NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
1
|
ORGANIZATION AND DESCRIPTION OF BUSINESS
|
On May 12, 2016, QPAGOS (formerly
known as Asiya Pearls, Inc.), a Nevada corporation (“QPAGOS”), entered into an Agreement and Plan of Merger (the “Merger
Agreement”) with Qpagos Corporation, a Delaware corporation (“Qpagos Corporation”), and Qpagos Merge, Inc., a
Delaware corporation and wholly owned subsidiary of QPAGOS (“Merger Sub”). Pursuant to the Merger Agreement,
on May 12, 2016, the merger was consummated and Qpagos Corporation and Merger Sub merged (the “Merger”), with Qpagos
Corporation continuing as the surviving corporation of the Merger.
Pursuant to the Merger Agreement,
upon consummation of the Merger, each share of Qpagos Corporation’s capital stock issued and outstanding immediately prior
to the Merger was converted into the right to receive two shares of QPAGOS common stock, par value $0.0001 per share (the “Common
Stock”). Additionally, pursuant to the Merger Agreement, upon consummation of the Merger, QPAGOS assumed all of Qpagos Corporation’s
warrants issued and outstanding immediately prior to the Merger, which are now exercisable for approximately 6,219,200 shares of
Common Stock, respectively, as of the date of the Merger. Prior to and as a condition to the closing of the Merger, the then-current
QPAGOS stockholder of 5,000,000 shares of Common Stock agreed to return to QPAGOS 4,975,000 shares of Common Stock held by such
holder to QPAGOS and the then-current QPAGOS stockholder retained an aggregate of 25,000 shares of Common Stock and the other stockholders
of QPAGOS retained 5,000,000 shares of Common Stock. Therefore, immediately following the Merger, Qpagos Corporation’s former
stockholders held 49,929,000 shares of QPAGOS common stock which represented approximately 91% of the outstanding Common Stock.
The Merger is being treated
as a reverse acquisition of QPAGOS, a public shell company, for financial accounting and reporting purposes. As such, Qpagos Corporation
is treated as the acquirer for accounting and financial reporting purposes while QPAGOS is treated as the acquired entity for accounting
and financial reporting purposes. Further, as a result, the historical financial statements that are reflected in this Quarterly
Report on Form 10-Q and that will be reflected in the Company’s future financial statements filed with the United States
Securities and Exchange Commission (“SEC”) will be those of Qpagos Corporation, and the Company’s assets, liabilities
and results of operations will be consolidated with the assets, liabilities and results of operations of Qpagos Corporation.
Qpagos Corporation was incorporated
on May 1, 2015 under the laws of Delaware under the name Qpagos Corporation as the holding company for two 99.99% owned operating
subsidiaries, QPagos, S.A.P.I. de C.V. and Redpag Electrónicos S.A.P.I. de C.V. Each of these entities were incorporated
in November 2013 in Mexico.
QPagos, S.A.P.I. de C.V. was
formed to process payment transactions for service providers it contracts with, and Redpag Electrónicos S.A.P.I. de C.V.
was formed to deploy and operate kiosks as a distributor.
On May 27, 2016, Asiya changed
its name to QPAGOS. QPAGOS and its direct and indirect subsidiaries Qpagos Corporation, QPagos, S.A.P.I. de C.V. and Redpag Electrónicos
S.A.P.I. de C.V., will be referred to hereafter as “the Company”.
On June 1, 2016, the board of
directors changed the Company’s fiscal year end from October 31 to December 31.
|
b)
|
Description of the business
|
QPAGOS, through its indirect
subsidiaries QPagos, S.A.P.I. de C.V. and Redpag Electrónicos S.A.P.I. de C.V., provides physical and virtual payment services
to the Mexican market. The Company provides an integrated network of kiosks, terminals and payment channels that enable consumers
in Mexico to deposit cash, convert it into a digital form and remit the funds to any merchant in our network quickly and securely.
The Company helps consumers and merchants connect more efficiently in markets and consumer segments, such as Mexico, that are largely
cash-based and lack convenient alternatives for consumers to pay for goods and services in physical, online and mobile environments.
For example, the Company’s licensed technology can be used to pay bills, add minutes to mobile phones, purchase transportation
tickets, shop online or at a retail store, buy digital services or send money to a friend or relative.
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
2
|
ACCOUNTING POLICIES AND ESTIMATES
|
The accompanying unaudited condensed
financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”)
for interim financial information with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, these unaudited
condensed financial statements do not include all of the information and disclosures required by U.S. GAAP for complete financial
statements. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments (consisting
only of normal recurring adjustments), which the Company considers necessary, for a fair presentation of those financial statements.
The results of operations and cash flows for the three months ended March 31, 2017 may not necessarily be indicative of results
that may be expected for any succeeding quarter or for the entire fiscal year. The information contained in this Quarterly Report
on Form 10-Q should be read in conjunction with the audited financial statements of Qpagos for the year ended December 31, 2016,
included in the current report on Form 10-K as filed with the Securities and Exchange Commission (the “SEC”) on April
17, 2017.
All amounts referred to in the
notes to the financial statements are in United States Dollars ($) unless stated otherwise.
|
b)
|
Principles of Consolidation
|
The consolidated financial statements
include the financial statements of the Company and its wholly owned subsidiary and its indirect subsidiaries. All significant
inter-company accounts and transactions have been eliminated in the consolidated financial statements. The entities included in
these consolidated financial statements are as follows:
QPAGOS – Parent Company
QPAGOS Corporation
Qpagos Corporation –
100% owned
QPagos, S.A. P.I de C.V., a
Mexican entity (99.996% owned)
Redpag Electrónicos,
S.A. P.I. de C.V., a Mexican entity (99.990% owned)
The financial statements of
the Company’s Mexican operations are measured using local currencies as their functional currencies.
The Company translates the assets
and liabilities of its Mexican subsidiaries at the exchange rates in effect at year end and the results of operations at the average
rate throughout the year. The translation adjustments are recorded directly as a separate component of stockholders’ equity,
while transaction gains (losses) are included in net income (loss). All sales to customers are in Mexico.
The preparation of unaudited
condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions,
which are evaluated on an ongoing basis, that affect the amounts reported in the unaudited condensed consolidated financial statements
and accompanying notes. Management bases its estimates on historical experience and on various other assumptions that it believes
are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets
and liabilities and the amounts of revenues and expenses that are not readily apparent from other sources. Actual results could
differ from those estimates and judgments. In particular, significant estimates and judgments include those related to: the estimated
useful lives for plant and equipment, the fair value of warrants and stock options granted for services or compensation, estimates
of the probability and potential magnitude of contingent liabilities, derivative liabilities, the valuation allowance for deferred
tax assets due to continuing operating losses, those related to revenue recognition and the allowance for doubtful accounts.
Making estimates requires management
to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation
or set of circumstances that existed at the date of the consolidated financial statements, which management considered in formulating
its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ
significantly from our estimates.
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
2
|
ACCOUNTING POLICIES AND ESTIMATES (continued)
|
Certain conditions may exist
as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when
one or more future events occur or fail to occur.
The Company’s management
assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment.
If the assessment of a contingency
indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the
estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that
a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then
the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would
be disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees,
in which case the guarantee would be disclosed.
|
f)
|
Fair Value of Financial Instruments
|
The Company adopted the guidance
of Accounting Standards Codification (“ASC”) 820 for fair value measurements which clarifies the definition of fair
value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring
fair value as follows:
Level 1-Inputs are unadjusted
quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level 2-Inputs are unadjusted
quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities
in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by
observable market data.
Level 3-Inputs are unobservable
inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing
the asset or liability based on the best available information.
The carrying amounts reported
in the balance sheets for cash, accounts receivable, other current assets, other assets, accounts payable, accrued liabilities,
and notes payable, approximate fair value due to the relatively short period to maturity for these instruments. The Company did
not identify any other assets or liabilities that are required to be presented on the balance sheets at fair value in accordance
with the accounting guidance.
ASC 825-10 “Financial
Instruments
” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value
(fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new
election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should
be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding
instruments.
|
g)
|
Risks and Uncertainties
|
The Company's operations will
be subject to significant risk and uncertainties including financial, operational, regulatory and other risks associated, including
the potential risk of business failure. The recent global economic crisis has caused a general tightening in the credit markets,
lower levels of liquidity, increases in the rates of default and bankruptcy, and extreme volatility in credit, equity and fixed
income markets. These conditions not only limit the Company’s access to capital, but also make it difficult for its customers,
vendors and the Company to accurately forecast and plan future business activities.
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
2
|
ACCOUNTING POLICIES AND ESTIMATES (continued)
|
|
g)
|
Risks and Uncertainties (continued)
|
The Company’s operations
are carried out in Mexico. Accordingly, the Company’s business, financial condition and results of operations may be influenced
by the political, economic and legal environment in Mexico and by the general state of that economy. The Company’s results
may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures,
and rates and methods of taxation, among other things.
|
h)
|
Recent Accounting Pronouncements
|
In January 2017, the FASB
issued ASU 2017-02, an amendment to Topic 805, Business Combinations. The amendments in this Update clarify the definition of
a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted
for as acquisitions (or disposals) of assets or businesses. The amendments in this Update affect all reporting entities that
must determine whether they have acquired or sold a business. The amendments in this Update provide a more robust framework
to use in determining when a set of assets and activities is a business. The amendments in this Update apply to annual
periods beginning after December 15, 2017. The amendments in this Update should be applied prospectively on or after the
effective date. No disclosures are required at transition. The Company does not expect this guidance to have a
material impact on its financial statements.
In January 2017, the FASB
issued ASU 2017-04, an amendment to Topic 350, Intangibles – Goodwill and Other, that provides that an entity no longer
will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a
reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination.
Because these amendments eliminate Step 2 from the goodwill impairment test, they should reduce the cost and complexity of
evaluating goodwill for impairment. An entity should apply the amendments in this Update on a prospective basis. The
amendments in this Update are effective for Goodwill impairment tests in fiscal years beginning after December 15, 2019.
Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.
We are currently evaluating the effect ASU 2017-04 will have on our unaudited condensed consolidated financial
statements.
In February 2017, the FASB
issued ASU 2017-05, an amendment to Subtopic 610-20, Other Income—Gains and Losses from the Derecognition of
Nonfinancial Assets. The amendments in this Update are required for public business entities and other entities that have
goodwill reported in their financial statements, under the amendments in this Update, an entity should perform its annual, or
interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The amendments in
this Update modify the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its
implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. An
entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the
fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business
combination. An entity should apply the amendments in this Update on a prospective basis. The amendments in this Update are
effective for fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill
impairment tests performed on testing dates after January 1, 2017. We are currently evaluating the effect ASU 2017-05 will
have on our unaudited condensed consolidated financial statements.
In March 2017, the FASB issued
ASU 2017-07, Compensation-Retirement Benefits (Topic 715). This Update is being issued primarily to improve
the presentation of net periodic pension cost and net periodic postretirement benefit cost. This Update also includes amendments
to the Overview and Background Sections of the FASB Accounting Standards Codification. Under generally accepted accounting principles
(GAAP), defined benefit pension cost and postretirement benefit cost (net benefit cost) comprise several components that reflect
different aspects of an employer’s financial arrangements as well as the cost of benefits provided to employees. Those components
are aggregated for reporting in the financial statements. The amendments in this Update apply to all employers, including not-for-profit
entities that offer to their employees defined benefit pension plans, other postretirement benefit plans, or other types of benefits
accounted for under Topic 715. 2 What Are the Main Provisions? The amendments in this Update require that an employer disaggregate
the service cost component from the other components of net benefit cost. The amendments also provide explicit guidance on how
to present the service cost component and the other components of net benefit cost in the income statement and allow only the service
cost component of net benefit cost to be eligible for capitalization. The amendments in this Update are effective for public business
entities for annual periods beginning after December 15, 2017, including interim periods within those 3 annual periods. For other
entities, the amendments in this Update are effective for annual periods beginning after December 15, 2018, and interim periods
within annual periods beginning after December 15, 2019. Early adoption is permitted as of the beginning of an annual period for
which financial statements have not been issued or made available for issuance. The amendments in this Update should be applied
retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net
periodic postretirement benefit cost in the income statement and prospectively, on and after the effective date, for the capitalization
of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets. We are currently
evaluating the effect ASU 2017-07 will have on our consolidated financial statements.
In March 2017, the FASB issued
ASU 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20) Premium Amortization
of Purchased Callable Debt Securities. The amendments in this Update affect all entities that hold investments in callable debt
securities that have an amortized cost basis in excess of the amount that is repayable by the issuer at the earliest call date
(that is, at a premium). The amendments in this Update shorten the amortization period for certain callable debt securities held
at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not
require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. Under current
GAAP, premiums and discounts on callable debt securities generally are amortized to the maturity date. The amendments in this Update
more closely align the amortization period of premiums and discounts to expectations incorporated in market pricing on the underlying
securities. As a result, the amendments more closely align interest income recorded on bonds held at a premium or a discount with
the economics of the underlying instrument. For public business entities, the amendments in this Update are effective for fiscal
years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments
are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December
15, 2020. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an
interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An
entity should apply the amendments in this Update on a modified retrospective basis through a cumulative-effect adjustment directly
to retained earnings as of the beginning of the period of adoption. Additionally, in the period of adoption, an entity should provide
disclosures about a change in accounting principle. We are currently evaluating the effect ASU 2017-08 will have on our consolidated
financial statements.
Any new accounting standards,
not disclosed above, that have been issued or proposed by FASB that do not require adoption until a future date are not expected
to have a material impact on the consolidated financial statements upon adoption.
|
i)
|
Cash and Cash Equivalents
|
The Company considers all highly
liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. At March 31,
2017 and December 31, 2016, respectively, the Company had no cash equivalents.
The Company minimizes credit
risk associated with cash by periodically evaluating the credit quality of its primary financial institution in the United States.
The balance at times may exceed federally insured limits. At March 31, 2017 and December 31, 2016, cash balances in the United
States did not exceed the federally insured limit.
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
2
|
ACCOUNTING POLICIES AND ESTIMATES (continued)
|
|
j)
|
Accounts Receivable and Allowance for Doubtful Accounts
|
Accounts receivable are reported
at realizable value, net of allowances for doubtful accounts, which is estimated and recorded in the period the related revenue
is recorded. The Company has a standardized approach to estimate and review the collectability of its receivables based on a number
of factors, including the period they have been outstanding. Historical collection and payer reimbursement experience is an integral
part of the estimation process related to allowances for doubtful accounts. In addition, the Company regularly assesses the state
of its billing operations in order to identify issues, which may impact the collectability of these receivables or reserve estimates.
Revisions to the allowance for doubtful accounts estimates are recorded as an adjustment to bad debt expense. Receivables deemed
uncollectible are charged against the allowance for doubtful accounts at the time such receivables are written-off. Recoveries
of receivables previously written-off are recorded as credits to the allowance for doubtful accounts. There were no recoveries
during the three months ended March 31, 2017.
|
k)
|
Cost Method Investments
|
Investee companies not accounted
for under the consolidation or the equity method are accounted for under the cost method of accounting. Under this method, the
Company’s share of earnings or losses of such investee companies is not included in the condensed consolidated balance sheet
or statement of comprehensive loss. However, impairment charges are recognized in the condensed consolidated statement of comprehensive
loss. If circumstances suggest that the value of the investee company has subsequently recovered, such recovery is not recorded.
There is no impairment of investment at March 31, 2017.
The Company primarily values
inventories at the lower of cost or market applied on a first-in, first-out basis. The Company identifies and writes down its excess
and obsolete inventories to net realizable value based on usage forecasts, order volume and inventory aging. With the development
of new products, the Company also rationalizes its product offerings and will write-down discontinued product to the lower of cost
or net realizable value.
|
m)
|
Advances received from customers
|
Other than the sale of kiosks
to customers, the provision of services through our kiosks is conducted on a cash basis. Customers are required to deposit cash
with the Company to meet anticipated demand for services provided through kiosks either owned or operated by them. The services
provided through the customer owned or operated kiosks are deducted from the deposits held on their behalf, the Company requires
that these deposits be replenished as and when the services are provided.
The Company’s revenue
recognition policy is consistent with the requirements of Financial Accounting Standards Board (FASB) Accounting Standards Codification
(ASC) 605, Revenue Recognition (ASC 605). In general, the Company records revenue when it is realized, or realizable and earned.
The Company considers revenue to be realized, or realizable and earned when, persuasive evidence of an arrangement exists, the
products or services have been approved by the customer after delivery and/or installation acceptance or performance of services;
the sales price is fixed or determinable within the contract; and collectability is reasonably assured.
The Company has the following
sources of revenue which is recognized on the basis described below.
|
·
|
Revenue from the sale of services
.
|
Prepaid services are acquired
from providers and is sold to end-users through kiosks that the Company owns or kiosks that are owned by third parties. The Company
recognizes the revenue on the sale of these services when the end-user deposits funds into the terminal and the prepaid service
is delivered to the end-user. The revenue is recognized at the gross value, including margin, of the prepaid service to the Company,
net of any value-added tax which is collected on behalf of the Mexican Revenue Authorities.
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
2
|
ACCOUNTING POLICIES AND ESTIMATES (continued)
|
|
n)
|
Revenue Recognition (continued)
|
|
·
|
Payment processing provided to end-users
|
The Company provides a secure
means for end-users to pay for certain services, such as utilities through our kiosks. The Company earns either a fixed per-transaction
fee or a fixed percentage of the service sold. The Company acts as a collection agent and recognizes the payment processing fee,
net of any value-added taxes collected on behalf of the Mexican Revenue Authorities, when the funds are deposited into the kiosk
and the customer has settled his liability or has acquired a prepaid service.
|
·
|
Revenue from the sale of kiosks.
|
The Company imports, assembles
and sell kiosks that are used to generate the revenues discussed above. Revenue is recognized on the full value of the kiosks sold,
net of any valued added taxation collected on behalf of the Mexican Revenue Authorities, when the customer takes delivery of the
kiosk and all the risks and rewards of ownership are passed to the customer.
The Company does not enter into
any leasing of kiosks arrangements with customers and the Company does not generate any revenues from merchants who access its
terminals as yet.
3
|
RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
|
Fixed Assets
The Company reclassified certain
kiosk assets used in the production of income, previously recorded in inventory as fixed assets and applied an appropriate depreciation
policy to these kiosks.
The restated Unaudited
Condensed Consolidated Balance Sheet, Statements of Operations and Comprehensive loss and the Statement of Cash Flows for the
three months ended March 31, 2016, is presented below:
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
3
|
RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (continued)
|
QPAGOS
CONDENSED CONSOLIDATED BALANCE SHEET
March 31, 2016
|
|
As
|
|
|
|
|
|
|
|
|
|
|
|
Previously
|
|
|
|
|
|
|
|
As
|
|
|
|
Reported
|
|
|
Adjustments
|
|
|
Notes
|
|
Restated
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
(Unaudited)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
250,908
|
|
|
$
|
|
|
|
|
|
$
|
250,908
|
|
Accounts receivable
|
|
|
398,074
|
|
|
|
|
|
|
|
|
|
398,074
|
|
Inventory
|
|
|
553,259
|
|
|
|
(281,364
|
)
|
|
(A)
|
|
|
271,895
|
|
Recoverable IVA taxes and credits
|
|
|
527,597
|
|
|
|
|
|
|
|
|
|
527,597
|
|
Other current assets
|
|
|
69.422
|
|
|
|
|
|
|
|
|
|
69,422
|
|
Total Current Assets
|
|
|
1,799,260
|
|
|
|
(281,364
|
)
|
|
|
|
|
1,517,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant and equipment, net
|
|
|
62,395
|
|
|
|
222,563
|
|
|
(A)
|
|
|
284,958
|
|
Intangibles, net
|
|
|
200,667
|
|
|
|
|
|
|
|
|
|
200,667
|
|
Investment
|
|
|
3,000
|
|
|
|
|
|
|
|
|
|
3,000
|
|
Other assets
|
|
|
11,780
|
|
|
|
|
|
|
|
|
|
11,780
|
|
Total Non-Current Assets
|
|
|
277,842
|
|
|
|
222,563
|
|
|
|
|
|
500,405
|
|
Total Assets
|
|
$
|
2,077,102
|
|
|
$
|
(58,801
|
)
|
|
|
|
$
|
2,018,301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
77,082
|
|
|
$
|
|
|
|
|
|
$
|
77,082
|
|
Notes payable
|
|
|
106,312
|
|
|
|
|
|
|
|
|
|
106,312
|
|
IVA and other taxes payable
|
|
|
195,347
|
|
|
|
|
|
|
|
|
|
195,347
|
|
Advances from customers
|
|
|
5,859
|
|
|
|
|
|
|
|
|
|
5,859
|
|
Total Current Liabilities
|
|
|
384,600
|
|
|
|
|
|
|
|
|
|
384,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
384,600
|
|
|
|
|
|
|
|
|
|
384,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.0001 par value; 100,000,000 shares authorized, 49,929,000 shares issued and outstanding as of March 31, 2016.
|
|
|
4,993
|
|
|
|
|
|
|
|
|
|
4,993
|
|
Additional paid-in-capital
|
|
|
7,875,621
|
|
|
|
|
|
|
|
|
|
7,875,621
|
|
Accumulated deficit
|
|
|
(6,651,100
|
)
|
|
|
(49,158
|
)
|
|
|
|
|
(6,700,258
|
)
|
Accumulated other comprehensive income
|
|
|
462,988
|
|
|
|
(9,643
|
)
|
|
|
|
|
453,345
|
|
Total stockholder's equity - controlling interest
|
|
|
1,692,502
|
|
|
|
(58,801
|
)
|
|
|
|
|
1,633,701
|
|
Non-controlling interest
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
-
|
|
Total Stockholders' Equity
|
|
|
1,692,502
|
|
|
|
(58,801
|
)
|
|
|
|
|
1,633,701
|
|
Total Liabilities and Stockholders' Equity
|
|
$
|
2,077,102
|
|
|
$
|
(58,801
|
)
|
|
|
|
$
|
2,018,301
|
|
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3
|
RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (continued)
|
QPAGOS
UNAUDITED CONDENSED CONSOLIDATED STATEMENT
OF OPERATIONS AND COMPREHENSIVE LOSS
For The Three Months Ended March 31,
2016
|
|
As
|
|
|
|
|
|
|
|
|
|
|
|
Previously
|
|
|
|
|
|
|
|
As
|
|
|
|
Reported
|
|
|
Adjustments
|
|
|
Notes
|
|
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Airtime
|
|
$
|
497,985
|
|
|
$
|
|
|
|
|
|
$
|
497,985
|
|
Kiosk sales
|
|
|
130,972
|
|
|
|
|
|
|
|
|
|
130,972
|
|
Commissions on services
|
|
|
977
|
|
|
|
|
|
|
|
|
|
977
|
|
|
|
|
629,934
|
|
|
|
-
|
|
|
|
|
|
629,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Goods Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Airtime
|
|
|
483,885
|
|
|
|
|
|
|
|
|
|
483,885
|
|
Kiosk sales
|
|
|
113,357
|
|
|
|
|
|
|
|
|
|
113,357
|
|
Depreciation - kiosks
|
|
|
-
|
|
|
|
9,633
|
|
|
(A)
|
|
|
9,633
|
|
Other
|
|
|
12,046
|
|
|
|
|
|
|
|
|
|
12,046
|
|
|
|
|
609,288
|
|
|
|
9,633
|
|
|
|
|
|
618,921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross (Loss) Profit
|
|
|
20,646
|
|
|
|
(9,633
|
)
|
|
|
|
|
11,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
2,693,703
|
|
|
|
|
|
|
|
|
|
2,693,703
|
|
Depreciation and amortization
|
|
|
19,345
|
|
|
|
(2,106
|
)
|
|
(A)
|
|
|
17,239
|
|
Total Expense
|
|
|
2,713,048
|
|
|
|
(2,106
|
)
|
|
|
|
|
2,710,942
|
|
Loss from Operations
|
|
|
(2,692,402
|
)
|
|
|
(7,527
|
)
|
|
|
|
|
(2,699,929
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (expense) income
|
|
|
2,999
|
|
|
|
|
|
|
|
|
|
2,999
|
|
Interest expense, net
|
|
|
(2,992
|
)
|
|
|
|
|
|
|
|
|
(2,992
|
)
|
Foreign currency gain
|
|
|
30,984
|
|
|
|
-
|
|
|
|
|
|
30,984
|
|
Loss before Provision for Income Taxes
|
|
|
(2,661,411
|
)
|
|
|
(7,527
|
)
|
|
|
|
|
(2,668,938
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Income Taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
(2,661,411
|
)
|
|
|
(7,527
|
)
|
|
|
|
|
(2,668,938
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to non-controlling interest
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss Attributable to Controlling Interest
|
|
$
|
(2,661,411
|
)
|
|
$
|
(7,527
|
)
|
|
|
|
$
|
(2,668,938
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss Per Share - Basic and Diluted
|
|
$
|
(0.06
|
)
|
|
|
|
|
|
|
|
$
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Number of Shares Outstanding - Basic and Diluted
|
|
|
42,895,154
|
|
|
|
|
|
|
|
|
|
42,895,154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
42,982
|
|
|
|
3,792
|
|
|
|
|
|
46,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive Loss
|
|
|
(2,618,429
|
)
|
|
|
(3,735
|
)
|
|
|
|
|
(2,622,164
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss attributable to non-controlling interest
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Loss Attributable to Controlling Interest
|
|
$
|
(2,618,429
|
)
|
|
$
|
(3,735
|
)
|
|
|
|
$
|
(2,622,164
|
)
|
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3
|
RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (continued)
|
QPAGOS
UNAUDITED CONDENSED CONSOLIDATED STATEMENT
OF CASH FLOWS
For The Three Months Ended March 31,
2016
|
|
As
|
|
|
|
|
|
|
|
|
|
|
|
Previously
|
|
|
|
|
|
|
|
As
|
|
|
|
Reported
|
|
|
Adjustments
|
|
|
Notes
|
|
Restated
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to the company
|
|
$
|
(2,661,411
|
)
|
|
$
|
(7,527
|
)
|
|
(A)
|
|
$
|
(2,668,938
|
)
|
Less: loss attributable to non-controlling interest
|
|
|
-
|
|
|
|
|
|
|
|
|
|
-
|
|
Net loss
|
|
|
(2,661,411
|
)
|
|
|
(7,527
|
)
|
|
|
|
|
(2,668,938
|
)
|
Adjustment to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense
|
|
|
8,415
|
|
|
|
7,473
|
|
|
(A)
|
|
|
15,888
|
|
Amortization expense
|
|
|
10,930
|
|
|
|
54
|
|
|
(A)
|
|
|
10,984
|
|
Equity based compensation charge
|
|
|
108,000
|
|
|
|
|
|
|
|
|
|
108,000
|
|
Shares issued for services
|
|
|
2,032,275
|
|
|
|
|
|
|
|
|
|
2,032,275
|
|
Non- cash investment in affiliates
|
|
|
(3,000
|
)
|
|
|
|
|
|
|
|
|
(3,000
|
)
|
Other foreign currency movements
|
|
|
-
|
|
|
|
(3,792
|
)
|
|
(A)
|
|
|
(3,792
|
)
|
Changes in Assets and Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(155,999
|
)
|
|
|
|
|
|
|
|
|
(155,999
|
)
|
Inventory
|
|
|
115,308
|
|
|
|
|
|
|
|
|
|
115,308
|
|
Recoverable IVA taxes and credits
|
|
|
(109,700
|
)
|
|
|
|
|
|
|
|
|
(109,700
|
)
|
Prepayments
|
|
|
(17,408
|
)
|
|
|
|
|
|
|
|
|
(17,408
|
)
|
Other assets
|
|
|
(68
|
)
|
|
|
|
|
|
|
|
|
(68
|
)
|
Accounts payable and accrued expenses
|
|
|
38,711
|
|
|
|
|
|
|
|
|
|
38,711
|
|
IVA and other taxes payable
|
|
|
3,303
|
|
|
|
|
|
|
|
|
|
3,303
|
|
Advances from customers
|
|
|
3,873
|
|
|
|
|
|
|
|
|
|
3,873
|
|
Interest accruals
|
|
|
2,992
|
|
|
|
|
|
|
|
|
|
2,992
|
|
CASH USED IN OPERATING ACTIVITIES
|
|
|
(623,779
|
)
|
|
|
(3,792
|
)
|
|
|
|
|
(627,571
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(454
|
)
|
|
|
|
|
|
|
|
|
(454
|
)
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
|
(454
|
)
|
|
|
-
|
|
|
|
|
|
(454
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from loans payable
|
|
|
-
|
|
|
|
|
|
|
|
|
|
-
|
|
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
42,982
|
|
|
|
3,792
|
|
|
|
|
|
46,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET DECREASE IN CASH
|
|
|
(581,251
|
)
|
|
|
-
|
|
|
|
|
|
(581,251
|
)
|
CASH AT BEGINNING OF PERIOD
|
|
|
832,159
|
|
|
|
|
|
|
|
|
|
832,159
|
|
CASH AT END OF PERIOD
|
|
$
|
250,908
|
|
|
$
|
-
|
|
|
|
|
$
|
250,908
|
|
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
3
|
RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (continued)
|
NOTES
|
A.
|
To correct an error
in classifying kiosks acquired in 2015 as inventory and available for sale, to property and equipment, along with the
recording of related accumulated depreciation and depreciation expense.
|
These financial
statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and
discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred a loss since
inception resulting in an accumulated deficit of $9,313,135 as of March 31, 2017 and has not generated sufficient revenue to
cover its operating expenditure, raising substantial doubt about the Company's ability to continue as a going concern
for one year from the issuance of the financial statements. In addition to operational expenses, as the Company
executes its business plan, additional capital resources will be required. The Company will need to raise capital in the near
term in order to continue operating and executing its business plan. The ability to continue as a going concern is dependent
upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its
obligations and repay its liabilities arising from normal business operations when they come due. The Company’s plan is
to expand its market penetration by deploying more kiosks through various channels, thereby increasing revenues. In addition,
the Company intends to raise additional equity or loan funds to meet its short term working capital needs. The accompanying
financial statements do not include any adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the
Company to continue as a going concern.
Inventory consisted of the following:
|
|
March 31,
2017
|
|
|
December 31,
2016
|
|
|
|
|
|
|
|
|
Kiosks and accessories
|
|
$
|
297,810
|
|
|
$
|
350,273
|
|
|
|
$
|
297,810
|
|
|
$
|
350,273
|
|
Plant and Equipment
consisted of the following:
|
|
March 31,
2017
|
|
|
December 31,
2016
|
|
|
|
|
|
|
|
|
Kiosks
|
|
$
|
259,792
|
|
|
$
|
269,810
|
|
Computer equipment
|
|
|
76,852
|
|
|
|
69,577
|
|
Office equipment
|
|
|
10,416
|
|
|
|
9,430
|
|
Leasehold improvement
|
|
|
9,048
|
|
|
|
8,192
|
|
Total cost
|
|
|
356,108
|
|
|
|
357,009
|
|
Less: accumulated depreciation and amortization
|
|
|
(154,351
|
)
|
|
|
(125,681
|
)
|
Plant and equipment, net
|
|
$
|
201,757
|
|
|
$
|
231,328
|
|
Depreciation and
amortization expense totaled $15,009 and $16,122 for the three months ended March 31, 2017 and 2016, respectively.
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
License
Localization and implementation
of the different software and technology modules is supported through a Localization Agreement. Under this agreement, at a cost
of $215,000, the licensor allocated engineering and programming resources to the Company. The cost is being amortized over 5 years.
On May 1, 2015, Qpagos Corporation
entered into a renewable ten-year license with the Licensor for the non-exclusive right to license technology to provide payment
services. Subsequently, on November 1, 2015, the Company and the Licensor concluded an additional amendment to the License Agreement
by which the Licensor agreed to the exclusivity to the Mexican market subject to the payment of $20,000 per year payable in quarterly
installments, the first two such installments payable December 1, 2015. The agreement may be terminated early by the Licensor if
Qpagos Corporation fails to comply with its terms and conditions.
Intangibles consisted of the following:
|
|
March 31,
2017
|
|
|
December 31,
2016
|
|
|
|
|
|
|
|
|
Software Localization Agreement
|
|
$
|
215,000
|
|
|
$
|
215,000
|
|
|
|
|
|
|
|
|
|
|
Total cost
|
|
|
215,000
|
|
|
|
215,000
|
|
Less: accumulated amortization
|
|
|
(57,333
|
)
|
|
|
(46,583
|
)
|
Intangibles, net
|
|
$
|
157,667
|
|
|
$
|
168,417
|
|
Amortization expense was $10,750 and $10,750 for the three months ended March 31, 2017 and 2016, respectively.
Notes payable consisted of the following:
|
|
Interest
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
Description
|
|
Rate
|
|
|
Maturity
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YP Holdings LLC
|
|
|
12
|
%
|
|
December 31, 2015
|
|
$
|
163,312
|
|
|
$
|
151,353
|
|
Strategic IR
|
|
|
10
|
%
|
|
January 1, 2017 to
May 30, 2017
|
|
|
165,253
|
|
|
|
146,575
|
|
Gibbs International Holdings
|
|
|
15
|
%
|
|
June 13, 2017
|
|
|
52,493
|
|
|
|
50,986
|
|
Cobbolo Limited
|
|
|
10
|
%
|
|
May 30, 2017
|
|
|
103,932
|
|
|
|
101,466
|
|
Joseph W and Patricia G Abrams
|
|
|
15
|
%
|
|
June 13, 2017
|
|
|
25,486
|
|
|
|
25,534
|
|
Delinvest Commercial LTD
|
|
|
15
|
%
|
|
June 29, 2017
|
|
|
52,274
|
|
|
|
50,836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total notes payable
|
|
|
|
|
|
|
|
$
|
562,750
|
|
|
$
|
526,750
|
|
Interest expense totaled $21,822
and $2,992 for the three months ended March 31, 2017 and 2016, respectively.
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8
|
NOTES PAYABLE (continued)
|
YP Holdings LLC
On September 21, 2015, Qpagos
Corporation borrowed $100,000 from YP Holdings LLC (“YP”), pursuant to an unsecured loan agreement. The unpaid balance
and any accrued interest was due on December 31, 2015. The loan bears interest at a rate of 12%. The debt remains outstanding as
of the date of this report and is expected to be settled within 12 months. We are currently negotiating with YP to extend the term
of the loan, however in terms of loan agreement we have accrued default interest at the rate of 0.1% per day as the loan and interest
payment deadlines were not met, this default interest amounted to $9,000 for the quarter ended March 31, 2017 and is included in
the loan balance. Accrued interest included in the loan balance totaled $63,312 and $51,353, at March 31, 2017 and
December 31, 2016, respectively.
Strategic
IR
Effective October 14, 2016 the
Company executed an unsecured promissory note for $50,000, for an advance that took place on September 29, 2016, which matured
on February 13, 2017, bearing interest at 10% per annum. The maturity date of this loan was recently extended on May 19, 2017 by
the execution of an Extension Agreement.
On May 19, 2017 the Company executed
a Secured Grid Note for advances totaling $110,000 which took place between December 12, 2016 and March 6, 2017, bearing interest
at 10% per annum maturing on May 30, 2017 or earlier upon acceleration by Strategic IR.
Accrued interest included in
the loan balances totaled $5,253 and $1,575, at March 31, 2017 and December 31, 2016, respectively.
Gibbs
International Holdings
Effective October 20, 2016,
the Company executed an unsecured promissory note for $50,000 with an investor, bearing interest at 10% per annum payable on
February 19, 2017. On February 19, 2017, the Company executed an amended and restated promissory note extending the
maturity date to June 13, 2017 and increasing the interest rate to 15% per annum. Accrued interest included in the loan
balance totaled $2,493 and $986, at March 31, 2017 and December 31, 2016, respectively.
Cobbolo
Limited
Between October 21, 2016 and
November 25, 2016, the Company executed unsecured promissory notes totaling $100,000 with an investor, bearing interest at
10% per annum maturing between February 17, 2017 and March 25, 2017. The maturity date of these notes has been extended to
May 30, 2017. Accrued interest included in the loan balance totaled $3,932 and $1,466, at March 31, 2017 and December
31, 2016, respectively.
Joseph
W and Patricia G Abrams
Effective October 14, 2016,
the Company executed an unsecured promissory note for $25,000 with an investor, bearing interest at 10% per annum payable on
February 13, 2017. On February 13, 2017, the Company executed an amended and restated promissory note extending the
maturity date to June 13, 2017 and increasing the interest rate to 15% per annum. Accrued interest included in the loan
balance totaled $486 and $534, at March 31, 2017 and December 31, 2016, respectively.
Delinvest
Commercial LTD
Effective October 31, 2016,
the Company executed an unsecured promissory note for $50,000 with an investor, bearing interest at 10% per annum payable on
March 1, 2017. On March 1, 2017, the Company executed an amended and restated promissory note extending the maturity
date to June 29, 2017 and increasing the interest rate to 15% per annum. Accrued interest included in the loan balance
totaled $2,274 and $836, at March 31, 2017 and December 31, 2016, respectively.
9
|
CONVERTIBLE NOTES PAYABLE
|
Convertible notes payable consists
of the following:
|
|
|
|
|
Accrued
|
|
|
Debt
|
|
|
Interest
|
|
|
|
|
March 31,
|
|
Note Holder
|
|
Principal
|
|
|
Interest
|
|
|
Discount
|
|
|
Rate
|
|
|
Maturity
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Power Up Lending Group Ltd
|
|
$
|
77,000
|
|
|
$
|
1,586
|
|
|
$
|
(50,870
|
)
|
|
|
8
|
%
|
|
September 30, 2017
|
|
$
|
27,716
|
|
Power Up Lending Group Ltd
|
|
|
53,000
|
|
|
|
441
|
|
|
|
(45,858
|
)
|
|
|
8
|
%
|
|
November 30, 2017
|
|
|
7,583
|
|
Labrys Fund, LP
|
|
|
105,000
|
|
|
|
1,450
|
|
|
|
(68,453
|
)
|
|
|
8
|
%
|
|
July 27, 2017
|
|
|
37,997
|
|
JSJ Investments Inc.
|
|
|
200,000
|
|
|
|
2,323
|
|
|
|
(161,172
|
)
|
|
|
8
|
%
|
|
November 6,2017
|
|
|
41,151
|
|
Vista Capital Investment, LLC
|
|
|
100,000
|
|
|
|
483
|
|
|
|
(93,973
|
)
|
|
|
8
|
%
|
|
March 9,2018
|
|
|
6,510
|
|
|
|
$
|
535,000
|
|
|
$
|
6,283
|
|
|
$
|
(420,326
|
)
|
|
|
|
|
|
|
|
$
|
120,957
|
|
|
|
|
|
|
Accrued
|
|
|
Debt
|
|
|
Interest
|
|
|
|
|
December 31,
|
|
Note Holder
|
|
Principal
|
|
|
Interest
|
|
|
Discount
|
|
|
Rate
|
|
|
Maturity
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Power Up Lending Group Ltd
|
|
$
|
77,000
|
|
|
$
|
68
|
|
|
$
|
(75,888
|
)
|
|
|
8
|
%
|
|
September 30, 2017
|
|
$
|
1,180
|
|
Interest expense totaled $6,216
and $0 for the three months ended March 31, 2017 and 2016, respectively.
Power Up Lending Group Ltd.
On December 28, 2016, the Company
entered into a Securities Purchase Agreement, pursuant to which the Company issued a Convertible Promissory Note in the aggregate
principal amount of $77,000. The Note has a maturity date of September 30, 2017 and a coupon of eight percent per annum. The Company
has the right to prepay the Note, provided it makes a payment to the purchaser as set forth in the Note within 180 days of its
Issue Date. The outstanding principal amount of the Note is convertible at any time and from time to time at the election
of the Note holder during the period beginning on the date that is 180 days following the Issue Date into shares of the Company’s common
stock, at a conversion price based on a pre-determined formula. The balance of the Note plus accrued interest at March 31, 2017
and December 31, 2016, was $27,716 and $1,180, net of unamortized discount of $50,870 and $75,888, respectively.
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
9
|
CONVERTIBLE NOTES PAYABLE (continued)
|
Power Up Lending Group Ltd.
(continued)
On February 21, 2017, the Company
entered into a Securities Purchase Agreement, pursuant to which the Company issued a Convertible Promissory Note in the aggregate
principal amount of $53,000. The Note has a maturity date of November 30, 2017 and a coupon of eight percent per annum. The Company
has the right to prepay the Note, provided it makes a payment to the Purchaser as set forth in the Note within 180 days of its
Issue Date. The outstanding principal amount of the Note is convertible at any time and from time to time at the election
of the Note holder during the period beginning on the date that is 180 days following the Issue Date into shares of the Company’s common
stock, at a conversion price based on a pre-determined formula. The balance of the Note plus accrued interest at March 31, 2017
was $7,583, net of unamortized discount of $45,858.
Labrys Fund, LP
On January 27, 2017, the
Company entered into a Securities Purchase Agreement, pursuant to which the Company issued a Convertible Promissory Note in
the aggregate principal amount of $105,000. The Note has a maturity date of July 27, 2017 and a coupon of eight percent per
annum. In connection with the issuance of the note, the Company was required to issue 150,000 shares of common stock as a
commitment fee valued at $66,000. The shares are returnable to the Company if no Event of Default has occurred prior to the
date the Note is fully repaid. Management has determined that it is probable that the Company will meet the conditions under
the Note and therefore it more likely than not that the Company will not be in Default as defined in the Note. As a result,
management has concluded that it is probable that the shares would be returned and therefore the value of the 150,000 shares
will not be recorded. The Company will reassess the likelihood of such at each period end.
The Company has the right to
prepay the Note within 180 days of its Issue Date. After the 180 days, the Company has no right to prepayment. The outstanding
principal amount of the Note is convertible at any time and from time to time at the election of the Note holder during
the period beginning on the date that is 180 days following the Issue Date into shares of the Company’s common
stock, at a conversion price based on a pre-determined formula. The balance of the Note plus accrued interest at March 31, 2017
was $37,997, net of unamortized discount of $68,453.
JSJ Investments Inc.
On February 6, 2017, the Company
entered into a Securities Purchase Agreement, pursuant to which the Company issued a Convertible Promissory Note in the aggregate
principal amount of $200,000. The Note has a maturity date of November 6, 2017 and a coupon of eight percent per annum. The Company
has the right to prepay the Note within 180 days of its Issue Date. After the 180 days, the Company has no right to prepayment.
The outstanding principal amount of the Note is convertible at any time and from time to time at the election of the
Note holder during the period beginning on the date that is 180 days following the Issue Date into shares of the Company’s common
stock, at a conversion price based on a pre-determined formula. The balance of the Note plus accrued interest at March 31, 2017
was $41,151, net of unamortized discount of $161,172.
Vista Capital Investments,
LLC
On March 9, 2017, the Company
entered into a Securities Purchase Agreement, pursuant to which the Company issued a Convertible Promissory Note in the aggregate
principal amount of $100,000. The Note has a maturity date of March 9, 2018 and a coupon of eight percent per annum. The Company
has the right to prepay the Note, provided it makes a payment to the Purchaser as set forth in the Note through the maturity date.
The outstanding principal amount of the Note is convertible at any time and from time to time at the election of the
Note holder during the period beginning on the date that is 150 days following the Issue Date into shares of the Company’s common
stock, at a conversion price based on a pre-determined formula. The balance of the Note plus accrued interest at March 31, 2017
was $6,510, net of unamortized discount of $93,973.
The short-term convertible notes
disclosed in note 9 above, have variable priced conversion rights with no fixed floor price and will re-price dependent on the
share price performance over varying periods of time. This gives rise to a derivative financial liability, which was initially
valued at inception of the convertible note using a Black-Scholes valuation model. The value of this derivative financial liability
was re-assessed at March 31, 2017 and March 31, 2016, and $247,770 and $0 was charged to the statement of operations and
comprehensive loss, respectively. The value of the derivative liability will be re-assessed at each financial reporting period,
with any movement thereon recorded in the statement of operations in the period in which it is incurred.
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
10
|
DERIVATIVE LIABILITY (continued)
|
The following assumptions were
used in the Black-Scholes valuation model:
|
|
Three
|
|
|
|
|
|
|
Months Ended
|
|
|
Year ended
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Conversion price
|
|
$
|
0.11
to 0.22
|
|
|
$
|
0.22 to 0.23
|
|
Risk free interest rate
|
|
|
0.63
to 1.04
|
%
|
|
|
0.85
|
%
|
Expected life of derivative liability
|
|
|
4 to 11 months
|
|
|
|
9 months
|
|
expected volatility of underlying stock
|
|
|
132.56
to 138.19
|
%
|
|
|
133.0
|
%
|
Expected dividend rate
|
|
|
0
|
%
|
|
|
0
|
%
|
The movement in derivative liability
is as follows:
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
Opening balance
|
|
$
|
113,074
|
|
|
$
|
-
|
|
Derivative financial liability arising from convertible note
|
|
|
458,000
|
|
|
|
77,000
|
|
Fair value adjustment to derivative liability
|
|
|
247,770
|
|
|
|
36,074
|
|
|
|
$
|
818,844
|
|
|
$
|
113,074
|
|
The Company has authorized 100,000,000
common shares with a par value of $0.0001 each, and issued and has outstanding 55,454,000 shares of common stock as of March 31,
2017.
The Company has recorded an
expense of $0 and $108,000 for the three months ended March 31, 2017 and 2016, respectively, relating to restricted stock awards,
which were fully vested in April 2016.
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11
|
STOCKHOLDERS’ EQUITY (continued)
|
The Company has authorized 25,000,000
shares of preferred stock with a par value of $0.0001, no preferred stock is issued and outstanding as of March 31, 2017.
In connection with the Merger,
outstanding Qpagos Corporation warrants were assumed by QPAGOS and converted to QPAGOS warrants at a ratio of two QPAGOS warrants
for each Qpagos Corporation warrant issued.
During the period June 2015
to December 2015, pursuant to the private placement agreement and individual Securities Purchase Agreements entered into, new,
qualified investors, acquired 4,784,000 (2,392,000 pre-merger) common units of the Company at a price of $0.625 ($1.25 pre-merger)
per unit, each unit consisting of one share of Common Stock and a five year warrant exercisable for one share of common stock at
an exercise price of $0.625 ($1.25 pre-merger) per share.
The placement agent was also issued, in terms of
a placement agent agreement, five year warrants to purchase 717,600 (358,800 pre-QPAGOS Merger) units at $0.625 ($1.25 pre-QPAGOS
Merger)) per unit, each consisting of one share of Common stock and an additional five year warrant exercisable for one shares
of Common Stock at an exercise price of $0.625 ($1.25 pre-QPAGOS Merger)) per share, giving a total of 1,435,200 (717,600 pre-QPAGOS
Merger) warrants to purchase common shares at an exercise price of $0.625 ($1.25 pre-QPAGOS Merger)) per share if all placement
agent warrants are exercised.
The warrants outstanding and exercisable at March
31, 2017 are as follows:
|
|
|
Warrants Outstanding
|
|
|
Warrants Exercisable
|
|
Exercise
Price
|
|
|
Number
Outstanding
|
|
|
Weighted
Average
Remaining
Contractual
life in years
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Number
Exercisable
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual
life in years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.625
|
|
|
|
6,219,200
|
|
|
|
3.51
|
|
|
$
|
0.625
|
|
|
|
6,219,200
|
|
|
$
|
0.625
|
|
|
|
3.51
|
|
The warrants outstanding have
an intrinsic value of $0 and $0 as of March 31, 2017 and December 31, 2016, respectively.
Revenue is derived from the following sources:
|
|
Three
|
|
|
Three
|
|
|
|
Months
Ended
|
|
|
Months
Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Sales of services
|
|
$
|
801,692
|
|
|
$
|
497,985
|
|
Payment processing fees
|
|
|
10,060
|
|
|
|
977
|
|
Kiosk sales
|
|
|
113,921
|
|
|
|
130,972
|
|
Other
|
|
|
1,637
|
|
|
|
-
|
|
|
|
$
|
927,310
|
|
|
|
629,934
|
|
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13
|
EQUITY BASED COMPENSATION
|
Equity based compensation
is made up of the following:
|
|
Three
Months Ended
March 31,
2017
|
|
|
Three
Months Ended
March 31,
2016
|
|
|
|
|
|
|
|
|
Stock issued for services rendered
|
|
|
-
|
|
|
|
2,032,275
|
|
|
|
$
|
-
|
|
|
$
|
2,032,275
|
|
Basic loss per share is based
on the weighted-average number of common shares outstanding during each period. Diluted loss per share is based on basic shares
as determined above plus common stock equivalents. The computation of diluted net loss per share does not assume the issuance of
common shares that have an anti-dilutive effect on net loss per share. For the three months ended March 31, 2017 and 2016, all
unvested restricted stock awards and warrants, were excluded from the computation of diluted net loss per share. Dilutive shares
which could exist pursuant to the exercise of outstanding stock instruments and which were not included in the calculation because
their affect would have been anti-dilutive are as follows:
|
|
Three
Months Ended
March 31,
2017
(Shares)
|
|
|
Three
Months Ended
March 31,
2016
(Shares)
|
|
|
|
|
|
|
|
|
Restricted stock awards – unvested
|
|
|
-
|
|
|
|
1,160,000
|
|
Warrants
|
|
|
6,219,200
|
|
|
|
6,219,200
|
|
|
|
|
6,219,200
|
|
|
|
7,379,200
|
|
15
|
COMMITMENTS AND CONTINGENCIES
|
The Company operates from an
office facility in Mexico. The office is leased under a three (3) year non-cancellable operating lease, which ends on December
16, 2019. The lease calls for monthly rental payment, including maintenance, of $2,846, as adjusted for exchange rate changes.
The Company also leases space on a month-to-month basis for its data servers at a monthly rate of $1,680. In addition, Qpagos leases
warehouse space on a month-to-month basis for $1,081 per month.
The future minimum lease installments
under the office facility lease agreement as of March 31, 2017 are $25,614 for the remainder of 2017 and $34,152 for each year
2018 and 2019, subject to exchange rate changes.
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
On April 6, 2017, the Company
entered into a Convertible Promissory Note in the aggregate principal amount of $100,000. The Note has a maturity date of January
6, 2018 and a coupon of eight percent (8%) per annum. The Company has the right to prepay the Note, provided it makes a pre-payment
penalty as specified in the Note. The outstanding principal amount of the Note is convertible at any time and from time
to time at the election of the Holder into shares of the Company’s common stock, par value $0.0001 per share (the
“Common Stock”) at a conversion price equal to a 40% discount to the average of the two (2) lowest trading bid
prices during the previous fifteen (15) trading days to the date of conversion.
On April 25, 2017, the Company,
entered into a Securities Purchase Agreement with Power Up Lending Group Ltd., pursuant to which the Company issued to the Purchaser
a Convertible Promissory Note in the aggregate principal amount of $33,000. The Note has a maturity date of February 10, 2018 and
the Company has agreed to pay interest on the unpaid principal balance of the Note at the rate of eight percent per annum from
the date on which the Note is issued until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment
or otherwise. The Company shall have the right to prepay the Note in terms of agreement. The outstanding principal amount of the
Note is convertible at any time and from time to time at the election of the Purchaser during the period beginning on
the date that is 180 days following the issue date into shares of the Company’s common stock at a conversion price
equal to 40% discount to market price as set forth in the Note.
Other than disclosed above, in
accordance with ASC 855-10, the Company has analyzed its operations subsequent to March 31, 2017 to the date these financial statements
were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements.
Item 2.