Business Context and Reporting Period
ZenaTech, Inc. (Nasdaq: ZENA) is a Canadian foreign private issuer and emerging growth company incorporated in British Columbia. The company operates in two segments: Enterprise Software-as-a-Service (SaaS) and Drone as a Service (DaaS). This Form 20-F covers the fiscal year ended December 31, 2025. In 2025, the company executed a major strategic pivot, transitioning from a pure software developer to a hybrid model by acquiring approximately 21 land surveying and engineering firms to integrate drone technology into their service delivery.
Key Financial Metrics
| Metric | 2025 (CAD) | 2024 (CAD) | Change |
|---|---|---|---|
| Total Revenue | $12,912,722 | $1,963,605 | +558% |
| Gross Profit | $8,093,990 | $1,741,595 | +369% |
| Net Loss | $(45,218,074) | $(4,481,751) | +909% |
| Operating Cash Flow | $(35,461,668) | $(9,834,420) | N/A |
| Total Assets | $99,763,441 | $34,646,359 | +188% |
| Total Liabilities | $31,801,990 | $12,827,016 | +148% |
| Cash and Equivalents | $5,980,366 | $3,754,075 | +59% |
| Loans Payable | $17,256,413 | $9,908,235 | +74% |
Note: All amounts are in Canadian Dollars (CAD) unless otherwise specified. The DaaS segment contributed approximately 78% of total revenue in 2025.
Material Changes vs. Prior Period
- Revenue Surge: Revenue increased by 558% primarily due to the consolidation of ~21 land surveying acquisitions (DaaS segment), which generated $10.1 million in revenue. The SaaS segment grew modestly by 43% to $2.8 million.
- Expense Expansion: Total operating expenses rose to $38.2 million from $5.0 million. This was driven by wages and benefits ($13.4M vs $0.6M) and sales/marketing ($6.6M vs $1.2M) associated with the acquired workforce and market entry.
- Non-Cash Finance Expenses: Net loss widened significantly due to $19.9 million in finance expenses, approximately $18.1 million of which was non-cash loan derivative expense related to convertible debt instruments used to finance acquisitions.
- Balance Sheet Growth: Total assets nearly tripled, driven by Property, Plant, and Equipment (PPE) increasing by $11.3 million and Goodwill increasing by $9.6 million due to acquisitions.
Guidance, Outlook, and Risks
Outlook and Strategy: Management anticipates continued revenue growth in 2026 as the DaaS segment benefits from a full year of revenue from 2025 acquisitions. The strategy focuses on converting traditional surveying operations to drone-based delivery to reduce labor costs and improve margins. The company plans to pursue additional acquisitions and expects non-cash finance expenses to decrease as convertible debt is resolved.
Material Risks and Contingencies:
- Internal Controls: Management identified a material weakness in internal control over financial reporting due to the rapid expansion of the drone sector, which contributed to the need for amendments to the 2024 Annual Report.
- Related Party Transactions: The company has significant transactions with Epazz, Inc. (controlled by CEO Dr. Shaun Passley), including a management services agreement, advances totaling $24.2 million, and acquisitions of patents and technology. Several transactions require minority shareholder approval.
- Liquidity and Going Concern: While the company has a working capital surplus of $18.3 million, it relies on revolving credit facilities and cash flows from operations to fund its aggressive acquisition strategy. There is no assurance that additional financing will be available on acceptable terms.
- Regulatory and Operational: Risks include the ability to obtain regulatory approvals for drone operations (FAA, EASA), integration risks of numerous acquisitions, and dependence on key personnel (CEO Dr. Passley).
Key Facts for Investor Verification
- Revenue Quality: Verify the sustainability of the DaaS revenue, which is currently derived from traditional surveying services pending full drone integration.
- Non-Cash Losses: Confirm the impact of the $18.1 million non-cash loan derivative expense on the reported net loss and its effect on future cash burn.
- Related Party Advances: Review the $24.2 million in advances to Epazz, Inc. and the terms of the management services agreement to assess potential conflicts of interest and repayment risks.
- Internal Control Remediation: Monitor the progress of remediation efforts for the identified material weakness in internal controls over financial reporting.
- Debt Conversion: Assess the dilution risk associated with convertible debt instruments and the potential conversion of $5.9 million in debt into common stock.