EX-99.2 3 snippq32019fs.htm INTERIM FINANCIAL STATEMENTS FOR THE PERIOD ENDED SEPTEMBER 30, 2019 Snipp Q3 Interim FS




SNIPP INTERACTIVE INC.




CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars unless otherwise noted)

(Unaudited)


FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019





NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS

In accordance with National Instrument 51-102 released by the Canadian Securities Administrators, the Company discloses that its auditors have not reviewed the unaudited condensed interim consolidated financial statements for the period ended September 30, 2019.


 

 

 

 

 

 

 

 

 


SNIPP INTERACTIVE INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Expressed in U.S. Dollars) (Unaudited)

As at


 

 

September 30, 2019

December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Current

 

 

 

 

 

Cash

(Note 3)

$

802,942

$

1,594,429

Accounts receivable, net of allowance for expected credit losses $62,791 (2018 - $15,309)

 

 

2,542,143

 

2,378,671

Deposits, prepaid expenses and other assets

 

 

383,729

 

716,877

 

 

 

 

 

 

 

 

 

3,728,814

 

4,689,977

 

 

 

 

 

 

Equipment

(Note 5)

 

28,479

 

43,419

Intangible assets

(Note 6)

 

3,881,039

 

4,701,199

Goodwill

 

 

3,333,943

 

3,343,129

 

 

 

 

 

 

 

 

$

10,972,275

$

12,777,724

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Current

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

2,375,173

$

2,861,051

Deferred revenue

 

 

919,016

 

561,760

Due to related parties

(Note 7)

 

30,566

 

77,244

Working Capital Line of Credit

(Note 10)

 

221,187

 

-

 

 

 

 

 

 

 

 

 

3,545,942

 

3,500,055

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

Common shares

(Note 8)

 

29,523,285

 

29,523,285

Warrants

(Note 8)

 

421,796

 

421,796

Contributed surplus

(Note 8)

 

5,257,565

 

5,127,412

Deficit

 

 

(26,502,526)

 

(24,492,047)

Accumulated other comprehensive loss

 

 

(1,273,787)

 

(1,302,777)

 

 

 

 

 

 

 

 

 

7,426,333

 

9,277,669

 

 

 

 

 

 

 

 

$

10,972,275

$

12,777,724


Approved and authorized by the Board of Directors on November 27, 2019.


  “Atul Sabharwal ”

Director

   “Sarfaraz Haji ”

Director

Atul Sabharwal

Sarfaraz Haji

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


 

 

 

 

 

 

 

 

 


SNIPP INTERACTIVE INC.

CONDENSEDF INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Expressed in U.S. Dollars)

(Unaudited)

 

Three

Months Ended

September 30, 2019

Three

Months Ended

September 30, 2018

Nine

Months Ended

September 30, 2019

Nine

Months Ended

September 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUE

$

2,011,647

$

2,944,231

$

7,294,070

$

8,836,090

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

Salaries and compensation (Note 7)

 

1,526,840

 

1,655,686

 

4,587,244

 

5,420,830

General and administrative

 

208,539

 

218,685

 

636,096

 

729,390

Campaign infrastructure

 

468,082

 

700,656

 

1,748,684

 

3,210,525

Professional fees

 

17,783

 

27,871

 

180,367

 

157,197

Marketing and investor relations

 

33,394

 

42,464

 

190,829

 

119,628

Travel

 

15,541

 

45,844

 

74,300

 

88,449

Bad debt expense

 

-

 

1,711

 

91,639

 

1,711

Amortization of intangibles (Note 6)

 

545,165

 

485,723

 

1,608,563

 

1,433,665

Depreciation of equipment (Note 5)

 

6,133

 

7,860

 

20,268

 

22,388

Stock-based compensation (Note 8)

 

32,645

 

41,975

 

130,153

 

212,219

 

 

2,854,122

 

3,228,475

 

9,268,143

 

11,396,002

 

 

 

 

 

 

 

 

 

Net loss before interest, foreign exchange and taxes

 

(842,475)

 

(284,244)

 

(1,974,073)

 

(2,559,912)

 

 

 

 

 

 

 

 

 

Interest expense

 

-

 

835

 

(149)

 

(7,798)

Foreign exchange loss

$

(13,011)

 

9,176

 

(31,889)

 

3,235

Net loss before tax provision

 

(855,486)

 

(274,233)

 

(2,006,111)

 

(2,564,475)

Provision for taxes

 

-

 

(14,895)

 

(4,368)

 

(28,186)

Net loss for the period

 

(855,486)

 

(289,128)

 

(2,010,479)

 

(2,592,661)

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE LOSS

 

 

 

 

 

 

 

 

Items that may be reclassified subsequently to loss

 

 

 

 

 

 

 

 

Cumulative translation adjustment

 

67,159

 

86,556

 

28,990

 

96,792

Comprehensive loss for the period

$

(788,327)

$

(202,572)

$

(1,981,489)

$

(2,495,869)

Basic and diluted loss per common share

$

(0.00)

$

(0.00)

$

(0.01)

$

(0.01)

Weighted average number of common shares

outstanding – basic and diluted

 

226,163,904

 

217,252,775

 

226,163,904

 

204,690,208

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



 

 

 

 

 

 

 

 

 



SNIPP INTERACTIVE INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in U.S. Dollars)

(Unaudited)

 

Nine

Months Ended

September 30, 2019

Nine

Months Ended

September 30, 2018

 

 

 

 

 

CASH FLOWS FROM OPERATING

 

 

 

 

Net loss for the period

$

(2,010,479)

$

(2,592,661)

Items not involving cash:

 

 

 

 

Amortization of intangibles

 

1,608,563

 

1,433,665

Depreciation of equipment

 

20,268

 

22,388

Stock-based compensation

 

130,153

 

212,219

Changes in non-cash working capital items:

 

 

 

 

Accounts receivable

 

(163,472)

 

583,952

Deposits, prepaid expenses and other assets

 

333,148

 

(130,913)

Accounts payable and accrued liabilities

 

(485,878)

 

347,972

Deferred revenue

 

357,256

 

(162,931)

Due to related parties

 

(46,678)

 

25,898

 

 

 

 

 

Net cash flows generated by (used in) operating activities

 

(257,119)

 

(260,411)

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

Additions to equipment

 

(10,706)

 

(7,088)

Cash paid for acquisition of Ziploop

 

-

 

(25,000)

Additions to intangible assets

 

(688,735)

 

(789,223)

 

 

 

 

 

Net cash flows used in investing activities

 

(699,441)

 

(821,311)

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

Proceeds from common shares issued

 

-

 

3,018,950

Share issuance costs

 

-

 

(109,791)

Working capital line of credit

 

221.187

 

(933,159)

 

 

 

 

 

Net cash flows provided by financing activities

 

221,187

 

1,976,000

 

 

 

 

 

Effect of exchange rate changes on cash

 

(56,114)

 

96,792

 

 

 

 

 

Change in cash for the period

 

(791,487)

 

991,070

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

1,594,429

 

386,630

 

 

 

 

 

Cash and cash equivalents, end of period

$

802,942

$

1,377,700


Supplemental disclosure regarding cash flows (Note 9)


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


 

 

 

 

 

 

 

 

 


SNIPP INTERACTIVE INC.

 

 

 

 

 

 

 

 

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Expressed in U.S. Dollars)

 

 

 

 

 

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

Common Shares

Amount

Warrants

Contributed

Surplus

Accumulated Other Comprehensive Loss

Deficit

Total

Shareholders'

Equity

 

 

 

 

 

 

 

 

Balance, December 31, 2017

177,736,675

$      26,186,684

$    421,796

$   4,797,541

$          (1,259,678)

$   (21,395,878)

$       8,750,465

 Private placement shares issued

37,916,667

3,018,950

-

-

-

-

3,018,950

 Financing issuance costs

 

(109,791)

-

-

-

-

(109,791)

 Fair value of Finder’s Warrants

-

(72,558)

-

72,558

-

-

-

 Ziploop acquisition shares issued (Note 10)

10,510,562

500,000

-

-

-

-

500,000

 Stock-based compensation

-

-

-

212,219

-

-

212,219

 Cumulative translation adjustment

-

-

-

-

96,792

-

96,792

 Net loss for the period

-

-

-

-

-

(2,592,661)

(2,592,661)

Balance, September 30, 2018

226,163,904

$      29,523,285

$    421,796

$    5,082,318

$         (1,162,886)

$   (23,988,539)

$      9,875,974

 Stock-based compensation

-

-

-

45,094

-

-

45,094

 Cumulative translation adjustment

-

-

-

-

(139,891)

-

(139,891)

 Net loss for the period

-

-

-

-

-

(503,508)

(503,508)

Balance, December 31, 2018

226,163,904

$      29,523,285

$    421,796

$    5,127,412

$         (1,302,777)

$   (24,492,047)

$      9,277,669

 Stock-based compensation

-

-

-

130,153

-

-

130,153

 Cumulative translation adjustment

-

-

-

-

28,990

-

28,990

 Net loss for the period

-

-

-

-

-

(2,010,479)

(2,010,479)

Balance, September 30, 2019

226,163,904

$      29,523,285

$    421,796

$    5,257,565

$         (1,273,787)

$   (26,502,526)

$      7,426,333


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


 

 

 

 

 

 

 

 

 


SNIPP INTERACTIVE INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(Unaudited)

 September 30, 2019


1

NATURE OF OPERATIONS


Snipp Interactive Inc. (the “Company” or “Snipp”) was incorporated under the Business Corporations Act (British Columbia) on January 21, 2010 and its business is to provide a full suite of mobile marketing, rebates and loyalty solutions in the US, Canada and internationally.


Unless otherwise indicated in these condensed interim consolidated financial statements, references to “$” are to U.S. dollars.


These condensed interim consolidated financial statements have been prepared on a going concern basis, which assumes the realization of assets and settlement of liabilities in the normal course of business.


The registered address, head office, principal address and records office of the Company are located at 219 Dufferin St, Unit 208B, Toronto, Ontario M6K 3J1, Canada.


The condensed interim consolidated financial statements were authorized for issuance by the Board of Directors on November 27, 2019.


The Company has a working capital surplus of $182,872 (2018 - $1,189,922), a net loss of $2,010,479, accumulated deficit of $26,502,526 and negative cash flows from operations of $257,119. Management is of the opinion that sufficient working capital is available from its financings and will be obtained from operations to meet the Company's liabilities and commitments as they come due for the next twelve months.


2

SIGNIFICANT ACCOUNTING POLICIES


Statement of Compliance


These unaudited interim condensed consolidated financial statements have been prepared in accordance with International Accounting Standard 34, ‘‘Interim Financial Reporting’’ (IAS 34), as issued by the International Accounting Standards Board (IASB). These unaudited interim condensed consolidated financial statements do not include all the information and disclosures required in annual financial statements, and should be read in conjunction with the Company’s audited annual consolidated financial statements as at and for the year ended December 31, 2018 (December 31, 2018 consolidated financial statements) filed on SEDAR on April 30, 2019. All defined terms used herein are consistent with those terms defined in the December 31, 2018 consolidated financial statements.


Basis of presentation


The condensed interim consolidated financial statements have been prepared on a historical cost basis, except for financial instruments classified as financial instruments at fair value through profit and loss, which are stated at their fair value. In addition, these condensed interim consolidated financial statements have been prepared using the accrual basis of accounting except for cash flow information.


Basis of consolidation


These condensed interim consolidated financial statements include the accounts of the Company and its wholly-owned legal subsidiaries Snipp Interactive Inc. (formerly Consumer Impulse, Inc.), which was incorporated in Delaware, USA, Snipp Interactive (India) Private Limited, which was incorporated in India, Snipp Interactive Limited (formerly Swiss Post Solutions Ireland Limited), which was incorporated in Ireland, Snipp Interactive AG, which was incorporated in Switzerland, Hip Digital, Inc., which was incorporated in Delaware, USA and Hip Digital Media Inc., which was incorporated in British Columbia, Canada. All material inter-company balances and transactions have been eliminated.


 

 

 

 

 

 

 

 

 


SNIPP INTERACTIVE INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(Unaudited)

 September 30, 2019


2

SIGNIFICANT ACCOUNTING POLICIES (cont’d…)


Critical judgement and accounting estimates


The preparation of these condensed interim consolidated financial statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed interim consolidated financial statements and the reported expenses during the period. Significant  assumptions about the future and other sources of estimation uncertainty that management has made at the end of the reporting period relate to provisions for receivables, depreciation, impairment testing, determining the fair value of identifiable assets acquired and liabilities assumed in a business combination, determining the risk free rate of return, expected volatility and future market conditions when calculating the fair value of stock options and warrants, and determining fair values of financial instruments. Actual results could differ from these estimates due to the underlying uncertainty that could result in a material adjustment to the carrying amounts of assets, liabilities, and equity in the   event that actual results differ from assumptions made, relate to, but are not limited to, the following:


i)

The recoverability of accounts receivable and the expected credit loss allowance that are included in the condensed interim consolidated statements of financial position are based on historical collection of receivables.


ii)

The inputs used in accounting for share-based payments expense included in profit and loss calculated using the Black Scholes option pricing model (Note 8).


iii)

The carrying value of intangible assets (capitalized software development, customer relationships, intellectual property and music label contracts) that are included in the condensed interim consolidated statements of financial position are based on management assessments of the recoverable amount of the asset. As well, management estimates on the capitalized costs that are directly attributable to the development of the intangible asset (Note 6).


iv)

The carrying value of goodwill and intangibles acquired from acquisitions and estimates on any assumptions underlying the analysis of impairment.


v)

The purchase price allocation corresponding to completed acquisitions and the related contingent considerations (Note 10).


Revenue from contracts with customers


The Company provides a full suite of promotions-related marketing services in the US, Canada and internationally, and generates revenue by designing, constructing, implementing and managing these promotions marketing services for its customers. The Company adopted IFRS 15 on January 1, 2018. IFRS 15 introduces a single, principles-based, five-step model for the recognition of revenue when control of goods is transferred to the customer. The five steps are: identify the contract(s) with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to each performance obligation and recognize revenue as each performance obligation is satisfied. IFRS 15 also requires enhanced disclosures about revenue to help users better understand the nature, amount, timing and uncertainty of revenue and cash flows from contracts with customers. There is no impact to the timing or amounts of revenue recognized in its statement of operations upon the adoption of the standard.


Arrangements with multiple deliverables


Many of the Company’s arrangements with customers include multiple performance obligations such as campaign development and campaign management which are delivered at varying times. In these cases, the Company treats the delivered items as separate performance obligations of accounting if they have value to the customer on a stand-alone basis and, where the arrangement includes a general right of return relative to the delivered item, delivery or performance of undelivered items is considered probable and substantially in the Company’s control. The Company allocates the total arrangement consideration to all performance obligations using its best estimate of their relative fair value, since vendor- specific objective or third-party evidence of the selling price is generally unavailable. It then recognizes revenue on the different performance obligations in accordance with the policies set out above.


 

 

 

 

 

 

 

 

 


SNIPP INTERACTIVE INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(Unaudited)

 September 30, 2019


2

SIGNIFICANT ACCOUNTING POLICIES (cont’d…)


New standards adopted


Effective January 1, 2019, the Company adopted IFRS 16, “Leases”, using the modified approach. The most significant change introduced by IFRS 16 is a single lessee accounting model, bringing leases on balance sheet for lessees. Adoption of this standard did not have a significant impact on the Company's consolidated financial statements.


The Company is a party to lease contracts for office space. Leases are recognized, measured and presented in line with IFRS 16. The Company implemented a single accounting model, requiring lessees to recognize assets and liabilities for all leases excluding exceptions listed in the standard. The Company elected to apply exemptions for short term leases and for leases for which the underlying asset is of low value. The Company has also elected to apply the practical expedient to not separate non-lease components from lease components, and instead account for each lease component and any associated non-lease components as a single lease component.


At the inception of a contract, the Company assesses whether a contract is, or contains a lease based on whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.


Based on the accounting policy applied the Company recognizes a right-of-use asset and a lease liability at the commencement date of the contract for all leases conveying the right to control the use of an identified asset for a period of time. The commencement date is the date on which the lessor makes an underlying asset available for use by a lessee.


Leases with a remaining term of twelve months or less from the date of application have been accounted for as short- term leases even though the initial term from lease commencement have been more than twelve months.


 

 

 

 

 

 

 

 

 


SNIPP INTERACTIVE INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(Unaudited)

 September 30, 2019


3

CASH


 

 

 

September 30,

2019

 

December 31,

2018

 

 

 

 

 

 

 

Cash on deposit

$

802,942

$

1,594,429

 

Total

$

802,942

$

1,594,429


4

SEGMENTED INFORMATION


IFRS 8 “Operating Segments” defines an operating segment as i) a component of an entity that engages in business activities from which it may earn revenues and incur expenses; ii) whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and to assess its performance; and iii) for which discrete financial information is available.


The Company’s management and chief operating decision maker reviews performance of the Company on a consolidated basis and has integrated its products and services as one operating segment, which provides a full suite of mobile marketing and loyalty services in the United States, Ireland and internationally.


Geographic information


The Company has one operating segment, which provides a full suite of mobile marketing and loyalty services in the United States, Ireland and internationally.


For the Company’s geographically segmented non-current assets (equipment and intangible assets, including goodwill), the Company has allocated based on location of assets as follows:


 

 

 

 

September 30,

2019

December 31,

2018

 

 

 

 

 

 

 

 

 

United States

$

4,262,414

$

4,978,846

 

Ireland

 

1,160,744

 

1,281,621

 

International

 

1,735,199

 

1,827,280

 

Total

 

 

$

7,158,357

$

8,087,747


For the Company’s geographically segmented revenue, the Company has allocated revenue based on the location of the customer, as follows:


 

 

Three Months

Ended

September 30,

2019

Three Months

Ended

September 30,

2018

Nine Months

Ended

September 30,

2019

Nine Months

Ended

September 30,

2018

 

 

 

 

 

 

 

United States

$      1,400,986

$      2,413,381

$      4,758,511

$     7,367,428

 

Ireland

510,117

228,893

$      2,041,723

678,054

 

International

100,544

301,957

$         493,836

790,608

 

Total

$      2,011,647

$      2,944,231

$      7,294,070

$     8,836,090


 

 

 

 

 

 

 

 

 


SNIPP INTERACTIVE INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(Unaudited)

 September 30, 2019


5

EQUIPMENT


 

September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

Opening

 

 

Closing

Opening

Depreciation

Closing

Foreign

 

 

 

cost

 

 

cost

accumulated

during the

depreciation

exchange

Net book

 

 

balance

Additions

Disposals

balance

depreciation

period

balance

adjustment

value


Office Equipment


$     18,026

  $              -

$              -


$     18,026


$    15,160


$       1,242


$     16,402


$              -


$     1,624

Computer Equipment

     188,802

$          10,706

                -

    199,508

    148,249

         19,026

     167,275

     (5,378)

     26,855

 

 

$   206,828

$          10,706

$              -

$   217,534

$ 163,409

$     20,268

$   183,677

$    (5,378)

$   28,479



 

December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

Opening

 

 

Closing

Opening

Depreciation

Closing

Foreign

          

 

 

cost

 

 

cost

accumulated

during the

depreciation

exchange

Net book

 

 

balance

Additions

Disposals

balance

depreciation

period

balance

adjustment

value


Office Equipment


$     18,026

  $               -

$              -


$     18,026


$    14,729


$               431


$     15,160


$             -


$     2,866

Computer Equipment

     181,077

$       7,725

                -

    188,802

    118,045

        30,204

     148,249

               -

     40,553

 

 

$   199,103

$       7,725

$              -

$   206,828

$ 132,774

$          30,635

$   163,409

$             -

$   43,419


6

INTANGIBLE ASSETS


September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

Opening

 

 

Closing

Opening

Amortization

Closing

Foreign

 

 

cost

 

 

cost

accumulated

during the

amortization

exchange

Net book

 

balance

Additions

Disposals

balance

amortization

period

balance

adjustment

value


Software platform


$ 5,506,345

$  688,735

$              -


$  6,195,080


$2,599,226


$     829,316


$ 3,428,542

$     62,966


$   2,829,504

Intellectual property

3,020,000

-

-

3,020,000

1,826,579

452,997

2,279,576

25,736

766,160

Customer relationships

1,195,000

-

-

1,195,000

872,012

179,253

1,051,265

10,966

154,701

Music label contracts

      980,000

                -

                -

     980,000

    702,329

       146,997

     849,326

                 -

     130,674

 

$10,701,345

$  688,735

$              -

$11,390,080

$6,000,146

$  1,608,563

$ 7,608,709

$     99,668

$   3,881,039


December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

Opening

 

 

Closing

Opening

Amortization

Closing

Foreign

 

 

cost

 

 

cost

accumulated

during the

amortization

Exchange

Net book

 

balance

Additions

Disposals

balance

amortization

period

balance

adjustment

value


Software platform


$ 4,499,350


$1,006,995

$              -


$  5,506,345


$1,606,831


$   992,395


$ 2,599,226

$               -


$   2,907,119

Intellectual property

2,495,000

525,000

-

3,020,000

1,301,333

525,246

1,826,579

-

1,193,421

Customer relationships

1,195,000

-

-

1,195,000

633,008

239,004

872,012

-

322,988

Music label contracts

      980,000

                -

                -

     980,000

    506,333

      195,996

     702,329

                  -

   277,671

 

$ 9,169,350

$1,531,995

$              -

$10,701,345

$4,047,505

$ 1,952,641

$ 6,000,146

$               -

$   4,701,199


 

 

 

 

 

 

 

 

 


SNIPP INTERACTIVE INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(Unaudited)

 September 30, 2019


7

RELATED PARTY TRANSACTIONS


The related parties of the Company are key management personnel and officers. Related party transactions not disclosed elsewhere included in expenses for the three months ended September 30, 2019 and 2018 are salaries and compensation of $247,590 and $212,853, respectively, charged by officers and key management personnel of the Company. Related party transactions not disclosed elsewhere included in expenses for the nine months ended September 30, 2019 and 2018 are salaries and compensation of $662,970 and $715,539, respectively, charged by officers and key management personnel of the Company. At September 30, 2019, $30,566 was due to officers and directors (2018 - $77,244). The amounts due to related parties represent unpaid salaries and compensation and unpaid expenses. The amounts are non- interest bearing, unsecured and have no specified terms of repayment.


8

CAPITAL STOCK


Authorized


Unlimited common shares, without par value

Unlimited preferred shares, without par value, issuable in series:

Unlimited Series 1 voting preferred shares, without par value, redeemable at C$0.0001 per share


Share issuances


On February 28, 2018, the Company announced a non-brokered private placement financing and closed a first tranche comprised of 8,500,000 common shares at a price of C$0.10 per share for gross proceeds of $667,165 (C$850,000). On March 12, 2018, the Company closed a second tranche comprised of 8,000,000 common shares at a price of C$0.10 per share for gross proceeds of $623,520 (C$800,000). On March 21, 2018, the Company closed a third tranche comprised of 2,500,000 common shares at a price of C$0.10 per share for gross proceeds of $192,925 (C$250,000). On March 28, 2018, the Company closed a fourth tranche comprised of 6,000,000 common shares at a price of C$0.10 per share for gross proceeds of $465,060 (C$600,000). On April 18, 2018, the Company closed a fifth and final tranche comprised of 10,000,000 common shares at a price of C$0.10 per share for gross proceeds of $792,800 (C$1,000,000) and also closed an over-allotment to the fifth tranche comprised of 2,916,667 common shares at a price of C$0.12 per share for gross proceeds of $277,480 (C$350,000). Commissions of $37,411 (C$48,000), $27,904 (C$36,000) and $28,541 (C$36,000) were paid in connection with the second, fourth and fifth tranches. In addition, 480,000 and 360,000 Finder's Warrants were issued in connection with the second and fourth tranches and 222,000 and 115,000 Finder's Warrants were issued in connection with the fifth tranche and the over-allotment to the fifth tranche. The Finder’s Warrants issued for the second, fourth and fifth tranches entitles the holder to purchase one common share at an exercise price of C$0.10 for a period of 2 years and the Finder's Warrants issued for the over-allotment to the fifth tranche entitles the holder to purchase one common share at an exercise price of C$0.12 for a period of 2 years. The fair value of the Finder’s Warrants was estimated on the date of issuance using the Black-Scholes option pricing model with the following assumptions: 2 year expected life, volatility of 125%, risk-free rate of 1.35% and dividend rate of 0%. The Finder’s Warrants were valued   at $25,038 (C$32,125), $22,160 (C$28,590), $16,978 (C$21,415) and $8,382 (C$10,573) respectively, with aggregate amount of $72,558 being deducted from common shares as a cost of financing and a corresponding addition to contributed surplus during the year ended December 31, 2018. Filing fees of $15,935 (C$20,100) were also paid in connection with the fifth tranche.


Stock options


On October 26, 2018, disinterested shareholders approved and the Company adopted an amended fixed number incentive stock option plan which was previously approved on June 16, 2017 (the “Option Plan”) which provides that a committee of the Board of Directors appointed in accordance with the Option Plan (the “Committee”) may from time to time, in its discretion, and in accordance with the TSX-V requirements, grant to directors, officers and consultants of the Company, non-transferable options to purchase common shares (“Options”), reserving 45,232,780 shares, being 20% of the Company’s issued and outstanding shares as at October 26, 2018. Such Options will be exercisable for a period of up to 10 years from the date of grant. Vesting terms are determined at the time of grant by the Committee.


 

 

 

 

 

 

 

 

 


SNIPP INTERACTIVE INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(Unaudited)

 September 30, 2019


8

CAPITAL STOCK (cont’d…)


Stock options (cont’d…)


During the three and nine months ended September 30, 2019, the Company recognized stock-based compensation expense of $32,645 and $130,153, respectively, corresponding to the vesting of stock options that were granted during fiscal 2018 and prior years. During the three and nine months ended September 30, 2018, the Company recognized stock- based compensation expense of $41,975 and $212,219, respectively, corresponding to the vesting of stock options that were granted during prior years. In fiscal 2018, the Company granted 350,000 options with exercise price of C$0.065 on September 14, 2018 and 3,526,000 options with exercise price of C$0.10 on October 26, 2018. All options granted in fiscal 2018 have a five year expiry date from the date of grant. The options were valued at $13,541, and $150,082 respectively. The following assumptions were used for the Black-Scholes valuation of options granted in fiscal 2018 (Risk-free interest rate: 2.23% - 2.32%; expected life of option: 5.0 years; annualized volatility: 125%; dividend rate: 0.00%). All stock options have been granted in Canadian dollars and will be vested in current and future periods.


Stock option activity is presented below:


 

 

Number of

Weighted Average

 

 

Options

Exercise Price

 

 

 

C$

 

Outstanding, December 31, 2017

14,625,938

0.27

 

Cancelled

(1,478,766)

0.18

 

Granted

3,876,000

0.10

 

Expired

(1,750,000)

0.11

 

Outstanding, December 31, 2018

15,273,172

0.25

 

Cancelled

(969,535)

0.28

 

Expired

(300,000)

0.15

 

Outstanding, September 30, 2019

14,003,637

0.25


 

 

 

 

 

 

 

 

 


SNIPP INTERACTIVE INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(Unaudited)

 September 30, 2019


8

CAPITAL STOCK (cont’d…)


Stock options (cont’d…)


The weighted average remaining life of the stock options outstanding is 2.29 years as at September 30, 2019. As at September 30, 2019, the following stock options are outstanding and exercisable:


Number of Options

Number of Options

Exercise Price

Expiry Date

Outstanding

Exercisable

C$

 

200,000

200,000

$0.34

06-Nov-19

175,000

175,000

$0.33

26-Nov-19

1,150,000

1,150,000

$0.55

29-Dec-19

270,000

270,000

$0.68

09-Feb-20

25,000

25,000

$0.65

26-Mar-20

100,000

100,000

$0.68

08-Jun-20

814,258

814,258

$0.41

09-Jul-20

415,000

415,000

$0.41

13-Aug-20

85,000

85,000

$0.41

15-Sep-20

200,000

200,000

$0.44

05-Oct-20

200,000

200,000

$0.465

14-Oct-20

400,000

400,000

$0.46

19-Oct-20

60,000

60,000

$0.42

10-Nov-20

1,960,380

1,960,380

$0.38

09-Feb-21 to 12-Feb-21

46,666

31,111

$0.15

15-Dec-21

3,526,333

2,350,889

$0.10

13-Jun-22 to

16-Jun-22

500,000

166,667

$0.10

01-Nov-22

350,000

116,667

$0.065

14-Sep-23

3,526,000

-

$0.10

26-Oct-23

14,003,637

8,719,972

 

 


 

 

 

 

 

 

 

 

 


SNIPP INTERACTIVE INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(Unaudited)

 September 30, 2019


8

CAPITAL STOCK (cont’d…)


Warrants


 

 

 

Equity Classification

 

 


Number of Shares

Weighted Average

Exercise Price

 

Outstanding, December 31, 2017

6,188,688

0.13

 

Expired – Financing warrants

(6,188,688)

0.13

 

Outstanding, December 31, 2018 and September 30, 2019

-

-



 



Finder’s Warrants



Number of Shares

Weighted

Average Exercise

Price

C$

 

Outstanding, December 31, 2017

-

-

 

 

 

 

 

Issued

1,177,000

0.10

 

 

 

 

 

Outstanding, December 31, 2018 and September 30, 2019

1,177,000

0.10


Each Finder’s Warrant entitles the holder to purchase one common share at the applicable exercise price for a period of 2 years from the date of issuance.


The following assumptions were used for the Black-Scholes valuation of the Finder’s Warrants issued during the period ended December 31, 2018:


 

Risk-free interest rate

1.35%

 

Expected life of warrants

2.0 years

 

Annualized volatility

125%

 

Dividend rate

0.00%


As at September 30, 2019 the following Finder’s Warrants are outstanding:


 

Number of Common Shares

Issuable

Weighted Average Exercise

Price  C$



Expiry Date

 

480,000

0.10

12-Mar-20

 

360,000

0.10

28-Mar-20

 

222,000

0.10

18-Apr-20

 

115,000

0.12

18-Apr-20

 

1,177,000

0.10

 


 

 

 

 

 

 

 

 

 


SNIPP INTERACTIVE INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(Unaudited)

 September 30, 2019


9

SUPPLEMENTAL DISCLOSURE REGARDING CASH FLOWS


 

 

Nine Months

Ended

September 30,

2019

Nine Months

Ended

September 30,

2018

 

 

 

 

 

Cash paid during the period for interest

149

7,798

 

 

 

 


10

ACQUISITION OF ZIPLOOP ASSETS


On September 17, 2018, the Company acquired substantially all of the assets of Ziploop, Inc., a Delaware corporation (“Ziploop”), consisting primarily of Ziploop’s proprietary intellectual property assets (the “Acquisition”), as per the asset purchase agreement (the “Purchase Agreement”) with Ziploop dated September 7, 2018. The purchase price of the Acquisition is $525,000 (C$686,884) which has been paid in full by the issuance of 10,510,562 common shares (the “Shares”) at a price of CAN$0.062 per share and a cash payment of $25,000. The Shares are subject to a six-month hold period. Prior to closing the Company paid $25,000 as an exclusivity payment as per the letter of intent (the “LOI”) dated August 3, 2018. The acquired intellectual property provides an intelligent learning platform that when added to Snipp’s existing receipt processing platform, will result in a smarter, faster and more robust technology suite.


The fair value of the consideration to Ziploop was calculated as follows:


 

 

 

 

 

Exclusivity payment

$

25,000

 

Purchase price based on issuance of Shares

 

500,000

 

Consideration Payable

$

525,000


The Company’s purchase price allocation is as follows:


 

Intellectual Property

$

525,000

 

 

$

525,000


11

CAPITAL MANAGEMENT


The Company defines capital as all components of shareholders’ equity. The Company has a working capital line of credit as well as deferred revenue, due to related parties, accounts payable and accrued liabilities in the ordinary course of operations. The Board of Directors does not establish quantitative return on capital criteria for management due to the nature of the Company’s business. The Company does not pay dividends. The Company is not subject to any externally imposed capital requirements.


12

COMMITMENT


The Company has leased office space in the US, Canada and Ireland. The remaining terms of the leases in the various locations range from 1 to 3 years. Future remaining minimum lease payments as at September 30, 2019 are as follows:


 

2019

$

47,381

 

2020

 

92,645

 

2021

 

31,959

 

2022

 

10,653

 

 

$

182,638


 

 

 

 

 

 

 

 

 


SNIPP INTERACTIVE INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(Unaudited)

 September 30, 2019


13

FINANCIAL INSTRUMENTS


Fair value


Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair values.


The carrying value of accounts receivable excluding sales tax, due to related parties, accounts payable and accrued liabilities and working capital line of credit approximate their fair value because of the short-term nature of these instruments while cash is valued using a level 1 fair value measurement.


 

 

September 30, 2019

  December 31, 2018

 

 

Carrying

Value

Fair

Value

Carrying

Value

Fair

Value

 

Fair value through profit and loss – assets

$802,942

$802,942

$1,594,429

$1,594,429

 

Fair value through profit and loss – liabilities

-

-

-

-

 

 

$802,942

$802,942

$1,594,429

$1,594,429


Financial risk factors


The Company’s risk exposures and the impact on the Company’s financial statements are summarized below.


Credit risk


Financial instruments that potentially subject the Company to a significant concentration of credit risk consist primarily of cash and accounts receivable excluding sales tax. The Company places its cash with major financial institutions to limit risk from cash. The maximum exposure to credit risk is equal to the fair value or carrying value of the related financial assets. The Company’s receivables consist of amounts due from customers. Some customers settle their accounts past normal trade terms and in cases where amounts become uncollectible the Company recognizes bad debt expense to write off the uncollectible amounts. At September 30, 2019, the Company had $319,081 (December 31, 2018 - $155,976) in amounts due from customers greater than 90 days and during the nine months ended September 30, 2019 recognized bad debt expense of $91,639 (2018 - $1,711).


Liquidity risk


Liquidity risk is the risk that the Company will not be able to meet its obligations as they become due. Management is of the opinion that sufficient working capital is available from its financings and will be obtained from operations to meet the Company's liabilities and commitments as they come due. The Company manages its liquidity risk by forecasting cash flows from operations and anticipating any investing and financing activities. Management and the Board of Directors are actively involved in the review, planning and approval of significant expenditures and commitments.


 

 

 

 

 

 

 

 

 


SNIPP INTERACTIVE INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(Unaudited)

 September 30, 2019


13

FINANCIAL INSTRUMENTS (cont’d…)


In Fiscal 2016, the Company secured a four-million-dollar credit facility with Silicon Valley Bank. The credit facility was an accounts receivable line of credit to provide the Company with additional working capital and was secured by the Company’s accounts receivable and intellectual property, consisting of all recognized and unrecognized intangible assets. As at December 31, 2017, the Company had drawn on $933,159 of the credit facility. The credit facility had a maturity date of November 22, 2017, which was extended to February 28, 2018 and was fully repaid on March 2, 2018. The credit facility bore interest at a range of prime plus 1.25% to 2.5%. During the period ended September 30, 2018, the Company incurred $7,798 in interest expense corresponding to this credit facility. The Company announced on May 31, 2018 that it secured a two-million-dollar credit facility with Bridge Bank. The credit facility is an accounts receivable line of credit to provide the Company with additional working capital and is secured by the Company’s accounts receivable and intellectual property, consisting of all recognized and unrecognized intangible assets. As at September 30, 2019 the Company had drawn $221,187 on the credit facility. As at December 31, 2018, the Company had not drawn on the credit facility. The credit facility bears interest at prime plus 1.75%.


Market risk


Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates and commodity and equity prices. Such fluctuations may be significant.


a)

Interest rate risk


The Company is exposed to interest rate risk to the extent that the cash maintained at financial institutions is subject to a floating rate of interest. The interest rate risks on cash and on the Company’s, obligations are not considered significant. A plus or minus 1% change in interest rates would affect profit or loss and comprehensive profit or loss by approximately

$1,000 (2018 - $16,000).


b)

Foreign currency risk


The Company is exposed to foreign currency risk on fluctuations related to cash, accounts receivable, accounts payable and accrued liabilities that are denominated in a foreign currency. As at September 30, 2019, the Company held cash as well as accounts payable and accrued liabilities denominated in the Canadian dollar, European Euro, Swiss Franc, and Indian Rupee and considers foreign currency risk low. The majority of the Company's foreign currency amounts are held in Canadian dollars. A plus or minus 1% change in Canadian foreign exchange rates would affect profit or loss and comprehensive profit or loss by less than $1,000 (2018 - $1,000).


The following table summarizes the Company’s exposure to the Canadian currency:


 

 

 

 

September 30,

2019

December 31,

2018

 

 

 

 

C$

C$

 

 

 

 

 

 

 

Cash

93,108

73,202

 

Accounts receivable

87,293

257,492

 

Accounts payable and accrued liabilities

           (678,269)

           (653,150)

 

 

 

 

 

 

 

Total

 

 

(497,868)

(322,456)