Notes
to Consolidated Financial Statements
Years
ended December 31, 2021 and 2020
1. Introduction:
|
Nature
of business |
|
|
|
Kidoz
Inc., incorporated in Anguilla, British West Indies in 2005, is a focused AdTech solution provider. Owner of the Kidoz SDK and Kidoz
Connect Programmatic network, a Children’s Online Privacy Protection Rule (“COPPA”) & General Data Protection Regulation
(“GDPR”) compliant contextual mobile advertising network that reaches kids, teens, and families every month. Google certified
and Apple approved, Kidoz provides a suite of advertising technology that connects brands, content publishers and families. The
Company has created a network that app developers use to compliantly monetize traffic and advertisers rely on to reach their customers.
Kidoz has developed a contextual targeting tools to enable brands to reach their ideal customers. |
|
|
|
Continuing
operations |
|
|
|
These
consolidated financial statements have been prepared assuming the realization of assets and the settlement of liabilities in the
normal course of operations. The Company expects to continue to achieve profitable operations to generate sufficient cash flows to
fund continued operations for the next 12 months, or, in the absence of adequate cash flows from operations, obtaining additional
financing. |
|
|
|
Management
continues to review operations in order to identify additional strategies designed to generate cash flow, improve the Company’s
financial position, and enable the timely discharge of the Company’s obligations. |
|
|
|
In
March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which
has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies, and financial
markets globally, has led to an economic downturn. It has also disrupted the normal operations of many businesses, including the
Company’s. In early March 2020, the Company’s employees commenced working from home and commenced social distancing.
This outbreak has affected spending, thereby affecting demand for the Company’s product and the Company’s business and
results of operations. It is not possible for the Company to predict the duration or magnitude of the outbreak and at this time its
full effects on the Company’s business, its future results of operations, or ability to raise funds. |
2. Summary of significant accounting policies:
(a) Basis of presentation:
|
|
These
consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States
of America (“US GAAP”) applicable to annual financial information and with the rules and regulations of the United States
Securities and Exchange Commission. |
Kidoz
Inc. and subsidiaries
(Expressed
in United States Dollars)
Notes
to Consolidated Financial Statements
Years
ended December 31, 2021 and 2020
2. Summary of significant accounting policies (Continued):
(a) Basis of presentation:
The
financial statements include the accounts of the Company’s subsidiaries:
Schedule
of Consolidation, Wholly Owned and Less than Wholly Owned Subsidiary, Parent Ownership Interest
Company | |
Registered | |
%
Owned | |
Shoal Media (Canada) Inc. | |
British Columbia, Canada | |
| 100 | % |
Coral Reef Marketing Inc. | |
Anguilla | |
| 100 | % |
Kidoz Ltd. | |
Israel | |
| 100 | % |
Rooplay Media Ltd. | |
British Columbia, Canada | |
| 100 | % |
Rooplay Media Kenya Limited | |
Kenya | |
| 100 | % |
Shoal Media Inc. | |
Anguilla | |
| 100 | % |
Shoal Games (UK) Plc | |
United Kingdom | |
| 99 | % |
Shoal Media (UK) Ltd. | |
United Kingdom | |
| 100 | % |
In
addition, there are the following dormant subsidiaries; Bingo.com (Antigua) Inc., Bingo.com (Wyoming) Inc., and Bingo Acquisition Corp.
All
inter-company balances and transactions have been eliminated in the consolidated financial statements.
(b) Use of estimates:
The
preparation of consolidated financial statements in conformity with US GAAP, requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial
statements and recognized revenues and expenses for the reporting periods.
Significant
areas requiring the use of estimates include the collectability of accounts receivable, the valuation of stock-based compensation, the
useful lives of intangible assets, assessment of recoverable amount on goodwill and intangible assets, and the estimated interest rate
of 12% for the license right-of-use assets, 4.12% - 5% for the rental units right-of-use asset and the derivative liability – warrants
valuation. Actual results may differ significantly from these estimates.
(c) Revenue recognition:
In
accordance with ASC 606, Revenue from Contracts with Customers, revenue is recognized when a customer obtains control of promised services.
The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these
services.
We
derive substantially all of our revenue from the sale of Ad tech advertising revenue.
Kidoz
Inc. and subsidiaries
(Expressed
in United States Dollars)
Notes
to Consolidated Financial Statements
Years
ended December 31, 2021 and 2020
2. | Summary
of significant accounting policies (Continued): |
(c) Revenue recognition: (Continued)
To
achieve this core principle, the Company applied the following five steps:
1)
Identify the contract with a customer
A
contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s
rights regarding the services to be transferred, whose impression count will form the basis of the revenue and identifies the payment
terms related to these services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially
all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised
consideration. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety
of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial
information pertaining to the customer.
2)
Identify the performance obligations in the contract
Performance
obligations promised in a contract are identified based on the services that will be transferred to the customer that are both capable
of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily
available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the services
is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised services, the Company
must apply judgment to determine whether promised services are capable of being distinct and distinct in the context of the contract.
If these criteria are not met the promised services are accounted for as a combined performance obligation.
3)
Determine the transaction price
The
transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring services
to the customer. None of the Company’s contracts contain financing or variable consideration components.
4)
Allocate the transaction price to performance obligations in the contract
If
the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation.
Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation
based on a relative standalone selling price basis. The Company determines standalone selling price based on the price at which the performance
obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the
standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines
related to the performance obligations.
Kidoz
Inc. and subsidiaries
(Expressed
in United States Dollars)
Notes
to Consolidated Financial Statements
Years
ended December 31, 2021 and 2020
2. | Summary
of significant accounting policies (Continued): |
(c) Revenue recognition: (Continued)
5)
Recognize revenue when or as the Company satisfies a performance obligation
The
Company satisfies performance obligations at a point in time as discussed in further detail under “Disaggregation of Revenue”
below. Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised service to a customer.
Disaggregation
of Revenue
All
of the Company’s performance obligations, and associated revenue, are generally transferred to customers at a point in time. The
Company has the following revenue streams:
1)
Ad tech advertising revenue - The Company generally offers these services under a customer contract Cost-per-Impression (CPM), Cost-Per-Install
or CPI arrangements, Cost per completed video view or CPC and/or Cost-Per-Action or CPA arrangements with third-party advertisers and
developers, as well as advertising aggregators, generally in the form of insertion orders that specify the type of arrangement (as detailed
above) at particular set budget amounts/restraints. These advertiser customer contracts are generally short term in nature at less than
one year as the budget amounts are typically spent in full within this time period. These agreements typically include the delivery of
Ad tech advertising through partner networks, defined as publishers / developers, to home screens of devices and agree on whose results
will be relied on from a revenue point of view.
The
Company has concluded that the delivery of the Ad tech advertising is delivered at a point in time and, as such, has concluded these
deliveries are a single performance obligation. The Company invoices fees which are generally variable based on the arrangement, which
would typically include the number of impressions delivered at a specified price per application. For impressions delivered, revenue
is recognized in the month in which the Company delivers the application to the end consumer or the month when the campaign ends.
2)
Content revenue – The Company recognizes content revenue on the following forms of revenue:
a)
Carriers and OEMs - The Company generally offers these services under a customer contract per tablet device license fee model with OEMs.
Monthly or quarterly license fees are based on the OEM agreement with the number of devices the Kidoz Kid Mode is installed upon.
b)
Rooplay - The Company generates revenue through subscriptions or premium sales of Rooplay, (www.rooplay.com) the cloud-based EduGame
system for kids to learn and play within its games on smartphones and tablet devices, such as Apple’s iPhone and iPad, and mobile
devices utilizing Google’s Android operating system. Users can download the Company’s games through Digital Storefronts and
decide to subscribe to the multiple of educational and fun games in the Rooplay, cloud-based EduGame system or make a premium per purchase
of particular games. The revenue is recognized net of platform fees.
Kidoz
Inc. and subsidiaries
(Expressed
in United States Dollars)
Notes
to Consolidated Financial Statements
Years
ended December 31, 2021 and 2020
| 2. | Summary
of significant accounting policies (Continued): |
(c) Revenue recognition: (Continued)
c)
Rooplay licensing - The Company licenses its branded educational games under a monthly cost per game agreement license fee model. Monthly
license fees are based on the number of games licensed.
d)
In App purchases - The Company generates revenue through in-application purchases (“in-app purchases”) within its games;
(i.e. Trophy Bingo (www.trophybingo.com)) on smartphones and tablet devices, such as Apple’s iPhone and iPad, and mobile devices
utilizing Google’s Android operating system. Users can download the Company’s free-to-play games through Android, Amazon,
iOS and Facebook Messenger (this was discontinued in fiscal 2021) and pay to acquire virtual currency which can be redeemed in the game
for power plays. The initial download of the mobile game from the Digital Storefront does not create a contract under ASC 606 because
of the lack of commercial substance; however, the separate election by the player to make an in-application purchase satisfies the criterion
thus creating a contract under ASC 606.
The
Company has identified the following performance obligations in these contracts:
i.
Ongoing game related services such as hosting of game play, storage of customer content, when and if available content updates, maintaining
the virtual currency management engine, tracking gameplay statistics, matchmaking as it relates to multiple player gameplay, etc.
ii.
Obligation to the paying player to continue displaying and providing access to the virtual items within the game.
Neither
of these obligations are considered distinct since the actual mobile game and the related ongoing services are both required to purchase
and benefit from the related virtual items. As such, the Company’s performance obligations represent a single combined performance
obligation which is to make the game and the ongoing game related services available to the players. The revenue is recognized net of
platform fees.
(d) Foreign currency:
The
consolidated financial statements are presented in United States dollars, the functional currency of the Company and its subsidiaries.
The Company accounts for foreign currency transactions and translation of foreign currency financial statements under ASC 830, Foreign
Currency Matters. Transaction amounts denominated in foreign currencies are translated at exchange rates prevailing at the transaction
dates. Carrying values of monetary assets and liabilities are adjusted at each balance sheet date to reflect the exchange rate at that
date. Non-monetary assets and liabilities are translated at the exchange rate on the original transaction date.
Kidoz
Inc. and subsidiaries
(Expressed
in United States Dollars)
Notes
to Consolidated Financial Statements
Years
ended December 31, 2021 and 2020
2. | Summary
of significant accounting policies (Continued): |
(d) Foreign currency: (Continued)
Gains
and losses from restatement of foreign currency monetary and non-monetary assets and liabilities are included in operations. Revenues
and expenses are translated at the rates of exchange prevailing on the dates such items are recognized in earnings.
(e) Cash and Cash Equivalents:
Cash
and cash equivalents includes cash on hand, deposits held at call with financial institutions and other short-term, highly liquid investments
with original maturities of three months or less that are readily convertible to known amounts of cash, collateral accounts with maturities
greater than 1 year and subject to an insignificant risk of change in value.
(f) Accounts receivable:
Trade
and other accounts receivable are reported at face value less any provisions for uncollectible accounts considered necessary. Accounts
receivable includes receivables from online platforms and trade receivables from customers. The Company estimates doubtful accounts on
an item-by-item basis and includes over-aged accounts as part of allowance for doubtful accounts, which are generally ones that are greater
than ninety-days overdue. Bad debt expense, for the year ended December 31, 2021 was $945 (2020 - $1,952). (Note 3)
(g) Equipment:
Equipment
is recorded at cost less accumulated depreciation. Depreciation is provided for annually on the declining balance method over the following
periods:
Schedule
of Property, Plant and Equipment, Useful Life
Equipment
and computers |
3
years |
Furniture
and fixtures |
5
years |
Expenditures
for maintenance and repairs are charged to expenses as incurred. Major improvements are capitalized. Gains and losses on disposition
of equipment are included in operations as realized.
In
accordance with ASU No. 2016-02 “Leases (Topic 842), leasehold improvements are accounted as a prepayment of rental payments since
they are deemed to be an asset of the lessor.
Kidoz
Inc. and subsidiaries
(Expressed
in United States Dollars)
Notes
to Consolidated Financial Statements
Years
ended December 31, 2021 and 2020
2. |
Summary
of significant accounting policies (Continued): |
(h) Software Development Costs:
The
Company expenses all software development costs as incurred for the year ended December 31, 2021 and 2020. As at December 31, 2021 and
2020, all capitalized software development costs have been fully amortized and the Company has no capitalized software development costs.
Total
software development costs were $10,559,601 as at December 31, 2021 (2020 - $8,880,753) (Note 8).
(i) Derivative liability – warrants
The
Company’s warrants have an exercise price in Canadian dollars whilst the Company’s functional currency is US Dollars. Therefore,
in accordance with ASU 815 – Derivatives and Hedging, the warrants have a derivative liability value. This liability value has
no effect on the cashflow of the Company and does not represent a cash payment of any kind.
(j) Stock-based compensation:
The
Company accounts for stock-based compensation under the provisions of Accounting Standard Codification (“ASC”) 718, “Compensation-Stock
Compensation”. Under the fair value recognition provisions, stock-based compensation expense is measured at the grant date for
all stock-based awards to employees, directors and non-employees and is recognized as an expense over the requisite service period, which
is generally the vesting period. The Black-Scholes option valuation model is used to calculate fair value.
The
fair value of each option grant has been estimated on the date of the grant using the Black-Scholes option-pricing model with the following
weighted average assumptions:
Schedule
of Share-based Payment Award, Stock Option
| |
2021 | |
2020 |
Expected dividend yield | |
| - | | |
| - | |
Volatility | |
| 107.06 | % | |
| 123 | % |
Risk-free interest rate | |
| 0.52 | % | |
| 0.32 | % |
Expected life of options | |
| 5
years | | |
| 5
years | |
Forfeiture rate | |
| 5 | % | |
| 5 | % |
(k) Right-of-use assets:
The
Company determines if an agreement is a lease at inception. The Company evaluates the lease terms to determine whether the lease will
be accounted for as an operating or finance lease. Operating leases are included in operating lease right-of-use (“ROU”)
assets, operating lease liabilities, current portion, and operating lease liabilities, net of current portion in the consolidated balance
sheets.
ROU
assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent our obligation
to make lease payments arising from the lease.
Kidoz
Inc. and subsidiaries
(Expressed
in United States Dollars)
Notes
to Consolidated Financial Statements
Years
ended December 31, 2021 and 2020
2. |
Summary
of significant accounting policies (Continued): |
(k) Right-of-use assets: (Continued)
Operating
lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.
As most of the Company leases do not provide an implicit rate, the Company
uses the incremental borrowing rate based on the information available at commencement date in determining the present value of lease
payments. The Company uses the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments
made and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably
certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
A
lease that transfers substantially all of the benefits and risks incidental to ownership of property are accounted for as finance leases.
At the inception of a finance lease, an asset and finance lease obligation is recorded at an amount equal to the lesser of the present
value of the minimum lease payments and the property’s fair market value. Finance lease obligations are classified as either current
or long-term based on the due dates of future minimum lease payments, net of interest.
(l) Impairment of long-lived assets and long-lived assets to be disposed of:
If
such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of
the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount and the fair
value less costs to sell.
The
Company identified the following intangible assets in the acquisition of Kidoz Ltd. Intangible assets are recorded at cost less accumulated
amortization. Amortization is provided for annually on the straight-line method over the following periods:
Schedule
of Finite-Lived Intangible Assets, Amortization Period
|
|
Amortization
period |
Ad
Tech technology |
|
5
years |
Kidoz
OS technology |
|
3
years |
Customer
relationships |
|
8
years |
(m) Goodwill:
The
Company accounts for goodwill in accordance with the provisions of ASC 350, Intangibles-Goodwill and Others. Goodwill is the excess of
the purchase price over the fair value of identifiable assets acquired, less liabilities assumed, in a business combination. The Company
reviews goodwill for impairment. Goodwill is not amortized but is evaluated for impairment at least annually or whenever events or changes
in circumstances indicate that it is more likely than not that the carrying amount may not be recoverable.
Kidoz
Inc. and subsidiaries
(Expressed
in United States Dollars)
Notes
to Consolidated Financial Statements
Years
ended December 31, 2021 and 2020
2. |
Summary
of significant accounting policies (Continued): |
(m) Goodwill: (Continued)
The
goodwill impairment test is used to identify both the existence of impairment and the amount of impairment loss, and compares the fair
value of a reporting unit with its carrying amount and is based on discounted future cash flows, based on market multiples applied to
free cash flow. The determination of the fair value of our reporting units requires management to make significant estimates and assumptions
including the selection of control premiums, discount rates, terminal growth rates, forecasts of revenue and expense growth rates, income
tax rates, changes in working capital, depreciation, amortization and capital expenditures. Changes in assumptions concerning future
financial results, exogenous market conditions, or other underlying assumptions could have a significant impact on either the fair value
of the reporting unit or the amount of the goodwill impairment charge. If the carrying value of the reporting unit exceeds its fair value,
an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting
unit.
During
the year ended December 31, 2021 and 2020, the Company deemed there was no impairment of the goodwill.
(n) Income taxes:
The
Company follows the asset and liability method of accounting for income taxes. Under this method, current income taxes are recognized
for the estimated income taxes payable for the current period. The Company recognizes the income tax recovery from the receipt of tax
credits upon receipt of funds. Deferred income taxes are provided based on the estimated future tax effects of temporary differences
between financial statement carrying amounts of assets and liabilities and their respective tax bases, as well as the benefit of losses
available to be carried forward to future years for tax purposes.
Deferred
tax assets and liabilities are measured using the enacted tax rates that are expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered and settled. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in operations in the period that includes the enactment date. A valuation allowance is recorded for deferred
tax assets when it is not more likely than not that such future tax assets will be realized.
(o) Net income (loss) per share:
ASC
260, “Earnings Per Share”, requires presentation of basic earnings per share (“Basic EPS”) and diluted earnings
per share (“Diluted EPS”). Basic earnings (loss) per share is computed by dividing earnings (loss) available to common stockholders
by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the potential dilution,
using the treasury stock method, that could occur if outstanding options or warrants were exercised and converted into common stock.
In computing diluted earnings per share, the treasury stock method assumes that outstanding options and warrants are exercised and the
proceeds are used to purchase common stock at the average market price during the period.
Kidoz
Inc. and subsidiaries
(Expressed
in United States Dollars)
Notes
to Consolidated Financial Statements
Years
ended December 31, 2021 and 2020
2. |
Summary
of significant accounting policies (Continued): |
(o) Net income (loss) per share: (Continued)
Options
and warrants will have a dilutive effect under the treasury stock method only when the average market price of the common stock during
the period exceeds the exercise price of the options and warrants. In periods where losses are reported, the weighted average number
of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. A total of 6,870,150 (2020
- 5,875,750) stock options were excluded as at December 31, 2021.
The
earnings per share data for the year ended December 31, 2021 and 2020 are summarized as follows:
Schedule
of Earnings Per Share, Basic and Diluted
| |
2021 | |
2020 |
(Loss) Income for the year | |
$ | (190,321 | ) | |
$ | 103,971 | |
| |
| | | |
| | |
Basic and diluted weighted
average number of common shares outstanding | |
| 131,340,989 | | |
| 131,124,989 | |
| |
| | | |
| | |
Basic and diluted (loss)
income per common share outstanding | |
$ | (0.00 | ) | |
$ | 0.00 | |
(p) New accounting pronouncements and changes in accounting policies:
In
December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”.
The ASU is expected to reduce cost and complexity related to the accounting for income taxes by removing specific exceptions to general
principles in Topic 740 (eliminating the need for an organization to analyze whether certain exceptions apply in a given period) and
improving financial statement preparers’ application of certain income tax-related guidance. This standard is effective for fiscal
years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption of this standard is permitted.
The Company concluded that the adoption did not have a material impact on these consolidated financial statements.
There
have been no other recent accounting standards, or changes in accounting standards, during the year ended December 31, 2021, that are
of material significance, or have potential material significance, to us.
(q) Financial instruments and fair value measurements:
(i)
Fair values:
Fair
value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between market participants on measurement date. The Company
classifies assets and liabilities recorded at fair value under the fair value hierarchy based upon the observability of inputs used in
valuation techniques. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs
(lowest level) reflect internally developed market assumptions. The fair value measurements are classified under the following hierarchy:
Level
1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets and liabilities in active markets;
Kidoz
Inc. and subsidiaries
(Expressed
in United States Dollars)
Notes
to Consolidated Financial Statements
Years
ended December 31, 2021 and 2020
2. |
Summary
of significant accounting policies (Continued): |
(q) Financial instruments and fair value measurements: (Continued)
Level
2—Observable inputs, other than quoted market prices, that are either directly or indirectly observable in the marketplace for
identical or similar assets and liabilities, quoted prices in markets that are not active, or other inputs that are observable or can
be corroborated by observable market data for substantially the full term of the assets and liabilities; and
Level
3—Unobservable inputs that are supported by little or no market activity that are significant to the fair value of assets or liabilities.
When
available, we use quoted market prices to determine fair value, and we classify such measurements within Level 1. In some cases where
market prices are not available, we make use of observable market-based inputs to calculate fair value, in which case the measurements
are classified within Level 2. If quoted or observable market prices are not available, fair value is based upon valuations in which
one or more significant inputs are unobservable, including internally developed models that use, where possible, current market-based
parameters such as interest rates, yield curves and currency rates. These measurements are classified within Level 3.
Fair
value measurements are classified according to the lowest level input or value-driver that is significant to the valuation. A measurement
may therefore be classified within Level 3 even though there may be significant inputs that are readily observable.
Fair
value measurement includes the consideration of nonperformance risk. Nonperformance risk refers to the risk that an obligation (either
by a counterparty) will not be fulfilled.
For
financial assets traded in an active market (Level 1 and certain Level 2), the nonperformance risk is included in the market price. For
certain other financial assets and liabilities (certain Level 2 and Level 3), our fair value calculations have been adjusted accordingly.
The
fair value of accounts receivable, accounts payable, accrued liabilities, and accounts payable and accrued liabilities - related party
approximate their financial statement carrying amounts due to the short-term maturities of these instruments and are therefore carried
at their historical cost basis.
The
government CEBA loan is classified as a financial liability and its fair value was determined using the effective interest rate method,
and is carried at amortized cost.
Kidoz
Inc. and subsidiaries
(Expressed
in United States Dollars)
Notes
to Consolidated Financial Statements
Years
ended December 31, 2021 and 2020
2. |
Summary
of significant accounting policies (Continued): |
(q) Financial instruments and fair value measurements: (Continued)
Fair
values determined by Level 3 inputs are unobservable data points for the asset or liability, and included situations where there is little,
if any, market activity for the asset. The Company’s cash and long-term cash equivalents were measured using Level 1 inputs. Stock-based
compensation and derivative liability – warrants were measured using Level 2 inputs. Goodwill impairment was measured using Level
3 inputs.
(ii)
Foreign currency risk:
The
Company operates internationally, which gives rise to the risk that cash flows may be adversely impacted by exchange rate fluctuations.
The Company has not entered into any forward exchange contracts or other derivative instrument to hedge against foreign exchange risk.
3. Accounts Receivable:
The
accounts receivable as at December 31, 2021, is summarized as follows:
Schedule
of Accounts, Notes, Loans and Financing Receivable
| |
2021 | |
2020 |
Accounts receivable | |
$ | 6,684,469 | | |
$ | 3,989,200 | |
| |
| | | |
| | |
Provision for doubtful
accounts | |
| (56,605 | ) | |
| (55,660 | ) |
| |
| | | |
| | |
Net accounts receivable | |
$ | 6,627,864 | | |
$ | 3,933,540 | |
The
Company had bank accounts with the National Bank of Anguilla. During the year ended December 31, 2016, the National Bank of Anguilla
filed for chapter 11 protection. The Company expensed the balance on account of $27,666 in fiscal 2016 as a doubtful debt. The Company
has a doubtful debt provision of $28,939 (2020 - $27,994) for existing accounts receivable.
4. Prepaid expenses
The
Company has other prepaid expenses of $105,468 (2020 - $89,970) including leasehold improvements of $16,499 (2020 - $23,831), which is
recognized as prepaid rent for the year ended December 31, 2021.
5. Equipment:
Schedule
of Property, Plant and Equipment
2021 | |
Cost | |
Accumulated
depreciation | |
Net
book Value |
| |
| |
| |
|
Equipment and computers | |
$ | 152,967 | | |
$ | 139,590 | | |
$ | 13,377 | |
Furniture and fixtures | |
| 16,517 | | |
| 9,371 | | |
| 7,146 | |
| |
$ | 169,484 | | |
$ | 148,961 | | |
$ | 20,523 | |
Kidoz
Inc. and subsidiaries
(Expressed
in United States Dollars)
Notes
to Consolidated Financial Statements
Years
ended December 31, 2021 and 2020
5. |
Equipment: (Continued) |
2020 | |
Cost | |
Accumulated
depreciation | |
Net
book Value |
| |
| |
| |
|
Equipment and computers | |
$ | 146,545 | | |
$ | 130,798 | | |
$ | 15,747 | |
Furniture and fixtures | |
| 14,787 | | |
| 8,695 | | |
| 6,092 | |
| |
$ | 161,332 | | |
$ | 139,493 | | |
$ | 21,839 | |
Depreciation
expense was $9,468 (2020 - $8,555) for the year ended December 31, 2021.
6. Intangible assets:
Schedule
of Finite-Lived Intangible Assets
2021 | |
Cost | |
Accumulated
amortization | |
Net
book Value |
| |
| |
| |
|
Ad Tech technology | |
$ | 1,877,415 | | |
$ | 1,063,869 | | |
$ | 813,546 | |
Kidoz OS technology | |
| 31,006 | | |
| 29,283 | | |
| 1,723 | |
Customer relationship | |
| 1,362,035 | | |
| 482,387 | | |
| 879,648 | |
| |
$ | 3,270,456 | | |
$ | 1,575,539 | | |
$ | 1,694,917 | |
2020 | |
Cost | |
Accumulated
amortization | |
Net
book Value |
| |
| |
| |
|
Ad Tech technology | |
$ | 1,877,415 | | |
$ | 688,386 | | |
$ | 1,189,029 | |
Kidoz OS technology | |
| 31,006 | | |
| 18,948 | | |
| 12,058 | |
Customer relationship | |
| 1,362,035 | | |
| 312,133 | | |
| 1,049,902 | |
| |
$ | 3,270,456 | | |
$ | 1,019,467 | | |
$ | 2,250,989 | |
Amortization
expense was $556,072 (2020 - $556,073) for the year ended December 31, 2021.
7. Goodwill:
The
Company has a goodwill balance of $3,301,439 for year ended December 31, 2021 and 2020 from the acquisition of Kidoz Ltd.
The
Company’s annual goodwill impairment analysis performed during the fourth quarter of fiscal 2021 and 2020 included a quantitative
analysis of the Kidoz Ltd. reporting unit (consisting of intangible assets (Note 6), deferred taxation (Note 13) and goodwill).
The reporting unit has a carrying amount of $4,785,857
(2020 - $5,552,428)
as at December 31, 2021. The Company performed a discounted cash flow analysis for the Company. These discounted cash flow models included
management assumptions for expected sales growth, margin expansion, operational leverage, capital expenditures, and overall operational
forecasts. The Company classified these significant inputs and assumptions as Level 3 fair value measurements. Based on the annual impairment
test described above there was no additional impairment determined for fiscal 2021 or fiscal 2020.
Kidoz
Inc. and subsidiaries
(Expressed
in United States Dollars)
Notes
to Consolidated Financial Statements
Years
ended December 31, 2021 and 2020
8.
Content and software development costs:
Since
the year ended December 31, 2014, the Company has been developing software technology and content for our business. This software technology
and content includes the the continued development of the KIDOZ Safe Ad Network, the KIDOZ Kid-Mode Operating System, and the KIDOZ publisher
SDK, development of Trophy Bingo, a social bingo game, the license, the development of the Rooplay platform and the development of the
Rooplay Originals games.
During
the year ended December 31, 2021 and 2020, the Company has expensed the development costs of all products as incurred and has expensed
the following development costs.
Expense of Development Costs
| |
2021 | |
2020 |
Opening total software technology
and content development costs | |
$ | 8,880,753 | | |
$ | 7,730,851 | |
| |
| | | |
| | |
Software technology
and content development during the year | |
| 1,678,848 | | |
| 1,149,902 | |
Closing total software
technology and content development costs | |
$ | 10,559,601 | | |
$ | 8,880,753 | |
9. Government CEBA loan:
During
the year ended December 31, 2020, the Company was granted a loan of $47,089 (CAD$60,000) under the Canada Emergency Business Account
(CEBA) loan program for small businesses. The CEBA loan program is one of the many incentives the Canadian Government put in place in
response to COVID-19. The loan is interest free and a quarter of the loan $11,812 (CAD$20,000) is eligible for complete forgiveness if
$35,436 (CAD$40,000) is fully repaid on or before December 31, 2022. If the loan cannot be repaid by December 31, 2022, it can be converted
into a 3-year term loan charging an interest rate of 5%. Subsequent to the year ended December 31, 2021, the repayment of the loan was
extended by the Canadian Government to December 31, 2023.
During
the year ended December 31, 2021, the Company drew $200,000 from its line of credit with the Leumi Bank in Israel. The loan was repaid
in full during the year ended December 31, 2021 with interest costs of $987.
10. Stockholders’ Equity:
The
holders of common stock are entitled to one vote for each share held. There are no restrictions that limit the Company’s ability
to pay dividends on its common stock. The Company has not declared any dividends since incorporation. The Company’s common stock
has no par value per common stock and there is only one class of common shares. The Company has an unlimited number of common shares
authorized for issue.
Kidoz
Inc. and subsidiaries
(Expressed
in United States Dollars)
Notes
to Consolidated Financial Statements
Years
ended December 31, 2021 and 2020
10. Stockholders’ Equity: (Continued)
|
(a) |
Common stock issuances: |
Fiscal
2021
During
the year ended December 31, 2021, the Company engaged Research Capital Corporation (“RCC”) as a financial and capital markets
advisor. As part of the compensation for its services, RCC will receive a monthly fee of $5,119 (CAD$6,500) for its trading advisory
services for a minimum of 6 months with extension by mutual agreement and a financial advisory fee to be satisfied by the issuance of
230,000 common shares of the Company valued at $179,293. In addition, the Company granted 230,000 common share purchase warrants to RCC
(Note 2(i)). Each warrant will entitle the holder thereof to purchase one common share in the capital of the Company at an exercise price
of $0.77 (CAD$0.98) at any time up to 24 months following the date of issuance. During the year ended December 31, 2021, the Company
issued the shares and granted the warrants.
During
the year ended December 31, 2021, the holder of 70,000 stock options exercised their options for 70,000 shares for $31,264 at an average
exercise price of $0.45 (CAD$0.54) per share.
Fiscal
2020
There
were no common stock issuances for the year ended December 31, 2020.
(b) Warrants
A
summary of warrant activity for the year ended December 31, 2021 are as follows:
Schedule of Share-
based Payment Arrangement, Warrant Activity
| |
Number
of
options | |
Exercise
price | |
Expiry
date |
Outstanding, December 31, 2020 and 2019 | |
| - | | |
$ | - | | |
| | |
| |
| | | |
| | | |
| | |
Granted | |
| 230,000 | | |
| CAD$0.98 | | |
| April
3, 2023 | |
| |
| | | |
| | | |
| | |
Outstanding December 31, 2021 | |
| 230,000 | | |
| CAD$0.98 | | |
| | |
A
fair value of the derivative liability of $83,572 was been estimated on the date of the subscription using the Binomial Lattice pricing
model. Since the warrant was issued there was a gain on derivative liability - warrants of $60,207 and the derivative liability –
warrants value reduced to $23,365 with the following assumptions:
Schedule
of Fair Value of Warrants Assumptions
| |
December
31, 2021 | |
April
1, 2021 |
Exercise price | |
| CAD$0.98 | | |
| CAD$0.98 | |
Stock price | |
| CAD$0.59 | | |
| CAD$0.98 | |
Expected term | |
| 1.25
years | | |
| 2
years | |
Expected dividend yield | |
| - | | |
| - | |
Expected stock price volatility | |
| 88.33 | % | |
| 145.71 | % |
Risk-free interest rate | |
| 1.18 | % | |
| 0.73 | % |
Kidoz
Inc. and subsidiaries
(Expressed
in United States Dollars)
Notes
to Consolidated Financial Statements
Years
ended December 31, 2021 and 2020
10. |
Stockholders’ Equity: (Continued) |
(c) Stock
option plans:
2015
stock option plan
In
the year ended December 31, 2015, the shareholders approved the 2015 stock option plan and the 1999, 2001 and the 2005 plans were discontinued.
The 2015 stock option plan as amended in November 2020, is intended to provide incentive to employees, directors, advisors and consultants
of the Company to encourage proprietary interest in the Company, to encourage such employees to remain in the employ of the Company or
such directors, advisors and consultants to remain in the service of the Company, and to attract new employees, directors, advisors and
consultants with outstanding qualifications. The maximum number of shares issuable under the Plan shall not exceed 10% of the number
of Shares of the Company issued and outstanding as of each Award Date unless shareholder approval is obtained in advance.
The
Board of Directors determines the terms of the options granted, including the number of options granted, the exercise price and their
vesting schedule. The maximum term possible is 10 years. Under the 2015 plan we have reserved 10% of the number of Shares of the Company
issued and outstanding as of each Award Date. During the year ended December 31, 2020, the Rolling Stock Option plan was amended by inclusion
of an Israeli Taxpayers Appendix.
During
the year ended December 31, 2021, the Company granted to employees and consultants the following options:
|
● |
1,040,000
options at CAD$0.50 ($0.39) where 10% vests on grant date, 15% one year following and 2% per month thereafter and expire on February
1, 2026. 400,000 of these options were granted to directors and officers of the Company. |
|
|
|
|
● |
35,000
options at CAD$0.50 ($0.39) which vested immediately and expire on February 1, 2026. |
|
|
|
|
● |
1,300,000
options at CAD$1.02 ($0.80) where 2% vests per month and expire on April 6, 2026. 400,000 of these options were granted to directors
and officers of the Company. |
|
|
|
|
● |
300,000
options at CAD$0.66 ($0.52) where 2% vests per month and expire on July 12, 2026. |
During
the year ended December 31, 2020, the Company granted to employees and consultants 2,745,000 options with an exercise price of CAD$0.45
($0.33) expiring on June 30, 2025, of which 60,000 options were fully vested, 2,595,000 options were issued where 2.08% vests per month
commencing June 30, 2021, and 90,000 options were issued where 2% vests per month commencing on grant date. 1,250,000 of these options
were granted to directors and officers of the Company.
Subsequent
to the year ended December 31, 2021, a further 2,550,000 options were awarded where 2% vests per month, with an exercise price of CAD$0.50
($0.39) and 210,000 options were cancelled.
Kidoz
Inc. and subsidiaries
(Expressed
in United States Dollars)
Notes
to Consolidated Financial Statements
Years
ended December 31, 2021 and 2020
10. |
Stockholders’ Equity: (Continued) |
(c) Stock
option plans: (Continued)
A
summary of stock option activity for the stock option plans for the years ended December 31, 2021 and 2020 are as follows:
Schedule of Share-based Payment Arrangement, Option, Activity
| |
Number
of
options | |
Weighted
average exercise price |
Outstanding December 31, 2019 | |
| 3,200,750 | | |
$ | 0.45 | |
| |
| | | |
| | |
Granted | |
| 2,745,000 | | |
| 0.33 | |
Exercised | |
| - | | |
| - | |
Cancelled | |
| (70,000 | ) | |
| (0.42 | ) |
Outstanding December 31, 2020 | |
| 5,875,750 | | |
$ | 0.39 | |
| |
| | | |
| | |
Granted | |
| 2,675,000 | | |
| 0.60 | |
Exercised | |
| (70,000 | ) | |
| (0.45 | ) |
Expired | |
| (570,000 | ) | |
| (0.43 | ) |
Cancelled | |
| (1,040,600 | ) | |
| (0.42 | ) |
Outstanding December 31, 2021 | |
| 6,870,150 | | |
$ | 0.48 | |
The
aggregate intrinsic value for options as of December 31, 2021 was $334,897 (2020 - $137,250).
The
following table summarizes information concerning outstanding and exercisable stock options at December 31, 2021:
Schedule of Share-based Payment Arrangement, Option, Exercise Price Range
Exercise
prices per share | |
Number
outstanding | |
Number
exercisable | |
Expiry date |
| CAD$0.45 | | |
| 2,030,400 | | |
| 399,672 | | |
June 30, 2025 |
| CAD$0.50 | | |
| 889,600 | | |
| 124,600 | | |
February 1, 2026 |
| CAD$0.54 | | |
| 506,150 | | |
| 506,150 | | |
November 8, 2022 |
| CAD$0.54 | | |
| 713,000 | | |
| 713,000 | | |
June 4, 2023 |
| CAD$0.66 | | |
| 300,000 | | |
| 20,000 | | |
July 12, 2026 |
| US$0.50 | | |
| 1,275,000 | | |
| 1,275,000 | | |
June 4, 2023 |
| CAD$1.02 | | |
| 1,156,000 | | |
| 190,000 | | |
April 6, 2026 |
| | | |
| 6,870,150 | | |
| 3,228,422 | | |
|
The
Company recorded stock-based compensation of $660,266 on the options granted and vested (2020 – $158,883) and as per the Black-Scholes
option-pricing model, with a weighted average fair value per option grant of $0.45 (2020 - $0.27).
Kidoz
Inc. and subsidiaries
(Expressed
in United States Dollars)
Notes
to Consolidated Financial Statements
Years
ended December 31, 2021 and 2020
11. |
Fair value measurement: |
The
following table sets forth the fair value of the Company’s financial assets and liabilities measured at fair value on a recurring
basis based on the three-tier fair value hierarchy.
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis
| |
Level
1 | | |
Level
2 | | |
Level
3 | | |
Total | |
As at December 31, 2021 | |
| | | |
| | | |
| | | |
| | |
Assets | |
| | | |
| | | |
| | | |
| | |
Cash | |
$ | 2,078,607 | | |
$ | - | | |
$ | - | | |
$ | 2,078,607 | |
Long term cash equivalent | |
| 23,624 | | |
| - | | |
| - | | |
| 23,624 | |
Liabilities | |
| | | |
| | | |
| | | |
| | |
Derivative liability
– warrants | |
| - | | |
| (23,365 | ) | |
| - | | |
| (23,365 | ) |
Total assets (liabilities)
measured and recorded at fair value | |
$ | 2,102,231 | | |
$ | (23,365 | ) | |
$ | - | | |
$ | 2,078,866 | |
| |
Level
1 | | |
Level
2 | | |
Level
3 | | |
Total | |
As at December 31, 2020 | |
| | | |
| | | |
| | | |
| | |
Assets | |
| | | |
| | | |
| | | |
| | |
Cash | |
$ | 1,226,045 | | |
$ | - | | |
$ | - | | |
$ | 1,226,045 | |
Long term cash equivalent | |
| 31,392 | | |
| - | | |
| - | | |
| 31,392 | |
Total assets measured
and recorded at fair value | |
$ | 1,257,437 | | |
$ | - | | |
$ | - | | |
$ | 1,257,437 | |
The
Company leases office facilities in Vancouver, British Columbia, Canada, The Valley, Anguilla, British West Indies and Netanya, Israel.
These office facilities are leased under operating lease agreements.
During
the year ended December 31, 2020, the Company signed a five-year lease for a facility in Vancouver, Canada, commencing April 1, 2020
and ending March 2024. This facility comprises approximately 1,459 square feet. The Company accounts for the lease in accordance with
ASU 2016-02 (Topic 842) and recognizes a right-of-use asset and operating lease liability.
The
Netanya, Israel operating lease expired on July 14, 2017 but unless 3 months’ notice is given it automatically renews for a future
12 months until notice is given. During the year ended December 31, 2021, the lease was extended for a further 12 months. This facility
comprises approximately 190 square metres. The renewal of this lease is uncertain, hence the Company has accounted for this lease as
a short-term lease.
The
Anguillan operating lease expired on April 1, 2011 but unless 3 months’ notice is given it automatically renews for a further 3
months. The Company expects this lease to continue. Therefore, the Company accounts for the lease in accordance with ASU 2016-02 (Topic
842) and recognizes a right-of-use asset and operating lease liability.
Kidoz
Inc. and subsidiaries
(Expressed
in United States Dollars)
Notes
to Consolidated Financial Statements
Years
ended December 31, 2021 and 2020
12. |
Commitments: (Continued) |
|
|
Minimum
lease payments under these leases are approximately as follows:
Schedule of Lessee, Operating Lease, Liability, Maturity
| |
| | |
2022 | |
$ | 64,516 | |
2023 | |
| 50,002 | |
2024 | |
| 12,572 | |
The
Company paid rent expense totaling $129,250 for the year ended December 31, 2021 (2020 - $119,055).
The
Company has the following management consulting agreements with related parties.
Schedule
of Consulting Agreement With Related Parties
Company | |
Person | |
Role | |
Minimum
Monthly amount | | |
Maximum
Monthly amount | |
T.M.
Williams (ROW), Inc. | |
T.
M. Williams | |
Executive
Chairman | |
$ | 11,000 | | |
$ | 25,000 | |
Jayska
Consulting Ltd. | |
J.
M. Williams | |
Co-CEO | |
| GBP£5,000 | | |
| GBP£5,000 | |
LVA
Media Inc. | |
J.
M. Williams | |
Co-CEO | |
$ | 7,500 | | |
$ | 25,000 | |
Bromley
Accounting Services Ltd. | |
H.
W. Bromley | |
CFO | |
| CAD$15,000 | | |
| CAD$15,000 | |
Farcast
Operations Inc. | |
T.
H. Williams | |
VP
Product | |
| CAD$15,000 | | |
| CAD$15,000 | |
As
at December 31, 2021, the Company had a number of renewable license commitments with large brands, including, Mr. Men and Little Miss
and Mr. Bean. These agreements have commitments to pay royalties on the revenue from the licenses subject to the minimum guarantee payments.
As at December 31, 2021, there were no further minimum guarantee payments commitments.
The
Company expensed the minimum guarantee payments over the life of the agreement and recognized license expense of $18,512 (2020 - $46,841)
for the year ended December 31, 2021.
13. Income taxes:
Kidoz
Inc. is domiciled in the tax-free jurisdiction of Anguilla, British West Indies. However certain of the Company’s subsidiaries
incur income taxation.
Kidoz
Inc. and subsidiaries
(Expressed
in United States Dollars)
Notes
to Consolidated Financial Statements
Years
ended December 31, 2021 and 2020
13. Income taxes: (Continued)
The
tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at
December 31, 2021 and 2020, are presented below:
Schedule
of Effective Income Tax Rate Reconciliation
| |
2021 | | |
2020 | |
Computed “expected”
tax expense | |
$ | (5,535 | ) | |
$ | (10,192 | ) |
Change in statutory, foreign
tax, foreign exchange rates and other | |
| (231,545 | ) | |
| 150,835 | |
Permanent differences | |
| (227 | ) | |
| (180,123 | ) |
Adjustment to prior years
provision versus statutory tax returns | |
| (17,161 | ) | |
| 55,243 | |
Change in valuation allowance | |
| 37,791 | | |
| 39,480 | |
(Provision for) Recovery
of current income taxes | |
$ | (6,178 | ) | |
$ | 55,243 | |
Deferred income taxes | |
| (210,499 | ) | |
| - | |
Total taxation | |
$ | (216,677 | ) | |
$ | 55,243 | |
The
tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at
December 31, 2021 and 2020 are presented below:
Schedule
of Deferred Tax Assets and Liabilities
| |
2021 | | |
2020 | |
Deferred tax (liabilities) assets: | |
| | | |
| | |
Net operating loss carry forwards | |
$ | 285,045 | | |
$ | 694,814 | |
Equipment | |
| 74 | | |
| 5,173 | |
Intangible assets | |
| (389,831 | ) | |
| (517,727 | ) |
Other | |
| 193,220 | | |
| 147,989 | |
Valuation Allowance | |
| (299,007 | ) | |
| (330,249 | ) |
Total deferred tax (liability) asset | |
$ | (210,499 | ) | |
$ | - | |
As
at December 31, 2021, the Company’s had $1,130,369 of non-capital losses expiring through December 31, 2041.
In
assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those differences become deductible.
Management
considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in assessing
the realizability of deferred tax assets.
During
the year ended December 31, 2020, Shoal Media (Canada) Inc., a subsidiary of Kidoz Inc., received the British Columbia Interactive Digital
Media Tax Credit of CAD$73,828 ($55,243) from the British Columbia Provincial Government. No British Columbia Interactive Digital Media
Tax Credit was received in 2021.
The
Company recognized this tax credit as a recovery of income tax expense on the statement of operations and comprehensive (loss) income
upon receipt of funds.
Kidoz
Inc. and subsidiaries
(Expressed
in United States Dollars)
Notes
to Consolidated Financial Statements
Years
ended December 31, 2021 and 2020
14. Right-of-use assets:
There
is no discount rate implicit in the Anguilla office operating lease agreement, so the Company estimated a 5% discount rate for the incremental
borrowing rate for the lease as of the adoption date, January 1, 2020. There is no discount rate implicit in the license agreement, so
the Company estimated a 12% discount rate for the incremental borrowing rate for the licenses as of the adoption date, January 1, 2019.
Effective
April 1, 2019, we recognized lease assets and liabilities of $125,474, in relation to the Vancouver office. We estimated a discount rate
of 4.12%.
We
elected the package of practical expedients permitted under the transition guidance within Topic 842, which allowed us to carry forward
prior conclusions about lease identification, classification and initial direct costs for leases entered into prior to adoption of Topic
842.
Additionally,
we elected to not separate lease and non-lease components for all of our leases. For leases with a term of 12 months or less, our current
offices, we elected the short-term lease exemption, which allowed us to not recognize right-of-use assets or lease liabilities for qualifying
leases existing at transition and new leases we may enter into in the future, as there is significant uncertainty on whether the leases
will be renewed.
The
right-of-use assets as at December 31, 2021, is summarized as follows:
Schedule
of Right-of-use Assets
| |
2021 | | |
2020 | |
| |
| | |
| |
Opening balance for the year | |
$ | 106,315 | | |
$ | 134,914 | |
Capitalization of additional license leases | |
| - | | |
| 25,472 | |
Amortization of operating
lease right-of use assets | |
| (40,851 | ) | |
| (54,071 | ) |
Closing balance for
the year | |
$ | 65,464 | | |
$ | 106,315 | |
The
operating lease as at December 31, 2021, is summarized as follows:
Lessee,
Operating Lease, Liability, Maturity
As
at December 31, 2021 | |
| |
| |
| Office
lease | |
2022 | |
$ | 34,021 | |
2023 | |
| 35,170 | |
2024 | |
| 8,114 | |
Total lease payments | |
$ | 77,305 | |
Less: Interest | |
| (3,238 | ) |
Present value of lease liabilities | |
$ | 74,067 | |
| |
| | |
Amounts recognized on the balance sheet | |
| | |
Current lease liabilities | |
$ | 32,068 | |
Long-term lease liabilities | |
| 41,999 | |
Total lease payments | |
$ | 74,067 | |
Kidoz
Inc. and subsidiaries
(Expressed
in United States Dollars)
Notes
to Consolidated Financial Statements
Years
ended December 31, 2021 and 2020
14. Right-of-use assets: (Continued)
Schedule
of Operating Lease Liability
| |
2021 | | |
2020 | |
| |
| | |
| |
Opening balance for the year | |
$ | 103,918 | | |
$ | 127,615 | |
Payments on operating
lease liabilities | |
| (29,851 | ) | |
| (23,697 | ) |
Closing balance for
the year | |
| 74,067 | | |
| 103,918 | |
Less: current portion | |
| (32,068 | ) | |
| (30,083 | ) |
Operating lease liabilities
– non-current portion as at end of year | |
$ | 41,999 | | |
$ | 73,835 | |
As
of December 31, 2021, the ROU assets of $65,464
are included in non-current assets on the
balance sheet, and lease liabilities of $74,067 are
included in current liabilities and non-current liabilities on the balance sheet.
15. Related party transactions:
As
at and for the year ended December 31, 2021, the Company has the following related party transactions:
Schedule
of Related Party Transactions
| |
2021 | | |
2020 | |
Directors fees | |
$ | 8,000 | | |
$ | 8,248 | |
Salaries, wages, consultants and benefits | |
| 612,492 | | |
| 456,042 | |
Selling and marketing | |
| 77,906 | | |
| 57,498 | |
Stock-based compensation (Note 10) | |
| 237,348 | | |
| 61,701 | |
Content and software
development (Note 8) | |
| 214,843 | | |
| 156,522 | |
Closing balance for
the year | |
$ | 1,150,589 | | |
$ | 740,011 | |
The
Company has liabilities of $53,829 (2020 - $50,772) as at December 31, 2021, to current directors, officers and companies owned by the
current directors and officers of the Company for employment, director and consulting fees.
During
the year ended December 31, 2021, the Company granted the following options to related parties:
|
|
a)
400,000 options with an exercise price of CAD$0.50 ($0.39) per share |
|
|
|
|
|
b)
400,000 options with an exercise price of CAD$1.02 ($0.80) per share |
During
the year ended December 31, 2020, the Company granted the 1,250,000 options with an exercise price of CAD$0.45 ($0.33) per share, to
related parties.
The
related party transactions are in the normal course of operations and were measured at the exchange amount, which is the amount of consideration
established and agreed to by the related parties.
16.
Segmented information:
The
Company operates in reportable business segments, the sale of Ad tech advertising and content revenue, including the sale of in-app purchases
on Trophy Bingo and Garfield’s Bingo; the premium purchase for Rooplay Originals and recurring subscription revenues from Rooplay
and Kidoz OS and the sale of licenses of Kidoz OS.
Operating
segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation
by the chief operating decision maker, or decision-making group, in making decisions on how to allocate resources and assess performance.
The Company’s chief operating decision makers are the Co-chief executive officers. The Company and the chief decision makers view
the Company’s operations and manage its business as two operating segments, namely Ad tech and content revenue.
Kidoz
Inc. and subsidiaries
(Expressed
in United States Dollars)
Notes
to Consolidated Financial Statements
Years
ended December 31, 2021 and 2020
16.
Segmented information: (Continued)
The
Company had the following revenue by geographical region.
Schedule
of Revenue By Geographical Region
| |
2021 | | |
2020 | |
Ad tech advertising
revenue | |
| | | |
| | |
Western Europe | |
$ | 3,927,191 | | |
$ | 1,911,627 | |
Central, Eastern and Southern Europe | |
| 193,085 | | |
| - | |
North America | |
| 7,702,386 | | |
| 4,702,565 | |
Other | |
| 421,204 | | |
| 133,872 | |
| |
| | | |
| | |
Total ad tech advertising
revenue | |
$ | 12,243,866 | | |
$ | 6,748,064 | |
| |
| | | |
| | |
Content revenue | |
| | | |
| | |
Western Europe | |
$ | 84,884 | | |
$ | 100,625 | |
Central, Eastern and Southern Europe | |
| 1,517 | | |
| 38,741 | |
North America | |
| 47,390 | | |
| 182,676 | |
Other | |
| 97,823 | | |
| 77,923 | |
| |
| | | |
| | |
Total content revenue | |
$ | 231,614 | | |
$ | 399,965 | |
| |
| | | |
| | |
Total revenue | |
| | | |
| | |
Western Europe | |
$ | 4,012,075 | | |
$ | 2,012,252 | |
Central, Eastern and Southern Europe | |
| 194,602 | | |
| 38,741 | |
North America | |
| 7,749,776 | | |
| 4,885,241 | |
Other | |
| 519,027 | | |
| 211,795 | |
Total revenue | |
$ | 12,475,480 | | |
$ | 7,148,029 | |
Equipment
The
Company’s equipment is located as follows:
Schedule
of Company Equipment
Net Book Value | |
2021 | | |
2020 | |
| |
| | |
| |
Anguilla | |
$ | 91 | | |
$ | 164 | |
Canada | |
| 8,542 | | |
| 7,482 | |
Israel | |
| 11,055 | | |
| 12,870 | |
United Kingdom | |
| 835 | | |
| 1,323 | |
Total equipment | |
$ | 20,523 | | |
$ | 21,839 | |
17. General and administrative:
General
and administrative expenses were as follows:
Schedule of General and Administrative Expense
| |
2021 | | |
2020 | |
| |
| | |
| |
Professional fees | |
$ | 211,873 | | |
$ | 183,475 | |
Rental (Note 12) | |
| 129,250 | | |
| 119,055 | |
Other general and administrative
expenses | |
| 263,759 | | |
| 226,178 | |
Total general and administrative
expenses | |
$ | 604,882 | | |
$ | 528,708 | |
Kidoz
Inc. and subsidiaries
(Expressed
in United States Dollars)
Notes
to Consolidated Financial Statements
Years
ended December 31, 2021 and 2020
18. Stock awareness program
During
the year ended December 31, 2021, the Company commenced a corporate stock awareness program. The Company engaged Research Capital
Corporation, Agora Internet Relations Corp., Stockhouse Publishing Ltd. and Proactive for financial and capital markets advisory services
and to assist with general market outreach to increase investor awareness as the Company continues to achieve important milestones and
grow its investor base.
The
Company incurred stock awareness expenses of $402,845
during the year ended December 31, 2021, of which
$179,293 is
from the issuance of 230,000
common shares to RCC (Note 10) and a derivative
liability of $83,572 (Note 10) from the warrants granted.
19 Concentrations:
Major
customers
During
the year ended December 31, 2021, and 2020, the Company sold Ad tech revenue; sold subscriptions on its site Rooplay; sold in-app purchases
on its social bingo sites, Trophy Bingo and Garfield’s Bingo and premium purchases of Rooplay Originals. During the year ended
December 31, 2021, the Company had revenues of $3,373,241, $2,522,559 and $1,381,678 from three customers (December 31, 2020 - two customers
for $2,661,595 and $1,551,661) which was more than 10% of the total revenue. The Company is reliant on the Google App, iOS App and Amazon
App Stores to provide a content platform for Rooplay, Trophy Bingo and Garfield’s Bingo to be played thereon and certain advertising
agencies for the Ad tech revenue.
20. Concentrations of credit risk:
Financial
instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable.
The Company places its cash and cash equivalents with high quality financial institutions and limits the amount of credit exposure with
any one institution.
The
Company currently maintains a substantial portion of its day-to-day operating cash and long-term cash equivalents balances at financial
institutions. At December 31, 2021, the Company had total cash of $2,102,231 (2020 - $1,257,437) at financial institutions, where $1,793,265
(2020 - $970,453) is in excess of federally insured limits.
The
Company has concentrations of credit risk with respect to accounts receivable, the majority of its accounts receivable are concentrated
geographically in the United States amongst a small number of customers.
As
of December 31, 2021, the Company had three customers, totaling $1,952,040, $1,165,807, and $1,054,625 respectively who accounted for
greater than 10% of the total accounts receivable. As of December 31, 2020, the Company had two customers, totaling $1,618,244 and $807,346
who accounted for greater than 10% of the total accounts receivable.
The
Company controls credit risk through monitoring procedures and receiving prepayments of cash for services rendered. The Company performs
credit evaluations of its customers but generally does not require collateral to secure accounts receivable.