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. Our auditors have issued a going concern opinion on our financial statements for the
years ended December 31, 2018 and 2019, expressing substantial doubt that we can continue as an ongoing business for the twelve
month period subsequent to the issuance of their report. 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 nine months ended September 30,
2020 and 2019, we incurred a net loss of $4,082,507 and $3,532,596, respectively. We have an accumulated deficit of $26,267,538
through September 30, 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 September 30, 2020, we had cash and cash equivalents of $124,404. 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. 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 our insufficient controls over review of accounting for certain complex transactions
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 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 Secured 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
Secured Notes are secured by a lien on all of our assets. If we fail to comply with the terms of the Secured Notes and/or the
related agreements, the note holder could declare a note default and if the default were to remain uncured, the secured creditors
would have the right to proceed against any or all of the collateral securing their Secured Notes. 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 September 30, 2020, we have outstanding
convertible debt in the principal amount of $597,410, net of unamortized discount of $930,672, pursuant to the terms of various
notes that we issued. Subsequent to September 30, 2020, we issued unsecured convertible notes in the principal amounts of $28,600
and $286,000 to Mark Geist and Bellridge Capital , LP, respectively. 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 Notes 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 Secured 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 Agreements 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 105 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 various Registration Rights Agreements.
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 the U.S. 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 U.S. 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 three of our largest stockholders may limit your ability to influence corporate matters.
As of November 27, 2020, three stockholders
(exclusive of our officers and directors) own 56,331,966 shares of common stock, representing approximately 29% of the voting
power of our issued share capital. As a result of this concentration of share ownership, the three stockholders have significant
influence over certain matters submitted to our stockholders for approval. 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 three 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 up-list 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.
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 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.
Management
Discussion and Analysis of financial condition
The discussion and analysis of our financial
condition and results of operations is based upon the unaudited condensed consolidated financial statements for the three and
nine months ended September 30, 2020 and 2019 and for the year ended December 2019 and 2018, 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 September 30, 2020 and September 30, 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 $336,879 and $139,855 for the three months ended September 30, 2020 and 2019, respectively, an
increase of $197,024 or 140.9%. The increase is primarily due to salaries and wage expenses of $114,360 including restricted stock
award expenses for restricted stock issued to our CEO, in the prior period all payroll expenses were for operational personnel
located at the Mexican operating sites, an increase in professional fees, including legal fees of $50,572 due to new business
development initiatives, the balance of the increase consists of several minor cost increases.
Depreciation
Depreciation
was $4,166 and $0 for the three months ended September 30, 2020 and 2019, respectively, an increase of $4,166. Depreciation during
the current period represents depreciation on the kiosks received from Qpagos Mexico.
Loss
on debt conversion
Loss
on debt conversion was $283,336 and $486,763 for the three months ended September 30, 2020 and 2019, respectively, a decrease
of $203,427 or 41.8%. 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 September 30, 2020 and
2019, $224,620 and $458,277 of principal and interest was converted into equity.
Interest
expense, net
Interest
expense was $253,487 and $52,650 for the three months ended September 30, 2020 and 2019, respectively, an increase of $200,837
or 381.5%. The increase is primarily due to penalty interest amounting to $211,425 incurred on settlement of several convertible
notes before conversion during the current period
Amortization
of debt discount
Amortization
of debt discount was $428,282 and $487,606 for the three months ended September 30, 2020 and 2019, respectively, a decrease of
$59,324 or 12.2%. The decrease is primarily due to the timing of new debt with associated debt discount issued during the current
period, several new convertible loans were advanced to the Company during the second half of the current quarter to settle convertible
notes with less favorable terms.
Derivative
liability movements
Derivative
liability movements were $(380,556) and $123,598 for the three months ended September 30, 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 September 30, 2020.
Net
loss from continuing operations
We
incurred a net loss of $1,706,706 and $1,194,460 for the three months ended September 30, 2020 and 2019 respectively, an increase
in loss of $512,246 or 42.9%, primarily due to the increase in general and administrative expenses, the increase in interest expense
and the net movement in derivative liabilities offset by a reduction in the loss on debt conversion, as discussed above.
Loss
from discontinued operations
The
loss from discontinued operations was $0 and $592,852 the three months ended September 30, 2020 and 2019, respectively. The decrease
was due to our sale of our Mexican operations effective December 31, 2019.
Net
loss
Net
loss was $1,706,706 and $1,787,312 for the three months ended September 30, 2020 and 2019, respectively, a decrease in loss of
$80,606 or 4.5%. The decrease is due to the loss realized on discontinued operations in the prior year offset by the increase
in net loss from continuing operations in the current period, discussed in detail above.
Results
of Operations for the Nine Months Ended September 30, 2020 and September 30, 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 $1,289,542 and $493,847 for the nine months ended September 30, 2020 and 2019, respectively,
an increase of $795,695 or 161.1%. The increase is primarily due to the issuance of restricted stock to our CEO with a related
expense of $439,362, directors fees of $88,000 during the current period, an increase in professional fees of $209,977 related
to the development of our platform for the US market and certain payroll expenses of $134,073 incurred during the current period.
Depreciation
Depreciation
was $8,333 and $0 for the nine months ended September 30, 2020 and 2019, respectively, an increase of $8,333. Depreciation during
the current period represents depreciation on the kiosks received from Qpagos Mexico.
Investment
impairment charge
Investment
impairment charge was $1,019,960 and $0 for the nine months ended September 30, 2020 and 2019, respectively, the Company raised
an impairment charge against the investment in Vivi Holdings Inc, as Vivi continues to not meet any of its indicated milestones
concerning its proposed IPO and fund raising efforts.
Loss
on debt conversion
Loss
on debt conversion was $433,610 and $1,037,822 for the nine months ended September 30, 2020 and 2019, respectively, a decrease
of $604,212 or 58.2%. 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 nine months ended September 30, 2020 and
2019, $335,948 and $953,612, respectively, 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 nine months ended September 30, 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
Interest
expense was $337,575 and $250,995 for the nine months ended September 30, 2020 and 2019, respectively, an increase of $86,580
or 34.5%. The increase is primarily due to the penalty interest incurred on the cash settlement of convertible debt resulting
in penalty interest of $238,080 offset by a reduction in interest expense due to the timing of new convertible debt taken out
during the current period.
Amortization
of debt discount
Amortization
of debt discount was $801,460 and $1,500,143 for the nine months ended September 30, 2020 and 2019, respectively, a decrease of
$698,683 or 46.6%. The decrease is primarily due to the timing of new convertible debt advanced during the third quarter of the
current period.
Derivative
liability movements
Derivative
liability movements were $(101,945) and $986,011 for the nine months ended September 30, 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 September 30, 2020.
Net
loss from continuing operations
We
incurred a net loss of $4,082,507 and $2,447,980 for the nine months ended September 30, 2020 and 2019 respectively, an increase
in loss of $1,634,527 or 66.8%, primarily due to the increase in general and administrative expenses, the investment impairment
charge and the reduction in the derivative liability gain, offset by a reduction in loss on debt conversion and the amortization
of debt discount as discussed above.
Loss
from discontinued operations
The
loss from discontinued operations was $0 and $1,084,616 the nine months ended September 30, 2020 and 2019, respectively. We sold
our Mexican operations effective December 31, 2019.
Net
loss
Net
loss was $4,082,507 and $3,532,596 for the nine months ended September 30, 2020 and 2019, respectively, an increase in loss of
$549,911 or 15.6%. The increase is due to the increase in net loss from continuing operations offset by 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.
We
incurred an accumulated deficit of $26,237,538 through September 30, 2020 and incurred negative cash flow from operations of $951,303
for the nine months ended September 30, 2020. 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. 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
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
September 30, 2020, we had cash of $124,404 and a negative working capital of $3,139,449, including a derivative liability of
$2,138,615. At December 31, 2019, we had cash of $2,979 and a working capital deficit of $1,613,080 (2018: $3,208,365).There
is substantial doubt about our ability to continue as a going concern. After eliminating the derivative liability our working
capital deficit is $1,000,834 at September 30, 2020. 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.
We
utilized cash of $951,303 and generated cash of $108,692 from continuing operations for the nine months ended September 30, 2020
and 2019, respectively and utilized cash of $0 and $632,428 from discontinued operations for the nine months ended September 30,
2020 and 2019, respectively. Overall cash utilized in operations increased by $427,567, primarily due to penalty interest incurred
on the settlement of convertible debt.
We
acquired terminals for gross proceeds of $50,000 from Qpagos Corporation during the nine months ended September 30, 2020, in terms
of the SPA agreement entered into with Vivi Holdings in December 2019. During the nine months ended September 30, 2019 we had
minimal investment activity.
Cash
provided by financing activities during the nine months ended September 30, 2020 was primarily comprised of $1,602,100 of proceeds
from short term notes and convertible notes and to a lesser extent share issuances of $33,000 and proceeds from Federal relief
funds of $210,292, which was offset by $807,664 in repayment of loans payable and repayment of convertible notes. Cash provided
by financing activities during the nine months ended September 30, 2019 was primarily comprised of $499,782 of proceeds from short
term notes and convertible notes and proceeds from loans payable.
At November 27, 2020, we had outstanding
notes in the principal amount of $1,819,600.
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 at September 30, 2020 are as follows:
|
|
Amount
|
|
Undiscounted minimum future lease payments
|
|
|
|
Total installments due:
|
|
|
|
2020
|
|
$
|
11,835
|
|
2021
|
|
|
47,340
|
|
2022
|
|
|
7,890
|
|
|
|
|
67,065
|
|
Off
Balance Sheet Arrangements
None
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 the novel coronavirus outbreak (“COVID-19”), businesses have been suspended due to local and state stay-at-home
orders intended to contain the COVID-19 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 favorable terms.
None.
Employees
As of November 27, 2020, we had two full
time employees, which are our Chief Executive Officer and Chief Technology 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 October 31, 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 subscribers from Mexico 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.
Legal
Proceedings
From
time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business.
We
are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have
a material adverse effect on our business, operating results, financial condition or cash flows.
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:
William
Corbett
Effective
January 1, 2020, we granted Mr. Corbett 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.
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.
On
April 7, 2020, we issued to Mr. Novikov 282,146 shares of our common stock.
James
Fuller
On
March 18, 2020, Mr. Fuller received 2,000,000 shares of common stock for his service as a non-executive director.
On
June 29, 2018, we granted Mr. Fuller 12,000 shares of restricted common stock pursuant to the Company’s 2018 Stock Incentive
Plan for his service as a director.
On
December 27, 2018, we granted Mr. Fuller 7,000 shares of restricted common stock i pursuant to the Company’s 2018 Stock
Incentive Plan for his service as a director.
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. 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 IR”). 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. 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. 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. 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. 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. 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.
On November 25, 2020, the Company entered
into the Bellridge SPA with Bellridge Capital, LP, pursuant to which the Company issued an Original Issue Discount 10% Convertible
Note with a principal balance of $286,000 and a five year warrant to purchase 8,171,429 shares of common stock at an exercise
price of $0.05 to Bellridge for gross proceeds of $250,250. The note has a maturity date of 12 months after issuance. 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. The issuance of the Bellridge Note and Bellridge
Warrant 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.
Vladimir
Skigin
On April 17, 2018, we issued a Promissory
Note in the aggregate principal amount of $49,491 to Vladimir Skigin. 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. 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 Wakatec OU, Mr. Skigin acquired $30,000 of the promissory
note issued to Wakatec 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. Skigin 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 January 7, 2020,
we entered into a debt exchange agreement with Mr. Skigin, 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.
On
December 11, 2019, Mr. Skigin 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. Skigin 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, Skiguin 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. 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 the three and nine months ended September 30, 2020 and 2019
|
|
Condensed
Consolidated Balance Sheets as of September 30, 2020 (unaudited) and December 31, 2019
|
F-49
|
Condensed
Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2020 and 2019
(unaudited)
|
F-50
|
Condensed
Consolidated Statements of Changes in Stockholders’ Deficit for the three and nine months ended September 30, 2020 and
2019 (unaudited)
|
F-51
|
Condensed
Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019, (unaudited)
|
F-52
|
Notes
to the Unaudited Condensed Consolidated Financial Statements
|
F-53–F-79
|
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 Pukhovskiy
|
|
|
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 Pukhovskiy
On December 17, 2019, in terms
of a settlement agreement entered into between the Company, Qpagos Corporation and Maxim Pukhovskiy, the Company issued a promissory
note to Mr. Pukhovskiy 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 Wakatec OU in settlement of a $93,000 trade payable owing by Qpagos Corporation to Wakatec 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 Wakatec OU, Mr. Motorin acquired $20,000 of the promissory note issued to Wakatec
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, 2019, 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 Wakatec OU, Mr. Skiguine acquired $30,000 of the promissory note issued to Wakatec
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 IR”). 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, 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
On 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
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(Unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash
|
|
$
|
124,404
|
|
|
$
|
2,979
|
|
Other current assets
|
|
|
8,668
|
|
|
|
55,059
|
|
Total Current Assets
|
|
|
133,072
|
|
|
|
58,038
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
Investment
|
|
|
1
|
|
|
|
1,019,961
|
|
Plant and equipment, net
|
|
|
41,667
|
|
|
|
-
|
|
Right of use asset
|
|
|
62,290
|
|
|
|
-
|
|
Security deposit
|
|
|
4,000
|
|
|
|
-
|
|
Total non-current assets
|
|
|
107,958
|
|
|
|
1,019,961
|
|
Total Assets
|
|
$
|
241,030
|
|
|
$
|
1,077,999
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
409,752
|
|
|
$
|
314,523
|
|
Federal relief loans
|
|
|
60,292
|
|
|
|
-
|
|
Loans payable
|
|
|
23,403
|
|
|
|
61,631
|
|
Loans payable - Related parties
|
|
|
-
|
|
|
|
30,026
|
|
Convertible debt, net of unamortized discount of
$930,671 and $371,387, respectively
|
|
|
597,410
|
|
|
|
359,362
|
|
Operating lease liability
|
|
|
43,049
|
|
|
|
|
|
Derivative liability
|
|
|
2,138,615
|
|
|
|
905,576
|
|
Total Current Liabilities
|
|
|
3,272,521
|
|
|
|
1,671,118
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
Federal relief loans
|
|
|
151,310
|
|
|
|
-
|
|
Operating lease liability
|
|
|
19,241
|
|
|
|
-
|
|
Total
Liabilities
|
|
|
3,443,072
|
|
|
|
1,671,118
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value, 25,000,000 shares authorized,
and 0 shares issued and outstanding as of September 30, 2020 and December 31, 2019.
|
|
|
-
|
|
|
|
-
|
|
Common stock, $0.0001 par value; 500,000,000 shares authorized, 191,121,339
and 128,902,124 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively.*
|
|
|
19,112
|
|
|
|
12,890
|
|
Additional paid-in-capital*
|
|
|
23,046,384
|
|
|
|
21,579,022
|
|
Accumulated deficit
|
|
|
(26,267,538
|
)
|
|
|
(22,185,031
|
)
|
Total
Stockholders’ Deficit
|
|
|
(3,202,042
|
)
|
|
|
(593,119
|
)
|
Total Liabilities
and Stockholders’ Deficit
|
|
$
|
241,030
|
|
|
$
|
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.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS AND COMPREHENSIVE LOSS
|
|
Three months
ended
|
|
|
Three months
ended
|
|
|
Nine months
ended
|
|
|
Nine months
ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Goods Sold
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
336,879
|
|
|
|
139,855
|
|
|
|
1,289,542
|
|
|
|
493,847
|
|
Depreciation and amortization
|
|
|
4,166
|
|
|
|
-
|
|
|
|
8,333
|
|
|
|
-
|
|
Total Expense
|
|
|
341,045
|
|
|
|
139,855
|
|
|
|
1,297,875
|
|
|
|
493,847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations
|
|
|
(341,045
|
)
|
|
|
(139,855
|
)
|
|
|
(1,297,875
|
)
|
|
|
(493,847
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment impairment charge
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,019,960
|
)
|
|
|
-
|
|
Loss on debt conversion
|
|
|
(283,336
|
)
|
|
|
(486,763
|
)
|
|
|
(433,610
|
)
|
|
|
(1,037,822
|
)
|
Loss on settlement of liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
(50,082
|
)
|
|
|
|
|
Penalty on convertible notes
|
|
|
-
|
|
|
|
(151,184
|
)
|
|
|
-
|
|
|
|
(151,184
|
)
|
Interest expense
|
|
|
(253,487
|
)
|
|
|
(52,650
|
)
|
|
|
(337,575
|
)
|
|
|
(250,995
|
)
|
Amortization of debt discount
|
|
|
(428,282
|
)
|
|
|
(487,606
|
)
|
|
|
(801,460
|
)
|
|
|
(1,500,143
|
)
|
Derivative liability movements
|
|
|
(380,556
|
)
|
|
|
123,598
|
|
|
|
(101,945
|
)
|
|
|
986,011
|
|
Other (expense) income
|
|
|
(20,000
|
)
|
|
|
-
|
|
|
|
(40,000
|
)
|
|
|
-
|
|
Loss before Income Taxes from continuing operations
|
|
|
(1,706,706
|
)
|
|
|
(1,194,460
|
)
|
|
|
(4,082,507
|
)
|
|
|
(2,447,980
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss from continuing operations
|
|
|
(1,706,706
|
)
|
|
|
(1,194,460
|
)
|
|
|
(4,082,507
|
)
|
|
|
(2,447,980
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of income taxes
|
|
|
-
|
|
|
|
(592,852
|
)
|
|
|
-
|
|
|
|
(1,084,616
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(1,706,706
|
)
|
|
$
|
(1,787,312
|
)
|
|
$
|
(4,082,507
|
)
|
|
|
(3,532,596
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(0.01
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.02
|
)
|
|
|
(0.15
|
)
|
Discontinued operations
|
|
$
|
-
|
|
|
$
|
(0.02
|
)
|
|
$
|
-
|
|
|
|
(0.07
|
)
|
|
|
$
|
(0.01
|
)
|
|
$
|
(0.07
|
)
|
|
$
|
(0.02
|
)
|
|
|
(0.22
|
)
|
Weighted Average Number of Shares Outstanding *
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
181,960,300
|
|
|
|
24,977,520
|
|
|
|
164,604,005
|
|
|
|
15,933,974
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive gain
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
(2,286
|
)
|
|
|
-
|
|
|
|
15,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive income (loss)
|
|
$
|
(1,706,706
|
)
|
|
$
|
(1,789,598
|
)
|
|
$
|
(4,082,507
|
)
|
|
$
|
(3,517,158
|
)
|
|
*
|
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 CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2020 AND 2019
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
Additional
Paid-in
|
|
|
Accumulated
|
|
|
Accumulated
Other
Comprehensive
|
|
|
Total
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
|
)
|
Settlement of liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
2,504,110
|
|
|
|
250
|
|
|
|
99,914
|
|
|
|
-
|
|
|
|
-
|
|
|
|
100,164
|
|
Conversion of debt
to equity
|
|
|
-
|
|
|
|
-
|
|
|
|
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
|
|
|
-
|
|
|
|
-
|
|
|
|
2,000,000
|
|
|
|
200
|
|
|
|
87,800
|
|
|
|
-
|
|
|
|
-
|
|
|
|
88,000
|
|
Fair value of Restricted
Stock Awards
|
|
|
-
|
|
|
|
-
|
|
|
|
20,495,000
|
|
|
|
2,050
|
|
|
|
311,781
|
|
|
|
-
|
|
|
|
-
|
|
|
|
313,831
|
|
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
|
)
|
Conversion of debt
to equity
|
|
|
-
|
|
|
|
-
|
|
|
|
5,330,737
|
|
|
|
533
|
|
|
|
154,933
|
|
|
|
-
|
|
|
|
-
|
|
|
|
155,466
|
|
Shares issued for
services
|
|
|
-
|
|
|
|
-
|
|
|
|
282,146
|
|
|
|
28
|
|
|
|
13,472
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13,500
|
|
Fair value of Restricted
Stock Awards
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
62,765
|
|
|
|
-
|
|
|
|
-
|
|
|
|
62,765
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(977,738
|
)
|
|
|
-
|
|
|
|
(977,738
|
)
|
Balance as of June 30, 2020
|
|
|
|
|
|
|
-
|
|
|
|
163,142,595
|
|
|
|
16,314
|
|
|
|
22,478,459
|
|
|
|
(24,560,832
|
)
|
|
|
-
|
|
|
|
(2,066,059
|
)
|
Conversion of debt
to equity
|
|
|
-
|
|
|
|
-
|
|
|
|
27,978,744
|
|
|
|
2,798
|
|
|
|
505,159
|
|
|
|
-
|
|
|
|
-
|
|
|
|
507,957
|
|
Fair value of Restricted
Stock Awards
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
62,766
|
|
|
|
-
|
|
|
|
-
|
|
|
|
62,766
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,706,706
|
)
|
|
|
-
|
|
|
|
(1,706,706
|
)
|
Balance
at September 30, 2020
|
|
|
-
|
|
|
$
|
-
|
|
|
|
191,121,339
|
|
|
$
|
19,112
|
|
|
$
|
23,046,384
|
|
|
$
|
(26,267,538
|
)
|
|
$
|
-
|
|
|
$
|
(3,202,042
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Accumulated
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
|
|
|
$
|
8,88
|
|
|
$
|
14,865,765
|
|
|
$
|
(18,455,925
|
)
|
|
$
|
380,907
|
|
|
$
|
(3,208,365
|
)
|
Conversion of debt
to equity
|
|
|
-
|
|
|
|
-
|
|
|
|
2,437,616
|
|
|
|
2,44
|
|
|
|
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
|
)
|
Conversion of debt
to equity
|
|
|
-
|
|
|
|
-
|
|
|
|
3,517,084
|
|
|
|
352
|
|
|
|
371,578
|
|
|
|
-
|
|
|
|
-
|
|
|
|
371,930
|
|
Shares issued for
services
|
|
|
|
|
|
|
|
|
|
|
82,572
|
|
|
|
8
|
|
|
|
162,246
|
|
|
|
-
|
|
|
|
-
|
|
|
|
162,254
|
|
Translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,705
|
|
|
|
7,705
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(878,441
|
)
|
|
|
-
|
|
|
|
(878,441
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
|
14,921,224
|
|
|
$
|
1,492
|
|
|
$
|
16,077,308
|
|
|
$
|
(20,201,209
|
)
|
|
$
|
398,631
|
|
|
$
|
(3,723,778
|
)
|
Conversion of debt
to equity
|
|
|
-
|
|
|
|
-
|
|
|
|
15,476,673
|
|
|
|
1,548
|
|
|
|
943,993
|
|
|
|
-
|
|
|
|
-
|
|
|
|
945,541
|
|
Share subscriptions
|
|
|
-
|
|
|
|
-
|
|
|
|
650,000
|
|
|
|
65
|
|
|
|
64,935
|
|
|
|
-
|
|
|
|
-
|
|
|
|
65,000
|
|
Translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,286
|
)
|
|
|
(2,286
|
)
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,787,312
|
)
|
|
|
-
|
|
|
|
(1,787,312
|
)
|
Balance
at September 30, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
31,047,897
|
|
|
|
3,105
|
|
|
|
17,086,236
|
|
|
|
(21,988,521
|
)
|
|
|
396,345
|
|
|
|
(4,502,835
|
)
|
|
*
|
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
|
|
Nine months
ended
|
|
|
Nine months
ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(4,082,507
|
)
|
|
$
|
(3,532,596
|
)
|
Less: net loss from discontinued operations
|
|
|
-
|
|
|
|
1,084,616
|
|
Net loss from continuing operations
|
|
|
(4,082,507
|
)
|
|
|
(2,447,980
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Derivative liability movements
|
|
|
101,945
|
|
|
|
(986,011
|
)
|
Depreciation
|
|
|
8,333
|
|
|
|
-
|
|
Amortization of debt discount
|
|
|
801,460
|
|
|
|
1,500,143
|
|
Investment impairment charge
|
|
|
1,019,960
|
|
|
|
-
|
|
Loss on conversion of debt to equity
|
|
|
433,610
|
|
|
|
1,037,822
|
|
Loss on settlement of liabilities
|
|
|
50,164
|
|
|
|
-
|
|
Penalty on convertible notes
|
|
|
-
|
|
|
|
150,000
|
|
Convertible notes issued for services
|
|
|
-
|
|
|
|
53,516
|
|
Shares issued for services
|
|
|
43,500
|
|
|
|
-
|
|
Stock based compensation
|
|
|
527,362
|
|
|
|
162,254
|
|
Amortization of right of use asset
|
|
|
24,451
|
|
|
|
-
|
|
Changes in Assets and Liabilities
|
|
|
|
|
|
|
|
|
Other current assets
|
|
|
42,390
|
|
|
|
1,441
|
|
Accounts payable and accrued expenses
|
|
|
95,227
|
|
|
|
416,573
|
|
Operating lease liabilities
|
|
|
(24,451
|
)
|
|
|
-
|
|
Interest accruals
|
|
|
7,253
|
|
|
|
220,934
|
|
Cash used in operating activities – continuing operations
|
|
|
(951,303
|
)
|
|
|
108,692
|
|
Cash used in operating activities – discontinued
operations
|
|
|
-
|
|
|
|
(632,428
|
)
|
CASH USED IN OPERATING ACTIVITIES
|
|
|
(951,303
|
)
|
|
|
(523,736
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Plant and equipment purchased
|
|
|
(50,000
|
)
|
|
|
-
|
|
Net cash used in investing activities – continuing operations
|
|
|
(50,000
|
)
|
|
|
-
|
|
Net cash used in investing activities – discontinued
operations
|
|
|
-
|
|
|
|
(2,441
|
)
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
|
(50,000
|
)
|
|
|
(2,441
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from share issuances
|
|
|
33,000
|
|
|
|
-
|
|
Proceeds from loans payable
|
|
|
85,000
|
|
|
|
199,455
|
|
Repayment of loans payable
|
|
|
(104,500
|
)
|
|
|
-
|
|
Repayment of convertible notes
|
|
|
(703,164
|
)
|
|
|
-
|
|
Proceeds from short term notes and convertible notes
|
|
|
1,602,100
|
|
|
|
300,327
|
|
Proceeds from federal relief funds
|
|
|
210,292
|
|
|
|
-
|
|
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
1,122,728
|
|
|
|
499,782
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
-
|
|
|
|
8,408
|
|
|
|
|
|
|
|
|
|
|
NET DECREASE IN CASH
|
|
|
121,425
|
|
|
|
(17,987
|
)
|
CASH AT BEGINNING OF PERIOD
|
|
|
2,979
|
|
|
|
71,294
|
|
CASH AT END OF PERIOD
|
|
$
|
124,404
|
|
|
$
|
53,307
|
|
|
|
|
|
|
|
|
|
|
CASH PAID FOR INTEREST AND TAXES:
|
|
|
|
|
|
|
|
|
Cash paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash paid for interest
|
|
$
|
340,242
|
|
|
$
|
-
|
|
NON CASH INVESTING AND FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Recognition of right of use lease
|
|
$
|
86,741
|
|
|
$
|
-
|
|
Conversion of convertible debt to equity
|
|
$
|
769,558
|
|
|
$
|
1,022,612
|
|
Settlement of liabilities with equity
|
|
$
|
100,164
|
|
|
$
|
74,662
|
|
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 Mexico was formed to
process payment transactions for service providers it contracts with, and Redpag was formed to deploy and operate kiosks as a
distributor.
On May 27, 2016 Asiya changed
its name to QPAGOS.
On June 1, 2016, the board
of directors of QPAGOS (the “Board”) changed the Company’s fiscal year end from October 31 to December 31.
On November 1, 2019, the Company
changed its name from QPAGOS 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 the Company’s common stock, par value $0.0001 per share (the “common stock”) at a ratio of
1-for-10, effective on November 1, 2019 (the Reverse Stock Split”). 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 of 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, Qpagos Mexico and Redpag in exchange for 2,250,000 shares (the
“Vivi Shares”) of common stock of Vivi Holdings, Inc. (“Vivi” or “Vivi Holdings”) pursuant
to a Stock Purchase Agreement dated August 5, 2019 (the “SPA”). Of the 2,250,000 shares of Vivi, nine percent (9%)
was allocated as follows: 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 the Company’s
shareholders. Innovative Payment Solutions no longer has any business operations in Mexico and has retained its U.S. operations
based in Calabasas, 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, Qpagos Mexico and Redpag, the Company’s focus
was on the operations of Qpagos Corporation in Mexico. The Company’s current focus is on providing physical and virtual
payment services to the United States market, leveraging the knowledge it 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 pursuant to the SPA, 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 the Company’s shareholders. The Company 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 Mexico and 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 Mexico 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.
In March 2020, the outbreak
of COVID-19 (also known as the 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 local and state stay-at-home orders intended
to contain the COVID-19 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 this Report.
The Company continues to monitor
the impact of the COVID-19 outbreak closely. The extent to which the COVID-19 outbreak will continue to impact the Company’s
operations, ability to obtain financing or future financial results is uncertain.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
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 and nine months
ended September 30, 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 Report 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 (the “2019 10-K”).
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
located 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 materially 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. The Company evaluates 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 risks and uncertainties including financial, operational, regulatory, and other risks, 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 its 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 August 2020, the Financial
Accounting Standards Board (the “FASB”) issued ASU No. 2020-06, debt with Conversion and Other Options (subtopic 470-20):
and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), certain accounting models for convertible
debt instruments with beneficial conversion features or cash conversion features are removed from the guidance and for equity
instruments the contracts affected are free standing instruments and embedded features that are accounted for as derivatives,
the settlement assessment was simplified by removing certain settlement requirements.
This ASU is effective for fiscal
years and interim periods beginning after December 15, 2021.
The effects of this ASU on
the Company’s condensed consolidated financial statements is currently being assessed and is expected to have an impact
on the treatment of certain convertible instruments and the derivative liabilities associated with these convertible instruments.
The FASB issued several additional
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 September
30, 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 September 30, 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 $0 and $1,019,960 on its non-marketable equity securities for the three and nine months ended September 30, 2020, respectively.
The impairment charge was based on management’s determination that due to the lack of ability, to date, by Vivi Holdings
(“Vivi”) to fulfill its capital raising requirements and implement its business strategy that there is a significant
risk that Vivi may not be able to meet its obligations.
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
|
|
3 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 FASB 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 during the nine months ended September 30, 2019 which was recognized on the basis described below.
|
●
|
Revenue from the sale of services.
|
Prepaid services were acquired
from providers and were sold to end-users through kiosks that the Company owned or kiosks that were owned by third parties. The
Company recognized the revenue on the sale of these services when the end-user deposited funds into the terminal and the prepaid
service was delivered to the end-user. The revenue was recognized at the gross value, including margin, of the prepaid service
to the Company, net of any value-added tax which was 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. During the nine months ended September
30, 2019, the Company earned either a fixed per-transaction fee or a fixed percentage of the service sold. The Company acted as
a collection agent and recognized 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 were deposited
into the kiosk and the customer had settled his liability or had acquired a prepaid service.
|
●
|
Revenue from the sale of kiosks.
|
During the nine months ended
September 30, 2019, the Company imported, assembled and sold kiosks that were used to generate the revenues discussed above. Revenues
were recognized on the full value of the kiosks sold, net of any sales taxation collected on behalf of the Revenue authorities,
when the customers took delivery of the kiosk and all the risks and rewards of ownership were 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 Merger 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 topic 815: Derivatives
and Hedging (“topic 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 $26,267,538 as of September 30, 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 Corporation to Vivi. The operations of Qpagos
Corporation and its two Mexican entities; Qpagos Mexico and Redpag 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
September 30,
|
|
|
Nine months
ended
September 30,
|
|
|
|
2019
|
|
|
2019
|
|
|
|
|
|
|
|
|
Net Revenue
|
|
$
|
3,480,878
|
|
|
$
|
7,550,475
|
|
|
|
|
|
|
|
|
|
|
Cost of Goods Sold
|
|
|
3,767,192
|
|
|
|
7,748,178
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
(286,314
|
)
|
|
|
(197,703
|
)
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
278,960
|
|
|
|
832,623
|
|
Depreciation and amortization and impairment costs
|
|
|
11,276
|
|
|
|
33,885
|
|
Total Expense
|
|
|
290,236
|
|
|
|
866,508
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations
|
|
|
(576,550
|
)
|
|
|
(1,064,211
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
(866
|
)
|
|
|
1,007
|
|
Foreign currency loss
|
|
|
(15,436
|
)
|
|
|
(21,412
|
)
|
Loss before taxation
|
|
|
(592,852
|
)
|
|
|
(1,084,616
|
)
|
Taxation
|
|
|
-
|
|
|
|
-
|
|
Loss from discontinued operations, net of taxation
|
|
|
(592,852
|
)
|
|
$
|
(1,084,616
|
)
|
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 Corporation, together with its 99.9% ownership
interest of Qpagos Mexico and Redpag, 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 September 30, 2020, the
Company impaired the carrying value of the investment in Vivi by $1,019,960 based on Vivi’s lack of ability to execute on
its proposed IPO and fund raising activities, largely impacted by the COVID-19 pandemic.
The shares in Vivi are unlisted
as of September 30, 2020.
|
|
September
30,
2020
|
|
|
December 31,
2019
|
|
|
|
|
|
|
|
|
Investment in Vivi Holdings, Inc.
|
|
$
|
1,019,961
|
|
|
$
|
1,019,961
|
|
Impairment provision
|
|
|
(1,019,960
|
)
|
|
|
-
|
|
|
|
$
|
1
|
|
|
$
|
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 included in the unaudited condensed
consolidated Balance Sheet are as follows:
|
|
September
30,
2020
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
Right of use assets, operating leases, net of amortization
|
|
$
|
62,290
|
|
Total Lease Cost
Individual components of the
total lease cost incurred by the Company is as follows:
|
|
Nine
months
ended
September 30,
2020
|
|
|
|
|
|
Operating lease expense
|
|
$
|
29,588
|
|
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
|
|
$
|
11,835
|
|
2021
|
|
|
47,340
|
|
2022
|
|
|
7,890
|
|
|
|
|
67,065
|
|
Imputed interest
|
|
|
(4,775
|
)
|
Total operating lease liability
|
|
$
|
62,290
|
|
|
|
|
|
|
Disclosed as:
|
|
|
|
|
Current portion
|
|
$
|
43,049
|
|
Non-current portion
|
|
|
19,241
|
|
|
|
$
|
62,290
|
|
Other lease information:
|
|
Nine
months
ended
September
30,
2020
|
|
|
|
|
|
Cash paid for amounts included in the measurement of lease liabilities
|
|
|
|
Operating cash flows from operating leases
|
|
$
|
(29,588
|
)
|
|
|
|
|
|
Remaining lease term – operating lease
|
|
|
17 months
|
|
|
|
|
|
|
Discount rate – operating lease
|
|
|
10.0
|
%
|
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Payroll Protection Program loan
On May 7, 2020, the Company
received a Payroll Protection Program (“PPP”) 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 installments 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.
Small Business Administration
Disaster Relief loan
On July 7, 2020, the Company
received a Small Business Economic Injury Disaster loan amounting to $150,000, bearing interest at 3.75% per annum and repayable
in monthly installments of $731 commencing twelve months after inception with the balance of interest and principal repayable
on July 7, 2050. The loan is secured by all tangible and intangible assets of the Company. The proceeds are to be used for working
capital purposes to alleviate economic injury caused by the COVID-19 pandemic.
Loans payable consisted of
the following:
Description
|
|
Interest
Rate
|
|
|
Maturity
|
|
September
30,
2020
|
|
|
December 31,
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stanislav Minaychenko
|
|
|
4.0
|
%
|
|
September 16, 2020
|
|
|
14,390
|
|
|
|
23,930
|
|
Maxim Pukhoskiy
|
|
|
4.0
|
%
|
|
June 16, 2020
|
|
|
7,963
|
|
|
|
17,683
|
|
Dieter Busenhart
|
|
|
10.0
|
%
|
|
January 17, 2021
|
|
|
1,050
|
|
|
|
-
|
|
Alexander Motorin
|
|
|
4.0
|
%
|
|
December 23, 2020
|
|
|
-
|
|
|
|
20,018
|
|
Total loans payable
|
|
|
|
|
|
|
|
$
|
23,403
|
|
|
$
|
61,631
|
|
Interest expense totaled $767
and $1,148 for the three and nine months ended September 30, 2020, respectively, and $1,328 and $6,803 for the three and nine
months ended September 30, 2019, 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 nine months ended
September 30, 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 note is currently in default
as we were unable to pay the outstanding balance by September 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 September 30, 2020 is $14,390.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
8
|
LOANS PAYABLE (continued)
|
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 nine months ended
September 30, 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 September 30, 2020 is $7,963.
Dieter Busenhart
On July 17, 2020, the Company
issued a promissory note to Dieter Busenhart in the aggregate principal amount of $50,000 for net proceeds of $50,000, bearing
interest at 10% per annum and maturing on January 17, 2021.
Between August 5, 2020 and
September 16, 2020, the Company repaid $49,500 of the principal outstanding.
The balance of the promissory
note, including interest thereon at September 30, 2020 is $1,050.
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
9
|
CONVERTIBLE NOTES PAYABLE
|
Convertible notes payable consists
of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized
|
|
|
September 30,
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
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,643
|
|
|
|
|
12
|
%
|
|
December 23, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,543
|
|
|
|
|
12
|
%
|
|
January 22, 2021
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
12
|
%
|
|
July 13, 2021
|
|
|
63,000
|
|
|
|
1,636
|
|
|
|
(49,364
|
)
|
|
|
15,272
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GS Capital Partners, LLC
|
|
|
8
|
%
|
|
August 14, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
27,557
|
|
|
|
|
8
|
%
|
|
August 14, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
174,789
|
|
|
|
|
8
|
%
|
|
February 4, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
49,243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crown Bridge Partners, LLC
|
|
|
8
|
%
|
|
August 31, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30,803
|
|
|
|
|
8
|
%
|
|
October 16, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30,387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Odyssey Funding LLC
|
|
|
10
|
%
|
|
November 15, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
27,658
|
|
|
|
|
10
|
%
|
|
January 13, 2021
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Black Ice Advisors, LLC
|
|
|
10
|
%
|
|
November 25, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adar Alef, LLC
|
|
|
10
|
%
|
|
February 5, 2021
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LG Capital Funding LLC
|
|
|
10
|
%
|
|
February 24, 2021
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cavalry Fund I LP
|
|
|
10
|
%
|
|
June 30, 2021
|
|
|
300,000
|
|
|
|
7,479
|
|
|
|
(202,193
|
)
|
|
|
105,286
|
|
|
|
-
|
|
|
|
|
10
|
%
|
|
July 31, 2021
|
|
|
300,000
|
|
|
|
5,014
|
|
|
|
(126,476
|
)
|
|
|
178,538
|
|
|
|
-
|
|
|
|
|
10
|
%
|
|
September 24, 2021
|
|
|
114,000
|
|
|
|
187
|
|
|
|
(112,126
|
)
|
|
|
2,061
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mercer Street Global Opportunity Fund, LLC
|
|
|
10
|
%
|
|
August 3, 2021
|
|
|
400,000
|
|
|
|
6,356
|
|
|
|
(168,885
|
)
|
|
|
237,471
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pinz Capital Special Opportunities Fund LP
|
|
|
10
|
%
|
|
August 5, 2021
|
|
|
100,000
|
|
|
|
1,534
|
|
|
|
(52,372
|
)
|
|
|
49,162
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Iroquois Master Fund Ltd.
|
|
|
10
|
%
|
|
September 16, 2021
|
|
|
228,000
|
|
|
|
875
|
|
|
|
(219,255
|
)
|
|
|
9,620
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total convertible
notes payable
|
|
|
|
|
|
|
|
$
|
1,505,000
|
|
|
$
|
23,081
|
|
|
$
|
(930,671
|
)
|
|
$
|
597,410
|
|
|
$
|
359,362
|
|
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
|
9
|
CONVERTIBLE NOTES PAYABLE (continued)
|
Interest expense, including
penalty interest totaled $241,652 and $324,953 for the three and nine months ended September 30, 2020, respectively and $324,953
and $158,500 for the three and nine months ended September 30, 2019, respectively.
Amortization of debt discount
totaled $428,282 and $799,451 for the three and nine months ended September 30, 2020, respectively and $801,460 and $1,500,143
for the three and nine months ended September 30, 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.
The total value of the beneficial
conversion feature recorded as a debt discount during the three and nine months ended September 30, 2020 was $1,144,484 and $1,471,234,
respectively and for the three and nine months ended September 30, 2019 was $33,327 and $1,027,684, 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.
Between June 16, 2020 and June
22, 2020, the Company received notices of conversion from Power Up Lending Group converting $39,000 of principal
into 3,360,149 shares of common stock at an average conversion price of $0.0116. The Company incurred a loss on conversion
of $41,096.
Between July 8, 2020 and July
20, 2020, the Company repaid the remaining principal and interest outstanding of $59,580, thereby extinguishing the note.
|
|
●
|
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.
On July 8, 2020, the Company repaid
the remaining principal and interest on the note, including penalty interest thereon of $90,447, thereby extinguishing
the note.
|
|
●
|
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.
On July 15, 2020, the Company
repaid the remaining principal and interest on the note, including penalty interest thereon of $63,294, thereby extinguishing
the note.
|
|
●
|
On July 13, 2020, the Company
issued a Convertible Promissory Note in the aggregate principal amount of $63,000 to Power Up Lending Group Ltd for net
proceeds of $60,000 after certain expenses. The note has a maturity date of July 13, 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 September 30, 2020 was $15,272. After unamortized debt discount of $49,364.
|
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
9
|
CONVERTIBLE NOTES PAYABLE (continued)
|
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
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.
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 accrued 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.
|
|
●
|
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 accrued interest at the default interest rate of 24% per annum.
On July 20, 2020, in terms of
a conversion notice received from GS Capital Partners, converting an aggregate principal amount of $35,000 and interest
thereon of $10,418 at a conversion price of $0.0083 per share into 5,466,723 shares of common stock.
On August 10, 2020, the Company
repaid the remaining principal and interest on the note, including penalty interest thereon of $150,704, thereby extinguishing
the note.
|
|
●
|
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 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 December 19, 2019, the Company
repaid the principal sum of $48,000 on the convertible note.
On January 14, 2020, the Company
repaid the principal sum of $48,000 and accrued interest and penalty interest of $33,030, thereby extinguishing the note.
|
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
|
9
|
CONVERTIBLE NOTES PAYABLE (continued)
|
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 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.
As of August 31, 2019 the note
was in default and interest accrued 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.
On August 31, 2020, the Company
repaid the remaining principal and interest on the note of $24,032, thereby extinguishing the note.
|
|
●
|
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
was in default and accrued 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.
On August 31, 2020, the Company
repaid the remaining principal and interest on the note of $31,587, thereby extinguishing the note.
|
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 had the right to prepay the note with
prepayment penalties ranging from 120% to 145%. 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 58%
of the lowest trading price during the previous fifteen trading days.
On August 3, 2020, the Company
repaid the principal and interest on the note, including penalty interest thereon of $207,421, thereby extinguishing the
note.
|
|
●
|
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 had the right to prepay the note with prepayment
penalties ranging from 120% to 145%. 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 58% of the lowest
trading price during the previous fifteen trading days.
On July 17, 2020, the Company
repaid the principal and interest on the note, including penalty interest thereon of $152,349, thereby extinguishing the
note.
|
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
|
9
|
CONVERTIBLE NOTES PAYABLE (continued)
|
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 had the right to prepay the note with prepayment penalties
ranging from 120% to 145%. 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 58% of the lowest trading price during the
previous fifteen trading days.
Between May 27, 2020 and June
8, 2020, the Company received notices of conversion from Black Ice Advisors, LLC converting $37,000 of principal into 1,970,588
shares of common stock at an average conversion price of $0.0188. The Company incurred a loss on conversion of $38,371.
On July 9, 2020, the Company
repaid the remaining principal and interest on the note, including penalty interest thereon of $25,975, thereby extinguishing
the note.
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 had a maturity
date of February 5, 2021 and a coupon of 10% per annum. The Company had the right to prepay the note with prepayment penalties
ranging from 120% to 145%. 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 58% of the lowest trading price during the
previous fifteen trading days.
On August 5, 2020, the Company
repaid principal and interest on the note, including penalty interest thereon of $78,765.
On September 9, 2020, in terms
of a conversion notice received, Adar Alef, LLC converted $55,563 of principal and interest into 5,556,250 shares of common stock,
thereby extinguishing the note.
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 had the right to prepay the note with prepayment penalties
ranging from 120% to 145%. 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 58% of the lowest trading price during the
previous fifteen trading days.
On August 25, 2020, the Company
repaid the principal and interest on the note, including penalty interest thereon of $119,819, thereby extinguishing the note.
Cavalry Fund LLP
|
●
|
On July 1, 2020, the Company closed
a transaction with Cavalry Fund I LP (“Cavalry”), pursuant to which the Company received net proceeds of $246,600,
after certain expenses in exchange for the issuance of a $300,000 Senior Secured Convertible Note (“Initial Note”),
with an original issue discount of 12.5% or $37,500, bearing interest at 10% per annum and maturing on June 30, 2021,
the initial Note is convertible into shares of common stock at an initial conversion price of $0.035 per share, in addition,
the Company issued a warrant exercisable over 8,571,428 shares of common stock at an initial exercise price of $.0.05
per share.
The Initial Note may be prepaid
at any time for the first 90 days at face value plus accrued interest. From day 91 through day 180, the Initial Note 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 Initial 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 balance of the Initial Note
plus accrued interest at September 30, 2020 was $105,286, after unamortized debt discount of $202,193.
|
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
|
9
|
CONVERTIBLE NOTES PAYABLE (continued)
|
Cavalry Fund LLP (continued)
|
●
|
Cavalry had agreed to purchase
an additional $300,000 Senior Secured Convertible Note (the “Second Note”); from the Company upon the same
terms as the Initial Note, within three trading days of a registration statement registering the shares of the Company’s
common stock issuable under the Notes and upon exercise of the Warrants being declared effective by the SEC. On July 28,
2020 the registration statement was declared effective and on July 31, 2020, the Company received the additional net proceeds
of $262,500. In addition, the Company issued a warrant exercisable over 8,571,429 shares of common stock at an initial
exercise price of $0.05 per share.
The Second Note may be prepaid
at any time for the first 90 days at face value plus accrued interest. From day 91 through day 180, the Second Note 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 Second 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 balance of the Second Note
plus accrued interest at September 30, 2020 was $178,538, after unamortized debt discount of $126,476.
|
|
●
|
On September 24, 2020, the Company
closed a transaction with Cavalry Fund I LP (“Cavalry”), pursuant to which the Company received net proceeds
of $99,750, after certain expenses in exchange for the issuance of a $114,000 Senior Secured Convertible Note (the “Third
Note”), with an original issue discount of $14,000, bearing interest at 10% per annum and maturing on September
24, 2021, the Third Note is convertible into shares of common stock at an initial conversion price of $0.035 per share,
in addition, the Company issued a warrant exercisable over 3,257,143 shares of common stock at an initial exercise price
of $0.05 per share.
The Third Note may be prepaid
at any time for the first 90 days at face value plus accrued interest. From day 91 through day 180, the Third Note 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 Third 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 balance of the Third Note
plus accrued interest at September 30, 2020 was $2,061, after unamortized debt discount of $112,126.
|
In connection with the Securities
Purchase Agreement, the Company entered into for the sale of the initial Note and the Second Note, the Company entered into a
Registration Rights Agreement, dated June 30, 2020 with Cavalry pursuant to which it is obligated to file a registration statement
with the SEC within sixty (60) days after the date of the agreement to register the resale by the Investor of the Conversion Shares
and Warrant Shares, and use all commercially reasonable efforts to have the registration statement declared effective by the SEC
within seventy five (75) days after the registration statement is filed.
The Company has pledged substantially
all of its assets as security for amounts due under the Initial Note, Second Note and Third Note, upon the terms and subject to
the conditions set forth in a Security Agreement, dated June 30, 2020, between the Company and Cavalry.
Mercer Street Global
opportunity Fund, LLC
On August 3, 2020, the Company
closed a transaction with Mercer Street Global Opportunity Fund, LLC, (“Mercer”), pursuant to which the Company received
net proceeds of $350,000, after an original issue discount of $50,000 in exchange for the issuance of a $400,000 Senior Secured
Convertible Note, bearing interest at 10% per annum and maturing on August 3, 2021, the note is convertible into shares of common
stock at an initial conversion price of 0.035 per share, in addition, the Company issued a warrant exercisable over 11,428,571
shares of common stock at an initial exercise price of $0.05 per share.
The note may be prepaid at
any time for the first 90 days at face value plus accrued interest. From day 91 through day 180, the note 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 balance of the note plus
accrued interest at September 30, 2020 was $237,471, after unamortized debt discount of $168,885.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
|
9
|
CONVERTIBLE NOTES PAYABLE (continued)
|
Pinz Capital Special
Opportunities Fund, LP
On August 5, 2020, the Company
closed a transaction with Pinz Capital Special Opportunities Fund, LP (“Pinz”), pursuant to which the Company received
net proceeds of $87,500, after an original issue discount of $12,500 in exchange for the issuance of a $100,000 Senior Secured
Convertible Note, bearing interest at 10% per annum and maturing on August 5, 2021, the note is convertible into shares of common
stock at an initial conversion price of 0.035 per share, in addition, the Company issued a warrant exercisable over 2,857,143
shares of common stock at an initial exercise price of $0.05 per share.
The note may be prepaid at
any time for the first 90 days at face value plus accrued interest. From day 91 through day 180, the note 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 balance of the note plus
accrued interest at September 30, 2020 was $49,162, after unamortized debt discount of $52,372.
Iroquois Master Fund
Ltd.
On September 16, 2020, the
Company closed a transaction with Iroquois Master Fund Ltd., pursuant to which the Company received net proceeds of $199,500,
after an original issue discount of $28,500 in exchange for the issuance of a $228,000 Senior Secured Convertible Note, bearing
interest at 10% per annum and maturing on September 16, 2021, the note is convertible into shares of common stock at an initial
conversion price of 0.035 per share, in addition, the Company issued a warrant exercisable over 6,514,286 shares of common stock
at an initial exercise price of $0.05 per share.
The note may be prepaid at
any time for the first 90 days at face value plus accrued interest. From day 91 through day 180, the note 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 balance of the note plus
accrued interest at September 30, 2020 was $9,620, after unamortized debt discount of $219,255.
Certain of the short-term convertible
notes disclosed in note 9 above and certain warrants disclosed in note 11 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 and certain notes and
warrants have fundamental transaction clauses which might result in cash settlement, due to these factors, all convertible notes
and any warrants attached thereto 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 nine months ended
September 30, 2020, an additional $1,131,094 was raised as a derivative liability on variably priced convertible notes.
The value of this derivative
financial liability was re-assessed at September 30, 2020, and $101,945 was charged to the statement of operations and comprehensive
loss, respectively. The value of the derivative liability will be re-assessed at each financial reporting period, with any movement
thereon recorded in the statement of operations in the period in which it is incurred.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
|
10
|
DERIVATIVE LIABILITY Continued)
|
The following assumptions were
used in the Black-Scholes valuation model:
|
|
Nine months
ended
September 30,
2020
|
|
|
Year ended
December 31,
2019
|
|
Conversion price
|
|
$
|
0.016 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
|
|
|
11.7 to 222.6
|
%
|
|
|
148.5 to 224.3
|
%
|
Expected dividend rate
|
|
|
0
|
%
|
|
|
0
|
%
|
The movement in derivative
liability is as follows:
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
|
|
|
|
|
|
|
Opening balance
|
|
$
|
905,576
|
|
|
$
|
1,833,672
|
|
Derivative financial liability arising from convertible note
|
|
|
1,131,094
|
|
|
|
1,053,842
|
|
Fair value adjustment to derivative liability
|
|
|
101,945
|
|
|
|
(1,981,938
|
)
|
|
|
$
|
2,138,615
|
|
|
$
|
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 191,121,339 and 128,902,124 shares of common
stock as of September 30, 2020 and December 31, 2019.
The following common shares
were issued by the Company during the nine months ended September 30, 2020.
|
●
|
In terms of debt conversion notices received between January
28, 2020 and September 9, 2020, the Company issued an aggregate of 35,002,245 shares of common stock for the conversion of
$335,948 of convertible debt, realizing a loss on conversion of $433,610 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 $50,082 of
loans payable, resulting in a net loss on exchange of $50,082.
|
|
●
|
In terms of subscription agreements entered into with investors
on February 20, 2020 and March 16, 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.
|
|
●
|
In terms of an employment agreement entered into with the Company’s
Chief Operating Officer, the Company issued 282,146 shares of common stock valued at $13,500.
|
|
●
|
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
|
11
|
STOCKHOLDERS’ EQUITY (continued)
|
|
b.
|
Restricted stock awards
|
The following restricted stock
awards were made during the nine months ended September 30, 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 September 30, 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 $62,766 and $439,362 for the three months and nine months ended September 30, 2020, respectively, 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 September
30, 2020 and December 31, 2019.
In connection with the subscription
agreement entered into with an investor, a three year warrant exercisable for 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.
In terms of the Senior Secured
convertible notes entered into with various noteholders as described in note 9 above, the Company issued five year warrants exercisable
for a total of 41,200,000 shares of common stock at an initial exercise price of $0.05 per share. The warrants have a cashless
exercise option and an exercise limitation based on a certain beneficial ownership percentage of 4.99% which may be adjusted to
9.99%. The Company has a mandatory exercise right if the closing price of the common stock trades above $0.15 per share for ten
consecutive days and trading volume is at least $250,000. The exercise price of the warrant is adjustable under the following
conditions; i) subsequent equity sales are at a price below the exercise price of the warrant; ii) the Company issues options
with an exercise price lower than the exercise price of the warrants; iii) issues convertible securities which are convertible
into common stock at a price lower than the warrant exercise price; and iv) the option exercise price or rate of conversion for
convertible securities results in a lower exercise price than the exercise price of the warrants.
As long as the senior secured
convertible debt which resulted in these warrant being issued, is still outstanding, the warrants will have a full rachet increase
right upon a change in the exercise price of the warrant as described above. The increase in warrants will be determined by multiplying
the exercise price of the warrant immediately before a change in exercise price has occurred by the number of warrants outstanding,
and dividing the product obtained by the revised exercise price.
The warrant holders also have
the option to acquire subsequent rights offering rights, under certain circumstances and is entitled to pro-rata distributions
made by the Company in assets or securities other than common stock.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
|
11
|
STOCKHOLDERS’ EQUITY (continued)
|
The warrants include a fundamental
transaction clause which will give the warrant holder the right on an as converted basis to the proceeds which common shareholders
would be entitled to as a result of a fundamental transaction. Notwithstanding the aforementioned rights, provided the warrants
are not registered under an effective registration statement, the holder of the warrant has the right to receive cash equal to
the Black-Scholes value of the unexercised portion of the warrant in accordance with the terms of the warrant agreement.
The fair value of the warrants
issued were determined by using a Black Scholes valuation model using the following assumptions:
|
|
Nine months ended
September 30,
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
to 216.9
|
%
|
Expected dividend rate
|
|
|
0
|
%
|
A summary of warrant activity
during the period January 1, 2019 to September 30, 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
|
|
|
42,200,000
|
|
|
|
0.05
|
|
|
|
0.05
|
|
Forfeited/Cancelled
|
|
|
(536,775
|
)
|
|
|
2.00
to 6.25
|
|
|
|
4.42
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding September 30, 2020
|
|
|
42,516,000
|
|
|
$
|
0.05
to 6.25
|
|
|
$
|
0.10
|
|
The warrants outstanding and
exercisable at September 30, 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
|
|
|
|
316,000
|
|
|
|
0.12
|
|
|
|
|
|
|
|
316,000
|
|
|
|
|
|
|
|
|
|
$
|
0.05
|
|
|
|
42,200,000
|
|
|
|
4.80
|
|
|
|
|
|
|
|
42,200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,516,000
|
|
|
|
4.76
|
|
|
$
|
0.10
|
|
|
|
42,516,000
|
|
|
$
|
0.10
|
|
|
|
4.76
|
|
The warrants outstanding have
an intrinsic value of $0 and $0 as of September 30, 2020 and December 31, 2019.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
|
11
|
STOCKHOLDERS’ EQUITY (continued)
|
On June 18, 2018, the Company
established its 2018 Stock Incentive Plan (the “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.
No options were granted for
the three and nine months ended September 30, 2020.
A summary of option activity
during the period January 1, 2019 to September 30, 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 September 30, 2020
|
|
|
100,000
|
|
|
$
|
0.40
|
|
|
$
|
0.40
|
|
The options outstanding and
exercisable at September 30, 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
|
|
|
|
8.50
|
|
|
$
|
0.40
|
|
|
|
100,000
|
|
|
$
|
0.4
|
|
|
|
8.50
|
|
The options outstanding have
an intrinsic value of $0 and $0 as of September 30, 2020 and December 31, 2019.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
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 nine months ended September 30, 2020
and 2019 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 and nine months ended September 30, 2020 and 2019 are as follows:
|
|
Three and nine
months ended
September 30,
2020
(Shares)
|
|
|
Three and nine
months ended
September 30,
2019
(Shares)
|
|
|
|
|
|
|
|
|
Convertible debt
|
|
|
43,659,481
|
|
|
|
54,292,074
|
|
Stock options
|
|
|
100,000
|
|
|
|
200,000
|
|
Warrants to purchase shares of common stock
|
|
|
42,659,520
|
|
|
|
852,775
|
|
|
|
|
86,419,001
|
|
|
|
55,344,849
|
|
|
13
|
RELATED PARTY TRANSACTIONS
|
The following transactions
were entered into with related parties:
James Fuller
On March 18, 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.
Effective June 24, 2020, the
Company entered into an executive employment agreement with William Corbett, (the “Corbett Employment Agreement”)
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 Corbett 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 of 1933, as amended, or the Securities Exchange Act of 1934, as amended, or the rules and regulations thereunder.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
13
|
RELATED PARTY TRANSACTIONS (continued)
|
LOANS PAYABLE
Description
|
|
Interest
Rate
|
|
|
Maturity Date
|
|
September
30,
2020
|
|
|
December
31,
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vladimir Skigin
|
|
|
4
|
%
|
|
December 12, 2020
|
|
|
-
|
|
|
|
30,026
|
|
Loans payable - Related parties
|
|
|
|
|
|
|
|
$
|
-
|
|
|
$
|
30,026
|
|
Interest expense amounted to
$8,413 and $23,248 for the three and nine months ended September 30, 2020 and 2019, respectively.
Vladimir Skigin
Mr. Skigin is considered to
be a related party as his shareholding and that of the Companies under his control exceeds 5%.
On December 23, 2019, in terms
of a debt purchase agreement entered into with Waketec OU, Mr. Skigin 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. Skigin 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. Skigin, 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.
14
|
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
|
|
$
|
67,065
|
|
Imputed interest
|
|
|
(4,775
|
)
|
Total operating lease liability
|
|
$
|
62,290
|
|
|
|
|
|
|
Disclosed as:
|
|
|
|
|
Current portion
|
|
$
|
43,049
|
|
Non-current portion
|
|
|
19,241
|
|
|
|
$
|
62,290
|
|
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Convertible debt issued
On October 20, 2020, the Company
closed a transaction with Mark Geist (“Geist”), pursuant to which the Company received net proceeds of $25,025, after
an original issue discount of $3,575 in exchange for the issuance of a $28,600 Senior Secured Convertible Note, bearing interest
at 10% per annum and maturing on October 20, 2021, the note is convertible into shares of common stock at an initial conversion
price of $0.035 per share, in addition, the Company issued a warrant exercisable over 817,143 shares of common stock at an initial
exercise price of $0.05 per share.
The note may be prepaid at
any time for the first 90 days at face value plus accrued interest. From day 91 through day 180, the note 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.
INNOVATIVE PAYMENT SOLUTIONS, INC.
69,396,005 SHARES OF COMMON STOCK
PROSPECTUS
December
7, 2020
Through
and including January 1, 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.