ZenaTech, Inc. (ZENA) - Form 20-F Summary
Business Context and Reporting Period
Company: ZenaTech, Inc.
Reporting Period: Fiscal Year Ended December 31, 2024
Listing: Nasdaq Capital Market (Ticker: ZENA), Mexican Stock Exchange, Frankfurt Stock Exchange.
Business Model: Enterprise software technology company specializing in cloud-based applications integrated with smart hardware. The company operates two primary segments: established software solutions (medical records, SCADA, law enforcement, field service) and a developing drone manufacturing and services business (ZenaDrone).
Accounting Basis: International Financial Reporting Standards (IFRS). All amounts in Canadian Dollars (CAD) unless noted.
Key Financial Metrics (Year Ended Dec 31, 2024)
| Metric | 2024 (CAD) | 2023 (CAD) | Variance |
|---|---|---|---|
| Revenue | $1,963,605 | $1,827,740 | +7.4% |
| Net Loss | $(4,481,751) | $(241,504) | Worsened significantly |
| Total Assets | $34,646,359 | $16,453,876 | +110% |
| Total Liabilities | $12,827,016 | $9,134,130 | +40% |
| Shareholders' Equity | $21,819,343 | $7,319,746 | +198% |
| Working Capital | $3,349,017 | $1,493,931 | +124% |
| Cash and Equivalents | $3,754,075 | $1,184 | Significant Increase |
Revenue Drivers: Revenue increased primarily due to the Q4 2024 acquisitions of Ecker Capital and ZooOffice, which contributed approximately $532,553. PsPortals (Law Enforcement) remains the largest revenue contributor at 70% of total revenue.
Expense Highlights: General and Administrative (G&A) expenses surged 182% to $5.82 million, driven by professional fees for Nasdaq listing ($697k), stock-based compensation ($521k), and stock issued for services ($817k). Drone development costs of $4.05 million were capitalized in 2024.
Material Changes vs. Prior Period
- Acquisitions: Completed acquisitions of Ecker Capital (warehouse software) and ZooOffice (compliance software) in Q4 2024. These were related-party transactions with Epazz/Ameritek (controlled by CEO Dr. Shaun Passley). Consideration included issuance of Common, Preferred, and Super Voting shares.
- Capital Structure: Issued 17.15 million Preferred Shares and 60,000 Super Voting Shares in 2024, primarily for acquisitions and patent purchases. Common shares outstanding increased 49% to 25.1 million.
- Debt Financing: Refinanced several lines of credit in Q4 2024, rolling over 6% interest loans into new 8% interest revolving lines of credit with related parties (GG Mars Capital, Star Financial, Jennings Family Investments). Total loans payable increased to $9.78 million.
- Reverse Stock Split: Executed a 1-for-6 reverse stock split on July 1, 2024.
- Going Concern: Financial statements are prepared on a going concern basis, though the company notes dependence on future financing and profitable operations to sustain growth.
Guidance, Outlook, and Risks
Outlook: Management anticipates the drone business will increasingly generate income over the next five years. The company is pursuing a "Drone as a Service" (DaaS) model and acquiring land surveying companies to integrate drone technology. Revenue from drone pilot programs is currently minimal but expected to convert to sales.
Key Risks:
- Related Party Dependence: Significant reliance on Epazz, Inc. (controlled by CEO) for management services, technology licensing, and financing. CEO Dr. Shaun Passley controls approximately 87% of voting power.
- Liquidity and Financing: The company has a history of negative operating cash flow and relies on debt and equity financing. Future profitability is not guaranteed.
- Regulatory and Operational: Risks associated with drone regulations (FAA, EASA), supply chain disruptions, and the ability to obtain necessary certifications (Green/Blue UAS) for military and government contracts.
- Market Volatility: Stock price volatility and potential delisting risks if Nasdaq requirements are not met.
Investor Verification Checklist
- Related Party Transactions: Verify the valuation and terms of the Ecker Capital and ZooOffice acquisitions, as well as the patent purchases from Epazz, given the CEO's controlling interest in the sellers.
- Debt Conversion Terms: Review the terms of the convertible debt (approx. $8.7M outstanding) which can be converted at a 20% discount to market price, creating significant potential dilution.
- Drone Revenue Reality: Confirm the status of pilot programs and the timeline for converting pilot customers into paying revenue, as the drone segment is currently a cost center.
- Going Concern Status: Assess the company's ability to fund operations without further dilutive equity issuances or debt refinancing, given the accumulated deficit of $8.5 million.
- Management Services Agreement: Review the terms of the agreement with Epazz, including the 20% markup on expenses and the offset mechanism for advances made to the affiliate.