On May 12, 2016, QPAGOS, a Nevada
corporation (“QPAGOS”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Qpagos
Corporation, a Delaware corporation (“Qpagos Corporation”), and Qpagos Merge, Inc., a Delaware corporation and wholly
owned subsidiary of QPAGOS (“Merger Sub”). Pursuant to the Merger Agreement, on May 12, 2016, the merger was consummated
and Qpagos Corporation and Merger Sub merged (the “Merger”), with Qpagos Corporation continuing as the surviving corporation
of the Merger.
Pursuant to the Merger Agreement,
upon consummation of the Merger, each share of Qpagos Corporation’s capital stock issued and outstanding immediately prior
to the Merger was converted into the right to receive two shares of QPAGOS common stock, par value $0.0001 per share (the “Common
Stock”). Additionally, pursuant to the Merger Agreement, upon consummation of the Merger, QPAGOS assumed all of Qpagos Corporation’s
warrants issued and outstanding immediately prior to the Merger, which are now exercisable for approximately 6,219,200 shares of
Common Stock, respectively. Prior to and as a condition to the closing of the Merger, the then-current QPAGOS stockholder of 5,000,000
shares of Common Stock agreed to return to QPAGOS 4,975,000 shares of Common Stock held by such holder to QPAGOS and the then-current
QPAGOS stockholder retained an aggregate of 25,000 shares of Common Stock and the other stockholders of QPAGOS retained 5,000,000
shares of Common Stock. Therefore, immediately following the Merger, Qpagos Corporation’s former stockholders held 49,929,000
shares of QPAGOS common stock which represented approximately 91% of the outstanding Common Stock.
The Merger is being treated
as a reverse acquisition of QPAGOS, a public shell company, for financial accounting and reporting purposes. As such, Qpagos Corporation
is treated as the acquirer for accounting and financial reporting purposes while QPAGOS is treated as the acquired entity for accounting
and financial reporting purposes. Further, as a result, the historical financial statements that are reflected in this Quarterly
Report on Form 10-Q and that will be reflected in the Company’s future financial statements filed with the United States
Securities and Exchange Commission (“SEC”) will be those of Qpagos Corporation, and the Company’s assets, liabilities
and results of operations will be consolidated with the assets, liabilities and results of operations of Qpagos Corporation.
Qpagos Corporation was incorporated
on May 1, 2015 under the laws of Delaware under the name Qpagos Corporation as the holding company for two 99.99% owned operating
subsidiaries, Qpagos, S.A.P.I. de C.V. and Redpag Electrónicos S.A.P.I. de C.V. Each of these entities were incorporated
in November 2013 in Mexico.
Qpagos, S.A.P.I. de C.V. was
formed to process payment transactions for service providers it contracts with, and Redpag Electrónicos S.A.P.I. de C.V.
was formed to deploy and operate kiosks as a distributor.
On May 27, 2016, Asiya changed
its name to QPAGOS. QPAGOS and its direct and indirect subsidiaries Qpagos Corporation, Qpagos, S.A.P.I. de C.V. and Redpag Electrónicos
S.A.P.I. de C.V., will be referred to hereafter as “the Company”.
On June 1, 2016, the board of
directors changed the Company’s fiscal year end from October 31 to December 31.
QPAGOS, through its indirect
subsidiaries Qpagos, S.A.P.I. de C.V. and Redpag Electrónicos S.A.P.I. de C.V., provides physical and virtual payment services
to the Mexican market. The Company provides an integrated network of kiosks, terminals and payment channels that enable consumers
in Mexico to deposit cash, convert it into a digital form and remit the funds to any merchant in our network quickly and securely.
The Company helps consumers and merchants connect more efficiently in markets and consumer segments, such as Mexico, that are largely
cash-based and lack convenient alternatives for consumers to pay for goods and services in physical, online and mobile environments.
For example, the Company’s licensed technology can be used to pay bills, add minutes to mobile phones, purchase transportation
tickets, shop online or at a retail store, buy digital services or send money to a friend or relative.
The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally
accepted accounting principles (“U.S. GAAP”) for interim financial information with the instructions to Form 10-Q and
Rule 8-03 of Regulation S-X. Accordingly, these unaudited condensed 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 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, 2017 may not necessarily be indicative of results that may be expected for any succeeding quarter
or for the entire fiscal year. The information contained in this Quarterly Report on Form 10-Q should be read in conjunction with
the audited financial statements of QPAGOS for the year ended December 31, 2016, included in the current report on Form 10-K as
filed with the Securities and Exchange Commission (the “SEC”) on April 17, 2017.
All amounts referred to in the notes to the unaudited condensed consolidated financial statements are
in United States Dollars ($) unless stated otherwise.
The unaudited condensed consolidated financial statements include the financial statements of the Company
and its wholly owned subsidiary and its indirect subsidiaries. All significant inter-company accounts and transactions have been
eliminated in the consolidated financial statements. The entities included in these consolidated financial statements are as follows:
Redpag Electrónicos,
S.A.P.I. de C.V., a Mexican entity (99.990% owned)
The financial statements of
the Company’s Mexican operations are measured using local currencies as their functional currencies.
The Company translates the assets and liabilities of its Mexican subsidiaries at the exchange rates in
effect at 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 to customers are in Mexico.
The preparation of unaudited
condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions,
which are evaluated on an ongoing basis, that affect the amounts reported in the unaudited condensed consolidated financial statements
and accompanying notes. Management bases its estimates on historical experience and on various other assumptions that it believes
are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets
and liabilities and the amounts of revenues and expenses that are not readily apparent from other sources. Actual results could
differ from those estimates and judgments. In particular, significant estimates and judgments include those related to: the estimated
useful lives for plant and equipment, the fair value of warrants and stock options granted for services or compensation, estimates
of the probability and potential magnitude of contingent liabilities, derivative liabilities, the valuation allowance for deferred
tax assets due to continuing operating losses, those related to revenue recognition and the allowance for doubtful accounts.
Making estimates requires management
to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation
or set of circumstances that existed at the date of the consolidated financial statements, which management considered in formulating
its estimate could change in the near-term due to one or more future confirming events. Accordingly, the actual results could differ
significantly from our estimates.
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.
The Company adopted the guidance
of Accounting Standards Codification (“ASC”) 820 for fair value measurements which clarifies the definition of fair
value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring
fair value as follows:
Level 1-Inputs are unadjusted
quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level 2-Inputs are unadjusted
quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities
in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by
observable market data.
Level 3-Inputs are unobservable
inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing
the asset or liability based on the best available information.
The carrying amounts reported
in the balance sheets for cash, accounts receivable, other current assets, other assets, accounts payable, accrued liabilities,
and notes payable, approximate fair value due to the relatively short period to maturity for these instruments. The Company did
not identify any other assets or liabilities that are required to be presented on the balance sheets at fair value in accordance
with the accounting guidance.
The Company’s operations
will be subject to significant risk and uncertainties including financial, operational, regulatory and other risks associated,
including the potential risk of business failure. The recent global economic crisis has caused a general tightening in the credit
markets, lower levels of liquidity, increases in the rates of default and bankruptcy, and extreme volatility in credit, equity
and fixed income markets. These conditions not only limit the Company’s access to capital, but also make it difficult for
its customers, vendors and the Company to accurately forecast and plan future business activities.
The Company’s operations
are carried out in Mexico. Accordingly, the Company’s business, financial condition and results of operations may be influenced
by the political, economic and legal environment in Mexico and by the general state of that economy. The Company’s results
may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures,
and rates and methods of taxation, among other things.
In July 2017, the FASB issued
Accounting Standards Update No. (“ASU’’) 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities
from Equity (Topic 480) and Derivatives and Hedging (Topic 815). The amendments in this Update provide guidance about:
The amendments in Part I of
this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down
round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments,
a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s
own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding
equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at
fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the
amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down
round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders
in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized
guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options),
including related EPS guidance (in Topic 260).
The amendments in Part II of
this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content
in the Codification, to a scope exception. Those amendments do not have an accounting effect.
The amendments in Part I of
this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early
adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an
interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The
amendments in Part 1 of this Update should be applied in either of the following ways: 1. Retrospectively to outstanding financial
instruments with a down round feature by means of a cumulative-effect adjustment to the statement of financial position as of the
beginning of the first fiscal year and interim period(s) in which the pending content that links to this paragraph is effective
2. Retrospectively to outstanding financial instruments with a down round feature for each prior reporting period presented in
accordance with the guidance on accounting changes in paragraphs 250-10-45-5 through 45-10.
The amendments
in Part II of this Update do not require any transition guidance because those amendments do not have an accounting effect.
The Company
is currently evaluating the impact this ASU will have on its consolidated financial statements.
In August 2017, the FASB issued ASU 2017-12, Derivatives
and Hedging, an amendment to Topic 815. The amendments in this Update better align an entity’s risk management activities
and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying
hedging relationships and the presentation of hedge results. To meet that objective, the amendments expand and refine hedge accounting
for both nonfinancial and financial risk components 2 and align the recognition and presentation of the effects of the hedging
instrument and the hedged item in the financial statements. The amendments in this Update require an entity to present the earnings
effect of the hedging instrument in the same income statement line item in which the earnings effect of the hedged item is reported.
The amendments in this Update are effective for fiscal
years beginning after December 15, 2018, and interim periods within those fiscal years. Early application is permitted in any interim
period after issuance of the Update. All transition requirements and elections should be applied to hedging relationships existing
(that is, hedging relationships in which the hedging instrument has not expired, been sold, terminated, or exercised or the entity
has not removed the designation of the hedging relationship) on the date of adoption. The effect of adoption should be reflected
as of the beginning of the fiscal year of adoption. The Company is currently evaluating the impact this ASU will have on its consolidated
financial statements.
In September 2017, the FASB issued ASU 2017-13, Revenue
Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842). The amendments
in this ASU deals with the transition and effective dates of implementing to ASU 2014-09, Revenue from contracts with customers,
ASU 2016-08, Revenue from contracts with customers, principal versus agent considerations, ASU 2016-10, revenues from contacts
with customers; identifying performance obligations and licensing, ASU 2016-12, revenues from contacts with customers, narrow scope
improvements and practical expedients, 2016-20, technical corrections and improvements and ASU 2017-05, other income, gains and
losses from the derecognition of non-financial assets.
The transition provisions require adoption of Topic
606 for annual reporting periods commencing after December 15, 2017 and the adoption of Topic 842 for annual reporting periods
beginning after December 15, 2018 for public business entities, if the requirements of a public business entity as defined in ASU
2017-122 are not met, may adopt Topic 606 for annual reporting periods commencing after December 15, 2018 and for Topic 842 for
annual reporting periods commencing after December 15, 2019. Early adoption is permitted of both Topics. The Company is currently
evaluating the impact this ASU will have on its consolidated financial statements.
Any new accounting standards, not disclosed above,
that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material
impact on the financial statements upon adoption.
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, 2017 and December 31, 2016, respectively, the Company had no cash equivalents.
The Company assesses 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, 2017 and December 31, 2016, cash balances in the United
States did not exceed the federally insured limit.
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 nine months ended September 30, 2017.
Investee companies not accounted for under the consolidation or the equity method are accounted for under
the cost method of accounting. Under this method, the Company’s share of earnings or losses of such investee companies is
not included in the condensed consolidated balance sheet or statement of operations and comprehensive loss. However, impairment
charges are recognized in the condensed consolidated statement of operations and comprehensive loss. If circumstances suggest that
the value of the investee company has subsequently recovered, such recovery is not recorded. There is no impairment of investment
at September 30, 2017 and December 31, 2016.
The Company primarily values inventories at 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 aging. With the development of new products, the Company also rationalizes its product offerings and will
write-down discontinued product to the lower of cost or net realizable value.
Other than the sale of kiosks
to customers, the provision of services through our kiosks is conducted on a cash basis. Customers are required to deposit cash
with the Company to meet anticipated demand for services provided through kiosks either owned or operated by them. The services
provided through the customer owned or operated kiosks are deducted from the deposits held on their behalf, the Company requires
that these deposits be replenished as and when the services are provided.
The Company’s revenue
recognition policy is consistent with the requirements of Financial Accounting Standards Board (FASB) Accounting Standards Codification
(ASC) 605, Revenue Recognition (ASC 605). In general, the Company records revenue when it is realized, or realizable and earned.
The Company considers revenue to be realized, or realizable and earned when, persuasive evidence of an arrangement exists, the
products or services have been approved by the customer after delivery and/or installation acceptance or performance of services;
the sales price is fixed or determinable within the contract; and collectability is reasonably assured.
The Company has the following
sources of revenue which is recognized on the basis described below.
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.
The Company provides a secure
means for end-users to pay for certain services, such as utilities through our kiosks. The Company earns either a fixed per-transaction
fee or a fixed percentage of the service sold. The Company acts as a collection agent and recognizes the payment processing fee,
net of any value-added taxes collected on behalf of the Mexican Revenue Authorities, when the funds are deposited into the kiosk
and the customer has settled his liability or has acquired a prepaid service.
The Company imports, assembles
and sell kiosks that are used to generate the revenues discussed above. Revenue is recognized on the full value of the kiosks sold,
net of any valued added taxation collected on behalf of the Mexican Revenue Authorities, when the customer takes delivery of the
kiosk and all the risks and rewards of ownership are passed to the customer.
The Company does not enter into
any leasing of kiosks arrangements with customers and the Company does not generate any revenues from merchants who access its
terminals as yet.
The Company reclassified certain
kiosk assets used in the production of income, previously recorded in inventory as fixed assets and applied an appropriate depreciation
policy to these kiosks.
The restated Unaudited Condensed
Consolidated Balance Sheet as of September 30, 2016 and the related Consolidated Statements of Operations and Comprehensive loss
and the Statement of Cash Flows for the three and nine months ended September 30, 2016, is presented below:
Depreciation expense totaled
$16,301 and $15,318 for the three months ended September 30, 2017 and 2016, respectively, and $80,648 and $83,547 for the nine
months ended September 30, 2017 and 2016, respectively.
Amortization expense was $10,750
and $10,750 for the three months ended September 30, 2017 and 2016, respectively and $32,250 and $32,788 for the nine months ended
September 30, 2017 and 2016, respectively.
QPAGOS
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Notes
payable consisted of the following:
|
|
|
Interest
|
|
|
Maturity
|
|
|
September
30,
|
|
|
December
31,
|
|
|
Description
|
|
Rate
|
|
|
Date
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YP
Holdings LLC
|
|
12%
|
|
|
December
31, 2015
|
|
|
|
—
|
|
|
$
|
151,353
|
|
|
Strategic
IR
|
|
10%
|
|
|
January
1, 2017
|
|
|
|
—
|
|
|
|
146,575
|
|
|
Joseph
W and Patricia G Abrams
|
|
15%
|
|
|
June
13, 2017
|
|
|
|
—
|
|
|
|
25,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
notes payable
|
|
|
|
|
|
|
|
$
|
—
|
|
|
$
|
323,462
|
|
Interest expense totaled $0 and $3,025 for the three months ended September 30, 2017 and 2016, respectively,
and $1,804 and $9,008 for the nine months ended September 30, 2017 and 2016, respectively.
YP
Holdings, LLC
On
September 21, 2015, Qpagos Corporation borrowed $100,000 from YP Holdings LLC (“YP”), pursuant to an unsecured loan
agreement. The unpaid balance and any accrued interest was due on December 31, 2015. The loan bears interest at a rate of 12%.
On May 26, 2017, the Company re-negotiated the loan with YP Holdings and exchanged the note with a convertible note in the Company,
refer to note 9 below.
Strategic IR
Effective October 14, 2016 the Company
executed an unsecured promissory note for $50,000, for an advance that took place on September 29, 2016, which matured on February
13, 2017, bearing interest at 10% per annum. The maturity date of this loan was extended to May 19, 2017 and further extended to
June 29, 2017 by the execution of Extension Agreements.
On June 29, 2017, the note, principal
amount of $50,000 and accrued interest thereon of $3,740 was exchanged for a convertible note, refer to note 9 below.
On May 12, 2017, the Company executed
an unsecured promissory note for $20,000 with an investor, bearing interest at 10% per annum payable on June 11, 2017. Effective
June 11, 2017, the note, principal amount of $20,000 and accrued interest thereon of $164 was exchanged for a convertible note,
refer note to 9 below.
On May 19, 2017, the Company executed
a Secured Grid Note for advances totaling $110,000 which took place between December 12, 2016 and March 6, 2017, bearing interest
at 10% per annum maturing on May 30, 2017 or earlier upon acceleration by Strategic IR. The Company entered into an extension agreement
with Strategic IR extending the maturity date of the note to June 29, 2017.
On June 29, 2017, the note, principal
amount of $110,000 and accrued interest thereon of $5,535 was exchanged for a convertible note, refer to note 9 below.
Joseph
W and Patricia G Abrams
Effective
October 14, 2016, the Company executed an unsecured promissory note for $25,000 with an investor, bearing interest at 10% per
annum payable on February 13, 2017. On February 13, 2017, the Company executed an amended and restated promissory note extending
the maturity date to June 13, 2017 and increasing the interest rate to 15% per annum.
On
June 13, 2017, the note, principal amount of $25,000 and accrued interest thereon of $1,247 was exchanged for a convertible note,
refer to note 9 below.
QPAGOS
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
|
9
|
CONVERTIBLE
NOTES PAYABLE
|
Convertible
notes payable consists of the following:
|
Description
|
|
Interest
rate
|
|
|
Maturity
Date
|
|
Principal
|
|
|
Accrued
interest
|
|
|
Unamortized
debt discount
|
|
|
September
30,
2017
Balance,
net
|
|
|
December
31,
2016
Balance,
net
|
|
Power
Up Lending Group
|
|
8%
|
|
|
September
30, 2017
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
1,180
|
|
|
|
8%
|
|
|
November 30, 2017
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
8%
|
|
|
February 10, 2018
|
|
|
33,000
|
|
|
|
1,143
|
|
|
|
(15,083
|
)
|
|
|
19,060
|
|
|
—
|
|
|
|
8%
|
|
|
April 20, 2018
|
|
|
83,000
|
|
|
|
1,492
|
|
|
|
(59,035
|
)
|
|
|
25,457
|
|
|
—
|
|
|
|
8%
|
|
|
June 30, 2018
|
|
|
63,000
|
|
|
|
221
|
|
|
|
(59,512
|
)
|
|
|
3,709
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Labrys
Fund, LP
|
|
8%
|
|
|
July 27, 2017
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JSJ
Investments, Inc.
|
|
8%
|
|
|
November 6, 2017
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vista
Capital Investment, LLC
|
|
8%
|
|
|
March 9, 2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crossover
Capital Fund II, LLC
|
|
8%
|
|
|
January 6, 2018
|
|
|
100,000
|
|
|
|
3,879
|
|
|
|
(35,636
|
)
|
|
|
68,243
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GS
Capital Partners, LLC
|
|
8%
|
|
|
May 22, 2018
|
|
|
75,000
|
|
|
|
2,153
|
|
|
|
(48,082
|
)
|
|
|
29,071
|
|
|
—
|
|
|
|
8%
|
|
|
June 16, 2018
|
|
|
112,500
|
|
|
|
2,614
|
|
|
|
(79,829
|
)
|
|
|
35,285
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YP
Holdings, LLC
|
|
8%
|
|
|
May 26, 2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strategic
IR
|
|
12%
|
|
|
December 8, 2017
|
|
|
10,000
|
|
|
|
372
|
|
|
|
(3,722
|
)
|
|
|
6,650
|
|
|
—
|
|
|
|
12%
|
|
|
December
8, 2017
|
|
|
20,164
|
|
|
|
736
|
|
|
|
(7,730
|
)
|
|
|
13,170
|
|
|
—
|
|
|
|
8%
|
|
|
December 24, 2017
|
|
|
100,000
|
|
|
|
2,082
|
|
|
|
(44,992
|
)
|
|
|
57,090
|
|
|
—
|
|
|
|
12%
|
|
|
December 26, 2017
|
|
|
53,740
|
|
|
|
1,643
|
|
|
|
(25,974
|
)
|
|
|
29,409
|
|
|
—
|
|
|
|
12%
|
|
|
December 26, 2017
|
|
|
115,535
|
|
|
|
3,533
|
|
|
|
(55,842
|
)
|
|
|
63,226
|
|
|
—
|
|
|
|
8%
|
|
|
January 22, 2018
|
|
|
117,000
|
|
|
|
1,692
|
|
|
|
(74,100
|
)
|
|
|
44,592
|
|
|
—
|
|
|
|
8%
|
|
|
March 9, 2018
|
|
|
100,000
|
|
|
|
4,493
|
|
|
|
(43,836
|
)
|
|
|
60,657
|
|
|
—
|
|
|
|
8%
|
|
|
August 24,2018
|
|
|
113,845
|
|
|
|
923
|
|
|
|
(102,305
|
)
|
|
|
12,463
|
|
|
—
|
|
|
|
8%
|
|
|
August 31, 2018
|
|
|
88,847
|
|
|
|
584
|
|
|
|
(81,545
|
)
|
|
|
7,886
|
|
|
—
|
|
|
|
8%
|
|
|
November 6, 2017
|
|
|
176,000
|
|
|
|
10,077
|
|
|
|
(23,854
|
)
|
|
|
162,223
|
|
|
—
|
|
|
|
8%
|
|
|
September 18, 2018
|
|
|
69,047
|
|
|
|
182
|
|
|
|
(66,777
|
)
|
|
|
2,452
|
|
|
—
|
|
|
|
8%
|
|
|
September 26, 2018
|
|
|
20,000
|
|
|
|
18
|
|
|
|
(19,781
|
)
|
|
|
237
|
|
|
—
|
|
|
|
8%
|
|
|
September 28, 2018
|
|
|
246,000
|
|
|
|
108
|
|
|
|
(244,652
|
)
|
|
|
1,456
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph
W and Patricia G Abrams
|
|
12%
|
|
|
December 10, 2017
|
|
|
26,247
|
|
|
|
941
|
|
|
|
(11,482
|
)
|
|
|
15,706
|
|
|
—
|
|
|
|
12%
|
|
|
January 27, 2018
|
|
|
3,753
|
|
|
|
75
|
|
|
|
(2,481
|
)
|
|
|
1,347
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roman
Shefer
|
|
12%
|
|
|
December 24, 2017
|
|
|
10,000
|
|
|
|
312
|
|
|
|
(5,900
|
)
|
|
|
4,412
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crown
Bridge Partners, LLC
|
|
8%
|
|
|
August 14, 2018
|
|
|
75,000
|
|
|
|
773
|
|
|
|
(65,342
|
)
|
|
|
10,431
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
convertible notes payable
|
|
|
|
|
|
|
$
|
1,811,678
|
|
|
$
|
40,046
|
|
|
$
|
(1,177,492
|
)
|
|
$
|
674,232
|
|
$
|
1,180
|
Interest expense, together with amortized
debt discount totaled $641,495 and $0 for the three months ended September 30, 2017 and 2016, respectively, and $1,108,782 and
$0 for the nine months ended September 30, 2017 and 2016, respectively.
The
12% convertible notes, above have a fixed conversion price of $0.20 per common share and certain investors who met a minimum investment
requirement of $30,000 were issued three-year warrants convertible into common shares at a conversion price of; i) $0.20 per share
if the convertible notes are converted prior to maturity date; and ii) $0.30 per share if the convertible notes are not converted
prior to maturity date. These convertible notes have a beneficial conversion feature and attached warrants valued using a Black-Scholes
valuation model, refer note 11 c) below, the value of the beneficial conversion feature of the notes were determined based on
fair market price of the common stock at the date of the issuance of the note, the difference between the fair market value of
the common stock and the conversion price was recorded as a debt discount with a corresponding credit to derivative financial
liability.
The total value of the beneficial conversion feature and warrant value recorded as a debt discount during
the nine months ended September 30, 2017 was $238,507.
QPAGOS
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
|
9
|
CONVERTIBLE
NOTES PAYABLE (continued)
|
Power
Up Lending Group Ltd.
On
December 28, 2016, the Company entered into a Securities Purchase Agreement, pursuant to which the Company issued a Convertible
Promissory Note in the aggregate principal amount of $77,000 to Power Up Lending Group Ltd. The note had a maturity date of September
30, 2017 and a coupon of eight percent per annum. The Company has the right to prepay the note, provided it makes a payment to
the purchaser as set forth in the note within 180 days of its issue date. The note provided that its outstanding principal amount
was convertible at any time and from time to time at the election of the note holder during the period beginning on
the date that is 180 days following the issue date into shares of the Company’s common stock, at a conversion
price equal to 58% of the average of the lowest three closing bid prices of the Company’s common stock for the ten trading
days prior to conversion.
On
June 27, 2017, the Company prepaid this note for a total of $107,005, including accrued interest thereon and an early settlement
penalty of 35% of the principal outstanding.
On
February 21, 2017, the Company entered into a Securities Purchase Agreement, pursuant to which the Company issued a Convertible
Promissory Note in the aggregate principal amount of $53,000 to Power Up Lending Group Ltd. The note has a maturity date of November
30, 2017 and a coupon of eight percent per annum. The Company has the right to prepay the note, provided it makes a payment to
the Purchaser as set forth in the note within 180 days of its issue date. The outstanding principal amount of the note is convertible at
any time and from time to time at the election of the note holder during the period beginning on the date that is 180 days following
the issue date into shares of the Company’s common stock, at a conversion price equal to 60% of the average of
the lowest three closing bid prices of the Company’s common stock for the ten trading days prior to conversion.
On
August 22, 2017, the Company prepaid this note for a total of $73,560, including accrued interest thereon and an early settlement
penalty of 35% of the principal outstanding.
On
April 25, 2017, the Company entered into a Securities Purchase Agreement pursuant to which the Company issued a Convertible Promissory
Note in the aggregate principal amount of $33,000 to Power Up Lending Group Ltd. The note has a maturity date of February 10,
2018 and the Company has agreed to pay interest on the unpaid principal balance of the note at the rate of eight percent per annum
from the date on which the note is issued until the same becomes due and payable, whether at maturity or upon acceleration or
by prepayment or otherwise. The Company has the right to prepay the note in terms of agreement. The outstanding principal amount
of the note is convertible at any time and from time to time at the election of the purchaser during the period beginning
on the date that is 180 days following the issue date into shares of the Company’s common stock at a conversion
price equal to 60% of the average lowest three closing bid prices of the Company’s common stock for the ten trading days
prior to conversion. The balance of the note plus accrued interest at September 30, 2017 was $19,060, net of unamortized discount
of $15,083.
On
July 10, 2017, the Company, entered into a Securities Purchase Agreement pursuant to which the Company issued a Convertible Promissory
Note in the aggregate principal amount of $83,000 to Power Up Lending Group Ltd. The note has a maturity date of April 20, 2018
and the Company has agreed to pay interest on the unpaid principal balance of the note at the rate of eight percent per annum
from the date on which the note is issued until the same becomes due and payable, whether at maturity or upon acceleration or
by prepayment or otherwise. The Company has the right to prepay the note in terms of agreement. The outstanding principal amount
of the note is convertible at any time and from time to time at the election of the purchaser during the period beginning
on the date that is 180 days following the issue date into shares of the Company’s common stock at a conversion
price equal to 58% of the average lowest three closing bid prices of the Company’s common stock for the ten trading days
prior to conversion. The balance of the note plus accrued interest at September 30, 2017 was $25,457, net of unamortized discount
of $59,035.
On
September 14, 2017, the Company, entered into a Securities Purchase Agreement pursuant to which the Company issued a Convertible
Promissory Note in the aggregate principal amount of $63,000 to Power Up Lending Group Ltd. The note has a maturity date of June
30, 2018 and the Company has agreed to pay interest on the unpaid principal balance of the note at the rate of eight percent per
annum from the date on which the note is issued until the same becomes due and payable, whether at maturity or upon acceleration
or by prepayment or otherwise. The Company has the right to prepay the note in terms of agreement. The outstanding principal amount
of the note is convertible at any time and from time to time at the election of the purchaser during the period beginning
on the date that is 180 days following the issue date into shares of the Company’s common stock at a conversion
price equal to 58% of the average lowest three closing bid prices of the Company’s common stock for the ten trading days
prior to conversion. The balance of the note plus accrued interest at September 30, 2017 was $3,709, net of unamortized discount
of $59,512.
Labrys
Fund, LP
On
January 27, 2017, the Company entered into a Securities Purchase Agreement, pursuant to which the Company issued a Convertible
Promissory Note in the aggregate principal amount of $105,000 to Labrys Fund, LP. The note had a maturity date of July 27, 2017
and a coupon of eight percent per annum. In connection with the issuance of the note, the Company was required to issue 150,000
shares of common stock as a commitment fee valued at $66,000. The shares were returnable to the Company if no Event of Default
has occurred prior to the date the note is fully repaid. Management had determined that it is probable that the Company would
meet the conditions under the note and therefore it more likely than not that the Company would not be in Default as defined in
the note. As a result, management has concluded that it was probable that the shares would be returned and therefore the value
of the 150,000 shares was not recorded.
The
Company had the right to prepay the note within 180 days of its Issue Date. After the 180 days, the Company had no right to prepayment.
The outstanding principal amount of the note was convertible at any time and from time to time at the election of the
note holder during the period beginning on the date that is 180 days following the issue date into shares of the Company’s common
stock, at a conversion price equal to 60% of the average of the lowest three closing bid prices of the Company’s common
stock for the ten trading days prior to conversion.
On
July 26, 2017, the Company repaid this note for a total of $109,142, including interest thereon. The 150,000 shares of common
stock issued to Labrys Fund as a commitment fee for the convertible loan advanced have been returned to the Company and have been
cancelled.
QPAGOS
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
|
9
|
CONVERTIBLE
NOTES PAYABLE (continued)
|
JSJ
Investments Inc.
On
February 6, 2017, the Company entered into a Securities Purchase Agreement, pursuant to which the Company issued a Convertible
Promissory Note in the aggregate principal amount of $200,000 to JSJ Investments Inc., (“JSJ”). The note has a maturity
date of November 6, 2017 and a coupon of eight percent per annum. The Company has the right to prepay the note within 180 days
of its issue date. After the 180 days, the Company has no right to prepayment. The outstanding principal amount of the note is convertible at
any time and from time to time at the election of the note holder during the period beginning on the date that is 180 days following
the issue date into shares of the Company’s common stock, at a conversion price equal to 60% of the average of
the lowest three closing bid prices of the Company’s common stock for the ten trading days prior to conversion.
On
August 10, 2017, JSJ converted $24,000 of the principal amount of the convertible note into equity at a conversion price of $0.11
per share for an aggregate 224,299 shares of common stock.
On
August 31, 2017, Strategic IR entered into an agreement whereby the convertible note was acquired from JSJ for the remaining principal
balance of $176,000 and accrued interest outstanding of $8,715. An additional payment of $88,847 was made by Strategic IR on behalf
of the Company as compensation for the early settlement penalty and legal fees incurred on assigning the note to Strategic IR.
Vista
Capital Investments, LLC
On
March 9, 2017, the Company entered into a Securities Purchase Agreement, pursuant to which the Company issued a Convertible Promissory
Note in the aggregate principal amount of $100,000 to Vista Capital Investments, LLC., (“Vista”). The note has a maturity
date of March 9, 2018 and a coupon of eight percent per annum. The Company has the right to prepay the note, provided it makes
a payment to the Purchaser as set forth in the note through the maturity date. The outstanding principal amount of the note is convertible at
any time and from time to time at the election of the note holder during the period beginning on the date that is 150 days following
the issue date into shares of the Company’s common stock, at a conversion price equal to 60% of the average of
the last two lowest trading bid prices during the fifteen trading days prior to conversion.
On September 18, 2017, Strategic
IR entered into an agreement whereby the convertible note was acquired from Vista for the principal balance of $100,000 and accrued
interest outstanding of $4,230. An additional payment of $60,770 was made by Strategic IR on behalf of the Company as compensation
for the early settlement penalty and legal fees incurred on assigning the note to Strategic IR.
Crossover Capital Fund II,
LLC
On April 6, 2017, the Company issued a Convertible Promissory Note in the aggregate principal amount of
$100,000 to Crossover Capital Fund II, LLC. The note has a maturity date of January 6, 2018 and a coupon of eight percent (8%)
per annum. The Company has the right to prepay the note, provided it makes a pre-payment penalty as specified in the note. The
outstanding principal amount of the note is convertible at any time and from time to time at the election of the holder
into shares of the Company’s common stock at a conversion price equal to 60% of the lowest trading bid price
during the previous fifteen (15) trading days to the date of conversion. The balance of the note plus accrued interest at September
30, 2017 was $68,243, net of unamortized discount of $35,636.
GS
Capital Partners, LLC
On
May 22, 2017, the Company issued a Convertible Promissory Note in the aggregate principal amount of $75,000 to GS Capital Partners,
LLC. The note has a maturity date of May 22, 2018 and a coupon of eight percent (8%) per annum. The Company has the right to prepay
the note, provided it makes a pre-payment penalty as specified in the note. The outstanding principal amount of the note is convertible at
any time and from time to time at the election of the holder into shares of the Company’s common stock 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. The balance of the note plus accrued interest at September 30, 2017 was $29,071, net of unamortized
discount of $48,082.
On
June 16, 2017, the Company issued a Convertible Promissory Note in the aggregate principal amount of $112,500 to GS Capital Partners,
LLC. The note has a maturity date of June 16, 2018 and a coupon of eight percent (8%) per annum. The Company has the right to
prepay the note, provided it makes a pre-payment penalty as specified in the note. The outstanding principal amount of the note
is convertible at any time and from time to time at the election of the holder into shares of the Company’s common
stock 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. The balance of the note plus accrued interest at September 30, 2017 was $35,285,
net of unamortized discount of $79,829.
YP Holdings, LLC
YP Holdings forgave $19,553 of
accrued interest on a note with a principal amount of $100,000 (refer note 8 above), with the remaining accrued interest of $43,759
and was issued in lieu thereof a convertible note with a principal amount of $143,759, bearing interest at 8% per annum, maturing
on May 26, 2018. The Company has the right to prepay the note within 180 days of its issue date. The outstanding principal amount
of the Note is convertible at any time and from time to time at the election of the Note holder during the period beginning
on the date that is 180 days following the Issue Date. The note is convertible into shares of the Company’s common
stock, at a conversion price equal to 70% of the average of the lowest three closing bid prices of the Company’s common stock
for the ten prior trading days.
On June 12, 2017, YP Holdings
converted a total of $11,556 of the principal and interest of the convertible note outstanding into 57,143 common shares of the
Company at a net issue price of $0.202 per share. On June 22, 2107 a further $20,125 of the principal and interest of the convertible
note outstanding was converted into 100,000 shares of common stock at a conversion price of $0.2013 per share.
On August 24, 2017, the Company utilized the proceeds of a further convertible note it received
from Strategic IR to repay the note for an aggregate of $113,845.
QPAGOS
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
|
9
|
CONVERTIBLE
NOTES PAYABLE (continued)
|
Strategic
IR
On
June 11, 2017, the Company issued a convertible promissory note in the aggregate principal amount of $10,000 to Strategic IR (“Strategic”).
The note bears interest at 12% per annum and matures on December 16, 2017. The note is convertible into common shares at a conversion
price of $.20 per share. The balance of the note plus accrued interest at September 30, 2017 was $6,650, net of unamortized discount
of $3,722.
On
June 11, 2017, the Company exchanged a note issued to Strategic 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
maturing on December 8, 2017. The note is convertible into common shares of the Company at a conversion price of $0.20 per share.
The balance of the note plus accrued interest at September 30, 2017 was $13,170, net of unamortized discount of $7,730.
On
June 27, 2017, a previously unclassified amount due to Strategic was classified as a Convertible Promissory Note in the aggregate
principal amount of $100,000. The note has a maturity date of December 24, 2017 and a coupon of eight percent (8%) per annum.
The Company has the right to prepay the note, provided it makes a pre-payment penalty as specified in the note. The outstanding
principal amount of the note is convertible at any time and from time to time at the election of the holder into shares
of the Company’s common stock at a conversion price equal to 60% of the average of the lowest three trading
bid prices during the previous ten (10) trading days. The balance of the note plus accrued interest at September 30, 2017 was
$57,090, net of unamortized discount of $44,992.
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 and
maturing on December 26, 2017. The note is convertible into common shares of the Company at a conversion price of $0.20 per share.
The balance of the note plus accrued interest at September 30, 2017 was $29,409, net of unamortized discount of $25,974.
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 maturing on December 26, 2017. The convertible note is convertible into common shares of the Company at a conversion price
of $0.20 per share. The balance of the note plus accrued interest at September 30, 2017 was $63,226, net of unamortized discount
of $55,842.
On
July 26, 2017, the Company issued a Convertible Promissory Note in the aggregate principal amount of $117,000 to Strategic. The
note has a maturity date of January 22, 2018 and a coupon of eight percent (8%) per annum. The Company has the right to prepay
the note, provided it makes a pre-payment penalty as specified in the note. The outstanding principal amount of the note is convertible at
any time and from time to time at the election of the holder into shares of the Company’s common stock 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. The balance of the note plus accrued interest at September 30, 2017 was
$44,592, net of unamortized discount of $74,100.
On September 18, 2017, Strategic
IR entered into an agreement whereby the convertible note held by Vista Capital Investments was acquired by Strategic for the aggregate
principal balance of $100,000 and accrued interest thereon of $4,230. An additional payment of $60,770 was made by Strategic IR
on behalf of the Company as compensation for the early settlement penalty and legal fees incurred on assigning the note to Strategic
IR. The note has a maturity date of March 9, 2018 and a coupon of eight percent per annum. The Company has the right to prepay
the note, provided it makes a payment to the Purchaser as set forth in the note through the maturity date. The outstanding principal
amount of the note is convertible at any time and from time to time at the election of the note holder during the period
beginning on the date that is 150 days following the issue date into shares of the Company’s common stock, at a
conversion price equal to 60% of the average of the last two lowest trading bid prices during the fifteen trading days prior to
conversion. The balance of the note plus accrued interest at September 30, 2017 was $60,657, net of unamortized discount of $43,836.
On August 24, 2017, the Company
issued a Convertible Promissory Note in the aggregate principal amount of $113,845 to Strategic. The note has a maturity date of
August 24, 2018 and a coupon of eight percent (8%) per annum. The Company has the right to prepay the note, provided it makes a
pre-payment penalty as specified in the note. The outstanding principal amount of the note is convertible at any time
and from time to time at the election of the holder into shares of the Company’s common stock 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. The balance of the note plus accrued interest at September 30, 2017 was $12,463, net
of unamortized discount of $102,305.
QPAGOS
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
|
9
|
CONVERTIBLE
NOTES PAYABLE (continued)
|
Strategic IR (continued)
On August 31, 2017, the Company
issued a Convertible Promissory Note in the aggregate principal amount of $88,847 to Strategic. The note has a maturity date of
August 31, 2018 and a coupon of eight percent (8%) per annum. The Company has 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. The balance of the note plus accrued interest at September 30, 2017 was $7,886, net of unamortized discount
of $81,545.
On August 31, 2017, Strategic
purchased a convertible note from JSJ Investments, Inc. for an aggregate principal outstanding of $176,000 together with interest
thereon of $8,715. The note has a maturity date of November 6, 2017 and a coupon of eight percent per annum. The Company has the
right to prepay the note within 180 days of its issue date. After the 180 days, the Company has no right to prepayment. The outstanding
principal amount of the note is convertible at any time and from time to time at the election of the note holder during
the period beginning on the date that is 180 days following the issue date into shares of the Company’s common
stock, at a conversion price equal to 60% of the average of the lowest three closing bid prices of the Company’s common stock
for the ten trading days prior to conversion. The balance of the note plus accrued interest at September 30, 2017 was $162,223,
net of unamortized discount of $23,854.
On September 18, 2017, the Company
issued a Convertible Promissory Note in the aggregate principal amount of $69,047 to Strategic. The note has a maturity date of
September 18, 2018 and a coupon of eight percent (8%) per annum. The Company has 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. The balance of the note plus accrued interest at September 30, 2017 was $2,452, net of unamortized discount
of $66,777.
On September 26, 2017, the Company
issued a Convertible Promissory Note in the aggregate principal amount of $20,000 to Strategic. The note has a maturity date of
September 26, 2018 and a coupon of eight percent (8%) per annum. The Company has 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. The balance of the note plus accrued interest at September 30, 2017 was $237, net of unamortized discount
of $19,781.
On September 28, 2017, the Company
issued a Convertible Promissory Note in the aggregate principal amount of $246,000 to Strategic. The note has a maturity date of
September 28, 2018 and a coupon of eight percent (8%) per annum. The Company has 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. The balance of the note plus accrued interest at September 30, 2017 was $1,456, net of unamortized discount
of $244,652.
In connection with the convertible
notes above, the Company issued warrants to purchase 997,195 common shares of the Company at a variable exercise price of $0.20
per share, if the convertible note above is converted into common shares prior to its maturity date or $0.30 per share if the convertible
note is not converted prior to its maturity date.
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 maturing on December 10, 2017. The convertible note is convertible
into common shares of the Company at a conversion price of $0.20 per share. The balance of the note plus accrued interest at September
30, 2017 was $15,706, net of unamortized discount of $11,482.
On July 31, 2017, the Company
issued a Convertible Promissory Note to Abrams in the aggregate principal amount of $3,753. The note has a maturity date of January
27, 2018 and a coupon of twelve percent (12%) per annum. The Company has 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. The balance of the note plus accrued
interest at September 30, 2017 was $1,347, net of unamortized discount of $2,481.
In connection with the Convertible
note above, the Company issued a warrant to purchase 146,247 shares of common stock of the Company at a variable exercise price
of $0.20 per share, if the convertible note above is converted into common shares prior to its maturity date or $0.30 per share
if the convertible note is not converted prior to its maturity date.
Roman
Shefer
On June 27, 2017, the Company entered into a convertible promissory note in the aggregate principal amount
of $10,000. The note bears interest at 12% per annum and matures on December 16, 2017. The note is convertible into common shares
at a conversion price of $.20 per share. The balance of the note plus accrued interest at September 30, 2017 was $4,412, net of
unamortized discount of $5,900.
QPAGOS
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
|
9
|
CONVERTIBLE NOTES PAYABLE (continued)
|
Crown Bridge Partners
On August 14, 2017, the Company issued
a Convertible Promissory Note in the aggregate principal amount of $75,000 to Crown Bridger Partners. The note has a maturity date
of August 14, 2018 and a coupon of eight percent (8%) per annum. The Company has 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
fifteen (15) trading days. The balance of the note plus accrued interest at September 30, 2017 was $10,431, net of unamortized
discount of $65,342.
Certain of the short-term convertible
notes disclosed in note 9 above, have variable priced conversion rights with no fixed floor price and will re-price dependent on
the share price performance over varying periods of time, 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 September 30, 2017 and 2016, and $283,668 and $0 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:
|
|
|
Nine Months
Ended
September 30,
2017
|
|
|
Year ended
December 31,
2016
|
|
|
Conversion price
|
|
$
|
0.08 to 0.40
|
|
|
$
|
0.22 to 0.23
|
|
|
Risk free interest rate
|
|
|
1.05 to 1.53
|
%
|
|
|
0.85
|
%
|
|
Expected life of derivative liability
|
|
|
9 to 36 months
|
|
|
|
9 months
|
|
|
expected volatility of underlying stock
|
|
|
134.1 to 194.5
|
%
|
|
|
133.0
|
%
|
|
Expected dividend rate
|
|
|
0
|
%
|
|
|
0
|
%
|
The
movement in derivative liability is as follows:
|
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
Opening balance
|
|
$
|
113,074
|
|
|
$
|
—
|
|
|
Derivative financial liability arising from convertible note
|
|
|
2,365,235
|
|
|
|
77,000
|
|
|
Fair value adjustment to derivative liability
|
|
|
(283,668
|
)
|
|
|
36,074
|
|
|
|
|
$
|
2,194,641
|
|
|
$
|
113,074
|
|
The
Company has 100,000,000 common shares with a par value of $0.0001 each authorized, has issued and outstanding 55,835,442 shares
of common stock as of September 30, 2017 and 55,454,000 as of December 31, 2016.
On June 12, 2017, a convertible note holder converted debt and accrued interest thereon, totaling $11,556
into 57,143 shares of common stock, valued at $18,285 resulting in a loss on conversion of $6,730.
On
June 22, 2017, a convertible note holder converted debt and accrued interest thereon, totaling $20,125 into 100,000 shares of
common stock valued at $37,000 resulting in a loss on conversion of $16,875.
On
August 10, 2017, a convertible note holder converted debt and accrued interest thereon, totaling $24,000 into 224,299 shares of
common stock valued at $44,860 resulting in a loss on conversion of $20,860.
The
Company has recorded an expense of $0 and $144,000 for the nine months ended September 30, 2017 and 2016, respectively, relating
to restricted stock awards, which were fully vested in April 2016.
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, 2017.
QPAGOS
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
11
|
STOCKHOLDERS’ EQUITY
(continued)
|
In
connection with the Merger, outstanding Qpagos Corporation warrants were assumed by QPAGOS and converted to QPAGOS warrants at
a ratio of two QPAGOS warrants for each Qpagos Corporation warrant issued.
During
the period June 2015 to December 2015, pursuant to the private placement agreement and individual Securities Purchase Agreements
entered into, new, qualified investors, acquired 4,784,000 (2,392,000 pre-merger) common units of the Company at a price of $0.625
($1.25 pre-merger) per unit, each unit consisting of one share of Common Stock and a five year warrant exercisable for one share
of common stock at an exercise price of $0.625 ($1.25 pre-merger) per share.
The placement agent was also issued, in terms of a placement agent agreement, five year warrants to purchase
717,600 (358,800 pre-QPAGOS Merger) units at $0.625 ($1.25 pre-QPAGOS Merger)) per unit, each consisting of one share of Common
stock and an additional five year warrant exercisable for one share of Common Stock at an exercise price of $0.625 ($1.25 pre-QPAGOS
Merger)) per share, giving a total of 1,435,200 (717,600 pre-QPAGOS Merger) warrants to purchase common shares at an exercise price
of $0.625 ($1.25 pre-QPAGOS Merger)) per share if all placement agent warrants are exercised.
During the period June 8, 2017
to July 31, 2017, the Company issued warrants to the 12% convertible note holders, disclosed in note 9 above, to acquire 2,308,513
shares of common stock at a variable exercise price of; i) $0.20 per share if the convertible notes underlying the warrant issue
are converted to common stock prior to maturity date; or ii) $0.30 per share if the convertible notes underlying the warrants are
not converted to common stock prior to the maturity date. These warrants were issued to investors who had invested a cumulative
minimum of $30,000 in convertible notes prior to August 31, 2017.
The Warrants were valued using
a Black-Scholes valuation model and the proceeds received from the convertible notes were allocated based on the percentage of
the value of the warrants to the total value of the debt securities in this offering, resulting in a total debt discount of $37,083.
The
following assumptions were used in the Black-Scholes valuation model:
|
|
|
Nine Months Ended September 30, 2017
|
|
|
Exercise price
|
|
$
|
0.20
|
|
|
Risk free interest rate
|
|
|
1.50 to 1.53
|
%
|
|
Expected life of warrants
|
|
|
3 years
|
|
|
expected volatility of underlying stock
|
|
|
159.7 to 168.7
|
%
|
|
Expected dividend rate
|
|
|
0
|
%
|
A
summary of the Company’s warrant activity for the period January 1, 2016 to September 30, 2017, is as follows:
|
|
|
No. of shares
|
|
|
Exercise
price per
share
|
|
|
Weighted
average
exercise
price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding January 1, 2016
|
|
|
6,219,200
|
|
|
$
|
0.625
|
|
|
$
|
0.63
|
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Forfeited/cancelled
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Outstanding December 31, 2016
|
|
|
6,219,200
|
|
|
$
|
0.625
|
|
|
|
0.63
|
|
|
Granted
|
|
|
2,308,513
|
|
|
|
0.20
|
|
|
|
0.20
|
|
|
Forfeited/cancelled
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Outstanding September 30, 2017
|
|
|
8,527,713
|
|
|
$
|
0.20 to 0.625
|
|
|
$
|
0.51
|
|
The
warrants outstanding and exercisable at September 30, 2017 are as follows:
|
|
|
|
Warrants outstanding
|
|
|
Warrants exercisable
|
|
|
Exercise price
|
|
|
No. of shares
|
|
|
Weighted
average
remaining
years
|
|
|
Weighted
average
exercise
price
|
|
|
No. of shares
|
|
|
Weighted
average
exercise
price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.625
|
|
|
|
6,219,200
|
|
|
|
3.00
|
|
|
|
|
|
|
|
6,219,200
|
|
|
|
|
|
|
$0.20
|
|
|
|
2,308,513
|
|
|
|
2.75
|
|
|
|
|
|
|
|
2,308,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,527,713
|
|
|
|
2.94
|
|
|
$
|
0.51
|
|
|
|
8,527,713
|
|
|
$
|
0.51
|
|
The
warrants outstanding have an intrinsic value of $0 and $0 as of September 30, 2017 and December 31, 2016, respectively.
QPAGOS
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Revenue
is derived from the following sources:
|
|
|
Three
Months
Ended September 30, 2017
|
|
|
Three Months
Ended September 30,
2016
|
|
|
Nine
Months
Ended September 30, 2017
|
|
|
Nine
Months
Ended September 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
of services
|
|
$
|
924,573
|
|
|
$
|
736,967
|
|
|
$
|
2,735,913
|
|
|
$
|
1,830,238
|
|
|
Payment
processing fees
|
|
|
3,138
|
|
|
|
16,532
|
|
|
|
20,532
|
|
|
|
30,112
|
|
|
Kiosk
sales
|
|
|
—
|
|
|
|
16,428
|
|
|
|
113,921
|
|
|
|
165,751
|
|
|
Other
|
|
|
3,607
|
|
|
|
—
|
|
|
|
19,092
|
|
|
|
147
|
|
|
|
|
$
|
931,318
|
|
|
$
|
769,897
|
|
|
$
|
2,889,458
|
|
|
$
|
2,026,248
|
|
|
13
|
EQUITY
BASED COMPENSATION
|
Equity
based compensation is made up of the following:
|
|
|
Nine
Months Ended
September 30,
2017
|
|
|
Nine
Months Ended
September 30,
2016
|
|
|
|
|
|
|
|
|
|
|
Stock issued for services rendered
|
|
$
|
—
|
|
|
$
|
2,032,275
|
|
|
|
|
$
|
—
|
|
|
$
|
2,032,275
|
|
Basic loss per share is based
on the weighted-average number of common shares outstanding during each period. Diluted loss per share is based on basic shares
as determined above plus common stock equivalents. The computation of diluted net loss per share does not assume the issuance of
common shares that have an anti-dilutive effect on net loss per share. For the nine months ended September 30, 2017 and 2016, all
convertible debt and warrants, were excluded from the computation of diluted net loss per share. Dilutive shares which could exist
pursuant to the exercise of outstanding stock instruments and which were not included in the calculation because their affect would
have been anti-dilutive are as follows:
|
|
|
Nine
Months Ended
September 30,
2017
(Shares)
|
|
|
Nine
Months Ended
September 30,
2016
(Shares)
|
|
|
|
|
|
|
|
|
|
|
Convertible
debt
|
|
21,491,850
|
|
|
—
|
|
|
Warrants
|
|
|
8,527,713
|
|
|
|
6,219,200
|
|
|
|
|
|
30,019,563
|
|
|
|
6,219,200
|
|
QPAGOS
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
15
|
RELATED
PARTY TRANSACTIONS
|
The
following transactions were entered into with related parties:
NOTES
PAYABLE
|
|
|
Interest
|
|
|
Maturity
|
|
|
September
30,
|
|
|
December
31,
|
|
|
Description
|
|
Rate
|
|
|
Date
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gibbs
International Holdings – Equipment funding
|
|
N/A
|
|
|
November
1, 2017
|
|
|
$
|
294,620
|
|
|
|
—
|
|
|
Vladimir
Skigin – Equipment funding
|
|
N/A
|
|
|
November
1, 2017
|
|
|
|
55,295
|
|
|
|
—
|
|
|
Gibbs
International Holdings
|
|
15%
|
|
|
June
13, 2017
|
|
|
|
—
|
|
|
|
50,986
|
|
|
Cobbolo
Limited
|
|
10%
|
|
|
May
30, 2017
|
|
|
|
—
|
|
|
|
101,466
|
|
|
Delinvest
Commercial LTD
|
|
15%
|
|
|
June
29, 2017
|
|
|
|
—
|
|
|
|
50,836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N
otes
payable – Related parties
|
|
|
|
|
|
|
|
$
|
349,915
|
|
|
$
|
203,288
|
|
Interest
expense totaled $0 and $3,025 for the three months ended September 30, 2017 and 2016, respectively, and $11,534 and $0 for the
nine months ended September 30, 2017 and 2016, respectively.
Jimmy
Gibbs
Jimmy
Gibbs is the principal and has control over Gibbs Investment Holdings and Gibbs International Holdings.
|
|
●
|
Gibbs
International Holdings (“Gibbs”) – Inventory funding
|
The
Company entered into an agreement with Gibbs, whereby the importation of kiosks and accessories was arranged and funded by Gibbs.
In terms of the agreement entered into with Gibbs, 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 Gibbs.
|
|
●
|
Gibbs
International Holdings
|
Effective
October 20, 2016, the Company executed an unsecured promissory note for $50,000 with an investor, bearing interest at 10% per
annum payable on February 19, 2017. On February 19, 2017, the Company executed an amended and restated promissory note extending
the maturity date to June 19, 2017 and increasing the interest rate to 15% per annum.
Effective
June 19, 2017, the note, principal amount of $50,000 and accrued interest thereon of $2,494 was exchanged for a convertible note,
refer note to 9 below.
Vladimir
Skigin
Vladimir
Skigin is the principal and has control over Newvello Limited and Cobbolo Limited and has personally advanced the Company inventory
funding.
|
|
●
|
Vladimir
Skigin (“Skigin”) – Inventory funding
|
The
Company entered into an agreement with Gibbs, whereby the importation of kiosks and accessories was arranged and funded by Gibbs,
Skigin funded a portion of the kiosks and accessories purchased under the same terms and conditions of the agreement entered into
with Gibbs. In 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 Skigin.
Between
October 21, 2016 and November 25, 2016, the Company executed unsecured promissory notes totaling $100,000 with an investor, bearing
interest at 10% per annum maturing between February 17, 2017 and March 25, 2017. The maturity date of these notes has been extended
to May 30, 2017 and further extended to June 29, 2017.
On
June 29, 2017, the notes; i) principal amount of $50,000 and accrued interest thereon of $3,438; and ii) principal amount of $50,000
and accrued interest thereon of $2,959, were exchanged for two convertible notes, refer to note 9 below.
Alex
Motorin
Alex
Motorin is the principal of Delinvest Commercial LTD.
|
|
●
|
Delinvest
Commercial, LTD
|
Effective
October 31, 2016, the Company executed an unsecured promissory note for $50,000 with an investor, bearing interest at 10% per
annum payable on March 1, 2017. On March 1, 2017, the Company executed an amended and restated promissory note extending
the maturity date to June 29, 2017 and increasing the interest rate to 15% per annum.
On
June 29, 2017, the note, principal amount of $50,000 and accrued interest thereon of $4,123 was exchanged for a convertible note,
refer to note 9 below.
Viktoria
Akhmetova
On
May 12, 2017, the Company executed an unsecured promissory note for $20,000 with an investor, bearing interest at 10% per annum
payable on June 11, 2017.
Effective
June 11, 2017, the note, principal amount of $20,000 and accrued interest thereon of $164 was exchanged for a convertible note,
refer to note 9 below.
QPAGOS
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
15
|
RELATED
PARTY TRANSACTIONS (continued)
|
CONVERTIBLE
NOTES PAYABLE
|
Description
|
|
Interest
rate
|
|
|
Maturity
Date
|
|
Principal
|
|
|
Accrued
interest
|
|
|
Unamortized
debt discount
|
|
|
September
30,
2017
Balance,
net
|
|
|
December
31,
2016
Balance,
net
|
|
Delinvest
Commercial, LTD
|
|
12%
|
|
|
December
16, 2017
|
|
|
20,000
|
|
|
|
677
|
|
|
|
(7,444
|
)
|
|
|
13,233
|
|
|
—
|
|
|
|
12%
|
|
|
December
26, 2017
|
|
|
54,123
|
|
|
|
1,655
|
|
|
|
(26,160
|
)
|
|
|
29,618
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Viktoria
Akhmetova
|
|
12%
|
|
|
December
8, 2017
|
|
|
20,164
|
|
|
|
736
|
|
|
|
(7,716
|
)
|
|
|
13,184
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gibbs
International Holdings
|
|
12%
|
|
|
December
16, 2017
|
|
|
52,494
|
|
|
|
1,778
|
|
|
|
(22,456
|
)
|
|
|
31,816
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cobbolo
Limited
|
|
12%
|
|
|
December
26, 2017
|
|
|
53,438
|
|
|
|
1,634
|
|
|
|
(25,829
|
)
|
|
|
29,243
|
|
|
—
|
|
|
|
12%
|
|
|
December
26, 2017
|
|
|
52,959
|
|
|
|
1,619
|
|
|
|
(25,597
|
)
|
|
|
28,981
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
convertible notes payable – Related parties
|
|
$
|
253,178
|
|
|
$
|
8,099
|
|
|
$
|
(115,202
|
)
|
|
$
|
146,075
|
|
$
|
—
|
Interest expense, together with amortized
debt discount totaled $135,514 and $0 for the three months ended September 30, 2017 and 2016, respectively, and $144,198 and $0
for the nine months ended September 30, 2017 and 2016, respectively.
The
12% convertible notes, above have a fixed conversion price of $0.20 per common share and certain investors who met a minimum investment
requirement of $30,000 were issued three-year warrants convertible into common shares at a conversion price of; i) $0.20 per share
if the convertible notes are converted prior to maturity date; and ii) $0.30 per share if the convertible notes are not converted
prior to maturity date. These convertible notes have a beneficial conversion feature and attached warrants valued using a Black-Scholes
valuation model, refer note 11 c) below, the value of the beneficial conversion feature of the notes were determined based on
fair market price of the common stock at the date of the issuance of the note, the difference between the fair market value of
the common stock and the conversion price was recorded as a debt discount with a corresponding credit to derivative financial
liability.
The
total value of the beneficial conversion feature and warrant value recorded as a debt discount during the nine months ended September
30, 2017 was $251,299.
Alex
Motorin
Alex
Motorin is the principal of Delinvest Commercial LTD.
|
|
●
|
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 bears interest at 12% per annum and matures on December 16, 2017. The note is convertible
into common shares at a conversion price of $.20 per share. The balance of the note plus accrued interest at September 30, 2017
was $13,233, net of unamortized discount of $7,444.
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 maturing
on December 26, 2017. The note is convertible into common shares of the Company at a conversion price of $0.20 per share. The
balance of the note plus accrued interest at September 30, 2017 was $29,618, net of unamortized discount of $26,160.
In
connection with the convertible notes above, the Company issued warrants to purchase 370,616 common shares of the Company at a
variable exercise price of $0.20 per share, if the convertible note above is converted into common shares prior to its maturity
date or $0.30 per share if the convertible note is not converted prior to its maturity date.
QPAGOS
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
15
|
RELATED PARTY TRANSACTIONS (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 maturing on December 8, 2017. The note is convertible into common shares of the Company at a conversion price of $0.20 per
share. The balance of the note plus accrued interest at September 30, 2017 was $13,184, net of unamortized discount of $7,716.
Jimmy
Gibbs
Jimmy
Gibbs is the principal and has control over Gibbs Investment Holdings and Gibbs International Holdings.
|
|
●
|
Gibbs
International Holdings
|
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 maturing on December 16, 2017. The convertible note is convertible into common shares of the Company at a
conversion price of $0.20 per share. The balance of the note plus accrued interest at September 30, 2017 was $31,816, net of unamortized
discount of $22,456.
In
connection with the Convertible note above, the Company issued a warrant to purchase 262,468 common shares of the Company at a
variable exercise price of $0.20 per share, if the convertible note above is converted into common shares prior to its maturity
date or $0.30 per share if the convertible note is not converted prior to its maturity date.
Vladimir
Skigin
Vladimir
Skigin is the principal and has control over Newvello Limited and Cobbolo Limited and has also personally advanced the Company
inventory funding.
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 maturing on December 26, 2017. The convertible note is convertible into common shares of the Company at a conversion
price of $0.20 per share. The balance of the note plus accrued interest at September 30, 2017 was $29,243, net of unamortized
discount of $25,829.
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 maturing on December 26, 2017. The convertible note is convertible into common shares of the Company at a conversion
price of $0.20 per share. The balance of the note plus accrued interest at September 30, 2017 was $28,981, net of unamortized
discount of $25,597.
In
connection with the Convertible notes above, the Company issued a warrant to purchase 531,987 common shares of the Company at
a variable exercise price of $0.20 per share, if the convertible note above is converted into common shares prior to its maturity
date or $0.30 per share if the convertible note is not converted prior to its maturity date.
QPAGOS
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
|
16
|
COMMITMENTS
AND CONTINGENCIES
|
The
Company operates from an office facility in Mexico. The office is leased under a three (3) year non-cancellable operating lease,
which ends on December 16, 2019. The lease calls for monthly rental payment, including maintenance, of $3,232, as adjusted for
exchange rate changes. The Company also leases space on a month-to-month basis for its data servers at a monthly rate of $1,908.
In addition, Qpagos leases warehouse space on a month-to-month basis for $1,227 per month.
The
future minimum lease installments under the office facility lease agreement as of September 30, 2017 are $9,695 for the remainder
of 2017 and $38,780 for each year 2018 and 2019, subject to exchange rate fluctuations.
The Company entered into an additional
ten-year software licensing agreement with the Licensor on May 1, 2015, whereby we are committed to pay an annual license fee in
quarterly installments of $5,000 ($20,000 per annum) to the Licensor for an exclusive license for the Mexican market of certain
revenue payment services.
The Company's primary financial commitments as
of the date hereof are payments owed under the License Agreement. The minimum commitments due under the license agreement is summarized
as follows:
|
|
|
Amount
|
|
|
|
|
|
|
|
2017
|
|
|
20,100
|
|
|
2018
|
|
|
20,100
|
|
|
2019
|
|
|
20,100
|
|
|
2020
|
|
|
20,100
|
|
|
2021 and thereafter
|
|
|
97,167
|
|
|
|
|
$
|
177,567
|
|
On October 3, 2017, Strategic IR entered into an agreement whereby a convertible note was acquired from
Crossover Capital for the principal balance of $100,000 and accrued interest thereon of $4,000. An additional payment of $48,880
was made by Strategic IR on behalf of the Company as compensation for the early settlement penalty and legal fees incurred on assigning
the note to Strategic IR.
On October 3, 2017, the Company
issued a Convertible Promissory Note in the aggregate principal amount of $48,880 to Strategic. The note has a maturity date of
October 3, 2018 and a coupon of eight percent (8%) per annum. The Company has 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.
On October 23, 2017, Anna Mosk, the Principal of Strategic IR, entered into an agreement whereby a convertible
note was acquired from Power Up Lending Group for the principal balance of 33,000 and accrued interest thereon of $1,309. An additional
payment of $14,298 was made by Strategic IR on behalf of the Company as compensation for the early settlement penalty and legal
fees incurred on assigning the note to Strategic IR.
On October 23, 2017, the Company issued a Convertible Promissory Note in the aggregate principal amount
of $14,298 to Strategic. The note has a maturity date of October 23, 2018 and a coupon of eight percent (8%) per annum. The Company
has 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.
On October 11, October 12 and October 26, 2017, the Company received three instalments of $50,000 from
Vladimir Skigin totaling $150,000 and issued a Convertible Promissory Note in the aggregate principal amount of $150,000 to him.
The note has a maturity date of October 10, 2018 and a coupon of eight percent (8%) per annum. The Company has the right to prepay
the note within the first 180 days at a premium of 110% of the sum of the accrued interest and principal. 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.
On October 31, 2017, the Company issued a Convertible Promissory Note in the aggregate principal amount
of $50,000 to Viktoria Akhmetova. The note has a maturity date of October 20, 2018 and a coupon of eight percent (8%) per annum.
The Company has the right to prepay the note within the first 180 days at a premium of 110% of the sum of the accrued interest
and principal. 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.
On October 26, 2017, the Company
received conversion notices from five note holders to convert an aggregate of thirteen notes. The Company is currently evaluating whether these conversion notices can be acted upon.
Other than disclosed above, in accordance
with ASC 855-10, the Company has analyzed its operations subsequent to September 30, 2017 to the date these financial statements
were issued, and has determined that it does not have any material subsequent events to disclose in these unaudited condensed consolidated
financial statements.
Item
2.