NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
1
|
ORGANIZATION AND DESCRIPTION OF BUSINESS
|
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 were 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
Quarterly Report on Form 10-Q and that will be reflected in the Company’s 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 (“QPAGOS”)
was incorporated on May 1, 2015 under the laws of the state of Delaware to effectuate a reverse merger transaction with Qpagos,
S.A.P.I. de C.V. (Qpagos) 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.
|
b)
|
Description of the business
|
QPAGOS Corporation, through
its subsidiaries Qpagos S.A.P.I de C.V. (“Qpagos”) and Redpag Electronicos S.A.P.I de C.V. (“Redpag”),
provides physical and virtual payment services to the Mexican market. 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
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
2
|
ACCOUNTING POLICIES AND ESTIMATES
|
The accompanying unaudited
condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S.
GAAP”) for interim financial information with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly,
these unaudited condensed consolidated financial statements do not include all of the information and disclosures required by
U.S. GAAP for complete financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial
statements include all adjustments (consisting only of normal recurring adjustments), which the Company considers necessary, for
a fair presentation of those financial statements. The results of operations and cash flows for the three months ended March 31,
2018 may not necessarily be indicative of results that may be expected for any succeeding quarter or for the entire fiscal year.
The information contained in this Quarterly Report on Form 10-Q should be read in conjunction with the audited financial statements
of QPAGOS for the year ended December 31, 2018, included in the Annual Report on Form 10-K as filed with the Securities and Exchange
Commission (the “SEC”) on April 9, 2019.
All amounts referred to in
the notes to the unaudited condensed consolidated financial statements are in United States Dollars ($) unless stated otherwise.
|
b)
|
Principles of Consolidation
|
The unaudited condensed consolidated
financial statements include the financial statements of the Company 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 period end and the results of operations
at the average rate throughout the period. The translation adjustments are recorded directly as a separate component of stockholders’
equity, while transaction gains (losses) are included in net income (loss). All sales to customers are in Mexico.
The preparation of unaudited
condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions,
which are evaluated on an ongoing basis, that affect the amounts reported in the unaudited condensed consolidated financial statements
and accompanying notes. Management bases its estimates on historical experience and on various other assumptions that it believes
are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets
and liabilities and the amounts of revenues and expenses that are not readily apparent from other sources. Actual results could
differ from those estimates and judgments. In particular, significant estimates and judgments include those related to; the estimated
useful lives for plant and equipment, the fair value of warrants and stock options granted for services or compensation, estimates
of the probability and potential magnitude of contingent liabilities, derivative liabilities, the valuation allowance for deferred
tax assets due to continuing operating losses, those related to revenue recognition and the allowance for doubtful accounts.
Making estimates requires management
to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation
or set of circumstances that existed at the date of the unaudited condensed consolidated financial statements, which management
considered in formulating its estimate could change in the near-term due to one or more future confirming events. Accordingly,
the actual results could differ significantly from our estimates.
QPAGOS
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
2
|
ACCOUNTING POLICIES AND ESTIMATES (continued)
|
Certain conditions may exist
as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved
when one or more future events occur or fail to occur.
The Company’s management
assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment.
If the assessment of a contingency
indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the
estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that
a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then
the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would
be disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees,
in which case the guarantee would be disclosed.
|
f)
|
Fair Value of Financial Instruments
|
The Company adopted the guidance
of Accounting Standards Codification (“ASC”) 820 for fair value measurements which clarifies the definition of fair
value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring
fair value as follows:
Level 1-Inputs are unadjusted
quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level 2-Inputs are unadjusted
quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities
in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by
observable market data.
Level 3-Inputs are unobservable
inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing
the asset or liability based on the best available information.
The carrying amounts reported
in the balance sheets for 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 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.
QPAGOS
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
2
|
ACCOUNTING POLICIES AND ESTIMATES (continued)
|
|
h)
|
Adoption of accounting standards
|
In February 2016,
the Financial Accounting Standards Board (“FSAB”) issued Accounting Standards Update (“ASU”), No. 2016-02,
Leases (Topic 842) (ASC 842)
The amendments in this update
establishes a comprehensive new lease accounting model. The new standard: (a) clarifies the definition of a lease; (b) requires
a dual approach to lease classification similar to current lease classifications; and (c) causes lessees to recognize leases on
the balance sheet as a lease liability with a corresponding right-of-use asset for leases with a lease-term of more than twelve
months. The new standard is effective for fiscal years and interim periods beginning after December 15, 2018, with early adoption
permitted. A modified retrospective transition approach is required for leases existing at, or entered into after, the beginning
of the earliest comparative period presented in the financial statements, including a number of optional practical expedients
that entities may elect to apply. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, an
update which provides another transition method, the prospective transition method, which allows entities to initially apply the
new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings
in the period of adoption. The Company adopted the new standard on January 1, 2019 using the prospective transition method.
The Company has identified all leases and reviewed the leases to determine the impact of ASC 842 on its
unaudited condensed consolidated financial statements. The Company has elected to apply all of the practical expedients to all
leases, which include not reassessing (1) whether any expired or existing contracts are or contain leases, (2) lease classification
for any expired or existing leases, and (3) initial direct costs for any existing leases. The adoption of the new standard resulted
in the recording of a right-of-use asset and a lease liability on the consolidated balance sheet on January 1, 2019 of MXN Pesos
639,400 ($32,996) and the subsequent amortization of the asset and the lease liability.
|
i)
|
Recent accounting pronouncements
|
The FASB issued several updates
during the period, none of these standards are either applicable to the Company or require adoption at a future date and are not
expected to have a material impact on the unaudited condensed consolidated 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.
|
k)
|
Cash and Cash Equivalents
|
The Company considers all highly
liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. At March 31,
2019 and December 31, 2018, respectively, the Company had no cash equivalents.
The Company assesses credit
risk associated with cash by periodically evaluating the credit quality of its primary financial institution in the United States.
The balance at times may exceed federally insured limits. At March 31, 2019 and December 31, 2018, cash balances in the United
States did not exceed the federally insured limit.
|
l)
|
Accounts Receivable and Allowance for Doubtful Accounts
|
Accounts receivable are reported
at realizable value, net of allowances for doubtful accounts, which is estimated and recorded in the period the related revenue
is recorded. The Company has a standardized approach to estimate and review the collectability of its receivables based on a number
of factors, including the period they have been outstanding. Historical collection and payer reimbursement experience is an integral
part of the estimation process related to allowances for doubtful accounts. In addition, the Company regularly assesses the state
of its billing operations in order to identify issues, which may impact the collectability of these receivables or reserve estimates.
Revisions to the allowance for doubtful accounts estimates are recorded as an adjustment to bad debt expense. Receivables deemed
uncollectible are charged against the allowance for doubtful accounts at the time such receivables are written-off. Recoveries
of receivables previously written-off are recorded as credits to the allowance for doubtful accounts. There were no recoveries
during the three months ended March 31, 2019.
QPAGOS
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
2
|
ACCOUNTING POLICIES AND ESTIMATES (continued)
|
|
m)
|
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 operations and comprehensive loss. However, impairment charges are recognized in the condensed consolidated statement
of operations and comprehensive loss. If circumstances suggest that the value of the investee company has subsequently recovered,
such recovery is not recorded. There is no impairment of investment at March 31, 2019 and December 31, 2018.
The Company primarily values
inventories at net realizable value applied on a first-in, first-out basis. The Company identifies and writes down its excess
and obsolete inventories to net realizable value based on usage forecasts, order volume and inventory aging. With the development
of new products, the Company also rationalizes its product offerings and will write-down discontinued product to the lower of
cost or net realizable value.
|
o)
|
Advances received from customers
|
Other than the sale of kiosks
to customers, the provision of services through the Company’s 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:
Description
|
Estimated Useful Life
|
Kiosks
|
7 years
|
Computer equipment
|
3 years
|
Leasehold improvements
|
Lesser of estimated useful life or life of lease
|
Office equipment
|
10 years
|
The cost of repairs and maintenance
is expensed as incurred. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts,
and any resulting gains or losses are included in income in the year of disposition.
QPAGOS
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
2
|
ACCOUNTING POLICIES AND ESTIMATES (continued)
|
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.
i) License Agreements
License agreements acquired by
the Company are reported at acquisition value less accumulated amortization and impairments.
ii) Amortization
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.
Our revenues are recognized
when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that
the Company expects to receive in exchange for those services. The Company derives its revenues from the sale of its services,
as defined below. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized
as it fulfills its obligations under each of its revenue transactions:
|
i.
|
identify the contract with a customer;
|
|
ii.
|
identify the performance obligations in the contract;
|
|
iii.
|
determine the transaction price;
|
|
iv.
|
allocate the transaction price to performance obligations in
the contract; and
|
|
v.
|
recognize revenue as the performance obligation is satisfied.
|
QPAGOS
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
2
|
ACCOUNTING POLICIES AND ESTIMATES (continued)
|
|
s)
|
Revenue Recognition (continued)
|
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.
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 $19,322,768 as of March 31, 2019 and has not generated sufficient revenue to cover its operating expenditure, raising
substantial doubt about the Company’s ability to continue as a going concern. In addition to operational expenses, as the
Company executes its 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.
QPAGOS
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Inventory consisted of the following:
|
|
March 31,
2019
|
|
|
December 31,
2018
|
|
|
|
|
|
|
|
|
Kiosks and accessories
|
|
$
|
335,295
|
|
|
$
|
330,632
|
|
|
|
$
|
335,295
|
|
|
$
|
330,632
|
|
Plant and Equipment
consisted of the following:
|
|
March 31,
2019
|
|
|
December 31,
2018
|
|
|
|
|
|
|
|
|
Kiosks
|
|
$
|
414,555
|
|
|
$
|
409,990
|
|
Computer equipment
|
|
|
74,822
|
|
|
|
73,781
|
|
Office equipment
|
|
|
10,056
|
|
|
|
9,916
|
|
Leasehold improvement
|
|
|
8,735
|
|
|
|
8,615
|
|
Total cost
|
|
|
508,168
|
|
|
|
502,302
|
|
Less: accumulated depreciation and amortization
|
|
|
(293,197
|
)
|
|
|
(274,199
|
)
|
Plant and equipment, net
|
|
$
|
214,971
|
|
|
$
|
228,103
|
|
Depreciation expense totaled
$15,619 and $11,561 for the three months ended March 31, 2019 and 2018, respectively.
Adoption of ASC Topic 842, "Leases"
On January 1, 2019, the Company adopted Topic 842 using the prospective transition method applied
to leases that were in place as of January 1, 2019. Results for reporting periods beginning after January 1, 2019 are
presented under Topic 842, while prior period amounts are not adjusted and continue to be reported in accordance with the Company’s
historic accounting under Topic 840. The Company's lease consist of an operating lease that relate to a real estate agreement entered
into in December 2016.
Practical Expedients and Elections
The Company elected the package of practical
expedients permitted under the transition guidance, which allowed the Company to carryforward its historical lease classification,
the Company’s assessment on whether a contract is or contains a lease, and its initial direct costs for any leases that exist
prior to adoption of the new standard.
Discount Rate
To determine the present value of minimum
future lease payments for operating leases at January 1, 2019, the Company was required to estimate a rate of interest that it
would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic
environment (the "incremental borrowing rate" or "IBR").
The Company determined the appropriate IBR by identifying a reference rate and making adjustments that
take into consideration financing options and certain lease-specific circumstances. For the reference rate, the Company used the
Mexican Mortgage interest rate at the time of entering into the agreement and compared that rate to the Company’s weighted
average cost of funding at the time of entering into the operating lease. The Company determined that 10.65% was an
appropriate incremental borrowing rate to apply to its real-estate operating lease.
QPAGOS
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Right of use assets
Right of use assets are included in the unaudited condensed
consolidated Balance Sheet are as follows:
|
|
March
31,
2019
|
|
|
|
|
|
Non-current
assets
|
|
|
|
|
Right
of use assets, operating leases, net of amortization
|
|
$
|
25,174
|
|
Total Lease Cost
Individual components of the total lease
cost incurred by the Company is as follows:
|
|
Three
months
ended
March 31,
2019
|
|
|
|
|
|
Operating
lease expense
|
|
$
|
8,813
|
|
Maturity of Operating Leases
The amount of future minimum lease payments
under operating leases are as follows:
|
|
Amount
|
|
Undiscounted
minimum future lease payments
|
|
|
|
Remainder
of 2019
|
|
$
|
26,304
|
|
Deferred
rental on straight line amortization
|
|
|
101
|
|
Imputed
interest
|
|
|
(1,130
|
)
|
|
|
|
|
|
Total
operating lease liability
|
|
$
|
25,275
|
|
|
|
|
|
|
Disclosed
as:
|
|
|
|
|
Current
portion
|
|
$
|
25,275
|
|
Non-current
portion
|
|
|
—
|
|
|
|
$
|
25,275
|
|
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, Qpagos Corporation 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 agreement may be terminated early by the Licensor if Qpagos Corporation fails to comply with its
terms and conditions.
Intangibles consisted of the following:
|
|
March 31,
2019
|
|
|
December 31,
2018
|
|
|
|
|
|
|
|
|
Software Localization Agreement
|
|
$
|
215,000
|
|
|
$
|
215,000
|
|
|
|
|
|
|
|
|
|
|
Total cost
|
|
|
215,000
|
|
|
|
215,000
|
|
Less: accumulated amortization
|
|
|
(143,333
|
)
|
|
|
(132,583
|
)
|
Intangibles, net
|
|
$
|
71,667
|
|
|
$
|
82,417
|
|
Amortization expense was $10,750
and $10,750 for the three months ended March 31, 2019 and 2018, respectively.
QPAGOS
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Loans payable consist of the
following:
Description
|
|
Interest
Rate
|
|
|
Maturity
|
|
|
March 31,
2019
|
|
|
December 31,
2018
|
|
Strategic IR
|
|
|
15
|
%
|
|
|
February 10, 2020
|
|
|
$
|
182,430
|
|
|
$
|
177,159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Victoria Akhmetova
|
|
|
15
|
%
|
|
|
January 11, 2020
|
|
|
|
57,938
|
|
|
|
56,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Boba Management Corporation
|
|
|
10
|
%
|
|
|
February 20, 2020
|
|
|
|
20,203
|
|
|
|
—
|
|
|
|
|
10
|
%
|
|
|
March 1, 2020
|
|
|
|
20,164
|
|
|
|
—
|
|
|
|
|
10
|
%
|
|
|
March 26, 2020
|
|
|
|
20,027
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans payable
|
|
|
|
|
|
|
|
|
|
$
|
300,762
|
|
|
$
|
233,203
|
|
Strategic IR
Strategic IR advanced the Company
$168,000 between January 16 and June 15, 2018. This loan was formalized into a written note on October 13, 2018 and bears interest
at the rate of 10% per annum. The note had a maturity date of February 10, 2019. On March 18, 2019 the note was extended to February
10, 2020, and the interest rate was changed to 15%. The note may be prepaid at any time without premium or penalty. The balance
of the note plus accrued interest at March 31, 2019 was $182,430.
Viktoria Akhmetova
On April 17, 2018, the Company
issued a Promissory Note in the aggregate principal amount of $50,000 to Viktoria Akhmetova. The note had a maturity date of September
13, 2018 and a coupon of 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, and the interest rate changed to 15%. The balance of the note plus accrued interest at March 31, 2019 was
$57,938.
Boba Management Corporation
February 20, 2020
On February 22, 2019, the Company
issued a Promissory Note in the aggregate principal amount of $20,000 to Boba Management Corporation. The note had a maturity
date of February 22, 2020 and a coupon of ten percent per annum. The Company has the right to prepay the note without penalty
prior to maturity date. The balance of the note plus accrued interest at March 31, 2019 was $20,203.
March 1, 2020
On March 1, 2019, the Company
issued a Promissory Note in the aggregate principal amount of $20,000 to Boba Management Corporation. The note had a maturity
date of March 1, 2020 and a coupon of ten percent per annum. The Company has the right to prepay the note without penalty prior
to maturity date. The balance of the note plus accrued interest at March 31, 2019 was $20,164.
March 26, 2020
On March 26, 2019, the Company
issued a Promissory Note in the aggregate principal amount of $20,000 to Boba Management Corporation. The note had a maturity
date of March 26, 2020 and a coupon of ten percent per annum. The Company has the right to prepay the note without penalty prior
to maturity date. The balance of the note plus accrued interest at March 31, 2019 was $20,027.
QPAGOS
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
9
|
CONVERTIBLE NOTES PAYABLE
|
Convertible notes payable consists
of the following:
Description
|
|
Interest rate
|
|
|
Maturity Date
|
|
Principal
|
|
|
Accrued interest
|
|
|
Unamortized debt discount
|
|
|
March 31
2019
Balance, net
|
|
|
December 31, 2018
Balance, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Power Up Lending Group
|
|
|
8
|
%
|
|
April 30, 2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
38,645
|
|
|
|
|
8
|
%
|
|
September 15, 2019
|
|
|
83,000
|
|
|
|
2,365
|
|
|
|
(46,792
|
)
|
|
|
38,573
|
|
|
|
11,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Labrys Fund, LP
|
|
|
8
|
%
|
|
February 28, 2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
129,758
|
|
|
|
|
8
|
%
|
|
April 25, 2019
|
|
|
300,000
|
|
|
|
10,323
|
|
|
|
(64,882
|
)
|
|
|
245,441
|
|
|
|
126,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JSJ Investments, Inc.
|
|
|
8
|
%
|
|
July 26, 2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
46,751
|
|
|
|
|
8
|
%
|
|
October 8, 2019
|
|
|
100,000
|
|
|
|
3,814
|
|
|
|
(52,329
|
)
|
|
|
51,485
|
|
|
|
24,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GS Capital Partners, LLC
|
|
|
8
|
%
|
|
May 11, 2019
|
|
|
26,000
|
|
|
|
1,846
|
|
|
|
(2,921
|
)
|
|
|
24,925
|
|
|
|
41,543
|
|
|
|
|
8
|
%
|
|
August 14, 2019
|
|
|
150,000
|
|
|
|
7,529
|
|
|
|
(55,890
|
)
|
|
|
101,639
|
|
|
|
61,693
|
|
|
|
|
8
|
%
|
|
August 14, 2019
|
|
|
150,000
|
|
|
|
6,608
|
|
|
|
(60,534
|
)
|
|
|
96,074
|
|
|
|
53,056
|
|
|
|
|
8
|
%
|
|
September 19, 2019
|
|
|
33,252
|
|
|
|
1,407
|
|
|
|
(15,670
|
)
|
|
|
18,989
|
|
|
|
10,134
|
|
|
|
|
8
|
%
|
|
September 19, 2019
|
|
|
47,730
|
|
|
|
2,029
|
|
|
|
(22,492
|
)
|
|
|
27,267
|
|
|
|
14,557
|
|
|
|
|
8
|
%
|
|
February 4, 2020
|
|
|
96,000
|
|
|
|
1,157
|
|
|
|
(81,534
|
)
|
|
|
15,623
|
|
|
|
—
|
|
|
|
|
8
|
%
|
|
February 4, 2020
|
|
|
96,000
|
|
|
|
568
|
|
|
|
(88,309
|
)
|
|
|
8,259
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strategic IR
|
|
|
15
|
%
|
|
December 8, 2019
|
|
|
10,000
|
|
|
|
2,563
|
|
|
|
—
|
|
|
|
12,563
|
|
|
|
12,193
|
|
|
|
|
15
|
%
|
|
December 8, 2019
|
|
|
20,164
|
|
|
|
5,154
|
|
|
|
—
|
|
|
|
25,318
|
|
|
|
24,573
|
|
|
|
|
15
|
%
|
|
December 26, 2019
|
|
|
53,740
|
|
|
|
13,339
|
|
|
|
—
|
|
|
|
67,079
|
|
|
|
65,091
|
|
|
|
|
15
|
%
|
|
December 26, 2019
|
|
|
115,535
|
|
|
|
28,678
|
|
|
|
—
|
|
|
|
144,213
|
|
|
|
139,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Viktoria Akhmetova
|
|
|
15
|
%
|
|
December 8, 2019
|
|
|
20,164
|
|
|
|
5,154
|
|
|
|
—
|
|
|
|
25,318
|
|
|
|
24,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph W and Patricia G Abrams
|
|
|
15
|
%
|
|
December 10, 2019
|
|
|
26,247
|
|
|
|
6,688
|
|
|
|
—
|
|
|
|
32,935
|
|
|
|
31,964
|
|
|
|
|
15
|
%
|
|
January 27, 2020
|
|
|
3,753
|
|
|
|
882
|
|
|
|
—
|
|
|
|
4,635
|
|
|
|
4,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roman Shefer
|
|
|
15
|
%
|
|
December 24, 2019
|
|
|
10,000
|
|
|
|
2,490
|
|
|
|
—
|
|
|
|
12,490
|
|
|
|
12,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crown Bridge Partners, LLC
|
|
|
8
|
%
|
|
May 14, 2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
18,796
|
|
|
|
|
8
|
%
|
|
June 12, 2019
|
|
|
17,800
|
|
|
|
1,726
|
|
|
|
(3,560
|
)
|
|
|
15,966
|
|
|
|
16,437
|
|
|
|
|
8
|
%
|
|
July 26, 2019
|
|
|
27,500
|
|
|
|
1,495
|
|
|
|
(8,815
|
)
|
|
|
20,180
|
|
|
|
12,856
|
|
|
|
|
8
|
%
|
|
August 31, 2019
|
|
|
27,500
|
|
|
|
1,278
|
|
|
|
(11,527
|
)
|
|
|
17,251
|
|
|
|
9,927
|
|
|
|
|
8
|
%
|
|
October 16, 2019
|
|
|
27,500
|
|
|
|
1,001
|
|
|
|
(14,994
|
)
|
|
|
13,507
|
|
|
|
6,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alex Pereira
|
|
|
8
|
%
|
|
November 5, 2019
|
|
|
19,250
|
|
|
|
616
|
|
|
|
(11,550
|
)
|
|
|
8,316
|
|
|
|
3,189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gibbs International Holdings
|
|
|
15
|
%
|
|
On demand
|
|
|
52,494
|
|
|
|
13,246
|
|
|
|
—
|
|
|
|
65,740
|
|
|
|
63,798
|
|
|
|
|
8
|
%
|
|
August 31, 2019
|
|
|
405,735
|
|
|
|
19,831
|
|
|
|
(165,100
|
)
|
|
|
260,466
|
|
|
|
155,345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Delinvest Commercial, LTD
|
|
|
15
|
%
|
|
December 16, 2019
|
|
|
20,000
|
|
|
|
5,047
|
|
|
|
—
|
|
|
|
25,047
|
|
|
|
24,307
|
|
|
|
|
15
|
%
|
|
December 26, 2019
|
|
|
54,123
|
|
|
|
13,434
|
|
|
|
—
|
|
|
|
67,557
|
|
|
|
65,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BOBA Management Corporation
|
|
|
8
|
%
|
|
January 23, 2020
|
|
|
92,884
|
|
|
|
1,364
|
|
|
|
(75,834
|
)
|
|
|
18,414
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total convertible notes payable
|
|
|
|
|
|
|
|
$
|
2,086,371
|
|
|
$
|
161,632
|
|
|
$
|
(782,732
|
)
|
|
$
|
1,465,271
|
|
|
$
|
1,251,033
|
|
Interest expense together with
amortized debt discount totaled $612,959 and $484,801 for the three months ended March 31, 2019 and 2018, respectively.
The convertible notes disclosed
above with a coupon of 15%, have a fixed conversion price of $0.20 per common share.
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 three months ended March 31, 2019 and 2018 was $284,884 and
$668,545, respectively.
QPAGOS
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
9
|
CONVERTIBLE NOTES PAYABLE (continued)
|
Power Up Lending Group Ltd.
April, 30, 2019
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.
On January 23, 2019, in terms of a debt
purchase agreement entered into with BOBA Management Corp., the $63,000 convertible note, plus accrued interest thereon of $2,583,
plus penalty interest thereon of $22,878 and expenses of $4,423, was exchanged for a new convertible note with a principal sum
of $92,884, bearing interest at 8% per annum and maturing on January 23, 2020.
September 15, 2019
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 March 31, 2019 was $38,573, net of unamortized discount of $46,792.
Labrys Fund, LP
February 28, 2019
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. In December 2018
the maturity date was extended to February 28, 2019.
Between December 26, 2018 and
February 13, 2019, the Company received conversion notices converting an aggregate principal amount of $150,000 and interest thereon
of $7,116, at an average conversion price of $0.0156 per share, into 10,070,334 shares of common stock, thereby extinguishing the
note.
April 25, 2019
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 March 31, 2019 was $245,441, net of unamortized discount of $64,882.
QPAGOS
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
9
|
CONVERTIBLE NOTES PAYABLE (continued)
|
JSJ Investments Inc.
July 26, 2019
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.
Between January 28, 2019 and
March 11, 2019, the Company received conversion notices, converting an aggregate principal amount of $100,000 and interest thereon
of $4,533, at an average conversion price of $0.0126 into 8,304,805 shares of common stock, thereby extinguishing the convertible
note.
October 8, 2019
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 March
31, 2019 was $51,485, net of unamortized discount of $52,329.
GS Capital Partners, LLC
May 11, 2019
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.
Between December 27, 2018 and
March 20, 2019, the Company received conversion notices converting an aggregate principal amount of $54,000 and interest thereon
of $3,239, at an average conversion price of $0.0148 per share, into 3,878,553 shares of common stock. The balance of the note
plus accrued interest at March 31, 2019 was $24,925, net of unamortized discount of $2,921.
August 14, 2019
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 March 31, 2019 was $101,639 net of unamortized discount of $55,890.
Q
PAGOS
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
9
|
CONVERTIBLE NOTES PAYABLE (continued)
|
GS Capital Partners, LLC (continued)
August 14, 2019
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 March 31, 2019 was $96,074 net of unamortized
discount of $60,534.
September 19, 2019
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 March 31, 2019 was $18,989 net
of unamortized discount of $15,670.
September 19, 2019
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 a maturity date of September 19, 2019. The note may
not be prepaid. The outstanding principal amount of the note is convertible at any time and from time to time at the election of
the holder into shares of the Company’s common stock at a conversion price equal to 65% of the average of the lowest two
trading bid prices during the previous ten (10) trading days, including the date the notice of conversion is received.
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 March 31, 2019 was
$27,267 net of unamortized discount of $22,492.
February 4, 2020
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.
The balance of the note plus accrued
interest at March 31, 2019 was $15,623 net of unamortized discount of $81,534.
February 4, 2020
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.
The balance
of the note plus accrued interest at March 31, 2019 was $8,259 net of unamortized discount of $88,309.
QPAGOS
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
9
|
CONVERTIBLE NOTES PAYABLE (continued)
|
Strategic IR
December 8, 2019
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 March 31, 2019 was
$12,563.
December 8, 2019
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 March 31, 2019 was $25,318.
December 26, 2019
On June 29, 2017, the Company
exchanged a note issued to Strategic with a principal amount of $50,000, together with accrued interest thereon of $3,740, totaling
$53,740, for a convertible note, principal amount of $53,740, bearing interest at 12% per annum which matured on December 26, 2017.
In terms of an agreement entered into with the note holder, the maturity date was extended to December 26, 2018 and the interest
rate was increased to 15% per annum. On February 21, 2019 the maturity date was extended to December 26, 2019, with the interest
rate remaining unchanged. 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 March 31, 2019 was $67,079.
December 26, 2019
On June 29, 2017, the Company
exchanged a note issued to Strategic with a principal amount of $110,000, together with accrued interest thereon of $5,535, totaling
$115,535, for a convertible note, principal amount of $115,535, bearing interest at 12% per annum and matured on December 26, 2017.
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 March 31, 2019 was $144,213.
Viktoria Akhmetova
December
8, 2019
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 March 31, 2019 was $25,318.
QPAGOS
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
9
|
CONVERTIBLE NOTES PAYABLE (continued)
|
Joseph W and Patricia G Abrams
December 10, 2019
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 March 31, 2019
was $32,935.
January
27, 2020
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 March 31, 2019 was $4,635.
Roman Shefer
December
24, 2019
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 March 31, 2019 was $12,490.
Crown Bridge Partners
May 14, 2019
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.
Between January 16, 2019 and
February 12, 2019 the Company received conversion notices, converting an aggregate principal amount of $27,500, fees of $1,500
and interest thereon of $1,580, at an average conversion price of $0.0128, into 2,380,300 shares of common stock, thereby extinguishing
the note.
QPAGOS
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
9
|
CONVERTIBLE NOTES PAYABLE (continued)
|
Crown Bridge Partners (continued)
June 12, 2019
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.
On March 15, 2019, the Company
received a conversion notice, converting an aggregate principal amount of $9,700 and fees thereon of $500, at a conversion price
of $0.006, into 1,700,000 shares of common stock. The balance of the note plus accrued interest at March 31, 2019 was $15,966 net
of unamortized discount of $3,560.
July 26,2019
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 March 31, 2019 was $20,180 net of unamortized discount of $8,815.
August 31, 2019
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 March 31, 2019 was $17,251 net of unamortized discount of $11,527.
October 16, 2019
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 March 31, 2019 was $13,507 net of unamortized discount of $14,994.
Alex Pereira
November 5, 2019
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 March 31, 2019 was $8,316 net of unamortized discount of $11,550.
QPAGOS
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
|
9
|
CONVERTIBLE NOTES PAYABLE (continued)
|
Gibbs International
Holdings
On Demand
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.
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.
The balance of the note plus accrued interest at March 31, 2019 was $65,740.
August 31, 2019
Effective August 20, 2018, the
Company exchanged a note issued to Gibbs International Holdings with a principal amount of $294,620, together with accrued interest
thereon of $111,115, totaling $405,735, for a convertible note, principal amount of $405,735, with a coupon of 8% per annum and
maturing on August 31, 2019. The Company 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 March 31, 2019 was $260,466
net of unamortized discount of $165,100.
Delinvest
Commercial, LTD.
December 16, 2019
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 March
31, 2019 was $25,047.
December 26, 2019
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 March 31, 2019 was $67,557.
In connection with the convertible notes above, the
Company issued warrants to purchase 370,616 common shares of the Company at a variable exercise price of $0.20 per share, if the
convertible note above is converted into common shares prior to its maturity date or $0.30 per share if the convertible note is
not converted prior to its maturity date.
QPAGOS
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
9
|
CONVERTIBLE NOTES PAYABLE (continued)
|
BOBA Management Corporation.
January 23, 2020
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.
The balance of the note plus
accrued interest at March 31, 2019 was $18,414 net of unamortized discount of $75,834.
Certain of the short-term convertible
notes disclosed in note 9 above and note 14 below, have variable priced conversion rights with no fixed floor price and will re-price
dependent on the share price performance over varying periods of time, due to the variable priced conversion rights, all convertible
notes and any warrants attached thereto, issued subsequent to the variable priced conversion notes are valued and give rise to
a derivative financial liability, which was initially valued at inception of the convertible notes using a Black-Scholes valuation
model. The value of this derivative financial liability was re-assessed at March 31, 2019 and 2018, a total of $542,525 and $2,531,332
was credited to the statement of comprehensive loss, respectively. The value of the derivative liability will be re-assessed at
each financial reporting period, with any movement thereon recorded in the statement of operations in the period in which it is
incurred.
The following assumptions were
used in the Black-Scholes valuation model:
|
|
Three
months
ended
March 31,
2019
|
|
Conversion price
|
|
$
|
0.009 to 0.20
|
|
Risk free interest rate
|
|
|
2.34 to 2.59
|
%
|
Expected life of derivative liability
|
|
|
1 to 16 months
|
|
Expected volatility of underlying stock
|
|
|
173.1% to 174.2
|
%
|
Expected dividend rate
|
|
|
0
|
%
|
The movement in derivative liability
is as follows:
|
|
March 31, 2019
|
|
|
December
31, 2018
|
|
|
|
|
|
|
|
|
Opening balance
|
|
$
|
1,833,672
|
|
|
$
|
3,277,621
|
|
Derivative financial liability arising from convertible notes
|
|
|
284,884
|
|
|
|
2,685,845
|
|
Fair value adjustment to derivative liability
|
|
|
(542,525
|
)
|
|
|
(4,129,793
|
)
|
|
|
$
|
1,576,031
|
|
|
$
|
1,833,672
|
|
QPAGOS
NOTES TO THE UNAUDITED CONDENSED 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 113,215,382 and 88,839,218 shares of common
stock as of March 31, 2019 and December 31, 2018.
In terms of various debt conversion
notices received between January 16, 2019 and March 2, 2019, the Company issued an aggregate of 24,376,164 shares of common stock
in settlement of $310,259 of convertible notes, resulting in a net loss on conversion of $367,704.
The Company has authorized 25,000,000
shares of preferred stock with a par value of $0.0001 authorized, no preferred stock is issued and outstanding as of March 31,
2019.
The warrants outstanding and exercisable at March
31, 2019 are as follows:
|
|
|
|
Warrants outstanding
|
|
|
Warrants exercisable
|
|
Exercise price
|
|
|
No. of
shares
|
|
|
Weighted
average
remaining
years
|
|
|
Weighted
average
exercise
price
|
|
|
No. of
shares
|
|
|
Weighted
average
exercise
price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.625
|
|
|
|
6,219,200
|
|
|
|
1.10
|
|
|
|
|
|
|
|
6,219,200
|
|
|
|
|
|
$
|
0.20
|
|
|
|
2,308,513
|
|
|
|
1.24
|
|
|
|
|
|
|
|
2,308,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,527,713
|
|
|
|
1.44
|
|
|
$
|
0.51
|
|
|
|
8,527,713
|
|
|
$
|
0.51
|
|
The warrants outstanding have
an intrinsic value of $0 and $0 as of March 31, 2019 and December 31, 2018, respectively.
On June 18, 2018, the Company
established its 2018 Stock Incentive Plan. The purpose of the plan is to promote the interests of the Company and the stockholders
of the Company by providing directors, officers, employees and consultants of the Company with appropriate incentives and rewards
to encourage them to enter into and continue in the employ or service of the Company, to acquire a proprietary interest in the
long-term success of the Company and to reward the performance of individuals in fulfilling long-term corporate objectives. The
plan terminates after a period of ten years in June 2028.
The Plan is administered by
the Board of Directors or a Committee appointed by the Board of Directors who have the authority to administer the Plan and to
exercise all the powers and authorities 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.
QPAGOS
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
11
|
STOCKHOLDERS’ EQUITY (continued)
|
|
d)
|
Stock options (continued)
|
The options outstanding and
exercisable at March 31, 2019 are as follows:
|
|
|
|
Options outstanding
|
|
|
Options exercisable
|
|
Exercise price
|
|
|
No. of
shares
|
|
|
Weighted
average
remaining
years
|
|
|
Weighted
average
exercise
price
|
|
|
No. of
shares
|
|
|
Weighted
average
exercise
price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.04
|
|
|
|
|
2,000,000
|
|
|
|
9.75
|
|
|
$
|
0.04
|
|
|
|
2,000,000
|
|
|
$
|
0.04
|
|
The options outstanding have
an intrinsic value of $0 as of March 31, 2019.
Revenue is derived from the following sources:
|
|
Three
Months
Ended
March 31,
2019
|
|
|
Three
Months
Ended
March 31,
2018
|
|
|
|
|
|
|
|
|
Sales of services
|
|
$
|
1,206,137
|
|
|
$
|
1,443,107
|
|
Payment processing fees
|
|
|
9,234
|
|
|
|
5,294
|
|
Kiosk sales
|
|
|
5,432
|
|
|
|
—
|
|
Other
|
|
|
15,399
|
|
|
|
16,388
|
|
|
|
$
|
1,236,202
|
|
|
$
|
1,464,789
|
|
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, 2019 and 2018, all
convertible debt and warrants, were excluded from the computation of diluted net loss per share.
Dilutive shares which could exist
pursuant to the exercise of outstanding stock instruments and which were not included in the calculation because their effect would
have been anti-dilutive are as follows:
|
|
Three
Months Ended
March 31,
2019
(Shares)
|
|
|
Three
Months Ended
March 31,
2018
(Shares)
|
|
|
|
|
|
|
|
|
Convertible debt
|
|
|
196,182,830
|
|
|
|
9,227,676
|
|
Stock Options
|
|
|
2,000,000
|
|
|
|
—
|
|
Warrants
|
|
|
8,527,713
|
|
|
|
8,527,713
|
|
|
|
|
206,710,543
|
|
|
|
17,755,389
|
|
QPAGOS
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
14
|
RELATED PARTY TRANSACTIONS
|
The following transactions were
entered into with related parties:
LOANS PAYABLE
Description
|
|
Interest Rate
|
|
|
Maturity
Date
|
|
March 31,
2019
|
|
|
December 31,
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vladimir Skigin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment funding
|
|
|
36
|
%
|
|
On Demand
|
|
$
|
86,225
|
|
|
$
|
81,316
|
|
Promissory note
|
|
|
15
|
%
|
|
January 11,
2020
|
|
|
57,348
|
|
|
|
55,474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable – Related parties
|
|
|
|
|
|
|
|
$
|
143,573
|
|
|
$
|
136,790
|
|
Interest expense totaled $6,784
and $69,748 for the three months ended March 31, 2019 and 2018, 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 March 31, 2019 is $86,225.
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 changed to 15%.
The balance of the note plus accrued interest
at March 31, 2019 is $57,348.
QPAGOS
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
14
|
RELATED PARTY TRANSACTIONS (continued)
|
CONVERTIBLE NOTES PAYABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31
2019
|
|
|
December 31
2018
|
|
Description
|
|
Interest
rate
|
|
|
Maturity Date
|
|
Principal
|
|
|
Accrued
interest
|
|
|
Unamortized
debt discount
|
|
|
Balance,
net
|
|
|
Balance,
net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cobbolo Limited
|
|
|
15
|
%
|
|
December 26, 2019
|
|
|
53,438
|
|
|
|
13,265
|
|
|
|
—
|
|
|
|
66,703
|
|
|
|
64,726
|
|
|
|
|
15
|
%
|
|
December 26, 2019
|
|
|
52,959
|
|
|
|
13,146
|
|
|
|
—
|
|
|
|
66,105
|
|
|
|
64,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total convertible notes payable
|
|
|
|
|
|
|
|
$
|
106,397
|
|
|
$
|
26,411
|
|
|
$
|
—
|
|
|
$
|
132,808
|
|
|
$
|
128,872
|
|
Interest expense totaled to $3,935
and $506,865 for the three months ended March 31, 2019 and 2018, respectively.
The convertible notes above have
a fixed conversion price of $0.20 per common share.
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 March 31, 2019 was $66,703.
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 March 31,2019 was $66,105.
In connection with the Convertible
notes above, the Company issued a warrant to purchase 531,987 common shares of the Company at a variable exercise price of $0.20
per share, if the convertible note above is converted into common shares prior to its maturity date or $0.30 per share if the convertible
note is not converted prior to its maturity date.
QPAGOS
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
15
|
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.
Refer to Note 6 above for future minimum operating lease commitments.
Conversion of convertible
notes into equity
On April 18, 2019, the Company
received a notice of conversion from JSJ investments, converting $35,000 into 5,028,735 shares of common stock at a conversion
price of $0.00696 per share. The company made a loss on conversion of $61,853.
On April 29, 2019, the Company
received a notice of conversion from Labrys fund, converting $11,967 of interest into 1,869,979 shares of common stock at a conversion
price of $0.0063996 per share. The company made a loss on conversion of $24,684.
On April 30, 2019, the Company
received a notice of conversion from JSJ investments, converting $35,000 into 5,511,984 shares of common stock at a conversion
price of $0.00635 per share. The company made a loss on conversion of $73,309.
On May 6, 2019, the Company received
a notice of conversion from GS Capital Partners, converting $26,000 of principal and $2,051 of interest into 4,208,778 shares of
common stock at a conversion price of $0.006665 per share. The company made a loss on conversion of $22,454.
On May 13, 2019, the Company
received a notice of conversion from Crown Bridge Partners converting $9,760 of principal into 2,700,000 shares of common stock
at a conversion price of $0.0038 per share. The company made a loss on conversion of $19,440.
Convertible notes
On April 2, 2019, the company
received the proceeds of a convertible promissory note issued to JSJ Investments, Inc. on March 29, 2019, with the aggregate principal
amount of $75,000. The note 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.
Promissory notes
On April 12, 2019, the Company
issued a Promissory Note in the aggregate principal amount of $20,000 to Boba Management Corporation. The note has a maturity date
of April 12, 2020 and a coupon of ten percent per annum. The Company has the right to prepay the note without penalty prior to
maturity date.
On May 7, 2019, the Company issued
a Promissory Note in the aggregate principal amount of $10,000 to Boba Management Corporation. The note has a maturity date of
May 7, 2020 and a coupon of ten percent per annum. The Company has the right to prepay the note without penalty prior to maturity
date.
On May 13, 2019, the Company issued a Promissory Note in the aggregate principal amount of $15,000 to
Boba Management Corporation. The note has a maturity date of May 13, 2020 and a coupon of ten percent per annum. The Company has
the right to prepay the note without penalty prior to maturity date.
Other than disclosed above, The
Company has evaluated subsequent events through the date of the unaudited condensed consolidated financial statements were available
to be issued and has concluded that no such events or transactions took place that would require disclosure herein.
Item 2.