Tenet Fintech Group Inc.
Condensed Interim Consolidated
Financial Statements (Unaudited)
For the three-month periods
ended March 31, 2022, and 2021
2
TENET FINTECH GROUP INC.
Condensed Interim Consolidated Statements of Comprehensive Loss
For the three-month periods ended March 31, 2022 and 2021
(In Canadian dollars, except weighted average number of outstanding shares)
(Unaudited)
Note | 2022 | 2021 | |||||
$ | $ | ||||||
Revenues | 34,741,460 | 14,239,776 | |||||
Expenses | |||||||
Cost of service | 30,024,865 | 12,347,170 | |||||
Salaries and fringe benefits | 2,345,268 | 723,860 | |||||
Service fees | 102,926 | 157,651 | |||||
Royalty on software | - | 30,776 | |||||
Board remuneration | 191,924 | 124,527 | |||||
Consulting fees | 343,738 | 62,869 | |||||
Management fees | 11,964 | 12,818 | |||||
Professional fees | 1,032,464 | 331,655 | |||||
Public relations and press releases | 316,072 | 121,493 | |||||
Office supplies, software and utilities | 177,058 | 30,214 | |||||
Lease expenses | 60,161 | 11,570 | |||||
Insurance | 331,646 | 14,896 | |||||
Finance costs | 17.4 | 446,983 | 44,833 | ||||
Expected credit loss | 5 | 87,618 | 19,893 | ||||
Travel and entertainment | 78,485 | 34,002 | |||||
Stock exchange and transfer agent costs | 45,032 | 90,714 | |||||
Translation cost and others | 26,020 | 39,310 | |||||
Depreciation of property and equipment | 7 | 21,551 | 22,337 | ||||
Depreciation of right-of-use assets | 7 | 109,782 | 69,157 | ||||
Amortization of intangible assets | 8 | 1,502,347 | 66,484 | ||||
Amortization of initial financing costs | 6,551 | 6,651 | |||||
(Gain) Loss on foreign exchange | 134,424 | (35,379 | ) | ||||
37,396,879 | 14,327,501 | ||||||
Loss before income taxes | (2,655,419 | ) | (87,725 | ) | |||
Income tax | 704,182 | 301,977 | |||||
Net loss | (3,359,601 | ) | (389,702 | ) | |||
Net profit (loss) attributable to: | |||||||
Non-controlling interest | 22,670 | 375,929 | |||||
Owners of the parent | (3,382,271 | ) | (765,631 | ) | |||
(3,359,601 | ) | (389,702 | ) | ||||
Item that will be reclassified subsequently to profit or loss | |||||||
Currency translation adjustment | 760,601 | 546,909 | |||||
Total comprehensive loss | (4,120,202 | ) | (936,611 | ) | |||
Total comprehensive profit (loss) attributable to: | |||||||
Non-controlling interest | (17,577 | ) | 256,973 | ||||
Owners of the parent | (4,102,625 | ) | (1,193,584 | ) | |||
(4,120,202 | ) | (936,611 | ) | ||||
Weighted average number of outstanding shares | 75,700,826 | 61,683,058 | |||||
Basic and diluted loss per share | (0.045 | ) | (0.012 | ) | |||
Going concern uncertainty (note 2)
Subsequent events (note 22)
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
3
TENET FINTECH GROUP INC.
Condensed Interim Consolidated Statements of Changes in Equity
For the three-month periods ended March 31, 2022 and 2021
(In Canadian dollars)
(Unaudited)
Accumulated | Total | |||||||||||||||||||||||||||
Capital stock | other | attributable | Non | Shareholders' | ||||||||||||||||||||||||
Number of | Equity to | Contributed | comprehensive | to owners | Controlling | equity | ||||||||||||||||||||||
Note | common shares | Amount | issue | surplus | income | Deficit | of parent | interest | (deficiency) | |||||||||||||||||||
(number of shares | ||||||||||||||||||||||||||||
see note 14) | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
# | ||||||||||||||||||||||||||||
Balance as of January 1, 2022 | 97,167,183 | 208,219,490 | 150,000 | 21,531,185 | 1,366,752 | (79,997,442 | ) | 151,269,985 | 14,320,381 | 165,590,366 | ||||||||||||||||||
Exercise of warrants and broker warrants | 14 | 1,527,500 | 2,101,894 | (150,000 | ) | (443,144 | ) | 1,508,750 | 1,508,750 | |||||||||||||||||||
Exercise of options | 14, 15 | 100,000 | 391,300 | (181,300 | ) | 210,000 | 210,000 | |||||||||||||||||||||
Share-based compensation | 15 | 541,599 | 541,599 | 541,599 | ||||||||||||||||||||||||
Subscription for shares by non-controlling interest | 164,418 | 164,418 | ||||||||||||||||||||||||||
Transactions with owners | 98,794,683 | 210,712,684 | - | 21,448,340 | 1,366,752 | (79,997,442 | ) | 153,530,334 | 14,484,799 | 168,015,133 | ||||||||||||||||||
Net profit (loss) | (3,382,271 | ) | (3,382,271 | ) | 22,670 | (3,359,601 | ) | |||||||||||||||||||||
Other comprehensive profit | (720,354 | ) | (720,354 | ) | (40,247 | ) | (760,601 | ) | ||||||||||||||||||||
Total comprehensive loss for the period | - | - | - | - | (720,354 | ) | (3,382,271 | ) | (4,102,625 | ) | (17,577 | ) | (4,120,202 | ) | ||||||||||||||
Balance as of March 31, 2022 | 98,794,683 | 210,712,684 | - | 21,448,340 | 646,398 | (83,379,713 | ) | 149,427,709 | 14,467,222 | 163,894,931 | ||||||||||||||||||
Balance as of January 1, 2021 | 118,024,189 | 39,131,010 | 511,221 | 11,582,653 | (140,782 | ) | (30,240,372 | ) | 20,843,730 | 11,770,520 | 32,614,250 | |||||||||||||||||
Issuance of shares and warrants to settle debts owed for services provided | 14 | 27,466 | 33,900 | 33,900 | 33,900 | |||||||||||||||||||||||
Exercise of warrants and broker warrants | 14 | 9,984,631 | 5,233,340 | (1,525,179 | ) | 3,708,161 | 3,708,161 | |||||||||||||||||||||
Conversion of convertible debentures | 50,000 | 27,483 | 27,483 | 27,483 | ||||||||||||||||||||||||
Share-based compensation | 15 | 344,690 | 344,690 | 344,690 | ||||||||||||||||||||||||
Transactions with owners | 128,086,286 | 44,425,733 | 511,221 | 10,402,164 | (140,782 | ) | (30,240,372 | ) | 24,957,964 | 11,770,520 | 36,728,484 | |||||||||||||||||
Net (loss) profit | (765,631 | ) | (765,631 | ) | 375,929 | (389,702 | ) | |||||||||||||||||||||
Other comprehensive income | (427,952 | ) | (427,952 | ) | (118,957 | ) | (546,909 | ) | ||||||||||||||||||||
Total comprehensive profit (loss) for the period | - | - | - | - | (427,952 | ) | (765,631 | ) | (1,193,583 | ) | 256,973 | (936,611 | ) | |||||||||||||||
Balance as of March 31, 2021 | 128,086,286 | 44,425,733 | 511,221 | 10,402,164 | (568,734 | ) | (31,006,003 | ) | 23,764,381 | 12,027,492 | 35,791,873 |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
4
TENET FINTECH GROUP INC.
Condensed Interim Consolidated Statements of Cash Flows
For the three-month periods ended March 31, 2022 and 2021
(In Canadian dollars)
(Unaudited)
Note | 2022 | 2021 | |||||
$ | $ | ||||||
OPERATING ACTIVITIES | |||||||
Net loss | (3,359,601 | ) | (389,702 | ) | |||
Non-cash items | |||||||
Expected credit loss | 5 | 87,618 | 19,893 | ||||
Depreciation of property and equipment | 7 | 21,551 | 22,337 | ||||
Depreciation of right-of-use assets | 7 | 109,782 | 69,157 | ||||
Amortization of intangible assets | 8 | 1,502,347 | 66,484 | ||||
Amortization of initial financing costs | 6,551 | 6,651 | |||||
Accretion of bonds | 17 | 7,614 | 6,924 | ||||
Accretion of lease interest | 10, 17.4 | 37,133 | 6,435 | ||||
Issuance of shares and warrants for settlement of debt | 11 | - | 15,000 | ||||
Change in fair value of contingent consideration payable | 4 | 398,031 | - | ||||
Share-based compensation | 15 | 541,599 | 344,690 | ||||
Deferred tax liability | (3,623,295 | ) | - | ||||
Loans receivable maturing in more than 12 months | 5 | 820,056 | 47,575 | ||||
Net changes in working capital items | |||||||
Restricted cash | 10,000 | (40 | ) | ||||
Income tax payable | 3,711,958 | 131,670 | |||||
Accounts receivable | 6 | (1,330,948 | ) | 2,621,809 | |||
Deposits made to third parties regarding transactions on platforms | 6 | 5,154,909 | - | ||||
Prepayment to third party subcontractors | 6 | (2,299,695 | ) | - | |||
Other debtors | 6 | 1,139,804 | (48,295 | ) | |||
Loans receivable maturing in less than 12 months | 5 | (706,752 | ) | (292,755 | ) | ||
Assets held for resale | 69,687 | - | |||||
Other prepaid expenses | 4,622 | (416,506 | ) | ||||
Accounts payable, advances and accrued liabilities | 9 | (755,692 | ) | (2,316,749 | ) | ||
Cash flows from operating activities | 1,547,279 | (105,422 | ) | ||||
INVESTING ACTIVITIES | |||||||
Debtors | - | (4,297,435 | ) | ||||
Investment in third party entity | (492,750 | ) | - | ||||
Property and equipment - additions | 7 | (16,897 | ) | (1,596 | ) | ||
Property and equipment - disposals | 7 | 2,344 | 5,989 | ||||
Intangible asset - additions | 8 | (1,520,489 | ) | (325,783 | ) | ||
Cash flows from investing activities | (2,027,792 | ) | (4,618,825 | ) | |||
FINANCING ACTIVITIES | |||||||
Proceeds (repayments) of advances from third parties | (303,533 | ) | (89,675 | ) | |||
Proceeds / (repayment) of advances made from a Director | - | (261,316 | ) | ||||
Repayment /proceeds of advances made from affiliates | - | 102,966 | |||||
Repayment of lease liabilities | 10 | (76,667 | ) | (12,592 | ) | ||
Proceeds from the exercise of warrants | 14 | 1,508,750 | 3,708,161 | ||||
Proceeds from the exercise of options | 15 | - | 25,000 | ||||
Subscriptions for shares from non-controlling interest | 164,418 | - | |||||
Cash flows from financing activities | 1,292,968 | 3,472,544 | |||||
IMPACT OF FOREIGN EXCHANGE | (645,104 | ) | (499,771 | ) | |||
Net (decrease) increase in cash | 167,351 | (1,751,474 | ) | ||||
Cash, beginning of period | 18,796,914 | 5,873,877 | |||||
Cash, end of period | 18,964,265 | 4,122,403 | |||||
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
5
TENET FINTECH GROUP INC.
Condensed Interim Consolidated Statements of Financial Position
As at March 31, 2022 and December 31, 2021
(In Canadian dollars)
(Unaudited)
As at | As at | ||||||
March 31, | December 31, | ||||||
Note | 2022 | 2021 | |||||
$ | $ | ||||||
ASSETS | |||||||
Current | |||||||
Cash | 18,964,265 | 18,796,914 | |||||
Restricted cash | 43,333 | 53,333 | |||||
Loans receivable | 5 | 18,172,492 | 17,553,358 | ||||
Assets held for resale | 251,272 | 320,959 | |||||
Debtors | 6 | 53,547,733 | 56,001,475 | ||||
Prepaid expenses and other current assets | 1,670,927 | 1,675,549 | |||||
92,650,022 | 94,401,588 | ||||||
Loans receivable | 6 | 2,450,277 | 3,270,333 | ||||
Property and equipment | 7 | 1,923,208 | 2,062,014 | ||||
Investments | 492,750 | - | |||||
Intangible assets | 8 | 32,770,145 | 32,845,799 | ||||
Goodwill | 8 | 62,522,554 | 62,522,554 | ||||
Deferred tax assets | 285,586 | 190,835 | |||||
193,094,542 | 195,293,123 | ||||||
LIABILITIES | |||||||
Current | |||||||
Accounts payable, advances and accrued liabilities | 9 | 15,209,070 | 16,268,296 | ||||
Lease liabilities | 10 | 434,995 | 432,621 | ||||
Current tax liabilities | 7,337,642 | 3,625,683 | |||||
22,981,707 | 20,326,600 | ||||||
Bonds | 12 | 327,399 | 313,234 | ||||
CEBA Loan | 13 | 100,000 | 100,000 | ||||
Lease liabilities | 10 | 1,273,455 | 1,315,363 | ||||
Foreign deferred tax liability | 1,922,556 | 1,922,556 | |||||
Canadian deferred tax liability | 275,463 | 3,804,004 | |||||
Contingent consideration payable | 4 | 2,319,031 | 1,921,000 | ||||
29,199,611 | 29,702,757 | ||||||
SHAREHOLDERS' EQUITY | |||||||
Capital stock | 14 | 210,712,684 | 208,219,490 | ||||
Shares to be issued | 14 | - | 150,000 | ||||
Contributed surplus | 21,448,340 | 21,531,185 | |||||
Accumulated other comprehensive income | 646,398 | 1,366,752 | |||||
Deficit | (83,379,713 | ) | (79,997,442 | ) | |||
Shareholders' equity attributable to owners of the parent | 149,427,709 | 151,269,985 | |||||
Non-controlling interest | 14,467,222 | 14,320,381 | |||||
Total shareholders' equity | 163,894,931 | 165,590,366 | |||||
193,094,542 | 195,293,123 | ||||||
Going concern uncertainty (note 2)
Subsequent events (note 22)
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
On behalf of the Board, |
|
|
/S/ Johnson Joseph |
| /S/ Charles-André Tessier |
Director |
| Director |
6 |
TENET FINTECH GROUP INC. Notes to Consolidated Financial Statements For the three-month periods ended March 31, 2022 and 2021 (In Canadian dollars) |
1 - GOVERNING STATUTES, NATURE OF OPERATIONS AND GENERAL INFORMATION
Tenet Fintech Group Inc. (hereinafter "Tenet'' 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. Tenet Fintech Group Inc.'s head office is located at 119 Spadina Avenue, Suite 705, Toronto, Ontario,. 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''.
Tenet is the parent company of a group of innovative artificial intelligence (AI) and financial technology (Fintech) subsidiaries operating in Canada and China. Tenet's subsidiaries use technology, analytics and artificial intelligence to create an ecosystem of small- and medium- sized enterprises (SMEs) carry out a range of interactions and transactions, including in the commercial lending space, in a rapid, safe, efficient, and transparent manner.
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 initiatives . 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 generated a net cash inflow of $47,981,290 in the first quarter of 2021, there is no assurance that it will manage to obtain additional financing in the future. Also, the Company incurred a net loss of $3,359,601, for the three-month period ended March 31, 2022 (year ended December 31, 2021 - $48,561,968), it has an accumulated deficit of $83,379,713 as at March 31, 2022 (year ended December 31, 2021 - $79,997,442) 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.
Since the outbreak of the COVID-19 global pandemic, many businesses around the world 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, 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. Moreover, China, in particular, has occasionally taken strong measures to try to curb the spread of the virus and protect its citizens and, in doing so, there has been an impact on the economic activities of many of its regions. Given that the Company has significant operations in China, any such measures may have an adverse impact on the Company's revenues and cash resources, ability to expand its business, access to suppliers, partners, and customers, and ability to carry on its day-to-day operations without interruption.
These 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.
7 |
TENET FINTECH GROUP INC. Notes to Consolidated Financial Statements For the three-month periods ended March 31, 2022 and 2021 (In Canadian dollars) |
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3.1 Statement of compliance with IFRS
These condensed interim consolidated financial statements for the three-month period ended March 31, 2022, 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, 2021. 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, 2021.
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, 2021 except for new standards and interpretations effective January 1, 2022.
These condensed interim consolidated financial statements for the three-month periods ended March 31, 2022 (including comparative figures) were approved by the Board of Directors on May XX, 2022.
3.2 Basis of measurement
These condensed interim 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 | Principal activity | Functional | |
Entities | Registered | and voting right | Currency | ||
Tenet Fintech Group Inc. | Canada |
| Holding and parent company | Canadian dollar | |
Cubeler Inc. (note 6.3) | Canada | 100% | Technology based product developer and procurement facilitator | 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 Management Co.,Ltd (1) | China | 100% | Technology based product procurement facilitator | Renminbi | |
Asia Synergy Data Solutions Ltd. | China | 100% | Fintech | Renminbi | |
Asia Synergy Credit Solutions Ltd | China | 100% | Credit outsourcing services | Renminbi | |
Asia Synergy Supply Chain Ltd | China | 51% | Supply chain services | Renminbi | |
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 6.1) | China | 100% | Technology based product facilitator | Renminbi | |
Wechain (Nanjing) Technology Service Co., Ltd. (note 6.1) | China | 51% | Fintech | Renminbi | |
Beijing Kailifeng New Energy Technology Co., Ltd. (1) | China | 51% | Technology based product facilitator | Renminbi | |
Shanghai Xinhuizhi Supply Chain Management Co.,Ltd. (1) | China | 51% | Technology based product procurement facilitator | Renminbi |
8 |
TENET FINTECH GROUP INC. Notes to Consolidated Financial Statements For the three-month periods ended March 31, 2022 and 2021 (In Canadian dollars) |
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
3.3 Basis of Consolidation (continued)
The Company's 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.
4 - BUSINESS COMBINATIONS
4.1 Subsequent Accounting
At each balance date, the Company revises its estimation of the fair value of the contingent consideration payable under the Heartbeat Acquisition and records an accretion entry accordingly. The re-evaluation process takes into account the historical performance of the operations of Huike and Heartbeat platform assets compared to agreed targets and discount the resultant estimate of the value of share instalments payable. As at March 31, 2022, the value of contingent consideration payable was estimated as $2,319,031 (December 31, 2021 - $1,921,000) and, consequently, an amount of $398,031 for the three-month period ended March 31, 2022 (three-month period ended March 31, 2021 - $Nil) was recorded as an expense in the condensed interim consolidated statements of comprehensive loss with a corresponding credit recorded in the consolidated statement of financial position to contingent consideration payable.
The intangible assets recorded as part of the Heartbeat and Cubeler purchase price allocations, excluding goodwill, are being amortized to the profit and loss account over their remaining useful lives, estimated to be 8 years. During the three-month period ended March 31, 2022, an amount of $854,391 (three-month period ended March 31, 2021 - $Nil) has been charged to the condensed interim consolidated statement of comprehensive loss in respect of amortization of intangible assets acquired under business combinations in the current year (refer note 8).
5 - LOANS RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES
One of the Company's subsidiaries in China, Asia Synergy Financial Capital ("ASFC"), provides various financial services to small- and medium-sized enterprises.
ASFC 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 guaranteed 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 March 31, 2022 (76% as at December 31, 2021). 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.
9 |
TENET FINTECH GROUP INC. Notes to Consolidated Financial Statements For the three-month periods ended March 31, 2022 and 2021 (In Canadian dollars) |
5 - LOANS RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES (CONTINUED)
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 :
2022-03-31 | 2021-12-31 | |||||
$ | $ | |||||
Principal balance loans receivables | 20,857,599 | 20,989,935 | ||||
Less expected credit loss (ECL) | (234,831 | ) | (166,244 | ) | ||
Loan receivables net | 20,622,768 | 20,823,691 | ||||
Loans receivables maturing in less than 12 months | 18,172,492 | 17,553,358 | ||||
Loans receivables maturing in more than 12 months | 2,450,277 | 3,270,333 | ||||
Total loans | 20,622,769 | 20,823,691 |
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, 2021.
Credit quality of loans
The following table presents the gross carrying amount of loans receivables as at March 31, 2022 and December 31, 2021, according to credit quality and ECL impairment stages.
10 |
TENET FINTECH GROUP INC. Notes to Consolidated Financial Statements For the three-month periods ended March 31, 2022 and 2021 (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 |
|
| Credit loss | applied - | applied -Credit |
|
| allocation | Residential | and supply chain |
|
| applied - Auto | Property | finance credit |
Stage 1 : 1% |
| 1.0% | 1.0% | 2.0% |
Stage 2: 30% |
| 7.0% | 1.0% | 2.0% |
Stage 3 :100% |
| 12.0% | 1.0% | 2.0% |
Gross Carrying | Allowance for | Net Carrying | ||||||||
March 31, 2022 | % | amount | credit loss | Amount | ||||||
$ | $ | $ | ||||||||
Stage 1 Not overdue <= 30 Days | 87.8% | 18,309,258 | (3,501 | ) | 18,305,757 | |||||
Stage 2 Overdue 30-90 days | 1.2% | 239,951 | (2,186 | ) | 237,765 | |||||
Stage 3 Overdue> 90 days | 11.1% | 2,308,390 | (229,143 | ) | 2,079,248 | |||||
Total | 100.0% | 20,857,599 | (234,830 | ) | 20,622,770 |
Gross Carrying | Allowance for | Net Carrying | ||||||||
December 31, 2021 | % | amount | credit loss | Amount | ||||||
$ | $ | $ | ||||||||
Stage 1 Not overdue <= 30 Days | 85.2% | 17,882,518 | (3,362 | ) | 17,879,156 | |||||
Stage 2 Overdue 30-90 days | 2.6% | 540,283 | (3,000 | ) | 537,283 | |||||
Stage 3 Overdue> 90 days | 12.2% | 2,567,134 | (159,882 | ) | 2,407,252 | |||||
Total | 100.0% | 20,989,935 | (166,244 | ) | 20,823,691 |
The loss allowance for loans to customers as at March 31, 2022, 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, 2021 | 1 | 1,618 | 150,126 | 151,745 | ||||||||
Originations net of repayments and other derecognitions | (11 | ) | (53 | ) | (16,714 | ) | (16,778 | ) | ||||
Net remeasurement | (2 | ) | 593 | 171,155 | 171,746 | |||||||
Transfers | ||||||||||||
- to lifetime ECL performing | (4 | ) | 4 | - | - | |||||||
- to lifetime ECL credit-impaired | - | (849 | ) | 849 | - | |||||||
Write-offs | - | - | (62,818 | ) | (62,818 | ) | ||||||
Foreign exchange and other | 20 | 406 | (22,387 | ) | (21,961 | ) | ||||||
Loss allowance as at March 31, 2022 | 4 | 1,719 | 220,211 | 221,934 |
11 |
TENET FINTECH GROUP INC. Notes to Consolidated Financial Statements For the three-month periods ended March 31, 2022 and 2021 (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, 2021 | 207 | 1,382 | 9,756 | 11,345 | ||||||||
Originations net of repayments and other derecognitions | (45 | ) | (628 | ) | (2,214 | ) | (2,887 | ) | ||||
Change in model | ||||||||||||
Net remeasurement | (940 | ) | 450 | 1,720 | 1,230 | |||||||
Transfers | ||||||||||||
- to 12-month ECL | 950 | - | (950 | ) | - | |||||||
- to lifetime ECL performing | (16 | ) | 16 | - | - | |||||||
- to lifetime ECL credit-impaired | - | (737 | ) | 737 | - | |||||||
Foreign exchange and other | (2 | ) | (16 | ) | (117 | ) | (135 | ) | ||||
Loss allowance as at March 31, 2022 | 154 | 467 | 8,932 | 9,553 |
Product Type - Credit & Supply Chain Finance Credit | ||||||||||||
Stage 1 | Stage 2 | Stage 3 | Total ECL | |||||||||
$ | $ | $ | $ | |||||||||
Loss allowance as at December 31, 2021 | 3,154 | - | - | 3,154 | ||||||||
Originations net of repayments and other derecognitions | 116 | - | - | 116 | ||||||||
Foreign exchange and other | 73 | - | - | 73 | ||||||||
Loss allowance as at March 31, 2022 | 3,343 | - | - | 3,343 |
The loss allowance for loans to customers as at December 31, 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 | ||||||||
Originations net of repayments and other derecognitions | (139 | ) | (1,535 | ) | (156,264 | ) | (157,938 | ) | ||||
Net remeasurement | 7 | 894 | (33,302 | ) | (32,401 | ) | ||||||
Transfers | ||||||||||||
- to lifetime ECL credit-impaired | (13 | ) | (144 | ) | 156 | (1 | ) | |||||
Write-offs | - | - | (22,147 | ) | (22,147 | ) | ||||||
Foreign exchange and other | (2 | ) | 523 | 10,390 | 10,911 | |||||||
Loss allowance as at December 31, 2021 | 1 | 1,618 | 150,126 | 151,745 |
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 | ||||||||
Originations net of repayments and other derecognitions | (79 | ) | 790 | 90 | 801 | |||||||
Net remeasurement | - | - | 3,645 | 3,645 | ||||||||
Transfers | ||||||||||||
- to lifetime ECL credit-impaired | (13 | ) | (894 | ) | 907 | - | ||||||
Foreign exchange and other | 4 | 34 | 120 | 158 | ||||||||
Loss allowance as at December 31, 2021 | 207 | 1,382 | 9,756 | 11,345 |
Product Type - Credit & Supply Chain Finance Credit | ||||||||||||
Stage 1 | Stage 2 | Stage 3 | Total ECL | |||||||||
$ | $ | $ | $ | |||||||||
Loss allowance as at December 31, 2020 | 224,355 | - | - | 224,355 | ||||||||
Originations net of repayments and other derecognitions | 33,328 | - | - | 33,328 | ||||||||
Net remeasurement | (259,815 | ) | - | - | (259,815 | ) | ||||||
Foreign exchange and other | 5,286 | - | - | 5,286 | ||||||||
Loss allowance as at December 31, 2021 | 3,154 | - | - | 3,154 |
12 |
TENET FINTECH GROUP INC. Notes to Consolidated Financial Statements For the three-month periods ended March 31, 2022 and 2021 (In Canadian dollars) |
6 - DEBTORS
2022-03-31 | 2021-12-31 | |||||
$ | $ | |||||
Sales tax receivable | 343,968 | 271,514 | ||||
Advances to a company | 47,538 | 141,184 | ||||
Deposit on investment (1) | 281,879 | 498,750 | ||||
Deposits made for transactions on platforms with guarantee (2) | 26,005,412 | 31,142,201 | ||||
Deposits made for transactions on platforms (3) | 1,488,105 | 1,506,225 | ||||
Accounts receivable | 10,963,599 | 9,632,651 | ||||
Safety deposits with guarantor (4) | 591,300 | 712,412 | ||||
Subscriptions receivable from non-controlling interests | 261,683 | 98,239 | ||||
Promissory note (5) | 113,522 | 113,193 | ||||
Other subscriptions receivable | 210,000 | - | ||||
Prepayments to third party subcontractors (6) | 13,240,727 | 11,885,106 | ||||
53,547,733 | 56,001,475 |
(1) At March 31, 2022, as per agreement signed with third parties, AST, a subsidiary of the Company, agreed to participate in a future partnership agreement with a deposit of $281,879. At December 31, 2021, as per agreement signed with third parties, ASDS, a subsidiary of the Company, agreed to participate in a future partnership agreement. ASDS provided 25% of the deposit representing $498,750.
(2) As per agreements signed with third parties, subsidiaries of the Company have provided deposits in order to facilitate capital support from financial institutions such as banks and lenders in mainland China. As collateral, the Company kept 10 to 20% 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 institutions such as banks and lenders in mainland China. As collateral, the Company kept 5 to 8% of the merchandise in guarantee.
(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) On December 15, 2021, loans were issued to two board members of the Company in the amounts of $72,793 and $40,000. Each loan is due on December 15, 2022. Each loans bears interest at an annual rate of 1%, which was the prescribed rate at the date of issuance. As of December 31, 2021, the aggregate outstanding principal amount due for said loans is $113,193.
(6) Subsidiaries of the Company active in supply chain activity made prepayments to suppliers to support operational supply chain processes. These prepayments 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, Deposits made for transaction on platforms with guarantees, Deposits made for transaction on platforms, Accounts receivable, Service deposits, Subscriptions receivable from non- controlling interests, Promissory note, Other subscriptions receivable and Prepayment to third party subcontractors 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 March 31, 2022 an amount of $326,297 (2021 - $317,778) was registered for expected credit loss for debtors.
13 |
TENET FINTECH GROUP INC. Notes to Consolidated Financial Statements For the three-month periods ended March 31, 2022 and 2021 (In Canadian dollars) |
7 - PROPERTY AND EQUIPMENT
Vehicles and | ||||||||||||
Right-of-use | IT and office | other | ||||||||||
assets | equipment | equipment | Total | |||||||||
$ | $ | $ | $ | |||||||||
Gross carrying amount | ||||||||||||
Balance as at January 1, 2022 | 3,067,626 | 201,858 | 191,393 | 3,460,877 | ||||||||
Additions | - | 16,897 | - | 16,897 | ||||||||
Disposals | (2,344 | ) | - | - | (2,344 | ) | ||||||
Balance as at March 31, 2022 | 3,065,282 | 218,755 | 191,393 | 3,475,429 | ||||||||
Accumulated amortization | ||||||||||||
Balance as at January 1, 2022 | 1,186,255 | 110,873 | 101,736 | 1,398,864 | ||||||||
Amortization | 109,782 | 9,661 | 11,890 | 131,333 | ||||||||
Exchange differences | 19,605 | 1,342 | 1,078 | 22,024 | ||||||||
Balance as at March 31, 2022 | 1,315,642 | 121,876 | 114,704 | 1,552,221 | ||||||||
Net carrying amount as at March 31, 2022 | 1,749,640 | 96,879 | 76,689 | 1,923,208 | ||||||||
Gross carrying amount | ||||||||||||
Balance as at January 1, 2021 | 1,136,485 | 122,336 | 205,358 | 1,464,179 | ||||||||
Amounts acquired in a business combination | 179,812 | 25,312 | - | 205,124 | ||||||||
Additions | 1,808,761 | 54,210 | - | 1,862,971 | ||||||||
Disposals | (57,432 | ) | - | (13,965 | ) | (71,397 | ) | |||||
Balance as at December 31, 2021 | 3,067,626 | 201,858 | 191,393 | 3,460,877 | ||||||||
Accumulated amortization | ||||||||||||
Balance as at January 1, 2021 | 800,068 | 70,353 | 64,391 | 934,812 | ||||||||
Amortization | 286,850 | 41,726 | 48,413 | 376,989 | ||||||||
Other adjustments | 99,715 | - | - | 99,715 | ||||||||
Revaluation of Right-of-use assets | 9,978 | - | - | 9,978 | ||||||||
Disposals | - | 21 | (7,739 | ) | (7,718 | ) | ||||||
Exchange differences | (10,356 | ) | (1,227 | ) | (3,329 | ) | (14,912 | ) | ||||
Balance as at December 31, 2021 | 1,186,255 | 110,873 | 101,736 | 1,398,863 | ||||||||
Net carrying amount as at December 31, 2021 | 1,881,371 | 90,985 | 89,657 | 2,062,014 |
14 |
TENET FINTECH GROUP INC. Notes to Consolidated Financial Statements For the three-month periods ended March 31, 2022 and 2021 (In Canadian dollars) |
8- INTANGIBLE ASSETS
Gold River Supply- | ||||||||||||||||||||||||||||||
Loan servicing | chain services | Other ERP | ||||||||||||||||||||||||||||
agreement | Gold River | platforms | Cubeler Interface | Cubeler Platform | platforms | Heartbeat Platform | Tradenames | Total | Goodwill | |||||||||||||||||||||
# | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
Gross carrying amount | ||||||||||||||||||||||||||||||
Balance as at January 1, 2022 | 1,430,000 | 2,461,348 | 4,254,973 | 2,084,893 | 23,862,000 | 2,438,060 | 8,368,063 | 5,287,000 | 50,186,337 | 103,908,976 | ||||||||||||||||||||
Addition | - | - | 683,825 | 54,991 | - | 555,922 | 225,750 | - | 1,520,489 | - | ||||||||||||||||||||
Balance as at March 31, 2022 | 1,430,000 | 2,461,348 | 4,938,798 | 2,139,884 | 23,862,000 | 2,993,982 | 8,593,813 | 5,287,000 | 51,706,826 | 103,908,976 | ||||||||||||||||||||
Accumulated amortization | 429,000 | 2,461,348 | 231,217 | 643,496 | 10,228,688 | 81,731 | 410,966 | 2,854,095 | 17,340,541 | 41,386,422 | ||||||||||||||||||||
Balance as at January 1, 2022 | ||||||||||||||||||||||||||||||
Amortization | 35,750 | - | 333,214 | 111,820 | 463,389 | 167,172 | 307,325 | 83,677 | 1,502,347 | - | ||||||||||||||||||||
Exchange differences | - | - | 48,406 | 7,447 | - | 28,347 | 9,593 | - | 93,793 | - | ||||||||||||||||||||
Balance as at March 31, 2022 | 464,750 | 2,461,348 | 612,837 | 762,764 | 10,692,077 | 277,250 | 727,883 | 2,937,772 | 18,936,681 | 41,386,422 | ||||||||||||||||||||
Net carrying amount as at March 31, 2022 | 965,250 | - | 4,325,962 | 1,377,119 | 13,169,923 | 2,716,732 | 7,865,930 | 2,349,228 | 32,770,145 | 62,522,554 | ||||||||||||||||||||
Gross carrying amount | ||||||||||||||||||||||||||||||
Balance as at January 1, 2021 | 1,430,000 | 2,461,348 | - | 2,413,059 | - | - | - | - | 6,304,407 | - | ||||||||||||||||||||
Amounts arising from business combinations | - | - | - | - | 23,862,000 | - | 7,471,000 | 5,287,000 | 36,620,000 | 103,908,976 | ||||||||||||||||||||
Addition | - | - | 3,926,807 | - | - | 2,438,061 | 897,063 | - | 7,261,931 | - | ||||||||||||||||||||
Transferred in | - | - | 3,006,491 | 1,942,735 | - | 234,381 | - | - | 5,183,607 | - | ||||||||||||||||||||
Transferred out | - | - | (2,678,325 | ) | (2,270,901 | ) | - | (234,381 | ) | - | - | (5,183,607 | ) | - | ||||||||||||||||
Balance as at December 31, 2021 | 1,430,000 | 2,461,348 | 4,254,973 | 2,084,893 | 23,862,000 | 2,438,061 | 8,368,063 | 5,287,000 | 50,186,338 | 103,908,976 | ||||||||||||||||||||
Accumulated amortization | ||||||||||||||||||||||||||||||
Balance as at January 1, 2021 | 286,000 | 2,461,348 | - | 393,182 | - | - | - | - | 3,140,530 | - | ||||||||||||||||||||
Amortization | 143,000 | 193,717 | 231,217 | 295,868 | 745,688 | 81,731 | 410,966 | 165,095 | 2,267,281 | - | ||||||||||||||||||||
Impairment loss on intangible | - | (193,717 | ) | - | - | 9,483,000 | - | - | 2,689,000 | 11,978,283 | 41,386,422 | |||||||||||||||||||
Exchange differences | - | - | - | (45,554 | ) | - | - | - | - | (45,554 | ) | - | ||||||||||||||||||
Balance as at December 31, 2021 | 429,000 | 2,461,348 | 231,217 | 643,496 | 10,228,688 | 81,731 | 410,966 | 2,854,095 | 17,340,540 | 41,386,422 | ||||||||||||||||||||
Net carrying amount as at December 31, 2021 | 1,001,000 | - | 4,023,756 | 1,441,397 | 13,633,312 | 2,356,331 | 7,957,097 | 2,432,905 | 32,845,798 | 62,522,554 |
9 - ACCOUNTS PAYABLE, ADVANCES AND ACCRUED LIABILITIES
2022-03-31 | 2021-12-31 | |||||
$ | $ | |||||
Trade accounts payable and accruals | 4,468,431 | 5,224,124 | ||||
Advance from third party customers, no interest (1) | 10,740,639 | 11,044,172 | ||||
15,209,070 | 16,268,296 |
(1) Advance from downstream corportative clients for supply chain bundle service fee.
10 - LEASE LIABILITIES
2022-03-31 | 2021-12-31 | |||||
$ | $ | |||||
Balance - beginning of perod | 1,747,984 | 239,507 | ||||
Additions | - | 1,977,352 | ||||
Accretion interest | 37,133 | 65,908 | ||||
Lease payments | (76,667 | ) | (565,880 | ) | ||
Effect of exchange rate change on obligation | - | 31,097 | ||||
Balance - end of period | 1,708,450 | 1,747,984 | ||||
Current Portion | 434,995 | 432,621 | ||||
1,273,455 | 1,315,363 |
15 |
TENET FINTECH GROUP INC. Notes to Consolidated Financial Statements For the three-month periods ended March 31, 2022 and 2021 (In Canadian dollars) |
10 - LEASE LIABILITIES (CONTINUED)
Following is a summary of the Company's obligations regarding lease payments:
44,741 | Payment due by period | |||||||||||
1 year | 2-5 years | Beyond 5 years | Total | |||||||||
$ | $ | $ | $ | |||||||||
As at March 31, 2022 | ||||||||||||
Lease payments | 552,479 | 879,986 | 720,516 | 2,152,981 | ||||||||
As at December 31, 2021 | ||||||||||||
Lease payments | 561,677 | 951,334 | 729,289 | 2,242,301 |
11 - DEBENTURES
Debenture issuance of April 24, 2019
The movement during the three-month period ended March 31, 2021 and the year ended 2021, relating to this debenture can be summarised as follows:
2021-03-31 | 2021-12-31 | |||||
$ | $ | |||||
Balance at the beginning | - | 23,311 | ||||
Accretion of debentures | - | 683 | ||||
Conversion of debentures | - | (23,994 | ) | |||
Balance at the end | - | - |
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 $2.00 per share for a period of 36 months from the date of issuance.
The Bonds will be redeemable after 36 months from the date of issuance (the "Initial Maturity Date"). Each holder has a right (the "Initial Extension Right") at the end of the Initial Maturity Date to extend the Bond for another 12 months (the "Initial Extension Period") by giving written notice to that effect to the Company no later than sixty (60) days prior to the Initial Maturity Date. Any holder that has elected to exercise its Initial Extension Right will also have a further right at the end of the Initial Extension Period to extend its Bond for another 12 months (the "Second Extension Period") under the same notice conditions as stated in the Initial Extension.
If a holder elects to extend its Bonds, the Company may redeem such holder's Bonds at any time on payment of a 5% premium to redeem the Bonds ("Penalty").
The Company has set aside an amount equal to two years of interest in a separate bank account, which will be used to pay interest payable on the Bonds. Any interest accrued on such sum will be in favour of the Company. The set aside amount at March 31, 2022, is $43,333 (2021 - $53,333) 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%.
16 |
TENET FINTECH GROUP INC. Notes to Consolidated Financial Statements For the three-month periods ended March 31, 2022 and 2021 (In Canadian dollars) |
12 - BONDS (CONTINUED)
The movement during the three-month period ended March 31, 2021 the year ended 2021, relating to these bonds can be summarised as follows:
2022-03-31 | 2021-12-31 | |||||
$ | $ | |||||
Balance at the beginning | 313,234 | 258,933 | ||||
Addition | - | - | ||||
Accretion of bonds | 7,614 | 27,327 | ||||
Amortization of initial costs | 6,551 | 26,974 | ||||
Balance at the end | 327,399 | 313,234 |
(1) The volatility was determined by using the Company's own historical volatility over a period corresponding to expected life of the share options.
13 - CEBA LOAN (Canada Emergency Business Account)
On April 20, 2020, the Company applied for and received $40,000 under the Canada Emergency Business Account (CEBA). Further, on September 1, 2021, through its acquisition of Cubeler, the Company acquired an additional CEBA loan totalling $60,000. Under this program providing interest-free loans, repaying the balance of the loan on or before December 31, 2023, will result in loan forgiveness of 33% ($33,000), which is the intention of the Company. Subsequent to year-end, the Government of Canada announced that the deadline to repay loans under the Canada Emergency Business Account program would be extended by one year (that is from December 31, 2022 to December 31, 2023). As of January 1, 2024, the loan balance will bear interest at 5% and will be repayable on maturity on December 31, 2025.
14 - SHAREHOLDERS' EQUITY
14.1 Authorized share capital
The share capital of the Company consists of an unlimited number of common shares without par value.
Share Consolidation
Effective July 27, 2021, the Company consolidated its issued and outstanding common shares on the basis of one post-consolidation share for two pre-consolidation shares. Unless otherwise stated, all share amounts have been restated retrospectively to reflect this share consolidation.
14.2 Description of the shareholders' equity operations during the three-month period ended March 31, 2022
a) During the three-month period ended March 31, 2022, the Company issued 1,527,500 common shares at an average exercise price of $1.09 per share for total proceeds of $1,658,750 upon the exercise of share purchase warrants, and $443,144 related to exercised warrants were transferred from contributed surplus to share capital in the consolidated statements of changes in equity (note 14.4).
b) During the three-month period ended March 31, 2022, the Company issued 100,000 common shares at an average exercise price of $2.10 per share for total proceeds of $210,000 upon the exercise of stock options included in debtors in the consolidated statement of financial position, and $181,300 related to exercised stock options were transferred from contributed surplus to share capital in the consolidated statements of changes in equity (note 15).
14.3 Description of the shareholders' equity operations during the three-month period ended March 31, 2021
a) During the three-month period ended March 31, 2021, $25,000 of secured debentures with a conversion price of $0.50 per share were converted into common shares of the Company. At the date of conversion these debentures had an amortized cost totalling $23,994. The Company therefore issued 50,000 common shares to the debenture holders and recorded $23,994 in share capital. In addition, amounts of $3,489 related to these debenture conversions, were transferred to capital stock from conversion options in the consolidated statement of financial position.
b) During the three-month period ended March 31, 2021, the Company issued 27,466 common shares at an average price of $1.23 per share to settle $33,900 of debts related to services received by the Company, of which $15,000 was recorded in public relations fees in the consolidated statements of comprehensive loss, $18,900 was recorded against accounts payable and accruals in the consolidated statement of financial position.
c) During the three-month period ended March 31, 2021, the Company issued 9,984,631 common shares at an average exercise price of $0.37 per share for total proceeds of $3,708,161 upon the exercise of share purchase warrants, and $1,525,179 related to exercised warrants were transferred from contributed surplus to share capital (note 14.4).
17 |
TENET FINTECH GROUP INC. Notes to Consolidated Financial Statements For the three-month periods ended March 31, 2022 and 2021 (In Canadian dollars) |
14 - SHAREHOLDERS' EQUITY (CONTINUED)
14.4 Warrants
The outstanding warrants as at March 31, 2022 and December 31, 2021 and the respective changes during the three-month period and the year then ended, are summarized as follows:
2022-03-31 | 2021-12-31 | |||||||||||
Weighted | Weighted | |||||||||||
Number of | average | Number of | average | |||||||||
warrants | exercise price | warrants | exercise price | |||||||||
$ | $ | |||||||||||
Outstanding, beginning of period | 17,332,504 | 3.057 | 14,662,750 | 0.966 | ||||||||
Granted | - | 14,990,999 | 3.500 | |||||||||
Expired | - | (15,000 | ) | 1.333 | ||||||||
Exercised | (1,527,500 | ) | 1.086 | (12,306,245 | ) | 1.107 | ||||||
Outstanding and exercisable, end of period | 15,805,004 | 3.248 | 17,332,504 | 3.057 |
As of March 31, 2022 and December 31, 2021, the number of outstanding warrants which could be exercised for an equivalent number of common shares is as follows:
2022-03-31 | 2021-12-31 | |||||||||||
Number | Exercise price | Number | Exercise price | |||||||||
$ | $ | |||||||||||
Expiration date | ||||||||||||
February 2022 | 360,000 | 2.00 | ||||||||||
July 2022 | 585,000 | 0.50 | 585,000 | 0.50 | ||||||||
August 2022 | 731,190 | 0.50 | 1,298,690 | 0.50 | ||||||||
October 2022 | - | 0.80 | 350,000 | 0.80 | ||||||||
October 2022 | - | 1.50 | 250,000 | 1.50 | ||||||||
May 2023 | 13,328 | 1.00 | 13,328 | 1.00 | ||||||||
May 2023 | 3,500 | 2.00 | 3,500 | 2.00 | ||||||||
July 7, 2023 | 12,870,149 | 3.50 | 12,870,149 | 3.50 | ||||||||
July 7, 2023 | 1,601,837 | 3.50 | 1,601,837 | 3.50 | ||||||||
15,805,004 | 17,332,504 |
18 |
TENET FINTECH GROUP INC. Notes to Consolidated Financial Statements For the three-month periods ended March 31, 2022 and 2021 (In Canadian dollars) |
15 - 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 March 31, 2022 and December 31,2021 and the respective changes during the three-month period and the year then ended, are summarized as follows:
2022-03-31 | 2021-12-31 | |||||||||||
Weighted | Weighted | |||||||||||
Number of | average | Number of | average | |||||||||
options | exercise price | options | exercise price | |||||||||
$ | $ | |||||||||||
Outstanding, beginning of period | 4,689,250 | 1.929 | 4,351,750 | 1.336 | ||||||||
Granted | 78,547 | 6.335 | 945,000 | 4.448 | ||||||||
Exercised (1) | (100,000 | ) | 2.100 | (607,500 | ) | 1.594 | ||||||
Outstanding end of period | 4,667,797 | 2.000 | 4,689,250 | 1.929 | ||||||||
Exercisable end of period | 3,026,050 | 1.570 | 2,488,550 | 1.390 |
(1) Market value of the shares was $3.96 on the exercise date of these options
The table below summarizes the information related to outstanding share options as at March 31, 2022.
Range of | Number of | Weighted average remaining | |||||||
Maturity date | exercise price | options | contractual life (years) | ||||||
$ | |||||||||
June 1, 2022 | 2.100 | 290,000 | 2 months | ||||||
November 27, 2022 | 1.100 | 18,750 | 7 months | ||||||
December 15, 2022 | 1.600 | 171,250 | 8 months | ||||||
April 16, 2023 | 1.000 | 5,000 | 1 year | ||||||
June 5, 2023 | 1.000 | 288,750 | 1 year and 2 months | ||||||
November 28, 2023 | 1.000 | 37,500 | 1 year and 7 months | ||||||
May 1, 2024 | 1.000 | 50,000 | 2 years and 1 month | ||||||
May 27, 2024 | 1.000 | 447,500 | 2 years and 1 month | ||||||
September 5, 2024 | 1.000 | 10,000 | 2 years and 5 months | ||||||
November 1, 2024 | 1.100 | 50,000 | 2 years and 7 months | ||||||
November 12, 2024 | 1.000 | 5,000 | 2 years and 7 months | ||||||
June 11, 2025 | 1.000 | 745,500 | 3 years and 2 months | ||||||
August 7, 2025 | 0.450 | 250,000 | 3 years and 4 months | ||||||
October 28, 2025 | 1.500 | 1,225,000 | 3 years and 6 months | ||||||
November 6, 2025 | 2.700 | 50,000 | 3 years and 7 months | ||||||
January 28, 2026 | 5.700 | 25,000 | 3 years and 9 months | ||||||
March 22, 2026 | 5.500 | 55,000 | 3 years and 11 months | ||||||
May 13, 2026 | 4.800 | 10,000 | 4 years and 1 month | ||||||
July 7, 2026 | 4.100 | 825,000 | 4 years and 3 months | ||||||
August 10, 2026 | 8.000 | 5,000 | 4 years and 4 months | ||||||
October 28, 2026 | 11.500 | 25,000 | 4 years and 6 months | ||||||
January 1, 2027 | 7.500 | 32,725 | 4 years and 9 months | ||||||
February 1, 2027 | 5.600 | 42,881 | 4 years and 10 months | ||||||
March 1, 2027 | 4.100 | 2,941 | 4 years and 11 months | ||||||
4,667,797 |
19 |
TENET FINTECH GROUP INC. Notes to Consolidated Financial Statements For the three-month periods ended March 31, 2022 and 2021 (In Canadian dollars) |
15 - SHARE-BASED PAYMENTS (CONTINUED)
The table below summarizes the information related to outstanding share options as at December 31, 2021.
Range of | Number of | Weighted average remaining | |||||||
Maturity date | exercise price | options | contractual life (years) | ||||||
$ | |||||||||
June 1, 2022 | 2.100 | 390,000 | 5 months | ||||||
November 27, 2022 | 1.100 | 18,750 | 10 months | ||||||
December 15, 2022 | 1.600 | 171,250 | 11 months | ||||||
April 16, 2023 | 1.000 | 5,000 | 1 year and 3 months | ||||||
June 5, 2023 | 1.000 | 288,750 | 1 year and 5 months | ||||||
November 28, 2023 | 1.000 | 37,500 | 1 year and 10 months | ||||||
May 1, 2024 | 1.000 | 50,000 | 2 years and 4 months | ||||||
May 27, 2024 | 1.000 | 447,500 | 2 years and 4 months | ||||||
September 5, 2024 | 1.000 | 10,000 | 2 years and 8 months | ||||||
November 1, 2024 | 1.100 | 50,000 | 2 years and 10 months | ||||||
November 12, 2024 | 1.000 | 5,000 | 2 years and 10 months | ||||||
June 11, 2025 | 1.000 | 745,500 | 3 years and 5 months | ||||||
August 7, 2025 | 0.450 | 250,000 | 3 years and 7 months | ||||||
October 28, 2025 | 1.500 | 1,225,000 | 3 years and 9 months | ||||||
November 6, 2025 | 2.700 | 50,000 | 3 years and 10 months | ||||||
January 28, 2026 | 5.700 | 25,000 | 4 years and 0 months | ||||||
March 22, 2026 | 5.500 | 55,000 | 4 years and 2 months | ||||||
May 13, 2026 | 4.800 | 10,000 | 4 years and 4 months | ||||||
July 7, 2026 | 4.100 | 825,000 | 4 years and 6 months | ||||||
August 10, 2026 | 8.000 | 5,000 | 4 years and 7 months | ||||||
October 28, 2026 | 11.500 | 25,000 | 4 years and 9 months | ||||||
4,689,250 |
During the three-month period ended March 31, 2022 the Company recorded an expense of $541,599 related to share-based payments (2021- $344,690). The offset was credited to contributed surplus.
15.1 Share-based payments granted to directors and employees during the three-month period ended March 31, 2022
a) On January 1, 2022 the Company granted options to acquire 32,725 common shares of the Company at an average exercise price of $7.50 to employees.
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 $179,183, was calculated using the Black & Scholes option pricing model using the following assumptions:
Share price at the date of grant | 7.15 |
Expected life | 5 years |
Risk-free interest rate | 1.25% |
Volatility (1) | 106% |
Exercise price at the date of grant | 7.50 |
The volatility was determined by using the Company's own historical volatility over a period corresponding to expected life of the share options.
b) On February 1, 2022 the Company granted options to acquire 42,881 common shares of the Company at an average exercise price of $5.60 to employees.
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 $173,796, was calculated using the Black & Scholes option pricing model using the following assumptions:
Share price at the date of grant | 5.28 |
Expected life | 5 years |
Risk-free interest rate | 1.63% |
Volatility (1) | 106% |
Exercise price at the date of grant | 5.60 |
The volatility was determined by using the Company's own historical volatility over a period corresponding to expected life of the share options.
20 |
TENET FINTECH GROUP INC. Notes to Consolidated Financial Statements For the three-month periods ended March 31, 2022 and 2021 (In Canadian dollars) |
15 - SHARE-BASED PAYMENTS (CONTINUED)
c) On March 1, 2022 the Company granted options to acquire 2,941 common shares of the Company at an average exercise price of $4.10 to employees.
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 $8,455, was calculated using the Black & Scholes option pricing model using the following assumptions:
Share price at the date of grant | 3.80 |
Expected life | 5 years |
Risk-free interest rate | 1.61% |
Volatility (1) | 104% |
Exercise price at the date of grant | 4.10 |
The volatility was determined by using the Company's own historical volatility over a period corresponding to expected life of the share options.
15.2 Share-based payments granted to directors and employees during the three-month period ended March 31, 2021
a) During the three-month period ended March 31, 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 |
The volatility was determined by using the Company's own historical volatility over a period corresponding to expected life of the share options.
15.3 Options granted to consultants during the three-month period ended March 31, 2021
a) During the three-month period ended March 31, 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 |
The volatility was determined by using the Company's own historical volatility over a period corresponding to expected life of the share options.
16 - 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 $163,894,931 as at March 31, 2022 (December 31, 2021 - $165,590,366).
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.
21 |
TENET FINTECH GROUP INC. Notes to Consolidated Financial Statements For the three-month periods ended March 31, 2022 and 2021 (In Canadian dollars) |
17 - FINANCIAL INSTRUMENTS
17.1 Classification of financial instruments
As at March 31, 2022, the carrying amount of financial assets and financial liabilities were as follows:
2022-03-31 | |||||||||
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 | 18,964,265 | 18,964,265 | |||||||
Restricted Cash | 43,333 | 43,333 | |||||||
Debtors | 53,203,765 | 53,203,765 | |||||||
Loans receivable | 20,622,769 | 20,622,769 | |||||||
- | 92,834,132 | 92,834,132 | |||||||
Financial liabilities | |||||||||
Financial liabilities measured at amortized cost | |||||||||
Accounts payable and accrued liabilities | 14,858,149 | 14,858,149 | |||||||
Bonds | 327,399 | 327,399 | |||||||
CEBA Loan | 100,000 | 100,000 | |||||||
Contingent consideration payable | 2,319,031 | 2,319,031 | |||||||
2,319,031 | 15,285,548 | 17,604,579 |
As at December 31, 2021, the carrying amount of financial assets and financial liabilities were as follows:
2021-12-31 | |||||||||
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 | 18,796,914 | 18,796,914 | |||||||
Restricted Cash | 53,333 | 53,333 | |||||||
Debtors | 55,729,961 | 55,729,961 | |||||||
Loans receivable | 20,823,691 | 20,823,691 | |||||||
- | 95,403,898 | 95,403,899 | |||||||
Financial liabilities | |||||||||
Financial liabilities measured at amortized cost | |||||||||
Accounts payable and accrued liabilities | 15,903,158 | 15,903,158 | |||||||
Bonds | 313,234 | 313,234 | |||||||
CEBA Loan | 100,000 | 100,000 | |||||||
Contingent consideration payable | 1,921,000 | 1,921,000 | |||||||
1,921,000 | 16,316,392 | 18,237,392 |
22 |
TENET FINTECH GROUP INC. Notes to Consolidated Financial Statements For the three-month periods ended March 31, 2022 and 2021 (In Canadian dollars) |
17 - FINANCIAL INSTRUMENTS (CONTINUED)
17.2 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.
17.3 Financial risks
17.3.1 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 (note 2).
The Company's non-derivative financial liabilities have contractual maturities (including interest payments where applicable) as summarized below:
2022-03-31 | |||||||||
Current | Long-term | ||||||||
Within | More | ||||||||
6 months | 6 to 12 months | than 12 months | |||||||
$ | $ | $ | |||||||
Accounts payable and accrued liabilities | 14,858,149 | - | - | ||||||
Bonds | - | - | 400,000 | ||||||
Contingent considerable payable | - | 1,017,031 | 1,302,000 | ||||||
CEBA loan | - | - | 100,000 | ||||||
14,858,149 | 1,017,031 | 1,802,000 |
2021-12-31 | |||||||||
Current | Long-term | ||||||||
Within | More | ||||||||
6 months | 6 to 12 months | than 12 months | |||||||
$ | $ | $ | |||||||
Accounts payable and accrued liabilities | 15,903,158 | - | - | ||||||
Debentures | - | - | 400,000 | ||||||
Bonds | - | 1,303,588 | 617,412 | ||||||
CEBA loan | - | - | 100,000 | ||||||
15,903,158 | 1,303,588 | 1,117,412 |
23 |
TENET FINTECH GROUP INC. Notes to Consolidated Financial Statements For the three-month periods ended March 31, 2022 and 2021 (In Canadian dollars) |
17 - FINANCIAL INSTRUMENTS (CONTINUED)
17.4 Finance costs
The breakdown in Finance costs during the three-month periods ended March 31, 2022 and 2021 is as follows:
2022-03-31 | 2021-03-31 | |||||
Interest on debentures | - | 333 | ||||
Interest on lease liabilities (note 10) | 37,133 | 6,436 | ||||
Interest on security deposit and advances | 4,327 | 28,233 | ||||
Interest on bonds | 10,000 | 10,000 | ||||
Interest income | (15,166 | ) | (9,157 | ) | ||
Accretion on debentures and bonds | 7,614 | 6,924 | ||||
Accretion of contingent payable | 398,031 | - | ||||
Total interest expense | 441,939 | 42,769 | ||||
Miscellaneous | 5,044 | 2,064 | ||||
446,983 | 44,833 |
17.5 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, restricted cash, loans receivables on short and long term and debtors (except sales tax receivables), accounts payable, advances, option conversions and accrued liabilities approximate their carrying amount, given the short-term maturity;
- The fair value of the debentures and the bonds is estimated using a discounted cash flow approach and approximate their carrying amount. CEBA loan is recognized as it cost which is close from its fair value;
- The fair value of contingent compensation payable related to the acquisition of certain assets and personnel from Heartbeat. (note 4) is estimated by probability-weighted cash outflows and reflect management's estimate of a 85% 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).
Bonds are level 3 under the fair value hierarchy.
Contingent consideration payable CEBA loan, loans receivable on short and long term and the option conversion are level 3 under the fair value hierarchy.
24 |
TENET FINTECH GROUP INC. Notes to Consolidated Financial Statements For the three-month periods ended March 31, 2022 and 2021 (In Canadian dollars) |
18 - RELATED PARTY TRANSACTIONS
The Company's related party transactions do not include, unless otherwise stated, special terms and conditions. No guarantees were given or received. Outstanding balances are usually settled in cash.
Transactions with key management personnel, officers and directors
The Company's key management personnel are, the CEO, the CFO , the China CEO and the members of the Board. Their remuneration includes the following expenses:
2022-03-31 | 2021-03-31 | |||||
$ | $ | |||||
Salaries and fringe benefits | 379,823 | 141,420 | ||||
Share-based payments | 413,050 | 312,158 | ||||
Royalty- Cubeler | - | 30,776 | ||||
Total | 792,873 | 484,354 |
These transactions occurred in the normal course of operations and have been measured at fair value.
As at March 31, 2022 and December 31, 2021 the condensed interim consolidated statement of financial position includes the following amounts with related parties:
2022-03-31 | 2021-12-31 | |||||
$ | $ | |||||
Loans, with interest (1) | 113,522 | 113,193 | ||||
113,522 | 113,193 |
(1) On December 15, 2021, loans were issued to two board members of the Company in the amounts of $72,793 and $40,000. Each loan is due on December 15, 2022. Each loans bears interest at an annual rate of 1%, which was the prescribed rate at the date of issuance. As of March 31, 2022, the aggregate outstanding principal amount due for said loans is $113,522 (December 31, 2021 - $113,193).
On October 1, 2021, the Company aquired 100% of the issued and the outstanding shares of Cubeler from Cubeler's shareholders in exchange for $1,000,000 in cash and 11,133,326 common shares of Tenet representing $106,654,255 (note 4).
19 - SEGMENT REPORTING
The Company has determined that it has 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.
25 |
TENET FINTECH GROUP INC. Notes to Consolidated Financial Statements For the three-month periods ended March 31, 2022 and 2021 (In Canadian dollars) |
19 - SEGMENT REPORTING (CONTINUED)
Financial Services
The Financial Services segment encompasses providing commercial loans to entrepreneurs and SMEs and the activity of providing turn-key credit outsourcing services to banks and other lending institutions.
The Fintech Platform segment operates in North America and China, the Financial Services segment operates in China.
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 three-month periods ended March 31, 2022, and 2021 are as follows:
Three months ended 2022-03-31 | |||||||||||||||
Fintech | Financial | Other | Elimination | Total | |||||||||||
Platform | Services | ||||||||||||||
$ | $ | $ | $ | ||||||||||||
Revenues (1) | |||||||||||||||
Financial service revenue from external customers | - | 587,760 | - | - | 587,760 | ||||||||||
Fees/sales from external customers | 1,042,988 | 180,267 | - | - | 1,223,255 | ||||||||||
Supply chain services | 32,982,642 | - | (52,197 | ) | - | 32,930,445 | |||||||||
Inter-segment | 949,972 | 115,178 | 598,274 | (1,663,424 | ) | - | |||||||||
Total revenues | 34,975,603 | 883,204 | 546,078 | (1,663,424 | ) | 34,741,460 | |||||||||
Expenses | |||||||||||||||
Depreciation and amortization | 1,346,263 | 49,888 | 1,979 | - | 1,398,130 | ||||||||||
Interest expense | 31,329 | 8,645 | (451 | ) | - | 39,524 | |||||||||
Write down of accounts receivable | 40 | - | - | - | 40 | ||||||||||
All other expenses | 32,587,109 | 410,555 | 4,624,944 | (1,663,424 | ) | 35,959,184 | |||||||||
Total expenses | 33,964,742 | 469,089 | 4,626,472 | (1,663,424 | ) | 37,396,879 | |||||||||
Profit (loss) before tax | 1,010,861 | 414,115 | (4,080,394 | ) | - | (2,655,419 | ) | ||||||||
Income tax | 588,212 | 115,970 | - | - | 704,182 | ||||||||||
Net profit (loss) | 422,649 | 298,145 | (4,080,394 | ) | - | (3,359,601 | ) | ||||||||
Non-controlling interest | (147,808 | ) | 170,478 | - | - | 22,670 | |||||||||
Net profit (loss) attributable to owners of the parent | 570,457 | 127,668 | (4,080,394 | ) | - | (3,382,271 | ) | ||||||||
Segmented assets | 152,539,181 | 25,435,971 | 15,959,446 | (840,056 | ) | 193,094,542 |
26 |
TENET FINTECH GROUP INC. Notes to Consolidated Financial Statements For the three-month periods ended March 31, 2022 and 2021 (In Canadian dollars) |
19 - SEGMENT REPORTING (CONTINUED)
Three months ended 2021-03-31 | |||||||||||||||
Fintech | Financial | Other | Elimination | Total | |||||||||||
Platform | Services | ||||||||||||||
$ | $ | $ | $ | ||||||||||||
Revenues (1) | |||||||||||||||
Financial service revenue from external customers | - | 592,815 | - | - | 592,815 | ||||||||||
Fees/sales from external customers | 804,080 | 231,067 | - | - | 1,035,147 | ||||||||||
Supply chain services | 12,578,180 | - | 33,634 | - | 12,611,814 | ||||||||||
Inter-segment | 89,165 | 11,034 | 79,162 | (179,361 | ) | - | |||||||||
Total revenues | 13,471,425 | 834,916 | 112,796 | (179,361 | ) | 14,239,776 | |||||||||
Expenses | |||||||||||||||
Depreciation and amortization | 79,768 | 72,717 | 5,493 | - | 157,978 | ||||||||||
Interest expense | 26,111 | 1,636 | 17,086 | - | 44,833 | ||||||||||
All other expenses | 12,791,220 | 405,551 | 1,107,280 | (179,361 | ) | 14,124,690 | |||||||||
Total expenses | 12,897,099 | 479,904 | 1,129,859 | (179,361 | ) | 14,327,501 | |||||||||
Profit (loss) before tax | 574,326 | 355,012 | (1,017,063 | ) | - | (87,725 | ) | ||||||||
Income tax | 199,521 | 95,337 | 7,119 | 301,977 | |||||||||||
Net profit (loss) | 374,805 | 259,675 | (1,024,182 | ) | - | (389,702 | ) | ||||||||
Non-controlling interest | 235,783 | 140,146 | - | - | 375,929 | ||||||||||
Net profit (loss) attributable to owners of the parent | 139,022 | 119,529 | (1,024,182 | ) | - | (765,631 | ) | ||||||||
Segmented assets | 36,019,104 | 24,002,263 | 28,860,091 | (26,734,172 | ) | 62,147,286 |
(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 are located in the following geographic regions:
2022-03-31 | 2021-12-31 | |||||
Non-current | Non-current | |||||
Assets | Assets | |||||
$ | $ | |||||
China | 12,015,535 | 10,900,348 | ||||
Canada | 88,428,985 | 89,991,187 | ||||
Total | 100,444,520 | 100,891,535 |
27 |
TENET FINTECH GROUP INC. Notes to Consolidated Financial Statements For the three-month periods ended March 31, 2022 and 2021 (In Canadian dollars) |
20 - NON-CONTROLLING INTERESTS
The Company controls the following subsidiaries that have significant non-controlling interests (NCIs).
2022-03-31 | 2021-12-31 | |||||||
% 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% | 49% | ||||||
Beijing Kailifeng New Energy Technology Co., Ltd | 49% | 49% | ||||||
Shanghai Xinhuizhi Supply Chain ManagementCo.,Ltd | 49% | 49% |
Total comprehensive loss allocated | ||||||||||||
to NCI | Accumulated NCI | |||||||||||
Three-month | Three-month | |||||||||||
period ended | period ended | As at | As at | |||||||||
2022-03-31 | 2021-03-31 | 2022-03-31 | 2021-12-31 | |||||||||
Asia Synergy Supply Chain Ltd | (39,080 | ) | 234,977 | 1,876,634 | 1,951,538 | |||||||
Asia Synergy Financial Capital Ltd | 125,963 | 21,996 | 11,682,645 | 11,520,859 | ||||||||
Wechain (Nanjing) Technology Service Co., Ltd | (80,716 | ) | - | 702,566 | 783,281 | |||||||
Beijing Kailifeng New Energy Technology Co., Ltd | (23,740 | ) | - | 204,407 | 64,703 | |||||||
Shanghai Xinhuizhi Supply Chain ManagementCo.,Ltd | - | - | 975 | - | ||||||||
(17,574 | ) | 256,973 | 14,467,227 | 14,320,381 |
No dividends were paid to NCIs during the three-month periods ended March 31, 2022 and 2021.
28 |
TENET FINTECH GROUP INC. Notes to Consolidated Financial Statements For the three-month periods ended March 31, 2022 and 2021 (In Canadian dollars) |
20 - NON-CONTROLLING INTERESTS (CONTINUED)
Summarised financial information for subsidiaries with NCIs, before intragroup eliminations are as follows:
ASSC | ASFC | Wechain | Kailifeng | ASAC | Total | |||||||||||||||||||||||||||||||
2022-03-31 | 2021-12-31 | 2022-03-31 | 2021-12-31 | 2022-03-31 | 2021-12-31 | 2022-03-31 | 2021-12-31 | 2022-03-31 | 2021-12-31 | 2022-03-31 | 2021-12-31 | |||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Current assets | 6,193,966 | 8,454,526 | 23,248,677 | 23,223,244 | 612,364 | 446,330 | 359,531 | 130,545 | 1,972 | - | 30,416,510 | 32,254,645 | ||||||||||||||||||||||||
Non-current assets | 267 | 391 | 2,579,155 | 3,421,288 | 947,418 | 1,283,169 | 85,625 | 59,760 | - | - | 3,612,465 | 4,764,607 | ||||||||||||||||||||||||
6,194,233 | 8,454,917 | 25,827,832 | 26,644,532 | 1,559,782 | 1,729,498 | 445,157 | 190,305 | 1,972 | - | 34,028,975 | 37,019,252 | |||||||||||||||||||||||||
Current liabilities | 2,122,672 | 4,238,109 | 1,716,159 | 2,584,145 | 126,380 | 67,363 | 29,577 | 56,091 | - | - | 3,994,788 | 6,945,708 | ||||||||||||||||||||||||
Non-current liabilities | - | - | 65,817 | 69,209 | 66,101 | 66,128 | - | - | - | - | 131,918 | 135,337 | ||||||||||||||||||||||||
Total liabilities | 2,122,672 | 4,238,109 | 1,781,976 | 2,653,354 | 192,481 | 133,491 | 29,577 | 56,091 | - | - | 4,126,706 | 7,081,045 | ||||||||||||||||||||||||
Equity attributable to owners of the parent | 1,953,232 | 2,031,193 | 12,159,488 | 11,991,098 | 731,242 | 815,252 | 212,750 | 67,344 | 1,014 | - | 15,057,725 | 14,904,886 | ||||||||||||||||||||||||
Non-controlling interests | 1,876,634 | 1,951,538 | 11,682,645 | 11,520,859 | 702,566 | 783,281 | 204,407 | 64,703 | 975 | - | 14,467,226 | 14,320,381 |
ASSC | ASFC | Wechain | Kailifeng | ASAC | Total | |||||||||||||||||||||||||||||||
Three-month period ending | Three-month period ending | Three-month period ending | Three-month period ending | Three-month period ending | Three-month period ending | |||||||||||||||||||||||||||||||
2022-03-31 | 2021-03-31 | 2022-03-31 | 2021-03-31 | 2022-03-31 | 2021-03-31 | 2022-03-31 | 2021-03-31 | 2022-03-31 | 2021-03-31 | 2022-03-31 | 2021-03-31 | |||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||
Revenue | 798,392 | 13,082,260 | 702,938 | 592,815 | 190,660 | - | - | - | - | - | 1,691,989 | 13,675,075 | ||||||||||||||||||||||||
Profit for the year attributable to owners of the parent | (51,789 | ) | 245,407 | 177,436 | 145,866 | (76,677 | ) | - | (25,375 | ) | - | - | - | 23,595 | 391,273 | |||||||||||||||||||||
Profit for the year attributable to NCIs | (49,758 | ) | 235,783 | 170,478 | 140,146 | (73,670 | ) | - | (24,380 | ) | - | - | - | 22,670 | 375,929 | |||||||||||||||||||||
Profit for the year | (101,548 | ) | 481,190 | 347,914 | 286,012 | (150,347 | ) | - | (49,754 | ) | - | - | - | 46,265 | 767,202 | |||||||||||||||||||||
�� | ||||||||||||||||||||||||||||||||||||
Other comprehensive income ("OCI") for the year | ||||||||||||||||||||||||||||||||||||
OCI attributable to the owners of the parent | 11,114 | (840 | ) | (46,331 | ) | (122,972 | ) | (7,333 | ) | - | 665 | - | - | - | (41,885 | ) | (123,812 | ) | ||||||||||||||||||
OCI attributable to NCIs | 10,678 | (807 | ) | (44,514 | ) | (118,150 | ) | (7,046 | ) | - | 639 | - | - | - | (40,243 | ) | (118,957 | ) | ||||||||||||||||||
OCI for the year | 21,792 | (1,647 | ) | (90,846 | ) | (241,122 | ) | (14,379 | ) | - | 1,304 | - | - | - | (82,128 | ) | (242,769 | ) | ||||||||||||||||||
Total comprehensive income for the year attributable to the owners of the parent | (40,675 | ) | 244,566 | 131,105 | 22,894 | (84,010 | ) | - | (24,709 | ) | - | - | - | (18,290 | ) | 267,460 | ||||||||||||||||||||
Total comprehensive income for the year attributable to NCIs | (39,080 | ) | 234,977 | 125,963 | 21,996 | (80,716 | ) | - | (23,740 | ) | - | - | - | (17,573 | ) | 256,973 | ||||||||||||||||||||
Total comprehensive income for the year | (79,755 | ) | 479,543 | 257,068 | 44,890 | (164,726 | ) | - | (48,450 | ) | - | - | - | (35,863 | ) | 524,433 | ||||||||||||||||||||
Net cash used in operating activities | 1,809,593 | 2,465,438 | 2,127,652 | (540,182 | ) | (66,973 | ) | - | (295,053 | ) | - | - | - | 3,575,219 | 1,925,257 | |||||||||||||||||||||
Net cash used in investing activities | 3 | - | 110,989 | (926,739 | ) | 20,714 | - | (25,273 | ) | - | - | - | 106,433 | (926,739 | ) | |||||||||||||||||||||
Net cash from financing activities | (1,796,478 | ) | (2,537,190 | ) | (913,382 | ) | 7,929 | (1,047 | ) | - | 335,832 | - | - | - | (2,375,075 | ) | (2,529,261 | ) | ||||||||||||||||||
Foreign exchange differences | (43,700 | ) | - | (293,236 | ) | - | (12,259 | ) | - | (2,439 | ) | - | - | - | (351,634 | ) | - | |||||||||||||||||||
Net cash (outflow) inflow for the year | (30,582 | ) | (71,752 | ) | 1,032,023 | (1,458,991 | ) | (59,565 | ) | - | 13,067 | - | - | - | 954,943 | (1,530,743 | ) |
29 |
TENET FINTECH GROUP INC. Notes to Consolidated Financial Statements For the three-month periods ended March 31, 2022 and 2021 (In Canadian dollars) |
20 - NON-CONTROLLING INTERESTS (CONTINUED)
During the three-month period ended March 31, 2022, the Company's subsidiary, ASDS along with the non-controlling interests of Kalifeng subscribed for additional share capital in the ratio of their relevant ownership percentages. The total value of capital injected by NCIs in Kalifeng totalled $163,444 (three-months ended March 31, 2021 - $Nil). As at March 31, 2022 the amount of the NCI's portion of the capital injection agreed for Kailifeng that was outstanding was $261,683 (December 31, 2021 - $98,239) (refer note 6).
21 - CONTINGENCIES
Through the normal course of operations, the Company may be exposed to a number of lawsuits, claims and contingencies. Provisions are recognized as liabilities in instances when there are present obligations and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligations and where such liabilities can be reliably estimated. No provision has been recognized in these consolidated financial statements. Although it is possible that liabilities may be incurred in instances where no provision has been made, the Company has no reason to believe that the ultimate resolution of such matters will have a material impact on its financial position.
22 - SUBSEQUENT EVENTS
During the period from April 1, 2022, and May 30, 2022, the Company issued 15,627 share purchase options to new employees and consultant with a strike price of $4.16. Stock options are vested between a period of 12 to 24 months and mature 5 years after the issuance date.