RISK FACTORS
Investing in our common stock involves
a high degree of risk, and you should be able to bear the complete loss of your investment. You should carefully consider the risks
described below, the other information in this prospectus and the documents incorporated by reference herein when evaluating our
company and our business. If any of the following risks actually occur, our business could be harmed. In such case, the trading
price of our common stock could decline and investors could lose all or a part of the money paid to buy our common stock
RISKS RELATING TO OUR BUSINESS
Risks Relating to Our Business and Industry
We have had very limited operations
to date with our new business model.
In December 2019, we sold our Mexican operations
and are now focused on operations in the United States. To date, as a result of COVID-19 business closures the installation of
our network of kiosks, terminals and payment channels in Southern California has been delayed, and we have not yet installed any
kiosks in the United States. As such, we have a very limited operating history. We have yet to demonstrate our ability to overcome
the risks frequently encountered in the payment services industry in the United States and are still subject to many of the risks
common to early stage companies, including the uncertainty as to our ability to implement our business plan, market acceptance
of our proposed business and services, under-capitalization, cash shortages, limitations with respect to personnel, financing and
other resources and uncertainty of our ability to generate revenues. There is no assurance that our activities will be successful
or will result in any revenues or profit, and the likelihood of our success must be considered in light of the stage of our development.
There can be no assurance that we will be able to consummate our business strategy and plans, or that financial, technological,
market, or other limitations may force us to modify, alter, significantly delay, or significantly impede the implementation of
such plans. We have insufficient results for investors to use to identify historical trends. Investors should consider our prospects
in light of the risk, expenses and difficulties we will encounter as an early stage company. Our revenue and income potential is
unproven and our business model is continually evolving. We are subject to the risks inherent to the operation of a new business
enterprise, and cannot assure you that we will be able to successfully address these risks.
Our consolidated financial statements
have been prepared assuming that it will continue as a going concern.
Our operating losses, negative cash flows
from operations and limited alternative sources of revenue raise substantial doubt about our ability to continue as a going concern.
The consolidated financial statements for the year ended December 31, 2019 do not include any adjustments that might result from
the outcome of this uncertainty. If we cannot raise adequate capital on acceptable terms or generate sufficient revenue from operations,
we will need to revise our business plans.
We may continue to generate operating
losses and experience negative cash flows and it is uncertain whether we will achieve profitability.
For the three months ended March 31, 2020
and 2019, we incurred a net loss of $1,398,063 and $866,843, respectively. We have an accumulated deficit of $23,583,094 through
March 31, 2020. For the years ended December 31, 2019 and 2018, we incurred a net loss of $3,729,106 and $5,067,734, respectively.
We expect to continue to incur operating losses until such time, if ever, as we are able to achieve sufficient levels of revenue
from operations. There can be no assurance that we will ever generate significant sales or achieve profitability. Accordingly,
the extent of future losses and the time required to achieve profitability, if ever, cannot be predicted at this point.
We also expect to experience negative cash
flows for the foreseeable future as we fund our operating losses. As a result, we will need to generate significant revenues or
raise additional financing in order to achieve and maintain profitability. We may not be able to generate these revenues or achieve
profitability in the future. Our failure to achieve or maintain profitability would likely negatively impact the value of our securities
and financing activities.
The COVID-19 Pandemic has caused a delay in our roll out
plans which has negatively impacted our operations and results of operations.
The COVID-19 pandemic has required our
management to focus their attention primarily on responding to the challenges presented by the pandemic, including ensuring continuous
operations, and adjusting our operations to address changes in the virtual payments industry. Due to measures imposed by the local
governments in areas affected by COVID-19, businesses have been suspended due to quarantine intended to contain this outbreak and
many people have been forced to work from home in those areas. As a result, installation of our network of kiosks, terminals and
payment channels in Southern California has been delayed, which has had an adverse impact on our business and financial condition
and has hampered its ability to generate revenue and access usual sources of liquidity on reasonable terms.
We will need substantial additional
funding and may be unable to raise capital when needed, which would force us to delay, reduce or eliminate our product development
programs or commercialization efforts.
As of March 31,
2020, we had cash and cash equivalents of $705. Upon issuance of the Notes we received an additional $262,500. We believe that
based on our current operating plan, our existing cash and cash equivalents will not be sufficient to enable us to fund our operations;
our debt and other obligations; and our capital expenditure requirements for at least the next twelve months. See “Management’s
Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” above. We
will need additional funds to meet our obligations and fund operations beyond that time. Additional equity or debt financing, or
corporate collaboration and licensing arrangements, may not be available on acceptable terms, if at all, particularly in the current
economic environment. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or
more of our research and development programs.
Until such time,
if ever, as we can generate substantial product revenues, we will be required to finance our cash needs through public or private
equity offerings, debt financings and corporate collaboration and licensing arrangements. If we raise additional funds by issuing
equity securities, our stockholders may experience dilution. Debt financing, if available, may involve agreements that include
covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures
or declaring dividends. Any debt financing or additional equity that we may raise may contain terms, such as liquidation and other
preferences, that are not favorable to us or our stockholders. If we raise additional funds through collaboration and licensing
arrangements with third parties, it may be necessary to relinquish valuable rights to our technologies, research programs or product
candidates or grant licenses on terms that may not be favorable to us.
If we cannot establish profitable
operations, we will need to raise additional capital to fully implement our business plan, which may not be available on commercially
reasonable terms, or at all, and which may dilute your investment.
Achieving and sustaining profitability
will require us to increase our revenues and manage our operating and administrative expenses. We cannot guarantee that we will
be successful in achieving profitability. If we are unable to generate sufficient revenues to pay our expenses and our existing
sources of cash and cash flows are otherwise insufficient to fund our activities, we will need to raise additional funds to continue
our operations and in order to fully implement our business plan. If we do not generate such revenue from operations, we may be
forced to limit our expansion. Furthermore, if we issue equity or debt securities to raise additional funds, our existing stockholders,
may experience dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of our
existing stockholders. If we are unsuccessful in achieving profitability, and we cannot obtain additional funds on commercially
reasonable terms or at all, we may be required to curtail significantly or cease our operations, which could result in the loss
to investors of their investment in our securities.
We have identified material weaknesses
in our internal controls, and we cannot provide assurances that these weaknesses will be effectively remediated or that additional
material weaknesses will not occur in the future. If our internal control over financial reporting or our disclosure controls and
procedures are not effective, we may not be able to accurately report our financial results, prevent fraud, or file our periodic
reports in a timely manner, which may cause investors to lose confidence in our reported financial information and may lead to
a decline in our stock price.
Our management is responsible for establishing
and maintaining adequate internal control over our financial reporting, as defined in Rule 13a- 15(f) under the Exchange Act. We
have identified material weaknesses in our internal controls with respect to our segregation of duties and our limited resources
and therefore our disclosure controls and procedures are not effective in providing material information required to be included
in our periodic SEC filings on a timely basis and to ensure that information required to be disclosed in our periodic SEC filings
is accumulated and communicated to our management to allow timely decisions regarding required disclosure about our internal control
over financial reporting. Due to limited staffing, we are not always able to detect minor errors or omissions in financial reporting.
If we fail to comply with the rules under Sarbanes-Oxley related to disclosure controls and procedures in the future, or, if we
continue to have material weaknesses and other deficiencies in our internal control and accounting procedures and disclosure controls
and procedures, our stock price could decline significantly and raising capital could be more difficult. If additional material
weaknesses or significant deficiencies are discovered or if we otherwise fail to address the adequacy of our internal control and
disclosure controls and procedures our business may be harmed. Moreover, effective internal controls are necessary for us to produce
reliable financial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports
or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial
information, and the trading price of our securities could drop significantly.
The failure to comply with the terms
of the Notes could result in a default under the terms of the notes and, if uncured, it could
potentially result in action against our pledged assets.
The Notes are secured by a lien on all
of our assets. If we fail to comply with the terms of the Notes and/or the related agreements, the note holder could declare a
note default and if the default were to remain uncured, the secured creditor would have the right to proceed against any or all
of the collateral securing their Notes, subject to the first priority of our secured creditors. Any action by our secured or unsecured
creditors to proceed against our assets would likely have a serious disruptive effect on our business operations.
To date we have not successfully
generated sufficient revenue to pay our operating expenses and have relied on proceeds from recent note issuances to pay the deficiency.
As of March 31, 2020, we have outstanding
convertible debt in the principal amount of $932,664 pursuant to the terms of various notes that we issued. To date, we have not
generated sufficient revenue to pay the balances owed under these notes and provide sufficient working capital to run our business.
The outstanding principal amount of the notes is convertible at any time and from time to time at the election of the holder after
certain periods of time into shares of our common stock at discounts to the market price of our common stock. In addition, upon
the occurrence and during the continuation of an Event of Default (as defined in the notes), the notes each will become immediately
due and payable and we have agreed to pay additional default interest rates. Upon conversion of these notes, our current shareholders
will suffer dilution, which could be significant.
Servicing our debt requires a significant
amount of cash. Our ability to generate sufficient cash to service our debt depends on many factors beyond our control.
Our ability to make payments on and to
refinance our debt, to fund planned capital expenditures and to maintain sufficient working capital depends on our ability to generate
cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory
and other factors that are beyond our control. We cannot assure you that our business will generate sufficient cash flow from operations
or from other sources in an amount sufficient to enable us to service our debt or to fund our other liquidity needs. If our cash
flow and capital resources are insufficient to allow us to make scheduled payments on our debt, we may need to seek additional
capital or restructure or refinance all or a portion of our debt on or before the maturity thereof, any of which could have a material
adverse effect on our business, financial condition or results of operations. We cannot assure you that we will be able to refinance
any of our debt on commercially reasonable terms or at all, or that the terms of that debt will allow any of the above alternative
measures or that these measures would satisfy our scheduled debt service obligations. If we are unable to generate sufficient cash
flow to repay or refinance our debt on favorable terms, it could significantly adversely affect our financial condition and the
value of our outstanding debt. Our ability to restructure or refinance our debt will depend on the condition of the capital markets
and our financial condition. Any refinancing of our debt could be at higher interest rates and may require us to comply with more
onerous covenants, which could further restrict our business operations. There can be no assurance that we will be able to obtain
any financing when needed.
Covenant restrictions under our indebtedness
may limit our ability to operate our business.
The Notes contain, and our future indebtedness
agreements may contain covenants that restrict our ability to finance future operations or capital needs or to engage in other
business activities. The Term Loans restrict our ability to:
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incur, assume or guarantee
or suffer to exist any indebtedness for borrowed money of any kind, including, but not limited to, a guarantee, on or with respect
to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom other
than Permitted Indebtedness (as defined in the Notes);
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repurchase capital stock;
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repay any Indebtedness
other than the Notes or Permitted Indebtedness or make other restricted payments including, without limitation, paying dividends
and making investments;
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sell or otherwise dispose
of assets; and
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enter into transactions
with affiliates.
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Our failure to fulfill all of our registration requirements
may cause us to suffer liquidated damages, which may be very costly.
Pursuant to the terms of the Registration
Rights Agreement that we entered into in connection with the Notes and Warrants we are required to file a registration statement
with respect to securities issued to the note holders upon their request within a certain time period, the registration statement
must be declared effective within 75 days of the closing of the issuance of the Notes and Warrants and maintain the effectiveness
of such registration statement. If we fail to do so we could be required to pay liquidated damages. The failure to do so could
result in the payment of damages by us. There can be no assurance as to when this registration statement will be declared effective
or that we will be able to maintain the effectiveness of any registration statement, and therefore there can be no assurance that
we will not incur damages under the RRA.
The payment services industry is
highly competitive, and many of our competitors are larger and have greater financial and other resources.
The payment services industry is highly
competitive, and our continued growth depends on our ability to compete effectively with both traditional and non-traditional payment
service providers. Although we do not currently face direct competition from any competitor in exactly the same kiosk-based line
of business as ours, we currently expect to face competition from a variety of financial and non-financial business groups which
include retail banks, non-traditional payment service providers, such as retailers, like 7-Eleven and Walmart which provide mobile
top-up services, and mobile network operators, traditional kiosk and terminal operators and electronic payment system operators,
as well as other companies that provide various forms of payment services, including electronic payment and payment processing
services. Competitors in our industry seek to differentiate themselves by features and functionalities such as speed, convenience,
network size, accessibility, hours of operation, reliability and price. A significant number of these competitors have greater
financial, technological and marketing resources than we have, operate robust networks and are highly regarded by consumers.
There is uncertainty as to market
acceptance of our technology and services.
We have conducted our own research into
the markets for our services; however, because we are a new entrant into the market, we cannot guarantee market acceptance of our
services and have somewhat limited information on which to estimate our anticipated level of sales. Our services require consumers
and service providers to adopt our technology. Our industry is susceptible to rapid technological developments and there can be
no assurance that we will be able to match any new technological advances. If we are unable to match the technological changes
in the needs of our customers the demand for our products will be reduced.
We rely on an outside vendor for
the supply of key kiosk parts and the partial or complete loss of this supplier could cause customer supply or production delays
and as a result potentially a loss of revenues.
We currently rely on a vendor to manufacture
substantial portions of critical hardware that are used with or included in our kiosks. Although we do not believe the contract
is material to us because there are other vendors that could supply the hardware required for the kiosks, we do not have a contract
with any other vendors and therefore, if our present vendor was to delay or terminate its performance, our business could be disrupted.
Although we may add or change our vendors
in the future, our reliance on vendors is expected to continue and involves other risks, including our limited control over the
availability of components, delivery schedules, pricing and product quality. We may also experience delays, additional expenses
and lost sales as a result of our dependency upon outside vendors. If the outside vendors on which we rely are not able to supply
us with needed products or parts, or were to cease or interrupt production, and if other existing vendors were also unable to supply
us in a timely manner, or on comparable terms, our business could be materially adversely impacted.
Our reliance on outside vendors for our
kiosk hardware involves several risks, including the following:
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there are a number of
reasons our suppliers of required parts may cease or interrupt production or otherwise fail to supply us with an adequate supply
of required parts, including contractual disputes with our supplier or adverse financial developments at or affecting the supplier;
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we have reduced control
over the pricing of third party-supplied materials, and our suppliers may be unable or unwilling to supply us with required materials
on commercially acceptable terms, or at all;
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we have reduced control
over the timely delivery of third party-supplied materials; and
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our suppliers may be
unable to develop technologically advanced products to support our growth and development of new systems.
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Disruptions in international trade and
finance or in transportation also may have a material adverse effect on our business, financial condition and results of operation. Any
significant disruption in our operations for any reason, such as regulatory requirements, scheduling delays, quality control problems,
loss of certifications, power interruptions, fires, hurricanes, war or threats of terrorism, labor strikes, contract disputes,
could adversely affect our sales and customer relationships. In addition, in the event of a breach of law by a vendor based outside
of Mexico or a breach of a contractual obligation that has an adverse effect upon our operations, we may have little or no recourse
because all of our vendors’ assets could be located in a foreign country, such as Russia, Italy, Germany, Canada or the People’s
Republic of China where it may not be possible to effect service of process and uncertainty exists as to whether the courts in
such foreign jurisdiction would recognize or enforce a judgment of a Mexican court obtained against the vendor.
We are subject to the economic risk
and business cycles of our merchants and agents and the overall level of consumer spending.
The payment services industry depends heavily
on the overall level of consumer spending. We are exposed to general economic conditions that affect consumer confidence, consumer
spending, consumer discretionary income or changes in consumer purchasing habits. Economic factors such as employment levels, business
conditions, energy and fuel costs, interest rates, and inflation rate could reduce consumer spending or change consumer purchasing
habits. A reduction in the amount of consumer spending could result in a decrease in our revenue and profits. If our merchants
make fewer sales of their products and services using our services or consumers spend less money per transaction, we will have
fewer transactions to process at lower amounts, resulting in lower revenue. Weakening in the Mexican economy could have a negative
impact on our merchants, as well as consumers who purchase products and services using our payment processing systems, which could,
in turn, negatively impact our business, financial condition and results of operations, particularly if the recessionary environment
disproportionately affects some of the market segments that represent a larger portion of our payment processing volume. In addition,
these factors could force some of our merchants and/or agents to liquidate their operations or go bankrupt, or could cause our
agents to reduce the number of their locations or hours of operation, resulting in reduced transaction volumes. We also have a
certain amount of fixed costs, including salaries and rent, which could limit our ability to adjust costs and respond quickly to
changes affecting the economy and our business.
If consumer confidence in our business
deteriorates, our business, financial condition and results of operations could be adversely affected.
Our business is built on consumers’
confidence in our brands, as well as our ability to provide fast, reliable payment services. As a consumer business, the strength
of our brand and reputation are of paramount importance to us. A number of factors could adversely affect consumer confidence in
our brand, many of which are beyond our control, and could have an adverse impact on our results of operations. These factors include:
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any regulatory action
or investigation against us;
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any significant interruption
to our systems and operations; and
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any breach of our security
systems or any compromises of consumer data.
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A decline in the use of cash as a
means of payment may result in a decline in the use of our kiosks and terminals.
We believe that consumers making cash payments
are more likely to use our kiosks and terminals than where alternative payment methods are available. As a result, we believe that
our profitability depends on the use of cash as a means of payment. During the COVID-19 pandemic the use of cash has been discouraged
by some local governmental authorities and health experts. There can be no assurance that over time, the prevalence of cash payments
in Southern California will not decline as a greater percentage of the population adopts credit and debit card payments and electronic
banking. The shift from cash payments to credit and debit card payments and electronic banking could reduce our market share and
payment volumes and may have a material adverse effect on our business, financial condition and results of operations.
Our business operations are geographically
concentrated and could be significantly affected by any adverse change in the regions in which we operate.
Our business operations are now solely
in the United States. Because to date we plan to derive all of our total revenues from our operations in United States and expect
to continue to derive a significant portion of our revenue from operations solely in the United States for the near future, our
business is exposed to adverse regulatory and competitive changes, economic downturns and changes in political conditions in the
United States. Moreover, due to the concentration of our businesses in the United States, our business is less diversified and,
accordingly, is subject to regional risks.
We are not currently subject to extensive
government regulation; however, we could be subject to extensive government regulation, and there can be no guarantee that new
regulations applicable to our business will not be enacted.
Currently our business is not impacted
by government regulation; however, we may be subject to a variety of regulations aimed at preventing money laundering and financing
criminal activity and terrorism, financial services regulations, payment services regulations, consumer protection laws, currency
control regulations, advertising laws and privacy and data protection laws and therefore experience periodic investigations by
various regulatory authorities in connection with the same, which may sometimes result in monetary or other sanctions being imposed
on us. Many of these laws and regulations are constantly evolving, and are often unclear and inconsistent with other applicable
laws and regulations, making compliance challenging and increasing our related operating costs and legal risks. In particular,
there has been increased public attention and heightened legislation and regulations regarding money laundering and terrorist financing.
We may have to make significant judgment calls in applying anti-money laundering legislation and risk being found in non-compliance
with such laws.
We may not be able to complete or integrate successfully
any potential future acquisitions, partnerships or joint ventures.
From time-to-time, we may evaluate possible
acquisition transactions, partnerships or joint ventures, some of which may be material. Potential future acquisitions, partnerships
and joint ventures may pose significant risks to our existing operations if they cannot be successfully integrated. These projects
would place additional demands on our managerial, operational, financial and other resources, create operational complexity requiring
additional personnel and other resources and require enhanced control procedures. In addition, we may not be able to successfully
finance or integrate any businesses, services or technologies that we acquire or with which we form a partnership or joint venture.
Furthermore, the integration of any acquisition may divert management’s time and resources from our core business and disrupt
our operations. Moreover, even if we were successful in integrating newly acquired assets, expected synergies or cost savings may
not materialize, resulting in lower than expected benefits to us from such transactions. We may spend time and money on projects
that do not increase our revenue. Additionally, when making acquisitions it may not be possible for us to conduct a detailed investigation
of the nature of the assets being acquired due to, for instance, time constraints in making the decision and other factors. We
may become responsible for additional liabilities or obligations not foreseen at the time of an acquisition. In addition, in connection
with any acquisitions, we must comply with various antitrust requirements. It is possible that perceived or actual violations of
these requirements could give rise to regulatory enforcement action or result in us not receiving all necessary approvals in order
to complete a desired acquisition. To the extent we pay the purchase price of any acquisition in cash, it would reduce our cash
reserves, and to the extent the purchase price is paid with our stock, it could be dilutive to our stockholders. To the extent
we pay the purchase price with proceeds from the incurrence of debt, it would increase our level of indebtedness and could negatively
affect our liquidity and restrict our operations. All of the above risks could have a material adverse effect on our business,
results of operations, financial condition, and prospects.
As our business develops we will need to implement enhanced
compliance processes, procedures and controls with respect to the rules and regulations that apply to our business.
Our success requires significant public
confidence in our ability to handle large and growing payment volumes and amounts of consumer funds, as well as comply with applicable
regulatory requirements. Any failure to manage consumer funds or to comply with applicable regulatory requirements could result
in the imposition of fines, harm our reputation and significantly diminish use of our products. In addition, if we are not in compliance
with anti-corruption laws and other laws governing the conduct of business with government entities and/or officials (including
local laws), we may be subject to criminal and civil penalties and other remedial measures, which could have an adverse impact
on our business, financial condition, results of operations and prospects.
If we cannot keep pace with rapid
developments and change in our industry and provide new services to our clients, the use of our services could decline, reducing
our revenues.
The payment services industry in which
we operate is characterized by rapid technological change, new product and service introductions, evolving industry standards,
changing customer needs and the entrance of more established market players seeking to expand into these businesses. In order to
remain competitive, we continually seek to expand the services we offer and to develop new projects, including, for example, the
electronic wallet. These projects carry risks, such as delays in delivery, performance problems and lack of customer acceptance.
In our industry, these risks are acute. Any delay in the delivery of new services or the failure to differentiate our services
or to accurately predict and address market demand could render our services less desirable, or even obsolete, to consumers. In
addition, if alternative payment mechanisms become widely available, substituting our current products and services, and we do
not develop and offer similar alternative payment mechanisms successfully and on a timely basis, our business and prospects could
be adversely affected. Furthermore, we may be unable to recover the costs we have incurred in developing new services. Our development
efforts could result in increased costs and we could also experience a loss in business that could reduce our earnings or could
cause a loss of revenue if promised new services are not timely delivered to our clients, we are not able to compete effectively
with our competitors’ or do not perform as anticipated. If we are unable to develop, adapt to or access technological changes
or evolving industry standards on a timely and cost effective basis, our business, financial condition and results of operations
could be materially adversely affected.
Our systems and our third party providers’
systems may fail due to factors beyond our control, which could interrupt our service, cause us to lose business and increase our
costs.
We depend on the efficient and uninterrupted
operation of numerous systems, including our computer systems, software and telecommunications networks, as well as the data centers
that we lease from third parties. Our systems and operations, or those of our third party providers, could be exposed to damage
or interruption from, among other things, fire, flood, natural disaster, power loss, telecommunications failure, vendor failure,
unauthorized entry, improper operation and computer viruses. Substantial property and equipment loss, and disruption in operations,
as well as any defects in our systems or those of third parties or other difficulties could expose us to liability and materially
adversely impact our business, financial condition and results of operations. In addition, any outage or disruptive efforts to
our data center would result in the failure of our computers and kiosks to operate and would, if for an extensive period of time,
adversely impact our reputation, brand and future prospects.
Unauthorized disclosure of data,
whether through cybersecurity breaches, computer viruses or otherwise, could expose us to liability, protracted and costly litigation
and damage our reputation.
We store and/or transmit sensitive data,
such as mobile phone numbers, and we have ultimate liability to our consumers for our failure to protect this data. If breaches
occur our encryption of data and other protective measures may not prevent unauthorized disclosure of data. Unauthorized disclosure
of data or a cybersecurity breach could harm our reputation and deter clients from using electronic payments as well as kiosks
and terminals generally and our services specifically, increase our operating expenses in order to correct the breaches or failures,
expose us to uninsured liability, increase our risk of regulatory scrutiny, subject us to lawsuits, result in the imposition of
material penalties and fines by state authorities and otherwise materially adversely affect our business, financial condition and
results of operations.
Customer complaints or negative publicity
about our customer service could affect attractiveness of our services adversely and, as a result, could have an adverse effect
on our business, financial condition and results of operations.
Customer complaints or negative publicity
about our customer service could diminish consumer confidence in, and the attractiveness of, our services. Breaches of our consumers’
privacy and our security systems could have the same effect. We sometimes take measures to combat risks of fraud and breaches of
privacy and security, such as freezing consumer funds, which could damage relations with our consumers. These measures heighten
the need for prompt and attentive customer service to resolve irregularities and disputes. Effective customer service requires
significant personnel expense, and this expense, if not managed properly, could impact our profitability significantly. Any inability
by us to manage or train our customer service representatives properly could compromise our ability to handle customer complaints
effectively. If we do not handle customer complaints effectively, our reputation may suffer, and we may lose our customers’
confidence, which could have a material adverse effect on our business, financial condition and results of operations.
Our payment system might be used
for fraudulent, illegal or improper purposes, which could expose us to additional liability and harm our business.
Despite measures we have taken and continue
to take, our payment system remains susceptible to potentially illegal or improper uses. These may include use of our payment services
in connection with fraudulent sales of goods or services, illicit sales of prescription medications or controlled substances, software
and other intellectual property piracy, money laundering, bank fraud and prohibited sales of restricted products. In the past there
have been news articles on how organized crime groups have used other payment services to transfer money in the course of illegal
transactions.
Criminals are using increasingly sophisticated
methods to engage in illegal activities such as counterfeiting and fraud. It is possible that incidents of fraud could increase
in the future. Our risk management policies and procedures may not be fully effective to identify, monitor and manage these risks.
We are not able to monitor in each case the sources for our counterparties’ funds or the ways in which they use them. Increases
in chargebacks or other liability could have a material adverse effect on our business, financial condition and results of operations.
Furthermore, an increase in fraudulent transactions or publicity regarding chargeback disputes could harm our reputation and reduce
consumer confidence in the use of our kiosks and electronic wallets.
We may not be able to successfully
protect the intellectual property we license and may be subject to infringement claims.
We rely on a combination of contractual
rights, copyright, trademark and trade secret laws to establish and protect our technology and the technology that we license.
We customarily require our employees and independent contractors to execute confidentiality agreements or otherwise to agree to
keep our proprietary information and the information we license confidential when their relationship with us begins. Typically,
our employment contracts also include clauses requiring our employees to assign to us all of the inventions and intellectual property
rights they develop in the course of their employment and to agree not to disclose our confidential information. Nevertheless,
others, including our competitors, may independently develop similar technology to that licensed by us, duplicate our services
or design around our intellectual property. Further, contractual arrangements may not prevent unauthorized disclosure of our confidential
information or ensure an adequate remedy in the event of any unauthorized disclosure of our confidential information. Because of
the limited protection and enforcement of intellectual property rights in Mexico, our intellectual property rights may not be as
protected as they may be in more developed markets such as the United States. We may have to litigate to enforce or determine the
scope or enforceability of our intellectual property rights (including trade secrets and know-how), which could be expensive, could
cause a diversion of resources and may not prove successful. The loss of intellectual property protection could harm our business
and ability to compete and could result in costly redesign efforts, discontinuance of certain service offerings or other competitive
harm. Additionally, we do not hold any patents for our business model or our business processes, and we do not currently intend
to obtain any such patents in Mexico, the United States or elsewhere.
We may also be subject to costly litigation
in the event our services or the technology that we license are claimed to infringe, misappropriate or otherwise violate any third
party’s intellectual property or proprietary rights. Such claims could include patent infringement, copyright infringement,
trademark infringement, trade secret misappropriation or breach of licenses. We may not be able to successfully defend against
such claims, which may result in a limitation on our ability to use the intellectual property subject to these claims and also
might require us to redesign affected services, enter into costly settlement or license agreements, pay costly damage awards, or
face a temporary or permanent injunction prohibiting us from marketing or selling certain of our services. In such circumstances,
if we cannot or do not license the infringed technology on reasonable terms or substitute similar technology from another source,
our revenue and earnings could be adversely impacted. Additionally, in recent years, non-practicing entities have been acquiring
patents, making claims of patent infringement and attempting to extract settlements from companies in our industry. Even if we
believe that such claims are without merit and successfully defend these claims, defending against such claims is time consuming
and expensive and could result in the diversion of the time and attention of our management and employees.
We may use open source software in a manner that could
be harmful to our business.
We use open source software in connection
with our technology and services. The original developers of the open source code provide no warranties on such code. Moreover,
some open source software licenses require users who distribute open source software as part of their software to publicly disclose
all or part of the source code to such software and/or make available any derivative works of the open source code on unfavorable
terms or at no cost. The use of such open source code may ultimately require us to replace certain code used in our products, pay
a royalty to use some open source code or discontinue certain products. Any of the above requirements could be harmful to our business,
financial condition and operations.
We do not have and may be unable to obtain sufficient
insurance to protect ourselves from business risks.
While we hold certain mandatory types of
insurance policies, we do not currently maintain insurance coverage for business interruption, property damage or loss of key management
personnel, as we have been unable to obtain these on commercially acceptable terms. We do not hold insurance policies to cover
for any losses resulting from counterparty and credit risks or fraudulent transactions. We also do not generally maintain separate
funds or otherwise set aside reserves for most types of business-related risks. Accordingly, our lack of insurance coverage or
reserves with respect to business-related risks may expose us to substantial losses, which could materially adversely affect our
business, financial condition and results of operations.
In a dynamic industry like ours,
the ability to attract, recruit, retain and develop qualified personnel is critical to our success and growth.
Our business functions at the intersection
of rapidly changing technological, social, economic and regulatory developments that require a wide-ranging set of expertise and
intellectual capital. In order for us to compete and grow successfully, we must attract, recruit, retain and develop the necessary
personnel who can provide the needed expertise across the entire spectrum of our capital needs. This is particularly true with
respect to qualified and experienced software engineers and IT staff, who are highly sought after. The market for such personnel
is highly competitive, and we may not succeed in recruiting additional personnel or may fail to replace effectively current personnel
who depart with qualified or effective successors. Our efforts to retain and develop personnel may result in significant additional
expenses, which could adversely affect our profitability. We cannot assure you that we will be able to attract and retain qualified
personnel in the future. Failure to retain or attract key personnel could have a material adverse effect on our business, financial
condition and results of operations.
The substantial share ownership position
of thirteen of our largest stockholders may limit your ability to influence corporate matters.
As of July 10, 2020, 6 stockholders (exclusive
of our officers and directors) own 79,017,765 shares of common stock, representing approximately 54.8% of the voting power of our
issued share capital. As a result of this concentration of share ownership, the 6 stockholders have sole discretion over certain
matters submitted to our stockholders for approval that require a simple majority vote and has significant voting power on all
matters submitted to our stockholders for approval that require a qualified majority vote, including the power to veto them. This
concentration of ownership could delay, deter or prevent a change of control or other business combination, which could negatively
impact the value of our shares. The interests of these 6 stockholders may not always coincide with the interests of our other stockholders.
Certain of our officers may have a conflict of interest.
Certain of our officers are currently working
for our company on a part-time basis. One such officer also works at other jobs and has discretion to decide what time he devotes
to our activities, which may result in a lack of availability when needed due to responsibilities at other jobs.
Risks Relating to our Securities
There is currently a limited public
trading market for our common stock and one may never develop.
There currently is a limited public trading
market for our securities, and it is not assured that any such public market will develop in the foreseeable future. Moreover,
there can be no assurance that even if our common stock is approved for listing on an exchange or is quoted in the over-the-counter
market in the future, that an active trading market will develop or be sustained. Therefore, we cannot predict the prices at which
our common stock will trade in the future, if at all. As a result, our investors may have limited or no ability to liquidate their
investments.
Trading in our common stock is conducted
on the OTCQB, as we currently do not meet the initial listing criteria for any registered securities exchange. The OTCQB
and OTC Markets are less recognized markets than the registered securities exchanges and is often characterized by low trading
volume and significant price fluctuations. These and other factors may further impair our stockholders’ ability
to sell their shares when they want to and/or could depress our stock price. As a result, stockholders could find it difficult
to dispose of, or obtain accurate quotations of the price of our securities because smaller quantities of shares could be bought
and sold, transactions could be delayed and security analyst and news coverage of our Company may be limited. If a public
market for our common stock does develop, these factors could result in lower prices and larger spreads in the bid and ask prices
for our shares of common stock.
The market price of our common stock
may be highly volatile and such volatility could cause you to lose some or all of your investment.
The market price of our common stock may
fluctuate significantly in response to numerous factors, some of which are beyond our control, such as:
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the announcement of
new products or product enhancements by us or our competitors;
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developments concerning
intellectual property rights;
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changes in legal, regulatory,
and enforcement frameworks impacting our services;
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variations in our and
our competitors’ results of operations;
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fluctuations in earnings
estimates or recommendations by securities analysts, if our common stock is covered by analysts;
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the results of intellectual
property lawsuits;
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future issuances of
common stock or other securities;
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the addition or departure
of key personnel; and
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general market conditions
and other factors, including factors unrelated to our operating performance.
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Further, the stock market has recently
experienced extreme price and volume fluctuations. The volatility of our common stock could be further exacerbated due to low trading
volume. Continued market fluctuations could result in extreme volatility in the price of our common stock, which could cause a
decline in the value of our common stock and the loss of some or all of our investors’ investment.
Some or all of the “restricted”
shares of our common stock held by our stockholders, including, but not limited to, shares issued in the Merger may be offered
from time to time in the open market pursuant to an effective registration statement under the Securities Act, or without registration
pursuant to Rule 144 promulgated thereunder, and these sales may have a depressive effect on the market price of our common stock.
Because our common stock may be a
“penny stock,” it may be more difficult for investors to sell shares of our common stock, and the market price of our
common stock may be adversely affected.
Our common stock may be a “penny
stock” if, among other things, the stock price is below $5.00 per share, it is not listed on a national securities exchange,
or it has not met certain net tangible asset or average revenue requirements. Broker-dealers who sell penny stocks must provide
purchasers of these stocks with a standardized risk-disclosure document prepared by the SEC. This risk-disclosure document provides
information about penny stocks and the nature and level of risks involved in investing in the penny-stock market. A broker must
also give a purchaser, orally or in writing, bid and offer quotations and information regarding broker and salesperson compensation,
make a written determination that the penny stock is a suitable investment for the purchaser and obtain the purchaser’s written
agreement to the purchase. Broker-dealers must also provide customers that hold penny stock in their accounts with such broker-dealer
a monthly statement containing price and market information relating to the penny stock. If a penny stock is sold to an investor
in violation of the penny stock rules, the investor may be able to cancel its purchase and get their money back.
If applicable, the penny stock rules may
make it difficult for stockholders to sell their shares of our common stock. Because of the rules and restrictions applicable to
a penny stock, there is less trading in penny stocks and the market price of our common stock may be adversely affected. Also,
many brokers choose not to participate in penny stock transactions. Accordingly, stockholders may not always be able to resell
their shares of our common stock publicly at times and prices that they feel are appropriate.
Because we became public by means
of a reverse Merger, we may not be able to attract the attention of brokerage firms.
Additional risks may exist because we became
public through a “Reverse Merger.” Securities analysts of brokerage firms may not provide coverage of our company
since there is little incentive for brokerage firms to recommend the purchase of our common stock. No assurance can be given
that brokerage firms will want to conduct secondary offerings on our behalf in the future. In addition, if we were to attempt to
uplist the listing of our securities on a national securities exchange we will likely be subject to additional listing requirements
applicable to entities that became public through a “Reverse Merger.”
Compliance with the reporting requirements
of federal securities laws can be expensive.
We are a public reporting company in the
United States, and accordingly, subject to the information and reporting requirements of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), and other federal securities laws, and the compliance obligations of the Sarbanes-Oxley
Act of 2002. The costs of preparing and filing annual and quarterly reports and other information with the SEC and furnishing
audited reports to stockholders are substantial. If we do not provide current information about our company to market makers,
they will not be able to trade our stock. Failure to comply with the applicable securities laws could result in private or governmental
legal action against us or our officers and directors, which could have a detrimental impact on our business and financials, the
value of our stock, and the ability of stockholders to resell their stock.
Our investors’ ownership may
be diluted in the future.
In the future, we may issue additional
authorized but previously unissued equity securities, resulting in the dilution of ownership interests of our present stockholders.
We expect to need to issue a substantial number of shares of common stock or other securities convertible into or exercisable for
common stock in connection with hiring or retaining employees, future acquisitions, raising additional capital in the future to
fund our operations, and other business purposes. Additional shares of common stock issued by us in the future, including shares
issued upon exercise of the warrants for which we are filing the registration statement for which this prospectus forms a part,
will dilute an investor’s investment in the Company.
Directors, executive officers, and
eight unaffiliated stockholders own a significant percentage of our capital stock, and they may make decisions that our stockholders
do not consider to be in their best interests.
As of the date of this prospectus, our
directors, executive officers, and five unaffiliated stockholders beneficially own, in the aggregate, approximately 57% of our
outstanding voting securities. As a result, if some or all of them acted together, they would have the ability to exert substantial
influence over the election of our board of directors and the outcome of issues requiring approval by our stockholders. This concentration
of ownership may also have the effect of delaying or preventing a change in control of our company that may be favored by other
stockholders. This could prevent transactions in which stockholders might otherwise recover a premium for their shares over current
market prices. This concentration of ownership and influence in management and board decision-making could also harm the price
of our capital stock by, among other things, discouraging a potential acquirer from seeking to acquire shares of our capital stock
(whether by making a tender offer or otherwise) or otherwise attempting to obtain control of our company.
Our board of directors has historically
had significant control over us and we have yet to establish committees comprised of independent directors.
We only have three directors. Because of
such limited number of directors, each of our board members had significant control over all corporate issues. In addition, two
of our three directors serve as our officers and also hold officer positions in IPSI. We have not established board committees
comprised of independent members, and we do not have an audit or compensation committee comprised of independent directors. Our
three directors performed these functions, despite not all being independent directors. Thus, there is potential conflict in that
two of our directors were also engaged in management and participated in decisions concerning management compensation and audit
issues that may affect management and IPSI’s performance.
We do not expect to pay dividends
on our common stock in the foreseeable future.
We have not paid cash dividends on our
common stock to date and we do not expect to pay dividends on our common stock for the foreseeable future, and we may never pay
dividends. Consequently, the only opportunity for investors to achieve a return on their investment may be if an active
trading market develops, and investors are able to sell their shares for a profit or if our business is sold at a price that enables
investors to recognize a profit, neither of which we can guarantee will ever take place. Our payment of any future dividends will
be at the discretion of our Board of Directors after taking into account various factors, including but not limited to our financial
condition, operating results, cash needs, and growth plans. See “Dividend Policy.”
We do not have an independent compensation
committee, which presents the risk that compensation and benefits paid to those executive officers who are board members and other
officers may not be commensurate with its financial performance.
A compensation committee consisting of
independent directors is a safeguard against self-dealing by company executives. Our board of directors, is comprised of two executive
officers and one other director, and absent an independent compensation committee currently determines the compensation and benefits
of our executive officers, administers our employee stock and benefit plans, and reviews policies relating to the compensation
and benefits of our employees. Our lack of an independent compensation committee presents the risk that our executive officers
on the board may have influence over their personal compensation and benefits levels that may not be commensurate with its financial
performance.
Limitations on director and officer
liability and indemnification of our officers and directors by our certificate of incorporation and by-laws it may discourage stockholders
from bringing suit against an officer or director.
Our certificate of incorporation and bylaws
provide, with certain exceptions as permitted by Nevada law, that a director or officer shall not be personally liable to us or
our stockholders for breach of fiduciary duty as a director or officer, unless the director or officer committed both a breach
of fiduciary duty and such breach was accompanied by intentional misconduct, fraud or knowing violation of law. These provisions
may discourage stockholders from bringing suit against a director or officer for breach of fiduciary duty and may reduce the likelihood
of derivative litigation brought by stockholders on behalf of us against a director or officer.
We are responsible for the indemnification
of our officers and directors.
Should our officers and/or directors require
us to contribute to their defense in an action brought against them in their capacity as such, we may be required to spend significant
amounts of our capital. Our certificate of incorporation and bylaws also provide for the indemnification of our directors, officers,
employees, and agents, under certain circumstances, against attorney’s fees and other expenses incurred by them in any litigation
to which they become a party arising from their association with or activities on behalf of us. This indemnification policy could
result in substantial expenditures, which we may be unable to recoup. If these expenditures are significant, or involve issues
which result in significant liability for our key personnel, we may be unable to continue operating as a going concern.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis
should be read in conjunction with and is qualified in its entirety by and should be read together with our financial statements
and the related notes thereto appearing elsewhere in this prospectus. This discussion contains certain forward-looking statements
that involve risks and uncertainties, as described under the heading “Note Regarding Forward-Looking Statements”. Actual
results could differ materially from those projected in the forward-looking statements.
Overview and Financial Condition
We intend to continue to expand our operations
in the United States with a focus initially on southern California. We are also exploring acquisition opportunities that we believe
will be accretive to our business.
We offer a simple payment solution for
consumers and businesses. We have plans to roll out 50 kiosks in Southern California to provide digital payments for the unbanked
and underbanked using self-service kiosks and an E wallet ecosystem. The kiosks are currently located in our warehouse in Southern
California awaiting installation. Due to measures imposed by state and local governments in areas affected by COVID-19, businesses
have been suspended due to quarantine intended to contain the pandemic and many people have been forced to work from home in those
areas. As a result, installation of our network of kiosks, terminals and payment channels in Southern California has been
delayed, which has had an adverse impact on our business and financial condition and has hampered our ability to generate
revenue and access usual sources of liquidity on reasonable terms.
Management Discussion and Analysis
of financial condition
The discussion and analysis of our financial
condition and results of operations is based upon our financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States. The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets
and liabilities, disclosure of any contingent liabilities at the financial statement date and reported amounts of revenue and expenses
during the reporting period. On an on-going basis, we review our estimates and assumptions. The estimates are based on our historical
experience and other assumptions that we believe to be reasonable under the circumstances. Actual results are likely to differ
from those estimates under different assumptions or conditions.
Results of Operations for the Three
Months Ended March 31, 2020 and March 31, 2019
Net revenue
We have treated our Mexican operations
as a discontinued operation in these interim financial statements, we have not generated any revenues from our US operations to
date. We anticipate that we will recommence generating revenue once we are able to install our kiosks, the timing of which is uncertain
due to the COVID-19 pandemic.
Cost of goods sold
We have treated our Mexican operations
as a discontinued operation in these interim financial statements we have not generated any cost of goods sold from our US operations
to date. We anticipate that our cost of goods sold will increase once we are able to install our kiosks.
General and administrative expenses
General and administrative expenses were
$654,899 and $156,758 for the three months ended March 31, 2020 and 2019, respectively, an increase of $498,141 or 317.8%. The
increase is primarily due to the issuance of restricted stock to our CEO with a related expense of $313,830 during the current
period, directors fees expense of $88,000 related to stock issued to our independent director and an increase in professional fees
of $50,471 primarily due to payments to an outside advisor on our business strategy and development of the software for our business
plan.
Investment impairment charge
Investment impairment charge was $509,981
and $0 for the three months ended March 31, 2020 and 2019, respectively, the Company raised an impairment charge against the investment
in Vivi Holdings Inc, as the Company has not met any of its indicated milestones concerning its proposed IPO and fund raising efforts.
Loss on debt conversion
Loss on debt conversion was $70,807 and
$367,704 for the three months ended March 31, 2020 and 2019, respectively, a decrease of $296,897 or 80.7%. The loss on debt conversion
represents a loss realized on the conversion of convertible notes into equity at conversion prices ranging from 38% to 40% below
current market prices. During the three months ended March 31, 2020 and 2019, $35,328 and $310,259 of principal and interest was
converted into equity.
Loss on settlement of liabilities
Loss on settlement of liabilities was $50,082
and $0 for the three months ended March 31, 2020 and 2019, respectively, an increase of $50,082. The loss on settlement of liabilities
represents the settlement of certain promissory notes during the current period by the issuance of 1,692,764 shares of common stock
at a discount to current market prices.
Interest expense, net
Interest expense was $54,337 and $90,091
for the three months ended March 31, 2020 and 2019, respectively, a decrease of $35,754 or 39.7%. The decrease is primarily due
to the reduction in convertible debt from $1,597,079, net of debt discounts, in the prior year to $457,072, net of debt discounts,
in the current period.
Amortization of debt discount
Amortization of debt discount was $160,078
and $541,146 for the three months ended March 31, 2020 and 2019, respectively, a decrease of $381,068 or 70.4%. The decrease is
primarily due to the reduction in convertible debt from $1,597,079, net of debt discounts, in the prior year to $457,072, net of
debt discounts, in the current period.
Derivative liability movements
Derivative liability movements were $102,121
and $542,525 for the three months ended March 31, 2020 and 2019, respectively. The derivative liability arose due to the issuance
of convertible securities with variable conversion prices and no floor conversion price. The charge during the current period represents
the mark-to-market of the derivative liability outstanding as of March 31, 2020.
Net loss from continuing operations
We incurred a net loss of $1,398,063 and
$613,156 for the three months ended March 31, 2020 and 2019 respectively, an increase in loss of $784,907, primarily due to the
increase in general and administrative expenses and the current period investment impairment charge offset by a reduction in the
derivative liability gain of $440,404.
Loss from discontinued operations
The loss from discontinued operations was
$0 and $253,687 the three months ended March 31, 2020 and 2019, respectively. We sold our Mexican operations effective December
31, 2019.
Net loss
Net loss was $1,398,063 and $866,843 for
the three months ended March 31, 2020 and 2019, respectively, an increase in loss of $531,220 or 61.3%. The increase is due to
the increase in net loss from continuing operations and the loss from discontinued operations, discussed in detail above.
Results of Operations for the years Ended December 31, 2019
and December 31, 2018
Net Revenue
We have treated our Mexican operations
as a discontinued operation in these interim financial statements, we have not generated any revenues from our US operations to
date.
Cost of goods sold
We have treated our Mexican operations
as a discontinued operation in these interim financial statements we have not generated any cost of goods sold from our US operations
to date.
Gross profit
We have treated our Mexican operations
as a discontinued operation in these interim financial statements we have not generated any gross profit from our US operations
to date.
General and administrative expenses
General and administrative expenses were
$807,934 and $994,913 for the years ended December 31, 2019 and 2018, respectively, a decrease of $186,979 or 18.8%. The decrease
is primarily due to a decrease in IT consulting expenses during the current period of $211,163 primarily due to a reduction in
consulting hours and rates. The remaining increase is made up of several immaterial changes in expenses as management focused on
reducing overall overhead.
Loss on debt conversion
Loss on debt conversion was $2,838,599
and $3,738,307 for the years ended December 31, 2019 and 2018, respectively, a decrease of $899,708 or 24.1%. The loss on debt
conversion represents a loss realized on the conversion of convertible notes into equity at conversion prices ranging from 38%
to 50% below current market prices. There was a higher value of debt converted to equity and debt exchanged for equity during the
current year, however the average discount on conversion was lower than in the prior year, primarily due to debt exchange agreements
and certain convertible notes being exchanged at market prices.
Penalty on convertible notes
Penalty on convertible notes was $191,757
and $0 for the years ended December 31, 2019 and 2018, respectively, an increase of $191,757 or 100%. The Penalty on convertible
notes arose due to certain convertible notes maturing before they could be repaid, resulting in a default whereby the principal
sum of the note increased by percentages ranging from 10% to 50% of the capital outstanding.
Provision against receivables
A provision of $129,995 was raised against
receivables from Qpagos Mexico relating to VAT refunds. These refunds have been outstanding for an extended period and collectability
is uncertain based on the ageing of the refunds due.
Interest expense, net
Interest expense, net was $2,061,415 and
$3,059,573 for the years ended December 31, 2019 and 2018, respectively, a decrease of $998,158 or 32.6%. The interest
expense in the current year includes the amortization of non-cash debt discount of $1,692,110 (2018: $2,637,656) and interest expense
of $369,305 (2018: $344,613), consisting of interest on notes payable and on the convertible notes, including penalty interest
of $28,063 (2018: $77,328) on early note settlements. The decrease in debt discount was primarily due to a reduction in the value
of convertible debt outstanding and the conversion of $2,496,715 of convertible debt to equity, compared to the prior year. The
increase in interest expense is primarily due to the increase in loans payable during the current year, which were primarily converted
to equity during the last quarter of 2019 compared to the prior year.
Derivative liability movements
The change in fair value of derivative
liabilities was $1,981,938 and $4,129,793 for the years ended December 31, 2019 and 2018, respectively. The movements
in derivative liabilities represents the mark-to-market of underlying conversion features of debt and warrant securities and is
dependent on the market price of the Company’s stock and the volatility underpinning our stock.
Foreign currency loss
The foreign currency loss was $0 and $7,562
for the years ended December 31, 2019 and 2018. The decrease is primarily due to the mark to market of foreign currency
assets and liabilities due to a lower value of net liabilities denominated in foreign currencies and the weakness of the Mexican
Peso against the US$ during the prior year.
Net loss from continuing operations
We incurred a net loss from continuing
operations of $4,047,762 and $3,670,562, for the years ended December 31, 2019 and 2018, respectively, an increase of
$377,200 or 10.3%, primarily due to the decrease in the derivative liability movement of $2,147,855 offset by the reduction in;
(i) general and administrative expenses of $186,979; loss on debt conversion of $899,708 and interest expense, net of $998,158,
as discussed above.
Operating loss from discontinued operations,
net of taxation
Operating loss from discontinued operations,
net of taxation was $653,246 and $1,397,172 for the year ended December 31, 2019 and 2018, respectively, a decrease of $743,926
or 53.2%. The decrease is primarily due to a reduction in general and administrative expenses of $560,316 due to a concerted effort
by management to reduce operating expenditure due to the loss making nature of the business and an increase in foreign exchange
gain of $276,103, primarily due to the disposal of the business effective December 31, 2019, resulting in a realization of the
foreign currency translation adjustment.
Profit on disposal of subsidiaries
Profit on disposal of subsidiaries was
$971,903 and $0 for the years ended December 31, 2019 and 2018, respectively, an increase of $971,903 or 100%. We disposed of our
Mexican operation effective December 31, 2019, in exchange for shares in Vivi Holdings, Inc, valued at $1,120,836 using the market
value method to determine the value of the business disposed of due to the lack of relevant financial information from Vivi Holdings,
Inc. and other proceeds of $180,000. We incurred expenditure of $129,203 related to the disposal, including allocating Vivi Holdings,
Inc shares to certain individuals who facilitated the transaction, valued at $100,875. The net asset value of the subsidiaries
disposed of was $199,730, resulting in the net gain on disposal of $971,903.
Net loss
Net loss was $3,729,106 and $5,067,734
for the years ended December 31, 2019 and 2018, respectively, a decrease in loss of $1,338,628 or 26.4%, The decrease in net loss
is primarily due to the profit on disposal of subsidiaries and the reduction in operating loss from discontinued operations, offset
by the slight increase in the net loss from continuing operations, as discussed above.
Liquidity and Capital Resources
To date, our primary sources of cash have
been funds raised primarily from the sale of our debt securities as well as revenue derived from operations.
Our historical operating results indicate
substantial doubt exists related to our ability to continue as a going concern. We can give no assurances that any additional capital
that we are able to obtain, if any, will be sufficient to meet our needs, or that any such financing will be obtainable on acceptable
terms. If we are unable to obtain adequate capital, we could be forced to cease operations or substantially curtail our commercial
activities. These conditions raise substantial doubt as to our ability to continue as a going concern. The accompanying consolidated
financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts
and classification of liabilities should we be unable to continue as a going concern.
We incurred an accumulated deficit of $23,583,094
through March 31, 2020 and incurred negative cash flow from operations of $213,524 for the three months ended March 31, 2020. The
new direction of the Company into the US payment services market will require us to spend, substantial amounts in connection with
implementing our business strategy, including our planned product development effort and we will be required to raise additional
funding. We incurred an accumulated deficit of $22,185,031 through December 31, 2019 and incurred negative cash flow
from operations of $774,856 and $1,734,320 for the years ended December 31, 2019 and 2018, respectively.
We will need to generate additional revenue
from operations and/or obtain additional financing to pursue our business strategy, which includes expansion in the US market,
repay our outstanding note obligations and take advantage of business opportunities that may arise. To meet our financing needs,
we are considering multiple alternatives, including, but not limited to, additional equity financings and, debt financings and/or
funding from partnerships. There can be no assurance that we will be able to complete any such transactions on acceptable terms
or otherwise and may have to significantly curtail our operations.
At March 31, 2020, we had cash of $705
and a negative working capital of $1,924,990, including a derivative liability of $1,099,705. There is substantial doubt about
our ability to continue as a going concern. After eliminating the derivative liability our working capital deficit is $825,285.
We believe that the current cash balances together with revenue anticipated to be generated from operations will not be sufficient
to meet our current working capital needs and as mentioned above, we will seek further funding from either equity issues or further
debt funding, should we not be successful, we may have to curtail our operations significantly. Due to the COVID-19 pandemic our
ability to generate revenue has been significantly impacted and it is difficult to determine when we my start to generate revenue
from operations. At December 31, 2019, we had cash of $2,979 and a working capital deficit of $1,613,080 (2018: $3,208,365).
We utilized cash of $213,524 and $149,309
from continuing operations for the three months ended March 31, 2020 and 2019, respectively and utilized cash of $0 and $105,100
from discontinued operations for the three months ended March 31, 2020 and 2019, respectively. Overall cash utilized in operations
decreased by $40,885. The increase in cash utilization from continuing operations is due to the payment of professional fees in
the development of our strategy and software for implementation in the US market.
We acquired terminals for gross proceeds
of $50,000 from Qpagos Corporation during the three months ended March 31, 2020, in terms of the SPA agreement entered into with
Vivi Holdings in December 2019.
During the three months ended March 31,
2020, we funded our operations by proceeds from convertible notes of $296,250. During the year ended December 31, 2019,
the Company raised $200,400 from share issuances and a further 988,488 from the issuance of debt securities, to fund operations,
we also exchanged $6,498,005 of debt securities for 119,285,531 shares of common stock.
Other than amounts owed under convertible
notes, we have a commitment for a property lease which expires in February 2022.
The amount of future minimum lease payments
under operating leases are as follows:
|
|
Amount
|
|
Undiscounted minimum future lease payments
|
|
|
|
Total instalments due:
|
|
|
|
2020
|
|
$
|
35,505
|
|
2021
|
|
|
47,340
|
|
2022
|
|
|
7,890
|
|
|
|
|
90,735
|
|
Imputed interest
|
|
|
(8,476
|
)
|
Total operating lease liability
|
|
$
|
82,259
|
|
Critical Accounting Policies, Estimates
and Judgments
Our consolidated financial statements are
prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”), which require us
to make estimates and assumptions. Certain critical accounting policies affect the more significant accounts, particularly those
that involve judgments, estimates and assumptions used in the preparation of our consolidated financial statements. The development
and selection of these critical accounting policies have been determined by our management. We have reviewed our critical accounting
policies and estimates with our board of directors. Due to the significant judgment involved in selecting certain of the assumptions
used in these policies, it is possible that different parties could choose different assumptions and reach different conclusions.
We consider our policies relating to the following matters to be critical accounting policies. For a description of our Critical
Accounting Policies, Estimates and Judgements, see “Accounting policies and Estimates” in our Consolidated Financial
Statements included elsewhere is this prospectus.
Certain conditions may exist as of the
date the financial statements are issued, which may result in a loss to us, but which will only be resolved when one or more future
events occur or fail to occur.
Our 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.
Recently Issued Accounting Pronouncements
For a description of recently announced
accounting standards, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements,
see “Recently Issued Accounting Pronouncements” in our Consolidated Financial Statements included elsewhere is this
prospectus.
BUSINESS
Business Overview
We intend to continue to expand our
operations in the United States with a focus initially on southern California. We are also exploring acquisition opportunities
that we believe will be accretive to our business.
We offer a simple payment solution for
consumers and businesses. We have plans to roll out 50 kiosks in Southern California to provide digital payments for the unbanked
and underbanked using self-service kiosks and an E wallet ecosystem. The kiosks are currently located in our warehouses in Southern
California awaiting installation. Due to measures imposed by the local governments in areas affected by COVID-19, businesses have
been suspended due to quarantine intended to contain this outbreak and many people have been forced to work from home in those
areas. As a result, installation of our network of kiosks, terminals and payment channels in Southern California has been
delayed, which has had an adverse impact on our business and financial condition and has hampered our ability to generate
revenue and access usual sources of liquidity on reasonable terms.
Recent Developments
On June 30, 2020, Innovative Payment Solutions,
Inc. (the “Company”), entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”)
with Cavalry Fund I LP (the “Investor”), pursuant to which the Company received $262,500 in exchange for the issuance
of:
|
●
|
a 10% Original Issue Discount Senior Secured Convertible Note (the “Initial Note”) in the principal amount of $300,000 (issued at an original issue discount of 12.5%); and
|
|
●
|
a five-year warrant
(the “Warrant”) to purchase 8,571,428 shares of the Company’s common stock at an exercise price of $0.05 per
share.
|
The transactions contemplated under the Securities
Purchase Agreement closed on July 1, 2020. Pursuant to the Securities Purchase Agreement, the Investor has agreed to purchase an
additional $300,000 10% Original Issue Discount Senior Secured Convertible Note (the “Second Note”; and together with
the Initial Note, the “Notes”) from the Company upon the same terms as the Initial Note (subject to there being no
event of default under the Initial Note or other customary closing conditions), within three trading days of a registration statement
registering the shares of the Company’s common stock issuable under the Notes (the “Conversion Shares”) and upon
exercise of the Warrants (the “Warrant Shares”) being declared effective by the SEC.
The Notes mature in 12 months, bear interest
at a rate of 10% per annum, and are initially convertible into the Company’s common stock at a conversion price of $0.035
per share (as adjusted for stock splits, stock combinations, dilutive issuances and similar events).
The Notes may be prepaid at any time for
the first 90 days at face value plus accrued interest. From day 91 through day 180, the Notes may be prepaid in an amount equal
to 115% of the principal amount plus accrued interest. From day 181 through day 365, it may be prepaid in an amount equal to 125%
of the principal amount plus accrued interest. The Note contains certain covenants, such as restrictions on: (i) distributions
on capital stock, (ii) stock repurchases, and (iii) sales and the transfer of assets.
The Notes and the Warrant contain conversion
limitations providing that a holder thereof may not convert the Note or exercise the Warrant to the extent (but only to the extent)
that, if after giving effect to such conversion, the holder or any of its affiliates would beneficially own in excess of 4.99%
(the “Maximum Percentage”) of the outstanding shares of the Company’s common stock immediately after giving effect
to such conversion or exercise. A holder may increase or decrease its beneficial ownership limitation upon notice to the Company
provided that in no event such limitation exceeds 9.99%, and that any increase shall not be effective until the 61st day after
such notice.
Employees
As of July 10, 2020, Innovative Payment/Solutions
had two full time employees, which are its chief executive officer and chief technical officer.
Property
We maintain the following operating facility:
Location
|
|
Description
|
|
Owned / Leased
|
|
|
|
|
|
Northridge, California
|
|
Corporate office
|
|
Leased
|
In the opinion of our management, our property
is adequate for its present needs. We do not anticipate difficulty in renewing the existing lease as it expires or in finding alternative
facilities if necessary. We believe all of our assets are adequately covered by insurance.
Corporate Information
We were incorporated on September 25, 2013
under the laws of the State of Nevada originally under the name Asiya Pearls, Inc. On May 27, 2016, Asiya Pearls, Inc. filed a
Certificate of Amendment to its Articles of Incorporation to change its name from Asiya Pearls, Inc. to QPAGOS.
Qpagos Corporation was incorporated on
May 1, 2015 under the laws of Delaware under the name Qpagos Corporation as the holding company for its two 99.9% owned operating
subsidiaries, QPagos, S.A.P.I. de C.V. “Qpagos Mexico”) and Redpag Electrónicos S.A.P.I. de C.V. (“Redpag”).
Each of these entities were incorporated in November 2013 in Mexico.
Qpagos Mexico was formed to process payment
transactions for service providers it contracts with as well as provide electronic payment solutions to multiple clients in several
industry segments including retail, financial transportation and government; and Redpag was formed to deploy and operate kiosks
as a distributor of Qpagos Mexico.
On August 31, 2015, QPAGOS Corporation
entered into various agreements with the shareholders of Qpagos Mexico and Redpag to give effect to a reverse merger transaction
(the “Reverse Merger’’). Pursuant to the Reverse Merger, the majority of the shareholders of Qpagos Mexico and
Redpag effectively received shares in Qpagos Corporation, through various consulting and management agreements entered into with
Qpagos Corporation and sold an effective 99.996% and 99.990% of the outstanding shares in Qpagos Mexico and Redpag, respectively
to Qpagos Corporation. The series of transactions closed effective August 31, 2015. Upon the close of the Reverse Merger,
Qpagos Corporation became the parent of Qpagos Mexico and Redpag and assumed the operations of these two companies as its sole
business.
On May 12, 2016, Qpagos Corporation
entered into an Agreement and Plan of Merger (the “Merger Agreement”) with QPAGOS and QPAGOS Merge, Inc., a Delaware
corporation and wholly owned subsidiary of QPAGOS (“Merger Sub”). Pursuant to the Merger Agreement, on May 12, 2016
Qpagos Corporation and Merger Sub merged (the “Merger”), and Qpagos Corporation continued as the surviving corporation
of the Merger and became a wholly owned subsidiary of QPAGOS. As a result of the Merger, each outstanding share of Qpagos Corporation
common stock was converted into the right to receive two shares of QPAGOS common stock as set forth in the Merger Agreement. Under
the terms of the Merger Agreement, we issued, and Qpagos Corporation stockholders received in a tax-free exchange, shares of our
common stock such that Qpagos Corporation stockholders owned approximately 91% of our company immediately after the Merger. In
addition, each outstanding warrant of Qpagos Corporation was assumed by us and converted into a warrant to acquire a number of
shares of our common stock equal to twice the number of shares of common stock of Qpagos Corporation subject to the warrant immediately
before the effective time of the Merger at an exercise price per share of Company common stock equal to 50% of the warrant exercise
price for Qpagos Corporation common stock. There were no options outstanding in Qpagos Corporation prior to the merger.
On November 1, 2019, we changed our name
from QPAGOS to Innovative Payment Solutions, Inc. On November 1, 2019, we also filed a Certificate of Change with the Secretary
of State of the State of Nevada to effect a reverse split of our common stock at a ratio of 1-for-10 (the “Reverse Stock
Split”), effective on November 1, 2019. As a result of the Reverse Stock Split, each ten (10) pre-split shares of common
stock outstanding were automatically combined into one (1) new share of common stock. Unless otherwise stated, all share and per
shares numbers in the Annual Report on Form 10-K have been adjusted to reflect the Reverse Stock Split.
On December 31, 2019, we consummated the
disposal of Qpagos Corporation, including the two Mexican subsidiaries, Qpagos Mexico and Redpag in exchange for 2,250,000 shares
of common stock of Vivi Holdings, of which nine percent (9%) was allocated to the following: Gaston Pereira (5%), Andrey Novikov
(2.5%), and Joseph Abrams (1.5%). The SPA was closed on December 31, 2019 after the satisfaction of customary conditions, the receipt
of a final fairness opinion and the approval of our shareholders. Innovative Payment Solutions no longer has any business operations
in Mexico and has retained its U.S. operations based in Northridge, California.
Our principal offices are located at 19355
Business Center Drive, #9, Northridge, California, and our telephone number at that office is (818) 864-8404.
Our Strategy
We offer a simple payment solution
for consumers and businesses. We have plans to roll out 50 kiosks in Southern California to provide digital payments for the unbanked
and underbanked using self-service kiosks and an E wallet ecosystem. The kiosks are currently located in our warehouses in Southern
California awaiting installation. Due to measures imposed by the local governments in areas affected by COVID-19, businesses have
been suspended due to quarantine intended to contain this outbreak and many people have been forced to work from home in those
areas. As a result, installation of our network of kiosks, terminals and payment channels in Southern California has been
delayed, which has had an adverse impact on our business and financial condition and has hampered our ability to generate
revenue and access usual sources of liquidity on reasonable terms.
Our mission is to pivot from the 4 year
success we had with our Mexican kiosks and build out a US only kiosk network in Southern California that will allow the majority
of the Southern California market to transfer money to Mexico cheaper than their current options and make payments to Mexican vendors
as well.
The launch of the kiosks in Southern California
will be directed toward the heavily trafficked Mexican grocery stores, convenience stores, check cashing businesses, and gas stations.
Our goal is to develop a distribution network of kiosks that allow our clients to enhance their customer experience by combining
mobile and hardware interfaces, such as mobile wallets, coupled with self-service kiosks into a seamless customer centric ecosystem.
Business Model
Our primary source of revenue is expected
to come from commissions and fees. We also expect to derive revenue from a second screen on the kiosks which will be an ad driven
revenue producer. Over the last 4 years we proved the model, with over $11 million in revenue last year and 2 million Mexican subscribers
using the kiosks regularly. This experience and the vending partnerships established in those machines should facilitate the roll-out
of our company owned machines in Southern California. This coupled with US vending additions such as micro loans, money transmitting
opportunities (a $30 Billion business), lotto tickets, and the built- in Mexican vendors, gives us what we believe to be the total
solution for the Mexican consumer population in Southern California. After the launch of the 50 kiosks in a small designated Los
Angeles area, we anticipate having a sophisticated distribution network of over 500 kiosks in California, Texas and Florida. With
this initial launch in Southern California we will own the first 50 machines and the retailer will receive 20% of the fees as rent.
Alternatively, we may sell the kiosks to retailers for a unit price of $6,000 and in return receive 30% of the revenues.
Distribution Network
We are developing a distribution network
along two verticals; 1) An agent network of independent businesses with high customer traffic in which our kiosks will be deployed
generating additional revenue for them; 2) Retailers that wish to decongest long lines and shift service payments to self-service
kiosks.
Marketing
We participate in special local events
and exhibitions and provide promo materials to distribute to retailers. We intend to direct advertisements to the mainly Spanish
speaking customers in Southern California, along with our Spanish speaking employees that can educate and demonstrate services
at the kiosks. We expect this will add tremendously to acceptance and word of mouth advertising in the respective neighborhoods.
Competition
The payment service business is highly
competitive and continued growth depends on our ability to compete effectively. Although we don’t face direct competition
in the form of kiosks, companies like Western Union, Money Gram, Wells Fargo, dominate the money remittance, wiring business. However,
with the E wallet, our customer has the ability to deposit money into the kiosks and consequently creating their own digital wallet
bank on our network.
Government and Environmental Regulation and Laws
Currently our business is not impacted
by government regulation. We may in the future be subject to a variety of regulations aimed at preventing money laundering and
financing criminal activity and terrorism, financial services regulations, payment services regulations, consumer protection laws,
currency control regulations, advertising laws and privacy and data protection laws and therefore expect to experience periodic
investigations by various regulatory authorities in connection with the same, which may sometimes result in monetary or other sanctions
being imposed on us. Many of these laws and regulations are constantly evolving and are often unclear and inconsistent with other
applicable laws and regulations, making compliance challenging and increasing our related operating costs and legal risks. In particular,
there has been increased public attention and heightened legislation and regulations regarding money laundering and terrorist financing.
We may have to make significant judgment calls in applying anti-money laundering legislation and risk being found in non-compliance
with such laws.
Available Information
We have included our website address as
a factual reference and do not intend it to be an active link to our website. We make available on our website, www.innovatepaysolve.com.
our Annual Reports on Form 10-K, quarterly Reports on Form 10-Q and Current Reports on Form 8-K and amendments to those reports
filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. These reports are available free of charge through the
investor relations page of our internet website as soon as reasonably practicable after those reports are filed with the SEC.
CERTAIN RELATIONSHIPS AND RELATED PERSON
TRANSACTIONS
The following includes a summary
of any transaction occurring since January 1, 2018 for us and our subsidiaries or any proposed transaction, in which we and our
subsidiaries were or are to be a participant and the amount involved exceeded or exceeds 1% of the average of our total assets
for at year end for the last two completed fiscal years, and in which any related person had or will have a direct or indirect
material interest (other than compensation described under “Executive Compensation” above). We believe the terms obtained
or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to
terms available or the amounts that would be paid or received, as applicable, in arm’s-length transactions:
Gaston Pereira
On December 27, 2018, we granted Mr. Pereira
ten-year options to purchase an aggregate of 100,000 shares of common stock at an exercise price of $0.40 per share. These options
expired on November 1, 2019, three months after his resignation.
On December 31, 2019, in terms of the SPA
Agreement entered into with Vivi Holdings, 112,500 shares in Vivi Holdings were allocated to Mr. Pereira as compensation for facilitating
the disposal of Qpagos Corporation and our Mexican operations.
Andrey Novikov
On December 27, 2018, we granted Mr. Novikov
ten-year options to purchase an aggregate of 100,000 shares of common stock at an exercise price of $0.40 per share.
On December 31, 2019, in terms of the SPA
Agreement entered into with Vivi Holdings, 56,250 shares in Vivi Holdings were allocated to Mr. Pereira as compensation for facilitating
the disposal of Qpagos Corporation and our Mexican operations.
James Fuller
On June 29, 2018, we granted Mr. Fuller
12,000 shares of restricted common stock in terms of the Stock Incentive Plan.
On December 27, 2018, we granted Mr. Fuller
7,000 shares of restricted common stock in terms of the stock incentive plan.
Strategic IR
Strategic IR advanced us $168,000 between
January 16 and June 15, 2018. This loan was formalized into a written note on October 13, 2018 and bears interest at the rate of
10% per annum. The note had a maturity date of February 10, 2019. On March 18, 2019 the note was extended to February 10, 2020,
and the interest rate was changed to 15%. On July 30, 2019, the holders of loans payable by us, entered into debt exchange agreements,
whereby the aggregate principal amount of the loans payable, together with accrued interest thereon until July 30, 2019 were exchanged
for shares of common stock at an exchange price of $0.0063 pre-reverse split ($0.063 post reverse split that was effected in November
2019) per share. We did not have sufficient unissued shares to effect the exchange until the reverse stock split of 10:1 shares
came into effect on November 1, 2019. The balance of the note as of July 30, 2019, plus accrued interest thereon was $7196,307
and was converted into 3,166,240 post reverse split shares on November 18, 2019.
On November 15, 2019, we entered into Securities
Purchase Agreements with Strategic IR whereby the following notes totaling $79,500 previously advanced to us during the period
August 19, 2019 to October 15, 2019, was converted into 4,486,750 shares of common stock at a conversion price of $0.037 per share,
thereby extinguishing the notes and realizing a loss on conversion of $85,248.
|
●
|
On August 19, 2019,
we issued a Promissory Note in the aggregate principal amount of $15,000 to Strategic IR. The note has a maturity date of November
17, 2019 and a coupon of ten percent per annum. We had the right to prepay the note without penalty prior to maturity date.
|
|
●
|
On September 10, 2019,
we issued a Promissory Note in the aggregate principal amount of $37,500 to Strategic IR. The note has a maturity date of December
10, 2019 and a coupon of ten percent per annum. We had the right to prepay the note without penalty prior to maturity date.
|
|
●
|
On September 25, 2019,
we issued a Promissory Note in the aggregate principal amount of $2,000 to Strategic IR. The note has a maturity date of December
25, 2019 and a coupon of ten percent per annum. We had the right to prepay the note without penalty prior to maturity date.
|
|
●
|
On October 11, 2019,
we issued a Promissory Note in the aggregate principal amount of $3,000 to Strategic IR. The note has a maturity date of January
9, 2020 and a coupon of ten percent per annum. We had the right to prepay the note without penalty prior to maturity date.
|
|
●
|
On October 15, 2019,
we issued a Promissory Note in the aggregate principal amount of $22,000 to Strategic IR. The note has a maturity date of January
13, 2020 and a coupon of ten percent per annum. We had the right to prepay the note without penalty prior to maturity date.
|
On May 15, 2019, pursuant to the terms
of a debt purchase agreement entered into with Labrys Fund LP. the $300,000 convertible promissory note issued on October 25, 2018,
with a maturity date of April 25, 2019 and an original coupon of 8% per annum, was acquired by Strategic IR for gross proceeds
of $302,367, including accrued interest thereon. The Convertible note earns interest at 18% per annum, the default interest rate
in terms of the Promissory note. The terms of the convertible note include a provision for an automatic note penalty of 50% of
the note outstanding if the note is in default. Strategic IR enforced this term resulting in an increase in the principal outstanding
in terms of the note of $150,000. On June 19, 2019, pursuant to the terms of a debt purchase agreement entered into with Bellridge
Capital LP, Strategic IR transferred and assigned the aggregate principal sum of $200,000 plus accrued interest thereon of $3,124,
of the Convertible note acquired from Labrys Fund LP. On July 30, 2019, the Company received a notice of conversion from Strategic
IR, converting $108,882 of the April 25, 2018 convertible note acquired from Labrys Fund LP, into 37,034,605 pre-reverse split
(3,703,461 post reverse split that was effected in November 2019) shares of common stock at a conversion price of $0.003 pre-reverse
split ($0.03 post reverse split that was effected in November 2019) per share. On November 18, 2019, we and Strategic IR entered
into an exchange agreement, replacing the existing note with a new note with a maturity date of November 18, 2020, removing the
conversion limitation of ownership of 9.99% and reducing the interest rate to 6% per annum. On November 19, 2019, in terms of a
conversion notice received, we received a conversion notice converting the aggregate principal sum of $150,000 and interest thereon
of $9,125 into 10,007,882 shares of common stock at a conversion price of $0.0159 per share, thereby extinguishing the note and
realizing a loss on conversion of $211,166.
On June 11, 2017, we issued a convertible
promissory note in the aggregate principal amount of $10,000 to Strategic IR (“Strategic”). The note bears interest
at 12% per annum and matured on December 16, 2017. Pursuant to the terms of an agreement entered into with the note holder, the
maturity date of the note was extended to December 8, 2018 and the interest rate was increased to 15% per annum. On February 21,
2019 the maturity date was extended to December 8, 2019, with the interest rate remaining unchanged. On July 30, 2019, the holders
of convertible notes with a $0.20 fixed price conversion feature, entered into debt exchange agreements with us, whereby the aggregate
principal amount of the convertible notes, together with accrued interest thereon until July 30, 2019 were exchanged for shares
of common stock at an exchange price of $0.0063 pre-reverse split ($0.063 post reverse split that was effected in November 2019)
per share. We did not have sufficient unissued shares to effect the exchange until the reverse stock split of 10:1 shares came
into effect on November 1, 2019. The balance of the note as of July 30, 2019, plus accrued interest thereon was $13,060 and was
converted into 210,645 post reverse split shares on November 18, 2019.
On June 11, 2017, we exchanged a note issued
to Viktoria Akhmetova, with a principal amount of $20,000, together with accrued interest thereon of $164, totaling $20,164, for
a convertible note, principal amount of $20,164, bearing interest at 12% per annum and matured on December 8, 2017. In terms of
an agreement entered into with the note holder, the maturity date was extended to December 8, 2018 and the interest rate was increased
to 15% per annum. On February 21, 2019 the maturity date was extended to December 8, 2019, with the interest rate remaining unchanged.
On July 30, 2019, the holders of convertible notes with a $0.20 fixed price conversion feature, entered into debt exchange agreements
with us, whereby the aggregate principal amount of the convertible notes, together with accrued interest thereon until July 30,
2019 were exchanged for shares of common stock at an exchange price of $0.0063 pre-reverse split ($0.063 post reverse split that
was effected in November 2019) per share. We did not have sufficient unissued shares to effect the exchange until the reverse stock
split of 10:1 shares came into effect on November 1, 2019. The balance of the note as of July 30, 2019, plus accrued interest thereon
was $26,321 and was converted into 424,540 post reverse split shares on November 18, 2019.
On June 29, 2017, we exchanged a note issued
to Strategic with a principal amount of $50,000, together with accrued interest thereon of $3,740, totaling $53,740, for a convertible
note, principal amount of $53,740, bearing interest at 12% per annum which matured on December 26, 2017. In terms of an agreement
entered into with the note holder, the maturity date was extended to December 26, 2018 and the interest rate was increased to 15%
per annum. On February 21, 2019 the maturity date was extended to December 26, 2019, with the interest rate remaining unchanged.
On July 30, 2019, the holders of convertible notes with a $0.20 fixed price conversion feature, entered into debt exchange agreements
with us, whereby the aggregate principal amount of the convertible notes, together with accrued interest thereon until July 30,
2019 were exchanged for shares of common stock at an exchange price of $0.0063 pre-reverse split ($0.063 post reverse split that
was effected in November 2019) per share. We did not have sufficient unissued shares to effect the exchange until the reverse stock
split of 10:1 shares came into effect on November 1, 2019. The balance of the note as of July 30, 2019, plus accrued interest thereon
was $69,751 and was converted into 1,125,020 post reverse split shares on November 18, 2019.
On June 29, 2017, we exchanged a note issued
to Strategic with a principal amount of $110,000, together with accrued interest thereon of $5,535, totaling $115,535, for a convertible
note, principal amount of $115,535, bearing interest at 12% per annum and matured on December 26, 2017. Pursuant to the terms of
an agreement entered into with the note holder the maturity date was extended to December 26, 2018 and the interest rate was increased
to 15% per annum. On February 21, 2019 the maturity date was extended to December 26, 2019, with the interest rate remaining unchanged.
On July 30, 2019, the holders of convertible notes with a $0.20 fixed price conversion feature, entered into debt exchange agreements
with us, whereby the aggregate principal amount of the convertible notes, together with accrued interest thereon until July 30,
2019 were exchanged for shares of common stock at an exchange price of $0.0063 pre-reverse split ($0.063 post reverse split that
was effected in November 2019) per share. we did not have sufficient unissued shares to effect the exchange until the reverse stock
split of 10:1 shares came into effect on November 1, 2019. The balance of the note as of July 30, 2019, plus accrued interest thereon
was $149,958 and was converted into 2,418,674 post reverse split shares on November 18, 2019.
On July 17, 2019, Strategic IR entered
into a debt purchase agreement with GS Capital Partners, whereby the remaining balance of the September 19, 2019 convertible note
in the aggregate principal amount of $33,252 plus accrued interest thereon of $2,165, was acquired for gross proceeds of $35,417.
In addition to this strategic IR paid additional settlement costs of $14,583 including an early settlement penalty to GS Capital
Partners. As of September 19, 2019, the note is in default and earns interest at the default interest rate. On November 18, 2019,
we and Strategic IR entered into an exchange agreement, replacing the existing note with a new note with a maturity date of November
18, 2020, removing the conversion limitation of ownership of 9.99% and reducing the interest rate to 6% per annum. On November
19, 2019, we received a conversion notice converting the aggregate principal sum of $37,224 into 2,386,181 shares of common stock
at a conversion price of $0.0156 per share, thereby extinguishing the note and realizing a loss on conversion of $51,064.
On July 17, 2019, we issued Strategic IR
a Convertible Promissory Note in the aggregate principal amount of $14,583. The note had a maturity date of July 17, 2020 and a
coupon of 6% per annum. We had the right to prepay the note provided it makes a prepayment penalty as set forth in the note. The
outstanding principal amount of the note is convertible at any time into shares of our common stock at a conversion price equal
to 60% of the average of the lowest three trading bid prices during the previous ten (10) trading days, including the date the
notice of conversion is received. On November 19, 2019, we received a conversion notice converting the aggregate principal sum
of $14,583, including interest thereon of $297 into 935,887 shares of common stock at a conversion price of $0.0159 per share,
thereby extinguishing the note and realizing a loss on conversion of $19,747.
Gibbs International Holdings
Effective June 19, 2017, we exchanged a
note issued to Gibbs International Holdings with a principal amount of $50,000, together with accrued interest thereon of $2,494,
totaling $52,494, for a convertible note, principal amount of $52,494, bearing interest at 12% per annum and matured on December
16, 2017. In terms of an agreement entered into with the note holder, the maturity date was extended to December 16, 2018 and the
interest rate was increased to 15% per annum. The note was past its maturity date which maturity date has not been extended
as yet, and thereby; (i) became immediately due and payable; (ii) can only be amended with the written consent of the holder; and
(iii) may be sold, assigned or transferred by the holder without our consent. The note was convertible into our common shares at
a conversion price of $0.20 per share. On July 30, 2019, the holders of convertible notes with a $0.20 fixed price conversion feature,
entered into debt exchange agreements with us, whereby the aggregate principal amount of the convertible notes, together with accrued
interest thereon until July 30, 2019 were exchanged for shares of common stock at an exchange price of $0.0063 pre-reverse split
($0.063 post reverse split that was effected in November 2019) per share. We did not have sufficient unissued shares to effect
the exchange until the reverse stock split of 10:1 shares came into effect on November 1, 2019. The balance of the note as of July
30, 2019, plus accrued interest thereon was $68,350 and were exchanged for 1,102,412 post reverse split shares on November 18,
2019.
Effective August 20, 2018, we exchanged
a note issued to Gibbs International Holdings with a principal amount of $294,620, together with accrued interest thereon of $111,115,
totaling $405,735, for a convertible note, principal amount of $405,735, with a coupon of 8% per annum and maturing on August 31,
2019. We had the right to prepay the note within 180 days without penalties. The outstanding principal amount of the note was convertible
at any time and from time to time at the election of the holder into our shares of common stock at a conversion price equal to
60% of the three lowest trading bid prices during the previous ten (10) trading days, including the date the notice of conversion
is received. As of August 31, 2019 the note is in default and the note provided for the payment of a penalty of 10% of the principal
outstanding, amounting to $40,573. On December 4, 2019, we received conversion notices converting the principal sum of $405,735,
a once off penalty of $40,573 and interest thereon of $54,529 into 21,000,000 shares of common stock at a conversion price of $0.0238
thereby extinguishing the note. A loss on conversion of $528,162 was realized.
Bellridge Capital LP
On June 19, 2019, in terms of a debt purchase
agreement entered into with Strategic IR, Bellridge Capital LP acquired an aggregate principal amount of $200,000 plus accrued
interest thereon of $3,124 off the $300,000 convertible promissory note originally issued on October 25, 2018, to Labrys Fund LP,
with a maturity date of April 25, 2019 and an original coupon of 8% per annum. The Convertible note accrues interest at 18% per
annum, the default interest rate in terms of the original Promissory note. On November 19, 2019, we received a notice of conversion
from Bellridge Capital LP converting the principal sum of $200,000 and interest thereon of $21,568 into 13,935,112 shares of common
stock at a conversion price of $0.0159 per share, thereby extinguishing the note. The Company incurred a loss on conversion of
$294,031.
Vladimir Skiguine
On April 17, 2018, we issued a Promissory
Note in the aggregate principal amount of $49,491 to Vladimir Skiguine. The note had a maturity date of September 13, 2018 and
a coupon of eighteen percent per annum. We had the right to prepay the note without penalty prior to maturity date. On September
13, 2018, the maturity date of the note was extended to January 11, 2019. On February 21, 2019 the maturity date was extended to
September 13, 2019, with the interest rate changed to 15%. On July 30, 2019, the holders of loans payable by us, entered into debt
exchange agreements, whereby the aggregate principal amount of the loans payable, together with accrued interest thereon until
July 30, 2019 were exchanged for shares of common stock at an exchange price of $0.0063 pre-reverse split ($0.063 post reverse
split that was effected in November 2019) per share. We did not have sufficient unissued shares to effect the exchange until the
reverse stock split of 10:1 shares came into effect on November 1, 2019. The balance of the note as of July 30, 2019, plus accrued
interest thereon was $59,810 and was converted into 964,670 post reverse split shares on November 18, 2019.
On December 23, 2019, in terms of a debt
purchase agreement entered into with Waketec OU, Mr. Skiguine acquired $30,000 of the promissory note issued to Waketec OU by Qpagos
Corporation. On December 23, 2019, we entered into a debt settlement agreement whereby we agreed to the assignment of the debt
owed to Mr. Skiguine by Qpagos Corporation to us in exchange for a new promissory note in the principal amount of $30,000 issued
by us. The promissory note is unsecured, bears interest at 4% per annum and matures on December 23, 2020. The balance of the promissory
note, including interest thereon at December 31, 2019 is $30,026.
On December 11, 2019, Mr. Skiguine purchased
a portion of a note issued to Andrey Novikov by Qpagos Corporation in the principal amount of $65,953. On December 17, 2019, we
entered into a debt settlement with Mr. Skiguine whereby the Note was assigned from Qpagos Corporation to us and was simultaneously
settled by the issue of 2,231,768 shares of common stock at an issue price of $0.03 per share, thereby extinguishing the note.
A loss on settlement of $67,953 was realized.
We entered into an agreement with Gibbs,
whereby the importation of kiosks and accessories was arranged and funded by Gibbs, Skiguine funded a portion of the kiosks and
accessories purchased under the same terms and conditions of the agreement entered into with Gibbs. Pursuant to the terms of the
agreement, a 5% margin has been added to the cost of the kiosks and accessories purchased and to the liability outstanding. The
amount was due on November 1, 2017. On July 30, 2019, the holders of loans payable by us, entered into debt exchange agreements,
whereby the aggregate principal amount of the loans payable, together with accrued interest thereon until July 30, 2019 were exchanged
for shares of common stock at an exchange price of $0.0063 pre-reverse split ($0.063 post reverse split that was effected in November
2019) per share. We did not have sufficient unissued shares to effect the exchange until the reverse stock split of 10:1 shares
came into effect on November 1, 2019. The balance of the note as of July 30, 2019, plus accrued interest thereon was $74,662, after
the interest was adjusted to $19,366 and was converted into 1,204,234 post reverse split shares on November 18, 2019.
West Point Partners, LLC
On September 3, 2019, we issued West Point
Partners, LLC a Convertible Promissory Note in the aggregate principal amount of $26,527. The note had a maturity date of September
3, 2020 and a coupon of 8% per annum. We have the right to prepay the note provided it makes a prepayment penalty as set forth
in the note. The outstanding principal amount of the note is convertible at any time into shares of our common stock at a conversion
price equal to 60% of the average of the lowest two trading bid prices during the previous ten (10) trading days, including the
date the notice of conversion is received.
On November 19, 2019, we received a notice
of conversion converting the aggregate principal amount of the note outstanding, including interest thereon, totaling $26,968 into
1,812,390 shares of common stock at a conversion price of $0.149 per share, thereby extinguishing the note. We realized a loss
on conversion of $40,090.
On October 21, 2019, West point Partners,
LLC entered into a debt purchase agreement with GS Capital Partners, whereby the convertible note in the aggregate principal amount
of $96,000 plus accrued interest thereon of $3,745, was acquired for gross proceeds of $99,745. On November 18, 2019, we and West
Point Partners, LLC entered into an exchange agreement, replacing the existing note with a new note with a maturity date of November
18, 2020, removing the conversion limitation of ownership of 9.99% and reducing the interest rate to 6% per annum.
On November 19, 2019, we received a notice
of conversion converting the aggregate principal amount of the note outstanding, including interest thereon, totaling $102,039
into 6,857,446 shares of common stock at a conversion price of $0.149 per share, thereby extinguishing the note. We realized a
loss on conversion of $151,687.
On October 21, 2019, we issued a Convertible
Promissory Note in the aggregate principal amount of $22,977 to West Point Partners, LLC for penalty interest and expenses incurred
by West Point Partners LLC on acquiring the GS Capital Partners note dated March 4, 2019. The note had a maturity date of October
21, 2020 and bears interest at 8% per annum. The outstanding principal amount of the note was convertible after 180 days, at the
election of the holder into shares of our common stock at a conversion price equal to 62% of the lowest two trading prices during
the previous ten trading days.
On November 19, 2019, we received a notice
of conversion converting the aggregate principal amount of the note outstanding, including interest thereon, totaling $23,118 into
1,553,621 shares of common stock at a conversion price of $0.149 per share, thereby extinguishing the note. We realized a loss
on conversion of $34,366.
Director Independence
Board of Directors
The Board, in the exercise of its reasonable
business judgment, has determined that James Fuller, is our only director that qualifies as an independent director pursuant to
Nasdaq Stock Market Rule 5605(a)(2) and applicable SEC rules and regulations. Mr. Corbett and Mr. Novikov currently employed as
our Chief Executive Officer and Chief Technology Officer, respectively, and therefore would not be considered independent directors.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Audited Consolidated Financial Statements
|
Page
|
Report
of the Independent, Registered Public Accounting firm
|
F-2
|
Consolidated
Balance Sheets as of December 31, 2019 and December 31, 2018
|
F-3
|
Consolidated
Statements of Operations and Comprehensive Loss for the years ended December 31, 2019 and December 31, 2018
|
F-4
|
Consolidated
Statements of Deficit for the years ended December 31, 2019 and December 31, 2018
|
F-5
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2019 and December 31, 2018
|
F-6
|
Notes
to the Consolidated Financial Statements
|
F-7
to F-48
|
|
|
Condensed Consolidated Financial Statements (unaudited) for
quarter ended March 31, 2020 and 2019
|
|
Condensed Consolidated Balance Sheets as of March 31, 2020 (unaudited) and December 31, 2019
|
F-49
|
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2020 and 2019 (unaudited)
|
F-50
|
Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the three months ended March 31, 2020 and 2019 (unaudited)
|
F-51
|
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019, (unaudited)
|
F-52
|
Notes to the Unaudited Condensed Consolidated Financial Statements
|
F-53–F-74
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
of
Innovative Payment Solutions, Inc.
(FKA: Qpagos)
Opinion on the Financial Statements
We have audited the accompanying consolidated
balance sheets of Innovative Payment Solutions, Inc. (formerly Qpagos) and Subsidiaries (the Company) as of December 31, 2019 and
2018, and the related consolidated statements of operations and comprehensive loss, stockholders’ deficit and cash flows
for each of the years in the two year period ended December 31, 2019, and the related notes (collectively referred to as the consolidated
financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the
years in the two-year period ended December 31, 2019, in conformity with accounting principles generally accepted in the United
States of America.
Emphasis of Matter Regarding Going Concern
The accompanying consolidated financial
statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial
statements, the Company has suffered recurring losses from operations and this raises substantial doubt about the Company’s
ability to continue as a going concern. Management’s plans in regard to these matters also are described in Note 3. The consolidated
financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements
are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with
the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required
to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.
/s/
RBSM LLP
We have served as the Company’s auditor since 2014.
Henderson,
NV
May
13, 2020
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
CONSOLIDATED
BALANCE SHEETS
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash
|
|
$
|
2,979
|
|
|
$
|
71,294
|
|
Other current assets
|
|
|
55,059
|
|
|
|
9,575
|
|
Assets held for sale
|
|
|
-
|
|
|
|
983,105
|
|
Total Current Assets
|
|
|
58,038
|
|
|
|
1,063,974
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
Investment
|
|
|
1,019,961
|
|
|
|
-
|
|
Total Assets
|
|
$
|
1,077,999
|
|
|
$
|
1,063,974
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
314,523
|
|
|
$
|
508,755
|
|
Liabilities held for sale
|
|
|
-
|
|
|
|
180,014
|
|
Loans payable
|
|
|
61,631
|
|
|
|
56,044
|
|
Loans payable - Related parties
|
|
|
30,026
|
|
|
|
313,949
|
|
Convertible debt, net of unamortized discount of $371,387 and $777,242, respectively
|
|
|
359,362
|
|
|
|
790,093
|
|
Convertible debt - Related parties, net of unamortized discount of $0
and $0 respectively
|
|
|
-
|
|
|
|
589,812
|
|
Derivative liability
|
|
|
905,576
|
|
|
|
1,833,672
|
|
Total Current Liabilities
|
|
|
1,671,118
|
|
|
|
4,272,339
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
1,671,118
|
|
|
|
4,272,339
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value, 25,000,000 shares authorized, and 0
shares issued and outstanding as of December 31, 2019 and December 31, 2018.
|
|
|
-
|
|
|
|
-
|
|
Common stock, $0.0001 par value; 500,000,000 shares authorized, 128,902,124
and 8,883,922 shares issued and outstanding as of December 31, 2019 and December 31, 2018, respectively.*
|
|
|
12,890
|
|
|
|
888
|
|
Additional paid-in-capital
|
|
|
21,579,022
|
|
|
|
14,865,765
|
|
Accumulated deficit
|
|
|
(22,185,031
|
)
|
|
|
(18,455,925
|
)
|
Accumulated other comprehensive income
|
|
|
-
|
|
|
|
380,907
|
|
Total Stockholders’ Deficit
|
|
|
(593,119
|
)
|
|
|
(3,208,365
|
)
|
Total Liabilities and Stockholders’ Deficit
|
|
$
|
1,077,999
|
|
|
$
|
1,063,974
|
|
|
*
|
After
giving effect to a 10 for 1 reverse stock split effective November 1, 2019.
|
The
accompanying notes are an integral part of these consolidated financial statements.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
|
|
Twelve months ended
|
|
|
Twelve months ended
|
|
|
|
December
|
|
|
December
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Cost of Goods Sold
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
807,934
|
|
|
|
994,913
|
|
Total Expense
|
|
|
807,934
|
|
|
|
994,913
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations
|
|
|
(807,934
|
)
|
|
|
(994,913
|
)
|
|
|
|
|
|
|
|
|
|
Loss on debt conversion
|
|
|
(2,838,599
|
)
|
|
|
(3,738,307
|
)
|
Penalty on default note
|
|
|
(191,757
|
)
|
|
|
-
|
|
Provision against receivables
|
|
|
(129,995
|
)
|
|
|
-
|
|
Interest expense, net
|
|
|
(2,061,415
|
)
|
|
|
(3,059,573
|
)
|
Derivative liability movements
|
|
|
1,981,938
|
|
|
|
4,129,793
|
)
|
Foreign currency gain
|
|
|
-
|
|
|
|
(7,562
|
)
|
Loss before Taxation from continuing operations
|
|
|
(4,047,762
|
)
|
|
|
(3,670,562
|
)
|
|
|
|
|
|
|
|
|
|
Taxation
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net loss from continuing operations
|
|
|
(4,047,762
|
)
|
|
|
(3,670,562
|
)
|
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
Operating loss from discontinued operations
|
|
|
(653,247
|
)
|
|
|
(1,397,172
|
)
|
Profit on disposal of subsidiaries
|
|
|
971,903
|
|
|
|
-
|
|
|
|
|
318,656
|
|
|
|
(1,397,172
|
)
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(3,729,106
|
)
|
|
|
(5,067,734
|
)
|
Basic and diluted loss per share*
|
|
|
|
|
|
|
|
|
Net loss per share from continuing operations
|
|
$
|
(0.14
|
)
|
|
$
|
(0.47
|
)
|
Net income per share from discontinued operations
|
|
$
|
0.01
|
|
|
$
|
(0.18
|
)
|
|
|
$
|
(0.13
|
)
|
|
$
|
(0.65
|
)
|
|
|
|
|
|
|
|
|
|
Weighted Average Number of Shares Outstanding - Basic and diluted
|
|
|
29,170,995
|
|
|
|
7,829,947
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive loss
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
(380,907
|
)
|
|
|
(106,647
|
)
|
|
|
|
|
|
|
|
|
|
Total Comprehensive loss
|
|
$
|
(4,110,013
|
)
|
|
$
|
(5,174,381
|
)
|
|
*
|
After
giving effect to a 10 for 1 reverse stock split effective November 1, 2019.
|
The
accompanying notes are an integral part of these consolidated financial statements.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE PERIOD JANUARY 1, 2018 TO DECEMBER 31, 2019
|
|
Preferred Stock
Shares
|
|
|
Amount
|
|
|
Common Stock
Shares*
|
|
|
Amount
|
|
|
Additional
Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Accumulated
Other
Comprehensive
Income
|
|
|
Total
Stockholders’
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
|
5,620,742
|
|
|
$
|
562
|
|
|
$
|
8,499,560
|
|
|
$
|
(13,388,191
|
)
|
|
$
|
487,554
|
|
|
$
|
(4,400,515
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of debt to equity
|
|
|
-
|
|
|
|
-
|
|
|
|
3,232,600
|
|
|
|
323
|
|
|
|
6,199,688
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,200,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
19,000
|
|
|
|
2
|
|
|
|
52,173
|
|
|
|
-
|
|
|
|
-
|
|
|
|
52,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
11,580
|
|
|
|
1
|
|
|
|
34,738
|
|
|
|
-
|
|
|
|
-
|
|
|
|
34,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock option compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
79,606
|
|
|
|
-
|
|
|
|
-
|
|
|
|
79,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(106,647
|
)
|
|
|
(106,647
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,067,734
|
)
|
|
|
-
|
|
|
|
(5,067,734
|
)
|
Balance as of December 31, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
|
8,883,922
|
|
|
$
|
888
|
|
|
$
|
14,865,765
|
|
|
$
|
(18,455,925
|
)
|
|
$
|
380,907
|
|
|
$
|
(3,208,365
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reverse split adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
99
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of debt to equity
|
|
|
-
|
|
|
|
-
|
|
|
|
119,285,531
|
|
|
|
11,929
|
|
|
|
6,486,076
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,498,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
82,572
|
|
|
|
8
|
|
|
|
162,246
|
|
|
|
-
|
|
|
|
-
|
|
|
|
162,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares subscriptions
|
|
|
-
|
|
|
|
-
|
|
|
|
650,000
|
|
|
|
65
|
|
|
|
64,935
|
|
|
|
-
|
|
|
|
-
|
|
|
|
65,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(380,907
|
)
|
|
|
(380,907
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,729,106
|
)
|
|
|
-
|
|
|
|
(3,729,106
|
)
|
Balance at December 31, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
|
128,902,124
|
|
|
$
|
12,890
|
|
|
$
|
21,579,022
|
|
|
$
|
(22,185,031
|
)
|
|
$
|
-
|
|
|
$
|
(593,119
|
)
|
*
|
After
giving effect to a 10 for 1 reverse stock split effective November 1, 2019.
|
The
accompanying notes are an integral part of these consolidated financial statements.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
Twelve
months ended
|
|
|
Twelve
months ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(3,729,106
|
)
|
|
$
|
(5,067,734
|
)
|
Net (income) loss from discontinued operations
|
|
|
(318,656
|
)
|
|
|
1,397,172
|
|
Net loss from continuing operations
|
|
|
(4,047,762
|
)
|
|
|
(3,670,562
|
)
|
Adjustment to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Derivative liability movements
|
|
|
(1,981,938
|
)
|
|
|
(4,129,793
|
)
|
Amortization of debt discount
|
|
|
1,692,110
|
|
|
|
2,637,656
|
|
Loss on conversion of debt to equity
|
|
|
2,838,599
|
|
|
|
3,738,307
|
|
Penalty on default note
|
|
|
191,757
|
|
|
|
-
|
|
Provision against Receivables
|
|
|
129,995
|
|
|
|
-
|
|
Convertible notes issued for services
|
|
|
62,996
|
|
|
|
119,974
|
|
Shares issued for services
|
|
|
162,253
|
|
|
|
34,739
|
|
Stock based compensation
|
|
|
-
|
|
|
|
131,781
|
|
Changes in Assets and Liabilities
|
|
|
|
|
|
|
|
|
Other current assets
|
|
|
4,521
|
|
|
|
(1,380
|
)
|
Accounts payable and accrued expenses
|
|
|
249,815
|
|
|
|
58,476
|
|
Interest accruals
|
|
|
204,013
|
|
|
|
241,053
|
|
Cash used in operating activities - continuing operations
|
|
|
(493,641
|
)
|
|
|
(839,749
|
)
|
Cash used in operating activities - discontinued operations
|
|
|
(281,215
|
)
|
|
|
(894,571
|
)
|
CASH USED IN OPERATING ACTIVITIES
|
|
|
(774,856
|
)
|
|
|
(1,734,320
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net cash used in investing activities - discontinued operations
|
|
|
-
|
|
|
|
(291
|
)
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
|
-
|
|
|
|
(291
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from share issuances
|
|
|
65,000
|
|
|
|
-
|
|
Proceeds from loans payable
|
|
|
264,435
|
|
|
|
267,491
|
|
Proceeds from short term notes and convertible notes
|
|
|
859,453
|
|
|
|
2,021,867
|
|
Repayment of convertible notes
|
|
|
(138,000
|
)
|
|
|
(394,226
|
)
|
Net cash provided by financing activities - continuing operations
|
|
|
1,050,888
|
|
|
|
1,895,132
|
|
Net cash provided by financing activities - discontinued operations
|
|
|
-
|
|
|
|
-
|
|
|
|
|
1,050,888
|
|
|
|
1,895,132
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(344,347
|
)
|
|
|
(108,255
|
)
|
|
|
|
|
|
|
|
|
|
NET (DECREASE) INCREASE IN CASH
|
|
|
(68,315
|
)
|
|
|
52,266
|
|
CASH AT BEGINNING OF YEAR
|
|
|
71,294
|
|
|
|
19,028
|
|
CASH AT END OF YEAR
|
|
$
|
2,979
|
|
|
$
|
71,294
|
|
|
|
|
|
|
|
|
|
|
CASH PAID FOR INTEREST AND TAXES:
|
|
|
|
|
|
|
|
|
Cash paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash paid for interest
|
|
$
|
-
|
|
|
$
|
61,007
|
|
|
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Notes payable including interest thereon converted to convertible notes payable
|
|
$
|
298,117
|
|
|
$
|
405,735
|
|
Conversion of convertible debt to equity
|
|
$
|
2,777,768
|
|
|
$
|
2,461,705
|
|
Conversion of loans payable to equity
|
|
$
|
791,857
|
|
|
$
|
-
|
|
Inventory reclassed to fixed assets
|
|
$
|
-
|
|
|
$
|
146,774
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
1
|
ORGANIZATION
AND DESCRIPTION OF BUSINESS
|
On
May 12, 2016, Innovative Payment Solutions, Inc. (formerly known as QPAGOS and Asiya Pearls, Inc.), a Nevada corporation (“IPSI”
or the “Company”), 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 IPS (“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 IPS common stock, par value $0.0001 per
share (the “Common Stock”). Additionally, pursuant to the Merger Agreement, upon consummation of the Merger, IPS assumed
all of Qpagos Corporation’s warrants issued and outstanding immediately prior to the Merger, which were exercisable for
approximately 6,219,200 pre-reverse split (621,920 post reverse split that was effected in November 2019) 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 IPS stockholder
of 5,000,000 pre-reverse split (500,000 post reverse split that was effected in November 2019) shares of Common Stock agreed to
return to IPS 4,975,000 pre-reverse split (497,500 post reverse split that was effected in November 2019) shares of Common Stock
held by such holder to IPS and the then-current IPS stockholder retained an aggregate of 25,000 pre-reverse split (2,500 post
reverse split that was effected in November 2019) shares of Common Stock and the other stockholders of IPS retained 5,000,000
pre-reverse split (500,000 post reverse split that was effected in November 2019) shares of Common Stock. Therefore, immediately
following the Merger, Qpagos Corporation’s former stockholders held 49,929,000 pre-reverse split (4,992,900 post reverse
split that was effected in November 2019) shares of IPS common stock which represented approximately 91% of the outstanding Common
Stock.
The
Merger was treated as a reverse acquisition of IPS, a public shell company, for financial accounting and reporting purposes. As
such, Qpagos Corporation was treated as the acquirer for accounting and financial reporting purposes while IPS was treated as
the acquired entity for accounting and financial reporting purposes.
Qpagos
Corporation (“Qpagos”) was incorporated on May 1, 2015 under the laws of the state of Delaware to effectuate a reverse
merger transaction with Qpagos, S.A.P.I. de C.V. (Qpagos Mexico) and Redpag Electrónicos S.A.P.I. de C.V. (Redpag). Each
of the 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.
On
November 1, 2019, the Company changed its name to Innovative Payment Solutions Inc.
Also
on November 1, 2019, immediately following the name change, the Company filed a Certificate of Change with the Secretary of State
of the State of Nevada to effect a reverse split of Company’s common stock at a ratio of 1-for-10, effective on November
1, 2019. As a result of the Reverse Stock Split, each ten pre-split shares of common stock outstanding automatically combined
into one new share of common stock without any further action on the part of the holders, and the number of outstanding shares
common stock was reduced from 320,477,867 shares to 32,047,817 after rounding for fractional shares.
On December 31, 2019, Innovative
Payment Solutions consummated the disposal of Qpagos Corporation, including the two Mexican subsidiaries, Qpagos Mexico and Redpag
in exchange for 2,250,000 shares of common stock of Vivi Holdings, of which nine percent (9%) was allocated to the following: Gaston
Pereira (5%), Andrey Novikov (2.5%), and Joseph Abrams (1.5%). The SPA was closed on December 31, 2019 after the satisfaction of
customary conditions, the receipt of a final fairness opinion and the approval of our shareholders. Innovative Payment Solutions
no longer have any business operations in Mexico and has retained its U.S. operations based in Northridge, California.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
1
|
ORGANIZATION
AND DESCRIPTION OF BUSINESS (continued)
|
|
b)
|
Description
of the business
|
Qpagos
Corporation, through its subsidiaries Qpagos S.A.P.I de C.V. (“Qpagos”) and Redpag Electronicos S.A.P.I de C.V. (“Redpag”),
provides physical and virtual payment services to the Mexican market. Qpagos Corporation provided an integrated network of kiosks,
terminals and payment channels that enabled 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 helped 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 and tickets, shop online or at a retail store, buy
digital services or send money to a friend or relative.
On
December 31, 2019, the Company consummated the disposal of Qpagos Corporation, including the two Mexican subsidiaries, Qpagos
Mexico and Redpag in terms of a Stock Purchase Agreement entered into with Vivi Holdings, Inc on August 5, 2019, in exchange for
2,250,000 shares of common stock of Vivi Holdings, of which nine percent (9%) was allocated to the following: Gaston Pereira (5%),
Andrey Novikov (2.5%), and Joseph Abrams (1.5%). The SPA was closed on December 31, 2019 after the satisfaction of customary conditions,
the receipt of a final fairness opinion and the approval of our shareholders. Innovative Payment Solutions no longer have any business operations in
Mexico and has retained its U.S. operations based in Northridge, California.
2
|
ACCOUNTING
POLICIES AND ESTIMATES
|
The
accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles
(“U.S. GAAP”).
All
amounts referred to in the notes to the consolidated 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 subsidiary in which it has a majority
voting interest. All significant inter-company accounts and transactions have been eliminated in the consolidated financial statements.
Effective
December 31, 2019, the Company disposed of Qpagos Corporation, Qpagos S.A.P.I. de CV and Redpag Electronicos, S.A.P.I. de CV,
these entities are reported as discontinued operations in these consolidated financial statements.
The
entities included in these consolidated financial statements are as follows:
Innovative Payment Solutions,
Inc. - Parent Company
Qpagos Corporation - 100% owned
– disposed of effective December 31, 2019.
Qpagos, S.A. P.I de C.V., a Mexican
entity (99.996% owned) – disposed of effective December 31, 2019.
Redpag Electrónicos,
S.A. P.I. de C.V., a Mexican entity (99.990% owned) – disposed of effective December 31, 2019.
The
financial statements of the Company’s discontinued Mexican operations are measured using local currencies as their functional
currencies.
The
Company translates the assets and liabilities of its discontinued 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.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
2
|
ACCOUNTING
POLICIES AND ESTIMATES (continued)
|
The
preparation of 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 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 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.
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 the investment in Vivi Holdings Inc., was evaluated at fair value using Level 3 Inputs based on the Company’s
estimate of the market value of the entities disposed to Vivi Holdings, Inc. Vivi Holdings Inc., does not have sufficient information
available to assess the current market price of its equity.
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 has identified the short-term convertible notes and certain warrants attached to certain of the notes 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. We evaluate the fair value of variably priced
derivative liabilities on a quarterly basis and report any movements thereon ibn earnings.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
2
|
ACCOUNTING
POLICIES AND ESTIMATES (continued)
|
|
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 Covid-19 breakout has caused
an economic crisis which may result in 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 may
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. In addition, businesses have been suspended due to quarantines
intended to contain this outbreak and many people have been forced to work from home in those areas. As a result,
installation of the Company’s network of kiosks, terminals and payment channels in Southern California has been
delayed, which has had an adverse impact on our business and financial condition and has hampered our ability to
generate revenue and access usual sources of liquidity on reasonable terms.
The
Company’s operations were carried out in Mexico. Accordingly, the Company’s business, financial condition and results
of operations were 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)
|
Adoption
of accounting standards
|
In
February 2016, the Financial Accounting Standards Board (“FSAB”) issued Accounting Standards Update (“ASU”),
No. 2016-02, Leases (Topic 842) (ASC 842)
The
amendments in this update establishes a comprehensive new lease accounting model. The new standard: (a) clarifies the definition
of a lease; (b) requires a dual approach to lease classification similar to current lease classifications; and (c) causes lessees
to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset for leases with a lease-term
of more than twelve months. The new standard is effective for fiscal years and interim periods beginning after December 15, 2018,
with early adoption permitted. A modified retrospective transition approach is required for leases existing at, or entered into
after, the beginning of the earliest comparative period presented in the financial statements, including a number of optional
practical expedients that entities may elect to apply. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted
Improvements, an update which provides another transition method, the prospective transition method, which allows entities to
initially apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance
of retained earnings in the period of adoption. The Company adopted the new standard on January 1, 2019 using the prospective
transition method.
The
Company has identified all leases and reviewed the leases to determine the impact of ASC 842 on its consolidated financial statements.
The Company has elected to apply all of the practical expedients to all leases, which include not reassessing (1) whether any
expired or existing contracts are or contain leases, (2) lease classification for any expired or existing leases, and (3) initial
direct costs for any existing leases. The adoption of the new standard resulted in the recording of a right-of-use asset and a
lease liability on the consolidated balance sheet on January 1, 2019 of MXN Pesos 639,400 ($32,996) utilizing an incremental borrowing
rate of 10.65% and the subsequent amortization of the asset and the lease liability.
|
i)
|
Recent
accounting pronouncements
|
In
December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740)
The
Amendments in this update reduce the complexity in accounting for income taxes by removing certain exceptions to accounting for
income taxes and deferred taxes and simplifying the accounting treatment of franchise taxes, a step up in the tax basis of goodwill
as part of business combinations, the allocation of current and deferred tax to a legal entity not subject to tax in its own financial
statements, reflecting changes in tax laws or rates in the annual effective rate in interim periods that include the enactment
date and minor codification improvements.
This
ASU is effective for fiscal years and interim periods beginning after December 15, 2020.
The
effects of this ASU on the Company’s financial statements is not considered to be material.
The
FASB issued several updates during the period, none of these standards are either applicable to the Company or require adoption
at a future date and none are expected to have a material impact on the consolidated financial statements upon adoption.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
2
|
ACCOUNTING
POLICIES AND ESTIMATES (continued)
|
No
segmental information is required as the Company, during the years ended December 31, 2019 and 2018 only had one segment of business
from which it derived revenue, providing physical and virtual payment services in the Mexican Market. This business segment was
discontinued on December 31, 2019 and no revenue has been derived from activities in the US market as yet.
|
k)
|
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 December 31, 2019 and December 31, 2018, 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 December 31, 2019 and 2018, the balance did
not exceed the federally insured limit.
|
l)
|
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 period ended December 31, 2019 and 2018.
The
Company’s non-marketable equity securities are investments in privately held companies without readily determinable market
values. The carrying value of our non-marketable equity securities is adjusted to fair value for observable transactions for identical
or similar investments of the same issuer or impairment (referred to as the measurement alternative). All gains and losses on
non-marketable equity securities, realized and unrealized, are recognized in other income (expense), net. Non-marketable equity
securities that have been remeasured during the period are classified within Level 3 in the fair value hierarchy because the Company
estimates the value based on valuation methods using the observable transaction price at the transaction date and other unobservable
inputs including volatility, rights, and obligations of the securities the Company holds. The cost method is used when the Company
has a passive, long-term investment that doesn't result in influence over the company. The cost method is used when the investment
results in an ownership stake of less than 20%, and there is no substantial influence. Under the cost method, the stock purchased
is recorded on a balance sheet as a non-current asset at the historical acquisition/purchase price, and is not modified unless
shares are sold, additional shares are purchased or there is evidence of the fair market value of the investment declining below
carrying value. Any dividends received are recorded as income.
The
Company had no realized or unrealized gains or losses on its non-marketable equity securities and on cumulative net gain or loss
in 2019.
The
Company primarily values inventories at the lower of cost or net realizable value 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 ageing. 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.
|
o)
|
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.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
2
|
ACCOUNTING
POLICIES AND ESTIMATES (continued)
|
Plant
and equipment is stated at cost, less accumulated depreciation. Plant and equipment with costs greater than $1,000 are capitalized
and depreciated. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The estimated
useful lives of the assets are as follows:
|
Description
|
|
Estimated
Useful Life
|
|
|
|
|
|
Kiosks
|
|
7
years
|
|
|
|
|
|
Computer
equipment
|
|
3
years
|
|
|
|
|
|
Leasehold
improvements
|
|
Lesser
of estimated useful life or life of lease
|
|
|
|
|
|
Office
equipment
|
|
10
years
|
The
cost of repairs and maintenance is expensed as incurred. When assets are retired or disposed of, the cost and accumulated depreciation
are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition.
All
of the Company’s intangible assets are subject to amortization. The Company evaluates the recoverability of intangible assets
periodically by taking into account events or circumstances that may warrant revised estimates of useful lives or that indicate
the asset may be impaired. Where intangibles are deemed to be impaired, we recognize an impairment loss measured as the difference
between the estimated fair value of the intangible and its book value.
License
agreements acquired by the Company are reported at acquisition value less accumulated amortization and impairments.
Amortization
is reported in the statement of operations on a straight-line basis over the estimated useful life of the intangible assets, unless
the useful life is indefinite. Amortizable intangible assets are amortized from the date that they are available for use. The
estimated useful life of the license agreement is five years which is the expected period for which we expect to derive a benefit
from the underlying license agreements.
Assets
are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to
future undiscounted net cash flows expected to be generated by the asset. If such assets are considered impaired, the impairment
to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
2
|
ACCOUNTING
POLICIES AND ESTIMATES (continued)
|
The
Company’s revenue recognition policy is consistent with the requirements of Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC) 606, Revenue.
The
Company’s revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount
that reflects the consideration that the Company expects to receive in exchange for those services. The Company derives its revenues
from the sale of its services, as defined below. The Company applies the following five steps in order to determine the appropriate
amount of revenue to be recognized as it fulfills its obligations under each of its revenue transactions:
|
i.
|
identify
the contract with a customer;
|
|
ii.
|
identify
the performance obligations in the contract;
|
|
iii.
|
determine
the transaction price;
|
|
iv.
|
allocate
the transaction price to performance obligations in the contract; and
|
|
v.
|
recognize
revenue as the performance obligation is satisfied.
|
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.
|
●
|
Payment
processing provided to end-users
|
The
Company provides a secure means for end-users to pay for certain services, such as utilities through its 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 (with respect
to revenue generated prior to the sale of the Mexican operations), 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 (with respect
to revenue generated prior to the sale of the Mexican operations), 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.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
2
|
ACCOUNTING
POLICIES AND ESTIMATES (continued)
|
|
t)
|
Share-Based Payment Arrangements
|
Generally,
all forms of share-based payments, including stock option grants, restricted stock grants and stock appreciation rights are measured
at their fair value on the awards’ grant date, based on the estimated number of awards that are ultimately expected to vest.
Share-based compensation awards issued to non-employees for services rendered are recorded at either the fair value of the services
rendered or the fair value of the share-based payment, whichever is more readily determinable. The expense resulting from share-based
payments is recorded in operating expenses in the consolidated statement of operations.
Prior
to the Company’s reverse merger which took place on May 12, 2016, all share-based payments were based on management’s
estimate of market value of the Company’s equity. The factors considered in determining managements estimate of market value
includes, assumptions of future revenues, expected cash flows, market acceptability of our technology and the current market conditions.
These assumptions are complex and highly subjective, compounded by the business being in its early stage of development in a new
market with limited data available.
Where
equity transactions with arms-length third parties, who had applied their own assumptions and estimates in determining the market
value of our equity, had taken place prior to and within a reasonable time frame of any share-based payments, the value of those
share transactions have been used as the fair value for any share-based equity payments.
Where
equity transactions with arms-length third parties, included both shares and warrants, the value of the warrants have been eliminated
from the unit price of the securities using a Black-Scholes valuation model to determine the value of the warrants. The assumptions
used in the Black Scholes valuation model includes market related interest rates for risk-free government issued treasury securities
with similar maturities; the expected volatility of the Company’s common stock based on companies operating in similar industries
and markets; the estimated stock price of the Company; the expected dividend yield of the Company and; the expected life of the
warrants being valued.
Subsequent
to the Company’s reverse merger which took place on May 12, 2016, the Company has utilized the market value of its common
stock as quoted on the OTCQB, as an indicator of the fair value of its common stock in determining share- based payment arrangements.
|
u)
|
Derivative
Liabilities
|
ASC
815 generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments
and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a)
the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic
characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument
and the host contract is not re- measured at fair value under otherwise applicable generally accepted accounting principles with
changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative
instrument would be considered a derivative instrument subject to the requirements of ASC 815. ASC 815 also provides an exception
to this rule when the host instrument is deemed to be conventional, as described.
Prior
to December 31, 2019, the Company’s primary operations were based in Mexico and enacted tax laws in Mexico are used in the
calculation of income taxes, the holding company is based in the US and currently enacted US tax laws are used in the calculation
of income taxes.
Income
taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and
liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and
are measured using the currently enacted tax rates and laws. A full valuation allowance is provided for the amount of deferred
tax assets that, based on available evidence, are not expected to be realized. It is the Company’s policy to classify interest
and penalties on income taxes as interest expense or penalties expense. As of December 31, 2019, and 2018, there have been no
interest or penalties incurred on income taxes.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
2
|
ACCOUNTING
POLICIES AND ESTIMATES (continued)
|
Comprehensive
income is defined as the change in equity of a company during a period from transactions and other events and circumstances excluding
transactions resulting from investments from owners and distributions to owners. For the Company, comprehensive income for the
periods presented includes translation adjustment and net loss.
|
x)
|
Reclassification
of prior year presentation
|
Certain
prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect
on the reported results of operations.
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. Other than the disposal of its subsidiary
Qpagos Corporation, including its Mexican operations, the Company has incurred an operating loss since inception resulting in
an accumulated deficit of $22,185,031, after realizing a profit on disposal of Qpagos Corporation and the Mexican operations of
$971,903, as of December 31, 2019 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. In addition to operational expenses, as the Company executes
its US 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 new US 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 has acquired kiosks that it plans
to deploy in the US market and establish a payment solutions to certain demographic sectors, thereby generating revenues in the
US market with an expected improvement in margins, 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 for at least the next twelve months from
the date the financial statements were issued.
4
|
PROFIT
ON DISPOSAL OF SUBSIDIARIES
|
Effective
December 31, 2019, the Company sold 100% of the outstanding common stock of its subsidiary, Qpagos Corporation, to Vivi Holdings,
Inc. (“Vivi”), together with its ownership interest of 99.9% of Qpagos Corporations’ two Mexican entities: QPagos
S.A.P.I. de C.V. and Redpag Electrónicos S.A.P.I. de C.V. (the “Sale”). The Sale was conducted pursuant to
a Stock Purchase Agreement (the “Purchase Agreement”) between the Company and Vivi, dated August 5, 2019. The Purchase
Agreement contains customary representations, warranties and covenants made by Company and Vivi.
As
consideration for the Acquisition, and in accordance with the Purchase Agreement, Vivi issued an aggregate of 2,250,000 fully-paid
and non-assessable shares of its common stock (the “Shares”) as follows: 2,047,500 Shares to the Company; 56,250 Shares
to the Company’s designee, Mr. Andrey Novikov; 33,750 Shares to the Company’s designee, the Joseph W. & Patricia
G. Abrams Family Trust; and 112,500 Shares to the Company’s designee, Mr. Gaston Pereira. In addition, in connection with
the closing of the Sale, the Company received an unsecured non-interest bearing promissory note from Qpagos Corporation. relating to
refunds of certain Value Added Tax amounts anticipated to be received for tax years 2015 through 2019 (each, a “VAT Refund”)
from the Mexican Tax Administration, or the applicable Mexican governmental authority. QPAGOS Corporation. has agreed to diligently file
the VAT Refund for tax years 2015 through 2019 and to pay the Company forty-six percent of each VAT Refund received by it, up
to $130,000.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
4
|
PROFIT
ON DISPOSAL OF SUBSIDIARIES (continued)
|
The
Company no longer has any business operations in Mexico and has retained its U.S. operations based in Northridge, California.
|
|
Year ended
December 31,
2019
|
|
|
|
|
|
Proceeds on disposal
|
|
|
|
Shares in Vivi Holdings, Inc.
|
|
$
|
1,120,836
|
|
Promissory note from Qpagos Corporation
|
|
|
130,000
|
|
Kiosks to be transferred to Innovative Payment Solutions
|
|
|
50,000
|
|
Gross proceeds
|
|
|
1,300,836
|
|
|
|
|
|
|
Vivi Holdings, Inc. shares distributed as deal related fees
|
|
|
(100,875
|
)
|
Deal related expenses
|
|
|
(28,328
|
)
|
Net proceeds
|
|
$
|
1,171,633
|
|
|
|
|
|
|
Assets disposed of:
|
|
|
|
|
Cash
|
|
$
|
59,551
|
|
Inventory
|
|
|
150,117
|
|
Accounts receivable
|
|
|
10,863
|
|
Recoverable IVA and tax credits
|
|
|
170,981
|
|
Other current assets
|
|
|
186,093
|
|
Intangible assets
|
|
|
39,417
|
|
Plant and equipment
|
|
|
178,778
|
|
Other non-current assets
|
|
|
12,849
|
|
|
|
|
808,649
|
|
Liabilities assumed by purchaser
|
|
|
|
|
Accounts payable and other payables
|
|
|
(355,652
|
)
|
Notes payable
|
|
|
(43,000
|
)
|
IVA and other taxes payable
|
|
|
(14,923
|
)
|
Advances from customers
|
|
|
(195,344
|
)
|
Net
|
|
|
(608,919
|
)
|
Net assets sold
|
|
$
|
199,730
|
|
Net profit realized on disposal
|
|
$
|
971,903
|
|
5
|
DISCONTINUED
OPERATIONS
|
Effective
December 31, 2019, the Company sold 100% of the outstanding common stock of its subsidiary, Qpagos Corp to Vivi. The operations
of Qpagos Corp and its two Mexican entities; QPagos S.A.P.I. de C.V. and Redpag Electrónicos S.A.P.I. de C.V, which represent
substantially all of its assets, are reported as discontinued operations.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
5
|
DISCONTINUED
OPERATIONS (continued)
|
The
following assets and liabilities are reported as discontinued operations:
|
|
December 31,
|
|
|
|
2018
|
|
Current Assets
|
|
|
|
Accounts receivable
|
|
$
|
60,523
|
|
Inventory
|
|
|
330,632
|
|
Recoverable IVA taxes and credits
|
|
|
98,493
|
|
Other current assets
|
|
|
169,564
|
|
Total current assets
|
|
|
659,212
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
Plant and equipment, net
|
|
|
228,103
|
|
Intangibles, net
|
|
|
82,417
|
|
Investment
|
|
|
3,000
|
|
Other assets
|
|
|
10,373
|
|
Total non-current assets
|
|
|
323,893
|
|
|
|
|
|
|
Assets held for sale
|
|
$
|
983,105
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
Accounts payable
|
|
$
|
40,136
|
|
ICA and other taxes payable
|
|
|
18,969
|
|
Advances from clients
|
|
|
120,909
|
|
Liabilities held for sale
|
|
$
|
180,014
|
|
The
statement of operations from discontinued operations is as follows:
|
|
Year ended
|
|
|
Year ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Net Revenue
|
|
$
|
11,480,637
|
|
|
$
|
7,936,273
|
|
|
|
|
|
|
|
|
|
|
Cost of Goods Sold
|
|
|
11,525,223
|
|
|
|
7,867,557
|
|
|
|
|
|
|
|
|
|
|
Gross (loss) profit
|
|
|
(44,586
|
)
|
|
|
68,716
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
953,491
|
|
|
|
1,513,807
|
|
Depreciation and amortization and impairment costs
|
|
|
45,360
|
|
|
|
65,455
|
|
Total Expense
|
|
|
998,851
|
|
|
|
1,579,262
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations
|
|
|
(1,043,437
|
)
|
|
|
(1,510,546
|
)
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
6,648
|
|
|
|
5,934
|
|
Foreign currency gain
|
|
|
383,542
|
|
|
|
107,440
|
|
Loss before taxation
|
|
|
(653,247
|
)
|
|
|
(1,397,172
|
)
|
Taxation
|
|
|
-
|
|
|
|
-
|
|
Loss from discontinued operations, net of taxation
|
|
$
|
(653,247
|
)
|
|
$
|
(1,397,172
|
)
|
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Investment
in Vivi Holdings, Inc.
Effective
December 31, 2019, the Company sold 100% of the outstanding common stock of its subsidiary, Qpagos Corp, together with its 99.9%
ownership interest of Qpagos Corporations’ two Mexican entities: QPagos S.A.P.I. de C.V. and Redpag Electrónicos
S.A.P.I. de C.V, to Vivi.
As
consideration for the disposal Vivi issued an aggregate of 2,250,000 Shares of its common stock as follows: 2,047,500 Shares to
the Company; 56,250 Shares to the Company’s designee, Mr. Andrey Novikov; 33,750 Shares to the Company’s designee,
the Joseph W. & Patricia G. Abrams Family Trust; and 112,500 Shares to the Company’s designee, Mr. Gaston Pereira.
Due to the lack of available
information, the Vivi Shares were valued by a modified market method, whereby the value of the assets disposed of were determined
by management using the enterprise value of the entire Company less the liabilities and assets retained by the Company.
The
shares in Vivi Holdings, Inc., are unlisted as of December 31, 2019.
|
|
December 31,
2019
|
|
|
|
|
|
|
Investment in Vivi Holdings, Inc.
|
|
$
|
1,019,961
|
|
Loans
payable consisted of the following:
Description
|
|
Interest
Rate
|
|
|
Maturity
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stanislav Minaychenko
|
|
|
4.0
|
%
|
|
June 16, 2020
|
|
|
23,930
|
|
|
|
-
|
|
Maxim Pukhoskiy
|
|
|
4.0
|
%
|
|
June 16, 2020
|
|
|
17,683
|
|
|
|
-
|
|
Wakatec OU
|
|
|
4.0
|
%
|
|
December 21, 2020
|
|
|
-
|
|
|
|
-
|
|
Alexander Motorin
|
|
|
4.0
|
%
|
|
December 23,2020
|
|
|
20,018
|
|
|
|
-
|
|
Andrey Novikov
|
|
|
8.0
|
%
|
|
December 9, 2020
|
|
|
-
|
|
|
|
-
|
|
Victoria Akhmetova
|
|
|
15
|
%
|
|
January 11, 2020
|
|
|
-
|
|
|
|
56,044
|
|
Boba Management Corporation
|
|
|
10
|
%
|
|
December 26, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
|
10
|
%
|
|
February 22, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
|
10
|
%
|
|
March 1, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
|
10
|
%
|
|
March 26, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
April 12, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
May 7, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
May 13,2020
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
May 20, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
May 23, 2020
|
|
|
-
|
|
|
|
-
|
|
Global Business Partnership AG
|
|
|
10
|
%
|
|
January 14, 2020
|
|
|
-
|
|
|
|
-
|
|
Total loans payable
|
|
|
|
|
|
|
|
$
|
61,631
|
|
|
$
|
56,044
|
|
Interest
expense totaled $7,513 and $6,044 for the year ended December 31, 2019 and 2018, respectively.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
7
|
LOANS PAYABLE (continued)
|
Stanislav
Minaychenko
On
December 17,2019, in terms of a settlement agreement entered into between the Company, Qpagos Corporation and Stanislav Minaychenko,
the Company issued a promissory note to Mr. Minaychenko in settlement of $23,893 owing to him in terms of a service agreement
dated September 1, 2015. The promissory note bears interest at 4% per annum, is unsecured and matures on June 16, 2020. The balance
of the promissory note, including interest thereon at December 31, 2019 is $23,930.
Maxim
Pukhoskiy
On
December 17, 2019, in terms of a settlement agreement entered into between the Company, Qpagos Corporation and Maxim Pukhoskiy,
the Company issued a promissory note to Mr. Pukhoskiy in settlement of $17,856 owing to him in terms of a service agreement dated
May 1, 2015. The promissory note bears interest at 4% per annum, is unsecured and matures on June 16, 2020. The balance of the
promissory note, including interest thereon at December 31, 2019 is $17,683.
Wakatec
OU
On
December 21, 2019, the Company issued a promissory note to Waketec OU in settlement of a $93,000 trade payable owing by Qpagos
Corporation to Waketec OU. The promissory note bears interest at 4% per annum, is unsecured and matures on December 21, 2020.
On
December 23, 2019, in terms of two debt purchase agreements and assignment agreements entered into Wakatec disposed of $30,000
and $20,000 of the promissory note to Vladimir Skiguine and Alexander Motorin. The remaining principal outstanding of $43,000 was
disposed of in terms of the sale of Qpagos Corporation to Viv Holdings, Inc. (Note 4 above).
Alexander
Motorin
On
December 23, 2019, in terms of a debt purchase agreement entered into with Waketec OU, Mr. Motorin acquired $20,000 of the promissory
note issued to Waketec OU by Qpagos Corporation. On December 23, 2019, the Company entered into a debt settlement agreement whereby
the company agreed to the assignment of the debt owed to Mr. Motorin by Qpagos Corporation to the Company in exchange for a new
promissory note in the principal amount of $20,000 issued by the Company. The promissory note is unsecured, bears interest at
4% per annum and matures on December 23, 2020. The balance of the promissory note, including interest thereon at December 31,
2019 is $20,018.
Andrey
Novikov
On
December 9, 2019, in terms of a settlement agreement entered into between the Company, Qpagos Corporation and Andrey Novikov,
the Company issued a promissory note to Mr. Novikov in settlement of $131,906 of a total debt owing to Mr. Novikov of $156,206
owing to him in terms of a service agreement dated September 1, 2015, the balance remaining as owing to Mr. Novikov by Qpagos
Corporation. The promissory note bears interest at 8% per annum, is unsecured and matures on December 9,2020.
On December 11, 2019, Mr. Novikov
entered into two debt purchase agreements, whereby he disposed of the promissory note as follows; (i) a portion of the note in
the principal amount of $65,953 was sold and assigned to Strategic IR and; (ii) a portion of the note in the principal amount of
$65,953 was sold and assigned to Vladimir Skiguine, thereby extinguishing the liability owing to Mr. Novikov.
Viktoria
Akhmetova
On
April 17, 2018, the Company issued a Promissory Note in the aggregate principal amount of $50,000 to Viktoria Akhmetova. The note
had a maturity date of September 13, 2018 and a coupon of 18% per annum. The Company had the right to prepay the note without
penalty prior to maturity date. On September 13, 2018, the maturity date of the note was extended to January 11, 2019. On March
19, 2019, the note was extended to January 11, 2020, and the interest rate changed to 15% per annum.
On
July 30, 2019, the holders of loans payable by the Company, entered into debt exchange agreements, whereby the aggregate principal
amount of the loans payable, together with accrued interest thereon until July 30, 2019 were exchanged for shares of common stock
at an exchange price of $0.0063 pre-reverse split ($0.063 post reverse split that was effected in November 2019) per share.
The
balance of the note as of July 30, 2019, plus accrued interest thereon was $60,425 and was converted into 974,592 post reverse
split shares of common stock on November 18, 2019.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
7
|
LOANS
PAYABLE (continued)
|
Boba
Management Corporation
|
●
|
On
February 22, 2019, the Company issued a Promissory Note in the aggregate principal amount
of $20,000 to Boba Management Corporation. The note had a maturity date of February 22,
2020 and a coupon of 10% per annum. The Company had the right to prepay the note without
penalty prior to maturity date.
|
On
July 30, 2019, the holders of loans payable by the Company, entered into debt exchange agreements, whereby the aggregate principal
amount of the loans payable, together with accrued interest thereon until July 30, 2019 were exchanged for shares of common stock
at an exchange price of $0.0063 pre-reverse split ($0.063 post reverse split that was effected in November 2019) per share.
The
balance of the note as of July 30, 2019, plus accrued interest thereon was $20,866 and was converted into 336,545 post reverse
split shares of common stock on November 18, 2019.
|
●
|
On
March 1, 2019, the Company issued a Promissory Note in the aggregate principal amount
of $20,000 to Boba Management Corporation. The note had a maturity date of March 1, 2020
and a coupon of 10% per annum. The Company had the right to prepay the note without penalty
prior to maturity date.
|
On
July 30, 2019, the holders of loans payable by the Company, entered into debt exchange agreements, whereby the aggregate principal
amount of the loans payable, together with accrued interest thereon until July 30, 2019 were exchanged for shares of common stock
at an exchange price of $0.0063 pre-reverse split ($0.063 post reverse split that was effected in November 2019) per share.
The
balance of the note as of July 30, 2019, plus accrued interest thereon was $20,827 and was converted into 335,926 post reverse
split shares of common stock on November 18, 2019.
|
●
|
On
March 26, 2019, the Company issued a Promissory Note in the aggregate principal amount
of $20,000 to Boba Management Corporation. The note had a maturity date of March 26,
2020 and a coupon of 10% per annum. The Company had the right to prepay the note without
penalty prior to maturity date. The balance of the note plus accrued interest at September
30, 2019 was $20,690.
|
On
July 30, 2019, the holders of loans payable by the Company, entered into debt exchange agreements, whereby the aggregate principal
amount of the loans payable, together with accrued interest thereon until July 30, 2019 were exchanged for shares of common stock
at an exchange price of $0.0063 pre-reverse split ($0.063 post reverse split that was effected in November 2019) per share.
The
balance of the note as of July 30, 2019, plus accrued interest thereon was $20,690 and was converted into 333,717 post reverse
split shares of common stock on November 18, 2019.
|
●
|
On
September 26, 2019, the Company issued a Promissory Note in the aggregate principal amount
of $34,955 to Boba Management Corporation. The note had a maturity date of December 26,
2019 and a coupon of 10% per annum. The Company had the right to prepay the note without
penalty prior to maturity date. The balance of the note plus accrued interest at September
30, 2019 was $34,994.
|
On
November 19, 2019, in terms of a debt exchange agreement entered into, Boba Management exchanged principal in the aggregate of
$34,955 and interest thereon of $469 into 1,968,014 shares of common stock at a conversion price of $0.04 per share, thereby extinguishing
the debt and realizing a loss on exchange of $37,392.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
7
|
LOANS
PAYABLE (continued)
|
Boba
Management Corporation (continued)
On
July 15, 2019, the Company entered into Securities Purchase Agreements with Boba Management Corp whereby the following notes totaling
$65,000 previously advanced to the Company during the period April 12 to May 23, 2019, was converted into 6,500,000 pre-reverse
split (650,000 post reverse split that was effected in November 2019) shares of common stock at a conversion price of $0.01 per
share.
|
●
|
On
April 12, 2019, the Company issued a Promissory Note in the aggregate principal amount
of $20,000 to Boba Management Corporation.
|
|
●
|
On
May 7, 2019, the Company issued a Promissory Note in the aggregate principal amount of
$10,000 to Boba Management Corporation.
|
|
●
|
On
May 13, 2019, the Company issued a Promissory Note in the aggregate principal amount
of $15,000 to Boba Management Corporation.
|
|
●
|
On
May 20, 2019, the Company issued a Promissory Note in the aggregate principal amount
of $15,000 to Boba Management Corporation.
|
|
●
|
On
May 23, 2019, the Company issued a Promissory Note in the aggregate principal amount
of $5,000 to Boba Management Corporation.
|
Global
Business Partnership AG
On
October 16, 2019, the Company issued a Promissory Note in the aggregate principal amount of $24,980 to Global Business Partners
AG. The note had a maturity date of January 14, 2020 and a coupon of 10% per annum. The Company had the right to prepay the note
without penalty prior to maturity date.
On
November 14, 2019, Global Business Partners entered into a share purchase agreement whereby the principal sum of $24,980 and interest
thereon of $198 was settled by the issue of 1,398,803 shares of common stock.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
8
|
CONVERTIBLE
NOTES PAYABLE
|
Convertible
notes payable consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized
|
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
Description
|
|
Interest
rate
|
|
|
Maturity
Date
|
|
Principal
|
|
|
Accrued
interest
|
|
|
debt
discount
|
|
|
Balance,
net
|
|
|
Balance,
net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Power Up Lending Group
|
|
|
8
|
%
|
|
April 30, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
38,645
|
|
|
|
|
8
|
%
|
|
September 15, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,869
|
|
|
|
|
12
|
%
|
|
November 12, 2020
|
|
|
93,000
|
|
|
|
1,223
|
|
|
|
(82,580
|
)
|
|
|
11,643
|
|
|
|
-
|
|
|
|
|
12
|
%
|
|
December 23, 2020
|
|
|
63,000
|
|
|
|
166
|
|
|
|
(61,623
|
)
|
|
|
1,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Labrys Fund, LP
|
|
|
8
|
%
|
|
December, 22 2018
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
129,758
|
|
|
|
|
8
|
%
|
|
April 25, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
126,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JSJ Investments, Inc.
|
|
|
8
|
%
|
|
July 26, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
46,751
|
|
|
|
|
8
|
%
|
|
October 8, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
24,855
|
|
|
|
|
8
|
%
|
|
March 29, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GS Capital Partners, LLC
|
|
|
8
|
%
|
|
May 11, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
41,543
|
|
|
|
|
8
|
%
|
|
August 14, 2019
|
|
|
10,000
|
|
|
|
17,557
|
|
|
|
-
|
|
|
|
27,557
|
|
|
|
61,693
|
|
|
|
|
8
|
%
|
|
August 14, 2019
|
|
|
150,000
|
|
|
|
24,789
|
|
|
|
-
|
|
|
|
174,789
|
|
|
|
53,056
|
|
|
|
|
8
|
%
|
|
September 19, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14,557
|
|
|
|
|
8
|
%
|
|
September 19, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,134
|
|
|
|
|
8
|
%
|
|
February 4, 2020
|
|
|
48,000
|
|
|
|
6,228
|
|
|
|
(4,985
|
)
|
|
|
49,243
|
|
|
|
-
|
|
|
|
|
8
|
%
|
|
February 4, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Viktoria Akhmetova
|
|
|
15
|
%
|
|
December 8, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
24,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph W and Patricia G Abrams
|
|
|
15
|
%
|
|
December 10, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
31,964
|
|
|
|
|
15
|
%
|
|
January 27, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roman Shefer
|
|
|
15
|
%
|
|
December 24, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crown Bridge Partners, LLC
|
|
|
8
|
%
|
|
May 14, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
18,796
|
|
|
|
|
8
|
%
|
|
June 12, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
16,437
|
|
|
|
|
8
|
%
|
|
July 26, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
12,856
|
|
|
|
|
8
|
%
|
|
August 31, 2019
|
|
|
27,500
|
|
|
|
3,303
|
|
|
|
-
|
|
|
|
30,803
|
|
|
|
9,927
|
|
|
|
|
8
|
%
|
|
October 16, 2019
|
|
|
27,500
|
|
|
|
2,887
|
|
|
|
-
|
|
|
|
30,387
|
|
|
|
6,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alex Pereira
|
|
|
8
|
%
|
|
November 11, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Delinvest Commercial, LTD
|
|
|
15
|
%
|
|
December 16, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
24,307
|
|
|
|
|
15
|
%
|
|
December 26, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
65,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BOBA Management Corp
|
|
|
8
|
%
|
|
January 23, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
8
|
%
|
|
October 8, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
8
|
%
|
|
July 16, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Consulting Alliance
|
|
|
8
|
%
|
|
September 15, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
8
|
%
|
|
May 24, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dieter Busenhart
|
|
|
6
|
%
|
|
November 12, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
6
|
%
|
|
November 18, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Odyssey Funding LLC
|
|
|
10
|
%
|
|
November 15, 2020
|
|
|
200,000
|
|
|
|
2,521
|
|
|
|
(174,863
|
)
|
|
|
27,658
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Black Ice Advisors, LLC
|
|
|
10
|
%
|
|
November 25, 2020
|
|
|
52,500
|
|
|
|
575
|
|
|
|
(47,336
|
)
|
|
|
5,739
|
|
|
|
-
|
|
Total convertible notes payable
|
|
|
|
|
|
|
|
$
|
671,500
|
|
|
$
|
59,249
|
|
|
$
|
(371,387
|
)
|
|
$
|
359,362
|
|
|
$
|
790,093
|
|
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
8
|
CONVERTIBLE
NOTES PAYABLE (continued)
|
Interest
expense totaled $188,159 and $196,496 and amortization of debt discount totaled $1,349,071 and $2,023,379 for the year ended
December 31, 2019 and 2018, respectively.
The
convertible notes have variable conversion prices based on a discount to market price of trading activity over a specified period
of time. The variable conversion features were valued using a Black Scholes valuation model. The difference between the fair market
value of the common stock and the calculated conversion price on the issuance date was recorded as a debt discount with a corresponding
credit to derivative financial liability.
The
total value of the beneficial conversion feature recorded as a debt discount during the year ended December 31, 2019 and 2018
was $882,448 and $2,141,024, respectively.
Power
Up Lending Group Ltd
|
●
|
On
July 20, 2018, the Company issued a Convertible Promissory Note in the aggregate principal
amount of $63,000 to Power Up Lending Group LTD. The note had a maturity date of April
30, 2019 and a coupon of eight percent (8%) per annum. The Company had the right to prepay
the note without penalty for the first 180 days. The outstanding principal amount of
the note was convertible at any time and from time to time at the election of the holder
into shares of the Company’s common stock at a conversion price equal to 62% of
the average of the lowest three trading bid prices during the previous ten trading days,
including the date the notice of conversion is received.
|
On
January 23, 2019, in terms of a debt purchase agreement entered into with BOBA Management Corp., BOBA purchased the $63,000 convertible
note plus interest and penalty interest thereon of $25,461. BOBA incurred expenses of $4,423 in purchasing the note, The Company
replaced the convertible note purchased by BOBA for a new convertible note with a principal sum of $92,884, bearing interest at
8% per annum and maturing on January 23, 2020.
|
●
|
On
November 21, 2018, the Company issued a Convertible Promissory Note in the aggregate
principal amount of $83,000 to Power up Lending Group Ltd. The note had a maturity date
of September 15, 2019 and a coupon of 8% per annum. The Company may not prepay the note.
The outstanding principal amount of the note was convertible after 180 days, at the election
of the holder into shares of the Company’s common stock at a conversion price equal
to 62% of the lowest three trading prices during the previous ten trading days.
|
On
May 25, 2019, in terms of a debt purchase agreement entered into with Global Consulting Alliance., the $83,000 convertible note,
plus accrued interest thereon of $3,275, was acquired by Global Consulting Alliance for gross proceeds of $86,275 and an additional
payment directly to Power Up to settle the penalty interest of $34,510.
|
●
|
On
November 21, 2019, the Company issued a Convertible Promissory Note in the aggregate
principal amount of $93,000 to Power up Lending Group Ltd. The note had a maturity date
of November 12, 2020 and a coupon of 12% per annum. The Company may prepay the note with
prepayment penalties ranging from 115% to 135%. The outstanding principal amount of the
note is convertible after 180 days, at the election of the holder into shares of the
Company’s common stock at a conversion price equal to 61% of the lowest three trading
prices during the previous fifteen trading days.
|
The
balance of the note plus accrued interest at December 31, 2019 was $11,643, less unamortized debt discount of $82,580.
|
●
|
On
December 23, 2019, the Company issued a Convertible Promissory Note in the aggregate
principal amount of $63,000 to Power up Lending Group Ltd. The note had a maturity date
of December 23, 2020 and a coupon of 12% per annum. The Company may prepay the note with
prepayment penalties ranging from 115% to 135%. The outstanding principal amount of the
note is convertible after 180 days, at the election of the holder into shares of the
Company’s common stock at a conversion price equal to 61% of the lowest three trading
prices during the previous fifteen trading days.
|
The
balance of the note plus accrued interest at December 31, 2019 was $1,542, less unamortized debt discount of $61,623.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
8
|
CONVERTIBLE
NOTES PAYABLE (continued)
|
Labrys
Fund, LP
|
●
|
On
June 22, 2018, the Company issued a Convertible Promissory Note in the aggregate principal
amount of $150,000 to Labrys Fund, LP. The note had a maturity date of December 22, 2018
and a coupon of 8% per annum. The Company had the right to prepay the note without penalty
for the first 180 days. 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 at a conversion price equal to 60% of the average of the lowest three trading
bid prices during the previous ten (10) trading days, including the date the notice of
conversion is received. In December 2018 the maturity date was extended to February 28,
2019.
|
Between
December 26, 2018 and February 13, 2019, the Company received conversion notices converting an aggregate principal amount of $150,000
and interest thereon of $7,116, at an average conversion price of $0.0156 pre-reverse stock split ($0.156 post reverse stock split
that was effected in November 2019) per share, into 10,070,334 pre-reverse split (1,007,034 post reverse split that was effected
in November 2019) shares of common stock, thereby extinguishing the note.
|
●
|
On
October 25, 2018, the Company issued a Convertible Promissory Note in the aggregate principal
amount of $300,000 to Labrys Fund LP. The note has a maturity date of April 25, 2019
and a coupon of 8% per annum. In connection with the issuance of the note, the Company
was required to issue 825,718 shares of common stock as a commitment fee valued at $165,254.
The shares are returnable to the Company if no Event of Default has occurred prior to
the date the note is fully repaid. The Company may not prepay the note. The outstanding
principal amount of the note was convertible after 180 days, at the election of the holder
into shares of the Company’s common stock at a conversion price equal to 60% of
the lowest trading price during the previous ten (10) trading days.
|
On
April 25, 2019, the Company received conversion notices converting the interest outstanding of $11,967 at a conversion price of
$0.0006 per share, into 1,869,979 pre-reverse split (186,998 post reverse split that was effected in November 2019) shares of
common stock. The note was not repaid and not converted prior to the maturity date, therefore the 825,718 pre-reverse split (82,572
post reverse split that was effected in November 2019) commitment share valued at $165,254 were expensed and the interest rate
on the convertible note increased to 18%, the default interest rate as provided for in the Promissory Note.
On
May 15, 2019, in terms of a debt purchase agreement entered into with Strategic IR, the $300,000 convertible note plus accrued
interest thereon of $2,367 was acquired by Strategic IR for gross proceeds of $302,367.
JSJ
Investments Inc.
|
●
|
On
July 26, 2018, the Company issued a Convertible Promissory Note in the aggregate principal
amount of $100,000 to JSJ Investments, Inc. The note had a maturity date of July 26,
2019 and a coupon of 8% per annum. The Company had the right to prepay the note provided
it makes a prepayment penalty as set forth in the note. The outstanding principal amount
of the note is convertible at any time into shares of the Company’s common stock
at a conversion price equal to 60% of the average of the lowest three trading bid prices
during the previous ten (10) trading days, including the date the notice of conversion
is received.
|
Between
January 28, 2019 and March 11, 2019, the Company received conversion notices, converting an aggregate principal amount of $100,000
and interest thereon of $4,533, at an average conversion price of $0.0126 pre-reverse stock split ($0.126 post reverse stock split
that was effected in November 2019) into 8,304,805 pre-reverse split (830,481 post reverse split that was effected in November
2019) shares of common stock, thereby extinguishing the convertible note.
|
●
|
On
October 8, 2018, the Company issued a Convertible Promissory Note in the aggregate principal
amount of $100,000 to JSJ Investments Inc. The note has a maturity date of October 8,
2019 and a coupon of eight percent (8%) per annum. The Company had the right to prepay
the note prior to maturity in accordance with penalty provisions set forth in the note.
The outstanding principal amount of the note plus interest and any default interest is
convertible at any time after the pre-payment date at the election of the holder into
shares of the Company’s common stock at a conversion price equal to 60% of the
average of the lowest three trading bid prices during the previous ten (10) trading days,
including the date the notice of conversion is received.
|
Between
April 17, 2019 and June 3, 2019 the Company received conversion notices, converting an aggregate principal amount of $88,000 and
fees thereon of $1,500, at an average conversion price of $0.0583 pre-reverse stock split ($0.583 post reverse stock split that
was effected in November 2019), into 14,832,564 pre-reverse split (1,483,257 post reverse split that was effected in November
2019) shares of common stock.
On
July 16, 2019, Boba Management Corp entered into a debt purchase agreement with JSJ Investments, Inc., whereby the remaining balance
of the October 8, 2018 convertible note in the aggregate principal amount of $12,000 plus accrued interest thereon of $4,862,
was acquired for gross proceeds of $16,862. In addition to this Boba Management Corp paid additional settlement costs of $6,800
including an early settlement penalty to JSJ Investments, Inc.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
8
|
CONVERTIBLE
NOTES PAYABLE (continued)
|
JSJ
Investments Inc. (continued)
|
●
|
On
April 2, 2019, the Company received the proceeds of a convertible promissory note issued
to JSJ Investments, Inc. on March 29, 2019, with the aggregate principal amount of $75,000.
The note had a maturity date of March 29, 2020 and a coupon of 8% per annum. The Company
may prepay the note at a premium ranging from 120% to 140% of the principal plus accrued
interest. The outstanding principal amount of the note is convertible after 180 days,
at the election of the holder into shares of the Company’s common stock at a conversion
price equal to 60% of the lowest three trading prices during the previous ten (10) trading
days.
|
On
October 3, 2019, the Company received a notice of conversion from JSJ Investments, converting $25,000 into 9,999,200 pre-reverse
stock split (999,920 post reverse split that was effected in November 2019) shares of common stock at a conversion price of $0.0025
pre-reverse split ($0.025 post reverse split that was effected in November 2019) per share. The Company incurred a loss on conversion
of $24,996.
On
November 12, 2019, Dieter Busenhart entered into a debt purchase agreement with JSJ Investments, Inc., whereby the remaining balance
of the March 29, 2019 convertible note in the aggregate principal amount of $50,000 plus accrued interest thereon of $3,485, was
acquired for gross proceeds of $53,485. In addition to this Mr. Busenhart paid additional settlement costs of $20,000 including
an early settlement penalty to JSJ Investments, Inc.
GS
Capital Partners, LLC
|
●
|
On
May 11, 2018, the Company issued a Convertible Promissory Note in the aggregate principal
amount of $80,000 to GS Capital Partners, LLC. The note had a maturity date of May 11,
2019 and a coupon of 8% per annum. The Company had 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 at a conversion price equal to 62% of
lowest trading bid prices during the previous ten (10) trading days, including the date
the notice of conversion is received.
|
Between
December 27, 2018 and May 6, 2019, the Company received conversion notices converting an aggregate principal amount of $80,000
and interest thereon of $5,290, at an average conversion price of $0.01055 pre-reverse stock split ($0.1055 post reverse stock
split that was effected in November 2019) per share, into 8,087,331 pre-reverse split (808,733 post reverse split that was effected
in November 2019) shares of common stock thereby extinguishing the note.
|
●
|
On
August 14, 2018, the Company issued a Convertible Promissory Note in the aggregate principal
amount of $150,000 to GS Capital Partners, LLC. The note had a maturity date of August
14, 2019 and a coupon of 8% per annum. The Company had the right to prepay the note up
to 180 days, provided it makes a pre-payment penalty as specified in the note. The outstanding
principal amount of the note is convertible at any time after the six-month anniversary
of the note, at the election of the holder into shares of the Company’s common
stock at a conversion price equal to 62% of lowest trading bid prices during the previous
ten (10) trading days, including the date the notice of conversion is received.
|
Between
August 12, 2019 and September 11, 2019, the Company received notices of conversion from GS Capital Partners converting $50,000 of
principal and $3,945 of interest into 17,432,265 pre-reverse split (1,743,227 post reverse split that was effected in November
2019) shares of common stock at an average conversion price of $0.00309 pre-reverse stock split ($0.031 post reverse stock split
that was effected in November 2019) per share. The Company incurred a loss on conversion of $56,315.
As
of August 14, 2019 the note is in default and accrues interest at the default interest rate of 24% per annum.
On
December 30, 2019, the Company repaid the principal sum of $90,000 on the convertible note.
The
balance of the note plus accrued interest at December 31, 2019 was $27,557.
|
●
|
On
September 11, 2018, the Company issued a Convertible Promissory Note in the aggregate
principal amount of $150,000 to GS Capital Partners, LLC. The note has a maturity date
of August 14, 2019 and a coupon of 8% per annum. The note may not be prepaid. The outstanding
principal amount of the note was convertible at any time after the six month anniversary
of the note, at the election of the holder into shares of the Company’s common
stock at a conversion price equal to 62% of lowest trading bid prices during the previous
ten (10) trading days, including the date the notice of conversion is received.
|
As
of August 14, 2019 the note is in default and accrues interest at the default interest rate of 24% per annum.
The
balance of the note plus accrued interest at December 31, 2019 was $174,789.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
8
|
CONVERTIBLE
NOTES PAYABLE (continued)
|
GS
Capital Partners, LLC (continued)
|
●
|
On
September 21, 2018, pursuant to a debt purchase agreement entered into with GS Capital
Partners LLC, the convertible note issued to Power Up Lending Group LTD on March 26,
2018 of $68,000 plus accrued interest thereon of $2,698 was exchanged for a new note
issued to GS Capital Partners LLC, with a principal sum of $70,698 bearing interest at
8% per annum with a maturity date of September 19, 2019. The note may not be prepaid.
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
at a conversion price equal to 65% of the average of the lowest two trading bid prices
during the previous ten (10) trading days, including the date the notice of conversion
is received.
|
Between
October 9, 2018 and June 11, 2019, the Company received notices of conversion, converting principal of $40,698 and interest of
$1,112 into 4,267,152 pre-reverse stock split (426,716 post reverse split that was effected in November 2019) shares of common
stock at an average conversion price of $0.0098 pre-reverse stock split ($0.098 post reverse stock split that was effected in
November 2019) per share.
Between
July 10, 2019 and July 31, 2019, the Company received notices of conversion from GS Capital Partners, converting $30,000 of capital
and $1,983 of interest into 9,936,206 pre-reverse stock split (993,621 post reverse stock split that was effected in November
2019) shares of common stock at an average conversion price of $0.00322 pre-reverse stock split ($0.032 post reverse split that
was effected in November 2019) per share, thereby extinguishing the note. The Company incurred a loss on conversion of $28,009.
|
●
|
On
September 19, 2018, pursuant to a debt purchase agreement entered into with GS Capital
Partners, LLC, the Company issued a convertible promissory note in the aggregate amount
of $33,252 for the payment of penalty interest and legal fees associated with the March
26, 2018 Power Up convertible note discussed below. The note has a maturity date of September
19, 2019 and a coupon of 8% per annum. The Company has the right to prepay the note,
provided it makes payment of 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 at a conversion
price equal to 65% of the two lowest trading bid prices during the previous ten (10)
trading days, including the date the notice of conversion is received.
|
On
July 17, 2019, Strategic IR entered into a debt purchase agreement with GS Capital Partners, whereby the remaining balance of
the September 19, 2019 convertible note in the aggregate principal amount of $33,252 plus accrued interest thereon of $2,165,
was acquired for gross proceeds of $35,417. In addition to this strategic IR paid additional settlement costs of $14,583 including
an early settlement penalty to GS Capital Partners.
|
●
|
On
February 4, 2019, the Company issued a Convertible Promissory Note in the aggregate principal
amount of $96,000 to GS Capital Partners LLC. The note has a maturity date of February
4, 2020 and a coupon of 8% per annum. The Company may not prepay the note. The outstanding
principal amount of the note is convertible after 180 days, at the election of the holder
into shares of the Company’s common stock at a conversion price equal to 62% of
the lowest three trading prices during the previous ten (10) trading days.
|
On
December 19, 2019, the Company repaid the principal sum of $48,000 on the convertible note.
The
balance of the note plus accrued interest at December 31, 2019 was $49,243.
|
●
|
On
March 4, 2019, the Company funded a back-end Convertible Promissory Note in the aggregate
principal amount of $96,000 from GS Capital Partners LLC. The note has a maturity date
of February 4, 2020 and a coupon of 8% per annum. The Company may not prepay the note.
The outstanding principal amount of the note is convertible after 180 days, at the election
of the holder into shares of the Company’s common stock at a conversion price equal
to 62% of the lowest three trading prices during the previous ten (10) trading days.
|
On
October 21, 2019, West point Partners, LLC entered into a debt purchase agreement with GS Capital Partners, whereby the convertible
note in the aggregate principal amount of $96,000 plus accrued interest thereon of $3,745, was acquired for gross proceeds of
$99,745. In addition to this West Point Partners, LLC IR paid additional settlement costs of $22,977 including an early settlement
penalty to GS Capital Partners.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
8
|
CONVERTIBLE
NOTES PAYABLE (continued)
|
Viktoria
Akhmetova
On
June 11, 2017, the Company exchanged a note issued to Viktoria Akhmetova, with a principal amount of $20,000, together with accrued
interest thereon of $164, totaling $20,164, for a convertible note, principal amount of $20,164, bearing interest at 12% per annum
and matured on December 8, 2017. Pursuant to the terms of an agreement entered into with the note holder, the maturity date was
extended to December 8, 2018 and the interest rate was increased to 15% per annum. On February 21, 2019 the maturity date was
extended to December 8, 2019, with the interest rate remaining unchanged. The note is convertible into common shares of the Company
at a conversion price of $0.20 per share.
On
July 30, 2019, the holders of convertible notes with a $0.20 fixed price conversion feature, entered into debt exchange agreements
with the Company, whereby the aggregate principal amount of the convertible notes, together with accrued interest thereon until
July 30, 2019 were exchanged for shares of common stock at an exchange price of $0.0063 pre-reverse split ($0.063 post reverse
split that was effected in November 2019) per share. The Company did not have sufficient unissued shares to effect the exchange
until the reverse stock split of 10:1 shares was effected on November 1, 2019.
The
balance of the note as of July 30, 2019, plus accrued interest thereon was $26,321 and was exchanged for 424,540 post reverse
split shares of common stock on November 18, 2019.
Joseph
W and Patricia G Abrams
|
●
|
Effective
June 13, 2017, the Company exchanged a note issued to Joseph W and Patricia G Abrams
(“Abrams”) with a principal amount of $25,000, together with accrued interest
thereon of $1,247, totaling $26,247, for a convertible note, principal amount of $26,247,
bearing interest at 12% per annum and matured on December 10, 2017. Pursuant to the terms
of an agreement entered into with the note holder, the maturity date was extended to
December 10, 2018 and the interest rate was increased to 15% per annum. On February 21,
2019 the maturity date was extended to December 10, 2019, with the interest rate remaining
unchanged. The convertible note is convertible into common shares of the Company at a
conversion price of $0.20 per share.
|
On
July 30, 2019, the holders of convertible notes with a $0.20 fixed price conversion feature, entered into debt exchange agreements
with the Company, whereby the aggregate principal amount of the convertible notes, together with accrued interest thereon until
July 30, 2019 were exchanged for shares of common stock at an exchange price of $0.0063 pre-reverse split ($0.063 post reverse
split that was effected in November 2019) per share. The Company did not have sufficient unissued shares to effect the exchange
until the reverse stock split of 10:1 shares came into effect on November 1, 2019.
The
balance of the note as of July 30, 2019, plus accrued interest thereon was $34,239 and was exchanged for 552,250 post reverse
split shares of common stock on November 18, 2019.
|
●
|
On
July 31, 2017, the Company issued a Convertible Promissory Note to Abrams in the aggregate
principal amount of $3,753. The note had a maturity date of January 27, 2018 and a coupon
of 12% per annum. Pursuant to terms of an agreement entered into with the note holder,
the maturity date was extended to January 27, 2019 and the interest rate was increased
to 15% per annum. On February 21, 2019 the maturity date was extended to January 27,
2020, with the interest rate remaining unchanged. The Company had the right to prepay
the note without penalty. 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 at a conversion price of $0.25 per share.
|
On
July 30, 2019, the holders of convertible notes with a $0.20 fixed price conversion feature, entered into debt exchange agreements
with the Company, whereby the aggregate principal amount of the convertible notes, together with accrued interest thereon until
July 30, 2019 were exchanged for shares of common stock at an exchange price of $0.0063 pre-reverse split ($0.063 post reverse
split that was effected in November 2019) per share. The Company did not have sufficient unissued shares to effect the exchange
until the reverse stock split of 10:1 shares came into effect on November 1, 2019.
The
balance of the note as of July 30, 2019, plus accrued interest thereon was $4,822 and was exchanged for 77,776 post reverse split
shares of common stock on November 18, 2019.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
8
|
CONVERTIBLE
NOTES PAYABLE (continued)
|
Roman
Schefer
On
June 27, 2017, the Company entered into a convertible promissory note in the aggregate principal amount of $10,000. The note bore
interest at 12% per annum and matured on December 16, 2017. Pursuant to the terms of an agreement entered into with the note holder,
the maturity date was extended to December 24, 2018 and the interest rate was increased to 15% per annum. On February 21, 2019
the maturity date was extended to December 24, 2019, with the interest rate remaining unchanged. The note is convertible into
common shares at a conversion price of $.20 per share.
On
July 30, 2019, the holders of convertible notes with a $0.20 fixed price conversion feature, entered into debt exchange agreements
with the Company, whereby the aggregate principal amount of the convertible notes, together with accrued interest thereon until
July 30, 2019 were exchanged for shares of common stock at an exchange price of $0.0063 pre-reverse split ($0.063 post reverse
split that was effected in November 2019) per share. The Company did not have sufficient unissued shares to effect the exchange
until the reverse stock split of 10:1 shares came into effect on November 1, 2019.
The
balance of the note as of July 30, 2019, plus accrued interest thereon was $12,988 and was exchanged for 209,479 post reverse
split shares of common stock on November 18, 2019.
Crown
Bridge Partners
|
●
|
On
May 14, 2018, the Company issued a Convertible Promissory Note in the aggregate principal
amount of $27,500 to Crown Bridge Partners. The note had a maturity date of May 14, 2019
and a coupon of 8% per annum. The Company had the right to prepay the note for the first
180 days, subject to a penalty ranging from 10% to 35% of the prepayment, dependent upon
the timing of the prepayment. The outstanding principal amount of the note was convertible
at any time and from time to time at the election of the holder into shares of the Company’s
common stock at a conversion price equal to 60% of the lowest trading price during the
previous fifteen (15) trading days.
|
Between
January 16, 2019 and February 12, 2019 the Company received conversion notices, converting an aggregate principal amount of $27,500,
fees of $1,500 and interest thereon of $1,580, at an average conversion price of $0.0128 pre-reverse split ($0.128 post reverse
split that was effected in November 2019), into 2,380,300 pre-reverse split (238,030 post reverse split that was effected in November
2019) shares of common stock, thereby extinguishing the note.
|
●
|
On
June 12, 2018, the Company issued a Convertible Promissory Note in the aggregate principal
amount of $27,500 to Crown Bridge Partners. The note had a maturity date of June 12,
2019 and a coupon of 8% per annum. The Company had the right to prepay the note for the
first 180 days, subject to a penalty ranging from 10% to 35% of the prepayment, dependent
upon the timing of the prepayment. The outstanding principal amount of the note was convertible
at any time and from time to time at the election of the holder into shares of the Company’s
common stock at a conversion price equal to 60% of the lowest trading price during the
previous fifteen (15) trading days.
|
Between
March 15, 2019 and May 24, 2019, the Company received conversion notices, converting an aggregate principal amount of
$27,500, fees thereon of $1,500 and interest thereon of $1,896, at an average conversion price of $0.0043 pre-reverse split
($0.043 post reverse split that was effected in November 2019), into 7,146,260 pre-reverse split (714,626 post reverse split
that was effected in November 2019) shares of common stock, thereby extinguishing the note.
|
●
|
On
July 26, 2018, the Company issued a Convertible Promissory Note in the aggregate principal
amount of $27,500 to Crown Bridge Partners. The note had a maturity date of July 26,
2019 and a coupon of 8% per annum. The Company had the right to prepay the note for the
first 180 days, subject to a penalty ranging from 10% to 35% of the prepayment, dependent
upon the timing of the prepayment. The outstanding principal amount of the note was convertible
at any time and from time to time at the election of the holder into shares of the Company’s
common stock at a conversion price equal to 60% of the lowest trading price during the
previous ten (10) trading days.
|
Between
June 12,2019 and August 7, 2019, the Company received conversion notices, converting an aggregate principal amount of $18,700,
and fees thereon of $1,000, at an average conversion price of $0.0026 pre-reverse split ($0.026 post reverse split that was effected
in November 2019), into 7,700,000 pre-reverse split (770,000 post reverse split that was effected in November 2019) shares of
common stock.
On
December 16, 2019, the Company received a notice of conversion from Crown Bridge Partners converting $8,800 of principal, fees
thereon of $500 and interest of $2,409 into 1,045,457 shares of common stock at a conversion price of $0.011 per share, thereby
extinguishing the note. The Company incurred a loss on conversion of $58,336.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
8
|
CONVERTIBLE
NOTES PAYABLE (continued)
|
Crown
Bridge Partners (continued)
|
●
|
On
August 31, 2018, the Company issued a Convertible Promissory Note in the aggregate principal
amount of $27,500 to Crown Bridge Partners. The note had a maturity date of August 31,
2019 and a coupon of 8% per annum. The Company had the right to prepay the note for the
first 180 days, subject to a penalty ranging from 10% to 35% of the prepayment, dependent
upon the timing of the prepayment. 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 at a conversion price equal to 60% of the lowest trading price during the
previous ten (10) trading days.
|
As
of August 31, 2019 the note is in default and interest accrues at the default interest rate of 12% per annum and the note holder
may require the Company to pay a penalty of 50% of the value of the note outstanding, including default interest.
The
balance of the note plus accrued interest at December 31, 2019 was $30,803.
|
●
|
On
October 16, 2018, the Company issued a Convertible Promissory Note in the aggregate principal
amount of $27,500 to Crown Bridge Partners. The note has a maturity date of October 16,
2019 and a coupon of 8% per annum. The Company may not prepay the note. The outstanding
principal amount of the note is convertible after 180 days, at the election of the holder
into shares of the Company’s common stock at a conversion price equal to 60% of
the lowest trading price during the previous fifteen (15) trading days.
|
As
of October 31, 2019 the note is in default and attracts interest at the default interest rate of 12% per annum and the note holder
may require the Company to pay a penalty of 50% of the value of the note outstanding, including default interest.
The
balance of the note plus accrued interest at December 31, 2019 was $30,387.
Alex
Pereira
On
November 5, 2018, the Company issued a Convertible Promissory Note in the aggregate principal amount of $19,250 to Alex Pereira
as compensation for the expenses incurred on its behalf. The note has a maturity date of November 5, 2019 and a coupon of 8% per
annum. The Company has the right to prepay the note prior to maturity in accordance with penalty provisions set forth in the note.
The outstanding principal amount of the note is convertible after 180 days, at the election of the holder into shares of the Company’s
common stock at a conversion price equal to 62% of the lowest trading price during the previous ten (10) trading days.
On
May 19, 2019, the Company received a conversion notice, converting an aggregate principal amount of $9,660, at a conversion price
of $0.0047 pre-reverse split ($0.047 post reverse split that was effected in November 2019), into 2,049,981 pre-reverse split
(204,999 post reverse split that was effected in November 2019) shares of common stock.
On
July 24, 2019, the Company received a notice of conversion from Alex Pereira, converting $10,692 into 3,414,786 pre-reverse split
(341,479 post reverse split that was effected in November 2019) shares of common stock at a conversion price of $0.003131 pre-reverse split (0.0313 post reverse split that was effected in November 2019) per share, thereby extinguishing the note. The Company
incurred a loss on conversion of $9,797.
Delinvest
Commercial, LTD.
|
●
|
On
June 19, 2017, the Company issued Delinvest Commercial LTD. (“Delinvest”)
a convertible promissory note in the aggregate principal amount of $20,000. The note
bore interest at 12% per annum and matured on December 16, 2017. Pursuant to the terms
of an agreement entered into with the note holder, the maturity date was extended to
December 16, 2018 and the interest rate was increased to 15% per annum. On February 21,
2019 the maturity date was extended to December 16, 2019, with the interest rate remaining
unchanged. The note was convertible into common shares of the Company at a conversion
price of $0.20 per share.
|
On
July 30, 2019, the holders of convertible notes with a $0.20 fixed price conversion feature, entered into debt exchange agreements
with the Company, whereby the aggregate principal amount of the convertible notes, together with accrued interest thereon until
July 30, 2019 were exchanged for shares of common stock at an exchange price of $0.0063 pre-reverse split ($0.063 post reverse
split that was effected in November 2019) per share. The Company did not have sufficient unissued shares to effect the exchange
until the reverse stock split of 10:1 shares came into effect on November 1, 2019.
The
balance of the note as of July 30, 2019, plus accrued interest thereon was $26,041 and was exchanged for 420,018 post reverse
split shares on November 18, 2019.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
8
|
CONVERTIBLE
NOTES PAYABLE (continued)
|
Delinvest
Commercial, LTD. (continued)
|
●
|
On
June 29, 2017, the Company exchanged a Delinvest note with a principal amount of $50,000,
together with accrued interest thereon of $4,123, totaling $54,123, for a convertible
note, principal amount of $54,123, bearing interest at 12% per annum and matured on December
26, 2017. Pursuant to the terms of an agreement entered into with the note holder, the
maturity date was extended to December 26, 2018 and the interest rate was increased to
15% per annum. On February 21, 2019 the maturity date was extended to December 26, 2019,
with the interest rate remaining unchanged. The note was convertible into common
shares of the Company at a conversion price of $0.20 per share.
|
On
July 30, 2019, the holders of convertible notes with a $0.20 fixed price conversion feature, entered into debt exchange agreements
with the Company, whereby the aggregate principal amount of the convertible notes, together with accrued interest thereon until
July 30, 2019 were exchanged for shares of common stock at an exchange price of $0.0063 pre-reverse split ($0.063 post reverse
split that was effected in November 2019) per share. The Company did not have sufficient unissued shares to effect the exchange
until the reverse stock split of 10:1 shares came into effect on November 1, 2019.
The
balance of the note as of July 30, 2019, plus accrued interest thereon was $70,249 and were exchanged for 1,133,050 post reverse
split shares on November 18, 2019.
BOBA
Management Corporation
|
●
|
On
January 23, 2019, the Company issued a Convertible Promissory Note in the aggregate principal
amount of $92,884 to BOBA Management Corporation to assume a Power up Note dated July
20, 2018. The note had a maturity date of January 23, 2020. The outstanding principal
amount of the note was convertible after 180 days, at the election of the holder into
shares of the Company’s common stock at a conversion price equal to 60% of the
lowest three trading prices during the previous ten (10) trading days.
|
On
July 30, 2019, the Company received a notice of conversion from Boba Management Corp, converting $96,710 into 32,894,528 pre-reverse
split (3,289,453 post reverse split that was effected in November 2019) shares of common stock at a conversion price of $0.003
pre-reverse split ($0.03 post reverse split that was effected in November 2019) per share. The Company incurred a loss on conversion
of $103,947.
|
●
|
On
July 16, 2019, Boba Management Corp entered into a debt purchase agreement with JSJ Investments,
Inc., whereby the remaining balance of the October 8, 2018 convertible note in the aggregate
principal amount of $12,000 plus accrued interest thereon of $4,862, was acquired for
gross proceeds of $16,862. In addition to this Boba Management Corp paid additional settlement
costs of $6,800 including an early settlement penalty to JSJ Investments, Inc.
|
|
●
|
On
July 16, 2019, the Company issued Boba Management Corp a Convertible Promissory Note
in the aggregate principal amount of $6,800. The note had a maturity date of July 26,
2020 and a coupon of 8% per annum. The Company had the right to prepay the note provided
it makes a prepayment penalty as set forth in the note. The outstanding principal amount
of the note was convertible at any time into shares of the Company’s common stock
at a conversion price equal to 60% of the average of the lowest three trading bid prices
during the previous ten (10) trading days, including the date the notice of conversion
is received.
|
On
July 30, 2019, the Company received notices of conversion from Boba Management Corp, converting the following: (i) the convertible
note acquired from JSJ Investments, Inc. in the aggregate principal amount of $12,000 plus accrued interest thereon of $4,911
into 5,752,981 pre-reverse split (575,299 post reverse split that was effected in November 2019) shares of common stock at a conversion
price of $0.003 pre-reverse split ($0.03 post reverse split that was effected in November 2019) per share; and (ii) the convertible
promissory note in the aggregate principal amount of $6,800 plus accrued interest thereon of $19 into 2,319,982 pre-reverse split
(231,999 post reverse split that was effected in November 2019) shares of common stock at a conversion price of $0.003 pre-reverse
split ($0.03 post reverse split that was effected in November 2019) per share, thereby extinguishing both notes.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
8
|
CONVERTIBLE
NOTES PAYABLE (continued)
|
Global
Consulting Alliance
|
●
|
On
May 25, 2019, pursuant to the terms of a debt purchase agreement entered into with Power
Up Lending., the $83,000 convertible note dated November 21, 2018, plus accrued interest
thereon of $3,275 was acquired by Global Consulting Alliance. The note had a maturity
date of September 15, 2019 and a coupon of 8% per annum. The Company may not prepay the
note. The outstanding principal amount of the note was convertible after 180 days, at
the election of the holder into shares of the Company’s common stock at a conversion
price equal to 62% of the lowest three trading prices during the previous ten (10) trading
days.
|
On
July 30, 2019, the Company received a notice of conversion from Global Consulting Alliance, converting $87,565 into 28,823,153
pre-reverse split (2,882,216 post reverse split that was effected in November 2019) shares of common stock at a conversion price
of $0.00304 pre-reverse split ($0.0304 post reverse split that was effected in November 2019) per share, thereby extinguishing
the note. The Company incurred a loss on conversion of $88,256.
|
●
|
On
May 25, 2019, the Company issued a Convertible Promissory Note in the aggregate principal
amount of $34,510 to Global Consulting Alliance for penalty interest and expenses incurred
by Global consulting Alliance on assuming the Power up Note dated November 21, 2018.
The note had a maturity date of May 24, 2020. The outstanding principal amount of the
note was convertible after 180 days, at the election of the holder into shares of the
Company’s common stock at a conversion price equal to 60% of the lowest two trading
prices during the previous ten (10) trading days.
|
On
July 30, 2019, the Company received a notice of conversion from Global Consulting Alliance, converting $35,016 into 12,158,241
pre-reverse split shares (1,215,825 post reverse split that was effected in November 2019) shares of common stock at a conversion
price of $0.00288 pre-reverse split ($0.0288 post reverse split that was effected in November 2019) per share., thereby extinguishing
the note. The Company incurred a loss on conversion of $39,150.
Dieter
Busenhart
|
●
|
On
November 12, 2019, Dieter Busenhart entered into a debt purchase agreement with JSJ Investments,
Inc., whereby the remaining balance of the March 29, 2019 convertible note in the aggregate
principal amount of $50,000 plus accrued interest thereon of $3,485, was acquired for
gross proceeds of $53,485. The note had a maturity date of March 29, 2020 and a coupon
of 8% per annum. The Company may prepay the note at a premium ranging from 120% to 140%
of the principal plus accrued interest. The outstanding principal amount of the note
is convertible after 180 days, at the election of the holder into shares of the Company’s
common stock at a conversion price equal to 60% of the lowest three trading prices during
the previous ten (10) trading days. On November 18, 2019, the Company and Dieter Busenhart
entered into an exchange agreement, replacing the existing note with a new note with
a maturity date of November 18, 2020, removing the conversion limitation of ownership
of 9.99% and reducing the interest rate to 6% per annum.
|
On
November 19, 2019, the Company received a notice of conversion converting the aggregate principal amount of the note outstanding,
including interest thereon, totaling $53,595 into 3,370,725 shares of common stock at a conversion price of $0.159 per share,
thereby extinguishing the note. The Company realized a loss on conversion of $71,122.
|
●
|
On
November 12, 2019, the Company issued a Convertible Promissory Note in the aggregate
principal amount of $23,250 to Dieter Busenhart for penalty interest and expenses incurred
by him on acquiring the JSJ Investments, Inc. note dated March 29, 2019. The note had
a maturity date of November 12, 2020 and bears interest at 6% per annum. The outstanding
principal amount of the note was convertible after 180 days, at the election of the holder
into shares of the Company’s common stock at a conversion price equal to 60% of
the average three lowest trading prices during the previous ten trading days.
|
On
November 19, 2019, the Company received a notice of conversion converting the aggregate principal amount of the note outstanding,
including interest thereon, totaling $23,273 into 1,463,706 shares of common stock at a conversion price of $0.159 per share,
thereby extinguishing the note. The Company realized a loss on conversion of $30,884.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
8
|
CONVERTIBLE
NOTES PAYABLE (continued)
|
Odyssey
Funding, LLC
On
November 15, 2019, the Company issued a Convertible Promissory Note in the aggregate principal amount of $200,000 to Odyssey Funding,
LLC. The note had a maturity date of November 15, 2020 and a coupon of 10% per annum. The Company may prepay the note with prepayment
penalties ranging from 120% to 145%. The outstanding principal amount of the note is convertible after 180 days, at the election
of the holder into shares of the Company’s common stock at a conversion price equal to 58% of the lowest trading price during
the previous fifteen trading days.
The
balance of the note plus accrued interest at December 31, 2019 was $27,657, less unamortized debt discount of $174,864.
Black
Ice Advisors, LLC
On
November 25, 2019, the Company issued a Convertible Promissory Note in the aggregate principal amount of $52,500 to Black Ice
Advisors, LLC. The note had a maturity date of November 25, 2020 and a coupon of 10% per annum. The Company may prepay the note
with prepayment penalties ranging from 120% to 145%. The outstanding principal amount of the note is convertible after 180 days,
at the election of the holder into shares of the Company’s common stock at a conversion price equal to 58% of the lowest
trading price during the previous fifteen trading days.
The
balance of the note plus accrued interest at December 31, 2019 was $5,739, less unamortized debt discount of $47,336.
Certain
of the short-term convertible notes disclosed in note 8 above and note 14 below, 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, due to the variable
priced conversion rights, all convertible notes and any warrants attached thereto, issued subsequent to the variable priced conversion
notes are valued and give rise to a derivative financial liability, which was initially valued at inception of the convertible
notes using a Black-Scholes valuation model. The value of this derivative financial liability was re-assessed at December 31, 2019
and 2018, and $1,981,938 and $4,129,793 was credited 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.
The
following assumptions were used in the Black-Scholes valuation model:
|
|
Year ended
December 31,
2019
|
|
|
Year ended
December 31,
2018
|
|
Conversion price*
|
|
$
|
0.02
to 2.00
|
|
|
$
|
0.20
to 2.50
|
|
Risk free interest rate
|
|
|
1.53
to 2.59
|
%
|
|
|
1.78
to 2.81
|
%
|
Expected life of derivative liability
|
|
|
1
to 12 months
|
|
|
|
3
to 12 months
|
|
Expected volatility of underlying stock
|
|
|
148.5
to 224.3
|
%
|
|
|
169.15
to 230.55
|
%
|
Expected dividend rate
|
|
|
0
|
%
|
|
|
0
|
%
|
*
|
Adjusted
for 10 for 1 reverse stock split effective November 1, 2019.
|
The
movement in derivative liability is as follows:
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
|
|
|
|
|
|
|
Opening balance
|
|
$
|
1,833,672
|
|
|
$
|
3,277,621
|
|
Derivative financial liability arising from convertible note
|
|
|
1,053,842
|
|
|
|
2,685,844
|
|
Fair value adjustment to derivative liability
|
|
|
(1,981,938
|
)
|
|
|
(4,129,793
|
)
|
|
|
$
|
905,576
|
|
|
$
|
1,833,672
|
|
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
The
Company has authorized 500,000,000 common shares with a par value of $0.0001 each. The Company has issued and outstanding 128,902,124
shares of common stock as of December 31, 2019 and 8,883,922 as of December 31, 2018, after giving effect
to a 10 for 1 reverse stock split.
On
November 1, 2019, the Company filed a Certificate of Change with the Secretary of State of the State of Nevada to effect a reverse
split of Company’s common stock at a ratio of 1-for-10 (the “Reverse Stock Split”), effective on November 1,
2019. As a result of the Reverse Stock Split, each ten (10) pre-split shares of common stock outstanding was automatically combined
into one (1) new share of common stock without any further action on the part of the holders, and the number of outstanding shares
common stock was reduced from 320,477,867 shares to 32,047,886 shares, after taking into account rounding up for fractional shares.
The
following common shares were issued by the Company during the year ended December 31, 2019.
|
●
|
In
terms of various debt conversion notices received between January 16, 2019 and December
17, 2019, the Company issued an aggregate of 99,106,803 shares of common stock, and in
terms of various debt exchange agreements entered into on November 18, 2019, the Company
issued an aggregate of 17,641,713 shares of common stock, in settlement of $2,792,648
of convertible notes and $791,857 of loans payable, resulting in a net loss on conversion
and exchange of $2,838,599.
|
|
●
|
The
Company did not repay a convertible note issued to Labrys Fund, LP prior to the maturity
date, which resulted in the returnable commitment shares being retained by Labrys Fund,
LP. The 82,572 shares of common stock was expensed as a commitment fee, valued at $165,254
on April 25, 2019.
|
|
●
|
In
terms of subscription agreements entered into with investors between August 5, 2019 and
November 18, 2019, the Company issued 3,177,015 shares of common stock for gross proceeds
of $200,400.
|
The
Company has authorized 25,000,000 shares of preferred stock with a par value of $0.0001 authorized, no preferred stock is issued
and outstanding as of December 31, 2019 and 2018.
A
summary of warrant activity during the period January 1, 2018 to December 31, 2019 is as follows:
|
|
Shares
Underlying
Warrants*
|
|
|
Exercise
price per
share*
|
|
|
Weighted
average
exercise
price*
|
|
Outstanding January 1, 2018
|
|
|
852,775
|
|
|
$
|
2.00
to 6.25
|
|
|
$
|
5.10
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited/Cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding December 31, 2018
|
|
|
852,775
|
|
|
$
|
2.00
to 6.25
|
|
|
$
|
5.10
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited/Cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding December 31, 2019
|
|
|
852,775
|
|
|
$
|
2.00
to 6.25
|
|
|
$
|
5.10
|
|
*
Adjusted for 10 for 1 reverse stock split effective November 1, 2019.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
10
|
STOCKHOLDERS’
EQUITY (continued)
|
The
warrants outstanding and exercisable at December 31, 2019 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
|
|
$
|
6.25
|
|
|
|
621,920
|
|
|
|
0.75
|
|
|
|
|
|
|
|
621,920
|
|
|
|
|
|
|
|
|
|
$
|
2.00
|
|
|
|
230,855
|
|
|
|
0.50
|
|
|
|
|
|
|
|
230,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
852,775
|
|
|
|
0.68
|
|
|
$
|
5.10
|
|
|
|
852,775
|
|
|
$
|
5.10
|
|
|
|
0.68
|
|
*
|
Adjusted
for 10 for 1 reverse stock split effective November 1, 2019.
|
The
warrants outstanding have an intrinsic value of $0 and $0 as of December 31, 2019 and 2018, respectively.
On
June 18, 2018, the Company established its 2018 Stock Incentive Plan. The purpose of the plan is to promote the interests of the
Company and the stockholders of the Company by providing directors, officers, employees and consultants of the Company with appropriate
incentives and rewards to encourage them to enter into and continue in the employ or service of the Company, to acquire a proprietary
interest in the long-term success of the Company and to reward the performance of individuals in fulfilling long-term corporate
objectives. The plan terminates after a period of ten years in June 2028.
The
Plan is administered by the Board of Directors or a Committee appointed by the Board of Directors who have the authority to administer
the Plan and to exercise all the powers and authorities either specifically granted to it under the Plan.
The
maximum number of securities available under the plan is 8,000,000 shares of common stock. The maximum number of shares of common
stock awarded to any individual during any fiscal year may not exceed 1,000,000 shares of common stock.
No
options or restricted shares were granted for the year ended December 31, 2019.
On
June 29, 2018, the Company granted a director 120,000 shares of restricted common stock in terms of the Stock Incentive Plan.
These shares were valued at $49,200 on the date of grant and were vested immediately.
On
December 27, 2018, the Company granted a director 70,000 shares of restricted common stock in terms of the stock incentive plan.
These shares were valued at $2,975 on the granted date and vested immediately.
On
December 27, 2018, the Company granted ten year options to purchase an aggregate of 2,000,000 shares of common stock at an exercise
price of $0.04 per share, valued at $79,606, to the executive officers of the Company.
On
November 1, 2019m, the 100,000 stock options issued to Gaston Pereira expired as they were not exercised within three months of
his resignation.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
10
|
STOCKHOLDERS’
EQUITY (continued)
|
|
d.
|
Stock
options (continued)
|
The
fair value of the options issued were valued using a Black Scholes option pricing model using the following assumptions:
|
|
Year ended
December 31,
2018
|
|
|
|
|
|
Calculated stock price
|
|
$
|
0.04
|
|
Risk-free interest rate
|
|
|
2.77
|
%
|
Expected life of warrants (in years)
|
|
|
10
|
|
Expected volatility of the underlying stock
|
|
|
174.91
|
%
|
Expected dividend rate
|
|
|
0
|
%
|
The
volatility of the common stock is estimated using historical data of the Company. The risk-free interest rate used in the Black-Scholes
pricing model is determined by reference to historical U.S. Treasury constant maturity rates with maturities approximate
to the life of the options granted. An expected dividend yield of zero is used in the valuation model, because the Company does
not expect to pay any cash dividends in the foreseeable future. As of December 31, 2018, the Company does not anticipate
any of the options will be forfeited in performing the valuation of the options.
A
summary of option activity during the period January 1, 2018 to December 31, 2019 is as follows:
|
|
Shares
Underlying
options*
|
|
|
Exercise
price per
share*
|
|
|
Weighted
average
exercise
price*
|
|
Outstanding January 1, 2018
|
|
|
200,000
|
|
|
$
|
0,40
|
|
|
$
|
0,40
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited/Cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding December 31, 2018
|
|
|
200,000
|
|
|
|
0.40
|
|
|
|
0.40
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited/Cancelled
|
|
|
(100,000
|
)
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding December 31, 2019
|
|
|
100,000
|
|
|
$
|
0.40
|
|
|
$
|
0.40
|
|
*
|
Adjusted
for 10 for 1 reverse stock split effective November 1, 2019.
|
The
options outstanding and exercisable at December 31, 2019 are as follows:
|
|
|
Options Outstanding
|
|
|
Options 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
|
|
|
0.40
|
|
|
|
100,000
|
|
|
|
9.00
|
|
|
$
|
0.40
|
|
|
|
100,000
|
|
|
$
|
0.4
|
|
|
|
9.00
|
|
*
|
Adjusted
for 10 for 1 reverse stock split effective November 1, 2019.
|
The
options outstanding have an intrinsic value of $0 and $0 as of December 31, 2019 and 2018, respectively.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
The
Company’s primary operations were based in Mexico and currently enacted tax laws in Mexico are used in the calculation of
income taxes, the holding company is based in the US and currently enacted US tax laws are used in the calculation of income taxes.
Federal
Corporate Income Tax (“CIT”) - Mexico
CIT
applies to Mexican resident taxpayers’ income from worldwide sources, as well as to foreign residents on the income attributed
to their permanent establishments (“Pes”) located in Mexico. The federal CIT rate is 30%.
All
corporate entities, including associations of a civil nature, branches, etc., are subject to the tax rules applicable to Mexican
corporations (unless specifically ruled out).
Provisions
to recognize the effects of inflation for tax purposes in the areas of monetary assets and liabilities (annual monetary adjustment)
and depreciable assets are provided in the Mexican Income Tax Law, even though recent inflation rates have been stable at low
levels
Federal
Income Tax - United States
On
December 22, 2017, the Tax Cuts and Jobs Act (the TCJA), which significantly modified U.S. corporate income tax law, was signed
into law by President Trump. The TCJA contains significant changes to corporate income taxation, including but not limited to
the reduction of the corporate income tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction
for interest expense to 30% of earnings (except for certain small businesses), limitation of the deduction for net operating losses
to 80% of current year taxable income and generally eliminating net operating loss carrybacks, allowing net operating losses to
carryforward without expiration, one-time taxation of offshore earnings at reduced rates regardless of whether they are repatriated,
elimination of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain new investments
instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits (including
changes to the orphan drug tax credit and changes to the deductibility of research and experimental expenditures that will be
effective in the future). Notwithstanding the reduction in the corporate income tax rate, the overall impact of the new federal
tax law is uncertain, including to what extent various states will conform to the newly enacted federal tax law.
Income
taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and
liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and
are measured using the currently enacted tax rates and laws. A full valuation allowance is provided for the amount of deferred
tax assets that, based on available evidence, are not expected to be realized. It is the Company’s policy to classify interest
and penalties on income taxes as interest expense or penalties expense. As of December 31, 2019 and 2018, there have been no interest
or penalties incurred on income taxes.
The
provision for income taxes consists of the following:
|
|
|
Year
ended
December 31,
2019
|
|
|
|
Year
ended
December 31,
2018
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
-
|
|
|
$
|
-
|
|
State
|
|
|
-
|
|
|
|
-
|
|
Foreign
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
-
|
|
|
$
|
-
|
|
State
|
|
|
-
|
|
|
|
-
|
|
Foreign
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
11
|
INCOME
TAXES (continued)
|
A
reconciliation of the U.S. Federal statutory income tax to the effective income tax is as follows:
|
|
Year ended
December 31,
2019
|
|
|
Year ended
December 31,
2018
|
|
Continuing operations
|
|
|
|
|
|
|
Tax expense at the federal statutory rate
|
|
$
|
(850,030
|
)
|
|
$
|
(1,141,370
|
)
|
State tax expense, net of federal tax effect
|
|
|
-
|
|
|
|
-
|
|
Effect of foreign operations
|
|
|
-
|
|
|
|
27,713
|
|
Effect of income tax rate change
|
|
|
-
|
|
|
|
-
|
|
Permanent timing differences
|
|
|
772,183
|
|
|
|
(147,563
|
)
|
Temporary timing differences
|
|
|
27,299
|
|
|
|
8,271
|
|
|
|
|
(50,548
|
)
|
|
|
(1,252,950
|
)
|
Deferred income tax asset valuation allowance
|
|
|
50,548
|
|
|
|
1,252,950
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
Tax expense at the federal statutory rate
|
|
$
|
66,918
|
|
|
$
|
(1,141,370
|
)
|
State tax expense, net of federal tax effect
|
|
|
-
|
|
|
|
-
|
|
Effect of foreign operations
|
|
|
(27,739
|
)
|
|
|
27,713
|
|
Effect of income tax rate change
|
|
|
-
|
|
|
|
-
|
|
Permanent timing differences
|
|
|
(1,834,306
|
)
|
|
|
(147,563
|
)
|
Temporary timing differences
|
|
|
63,004
|
|
|
|
8,271
|
|
|
|
|
(1,732,123
|
)
|
|
|
(1,252,950
|
)
|
Deferred income tax asset valuation allowance
|
|
|
1,732,123
|
|
|
|
1,252,950
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Significant components of the Company’s
deferred income tax assets are as follows:
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
Depreciation and amortization
|
|
$
|
-
|
|
|
$
|
12,618
|
|
Other
|
|
|
27,299
|
|
|
|
(15,412
|
)
|
Net operating losses
|
|
|
3,936,879
|
|
|
|
3,750,027
|
|
Valuation allowance
|
|
|
(3,964,178
|
)
|
|
|
(3,747,233
|
)
|
Net deferred income tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
The valuation allowance for deferred income
tax assets as of December 31, 2019 and December 31, 2018 was $3,964,178 and $3,747,233, respectively. The net
change in the deferred income tax assets valuation allowance was an increase of 216,946 after reducing prior year tax loss carry
forwards by $(313,050) upon assessment, increasing the deferred tax asset by $63,004 for current year temporary timing differences
and by reducing the deferred tax asset by $(1,315,240) for the disposal of Qpagos Corporation and the Mexican operations, effective
December 31, 2019.
As of December 31, 2019,
the prior three years remain open for examination by the federal or state regulatory agencies for purposes of an audit for tax
purposes.
Estimated net operating loss
carry-forwards of Innovative Payment Solutions of $18,747,044 begin to expire in 2034 through 2040. In assessing the realizability
of deferred income tax assets, management considers whether or not it is more likely than not that some portion or all deferred
income tax assets will be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary differences become deductible. Management considers the projected
future taxable income and tax planning strategies in making this assessment.
The Company’s ability
to utilize the United States Federal operating loss carry-forwards may be subject to an annual limitation if pursuant to IRC Section
382/383 of the Internal Revenue Code of 1986, as amended, if a change of ownership has occurred. Management has not determined
if an ownership change has occurred under IRC Section 382/383, but is evaluating, if such change has occurred. If such change
has occurred it is also possible that the loss carryforward could be eliminated.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
12
|
EQUITY
BASED COMPENSATION
|
Equity
based compensation is made up of the following:
|
|
Year ended December 31,
2019
|
|
|
Year ended December 31,
2018
|
|
|
|
|
|
|
|
|
Incentive stock awards
|
|
$
|
-
|
|
|
|
52,175
|
|
Stock issued for services rendered
|
|
|
162,254
|
|
|
|
34,739
|
|
|
|
$
|
162,254
|
|
|
$
|
86,914
|
|
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 years ended December 31, 2019
and 2018 all warrants options and convertible debt securities 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 for the years ended December 31, 2019 and 2018 are as follows:
|
|
Year ended
December 31,
2019
(Shares)
|
|
|
Year ended
December 31,
2018
(Shares)
|
|
|
|
|
|
|
|
|
Convertible debt
|
|
|
28,557,283
|
|
|
|
7,791,195
|
|
Stock options
|
|
|
100,000
|
|
|
|
200,000
|
|
Warrants to purchase shares of common stock
|
|
|
852,775
|
|
|
|
852,775
|
|
|
|
|
29,510,058
|
|
|
|
8,843,970
|
|
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
14
|
RELATED
PARTY TRANSACTIONS
|
The
following transactions were entered into with related parties:
Gaston
Pereira
On
December 27, 2018, the company granted Mr. Pereira ten year options to purchase an aggregate of 100,000 shares of common stock
at an exercise price of $0.40 per share. These options expired on November 1, 2019, three months after his resignation
Andrey
Novikov
On
December 27, 2018, the company granted Mr. Novikov ten year options to purchase an aggregate of 100,000 shares of common stock
at an exercise price of $0.40 per share.
James
Fuller
On
June 29, 2018, the Company granted Mr. Fuller 12,000 shares of restricted common stock in terms of the Stock Incentive Plan.
On
December 27, 2018, the Company granted Mr. Fuller 7,000 shares of restricted common stock in terms of the stock incentive plan.
LOANS
PAYABLE
Description
|
|
Interest Rate
|
|
|
Maturity Date
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vladimir Skiguine
|
|
|
18
|
%
|
|
January 11, 2020
|
|
|
-
|
|
|
|
55,474
|
|
|
|
|
4
|
%
|
|
December 12,2020
|
|
|
30,026
|
|
|
|
-
|
|
|
|
|
8
|
%
|
|
December 9, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
|
36
|
%
|
|
On Demand
|
|
|
-
|
|
|
|
81,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strategic IR
|
|
|
10
|
%
|
|
February 10, 2020
|
|
$
|
-
|
|
|
$
|
177,159
|
|
|
|
|
|
|
|
November 17, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
|
10
|
%
|
|
December 10, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
|
10
|
%
|
|
December 25, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
January 9, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
January 13, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans payable - Related parties
|
|
|
|
|
|
|
|
$
|
30,026
|
|
|
$
|
313,949
|
|
Interest
expense amounted to $24,771 and $14,141 for the years ended December 31, 2019 and 2018, respectively.
Vladimir Skiguine
Mr.
Skiguine is considered to be a related party as his shareholding and that of the Company’s under his control exceeds 5%.
On April 17, 2018, the Company
issued a Promissory Note in the aggregate principal amount of $49,491 to Vladimir Skiguine. The note had a maturity date of September
13, 2018 and a coupon of eighteen percent per annum. The Company had the right to prepay the note without penalty prior to maturity
date. On September 13, 2018, the maturity date of the note was extended to January 11, 2019. On February 21, 2019 the maturity
date was extended to September 13, 2019, with the interest rate changed to 15%.
On July 30, 2019, the holders
of loans payable by the Company, entered into debt exchange agreements, whereby the aggregate principal amount of the loans payable,
together with accrued interest thereon until July 30, 2019 were exchanged for shares of common stock at an exchange price of $0.0063
pre-reverse split ($0.063 post reverse split that was effected in November 2019) per share. The Company did not have sufficient
unissued shares to effect the exchange until the reverse stock split of 10:1 shares came into effect on November 1, 2019.
The balance of the note as of
July 30, 2019, plus accrued interest thereon was $59,810 and was converted into 964,670 post reverse split shares on November
18, 2019.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
14
|
RELATED
PARTY TRANSACTIONS (continued)
|
LOANS
PAYABLE (continued)
Vladimir Skiguine (continued)
On
December 23, 2019, in terms of a debt purchase agreement entered into with Waketec OU, Mr. Skiguine acquired $30,000 of the promissory
note issued to Waketec OU by Qpagos Corporation. On December 23, 2019, the Company entered into a debt settlement agreement whereby
the company agreed to the assignment of the debt owed to Mr. Skiguine by Qpagos Corporation to the Company in exchange for a new
promissory note in the principal amount of $30,000 issued by the Company. The promissory note is unsecured, bears interest at
4% per annum and matures on December 23, 2020. The balance of the promissory note, including interest thereon at December 31,
2019 is $30,026.
On
December 11, 2019, Mr. Skiguine purchased a portion of a note issued to Andrey Novikov by Qpagos Corporation in the principal amount
of $65,953. On December 17, 2019, the company entered into a debt settlement with Mr. Skiguine whereby the Note was assigned from
Qpagos Corporation to the Company and was simultaneously settled by the issue of 2,231,768 shares of common stock at an issue
price of $0.03 per share, thereby extinguishing the note. A loss on settlement of $67,953 was realized.
The
Company entered into an agreement with Gibbs, whereby the importation of kiosks and accessories was arranged and funded by Gibbs,
Skiguine funded a portion of the kiosks and accessories purchased under the same terms and conditions of the agreement entered into
with Gibbs. Pursuant to the terms of the agreement, a 5% margin has been added to the cost of the kiosks and accessories purchased
and to the liability outstanding. The amount was due on November 1, 2017. The amount has not been paid to date. The agreement
does not provide for any default provisions and management is currently negotiating the terms of repayment with Skiguine. A penalty
interest rate has been provided for on the loan.
On
July 30, 2019, the holders of loans payable by the Company, entered into debt exchange agreements, whereby the aggregate principal
amount of the loans payable, together with accrued interest thereon until July 30, 2019 were exchanged for shares of common stock
at an exchange price of $0.0063 pre-reverse split ($0.063 post reverse split that was effected in November 2019) per share. The
Company did not have sufficient unissued shares to effect the exchange until the reverse stock split of 10:1 shares came into
effect on November 1, 2019.
The
balance of the note as of July 30, 2019, plus accrued interest thereon was $74,662, after the interest was adjusted to $19,366
and was converted into 1,204,234 post reverse split shares on November 18, 2019.
Strategic
IR
Strategic
IR is considered to be a related party as its shareholding is approximately 24.0%.
|
●
|
Strategic
IR advanced the Company $168,000 between January 16 and June 15, 2018. This loan was
formalized into a written note on October 13, 2018 and bears interest at the rate of
10% per annum. The note had a maturity date of February 10, 2019. On March 18, 2019 the
note was extended to February 10, 2020, and the interest rate was changed to 15%.
|
On
July 30, 2019, the holders of loans payable by the Company, entered into debt exchange agreements, whereby the aggregate principal
amount of the loans payable, together with accrued interest thereon until July 30, 2019 were exchanged for shares of common stock
at an exchange price of $0.0063 pre-reverse split ($0.063 post reverse split that was effected in November 2019) per share. The
Company did not have sufficient unissued shares to effect the exchange until the reverse stock split of 10:1 shares came into
effect on November 1, 2019.
The
balance of the note as of July 30, 2019, plus accrued interest thereon was $196,307 and was converted into 3,166,240 post reverse
split shares on November 18, 2019.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
14
|
RELATED
PARTY TRANSACTIONS (continued)
|
LOANS
PAYABLE (continued)
Strategic
IR
On
November 15, 2019, the Company entered into Securities Purchase Agreements with Strategic IR whereby the following notes totaling
$79,500 previously advanced to the Company during the period August 19, 2019 to October 15, 2019, was converted into 4,486,750
shares of common stock at a conversion price of $0.037 per share, thereby extinguishing the notes and realizing a loss on conversion
of $85,248.
|
●
|
On
August 19, 2019, the Company issued a Promissory Note in the aggregate principal amount
of $15,000 to Strategic IR. The note has a maturity date of November 17, 2019 and a coupon
of ten percent per annum. The Company has the right to prepay the note without penalty
prior to maturity date.
|
|
●
|
On
September 10, 2019, the Company issued a Promissory Note in the aggregate principal amount
of $37,500 to Strategic IR. The note has a maturity date of December 10, 2019 and a coupon
of ten percent per annum. The Company has the right to prepay the note without penalty
prior to maturity date.
|
|
●
|
On
September 25, 2019, the Company issued a Promissory Note in the aggregate principal amount
of $2,000 to Strategic IR. The note has a maturity date of December 25, 2019 and a coupon
of ten percent per annum. The Company has the right to prepay the note without penalty
prior to maturity date.
|
|
●
|
On
October 11, 2019, the Company issued a Promissory Note in the aggregate principal amount
of $3,000 to Strategic IR. The note has a maturity date of January 9, 2020 and a coupon
of ten percent per annum. The Company has the right to prepay the note without penalty
prior to maturity date.
|
|
●
|
On
October 15, 2019, the Company issued a Promissory Note in the aggregate principal amount
of $22,000 to Strategic IR. The note has a maturity date of January 13, 2020 and a coupon
of ten percent per annum. The Company has the right to prepay the note without penalty
prior to maturity date.
|
CONVERTIBLE
NOTES PAYABLE
Description
|
|
Interest
rate
|
|
|
Maturity Date
|
|
Principal
|
|
|
Accrued
interest
|
|
|
Unamortized
debt
discount
|
|
|
December 31,
2019
Balance,
net
|
|
|
December 31,
2018
Balance,
net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strategic IR
|
|
|
18
|
%
|
|
April 25, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
15
|
%
|
|
December 8, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,193
|
|
|
|
|
15
|
%
|
|
December 8, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
24,573
|
|
|
|
|
15
|
%
|
|
December 26, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
65,091
|
|
|
|
|
15
|
%
|
|
December 26, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
139,940
|
|
|
|
|
8
|
%
|
|
September 19, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
6
|
%
|
|
July 17,2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cobbolo Limited
|
|
|
15
|
%
|
|
December 26, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
64,726
|
|
|
|
|
15
|
%
|
|
December 26, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
64,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gibbs International Holdings
|
|
|
15
|
%
|
|
On demand
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
63,798
|
|
|
|
|
8
|
%
|
|
August 31, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
155,345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bellridge Capital LP
|
|
|
18
|
%
|
|
April 25, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
West Point Partners, LLC
|
|
|
8
|
%
|
|
September 3, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
6
|
%
|
|
November 18, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
8
|
%
|
|
October 21, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total convertible
notes payable
|
|
|
|
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
589,812
|
|
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
14
|
RELATED
PARTY TRANSACTIONS (continued)
|
CONVERTIBLE
NOTES PAYABLE (continued)
Interest
expense amounted to $58,732 and $67,101 for the years ended December 31, 2019 and 2018, respectively. The amortization of debt
discount amounted to $343,039 and $614,277 for the years ended December 31, 2019 and 2018, respectively.
The
convertible notes have variable conversion prices based on a discount to market price of trading activity over a specified period
of time. The variable conversion features were valued using a Black Scholes valuation model. The difference between the fair market
value of the common stock and the calculated conversion price on the issuance date was recorded as a debt discount with a corresponding
credit to derivative financial liability.
The
total value of the beneficial conversion feature recorded as a debt discount during the year ended December 31, 2019 and 2018
was $141,591and $544,819, respectively.
Strategic
IR
|
●
|
On
May 15, 2019, pursuant to the terms of a debt purchase agreement entered into with Labrys
Fund LP. the $300,000 convertible promissory note issued on October 25, 2018, with a
maturity date of April 25, 2019 and an original coupon of 8% per annum, was acquired
by Strategic IR for gross proceeds of $302,367, including accrued interest thereon.
|
The
Convertible note earns interest at 18% per annum, the default interest rate in terms of the Promissory note.
The
terms of the convertible note include a provision for an automatic note penalty of 50% of the note outstanding if the note is
in default. Strategic IR enforced this term resulting in an increase in the principal outstanding in terms of the note of $150,000.
On June 19, 2019, pursuant to the terms of a debt purchase agreement entered into with Bellridge Capital LP, Strategic IR transferred
and assigned the aggregate principal sum of $200,000 plus accrued interest thereon of $3,124, of the Convertible note acquired
from Labrys Fund LP.
On
July 30, 2019, the Company received a notice of conversion from Strategic IR, converting $108,882 of the April 25, 2018 convertible
note acquired from Labrys Fund LP, into 37,034,605 pre-reverse split (3,703,461 post reverse split that was effected in November
2019) shares of common stock at a conversion price of $0.003 pre-reverse split ($0.03 post reverse split that was effected in
November 2019) per share.
On
November 18, 2019, the Company and Strategic IR entered into an exchange agreement, replacing the remaining balance of the May
15, 2019 convertible note purchased from Labrys Fund LP, 2019, including interest thereon with a new note in the aggregate principal
amount of $159,123 with a maturity date of November 18, 2020, removing the conversion limitation of ownership of 9.99% and reducing
the interest rate to 6% per annum.
On
November 19, 2019, in terms of a conversion notice received, the Company received a conversion notice converting the aggregate
principal sum of $159,123 and interest thereon into 10,007,882 shares of common stock at a conversion price of $0.0159 per share,
thereby extinguishing the note and realizing a loss on conversion of $211,166.
|
●
|
On
June 11, 2017, the Company issued a convertible promissory note in the aggregate principal
amount of $10,000 to Strategic IR (“Strategic”). The note bears interest
at 12% per annum and matured on December 16, 2017. Pursuant to the terms of an agreement
entered into with the note holder, the maturity date of the note was extended to December
8, 2018 and the interest rate was increased to 15% per annum. On February 21, 2019 the
maturity date was extended to December 8, 2019, with the interest rate remaining unchanged.
|
On
July 30, 2019, the holders of convertible notes with a $0.20 fixed price conversion feature, entered into debt exchange agreements
with the Company, whereby the aggregate principal amount of the convertible notes, together with accrued interest thereon until
July 30, 2019 were exchanged for shares of common stock at an exchange price of $0.0063 pre-reverse split ($0.063 post reverse
split that was effected in November 2019) per share. The Company did not have sufficient unissued shares to effect the exchange
until the reverse stock split of 10:1 shares came into effect on November 1, 2019.
The
balance of the note as of July 30, 2019, plus accrued interest thereon was $13,060 and was converted into 210,645 post reverse
split shares on November 18, 2019.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
14
|
RELATED
PARTY TRANSACTIONS (continued)
|
CONVERTIBLE
NOTES PAYABLE (continued)
Strategic
IR (continued)
|
●
|
On
June 11, 2017, the Company exchanged a note issued to Viktoria Akhmetova, with a principal
amount of $20,000, together with accrued interest thereon of $164, totaling $20,164,
for a convertible note, principal amount of $20,164, bearing interest at 12% per annum
and matured on December 8, 2017. In terms of an agreement entered into with the note
holder, the maturity date was extended to December 8, 2018 and the interest rate was
increased to 15% per annum. On February 21, 2019 the maturity date was extended to December
8, 2019, with the interest rate remaining unchanged.
|
On
July 30, 2019, the holders of convertible notes with a $0.20 fixed price conversion feature, entered into debt exchange agreements
with the Company, whereby the aggregate principal amount of the convertible notes, together with accrued interest thereon until
July 30, 2019 were exchanged for shares of common stock at an exchange price of $0.0063 pre-reverse split ($0.063 post reverse
split that was effected in November 2019) per share. The Company did not have sufficient unissued shares to effect the exchange
until the reverse stock split of 10:1 shares came into effect on November 1, 2019.
The
balance of the note as of July 30, 2019, plus accrued interest thereon was $26,321 and was converted into 424,540 post reverse
split shares on November 18, 2019.
|
●
|
On
June 29, 2017, the Company exchanged a note issued to Strategic with a principal amount
of $50,000, together with accrued interest thereon of $3,740, totaling $53,740, for a
convertible note, principal amount of $53,740, bearing interest at 12% per annum which
matured on December 26, 2017. In terms of an agreement entered into with the note holder,
the maturity date was extended to December 26, 2018 and the interest rate was increased
to 15% per annum. On February 21, 2019 the maturity date was extended to December 26,
2019, with the interest rate remaining unchanged.
|
On
July 30, 2019, the holders of convertible notes with a $0.20 fixed price conversion feature, entered into debt exchange agreements
with the Company, whereby the aggregate principal amount of the convertible notes, together with accrued interest thereon until
July 30, 2019 were exchanged for shares of common stock at an exchange price of $0.0063 pre-reverse split ($0.063 post reverse
split that was effected in November 2019) per share. The Company did not have sufficient unissued shares to effect the exchange
until the reverse stock split of 10:1 shares came into effect on November 1, 2019.
The
balance of the note as of July 30, 2019, plus accrued interest thereon was $69,751 and was converted into 1,125,020 post reverse
split shares on November 18, 2019.
|
●
|
On
June 29, 2017, the Company exchanged a note issued to Strategic with a principal amount
of $110,000, together with accrued interest thereon of $5,535, totaling $115,535, for
a convertible note, principal amount of $115,535, bearing interest at 12% per annum and
matured on December 26, 2017. Pursuant to the terms of an agreement entered into with
the note holder the maturity date was extended to December 26, 2018 and the interest
rate was increased to 15% per annum. On February 21, 2019 the maturity date was extended
to December 26, 2019, with the interest rate remaining unchanged.
|
On
July 30, 2019, the holders of convertible notes with a $0.20 fixed price conversion feature, entered into debt exchange agreements
with the Company, whereby the aggregate principal amount of the convertible notes, together with accrued interest thereon until
July 30, 2019 were exchanged for shares of common stock at an exchange price of $0.0063 pre-reverse split ($0.063 post reverse
split that was effected in November 2019) per share. The Company did not have sufficient unissued shares to effect the exchange
until the reverse stock split of 10:1 shares came into effect on November 1, 2019.
The
balance of the note as of July 30, 2019, plus accrued interest thereon was $149,958 and was converted into 2,418,674 post reverse
split shares on November 18, 2019.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
14
|
RELATED
PARTY TRANSACTIONS (continued)
|
CONVERTIBLE
NOTES PAYABLE (continued)
Strategic
IR (continued)
|
●
|
On
July 17, 2019, Strategic IR entered into a debt purchase agreement with GS Capital Partners,
whereby the remaining balance of the September 19, 2019 convertible note in the aggregate
principal amount of $33,252 plus accrued interest thereon of $2,165, was acquired for
gross proceeds of $35,417. In addition to this strategic IR paid additional settlement
costs of $14,583 including an early settlement penalty to GS Capital Partners.
|
As
of September 19, 2019, the note is in default and earns interest at the default interest rate.
On
November 18, 2019, the Company and Strategic IR entered into an exchange agreement, replacing the balance of the July 15, 2019
convertible note purchased from GS Capital Partners, including interest thereon with a new note in the aggregate principal amount
of $37,224 with a maturity date of November 18, 2020, removing the conversion limitation of ownership of 9.99% and reducing the
interest rate to 6% per annum.
On
November 19, 2019, in terms of a conversion notice received, the Company received a conversion notice converting the aggregate
principal sum of $37,224 into 2,386,181 shares of common stock at a conversion price of $0.0156 per share, thereby extinguishing
the note and realizing a loss on conversion of $51,064.
|
●
|
On
July 17, 2019, the Company issued Strategic IR a Convertible Promissory Note in the aggregate
principal amount of $14,583. The note had a maturity date of July 17, 2020 and a coupon
of 6% per annum. The Company has the right to prepay the note provided it makes a prepayment
penalty as set forth in the note. The outstanding principal amount of the note is convertible
at any time into shares of the Company’s common stock at a conversion price equal
to 60% of the average of the lowest three trading bid prices during the previous ten
(10) trading days, including the date the notice of conversion is received.
|
On
November 19, 2019, in terms of a conversion notice received, the Company received a conversion notice converting the aggregate
principal sum of $14,583, including interest thereon of $297 into 935,887 shares of common stock at a conversion price of $0.0159
per share, thereby extinguishing the note and realizing a loss on conversion of $19,747.
|
●
|
On
December 11, 2019, Strategic IR purchased a portion of a note issued to Andrey Novikov
by Qpagos Corporation in the principal amount of $65,953. On December 17, 2019, the company
entered into a debt settlement with Strategic IR whereby the Note was assigned from Qpagos
Corporation to the Company and was simultaneously settled by the issue of 2,231,768 shares
of common stock at an issue price of $0.03 per share, thereby extinguishing the note.
A loss on settlement of $67,953 was realized.
|
Vladimir
Skiguine
Vladimir
Skiguine is the principal and has control over Cobbolo Limited and has also personally advanced the Company funds.
Cobbolo
Limited
|
●
|
On
June 29, 2017, the Company exchanged a note issued to Cobbolo Limited with a principal
amount of $50,000, together with accrued interest thereon of $3,438, totaling $53,438,
for a convertible note, principal amount of $53,438, bearing interest at 12% per annum
and matured on December 26, 2017. Pursuant to the terms of an agreement entered into
with the note holder, the maturity date was extended to December 26, 2018 and the interest
rate was increased to 15% per annum. On February 21, 2019 the maturity date was extended
to December 26, 2019, with the interest rate remaining unchanged.
|
On
July 30, 2019, the holders of convertible notes with a $0.20 fixed price conversion feature, entered into debt exchange agreements
with the Company, whereby the aggregate principal amount of the convertible notes, together with accrued interest thereon until
July 30, 2019 were exchanged for shares of common stock at an exchange price of $0.0063 pre-reverse split ($0.063 pre-reverse
split) per share. The Company did not have sufficient unissued shares to effect the exchange until the reverse stock split of
10:1 shares came into effect on November 1, 2019.
The
balance of the note as of July 30, 2019, plus accrued interest thereon was $69,360 and was converted into 1,118,711 post-reverse
split shares on November 18, 2019.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
14
|
RELATED
PARTY TRANSACTIONS (continued)
|
CONVERTIBLE
NOTES PAYABLE (continued)
Vladimir Skiguine (continued)
|
●
|
On
June 29, 2017, the Company exchanged a note issued to Cobbolo Limited with a principal
amount of $50,000, together with accrued interest thereon of $2,959, totaling $52,959,
for a convertible note, principal amount of $52,959, bearing interest at 12% per annum
and matured on December 26, 2017. Pursuant to the terms of an agreement entered into
with the note holder, the maturity date was extended to December 26, 2018 and the interest
rate was increased to 15% per annum. On February 21, 2019 the maturity date was extended
to December 26, 2019, with the interest rate remaining unchanged. The note is convertible
into common shares of the Company at a conversion price of $0.20 per share.
|
On
July 30, 2019, the holders of convertible notes with a $0.20 fixed price conversion feature, entered into debt exchange agreements
with the Company, whereby the aggregate principal amount of the convertible notes, together with accrued interest thereon until
July 30, 2019 were exchanged for shares of common stock at an exchange price of $0.0063 pre-reverse split ($0.063 post reverse
split that was effected in November 2019) per share. The Company did not have sufficient unissued shares to effect the exchange
until the reverse stock split of 10:1 shares came into effect on November 1, 2019.
The
balance of the note as of July 30, 2019, plus accrued interest thereon was $68,738 and was converted into 1,108,674 post-reverse
split shares on November 18, 2019.
Gibbs
International Holdings
Gibbs
International Holdings is considered to be a related party as its shareholding is approximately 14.4%.
|
●
|
Effective
June 19, 2017, the Company exchanged a note issued to Gibbs International Holdings with
a principal amount of $50,000, together with accrued interest thereon of $2,494, totaling
$52,494, for a convertible note, principal amount of $52,494, bearing interest at 12%
per annum and matured on December 16, 2017. In terms of an agreement entered into with
the note holder, the maturity date was extended to December 16, 2018 and the interest
rate was increased to 15% per annum. The note was past its maturity date which
maturity date has not been extended as yet, and thereby; (i) became immediately due and
payable; (ii) can only be amended with the written consent of the holder; and (iii) may
be sold, assigned or transferred by the holder without the Company’s consent. The
note is currently recorded under current liabilities. The note was convertible into common
shares of the Company at a conversion price of $0.20 per share.
|
On
July 30, 2019, the holders of convertible notes with a $0.20 fixed price conversion feature, entered into debt exchange agreements
with the Company, whereby the aggregate principal amount of the convertible notes, together with accrued interest thereon until
July 30, 2019 were exchanged for shares of common stock at an exchange price of $0.0063 pre-reverse split ($0.063 post reverse
split that was effected in November 2019) per share. The Company did not have sufficient unissued shares to effect the exchange
until the reverse stock split of 10:1 shares came into effect on November 1, 2019.
The
balance of the note as of July 30, 2019, plus accrued interest thereon was $68,350 and were exchanged for 1,102,412 post reverse
split shares on November 18, 2019.
|
●
|
Effective
August 20, 2018, the Company exchanged a note issued to Gibbs International Holdings
with a principal amount of $294,620, together with accrued interest thereon of $111,115,
totaling $405,735, for a convertible note, principal amount of $405,735, with a coupon
of 8% per annum and maturing on August 31, 2019. The Company had the right to prepay
the note within 180 days without penalties. The outstanding principal amount of the note
was convertible at any time and from time to time at the election of the holder into
shares of the Company’s common stock at a conversion price equal to 60% of the
three lowest trading bid prices during the previous ten (10) trading days, including
the date the notice of conversion is received.
|
As
of August 31, 2019 the note is in default and the note provided for the payment of a penalty of 10% of the principal outstanding,
amounting to $40,573.
On
December 4, 2019, the Company received conversion notices converting the principal sum of $405,735, a once off penalty of $40,573
and interest thereon of $54,529 into 21,000,000 shares of common stock at a conversion price of $0.0238 thereby extinguishing
the note. A loss on conversion of $528,162 was realized.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
14
|
RELATED
PARTY TRANSACTIONS (continued)
|
CONVERTIBLE
NOTES PAYABLE (continued)
Bellridge
Capital LP
Bellridge
Capital LP is considered to be a related party as its shareholding is approximately 10.5%.
On
June 19, 2019, in terms of a debt purchase agreement entered into with Strategic IR, Bellridge Capital LP acquired an aggregate
principal amount of $200,000 plus accrued interest thereon of $3,124 off the $300,000 convertible promissory note originally issued
on October 25, 2018, to Labrys Fund LP, with a maturity date of April 25, 2019 and an original coupon of 8% per annum.
The
Convertible note accrues interest at 18% per annum, the default interest rate in terms of the original Promissory note.
On
November 19, 2019, the Company received a notice of conversion from Bellridge Capital LP converting the principal sum of $200,000
and interest thereon of $21,568 into 13,935,112 shares of common stock at a conversion price of $0.0159 per share, thereby extinguishing
the note. The Company incurred a loss on conversion of $294,031.
West
Point Partners, LLC
|
●
|
On
September 3, 2019, the Company issued West Point Partners, LLC a Convertible Promissory
Note in the aggregate principal amount of $26,527. The note had a maturity date of September
3, 2020 and a coupon of 8% per annum. The Company has the right to prepay the note provided
it makes a prepayment penalty as set forth in the note. The outstanding principal amount
of the note is convertible at any time into shares of the Company’s common stock
at a conversion price equal to 60% of the average of the lowest two trading bid prices
during the previous ten (10) trading days, including the date the notice of conversion
is received.
|
On
November 19, 2019, the Company received a notice of conversion converting the aggregate principal amount of the note outstanding,
including interest thereon, totaling $26,968 into 1,812,390 shares of common stock at a conversion price of $0.149 per share,
thereby extinguishing the note. The Company realized a loss on conversion of $40,090.
|
●
|
On
October 21, 2019, West point Partners, LLC entered into a debt purchase agreement with
GS Capital Partners, whereby the convertible note in the aggregate principal amount of
$96,000 plus accrued interest thereon of $3,745, was acquired for gross proceeds of $99,745.
On November 18, 2019, the Company and West Point Partners, LLC entered into an exchange
agreement, replacing the existing note with a new note with a maturity date of November
18, 2020, removing the conversion limitation of ownership of 9.99% and reducing the interest
rate to 6% per annum.
|
On
November 19, 2019, the Company received a notice of conversion converting the aggregate principal amount of the note outstanding,
including interest thereon, totaling $102,039 into 6,857,446 shares of common stock at a conversion price of $0.149 per share,
thereby extinguishing the note. The Company realized a loss on conversion of $151,687.
|
●
|
On
October 21, 2019, the Company issued a Convertible Promissory Note in the aggregate principal
amount of $22,977 to West Point Partners, LLC for penalty interest and expenses incurred
by West Point Partners LLC on acquiring the GS Capital Partners note dated March 4, 2019.
The note had a maturity date of October 21, 2020 and bears interest at 8% per annum.
The outstanding principal amount of the note was convertible after 180 days, at the election
of the holder into shares of the Company’s common stock at a conversion price equal
to 62% of the lowest two trading prices during the previous ten trading days.
|
On
November 19, 2019, the Company received a notice of conversion converting the aggregate principal amount of the note outstanding,
including interest thereon, totaling $23,118 into 1,553,621 shares of common stock at a conversion price of $0.149 per share,
thereby extinguishing the note. The Company realized a loss on conversion of $34,366.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
15
|
COMMITMENTS
AND CONTINGENCIES
|
The Company operates out of sub-let
premises in Northridge, California. The sub-lease is on a month to month basis at $4,000 per month.
The
discontinued operations of the Company operates from an office facility in Mexico. The office is leased under a three (3) year
non-cancellable operating lease, which ended on December 16, 2019.
COVID-19 Outbreak
In March 2020, the outbreak of COVID-19
(coronavirus) caused by a novel strain of the coronavirus was recognized as a pandemic by the World Health Organization, and the
outbreak has become increasingly widespread in the United States, including in each of the areas in which the Company operates.
While to date the Company has not been required to stop operating, management is evaluating its use of its office space, virtual
meetings and the like. The Company continues to monitor the impact of the COVID-19 (coronavirus) outbreak closely. The extent
to which the COVID-19 (coronavirus) outbreak will impact our operations, ability to obtain financing or future financial results
is uncertain.
Debt exchanges
On
January 7, 2020, the Company entered into a debt exchange agreement whereby the aggregate principal sum of $20,000 plus accrued
interest of $33 was exchanged for 1,001,644 shares of common stock at an issue price of $0.02 per share, realizing a loss on exchange
of $20,033.
On January 7, 2020, the Company entered into a debt exchange agreement
whereby the aggregate principal sum of $30,000 plus accrued interest of $49 was exchanged for 1,502,466 shares of common stock
at an issue price of $0.02 per share, realizing a loss on exchange of $30,049.
Convertible
note funding
On
January 13, 2020, the Company issued a Convertible Promissory Note in the aggregate principal amount of $100,000 to Odyssey Funding,
LLC. The note had a maturity date of January 13, 2021 and a coupon of 10% per annum. The Company may prepay the note with prepayment
penalties ranging from 125% to 145%. The outstanding principal amount of the note is convertible after 180 days, at the election
of the holder into shares of the Company’s common stock at a conversion price equal to 58% of the lowest trading price during
the previous fifteen trading days.
On
January 22, 2020, the Company issued a Convertible Promissory Note in the aggregate principal amount of $43,000 to Power Up Lending
Group Ltd. The note had a maturity date of January 22, 2021 and a coupon of 12% per annum. The Company may prepay the note with
prepayment penalties ranging from 115% to 135%. The outstanding principal amount of the note is convertible after 180 days, at
the election of the holder into shares of the Company’s common stock at a conversion price equal to 61% of the lowest trading
price during the previous fifteen trading days.
On
February 5, 2020, the Company issued a Convertible Promissory Note in the aggregate principal amount of $105,000 to Adar Alef,
LLC. The note had a maturity date of February 5, 2021 and a coupon of 10% per annum. The Company may prepay the note with prepayment
penalties ranging from 120% to 145%. The outstanding principal amount of the note is convertible after 180 days, at the election
of the holder into shares of the Company’s common stock at a conversion price equal to 58% of the lowest trading price during
the previous fifteen trading days.
On
February 24, 2020, the Company issued a Convertible Promissory Note in the aggregate principal amount of $78,750 to LG Capital
Funding LLC. The note had a maturity date of February 24, 2021 and a coupon of 10% per annum. The Company may prepay the note
with prepayment penalties ranging from 120% to 145%. The outstanding principal amount of the note is convertible after 180 days,
at the election of the holder into shares of the Company’s common stock at a conversion price equal to 58% of the lowest
trading price during the previous fifteen trading days.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
16
|
SUBSEQUENT EVENTS
(continued)
|
Share
subscriptions
On
February 20, 2020, the Company entered into a Securities Purchase Agreement whereby 1,000,000 shares of common stock and 1,000,000
three year warrants, exercisable at $0.05 per share were sold to an investor for gross proceeds of $25,000.
On
March 16, 2020, the Company entered into a Securities Purchase Agreement whereby 400,000 shares of common stock were sold to an
investor for gross proceeds of $8,000.
Debt
Conversions
Om January 28, 2020, the Company
received a conversion notice from Global Consulting Alliance, converting an aggregate amount of $27,741, at a conversion price
of $0.02449 into 1,132,764 shares of common stock, thereby extinguishing the note.
On
March 11, 2020, the Company received a conversion notice, converting an aggregate principal amount of $7,586.40 and fees thereon
of $500, at a conversion price of $0.01444 into 560,000 shares of common stock.
Shares
issued for services
On
January 30, 2020, the Company entered into a Corporate Brand
Consulting Agreement with Ludlow Business Services, Inc. whereby the consultant agreed to provide corporate consulting, development
of strategies, corporate awareness, business plans and advising on interactions with investment professionals, for a consideration
of $7,500 per month and 535,714 shares of common stock amounting to $30,000, at the average closing price of the common stock ten
days prior to the execution of the agreement.
On
March 19, 2020, the Company issued 2,000,000 shares of common stock to a director for directors fees valued at $88,000.
On April 4, 2020, the Company issued
282,146 shares to Andrey Novikov as compensation in terms of an employment agreement entered into with Mr. Novikov in December
2019.
Other
than disclosed above, the Company has evaluated subsequent events through the date the consolidated financial statements were
available to be issued and has concluded that no such events or transactions took place that would require disclosure herein.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Assets
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash
|
|
$
|
705
|
|
|
$
|
2,979
|
|
Other current assets
|
|
|
10,964
|
|
|
|
55,059
|
|
Total Current Assets
|
|
|
11,669
|
|
|
|
58,038
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
Investment
|
|
|
509,980
|
|
|
|
1,019,961
|
|
Plant and equipment
|
|
|
50,000
|
|
|
|
-
|
|
Right of use asset
|
|
|
82,259
|
|
|
|
-
|
|
Security deposit
|
|
|
4,000
|
|
|
|
-
|
|
Total non-current assets
|
|
|
646,239
|
|
|
|
1,019,961
|
|
Total Assets
|
|
$
|
657,908
|
|
|
$
|
1,077,999
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
317,003
|
|
|
$
|
314,523
|
|
Loans payable
|
|
|
21,921
|
|
|
|
61,631
|
|
Loans payable - Related parties
|
|
|
-
|
|
|
|
30,026
|
|
Convertible debt, net of unamortized discount of $538,060 and $371,387, respectively
|
|
|
457,072
|
|
|
|
359,362
|
|
Operating lease liability
|
|
|
40,958
|
|
|
|
|
|
Derivative liability
|
|
|
1,099,705
|
|
|
|
905,576
|
|
Total Current Liabilities
|
|
|
1,936,659
|
|
|
|
1,671,118
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
Operating lease liability
|
|
|
41,301
|
|
|
|
-
|
|
Total Liabilities
|
|
|
1,977,960
|
|
|
|
1,671,118
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value, 25,000,000 shares authorized, and 0
shares issued and outstanding as of March 31, 2020 and December 31, 2019.
|
|
|
-
|
|
|
|
-
|
|
Common stock, $0.0001 par value; 500,000,000 shares authorized, 157,529,712
and 128,902,124 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively.
|
|
|
15,753
|
|
|
|
12,890
|
|
Additional paid-in-capital
|
|
|
22,247,289
|
|
|
|
21,579,022
|
|
Accumulated deficit
|
|
|
(23,583,094
|
)
|
|
|
(22,185,031
|
)
|
Total Stockholders’ Deficit
|
|
|
(1,320,052
|
)
|
|
|
(593,119
|
)
|
Total Liabilities and Stockholders’ Deficit
|
|
$
|
657,908
|
|
|
$
|
1,077,999
|
|
|
*
|
After
giving effect to a 10 for 1 reverse stock split effective November 1, 2019.
|
See
notes to the unaudited condensed consolidated financial statements.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
|
|
Three months
ended
|
|
|
Three months
ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Net Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Cost of Goods Sold
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
654,899
|
|
|
|
156,758
|
|
Total Expense
|
|
|
654,899
|
|
|
|
156,758
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations
|
|
|
(654,899
|
)
|
|
|
(156,758
|
)
|
|
|
|
|
|
|
|
|
|
Investment impairment charge
|
|
|
(509,981
|
)
|
|
|
|
|
Loss on debt conversion
|
|
|
(70,807
|
)
|
|
|
(367,704
|
)
|
Loss on settlement of liabilities
|
|
|
(50,082
|
)
|
|
|
-
|
|
Interest expense
|
|
|
(54,337
|
)
|
|
|
(90,091
|
)
|
Amortization of debt discount
|
|
|
(160,078
|
)
|
|
|
(541,146
|
)
|
Derivative liability movements
|
|
|
102,121
|
|
|
|
542,525
|
|
Foreign currency gain
|
|
|
-
|
|
|
|
18
|
|
Loss before Income Taxes from continuing
operations
|
|
|
(1,398,063
|
)
|
|
|
(613,156
|
)
|
Income Taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net loss from continuing operations
|
|
|
(1,398,063
|
)
|
|
|
(613,156
|
)
|
Loss from discontinued operations,
net of income taxes
|
|
|
-
|
|
|
|
(253,687
|
)
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,398,063
|
)
|
|
$
|
(866,843
|
)
|
Basic and Diluted loss per share*
|
|
|
|
|
|
|
|
|
Loss per share from continuing operations*
|
|
$
|
(0.01
|
)
|
|
$
|
(0.06
|
)
|
Loss per share from discontinued
operations*
|
|
|
-
|
|
|
|
(0.03
|
)
|
|
|
$
|
(0.01
|
)
|
|
$
|
(0.09
|
)
|
Weighted Average Number of Shares Outstanding -
|
|
|
|
|
|
|
|
|
Basic and diluted*
|
|
|
152,922,870
|
|
|
|
10,007,073
|
|
Other Comprehensive gain (loss)
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
10,019
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive
loss
|
|
$
|
(1,398,063
|
)
|
|
$
|
(856,824
|
)
|
|
*
|
After
giving effect to a 10 for 1 reverse stock split effective November 1, 2019.
|
See
notes to the unaudited condensed consolidated financial statements.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
(formerly
QPAGOS)
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS’
DEFICIT
FOR
THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares*
|
|
|
Amount*
|
|
|
Capital*
|
|
|
Deficit
|
|
|
Income
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
|
128,902,124
|
|
|
$
|
12,890
|
|
|
$
|
21,579,022
|
|
|
$
|
(22,185,031
|
)
|
|
$
|
-
|
|
|
$
|
(593,119
|
)
|
Conversion of debt to equity
|
|
|
-
|
|
|
|
-
|
|
|
|
2,504,110
|
|
|
|
250
|
|
|
|
99,914
|
|
|
|
-
|
|
|
|
-
|
|
|
|
100,164
|
|
Settlement of liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
1,692,764
|
|
|
|
169
|
|
|
|
105,966
|
|
|
|
-
|
|
|
|
-
|
|
|
|
106,135
|
|
Shares issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
535,714
|
|
|
|
54
|
|
|
|
29,946
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30,000
|
|
Share subscriptions
|
|
|
-
|
|
|
|
-
|
|
|
|
1,400,000
|
|
|
|
140
|
|
|
|
32,860
|
|
|
|
-
|
|
|
|
-
|
|
|
|
33,000
|
|
Stock based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
22,495,000
|
|
|
|
2,250
|
|
|
|
399,581
|
|
|
|
-
|
|
|
|
-
|
|
|
|
401,831
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,398,063
|
)
|
|
|
-
|
|
|
|
(1,398,063
|
)
|
Balance as of March 31, 2020
|
|
|
-
|
|
|
$
|
-
|
|
|
|
157,529,712
|
|
|
$
|
15,753
|
|
|
$
|
22,247,289
|
|
|
$
|
(23,583,094
|
)
|
|
$
|
-
|
|
|
$
|
(1,320,052
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares*
|
|
|
Amount*
|
|
|
Capital*
|
|
|
Deficit
|
|
|
Income
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
|
8,883,952
|
|
|
$
|
888
|
|
|
$
|
14,865,765
|
|
|
$
|
(18,455,925
|
)
|
|
$
|
380,907
|
|
|
$
|
(3,208,365
|
)
|
Conversion of debt to equity
|
|
|
-
|
|
|
|
-
|
|
|
|
2,437,616
|
|
|
|
244
|
|
|
|
677,719
|
|
|
|
-
|
|
|
|
-
|
|
|
|
677,963
|
|
Translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,019
|
|
|
|
10,019
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(866,843
|
)
|
|
|
-
|
|
|
|
(866,843
|
)
|
Balance as of March 31, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
|
11,321,568
|
|
|
$
|
1,132
|
|
|
$
|
15,543,484
|
|
|
$
|
(19,322,768
|
)
|
|
$
|
390,926
|
|
|
$
|
(3,387,226
|
)
|
|
*
|
After
giving effect to a 10 for 1 reverse stock split effective November 1, 2019.
|
See
notes to the unaudited condensed consolidated financial statements.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
Three months
ended
|
|
|
Three months
ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,398,063
|
)
|
|
$
|
(866,843
|
)
|
Less: net loss from discontinued
operations
|
|
|
-
|
|
|
|
253,687
|
|
Net loss from continuing operations
|
|
|
(1,398,063
|
)
|
|
|
(613,156
|
)
|
Adjustments to reconcile net loss to
net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Derivative liability movements
|
|
|
(102,121
|
)
|
|
|
(542,525
|
)
|
Amortization of debt discount
|
|
|
160,078
|
|
|
|
541,612
|
|
Investment impairment charge
|
|
|
509,981
|
|
|
|
|
|
Loss on conversion of debt to equity
|
|
|
70,807
|
|
|
|
367,704
|
|
Loss on settlement of liabilities
|
|
|
50,082
|
|
|
|
-
|
|
Convertible notes issued for services
|
|
|
-
|
|
|
|
4,423
|
|
Shares issued for services
|
|
|
30,000
|
|
|
|
-
|
|
Stock based compensation
|
|
|
401,831
|
|
|
|
-
|
|
Amortization of right of use asset
|
|
|
4,482
|
|
|
|
|
|
Changes in Assets and Liabilities
|
|
|
|
|
|
|
|
|
Other current assets
|
|
|
47,595
|
|
|
|
7,575
|
|
Accounts payable and accrued expenses
|
|
|
(5,021
|
)
|
|
|
6,212
|
|
Operating lease liabilities
|
|
|
(4,482
|
)
|
|
|
|
|
Interest accruals
|
|
|
21,307
|
|
|
|
78,846
|
|
Cash used in operating activities –
continuing operations
|
|
|
(213,524
|
)
|
|
|
(149,309
|
)
|
Cash used in
operating activities – discontinued operations
|
|
|
-
|
|
|
|
(105,100
|
)
|
CASH USED IN OPERATING
ACTIVITIES
|
|
|
(213,524
|
)
|
|
|
(254,409
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Plant and equipment purchased
|
|
|
(50,000
|
)
|
|
|
-
|
|
Net cash used in investing activities
– continuing operations
|
|
|
(50,000
|
)
|
|
|
-
|
|
Net cash provided
by investing activities – discontinued operations
|
|
|
-
|
|
|
|
4,166
|
|
NET CASH USED IN
(PROVIDED BY) INVESTING ACTIVITIES
|
|
|
(50,000
|
)
|
|
|
4,166
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from share issuances
|
|
|
33,000
|
|
|
|
-
|
|
Proceeds from loans payable
|
|
|
-
|
|
|
|
60,000
|
|
Repayment of loans payable
|
|
|
(20,000
|
)
|
|
|
-
|
|
Repayment of convertible notes
|
|
|
(48,000
|
)
|
|
|
-
|
|
Proceeds from short term notes and
convertible notes
|
|
|
296,250
|
|
|
|
192,000
|
|
NET CASH PROVIDED
BY FINANCING ACTIVITIES
|
|
|
261,250
|
|
|
|
252,000
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
and cash equivalents
|
|
|
-
|
|
|
|
(914
|
)
|
|
|
|
|
|
|
|
|
|
NET (DECREASE) INCREASE IN CASH
|
|
|
(2,274
|
)
|
|
|
843
|
|
CASH AT BEGINNING OF PERIOD
|
|
|
2,979
|
|
|
|
71,294
|
|
CASH AT END OF PERIOD
|
|
$
|
705
|
|
|
$
|
72,137
|
|
|
|
|
|
|
|
|
|
|
CASH PAID FOR INTEREST AND TAXES:
|
|
|
|
|
|
|
|
|
Cash paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash paid for interest
|
|
$
|
-
|
|
|
$
|
-
|
|
NON CASH INVESTING AND FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Recognition of right of use lease
|
|
$
|
86,741
|
|
|
|
-
|
|
Conversion of convertible debt to equity
|
|
$
|
100,164
|
|
|
$
|
677,963
|
|
Settlement of liabilities with equity
|
|
$
|
106,135
|
|
|
|
-
|
|
See
notes to the unaudited condensed consolidated financial statements.
INNOVATIVE PAYMENT
SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
1.
|
ORGANIZATION AND DESCRIPTION OF BUSINESS
|
On May 12, 2016, Innovative
Payment Solutions, Inc. (formerly known as QPAGOS and Asiya Pearls, Inc.), a Nevada corporation (“IPSI” or the “Company”),
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 IPSI (“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 IPSI common stock, par value $0.0001 per share (the “Common
Stock”). Additionally, pursuant to the Merger Agreement, upon consummation of the Merger, IPSI assumed all of Qpagos Corporation’s
warrants issued and outstanding immediately prior to the Merger, which were exercisable for approximately 6,219,200 pre-reverse
split (621,920 post reverse split that was effected in November 2019) 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 IPSI stockholder of 5,000,000 pre-reverse
split (500,000 post reverse split that was effected in November 2019) shares of Common Stock agreed to return to IPSI 4,975,000
pre-reverse split (497,500 post reverse split that was effected in November 2019) shares of Common Stock held by such holder to
IPSI and the then-current IPSI stockholder retained an aggregate of 25,000 pre-reverse split (2,500 post reverse split that was
effected in November 2019) shares of Common Stock and the other stockholders of IPSI retained 5,000,000 pre-reverse split (500,000
post reverse split that was effected in November 2019) shares of Common Stock. Therefore, immediately following the Merger, Qpagos
Corporation’s former stockholders held 49,929,000 pre-reverse split (4,992,900 post reverse split that was effected in November
2019) shares of IPSI common stock which represented approximately 91% of the outstanding Common Stock.
The Merger was treated as a
reverse acquisition of IPSI, a public shell company, for financial accounting and reporting purposes. As such, Qpagos Corporation
was treated as the acquirer for accounting and financial reporting purposes while IPSI was treated as the acquired entity for
accounting and financial reporting purposes.
Qpagos Corporation (“Qpagos”)
was incorporated on May 1, 2015 under the laws of the state of Delaware to effectuate a reverse merger transaction with Qpagos,
S.A.P.I. de C.V. (Qpagos Mexico) and Redpag Electrónicos S.A.P.I. de C.V. (Redpag). Each of the 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.
On November 1, 2019, the Company
changed its name to Innovative Payment Solutions Inc.
Also on November 1, 2019, immediately
following the name change, the Company filed a Certificate of Change with the Secretary of State of the State of Nevada to effect
a reverse split of Company’s common stock at a ratio of 1-for-10, effective on November 1, 2019. As a result of the Reverse
Stock Split, each ten pre-split shares of common stock outstanding automatically combined into one new share of common stock without
any further action on the part of the holders, and the number of outstanding shares common stock was reduced from 320,477,867
shares to 32,047,817 after rounding for fractional shares.
On December 31, 2019, Innovative
Payment Solutions consummated the disposal of Qpagos Corporation, including the two Mexican subsidiaries, Qpagos Mexico and Redpag
in exchange for 2,250,000 shares of common stock of Vivi Holdings, of which nine percent (9%) was allocated to the following:
Gaston Pereira (5%), Andrey Novikov (2.5%), and Joseph Abrams (1.5%). The SPA was closed on December 31, 2019 after the satisfaction
of customary conditions, the receipt of a final fairness opinion and the approval of our shareholders. Innovative Payment Solutions
no longer has any business operations in Mexico and has retained its U.S. operations based in Northridge, California.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
1
|
ORGANIZATION AND DESCRIPTION OF BUSINESS
(continued)
|
|
b)
|
Description of the business
|
Subsequent to the merger of
Qpagos Corporation into IPSI and until the divestiture of Qpagos Corporation, our focus was only the operations of Qpagos Corporation
in Mexico. Our current focus is on providing physical and virtual payment services to the United States market, leveraging the
knowledge we obtained from the operations of Qpagos Corporation. On December 31, 2019, the Company consummated the disposal of
Qpagos Corporation, including the two Mexican subsidiaries, Qpagos Mexico and Redpag in terms of a Stock Purchase Agreement entered
into with Vivi Holdings, Inc on August 5, 2019, in exchange for 2,250,000 shares of common stock of Vivi Holdings, of which nine
percent (9%) was allocated to the following: Gaston Pereira (5%), Andrey Novikov (2.5%), and Joseph Abrams (1.5%). The SPA was
closed on December 31, 2019 after the satisfaction of customary conditions, the receipt of a final fairness opinion and the approval
of our shareholders. Innovative Payment Solutions no longer has any business operations in Mexico and has retained its U.S. operations
based in Northridge, California.
Qpagos Corporation, through
its subsidiaries Qpagos S.A.P.I de C.V. (“Qpagos”) and Redpag Electronicos S.A.P.I de C.V. (“Redpag”),
provided physical and virtual payment services to the Mexican market. Qpagos Corporation provided an integrated network of kiosks,
terminals and payment channels that enabled 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. Qpagos helped 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, Qpagos licensed technology can be used to pay bills, add
minutes to mobile phones, purchase transportation and tickets, shop online or at a retail store, buy digital services or send
money to a friend or relative.
2
|
ACCOUNTING POLICIES AND ESTIMATES
|
The accompanying unaudited
condensed consolidated 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 consolidated 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 consolidated
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, 2020 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 IPSI for the year ended December 31, 2019, included in the Annual Report on Form 10-K as filed with the Securities
and Exchange Commission (the “SEC”) on May 14, 2020.
All amounts referred to in
the notes to the unaudited condensed consolidated financial statements are in United States Dollars ($) unless stated otherwise.
|
b)
|
Principles of Consolidation
|
The unaudited condensed consolidated
financial statements include the financial statements of the Company. In the prior year the financial statements included 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:
Entity
|
|
Percentage owned
|
|
|
Country
|
|
|
Disposed of
|
|
|
|
|
|
|
|
|
|
Innovative Payment Solutions, Inc
|
|
|
-
|
|
|
|
USA
|
|
|
-
|
Qpagos Corporation
|
|
|
100
|
%
|
|
|
USA
|
|
|
December 31, 2019
|
Qpagos, S.A.P.I de C.V.
|
|
|
99.996
|
%
|
|
|
Mexico
|
|
|
December 31, 2019
|
Redpag Electrónicos, S.A.P.I. de C.V
|
|
|
99.990
|
%
|
|
|
Mexico
|
|
|
December 31, 2019
|
The financial statements of
the Company’s discontinued Mexican operations in the prior period are measured using local currencies as their functional
currencies.
The Company translated the
assets and liabilities of its discontinued Mexican subsidiaries at the exchange rates in effect at the period end and the results
of operations at the average rate throughout the period. 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 were to customers
are in Mexico.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
2
|
ACCOUNTING POLICIES AND ESTIMATES (continued)
|
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, investment valuation, 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 unaudited condensed 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.
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 the investment in Vivi Holdings Inc., was evaluated at fair value using Level 3 Inputs based on the
Company’s estimate of the market value of the entities disposed to Vivi Holdings, Inc. Vivi Holdings Inc., does not have
sufficient information available to assess the current market price of its equity.
The carrying amounts reported
in the balance sheets for cash, 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 has identified the short-term
convertible notes and certain warrants attached to certain of the notes 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. We evaluate the fair value of variably priced derivative liabilities
on a quarterly basis and report any movements thereon in earnings.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
2
|
ACCOUNTING POLICIES AND ESTIMATES (continued)
|
|
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 Covid-19 breakout has caused an economic crisis which may
result in 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 may 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. In addition, businesses have been suspended due to quarantines intended to contain this outbreak and many people have
been forced to work from home in those areas. As a result, installation of the Company’s network of kiosks, terminals
and payment channels in Southern California has been delayed, which has had an adverse impact on our business and financial
condition and has hampered the Company’s ability to generate revenue and access usual sources of liquidity on reasonable
terms.
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 December 2019, the
FASB issued ASU 2019-12, Income Taxes (Topic 740)
The Amendments in this update
reduce the complexity in accounting for income taxes by removing certain exceptions to accounting for income taxes and deferred
taxes and simplifying the accounting treatment of franchise taxes, a step up in the tax basis of goodwill as part of business
combinations, the allocation of current and deferred tax to a legal entity not subject to tax in its own financial statements,
reflecting changes in tax laws or rates in the annual effective rate in interim periods that include the enactment date and minor
codification improvements.
This ASU is effective for fiscal
years and interim periods beginning after December 15, 2020.
The effects of this ASU on
the Company’s financial statements is not considered to be material.
The FASB issued several updates
during the period, none of these standards are either applicable to the Company or require adoption at a future date and none
are 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,
2020 and December 31, 2019, 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, 2020 and December 31, 2019, the balance did not exceed
the federally insured limit.
INNOVATIVE PAYMENT
SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
2
|
ACCOUNTING POLICIES AND ESTIMATES (continued)
|
The Company’s non-marketable
equity securities are investments in privately held companies without readily determinable market values. The carrying value of
our non-marketable equity securities is adjusted to fair value for observable transactions for identical or similar investments
of the same issuer or impairment (referred to as the measurement alternative). All gains and losses on non-marketable equity securities,
realized and unrealized, are recognized in other income (expense), net. Non-marketable equity securities that have been remeasured
during the period are classified within Level 3 in the fair value hierarchy because the Company estimates the value based on valuation
methods using the observable transaction price at the transaction date and other unobservable inputs including volatility, rights,
and obligations of the securities the Company holds. The cost method is used when the Company has a passive, long-term investment
that doesn’t result in influence over the company. The cost method is used when the investment results in an ownership stake
of less than 20%, and there is no substantial influence. Under the cost method, the stock purchased is recorded on a balance sheet
as a non-current asset at the historical acquisition/purchase price, and is not modified unless shares are sold, additional shares
are purchased or there is evidence of the fair market value of the investment declining below carrying value. Any dividends received
are recorded as income.
The Company recorded an impairment
charge of $509,981 on its non-marketable equity securities for the three months ended March 31, 2020. The impairment charge was
based on management’s determination that there is a 50% probability that Vivi Holdings will be able to fulfill its capital
raising requirements and implement its business strategy. In addition the technology and applications that Vivi have developed
are operational in Mexico, Brazil and the USA.
Plant and equipment is stated
at cost, less accumulated depreciation. Plant and equipment with costs greater than $1,000 are capitalized and depreciated. Depreciation
is computed using the straight-line method over the estimated useful lives of the assets. The estimated useful lives of the assets
are as follows:
|
Description
|
|
Estimated Useful Life
|
|
|
|
|
|
Kiosks
|
|
7 years
|
|
|
|
|
|
Computer equipment
|
|
3 years
|
|
|
|
|
|
Leasehold improvements
|
|
Lesser of estimated useful life or life of lease
|
|
|
|
|
|
Office equipment
|
|
10 years
|
The cost of repairs and maintenance
is expensed as incurred. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts,
and any resulting gains or losses are included in income in the year of disposition.
Assets are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability
of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows
expected to be generated by the asset. If such assets are considered impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceeds the fair value of the assets.
INNOVATIVE PAYMENT
SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
2
|
ACCOUNTING POLICIES AND ESTIMATES (continued)
|
The Company’s revenue
recognition policy is consistent with the requirements of Financial Accounting Standards Board (FASB) Accounting Standards Codification
(ASC) 606, Revenue.
The Company’s revenues
are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration
that the Company expects to receive in exchange for those services. The Company derives its revenues from the sale of its services,
as defined below. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized
as it fulfills its obligations under each of its revenue transactions:
|
i.
|
identify the contract with a customer;
|
|
ii.
|
identify the performance obligations in the contract;
|
|
iii.
|
determine the transaction price;
|
|
iv.
|
allocate the transaction price to performance obligations in
the contract; and
|
|
v.
|
recognize revenue as the performance obligation is satisfied.
|
The Company had 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.
|
●
|
Payment processing provided to end-users
|
The Company provides a secure
means for end-users to pay for certain services, such as utilities through its 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 (with respect to revenue generated prior to
the sale of the Mexican operations), 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 (with respect to revenue generated
prior to the sale of the Mexican operations), when the customer takes delivery of the kiosk and all the risks and rewards of ownership
are passed to the customer.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
2
|
ACCOUNTING POLICIES AND ESTIMATES (continued)
|
|
n)
|
Share-Based Payment Arrangements
|
Generally, all forms of share-based
payments, including stock option grants, restricted stock grants and stock appreciation rights are measured at their fair value
on the awards’ grant date, based on the estimated number of awards that are ultimately expected to vest. Share-based compensation
awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair
value of the share-based payment, whichever is more readily determinable. The expense resulting from share-based payments is recorded
in operating expenses in the consolidated statement of operations.
Prior to the Company’s
reverse merger which took place on May 12, 2016, all share-based payments were based on management’s estimate of market
value of the Company’s equity. The factors considered in determining managements estimate of market value includes, assumptions
of future revenues, expected cash flows, market acceptability of our technology and the current market conditions. These assumptions
are complex and highly subjective, compounded by the business being in its early stage of development in a new market with limited
data available.
Where equity transactions with
arms-length third parties, who had applied their own assumptions and estimates in determining the market value of our equity,
had taken place prior to and within a reasonable time frame of any share-based payments, the value of those share transactions
have been used as the fair value for any share-based equity payments.
Where equity transactions with
arms-length third parties, included both shares and warrants, the value of the warrants have been eliminated from the unit price
of the securities using a Black-Scholes valuation model to determine the value of the warrants. The assumptions used in the Black
Scholes valuation model includes market related interest rates for risk-free government issued treasury securities with similar
maturities; the expected volatility of the Company’s common stock based on companies operating in similar industries and
markets; the estimated stock price of the Company; the expected dividend yield of the Company and; the expected life of the warrants
being valued.
Subsequent to the Company’s
reverse merger which took place on May 12, 2016, the Company has utilized the market value of its common stock as quoted on the
OTCQB, as an indicator of the fair value of its common stock in determining share- based payment arrangements.
|
o)
|
Derivative Liabilities
|
ASC 815 generally provides
three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them
as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics
and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks
of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is
not re- measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value
reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would
be considered a derivative instrument subject to the requirements of ASC 815. ASC 815 also provides an exception to this rule
when the host instrument is deemed to be conventional, as described.
|
p)
|
Reclassification of prior year presentation
|
Certain prior year amounts
have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported
results of operations.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
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 an operating loss since inception resulting
in an accumulated deficit of $23,583,094 as of March 31, 2020 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. In addition to operational
expenses, as the Company executes its US 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 new US 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
has acquired kiosks that it plans to deploy in the US market and establish a payment solution to certain demographic sectors,
thereby generating revenues in the US market with an expected improvement in margins, 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 for at least the next
twelve months from the date the financial statements were issued.
4
|
DISCONTINUED OPERATIONS
|
Effective December 31, 2019,
the Company sold 100% of the outstanding common stock of its subsidiary, Qpagos Corp to Vivi. The operations of Qpagos Corp and
its two Mexican entities; QPagos S.A.P.I. de C.V. and Redpag Electrónicos S.A.P.I. de C.V, which represent substantially
all of its assets, are reported as discontinued operations.
The statement of operations
from discontinued operations is as follows:
|
|
Three months ended
|
|
|
|
March 31,
|
|
|
|
2019
|
|
|
|
|
|
Net Revenue
|
|
$
|
1,236,202
|
|
|
|
|
|
|
Cost of Goods Sold
|
|
|
1,224,184
|
|
|
|
|
|
|
Gross profit
|
|
|
12,018
|
|
|
|
|
|
|
General and administrative
|
|
|
255,555
|
|
Depreciation and amortization and impairment costs
|
|
|
11,960
|
|
Total Expense
|
|
|
267,515
|
|
|
|
|
|
|
Loss from Operations
|
|
|
(255,497
|
)
|
|
|
|
|
|
Other income
|
|
|
7,031
|
|
Foreign currency loss
|
|
|
(5,221
|
)
|
Loss before taxation
|
|
|
(253,687
|
)
|
Taxation
|
|
|
-
|
|
Loss from discontinued operations, net of taxation
|
|
$
|
(253,687
|
)
|
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Investment in Vivi Holdings,
Inc.
Effective December 31, 2019,
the Company sold 100% of the outstanding common stock of its subsidiary, Qpagos Corp, together with its 99.9% ownership interest
of Qpagos Corporations’ two Mexican entities: QPagos S.A.P.I. de C.V. and Redpag Electrónicos S.A.P.I. de C.V, to
Vivi.
As consideration for the disposal
Vivi issued an aggregate of 2,250,000 Shares of its common stock as follows: 2,047,500 Shares to the Company; 56,250 Shares to
the Company’s designee, Mr. Andrey Novikov; 33,750 Shares to the Company’s designee, the Joseph W. & Patricia
G. Abrams Family Trust; and 112,500 Shares to the Company’s designee, Mr. Gaston Pereira.
Due to the lack of available
information, the Vivi Shares were valued by a modified market method, whereby the value of the assets disposed of were determined
by management using the enterprise value of the entire Company less the liabilities and assets retained by the Company.
As of March 31, 2020, the Company
impaired the carrying value of the investment in Vivi Holdings, Inc by $509,981 based on Vivi’s indicated timeline for its
proposed IPO and fund raising activities, largely impacted by the COVID-19 pandemic.
The shares in Vivi Holdings,
Inc., are unlisted as of March 31, 2020.
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
|
|
|
|
|
|
|
Investment in Vivi Holdings, Inc.
|
|
$
|
509,980
|
|
|
$
|
1,019,961
|
|
Adoption of ASC Topic 842, “Leases”
On January 1, 2019,
the Company adopted Topic 842 using the prospective transition method applied to leases that were in place as of January 1,
2019. Results for reporting periods beginning after January 1, 2019 are presented under Topic 842, while prior
period amounts are not adjusted and continue to be reported in accordance with the Company’s historic accounting under Topic
840.
The Company entered into a
real property lease for office and warehouse space located at 19355 Business Center Drive in Northridge California, Los Angeles
County. The lease commenced on February 15, 2020 and expires on February 28, 2022, monthly rental expense is $3,945 per month
with no escalations during the term of the lease.
The initial value of the right-of-use
asset was $86,741 and the operating lease liability was $86,741. The Company monitors for events or changes in circumstances that
require a reassessment of our lease. When a reassessment results in the remeasurement of a lease liability, a corresponding adjustment
is made to the carrying amount of the corresponding right-of-use asset unless doing so would reduce the carrying amount of the
right-of-use asset to an amount less than zero. In that case, the amount of the adjustment that would result in a negative right-of-use
asset balance is recorded as a loss in the statement of operations.
Discount Rate
To determine the present value
of minimum future lease payments for operating leases at February 15, 2020, the Company was required to estimate a rate of interest
that it would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar
economic environment (the “incremental borrowing rate” or “IBR”).
The Company determined the
appropriate IBR by identifying a reference rate and making adjustments that take into consideration financing options and certain
lease-specific circumstances. For the reference rate, the Company used the 5 year ARM interest rate at the time of entering into
the agreement and compared that rate to the Company’s weighted average cost of funding at the time of entering into the
operating lease. The Company determined that 10.00% was an appropriate incremental borrowing rate to apply to its real-estate
operating lease.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Right of use assets
Right of use assets are included in the unaudited
condensed consolidated Balance Sheet are as follows:
|
|
March 31,
2020
|
|
|
|
|
|
Non-current assets
|
|
|
|
Right of use assets, operating leases, net of amortization
|
|
$
|
82,259
|
|
Total Lease Cost
Individual components of the
total lease cost incurred by the Company is as follows:
|
|
Three months
ended
March 31,
2020
|
|
|
|
|
|
Operating lease expense
|
|
$
|
5,918
|
|
Maturity of Operating Leases
The amount of future minimum
lease payments under operating leases are as follows:
|
|
Amount
|
|
Undiscounted minimum future lease payments
|
|
|
|
Total instalments due:
|
|
|
|
2020
|
|
$
|
35,505
|
|
2021
|
|
|
47,340
|
|
2022
|
|
|
7,890
|
|
|
|
|
90,735
|
|
Imputed interest
|
|
|
(8,476
|
)
|
Total operating lease liability
|
|
$
|
82,259
|
|
|
|
|
|
|
Disclosed as:
|
|
|
|
|
Current portion
|
|
$
|
40,958
|
|
Non-current portion
|
|
|
41,301
|
|
|
|
$
|
82,259
|
|
Other lease information:
|
|
Three months ended
March 31,
2020
|
|
|
|
|
|
Cash paid for amounts included in the measurement of lease liabilities
|
|
|
|
Operating cash flows from operating leases
|
|
$
|
(5,945
|
)
|
|
|
|
|
|
Remaining lease term – operating lease
|
|
|
23 months
|
|
|
|
|
|
|
Discount rate – operating lease
|
|
|
10.0
|
%
|
INNOVATIVE PAYMENT
SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Loans payable consisted of
the following:
Description
|
|
Interest
Rate
|
|
|
Maturity
|
|
December 31,
2019
|
|
|
December 31,
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stanislav Minaychenko
|
|
|
4.0
|
%
|
|
June 16, 2020
|
|
|
14,111
|
|
|
|
23,930
|
|
Maxim Pukhoskiy
|
|
|
4.0
|
%
|
|
June 16, 2020
|
|
|
7,810
|
|
|
|
17,683
|
|
Alexander Motorin
|
|
|
4.0
|
%
|
|
December 23,2020
|
|
|
-
|
|
|
|
20,018
|
|
Total loans payable
|
|
|
|
|
|
|
|
$
|
21,921
|
|
|
$
|
61,631
|
|
Interest expense totaled $323
and $7,559 for the three months ended March 31, 2020, respectively.
Stanislav Minaychenko
On December 17,2019, in terms
of a settlement agreement entered into between the Company, Qpagos Corporation and Stanislav Minaychenko, the Company issued a
promissory note to Mr. Minaychenko in settlement of $23,893 owing to him in terms of a service agreement dated September 1, 2015.
The promissory note bears interest at 4% per annum, is unsecured and matures on June 16, 2020.
During the three months ended
March 31, 2020, the Company repaid an aggregate principal amount of $10,000.
On July 1, 2020, the Company
entered into an extension agreement with Stanislav Minaychenko, extending the maturity date to September 16, 2020.
The balance of the promissory
note, including interest thereon at March 31, 2020 is $14,111.
Maxim Pukhoskiy
On December 17, 2019, in terms
of a settlement agreement entered into between the Company, Qpagos Corporation and Maxim Pukhoskiy, the Company issued a promissory
note to Mr. Pukhoskiy in settlement of $17,856 owing to him in terms of a service agreement dated May 1, 2015. The promissory
note bears interest at 4% per annum, is unsecured and matures on June 16, 2020.
During the three months ended
March 31, 2020, the Company repaid an aggregate principal amount of $10,000.
The note is currently in default
as we were unable to pay the outstanding balance by June 16, 2020. The note has no default penalties and we anticipate repaying
the note as soon as we have sufficient funds.
The balance of the promissory
note, including interest thereon at March 31, 2020 is $7,810.
Alexander Motorin
On December 23, 2019, in terms
of a debt purchase agreement entered into with Waketec OU, Mr. Motorin acquired $20,000 of the promissory note issued to Waketec
OU by Qpagos Corporation. On December 23, 2019, the Company entered into a debt settlement agreement whereby the company agreed
to the assignment of the debt owed to Mr. Motorin by Qpagos Corporation to the Company in exchange for a new promissory note in
the principal amount of $20,000 issued by the Company. The promissory note is unsecured, bears interest at 4% per annum and matures
on December 23, 2020.
On January 7, 2020, the Company
entered into a debt exchange agreement whereby the aggregate principal sum of $20,000 plus accrued interest of $33 was exchanged
for 1,001,644 shares of common stock at an issue price of $0.02 per share, realizing a loss on exchange of $20,033.
INNOVATIVE PAYMENT
SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
8
|
CONVERTIBLE NOTES PAYABLE
|
Convertible notes payable consists
of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized
|
|
|
March 31, 2020
|
|
|
December 31,
2019
|
|
Description
|
|
Interest
rate
|
|
|
Maturity
Date
|
|
Principal
|
|
|
Accrued
interest
|
|
|
debt
discount
|
|
|
Balance,
net
|
|
|
Balance,
net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Power Up Lending Group
|
|
|
12%
|
|
|
November 12, 2020
|
|
|
93,000
|
|
|
|
4,005
|
|
|
|
(58,874
|
)
|
|
|
38,131
|
|
|
|
11,643
|
|
|
|
|
12%
|
|
|
December 23, 2020
|
|
|
63,000
|
|
|
|
2,051
|
|
|
|
(45,959
|
)
|
|
|
19,092
|
|
|
|
1,543
|
|
|
|
|
12%
|
|
|
January 22, 2021
|
|
|
43,000
|
|
|
|
975
|
|
|
|
(34,893
|
)
|
|
|
9,082
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GS Capital Partners, LLC
|
|
|
8%
|
|
|
August 14, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
27,557
|
|
|
|
|
8%
|
|
|
August 14, 2019
|
|
|
150,000
|
|
|
|
33,764
|
|
|
|
-
|
|
|
|
183,764
|
|
|
|
174,789
|
|
|
|
|
8%
|
|
|
February 4, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
49,243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crown Bridge Partners, LLC
|
|
|
8%
|
|
|
August 31, 2019
|
|
|
19,914
|
|
|
|
4,076
|
|
|
|
-
|
|
|
|
23,990
|
|
|
|
30,803
|
|
|
|
|
8%
|
|
|
October 16, 2019
|
|
|
27,500
|
|
|
|
3,710
|
|
|
|
-
|
|
|
|
31,210
|
|
|
|
30,387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Odyssey Funding LLC
|
|
|
10%
|
|
|
November 15, 2020
|
|
|
200,000
|
|
|
|
7,507
|
|
|
|
(125,137
|
)
|
|
|
82,370
|
|
|
|
27,658
|
|
|
|
|
10%
|
|
|
January 13, 2020
|
|
|
100,000
|
|
|
|
2,137
|
|
|
|
(78,689
|
)
|
|
|
23,448
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Black Ice Advisors, LLC
|
|
|
10%
|
|
|
November 25, 2020
|
|
|
52,500
|
|
|
|
1,884
|
|
|
|
(34,283
|
)
|
|
|
20,101
|
|
|
|
5,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adar Alef, LLC
|
|
|
10%
|
|
|
February 5, 2021
|
|
|
105,000
|
|
|
|
1,582
|
|
|
|
(89,221
|
)
|
|
|
17,361
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LG Capital Funding LLC
|
|
|
10%
|
|
|
February 24, 2021
|
|
|
78,750
|
|
|
|
777
|
|
|
|
(71,004
|
)
|
|
|
8,523
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total convertible notes payable
|
|
|
|
|
|
|
|
$
|
932,664
|
|
|
$
|
62,468
|
|
|
$
|
(538,060
|
)
|
|
$
|
457,072
|
|
|
$
|
359,362
|
|
Interest expense totaled $53,991
and $71,347 and amortization of debt discount totaled $160,078 and $541,611 for the three months ended March 31, 2020 and 2019,
respectively.
The convertible notes have
variable conversion prices based on a discount to market price of trading activity over a specified period of time. The variable
conversion features were valued using a Black Scholes valuation model. The difference between the fair market value of the common
stock and the calculated conversion price on the issuance date was recorded as a debt discount with a corresponding credit to
derivative financial liability.
INNOVATIVE PAYMENT
SOLUTIONS, INC.
NOTES TO THE UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
8
|
CONVERTIBLE NOTES PAYABLE (continued)
|
The total value of the beneficial
conversion feature recorded as a debt discount during the three months ended March 31, 2020 and 2019 was $326,750 and $284,884,
respectively.
Power Up Lending Group
Ltd
|
●
|
On November 21, 2019, the Company issued a Convertible Promissory
Note in the aggregate principal amount of $93,000 to Power up Lending Group Ltd. The note has a maturity date of November
12, 2020 and a coupon of 12% per annum. The Company may prepay the note with prepayment penalties ranging from 115% to 135%.
The outstanding principal amount of the note is convertible after 180 days, at the election of the holder into shares of the
Company’s common stock at a conversion price equal to 61% of the lowest three trading prices during the previous fifteen
trading days.
|
The balance of the note plus
accrued interest at March 31, 2020 was $38,141, after unamortized debt discount of $58,874.
|
●
|
On December 23, 2019, the Company issued a Convertible Promissory
Note in the aggregate principal amount of $63,000 to Power up Lending Group Ltd. The note has a maturity date of December
23, 2020 and a coupon of 12% per annum. The Company may prepay the note with prepayment penalties ranging from 115% to 135%.
The outstanding principal amount of the note is convertible after 180 days, at the election of the holder into shares of the
Company’s common stock at a conversion price equal to 61% of the lowest three trading prices during the previous fifteen
trading days.
|
The balance of the note plus
accrued interest at March 31, 2020 was $19,092, after unamortized debt discount of $45,959.
|
●
|
On January 22, 2020, the Company issued a Convertible Promissory
Note in the aggregate principal amount of $43,000 to Power Up Lending Group Ltd. The note has a maturity date of January 22,
2021 and a coupon of 12% per annum. The Company may prepay the note with prepayment penalties ranging from 115% to 135%. The
outstanding principal amount of the note is convertible after 180 days, at the election of the holder into shares of the Company’s
common stock at a conversion price equal to 61% of the lowest trading price during the previous fifteen trading days.
|
The balance of the note plus
accrued interest at March 31, 2020 was $9,082, after unamortized debt discount of $34,893.
GS Capital Partners,
LLC
|
●
|
On August 14, 2018, the Company issued a Convertible Promissory
Note in the aggregate principal amount of $150,000 to GS Capital Partners, LLC. The note had a maturity date of August 14,
2019 and a coupon of 8% per annum. The Company had the right to prepay the note up to 180 days, provided it makes a pre-payment
penalty as specified in the note. The outstanding principal amount of the note is convertible at any time after the six-month
anniversary of the note, at the election of the holder into shares of the Company’s common stock at a conversion price
equal to 62% of lowest trading bid prices during the previous ten (10) trading days, including the date the notice of conversion
is received.
|
Between August 12, 2019 and
September 11, 2019, the Company received notices of conversion from GS Capital Partners converting $50,000 of principal and
$3,945 of interest into 17,432,265 pre-reverse split (1,743,227 post reverse split that was effected in November 2019) shares
of common stock at an average conversion price of $0.00309 pre-reverse stock split ($0.031 post reverse stock split that was effected
in November 2019) per share. The Company incurred a loss on conversion of $56,315.
As of August 14, 2019 the note
was in default and accrues interest at the default interest rate of 24% per annum.
On December 30, 2019, the Company
repaid the principal sum of $90,000 on the convertible note.
On January 28, 2020, in terms
of a conversion notice received, the remaining principal balance of $10,000 plus accrued interest thereon of $17,741was converted
into 1,132,764 shares of common stock at a conversion price of $0.02449, thereby extinguishing the note.
INNOVATIVE PAYMENT
SOLUTIONS, INC.
NOTES TO THE UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
8
|
CONVERTIBLE NOTES PAYABLE (continued)
|
GS Capital Partners, LLC (continued)
|
●
|
On September 11, 2018, the Company issued a Convertible Promissory
Note in the aggregate principal amount of $150,000 to GS Capital Partners, LLC. The note has a maturity date of August 14,
2019 and a coupon of 8% per annum. The note may not be prepaid. The outstanding principal amount of the note was convertible
at any time after the six month anniversary of the note, at the election of the holder into shares of the Company’s
common stock at a conversion price equal to 62% of lowest trading bid prices during the previous ten (10) trading days, including
the date the notice of conversion is received.
|
As of August 14, 2019 the note
was in default and accrues interest at the default interest rate of 24% per annum.
The balance of the note plus
accrued interest at March 31, 2020 was $183,764.
Crown Bridge Partners
|
●
|
On August 31, 2018, the Company issued a Convertible Promissory
Note in the aggregate principal amount of $27,500 to Crown Bridge Partners. The note had a maturity date of August 31, 2019
and a coupon of 8% per annum. The Company had the right to prepay the note for the first 180 days, subject to a penalty ranging
from 10% to 35% of the prepayment, dependent upon the timing of the prepayment. 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
at a conversion price equal to 60% of the lowest trading price during the previous ten (10) trading days.
|
As of August 31, 2019 the note
is in default and interest accrues at the default interest rate of 12% per annum and the note holder may require the Company to
pay a penalty of 50% of the value of the note outstanding, including default interest.
On March 11, 2020, the Company
received a conversion notice from Crown Bridge Partners, converting an aggregate principal amount of $7,586 and fees thereon of
$500, at a conversion price of $0.01444 into 560,000 shares of common stock.
The balance of the note plus
accrued interest at March 31, 2020 was $23,990.
|
●
|
On October 16, 2018, the Company issued a Convertible Promissory
Note in the aggregate principal amount of $27,500 to Crown Bridge Partners. The note has a maturity date of October 16, 2019
and a coupon of 8% per annum. The Company may not prepay the note. The outstanding principal amount of the note is convertible
after 180 days, at the election of the holder into shares of the Company’s common stock at a conversion price equal
to 60% of the lowest trading price during the previous fifteen (15) trading days.
|
As of October 31, 2019 the note
is in default and attracts interest at the default interest rate of 12% per annum and the note holder may require the Company
to pay a penalty of 50% of the value of the note outstanding, including default interest.
The balance of the note plus
accrued interest at March 31, 2020 was $31,210.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
8
|
CONVERTIBLE NOTES PAYABLE (continued)
|
Odyssey Funding, LLC
|
●
|
On November 15, 2019, the Company issued a Convertible Promissory
Note in the aggregate principal amount of $200,000 to Odyssey Funding, LLC. The note has a maturity date of November 15, 2020
and a coupon of 10% per annum. The Company may prepay the note with prepayment penalties ranging from 120% to 145%. The outstanding
principal amount of the note is convertible after 180 days, at the election of the holder into shares of the Company’s
common stock at a conversion price equal to 58% of the lowest trading price during the previous fifteen trading days.
|
The balance of the note plus
accrued interest at March 31, 2020 was $82,370, after unamortized debt discount of $125,137.
|
●
|
On January 13, 2020, the Company issued a Convertible Promissory
Note in the aggregate principal amount of $100,000 to Odyssey Funding, LLC. The note has a maturity date of January 13, 2021
and a coupon of 10% per annum. The Company may prepay the note with prepayment penalties ranging from 120% to 145%. The outstanding
principal amount of the note is convertible after 180 days, at the election of the holder into shares of the Company’s
common stock at a conversion price equal to 58% of the lowest trading price during the previous fifteen trading days.
|
The balance of the note plus
accrued interest at March 31, 2020 was $23,448, after unamortized debt discount of $78,689.
Black Ice Advisors, LLC
On November 25, 2019, the Company
issued a Convertible Promissory Note in the aggregate principal amount of $52,500 to Black Ice Advisors, LLC. The note has a maturity
date of November 25, 2020 and a coupon of 10% per annum. The Company may prepay the note with prepayment penalties ranging from
120% to 145%. The outstanding principal amount of the note is convertible after 180 days, at the election of the holder into shares
of the Company’s common stock at a conversion price equal to 58% of the lowest trading price during the previous fifteen
trading days.
The balance of the note plus
accrued interest at March 31, 2020 was $20,101, after unamortized debt discount of $34,283.
Adar Alef, LLC
On February 5, 2020, the Company
issued a Convertible Promissory Note in the aggregate principal amount of $105,000 to Adar Alef, LLC. The note has a maturity
date of February 5, 2021 and a coupon of 10% per annum. The Company may prepay the note with prepayment penalties ranging from
120% to 145%. The outstanding principal amount of the note is convertible after 180 days, at the election of the holder into shares
of the Company’s common stock at a conversion price equal to 58% of the lowest trading price during the previous fifteen
trading days.
The balance of the note plus
accrued interest at March 31, 2020 was $17,361, after unamortized debt discount of $89,221.
LG Capital Funding, LLC
On February 24, 2020,
the Company issued a Convertible Promissory Note in the aggregate principal amount of $78,750 to LG Capital Funding LLC. The note
has a maturity date of February 24, 2021 and a coupon of 10% per annum. The Company may prepay the note with prepayment penalties
ranging from 120% to 145%. The outstanding principal amount of the note is convertible after 180 days, at the election of the
holder into shares of the Company’s common stock at a conversion price equal to 58% of the lowest trading price during the
previous fifteen trading days.
The balance of the note plus
accrued interest at March 31, 2020 was $8,523, after unamortized debt discount of $71,004.
INNOVATIVE PAYMENT
SOLUTIONS, INC.
NOTES TO THE UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Certain of the short-term convertible
notes disclosed in note 8 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, due to the variable priced conversion rights, all convertible notes
and any warrants attached thereto, issued subsequent to the variable priced conversion notes are valued and give rise to a derivative
financial liability, which was initially valued at inception of the convertible notes using a Black-Scholes valuation model.
During the three months ended
March 31, 2020, an additional $296,250 was raised as a derivative liability on variably priced convertible notes.
The value of this derivative
financial liability was re-assessed at March 31, 2020 and December 31, 2019, and $102,121 and $1,981,938 was credited
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.
The following assumptions were
used in the Black-Scholes valuation model:
|
|
Three months
ended
March 31,
2020
|
|
|
Year ended
December 31,
2019
|
|
Conversion price*
|
|
$
|
0.02 to 2.00
|
|
|
$
|
0.02 to 2.00
|
|
Risk free interest rate
|
|
|
0.11 to 1.53
|
%
|
|
|
1.53 to 2.59
|
%
|
Expected life of derivative liability
|
|
|
1 to 12 months
|
|
|
|
1 to 12 months
|
|
Expected volatility of underlying stock
|
|
|
219.1 to 222.6
|
%
|
|
|
148.5 to 224.3
|
%
|
Expected dividend rate
|
|
|
0
|
%
|
|
|
0
|
%
|
The movement in derivative
liability is as follows:
|
|
March
31,
2020
|
|
|
December 31,
2019
|
|
|
|
|
|
|
|
|
Opening balance
|
|
$
|
905,576
|
|
|
$
|
1,833,672
|
|
Derivative financial liability arising from convertible note
|
|
|
296,250
|
|
|
|
1,053,842
|
|
Fair value adjustment to derivative liability
|
|
|
(102,121
|
)
|
|
|
(1,981,938
|
)
|
|
|
$
|
1,099,705
|
|
|
$
|
905,576
|
|
The Company has authorized 500,000,000
common shares with a par value of $0.0001 each. The Company has issued and outstanding 157,529,712 and 128,902,124 shares of common
stock as of March 31, 2020 and December 31, 2019.
The following common shares
were issued by the Company during the three months ended March 31, 2020.
|
●
|
In terms of debt conversion notices received between January
28, 2020 and March 11, 2020, the Company issued an aggregate of 1,692,764 shares of common stock, and in terms of debt exchange
agreements entered into on January 7, 2020, the Company issued an aggregate of 2,504,110 shares of common stock, in settlement
of $35,328 of convertible notes and $50,082 of loans payable, resulting in a net loss on conversion and exchange of $120,889.
|
|
●
|
In terms of subscription agreements entered into with investors
between March 16, 2020 and March 19, 2020, the Company issued 1,400,000 shares of common stock for gross proceeds of $33,000.
|
|
●
|
In terms of an agreement entered into with a supplier, the Company
issued 535,714 shares of common stock valued at $30,000 on grant date, as partial compensation for services provided.
|
|
●
|
The Company granted a director 2,000,000 shares of common stock
for services to be rendered as a director of the Company, these shares were valued at grant date at $88,000.
|
INNOVATIVE PAYMENT
SOLUTIONS, INC.
NOTES TO THE UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
10
|
STOCKHOLDERS’ EQUITY (continued)
|
|
b.
|
Restricted stock awards
|
The following restricted stock
awards were made during the three months ended March 31, 2020.
|
(a)
|
An aggregate of 5,123,750 shares
of restricted common stock were issued to our Chief Executive Officer in terms of an employment
agreement entered into with him. These shares are restricted and were fully vested on January
1, 2020. These restricted shares were valued at $251,064 or $0.049 per share, the market price
of the Company’s common stock on grant date.
|
|
(b)
|
An aggregate of 15,371,250 shares of restricted common stock
were issued to our Chief Operating Officer in terms of an employment agreement entered into with him. These shares are restricted
and vest over a three year period commencing on December 31, 2020. These restricted shares were valued at $753,191 or $0.049
per share, the market price of the Company’s common stock on grant date.
|
The restricted stock granted
and exercisable at March 31, 2020 is as follows:
|
|
|
Restricted
Stock Granted
|
|
Restricted
Stock Vested
|
Grant
date Price
|
|
|
Number
Granted
|
|
Weighted
Average
Fair Value per
Share
|
|
|
Number
Vested
|
|
Weighted
Average
Fair Value per Share
|
|
$
|
0.049
|
|
|
20,495,000
|
|
$
|
0.049
|
|
|
5,123,750
|
|
$
|
0.049
|
|
The Company has recorded an
expense of $313,830 for the three months ended March 31, 2020 relating to the restricted stock awards.
The Company has authorized 25,000,000
shares of preferred stock with a par value of $0.0001 authorized, no preferred stock is issued and outstanding as of March 31,
2020 and December 31, 2019.
In connection with the subscription
agreement entered into with an investor, a three year warrant exercisable over 1,000,000 shares of common stock was granted to
the investor, together with 1,000,000 shares of common stock for subscription proceeds of $25,000.
The warrants were valued using
a Black Scholes valuation model using the following assumptions:
|
|
Three
months ended
March 31, 2020
|
|
Conversion price*
|
|
$
|
0.05
|
|
Risk free interest rate
|
|
|
1.35
|
%
|
Expected life of derivative liability
|
|
|
3
years
|
|
Expected volatility of underlying stock
|
|
|
190.4
|
%
|
Expected dividend rate
|
|
|
0
|
%
|
INNOVATIVE PAYMENT
SOLUTIONS, INC.
NOTES TO THE UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
10
|
STOCKHOLDERS’ EQUITY (continued)
|
A summary of warrant activity
during the period January 1, 2019 to March 31, 2020 is as follows:
|
|
Shares
Underlying
Warrants*
|
|
|
Exercise
price per
share
|
|
|
Weighted
average
exercise
price
|
|
Outstanding January 1, 2019
|
|
|
852,775
|
|
|
$
|
2.00 to 6.25
|
|
|
$
|
5.10
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited/Cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding December 31, 2019
|
|
|
852,775
|
|
|
$
|
2.00 to 6.25
|
|
|
$
|
5.10
|
|
Granted
|
|
|
1,000,000
|
|
|
|
0.05
|
|
|
|
0.05
|
|
Forfeited/Cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding March 31, 2020
|
|
|
1,852,775
|
|
|
$
|
0.05 to 6.25
|
|
|
$
|
2.35
|
|
The warrants outstanding and
exercisable at March 31, 2020 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
|
|
$
|
6.25
|
|
|
|
621,920
|
|
|
|
0.50
|
|
|
|
|
|
|
|
621,920
|
|
|
|
|
|
|
|
|
|
$
|
2.00
|
|
|
|
230,855
|
|
|
|
0.25
|
|
|
|
|
|
|
|
230,855
|
|
|
|
|
|
|
|
|
|
$
|
0.05
|
|
|
|
1,000,000
|
|
|
|
2.89
|
|
|
|
|
|
|
|
1,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,852,775
|
|
|
|
1.76
|
|
|
$
|
2.35
|
|
|
|
1,852,775
|
|
|
$
|
2.35
|
|
|
|
1.76
|
|
The warrants outstanding have
an intrinsic value of $0 and $0 as of March 31, 2020 and December 31, 2019.
On June 18, 2018, the Company
established its 2018 Stock Incentive Plan. The purpose of the plan is to promote the interests of the Company and the stockholders
of the Company by providing directors, officers, employees and consultants of the Company with appropriate incentives and rewards
to encourage them to enter into and continue in the employ or service of the Company, to acquire a proprietary interest in the
long-term success of the Company and to reward the performance of individuals in fulfilling long-term corporate objectives. The
plan terminates after a period of ten years in June 2028.
The Plan is administered by
the Board of Directors or a Committee appointed by the Board of Directors who have the authority to administer the Plan and to
exercise all the powers and authorities either specifically granted to it under the Plan.
The maximum number of securities
available under the plan is 800,000 shares of common stock. The maximum number of shares of common stock awarded to any individual
during any fiscal year may not exceed 100,000 shares of common stock.
INNOVATIVE PAYMENT
SOLUTIONS, INC.
NOTES TO THE UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
10
|
STOCKHOLDERS’ EQUITY (continued)
|
|
e.
|
Stock options (continued)
|
No options were granted for
the three months ended March 31, 2020.
A summary of option activity
during the period January 1, 2019 to March 31, 2020 is as follows:
|
|
Shares
Underlying
options
|
|
|
Exercise
price per
share
|
|
|
Weighted
average
exercise
price
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding January 1, 2019
|
|
|
200,000
|
|
|
$
|
0,40
|
|
|
$
|
0,40
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited/Cancelled
|
|
|
(100,000
|
)
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding December 31, 2019
|
|
|
100,000
|
|
|
|
0.40
|
|
|
|
0.40
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited/Cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding March 31, 2020
|
|
|
100,000
|
|
|
$
|
0.40
|
|
|
$
|
0.40
|
|
The options outstanding and
exercisable at March 31, 2020 are as follows:
|
|
Options Outstanding
|
|
|
Options
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.40
|
|
|
100,000
|
|
|
|
8.75
|
|
|
$
|
0.40
|
|
|
|
100,000
|
|
|
$
|
0.4
|
|
|
|
8.75
|
|
The options outstanding have
an intrinsic value of $0 and $0 as of March 31, 2020 and December 31, 2019.
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 years ended December 31, 2019 and
2018 all warrants, options and convertible debt securities 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 for the three months ended March 31, 2020 and 2019 are as follows:
|
|
Three
months ended
March 31,
2020
(Shares)
|
|
|
Three
months ended March 31,
2019
(Shares)
|
|
|
|
|
|
|
|
|
Convertible debt
|
|
|
44,283,120
|
|
|
|
19,618,283
|
|
Stock options
|
|
|
100,000
|
|
|
|
200,000
|
|
Warrants to purchase shares of common stock
|
|
|
1,852,775
|
|
|
|
852,775
|
|
|
|
|
46,235,895
|
|
|
|
8,843,970
|
|
INNOVATIVE PAYMENT
SOLUTIONS, INC.
NOTES TO THE UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
12
|
RELATED PARTY TRANSACTIONS
|
The following transactions
were entered into with related parties:
James Fuller
On March 19, 2020, the Company
granted Mr. Fuller, a director of the Company, 2,000,000 shares of restricted common stock in terms of the Stock Incentive Plan.
William Corbett
Effective January 1, 2020,
the Company granted Mr. Corbett, the Chief Executive Officer of the Company, a total of 20,495,000 restricted shares of common
stock of which 5,123,750 vested immediately and a further 15,371,250 which vest annually and equally over a three year period
commencing on December 31, 2020.
LOANS PAYABLE
Description
|
|
Interest
Rate
|
|
|
Maturity Date
|
|
March 31,
2020
|
|
|
December
31,
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vladimir Skiguine
|
|
|
4
|
%
|
|
December 12, 2020
|
|
|
-
|
|
|
|
30,026
|
|
Loans payable - Related parties
|
|
|
|
|
|
|
|
$
|
-
|
|
|
$
|
30,026
|
|
Interest expense amounted to
$23 and $6,784 for the three months ended March 31, 2020 and 2019, respectively.
Vladimir Skiguine
Mr. Skiguine is considered to be a related party as his shareholding
and that of the Company’s under his control exceeds 5%.
On December 23, 2019, in terms
of a debt purchase agreement entered into with Waketec OU, Mr. Skiguine acquired $30,000 of the promissory note issued to Waketec
OU by Qpagos Corporation. On December 23, 2019, the Company entered into a debt settlement agreement whereby the company agreed
to the assignment of the debt owed to Mr. Skiguine by Qpagos Corporation to the Company in exchange for a new promissory note in
the principal amount of $30,000 issued by the Company. The promissory note is unsecured, bears interest at 4% per annum and matures
on December 23, 2020. The balance of the promissory note, including interest thereon at December 31, 2019 is $30,026.
On January 7, 2020, the Company
entered into a debt exchange agreement with Mr. Skiguine, whereby the aggregate principal sum of $30,000 plus accrued interest
of $49 was exchanged for 1,502,466 shares of common stock at an issue price of $0.02 per share, realizing a loss on exchange of
$30,049.
INNOVATIVE PAYMENT
SOLUTIONS, INC.
NOTES TO THE UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
13
|
COMMITMENTS AND CONTINGENCIES
|
The Company entered into a
property lease agreement as disclosed under note 6 above.
The future minimum lease commitments
are as follows:
|
|
Amount
|
|
Undiscounted minimum future lease payments
|
|
|
|
Total instalments due
|
|
$
|
90,735
|
|
Imputed interest
|
|
|
(8,476
|
)
|
Total operating lease liability
|
|
$
|
82,259
|
|
|
|
|
|
|
Disclosed as:
|
|
|
|
|
Current portion
|
|
$
|
40,958
|
|
Non-current portion
|
|
|
41,301
|
|
|
|
$
|
82,259
|
|
COVID-19 Outbreak
In March 2020, the outbreak
of COVID-19 (coronavirus) caused by a novel strain of the coronavirus was recognized as a pandemic by the World Health Organization,
and the outbreak has become increasingly widespread in the United States, including in each of the areas in which the Company
operates. While to date the Company has not been required to stop operating, management is evaluating its use of its office space,
virtual meetings and the like.
The Company provides an integrated
network of kiosks, terminals and payment channels that enable consumers to deposit cash, convert it into a digital form and remit
the funds to any merchant in its network quickly and securely. The Company has plans to roll out 50 kiosks in Southern California
to provide digital payments for the unbanked and underbanked using self-service kiosks and an E wallet ecosystem. The kiosks are
currently located in the Company’s warehouses in Southern California awaiting installation. Due to measures imposed by the
local governments in areas affected by COVID-19, businesses have been suspended due to quarantine intended to contain this outbreak
and many people have been forced to work from home in those areas. As a result, installation of the Company’s network of
kiosks, terminals and payment channels in Southern California has been delayed, which has had an adverse impact on the Company’s
business and financial condition and has hampered its ability to generate revenue and access usual sources of liquidity on reasonable
terms.
The Company has been following
the recommendations of local health authorities to minimize exposure risk for its employees for the past several weeks, including
the temporary closures of its offices and having employees work remotely to the extent possible, which has to an extent adversely
affected their efficiency. As a result, the Company’s books and records were not easily accessible, resulting in delays
in preparation and completion of its financial statements. Further, the various governmental mandatory closures of businesses
in these locations have precluded the Company’s personnel, particularly its senior accounting staff, from obtaining access
to its books and records necessary to prepare the Company’s financial statements to be included in the Quarterly Report.
The Company continues to monitor
the impact of the COVID-19 (coronavirus) outbreak closely. The extent to which the COVID-19 (coronavirus) outbreak will continue
to impact our operations, ability to obtain financing or future financial results is uncertain.
Payroll Protection Program
loan
On May 7, 2020, the Company
received a payroll Protection Program loan through its bankers, Wells Fargo Bank amounting to $60,292 earning interest at 1% per
annum, maturing on May 5, 2022 and repayable in instalments of $2,538 commencing on November 5, 2020. The Company may apply for
the loan to be forgiven in whole or in part based on the loan being utilized for payroll costs, continuation of healthcare benefits,
mortgage interest payments, rent, utility and interest payments on any other debt obligation. The Company anticipates that the
loan will be forgivable.
INNOVATIVE PAYMENT
SOLUTIONS, INC.
NOTES TO THE UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
14
|
SUBSEQUENT EVENTS (continued)
|
Debt Conversions
On May 27, 2020 and June 8,
2020, in terms of conversion notices received from Black Ice Investors, LLC, converting $12,000 and $25,000, at conversion prices
of $0.024 and $0.017into 500,000 and 1,470,586 shares of common stock.
On June 16, 2020, June 17,
2020 and June 22, 2020, in terms of conversion notices received from Power Up Lending Group Ltd, converting $12,000, $12,000 and
$15,000 at conversion prices of $0.0128, $0.0128 and $0.0101 into 937,500, 937,500 and 1,485,149 shares of common stock.
Shares issued for services
On April 8, 2020, the Company
issued 282,146 shares of common stock to Andrey Novikov for services rendered.
Employment Agreement
Effective June 24, 2020, the
Company entered into an executive employment agreement with William Corbett, to employ Mr. Corbett as the Company’s Chief
Executive Officer for a term of three (3) years, provide for an annual base salary of $150,000, provide for a signing bonus of
$25,000, structure for a bonus of up to 50% of base salary upon the Company’s achievement of $2,000,000 EBITDA and additional
performance bonus payments as may be determined by the Company’s board of directors. and provide for severance in the event
of a termination without cause in amount equal to equal to fifty percent (50%) of his annual base salary rate then in effect,
provided that if such termination without cause occurs after an Acquisition of the Company, Mr. Corbett will be entitled to receive
severance in an amount equal to equal to 100% of his annual base salary rate then in effect.
The Employment Agreement provides
for the grant to Mr. Corbett of 5,123,750 shares of the Company’s common stock, which are fully vested and not subject to
forfeiture.
On June 24, 2020, the Company
entered into a restricted stock agreement with Mr. Corbett pursuant to which the Company granted him a restricted stock award
of 15,371,250 shares of the Company’s common stock, which forfeiture restriction lapse 33%, 33% and 34%, respectively, on
the first, second and third anniversary of the date of grant.
On June 24, 2020, the Company
entered into an indemnification agreement with Mr. Corbett to indemnify him, in connection with his position of employment with
Company and in the discharge of his duties and responsibilities to Company, to the maximum extent allowed under the laws of the
State of Nevada. The Company is not be required or obligated to indemnify Mr. Corbett to extent it would violate the Securities
Act, or the Securities Exchange Act of 1934, as amended, or the rules and regulations thereunder.
Extension of maturity date
of loan payable.
On July 1, 2020, the Company
entered into an extension agreement with Stanislav Minaychenko, extending the maturity date to September 16, 2020.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
34,285,712 SHARES OF COMMON
STOCK
PROSPECTUS
, 2020
Through and including ,
2020 (25 days after commencement of this offering), all dealers that effect transactions in these securities, whether or not participating
in this offering, may be required to deliver a prospectus. This is in addition to the dealer’s obligation to deliver a prospectus
when acting as an underwriter and with respect to their unsold allotments or subscriptions.
PART
II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM
13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
We
estimate that expenses in connection with the distribution described in this registration statement (other than brokerage commissions,
discounts or other expenses relating to the sale of the shares by the selling security holders) will be as set forth below. We
will pay all of the expenses with respect to the distribution, and such amounts, with the exception of the SEC registration fee,
are estimates.
Accounting fees and expenses
|
|
$
|
5,000.00
|
|
Legal fees and expenses
|
|
$
|
25,000.00
|
|
Transfer agent fees and expenses
|
|
|
-
|
|
SEC registration fee
|
|
$
|
155.76
|
|
Miscellaneous
|
|
$
|
2,044.24
|
|
Total
|
|
$
|
32,200.00
|
|
ITEM
14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section
78.138 of the Nevada Revised Statute provides that a director or officer is not individually liable to the corporation or its
stockholders or creditors for any damages as a result of any act or failure to act in his capacity as a director or officer unless
it is proven that (1) his act or failure to act constituted a breach of his fiduciary duties as a director or officer and (2)
his breach of those duties involved intentional misconduct, fraud or a knowing violation of law.
This
provision is intended to afford directors and officers protection against and to limit their potential liability for monetary
damages resulting from suits alleging a breach of the duty of care by a director or officer. As a consequence of this provision,
stockholders of our company will be unable to recover monetary damages against directors or officers for action taken by them
that may constitute negligence or gross negligence in performance of their duties unless such conduct falls within one of the
foregoing exceptions. The provision, however, does not alter the applicable standards governing a director’s or officer’s
fiduciary duty and does not eliminate or limit the right of our company or any stockholder to obtain an injunction or any other
type of non-monetary relief in the event of a breach of fiduciary duty.
The
Registrant’s Articles of Incorporation, as amended, and amended and restated bylaws provide for indemnification of directors,
officers, employees or agents of the Registrant to the fullest extent permitted by Nevada law (as amended from time to time).
Section 78.7502 of the Nevada Revised Statute provides that such indemnification may only be provided if the person acted in good
faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interest of the Registrant and, with
respect to any criminal action or proceeding, had no reasonable cause to behave his conduct was unlawful.
In
any underwriting agreement we enter into in connection with the sale of the securities being registered hereby, the underwriters
will agree to indemnify, under certain conditions, us, our directors, our officers and persons who control us, within the meaning
of the Securities Act, against certain liabilities.
ITEM
15. RECENT SALES OF UNREGISTERED SECURITIES
Other
than as set forth below or as previously disclosed in our filings with the Securities and Exchange Commission, we did not sell
any equity securities during the year ended December 31, 2019 in transactions that were not registered under the Securities
Act.
Issuance
of common stock
On
January 7, 2020 we issued 1, 001,644 shares of common stock in exchange for extinguishment of a note in the principal amount of
$20,000.
In
terms of debt conversion notices received between January 28, 2020 and March 11, 2020, the Company issued an aggregate of 1,692,764
shares of common stock, and in terms of debt exchange agreements entered into on January 7, 2020, the Company issued an aggregate
of 2,504,110 shares of common stock, in settlement of $35,328 of convertible notes and $50,082 of loans payable.
In
terms of subscription agreements entered into with investors between March 16, 2020 and March 19, 2020, the Company issued 1,400,000
shares of common stock for gross proceeds of $33,000.
In
terms of an agreement entered into with a supplier, the Company issued 535,714 shares of common stock as partial compensation
for services provided.
The
Company granted a director 2,000,000 shares of common stock for services to be rendered as a director of the Company.
An
aggregate of 5,123,750 shares of restricted common stock are issuable to our Chief Executive Officer under the terms of an employment
agreement entered into with him. These shares are restricted and were fully vested on January 1, 2020.
An
aggregate of 15,371,250 shares of restricted common stock were issued to our Chief Operating Officer in terms of an employment
agreement entered into with him. These shares are restricted and vest over a three year period commencing on December 31, 2020.
Issuance
of promissory notes
On
October 11, 2019, we issued a Promissory Note in the aggregate principal amount of $3,000 to Strategic IR. The note has a maturity
date of January 9, 2020 and a coupon of ten percent per annum. We had the right to prepay the note without penalty prior to maturity
date. On November 20, 2019 in terms of an agreement entered into with Strategic IR the principal amount plus accrued interest
thereon amounting to $3,028 was converted into 168,219 shares of common stock at a conversion price of $0.04 per share.
On
October 15, 2019, we issued a Promissory Note in the aggregate principal amount of $22,000 to Strategic IR. The note has a maturity
date of January 13, 2020 and a coupon of ten percent per annum. We have the right to prepay the note without penalty prior to
maturity date. On November 20, 2019 in terms of an agreement entered into with Strategic IR the principal amount plus accrued
interest thereon amounting to $22,181 was converted into 1,232,268 shares of common stock at a conversion price of $0.04 per share.
On
October 16 2019, we issued a Promissory Note in the aggregate principal amount of $24,980 to Global Business Partnership. The
note has a maturity date of January 14, 2020 and a coupon of ten percent per annum. We had the right to prepay the note without
penalty prior to maturity date.
On
December 9, 2019, in terms of a settlement agreement entered into between us, Qpagos Corporation and Andrey Novikov, we issued
a promissory note to Mr. Novikov in settlement of $131,906 of a total debt owing to Mr. Novikov of $156,206 owing to him in terms
of a service agreement dated September 1, 2015, the balance remaining as owing to Mr. Novikov by Qpagos Corporation. The promissory
note bears interest at 8% per annum, is unsecured and matures on December 9, 2020. This promissory note was subsequently purchased
by Vladimir Skiguine and Strategic IR and converted into equity, refer to Exchange of debt into equity, below.
On
December 17, 2019, in terms of a settlement agreement entered into between us, Qpagos Corporation and Stanislav Minaychenko, we
issued a promissory note to Mr. Minaychenko in settlement of $23,893 owing to him in terms of a service agreement dated September
1, 2015. The promissory note bears interest at 4% per annum, is unsecured and matures on June 16, 2020. The balance of the promissory
note, including interest thereon at December 31, 2019 is $23,930.
On
December 17, 2019, in terms of a settlement agreement entered into between us, Qpagos Corporation and Maxim Pukhoskiy, we issued
a promissory note to Mr. Pukhoskiy in settlement of $17,856 owing to him in terms of a service agreement dated May 1, 2015. The
promissory note bears interest at 4% per annum, is unsecured and matures on June 16, 2020. The balance of the promissory note,
including interest thereon at December 31, 2019 is $17,683.
On
December 21, 2019, Qpagos Corporation issued a promissory note to Waketec OU in settlement of a $93,000 trade payable owing by
Qpagos Corporation to Waketec OU. The promissory note bears interest at 4% per annum, is unsecured and matures on December 21,
2020.
On
December 23, 2019, in terms of a debt purchase agreement entered into with Waketec OU, Mr. Motorin acquired $20,000 of the promissory
note issued to Waketec OU by Qpagos Corporation. On December 23, 2019, we entered into a debt settlement agreement whereby we
agreed to the assignment of the debt owed to Mr. Motorin by Qpagos Corporation to us in exchange for a new promissory note in
the principal amount of $20,000 issued by us. The promissory note is unsecured, bears interest at 4% per annum and matures on
December 23, 2020. The balance of the promissory note, including interest thereon at December 31, 2019 is $20,018.
On
December 23, 2019, in terms of a debt purchase agreement entered into with Waketec OU, Mr. Skiguine acquired $30,000 of the promissory
note issued to Waketec OU by Qpagos Corporation. On December 23, 2019, we entered into a debt settlement agreement whereby we
agreed to the assignment of the debt owed to Mr. Skiguine by Qpagos Corporation to us in exchange for a new promissory note in
the principal amount of $30,000 issued by us. The promissory note is unsecured, bears interest at 4% per annum and matures on
December 23, 2020. The balance of the promissory note, including interest thereon at December 31, 2019 is $30,026.
Issuance
of convertible notes
On
June 30, 2020, the Company issued a Convertible Promissory Note in the aggregate principal amount of $300,000 to Cavalry Fund
I LLP. The note had a maturity date of 12 months after issuance and was issued at a 10% original issue discount. The Company may
prepay the note with prepayment penalties ranging from 115% to 120%. The outstanding principal amount of the note is convertible,
at the election of the holder into shares of the Company’s common stock at a conversion price equal to $0.035. The Company
also issued to the lender a warrant to purchase 8,571,428 shares of common stock.
On
January 22, 2020, the Company issued a Convertible Promissory Note in the aggregate principal amount of $43,000 to Power Up Lending
Group Ltd. The note had a maturity date of January 22, 2021 and a coupon of 12% per annum. The Company may prepay the note with
prepayment penalties ranging from 115% to 135%. The outstanding principal amount of the note is convertible after 180 days, at
the election of the holder into shares of the Company’s common stock at a conversion price equal to 61% of the lowest trading
price during the previous fifteen trading days.
On
January 13, 2020, the Company issued a Convertible Promissory Note in the aggregate principal amount of $100,000 to Odyssey Funding,
LLC. The note had a maturity date of January 13, 2021 and a coupon of 10% per annum. The Company may prepay the note with prepayment
penalties ranging from 120% to 145%. The outstanding principal amount of the note is convertible after 180 days, at the election
of the holder into shares of the Company’s common stock at a conversion price equal to 58% of the lowest trading price during
the previous fifteen trading days.
On
February 5, 2020, the Company issued a Convertible Promissory Note in the aggregate principal amount of $105,000 to Adar Alef,
LLC. The note had a maturity date of February 5, 2021 and a coupon of 10% per annum. The Company may prepay the note with prepayment
penalties ranging from 120% to 145%. The outstanding principal amount of the note is convertible after 180 days, at the election
of the holder into shares of the Company’s common stock at a conversion price equal to 58% of the lowest trading price during
the previous fifteen trading days.
On
February 24, 2020, the Company issued a Convertible Promissory Note in the aggregate principal amount of $78,750 to LG Capital
Funding LLC. The note had a maturity date of February 24, 2021 and a coupon of 10% per annum. The Company may prepay the note
with prepayment penalties ranging from 120% to 145%. The outstanding principal amount of the note is convertible after 180 days,
at the election of the holder into shares of the Company’s common stock at a conversion price equal to 58% of the lowest
trading price during the previous fifteen trading days.
On
October 21, 2019, we issued a Convertible Promissory Note in the aggregate principal amount of $22,977 to West Point Partners,
LLC for penalty interest and expenses incurred by West Point Partners LLC on acquiring the GS Capital Partners note dated March
4, 2019. The note had a maturity date of October 21, 2020 and bears interest at 8% per annum. The outstanding principal amount
of the note was convertible after 180 days, at the election of the holder into shares of our common stock at a conversion price
equal to 62% of the lowest two trading prices during the previous ten trading days.
On
November 12, 2019, we issued a Convertible Promissory Note in the aggregate principal amount of $23,250 to Dieter Busenhart for
penalty interest and expenses incurred by him on acquiring the JSJ Investments, Inc. note dated March 29, 2019. The note had a
maturity date of November 12, 2020 and bears interest at 6% per annum. The outstanding principal amount of the note was convertible
after 180 days, at the election of the holder into shares of our common stock at a conversion price equal to 60% of the average
three lowest trading prices during the previous ten trading days.
On
November 19, 2019, in terms of a conversion notice received from Dieter Busenhart, on the convertible note entered into on November
12, 2019, converting the aggregate principal amount, including interest thereon, totaling $23,273 into 1,463,706 shares of common
stock at a conversion price of $0.159 per share, thereby extinguishing the note and realizing a loss on conversion of $30,884.
On
November 15, 2019, we issued a Convertible Promissory Note in the aggregate principal amount of $200,000 to Odyssey Funding, LLC.
The note had a maturity date of November 15, 2020 and a coupon of 10% per annum. We may prepay the note with prepayment penalties
ranging from 120% to 145%. The outstanding principal amount of the note is convertible after 180 days, at the election of the
holder into shares of our common stock at a conversion price equal to 58% of the lowest trading price during the previous fifteen
trading days. The balance of the note plus accrued interest at December 31, 2019 was $27,657, less unamortized debt discount of
$174,864.
On
November 18, 2019, we and Strategic IR entered into an exchange agreement, replacing the remaining balance of the May 15, 2019
convertible note purchased from Labrys Fund LP, 2019, including interest thereon with a new note in the aggregate principal amount
of $159,123 with a maturity date of November 18, 2020, removing the conversion limitation of ownership of 9.99% and reducing the
interest rate to 6% per annum.
On
November 19, 2019, in terms of a conversion notice received from Strategic IR on the convertible note entered into on November
18, 2019, converting the aggregate principal sum of $159,123 and interest thereon into 10,007,882 shares of common stock at a
conversion price of $0.0159 per share, thereby extinguishing the note and realizing a loss on conversion of $211,166.
On
November 18, 2019, we and Strategic IR entered into an exchange agreement, replacing the balance of the July 15, 2019 convertible
note purchased from GS Capital Partners, including interest thereon with a new note in the aggregate principal amount of $37,224
with a maturity date of November 18, 2020, removing the conversion limitation of ownership of 9.99% and reducing the interest
rate to 6% per annum.
On
November 19, 2019, in terms of a conversion notice received from Strategic IR on a convertible note entered into on November 18,
2019, converting the aggregate principal sum of $37,224 into 2,386,181 shares of common stock at a conversion price of $0.0156
per share, thereby extinguishing the note and realizing a loss on conversion of $51,064.
On
November 18, 2019, we and Dieter Busenhart entered into an exchange agreement, replacing the balance of the March 29, 2019 convertible
note purchased from JSJ Investments , Inc. with a new note in the aggregate principal amount of $53,595 with a maturity date of
November 18, 2020, removing the conversion limitation of ownership of 9.99% and reducing the interest rate to 6% per annum.
On
November 19, 2019, in terms of a conversion notice received from Dieter Busenhart, on a convertible note entered into on November
18, 2019, converting the aggregate principal amount of $53,595 into 3,370,725 shares of common stock at a conversion price of
$0.159 per share, thereby extinguishing the note and realizing a loss on conversion of $71,122.
On
November 18, 2019, we and West Point Partners, LLC entered into an exchange agreement, replacing the March 4, 2019 GS Capital
note with a new note in the aggregate principal sum of $102,039 with a maturity date of November 18, 2020, removing the conversion
limitation of ownership of 9.99% and reducing the interest rate to 6% per annum.
On
November 21, 2019, we issued a Convertible Promissory Note in the aggregate principal amount of $93,000 to Power up Lending Group
Ltd. The note had a maturity date of November 12, 2020 and a coupon of 12% per annum. We may prepay the note with prepayment penalties
ranging from 115% to 135%. The outstanding principal amount of the note is convertible after 180 days, at the election of the
holder into shares of our common stock at a conversion price equal to 61% of the lowest three trading prices during the previous
fifteen trading days. The balance of the note plus accrued interest at December 31, 2019 was $11,643, less unamortized debt discount
of $82,580.
On
November 25, 2019, we issued a Convertible Promissory Note in the aggregate principal amount of $52,500 to Black Ice Advisors,
LLC. The note had a maturity date of November 25, 2020 and a coupon of 10% per annum. We may prepay the note with prepayment penalties
ranging from 120% to 145%. The outstanding principal amount of the note is convertible after 180 days, at the election of the
holder into shares of our common stock at a conversion price equal to 58% of the lowest trading price during the previous fifteen
trading days. The balance of the note plus accrued interest at December 31, 2019 was $5,739, less unamortized debt discount of
$47,336.
On
December 23, 2019, we issued a Convertible Promissory Note in the aggregate principal amount of $63,000 to Power up Lending Group
Ltd. The note had a maturity date of December 23, 2020 and a coupon of 12% per annum. We may prepay the note with prepayment penalties
ranging from 115% to 135%. The outstanding principal amount of the note is convertible after 180 days, at the election of the
holder into shares of our common stock at a conversion price equal to 61% of the lowest three trading prices during the previous
fifteen trading days. The balance of the note plus accrued interest at December 31, 2019 was $1,542, less unamortized debt discount
of $61,623.
Exchange
of debt into equity
On
December 11, 2019, Mr. Skiguine purchased a portion of a note issued to Andrey Novikov by Qpagos Corporation in the principal
amount of $65,953. On December 17, 2019, we entered into a debt settlement with Mr. Skiguine whereby the Note was assigned from
Qpagos Corporation to us and was simultaneously settled by the issue of 2,231,768 shares of common stock at an issue price of
$0.03 per share, thereby extinguishing the note. A loss on settlement of $67,953 was realized.
On
December 11, 2019, Strategic IR purchased a portion of a note issued to Andrey Novikov by Qpagos Corporation in the principal
amount of $65,953. On December 17, 2019, we entered into a debt settlement with Strategic IR whereby the Note was assigned from
Qpagos Corporation to us and was simultaneously settled by the issue of 2,231,768 shares of common stock at an issue price of
$0.03 per share, thereby extinguishing the note. A loss on settlement of $67,953 was realized.
On
November 19, 2019, in terms of a debt exchange agreement entered into, Boba Management exchanged a promissory note in the aggregate
principal amount of $34,955 and interest thereon of $469 into 1,968,014 shares of common stock at a conversion price of $0.04
per share, thereby extinguishing the debt and realizing a loss on exchange of $37,392.
Conversion
of debt into equity
On
October 3, 2019, in terms of a conversion notice received from JSJ Investments, converting $25,000 into 999,920 shares of common
stock at a conversion price of $0.025 per share, realizing a loss on conversion of $24,996.
On
November 19, 2019, in terms of a conversion notice received from Bellridge Capital LP, converting the principal sum of $200,000
and interest thereon of $21,568 into 13,935,112 shares of common stock at a conversion price of $0.0159 per share, thereby extinguishing
the note and realizing a loss on conversion of $294,031.
On
November 19, 2019, in terms of a conversion notice received from Strategic IR converting the aggregate principal sum of $14,583,
including interest thereon of $297 into 935,887 shares of common stock at a conversion price of $0.0159 per share, thereby extinguishing
the note and realizing a loss on conversion of $19,747.
On
November 19, 2019, in terms of a conversion notice received from West Point Capital Partners, LLC, converting the aggregate principal
amount, including interest thereon, $26,968 into 1,812,390 shares of common stock at a conversion price of $0.149 per share, thereby
extinguishing the note and realizing a loss on conversion of $40,090.
On
November 19, 2019, in terms of a conversion notice received from West Point Capital Partners, LLC, on a convertible note entered
into on November 18, 2019, converting the aggregate principal amount of $102,039 into 6,857,446 shares of common stock at a conversion
price of $0.149 per share, thereby extinguishing the note. The Company realized a loss on conversion of $151,687.
On
November 19, 2019, in terms of a conversion notice received from west Point Capital Partners, LLC, on a convertible note entered
into on October 21, 2019, converting the aggregate principal amount of the note outstanding, including interest thereon, totaling
$23,118 into 1,553,621 shares of common stock at a conversion price of $0.149 per share, thereby extinguishing the note and realizing
a loss on conversion of $34,366.
On
December 4, 2019, in terms of a conversion notices received from Gibbs International converting the principal sum of $405,735,
a once off penalty of $40,573 and interest thereon of $54,529 into 21,000,000 shares of common stock at a conversion price of
$0.0238 thereby extinguishing the note realizing a loss on conversion of $528,162.
On
December 16, 2019, in terms of a conversion notice received from Crown Bridge Partners converting $8,800 of principal, fees thereon
of $500 and interest of $2,409 into 51,045,457 shares of common stock at a conversion price of $0.011 per share, thereby extinguishing
the note, realizing a loss on conversion of $58,336.
All
sales to U.S. persons in each of the transactions set forth above were issued relying on the exemption provided by Section 4(a)(2)
of the Securities Act and Regulation D promulgated thereunder for the offer and sale of securities not involving a public offering,
except for debt conversions which were effected relying on Section 3(a)(9) of the Securities Act as the common stock was exchanged
by us with our existing security holders exclusively and no commission or other remuneration was paid or given directly or indirectly
for soliciting such exchange. The recipients of securities in each of these transactions relying on Section 4(a)(2) of the Securities
Act and/or Rule 506 promulgated thereunder acquired the securities for investment only and not with a view to or for sale in connection
with any distribution thereof, and appropriate legends were affixed to the securities issued in these transactions. Each of the
recipients of securities in these transactions was an accredited investor within the meaning of Rule 501 of Regulation D under
the Securities Act and had adequate access, through employment, business or other relationships, to information about us.
All
sales to non U.S. persons in each of the transactions set forth above were issued relying on Regulation S. The recipients of the
securities in each of these transactions relying on Regulation S represented that they were not a U.S. Person as that term is
defined in Regulation S, that at the time of purchase of the securities they were located outside the United States and that they
acquired the securities solely for their own account and not for the account or the benefit of a U.S. person.
ITEM
16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES [UPDATE EXHIBITS]
Exhibit No.
|
|
Description
|
2.1
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|
Agreement and Plan of Merger, dated as of May 12, 2016, by and among Asiya Pearls, Inc., QPAGOS Merge, Inc. and Qpagos Corporation (Incorporated by reference to Exhibit 2.1 to the Registrant’s Form 8-K (File No. 333-192877) filed with the Securities and Exchange Commission on May 13, 2016)
|
3.1
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|
Articles of Incorporation of the Registrant (Incorporated by reference to Exhibit 3.1 to the Registrant’s registration statement on Form S-1 (File No. 333-192877) filed with the Securities and Exchange Commission on December 16, 2013)
|
3.2
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|
Bylaws (Incorporated by reference to Exhibit 3.2 to the Registrant’s Form 8-K (File No. 333-192877) filed with the Securities and Exchange Commission on May 13, 2016)
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3.3
|
|
Certificate of Amendment to Articles of Incorporation of the Registrant (Incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K (File No. 333-192877) filed with the Securities and Exchange Commission on June 2, 2016)
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3.4
|
|
Certificate of Amendment to Articles of Incorporation of the Registrant (Incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K (File No. 333-192877) filed with the Securities and Exchange Commission on March 6, 2018)
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3.5
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Certificate of Amendment to the Articles of Incorporation of the Registrant (Name Change) (Incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K (File No. 333-192877) filed with the Securities and Exchange Commission on November 4, 2019)
|
3.6
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|
Certificate of Change to the Articles of Incorporation of the Registrant (Reverse) (Incorporated by reference to Exhibit 3.2 to the Registrant’s Form 8-K (File No. 333-192877) filed with the Securities and Exchange Commission on November 4, 2019)
|
4.1
|
|
Form of Warrants issued to Investors (Incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K (File No. 333-192877) filed with the Securities and Exchange Commission on May 13, 2016)
|
4.2
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|
Form of Warrant issued to Placement Agent and its designees (Incorporated by reference to Exhibit 4.2 to the Registrant’s Form 8-K (File No. 333-192877) filed with the Securities and Exchange Commission on May 13, 2016)
|
4.3
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Form of Amendment to Warrant issued to Placement Agent and its designees (Incorporated by reference to Exhibit 4.3 to Amendment No. 1 to the Registrant’s registration statement on Form S-1 (File No. 333-192877) filed with the Securities and Exchange Commission on December 22, 2016)
|
4.4
|
|
Note in the principal amount of $77,000 issued December 28, 2016 (Incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K (File No. 333-192877) filed with the Securities and Exchange Commission on December 29, 2016)
|
4.5
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|
Note in the principal amount of $105,000 issued January 27, 2017 (Incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K (File No. 333-192877) filed with the Securities and Exchange Commission on February 1, 2017)
|
4.6
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|
Note in the principal amount of $200,000 issued February 6, 2017 (Incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K (File No. 333-192877) filed with the Securities and Exchange Commission on February 13, 2017)
|
4.7
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|
Note in the principal amount of $53,000 issued February 21, 2017 (Incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K (File No. 333-192877) filed with the Securities and Exchange Commission on March 1, 2017)
|
4.8
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|
Note in the principal amount of $100,000 issued March 9, 2017 (Incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K (File No. 333-192877) filed with the Securities and Exchange Commission on March 15, 2017)
|
4.9
|
|
Note in the principal amount of $100,000 issued March 9, 2017 (Incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K (File No. 333-192877) filed with the Securities and Exchange Commission on May 1, 2017)
|
4.10
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|
Note in the principal amount of $50,000 issued October 20, 2016 (Incorporated by reference to Exhibit 4.10 to the Registrant’s Form 10-K (File No. 000-55648) filed with the Securities and Exchange Commission April 17, 2018)
|
4.11
|
|
Note in the principal amount of $50,000 issued October 21, 2016 (Incorporated by reference to Exhibit 4.11 to the Registrant’s Form 10-K (File No. 000-55648) filed with the Securities and Exchange Commission April 17, 2018)
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4.12
|
|
Note in the principal amount of $50,000 issued October 31, 2016 (Incorporated by reference to Exhibit 4.12 to the Registrant’s Form 10-K (File No. 000-55648) filed with the Securities and Exchange Commission April 17, 2018)
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4.13
|
|
Note in the principal amount of $50,000 issued February 19, 2017 (Incorporated by reference to Exhibit 4.13 to the Registrant’s Form 10-K (File No. 000-55648) filed with the Securities and Exchange Commission April 17, 2018)
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4.14
|
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Note in the principal amount of $50,000 issued March 1, 2017 (Incorporated by reference to Exhibit 4.14 to the Registrant’s Form 10-K (File No. 000-55648) filed with the Securities and Exchange Commission April 17, 2018)
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4.15
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Extension Agreement dated May 19, 2017 (Incorporated by reference to Exhibit 4.15 to the Registrant’s Form 10-K (File No. 000-55648) filed with the Securities and Exchange Commission April 17, 2018)
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4.16
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Extension Agreement dated May 30, 2017 ((Incorporated by reference to Exhibit 4.16 to the Registrant’s Form 10-K (File No. 000-55648) filed with the Securities and Exchange Commission April 17, 2018))
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4.17
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Note in the principal amount of $20,000 issued June 19, 2017 (Incorporated by reference to Exhibit 4.17 to the Registrant’s Form 10-K (File No. 000-55648) filed with the Securities and Exchange Commission April 17, 2018)
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4.18
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Note in the principal amount of $52,493.59 issued June 19, 2017 (Incorporated by reference to Exhibit 4.18 to the Registrant’s Form 10-K (File No. 000-55648) filed with the Securities and Exchange Commission April 17, 2018)
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4.19
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Warrant issued to Gibbs International, Inc. issued June 19, 2017 (Incorporated by reference to Exhibit 4.19 to the Registrant’s Form 10-K (File No. 000-55648) filed with the Securities and Exchange Commission April 17, 2018)
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4.20
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Note in the principal amount of $53,438.36 issued June 29, 2017 (Incorporated by reference to Exhibit 4.20 to the Registrant’s Form 10-K (File No. 000-55648) filed with the Securities and Exchange Commission April 17, 2018)
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4.21
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Warrant issued to Cobbolo Limited dated June 29, 2017 (Incorporated by reference to Exhibit 4.21 to the Registrant’s Form 10-K (File No. 000-55648) filed with the Securities and Exchange Commission April 17, 2018)
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4.22
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Note in the principal amount of $54,123.29 issued June 29, 2017 (Incorporated by reference to Exhibit 4.22 to the Registrant’s Form 10-K (File No. 000-55648) filed with the Securities and Exchange Commission April 17, 2018)
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4.23
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|
Warrant issued to Delinvest Commercial Ltd issued June 29, 2017 (Incorporated by reference to Exhibit 4.23 to the Registrant’s Form 10-K (File No. 000-55648) filed with the Securities and Exchange Commission April 17, 2018)
|
4.24
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|
8% Promissory Note between the Company and Andrey Novikov dated December 9, 2019 (Incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K (File No. 000-55648) filed with the Securities and Exchange Commission on December 11, 2019)
|
4.25
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|
Form of 10% Original Issue Discount Senior Secured Convertible Note (Incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K (File No. 000-55648) filed with the Securities and Exchange Commission on July 2, 2020)
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4.26
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|
Warrant Agreement, dated June 30, 2020 (Incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K (File No. 000-55648) filed with the Securities and Exchange Commission on July 2, 2020)
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5.1
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Opinion of Parsons Behle & Latimer **
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10.1
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Sublicense Agreement between Janor Enterprises and Qpagos Corporation dated May 1, 2015 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K (File No. 333-192877) filed with the Securities and Exchange Commission on May 13, 2016)
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10.2
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Additional Agreement No. 1 to Sublicense Agreement between Janor Enterprises and Qpagos Corporation dated November 1, 2015 (Incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K (File No. 333-192877) filed with the Securities and Exchange Commission on May 13, 2016)
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10.3†
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Employment Agreement Gaston Pereira (Incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K (File No. 333-192877) filed with the Securities and Exchange Commission on May 13, 2016)
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10.4†
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Employment Agreement Andrey Novikov (Incorporated by reference to Exhibit 10.4 to the Registrant’s Form 8-K (File No. 333-192877) filed with the Securities and Exchange Commission on May 13, 2016)
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10.5
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Form of Securities Purchase Agreement (Incorporated by reference to Exhibit 10.5 to the Registrant’s Form 8-K (File No. 333-192877) filed with the Securities and Exchange Commission on May 13, 2016)
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10.6
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Placement Agent Agreement (Incorporated by reference to Exhibit 10.6 to the Registrant’s Form 8-K (File No. 333-192877) filed with the Securities and Exchange Commission on May 13, 2016)
|
10.7
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Form of Registration Rights Agreement (Incorporated by reference to Exhibit 10.7 to the Registrant’s Form 8-K (File No. 333-192877) filed with the Securities and Exchange Commission on May 13, 2016)
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10.8
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Consulting Agreement between Qpagos Corporation and Yogipay Corporation dated February 11, 2016 (Incorporated by reference to Exhibit 10.8 to the Registrant’s Form 8-K (File No. 333-192877) filed with the Securities and Exchange Commission on May 13, 2016)
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10.9
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Consulting Agreement between Qpagos Corporation and Eurosa Inc. dated February 11, 2016 (Incorporated by reference to Exhibit 10.9 to the Registrant’s Form 8-K (File No. 333-192877) filed with the Securities and Exchange Commission on May 13, 2016)
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10.10
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Form of Exchange Agreement (Incorporated by reference to Exhibit 10 to Amendment No. 1 to the Registrant’s registration statement on Form S-1 (File No. 333-192877) filed with the Securities and Exchange Commission on December 22, 2016)
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10.11
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Share Purchase Agreement between Panatrade Business Limited (QPAGOS S.A.P.I.) and QPAGOS Corporation dated August 27, 2015 (Incorporated by reference to Exhibit 11 to Amendment No. 1 to the Registrant’s registration statement on Form S-1 (File No. 333-192877) filed with the Securities and Exchange Commission on December 22, 2016)
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10.12
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Share Purchase Agreement between Panatrade Business Limited (Redpag Electronicos S.A.P.I.) and QPAGOS Corporation dated August 27, 2015 (Incorporated by reference to Exhibit 12 to Amendment No. 1 to the Registrant’s registration statement on Form S-1 (File No. 333-192877) filed with the Securities and Exchange Commission on December 22, 2016)
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10.13
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Consulting Agreement between Panatrade Business Limited and QPAGOS Corporation dated October 29, 2015 (Incorporated by reference to Exhibit 13 to Amendment No. 1 to the Registrant’s registration statement on Form S-1 (File No. 333-192877) filed with the Securities and Exchange Commission on December 22, 2016)
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10.14
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Consulting Agreement between Delinvest Commercial Ltd. and QPAGOS Corporation dated October 29, 2015 (Incorporated by reference to Exhibit 14 to Amendment No. 1 to the Registrant’s registration statement on Form S-1 (File No. 333-192877) filed with the Securities and Exchange Commission on December 22, 2016)
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10.15
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Consulting Agreement between Sergey Rumyantsev and QPAGOS Corporation dated May 1, 2015 (Incorporated by reference to Exhibit 15 to Amendment No. 1 to the Registrant’s registration statement on Form S-1 (File No. 333-192877) filed with the Securities and Exchange Commission on December 22, 2016)
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10.16
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Securities Purchase Agreement dated December 28, 2016 between the Registrant and Power Up Lending Group Ltd (Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K (File No. 333-192877) filed with the Securities and Exchange Commission on December 29, 2016)
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10.17
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Securities Purchase Agreement dated January 27, 2017 between the Registrant and Labrys Fund, LP (Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K (File No. 333-192877) filed with the Securities and Exchange Commission on February 1, 2017)
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10.18
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Securities Purchase Agreement dated February 21, 2017 between the Registrant and Power Up Lending Group Ltd (Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K (File No. 333-192877) filed with the Securities and Exchange Commission on March 1, 2017)
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10.19
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Securities Purchase Agreement dated August 25, 2017 between the Registrant and Power Up Lending Group Ltd (Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K (File No. 333-192877) filed with the Securities and Exchange Commission on May 1, 2017)
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10.20
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Securities Purchase Agreement dated June 19, 2017 between Registrant and Gibbs International Inc. (Incorporated by reference to Exhibit 10.20 to the Registrant’s Form 10-K (File No. 000-55648) filed with the Securities and Exchange Commission April 17, 2018)
|
10.21
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Securities Purchase Agreement dated June 29, 2017 between Registrant and Delinvest Commercial Ltd. (Incorporated by reference to Exhibit 10.21 to the Registrant’s Form 10-K (File No. 000-55648) filed with the Securities and Exchange Commission April 17, 2018)
|
10.22
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Securities Purchase Agreement dated July 29, 2017 between Registrant and Cobbolo Limited (Incorporated by reference to Exhibit 10.22 to the Registrant’s Form 10-K (File No. 000-55648) filed with the Securities and Exchange Commission April 17, 2018)
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10.23
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Securities Purchase Agreement dated July 29, 2017 between Registrant and Delinvest Commercial Ltd (Incorporated by reference to Exhibit 10.23 to the Registrant’s Form 10-K (File No. 000-55648) filed with the Securities and Exchange Commission April 17, 2018)
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10.24
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Amendment, dated April 30, 2018, to Employment Agreement, by and between QPAGOS Corporation and Gaston Pereira (Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K (File No. 000-55648) filed with the Securities and Exchange Commission on May 2, 2018)
|
10.25
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|
Amendment, dated April 30, 2018, to Employment Agreement, by and between QPAGOS Corporation and Andrey Novikov (Incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K (File No. 000-55648) filed with the Securities and Exchange Commission on May 2, 2018)
|
10.26
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Agreement to Organize and Operate a Joint Venture, dated June 14, 2018, by and among the Company, Digital Power Lending, LLC and Innovative Payment Systems, Inc. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8- K (File No. 000-55648) filed with the Securities and Exchange Commission on June 14, 2018)
|
10.27
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|
Amendment, dated June 29, 2018, to Agreement to Organize and Operate a Joint Venture by and among the Company, Digital Power Lending, LLC and Innovative Payment Systems, Inc. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8- K (File No. 000-55648) filed with the Securities and Exchange Commission on July 2, 2018)
|
10.28
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|
Amendment, dated July 16, 2018, to Agreement to Organize and Operate a Joint Venture by and among the Company, Digital Power Lending, LLC and Innovative Payment Systems, Inc. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8- K (File No. 000-55648) filed with the Securities and Exchange Commission on July 2, 2018)
|
10.29
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|
Extension of Agreement to Organize and Operate a Joint Venture dated August 17, 2018 by and among the Company, Digital Power Lending, LLC and Innovative Payment Systems, Inc. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8- K (File No. 000-55648) filed with the Securities and Exchange Commission on August 24, 2018)
|
10.30
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|
Amendment to Employment Agreement by and between the Company and Gaston Pereira (Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8- K (File No. 000-55648) filed with the Securities and Exchange Commission on June 17, 2019)
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10.31
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|
Amendment To Employment Agreement By And Between The Company And Andrey Novikov (Incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8- K (File No. 000-55648) filed with the Securities and Exchange Commission on June 17, 2019)
|
10.32
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|
Stock Purchase Agreement Between the QPAGOS and Vivi Holdings, Inc. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8- K (File No. 000-55648) filed with the Securities and Exchange Commission on August 8, 2019)
|
10.33
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|
Employment Agreement By And Between The Company And Andrey Novikov (Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8- K (File No. 000-55648) filed with the Securities and Exchange Commission on December 6, 2019)
|
10.34
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|
Partial Settlement of Outstanding Balance Between the Company and Andrey Novikov (Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8- K (File No. 000-55648) filed with the Securities and Exchange Commission on December 11, 2019)
|
10.35
|
|
Executive Employment Agreement between Innovative Payment Solutions, Inc. and William Corbett, effective June 24, 2020 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8- K (File No. 000-55648) filed with the Securities and Exchange Commission on June 29, 2020)
|
10.36
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|
Restricted Stock Agreement between Innovative Payment Solutions, Inc. and William Corbett, effective June 24, 2020 (Incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8- K (File No. 000-55648) filed with the Securities and Exchange Commission on June 29, 2020)
|
10.37
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|
Indemnification Agreement between Innovative Payment Solutions, Inc. and William Corbett, effective June 24, 2020 (Incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8- K (File No. 000-55648) filed with the Securities and Exchange Commission on June 29, 2020)
|
10.38
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|
Securities Purchase Agreement, between Innovative Payment Solutions, Inc. and Cavalry Fund I LP, dated June 30, 2020 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8- K (File No. 000-55648) filed with the Securities and Exchange Commission on July 2, 2020)
|
10.39
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|
Security Agreement, between Innovative Payment Solutions, Inc. and Cavalry Fund I LP, dated June 30, 2020 (Incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8- K (File No. 000-55648) filed with the Securities and Exchange Commission on July 2, 2020)
|
10.40
|
|
Registration Rights Agreement, between Innovative Payment Solutions, Inc. and Cavalry Fund I LP, dated June 30, 2020 (Incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8- K (File No. 000-55648) filed with the Securities and Exchange Commission on July 2, 2020)
|
14.1
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|
Code of Ethics (Incorporated by reference to Exhibit 14.1 to the Registrant’s Form 8-K (File No. 333-192877) filed with the Securities and Exchange Commission on May 13, 2016)
|
21
|
|
List of Subsidiaries **
|
23.1
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|
Consent of RBSM LLP.**
|
23.2
|
|
Consent of Parsons Behle & Latimer (contained in Exhibit 5.1)**
|
**
|
Filed
herewith
|
†
|
Indicates
management contract or compensatory plan
|
101.INS
|
|
XBRL
Instance Document **
|
101.SCH
|
|
XBRL
Taxonomy Extension Schema Document **
|
101.CAL
|
|
XBRL
Taxonomy Extension Calculation Linkbase Document **
|
101.DEF
|
|
XBRL
Taxonomy Extension Definition Linkbase Document **
|
101.LAB
|
|
XBRL
Taxonomy Extension Label Linkbase Document **
|
101.PRE
|
|
XBRL
Taxonomy Extension Presentation Linkbase Document **
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ITEM
17. UNDERTAKINGS
The
undersigned Registrant hereby undertakes:
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(1)
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To
file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
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(i)
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to
include any prospectus required by Section 10(a)(3) of the Securities Act;
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(ii)
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to
reflect in the prospectus any acts or events arising after the effective date of this registration statement (or the most
recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information
set forth in this registration statement (notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering range may be reflected in the form of a prospectus filed with the Commission
pursuant to Rule 424(b) under the Securities Act if, in the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table
in the effective registration statement); and
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(iii)
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to
include any material information with respect to the plan of distribution not previously disclosed in this registration statement
or any material change to such information in this registration statement; provided , however , that subparagraphs
(i), (ii) and (iii) do not apply if the information required to be included in a post-effective amendment by those subparagraphs
is contained in periodic reports filed with or furnished to the Commission by the Registrant pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934, that are incorporated by reference in this registration statement, or is contained
in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.
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(2)
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That,
for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
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(3)
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To
remove from registration, by means of a post-effective amendment, any of the securities being registered which remain unsold
at the termination of the offering.
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(4)
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That,
for the purpose of determining liability under the Securities Act of 1933 to any purchaser:
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(i)
Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as
of the date the filed prospectus was deemed part of and included in the registration statement; and
(ii)
Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance
on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information
statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract
of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer
and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement
relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement
made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or
deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will,
as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made
in the registration statement or prospectus that was part of the registration statement or made in any such document immediately
prior to such effective date.
(5)
That, for the purpose of determining liability of the registrant under the Securities Act of 1933, each filing of the registrant’s
annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated
by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(6)
If the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating
to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A,
shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness.
Provided, however, that no statement made in a registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus
that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede
or modify any statement that was made in the registration statement or prospectus that was part of the registration statement
or made in any such document immediately prior to such date of first use.
(7)
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion
of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other than the payment by a Registrant of expenses incurred
or paid by a director, officer or controlling person of a Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with the securities being registered, that Registrant
will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
(8)
For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement
as of the time it was declared effective.