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Fintech Select Ltd. — Interim / Quarterly Report 2020
Nov 30, 2020
45418_rns_2020-11-30_98747ac7-294f-4255-95e9-a204efadb601.pdf
Interim / Quarterly Report
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FINTECH SELECT LTD.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS Unaudited September 30, 2020
FINTECH SELECT LTD. September 30, 2020 CONTENTS
| Page | |
|---|---|
| NOTICE TO READER | 1 |
| CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS | |
| Condensed Consolidated Interim Statements of Financial Position | 2 |
| Condensed Consolidated Interim Statements of Operations and Comprehensive Loss |
3 |
| Condensed Consolidated Interim Statements of Cash Flows | 4 |
| Condensed Consolidated Interim Statements of Changes in Shareholders’ Deficit |
5 |
| Notes to Condensed Consolidated Interim Financial Statements | 6 – 18 |
NOTICE OF NO AUDITOR REVIEW OF CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Under National Instrument 51-102, Part 4, subsection 4.3 (3) (a), if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that an auditor has not reviewed the financial statements.
The accompanying condensed unaudited interim financial statements of the Company have been prepared by and are the responsibility of the Company’s management.
The Company’s independent auditor has not performed a review of these condensed financial statements in accordance with standards established by the Canadian Institute of Chartered Accountants for a review of interim financial statements by an entity’s auditor.
Fintech Select Ltd.
Condensed Consolidated Interim Statements of Financial Position (Unaudited)
(Presented in Canadian Dollars) As at September 30, 2020
| Note | September 30 | December 31 | |
|---|---|---|---|
| 2020 | 2019 | ||
| ASSETS | |||
| CURRENT | |||
| Cash | $ 21,024 | $ 26,217 | |
| Accounts receivable |
158,594 |
122,706 |
|
| Intangibles – short term | 4 | 86,147 | 84,207 |
| Inventory | 39,223 | 32,628 | |
| Prepaid and other assets | 20,174 | 25,272 | |
| 325,162 | 291,030 | ||
| LONG TERM | |||
| Property and equipment | 3 | 134,883 | 154,663 |
| Intangibles – longterm | 4 | 680,792 | 742,297 |
| 815,675 | 896,960 | ||
| $ 1,140,837 | $ 1,187,990 | ||
| LIABILITIES & SHAREHOLDER’S EQUITY | |||
| CURRENT | |||
| Accounts payable and accrued liabilities | 15 | 3,654,257 | 3,948,823 |
| Deferred revenue | 13,417 | 65,917 | |
| Demand loan | 5 | 187,481 | 190,896 |
| Customer deposits | 34,700 | 35,200 | |
| Currentportion of lease obligations | 10 | 114,910 | 131,315 |
| 4,004,765 | 4,372,151 | ||
| NONCURRENT | |||
| Lease obligations | 12 | 177,481 | 244,687 |
| 4,182,246 | 4,616,838 | ||
| SHAREHOLDERS’ EQUITY | |||
| Share capital | 6 | 18,270,142 | 18,270,142 |
| Contributed and other surplus | 6,694,857 | 6,375,740 | |
Warrant capital |
7, 8 | 468 | 319,354 |
| Other comprehensive loss | (254,597) | (238,888) | |
Deficit |
(27,752,279) |
(28,155,196) |
|
| (3,041,409) | (3,428,848) | ||
| $ 1,140,837 | $ 1,187,990 |
Nature of Operations and Going concern (Note 1) Provision (Note 15) Approved by the Board
Naveed UI-Hassan Mohammad Abuleil Director (Signed) Director (Signed)
The accompanying notes form an integral part of these consolidated financial statements.
2
Fintech Select Ltd. Condensed Consolidated Interim Statements of Operations and Comprehensive Income (Unaudited)
(Presented in Canadian Dollars) For 3 and 9 months ended September 30, 2020
| 3 months Septem |
ended ber 30 |
9 months Septem |
ended ber 30, |
|
|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |
| REVENUE | $ 628,160 | $ 725,310 | $ 2,326,155 | $ 2,513,606 |
| EXPENSES | ||||
| Goods and services purchased | 62,694 | 108,477 | 262,520 | 337,884 |
| Salaries and benefits | 360,218 | 559,885 | 1,335,946 | 1,884,493 |
| Other general and administrative | 54,005 | 77,934 | 221,607 | 246,155 |
| Stock based compensation | -- | -- | 231 | -- |
| Foreign exchange loss (gain) | 13,105 | (5,360) | (10,533) | 25,677 |
| Depreciation and amortization | 38,773 | 52,331 | 123,190 | 161,246 |
| Interest expenses | 9,805 | 12,816 | 31,148 | 36,459 |
| 538,600 | 806,083 | 1,964,109 | 2,691,914 | |
| Net income (loss) from operations | 89,560 | (80,773) | 362,046 | (178,308) |
| Gain on disposal of intangibles | -- | -- | 11,735 | 32,754 |
| Gain (loss) on revaluation of intangibles | 11,718 | (23,975) | 29,136 | 51,211 |
| Net income (loss) | 101,278 | (104,748) | 402,917 | (94,343) |
| Exchange difference on translating foreign operation |
12,935 | (7,066) | (15,709) | 18,073 |
| Comprehensive income(loss) | $114,213 | $ (111,814) | $387,208 | $ (76,270) |
| Income(Loss) per share | ||||
| Basic and diluted | $ 0.001 | $ (0.001) | $ 0.006 | $ (0.001) |
| Weighted average number of shares outstanding | ||||
| Basic and diluted | 70,874,515 | 70,874,515 | 70,874,515 | 69,898,325 |
The accompanying notes form an integral part of these consolidated financial statements
3
Fintech Select Ltd. Condensed Consolidated Interim Statements of Cash Flow (Presented in Canadian Dollars) For 3 and 9 months ended September 30, 2020
| Three mont |
hs ended |
Nine mont |
hs ended |
|
|---|---|---|---|---|
| Septem |
er 30 |
Septem |
er 30, |
|
| 2020 | 2019 | 2020 | 2019 | |
| Cash provided by (used in) | ||||
| Operations | ||||
| Net income (loss) | $ 101,278 |
(104,748) | $ 402,917 | $ (94,343) |
| Items not affecting cash | ||||
| Amortization | 38,773 | 52,331 | 123,190 | 161,246 |
| Interest expenses | 9,805 | 12,816 | 31,148 | 36,459 |
| Stock based compensation | -- | -- | 231 | -- |
| Gain on disposal of intangible | -- | -- | (11,735) | (32,754) |
| (Gain) Loss on revaluation of intangible |
(11,718) |
23,975 | (29,136) |
(51,211) |
| Unrealized foreign exchange loss/(gain) | 12,647 |
5,551 | (15,360) | 18,181 |
| 150,785 | (10,075) | 501,255 | 37,578 | |
| Net change in non-cash working capital | ||||
| Accounts receivable |
196,260 |
3,748 |
(35,889) |
24,161 |
| Inventory | (6,445) | (7,398) | (6,595) | (25,838) |
| Prepaid and other assets | 15,066 | 1,475 | 5,097 | (477) |
| Accounts payable and accrued liabilities | (238,584) | 35,847 | (294,565) | 82,955 |
Deferred revenue |
(17,500) |
(17,500) | (52,500) |
(52,848) |
| Customer deposits | (500) | -- | (500) | |
| 99,082 | 6,097 | 116,303 | 65,531 | |
| Investing | ||||
| Disposal of intangible | -- | -- | 38,932 | 49,134 |
| Additions of intangibles and equipment | (26,320) | -- | (41,904) | (30,869) |
| (26,320) | -- | (2,972) | 18,265 | |
| Financing | ||||
| (Decrease)Increase in bank draft | (6,217) | 8,594 | -- | 8,594 |
| Repayment of demand loan | (15,000) | -- | (15,000) | -- |
| Lease payment | (30,808) | (36,088) | (103,175) | (108,176) |
(52,025) |
(27,494) |
(118,175) |
(99,582) |
|
| Net change in cash | 20,737 | (21,397) | (4,844) | (15,786) |
| Effect of exchange rate changes on cash | 287 |
43 | (349) | (108) |
| Cash, beginning of the period | -- | 21,354 | 26,217 | 15,894 |
| Cash, end of the period | $ 21,024 | -- | $ 21,024 | $-- |
The accompanying notes form an integral part of these consolidated financial statements
4
Fintech Select Ltd.
Condensed Consolidated Interim Statement of Changes in Shareholders’ Deficit (Presented in Canadian Dollars) For the 9 months ended September 30, 2020
| Share Number |
Capital Amount |
Contributed Surplus |
Options and Warrant Capital |
Accumulated Other Comprehensive Income (Loss) |
Deficit | Total | |
|---|---|---|---|---|---|---|---|
| Balance, December 31, 2019 | 70,874,515 | 18,270,142 | 6,375,740 | 319,354 | (238,888) | (28,155,196) | (3,428,848) |
| Grant of options | -- | -- | -- | 231 | -- | -- | 231 |
| Options and warrants expired | -- | -- | 319,117 | (319,117) | -- | -- | -- |
| Other comprehensive income from | |||||||
| translation of foreign entity | -- | -- | -- | -- | (15,709) | -- | (15,709) |
| Net income | -- | -- | -- | -- | -- | 402,917 | 402,917 |
| As at September 30,2020 | 70,874,515 | 18,270,142 | 6,694,857 | 468 | (254,597) | (27,752,279) | (3,041,409) |
| Balance, December 31, 2018 | 64,374,515 | 17,945,142 | 6,338,801 | 356,293 | (268,511)) | (27,901,683) | (3,529,958) |
| Issuance of new shares | 6,500,000 | 325,000 | -- | -- | -- | -- | 325,000 |
| Other comprehensive income from translation of foreign entity |
-- | -- | -- | -- | 18,073 | -- | 18,073 |
| Net income | -- | -- | -- | -- | -- | (94,343) | (94,343) |
| As at September 30,2019 | 70,874,515 | 18,270,142 | 6,338,801 | 356,293 | (250,438) | (27,996,026) | (3,281,228) |
The accompanying notes form an integral part of these consolidated financial statements
5
FINTECH SELECT LTD. Notes to condensed consolidated interim financial statements (Unaudited) September 30, 2020 (Presented in Canadian Dollars)
1. NATURE OF OPERATIONS AND GOING CONCERN UNCERTAINTY
Fintech Select Ltd. (the "Company") is a leader in financial payment services and is a provider of robust and disruptive payment solutions, including prepaid card programs, Crypto-currency POS, and recently acquired e-wallet and online payment solutions . The address of the registered office of Company is 100 King St W, Unit T201a, Chatham, ON, N7M 6A9. The Company’s shares are listed on the TSX Venture Exchange under symbol FTEC.
These consolidated financial statements have been prepared on a going concern basis, which assumes the Company will continue its operations in the foreseeable future and that it will be able to realize its assets and discharge its liabilities in the normal course of operations. The facts and circumstances noted below cast significant doubt on the company’s ability to continue as going concern.
During the quarter, the company incurred a net income from operations $101,278 (third quarter of 2019Net loss 104,748). The company had a net inflow of cash from operations of $99,083 (third quarter of 2019 - inflow $6,097). The Company has a working capital deficiency of $3,679,603 (December 31, 2019 deficit $4,081,121). The working capital deficiency limits the Company’s ability to fund capital expenditures and operations.
As of the period end, the Company had collateral account shortfalls which was contrary to the terms of special agreements with the financial institution whereby the Company agreed that it shall maintain in designated special collateral account in a designated bank of amounts equivalent to the consumers unspent card balances. As of September 30, 2020, the Company had collateral account shortfalls of approximately $2.8 million liable to the cardholders and financial institution. These collateral shortfalls are already included in the working capital deficiency number noted above. The Company continues to work towards an agreeable resolution with the financial institution and simultaneously has been working to address the collateral shortfall.
The continuation of the Company as a going concern is dependent on raising sufficient working capital to maintain operations, reducing operating expenses, and increasing revenues and profits. The Company is pursuing further financing alternatives to fund its operations, to settle the shortfall noted above and continue its activities as a going concern. There is no assurance that it will be able to do so in the near future, as without enough financing, the Company may be forced to cease operations.
These consolidated financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the going concern assumption not be appropriate. These adjustments could be material.
The consolidated financial statements were authorized for issuance by the Board of Directors on November 29, 2020.
6
FINTECH SELECT LTD. Notes to condensed consolidated interim financial statements (Unaudited) September 30, 2020 (Presented in Canadian Dollars)
2. BASIS OF PRESENTATION
Statement of compliance
The condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standards 34, Interim Financial Reporting (IAS 34”) using accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (IFRIC”). The accounting policies and methods of computation applied by the Company in these condensed consolidated interim financial statements are the same as those applied in the Company’s annual financial statements as at and for the year ended December 31, 2019, excepted as outlined below. These condensed consolidated interim financial statements should be read in conjunction with the 2019 annual financial statements.
Basis of presentation
These consolidated financial statements are prepared on the historical cost basis except for intangibles - short term which are measured at the fair value, with changes being recognized in other comprehensive income and financial assets classified as “fair value through profit and loss”, if any, which are measured at fair value.
Principles of consolidation
The condensed consolidated interim financial statements include the accounts of the Company and its wholly owned subsidiaries, 1382285 Ontario Limited ("SelectComm"), 2143436 Ontario Limited ("SelectCore Comm"), Local Fone Service, Inc. ("LFS"), SelectCore USA, LLC ("SelectCore US") and 2314606 Ontario Limited (“SelectCore Financial Services”).
Subsidiaries are all entities over which the Company has the power, is exposed, or has rights, to variable returns from its involvement and has the ability to use its power to affect its returns. Subsidiaries are fully consolidated from the date on which control is transferred to the Company.
The company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.
Inter-Company transactions, balances and unrealized gains or losses between subsidiaries are eliminated in preparing the consolidated financial statements. The financial statements of the subsidiaries are prepared for the same reporting period as the reporting company using consistent accounting policies.
Functional and presentational currency
Unless otherwise noted, all amounts in the accompanying consolidated financial statements and these notes are presented in Canadian funds, which is the functional currency of the Company.
7
FINTECH SELECT LTD. Notes to condensed consolidated interim financial statements (Unaudited) September 30, 2020 (Presented in Canadian Dollars)
3. PROPERTY AND EQUIPMENT
Activity during the year ended September 30, 2020 is as follows:
| Electronic |
Office Furniture |
|||
|---|---|---|---|---|
| Cost | **Terminals ** | Equipment | & Fixtures | Totals |
| Balance January1,2020 | 954,633 | 671,372 | 183,960 | 1,809,965 |
| Additions | - | 4,316 | - | 4,316 |
| Balance September 30,2020 | 954,633 | 675,688 | 183,960 | 1,814,281 |
| Accumulated Depreciation | ||||
| Balance January1,2020 | 921,555 | 581,052 | 152,695 | 1,655,302 |
| Depreciation | 6,740 | 12,968 | 4,389 | 24,097 |
| Balance September 30,2020 | 928,295 | 594,020 | 157,084 | 1,679,399 |
| Net Book Value | 26,338 | 81,668 | 26,876 | 134,882 |
Activity during the year ended September 30, 2019 is as follows:
| Electronic |
Office Furniture |
|||
|---|---|---|---|---|
| Cost |
**Terminals ** | Equipment | & Fixtures | Totals |
| Balance January1,2019 | 954,817 | 667,445 | 183,960 | 1,806,222 |
| Additions | 62 | 3,927 | - | 3,989 |
| Disposal | (246) | - | - | (246) |
| Balance September 30,2019 | 954,633 | 671,372 | 183,960 | 1,809,965 |
| Accumulated Depreciation | ||||
| Balance January1,2019 | 909,779 | 561,000 | 145,415 | 1,616,194 |
| Depreciation | 9,166 | 15,382 | 5,596 | 30,144 |
| Balance September 30,2019 | 918,945 | 576,382 | 151,011 | 1,646,338 |
| Net Book Value | 35,688 | 94,990 | 32,949 | 163,627 |
8
FINTECH SELECT LTD. Notes to condensed consolidated interim financial statements (Unaudited) September 30, 2020 (Presented in Canadian Dollars)
4. INTANGIBLES
Intangibles – short term represents bitcoins held for sale. As of September 30, 2020, the Company has 6 bitcoins (December 31, 2019: 9 bitcoins). Cryptocurrency was revalued quarterly based on open market quoted price.
| Cryptocurrency | |
|---|---|
| Balance January1,2020 | $ 84,207 |
| Additions | |
| Disposal | (27,197) |
| Revaluation | 29,137 |
| Balance September 30,2020 | $ 86,147 |
Intangibles – long term represents computer software, Right-of-Use assets and leasehold improvement.
| Computer | Right-of-use | Leasehold | ||
|---|---|---|---|---|
| Cost | Software | Assets | Improvement | Totals |
| Balance January1,2020 | 1,550,029 | 499,967 | 6,522 | 2,056,518 |
| Additions | 37,588 | - | - | 37,588 |
| Balance September 30,2020 | 1,587,617 | 499,967 | 6,522 | 2,094,106 |
| Accumulated Depreciation | ||||
| Balance January1,2020 | 1,182,338 | 130,256 | 1,627 | 1,314,221 |
| Depreciation | 3,173 | 94,919 | 1,001 | 99,093 |
| Balance September 30,2020 | 1,185,511 | 225,175 | 2,628 | 1,413,314 |
| Net Book Value | 402,106 | 274,792 | 3,894 | 680,792 |
5. Demand Loan
| September 30, 2020 | December 31, 2019 | |
|---|---|---|
| Demand loan | $ 187,481 | $190,896 |
This loan bears an interest rate of 8% per annum. It was secured by a promissory note and a general security agreement, covering all of the assets of the Company.
9
FINTECH SELECT LTD. Notes to condensed consolidated interim financial statements (Unaudited) September 30, 2020 (Presented in Canadian Dollars)
6. SHARE CAPITAL
Authorized: Unlimited common shares
Issued and fully paid:
| Septembe Number |
r 30, 2020 Amount |
December Number |
31, 2019 Amount |
|
|---|---|---|---|---|
| Common Shares | 70,874,515 | $ 18,270,142 | 70,874,515 | $ 18,270,142 |
| Total | 70,874,515 | $ 18,270,142 | 70,874,515 | $ 18,270,142 |
In February 2019, the Company issued six million (6,000,000) common shares to acquire an online payment and e-wallet platform, and five hundred thousand (500,000) common shares, as payment of finder’s fees to an arm’s length third-party.
7. STOCK OPTIONS
The Board of Directors has adopted a stock option plan for the Company (the “Plan”). Pursuant to the Plan, the Board of Directors may, from time to time at its discretion, allocate non-transferable options to purchase shares to directors, officers and technical consultants of the Company.
Under the Plan, the aggregate number of shares to be issued upon the exercise of options granted thereunder may not exceed 10% of outstanding shares. Furthermore, the aggregate number of shares to be issued upon exercise of the options granted there under to any one director or officer shall not exceed 5% of the issued and outstanding shares and the number of shares reserved for issuance to all technical consultants will not exceed 2% of the issued and outstanding shares. Options shall expire no later than five years after the date of grant. Options may be exercised no later than ninety (90) days following cessation of the optionee’s position with the Company, provided that if the cessation of office, directorship or technical consulting arrangement was by reason of death, the option may be exercised within a maximum period of one year after such death, subject to the expiry date of such option.
The exercise price of options granted pursuant to the Plan shall be set by the Board of Directors and shall not be less than the applicable discount permitted by the TSX-V or such other stock market on which the shares are then traded. The options issued under the plan vest according to the provisions determined by the Board at the time of grant.
On April 3, 2017, the Company granted 3,380,000 incentive stock options, each giving the holder the right to acquire one common share to various officers, directors, employees and consultants. The options are exercisable at $0.17 per option for a period of three years from the date of grant, vesting immediately. 120,000 stock options were exercised during the year ended December 31, 2017. 1,465,000 options expired during the year ended December 31, 2019. The remaining 1,795,000 options expired in April 2020.
On June 26, 2017, the Company granted 2,000,000 incentive stock options, each giving the holder the right to acquire one common share to directors and consultants. The options are exercisable at $0.30 per option for a period of three years from the date of grant, vesting immediately. 250,000 stock options were exercised during the year ended December 31, 2017. The remaining 1,750,000 options expired in June 2020.
10
FINTECH SELECT LTD. Notes to condensed consolidated interim financial statements (Unaudited) September 30, 2020 (Presented in Canadian Dollars)
On April 12, 2018, the Company granted 1,425,000 incentive stock options, each giving the holder the right to acquire one common share to certain of its consultants, directors and officers. The options are exercisable at $0.30 per option for a period of three years from the date of grant, vesting immediately. 300,000 options expired during the year ended December 31, 2019. None of these options were exercised yet.
On June 22, 2020, the Company granted 3,850,000 incentive stock options, each giving the holder the right to acquire one common share to certain of its directors and officers. The options are exercisable at $0.05 per option for a period of three years from the date of grant, vesting immediately. None of these options were exercised yet.
The Company had following options outstanding and exercisable at September 30, 2020:
| 9 months ended Se | pt 30, 2020 | Year ended Decem | ber 31, 2019 | |
|---|---|---|---|---|
| In number of units, except for exercise price |
Number of options | Weighted average exercise price |
Number of options | Weighted average exercise price |
| Outstanding, beginning of year | 4,670,000 | 0.25 | 4,670,000 | 0.25 |
| Granted | 3,850,000 | 0.05 | -- | |
| Expired | 3,545,000 | 0.25 | -- | -- |
| Outstanding, end of year | 4,975,000 | 0.10 | 4,670,000 | 0.25 |
| Exercisable,end ofyear | 4,975,000 | 0.10 | 4,670,000 | 0.25 |
Below is a summary of exercise prices, and weighted average remaining life as at September 30, 2020 for each grant of options.
| Number of options |
Weighted average exercise price |
Remaining life (Years) |
|
|---|---|---|---|
| Granted in April 2018 | 1,125,000 | 0.25 | 0.5 |
| Granted in June 2020 | 3,850,000 | 0.05 | 2.8 |
| Balance, September 30, 2020 | 4,975,000 | $0.10 | 2.3 |
11
FINTECH SELECT LTD. Notes to condensed consolidated interim financial statements (Unaudited) September 30, 2020 (Presented in Canadian Dollars)
The following are the valuations of each grant of options and the major assumptions used to value these options.
| Date of Expiry | Number of Options |
Exercise Price |
Grant Date Fair Value of options |
|---|---|---|---|
| 11-Apr-21 | 1,125,000 | $0.30 | $225 |
The options granted were valued using the Black-Scholes option pricing model with the following assumptions.
| 2018 | ||||
|---|---|---|---|---|
| Expected dividend yield | 0.00% | |||
| Expected volatility | 15% | |||
| Risk free interest rate | 1.20% | |||
| Expected life | 3 | |||
| Date of Expiry | Number of Options |
Exercise Price | Grant Date Fair Value of options |
|
| 22-Jun-23 | 3,850,000 | $0.05 | $231 |
The options granted were valued using the Black-Scholes option pricing model with the following assumptions.
| 2020 | |
|---|---|
| Expected dividend yield | 0.00% |
Expected volatility |
14% |
Risk free interest rate |
0.25% |
| Expected life | 3 |
12
FINTECH SELECT LTD. Notes to condensed consolidated interim financial statements (Unaudited) September 30, 2020 (Presented in Canadian Dollars)
8. WARRANTS
The Company had the following warrants outstanding and exercisable at September 30, 2020 and December 31, 2019.
| 9 months ended Se | pt 30, 2020 | Year ended Decem | ber 31, 2019 | |
|---|---|---|---|---|
| In number of units, except for exercise price |
Number of warrants |
Weighted average exercise price |
Number of warrants |
Weighted average exercise price |
| Outstanding, beginning of period | 15,679,997 | 0.25 | 15,679,997 | 0.25 |
| Granted | -- | -- | -- | -- |
| Expired | 15,679,997 | 0.25 | -- | -- |
| Outstanding, end of period | -- | -- | 15,679,997 | 0.25 |
| Exercisable,end ofperiod | -- | -- | 15,679,997 | 0.25 |
9. SEGMENT INFORMATION
Although the Company has revenue from US customers, it operates solely in Canada.
The Company operates primarily in three industry segments based on the nature of the product/service: its distribution division, which sells prepaid wireless airtime, its call center and its Financial Services division which provides prepaid debit card services.
| Distrib | ution | Call C | enter | Financia Payment S |
l and ervices |
Corpor | ate | To | tal | |
|---|---|---|---|---|---|---|---|---|---|---|
| $ Millions | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
| Revenue | 0.10 | 0.25 | 2.22 | 2.23 | 0.01 | 0.04 | -- | -- | 2.33 | 2.51 |
| Assets Net |
0.10 | 0.09 | 0.48 | 0.60 | 0.52 | 0.62 | 0.04 | 0.08 | 1.14 | 1.39 |
| Profit/(Loss) | (0.06) | -- | 0.86 | 0.54 | (0.04) | (0.04) | (0.36) | (0.59) | 0.40 | (0.09) |
13
FINTECH SELECT LTD. Notes to condensed consolidated interim financial statements (Unaudited) September 30, 2020 (Presented in Canadian Dollars)
10. COMMITMENTS
a) The Company has no lease commitments as at September 30, 2020.
b) Right of use assets
The Company had the following future commitments associated with its lease obligations:
| Balance at December 31, 2019 | $ 376,002 |
|---|---|
| Interest expense | 19,564 |
| Lease payments | (103,175) |
| Balance at September 30, 2020 | $ 292,391 |
| Current portion | 114,910 |
| Long term portion | 177,481 |
11. CAPITAL MANAGEMENT
The Company's objective when managing capital is to maintain its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders.
The Company includes equity, comprised of issued common shares, warrant reserve, contributed surplus and accumulated other comprehensive income in the definition of capital.
The Company's primary objective with respect to its capital management is to ensure that it has sufficient cash resources to fund its growth activities, and to maintain its ongoing operations. To secure the additional capital necessary to pursue these plans, the Company may attempt to raise additional funds through the issuance of equity and or debt financing. See note 1.
The Company’s overall capital management strategy during the period ended September 30, 2020 and 2019 has been to raise share capital, reach settlement with creditors, shut down money-losing businesses, and expand profitable call center business.
12. FINANCIAL RISK MANAGEMENT
The Company is exposed to a variety of financial risks by virtue of its activities: market risk (including currency risk and interest rate risk), credit risk and liquidity risk. The overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on financial performance.
Risk management is carried out by the accounting and finance department under policies approved by the Board of Directors. This department identifies and evaluates financial risks in close cooperation with management. The finance department is charged with the responsibility of establishing controls and procedures to ensure that financial risks are mitigated in accordance with the approved policies.
14
FINTECH SELECT LTD. Notes to condensed consolidated interim financial statements (Unaudited) September 30, 2020 (Presented in Canadian Dollars)
FINANCIAL RISK MANAGEMENT (Cont’d)
(a) Market Risk
(i) Currency Risk
The Company operates primarily in Canada and has a subsidiary in USA that had ceased operation. The Company has exposure to foreign exchange risk. Foreign exchange risk arises from purchase and sales transactions, as well as recognized financial assets and liabilities denominated in foreign currencies.
The Company's main objective in managing its foreign exchange is to maintain Canadian cash on hand to support Canadian forecasted cash flows over a 12-month horizon. To achieve this objective, the Company monitors forecasted cash flows in foreign currencies and attempts to mitigate the risk by modifying the currency of cash held.
Balances denominated in USD at September 30, 2020 and 2019 are as follows:
| 2020 | 2019 |
|---|---|
| Cash $ 36 |
$ -- |
| Accounts receivable and other receivables137,040 | 131,176 |
| Accounts payable and accrued liabilities(101,967) | (132,983) |
| Total net asset(liability) $ 35,109 |
$ (1,807) |
Fluctuations in the Canadian dollar exchange rate have an impact on the Company’s results from operations.
Fluctuation of the U.S. dollar relative to the Canadian dollar of 5% would impact net income by approximately $ 205 as of September 30, 2020 (2019 impact net income - $90).
(ii) Interest rate risk:
Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
Financial assets and financial liabilities with variable interest rates expose the Company to cash flow interest rate risk.
The Company's demand loan has fixed interest rates and is not exposed to interest rate risk.
(b) Credit Risk
Credit risk is the risk of a financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligation. The maximum exposure to credit risk of the Company at period-end is the carrying value of its cash and accounts receivables.
The Company manages credit risk by maintaining bank accounts with Schedule 1 banks in Canada。
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FINTECH SELECT LTD. Notes to condensed consolidated interim financial statements (Unaudited) September 30, 2020 (Presented in Canadian Dollars)
FINANCIAL RISK MANAGEMENT (Cont’d)
The Company does not require collateral or other security for accounts receivable or amounts due from related parties. The Company estimates its provision for uncollectable amounts based on analysis of the specific amount and debtor's payment history and prospects. Accounts receivable are stated net of an allowance for doubtful accounts of $20,744 (2019 $30,757).
Top three customers represent 82% of trade accounts receivable as of September 30, 2020 (December 31, 2019 - three customers represented 80%). As of November 25, 2020, 77% of the accounts receivable balance was collected. As of September 30, 2020, approximately $23,354 (December 31, 2019 – $42,597) of the Company’s receivable were 60 days past due of which approximately $20,744 (December 31, 2019 - $30,757) have been allowed for as doubtful debts.
(c) Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its obligations as they fall due.
The Company manages its liquidity risk by forecasting cash flows from operations and anticipated investing and financing activities. Senior management is also actively involved in the review and approval of planned expenditures.
As at September 30, 2020, the Company has accounts payable and accrued liabilities, demand loan and current portion of lease obligations of $3,956,648 due within 12 months (December 31, 2019 - $4,271,034), cash of $21,024 (December 31, 2019 - $26,217), receivables of $158,594 (December 31, 2019 - $122,706) and intangibles-short term of $86,147 (December 31, 2019 - $84,207) to meet its current obligations. As a result, the Company has liquidity risk.
(d) Economic Dependence
One customer represents 84% of the Company's revenue in the current period (2019 - one customer, accounting for more than 80% of total revenues).
The Company depends on large telecommunications carriers to provide certain products and services. If these carriers were unwilling or unable to provide such products and services in the future, the Company's ability to provide products and services to its customers may be adversely affected and the Company may not be able to obtain similar services from alternative carriers on a timely basis or on terms favorable to the Company.
(e) Fair value
The estimated fair values of accounts receivable, accounts payable, accrued liabilities and demand loans debt approximates their carrying values due to the relatively short-term nature of the instruments. The fair value of intangible – short term is based on open market price.
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FINTECH SELECT LTD. Notes to condensed consolidated interim financial statements (Unaudited) September 30, 2020 (Presented in Canadian Dollars)
13. RELATED PARTY TRANSACTIONS AND BALANCES
The following summarizes the Company’s outstanding balances with related parties:
| September 30, 2020 | September 30, 2019 | |
|---|---|---|
| Accounts payable | $ 281,464 | 357,396 |
The balances are non-secured and without interest or payment terms. They mainly represent compensations due to directors for services provided.
14. KEY MANAGEMENT COMPENSATION
Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly. Company’s key management personnel include the board of directors, Chief Executive Officer & President, Chief Financial Officer and Director of Business Operations.
Remuneration of Directors and key management of Company was as follows:
| Three months en 2020 |
ded September 30 2019 |
|---|---|
| Salaries and Benefits$ 95,192 | $ 88,708 |
| Total$ 95,192 | $88,708 |
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FINTECH SELECT LTD. Notes to condensed consolidated interim financial statements (Unaudited) September 30, 2020 (Presented in Canadian Dollars)
15. PROVISION
In April, 2017, the Company was served by a service provider with a Statement of Claim filed in the Ontario Superior Court of Justice (the " Claim ") for the amount of $4,000,000. The Claim relates to the shortfall of a secured cash pledge ("Secured Deposit"), as per the Special Account Agreement executed between the Company and the service provider. The Company has recorded its best estimate of the liabilities associated to the service provider as of September 30, 2020. The Company has been working on settling this claim. The company does not expect that any additional loss will be incurred.
In July 2019, one of the Company’s subsidiary (“subsidiary”) has been served with a Statement of Claim by Her Majesty the Queen in Right of Alberta (“Alberta”) in the amount of $633,284 (the “Claim”). The Claim relates to the balance of funds on expired cards pursuant to a Card Management Agreement between the subsidiary and Alberta. The claimed amount was included in a claim served on the Company by its service provider. The Company has recorded such payables in its financial statements. The Company intends to vigorously defend the Claim, as all of the funds claimed by Alberta were received by the Company’s service provider and not that of the subsidiary.
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