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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-K

 

(Mark One)

 

ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2021

 

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ____________to __________

 

Commission file number 333-120120-01

 

KIDOZ Inc.

 

(Exact name of registrant as specified in its charter)

 

ANGUILLA, B.W.I.   98-0206369
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)

 

Hansa Bank Building, Ground Floor, Landsome Road

AI 2640, The Valley, Anguilla, B.W.I

 

(Address of principal executive offices)

 

(888) 374-2163

 

(Registrant’s telephone number, including area code)

 

Securities registered under Section 12(b) of the Exchange Act:

 

None

 

(Title of Each Class & Name of each exchange on which registered)

 

Securities registered under section 12(g) of the Exchange Act:

 

COMMON STOCK, NO PAR VALUE PER SHARE

 

(Title of class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

 

Yes ☐ No

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

 

Yes ☐ No

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months.

 

Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
    Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Ex- change Act. ☐

 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

 

Yes ☐ No

 

State issuer’s revenues for its most recent fiscal year. $12,475,480

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.

 

Our common stock is quoted on the TSX Venture Exchange in Canada under the symbol “KIDZ” (previously “SGW”). The closing share price as of March 30, 2022, being CAD$0.45 (US$0.36) per share under symbol KIDZ on the TSX Venture Exchange and is quoted on the Over-the-Counter Markets – The Venture Marketplace (“OTCQB”) operated by OTC Markets Group Inc. (http://www.otcmarkets.com/) under the symbol “KDOZF and the aggregate market value of the voting and non-voting common equity held by non-affiliates is $22,719,273.

 

APPLICABLE ONLY TO CORPORATE REGISTRANTS

 

Indicate the number of shares outstanding of the registrant’s common stock, no par value per share, was 131,424,989 as of March 30, 2022.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

The merger of Bingo.com, Inc. with Shoal Games Ltd., which was approved by the Securities Exchange Commission on March 8, 2005, and is effective on April 7, 2005, is described in the prospectus filed under Rule 424(b) of the Securities Act and the Form S-4, which were filed on March 9, 2005, and March 4, 2005, respectively. The Company filed Form SB2 on September 18, 2007, for the registration of shares originally issued in the private placement. The Company filed a TSX Venture Exchange Listing Application for the TSX-V listing on June 29, 2015. The Company filed a share purchase agreement for the acquisition of Kidoz Ltd. on March 12, 2019.

 

 

 

 

 

 

TABLE OF CONTENTS

 

PART I
ITEM 1. BUSINESS 3
ITEM 2. PROPERTIES. 8
ITEM 3. LEGAL PROCEEDINGS. 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. 10
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. 11
ITEM 6. SELECTED FINANCIAL DATA 13
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 14
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. 24
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. 56
ITEM 9A. CONTROLS AND PROCEDURES 56
ITEM 9B. OTHER INFORMATION 56
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 57
ITEM 11. EXECUTIVE COMPENSATION 60
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS 62
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 64
Item 14. Principal AccountANT Fees and Services 64
PART IV
ITEM 15. EXHIBITS 65
SIGNATURES 66
CERTIFICATIONS
CERTIFICATION PURSUANT TO 18 U.S.C. §1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT LIST 67

 

Page 2

 

 

PART I

 

This Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties. All statements contained herein that are not statements of historical fact constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Discussions containing forward-looking statements may be found in the material set forth under “Business,” and “Management’s Discussion and Analysis or Plan of Operation,” as well as in this Annual Report generally. We generally use words such as “believes,” “intends,” “expects,” “anticipates,” “plans,” and similar expressions to identify forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. These forward-looking statements are subject to risks, uncertainties and other factors, some of which are beyond our control, which could cause actual results to differ materially from this forecast or anticipated in such forward-looking statements.

 

You should not place undue reliance on these forward-looking statements, which reflect our view only as of the date of this report. We undertake no obligation to update these statements or publicly release the result of any revisions to these statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.

 

ITEM 1. BUSINESS

 

INTRODUCTION

 

Kidoz Inc. (TSXV: KIDZ) is a mobile advertising technology company and owner of the KIDOZ Safe Ad Network (www.kidoz.net) and the Kidoz Publisher Software Development Kit (“SDK”). By developing solutions for app developers to monetize with safe, relevant, and fun ads we help keep the Google and Apple app stores safe and free for children. Our commitment to children’s privacy and safety has created one of the fastest growing mobile networks in the world. Unlike most digital advertising, every campaign on the Kidoz platform is free of location information, device identifiers, behavioural data, and other trackers used by advertisers to identify and track users across the Internet commonly known as IDFA and AAID. Our technology does not rely on any permanent identifiers, and as Google and Apple begin to disallow persistent trackers from being employed by any network (child-directed or not), Kidoz’s strength increases.

 

Fiscal 2021 saw Kidoz’s growth, profitability, and revenues reach new heights. The Company’s continued and increasing pace of growth is attributed to potent market and consumer forces both from the wider digital economy and also specific to the Kidoz niche of private, safe, and contextual advertising. One of the key factors driving growth is the ever-increasing dominance of mobile usage and mobile entertainment across all age groups. Mobile is now consumers’ preferred choice for entertainment and Kidoz provides a safe and high-performance platform to reach hundreds of millions of consumers on their mobile devices.

 

Kidoz is a dedicated AdTech developer that is completely focused on creating a high-performance mobile ad network. We’ve listened to our advertisers who want safe mobile inventory with the greatest reach and widest variety combined with full-service transparency and brand safety. As a contextual network free of data targeting, we build value and trust with advertisers by facilitating pre-campaign contextual app list planning, live campaign optimizations, and detailed post-campaign reporting and analysis. Our strategy continues to succeed in the dynamic digital advertising environment, and we’re excited to be expanding our team and refining our products to grow even faster in the months and years ahead.

 

The Kidoz network continues to grow in size and now boasts more than double the SDK app adoption than its closest direct mobile ad competitor. Kidoz continues to build value and trust with advertisers who seek private, safe, and contextual advertising. We continue to invest heavily into our systems and technology to increase our network reach and solidify our position as the market leader. The latest Kidoz technology that was released in 2021 has the power to further increase our growth rate and fill the billions of impressions exposed monthly on the Kidoz network.

 

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The most powerful new product is Kidoz’s COPPA compliant programmatic technology solution: Kidoz Connect. This new product release is a unique programmatic solution providing ‘review & monetize’ technology to enable open market ad sourcing at scale. Kidoz Connect creates a safe pipeline of advertising sources to be connected to the Kidoz Contextual Ad Network and funneled to the thousands of apps currently utilizing Kidoz monetization technology.

 

Kidoz has also developed new tools for enabling the growth of performance campaigns on the Kidoz network. Software that facilitates the management, tracking, attribution and reporting of performance app install campaigns have enabled Kidoz to significantly grow this cost-per-install (CPI) business line.

 

Kidoz is recognized globally for safely reaching children under the age of 13 on their mobile devices via the Kidoz Contextual Ad Network. After years of development and growth of the Kidoz mobile platform, the Company has now expanded its offering to include both the teens (13-19) and parents’ markets. Using the enormous reach of the Kidoz SDK, the Kidoz media team can now contextually target the children, teen and parent segments in their favourite gaming and app environments.

 

Kidoz has a unique sales strategy that empowers more than thirty local and international media agencies to sell the Kidoz mobile advertising inventory created by the Kidoz SDK and Kidoz Connect programmatic solution. Agencies are thrilled with the expansion of the Kidoz technology into the Teen and Parent markets as the opportunities for new business are enormous. The success of our strategy and technology increases the pace of our technical investments and creates further opportunities to accelerate the speed of our growth as we refine our software and systems. Mobile digital media is one of the world’s largest industries and Kidoz is perfectly positioned with the correct team and technology to deliver value to its publishers, advertisers, and investors.

 

Kidoz has recently closed the busiest quarter in Company history. Management is pleased with the Company’s performance in 2021, excited by the trajectory of our technology, and believe that 2022 will be another record year for Kidoz.

 

Kidoz’s mobile products include the Kid Mode Operating System installed on millions of OEM tablets worldwide, Rooplay (www.rooplay.com) the cloud-based EduGame system for kids to learn and play; and Trophy Bingo (www.trophybingo.com), live across mobile platforms.

 

References in this document to “the Company,” “we,” “us,” and “our” refer to Kidoz Inc. and our subsidiaries, which are described below.

 

Our executive offices are located at Hansa Bank Building, Ground Floor, Landsome Road, The Valley, AI 2640, The Valley, Anguilla, B.W.I. Our telephone number is (888) 374-2163.

 

History and Corporate Structure

 

The Company was originally incorporated in the State of Florida on January 12, 1987.

 

On January 22, 2015, Bingo.com, Ltd. filed Articles of Amendment with the Anguilla Registrar of Companies changing its name to “Shoal Games Ltd.”. Effective at the open of markets on January 27, 2015, the Common Shares commenced trading under the new trading symbol “SGLDF” on the OTC-QB.

 

On June 29, 2015, the Company filed a TSX Venture Exchange Listing Application for the TSX Venture Exchange listing and commenced trading on July 2, 2015, under the symbol “SGW”.

 

On April 4, 2019, Shoal Games Ltd. filed Articles of Amendment with the Anguilla Registrar of Companies changing its name to “Kidoz Inc.”. Effective at the open of markets on April 9, 2019, the Common Shares commenced trading under the new trading symbol “KIDZ” on the TSX Venture Exchange.

 

We conduct our business through the Anguilla incorporated entity and through our wholly-owned subsidiaries Kidoz Ltd. (“Kidoz Ltd.”), Shoal Media (Canada) Inc. (“Shoal Media Canada”), Shoal Games (UK) plc (“Shoal UK”), Coral Reef Marketing Inc. (“Coral Reef”), Shoal Media Inc. (“Shoal Media”), Rooplay Media Ltd. (“Rooplay Media”), Shoal Media UK Ltd. (“Shoal Media UK”), and Rooplay Media Kenya Limited. (“Rooplay Kenya”)

 

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Shoal Media Canada was incorporated under the laws of British Columbia, Canada, on February 10, 1998, as 559262 B.C. Ltd. and changed its name to Bingo.com (Canada) Enterprises Inc. on February 11, 1999. It subsequently changed its name to English Bay Office Management Limited on September 8, 2003. Effective March 11, 2016, it changed its name to Shoal Media (Canada) Inc.

 

On August 15, 2002, 99% of the share capital of Shoal UK was acquired. Shoal UK was incorporated under the laws of England and Wales on August 18, 2000, as CellStop plc. and changed its name to Bingo.com (UK) plc. on August 5, 2002. During the year ended December 31, 2015, the Company changed the name of the company to Shoal Games (UK) plc.

 

On January 21, 2008, Coral Reef Marketing Inc., was incorporated under the laws of Anguilla, British West Indies.

 

On January 1, 2013, 100% of the share capital of Shoal Media Inc., an Anguillian Company was acquired.

 

On October 25, 2016, Rooplay Media Ltd., was incorporated under the laws of British Columbia, Canada.

 

On March 27, 2017, Shoal Media UK Ltd. was incorporated under the laws of England and Wales.

 

On July 12, 2017, Rooplay Media Kenya Limited was incorporated under the laws of Kenya.

 

On March 4, 2019 the Company completed the acquisition of all of the issued and outstanding equity securities of Kidoz Ltd. (“Kidoz”) (www.kidoz.net), a privately held Israeli company.

 

The Company also maintains a number of inactive wholly-owned subsidiaries. These are:

 

  - Bingo.com (Antigua), Inc., (“Bingo.com (Antigua)”) incorporated as an Antigua International Business Corporation on April 7, 1999, as Star Communications Ltd. and changed its name to Bingo.com. (Antigua), Inc. on April 21, 1999;
     
  - Bingo.com (Wyoming), Inc., incorporated in the State of Wyoming on July 14, 1999;
     
  - Bingo.com Acquisition Corp., incorporated in the State of Delaware on January 9, 2001.

 

All three of the inactive subsidiaries were incorporated to facilitate the implementation of business plans that we have since modified and refocused and, consequently, there is no activity in these entities.

 

Our common shares are currently quoted on the TSX Venture Exchange in Canada under the symbol “KIDZ”. We have not been subject to any bankruptcy, receivership or other similar proceedings.

 

Development of the Business

 

The core focus of Kidoz Inc. is the development and expansion of the Kidoz Ad Network which provides a safe and curated platform for family focused advertisers who care about brand safety. The size of the mobile advertising ecosystem is projected by eMarketer to exceed over US$400 billion by 2023 (eMarketer). It is the Company’s intention to continue to expand the reach application of our technology to access the wider mobile advertising ecosystem via programmatic connections or synergistic M&A opportunities and expand in the teen and parent market. As developments in privacy laws and Apple and Google’s policy updates move to provide additional protection to digital minors, Kidoz’s importance in the digital advertising eco-system increases.

 

Kidoz Inc. Domain Names

 

Kidoz Inc. owns the domain names Kidoz.net, Rooplay.com, Shoalgames.com, Shoalgames.net, Shoalmedia.com, Garfieldsbingo.com, Trophybingo.com, Trophybingo.ca, Prado.co and many other smaller domains.

 

BUSINESS OVERVIEW

 

Kidoz Inc. is an AdTech software developer and owner of the leading mobile Kidoz Safe Ad Network (www.kidoz.net). We help create a free and safe mobile app environment for children by enabling content producers to monetize their apps and video with safe, relevant, and fun ads. Our commitment to family privacy and safety has created one of the fastest growing mobile networks in the world.

 

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Product Strategy

 

Kidoz builds and maintains the Kidoz Safe Ad Network, the Kidoz SDK, and the Kidoz Connect Programmatic solution for app developers and global advertisers to reach children and families in a compliant and brand safe way. The Kidoz SDK is the core of the advertising technology that enables Kidoz to have advertising impressions available for sale. The Kidoz proprietary advertising system is compliant with COPPA (“Children’s Online Privacy Protection Rule”), GDPR-K (“The European Union’s General Data Protection Regulation for children”) and other regulations adopted to protect children in a complex digital world. Kidoz technology is completely proprietary. Kidoz continues to upgrade its advertising systems to be compatible with the latest IAB (“International Advertising Board”) specifications for real-time-bidding, header bidding, and server-to-server direct connections. Our design and implementation of these solutions incorporates a view to their utilization not only in the kids’ marketplace but to the entire advertising market. Programmatic advertising is the use of automated advertising technology to enable media buying and selling as opposed to traditional direct methods of digital advertising which involve humans interfacing to agree to deal terms. Offering a managed programmatic solution of the best mobile advertising inventory is a valuable offering that our agency partners are utilizing with increased frequency and scale.

 

Marketing & Distribution Strategy

 

Each new app that installs the Kidoz SDK increases our user base and increases the number of available impressions that Kidoz can monetize. The adoption of the Kidoz SDK has been rapid as app developers have few choices when it comes to sources of safe, compliant, and relevant ads for their users. Kidoz has built its brand and reputation as the market leader for safe child and family mobile advertising technology and this has enabled our SDK to become quickly adopted. It is our strategy to invest in our systems and build alliances with the largest software companies in the world. Since Google’s certification of Kidoz and Apple’s updated rules endorsing Kidoz’s methodologies the Company is experiencing unprecedented demand for its safe advertising solutions.

 

Sales & Pricing Strategy

 

Kidoz has a global sales agency partnership strategy that places local sellers into dozens of national and international markets. In 2021 Kidoz launched campaigns in 58 different countries. Through our direct sales and marketing channels we locate, recruit and sign new international sales houses. As the Kidoz network is a unique advertising platform in the market, it commands high prices and media sales houses aspire to represent the Company. Kidoz has found the agency partnership strategy to be highly effective as once sales houses are recruited and the first few campaigns are delivered with success, repeat customers are established and the value of the region begins to grow. After years of development with this strategy, Kidoz has many established sales houses in the largest economies of the world and is now tasked with increasing the value of each partnership and empowering the sales houses to increase the portion of advertisers’ budgets that is spent with Kidoz. The Kidoz Connect solution has created new opportunities for all of Kidoz’s agency partners as the solution creates inventory for brands who are building awareness with parents and teens in addition to children.

 

Growth Strategy

 

The Kidoz sales, product, and operational strategies are custom fit to match the favorable regulatory, consumer, and technological trends occurring in the market. It is the Kidoz mission to deliver best-in-class solutions for our advertiser and publisher partners that are compliant with Apple, Google, and strict government data privacy regulations. Kidoz technology is built with privacy as a priority and we champion contextual advertising as a superior method of reaching target consumers. Kidoz publisher partners can monetize with human-curated safe advertising on a global scale and with the knowledge that their users’ data is not compromised.

 

Kidoz is growing at a rapid pace as a result of its core media business and the expansion to include the teen and parent segments. Kidoz growth is also being propelled by a new customer type, the app developer themselves. Kidoz is increasingly utilized as a performance platform for apps to scale their installs and revenues by paying on a cost-per-install (“CPI”) basis. The global app install segment of mobile advertising is estimated to be US$118B in 2022 according to AppsFlyer. Kidoz has launched new software to support this high growth business and the Company expects performance CPI media to be an increasing percentage of overall business. Finally, Kidoz Connect is the latest product release to deliver enhanced value to our advertising partners as the technology enables Kidoz to ingest programmatic campaigns of all types and scale them across the Kidoz network. The Kidoz commercial teams look forward to welcoming many new and existing customers to this new offering as we expand the Kidoz reach within the global digital advertising ecosystem.

 

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Furthermore, while the focus of the Company is the development and expansion of the KIDOZ Safe Ad Network, we are investigating options to use our technology to expand into new markets, either through new connections to the wider mobile advertising market, or via synergistic M&A.

 

Kidoz Original Equipment Manufacturer (“OEM”)

 

Kidoz’s mobile products includes the Kid Mode Operating System (“OS”) installed on millions of OEM tablets worldwide. The Company earns license fees based on the OEM agreements dependent on the number of devices the Kidoz Kid Mode OS is installed.

 

Rooplay

 

The Company owns Rooplay (www.rooplay.com) the cloud-based EduGame system for kids to play multiple games to learn and play. The platform is live on the Google’s Android system and has stand-alone games available on Apple’s iOS and Google’s Android systems.

 

Trophy Bingo

 

The Company has the social bingo games Trophy Bingo which is available on Apple’s iOS, Google’s Android and Amazon Android systems. Revenue is generated in the games via in-app purchases and advertising.

 

OPERATIONS

 

Employees

 

As of December 31, 2021, we had 32 consultants, employees and independent contractors throughout the world including fourteen full-time employees in Canada and Israel. Since 2006 it has been, and continues to be, the Company’s objective to control its costs by retaining consultants, as needed, to provide special expertise in developing internal strategic, marketing, accounting and technical services. None of our employees or consultants are represented by a labor union, and we believe that our relationship with our employees and consultants is good.

 

We are substantially dependent upon the continued services and performance of J. M. Williams, Co-Chief Executive Officer; Eldad Ben Tora, Co-Chief Executive Officer and T. M. Williams, Executive Chairman. The loss of the services of these key individuals would have a material adverse effect on our business, financial condition and results of operations. We do not carry any key man life insurance on any individuals.

 

Competition

 

Kidoz competes with other advertising technology providers that offer safe, COPPA compliant, products. These companies include Super Awesome and Google’s Admob. However, these competitors are not direct threats to Kidoz as their operations and strategies are quite different. For instance, Super Awesome, who maintains a COPPA SDK, sells a variety of media types and technologies unrelated to mobile inventory which is core to Kidoz. As a result, Super awesome is one of Kidoz largest customers. While on the other hand, Google’s Admob SDK is focused on mobile inventory, but is not human curated for child safety. As the technology barriers are high to enter the market with a mobile advertising network, few competitors exist for Kidoz. Kidoz offers a highly customized and targeted offering to advertisers that management believes will enable the Company to grow and succeed in the market.

 

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Costs and Effects of Compliance with Environmental Laws

 

The Company is in the business of developing and marketing mobile products and services for kids in a digital world. To the best of our knowledge, no federal, state or local environmental laws are applicable to our business.

 

BRITISH COLUMBIA SECURITIES COMMISSION

 

Effective September 15, 2008, the British Columbia Securities Commission (“BCSC”) issued rule 51-509 Issuers Quoted in the U.S. Over-the-Counter Markets. Rule 51 - 509 requires all Over-the-Counter Companies that have connections to British Columbia (BC) to comply with BC securities law and certain public disclosure requirements. The Company is deemed to have connection to BC due to the fact that administration and a director are located in BC. The Company has complied with rule 51-509 and registered and filed the necessary documents on SEDAR. The Company is deemed, due to the fact that there are less than 50% of the Company’s shareholders located in BC, to be a foreign reporting issuer in accordance with NI 71-102 “Continuous Disclosure and Other Exemptions Relating to Foreign Issuers”. Therefore, the Company meets all requirements to file its reports, statements or other information that it files with the Securities and Exchange Commission on SEDAR.

 

FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS

 

The equipment of the Company to operate the operations of the Company is located in Anguilla, Israel, United Kingdom, and Canada. The revenue from Ad Tech and in-app purchases is worldwide, with the majority from the USA and Europe.

 

AVAILABLE INFORMATION

 

The Company makes available through the Corporate Kidoz Inc. section of its internet website at http://investor.kidoz.net its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Press Releases, Research Reports, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after electronically filing such material with the Securities and Exchange Commission.

 

You may read and copy any reports, statements or other information that we file with TSX Venture exchange on SEDAR. The address of this Internet site is http://www.sedar.com.

 

In addition, we file with the Securities and Exchange Commission at the Securities and Exchange Commission’s Public Reference Room at 100 F Street, N.E., Washington D.C. 20549. You can request copies of these documents, upon payment of a duplicating fee, by writing to the Securities and Exchange Commission. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the operation of the Public Reference Room.

 

We file our reports with the Securities and Exchange Commission electronically through the Securities and Exchange Commission’s Electronic Data Gathering, Analysis and Retrieval (“EDGAR”) system. The Securities and Exchange Commission maintains an Internet site that contains reports, proxy and information statements, and other information regarding companies that file electronically with the Securities and Exchange Commission through EDGAR. The address of this Internet site is http://www.sec.gov.

 

ITEM 2. PROPERTIES.

 

Since 2005 our executive office is located in The Valley, Anguilla, British West Indies. We commenced the present lease agreement on April 1, 2010, for a period of one year. Unless 3 months’ notice is given it automatically renews for a future 3 months until notice is given. To date no notice has been given. The monthly rental is $250.

 

We have 2 primary development and operational offices located in Vancouver, Canada and Netanya, Israel.

 

During the year ended December 31, 2019, the Company signed a five-year lease in Vancouver, Canada ending March 2024. This facility comprises approximately 1,459 square feet. The monthly rental is approximately $4,071.

 

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Kidoz Ltd. has an annual office lease in Netanya, Israel, with rent payable on a quarterly basis. The 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. This facility comprises approximately 190 square metres. The monthly rental is approximately $4,065.

 

We operate a sales and marketing office in London, United Kingdom. There are no direct monthly rental fees associated with the London office.

 

We believe that these facilities will be adequate to meet our requirements for the near future and that suitable additional space will be available if needed. Since March 2020, the majority of Kidoz staff world-wide is operating from home or other suitable locations and interacting on a daily basis through communication technologies. It is anticipated this will continue for the foreseeable future due to the benefits derived with increased productivity and personal satisfaction from our staff. Other than described above, neither we, nor any of our subsidiaries presently own or lease any other property or real estate.

 

ITEM 3. LEGAL PROCEEDINGS.

 

We are not currently a party to any legal proceedings and were not a party to any other legal proceeding, during the fiscal year ended December 31, 2021. We are currently not aware of any legal proceedings proposed to be initiated against us. However, from time-to-time, we may become subject to claims and litigation generally associated with any business venture.

 

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

 

We held our Annual Meeting of Stockholders in Anguilla on November 27, 2021. The Annual Meeting was for the purposes of electing to set the number of directors to be 6; electing our directors; and to ratify the appointment of Davidson & Company LLP, Chartered Professional Accountants, as our independent auditors for the 2021 fiscal year; to ratify our Rolling Stock Option plan as amended by inclusion of an Israeli Taxpayers Appendix thereto; and for any other regular business. The Company issued a schedule 14A proxy statement to the shareholders on November 27, 2021.

 

All nominees for directors were elected; the appointment of auditors was ratified; and the Rolling Stock Option plan as amended by inclusion of an Israeli Taxpayers Appendix thereto was ratified. The voting on each matter is set forth below:

 

(a) Elected to set the number of directors to be 6.

 

For   Against   Not Voted 
 58,258,531    7,800    643,887 

 

(b) Elected the following persons to serve as directors until the next annual meeting or until their successors are duly qualified:

 

T. M. Williams

 

J. M. Williams

 

E. Ben Tora

 

F. Curtis (Non-Executive Director)

 

C. Kalborg (Non-Executive Director)

 

M. David (Non-Executive Director)

 

Election of the Directors of the Company.

 

NOMINEE  FOR   WITHHOLD   NOT VOTED 
Mr. T. M. Williams   58,258,156    8,175    643,887 
Mr. J. M. Williams   58,258,356    7,975    643,887 
Mr. E. Ben Tora   58,258,156    8,175    643,887 
Ms. F. Curtis   58,258,643    7,688    643,887 
Mr. C. Kalborg   58,260,881    5,450    643,887 
Mr. M. David   58,258,356    7,975    643,887 

 

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(c) Approved the selection of Davidson & Company LLP, Chartered Professional Accountants as the Company’s independent auditors for the fiscal year ending December 31, 2021.

 

FOR   WITHHOLD   NOT VOTED
 58,903,993    6,225   nil

 

(d) The ratification of the existing 2015, 10% Rolling Stock Option plan, as amended by inclusion of an Israeli Taxpayers Appendix thereto, as more particularly set out in Schedule B to the Proxy Statement was approved.

 

FOR   AGAINST   NOT VOTED 
 58,041,055    225,276    643,887 

 

Subsequent to their appointment the Board of Directors ratified the continuation of Mr. Jason Williams and Mr. Eldad Ben Tora will continue as Co-CEO of the Kidoz Inc. organization and Mr. T. M. Williams, will continue to serve as Executive Chairman.

 

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PART II

 

Item 5. Market for REGISTRANT’S Common Equity, Related Stockholder Matters AND ISSUER PURCHASES OF EQUITY SECURITIES.

 

Our common stock is currently quoted on the TSX Venture Exchange in Canada under the symbol “KIDZ”.

 

On March 19, 1997, our common stock was approved for trading on the National Association of Securities Dealers OTC Bulletin Board (the “OTCBB”) under the symbol “PGLB”. In January 1999, when we changed our name to Bingo.com, Inc., our OTCBB symbol was changed to “BIGG”. On July 26, 1999, we changed our trading symbol from “BIGG” to “BIGR”. On April 7, 2005, Bingo.com, Inc. completed a merger with its wholly- owned subsidiary Bingo.com, Ltd. The principal reason for Bingo.com, Inc.’s merger with its subsidiary Bingo.com, Ltd. was to facilitate Bingo.com, Inc.’s reincorporation under the International Business Companies Act of Anguilla, B.W.I. Effective April 7, 2005, the shares of Bingo.com, Ltd. began trading under the new ticker symbol “BNGOF”. In 2011, we transferred to the Over the Counter Markets - The Venture Marketplace (“OTCQB”) operated by OTC Markets Group Inc., whilst continuing our ticker symbol “BNGOF”. During the year ended December 31, 2015, the Company changed its name to Shoal Games Ltd. and changed our trading symbol on the OTCQB from “BNGOF” to “SGLDF”.

 

Effective July 2, 2015, the Company additionally commenced trading on the TSX Venture Exchange in Canada (“TSXV”) under the symbol “SGW”. On December 31, 2019 our shares were Halt Traded on the TSXV pending completion of our acquisition of Kidoz Ltd. The Halt Trade was rescinded on March 7, 2019, after our announcement on March 4, 2019 that we had successfully completed the acquisition of all of the Kidoz Ltd. shares. Effective January 7, 2019, our shares ceased to be quoted on and traded through the OTCQB due to the TSXV Halt Trade. The Company has decided not to reinstate the quotation of its shares on the OTCQB, due to the small number of trades effected through the OTCQB subsequent to our shares being listed on the TSXV on July 2, 2015.

 

Effective April 4, 2019, the Company received approval from the TSX Venture Exchange (the “Exchange”) to change its name to “Kidoz Inc.” and to have its shares trade under the new symbol TSXV:KIDZ. The common shares of the Company began trading on the Exchange under the new name and symbol at market open on Tuesday, April 9, 2019. The shares continue to be quoted on the OTC under the symbol “KDOZF”. The bid quotations set forth below, reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not reflect actual transactions.

 

    TSX-V - KIDZ   OTC - KDOZF 
Quarter Ended  

High (1)

CAD$

  

Low (1)

CAD$

  

High (1)

US$

  

Low (1)

US$

 
 December 31, 2021   $0.75   $0.58   $0.64   $0.45 
 September 30, 2021   $0.76   $0.60   $0.61   $0.45 
 June 30, 2021   $1.14   $0.63   $0.96   $0.53 
 March 31, 2021   $1.20   $0.45   $0.98   $0.35 
 December 31, 2020   $0.56   $0.42   $0.46   $0.33 
 September 30, 2020   $0.45   $0.21   $0.25   $0.16 
 June 30, 2020   $0.34   $0.20   $0.27   $0.07 
 March 31, 2020   $0.30   $0.20   $0.23   $0.16 

 

1.       Prices as per Yahoo! TM Finance

 

On March 30, 2022, the last reported sale price of our common stock, as reported by the TSX Venture Exchange, was CAD$0.45 per share.

 

As of March 30, 2022, we believe there are approximately 731 shareholders (including nominees and brokers holding street accounts) of our shares of common stock.

 

Other than described above, our shares of common stock are not and have not been listed on any other exchange.

 

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Dividend Policy

 

We have not declared or paid any cash dividends on our common stock since our inception. The Board of Directors is presently reviewing the Company’s dividend policy. Any future payment of dividends will depend upon our results of operations, financial condition, cash requirements and other factors deemed relevant by our Board of Directors.

 

Recent Sales of Unregistered Securities

 

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 $5,162 (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. 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 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.

 

During the year ended December 31, 2020, no shares were issued by the Company.

 

Securities authorized for issuance under equity compensation plans.

 

In 2015, the shareholders approved the 2015 Rolling Stock Option plan. Under the 2015 plan we have reserved 10% of the number of Shares of the Company issued and outstanding as of each Award Date. Pursuant to this plan we have 6,870,150 stock purchase options (2020 - 5,875,750) outstanding at December 31, 2021. During the year ended December 31, 2021, there were 70,000 (2020 – nil) options exercised and 1,040,600 (2020 – 70,000) options cancelled and 570,000 (2020 – nil) options expired unexercised, issued under this plan.

 

Equity Compensation Plan Information

 

Plan category  Number of securities to be issued upon exercise of outstanding options and rights   Weighted average exercise price of outstanding options and rights   Number of securities remaining available for future issuance 
   (a)   (b)   (c) 
Equity compensation plans approved by security holders   6,870,150    0.48    6,272,349 
Equity compensation plans not approved by security holders   0    0    0 
Total   6,870,150    0.48    6,272,349 

 

Subsequent to the year ended December 31, 2021, a further 2,550,000 options were awarded at CAD$0.50 (approximately $0.39) and 210,000 options were cancelled unexercised.

 

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ITEM 6. SELECTED FINANCIAL DATA:

 

   2021   2020   2019 
Consolidated Balance Sheet Data:               
Cash  $2,078,607   $1,226,045   $967,212 
Total assets   13,925,531    10,969,129    9,786,640 
Total liabilities   4,574,834    2,298,934    1,379,299 
Total stockholders’ equity (deficit)   9,350,697    8,670,194    8,407,341 
Working capital   4,536,852    3,071,545    2,192,505 

 

Consolidated Statement of Operations Data for continuing operations:

 

   2021   2020   2019 
             
Revenue  $12,475,480   $7,148,029   $4,517,379 
                
Cost of sales   7,143,148    3,800,114    2,778,911 
Trophy Bingo amortization   -    -    - 
Gross (loss) profit   5,332,332    3,347,915    1,738,468 
                
Operating expenses excluding interest and other income (expenses)   (4,357,188)   (2,681,491)   (2,632,399)
Acquisition of subsidiary   -    -    (190,228)
Amortization of right-of-use assets   (40,851)   (54,071)   (72,416)
Depreciation and amortization   (565,540)   (564,628)   (473,854)
Gain on derivative liability – warrants   60,207    -    - 
Impairment of goodwill   -    -    (13,877,385)
Interest and other income   241    1,003    3,302 
Income tax (expense) / recovery   (216,677)   55,243    850,280 
Promissory note accretion and interest   -    -    - 
Stock awareness program   (402,845)   -    - 
Net (loss) income  $(190,321)  $103,971   $(14,654,232)
                
Basic and diluted net (loss) income per share from continuing operations  $(0.00)  $0.00   $(0.12)
Weighted average common shares outstanding   131,340,989    131,124,989    121,208,912 

 

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

The information contained in this Management’s Discussion and Analysis or Plan of Operation contains “forward looking statements.” Actual results may materially differ from those projected in the forward looking statements as a result of certain risks and uncertainties set forth in this report. Although management believes that the assumptions made and expectations reflected in the forward looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual future results will not be materially different from the expectations expressed in this Annual Report. The following discussion should be read in conjunction with the audited Consolidated Financial Statements and related Notes thereto included in Item 7 and with the Special Note regarding forward-looking statements included in Part I.

 

OVERVIEW

 

Kidoz Inc. (TSXV:KIDZ) owns the leading Children’s Online Privacy Protection Rule (“COPPA”) & General Data Protection Regulation (“GDPR”) compliant contextual mobile advertising network that safely reaches hundreds of million kids, teens, and families every month. Google certified and Apple approved, Kidoz provides an essential suite of advertising technology that unites brands, content publishers and families. Trusted by Disney, Hasbro, Lego and more, the Kidoz Contextual Ad Network helps the world’s largest brands to safely reach and engage kids across thousands of mobile apps, websites and video channels. The Kidoz network does not use location or Personally Identifiable Information (“PII”) data tracking commonly used in digital advertising. Instead, Kidoz has developed advanced contextual targeting tools to enable brands to reach their ideal customers with complete brand safety. A focused AdTech solution provider, the Kidoz SDK and Kidoz Programmatic network have become essential products in the digital advertising ecosystem. Our commitment to advertising privacy and safety has created one of the fastest growing mobile networks in the world.

 

Kidoz is the market leader in contextual mobile advertising and the segment is only beginning to develop as new rules and stricter regulations are enacted and enforced by Google, Apple, and governments around the world. Kidoz builds and maintains the Kidoz SDK (Software Development Kit) that app developers install into their apps before releasing them into the App Stores. The Kidoz SDK is the core of the advertising technology that enables Kidoz to access advertising impressions available for sale. The Kidoz proprietary advertising system is compliant with COPPA, GDPR-K and other regulations adopted to protect the privacy and security of minors. The Kidoz proprietary advertising technology is installed in thousands of different apps, making it the most popular contextual mobile solution in the market.

 

Kidoz has established its leadership position through continued investments into research and development. Mobile devices are the primary tool used for all digital activities in everyday life across the entire world. The predominance of mobile is well established and Kidoz is well positioned to benefit from the wide adoption of its technology across thousands of popular apps. As the number of active campaigns live on Kidoz has increased substantially over the past 18 months, Kidoz has recruited hundreds of new apps and developers that focus on a wide range of audience segments. As a result of Kidoz’s rapid growth, the Company is now able to expand beyond its core advertising audience of children, and begin to contextually target teens and parents for its brand partners.

 

Mobile AdTech systems are some of the most integrated and most valuable systems in the world. The scale of users we can reach with the Kidoz network is powerful and it opens many new opportunities for the Company. Extending our media offering beyond children is the first step we are taking as our sales and agency partners are interested in accessing these related segments of our traffic. Kidoz is experiencing a period of rapid growth and we are extending our business model in ways that will fill our huge available inventory with safe and high performing media.

 

Driving our revenue growth is strong underlying system growth for both users and publishers that are accessing the Kidoz technology. Media budgets continue to shift from linear TV to digital platforms like Kidoz as brands seek to engage their customers where families spend most of their screen time. In addition, regulation at the government level is positively influencing growth of the KIDOZ Safe Ad Network. COPPA in America and GDPR in Europe have forced advertisers and publishers to ensure their data and advertising methodologies are safe. Regulators in America are updating COPPA to further enhance child safety online, and regulators in China, India and other regions are considering similar measures. As Kidoz is compliant, the Company benefits from all child-safe advertising regulation.

 

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Building on our performance in 2021, we plan to continue our successful growth strategies in 2022. Our sales, product, and operational strategies are custom fit to match the favourable regulatory, consumer, and technological trends occurring in the market. The Kidoz programmatic technology is live, growing, and actively filling publisher inventory with campaigns safely sourced from the programmatic marketplace. As Kidoz advances its multiple product offerings, new opportunities arise in the bountiful mobile advertising ecosystem that is projected by eMarketer to exceed over US$400 billion by 2023 (eMarketer). It is our intention to explore expanding, either through additional uses of our new technology platforms for the entire mobile advertising market, or via synergistic M&A.

 

In 2022, the entire company is focused on enabling advertisers to reach children, teens and families at enormous scale with its enhanced technologies. The Company is committed to achieving our product development and financial goals for the year. Kidoz is perfectly positioned with powerful technology in a booming market and management anticipates a record 2022 ahead.

 

Kidoz’s mobile products include the Kid Mode Operating System installed on millions of OEM tablets worldwide, Rooplay (www.rooplay.com) the cloud-based EduGame system for kids to learn and play, and Trophy Bingo (www.trophybingo.com), live across mobile platforms.

 

CRITICAL ACCOUNTING POLICIES

 

The following discussion of critical accounting policies is intended to supplement the Summary of Significant Accounting Policies presented as Note 2 to our audited consolidated financial statements presented elsewhere in this report. Note 2 summarizes the accounting policies and methods used in the preparation of our consolidated financial statements. The policies discussed below were selected because they require the more significant judgments and estimates in the preparation and presentation of our financial statements. On an ongoing basis, management evaluates these judgments and estimates, including whether there are any uncertainties as to compliance with the revenue recognition criteria described below, and recoverability of long-lived assets, as well as the assessment as to whether there are contingent assets and liabilities that should be recognized or disclosed for the consolidated financial statements to fairly present the information required to be set forth therein. We base our estimates on historical experience, as well as other events and assumptions that are believed to be reasonable at the time. Actual results could differ from these estimates under different conditions.

 

We consider the following accounting policies to be both those most important to the portrayal of our financial condition and require the most subjective judgment:

 

  - Revenue recognition;
     
  - Software development;
     
  - Impairment of long-lived assets
     
  - Goodwill

 

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.

 

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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.

 

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.

 

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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.
   
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.
   
  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.

 

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.

 

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Total software development costs were $10,559,601 as at December 31, 2021 (2020 - $8,880,753).

 

Impairment of Long-lived Assets

 

The Company accounts for long-lived assets in accordance with the provisions of ASC 360, Property, Plant and Equipment and ASC 350, Intangibles-Goodwill and Others. During the periods presented, the only long-lived assets reported on the Company’s consolidated balance sheet are equipment, and security deposits. These provisions require that long-lived assets and certain identifiable recorded intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset.

 

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:

 

    Amortization period
Ad Tech technology   5 years
Kidoz OS technology   3 years
Customer relationships   8 years

 

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 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, 2021 and 2020, the Company deemed there was no impairment of the goodwill.

 

SOURCES OF REVENUE AND REVENUE RECOGNITION

 

We generate our revenue from the following:

 

  - The sale of Ad Tech advertising including banners, in-game advertising, completed view videos, cost per install and playable ads on all gaming aps containing the Kidoz SDK.
     
  - The sale of licensing including our KIDOZ OS platform loaded on new machines and tablets
     
  - The sale of in-app purchases in, our online gaming Aps such as Garfield’s Bingo and Trophy Bingo in the Google play, Apple iOS, Facebook Messenger (discontinued in fiscal 2021) and Amazon App stores.
     
  - In-game advertising on all gaming aps containing the Kidoz SDK, whereby players watch advertising to gain in-game currency.

 

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  - Consumer subscription from players paying to unlock the Rooplay game catalog and Kidoz OS platform.
     
  - The sale of premium purchases of Rooplay Originals (Branded EdTech games for children and families) in the Google play and Apple iOS stores.
     
  - Sales of licenses for our Rooplay Originals games.

 

SUPPLEMENTARY FINANCIAL INFORMATION

 

Quarterly Results of Operations

 

The following tables present our unaudited consolidated quarterly results of operations for each of our last eight quarters. This data has been derived from unaudited consolidated financial statements that have been prepared on the same basis as the annual audited consolidated financial statements and, in our opinion, include all normal recurring adjustments necessary for the fair presentation of such information. These unaudited quarterly results should be read in conjunction with our audited consolidated financial statements, included in Item 8 of this report.

 

   Three Months Ended 
   December 31, 2021   September 30 2021   June 30
2021
   March 31
2021
 
   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited) 
                 
Revenue  $5,925,391   $2,814,642   $2,177,505   $1,557,942 
                     
Cost of sales   3,528,967    1,588,108    1,153,172    872,901 
Gross profit   2,396,424    1,226,534    1,024,333    685,041 
                     
Operating expenses and other income / (expenses)   (1,213,015)   (1,094,865)   (1,139,458)   (890,253)
Stock awareness program   (51,596)   (65,392)   (285,857)   - 
Depreciation and amortization   (141,285)   (141,326)   (141,097)   (141,832)
Income (Loss) before income taxes   990,528    (75,049)   (542,079)   (347,044)
                     
Income tax (expense) recovery   (213,688)   9    (2,998)   - 
Income (Loss) after tax  $776,840   $(75,040)   (545,077)   (347,044)
                     
Basic and diluted Income (loss) per share  $0.01   $(0.00)  $(0.00)  $(0.00)
                     
Weighted average common shares, basic   131,424,989    131,424,989    131,384,769    131,124,989 
Weighted average common shares, diluted   132,853,132    131,424,989    131,384,769    131,124,989 

 

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   Three Months Ended 
   December 31, 2020   September 30 2020   June 30
2020
   March 31
2020
 
   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited) 
                 
Revenue  $3,507,250   $1,919,973   $736,827   $983,979 
                     
Cost of sales   1,843,936    1,005,316    411,058    539,804 
Gross profit   1,663,314    914,657    325,769    444,175 
                     
Operating expenses and other income / (expenses)   (824,706)   (657,338)   (545,747)   (706,768)
Depreciation and amortization   (141,191)   (140,685)   (141,421)   (141,331)
Income (Loss) before income taxes   697,417    116,634    (361,399)   (403,924)
                     
Income tax recovery   55,243    -    -    - 
Income (Loss) after tax  $752,660   $116,634    (361,399)   (403,924)
                     
Basic and diluted Income (loss) per share  $0.01   $0.00   $(0.00)  $(0.00)
                     
Weighted average common shares, basic   131,124,989    131,124,989    131,124,989    131,124,989 
Weighted average common shares, diluted   131,275,099    131,124,989    131,124,989    131,124,989 

 

Our financial statements and related schedules are described under “Item 8. Financial Statements”.

 

RESULTS OF OPERATIONS

 

Years Ended December 31, 2021 and 2020

 

Revenue

 

Total revenue, net of platform fees (to Apple, Google and Amazon) and withholding taxes, for the year ended December 31, 2021 increased to $12,475,480, an increase of 75% over total revenue net of fees and withholding taxes of $7,148,029 for fiscal 2020. Ad Tech advertising revenue for the year ended December 31, 2021, was $12,243,866 an increase of 81% over Ad Tech advertising revenue of $6,748,064 for fiscal 2020. Content revenue for year ended December 31, 2021 decreased to $231,614, a decrease of 42% over content revenue of $399,965 for fiscal 2020. The increase in total revenue over fiscal 2020 is due to the growth of our publisher reach and our advertising customers increasing their advertising budgets with the Kidoz safe mobile network. The decrease in content revenue is due to the reduced OEM sales of kids tablets.

 

Selling and marketing expenses

 

Sales and marketing expenses for the year ended December 31, 2021 were $641,393, an increase of 61% over selling and marketing expenses of $397,948 for fiscal 2020. The increase in sales and marketing expenses over fiscal 2020 is due to an increase in the sales and marketing team to serve our clients better. Selling and marketing expenses consist primarily of sales staff salaries and benefits and publishing services and user acquisition costs incurred to acquire game players.

 

We expect to incur increased sales and marketing expenses in growing the Ad tech advertising revenue and to bring new players to Rooplay; our Rooplay Originals; and our bingo games. There can be no assurances that these expenditures will result in increased traffic or significant additional revenue.

 

General and administrative expenses

 

General and administrative expenses consist primarily of premises costs for our offices and development facilities, legal and professional fees, and other general corporate and office expenses. General and administrative expenses increased to $604,882 for the year ended December 31, 2021, an increase of 14% over general and administrative expenses of $528,708 in fiscal 2020. The increase in general and administrative expenses is due an increase in fees paid to our professional advisors. The Company continues to maintain its current office space despite the large majority of our staff working from home since early March 2020.

 

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We expect to continue to incur general and administrative expenses to support the business, and there can be no assurances that we will be able to generate sufficient revenue to cover these expenses.

 

Salaries, wages, consultants and benefits

 

Salaries, wages, consultants and benefits increased to $693,964 for the year ended December 31, 2021, an increase of 47% over salaries, wages, consultants and benefits of $470,658 for fiscal 2020. The increase in salaries, wages, consultants and benefits over fiscal 2020, is due to an increase in the overall headcount of staff employed by the Company to service its rapid growth and bonuses paid.

 

Depreciation and amortization

 

Intangible assets are amortized using a straight-line method over three to eight years. These intangible assets include customer lists, the technology for Kidoz OS and the software development kits for advertising platform. These intangible assets are as result of the acquisition of Kidoz Ltd. The amortization for the year ended December 31, 2021, was $565,540 compared to $556,073 in fiscal 2020.

 

Equipment is depreciated using the declining balance method over the useful lives of the assets, ranging from three to five years. Depreciation decreased to $9,468 during the year ended December 31, 2021, over depreciation of $8,555 in fiscal 2020. This increase in depreciation and amortization compared to fiscal 2020, is due to the acquisition of new equipment and the write off of old equipment.

 

Content and software development

 

We do not capitalize our development costs. Content and software development costs of $1,678,848 were expensed for year ended December 31, 2021, an increase of 46% from content and software development costs of $1,149,902 expensed for fiscal 2020. These increases over fiscal 2020, is due to the hiring of additional development staff as a result of an increased focus in development of our base technology and the development of our safe programmatic ad sourcing solution Kidoz Connect.

 

Stock-based compensation expense

 

During the year ended December 31, 2021, the Company incurred non-cash stock compensation expenses of $660,266 compared to non-cash stock compensation expenses of $158,883 for fiscal 2020. During the year ended December 31, 2021, the Company granted 2,675,000 options. The options granted in fiscal 2021, are issued to consultants and employees as per the Company’s 2015 Rolling Stock Option Plan. The non-cash stock compensation program is an integral part of the Companies overall Staff Compensation Program.

 

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 $316,237 is a non-cash expense from the issuance of shares and warrants.

 

Other income and expenses

 

During the year ended December 31, 2021, the Company has a foreign exchange loss of ($69,835) compared to foreign exchange gain of $32,856 in the prior year. These (losses) / gains are due to the exchange rate movements of the US Dollar compared to the Pound Sterling, Israeli Shekel and the Canadian Dollar. The Company does not hedge its cash assets.

 

During the year ended December 31, 2021, we received interest income of $241 compared to interest income of $1,003 in the prior year. The interest income is received from bank term deposits from investing our cash. The decrease in interest income is due to lower bank account balances in interest earning bank accounts in fiscal 2021 compared to fiscal 2020.

 

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During the year ended December 31, 2021, the Company had a gain on the derivative liability – warrants of $60,207 from the issuance of the 230,000 warrants to Research Capital Corporation during the year ended December 31, 2021.

 

Amortization of right-of-use assets

 

On January 1, 2020, the Company adopted ASC Topic 842 using the modified retrospective transition method. Topic 842 requires the recognition of lease assets and liabilities for operating leases. The Company recognized right-of-use assets relating to the brand licenses and the Vancouver, Canada and Anguillian office rental. During the year ended December 31, 2021, the Company amortized $40,851 compared to right-of-use assets amortization of $54,071 in fiscal 2020. The decrease over fiscal 2020, is due to certain licensing expiring.

 

Income taxes

 

During the year ended December 31, 2021, had tax expense of $216,677. Our Israeli subsidiary had a deferred tax liability of $210,449 from the acquisition of Kidoz Ltd. intangible assets and a subsidiary of the Company of tax expense of $6,178. During the year ended December 31, 2020, a subsidiary of the Company applied for a Canadian tax credit in relation to fiscal 2019. The Company received a tax credit of $55,243 in fiscal 2020. The Company is no longer eligible to receive the Canadian Tax credit, so no funds were received in fiscal 2021.

 

During the year ended December 31, 2005, Bingo.com, Inc. merged with its subsidiary Bingo.com, Ltd. in Anguilla, British West Indies. Anguilla is a zero-tax jurisdiction.

 

Net (loss) income and (loss) income per share

 

The net loss after taxation for the year ended December 31, 2021, amounted to ($190,321) a loss of ($0.00) per share, compared to a net income of $103,971, an income of $0.00 per share, in the year ended December 31, 2020. The net loss increased for the year ended December 31, 2021, despite an increase in revenue due to the initiation of the stock awareness program, a one-time bonuses paid to our staff and consultants in fiscal 2021 in recognition of their dedicated service during the stressful COVID-19 period and the deferred tax liability on the intangibles assets acquired in the acquisition of Kidoz Ltd.

 

Adjusted earnings before interest; depreciation and amortization; stock awareness program; stock-based compensation and impairment of goodwill (“Adjusted EBITDA”) for the year ended December 30, 2021, amounted to $1,507,951, an increase of 96%, compared to an Adjusted EBITDA of $771,236 in the prior year.

 

Our Adjusted EBITDA is reconciled as follows:

 

   2021   2020 
(Loss) Income for the year  $(190,321)  $103,971 
           
Depreciation and amortization   565,540    564,628 
Stock awareness program   316,237    - 
Stock-based compensation   660,266    158,883 
Gain on derivative liability – warrants   (60,207)   - 
Interest and other income   (241)   (1,003)
Income tax expense   216,677    (55,243)
Adjusted EBITDA  $1,507,951   $771,236 

 

We use Adjusted EBITDA internally to evaluate our performance and make financial and operational decisions that are presented in a manner that adjusts from their equivalent GAAP measures or that supplement the information provided by our GAAP measures. Adjusted EBITDA is defined by us as EBITDA (net income (loss) plus depreciation expense, amortization expense, interest, stock-based compensation and impairment of goodwill), further adjusted to exclude certain non-cash expenses and other adjustments. We use Adjusted EBITDA because we believe it more clearly highlights business trends that may not otherwise be apparent when relying solely on GAAP financial measures, since Adjusted EBITDA eliminates from our results specific financial items that have less bearing on our core operating performance.

 

Page 22

 

 

Adjusted EBITDA is not presented in accordance with, or as an alternative to, GAAP financial measures and may be different from non-GAAP measures used by other companies. These non-GAAP measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with generally accepted accounting principles in the United States of America (“GAAP”). We encourage investors to review the GAAP financial measures included in this Annual Report, including our consolidated financial statements, to aid in their analysis and understanding of our performance and in making comparisons.

 

LIQUIDITY AND CAPITAL RESOURCES

 

We had cash of $2,078,607 and working capital of $4,536,852 as at December 31, 2021. This compares to cash of $1,226,045 and working capital of $3,071,545 as at December 31, 2020.

 

During the year ended December 31, 2021, we provided cash of $851,533 in operating activities compared to providing cash of $256,978 in the prior year.

 

Net cash provided by financing activities was $1,413 in the year ended December 31, 2021, which compares to cash provided by financing activity of $23,392 in fiscal 2020.

 

Cash of ($384) was used in investing activities in fiscal 2021, compared to cash used of ($21,537) in the prior year.

 

Our future capital requirements will depend on a number of factors, including costs associated with the further development of the Ad tech advertising business, the further development of the content platform including, Rooplay; Rooplay Originals; and Trophy Bingo; the cost of marketing and player acquisition costs for Rooplay; Rooplay Originals; and Trophy Bingo, the development of new products, the acquisition of new companies and the success of Rooplay; Rooplay Originals; and Trophy Bingo.

 

Off Balance Sheet Arrangements

 

We did not have any Off Balance sheet arrangements for the year ended December 31, 2021 and 2020.

 

AUDIT COMMITTEE

 

Our audit committee consists of three directors and reports to the Board of Directors. The audit committee meets regularly throughout the year and met with the independent auditors on March 29, 2022, and approved the financial statements for the year ended December 31, 2021.

 

Page 23

 

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

 

KIDOZ INC. and subsidiaries

 

Consolidated Financial Statements

 

Years ended December 31, 2021 and 2020

 

Report of Independent Registered Public Accounting Firm for the years ended December 31, 2021 and 2020 (PCAOB ID. 731) 25
   
Consolidated Financial Statements  
   
Consolidated Balance Sheets 28
   
Consolidated Statements of Operations and Comprehensive (Loss) Income 29
   
Consolidated Statements of Stockholders’ Equity 30
   
Consolidated Statements of Cash Flows 31
   
Notes to Consolidated Financial Statements 32

 

Page 24

 

 

 

Report of Independent Registered Public Accounting Firm

 

To the Shareholders and Directors of

 

Kidoz Inc.

 

Opinion on the Consolidated Financial Statements

 

We have audited the accompanying consolidated balance sheets of Kidoz Inc. (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations and comprehensive (loss) income, stockholders’ equity, and cash flows for the years ended December 31, 2021 and 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for years ended December 31, 2021 and 2020, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

 

Page 25

 

 

Critical Audit Matters

 

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

 

Evaluation of intangible asset and goodwill impairment analysis

 

As described in Notes 6 and 7 to the consolidated financial statements, the carrying amount of the Company’s sole reporting unit, consisting of intangible assets, goodwill, and the associated deferred tax liability was $4,785,857 as at December 31, 2021 and is a significant portion (36%) of the Company’s total assets. As discussed in notes 2(l) and 2(m) to the consolidated financial statements, the Company performs impairment testing on an annual basis or whenever events or changes in circumstances indicate that the carrying value of a reporting unit may exceed its recoverable amount. During the year ended December 31, 2021, the Company determined that no impairment was necessary.

 

We identified the evaluation of the goodwill impairment analysis as a critical audit matter. The estimated recoverable amount of the reporting unit uses forward-looking estimates that involved a high degree of subjective auditor judgment, in addition to specialized skills and knowledge to evaluate. The sensitivity of reasonably possible changes to those assumptions could have a significant impact on the determination of the recoverable amount of the reporting unit and the Company’s assessment of impairment.

 

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures include, among others:

 

  Evaluating projected earnings before interest, taxes, depreciation, and amortization (“EBITDA”) by comparing historical EBITDA forecasts to actual results and by examining the historical trend analysis of both increases and decreases in actual revenues and costs as compared to forecasted amounts;
     
  Involving our valuation specialists to assist in testing certain significant assumptions described above, such as discount rates and long-term growth rates;
     
  Performing sensitivity analyses on significant assumptions to evaluate the changes in fair value that would result from changes in these assumptions; and
     
  Assessing the adequacy of the associated disclosures in the financial statements.

 

Reliability of internally-generated reports supporting revenues

 

The Company uses an underlying operating system to track ad tech advertising revenue and report this information to customers and suppliers. As disclosed in Note 2(c) of the consolidated financial statements, the Company records revenues when a customer obtains control of promised services, which in certain instances, is determined by the Company’s underlying operating and ad tech systems.

 

We identified relying on internally-generated reports as a critical audit matter. Assessing the reliability of information produced by the Company as audit evidence requires significant judgment with respect to testing and evaluating the information to determine if it is sufficient and appropriate for purposes of the audit. Auditing the Company’s accounting for revenue from contracts with customers was challenging and complex due to the dependency on these internally-generated reports.

 

Page 26

 

 

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures include, among others:

 

  Testing, on a sample basis, the completeness and accuracy of the underlying data within the Company’s billing system;
     
  Testing, on a sample basis, credit notes issued to customers to determine if there is a history of modification;
     
  Comparing the Company’s internally-generated reports to similar reports as provided by key customers to determine if any difference were within an acceptable range of variance; and
     
  Confirming, on a sample basis, revenues directly with customers.

 

We have served as the Company’s auditor since 2010.

 

  /s/ DAVIDSON & COMPANY LLP
   
Vancouver, Canada Chartered Professional Accountants
March 30, 2022  

 

Page 27

 

 

Kidoz Inc. and subsidiaries

(Expressed in United States Dollars)

 

Consolidated Balance Sheets

 

       
As at December 31,  2021   2020 
Assets        
Current assets:          
Cash  $2,078,607   $1,226,045 
Accounts receivable, less allowance for doubtful accounts
$56,605 (2020 - $55,660) (Note 3)
   6,627,864    3,933,540 
Prepaid expenses (Note 4)   105,468    89,970 
Total Current Assets   8,811,939    5,249,555 
           
Equipment (Note 5)   20,523    21,839 
Goodwill (Note 7)   3,301,439    3,301,439 
Intangible assets (Note 6)   1,694,917    2,250,989 
Long term cash equivalent   23,624    31,392 
Operating lease right-of-use assets (Note 14)   65,464    106,315 
Security deposit   7,625    7,600 
           
Total Assets  $13,925,531   $10,969,129 
           
Liabilities and Stockholders’ Equity          
Current liabilities:          
Accounts payable  $3,693,944   $1,722,066 
Accrued liabilities   471,882    375,089 
Accounts payable and accrued liabilities - related party
(Note 15)
   53,829    50,772 
Derivative liability – warrants (Note 2i and 10)   23,365    - 
Operating lease liabilities – current portion (Note 14)   32,068    30,083 
Total Current Liabilities   4,275,088    2,178,010 
           
Deferred tax liability (Note 13)   210,499    - 
Government CEBA loan (Note 9)   47,248    47,089 
Operating lease liabilities – non-current portion (Note 14)   41,999    73,835 
Total Liabilities   4,574,834    2,298,934 
           
Commitments (Note 12)   -     -  
           
Stockholders’ Equity (Note 10):          
Common stock, no par value, unlimited shares authorized, 131,424,989 shares issued and outstanding (December 31, 2020 - 131,124,989)   49,964,919    49,094,096 
Accumulated deficit   (40,638,802)   (40,448,481)
Accumulated other comprehensive income:
Foreign currency translation adjustment
   24,580    24,580 
Total Stockholders’ Equity   9,350,697    8,670,195 
           
Total Liabilities and Stockholders’ Equity  $13,925,531   $10,969,129 

 

See accompanying notes to consolidated financial statements.

 

Page 28

 

 

Kidoz Inc. and subsidiaries

(Expressed in United States Dollars)

 

Consolidated Statements of Operations AND COMPREHENSIVE (LOSS) INCOME

 

       
Years ended December 31,  2021   2020 
         
Revenue:          
Ad tech advertising revenue  $12,243,866   $6,748,064 
Content revenue   231,614    399,965 
Total revenue   12,475,480    7,148,029 
           
Cost of sales:   7,143,148    3,800,114 
Total cost of sales   7,143,148    3,800,114 
           
Gross profit   5,332,332    3,347,915 
           
Operating expenses:          
Amortization of operating lease right-of-use assets
(Note 14)
   40,851    54,071 
Depreciation and amortization (Note 5 and 6)   565,540    564,628 
Directors fees   8,000    8,248 
General and administrative (Note 17)   604,882    528,708 
Salaries, wages, consultants and benefits   693,964    470,658 
Selling and marketing   641,393    397,948 
Stock awareness program (Note 18)   402,845    - 
Stock-based compensation (Note 10)   660,266    158,883 
Content and software development (Note 8)   1,678,848    1,149,902 
Total operating expenses   5,296,589    3,333,046 
           
Income before other income (expense) and income taxes   35,743    14,869 
           
Other income (expense):          
Foreign exchange (loss) gain   (69,835)   32,856 
Gain on derivative liability – warrants (Note 2i)   60,207    - 
Interest and other income   241    1,003 
           
Net income before income taxes   26,356    48,728 
           
(Provision for) recovery of income taxes (Note 13)   (6,178)   55,243 
Deferred taxation expense (Note 13)   (210,499)   - 
           
Net (loss) income after tax  $(190,321)  $103,971 
           
Other comprehensive income (loss)   -    - 
           
Comprehensive (loss) income  $(190,321)  $103,971 
           
Basic and diluted (loss) income per common share (Note 2)  $(0.00)  $0.00 
           
Weighted average common shares outstanding, basic
(Note 2)
   131,340,989    131,124,989 
Weighted average common shares outstanding, diluted
(Note 2)
   131,340,989    131,124,989 

 

See accompanying notes to consolidated financial statements.

 

Page 29

 

 

Kidoz Inc. and subsidiaries

(Expressed in United States Dollars)

 

Consolidated Statements of Stockholders’ Equity

 

Years ended December 31, 2021 and 2020

 

    Shares                 
    Common stock    Accumulated    Accumulated Other Comprehensive income Foreign currency translation    Total Stockholders’ 
    Shares    Amount    Deficit    adjustment    Equity  
Balance, December 31, 2019   131,124,989   $48,935,213   $(40,552,452)  $24,580   $8,407,341 
                          
Stock-based compensation   -    158,883    -    -    158,883 
                          
Net income   -    -    103,971    -    103,971 
Balance, December 31, 2020   131,124,989   $49,094,096   $(40,448,481)  $24,580   $8,670,195 
                          
Shares issued   230,000    179,293    -    -    179,293 
                          
Options exercised   70,000    31,264    -    -    31,264 
                          
Stock-based compensation   -    660,266    -    -    660,266 
                          
Net loss   -    -    (190,321)   -    (190,321)
                          
Balance, December 31, 2021   131,424,989   $49,964,919   $(40,638,802)  $24,580   $9,350,697 

 

See accompanying notes to consolidated financial statements.

 

Page 30

 

 

Kidoz Inc. and subsidiaries

(Expressed in United States Dollars)

 

Consolidated Statements of Cash Flows

 

       
Years ended December 31,  2021   2020 
Cash flows from operating activities:          
Net (loss) income  $(190,321)  $103,971 
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   565,540    564,628 
Amortization of operating lease right-of-use assets   40,851    54,071 
Gain on derivative liability – warrants   (60,207)   - 
Shares issued for services   179,293    - 
Stock awareness program – warrants granted for services   83,572    - 
Deferred income tax expense   210,499    - 
Stock-based compensation   660,266    158,883 
Unrealized foreign exchange loss   134    - 
           
Changes in operating assets and liabilities:          
Accounts receivable   (2,694,324)   (1,540,762)
Prepaid expenses   (15,498)   19,944 
Accounts payable and accrued liabilities   2,071,728    896,243 
Net cash provided by operating activities   851,533    256,978 
           
Cash flows from investing activities:          
Acquisition of equipment   (8,152)   (3,212)
Long-term cash equivalent   7,768    7,020 
Acquisition of right-of-use assets   -    (25,472)
Security deposits   -    127 
Net cash used in investing activities   (384)   (21,537)
           
Cash flows from financing activities:          
Options exercised   31,264    - 
Proceeds of short-term loan   200,000    - 
Repayment of short-term loan   (200,000)   - 
Government CEBA loan   -    47,089 
Payments on operating lease liabilities   (29,851)   (23,697)
Net cash provided by financing activities   1,413    23,392 
           
Change in cash   852,562    258,833 
           
Cash, beginning of year   1,226,045    967,212 
Cash, end of year  $2,078,607   $1,226,045 
           
Supplementary information:          
Interest paid  $987   $- 
Income taxes paid (recovery)  $2,989   $(55,243)

 

See accompanying notes to consolidated financial statements.

 

Page 31

 

 

Kidoz Inc. and subsidiaries

(Expressed in United States Dollars)

 

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.

 

Page 32

 

 

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:

 

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%<