is non-convertible. The fair value of the liability component was $2,968,124 computed as the present value of future principal and interest discounted at a rate of 30%.

    2020-09-30     2019-12-31  
    $     $  
Balance, beginning of year   2,990,043     3,540,000  
Derecognition of original debt   -     (3,540,000 )
Fair market value of renegotiate debentures at fair market value   -     2,968,124  
Surrendering of debentures for exercise of warrants (1)   (598,098 )   -  
Accretion of debentures   365,428     21,919  
Balance at the end   2,757,373     2,990,043  

The value attributed to the warrants is $702,010. The fair value of the warrants was calculated using the Black & Scholes option pricing model and the following weighted average assumptions:

Share prices at the date of grant

$0.40

Expected life

1 year

Risk-free interest rate

1.71%

Expected volatility

82%

Dividend

0%

Exercise prices at the date of grant

$0.50

The value attributed to the warrants is $686,659. The fair value of the warrants was calculated using the Black & Scholes option pricing model and the following weighted average assumptions:

Share prices at the date of grant

$0.40

Expected life

2 years

Risk-free interest rate

1.71%

Expected volatility

79%

Dividend

0%

Exercise prices at the date of grant

$0.80

(1) During the first nine months of 2020, 1,340,000 warrants were exercised at a price of $0.50 following surrendering of debentures for a total face value of $ 670,000.

 

17

PEAK FINTECH GROUP INC.        
(Formerly Peak Positioning Technologies Inc.)
Notes to Interim Consolidated Financial Statements

for the three and nine-month ended September 30, 2020 and 2019

(In Canadian dollars)
(Unaudited)

 

 

12 b)     Debenture issuance of December 19, 2018

On December 19, 2018, the Company has placed 51 units of unsecured convertible debentures at $10,000 per unit for a gross proceeds of $510,000. Each unit sold is comprised of $10,000 face value debentures, maturing on December 19, 2020, bearing interest at a nominal rate of 8% payable monthly, plus 1,000 purchase warrants exercisable into Company common share at $1.00 per share for a period of 24 months from the date of issuance.

The debentures allow their subscribers to convert them into common shares of the Company at any time prior to maturity, subject to certain terms and conditions, at a price of $0.50 per common share.

The units contain a "forced warrant conversion" feature under which the debenture will automatically be surrendered and converted into common shares of the Company should the shares of the Company trade at $2.00 or more for 3 consecutive trading days.

The Company used the residual value method to allocate the principal amount of the debentures between the liability, equity component of debentures and the contributed surplus. Under this method, an amount of $93,940 and $3,578 (net of transaction costs) related to the conversion features and the warrants issued was applied to the equity component of debenture and contributed surplus (respectively). The fair value of the liability component was $396,672 computed as the present value of future principal and interest discounted at a rate of 22%.

    2020-09-30     2019-12-31  
    $     $  
Balance at the beginning   231,238     398,015  
Addition   -     -  
Conversion of debentures         (216,819 )
Accretion of debentures   20,744     38,744  
Issuance costs (1)   1,048     11,298  
Balance at the end   253,029     231,238  

1) Issuance costs are related to legal expenses and broker commissions.

 

 

18

PEAK FINTECH GROUP INC.        
(Formerly Peak Positioning Technologies Inc.)
Notes to Interim Consolidated Financial Statements

for the three and nine-month ended September 30, 2020 and 2019

(In Canadian dollars)
(Unaudited)

 

 

12 c)     Debenture issuance of April 24, 2019

On April 24, 2019, the Company placed 28 units of unsecured convertible debentures at $10,000 per unit for gross proceeds of $280,000. Each unit sold is comprised of $10,000 face value debentures, maturing on April 24, 2021, bearing interest at a nominal rate of 8% payable monthly, plus 20,000 purchase warrants exercisable into Company common shares at $1.00 per share for a period of 24 months from the date of issuance.

The debentures allow their subscribers to convert them into common shares of the Company at any time prior to maturity, subject to certain terms and conditions, at the lower of $0.50 per common share or at the market price per common share prevailing at the time of conversion.

The units contain a "forced warrant conversion" feature under which the debenture will automatically be surrendered and converted into common shares of the Company should the shares of the Company trade at $2.00 or more for 3 consecutive trading days.

The fair value of the instrument corresponds to the individual fair value of each different instruments as such each component was recorded at its original fair value. an amount of $39,077 and $43,107 related to the conversion features and the warrants issued were applied to the conversion option and contributed surplus (respectively). The fair value of the liability component was $197,817 computed as the present value of future principal and interest discounted at a rate of 30%.

    2020-09-30     2019-12-31  
    $     $  
Balance at the beginning   137,638     -  
Addition   -     280,000  
Conversion of debentures   -     (92,852 )
Accretion of debentures   18,473     18,020  
Conversion option   -     (24,423 )
Contributed surplus   -     (43,107 )
Balance at the end   156,111     137,638  

In September 2019, $105,000 face value of debentures was converted to 500,000 common shares of the Company at a price of $0.40 and $0.20 per share.

 

19

PEAK FINTECH GROUP INC.        
(Formerly Peak Positioning Technologies Inc.)
Notes to Interim Consolidated Financial Statements

for the three and nine-month ended September 30, 2020 and 2019

(In Canadian dollars)
(Unaudited)

 

 

12 d)     Debenture issuance of January 15, 2020

On January 15, 2020, the Company has placed 16 units of unsecured convertible debentures at $10,000 per unit for a gross proceeds of $160,000. Each unit sold is comprised of $10,000 face value debentures, maturing on January 15, 2021, bearing interest at a nominal rate of 8% payable monthly, plus 1,000 purchase warrants exercisable into Company common share at $0.80 per share for a period of 24 months from the date of issuance.

The debentures allow their subscribers to convert them into common shares of the Company at any time prior to maturity, subject to certain terms and conditions, at a price of $0.50 per common share.

The units contain a "forced warrant conversion" feature under which the debenture will automatically be surrendered and converted into common shares of the Company should the shares of the Company trade at $1.50 or more for 5 consecutive trading days.

The Company used the residual value method to allocate the principal amount of the debentures between the liability, equity component of debentures and the contributed surplus. Under this method, an amount of $54,263 and $65,015 (net of transaction costs) related to the conversion features and the warrants issued was applied to the equity component of debenture and contributed surplus (respectively). The fair value of the liability component was $139,320 computed as the present value of future principal and interest discounted at a rate of 25%.

    2020-09-30     2019-12-31  
    $     $  
Balance at the beginning   -     -  
Addition   160,000     -  
Conversion of debentures (1)   (47,738 )   -  
Accretion of debentures   13,794        
Equity component of debentures   (9,408 )   -  
Contributed surplus for warrants   (11,273 )   -  
Balance at the end   105,375        

(1) In September 2020, $50,000 face value of debentures was converted to 100,000 common shares of the Company at a price of $0.50 per share.

 

20

PEAK FINTECH GROUP INC.        
(Formerly Peak Positioning Technologies Inc.)
Notes to Interim Consolidated Financial Statements

for the three and nine-month ended September 30, 2020 and 2019

(In Canadian dollars)
(Unaudited)

 

 

13 - BONDS

On May 29, 2020, the Company has placed 400 units of secured corporate bonds at $1,000 per unit. Each unit sold is comprised of $1,000 face value bonds, redeemable on June 10, 2023, bearing interest at a nominal rate of 10% payable monthly, plus 20 purchase warrants exercisable into Company common share at $1.00 per share for a period of 36 months from the date of issuance.

The Bonds will be redeemable after 36 months from the date of issuance (the "Initial Maturity Date"). Each holder has a right (the "Initial Extension Right") at the end of the Initial Maturity Date to extend the Bond for another 12 months (the "Initial Extension Period") by giving written notice to that effect to the Company no later than sixty (60) days prior to the Initial Maturity Date. Any holder that has elected to exercise its Initial Extension Right will also have a further right at the end of the Initial Extension Period to extend its Bond for another 12 months (the "Second Extension Period") under the same notice conditions as stated in the Initial Extension.

If a holder elects to extend its Bonds, the Company may redeem such holder's Bonds at any time on payment of a 5% premium to redeem the Bonds ("Penalty") 

The Company has set aside an amount equal to two years of interest in a separate bank account, which will be used to pay interest payable on the Bonds. Any interest accrued on such sum will be in favour of the Company. The set aside amount at September 30, 2020, is $80,051 and is presented under Cash in the Consolidated statements Financial Position.

Bonds are secured by a pledge on the aggregate assets of the Company, maturing on May 29, 2023. The Company used the residual value method to allocate the principal amount of the bond between the liability and contributed surplus. Under this method, an amount of $64,896 (net of transaction costs) related to the warrants issued was applied to contributed surplus.

The fair value of the liability component was $ 309,916 computed as the present value of future principal and interest payments discounted at a rate of 22%.

    2020-09-30     2019-12-31  
    $     $  
Balance at the beginning   -     -  
Addition   400,000     -  
Accretion of bonds   7,716     -  
Contributed surplus for warrants   (64,896 )   -  
Issuance costs   (101,752 )   -  
Balance at the end   241,067     -  

14 - CEBA LOAN (Canada Emergency Business Account)

The Company applied and received on April 15, 2020, $40,000 under the Canada Emergency Business Account ( CEBA) Under this program providing interest-free loans , repaying the balance of the loan on or before December 31, 2022,

will result in loan forgiveness of 25 % ( $10,000), which is the intention of the company.

 

21

PEAK FINTECH GROUP INC.        
(Formerly Peak Positioning Technologies Inc.)
Notes to Interim Consolidated Financial Statements

for the three and nine-month ended September 30, 2020 and 2019

(In Canadian dollars)
(Unaudited)

 

 

15 - SHAREHOLDERS' EQUITY

15.1 Authorized share capital

The share capital of the Company consists of an unlimited number of common shares without par value.

Share Consolidation

Effective July 28, 2020, the Company consolidated its issued and outstanding common shares on the basis of one post- consolidation share for 10 pre-consolidation shares. Unless otherwise stated, all share amounts have been restated retrospectively to reflect this share consolidation.

15.2 Descriptions of the shareholders' equity operations

a) As part of the private placement consisting of unsecured convertible debentures closed on January 15, 2020 for a consideration of $160,000, the Company issued 320,000 share purchase warrants with an exercise price of $0.80 per share for a twenty-four (24) month period following the closing date.

The fair value of the 320,000 warrants was $65,015 with an attributed value of $11,272 to contributed surplus. The fair value of the warrants was calculated using the Black & Scholes option pricing model and the following weighted average assumptions:

Share price at the date of grant

$0.40

Expected life

2 years

Risk-free interest rate

1.63%

Expected volatility (1)

128%

Dividend

0%

Exercise price at the date of grant

$0.80

b) On February 3, 2020, the Company closed a private placement consisting of the sale of 1,440,000 units (a ''Unit'') at a price of $0.40 per Unit for proceed s of $570,000. Each unit consists of one (1) common share and half (1/2) common share purchase warrant. Each warrant entitles the holder to purchase one (1) share of the Company at the price of $1.00 each for a period of twenty-four (24) months from the date of issuance.

The fair value of the 720,000 warrants was $157,547. The value attributed to these warrants was $112,653. The fair value was calculated using the Black & Scholes option pricing model and the following weighted average assumptions:

Share price at the date of grant

$0.45

Expected life

2 years

Risk-free interest rate

1.42%

Expected volatility (1)

128%

Dividend

0%

Exercise price at the date of grant

$1.00

 

22

PEAK FINTECH GROUP INC.        
(Formerly Peak Positioning Technologies Inc.)
Notes to Interim Consolidated Financial Statements

for the three and nine-month ended September 30, 2020 and 2019

(In Canadian dollars)
(Unaudited)

 

 

15 - SHAREHOLDERS' EQUITY (cont'd)

Peak also granted 150,000 finder's compensation warrants to eligible persons who helped place the private placements entitling them to purchase a number of Peak common shares at a price of $0.50 per common share for a twenty-four-month period the issuance.

The fair value of the 150,000 warrants was $41,878 that was attributed to contributed surplus. The fair value of the warrants was calculated using the Black & Scholes option pricing models and the following weighted average assumptions:


Share prices at the date of grant

$0.45

Expected life

2 years

Risk-free interest rate

1.42%

Expected volatility (1)

128.0%

Dividend

0%

Exercise price at the date of grant

$0.50

c) In the first nine months of 2020, the Company issued 4,160,812 common shares to settle $988,744 of debt related to consulting services received by the Company.

d) Between January 1, 2020, and September 30, 2020, $670,000 of secured debentures were surrendered to exercise share purchase warrants at a price of $0.50 per share pursuant to the private placement closed in December 2017. The Company therefore issued 1,340,000 common shares at a price of $0.50 per share to the debenture holders. A corresponding residual value of $132,866 attributed to warrants was transferred to capital stock.

e) On July 22, 2020 and August 24, 2020, the Company closed a private placement consisting in the sale of 3,850,000 and 13,745,000 units respectively at a price of $0.20 per shares for gross proceeds of $3,519,000. Each unit is composed of one common share and one common share purchase warrant, with each warrant entitling the holder to acquire one common share at a price of $0.25 for a period of 24 months following the closing date of the offering.

The fair value of the 3,850,000 warrants was $649,891. The value attributed to contributed surplus was $352433. The fair value was calculated using the Black & Scholes option pricing model and the following weighted average assumptions:

Share price at the date of grant

$0.25

Expected life

2 years

Risk-free interest rate

0.27%

Expected volatility (1)

139%

Dividend

0%

Exercise price at the date of grant

$0.25

 

23

PEAK FINTECH GROUP INC.        
(Formerly Peak Positioning Technologies Inc.)
Notes to Interim Consolidated Financial Statements

for the three and nine-month ended September 30, 2020 and 2019

(In Canadian dollars)
(Unaudited)

 

 

The fair value of the 13,745,000 warrants was $4,104,301. The value attributed to contributed surplus was $1,646,320. The fair value was calculated using the Black & Scholes option pricing model and the following weighted average assumptions:

Share price at the date of grant

$0.395

Expected life

2 years

Risk-free interest rate

0.29%

Expected volatility (1)

143%

Dividend

0%

Exercise price at the date of grant

$0,25

Peak also granted 248,000 finder's compensation warrants to eligible persons who helped place the private placements entitling them to purchase a number of Peak common shares at a price of $0.25 per common share for a twenty-four-month period the issuance.

The fair value of the 248,000 warrants was $74,054 that was attributed to contributed surplus. The fair value of the warrants was calculated using the Black & Scholes option pricing models and the following weighted average assumptions:

Share prices at the date of grant

$0.395

Expected life

2 years

Risk-free interest rate

0.29%

Expected volatility (1)

143%

Dividend

0%

Exercise price at the date of grant

$0,25

In connection with the private placement, the Company paid a cash finder's fees representing 8% of the value of the private placement for a total of $119,500.

15.3 Warrants

Outstanding warrants entitle their holders to subscribe to an equivalent number of common shares as follows:

          2020-09-30           2019-12-31  
          Weighted           Weighted  
    Number of     average     Number of     average  
    warrants     exercise price     warrants     exercise price  
          $           $  
Outstanding, beginning of period   19,069,500     0.610     11,626,036     0.630  
Granted   19,708,000     0.282     8,927,500     0.743  
Expired   (1,430,000 )   0.500     (7,944,036 )   0.531  
Extended   1,140,000     0.500     7,080,000     0.500  
Exercised   (1,340,000 )   0.500     (620,000 )   0.500  
Outstanding and exercisable, end of period   37,147,500     0.479     19,069,500     0.610  

 

24

PEAK FINTECH GROUP INC.        
(Formerly Peak Positioning Technologies Inc.)
Notes to Interim Consolidated Financial Statements

for the three and nine-month ended September 30, 2020 and 2019

(In Canadian dollars)
(Unaudited)

 

 

15.3 Warrants (continued)

As of September 30, 2020 and December 31, 2019, the number of outstanding warrants which could be exercised for an equivalent number of common shares is as follows:


    2020-09-30      2019-12-31   
    Number     Exercise price     Number     Exercise price  
          $           $  
                         
Expiration date                        
May 2020   -     -     290,000     0.500  
August 2020   -           1,140,000     0.500  
December 2020   5,761,000     0.500     7,101,000     0.500  
December 2020   51,000     1.000     51,000     1.000  
February 2021   1,140,000     0.500     -     -  
April 2021   7,500     0.500     7,500     0.500  
April 2021   560,000     0.500     560,000     0.500  
July 2021   140,000     0.800     140,000     0.800  
September 2021   610,000     0.400     -     -  
December 2021   7,080,000     0.800     7,080,000     0.800  
January 2022   320,000     0.800     -     -  
February 2022   720,000     1.000     -     -  
February 2022   150,000     0.500     -     -  
June 2022   386,667     0.500     386,667     0.500  
June 2022   580,000     0.570     580,000     0.570  
June 2022   333,333     0.610     333,333     0.610  
June 2022   1,400,000     1.200     1,400,000     1.200  
July 2022   3,850,000     0.250     -     -  
August 2022 (note 1)   13,993,000     0.250     -     -  
May 2023   57,000     0.500     -     -  
May 2023   8,000     1.000     -     -  
    37,147,500           19,069,500        

Note 1: Holders of these warrants must not trade the unit before December 22, 2020

 

25

PEAK FINTECH GROUP INC.        
(Formerly Peak Positioning Technologies Inc.)
Notes to Interim Consolidated Financial Statements

for the three and nine-month ended September 30, 2020 and 2019

(In Canadian dollars)
(Unaudited)

 

 

16 - SHARE-BASED PAYMENTS

The Company has adopted an incentive stock option plan which provides that the Board of Directors of the Company may, from time to time, at its discretion and in accordance with the Exchange regulations, grant to directors, officers, employees and others providing similar services to the Company, non-transferable options to purchase common shares, provided that the number of common shares reserved for issuance will not exceed 10% of the issued and outstanding common shares exercisable for a period of up to 5 years from the date of grant. The options reserved for issuance to any individual director, officer or employee will not exceed 5% of the issued and outstanding common shares and the number of common shares reserved for issuance to others providing services will not exceed 2% of the issued and outstanding common shares. Options may be exercised as of the grant date for a period determined by the Board, but shall not be greater than 5 years from the date of the grant and 90 days following cessation of the optionee's position with the Company. Provided that the cessation of office, directorships or employment or other similar service arrangement was by reason of death (in the case of an individual), the option may be exercised within a maximum period of one year after such death, subject to the expiry date of such option.

Share options and weighted average exercise prices are as follows for the reporting periods presented :

          2020-09-30           2019-12-31  
          Weighted           Weighted  
    Number of     average     Number of     average  
    options     exercise price     options     exercise price  
          $           $  
Outstanding, beginning of period   5,102,500     0.680     4,190,000     0.740  
Granted   2,011,000     0.430     1,580,000     0.520  
Expired   (380,000 )   0.500     -        
Forfeited   -           (667,500 )   0.660  
Exercised   -           -        
Outstanding end of period   6,733,500     0.614     5,102,500     0.680  
                         
Exercisable end of period   4,249,500     0.713     3,626,250     0.750  

 

26

PEAK FINTECH GROUP INC.        
(Formerly Peak Positioning Technologies Inc.)
Notes to Interim Consolidated Financial Statements

for the three and nine-month ended September 30, 2020 and 2019

(In Canadian dollars)
(Unaudited)

 

 

The table below summarizes the information related to outstanding share options as at September 30, 2020

    Range of     Number of     Weighted average remaining  
    exercise price     options     contractual life (years)  
    $              
    0.500     260,000     2 months  
    0.500     250,000     3 months  
    0.500     15,000     8 months  
    0.850     1,050,000     10 months  
    1.050     780,000     1 years and 9 months  
    0.550     37,500     2 years and 2 months  
    0.800     342,500     2 years and 3 months  
    0.500     10,000     2 years and 7 months  
    0.500     727,500     2 years and 9 months  
    0.500     75,000     3 years and 2 months  
    0.500     995,000     3 years and 8 months  
    0.500     20,000     4 years  
    0.500     60,000     4 years and 2 months  
    0.550     100,000     4 years and 2 months  
    0.500     1,511,000     4 years and 9 months  
    0.225     500,000     4 years and 11 months  
          6,733,500        

The Company has recorded an expense of $260,412 in the first three quarters of 2020 ($268,465 in 2020) as stock-based compensation. The offset was credited to contributed surplus.

16.1 Share-based payments granted to directors and employees

a) On June 11, 2020 the Company granted options to acquire 1,511,000 common shares at a price of $0.50 to certain directors and employees.

The shares vest over a two-year period and are exercisable over a period of five years expiring in June 2025.

The fair value of the options granted to certain directors and employees amounted to $321,756 and was calculated using the Black & Scholes option pricing model and the following assumptions on a weighted average basis:

Share price at the date of grant

$0.25

Expected life

5 years

Risk-free interest rate

0.38%

Volatility (1)

144%

Dividend

0%

Exercise price at the date of grant

$0.50

The volatility was determined by using the Company's own historical volatility over a period corresponding to expected life of the share options.

 

27

PEAK FINTECH GROUP INC.        
(Formerly Peak Positioning Technologies Inc.)
Notes to Interim Consolidated Financial Statements

for the three and nine-month ended September 30, 2020 and 2019

(In Canadian dollars)
(Unaudited)

 

 

16.1 Share-based payments granted to directors and employees(cont'd)

b) On August 7, 2020 the Company granted options to acquire 500,000 common shares at a price of $0.225 to a director.

The shares vest over a two-year period and are exercisable over a period of five years expiring in August 2025.

The fair value of the options granted to certain directors and employees amounted to $88,469 and was calculated using the Black & Scholes option pricing model and the following assumptions on a weighted average basis:

Share price at the date of grant

$0.20

Expected life

5 years

Risk-free interest rate

0.41%

Volatility (1)

143%

Dividend

0%

Exercise price at the date of grant

$0.225

The volatility was determined by using the Company's own historical volatility over a period corresponding to expected life of the share options.

 

28

PEAK FINTECH GROUP INC.        
(Formerly Peak Positioning Technologies Inc.)
Notes to Interim Consolidated Financial Statements

for the three and nine-month ended September 30, 2020 and 2019

(In Canadian dollars)
(Unaudited)

 

 

17 - Finance costs

      2020-09-30     2019-09-30     2020-09-30     2019-09-30  
      ( 3 months)     ( 3 months)     ( 9 months)     ( 9 months)  
Interest on debentures     71,630     91,419     213,005     266,667  
Interest on lease liabilities (note 10)     8,507     12,513     25,413     34,343  
Interest on security deposit and advances     51,325     18,899     142,778     49,010  
Interest on bonds 6   10,417     -     13,924     -  
Interest income     (10,317 )   (3,029 )   (24,564 )   (4,735 )
Accretion on debentures     147,475     145,746     426,153     406,029  
Total interest expense     279,037     265,548     796,709     751,314  
Miscellaneous     1,547     1,735     4,225     3,937  
      280,584     267,283     800,934     755,251  

18 - RELATED PARTY TRANSACTIONS

The Company's related party transactions do not include, unless otherwise stated, special terms and conditions. No guarantees were given or received. Outstanding balances are usually settled in cash.

Transactions with key management personnel, officers and directors

The Company's key management personnel, the Chief Executive Officer and the Chief Executive Officer of the Chinese subsidiaries are members of the Board, and their remuneration includes the following expenses:

    2020-09-30     2019-09-30     2020-09-30     2019-09-30  
    (3 months)     (3 months)     (9 months)     (9 months)  
    $     $     $     $  
Salaries and fringe benefits   93,556     91,076     286,759     282,743  
Share-based payments   94,311     92,873     203,866     244,994  
Technical, marketing and website services paid to an affiliated company   -     -     -     21,000  
Royalty   47,469     30,427     104,370     30,427  
Management fees paid to a company held by a director   -     3,925     2,675     24,825  
Interest on debentures   200     333     600     881  
Total   235,536     218,634     598,270     604,870  

These transactions occurred in the normal course of operations and have been measured at fair value.

As at September 30, 2020 and December 31, 2019 the consolidated statement of financial position includes the following amounts with related parties:

    2020-06-30     2019-12-31  
    $     $  
Advance from a director to a subsidiary, no interest   314,080     298,400  
Advances(payable) to an affiliated company (a)   (4,280 )   17,758  
    309,800     316,158  

 

29

PEAK FINTECH GROUP INC.        
(Formerly Peak Positioning Technologies Inc.)
Notes to Interim Consolidated Financial Statements

for the three and nine-month ended September 30, 2020 and 2019

(In Canadian dollars)
(Unaudited)

 

 

18 - RELATED PARTY TRANSACTIONS (cont'd)

a) The advance to Cubeler, a related entity to the Company, is documented by an on-demand promissory note, yielding 8.5% interest annually. In the case that the advance is not fully paid on December 16, 2019, Cubeler shall execute and deliver a hypothec on the universality of the present and future movable assets to the Company. The Company decided not to execute its rights on the assets considering the low value of the advances

19 - SEGMENT REPORTING

The Company has determined that there were two operating segments, which are defined below. For presentation purposes, other activities are grouped in the other heading. Each operating segment is distinguished by the type of products and services it offers and is managed separately has each requires different business processes, marketing approaches and resources. All inter-segment transfers are carried out at arm's length prices based on prices charged to unrelated customers in stand-alone sales of identical goods and services.

The operating segments are detailed as follows:

Fintech Platform

The Fintech Platform segment comprises the procurement and distribution of products within supply chain or facilitating transactions in the commercial lending industry through technology platforms.

Financial Services

The Financial Services segment encompasses providing commercial loans to entrepreneurs and SMEs and the activity of providing turn-key credit outsourcing services to banks and other lending institutions.

Both operating segments are geographically located in China.

Other

The "other" category include the activity and unallocated portion of the Canadian parent company's services and all non-operating holdings registered in Hong Kong and China

 

30

PEAK FINTECH GROUP INC.        
(Formerly Peak Positioning Technologies Inc.)
Notes to Interim Consolidated Financial Statements

for the three and nine-month ended September 30, 2020 and 2019

(In Canadian dollars)
(Unaudited)

 

 

 

19 - SEGMENT REPORTING (Continued)

The segment information for the nine-month reporting period is as follows:

                            2020-09-30  
    Fintech     Financial     Other     Elimination     Total  
    Platform     Services                    
          $     $     $     $  
Revenues (1)                              
Financial service revenue from   -     2,452,592     -     -     2,452,592  
Fees/sales from external customers   2,130,883     717,082     -     -     2,847,965  
Supply chain services   21,028,710                       21,028,710  
Inter-segment   414,382     -     247,705     (662,087 )   -  
Total revenues   23,573,975     3,169,674     247,705     (662,087 )   26,329,267  
Expenses                              
Depreciation and amortization   144,815     414,729     107,209           666,753  
Interest expenses   111,660     34,502     640,849           787,011  
All other expenses   21,531,391     2,247,912     3,114,355     (662,087 )   26,231,572  
Total expenses   21,787,866     2,697,143     3,862,413     (662,087 )   27,685,336  
Profit (loss) before tax   1,786,109     472,531     (3,614,708 )   -     (1,356,069 )
Income tax   392,510     108,893     -     -     501,403  
Net profit (loss)   1,393,599     363,638     (3,614,708 )   -     (1,857,472 )
Non-controlling interest   490,609     124,470     -     -     615,079  
Net profit (loss) attributable to owners of the parent   902,990     239,168     (3,614,708 )   -     (2,472,550 )
                               
Segmented assets   23,365,186     24,273,744     21,777,735     (20,729,125 )   48,687,541  

 

31

PEAK FINTECH GROUP INC.        
(Formerly Peak Positioning Technologies Inc.)
Notes to Interim Consolidated Financial Statements

for the three and nine-month ended September 30, 2020 and 2019

(In Canadian dollars)
(Unaudited)

 

 

19 - SEGMENT REPORTING (Continued)

                            2019-09-30  
    Fintech     Financial     Other     Elimination     Total  
    Platform     Services                    
          $     $     $     $  
Revenues (1)                              
Financial services revenue   26,820     2,519,152     -     -     2,545,972  
Fees/sales from external customers   1,211,539     939,809     -     -     2,151,348  
Supply chain services   2,653,866     -     -     -     2,653,866  
Inter-segment   384,696     -     103,530     (488,226 )   -  
Total revenues   4,276,921     3,458,961     103,530     (488,226 )   7,351,186  
Expenses                              
Depreciation and amortization   113,579     300,594     526,367           940,540  
Interest expenses   6,268     74,742     674,240           755,250  
Impairment of intangible asset               584,189           584,189  
All other expenses   3,472,554     2,297,383     886,534     (488,226 )   6,168,245  
Total expenses   3,592,401     2,672,719     2,671,330     (488,226 )   8,448,224  
Profit (loss) before tax   684,520     786,242     (2,567,800 )   -     (1,097,038 )
Income tax (recovery)   260,506     284,538     -     -     545,044  
Net Profit (loss)   424,014     501,704     (2,567,800 )   -     (1,642,082 )
Non-controlling interest   298,677     190,095     -     -     488,772  
Net profit (loss) attributable to owners of the parent   125,337     311,609     (2,567,800 )   -     (2,130,854 )
                               
Segmented assets   7,030,648     22,902,481     17,393,945     (17,802,505 )   29,524,569  

Note (1): Revenues from external customers have been identified on the basis of the customer's geographical location, which is China.

 

32

PEAK FINTECH GROUP INC.        
(Formerly Peak Positioning Technologies Inc.)
Notes to Interim Consolidated Financial Statements

for the three and nine-month ended September 30, 2020 and 2019

(In Canadian dollars)
(Unaudited)

 

 

19 - SEGMENT REPORTING (Continued)

Other (continued)

The Company's non-current assets ( other than financial instruments) are located into the following geographic regions at :

    2020-09-30     2019-12-31  
    Non-current     Non-current  
    Assets     Assets  
    $     $  
China   2,460,407     1,846,853  
Canada   1,179,750     1,287,000  
Total   3,640,157     3,133,853  

20 - COMPARATIVE FIGURES

Certain comparative figures have been reclassified in order to comply with the basis of presentation adopted in the current year.

21 - SUBSEQUENT EVENTS

a) On October 5, 2020 , the Company closed a private placement consisting in the sale of 1,250,000 units at a price of $0.40 per shares for gross proceeds of $500,000. Each unit is composed of one common share and one common share purchase warrant, with each warrant entitling the holder to acquire one common share at a price of $0.40 for a period of 24 months following the closing date of the offering.

b) On October 28, 2020, the Company granted incentive options to acquire 2,450,000 common shares to certain directors, officers and key employees. The stock options expire in October 2025, vest over two years and have an exercise price of $0.75

c) On November 9, 2020, the Company held a special meeting of shareholders to approve a name change of Peak Positioning Technologies Inc. to Peak Fintech Group Inc. The name change was approved at that date. It was decided to reflect the name change in these interim financial statements.