On May 12, 2016, QPAGOS (formerly known as Asiya Pearls, Inc.), a Nevada corporation (“QPAGOS”),
entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Qpagos Corporation, a Delaware corporation
(“Qpagos Corporation”), and Qpagos Merge, Inc., a Delaware corporation and wholly owned subsidiary of QPAGOS (“Merger
Sub”). Pursuant to the Merger Agreement, on May 12, 2016, the merger was consummated, and Qpagos Corporation and
Merger Sub merged (the “Merger”), with Qpagos Corporation continuing as the surviving corporation of the Merger.
Pursuant to the Merger Agreement,
upon consummation of the Merger, each share of Qpagos Corporation’s capital stock issued and outstanding immediately prior
to the Merger was converted into the right to receive two shares of QPAGOS common stock, par value $0.0001 per share (the “Common
Stock”). Additionally, pursuant to the Merger Agreement, upon consummation of the Merger, QPAGOS assumed all of Qpagos Corporation’s
warrants issued and outstanding immediately prior to the Merger, which are now exercisable for approximately 6,219,200 shares of
Common Stock, respectively, as of the date of the Merger. Prior to and as a condition to the closing of the Merger, the then-current
QPAGOS stockholder of 5,000,000 shares of Common Stock agreed to return to QPAGOS 4,975,000 shares of Common Stock held by such
holder to QPAGOS and the then-current QPAGOS stockholder retained an aggregate of 25,000 shares of Common Stock and the other stockholders
of QPAGOS retained 5,000,000 shares of Common Stock. Therefore, immediately following the Merger, Qpagos Corporation’s former
stockholders held 49,929,000 shares of QPAGOS common stock which represented approximately 91% of the outstanding Common Stock.
The Merger was treated as a
reverse acquisition of QPAGOS, 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 QPAGOS was treated as the acquired entity for
accounting and financial reporting purposes. Further, as a result, the historical financial statements that are reflected in this
Annual Report on Form 10-K 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 (“the
Company”) 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) 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.
QPAGOS Corporation, through
its subsidiaries Qpagos and Redpag, 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, our 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.
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.
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. The entities included in
these consolidated financial statements are as follows:
Qpagos, S.A. P.I de C.V., a
Mexican entity (99.996% owned)
Redpag Electrónicos,
S.A. P.I. de C.V., a Mexican entity (99.990% owned)
The financial statements of
the Company’s Mexican operations are measured using local currencies as their functional currencies.
The Company translates the assets
and liabilities of its Mexican subsidiaries at the exchange rates in effect at year end and the results of operations at the average
rate throughout the year. The translation adjustments are recorded directly as a separate component of stockholders’ equity,
while transaction gains (losses) are included in net income (loss). All sales to customers are in Mexico.
The preparation of 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.
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 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.
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.
The amendments in this Update
are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years.
Early adoption of the amendments in this Update is permitted, including adoption in any interim period. The amendments in this
Update should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of
the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized.
This ASU was applied retrospectively
to the consolidated financial statements and resulted in a reduction in the tax effect of net operating losses carried forward.
The amendment clarifies that
an entity measuring an equity security using the measurement alternative may change its measurement approach to a fair value method
in accordance with Topic 820, Fair Value Measurement, through an irrevocable election that would apply to that security and all
identical or similar investments of the same issuer. Once an entity makes this election, the entity should measure all future purchases
of identical or similar investments of the same issuer using a fair value method in accordance with Topic 820.
The amendment clarifies that
the adjustments made under the measurement alternative are intended to reflect the fair value of the security as of the date that
the observable transaction for a similar security took place.
The amendment clarifies that
remeasuring the entire value of forward contracts and purchased options is required when observable transactions occur on the underlying
equity securities.
The amendment clarifies that
when the fair value option is elected for a financial liability, the guidance in paragraph 825-10-45-5 should be applied, regardless
of whether the fair value option was elected under either Subtopic 815-15, Derivatives and Hedging—Embedded Derivatives,
or 825-10, Financial Instruments—Overall.
The amendments clarify that
for financial liabilities for which the fair value option is elected, the amount of change in fair value that relates to the instrument
specific credit risk should first be measured in the currency of denomination when presented separately from the total change in
fair value of the financial liability. Then, both components of the change in the fair value of the liability should be remeasured
into the functional currency of the reporting entity using end-of-period spot rates.
The amendment clarifies that
the prospective transition approach for equity securities without a readily determinable fair value in the amendments in Update
2016-01 is meant only for instances in which the measurement alternative is applied. An insurance entity subject to the guidance
in Topic 944, Financial Services—Insurance, should apply a prospective transition method for Correction or Improvement Summary
of Amendments when applying the amendments related to equity securities without readily determinable fair values. An insurance
entity should apply the selected prospective transition method consistently to the entity’s entire population of equity securities
for which the measurement alternative is elected.
The amendments in this Update
are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years beginning after
June 15, 2018. All entities may early adopt these amendments for fiscal years beginning after December 15, 2017, including interim
periods within those fiscal years, as long as they have adopted Update 2016-01.
The amendments in this update
are not expected to have a material impact on the consolidated financial statements.
The amendments in this Update
expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. An
entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing
model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost
recognition over that period). The amendments specify that Topic 718 applies to all share-based payment transactions in which a
grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards.
The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to
the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for
under Topic 606, Revenue from Contracts with Customers.
The amendments in this Update
are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within
that fiscal year. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606.
The impact of this ASU on the
consolidated financial statements is not expected to be material.
The amendments in this Update
provide entities with an additional (and optional) transition method to adopt the new leases standard. Under this new transition
method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment
to the opening balance of retained earnings in the period of adoption consistent with preparers’ requests.
The amendments in this Update
provide lessors with a practical expedient, by class of underlying asset, to not separate non-lease components from the associated
lease component and, instead, to account for those components as a single component if the non-lease components otherwise would
be accounted for under the new revenue guidance (Topic 606) and both of the following are met: 1. The timing and pattern of transfer
of the non-lease component(s) and associated lease component are the same. 2. The lease component, if accounted for separately,
would be classified as an operating lease.
The amendments in this Update
related to separating components of a contract affect the amendments in Update 2016-02, which are not yet effective but can be
early adopted.
The Company is currently considering
the impact this ASU will have on its consolidated financial statements.
The amendments in this Update modify the disclosure
requirements on fair value measurements in Topic 820, Fair Value Measurement.
In addition, the amendments
clarify that materiality is an appropriate consideration of entities and their auditors when evaluating disclosure requirements.
The amendments in this Update
are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.
The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used
to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively
for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should
be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this
Update. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this Update and delay adoption
of the additional disclosures until their effective date.
The impact of this ASU on the consolidated financial statements is not
expected to be material.
A collaborative arrangement,
as defined by the guidance in Topic 808, is a contractual arrangement under which two or more parties actively participate in a
joint operating activity and are exposed to significant risks and rewards that depend on the activity’s commercial success.
Topic 808 does not provide comprehensive recognition or measurement guidance for collaborative arrangements, and the accounting
for those arrangements is often based on an analogy to other accounting literature or an accounting policy election.
The amendments in this Update
provide guidance on whether certain transactions between collaborative arrangement participants should be accounted for with revenue
under Topic 606. The amendments in this Update make targeted improvements to generally accepted accounting principles (GAAP) for
collaborative arrangements as follows:
For public business entities,
the amendments in this Update are effective for fiscal years beginning after December 15, 2019, and interim periods within those
fiscal years. Early adoption is permitted, including adoption in any interim period. An entity may not adopt the amendments earlier
than its adoption date of Topic 606. The amendments in this Update should be applied retrospectively to the date of initial application
of Topic 606. An entity should recognize the cumulative effect of initially applying the amendments as an adjustment to the opening
balance of retained earnings of the later of the earliest annual period presented and the annual period that includes the date
of the entity’s initial application of Topic 606. An entity may elect to apply the amendments in this Update retrospectively
either to all contracts or only to contracts that are not completed at the date of initial application of Topic 606. An entity
should disclose its election.
The impact of this ASU on the
consolidated financial statements is not expected to be material.
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.
No segmental information is
required as the Company currently only has one segment of business, providing physical and virtual payment services in the Mexican
Market.
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, 2018 and December 31, 2017, 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, 2018 and 2017, the balance 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 period ended December 31, 2018 and 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 consolidated balance sheet or statement
of operations and comprehensive loss. However, impairment charges are recognized in the 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 December 31, 2018.
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 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.
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:
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 our intangible assets are subject to amortization. We evaluate 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.
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 has analyzed its
revenue transaction pursuant to ASC 606, Revenue, and it has no material impact as a result of the transition from ASC 605 to 606.
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:
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 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, 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.
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.
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.
The Company’s primary
operations are 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.
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, 2018, and 2017, there have been no interest or penalties incurred
on income taxes.
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.
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. The Company
has incurred a loss since inception resulting in an accumulated deficit of $18,455,925 as of December 31, 2018 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 business plan, additional capital resources
will be required. The Company will need to raise capital in the near term in order to continue operating and executing its business
plan. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or
obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when
they come due. The Company’s plan is to expand its market penetration by deploying more kiosks through various channels,
thereby increasing revenues, in addition, the Company intends to raise additional equity or loan funds to meet its short-term working
capital needs. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible
inability of the Company to continue as a going concern for at least the next twelve months from the date the financial statements
were issued.
Depreciation and amortization expense
totaled $57,147 and $65,827 for the years ended December 31, 2018 and 2017, respectively.
An impairment charge of $21,415 for the
year ended December 31, 2018 was made against certain obsolete kiosk assets.
Localization
and implementation of the different software and technology modules is supported through a Localization Agreement. Under this
agreement, at a cost of $215,000, the Licensor allocated engineering and programming resources to the Company. The cost is being
amortized over 5 years.
On
May 1, 2015, the Company entered into a ten-year license with the Licensor for the non-exclusive right to license technology
to provide payment services. Subsequently, on November 1, 2015, the Company and the Licensor concluded an additional
amendment to the License Agreement by which the Licensor agreed to the exclusivity to the Mexican market subject to the payment
of $20,000 per year payable in quarterly installments, the first two such installments payable December 1, 2015. The
agreement may be terminated early by the Licensor if the Company fails to comply with its terms and conditions.
Amortization
expense was $43,000 for the years ended December 31, 2018 and 2017.
Interest expense totaled $120,336
and $0 for the year ended December 31, 2018 and 2017, respectively.
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. On August 20, 2018 the principal
of $294,620 together with accrued interest of $111,115 was converted to a convertible promissory note of $405,735.
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. The note may be prepaid at any time without premium or penalty. The balance of the
note plus accrued interest at December 31, 2018 was $177,159.
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 eighteen percent per annum. The Company has 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. The balance of the note plus accrued interest at December
31, 2018 was $56,044.
QPAGOS
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
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CONVERTIBLE NOTES PAYABLE
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Convertible
notes payable consists of the following:
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|
|
|
|
|
|
|
|
|
December
31,
|
|
|
December
31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
Description
|
|
Interest rate
|
|
|
Maturity
Date
|
|
Principal
|
|
|
Accrued
interest
|
|
|
Unamortized
debt discount
|
|
|
Balance,
net
|
|
|
Balance,
net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Power
Up Lending Group
|
|
8
|
%
|
|
April
20, 2018
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
54,017
|
|
|
|
8
|
%
|
|
June 30, 2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
25,034
|
|
|
|
8
|
%
|
|
August 30, 2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,165
|
|
|
|
8
|
%
|
|
October 30, 2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8
|
%
|
|
January 15, 2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8
|
%
|
|
March 15,2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8
|
%
|
|
April 30, 2019
|
|
|
63,000
|
|
|
|
2,265
|
|
|
|
(26,620
|
)
|
|
|
38,645
|
|
|
|
—
|
|
|
|
8
|
%
|
|
September 15, 2019
|
|
|
83,000
|
|
|
|
728
|
|
|
|
(71,859
|
)
|
|
|
11,869
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Labrys
Fund, LP
|
|
8
|
%
|
|
June 14, 2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,577
|
|
|
|
8
|
%
|
|
August 12, 2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8
|
%
|
|
February 28, 2019
|
|
|
129,616
|
|
|
|
142
|
|
|
|
—
|
|
|
|
129,758
|
|
|
|
—
|
|
|
|
8
|
%
|
|
April 25, 2019
|
|
|
300,000
|
|
|
|
4,405
|
|
|
|
(177,579
|
)
|
|
|
126,826
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JSJ
Investments, Inc.
|
|
8
|
%
|
|
November 29, 2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,101
|
|
|
|
8
|
%
|
|
July 26, 2019
|
|
|
100,000
|
|
|
|
3,463
|
|
|
|
(56,712
|
)
|
|
|
46,751
|
|
|
|
—
|
|
|
|
8
|
%
|
|
October 8, 2019
|
|
|
100,000
|
|
|
|
1,841
|
|
|
|
(76,986
|
)
|
|
|
24,855
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GS
Capital Partners, LLC
|
|
8
|
%
|
|
May 22, 2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
23,112
|
|
|
|
8
|
%
|
|
June 16, 2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
65,909
|
|
|
|
8
|
%
|
|
May 3, 2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8
|
%
|
|
May 11, 2019
|
|
|
60,000
|
|
|
|
3,077
|
|
|
|
(21,534
|
)
|
|
|
41,543
|
|
|
|
—
|
|
|
|
8
|
%
|
|
August 14, 2019
|
|
|
150,000
|
|
|
|
4,570
|
|
|
|
(92,877
|
)
|
|
|
61,693
|
|
|
|
—
|
|
|
|
8
|
%
|
|
September 19, 2019
|
|
|
47,730
|
|
|
|
1,088
|
|
|
|
(34,261
|
)
|
|
|
14,557
|
|
|
|
—
|
|
|
|
8
|
%
|
|
August 14, 2019
|
|
|
150,000
|
|
|
|
3,649
|
|
|
|
(100,593
|
)
|
|
|
53,056
|
|
|
|
—
|
|
|
|
8
|
%
|
|
September 19, 2019
|
|
|
33,252
|
|
|
|
751
|
|
|
|
(23,869
|
)
|
|
|
10,134
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strategic
IR
|
|
15
|
%
|
|
December 8, 2019
|
|
|
10,000
|
|
|
|
2,193
|
|
|
|
—
|
|
|
|
12,193
|
|
|
|
10,693
|
|
|
|
15
|
%
|
|
December 8, 2019
|
|
|
20,164
|
|
|
|
4,409
|
|
|
|
—
|
|
|
|
24,573
|
|
|
|
21,548
|
|
|
|
15
|
%
|
|
December 26, 2019
|
|
|
53,740
|
|
|
|
11,351
|
|
|
|
—
|
|
|
|
65,091
|
|
|
|
57,031
|
|
|
|
15
|
%
|
|
December 26, 2019
|
|
|
115,535
|
|
|
|
24,405
|
|
|
|
—
|
|
|
|
139,940
|
|
|
|
122,610
|
|
|
|
8
|
%
|
|
October 23, 2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,709
|
|
|
|
8
|
%
|
|
January 9, 2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8
|
%
|
|
February 14, 2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8
|
%
|
|
February 14, 2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8
|
%
|
|
February 15, 2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Viktoria
Akhmetova
|
|
15
|
%
|
|
December 8, 2019
|
|
|
20,164
|
|
|
|
4,409
|
|
|
|
—
|
|
|
|
24,573
|
|
|
|
21,548
|
|
|
|
8
|
%
|
|
October 20, 2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,893
|
|
|
|
8
|
%
|
|
August 24,2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
41,782
|
|
|
|
8
|
%
|
|
September 18, 2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
20,234
|
|
|
|
8
|
%
|
|
September 26, 2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,387
|
|
|
|
8
|
%
|
|
January 31, 2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8
|
%
|
|
February 26, 2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph
W and Patricia G Abrams
|
|
15
|
%
|
|
December 10, 2019
|
|
|
26,247
|
|
|
|
5,717
|
|
|
|
—
|
|
|
|
31,964
|
|
|
|
28,027
|
|
|
|
15
|
%
|
|
January 27, 2019
|
|
|
3,753
|
|
|
|
743
|
|
|
|
—
|
|
|
|
4,496
|
|
|
|
3,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roman
Shefer
|
|
15
|
%
|
|
December 24, 2019
|
|
|
10,000
|
|
|
|
2,121
|
|
|
|
—
|
|
|
|
12,121
|
|
|
|
10,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crown
Bridge Partners, LLC
|
|
8
|
%
|
|
August 14, 2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
30,846
|
|
|
|
8
|
%
|
|
February 27, 2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8
|
%
|
|
May 14, 2019
|
|
|
27,500
|
|
|
|
1,392
|
|
|
|
(10,096
|
)
|
|
|
18,796
|
|
|
|
—
|
|
|
|
8
|
%
|
|
June 12, 2019
|
|
|
27,500
|
|
|
|
1,218
|
|
|
|
(12,281
|
)
|
|
|
16,437
|
|
|
|
—
|
|
|
|
8
|
%
|
|
July 26, 2019
|
|
|
27,500
|
|
|
|
952
|
|
|
|
(15,596
|
)
|
|
|
12,856
|
|
|
|
—
|
|
|
|
8
|
%
|
|
August 31, 2019
|
|
|
27,500
|
|
|
|
735
|
|
|
|
(18,308
|
)
|
|
|
9,927
|
|
|
|
—
|
|
|
|
8
|
%
|
|
October 16, 2019
|
|
|
27,500
|
|
|
|
458
|
|
|
|
(21,774
|
)
|
|
|
6,184
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BOBA
Management
|
|
8
|
%
|
|
December 24, 2017
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
102,630
|
|
|
|
8
|
%
|
|
August 31, 2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
30,768
|
|
|
|
8
|
%
|
|
October 3, 2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12,155
|
|
|
|
8
|
%
|
|
March 26, 2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8
|
%
|
|
March 26, 2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anna
Mosk
|
|
8
|
%
|
|
January 9, 2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
616796
BC Ltd
|
|
8
|
%
|
|
June
20, 2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alex
Pereira
|
|
8
|
%
|
|
May 3, 2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8
|
%
|
|
November 5, 2019
|
|
|
19,250
|
|
|
|
236
|
|
|
|
(16,297
|
)
|
|
|
3,189
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gibbs International Holdings
|
|
15
|
%
|
|
On demand
|
|
|
52,494
|
|
|
|
11,304
|
|
|
|
—
|
|
|
|
63,798
|
|
|
|
55,924
|
|
|
|
8
|
%
|
|
August 31, 2019
|
|
|
405,735
|
|
|
|
11,827
|
|
|
|
(262,217
|
)
|
|
|
155,345
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Delinvest Commercial LTD.
|
|
15
|
%
|
|
December 16, 2019
|
|
|
20,000
|
|
|
|
4,307
|
|
|
|
—
|
|
|
|
24,307
|
|
|
|
21,307
|
|
|
|
15
|
%
|
|
December 26, 2019
|
|
|
54,123
|
|
|
|
11,433
|
|
|
|
—
|
|
|
|
65,556
|
|
|
|
57,437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
convertible notes payable
|
|
|
|
|
$
|
2,165,303
|
|
|
$
|
125,189
|
|
|
$
|
(1,039,459
|
)
|
|
$
|
1,251,033
|
|
|
$
|
859,444
|
|
Interest expense amounted to
$236,091 and $104,485 for the years ended December 31, 2018 and 2017, respectively. Debt discount amortized amounted
to $2,317,577 and $1,205,342 for the years ended December 31, 2018 and 2017, respectively.
The convertible notes disclosed
above with a coupon of 15%, 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. The beneficial conversion feature was 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 and the conversion price. The
difference between the fair market value and the conversion price was recorded as a debt discount with a corresponding credit to
derivative financial liability.
The remaining 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, 2018
and 2017 was $2,685,843 and $1,782,016, respectively.
QPAGOS
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
9
|
CONVERTIBLE NOTES PAYABLE (continued)
|
Power Up Lending Group Ltd
.
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 had a maturity date of April 20, 2018 and the Company had 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
was issued until the same became due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company
had the right to prepay the note in terms of agreement. The outstanding principal amount of the note was 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. On January 9, 2018, in terms of an assignment
agreement entered into with Anna Mosk, the $83,000 convertible note plus accrued interest thereon of $3,329 was exchanged for a
new note with a principal sum of $86,329 bearing interest at 8% per annum with the maturity date extended to January 9, 2019.
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 had a maturity date of June 30, 2018 and the Company had 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
was issued until the same became due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company
had the right to prepay the note in terms of agreement. The outstanding principal amount of the note was 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. On March 26, 2018, in terms of a debt
purchase agreement entered into with Boba Management Corp., the $63,000 convertible note plus accrued interest thereon of $2,513
was exchanged for a new note with a principal sum of $65,513 bearing interest at 8% per annum with the maturity date extended to
March 26, 2019.
On November 14, 2017, the Company
issued a Convertible Promissory Note in the aggregate principal amount of $53,000 to Power Up Lending Group LTD. The note had a
maturity date of August 30, 2018 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 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 May 14, 2018, the Company repaid the convertible promissory note together with interest and early settlement penalty
interest thereon for gross proceeds of $74,373.
On January 24, 2018, the Company
issued a Convertible Promissory Note in the aggregate principal amount of $68,000 to Power Up Lending Group LTD. The note had a
maturity date of October 30, 2018 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 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 25, 2018, the Company repaid the convertible promissory note together with interest and early settlement penalty
interest thereon for gross proceeds of $95,402.
On March 26, 2018, the Company
issued a Convertible Promissory Note in the aggregate principal amount of $68,000 to Power Up Lending Group LTD. The note had a
maturity date of January 15, 2019 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 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 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 September 21, 2018, in terms of a debt purchase agreement entered into with GS Capital Partners LLC, the convertible
note issued to Power Up Lending Group LTD of $68,000 plus accrued interest thereon of $2,698 was exchanged for a new note with
a principal sum of $70,698 bearing interest at 8% per annum with the maturity date extended to September 19, 2019.
QPAGOS
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
9
|
CONVERTIBLE NOTES PAYABLE
(continued)
|
Power Up Lending Group Ltd
.
(continued)
On May 24, 2018, 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 March 15, 2019 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 November
29, 2018, the Company received a conversion notice, converting $10,000 of principal into 153,139 shares of common stock at a conversion
price of $0.0653 per share. On November 30, 2018, the Company received a further conversion notice, converting $15,000 of principal
into 233,281 shares of common stock at a conversion price of $0.0643 per share. On December 3, 2018, the Company received a further
conversion notice, converting $18,000 of principal into 280,811 shares of common stock at a conversion price of $0.0641 per share.
On December 17, 2018, the Company received a further conversion notice, converting $15,000 of principal into 403,226 shares of
common stock at a conversion price of $0.0372 per share. On December 31, 2018, the Company received a final conversion notice converting
$7,520, consisting of $5,000 of principal and accrued interest of $2,520 into 293,750 shares of common stock at a conversion price
of $0.0256 per share thereby extinguishing the note.
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 has a
maturity date of April 30, 2019 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 62% 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 December 31, 2018 was $38,645, net of unamortized discount of $26,620.
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 has 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 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. The balance of
the note plus accrued interest at December 31, 2018 was $11,869, net of unamortized discount of $71,859.
Labrys Fund, LP
On December 14, 2017, the Company
issued a Convertible Promissory Note in the aggregate principal amount of $78,000 to Labrys Fund, LP. The note had a maturity date
of June 14, 2018 and a coupon of 8% per annum. In connection with the issuance of the note, the Company was required to issue 231,591
shares of common stock as a commitment fee valued at $76,537. The shares were returnable to the Company if no Event of Default
had occurred prior to the date the note was fully repaid. 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 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 June
14, 2018, $15,000 of the outstanding principal was converted into 118,483 shares of common stock at a conversion price of $0.1266
per share. On June 20, 2018, the remaining principal of $40,000 together with interest thereon of $44 was repaid. On June 20, 2018,
a further $23,000 of the principal outstanding together with interest of $3,184 was converted into 199,269 shares of common stock
at a conversion price of $0.1314 per share. Labrys Fund LP returned 115,796 of the commitment shares to the Company and retained
the remaining 115,795 shares of common stock as commitment fees.
On February 12, 2018, the Company
issued a Convertible Promissory Note in the aggregate principal amount of $88,000 to Labrys Fund, LP. The note has a maturity date
of August 12, 2018 and a coupon of 8% per annum. In connection with the issuance of the note, the Company was required to issue
440,000 shares of common stock as a commitment fee valued at $70,400. The shares are 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 and therefore the value of the 440,000 shares was not recorded. 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 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 August
14, 2018, $18,000 of the principal together with interest of $3,520 was converted into 170,769 shares of common stock at a conversion
price of $0.126 per share. On the same day the balance of the principal of $70,000 was repaid thereby extinguishing the note, the
440,000 commitment shares were returned to the Company and cancelled.
QPAGOS
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
9
|
CONVERTIBLE NOTES PAYABLE
(continued)
|
Labrys Fund, LP (continued)
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 has a maturity
date of December 22, 2018 and a coupon of 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 December 26,
2018, the Company received a conversion notice, converting $26,400 consisting of $20,384 principal and $6,016 accrued interest,
into 1,100,000 shares of common stock at a conversion price of $0.024 per share. In December 2018 the maturity date was extended
to February 28, 2019. The balance of the note plus accrued interest at December 31, 2018 was $129,758.
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. 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 and therefore the value of the 825,718 shares was not recorded. 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 ten (10) trading days. The balance of
the note plus accrued interest at December 31, 2018 was $126,826, net of unamortized discount of $177,579.
JSJ Investments Inc.
On November 29, 2017, the Company
issued a Convertible Promissory Note in the aggregate principal amount of $75,000 to JSJ Investments, Inc. The note had a maturity
date of November 29, 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 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 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 June 4, 2018,
$40,000 of the outstanding principal was converted into 328,407 shares of common stock at a conversion price of $0.1218 per share.
On June 21, 2018, the remaining $35,000 of the principal outstanding together with interest of $3,210 was converted into 288,943
shares of common stock at a conversion price of $0.1322 per share.
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 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. The balance of the note plus accrued interest at December
31, 2018 was $46,751, net of unamortized discount of $56,712.
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 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 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. The balance of the note plus accrued interest at December
31, 2018 was $24,855, net of unamortized discount of $76,986.
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., (“GS Capital”).
The note had a maturity date of May 22, 2018 and a coupon of 8% per annum. The Company had the right to prepay the note, provided
it made a pre-payment penalty as specified in the note. 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 lowest trading bid prices during the previous ten (10) trading days, including the date the notice of conversion is received.
On November 11, 2017, GS Capital converted $20,000 of the principal amount of the convertible note into equity at a conversion
price of $0.1023 per share for an aggregate 203,516 shares of common stock. On December 13, 2017, GS Capital converted a further
$20,000 of the principal amount of the convertible note into equity at a conversion price of $0.1240 per share for an aggregate
168,466 shares of common stock. On January 17, 2018, GS Capital converted a further $18,000 principal, plus accrued interest thereon
of $939 of the convertible note into equity at a conversion price of $0.0778 per share for an aggregate 243,400 shares of common
stock. On February 14, 2018, in terms of a debt purchase agreement entered into with Strategic IR, the remaining $17,000 convertible
note plus accrued interest thereon of $984 was exchanged for a new note with a principal sum of $17,984 bearing interest at 8%
per annum with the maturity date extended to February 14, 2019.
QPAGOS
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
9
|
CONVERTIBLE NOTES PAYABLE
(continued)
|
GS Capital Partners, LLC (continued)
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 had a maturity date of June 16, 2018 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 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 lowest trading bid prices during the previous ten (10) trading days, including the date the notice of conversion
is received. On February 22, 2018, GS Capital converted $27,500 principal, plus accrued interest thereon of $1,477 into 385,456
shares of common stock at a conversion price of $0.0752 per share. On March 12, 2018, GS Capital converted $29,000 principal, plus
accrued interest thereon of $1,672 into 391,070 shares of common stock at a conversion price of $0.0784 per share. On April 18,
2018 the remaining principal of $56,000 together with interest thereon of $3,682 was converted into 518,930 shares of common stock
at a conversion price of $0.1150 per share, thereby extinguishing the note.
On May 3, 2018, the Company issued
a Convertible Promissory Note in the aggregate principal amount of $105,000 to GS Capital Partners, LLC. The note has a maturity
date of May 3, 2019 and a coupon of 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. On November 2, 2018,
the Company repaid $70,356 consisting of principal of $52,500, accrued interest thereon of $2,106 and early settlement penalty
of $15,750. On November 5, 2018, in terms of a debt purchase agreement entered into between Alex Pereira and GS Capital Partners,
the remaining principal amount of $52,500 and accrued interest thereon was acquired by Alex Pereira.
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 has a maturity date of May 11, 2019 and a coupon of 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. On December 27, 2018, the Company received a conversion notice, whereby $21,008 consisting of
$20,000 of principal with accrued interest of $1,008 was converted into 857,828 shares of common stock at a conversion price of
$0.02449 per share. The balance of the note plus accrued interest at December 31, 2018 was $41,543, net of unamortized discount
of $21,534.
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 has a
maturity date of August 14, 2019 and a coupon of 8% per annum. The Company has 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. The balance of the note plus accrued interest at December 31, 2018 was $61,693 net of unamortized discount
of $92,877.
On September 21, 2018, in terms
of 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 the maturity date extended to 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. On October
9, 2018, the Company received a notice of conversion, converting $23,058, consisting of principal of $22,968 and interest of $90
into 203,874 shares of common stock at a conversion price of $0.1131 per share. The balance of the note plus accrued interest at
December 31, 2018 was $14,557 net of unamortized discount of $34,261.
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 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. The balance of the note plus accrued interest at December 31, 2018
was $53,056 net of unamortized discount of $100,593.
QPAGOS
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
9
|
CONVERTIBLE NOTES PAYABLE
(continued)
|
GS Capital Partners, LLC (continued)
On September 19, 2018, in terms
of 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. The balance of the note plus accrued interest at December 31, 2018 was $10,134 net
of unamortized discount of $23,869.
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 matured on December 16, 2017. In 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. The note is convertible
into common shares at a conversion price of $0.20 per share. The balance of the note plus accrued interest at December 31, 2018
was $12,193.
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. 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 December 31, 2018 was $24,573.
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. 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 December 31, 2018 was $65,091.
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.
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. 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 December 31, 2018 was $139,940.
On October 23, 2017, the Company
issued a Convertible Promissory Note in the aggregate principal amount of $14,298 to Strategic. The note had a maturity date of
October 23, 2018 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 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 was received. On March
7, 2018, in terms of a conversion notice received on October 25, 2017, the Company, after increasing its authorized share capital,
issued 192,216 shares of common stock at a conversion price of $0.0744 in settlement of the principal of $14,298 and accrued interest
thereon of $7, thereby extinguishing the note.
QPAGOS
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
9
|
CONVERTIBLE NOTES PAYABLE
(continued)
|
Strategic IR (continued)
On January 9, 2018, in terms of
an additional payment made by Strategic IR to Power Up Lending Group to settle outstanding early settlement penalties and interest
thereon, related to the assignment agreement entered into between Anna Mosk and Power up Lending Group, the Company issued a convertible
promissory note to Strategic IR in the aggregate principal amount of $40,521. The note had a maturity date of January 9, 2019 and
a coupon of 8% per annum. The Company had the right to prepay the note, provided it makes a prepayment penalty as specified in
the note. 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 was received. On March 13, 2018, in terms
of a conversion notice received, the Company issued 479,587 shares of common stock at a conversion price of $0.0856 in settlement
of the principal of $40,521 and accrued interest thereon of $551, thereby extinguishing the note.
On February 14, 2018, in terms
of a debt purchase agreement entered into with GS Capital Partners, LLC, the Company issued a convertible promissory note in the
aggregate amount of $17,984 in exchange for a convertible promissory note in the aggregate amount of $17,000 plus accrued interest
thereon of $984. The note had a maturity date of February 14, 2019 and a coupon of 8% per annum. The Company had the right to prepay
the note, provided it made a pre-payment penalty as specified in the note. 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. On March 13, 2018, in terms of a conversion notice received, the Company issued 211,188 shares of common
stock at a conversion price of $0.0856 in settlement of the principal of $17,984 and accrued interest thereon of $102, thereby
extinguishing the note.
On February 14, 2018, in terms
of an additional payment made by Strategic IR to GS Capital Partners, LLC to settle outstanding early settlement penalties and
interest thereon, related to the convertible note mentioned above, the Company issued a convertible promissory note in the aggregate
principal amount of $7,610. The note had a maturity date of February 14, 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 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. On March 13, 2018, in terms of a conversion notice received, the Company issued
89,367 shares of common stock at a conversion price of $0.0856 in settlement of the principal of $7,610 and accrued interest thereon
of $43, thereby extinguishing the note.
On February 15, 2018, in terms
of a Securities Purchase Agreement, the Company issued a Convertible Promissory Note in the aggregate principal amount of $72,969
to Strategic IR. The note had a maturity date of February 15, 2019 and a coupon of 8% per annum. The Company had the right to prepay
the note, provided it made a pre-payment penalty as specified in the note. 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 lowest three trading bid prices during the previous ten (10) trading days, including the date the notice
of conversion is received. The proceeds of the convertible note was used to purchase $50,000 of the principal of the Crown Bridge
Capital Partners note dated August 14, 2017 plus accrued interest thereon of $1,994 and early settlement penalty of $20,975. On
March 13, 2018, in terms of a conversion notice received, the Company issued 856,715 shares of common stock at a conversion price
of $0.0856 in settlement of the principal of $72,969 and accrued interest thereon of $400, thereby extinguishing the note.
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. 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. 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 December 31, 2018 was $24,573.
On
October 31, 2017, the Company issued a Convertible Promissory Note in the aggregate principal amount of $50,000 to Viktoria
Akhmetova. The note had a maturity date of October 20, 2018 and a coupon of eight percent (8%) per annum. The Company had 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 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 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 March 7, 2018,
in terms of a conversion notice received on October 25, 2017, the Company, after increasing its authorized share capital,
issued 687,968 shares of common stock at a conversion price of $0.074 in settlement of the principal of $50,000 plus accrued
interest thereon of $910, thereby extinguishing the note.
QPAGOS
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
9
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CONVERTIBLE NOTES PAYABLE
(continued)
|
Viktoria Akhmetova (continued)
On October 25, 2017, in
terms of an agreement entered into, Strategic IR assigned a note entered into on August 24, 2017 with the Company to Viktoria
Akhmetova. The note had an aggregate principal amount of $113,845 and accrued interest thereon of $1,547. The note has a
maturity date of August 24, 2018 and a coupon of 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. On October 25, 2017, the Company received a notice of conversion of the
outstanding principal and interest into common shares effective October 25, 2017. The Company had to increase its number of
authorized shares in order to give effect to this conversion. The Company received a default waiver from the note holder to
allow it to increase its authorized shares. On March 7, 2018, in terms of a conversion notice received on October 25, 2017,
the Company, after increasing its authorized share capital, issued 1,329,044 shares of common stock at a conversion price of
$0.0868 in settlement of the principal of $113,845 plus accrued interest thereon of $1,547, thereby extinguishing the
note.
On October 25, 2017, in terms
of an agreement entered into, Strategic IR assigned a note entered into on September 18, 2017 with the Company to Viktoria Akhmetova.
The note had an aggregate principal amount of $69,047 and accrued interest thereon of $560. The note has a maturity date of September
18, 2018 and a coupon of 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 25, 2017, the Company
received a notice of conversion of the outstanding principal and interest into common shares effective October 25, 2017. The Company
had to increase its number of authorized shares in order to give effect to this conversion. The Company received a default waiver
from the note holder to allow it to increase its authorized shares. On March 7, 2018, in terms of a conversion notice received
on October 25, 2017, the Company, after increasing its authorized share capital, issued 935,324 shares of common stock at a conversion
price of $0.0744 in settlement of the principal of $69,047 plus accrued interest thereon of $560, thereby extinguishing the note.
On October
25, 2017, in terms of an agreement entered into, Strategic IR assigned a note entered into on September 26, 2017 with the Company
to Viktoria Akhmetova. The note had an aggregate principal amount of $20,000 and accrued interest thereon of $127. The note had
a maturity date of September 26, 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 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 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 25, 2017, the Company received a notice of conversion of the outstanding principal and interest into common shares
effective October 25, 2017. The Company had to increase its number of authorized shares in order to give effect to this conversion.
The Company received a default waiver from the note holder to allow it to increase its authorized shares. On March 7, 2018, in
terms of a conversion notice received on October 25, 2017, the Company, after increasing its authorized share capital, issued
270,453 shares of common stock at a conversion price of $0.0744 in settlement of the principal of $20,000 plus accrued interest
thereon of $127, thereby extinguishing the note.
On January 31, 2018, the Company
issued a Convertible Promissory Note in the aggregate principal amount of $30,000 to Viktoria Akhmetova. The note had a maturity
date of January 31, 2019 and a coupon of 8% per annum. The Company had 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 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 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 April 18, 2018, in terms of a conversion notice received, the Company issued 235,691
shares of common stock at a conversion price of $0.1287 in settlement of the principal of $30,000 plus accrued interest thereon
of $329, thereby extinguishing the note.
On February 26, 2018, the Company
issued a Convertible Promissory Note in the aggregate principal amount of $37,000 to Viktoria Akhmetova. The note had a maturity
date of February 26, 2019 and a coupon of 8% per annum. The Company had 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 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 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 April 18, 2018, in terms of a conversion notice received, the Company issued
292,325 shares of common stock at a conversion price of $0.1287 in settlement of the principal of $37,000 plus accrued interest
thereon of $616, thereby extinguishing the note.
QPAGOS
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
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9
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CONVERTIBLE NOTES PAYABLE
(continued)
|
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. In 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. The balance of the note plus accrued interest at December 31,
2018 was $31,964.
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 12% per annum. In 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 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 December 31, 2018 was $4,496.
Roman Shefer
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. In 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. The balance of the note plus accrued interest at December 31, 2018 was $12,121.
Crown Bridge Partners LLC
On August 14, 2017, the Company
issued a Convertible Promissory Note in the aggregate principal amount of $75,000 to Crown Bridge Partners. The note had a maturity
date of August 14, 2018 and a coupon of eight percent (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. On February 15, 2018, the Company repurchased $50,000 of the principal outstanding plus accrued interest thereon of $1,994,
after paying an early settlement penalty of $20,975 out of the proceeds of a note issued to Strategic IR. On March 6, 2018, Crown
Bridge Partners converted $9,501 of the principal outstanding into equity at a conversion price of $0.0685 per share for an aggregate
146,000 shares of common stock. On April 5, 2018, Crown Bridge Partners converted $9,356 of the principal outstanding into equity
at a conversion price of $0.0616 per share for an aggregate of 160,000 shares of common stock. On June 19, 2018, Crown Bridge Partners
converted the remaining principal of $6,143, together with interest thereon of $3,293, at a conversion price of $0.1002 per share
for an aggregate of 94,183 shares of common stock, thereby extinguishing the note.
On February
27, 2018, the Company issued a Convertible Promissory Note in the aggregate principal amount of $55,000 to Crown Bridge Partners.
The note has a maturity date of February 27, 2019 and a coupon of 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. On September 7, 2018, the company received a conversion notice, converting $18,025, consisting of principal
of $17,525 and fees thereon of $500 into 206,000 shares of common stock at a conversion price of $0.0875. On October 8, 2018 the
Company received a further conversion notice, converting $15,759, consisting of principal of $15,259 and fees thereon of $500
into 206,000 shares of common stock at a conversion price of $0.0765 per share. On October 19, 2018 the Company received a further
conversion notice, converting $14,940, consisting of principal of $14,440 and fees thereon of $500 into 180,000 shares of common
stock at a conversion price of $.083 per share. On December 21, 2018, the Company received a further conversion notice, converting
$10,934, consisting of principal of $7,776, accrued interest of $2,658 and fees thereon of $500 into 436,477 shares of common
stock at a conversion price of $.02505 per share, thereby extinguishing the note.
QPAGOS
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
9
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CONVERTIBLE NOTES PAYABLE
(continued)
|
Crown Bridge Partners LLC (continued)
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 has a maturity
date of May 14, 2019 and a coupon of 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 December 31, 2018 was $18,796 net of unamortized discount of $10,096.
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 has a maturity
date of June 12, 2019 and a coupon of 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 December 31, 2018 was $16,437 net of unamortized discount of $12,281.
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 has a maturity
date of July 26, 2019 and a coupon of 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 ten (10) trading days. The balance
of the note plus accrued interest at December 31, 2018 was $12,856 net of unamortized discount of $15,596.
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 has a maturity
date of August 31, 2019 and a coupon of 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 ten (10) trading days. The balance
of the note plus accrued interest at December 31, 2018 was $9,927 net of unamortized discount of $18,308.
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. The balance of the note plus accrued
interest at December 31, 2018 was $6,184 net of unamortized discount of $21,774.
BOBA Management
On October 25, 2017, in terms
of an agreement entered into, Strategic IR assigned a note entered into on August 31, 2017 with the Company to BOBA Management.
The note had an aggregate principal amount of $88,847 and accrued interest thereon of $1,071. The note had a maturity date of August
31, 2018 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 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 25, 2017,
the Company received a notice of conversion of the outstanding principal and interest into common shares effective October 25,
2017. The Company had to increase its number of authorized shares in order to give effect to this conversion. The Company received
a default waiver from the note holder to allow it to increase its authorized shares. On March 7, 2018, in terms of a conversion
notice received on October 25, 2017, the Company, after increasing its authorized share capital, issued 1,208,251 shares of common
stock at a conversion price of $0.0744 in settlement of the principal of $88,847 plus accrued interest thereon of $1,071, thereby
extinguishing the note.
QPAGOS
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
9
|
CONVERTIBLE NOTES PAYABLE
(continued)
|
BOBA Management (continued)
On
October 25, 2017, in terms of an agreement entered into, Strategic IR assigned a note entered into on October 3, 2017 with the
Company to BOBA Management. The note had an aggregate principal amount of $48,880 and accrued interest thereon of $236. The note
had a maturity date of October 3, 2018 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 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 25, 2017, the Company received a notice of conversion of the outstanding principal and interest into common
shares effective October 25, 2017. The Company had to increase its number of authorized shares in order to give effect to this
conversion. The Company received a default waiver from the note holder to allow it to increase its authorized shares. On March
7, 2018, in terms of a conversion notice received on October 25, 2017, the Company, after increasing its authorized share capital,
issued 659,980 shares of common stock at a conversion price of $0.0744 in settlement of the principal of $48,880 plus accrued interest
thereon of $236, thereby extinguishing the note.
On October 25, 2017, in terms
of an agreement entered into, Strategic IR assigned a previously unclassified amount due to Strategic, subsequently classified
as a Convertible Promissory Note on June 27, 2017 with an aggregate principal amount of $100,000 and accrued interest thereon of
$2,630, to BOBA Management. The note has a maturity date of December 24, 2017 and a coupon of 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. On October 25, 2017, the Company received a notice of conversion of the outstanding principal and interest into common shares
effective October 25, 2017. The Company had to increase its number of authorized shares in order to give effect to this conversion.
The Company received a default waiver from the note holder to allow it to increase its authorized shares. On March 7, 2018, in
terms of a conversion notice received on October 25, 2017, the Company, after increasing its authorized share capital, issued 1,379,067
shares of common stock at a conversion price of $0.0744 in settlement of the principal of $100,000 plus accrued interest thereon
of $2,630, thereby extinguishing the note.
On March 26, 2018, in terms
of a debt purchase agreement entered into with Power Up Lending Group, the Company issued Boba Management Corp a new note with
as principal sum of $65,513. The note had a maturity date of March 26, 2019 and a coupon of 8% per annum. The Company had the right
to prepay the note, provided it made a pre-payment penalty as specified in the note. 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. On April 18, 2018, in terms of a conversion notice received, the Company issued
511,571 shares of common stock at a conversion price of $0.1287 in settlement of the principal of $65,313 plus accrued interest
thereon of $316, thereby extinguishing the note.
On March 26, 2018, in terms
of a Securities Purchase Agreement, the Company issued a Convertible Promissory Note in the aggregate principal amount of $31,618
to BOBA Management Corp. The note had a maturity date of March 26, 2019 and a coupon of 8% per annum. The Company had the right
to prepay the note, provided it made a pre-payment penalty as specified in the note. 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 lowest three trading bid prices during the previous ten (10) trading days, including the
date the notice of conversion was received. The proceeds of the convertible note were used to pay early settlement penalties and
fees associated with the Power Up lending note above. On April 18, 2018, in terms of a conversion notice received, the Company
issued 246,899 shares of common stock at a conversion price of $0.1287 in settlement of the principal of $31,618 plus accrued interest
thereon of $152, thereby extinguishing the note.
Anna Mosk
On January 9, 2018, in terms
of an assignment agreement entered into with Power Up Lending Group, the Company issued a Convertible Promissory Note in the aggregate
principal amount of $86,329 to Anna Mosk. The note had a maturity date of January 9, 2019 and a coupon of 8% per annum. The Company
had 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 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 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 March 13, 2018, in terms
of a conversion notice received, the Company issued 1,021,745 shares of common stock at a conversion price of $0.0856 in settlement
of the principal of $86,329 and accrued interest thereon of $1,173, thereby extinguishing the note.
QPAGOS
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
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9
|
CONVERTIBLE NOTES PAYABLE
(continued)
|
616796
BC Ltd.
On
June 20, 2018, the Company issued a Convertible Promissory Note in the aggregate principal amount of $50,000 to 616796 BC, Ltd.
The note had a maturity date of June 20, 2019 and a coupon of 8% per annum. 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. On June 20, 2018, in terms of a conversion
notice received, the Company issued 302,480 shares of common stock at a conversion price of $0.1653 in settlement of the principal
of $50,000, thereby extinguishing the note.
Alex
Pereira
On
November 5, 2018, in terms of a debt purchase agreement entered into, the remaining GS Capital convertible note consisting of
principal of $52,500 and accrued interest thereon of $2,106 was acquired by Alex Pereira from GS Capital. On November 7, 2018,
the Company received a conversion notice, converting the remaining principal and accrued interest thereon of $54,606 into 628,519
shares of common stock at a conversion price of $0.087 per share, thereby extinguishing the note.
In
conjunction with the purchase of the convertible note above, Alex Pereira paid the early settlement penalty and legal fees associated
therewith on the remaining principal of $52,500 directly to GS Capital amounting to $19,250. 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. The balance of the note plus
accrued interest at December 31, 2018 was $3,189 net of unamortized discount of $16,297.
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 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 is 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 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 December 31, 2018 was
$63,798.
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.
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 has the right to prepay the note within 180 days without penalties.
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 three 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 December 31, 2018 was $155,345 net of unamortized discount of $262,217.
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. 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. On February 21, 2019 the maturity date was extended to December 16, 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. The balance of the
note plus accrued interest at December 31, 2018 was $24,307.
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. 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. 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 December 31, 2018 was $65,556.
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.
Certain of the short-term convertible notes disclosed in note 9 above and note 16 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, 2018 and 2017, and ($4,129,793) and $330,134 was (credited)/debited 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,
2018
|
|
|
Year ended
December 31,
2017
|
|
Conversion price
|
|
$
|
0.02 to 0.25
|
|
|
$
|
0.08 to 0.40
|
|
Risk free interest rate
|
|
|
1.78 to 2.81
|
%
|
|
|
1.05 to 1.98
|
%
|
Expected life of derivative liability
|
|
|
3 to 12 months
|
|
|
|
9 to 36 months
|
|
Expected volatility of underlying stock
|
|
|
169.15 to 230.55
|
%
|
|
|
134.1 to 202.3
|
%
|
Expected dividend rate
|
|
|
0
|
%
|
|
|
0
|
%
|
The movement in derivative liability
is as follows:
|
|
December 31,
2018
|
|
|
December 31,
2017
|
|
|
|
|
|
|
|
|
|
|
Opening balance
|
|
$
|
3,277,621
|
|
|
$
|
113,074
|
|
Derivative financial liability arising from convertible note
|
|
|
2,685,845
|
|
|
|
2,834,413
|
|
Fair value adjustment to derivative liability
|
|
|
(4,129,793
|
)
|
|
|
330,134
|
|
|
|
$
|
1,833,672
|
|
|
$
|
3,277,621
|
|
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 88,839,218
shares of common stock as of December 31, 2018 and 56,207,424 as of December 31, 2017.
On
March 5, 2018, in terms of an amendment to the Company’s Articles of Incorporation, the authorized share capital was increased
to 500,000,000 common shares with a par value of $0.001 each.
The
following common shares were issued by the Company during the years ended December 31, 2018.
In
terms of various debt conversion notices received between January 17, 2018 and December 31, 2018, the Company issued an aggregate
of 32,325,999 shares of common stock in settlement of $2,461,705 of convertible notes, resulting in a net loss on conversion of
$3,738,306.
On June 6, 2018, 115,795 of
the commitment shares, valued at $34,739 that were issued to Labrys Fund, LLP, were recorded as issued as the Company had not repaid
the note by the due date of June 16, 2018. The remaining 115,796 commitment shares were returned to the Company and were cancelled.
On
June 29, 2018, in terms of a share option plan recently implemented by the Company, 120,000 restricted shares valued at $49,200
on the grant date were granted to a director as compensation for services rendered. These shares vested immediately. On December
27, 2018, a further 70,000 shares of common stock valued at $2,975 on the grant date were granted to a director. These shares
vested immediately.
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, 2018
and 2017.
A summary of warrant activity
during the period January 1, 2017 to December 31, 2018 is as follows:
|
|
|
Shares
Underlying
Warrants
|
|
|
Exercise
price per
share
|
|
|
Weighted
average
exercise
price
|
|
Outstanding January 1, 2017
|
|
|
|
6,219,200
|
|
|
$
|
0.625
|
|
|
$
|
0.625
|
|
Granted
|
|
|
|
2,308,513
|
|
|
|
0.20
|
|
|
|
0.20
|
|
Forfeited/Cancelled
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Exercised
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Outstanding December 31, 2017
|
|
|
|
8,527,713
|
|
|
$
|
0.20
to 0.625
|
|
|
$
|
0.51
|
|
Granted
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Forfeited/Cancelled
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Exercised
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Outstanding December 31, 2018
|
|
|
|
8,527,713
|
|
|
$
|
0.20
to 0.625
|
|
|
$
|
0.51
|
|
The warrants outstanding and exercisable
at December 31, 2018 are as follows:
|
|
|
Warrants Outstanding
|
|
|
Warrants Exercisable
|
|
Exercise
Price
|
|
|
Number
Outstanding
|
|
|
Weighted
Average
Remaining
Contractual
life in years
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Number
Exercisable
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual
life in years
|
|
$
|
0.625
|
|
|
|
6,219,200
|
|
|
|
1.75
|
|
|
|
|
|
|
6,219,200
|
|
|
|
|
|
|
|
|
$
|
0.20
|
|
|
|
2,308,513
|
|
|
|
1.50
|
|
|
|
|
|
|
2,308,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,527,713
|
|
|
|
1.68
|
|
|
$
|
0.51
|
|
|
8,527,713
|
|
$
|
0.51
|
|
|
|
1.68
|
|
The warrants outstanding have
an intrinsic value of $0 and $0 as of December 31, 2018 and 2017, respectively.
QPAGOS
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
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.
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.
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, 2018 is as follows:
|
|
|
Shares
Underlying
options
|
|
|
Exercise
price per
share
|
|
|
Weighted
average
exercise
price
|
|
Granted
|
|
|
|
2,000,000
|
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
Forfeited/Cancelled
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Exercised
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Outstanding December 31, 2018
|
|
|
|
2,000,000
|
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
The options outstanding and exercisable
at December 31, 2018 are as follows:
|
|
|
Warrants Outstanding
|
|
|
Warrants Exercisable
|
|
Exercise
Price
|
|
|
Number
Outstanding
|
|
|
Weighted
Average
Remaining
Contractual
life in years
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Number
Exercisable
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual
life in years
|
|
0.04
|
|
|
|
2,000,000
|
|
|
|
10.00
|
|
|
$
|
0.04
|
|
|
|
2,000,000
|
`
|
|
$
|
0.04
|
|
|
|
10.00
|
|
The options outstanding have
an intrinsic value of $0 as of December 31, 2018.
QPAGOS
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Revenue is derived from the following sources:
|
|
Year ended
December 31, 2018
|
|
|
Year ended
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
Sales of services
|
|
$
|
7,809,053
|
|
|
$
|
3,744,051
|
|
Payment processing fees
|
|
|
43,735
|
|
|
|
29,712
|
|
Kiosk sales
|
|
|
41,381
|
|
|
|
131,621
|
|
Other
|
|
|
42,104
|
|
|
|
35,889
|
|
|
|
$
|
7,936,273
|
|
|
$
|
3,941,273
|
|
The Company’s primary operations
are 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, 2018 and 2017, there have been no interest or penalties incurred on
income taxes.
The Company has not recorded the
necessary provisional adjustments in the financial statements in accordance with its current understanding of the TCJA and guidance
currently available as of this filing. But management is reviewing the TCJA’s potential ramifications. Noting, The Company determined
that it had no liability as of December 31, 2018 for the one-time transition tax on deemed repatriated earnings of foreign
subsidiaries imposed by the Act.
The provision for income taxes
consists of the following:
|
|
|
Year ended
December 31, 2018
|
|
|
Year ended
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
$
|
—
|
|
|
$
|
—
|
|
State
|
|
|
|
—
|
|
|
|
—
|
|
Foreign
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
$
|
—
|
|
|
$
|
—
|
|
State
|
|
|
|
—
|
|
|
|
—
|
|
Foreign
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
QPAGOS
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
13
|
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 , 2018
|
|
|
Year ended
December 31, 2017
|
|
|
|
|
|
|
|
|
Tax expense at the federal statutory rate
|
|
$
|
(1,141,370
|
)
|
|
$
|
(1,611,075
|
)
|
State tax expense, net of federal tax effect
|
|
|
—
|
|
|
|
—
|
|
Effect of foreign operations
|
|
|
(27,713
|
)
|
|
|
20,860
|
|
Effect of income tax rate change
|
|
|
—
|
|
|
|
547,371
|
|
Permanent timing differences
|
|
|
(147,563
|
)
|
|
|
98,885
|
|
Temporary timing differences
|
|
|
8,271
|
|
|
|
—
|
|
|
|
|
(1,252,950
|
)
|
|
|
(943,959
|
)
|
Deferred income tax asset valuation allowance
|
|
|
1,252,950
|
|
|
|
943,959
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Significant components of the
Company’s deferred income tax assets are as follows:
|
|
December 31 , 2018
|
|
|
December 31,
2017
|
|
Depreciation and amortization
|
|
$
|
12,618
|
|
|
$
|
(46,332
|
)
|
Other
|
|
|
(15,412
|
)
|
|
|
53,105
|
|
Net operating losses
|
|
|
3,750,027
|
|
|
|
172,940
|
|
Valuation allowance
|
|
|
(3,747,233
|
)
|
|
|
(179,713
|
)
|
Net deferred income tax assets
|
|
$
|
—
|
|
|
$
|
—
|
|
The valuation allowance for deferred
income tax assets as of December 31, 2018 and December 31, 2017 was $3,752,798 and $179,713 , respectively.
The net change in the deferred income tax assets valuation allowance was an increase of $3,573,085 for 2018, after making adjustments
to the prior year opening balances.
As of December 31, 2018,
the prior three years remain open for examination by the federal or state regulatory agencies for purposes of an audit for tax
purposes.
The Company’s net operating
loss carry-forwards of its foreign subsidiaries of $4,298,663 begin to expire in 2023 through 2027. Net operating loss carry-forwards
of the US companies of $13,585,107 begin to expire in 2033 through 2038. 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 occur. 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.
|
14
|
EQUITY BASED COMPENSATION
|
Equity based compensation is made up of the following:
|
|
Year ended
December 31, 2018
|
|
|
Year ended
December 31, 2017
|
|
|
|
|
|
|
|
|
Incentive stock awards
|
|
$
|
52,175
|
|
|
|
—
|
|
Stock issued for services rendered
|
|
|
34,739
|
|
|
|
—
|
|
|
|
$
|
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, 2018 and 2017,
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 are as follows:
|
|
Year ended
December 31, 2018
(Shares)
|
|
|
Year ended
December 31, 2017
(Shares)
|
|
|
|
|
|
|
|
|
Convertible debt
|
|
|
77,911,950
|
|
|
|
18,884,635
|
|
Stock options
|
|
|
2,000,000
|
|
|
|
—
|
|
Warrants to purchase shares of common stock
|
|
|
8,527,713
|
|
|
|
8,527,713
|
|
|
|
|
88,439,663
|
|
|
|
27,412,348
|
|
QPAGOS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
16
|
RELATED PARTY TRANSACTIONS
|
The following transactions were
entered into with related parties:
LOANS PAYABLE
Description
|
|
Interest Rate
|
|
|
Maturity Date
|
|
December 31,
2018
|
|
|
December 31,
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vladimir Skigin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment funding
|
|
|
36
|
%
|
|
On Demand
|
|
|
81,316
|
|
|
|
55,296
|
|
Promissory note
|
|
|
18
|
%
|
|
January 11, 2020
|
|
|
55,474
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable – Related parties
|
|
|
|
|
|
|
|
$
|
136,790
|
|
|
$
|
55,296
|
|
Interest expense amounted to $32,002
and $0 for the years ended December 31, 2018 and 2017, respectively.
Vladimir Skigin
Vladimir Skigin has personally
advanced the Company equipment funding. Mr. Skigin is considered to be a related party as his shareholding and that of the Company’s
under his control exceeds 5%.
Equipment 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. A penalty interest rate has been provided for on the
loan. The balance of the note plus accrued interest at December 31, 2018 is $81,316.
Promissory note
On April 17, 2018, the Company
issued a Promissory Note in the aggregate principal amount of $49,491 to Vladimir Skigin. The note has a maturity date of September
13, 2018 and a coupon of eighteen percent per annum. The Company has 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 remaining unchanged. The balance of the note plus accrued
interest at December 31, 2018 is $55,474.
QPAGOS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
16
|
RELATED PARTY TRANSACTIONS
(continued)
|
CONVERTIBLE NOTES PAYABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
Description
|
|
Interest
rate
|
|
|
Maturity Date
|
|
Principal
|
|
|
Accrued
interest
|
|
|
Unamortized
debt discount
|
|
|
Balance,
net
|
|
|
Balance,
net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cobbolo Limited
|
|
|
15
|
%
|
|
December 26, 2019
|
|
$
|
53,438
|
|
|
$
|
11,288
|
|
|
$
|
—
|
|
|
$
|
64,726
|
|
|
$
|
56,710
|
|
|
|
|
15
|
%
|
|
December 26, 2019
|
|
|
52,959
|
|
|
|
11,187
|
|
|
|
—
|
|
|
|
64,146
|
|
|
|
56,202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vladimir Skigin
|
|
|
8
|
%
|
|
January 22, 2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
105,034
|
|
|
|
|
8
|
%
|
|
October 10, 2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
36,395
|
|
|
|
|
8
|
%
|
|
September 28, 2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
64,809
|
|
|
|
|
8
|
%
|
|
January 6, 2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
102,245
|
|
|
|
|
8
|
%
|
|
February 10, 2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
29,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beverly Pacific Holdings
|
|
|
8
|
%
|
|
March 9, 2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
86,411
|
|
|
|
|
8
|
%
|
|
November 6, 2017
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
187,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total convertible notes payable
|
|
|
|
|
|
|
|
$
|
106,397
|
|
|
$
|
22,475
|
|
|
$
|
—
|
|
|
$
|
128,872
|
|
|
$
|
724,522
|
|
Interest expense amounted to $16,388
and $34,833 for the years ended December 31, 2018 and 2017, respectively. The amortization of debt discount amounted to $320,079
and $713,688 for the years ended December 31, 2018 and 2017, respectively.
The 15% 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 were valued using
a Black-Scholes valuation model, 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 remaining 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, 2018 and 2017 was $0 and $1,052,397, respectively.
QPAGOS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
16
|
RELATED PARTY TRANSACTIONS
(continued)
|
CONVERTIBLE NOTES PAYABLE
(continued)
Vladimir Skigin
Vladimir Skigin is the principal
and has control over Cobbolo Limited and has also personally advanced the Company funds.
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. 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. 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 December 31, 2018 was $64,726.
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. 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. 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 December 31, 2018 was $64,146.
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.
On October 25, 2017, in terms of
an agreement entered into, Strategic IR assigned a note entered into on July 26, 2017 with the Company to Vladimir Skigin. The
Note had an aggregate principal amount of $117,000 and accrued interest thereon of $2,334. The note has a maturity date of January
22, 2018 and a coupon of 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. On October 25, 2017, the Company received a notice of conversion of the outstanding principal and interest
into common shares effective October 25, 2017. The Company had to increase its number of authorized shares in order to give effect
to this conversion. The Company received a default waiver from the note holder to allow it to increase its authorized shares.
On March 7, 2018, in terms of a conversion notice received on October 25, 2017, the Company, after increasing its authorized share
capital, issued 1,603,515shares of common stock at a conversion price of $0.0744 in settlement of the principal of $117,000 plus
accrued interest thereon of $2,334, thereby extinguishing the note.
On October 11, October 12 and October 26, 2017, the Company
received three installments of $50,000 each from Vladimir Skigin totaling $150,000 and issued a Convertible Promissory Note in
the aggregate principal amount of $150,000 to him. The note had a maturity date of October 10, 2018 and a coupon of 8% per annum.
The Company had 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 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 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
March 7, 2018, in terms of a conversion notice received on January 22, 2018, the Company, after increasing its authorized share
capital, issued 2,070,459 shares of common stock at a conversion price of $0.074 in settlement of the principal of $150,000 plus
accrued interest thereon of $3,124, thereby extinguishing the note.
QPAGOS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
16
|
RELATED PARTY TRANSACTIONS (continued)
|
CONVERTIBLE NOTES PAYABLE
(continued)
Vladimir Skigin (continued)
|
●
|
Vladimir Skigin (continued)
|
On October 25, 2017 in terms
of an agreement entered into, Strategic IR assigned a note entered into on September 28, 2017 with the Company to Vladimir Skigin.
The note had an aggregate principal amount of $246,000 and accrued interest thereon of $1,456. The note has a maturity date of
September 28, 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 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 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 25,
2017, the Company received a notice of conversion of the outstanding principal and interest into common shares effective October
25, 2017. The Company had to increase its number of authorized shares in order to give effect to this conversion. The Company
received a default waiver from the note holder to allow it to increase its authorized shares. On March 7, 2018, in terms of a
conversion notice received on October 25, 2017, the Company, after increasing its authorized share capital, issued 3,325,125 shares
of common stock at a conversion price of $0.0744 in settlement of the principal of $246,000 plus accrued interest thereon of $1,456,
thereby extinguishing the note.
On October 25, 2017 in terms of an agreement entered into, Strategic IR assigned a note entered
into on October 3, 2017, with the Company to Vladimir Skigin. The note had an aggregate principal balance of $100,000 and accrued
interest thereon of $4,427. The note had a maturity date of January 6, 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 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 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 25, 2017, the Company received a notice of conversion of the outstanding
principal and interest into common shares effective October 25, 2017. The Company had to increase its number of authorized shares
in order to give effect to this conversion. The Company received a default waiver from the note holder to allow it to increase
its authorized shares. On March 7, 2018, in terms of a conversion notice received on October 25, 2017, the Company, after increasing
its authorized share capital, issued 1,607,070 shares of common stock at a conversion price of $0.0650 in settlement of the principal
of $100,000 plus accrued interest thereon of $4,427, thereby extinguishing the note.
On October 25, 2017, in terms of an agreement entered into, Anna Mosk, the principal of Strategic IR, assigned
a note entered into on October 23, 2017 to Vladimir Skigin. The note had an aggregate principal balance of $33,000 and accrued
interest thereon of $1,324. The note had a maturity date of February 10, 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 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 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 25, 2017, the Company received a notice of conversion of the outstanding principal
and interest into common shares effective October 25, 2017. The Company had to increase its number of authorized shares in order
to give effect to this conversion. The Company received a default waiver from the note holder to allow it to increase its authorized
shares. On March 7, 2018, in terms of a conversion notice received on October 25, 2017, the Company, after increasing its authorized
share capital, issued 461,215 shares of common stock at a conversion price of $0.0744 in settlement of the principal of $33,000
plus accrued interest thereon of $1,324, thereby extinguishing the note.
QPAGOS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
16
|
RELATED PARTY TRANSACTIONS
(continued)
|
CONVERTIBLE NOTES PAYABLE
(continued)
Beverly Pacific Holdings
On October 25, 2017, in terms
of an agreement entered into, Strategic IR assigned a note entered into on September 18, 2017 with the Company to Beverly Pacific
Holdings. The note had an aggregate principal balance of $100,000 and accrued interest thereon of $5,041. The note had a maturity
date of March 9, 2018 and a coupon of eight percent per annum. The Company had 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 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
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 October 25, 2017, the Company
received a notice of conversion of the outstanding principal and interest into common shares effective October 25, 2017. The Company
had to increase its number of authorized shares in order to give effect to this conversion. The Company received a default waiver
from the note holder to allow it to increase its authorized shares. On March 7, 2018, in terms of a conversion notice received
on October 25, 2017, the Company, after increasing its authorized share capital, issued 1,607,608 shares of common stock at a conversion
price of $0.0744 in settlement of the principal of $100,000 plus accrued interest thereon of $5,041, thereby extinguishing the
note.
On October 25, 2017, in terms
of an agreement entered into, Strategic IR assigned a note dated August 31, 2017, it had purchased from JSJ Investments to Beverly
Pacific Holdings. The note had an aggregate principal outstanding of $176,000 together with interest thereon of $11,041. The note
had a maturity date of November 6, 2017 and a coupon of eight percent per annum. 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 October 25, 2017, the Company received a notice of conversion of the outstanding principal and interest into
common shares effective October 25, 2017. The Company had to increase its number of authorized shares in order to give effect
to this conversion. The Company received a default waiver from the note holder to allow it to increase its authorized shares.
On March 7, 2018, in terms of a conversion notice received on October 25, 2017, the Company, after increasing its authorized share
capital, issued 2,513,321 shares of common stock at a conversion price of $0.0744 in settlement of the principal of $176,000 plus
accrued interest thereon of $11,041, thereby extinguishing the note.
QPAGOS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
17
|
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 rental payment, including maintenance, of $3,377 per month, 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 $1,766. In addition, Qpagos leases
warehouse space on a month-to-month basis for $1,136 per month.
The future minimum lease installments
under the office facility lease agreement as of December 31, 2018 are $40,524 for 2019, subject to exchange rate changes.
The Company has various short-term convertible notes with maturities ranging from April 30, 2019 to December
26, 2019, with a principal balance outstanding of $2,271,700 and interest as of December 31, 2018 amounting to $147,664. Should
these notes not convert prior to maturity date, the Company will need to source funds to repay the principal and interest outstanding
at maturity date.
The Company also has various
short-term loans payable with maturities ranging from on-demand to February 10, 2020, with a principal balance outstanding of $322,787
and interest thereon as of December 31, 2018 of $47,206. The Company will need to raise funds to repay these notes prior to maturity.
Future commitments are summarized
as follows:
|
|
Amount
|
|
Within 1 year
|
|
$
|
2,459,888
|
|
One to two years
|
|
|
369,993
|
|
|
|
$
|
2,829,881
|
|
On January 16, 2019 the Company
received a conversion notice from Crown Bridge Partners LLC, converting $8,085, consisting of $7,585 of principal and $500 of fees
on a convertible note issued on February 27, 2018, into 490,000 shares of common stock at a conversion price of $0.0165 per share.
The company made a loss on conversion of $13,965.
On January 17, 2019, the Company
received a conversion notice from Labrys fund, LP, converting $12,585, consisting of $11,961 of principal and $625 of interest
on a convertible note issued on June 22, 2018 into 570,000 shares of common stock at a conversion price of $0.02208 per share.
The company made a loss on conversion of $13,064.
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 has a maturity date of January 23,
2020. 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 January 25, 2019, the Company
received a conversion notice from Labrys fund, LP, converting $13,748, consisting of $13,542 of principal and $206 of interest
on a convertible note issued on June 22, 2018, into 700,000 shares of common stock at a conversion price of $0.0196398 per share.
The company made a loss on conversion of $10,052.
On January 28, 2019, the Company
received a conversion notice from JSJ Investments, converting $25,000 of principal on a convertible note issued on July 26, 2018,
into 1,459,427 shares of common stock at a conversion price of $0.01713 per share. The company made a loss on conversion of $18,783.
On January 30, 2019, the Company
received a conversion notice from Labrys fund, LP, converting $19,992, consisting of $19,888 of principal and $114 of interest
on a convertible note issued on June 22, 2018, into 1,176,000 shares of common stock at a conversion price of $0.0169998 per share.
The company made a loss on conversion of $19,992.
On February 4, 2019, the Company
received a conversion notice from Labrys fund, LP, converting $26,440, consisting of $26,347 of principal and $92 of interest on
a convertible note issued on June 22, 2018, into 2,000,000 shares of common stock at a conversion price of $0.0132198 per share.
The company made a loss on conversion of $31,560.
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
February 6, 2019, the Company received a conversion notice from Crown Bridge Partners LLC, converting $11,900, consisting of $11,400
of principal and $500 of fees on a convertible note issued on May 14, 2018 into 1,000,000 shares of common stock at a conversion
price of $0.0119 per share. The company made a loss on conversion of $20,100.
On February 7, 2019, the Company
received a conversion notice from Labrys fund, LP, converting $39,659, consisting of $39,621 of principal and $38 of interest on
a convertible note issued on June 22, 2018 into 3,000,000 shares of common stock at a conversion price of $0.0132198 per share.
The company made a loss on conversion of $59,341.
QPAGOS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
On February 8, 2019, the Company
received a conversion notice from JSJ Investments, converting $45,000 of principal on a convertible note issued on July 26, 2018,
into 3,008,423 shares of common stock at a conversion price of $0.015 per share. The company made a loss on conversion of $45,253.
On
February 12, 2019, the Company received a conversion notice from Crown Bridge Partners LLC, converting $10,595, consisting of
$8,515 of principal, $1,580 of interest and $500 of fees on a convertible note issued on May 14, 2018 into 890,300 shares of common
stock at a conversion price of $0.0119 per share. The company made a loss on conversion of $15,224.
On
February 13, 2019, the Company received a conversion notice from Labrys fund, LP, converting $18,292, consisting of $18,268 of
principal and $24 of interest on a convertible note issued on June 22, 2018, into 1,524,334 shares of common stock at a conversion
price of $0.012 per share. The company made a loss on conversion of $25,914.
On
February 19, 2019, the Company received a conversion notice from GS Capital, converting $16,996, consisting of $16,000 of principal
and $996 of interest on a convertible note issued on May 11, 2018, into 1,038,364 shares of common stock at a conversion price
of $0.0164 per share. The company made a loss on conversion of $10,002.
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
March 11, 2019, the Company received a conversion notice from JSJ Investments, converting $34,533, consisting of $30,000 of principal
and $4,533 of interest on a convertible note issued on July 26, 2018, into 3,836,955 shares of common stock at a conversion price
of $0.009 per share. The company made a loss on conversion of $42,207.
On
March 15, 2019, the Company received a conversion notice from Crown Bridge Partners LLC, converting $10,200, consisting of $9,700
of principal, and $500 of fees on a convertible note issued on February 27, 2018 into 1,700,000 shares of common stock at a conversion
price of $0.006 per share. The company made a loss on conversion of $23,800.
On
March 20, 2019, the Company received a conversion notice from GS Capital, converting $19,235, consisting of $18,000 of principal
and $1,235 of interest on a convertible note issued on May 11, 2018, into 1,982,361 shares of common stock at a conversion price
of $0.009703 per share. The company made a loss on conversion of $16,448.
On March 29, 2019, the Company
issued a Convertible Promissory Note in the aggregate principal amount of $75,000 to JSJ Investments, Inc. The note has 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.
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.