Peak Fintech Group Inc.
Condensed Interim Consolidated Financial
Statements (Unaudited)
For the three and six-month periods ended
June 30, 2021, and 2020
2
PEAK FINTECH GROUP INC.
Condensed Interim Consolidated Statements of Comprehensive Profit and Loss
For the three and six-month periods ended June 30, 2021 and 2020
(In Canadian dollars, except weighted average number of outstanding shares)
(Unaudited)
Three-month periods ended | Six-month periods ended | |||||||||||||
Note | June 30 | June 30 | ||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||
$ | $ | $ | $ | |||||||||||
Revenues | 30 649 179 | 7 263 504 | 44 888 955 | 11 212 899 | ||||||||||
30 649 179 | 7 263 504 | 44 888 955 | 11 212 899 | |||||||||||
Expenses | ||||||||||||||
Cost of service | 27 442 884 | 5 422 993 | 39 790 055 | 7 527 143 | ||||||||||
Salaries and fringe benefits | 692 610 | 389 120 | 1 416 469 | 712 930 | ||||||||||
Service fees | 148 987 | 138 831 | 306 638 | 270 463 | ||||||||||
Royalty on software | 43 902 | 26 028 | 74 678 | 56 901 | ||||||||||
Board remuneration | 146 302 | 12 774 | 270 829 | 22 343 | ||||||||||
Consulting fees | 118 873 | 527 285 | 181 742 | 853 001 | ||||||||||
Management fees | 14 356 | 17 987 | 27 174 | 39 532 | ||||||||||
Professional fees | 581 227 | 130 133 | 912 882 | 186 535 | ||||||||||
Administrative and indirect cost | - | 1 717 | - | 237 828 | ||||||||||
Public relations and press releases | 134 987 | 27 800 | 256 480 | 51 904 | ||||||||||
Office supplies, software and utilities | 58 272 | 49 517 | 88 486 | 102 311 | ||||||||||
Lease expenses | 11 247 | 11 571 | 22 817 | 23 104 | ||||||||||
Insurance | 27 277 | 10 489 | 42 173 | 21 778 | ||||||||||
Finance costs | 15.4 | 50 935 | 260 401 | 95 768 | 520 352 | |||||||||
Expected credit loss | (10 647 | ) | 254 080 | 9 246 | 615 605 | |||||||||
Travel and entertainment | 43 663 | 35 424 | 77 666 | 82 257 | ||||||||||
Stock exchange and transfer agent costs | 62 655 | 25 338 | 153 370 | 36 116 | ||||||||||
Translation cost and others | 81 576 | 5 587 | 120 883 | 13 937 | ||||||||||
Reversal of impairment loss | 8 | (193 717 | ) | - | (193 717 | ) | - | |||||||
Depreciation of property and equipment | 7 | 20 965 | 21 785 | 43 302 | 43 154 | |||||||||
Amortization of intangible assets | 8 | 155 948 | 82 475 | 222 432 | 164 280 | |||||||||
Expiration of deferred finance cost | - | - | 353 377 | |||||||||||
Amortization of financing initial costs | 6 725 | 348 | 13 376 | 696 | ||||||||||
Depreciation of right-of-use assets | 7 | 44 749 | 126 245 | 113 906 | 232 998 | |||||||||
(Gain) Loss on foreign exchange | 7 526 | 716 | (27 852 | ) | 11 051 | |||||||||
29 691 302 | 7 578 644 | 44 018 803 | 12 179 596 | |||||||||||
Profit (loss) before income taxes | 957 877 | (315 140 | ) | 870 152 | (966 697 | ) | ||||||||
Income tax | 661 806 | 223 763 | 963 783 | 377 900 | ||||||||||
Net profit (loss) | 296 071 | (538 903 | ) | (93 631 | ) | (1 344 597 | ) | |||||||
Net profit (loss) attributable to: | ||||||||||||||
Non-controlling interest | 315 631 | 177 983 | 691 559 | 265 064 | ||||||||||
Owners of the parent | (19 560 | ) | (716 886 | ) | (785 190 | ) | (1 609 661 | ) | ||||||
296 071 | (538 903 | ) | (93 631 | ) | (1 344 597 | ) | ||||||||
Item that will be reclassified subsequently to profit or loss | ||||||||||||||
Currency translation adjustment | (325 829 | ) | 809 770 | 221 081 | (623 537 | ) | ||||||||
Total comprehensive profit (loss) | 621 900 | (1 348 673 | ) | (314 712 | ) | (721 060 | ) | |||||||
Total comprehensive profit (loss) attributable to: | ||||||||||||||
Non-controlling interest | 357 625 | (18 799 | ) | 614 596 | 434 150 | |||||||||
Owners of the parent | 264 275 | (1 329 874 | ) | (929 308 | ) | (1 155 210 | ) | |||||||
621 900 | (1 348 673 | ) | (314 712 | ) | (721 060 | ) | ||||||||
Weighted average number of outstanding shares | 129 726 489 | 74 291 302 | 127 361 537 | 73 783 060 | ||||||||||
Basic and diluted profit (loss) per share | 0,000 | (0,010 | ) | (0,006 | ) | (0,022 | ) | |||||||
Going concern uncertainty (note 2) |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
3
PEAK FINTECH GROUP INC.
Condensed Interim Consolidated Statements of Changes in Equity
For the six-month periods ended June 30, 2021 and 2020
(In Canadian dollars)
(Unaudited)Equity | Accumulated | Total | |||||||||||||||||||||||||||||
component of | other | attributable | Non | Shareholders' | |||||||||||||||||||||||||||
Note | Number of | Capital stock | Equity to | Contributed | convertible | comprehensive | to owners of | Controlling | equity | ||||||||||||||||||||||
common shares | Amount | issue | surplus | debentures | income | Deficit | parent | interest | (deficiency) | ||||||||||||||||||||||
(number of shares - | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
see note 15) | |||||||||||||||||||||||||||||||
Balance as of January 1, 2021 | 118 024 189 | 39 131 010 | 511 221 | 11 582 653 | - | (140 782 | ) | (30 240 372 | ) | 20 843 730 | 11 770 520 | 32 614 250 | |||||||||||||||||||
Issuance of shares and warrants to settle debts owed for services provided | 12 | 33 351 | 50 850 | 50 850 | 50 850 | ||||||||||||||||||||||||||
Issuance of shares re business acquisition | 4 | 1 022 337 | 403 610 | (403 610 | ) | - | - | ||||||||||||||||||||||||
Exercise of warrants and broker warrants | 12 | 14 315 464 | 8 129 647 | (107 611 | ) | (2 135 722 | ) | 5 886 314 | 5 886 314 | ||||||||||||||||||||||
Conversion of convertible debentures | 11 | 50 000 | 27 483 | 27 483 | 27 483 | ||||||||||||||||||||||||||
Exercise of options | 165 000 | 162 090 | (79 590 | ) | 82 500 | 82 500 | |||||||||||||||||||||||||
Share-based compensation | 13 | 741 205 | 741 205 | 741 205 | |||||||||||||||||||||||||||
Transactions with owners | 133 610 341 | 47 904 690 | - | 10 108 546 | - | (140 782 | ) | (30 240 372 | ) | 27 632 083 | 11 770 520 | 39 402 602 | |||||||||||||||||||
Net (loss) profit | (785 190 | ) | (785 190 | ) | 691 559 | (93 631 | ) | ||||||||||||||||||||||||
Other comprehensive loss | (144 118 | ) | (144 117 | ) | (76 963 | ) | (221 081 | ) | |||||||||||||||||||||||
Total comprehensive (loss) profit for the year | - | - | - | - | - | (144 118 | ) | (785 190 | ) | (929 307 | ) | 614 596 | (314 712 | ) | |||||||||||||||||
Balance as of June 30, 2021 | 133 610 341 | 47 904 690 | - | 10 108 546 | - | (284 900 | ) | (31 025 562 | ) | 26 702 774 | 12 385 116 | 39 087 890 | |||||||||||||||||||
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 and warrants | 12 | 1 740 000 | 538 347 | 154 531 | 692 878 | 692 878 | |||||||||||||||||||||||||
Issuance of shares and warrants to settle debts owed for services provided | 12 | 1 065 000 | 360 000 | 360 000 | 360 000 | ||||||||||||||||||||||||||
Shares to be issued | 265 000 | 265 000 | 265 000 | ||||||||||||||||||||||||||||
Issuance of convertible debentures and warrants | 11 | 11 272 | 9 408 | 20 680 | 20 680 | ||||||||||||||||||||||||||
Issuance of bonds and warrants | 76 197 | 76 197 | 76 197 | ||||||||||||||||||||||||||||
Issue costs - shares and warrants | 12 | (33 000 | ) | (33 000 | ) | (33 000 | ) | ||||||||||||||||||||||||
Exercise of warrants on surrender of non-convertible debentures | 11 | 1 000 000 | 535 555 | (99 153 | ) | 436 402 | 436 402 | ||||||||||||||||||||||||
Share-based compensation | 13 | 147 492 | 147 492 | 147 492 | |||||||||||||||||||||||||||
Transactions with owners | 75 864 214 | 25 635 525 | 758 414 | 9 870 672 | 57 299 | (1 054 211 | ) | (23 623 950 | ) | 11 643 749 | 10 441 584 | 22 085 333 | |||||||||||||||||||
Net (loss) profit | (1 609 661 | ) | (1 609 661 | ) | 265 064 | (1 344 597 | ) | ||||||||||||||||||||||||
Other comprehensive profit | 454 451 | 454 451 | 169 086 | 623 537 | |||||||||||||||||||||||||||
Total comprehensive profit (loss) for the year | - | - | - | - | - | 454 451 | (1 609 661 | ) | (1 155 210 | ) | 434 150 | (721 060 | ) | ||||||||||||||||||
Balance as of June 30, 2020 | 75 864 214 | 25 635 525 | 758 414 | 9 870 672 | 57 299 | (599 760 | ) | (25 233 611 | ) | 10 488 539 | 10 875 734 | 21 364 273 | |||||||||||||||||||
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
4
PEAK FINTECH GROUP INC.
Condensed Interim Consolidated Statements of Financial Position
As at June 30, 2021 and December 31, 2020
(In Canadian dollars)
(Unaudited)
June 30 | December 31 | ||||||
Note | 2021 | 2020 | |||||
$ | $ | ||||||
ASSETS | Unaudited | Audited | |||||
Current | |||||||
Cash | 2 091 004 | 5 873 876 | |||||
Restricted cash | 80 171 | 80 091 | |||||
Loans receivable | 5 | 16 047 905 | 15 425 242 | ||||
Assets held for esale | 285 137 | 183 732 | |||||
Debtors | 6 | 41 213 246 | 30 575 357 | ||||
Deposit for investments | 882 740 | 194 900 | |||||
Prepaid expenses | 308 464 | 989 718 | |||||
60 908 668 | 53 322 916 | ||||||
Loans receivable | 5 | 4 968 596 | 3 999 446 | ||||
Property and equipment | 7 | 482 618 | 529 372 | ||||
Intangible assets | 8 | 3 897 618 | 3 163 877 | ||||
Deferred Tax assets | 291 931 | 291 931 | |||||
70 549 430 | 61 307 542 | ||||||
LIABILITIES | |||||||
Current | |||||||
Accounts payable, advances and accrued liabilities | 9 | 29 646 017 | 26 559 427 | ||||
Lease liabilities | 10 | 169 985 | 117 709 | ||||
Current tax liabilities | 1 179 449 | 1 568 626 | |||||
Debentures | 11 | - | 23 311 | ||||
Conversion option | - | 3 489 | |||||
30 995 451 | 28 272 562 | ||||||
Bonds | 285 180 | 258 933 | |||||
CEBA Loan | 40 000 | 40 000 | |||||
Lease liabilities | 10 | 140 909 | 121 797 | ||||
31 461 540 | 28 693 292 | ||||||
SHAREHOLDERS' DEFICIENCY | |||||||
Capital stock | 12 | 47 904 690 | 39 131 010 | ||||
Shares to be issued | 4 | - | 511 221 | ||||
Contributed surplus | 10 108 546 | 11 582 653 | |||||
Accumulated other comprehensive income | (284 900 | ) | (140 782 | ) | |||
Deficit | (31 025 562 | ) | (30 240 372 | ) | |||
Shareholders' equity attributable to owners of the parent | 26 702 774 | 20 843 730 | |||||
Non-controlling interest | 12 385 116 | 11 770 520 | |||||
Total shareholders' equity | 39 087 890 | 32 614 250 | |||||
70 549 430 | 61 307 542 |
Going concern uncertainty (note 2)
Subsequent events (note 20)
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
On behalf of the Board,
/S/ Johnson Joseph | /S/ Charles-André Tessier |
Director | Director |
5
PEAK FINTECH GROUP INC.
Condensed Interim Consolidated Statements of Cash Flows
For the three and six-month periods ended June 30, 2021 and 2020
(In Canadian dollars)
(Unaudited)
Three-month periods ended | Six-month periods ended | ||||||||||||
June 30 | June 30 | ||||||||||||
Note | 2021 | 2020 | 2021 | 2020 | |||||||||
$ | $ | $ | $ | ||||||||||
OPERATING ACTIVITIES | |||||||||||||
Net profit (loss) | 296 071 | (538 903 | ) | (93 631 | ) | (1 344 597 | ) | ||||||
Non-cash items | |||||||||||||
Expected credit loss | (10 647 | ) | 254 080 | 9 246 | 615 605 | ||||||||
Depreciation of property and equipment | 7 | 20 965 | 21 785 | 43 302 | 43 154 | ||||||||
Depreciation of right-of-use assets | 7 | 44 749 | 126 245 | 113 906 | 232 998 | ||||||||
Amortization of intangible assets | 8 | 155 948 | 82 475 | 222 432 | 164 280 | ||||||||
Amortization of initial cost debenture | 6 725 | 348 | 13 376 | 696 | |||||||||
Reversal of impairment loss | 8 | (193 717 | ) | - | (193 717 | ) | - | ||||||
Accretion of debentures and bonds | 11, 15.4 | 6 630 | 139 449 | 13 554 | 278 678 | ||||||||
Accretion of lease interest | 10, 15.4 | 7 534 | - | 13 970 | - | ||||||||
Issuance of shares for settlement of debt | - | 121 301 | 15 000 | 413 179 | |||||||||
Expiration of deferred financing cost | - | - | - | 353 377 | |||||||||
Share-based compensation | 13 | 396 515 | 78 290 | 741 205 | 147 492 | ||||||||
Loans receivable maturing in more than 12 months | (1 016 725 | ) | 2 597 505 | (969 150 | ) | 4 552 265 | |||||||
Net changes in working capital items | |||||||||||||
Income tax payable | (520 847 | ) | 161 534 | (389 178 | ) | 254 716 | |||||||
Debtors | 1 613 096 | (2 600 892 | ) | 4 186 610 | (3 682 221 | ) | |||||||
Loans receivable maturing in less than 12 months | (440 558 | ) | (3 291 700 | ) | (733 313 | ) | (3 470 559 | ) | |||||
Prepaid expenses | 1 097 761 | 1 768 492 | 681 254 | 235 107 | |||||||||
Deposits made for transactions on platforms | (7 452 368 | ) | - | (7 452 368 | ) | - | |||||||
Accounts payable, advances and accrued liabilities | 1 787 031 | 1 218 369 | (529 718 | ) | 921 167 | ||||||||
Deposits received for transactions on platforms | 4 349 056 | - | 4 660 178 | 2 236 269 | |||||||||
Cash flows from operating activities | 147 219 | 138 378 | 352 959 | 1 951 606 | |||||||||
INVESTING ACTIVITIES | |||||||||||||
Debtors | 6 | (3 797 536 | ) | 177 726 | (8 094 971 | ) | 388 556 | ||||||
Property and equipment - additions | 7 | (2 717 | ) | 9 070 | (4 313 | ) | (17 923 | ) | |||||
Property and equipment - disposals | 7 | - | - | 5 989 | - | ||||||||
Intangible asset - additions | 8 | (463 425 | ) | (207 713 | ) | (789 208 | ) | (554 216 | ) | ||||
Cash flows from investing activities | (4 263 678 | ) | (20 917 | ) | (8 882 503 | ) | (183 583 | ) | |||||
FINANCING ACTIVITIES | |||||||||||||
Proceeds repayments re advances from third parties | (326 230 | ) | - | (727 027 | ) | (347 215 | ) | ||||||
Proceeds from advances made from a Director | - | - | - | 21 920 | |||||||||
Proceeds from advances made from affiliates | (113 050 | ) | - | (10 084 | ) | - | |||||||
Repayment of advances made from a Director | (9 595 | ) | - | (270 911 | ) | - | |||||||
Debenture subscription received | - | - | - | (110 000 | ) | ||||||||
Repayment of lease liabilities | 10 | (63 580 | ) | (74 423 | ) | (76 172 | ) | (246 894 | ) | ||||
Proceeds from the issuance of shares and warrants | 12 | - | 73 000 | - | 618 000 | ||||||||
Proceeds from the issuance of debentures | 11 | - | - | - | 160 000 | ||||||||
Proceeds from the issuance of Bonds | - | 288 159 | - | 288 159 | |||||||||
Proceeds from the issuance of CEBA Loan | - | 40 000 | - | 40 000 | |||||||||
Proceeds from the exercise of warrants | 12 | 2 178 153 | - | 5 886 314 | - | ||||||||
Proceeds from the exercise of options | 13 | 92 500 | - | 117 500 | - | ||||||||
Shares to issue | - | 265 000 | - | 265 000 | |||||||||
Non-controlling interest | - | (18 799 | ) | - | 434 150 | ||||||||
Cash flows from financing activities | 1 758 198 | 572 937 | 4 919 620 | 1 123 120 | |||||||||
IMPACT OF FOREIGN EXCHANGE | 326 903 | (987 752 | ) | (172 868 | ) | 189 388 | |||||||
Net (decrease) increase in cash | (2 031 358 | ) | (297 354 | ) | (3 782 792 | ) | 3 080 531 | ||||||
Cash, beginning of period | 4 202 533 | 5 095 394 | 5 953 967 | 1 717 509 | |||||||||
Cash, end of period | 2 171 175 | 4 798 040 | 2 171 175 | 4 798 040 | |||||||||
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
PEAK FINTECH GROUP INC. | 6 |
1 - GOVERNING STATUTES, NATURE OF OPERATIONS AND GENERAL INFORMATION
Peak Fintech Group Inc. (hereinafter ''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, Québec, 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 primarily in the commercial lending industry. Peak's subsidiaries bring together lending financial institutions and businesses to create the Cubeler Business Hub, an ecosystem where analytics and artificial intelligence are used to facilitate transactions among members of the ecosystem.
2 - GOING CONCERN UNCERTAINTY AND COVID-19
These condensed interim consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assume that the Company will continue in operation and will be able to realize its assets and discharge its liabilities in the normal course of operations. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but not limited to twelve months from the end of the reporting period. The use of these principles may not be appropriate.
The level of revenue currently being generated is not presently sufficient to meet the Company's 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 $93,631 for the six-month period ended June 30, 2021 (year ended December 31, 2020 - $5,513,511), it has an accumulated deficit of $31,025,562 as at June 30, 2021 ($30,240,372 as at December 31, 2020) 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 initiatives 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.
These condensed 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.
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3.1 Statement of compliance with IFRS
These condensed interim consolidated financial statements for the six-month period ended June 30, 2021, have been prepared in accordance 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, 2020. There have not been any significant changes in judgments, estimates or assumptions since then. These condensed interim consolidated financial statements should be read in conjunction with the Company's consolidated financial statements for the year ended December 31, 2020.
PEAK FINTECH GROUP INC. | 7 |
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
3.1 Statement of compliance with IFRS (Continued)
The same accounting policies and methods of computation were used in the preparation of these condensed interim consolidated financial statements as were followed in the preparation of the consolidated financial statements for the year ended December 31, 2020 except for new standards and interpretations effective January 1, 2021.
These condensed interim consolidated financial statements for the three and six-month periods ended June 30, 2021 (including comparative figures) were approved by the Board of Directors on August 26, 2021.
3.2 Basis of measurement
These consolidated financial statements are prepared on an accrual basis using the historical cost method.
3.3 Basis of Consolidation
These condensed interim consolidated financial statements include the accounts of Peak 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 condensed interim consolidated financial statements:
Entities | Registered | % of ownership and voting right | Principal activity | Functional Currency | |||
Peak Fintech Group Inc. | Canada | Holding and parent company | Canadian dollar | ||||
Asia Synergy Limited | Hong Kong | 100% | Holding | U.S. $ | |||
Asia Synergy Holdings | China | 100% | Holding | Renminbi | |||
Asia Synergy Technologies Ltd. | China | 100% | Technology based product procurement facilitator | Renminbi | |||
Asia Synergy Supply Chain Technologies Ltd (1) | China | 100% | Technology based product procurement facilitator | Renminbi | |||
Zhejiang Xinjiupin Clean Tech - Oil & Gas Management Co. Ltd (1) | 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 | China | 51% | Supply Chain services | Renminbi | |||
Xinxiang (insurance services) Technologies Ltd (1) | China | 100% | Fintech | Renminbi | |||
Wuxi Aorong Ltd. | China | 100% | Holding | Renminbi | |||
Asia Synergy Financial Capital Ltd | China | 51% | Financial institution | Renminbi |
PEAK FINTECH GROUP INC. | 8 |
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
3.3 Basis of Consolidation (continued)
(1): Creation of new subsidiaries
In November 2020, the Company created a new subsidiary called Asia Synergy Supply Chain Technology ("ASST") as a wholly owned subsidiary of the Company's Asia Synergy Technologies ("AST") subsidiary. ASST was created to allow the Company to provide services related to the distribution of food products and beverages. As a result, AST owns 100% interest in ASST.
In May 2021, the Company created a new subsidiary called Zhejiang Xinjiupin Clean Tech - Oil & Gas Management Co. Ltd. ("AJP") as a wholly owned subsidiary of the Company's Asia Synergy Technologies ("AST") subsidiary. AJP was created to allow the Company to provide services related to the selling and distribution of oil and gas products and clean technology products. As a result, AST owns 100% interest in AJP.
In June 2021, the Company created a new subsidiary called Xinxiang (insurance services) Technologies Ltd. ("ASSI") as a wholly owned subsidiary of the Company's Asia Synergy Data Solutions ("ASDS") subsidiary. ASSI was created to allow the Company to provide services related to the selling and distribution of property and liability insurance products in China. As a result, ASDS owns 100% interest in ASSI.
All the subsidiaries have December 31 financial year-end dates and are incorporated in either Canada, Hong Kong or China. All intercompany transactions and accounts were eliminated upon consolidation, including unrealized gains or losses on intercompany transactions. Where unrealized losses on intercompany asset sales are reversed upon consolidation, the underlying asset is also tested for impairment from the Company's perspective. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Company.
Profit or loss of subsidiaries acquired or disposed of during the year are recognized from the effective date of acquisition, or up to the effective date of disposal, as applicable.
3.4 Functional and presentation currency
The consolidated financial statements are presented in Canadian dollars, which is also the functional currency of the parent company.
3.5 New Standards adopted as at January 1, 2021
Some accounting pronouncements which have become effective from January 1, 2021, and have therefore been adopted do not have a significant impact on the Company financial results or position.
4 - BUSINESS COMBINATION
On January 1, 2019, the Company, through its Asia Synergy Credit Solutions ("ASCS") subsidiary, transferred certain assets and personnel from Wuxi Wenyi Financial Services Co. ("Wenyi") to ASSC. 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 were intangible assets consisting of loan-servicing agreements. The assets acquired were determined to constitute a business combination and, accordingly, the acquisition was be accounted for using the acquisition method of accounting.
The purchase price payable for this acquisition was to be settled with the issuance of up a maximum of 2,000,000 common shares of the Company. The final value of consideration payable was contingent on achievement by ASCS of certain financial performance metrics during its first 18 months of operations. In the event that 2,000,000 shares were to be issued after the 18-month period and the listed common share price of the Company was less than $1.00 at that time, the Company was to issue additional shares to bring the aggregate consideration value to $2,000,000.
PEAK FINTECH GROUP INC. | 9 |
4 - BUSINESS COMBINATION (CONTINUED)
As at June 30, 2020, the 18 month performance period concluded and based on actual results of ASCS the final contingent consideration payable was settled at $530,675. As per the asset transfer agreement, the total number of shares issuable to settle the consideration totaled 1,340,000 at an average issue price of $0.40 per share.
On November 11, 2020, the Company issued 317,663 common shares of the Company, at $0,40 per share, in part settlement ($127,065) of the consideration payable under the asset transfer agreement. On April 8, 2021, the Company issued the final tranche of shares under the agreement (1,022,337 at $0,40 per share totaling $403,610). As at June 30, 2021, the consideration remaining payable under the agreement totaled $Nil (December 31, 2020 - $403,610).
5 - LOANS RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES
The Company's Asia Synergy Financial Capital ("ASFC") subsidiary provides various financial services to small and medium size enterprises and entrepreneurs in China, including loans.
ASFC's loans are either guaranteed by a third party and/or collateral assets. The loans secured with collateral are either secured by used vehicles or by the residential properties of the borrowers. Loans that are not guaranteed by collateral assets are insured by a third party.
Loans guaranteed by used vehicles.
The used vehicles are valued by ASFC's credit department before approving a loan. The loan value at inception represents typically between 50% to 80% of the collateral value with an average of 78% as at June 30, 2021 (78% as at December 31, 2020). The used vehicles' collateral value are evaluated at the beginning of the loans and periodically during the life of the loans, based on an industry recognized used car guide which has been validated by ASFC personnel, their knowledge, experience and the inspection process before approval of the loans.
Loans guaranteed by second rank mortgage on residential property
Before approving a loan, ASFC's credit department will assess the value of any other mortgages taken out on the residential property and put as collateral by the prospective borrower. The loan value at inception typically represents between 25% and 32% of the collateral value exceeding the first rank mortgage taken by the borrower. The value of the residential property is evaluated at the beginning of the loan and periodically during the life of the loan based on a residential broker site, which is validated by ASFC personnel, their knowledge, experience and inspection process before approval of the loan.
All the loans secured by collateral assets are registered on the appropriate government regulated system.
Credit Loans guaranteed by a third party
ASFC makes loans to small and medium enterprises in the technology sector through the Company's Business Hub. Before approving a loan, ASFC relies on the credit evaluation of the borrower. The credit evaluation includes: the borrower' company's credit profile, operating performance, financial statements, tax payments/receipt records, shareholders' structure and their individual credit ratings. Based on the result of this initial evaluation, ASFC will then proceed to sign a loan agreement with the SME borrowers. To mitigate the default risk in the case of any overdue situation incurred regarding the loans, a letter of guarantee must also be signed before a loan is finally granted to SME borrowers. Accordingly, a 3rd party must accept to provide a full guarantee to cover any overdue principal and interest on behalf of the borrowers. ASFC will also perform on-going monitoring of SMEs borrowers in the tech industry through the Business Hub app, visits, phone calls and follow- up on business models development.
PEAK FINTECH GROUP INC. | 10 |
5 - LOANS RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES (CONTINUED)
For the majority of loans granted, principal and interest are payable by the borrower on a monthly basis.
Loans receivables are described as follows :
2021-06-30 | 2020-12-31 | |||||
$ | $ | |||||
Principal balance loans receivables | 21 590 169 | 20 009 105 | ||||
Less expected credit loss (ECL) | (573 668 | ) | (584 417 | ) | ||
Loan receivables net | 21 016 501 | 19 424 688 | ||||
Loans receivables maturing in less than 12 months | 16 047 905 | 15 425 242 | ||||
Loans receivables maturing in more than 12 months | 4 968 596 | 3 999 446 | ||||
Total loans | 21 016 501 | 19 424 688 |
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 4.11 of the annual consolidated financial statements for the year ended December 31, 2020.
Credit quality of loans
The following table presents the gross carrying amount of loans receivables at June 30, 2021 and December 31, 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:
Provision % | Credit loss allocation applied - Auto | allocation applied - Residential Property | |
Stage 1 : 1% | 1,0% | 1,0% | 1,0% |
Stage 2: 30% | 30,0% | 1,0% | 1,0% |
Stage 3 :100% | 100,0% | 13,0% | 1,0% |
Gross Carrying | Allowance for | Net Carrying | ||||||||
June 30, 2021 | % | amount | credit loss | Amount | ||||||
$ | $ | $ | ||||||||
Stage 1 Not overdue <= 30 Days | 85,4% | 18 430 566 | (288 736 | ) | 18 141 830 | |||||
Stage 2 Overdue 30-90 days | 0,2% | 35 010 | - | 35 010 | ||||||
Stage 3 Overdue> 90 days | 14,5% | 3 124 592 | (284 932 | ) | 2 839 661 | |||||
Total | 100,0% | 21 590 169 | (573 668 | ) | 21 016 501 |
PEAK FINTECH GROUP INC. | 11 |
5 - LOANS RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES (CONTINUED)
Gross Carrying | Allowance for | Net Carrying | ||||||||
December 31, 2020 | % | amount | credit loss | Amount | ||||||
$ | $ | $ | ||||||||
Stage 1 Not overdue <= 30 Days | 78,2% | 15 652 125 | (224 798 | ) | 15 427 327 | |||||
Stage 2 Overdue 30-90 days | 5,6% | 1 110 537 | (3 332 | ) | 1 107 205 | |||||
Stage 3 Overdue> 90 days | 16,2% | 3 246 443 | (356 287 | ) | 2 890 156 | |||||
Total | 100,0% | 20 009 105 | (584 417 | ) | 19 424 688 |
The loss allowance for loans to customers as at June 30, 2021, broken down by product type, reconciles to the opening loss allowance for that provision as follows:
Product Type - Autos | |||||||||||||
Stage 1 | Stage 2 | Stage 3 | Total ECL | ||||||||||
$ | $ | $ | $ | ||||||||||
Loss allowance as at December 31, 2020 | 148 | 1 880 | 351 293 | 353 321 | |||||||||
Individual financial assets transferred to (from) stage 2 (lifetime expected credit losses) | 181 | 181 | |||||||||||
Individual financial assets transferred to (from) stage 3 | - | ||||||||||||
Credit-impaired financial assets | (193 854 | ) | (193 854 | ) | |||||||||
New financial assets originated | (73 | ) | (73 | ) | |||||||||
Write-offs | (42 607 | ) | (42 607 | ) | |||||||||
Recoveries | (69 | ) | - | 144 291 | 144 222 | ||||||||
Change in Credit loss allocation + ECL % assumption | (153 | ) | (1 880 | ) | 16 412 | 14 379 | |||||||
Foreign exchange | - | ||||||||||||
Loss allowance as at June 30, 2021 | 34 | - | 275 535 | 275 569 |
Product Type - Residential property | |||||||||||||
Stage 1 | Stage 2 | Stage 3 | Total ECL | ||||||||||
$ | $ | $ | $ | ||||||||||
Loss allowance as at December 31, 2020 | 295 | 1 452 | 4 994 | 6 741 | |||||||||
Individual financial assets transferred to (from) stage 2 (lifetime expected credit losses) | 55 | (1 649 | ) | (1 594 | ) | ||||||||
Individual financial assets transferred to (from) stage 3 | - | ||||||||||||
Credit-impaired financial assets | (664 | ) | 2 213 | 1 549 | |||||||||
New financial assets originated | (95 | ) | (95 | ) | |||||||||
Write-offs | - | ||||||||||||
Recoveries | 164 | - | 2 255 | 2 419 | |||||||||
Change in Credit loss allocation + ECL % assumption | 18 | 861 | (65 | ) | 814 | ||||||||
Foreign exchange | - | ||||||||||||
Loss allowance as at June 30, 2021 | 437 | - | 9 397 | 9 834 |
PEAK FINTECH GROUP INC. | 12 |
5 - LOANS RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES (CONTINUED)
Product Type - Credit | ||||||||||||
Stage 1 | Stage 2 | Stage 3 | Total ECL | |||||||||
$ | $ | $ | $ | |||||||||
Loss allowance as at December 31, 2020 | 224 355 | - | - | 224 355 | ||||||||
Individual financial assets transferred to (from) stage 2 (lifetime expected credit losses) | - | - | ||||||||||
Individual financial assets transferred to (from) stage 3 | - | |||||||||||
Credit-impaired financial assets | - | |||||||||||
New financial assets originated | (131 720 | ) | (131 720 | ) | ||||||||
Write-offs | - | |||||||||||
Recoveries | 219 994 | 219 994 | ||||||||||
Change in Credit loss allocation + ECL % assumption | (24 364 | ) | (24 364 | ) | ||||||||
Foreign exchange | - | |||||||||||
Loss allowance as at June 30, 2021 | 288 265 | - | 288 265 |
The loss allowance for loans to customers as at December 31, 2020, broken down by product type, reconciles to the opening loss allowance for that provision as follows:
Product type - Autos | ||||||||||||
Stage 1 | Stage 2 | Stage 3 | Total ECL | |||||||||
$ | $ | $ | $ | |||||||||
Loss allowance as at December 31, 2019 | 11 615 | 25 382 | 328 005 | 365 002 | ||||||||
Individual financial assets transferred to (from) stage 2 (lifetime expected credit losses)* | (17 | ) | 509 | - | 492 | |||||||
Individual financial assets transferred to (from) stage 3 | - | - | - | - | ||||||||
Credit-impaired financial assets | - | (3 806 | ) | 137 974 | 134 168 | |||||||
New financial assets originated | (1 477 | ) | - | - | (1 477 | ) | ||||||
Write-offs | - | - | - | - | ||||||||
Recoveries | (152 | ) | - | 78 307 | 78 155 | |||||||
Change in Credit loss allocation + ECL % assumption | (9 821 | ) | (20 205 | ) | (192 993 | ) | (223 019 | ) | ||||
Loss allowance as at December 31, 2020 | 148 | 1 880 | 351 293 | 353 321 |
PEAK FINTECH GROUP INC. | 13 |
5 - LOANS RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES (CONTINUED)
Product Type - Residential property | ||||||||||||
Stage 1 | Stage 2 | Stage 3 | Total ECL | |||||||||
$ | $ | $ | $ | |||||||||
Loss allowance as at December 31, 2019 | - | - | - | - | ||||||||
Individual financial assets transferred to (from) stage 2 (lifetime expected credit losses)* | (98 | ) | 2 933 | - | 2 835 | |||||||
Individual financial assets transferred to (from) stage 3 | - | - | - | - | ||||||||
Credit-impaired financial assets | - | (1 489 | ) | 4 962 | 3 473 | |||||||
New financial assets originated | 331 | - | - | 331 | ||||||||
Write-offs | - | - | - | - | ||||||||
Recoveries | - | - | - | - | ||||||||
Change in Credit loss allocation + ECL % assumption | 62 | 8 | 32 | 102 | ||||||||
Loss allowance as at December 31, 2020 | 295 | 1 452 | 4 994 | 6 741 |
Product Type - Credit | ||||||||||||
Stage 1 | Stage 2 | Stage 3 | Total ECL | |||||||||
$ | $ | $ | $ | |||||||||
Loss allowance as at December 31, 2019 | - | - | 34 945 | 34 945 | ||||||||
Individual financial assets transferred to (from) stage 2 (lifetime expected credit losses)* | - | - | - | - | ||||||||
Individual financial assets transferred to (from) stage 3 | - | - | - | - | ||||||||
Credit-impaired financial assets | - | - | - | - | ||||||||
New financial assets originated | 209 791 | - | - | 209 791 | ||||||||
Write-offs | - | - | - | - | ||||||||
Recoveries | - | - | - | - | ||||||||
Change in Credit loss allocation + ECL % assumption | 14 564 | - | (34 945 | ) | (20 381 | ) | ||||||
Loss allowance as at December 31, 2020 | 224 355 | - | - | 224 355 |
6 - DEBTORS
2021-06-30 | 2020-12-31 | |||||
$ | $ | |||||
Sales tax receivable | 117 182 | 21 011 | ||||
Advances to a company (1) | - | 17 139 | ||||
Deposits made for transactions on platforms | 7 452 368 | - | ||||
Accounts receivable | 32 004 483 | 28 834 941 | ||||
Safety deposits with guarantor (2) | 679 713 | 692 766 | ||||
Service deposits (3) | 959 500 | 974 500 | ||||
Subscriptions receivable | - | 35 000 | ||||
41 213 246 | 30 575 357 |
(1) As per an agreement with a prospective customer of the Gold River platform, the Company agreed to advance an amount to secure certain transactions on the platform during the first quarter of 2021. The transactions were successfully performed and the advance was reimbursed to the Company in the second quarter of 2021.
(2) As per an agreement with certain loan insurance providers, ASCS, a subsidiary of the Company must maintain a deposit with a loan insurance providers representing 10% of the value of loans serviced by ASCS on behalf of certain commercial banks guaranteed by loan insurance providers. ASCS's third party financial partners and the Company's ASFC subsidiary have a three- way agreement in place with ASCS under which third party financial partners and ASFC are jointly responsible for providing and maintaining the 10% safety deposit with loan insurance providers 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 retains all rights to realize the collateral.
PEAK FINTECH GROUP INC. | 14 |
6 - DEBTORS (CONTINUED)
(3) As per an agreement signed with a third party to finance the purchase or leasing of vehicles in the city of Xi'An, ASDS, a subsidiary of the Company, provides deposits which are used to help to secure capital contributed by financial institutions such as banks and lenders in mainland China on the Company's Business Hub. The deposits are to be returned to ASDS in the event the agreement is terminated. In exchange for the deposits, ASDS receives a 2% referral fee for each vehicle leasing and financing transaction conducted under the agreement. ASDS retains the right to retrieve at any time the $959,500.(December 31, 2020 - $974,500) deposit committed as per agreement.
Debtors amounts are presented on the consolidated statements of financial position net of the allowance for doubtful accounts. In measuring the expected credit losses, the accounts receivables have been assessed on a collective basis as they possess shared credit risk characteristics. They have been grouped based on the days past due. The expected loss rates are based on the payment profile for sales based on historical credit losses. Accounts receivables are written off by taking in consideration third party guarantee on payment of debtors and if there is no reasonable expectation of recovery.
When measuring the expected credit losses of other debtors, Advances to a company, Safety deposits with guarantor, Service deposits and Subscriptions receivable , are assessed individually due to the low number of accounts. The expected loss rates are based on the payment profile of debtor, assessed by the company's lending hub system.
Debtors are written off (i.e. de-recognized) when there is no reasonable expectation of recovery. Failure to make payments within 180 days from the invoice date and failure to engage with the Issuer on alternative payment arrangements, amongst other things, are considered indicators of no reasonable expectation of recovery. As at June 30, 2021 an amount of $218,262 ($273,932 at December 31, 2020) was registered for expected credit loss for debtors.
7 - PROPERTY AND EQUIPMENT
Right-of-use | Office | |||||||||||
assets | equipment | Vehicles | Total | |||||||||
$ | $ | $ | ||||||||||
Gross carrying amount | ||||||||||||
Balance as at January 1,2021 | 1 136 485 | 122 336 | 205 358 | 1 464 179 | ||||||||
Acquisitions | 147 059 | 4 314 | - | 151 373 | ||||||||
Disposals | - | - | (13 433 | ) | (13 433 | ) | ||||||
Balance as at June 30, 2021 | 1 283 544 | 126 650 | 191 925 | 1 602 119 | ||||||||
Accumulated amortization | ||||||||||||
Balance as at January 1, 2021 | 800 066 | 70 352 | 64 389 | 934 807 | ||||||||
Amortization | 113 906 | 19 704 | 23 598 | 157 208 | ||||||||
Disposals | - | - | (7 444 | ) | (7 444 | ) | ||||||
Exchange differences | 32 140 | 800 | 1 990 | 34 930 | ||||||||
Balance as at June 30, 2021 | 946 112 | 90 856 | 82 533 | 1 119 502 | ||||||||
Net carrying amount as at June 30, 2021 | 337 432 | 35 794 | 109 392 | 482 618 | ||||||||
Gross carrying amount | ||||||||||||
Balance as at January 1, 2020 | 897 453 | 106 196 | 205 358 | 1 209 007 | ||||||||
Acquisition | 239 032 | 16 140 | - | 255 172 | ||||||||
Balance as at December 31, 2020 | 1 136 485 | 122 336 | 205 358 | 1 464 179 | ||||||||
Accumulated amortization | ||||||||||||
Balance as at January 1, 2020 | 415 644 | 36 546 | 22 374 | 474 564 | ||||||||
Amortization | 406 762 | 36 820 | 50 112 | 493 694 | ||||||||
Exchange differences | (22 340 | ) | (3 014 | ) | (8 097 | ) | (33 451 | ) | ||||
Balance as at December 31, 2020 | 800 066 | 70 352 | 64 389 | 934 807 | ||||||||
Net carrying amount as at December 31, 2020 | 336 419 | 51 985 | 140 969 | 529 372 |
PEAK FINTECH GROUP INC. | 15 |
8 - INTANGIBLE ASSETS
Loan servicing | ||||||||||||
servicing | Cubeler | |||||||||||
agreement | Gold River | Interface | Total | |||||||||
$ | $ | $ | $ | |||||||||
Gross carrying amount | ||||||||||||
Balance as at January 1, 2021 | 1 430 000 | 2 461 348 | 2 413 059 | 6 304 407 | ||||||||
Acquisition | - | - | 789 208 | 789 208 | ||||||||
Reversal of impairment loss | - | 193 717 | - | 193 717 | ||||||||
Balance as at June 30, 2021 | 1 430 000 | 2 655 065 | 3 202 267 | 7 287 332 | ||||||||
Accumulated amortization | ||||||||||||
Balance as at January 1, 2021 | 286 000 | 2 461 348 | 393 182 | 3 140 530 | ||||||||
Amortization | 71 500 | - | 150 932 | 222 432 | ||||||||
Exchange differences | - | - | 26 751 | 26 751 | ||||||||
Balance as at June 30, 2021 | 357 500 | 2 461 348 | 570 865 | 3 389 714 | ||||||||
Net carrying amount as at June 30, 2021 | 1 072 500 | 193 717 | 2 631 401 | 3 897 618 | ||||||||
Gross carrying amount | ||||||||||||
Balance as at January 1, 2020 | 1 430 000 | 2 461 348 | 1 354 774 | 5 246 122 | ||||||||
Acquisition | - | - | 1 058 285 | 1 058 285 | ||||||||
Balance as at December 31, 2020 | 1 430 000 | 2 461 348 | 2 413 059 | 6 304 407 | ||||||||
Accumulated amortization | ||||||||||||
Balance as at January 1, 2020 | 143 000 | 2 461 348 | 242 364 | 2 846 712 | ||||||||
Amortization | 143 000 | - | 236 850 | 379 850 | ||||||||
Exchange differences | - | - | (86 032 | ) | (86 032 | ) | ||||||
Balance as at December 31, 2020 | 286 000 | 2 461 348 | 393 182 | 3 140 530 | ||||||||
Net carrying amount as at December 31, 2020 | 1 144 000 | - | 2 019 877 | 3 163 877 |
9 - ACCOUNTS PAYABLE, ADVANCES AND ACCRUED LIABILITIES
2021-06-30 | 2020-12-31 | ||||||||||
$ | $ | ||||||||||
Trade accounts payable and accruals | 22 151 599 | 22 717 164 | |||||||||
Advance from third party, annual interest 10% | 663 974 | 1 391 001 | |||||||||
Advance from a director, no interest (note 16) | - | 270 911 | |||||||||
Deposits received for transactions on platforms | 6 800 395 | 2 140 217 | |||||||||
Advance from an affiliated company (notes 6 and 16) | 30 050 | 40 134 | |||||||||
29 646 017 | 26 559 427 |
10 - LEASE LIABILITIES
2021-06-30 | 2020-12-31 | ||||||||||
$ | $ | ||||||||||
Balance - beginning of year | 239 506 | 452 528 | |||||||||
Additions | 146 918 | 239 032 | |||||||||
Accretion interest | 13 912 | 30 426 | |||||||||
Lease payments | (76 172 | ) | (517 171 | ) | |||||||
Effect of exchange rate change on obligation | (13 271 | ) | 34 691 | ||||||||
Balance - end of period | 310 893 | 239 506 | |||||||||
Current Portion | 169 985 | 117 709 | |||||||||
140 908 | 121 797 |
PEAK FINTECH GROUP INC. | 16 |
10 - LEASE LIABILITIES (CONTINUED)
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 June 30, 2021 Lease payments | 171 936 | 142 526 | - | 314 462 | ||||||||
As at December 31, 2020 Lease payments | 116 864 | 120 922 | - | 237 786 |
11 - DEBENTURES
The movement in debentures during the years ended December 31, 2020 and December 31, 2019, was as follows:
2021-06-30 | 2020-12-31 | |||||
$ | $ | |||||
Debenture issued of December 19, 2018 | - | - | ||||
Debenture issued of April 24, 2019 | - | 23 311 | ||||
Debenture issued of January 15, 2020 | - | - | ||||
Balance - end of period / year | - | 23 311 | ||||
Current portion | - | 23 311 | ||||
- | - |
11 a) Debenture issuance of December 19, 2018
During the six-month period ended June 30, 2021, Nil (six-month period ended June 30, 2020 - 1,000,000) warrants were exercised at a price of $0.50 per share following surrendering of debentures for a total face value of $ Nil (six-month period ended June 30, 2020 - $500,000) (note 12.3 (c)).
11 b) Debenture issuance of April 24, 2019
The movement during the six-month period ended June 30, 2021 and the year ended December 31, 2020, relating this debenture can be summarized as follows:
2021-06-30 | 2020-12-31 | |||||
$ | $ | |||||
Balance at the beginning | 23 311 | 137 638 | ||||
Accretion of debentures | 683 | 23 452 | ||||
Conversion of debentures | (23 994 | ) | (137 779 | ) | ||
Balance at the end | - | 23 311 |
During the six-month period ended June 30, 2021, $25,000 (six-month period ended June 30, 2020, $Nil) face value of debentures were converted to 50,000 (six-month period ended June 30, 2020 - Nil) common shares of the Company at a price of $0.50 per share (notes 12.2 (a)).
12 - SHAREHOLDERS' EQUITY
12.1 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.
PEAK FINTECH GROUP INC. | 17 |
12 - SHAREHOLDERS' EQUITY (CONTINUED)
12.2 Description of the shareholders' equity operations during the six-month period ended June 30, 2021
a) During the six-month period ended June 30, 2021, $25,000 of secured debentures with a conversion price of $0.50 per share were converted into common shares of the Company. At the date of conversion these debentures had an amortized cost totalling $23,994. The Company therefore issued 50,000 common shares to the debenture holders and recorded $23,994 in share capital. In addition, amounts of $3,489 related to these debenture conversions, were transferred to capital stock from conversion options in the consolidated statement of financial position.
b) During the six-month period ended June 30, 2021, the Company issued 33,351 common shares at an average price of $1.52 per share to settle $50,850 of debts related to services received by the Company, of which $15,000 was recorded in public relations fees in the condenssed interim consolidated statements of comprehensive loss, $35,850 was recorded against accounts payable and accruals in the condensed interim consolidated statements of financial position.
c) During the six-month period ended June 30, 2021, the Company issued 14,315,464 common shares at an average exercise price of $0.41 per share for total proceeds of $5,993,925 upon the exercise of share purchase warrants, and $2,135,722 related to exercised warrants were transferred from contributed surplus to share capital in the condensed interim statements of consolidated equity (note 12.4).
d) During the six-month period ended June 30, 2021, the Company issued 165,000 common shares at an average exercise price of $0.50 per share for total proceeds of $82,500 upon the exercise of stock options, and $79,590 related to exercised stock options were transferred from contributed surplus to share capital in the condensed interim statements of consolidated equity (note 13).
e) On April 8, 2021 the Company issued the final tranche of 1,022,337 common shares at $0.40 per share with a total consideration of $403,610 in relation to a business combination (refer note 4). Consequently $403,610 was credited to share capital with the offset being debited to equity to issue in the condensed interim statement of consolidated equity.
12.3 Description of the shareholders' equity operations during the six-month period ended June 30, 2020
a) 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 proceeds of $576,000. 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 contributed surplus 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 |
b) On April 4, 2020, the Company closed a private placement consisting in the sale of 300,000 shares at a price of $0.25 per shares for gross proceeds of $75,000.
c) During the six-month period ended June 30, 2020, $500,000 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. At the date of conversion these debentures had a amortised cost totalling $436,402. The Company therefore issued 1,000,000 common shares at a price of $0.43 per share to the debenture holders and recorded $436,402 in share capital. In addition, a corresponding residual value of $99,153 attributed to these warrants was transferred to capital stock from contributed surplus.
PEAK FINTECH GROUP INC. | 18 |
12.4 Warrants
The outstanding options as at June 30, 2021 and December 30, 2020 and the respective changes during the six-month periods then ended, are summarized as follows:
2021-06-30 | 2020-12-31 | |||||||||||
Weighted | Weighted | |||||||||||
Number of | average | Number of | average | |||||||||
warrants | exercise price | warrants | exercise price | |||||||||
$ | $ | |||||||||||
Outstanding, beginning of period | 29 325 500 | 0,483 | 19 069 500 | 0,610 | ||||||||
Granted | - | - | 26 930 000 | 0,328 | ||||||||
Expired | - | - | (1 430 000 | ) | 0,500 | |||||||
Extended | - | - | 1 140 000 | 0,500 | ||||||||
Exercised (1) | (14 195 464 | ) | 0,422 | (16 384 000 | ) | 0,390 | ||||||
Outstanding and exercisable, end of period | 15 130 036 | 0,540 | 29 325 500 | 0,483 |
As of June 30, 2021 and December 31, 2020, the number of outstanding warrants which could be exercised for an equivalent number of common shares is as follows:
(1) As at December 31, 2020, 120,000 warrants had been exercised but the shares had not been issued. At December 31, 2020 the value of those shares to be issued, amounting to $107,611, were classified as equity to be issued. These shares were issued in February 2021.
2021-06-30 | 2020-12-31 | |||||||||||
Number | Exercise price | Number | Exercise price | |||||||||
Expiration date | $ | $ | ||||||||||
February 2021 | - | 0,500 | 1 000 000 | 0,50 | ||||||||
April 2021 | - | 0,500 | 7 500 | 0,50 | ||||||||
April 2021 | - | 0,500 | 370 000 | 0,50 | ||||||||
July 2021 | 20 000 | 0,800 | 100 000 | 0,80 | ||||||||
September 2021 | 10 000 | 0,400 | 610 000 | 0,40 | ||||||||
October 2021 | - | 0,400 | 100 000 | 0,40 | ||||||||
October 2021 | 250 000 | 0,750 | 250 000 | 0,75 | ||||||||
December 2021 | 5 190 000 | 0,800 | 6 600 000 | 0,80 | ||||||||
January 2022 | - | 0,800 | 300 000 | 0,80 | ||||||||
February 2022 | 720 000 | 1,000 | 720 000 | 1,00 | ||||||||
June 2022 | - | 0,500 | 386 667 | 0,50 | ||||||||
June 2022 | - | 0,570 | 580 000 | 0,57 | ||||||||
June 2022 | - | 0,610 | 333 333 | 0,61 | ||||||||
June 2022 | - | 1,200 | 1 400 000 | 1,20 | ||||||||
July 2022 | 1 565 000 | 0,250 | 2 390 000 | 0,25 | ||||||||
August 2022 | 4 032 380 | 0,250 | 10 334 000 | 0,25 | ||||||||
October 2022 | 2 300 000 | 0,400 | 2 300 000 | 0,40 | ||||||||
October 2022 | 500 000 | 0,750 | 500 000 | 0,75 | ||||||||
November 2022 | 500 000 | 0,750 | 1 000 000 | 0,75 | ||||||||
May 2023 | 8 000 | 0,500 | 36 000 | 0,50 | ||||||||
May 2023 | 34 656 | 1,000 | 8 000 | 1,00 | ||||||||
15 130 036 | 29 325 500 |
PEAK FINTECH GROUP INC. | 19 |
13 - 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 stock 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.
The outstanding options as at June 30, 2021 and December 31, 2020 and the respective changes during the six-month periods then ended, are summarized as follows:
2021-06-30 | 2020-12-31 | |||||||||||
Weighted | Weighted | |||||||||||
Number of | average | Number of | average | |||||||||
options | exercise price | options | exercise price | |||||||||
$ | $ | |||||||||||
Outstanding, beginning of period | 8 703 500 | 0,668 | 5 102 500 | 0,680 | ||||||||
Granted | 180 000 | 2,739 | 4 561 000 | 0,623 | ||||||||
Expired | - | - | (380 000 | ) | 0,500 | |||||||
Forfeited | - | - | (57 500 | ) | 0,500 | |||||||
Exercised | (165 000 | ) | 0,500 | (522 500 | ) | 0,500 | ||||||
Outstanding end of period | 8 718 500 | 0,714 | 8 703 500 | 0,668 | ||||||||
Exercisable end of period | 5 200 750 | 0,729 | 3 782 000 | 0,740 |
The table below summarizes the information related to outstanding share options as at June 30, 2021.
Maturity date | Range of |
| Number of |
| Weighted average remaining |
$ | |||||
July 8, 2021 | 0,850 |
| 1 050 000 |
| 0 month |
June 1, 2022 | 1,050 |
| 780 000 |
| 11 months |
November 27, 2022 | 0,550 |
| 37 500 |
| 1 years and 4 months |
December 15, 2022 | 0,800 |
| 342 500 |
| 1 years and 5 months |
April 16, 2023 | 0,500 |
| 10 000 |
| 1 years and 9 months |
June 5, 2023 | 0,500 |
| 577 500 |
| 1 years and 11 months |
November 28, 2023 | 0,500 |
| 75 000 |
| 2 years and 4 months |
May 1, 2024 | 0,500 |
| 100 000 |
| 2 years and 10 months |
May 27, 2024 | 0,500 |
| 895 000 |
| 2 years and 10 months |
September 5, 2024 | 0,500 |
| 20 000 |
| 3 years and 2 months |
November 1, 2024 | 0,550 |
| 100 000 |
| 3 years and 4 months |
November 12, 2024 | 0,500 |
| 10 000 |
| 3 years and 4 months |
June 11, 2025 | 0,500 |
| 1 491 000 |
| 3 years and 11 months |
August 7, 2025 | 0,225 |
| 500 000 |
| 4 years and 1 month |
October 28, 2025 | 0,750 |
| 2 450 000 |
| 4 years and 3 months |
November 6, 2025 | 1,350 |
| 100 000 |
| 4 years and 4 months |
January 28, 2026 | 2,850 |
| 50 000 |
| 4 years and 6 months |
March 22, 2026 | 2,750 |
| 110 000 |
| 4 years and 8 months |
May 13, 2026 | 2,400 |
| 20 000 |
| 4 years and 10 months |
|
|
| 8 718 500 |
|
|
PEAK FINTECH GROUP INC. | 20 |
13 - SHARE-BASED PAYMENTS (CONTINUED)
The table below summarizes the information related to outstanding share options as at December 31, 2020.
Maturity date | Range of |
| Number of |
| Weighted average remaining |
$ | |||||
May 25, 2021 | 0,500 |
| 15 000 |
| 5 months |
July 8, 2021 | 0,850 |
| 1 050 000 |
| 7 months |
June 1, 2022 | 1,050 |
| 780 000 |
| 1 years and 6 months |
November 27, 2022 | 0,550 |
| 37 500 |
| 1 year and 11 months |
December 15, 2022 | 0,800 |
| 342 500 |
| 2 years |
April 16, 2023 | 0,500 |
| 10 000 |
| 2 years and 4 months |
June 5, 2020 | 0,500 |
| 727 500 |
| 2 years and 6 months |
November 28, 2023 | 0,500 |
| 75 000 |
| 2 years and 11 months |
May 27, 2024 | 0,500 |
| 995 000 |
| 3 years and 5 months |
September 5, 2024 | 0,500 |
| 20 000 |
| 3 years and 9 months |
November 1, 2024 | 0,550 |
| 100 000 |
| 3 years and 11 months |
November 12, 2024 | 0,500 |
| 10 000 |
| 3 years and 11 months |
June 11, 2025 | 0,500 |
| 1 491 000 |
| 4 years and 6 months |
August 7, 2025 | 0,225 |
| 500 000 |
| 4 years and 8 months |
October 28, 2025 | 0,750 |
| 2 450 000 |
| 4 years and 10 months |
6 novembre 2025 | 1,350 |
| 100 000 |
| 4 years and 11 months |
|
|
| 8 703 500 |
|
|
During the three and six-month periods ended June 30, 2021 the Company recorded an expense of $396,515 and $741,205 respectively related to share-based payments (periods ended June 30, 2020 - $78,290 and $147,492). The offset was credited to contributed surplus.
13.1 Share-based payments granted to directors and employees during the six-month period ended June 30, 2021
a) During the three-month period ended March 31, 2021 the Company granted options to acquire 50,000 common shares of the Company at an average exercise price of $2.85 to a director.
The options vest over a two-year period and are exercisable over a period of five years .
The fair value of the options granted, amounting to $103,780, was calculated using the Black & Scholes option pricing model using the following assumptions:
Share price at the date of grant | $2.66 |
Expected life | 5 years |
Risk-free interest rate | 0,46% |
Volatility (1) | 111% |
Dividend | 0% |
Exercise price at the date of grant | $2.85 |
The volatility was determined by using the Company's own historical volatility over a period corresponding to expected life of the share options.
PEAK FINTECH GROUP INC. | 21 |
13 - SHARE-BASED PAYMENTS (CONTINUED)
b) On May 13, 2021, the Company granted 20,000 options to new employees at an exercise price of $2.40 per share. The options are vesting over a twenty-four-month period following the date of granting and will be exercisable over a period of five years expiring in May 2026.
The options vest over a period of eight, sixteen and twenty-four months and are exercisable over a period of five years .
The fair value of the options granted, amounting to $33,764, was calculated using the Black & Scholes option pricing model using the following assumptions:
Share price at the date of grant | $2.20 |
Expected life | 5 years |
Risk-free interest rate | 0,95% |
Volatility (1) | 108% |
Dividend | 0% |
Exercise price at the date of grant | $2.40 |
The volatility was determined by using the Company's own historical volatility over a period corresponding to expected life of the share options.
13.2 Options granted to consultants during the six-month period ended June 30, 2021
a)
During the six-month period ended June 30, 2021 the Company granted options to acquire 110,000 common shares of the Company at an average exercise price of $2.75 to one of its service providers as part of an investors relations agreement.
The options vest over a period of nine months and are exercisable over a period of five years .
The fair value of the options granted, amounting to $235,434, was calculated using the Black & Scholes option pricing model using the following assumptions:
Share price at the date of grant | $2.74 |
Expected life | 5 years |
Risk-free interest rate | 0,92% |
Volatility (1) | 109% |
Dividend | 0% |
Exercise price at the date of grant | $2.75 |
The volatility was determined by using the Company's own historical volatility over a period corresponding to expected life of the share options.
PEAK FINTECH GROUP INC. | 22 |
14 - CAPITAL MANAGEMENT POLICIES AND PROCEDURES
The Company's capital management objectives are as follows:
- To ensure the Company's ability to continue its development;
- To provide an adequate return to shareholders.
The Company monitors capital on the basis of the carrying amount of equity which represents $39,087,890 ($32,614,250 as at December 31, 2020).
The Company manages its capital structure and makes adjustments to it to ensure it has sufficient liquidity and raises capital through stock markets to continue its development.
The Company is not subject to any externally imposed capital requirements.
15 - FINANCIAL INSTRUMENTS
15.1 Classification of financial instruments
As at June 30,2021 and December 31, 2020, the carrying amount of financial assets and financial liabilities were as follows:
2021-06-30 | |||||||||
Assets and | Assets and | ||||||||
liabilities | liabilities | ||||||||
carried at | carried at | Total | |||||||
fair value | amortized cost | carrying value | |||||||
$ | $ | $ | |||||||
Financial assets | |||||||||
Financial assets measured at amortized cost | |||||||||
Cash | 2 091 004 | 2 091 004 | |||||||
Restricted Cash | 80 171 | 80 171 | |||||||
Debtors | 41 096 064 | 41 096 064 | |||||||
Loans receivable | 21 016 501 | 21 016 501 | |||||||
Deposits for investments | 882 740 | 882 740 | |||||||
- | 65 166 480 | 65 166 480 | |||||||
Financial liabilities | |||||||||
Financial liabilities measured at amortized cost | |||||||||
Accounts payable and accrued liabilities | 29 646 017 | 29 646 017 | |||||||
Bonds | 285 180 | 285 180 | |||||||
CEBA Loan | 40 000 | 40 000 | |||||||
- | 29 971 197 | 29 971 197 |
PEAK FINTECH GROUP INC. | 23 |
15 - FINANCIAL INSTRUMENTS (CONTINUED)
2020-12-31 | |||||||||
Assets and | Assets and | ||||||||
liabilities | liabilities | ||||||||
carried at | carried at | Total | |||||||
fair value | amortized cost | carrying value | |||||||
$ | $ | $ | |||||||
Financial assets | |||||||||
Financial assets measured at amortized cost | |||||||||
Cash | 5 873 876 | 5 873 876 | |||||||
Restricted Cash | 80 091 | 80 091 | |||||||
Debtors | 29 248 478 | 29 248 478 | |||||||
Loans receivable | 19 424 689 | 19 424 689 | |||||||
Deposits for investments | 194 900 | 194 900 | |||||||
- | 54 822 034 | 54 822 034 | |||||||
Financial liabilities | |||||||||
Financial liabilities measured at amortized cost | |||||||||
Accounts payable and accrued liabilities | 25 128 066 | 25 128 066 | |||||||
Debentures | 23 311 | 23 311 | |||||||
Bonds | 258 933 | 258 933 | |||||||
CEBA Loan | 40 000 | 40 000 | |||||||
Financial liabilities carried at fair value | |||||||||
Conversion option | (3 489 | ) | (3 489 | ) | |||||
(3 489 | ) | 25 450 310 | 25 446 821 |
15.2 Financial risk management objectives and policies
The Company is exposed to various risks in relation to financial instruments. The main risks the Company is exposed to are credit risk (see note 5), market risk and liquidity risk.
The Company does not actively engage in the trading of financial instruments for speculative purposes.
No changes were made in the objectives, policies and processes related to financial instrument risk management during the reporting periods.
The most significant financial risks to which the Company is exposed are described below.
PEAK FINTECH GROUP INC. | 24 |
15 - FINANCIAL INSTRUMENTS (CONTINUED)
15.3 Financial risks
15.3.1 Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset.
Liquidity risk management serves to maintain a sufficient amount of cash and to ensure that the Company has financing sources for a sufficient amount. The Company's objective is to maintain a cash position sufficient to cover the next twelve-month obligations (notes 2 ).
The Company's non-derivative financial liabilities have contractual maturities (including interest payments where applicable) as summarized below:
2021-06-30 | |||||||||
Current | Long-term | ||||||||
Within | More | ||||||||
6 months | 6 to 12 months | than 12 months | |||||||
$ | $ | $ | |||||||
Accounts payable and accrued liabilities | 29 646 017 | - | |||||||
Bonds | - | - | 400 000 | ||||||
CEBA loan | 40 000 | - | - | ||||||
29 686 017 | - | 400 000 | |||||||
2020-12-31 | |||||||||
Current | Long-term | ||||||||
Within | More | ||||||||
6 months | 6 to 12 months | than 12 months | |||||||
$ | $ | $ | |||||||
Accounts payable and accrued liabilities | 26 749 055 | - | - | ||||||
Debentures | 25 000 | - | - | ||||||
Bonds | - | - | 400 000 | ||||||
CEBA loan | 40 000 | - | - | ||||||
26 814 055 | - | 400 000 |
The breakdown in Finance costs during the six-month period ended June 30, 2021 and 2020 is as follows:
15.4 Finance costs
2021-06-30 | 2020-06-30 | 2021-06-30 | 2020-06-30 | |||||||||
(3 months) | (3 months) | (6 months) | (6 months) | |||||||||
Interest on debentures | - | 74 033 | 333 | 141 375 | ||||||||
Interest on lease liabilities (note 10) | 7 535 | 7 718 | 13 970 | 16 906 | ||||||||
Interest on security deposit and advances | 25 926 | 44 099 | 54 158 | 91 453 | ||||||||
Interest on bonds | 10 000 | 3 507 | 20 000 | 3 507 | ||||||||
Interest income | (1 449 | ) | (9 276 | ) | (10 606 | ) | (14 246 | ) | ||||
Accretion on debentures and bonds | 6 630 | 139 449 | 13 554 | 278 678 | ||||||||
Total interest expense | 48 641 | 259 530 | 91 410 | 517 673 | ||||||||
Miscellaneous | 2 294 | 871 | 4 358 | 2 679 | ||||||||
50 935 | 260 401 | 95 768 | 520 352 |
PEAK FINTECH GROUP INC. | 25 |
15 - FINANCIAL INSTRUMENTS (CONTINUED)
15.5 Fair value
The following methods and assumptions were used to determine the estimated fair value for each class of financial instruments:
- The fair value of cash, loans receivables and debtors (except sales tax receivables) , accounts payable and accrued liabilities approximate their carrying amount, given the short-term maturity;
- The fair value of the debentures is estimated using a discounted cash flow approach and approximate their carrying amount.
- The fair value of contingent compensation payable related to the acquisition of certain assets and personnel from Wuxi Wenyi Financial Services Co. (note 4) is estimated by probability-weighted cash outflows and reflect management's estimate of a 80% probability that the contract's target level will be achieved and the expected Company's share price.
The Company categorized its financial instruments based on the following three levels of inputs used for fair value measurements:
Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities;
Level 2: Inputs other than quoted prices included in Level 1 that are observable for the assets and liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices);
Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Debentures are level 2 under the fair value hierarchy.
Contingent compensation payable and the option conversion are level 3 under the fair value hierarchy.
16 - 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 are, the CEO, the CFO, the Chinese operations CEO, and the members of the Board. Their remuneration includes the following expenses:
2021-06-30 (3 months) | 2020-06-30 (3 months) | 2021-06-30 (6 months) | 2020-06-30 (6 months) | |||||||||
$ | $ | $ | $ | |||||||||
Salaries, bonus and fringe benefits | 167 034 | 97 017 | 308 453 | 218 203 | ||||||||
Share-based payments | 331 262 | 60 933 | 643 420 | 109 555 | ||||||||
Royalty- Cubeler | 43 902 | 26 028 | 74 678 | 56 901 | ||||||||
Management fees paid to a company held by a director | - | - | - | 5 775 | ||||||||
Interest on debentures | - | 200 | - | 200 | ||||||||
Total | 542 198 | 184 178 | 1 026 551 | 390 634 |
PEAK FINTECH GROUP INC. | 26 |
16 - RELATED PARTY TRANSACTIONS (CONTINUED)
These transactions occurred in the normal course of operations and have been measured at fair value.
As at June 30, 2021, and December 31, 2020 the condensed interim consolidated statement of financial position includes the following amounts with related parties:
2021-06-30 | 2020-12-31 | |||||
$ | $ | |||||
Advance from a director to a subsidiary, no interest | - | 270 911 | ||||
Subscriptions to be received | - | 25 000 | ||||
Payable to an affiliated company | (137 852 | ) | (40 134 | ) | ||
(137 852 | ) | 255 777 |
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.
17 - 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 as 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.
17 - SEGMENT REPORTING (CONTINUED)
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.
PEAK FINTECH GROUP INC. | 27 |
17 - SEGMENT REPORTING (CONTINUED)
Other
The "other" category includes the activity and unallocated portion of the Canadian parent company's services and all non-operating holdings registered in Hong Kong and China.
The segment information for the six-month periods ended June 30, 2021, and 2020 are as follows:
Six months ended 2021-06-30 | |||||||||||||||
Fintech | Financial | Other | Elimination | Total | |||||||||||
Platform | Services | ||||||||||||||
$ | $ | $ | $ | ||||||||||||
Revenues (1) | |||||||||||||||
Financial service revenue | - | 1 202 401 | - | - | 1 202 401 | ||||||||||
Fees/sales from external customers | 1 792 397 | 602 843 | - | - | 2 395 240 | ||||||||||
Supply chain services | 41 177 420 | - | 113 894 | - | 41 291 314 | ||||||||||
Inter-segment | 558 830 | 53 503 | 182 841 | (795 174 | ) | - | |||||||||
Total revenues | 43 528 648 | 1 858 747 | 296 734 | (795 174 | ) | 44 888 955 | |||||||||
Expenses | |||||||||||||||
Depreciation and amortization | 257 120 | 111 679 | 10 840 | - | 379 640 | ||||||||||
Interest expense | 56 600 | 3 215 | 35 953 | - | 95 768 | ||||||||||
All other expenses | 41 128 057 | 785 485 | 2 425 027 | (795 174 | ) | 43 543 395 | |||||||||
Total expenses | 41 441 777 | 900 380 | 2 471 820 | (795 174 | ) | 44 018 803 | |||||||||
Profit (loss) before tax | 2 086 871 | 958 367 | (2 175 086 | ) | - | 870 152 | |||||||||
Income tax | 582 564 | 357 495 | 23 724 | 963 783 | |||||||||||
Net profit (loss) | 1 504 306 | 600 872 | (2 198 810 | ) | - | (93 631 | ) | ||||||||
Non-controlling interest | 413 076 | 278 484 | - | - | 691 559 | ||||||||||
Net profit (loss) attributable to owners of the parent | 1 091 231 | 322 389 | (2 198 810 | ) | - | (785 190 | ) | ||||||||
Segmented assets | 45 457 236 | 23 633 063 | 29 352 033 | (27 892 901 | ) | 70 549 430 |
PEAK FINTECH GROUP INC. | 28 |
17 - SEGMENT REPORTING (CONTINUED)
Other (continued)
Six months ended 2020-06-30 | |||||||||||||||
Fintech Platform | Financial Services | Other | Elimination | Total | |||||||||||
$ | $ | $ | $ | ||||||||||||
Revenues (1) | |||||||||||||||
Financial service revenue | - | 1 788 414 | - | - | 1 788 414 | ||||||||||
Fees/sales from external customers | 1 375 703 | 477 442 | - | - | 1 853 145 | ||||||||||
Supply chain services | 7 571 339 | - | - | - | 7 571 339 | ||||||||||
Inter-segment | 386 504 | - | 140 997 | (527 501 | ) | - | |||||||||
Total revenues | 9 333 546 | 2 265 856 | 140 997 | (527 501 | ) | 11 212 898 | |||||||||
Expenses | |||||||||||||||
Depreciation and amortization | 110 349 | 278 780 | 51 303 | - | 440 432 | ||||||||||
Interest expenses | 74 661 | 21 305 | 420 878 | - | 516 844 | ||||||||||
Impairment of intangible asset | - | - | - | - | - | ||||||||||
Loss on extinction of debt | - | - | - | - | - | ||||||||||
Gain on bargain purchase | - | - | - | - | - | ||||||||||
Loss on fair value variation | - | - | - | - | - | ||||||||||
All other expenses | 7 989 497 | 2 030 130 | 1 730 194 | (527 501 | ) | 11 222 320 | |||||||||
Total expenses | 8 174 507 | 2 330 215 | 2 202 375 | (527 501 | ) | 12 179 596 | |||||||||
Profit (loss) before tax | 1 159 039 | (64 359 | ) | (2 061 378 | ) | - | (966 698 | ) | |||||||
Income tax (recovery) | 284 126 | 93 774 | - | - | 377 900 | ||||||||||
Net profit (loss) | 874 913 | (158 133 | ) | (2 061 378 | ) | - | (1 344 598 | ) | |||||||
Non-controlling interest | 322 229 | (57 165 | ) | - | - | 265 064 | |||||||||
Net profit (loss) attributable to owners of the parent | 552 684 | (100 968 | ) | (2 061 378 | ) | - | (1 609 662 | ) | |||||||
Segmented assets | 11 376 375 | 23 169 506 | 17 962 352 | (18 896 677 | ) | 33 611 556 |
(1): Revenues from external customers have been identified on the basis of the customer's geographical location, which is China.
The Company's non-current assets (other than financial instruments) are located in the following geographic regions:
2021-06-30 | 2020-12-31 | |||||
Non-current | Non-current | |||||
Assets | Assets | |||||
$ | $ | |||||
China | 8 082 615 | 6 548 695 | ||||
Canada | 1 072 500 | 1 144 000 | ||||
Total | 9 155 115 | 7 692 695 |
PEAK FINTECH GROUP INC. | 29 |
18 - NON-CONTROLLING INTERESTS
The Company controls two subsidiaries that have significant non-controlling interests (NCIs).
2021-06-30 | 2020-12-31 | |||||
% ownership | % ownership | |||||
and voting rights | and voting rights | |||||
Entities | held the by NCIs | held the by NCIs | ||||
Asia Synergy Supply Chain Ltd ("ASSC") | 49% | 49% | ||||
Asia Synergy Financial Capital Ltd ("ASFC") | 49% | 49% |
Total comprehensive income | ||||||||||||
allocated to NCI | Accumulated NCI | |||||||||||
Six-month | ||||||||||||
period ending | Year ending | As at | As at | |||||||||
2021-06-30 | 2020-12-31 | 2021-06-30 | 2020-12-31 | |||||||||
Asia Synergy Supply Chain Ltd | 464 568 | 921 521 | 1 799 149 | 1 334 581 | ||||||||
Asia Synergy Financial Capital Ltd | 150 028 | 407 414 | 10 585 967 | 10 435 939 | ||||||||
614 596 | 1 328 935 | 12 385 116 | 11 770 520 |
No dividends were paid to NCIs during the six-month period ended June 30, 2021 and the year ended December 31, 2020 .
Summarised financial information for ASSC and ASFC before intragroup eliminations are as follows:
ASSC | ASFC | |||||||||||
2021-06-30 | 2020-12-31 | 2021-06-30 | 2020-12-31 | |||||||||
$ | $ | $ | $ | |||||||||
Current assets | 24 439 896 | 26 997 077 | 18 227 220 | 18 770 871 | ||||||||
Non-current assets | 724 | 853 | 4 222 543 | 4 360 915 | ||||||||
Total assets | 24 440 620 | 26 997 930 | 22 449 763 | 23 131 786 | ||||||||
Current liabilities | 21 737 105 | 24 274 295 | 1 832 485 | 1 689 668 | ||||||||
Non-current liabilities | - | - | 142 762 | 144 283 | ||||||||
Total liabilities | 21 737 105 | 24 274 295 | 1 975 247 | 1 833 951 | ||||||||
Equity attributable to owners of the parent | 1 872 584 | 1 389 054 | 11 018 047 | 10 861 896 | ||||||||
Non-controlling interests | 1 799 149 | 1 334 581 | 10 585 967 | 10 435 939 |
PEAK FINTECH GROUP INC. | 30 |
18 - NON-CONTROLLING INTERESTS (CONTINUED)
ASSC | ASFC | |||||||||||
Six-month | Six-month | |||||||||||
period ending | Year ending | period ending | Year ending | |||||||||
2021-06-30 | 2020-12-31 | 2021-06-30 | 2020-12-31 | |||||||||
$ | $ | $ | $ | |||||||||
Revenue | 20 170 369 | 38 409 836 | 1 255 404 | 2 446 058 | ||||||||
Profit for the year attributable to owners of the parent | 429 935 | 958 850 | 289 850 | 189 077 | ||||||||
Profit for the year attributable to NCIs | 413 075 | 921 248 | 278 484 | 181 662 | ||||||||
Profit for the year | 843 010 | 1 880 097 | 568 334 | 370 739 | ||||||||
Other comprehensive income ("OCI") for the year OCI attributable to the owners of the parent | 53 595 | 285 | (133 699 | ) | 234 967 | |||||||
OCI attributable to NCIs | 51 493 | 273 | (128 456 | ) | 225 752 | |||||||
OCI for the year | 105 088 | 558 | (262 155 | ) | 460 719 | |||||||
Total comprehensive income for the year attributable to the owners of the parent | 483 530 | 959 134 | 156 151 | 424 043 | ||||||||
Total comprehensive income for the year attributable to NCIs | 464 568 | 921 521 | 150 028 | 407 414 | ||||||||
Total comprehensive income for the year | 948 098 | 1 880 655 | 306 179 | 831 458 | ||||||||
Net cash used in operating activities | 1 445 050 | (1 284 050 | ) | (2 591 071 | ) | 461 254 | ||||||
Net cash used in investing activities | 12 | 466 250 | 35 367 | 15 935 | ||||||||
Net cash from financing activities | (1 510 652 | ) | 743 189 | 71 158 | 227 582 | |||||||
Foreign exchange differences | 3 534 | 4 693 | (338 580 | ) | 927 798 | |||||||
Net cash (outflow) inflow for the year | (62 056 | ) | (69 918 | ) | (2 823 126 | ) | 1 632 569 |
19 - COMPARATIVE FIGURES
Certain comparative figures have been reclassified in order to comply with the basis of presentation adopted in the current year.
20 - SUBSEQUENT EVENTS
a) On July 7, 2021, the Company closed a short-form prospectus financing for gross proceeds of $52,600,000 (net proceeds of $48,918,000 before related expenses). The Company issued 26,300,000 shares at a price of $2.00 and 13,149,999 warrants at an exercise price of $3.50 for a period of twenty-four months. Also, 1,841,000 broker warrants at an exercise price of $3.50 good for a period of twenty-four months were issued to agents.
b) On July 7, 2021, the Company granted incentive options to acquire 1,650,000 common shares to certain directors, officers and key employees. The stock options expire in July 2026, vest over two years and have an exercise price of $2.05
c) Effective July 27, 2021, the Company consolidated its issued and outstanding common shares on the basis of one (1) post-consolidation common share for each two (2) pre-consolidated common share
d) On August 16,2021, the Company announces that it had signed an agreement to acquire 100% of the outstanding shares of Cubeler Inc, a related-party private company, for $1,000,000 in cash and 11,133,326 common shares of the Company. The acquisition is expected to close on or prior to September 30, 2021