www.ntgclarity.com
NTG Clarity Networks Inc.
Simplifying Business Solutions
www.ntgapps.com
ANNUAL REPORT 2021
Our Vision
To be the leading provider of high-quality systems and solutions
while creating an environment of success
for our customers, employees and shareholders.
OSS/BSS
NTS
Telecom
Services
Smart2Go
NTG Core
Competencies
E-solutions
Consulting &
Outsourcing
IoT
NTGapps
Mobile
Applications
Our Value Proposition
NTG Clarity partners with groups who design, build, manage, and support networks and network software
applications.
We are the experts in applying technology, methodology, process, and people to provide quality and on
time network services; on your premises or ours. We help you, our customer, to increase revenue, improve
customer satisfaction, and focus on your bottom line.
“We are your software and network services partner!”
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Table of Contents
Letter to our Shareholders..........................................................................................................................5
Management’s Discussion & Analysis of Financial Conditions and Results of Operations ............................6
Forward-Looking Statements ................................................................................................................ 6
Business Overview ................................................................................................................................ 6
Summary of Major NTG Events in 2021 ..................................................................................................................7
Outlook....................................................................................................................................................................9
Summary of Quarterly Results ............................................................................................................... 9
Quarterly and Annual Results of Operations ........................................................................................ 10
Revenue.................................................................................................................................................................10
Cost of Sales and Gross Margin .............................................................................................................................11
Operating Expenses...............................................................................................................................................11
Other Expenses .....................................................................................................................................................13
Total Comprehensive Income after Taxes (Net Income) .......................................................................................14
Assets and non-current liabilities......................................................................................................... 14
Property and equipment .......................................................................................................................................14
Intangible assets ....................................................................................................................................................14
Non-current liabilities............................................................................................................................................15
Liquidity and Capital Resources ........................................................................................................... 15
Cash Flow Provided by Operations .......................................................................................................................15
Cash Flow from Financing Activities ......................................................................................................................15
Cash Flow from Investing Activities.......................................................................................................................16
Commitments and Contractual Obligations ......................................................................................... 16
Off-Balance Sheet Arrangements ........................................................................................................ 16
Transactions with Related Parties ........................................................................................................ 16
Basis of Preparation and Significant Accounting Policies ...................................................................... 17
Proposed Transactions ........................................................................................................................ 17
Business Risk and Management .......................................................................................................... 17
Market risk ............................................................................................................................................................17
Interest rate risk ....................................................................................................................................................18
Credit risk ..............................................................................................................................................................18
Foreign currency risk .............................................................................................................................................18
Liquidity risk ..........................................................................................................................................................19
Capital Management .............................................................................................................................................20
Legal claim contingency ........................................................................................................................................20
Guarantees ............................................................................................................................................................20
Collateral ...............................................................................................................................................................20
Disclosure Controls and Procedures and Internal Controls over Financial Reporting ............................ 20
Standards issued but not yet effective ................................................................................................. 21
Management’s Statement of Responsibility ..............................................................................................21
Independent Auditor’s Report ..................................................................................................................22
Consolidated Statements of Financial Position..........................................................................................25
Consolidated Statements of Changes in Equity .........................................................................................26
Consolidated Statements of Profit and Loss and Comprehensive Income ..................................................27
Consolidated Statements of Cash Flows....................................................................................................28
CORPORATE INFORMATION .................................................................................................... 29
GOING CONCERN .................................................................................................................... 29
BASIS OF PRESENTATION ........................................................................................................ 29
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ............................................................... 30
SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES, AND ASSUMPTIONS ............................ 45
STANDARDS ISSUED BUT NOT YET EFFECTIVE ......................................................................... 48
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OPERATING SEGMENT INFORMATION .................................................................................... 48
INCOME TAXES ....................................................................................................................... 50
EARNINGS PER SHARE ............................................................................................................. 51
CASH AND CASH EQUIVALENTS ............................................................................................... 52
TRADE AND OTHER RECEIVABLES ............................................................................................ 52
PREPAID EXPENSES AND DEPOSITS ......................................................................................... 53
BID/PERFORMANCE BONDS .................................................................................................... 53
PROPERTY AND EQUIPMENT ................................................................................................... 54
INTANGIBLE ASSETS ................................................................................................................ 55
RIGHT OF USE ASSET ............................................................................................................... 56
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES ..................................................................... 57
OTHER FINANCIAL ASSETS AND FINANCIAL LIABILITIES............................................................ 57
GOVERNMENT GRANT ............................................................................................................ 59
EQUITY INSTRUMENTS ............................................................................................................ 60
CONTRIBUTED SURPLUS ......................................................................................................... 62
DIVIDENDS PAID AND PROPOSED............................................................................................ 62
COST OF SALES........................................................................................................................ 62
EXPENSES: DISCLOSURE OF FUNCTION EXPENSES ................................................................... 62
LOANS PAYABLE ...................................................................................................................... 63
RELATED PARTY DISCLOSURES ................................................................................................ 63
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES .................................................... 64
COMMITMENTS, CONTINGENCIES, AND GUARANTEES ........................................................... 68
SALE OF ENTERPRISE LICENSES................................................................................................ 69
COMPARATIVE FIGURES .......................................................................................................... 69
EVENTS AFTER THE REPORTING YEAR ..................................................................................... 69
Corporate Information .............................................................................................................................71
4
Letter to our Shareholders
2021 was a very good year for NTG that has seen an increase in revenue and a turnaround towards
profitability. Revenues for 2021 were up 50% to $11.895M compared to $7.9M in 2020. Profit was $1.36M
compared to a loss of $1M in 2020. We have capitalized on our track record and experience, and the
goodwill we have built with our customers and partners over the years. NTG is now recognized as a provider
of top-tier, high quality services with very competitive pricing, and we have added new clients to our
customer base, especially in the financial sector where we have been focusing expansion this year. This
sector is outside our traditional telecom vertical and is an important growth opportunity for us as they are
going through a digital transformation. We are working hard to capitalize on the booming demands for IT
and telecom services and on establishing NTG as a major offshoring hub for technology and IT services.
During the year, we continued developing our product NTGapps -- a digital transformation tool providing a
low-code platform that enables users to develop applications quickly and easily. In 2021, we have seen the
demand for the system reflected in purchase orders and we look forward to increasing product sales and
the professional services to implement and support the system. The NTGapps software platform is being
sold as a service either on the cloud or implemented on premises for large corporate clients.
Going forward, NTG will focus on promoting and expanding our product offerings that provide a high profit
margin. We are focused on our NTGapps digital transformation platform that integrates with our Network
Asset Management product. Digital Transformation is one of the current key objectives of most
organizations and NTGapps provides a tool to enable these organization to achieve this goal in using a
phased approach while integrating with their legacy systems. We believe that NTGapps is one of the best
digital transformation platforms available. It enables our customers to consolidate their end-to-end
business software and integrate with specialty third-party platforms, enhancing operational efficiency and
saving clients time that can instead be used to create new revenue streams.
We would like to thank our valued shareholders for their continued support during these challenging times.
As management’s interests are closely aligned with our shareholder base, we remain committed to working
diligently to increase our profitability and working towards reducing our debts. We look forward to growing
the company further in the years ahead.
"Ashraf Zaghloul"
Ashraf Zaghloul, Chair and Chief Executive Officer
NTG Clarity Networks Inc.
5
Management’s Discussion & Analysis of Financial Conditions and
Results of Operations
This management discussion and analysis (MD&A) focuses on key statistics from the consolidated financial
statements and pertains to known risks and uncertainties relating to the telecommunications and
consulting industry. This discussion should not be considered all-inclusive, as it excludes changes that may
occur in general economic, political and environmental conditions. This discussion and analysis of the
financial condition and results of operations has been prepared as of April 11, 2022, for the year ending
December 31, 2021 and should be read in conjunction with the audited consolidated financial statements
and related notes and material contained in other parts of this annual report.
Additional information related to the Corporation is available on SEDAR at www.sedar.com.
Forward-Looking Statements
Certain statements in this MD&A and associated notes and financial statements may be considered
“forward-looking” within the meaning of applicable securities laws. These statements reflect the
Corporation’s plans and expectations based on our experience, interpretation of past trends, key
assumptions and other relevant information available at the date that such statements are made.
The statements involve business, economic and competitive risks, uncertainties and contingencies. There
is significant risk that predictions, projections or conclusions will not prove to be accurate and actual results
may differ materially from estimates, expectations, or intentions expressed.
The forward-looking statements in this MD&A and associated notes and financial statements are based on
what we believe are reasonable assumptions, however we caution readers not to place undue reliance on
our forward-looking statements. We assume no obligation to update or revise these forward-looking
statements to reflect new events or circumstances, except as required by securities law.
Business Overview
NTG Clarity is a Canadian publicly traded Corporation (TSXV:NCI) that provides telecommunications
engineering, Information Technology, networking and related software solutions. We have been developing
niche software products directed at telecom service providers and utilities markets since our inception in
1993. We also provide professional services and managed services to this same vertical. We have also
expanded into the financial and government sectors, providing products and technical resources to assist
customers with projects that include digital transformation.
We are headquartered in Toronto, Canada and have subsidiaries/branch offices in Cairo, Egypt; the USA;
Riyadh, Saudi Arabia and Oman. The Corporation is organized into two business segments: the Canadian
segment, which is made up of activities in Canada and our offices in Saudi Arabia and Oman; and the Egypt
segment, which is our software development group and also provides professional services, offshoring
services and network services to customers in Egypt.
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Summary of Major NTG Events in 2021
Announcements made over the course of the year highlight our increase in the number of customers and
contracts/POs, our reduction in debt through a Shares for Debt transaction, and our introduction of
NTGapps; our newest software product.
The following outlines the events that occurred in 2021:
In Q1 2021, we announced the following:
a Memo of Understanding (MOU) with a major bank in the Gulf region to provide offshore software
development and IT resources and facilities through our Egypt subsidiary (estimated annual revenue of
$2.5M).
multiple purchase orders totaling over $1.1M in contract value. Some of this was for renewal of existing
work however the majority was for new work.
soft-launch of NTGapps (formerly Smart2Go) - a Digital Transformation software product. We also
announced receipt of a $550K PO from a major Health Care Provider to deliver their digital products on
the NTGapps platform.
In Q2 2021, we announced the following:
receipt of a Contract Purchase Agreement with a major financial institution in the Middle East to
provide onshore and offshore professional resources ($3.6M).
multiple purchase orders for a total estimated amount of $900K in contract value to provide IT, telecom
and professional resources.
In Q3 2021, we announced the following:
closing of a board-approved Shares for Debt transaction. We issued 40 million shares and reduced our
outstanding payables/loans by $2M.
two new POs for the NTGapps totaling $800K and other POs valued at $140K for support of other NTG
products.
a Letter of Intent (LOI) for the purchase of NTG's Asset Management, Network Discovery, Discrepancy
and Reconciliation software ($4.5M).
In Q4 2021, we announced the following:
a PO to provide professional resources offshore for a major transportation company in the Middle East,
valued at $170K.
multiple POs totaling $750K; an estimated $450K for the implementation of NTGapps for two customers
and $300K is to provide resources to multiple customers.
With regards to the $4.5M CAD Letter of Intent (LOI) announced in Q3 2021, the first PO valued at
$1.22M for the product license and a second PO for $1.35M implementation.
POs to provide professional technical resources and consultants in both the financial and telecom
sectors in the Middle East for $642K.
a PO to provide project work for utilizing our NTGapps technology and know-how for $168K
3 POs from a financial institution in the Gulf region to provide technical professional service resources
both on the customer premises and offshore in our Egypt Offshore Centre.
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signing of a 1-year renewable Framework Agreement for manpower services to provide future technical
IT consultation services to a credit bureau in the Middle East.
a letter of intent (LOI) from a major financial institution in the Middle East, to provide technical
professional resources both on the customer’s premises and offshore in our Egypt Offshore Centre.
Canada
Before 2021, our Canadian operations were relatively small compared to our international operations. This
year, Canadian customers and customers billed through our Canadian office account for 14% of NTG’s
revenue. In December 2021, we were awarded two projects through our Canadian office to:
license and install NTG’s NTS Asset Management, Network Discovery, Discrepancy and Reconciliation
software, including our new low-code NTGapps digital toolbox. The license revenue included in 2021
was approximately $1.22M for this new customer. Future implementation revenue over the next 15
months (PO announced December 9, 2021) is expected to be $1.3M.
license, install and support our NTS Utility Billing software. The USD$360K contract includes a license
amount of USD$126K that was invoiced and received in January 2022. Future milestone billing for the
balance is expected over 8 months (contract announced January 5, 2022).
Egypt
Egypt continues to be a challenging place to do business with restrictions on using foreign currency for
business operations and on moving funds out of the country. We mitigate much of the risk of doing business
in the country as our expenses and the majority of our contracts in Egypt are both in the local currency.
Additionally, most of the technical and professional services for offshoring and outsourcing are based in
Egypt, allowing NTG to provide experienced resources and expertise at extremely competitive prices. This
has proven to be a successful strategy as the offshoring of resources to Egypt is increasingly popular.
We are also working to diversify our customer base in the country. In addition to our 2 major customers
who represent 50% of Egypt’s annual revenue (2020: 75%), we are increasing work with other existing
customers and have added 7 new customers (6% of revenue) in the financial and telecom sectors.
In addition to offshoring and providing professional services to customers in Egypt, we have focused efforts
more on our core software products and our NTGapps low-code development platform. We have sold our
NTGapps software product to 4 of our existing customers in Egypt.
In 2021, Egypt’s revenue contribution continues to be strong with the subsidiary contributing 23% of the
Corporation’s revenue (2020: 26%).
Subsequent to year end, in March 2022, Egypt devalued its currency by 14%, prompting an increase in
interest rates and inflation in the country. The effects on NTG’s operations are not yet quantifiable. We
anticipate, as in 2016, there will be more growth opportunities as other companies leave the marketplace
because of reluctance to do business in the local currency. We also expect to increase some salaries to
retain our highly skilled personnel.
Kingdom of Saudi Arabia (KSA)
NTG has been doing business in KSA for over 15 years, and ongoing initiatives continue to show returns
with 70% of our professional service work and 58% of our revenue being from KSA (2020: 79% and 63%
respectively). NTG has developed good brand recognition and a solid track record over the years, which is
an asset to our work in the region.
8
During the year, COVID-19 travel restrictions slowed the movement of personnel to customer sites. We
were required to quarantine our personnel for two weeks in another country (Bahrain or Maldives) prior to
arriving in KSA. This resulted in significant increases in travel and accommodation costs during the year.
We have sold our NTGapps software to new and existing customers in the country, and product demos
show promising interest across multiple sectors.
Our KSA revenue has increased by 41% over 2020 revenues. Additionally, customers in the banking and in
public sectors are contributing significantly to our revenue (32%).
Oman
In 2021, we continued work for our customer in Oman, who is using our NTS Network Inventory and Project
Management modules. Recurring revenues in Oman from product maintenance, support, and change
requests as well as professional services contributed 5% to NTG’s revenue in 2021 (2020: 11%).
Outlook
Customers have been recognizing our quality of work and track record and this has resulted in increased
work from our major customers, including sales of our NTGapps software product. KSA’s economic
rebound, due in large part to increasing prices for oil, has shown increasing demand for our products and
services. Our Q4 2021 revenue is the highest quarterly revenue since 2016 and we have been profitable for
the sixth straight quarter.
Subsequent to year end, most of the marketplaces we operate in have relaxed or eliminated COVID-19
requirements and we are seeing many of our customers and activities return to normal. However, some
customers have retained some form of the “work from home” model and some are making use of the
technical, IT and professional services we offer through our Egypt Offshore Centre. We are excited about
the increasing demand for this offering model as we expand our business into new verticals that include
government and financial sectors. We expect the additional travel and accommodation costs that were
necessary in KSA this year will be greatly reduced going forward, however this remains a concern.
Finally, with the increased demand for our software product; NTGapps digital toolbox, we anticipate being
able to further expand into new verticals. We are expanding the focus of NTGapps to include tools related
to small and medium enterprise (SME) end-to-end business operations. We are already seeing demand in
the financial and government sectors and we see this as an opportunity to present our product for use in
the medical sector. Of particular note is the PO we received in March of this year for a new customer in the
medical sector to deliver their digital products on the NTGapps platform. For more information, visit
www.ntgapps.com. We are also seeing an increased demand for our Utility software and Network Asset
Management and feel this will lead to new customers and increased recurring revenue.
As of the publishing of this report, NTG has a backlog of $11.7M in unbilled amounts for POs on hand. This
amount is roughly equal to the total revenue for 2021. This is in addition to already invoiced amounts in Q1
2022. This put us in a healthy position to continue our profitability going forward and contributes to the
growth of our organization. Additionally, we are expecting to renew several contracts with major customers
that are coming up for renewal within the next six months.
Summary of Quarterly Results
Historically, NTG’s operating results have fluctuated due to the timing of new contracts and their
corresponding billing, and we expect this trend to continue. Q4 2021 contains $1.22M in license fees for a
new telecom customer who purchased our NTS Asset Management, Network Discovery, Discrepancy and
Reconciliation software. Our Q4 2021 revenue is the highest quarterly revenue since 2016 and we have
been profitable for six straight quarters.
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The following table shows a summary of our eight most recent quarters (in Canadian dollars).
2021
Revenue
Net Income
Profit per
Share
Diluted Profit
per Share
Quarter One
Quarter Two
Quarter Three
Quarter Four
TOTAL
2020
Quarter One
Quarter Two
Quarter Three
Quarter Four
TOTAL
$ 2,298,307
$ 2,621,252
$ 2,844,338
$ 4,132,046
$ 11,895,943
$ 249,727
$ 459,813
$ 237,671
$ 416,748
$ 1,363,958
$ 0.00
$ 0.00
$ 0.00
$ 0.01
$ 0.01
$ 0.00
$ 0.00
$ 0.00
$ 0.01
$ 0.01
Revenue
$ 2,474,766
$ 1,651,209
$ 2,233,248
$ 1,547,766
$ 7,906,989
Net Income
(Loss)
Profit (Loss)
per Share
Diluted Profit
per Share
$ (598,736)
$ (1,019,715)
$ 252,059
$ 267,776
$ (1,098,617)
$ (0.01)
$ (0.01)
$ 0.00
$ 0.00
$ (0.01)
$ (0.01)
$ (0.01)
$ 0.00
$ 0.00
$ (0.01)
Total Assets
$ 3,390,312
$ 4,409,643
$ 5,115,346
$ 6,490,706
$ 6,490,706
Total Assets
$ 2,750,861
$ 2,165,928
$ 2,448,748
$ 3,406,422
$ 3,406,422
Quarterly and Annual Results of Operations
NTG’s business continues to operate and support customers’ operations despite COVID-19 restrictions. We
have managed to keep quarter over quarter revenues strong with six straight quarters of profitability. Cash
flow remains a concern as NTG depends on collections to finance operations. Generally, in 2021, collections
have been within acceptable limits and there is a small provision for bad debts of $21,524.
Financial highlights for the three months and year ending December 31, 2021:
Revenue
Consolidated revenues for the three months ending December 31, 2021 was $4,132,046 compared to
$1,547,766 for the same period in 2020. Revenue for the year increased 50% to $11,895,943 compared to
$7,906,989 reported in the prior year.
Professional service revenue continues to be an important source of revenue for us, given its generally
recurring nature (81% as compared to 78% in 2020). We continue to work to make product sales a more
balanced part of NTG’s revenue stream.
Consolidated revenues for Q4 2021 for the Egypt operating segment increased significantly to $1,183,846
compared to $393,190 in 2020. For the year ending December 31, 2021 revenues increased 31% to
$2,735,335 compared to $2,094,422 in 2020.
For the Canadian operating segment, revenues increased to $2,948,200 compared to $1,154,577 in Q4
2020. For the year ending December 31, 2021 revenues increased 58% to $9,160,608 compared to
$5,812,568 in 2020.
Revenues are 50% higher this year as we work to increase the number of customers and the work done for
each customer. The significant increase in Q4 and YTD revenues was due to:
a 42% increase in work for our largest customer in the financial sector in KSA
a 600% increase in work for a large financial sector customer in Egypt
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a license fee for a new customer
significant increases in work for 6 of our existing customers in KSA
revenue from new customers in KSA and Egypt.
Though we currently have three Canadian customers, the Middle East continues to be where the majority
of NTG’s revenue comes from and as of December 31, 2021, represents 96% of total revenue. We are
hopeful that 2022 will continue to see improved results from our past efforts with both existing and new
customers.
Unbilled Revenue
Unbilled revenue is revenue which had been earned and therefore recognized in compliance with IFRS, but
which has not been billed to the client(s) due to contract terms and/or billing cycle. NTG derives revenue
from fees charged to customers for licenses for software products and professional services: support,
consulting, development, training, and other services.
Revenue can be recognized for projects based on time and materials for professional services, or on a
percentage of completion basis for product implementation and support. Both can result in unbilled
revenue until the customer is invoiced. Based on NTG’s contracts, the customer is invoiced upon the
completion of defined milestones and/or the required customer acceptance. For many contracts, revenue
is recognized each month, but billed on a quarterly basis and we anticipate this to continue.
At December 31, 2021, unbilled revenue was $342,574 compared to $315,171 at December 31, 2020.
Cost of Sales and Gross Margin
Cost of sales consists of the expense of personnel providing professional services, and services to implement
and provide technical support for our solutions. In addition, it includes an allocation of certain direct and
indirect costs attributable to these activities.
Cost of sales for the three months and year ending December 31, 2021 were $881,903 and $5,307,491
(2020: $1,675,034 and $5,673,356).
Cost of sales
Salaries and wages
Travel
Hardware
Other expenses
Total
December 31, 2021
December 31, 2020
$
$
4,942,357
384,477
76,990
(96,333)
5,307,491
$
$
5,223,849
123,344
240,393
85,770
5,673,356
For the Egypt operating segment, the cost of sales for the three months and year ending December 31,
2021 were $652,876 and $1,616,186 respectively compared to $622,475 and $1,694,496 in 2020.
For the Canadian operating segment, the cost of sales for the three months and year ending December 31,
2021 were $229,027 and $3,691,305 respectively compared to $1,052,559 and $3,978,860 in 2020. The
decreases were due to the capitalization of work done on our NTGapps product.
The gross margin for the year ending December 31, 2021 was 55% compared to 28% in 2020. Realistic
margins are anticipated to be between 30-40%, based on the product mix. This year’s margin was higher
due to a large license fee which has a high margin.
Operating Expenses
As COVID-19 restrictions were lifted, costs for travelling and marketing events impacted 2021 results. For
the three months and year ending 2021, expenses were $2,315,416 and $3,992,545 respectively compared
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to $376,626 and $3,394,410 in 2020. Both selling/marketing and G&A costs increased this year, primarily
due to the significant loss in foreign exchange.
Selling and Marketing
Selling and marketing expenses consist primarily of sales staff remuneration, commissions, travel,
advertising, consulting, and trade show costs.
Sales and marketing expenses for the three months and year ending December 31, 2021 were $641,731
and $1,257,849 respectively compared to $301,073 and $955,428 in 2020. The increase in the selling and
marketing expenses occurred as COVID-19 restrictions were lifted. Travel and in-person customer
meetings/visits resumed and sales staff and salaries were returned to pre-COVID levels. Also, larger
commission costs were due as sales increased.
Selling
Salary and wages
Marketing and advertising
Mailing and courier
Professional services
Meals and entertainment
Total
For the twelve months ended
December 31, 2021
December 31, 2020
$
1,053,291
$
670,146
68,456
7,223
25,805
103,074
186,217
5,534
39,485
54,046
$
1,257,849
$
955,428
General and Administrative
General and administration expenses (G&A) consist primarily of salary and benefits, rent and office
expenses, insurance, professional fees, accounting and legal fees, director’s fees, etc.
G&A expenses for the three months and year ending December 31, 2021 were $1,329,679 and $2,440,239
respectively compared to $180,271 and $2,353,089 in 2020.
General and Administrative
December 31, 2021
December 31, 2020
Salary and wages
Occupancy
Consulting
Professional fees
Bid/performance bond fees
Insurance
Dues and subscriptions
Penalties and fees
Office and general
Total
$
1,674,735
138,121
$
1,364,997
222,847
25,430
117,733
–
276,562
22,006
133,098
52,554
99,800
120,645
831
242,299
25,690
37,245
238,735
$
2,440,239
$
2,353,089
Foreign Exchange Gain/Loss
Each entity in the Corporation determines its own functional currency and items included in the financial
statements of each entity are measured using that functional currency. The functional currency and the
presentation currency of the parent entity is the Canadian dollar. Transactions in foreign currencies are
initially recorded in respective functional currency rates at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are retranslated at the functional currency rate at the reporting
date. Differences are taken to the statement of profit or loss and comprehensive income.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using
the exchange rates as at the dates of the initial transactions. The functional currency of the subsidiary NTG
Egypt Advanced is the Egyptian pound, and the functional currency of the subsidiary NTG Clarity Networks
US Inc. is the US Dollar.
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An entity may present its financial statements in any currency (or currencies). If the presentation currency
differs from the entity's functional currency, it translates its results and financial position into the
presentation currency. For example, when a group contains individual entities with different functional
currencies, the results and financial position of each entity are expressed in a common currency so that
consolidated financial statements may be presented.
For practical reasons, an average rate for the period is often used to translate income and expense items.
When the exchange differences relate to a foreign operation that is consolidated but not wholly owned,
accumulated exchange differences arising from translation and attributable to non-controlling interests are
allocated to, and recognized as part of, non-controlling interests in the consolidated statement of financial
position.
IAS 21.–47, in addition to IAS 21.–43, apply when the results and financial position of a foreign operation
are translated into a presentation currency so that the foreign operation can be included in the financial
statements of the reporting entity by consolidation or the equity method.
For the quarter ended December 31, 2021, the Corporation recognized a significant foreign currency
exchange loss of $344,006 compared to a gain of $104,718 for the same period in 2020. For the year ending
December 31, 2021, the Corporation recognized a foreign currency exchange loss of $294,457 compared to
a loss of $85,893 the year ending 2020. For more information on foreign exchange, see Note 4(b): Foreign
currency translation.
Other Expenses
Research and Development
With the exception of NTGapps, our flagship product, research and development is paid for by customer
requests and is therefore, included in cost of sales.
Provision for Bad Debt
NTG has made a provision for bad debt in 2021 of $21,524 (2020: $339,602).
Amortization of Intangible Assets
Intangible assets are related to the NTGapps low-code digital transformation platform initially capitalized
in 2020. Expenditures on development of the software are recognized as an asset from the time the
Corporation has determined an indefinite future economic benefit exists.
The amortization costs for the three months and year ending December 31, 2021 were $44,933 and
$131,222 respectively compared to $Nil in 2020.
Interest Expense
As of December 31, 2021, the interest expense for the three months and year was $(6,935) and $200,310
as compared to $70,086 and $268,957 for the same periods in 2020. There is no change in the principal
indebtedness carrier’s requirements. Interest for the quarter is lower primarily due to the reversal of
interest accruals for loans repaid this year.
Share-based Compensation
NTG has a formal stock option plan allowing the issuance of options to directors, officers, employees and
consultants in order to attract and retain qualified and experienced individuals. All options granted are non-
assignable, generally expire five years after the grant date, and usually vest over one year but can have
varying vesting periods.
13
No options were granted to non-employees during 2021. Stock options granted during the three months
and year ending December 31, 2021 totalled 7,420,000 and 17,415,000 compared to 400,000 and 500,000
in 2020. The weighted average expected contractual lives of outstanding and exercisable options are shown
in Note 18(b). 12,105,000 options have vested and there are 12,475,000 issued. The difference of 370,000
will vest in the foreseeable future (within the next 12 months) and the expense will be charged in the future
quarters.
Income Taxes
There are no income taxes for the taxation year ending December 31, 2021 as NTG has income tax losses
in the amount of $16,512,842 that are available for Canadian federal and provincial tax purposes which may
be carried forward to reduce future years’ taxable income (December 31, 2020: $17,799,962).
Total Comprehensive Income after Taxes (Net Income)
For Q4 2021, the Corporation recorded a net income of $416,748 compared to $267,776 for the same
period in 2020. For the year ending December 31, 2021, the Corporation recorded a net income of
$1,363,958 compared to a net loss of $(1,098,617) in 2020.
The Egypt operating segment, for the three months ending December 31, 2021 recorded a net income of
$102,129 compared to $806,277 in 2020. For the year ending December 31, 2021 there was a net income
of $158,673 compared to $551,783 in 2020.
For the Canadian operating segment, for the three months ending December 31, 2021 recorded a net
income of $314,620 compared to a net loss of $(538,500) in 2020. For the year ending December 31, 2021
there was a net income of $1,205,285 compared to a net loss of $(1,650,402).
Assets and non-current liabilities
As of December 31, 2021, the Corporation closed the year with $158,870 cash on hand (2020: $145,224),
bid/performance bonds of $55,764 (2020: $60,233) and prepaid amounts of $64,446 (2020: $67,501).
Differences in prepaid amounts are due to the timing of insurance and rental renewals. The decrease in
bond values compared to year-to-date 2020 occurred because of bonds that expired in Egypt and KSA.
Property and equipment
Property and equipment of $183,294 as of December 31, 2021 (2020: $157,757) consists mainly of
computer equipment and office furniture with a useful life of 4-10 years. We are not dependent on tangible
assets and we expect the purchase and disposal of property and equipment to be consistently modest in
the foreseeable future. NTG had additions of $97,032 during 2021 (2020: $19,677) and depreciation of
$112,873 (2020: $41,082). The majority of the additions were in Egypt for laptops for internal and
outsourced personnel and servers to support operations. Note the depreciation includes depreciation of
our right-of-use asset of $41,378. See Note 16 for more information.
Intangible assets
In past years, intangible assets were related to the upgrade of our internally developed Operations Support
System/Business Support System (OSS/BSS) software product called NTS, and StageEM, our enterprise
solution that allows companies to manage many current and/or proposed projects and maintain control of
resources, budgets and other elements. As of December 2021, these products not on NTG’s balance sheet,
though we consider both products to be valuable assets.
In 2021, intangible assets relate to the upgrade of our internally developed NTGapps (formerly Smart2Go)
platform. NTGapps is a powerful development tool that offers rapid application development and whose
14
users need no knowledge of development languages. Powerful templates allow users to create their own
tools for HR, CRM, asset management, etc. In 2021, NTGapps development was capitalized for $1,451,381
(2020: $860,636). The amortization cost for 2021 was $131,221 (2020: $Nil).
An impairment test is performed on the non-current assets at year end, or when indicators warrant it. A
test was performed at year end 2021 and there was no impairment. We will continue to assess on a
quarterly basis for indicators of impairment.
Non-current liabilities
As of December 31, 2021, NTG had the following non-current liabilities:
The outstanding indebtedness of $6,512,880 held by a numbered Company is disclosed as a long-term
debt on the Statements of Financial Position. See Note 18(a) and Note 26 for more information.
An amount due from and owed to related parties includes balances owing to key management and key
management compensation. See Note 26 for more information.
Several loans payable of $422,093, provided by international investors.
Liquidity and Capital Resources
NTG’s principal requirement for capital is to provide working capital to fund its operations and support its
organic growth. Historically, we have funded operations by using profits generated by operations and
through the issuance of equity. In 2021, we funded operations, changes in non-cash working capital and
capital expenditures using internally generated cash flows, cash on hand, short-term loans, and a Shares
for Debt private placement in August 2021.
As of December 31, 2021, we had a declining working capital deficit of $3,757,061 compared to a deficit of
$6,336,678 at December 31, 2020. The improvement in working capital was primarily due to:
closing a Shares for Debt transaction on August 10, 2021 to reduce payables by $2,000,000.
continuing our increased collection activities.
loans from overseas investors.
Cash Flow Provided by Operations
The cash in-flow from operating activities for the year ending December 31, 2021 was $1,801,557 compared
to $1,836,727 for the same period in 2020. Though cash inflow was similar to last year, of note is:
a net income of $1,363,958 compared to a net loss of $(1,098,617) in 2020.
a 36% reduction in loans payable.
a larger Shares for Debt transaction ($2,000,000 compared to $660,000 in 2020).
a $1.6M increase in accounts receivable compared to a $400K decrease in 2020.
a $819K decrease in accounts payable compared to a $619K increase in 2020.
Cash Flow from Financing Activities
The cash out-flow from financing activities for the year ending December 31, 2021 was $239,498 compared
to an out-flow of $842,258 for the same period in 2020. This was primarily due to:
the decrease in long-term debt ($670,708 compared to an increase of $117,072 in 2020).
the issuance of common shares for $443,000 (2020: $Nil).
15
Cash Flow from Investing Activities
Cash out-flow from investing activities for the year ending December 31, 2021, was $1,548,413 compared
to an out-flow of $880,313 for the same period in 2020. This was primarily due to the capitalization of
development costs for our NTGapps software product.
Commitments and Contractual Obligations
NTG was committed under agreements for the rental of office space in Canada at a monthly rate of $9,232
for the period from June 1, 2016 to May 31, 2021. As of June 1, 2021, we renewed the agreement and
committed to pay $6,639 monthly for the period from June 1, 2021 to May 31, 2022 and $8,195 monthly
for the period from June 1, 2022 to May 31, 2023. As of December 31, 2021, NTG has a deferred rent balance
due of $80,847 that is related to the Forbearance Agreement signed in April 2020. As of the publishing of
this report, this amount has been repaid in full.
Additionally, we are committed under agreements for the rental of office spaces in Egypt and Oman at a
monthly rate ranging from $800 to $3000 for the periods from August 2021 to October 2023.
Debt and Credit Facilities
As of December 31, 2021, NTG’s indebtedness continues to be controlled by a numbered Company,
controlled by Ashraf Zaghloul, NTG CEO and Kristine Lewis, NTG President. The numbered Company retains
the Indebtedness and the Security, and all the rights, title and interest together with the full benefit of all
powers and all covenants and provisions contained in the Security. The Company has agreed to extend the
grace period for principal installment repayments until December 2022. This has helped NTG significantly
by helping with cash flow and reducing pressure on management to allow them to focus on business. The
Indebtedness held by the Company is secured by a General Security Agreement (GSA) over the assets of the
Corporation. It is listed as Long-term debt on the Interim Consolidated Statements of Financial Position.
As of December 31, 2021, NTG Egypt Advanced Software, a subsidiary of NTG, had the following:
an overdraft facility with QNB bank in Egypt in the amount of 7,777,243 Egyptian pounds
(approximately $626,068; 2020: $569,734) with an interest rate of 18%.
a loan with CIB bank in Egypt in the amount of 3,000,000 Egyptian pounds at interest rate of 7% per
annum, repayable in monthly principal payments of 125,000 Egyptian pounds plus interest. The loan
matures on April 1, 2023. The loan outstanding at year end was 2,000,000 Egyptian pounds
(approximately $161,000).
In 2020, NTG received $60,000 interest-free for the Canadian Emergency Business Account (CEBA) revolving
line of credit. As of December 31, 2021, the balance owed on this line of credit is $60,000. Subsequent to
year end, in March 2022, we repaid CAD$30,000. See Note 19 for more information.
Off-Balance Sheet Arrangements
The Corporation has not entered into off-balance sheet financing arrangements. All commitments are
reflected on the Corporation’s balance sheet.
Transactions with Related Parties
Transactions between the Corporation and its subsidiaries, which are related parties to the Corporation,
have been eliminated on consolidation. Related parties include key management, the Board of Directors,
close family members and entities which are controlled by these individuals as well as certain persons
performing similar functions.
16
The standard key management compensation is listed in Note 26.
The Corporation’s long-term debt is controlled by a numbered Company, controlled by Ashraf Zaghloul,
NTG CEO and Kristine Lewis, NTG President.
Basis of Preparation and Significant Accounting Policies
The audited consolidated financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
Significant accounting policies are presented in detail in Note 3 of our audited consolidated financial
statements for the year ending December 31, 2021. These are available on SEDAR (www.sedar.com). The
policies applied in these statements are based on IFRS issued and outstanding as of April 11, 2022, the date
the Board of Directors approved the consolidated financial statements.
Proposed Transactions
There are no Proposed Transactions.
Business Risk and Management
NTG’s primary risk management objective is to protect our balance sheet and cash flow. Principal financial
liabilities are made up of a Company Indebtedness (assumed from RBC Royal Bank in December 2019), and
trade and other payables. NTG has also taken on short-term debt from overseas to assist with cash flow.
We are exposed to market risk, interest rate risk, foreign exchange risk, credit risk, and liquidity risk. Senior
management oversees the management of these risks and is supported by a Committee that advises on
financial risks and the appropriate financial risk governance framework. The Board of Directors reviews and
agrees policies for managing risks.
In addition to risks described elsewhere, NTG is subject to a number of risk factors. We have significant
reliance on certain key personnel, some of whom are also key shareholders; Ashraf Zaghloul, CEO; Kristine
Lewis, President; and Yaser Yousef, CTO.
Though we have worked hard to diversify our customer base, we are dependent on a few large customers.
As of December 31, 2021, 35% of NTG’s revenue was from two customers (2020: 29% from one customer).
34% (2020: 25%) of our trade accounts receivable balance was from one customer. Management continues
to work to diversify the customer base and country concentration.
The uncertainties around COVID-19 has required the use of significant judgement and estimates as of
December 31, 2021, we have not noted any resulting significant impairment.
Additional risks and uncertainties not described below or not presently known to the Corporation may also
impact our business. If any of these risks occur, our company’s business, financial condition or results of
operations could be harmed and the trading price of NTG’s common shares could be materially affected.
The purpose of discussing these risks and uncertainties is to highlight factors that could cause actual results
to differ materially from past results or from those described in forward-looking statements. It is not to
describe facts, trends and circumstances that could have a positive impact on the results or financial
position.
Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because
of changes in market prices. Market prices comprise several types of risk: interest rate risk, currency risk,
17
commodity price risk, and other price risk, such as equity risk. The Corporation is not subject to price risk
from fluctuations in market prices of commodities and has no exposure to equity price risk.
There is a high concentration of competition in the telecom industry and no barrier of entry for new
competitors into the market. Many of our competitors are larger companies that have greater resources.
To help mitigate this risk, we have partnered with, or signed agreements to work through; a few of the large
competitors, as we can offer seasoned resources at extremely competitive rates.
Changes in the regulatory environment would always affect our plans and investments. As we continue to
grow, we will continually monitor and evaluate the various policies and procedures to ensure that they
consider any changes in the Corporation and its marketplace.
In 2021, approximately 71% of our revenue came from work done in KSA (2020: 63%). The majority of NTG’s
KSA customers are consistently within our payment terms.
Historically 7-11% of our revenue comes from work done through our subsidiary, NTG Egypt, based in Cairo,
Egypt. Since 2014, the contribution percentage has grown from 13.7% to 23% in 2021. The economic
challenges in the region continue have a positive impact on our Egypt operations.
Oman’s major customer contributed 5% of the revenue in 2021 (2020: 11%).
Interest rate risk
NTG's exposure to interest rate fluctuations is primarily interest paid on its indebtedness and long-term
loans. The Corporation has performed sensitivity analysis on interest rates on December 31, 2021 to
determine how a change in interest rates would impact equity and net loss.
During the year, NTG paid $200,310 (2020: $277,126) on its loans and liabilities. An increase or decrease of
100 basis points in the average interest rate paid during the period would have adjusted net earnings by
approximately $26,896 (2020: $29,896). This analysis assumes that all other variables remain constant.
Credit risk
Credit risk is the risk of an unexpected loss if a customer or counterparty to a financial instrument fails to meet
its contractual obligation. NTG’s financial instruments that are exposed to credit risk consist primarily of trade
receivable. Our exposure to credit risk is impacted by the economic conditions for the industry which could
affect the customers' ability to satisfy their obligations. To reduce risks, we perform periodic credit evaluations
of the financial conditions of its customers and typically does not require collateral from them. Management
assesses the need for allowance for potential credit losses by considering the credit risk of specific customers,
historical trends and other information.
The credit quality of all the accounts receivable of the Corporation that are neither past due nor impaired
and the age of accounts receivable that are past due but not impaired have been assessed on an individual
basis and determined to have a mitigated risk profile due to their payment history. NTG previously had
receivables and pre-shipping insurance; however, we did not renew this insurance due to cash flow (see
Note 26). This introduces a new level of risk of non-payment by customers which was not previously there.
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in foreign exchange rates. Our exposure to the risk of changes in foreign exchange rates
relates primarily to operating activities, when revenue or expense are denominated in a different currency
from our functional currency, the Canadian dollar.
18
We do not hedge the risk related to fluctuations of the exchange rate between USA and Canadian dollars from
the date of the sales transactions to the collection date due to the short-term nature of this exposure. The
Corporation does not hedge the risk related to fluctuations of the exchange rate between USA and Canadian
dollars from the date of the sales transactions to the collection date due to the short-term nature of this
exposure.
A 10% change in exchange rates on December 31, 2021 would have the following approximate impacts:
10% impact to:
P&L in CAD
Equity in CAD
U.S.
Dollar
USD
22,367
16,440
Omani
Riyal
OMR
2,025
1,489
Kuwait
Dinar
KWD
38,704
28,448
Saudi
Riyal
SAR
7,897
5,804
Turkish
Lira
TRY
238
175
Egyptian
Pound
LE
23,569
17,323
Liquidity risk
Liquidity risk is the risk that NTG will not be able to meet its financial obligations as they fall due. Our
approach to managing liquidity is to ensure, as far as possible, that we will always have sufficient liquidity
to meet our liabilities when due, under normal and stressed conditions. We manage liquidity risk by
reviewing capital requirements on an ongoing basis. We continuously review both actual and forecasted
cash flows to ensure that we have appropriate capital capacity.
The following table summarizes the amount of contractual undiscounted future cash flow requirements for
financial instruments as of December 31, 2021:
Contractual obligations
2022
2023
2024
2025 and after
Total
Operating line of credit
$
626,068
$
Accounts payable and
accrued liabilities
6,540,227
– $
–
Operating lease
Long-term debt
Loans payable
233,366
108,209
6,703,375
422,093
–
–
$
–
–
–
–
–
–
–
–
–
–
$
626,068
6,540,227
341,575
6,703,375
422,093
The aging of trade accounts payable are as follows:
December 31,
Current
31 – 60 days
61 – 90 days
91 – 180 days
More than 180 days
2021
1,531,550
1,959
6,898
13,106
622,523
2,176,036
2020
800,211
109,175
30,732
98,235
2,685,866
3,724,219
$
$
$
$
Expenses are accrued when incurred. Accounts are deemed payable once an event occurs that requires
payment by a specific date. The contractual maturity of the majority of accounts payable is within one
month.
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Capital Management
NTG manages its capital, which consists of cash provided from operations and long term debt, with the
primary objective being safeguarding sufficient working capital to sustain operations. The Board of
Directors has not established capital benchmarks or other targets.
There have been no changes in NTG’s approach to capital management during the year ending December
31, 2021. Also, no changes were made in the objectives, policies, or processes during the year ending
December 31, 2021. We will continually assess the adequacy of our capital structure and capacity and make
adjustments within the context of NTG’s strategy, economic conditions, and the risk characteristics of the
business.
NTG’s objectives when managing capital are to:
(i)
(ii)
safeguard the Corporation's ability to continue as a going concern, so that it can provide adequate
returns for shareholders and benefits for other stakeholders;
fund capital projects for facilitation of business expansion provided there is sufficient liquidly of
capital to enable the internal financing; and
(iii) maintain a capital base to maintain investor, creditor, and market confidence.
NTG considers the items included in the consolidated statements of changes in shareholders' equity as
capital. We manage and adjust the capital structure in light of changes in economic conditions and the risk
characteristics of the underlying assets. In order to maintain or adjust the capital structure, we may issue
new shares. We are not subject to externally imposed capital requirements.
Legal claim contingency
NTG is subject to a variety of claims and suits that arise from time to time in the ordinary course of business.
Although management currently believes that resolving claims against NTG, individually or in aggregate, will
not have a material adverse impact on our financial position, results of operations, and cash flows, these
matters are subject to inherent uncertainties and management's view of these matters may change in the
future. To date, there are no claims or suits outstanding.
Guarantees
NTG indemnifies its directors and officers against claims reasonably incurred and resulting from the
performance of their services to the Corporation. NTG has been unable to renew its Directors and Officers
liability insurance since March 2020. The insurance remains a concern and we are looking for alternatives.
Collateral
NTG has pledged its assets under a General Security Agreement ("GSA") as disclosed in Note 18(a). NTG did
not hold collateral on December 31, 2021 and December 31, 2020.
Disclosure Controls and Procedures and Internal Controls over Financial Reporting
The Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Corporation’s
disclosure controls and procedures as of December 31, 2021 and have concluded that such disclosure
controls and procedures were effective to provide reasonable assurance that material information relating
to the Corporation or its subsidiaries is made known to them.
In contrast to the certificate required for non-venture issuers under National Instrument 52-109
Certification of Disclosure in Issuers’ Annual and Interim Filings (NI 52-109), this Venture Issuer Basic
20
Certificate does not include representations relating to the establishment and maintenance of disclosure
controls and procedures (DC&P) and internal control over financial reporting (ICFR), as defined in NI 52-
109. In particular, the certifying officers (CFO and CEO) filing the NI 52-109 certificate is not making any
representations relating to the establishment and maintenance of:
i) controls and other procedures designed to provide reasonable assurance that information required to
be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under
securities legislation is recorded, processed, summarized and reported within the time periods specified
in securities legislation; and
ii) a process to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with the issuer’s GAAP (IFRS).
The issuer’s certifying officers are responsible for ensuring that processes are in place to provide them with
sufficient knowledge to support the representations they are making in the NI 52-109 certificate. Investors
should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design
and implement on a cost-effective basis DC&P and ICFR as defined in NI 52- 109 may result in additional
risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports
provided under securities legislation.
Standards issued but not yet effective
As of April 11, 2022, the date of authorization of these financial statements, certain new standards,
amendments, and interpretations to existing IFRS standards have been published but are not yet effective
and have not been adopted by the Corporation. All other standards were early adopted as explained in the
prior year's financial statements.
Management’s Statement of Responsibility
The management of NTG Clarity Networks Inc. is responsible for the preparation of the accompanying
consolidated financial statements and the preparation and presentation of information in the Annual
Report. The consolidated financial statements have been prepared in accordance with International
Financial Reporting Standards, and are considered by management to present fairly the financial position
and operating results of the Corporation.
The Corporation maintains various systems of internal control to provide reasonable assurance that
transactions are properly authorized and recorded, that assets are safeguarded, and that financial reports
are properly maintained to provide reliable financial statements.
The Corporation's audit committee is comprised of independent directors and a management
representative and is appointed by the Board of Directors annually. The committee meets periodically with
the Corporation's management and independent auditors to review the consolidated financial statements
and the independent auditors report. The audit committee has approved the consolidated financial
statements and reported its findings to the Board of Directors.
The Corporation's independent auditors, NVS Professional Corporation, have examined the consolidated
financial statements and their report follows.
"Ashraf Zaghloul"
Ashraf Zaghloul
Chief Executive Officer
April 11, 2022
"Kristine Lewis"
Kristine Lewis
President
April 11, 2022
21
Independent Auditor’s Report
To the Shareholders of
NTG Clarity Networks Inc.:
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the accompanying consolidated financial statements of NTG Clarity Networks Inc. and its subsidiaries (the
"Corporation"), which comprise the consolidated statements of financial position as of December 31, 2021 and December 31,
2020, and the consolidated statements of profit and loss and comprehensive income, consolidated statements of changes in
equity and consolidated statements of cash flows for the years then ended, and notes to the consolidated financial statements,
including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated
financial position of the Corporation as at December 31, 2021 and December 31, 2020, and its consolidated financial
performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting
Standards (IFRS).
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those
standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section
of our report. We are independent of the Corporation in accordance with the ethical requirements that are relevant to our
audit of the consolidated financial statements in Canada, and we have fulfilled our ethical responsibilities in accordance with
these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Material Uncertainty Related to Going Concern
We draw attention to Note 2 in the consolidated financial statements, which indicates that the Corporation has attained a gain
/ (loss) from operations of $1,363,958 (2020: $(1,098,618)) during the year ended December 31, 2021 and, as of that date, the
Corporation has an accumulated deficit of $23,426,487 and current assets are less than current liabilities by a ratio of 1:1.93.
As stated in Note 2, these events or conditions, along with other matters as set forth in Note 2, indicate that a material
uncertainty exists that may cast significant doubt on the Corporation’s ability to continue as a going concern. Our opinion is not
modified in respect of this matter.
Other Information
Management is responsible for the other information. The other information comprises:
• Management's Discussion and Analysis
•
The information, other than the financial statements and our auditor's report thereon, in the Annual Report.
Our opinion on the financial statements does not cover the other information and we do not and will not express any form of
assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We obtained Management's Discussion and Analysis prior to the date of this auditor's report. If, based on the work we have
performed on this other information, we conclude that there is a material misstatement of this other information, we are
required to report that fact in this auditor's report. We have nothing to report in this regard.
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The Annual Report is expected to be made available to us after the date of the auditor's report. If, based on the work we will
perform on this other information, we conclude that there is a material misstatement of this other information, we are required
to report that fact to those charged with governance.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance
with IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Corporation’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless management either intends to liquidate the Corporation or to cease operations, or has no realistic alternative
but to do so.
Those charged with governance are responsible for overseeing the Corporation’s financial reporting process.
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian
generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and
maintain professional skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is
higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations,
or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Corporation’s internal
control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on
the Corporation’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the
date of our auditor’s report. However, future events or conditions may cause the Corporation to cease to continue as a
going concern.
23
23
Evaluate the overall presentation, structure, and content of the consolidated financial statements, including the
disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within
the Corporation to express an opinion on the consolidated financial statements. We are responsible for the direction,
supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought
to bear on our independence, and where applicable, related safeguards.
The engagement partner on the audit resulting in this independent auditor’s report is Sadik Najarali.
NVS Professional Corporation
NVS Professional Corporation
Authorized to practice public accounting by
the Chartered Professional Accountants of Ontario
Markham, Ontario
April 11, 2022
24
NTG CLARITY NETWORKS INC.
Consolidated Statements of Financial Position
(In Canadian Dollars)
As at December 31,
ASSETS
Current assets
Cash and cash equivalents (Note 10)
Trade and other receivables (Note 11)
Bid/performance bonds (Note 13)
Prepaid expenses and deposits (Note 12)
Total current assets
Non-current assets
Property, plant and equipment (Note 14)
Intangible assets (Note 15)
Right-of-use of assets (Note 16)
Total non-current assets
Total Assets
LIABILITIES
Current liabilities
Bank indebtedness (Note 18)
Accounts payable and accrued liabilities (Note 17)
Current portion of leasehold liability (Note 16)
Deferred revenue
Loans payable (Note 25)
Current portion of long-term debt (Note 18)
Total current liabilities
Non-current liabilities
Long-term debt (Note 18) (Note 26)
Leasehold liability (Note 16)
Total non-current liabilities
Total liabilities
SHAREHOLDER’S EQUITY
Capital stock (Note 20)
Contributed surplus (Note 21)
Foreign exchange account
Deficit
Total shareholders’ equity
Total liabilities and shareholders’ equity
Approved on behalf of the Board:
"Ashraf Zaghloul"
Director
See accompanying notes to consolidated financial statements.
$
$
$
$
$
$
$
$
2021
2020
$
$
$
158,870
3,747,046
55,764
64,446
4,026,126
183,294
2,180,796
100,490
2,464,580
145,224
2,115,072
60,233
67,501
2,388,029
157,757
860,636
–
1,018,393
6,490,706
$
3,406,422
626,068
6,540,227
74,049
–
422,093
120,750
7,783,187
6,587,326
39,005
6,626,331
14,409,518
13,561,986
2,309,023
(363,334)
(23,426,487)
(7,918,812)
$
$
$
$
569,734
7,360,079
1,551
133,797
659,547
–
8,724,708
7,217,784
–
7,217,784
15,942,492
10,808,186
1,809,523
(357,204)
(24,796,574)
(12,536,069)
$
6,490,706
$
3,406,422
"Kristine Lewis"
Director
25
NTG CLARITY NETWORKS INC.
Consolidated Statements of Changes in Equity
For the years ended December 31, 2021 and December 31, 2020
(In Canadian Dollars)
Share
Capital
Contributed
Surplus
Deficit
Foreign
Exchange
Reserve
Total
Shareholders’
Equity
Balance, January 1, 2020
$ 10,148,186 $ 1,804,824 $ (23,164,121) $
(891,040) $ (12,102,151)
Income from continuing operations
Other comprehensive income
–
–
Share-based compensation (Note 20)
–
Debt for share exchange (Note 20)
660,000
–
(1,632,453)
–
4,699
–
–
–
–
533,836
–
–
(1,632,453)
533,836
4,699
660,000
Balance, December 31, 2020
$ 10,808,186 $ 1,809,523 $ (24,796,574) $
(357,204) $ (12,536,069)
Income from continuing operations
Other comprehensive income
Share-based compensation (Note 21)
Reallocation of contributed surplus
(Note 20) (Note 21)
–
–
–
–
–
310,800
810,300
(310,800)
Issuance of share capital (Note 20)
443,000
Debt for share exchange (Note 20)
2,000,000
–
–
1,370,088
–
–
–
–
–
–
(6,130)
–
–
–
–
1,370,088
(6,130)
810,300
–
443,000
2,000,000
Balance, December 31, 2021
$ 13,561,986 $ 2,309,023 $ (23,426,487) $
(363,334) $ (7,918,812)
26
NTG CLARITY NETWORKS INC.
Consolidated Statements of Profit and Loss and Comprehensive Income
(In Canadian Dollars)
For the years ended December 31,
2021
REVENUE (Note 7)
COST OF SALES (Note 23)
GROSS MARGIN
OPERATING EXPENSES
Selling (Note 24)
General and administration (Note 24)
Loss on foreign exchange
Total operating expenses
INCOME (LOSS) FROM OPERATIONS
OTHER (INCOME) EXPENSES
Amortization (Note 15)
Depreciation (Note 14) (Note 16)
Government subsidy (Note 19)
Accretion (Note 19)
Provision for bad debts (Note 11)
Interest
(Gain) on sale of licenses (Note 29)
Share-based payments (Note 21)
Other income
Total other expenses
INCOME (LOSS) FROM CONTINUING OPERATIONS
Other comprehensive income:
Exchange gain (loss) arising on translation of foreign operations
TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE YEAR
Earnings (loss) per share (Note 9)
Basic
Diluted
Weighted average number of shares outstanding
Basic
Diluted
See accompanying notes to consolidated financial statements.
$
$
$
$
$
$
2020
7,906,989
5,673,356
2,233,633
955,428
2,353,089
85,893
3,394,410
(1,160,777)
$
–
41,082
(34,970)
3,470
339,602
268,957
(99,428)
4,699
(51,736)
471,676
$
11,895,943
5,307,491
6,588,452
1,257,849
2,440,239
294,457
3,992,545
2,595,907
131,222
112,873
–
5,697
21,524
200,310
–
810,300
(56,107)
1,225,819
1,370,088
$
(1,632,453)
(6,130)
533,836
1,363,958
$
(1,098,617)
0.01
0.01
$
$
(0.01)
(0.01)
147,472,355
159,947,355
100,102,355
103,514,355
27
For the years ended December 31,
Cash provided by (used in)
OPERATING ACTIVITIES
Net income (loss) for the year
Add-Items not affecting cash:
Amortization (Note 15)
Depreciation (Note 14)
Interest expense
Share-based payment (Note 20)
Shares for debt issued (Note 20)
Net change in non-cash working capital items,
Decrease (increase) in trades and other receivable
(Decrease) increase in deferred revenue
Increase in bid/performance bond
Decrease in prepaid expenses and deposits
(Decrease) increase in accounts payable and accrued
liabilities
Increase (decrease) increase in leasehold liability
Increase (decrease) in loans payable
TOTAL CASH IN-FLOW FROM OPERATING ACTIVITIES
FINANCING ACTIVITIES
Advances from related parties
Proceeds from Loans (Note 18)
Increase (decrease) in long-term debt (Note 18)
Interest paid
Issuance of common shares (Note 20)
Increase in bank indebtedness (Note 18)
Lease payment (Note 16)
TOTAL CASH (OUT-FLOW) FROM FINANCING
ACTIVITIES
INVESTING ACTIVITIES
Disposal of property, plant and equipment (Note 14)
(Additions) intangible assets (Note 15)
TOTAL CASH (OUT-FLOW) FROM INVESTING ACTIVITIES
NET INCREASE IN CASH
Cash balance, beginning of period
Cash balance, end of period
NTG CLARITY NETWORKS INC.
Consolidated Statements of Cash Flows
(In Canadian Dollars)
2021
2020
$
1,363,958
$
(1,098,617)
$
$
$
$
131,222
112,873
200,310
810,300
2,000,000
4,618,663
(1,631,974)
(133,797)
4,468
3,055
(819,852)
(1,552)
(237,454)
1,801,557
–
161,000
(670,708)
(182,652)
443,000
56,334
(46,472)
$
$
$
$
–
41,082
268,957
4,699
660,000
(123,879)
464,872
133,797
25,442
57,908
619,040
–
659,547
1,836,727
(1,256,417)
–
117,072
(268,957)
–
569,734
(3,690)
$
(239,498)
$
(842,258)
(97,032)
(1,451,381)
(1,548,413)
$
13,646
145,224
158,870
$
(19,676)
(860,636)
(880,313)
114,156
31,068
145,224
$
$
See accompanying notes to consolidated financial statements.
28
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
1.
CORPORATE INFORMATION
NTG Clarity Networks Inc. (the “Corporation”) is domiciled in Canada and its shares are traded publicly
on the TSX Venture Exchange under ticker symbol NCI.V. The Corporation is domiciled in Canada and
was incorporated on May 15, 2001 under the laws of Alberta. The Corporation’s principal and registered
office is Suite 202, 2820 14th Avenue, Markham, Ontario, L3R 0S9.
The Corporation provides network, telecom, IT and infrastructure solutions to medium and large
network service providers. The Corporation specializes in providing telecommunications engineering,
networking and related software solutions and has developed niche software products directed at the
telecom service providers. NTG continues to offer professional telecom and IT services in the North
American and Middle Eastern markets.
The telecom industry is subject to rapid and substantial technological change which could reduce
marketability of the Corporation’s technology and services.
Impact of COVID-19
The uncertainties around the outbreak of the COVID-19 pandemic required the use of significant
judgement and estimates. As at December 31, 2021, the Corporation has not noted any significant
impairment as a result of COVID-19. The uncertain future impact of COVID-19 could generate, in future
reporting periods, a significant risk of material adjustments to the carrying amount of: accounts
receivable, property, plant & equipment, finite-life intangible assets, and government authorities’ loans
and other loans. As an emerging risk, the duration and full financial effect of the COVID-19 pandemic is
unknown at this time, and accordingly estimates of the extent to which the COVID-19 may materially
and adversely affect the Corporation's consolidated financial condition, operations and consolidated
financial results are subject to significant uncertainty.
2. GOING CONCERN
The Corporation prepared consolidated financial statements on a going concern basis which presume
the realization of assets and discharge of liabilities in a normal course of business for the foreseeable
future. The Corporation’s ability to continue operations and to realize assets at their carrying values is
dependent upon generating revenues sufficient to cover its operating costs, obtaining additional
financing aid and the continued support of its shareholders.
As at December 31, 2021, the Corporation had a working capital deficit of $3,757,061 (2020: deficit of
$6,336,679), Profit/(loss) from operations of $2,595,907 (2020: loss of $1,160,778), and accumulated
losses since inception of $23,426,487 (2020: $24,796,575).
The financial statements have been prepared under the assumption that the Corporation is a going
concern and will continue to be in operation for the foreseeable future.
3. BASIS OF PRESENTATION
The audited consolidated financial statements have been prepared on a historical cost basis, except for
certain financial instruments that have been measured at fair value.
29
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
3. BASIS OF PRESENTATION (cont’d)
Statement of Compliance
The audited consolidated financial statements of the Corporation have been prepared in accordance
with International Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board (IASB), London, and the Interpretations of the International Financial Reporting
Interpretations Committee (IFRIC) and in effect at the closing date of April 11, 2022.
Management of the Corporation prepared the consolidated financial statements of the Corporation
during January and February 2022, and the Board of Directors approved them. The Audit Committee of
the Corporation discussed the audited consolidated financial statements at its meeting on April 11,
2022, and the Board of Directors approved them at its meeting on April 11, 2022.
The audited consolidated financial statements of the Corporation are presented in Canadian dollars.
Amounts are stated in Canadian dollars except where otherwise indicated. The financial statements of
the individual companies is prepared as of the closing date of the Corporation’s financial statements
using the same accounting policies.
In the audited consolidated statement of profit and loss and comprehensive income, consolidated
statement of financial position, consolidated statement of cash flows, and consolidated statement of
changes in equity, certain items are combined for the sake of clarity. These are explained within the
notes. The consolidated statement of profit and loss and comprehensive income is prepared using the
cost-of-sales method. Assets and liabilities are classified by maturity. They are regarded as current if
they mature within one year or within the normal business cycle of the Corporation. The normal
business cycle is defined for this purpose as beginning with the procurement of the resources necessary
for the production process and ending with the receipt of cash or cash equivalents as consideration for
the sale of the goods or services produced in that process. Trade accounts receivable and payable,
claims for tax refunds, and tax liabilities are always presented as current items; deferred tax assets and
liabilities, if any, are presented as non- current items. Provisions (if any), debt and other liabilities are
shown between current and non- current.
4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of consolidation
The audited consolidated financial statements comprise the financial statements of the Corporation
and its subsidiaries as at December 31, 2021.
The subsidiaries are fully consolidated from the date of acquisition, being the date on which the
Corporation obtains control, and continues to be consolidated until the date that such control ceases.
The financial statements of the subsidiary is prepared for the same reporting period as the parent
corporation using consistent accounting policies. All intra-group balances, income and expenses,
unrealized gains and losses, and dividends resulting from intra-group transactions, if any, are
eliminated in full.
A change in the ownership interest of a subsidiary, without a change of control, is accounted for as
an equity transaction.
30
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(a) Basis of consolidation (cont’d)
The subsidiary of the Corporation as of December 31, 2021 is its 95% owned subsidiary, NTG Egypt
Advanced Software, and its wholly owned U.S. subsidiary, NTG Clarity Networks US Inc.
(b) Foreign currency transaction
Translation to the presentation currency
Each entity in the Corporation determines its own functional currency and items included in the
financial statements of each entity are measured using that functional currency. The functional
currency and the presentation currency of the parent entity is the Canadian dollar. Transactions in
foreign currencies are initially recorded in respective functional currency rates at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the
functional currency rate at the reporting date. Differences are taken to the statement of profit or loss
and comprehensive income. Non-monetary items that are measured in terms of historical cost in a
foreign currency are translated using the exchange rates as at the dates of the initial transactions.
The functional currency of the subsidiary NTG Egypt Advanced is the Egyptian pound, and the
functional currency of the subsidiary NTG Clarity Networks US Inc. is the US Dollar.
An entity may present its financial statements in any currency (or currencies). If the presentation
currency differs from the entity's functional currency, it translates its results and financial position
into the presentation currency. For example, when a group contains individual entities with different
functional currencies, the results and financial position of each entity are expressed in a common
currency so that consolidated financial statements may be presented.
The results and financial position of an entity whose functional currency is not the currency of a
hyperinflationary economy shall be translated into a different presentation currency using the
following procedures:
1. Assets and liabilities for each statement of financial position presented (i.e. including
comparatives) shall be translated at the closing rate at the date of that statement of financial
position;
Income and expenses for each statement presenting profit or loss and other comprehensive
income (i.e. including comparatives) shall be translated at exchange rates at the dates of the
transactions; and
2.
3.
All resulting exchange differences shall be recognized in other comprehensive income.
For practical reasons, a rate that approximates the exchange rates at the dates of the transactions,
for example an average rate for the period, is often used to translate income and expense items.
However, if exchange rates fluctuate significantly, the use of the average rate for a period is
inappropriate.
31
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(b) Foreign currency transaction (cont'd)
Translation to the presentation currency (cont’d)
The exchange differences referred to in IAS 21.39(c) result from:
1.
2.
Translating income and expenses at the exchange rates at the dates of the transactions and assets
and liabilities at the closing rate.
Translating the opening net assets at a closing rate that differs from the previous closing rate.
These exchange differences are not recognized in profit or loss because the changes in exchange rates
have little or no direct effect on the present and future cash flows from operations. The cumulative
amount of the exchange differences is presented in a separate component of equity until disposal of
the foreign operation. When the exchange differences relate to a foreign operation that is
consolidated but not wholly-owned, accumulated exchange differences arising from translation and
attributable to non-controlling interests are allocated to, and recognized as part of, non-controlling
interests in the consolidated statement of financial position.
The results and financial position of an entity whose functional currency is the currency of a
hyperinflationary economy shall be translated into a different presentation currency using the
following procedures:
1. All amounts (i.e. assets, liabilities, equity items, income and expenses, including comparatives)
shall be translated at the closing rate at the date of the most recent statement of financial
position, except that
2.
When amounts are translated into the currency of a non-hyperinflationary economy,
comparative amounts shall be those that were presented as current year amounts in the relevant
prior year financial statements (i.e. not adjusted for subsequent changes in the price level or
subsequent changes in exchange rates).
When an entity's functional currency is the currency of a hyperinflationary economy, the entity shall
restate its financial statements in accordance with before applying the translation method set out in
IAS 21., except for comparative amounts that are translated into a currency of a non-
hyperinflationary economy (see IAS 21.42(b)). When the economy ceases to be hyperinflationary and
the entity no longer restates its financial statements in accordance with IAS 29, it shall use as the
historical costs for translation into the presentation currency the amounts restated to the price level
at the date the entity ceased restating its financial statements.
Translation of a foreign operation
IAS 21.–47, in addition to IAS 21.–43, apply when the results and financial position of a foreign
operation are translated into a presentation currency so that the foreign operation can be included
in the financial statements of the reporting entity by consolidation or the equity method.
32
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(b) Foreign currency transaction (cont'd)
Translation of a foreign operation (cont’d)
The incorporation of the results and financial position of a foreign operation with those of the
reporting entity follows normal consolidation procedures, such as the elimination of intra-group
balances and intra-group transactions of a subsidiary (see Consolidated Financial Statements).
However, an intra-group monetary asset (or liability), whether short-term or long-term, cannot be
eliminated against the corresponding intra-group liability (or asset) without showing the results of
currency fluctuations in the consolidated financial statements. This is because the monetary item
represents a commitment to convert one currency into another and exposes the reporting entity to
a gain or loss through currency fluctuations. Accordingly, in the consolidated financial statements of
the reporting entity, such an exchange difference is recognized in profit or loss or, if it arises from the
circumstances described in IAS 21, it is recognized in other comprehensive income and accumulated
in a separate component of equity until the disposal of the foreign operation.
When the financial statements of a foreign operation are as of a date different from that of the
reporting entity, the foreign operation often prepares additional statements as of the same date as
the reporting entity's financial statements. When this is not done, allows the use of a different date
provided that the difference is no greater than three months and adjustments are made for the
effects of any significant transactions or other events that occur between the different dates.
In such a case, the assets and liabilities of the foreign operation are translated at the exchange rate
at the end of the reporting period of the foreign operation. Adjustments are made for significant
changes in exchange rates up to the end of the reporting period of the reporting entity in accordance
with IFRS 10. The same approach is used in applying the equity method to associates and joint
ventures in accordance with.
Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the
carrying amounts of assets and liabilities arising on the acquisition of that foreign operation shall be
treated as assets and liabilities of the foreign operation. Thus they shall be expressed in the functional
currency of the foreign operation and shall be translated at the closing rate in accordance with IAS
21. and IAS 21.42.
Disposal or partial disposal of a foreign operation
On the disposal of a foreign operation, the cumulative amount of the exchange differences relating
to that foreign operation, recognized in other comprehensive income and accumulated in the
separate component of equity, shall be reclassified from equity to profit or loss (as a reclassification
adjustment) when the gain or loss on disposal is recognized (see Presentation of Financial
Statements).
33
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(b) Foreign currency translation (cont'd)
Disposal or partial disposal of a foreign operation (cont’d)
In addition to the disposal of an entity’s entire interest in a foreign operation, the following partial
disposals are accounted for as disposals:
1. When the partial disposal involves the loss of control of a subsidiary that includes a foreign
operation, regardless of whether the entity retains a non-controlling interest in its former
subsidiary after the partial disposal; and
2. When the retained interest after the partial disposal of an interest in a joint arrangement or a
partial disposal of an interest in an associate that includes a foreign operation is a financial asset
that includes a foreign operation.
On disposal of a subsidiary that includes a foreign operation, the cumulative amount of the exchange
differences relating to that foreign operation that have been attributed to the non- controlling
interests shall be unrecognized, but shall not be reclassified to profit or loss.
On the partial disposal of a subsidiary that includes a foreign operation, the entity shall re- attribute
the proportionate share of the cumulative amount of the exchange differences recognized in other
comprehensive income to the non-controlling interests in that foreign operation. In any other partial
disposal of a foreign operation the entity shall reclassify to profit or loss only the proportionate share
of the cumulative amount of the exchange differences recognized in other comprehensive income.
A partial disposal of an entity's interest in a foreign operation is any reduction in an entity's ownership
interest in a foreign operation, except those reductions in paragraph that are accounted for as
disposals.
An entity may dispose or partially dispose of its interest in a foreign operation through sale,
liquidation, repayment of share capital or abandonment of all, or part of, that entity. A write- down
of the carrying amount of a foreign operation, either because of its own losses or because of an
impairment recognized by the investor, does not constitute a partial disposal. Accordingly, no part of
the foreign exchange gain or loss recognized in other comprehensive income is reclassified to profit
or loss at the time of a write-down.
(c) Revenue Recognition
The Corporation derives revenue from fees charged to customers for licenses for software products
and professional services: support, consulting, development, training, and other services. Some of
the Corporation's software arrangements include product sales and professional services.
If, for any of the Corporation's product or service offerings, the Corporation determines at the outset
of an arrangement that the amount of revenue cannot be measured reliably, the Corporation
concludes that the inflow of economic benefits associated with the transaction is not probable and
defers revenue until the arrangement fee becomes due and payable by the customer.
34
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(c) Revenue Recognition (cont'd)
If, at the outset of an arrangement, it is determined that collectability is not probable, the Corporation
concludes that the inflow of economic benefits associated with the transaction is not probable, and
recognition of revenue is deferred until the earlier of when collectability becomes probable or
payment is received. If collectability becomes unlikely before all revenue from an arrangement is
recognized, revenue is recognized only to the extent of the fees that are successfully collected unless
collectability becomes reasonably assured again. If a customer is specifically identified as a bad
debtor, the Corporation stops recognizing revenue from this customer except to the extent of the
fees that have already been collected.
Software revenue represents fees earned from the sale or license of software to customers for use
on the customer’s premises, in other words, where the customer has the right to take possession of
the software for installation on the customer’s premises (on-premise software). The fee of the sale is
recognized net of returns and allowances, trade discounts, and volume rebates. In general, the
Corporation's software license agreements do not include acceptance-testing provisions. If an
arrangement allows for customer acceptance-testing of the software, revenue is deferred until the
earlier of customer acceptance or when the acceptance right lapses. The Corporation may enter into
customer-specific on-premise software development agreements. Software revenue in connection
with these arrangements is recognized using the percentage-of completion method based on
contract costs incurred to date as a percentage of total estimated contract costs required to complete
the development work. If there is no sufficient basis to reasonably measure the progress of
completion or to estimate the total contract revenue and costs, revenue is recognized only to the
extent of the contract costs incurred for which recoverability is believed to be probable. When it
becomes that total contract costs exceed total contract revenue in an arrangement, the expected
losses are recognized immediately as an expense based on the costs attributable to the contract.
On-premise software may combine software and support service elements, as under these contracts
the customer is provided with current software products, rights to receive unspecified future
software products, and rights to services during the on-premise software subscription term.
Customers pay a periodic fee for a defined subscription term, and such fees are recognized ratably
over the term of the arrangement beginning with the delivery of the first product.
Support revenue represents fees earned from providing customers with unspecified future software
updates, upgrades, and enhancements, and technical product support for on-premise software
products. Support revenue is recognized based on the Corporation's performance under the support
arrangements. Under the major support services the Corporation's performance obligation is to stand
ready to provide technical product support and to provide unspecified updates and enhancements
on a when and- if-available basis. For these support services revenue is recognized ratably over the
term of the support arrangement. Consulting and other service revenue is recognized when the
services are performed. Consulting revenue primarily results from implementation contracts to install
and configure our software products and offerings. Other service revenue consists of fees from
training services. Training services provide educational services to customers and partners regarding
the use of our software products. Training revenue is recognized when the services are rendered.
35
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(c) Revenue Recognition (cont'd)
Some arrangements contain multiple elements. Software, consulting and other service deliverables
are accounted for as separate units of accounting and allocate revenue based on fair value. Fair value
is determined by establishing either corporation-specific objective evidence, or an estimated stand-
alone selling price. Revenue from multiple-element arrangements is allocated to the different
elements based on their individual fair values. The revenue amounts allocated to the individual
elements are recognized when the revenue recognition criteria described above have been met for
the respective element.
The Corporation determines the fair value of and allocate revenue to each element based on its
corporation-specific objective evidence of fair value, which is the price charged when that element is
sold separately or, for elements not yet sold separately, the price established by management if it is
probable that the price will not change before the element is sold separately.
Revenues from customers of Zaha Tech (Note 29) are recognized on a net basis, as the Corporation
does not control the services provided by Zaha Tech to the end user. NTG invoices the customers of
Zaha Tech, and retains a 10% administrative fee upon receipt of the funds from the customer. All
liabilities of the contract lie with Zaha Tech and NTG holds no obligation for the performance of the
contract.
(d) Taxes
Current income tax
Current income tax assets and liabilities for the respective and prior years are measured at the
amount expected to be recovered from or paid to the Canadian taxation authorities. The tax rates
and tax laws used to compute the amount are those that are enacted or substantively enacted, by
the reporting date, in the country where the Corporation operates and generates taxable income.
Current income tax relating to items recognized directly in equity is recognized in equity and not in
the statement of profit and loss and comprehensive income. Management periodically evaluates
positions taken in the tax returns with respect to situations in which applicable tax regulations are
subject to interpretation and establishes provisions where appropriate in accordance with IAS 37
Provisions, Contingent Liabilities, and Contingent Assets.
Deferred tax
Deferred tax is provided using the liability method on temporary differences at the reporting date
between the tax bases of assets and liabilities and their carrying amounts for financial reporting
purposes.
Deferred tax liabilities are recognized for all taxable temporary differences, except:
• Where the deferred tax liability arises from an asset or liability in a transaction that is not a
business combination and, at the time of the transaction, affects neither the accounting profit
nor taxable profit or loss.
36
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(d) Taxes (cont'd)
Deferred tax (cont’d)
•
In respect of taxable temporary differences associated with investments in the subsidiary where
the timing of the reversal of the temporary differences can be controlled and it is probable that
the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused
tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available
against which the deductible temporary differences, and the carry forward of unused tax credits and
unused tax losses can be utilized, except:
• Where the deferred tax asset relating to the deductible temporary difference arises from the
initial recognition of an asset or liability in a transaction that is not a business combination and,
at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
•
In respect of deductible temporary differences associated with investments in the subsidiary,
deferred tax assets are recognized only to the extent that it is probable that the temporary
differences will reverse in the foreseeable future and taxable profit will be available against which
the temporary differences can be utilized.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the
extent that it is no longer probable that sufficient taxable profit will be available to allow all or part
of the deferred tax asset to be utilized.
Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the
extent that it has become probable that future taxable profits will allow the deferred tax asset to be
recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the
period when the asset is realized or the liability is settled, based on tax rates and tax laws that have
been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss.
Deferred tax items are recognized in correlation to the underlying transaction either in other
comprehensive income or directly in equity.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off
current tax assets against current income tax liabilities and the deferred tax relates to the same
taxable entity and the same taxation authority.
37
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(d) Taxes (cont'd)
Sales tax
Revenues, expenses, liabilities and assets are recognized net of the amount of sales tax except:
• Where the sales tax incurred on a purchase of assets or services is not recoverable from the
taxation authority, in which case the sales tax is recognized as part of the cost of acquisition of
the asset or as part of the expense item as applicable.
• Receivables and payables that are stated with the amount of sales tax included.
The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part
of receivables or payables in the statement of financial position.
(e) Government grants and assistance and investment tax credit
Government grants and assistance are recognized where there is reasonable assurance that the
grant or assistance will be received and all attached conditions will be complied with. When the
grant or assistance relates to an expense item, it is recognized as income over the period necessary
to match the grant or assistance on a systematic basis to the costs that it is intended to compensate.
Where the grant relates to an asset, it reduces the carrying amount of the asset. The grant is then
recognized as income over the useful life of a depreciable asset by way of a reduced depreciation
charge. When government assistance is received which relates to expenses of future periods, the
amount is deferred and amortized to income as the related expenditures are incurred.
(f) Financial instruments - initial recognition and subsequent measurement
Financial assets and financial liabilities are recognized when the Corporation becomes party to the
contractual provisions of the financial instrument.
Financial assets and financial liabilities are initially measured at fair value. Transactions costs that
are directly attributable to the acquisition or issue of financial instruments classified as amortized
costs or FVTOCI are included with the carrying amount of such instruments.
Transaction costs that are directly attributable to the acquisition or issue of the financial instruments
classified as fair value through profit and loss (FVTPL) are recognized immediately in the profit or
loss within the consolidated statements of comprehensive income.
(i) Financial assets
The Corporation classifies its financial assets in the following measurement categories: those to
be measured at amortized cost and those to be measured subsequently at fair value (either
through other comprehensive income (FVTOCI), or through profit or loss (FVTPL)). The
classification depends on the entity’s business model for managing the financial assets and the
contractual terms of cash flows.
38
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(f) Financial instruments - initial recognition and subsequent measurement (cont'd)
(i) Financial assets (cont’d)
Financial assets at amortized cost
Financial assets that meet the following conditions are measured at amortized cost less
impairment losses: the financial asset is held within a business model whose objective is to hold
financial assets in order to collect contractual cash-flows; the contractual terms of the financial
asset give rise on specific dates to cash flows that are solely payments of principal and interest
on the principal amount outstanding; and the financial asset was not acquired principally for the
purpose of selling in the near term or for short-term profit making (held-for-trading).
Financial assets at fair value through profit or loss (FVTPL)
All other financial assets, except equity and debt instruments as described below, are remeasured
at fair value and classified as fair value through profit or loss. The gains or losses, if any, arising
on remeasurement of FVTPL are recognized in profit or loss within the consolidated statements
of comprehensive income.
The method of measurement of instruments in debt instruments will depend on the business
model in which the instrument is held. For instruments in equity instruments, it will depend on
whether the Corporation has made an irrevocable election at the time of initial recognition to
account for the equity instrument at fair value through other comprehensive income (FVTOCI).
Financial assets with embedded derivatives are considered in their entirety when determining
whether their cash flows are solely payment of principal and interest.
(ii) Financial liabilities
Financial liabilities are classified as FVTPL when the financial liability is either held-for-trading or
is designated at FVTPL. Financial liabilities at FVTPL are remeasured in subsequent reporting
periods at fair value. Any gains or losses arising on remeasurement of held for trading financial
liabilities are recognized in profit or loss within the consolidated statements of comprehensive
income. Such gains or losses recognized in profit or loss includes any interest paid on the financial
liabilities.
Financial liabilities that are not held for trading and are not designated as FVTPL are measured at
amortized cost. The carrying amounts of financial liabilities that are measured at amortized cost
are determined based on the effective interest rate method. The effective interest method is a
method of calculating the amortized cost of a financial liability (or financial asset) and of allocating
interest expense (or income) over the expected life of the financial liability (or financial asset). All
financial assets and financial liabilities held by the Corporation are measured at amortized cost.
39
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(f) Financial instruments - initial recognition and subsequent measurement (cont'd)
(ii) Financial liabilities (cont’d)
Impairment
The Corporation assesses on a forward-looking basis, the expected credit losses associated with
its assets carried at amortized cost and FVTOCI. The impairment methodology applied depends
on whether there has been a significant increase in credit risk. For trade receivables only, the
Corporation applies the simplified approach permitted by IFRS 9, which requires expected
lifetime losses to be recognized from initial recognition of the receivables.
The Corporation has applied IFRS 9 retrospectively, but has elected not to restate comparative
information as there is no impact on the financial statements of the Corporation from adopting
IFRS 9. As a result, the comparative information provided continues to be accounted for in
accordance with the Corporation’s previous accounting policy which reflects the same
measurement of IFRS 9.
The accounting policies were changed to comply with the full requirements of IFRS 9 as issued by
the IASB. IFRS 9 replaces the provisions of IAS 39 that relate to the recognition, classification and
measurement of financial assets and financial liabilities; derecognition of financial instruments;
impairment of financial assets and hedge accounting. IFRS 9 also significantly amends other
standards dealing with financial instruments such as IFRS 7 Financial Instruments: Disclosures.
The total impact on retained earnings due to classification and measurement of financial
instruments as at January 1, 2016 and the date of these financial statements was Nil.
(iii) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount reported in the statement
of financial position if, and only if, there is a currently enforceable legal right to offset the
recognized amounts and there is an intention to settle on a net basis, or to realize the assets and
settle the liabilities simultaneously.
(g) Compound instruments
The component parts of compound instruments (e.g., debt issued with warrants) issued by the
Corporation are classified separately as financial liabilities and equity in accordance with the
substance of the contractual arrangements and the definitions of a financial liability and an equity
instrument. At the date of issue, the fair value of the liability component is estimated using the
prevailing market interest rate for similar debt without warrants. This amount is recorded as a liability
on the amortized cost basis using the effective interest method until extinguished or at the
instrument’s maturity date.
The warrants classified as equity are determined by deducting the amount of the liability component
from the fair value of the instrument as a whole. This is recognized and included in equity and is not
subsequently remeasured.
40
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(g) Compound instruments (cont’d)
Warrants classified as equity will remain in equity until the conversion option is exercised, in which
case the balance recognized in equity will be transferred to common shares within equity. When the
warrants remain unexercised at their maturity date, the balance recognized in equity will be
transferred to retained earnings or deficit. No gain or loss is recognized in profit or loss upon
conversion or expiration of the warrants.
Transaction costs that relate to the issue of the instruments are allocated to the liability and equity
components in proportion to the allocation of the gross proceeds. Transaction costs relating to the
equity component are recognized directly in equity. Transaction costs relating to the liability
component are included in the carrying amount of the liability component and are amortized over
the life of the debt using the effective interest method.
(h) Derivative financial instruments and hedge accounting
The Corporation has not entered into any derivative financial instruments and has not applied hedge
accounting for the years ending December 31, 2021 and December 31, 2020.
(i) Treasury shares
Own equity instruments which are reacquired (treasury shares) are recognized at cost and deducted
from equity. No gain or loss is recognized in the statement of profit and loss and comprehensive
income on the purchase, sale, issue, or cancellation of the Corporation’s own equity instruments. Any
difference between the carrying amount and the consideration is recognized in capital reserves.
(j) Property and equipment
Property and equipment is stated at cost, net of accumulated depreciation and accumulated
impairment losses (if any). Such cost includes the cost of replacing part of the property and equipment
and borrowing costs for long-term construction projects if the recognition criterion are met. When
significant parts of property and equipment are required to be replaced in intervals, the Corporation
recognizes such parts as individual assets with specific useful lives and depreciation, respectively.
Likewise, when a major inspection is performed, its cost is recognized in the carrying amount of the
property and equipment as a replacement if the recognition criteria are satisfied. All other repair and
maintenance costs are recognized in the statement of profit and loss and comprehensive income as
incurred. The present value of the expected cost for the decommissioning of the asset, if any, after
its use is included in the cost of the respective asset if the recognition criteria for a provision are met.
41
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(j) Property and equipment (cont’d)
Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:
Computer software
Computer equipment
Office equipment
Leasehold improvements
Straight-line 1-2 years
Straight-line 2-4 years
Straight-line 4-10 years
Straight-line over the lesser of the expected term of the
lease or the useful life of the asset
An item of property and equipment and any significant part initially recognized is derecognized upon
disposal or when no future economic benefits are expected from its use. Any gain or loss arising on
derecognition of the asset (calculated as the difference between the net disposal proceeds and the
carrying amount of the asset) is included in the statement of profit and loss and comprehensive
income when the asset is derecognized.
The assets’ residual values, useful lives, and methods of depreciation are reviewed at each financial
year end and adjusted prospectively, if appropriate.
(k) Leases
Finance leases, which transfer to the Corporation substantially all the risks and benefits incidental to
ownership of the leased item, are capitalized at the commencement of the lease at the fair value of
the leased property or, if lower, at the present value of the minimum lease payments. Lease payments
are apportioned between finance charges and reduction of the lease liability so as to achieve a
constant rate of interest on the remaining balance of the liability. Finance charges are recognized in
the statement of profit and loss and comprehensive income.
Leased assets are depreciated over the useful life of the asset. However, if there is no reasonable
certainty that the Corporation will obtain ownership by the end of the lease term, the asset is
depreciated over the shorter of the estimated useful life of the asset and the lease term. For the years
December 31, 2021 and December 31, 2020, the Corporation did not hold any finance leases.
Operating lease payments are recognized as an expense in the statement of profit and loss and
comprehensive income on a straight-line basis over the lease term.
(l) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction, or production of an asset that
necessarily takes a substantial year of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective assets. All other borrowing costs are expensed in the year they
occur. Borrowing costs consist of interest and other costs that the Corporation incurs in connection
with the borrowing of funds. For the years ending December 31, 2021 and December 31, 2020, the
Corporation did not capitalize any borrowing cost.
42
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(m) Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial
recognition, intangible assets are carried at cost less any accumulated amortization and any
accumulated impairment losses. Certain internally generated intangible assets are capitalized, as they
meet the criterion under IAS 38.
(n) Inventories
Inventories are measured at the lower of cost and net realizable value. Net realizable value is the
estimated selling price in the ordinary course of business, less the estimated costs of completion and
the estimated costs necessary to make the sale.
(o) Product development costs
Research and product development costs include out-of-pocket cost and direct overhead. Research
costs are expensed as incurred. Product development costs are expensed as incurred unless they
meet the IAS 38 criterion for deferral and amortization.
Development activities involve a plan or design for the production of a new core of substantially
improved products and processes. Development expenditure is capitalized only if development costs
can be measured reliably, the product or process is technically and commercially feasible, future
economic benefits are probable, and the Corporation intends to and has sufficient resources to
complete development and to use or sell the asset. The expenditure capitalized includes the cost of
materials, direct labour and overhead costs that are directly attributable to preparing the asset for
its intended use. All other development expenditure is recognized in statement of profit and loss and
comprehensive income as incurred.
Capitalized development costs (intangible asset) with finite useful lives are amortized over their
estimated useful lives. The amortization methods and estimated useful lives of intangible assets are
reviewed annually. Intangible assets are tested for impairment as required by IAS 38 and IAS 36 if
there are indicators of impairment. If any such indication exists, the asset’s recoverable amount is
estimated. An impairment loss is recognized whenever the carrying amount of the intangible assets
or the cash-generating unit exceeds their recoverable amount. Impairment losses are recognized in
the statements of comprehensive income. Amortization is provided on a straight-line basis over 10
years.
(p) Impairment of non-financial assets
The Corporation assesses at each reporting date whether there is an indication that an asset or cash
generating unit (CGU) may be impaired. If any indication exists, or when annual impairment testing
for an asset is required, the Corporation estimates the asset’s (CGU) recoverable amount. An asset’s
(CGU) recoverable amount is the higher of its fair value less costs of disposal and its value in use.
Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered
impaired and is written down to its recoverable amount.
43
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(p) Impairment of non-financial assets (cont'd)
In assessing value in use, the estimated future cash flows are discounted to their present value using
a pre-tax discount rate that reflects current market assessments of the time value of money and the
risks specific to the asset or cash-generating unit (CGU). In determining fair value less costs of
disposal, an appropriate valuation model is used. The Corporation has cash- generating units which
impairment could be tested against. The Corporation had no goodwill or indefinite life intangible
assets for the years ending December 31, 2021 and December 31, 2020.
Impairment losses of continuing operations are recognized in the statement of profit and loss and
comprehensive income in those expense categories consistent with the function and nature of the
impaired asset.
For non-financial assets, an assessment is made at each reporting date as to whether there is any
indication that previously recognized impairment losses may no longer exist or may have decreased.
If such indication exists, the Corporation estimates the non-financial asset’s or cash- generating unit’s
recoverable amount.
A previously recognized impairment loss is reversed only if there has been a change in the
assumptions used to determine the non-financial asset’s recoverable amount since the last
impairment loss was recognized.
The reversal is limited so that the carrying amount of the non-financial asset does not exceed its
recoverable amount, nor exceed the carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognized for the non-financial asset in prior periods.
Such reversal is recognized in the statement of profit and loss and comprehensive income.
(q) Cash and cash equivalents
Cash and cash equivalents in the statement of financial position comprise cash at banks and on hand
and short-term deposits with an original maturity of three months or less. The Corporation uses the
indirect method of reporting cash flow from operating activities.
(r) Provisions
Provisions are recognized when the Corporation has a present obligation, legal or constructive, as a
result of a past event, it is probable that an outflow of resources embodying economic benefits will
be required to settle the obligation, and a reliable estimate can be made of the amount of the
obligation. Where the Corporation expects some or all of a provision to be reimbursed, for example
under an insurance contract, the reimbursement is recognized as a separate asset but only when the
reimbursement is virtually certain.
The expense relating to any provision is presented in the statement of profit and loss and
comprehensive income net of any reimbursement. If the effect of the time value of money is material,
provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks
specific to the liability. Where discounting is used, the increase in the provision due to the passage of
time is recognized as a finance cost.
44
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(r) Provisions (cont’d)
A provision for warranties is recognized when the underlying products or services are sold. The
provision is based on the expected warranty data and an expected weighting of all possible outcome
against their associated probabilities.
A provision for restructuring is recognized when the Corporation has approved a detailed and formal
restructuring plan, and the restructuring either has commenced or has been announced publicly. No
provision is made for future operating losses.
A provision for onerous contracts is recognized when the expected benefits to be derived by the
Corporation from a contract are lower than the unavoidable cost of meeting its obligation under the
contract. The provision is measured at the present value of the lower of the expected cost of
terminating the contract and the expected cost net cost of continuing with the contract.
Before a provision is established, the Corporation recognizes any impairment loss on the asset
associated with the contract.
(s) Basic and diluted earnings per share
Basic earnings per share is calculated by dividing the income for the year by the weighted average
number of common shares outstanding during the year. The Corporation uses the treasury stock
method for calculating the dilutive effect of the outstanding stock options and other dilutive
securities. Under the treasury stock method, the weighted average number of common shares
outstanding used for the calculation of diluted income per share assumes that the proceeds to be
received on the exercise of dilutive share options are used to repurchase common shares at the
average market price during the year.
(t) Share-based compensation
The Corporation has a share-based compensation plan. The Corporation accounts for share-based
compensation options granted to employees and consultants using the fair value method. Under this
method, compensation expense for share-based compensation granted is measured at the fair value
at the grant date, using the Black-Scholes option valuation model. In accordance with the fair value
method, the Corporation recognizes estimated compensation expense related to share- based
compensation over the vesting period of the options granted, with the related credit being charged
to capital reserves. Consideration paid by employees on the exercise of share-based compensation is
recorded as capital stock and the related share-based compensation is transferred from capital
reserves to capital stock.
5.
SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES, AND ASSUMPTIONS
The preparation of the Corporation’s consolidated financial statements requires management to make
judgments, estimates, and assumptions that affect the reported amounts of revenues, expenses,
assets, and liabilities, and the disclosure of contingent liabilities, at the end of the reporting years.
However, uncertainty about these assumptions and estimates could result in outcomes that require a
material adjustment to the carrying amount of the asset or liability affected in future years.
45
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
5. SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES, AND ASSUMPTIONS (cont’d)
In the process of applying the Corporation’s accounting policies, management has made the following
judgments, which has the most significant effect on the amounts recognized in the consolidated
financial statements.
Revenues
The Corporation derives revenue from fees charged to customers for licenses for software products
and for professional services (support, consulting, development, training, etc.). Some of the software
arrangements may contain multiple elements (product sales and professional services). The
Corporation accounts for software, consulting and other service deliverables as separate units of
accounting and allocate revenue based on their individual fair values. The revenue amounts allocated
to the individual elements are recognized when the revenue recognition criteria have been met for the
respective element. When services are essential to the functionality of the software, the software does
not have standalone value and is combined with the essential services as a single element.
Unbilled revenues
Unbilled revenue is revenue which had been earned and therefore recognized in compliance with IFRS,
but which has not been billed to the client(s) due to contract terms and/or billing cycle. Revenue can
be recognized for projects based on time and materials, for professional services or on a percentage of
completion basis for product implementation and support. Both can result in unbilled revenue until the
customer is invoiced.
Impairment of non-financial assets
Impairment exists when the carrying value of a non-financial asset or cash-generating unit exceeds its
recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The value
in use calculation is based on a discounted cash flow model. The cash flows are derived from the
Corporation’s budget and do not include restructuring activities, if any, that the Corporation is not yet
committed to or significant future investments that will enhance the non- financial asset’s performance
of the cash-generating unit being tested. The recoverable amount is most sensitive to the discount rate
used for the discounted cash flow model as well as the expected future cash-inflows and the growth
rate used for extrapolation purposes. The key assumptions used to determine the recoverable amount
for the different cash-generating units may include a sensitivity analysis.
Taxes
Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and
timing of future taxable income. Given the range of business relationships and the long-term nature of
existing contractual agreements, differences arising between the actual results and the assumptions
made, or future changes to such assumptions, could necessitate future adjustments to tax income and
expense already recorded. The Corporation may establish provisions, based on reasonable estimates,
for possible consequences of audits by the tax authorities. The amount of such provisions is based on
various factors, such as experience of previous tax audits and differing interpretations of tax regulations
by the taxable entity and the responsible tax authority. Deferred tax assets, if any, are recognized for
all unused tax losses to the extent that it is probable that taxable profit will be available against which
the losses can be utilized.
46
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
5. SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES, AND ASSUMPTIONS (cont’d)
Taxes (cont’d)
Significant management judgment is required to determine the amount of deferred tax assets that can
be recognized, based upon the likely timing and the level of future taxable profits together with future
tax planning strategies.
Share-based compensation
The Corporation has a share-based compensation plan. The Corporation accounts for share-based
compensation options granted to employees and consultants using the fair value method determined
using the Black-Scholes option valuation model. The estimated compensation expense related to share-
based compensation is recognized over the vesting period of the options granted, with the related
credit being charged to contributed surplus. Consideration paid by employees on the exercise of share-
based compensation is recorded as capital stock and the related share-based compensation is
transferred from capital reserves to capital stock.
Fair value of financial instruments
Where the fair value of financial assets and financial liabilities recorded in the statement of financial
position cannot be derived from active markets, they are determined using valuation techniques
including the discounted cash flows model. The inputs to these models are taken from observable
markets where possible, but where this is not feasible, a degree of judgment is required in establishing
fair values. The judgments include considerations of inputs such as liquidity risk, credit risk, and
volatility. Changes in assumptions about these factors could affect the reported fair value of financial
instruments.
Useful life of an intangible asset
Intangible assets with finite lives are amortized on a straight-line basis over their expected useful life
once the asset is available for use. Many factors are considered in determining the useful life of an
intangible asset, including technical, technological, commercial or other types of obsolescence and
typical product life cycles for the asset. Changes to the expected useful life of an asset is accounted for
prospectively.
Treatment of development costs
Costs to develop products are capitalized to the extent that the criteria are met for recognition as
intangible assets in accordance with IAS 38. Such criteria require that the product is technically and
economically feasible, the Company has the intention and ability to use the asset, and that the asset
will generate future benefits to the Company.
Management assessed the capitalization of development costs based on the attributes of each
development project, perceived user needs, industry trends and expected future economic conditions.
Management considers these factors in aggregate and applies significant judgment to determine
whether the product is technically and economically feasible.
47
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
6.
STANDARDS ISSUED BUT NOT YET EFFECTIVE
As at April 11, 2022, the date of authorization of these financial statements, certain new standards,
amendments, and interpretations to existing IFRS standards have been published but are not yet
effective and have not been adopted by the Corporation. All other standards were early adopted as
explained in the prior year’s financial statements.
7. OPERATING SEGMENT INFORMATION
For management purposes, the Corporation is organized into two operating segments. The
Corporation's chief decision makers; the Chief Executive Officer, the President and the Chief Financial
Officer, tracks the Corporation's operations by country.
These country segments represent the Corporation’s reportable operating segments, which are used
to manage the business. The Corporation analyses the segments based on expenditures and revenue
growth. Statement of profit and loss for the year ending December 31, performance of its operating
segments based on expenditures and revenue growth.
Statement of profit and loss for the year ending December 31, 2021
Revenue
Cost of sales
Gross margin
Expenses
Depreciation / Amortization
Other income
Accretion
Exchange gain (loss) arising on translation
NTG Canada
9,160,608 $
3,691,305
NTG Egypt
2,735,335
1,616,186
$
Consolidated
Total
11,895,943
5,307,491
5,469,303 $
1,119,149 $
6,588,452
$
$
(4,066,114)
(192,207)
–
(5,697)
–
(958,565)
(51,888)
56,107
–
(6,130)
(5,024,679)
(244,095)
56,107
(5,697)
(6,130)
Total comprehensive income (loss) for the year
$
1,205,285 $
158,673 $
1,363,958
Statement of profit and loss for the year ending December 31, 2020
Revenue
Cost of sales
Gross margin
Expenses
Depreciation / Amortization
Gain on sale of licenses to Zaha Tech
Other income
Accretion
Exchange gain (loss) arising on translation
NTG Canada
5,812,568 $
3,978,860
NTG Egypt
2,094,422
1,694,496
Consolidated
Total
7,906,989
5,673,356
$
1,833,708 $
399,926 $
2,233,634
$
$
(3,492,640)
(22,968)
–
34,970
(3,470)
–
(515,029)
(18,114)
99,428
51,736
–
533,836
(4,007,669)
(41,082)
99,428
86,706
(3,470)
533,836
Total comprehensive income (loss) for the year
$
(1,650,400) $
551,783 $
(1,098,617)
All of the Corporation’s assets are located in Canada and the Middle East.
48
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
7. OPERATING SEGMENT INFORMATION (cont’d)
Long term asset additions for the year ended December 31, 2021
Asset additions for the year ending December 31,
2021
Property and equipment (Note 14)
Intangible assets (Note 15)
NTG Canada
NTG Egypt
Consolidated
Total
$
$
6,047 $
1,451,381
90,985 $
–
97,032
1,451,381
1,457,428 $
90,985 $
1,548,413
Long term asset additions for the year ended December 31, 2020
Asset additions for the year ending December 31,
2020
Property and equipment (Note 14)
Intangible assets (Note 15)
NTG Canada
NTG Egypt
Consolidated
Total
$
$
2,423 $
860,636
17,254 $
–
19,677
860,636
863,059 $
17,254 $
880,313
Long term assets for the year ended December 31, 2021
Assets as at December 31, 2021
Property and equipment
Intangible assets
NTG Canada
NTG Egypt
Consolidated
Total
$
$
38,750 $
144,544 $
2,180,796
–
183,294
2,180,796
2,219,546 $
144,544 $
2,364,090
Long term assets for the year ended December 31, 2020
Assets as at December 31, 2020
Property and equipment
Intangible assets
NTG Canada
NTG Egypt
Consolidated
Total
$
$
52,311 $
860,636
105,446 $
–
157,757
860,636
912,947 $
105,446 $
1,018,393
The Corporation determines the geographic location of revenues based on the location of its customers.
Sales by geographic location for the year ending December 31,
North America
Iraq
Saudi Arabia
Egypt
Oman
Kuwait
2021
465,289 $
1,203,360
6,855,465
2,735,335 $
636,494 $
2020
94,260
–
4,833,090
2,094,422
854,765
– $
30,452
11,895,943 $
7,906,989
$
$
$
$
$
49
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
7. OPERATING SEGMENT INFORMATION (cont’d)
In the past, the majority of the Corporation’s revenue is derived from the telecommunication industry.
In 2021, the Corporation has been working within the IT field in the banking industry. In 2021,
approximately 35% (2020: 29%) of the Corporation’s revenue was derived from two customer (2020:
one customer).
Receivables by segment for the year ending December 31,
Canada
Egypt
2021
2,595,374
1,151,672
3,747,046
$
$
$
2020
1,109,826
1,005,245
2,115,071
$
$
$
As at December 31, 2021, approximately 34% (2020: 25%) of the Corporation’s trade accounts
receivable balance was from one customer.
Payables by segment for the year ending December 31,
2021
2020
Canada
Egypt
Bank indebtedness by segment for the year ending December 31,
Canada
Egypt
8.
INCOME TAXES
$
$
5,819,456
$
6,768,529
720,771
591,549
6,540,227
$
7,360,079
2021
–
626,068
$
626,068 $
2020
–
569,734
569,734
The following is a reconciliation of the taxable losses for the years ended as indicated.
NTG Clarity Networks Inc.
As at December 31,
2021
2020
Gain / (loss) before income taxes
$
1,205,285
$
(1,650,400)
Income tax (recovery) at the combined Canadian federal
and provincial tax rate of 26.5%
319,401
(437,356)
Non-deductible share-based payments
Intercompany expenses
Depreciation/amortization of PPE and intangibles
Non-deductible meals & entertainment expenses
Income tax (recovery) not probable to be utilized
214,730
(244,053)
33,774
13,657
(337,509)
Income tax (recovery) recognized on the statement of
comprehensive income
$
–
$
1,245
–
10,887
14,322
410,902
–
50
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
8.
INCOME TAXES (cont’d)
NTG Egypt Advanced Software
As at December 31,
2021
2020
Income (loss) before income taxes
$
164,803
$
17,947
Income tax (recovery) at the combined Egyptian federal
and provincial tax rate of 22.5%
Income tax (recovery) not probable to be utilized
Income tax (recovery) recognized on the statement of
comprehensive income
37,081
(37,081)
4,038
(4,038)
$
–
$
–
The Corporation also has the following unrecognized deferred income tax assets for the years ended as
indicated. However, they were not recognized on the statements of financial position because it was
not probably that they would be utilized.
As at December 31,
Deferred tax asset in relation to:
Property and equipment
Non-capital loss carry-forwards
Deferred tax assets not recognized
Less: Valuation allowance
Deferred tax asset recognized
2021
2020
$
43,133
$
161,708
4,375,903
4,419,036
4,419,036
4,716,990
4,878,698
4,878,698
$
36,34 –
$
36,34 –
The Corporation has available income tax losses in the amounts of $16,512,842 for the Canadian federal
and provincial tax purposes which may be carried forward to reduce future years’ taxable income which
expire as follows:
2037
2039
2040
$
7,995,688
6,834,650
1,682,504
16,512,842
$
9.
EARNINGS PER SHARE
Basic earnings per share amounts are calculated by dividing net income for the year attributable to
ordinary equity holders of the parent by the weighted average number of common shares outstanding
during the year.
Diluted earnings per share amounts are calculated by dividing the net income attributable to ordinary
equity holders of the parent by the weighted average number of common shares outstanding during
the year plus the weighted average number of common shares, if any, that would be issued on
conversion of all the dilutive potential effects.
51
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
9. EARNINGS PER SHARE (cont’d)
The outstanding number and type of securities that could potentially dilute basic net income per share
in the future but that were not included in the computation of diluted net income per shares because
to do so would have reduced the earnings per share (anti-dilutive) for the year presented are as noted
below.
The following outstanding instruments could have a dilutive effect in the future:
As at December 31, 2021
Options – Share-based payments (Note 20(b))
12,475,000
Note a: Of which 12,105,000 had vested as of December 31, 2021.
The following reflects the earnings and unit data used in the basic and diluted earnings per share
computations:
December 31,
Net earnings (loss) attributable to ordinary equity holders of the parent for
basic earnings
Net earnings (loss) attributable to ordinary equity holders of the parent
adjusted for the effect of dilution
2021
2020
$1,363,958
$(1,098,617)
$1,363,958
$(1,098,617)
December 31,
2021
2020
Weighted average number of common shares outstanding for basic earnings
per share (Note 19)
147,472,355
100,102,355
Weighted average number with the effect of dilution on common shares
159,947,355
103,514,355
Income per share (basic)
Income per share (diluted)
$0.01
$0.01
$(0.01)
$(0.01)
10. CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise of cash at banks and on hand in the amount of $158,870 as at
December 31, 2021 (2020: $145,224).
11. TRADE AND OTHER RECEIVABLES
December 31,
Trade receivables
Less: allowance for doubtful debt
Trade receivables after impairment
$
2021
3,035,110
(36,741)
2,998,369
$
2020
1,460,810
(15,162)
1,445,648
Unbilled revenue
342,574
315,171
52
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
December 31,
Less: Impaired
Unbilled revenue after impairment
Total trade receivables and unbilled revenue
after impairment
Receivables from tax authorities
Other receivables
2021
–
342,574
3,340,943
303,639
102,464
2020
–
315,171
1,760,819
228,253
126,000
Total trade and other receivables
$
3,747,046
$
2,115,075
Trade receivables are non-interest bearing and are generally on 30-180 day terms. The Corporation had
a provision for bad debt in the amount of $36,741 (2020: $15,162). The amount relating to impairment
of trades receivables is $21,524 (2020: $339,602).
Included in accounts receivable is an amount of $267,489, for which the payment is being held by the
customer as a performance bond.
Neither past due nor impaired
2021
2020
Current
31 – 60 days
61 – 90 days
91 – 180 days
Past due but not impaired
Greater than 180 days
$
2,092,958
$
1,057,153
351,627
74,706
378,893
136,926
135,759
88,593
60,655
118,650
$
3,035,110
$
1,460,810
Unbilled revenue consists of service revenue that has already been rendered as at December 31, 2021
and recognized in accordance with the Corporation's revenue recognition policy from Note 3.
12. PREPAID EXPENSES AND DEPOSITS
December 31,
Prepaid rent
Prepaid insurance
Other prepaids
13. BID/PERFORMANCE BONDS
2021
46,380
12,343
5,723
64,446
$
$
2020
63,593
3,861
47
67,501
$
$
At December 31, 2021, of the $55,764 in performance bonds (2020: $60,232), $28,915 (2020: $36,270)
was for one bid bond and three performance bonds in Saudi Arabia (KSA) to guarantee delivery against
work on various projects and $26,849 (2020: $23,962) was for various bonds in Egypt. Performance
bonds typically remain in place for a period of one year from the start of the project and are released
back to the Corporation when the project is completed subsequent to customer acceptance. Bid bonds
are typically in place for a 90-120 day period but can be extended. The bonds are non-interest bearing.
Premiums for these bonds for the year ended December 31, 2021 were $Nil (2020: $831). The
Corporation currently has no EDC bonding facility.
53
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
13. BID/PERFORMANCE BONDS (cont’d)
Performance Bond - Opening Balance January 1,
Saudi Arabia
Egypt
Opening Balance - January 1,
Additions during the year:
Saudi Arabia
Egypt
Total additions during the year
Refunded during the year:
Saudi Arabia
Egypt
Total refunded during the year
Performance Bond - Ending Balance December 31,
Saudi Arabia
Egypt
Ending Balance – December 31,
14. PROPERTY AND EQUIPMENT
2021
36,270
23,962
60,232
–
5,260
5,260
(7,363)
(2,365)
(9,728)
28,907
26,857
55,764
$
2020
36,134
49,514
85,648
36,270
23,962
60,232
(36,134)
(49,514)
(85,648)
36,270
23,962
60,232
$
The amount of borrowing costs capitalized during the year ending December 31, 2021 was $Nil (2020:
$Nil).
Cost:
At January 1, 2020
Additions
Disposals
At December 31, 2020
Additions
Disposals
Furniture and
Equipment
Computer
Equipment
Computer
Software
$576,382
2,423
–
$578,805
2,044
–
$817,031
17,254
–
$834,285
94,988
–
$400,996
–
–
$400,996
–
–
Total
$1,794,409
19,677
–
$1,814,086
97,032
–
At December 31, 2021
$580,849
$929,273
$400,996
$1,911,118
Accumulated depreciation and impairment:
At January 1, 2020
Depreciation for the year
At December 31, 2020
Depreciation for the year
Impairment
Disposals
At December 31, 2021
Net book value:
At December 31, 2021
At December 31, 2020
54
$453,988
16,561
$470,549
15,204
–
–
$804,950
24,500
$829,450
56,291
–
–
$356,309
21
$356,330
$1,615,247
41,082
$1,656,329
–
–
–
71,495
–
–
$485,753
$885,741
$356,330
$1,727,824
95,096
108,256
$43,532
$4,835
$44,666
$44,666
$183,294
$157,757
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
15.
INTANGIBLE ASSETS
Intangible assets related to the upgrade of the internally developed the NTGapps (formerly Smart2Go)
platform capitalized in 2020 and 2021. Expenditures on development of the software are recognized as
an asset from the time the Corporation has determined an indefinite future economic benefit exists.
NTGapps (formerly Smart2Go) will expedite and facilitate the digital transformation journey for
enterprises in all business verticals. It enables enterprises to automate their processes and create
applications without need for development. NTGapps offers the future of rapid application
development with different output format. It is a powerful development tool without the need for
knowledge of development languages. NTGapps is built on NTG's proven workflow technology and
provides both a portal and mobile apps for its users. NTG will provide its NTGapps platform and its
associated marketplace of the applications developed on it, on the cloud, software-as-a-service or on
premise for its large enterprise customers. The platform allows users to graphically build new screens,
define and apply business rules, and create required workflow. In addition, one of the most powerful
features of NTGapps is the ease of integration with other systems such as ERPs, CRMs, financial systems,
engineering systems etc. With a mouse click, supporting various popular integration protocols such as
SOAP, REST and others. The development costs are determined to have a useful life of 10 years are
amortized on a straight-line basis. During 2021, $1,451,381 was capitalized (2020: $860,636) and
$131,221 was amortized (2020: $Nil).
Cost:
At January 1, 2020
Additions
Disposals
At December 31, 2020
Additions
Disposals
At December 31, 2021
At January 1, 2020
Amortization charge for the year
Impairment
Disposals
At December 31, 2020
Amortization charge for the year
Impairment
Disposals
At December 31, 2021
Net book value:
At December 31, 2021
At December 31, 2020
NTGapps (formerly
Smart2Go)
Development Costs
–
860,636
–
860,636
1,451,381
–
2,312,017
–
–
–
–
–
131,221
–
–
131,221
2,180,796
860,636
55
$
$
$
$
$
$
$
$
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
16. RIGHT OF USE ASSET
Right-of-use of Asset as at January 1, 2020
Effect of discounting at the incremental borrowing rate of 19%
Depreciation
Right-of-use of Asset as at January 1, 2021
Present value of lease commitments at a borrowing rate of 19%
Depreciation
Right-of-use Asset as at December 31, 2021
$ –
–
–
–
141,868
(41,378)
$ 100,490
On June 1, 2021, the Corporation leased office space for a period of 2 years, expiring May 31, 2023. The
Corporation recognized right-of-use assets and lease liability of $141,868 (2020: $Nil). The lease
liabilities were measured at the present value of the remaining lease payments, discounted at the
Corporation’s incremental borrowing rate of 19% (2020: Nil), which represents a significant accounting
judgment.
Lease liability
The lease liability as at December 31, 2021 is as follows:
Right-of-use of Asset as at January 1, 2020
$ –
Effect of discounting at the incremental borrowing rate of 19%
Add: interest accretion during the reporting period
Subtract: lease payments during the reporting period
Lease Liability as at January 1, 2021
Add: present value of new lease commitments at a borrowing rate of 19%
Add: interest accretion during the reporting period
Subtract: lease payments during the reporting period
Lease Liability as at December 31, 2021
Current portion
Long-term portion
The undiscounted future lease payments are as follows:
2022
2023
56
–
–
–
–
141,868
17,658
(46,472)
$ 113,054
74,049
39,005
$ 90,559
40,974
$ 131,533
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
17. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
December 31,
Trade payables
Accrued liabilities
Related parties payable
Payroll liability
Payroll taxes payable
Sales taxes payable
Other accounts payable
2021
2,176,036
45,702
1,376,360
1,330,148
111,622
719,964
780,395
6,540,227
$
$
2020
3,724,219
276,361
148,127
1,344,250
69,991
590,774
1,206,357
7,360,079
$
$
Terms and conditions of the above financial liabilities:
• Trade payables and accrued liabilities are non-interest bearing.
• Related parties payables are interest bearing at 5-8% interest per annum, $111,277 (2020:
$110,589) was recognized as an interest accrued for the year ended December 31, 2021 and have
no specific terms of repayment.
18. OTHER FINANCIAL ASSETS AND FINANCIAL LIABILITIES
(a) Other financial liabilities
Long-term debt
December 31,
Long-term debt (i)
CEBA loan (Note 19)
Long-term portion of CIB loan (Note 18)
2021
2020
$ 6,512,880
$ 7,189,285
34,196
28,499
40,250
–
$ 6,587,326
$ 7,217,784
(i) On September 16, 2019, the Corporation received a formal demand for payment of its Bank
facilities, requesting payment in full within ten (10) days. The Bank assigned the Bank
Indebtedness and the Security to 2729252 Ontario Inc., a company controlled by Ashraf
Zaghloul, NTG CEO and Kristine Lewis, NTG President.
Effective December 16, 2019, all the rights, title and interest of the Bank Indebtedness and the
Security together the full benefit of all powers and all covenants and provisions contained in the
Security were assigned to the above company.
The loan remains secured by a General Security Agreement over the assets of the Corporation and
has an interest rate of bank prime plus 2.05%. There are no specific repayment terms. The
Corporation recognized interest expense of $49,822 which is included in the above loan balance.
During the year, the Corporation issued pursuant to the private placement, 15,000,000 common
shares at the deemed price of $0.05 cents to settle partial indebtedness of $750,000.
57
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
18. OTHER FINANCIAL ASSETS AND FINANCIAL LIABILITIES (cont’d)
(a) Other financial liabilities (cont’d)
December 31,
Bank indebtedness (i)
Bank indebtedness
Long-term debt (ii)
Long-term debt Payable (CIB Loan)
- Current portion of long-term debt
- Long term debt payable
2021
2020
$ 626,068
$ 569,734
$ 161,000
$ 120,750
$ 40,250
–
–
–
As of December 31, 2021, NTG Egypt Advanced Software has the following credit facilities:
(i) Overdraft facility with QNB bank in Egypt in the amount of 7,777,243 Egyptian pounds
(approximately $626,068, 2020: $569,734) with an interest rate of 18%.
(ii) In May 2021, the company has availed loan with CIB bank in Egypt in the amount of 3,000,000
Egyptian pounds at interest rate of 7% per annum, repayable in monthly principal payments of
125,000 Egyptian pounds plus interest. The loan matures on April 01, 2023. The loan
outstanding as on year end is 2,000,000 Egyptian pounds (approximately $161,000, (2020: Nil).
(b) Fair values
Set out below is a comparison by class of the carrying amount and fair value of the Corporation's
financial instruments that are carried in the financial statements.
Carrying Amount
December 31,
2021
December
31, 2020
Fair Value
December 31,
2021
December
31, 2020
Financial assets
Cash and cash equivalents
Trade and accounts receivable
Bid/performance bonds
$ 158,870
3,747,046
55,764
$ 145,224
2,115,072
60,232
$ 158,870
$ 145,224
3,747,046
55,764
2,115,072
60,232
Total Financial Assets
$3,961,680
$2,320,528
$3,961,680
$2,320,528
Carrying Amount
Fair Value
December 31,
2021
December
31, 2020
December 31,
2021
December 31,
2020
Financial liabilities
Accounts payable and accrued
liabilities
Bank indebtedness
Due to related parties
Long-term debt
$6,540,227
$7,360,079
$6,540,227
$7,360,079
626,068
120,750
569,734
–
626,068
120,750
569,734
–
6,587,326
7,217,784
6,587,326
7,217,784
Total Financial Liabilities
$13,874,371
$15,147,597
$13,874,371
$15,147,597
58
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
18. OTHER FINANCIAL ASSETS AND FINANCIAL LIABILITIES (cont’d)
(b) Fair values (cont’d)
The fair value of the financial assets and financial liabilities are included at the amount at which the
instrument could be exchanged in an orderly transaction between market participants in an arm's
length transaction at the measurement date. The following methods and assumptions were used
to estimate the fair values:
•
•
Trade and other accounts receivables, accounts payable and accrued liabilities, other current
liabilities approximate their carrying amounts largely due to the short-term maturities of these
instruments.
Fair values of quoted instruments are based on price quotations at the reporting date. The fair
value of unquoted instruments and other financial liabilities (loans payable) are estimated by
discounting future cash flows using rates currently available for debt on similar terms, credit risk,
and remaining maturities.
Fair value hierarchy
As at December 31, 2021, the Corporation held cash measured at fair value. The Corporation uses the
following hierarchy for determining and disclosing the fair value of financial instruments by valuation
technique:
•
•
•
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair
value are observable, either directly or indirectly.
Level 3: techniques which use inputs which have a significant effect on the recorded fair value
that are not based on observable market data.
Assets measured at fair value
December 31, 2021
Level 1
Level 2
Level 3
Cash and cash equivalents
No liabilities were measured at fair
value
$ 158,870
$ 158,870
$ –
$ –
$ –
$ –
$ –
$ –
During the reporting year ending December 31, 2021, there were no transfers between Level 1 and
Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements.
19. GOVERNMENT GRANT
During the year 2020, the Corporation has received $60,000 for the Canadian Emergency Business
Account (CEBA) loan. The loan amount is interest-free and $20,000 forgivable if the $40,000 amount
is paid by December 31, 2023, after which the full amount is subject to a 5% annual interest rate and
due on December 31, 2025. Initial recognition of the $60,000 was at its fair value at a discount rate
of 19.99%, representing the Corporation’s estimated unsecured credit risk. The Corporation
recognized $(34,196) (2020: $(28,499)) as debt and $Nil (2020: $31,500) was recognized as a
government grant income and $5,697 (2020: $3,470)) was recognized as an interest accrued for the
year ended December 31, 2021.
59
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
20. EQUITY INSTRUMENTS
(a) Common shares
As at December 31, 2021, the authorized share capital consists of an unlimited number of first
preferred shares, second preferred shares and common shares. To date, no first or second preferred
shares have been issued. Before any shares of a particular preferred share series are issued the
directors of the Corporation, by resolution shall fix the dividend rates, whether the dividends are
cumulative and the redemption price of the redeemable shares.
Changes in the issued common shares of the Corporation are as follows:
Balance, January 1, 2020
Shares issued on debt for shares transaction (i)
Balance, December 31, 2020
Shares issued on exercise of share options (ii)
Allocation of contributed surplus (ii)
Shares issued on debt for shares transaction (iii)
Balance, December 31, 2020
Common Shares
Amount
56,102,355
$
10,148,186
44,000,000
100,102,355
7,370,000
–
40,000,000
147,472,355
660,000
$
10,808,186
443,000
310,800
2,000,000
$
13,561,986
(i)
In 2020, the Corporation offered employees and consultants the opportunity to participate in
debt for shares private placement. Subsequent to TSX approval, on April 30, 2020, the
Corporation closed the offering, and issued 44,000,000 common shares at $0.015 per share, for
a total value of $660,000. Of this amount, 18,600,000 of these shares were issued to directors
of the Corporation.
(ii)
In 2021, a total of 7,370,000 options were exercised, with a total value of $443,000. This resulted
in a re-allocation of contributed surplus to capital stock in the amount of $310,800.
(iii) In 2021, the Corporation offered employees and consultants the opportunity to participate in
debt for shares private placement. Subsequent to TSX approval, on August 6, 2021, the
Corporation closed the offering and issued 40,000,000 common shares (at $0.05 per share) for
a total value of $2,000,000. 5,090,000 of these shares were issued to directors of the
Corporation and 15,000,000 of these shares were issue to 2729252 Ontario Inc, a company
controlled by directors.
(b) Share-based payments
The Corporation has a formal stock option plan allowing the Corporation to issue options to its
directors, officers, employees and consultants in order to attract and retain qualified and experienced
individuals. The Board of Directors determines the exercise price and the number of options to be
granted as well as all the terms of conditions of the options. All options granted by the Corporation
are nonassignable. The options generally expire three to five years subsequent to the date of grant
and vest over two years.
No options were granted to non-employees during 2021 and 2020.
60
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
20. EQUITY INSTRUMENTS (cont’d)
(b) Share-based payments (cont’d)
Details of stock options are as follows:
Balance, 1 January 2020
Granted
Exercised
Expired
Balance, December 31, 2020
Granted
Exercised
Expired
Balance, December 31, 2021
Options
3,637,000
500,000
–
(725,000)
3,412,000
17,415,000
(7,370,000)
(982,000)
12,475,000
Weighted average
exercise price
$ 0.10
$ 0.05
0.10
0.10
$ 0.10
$ 0.05
0.05
0.09
$ 0.05
The stock options expire at various dates between January 2022 and December 2026. The weighted
average expected contractual lives of outstanding and exercisable options are as follows:
Options Outstanding
Number
outstanding
Dec 31/21
Remaining life of
option
Options Exercisable
Number
outstanding
Dec 31/21
Remaining life
of option
11,650,000
825,000
12,475,000
4.13
0.04
4.17
11,380,000
825,000
12,205,000
4.13
0.04
4.17
Exercise
Price
$ 0.05
$ 0.10
Total
Activity related to share-based compensation is as follows:
For the year ending December 31, 2021 the Corporation recorded $810,300 (2020: $4,699) as
contributed surplus and compensation expense, which is measured at fair value at the date of grant
and is expensed over the option’s vesting year. The weighted average fair value of options granted
during the year 2021 is $0.05 (2020: $0.01).
In determining the amount of share-based compensation, the Corporation used the Black- Scholes
option pricing model to establish the fair value of options granted by applying the following
assumptions:
Stock price
Risk-free interest rate
Expected life (years)
Expected dividend yield
Expected volatility
2021
$0.05
2020
$0.03
0.17 – 1.15%
0.09 – 1.15%
5 years
0%
5 years
0%
0.0 – 224.91%
0.0 – 135.35%
Fair value of options issued in fiscal year
0.05
0.01
61
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
20. EQUITY INSTRUMENTS (cont’d)
(b) Share-based payments (cont’d)
On October 8, 2019, the Investment Industry Regulatory Organization of Canada (IIROC) halted
trading for the Corporation citing the reason as “Pending Company Contract.” On February 3, 2020
trading resumed after the required TSX review.
21. CONTRIBUTED SURPLUS
Contributed surplus for the year ending consisted of $810,300 (2020: $28,231) for share-based
payments and re-allocation of contributed surplus on exercise of share options $310,800 (2020: $Nil).
Opening balance January 1, 2021
Share-based payments
Reallocation on exercise of share options
Balance as at December 31, 2021
$ 1,809,523
810,300
(310,800)
$ 2,309,023
22. DIVIDENDS PAID AND PROPOSED
Cash dividends
The Corporation’s practice is to not make dividend payments to shareholders.
23. COST OF SALES
The details of the Corporation’s cost of sales are as follows:
Cost of sales
Salaries
Travel
Hardware
Other
Total
2021
2020
$ 4,942,357
$ 5,223,849
384,477
76,990
(96,333)
123,344
240,393
85,770
$ 5,307,491
$ 5,673,356
24. EXPENSES: DISCLOSURE OF FUNCTION EXPENSES
The details of the Corporation’s function expenses are as follows:
Selling
Salary and wages
Marketing
Mailing and courier
Professional services
Meals and entertainment
Total
62
2021
2020
$ 1,053,291
$ 670,146
68,456
7,223
25,805
103,074
186,217
5,534
39,485
54,046
$ 1,257,849
$
955,428
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
24. EXPENSES: DISCLOSURE OF FUNCTION EXPENSES (cont’d)
2021
General and Administrative
2020
Salary and wages
Occupancy
Consulting
Professional fees
Bid/performance bond fees
Insurance
Dues and subscriptions
Penalties and fees
Office and General
Total
25. LOANS PAYABLE
$ 1,674,735
$ 1,364,997
138,121
25,430
117,733
–
276,562
22,006
133,098
52,554
222,847
99,800
120,645
831
242,299
25,690
37,245
238,735
$ 2,440,239
$ 2,353,089
In 2020, the Corporation entered into an agreement for funding on a sales project in the amount of
$338,080 (USD$266,667). The agreement states that the lender will be paid 67% for one-sixth of the
profit from the project. The Corporation renewed the agreement in July 2021 and as per the revised
term the investor will be paid 63% for one-eleventh of the profit from the project, and the capital
investment is payable by July 31, 2022. All other terms remain same. This transaction does not qualify
as a joint arrangement or a principal-agent relationship. The amount is non-secured.
The Corporation entered into a non-secured loan agreement in the amount of $58,400 at an interest
rate of 2.74%. The amount is non-secured, and was payable by February 25, 2021. In current year, the
full amount plus interest was repaid.
26. RELATED PARTY DISCLOSURES
The financial statements include the financial statements of the Corporation and the subsidiaries listed
in the following table:
Name
Country of Incorporation
Equity Interest
NTG Egypt Advanced Software (Subsidiary)
NTG Clarity Networks US Inc. (Subsidiary)
Egypt
USA
95%
100%
a) All related party transactions are carried out in the normal course of operation and are recorded at fair
value. The following tables provide the balances owing to key management and key management
compensation for the years:
Interest Received
Amounts Owed by
Related Parties
Amounts Owed to
Related Parties
Loans from/to shareholders
December 31, 2020
–
December 31, 2019 (Refer to Note (e) below) –
$
$
–
–
$
$
–
–
63
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
26. RELATED PARTY DISCLOSURES (cont’d)
Interest Received
Amounts Owed by
Related Parties
Amounts Owed to
Related Parties
Key management personnel of the Corporation:
December 31, 2021 (i)
December 31, 2020
Key management compensation
Short term employee benefits
Post-retirement employee benefits
Share-based payments
Total
–
–
$
$
$
–
–
2021
515,592
44,500
96,000
$ 1,588,722
$ 1,581,349
$
2020
117,560
–
–
$
656,092
$
117,560
(i) As of December 31, 2021, management (Ashraf Zaghloul and Kristine Lewis) is owed a total of
$1,588,722 for unpaid salaries, expenses, benefits and compensation, outstanding since 2016.
These amounts are part of Other Accounts Payable in Note 17.
b) The Ultimate Parent
The Corporation is the ultimate parent entity.
Related Party Transactions
Certain inter-company transactions between the Corporation and its subsidiaries, which are related
parties to the Corporation, have been eliminated.
Related parties include key management, the Board of Directors, close family members and entities
which are controlled by these individuals as well as certain persons performing similar functions.
c) During the year 2021, directors and officer of the company were granted a total number of 2,550,000
(2020: Nil) options, as described in Note 20 (b), that were valued at $127,500 (2020: $Nil). In the year
2021, the directors and officer exercised 1,650,000 options.
On November 29, 2019, the Corporation entered into an Assignment of Debt and Security agreement
with Royal Bank of Canada and 2729252 Ontario Inc. The debt amount of $7,100,712 was assigned to
2729252 Ontario Inc., which is a private company owned by two directors of the Corporation. See Note
18 (a) for more information. All terms, including annual interest rates, remain the same as with the
Bank (bank prime plus 2.05%). The Indebtedness held by the Company is secured by a General Security
Agreement over the assets of the Corporation. As of December 31, 2021, the loan amount is $6,512,880
(2020: $7,189,285).
27. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Corporation’s primary risk management objective is to protect the Corporation’s balance sheet and
cash flow.
The Corporation’s principal financial liabilities comprise of bank overdraft, long term debt and trade and
other payables. The main purpose of these financial liabilities is to raise finances for the Corporation’s
operations.
64
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
27. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont’d)
The Corporation is exposed to market risk, interest rate risk, foreign exchange risk, credit risk, and
liquidity risk.
The Corporation’s senior management oversees the management of these risks. The Corporation’s
senior management is supported by a Committee that advises on financial risks and the appropriate
financial risk governance framework for the Corporation.
The Committee provides assurance to the Corporation’s senior management that the Corporation’s
financial risk-taking activities are governed by appropriate policies and procedures and that financial
risks are identified, measured, and managed in accordance with the Corporation’s policies and group
risk appetite. All derivative activities, if any, for risk management purposes are carried out by a team
that has the appropriate skills, experience, and supervision. It is the Corporation’s policy that no trading
in derivatives for speculative purposes shall be undertaken.
The Board of Directors reviews and agrees policies for managing each of these risks which are
summarized below
Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate
because of changes in market prices. Market prices comprise several types of risk: interest rate risk,
currency risk, commodity price risk, and other price risk, such as equity risk.
Interest rate risk
The Corporation’s exposure to interest rate fluctuations is primarily interest paid on its bank
indebtedness and long-term loans. The Corporation has performed sensitivity analysis on interest rates
at December 31, 2021 to determine how a change in interest rates would impact equity and net loss.
During the year the Corporation paid $200,310 (2020: $268,957) on its loans and liabilities. An increase
or decrease of 100 basis points in the average interest rate paid during the period would have adjusted
net earnings by approximately $20,031 (2020: $26,896). This analysis assumes that all other variables
remain constant.
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in foreign exchange rates. The Corporation’s exposure to the risk of changes
in foreign exchange rates relates primarily to the Corporation’s operating activities, when revenue or
expense are denominated in a different currency from the Corporation’s functional currency. The parent
entity’s functional currency is the Canadian dollar.
The Corporation does not hedge the risk related to fluctuations of the exchange rate between USA and
Canadian dollars from the date of the sales transactions to the collection date due to the short-term
nature of this exposure.
65
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
27. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont’d)
Foreign currency risk (cont’d)
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in foreign exchange rates. The Corporation's exposure to the risk of changes
in foreign exchange rates relates primarily to the Corporation's operating activities, when revenue or
expenses are denominated in a different currency from the Corporation's functional currency. The parent
entity's functional currency is the Canadian dollar.
A 10% change in exchange rates on December 31, 2021 would have the following approximate impacts:
10% impact to:
U.S.
Dollar
USD
Omani
Riyal
OMR
Kuwait
Dinar
KWD
Saudi
Riyal
SAR
P&L in CAD
$117,569
$8,263
$30,417
$13,555
Equity in CAD
$86,413
$6,095
$22,356
$9,963
Qatari
Riyal
QAR
$11
$8
Egyptian
Pound
LE
$48,903
$35,944
A 10% change in exchange rates on December 31, 2020 would have the following approximate impacts:
10% impact to:
P&L in CAD
Equity in CAD
U.S.
Dollar
USD
$79,287
$58,276
Omani
Riyal
OMR
$7,938
$5,834
Kuwait
Dinar
KWD
Saudi
Riyal
SAR
$43,299
$60,188
$31,825
$44,113
Qatari
Riyal
QAR
$11
$8
Egyptian
Pound
LE
$25,459
$18,712
Commodity price risk
The Corporation is not subject to price risk from fluctuations in market prices of commodities.
Equity price risk
The Corporation has no exposure to equity price risk.
Credit risk
Credit risk is the risk of an unexpected loss if a customer or counterparty to a financial instrument fails to
meet its contractual obligation. The Corporation’s financial instruments that are exposed to credit risk
consist primarily of trade receivable. The Corporation’s exposure to credit risk is impacted by the
economic conditions for the industry which could affect the customers' ability to satisfy their obligations.
In order to reduce risks, the Corporation performs periodic credit evaluations of the financial conditions
of its customers and typically does not require collateral from them. Management assesses the need for
allowance for potential credit losses by considering the credit risk of specific customers, historical trends
and other information.
66
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
27. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont’d)
Credit risk (cont’d)
The aging of trade accounts receivable are as follows:
Neither past due nor impaired
2021
2020
Current
31 – 60 days
61 – 90 days
91 – 180 days
Past due but not impaired
Greater than 180 days
$
2,092,958
$
1,057,153
351,627
74,706
378,893
136,926
135,759
88,593
60,655
118,650
$
3,035,110
$
1,460,810
The credit quality of all the accounts receivable of the Corporation that are neither past due nor
impaired and the age of accounts receivable that are past due but not impaired have been assessed on
an individual basis and determined to have a mitigated risk profile.
Liquidity risk
Liquidity risk is the risk that the Corporation will not be able to meet its financial obligations as they fall
due. The Corporation’s approach to managing liquidity is to ensure, as far as possible, that it will always
have sufficient liquidity to meet its liabilities when due, under normal and stressed conditions. The
Corporation manages liquidity risk by reviewing its capital requirements on an ongoing basis. The
Corporation continuously reviews both actual and forecasted cash flows to ensure that the Corporation
has appropriate capital capacity. The following table summarizes the amount of contractual
undiscounted future cash flow requirements for financial instruments as at December 31, 2021:
Contractual obligations
2022
2023
2024
2025 and after
Total
Operating line of credit
$
626,068
$
Accounts payable and
accrued liabilities
6,540,227
– $
–
Operating lease
Long-term debt
Loans payable
80,506
41,303
6,587,326
422,093
–
–
$
–
–
–
–
–
–
–
–
–
–
$
626,068
6,540,227
121,819
6,587,326
422,093
The Corporation accrues expenses when incurred. Accounts are deemed payable once an event occurs
that requires payment by a specific date. The contractual maturity of accounts payable is within one
month.
The aging of trade accounts payable are as follows:
December 31,
Current
31 – 60 days
61 – 90 days
91 – 180 days
More than 180 days
2021
1,531,550
1,959
6,898
13,106
622,523
2,176,036
$
$
2020
800,211
109,175
30,732
98,235
2,685,866
3,724,219
$
$
67
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
27. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont’d)
Capital management
The Corporation manages its capital, which consists of cash provided from operations and long-term
debt, with the primary objective being safeguarding sufficient working capital to sustain operations.
The Board of Directors has not established capital benchmarks or other targets. As at December 31,
2021, the Corporation was considering pursuing additional capital through the issuance of additional
equity or debt financing. There can be no guarantee that they will be successful in raising additional
capital.
There have been no changes in the Corporation’s approach to capital management during the year
ending December 31, 2021. Also, no changes were made in the objectives, policies, or processes during
the year ending December 31, 2021. The Corporation will continually assess the adequacy of its capital
structure and capacity and will make adjustments within the context of the Corporation’s strategy,
economic conditions, and the risk characteristics of the business:
(i)
(ii)
safeguard the Corporation's ability to continue as a going concern, so that it can provide adequate
returns for shareholders and benefits for other stakeholders;
fund capital projects for facilitation of business expansion provided there is sufficient liquidly of
capital to enable the internal financing; and
(iii) maintain a capital base to maintain investor, creditor, and market confidence.
The Corporation considers the items included in the consolidated statements of changes in
shareholders' equity as capital. The Corporation manages the capital structure and makes adjustments
to it in the light of changes in economic conditions and the risk characteristics of the underlying assets.
In order to maintain or adjust the capital structure, the Corporation may issue new shares. The
Corporation is not subject to externally imposed capital requirements.
28. COMMITMENTS, CONTINGENCIES, AND GUARANTEES
Operating lease commitments – Corporation as lessee
The Corporation is committed under agreements for the rental of office spaces in Egypt and Oman at a
monthly rate ranging from $800 to $3000 for the periods from August 2021 to October 2023.
December 31, 2021
2022
2023
Legal claim contingency
$
80,506
41,313
$
121,819
The Corporation is subject to a variety of claims and suits that arise from time to time in the ordinary
course of business. Although management currently believes that resolving claims against the
Corporation, individually or in aggregate, will not have a material adverse impact on the Corporation’s
financial position, results of operations, and cash flows. These matters are subject to inherent
uncertainties and management's view of these matters may change in the future. To date, there are no
claims or suits outstanding.
68
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
28. COMMITMENTS, CONTINGENCIES, AND GUARANTEES (cont’d)
Guarantees
The Corporation indemnifies its directors and officers against claims reasonably incurred and resulting
from the performance of their services to the Corporation, and maintains liability insurance for its
directors and officers. In March 2020, the Corporation was unable to renew its Directors and Officers
insurance.
29. SALE OF ENTERPRISE LICENSES
On May 1, 2020, NTG signed an Agreement for licensing a copy of Product IP Rights and Support with an
Egyptian company, owned by a former Director of the Corporation. This Board- approved agreement
allows this Egyptian company to purchase NTG Egypt’s Enterprise business including a copy of the non-
exclusive rights for the IP of two software products (Utility Billing and HMIS) for 1.2 million Egyptian
pounds (approximately $99,428). The Enterprise revenue is approximately 3-4 million Egyptian pounds
per year. The divesting of these non-core older technology legacy products allows NTG management to
focus on core products and services going forward.
Upon execution of the agreement, both the Corporation and the company would own a copy of the
software listed (NTS UBS and HMIS), and both Parties would own the Copyright and Intellectual Property
of their software copy. Either Party is free without any limitations whatsoever, to license their source code
and the right to reproduce work, create derivative works, distribute and sell copies of the software
worldwide without the consent of the other Party. Each Party could sell their interest, in whole or in part
of their owned software to a 3rd Party without the consent of the other Party. The carrying value of these
intangible assets was zero, thus, the full proceeds of EGP 1,200,000 (approximately $99,428) has been
fully recognized as other income in the consolidated statements of profit and loss and comprehensive
income.
Upon signing of the Agreement, Zaha Tech will be the sole and exclusive provider of all support to all
current customers for a period of 30 months. NTG invoices the customers and retains a 10% fee upon
collection of the dues from these customers, and recognizes revenue on a Net basis. During the year, the
corporation recognized net revenue of $52,135 (2020: $72,485) under these contracts.
30. COMPARATIVE FIGURES
Certain insignificant balances of the 2020 figures have been reclassified to conform with the current year's
financial statement presentation.
31. EVENTS AFTER THE REPORTING YEAR
a) On January 17, 2022, the Corporation signed a new agreement for funding of a project in the amount
of US$240,000. The agreement states that the investor will be paid 56.7% for one- eleventh of the
profit from the project. This transaction does not qualify as a joint arrangement or a principal-agent
relationship. The amount is non-secured and the capital investment is payable by January 31, 2023.
69
NTG CLARITY NETWORKS INC.
Notes to the Audited Consolidated Financial Statements
December 31, 2021 and 2020
31. EVENTS AFTER THE REPORTING YEAR (cont’d)
b) At December 31, 2021, NTG had a Demand loan in Egypt in the amount of 3 million Egyptian pounds
with the balance outstanding of 2 million Egyptian pounds (approx. $161,996). On February 28, 2022,
NTG Egypt signed an agreement to increase the loan to 3.4 million Egyptian pounds (approx.
$242,995). See Note 18(a) for more information on the loan.
c) As of January 20, 2022, the Canadian Emergency Business Account (CEBA) revolving line of credit was
converted to a non-revolving term loan and remains interest-free. CAD$20,000 is forgivable if CAD
$40,000 amount is paid by December 31, 2023, after which the full amount is subject to a 5% annual
interest rate and is due on December 31, 2025. See Note 19 for more information.
70
Corporate Information
Board of Directors
Ashraf Zaghloul
Kristine Lewis
Mohamed Saleem Siddiqi
Syed Zeeshan Hasnain
Officers
Ashraf Zaghloul
Chair & Chief Executive Officer
Kristine Lewis
President & Chief Financial Officer
Registrar and Transfer Agent
Computershare Investor Services
100 University Ave., 8th Floor, North Tower
Toronto, Ontario M5J 2Y1
Telephone: 1-800-564-6253
Fax: 1-888-453-0330
Auditors
NVS Chartered Accountants Professional Corporation
100 Allstate Parkway, Suite 303
Markham ON L3R 6H3
Telephone: (905) 415-2511
Fax: (905) 415-2011
Legal Counsel
Borden Ladner Gervais
Centennial Place, East Tower
1900, 520 - 3rd Avenue S.W.
Calgary, Alberta T2P 0R3
Telephone: (403) 232-9500
Fax: (403) 266-1395
International Work
Stock Exchange Listing
The TSX Venture Exchange
Trading Symbol: NCI
Investor Relations
klewis@ntgclarity.com
Corporate Office
NTG Clarity Networks Inc.
2820 Fourteenth Avenue, Suite 202
Markham, Ontario
Canada L3R 0S9
Telephone: (905) 305 1325
Toll-free (North America):
(800) 838-7894
Fax: (800) 838-7895
E-mail: info-ntg@ntgclarity.com
www.ntgclarity.com
71