Exhibit 99.1
Kidoz Inc.
and subsidiaries
Condensed Interim Consolidated Financial Statements
Unaudited
September 30, 2023
Kidoz Inc. and subsidiaries
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying unaudited condensed interim consolidated financial statements of Kidoz Inc. are the responsibility of the management and Board of Directors of the Company.
The unaudited condensed interim consolidated financial statements have been prepared by management, on behalf of the Board of Directors, in accordance with the accounting policies disclosed in the notes to the financial statements. Where necessary, management has made informed judgments and estimates in accounting for transactions which were not complete at the statement of financial position date. In the opinion of management, the financial statements have been prepared within acceptable limits of materiality and are in accordance with the accounting principles generally accepted in the United States of America (“US GAAP”) applicable to interim financial information and with the rules and regulations of the United States Securities and Exchange Commission.
Management has established systems of internal control over the financial reporting process, which are designed to provide reasonable assurance that relevant and reliable financial information is produced.
The Board of Directors is responsible for reviewing and approving the financial statements together with other financial information of the Company and for ensuring that management fulfills its financial reporting responsibilities. An Audit Committee assists the Board of Directors in fulfilling this responsibility. The Audit Committee meets with management to review the financial reporting process and the unaudited condensed interim consolidated financial statements together with other financial information of the Company. The Audit Committee reports its findings to the Board of Directors for its consideration in approving the unaudited interim condensed consolidated financial statements together with other financial information of the Company for issuance to the shareholders.
Management recognizes its responsibility for conducting the Company’s affairs in compliance with established financial standards, and applicable laws and regulations, and for maintaining proper standards of conduct for its activities.
| /S/ J.M. Williams | /S/ H. W. Bromley | |
| J. M. Williams, | H.W. Bromley | |
| Chief Executive Officer | Chief Financial Officer |
| Page 1 |
Kidoz Inc. and subsidiaries
Unaudited Condensed Consolidated Interim Financial Statements
For Periods Ended September 30, 2023 and 2022
| Unaudited Condensed Interim Consolidated Financial Statements | |
| Consolidated Balance Sheets | 3 |
| Consolidated Statements of Operations and Comprehensive (Loss) Income | 4 |
| Consolidated Statements of Stockholders’ Equity | 5 |
| Consolidated Statements of Cash Flows | 6 |
| Notes to Consolidated Financial Statements | 7 |
| Page 2 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Unaudited Condensed Interim Consolidated Balance Sheets
(Unaudited)
| As at | September 30, 2023 | December 31, 2022 | ||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, less allowance for doubtful accounts $ | ||||||||
| Prepaid expenses | ||||||||
| Total Current Assets | ||||||||
| Equipment (Note 4) | ||||||||
| Goodwill (Note 6) | ||||||||
| Intangible assets (Note 5) | ||||||||
| Long term cash equivalent | ||||||||
| Operating lease right-of-use assets (Note 12) | ||||||||
| Security deposit | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Accounts payable and accrued liabilities - related party (Note 13) | ||||||||
| Derivative liability – warrants (Note 2e and 9) | ||||||||
| Government CEBA current loan (Note 9) | ||||||||
| Operating lease liabilities – current portion (Note 12) | ||||||||
| Total Current Liabilities | ||||||||
| Operating lease liabilities – non-current portion (Note 12) | ||||||||
| Total Liabilities | ||||||||
| Commitments (Note 11) | ||||||||
| Stockholders’ Equity (Note 9): | ||||||||
| Common stock, | ||||||||
| Treasury shares, shares (December 31, 2022 – ) | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income: Foreign currency translation adjustment | ||||||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
See accompanying notes to the unaudited condensed interim consolidated financial statements.
These unaudited condensed interim consolidated financial statements were authorized for issue by the Board of Directors on November 28, 2023. They are signed on the Company’s behalf by:
| Approved by the Board of Directors | /s/ Jason Williams |
| J. Williams | |
| CEO |
| Page 3 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Unaudited Condensed Interim Consolidated Statements of Operations and Comprehensive Loss
For Periods Ended September 30, 2023 and 2022
(Unaudited)
| Nine Months ended September 30, 2023 | Nine Months ended September 30, 2022 | Three Months ended September 30, 2023 | Three Months ended September 30, 2022 | |||||||||||||
| Revenue: | ||||||||||||||||
| Ad tech advertising revenue | $ | $ | $ | $ | ||||||||||||
| Programmatic advertising revenue | ||||||||||||||||
| Content revenue | ||||||||||||||||
| Total revenue | ||||||||||||||||
| Cost of sales: | ||||||||||||||||
| Total cost of sales | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Amortization of operating lease right-of-use assets (Note 12) | ||||||||||||||||
| Depreciation and amortization (Notes 4 & 5) | ||||||||||||||||
| Directors’ fees (Note 13) | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Provision for doubtful receivables | ||||||||||||||||
| Salaries, wages, consultants and benefits | ||||||||||||||||
| Selling and marketing (Note 13) | ||||||||||||||||
| Stock awareness program | ||||||||||||||||
| Stock-based compensation (Note 9 & 13) | ||||||||||||||||
| Content and software development (Note 7 & 13) | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss before other income (expense) and income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Foreign exchange gain (loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain on derivative liability – warrants (Note 2e) | ||||||||||||||||
| Interest and other income | ||||||||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax recovery (expense) | ||||||||||||||||
| Loss after tax | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other comprehensive income (loss) | ||||||||||||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic and diluted loss per common share | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average common shares outstanding, basic | ||||||||||||||||
| Weighted average common shares outstanding, diluted | ||||||||||||||||
See accompanying notes to the Unaudited Condensed Interim Consolidated Financial Statements.
| Page 4 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Unaudited Condensed Interim Consolidated Statements Of Stockholders’ Equity
For the periods ended September 30, 2023 and 2022
(Unaudited)
| Nine-Month period Ended September 30, 2023 | ||||||||||||||||||||||||
| Common stock | Accumulated Other Comprehensive income | |||||||||||||||||||||||
| Shares | Amount | Treasury shares | Accumulated Deficit | Foreign currency translation adjustment | Total Stockholders’ Equity | |||||||||||||||||||
| Balance, December 31, 2022 | $ | ($ | ) | $ | ( | ) | $ | $ | ||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Repurchase of common shares | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Net loss and comprehensive loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | ( | ) | $ | $ | ||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Net loss and comprehensive loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | ( | ) | $ | $ | ||||||||||||||||||
| Stock-based compensation | - | | ||||||||||||||||||||||
| Net loss and comprehensive loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | ( | ) | $ | $ | ||||||||||||||||||
| Nine-Month period Ended September 30, 2022 | ||||||||||||||||||||
| Common stock | Accumulated Other Comprehensive income | |||||||||||||||||||
| Shares | Amount | Accumulated Deficit | Foreign currency translation adjustment | Total Stockholders’ Equity | ||||||||||||||||
| Balance, December 31, 2021 | $ | ($ | ) | $ | $ | |||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||
| Net loss and comprehensive loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance, March 31, 2022 | $ | ($ | ) | $ | $ | |||||||||||||||
| Shares issued | ||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||
| Net loss and comprehensive loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance, June 30, 2022 | $ | ($ | ) | $ | $ | |||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||
| Net loss and comprehensive loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance, September 30, 2022 | $ | ($ | ) | $ | $ | |||||||||||||||
See accompanying notes to the Unaudited Condensed Interim Consolidated Financial Statements.
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Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Unaudited Condensed Interim Consolidated Statements of Cash Flows
For the Nine month periods ended September 30, 2023 and 2022
(Unaudited)
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of operating lease right-of-use assets | ||||||||
| Gain on derivative liability – warrants | ( | ) | ( | ) | ||||
| Provision for doubtful receivables | ||||||||
| Stock-based compensation | ||||||||
| Unrealized foreign exchange gain (loss) | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Accounts payable and accrued liabilities | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Acquisition of equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Payments for repurchase of common shares | ( | ) | ||||||
| Payments on operating lease liabilities | ( | ) | ( | ) | ||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| Change in cash | ( | ) | ( | ) | ||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| Supplementary information: | ||||||||
| Interest paid | $ | $ | ||||||
| Income taxes paid | $ | $ | ||||||
| Non-cash transaction | ||||||||
| Shares issued to settle accounts payable and accrued liabilities | $ | $ | ||||||
See accompanying notes to the Unaudited Condensed Interim Consolidated Financial Statements.
| Page 6 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Unaudited Condensed Interim Consolidated Financial Statements
Three Months ended September 30, 2023 and 2022
(Unaudited)
1. Basis of Presentation:
The accompanying unaudited condensed interim consolidated financial statements have been prepared by Kidoz Inc. (“the Company”) in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) applicable to interim financial information and with the rules and regulations of the United States Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed, or omitted, pursuant to such rules and regulations. In the opinion of management, the unaudited condensed interim consolidated financial statements include all adjustments necessary for the fair presentation of the results of the interim periods presented. All adjustments are of a normal recurring nature, except as otherwise noted below. These unaudited interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto filed April 19, 2023 for the year ended December 31, 2022, included in the Company’s Annual Financial Statements and Management’s Discussion and Analysis filed with the TSX Venture Exchange on SEDAR and the Annual Report on Form 20-F, filed with the Securities and Exchange Commission. The results of operations for the interim periods are not necessarily indicative of the results of operations for any other interim period or for a full fiscal year.
Continuing operations
These unaudited condensed interim 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 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.
There have been many factors which have affected the world economies in recent years. These include global pandemics (i.e. coronavirus COVID-19), inflation, the current banking crisis (e.g. Silicon Valley Bank), the war in Ukraine, the war in Gaza and many more. These factors have adversely affected workforces, economies, and financial markets globally. It has also disrupted the normal operations of many businesses, including the Company’s. These factors have affected spending, thereby affecting demand for the Company’s product and the Company’s business and its results of operations. It is not possible for the Company to predict the duration or magnitude of these factors at this time and the 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 unaudited condensed interim 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
| Page 7 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Unaudited Condensed Interim Consolidated Financial Statements
Three Months ended September 30, 2023 and 2022
(Unaudited)
| 2. | Summary of significant accounting policies: (Continued) |
| (a) | Basis of presentation: (Continued) |
States Securities and Exchange Commission and the TSX Venture Exchange. The financial statements include the accounts of the Company’s subsidiaries:
| Company | Registered | % Owned | ||||
| Shoal Media (Canada) Inc. | British Columbia, Canada | % | ||||
| Kidoz Ltd. | Israel | % | ||||
| Rooplay Media Ltd. | British Columbia, Canada | % | ||||
| Rooplay Media Kenya Limited | Kenya | % | ||||
| Shoal Media Inc. | Anguilla | % | ||||
| Shoal Games (UK) Plc | United Kingdom | % | ||||
| Shoal Media (UK) Ltd. | United Kingdom | % | ||||
During the quarter ended March 31, 2023, Shoal Games (UK) Plc was discontinued.
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 unaudited interim consolidated financial statements.
(b) Use of estimates:
The preparation of unaudited condensed interim 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 valuation of deferred tax assets and liabilities, the useful lives of intangible assets, the inputs used in assessing goodwill impairment, 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.
| Page 8 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Unaudited Condensed Interim Consolidated Financial Statements
Three Months ended September 30, 2023 and 2022
(Unaudited)
| 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
| Page 9 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Unaudited Condensed Interim Consolidated Financial Statements
Three Months ended September 30, 2023 and 2022
(Unaudited)
| 2. | Summary of significant accounting policies (Continued): |
| (c) | Revenue recognition: (Continued) |
available information such as market conditions and internally approved pricing guidelines related to the performance obligations.
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 pricing and terms for all our in-game advertising arrangements are mostly governed by insertion order which generally stipulates the payment terms, the duration (usually short term in nature), the number of advertising units delivered (e.g. impressions, completed views, or cost per install) and the contractually agreed upon price per advertising unit. 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) Programmatic advertising revenue - The Company generally offers these services under a programmatic bid on a Cost-per-Impression (CPM) basis. Our customers upload their advertisements into a demand side platform which then connects to our SDK through an exchange platform and on a bid system agree on the CPM rate and the impressions to be served.
The Company has concluded that the delivery of the Programmatic advertising is delivered at the earlier of month end or at a point in time and, as such, has concluded these deliveries are a single performance obligation. The Company is deemed to be the principal in the transaction and therefore recognizes the revenue on a gross basis and commissions are recognized as cost of sales. 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
| Page 10 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Unaudited Condensed Interim Consolidated Financial Statements
Three Months ended September 30, 2023 and 2022
(Unaudited)
| 2. | Summary of significant accounting policies (Continued): |
| (c) | Revenue recognition: (Continued) |
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.
3) 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. The revenue is recognized net of platform fees.
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, and Amazon, iOS 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,
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Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Unaudited Condensed Interim Consolidated Financial Statements
Three Months ended September 30, 2023 and 2022
(Unaudited)
| 2. | Summary of significant accounting policies (Continued): |
| (c) | Revenue recognition: (Continued) |
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) Software development costs:
The Company expenses all software development costs as incurred for the period ended September 30, 2023 and 2022. As at September 30, 2023, and December 31, 2022, all capitalized software development costs have been fully amortized and the Company has no capitalized software development costs.
Total
software development costs were $
(e) 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.
(f) Impairment of long-lived assets and long-lived assets to be disposed of:
The Company identified the following intangible assets in the acquisition of Kidoz Ltd. Finite life intangible assets are recorded at historical cost less accumulated amortization based on their estimated useful life and any impairment is determined in accordance with ASC 360. The Company does not have any indefinite life intangible assets. Amortization is provided for annually on the straight-line method over the following periods:
| Amortization period | ||
| Ad Tech technology | ||
| Kidoz OS technology | ||
| Customer relationship |
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.
(g) 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
| Page 12 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Unaudited Condensed Interim Consolidated Financial Statements
Three Months ended September 30, 2023 and 2022
(Unaudited)
| 2. | Summary of significant accounting policies (Continued): |
| (g) | Goodwill: (Continued) |
whenever events or changes in circumstances indicate that it is more likely than not that the carrying amount may not be recoverable.
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, 2022, the Company determined there was impairment of the goodwill.
(h) New accounting pronouncements and changes in accounting policy:
The Company has evaluated all of the recently issued, but not yet effective, accounting standards that have been issued or proposed by the Financial Accounting Standards Board or other standards-setting bodies through the filing date of these unaudited consolidated financial statements and does not believe the future adoption of any such pronouncements will have a material impact on its consolidated financial statements.
(i) 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:
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Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Unaudited Condensed Interim Consolidated Financial Statements
Three Months ended September 30, 2023 and 2022
(Unaudited)
| 2. | Summary of significant accounting policies (Continued): |
| (i) | Financial instruments and fair value measurements: (Continued) |
Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets and liabilities in active markets;
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, accrued liabilities - related party and the government CEBA loan approximate their financial statement carrying amounts due to the short-term maturities of these instruments and are therefore carried at their historical cost basis.
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.
| Page 14 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Unaudited Condensed Interim Consolidated Financial Statements
Three Months ended September 30, 2023 and 2022
(Unaudited)
| 2. | Summary of significant accounting policies (Continued): |
| (i) | Financial instruments and fair value measurements: (Continued) |
(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:
| September 30, 2023 | December 31, 2022 | |||||||
| Accounts receivable | $ | $ | ||||||
| Expected credit losses | ( | ) | ( | ) | ||||
| Net accounts receivable | $ | $ | ||||||
The
Company has a doubtful debt provision of $
4. Equipment:
| September 30, 2023 | Cost | Accumulated depreciation | Net book Value | |||||||||
| Equipment and computers | $ | $ | $ | |||||||||
| Furniture and fixtures | ||||||||||||
| $ | $ | $ | ||||||||||
| December 31, 2022 | Cost | Accumulated depreciation | Net book Value | |||||||||
| Equipment and computers | $ | $ | $ | |||||||||
| Furniture and fixtures | ||||||||||||
| $ | $ | $ | ||||||||||
Depreciation
expense was $
5. Intangible assets:
| September 30, 2023 | Cost | Accumulated depreciation | Net book Value | |||||||||
| Ad Tech technology | $ | $ | $ | |||||||||
| Kidoz OS technology | ||||||||||||
| Customer relationship | ||||||||||||
| $ | $ | $ | ||||||||||
| Page 15 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Unaudited Condensed Interim Consolidated Financial Statements
Three Months ended September 30, 2023 and 2022
(Unaudited)
| 5. | Intangible assets: (Continued) |
| December 31, 2022 | Cost | Accumulated amortization | Net book Value | |||||||||
| Ad Tech technology | $ | $ | $ | |||||||||
| Kidoz OS technology | ||||||||||||
| Customer relationship | ||||||||||||
| $ | $ | $ | ||||||||||
Amortization
expense was $
6. Goodwill:
The changes in the carrying amount of goodwill for the period ended September 30, 2023, and the year ended December 31, 2022 were as follows:
| September 30, 2023 | December 31, 2022 | |||||||
| Goodwill, balance at beginning of period | $ | $ | ||||||
| Impairment of goodwill | ||||||||
| Goodwill, balance at end of period | $ | $ | ||||||
The
Company’s annual goodwill impairment analysis performed during the fourth quarter of fiscal 2022 included a quantitative analysis
of Kidoz Ltd. reporting unit (consisting of intangible assets (Note 5) and goodwill). The reporting unit has a carrying amount of $
7. Content and software development assets:
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 continued development of the KIDOZ Safe Ad Network, the KIDOZ Kid-Mode Operating System, and the KIDOZ publisher SDK.
| Page 16 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Unaudited Condensed Interim Consolidated Financial Statements
Three Months ended September 30, 2023 and 2022
(Unaudited)
7. Content and software development assets: (Continued)
During the period ended September 30, 2023, the Company has expensed the development costs of all its technology as incurred and has expensed the following software development costs.
| Nine Months ended September 30, 2023 | Nine Months ended September 30, 2022 | Three Months ended September 30, 2023 | Three Months ended September 30, 2022 | |||||||||||||
| Opening total software development costs | $ | $ | $ | $ | ||||||||||||
| Software development during the period | ||||||||||||||||
| Closing total Software development costs | $ | $ | $ | $ | ||||||||||||
8. Government CEBA loan:
During
the year ended December 31, 2020, the Company was granted a loan of $
9. 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.
| (a) | Common stock issuances: |
There were no stock issuances during the quarter ended September 30, 2023 and 2022.
| (b) | Normal Course Issuer Bid: |
During the year ended December 31, 2022, the Company filed a Notice of Intention to Make a Normal Course Issuer Bid (the “Notice of Intention”) with the TSX Venture Exchange (“TSX-V”) on September 15, 2022. Upon receiving approval from the TSX-V, effective September 16, 2022, the Company commenced a normal course issuer bid (“NCIB”), whereby the Company may purchase for cancellation up to shares, being % of the issued and outstanding shares as of such date. Any purchases under the NCIB will be made on the open market through the facilities of the TSX-V or alternative Canadian trading systems. Purchases will be made at market prices of the shares at the time of acquisition.
Purchases under the NCIB may commence as of September 16, 2022, and expired on September 14, 2023.
| Page 17 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Unaudited Condensed Interim Consolidated Financial Statements
Three Months ended September 30, 2023 and 2022
(Unaudited)
9. Stockholders’ equity: (Continued)
| (b) | Normal Course Issuer Bid: (Continued) |
The normal course issuer bid was conducted through Kidoz Inc’s broker Research Capital Corporation. The purchase and payment of the common shares were made in accordance with the requirements of the TSX-V and applicable securities laws. The actual number of common shares purchased, timing of purchases and share price depended upon market conditions at the time and securities law requirements. All common shares acquired were returned to treasury and cancelled.
The purchase of and payment for the shares were made in accordance with the requirements of the TSX-V and applicable securities laws. The actual number of shares purchased, timing of purchases and share price depended upon market conditions at the time and securities law requirements. All shares acquired pursuant to the NCIB were returned to treasury and cancelled.
During
the year ended December 31, 2022, shares were acquired pursuant to the NCIB in effect, at an aggregate cost of $
During the quarter ended March 31, 2023, shares which were acquired, pursuant to the NCIB in effect, at an aggregate cost of $, were cancelled.
| (c) | Warrants |
A summary of warrant activity for the quarter ended September 30, 2023 are as follows:
| Number of warrants | Exercise price | Expiry date | ||||||||
| Outstanding, December 31, 2022 | CAD$ | |||||||||
| Granted | ||||||||||
| Expired unexercised | ) | CAD$ | ||||||||
| Outstanding September 30, 2023 | ||||||||||
During
the quarter ended June 30, 2023, the warrants expired unexercised and a gain on derivative liability - warrants of $
| September 30, 2023 | December 31, 2022 | |||||||
| Exercise price | CAD$ | CAD$ | ||||||
| Stock price | CAD$ | CAD$ | ||||||
| Expected term | days | years | ||||||
| Expected dividend yield | ||||||||
| Expected stock price volatility | % | % | ||||||
| Risk-free interest rate | % | % | ||||||
| Page 18 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Unaudited Condensed Interim Consolidated Financial Statements
Three Months ended September 30, 2023 and 2022
(Unaudited)
9. Stockholders’ equity: (Continued)
| (d) | 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 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 % 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 years. Under the amended 2015 plan we have reserved % of the number of Shares of the Company issued and outstanding as of each Award Date.
During the quarter ended March 31, 2023, the Company granted options at CAD$ ($). During the quarter ended June 30, 2023, options expired unexercised. During the quarter ended September 30, 2023, options were cancelled.
During the quarter ended March 31, 2022, the Company granted options at CAD$ ($)
| Number of options | Weighted average exercise price | |||||||
| Outstanding, December 31, 2021 | $ | |||||||
| Granted | ||||||||
| Expired | ( | ) | ( | ) | ||||
| Cancelled | ( | ) | ( | ) | ||||
| Outstanding, December 31, 2022 | $ | |||||||
| Granted | ||||||||
| Expired | ( | ) | ( | ) | ||||
| Cancelled | ( | ) | ( | ) | ||||
| Outstanding September 30, 2023 | $ | |||||||
The aggregate intrinsic value for options as of September 30, 2023 was $ (December 31, 2022 - $).
| Page 19 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Unaudited Condensed Interim Consolidated Financial Statements
Three Months ended September 30, 2023 and 2022
(Unaudited)
9. Stockholders’ equity: (Continued)
| (d) | Stock option plans: (Continued) |
Exercise prices per share | Number outstanding | Number exercisable | Expiry date | |||||||
| CAD$ | ||||||||||
| CAD$ | ||||||||||
| CAD$ | ||||||||||
| CAD$ | ||||||||||
| CAD$ | ||||||||||
| CAD$ | ||||||||||
During the quarter ended September 30, 2023, the Company recorded stock-based compensation of $ on the options granted and vested (September 30, 2022 – $) and as per the Black-Scholes option-pricing model, with a weighted average fair value per option grant of $ (September 30, 2022 - $).
10. 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.
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| As at September 30, 2023 | ||||||||||||||||
| Assets | ||||||||||||||||
| Cash | $ | $ | $ | $ | ||||||||||||
| Long term cash equivalent | ||||||||||||||||
| Liabilities | ||||||||||||||||
| Derivative liability – warrants | ||||||||||||||||
| Total net assets measured and recorded at fair value | $ | $ | $ | $ | ||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| As at December 31, 2022 | ||||||||||||||||
| Assets | ||||||||||||||||
| Cash | $ | $ | $ | $ | ||||||||||||
| Long term cash equivalent | ||||||||||||||||
| Liabilities | ||||||||||||||||
| Derivative liability – warrants | ( | ) | ( | ) | ||||||||||||
| Total assets (liabilities) measured and recorded at fair value | $ | $ | ( | ) | $ | $ | ||||||||||
| Page 20 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Unaudited Condensed Interim Consolidated Financial Statements
Three Months ended September 30, 2023 and 2022
(Unaudited)
11. Commitments:
The Company leases office facilities in Vancouver, British Columbia, Canada, and Netanya, Israel. These office facilities are leased under operating lease agreements. During the quarter ended March 31, 2023, the lease in The Valley, Anguilla was cancelled.
During
the quarter ended March 31, 2019, the Company signed a five year lease for a facility in Vancouver, Canada, commencing April 1, 2019
and ending March 2024. This facility comprises approximately
The
Netanya, Israel operating lease expired on July 14, 2017 but unless 3 month’s notice is given it automatically renews for a future
12 months until notice is given. During the year ended December 31, 2022, the lease was extended for a further 12 months. This facility
comprises approximately
The minimum lease payments under these operating leases are approximately as follows:
| 2023 | $ | |||
| 2024 |
The
Company paid rent expense totaling $
The Company has the following management consulting agreements with related parties.
| Company | Person | Role | Annual amount | |||||
| T.M. Williams (ROW), Inc. | T. M. Williams | Chairman | $ | |||||
| Bromley Accounting Services Ltd. | H. W. Bromley | CFO | CAD$ | |||||
| Farcast Operations Inc. | T. H. Williams | VP Product | CAD$ | |||||
As at September 30, 2023, 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 September 30, 2023, 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 $
| Page 21 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Unaudited Condensed Interim Consolidated Financial Statements
Three Months ended September 30, 2023 and 2022
(Unaudited)
12. Right of use assets:
There
is no discount rate implicit in the Anguilla office operating lease agreement, so the Company estimated a
Effective
April 1, 2019, we recognized lease assets and liabilities of $
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 are summarized as follows:
| September 30, 2023 | December 31, 2022 | |||||||
| Opening balance for the period | $ | $ | ||||||
| Amortization of operating lease right-of use assets | ( | ) | ( | ) | ||||
| Closing balance for the period | $ | $ | ||||||
The operating lease as at September 30, 2023, is summarized as follows:
| As at September 30, 2023 | Operating lease- Office lease | |||
| 2023 | $ | |||
| 2024 | ||||
| Total lease payments | $ | |||
| Less: Interest | ( | ) | ||
| Present value of lease liabilities | $ | |||
| Amounts recognized on the balance sheet | ||||
| Current lease liabilities | $ | |||
| Long-term lease liabilities | ||||
| Total lease payments | $ | |||
| Page 22 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Unaudited Condensed Interim Consolidated Financial Statements
Three Months ended September 30, 2023 and 2022
(Unaudited)
12. Right of use assets: (Continued)
| September 30, 2023 | December 31, 2022 | |||||||
| Opening balance for the period | $ | $ | ||||||
| Payments on operating lease liabilities | ( | ) | ( | ) | ||||
| Closing balance for the period | ||||||||
| Less: current portion | ( | ) | ( | ) | ||||
| Operating lease liabilities – non-current portion as at end of period | $ | $ | ||||||
13. Related party transactions:
For the quarter ended September 30, 2023, the Company has the following related party transactions:
| Nine Months ended September 30, 2023 | Nine Months ended September 30, 2022 | Three Months ended September 30, 2023 | Three Months ended September 30, 2022 | |||||||||||||
| Directors’ fees | $ | $ | $ | $ | ||||||||||||
| Salaries, wages, consultants and benefits | ||||||||||||||||
| Selling and marketing | ||||||||||||||||
| Stock-based compensation (Note 9) | ||||||||||||||||
| Content and software development (Note 7) | ||||||||||||||||
| Closing balance for the period | $ | $ | $ | $ | ||||||||||||
The
Company has liabilities of $
During the quarter ended March 31, 2023, the Company granted options with an exercise price of CAD$ ($) per share.
During the quarter ended March 31, 2022, the Company granted options with an exercise price of CAD$ ($) per share.
| Page 23 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Unaudited Condensed Interim Consolidated Financial Statements
Three Months ended September 30, 2023 and 2022
(Unaudited)
14. Segmented information:
Revenue
The Company operates in reportable business segments, the sale of Ad tech advertising and content revenue.
The Company had the following revenue by geographical region.
| Nine Months ended September 30, 2023 | Nine Months ended September 30, 2022 | Three Months ended September 30, 2023 | Three Months ended September 30, 2022 | |||||||||||||
| Ad tech advertising revenue | ||||||||||||||||
| Western Europe | $ | $ | $ | $ | ||||||||||||
| Central, Eastern and Southern Europe | ||||||||||||||||
| North America | ||||||||||||||||
| Other | ||||||||||||||||
| Total ad tech advertising revenue | $ | $ | $ | $ | ||||||||||||
| Content revenue | ||||||||||||||||
| Western Europe | $ | $ | $ | $ | ||||||||||||
| Central, Eastern and Southern Europe | ||||||||||||||||
| North America | ||||||||||||||||
| Other | ||||||||||||||||
| Total content revenue | $ | $ | $ | $ | ||||||||||||
| Programmatic advertising revenue | ||||||||||||||||
| North America | $ | $ | $ | $ | ||||||||||||
| Total Programmatic advertising revenue | $ | $ | $ | $ | ||||||||||||
| Total revenue | ||||||||||||||||
| Western Europe | $ | $ | $ | $ | ||||||||||||
| Central, Eastern and Southern Europe | ||||||||||||||||
| North America | ||||||||||||||||
| Other | ||||||||||||||||
| Total revenue | $ | $ | $ | $ | ||||||||||||
Equipment
The Company’s equipment is located as follows:
| Net Book Value | September 30, 2023 | December 31, 2022 | ||||||
| Anguilla | $ | $ | ||||||
| Canada | ||||||||
| Israel | ||||||||
| United Kingdom | ||||||||
| $ | $ | |||||||
| Page 24 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Unaudited Condensed Interim Consolidated Financial Statements
Three Months ended September 30, 2023 and 2022
(Unaudited)
15. Concentrations:
Major customers
During
the quarter ended September 30, 2023 and 2022, the Company sold Ad tech revenue, Programmatic advertising revenue and content revenue
including subscriptions on its site Rooplay, in-app purchases on its social bingo sites, Trophy Bingo and Garfield’s Bingo and
Rooplay Originals. During the quarter ended September 30, 2023, the Company had two Ad tech customers: $
16. 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 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 balances at financial institutions. At September 30,
2023, the Company had total cash and cash equivalents balances of $
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 September 30, 2023, the Company had one customer, totaling $
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.
| Page 25 |