Notes
to Financial Statements
March
31, 2022 and March 31, 2021
NOTE
1 – ORGANIZATION AND NATURE OF BUSINESS
Newpoint
Financial Corp. (“Newpoint”) was incorporated in the State of Delaware on November 16, 2005 under the name Blue Ribbon Pyrocool,
Inc. (“Blue Ribbon”). Blue Ribbon changed its name to Classic Rules Judo Championships, Inc. on July 15, 2008 then to Judo
Capital Corp on February 15, 2017. The Company formed a subsidiary in the State of Connecticut on August 13, 2008 named Classic Rules
World Judo Championships, Inc. to develop an annual judo championship tournament. Collectively the entities are referred to as “the
Company”. On June 2, 2014, the Company ceased its principal activities of hosting and sponsoring judo tournaments. The Company
had planned to operate in real estate investment activities focused in the New York City metropolitan area. On February 28, 2018, the
Company ceased its plans to operate in the real estate investment market. On January 19, 2021, the Company had a 500-1 reverse stock
split with FINRA and Change of Control. All share and per share information has been retroactively adjusted to reflect the reverse stock
split. On February 9, 2021, new officers and directors were elected and the name of the Company was changed to Newpoint Financial Corp.
(Delaware).
NOTE
2 – GOING CONCERN
The
accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of business. The Company has generated interest on the credit facility
provided of $4,860 for the quarter ended 31 March 2022 and has incurred net losses of $172,684 and $20,924 during the Quarter ended March
31, 2022 and March 31, 2021. The Company has an accumulated deficit of $704,774 and $532,090 as of March 31, 2022 and December 31, 2021,
and has experienced negative cash flows from operations. These circumstances raise some doubt about the Company’s ability to continue
as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The
Company to date has been financially supported by related party entities which are also owned by the majority shareholders of the Company.
The Company will continue to be financially supported by related party entities until such time as the company generates sufficient cashflow
to support its expense requirements or completes an external capital raising.
NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Estimates
The
preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, and expenses during the reporting period. On an on-going basis, the Company evaluates its estimates.
Actual results and outcomes may differ materially from the estimates as additional information becomes known.
Cash
and Cash Equivalents
Cash
and cash equivalents includes highly liquid instruments with original maturities of three months or less.
Investments
Short-term
investments, Fixed maturities and equity securities
Short-term
investments comprise investments with a maturity greater than three months up to one year from the date of purchase. Short-term investments
are carried at fair value, with realized and unrealized gains and losses included in net earnings are reported as net realized and unrealized
gains and losses, respectively.
Newpoint
Financial Corp.
Notes
to Financial Statements
March
31, 2022 and 2021
NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Investments
in debt securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities.
Trading securities are recorded at fair value on the balance sheet in current assets, with the change in fair value during the period
included in earnings. Debt securities held as investments that the Company classifies as held-to-maturity securities are recorded at
amortized cost, net of a valuation allowance for credit losses. Investments in debt securities not classified as either held-to-maturity
or trading securities are classified as available-for-sale securities. Available-for-sale securities are recorded at fair value, with
the change in fair value during the period excluded from earnings and recorded net of tax as a component of other comprehensive income.
Investments
in equity securities are reported at fair value with realized and unrealized gains and losses included in net earnings are reported as
net realized and unrealized gains and losses, respectively. If there are no readily determinable fair values, investments in equity securities
are measured at cost less impairment.
Valuation
allowance for fixed income securities
Management
evaluates impairment losses for all HTM securities each quarter. The HTM securities are evaluated for potential impairment on investments
not measured at fair value through net earnings. An allowance for impairment is derived based on various data sources, multiple key inputs
and forecast scenarios. These include default rates specific to the individual security, vintage of the security, geography of the issuer
of the security, industry analyst reports, credit ratings and consensus economic forecasts. Securities that meet any one of the criteria
included above will be subject to a discounted cash flow analysis by comparing the present value of expected future cash flows with the
amortized cost basis. Projected cash flows are driven primarily by assumptions regarding probability of default and the timing and amount
of recoveries associated with defaults.
Fair
Value of Financial Instruments
The
Company measures certain financial assets and liabilities at fair value based on 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. The carrying value of cash and cash equivalents and accounts payable approximate their fair
value because of the short-term nature of these instruments and their liquidity. Management is of the opinion that the Company is not
exposed to significant interest or credit risks arising from these financial instruments.
Income
Taxes
Deferred
income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss and credit carryforwards
and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at
the current enacted tax rates. The Company records an estimated valuation allowance on its deferred income tax assets if it is not more
likely than not that these deferred income tax assets will be realized.
The
Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained
on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements
from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate
settlement. As of March 31, 2022 and December 31, 2021, the Company has determined it does not have any uncertain tax positions.
Segment
Reporting
The
Company’s business currently operates in one segment.
Newpoint
Financial Corp.
Notes
to Financial Statements
March
31, 2022 and March 31, 2021
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Net
Loss per Share
The
computation of basic net loss per common share is based on the weighted average number of shares that were outstanding during the year.
The computation of diluted net loss per common share is based on the weighted average number of shares used in the basic net loss per
share calculation plus the number of common shares that would be issued assuming the exercise of all potentially dilutive common shares
outstanding using the treasury stock method.
Recently
Issued Accounting Pronouncements
The
Company reviews new accounting standards as issued. Although some of these accounting standards issued or effective after the end of
the Company’s previous fiscal year may be applicable to the Company, it has not identified any standards that it believes merit
further discussion. The Company does not expect the adoption of any recently issued accounting pronouncements to have a significant impact
on its financial position, results of operations, or cash flows.
Related
Parties
The
Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure
of related party transactions.
Pursuant
to Section 850-10-20 the related parties include (a) affiliates of the registrant; (b) entities for which investments in their equity
securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15,
to be accounted for by the equity method by the investing entity; (c) trusts for the benefit of employees, such as pension and profit-sharing
trusts that are managed by or under the trusteeship of management; (d) principal owners of the Company; (e) management of the Company;
(f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies
of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and
(g) Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership
interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting
parties might be prevented from fully pursuing its own separate interests.
The
financial statements include disclosures of material related party transactions, other than compensation arrangements, expense allowances,
and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation
of financial statements is not required in those statements. The disclosures shall include: (a) the nature of the relationship(s) involved;
(b) description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods
for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions
on the financial statements; (c) the dollar amounts of transactions for each of the periods for which income statements are presented
and the effects of any change in the method of establishing the terms from that used in the preceding period; and (d) amounts due from
or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
NOTE
4 – INVESTMENTS
On
December 10, 2021, the Company entered into a stock purchase agreement with Novea Inc., a Wyoming corporation (“Novea”),
whereby we acquired five hundred thousand (500,000) units (“Units”), each Unit having a stated value of $100 and consisting
of (i) one share of Series B Convertible Redeemable Preferred Stock (“Novea Preferred Stock”) and (ii) 2.503474 shares of
common stock of Novea (“Novea Common Stock”). We also acquired a warrant exercisable for ten years for additional shares
of common stock of up to $50,000,000, subject to adjustment as set forth therein. In aggregate, we acquired (i) 500,000 shares of Novea
Preferred Stock, (ii) 1,251,737 shares of Novea Common Stock, representing ten percent (10%) of Novea’s common stock, and (iii)
one warrant to purchase up to $50,000,000 of Novea Common Stock. Novea is a financial and insurance services software company.
As
consideration for such purchase, Newpoint Financial Corp (a Wyoming corporation), now known as NPFC SPV 1, Inc., an entity that was owned
by the current controlling shareholders, issued to Novea ten (10) secured $5,000,000 notes (each a “Collateral Note”), totaling
$50,000,000. The Collateral Notes are due on demand and we have the right to prepay the Collateral Notes at any time on NPFC SPV 1, Inc’s
behalf.
As
of March 31, 2022 and December 31, 2021, investments in debt securities include mandatorily redeemable preferred stock which is classified
as held to maturity, with a term ending in December 2031. The amortized cost was $50,000,000 as of March 31, 2022 and December 31, 2021.
The Novea Common Stock and warrants purchased as part of the transaction are considered to have a de minimis value as of December 31,
2021. Novea issued 1,251,737 shares of Novea Common Stock to the Company, representing ten percent (10%) of Novea’s common stock
outstanding. The shares issued had no par value. Novea is a private company and does not have a readily determinable fair value.
Newpoint
Financial Corp.
Notes
to Financial Statements
March
31, 2022 and March 31, 2021
NOTE
5 - DEPOSITS
In
August 2021, the Company entered into an agreement with Citadel Risk Holdings, Inc., (“CRHI”) which owns all the shares of
American Millennium Insurance Co., (“AMIC”) a New Jersey based insurance company. We agreed to purchase 3.75% of AMIC’s
outstanding shares per year over the course of 10 years for an aggregate total 37.5% of outstanding shares at the end of the term. Closing
is expected to occur in 2022 subject to receipt of regulatory approval and other customary closing conditions. As at March 31, 2022,
NPFC SPV1, Inc. had made a deposit of $1,000,000 to AMIC, on behalf of the Company, as part of an agreement that remains subject to approval.
NOTE
6 – CREDIT COMMITMENT
The
Company entered into a five (5) year revolving credit facility agreement with Novea dated as of December 10, 2021 (“Credit Facility”).
The Credit Facility provides for a revolving credit with a commitment equal to the lesser of: (i) $5,000,000; or (ii) on any amount greater
than $500,000, the lender shall only disburse any such excess up to the amount of 50% of the qualified receivables outstanding of the
borrower, bearing interest at LIBOR plus 5.25%. As of March 31, 2022 and December 31, 2021 there was $4,669,200 and $4,836,500 respectively
of additional borrowings were available to Novea subject to the borrowing criteria.
NOTE
7 – RELATED PARTY TRANSACTIONS AND NOTE PAYABLE
SCHEDULE OF RELATED PARTY TRANSACTION
| | |
March 31, 2022 | | |
December 31, 2021 | |
| Due to Related Parties | |
| | | |
| | |
| Newpoint Financial Corp (Wyoming) (1) | |
$ | 51,142,466 | | |
$ | 50,000,000 | |
| Newpoint Reinsurance Limited (2) | |
$ | 163,500 | | |
$ | 163,500 | |
| Newpoint Capital Limited (3) | |
$ | 260,655 | | |
$ | 68,021 | |
| Total | |
$ | 51,566,621 | | |
$ | 50,231,521 | |
| |
(1) |
Newpoint
Financial Corp (a Wyoming corporation), now known as NPFC SPV 1, Inc. entered into an agreement dated December 13, 2021 with the
Company as part of the transaction to provide the collateral notes to Novea. In December 2021 the Company entered into a Loan Facility
Agreement (the “LFA”) with NPFC SPV I, an entity owned by the Company’s principal stockholders, in connection with
the Stock Purchase Agreement between the Company and Novea (see Note 4). The LFA provides total principal of $50,000,000 and is due
in December 2031. If the Company is in default, as defined, at any time during the term of the LFA, then the lender can demand repayment
within 30 days. The LFA calls for interest at a fixed rate of 1% per annum. Interest can be deferred for up to two years upon the
Company’s request. As of March 31, 2022, NPFC SPV1, Inc. had made a deposit of $1,000,000 to AMIC, on behalf of the Company,
as part of an agreement that remains subject to approval. The remaining portion of $142,466 relates to interest incurred on amounts
outstanding. |
| |
|
|
| |
(2) |
Newpoint
Reinsurance Limited registered under the provisions of the Nevis business Corporation 1984 Ordinance, as amended. In December 2021
the Company entered into a Revolving Credit Facility Agreement (the “RCFA”) with Newpoint Reinsurance Company Limited,
an entity owned by the Company’s majority shareholder. The RCFA provides for available borrowings up to $1,000,000 for a term
of three years and an option to roll the facility. As of March 31, 2022 and December 31, 2021 the Company has additional available
borrowings of $836,500 after it was provided $163,500 as a related party transaction for the credit commitment agreement with Novea.
As of March 31, 2022 no further payments have been made from Newpoint Reinsurance Limited. |
| |
|
|
| |
(3) |
Newpoint
Capital Limited, a company registered in the United Kingdom has provided $260,655 of related party transactions to the Company as
of March 31, 2022 for the payment of amounts requested per the credit agreement with Novea totaling $167,300 and the remaining portion
for accounting, auditor fees and fees associated with filings with the SEC for annual and quarterly reports. |
Newpoint
Financial Corp.
Notes
to Financial Statements
March
31, 2022 and March 31, 2021
NOTE
8 – STOCKHOLDERS’ DEFICIT
Preferred
Stock
The
Company is authorized to issue 50,000,000 shares of preferred stock with a par value of $0.001 per share. There were no preferred shares
issued or outstanding as of March 31, 2022 or December 31, 2021.
Common
Stock
The
Company is authorized to issue up to 100,000,000 shares of common stock with a par value of $0.001 per share. As at March 31, 2022 there
were 19,153,923 shares of common stock issued and outstanding and at December 31, 2021 there were 19,153,923 shares of common stock issued
and outstanding. During the three months ended March 31, 2021, the Company issued 18,937,738 shares to settle related party liabilities.
NOTE
9 – SUBSEQUENT EVENTS
We
are in the process of seeking regulatory approval for the Company’s acquisitions of AMIC and CRHI shares. Upon approval, we expect
the transactions to be completed sometime in 2022.