NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
|
1
|
ORGANIZATION AND DESCRIPTION OF BUSINESS
|
On May 12, 2016, Asiya Pearls, Inc.,
a Nevada corporation (the “Asiya”), 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 the Asiya (“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 Asiya’s common stock, par value $0.0001 per share (the
“Common Stock”). Additionally, pursuant to the Merger Agreement, upon consummation of the Merger, Asiya 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 Asiya stockholder of 5,000,000 shares of Common Stock agreed to return to Asiya 4,975,000 shares of Common
Stock held by such holder to Asiya and the then-current Asiya stockholder retained an aggregate of 25,000 shares of Common Stock
and the other stockholders of Asiya retained 5,000,000 shares of Common Stock. Therefore, immediately following the Merger, Qpagos
Corporation’s former stockholders held 49,929,000 shares of Asiya common stock which represented approximately 91% of the
Company Common Stock outstanding.
The Merger is being treated as a
reverse acquisition of Asiya, a public shell company, for financial accounting and reporting purposes. As such, Qpagos Corporation
is treated as the acquirer for accounting and financial reporting purposes while Asiya is treated as the acquired entity for accounting
and financial reporting purposes. Further, as a result, the historical financial statements that will be reflected in the Company’s
future financial statements filed with the United States Securities and Exchange Commission (“SEC”) will be those of
Qpagos Corporation, and the Company’s assets, liabilities and results of operations will be consolidated with the assets,
liabilities and results of operations of Qpagos Corporation.
Qpagos Corporation was incorporated
on May 1, 2015 under the laws of Delaware under the name Qpagos Corporation as the holding company for two wholly owned operating
subsidiaries, Qpagos, S.A.P.I. de C.V. and Redpag Electrónicos S.A.P.I. de C.V. Each of these entities were incorporated
in November 2013 in Mexico.
Qpagos, S.A.P.I. de C.V. was
formed to process payment transactions for service providers it contracts with, and Redpag Electrónicos S.A.P.I. de C.V.
was formed to deploy and operate kiosks as a distributor.
On August 31, 2015, QPAGOS
Corporation entered into various agreements with the shareholders of Qpagos and Redpag to give effect to a reverse merger transaction
(the "Reverse Merger''). Pursuant to the Reverse Merger, the majority of the shareholders of Qpagos and Redpag effectively
received shares in QPAGOS, through various consulting and management agreements entered into with QPAGOS and sold an effective
99.996% and 99.990% of the outstanding shares on Qpagos and Redpag, respectively to QPAGOS. The series of transactions closed effective
August 31, 2015. Upon the close of the Reverse Merger, QPAGOS Corporation became the parent of Qpagos and Redpag and assumed the
operations of these two companies as its sole business. The transactions contemplated by the Reverse Merger were intended to be
a "tax-free" transaction pursuant to the Internal Revenue Code.
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. As a result of the change in fiscal year, the Company
is filing this Transition Report on Form 10-Q covering the transition period from December 31, 2015 to March 31, 2016.
|
b)
|
Description of the business
|
QPAGOS, through its indirect
subsidiaries Qpagos, S.A.P.I. de C.V. and Redpag Electrónicos S.A.P.I. de C.V., provides physical and virtual payment services
to the Mexican market. The Company provides an integrated network of kiosks, terminals and payment channels that enable consumers
in Mexico to deposit cash, convert it into a digital form and remit the funds to any merchant in our network quickly and securely.
The Company helps consumers and merchants connect more efficiently in markets and consumer segments, such as Mexico, that are largely
cash-based and lack convenient alternatives for consumers to pay for goods and services in physical, online and mobile environments.
For example, 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.
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
|
2
|
ACCOUNTING POLICIES AND ESTIMATES
|
The accompanying unaudited condensed
financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”)
for interim financial information with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, these unaudited
condensed financial statements do not include all of the information and disclosures required by U.S. GAAP for complete financial
statements. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments (consisting
only of normal recurring adjustments), which we consider necessary, for a fair presentation of those financial statements. The
results of operations and cash flows for the three months ended March 31, 2016 may not necessarily be indicative of results that
may be expected for any succeeding quarter or for the entire fiscal year. The information contained in this Transition Report on
Form 10-Q should be read in conjunction with our audited financial statements included in Form 8-K as filed with the Securities
and Exchange Commission (the “SEC”) on May 12, 2016.
All amounts referred to in the notes
to the financial statements are in United States Dollars ($) unless stated otherwise.
|
b)
|
Principles of Consolidation
|
The consolidated financial statements
include the financial statements of the Company and its wholly owned subsidiary and its indirect subsidiaries. All significant
inter-company accounts and transactions have been eliminated in the consolidated financial statements. The entities included in
these consolidated financial statements are as follows:
QPAGOS – Parent Company
QPAGOS Corporation – 100%
owned
Qpagos, S.A.P.I de C.V., a Mexican
entity (99.996% owned)
Redpag Electrónicos, S.A.P.I.
de C.V., a Mexican entity (99.990% owned)
The financial statements of the
Company’s Mexican operations are measured using local currencies as their functional currencies.
The Company translates the assets
and liabilities of its Mexican subsidiaries at the exchange rates in effect at year end and the results of operations at the average
rate throughout the year. The translation adjustments are recorded directly as a separate component of stockholders’ equity,
while transaction gains (losses) are included in net income (loss). All sales to customers are in Mexico.
The preparation of 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, those related to revenue recognition and the allowance for doubtful accounts.
Making estimates requires management
to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation
or set of circumstances that existed at the date of the consolidated financial statements, which management considered in formulating
its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ
significantly from our estimates.
Certain conditions may exist as
of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when
one or more future events occur or fail to occur. The Company’s management assesses such contingent liabilities, and such
assessment inherently involves an exercise of judgment.
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
|
2
|
ACCOUNTING POLICIES AND ESTIMATES (continued
|
|
e)
|
Contingencies (continued)
|
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 financial statements. If the assessment indicates that a potential
material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of
the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed.
Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case
the guarantee would be disclosed.
|
f)
|
Fair
Value of Financial Instruments
|
The Company adopted the guidance
of Accounting Standards Codification (“ASC”) 820 for fair value measurements which clarifies the definition of fair
value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring
fair value as follows:
Level 1-Inputs are unadjusted quoted
prices in active markets for identical assets or liabilities available at the measurement date.
Level 2-Inputs are unadjusted quoted
prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets
that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable
market data.
Level 3-Inputs are unobservable
inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing
the asset or liability based on the best available information.
The carrying amounts reported in
the balance sheets for cash, accounts receivable, other current assets, other assets, accounts payable, accrued liabilities, and
notes payable, approximate fair value due to the relatively short period to maturity for these instruments. The Company did not
identify any other assets or liabilities that are required to be presented on the balance sheets at fair value in accordance with
the accounting guidance.
ASC 825-10 “
Financial
Instruments
” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value
(fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new
election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should
be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding
instruments.
|
g)
|
Risks and Uncertainties
|
The Company's operations will be
subject to significant risk and uncertainties including financial, operational, regulatory and other risks associated, including
the potential risk of business failure. The recent global economic crisis has caused a general tightening in the credit markets,
lower levels of liquidity, increases in the rates of default and bankruptcy, and extreme volatility in credit, equity and fixed
income markets. These conditions not only limit the Company’s access to capital, but also make it difficult for its customers,
vendors and the Company to accurately forecast and plan future business activities.
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 those 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.
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
|
2
|
ACCOUNTING POLICIES AND ESTIMATES (continued)
|
|
h)
|
Recent Accounting Pronouncements
|
In January 2016
, the Financial
Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) No. 2016 – 01
“Recognition and Measurement
of Financial Assets and Financial Liabilities “
intended to improve the recognition and measurement of financial instruments.
The ASU affects public and private companies, not-for-profit organizations, and employee benefit plans that hold financial assets
or owe financial liabilities. The new guidance makes targeted improvements to existing GAAP by: Requiring equity investments (except
those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured
at fair value with changes in fair value recognized in net income; Requiring public business entities to use the exit price notion
when measuring the fair value of financial instruments for disclosure purposes; Requiring separate presentation of financial assets
and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on
the balance sheet or the accompanying notes to the financial statements; Eliminating the requirement to disclose the fair value
of financial instruments measured at amortized cost for organizations that are not public business entities; Eliminating the requirement
for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required
to be disclosed for financial instruments measured at amortized cost on the balance sheet, and; Requiring a reporting organization
to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting
from a change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected
to measure the liability at fair value in accordance with the fair value option for financial instruments. The ASU on recognition
and measurement will take effect for public companies for fiscal years beginning after December 15, 2017, including interim periods
within those fiscal years. For private companies, not-for-profit organizations, and employee benefit plans, the standard becomes
effective for fiscal years beginning after December 15, 2018, and for interim periods within fiscal years beginning after December
15, 2019. The ASU permits early adoption of the own credit provision (referenced above). Additionally, it permits early adoption
of the provision that exempts private companies and not-for-profit organizations from having to disclose fair value information
about financial instruments measured at amortized cost. We are currently evaluating the impact of adoption of ASU N. 2016-01 on
our financial statements.
In February 2016
, the Financial
Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) No. 2016 – 02,
“Leases”
intended to improve financial reporting about leasing transactions. The ASU affects all companies and other organizations that
lease assets such as real estate, office equipment and manufacturing equipment. The ASU will require organizations that lease assets—referred
to as “lessees”—to recognize on the balance sheet the assets and liabilities for the rights and obligations created
by those leases. Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms
of more than 12 months. Consistent with current Generally Accepted Accounting Principles (GAAP), the recognition, measurement,
and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance
or operating lease. However, unlike current GAAP—which requires only capital leases to be recognized on the balance sheet—the
new ASU will require both types of leases to be recognized on the balance sheet. The ASU also will require disclosures to help
investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from
leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts
recorded in the financial statements. The accounting by organizations that own the assets leased by the lessee—also known
as lessor accounting—will remain largely unchanged from current GAAP. However, the ASU contains some targeted improvements
that are intended to align, where necessary, lessor accounting with the lessee accounting model and with the updated revenue recognition
guidance issued in 2014. The ASU on leases will take effect for public companies for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2018. For all other organizations, the ASU on leases will take effect for fiscal years
beginning after December 15, 2019, and for interim periods within fiscal years beginning after December 15, 2020. We are currently
evaluating the impact of adoption of ASU N. 2016-02 on our financial statements.
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
|
2
|
ACCOUNTING POLICIES AND ESTIMATES (continued)
|
|
h)
|
Recent Accounting Pronouncements (continued)
|
In March 2016
, the Financial
Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) No. 2016 – 09
“Improvements to Employee
Share-Based Payment Accounting”
which is intended to improve the accounting for employee share-based payments. The ASU
affects all organizations that issue share-based payment awards to their employees. The ASU, Compensation—Stock Compensation
(Topic 718): Improvements to Employee Share-Based Payment Accounting, simplifies several aspects of the accounting for share-based
payment award transactions, including; the income tax consequences, classification of awards as either equity or liabilities, and
the classification on the statement of cash flows. The ASU simplifies two areas specific to private companies, with regards to
the expected term and intrinsic value measurements. The ASU simplifies the following areas to private and public companies; (a)
tax benefits and tax deficiencies with regards to the differences between book and tax deductions, (b) changes in the excess tax
benefits classification in the statement of cash flows, (c) make an entity wide accounting policy election for accrual of vested
awards verses individual awards, (d) changes in the amount qualifying as an equity award classification subject to statutory tax
withholdings, (e) clarification in the classification of shares withheld for statutory tax withholdings on the statement of cash
flows. For public companies, the amendments in this ASU are effective for annual periods beginning after December 15, 2016, and
interim periods within those annual periods. For private companies, the amendments are effective for annual periods beginning after
December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted for
any organization in any interim or annual period. We are currently evaluating the impact of adoption of ASU N. 2016-09 on our financial
statements.
In April 2016
, the Financial
Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) No. 2016 – 10
“Revenue from Contract
with Customers (Topic 606): identifying Performance Obligations and Licensing “
. The amendments in this Update do not
change the core principle of the guidance in Topic 606. Rather, the amendments in this Update clarify the following two aspects
of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles
for those areas. Topic 606 includes implementation guidance on (a) contracts with customers to transfer goods and services in exchange
for consideration and (b) determining whether an entity’s promise to grant a license provides a customer with either a right
to use the entity’s intellectual property (which is satisfied at a point in time) or a right to access the entity’s
intellectual property (which is satisfied over time). The amendments in this Update are intended render more detailed implementation
guidance with the expectation to reduce the degree of judgement necessary to comply with Topic 606. The amendments in this Update
affect the guidance in Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606), which is not yet
effective. The effective date and transition requirements for the amendments in this Update are the same as the effective date
and transition requirements in Topic 606 (and any other Topic amended by Update 2014-09). Accounting Standards Update 2015-14,
Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, defers the effective date of Update 2014-09
by one year. We are currently evaluating the impact of adoption of ASU N. 2016-10 on our financial statements.
Any new accounting standards, not
disclosed above, that have been issued or proposed by FASB that do not require adoption until a future date are not expected to
have a material impact on the financial statements upon adoption.
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.
|
j)
|
Cash and Cash Equivalents
|
The Company considers all
highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. At March
31, 2016 and December 31, 2015, 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, 2015, the Company had cash balances in the United States,
which exceeded the federally insured limits by $531,238. At March 31, 2016, cash balances in the United States did not exceed the
federally insured limit.
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
|
2
|
ACCOUNTING POLICIES AND ESTIMATES (continued)
|
|
k)
|
Cost Method Investments
|
Investee companies not accounted
for under the consolidation or the equity method are accounted for under the cost method of accounting. Under this method, The
Company’s share of earnings or losses of such investee companies is not included in the condensed consolidated balance sheet
or statement of comprehensive loss. However, impairment charges are recognized in the condensed consolidated statement of comprehensive
loss. If circumstances suggest that the value of the investee company has subsequently recovered, such recovery is not recorded.
There is no impairment of investment at March 31, 2016.
|
l)
|
Accounts Receivable and Allowance for Doubtful Accounts
|
Accounts receivable are reported
at realizable value, net of allowances for doubtful accounts, which is estimated and recorded in the period the related revenue
is recorded. The Company has a standardized approach to estimate and review the collectability of its receivables based on a number
of factors, including the period they have been outstanding. Historical collection and payer reimbursement experience is an integral
part of the estimation process related to allowances for doubtful accounts. In addition, the Company regularly assesses the state
of its billing operations in order to identify issues, which may impact the collectability of these receivables or reserve estimates.
Revisions to the allowance for doubtful accounts estimates are recorded as an adjustment to bad debt expense. Receivables deemed
uncollectible are charged against the allowance for doubtful accounts at the time such receivables are written-off. Recoveries
of receivables previously written-off are recorded as credits to the allowance for doubtful accounts. There were no recoveries
during the three months ended March 31, 2016 and 2015.
The Company primarily values inventories
at the lower of cost or market applied on a first-in, first-out basis. The Company identifies and writes down its excess and obsolete
inventories to net realizable value based on usage forecasts, order volume and inventory aging. With the development of new products,
the Company also rationalizes its product offerings and will write-down discontinued product to the lower of cost or net realizable
value.
Plant and equipment is stated at
cost, less accumulated depreciation. Plant and equipment with costs greater than $250 are capitalized and depreciated. Depreciation
is computed using the straight-line method over the estimated useful lives of the assets. The estimated useful lives of the assets
are as follows:
Description
|
Estimated Useful Life
|
Computer equipment
|
3 years
|
Leasehold improvements
|
Lesser of estimated useful life or life of lease
|
Office equipment
|
10 years
|
The cost of repairs and maintenance
is expensed as incurred. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts,
and any resulting gains or losses are included in income in the year of disposition.
All of 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 comprehensive loss 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.
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
|
2
|
ACCOUNTING POLICIES AND ESTIMATES (continued)
|
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)
605, Revenue Recognition (ASC 605). In general, the Company records revenue when it is realized, or realizable and earned. The
Company considers revenue to be realized, or realizable and earned when, persuasive evidence of an arrangement exists, the products
or services have been approved by the customer after delivery and/or installation acceptance or performance of services; the sales
price is fixed or determinable within the contract; and collectability is reasonably assured.
The Company has the following sources
of revenue which is recognized on the basis described below.
|
·
|
Revenue from the sale of services
.
|
Prepaid services are acquired from
providers and is sold to end-users through kiosks that the Company owns or kiosks that are owned by third parties. The Company
recognizes the revenue on the sale of these services when the end-user deposits funds into the terminal and the prepaid service
is delivered to the end-user. The revenue is recognized at the gross value, including margin, of the prepaid service to the Company,
net of any value-added tax which is collected on behalf of the Mexican Revenue Authorities.
|
·
|
Payment processing provided to end-users
|
The Company provides a secure means
for end-users to pay for certain services, such as utilities through our kiosks. The Company earns either a fixed per-transaction
fee or a fixed percentage of the service sold. The Company acts as a collection agent and recognizes the payment processing fee,
net of any value-added taxes collected on behalf of the Mexican Revenue Authorities, when the funds are deposited into the kiosk
and the customer has settled his liability or has acquired a prepaid service.
|
·
|
Revenue from the sale of kiosks.
|
The Company imports, assembles and
sell kiosks that are used to generate the revenues discussed above. Revenue is recognized on the full value of the kiosks sold,
net of any valued added taxation collected on behalf of the Mexican Revenue Authorities, when the customer takes delivery of the
kiosk and all the risks and rewards of ownership are passed to the customer.
The Company does not enter into
any leasing of kiosks arrangements with customers and the Company does not generate any revenues from merchants who access its
terminals as yet.
|
r)
|
Share-Based Payment Arrangements
|
Generally, all forms of share-based
payments, including stock option grants, restricted stock grants and stock appreciation rights are measured at their fair value
on the awards’ grant date, based on the estimated number of awards that are ultimately expected to vest. Share-based compensation
awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair
value of the share-based payment, whichever is more readily determinable. The expense resulting from share-based payments is recorded
in operating expenses in the consolidated statement of operations.
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
|
2
|
ACCOUNTING POLICIES AND ESTIMATES (continued)
|
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 March 31, 2016 and December 31, 2015, there have been no interest or penalties
incurred on income taxes.
Basic net loss per share is computed
on the basis of the weighted average number of common shares outstanding during the period.
Diluted net loss per share is computed
on the basis of the weighted average number of common shares and common share equivalents outstanding. Dilutive securities having
an anti-dilutive effect on diluted net loss per share are excluded from the calculation (See Note 14, below).
Dilution is computed by applying
the treasury stock method for options and warrants. Under this method, options and warrants are assumed to be exercised at the
beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common shares
at the average market price during the period.
Dilution is computed by applying
the if-converted method for convertible preferred shares. Under this method, convertible preferred stock is assumed to be converted
at the beginning of the period (or at the time of issuance, if later), and preferred dividends (if any) will be added back to determine
income applicable to common stock. The shares issuable upon conversion will be added to weighted average number of common shares
outstanding. Conversion will be assumed only if it reduces earnings per share (or increases loss per share).
Any common shares issued as a result
of the issue of stock options and warrants would come from newly issued common shares from our remaining authorized shares.
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 foreign currency translation adjustments and net loss.
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
|
3
|
RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
|
Revenues, Cost of Goods Sold and
Gross Profit
The Company has restated its consolidated
financial statements as of March 31, 2016 and December 31, 2015 and for the quarters ended March 31, 2016 and 2015. As a part of
the Company’s analysis of its books and records, the Company’s management had discovered a discrepancy in the recording
of revenue in its Mexican operations that had resulted in an overstatement of revenue, a corresponding overstatement of cost of
goods sold and a net understatement of the gross profit in the Company’s financial statements.
The Company has the following sources
of revenue:
|
·
|
Revenue from the sale of services.
|
Prepaid services are acquired from
providers and is sold to end users through kiosks that the Company owns or kiosks 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 value
added tax and the full value of the service acquired as cost of goods sold.
An error in recording this revenue,
in the Company’s Mexican operations, resulted in the cost of goods sold recorded as equal to revenues recorded. The gross
profit on these revenue transactions whereby the risks and rewards of ownership had passed to end-users remained on the balance
sheet in prepayments the Company had made to its service providers. This error has been corrected by the reduction in the Company’s
cost of goods sold expenditure, with a corresponding increase in the gross profit earned and the restatement of Mexican Value Added
Taxation related to these entries.
Certain expenses directly related
to cost of goods sold were previously reflected as Other Expense have been correctly reclassified as cost of goods sold in the
restated financial statements.
|
·
|
Revenue in the form of payment processing
fees.
|
The Company
provides a secure means for end-users to pay for certain services, such as utilities through its kiosks.
This revenue
was previously recorded at gross value, the full value of the transaction was recorded as revenue and the full value of the service
provided to the Company’s end users was recognized as cost of goods sold. The value-added taxation on both the revenue and
cost of goods sold was recorded as due to and due from, the Mexican revenue authorities, respectively. The Restated financial statements
reversed the difference between the gross revenue recorded and the payment processing fee actually earned and the cost of goods
sold entries recorded were reversed. The value-added taxation recorded has been restated and the Company has brought this restatement
to the attention of the Mexican revenue authorities and are in the process of correcting its tax returns.
|
·
|
Revenue from the sale of kiosks.
|
The Company
imports and sells kiosks. to customers and distributors, who then make use of its technology to provide services to end-users whereby
prepaid services can be acquired and other transactions can be performed utilizing the convenience of its kiosks and payment gateway.
The Company recognizes the full value of the revenue on the sale of these kiosks and the full value of the cost of the kiosks sold.
These transactions were correctly recorded and no restatement was necessary.
Organization – Reverse
Merger
The reverse merger transaction and
the shares retained by the existing shareholders in Asiya Pearls, Inc. (now known as QPAGOS) were originally pushed back to the
earliest period presented, this has been restated to reflect the reverse merger transaction as of the date of the reverse merger,
May 12, 2016, whereby the shares retained by the existing shareholders of Asiya Pearls, Inc. were recorded as a share issuance
on the effective date of the reverse merger, May 12, 2016.
The balance sheet has been restated
to eliminate the effects of pushing back the reverse merger transaction to the opening balance of the earliest period presented.
The restated Consolidated Balance
Sheet as of March 31, 2016 and December 31, 2015 and the Consolidated Statements of Operations and Cash Flows for the three months
ended March 31, 2016 and 2015, are presented below:
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
|
3
|
RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (continued)
|
QPAGOS
CONDENSED CONSOLIDATED BALANCE SHEET
March 31, 2016
|
|
As
|
|
|
|
|
|
|
|
|
|
|
|
Previously
|
|
|
|
|
|
|
|
As
|
|
|
|
Reported
|
|
|
Adjustments
|
|
|
Notes
|
|
Restated
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
(Unaudited)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
252,361
|
|
|
$
|
(1,453
|
)
|
|
(D)
|
|
$
|
250,908
|
|
Accounts receivable
|
|
|
398,074
|
|
|
|
|
|
|
|
|
|
398,074
|
|
Inventory
|
|
|
553,259
|
|
|
|
|
|
|
|
|
|
553,259
|
|
Recoverable IVA taxes and credits
|
|
|
501,549
|
|
|
|
26,048
|
|
|
(A), (B)
|
|
|
527,597
|
|
Other current assets
|
|
|
20,830
|
|
|
|
48,592
|
|
|
(B)
|
|
|
69,422
|
|
Total Current Assets
|
|
|
1,726,073
|
|
|
|
73,187
|
|
|
|
|
|
1,799,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant and equipment, net
|
|
|
62,395
|
|
|
|
|
|
|
|
|
|
62,395
|
|
Intangibles, net
|
|
|
200,667
|
|
|
|
|
|
|
|
|
|
200,667
|
|
Investment
|
|
|
3,000
|
|
|
|
|
|
|
|
|
|
3,000
|
|
Other assets
|
|
|
11,780
|
|
|
|
|
|
|
|
|
|
11,780
|
|
Total Non-Current Assets
|
|
|
277,842
|
|
|
|
-
|
|
|
|
|
|
277,842
|
|
Total Assets
|
|
$
|
2,003,915
|
|
|
$
|
73,187
|
|
|
|
|
$
|
2,077,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
80,082
|
|
|
$
|
(3,000
|
)
|
|
(D)
|
|
$
|
77,082
|
|
Notes payable
|
|
|
106,312
|
|
|
|
|
|
|
|
|
|
106,312
|
|
IVA and other taxes payable
|
|
|
162,592
|
|
|
|
32,755
|
|
|
(A), (B)
|
|
|
195,347
|
|
Advances from customers
|
|
|
5,859
|
|
|
|
|
|
|
|
|
|
5,859
|
|
Total Current Liabilities
|
|
|
354,845
|
|
|
|
29,755
|
|
|
|
|
|
384,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
354,845
|
|
|
|
29,755
|
|
|
|
|
|
384,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.0001 par value; 100,000,000 shares authorized, 49,929,000 shares issued and outstanding as of March 31, 2016.
|
|
|
5,496
|
|
|
|
(503
|
)
|
|
(D)
|
|
|
4,993
|
|
Additional paid-in-capital
|
|
|
7,873,571
|
|
|
|
2,050
|
|
|
(D)
|
|
|
7,875,621
|
|
Accumulated deficit
|
|
|
(6,694,959
|
)
|
|
|
43,859
|
|
|
|
|
|
(6,651,100
|
)
|
Accumulated other comprehensive income
|
|
|
464,962
|
|
|
|
(1,974
|
)
|
|
(C)
|
|
|
462,988
|
|
Total stockholder's equity - controlling interest
|
|
|
1,649,070
|
|
|
|
43,432
|
|
|
|
|
|
1,692,502
|
|
Non-controlling interest
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
-
|
|
Total Stockholders' Equity
|
|
|
1,649,070
|
|
|
|
43,432
|
|
|
|
|
|
1,692,502
|
|
Total Liabilities and Stockholders' Equity
|
|
$
|
2,003,915
|
|
|
$
|
73,187
|
|
|
|
|
$
|
2,077,102
|
|
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
|
3
|
RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (continued)
|
QPAGOS
CONSOLIDATED BALANCE SHEET
December 31, 2015
|
|
As
|
|
|
|
|
|
|
|
|
|
|
|
Previously
|
|
|
|
|
|
|
|
As
|
|
|
|
Reported
|
|
|
Adjustments
|
|
|
Notes
|
|
Restated
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
833,612
|
|
|
|
(1,453
|
)
|
|
(D)
|
|
$
|
832,159
|
|
Accounts receivable
|
|
|
242,075
|
|
|
|
|
|
|
|
|
|
242,075
|
|
Inventory
|
|
|
668,567
|
|
|
|
|
|
|
|
|
|
668,567
|
|
Recoverable IVA taxes and credits
|
|
|
412,143
|
|
|
|
5,754
|
|
|
(A), (B)
|
|
|
417,897
|
|
Other current assets
|
|
|
20,509
|
|
|
|
31,505
|
|
|
(B)
|
|
|
52,014
|
|
Total Current Assets
|
|
|
2,176,906
|
|
|
|
35,806
|
|
|
|
|
|
2,212,712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant and equipment, net
|
|
|
70,537
|
|
|
|
|
|
|
|
|
|
70,537
|
|
Intangibles, net
|
|
|
211,417
|
|
|
|
|
|
|
|
|
|
211,417
|
|
Other assets
|
|
|
11,712
|
|
|
|
|
|
|
|
|
|
11,712
|
|
Total Non-Current Assets
|
|
|
293,666
|
|
|
|
-
|
|
|
|
|
|
293,666
|
|
Total Assets
|
|
$
|
2,470,572
|
|
|
$
|
35,806
|
|
|
|
|
$
|
2,506,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
41,372
|
|
|
|
(3,000
|
)
|
|
(D)
|
|
$
|
38,372
|
|
Notes payable
|
|
|
103,320
|
|
|
|
|
|
|
|
|
|
103,320
|
|
IVA and other taxes payable
|
|
|
181,946
|
|
|
|
10,098
|
|
|
(A), (B)
|
|
|
192,044
|
|
Advances from customers
|
|
|
1,986
|
|
|
|
|
|
|
|
|
|
1,986
|
|
Total Current Liabilities
|
|
|
328,624
|
|
|
|
7,098
|
|
|
|
|
|
335,722
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
328,624
|
|
|
|
7,098
|
|
|
|
|
|
335,722
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value; 100,000,000 shares authorized, 44,784,000 shares issued and outstanding as of December 31, 2015.
|
|
|
4,981
|
|
|
|
(503
|
)
|
|
(D)
|
|
|
4,478
|
|
Additional paid-in-capital
|
|
|
5,733,811
|
|
|
|
2,050
|
|
|
(D)
|
|
|
5,735,861
|
|
Accumulated deficit
|
|
|
(4,019,428
|
)
|
|
|
29,739
|
|
|
|
|
|
(3,989,689
|
)
|
Accumulated other comprehensive income
|
|
|
422,584
|
|
|
|
(2,578
|
)
|
|
(C)
|
|
|
420,006
|
|
Total stockholder's equity - controlling interest
|
|
|
2,141,948
|
|
|
|
28,708
|
|
|
|
|
|
2,170,656
|
|
Non-controlling interest
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
-
|
|
Total Stockholders' Equity
|
|
|
2,141,948
|
|
|
|
28,708
|
|
|
|
|
|
2,170,656
|
|
Total Liabilities and Stockholders' Equity
|
|
$
|
2,470,572
|
|
|
$
|
35,806
|
|
|
|
|
$
|
2,506,378
|
|
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
|
3
|
RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (continued)
|
QPAGOS
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF COMPREHENSIVE LOSS
Three Months Ended March 31, 2016
|
|
As
|
|
|
|
|
|
|
|
|
|
|
|
Previously
|
|
|
|
|
|
|
|
As
|
|
|
|
Reported
|
|
|
Adjustments
|
|
|
Notes
|
|
Restated
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of services
|
|
$
|
755,541
|
|
|
$
|
(257,556
|
)
|
|
(A)
|
|
$
|
497,985
|
|
Kiosk sales
|
|
|
130,972
|
|
|
|
|
|
|
|
|
|
130,972
|
|
Payment processing fees
|
|
|
977
|
|
|
|
|
|
|
|
|
|
977
|
|
|
|
|
887,490
|
|
|
|
(257,556
|
)
|
|
|
|
|
629,934
|
|
Cost of Goods Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of services
|
|
|
755,561
|
|
|
|
(271,676
|
)
|
|
(A), (B)
|
|
|
483,885
|
|
Kiosk sales
|
|
|
113,357
|
|
|
|
|
|
|
|
|
|
113,357
|
|
Other
|
|
|
5,250
|
|
|
|
6,796
|
|
|
(E)
|
|
|
12,046
|
|
|
|
|
874,168
|
|
|
|
(264,880
|
)
|
|
|
|
|
609,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
13,322
|
|
|
|
7,324
|
|
|
(B)
|
|
|
20,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
2,693,703
|
|
|
|
|
|
|
|
|
|
2,693,703
|
|
Depreciation and amortization
|
|
|
19,345
|
|
|
|
|
|
|
|
|
|
19,345
|
|
Total Expense
|
|
|
2,713,048
|
|
|
|
-
|
|
|
|
|
|
2,713,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations
|
|
|
(2,699,726
|
)
|
|
|
7,324
|
|
|
|
|
|
(2,692,402
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (expense) income
|
|
|
(3,797
|
)
|
|
|
6,796
|
|
|
(E)
|
|
|
2,999
|
|
Interest expense, net
|
|
|
(2,992
|
)
|
|
|
|
|
|
|
|
|
(2,992
|
)
|
Foreign currency gain (loss)
|
|
|
30,984
|
|
|
|
|
|
|
|
|
|
30,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before Provision for Income Taxes
|
|
|
(2,675,531
|
)
|
|
|
14,120
|
|
|
|
|
|
(2,661,411
|
)
|
Provision for Income Taxes
|
|
|
-
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
(2,675,531
|
)
|
|
|
14,120
|
|
|
|
|
|
(2,661,411
|
)
|
Net loss attributable to non-controlling interest
|
|
|
-
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss Attributable to Controlling Interest
|
|
$
|
(2,675,531
|
)
|
|
$
|
14,120
|
|
|
|
|
$
|
(2,661,411
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss Per Share - Basic and Diluted
|
|
$
|
(0.06
|
)
|
|
$
|
0.00
|
|
|
|
|
$
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Number of Shares Outstanding - Basic and Diluted
|
|
|
42,895,154
|
|
|
|
42,895,154
|
|
|
(D)
|
|
|
42,895,154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
42,378
|
|
|
|
604
|
|
|
(C)
|
|
|
42,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive loss
|
|
|
(2,633,153
|
)
|
|
|
14,724
|
|
|
|
|
|
(2,618,429
|
)
|
Comprehensive loss attributable to non-controlling interest
|
|
|
-
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Loss Attributable to Controlling Interest
|
|
$
|
(2,633,153
|
)
|
|
$
|
14,724
|
|
|
|
|
$
|
(2,618,429
|
)
|
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
|
3
|
RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
(continued)
|
QPAGOS
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF COMPREHENSIVE LOSS
Three Months Ended March 31, 2015
|
|
As
|
|
|
|
|
|
|
|
|
|
|
|
Previously
|
|
|
|
|
|
|
|
As
|
|
|
|
Reported
|
|
|
Adjustments
|
|
|
Notes
|
|
Restated
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of services
|
|
$
|
54,528
|
|
|
$
|
(19,955
|
)
|
|
(A)
|
|
$
|
34,573
|
|
Kiosk sales
|
|
|
18,770
|
|
|
|
|
|
|
|
|
|
18,770
|
|
Payment processing fees
|
|
|
2,701
|
|
|
|
|
|
|
|
|
|
2,701
|
|
|
|
|
75,999
|
|
|
|
(19,955
|
)
|
|
|
|
|
56,044
|
|
Cost of Goods Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of services
|
|
|
58,130
|
|
|
|
(22,675
|
)
|
|
(A), (B)
|
|
|
35,455
|
|
Kiosk sales
|
|
|
13,030
|
|
|
|
|
|
|
|
|
|
13,030
|
|
Other
|
|
|
-
|
|
|
|
2,121
|
|
|
(E)
|
|
|
2,121
|
|
|
|
|
71,160
|
|
|
|
(20,554
|
)
|
|
|
|
|
50,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
4,839
|
|
|
|
599
|
|
|
(B)
|
|
|
5,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
429,724
|
|
|
|
|
|
|
|
|
|
429,724
|
|
Depreciation and amortization
|
|
|
8,441
|
|
|
|
|
|
|
|
|
|
8,441
|
|
Total Expense
|
|
|
438,165
|
|
|
|
-
|
|
|
|
|
|
438,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations
|
|
|
(433,326
|
)
|
|
|
599
|
|
|
|
|
|
(432,727
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (expense) income
|
|
|
(1,651
|
)
|
|
|
2,121
|
|
|
(E)
|
|
|
470
|
|
Interest expense, net
|
|
|
-
|
|
|
|
|
|
|
|
|
|
-
|
|
Foreign currency gain (loss)
|
|
|
(40,305
|
)
|
|
|
|
|
|
|
|
|
(40,305
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before Provision for Income Taxes
|
|
|
(475,282
|
)
|
|
|
2,720
|
|
|
|
|
|
(472,562
|
)
|
Provision for Income Taxes
|
|
|
-
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
(475,282
|
)
|
|
|
2,720
|
|
|
|
|
|
(472,562
|
)
|
Net loss attributable to non-controlling interest
|
|
|
-
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss Attributable to Controlling Interest
|
|
$
|
(475,282
|
)
|
|
$
|
2,720
|
|
|
|
|
$
|
(472,562
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss Per Share - Basic and Diluted
|
|
$
|
(0.10
|
)
|
|
$
|
0.00
|
|
|
|
|
$
|
(0.10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Number of Shares Outstanding - Basic and Diluted
|
|
|
4,918,628
|
|
|
|
4,918,628
|
|
|
(D)
|
|
|
4,918,628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
56,380
|
|
|
|
2,636
|
|
|
|
|
|
59,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive loss
|
|
|
(418,902
|
)
|
|
|
5,356
|
|
|
|
|
|
(413,546
|
)
|
Comprehensive loss attributable to non-controlling interest
|
|
|
-
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Loss Attributable to Controlling Interest
|
|
$
|
(418,902
|
)
|
|
$
|
5,356
|
|
|
|
|
$
|
(413,546
|
)
|
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
|
3
|
RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
(continued)
|
QPAGOS
CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended 31, 2016
|
|
As
|
|
|
|
|
|
|
|
|
|
|
|
Previously
|
|
|
|
|
|
|
|
As
|
|
|
|
Reported
|
|
|
Adjustments
|
|
|
Notes
|
|
Restated
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to the company
|
|
$
|
(2,675,531
|
)
|
|
$
|
14,120
|
|
|
(B)
|
|
$
|
(2,661,411
|
)
|
Less: loss attributable to non-controlling interest
|
|
|
-
|
|
|
|
|
|
|
|
|
|
-
|
|
Net loss
|
|
|
(2,675,531
|
)
|
|
|
14,120
|
|
|
|
|
|
(2,661,411
|
)
|
Adjustment to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense
|
|
|
8,415
|
|
|
|
|
|
|
|
|
|
8,415
|
|
Amortization expense
|
|
|
10,930
|
|
|
|
|
|
|
|
|
|
10,930
|
|
Equity based compensation charge
|
|
|
108,000
|
|
|
|
|
|
|
|
|
|
108,000
|
|
Shares issued for services
|
|
|
2,032,275
|
|
|
|
|
|
|
|
|
|
2,032,275
|
|
Non- cash investment in affiliates
|
|
|
(3,000
|
)
|
|
|
|
|
|
|
|
|
(3,000
|
)
|
Changes in Assets and Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(155,999
|
)
|
|
|
|
|
|
|
|
|
(155,999
|
)
|
Inventory
|
|
|
115,308
|
|
|
|
|
|
|
|
|
|
115,308
|
|
Recoverable IVA taxes and credits
|
|
|
(89,406
|
)
|
|
|
(20,294
|
)
|
|
(A), (B)
|
|
|
(109,700
|
)
|
Other current assets
|
|
|
(321
|
)
|
|
|
(17,087
|
)
|
|
(B)
|
|
|
(17,408
|
)
|
Other assets
|
|
|
(68
|
)
|
|
|
|
|
|
|
|
|
(68
|
)
|
Accounts payable and accrued expenses
|
|
|
38,711
|
|
|
|
|
|
|
|
|
|
38,711
|
|
IVA and other taxes payable
|
|
|
(19,354
|
)
|
|
|
22,657
|
|
|
(A), (B)
|
|
|
3,303
|
|
Advances from customers
|
|
|
3,873
|
|
|
|
|
|
|
|
|
|
3,873
|
|
Interest accruals
|
|
|
2,992
|
|
|
|
|
|
|
|
|
|
2,992
|
|
CASH USED IN OPERATING ACTIVITIES
|
|
|
(623,174
|
)
|
|
|
(604
|
)
|
|
|
|
|
(623,779
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(454
|
)
|
|
|
|
|
|
|
|
|
(454
|
)
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
|
(454
|
)
|
|
|
-
|
|
|
|
|
|
(454
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from loans payable
|
|
|
-
|
|
|
|
|
|
|
|
|
|
-
|
|
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
42,378
|
|
|
|
604
|
|
|
(C)
|
|
|
42,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET DECREASE IN CASH
|
|
|
(581,251
|
)
|
|
|
|
|
|
|
|
|
(581,251
|
)
|
CASH AT BEGINNING OF PERIOD
|
|
|
833,612
|
|
|
|
(1,453
|
)
|
|
(D)
|
|
|
832,159
|
|
CASH AT END OF PERIOD
|
|
$
|
252,361
|
|
|
$
|
(1,453
|
)
|
|
|
|
$
|
250,908
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH PAID FOR INTEREST AND TAXES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for income taxes
|
|
$
|
-
|
|
|
|
|
|
|
|
|
$
|
-
|
|
Cash paid for interest
|
|
$
|
-
|
|
|
|
|
|
|
|
|
$
|
-
|
|
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
|
3
|
RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (continued)
|
QPAGOS
CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended 31, 2015
|
|
As
|
|
|
|
|
|
|
|
|
|
|
|
Previously
|
|
|
|
|
|
|
|
As
|
|
|
|
Reported
|
|
|
Adjustments
|
|
|
Notes
|
|
Restated
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to the company
|
|
$
|
(475,282
|
)
|
|
$
|
2,720
|
|
|
(B)
|
|
$
|
(472,562
|
)
|
Less: loss attributable to non-controlling interest
|
|
|
-
|
|
|
|
|
|
|
|
|
|
-
|
|
Net loss
|
|
|
(475,282
|
)
|
|
|
2,720
|
|
|
|
|
|
(472,562
|
)
|
Adjustment to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense
|
|
|
8,311
|
|
|
|
|
|
|
|
|
|
8,311
|
|
Amortization expense
|
|
|
130
|
|
|
|
|
|
|
|
|
|
130
|
|
Equity based compensation charge
|
|
|
-
|
|
|
|
|
|
|
|
|
|
-
|
|
Shares issued for services
|
|
|
-
|
|
|
|
|
|
|
|
|
|
-
|
|
Non- cash investment in affiliates
|
|
|
-
|
|
|
|
|
|
|
|
|
|
-
|
|
Changes in Assets and Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(9,076
|
)
|
|
|
|
|
|
|
|
|
(9,076
|
)
|
Inventory
|
|
|
59,151
|
|
|
|
|
|
|
|
|
|
59,151
|
|
Recoverable IVA taxes and credits
|
|
|
(95,454
|
)
|
|
|
1,705
|
|
|
(A), (B)
|
|
|
(93,749
|
)
|
Other current assets
|
|
|
45,073
|
|
|
|
(3,129
|
)
|
|
(B)
|
|
|
41,944
|
|
Other assets
|
|
|
(4,913
|
)
|
|
|
|
|
|
|
|
|
(4,913
|
)
|
Accounts payable and accrued expenses
|
|
|
(38,888
|
)
|
|
|
|
|
|
|
|
|
(38,888
|
)
|
IVA and other taxes payable
|
|
|
11,924
|
|
|
|
(1,274
|
)
|
|
(A), (B)
|
|
|
10,650
|
|
Advances from customers
|
|
|
2,972
|
|
|
|
|
|
|
|
|
|
2,972
|
|
Interest accruals
|
|
|
-
|
|
|
|
|
|
|
|
|
|
-
|
|
CASH USED IN OPERATING ACTIVITIES
|
|
|
(496,052
|
)
|
|
|
22
|
|
|
|
|
|
(496,030
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(404
|
)
|
|
|
|
|
|
|
|
|
(404
|
)
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
|
(404
|
)
|
|
|
-
|
|
|
|
|
|
(404
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from loans payable
|
|
|
289,000
|
|
|
|
|
|
|
|
|
|
289,000
|
|
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
289,000
|
|
|
|
-
|
|
|
|
|
|
289,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
59,038
|
|
|
|
(22
|
)
|
|
(C)
|
|
|
59,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET DECREASE IN CASH
|
|
|
(148,418
|
)
|
|
|
|
|
|
|
|
|
(148,418
|
)
|
CASH AT BEGINNING OF PERIOD
|
|
|
173,828
|
|
|
|
|
|
|
|
|
|
173,828
|
|
CASH AT END OF PERIOD
|
|
$
|
25,410
|
|
|
$
|
-
|
|
|
|
|
$
|
25,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH PAID FOR INTEREST AND TAXES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for income taxes
|
|
$
|
-
|
|
|
|
|
|
|
|
|
$
|
-
|
|
Cash paid for interest
|
|
$
|
-
|
|
|
|
|
|
|
|
|
$
|
-
|
|
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
|
3
|
RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (continued)
|
NOTES
|
A.
|
Management noted an error in the recording of transactions related to a consumer’s use of
kiosks to pay for certain services such as utilities through our kiosks.
|
In these transactions, the Company
earns a payment processing fee as an agent, on either a percentage of transaction value or a fixed fee per transaction basis.
This revenue was previously recorded
at gross value, the full value of the transaction was recorded as revenue and the full value of the service provided to our end
users was recognized as cost of goods sold. The value-added taxation on both the revenue and cost of goods sold was recorded as
due to and due from, the Mexican revenue authorities, respectively.
The Restated financial statements reversed
the difference between the gross revenue recorded and the payment processing fee actually earned on these transactions; and the
cost of goods sold entries originally recorded were reversed. The value-added taxation recorded has been restated and the Company
has brought this restatement to the attention of the Mexican revenue authorities and are in the process of correcting its tax returns.
|
B.
|
Management noted an error in recording of cost of goods
sold of prepaid services sold to end users.
|
Purchases of prepaid services from
providers are recorded as a prepaid asset, which is subsequently expensed to cost of goods sold when the service is sold and the
risks and rewards of ownership passed to end users.
The cost of goods sold was incorrectly
recorded as equal to revenue on all service sales. The gross profit on these revenue transactions was earned but remained on our
balance sheet in prepaid expenditure.
The restated financial statements reduced
the costs of goods sold recorded by the gross profit earned on these transactions with a corresponding reduction in prepaid expenditure.
The net value added tax effect on these transactions was restated and the Company has brought this restatement to the attention
of the Mexican revenue authorities and are in the process of correcting its tax returns.
|
C.
|
Represents the restatement of the foreign currency translation adjustment directly related to the
restatement of revenues and cost of goods sold discussed in A and B above.
|
|
D.
|
To reflect the adjustments necessary to record the effect of the acquisition of the net assets
and liabilities and the common shares retained by the shareholders of Asiya Pearls, Inc., on the effective date of the transaction,
May 12, 2016, previously this was disclosed effective the earliest date presented in our financial statements.
|
|
E.
|
To reclass certain lease payments to retailers for the lease of floor space for the placement of
kiosks on their premises from other (expense) income to cost of goods sold.
|
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 $6,651,100 as of March 31, 2016 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.
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
On May 12, 2016, QPAGOS (formerly
known as Asiya Pearls, Inc.), a Nevada corporation entered into the Merger Agreement with Qpagos Corporation and Merger Sub. Pursuant
to the Merger Agreement, on May 12, 2016 the Merger was consummated and 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 Asiya’s common stock, par value $0.0001 per share (the
“Common Stock”). Additionally, pursuant to the Merger Agreement, upon consummation of the Merger, Asiya 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 Asiya stockholder of 5,000,000 shares of Common Stock agreed to return to Asiya 4,975,000 shares of Common
Stock held by such holder to Asiya and the then-current Asiya stockholder retained an aggregate of 25,000 shares of Common Stock
and the other stockholders of Asiya retained 5,000,000 shares of Common Stock. Therefore, immediately following the Merger, Qpagos
Corporation’s former stockholders held 49,929,000 shares of Asiya common stock which is approximately 91% of the Company
Common Stock outstanding.
The Merger is being treated as a
reverse acquisition of Asiya, a public shell company, for financial accounting and reporting purposes. As such, Qpagos Corporation
is treated as the acquirer for accounting and financial reporting purposes while Asiya is treated as the acquired entity for accounting
and financial reporting purposes. Further, as a result, the historical financial statements that will be reflected in the Company’s
future financial statements filed with the United States Securities and Exchange Commission (“SEC”) will be those of
Qpagos Corporation, and the Company’s assets, liabilities and results of operations will be consolidated with the assets,
liabilities and results of operations of Qpagos Corporation.
Qpagos Corporation was incorporated
on May 1, 2015 under the laws of Delaware under the name Qpagos Corporation as the holding company for two wholly owned operating
subsidiaries, Qpagos, S.A.P.I. de C.V. and Redpag Electrónicos S.A.P.I. de C.V. Each of these entities were incorporated
in November 2013 in Mexico.
Qpagos, S.A.P.I. de C.V. was
formed to process payment transactions for service providers it contracts with, and Redpag Electrónicos S.A.P.I. de C.V.
was formed to deploy and operate kiosks as a distributor.
On August 31, 2015, QPAGOS
Corporation entered into various agreements with the shareholders of Qpagos and Redpag to give effect to a reverse merger transaction
(the "Reverse Merger''). Pursuant to the Reverse Merger, the majority of the shareholders of Qpagos and Redpag effectively
received shares in QPAGOS, through various consulting and management agreements entered into with QPAGOS and sold an effective
99.996% and 99.990% of the outstanding shares on Qpagos and Redpag, respectively to QPAGOS. The series of transactions closed effective
August 31, 2015. Upon the close of the Reverse Merger, QPAGOS Corporation became the parent of Qpagos and Redpag and assumed the
operations of these two companies as its sole business.
On February 11, 2016, the Company
entered into a consulting agreement with a newly formed Delaware corporation, Yogipay Corporation (“Yogipay”), in terms
of the consulting agreement the Company will provide access to its considerable expertise in the payments services business to
Yogipay in exchange for 3,000,000 shares of the newly formed entity which represents a 15% ownership interest in Yogipay at the
date of entering into the agreement. The shares were valued at $3,000 at the date of the agreement and approximates it fair value
at March 31, 2016. The investment is accounted for under the cost method of accounting.
Inventory consisted of the following as of March 31, 2016
and December 31, 2015:
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
Kiosks and accessories
|
|
$
|
553,259
|
|
|
$
|
668,567
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
553,259
|
|
|
$
|
668,567
|
|
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Plant and Equipment consisted of the following as of March
31, 2016 and December 31, 2015:
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
Computer equipment
|
|
$
|
108,383
|
|
|
$
|
107,929
|
|
Office equipment
|
|
|
14,712
|
|
|
|
14,712
|
|
Leasehold improvement
|
|
|
12,375
|
|
|
|
12,375
|
|
Total cost
|
|
|
135,470
|
|
|
|
135,016
|
|
Less: accumulated depreciation and amortization
|
|
|
(73,075
|
)
|
|
|
(64,479
|
)
|
Property and equipment, net
|
|
$
|
62,395
|
|
|
$
|
70,537
|
|
Depreciation and amortization expense totaled
$8,595 and $8,441 for the three months ended March 31, 2016 and 2015, respectively.
License
Localization and implementation of
the different software and technology modules is supported through a Localization Agreement. Under this agreement, at a cost of
$215,000, the Licensor allocated engineering and programming resources to the Company. The cost is being amortized over 5 years.
On May 1, 2015, Qpagos Corporation
entered into a renewable ten-year license with the Licensor for the non-exclusive right to license technology to provide payment
services. Subsequently, on November 1, 2015, the Company and the Licensor concluded an additional amendment to the License Agreement
by which the Licensor agreed to the exclusivity to the Mexican market subject to the payment of $20,000 per year payable in quarterly
installments, the first two such installments payable December 1, 2015. The agreement may be terminated early by the Licensor if
Qpagos Corporation fails to comply with its terms and conditions. The quarterly payments are recorded as a prepaid expense and
is amortized over the period to which it relates.
Qpagos Corporation’s license
with the Licensor is a license for the rights to use three software programs (the “Programs”): RG Switch Payment (designed
to transfer payments to providers of services), RG Processing (designed processing and counting of payments) and RG Kiosk (designed
for performance of payments through payment collection equipment functioning in the self-service kiosks) to be used in Mexico.
Under this agreement the Licensor
is obligated to provide Qpagos Corporation with rights to use software updates developed by the Licensor. The ten-year term commences
on the date of full payment of the localization contract. The Licensor retains exclusive rights to any intellectual property, including
any addition, alteration, program updating, derivative or composed creation, obtained in the process of usage of the programs.
The payment for the rights granted under the license is a total of $1,000, payable in annual payments of $100 per year over ten
years and is in addition to the payments that we make under the Localization Agreement. The agreement provides, among other things,
that Qpagos Corporation will pay the fee, ensure confidentiality of commercial and technical information received when performing
the agreement and inform the Licensor of any changes in its structure. The Licensor has a right to terminate the agreement if we
breach the terms of the agreement or do not properly perform or if we do not cure any breach or nonperformance within 30 days of
receipt of notice of termination. If the Licensor suffers any damages, they are entitled to request compensation from Qpagos Corporation.
The rights to use the Programs terminate upon termination of the Agreement.
Intangibles consisted of the following as of March 31,
2016 and December 31, 2015, respectively:
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
Software license
|
|
$
|
215,000
|
|
|
$
|
215,000
|
|
|
|
|
|
|
|
|
|
|
Total cost
|
|
|
215,000
|
|
|
|
215,000
|
|
Less: accumulated amortization
|
|
|
(14,333
|
)
|
|
|
(3,583
|
)
|
Intangibles, net
|
|
$
|
200,667
|
|
|
$
|
211,417
|
|
Amortization expense was $10,750
and $0 for the three months ended March 31, 2016 and 2015, respectively.
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Notes payable consisted of the following as of March 31,
2016 and December 31, 2015, respectively:
Description
|
|
Interest
Rate
|
|
|
Maturity
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YP Holdings LLC
|
|
|
12
|
%
|
|
December 31, 2015
|
|
|
106,312
|
|
|
|
103,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total notes payable
|
|
|
|
|
|
|
|
$
|
106,312
|
|
|
$
|
103,320
|
|
YP Holdings LLC
On September 21, 2015, Qpagos Corporation
borrowed $100,000 from YP Holdings LLC, pursuant to an unsecured loan agreement. The unpaid balance and any accrued interest is
due on December 31, 2015 bears interest at a rate of 12%. The debt remains outstanding as of the date of this report. Qpagos Corporation
is expected to settle this debt in 2016.
The Company has authorized 100,000,000
common shares with a par value of $0.0001 each, and issued and has outstanding 49,929,000 shares of common stock as of March 31,
2016.
The following common shares were
issued by the Company during the three months ended March 31, 2016:
|
i.
|
On February 16, 2016, Qpagos Corporation entered into consulting agreements with Gibbs Investment
Holdings, Gibbs international, Eurosa, Inc. and Robert Skaff, in terms of which the parties have provided consulting services to
Qpagos Corporation and continue to provide such services and were issued a total of 5,145,000 (2,572,500 pre-merger) common shares
of Qpagos Corporation at an issue price of $0.395 ($0.79 pre-merger) per share. In connection with the Merger, these shares of
Qpagos Corporation were converted to QPAGOS shares in the ratio of 2 to 1.
|
Included in common stock is restricted stock which vests
on April 30, 2016:
|
|
|
Restricted Stock Granted
|
|
|
Restricted Stock Vested
|
|
Grant date Price
|
|
|
Number
Granted
|
|
|
Weighted
Average
Fair Value per
Share
|
|
|
Number
Vested
|
|
|
Weighted
Average
Fair Value per Share
|
|
$
|
0.10
|
|
|
|
2,880,000
|
|
|
$
|
0.10
|
|
|
|
-
|
|
|
$
|
-
|
|
$
|
0.10
|
|
|
|
1,440,000
|
|
|
$
|
0.10
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
4,320,000
|
|
|
$
|
0.10
|
|
|
|
-
|
|
|
$
|
-
|
|
The Company has recorded an expense
of $108,000 and $0 for the three months ended March 31, 2016, relating to the restricted stock awards.
The Company has authorized 25,0000,000
shares of preferred stock with a par value of $0.0001, no preferred stock is issued and outstanding as of March 31, 2016.
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
|
11
|
STOCKHOLDERS’ EQUITY (continued)
|
In connection with the Merger,
outstanding Qpagos Corporation warrants were assumed by QPAGOS and converted to QPAGOS warrants at a ratio of two QPAGOS warrants
for each Qpagos Corporation warrant issued.
During the period June 2015 to December
2015, pursuant to the private placement agreement and individual Securities Purchase Agreements entered into, new, qualified investors,
acquired 4,784,000 (2,392,000 pre-merger) common units of the Company at a price of $0.625 ($1.25 pre-merger) per unit, each unit
consisting of one share of Common Stock and a five year warrant exercisable for one share of common stock at an exercise price
of $0.625 ($1.25 pre-merger) per share.
The placement agent was also issued,
in terms of a placement agent agreement, five year warrants to purchase 717,600 (358,800 pre-merger) units at $0.625 ($1.25 pre-merger)
per unit (the First Warrant”), each consisting of one warrant to purchase one share of Common stock and an additional five
year warrant exercisable for one share of Common Stock at an exercise price of $0.625 per share (the Second Warrant”), upon
exercise of the First Warrant, giving a total of 1,435,200 (717,600 pre-merger) warrants to purchase common shares at an exercise
price of $0.625 per share.
A summary of all of our warrant activity during the period
January 1, 2016 to March 31, 2016 is as follows:
|
|
Shares
Underlying
Warrants
|
|
|
Exercise
price per
share
|
|
|
Weighted
average
exercise
price
|
|
Outstanding January 1, 2016
|
|
|
6,219,200
|
|
|
$
|
0.625
|
|
|
$
|
0.625
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited/Cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding March 31, 2016
|
|
|
6,219,200
|
|
|
$
|
0.625
|
|
|
$
|
0.625
|
|
The warrants outstanding and exercisable at March 31,
2016 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
|
|
|
|
4.51
|
|
|
$
|
0.625
|
|
|
|
6,219,200
|
|
|
$
|
0.625
|
|
|
|
4.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,219,200
|
|
|
|
|
|
|
$
|
0.625
|
|
|
|
6,219,200
|
|
|
$
|
0.625
|
|
|
|
|
|
The warrants outstanding have an
intrinsic value of $0 and $0 as of March 31, 2016 and December 31, 2015, respectively.
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
|
11
|
STOCKHOLDERS’ EQUITY (continued)
|
|
(d)
|
Reverse merger transaction
|
On May 12, 2016, QPAGOS (formerly
known as Asiya Pearls, Inc.), a Nevada corporation entered into the Merger Agreement with QPAGOS Corporation and Merger Sub. Pursuant
to the Merger Agreement, on May 12, 2016 the Merger was consummated and Qpagos Corporation and Merger Sub merged with Qpagos Corporation
continued as the surviving corporation of the Merger.
Pursuant to the Merger Agreement,
upon consummation of the Merger, each share of Qpagos Corporations’ capital stock issued and outstanding immediately prior
to the Merger was converted into the right to receive two shares of QPAGOS 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 is approximately 91% of the QPAGOS Common Stock outstanding. The common shares in issue by Qpagos Corporation
prior to the consummation of the reverse merger transaction have been retroactively adjusted to reflect the number of shares outstanding
as if the merger had taken place on the earliest date presented.
Revenue is derived from the following
sources:
|
|
Three months ended
March 31, 2016
|
|
|
Three months ended
March 31, 2015
|
|
|
|
|
|
|
|
|
Sales of services
|
|
$
|
497,985
|
|
|
$
|
34,573
|
|
Payment processing fees
|
|
|
977
|
|
|
|
2,701
|
|
Kiosk sales
|
|
|
130, 972
|
|
|
|
18,770
|
|
|
|
$
|
629,934
|
|
|
$
|
56,044
|
|
|
13
|
EQUITY BASED COMPENSATION
|
Equity based compensation
is made up of the following:
|
|
Three
Months Ended
March 31, 2016
|
|
|
Three
Months Ended
March 31, 2015
|
|
|
|
|
|
|
|
|
Stock issued for services rendered
|
|
$
|
108,000
|
|
|
$
|
-
|
|
|
|
$
|
108,000
|
|
|
$
|
-
|
|
QPAGOS
(FORMERLY KNOWN AS ASIYA PEARLS, INC.)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Basic loss per share is based on
the weighted-average number of common shares outstanding during each period. Diluted loss per share is based on basic shares as
determined above plus common stock equivalents. The computation of diluted net loss per share does not assume the issuance of common
shares that have an anti-dilutive effect on net loss per share. For the three months ended March 31, 2016 and 2015, all unvested
restricted stock awards and warrants, were excluded from the computation of diluted net loss per share. Dilutive shares which could
exist pursuant to the exercise of outstanding stock instruments and which were not included in the calculation because their affect
would have been anti-dilutive are as follows:
|
|
Three
Months Ended
March 31, 2016
(Shares)
|
|
|
Three
Months Ended
March 31, 2015
(Shares)
|
|
|
|
|
|
|
|
|
Restricted stock awards – unvested
|
|
|
4,320,000
|
|
|
|
-
|
|
Warrants to purchase shares of common stock
|
|
|
6,219,200
|
|
|
|
-
|
|
|
|
|
10,539,200
|
|
|
|
-
|
|
|
15
|
COMMITMENTS AND CONTINGENCIES
|
Qpagos Corporation operates from
an office facility in Mexico. The office is leased under a three (3) year non-cancellable operating lease, which ends on December
15, 2016. The lease calls for monthly rental payment, including maintenance, of $3,425 in 2015 and $2,929 in 2016, as adjusted
for exchange rate changes.
The future minimum lease installments
under this agreement as of March 31, 2016 to December 16, 2016 is approximately $26,360.
On May 12, 2016, Qpagos Corporation
entered into the Merger Agreement with Merger Sub. Pursuant to the Merger Agreement, Merger Sub merged with and into Qpagos Corporation
with Qpagos Corporation surviving the Merger as QPAGOS’ wholly owned subsidiary (the “Merger”). Each shareholder
of Qpagos Corporation received two shares of the common stock of QPAGOS for each share of common stock owned by such shareholder.
QPAGOS also assumed all of the warrants issued and outstanding immediately prior to the Merger, which are now exercisable for approximately
6,219,200 shares of Common Stock. Immediately after the merger, the shareholders of Qpagos Corporation owned approximately 91%
of the merged entity,
The acquisition of Qpagos Corporation
by QPAGOS has been accounted for as a reverse acquisition for financial accounting purposes. The Reverse Merger is deemed a capital
transaction and the net assets of Qpagos Corporation (the accounting acquirer) is carried forward to the Company (the legal acquirer)
at their carrying value before the merger. The acquisition process utilizes the capital structure of QPAGOS and the assets and
liabilities of Qpagos Corporation are recorded at historical cost. The financials statements of QPAGOS and Qpagos Corporation are
being combined and Qpagos Corporation is the operating entity for financial reporting purposes and the financial statements for
all periods presented represent the combined financial position and results of operations of Qpagos Corporation.
The equity of the Company is the
historical equity of Qpagos Corporation presented retroactively to reflect the number of shares issued in the transaction.
On May 27, the Company filed a certificate
of amendment changing the name of the Company from Asiya Pearls Inc. to QPAGOS.
On June 1, 2016, the Board of directors
approved changing the Company’s year end from October 31 to December 31. As a result of the change in fiscal year, the Company
is filing this Transition Report on Form 10-Q covering the transition period from December 31, 2015 to March 31, 2016.
On June 7, 2016, 4,975,000 shares
were returned to the Company and recorded as treasury shares, in terms of the Merger Agreement.
During the period May 16, 2016
to October 17, 2016, the Company issued an additional 500,000 shares of common stock for gross proceeds of $375,000 to an investor
in terms of executed Securities Purchase Agreements.
On September 15, 2016, the
Company executed a revolving line of credit note for $100,000 with our Chief Executive Officer pursuant to the terms of a
Revolving Line of Credit Agreement. The note bears interest at 6% and is due and payable 6 months from the effective date.
Provided the borrower is not in default, the borrower may extend and renew the note for an additional 6 month term. As of
December 12, 2016, the outstanding balance under the revolving line of credit was $20,000.
Between September 29, 2016
and November 23,2016, the Company executed six unsecured promissory notes totaling $275,000, with investors, each promissory note
bearing interest at 10% per annum and maturing between February 13,2017 and November 23, 2017.
In accordance with ASC 855-10, the
Company has analyzed its operations subsequent to March 31, 2016 to the date these financial statements were issued, and has determined
that it does not have any material subsequent events to disclose in these financial statements.
Item 2.