Tenet Fintech Group Inc.
Condensed Interim Consolidated
Financial Statements (Unaudited)
For the three and nine-month periods ended
September 30, 2022 and 2021
TENET FINTECH GROUP INC.
Condensed Interim Consolidated Statements of Comprehensive Profit and Loss
For the three and nine-month periods ended September 30, 2022 and 2021
(In Canadian dollars, except weighted average number of outstanding shares) (Unaudited)
Three-month periods ended | Nine-month periods ended | |||||||||||||
September 30 | September 30 | |||||||||||||
Note | 2022 | 2021 | 2022 | 2021 | ||||||||||
Revenues | 21,585,258 | 25,695,570 | 88,758,946 | 70,584,525 | ||||||||||
Expenses | ||||||||||||||
Cost of service | 16,976,733 | 21,120,835 | 74,973,340 | 60,910,889 | ||||||||||
Software delivery services | 942,837 | - | 1,928,235 | - | ||||||||||
Salaries and fringe benefits | 3,201,274 | 1,375,954 | 8,281,013 | 2,792,424 | ||||||||||
Service fees | 534,087 | 161,859 | 930,993 | 468,497 | ||||||||||
Royalty on software | - | 32,524 | - | 107,202 | ||||||||||
Board remuneration | 175,958 | 278,191 | 518,962 | 549,020 | ||||||||||
Consulting fees | 369,112 | 118,310 | 1,082,595 | 300,052 | ||||||||||
Management fees | 11,430 | 11,670 | 34,974 | 38,844 | ||||||||||
Outsourced services, software and maintenance | 346,832 | - | 1,346,990 | - | ||||||||||
Professional fees | 1,095,143 | 417,868 | 2,793,927 | 1,330,750 | ||||||||||
Marketing, public relations and press releases | 420,335 | 421,775 | 937,571 | 678,256 | ||||||||||
Office supplies, software and hardware | 381,835 | (1,517 | ) | 897,911 | 86,968 | |||||||||
Lease expenses | 40,045 | 11,510 | 125,854 | 34,327 | ||||||||||
Insurance | 316,758 | 35,637 | 965,139 | 77,809 | ||||||||||
Finance costs | 18.4 | 23,656 | 41,606 | 118,736 | 137,374 | |||||||||
Expected credit loss | 5,6 | 388,396 | (44,286 | ) | 577,569 | (35,040 | ) | |||||||
Travel and entertainment | 98,581 | 77,510 | 272,800 | 155,176 | ||||||||||
Stock exchange and transfer agent costs | 54,282 | 165,154 | 213,859 | 318,523 | ||||||||||
Translation cost and others | 30,259 | 16,150 | 113,450 | 137,035 | ||||||||||
Reversal of impairment loss | - | - | - | (193,717 | ) | |||||||||
Depreciation of property and equipment | 7 | 22,397 | 22,545 | 65,385 | 65,847 | |||||||||
Depreciation of right-of-use assets | 7 | 182,687 | 105,972 | 435,221 | 219,878 | |||||||||
Amortization of intangible assets | 9 | 1,754,964 | 462,831 | 4,820,138 | 685,263 | |||||||||
Amortization of initial financing costs | 13 | 6,799 | 6,799 | 20,175 | 20,175 | |||||||||
Impairment of goodwill | 9 | - | 216,421 | - | 216,421 | |||||||||
Impairment of intangible assets | 9 | 4,218,826 | - | 4,218,826 | - | |||||||||
Change in fair value of contingent consideration payable | 4.4 | (1,305,068 | ) | 171,432 | (603,589 | ) | 171,432 | |||||||
Gain on bargain purchase | 4.2 | (109,605 | ) | (1,910,597 | ) | (109,605 | ) | (1,910,597 | ) | |||||
(Gain) Loss on foreign exchange | (13,932 | ) | (4,129 | ) | 112,655 | (31,981 | ) | |||||||
30,164,621 | 23,312,024 | 105,073,124 | 67,330,827 | |||||||||||
Profit (loss) before income taxes | (8,579,363 | ) | 2,383,546 | (16,314,178 | ) | 3,253,698 | ||||||||
Income taxes (recovery) | (864,154 | ) | 857,260 | 1,093,304 | 1,821,043 | |||||||||
Net profit (loss) | (7,715,209 | ) | 1,526,286 | (17,407,482 | ) | 1,432,655 | ||||||||
Net profit (loss) attributable to: | ||||||||||||||
Non-controlling interest | 77,064 | 169,752 | 236,040 | 861,311 | ||||||||||
Owners of the parent | (7,792,273 | ) | 1,356,534 | (17,643,522 | ) | 571,344 | ||||||||
(7,715,209 | ) | 1,526,286 | (17,407,482 | ) | 1,432,655 | |||||||||
Item that will be reclassified subsequently to profit or loss | (782,277 | ) | ||||||||||||
Currency translation adjustment | (91,291 | ) | (1,003,357 | ) | (2,452,768 | ) | ||||||||
Total comprehensive profit (loss) | (7,806,500 | ) | 2,529,643 | (19,860,250 | ) | 2,214,932 | ||||||||
Total comprehensive profit (loss) attributable to: | ||||||||||||||
Non-controlling interest | 66,864 | 205,593 | (12,120 | ) | 820,190 | |||||||||
Owners of the parent | (7,873,364 | ) | 2,324,050 | (19,848,130 | ) | 1,394,742 | ||||||||
(7,806,500 | ) | 2,529,643 | (19,860,250 | ) | 2,214,932 | |||||||||
Weighted average number of outstanding shares | 99,310,145 | 80,351,626 | 98,819,297 | 69,298,789 | ||||||||||
Basic and diluted profit (loss) per share | (0.078 | ) | 0.017 | (0.179 | ) | 0.008 | ||||||||
Going concern uncertainty(note 2) | ||||||||||||||
Subsequent events (note 24) | ||||||||||||||
The accompanying notes are an integral part of these condensed interim consolidated financial statements
TENET FINTECH GROUP INC.
Condensed Interim Consolidated Statements of Changes in Equity
For the nine-month periods ended September 30, 2022 and 2021
(In Canadian dollars) (Unaudited)
Capital stock | ||||||||||||||||||||||||||||
Accumulated other | ||||||||||||||||||||||||||||
Number of | Equity to | Contributed | comprehensive | Total attributable | Non controlling | Shareholders' | ||||||||||||||||||||||
Note | common shares | Amount | issue | surplus | income | Deficit | to owners of parent | interest | equity | |||||||||||||||||||
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 | 15 | 2,259,500 | 2,548,471 | (150,000 | ) | (522,971 | ) | - | - | 1,875,500 | - | 1,875,500 | ||||||||||||||||
Exercise of options | 15,16 | 117,500 | 464,170 | - | (217,420 | ) | - | - | 246,750 | - | 246,750 | |||||||||||||||||
Share-based compensation | 16 | - | - | - | 1,672,237 | - | - | 1,672,237 | - | 1,672,237 | ||||||||||||||||||
Subscription for shares by non-controlling interest | - | - | - | - | - | - | - | 791,007 | 791,007 | |||||||||||||||||||
Transactions with owners | 99,544,183 | 211,232,131 | - | 22,463,031 | 1,366,752 | (79,997,442 | ) | 155,064,472 | 15,111,388 | 170,175,860 | ||||||||||||||||||
Net profit (loss) | - | - | - | - | - | (17,643,522 | ) | (17,643,522 | ) | 236,040 | (17,407,482 | ) | ||||||||||||||||
Other comprehensive loss | - | - | - | - | (2,204,608 | ) | - | (2,204,608 | ) | (248,160 | ) | (2,452,768 | ) | |||||||||||||||
Total comprehensive loss for the period | - | - | - | - | (2,204,608 | ) | (17,643,522 | ) | (19,848,130 | ) | (12,120 | ) | (19,860,250 | ) | ||||||||||||||
Balance as at September 30, 2022 | 99,544,183 | 211,232,131 | - | 22,463,031 | (837,856 | ) | (97,640,964 | ) | 135,216,342 | 15,099,268 | 150,315,610 |
Capital stock | ||||||||||||||||||||||||||||
Accumulated other | ||||||||||||||||||||||||||||
Number of | Equity to | Contributed | comprehensive | Total attributable | Non controlling | Shareholders' | ||||||||||||||||||||||
Note | common shares | Amount | issue | surplus | income | Deficit | to owners of parent | interest | equity | |||||||||||||||||||
Balance as at 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 | 15 | 13,149,999 | 41,922,442 | - | 10,677,558 | - | - | 52,600,000 | - | 52,600,000 | ||||||||||||||||||
Issuance of shares and warrants to settle debts | ||||||||||||||||||||||||||||
owed for services provided | 15 | 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 shares re business acquisition | 4 | 511,169 | 403,610 | (403,610 | ) | - | - | - | - | - | - | |||||||||||||||||
Issuance costs - shares and warrants | 15 | - | (4,618,710 | ) | - | - | - | - | (4,618,710 | ) | - | (4,618,710 | ) | |||||||||||||||
Issuance costs - broker compensation warrants | 15 | - | (1,875,595 | ) | - | 1,875,595 | - | - | - | - | - | |||||||||||||||||
Exercise of warrants and broker warrants | 15 | 9,272,738 | 12,310,172 | (107,611 | ) | (2,527,705 | ) | - | - | 9,674,857 | 9,674,857 | |||||||||||||||||
Conversion of convertible debentures | 12 | 25,000 | 27,483 | - | - | - | - | 27,483 | - | 27,483 | ||||||||||||||||||
Exercise of options | 15,16 | 607,500 | 1,890,443 | - | (921,690 | ) | - | - | 968,753 | - | 968,753 | |||||||||||||||||
Share-based compensation | 16 | - | - | - | 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 profit (loss) | - | - | - | - | 823,398 | - | 823,398 | (41,121 | ) | 782,277 | ||||||||||||||||||
Total comprehensive profit for the year | - | - | - | - | 823,398 | 571,344 | 1,394,742 | 820,190 | 2,214,932 | |||||||||||||||||||
Balance as at 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 |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
TENET FINTECH GROUP INC.
Condensed Interim Consolidated Statements of Cash Flows
For the three and nine-month periods ended September 30, 2022 and 2021
(In Canadian dollars) (Unaudited)
Three-month periods ended | Nine-month periods ended | ||||||||||||
September 30 | September 30 | ||||||||||||
Note | 2022 | 2021 | 2022 | 2021 | |||||||||
OPERATING ACTIVITIES | |||||||||||||
Net profit (loss) | (7,715,209 | ) | 1,526,286 | (17,407,482 | ) | 1,432,655 | |||||||
Non-cash items | |||||||||||||
Expected credit loss | 5,6 | 388,396 | (44,286 | ) | 577,569 | (35,040 | ) | ||||||
Depreciation of property and equipment | 7 | 22,397 | 22,545 | 65,385 | 65,847 | ||||||||
Depreciation of right-of-use assets | 7 | 182,687 | 105,972 | 435,221 | 219,878 | ||||||||
Amortization of intangible assets | 9 | 1,754,964 | 462,831 | 4,820,138 | 685,263 | ||||||||
Amortization of initial financing costs | 13 | 6,799 | 6,799 | 20,175 | 20,175 | ||||||||
Impairment of goodwill | - | 216,421 | - | 216,421 | |||||||||
Impairment of intangible assets | 9 | 4,218,826 | - | 4,218,826 | - | ||||||||
Reversal of impairment loss | - | - | - | (193,717 | ) | ||||||||
Accretion on debentures and bonds | 13,18.4 | 8,596 | 7,047 | 24,299 | 20,601 | ||||||||
Accretion of lease interest | 11,18.4 | 38,598 | 26,277 | 113,999 | 40,247 | ||||||||
Issuance of shares and warrants for settlement of debt | 15 | - | - | - | 15,000 | ||||||||
Change in fair value of contingent consideration payable | (1,305,068 | ) | 171,432 | (603,589 | ) | 171,432 | |||||||
Share-based compensation | 16 | 559,935 | 815,801 | 1,672,237 | 1,557,006 | ||||||||
Deferred tax liability | (53,818 | ) | (527,047 | ) | 53,744 | (527,047 | ) | ||||||
Gain on bargain purchase | 4.3 | (109,605 | ) | (1,910,597 | ) | (109,605 | ) | (1,910,597 | ) | ||||
Loans receivable maturing in more than 12 months | 5 | 424,693 | 949,511 | 2,014,300 | (19,639 | ) | |||||||
Net changes in working capital items | |||||||||||||
Restricted cash | 10,000 | 16,838 | 30,000 | 16,758 | |||||||||
Income tax payable | (880,910 | ) | 2,485,727 | (618,356 | ) | 2,096,549 | |||||||
Accounts receivable | 6 | (201,413 | ) | 20,543,495 | 1,331,492 | 16,047,029 | |||||||
Deposits made to third parties regarding | |||||||||||||
transactions on platforms | 6 | (1,941,456 | ) | (11,148,198 | ) | 5,259,693 | (11,148,198 | ) | |||||
Prepayment to third party subcontractors | 6 | (2,555,966 | ) | (11,595,993 | ) | (1,678,493 | ) | (11,595,993 | ) | ||||
Other debtors | 6 | 196,579 | 8,300,247 | 530,429 | 1,436,001 | ||||||||
Loans receivable maturing in less than 12 months | 5 | 2,753,875 | (158,996 | ) | 1,095,153 | (892,309 | ) | ||||||
Assets held for resale | (88,707 | ) | - | (23,949 | ) | - | |||||||
Other prepaid expenses | 480,507 | 110,930 | 912,461 | 792,184 | |||||||||
Deposits received for transactions on platforms | - | (3,113,772 | ) | - | 819,378 | ||||||||
Accounts payable, advances and accrued liabilities | 9 | 346,509 | (18,308,786 | ) | (1,520,511 | ) | (18,838,504 | ) | |||||
Cash flows from operating activities | (3,458,791 | ) | (11,039,513 | ) | 1,213,136 | (19,508,622 | ) | ||||||
INVESTING ACTIVITIES | |||||||||||||
Investments | 8 | (480,448 | ) | - | (1,061,496 | ) | - | ||||||
Property and equipment - additions | 7 | (19,007 | ) | (24,167 | ) | (44,441 | ) | (28,480 | ) | ||||
Property and equipment - disposals | 7 | - | 159 | 2,344 | 6,148 | ||||||||
Intangible assets - additions | 9 | (3,136,950 | ) | (8,630,952 | ) | (7,842,398 | ) | (9,420,160 | ) | ||||
Cash, acquired on acquisition of subsidiaries | 93,277 | 494,697 | 93,277 | 494,697 | |||||||||
Cash flows from investing activities | (3,543,128 | ) | (8,160,263 | ) | (8,852,714 | ) | (8,947,795 | ) | |||||
FINANCING ACTIVITIES | 717,351 | - | (1,874,752 | ) | - | ||||||||
Repayments of advances from third parties | |||||||||||||
Repayment of advances made from affiliates | - | (30,050 | ) | - | (40,133 | ) | |||||||
Repayments of advances made from a Director | - | - | - | (270,911 | ) | ||||||||
Repayments of lease liabilities | 11 | (205,441 | ) | (195,050 | ) | (503,678 | ) | (271,233 | ) | ||||
Proceeds from the issuance of shares and warrants | - | 47,981,290 | - | 47,981,290 | |||||||||
Proceeds from the exercise of warrants | 15 | 303,250 | 3,708,557 | 1,875,500 | 9,594,871 | ||||||||
Proceeds from the exercise of options | 16 | - | 886,253 | 246,750 | 1,003,753 | ||||||||
Subscriptions for shares from non-controlling interest | - | 189,532 | - | 189,532 | |||||||||
Cash flow from financing activities | 815,160 | 52,540,532 | (256,180 | ) | 58,187,169 | ||||||||
IMPACT OF FOREIGN EXCHANGE | (373,541 | ) | 967,068 | (2,412,909 | ) | 794,200 | |||||||
Net decrease in cash | (6,560,300 | ) | 34,307,824 | (10,308,667 | ) | 30,524,952 | |||||||
Cash, beginning of period | 15,048,547 | 2,091,004 | 18,796,914 | 5,873,876 | |||||||||
Cash, end of period | 8,488,247 | 36,398,828 | 8,488,247 | 36,398,828 | |||||||||
The accompanying notes are an integral part of these condensed interim consolidated financial statements
TENET FINTECH GROUP INC.
Condensed Interim Consolidated Statements of Financial Position
As at September 30, 2022 and December 31, 2021
(In Canadian dollars) (Unaudited)
As at | As at | ||||||
September 30, | December 31, | ||||||
Note | 2022 | 2021 | |||||
ASSETS | Unaudited | Unaudited | |||||
Current | |||||||
Cash | 8,488,247 | 18,796,914 | |||||
Restricted cash | 23,333 | 53,333 | |||||
Loans receivable | 5 | 15,880,636 | 17,553,358 | ||||
Assets held for sale | 344,908 | 320,959 | |||||
Debtors | 6 | 52,003,213 | 56,001,475 | ||||
Prepaid expenses and other current assets | 795,396 | 1,675,549 | |||||
77,535,733 | 94,401,588 | ||||||
Loans receivable | 5 | 1,256,033 | 3,270,333 | ||||
Property and equipment | 7 | 2,085,094 | 2,062,014 | ||||
Investments | 8 | 1,061,496 | - | ||||
Intangible assets | 9 | 31,935,847 | 32,845,799 | ||||
Goodwill | 9 | 61,265,980 | 62,522,554 | ||||
Deferred tax assets | 137,091 | 190,835 | |||||
175,277,274 | 195,293,123 | ||||||
LIABILITIES | |||||||
Current | |||||||
Accounts payable, advances and accrued liabilities | 10 | 13,856,525 | 16,268,296 | ||||
Lease liabilities | 11 | 486,037 | 432,621 | ||||
Bonds | 13 | 357,708 | - | ||||
Current tax liabilities | 3,005,865 | 3,625,683 | |||||
17,706,135 | 20,326,600 | ||||||
Bonds | 13 | - | 313,234 | ||||
CEBA Loan | 14 | 100,000 | 100,000 | ||||
Lease liabilities | 11 | 1,368,132 | 1,315,363 | ||||
Foreign deferred tax liability | 1,922,556 | 1,922,556 | |||||
Canadian deferred tax liability | 3,804,004 | 3,804,004 | |||||
Contingent consideration payable | 4.4 | 60,837 | 1,921,000 | ||||
24,961,664 | 29,702,757 | ||||||
SHAREHOLDERS' EQUITY | |||||||
Capital stock | 15 | 211,232,131 | 208,219,490 | ||||
Shares to be issued | 15 | - | 150,000 | ||||
Contributed surplus | 22,463,031 | 21,531,185 | |||||
Accumulated other comprehensive income | (837,856 | ) | 1,366,752 | ||||
Deficit | (97,640,964 | ) | (79,997,442 | ) | |||
Shareholders' equity attributable to owners of the parent | 135,216,342 | 151,269,985 | |||||
Non-controlling interest | 15,099,268 | 14,320,381 | |||||
Total shareholders' equity | 150,315,610 | 165,590,366 | |||||
175,277,274 | 195,293,123 | ||||||
Going concern uncertainty (note 2)
Subsequent events (note 23)
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
On behalf of the Board, |
|
|
/S/ Johnson Joseph |
| /S/ Dylan Tinker |
Director |
| Director |
TENET FINTECH GROUP INC. Notes to Condensed Interim Consolidated Financial Statements For the nine-month periods ended September 30, 2022 and 2021 (In Canadian dollars) (Unaudited) |
1 - GOVERNING STATUTES, NATURE OF OPERATIONS AND GENERAL INFORMATION
Tenet Fintech Group Inc. (hereinafter "Tenet'' or the "Company"), formerly named Peak Fintech Group Inc. until November 1, 2021, 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 (OTC) 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) to 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 depends upon its ability to raise additional financing. Even if the Company has been successful in the past in doing so, including financing by a prospectus that generated a net cash inflow of $47,981,290 in the third 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 $17,407,482 for the nine-month period ended September 30, 2022 (year ended December 31, 2021 - $48,561,968), it has an accumulated deficit of $97,640,964 as at September 30, 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.
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, 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 and the new Company accounting policies mentioned in 3.5 and 3.6.
These condensed interim consolidated financial statements for the nine-month periods ended September 30, 2022, and 2021 were approved by the Board of Directors on November 29, 2022.
3.2 Basis of measurement
These condensed interim consolidated financial statements are prepared on an accrual basis using the historical cost method.
TENET FINTECH GROUP INC. Notes to Condensed Interim Consolidated Financial Statements For the nine-month periods ended September 30, 2022 and 2021 (In Canadian dollars) (Unaudited) |
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
3.3 Basis of Consolidation
These condensed interim consolidated financial statements include the accounts of Tenet and all of its subsidiaries. The Company attributes the total comprehensive profit 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 |
Tenet Fintech Group Inc. | Canada | Holding and parent company | Canadian dollar | |
Cubeler Inc. | Canada | 100% | Technology based product developer and procurement facilitator | Canadian dollar |
Tenoris3 Inc. | Canada | 100% | Technology based product developer (currently with no operations) | Canadian dollar |
Asia Synergy Limited ("ASL") | Hong Kong | 100% | Holding | US dollar |
Asia Synergy Holdings ("ASH") | China | 100% | Holding | Renminbi |
Asia Synergy Technologies Ltd. ("AST") | China | 100% | Technology based product procurement facilitator | Renminbi |
Asia Synergy Supply Chain Technologies Ltd. ("ASSC") | China | 100% | Technology based product procurement facilitator | Renminbi |
Asia Synergy Solar-Gas & Oil Supply Chain Management Co., Ltd. ("AJP") | China | 100% | Technology based product procurement facilitator | Renminbi |
Asia Synergy Data Solutions Ltd. ("ASDS") | China | 100% | Fintech | Renminbi |
Asia Synergy Credit Solutions Ltd. ("ASCS") | China | 100% | Credit outsourcing services | Renminbi |
Asia Synergy Supply Chain Ltd. ("ASSA") | China | 51% | Supply chain services | Renminbi |
Asia Synergy Insurance Services ("ASSI") | China | 100% | Fintech | Renminbi |
Wuxi Aorong Ltd. ("AORONG") | China | 100% | Holding | Renminbi |
Asia Synergy Financial Capital Ltd. ("ASFC") | China | 51% | Financial institution | Renminbi |
Beijing Huike Internet Technology ("HUIKE") | China | 100% | Technology based product facilitator | Renminbi |
Wechain (Nanjing) Technology Service Co., Ltd. ("WECHAIN") | China | 51% | Fintech | Renminbi |
Beijing Kailifeng New Energy Technology Co., Ltd. ("KALIFENG") | China | 51% | Technology based clean energy trading platform facilitator | Renminbi |
Shanghai Xinhuizhi Supply Chain Management Co., Ltd. ("ASAC") | China | 51% | Technology based product procurement facilitator | Renminbi |
Tianjin Wodatong Technology Co., Ltd. ("ASB") | China | 100% | Fintech | Renminbi |
Jiangsu Supairui IOT Technology Co., Ltd. ("ASTH") (1) | China | 80% | Technology based product procurement facilitator | Renminbi |
Wuxi Suyetong Supply Chain Management Co., Ltd. ("SST") (1) | China | 80% | Technology based product procurement facilitator | Renminbi |
(1) Creation of new subsidiaries
In August 2022, the Company acquired a company called Jiangsu Supairui IOT Technology Co., Ltd. ("ASTH"), becoming a new partly owned subsidiary of
AST. Following the transaction, the Company created, Wuxi Suyetong Supply Chain Management Co., Ltd. ("SST"), a wholly owned subsidiary of ASTH
(note 4).
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.
3.5 Investments in associates
The Company applies the equity method in accounting investments in companies subject to significant influence ("associate company"). The share of the operating results of an associate company is recorded in the consolidated statements of comprehensive profit and loss. The cumulative Company's share of the associate company losses is limited to the recorded equity interest, except for obligation or payments assumed for another party. An impairment loss is recognized if any facts and circumstances indicate that the investment's fair value exceeds its carrying value.
TENET FINTECH GROUP INC. Notes to Condensed Interim Consolidated Financial Statements For the nine-month periods ended September 30, 2022 and 2021 (In Canadian dollars) (Unaudited) |
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
3.6 Financial assets at fair value through profit or loss
Equity investments, other than subsidiaries controlled by the Company or associate companies, are recorded at fair value through profit or loss. The equity investments are measured at fair value, following IFRS 13 guidelines, using either active market transactions to value its investment or other valuation methods whenever no active market exists. Variation in fair value is recorded in the consolidated statements of comprehensive profit and loss.
4 - BUSINESS COMBINATIONS
4.1 Acquisition of subsidiary - Jiangsu Supairui IOT Technology Co., Ltd. ("ASTH")
On August 1, 2022, the Company, through its AST subsidiary, acquired 80% of ASTH share capital and voting rights, effectively obtaining control of the company on that date. ASTH owns and operates a technology based product procurement platform that will be integrated into the Company supply chain technology service offering and is expected to benefit the Company by enabling it to reach and develop additional markets in Mainland China. No consideration was paid upon the acquisition as the Company's business network is expected to benefit the non-controlling interest shareholder.
As at the acquisition date, the fair value of ASTH net assets acquired was estimated at $137,007, based on management's valuation, resulting in a $109,605 bargain purchase attributable to the owners of the parent, recorded through the consolidated statements of comprehensive profit and loss. The Company was able to obtain a bargain purchase on the transaction as its business network is expected to impact the acquired business's expected growth and benefit the investment of the non-controlling shareholder. The non-controlling interest recognized on the acquisition date was measured at its proportionate share of the acquiree's identifiable net assets of 20%.
From the date of acquisition, ASTH contributed $1,120,254 in revenues and $92,730 to profit before tax from continuing operations of the Company. If the combination had taken place at the beginning of the year, pro forma revenue from continuing operations would have been$3,039,391 and pro forma loss before tax for the Company would have been$91,558. The pro forma results of operations are not intended to reflect the results that would have actually occurred had the acquisition closed on January 1, 2022. Further, the pro forma results of operations are not necessarily indicative of the results that may be generated by the Company in the future or reflect future events that may occur following the acquisition in a subsequent period or periods. As at the transaction date, the other receivables' gross contractual amount, included in the identifiable net assets acquired, was $682,717. Based on management's review of the account, the total other receivables amount is recoverable.
4.2 Accounting for business combinations
The ASTH acquisition has been determined to constitute a business combination and, accordingly, it has been accounted for using the acquisition method of accounting. During the reporting period, the Company also finalized its purchase price allocation for the Heartbeat acquisition, that occured on September 1, 2021.
Heartbeat | ASTH | ||||||||
Fair value of consideration transferred | Preliminary | Final | Preliminary | ||||||
Consideration paid | |||||||||
Cash | 11,000,000 | 11,000,000 | - | ||||||
Contingent consideration paid | |||||||||
Issuance of 600,000 shares of the Company at $11.50/share | 6,900,000 | 6,900,000 | - | ||||||
Total consideration paid as at year end | 17,900,000 | 17,900,000 | - | ||||||
Contingent consideration payable | |||||||||
Issuance of shares of the Company on December 31, 2022 - up to $7.1m in value | 3,717,074 | 2,916,000 | - | ||||||
Issuance of shares of the Company on December 31, 2023 - up to $6.0m in value | 1,760,500 | 1,305,000 | - | ||||||
Total estimated contingent consideration payable | 5,477,574 | 4,221,000 | - | ||||||
Total consideration (paid and contingent consideration) | 23,377,574 | 22,121,000 | - | ||||||
Identifiable net assets acquired | |||||||||
Cash | 185,830 | 185,830 | 93,277 | ||||||
Other receivables | - | - | 682,717 | ||||||
Other current assets | 292,547 | 292,547 | 32,308 | ||||||
Property and equipment | 1,574 | 1,574 | 46,937 | ||||||
Heartbeat Platform | 7,471,000 | 7,471,000 | - | ||||||
Tradename | 4,000 | 4,000 | - | ||||||
Other ERP Platforms | - | - | 285,150 | ||||||
Accounts payable and accrued liabilities | (1,204,036 | ) | (1,204,036 | ) | (983,492 | ) | |||
Lease liabilities | - | - | (19,890 | ) | |||||
Deferred tax liability | (1,868,750 | ) | (1,868,750 | ) | - | ||||
Identifiable total net assets | 4,882,165 | 4,882,165 | 137,007 | ||||||
Non-controlling interest | - | - | (27,402 | ) | |||||
Goodwill (Bargain purchase) arising on acquisition | |||||||||
Goodwill (Bargain purchase) attributable to Owners of the parent | 18,495,409 | 17,238,835 | (109,605 | ) | |||||
23,377,574 | 22,121,000 | 0 | |||||||
Consideration paid in cash | 11,000,000 | 11,000,000 | - | ||||||
Cash and cash equivalents acquired | 185,830 | 185,830 | 93,277 | ||||||
11,185,830 | 11,185,830 | 93,277 |
TENET FINTECH GROUP INC. Notes to Condensed Interim Consolidated Financial Statements For the nine-month periods ended September 30, 2022 and 2021 (In Canadian dollars) (Unaudited) |
4 - BUSINESS COMBINATIONS (CONTINUED)
The Company initially recognized, in its unaudited Condensed Interim Consolidated Financial Statements for the three and nine-month periods ended September 30, 2021, and 2020, a preliminary 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, and the estimated fair value of the consideration paid and payable. An adjusted purchase price allocation of the Heartbeat acquisition was reflected in note 6 of Consolidated Financial Statements for the year ended December 31, 2021, resulting in a Goodwill of $18,495,409.
During the period, the calculation of the purchase price allocation relating to the Heartbeat Platform acquisition was finalized. The final fair value of the contingent consideration payable under this agreement was estimated using a discount rate of 80%, at $22,121,000. This resulted in a Goodwill reduction adjustment arising from the transaction of $1,256,574 and an equivalent amount was debited in Contingent consideration payable.
The bargain purchase of $109,605 from the ASTH acquisition arises from the difference in the fair value of the net assets acquired over the purchase price. The Company was able to acquire ASTH with $Nil consideration as its current network is expected to benefit the NCI shareholder in the future.
4.3 Acquisitions and accounting treatment of subsidiaries during the previous year
On September 1, 2021, the Company, through its subsidiary 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"). 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. As of the date of its acquisition by ASDS, WECHAIN had traded and incurred retained losses and had accrued outstanding net liabilities totalling $216,422. The acquisition of WECHAIN was completed for no additional consideration and the net liabilities assumed gave rise to goodwill on consolidation totalling $216,421.
On September 1, 2021, the Company, through its ASDS, executed an agreement with shareholders of Huayan Kun Tai Technology Company Ltd ("Huayan") and Huike to purchase the assets and business known as the Heartbeat platform. The Heartbeat platform provides various solutions to insurers and insurance brokers in China and, in return, earns service fees based on the value of transactions occurring on the platform. The assets acquired comprised the platform technology itself, owned by Huayan, and the operating assets of the business, owned by Huike. Huike also outsourced all employee functions to Huayan. Under the agreement, ASDS first acquired 100% of the share capital of Huike and then Huike acquired the Heartbeat platform from Huayan. At the same time, all Huayan employees associated with the operation of the Heartbeat platform were transferred to Huike. Prior to the acquisition date, Huike, which was incorporated on March 13, 2019, operated the Heartbeat platform through a licensing arrangement with Huayan. Huayan and Huike were related companies, having common shareholders. Together, the acquisition of Huike, the Heartbeat platform assets, and the Huayan employees operating the Heartbeat platform are collectively referred to as the "Heartbeat Business".
The purchase price for the Heartbeat Business totalled up to $31,000,000, split between up front consideration totalling $17,900,000, comprising cash of $11,000,000 and the issuance of 600,000 common shares of the company valued at $11.50 per share ($6,900,000). The initial equity consideration, while paid upfront, is contingent on achieving certain financial metrics related to net profit targets set for the business for the 4-month period ended December 31, 2021 and the year ended December 31, 2022. A further two share instalments with a maximum combined value of $13,100,000 are payable as at December 31, 2022, and December 31, 2023, respectively, contingent on achieving additional net profit targets agreed for each calendar year. Consequently the total potential undiscounted payments Tenet may be required to make under this arrangement range between $Nil and $20,000,000. As at September 1, 2021, the fair value of consideration payable under this agreement was estimated using a discount rate of 66%, at $23,377,574.
The fair value of the Heartbeat platform assets acquired was estimated at $7,475,000 based on management's financial projections for those assets over the first 28 months of operations and an external valuation commissioned by management. 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 amounting to $7,471,000 and the Heartbeat tradename for $4,000. These assets are each considered to have a useful life of 8 years.
From the date of acquisition to December 31, 2021, the Heartbeat platform had contributed $255,627 of revenue and $479,652 to loss before tax from continuing operations of the Company.
4.4 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 discounts the resultant estimate of the value of share instalments payable. As at September 30, 2022, the value of contingent consideration payable was estimated at $60,837 (December 31, 2021 - $1,921,000). During the three and nine-month periods ended September 30, 2022, amounts totalling $1,305,068 and $603,589, respectively (2021 - $Nil and $Nil, respectively) were recorded as a gain in the condensed interim consolidated statements of comprehensive profit and loss with a corresponding credit recorded in the consolidated statement of financial position to contingent consideration payable.
TENET FINTECH GROUP INC. Notes to Condensed Interim Consolidated Financial Statements For the nine-month periods ended September 30, 2022 and 2021 (In Canadian dollars) (Unaudited) |
5 - LOANS RECEIVABLE 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, collateral assets or a combination of both. 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 40% to 80% of the collateral value with an average of 79% as at September 30, 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.
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 50% 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 review of the borrower company's credit profile, operating performance, financial statements, tax payments/receipt records, shareholders' structure and their individual credit rating. Based on 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 third party must agree to provide a full guarantee to cover any overdue principal and interest on behalf of the borrowers. The company will also perform ongoing monitoring of SMEs borrowers in the tech industry through visits, phone calls and follow-up on business models development.
TENET FINTECH GROUP INC. Notes to Condensed Interim Consolidated Financial Statements For the nine-month periods ended September 30, 2022 and 2021 (In Canadian dollars) (Unaudited) |
5 - LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES (CONTINUED)
For the majority of loans granted, principal and interest are payable by the borrower on a monthly basis.
Loans receivable are summarized as follows :
2022 | 2021 | |||||
September 30 | December 31 | |||||
Principal balance loans receivable | 17,624,337 | 20,989,935 | ||||
Less expected credit loss (ECL) | (487,668 | ) | (166,244 | ) | ||
Loans receivable net | 17,136,669 | 20,823,691 | ||||
Loans receivable maturing in less than 12 months | 15,880,636 | 17,553,358 | ||||
Loans receivable maturing in more than 12 months | 1,256,033 | 3,270,333 | ||||
17,136,669 | 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 receivable as at September 30, 2022 and December 31, 2021 according to credit quality and ECL impairment stages.
ECL is calculated at the period end on loans that are not insured by a third party with an assumption of a credit loss allocation provision applied as follows:
Credit Loss Allocation Applied | ||||||||||||
Credit and Supply | ||||||||||||
Residential | Chain Finance | |||||||||||
Autos | Property | Credit | ||||||||||
Stage 1 : 1% | 1.0% | 1.0% | 2.0% | |||||||||
Stage 2: 30% | 6.8% | 1.0% | 2.0% | |||||||||
Stage 3 :100% | 40.0% | 1.0% | 2.0% | |||||||||
Gross Carrying | Allowance for | Net Carrying | ||||||||||
September 30, 2022 | % | Amount | Credit Loss | Amount | ||||||||
Stage 1 Not overdue <= 30 Days | 88.2% | 15,544,450 | (3,062 | ) | 15,541,388 | |||||||
Stage 2 Overdue 30-90 days | 0.7% | 117,594 | (353 | ) | 117,241 | |||||||
Stage 3 Overdue> 90 days | 11.1% | 1,962,293 | (484,253 | ) | 1,478,040 | |||||||
100.0% | 17,624,337 | (487,668 | ) | 17,136,669 | ||||||||
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 | |||||||
100.0% | 20,989,935 | (166,244 | ) | 20,823,691 |
TENET FINTECH GROUP INC. Notes to Condensed Interim Consolidated Financial Statements For the nine-month periods ended September 30, 2022 and 2021 (In Canadian dollars) (Unaudited) |
5 - LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES (CONTINUED)
The loss allowance for loans to customers as at September 30, 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 | (21 | ) | (578 | ) | (21,955 | ) | (22,554 | ) | ||||
Net remeasurement | (0 | ) | - | 328,398 | 328,398 | |||||||
Transfers | ||||||||||||
- to lifetime ECL performing | - | - | - | - | ||||||||
- to lifetime ECL credit-impaired | - | (301 | ) | 301 | - | |||||||
Write-offs | - | - | 44,797 | 44,797 | ||||||||
Foreign exchange and other | 21 | (739 | ) | (25,123 | ) | (25,841 | ) | |||||
Loss allowance as at September 30, 2022 | 1 | - | 476,544 | 476,545 |
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 | (140 | ) | (668 | ) | (4,076 | ) | (4,884 | ) | ||||
Change in model | - | (478 | ) | 1,550 | 1,072 | |||||||
Net remeasurement | ||||||||||||
Transfers | ||||||||||||
- to 12-month ECL | - | - | - | - | ||||||||
- to lifetime ECL performing | (3 | ) | 831 | (828 | ) | - | ||||||
- to lifetime ECL credit-impaired | (10 | ) | (664 | ) | 674 | - | ||||||
Foreign exchange and other | (8 | ) | (50 | ) | 633 | 575 | ||||||
Loss allowance as at September 30, 2022 | 46 | 353 | 7,709 | 8,108 |
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 | 220 | - | - | 220 | ||||||||
Foreign exchange and other | (359 | ) | - | - | (359 | ) | ||||||
Loss allowance as at September 30, 2022 | 3,015 | - | - | 3,015 |
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 |
TENET FINTECH GROUP INC. Notes to Condensed Interim Consolidated Financial Statements For the nine-month periods ended September 30, 2022 and 2021 (In Canadian dollars) (Unaudited) |
5 - LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES (CONTINUED)
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 |
6 - DEBTORS
2022 | 2021 | |||||
September 30 | December 31 | |||||
Sales tax receivable | 244,157 | 271,514 | ||||
Advances to companies | 198,738 | 141,184 | ||||
Deposit on investment (1) | 519,210 | 498,750 | ||||
Deposits made for transactions on platforms with guarantee (2) | 26,177,243 | 31,142,201 | ||||
Deposits made for transactions on platforms (3) | 1,211,490 | 1,506,225 | ||||
Accounts receivable | 8,982,413 | 9,632,651 | ||||
Safety deposits with a guarantor | - | 712,412 | ||||
Subscriptions receivable from non-controlling interests | 860,870 | 98,239 | ||||
Promissory notes (4) | 245,493 | 113,193 | ||||
Prepayments to third party subcontractors (5) | 13,563,599 | 11,885,106 | ||||
52,003,213 | 56,001,475 |
(1) As at September 30, 2022, as per agreement signed with third parties, AST, a subsidiary of the Company, agreed to participate in a future partnership agreement. AST provided a deposit representing $519,210. As 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 and 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.
(4) On December 15, 2021, loans were issued to two board members of the Company in the amounts of $72,793 and $40,000. On June 3, 2022, an additional loan was issued to a board member of $130,462. The loans are due on December 15, 2022 and December 31 2022 respectively. Each loans bears interest at an annual rate of 1%, which was the prescribed rate at the date of issuance. As of September 30, 2022, the aggregate outstanding principal amount due for said loans is $245,493 (December 31, 2021 - $113,193). In August 2022, one of the board members owing the Company $40,000 resigned and ceased to be a related party.
(5) 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 receivable 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 receivable are written off by taking into consideration third party guarantees on payment of debtors and if there is no reasonable expectation of recovery.
When measuring the expected credit losses of other debtors, Advances to companies, Deposits made for transactions on platforms with guarantees, Deposits made for transactions on platforms, Accounts receivable, Safety deposits with a guarantor, Subscriptions receivable from non-controlling interests, Promissory notes 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 debtors, 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, 2022 an amount of $616,416 (December 31, 2021 - $317,778) was registered for expected credit loss.
TENET FINTECH GROUP INC. Notes to Condensed Interim Consolidated Financial Statements For the nine-month periods ended September 30, 2022 and 2021 (In Canadian dollars) (Unaudited) |
7 - PROPERTY AND EQUIPMENT
Vehicles & | ||||||||||||
Right-of-Use | IT & Office | Other | ||||||||||
Assets | Equipment | Equipment | Total | |||||||||
Gross carrying amount | ||||||||||||
Balance as of January 1, 2022 | 3,067,626 | 201,858 | 191,393 | 3,460,877 | ||||||||
Amounts acquired in a business combination | 26,308 | 20,629 | - | 46,937 | ||||||||
Adjustments | 19,626 | - | - | 19,626 | ||||||||
Additions | 455,803 | 44,441 | - | 500,244 | ||||||||
Disposals | (2,344 | ) | - | - | (2,344 | ) | ||||||
Balance as at September 30, 2022 | 3,567,019 | 266,928 | 191,393 | 4,025,340 | ||||||||
Accumulated amortization | ||||||||||||
Balance as of January 1, 2022 | 1,186,255 | 110,873 | 101,736 | 1,398,864 | ||||||||
Adjustments | 1,153 | - | - | 1,153 | ||||||||
Amortization | 435,221 | 30,586 | 34,799 | 500,606 | ||||||||
Exchange differences | 34,248 | 2,139 | 3,236 | 39,623 | ||||||||
Balance as at September 30, 2022 | 1,656,877 | 143,598 | 139,771 | 1,940,246 | ||||||||
carrying amount as at September 30, 2022 | 1,910,142 | 123,330 | 51,622 | 2,085,094 | ||||||||
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 |
8 - INVESTMENTS
2022 | 2021 | |||||
September 30 | December 31 | |||||
Associate company (1) | 99,996 | - | ||||
Other equity investments (2,3) | 961,500 | - | ||||
1,061,496 | - |
(1) The Company holds, through its ASFC subsidiary, a 26% equity interest in Wuxi Deyuan Management Consulting Co., Ltd. ("DEYUAN"), a China-registered company that provides credit outsourcing services.
(2) The Company holds, through its ASDS subsidiary, a 25% equity interest in Jiangyin Xinshang Enterprise Management Partnership ("AXS"), a China-registered company that provides payment services. The equity investment is valued at $480,750 as at September 30, 2022.
(3) The Company holds, through its ASFC subsidiary, a 5% equity interest in Wuxi Xincheng Venture Capital Partnership ("AVC"), a China-registered investment partnership. The equity investment is valued at $480,750 as at September 30, 2022.
TENET FINTECH GROUP INC. Notes to Condensed Interim Consolidated Financial Statements For the nine-month periods ended September 30, 2022 and 2021 (In Canadian dollars) (Unaudited) |
9 - INTANGIBLE ASSETS
Gold River | ||||||||||||||||||||||||||||||
Loan | Supply- | |||||||||||||||||||||||||||||
Chain | ||||||||||||||||||||||||||||||
Servicing | Service | Cubeler | Cubeler | Other ERP | Heartbeat | |||||||||||||||||||||||||
Agreement | Gold River | Platforms | Interface | Platform | Platforms | 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 | 2,438,062 | 8,368,063 | 5,287,000 | 50,186,339 | 103,908,976 | ||||||||||||||||||||
Amounts arising from business combination | - | - | - | - | - | 285,150 | - | - | 285,150 | (1,256,574 | ) | |||||||||||||||||||
Addition | - | - | 4,467,059 | 155,494 | 1,163,495 | 1,544,298 | 797,202 | - | 8,127,548 | - | ||||||||||||||||||||
Transferred in (out) | - | - | - | - | - | (367,365 | ) | 367,365 | - | - | - | |||||||||||||||||||
Balance as at September 30, 2022 | 1,430,000 | 2,461,348 | 8,722,032 | 2,240,387 | 25,025,495 | 3,900,145 | 9,532,630 | 5,287,000 | 58,599,037 | 102,652,402 | ||||||||||||||||||||
Accumulated amortization and impairment loss | ||||||||||||||||||||||||||||||
Balance as at January 1, 2022 | 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 | ||||||||||||||||||||
Amortization | 107,250 | - | 1,267,490 | 318,953 | 1,391,516 | 567,320 | 916,578 | 251,031 | 4,820,138 | - | ||||||||||||||||||||
Impairment loss on intangible | - | - | - | - | - | - | 4,218,826 | - | 4,218,826 | - | ||||||||||||||||||||
Exchange differences | - | - | 123,500 | 49,666 | - | 68,483 | 42,036 | - | 283,685 | - | ||||||||||||||||||||
Balance as at September 30, 2022 | 536,250 | 2,461,348 | 1,622,207 | 1,012,115 | 11,620,204 | 717,534 | 5,588,406 | 3,105,126 | 26,663,190 | 41,386,422 | ||||||||||||||||||||
Net carrying amount as at September 30, 2022 | 893,750 | - | 7,099,825 | 1,228,272 | 13,405,291 | 3,182,611 | 3,944,224 | 2,181,874 | 31,935,847 | 61,265,980 | ||||||||||||||||||||
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 and impairment loss | ||||||||||||||||||||||||||||||
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 |
TENET FINTECH GROUP INC. Notes to Condensed Interim Consolidated Financial Statements For the nine-month periods ended September 30, 2022 and 2021 (In Canadian dollars) (Unaudited) |
9 - INTANGIBLE ASSETS (CONTINUED)
Impairment testing - Goodwill and other intangible assets
Individual intangible assets or CGUs are tested for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.
For the purpose of impairment testing, goodwill is allocated to the operating segments expected to benefit from the synergies of the business combinations in which the goodwill arises as set out below, and is compared to its recoverable amount.
For the purpose of impairment testing, at the time of the purchase price allocation, when goodwill arises it is allocated to the operating segments (Cash Generating Units ("CGUs")) expected to benefit from the synergies of the business combinations in which the goodwill arises. Impairment of goodwill is assessed by estimating the recoverable amount of the CGU to which goodwill has been allocated compared to the net carrying value of CGU assets (after any Stage 1 assessment is completed).
Indicators of impairment - Heartbeat
As at September 30, 2022, management revised downward its Heartbeat's business forecasted growth and net generated cash flows following the CGU latest operating performance. Management concluded that Heartbeat's economic performance during the last quarters met the criteria to assess the CGU and related intangible assets for impairment.
Stage 1 impairment review - Heartbeat
The recoverable amounts of the intangible assets were determined individually, applying the Relief from Royalty Method, and compared to their respective carrying amounts. Where the carrying amount of any intangible asset exceeds its recoverable amount it was concluded that the intangible was impaired.
As at September 30, 2022, the recoverable amounts and related carrying values of the intangible assets in the Heartbeat CGUs were assessed to be as follows:
Recoverable | Carrying | |||||
amount | value | Impairment | ||||
Heartbeat platform | 3,944,224 | 8,163,050 | (4,218,826) | |||
Heartbeat tradename | 16,000 | 4,000 | - |
Stage 2 impairment review - Heartbeat
As at September 2022, the goodwill, recoverable amounts and related carrying values of the Heartbeat CGUs were assessed to be as follows:
Goodwill | Recoverable | Carrying | ||||||
included in CGU | amount | value | Impairment | |||||
Heartbeat CGU | 17,238,835 | 21,955,899 | 19,838,108 | - |
The recoverable amount of the Heartbeat's CGU was determined based on fair value less cost to sell, using the discounted cash flow method of a five-year financial budget approved by management. The Heartbeat's CGU fair value less cost to sell model, considers a post-tax discount rate of 20.5% that reflects current market conditions and the specific risks to the CGUs.
The key assumptions used by management in setting the financial budgets for the initial five-year period are as follows: forecast sales growth rates are based on actual or expected contractual agreements, adjusted for market share gain due to new industry regulations in China, forecast operating profits based on historical experience, adjusted for expected increased operationnal efficiency and market level margins.
Cash flows, beyond that five-year period, consider a steady 3% per annum growth rate, based on the long-term average growth rate for the relevant markets as estimated by management.
The Heartbeat CGU's recoverable amount estimate is particularly sensitive to the discount rate due to significant uncertainties in the forecast, which are reflected in the selected discount rate. A 2.0% discount rate increase would result in a recognized goodwill impairment loss of $7,274. Management is not aware of any other reasonable change in key assumptions that would significantly vary the recoverable amount for the valuation.
10 - ACCOUNTS PAYABLE, ADVANCES AND ACCRUED LIABILITIES
2022 | 2021 | |||||
September 30 | December 31 | |||||
Trade accounts payable and accruals | 4,687,105 | 5,224,124 | ||||
Advance from third party customers, no interest (1) | 9,169,420 | 11,044,172 | ||||
13,856,525 | 16,268,296 |
(1) Advance from downstream corporative clients for supply chain bundle service fee.
TENET FINTECH GROUP INC. Notes to Condensed Interim Consolidated Financial Statements For the nine-month periods ended September 30, 2022 and 2021 (In Canadian dollars) (Unaudited) |
11 - LEASE LIABILITIES
2022 | 2021 | |||||
September 30 | December 31 | |||||
Balance - beginning of period | 1,747,984 | 239,507 | ||||
Amounts arising from business combination | 19,890 | - | ||||
Additions | 455,803 | 1,977,352 | ||||
Accretion interest | 113,999 | 65,908 | ||||
Lease payments | (503,678 | ) | (565,880 | ) | ||
Effect of exchange rate change on obligation | 20,171 | 31,097 | ||||
Balance - end of period | 1,854,169 | 1,747,984 | ||||
Current Portion | 486,037 | 432,621 | ||||
Non-current Portion | 1,368,132 | 1,315,363 |
Following is a summary of the Company's obligations regarding lease payments:
As at September 30, 2022 | Payment due by period | |||||||||||
1 year | 2 - 5 years | Beyond 5 years | Total | |||||||||
Lease payments | 625,213 | 1,067,314 | 629,066 | 2,321,593 | ||||||||
Payment due by period | ||||||||||||
As at December 31, 2021 | 1 year | 2 - 5 years | Beyond 5 years | Total | ||||||||
Lease payments | 561,677 | 951,334 | 729,289 | 2,242,301 |
12 - DEBENTURES
Debenture issuance of April 24, 2019
The movement during the nine-month period ended September 30, 2022 and the year ended December 31, 2021, relating to this debenture is summarized as follows:
2022 | 2021 | |||||
September 30 | December 31 | |||||
Balance at the beginning period / year | - | 23,311 | ||||
Accretion of debentures | - | 683 | ||||
Conversion of debentures | - | (23,994 | ) | |||
Balance at the end of period / year | - | - |
13 - 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.
TENET FINTECH GROUP INC. Notes to Condensed Interim Consolidated Financial Statements For the nine-month periods ended September 30, 2022 and 2021 (In Canadian dollars) (Unaudited) |
13 - 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 amount set aside as at September 30, 2022, is $23,333 (December 31, 2021 - $53,333) and is presented under Restricted Cash in the Condensed Interim Consolidated statements of 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 movement during the nine-month period ended September 30, 2022 and the year ended December 31, 2021, relating to these bonds can be summarized as follows:
2022 | 2021 | |||||
September 30 | December 31 | |||||
Balance at the beginning period / year | 313,234 | 258,933 | ||||
Addition | - | - | ||||
Accretion on debentures and bonds | 24,299 | 27,327 | ||||
Amortization of initial costs | 20,175 | 26,974 | ||||
Balance at the end period / year | 357,708 | 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.
14 - 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 totaling $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 2021, 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.
15 - SHAREHOLDERS' EQUITY
15.1 Authorized share capital
The share capital of the Company consists of an unlimited number of common shares without par value.
Share Consolidation
Effective July 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.
TENET FINTECH GROUP INC. Notes to Condensed Interim Consolidated Financial Statements For the nine-month periods ended September 30, 2022 and 2021 (In Canadian dollars) (Unaudited) |
15 - SHAREHOLDERS' EQUITY (CONTINUED)
15.2 Description of the shareholders' equity operations during the nine-month period ended September 30, 2022
a) During the nine-month period ended September 30, 2022, the Company issued 2,259,500 common shares at an average exercise price of $0.90 per share for total proceeds of $2,025,500 upon the exercise of share purchase warrants, out of which, $150,000 was received in 2021. An amount of $522,971 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 nine-month period ended September 30, 2022, the Company issued 117,500 common shares at an average exercise price of $2.10 per share for total proceeds of $246,750 upon the exercise of stock options, and $217,420 related to exercised stock options were transferred from contributed surplus to share capital in the consolidated statements of changes in equity (note 16).
15.3 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 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 nine-month period ended September 30, 2021, the Company issued 16,675 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 condenssed 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 statements of consolidated equity.
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 statements of consolidated equity.
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 statement of consolidated 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% |
Volatility | 127% |
Exercise price at the date of grant | $7.00 |
The Company also granted 920,500 compensation warrants to eligible persons who helped place the private placements entitling them to purchase a number of the Company common shares at a price of $7.00 per common share for a twenty-four-month period from the issuance.
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 price at the date of grant | $3.90 |
Expected life | 2 years |
Risk-free interest rate | 0.48% |
Volatility | 127% |
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.
TENET FINTECH GROUP INC. Notes to Condensed Interim Consolidated Financial Statements For the nine-month periods ended September 30, 2022 and 2021 (In Canadian dollars) (Unaudited) |
15 - SHAREHOLDERS' EQUITY (CONTINUED)
15.4 Warrants
The outstanding warrants as at September 30, 2022 and December 31, 2021 and the respective changes during the nine-month period and the year then ended, are summarized as follows:
September 30, 2022 | December 31, 2021 | |||||||||||
Weighted | Weighted | |||||||||||
Number of | average | Number of | average | |||||||||
warrants | exercise price | warrants | exercise price | |||||||||
Outstanding, beginning of period | 17,332,504 | 3.06 | 14,662,750 | 0.97 | ||||||||
Granted | - | - | 14,990,999 | 3.50 | ||||||||
Expired | (584,690 | ) | - | (15,000 | ) | 1.33 | ||||||
Exercised | (2,259,501 | ) | 0.90 | (12,306,245 | ) | 1.11 | ||||||
Outstanding and exercisable, end of period | 14,488,313 | 3.50 | 17,332,504 | 3.06 |
As of September 30, 2022 and December 31, 2021, the number of outstanding warrants which could be exercised for an equivalent number of common shares at the exception of the warrants expiring on July 23, 2023 which two warrants are needed to be exercised for one common share, is as follows:
September 30, 2022 | December 31, 2021 | |||||||||||
Number | Exercise price | Number | Exercise price | |||||||||
Expiration date | ||||||||||||
February, 2022 | - | - | 360,000 | 2.00 | ||||||||
July, 2022 | - | - | 585,000 | 0.50 | ||||||||
August, 2022 | - | - | 1,298,690 | 0.50 | ||||||||
October, 2022 | - | - | 350,000 | 0.80 | ||||||||
October, 2022 | - | - | 250,000 | 1.50 | ||||||||
May, 2023 | 3,000 | 2.00 | 3,500 | 2.00 | ||||||||
May, 2023 | 13,328 | 1.00 | 13,328 | 1.00 | ||||||||
July, 2023 | 12,870,149 | 3.50 | 12,870,149 | 3.50 | ||||||||
July, 2023 | 1,601,836 | 3.50 | 1,601,837 | 3.50 | ||||||||
14,488,313 | 17,332,504 |
16 - SHARE-BASED PAYMENTS
The Company has adopted an incentive stock option plan which provides that the Board of Directors of the Company may, from time to time, at its discretion and in accordance with the Exchange regulations, grant to directors, officers, employees and others providing similar services to the Company, non-transferable options to purchase common shares, provided that the number of common shares reserved for issuance will not exceed 10% of the issued and outstanding common shares exercisable for a period of up to 5 years from the date of grant. The options reserved for issuance to any individual director, officer or employee will not exceed 5% of the issued and outstanding common shares and the number of common shares reserved for issuance to others providing services will not exceed 2% of the issued and outstanding common shares. Options may be exercised as of the grant date for a period determined by the Board, but shall not be greater than 5 years from the date of the grant and 90 days following cessation of the optionee's position with the Company. Provided that the cessation of office, directorships or employment or other similar service arrangement was by reason of death (in the case of an individual), the option may be exercised within a maximum period of one year after such death, subject to the expiry date of such option.
The outstanding options as at September 30, 2022 and December 31,2021 and the respective changes during the nine-month period and the year then ended, are summarized as follows:
September 30, 2022 | December 31, 2021 | |||||||||||
Weighted | Weighted | |||||||||||
Number of | average | Number of | average | |||||||||
options | exercise price | options | exercise price | |||||||||
Outstanding, beginning of period | 4,689,250 | 1.93 | 4,351,750 | 1.34 | ||||||||
Granted | 167,047 | 4.37 | 945,000 | 4.45 | ||||||||
Exercised (1) | (117,500 | ) | 2.10 | (607,500 | ) | 1.59 | ||||||
Expired | (272,500 | ) | 2.10 | - | - | |||||||
Forfeited | (560,000 | ) | 3.23 | - | - | |||||||
Outstanding end of period | 3,906,297 | 2.02 | 4,689,250 | 1.93 | ||||||||
Exercisable end of period | 2,764,750 | 1.50 | 2,488,550 | 1.39 |
(1) Market value of the shares was $3.96 and $2.95 on the exercise date of these options
TENET FINTECH GROUP INC. Notes to Condensed Interim Consolidated Financial Statements For the nine-month periods ended September 30, 2022 and 2021 (In Canadian dollars) (Unaudited) |
16 - SHARE-BASED PAYMENTS (CONTINUED)
The table below summarizes the information related to outstanding share options as at September 30, 2022.
Range of | Number of | Weighted average remaining | |||||||
Maturity date | exercise price | options | contractual life (years) | ||||||
November 27, 2022 | 1.10 | 18,750 | 1 months | ||||||
December 15, 2022 | 1.60 | 171,250 | 2 months | ||||||
April 16, 2023 | 1.00 | 5,000 | 6 months | ||||||
June 5, 2023 | 1.00 | 288,750 | 8 months | ||||||
November 28, 2023 | 1.00 | 37,500 | 1 years and 1 months | ||||||
May 1, 2024 | 1.00 | 50,000 | 1 years and 7 months | ||||||
May 27, 2024 | 1.00 | 447,500 | 1 years and 7 months | ||||||
September 5, 2024 | 1.00 | 10,000 | 1 years and 11 months | ||||||
November 1, 2024 | 1.10 | 50,000 | 2 years and 1 months | ||||||
November 12, 2024 | 1.00 | 5,000 | 2 years and 1 months | ||||||
June 11, 2025 | 1.00 | 745,500 | 2 years and 8 months | ||||||
October 28, 2025 | 1.50 | 1,075,000 | 3 years and 0 months | ||||||
November 6, 2025 | 2.70 | 50,000 | 3 years and 1 months | ||||||
March 22, 2026 | 5.50 | 55,000 | 3 years and 5 months | ||||||
May 13, 2026 | 4.80 | 5,000 | 3 years and 7 months | ||||||
July 7, 2026 | 4.10 | 700,000 | 3 years and 9 months | ||||||
October 28, 2026 | 11.50 | 25,000 | 4 years and 0 months | ||||||
January 1, 2027 | 7.50 | 32,725 | 4 years and 3 months | ||||||
February 1, 2027 | 5.60 | 42,881 | 4 years and 4 months | ||||||
March 1, 2027 | 4.10 | 2,941 | 4 years and 5 months | ||||||
April 1, 2027 | 4.16 | 15,627 | 4 years and 6 months | ||||||
May 1, 2027 | 5.13 | 13,585 | 4 years and 7 months | ||||||
June 1, 2027 | 2.55 | 2,842 | 4 years and 8 months | ||||||
July 1, 2027 | 1.65 | 5,763 | 4 years and 9 months | ||||||
August 1, 2027 | 1.41 | 35,892 | 4 years and 10 months | ||||||
September 1, 2027 | 2.08 | 14,791 | 4 years and 11 months | ||||||
3,906,297 |
TENET FINTECH GROUP INC. Notes to Condensed Interim Consolidated Financial Statements For the nine-month periods ended September 30, 2022 and 2021 (In Canadian dollars) (Unaudited) |
16 - 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 | 2.10 | 390,000 | 5 months | ||||||
November 27, 2022 | 1.10 | 18,750 | 10 months | ||||||
December 15, 2022 | 1.60 | 171,250 | 11 months | ||||||
April 16, 2023 | 1.00 | 5,000 | 1 year and 3 months | ||||||
June 5, 2023 | 1.00 | 288,750 | 1 year and 5 months | ||||||
November 28, 2023 | 1.00 | 37,500 | 1 year and 10 months | ||||||
May 1, 2024 | 1.00 | 50,000 | 2 years and 4 months | ||||||
May 27, 2024 | 1.00 | 447,500 | 2 years and 4 months | ||||||
September 5, 2024 | 1.00 | 10,000 | 2 years and 8 months | ||||||
November 1, 2024 | 1.10 | 50,000 | 2 years and 10 months | ||||||
November 12, 2024 | 1.00 | 5,000 | 2 years and 10 months | ||||||
June 11, 2025 | 1.00 | 745,500 | 3 years and 5 months | ||||||
August 7, 2025 | 0.45 | 250,000 | 3 years and 7 months | ||||||
October 28, 2025 | 1.50 | 1,225,000 | 3 years and 9 months | ||||||
November 6, 2025 | 2.70 | 50,000 | 3 years and 10 months | ||||||
January 28, 2026 | 5.70 | 25,000 | 4 years and 0 months | ||||||
March 22, 2026 | 5.50 | 55,000 | 4 years and 2 months | ||||||
May 13, 2026 | 4.80 | 10,000 | 4 years and 4 months | ||||||
July 7, 2026 | 4.10 | 825,000 | 4 years and 6 months | ||||||
August 10, 2026 | 8.00 | 5,000 | 4 years and 7 months | ||||||
October 28, 2026 | 11.50 | 25,000 | 4 years and 9 months | ||||||
4,689,250 |
During the three and nine-month period ended September 30, 2022 the Company recorded an expense of $559,935 and $1,672,237 respectively related to share-based payments (periods ended September 30, 2021 - $815,801 and $1,557,006). The offset was credited to contributed surplus.
16.1 Share-based payments granted to directors and employees during the nine-month period ended September 30, 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 | 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 | 106% |
Exercise price at the date of grant | $5.6 |
The volatility was determined by using the Company's own historical volatility over a period corresponding to expected life of the share options.
TENET FINTECH GROUP INC. Notes to Condensed Interim Consolidated Financial Statements For the nine-month periods ended September 30, 2022 and 2021 (In Canadian dollars) (Unaudited) |
16 - 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 | $3.82 |
Expected life | 5 years |
Risk-free interest rate | 1.61% |
Volatility | 104% |
Exercise price at the date of grant | $4.1 |
The volatility was determined by using the Company's own historical volatility over a period corresponding to expected life of the share options.
d) On April 1, 2022 the Company granted options to acquire 10,627 common shares of the Company at an average exercise price of $4.16 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 $37,748, was calculated using the Black & Scholes option pricing model using the following assumptions:
Share price at the date of grant | $3.96 |
Expected life | 5 years |
Risk-free interest rate | 2.50% |
Volatility | 109% |
Exercise price at the date of grant | $4.16 |
The volatility was determined by using the Company's own historical volatility over a period corresponding to expected life of the share options.
e) On May 1, 2022 the Company granted options to acquire 13,585 common shares of the Company at an average exercise price of $5.13 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 $50,605, was calculated using the Black & Scholes option pricing model using the following assumptions:
Share price at the date of grant | $4.67 |
Expected life | 5 years |
Risk-free interest rate | 2.80% |
Volatility | 103% |
Exercise price at the date of grant | $5.13 |
The volatility was determined by using the Company's own historical volatility over a period corresponding to expected life of the share options.
f) On June 1, 2022 the Company granted options to acquire 2,842 common shares of the Company at an average exercise price of $2.55 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 $5,440, was calculated using the Black & Scholes option pricing model using the following assumptions:
Share price at the date of grant | $2.14 |
Expected life | 5 years |
Risk-free interest rate | 2.86% |
Volatility | 109% |
Exercise price at the date of grant | $2.55 |
The volatility was determined by using the Company's own historical volatility over a period corresponding to expected life of the share options.
TENET FINTECH GROUP INC. Notes to Condensed Interim Consolidated Financial Statements For the nine-month periods ended September 30, 2022 and 2021 (In Canadian dollars) (Unaudited) |
16 - SHARE-BASED PAYMENTS (CONTINUED)
g) On July 1, 2022 the Company granted options to acquire 5,763 common shares of the Company at an average exercise price of $1.65 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 $6,589, was calculated using the Black & Scholes option pricing model using the following assumptions:
Share price at the date of grant | $1.46 |
Expected life | 5 years |
Risk-free interest rate | 3.06% |
Volatility (1) | 110% |
Exercise price at the date of grant | $1.65 |
The volatility was determined by using the Company's own historical volatility over a period corresponding to expected life of the share options.
h) On August 1, 2022 the Company granted options to acquire 35,892 common shares of the Company at an average exercise price of $1.41 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 $34,636, was calculated using the Black & Scholes option pricing model using the following assumptions:
Share price at the date of grant | $1.24 |
Expected life | 5 years |
Risk-free interest rate | 2.80% |
Volatility (1) | 109% |
Exercise price at the date of grant | $1.41 |
The volatility was determined by using the Company's own historical volatility over a period corresponding to expected life of the share options.
i) On September 1, 2022 the Company granted options to acquire 14,791 common shares of the Company at an average exercise price of $2.08 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 $22,581 was calculated using the Black & Scholes option pricing model using the following assumptions:
Share price at the date of grant | $1.90 |
Expected life | 5 years |
Risk-free interest rate | 3.37% |
Volatility (1) | 114% |
Exercise price at the date of grant | $2.08 |
The volatility was determined by using the Company's own historical volatility over a period corresponding to expected life of the share options.
16.2 Options granted to consultants during the nine-month period ended September 30, 2022
a) On April 1, 2022 the Company granted options to acquire 5,000 common shares of the Company at an average exercise price of $4.16 to a consultant.
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 $15,526 was calculated using the Black & Scholes option pricing model using the following assumptions:
Share price at the date of grant | $3.96 |
Expected life | 5 years |
Risk-free interest rate | 2.50% |
Volatility | 109% |
Exercise price at the date of grant | $4.16 |
The volatility was determined by using the Company's own historical volatility over a period corresponding to expected life of the share options.
TENET FINTECH GROUP INC. Notes to Condensed Interim Consolidated Financial Statements For the nine-month periods ended September 30, 2022 and 2021 (In Canadian dollars) (Unaudited) |
16 - SHARE-BASED PAYMENTS (CONTINUED)
16.3 Share-based payments granted to directors and employees during the nine-month period ended September 30, 2021
a) During the nine-month period ended September 30, 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 | 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.
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 periods of eight, sixteen and twenty-four-month following the date of granting and will be exercisable over a period of five years expiring in May 2026.
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 $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 | 108% |
Dividend | 0% |
Exercise price at the date of grant | $4.80 |
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 | 104% |
Dividend | 0% |
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.
TENET FINTECH GROUP INC. Notes to Condensed Interim Consolidated Financial Statements For the nine-month periods ended September 30, 2022 and 2021 (In Canadian dollars) (Unaudited) |
16 - SHARE-BASED PAYMENTS (CONTINUED)
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 | 104% |
Dividend | 0% |
Exercise price at the date of grant | $8.00 |
The volatility was determined by using the Company's own historical volatility over a period corresponding to expected life of the share options.
16.4 Options granted to consultants during the nine-month period ended September 30, 2021
a) During the nine-month period ended September 30, 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 | 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.
17 - 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 $150,315,610 as at September 30, 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.
TENET FINTECH GROUP INC. Notes to Condensed Interim Consolidated Financial Statements For the nine-month periods ended September 30, 2022 and 2021 (In Canadian dollars) (Unaudited) |
18 - FINANCIAL INSTRUMENTS
18.1 Classification of financial instruments
As at September 30, 2022, the carrying amount of financial assets and financial liabilities were as follows:
September 30, 2022 | |||||||||
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 | - | 8,488,247 | 8,488,247 | ||||||
Restricted Cash | - | 23,333 | 23,333 | ||||||
Debtors | - | 51,759,056 | 51,759,056 | ||||||
Loans receivable | - | 17,136,669 | 17,136,669 | ||||||
- | 77,407,305 | 77,407,305 | |||||||
Financial liabilities | |||||||||
Financial liabilities measured at amortized cost | |||||||||
Accounts payable and accrued liabilities | - | 13,373,093 | 13,373,093 | ||||||
Bonds | - | 357,708 | 357,708 | ||||||
CEBA Loan | - | 100,000 | 100,000 | ||||||
Contingent consideration payable | 60,837 | - | 60,837 | ||||||
60,837 | 13,830,801 | 13,891,638 |
As at December 31, 2021, the carrying amount of financial assets and financial liabilities were as follows:
December 31, 2021 | |||||||||
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 | ||||||
- | 95,403,899 | 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 |
TENET FINTECH GROUP INC. Notes to Condensed Interim Consolidated Financial Statements For the nine-month periods ended September 30, 2022 and 2021 (In Canadian dollars) (Unaudited) |
18 - FINANCIAL INSTRUMENTS (CONTINUED)
18.2 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 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.
18.3 Financial risks
18.3.1 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:
September 30, 2022 | |||||||||
Current | Long-term | ||||||||
Within 6 months | 6 to 12 months | More than 12 months | |||||||
Accounts payable and accrued liabilities | 13,373,093 | - | - | ||||||
Bonds | - | 400,000 | - | ||||||
Contingent consideration payable | - | - | 152,573 | ||||||
CEBA loan | - | - | 100,000 | ||||||
13,373,093 | 400,000 | 252,573 |
December 31, 2021 | |||||||||
Current | Long-term | ||||||||
Within 6 months | 6 to 12 months | More than 12 months | |||||||
Accounts payable and accrued liabilities | 15,903,158 | - | - | ||||||
Bonds | - | - | 400,000 | ||||||
Contingent consideration payable | - | 1,317,375 | 2,386,125 | ||||||
CEBA loan | - | - | 100,000 | ||||||
15,903,158 | 1,317,375 | 2,886,125 |
TENET FINTECH GROUP INC. Notes to Condensed Interim Consolidated Financial Statements For the nine-month periods ended September 30, 2022 and 2021 (In Canadian dollars) (Unaudited) |
18 - FINANCIAL INSTRUMENTS (CONTINUED)
18.4 Finance costs
The breakdown in Finance costs during the three and nine-month periods ended September 30, 2022 and 2021 is as follows:
2022 | 2021 | 2022 | 2021 | |||||||||
September 30 | September 30 | September 30 | September 30 | |||||||||
Three-month | Three-month | Nine-month | Nine-month | |||||||||
Interest on debentures | - | - | - | 333 | ||||||||
Interest on lease liabilities (note 11) | 38,598 | 26,277 | 113,999 | 40,247 | ||||||||
Interest on security deposit and advances | - | 22,697 | - | 76,856 | ||||||||
Interest on bonds | 10,000 | 10,000 | 30,000 | 30,000 | ||||||||
Interest income | (34,310 | ) | (26,343 | ) | (72,805 | ) | (36,949 | ) | ||||
Accretion on debentures and bonds | 8,596 | 7,047 | 24,299 | 20,601 | ||||||||
Total interest expense | 22,884 | 39,678 | 95,493 | 131,089 | ||||||||
Miscellaneous | 772 | 1,928 | 23,243 | 6,285 | ||||||||
Total Finance costs | 23,656 | 41,606 | 118,736 | 137,374 |
18.5 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 receivable on short and long term and debtors (except sales tax receivables), accounts payable, advances 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 using a discounted cash flow method and reflects management's estimate 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, the CEBA loan, loans receivable on short and long term are level 3 under the fair value hierarchy.
TENET FINTECH GROUP INC. Notes to Condensed Interim Consolidated Financial Statements For the nine-month periods ended September 30, 2022 and 2021 (In Canadian dollars) (Unaudited) |
19 - 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 | 2021 | 2022 | 2021 | |||||||||
September 30 | September 30 | September 30 | September 30 | |||||||||
Three-month | Three-month | Nine-month | Nine-month | |||||||||
Salaries and fringe benefits | 348,163 | 197,232 | 1,067,998 | 553,546 | ||||||||
Share-based payments | 385,324 | 747,880 | 1,207,171 | 1,391,300 | ||||||||
Royalty- Cubeler | - | 32,524 | - | 107,202 | ||||||||
733,487 | 977,636 | 2,275,169 | 2,052,048 |
These transactions occurred in the normal course of operations and have been measured at fair value.
As at September 30, 2022 and December 31, 2021 the condensed interim consolidated statement of financial position includes the following amounts with related parties:
2022 | 2021 | |||||
September 30 | December 31 | |||||
Loans, with interest (1) | 245,493 | 113,193 | ||||
245,493 | 113,193 |
(1) POn December 15, 2021, loans were issued to two board members of the Company in the amounts of $72,793 and $40,000. On June 3, 2022, an additional loan was issued to a board member of $130,462. The loans are due on December 15, 2022 and December 31, 2022 respectively. Each loans bears interest at an annual rate of 1%, which was the prescribed rate at the date of issuance. As of September 30, 2022, the aggregate outstanding principal amount due for said loans is $245,493 (December 31, 2021 - $113,193).
20 - 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.
TENET FINTECH GROUP INC. Notes to Condensed Interim Consolidated Financial Statements For the nine-month periods ended September 30, 2022 and 2021 (In Canadian dollars) (Unaudited) |
20 - 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 nine-month periods ended September 30, 2022 and 2021 are as follows:
Nine-month period ended September 30, 2022 | |||||||||||||||
Fintech | Financial | ||||||||||||||
Platform | Services | Other | Elimination | Total | |||||||||||
Revenues (1) | |||||||||||||||
Financial service revenue from external customers | - | 1,452,487 | - | - | 1,452,487 | ||||||||||
Fees and sales from external customers | 5,287,021 | 514,368 | - | - | 5,801,389 | ||||||||||
Supply chain services | 81,555,932 | - | (50,862 | ) | - | 81,505,070 | |||||||||
Inter-segment | 5,386,177 | 271,724 | - | (5,657,901 | ) | - | |||||||||
Total revenues | 92,229,130 | 2,238,579 | (50,862 | ) | (5,657,901 | ) | 88,758,946 | ||||||||
Expenses | |||||||||||||||
Depreciation and amortization | 5,185,746 | 129,213 | 5,785 | - | 5,320,744 | ||||||||||
Interest expense | 97,813 | 21,685 | (762 | ) | - | 118,736 | |||||||||
All other expenses | 87,322,076 | 1,097,673 | 16,871,796 | (5,657,901 | ) | 99,633,644 | |||||||||
Total expenses | 92,605,635 | 1,248,571 | 16,876,819 | (5,657,901 | ) | 105,073,124 | |||||||||
Profit (loss) before tax | (376,505 | ) | 990,008 | (16,927,681 | ) | - | (16,314,178 | ) | |||||||
Income tax | 818,705 | 274,599 | - | - | 1,093,304 | ||||||||||
Net profit (loss) | (1,195,210 | ) | 715,409 | (16,927,681 | ) | - | (17,407,482 | ) | |||||||
Non-controlling interest | (131,114 | ) | 367,154 | - | - | 236,040 | |||||||||
Net profit (loss) attributable to: | |||||||||||||||
Owners of the parent | (1,064,096 | ) | 348,255 | (16,927,681 | ) | - | (17,643,522 | ) | |||||||
Segmented assets | 146,761,792 | 21,846,676 | 6,881,299 | (212,494 | ) | 175,277,274 |
(1) Revenues from external customers have been identified on the basis of the customer's geographical location, which is China.
Nine-month period ended September 30, 2021 | |||||||||||||||
Fintech | Financial | ||||||||||||||
Platform | Services | Other | Elimination | Total | |||||||||||
Revenues (1) | |||||||||||||||
Financial service revenue from external customers | - | 1,835,609 | - | - | 1,835,609 | ||||||||||
Fees and 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 | - | 680,730 | ||||||||||
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 | (67,757,746 | ) | - | 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 | (67,757,746 | ) | - | 571,344 | |||||||||
Segmented assets | 37,622,440 | 24,588,687 | 19,368,327 | 49,162,711 | 130,742,165 |
(1) Revenues from external customers have been identified on the basis of the customer's geographical location, which is China.
TENET FINTECH GROUP INC. Notes to Condensed Interim Consolidated Financial Statements For the nine-month periods ended September 30, 2022 and 2021 (In Canadian dollars) (Unaudited) |
20 - SEGMENT REPORTING (CONTINUED)
The Company's non-current assets are located in the following geographic regions:
2022 | 2021 | |||||
September 30 | December 31 | |||||
Non-current Assets | Non-current Assets | |||||
China | 16,543,725 | 10,900,348 | ||||
Canada | 81,197,816 | 89,991,187 | ||||
97,741,541 | 100,891,535 |
21 - NON-CONTROLLING INTERESTS
The Company controls the following subsidiaries that have significant non-controlling interests.
| 2022 |
| 2021 |
| September 30 |
| December 31 |
| % ownership |
| % ownership |
| and voting rights |
| and voting rights |
Entities | held the by NCIs |
| held the by NCIs |
Asia Synergy Supply Chain Ltd. ("ASSA") | 49% |
| 49% |
Asia Synergy Financial Capital Ltd. ("ASFC") | 49% |
| 49% |
Wechain (Nanjing) Technology Service Co., Ltd. ("WECHAIN") | 49% |
| 49% |
Beijing Kailifeng New Energy Technology Co., Ltd. ("KALIFENG") | 49% |
| 49% |
Shanghai Xinhuizhi Supply Chain Management Co., Ltd. ("ASAC") | 49% |
| 49% |
Jiangsu Supairui IOT Technology Co., Ltd. ("ASTH") | 20% |
| - |
Total comprehensive profit and loss | ||||||||||||
allocated to NCI | Accumulated NCI | |||||||||||
Nine-month period ended | As at | |||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||
Entities | September 30 | September 30 | September 30 | December 31 | ||||||||
Asia Synergy Supply Chain Ltd. ("ASSA") | 148,721 | 491,538 | 2,131,520 | 1,951,538 | ||||||||
Asia Synergy Financial Capital Ltd. ("ASFC") | 172,592 | 453,500 | 11,662,189 | 11,520,859 | ||||||||
Wechain (Nanjing) Technology Service Co., Ltd. ("WECHAIN") | (235,754 | ) | (120,766 | ) | 547,527 | 783,281 | ||||||
Beijing Kailifeng New Energy Technology Co., Ltd. ("KALIFENG") | (112,520 | ) | (4,082 | ) | 714,815 | 64,703 | ||||||
Shanghai Xinhuizhi Supply Chain Management Co., Ltd. ("ASAC") | (25 | ) | - | 950 | - | |||||||
Jiangsu Supairui IOT Technology Co., Ltd. ("ASTH") | 14,866 | - | 42,267 | - | ||||||||
(12,120 | ) | 820,190 | 15,099,268 | 14,320,381 |
No dividends were paid to NCIs during the nine-month periods ended September 30, 2022 and 2021.
TENET FINTECH GROUP INC. Notes to Condensed Interim Consolidated Financial Statements For the nine-month periods ended September 30, 2022 and 2021 (In Canadian dollars) (Unaudited) |
21 - NON-CONTROLLING INTERESTS (CONTINUED)
Summarized financial information for subsidiaries with NCIs, before intragroup eliminations are as follows:
ASSC | ASFC | Wechain | Kailifeng | ASAC | ASTH | Total | ||||||||||||||||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||||||
September 30 | December 31 | September 30 | December 31 | September 30 | December 31 | September 30 | December 31 | September 30 | December 31 | September 30 | December 31 | September 30 | December 31 | |||||||||||||||||||||||||||||
Current assets | 6,125,772 | 8,454,526 | 24,350,960 | 26,519,686 | 590,967 | 446,330 | 893,222 | 130,545 | 1,904 | - | 1,247,011 | - | 33,209,837 | 35,551,087 | ||||||||||||||||||||||||||||
Non-current assets | 610 | 391 | 635,622 | 124,846 | 747,335 | 1,283,169 | 658,359 | 59,760 | - | - | 313,475 | - | 2,355,401 | 1,468,166 | ||||||||||||||||||||||||||||
6,126,383 | 8,454,917 | 24,986,581 | 26,644,532 | 1,338,302 | 1,729,499 | 1,551,582 | 190,305 | 1,904 | - | 1,560,486 | - | 35,565,238 | 37,019,252 | |||||||||||||||||||||||||||||
Current liabilities | 1,665,226 | 4,238,109 | 1,064,895 | 2,584,145 | 187,419 | 67,363 | 88,071 | 56,091 | - | - | 1,206,161 | - | 4,211,773 | 6,945,708 | ||||||||||||||||||||||||||||
Non-current liabilities | - | - | 56,596 | 69,209 | 46,318 | 66,128 | 9,601 | - | - | - | 20,540 | - | 133,055 | 135,337 | ||||||||||||||||||||||||||||
1,665,226 | 4,238,109 | 1,121,492 | 2,653,354 | 233,737 | 133,491 | 97,672 | 56,091 | - | - | 1,226,701 | - | 4,344,828 | 7,081,045 | |||||||||||||||||||||||||||||
Equity attributable to owners of the parent | 2,218,521 | 2,031,193 | 12,138,197 | 11,991,098 | 569,875 | 815,252 | 743,991 | 67,344 | 988 | - | 169,067 | - | 15,840,639 | 14,904,886 | ||||||||||||||||||||||||||||
Non-controlling interests | 2,131,520 | 1,951,538 | 11,662,189 | 11,520,859 | 547,527 | 783,281 | 714,815 | 64,703 | 950 | - | 42,267 | - | 15,099,268 | 14,320,381 |
ASSC | ASFC | Wechain | Kailifeng | ASAC | ASTH | Total | ||||||||||||||||||||||||||||||||||||
Nine-month period ended | Nine-month period ended | Nine-month period ended | Nine-month period ended | Nine-month period ended | Nine-month period ended | Nine-month period ended | ||||||||||||||||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||||||
September 30 | September 30 | September 30 | September 30 | September 30 | September 30 | September 30 | September 30 | September 30 | September 30 | September 30 | September 30 | September 30 | September 30 | |||||||||||||||||||||||||||||
Revenue | 2,935,957 | 20,968,703 | 1,724,211 | 1,954,642 | 569,428 | - | - | - | - | - | 1,122,012 | - | 6,351,608 | 22,923,345 | ||||||||||||||||||||||||||||
Profit for the year attributable to the | ||||||||||||||||||||||||||||||||||||||||||
owners of the parent | 196,283 | 507,742 | 382,140 | 517,286 | (232,621 | ) | (124,313 | ) | (119,546 | ) | (4,249 | ) | (10 | ) | - | 74,662 | - | 300,908 | 896,466 | |||||||||||||||||||||||
Profit for the year attributable to NCIs | 188,585 | 487,831 | 367,154 | 497,000 | (223,498 | ) | (119,438 | ) | (114,858 | ) | (4,082 | ) | (9 | ) | - | 18,666 | - | 236,040 | 861,311 | |||||||||||||||||||||||
Profit (loss) for the year | 384,869 | 995,573 | 749,294 | 1,014,286 | (456,119 | ) | (243,751 | ) | (234,404 | ) | (8,331 | ) | (19 | ) | - | 93,328 | - | 536,948 | 1,757,777 | |||||||||||||||||||||||
Other comprehensive income ("OCI") for the year | ||||||||||||||||||||||||||||||||||||||||||
OCI attributable to the owners of the parent | (41,491 | ) | 3,858 | (202,503 | ) | (45,276 | ) | (12,756 | ) | (1,382 | ) | 2,434 | - | (16 | ) | - | (3,955 | ) | - | (258,289 | ) | (42,800 | ) | |||||||||||||||||||
OCI attributable to NCIs | (39,864 | ) | 3,707 | (194,562 | ) | (43,500 | ) | (12,256 | ) | (1,328 | ) | 2,338 | - | (16 | ) | - | (3,800 | ) | - | (248,160 | ) | (41,121 | ) | |||||||||||||||||||
OCI for the year | (81,356 | ) | 7,565 | (397,065 | ) | (88,776 | ) | (25,012 | ) | (2,710 | ) | 4,772 | - | (32 | ) | - | (7,755 | ) | - | (506,448 | ) | (83,921 | ) | |||||||||||||||||||
Total comprehensive income for the year | ||||||||||||||||||||||||||||||||||||||||||
attributable to the owners of the parent | 154,792 | 511,600 | 179,637 | 472,010 | (245,377 | ) | (125,695 | ) | (117,112 | ) | (4,249 | ) | (26 | ) | - | 70,707 | - | 42,619 | 853,666 | |||||||||||||||||||||||
Total comprehensive income for | ||||||||||||||||||||||||||||||||||||||||||
the year attributable to NCIs | 148,721 | 491,538 | 172,592 | 453,500 | (235,754 | ) | (120,766 | ) | (112,520 | ) | (4,082 | ) | (25 | ) | - | 14,866 | - | (12,120 | ) | 820,190 | ||||||||||||||||||||||
Total comprehensive profit and | ||||||||||||||||||||||||||||||||||||||||||
loss for the year | 303,513 | 1,003,138 | 352,229 | 925,510 | (481,131 | ) | (246,461 | ) | (229,631 | ) | (8,331 | ) | (51 | ) | - | 85,572 | - | 30,500 | 1,673,856 | |||||||||||||||||||||||
Net cash used in operating activities | 2,107,979 | 1,489,543 | 3,167,764 | (1,424,832 | ) | (148,235 | ) | (142,353 | ) | (831,556 | ) | - | (19 | ) | - | (318,066 | ) | - | 3,977,866 | (77,642 | ) | |||||||||||||||||||||
Net cash used in investing activities | (645 | ) | (2 | ) | (459,554 | ) | (3,035 | ) | 44,099 | (141,532 | ) | (610,199 | ) | - | - | - | 98,977 | - | (927,322 | ) | (144,569 | ) | ||||||||||||||||||||
Net cash from financing activities | (1,993,590 | ) | (1,355,533 | ) | (794,560 | ) | 118,304 | (47,219 | ) | 256,409 | 1,447,156 | - | 1,989 | - | 312,757 | - | (1,073,467 | ) | (980,820 | ) | ||||||||||||||||||||||
Foreign exchange differences | (26,776 | ) | 36,123 | (875,382 | ) | 254,608 | (35,324 | ) | (4,940 | ) | (2,292 | ) | - | (66 | ) | - | (12,472 | ) | - | (952,311 | ) | 285,791 | ||||||||||||||||||||
Net cash (outflow) inflow for the year | 86,967 | 170,131 | 1,038,269 | (1,054,955 | ) | (186,679 | ) | (32,416 | ) | 3,109 | - | 1,904 | - | 81,196 | - | 1,024,767 | (917,240 | ) |
TENET FINTECH GROUP INC. Notes to Condensed Interim Consolidated Financial Statements For the nine-month periods ended September 30, 2022 and 2021 (In Canadian dollars) (Unaudited) |
21 - NON-CONTROLLING INTERESTS (CONTINUED)
During the nine months period ended September 30, 2022, the Company's subsidiaries, ASDS and AST along with the non-controlling interests of KALIFENG and ASAC respectively, subscribed for additional share capital in the ratio of their relevant ownership percentages. The total value of capital agreed to be injected by NCIs totaled $762,631 in KALIFENG (nine months ended September 30, 2021 - $Nil), totaled $975 in ASAC (nine months ended September 30, 2021 - $Nil) and $27,401 in ASTH (nine months ended September 30, 2021 - $Nil). As at September 30, 2022 the amount of the NCI's portion of the capital injection agreed for these NCI's that was outstanding was $860,870 (December 31, 2021 - $98,239) (note 6).
22 - 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.
23 - COMPARATIVE FIGURES
Certain comparative figures have been reclassified in order to comply with the basis of presentation adopted in the current year.
24 - SUBSEQUENT EVENTS
On October 3, 2022, the Company signed an office lease agreement in Montreal, Quebec, with a total rentable area of 15,000 square feet to accommodate the growing workforce in Canada. The lease begins on October 1, 2022, and engages the Company for minimum monthly rental payments starting on November 1, 2023, totalling $3,375,000 over a ten-year lease term.
On October 1, 2022, through its AST subsididary, the Company acquired and became the sole owner of Jiangsu Steel Chain Technology Co., Ltd. ("LINKSTEEL"), a fintech platform.
During the period from October 1, 2022 to November 29, 2022, the Company issued 82,465 share purchase options to new employees with an average strike price of $1.24. Stock options are vested between a period of 8 to 24 months and mature 5 years after the issuance date.