Exhibit 99.1
ITSQuest, Inc.
TABLE OF CONTENTS
INDEPENDENT AUDITOR’S REPORT
To the Board of Directors and Stockholders
of ITSQuest, Inc.
Opinion
We have audited the accompanying consolidated financial statements of ITSQuest, Inc. (a New Mexico corporation) and Affiliates (collectively, the Company), which comprise the consolidated balance sheets as of November 26, 2020 and December 31, 2019, and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for the period from January 1, 2020 through November 26, 2020 and the year ended December 31, 2019, and the related notes to the consolidated financial statements.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of November 26, 2020 and December 31, 2019, and the results of their operations and their cash flows for the period from January 1, 2020 through November 26, 2020 and the year ended December 31, 2019, in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the consolidated financial statements are available to be issued.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements, including omissions, are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements.
In performing an audit in accordance with generally accepted auditing standards, we:
| ● | Exercise professional judgment and maintain professional skepticism throughout the audit. |
| ● | Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. |
| ● | Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed. |
| ● | Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements. |
| ● | Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time. |
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.
/s/ Carr, Riggs & Ingram, LLC
Albuquerque, New Mexico
March 2, 2022
ITSQuest, Inc.
Consolidated Balance Sheets
| | | November 26, | | | December 31, | |
| | | 2020 | | | 2019 | |
| Assets | | | | | | | | |
| Current assets | | | | | | | | |
| Cash and cash equivalents | | $ | 349,895 | | | $ | 264,364 | |
| Accounts receivable - trade, net | | | 937,442 | | | | 1,193,154 | |
| Prepaid expenses | | | 6,325 | | | | 36,450 | |
| Total current assets | | | 1,293,662 | | | | 1,493,968 | |
| | | | | | | | | |
| Noncurrent assets | | | | | | | | |
| Property and equipment, net | | | 54,375 | | | | - | |
| Other assets | | | 50,455 | | | | 20,051 | |
| Total noncurrent assets | | | 104,830 | | | | 20,051 | |
| | | | | | | | | |
| Total assets | | $ | 1,398,492 | | | $ | 1,514,019 | |
| | | | | | | | | |
| Liabilities and Stockholders’ Deficit | | | | | | | | |
| Current liabilities | | | | | | | | |
| Accounts payable - trade | | $ | 7,635 | | | $ | 2,292 | |
| Accrued liabilities | | | 138,358 | | | | 155,887 | |
| Total current liabilities | | | 145,993 | | | | 158,179 | |
| | | | | | | | | |
| Non-current liabilities | | | | | | | | |
| Long-term liabilities | | | 4,472,421 | | | | 4,311,594 | |
| Total liabilities | | | 4,618,414 | | | | 4,469,773 | |
| | | | | | | | | |
| Stockholders’ deficit | | | | | | | | |
| Common stock - no par value, authorized 100,000 shares, issued 100,000 shares, and outstanding 100,000 shares | | | 11,500 | | | | 11,500 | |
| Additional paid-in capital | | | 205,073 | | | | 205,073 | |
| Accumulated deficit | | | (2,978,480 | ) | | | (2,669,205 | ) |
| Non-controlling interest | | | (458,015 | ) | | | (503,122 | ) |
| Total stockholders’ deficit | | | (3,219,922 | ) | | | (2,955,754 | ) |
| Total liabilities and stockholders’ deficit | | $ | 1,398,492 | | | $ | 1,514,019 | |
The accompanying notes are an integral part of these financial statements.
ITSQuest, Inc.
Consolidated Statements of Operations
|
| For the Period from January 1, 2020 through
November 26,
2020 |
|
| For the Year Ended
December 31,
2019 |
|
| Revenue | | $ | 11,486,125 | | | $ | 14,795,860 | |
| Cost of services | | | 8,242,889 | | | | 10,753,384 | |
| Gross profit | | | 3,243,236 | | | | 4,042,476 | |
| Operating Expenses | | | | | | | | |
| Salaries and wages | | | 1,092,622 | | | | 1,147,720 | |
| General and administrative | | | 2,231,356 | | | | 2,553,181 | |
| Total operating expenses | | | 3,323,978 | | | | 3,700,901 | |
| Operating profit (loss) | | | (80,742 | ) | | | 341,575 | |
| Other Expense | | | | | | | | |
| Interest expense | | | (57,139 | ) | | | (84,268 | ) |
| Income (loss) before income tax expense | | | (137,881 | ) | | | 257,307 | |
| Income tax expense | | | 134,716 | | | | 198,013 | |
| Net income (loss) | | | (272,597 | ) | | | 59,294 | |
| Less: Net income (loss) attributable to non-controlling interest | | | 33,700 | | | | (111,657 | ) |
| Net income (loss) attributable to common stockholders | | $ | (306,297 | ) | | $ | 170,951 | |
The accompanying notes are an integral part of these financial statements.
ITSQuest, Inc.
Consolidated Statements of Changes in Stockholders’ Deficit
For the period from January 1, 2020 through November 26, 2020 and the year ended December 31, 2019
| | | Common | | | Additional Paid-in | | | Accumulated | | | Non- controlling | | | Total Stockholders’ | |
| | | Stock | | | Capital | | | Deficit | | | interest | | | Deficit | |
| Balance at January 1, 2019 | | $ | 11,500 | | | $ | 205,073 | | | $ | (2,791,348 | ) | | $ | (410,393 | ) | | $ | (2,985,168 | ) |
| Non-controlling interest contributions | | | - | | | | - | | | | - | | | | 18,928 | | | | 18,928 | |
| Common stockholder distributions | | | - | | | | - | | | | (48,808 | ) | | | - | | | | (48,808 | ) |
| Net income (loss) | | | - | | | | - | | | | 170,951 | | | | (111,657 | ) | | | 59,294 | |
| Balance at December 31, 2019 | | | 11,500 | | | | 205,073 | | | | (2,669,205 | ) | | | (503,122 | ) | | | (2,955,754 | ) |
| Non-controlling interest contributions | | | - | | | | - | | | | - | | | | 11,407 | | | | 11,407 | |
| Common stockholder distributions | | | - | | | | - | | | | (2,978 | ) | | | - | | | | (2,978 | ) |
| Net income (loss) | | | - | | | | - | | | | (306,297 | ) | | | 33,700 | | | | (272,597 | ) |
| Balance at November 26, 2020 | | $ | 11,500 | | | $ | 205,073 | | | $ | (2,978,480 | ) | | $ | (458,015 | ) | | $ | (3,219,922 | ) |
The accompanying notes are an integral part of these financial statements.
ITSQuest, Inc.
Consolidated Statements of Cash Flows
|
| For the Period from January 1, 2020 through
November 26,
2020 |
|
| For the Year Ended
December 31,
2019 |
|
| Operating Activities | | | | | | | | |
| Net income (loss) | | $ | (272,597 | ) | | $ | 59,294 | |
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | | | | | | | | |
| Bad debt expense | | | 65,570 | | | | 69,457 | |
| Changes in operating assets and liabilities | | | | | | | | |
| Accounts receivable - trade | | | 190,142 | | | | (425,263 | ) |
| Prepaid expenses | | | 30,125 | | | | (22,647 | ) |
| Other assets | | | (30,404 | ) | | | 6,483 | |
| Accounts payable - trade | | | 5,343 | | | | (6,988 | ) |
| Accrued liabilities | | | (17,529 | ) | | | 1,986 | |
| Net cash used in operating activities | | | (29,350 | ) | | | (317,678 | ) |
| | | | | | | | | |
| Investing Activities | | | | | | | | |
| Capital expenditures | | | (54,375 | ) | | | - | |
| Net cash used in investing activities | | | (54,375 | ) | | �� | - | |
| | | | | | | | | |
| Financing Activities | | | | | | | | |
| Contributions by non-controlling interests | | | 11,407 | | | | 18,928 | |
| Common stockholder distributions paid | | | (2,978 | ) | | | (48,808 | ) |
| Tax assessments and other long-term liabilities | | | 160,827 | | | | 194,284 | |
| Net cash provided by financing activities | | | 169,256 | | | | 164,404 | |
| | | | | | | | | |
| Net change in cash and cash equivalents | | | 85,531 | | | | (153,274 | ) |
| Cash and cash equivalents at beginning of year | | | 264,364 | | | | 417,638 | |
| Cash and cash equivalents at end of year | | $ | 349,895 | | | $ | 264,364 | |
| | | | | | | | | |
| Schedule of Certain Cash Flow Information | | | | | | | | |
| Interest paid | | $ | 57,139 | | | $ | 84,268 | |
The accompanying notes are an integral part of these financial statements.
ITSQuest, Inc.
Notes to Consolidated Financial Statements
NOTE 1: DESCRIPTION OF THE BUSINESS
ITSQuest, Inc. (formerly Haldeman and Hoogestraat, Inc.) was organized in September 1994 in the state of New Mexico. In September 2002, an amendment to the Articles of Incorporation was filed thereby changing the legal name to ITSQuest, Inc.
ITSQuest, Inc. and the affiliates it controls (collectively, the Company) operates as a professional staffing agency. The Company offers human resource outsourcing, pre and post-employment, industry specific assessments, testing, vetting, training, recruiting, and contract project management services. The Company has 12 locations serving customers in the States of Texas and New Mexico.
In November 2020, a Share Exchange Agreement (the SEA) was entered into by TransparentBusiness, Inc. (Transparent) and ITSQuest, Inc., whereby Transparent acquired shares of ITSQuest, Inc., subject to satisfaction of various closing conditions set forth in the SEA, resulting in ITSQuest Inc. becoming a 51% owned subsidiary of Transparent. As of the acquisition date, November 27, 2020, Transparent will consolidate ITSQuest, Inc.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Periods Presented
The consolidated financial statements include the accounts of ITSQuest, Inc., and variable interest entities (VIE) (collectively, the Company). The Company consolidates an entity if the Company has a controlling financial interest in the entity. VIEs are consolidated if the Company has the power to direct the significant economic activities of the VIE that impact financial performance and has the obligation to absorb losses or the right to receive benefits that could potentially be significant (i.e., the Company is the primary beneficiary). The assessment of whether or not the Company is the primary beneficiary of a VIE is performed on an ongoing basis. This assessment includes both qualitative and quantitative reviews. Qualitative analysis is based on an evaluation of the design of the entity, its organizational structure including decision making ability, and financial agreements. Quantitative analysis is based on the Company’s forecasted cash flows.
The consolidated financial statements present the operating results and cash flows for the period from January 1, 2020 through November 26, 2020, and the year ended December 31, 2019.
All significant intercompany balances and transactions have been eliminated.
Basis of Accounting
The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The Financial Accounting Standards Board (FASB) provides authoritative guidance regarding U.S. GAAP through the Accounting Standards Codification (ASC) and related Accounting Standards Updates (ASUs).
ITSQuest, Inc.
Notes to Consolidated Financial Statements
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Use of Estimates
The preparation of U.S. GAAP financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates. Estimates that are particularly susceptible to significant change in the near term are related to the allowance for doubtful accounts.
Cash and Cash Equivalents
Cash and cash equivalents include cash and all highly-liquid debt instruments with an original maturity of 90 days or less.
Accounts Receivable
Accounts receivable represent amounts owed to the Company which are expected to be collected within twelve months and are presented in the balance sheets net of the allowance for doubtful accounts.
Allowance for Doubtful Accounts
Management evaluates its receivables on an ongoing basis by analyzing customer relationships and previous payment histories. The allowance for doubtful accounts is management’s best estimate of the amount of probable credit losses in the existing accounts based on current market conditions. Historically, losses on uncollectible accounts have been within management’s expectations. The allowance for doubtful accounts is reviewed on a periodic basis to ensure there is sufficient reserve to cover any potential credit losses. When receivables are considered uncollectible, they are charged against the allowance for doubtful accounts. Collections on accounts previously written off are included in income as received. The allowance for doubtful accounts was $436,519 and $393,128 at November 26, 2020 and December 31, 2019, respectively.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Expenditures for additions, major renewals, and betterments are capitalized and repairs and maintenance are charged to operations as incurred. Depreciation expense is recognized over the estimated useful lives of the property and equipment using the straight-line method.
ITSQuest, Inc.
Notes to Consolidated Financial Statements
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue Recognition
The Company enters into service agreements with customers for human resources support services. The Company’s agreements vary in duration having a legally enforceable term of generally one year or less. Effective January 1, 2019, the Company adopted FASB ASC 606, Revenue from Contracts with Customers, using the modified retrospective approach. Prior to the adoption of FASB ASC 606, the Company recognized revenue when persuasive evidence of an arrangement existed, delivery of services had occurred, the rate charged was fixed or determinable, and collectability was reasonably assured. Under FASB ASC 606, revenue is recognized when the performance obligation under the terms of the contract with customers is satisfied in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those services. For substantially all of the Company’s customer arrangements, the performance obligations in the agreements are satisfied over time because the customer simultaneously receives and consumes the benefits provided as the Company performs services. The Company uses the output method based on a fixed rate per employee by type of service provided to recognize revenue, as the value to the customer of the services transferred to date appropriately depicts the performance towards complete satisfaction of the performance obligation. Customer billing typically occurs in the period in which services are performed. Customer receivables are included in the balance sheet less an allowance for doubtful accounts. The Company has elected the practical expedient permitting it to disregard financing components, which may be deemed to be part of its transaction price as its customary payment terms are less than one year. As a result, there was no material impact to the recognition of revenue from providing human resources support services to the Company’s customers. Accordingly, the adoption of ASC 606 had no significant effect on the Company’s consolidated financial statements and there was no cumulative-effect adjustment recognized.
Income Taxes
The Company and its stockholders have elected to be taxed under the provisions of Subchapter “S” of the Internal Revenue Code and have elected similar provisions available in the states. Under those provisions, the Company does not pay federal and state corporate income taxes on its taxable income. Instead, the stockholders are liable for individual federal and state income taxes for their respective shares of the Company’s taxable income.
Tax positions are recognized only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax position is recorded. The Company is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.
The Company recognizes interest and/or penalties related to income tax matters in income tax expense.
Interest
Interest costs are charged to expense as incurred.
ITSQuest, Inc.
Notes to Consolidated Financial Statements
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Advertising
Advertising costs are charged to operations as incurred. Advertising expense totaled approximately $12,243 and $24,888 for the period from January 1, 2020 through November 26, 2020 and the year ended December 31, 2019, respectively.
Subsequent Events
Management has evaluated subsequent events through the date that the consolidated financial statements were available to be issued, March 2, 2022. See Note 10 for relevant disclosure(s). No subsequent events occurring after this date have been evaluated for inclusion in these consolidated financial statements.
Accounting Guidance Not Yet Adopted
In February 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-02, “Leases”, which establishes a comprehensive lease standard under Generally Accepted Accounting Standards (GAAP) for virtually all industries. The FASB issues additional amendments related to ASU 2016-02: (1) ASU 2018-01”Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842”; (2) ASU 2018-10, “Codification Improvements of Topic 842, Leases”; and (3) ASU 2018-11, “Leases (Topic 842): Targeted Improvements”. The new standard and related amendments require lessees to recognize a right of use asset and a lease liability for virtually all of their leases, other than leases that meet the definition of short-term leases. ASU 2019-10 was issued due to the transition challenges of public companies, which are often more significant in small private and nonprofit entities. Further, ASC 842-10-S65 states the SEC would not object to a public business entity (PBE) that would otherwise not meet the PBE definition except for the inclusion of its financial statements in another entity’s filing with the SEC adopting ASC 842 in fiscal year 2021. As amended by ASU 2020-05, the effective date for ASU 2016-02 is for annual periods beginning after December 15, 2021, including interim periods therein. As a result, the Company has not adopted ASU 2016-02. The Company is still evaluating the potential impact on the Company’s consolidated financial statements.
NOTE 3: CONCENTRATIONS
Financial instruments that subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. At various times during the year, the Company may have bank deposits significantly in excess of Federal Deposit Insurance Corporation insurance limits. Management believes any credit risk is low due to the overall financial strength of the financial institution. Concentrations of credit risk with respect to accounts receivable is limited due to the number of customers comprising the Company’s customer base and their dispersion across different geographic regions. To reduce risk, the Company routinely assesses the financial strength of its customers and, as a consequence, believes that its accounts receivable credit risk exposure is limited.
Revenue from 1 customer represented approximately 14 percent and 17 percent of total revenue for the period from January 1, 2020 through November 26, 2020 and the year ended December 31, 2019, respectively. At November 26, 2020 and December 31, 2019, the Company had accounts receivable of $71,590 and $211,832, respectively, due from this customer.
ITSQuest, Inc.
Notes to Consolidated Financial Statements
NOTE 4: PROPERTY AND EQUIPMENT
The components of property and equipment at November 26, 2020 and December 31, 2019, are as follows:
| | | Estimated
Useful Lives
(in years) | | | November 26,
2020 | | | December 31,
2019 | |
| Vehicles | | 5 | | | $ | 54,375 | | | $ | - | |
| Less accumulated depreciation | | | | | | - | | | | - | |
| Total | | | | | $ | 54,375 | | | $ | - | |
Depreciation expense for the period from January 1, 2020 through November 26, 2020 and the year ended December 31, 2019 amounted to $0 as the additions were purchased at the end of the period from January 1, 2020 through November 26, 2020.
NOTE 5: LONG TERM LIABILITIES
In recent years, the Company has been notified of an outstanding liability due to the New Mexico Taxation and Revenue Department for gross tax receipts, penalties and interest totaling approximately $4,380,000. This amount covers assessments for the period from January 31, 2011 to April 30, 2018. The Company has recognized the full amount on the consolidated balance sheets as a long term liability as a payment plan has not yet been finalized.
Income tax expense related to the assessment liability for the period from January 1, 2020 through November 26, 2020 and the year ended December 31, 2019, was $134,716 and $198,013, respectively.
NOTE 6: COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company leases certain facilities under non-cancelable lease agreements which expire at various dates through October 2023. Rent expense totaled approximately $216,500 and $235,700 for the period from January 1, 2020 through November 26, 2020 and the year ended December 31, 2019, respectively. These lease agreements have been classified as operating leases.
The following is a schedule of future minimum lease payments under the non-cancelable operating lease agreements subsequent to November 26, 2020:
| For the years ending December 31, | | | |
| 2021 | | $ | 102,300 | |
| 2022 | | | 68,200 | |
| 2023 | | | 24,000 | |
| Total | | $ | 194,500 | |
ITSQuest, Inc.
Notes to Consolidated Financial Statements
NOTE 6: COMMITMENTS AND CONTINGENCIES (Continued)
Contingencies
From time to time, the Company may have asserted and unasserted claims arising in the normal course of business. The Company does not expect losses, if any, arising from these asserted and unasserted claims to have a material effect on the consolidated financial statements.
NOTE 7: REVENUE
Revenues are recognized when promised services are delivered to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. Service revenues as presented on the consolidated statements of operations represent services rendered to customers less variable consideration, such as sales adjustments and allowances. Reimbursements, including those related to travel and out-of-pocket expenses, are also included in service revenues, and equivalent amounts of reimbursable expenses are included in costs of services.
Management consulting and temporary staffing revenue from contracts with customers are recognized in the amount to which the Company has a right to invoice, when the services are rendered by the Company’s engagement professionals. The substantial majority of engagement professionals placed on assignment by the Company are the Company’s legal employees while they are working on assignments. The Company pays all related costs of employment, including workers’ compensation insurance, state and federal unemployment taxes, social security and certain fringe benefits. The Company assumes the risk of acceptability of its employees to its customers.
The Company records management consulting and temporary staffing revenue on a gross basis as a principal versus on a net basis as an agent in the presentation of revenues and expenses. The Company has concluded that gross reporting is appropriate because the Company (i) has the risk of identifying and hiring qualified employees, (ii) has the discretion to select the employees and establish their price and duties and (iii) bears the risk for services that are not fully paid for by customers.
Disaggregated Revenue
| | For the Period from January 1, 2020 through November 26,
2020 | | | For the Year Ended
December 31,
2019 | |
| Light industrial | | $ | 2,089,305 | | | $ | 7,796,592 | |
| Clerical administrative | | | 820,328 | | | | 1,295,275 | |
| Government | | | 8,290,607 | | | | 5,541,355 | |
| Healthcare | | | 52,724 | | | | 31,272 | |
| Miscellaneous revenue | | | 233,161 | | | | 131,366 | |
| Total revenue | | $ | 11,486,125 | | | $ | 14,795,860 | |
The Company serves governmental entities across various service lines.
ITSQuest, Inc.
Notes to Consolidated Financial Statements
NOTE 7: REVENUE (Continued)
Contract Balances
| | For the Period from January 1, 2020 through November 26,
2020 | | | For the Year Ended
December 31,
2019 | |
| Net receivable from contracts, beginning of year | | $ | 1,193,154 | | | $ | 656,658 | |
| Net receivable from contracts, end of year | | $ | 937,442 | | | $ | 1,193,154 | |
NOTE 8: EMPLOYEE BENEFIT PLAN
The Company has a 401(k) Plan (the Plan), which covers all full-time employees meeting eligibility requirements. Matching contributions are half of employee contributions up to 4% of their compensation. Matching contributions are subject to vesting percentages as outlined in the Plan. The Company’s matching contributions were approximately $6,300 and $6,100 for the period from January 1, 2020 through November 26, 2020 and the year ended December 31, 2019, respectively.
NOTE 9: UNCERTAINTIES
In March 2020, the World Health Organization made the assessment that the outbreak of a novel coronavirus (COVID-19) can be characterized as a pandemic. As a result, uncertainties have arisen that may have a significant negative impact on the operating activities and results of the Company. The occurrence and extent of such an impact will depend on future developments, including (i) the duration and spread of the virus, (ii) government quarantine measures, (iii) voluntary and precautionary restrictions on travel or meetings, (iv) the effects on the financial markets, and (v) the effects on the economy overall, all of which are uncertain.
NOTE 10: SUBSEQUENT EVENTS
Management evaluated all events or transactions that occurred after November 26, 2020 through March 2, 2022, the date the Company’s consolidated financial statements were available to be issued. The following item occurred.
As described in Note 1, in November 2020, a Share Exchange Agreement (the SEA) was entered into by TransparentBusiness, Inc. and ITSQuest, Inc. The total purchase consideration was $3,800,000.
As of the date of the SEA Agreement, ITSQuest is responsible for the outstanding tax liability (Note 5).
