Kidoz Inc 20-F for FY2023
Kidoz Inc. (KDOZF)
About this 20-F
Kidoz Inc filed this 20-F on April 25, 2024, covering the fiscal year ended December 31, 2023 (FY2023).
Headline figures
Fiscal year ended December 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $13.33M
- down 11.7% from $15.1M a year earlier
- Net loss
- $2.01M
- compared with a net loss of $1.35M a year earlier
- Diluted EPS
- -$0.02
- compared with -$0.01 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
| REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the fiscal year ended
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
| SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| Large accelerated filer | ☐ | Accelerated filer | ☐ | ☒ | |
| Emerging growth company |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, 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 Exchange Act.
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
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☒ | International Financial Reporting Standards as issued by the International Accounting Standards Board | ☐ | Other | ☐ |
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☐ Item 17 ☐ Item 18
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TABLE OF CONTENTS
INTRODUCTION
This annual report on Form 20-F for the year ended December 31, 2023, or this “annual report,” should be read in conjunction with our consolidated financial statements and notes thereto included in this annual report. Unless the context otherwise requires, all references in this document to “the Company,” “we,” “us,” and “our” refer to Kidoz Inc. and our subsidiaries.
We prepare our consolidated financial statements 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.
As used in this annual report, Company means Kidoz Inc. (“Kidoz”) and the Company’s wholly-owned subsidiaries (collectively the “Company”). Information on the Company’s website www.kidoz.net is not incorporated by reference into this annual report.
FORWARD-LOOKING STATEMENTS
This Form 20-F Annual Report includes “forward-looking statements”. A shareholder or prospective shareholder should bear this in mind when assessing the Company’s business. All statements included in this annual report, other than statements of historical facts, including, without limitation, the statements located elsewhere herein regarding industry prospects and the Company’s financial position, are forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct.
This report on Form 20-F contains certain forward-looking information and forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended (the “U.S. Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and “forward-looking information” under Canadian securities laws (collectively referred to herein as “forward-looking statements”). All documents incorporated herein by reference, as well as statements made in press releases and oral statements that may be made by us or by officers, directors or employees acting on our behalf, that are not statements of historical fact constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to future events or the Company’s future performance. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause our actual results to be materially different from historical results or from any future results expressed or implied by such forward-looking statements. Readers should consider statements that include the terms “believe,” “belief,” “expect,” “plan,” “anticipate,” “intend” or the like to be uncertain and forward-looking. In addition, all statements, trends, analyses and other information contained in this report relative to trends in net sales, gross margin, anticipated expense levels and liquidity and capital resources, constitute forward-looking statements. Particular attention should be paid to the facts of our limited operating history, the unpredictability of our future revenues, our need for and the availability of capital resources, the evolving nature of our business model, and the risks associated with systems development, management of growth and business expansion. Except as required by law, we undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise. All cautionary statements made herein should be read as being applicable to all forward-looking statements wherever they appear. The forward-looking statements contained in this Form 20-F are based on our current expectations and beliefs concerning future developments and their potential effects on us taking into account information currently available to us. 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.
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SUMMARY OF RISK FACTORS
Our business is subject to numerous risks and uncertainties, including those described in Item 3.D “Risk Factors.” You should carefully consider these risks and uncertainties when investing in our ordinary shares. Principal risks and uncertainties affecting our business include the following:
| ● | Future operating or financial results; | |
| ● | Fluctuations in currencies and interest rates; | |
| ● | General market conditions; | |
| ● | Regulations especially with regards to highly regulated market with a Children’s Online Privacy Protection Rule (“COPPA”) & General Data Protection Regulation (“GDPR”); | |
| ● | Reliance on Apple and Google; | |
| ● | Expanding and growing company; | |
| ● | Reliance on key customers and suppliers; | |
| ● | Retaining and attracting customers; | |
| ● | No long term customer commitment; | |
| ● | Reliance on third parties such sales houses around the world and outsourced technology developers, advertising exchanges and other strategic partners; | |
| ● | Dependency on key management and personnel; | |
| ● | Children’s advertising; | |
| ● | Market conditions; | |
| ● | Inappropriate advertisements; | |
| ● | Cybersecurity; | |
| ● | Technology; | |
| ● | Outages; | |
| ● | Cloud based servers; | |
| ● | Placing advertisements in the incorrect segment; | |
| ● | Additional financing; | |
| ● | Payment risks; | |
| ● | Changes in GAAP; | |
| ● | Competition; | |
| ● | Ad blockers; | |
| ● | Failure to access advertising inventory; | |
| ● | Fraud; | |
| ● | Catastrophic events; | |
| ● | Economic, Political and Market Conditions; | |
| ● | Market for common shares; | |
| ● | Volatility in the market; | |
| ● | Public Company implications; | |
| ● | Other factors discussed in “Item 3—Key Information—Risk Factors” of this annual report. |
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PART 1
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable to Form 20-F filed as annual report.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable to Form 20-F filed as annual report.
ITEM 3. KEY INFORMATION
A. Selected Financial Data
The following table presents selected historical financial data which has been derived in part from our audited consolidated financial statements included elsewhere in this annual report and should be read together with and qualified in its entirety by reference to such audited consolidated financial statements. The following table should be read together with “Item 5—Operating and Financial Review and Prospects.”
Consolidated Balance Sheet Data:
| 2023 | 2022 | 2021 | ||||||||||
| Cash | $ | 1,469,224 | $ | 2,363,530 | $ | 2,078,607 | ||||||
| Total assets | 11,807,080 | 14,387,083 | 13,925,531 | |||||||||
| Total liabilities | 4,612,778 | 5,695,324 | 4,574,834 | |||||||||
| Total stockholders’ equity | 7,194,302 | 8,691,759 | 9,350,697 | |||||||||
| Working capital | 3,220,646 | 4,147,176 | 4,536,852 | |||||||||
Consolidated Statement of Operations Data for continuing operations:
| 2023 | 2022 | 2021 | ||||||||||
| Revenue | $ | 13,326,824 | $ | 15,097,056 | $ | 12,484,639 | ||||||
| Cost of sales | 8,392,767 | 9,973,211 | 7,152,307 | |||||||||
| Gross (loss) profit | 4,934,057 | 5,123,845 | 5,332,332 | |||||||||
| Operating expenses excluding interest and other income (expenses) | (6,153,451 | ) | (5,897,412 | ) | (4,357,188 | ) | ||||||
| Amortization and expiration of right-of-use assets | (29,748 | ) | (28,935 | ) | (40,851 | ) | ||||||
| Depreciation and amortization | (558,740 | ) | (557,267 | ) | (565,540 | ) | ||||||
| Gain on derivative liability – warrants | 51 | 23,314 | 60,207 | |||||||||
| Interest and other income | 1,049 | 185 | 241 | |||||||||
| Income tax recovery / (expense) | 25,978 | 150,489 | (216,677 | ) | ||||||||
| Provision for doubtful receivables | (84,952 | ) | - | - | ||||||||
| Stock awareness program | (146,300 | ) | (161,332 | ) | (402,845 | ) | ||||||
| Net (loss) income | $ | (2,012,056 | ) | $ | (1,347,113 | ) | $ | (190,321 | ) | |||
| Basic and diluted net (loss) income per share from continuing operations | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.00 | ) | |||
| Weighted average common shares outstanding | 131,305,254 | 131,481,983 | 131,340,989 | |||||||||
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Consolidated Cash flow data:
| 2023 | 2022 | 2021 | ||||||||||
| Net cash (used in) provided by operating activities | $ | (823,640 | ) | $ | 433,745 | $ | 851,533 | |||||
| Net cash used in investing activities | (8,714 | ) | (26,533 | ) | (384 | ) | ||||||
| Net cash (used in) provided by financing activities | (61,952 | ) | (122,289 | ) | 1,413 | |||||||
| Change in cash | (895,306 | ) | 284,923 | 852,562 | ||||||||
| Cash | $ | 1,469,224 | $ | 2,363,530 | $ | 2,078,607 | ||||||
B. Capitalization and Indebtedness
Not Applicable.
C. Reasons for the Offer and Use of Proceeds
Not Applicable.
D. Risk Factors
The Company’s business is subject to numerous risks and uncertainties, including those described elsewhere in this MD&A, as well as general economic and market risks. The following discussion describes material risks and uncertainties that the Company has identified that may affect the Company’s results of operations and financial condition.
Risks Related to the Business
| ● | Regulations - The Company operates in a highly regulated market with a Children’s Online Privacy Protection Rule (“COPPA”) & General Data Protection Regulation (“GDPR”). There is the risk that the regulations restrict the Company operations. The Company serves compliant contextual mobile advertising network that safely reaches hundreds of million kids, teens, and families every month. | |
| ● | Reliant on Google and Apple - The Company is heavily reliant on Google and Apple, on whose platform the games where we advertise are hosted. The Company has been Google certified and has been approved by Apple. | |
| ● | Expanding Company - the Company is a growing and expanding company. The Company’s revenues may be materially affected by the decisions of its management and/or customers, and due to a variety of other factors, many of which may be beyond the Company’s control. This may lead to expenses exceeding estimates or be incurred in the expectation of sales that do not occur or that occur later than expected. Management expects expenses to increase, especially hiring of additional staff to support its growth and expansion. Fluctuating results could cause unanticipated quarterly losses and cause the Company’s performance to fall below the expectations of investors, which could adversely affect the price of the common shares. The following will cause fluctuating results: |
| ○ | Changes in demand for Kidoz Platform | |
| ○ | Changes in the Company’s customer base, additions, and losses of customers | |
| ○ | Changes in advertising budgets of our customers | |
| ○ | Changes in the availability of advertising inventory or in the cost of reaching customers through digital advertising. | |
| ○ | Disruptions or outages on the Kidoz platform. | |
| ○ | New technology or offering by the Kidoz competitors. | |
| ○ | Timing differences between our payments for advertising inventory and our collection of advertising revenue. | |
| ○ | Shifting views and behaviors of consumers concerning use of data. |
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Based upon the factors above and others beyond the Company’s control, Kidoz forecasts future revenue, costs, and expenses, and continually reviews these forecasts. As a result, its operating results may, from time to time, fall below estimates or the expectations of securities analysts and investors.
| ● | Managing growth - The Company has expanded rapidly over the last few years. The continued rapid growth of the Company may strain management, financial, technical, and other resources. The Company must expand its sales, marketing, technology, and operational staff and expand its controls. If Kidoz continues its rapid growth, it will incur additional expenses, and its growth may continue to place a strain on resources, infrastructure, and ability to maintain the quality of its offering. Accordingly, the Company may not be able to effectively manage and coordinate growth to achieve or maximize future profitability. | |
| ● | Reliance on Key Customers - The Company is reliant on a relatively few customers and sales houses. The loss of a significant customer could harm the Company’s business and severely impact the future financial success of the Company. The Company is continually looking for new sales houses around the world to partner with. | |
| ● | Retaining and attracting customers - The Company, to continue to grow, must attract new customers and encourage existing advertisers to purchase additional offerings. Our competitors may introduce lower costs or differentiated products or services that compete with our current offering on price or technology and therefore our sales are impaired. The Company has hired additional sales staff and is continually developing its technology. | |
| ● | No long-term customer commitments - The Company does not have any long term commitments by its customers beyond the current insertion order, which can be cancelled prior to the campaign conclusion without any penalty. Therefore, the Company success is dependent on offering the best service and maintaining good customer relations. The Company allocates customer service personnel to manage the customer relationship. | |
| ● | Reliance on third parties - the Company is reliant on third parties to operate. These third parties include external sales houses, outsourced technology developers, advertising exchanges and other strategic partners. If these third parties fail to perform as agreed could negatively affect our operations. | |
| ● | Personnel - The loss of any member of the Company’s management team, could have a material adverse effect on its business and results of operations. The Company relies on its engineering staff to develop its technology; operations staff to manage and operate the campaigns and its sales teams to attract and retain key customers. The inability to hire, or the increased costs of new personnel, or the cost to maintain existing personnel could have a material adverse effect on the Company’s business and operating results. There is intense competition for capable personnel in all of these areas, and the Company may not be successful in attracting, training, integrating, motivating, or retaining new personnel, vendors, or subcontractors for these required functions. The growth of the Company is dependent on hiring additional personnel so there are additional costs in training these new personnel. | |
| ● | Children advertising - The Company is dependent on advertising to children so therefore is affected by changes to this business segment. The Company is expanding into advertising to teens and families and to be less reliant on advertising to children. | |
| ● | Market conditions - The economic uncertainty in the market has made and may continue to make it difficult for the Company to forecast revenue and operating results and to make decisions regarding operational cost structures and investments. The Company’s business depends on the overall demand for advertising and on the economic health of its customers. Economic downturns or unstable market conditions may cause the Company’s customers to decrease their advertising budgets, which could reduce usage of the Company’s platform and adversely affect its business, operating results, and financial condition. |
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| ● | Inappropriate advertisement - This is the risk that the Company serves an inappropriate advertisement. To mitigate this risk all adverts are human reviewed before the campaign commences. | |
| ● | Cybersecurity - Cybersecurity attacks, including breaches, computer malware and computer hacking have become more prevalent recent years across all businesses. Any cybersecurity breach caused by hacking, which involves efforts to gain unauthorized access to information or systems, or to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment, or the inadvertent transmission of computer viruses could adversely affect the business, financial condition, results of operations or reputation of the Company. The Company believes that it is taken reasonable steps to protect the security, integrity and confidentiality of the information collected, used, stored and disclosed, but there is no guarantee that in the future inadvertent (e.g., software bugs or other technical malfunctions, employee error or malfeasance, or other factors) or unauthorized data access or use will not occur despite its efforts in the past and in the future. | |
| ● | Technology - The Company’s future success is dependent on its ability to continue to develop and expand its products and technologies and to address the needs of its customers. The Company operates in an industry that is characterized by rapid technological change, frequent new product and service introductions and enhancements, uncertain product life cycles, changes in customer requirements, and evolving industry standards. The introduction of new products and new technologies, the emergence of new industry standards, or improvements to existing technologies could render the Company’s platform obsolete or relatively less competitive. | |
| ● | Outages - In addition, the Company operates 24/7 business so if outages were to occur it is critical for the technology to be restored in a timely manner. Any delay in restoring the systems will have a negative effect on its business, operating results, and financial condition. | |
| ● | Cloud based servers - The Company’s products and services involve storage using a third-party cloud-based hosting service. Any damage to, or failure of, the hosting service’s systems generally could result in interruptions in the use of the Company’s platform. Such interruptions may reduce the Company’s revenue, and adversely the Company’s ability to attract new customers. The Company’s business will also be harmed if its customers and potential customers believe its products or services are unreliable. | |
| ● | Incorrect advertising – The Company is developing a teens and family platform under its Prado brand. Therefore, there is the risk that an inappropriate advertisement is served to children, which could result in fines to the Company and have a negative effect on its business, operating results, and financial condition. The Company has put in internal controls that ensure no non children advertisement is served to children. |
Financial and Accounting Risks
| ● | Additional financing - There can be no certainty that the Company’s financial resources and revenue from sales will be sufficient for its future needs. The Company may need to incur significant expenses for growth, operations, research, and development, as well as sales and marketing and other unforeseen costs. The ability of the Company to arrange such financing in the future will depend in part upon the prevailing capital market conditions as well as the business performance of the Company. It may be difficult or impossible for the Company to obtain debt financing or equity financing on commercially acceptable terms. In addition, the issuance of common shares for an equity financing may have a negative effect on the existing shareholders of the Company such as dilution or negative sentiments in the market to the equity financing. |
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| ● | Growth – Kidoz anticipates continued growth that could require substantial financial and other resources to, among other things: (a) expand and develop product offerings; (b) improve technological infrastructure, including investing in its technology (c) cover general and administrative expenses, including legal, accounting, and other expenses; (d) cover sales and marketing expenses, including a significant expansion of the Company’s direct sales organization. Investment in these, however, may not yield anticipated returns. Consequently, as costs increase, the Company may not be able to generate sufficient revenue to achieve or sustain profitability. | |
| ● | Payment risks – If our customers do not pay, or dispute their invoices, then the business, operating results and financial condition may be adversely affected. In addition, if our customers do not pay in a timely manner will our operating results and financial condition may be adversely affected. | |
| ● | Internal Controls - A failure to maintain an effective system of internal control over financial reporting could harm the Company’s financial performance, its ability to raise capital and its continued listing on the TSX Venture Exchange. In addition, the Company is a small company so has limited segregation of duties. The Company is therefore reliant on the critical personnel and an increase in the risk of the failure of internal controls. | |
| ● | Changes to GAAP – The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). There is a risk that changes to US GAAP will negatively affect the Company in terms of results and could become more difficult, time-consuming, or costly and increase demand on the Company’s systems and resources to comply with this change. |
Industry Risk
| ● | Competition – the advertising business is a highly competitive business. The Company offers niche advertising in a highly regulated business. However, there are few barriers to existing large advertising companies entering the market. Our existing customers could develop their own in-house solutions and therefore no longer advertise with us. | |
| ● | Ad blockers – Consumers may load ad blocking software. This will affect our ability to serve advertisements and will therefore reduce our revenue. | |
| ● | Failure to access advertising inventory – We must maintain a consistent supply of ad inventory. Our success depends on our ability to secure inventory on reasonable terms in multiple locations. The amount, quality, and cost of inventory available to the Company can change at any time. If our relationships with any of our significant suppliers were to cease, or if the material terms of these relationships were to change unfavourably, our business would be negatively impacted. | |
| ● | Fraud – The Company operates as a technology and services provider in a dynamic ecosystem where fraud exists. Typical forms of fraud include robotic traffic, where robots mimic the behaviour of users in order to inflate the number of impressions, clicks, post clicks actions or other metrics associated with the ad. The Company reviews all ads and monitors the impression serving with our suppliers. | |
| ● | Catastrophic events – We maintain cloud-based servers around the world, that deliver advertising campaigns for our advertisers. Any of its existing and future facilities may be harmed or rendered inoperable by attack or security intrusion by a computer hacker, natural or man-made disasters, including earthquakes, tornadoes, hurricanes, wildfires, floods, nuclear disasters, war, acts of terrorism or other criminal activities, infectious disease outbreaks and power outages, any of which may render it difficult or impossible for the Company to operate its business for some period of time. The Company maintains backup and disaster recovery plans to get back up and running as fast as possible. |
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| ● | Economic, Political and Market Conditions – Our business depends on the overall demand for advertising and on the economic health of our current and prospective advertisers. Economic downturns, including a recession, or instability in political or market conditions may cause current or new advertisers to reduce their advertising budgets. These conditions are impacted by events outside of the Company’s control, such as the COVID-19 pandemic, may have a long-term impact on the global economy. Adverse economic conditions and general uncertainty about continued economic recovery are likely to affect the Company’s business prospects. This uncertainty may cause general business conditions to deteriorate or become volatile, which could cause advertisers to delay, decrease or cancel campaigns, and expose the Company to increased credit risk on advertiser orders, which, in turn, could negatively impact its business, financial condition and results of operations. In addition, continued geopolitical turmoil in many parts of the world have and may continue to put pressure on global economic conditions, which could lead to reduced spending on advertising. |
Risks Related to the Common Shares and Corporate and Securities Law
| ● | Market for common shares – The shares of the Company are illiquid. The Company has made efforts to improve the exposure of the Company through its stock awareness program and create a more active market for its shares. There are no assurances that our Stock Awareness campaigns will be effective to create a liquid market. | |
| ● | Volatility in the market - Technology stocks have historically experienced high levels of volatility, and we cannot predict the prices at which our common shares will trade. Fluctuations in the market price of our common shares could cause an investor to lose all or part of their investment in our common shares. These fluctuations in the market price and volatility of our common shares can be caused by factors outside the control of the Company such the following: |
| ○ | The volatility in the market price and trading volume of technology companies in general especially large companies in the digital advertising industry (e.g. Google and Meta); | |
| ○ | Changes in regulatory developments in Canada and the United States; | |
| ○ | General economic conditions and trends, including global financial markets, global economies and general market conditions, such as interest rates; | |
| ○ | Major catastrophic events (e.g. the war in the Ukraine); | |
| ○ | Unexpected market reactions to the Company announcements. |
As a result, share prices of many technology companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In general, in the past, shareholders have filed securities class action litigation following periods of market volatility. If Kidoz were to become involved in securities litigation, it could subject it to substantial costs, divert resources and the attention of management from our business, and adversely affect our business.
| ● | Public Company implications – The Company is listed on the Toronto Venture Stock Exchange and is therefore subject to its listing requirements. Compliance with these rules and regulations could become more difficult, time-consuming, or costly and increase demand on the Company’s systems and resources. |
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Item 4. INFORMATION ON THE COMPANY
A. History and development of the company.
Kidoz Inc. 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.
During the year ended December 31, 2023, Kidoz Inc. continued out of the jurisdiction of the Anguillian Business Companies Act, 2022, and into the jurisdiction of the Canada Business Corporations Act (“CBCA”).
The Company was originally incorporated in the State of Florida on January 12, 1987.
On January 22, 2015, Bingo.com, Ltd., the name of the Company at that time, 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, Shoal Games Ltd. 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.
During the year ended December 31, 2023, Kidoz Inc. continued out of the jurisdiction of the Anguillian Business Companies Act, 2022, and into the jurisdiction of the Canada Business Corporations Act (“CBCA”).
Our executive offices are located at Pacific Centre, Suite 1500, 701 West Georgia Street, Vancouver, British Columbia, V7Y 1C6, Canada. Our telephone number is (888) 374-2163.
B. 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.
During the year ended December 31, 2023, the Company launched a wholly owned division called Prado to advertise to the over 13 years of age family market. The Company has developed systems whereby our existing Kidsafe advertising will not be affected by Prado.
Product Strategy
Kidoz builds and maintains the Kidoz Safe Ad Network, the Kidoz SDK, and the Kidoz Privacy Shield 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.
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During the year ended December 31, 2023, the Company launched a wholly owned division called Prado to access the over 13 years of age family market. The Prado (www.prado.co) technology will provide a leading mobile SSP (Supply-side Platform), DSP (Demand-side Platform) and Ad Exchange programmatically to the entire Ad Tech universe. By activating high-performance programmatic campaigns across thousands of apps on their network, Prado makes digital advertising more efficient and effective by simplifying the process across a connected technology platform. The Company has developed systems whereby our existing Kidsafe advertising will not be affected by Prado. Kidoz software engineers have now completed the challenging transformation of their market leading kid safe Ad Network to also reach the significantly larger digital ad market of teens, families, and audiences over 13 years old whilst not compromising the safety of our existing kids marketplace. The Prado technology plus our internal controls will ensure that no inappropriate advertisements will be served to children and thereby compromise kids’ safety.
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 2023 Kidoz launched campaigns in 59 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 Programmatic 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’s 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 over US$120B annually according to AppsFlyer. Kidoz continues to advance its software and systems to support this high growth business and the Company expects performance CPI media to be an increasing percentage of overall business.
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Kidoz is growing as a result of its core media business, and we expect further growth in our expansion via our Prado division to include the teen and parent segments which became effective in 2023. 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 entire Kidoz and Prado networks. The Kidoz commercial teams look forward to welcoming many new and existing customers to these offerings as we expand the Kidoz reach within the global digital advertising ecosystem.
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 and Garfield Bingo
The Company has the social bingo games Trophy Bingo and Garfield Bingo which are available on Apple’s iOS, Google’s Android, and Amazon Android systems. Revenue is generated in the games via in-app purchases and advertising. During the year ended December 31, 2023, Trophy Bingo and Garfield Bingo were discontinued.
C. Organizational structure.
For the year ended December 31, 2023, we conducted 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”), Shoal Media Inc. (“Shoal Media”), Prado Media Ltd. (“Prado Media”), Shoal Media UK Ltd. (“Shoal Media UK”), and Rooplay Media Kenya Limited. (“Rooplay Kenya”). Effective January 1, 2023, we conducted our business through the Canadian incorporated entity and its subsidiaries.
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. During the year ended December 31, 2023, Shoal Games (UK) plc was discontinued and struck off.
On January 21, 2008, Coral Reef Marketing Inc., was incorporated under the laws of Anguilla, British West Indies. During the year ended December 31, 2022, Coral Reef Marketing Inc. was merged with Kidoz Inc. and Kidoz Inc. is the surviving corporation.
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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. During the year ended December 31, 2022, Rooplay Media Ltd. was renamed Prado Media Ltd.
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.
D. Property, plants and equipment.
Effective January 1, 2023 our executive office is located in Vancouver, British Columbia, Canada.
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 $4,137.
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 $4,004.
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 4A. UNRESOLVED STAFF COMMENTS
Not Applicable.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion and analysis is based on and should be read in conjunction with our consolidated financial statements, including the related notes, and the other financial information included in this Report. The following discussion contains forward-looking statements that reflect our current plans, estimates and beliefs and involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this Report.
Kidoz Inc. (TSXV: KIDZ) mission is to keep children safe in the complex digital advertising ecosystem. Kidoz Inc. 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.
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The following discussion and analysis of the Company’s financial condition and results of operations are presented in United States Generally Accepted Accounting Principles (“US GAAP”) and presented in US Dollars, the Company’s functional currency.
A. Operating results
Results of Operations
| 2023 | 2022 | 2021 | ||||||||||
| Revenue | $ | 13,326,824 | $ | 15,097,056 | $ | 12,484,639 | ||||||
| Cost of sales | 8,392,767 | 9,973,211 | 7,152,307 | |||||||||
| Gross (loss) profit | 4,934,057 | 5,123,845 | 5,332,332 | |||||||||
| Operating expenses excluding interest and other income (expenses) | (6,153,451 | ) | (5,897,412 | ) | (4,357,188 | ) | ||||||
| Amortization and expiration of right-of-use assets | (29,748 | ) | (28,935 | ) | (40,851 | ) | ||||||
| Depreciation and amortization | (558,740 | ) | (557,267 | ) | (565,540 | ) | ||||||
| Gain on derivative liability – warrants | 51 | 23,314 | 60,207 | |||||||||
| Interest and other income | 1,049 | 185 | 241 | |||||||||
| Income tax recovery / (expense) | 25,978 | 150,489 | (216,677 | ) | ||||||||
| Provision for doubtful receivables | (84,952 | ) | - | - | ||||||||
| Stock awareness program | (146,300 | ) | (161,332 | ) | (402,845 | ) | ||||||
| Net (loss) income | $ | (2,012,056 | ) | $ | (1,347,113 | ) | $ | (190,321 | ) | |||
| Basic and diluted net (loss) income per share from continuing operations | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.00 | ) | |||
| Weighted average common shares outstanding | 131,305,254 | 131,481,983 | 131,340,989 | |||||||||
Year Ended December 31, 2023, Compared with Year Ended December 31, 2022
Revenue
Total revenue, net of platform fees (to Apple, Google and Amazon) and withholding taxes, for the year ended December 31, 2023, decreased to $13,326,824, a decrease of 12% over total revenue net of fees and withholding taxes of to $15,097,056 for fiscal 2022. Ad Tech advertising revenue for the year ended December 31, 2023, was $11,879,425 a decrease of 18% over Ad Tech advertising revenue of $14,425,918 for fiscal 2022.
Programmatic advertising revenue for the year ended December 31, 2023, was $1,223,392 an increase of 239% over Programmatic advertising revenue of $361,394 for fiscal 2022.
Content revenue for year ended December 31, 2023, decreased to $224,007, a decrease of 28% over content revenue of $309,744 for fiscal 2022.
The decrease in total revenue over fiscal 2022 is due to the overall weakness in the general market and the loss of some campaigns from fiscal 2022 which did not renew in fiscal 2023. Management believes that distortions in the overall market in fiscal 2022 existed due to COVID and returned to normal in fiscal 2023. The increase in programmatic advertising revenue is due to the active promotion of this revenue stream and the strong demand for Programmatic advertising in the market.
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Selling and marketing expenses
Sales and marketing expenses for the year ended December 31, 2023, were $1,268,218, an increase of 22% over selling and marketing expenses of $1,039,713 for fiscal 2022. The increase in sales and marketing expenses over fiscal 2022 is due to an increase in sales and marketing staff to manage the anticipated growth in the Direct, Programmatic and Performance segments of our AdTech business. 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 selling the Ad tech advertising and to grow the Ad tech advertising revenue. There can be no assurances that these expenditures will result in increased traffic or significant additional revenue.
Software technology development
We do not capitalize our development costs. Software technology development costs of $2,999,079 were expensed for year ended December 31, 2023, an increase of 20% from software technology development costs of $2,496,877 expensed for fiscal 2022. These increases over fiscal 2022, is due to the hiring of additional development staff and the outsourcing of certain software development to increase the development of our base technologies including the development of the Prado technology. In addition, as we have expanded our global reach our server costs have increased.
General and administrative expenses
General and administrative expenses consist primarily of legal and professional fees, premises costs for our offices and development facilities, and other general corporate and office expenses. General and administrative expenses decreased to $673,654 for the year ended December 31, 2023, a decrease of 11% over general and administrative expenses of $760,936 in fiscal 2022. The decrease in general and administrative expenses is due a decrease in fees paid to our professional advisors and a decrease in legal and filing fees as a result of the Normal Course Issuer Bid and the continuation of the Company out of Anguilla and into Canada incurred in fiscal 2022.
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 decreased to $705,830 for the year ended December 31, 2023, a decrease of 6% over salaries, wages, consultants, and benefits of $751,811 for fiscal 2022. The decrease in salaries, wages, consultants, and benefits over fiscal 2022, is due to a decrease in the consultants employed by the Company in 2023.
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 (“SDK”) for our advertising platform. These intangible assets are as result of the acquisition of Kidoz Ltd. The amortization for the year ended December 31, 2023, was $545,737 compared to $547,460 in fiscal 2022. The decline is amortization for the year ended December 31, 2023, is due the full amortization of the Kidoz OS technology.
Equipment is depreciated using the declining balance method over the useful lives of the assets, ranging from three to five years. Depreciation increased to $13,002 during the year ended December 31, 2023, over depreciation of $9,807 in fiscal 2022. This increase in depreciation and amortization compared to fiscal 2022, is due to the acquisition of new equipment and the write-off of old equipment.
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Stock-based compensation expense
During the year ended December 31, 2023, the Company incurred non-cash stock compensation expenses of $515,116 compared to non-cash stock compensation expenses of $696,248 for fiscal 2022. During the year ended December 31, 2023, the Company granted 1,885,000 (fiscal 2022 - 2,550,000) options. The options granted in fiscal 2023 and 2022, are issued to consultants and employees as per the Company’s amended 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. During the year ended December 31, 2023, the Company discontinued its stock awareness program with Proactive and with Stockhouse Publishing Ltd. in fiscal 2022.
The Company incurred stock awareness expenses of $146,300 for year ended December 31, 2023, a decrease of 9% from stock awareness expenses of $161,332 expensed for fiscal 2022. The decrease in Stock Awareness expenses compared to fiscal 2022 is due to the planned reduction in stock awareness commitments and the discontinuance with Proactive.
Other income and expenses
During the year ended December 31, 2023, the Company has a foreign exchange gain of $1,139 compared to foreign exchange loss of ($142,857) in the prior year. These gains are due to the exchange rate movements of the US Dollar compared to the Pound Sterling, Israeli Shekel, European Euro, and the Canadian Dollar. The Company does not hedge its cash assets.
During the year ended December 31, 2023, we received interest income of $1,049 compared to interest income of $185 in the prior year. The interest income is received from bank term deposits from investing our cash. The increase in interest income is due to an increase in interest rates and higher bank account balances in interest earning bank accounts in fiscal 2023 compared to fiscal 2022.
During the year ended December 31, 2023, the Company had a gain on the derivative liability – warrants of $51 compared to gain on the derivative liability – warrants of $23,314 in fiscal 2022. This derivative liability – warrants results from the issuance of the 230,000 warrants to Research Capital Corporation during the year ended December 31, 2021, and which expired unexercised in the year ended December 31, 2023.
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 office rental. During the year ended December 31, 2023, the Company amortized $26,828 and $2,920 expired on the Anguillian lease compared to right-of-use assets amortization of $28,935 in fiscal 2022. Subsequent to the year ended December 31, 2023, the lease on the Vancouver office expired and was not renewed.
Income taxes
During the year ended December 31, 2023, the Company had a tax recovery of $25,978 compared to a tax recovery of $150,489 in fiscal 2022. During the year ended December 31, 2023, our Israeli subsidiary was officially recognized as a Preferred Technology Enterprise in Israel, a prestigious status that comes with extensive tax relief benefits as provided by law and applied to the fiscal 2022 tax year.
During the year ended December 31, 2023, the subsidiaries of the Company had a tax expense of $924 compared to a tax expense of $60,010 in fiscal 2022.
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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. During the year ended December 31, 2023, Kidoz Inc. continued out of the jurisdiction of the Anguillian Business Companies Act, 2022, and into the jurisdiction of the Canada Business Corporations Act (“CBCA”) and is now a Canadian taxpayer.
Net (loss) income and (loss) income per share
The net loss after taxation for the year ended December 31, 2023, amounted to ($2,012,056) a loss of ($0.02) per share, compared to a net loss of ($1,347,113), a loss of ($0.01) per share, in the year ended December 31, 2022. The net loss increased for the year ended December 31, 2023, due to a decrease in revenue, an increase in staff and outsourcing of certain software technology development. This increase in staff is due to the hiring of additional development staff and sales and marketing personnel to increase the development of our base technology and increase our sales and account management respectively.
Year Ended December 31, 2022, Compared with Year Ended December 31, 2021
Revenue
Total revenue, net of platform fees (to Apple, Google, and Amazon) and withholding taxes, for the year ended December 31, 2022, increased to $15,097,056, an increase of 21% over total revenue net of fees and withholding taxes of to $12,484,639 for fiscal 2021. Ad Tech advertising revenue for the year ended December 31, 2022, was $14,425,918 an increase of 18% over Ad Tech advertising revenue of $12,194,518 for fiscal 2021. Programmatic advertising revenue for the year ended December 31, 2022, was $361,394 an increase of 518% over Programmatic advertising revenue of $58,507 for fiscal 2021. Content revenue for year ended December 31, 2022, increased to $309,744, an increase of 34% over content revenue of $231,614 for fiscal 2021. The increase in total revenue over fiscal 2021 is due to the growth of our publisher reach and our advertising customers increasing their advertising budgets with the Kidoz safe mobile network. Programmatic revenue commenced in fiscal 2021 and in fiscal 2022 we actively started promoting this revenue stream and hired sales and support staff to operate it. The increase in content revenue is due to the increase of OEM sales of kids’ tablets.
Selling and marketing expenses
Sales and marketing expenses for the year ended December 31, 2022, were $1,039,713, an increase of 62% over selling and marketing expenses of $641,393 for fiscal 2021. The increase in sales and marketing expenses over fiscal 2021 is due to an increase in sales and marketing staff to manage the anticipated growth in the Direct, Programmatic and Performance segments of our AdTech business. Selling and marketing expenses consist primarily of sales staff salaries and benefits and publishing services and user acquisition costs incurred to acquire game players.
General and administrative expenses
General and administrative expenses consist primarily of legal and professional fees, premises costs for our offices and development facilities, and other general corporate and office expenses. General and administrative expenses increased to $760,936 for the year ended December 31, 2022, an increase of 26% over general and administrative expenses of $604,882 in fiscal 2021. The increase in general and administrative expenses is due an increase in fees paid to our professional advisors and an increase in legal and filing fees for the Normal Course Issuer Bid and the continuation of the Company out of Anguilla and into Canada.
Salaries, wages, consultants, and benefits
Salaries, wages, consultants, and benefits increased to $751,811 for the year ended December 31, 2022, an increase of 8% over salaries, wages, consultants, and benefits of $693,964 for fiscal 2021. The increase in salaries, wages, consultants, and benefits over fiscal 2021, is due to an increase in the overall headcount of staff employed by the Company to service its rapid growth.
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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 (“SDK”) for our advertising platform. These intangible assets are as result of the acquisition of Kidoz Ltd. The amortization for the year ended December 31, 2022, was $547,460 compared to $556,072 in fiscal 2021. The decline is amortization for the year ended December 31, 2022, is due the full amortization of the Kidoz OS technology.
Equipment is depreciated using the declining balance method over the useful lives of the assets, ranging from three to five years. Depreciation increased to $9,807 during the year ended December 31, 2022, over depreciation of $9,468 in fiscal 2021. This increase in depreciation and amortization compared to fiscal 2021, is due to the acquisition of new equipment and the write-off of old equipment.
Software technology development
We do not capitalize our development costs. Software technology development costs of $2,496,877 were expensed for year ended December 31, 2022, an increase of 49% from software technology development costs of $1,678,848 expensed for fiscal 2021. These increases over fiscal 2021, is due to the hiring of additional development staff and the outsourcing of certain software development to increase the development of our base technologies including the development of the Prado technology. In addition, as we have expanded our global reach our server costs have increased.
Stock-based compensation expense
During the year ended December 31, 2022, the Company incurred non-cash stock compensation expenses of $696,248 compared to non-cash stock compensation expenses of $660,266 for fiscal 2021. During the year ended December 31, 2022, the Company granted 2,550,000 options. The options granted in fiscal 2022, are issued to consultants and employees as per the Company’s amended 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. During the year ended December 31, 2022, the Company discontinued its stock awareness program with Stockhouse Publishing Ltd.
The Company incurred stock awareness expenses of $161,332 for year ended December 31, 2022, a decrease of 60% from stock awareness expenses of $402,845 expensed for fiscal 2021. The decrease in Stock Awareness expenses compared to fiscal 2021 is due to the planned reduction in stock awareness commitments.
Other income and expenses
During the year ended December 31, 2022, the Company has a foreign exchange loss of ($142,857) compared to foreign exchange loss of ($69,835) in the prior year. These losses are due to the exchange rate movements of the US Dollar compared to the Pound Sterling, Israeli Shekel, European Euro, and the Canadian Dollar. The Company does not hedge its cash assets.
During the year ended December 31, 2022, we received interest income of $185 compared to interest income of $241 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 2022 compared to fiscal 2021.
During the year ended December 31, 2022, the Company had a gain on the derivative liability – warrants of $23,314 compared to gain on the derivative liability – warrants of $60,207 in fiscal 2021. This derivative liability – warrants results from the issuance of the 230,000 warrants to Research Capital Corporation during the year ended December 31, 2021, and will expire in the year ended December 31, 2023.
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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, 2022, the Company amortized $28,935 compared to right-of-use assets amortization of $40,851 in fiscal 2021.
Income taxes
During the year ended December 31, 2022, the Company had a tax recovery of $150,489 compared to a tax expense of $216,677 in fiscal 2021. Our Israeli subsidiary had a deferred tax asset of $210,499 compared to a deferred tax liability of $210,449 in fiscal 2021. This deferred tax asset relates to the acquisition of Kidoz Ltd. intangible assets. During the year ended December 31, 2022, the subsidiaries of the Company had a tax expense of $60,010 compared to a tax expense of $6,178 in fiscal 2021.
Net (loss) income and (loss) income per share
The net loss after taxation for the year ended December 31, 2022, amounted to ($1,347,113) a loss of ($0.01) per share, compared to a net loss of ($190,321), a loss of ($0.00) per share, in the year ended December 31, 2021. The net loss increased for the year ended December 31, 2022, despite an increase in revenue due to an increase in staff and outsourcing of certain software development. This increase in staff is due to the hiring of additional development staff and sales and marketing personnel to increase the development of our base technology and increase our sales and account management respectively.
Net Cash generated from Operations and Adjusted EBITDA
Due to our focus on maintaining a strong balance sheet while striving to continue our rapid growth on an annual basis and to evaluate our performance and make financial and operational decisions accordingly we pay close attention to our net cash generated from operations and our adjusted EBITDA.
Our net cash from operations for the year ended December 31, 2023, was ($823,640) compared to $433,745 in the prior year. This decrease was due to the decrease in revenue, our expansion of our R&D program to increase the development of our base technologies and encompass the Prado technology to facilitate our entrance into the total Ad-tech market while maintaining our leadership position in the kid safe arena.
Additionally, our Adjusted Earnings Before Interest; Taxes; Depreciation and Amortization; stock awareness program; stock-based compensation and impairment of goodwill (“Adjusted EBITDA”) for the year ended December 31, 2023, amounted to a loss of ($891,166) compared to an Adjusted EBITDA of ($231,395) in the prior year.
Our Adjusted EBITDA is reconciled as follows:
| 2023 | 2022 | 2021 | ||||||||||
| Loss for the year | $ | (2,012,056 | ) | $ | (1,347,113 | ) | $ | (190,321 | ) | |||
| Depreciation and amortization | 558,740 | 557,267 | 565,540 | |||||||||
| Stock awareness program | 74,112 | 36,191 | 316,237 | |||||||||
| Stock-based compensation | 515,116 | 696,248 | 660,266 | |||||||||
| Gain on derivative liability – warrants | (51 | ) | (23,314 | ) | (60,207 | ) | ||||||
| Interest and other income | (1,049 | ) | (185 | ) | (241 | ) | ||||||
| Income tax (recovery) expense | (25,978 | ) | (150,489 | ) | 216,677 | |||||||
| Adjusted EBITDA | $ | (891,166 | ) | $ | (231,395 | ) | $ | 1,507,951 | ||||
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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.
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.
B. Liquidity and capital resources
The Company generates cash from operations but does have a line of credit with the Leumi Bank in Israel if required. During the year ended December 31, 2021, the Company drew $200,000 from the line of credit. The loan was repaid in full during the year ended December 31, 2021.
The Company believes it has sufficient cash resources to meet its current growth and development objectives. Although the Company has relied on revenue generated through its business, external funding may be required to continue growing the existing business and scaling operations. There can be no assurance that adequate funding will be available in the future, or under terms that are favorable to the Company.
December 31, 2023, Compared to December 31, 2022
We had cash of $1,469,224 and working capital of $3,220,646 as at December 31, 2023. This compares to cash of $2,363,530 and working capital of $4,147,176 as at December 31, 2022.
During the year ended December 31, 2023, we used cash of ($823,640) in operating activities compared to providing cash of $433,745 in the prior year.
Net cash used in financing activities was ($61,952) in the year ended December 31, 2023, which compares to cash used in financing activity of ($122,289) in fiscal 2022. During the year ended December 31, 2023, the Company repaid the CEBA loan of CAD$40,000 ($29,484). During the year ended December 31, 2023, to the Company acquired 2,000 (2022 - 275,000) shares acquired pursuant to the NCIB in effect at an aggregate cost of $517 (2022 - $87,778).
Cash of ($8,714) was used in investing activities in fiscal 2023, compared to cash used of ($26,533) in the prior year. This decrease related to the acquisition of new equipment for our new staff in fiscal 2022.
December 31, 2022, Compared to December 31, 2021
We had cash of $2,363,530 and working capital of $4,147,176 as at December 31, 2022. This compares to cash of $2,078,607 and working capital of $4,536,852 as at December 31, 2021.
During the year ended December 31, 2022, we provided cash of $433,745 in operating activities compared to providing cash of $851,533 in the prior year.
Net cash provided by financing activities was ($122,289) in the year ended December 31, 2022, which compares to cash provided by financing activity of $1,413 in fiscal 2021. This increase related to the Company acquiring 275,000 shares acquired pursuant to the NCIB in effect at an aggregate cost of $87,778.
Cash of ($26,533) was used in investing activities in fiscal 2022, compared to cash used of ($384) in the prior year. This increase related to the acquisition of new equipment for our new staff.
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Our future capital requirements will depend on several factors, including costs associated with the further development of the Ad tech advertising business, the cost of marketing and customer acquisition costs, the development of new products, the acquisition of new companies and the success of our overall business.
C. Research and development, patents and licenses, etc.
The Company is continually developing its technology to improve operations and to offer a better service to our customers. The Company expenses all software technology development costs as incurred for the year ended December 31, 2023 and 2022. As at December 31, 2023 and 2022, all capitalized software development costs have been fully amortized, and the Company has no capitalized software development costs.
D. Trend information.
Normal Course Issuer Bid:
During the year ended December 31, 2022, the Company filed a Notice of Intention to Make a Normal Course Issuer Bid (the “Notice of Intention”) with the TSX Venture Exchange (“TSX-V”) on September 15, 2022. Upon receiving approval from the TSX-V, effective September 16, 2022, the Company commenced a normal course issuer bid (“NCIB”), whereby the Company may purchase for cancellation up to 6,579,074 shares, being 5% of the issued and outstanding shares as of such date. Any purchases under the NCIB will be made on the open market through the facilities of the TSX-V or alternative Canadian trading systems. Purchases will be made at market prices of the shares at the time of acquisition.
Purchases under the NCIB may commence as of September 16, 2022, and will end on the earlier of: (i) September 14, 2023; or (ii) the date on which the Company has purchased the maximum number of shares to be acquired under the NCIB. The Company may terminate the NCIB earlier if it feels it is appropriate to do so.
The normal course issuer bid will be conducted through Kidoz Inc’s broker Research Capital Corporation. The purchase and payment of the common shares will be made in accordance with the requirements of the TSX-V and applicable securities laws. The actual number of common shares purchased, timing of purchases and share price will depend upon market conditions at the time and securities law requirements. All common shares acquired will be returned to treasury and cancelled.
The purchase of and payment for the shares will be made in accordance with the requirements of the TSX-V and applicable securities laws. The actual number of shares purchased, timing of purchases and share price will depend upon market conditions at the time and securities law requirements. All shares acquired pursuant to the NCIB will be returned to treasury and cancelled.
During the year ended December 31, 2023, 41,500 shares which were acquired during the year ended December 31, 2022, pursuant to the NCIB in effect, at an aggregate cost of $11,793, were cancelled.
During the year ended December 31, 2023, 2,000 shares were acquired pursuant to the NCIB in effect, at an aggregate cost of $517. During the year ended December 31, 2023, 2,000 shares were cancelled.
During the year ended December 31, 2022, 275,000 shares were acquired pursuant to the NCIB in effect, at an aggregate cost of $87,778. During the year ended December 31, 2022, 233,500 shares were cancelled.
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Common Shares
The bid quotations set forth below, reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not reflect actual transactions.
| TSX-V - KIDZ | OTC - KDOZF | |||||||||||||||
| Quarter Ended | High (1) CAD$ | Low (1) CAD$ | High (1) US$ | Low (1) US$ | ||||||||||||
| December 31, 2023 | $ | 0.215 | $ | 0.13 | $ | 0.28 | $ | 0.02 | ||||||||
| September 30, 2023 | $ | 0.27 | $ | 0.185 | $ | 0.30 | $ | 0.14 | ||||||||
| June 30, 2023 | $ | 0.28 | $ | 0.20 | $ | 0.83 | $ | 0.13 | ||||||||
| March 31, 2023 | $ | 0.385 | $ | 0.20 | $ | 0.26 | $ | 0.04 | ||||||||
| December 31, 2022 | $ | 0.55 | $ | 0.245 | $ | 0.40 | $ | 0.02 | ||||||||
| September 30, 2022 | $ | 0.405 | $ | 0.26 | $ | 0.51 | $ | 0.06 | ||||||||
| June 30, 2022 | $ | 0.55 | $ | 0.395 | $ | 0.51 | $ | 0.10 | ||||||||
| March 31, 2022 | $ | 0.60 | $ | 0.44 | $ | 0.65 | $ | 0.35 | ||||||||
| 1. | Prices as per Yahoo! TM Finance |
E. Critical Accounting Estimates
The information provided in this Form 20-F, including the consolidated financial statements, is the responsibility of management. The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. There is a full disclosure and description of the Company’s critical accounting policies, estimates, judgments, assumptions in the consolidated financial statements as at December 31, 2023 in notes 1 and 2.
Significant areas requiring the use of estimates include the collectability of accounts receivable, the valuation of stock-based compensation, the valuation of deferred tax assets and liabilities, the useful lives of intangible assets, and the derivative liability – warrants valuation. Actual results may differ significantly from these estimates.
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.
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 technology development; | |
| - | Impairment of long-lived assets | |
| - | Goodwill |
F. Off Balance Sheet Arrangements
We did not have any off balance sheet arrangements for the years ended December 31, 2023, 2022 and 2021.
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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and senior management.
Our directors and executive officers as at December 31, 2023, are as follows:
| Name | Age | Position | Audit Committee | Governance Committee | Compensation Committee | |||||
| T. M. Williams | 83 | Chairman | ||||||||
| J. M. Williams | 48 | Chief Executive Officer | X | |||||||
| E. Ben Tora | 53 | President & General Manager EMEA | ||||||||
| F. Curtis | 59 | Non-Executive Director | X* | X* | X | |||||
| C. Kalborg | 62 | Non-Executive Director | X | X | X | |||||
| M. David | 58 | Non-Executive Director | X | X* | ||||||
| H. W. Bromley | 53 | Chief Financial Officer | ||||||||
| T. H. Williams | 53 | VP Product |
X* - Chairman of Committee
Tryon (Tarrnie) M. Williams – Chairman, Member of the Board of Directors
Mr. T. M. Williams served as President, Chief Executive Officer and Chairman from August 2001 until June 2011 and from June 2011 till May 2022, Mr T. M. Williams served as Executive Chairman. From May 2022, Mr. T. M. Williams has served as the Chairman of the Company. Since 1984, Mr. Williams has served as a principal of T.M. Williams (ROW), Inc., a private consulting firm, and from 1993 until 2008, was Adjunct Professor, Sauder School of Business at the University of British Columbia. From 1988 to 1991, he was President and Chief Executive Officer of Distinctive Software, Inc. in Vancouver, BC, and, upon the acquisition of that company by Electronic Arts Inc., North America’s largest developer of entertainment software, he became President and Chief Executive Officer of Electronic Arts (Canada) Inc., where he continued until 1993. From 1995 to 2012, Mr. T. M. Williams was a director of YM Biosciences, Inc., a biotechnology company, until its acquisition by Gilead Sciences, Inc. In addition, he is a director of several other private corporations.
Jason Williams – Chief Executive Officer, Member of the Board of Directors
Mr. J.M. Williams has been a director since July 2007 and from June 2011 to March 2019, Mr. J. M. Williams served as the sole Chief Executive Officer of the Company. Since the acquisition of Kidoz Ltd. in 2019 until May 2022, he served as Co- Chief Executive Officer. From May 2022, has served the sole Chief Executive Officer of the Company. Prior to his employment with Kidoz Inc., he was a Business Analyst with Blue Zone Inc. (a technology company) and RBC Dominion Securities. Mr. J. M. Williams has a Bachelor of Commerce degree from the University of Victoria and a Masters of Business Administration degree, specializing in strategic marketing, from the University of Warwick. In addition, Mr. J. M. Williams is a Non-Executive Director of Adventurebox Technology AB (pubL). Mr. J. M. Williams is the son of Mr. T. M. Williams, the Company’s Chairman.
Eldad Ben Tora - President, Member of the Board of Directors
Mr. E. Ben Tora served as Co-Chief Executive Officer from the acquisition by the Company of Kidoz Ltd in March 2019 until May 2022. Since May 2022, Mr. E. Ben Tora has served as the President & General Manager EMEA and since April 2023 General Manager of Prado. Mr. E. Ben Tora was a co-founder of Kidoz Ltd. and has served as its Chief Executive Officer and Chief Revenue Officer since June 2013. Previously he served as General Manager and Chief Product officer at Bluesnap (formerly Plimus), which was acquired by Great Hill Partners in 2011. Mr. E. Ben Tora holds a bachelor’s degree in management and communication from the College of management in Tel Aviv. Mr. E. Ben Tora is a serial entrepreneur and senior executive in venture-backed and public Internet companies, both early and growth stage, bringing extensive experience in operating and scaling tech companies.
Fiona Curtis – Non-Executive Director
Ms. F. Curtis has served as a director of the Company since June 10, 2009. She has served as Compliance Officer and General Corporate Secretary for Counsel Limited, an Anguillan financial services corporation, since 2006. Ms. F. Curtis is the Managing Director of Counsel Limited. Ms. F. Curtis has been working in the financial services industry since 1990. She started at the brokerage firm, Burns Fry, in Toronto (now Nesbitt Burns, Bank of Montreal). She completed her Canadian Securities Course and became a licensed Securities Broker in 1992. She was educated in England, and attended the University of Toronto, Canada for her undergraduate degree. Ms. F. Curtis’s MBA in Finance & International Affairs was granted by the Rotman School of Business, University of Toronto. Ms. F. Curtis obtained her Associates Degree in Captive Insurance in 2018. She has also served as Chairman of the Board of Anguilla Finance (2016 - 2020), the marketing body for Anguilla Financial Services. Ms. F. Curtis is a Founding Member and Director of the Anguilla Compliance Association, now serving as Chairman.
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Claes Kalborg – Non-Executive Director
Mr. C. Kalborg is a 20-year licensing veteran with experience from leading game companies such as Rovio (the makers of Angry Birds) and King.com (the makers of Candy Crush). Taking on the aptly named role of licensing guru, Mr. C. Kalborg has gathered close to 50 licensees and established a network of regional agents for Candy Crush around the world. Those agents include Striker Entertainment in the U.S. and Canada; Tycoon Enterprises in Latin America (except Argentina and Brazil); Tycoon 360 in Brazil; IMC in Argentina; Mediogen in Israel; Sinerji in Turkey; Pacific Licensing Studio in Southeast Asia; Wild Pumpkin Licensing in Australia and New Zealand; PPW in greater China; and Voozclub in Korea. Mr. C. Kalborg brings a wealth of experience and a deep network in licensing and technology to Kidoz Inc. In addition, Mr. C. Kalborg is a Non-Executive Director of Fragbite, LL Games, CanopyLAB A/S and Adventurebox Technology AB (pubL) and he is a partner in Swiss based Non Violence S.A owning the IP rights for the globally renowned symbol “The Knotted Gun” and a board member and partner in CF Entertainment holding global rights for the Crazy Frog.
Moshe David – Non-Executive Director
Mr. M. David is an Investor, Executive, Board Director and Chairman. Currently serves as CEO of RAFT Technologies and Board member at Omnisys, Mappo and Questar. During 2022 and early 2023, Mr. David served as Investor and Resident Executive in Entree Capital and as Active Chairman at Wisesight, and as Board member and Advisor at Sweetch, Bria.ai and Swapp. Until early 2022 served as Chief Executive Officer at TIBA, a global leader in Parking revenue systems where he has quadrupled its revenue and became a global market leader. Prior to TIBA, Mr. David founded several companies and served as an Executive and Board member in several more, including NlightU, OzVision and TvPoint. Mr. David also served as deputy CEO managing Ness Technologies and as President of North America in Amdocs Inc., in both roles managing businesses of hundreds of millions of USD$ and thousands of employees around the globe. Mr. David started his career in the Israeli Airforce. He has a BA in Economics and Computer Science from Bar Ilan University in Israel, and an MBA Cum Laude from Boston University.
Mr. H. W. Bromley has served as our Chief Financial Officer since July 2002. From 2000 to 2001, Mr. Bromley was a Director and the Group Financial Officer for Agroceres & Co. Ltd. From 1995 - 1999, he was an employee of Ernst & Young working in South Africa and in the United States of America. Mr. Bromley has in addition worked for CitiBank, Unilever PLC, Gerrard, Roadhouse Interactive Ltd. and CellStop Systems Inc. Mr. Bromley is a Chartered Accountant.
Mr. T. H. Williams is VP Product, where he leads technology and product development. A highly experienced, creative leader who has dedicated his career to building products on the forefront of technology. Mr. T. H. Williams has led development on a wide variety of platform launches, new devices, and innovative business models, and has helped build and operate multiple successful studios and teams, including Electronic Arts Inc. in Vancouver, Canada and Los Angeles, United States; Relic Entertainment Inc.; Roadhouse Interactive Ltd.; and Blueprint Reality Inc. He is passionate about his teams, loves solving hard problems, and has produced over $2 billion in retail product sales across his career. Mr. T. H. Williams is the son of Mr. T. M. Williams, the Company’s Chairman.
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Board Diversity
The table below provides certain information regarding the diversity of our board of directors as of the date of this Annual Report.
| Board Diversity Matrix | |||||||
| Country of Principal Executive Offices | Canada | ||||||
| Foreign Private Issuers | Yes | ||||||
| Disclosure Prohibited Under Home Country Law | No | ||||||
| Total Number of Directors | 6 | ||||||
| Part I: Gender Identity | Female | Male | Non-Binary | Did not Disclose Gender | |||
| Directors | 1 | 5 | 0 | 0 | |||
| Part II: Demographic Background | |||||||
| Underrepresented Individual in Home Country Jurisdiction | 0 | ||||||
| LGBTQ+ | 0 | ||||||
| Did Not Disclose Demographic Background | 0 | ||||||
B. Compensation
| Annual Compensation | Long-term Compensation | |||||||||||||||||||||||||
| Name and Principal Position | Year | Fees | Bonus | Other Annual Compensation | Restricted Stock Awards | Securities Underlying Options granted | All Other Compensation | |||||||||||||||||||
| $ | $ | $ | $ | (#) | $ | |||||||||||||||||||||
| T.M. Williams - | 2023 | 159,089 | - | - | - | 50,000 | - | |||||||||||||||||||
| Chairman (1) | 2022 | 168,734 | - | - | - | 150,000 | - | |||||||||||||||||||
| 2021 | 132,000 | 19,800 | - | - | 100,000 | - | ||||||||||||||||||||
| J. M. Williams | 2023 | 220,962 | - | - | - | 50,000 | - | |||||||||||||||||||
| CEO (2) | 2022 | 208,184 | - | - | - | 150,000 | - | |||||||||||||||||||
| 2021 | 172,567 | 25,611 | - | - | 100,000 | - | ||||||||||||||||||||
| E. Ben Tora | 2023 | 227,779 | - | - | - | 50,000 | - | |||||||||||||||||||
| President & General (3) | 2022 | 216,957 | - | - | - | 50,000 | - | |||||||||||||||||||
| Manager EMEA (3) | 2021 | 194,680 | 22,278 | - | - | 100,000 | ||||||||||||||||||||
| H. W. Bromley | 2023 | 200,277 | - | - | - | 50,000 | - | |||||||||||||||||||
| CFO (4) | 2022 | 196,064 | - | - | - | 150,000 | - | |||||||||||||||||||
| 2021 | 144,464 | 25,742 | - | - | 100,000 | - | ||||||||||||||||||||
| T. H. Williams | 2023 | 178,341 | - | - | - | 50,000 | - | |||||||||||||||||||
| VP Product (5) | 2022 | 182,556 | - | - | - | 150,000 | - | |||||||||||||||||||
| 2021 | 157,321 | 10,779 | - | - | 100,000 | - | ||||||||||||||||||||
| (1) | All of the compensation paid to the Named Executive Officer is paid to T.M. Williams (ROW), Ltd. for the services of Mr. T. M. Williams. | |
| (2) | During the year ended December 31, 2022, Mr. J. M. Williams became an employee of Shoal Media (Canada) Inc., a wholly owned subsidiary of Kidoz Inc. Prior to Mr. J. M. Williams becoming an employee his compensation was paid to LVA Media Inc. for the services of Mr. J. M. Williams as CEO of the Company and Jayska Consulting Ltd for the marketing services of Mr. J. M. Williams. | |
| (3) | All of the compensation paid to the Named Executive Officer is paid to Mr. E. Ben Tora as an employee of Kidoz Ltd. | |
| (4) | All of the compensation paid to the Named Executive Officer is paid to Bromley Accounting Services Ltd. for the services of Mr. H. W. Bromley. | |
| (5) | All of the compensation paid to the Named Executive Officer is paid to Farcast Operations Inc. Ltd. for the services of Mr. T. H. Williams. |
Management Services Agreement
The Company has the following management consulting agreements with related parties.
| Company | Person | Role | Annual amount | |||||
| T.M. Williams (ROW), Inc. | T. M. Williams | Chairman | $ | 160,000 | ||||
| Bromley Accounting Services Ltd. | H. W. Bromley | CFO | CAD$ | 215,000 | ||||
| Farcast Operations Inc. | T. H. Williams | VP Product | CAD$ | 240,000 | ||||
Compensation of Non-Executive Directors
The Non-Executive Directors receive a cash compensation for their services as members of the Board of Directors based on a compensation per meeting. During the year ended December 31, 2023, the Non-Executive Directors collectively received compensation of $7,505 (Fiscal 2022 - $8,970). The Executive directors currently do not receive cash compensation for their services as members of the Board of Directors. In addition, both the Non-Executive and the Executive Directors are reimbursed for expenses in connection with attendance at Board of Directors meetings and specific business meetings. Directors are eligible to participate in our stock option plans. Option grants to directors are at the discretion of the Board of Directors acting upon the recommendation of the Compensation committee.
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C. Board Practices
We currently have six directors. All directors currently hold office until the next annual meeting of stockholders or until their successors have been elected and qualified. Our officers are appointed annually by the Board of Directors and hold office until their successors are appointed and qualified. Pursuant to the Company’s by-laws, the number of directors shall be increased or decreased from time-to-time by resolution of the Board of Directors or the shareholders. Mr. J. M. Williams and Mr. T. H. Williams are sons of Mr. T. M. Williams. There are no other family relationships between any of the officers and directors of the Company.
Committees of our board of directors
We currently have three committees of our Board of Directors.
| - | Audit Committee - This committee will review the financial statements of the Company and propose to the board to approve the financial statements. The Committee meets quarterly to review and approve the quarterly financial statements and to discuss the affairs of the company with the auditors. |
The Company’s audit committee has the overall duties and responsibilities to:
| ● | review the financial reporting process to ensure the accuracy of the financial statements of the Company; | |
| ● | assist the Board to properly and fully discharge its responsibilities; | |
| ● | strengthen the role of the Board by facilitating in depth discussions between directors, management and external auditors; | |
| ● | evaluate the independent auditor’s qualifications, performance and independence; | |
| ● | facilitate the independence of the independent auditor; | |
| ● | assess the processes relating to the determination and mitigation of risks and the maintenance of an effective control environment; and; | |
| ● | review the processes to monitor compliance with laws and regulations. |
| - | Governance Committee - This committee reviews the ethics policy of the Company and ensures compliance. It will make recommendations to the board for improvement in Corporate Governance. In addition, it will be this committee to whom a whistle blower will report. |
The duties and responsibilities of the Corporate Governance Committee include, without limitation, the following:
| ● | Develop and monitor the Company’s overall approach to corporate governance issues and, subject to approval by the Board, implement and administer this process. | |
| ● | Advise the Board or any of the committees of the Board of any corporate governance issues which the Committee determines ought to be considered by the Board or any such committees. | |
| ● | Review with the Board, on a regular basis, but not less than annually, the terms of reference for the Board, each committee of the Board, the Chairman, and the Chief Executive Officer. | |
| ● | Review with the Board, on a regular basis, the methods, and processes by which the Board fulfils its duties and responsibilities, including without limitation: |
i. the size of the Board;
ii. the number and content of meetings;
iii. the annual schedule of issues to be presented to the Board at its meetings or those of its committees;
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iv. material which is to be provided to the directors generally and with respect to the meetings of the Board or its committees;
v. resources available to the directors; and
vi. the communication process between the Board and management.
| ● | Review and, as necessary, authorize a committee or an individual director to engage separate independent counsel and/or advisors at the expense of the Company in appropriate circumstances. | |
| ● | Make recommendation to the Board regarding changes or revisions to the Board’s Corporate Governance Guidelines; | |
| ● | Evaluate and make recommendations to the Board concerning the appointment of directors to the committees and the selection of Board committee chairs; | |
| ● | Annually evaluate and report to the Board on the performance and effectiveness of the Board and its committees; | |
| ● | Annually, in conjunction with the Chief Executive Officer, evaluate the performance of the Company’s management (other than the Chief Executive Officer). Conduct an annual review of succession planning and report its findings and recommendations to the Board; | |
| ● | Evaluate and lead the Board’s annual review of the Chief Executive Officer’s performance; and | |
| ● | Annually review and evaluate its performance. |
| - | Compensation Committee - This committee will propose the appointment and remuneration of the Chief Executive Officer including salary, stock options, and bonuses. |
The duties and responsibilities of the Compensation Committee include, without limitation, the following:
| ● | to recommend to the Board compensation policies and guidelines for the Company; and | |
| ● | to review and approve corporate goals and objectives relevant to the compensation of the Chief Executive Officer and, in light of those goals and objectives, to recommend to the Board the annual salary, bonus and other benefits, direct and indirect, of the Chief Executive Officer and to approve compensation for all other designated officers of the Company, after considering the recommendations of the Chief Executive Officer, all within the human resources and compensation policies and guidelines approved by the Board. |
D. Employees
As of December 31, 2023, we had 43 employees, consultants, and independent contractors throughout the world including twenty 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, Chief Executive Officer; Eldad Ben Tora, President & General Manager EMEA and T. M. Williams, 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.
E. Share ownership.
See “Item 7—Major Shareholders and Related Party Transactions—Major Shareholders.”
| Page 26 |
F. Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation
Not applicable.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major Shareholders
The following table sets forth certain information known to us with respect to beneficial ownership of our common stock as of April 25, 2024, by:
| - | each person known by us to beneficially own 5% or more of our outstanding common stock; | |
| - | each of our directors; | |
| - | each of the Named Executive Officers; and | |
| - | all of our directors and Named Executive Officers as a group. |
In general, a person is deemed to be a “beneficial owner” of a security if that person has or shares the power to vote or direct the voting of such security, or the power to dispose or direct the disposition of such security. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options or debentures held by that person that are currently exercisable or convertible or exercisable or convertible within 60 days of April 25, 2024, are deemed outstanding.
Percentage of beneficial ownership is based upon 131,304,499 shares of common stock outstanding at April 25, 2024. To our knowledge, except as set forth in the footnotes to this table and subject to applicable community property laws, each person named in the table has sole voting and investment power with respect to the shares set forth opposite such person’s name.
| Name and Address of Beneficial Owner | Number of Shares Beneficially Owned |
Percent of Class | ||||||
| T. M. Williams (Canada) | 17,034,066 | (1) | 12.02 | % | ||||
| J. M. Williams (United Kingdom) | 1,426,950 | (2) | 1.01 | % | ||||
| E. Ben Tora (Israel) | 5,789,965 | (3) | 4.09 | % | ||||
| F. Curtis (Anguilla) | 518,750 | (4) | 0.40 | % | ||||
| C. Kalborg (Sweden) | 431,250 | (5) | 0.33 | % | ||||
| M. David (Israel) | 1,407,991 | (6) | 0.99 | % | ||||
| H. W. Bromley (Canada) | 893,750 | (7) | 0.63 | % | ||||
| T. H. Williams (Canada) | 1,226,080 | (8) | 0.87 | % | ||||
| All directors and Named Executive Officers as a group (8 persons) | 28,728,802 | 20.34 | % | |||||
| Pendinas Limited (Isle of Man) | 27,839,464 | (9) | 19.65 | % | ||||
| Wydler Global Equity Fund (Switzerland) | 12,200,000 | (10) | 8.61 | % | ||||
| Ordan Enterprises Ltd. (Israel) | 8,670,808 | (11) | 6.12 | % | ||||
| Norma Investment Ltd. (Cypress) | 7,700,752 | (12) | 5.43 | % | ||||
| (1) | Includes 16,515,316 shares held directly by Mr. T. M. Williams and 50,000 shares of common stock that may be issued upon the exercise of 50,000 stock purchase options with an exercise price of CAD$0.45 (approximately US$0.33) per share and 200,000 shares of common stock that may be issued upon the exercise of 200,000 stock purchase options with an exercise price of CAD$0.50 (approximately US$0.39) per share and 50,000 shares of common stock that may be issued upon the exercise of 50,000 stock purchase options with an exercise price of CAD$1.02 (approximately US$0.81) per share and 50,000 shares of common stock that may be issued upon the exercise of 50,000 stock purchase options with an exercise price of CAD$0.30 (approximately US$0.22) per share and 168,750 shares of common stock that may be issued upon the exercise of 168,750 stock purchase options with an exercise price of CAD$0.20 (approximately US$0.15) per share. |
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| (2) | Includes, 908,200 shares held directly by Mr. J. M. 50,000 shares of common stock that may be issued upon the exercise of 50,000 stock purchase options with an exercise price of CAD$0.45 (approximately US$0.33) per share and 200,000 shares of common stock that may be issued upon the exercise of 200,000 stock purchase options with an exercise price of CAD$0.50 (approximately US$0.39) per share and 50,000 shares of common stock that may be issued upon the exercise of 50,000 stock purchase options with an exercise price of CAD$1.02 (approximately US$0.81) per share and 50,000 shares of common stock that may be issued upon the exercise of 50,000 stock purchase options with an exercise price of CAD$0.30 (approximately US$0.22) per share and 168,750 shares of common stock that may be issued upon the exercise of 168,750 stock purchase options with an exercise price of CAD$0.20 (approximately US$0.15) per share. | |
| (3) | Includes 5,214,965 shares held directly by Mr. E. Ben Tora and 350,000 shares of common stock that may be issued upon the exercise of 350,000 stock purchase options with an exercise price of CAD$0.45 (approximately US$0.33) per share and 100,000 shares of common stock that may be issued upon the exercise of 100,000 stock purchase options with an exercise price of CAD$0.50 (approximately US$0.39) per share and 50,000 shares of common stock that may be issued upon the exercise of 50,000 stock purchase options with an exercise price of CAD$1.02 (approximately US$0.81) per share and 50,000 shares of common stock that may be issued upon the exercise of 50,000 stock purchase options with an exercise price of CAD$0.30 (approximately US$0.22) per share and 25,000 shares of common stock that may be issued upon the exercise of 25,000 stock purchase options with an exercise price of CAD$0.20 (approximately US$0.15) per share. | |
| (4) | Includes 50,000 shares held directly by Ms. F. Curtis and 200,000 shares of common stock that may be issued upon the exercise of 200,000 stock purchase options with an exercise price of CAD$0.50 (approximately US$0.39) per share and 50,000 shares of common stock that may be issued upon the exercise of 50,000 stock purchase options with an exercise price of CAD$1.02 (approximately US$0.81) per share and 50,000 shares of common stock that may be issued upon the exercise of 50,000 stock purchase options with an exercise price of CAD$0.30 (approximately US$0.22) per share and 168,750 shares of common stock that may be issued upon the exercise of 168,750 stock purchase options with an exercise price of CAD$0.20 (approximately US$0.15) per share. | |
| (5) | Includes 100,000 shares of common stock that may be issued upon the exercise of 100,000 stock purchase options with an exercise price of CAD$0.50 (approximately US$0.39) per share and 50,000 shares of common stock that may be issued upon the exercise of 50,000 stock purchase options with an exercise price of CAD$1.02 (approximately US$0.81) per share and 50,000 shares of common stock that may be issued upon the exercise of 50,000 stock purchase options with an exercise price of CAD$0.30 (approximately US$0.22) per share and 231,250 shares of common stock that may be issued upon the exercise of 231,250 stock purchase options with an exercise price of CAD$0.20 (approximately US$0.15) per share.. | |
| (6) | Includes 543,379 shares held indirectly by Mr. M. David and 339,612 shares indirectly by a Company owned by Mr. M. David and 300,000 shares of common stock that may be issued upon the exercise of 300,000 stock purchase options with an exercise price of CAD$0.45 (approximately US$0.33) per share and 100,000 shares of common stock that may be issued upon the exercise of 100,000 stock purchase options with an exercise price of CAD$0.50 (approximately US$0.39) per share and 50,000 shares of common stock that may be issued upon the exercise of 50,000 stock purchase options with an exercise price of CAD$1.02 (approximately US$0.81) per share and 50,000 shares of common stock that may be issued upon the exercise of 50,000 stock purchase options with an exercise price of CAD$0.30 (approximately US$0.22) per share and 25,000 shares of common stock that may be issued upon the exercise of 25,000 stock purchase options with an exercise price of CAD$0.20 (approximately US$0.15) per share. | |
| (7) | Includes, 375,000 shares held directly by Mr. H. W. Bromley and 50,000 shares of common stock that may be issued upon the exercise of 50,000 stock purchase options with an exercise price of CAD$0.45 (approximately US$0.33) per share and 200,000 shares of common stock that may be issued upon the exercise of 200,000 stock purchase options with an exercise price of CAD$0.50 (approximately US$0.39) per share and 50,000 shares of common stock that may be issued upon the exercise of 50,000 stock purchase options with an exercise price of CAD$1.02 (approximately US$0.81) per share and 50,000 shares of common stock that may be issued upon the exercise of 50,000 stock purchase options with an exercise price of CAD$0.30 (approximately US$0.22) per share and 168,750 shares of common stock that may be issued upon the exercise of 168,750 stock purchase options with an exercise price of CAD$0.20 (approximately US$0.15) per share. |
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| (8) | Includes, 676,080 shares held directly by Mr. T. H. Williams and 150,000 shares of common stock that may be issued upon the exercise of 150,000 stock purchase options with an exercise price of CAD$0.45 (approximately US$0.33) per share and 200,000 shares of common stock that may be issued upon the exercise of 200,000 stock purchase options with an exercise price of CAD$0.50 (approximately US$0.39) per share and 50,000 shares of common stock that may be issued upon the exercise of 50,000 stock purchase options with an exercise price of CAD$1.02 (approximately US$0.81) per share and 50,000 shares of common stock that may be issued upon the exercise of 50,000 stock purchase options with an exercise price of CAD$0.30 (approximately US$0.22) per share and 100,000 shares of common stock that may be issued upon the exercise of 100,000 stock purchase options with an exercise price of CAD$0.20 (approximately US$0.15) per share.. | |
| (9) | Includes 27,839,464 shares held directly by Pendinas Ltd., a company wholly owned by Mr. G. R. Williams. Mr. G. R. Williams is not related to Mr. T. M. Williams, Mr. J. M. Williams nor Mr. T. H. Williams. | |
| (10) | Includes 12,200,000 shares held directly by Wydler Global Equity Fund. | |
| (11) | Includes 8,670,807 shares held directly by Ordan Enterprises Ltd. | |
| (12) | Includes 7,700,752 shares held directly by Norma Investment Limited. |
B. Related Party Transactions
As at and for the year ended December 31, 2023, the Company has the following related party transactions:
| 2023 | 2022 | 2021 | ||||||||||
| Directors fees | $ | 7,505 | $ | 8,970 | $ | 8,000 | ||||||
| Salaries, wages, consultants and benefits | 667,229 | 659,558 | 612,492 | |||||||||
| Selling and marketing | 70,439 | 126,920 | 77,906 | |||||||||
| Stock-based compensation (Note 10) | 188,961 | 276,207 | 237,348 | |||||||||
| Software technology development (Note 8) | 248,780 | 246,016 | 214,843 | |||||||||
| Closing balance for the year | $ | 1,182,914 | $ | 1,317,671 | $ | 1,150,589 | ||||||
The Company has liabilities of $79,852 (2022 - $80,874) as at December 31, 2023, to current directors, officers and companies owned by the current directors and officers of the Company for employment, director and consulting fees.
During the year ended December 31, 2023, the Company granted 400,000 options with an exercise price of CAD$0.30 ($0.22) per share to current directors and officers of the Company. Subsequent to the year ended December 31, 2023, the Company granted 1,056,250 options with an exercise price of CAD$0.20 ($0.14) to current directors and officers of the Company.
During the year ended December 31, 2022, the Company granted 900,000 options with an exercise price of CAD$0.50 ($0.39) per share to current directors and officers of the Company.
During the year ended December 31, 2021, the Company granted the following options to related parties:
| a) | 400,000 options with an exercise price of CAD$0.50 ($0.39) per share | |
| b) | 400,000 options with an exercise price of CAD$1.02 ($0.80) per share |
The related party transactions are in the normal course of operations and were granted at the exchange amount, which is the amount of consideration established and agreed to by the related parties.
C. Interests of Experts and Counsel
Not applicable.
ITEM 8. FINANCIAL INFORMATION
A. Consolidated Statements and Other Financial Information
The Company’s financial statements are stated in United States dollars and are prepared in accordance with US GAAP.
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Please see “Item 18—Financial Statements” below for additional information required to be disclosed under this item.
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, 2023. 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.
Dividend Policy
We do not anticipate declaring or paying any cash dividends to holders of our common stock in the near term. We currently intend to retain future earnings, if any, to finance the growth of our business. We may, however, adopt in the future a policy to make cash dividends. Our future dividend policy is within the discretion of our board of directors. Any determination to pay or not pay cash dividends will depend upon then-existing conditions, including our results of operations, financial condition, capital requirements, investment opportunities, statutory and contractual restrictions on our ability to pay dividends and other factors our board of directors may deem relevant.
B. Significant Changes
Not applicable.
ITEM 9. THE OFFER AND LISTING
A. Offer and Listing Details
Our common shares are currently quoted on the TSX Venture Exchange in Canada under the symbol “KIDZ”. Our shares continue to be quoted on the OTC under the symbol “KDOZF”.
B. Plan of distribution
Not applicable.
C. Markets
Our common shares are currently quoted on the TSX Venture Exchange in Canada under the symbol “KIDZ”. Our shares continue to be quoted on the OTC under the symbol “KDOZF”.
D. Selling shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the issue
Not applicable.
ITEM 10. ADDITIONAL INFORMATION
A. Share Capital
Not applicable.
B. Memorandum and Articles of Association
The information required to be disclosed under this item is incorporated by reference to Exhibit 1.1 filed January 4, 2023, for the updated bylaws and memorandum and articles of association for the Company as a result of its continuation into Canada effective January 1, 2023.
Exhibit 1.2 contains the Certificate of Continuance into Canada.
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C. Material Contracts
The Company has Management Services Agreements with its Chairman and Chief Financial Officer and are included as Exhibits 10.37 to 10.39.
D. Exchange Controls
There are no government laws, decrees or regulations in Anguilla or Canada which restrict the export or import of capital, or which affect the remittance of dividends, interest, or other payments to non-resident holders of the Company’s common shares.
E. Taxation
Effective January 1, 2023, continued out of Anguilla and into Canada and became a Canadian taxpayer.
The following subsidiaries pay taxes:
| - | Kidoz Ltd. This is an Israeli Company. The Israeli corporate tax rate has been 12%. During the year ended December 31, 2023, our Israeli subsidiary was officially recognized as a Preferred Technology Enterprise in Israel, a prestigious status that comes with extensive tax relief benefits as provided by law and applied to the fiscal 2022 tax year. | |
| - | Shoal Media (Canada) Inc. This is an Canadian Company. The Canadian corporate tax rate has been 23% | |
| - | The remaining subsidiaries are not profitable and therefore have an assessed taxation loss. |
There are the following taxation effects for our shareholders subsequent to continuation of the Company into Canada.
Canadian Federal Income Tax Consequences
The following summarizes the principal Canadian federal income tax consequences applicable to the holding and disposition of common shares in the capital of the Company by a non Canadian residents, and who holds common shares solely as capital property. This summary is based on the current provisions of the Income Tax Act (Canada), referred to as the “Tax Act”, the regulations thereunder, all amendments thereto publicly proposed by the government of Canada, the published administrative practices of Revenue Canada, Customs, Excise and Taxation, and the current provisions of the Canada-United States Income Tax Convention, 1980, as amended, referred to as the “Treaty”. Except as otherwise expressly provided, this summary does not take into account any provincial, territorial or foreign (including without limitation, any United States) tax law or treaty. It has been assumed that all currently proposed amendments will be enacted substantially as proposed and that there is no other relevant change in any governing law or practice, although no assurance can be given in theses respects.
Each non Canadian shareholder is advised to obtain tax and legal advice applicable to such their particular circumstances.
Every non-Canadian shareholder is liable to pay a Canadian withholding tax on every dividend that is or is deemed to be paid or credited to the non-Canadian shareholder on the non-Canadian shareholder common shares. The statutory rate of withholding tax is 25% of the gross amount of the dividend paid. There are treaties which reduces the statutory rate with respect to dividends paid to a non-Canadian shareholder for the purposes of the treaties. Where applicable, the general rate of withholding tax under the treaties is 15% of the gross amount of the dividend. The Company is required to withhold the applicable tax from the dividend payable to the non-Canadian shareholder, and to remit the tax to the Receiver General of Canada for the account of the non-Canadian shareholder.
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Pursuant to the Tax Act, a non-Canadian shareholder will not be subject to Canadian capital gains tax on any capital gain realized on an actual or deemed disposition of a common share, including a deemed disposition on death, provided that the non-Canadian shareholder did not hold the common share as capital property used in carrying on a business in Canada, and that neither the non-Canadian shareholder nor persons with whom the non-Canadian shareholder did not deal at arms-length (alone or together) owned or had the right or an option to acquire 25% or more of the issued shares of any class of the Company at any time in the five years immediately preceding the disposition.
F. Dividends and paying agents.
Not applicable.
G. Statement by experts.
Not applicable.
H. Documents on display
We are subject to certain of the reporting requirements of the Exchange Act, as applicable to “foreign private issuers” as defined in Rule 3b-4 under the Exchange Act. As a foreign private issuer, we are exempt from certain provisions of the Exchange Act. Accordingly, our proxy solicitations are not subject to the disclosure and procedural requirements of Regulation 14A under the Exchange Act, and transactions in our equity securities by our officers and directors are exempt from reporting and the “short-swing” profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file periodic reports and financial statements as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. However, we file with the Securities and Exchange Commission an annual report on Form 20-F containing financial statements audited by an independent accounting firm. We also submit to the Securities and Exchange Commission reports on Form 6-K containing (among other things) press releases and unaudited financial information. We post our annual report on Form 20-F on our website (www.kidoz.net) promptly following the filing of our annual report with the Securities and Exchange Commission. The information on our website is not incorporated by reference into this annual report.
Any statement in this Report about any of our contracts or other documents is not necessarily complete. If the contract or document is filed as an exhibit to this report or any of our annual reports or to a registration statement or other documents filed by us, the contract or document is deemed to modify the description contained in this Report. You must review the exhibits themselves for a complete description of the contract or document. In the event any of the documents that are filed as exhibits to our annual reports are not in English, the original language version is on file in our offices and is available upon request.
The Company makes available through the Corporate Kidoz Inc. section of its internet website at http://investor.kidoz.net its annual report on Form 20-F, quarterly reports on Form 6-K, current reports on Form 6-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.
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I. Subsidiary Information
Not applicable.
J. Annual Report to Security Holders
We held our Annual Meeting of Stockholders in Anguilla on November 30, 2023. 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 2023 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 October 5, 2023.
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 | ||||||||
| 48,285,949 | 25,489 | Nil | ||||||||
(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 | 47,344,236 | 9,750 | 957,452 | |||||||||
| Mr. J. M. Williams | 47,344,236 | 9,750 | 957,452 | |||||||||
| Mr. E. Ben Tora | 47,345,036 | 8,950 | 957,452 | |||||||||
| Ms. F. Curtis | 47,343,098 | 10,888 | 957,452 | |||||||||
| Mr. C. Kalborg | 47,345,036 | 8,950 | 957,452 | |||||||||
| Mr. M. David | 47,345,236 | 8,750 | 957,452 | |||||||||
(c) Approved the selection of Davidson & Company LLP, Chartered Professional Accountants as the Company’s independent auditors for the fiscal year ending December 31, 2023.
| FOR | WITHHOLD | NOT VOTED | ||||||||
| 48,294,809 | 16,629 | nil | ||||||||
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(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 | ||||||||
| 46,304,936 | 1,049,050 | 957,452 | ||||||||
Subsequent to their appointment the Board of Directors ratified the continuation of Mr. Jason Williams as CEO of the Kidoz Inc. organization and Mr. T. M. Williams, will continue to serve as Chairman.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to various financial risks resulting from both its operations. The Company does not enter into financial instrument agreements including derivative financial instruments for speculative purposes. The fair values of the Company’s financial instruments approximate the carrying values, due to their short terms to maturity or attached market rates of interest. The Company is exposed to various risks related to its financial instruments as follows:
| (i) | Market risk | |
| Market risk is the risk that changes in market prices, such as interest rates and foreign exchange rates, will affect the Company’s net income and the value of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable limits, while maximizing returns. | ||
| (ii) | Foreign exchange risk | |
| The Company has exposure to foreign exchange risk which is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Foreign exchange risk arises when future commercial transactions and recognized assets and liabilities are denominated in a currency that is not the Company’s functional currency. The Company has not entered into foreign exchange purchase contracts to manage its foreign exchange risk, because, in management’s view, the cost of setting up the contracts is in excess of the risks associated with a sudden change in the exchange rates. Management continually monitors the exchange rates and will enter into risk prevention measures when warranted. The Company is also exposed to foreign exchange risk on its cash, accounts receivable and accounts payable balances that are mostly denominated in U.S. dollars and Euros, whereas our employment and consulting costs are mostly denominated in Israeli Shekels, British Pounds, Canadian Dollars, and US Dollars. | ||
| (iii) | Credit Risk | |
| Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Company is subject to credit risk with respect to cash and accounts receivable. The Company’s maximum exposure to credit risk at the end of the reporting period is the carrying value of these assets. Credit risk is managed through a credit approval process and monitoring procedures, and there are no expected credit losses. | ||
| All cash balances are held at a major banking institutions in Israel, United Kingdom and Canada and management believes the risk of loss to be remote. | ||
| (iv) | Liquidity risk | |
| Liquidity risk is the risk that arises when the maturity of assets and the maturity of liabilities do not match. An unmatched position potentially enhances profitability but can also increase the risk of loss. The Company’s liquidity needs can be met through a variety of sources. The Company generates cash from operations, and in the past by issuances of common shares. The Company manages liquidity risk by maintaining sufficient cash balances to meet liabilities when due and by continuously monitoring actual and forecast cash flows. |
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ITEM 12: DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Stock Option Plans
In the year ended December 31, 2015, the 1999, 2001 and 2005 Stock Option Plans were discontinued and replaced with the 2015 Stock Option Plan.
Our Board of Directors administers the 2015 Stock Option Plan. Our Board is authorized to construe and interpret the provisions of the Stock Option Plans, to select employees, directors, and consultants to whom options will be granted, to determine the terms and conditions of options and, with the consent of the grantee, to amend the terms of any outstanding options. The 2015 Stock Option Plan provides for the granting of stock options to the employees, directors, advisors, and consultants of the Corporation to encourage proprietary interest in the Corporation, to encourage such employees to remain in the employ of the Corporation or such directors, advisors and consultants to remain in the service of the Corporation, and to attract new employees, directors, advisors and consultants with outstanding qualifications.
Our Board determines the terms and provisions of each option granted under the Stock Option Plans, including the exercise price, vesting schedule, repurchase provisions, rights of first refusal and form of payment. The Plan shall not exceed 10% of the number of Shares of the Company issued and outstanding as of each Award Date, inclusive of all Shares presently reserved for issuance pursuant to previously granted stock options, unless shareholder approval is obtained in advance. The Exercise Price shall be that price per Share, as determined by the Board in its sole discretion, and announced as of the Award Date, at which an Option Holder may purchase a Share upon the exercise of an Option, provided that it shall not be less than the closing price of the Company’s Shares traded through the facilities of the Exchange on the day preceding the Award Date, less any discount permitted by the Exchange, or such other price as may be required or permitted by the Exchange.
The term of options under the Stock Option Plans will be determined by our Board; however, the term of the stock option may not be for more than ten years. Where the award agreement permits the exercise of an option for a period of time following the recipient’s termination of service with us, disability, or death, that option will terminate to the extent not exercised or purchased on the last day of the specified period or the last day of the original term of the option, whichever occurs first.
If a third party acquires the Company through the purchase of all or substantially all of our assets, a merger or other business combination, except as otherwise provided in an individual award agreement, all unexercised options will terminate unless assumed by the successor corporation.
During the year ended December 31, 2023, the Company granted 1,885,000 options to employees and consultants with an exercise price of CAD$0.30 ($0.23) where 2% vests per month. 400,000 of these options were granted to directors and officers of the Company.
During the year ended December 31, 2023, there were nil (2022 – nil) options exercised and 460,000 (2022 – 285,600) options cancelled and 1,988,000 (2022 – 506,150) options expired unexercised.
During the year ended December 31, 2022, the Company granted 2,550,000 options to employees and consultants with an exercise price of CAD$0.50 ($0.37) where 2% vests per month. 900,000 of these options were granted to directors and officers of the Company.
During the year ended December 31, 2022, 285,600 options were cancelled, and 506,150 options expired unexercised.
Subsequent to the year ended December 31, 2023, 2,318,750 options were granted to employees and consultants with an exercise price of CAD$0.20 ($0.14) where 2% vests per month. 1,056,250 options of these options were granted to directors and officers of the Company.
Warrants
The Company granted 230,000 common share purchase warrants to Research Capital Corporation (“RCC”) in the year ended December 31, 2022. 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 and expired unexercised on April 1, 2023.
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PART II
ITEM 13: DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
Not Applicable.
ITEM 14: MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Not applicable.
ITEM 15: CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures
Our Chairman, Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report, have concluded that, as of such date, our disclosure controls and procedures were effective to ensure that the information required in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
(b) Management’s Annual Report on Internal Control over Financial Reporting
Our management, including the Chairman, Chief Executive Officer, and the Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934, as amended, as a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management evaluated of the effectiveness of the Company’s design and operation of its disclosure controls and procedures as defined in Exchange Act Rule 13a-15(f), based on the framework set forth in the Internal Control—Integrated Framework (1992) issued by the by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on our evaluation, we believe that, as of December 31, 2023, the Company’s internal control over financial reporting is effective under the COSO framework.
(c) Attestation report of the registered public accounting firm.
This Form 20-F Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Form 20-F Annual Report.
(d) Changes in internal control over financial reporting
There were no changes in our internal control over financial reporting that occurred during the year ended December 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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ITEM 16. [RESERVED]
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
The Company does not have an audit committee financial expert serving on its audit committee. Each of the Company’s directors serving on the audit committee is financially literate and is able to professionally discharge the duties incumbent upon audit committee members. However, none of the audit committee members are “financial experts”. At such time as the Company may secure a project and is able to raise the significant funds necessary to exploit the opportunity, the Company will make a concerted effort to identify and appoint a financial expert to its audit committee.
ITEM 16B. CODE OF ETHICS
We have adopted a Code of Business Conduct and Ethics that applies to all entities controlled by the Company and its employees, directors, officers, and agents of the Company. We will provide any person, free of charge, a copy of our Code of Business Conduct and Ethics upon written request to our principal executive office.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
During the year ended December 31, 2023, the Company incurred fees of $105,104 (2022 - $129,946) from the principal accountant during fiscal 2023 - Davidson & Company LLP, $105,104 of these fees related to audit fees (2022 - $129,946).
Our Audit Committee reviewed the audit and non-audit services rendered by Davidson & Company LLP, during the periods set forth above and concluded that such services were compatible with maintaining the auditors’ independence. All audit and non-audit services performed by our independent accountants are pre-approved by our Audit Committee to assure that such services do not impair the auditors’ independence from us.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.
Not applicable
ITEM 16E: PURCHASE OF EQUITY SECURITIES BY THE COMPANY AND AFFILIATED PURCHASERS
During the year ended December 31, 2022, the Company filed a Notice of Intention to Make a Normal Course Issuer Bid (the “Notice of Intention”) with the TSX Venture Exchange (“TSX-V”) on September 15, 2022. Upon receiving approval from the TSX-V, effective September 16, 2022, the Company commenced a normal course issuer bid (“NCIB”), whereby the Company may purchase for cancellation up to 6,579,074 shares, being 5% of the issued and outstanding shares as of such date. Any purchases under the NCIB will be made on the open market through the facilities of the TSX-V or alternative Canadian trading systems. Purchases will be made at market prices of the shares at the time of acquisition.
Purchases under the NCIB may commence as of September 16, 2022, and will end on the earlier of: (i) September 14, 2023; or (ii) the date on which the Company has purchased the maximum number of shares to be acquired under the NCIB. The Company may terminate the NCIB earlier if it feels it is appropriate to do so.
The normal course issuer bid will be conducted through Kidoz Inc’s broker Research Capital Corporation. The purchase and payment of the common shares will be made in accordance with the requirements of the TSX-V and applicable securities laws. The actual number of common shares purchased, timing of purchases and share price will depend upon market conditions at the time and securities law requirements. All common shares acquired will be returned to treasury and cancelled.
| Page 37 |
The purchase of and payment for the shares will be made in accordance with the requirements of the TSX-V and applicable securities laws. The actual number of shares purchased, timing of purchases and share price will depend upon market conditions at the time and securities law requirements. All shares acquired pursuant to the NCIB will be returned to treasury and cancelled.
During the year ended December 31, 2023, 41,500 shares which were acquired during the year ended December 31, 2022, pursuant to the NCIB in effect, at an aggregate cost of $11,793, were cancelled.
During the year ended December 31, 2023, 2,000 shares were acquired pursuant to the NCIB in effect, at an aggregate cost of $517. During the year ended December 31, 2023, 2,000 shares were cancelled.
During the year ended December 31, 2022, 275,000 shares were acquired pursuant to the NCIB in effect, at an aggregate cost of $87,778. During the year ended December 31, 2022, 233,500 shares were cancelled.
ITEM 16F: CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTS
Not Applicable.
ITEM 16G: CORPORATE GOVERNANCE
We are organized under the laws of Canada, and our Common Shares are listed for trading on the TSX Venture Stock Exchange (“TSX-V”) under the symbol “KIDZ”. We comply with the applicable laws of Canada and rules and regulations of the TSX-V, including rules related to corporate governance practices.
General
Corporate governance refers to the policies and structure of the board of directors of a company whose members are elected by and are accountable to the shareholders of the Company. Corporate governance encourages establishing a reasonable degree of independence of the board of directors from executive management and the adoption of policies to ensure the board of directors recognizes the principles of good management. The Board of the Company is committed to sound corporate governance practices, as such practices are both in the interests of shareholders and help to contribute to effective and efficient decision-making.
Board of Directors
Directors are considered to be independent if they have no direct or indirect material relationship with the Company. A “material relationship” is a relationship which could, in the view of the Company’s Board, be reasonably expected to interfere with the exercise of a director’s independent judgment.
The non-independent members of the Board of the Company are as follows:
| Tryon (Tarrnie) Williams | Chairman | ||
| Jason Williams | CEO | ||
| Eldad Ben Tora | President & General Manager EMEA |
The independent, non-executive members of the Board of the Company are as follows:
Claes Kalborg
Moshe David
Fiona Curtis
Management has been delegated the responsibility for meeting defined corporate objectives, implementing approved strategic and operating plans, carrying on the Company’s business in the ordinary course, managing cash flow, evaluating new business opportunities, recruiting staff, and complying with applicable regulatory requirements. The board facilitates its independent supervision over management by reviewing and approving long-term strategic, business and capital plans, material contracts and business transactions, and all debt and equity financing transactions. Through its audit committee, the Board examines the effectiveness of the Company’s internal control processes and management information systems.
Board Meetings
The Company holds regular Board meetings which include presentations by the Company’s management to give the directors additional insight into the Company’s business.
Ethical Business Conduct
The Board is of the view that the fiduciary duties placed on individual directors by the Company’s governing corporate legislation and the common law are sufficient to ensure that the Board operates independently of management and in the best interests of the Company.
Nomination of Directors
The Board reviews its size each year. It considers the number of directors to recommend to the shareholders for election at the annual meeting of shareholders, taking into account the number required to carry out the Board’s duties effectively and to maintain a diversity of views and experience. Current board members stand for 1 year until re-election at the next board meeting.
| Page 38 |
Assessments
The Board monitors the adequacy of information given to directors, communication between the Board and management and the strategic direction and processes of the Board and committees. The Board has frequent communications with management and other board members and is regularly consulted on important Company decisions. In this context, the Board periodically reviews the performance of the Board as a whole, any standing committees it has appointed, and individual directors, to ensure each is performing effectively.
Quorum
A quorum of shareholders is present at a meeting of shareholders if the holders of not less than 33 1/3% of the shares entitled to vote at the meeting are present in person or represented by proxy (including electronically), irrespective of the number of persons actually present at the meeting.
ITEM 16H. MINE SAFETY DISCLOSURE
Not applicable.
ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
ITEM 16J. INSIDER TRADING POLICIES
Pursuant to applicable SEC transition guidance, the disclosure required by this Item 16J will be applicable to the Company for the fiscal year ending December 31, 2024.
ITEM 16K. CYBERSECURITY
At Kidoz Inc., cybersecurity risk management is an integral part of our overall enterprise risk management program. Our cybersecurity risk management program is designed to align with industry practices and provide a framework for handling cybersecurity threats and incidents. We identify and assess risks from cybersecurity threats as part of our overall risk assessment process. We have implemented certain tools and processes to aid us in our efforts to identify, assess, prevent, and manage such cybersecurity risks. In addition to our own expertise, we also collaborate with subject matter specialists, as necessary, to gather insights for identifying and assessing cybersecurity threat risks, their likelihood and severity, and potential preventative measures and mitigations.
Our framework includes steps for (i) assessing the severity of a cybersecurity threat, (ii) identifying the source of a cybersecurity threat, (iii) implementing cybersecurity countermeasures and mitigation strategies and (iv) informing management of material cybersecurity threats and incidents.
Our cybersecurity team engages as needed our Cyber Security division experts for risk assessment and system enhancements. In addition, our cybersecurity team is involved in annual training.
Our Board of Directors has overall oversight responsibility for our risk management and delegates the daily supervision of cybersecurity issues to our VP Product. Our VP Product reports material cybersecurity incidents to the Chairman and Chief Executive Officer, and if needed, the Chairman and Chief Executive Officer will report the incident to our Board of Directors to take appropriate and timely measures in response to the incident.
Our management is responsible for identifying, considering, and assessing material cybersecurity risks on an ongoing basis, establishing processes to ensure that such potential cybersecurity risk exposures are monitored, putting in place appropriate mitigation measures and maintaining cybersecurity programs. We established our data security management committee (the “Data Security Management Committee”) in 2021, composed of personnel from our cyber-Security division, IT center, and management team, to improve data security. The Data Security Management Committee is responsible for developing data security protection strategies, plans, and systems and providing required support and coordinating on major data security incidents. Our cybersecurity programs are under the direction of our VP Product who receives reports from our cybersecurity team and monitors the prevention, detection, mitigation, and remediation of cybersecurity incidents. Our VP Product and other dedicated personnel are experienced information systems professionals with many years of experience in maintaining cybersecurity.
During the year ended December 31, 2023, we did not identify any cybersecurity threats that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition. However, despite our efforts, we cannot eliminate all risks from cybersecurity threats, or provide assurances that we have not experienced an undetected cybersecurity incident. For more information about these risks, see “Item 3. Key Information — 3.D. Risk Factors — Risks Related to Our Business — Breaches of network or information technology security, natural disasters or terrorist attacks could have an adverse effect on our business.
| Page 39 |
PART III
ITEM 17: FINANCIAL STATEMENTS
Not Applicable.
ITEM 18: FINANCIAL STATEMENTS
Our Financial Statements are included in pages F-1.
ITEM 19. EXHIBITS
The following exhibits are filed as part of this annual report:
EXHIBIT LIST
The following instruments are included as exhibits to this Report. Exhibits incorporated by reference are so indicated.
| (a) | Previously filed with the Company’s report on Form 8-K on January 4, 2023. | |
| (b) | Previously filed with the Registrant’s registration statement on Form 10 on June 9, 1999. | |
| (c) | Previously filed with the Company’s quarterly report on Form 10-Q for the period ended September 30, 2002, on November 14, 2002. | |
| (d) | Previously filed with the Company’s quarterly report on Form 10-Q for the period ended September 30, 2002, on August 14, 2002. | |
| (e) | Previously filed with the Company’s report on Form 8-K on December 26, 2006. | |
| (f) | Previously filed with the Company’s report on Form 8-K on June 17, 2010. | |
| (g) | Previously filed with the Company’s report on Form 8-K on March 24, 2014. | |
| (h) | Previously filed with the Company’s report on Form 8-K on March 12, 2019. |
| Page 40 |
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
| KIDOZ INC. | ||
| By: | /s/ J. M. Williams | |
| J. M. Williams | ||
| Chief Executive Officer | ||
| By: | /s/ H. W. Bromley | |
| H. W. Bromley | ||
| Chief Financial Officer | ||
| Date: | April 25, 2024 | |
| Page 41 |
F1 – FINANCIAL STATEMENTS
Kidoz Inc. and subsidiaries
Consolidated Financial Statements
Years ended December 31, 2023, 2022 and 2021
| F-1 |
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, 2023 and 2022, and the related consolidated statements of operations and comprehensive (loss) income, stockholders’ equity, and cash flows for the years ended December 31, 2023, 2022 and 2021, 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, 2023 and 2022, and the results of its operations and its cash flows for the years ended December 31, 2023, 2022 and 2021, 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.
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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
| F-2 |
Evaluation of Intangible Assets 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, and goodwill, was $3,903,158 as at December 31, 2023 and is a significant portion (33%) of the Company’s total assets. As discussed in notes 2(l), 2(m) and 2(n) 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, 2023, 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, current industry, market and economic trends 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.
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/
| |
| Chartered Professional Accountants | |
| April 25, 2024 |
| F-3 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Consolidated Balance Sheets
| As at December 31, | 2023 | 2022 | ||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, less allowance for doubtful accounts $ | ||||||||
| Prepaid expenses (Note 4) | ||||||||
| Total Current Assets | ||||||||
| Equipment (Note 5) | ||||||||
| Goodwill (Note 7) | ||||||||
| Intangible assets (Note 6) | ||||||||
| Long term cash equivalent | ||||||||
| Operating lease right-of-use assets (Note 14) | ||||||||
| Security deposit | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Accounts payable and accrued liabilities - related party (Note 15) | ||||||||
| Derivative liability – warrants (Note 2i and 10) | ||||||||
| Government CEBA current loan (Note 9) | ||||||||
| Operating lease liabilities – current portion (Note 14) | ||||||||
| Total Current Liabilities | ||||||||
| Operating lease liabilities – non-current portion (Note 14) | ||||||||
| Total Liabilities | ||||||||
| Commitments (Note 12) | ||||||||
| Stockholders’ Equity (Note 10): | ||||||||
| Common stock, authorized, shares issued and outstanding (December 31, 2022 - ) | ||||||||
| Treasury shares, l shares (December 31, 2022 – ) | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income: | ||||||||
| Foreign currency translation adjustment | ||||||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
See accompanying notes to consolidated financial statements.
| F-4 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Consolidated Statements of Operations and Comprehensive (Loss) Income
| Years ended December 31, | 2023 | 2022 | 2021 | |||||||||
| Revenue: | ||||||||||||
| Ad tech advertising revenue | $ | $ | $ | |||||||||
| Programmatic advertising revenue | ||||||||||||
| Content revenue | ||||||||||||
| Total revenue | ||||||||||||
| Cost of sales: | ||||||||||||
| Total cost of sales | ||||||||||||
| Gross profit | ||||||||||||
| Operating expenses: | ||||||||||||
| Amortization and expiration of operating lease right-of-use assets (Note 14) | ||||||||||||
| Depreciation and amortization (Notes 5 and 6) | ||||||||||||
| Directors fees | ||||||||||||
| General and administrative (Note 17) | ||||||||||||
| Provision for doubtful debts | ||||||||||||
| Salaries, wages, consultants and benefits | ||||||||||||
| Selling and marketing | ||||||||||||
| Stock awareness program (Note 18) | ||||||||||||
| Stock-based compensation (Note 10) | ||||||||||||
| Software technology development (Note 8) | ||||||||||||
| Total operating expenses | ||||||||||||
| (Loss) Income before other income (expense) and income taxes | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||
| Foreign exchange gain (loss) | ( | ) | ( | ) | ||||||||
| Gain on derivative liability – warrants (Note 10(c)) | ||||||||||||
| Interest and other income | ||||||||||||
| Gain on settlement of debt (Note 9) | ||||||||||||
| Net (loss) income before income taxes | ( | ) | ( | ) | ||||||||
| Provision for income taxes (Note 13) | ( | ) | ( | ) | ||||||||
| Deferred taxation recovery (expense) (Note 13) | ( | ) | ||||||||||
| Net loss and comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Basic and diluted loss per common share (Note 2) | $ | ) | $ | ) | $ | ) | ||||||
| Weighted average common shares outstanding, basic (Note 2) | ||||||||||||
| Weighted average common shares outstanding, diluted (Note 2) | ||||||||||||
See accompanying notes to consolidated financial statements.
| F-5 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Consolidated Statements of Stockholders’ Equity
Years ended December 31, 2023, 2022 and 2021
| Common stock | Accumulated Other Comprehensive income | |||||||||||||||||||||||
| Shares | Amount | Treasury shares | Accumulated Deficit | Foreign currency translation adjustment | Total Stockholders’ Equity | |||||||||||||||||||
| Balance, December 31, 2020 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Shares issued | ||||||||||||||||||||||||
| Options exercised | ||||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Shares issued | ||||||||||||||||||||||||
| Repurchase of common shares | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||
| Repurchase of common shares | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
See accompanying notes to consolidated financial statements.
| F-6 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Consolidated Statements of Cash Flows
| Years ended December 31, | 2023 | 2022 | 2021 | |||||||||
| Cash flows from operating activities: | ||||||||||||
| Net (loss) income | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||||||
| Depreciation and amortization | ||||||||||||
| Amortization and expiration of operating lease right-of-use assets | ||||||||||||
| Gain on derivative liability – warrants | ( | ) | ( | ) | ( | ) | ||||||
| Gain on settlement of debt | ( | ) | ||||||||||
| Provision for doubtful debts | ||||||||||||
| Shares issued for services | ||||||||||||
| Stock awareness program – warrants granted for services | ||||||||||||
| Deferred income tax expense | ( | ) | ||||||||||
| Stock-based compensation | ||||||||||||
| Unrealized foreign exchange (income) loss | ( | ) | ( | ) | ||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Accounts receivable | ( | ) | ( | ) | ||||||||
| Prepaid expenses | ( | ) | ( | ) | ||||||||
| Accounts payable and accrued liabilities | ( | ) | ||||||||||
| Net cash (used in) provided by operating activities | ( | ) | ||||||||||
| Cash flows from investing activities: | ||||||||||||
| Acquisition of equipment | ( | ) | ( | ) | ( | ) | ||||||
| Long-term cash equivalent | ||||||||||||
| Security deposits | ( | ) | ||||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||||||
| Repayment of Government CEBA loan | ( | ) | ||||||||||
| Options exercised | ||||||||||||
| Payments for repurchase of common shares | ( | ) | ( | ) | ||||||||
| Proceeds of short-term loan | ||||||||||||
| Repayment of short-term loan | ( | ) | ||||||||||
| Payments on operating lease liabilities | ( | ) | ( | ) | ( | ) | ||||||
| Net cash (used in) provided by financing activities | ( | ) | ( | ) | ||||||||
| Change in cash | ( | ) | ||||||||||
| Cash, beginning of year | ||||||||||||
| Cash, end of year | $ | $ | $ | |||||||||
| Supplementary information: | ||||||||||||
| Interest paid | $ | $ | $ | |||||||||
| Income taxes paid (recovery) | $ | $ | $ | |||||||||
| Non-cash transaction | ||||||||||||
| Shares issued to settle accounts payable and accrued liabilities | $ | $ | $ | |||||||||
See accompanying notes to consolidated financial statements.
| F-7 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Consolidated Financial Statements
Years ended December 31, 2023, 2022 and 2021
1. Introduction:
Nature of business
Kidoz Inc. (the “Company”, “Kidoz” or “we”), incorporated in Anguilla, British West Indies in 2005, is a focused AdTech solution provider. The Company is the 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 contextual targeting tools to enable brands to reach their ideal customers.
Effective January 1, 2023, Kidoz Inc. continued out of the jurisdiction of the Anguillian Business Companies Act, 2022, and into the jurisdiction of the Canada Business Corporations Act (“CBCA”).
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 generate sufficient cash flows to fund continued operations for the next 12 months, or, in the absence of adequate cash flows from operations, obtaining additional financing.
Management continues to review operations in order to identify additional strategies designed to generate cash flow, improve the Company’s financial position, and enable the timely discharge of the Company’s obligations.
There have been many factors which have affected the world economies in recent years. These include global pandemics (i.e. coronavirus COVID-19), inflation, the war in Ukraine and Gaza and many more. These factors have adversely affected workforces, economies, and financial markets globally. It has also disrupted the normal operations of many businesses, including the Company’s. These factors have affected spending, thereby affecting demand for the Company’s product and the Company’s business and its results of operations. It is not possible for the Company to predict the duration or magnitude of these factors at this time and the full effects on the Company’s business, its future results of operations, or ability to raise funds.
2. Summary of significant accounting policies:
(a) Basis of presentation:
These 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.
| F-8 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Consolidated Financial Statements
Years ended December 31, 2023, 2022 and 2021
| 2. | Summary of significant accounting policies (Continued): |
(a) Basis of presentation: (Continued)
The financial statements include the accounts of the Company’s subsidiaries:
Schedule of Consolidation of Subsidiaries
| Company | Registered | % Owned | ||
| Shoal Media (Canada) Inc. | British Columbia, Canada | |||
| Kidoz Ltd. | Israel | |||
| Prado Media Ltd. | British Columbia, Canada | |||
| Rooplay Media Kenya Limited | Kenya | |||
| Shoal Media Inc. | Anguilla | |||
| Shoal Games (UK) Plc | United Kingdom | |||
| Shoal Media (UK) Ltd. | United Kingdom |
During the year ended December 31, 2022, Coral Reef Marketing Inc. merged with Kidoz Inc. and Kidoz Inc. is the surviving entity.
During the year ended December 31, 2023, Shoal Games (UK) Plc was discontinued.
In addition, there are the following dormant subsidiaries; Bingo.com (Antigua) Inc., Bingo.com (Wyoming) Inc., and Bingo Acquisition Corp.
All inter-company balances and transactions have been eliminated in the consolidated financial statements.
(b) Use of estimates:
The preparation of consolidated financial statements in conformity with US GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and recognized revenues and expenses for the reporting periods.
Significant areas requiring the use of estimates include the collectability of accounts receivable, the valuation of stock-based compensation, the valuation of deferred tax assets and liabilities, the useful lives of intangible assets, the inputs used in assessing goodwill impairment, and the derivative liability – warrants valuation. Actual results may differ significantly from these estimates.
(c) Revenue recognition:
In accordance with ASC 606, Revenue from Contracts with Customers, revenue is recognized when a customer obtains control of promised services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services.
We derive substantially all of our revenue from the sale of Ad tech advertising revenue.
| F-9 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Consolidated Financial Statements
Years ended December 31, 2023, 2022 and 2021
| 2. | Summary of significant accounting policies (Continued): |
(c) Revenue recognition: (Continued)
To achieve this core principle, the Company applied the following five steps:
1) Identify the contract with a customer
A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the services to be transferred, whose impression count will form the basis of the revenue and identifies the payment terms related to these services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.
2) Identify the performance obligations in the contract
Performance obligations promised in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised services, the Company must apply judgment to determine whether promised services are capable of being distinct and distinct in the context of the contract. If these criteria are not met the promised services are accounted for as a combined performance obligation.
3) Determine the transaction price
The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring services to the customer. None of the Company’s contracts contain financing or variable consideration components.
4) Allocate the transaction price to performance obligations in the contract
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis. The Company determines standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.
| F-10 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Consolidated Financial Statements
Years ended December 31, 2023, 2022 and 2021
| 2. | Summary of significant accounting policies (Continued): |
(c) Revenue recognition: (Continued)
5) Recognize revenue when or as the Company satisfies a performance obligation
The Company satisfies performance obligations at a point in time as discussed in further detail under “Disaggregation of Revenue” below. Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised service to a customer.
Disaggregation of Revenue
All of the Company’s performance obligations, and associated revenue, are generally transferred to customers at a point in time. The Company has the following revenue streams:
1) Ad tech advertising revenue - The pricing and terms for all our in-game advertising arrangements are mostly governed by insertion order which generally stipulates the payment terms, the duration (usually short term in nature), the number of advertising units delivered (e.g. impressions, completed views, or cost per install) and the contractually agreed upon price per advertising unit. The Company has concluded that the delivery of the Ad tech advertising is delivered at a point in time and, as such, has concluded these deliveries are a single performance obligation. The Company invoices fees which are generally variable based on the arrangement, which would typically include the number of impressions delivered at a specified price per application. For impressions delivered, revenue is recognized in the month in which the Company delivers the application to the end consumer or the month when the campaign ends.
2) Programmatic revenue - The Company generally offers these services under a programmatic bid on a Cost-per-Impression (CPM) basis. Our customers upload their advertisements into a demand side platform which then connects to our Publisher Software Development Kit (“SDK”) through an exchange platform and on a bid system agree on the CPM rate and the impressions to be served.
The Company has concluded that the delivery of the Programmatic advertising is delivered at the earlier of month end or at a point in time and, as such, has concluded these deliveries are a single performance obligation. The Company is deemed to be the principal in the transaction and therefore recognizes the revenue on a gross basis and commissions are recognized as cost of sales. The Company invoices fees which are generally variable based on the arrangement, which would typically include the number of impressions delivered at a specified price per application. For impressions delivered, revenue is recognized in the month in which the Company delivers the application to the end consumer or the month when the campaign ends.
3) Content revenue – The Company recognizes content revenue on the following forms of revenue:
a) Carriers and Original Equipment Manufacturer (“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.
| F-11 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Consolidated Financial Statements
Years ended December 31, 2023, 2022 and 2021
| 2. | Summary of significant accounting policies (Continued): |
(c) Revenue recognition: (Continued)
b) Rooplay - The Company generates revenue through subscriptions or premium sales of Rooplay, (www.rooplay.com) the cloud-based EduGame system for kids to learn and play within its games on smartphones and tablet devices, such as Apple’s iPhone and iPad, and mobile devices utilizing Google’s Android operating system. The revenue is recognized net of platform fees.
c) Rooplay licensing - The Company licenses its branded educational games under a monthly cost per game agreement license fee model. Monthly license fees are based on the number of games licensed.
d) In App purchases - The Company generates revenue through in-application purchases (“in-app purchases”) within its games; (i.e. Trophy Bingo (www.trophybingo.com)) on smartphones and tablet devices, such as Apple’s iPhone and iPad, and mobile devices utilizing Google’s Android operating system. Users can download the Company’s free-to-play games through Android, Amazon, iOS and Facebook Messenger (this was discontinued in fiscal 2021) and pay to acquire virtual currency which can be redeemed in the game for power plays. The initial download of the mobile game from the Digital Storefront does not create a contract under ASC 606 because of the lack of commercial substance; however, the separate election by the player to make an in-application purchase satisfies the criterion thus creating a contract under ASC 606.
The Company has identified the following performance obligations in these contracts:
i. Ongoing game related services such as hosting of game play, storage of customer content, when and if available content updates, maintaining the virtual currency management engine, tracking gameplay statistics, matchmaking as it relates to multiple player gameplay, etc.
ii. Obligation to the paying player to continue displaying and providing access to the virtual items within the game.
Neither of these obligations are considered distinct since the actual mobile game and the related ongoing services are both required to purchase and benefit from the related virtual items. As such, the Company’s performance obligations represent a single combined performance obligation which is to make the game and the ongoing game related services available to the players. The revenue is recognized net of platform fees.
(d) Foreign currency:
The consolidated financial statements are presented in United States dollars, the functional currency of the Company and its subsidiaries. The Company accounts for foreign currency transactions and translation of foreign currency financial statements under ASC 830, Foreign Currency Matters. Transaction amounts denominated in foreign currencies are translated at exchange rates prevailing
| F-12 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Consolidated Financial Statements
Years ended December 31, 2023, 2022 and 2021
| 2. | Summary of significant accounting policies (Continued): |
(d) Foreign currency: (Continued)
at the transaction dates. Carrying values of monetary assets and liabilities are adjusted at each balance sheet date to reflect the exchange rate at that date. Non-monetary assets and liabilities are translated at the exchange rate on the original transaction date.
Gains and losses from restatement of foreign currency monetary and non-monetary assets and liabilities are included in operations. Revenues and expenses are translated at the rates of exchange prevailing on the dates such items are recognized in earnings.
(e) Cash and Cash Equivalents:
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions and other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash, and subject to an insignificant risk of change in value.
(f) Accounts receivable:
Trade
and other accounts receivable are reported at face value less any provisions for uncollectible accounts considered necessary. Accounts
receivable includes receivables from online platforms and trade receivables from customers. The Company estimates doubtful accounts on
an item-by-item basis and includes over-aged accounts as part of allowance for doubtful accounts, which are generally ones that are greater
than ninety-days overdue. Bad debt expense, for the year ended December 31, 2023 was $
(g) Equipment:
Equipment is recorded at cost less accumulated depreciation. Depreciation is provided for annually on the declining balance method over the following periods:
Schedule of Useful Life of Equipment
| Equipment and computers | ||||
| Furniture and fixtures |
Expenditures for maintenance and repairs are charged to expenses as incurred. Major improvements are capitalized. Gains and losses on disposition of equipment are included in operations as realized.
In accordance with ASU No. 2016-02 “Leases (Topic 842), leasehold improvements are accounted as a prepayment of rental payments since they are deemed to be an asset of the lessor.
(h) Software Technology Development Costs:
The Company expenses all software technology development costs as incurred for the year ended December 31, 2023, 2022 and 2021. As at December 31, 2023 and 2022, all capitalized software technology development costs have been fully amortized and the Company has no capitalized software technology development costs.
| F-13 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Consolidated Financial Statements
Years ended December 31, 2023, 2022 and 2021
| 2. | Summary of significant accounting policies (Continued): |
(h) Software Technology Development Costs: (Continued)
Total
software technology development costs were $
(i) Derivative liability – warrants
The Company’s warrants have an exercise price in Canadian dollars whilst the Company’s functional currency is US Dollars. Therefore, in accordance with ASU 815 – Derivatives and Hedging, the warrants have a derivative liability value. This liability value has no effect on the cashflow of the Company and does not represent a cash payment of any kind.
The Company accounts for stock-based compensation under the provisions of Accounting Standard Codification (“ASC”) 718, “Compensation-Stock Compensation”. Under the fair value recognition provisions, stock-based compensation expense is measured at the grant date for all stock-based awards to employees, directors and non-employees and is recognized as an expense over the requisite service period, which is generally the vesting period. The Black-Scholes option valuation model is used to calculate fair value.
Schedule of Weighted Average Assumptions of Option
| 2023 | 2022 | 2021 | ||||||||||
| Expected dividend yield | ||||||||||||
| Volatility | % | % | % | |||||||||
| Risk-free interest rate | % | % | % | |||||||||
| Expected life of options | years | years | years | |||||||||
| Forfeiture rate | % | % | % | |||||||||
(k) Right-of-use assets:
The Company determines if an agreement is a lease at inception. The Company evaluates the lease terms to determine whether the lease will be accounted for as an operating or finance lease. Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liabilities, current portion, and operating lease liabilities, net of current portion in the consolidated balance sheets.
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.
Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company leases do not provide an implicit rate, the Company uses the incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company uses the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The Company’s lease terms may include
| F-14 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Consolidated Financial Statements
Years ended December 31, 2023, 2022 and 2021
| 2. | Summary of significant accounting policies (Continued): |
(k) Right-of-use assets: (Continued)
options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
A lease that transfers substantially all of the benefits and risks incidental to ownership of property are accounted for as finance leases. At the inception of a finance lease, an asset and finance lease obligation is recorded at an amount equal to the lesser of the present value of the minimum lease payments and the property’s fair market value. Finance lease obligations are classified as either current or long-term based on the due dates of future minimum lease payments, net of interest.
(l) Impairment of long-lived assets and long-lived assets to be disposed of:
If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount and the fair value less costs to sell.
(m) Intangible assets
The Company identified the following intangible assets in the acquisition of Kidoz Ltd. Finite life intangible assets are recorded at historical cost less accumulated amortization based on their estimated useful life and any impairment is determined in accordance with ASC 360. The Company does not have any indefinite life intangible assets. Amortization is provided for annually on the straight-line method over the following periods:
Schedule of Finite-Lived Intangible Assets, Amortization Period
| Amortization period | ||||
| Ad Tech technology | ||||
| Kidoz OS technology | ||||
| Customer relationships | ||||
The Company reviews intangible assets subject to amortization quarterly to determine if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in the remaining useful life. If an impairment indicator exists, we test the intangible asset for recoverability. For purposes of the recoverability test, amortizable intangible assets are grouped with other assets and liabilities at the lowest level of identifiable cash flows if the intangible asset does not generate cash flows independent of other assets and liabilities. If the carrying value of the asset group exceeds the undiscounted cash flows expected to result from the use and eventual disposition of the asset group, the Company will write the carrying value down to the fair value in the period identified.
(n) Goodwill:
The Company accounts for goodwill in accordance with the provisions of ASC 350, Intangibles-Goodwill and Others. Goodwill is the excess of the purchase price over the fair value of identifiable assets acquired, less liabilities assumed, in a business combination. The Company reviews goodwill for impairment. Goodwill is not amortized but is evaluated for impairment at least annually or whenever events or changes in circumstances indicate that it is more likely than not that the carrying amount may not be recoverable.
| F-15 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Consolidated Financial Statements
Years ended December 31, 2023, 2022 and 2021
| 2. | Summary of significant accounting policies (Continued): |
(n) Goodwill: (Continued)
The goodwill impairment test is used to identify both the existence of impairment and the amount of impairment loss, and compares the fair value of a reporting unit with its carrying amount and is based on discounted future cash flows, based on market multiples applied to free cash flow. The determination of the fair value of our reporting units requires management to make significant estimates and assumptions including the selection of control premiums, discount rates, terminal growth rates, forecasts of revenue and expense growth rates, income tax rates, changes in working capital, depreciation, amortization and capital expenditures. Changes in assumptions concerning future financial results, exogenous market conditions, or other underlying assumptions could have a significant impact on either the fair value of the reporting unit or the amount of the goodwill impairment charge. If the carrying value of the reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.
During the year ended December 31, 2023 and 2022, there was impairment of goodwill.
(o) Income taxes:
The Company follows the asset and liability method of accounting for income taxes. Under this method, current income taxes are recognized for the estimated income taxes payable for the current period. The Company recognizes the income tax recovery from the receipt of tax credits upon receipt of funds. Deferred income taxes are provided based on the estimated future tax effects of temporary differences between financial statement carrying amounts of assets and liabilities and their respective tax bases, as well as the benefit of losses available to be carried forward to future years for tax purposes.
Deferred tax assets and liabilities are measured using the enacted tax rates that are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered and settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. A valuation allowance is recorded for deferred tax assets when it is not more likely than not that such future tax assets will be realized.
ASC 260, “Earnings Per Share”, requires presentation of basic earnings per share (“Basic EPS”) and diluted earnings per share (“Diluted EPS”). Basic earnings (loss) per share is computed by dividing earnings (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the potential dilution, using the treasury stock method, that could occur if outstanding options or warrants were exercised and converted into common stock. In computing diluted earnings per share, the treasury stock method assumes that outstanding options and warrants are exercised and the proceeds are used to purchase common stock at the average market price during the period.
| F-16 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Consolidated Financial Statements
Years ended December 31, 2023, 2022 and 2021
| 2. | Summary of significant accounting policies (Continued): |
(p) Net income (loss) per share: (Continued)
Options and warrants will have a dilutive effect under the treasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options and warrants. In periods where losses are reported, the weighted average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. A total of (2022 - and 2021 – ) stock options and warrants were excluded as at December 31, 2023.
Schedule of Income (Loss) Per Share Data
| 2023 | 2022 | 2021 | ||||||||||
| Loss for the year | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Basic and diluted weighted average number of common shares outstanding | ||||||||||||
| Basic and diluted loss per common share outstanding | $ | ) | $ | ) | $ | ) | ||||||
(q) New accounting pronouncements and changes in accounting policies:
In November 2023, the Financial Standards Board issued ASU 2023-07, Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires that segment expenses deemed significant to the chief operating decision maker (CODM) typically incorporated in measuring profit or loss of the segment should be disclosed. The guidance also requires that the difference between segment revenues and these significant segment expenses is disclosed. Any annually disclosed segment information is now required to be reported in interim periods as well. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024. Public entities are required to apply the amendment retrospectively to prior periods presented in the financial statements. The Company plans to adopt ASU 2023-07 effective for its Fiscal year 2024 and for the interim periods beginning in Fiscal 2024.
The Company has evaluated all the recently issued, but not yet effective, accounting standards that have been issued or proposed by the Financial Accounting Standards Board or other standards-setting bodies through the filing date of these consolidated financial statements and does not believe the future adoption of any such pronouncements will have a material impact on its consolidated financial statements.
| F-17 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Consolidated Financial Statements
Years ended December 31, 2023, 2022 and 2021
| 2. | Summary of significant accounting policies (Continued): |
(r) Financial instruments and fair value measurements:
(i) Fair values:
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on measurement date. The Company classifies assets and liabilities recorded at fair value under the fair value hierarchy based upon the observability of inputs used in valuation techniques. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. The fair value measurements are classified under the following hierarchy:
Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets and liabilities in active markets;
Level 2—Observable inputs, other than quoted market prices, that are either directly or indirectly observable in the marketplace for identical or similar assets and liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets and liabilities; and
Level 3—Unobservable inputs that are supported by little or no market activity that are significant to the fair value of assets or liabilities.
When available, we use quoted market prices to determine fair value, and we classify such measurements within Level 1. In some cases where market prices are not available, we make use of observable market-based inputs to calculate fair value, in which case the measurements are classified within Level 2. If quoted or observable market prices are not available, fair value is based upon valuations in which one or more significant inputs are unobservable, including internally developed models that use, where possible, current market-based parameters such as interest rates, yield curves and currency rates. These measurements are classified within Level 3.
Fair value measurements are classified according to the lowest level input or value-driver that is significant to the valuation. A measurement may therefore be classified within Level 3 even though there may be significant inputs that are readily observable.
Fair value measurement includes the consideration of nonperformance risk. Nonperformance risk refers to the risk that an obligation (either by a counterparty) will not be fulfilled. For financial assets traded in an active market (Level 1 and certain Level 2), the nonperformance risk is included in the market price. For certain other financial assets and liabilities (certain Level 2 and Level 3), our fair value calculations have been adjusted accordingly.
The fair value of accounts receivable, accounts payable, accrued liabilities, and accounts payable, accrued liabilities - related party and the government CEBA loan approximate their financial statement carrying amounts due to the short-term maturities of these instruments and are therefore carried at their historical cost basis.
| F-18 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Consolidated Financial Statements
Years ended December 31, 2023, 2022 and 2021
| 2. | Summary of significant accounting policies (Continued): |
(r) Financial instruments and fair value measurements: (Continued)
(i) Fair values: (Continued)
Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and included situations where there is little, if any, market activity for the asset. Stock-based compensation and derivative liability – warrants were measured using Level 2 inputs. Goodwill impairment was measured using Level 3 inputs.
(ii) Foreign currency risk:
The Company operates internationally, which gives rise to the risk that cash flows may be adversely impacted by exchange rate fluctuations. The Company has not entered into any forward exchange contracts or other derivative instrument to hedge against foreign exchange risk.
3. Accounts Receivable:
The accounts receivable as at December 31, 2023, is summarized as follows:
Schedule of Accounts Receivable
| 2023 | 2022 | |||||||
| Accounts receivable | $ | $ | ||||||
| Provision for doubtful accounts | ( | ) | ( | ) | ||||
| Net accounts receivable | $ | $ | ||||||
The
Company has a doubtful debt provision of $
4. Prepaid expenses
The
Company has other prepaid expenses of $
5. Equipment:
Schedule of Equipment
| 2023 | Cost | Accumulated depreciation | Net book Value | |||||||||
| Equipment and computers | $ | $ | $ | |||||||||
| Furniture and fixtures | ||||||||||||
| Equipment total | $ | $ | $ | |||||||||
| F-19 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Consolidated Financial Statements
Years ended December 31, 2023, 2022 and 2021
5. Equipment: (Continued)
| 2022 | Cost | Accumulated depreciation | Net book Value | |||||||||
| Equipment and computers | $ | $ | $ | |||||||||
| Furniture and fixtures | ||||||||||||
| Equipment total | $ | $ | $ | |||||||||
Depreciation
expense was $
6. Intangible assets:
Schedule of Intangible Assets
| 2023 | Cost | Accumulated amortization | Net book Value | |||||||||
| Ad Tech technology | $ | $ | $ | |||||||||
| Kidoz OS technology | ||||||||||||
| Customer relationship | ||||||||||||
| Intangible assets total | $ | $ | $ | |||||||||
| 2022 | Cost | Accumulated amortization | Net book Value | |||||||||
| Ad Tech technology | $ | $ | $ | |||||||||
| Kidoz OS technology | ||||||||||||
| Customer relationship | ||||||||||||
| Intangible assets total | $ | $ | $ | |||||||||
Amortization
expense was $
7. Goodwill:
The
Company has a goodwill balance of $
The
Company’s annual goodwill impairment analysis performed during the fourth quarter of fiscal 2023 and 2022 included a quantitative
analysis of the Kidoz Ltd. reporting unit (consisting of intangible assets (Note 6), deferred taxation (Note 13) and goodwill). The reporting
unit has a carrying amount of $
| F-20 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Consolidated Financial Statements
Years ended December 31, 2023, 2022 and 2021
8. Software technology development costs:
The Company develops software technology for our business. This software technology includes the continued development of the KIDOZ Safe Ad Network, the KIDOZ Kid-Mode Operating System, and the KIDOZ publisher SDK.
During the years ended December 31, 2023, 2022 and 2021, the Company has expensed the development costs of all products as incurred and has expensed the following development costs.
Schedule of Expense of Development Costs
| 2023 | 2022 | 2021 | ||||||||||
| Opening total software technology development costs | $ | $ | $ | |||||||||
| Software technology development during the year | ||||||||||||
| Closing total software technology development costs | $ | $ | $ | |||||||||
9. Government CEBA loan:
During
the year ended December 31, 2020, the Company was granted a loan of $
During
the year ended December 31, 2021, the Company drew $
10. Stockholders’ Equity:
The holders of common stock are entitled to one vote for each share held. There are no restrictions that limit the Company’s ability to pay dividends on its common stock. The Company has not declared any dividends since incorporation. The Company’s common stock has no par value per common stock and there is only one class of common shares. The Company has an unlimited number of common shares authorized for issue.
(a) Common stock issuances:
Fiscal 2023
There were no common stock issuances for the year ended December 31, 2023.
| F-21 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Consolidated Financial Statements
Years ended December 31, 2023, 2022 and 2021
10. Stockholders’ Equity: (Continued)
(a) Common stock issuances: (Continued)
Fiscal 2022
During
the year ended December 31, 2021, the Company engaged with Agora Internet Relations Corp. for an online marketing campaign on the AGORACOM
platform. The agreement was for 12 months for a fee of $
Fiscal 2021
During
the year ended December 31, 2021, the Company engaged Research Capital Corporation (“RCC”) as a financial and capital markets
advisor. As part of the compensation for its services, RCC will receive a monthly fee of $
During
the year ended December 31, 2021, the holder of stock options exercised their options for shares for $
(b) Normal Course Issuer Bid:
During the year ended December 31, 2022, the Company filed a Notice of Intention to Make a Normal Course Issuer Bid (the “Notice of Intention”) with the TSX Venture Exchange (“TSX-V”) on September 15, 2022. Upon receiving approval from the TSX-V, effective September 16, 2022, the Company commenced a normal course issuer bid (“NCIB”), whereby the Company may purchase for cancellation up to shares, being % of the issued and outstanding shares as of such date. Any purchases under the NCIB will be made on the open market through the facilities of the TSX-V or alternative Canadian trading systems. Purchases will be made at market prices of the shares at the time of acquisition.
Purchases under the NCIB may commence as of September 16, 2022, and will end on the earlier of: (i) September 14, 2023; or (ii) the date on which the Company has purchased the maximum number of shares to be acquired under the NCIB. The Company may terminate the NCIB earlier if it feels it is appropriate to do so.
The normal course issuer bid will be conducted through Kidoz Inc’s broker Research Capital Corporation. The purchase and payment of the common shares will be made in accordance with the requirements of the TSX-V and applicable securities laws. The actual number of common shares purchased, timing of purchases and share price will depend upon market conditions at the time and securities law requirements. All common shares acquired will be returned to treasury and cancelled.
| F-22 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Consolidated Financial Statements
Years ended December 31, 2023, 2022 and 2021
10. Stockholders’ Equity: (Continued)
(b) Normal Course Issuer Bid: (Continued)
The purchase of and payment for the shares will be made in accordance with the requirements of the TSX-V and applicable securities laws. The actual number of shares purchased, timing of purchases and share price will depend upon market conditions at the time and securities law requirements. All shares acquired pursuant to the NCIB will be returned to treasury and cancelled.
During the year ended December 31, 2023, shares which were acquired during the year ended December 31, 2022, pursuant to the NCIB in effect, at an aggregate cost of $, were cancelled.
During
the year ended December 31, 2023, shares were acquired pursuant to the NCIB in effect, at an aggregate cost of $
During
the year ended December 31, 2022, shares were acquired pursuant to the NCIB in effect, at an aggregate cost of $
(c) Warrants:
A summary of warrant activity for the year ended December 31, 2023 and 2022 are as follows:
Schedule of Share Based Payment Arrangement Warrant Activity
| Number of warrants | Exercise price | Expiry date | ||||||||||
| Outstanding, December 31, 2022 and 2021 | CAD$ | |||||||||||
| Expired | ) | |||||||||||
| Outstanding December 31, 2023 | ||||||||||||
A
fair value of the derivative liability of $
During
the year ended December 31, 2023, the warrants expired unexercised and there was a gain on derivative liability - warrants of $
Schedule of Fair Value of Warrants Assumptions
| December 31, 2022 | December 31, 2021 | |||||||
| Exercise price | CAD$ | CAD$ | ||||||
| Stock price | CAD$ | CAD$ | ||||||
| Expected term | years | years | ||||||
| Expected dividend yield | ||||||||
| Expected stock price volatility | % | % | ||||||
| Risk-free interest rate | % | % | ||||||
| F-23 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Consolidated Financial Statements
Years ended December 31, 2023, 2022 and 2021
10. Stockholders’ Equity: (Continued)
(d) Stock option plans:
2015 stock option plan
In the year ended December 31, 2015, the shareholders approved the 2015 stock option plan. The 2015 stock option plan as amended in November 2020, is intended to provide incentive to employees, directors, advisors and consultants of the Company to encourage proprietary interest in the Company, to encourage such employees to remain in the employ of the Company or such directors, advisors and consultants to remain in the service of the Company, and to attract new employees, directors, advisors and consultants with outstanding qualifications. The maximum number of shares issuable under the Plan shall not exceed % of the number of Shares of the Company issued and outstanding as of each Award Date unless shareholder approval is obtained in advance.
The Board of Directors determines the terms of the options granted, including the number of options granted, the exercise price and their vesting schedule. The maximum term possible is years. Under the 2015 plan we have reserved % of the number of Shares of the Company issued and outstanding as of each Award Date. During the year ended December 31, 2020, the Rolling Stock Option plan was amended by inclusion of an Israeli Taxpayers Appendix.
During the year ended December 31, 2023, the Company granted options to employees and consultants with an exercise price of CAD$ ($) where % vests per month. of these options were granted to directors and officers of the Company. Subsequent to the year ended December 31, 2023, options were granted to employees and consultants with an exercise price of CAD$ ($) where % vests per month. options of these options were granted to directors and officers of the Company.
During the year ended December 31, 2023, options were cancelled, and options expired unexercised.
During the year ended December 31, 2022, the Company granted options to employees and consultants with an exercise price of CAD$ ($) where % vests per month. of these options were granted to directors and officers of the Company.
During the year ended December 31, 2022, options were cancelled, and options expired unexercised.
During the year ended December 31, 2021, the Company granted to employees and consultants the following options:
| ● | options at CAD$ ($) where % vests on grant date, % one year following and % per month thereafter and expire on February 1, 2026. of these options were granted to directors and officers of the Company. |
| ● | options at CAD$ ($) which vested immediately and expire on February 1, 2026. |
| ● | options at CAD$ ($) where % vests per month and expire on April 6, 2026. of these options were granted to directors and officers of the Company. |
| F-24 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Consolidated Financial Statements
Years ended December 31, 2023, 2022 and 2021
10. Stockholders’ Equity: (Continued)
(d) Stock option plans: (Continued)
| ● | options at CAD$ ($) where % vests per month and expire on July 12, 2026. |
Schedule of Share Based Payment Arrangement Option Activity
| Number of options | Weighted average exercise price | |||||||
| Outstanding December 31, 2020 | $ | |||||||
| Granted | ||||||||
| Exercised | ( | ) | ( | ) | ||||
| Expired | ( | ) | ( | ) | ||||
| Cancelled | ( | ) | ( | ) | ||||
| Outstanding December 31, 2021 | $ | |||||||
| Granted | ||||||||
| Expired | ( | ) | ( | ) | ||||
| Cancelled | ( | ) | ( | ) | ||||
| Outstanding December 31, 2022 | $ | |||||||
| Granted | ||||||||
| Expired | ( | ) | ( | ) | ||||
| Cancelled | ( | ) | ( | ) | ||||
| Outstanding December 31, 2023 | $ | |||||||
The aggregate intrinsic value for options as of December 31, 2023 was $ (2022 - $).
Schedule of Share Based Payment Arrangement Option Exercise Price Range
| Exercise prices per share | Number outstanding | Number exercisable | Expiry date | |||||||||
| CAD$ | ||||||||||||
| CAD$ | ||||||||||||
| CAD$ | ||||||||||||
| CAD$ | ||||||||||||
| CAD$ | ||||||||||||
| CAD$ | ||||||||||||
The Company recorded stock-based compensation of $ on the options granted and vested (2022 – $; 2021 - $) and as per the Black-Scholes option-pricing model, with a weighted average fair value per option grant of $ (2022 - $; 2021 - $).
| F-25 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Consolidated Financial Statements
Years ended December 31, 2023, 2022 and 2021
11. Fair value measurement:
Except for derivative liability – warrant that was measured at level 3 inputs in the three-tier fair value hierarchy, the Company does not have any other financial instruments that are subsequently measured at fair value.
12. Commitments:
The Company leases office facilities in Vancouver, British Columbia, Canada, British West Indies and Netanya, Israel. These office facilities are leased under operating lease agreements.
During the year ended December 31, 2020, the Company signed a five-year lease for a facility in Vancouver, Canada, commencing April 1, 2020 and ending March 2024. The Company accounts for the lease in accordance with ASU 2016-02 (Topic 842) and recognizes a right-of-use asset and operating lease liability. Subsequent to the year ended December 31, 2023, the lease on the Vancouver office expired and was not renewed. Our Canadian staff will continue to work on a virtual basis.
The Netanya, Israel operating lease expired on July 14, 2017, but unless 3 months’ notice is given it automatically renews for a future 12 months until notice is given. During the year ended December 31, 2023, the lease was extended for a further 12 months. The renewal of this lease is uncertain, hence the Company has accounted for this lease as a short-term lease.
Minimum lease payments under these leases are approximately as follows:
Schedule of Minimum Lease Payments
| 2024 | $ |
The
Company paid rent expense totaling $
The Company has the following management consulting agreements with related parties.
Schedule of Consulting Agreement with Related Parties
| Company | Person | Role | Annual amount | |||||
| T.M. Williams (ROW), Inc. | T. M. Williams | Chairman | $ | |||||
| Bromley Accounting Services Ltd. | H. W. Bromley | CFO | CAD$ | |||||
| Farcast Operations Inc. | T. H. Williams | VP Product | CAD$ | |||||
During the year ended December 31, 2022, Mr. J. M. Williams, the Company’s CEO, became an employee of Shoal Media (Canada) Inc.
As at December 31, 2023, the Company had a number of renewable license commitments with large brands, including, Mr. Men and Little Miss and Mr. Bean. These agreements have commitments to pay royalties on the revenue from the licenses subject to the minimum guarantee payments. As at December 31, 2023, there were no further minimum guarantee payments commitments.
The
Company expensed the minimum guarantee payments over the life of the agreement and recognized license expense of $
| F-26 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Consolidated Financial Statements
Years ended December 31, 2023, 2022 and 2021
13. Income taxes:
As at December 31, 2022, Kidoz Inc. was domiciled in the tax-free jurisdiction of Anguilla, British West Indies. However certain of the Company’s subsidiaries incur income taxation. Effective January 1, 2023, the Company continued out of Anguilla and into Canada and became a Canadian tax payer.
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2023 and 2022, are presented below:
Schedule of Effective Income Tax Rate Reconciliation
| 2023 | 2022 | 2021 | ||||||||||
| Expected tax (recovery) expense | $ | ( | ) | $ | ( | ) | $ | |||||
| Change in statutory, foreign tax, foreign exchange rates and other | ( | ) | ||||||||||
| Permanent differences | ||||||||||||
| Adjustment to prior years provision versus statutory tax returns | ( | ) | ( | ) | ||||||||
| Change in valuation allowance | ( | ) | ||||||||||
| Current income taxes (recovery) expense | $ | ( | ) | $ | $ | |||||||
| Deferred income tax (recovery) expense | ( | ) | ||||||||||
| Total taxation (recovery) expense | $ | ( | ) | $ | ( | ) | $ | |||||
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2023 and 2022 are presented below:
Schedule of Deferred Tax Assets and Liabilities
| 2023 | 2022 | |||||||
| Deferred tax (liabilities) assets: | ||||||||
| Non-capital loss carry forwards | $ | $ | ||||||
| Equipment | ( | ) | ||||||
| Intangible assets | ( | ) | ( | ) | ||||
| Other | ||||||||
| Valuation Allowance | ( | ) | ( | ) | ||||
| Total deferred tax (liability) asset | $ | $ | ||||||
As
at December 31, 2023, the Company’s had $
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those differences become deductible.
Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in assessing the realizability of deferred tax assets.
The Company recognized this tax credit as a recovery of income tax expense on the statement of operations and comprehensive (loss) income upon receipt of funds.
| F-27 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Consolidated Financial Statements
Years ended December 31, 2023, 2022 and 2021
14. Right-of-use assets:
Effective
April 1, 2019, we recognized lease assets and liabilities of $
We elected the package of practical expedients permitted under the transition guidance within Topic 842, which allowed us to carry forward prior conclusions about lease identification, classification and initial direct costs for leases entered into prior to adoption of Topic 842.
Additionally, we elected to not separate lease and non-lease components for all of our leases. For leases with a term of 12 months or less, our current offices, we elected the short-term lease exemption, which allowed us to not recognize right-of-use assets or lease liabilities for qualifying leases existing at transition and new leases we may enter into in the future, as there is significant uncertainty on whether the leases will be renewed.
The right-of-use assets as at December 31, 2023, is summarized as follows:
Schedule of Right-of-use Assets
| 2023 | 2022 | 2021 | ||||||||||
| Opening balance for the year | $ | $ | $ | |||||||||
| Amortization and expiration of operating lease right-of use assets | ( | ) | ( | ) | ( | ) | ||||||
| Closing balance for the year | $ | $ | $ | |||||||||
The operating lease as at December 31, 2023, is summarized as follows:
Schedule of Lessee Operating Lease Liability Maturity
| As at December 31, 2023 | ||||
| Office lease | ||||
| 2024 | ||||
| Total lease payments | $ | |||
| Less: Interest | ( | ) | ||
| Present value of lease liabilities | $ | |||
| Amounts recognized on the balance sheet | ||||
| Current lease liabilities | $ | |||
| Long-term lease liabilities | ||||
| Total lease payments | $ | |||
Schedule of Operating Lease Liability
| 2023 | 2022 | 2021 | ||||||||||
| Opening balance for the year | $ | $ | $ | |||||||||
| Payments on operating lease liabilities | ( | ) | ( | ) | ( | ) | ||||||
| Closing balance for the year | ||||||||||||
| Less: current portion | ( | ) | ( | ) | ( | ) | ||||||
| Operating lease liabilities – non-current portion as at end of year | $ | $ | $ | |||||||||
| F-28 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Consolidated Financial Statements
Years ended December 31, 2023, 2022 and 2021
15. Related party transactions:
As at and for the year ended December 31, 2023, the Company has the following related party transactions:
Schedule of Related Party Transactions
| 2023 | 2022 | 2021 | ||||||||||
| Directors fees | $ | $ | $ | |||||||||
| Salaries, wages, consultants and benefits | ||||||||||||
| Selling and marketing | ||||||||||||
| Stock-based compensation (Note 10) | ||||||||||||
| Software technology development (Note 8) | ||||||||||||
| Closing balance for the year | $ | $ | $ | |||||||||
The
Company has liabilities of $
During the year ended December 31, 2023, the Company granted options with an exercise price of CAD$ ($) per share to current directors and officers of the Company. Subsequent to the year ended December 31, 2023, the Company granted options with an exercise price of CAD$ ($) to current directors and officers of the Company.
During the year ended December 31, 2022, the Company granted options with an exercise price of CAD$ ($) per share to current directors and officers of the Company.
During the year ended December 31, 2021, the Company granted the following options to related parties:
a) options with an exercise price of CAD$ ($) per share
b) options with an exercise price of CAD$ ($) per share
The related party transactions are in the normal course of operations and were measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.
16. Segmented information:
The Company operates in reportable business segments, the sale of Ad tech advertising, programmatic advertising, and content revenue, including the sale of in-app purchases on Trophy Bingo and Garfield’s Bingo; the premium purchase for Rooplay Originals and recurring subscription revenues from Rooplay and Kidoz OS and the sale of licenses of Kidoz OS.
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions on how to allocate resources and assess performance. The Company’s chief operating decision makers are the Chairman, Chief Executive Officer and President. The Company and the chief decision makers view the Company’s operations and manage its business as three operating segments, namely Ad tech advertising, programmatic advertising, and content revenue.
| F-29 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Consolidated Financial Statements
Years ended December 31, 2023, 2022 and 2021
16. Segmented information: (Continued)
The Company had the following revenue by geographical region.
Schedule of Revenue By Geographical Region
| 2023 | 2022 | 2021 | ||||||||||
| Ad tech advertising revenue | ||||||||||||
| Western Europe | $ | $ | $ | |||||||||
| Central, Eastern and Southern Europe | ||||||||||||
| North America | ||||||||||||
| Other | ||||||||||||
| Total ad tech advertising revenue | $ | $ | $ | |||||||||
| Programmatic advertising revenue | ||||||||||||
| North America | $ | $ | $ | |||||||||
| Total Programmatic advertising revenue | $ | $ | $ | |||||||||
| Content revenue | ||||||||||||
| Western Europe | $ | $ | $ | |||||||||
| Central, Eastern and Southern Europe | ||||||||||||
| North America | ||||||||||||
| Other | ||||||||||||
| Total content revenue | $ | $ | $ | |||||||||
| Total revenue | ||||||||||||
| Western Europe | $ | $ | $ | |||||||||
| Central, Eastern and Southern Europe | ||||||||||||
| North America | ||||||||||||
| Other | ||||||||||||
| Total revenue | $ | $ | $ | |||||||||
Equipment
The Company’s equipment is located as follows:
Schedule of Equipment By Location
| Net Book Value | 2023 | 2022 | ||||||
| Anguilla | $ | $ | ||||||
| Canada | ||||||||
| Israel | ||||||||
| United Kingdom | ||||||||
| Total equipment | $ | $ | ||||||
| F-30 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Consolidated Financial Statements
Years ended December 31, 2023, 2022 and 2021
17. General and administrative:
General and administrative expenses were as follows:
Schedule of General and Administrative Expense
| 2023 | 2022 | 2021 | ||||||||||
| Computer expenses | $ | $ | $ | |||||||||
| Insurance | ||||||||||||
| Professional fees | ||||||||||||
| Rental (Note 12) | ||||||||||||
| Other general and administrative expenses | ||||||||||||
| Total general and administrative expenses | $ | $ | $ | |||||||||
18. Stock awareness program
During the year ended December 31, 2021, the Company commenced a corporate stock awareness program. The Company engaged Research Capital Corporation, Agora Internet Relations Corp., Stockhouse Publishing Ltd., TSM Talk Shop Media 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. Stockhouse Publishing Ltd. campaign was discontinued in the year ended December 31, 2022 and TSM Talk Shop Media was discontinued in the year ended December 31, 2023.
The
Company incurred stock awareness expenses of $
The
Company incurred stock awareness expenses of $
The
Company incurred stock awareness expenses of $
19 Concentrations:
Major customers
During
the year ended December 31, 2023, and 2022, the Company sold Ad tech revenue; sold subscriptions on its site Rooplay; sold in-app purchases
on its social bingo sites, Trophy Bingo and Garfield’s Bingo and premium purchases of Rooplay Originals. During the year ended
December 31, 2023, the Company had revenues of $
| F-31 |
Kidoz Inc. and subsidiaries
(Expressed in United States Dollars)
Notes to Consolidated Financial Statements
Years ended December 31, 2023, 2022 and 2021
20. Concentrations of credit risk:
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable. The Company places its cash and cash equivalents with high quality financial institutions and limits the amount of credit exposure with any one institution.
The
Company currently maintains a substantial portion of its day-to-day operating cash and long-term cash equivalents balances at financial
institutions. At December 31, 2023, the Company had total cash of $
The Company has concentrations of credit risk with respect to accounts receivable, the majority of its accounts receivable are concentrated geographically in the United States amongst a small number of customers.
As
of December 31, 2023, the Company had one customer, totaling $
The Company controls credit risk through monitoring procedures and receiving prepayments of cash for services rendered. The Company performs credit evaluations of its customers but generally does not require collateral to secure accounts receivable.
| F-32 |
EXHIBIT 8
List of Subsidiaries of Kidoz Inc. as at December 31, 2023
The financial statements include the accounts of the Company’s subsidiaries:
| Company | Registered | % Owned | ||
| Shoal Media (Canada) Inc. | British Columbia, Canada | 100% | ||
| Kidoz Ltd. | Israel | 100% | ||
| Prado Media Ltd. (formerly Rooplay Media Ltd.) | British Columbia, Canada | 100% | ||
| Rooplay Media Kenya Limited | Kenya | 100% | ||
| Shoal Media Inc. | Anguilla | 100% | ||
| Shoal Games (UK) Plc | United Kingdom | 0% | ||
| Shoal Media (UK) Ltd. | United Kingdom | 100% |
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. During the year ended December 31, 2023, Shoal Games (UK) plc was discontinued and struck off.
On January 21, 2008, Coral Reef Marketing Inc., was incorporated under the laws of Anguilla, British West Indies. During the year ended December 31, 2022, Coral Reef Marketing Inc. merged with Kidoz Inc. and Kidoz Inc. is the surviving entity.
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.
EXHIBIT 12.1
CERTIFICATIONS
I, J. M. Williams, certify that:
| 1. | I have reviewed this annual report on Form 20-F of Kidoz Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of Kidoz Inc. as of, and for, the periods presented in this annual report; |
| 4. | Kidoz Inc.’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Kidoz Inc., including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of Kidoz Inc.’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of as of December 31, 2023, covered by this annual report based on such evaluation; and | |
| (d) | Disclosed in this annual report any change Kidoz Inc.’s internal control over financial reporting that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, Kidoz Inc.’s internal control over financial reporting; and |
| 5. | Kidoz Inc.’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Kidoz Inc.’s auditors and the audit committee of Kidoz Inc. s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Kidoz Inc.’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Signed: | /s/ J. M. Williams | Date: | April 25, 2024 | |
| J. M. Williams, | ||||
| Chief Executive Officer, | ||||
EXHIBIT 12.2
CERTIFICATIONS
I, H. W. Bromley, certify that:
| 1. | I have reviewed this annual report on Form 20-F of Kidoz Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of Kidoz Inc. as of, and for, the periods presented in this annual report; |
| 4. | Kidoz Inc.’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Kidoz Inc., including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of Kidoz Inc.’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of as of December 31, 2023, covered by this annual report based on such evaluation; and | |
| (d) | Disclosed in this annual report any change Kidoz Inc.’s internal control over financial reporting that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, Kidoz Inc.’s internal control over financial reporting; and |
| 5. | Kidoz Inc.’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Kidoz Inc.’s auditors and the audit committee of Kidoz Inc. s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Kidoz Inc.’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Signed: | /s/ H. W. Bromley | Date: | April 25, 2024 | |
| H. W. Bromley, | ||||
| Chief Financial Officer, | ||||
EXHIBIT 13.1
CERTIFICATION PURSUANT TO RULE 13A-14(B) OR RULE 15D-14(B) OF THE SECURITIES EXCHANGE ACT OF
1934 AND SECTION 1350 OF CHAPTER 63 OF TITLE 18 OF THE UNITED STATES CODE.
In connection with the Annual Report on Form 20-F of Kidoz Inc. (the “Company”) for the year ended December 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, J. M. Williams, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| a) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| b) | The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| /s/ J. M. Williams | |
| J. M. Williams | |
| Chief Executive Officer | |
| April 25, 2024 |
A signed original of this written statement required by Section 906 has been provided to Kidoz Inc. and will be retained by the company and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 13.2
CERTIFICATION PURSUANT TO RULE 13A-14(B) OR RULE 15D-14(B) OF THE SECURITIES EXCHANGE ACT OF
1934 AND SECTION 1350 OF CHAPTER 63 OF TITLE 18 OF THE UNITED STATES CODE.
In connection with the Annual Report on Form 20-F of Kidoz Inc. (the “Company”) for the year ended December 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, H. W. Bromley, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| c) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| d) | The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| /s/ H. W. Bromley | |
| H. W. Bromley | |
| Chief Financial Officer | |
| April 25, 2024 |
A signed original of this written statement required by Section 906 has been provided to Kidoz Inc. and will be retained by the company and furnished to the Securities and Exchange Commission or its staff upon request.