Exhibit 4.2

Nuvei Corporation

Consolidated Financial Statements

Years ended December 31, 2020 and 2019

(in thousands of US dollars)

 

 

 

 

Nuvei Corporation

Consolidated Statements of Financial Position

As at December 31, 2020 and 2019

 

(in thousands of US dollars)

 

		Note				2020 $				2019 $
Assets
Current assets
Cash			28				180,722				60,072
Trade and other receivables			5				32,055				32,765
Inventory			6				80				709
Prepaid expenses							4,727				2,268
Income taxes receivable			18				6,690				—
Current portion of advances to third parties			9				8,520				8,901
Current portion of contract assets							1,587				1,720
Total current assets before segregated funds							234,381				106,435
Segregated funds							443,394				200,612
Total current assets							677,775				307,047
Non-current assets
Advances to third parties			9				38,478				42,584
Property and equipment			7				16,537				15,272
Intangible assets			8				524,232				408,380
Goodwill			8				969,820				768,497
Contract assets							1,300				1,426
Processor deposits							13,898				12,478
Other non-current assets							1,944				3,088
Total Assets							2,243,984				1,558,772
Liabilities
Current liabilities
Trade and other payables			10				64,779				51,258
Income taxes payable			18				7,558				2,866
Current portion of loans and borrowings			12				2,527				2,874
Other current liabilities			11				7,132				9,875
Liability classified common shares			17				—				58,262
Liability classified preferred shares			17				—				39,967
Total current liabilities before due to merchants							81,996				165,102
Due to merchants							443,394				200,612
Total current liabilities							525,390				365,714
Non-current liabilities
Loans and borrowings			12				212,726				722,166
Deferred tax liabilities			18				46,320				12,976
Other non-current liabilities			11				1,659				4,875
Unsecured convertible debentures due to shareholders			14				—				109,022
Total Liabilities							786,095				1,214,753
Equity
Equity attributable to shareholders
Share capital			17				1,625,785				450,523
Contributed surplus							11,966				1,603
Deficit							(211,042	)			(104,812	)
Accumulated other comprehensive income (loss)							22,470				(10,385	)
							1,449,179				336,929
Non-controlling interest							8,710				7,090
Total Equity							1,457,889				344,019
Total Liabilities and Equity							2,243,984				1,558,772
Contingencies			19

Approved by the Board of Directors

 

(signed) Philip Fayer				(signed) Michael Hanley
Chair of the Board				Chair of the Audit Committee

The accompanying notes are an integral part of these consolidated financial statements.

 

Nuvei Corporation

Consolidated Statements of Profit or Loss and Comprehensive Loss

For the years ended December 31, 2020 and 2019

 

(in thousands of US dollars, except for share and per share amounts)

 

		Note				2020 $				2019 $
Revenue			16				375,046				245,816
Cost of revenue			16				69,255				40,758
Gross profit							305,791				205,058
Selling, general and administrative expenses			16				241,690				193,770
Operating profit							64,101				11,288
Finance income			15				(5,427	)			(5,188	)
Finance costs			15				170,111				90,640
Net finance costs							164,684				85,452
Loss before income tax							(100,583	)			(74,164	)
Income tax expense (recovery)			18				3,087				(4,699	)
Net loss							(103,670	)			(69,465	)
Other comprehensive income (loss)
Items that may be reclassified subsequently to profit or loss Foreign operations – foreign currency translation differences							32,855				(9,225	)
Total comprehensive loss							(70,815	)			(78,690	)
Net income (loss) attributable to:
Common shareholders of the Company							(106,230	)			(70,502	)
Non-controlling interest							2,560				1,037
							(103,670	)			(69,465	)
Comprehensive income (loss) attributable to:
Common shareholders of the Company							(73,375	)			(79,727	)
Non-controlling interest							2,560				1,037
							(70,815	)			(78,690	)
Net loss per share			22
Net loss per share attributable to common shareholders of the Company (basic and diluted)							(1.08	)			(1.15	)
Weighted average number of common shares outstanding (basic and diluted)							98,681,060				61,483,675

The accompanying notes are an integral part of these consolidated financial statements.

 

Nuvei Corporation

Consolidated Statements of Cash Flows

For the years ended December 31, 2020 and 2019

 

(in thousands of US dollars)

 

		Note				2020 $				2019 $
Cash flows from (used in) operating activities
Net loss							(103,670	)			(69,465	)
Adjustments for:
Depreciation of property and equipment			7				5,121				3,682
Amortization of intangible assets			8				64,552				47,443
Amortization of contract assets							2,114				2,323
Share-based payments			24				10,407				994
Net finance costs			15				164,684				85,452
Impairment on disposal of a subsidiary			13				338				—
Write-down of inventory to net realizable value			6				513				134
Income tax expense (recovery)			18				3,087				(4,699	)
Changes in non-cash working capital items			26				10,061				2,667
Interest paid							(43,788	)			(43,197	)
Net realized loss on foreign currency exchange							(5,937	)			—
Income taxes paid							(14,223	)			(2,629	)
							93,259				22,705
Cash flows from (used in) investing activities
Business acquisitions, net of cash acquired			4				(67,537	)			(780,196	)
Decrease (increase) in other non-current assets							(1,683	)			1,158
Proceeds from the sale of a subsidiary, net of cash			13				19,045				—
Sale of equity investments			21				—				28,600
Net decrease (increase) in advances to third parties			9				9,401				(14,531	)
Acquisition of property and equipment			7				(3,395	)			(1,825	)
Acquisition of intangible assets			8				(14,448	)			(8,595	)
							(58,617	)			(775,389	)
Cash flows from (used in) financing activities
Transaction costs related to loans and borrowings			12				(3,380	)			(28,833	)
Repayment of unsecured convertible debentures due to shareholders			14				(93,384	)			(100,500	)
Issuance of Subordinate Voting Shares			17				758,447				—
Equity issuance fees			17				(42,966	)			—
Issuance of common shares			17				150				187,295
Proceeds from loans and borrowings			12				110,000				629,509
Repayment of loans and borrowings			12				(642,786	)			(157,496	)
Payment of lease liabilities			12				(946	)			(939	)
Dividend paid to non controlling interest							(940	)			(360	)
Redemption of preferred shares			17				—				(2,299	)
Issuance of preferred shares			17				—				81,240
Issuance of unsecured convertible debentures due to shareholders			14				—				199,000
							84,195				806,617
Effect of movements in exchange rates on cash							1,813				69
Net increase in cash							120,650				54,002
Cash – Beginning of year							60,072				6,070
Cash – End of year							180,722				60,072

The accompanying notes are an integral part of these consolidated financial statements.

 

Nuvei Corporation

Consolidated Statements of Changes in Equity

For the years ended December 31, 2020 and 2019

 

(in thousands of US dollars)

 

						Attributable to shareholders of the Company
		Note				Share capital $				Contributed surplus $				Deficit $				Accumulated other comprehensive income (loss) $				Non- controlling interest $				Total equity $
Balance as at December 31, 2018							168,203				609				(34,310	)			(1,160	)			—				133,342
Contributions and distributions
Share issuance			17				282,320				—				—				—				—				282,320
Equity-settled share-based payment			24				—				994				—				—				—				994
Business acquisition							—				—				—				—				6,413				6,413
Dividend paid to non-controlling interest							—				—				—				—				(360	)			(360	)
Net income (loss) and comprehensive income (loss)							—				—				(70,502	)			(9,225	)			1,037				(78,690	)
Balance as at December 31, 2019							450,523				1,603				(104,812	)			(10,385	)			7,090				344,019
Contributions and distributions
Share issuance			17				920,525				(44	)			—				—				—				920,481
Share redemption			17				(1	)			—				—				—				—				(1	)
Equity-settled share-based payment			24				—				10,407				—				—				—				10,407
Business acquisition							254,738				—				—				—				—				254,738
Dividend paid to non-controlling interest							—				—				—				—				(940	)			(940	)
Net income (loss) and comprehensive income (loss)							—				—				(106,230	)			32,855				2,560				(70,815	)
Balance as at December 31, 2020							1,625,785				11,966				(211,042	)			22,470				8,710				1,457,889

The accompanying notes are an integral part of these consolidated financial statements.

 

Nuvei Corporation

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

 

(in thousands of US dollars, except for share and per share amounts)

 

1	Reporting entity and reorganization

Nuvei Corporation (“Nuvei” or the “Company”) is a global provider of payment technology solutions to merchants and partners in North America, Europe, Asia Pacific and Latin America and is domiciled in Canada with its registered office located at 1100 René-Lévesque Blvd, 9th floor, Montreal, Quebec, Canada. Nuvei is the ultimate parent of the group and was incorporated on September 1, 2017 under the Canada Business Corporations Act (“CBCA”) under the name 10390461 Canada Inc. and changed its name to Pivotal Development Corporation Inc. on September 21, 2017 and to Nuvei Corporation on November 27, 2018.

On September 21, 2017, through a series of transactions, Nuvei acquired 100% of Pivotal Holdings Ltd.

On September 22, 2020, the Company was amalgamated with its subsidiary Nuvei Holdings Corporation (“NHC”), previously known as Pivotal Holdings Corporation (“PHC”).

Also on September 22, 2020, the Company completed an initial public offering (“IPO”) and its shares began trading on the Toronto Stock Exchange (“TSX”) under the symbols “NVEI” and “NVEI.U”.

 

2	Basis of preparation

Statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

The consolidated financial statements for the years ended December 31, 2020 and 2019 were authorized for issue by the Company’s Board of Directors on March 8, 2021.

Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis except for:

 

•

Advances to third parties (note 9), contingent considerations and put option liability (note 11), and investments, which are measured at fair value; and

 

•

Share-based compensation transactions, which are measured pursuant to IFRS 2, Share-based Payment (note 24).

Use of judgments and estimates

The preparation of the consolidated financial statements in conformity with IFRS requires management to make estimates, judgments and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

 

(1)

Nuvei Corporation

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

 

(in thousands of US dollars, except for share and per share amounts)

 

Estimates, judgments and assumptions are reviewed on an ongoing basis and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to accounting estimates are recognized prospectively.

Judgments

Critical judgments made in applying accounting policies that have the most significant effects on the amounts recognized in the consolidated financial statements include the following:

 

•

Revenue recognition (note 3):

The identification of revenue-generating contracts with customers, the identification of performance obligations, the determination of the transaction price and allocations between identified performance obligations, the use of appropriate revenue recognition method for each performance obligation and the measure of progress for performance obligations satisfied over time are the main aspects of the revenue recognition process, all of which require the exercise of judgment and use of assumptions. In addition, the Company has applied judgment in assessing the principal versus agent considerations for its transaction and processing services.

 

•

Determining the fair value of identifiable intangible assets following a business combination (note 4)

The Company uses valuation techniques to determine the fair value of identifiable intangible assets acquired in a business combination, which are generally based on a forecast of total expected future net discounted cash flows. These valuations are linked closely to the assumptions made by management regarding the future performance of the related assets and the discount rate applied as it would be assumed by a market participant.

Assumptions and estimation uncertainties

Assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year include the following:

 

•

Estimating the recoverable amount of goodwill (note 8);

 

•

Estimating the provision for losses on merchant accounts (note 11);

 

•

Estimating the recoverable amount of tax balances for recognition of tax assets (note 18); and

 

•

Estimating the fair value of share-based payment transactions (note 24).

COVID-19 impact on judgments, assumptions and estimation uncertainties

The COVID-19 pandemic has disrupted the economy and put unprecedented strains on governments, health care systems, businesses and individuals around the world. The impact and duration of the COVID-19 pandemic are difficult to assess or predict.

 

(2)

Nuvei Corporation

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

 

(in thousands of US dollars, except for share and per share amounts)

 

The spread of COVID-19 has caused us to modify our business practices to help minimize the risk of the virus to our employees, our partners, our merchants and their customers, and the communities in which we do business. The extent and continued impact of the COVID-19 pandemic on our business will depend on certain developments, including: the duration and spread of the outbreak; government responses to the pandemic; the impact on our customers and our sales cycles; the impact on customer, industry or employee events; and the effect on our partners, merchants and their customers, third-party service providers, customers and supply chains, all of which are uncertain and cannot be predicted. Accordingly, there is a higher level of uncertainty with respect to management’s judgments, assumptions and estimates.

 

3	Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by the Company’s subsidiaries, unless otherwise indicated.

Foreign currency

Functional and presentation currency

These consolidated financial statements are presented in US dollars, which is also the Company’s functional currency.

Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of entities of the Company at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction.

Foreign currency differences are recognized in profit or loss.

Foreign operations

The assets and liabilities of foreign operations whose functional currency is not the US dollar, including goodwill and fair value adjustments arising on acquisition, are translated to US dollars at the exchange rates at the reporting date. The revenue and expenses of foreign operations are translated into US dollars at the average exchange rate for the period.

Foreign currency differences are recognized in other comprehensive income (loss) in the cumulative translation reserve (accumulated other comprehensive income (loss)), except to the extent that the translation difference is allocated to the non-controlling interest.

 

(3)

Nuvei Corporation

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

 

(in thousands of US dollars, except for share and per share amounts)

 

Business combinations

Business combinations are accounted for using the acquisition method at the acquisition date. The consideration transferred for the acquisition of a business is the fair value of the assets transferred, and any liability and equity interests issued by the Company on the date control of the acquired company is obtained. The consideration transferred includes the fair value of any asset or a liability resulting from a contingent consideration arrangement. Contingent consideration is subsequently remeasured at fair value, with any resulting gain or loss recognized and included in the consolidated statements of profit or loss and comprehensive loss. Contingent consideration that is payable contingent upon key employees’ continued employment with the Company is expensed over the service period. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are generally measured initially at their fair values at the acquisition date. The Company measures goodwill as the fair value for the consideration transferred including the recognized amount of any non controlling interest in the acquiree, less the net recognized amount of the identifiable assets acquired and liabilities assumed, all measured at the acquisition date. If this consideration is lower than the fair value of the net assets of the business acquired, the difference is recognized immediately in the consolidated statements of profit or loss and comprehensive loss as a gain from a bargain purchase.

Transaction costs, other than those associated with the issue of debt or equity securities, and other direct costs of a business combination are not considered part of the business acquisition transaction and are expensed as incurred.

Basis of consolidation

Subsidiaries

Subsidiaries are all entities over which the Company has control. Control exists when the Company is exposed to, or has the rights to, variable returns from its involvement with the entity and has the ability to affect those returns through the power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

The Company’s principal subsidiaries, their jurisdiction of incorporation and the Company’s percentage ownership share of each are as follows:

 

Subsidiary		Jurisdiction of incorporation				Ownership percentage
SafeCharge International Group Limited			Guernsey				100	%
Nuvei Technologies Corp.			Canada				100	%
Nuvei Technologies Inc.			United States				100	%
Loan Payment Pro			United States				60	%
Smart2Pay Technology & Services B.V.			Netherlands				100	%

 

(4)

Nuvei Corporation

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

 

(in thousands of US dollars, except for share and per share amounts)

 

Non-controlling interest

In the case of a business combination involving less than 100% of ownership interests, a non-controlling interest is measured either at fair value or at the non-controlling interest’s share of the identifiable net assets of the acquiree. The basis of measurement is determined on a transaction-by-transaction basis. Changes in the Company’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

Transactions eliminated on consolidation

Intercompany balances and transactions, and any unrealized revenue and expenses arising from intercompany transactions, are eliminated in preparing the consolidated financial statements.

Revenue from contracts with customers

Performance obligations and revenue recognition policies

Revenues are recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for these goods and services. The following describes the nature and timing of the satisfaction of performance obligation in contracts with customers, including significant payment terms, and the related revenue recognition policies.

Merchant transaction and processing services

Revenue from the Company’s merchant transaction and processing services revenues are derived primarily from retail point of-sale and e-commerce payment processing services, and stem from relationships with individual merchants. Additionally, transaction and processing services revenues stem from contracts with financial institutions and other merchant acquirers, the terms of which generally range from three to five years. The contracts stipulate the types of services and set forth how fees will be incurred and calculated. Merchant transaction and processing services revenues are generated from processing electronic payment transactions for merchants.

The Company’s transaction and processing revenues primarily comprise (a) fees calculated based on a percentage of monetary value of transactions processed; (b) fees calculated based on number of transactions processed; (c) service fees; or (d) some combination thereof that are associated with transaction and processing services.

The Company’s promise to its customers is to stand ready to process transactions the customer requests on a daily basis over the contract term. The Company has determined that the merchant transaction and processing services represent a stand-ready series of distinct days of service that are substantially the same and have the same pattern of transfer to the customer. As a result, the Company has determined that merchant arrangements for transaction and processing services represent one performance obligation. Substantially all of the Company’s revenues are recognized over time as a daily series over the term of the contracts.

 

(5)

Nuvei Corporation

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

 

(in thousands of US dollars, except for share and per share amounts)

 

To provide the transaction and processing services, the Company routes and clears each transaction, and obtains authorization for the transaction and requests funds settlement from the card issuing financial institution, through the applicable payment network. When third parties are involved in the transfer of goods or services to a customer, the Company considers the nature of each specific promised good or service and applies judgment to determine whether it controls the good or service before it is transferred to a customer or whether it is acting as an agent of the third party. To determine whether or not it controls the good or service before it is transferred to the customer, the Company assesses a number of indicators including whether it or the third party is primarily responsible for fulfillment and which party has discretion in determining pricing for the good or service. Based on the Company’s assessment of these indicators, it has concluded that its promise to the customer to provide transaction and processing services is distinct from the services provided by the card issuing financial institutions and payment networks in connection with payment transactions. When the Company does not have the ability to direct the use of and obtain substantially all of the benefits of the services provided by the card issuing financial institutions and payment networks before these services are transferred to the customer, and on that basis, it does not control these services prior to being transferred to the customer, the Company presents revenues net of the interchange fees charged by the card issuing financial institutions and the fees charged by the payment networks. In all other instances, the transaction and processing services revenue is reported on a gross basis, as the Company has determined it is the principal in the arrangement.

Since the timing and quantity of transactions to be processed by the Company is not determinable in advance, and the consideration received is contingent upon the customers’ uses (e.g. a percentage of the transaction value or a fixed fee per transaction, number of payment transactions processed, or number of cards on file), the total transaction price is variable. The Company has determined that the performance obligation to provide merchant transaction and processing services meets the allocation of variable consideration exception criteria in that (a) the terms of the variable payment relate specifically to the entity’s efforts to satisfy the performance obligation or transfer the distinct service and (b) allocating the variable amount of consideration entirely to the performance obligation or the distinct good or service is consistent with the allocation objective when considering all of the performance obligations and payment terms in the contract. As a result, the Company allocates and recognizes variable consideration in the period it has the contractual right to invoice the customer.

Other revenues

The Company may sell hardware (“point-of-sale equipment”) as part of its contracts with customers. Hardware consists of terminals or gateway devices. The Company does not manufacture hardware but purchases hardware from third-party vendors and holds the hardware in inventory until purchased by a customer. The Company accounts for sales of hardware as a separate performance obligation and recognizes the revenue at its stand-alone selling price when a customer obtains control of the hardware, which is generally when the hardware is shipped.

Segregated funds and due to merchants

Segregated funds represent amounts held in segregated bank accounts, which are held on behalf of merchants where the Company is in the flow of funds in the settlement transaction cycle. A corresponding liability (due to merchants) is recognized for the amounts to be settled to merchants. The segregated bank accounts are held with the Company’s banks and are segregated from operating funds. Both the segregated funds and the due to merchants are derecognized when the transaction is settled.

 

(6)

Nuvei Corporation

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

 

(in thousands of US dollars, except for share and per share amounts)

 

Contract assets

Contract assets consist of costs to obtain contracts with customers, including employee sales commissions and fees to third party agents. At contract inception, the Company capitalizes such costs that it expects to recover and that would not have been incurred if the contract had not been obtained.

Consistent with the basis of transfer of the processing services to the customer, contract assets are amortized on a straight-line basis, over the expected period of contract benefit (ranging from three to five years), beginning when the accounts are activated and producing revenues. Amortization of contract assets is recorded in selling, general and administrative expense in the Company’s consolidated statement of profit or loss and comprehensive loss. Costs to obtain a contract with an expected period of benefit of one year or less are recognized as an expense when incurred.

Contract assets are evaluated for impairment by comparing, on a pooled basis, the expected future net cash flows underlying customer contracts to the carrying amount of the capitalized contract costs.

Inventory

Inventory consists of point-of-sale terminals and is measured at the lower of cost and net realizable value. Cost includes purchase, conversion and other costs incurred in bringing the inventories to their present location and condition. Cost is determined using the first-in, first-out method. Net realizable value is defined as the estimated selling price in the ordinary course of business, less selling expenses.

Property and equipment

Recognition and measurement

Property and equipment are recorded at cost, less accumulated depreciation and accumulated impairment losses. If significant parts of an item of property and equipment have different useful lives, then they are accounted for as separate items (major components) of property and equipment.

Depreciation

Depreciation is calculated to write off the cost of items of property and equipment less their estimated residual values using the straight-line method over their estimated useful lives and is recognized in profit or loss as follows:

 

		Assets		Period
		Terminals		3 to 5 years
		Office equipment		5 years
		Computer equipment		3 years
		Furniture and fixtures		5 years
		Leasehold improvements		Lease term – 5 to 10 years
		Right-of-use assets – Buildings		Lease term – 2 to 10 years

 

(7)

Nuvei Corporation

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

 

(in thousands of US dollars, except for share and per share amounts)

 

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

Intangible assets and goodwill

Recognition and measurement

Goodwill

Goodwill represents the excess of the purchase price over the fair values of the net assets of entities acquired at their respective dates of acquisition. Goodwill is carried at cost less accumulated impairment losses.

Research and development of software

The Company develops software that is used in providing processing services to customers.

Expenditure on research activities is recognized in profit or loss as incurred.

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 Company intends to and has sufficient resources to complete development and to use or sell the asset. Otherwise, it is recognized in profit or loss as incurred. Subsequent to initial recognition, development expenditure is carried at cost less accumulated amortization and any accumulated impairment losses.

Other intangible assets

Other intangible assets, including trademarks, technologies and partner and merchant relationships, that are acquired by the Company and have finite useful lives are carried at cost less accumulated amortization and any accumulated impairment losses.

Subsequent expenditure

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditures are recognized in profit or loss as incurred.

Amortization

Amortization is calculated to write off the cost of intangible assets less their estimated residual values using the straight-line method over their estimated useful lives, and is recognized in profit or loss. Goodwill is not amortized.

 

(8)

Nuvei Corporation

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

 

(in thousands of US dollars, except for share and per share amounts)

 

The estimated useful lives for current and comparative periods are as follows:

 

		Assets		Period
		Development costs – Computer software		3-5 years
		Trademarks		3-15 years
		Technologies		3-15 years
		Partner and merchant relationships		5-15 years

Amortization methods, useful lives and residual values are reviewed at each reporting date and are adjusted if appropriate.

Impairment of non-financial assets

At each reporting date, the Company reviews the carrying amounts of its non-financial assets to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested for impairment annually on October 1 and whenever an impairment trigger is identified.

For impairment testing purposes, assets that cannot be tested individually are grouped to form the smallest group of assets generating cash inflows that are largely independent of the cash inflows from other assets or groups of assets (“cash-generating units” or “CGUs”). Goodwill is allocated to the CGU or CGU group that is expected to benefit from the synergies resulting from the business combination. Each unit or group of units to which goodwill is allocated is not to be larger than an operating segment.

An impairment loss is recognized if the carrying amount of an asset or a CGU exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third party independent appraisals, as considered necessary. To estimate value in use, management estimates future cash flows from each asset or CGU, which are then discounted using a pre-tax discount rate that reflects current market appraisals of the time value of money and of risks of the specific asset. The data used for the impairment tests are directly related to the most recent forecast approved by the Company and are adjusted as needed to exclude the impact of future restructuring and improvements to assets.

Impairment losses are recognized in profit and loss. When recognized as CGUs, impairment losses are first allocated to reduce the carrying amount of goodwill allocated to the CGU, and then to reduce the carrying amount of the other assets of the CGU on a pro rata basis on the basis of the carrying amount of each asset in the CGU.

Goodwill impairment losses are not reversed. Impairment losses on non-financial assets other than goodwill are assessed at each reporting date for any indications that the loss has decreased or has been eliminated. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is only reversed to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of amortization, if no impairment loss had been recorded.

 

(9)

Nuvei Corporation

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

 

(in thousands of US dollars, except for share and per share amounts)

 

Provisions

A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

A contingent liability is a possible obligation that arises from past events and of which the existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not within the control of the Company; or a present obligation that arises from past events (and therefore exists), but is not recognized because it is not probable that a transfer or use of assets, provision of services or any other transfer of economic benefits will be required to settle the obligation, or the amount of the obligation cannot be estimated reliably.

Provision for losses on merchant accounts

Disputes between a cardholder and a merchant arise periodically, primarily as a result of customer dissatisfaction with merchandise quality or merchant services. Such disputes may not be resolved in the merchant’s favor. In these cases, the transaction amount is refunded to the customer by the card issuing financial institution, but the financial institution is refunded by the Company. The Company then charges back to the merchant the amount refunded to the financial institution. As such, the Company is exposed to credit risk in relation to the merchant since the Company assumes the repayment to the merchant’s customer for the full amount of the transaction even if the merchant has insufficient funds to reimburse the Company.

A provision for losses on merchant accounts is maintained to absorb chargebacks for merchant transactions that have been previously processed and on which revenues have been recorded. The provision for losses on merchant accounts specifically comprises identifiable provisions for merchant transactions for which losses can be estimated. Management evaluates the risk for such transactions and estimates the loss for disputed transactions based primarily on historical experience and other relevant factors. Management analyzes the adequacy of its provision for losses on merchant accounts in each reporting period.

The net charge for the provision for merchant losses is included in selling, general and administrative expenses in the consolidated statement of profit or loss and comprehensive loss.

Leases

At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use assets are presented within property and equipment.

 

(10)

Nuvei Corporation

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

 

(in thousands of US dollars, except for share and per share amounts)

 

The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. Lease terms range from zero to ten years for facilities. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the Company’s incremental borrowing rate unless the interest rate implicit in the lease can be readily determined.

Lease payments included in the measurement of the lease liability comprise:

 

•

fixed payments, including in-substance fixed payments;

 

•

variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

 

•

amounts expected to be payable under a residual value guarantee; and

 

•

the exercise price under a purchase option that the Company is reasonably certain to exercise, lease payments in an optional renewal period if the Company is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Company is reasonably certain not to terminate early.

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee or if the Company changes its assessment of whether it will exercise a purchase, extension or termination option.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

At commencement or on modification of a contract that contains a lease component, the Company has elected not to separate non-lease components and instead to account for the lease and non-lease components as a single lease component.

Short-term leases and leases of low-value assets

The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases and leases of low-value assets. The Company recognizes the lease payments associated with those leases as an expense on a straight-line basis over the lease term.

 

(11)

Nuvei Corporation

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

 

(in thousands of US dollars, except for share and per share amounts)

 

Financial instruments

Recognition and initial measurement

Financial assets and financial liabilities are initially recognized when the Company becomes a party to the contractual provisions of the instrument.

Classification and subsequent measurement

Financial instruments are classified into the following specified categories: amortized cost, fair value through other comprehensive income (“FVOCI”) or fair value through profit or loss (“FVTPL”). The classification depends on the nature and purpose of the financial instrument and is determined at the time of initial recognition. The Company’s financial instruments have been classified as follows:

 

		Financial instruments		Classification
		Financial assets
		Cash		Amortized cost
		Segregated funds		Amortized cost
		Trade and other receivables		Amortized cost
		Advances to third parties		FVTPL
		Processor deposits		Amortized cost
		Investments		FVTPL
		Financial liabilities
		Trade and other payables		Amortized cost
		Due to merchants		Amortized cost
		Loans and borrowings		Amortized cost
		Put option liability and contingent consideration		FVTPL
		Unsecured convertible debentures due to shareholders		Amortized cost
		Liability classified common shares		Amortized cost
		Liability classified preferred shares		Amortized cost

Financial assets classified and measured at amortized cost are initially recorded at fair value plus any directly attributable transaction costs and are subsequently measured using the effective interest method, less any impairment loss if:

 

•

The asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and

 

•

The contractual terms of the financial asset give rise, on specified dates, to cash flows that are solely payments of principal and/or interest.

Interest income or expense is recognized by applying the effective interest rate, except for short-term receivables when the effect of discounting is immaterial.

Financial assets that do not meet the above conditions are classified and measured at FVTPL and any transaction costs are expensed as incurred.

 

(12)

Nuvei Corporation

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

 

(in thousands of US dollars, except for share and per share amounts)

 

A financial liability is classified at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at fair value are measured at fair value and net gains and losses, including interest expense, are recognized in profit or loss.

Derecognition

The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred.

The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expired. The Company also derecognizes a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value. On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.

Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount presented in the consolidated statements of financial position only when the Company has a legal right to set off the amounts and intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.

Impairment of non-derivative financial assets

At each reporting date, the Company recognizes loss allowances for expected credit losses (“ECL”) on financial assets carried at amortized cost.

The Company’s trade and other receivables are accounts receivable with no financing component and have maturities of less than 12 months, and as such the Company applies the simplified approach for ECLs. As a result, the Company does not track changes in credit risk related to its trade and other receivables, but instead recognizes a loss allowance based on lifetime ECLs at each reporting date.

For other financial assets subject to impairment, the Company measures loss allowances at an amount equal to lifetime ECLs, except for the following, which are measured at 12-month ECLs:

 

•

debt securities that are determined to have low credit risk at the reporting date; and

 

•

other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

 

(13)

Nuvei Corporation

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

 

(in thousands of US dollars, except for share and per share amounts)

 

The Company’s approach to ECLs reflects a probability-weighted outcome, the time value of money and reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions. The maximum period considered when estimating ECLs is the maximum contractual period over which the Company is exposed to credit risk.

The Company uses the provision matrix as a practical expedient to measure ECLs on accounts receivable, based on days past due for groupings of receivables with similar loss patterns. Accounts receivable are grouped based on their nature. The provision matrix is based on historical and experience observed loss rates over the expected life of the receivables with merchants and processors, and is adjusted for forward-looking estimates. The Company also considers collection experience and makes estimates regarding collectability based on trends and aging.

Share capital

Common shares

Incremental costs directly attributable to the issuance of common shares are recognized as a deduction from equity, net of tax effects.

Prior to the IPO on September 22, 2020, certain Class A common shares, Series A, for which a holder had a put option to require the Company to purchase all or part of the common shares at any time at fair value in exchange for cash were classified as financial liabilities.

Preferred shares

Prior to the IPO on September 22, 2020, the Company had preferred shares outstanding.

Redeemable preferred shares were classified as financial liabilities because they were redeemable in cash by the holders. Any dividends thereon were recognized as interest expense in profit or loss as they were accrued.

Non-redeemable preferred shares were classified as equity because they bore discretionary dividends, did not contain any obligations to deliver cash or other financial assets and did not require settlement in a variable number of the Company’s equity instruments.

Share-based payment arrangements

The grant date fair value of equity-settled share-based arrangements granted to directors, officers, employees and consultants is recognized as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognized as an expense is adjusted to reflect the number of awards with which the related service is expected to be met, such that the amount ultimately recognized is based on the number of awards that meet the related service at the vesting date.

 

(14)

Nuvei Corporation

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

 

(in thousands of US dollars, except for share and per share amounts)

 

When share-based arrangements have been communicated and service inception date is deemed to have occurred but a shared understanding of the terms and conditions of the arrangement has not been reached, an expense, with a corresponding increase in equity, is recognized over the vesting period of the awards based on the best estimate of fair value at grant date. A shared understanding of the terms and conditions is not met if the outcome of the arrangement is based primarily on subjective factors. The fair value at grant date will be revised at every reporting period until the uncertainty is resolved or lapses.

Net loss per share

Basic loss per share is calculated by dividing net loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the year. Diluted loss per share is calculated by dividing net loss attributable to common shareholders of the Company, adjusted as necessary for the impact of potentially dilutive securities, by the weighted average number of common shares outstanding during the year and the impact of securities that would have a dilutive effect on loss per share.

Income taxes

Income tax expense comprises current and deferred taxes. Current and deferred taxes are recognized in profit or loss except to the extent that they relate to a business combination, or items recognized directly in equity or in other comprehensive income (loss).

The Company recognizes the tax benefit from an uncertain tax position only if it is probable that the tax position will be sustained based on its technical merits. The Company measures and records the tax benefits from such a position based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company’s estimated liabilities related to these matters are adjusted in the period in which the uncertain tax position is effectively settled, the statute of limitations for examination expires or when additional information becomes available.

Current income taxes

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

 

(15)

Nuvei Corporation

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

 

(in thousands of US dollars, except for share and per share amounts)

 

Deferred income taxes

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and they relate to income taxes levied by the same tax authority on the same taxable entity or on different tax entities, but the entities intend to settle current tax liabilities and assets on a net basis or the tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

Investment tax credits and other government grants

Government grants, consisting of grants and investment tax credits, are recorded as a reduction of the related expense or cost of the asset acquired. Government grants are recognized when there is reasonable assurance that the Company has met or will meet the requirements of the approved grant program and there is reasonable assurance that the grant will be received.

Grants that compensate the Company for expenses incurred are recognized in profit or loss in reduction thereof on a systematic basis in the same years in which the expenses are recognized. Grants that compensate the Company for the cost of an asset are recognized in profit or loss on a systematic basis over the useful life of the asset.

The Company incurs research and development expenditures which are eligible for scientific research and experimental development (SR&ED) tax credits. Refundable investment tax credits are recorded as SR&ED tax credits in the consolidated statements of profit or loss and comprehensive loss when there is reasonable assurance that the credits will be realized. Non-refundable SR&ED tax credits, which are deductible against income taxes otherwise payable, are recorded in income as a reduction of the related research and development expenses when there is reasonable assurance that the credits will be realized.

The SR&ED tax credits recorded are based on management’s best estimate of amounts expected to be recovered and are subject to audit by taxation authorities. To the extent that actual SR&ED tax credits differ from the estimate, those differences are recorded in the period of assessment by taxation authorities as an adjustment of the items to which they relate.

 

(16)

Nuvei Corporation

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

 

(in thousands of US dollars, except for share and per share amounts)

 

New accounting standards and interpretations adopted

A number of amendments to existing standards issued by the IASB have been applied in preparing these consolidated financial statements.

Amendments to references to conceptual framework in IFRS standards

On March 29, 2018, the IASB issued a revised version of its Conceptual Framework, which included the following main improvements:

 

•

New concepts on measurement, including factors to be considered when selecting a measurement basis;

 

•

New concepts on presentation and disclosure, including when to classify income and expenses in other comprehensive income;

 

•

New guidance on when assets and liabilities are removed from financial statements;

 

•

Updated definitions of an asset and liability;

 

•

Updated criteria for including assets and liabilities in financial statements; and

 

•

Clarifications of prudence, stewardship, measurement uncertainty and substance over form.

The amendments had no material impact on these consolidated financial statements.

Definition of a business (amendments to IFRS 3, Business Combinations)

On January 1, 2020, the Company adopted amendments to IFRS 3, Business Combinations that seek to clarify whether an acquisition results in a business acquisition or a group of assets. The amended definition of a business will have a narrow scope, stating that the process must be substantial, and that the inputs and the process must together have the capacity to contribute significantly to the creation of outputs. In addition, the definition of output will be reduced to the concept of goods and services to customers, whereas the previous definition emphasized returns in the form of dividends. The amendments will also include an optional fair value concentration test that simplifies the assessment of whether an acquisition results in a business acquisition or a group of assets.

The amendments had no material impact on these consolidated financial statements.

Definition of material (amendments to IAS 1, Presentation of Financial Statements, and IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors)

On October 31, 2018, the IASB clarified the definition of materiality. Following this amendment, information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements.

This amendment had no material impact on these consolidated financial statements.

 

(17)

Nuvei Corporation

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

 

(in thousands of US dollars, except for share and per share amounts)

 

IFRS 16 – COVID-19-related rent concessions

On May 28, 2020, the IASB published an amendment to IFRS 16, Leases, that provides an optional practical expedient for lessees from assessing whether a rent concession related to COVID-19 is a lease modification.

This amendment had no impact on these consolidated financial statements.

New accounting standards and interpretations issued but not yet adopted

A number of amendments to existing standards issued by the IASB are mandatory but not yet effective for the year ended December 31, 2020. The Company is still assessing the impact of these amendments, if any, on its consolidated financial statements.

Amendments to references to conceptual framework in IFRS Standards

This amendment replaces references to the 2010 Conceptual Framework for Financial Reporting with references to the 2018 Conceptual Framework for Financial Reporting in order to determine what constitutes an asset or liability in a business combination, add a new exception for certain liabilities and contingent liabilities to refer to IAS 37, Provisions, Contingent Liabilities and Contingent Assets, or IFRIC 21, Levies, rather than to the 2018 Conceptual Framework, and clarify that an acquirer should not recognize contingent assets at the acquisition date. The amendments are effective for business combinations occurring in reporting periods starting on or after January 1, 2022. Earlier application is permitted.

Amendments to liability classification

On January 23, 2020, the IASB issued amendments to IAS 1, Presentation of Financial Statements (the amendments), to clarify the requirements for classifying liabilities as current or non-current. More specifically:

 

*

The amendments specify that the conditions which exist at the end of the reporting period are those which will be used to determine if a right to defer settlement of a liability exists;

 

*

Management expectations about events after the consolidated statement of financial position date, for example on whether a covenant will be breached, or whether early settlement will take place, are not relevant; and

 

*

The amendments clarify the situations that are considered settlement of a liability.

The amendments are applicable to annual periods beginning on or after January 1, 2023.

 

(18)

Nuvei Corporation

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

 

(in thousands of US dollars, except for share and per share amounts)

 

4	Business acquisitions

Transaction for the year ended December 31, 2020

 

a)

Smart2Pay Technology & Services B.V. (“Smart2Pay”)

On November 2, 2020, the Company acquired Smart2Pay, a payment services provider headquartered in the Netherlands. The fair value of the consideration transferred consisted of cash paid of €70,900 ($81,927), subject to closing adjustments, and 6,711,923 Subordinate Voting Shares issued from the Company’s treasury at a fair value of $37.95 per share, which is based on the quoted price of the Subordinate Voting Shares on the TSX on the closing date.

To estimate the fair value of the intangible assets, management used the excess earnings method to value partner and merchant relationships and the royalty relief method to value technologies using discounted cash flow models. Management developed assumptions related to revenue and gross margin forecasts, partner and merchant attrition rates, royalty rates and discount rates.

Smart2Pay contributed revenues of $9,753 and net income of $2,029 to the Company for the period from the acquisition date to December 31, 2020. The net income contribution includes the amortization of identifiable intangible assets acquired. Acquisition costs of $4,044 have been expensed and recorded under selling, general and administrative expenses in the consolidated statement of profit or loss and comprehensive loss for the year ended December 31, 2020.

 

(19)

Nuvei Corporation

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

 

(in thousands of US dollars, except for share and per share amounts)

 

The following table summarizes the preliminary amounts of assets acquired and liabilities assumed at the acquisition date:

 

		Fair value $
Assets acquired
Cash			14,390
Segregated funds			25,534
Trade and other receivables			89
Prepaids			88
Other assets			96
Property and equipment			276
Right-of-use asset			95
Intangible assets:
Technologies			63,093
Partner and merchant relationships			103,503
Goodwill (not deductible for income tax purposes)			198,439
			405,603
Liabilities assumed
Trade and other payables			(1,026	)
Due to merchants			(25,534	)
Lease liabilities			(97	)
Income tax payable			(631	)
Deferred income taxes			(41,650	)
			336,665
Total cash consideration paid			81,927
Subordinate Voting Shares issued			254,738
Total			336,665

Goodwill arising from this acquisition mainly consists of future growth, expected synergies and assembled workforce, which were not recorded separately since they do not meet the recognition criteria for identifiable intangible assets.

To finance a portion of the cash consideration noted above, on November 2, 2020, the Company also increased its credit facility (see note 12) by amending its credit agreement to add a term loan of $10,000.

Transactions for the year ended December 31, 2019

 

b)

SafeCharge International Group Limited (“SafeCharge”)

On August 1, 2019, the Company acquired SafeCharge, a European-based payment service company, for a total cash consideration of $872,491. SafeCharge provides global omni-channel payment services from card acquiring and issuing to payment processing and checkout. Prior to the transaction, SafeCharge had been listed on the AIM market of the London Stock Exchange.

 

(20)

Nuvei Corporation

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

 

(in thousands of US dollars, except for share and per share amounts)

 

SafeCharge contributed revenues of $55,853 and net income of $11,643 to the Company for the period from the acquisition date to December 31, 2019. The net income contribution includes the amortization of identifiable intangible assets acquired. Acquisition costs of $11,425 have been expensed and recorded under selling, general and administrative expenses in the consolidated statement of profit or loss and comprehensive loss for the year ended December 31, 2019.

The following table summarizes the final recognized amounts of assets acquired and liabilities assumed at the acquisition date:

 

		Fair value $
Assets acquired
Cash			96,343
Segregated funds			162,177
Trade and other receivables			6,518
Other assets			44,362
Property and equipment			6,651
Right-of-use asset			4,645
Intangible assets:
Development costs—Computer software			14,862
Trademarks			2,654
Technologies			190,435
Partner and merchant relationships			113,857
Goodwill (not deductible for income tax purposes)			439,554
			1,082,058
Liabilities assumed
Trade and other payables			(30,969	)
Due to merchants			(162,177	)
Lease liabilities			(4,721	)
Deferred income taxes			(11,700	)
			872,491
Total cash consideration paid			872,491

Goodwill arising from this acquisition mainly consists of future growth and expected synergies, which were not recorded separately since they do not meet the recognition criteria for identifiable intangible assets.

To finance the SafeCharge acquisition noted above, on August 1, 2019:

 

(i)

The Company issued 81.2 million preferred shares at $1 per share for a total consideration of $81,240;

 

(ii)

The Company increased its credit facility (see note 12) by amending its credit agreement and entering into a further second lien agreement increasing its total available credit facilities to $845,000. An amount of $614,777 was drawn down to finance the SafeCharge acquisition; and

 

(iii)

The Company issued debentures for a total consideration of $199,000 (note 14).

 

(21)

Nuvei Corporation

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

 

(in thousands of US dollars, except for share and per share amounts)

 

c)

Loan Payment Pro (“LPP”)

On January 31, 2019, the Company acquired a 60% interest in LPP. The purchase price for this business acquisition totalled $11,461, of which $4,061 was paid in cash, including an amount of $600 placed in escrow in connection with adjustments to the purchase price or indemnification as per the purchase agreement. The remainder consists of a contingent consideration with an initial fair value of $7,400 whose payment is contingent upon meeting certain performance metrics (see notes 11 and 21). The acquisition was financed from existing facilities. LPP offers payment processing solutions specifically for the debt repayment industry.

LPP contributed revenues of $1,334 and a net loss of $961 to the Company for the period from the acquisition date to December 31, 2019. The net income contribution includes the amortization of identifiable intangible assets acquired. During the year ended December 31, 2019, acquisition costs of $107 were expensed and recorded under selling, general and administrative expenses in the consolidated statement of profit or loss and comprehensive loss.

The following table summarizes the final recognized amounts of assets acquired and liabilities assumed at the acquisition date:

 

		Fair value $
Assets acquired
Cash			13
Trade and other receivables			100
Processor deposits			3
Property and equipment			2
Intangible assets
Technologies			1,450
Partner and merchant relationships			2,165
Goodwill (not deductible for tax purposes)			15,383
			19,116
Liabilities assumed
Trade and other payables			(55	)
Put option liability			(1,187	)
Non-controlling interests, based on its fair value			(6,413	)
			11,461
Total consideration
Cash consideration paid			4,061
Contingent consideration			7,400
			11,461

Goodwill arising from this acquisition mainly consists of the assembled workforce, which was not recorded separately since it does not meet the recognition criteria for identifiable intangible assets.

 

(22)

Nuvei Corporation

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

 

(in thousands of US dollars, except for share and per share amounts)

 

5	Trade and other receivables

 

		2020 $				2019 $
Trade receivables			26,657				28,870
Investment tax credits			805				1,667
Other receivables			4,593				2,229
			32,055				32,765

A discussion of the Company’s exposure to credit and market risks and impairment losses for trade receivables is presented in note 20.

 

6

Inventory

For the year ended December 31, 2020, the cost of revenue includes inventory costs of $2,778 (2019 – $4,703) and a write-down to net realizable value of $513 (2019 – $134).

 

(23)

Nuvei Corporation

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

 

(in thousands of US dollars, except for share and per share amounts)

 

7	Property and equipment

 

		Note				Terminals $				Office equipment $				Computer equipment $				Furniture and fixtures $				Leasehold improvements $				Right-of-use assets – Buildings $				Total $
Cost
Balance as at December 31, 2018							1,767				20				925				316				975				3,669				7,672
Acquisitions							448				—				1,370				7				—				347				2,172
Acquisition through business combinations			4				37				—				3,298				766				2,552				4,645				11,298
Effect of movements in exchange rates							126				1				(15	)			53				57				15				237
Balance as at December 31, 2019							2,378				21				5,578				1,142				3,584				8,676				21,379
Acquisitions							541				—				2,725				47				82				3,176				6,571
Disposal							—				—				(3,401	)			(72	)			(74	)			—				(3,547	)
Acquisition through business combinations			4				—				—				164				43				69				95				371
Effect of movements in exchange rates							30				—				(270	)			—				4				47				(189	)
Balance as at December 31, 2020							2,949				21				4,796				1,160				3,665				11,994				24,585
Accumulated depreciation
Balance as at December 31, 2018							540				14				402				74				339				915				2,284
Depreciation							535				—				1,936				84				313				814				3,682
Effect of movement in exchange rates							34				7				63				17				10				10				141
Balance as at December 31, 2019							1,109				21				2,401				175				662				1,739				6,107
Depreciation							556				—				1,959				159				286				2,161				5,121
Disposal							—				—				(3,108	)			(28	)			(28	)			—				(3,164	)
Effect of movement in exchange rates							(1	)			—				—				—				—				(15	)			(16	)
Balance as at December 31, 2020							1,664				21				1,252				306				920				3,885				8,048
Carrying amounts
At December 31, 2019							1,269				—				3,177				967				2,922				6,937				15,272
At December 31, 2020							1,285				—				3,544				854				2,745				8,109				16,537

 

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Nuvei Corporation

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

 

 

(in thousands of US dollars, except for share and per share amounts)

 

8	Intangible assets and goodwill

 

a)

Intangible assets

 

		Notes				Development costs – Computer software $				Trademarks $				Technologies $				Partner and merchant relationships $				Total $
Cost
Balance as at December 31, 2018							11,391				6,865				5,071				135,206				158,533
Acquisitions – internally developed							8,595				—				—				—				8,595
Acquisition through business combinations			4				14,862				2,654				191,885				116,022				325,423
Effect of movements in exchange rates							2,182				—				—				—				2,182
Balance as at December 31, 2019							37,030				9,519				196,956				251,228				494,733
Acquisitions – internally developed							14,448				—				—				—				14,448
CreditGuard disposal			13				(3,957	)			(152	)			(3,122	)			(2,458	)			(9,689	)
Disposal							(226	)			(44	)			(145	)			(114	)			(529	)
Acquisition through business combinations			4				—				—				63,093				103,503				166,596
Effect of movements in exchange rates							820				—				3,220				5,173				9,212
Balance as at December 31, 2020							48,115				9,323				260,002				357,332				674,772
Accumulated amortization
Balance as at December 31, 2018							4,230				2,141				1,479				31,060				38,910
Amortization							6,243				2,443				7,692				31,065				47,443
Balance as at December 31, 2019							10,473				4,584				9,171				62,125				86,353
Amortization							10,861				3,216				13,454				37,021				64,552
Disposal							—				(54	)			(182	)			(143	)			(379	)
Effect of movement in exchange rates							—				—				1				13				14
Balance as at December 31, 2020							21,334				7,746				22,444				99,016				150,540
Carrying amounts
At December 31, 2019							26,557				4,935				187,785				189,103				408,380
At December 31, 2020							26,781				1,577				237,558				258,316				524,232

 

(25)