Peak Fintech Group Inc.
Condensed Interim Consolidated Financial
Statements (Unaudited)
For the three and nine-month periods ended
September 30, 2021, and 2020
Note to the reader : The Interim Consolidated Financial Statements have not been reviewed by the auditor
2
PEAK FINTECH GROUP INC.
Condensed Interim Consolidated Statements of Comprehensive Profit and Loss
For the three and nine-month periods ended September 30, 2021 and 2020
(In Canadian dollars, except weighted average number of outstanding shares)
(Unaudited)
Three-month periods ended | Nine-month periods ended | ||||||||||||
Note | September 30 | September 30 | |||||||||||
Restated | Restated | ||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||
$ | $ | $ | $ | ||||||||||
Revenues | 25,695,570 | 15,116,369 | 70,584,525 | 26,329,268 | |||||||||
25,695,570 | 15,116,369 | 70,584,525 | 26,329,268 | ||||||||||
Expenses | |||||||||||||
Cost of service | 21,120,835 | 13,385,347 | 60,910,889 | 20,912,490 | |||||||||
Salaries and fringe benefits | 1,375,954 | 386,676 | 2,792,424 | 1,099,606 | |||||||||
Service fees | 161,859 | 208,741 | 468,497 | 479,205 | |||||||||
Royalty on software | 32,524 | 47,469 | 107,202 | 104,370 | |||||||||
Board remuneration | 278,191 | 29,062 | 549,020 | 51,405 | |||||||||
Consulting fees | 118,310 | 1,181,765 | 300,052 | 2,034,766 | |||||||||
Management fees | 11,670 | 15,729 | 38,844 | 55,261 | |||||||||
Professional fees | 417,868 | 154,345 | 1,330,750 | 340,879 | |||||||||
Administrative and indirect cost | - | (16,246 | ) | - | 221,582 | ||||||||
Public relations and press releases | 421,775 | 88,207 | 678,256 | 140,112 | |||||||||
Office supplies, software and utilities | (1,517 | ) | 26,777 | 86,968 | 129,088 | ||||||||
Lease expenses | 11,510 | 11,570 | 34,327 | 34,673 | |||||||||
Insurance | 35,637 | 10,112 | 77,809 | 31,890 | |||||||||
Finance costs | 16.4 | 41,606 | 280,584 | 137,374 | 800,934 | ||||||||
Pre-acquisition expenses assumed on | |||||||||||||
consolidation of a subsidiary | 4 | 216,421 | - | 216,421 | - | ||||||||
Expected credit loss | 5 | (44,286 | ) | 451 | (35,040 | ) | 588,748 | ||||||
Travel and entertainment | 77,510 | 55,943 | 155,176 | 138,200 | |||||||||
Stock exchange and transfer agent costs | 165,154 | 65,857 | 318,523 | 101,973 | |||||||||
Translation cost and others | 16,150 | 6,676 | 137,035 | 20,618 | |||||||||
Reversal of impairment loss | 8 | - | - | (193,717 | ) | - | |||||||
Depreciation of property and equipment | 7 | 22,545 | 21,495 | 65,847 | 64,649 | ||||||||
Gain on bargain purchase | 4 | (1,910,598 | ) | - | (1,910,597 | ) | - | ||||||
Amortization of intangible assets | 8 | 462,831 | 67,616 | 685,263 | 231,896 | ||||||||
Expiration of deferred finance cost | - | - | - | 353,377 | |||||||||
Amortization of financing initial costs | 6,799 | 10,441 | 20,175 | 11,137 | |||||||||
Change in fair value of contingent | |||||||||||||
consideration payable | 4 | 171,432 | (217,325 | ) | 171,432 | (217,325 | ) | ||||||
Depreciation of right-of-use assets | 7 | 105,972 | 137,209 | 219,878 | 350,819 | ||||||||
(Gain) Loss on foreign exchange | (4,128 | ) | 2,776 | (31,981 | ) | 60,526 | |||||||
23,312,024 | 15,961,277 | 67,330,827 | 28,140,879 | ||||||||||
Profit (loss) before income taxes | 2,383,546 | (844,908 | ) | 3,253,698 | (1,811,611 | ) | |||||||
Income tax | 857,260 | 123,504 | 1,821,043 | 501,404 | |||||||||
Net profit (loss) | 1,526,286 | (968,412 | ) | 1,432,655 | (2,313,015 | ) | |||||||
Net profit (loss) attributable to: | |||||||||||||
Non-controlling interest | 169,752 | 350,015 | 861,311 | 615,079 | |||||||||
Owners of the parent | 1,356,534 | (1,318,427 | ) | 571,344 | (2,928,094 | ) | |||||||
1,526,286 | (968,412 | ) | 1,432,655 | (2,313,015 | ) | ||||||||
Item that will be reclassified subsequently to profit or loss | |||||||||||||
Currency translation adjustment | (1,003,357 | ) | (472,282 | ) | (782,277 | ) | (926,733 | ) | |||||
Total comprehensive profit (loss) | 2,529,643 | (496,130 | ) | 2,214,932 | (1,386,282 | ) | |||||||
Net profit (loss) and total comprehensive profit (loss) attributable to: | |||||||||||||
Non-controlling interest | 205,593 | 446,671 | 820,190 | 880,821 | |||||||||
Owners of the parent | 2,324,050 | (942,801 | ) | 1,394,742 | (2,267,102 | ) | |||||||
2,529,643 | (496,130 | ) | 2,214,932 | (1,386,281 | ) | ||||||||
Weighted average number of outstanding shares | 80,351,626 | 43,324,341 | 69,298,789 | 39,317,044 | |||||||||
Basic and diluted profit (loss) per share | 0.017 | (0.030 | ) | 0.008 | (0.074 | ) | |||||||
Going concern uncertainty (note 2)
Subsequent events (note 21)
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
Note to the reader : The Interim Consolidated Financial Statements have not been reviewed by the auditor
3
PEAK FINTECH GROUP INC.
Condensed Interim Consolidated Statements of Financial Position
As at September 30, 2021 and December 31, 2020
(In Canadian dollars)
(Unaudited)
September 30 | December 31 | ||||||
Note | 2021 | 2020 | |||||
$ | $ | ||||||
ASSETS | Unaudited | Audited | |||||
Current | |||||||
Cash | 36,398,828 | 5,873,876 | |||||
Restricted cash | 12 | 63,333 | 80,091 | ||||
Loans receivable | 5 | 16,270,100 | 15,425,242 | ||||
Assets held for esale | 266,224 | 183,732 | |||||
Debtors | 6 | 35,867,825 | 30,575,357 | ||||
Deposit for investments | 492,500 | 194,900 | |||||
Prepaid expenses | 458,240 | 989,718 | |||||
89,817,050 | 53,322,916 | ||||||
Loans receivable | 5 | 4,019,085 | 3,999,446 | ||||
Property and equipment | 7 | 997,127 | 529,372 | ||||
Intangible assets | 8 | 35,089,924 | 3,163,877 | ||||
Deferred Tax assets | 818,978 | 291,931 | |||||
130,742,165 | 61,307,542 | ||||||
LIABILITIES | |||||||
Current | |||||||
Accounts payable, advances and accrued liabilities | 9 | 14,371,288 | 26,559,427 | ||||
Lease liabilities | 10 | 168,037 | 117,709 | ||||
Current tax liabilities | 3,665,175 | 1,568,626 | |||||
Debentures | 11 | - | 23,311 | ||||
Conversion option | - | 3,489 | |||||
18,204,500 | 28,272,562 | ||||||
Bonds | 12 | 299,026 | 258,933 | ||||
CEBA Loan | 40,000 | 40,000 | |||||
Lease liabilities | 10 | 582,283 | 121,797 | ||||
Contingent consideration payable | 4 | 10,036,542 | - | ||||
29,162,351 | 28,693,292 | ||||||
SHAREHOLDERS' DEFICIENCY | |||||||
Capital stock | 13 | 89,258,655 | 39,131,010 | ||||
Shares to be issued | 4 | 6,000,000 | 511,221 | ||||
Contributed surplus | 22,243,418 | 11,582,653 | |||||
Accumulated other comprehensive income | 682,616 | (140,782 | ) | ||||
Deficit | (29,669,028 | ) | (30,240,372 | ) | |||
Shareholders' equity attributable to owners of the parent | 88,515,661 | 20,843,730 | |||||
Non-controlling interest | 13,064,153 | 11,770,520 | |||||
Total shareholders' equity | 101,579,814 | 32,614,250 | |||||
130,742,165 | 61,307,542 | ||||||
Going concern uncertainty (note 2), subsequent events (note 21)
On behalf of the Board, |
|
|
/S/ Johnson Joseph |
| /S/ Charles-André Tessier |
Director |
| Director |
4
PEAK FINTECH GROUP INC.
Condensed Interim Consolidated Statements of Cash Flows
For the three and nine-month periods ended September 30, 2021 and 2020
(In Canadian dollars)
(Unaudited)
Three-month periods ended | Nine-month periods ended | ||||||||||||
September 30 | September 30 | ||||||||||||
Restated | Restated | ||||||||||||
Note | 2021 | 2020 | 2021 | 2020 | |||||||||
$ | $ | $ | $ | ||||||||||
OPERATING ACTIVITIES | |||||||||||||
Net profit (loss) | 1,526,286 | (968,412 | ) | 1,432,655 | (2,313,015 | ) | |||||||
Non-cash items | |||||||||||||
Expected credit loss | 5 | (44,286 | ) | 451 | (35,040 | ) | 588,748 | ||||||
Depreciation of property and equipment | 7 | 22,545 | 21,495 | 65,847 | 64,649 | ||||||||
Depreciation of right-of-use assets | 7 | 105,972 | 137,209 | 219,878 | 350,819 | ||||||||
Amortization of intangible assets | 8 | 462,831 | 67,616 | 685,263 | 231,896 | ||||||||
Amortization of initial cost debenture | 6,799 | - | 20,175 | - | |||||||||
Revaluation of impairment loss | 8 | - | - | (193,717 | ) | - | |||||||
Accretion of debentures and bonds | 11, 16.4 | 7,047 | 147,475 | 20,601 | 426,153 | ||||||||
Accretion of lease interest | 10, 16.4 | 26,277 | - | 40,247 | - | ||||||||
Issuance of shares for settlement of debt | 13 | - | 563,375 | 15,000 | 1,198,373 | ||||||||
Issuance of warrants for settlement of debt | 13 | - | 233,482 | 233,482 | |||||||||
Expiration of deferred financing cost | - | - | - | 353,377 | |||||||||
Pre-acquisition expenses assumed on consolidation of a subsidiary | 4 | 216,421 | - | 216,421 | - | ||||||||
Change in fair value of contingent consideration payable | 4 | 171,432 | (217,325 | ) | 171,432 | (217,325 | ) | ||||||
Share-based compensation | 14 | 815,801 | 78,290 | 1,557,006 | 260,412 | ||||||||
Gain on bargain purchase | 4 | (1,910,597 | ) | - | (1,910,597 | ) | - | ||||||
Loans receivable maturing in more than 12 months | 5 | 949,511 | 925,704 | (19,639 | ) | 5,477,969 | |||||||
Net changes in working capital items | |||||||||||||
Income tax payable | 2,485,726 | 133,117 | 2,096,549 | 389,279 | |||||||||
Accounts receivable | 6 | 20,543,495 | (12,226,908 | ) | 16,047,029 | (15,986,658 | ) | ||||||
Deposits made for transactions on plateforms | 6 | (11,148,198 | ) | - | (11,148,198 | ) | - | ||||||
Prepayment to third party subcontractors | 6 | (11,595,993 | ) | - | (11,595,993 | ) | - | ||||||
Other debtors | 6 | 8,300,254 | 56,651 | 1,435,991 | 493,985 | ||||||||
Loans receivable maturing in less than 12 months | 5 | (158,996 | ) | (771,742 | ) | (892,309 | ) | (4,214,993 | ) | ||||
Prepaid expenses | 110,929 | 96,000 | 792,184 | 331,106 | |||||||||
Deferred tax asset | (527,047 | ) | - | (527,047 | ) | - | |||||||
Accounts payable, advances and accrued liabilities | 9 | (18,308,787 | ) | 11,503,421 | (18,838,504 | ) | 11,850,144 | ||||||
Proceeds (repayments) re advances from third parties | (3,113,772 | ) | (268,910 | ) | 819,378 | 1,889,054 | |||||||
Cash flows from operating activities | (11,056,350 | ) | (489,011 | ) | (19,525,389 | ) | 1,407,455 | ||||||
INVESTING ACTIVITIES | |||||||||||||
Property and equipment - additions | 7 | (24,167 | ) | - | (28,480 | ) | (3,862 | ) | |||||
Property and equipment - disposals | 7 | 159 | - | 6,148 | - | ||||||||
Intangible asset - additions | 4, 8 | (8,630,952 | ) | (345,740 | ) | (9,420,160 | ) | (820,723 | ) | ||||
Cash flows from investing activities | (8,654,960 | ) | (345,740 | ) | (9,442,492 | ) | (824,585 | ) | |||||
FINANCING ACTIVITIES | |||||||||||||
Proceeds from advances made from a Director | - | 5,600 | - | 15,680 | |||||||||
Repayment of advances made from affiliates | (30,050 | ) | - | (40,133 | ) | - | |||||||
Repayment of advances made from a Director | - | - | (270,911 | ) | - | ||||||||
Repayment of lease liabilities | 10 | (195,050 | ) | (107,968 | ) | (271,223 | ) | (359,815 | ) | ||||
Proceeds fom the issuance of shares and warrants | 13 | 47,981,290 | 2,882,400 | 47,981,290 | 3,804,400 | ||||||||
Proceeds from the issuance of debentures | 11 | - | - | - | 50,000 | ||||||||
Proceeds from the issuance of Bonds | 12 | - | - | - | 298,248 | ||||||||
Proceeds from the issuance of CEBA Loan | - | - | - | 40,000 | |||||||||
Proceeds from the exercise of warrants | 13 | 3,708,557 | - | 9,594,871 | - | ||||||||
Proceeds from the exercise of options | 14 | 886,253 | - | 1,003,753 | - | ||||||||
Subscriptions for shares from non-controlling interest | 189,532 | - | 189,532 | - | |||||||||
Cash flows from financing activities | 52,540,532 | 2,780,032 | 58,187,179 | 3,848,513 | |||||||||
IMPACT OF FOREIGN EXCHANGE | 967,068 | 649,249 | 794,200 | 1,243,677 | |||||||||
Net increase in cash | 33,796,290 | 2,594,530 | 30,013,498 | 5,675,060 | |||||||||
Cash, beginning of period | 2,171,175 | 4,798,039 | 5,953,967 | 1,717,509 | |||||||||
Cash, acquired on acquisition of subsidiaries | 494,697 | - | 494,697 | - | |||||||||
Cash, end of period | 36,462,161 | 7,392,569 | 36,462,161 | 7,392,569 | |||||||||
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
Note to the reader : The Interim Consolidated Financial Statements have not been reviewed by the auditor
5
PEAK FINTECH GROUP INC.
Condensed Interim Consolidated Statements of Changes in Equity
For the nine-month periods ended September 30, 2021 and 2020
(In Canadian dollars)
(Unaudited)
Equity | Accumulated | Total | ||||||||||||||||||||||||||||||
component of | other | attributable | Non | Shareholders' | ||||||||||||||||||||||||||||
Number of | Capital stock | Equity to | Contributed | convertible | comprehensive | to owners of | Controlling | equity | ||||||||||||||||||||||||
Note | common shares | Amount | issue | surplus | debentures | income | Deficit | parent | interest | (deficiency) | ||||||||||||||||||||||
(number of shares - | ||||||||||||||||||||||||||||||||
see note 15) | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
Balance as of January 1, 2021 | 59,012,095 | 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 | 13 | 13,149,999 | 41,922,442 | 10,677,558 | 52,600,000 | 52,600,000 | ||||||||||||||||||||||||||
Issuance of shares and warrants to settle debts | 13 | |||||||||||||||||||||||||||||||
owed for services provided | 13 | 16,676 | 67,800 | 67,800 | 67,800 | |||||||||||||||||||||||||||
Shares to be issued for business acquisition | 4 | 600,000 | 6,000,000 | 6,000,000 | 6,000,000 | |||||||||||||||||||||||||||
Issuance of for shares business acquisition | 4,13 | 511,169 | 403,610 | (403,610 | ) | - | - | |||||||||||||||||||||||||
Issuance costs - shares and warrants | 13 | (4,618,710 | ) | (4,618,710 | ) | (4,618,710 | ) | |||||||||||||||||||||||||
Issuance costs - broker compensation warrants | 13 | (1,875,595 | ) | 1,875,595 | - | - | ||||||||||||||||||||||||||
Conversion of convertible debentures | 11 | 25,000 | 27,483 | 27,483 | 27,483 | |||||||||||||||||||||||||||
Exercise of warrants and broker warrants | 13 | 9,272,738 | 12,310,172 | (107,611 | ) | (2,527,705 | ) | 9,674,857 | 9,674,857 | |||||||||||||||||||||||
Exercise of options | 14 | 607,500 | 1,890,443 | (921,690 | ) | 968,753 | 968,753 | |||||||||||||||||||||||||
Share-based compensation | 14 | 1,557,006 | 1,557,006 | 1,557,006 | ||||||||||||||||||||||||||||
Subscription for shares by non-controlling interest | 473,443 | 473,443 | ||||||||||||||||||||||||||||||
Transactions with owners | 83,195,176 | 89,258,655 | 6,000,000 | 22,243,418 | - | (140,782 | ) | (30,240,372 | ) | 87,120,919 | 12,243,963 | 99,364,882 | ||||||||||||||||||||
Net profit | 571,344 | 571,344 | 861,311 | 1,432,655 | ||||||||||||||||||||||||||||
Other comprehensive loss | 823,398 | 823,398 | (41,121 | ) | 782,277 | |||||||||||||||||||||||||||
Total comprehensive (loss) profit for the year | - | - | - | - | - | 823,398 | 571,344 | 1,394,742 | 820,190 | 2,214,932 | ||||||||||||||||||||||
Balance as of September 30, 2021 | 83,195,176 | 89,258,655 | 6,000,000 | 22,243,418 | - | 682,616 | (29,669,028 | ) | 88,515,661 | 13,064,153 | 101,579,814 | |||||||||||||||||||||
Balance as of January 1, 2020 | 36,029,607 | 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 | 13 | 11,747,906 | 3,775,336 | 1,527,750 | 5,303,086 | 5,303,086 | ||||||||||||||||||||||||||
Shares to be issued for business acquisition | 4 | - | - | 37,261 | - | - | - | - | 37,261 | - | 37,261 | |||||||||||||||||||||
Shares to be issued to consultant | 13 | - | - | 139,381 | 139,381 | 139,381 | ||||||||||||||||||||||||||
Exercise of warrants on surrendering of debenture | 12 | 670,000 | 730,963 | - | (132,865 | ) | - | - | - | 598,098 | - | 598,098 | ||||||||||||||||||||
Issuance of convertible debenture | 13 | - | - | - | 11,273 | 9,408 | - | - | 20,681 | - | 20,681 | |||||||||||||||||||||
Conversion of convertible debenture | 13 | 50,000 | 50,678 | - | (2,940 | ) | - | - | 47,738 | - | 47,738 | |||||||||||||||||||||
Issuance of warrants for service | 13 | 233,482 | 233,482 | 233,482 | ||||||||||||||||||||||||||||
Issuance costs | 13 | - | (226,554 | ) | - | 78,140 | - | - | - | (148,414 | ) | - | (148,414 | ) | ||||||||||||||||||
Issuance of bonds | 12 | - | - | - | 64,896 | - | - | - | 64,896 | - | 64,896 | |||||||||||||||||||||
Share-based compensation | 14 | - | - | - | 260,412 | - | - | - | 260,412 | - | 260,412 | |||||||||||||||||||||
Transactions with owners | 48,497,513 | 28,565,046 | 670,056 | 11,623,421 | 54,359 | (1,054,211 | ) | (23,623,950 | ) | 16,234,721 | 10,441,584 | 26,676,305 | ||||||||||||||||||||
Net (loss) profit | - | - | - | - | - | - | (2,928,094 | ) | (2,928,094 | ) | 615,079 | (2,313,015 | ) | |||||||||||||||||||
Other comprehensive loss | - | - | - | - | - | 926,733 | - | 926,733 | 265,742 | 1,192,475 | ||||||||||||||||||||||
Total comprehensive loss for the year | - | - | - | - | - | 926,733 | (2,928,094 | ) | (2,001,361 | ) | 880,821 | (1,120,540 | ) | |||||||||||||||||||
Balance as of September 30, 2020 (restated) | 48,497,513 | 28,565,046 | 670,056 | 11,623,421 | 54,359 | (127,478 | ) | (26,552,044 | ) | 14,233,360 | 11,322,405 | 25,555,765 | ||||||||||||||||||||
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
Note to the reader : The Interim Consolidated Financial Statements have not been reviewed by the auditor
PEAK FINTECH GROUP INC. | 6 |
Notes to Condensed Interim Consolidated Financial Statements |
|
For the three and nine-month periods ended September 30, 2021 and 2020 (In Canadian dollars) |
|
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 in China's commercial lending industry. Peak's subsidiaries use technology, analytics and artificial intelligence to create an ecosystem of lenders, borrowers and other participants in China's commercial lending space where lending operations are conducted rapidly, safely, efficiently and with the utmost transparency.
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 and business growth intiatives . 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, including a financing by prospectus that generate a net cah inflow of $47,981,290 in the thirs quarte of 2021, there is no assurance that it will manage to obtain additional financing in the future. Also, the Company incurred a net profit of $4,030,417 for the nine-month period ended September 30, 2021 (year ended December 31, 2020 - $5,513,511), it has an accumulated deficit of $27,0$71,266 as at September 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 some 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 nine-month period ended September 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 |
Notes to Condensed Interim Consolidated Financial Statements |
|
For the three and nine-month periods ended September 30, 2021 and 2020 (In Canadian dollars) |
|
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 nine-month periods ended September 30, 2021 (including comparative figures) were approved by the Board of Directors on November 15, 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:
|
| % of ownership |
| Functional | |
Entities | Registered | and voting right | Principal activity | 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 | Renminbi | |
Asia Synergy Supply Chain Technologies Ltd (1) | China | 100% | Technology based product procurement | Renminbi | |
Asia Synergy Solar-Gas & Oil Supply Chain | China | 100% | Technology based product procurement | 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 | |
Asia Synergy Insurance Services Co.,Ltd (1) | China | 100% | Fintech | Renminbi | |
Wuxi Aorong Ltd. | China | 100% | Holding | Renminbi | |
Asia Synergy Financial Capital Ltd | China | 51% | Financial institution | Renminbi | |
Beijing Huike Internet Technology (note 4.1) | China | 100% | Technology based product facilitator | Renminbi | |
Wechain (Nanjing) Technology Service Co., Ltd. | China | 51% | Fintech | Renminbi | |
Beijing Kailifeng New Energy Technology Co., Ltd. (1) | China | 51% | Technology based product facilitator | Renminbi |
PEAK FINTECH GROUP INC. | 8 |
Notes to Condensed Interim Consolidated Financial Statements |
|
For the three and nine-month periods ended September 30, 2021 and 2020 (In Canadian dollars) |
|
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") being a wholly owned subsidiary of the Company, Asia Synergy Technologies ("AST"), for the purpose of being involved in 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 Asia Synergy Solar-Gas & Oil Supply Chain Management Co. Ltd ("AJP") being a wholly owned subsidiary of the Company, Asia Synergy Technologies ("AST"), for the purpose of being involved in distribution of different products within the gas and oil retail industry. As a result, AST owns 100% interest in AJP.
In June 2021, the Company created a new subsidiary called Asia Synergy Insurance Service Co. Ltd ("ASSI") being a wholly owned subsidiary of the Company, Asia Synergy Data Solutions Ltd.("ASDS"), for the purpose of being involved in the distribution of insurance products in China. As a result, ASDS owns 100% interest in ASSI.
In September 2021, the Company created a new subsidiary, Beijing Kailifeng New Energy Technology Co. Ltd., for the purpose of being involved in the distribution of clean energy products. Kalifeng is a wholly owned subsidiary of the Company, Asia Synergy Data Solutions Ltd. ("ASDS").
The subsidiaries each have an annual reporting date of December 31 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 COMBINATIONS
4.1 Acquisition of subsidiaries - Huike and Wechain
On September 1, 2021, the Company, through it subsidiary Asia Synergy Data Solutions ("ASDS"), acquired 100% of the share capital of Beijing Huike Internet Technology ("Huike") and also 51% of the issued share capital of Wechain (Nanjing) Technology Service Co., Ltd ("Wechain").
Huike, which was incorporated on March 13, 2019, was acquired to be the vehicle that will be the gatekeeper of the Heartbeat platform acquired from Huayan Kun Tai Technology Company Ltd "(Huayan") (refer to 4.2 below). Huike will operate the Heatbeat platform which distributes various solutions to insurers and insurance brokers in China and in return it will earn service fees based on the value of transactions occurring on the platform. During the period leading up to its acquisition by ASDS, the company traded and incurred pre- acquisition costs on behalf of the group totalling $749,143. These were initially capitalized and formed part of it acquisition balance sheet. On consolidation of Huike these costs have been written off as pre-acquisition expenses and have been offset against the bargain purchase arising on acquisition of the Heatbeat assets in the condensed interim consolidated statements of profit and loss.
Wechain, which was incorporated on September 16, 2020, was acquired to operate the Weiliangou (BBC) platform which will develop analytics and AI software used by banks and financial institutions in China. During the period leading upto its acquisition by ASDS, the company traded and incurred pre-acquisition costs on behalf of the group totalling $216,421 which were initally capitalised and formed part of it acquisition balance sheet. On consolidation of Wechain these expenses have been written off as pre-acquisition expenses to the condensed interim consolidated statements of profit and loss.
PEAK FINTECH GROUP INC. | 9 |
Notes to Condensed Interim Consolidated Financial Statements |
|
For the three and nine-month periods ended September 30, 2021 and 2020 (In Canadian dollars) |
|
4 - BUSINESS COMBINATIONS (CONTINUED)
The acquisitions of Huike and Wechain were determined to constitute business combinations and, accordingly, the acquisitions have been accounted for using the acquisition method of accounting.
As at September 1, 2021, the fair value of consideration paid/payable and that of the identifiable assets acquired were as follows:
Huike | Wechain | |||||
Fair value of consideration transferred | $ | $ | ||||
Cash consideration paid | - | - | ||||
Identifiable net assets acquired | ||||||
Cash | 185,830 | 308,867 | ||||
Pre-acquisition costs | 749,143 | 216,421 | ||||
Other current assets | 257,011 | 384 | ||||
Property and equipment | 1,574 | 12,942 | ||||
Other non-current assets | - | 3,310 | ||||
Accounts payable and accrued liabilities | (1,193,558 | ) | (541,924 | ) | ||
Identifiable total net assets | - | - | ||||
Goodwill on acquisition | - | - | ||||
- | - |
4.2 Acquisition from Huayan Kun Tai Technology Company Ltd
On September 1, 2021, Peak, acquired certain assets and personnel from Huayan Kun Tai Technology Company Ltd ("Huayan") (the "Heartbeat Acquisition"). Huayan, primarily through its Heartbeat insurance product management and brokerage platform, provides various SaaS (software as a service) solutions to insurers and insurance brokers in China. The transfer included all of Huayan's assets, including the Heartbeat platform, its employees and its operations. The assets acquired comprise intangible assets consisting primarily of the Heartbeat platform.
The purchase price for the Heartbeat Acquisition totals $31,000,000 split between upfront consideration totalling $17,000,000, comprising cash of $11,000,000 and the issuance of 600,000 common shares of the company valued at $10 per share ($6,000,000). A further two share instalments with a maximum combined value of $14,000,000 are payable as at the company's 2022 and 2023 fiscal year ends, if certain financial performance metrics related to net profit target of Heartbeat business are achieved during the first 28 months of operations. The total fair value of the consideration payable was estimated at $26,865,110.
As at September 30, 2021, due to administrative delay, cash payments totalling $4,459,350 relating to this transaction remained unpaid and the 600,000 shares had not yet been issued. These were included in the accounts payable, advances and accrued liabilities and in shares to be issued in the condensed interim consolidated statements of financial position and changes in equity. The amounts were settled on November 9, 2021 and October 5, 2021 respectively.
The fair value of the Heartbeat asset acquired was estimated at $29,524,851 based on management's financial projections for the Heatbeat assets over the first 28 months of operations. The Company used probability-weighted estimates, assumptions about certain financial performance metrics and an appropriate discount rate to estimate the net present value of projected cashflows. The intangible assets acquired under the agreement have been identified as the Heartbeat insurance product management and brokerage platform. This will be amortized on a straight-line basis with a useful life of 10 years.
PEAK FINTECH GROUP INC. | 10 |
Notes to Condensed Interim Consolidated Financial Statements |
|
For the three and nine-month periods ended September 30, 2021 and 2020 (In Canadian dollars) |
|
The Heartbeat Acquisition was determined to constitute a business combination and, accordingly, the acquisition has been accounted for using the acquisition method of accounting.
Fair value of consideration transferred | $ | ||
Consideration paid | |||
Cash | 11,000,000 | ||
Issuance of 600,000 shares of the Company at $10 / share | 6,000,000 | ||
Total consideration due for payment as at September 30, 2021 | 17,000,000 | ||
Contingent consideration payable | |||
Issuance of shares of the Company on December 31, 2022 - up to $8,000,000 in value | 6,109,357 | ||
Issuance of shares of the Company on December 31, 2023 - up to $6,000,000 in value | 3,755,753 | ||
Total estimated contingent consideration payable at September 1, 2021 | 9,865,110 | ||
Total consideration (paid and contingent consideration) | 26,865,110 | ||
Gain on bargain purchase to profit and loss | 1,910,598 | ||
28,775,708 | |||
Identifiable net assets acquired | |||
Intangible assets - Heartbeat platform | 29,524,851 | ||
Pre-acquisition costs written off (Huike) (refer 4.1) | (749,143 | ) | |
Identifiable total net assets | 28,775,708 | ||
Goodwill on acquisition | - | ||
28,775,708 |
At the acquisition date, the Company recognized a gain on bargain purchase of $1,910,598, being the difference between the fair value of the identifiable assets acquired, net of the pre-acquisition expenses incurred by Huike (refer to 4.1), and the estimated fair value of the consideration paid and payable.
At each balance date, the Company will revise its estimation of the fair value of the contingent consideration payable and record an accretion entry accordingly. The re-evaluation process will take into account the historical performance of the operations of Huike and Heatbeat platform compared to agreed targets and discount the resultant estimate of the value of share instalments payable. As at September 30, 2021, the value of contingent consideration payable was estimated as $10,036,542 and consequently an amount of $171,432 was recorded as an expense in the condensed interim consolidated statements of comprehensive profit and loss with a credit recorded in the condensed interim consolidated statement of financial position as contingent consideration payable.
4.3 Acquisition from Wuxi Wenyi Financial Services Co.
On January 1, 2019, the Company, through its subsidiary called Asia Synergy Credit Solutions ("ASCS"), transferred certain assets and personnel from Wuxi Wenyi Financial Services Co. Wenyi offers turn-key credit outsourcing services to banks and other lending institutions in China. The asset transfer was made to enhance the Company position in the commercial lending market in China. The assets acquired were intangible assets consisting of loan-servicing agreements. The assets acquired were determined to constitute a business combination and, accordingly, the acquisition was 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 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.
As at September 30, 2020, the 18 month perfomance 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 totalled 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 (511,169 post consolidation shares at $0,79 per share totalling $403,610). As at September 30, 2021, the consideration remaining payable under the agreement totalled $Nil (December 31, 2020 - $403,610).
PEAK FINTECH GROUP INC. | 11 |
Notes to Condensed Interim Consolidated Financial Statements |
|
For the three and nine-month periods ended September 30, 2021 and 2020 (In Canadian dollars) |
|
5 - LOANS RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES
One of the Company's subsidiaries in China, named Asia Synergy Financial Capital ("ASFC"), provides various financial services to small and medium size enterprises and entrepreneurs.
The Company provides loans that are either guaranteed by a third party and/or collateral assets. The loans secured with collateral are either secured by second-hand vehicles or by the residential property of the borrower. Loans that are not guaranteed by collateral assets are insured by a third party.
Loans guaranteed by second-hand vehicles.
The second-hand vehicles are valued by the company 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 76% as at September 30, 2021 (78% as at December 31, 2020). The Second-hand vehicles collateral value is evaluated at the beginning of the loan and periodically during the life of the loan, based on an industry recognized used car guide which has been validated by company personnel, their knowledge, experience and the inspection process before approval of the loan.
Loans guaranteed by second rank mortgage on residential property
Before approving a loan, the Company'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 the Company 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
The Company makes loans to small and medium enterprises in the technology sector. Before approving a loan, the Company performs an initial 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 rating. Based on the result of this initial evaluation, the Company will then proceed to sign a loan agreement with the SMEs borrowers. To mitigate the default risk in the case of any overdue situation incurred re these credit loans, a letter of guarantee must also be signed before the loan is finally granted to SMEs borrowers. Accordingly, a 3rd party must accept to provide a full guarantee to cover any overdue principal and interest on behalf of the borrowers. The company will also perform on-going monitoring of SMEs borrowers in the tech industry through visits, phone calls and follow-up on business models development.
For the majority of loans granted, principal and interest are payable by the borrower on a monthly basis.
Loans receivables are described as follows :
2021-09-30 | 2020-12-31 | |||||
$ | $ | |||||
Principal balance loans receivables | 20,821,947 | 20,009,105 | ||||
Less expected credit loss (ECL) | (532,762 | ) | (584,417 | ) | ||
Loan receivables net | 20,289,185 | 19,424,688 | ||||
Loans receivables maturing in less than 12 months | 16,270,100 | 15,425,242 | ||||
Loans receivables maturing in more than 12 months | 4,019,085 | 3,999,446 | ||||
Total loans | 20,289,185 | 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 September 30, 2021 and December 31, 2020 , according to credit quality and ECL impairment stages.
PEAK FINTECH GROUP INC. | 12 |
Notes to Condensed Interim Consolidated Financial Statements |
|
For the three and nine-month periods ended September 30, 2021 and 2020 (In Canadian dollars) |
|
5 - LOANS RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES (CONTINUED)
ECL is calculated on loan value at the period end that are not insured by a third party with an assumption of a credit loss allocation provision applied as follows:
|
|
| Credit loss |
|
| Credit loss | allocation |
|
| allocation | applied - |
| Provision % | applied - Auto | Residential |
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 | ||||||||
September 30, 2021 | % | amount | credit loss | Amount | ||||||
$ | $ | $ | ||||||||
Stage 1 Not overdue <= 30 Days | 83.6% | 17,408,384 | (249,110 | ) | 17,159,274 | |||||
Stage 2 Overdue 30-90 days | 0.2% | 35,010 | - | 35,010 | ||||||
Stage 3 Overdue> 90 days | 16.2% | 3,378,553 | (283,652 | ) | 3,094,901 | |||||
Total | 100.0% | 20,821,947 | (532,762 | ) | 20,289,185 |
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 September 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 September 30, 2021 | 34 | - | 275,535 | 275,569 |
PEAK FINTECH GROUP INC. | 13 |
Notes to Condensed Interim Consolidated Financial Statements |
|
For the three and nine-month periods ended September 30, 2021 and 2020 (In Canadian dollars) |
|
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, 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 September 30, 2021 | 437 | - | 9,397 | 9,834 |
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 September 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. | 14 |
Notes to Condensed Interim Consolidated Financial Statements |
|
For the three and nine-month periods ended September 30, 2021 and 2020 (In Canadian dollars) |
|
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
2021-09-30 | 2020-12-31 | |||||
$ | $ | |||||
Sales tax receivable | 286,568 | 21,011 | ||||
Advances to a company | - | 17,139 | ||||
Deposit for acquisition (1) | 294,976 | - | ||||
Deposits made for transactions on platforms with guarantee (2) | 9,660,848 | - | ||||
Deposits made for transactions on platforms (3) | 1,487,350 | - | ||||
Accounts receivable | 11,461,033 | 28,834,941 | ||||
Safety deposits with guarantor (4) | 717,160 | 692,766 | ||||
Service deposits (5) | - | 974,500 | ||||
Subscriptions receivable from non-controlling interests | 283,912 | - | ||||
Other subscriptions receivable | 79,985 | 35,000 | ||||
Prepayments to third party subcontractors (6) | 11,595,993 | - | ||||
35,867,825 | 30,575,357 |
(1) As per agreements signed with potential shares or asset acquisition by two subsidiaries of the Company. These acquisitions or asset purchase transactions aim to be closed during the fourth quarter of 2021.
(2) As per agreements signed with third parties, subsidiaries of the Company have provided deposits in order to facilitate capital support from financial instutions such as banks and lenders in mainland China. As collateral, the Company kept 10 to 15% of the merchandise in guarantee.
(3) As per agreements signed with third parties, subsidiaries of the Company have provided deposits in order to facilitate capital support from financial instutions such as banks and lenders in mainland China.
PEAK FINTECH GROUP INC. | 15 |
Notes to Condensed Interim Consolidated Financial Statements |
|
For the three and nine-month periods ended September 30, 2021 and 2020 (In Canadian dollars) |
|
6 - DEBTORS (CONTINUED)
(4) As per an agreement with a loan insurance provider, ASCS, a subsidiary of the Company, agreed to maintain a deposit with the loan insurance provider, representing 10% of the value of loans serviced by ASCS, on behalf of certain commercial bank guarantees by loan insurer 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 the loan insurance provider on behalf of ASCS in exchange for a service fee representing a percentage of the amount of the safety deposit provided. The agreement indicates that in case of default by the borrowers, ASCS will retrieve all the rights to realize the collateral.
(5) As per an agreement signed with a third party, ASDS, a subsidiary of the company, has provided deposits which were used to help to get capital support from financial institutions such as banks and lenders in mainland China. The deposits are returnable to ASDS on the termination of the agreement. In exchange, ASDS is entitled to charge a 2% referral fee upon each transaction of truck financial leasing recorded by the hauling company platform of Xi'an Xinruifeng. ASDS retains all rights to the recovery of the $Nil.(December 31, 2020 - $974,500) deposit per the agreement signed.
(6) Subsidiaries of the Company active in supply chain activity made prepayments to suppliers to support operational supply chain processes. These prepayment will be reverted to Company's subsidiaries when services or merchandise transactions are executed.
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 September 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 | 771,642 | 42,997 | - | 814,639 | ||||||||
Disposals | - | - | (13,790 | ) | (13,790 | ) | ||||||
Balance as at September 30, 2021 | 1,908,127 | 165,333 | 191,568 | 2,265,028 | ||||||||
Accumulated amortization | ||||||||||||
Balance as at January 1, 2021 | 800,066 | 70,352 | 64,389 | 934,807 | ||||||||
Amortization | 219,348 | 31,725 | 34,653 | 285,725 | ||||||||
Disposals | - | - | (7,642 | ) | (7,642 | ) | ||||||
Exchange differences | 55,819 | (560 | ) | (248 | ) | 55,011 | ||||||
Balance as at September 30, 2021 | 1,075,232 | 101,516 | 91,152 | 1,267,901 | ||||||||
Net carrying amount as at September 30, 2021 | 832,895 | 63,817 | 100,416 | 997,127 | ||||||||
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. | 16 |
Notes to Condensed Interim Consolidated Financial Statements |
|
For the three and nine-month periods ended September 30, 2021 and 2020 (In Canadian dollars) |
|
8 - INTANGIBLE ASSETS
Loan servicing | |||||||||||||||
servicing | Cubeler | ||||||||||||||
Heartbeat | 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 | 29,524,851 | - | - | 2,879,511 | 32,404,362 | ||||||||||
Reversal of impairment loss | - | - | 193,717 | - | 193,717 | ||||||||||
Balance as at September 30, 2021 | 29,524,851 | 1,430,000 | 2,655,065 | 5,292,570 | 38,902,486 | ||||||||||
Accumulated amortization | |||||||||||||||
Balance as at January 1, 2021 | - | 286,000 | 2,461,348 | 393,182 | 3,140,530 | ||||||||||
Amortization | 258,333 | 107,250 | 9,686 | 309,994 | 685,263 | ||||||||||
Exchange differences | - | - | - | (13,231 | ) | (13,231 | ) | ||||||||
Balance as at September 30, 2021 | 258,333 | 393,250 | 2,471,034 | 689,945 | 3,812,562 | ||||||||||
Net carrying amount as at September 30, 2021 | 29,266,518 | 1,036,750 | 184,031 | 4,602,624 | 35,089,924 | ||||||||||
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
2021-09-30 | 2020-12-31 | |||||
$ | $ | |||||
Trade accounts payable and accruals | 10,020,692 | 22,717,164 | ||||
Advance from third party, annual interest 10% | 395,970 | 1,391,001 | ||||
Advance from a director, no interest (note 17) | - | 270,911 | ||||
Advance from third party customers, no interest | 3,954,626 | 2,140,217 | ||||
Advance from an affiliated company (notes 6 and 17) | - | 40,134 | ||||
14,371,288 | 26,559,427 |
10 - LEASE LIABILITIES
2021-09-30 | 2020-12-31 | |||||
$ | $ | |||||
Balance - beginning of year | 239,506 | 452,528 | ||||
Additions | 719,235 | 239,032 | ||||
Accretion interest | 41,018 | 30,426 | ||||
Lease payments | (271,223 | ) | (517,171 | ) | ||
Effect of exchange rate change on obligation | 21,784 | 34,691 | ||||
Balance - end of period | 750,320 | 239,506 | ||||
Current Portion | 168,037 | 117,709 | ||||
582,283 | 121,797 |
PEAK FINTECH GROUP INC. | 17 |
Notes to Condensed Interim Consolidated Financial Statements |
|
For the three and nine-month periods ended September 30, 2021 and 2020 (In Canadian dollars) |
|
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 September 30, 2021 | ||||||||||||
Lease payments | 492,670 | 911,344 | 795,860 | 2,199,874 | ||||||||
As at December 31, 2020 | ||||||||||||
Lease payments | 116,864 | 241,844 | - | 358,708 |
11 - DEBENTURES
The carrying value of debentures as at September 30, 2021 and December 31, 2020, were as follows:
2021-09-30 | 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 nine-month period ended September 30, 2021, Nil (nine-month period ended September 30, 2020 - 500,000) warrants were exercised at a price of $1.00 per share following surrendering of debentures for a total face value of $ Nil (nine-month period ended September 30, 2020 - $500,000) (note 13.3 (c)).
11 b) Debenture issuance of April 24, 2019
The movement during the nine-month period ended September 30, 2021 and the year ended December 31, 2020, relating to this debenture can be summarised as follows:
2021-09-30 | 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 nine-month period ended September 30, 2021, $25,000 (nine-month period ended September 30, 2020, $Nil) face value of debentures were converted to 25,000 (nine-month period ended September 30, 2020 - Nil) common shares of the Company at a price of $1.00 per share.
12 - BONDS
On May 29, 2020, the Company has placed 400 units of secured corporate bonds at $1,000 per unit. Each unit sold was comprised of $1,000 face value bonds, redeemable on June 10, 2023, bearing interest at a nominal rate of 10% payable monthly, plus 20 purchase warrants exercisable into Company common share at $1.00 per share for a period of 36 months from the date of issuance.
The Bonds will be redeemable after 36 months from the date of issuance (the "Initial Maturity Date"). Each holder has a right (the "Initial Extension Right") at the end of the Initial Maturity Date to extend the Bond for another 12 months (the "Initial Extension Period") by giving written notice to that effect to the Company no later than sixty (60) days prior to the Initial Maturity Date. Any holder that has elected to exercise its Initial Extension Right will also have a further right at the end of the Initial Extension Period to extend its Bond for another 12 months (the "Second Extension Period") under the same notice conditions as stated in the Initial Extension.
PEAK FINTECH GROUP INC. | 18 |
Notes to Condensed Interim Consolidated Financial Statements |
|
For the three and nine-month periods ended September 30, 2021 and 2020 (In Canadian dollars) |
|
12 - BONDS (CONTINUED)
If a holder elects to extend its Bonds, the Company may redeem such holder's Bonds at any time on payment of a 5% premium to redeem the Bonds ("Penalty").
The Company has set aside an amount equal to two years of interest in a separate bank account, which will be used to pay interest payable on the Bonds. Any interest accrued on such sum will be in favour of the Company. The set aside amount at September 9, 2021, is $63,333 and is presented under Restricted Cash in the Consolidated statements Financial Position.
Bonds are secured by a pledge on the aggregate assets of the Company, maturing on May 29, 2023. The Company used the residual value method to allocate the principal amount of the bond between the liability and the contributed surplus. Under this method, an amount of $64,896 (net of transaction costs) related to the warrants issued was applied to the contributed surplus. The fair value of the liability component was $227,569 computed as the present value of future principal and interest payments discounted at a rate of 22%.
The fair value of the warrants of $614 was calculated using the Black & Scholes option pricing model and the following weighted average assumptions:
Share price at the date of grant | $0.30 |
Expected life | 3 years |
Risk-free interest rate | 0.29% |
Expected volatility (1) | 83.12% |
Dividend | 0% |
Exercise price at the date of grant | $1.00 |
The Company also granted 57,000 compensation warrants to eligible persons who helped place the bonds units entitling them to purchase a number of Peak common shares equal to 8,0% of the value of debentures they help place, at a price of $0.50 per common share for a thirty-six-month period following the closing date.
The fair value of the compensation warrants of $6,995 was calculated using the Black & Scholes option pricing model and the following weighted average assumptions and was presented as issuance cost of the bonds:
Share price at the date of grant | $0.30 |
Expected life | 3 years |
Risk-free interest rate | 0.29% |
Expected volatility (1) | 83.12% |
Dividend | 0% |
Exercise price at the date of grant | $0.50 |
The movement during the nine-months ended September 30, 2021 and the year ended December 31, 2020, relating this bond can be summarised as follows:
2021-09-30 | 2020-12-31 | |||||
$ | $ | |||||
Balance at the beginning | 258,933 | - | ||||
Addition | - | 400,000 | ||||
Accretion of bonds | 19,918 | 13,789 | ||||
Amortisation of initial costs | 20,175 | 17,575 | ||||
Contributed surplus for warrants | - | (64,896 | ) | |||
Issuance costs | - | (107,535 | ) | |||
Balance at the end | 299,026 | 258,933 |
13 - SHAREHOLDERS' EQUITY
13.1 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. | 19 |
Notes to Condensed Interim Consolidated Financial Statements |
|
For the three and nine-month periods ended September 30, 2021 and 2020 (In Canadian dollars) |
|
13 - SHAREHOLDERS' EQUITY (CONTINUED)
Effective July 27, 2021, the Company consolidated its issued and outstanding common shares on the basis of one post-consolidation share for 2 pre-consolidation shares. Unless otherwise stated, all share amounts have been restated retrospectively to reflect this share consolidation.
13.2 Description of the shareholders' equity operations during the nine-month period ended September 30, 2021
a) During the nine-month period ended September 30, 2021, $25,000 of secured debentures with a conversion price of $1.00 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 25,000 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 nine-month period ended September 30, 2021, the Company issued 16,676 common shares at an average price of $3.05 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 condensed interim consolidated statements of comprehensive profit and loss, $35,850 was recorded against accounts payable and accruals in the condensed interim consolidated statements of financial position.
c) During the nine-month period ended September 30, 2021, the Company issued 7,157,732 common shares at an average exercise price of $0.84 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 consolidated statements of changes in equity (note 13.4).
d) During the nine-month period ended September 30, 2021, the Company issued 82,500 common shares at an average exercise price of $1.00 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 consolidated statements of changes in equity (note 14).
e) On April 8, 2021 the Company issued the final tranche of 511,169 common shares at $0.79 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 consolidated statement of changes in equity.
f) On July 7, 2021, the Company closed a short-form prospectus financing consisting of the sale of 13,149,999 units (a "Unit") at a price of $4,00 per Unit for poceeds of $52,600,000 (net proceeds of $46,105,695 after related expenses). Each unit consists of one (1) common share and half (0.5) common share purchase warrant. Each warrant entitles the holder to purchase one (1) share of the Company at the price of $7.00 each for a period of twenty-four (24) months from the date of issuance.
The fair value of the 6,575,000 warrants was $13,397,109. The value attributed to contributed surplus was $10,677,558. 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 | $3.90 |
Expected life | 2 years |
Risk-free interest rate | 0.48% |
Expected volatility (1) | 126.75% |
Dividend | 0% |
Exercise price at the date of grant | $7.00 |
Peak also granted 920,500 compensation warrants to eligible persons who helped place the private placements entitling them to purchase a number of Peak common shares at a price of $7.00 per common share for a twenty-four-month period from the issuance.
PEAK FINTECH GROUP INC. | 20 |
Notes to Condensed Interim Consolidated Financial Statements |
|
For the three and nine-month periods ended September 30, 2021 and 2020 (In Canadian dollars) |
|
13 - SHAREHOLDERS' EQUITY (CONTINUED)
The fair value of the 920,500 compensation warrants was $1,875,595 which was recorded in share issue costs and have been disclosed as a reduction in share capital in the interim condensed consolidated statements of changes in equity with the credit recorded in contributed surplus. The fair value of the warrants was calculated using the Black & Scholes option pricing models and the following weighted average assumptions:
Share prices at the date of grant | $3.90 |
Expected life | 2 years |
Risk-free interest rate | 0.48% |
Expected volatility (1) | 126.75% |
Dividend | 0% |
Exercise price at the date of grant | $7.00 |
In connection with the shot-form prospectus financing, the Company incurred share issue costs totalling $6,247,135 which have been disclosed as a reduction in share capital in the interim condensed consolidated statements of changes in equity.
13.3 Description of the shareholders' equity operations during the nine-month period ended September 30, 2020
a) On February 3, 2020, the Company closed a private placement consisting of the sale of 720,000 units (a ''Unit'') at a price of $0.80 per Unit for proceeds of $576,000. Each unit consists of one (1) common share and half (0.5) common share purchase warrant. Each warrant entitles the holder to purchase one (1) share of the Company at the price of $2.00 each for a period of twenty-four (24) months from the date of issuance.
The fair value of the 360,000 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 | $0.90 |
Expected life | 2 years |
Risk-free interest rate | 1.42% |
Expected volatility (1) | 128% |
Dividend | 0% |
Exercise price at the date of grant | $2.00 |
b) On April 4, 2020, the Company closed a private placement consisting in the sale of 150,000 shares at a price of $0.50 per shares for gross proceeds of $75,000.
c) During the nine-month period ended September 30, 2020, $500,000 of secured debentures were surrendered to exercise share purchase warrants at a price of $1.00 per share pursuant to the private placement closed in December 2017. At the date of conversion, these debentures had a amortized cost totalling $436,402. The Company therefore issued 500,000 common shares at a price of $0.87 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. | 21 |
Notes to Condensed Interim Consolidated Financial Statements |
|
For the three and nine-month periods ended September 30, 2021 and 2020 (In Canadian dollars) |
|
13 - SHAREHOLDERS' EQUITY (CONTINUED)
13.4 Warrants
The outstanding options as at September 30, 2021 and December 30, 2020 and the respective changes during the nine-month periods then ended, are summarized as follows:
2021-09-30 | 2020-12-31 | |||||||||||
Weighted | Weighted | |||||||||||
Number of | average | Number of | average | |||||||||
warrants | exercise price | warrants | exercise price | |||||||||
$ | $ | |||||||||||
Outstanding, beginning of period | 14,662,750 | 0.966 | 9,534,750 | 1.220 | ||||||||
Granted | 14,990,999 | 3.500 | 13,465,000 | 0.656 | ||||||||
Expired | - | - | (715,000 | ) | 1.000 | |||||||
Extended | - | - | 570,000 | 1.000 | ||||||||
Exercised (1) | (9,472,245 | ) | 1.032 | (8,192,000 | ) | 0.780 | ||||||
Outstanding and exercisable, end of period | 20,181,504 | 14,662,750 | 0.966 |
(1) As at December 31, 2020, 60,000 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.
As of September 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:
2021-09-30 | 2020-12-31 | |||||||||||
Number | Exercise price | Number | Exercise price | |||||||||
$ | $ | |||||||||||
Expiration date | ||||||||||||
February 2021 | - | 1.000 | 500,000 | 1.00 | ||||||||
April 2021 | - | 1.000 | 3,750 | 1.00 | ||||||||
April 2021 | - | 1.000 | 185,000 | 1.00 | ||||||||
July 2021 | 10,000 | 1.600 | 50,000 | 1.60 | ||||||||
September 2021 | 5,000 | 0.800 | 305,000 | 0.80 | ||||||||
October 2021 | - | 0.800 | 50,000 | 0.80 | ||||||||
October 2021 | 125,000 | 1.500 | 125,000 | 1.50 | ||||||||
December 2021 | 1,930,000 | 1.600 | 3,300,000 | 1.60 | ||||||||
January 2022 | - | 1.600 | 150,000 | 1.60 | ||||||||
February 2022 | 360,000 | 2.000 | 360,000 | 2.00 | ||||||||
September 2022 | - | 1.000 | 193,334 | 1.00 | ||||||||
September 2022 | - | 1.140 | 290,000 | 1.14 | ||||||||
September 2022 | - | 1.220 | 166,667 | 1.22 | ||||||||
September 2022 | - | 2.400 | 700,000 | 2.40 | ||||||||
July 2022 | 647,500 | 0.500 | 1,195,000 | 0.50 | ||||||||
August 2022 | 1,415,190 | 0.500 | 5,167,000 | 0.50 | ||||||||
October 2022 | 950,000 | 0.800 | 1,150,000 | 0.80 | ||||||||
October 2022 | 250,000 | 1.500 | 250,000 | 1.50 | ||||||||
November 2022 | - | 1.500 | 500,000 | 1.50 | ||||||||
May 2023 | 13,328 | 1.000 | 18,000 | 1.00 | ||||||||
May 2023 | 3,500 | 2.000 | 4,000 | 2.00 | ||||||||
July 7, 2023 | 12,870,149 | 3.500 | - | - | ||||||||
July 7, 2023 | 1,601,837 | 3.500 | - | - | ||||||||
20,181,504 | 14,662,750 |
PEAK FINTECH GROUP INC. | 22 |
Notes to Condensed Interim Consolidated Financial Statements |
|
For the three and nine-month periods ended September 30, 2021 and 2020 (In Canadian dollars) |
|
14 - SHARE-BASED PAYMENTS
The Company has adopted an incentive stock option plan which provides that the Board of Directors of the Company may, from time to time, at its discretion and in accordance with the Exchange regulations, grant to directors, officers, employees and others providing similar services to the Company, non-transferable options to purchase common shares, provided that the number of common shares reserved for issuance will not exceed 10% of the issued and outstanding common shares exercisable for a period of up to 5 years from the date of grant. The options reserved for issuance to any individual director, officer or employee will not exceed 5% of the issued and outstanding common shares and the number of common shares reserved for issuance to others providing services will not exceed 2% of the issued and outstanding common shares. Options may be exercised as of the grant date for a period determined by the Board, but shall not be greater than 5 years from the date of the grant and 90 days following cessation of the optionee's position with the Company. Provided that the cessation of office, directorships or employment or other similar service arrangement was by reason of death (in the case of an individual), the option may be exercised within a maximum period of one year after such death, subject to the expiry date of such option.
The outstanding options as at September 30, 2021 and December 31, 2020 and the respective changes during the nine-month periods then ended, are summarized as follows:
2021-09-30 | 2020-12-31 | |||||||||||
Weighted | Weighted | |||||||||||
Number of | average | Number of | average | |||||||||
options | exercise price | options | exercise price | |||||||||
$ | $ | |||||||||||
Outstanding, beginning of period | 4,351,750 | 1.336 | 2,551,250 | 1.360 | ||||||||
Granted | 920,000 | 4.256 | 2,280,500 | 1.247 | ||||||||
Expired | - | - | (190,000 | ) | 1.000 | |||||||
Forfeited | - | - | (28,750 | ) | 1.000 | |||||||
Exercised | (607,500 | ) | 1.605 | (261,250 | ) | 1.000 | ||||||
Outstanding end of period | 4,664,250 | 1.878 | 4,351,750 | 1.336 | ||||||||
Exercisable end of period | 1,205,050 | 1.359 | 1,891,000 | 1.480 |
The table below summarizes the information related to outstanding share options as at September 30, 2021.
Range of | Number of | Weighted average remaining | |||||||
Maturity date | exercise price | options | contractual life (years) | ||||||
$ | |||||||||
June 1, 2022 | 2.100 | 390,000 | 8 months | ||||||
November 27, 2022 | 1.100 | 18,750 | 1 year and 1 month | ||||||
December 15, 2022 | 1.600 | 171,250 | 1 year and 2 months | ||||||
April 16, 2023 | 1.000 | 5,000 | 1 year and 6 months | ||||||
June 5, 2023 | 1.000 | 288,750 | 1 year and 8 months | ||||||
November 28, 2023 | 1.000 | 37,500 | 2 years and 1 months | ||||||
May 1, 2024 | 1.000 | 50,000 | 2 years and 7 months | ||||||
May 27, 2024 | 1.000 | 447,500 | 2 years and 7 months | ||||||
September 5, 2024 | 1.000 | 10,000 | 2 years and 11 months | ||||||
November 1, 2024 | 1.100 | 50,000 | 3 years and 1 month | ||||||
November 12, 2024 | 1.000 | 5,000 | 3 years and 1 month | ||||||
June 11, 2025 | 1.000 | 745,500 | 3 years and 8 months | ||||||
August 7, 2025 | 0.450 | 250,000 | 3 years and 10 months | ||||||
October 28, 2025 | 1.500 | 1,225,000 | 4 years and 0 months | ||||||
November 6, 2025 | 2.700 | 50,000 | 4 years and 1 month | ||||||
January 28, 2026 | 5.700 | 25,000 | 4 years and 3 months | ||||||
March 22, 2026 | 5.500 | 55,000 | 4 years and 5 months | ||||||
May 13, 2026 | 4.800 | 10,000 | 4 years and 7 months | ||||||
July 7, 2026 | 4.100 | 825,000 | 4 years and 9 months | ||||||
August 10, 2026 | 8.000 | 5,000 | 4 years and 10 months | ||||||
4,664,250 |
PEAK FINTECH GROUP INC. | 23 |
Notes to Condensed Interim Consolidated Financial Statements |
|
For the three and nine-month periods ended September 30, 2021 and 2020 (In Canadian dollars) |
|
14 - SHARE-BASED PAYMENTS (CONTINUED)
The table below summarizes the information related to outstanding share options as at December 31, 2020.
Range of | Number of | Weighted average remaining | |||||||
Maturity date | exercise price | options | contractual life (years) | ||||||
$ | |||||||||
May 25, 2021 | 1.000 | 7,500 | 5 months | ||||||
July 8, 2021 | 1.700 | 525,000 | 7 months | ||||||
September 1, 2022 | 2.100 | 390,000 | 1 years and 6 months | ||||||
November 27, 2022 | 1.100 | 18,750 | 1 year and 11 months | ||||||
December 15, 2022 | 1.600 | 171,250 | 2 years | ||||||
April 16, 2023 | 1.000 | 5,000 | 2 years and 4 months | ||||||
September 5, 2020 | 1.000 | 363,750 | 2 years and 6 months | ||||||
November 28, 2023 | 1.000 | 37,500 | 2 years and 11 months | ||||||
May 27, 2024 | 1.000 | 497,500 | 3 years and 5 months | ||||||
September 5, 2024 | 1.000 | 10,000 | 3 years and 9 months | ||||||
November 1, 2024 | 1.100 | 50,000 | 3 years and 11 months | ||||||
November 12, 2024 | 1.000 | 5,000 | 3 years and 11 months | ||||||
September 11, 2025 | 1.000 | 745,500 | 4 years and 6 months | ||||||
August 7, 2025 | 0.450 | 250,000 | 4 years and 8 months | ||||||
October 28, 2025 | 1.500 | 1,225,000 | 4 years and 10 months | ||||||
06 November 2025 | 2.700 | 50,000 | 4 years and 11 months | ||||||
4,351,750 |
During the three and nine-month periods ended September 30, 2021 the Company recorded an expense of $815,801 and $1,557,006 respectively related to share-based payments (periods ended September 30, 2020 - $112,920 and $260,412). The offset was credited to contributed surplus.
14.1
Share-based payments granted to directors and employees during the nine-month period ended September 30, 2021
a) On January 28, 2021 the Company granted options to acquire 25,000 common shares of the Company at an average exercise price of $5.70 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 | $5.32 |
Expected life | 5 years |
Risk-free interest rate | 0.46% |
Volatility (1) | 111% |
Dividend | 0% |
Exercise price at the date of grant | $5.70 |
PEAK FINTECH GROUP INC. | 24 |
Notes to Condensed Interim Consolidated Financial Statements |
|
For the three and nine-month periods ended September 30, 2021 and 2020 (In Canadian dollars) |
|
14 - SHARE-BASED PAYMENTS (CONTINUED)
b) On May 13, 2021, the Company granted 10,000 options to new employees at an exercise price of $4.80 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 | $4.40 |
Expected life | 5 years |
Risk-free interest rate | 0.95% |
Volatility (1) | 108% |
Dividend | 0% |
Exercise price at the date of grant | $4.80 |
(1) The volatility was determined by using the Company's own historical volatility over a period corresponding to expected life of the share options.
c) On July 7, 2021, the Company granted 825,000 options to certain diectors, officers and key employees at an exercise price of $4.10 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 July 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 $2,424,249, was calculated using the Black & Scholes option pricing model using the following assumptions:
Share price at the date of grant | $3.90 |
Expected life | 5 years |
Risk-free interest rate | 0.93% |
Volatility (1) | 103.74% |
Dividend | 0% |
Exercise price at the date of grant | $4.10 |
d) On August 10, 2021, the Company granted 5,000 options to a new employee at an exercise price of $8.00 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 August 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 $28,459, was calculated using the Black & Scholes option pricing model using the following assumptions:
Share price at the date of grant | $7.57 |
Expected life | 5 years |
Risk-free interest rate | 0.41% |
Volatility (1) | 104.24% |
Dividend | 0% |
Exercise price at the date of grant | $8.00 |
(1) 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. | 25 |
Notes to Condensed Interim Consolidated Financial Statements |
|
For the three and nine-month periods ended September 30, 2021 and 2020 (In Canadian dollars) |
|
14.2 Options granted to consultants during the nine-month period ended September 30, 2021
a) On March 22, 2021 the Company granted options to acquire 55,000 common shares of the Company at an average exercise price of $5.50 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 | $5.48 |
Expected life | 5 years |
Risk-free interest rate | 0.92% |
Volatility (1) | 109% |
Dividend | 0% |
Exercise price at the date of grant | $5.50 |
(1) The volatility was determined by using the Company's own historical volatility over a period corresponding to expected life of the share options.
15 - 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 $104,177,576 ($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.
16 - FINANCIAL INSTRUMENTS
16.1 Classification of financial instruments
As at September 30, 2021 and December 31, 2020, the carrying amount of financial assets and financial liabilities were as follows:
2021-09-30 | |||||||||
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 | 36,398,828 | 36,398,828 | |||||||
Restricted Cash | 63,333 | 63,333 | |||||||
Debtors | 35,581,257 | 35,581,257 | |||||||
Loans receivable | 20,289,185 | 20,289,185 | |||||||
Deposits for investments | 492,500 | 492,500 | |||||||
- | 92,825,103 | 92,825,103 | |||||||
Financial liabilities | |||||||||
Financial liabilities measured at amortized cost | |||||||||
Accounts payable and accrued liabilities | 14,371,288 | 14,371,288 | |||||||
Bonds | 299,026 | 299,026 | |||||||
CEBA Loan | 40,000 | 40,000 | |||||||
- | 14,710,314 | 14,710,314 |
PEAK FINTECH GROUP INC. | 26 |
Notes to Condensed Interim Consolidated Financial Statements |
|
For the three and nine-month periods ended September 30, 2021 and 2020 (In Canadian dollars) |
|
16 - 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 |
16.2 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. | 27 |
Notes to Condensed Interim Consolidated Financial Statements |
|
For the three and nine-month periods ended September 30, 2021 and 2020 (In Canadian dollars) |
|
16 - FINANCIAL INSTRUMENTS (CONTINUED)
16.3 Financial risks
16.3.1 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:
2021-09-30 | |||||||||
Current | Long-term | ||||||||
Within | More | ||||||||
6 months | 6 to 12 months | than 12 months | |||||||
$ | $ | $ | |||||||
Accounts payable and accrued liabilities | 14,371,288 | - | - | ||||||
Bonds | - | - | 400,000 | ||||||
CEBA loan | 40,000 | - | - | ||||||
14,411,288 | - | 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 Nine-month period ended September 30, 2021 and 2020 is as follows:
16.4 Finance costs
2021-09-30 | 2020-09-30 | 2021-09-30 | 2020-09-30 | |||||||||
(restated) | (restated) | |||||||||||
(3 months) | (3 months) | (9 months) | (9 months) | |||||||||
Interest on debentures | - | 71,630 | 333 | 213,005 | ||||||||
Interest on lease liabilities (note 10) | 26,277 | 8,507 | 40,247 | 25,413 | ||||||||
Interest on security deposit and advances | 22,697 | 51,325 | 76,856 | 142,778 | ||||||||
Interest on bonds | 10,000 | 10,417 | 30,000 | 13,924 | ||||||||
Interest income | (26,343 | ) | (10,317 | ) | (36,949 | ) | (24,564 | ) | ||||
Accretion on debentures and bonds | 7,047 | 147,475 | 20,601 | 426,153 | ||||||||
Total interest expense | 39,678 | 279,037 | 131,088 | 796,709 | ||||||||
Miscellaneous | 1,928 | 1,547 | 6,286 | 4,225 | ||||||||
41,606 | 280,584 | 137,374 | 800,934 |
PEAK FINTECH GROUP INC. | 28 |
Notes to Condensed Interim Consolidated Financial Statements |
|
For the three and nine-month periods ended September 30, 2021 and 2020 (In Canadian dollars) |
|
16 - FINANCIAL INSTRUMENTS (CONTINUED)
16.5 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.
17 - 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 China CEO and the members of the Board. Their remuneration includes the following expenses:
2021-09-30 | 2020-09-30 | 2021-09-30 | 2020-09-30 | |||||||||
(restated) | (restated) | |||||||||||
(3 months) | (3 months) | (9 months) | (9 months) | |||||||||
$ | $ | $ | $ | |||||||||
Salaries and fringe benefits | 197,232 | 93,677 | 553,546 | 311,880 | ||||||||
Share-based payments | 747,880 | 94,311 | 1,391,300 | 203,866 | ||||||||
Royalty- Cubeler | 32,524 | 47,469 | 107,202 | 104,370 | ||||||||
Management fees paid to a company held by a director | - | - | - | 5,775 | ||||||||
Interest on debentures | - | 200 | - | 600 | ||||||||
Total | 977,636 | 235,657 | 2,052,048 | 626,491 |
PEAK FINTECH GROUP INC. | 29 |
Notes to Condensed Interim Consolidated Financial Statements |
|
For the three and nine-month periods ended September 30, 2021 and 2020 (In Canadian dollars) |
|
These transactions occurred in the normal course of operations and have been measured at fair value.
As at September 30, 2021, and December 31, 2020 the condensed interim consolidated statement of financial position includes the following amounts with related parties:
2021-09-30 | 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 | (206,955 | ) | (40,134 | ) | ||
(206,955 | ) | 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.
18 - 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.
18 - SEGMENT REPORTING
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. | 30 |
Notes to Condensed Interim Consolidated Financial Statements |
|
For the three and nine-month periods ended September 30, 2021 and 2020 (In Canadian dollars) |
|
18 - 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 nine-month periods ended September 30, 2021, and 2020 are as follows:
Nine months ended 2021-09-30 | |||||||||||||||
Fintech | Financial | Other | Elimination | Total | |||||||||||
Platform | Services | ||||||||||||||
$ | $ | $ | $ | ||||||||||||
Revenues (1) | |||||||||||||||
Financial service revenue from external | - | 1,835,609 | - | - | 1,835,609 | ||||||||||
Fees/sales from external customers | 3,022,671 | 827,237 | - | - | 3,849,908 | ||||||||||
Supply chain services | 64,730,021 | - | 168,988 | - | 64,899,009 | ||||||||||
Inter-segment | 669,460 | 119,034 | - | (788,494 | ) | - | |||||||||
Total revenues | 68,422,152 | 2,781,879 | 168,988 | (788,494 | ) | 70,584,525 | |||||||||
Expenses | |||||||||||||||
Depreciation and amortization | 475,874 | 189,470 | 15,386 | - | 680,729 | ||||||||||
Interest expense | 98,471 | 4,830 | (2,644 | ) | - | 100,657 | |||||||||
All other expenses | (475,874 | ) | (95,829 | ) | 67,909,637 | (788,494 | ) | 66,549,440 | |||||||
Total expenses | 98,471 | 98,471 | 67,922,378 | (788,494 | ) | 67,330,827 | |||||||||
Profit (loss) before tax | 68,323,680 | 2,683,408 | (67,753,390 | ) | - | 3,253,698 | |||||||||
Income tax | 1,359,718 | 456,969 | 4,356 | - | 1,821,043 | ||||||||||
Net profit (loss) | 66,963,963 | 2,226,439 | (67,757,747 | ) | - | 1,432,655 | |||||||||
Non-controlling interest | 364,311 | 497,000 | - | - | 861,311 | ||||||||||
Net profit (loss) attributable to owners of the parent | 66,599,652 | 1,729,439 | (67,757,747 | ) | - | 571,344 | |||||||||
Segmented assets | 37,622,440 | 24,588,687 | 19,368,327 | 49,162,711 | 130,742,165 |
PEAK FINTECH GROUP INC. | 31 |
Notes to Condensed Interim Consolidated Financial Statements |
|
For the three and nine-month periods ended September 30, 2021 and 2020 (In Canadian dollars) |
|
18 - SEGMENT REPORTING (CONTINUED)
Other (continued)
Nine months ended 2020-09-30 (restated) | |||||||||||||||
Fintech | Financial | Other | Elimination | Total | |||||||||||
Platform | Services | ||||||||||||||
$ | $ | $ | $ | ||||||||||||
Revenues (1) | |||||||||||||||
Financial service revenue from external | - | 2,452,592 | - | - | 2,452,592 | ||||||||||
Fees/sales from external customers | 2,130,883 | 717,082 | - | - | 2,847,965 | ||||||||||
Supply chain services | 21,028,711 | - | - | - | 21,028,711 | ||||||||||
Inter-segment | 414,382 | - | 247,705 | (662,087 | ) | - | |||||||||
Total revenues | 23,573,976 | 3,169,674 | 247,705 | (662,087 | ) | 26,329,268 | |||||||||
Expenses | |||||||||||||||
Depreciation and amortization | 144,815 | 395,340 | 107,209 | - | 647,364 | ||||||||||
Interest expenses | 111,660 | 34,502 | 640,849 | - | 787,011 | ||||||||||
Outsourcing expenses | 20,912,490 | - | - | - | 20,912,490 | ||||||||||
All other expenses | 618,901 | 2,267,307 | 3,569,893 | (662,087 | ) | 5,794,014 | |||||||||
Total expenses | 21,787,866 | 2,697,149 | 4,317,951 | (662,087 | ) | 28,140,879 | |||||||||
Profit (loss) before tax | 1,786,110 | 472,525 | (4,070,246 | ) | - | (1,811,611 | ) | ||||||||
Income tax (recovery) | 392,510 | 108,894 | - | - | 501,404 | ||||||||||
Net profit (loss) | 1,393,600 | 363,631 | (4,070,246 | ) | - | (2,313,015 | ) | ||||||||
Non-controlling interest | 490,609 | 124,470 | - | - | 615,079 | ||||||||||
Net profit (loss) attributable to owners of the parent | 902,991 | 239,161 | (4,070,246 | ) | - | (2,928,094 | ) | ||||||||
Segmented assets | 23,365,186 | 24,273,744 | 21,777,735 | (20,729,128 | ) | 48,687,537 |
(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:
2021-09-30 | 2020-12-31 | |||||
Non-current | Non-current | |||||
Assets | Assets | |||||
$ | $ | |||||
China | 38,875,670 | 6,548,695 | ||||
Canada | 1,036,750 | 1,144,000 | ||||
Total | 39,912,420 | 7,692,695 |
PEAK FINTECH GROUP INC. | 32 |
Notes to Condensed Interim Consolidated Financial Statements |
|
For the three and nine-month periods ended September 30, 2021 and 2020 (In Canadian dollars) |
|
19 - NON-CONTROLLING INTERESTS
The Company controls two subsidiaries that have significant non-controlling interests (NCIs).
2021-09-30 | 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% | ||||
Wechain (Nanjing) Technology Service Co., Ltd | 49% | - | ||||
Beijing Kailifeng New Energy Technology Co., Ltd | 49% | - |
Total comprehensive income | ||||||||||||
allocated to NCI | Accumulated NCI | |||||||||||
Nine-month | ||||||||||||
period ending | Year ending | As at | As at | |||||||||
2021-09-30 | 2020-12-31 | 2021-09-30 | 2020-12-31 | |||||||||
Asia Synergy Supply Chain Ltd | 491,538 | 921,521 | 2,015,651 | 1,334,581 | ||||||||
Asia Synergy Financial Capital Ltd | 453,500 | 407,414 | 10,889,439 | 10,435,939 | ||||||||
Wechain (Nanjing) Technology Service Co., Ltd | (120,766 | ) | - | 163,144 | - | |||||||
Beijing Kailifeng New Energy Technology Co., Ltd | (4,082 | ) | - | (4,082 | ) | - | ||||||
820,190 | 1,328,935 | 13,064,152 | 11,770,520 |
No dividends were paid to NCIs during the nine-month period ended September 30, 2021 and the year ended December 31, 2020 .
PEAK FINTECH GROUP INC. | 33 |
Notes to Condensed Interim Consolidated Financial Statements |
|
For the three and nine-month periods ended September 30, 2021 and 2020 (In Canadian dollars) |
|
19 - NON-CONTROLLING INTERESTS (CONTINUED)
Summarised financial information for subsudiaries with NCIs, before intragroup eliminations are as follows:
ASSC | ASFC | Wechain | Kalifeng | Total | ||||||||||||||||||||||||||
2021-09-30 | 2020-12-31 | 2021-09-30 | 2020-12-31 | 2021-09-30 | 2020-12-31 | 2021-09-30 | 2020-12-31 | 2021-09-30 | 2020-12-31 | |||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
Current assets | 9,177,437 | 26,997,077 | 20,887,935 | 18,770,871 | 589,849 | - | - | - | 30,655,221 | 45,767,948 | ||||||||||||||||||||
Non-current assets | 505 | 853 | 4,357,714 | 4,360,915 | 130,372 | - | - | - | 4,488,591 | 4,361,768 | ||||||||||||||||||||
Total assets | 9,177,942 | 26,997,930 | 25,245,649 | 23,131,786 | 720,221 | - | - | - | 35,143,812 | 50,129,716 | ||||||||||||||||||||
Current liabilities | 4,933,740 | 24,274,295 | 2,435,670 | 1,689,668 | 342,010 | - | 8,340 | - | 7,719,759 | 25,963,963 | ||||||||||||||||||||
Non-current liabilities | - | - | 166,835 | 144,283 | 53,503 | - | - | - | 220,339 | 144,283 | ||||||||||||||||||||
Total liabilities | 4,933,740 | 24,274,295 | 2,602,505 | 1,833,951 | 395,513 | - | 8,340 | - | 7,940,098 | 26,108,246 | ||||||||||||||||||||
Equity attributable to owners of the parent | 2,097,923 | 1,389,054 | 11,333,906 | 10,861,896 | 169,805 | - | (4,249 | ) | - | 13,597,385 | 12,250,950 | |||||||||||||||||||
Non-controlling interests | 2,015,651 | 1,334,581 | 10,889,439 | 10,435,939 | 163,144 | - | (4,082 | ) | - | 13,064,152 | 11,770,520 |
ASSC | ASFC | Wechain | Kalifeng | Total | ||||||||||||||||||||||||||
Nine-month | ||||||||||||||||||||||||||||||
Nine-month | Nine-month | Nine-month | period | Nine-month | ||||||||||||||||||||||||||
period ending | Year ending | period ending | Year ending | period ending | Year ending | ending | Year ending | period ending | Year ending | |||||||||||||||||||||
2021-09-30 | 2020-12-31 | 2021-09-30 | 2020-12-31 | 2021-09-30 | 2020-12-31 | 2021-09-30 | 2020-12-31 | 2021-09-30 | 2020-12-31 | |||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
Revenue | 20,968,703 | 38,409,836 | 1,954,642 | 2,446,058 | - | - | - | - | 22,923,345 | 40,855,894 | ||||||||||||||||||||
Profit for the year attributable to owners of the parent | 507,742 | 958,850 | 517,286 | 189,077 | (124,313 | ) | - | (4,249 | ) | - | 896,467 | 1,147,926 | ||||||||||||||||||
Profit for the year attributable to NCIs | 487,831 | 921,248 | 497,000 | 181,662 | (119,438 | ) | - | (4,082 | ) | - | 861,311 | 1,102,910 | ||||||||||||||||||
Profit for the year | 995,573 | 1,880,097 | 1,014,286 | 370,739 | (243,751 | ) | - | (8,331 | ) | - | 1,757,778 | 2,250,836 | ||||||||||||||||||
Other comprehensive income ("OCI") for the year | ||||||||||||||||||||||||||||||
OCI attributable to the owners of the parent | 3,858 | 285 | (45,276 | ) | 234,967 | (1,382 | ) | - | - | - | (42,799 | ) | 235,251 | |||||||||||||||||
OCI attributable to NCIs | 3,707 | 273 | (43,500 | ) | 225,752 | (1,328 | ) | - | - | - | (41,121 | ) | 226,026 | |||||||||||||||||
OCI for the year | 7,565 | 558 | (88,776 | ) | 460,719 | (2,710 | ) | - | - | - | (83,920 | ) | 461,277 | |||||||||||||||||
Total comprehensive income for the year attributable to the owners of the parent | 511,601 | 959,134 | 472,010 | 424,043 | (125,695 | ) | - | (4,249 | ) | - | 853,667 | 1,383,178 | ||||||||||||||||||
Total comprehensive income for the year attributable to NCIs | 491,538 | 921,521 | 453,500 | 407,414 | (120,766 | ) | - | (4,082 | ) | - | 820,190 | 1,328,935 | ||||||||||||||||||
Total comprehensive income for the year | 1,003,139 | 1,880,655 | 925,510 | 831,458 | (246,461 | ) | - | (8,331 | ) | - | 1,673,857 | 2,712,113 | ||||||||||||||||||
Net cash used in operating activities | 1,489,543 | (1,284,050 | ) | (1,424,832 | ) | 461,254 | (142,353 | ) | - | 8 | - | (77,634 | ) | (822,796 | ) | |||||||||||||||
Net cash used in investing activities | (2 | ) | 466,250 | (3,035 | ) | 15,935 | (141,532 | ) | - | - | - | (144,569 | ) | 482,185 | ||||||||||||||||
Net cash from financing activities | (1,355,533 | ) | 743,189 | 118,304 | 227,582 | 256,409 | - | - | (980,820 | ) | 970,771 | |||||||||||||||||||
Foreign exchange differences | 36,123 | 4,693 | 254,608 | 927,798 | (4,940 | ) | - | (8 | ) | - | 285,783 | 932,491 | ||||||||||||||||||
Net cash (outflow) inflow for the year | 170,131 | (69,918 | ) | (1,054,955 | ) | 1,632,569 | (32,416 | ) | - | - | - | (917,240 | ) | 1,562,651 |
PEAK FINTECH GROUP INC. | 34 |
Notes to Condensed Interim Consolidated Financial Statements |
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For the three and nine-month periods ended September 30, 2021 and 2020 (In Canadian dollars) |
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19 - NON-CONTROLLING INTERESTS (CONTINUED)
During the three and nine-month periods ended September 30, 2021, the Company's subsidiary, ASDS along with the non-controlling interests of ASSC and Wechain subscribed for additional share capital in these subsidiaries in the ratio of their relevant ownership percentages. The total value of capital injected by NCIs in ASSC totalled $189,432 and in Wechain totalled $283,912. As at September 30, 2021 the NCI's portion of the capital injection agreed for Wechain was oustanding and has been recorded as a receivable in the condensed interim cosolidated statement of financial position under debtors (refer note 6).
20 - COMPARATIVE FIGURES
Certain comparative figures have been reclassified in order to comply with the basis of presentation adopted in the current year.
21 - SUBSEQUENT EVENTS
a) On October 1, 2021, the Company acquired 100% of the outstanding shares of Cubeler Inc. ("Cubeler"). Cubeler is the developer and owner of the technology that powers Peak's Business Hub. Under the terms of the Cubeler Acquisition Agreement, Peak paid consideration with a fair value totalling $108,433,566 comprising $1,000,000 in cash and a total of 11,133,012 common shares of Peak at $9.65 per share. A fairness opinion was obtained from an independant third party.
The Company's evaluation of assets acquired following the acquisition is under review by the management and an advisor of the Company.
b) On October 28, 2021, the Company granted incentive options to acquire 25,000 common shares to a consultant. The stock options expire in October 2026, vest over two years and have an exercise price of $11.50.
c) On October 27, 2021, the company announced that its name would change to Tenet Fintech Group Inc., effective as of November 1, 2021.
d) On November 5, 2021, the Company announced that it had moved its head office to Toronto, Ontario.
e) On October 5, 2021, the Company issued 600,000 of its common shares to the owners of Huayan, as part of an asset purchase agreement that included the Heartbeat insurance brokerage platform, in the settlement of the share component of the upfront consideration payable under the transaction. Further, on November 9, 2021, the Company made the final cash payment of $4,459,350 to the owners of Huayan in full settlement of the cash component of the consideration payable under the agreement.