UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark one)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal period
ended December 31, 2021
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number – 000-55648
INNOVATIVE PAYMENT SOLUTIONS, INC.
(Exact Name of Registrant as Specified in Its Charter)
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Nevada |
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33 - 1230229 |
(State
or Other Jurisdiction of
Incorporation or Organization) |
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(I.R.S. Employer
Identification No.) |
56B 5th Street, Lot 1, AT#
Carmel by the Sea, CA 93921
(Address of principal executive offices) (Zip Code)
(866) 477-4729
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the
Act: None
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Title of Class |
|
Trading Symbol(s) |
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Name of each exchange on which
registered |
| N/A |
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N/A |
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N/A |
Securities registered pursuant to Section 12 (g) of the Act: Common
Stock, $0.0001 par value
Indicate
by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.
Yes ☐ No ☒
Indicate
by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No ☒
Indicate
by check mark whether the issuer: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. ☒ Yes No ☐
Indicate by check mark whether the registrant has submitted
electronically every interactive data file required to be submitted
pursuant to Rule 405 of Regulation S-T (section 232.405 of this
chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of
“large accelerated filer, “accelerated filer” “smaller reporting
company” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.:
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Large
accelerated filer |
☐ |
Accelerated
filer |
☐ |
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Non-accelerated
filer |
☒ |
Smaller
reporting company |
☒ |
|
| |
|
Emerging
growth company |
☐ |
|
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant has filed a report on and
attestation to its management’s assessment of the effectiveness of
its internal control over financial reporting under Section 404(b)
of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.
☐
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
As of
June 30, 2021, the last business day of the registrant’s most
recently completed second fiscal quarter, the aggregate market
value of the registrant’s common stock held by non-affiliates of
the registrant was approximately $28,155,012 (based upon the
closing sale price of the registrant’s common stock reported on
June 30, 2021 of $0.098 per share). This calculation excludes
shares held by the registrant’s current directors and executive
officers and stockholders that the registrant has concluded are
affiliates of the registrant.
As of
March 29, 2022, the issuer had 367,901,679 shares of common stock
outstanding.
Documents
incorporated by reference: None
FORM 10-K
TABLE OF CONTENTS
PART I
Unless the context requires otherwise, references to “we,” “us,”
“our,” “the Company” “IPSI” and “Innovative Payment Solutions,”
refer to Innovative Payment Solutions, Inc. and its
subsidiaries.
CAUTIONARY Note
Regarding Forward-Looking Statements
Many of the
matters discussed within this Annual Report on Form 10-K (this
“Annual Report”) which do not expressly relate to historical facts,
contain forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), on our current expectations, intentions and
projections about future events. In some cases, you can identify
forward-looking statements by terminology such as “may,” “should,”
“potential,” “continue,” “expects,” “anticipates,” “intends,”
“plans,” “believes,” “estimates,” and similar expressions. These
statements are based on our current beliefs, expectations, and
assumptions and are subject to significant risks and uncertainties,
many of which are difficult to predict and generally beyond our
control, that could cause actual results (including, without
limitation, the results of our digital payment product launches and
other strategic plans and initiatives) to differ materially from
those expressed, projected or implied in or by the forward-looking
statements. Such significant risks and uncertainties include the
risks noted under Part 1. “Business”, and Part I, Item 1A, Risk
Factors, Part II, Item 7”, “Management’s Discussion and
Analysis of Financial Conditions and Results of Operations” but are
also contained elsewhere. We do not undertake any obligation to
update any forward-looking statements. As a result of these
factors, we cannot assure you that the forward-looking statements
in this Annual Report will prove to be accurate. Furthermore, if
our forward-looking statements prove to be inaccurate, the
inaccuracy may be material. Considering the significant
uncertainties in these forward-looking statements, you should not
regard these statements as a representation or warranty by us or
any other person that we will achieve our objectives and plans in
any specified time frame, or at all. We do not undertake any
obligation to update any forward-looking statements.
SUMMARY RISK FACTORS
Our business faces significant risks and uncertainties of which
investors should be aware before making a decision to invest in our
common stock. If any of the following risks are realized, our
business, financial condition and results of operations could be
materially and adversely affected. The following is a summary of
the more significant risks relating to the Company. A more detailed
description of our risk factors set forth under the caption “Risk
Factors” in Item 1A in Part I of, and elsewhere in, this Annual
Report.
Risks Relating to our Company
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We have had very limited
operations to date with our new business model. |
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We
have generated, and we will likely continue to generate, operating
losses and experience negative cash flows, and it is uncertain
whether we will achieve profitability. |
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The
COVID-19 pandemic has caused and may continue to cause a delay in
our roll out plans, which has negatively impacted our ability to
generate revenue and operations and our results of
operations. |
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We
will need additional funding and may be unable to raise capital
when needed, which would force us to delay, reduce or eliminate our
product development programs or commercialization
efforts. |
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We
have identified material weaknesses in our internal controls, and
we cannot provide assurances that these weaknesses will be
effectively remediated or that additional material weaknesses will
not occur in the future. |
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We
have not generated sufficient revenue or cash flow to pay our
convertible debt, and conversion of such debt into shares of common
stock, which could cause significant dilution. |
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Servicing
our debt requires a significant amount of cash. Our ability to
generate sufficient cash to service our debt depends on many
factors beyond our control. |
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Covenant
restrictions under our indebtedness may limit our ability to
operate our business. |
Risks Relating to our Business
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The
payment services industry is highly competitive, and many of our
competitors are larger and have greater financial and other
resources. |
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There
is uncertainty as to market acceptance of our technology, products
and services. |
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We
expect to be subject to extensive government regulation if we are
deemed to be engaged in a regulated business or if we implement our
cryptocurrency operations, we are faced with the risk that new
regulations applicable to our business will be enacted. |
Risks Related to our Plans to Launch Various Digital Payment
Products
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● |
There
can be no assurance that we will be successful in developing
digital payment products. |
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● |
There
is uncertainty in the accounting treatment of digital assets and
therefore we cannot predict the impact our new digital asset line
of business will have on our financial statements. |
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● |
The
regulatory regime governing digital assets and offerings of digital
assets is evolving and uncertain, and new regulations or policies
may materially adversely affect our development. |
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● |
We
may have difficulty managing our growth, which may divert resources
and limit our ability to successfully expand our
operations. |
General Risk Factors
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The
laws and regulations regarding our industry is constantly evolving
and failure to comply adversely impact our business. |
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As
our business develops, we will need to implement enhanced
compliance processes, procedures and controls with respect to the
rules and regulations that apply to our business. |
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Our
systems and our third party providers’ systems may fail due to
factors beyond our control, which could interrupt our service,
cause us to lose business and increase our costs. |
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Our
payment system might be used for fraudulent, illegal or improper
purposes, which could expose us to additional liability and harm
our business. |
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We
may not be able to successfully protect the intellectual property
we license or own and may be subject to infringement
claims. |
Risks Relating to our Securities
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● |
There
is currently a limited public trading market for our common stock
and an active market may never develop. |
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● |
Our
stock price has fluctuated in the past, has recently been volatile
and may be volatile in the future, and as a result, investors in
our common stock could incur substantial losses. |
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● |
Because we became public by means of a reverse
merger, we may not be able to attract the attention of brokerage
firms. |
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● |
Our
board of directors has historically had significant control over us
and we have yet to establish committees comprised of independent
directors. |
Item 1. Business
Company Overview
We are a provider of digital payment solutions and services to
businesses and consumers. We are focused on operating and
developing “e-wallets” that enable consumers to deposit cash,
convert it into a digital form, and remit the funds to Mexico and
other countries quickly and securely. Our first e-wallet, the
Beyond Wallet, is currently operational. Our flagship
e-wallet, IPSIPay, was soft launched in December 2021
and will be fully launched during the second quarter of 2022.
Previously, we intended to invest in physical kiosks which required
the user presence at digital payment kiosk locations, and we still
intend to use our existing kiosks in certain target markets within
Southern California.
We acquired a 10% strategic interest in Frictionless Financial
Technologies, Inc. (“Frictionless”), on June 22, 2021. Frictionless
agreed to deliver to us, a live fully compliant financial payment
Software as a Service solution for use by us as a digital payment
platform that enables payments within the United States and abroad,
including Mexico, together with a service agreement providing a
full suite of product services to facilitate our anticipated
product offerings. We have an irrevocable right to acquire up to an
additional 41% of the outstanding common stock of Frictionless
at a purchase price of $300,000 for each 1% acquired.
On August 26, 2021, we formed a new majority owned
subsidiary, Beyond Fintech Inc. (“Beyond Fintech”), in which
we own a 51% stake, with Frictionless owning the
remaining 49%. Beyond Fintech acquired an exclusive
license to our Beyond Wallet offering to further its objective of
providing virtual payment services allowing U.S. persons to
transfer funds to Mexico and other countries.
Our Strategy and Market
We offer a simple digital e-wallet and digital payment
solution for consumers and businesses. We soft launched our IPSIPay
app in December 2021 and plan to fully launch our IPSIPay and
Beyond Wallet e-wallet brands in the second quarter of 2022. As a
California based fintech company, our initial launch will be in the
Central Valley region in California, which is the largest
agricultural belt in the U.S. Our platform (which can be used both
business-to-business and business-to-consumer) will facilitate the
transfer of funds in digital form to other countries, initially
Mexico but also, India and the Philippines, primarily from
hand-held devices as well as on desktop or laptop computers.
Our launch plan for IPSIPay and Beyond Wallet is to target lower
income, migrant communities in California (notably in the
agriculture industry), and expanding to other states with large
migrant populations such as Texas and Florida. According to the
American Immigration Counsel, in 2018, 10.6 million immigrants
(foreign-born individuals) comprised 27 percent of the population
of California, and the top country of origin for immigrants was
Mexico, at 38 percent of immigrants. According to The Wilson Center
Mexico Institute, the market for money remittance from California
to Mexico during 2021 was estimated to be approximately $16.25
billion. We therefore believe our market is not only large and
growing, but that servicing this market is socially responsible. We
believe our digital payment facilitation platform and related apps
will empower and enable the unbanked and under-served and payment
providers who service these users, acting as a bridge to provide
access to comprehensive and easy to use payment solutions. Given
the large size of our addressable market, our ability to capture
even a very small share of the market represents a significant
revenue opportunity for our company.
Previously, we intended to provide digital payment solutions via
kiosks, as part of our strategy. However due to the delays
experienced with the COVID-19 pandemic, we pivoted to a mobile
platform, we believe will offer our users more convenience,
security and efficiency through hand-held mobile devices, while
significantly reducing our capital expenditures.
Services and Business Model
Our primary sources of revenue is commissions and fees from the use
of our digital suite of products without physical custody of
customer funds. Our fully functional apps includes the ability to
use an e-wallet, Visa debit cards, bill payment platform,
e-commerce and the ability to buy gold and silver. We believe we
have the ability and technology to add micro-loans, tele-medicine
services as well as payroll services to our apps in the future.
In addition to these revenue generators, we intend releasing our
BeyondAgro software to enable growers to improve
business management and management of contract employees,
particularly migrant workers. This will be offered as a monthly
fee-based SaaS platform.
Our revenue will include fees derived from the use of debit cards,
ATM fees, merchant processing fees, money transfer fees,
commissions on international bill payments and, in the near future
micro-loans and tele-medicine.
Marketing
We intend to initially focus on the underserved labor markets,
initially focusing on the Californian agriculture industry to
acquire customers for our IPSIPay and Beyond Wallet apps. We will
use direct social media marketing strategies to the business to
consumer market.
Our marketing effort will be directed towards businesses, initially
towards agricultural businesses. In marketing our software
platform, we believe we have a differentiated product that will
allow agricultural companies to pay their laborers with e-wallet
money transfers instead of traditional check payments. The laborers
will then be able to transfer funds, pay utility bills and send
money abroad cheaper and more conveniently with instant settlement,
a product offering that, we believe, does not exist at present.
Competition
The payment service business is highly competitive and continued
growth depends on our ability to compete effectively. Companies
like Western Union, Money Gram, Paypal, and Venmo, dominate the
money remittance business, and most of our competitors have far
greater sources of financing, greater name recognition and have
been engaged in the industry longer than we have.
We believe, however that the differentiator with the IPSIPay and
Beyond Wallet apps is our ability to provide the unbanked and
under-served the ability to transact without the use of a
traditional bank account, with greater convenience, lower costs and
instant settlement, and with free wallet-to-wallet transfers, and
the ability to upload funds onto Visa debit cards across borders.
We believe the design of our apps will be highly attractive to our
initial target communities, thus allowing our product to compete
effectively.
Intellectual Property
We rely on a combination of contractual rights, copyright,
trademark and trade secret laws to establish and protect our
technology and the technology that we license and/or that we
develop in the future. We presently have three trademark
applications on file and under review, and our 51% subsidiary
Beyond Fintech has an additional three trademark applications on
file and under review.
Government and Environmental Regulation and Laws
We act as a facilitator between consumers and finance product
providers, and therefore operate in a highly regulated industry.
While we do not believe that our core business as a facilitator
presently is subject to significant government regulation our
finance product providers are subject to a variety of regulations
aimed at preventing money laundering and financing criminal
activity and terrorism, financial services regulations, payment
services regulations, consumer protection laws, currency control
regulations, advertising laws and privacy and data protection laws
and therefore may expect to experience periodic investigations by
various regulatory authorities in connection with the same, which
may sometimes result in monetary or other sanctions being imposed
upon them. Many of these laws and regulations are constantly
evolving and are often unclear and inconsistent with other
applicable laws and regulations, making compliance challenging, and
may indirectly increase our operating costs and legal risks (or
directly should it be determined that our business model is or
becomes subject to more extensive regulation). In particular, there
has been increased public attention and heightened legislation and
regulations regarding money laundering and terrorist financing. Our
providers may have to make significant judgment calls in applying
anti-money laundering legislation and risk being found in
non-compliance with such laws, and these judgement calls, to the
extent they curtail the availability of the applicable financial
product, could harm our business.
To the
extent our business is or will be involved in the
utilization of blockchain
or cryptocurrency, the regulatory regime governing these sectors is
highly uncertain, and new
regulations or policies may materially adversely affect our
business plans. Regulation of cryptocurrencies, blockchain
technologies and cryptocurrency exchanges, is currently undeveloped
and likely to rapidly evolve as government agencies take greater
interest in them. Regulation also varies significantly among
international, federal, state and local jurisdictions and is
subject to significant uncertainty.
In
addition, any violations of laws and regulations relating to the
safeguarding of private information in connection with IPSIPay and
Beyond Wallet, could subject us to fines, penalties or other
regulatory actions, as well as to civil actions by affected
parties.
Any violations of any of the foregoing or similar laws, rules or
regulations could adversely affect our ability to maintain IPSIPay
and Beyond Wallet, which could have a material adverse effect on
our operations and financial condition. Failure by us to comply
with any laws, rules and regulations, some of which may not exist
yet or are subject to interpretation and may be subject to change,
could result in a variety of adverse consequences, including civil
penalties and fines.
Human Capital/Employees
As of December 31, 2021, we had 6 full time employees,
including our Chief Executive Officer and President or Chief
Financial Officer and 4 employees. None of our employees are
represented by a labor union, and we consider our employee
relations to be good.
Our Corporate History and Background
We were incorporated on September 25, 2013 under the laws
of the State of Nevada originally under the name Asiya Pearls, Inc.
On May 27, 2016, Asiya Pearls, Inc. filed a Certificate
of Amendment to its Articles of Incorporation to change its name
from Asiya Pearls, Inc. to QPAGOS.
On May 12, 2016, we (at that time, under the name 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 our company (“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 our common stock, par value $0.0001
per share (the “Common Stock”). Additionally, pursuant to the
Merger Agreement, upon consummation of the Merger, we assumed all
of Qpagos Corporation’s warrants issued and outstanding immediately
prior to the Merger, which were exercisable for approximately
621,920 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 stockholder of 500,000 shares of Common Stock
agreed to return to us 497,500 shares of Common Stock held by such
holder and the then-current stockholder retained an aggregate of
2,500 shares of Common Stock and the other stockholders retained
500,000 shares of Common Stock. Therefore, immediately following
the Merger, Qpagos Corporation’s former stockholders held 4,992,900
shares of Common Stock which represented approximately 91% of the
then outstanding Common Stock.
The Merger was treated as a reverse acquisition of our company,
which was then a public shell company, for financial accounting and
reporting purposes. As such, Qpagos Corporation was treated as the
acquirer for accounting and financial reporting purposes while IPSI
was treated as the acquired entity for accounting and financial
reporting purposes.
Qpagos Corporation was incorporated on May 1, 2015 under the laws
of the state of Delaware to effectuate a reverse merger transaction
with Qpagos, S.A.P.I. de C.V. (“Qpagos Mexico”) and Redpag
Electrónicos S.A.P.I. de C.V. (“Redpag”). Each of the entities were
incorporated in November 2013 in Mexico.
Qpagos Mexico was formed to process payment transactions for
service providers it contracts with, and Redpag was formed to
deploy and operate kiosks as a distributor.
On June 1, 2016, our board of directors of changed our fiscal year
end from October 31 to December 31.
On November 1, 2019, we changed our name from QPAGOS to Innovative
Payment Solutions, Inc. Additionally, and immediately following the
name change, we filed a Certificate of Change with the Secretary of
State of the State of Nevada to affect a reverse split of the
Common Stock at a ratio of 1-for-10, effective on November 1, 2019
(the Reverse Stock Split”). As a result of the Reverse Stock Split,
each ten pre-split shares of Common Stock outstanding automatically
combined into one new share of Common Stock without any further
action on the part of the holders, and the number of outstanding
shares of Common Stock was reduced from 320,477,867 shares to
32,047,817 after rounding for fractional shares.
On December 31, 2019, we consummated the disposal of Qpagos
Corporation, Qpagos Mexico and Redpag in exchange for 2,250,000
shares (the “Vivi Shares”) of common stock of Vivi Holdings, Inc.
(“Vivi” or “Vivi Holdings”) pursuant to a Stock Purchase Agreement
dated August 5, 2019 (the “SPA”). Of the 2,250,000 shares of Vivi,
nine percent (9%) was allocated as follows: Gaston Pereira (5%),
Andrey Novikov (2.5%), and Joseph Abrams (1.5%). The SPA closed on
December 31, 2019 after the satisfaction of customary conditions,
the receipt of a final fairness opinion and the approval of our
shareholders. As a result of this transaction, we no longer has any
Mexican subsidiaries.
We acquired a 10% strategic interest in Frictionless on June
22, 2021. Frictionless agreed to deliver to us, a live, fully
compliant financial payment Software as a Service solution for use
by us as a digital payment platform that enables payments within
the United States and abroad, including Mexico, together with a
service agreement providing a full suite of product services to
facilitate our anticipated product offerings. We hold an
irrevocable right to acquire up to an additional 41% of the
outstanding common stock of Frictionless at a purchase price of
$300,000 for each 1% acquired.
On August 26, 2021, we formed a new subsidiary, Beyond Fintech to
acquire a product known as Beyond Wallet from a third party,
together with the logo, use of name and implementation of the
product into our technology. We own 51% of Beyond Fintech with
the other 49% owned by Frictionless.
Corporate Information
Our principal offices are located at 56B
5th Street, Lot 1, AT#, Carmel by the
Sea, CA, 93921, and our telephone number at that office
is (866) 477-4729. Our website address is www.ipsipay.com.
Information contained in our website does not form part of this
Annual Report and is intended for informational purposes only.
Available Information
We have included our website address as a factual reference and do
not intend it to be an active link to our website. We make
available on our website, www.ipsipay.com., our Annual Reports on
Form 10-K, quarterly Reports on Form 10-Q and Current Reports on
Form 8-K and amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Exchange Act. These
reports are available free of charge through the investor relations
page of our internet website as soon as reasonably practicable
after those reports are filed with the SEC.
Item 1A. Risk Factors
Risks Relating to our Company
We have had very limited operations to date with our new
business model.
In December 2019, we sold our Mexican subsidiaries and are now
focused on developing our U.S. based business. To date, as a result
of COVID-19 business closures and the resultant impact on being
able to travel and meet suppliers and customers, in person, the
launch of our e-wallets and the installation of a limited network
of kiosks in Southern California has been delayed. As such, we have
a very limited operating history in our current business model,
which makes it difficult to evaluate both our operating history and
our future potential. We have yet to demonstrate our ability to
overcome the risks frequently encountered in the payment services
industry in the United States and are still subject to many of the
risks common to early stage companies, including the uncertainty as
to our ability to implement our business plan, market acceptance of
our proposed business and services, under-capitalization, cash
shortages, limitations with respect to personnel, financing and
other resources and uncertainty of our ability to generate
revenues. There is no assurance that our activities will be
successful or will result in any revenues or profit, and the
likelihood of our success must be considered in light of the stage
of our development. There can be no assurance that we will be able
to consummate our business strategy and plans, or that financial,
technological, market, or other limitations may force us to modify,
alter, significantly delay, or significantly impede the
implementation of such plans. We have insufficient results for
investors to use to identify historical trends. Investors should
consider our prospects considering the risk, expenses and
difficulties we will encounter as an early-stage company. Our
revenue and income potential is unproven and our business model is
continually evolving. We are subject to the risks inherent to the
operation of a new business enterprise and cannot assure you that
we will be able to successfully address these risks.
We have generated and we will likely continue to generate,
operating losses and experience negative cash flows, and it is
uncertain whether we will achieve profitability.
For the years ended December 31, 2021 and 2020, we incurred a net
loss of $14,494,915 and $5,444,544, respectively. We have an
accumulated deficit of $42,111,701 through December 31, 2021. We
expect to continue to incur operating losses until such time, if
ever, as we are able to achieve sufficient levels of revenue from
operations. There can be no assurance that we will ever generate
significant sales or achieve profitability. Accordingly, the extent
of future losses and the time required to achieve profitability, if
ever, cannot be predicted.
We also expect to experience negative cash flows for the
foreseeable future as we fund our operating losses. Although we
believe our existing cash and cash equivalents will be sufficient
for the next twelve months, if in the long term we do not generate
significant revenues or raise additional financing in order to
achieve and maintain profitability. We may not be able to generate
these revenues or achieve profitability in the future. Our failure
to achieve or maintain profitability would likely negatively impact
the value of our securities and financing activities.
The COVID-19 pandemic has caused and may continue to cause a
delay in our roll out plans, which has negatively impacted our
ability to generate revenue and operations and results of
operations.
The COVID-19 pandemic has required our management to focus their
attention primarily on responding to the challenges presented by
the pandemic, including ensuring continuous operations, and
adjusting our operations to address changes in the virtual payments
industry. Due to measures imposed by the local governments in areas
affected by COVID-19, businesses have been suspended due to
quarantine intended to contain this outbreak and many people have
been forced to work from home in those areas. As a result,
development of our e-wallets and the limited installation of our
network of kiosks in Southern California has been delayed, which
has had an adverse impact on our business and financial condition
and has hampered our ability to generate revenue and access usual
sources of liquidity on reasonable terms. As the COVID-19 pandemic
evolves, we may face similar challenges in the future which could
lead to material adverse impacts on our company.
We will need additional funding and may be unable to raise
capital when needed, which would force us to delay, reduce or
eliminate our product development programs or commercialization
efforts.
As of December 31, 2021, we had cash and cash equivalents of
$5,449,751. We believe that based on our current operating plan,
our existing cash and cash equivalents will be sufficient to enable
us to fund our operations and our debt and other obligations
for the near term. See “Management’s Discussion and Analysis of
Financial Condition and Results of Operations—Liquidity and Capital
Resources” below. However, we will need additional funds to fully
implement our business plan as we seek to achieve revenues,
positive cash flow and profitability. There is a material risk that
we will be unable to generate sufficient revenues to pay our
expenses, and if our existing sources of cash and cash flows are
insufficient to fund our activities, we will need to raise
additional funds. Additional equity or debt financing may not be
available on acceptable terms, if at all, particularly in the
current economic environment. If adequate funds are not available,
we may be required to delay, reduce the scope of or eliminate one
or more of our new products in development.
Until such time, if ever, as we can generate substantial product
revenues, we will be required to finance our cash needs through
public or private equity offerings, debt financings and corporate
collaboration and licensing arrangements. If we raise additional
funds by issuing equity securities, our stockholders may experience
dilution. Debt financing, if available, may involve agreements that
include covenants limiting or restricting our ability to take
specific actions, such as incurring additional debt, making capital
expenditures or declaring dividends. Any debt financing or
additional equity that we may raise may contain terms, such as
liquidation and other preferences, that are not favorable to us or
our stockholders. If we raise additional funds through
collaboration and licensing arrangements with third parties, it may
be necessary to relinquish valuable rights to our technologies,
research programs or product candidates or grant licenses on terms
that may not be favorable to us.
If we are unsuccessful in achieving profitability, and we cannot
obtain additional funds on commercially reasonable terms or at all,
we may be required to significantly reduce or cease our operations,
which could result in the loss to investors of their investment in
our securities.
We have identified material weaknesses in our internal
controls, and we cannot provide assurances that these weaknesses
will be effectively remediated or that additional material
weaknesses will not occur in the future.
Our management is responsible for establishing and maintaining
adequate internal control over our financial reporting, as defined
in Rule 13a- 15(f) under the Exchange Act. We have identified
material weaknesses in our internal controls. As of December 31,
2021, which included (i) insufficient segregation of duties and
oversight of work performed in our accounting and finance function
due to limited personnel with the appropriate skill sets and (ii)
lack of written policies and procedures to address all material
transactions and developments impacting our financial statements.
As a result of these weaknesses, we are faced with the risk that we
may not always be able to detect errors or omissions in our
financial reporting. We may be unable to satisfactorily remediate
our internal control weaknesses, and if we fail to comply with the
rules under Sarbanes-Oxley related to disclosure controls and
procedures in the future, or, if we continue to have material
weaknesses and other deficiencies in our internal control and
accounting procedures and disclosure controls and procedures, our
stock price could decline significantly and raising capital could
be more difficult. If additional material weaknesses or significant
deficiencies are discovered or if we otherwise fail to address the
adequacy of our internal control and disclosure controls and
procedures our business may be harmed. Moreover, effective internal
controls are necessary for us to produce reliable financial reports
and are important to helping prevent financial fraud. If we cannot
provide reliable financial reports or prevent fraud, our business
and operating results could be harmed, investors could lose
confidence in our reported financial information, and the trading
price of our securities could drop significantly.
We have not generated sufficient revenue or cash flow to pay
our convertible debt, and conversion of such debt into shares of
common stock, which could cause significant dilution.
As of December 31, 2021, we had outstanding convertible debt in the
principal amount of $2,044,000. To date, we have not generated
sufficient revenue or cash flows to pay the balances owed under
these notes and provide sufficient working capital to run our
business. The outstanding principal amount of the notes is
convertible at any time and from time to time at the election of
the holder after certain periods of time into shares of our common
stock at discounts to the market price of our common stock. In
addition, upon the occurrence and during the continuation of an
Event of Default (as defined in the notes), the notes each will
become immediately due and payable and we have agreed to pay
additional default interest rates. We may not have sufficient cash
resources or access to funding to repay such notes. Moreover, upon
conversion of these notes, our current shareholders will suffer
dilution, which could be significant.
Servicing our debt requires a significant amount of cash. Our
ability to generate sufficient cash to service our debt depends on
many factors beyond our control.
Our ability to make payments on and to refinance our debt, to fund
planned capital expenditures and to maintain sufficient working
capital depends on our ability to generate cash in the future.
This, to a certain extent, is subject to general economic,
financial, competitive, legislative, regulatory and other factors
that are beyond our control. We cannot assure you that our business
will generate sufficient cash flow from operations or from other
sources in an amount sufficient to enable us to service our debt or
to fund our other liquidity needs. If our cash flow and capital
resources are insufficient to allow us to make scheduled payments
on our debt, we may need to seek additional capital or restructure
or refinance all or a portion of our debt on or before the maturity
thereof, any of which could have a material adverse effect on our
business, financial condition or results of operations. We cannot
assure you that we will be able to refinance any of our debt on
commercially reasonable terms or at all, or that the terms of that
debt will allow any of the above alternative measures or that these
measures would satisfy our scheduled debt service obligations. If
we are unable to generate sufficient cash flow to repay or
refinance our debt on favorable terms, it could significantly
adversely affect our financial condition and the value of our
outstanding debt. Our ability to restructure or refinance our debt
will depend on the condition of the capital markets and our
financial condition. Any refinancing of our debt could be at higher
interest rates and may require us to comply with more onerous
covenants, which could further restrict our business operations.
There can be no assurance that we will be able to obtain any
financing when needed.
Covenant restrictions under our indebtedness may limit our
ability to operate our business.
Our outstanding convertible notes contain, and our future
indebtedness agreements may contain covenants that restrict our
ability to finance future operations or capital needs or to engage
in other business activities. The Notes restrict our ability
to:
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incur, assume or guarantee or suffer to exist any
indebtedness for borrowed money of any kind, including, but not
limited to, a guarantee, on or with respect to any of its property
or assets now owned or hereafter acquired or any interest therein
or any income or profits therefrom other than Permitted
Indebtedness (as defined in the notes); |
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repurchase capital stock; |
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repay
any Indebtedness (as defined in the notes) other than certain
secured notes which are no longer outstanding or Permitted
Indebtedness or make other restricted payments including, without
limitation, paying dividends and making investments; |
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sell
or otherwise dispose of assets; and |
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enter
into transactions with affiliates. |
In addition, the notes contain price protection anti-dilution
provisions that will discourage financing at prices below the
conversion price of the notes and will result in a decrease in the
conversion price of the notes if we should issue securities below
such price.
We are dependent on technology networks and systems to
process, transmit and securely store electronic information and we
could be subject to liability if our technology systems fail to be
secure.
We could be held liable for damages or our reputation could suffer
from security breaches or disclosure of confidential information or
personal data. We are dependent on technology networks and systems
to process, transmit and securely store electronic information and
to communicate with our kiosks, with our partners and with our
customers. Security breaches of this infrastructure could lead to
shutdowns or disruptions of our systems and potential loss or
unauthorized disclosure of confidential information or data,
including personal data. The theft and/or unauthorized use or
publication of our, or our customers’, confidential information or
other proprietary business information as a result of such an
incident could adversely affect our competitive position and reduce
marketplace acceptance of our services. Any failure in the networks
or computer systems used by us or our customers could result in a
claim for substantial damages against us and significant
reputational harm, regardless of our responsibility for the
failure. In addition, the Company will have access to or are
required to manage, utilize, collect and store sensitive or
confidential customer or employee data, including personal data. As
a result, we are subject to numerous U.S. and non-U.S. laws and
regulations designed to protect this information, such as various
U.S. federal and state laws governing the protection of personal
data. If any person, including any of our employees, negligently
disregards or intentionally breaches controls or procedures with
which we are responsible for complying with respect to such data,
or otherwise mismanages or misappropriates that data, or if
unauthorized access to or disclosure of data in our possession or
control occurs, we could be subject to liability and penalties in
connection with any violation of applicable privacy laws and/or
criminal prosecution, as well as significant liability to our
customers or our customers’ clients’ for breaching contractual
confidentiality and security provisions or privacy laws. The loss
or unauthorized disclosure of sensitive or confidential customer or
employee data, including personal data, whether through breach of
computer systems, systems failure, employee negligence, fraud or
misappropriation, or otherwise, could damage our reputation and
cause us to lose customers. Similarly, unauthorized access to or
through our information systems and networks or those we develop or
manage for our customers, whether by our employees or third
parties, could result in negative publicity, legal liability and
damage to our reputation, which could in turn harm our business,
results of operations, or financial condition.
Risks Related to Our Business
The payment services industry is highly competitive, and many
of our competitors are larger and have greater financial and other
resources.
The payment services industry is highly competitive, and our
continued growth depends on our ability to compete effectively with
both traditional and non-traditional payment service providers. We
currently expect to face competition from a variety of financial
and non-financial business groups which include retail banks,
non-traditional payment service providers which provide mobile
top-up services, and mobile network operators, traditional kiosk
and terminal operators, electronic payment system operators, as
well as other companies that provide various forms of payment
services, including electronic payment and payment processing
services. Competitors in our industry seek to differentiate
themselves by features and functionalities such as speed,
convenience, network size, accessibility, hours of operation,
reliability and price. A significant number of these competitors
have greater financial, technological and marketing resources than
we have, and operate robust networks and are highly regarded by
consumers.
There is uncertainty as to market acceptance of our
technology, products and services.
We have conducted our own research into the markets for our
technology, products and services; however, because we are a new
entrant into the market, there is a risk that the market will not
accept our technology, products and services. Further, we have
limited information on which to estimate our anticipated level of
sales. Our products and services require consumers and service
providers to adopt our technology. Our industry is susceptible to
rapid technological developments and there can be no assurance that
we will be able to match any new technological advances. If we are
unable to match the technological changes in the needs of our
customers, the demand for our products will be reduced and our
ability to generate revenue could be adversely impacted.
We are subject to the economic risk and business cycles of
our merchants, agents and the overall level of consumer
spending.
The payment services industry depends heavily on the overall level
of consumer spending. We are exposed to general economic conditions
that affect consumer confidence, consumer spending, consumer
discretionary income or changes in consumer purchasing habits.
Economic factors such as employment levels, business conditions,
energy and fuel costs, interest rates, and inflation rate could
reduce consumer spending or change consumer purchasing habits. A
reduction in the amount of consumer spending could result in a
decrease in our revenue and profits. If our merchants make fewer
sales of their products and services using our services or
consumers spend less money per transaction, we will have fewer
transactions to process at lower amounts, resulting in lower
revenue. Weakening in the Mexican economy could have a negative
impact on our merchants, as well as consumers who purchase products
and services using our payment processing systems, which could, in
turn, negatively impact our business, financial condition and
results of operations, particularly if the recessionary environment
disproportionately affects some of the market segments that
represent a larger portion of our payment processing volume. In
addition, these factors could force some of our merchants and/or
agents to liquidate their operations or go bankrupt, or could cause
our agents to reduce the number of their locations or hours of
operation, resulting in reduced transaction volumes. We also have a
certain amount of fixed costs, including salaries and rent, which
could limit our ability to adjust costs and respond quickly to
changes affecting the economy and our business.
If consumer confidence in our business deteriorates, our
business, financial condition and results of operations could be
adversely affected.
Our business is built on consumers’ confidence in our brands, as
well as our ability to provide fast, reliable payment services. As
a consumer business, the strength of our brand and reputation are
of paramount importance to us. Several factors could adversely
affect consumer confidence in our brand, many of which are beyond
our control, and could have an adverse impact on our results of
operations. These factors include:
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any
regulatory action or investigation against us; |
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any
significant interruption to our systems and operations;
and |
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any
breach of our security systems or any compromises of consumer
data. |
Our business will initially be geographically concentrated
and could be significantly affected by any adverse change in the
region in which we operate.
Initially our business will be concentrated in states such as
California and later Texas and Florida, which have high migrant
populations. We plan to derive all of our revenues from our
businesses operating from these migrant states and expect to
continue to derive a significant portion of our revenue from
customers in these migrant states for the near future. Therefore,
our business is exposed to adverse regulatory and competitive
changes, economic downturns and changes in political conditions in
these migrant states. Moreover, due to the concentration of our
businesses in these migrant states, our business is less
diversified and, accordingly, is subject to regional risks,
including inclement weather, power outages, labor shortages, and
state and local laws, rules and regulations.
We expect to be subject to extensive government regulation if
we are deemed to be engaged in a regulated business or if we
implement our cryptocurrency operations, and we are faced with the
risk that new regulations applicable to our business will be
enacted
Currently, we are indirectly impacted by government regulation,
however, we may be directly subject to a variety of regulations
aimed at preventing money laundering and financing criminal
activity and terrorism, financial services regulations, payment
services regulations, consumer protection laws, currency control
regulations, advertising laws and privacy and data protection laws
which may sometimes result in monetary or other sanctions being
imposed on our financial service providers or us. Many of these
laws and regulations are constantly evolving, and are often unclear
and inconsistent with other applicable laws and regulations, making
compliance challenging and could directly or indirectly increase
our related operating costs and legal risks. In particular, there
has been increased public attention and heightened legislation and
regulations regarding money laundering and terrorist financing. Our
financial service providers or us, may have to make significant
judgment calls in applying anti-money laundering legislation and
risk being found in non-compliance with such laws. The
cryptocurrency business is subject to extensive regulation, see
Risks Related to our Plans to Launch Various Digital Payment
Cryptocurrency Products-The regulatory regime governing blockchain
technologies and cryptocurrencies is evolving and uncertain, and
new regulations or policies may materially adversely affect our
business in the future.
We may have difficulty managing our growth, which may divert
resources and limit our ability to successfully expand our
operations.
Our implementation of our business plan and current or future
strategic initiatives will place significant demands on our
operations and management. Our future success will depend on the
ability of our officers and other key employees to continue to
implement and improve our operational, credit, financial,
management and other internal risk controls and processes, along
with our reporting systems and procedures, as the number and
geographical scope of our customer and vendor relationships
continue to expand. We may be unable to implement improvements to
our management information and control systems and control
procedures and processes in an efficient or timely manner, and we
may discover additional deficiencies in existing systems and
controls. In particular, our controls and procedures must be able
to accommodate our expected increase in revenue. Our growth
strategy may require us to incur additional expenditures to expand
our administrative and operational infrastructure. If we are unable
to manage future expansion in our operations, we may experience
compliance and operational problems, have to slow the pace of
growth or have to incur additional expenditures beyond current
projections to support such growth, any one of which could
adversely affect our business and results of operations. We may be
unable to increase the volume of sales at acceptable risk levels,
expand our customer base and manage the costs and implementation
risks associated with our growth strategy. We also cannot provide
you with any assurance that our further expansion will be
profitable, that we will be able to maintain any specific level of
growth, if any, that we will be able to maintain capital sufficient
to support our continued growth or that we will be able to
adequately and profitably manage that growth.
Risks Related to our Plans to Launch Various Digital Payment
Products
There can be no assurance that we will be successful in
launching digital payment products.
We have developed and will launch various digital payment products
in the second quarter, including, IPSIPay and Beyond Wallet. No
assurance can be given that we will be able to successfully launch
these products as and when planned. Moreover, the growth of the
digital payments industry in general is subject to a high degree of
uncertainty, and the slowing or stopping of the development or
acceptance of developing protocols may occur unpredictably. This
would have a material adverse impact on our results of operations
and the viability of our current business model.
The regulatory regime governing digital assets and offerings
of digital assets is evolving and uncertain, and new regulations or
policies may materially adversely affect our
development.
The regulatory regime governing digital assets and offerings of
digital assets is uncertain, and new regulations or policies may
materially adversely affect the development and the value of the
Company. Regulation of digital assets is currently undeveloped and
likely to rapidly evolve as government agencies take greater
interest in them. Regulation also varies significantly among
international, federal, state and local jurisdictions and is
subject to significant uncertainty. Various legislative and
executive bodies in the United States and in other countries may in
the future adopt laws, regulations, or guidance, or take other
actions, which may severely impact the digital assets market. In
addition, any violations of laws and regulations relating to the
safeguarding of private information in connection with e-Wallets
could subject us to fines, penalties or other regulatory actions,
as well as to civil actions by affected parties. Any such
violations could adversely affect the ability of the Company to
maintain e-Wallets, which could have a material adverse effect on
our operations and financial condition. Failure by us to comply
with any laws, rules and regulations, some of which may not exist
yet or are subject to interpretation and may be subject to change,
could result in a variety of adverse consequences, including civil
penalties and fines.
General Risk Factors
The laws and regulations indirectly affecting our industry is
constantly evolving and failure to comply adversely impact our
business.
Our business is indirectly subject to a wide range and increasing
number of laws and regulations, as described below. Liabilities or
loss of business resulting from a failure by us, our agents or
their subagents to comply with laws and regulations and regulatory
or judicial interpretations thereof, including laws and regulations
designed to protect consumers, or detect and prevent money
laundering, terrorist financing, fraud and other illicit activity,
and increased costs or loss of business associated with compliance
with those laws and regulations has had and we expect will continue
to have an adverse effect on our business, financial condition,
results of operations, and cash flows. Our services are subject to
increasingly strict legal and regulatory requirements, including
those intended to help detect and prevent money laundering,
terrorist financing, fraud, and other illicit activity. The
interpretation of those requirements by judges, regulatory bodies
and enforcement agencies may change quickly and with little notice.
Additionally, these requirements or their interpretations in one
jurisdiction may conflict with those of another jurisdiction. As
United States federal and state as well as foreign legislative
and regulatory scrutiny and enforcement action in these areas
increase, we expect that our costs of complying with these
requirements could continue to increase, perhaps substantially, and
may make it more difficult or less desirable for consumers and
others to use our services or for us to contract with certain
intermediaries, either of which would have an adverse effect on our
revenue and operating income. For example, we have made additional
investments in our compliance programs based on the rapidly
evolving and increasingly complex global regulatory and enforcement
environment and our internal reviews. These additional investments
relate to enhancing our compliance capabilities, including our
consumer protection efforts. Further, failure by us or partners and
service providers to comply with any of these requirements or their
interpretation could result in the suspension or revocation of a
license or registration required to provide money transfer, payment
or foreign exchange services, the limitation, suspension or
termination of services, changes to our business model, loss of
consumer confidence, the seizure of our assets, and/or the
imposition of civil and criminal penalties, including fines and
restrictions on our ability to offer services. We are subject to
numerous regulations such as those imposed by the Foreign Corrupt
Practices Act (the “FCPA”) in the United States and similar laws in
other countries, which generally prohibit companies and those
acting on their behalf from making improper payments to foreign
government officials for the purpose of obtaining or retaining
business. Some of these laws, such as the Bribery Act, also
prohibit improper payments between commercial enterprises. Because
our services are offered in other countries, we face significant
risks associated with our obligations under the FCPA and other
national anti-corruption laws. Any determination that we have
violated these laws could have an adverse effect on our business,
financial condition, results of operations, and cash flows. Our
United States business is subject to reporting, recordkeeping and
anti-money laundering provisions of the BSA and could be subject to
regulatory oversight and enforcement by FinCEN.
The remittance and digital payments industry has come under
increasing scrutiny from government regulators and others in
connection with its ability to prevent its services from being
abused by people seeking to defraud others. Our failure to continue
to help prevent frauds and increased costs related to the
implementation of enhanced anti-fraud measures, or a change in
fraud prevention laws or their interpretation or the manner in
which they are enforced has had and could in the future have an
adverse effect on our business, financial condition, results of
operations, and cash flows.
Further, any determination that our partners have violated laws and
regulations could seriously damage our reputation and brands,
resulting in diminished revenue and profit and increased operating
costs. In some cases, we could be liable for the failure of our
partners to comply with laws which also could have an adverse
effect on our business, financial condition, results of operations,
and cash flows. The regulations implementing the remittance
provisions of the Dodd-Frank Act also impose responsibility on us
for any related compliance failures of our partners.
The requirements under the PSD/PSD2, the Dodd-Frank Act and similar
legislation enacted or proposed in other countries have resulted
and will likely continue to result in increased compliance costs,
and in the event we or our agents are unable to comply, could have
an adverse impact on our business, financial condition, results of
operations, and cash flows. Additional countries may adopt similar
legislation.
We may not be able to complete or integrate successfully any
potential future acquisitions, partnerships or joint
ventures.
From time-to-time, we may evaluate possible acquisition
transactions, partnerships or joint ventures, some of which may be
material. Potential future acquisitions, partnerships and joint
ventures may pose significant risks to our existing operations if
they cannot be successfully integrated. These projects would place
additional demands on our managerial, operational, financial and
other resources, create operational complexity requiring additional
personnel and other resources and require enhanced control
procedures. In addition, we may not be able to successfully finance
or integrate any businesses, services or technologies that we
acquire or with which we form a partnership or joint venture.
Furthermore, the integration of any acquisition may divert
management’s time and resources from our core business and disrupt
our operations. Moreover, even if we were successful in integrating
newly acquired assets, expected synergies or cost savings may not
materialize, resulting in lower than expected benefits to us from
such transactions. We may spend time and money on projects that do
not increase our revenue. Additionally, when making acquisitions it
may not be possible for us to conduct a detailed investigation of
the nature of the assets being acquired due to, for instance, time
constraints in making the decision and other factors. We may become
responsible for additional liabilities or obligations not foreseen
at the time of an acquisition. In addition, in connection with any
acquisitions, we must comply with various antitrust requirements.
It is possible that perceived or actual violations of these
requirements could give rise to regulatory enforcement action or
result in us not receiving all necessary approvals in order to
complete a desired acquisition. To the extent we pay the purchase
price of any acquisition in cash, it would reduce our cash
reserves, and to the extent the purchase price is paid with our
stock, it could be dilutive to our stockholders. To the extent we
pay the purchase price with proceeds from the incurrence of debt,
it would increase our level of indebtedness and could negatively
affect our liquidity and restrict our operations. All of the above
risks could have a material adverse effect on our business, results
of operations, financial condition, and prospects.
We are subject to the discretion of administrative
enforcement agencies.
In certain cases, regulations may provide administrative discretion
regarding enforcement, and regulations may be applied
inconsistently across the industry, resulting in increased costs
for the Company that may not be incurred by competitors. Changes in
laws, regulations or other industry practices and standards, or
interpretations of legal or regulatory requirements, may reduce the
market for or value of our products or services or render our
products or services less profitable or obsolete. For example,
policymakers may impose heightened customer due diligence
requirements or other restrictions, fees or taxes on remittances.
Changes in the laws affecting the kinds of entities that are
permitted to act as money transfer agents (such as changes in
requirements for capitalization or ownership) could adversely
affect our ability to distribute certain services and the costs of
providing those services.
A significant change or disruption in international migration
patterns could adversely affect our business, financial condition
and results of operations.
Our money transfer business relies in part on international
migration patterns, as individuals move from their native countries
to countries with greater economic opportunities or a more stable
political environment. A significant portion of money transfer
transactions are initiated by immigrants or refugees sending money
back to their native countries. Changes in immigration laws that
discourage international migration and political or other events
(such as war, trade wars, terrorism or health emergencies including
but not limited to the COVID-19 pandemic) that make it more
difficult for individuals to migrate or work abroad could adversely
affect our money transfer remittance volume or growth rate.
Specifically, since the start of the COVID-19 pandemic, many
governments have initiated, resumed or extended social distancing
rules, lockdowns or shelter-in-place orders resulting in the
inability of many individuals to migrate or work abroad, which has
impacted our business. The resulting economic impact of prior and
ongoing COVID-19 governmental lockdown orders could continue to
negatively impact our business. Furthermore, continuing increases
in COVID-19 cases occurring now or in the future could result in a
return to lockdowns and shelter-in-place orders by governments
which could negatively impact our business. Additionally, sustained
weakness in global economic conditions could reduce economic
opportunities for migrant workers and result in reduced or
disrupted international migration patterns. Reduced or disrupted
international migration patterns, particularly in the U.S. or
Europe, are likely to reduce money transfer transaction volumes and
therefore have an adverse effect.
Major bank failure or sustained financial market illiquidity,
or illiquidity at our clearing, cash management and custodial
financial institutions, could adversely affect our business,
financial condition and results of
operations.
We face certain risks in the event of a sustained deterioration of
financial market liquidity, as well as in the event of sustained
deterioration in
the liquidity, or failure, of our clearing, cash management and
custodial financial institutions. In particular:
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We
may be unable to access funds in our investment portfolio, deposit
accounts and clearing accounts on a timely basis to settle our
payment instruments, pay money transfers and make related
settlements to agents. Any resulting need to access other sources
of liquidity or short-term borrowing would increase our costs. Any
delay or inability to settle our payment instruments, pay money
transfers or make related settlements with our agents could
adversely impact our business, financial condition and results of
operations. |
|
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In
the event of a major bank failure, we could face major risks to the
recovery of our bank deposits used for the purpose of settling with
our agents and to the recovery of a significant portion of our
investment portfolio. A substantial portion of our cash, cash
equivalents and interest-bearing deposits are either held at banks
that are not subject to insurance protection against loss or exceed
the deposit insurance limit. |
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may
be unable to borrow from financial institutions or
institutional investors on favorable terms, which could adversely
impact our ability to pursue our growth strategy and fund key
strategic initiatives. |
If financial liquidity deteriorates, there can be no assurance we
will not experience an adverse effect, which may be material, on
our ability to access capital and on our business, financial
condition and results of operations.
As our business develops, we will need to implement enhanced
compliance processes, procedures and controls with respect to the
rules and regulations that apply to our business.
Our success requires significant public confidence in our ability
to handle large and growing payment volumes and amounts of consumer
funds, as well as comply with applicable regulatory requirements.
Any failure to manage consumer funds or to comply with applicable
regulatory requirements could result in the imposition of fines,
harm our reputation and significantly diminish use of our products.
In addition, if we are not in compliance with anti-corruption laws
and other laws governing the conduct of business with government
entities and/or officials (including local laws), we may be subject
to criminal and civil penalties and other remedial measures, which
could have an adverse impact on our business, financial condition,
results of operations and prospects.
If we cannot keep pace with rapid developments and change in
our industry and provide new services to our clients, the use of
our services could decline, reducing our revenues.
The payment services industry in which we operate is characterized
by rapid technological change, new product and service
introductions, evolving industry standards, changing customer needs
and the entrance of more established market players seeking to
expand into these businesses. In order to remain competitive, we
continually seek to expand the services we offer and to develop new
projects, including, for example, the electronic wallet. These
projects carry risks, such as delays in delivery, performance
problems and lack of customer acceptance. In our industry, these
risks are acute. Any delay in the delivery of new services or the
failure to differentiate our services or to accurately predict and
address market demand could render our services less desirable, or
even obsolete, to consumers. In addition, if alternative payment
mechanisms become widely available, substituting our current
products and services, and we do not develop and offer similar
alternative payment mechanisms successfully and on a timely basis,
our business and prospects could be adversely affected.
Furthermore, we may be unable to recover the costs we have incurred
in developing new services. Our development efforts could result in
increased costs and we could also experience a loss in business
that could reduce our earnings or could cause a loss of revenue if
promised new services are not timely delivered to our clients, we
are not able to compete effectively with our competitors’ or do not
perform as anticipated. If we are unable to develop, adapt to or
access technological changes or evolving industry standards on a
timely and cost effective basis, our business, financial condition
and results of operations could be materially adversely
affected.
Our systems and our third party providers’ systems may fail
due to factors beyond our control, which could interrupt our
service, cause us to lose business and increase our
costs.
We depend on the efficient and uninterrupted operation of numerous
systems, including our computer systems, software and
telecommunications networks, as well as the data centers that we
lease from third parties. Our systems and operations, or those of
our third party providers, could be exposed to damage or
interruption from, among other things, fire, flood, natural
disaster, power loss, telecommunications failure, vendor failure,
unauthorized entry, improper operation and computer viruses.
Substantial property and equipment loss, and disruption in
operations, as well as any defects in our systems or those of third
parties or other difficulties could expose us to liability and
materially adversely impact our business, financial condition and
results of operations. In addition, any outage or disruptive
efforts to our data center would result in the failure of our
computers and kiosks to operate and would, if for an extensive
period, adversely impact our reputation, brand and future
prospects.
Unauthorized disclosure of data, whether through
cybersecurity breaches, computer viruses or otherwise, could expose
us to liability, protracted and costly litigation and damage our
reputation.
We store and/or transmit sensitive data, such as mobile phone
numbers, and we have ultimate liability to our consumers for our
failure to protect this data. If breaches occur our encryption of
data and other protective measures may not prevent unauthorized
disclosure of data. Unauthorized disclosure of data or a
cybersecurity breach could harm our reputation and deter clients
from using electronic payments generally, our kiosks and our
products and services specifically, increase our operating expenses
in order to correct the breaches or failures, expose us to
uninsured liability, increase our risk of regulatory scrutiny,
subject us to lawsuits, result in the imposition of material
penalties and fines by state authorities and otherwise materially
adversely affect our business, financial condition and results of
operations.
Customer complaints or negative publicity about our customer
service could affect attractiveness of our services adversely and,
as a result, could have an adverse effect on our business,
financial condition and results of operations.
Customer complaints or negative publicity about our customer
service could diminish consumer confidence in, and the
attractiveness of, our services. Breaches of our consumers’ privacy
and our security systems could have the same effect. We sometimes
take measures to combat risks of fraud and breaches of privacy and
security, such as freezing consumer funds, which could damage
relations with our consumers. These measures heighten the need for
prompt and attentive customer service to resolve irregularities and
disputes. Effective customer service requires significant personnel
expense, and this expense, if not managed properly, could impact
our profitability significantly. Any inability by us to manage or
train our customer service representatives properly could
compromise our ability to handle customer complaints effectively.
If we do not handle customer complaints effectively, our reputation
may suffer, and we may lose our customers’ confidence, which could
have a material adverse effect on our business, financial condition
and results of operations.
Our payment system might be used for fraudulent, illegal or
improper purposes, which could expose us to additional liability
and harm our business.
Despite measures we have taken and continue to take, our payment
system remains susceptible to potentially illegal or improper uses.
These may include use of our payment services in connection with
fraudulent sales of goods or services, illicit sales of
prescription medications or controlled substances, software and
other intellectual property piracy, money laundering, bank fraud
and prohibited sales of restricted products. In the past there have
been news articles on how organized crime groups have used other
payment services to transfer money in the course of illegal
transactions.
Criminals are using increasingly sophisticated methods to engage in
illegal activities such as counterfeiting and fraud. It is possible
that incidents of fraud could increase in the future. Our risk
management policies and procedures may not be fully effective to
identify, monitor and manage these risks. We are not able to
monitor in each case the sources for our counterparties’ funds or
the ways in which they use them. Increases in chargebacks or other
liability could have a material adverse effect on our business,
financial condition and results of operations. Furthermore, an
increase in fraudulent transactions or publicity regarding
chargeback disputes could harm our reputation and reduce consumer
confidence in the use of our kiosks and electronic wallets.
We may not be able to successfully protect the intellectual
property we license or own and may be subject to infringement
claims.
We rely on a combination of contractual rights, copyright,
trademark and trade secret laws to establish and protect our
technology and the technology that we license and/or that we
develop in the future. We and our subsidiary have applied for
trademark protection for certain marks (notably IPSIPay), but there
is a risk that such trademarks will not be approved, which could
leave us without important protections for our brand.
Also, we customarily require our employees and independent
contractors to execute confidentiality agreements or otherwise to
agree to keep our proprietary information and the information we
license confidential when their relationship with us begins.
Typically, our employment contracts also include clauses requiring
our employees to assign to us all the inventions and intellectual
property rights they develop in the course of their employment and
to agree not to disclose our confidential information.
Nevertheless, others, including our competitors, may independently
develop similar technology to that licensed by us, duplicate our
services or design around our intellectual property. Further,
contractual arrangements may not prevent unauthorized disclosure of
our confidential information or ensure an adequate remedy in the
event of any unauthorized disclosure of our confidential
information. We may have to litigate to enforce or determine the
scope or enforceability of our intellectual property rights
(including trade secrets and know-how), which could be expensive,
could cause a diversion of resources and may not prove successful.
The loss of intellectual property protection could harm our
business and ability to compete and could result in costly redesign
efforts, discontinuance of certain service offerings or other
competitive harm. Additionally, we do not hold any patents for our
business model or our business processes, and we do not currently
intend to obtain any such patents in the United States or
elsewhere.
We may also be subject to costly litigation in the event our
services or the technology that we license are claimed to infringe,
misappropriate or otherwise violate any third party’s intellectual
property or proprietary rights. Such claims could include patent
infringement, copyright infringement, trademark infringement, trade
secret misappropriation or breach of licenses. We may not be able
to successfully defend against such claims, which may result in a
limitation on our ability to use the intellectual property subject
to these claims and might require us to redesign affected services,
enter into costly settlement or license agreements, pay costly
damage awards, or face a temporary or permanent injunction
prohibiting us from marketing or selling certain of our services.
In such circumstances, if we cannot or do not license the infringed
technology on reasonable terms or substitute similar technology
from another source, our revenue and earnings could be adversely
impacted. Additionally, in recent years, non-practicing entities
have been acquiring patents, making claims of patent infringement
and attempting to extract settlements from companies in our
industry. Even if we believe that such claims are without merit and
successfully defend these claims, defending against such claims is
time consuming and expensive and could result in the diversion of
the time and attention of our management and employees.
We may use open-source software in a manner that could be
harmful to our business.
We use open source software in connection with our technology and
services. The original developers of the open source code provide
no warranties on such code. Moreover, some open source software
licenses require users who distribute open source software as part
of their software to publicly disclose all or part of the source
code to such software and/or make available any derivative works of
the open source code on unfavorable terms or at no cost. The use of
such open source code may ultimately require us to replace certain
code used in our products, pay a royalty to use some open source
code or discontinue certain products. Any of the above requirements
could be harmful to our business, financial condition and
operations.
We do not have and may be unable to obtain sufficient
insurance to protect ourselves from business risks.
While we hold certain mandatory types of insurance policies, we do
not currently maintain insurance coverage for business
interruption, property damage or loss of key management personnel,
as we have been unable to obtain these on commercially acceptable
terms. We do not hold insurance policies to cover for any losses
resulting from counterparty and credit risks or fraudulent
transactions. We also do not generally maintain separate funds or
otherwise set aside reserves for most types of business-related
risks. Accordingly, our lack of insurance coverage or reserves with
respect to business-related risks may expose us to substantial
losses, which could materially adversely affect our business,
financial condition and results of operations.
We rely on certain key personnel and in a dynamic industry
like ours, the ability to attract, recruit, retain and develop
qualified personnel is critical to our success and
growth.
We rely substantially on the efforts of our current senior
management, including our Chief Executive Officer, William Corbett,
and our President and Chief Financial Officer, Richard Rosenblum.
Our business would be impeded or harmed if we were to lose their
services. In addition, our business functions at the intersection
of rapidly changing technological, social, economic and regulatory
developments that require a wide-ranging set of expertise and
intellectual capital. In order for us to compete and grow
successfully, we must attract, recruit, retain and develop the
necessary personnel who can provide the needed expertise across the
entire spectrum of our capital needs. This is particularly true
with respect to qualified and experienced software engineers and IT
staff, who are highly sought after. The market for such personnel
is highly competitive, and we may not succeed in recruiting
additional personnel or may fail to replace effectively current
personnel who depart with qualified or effective successors. Our
efforts to retain and develop personnel may result in significant
additional expenses, which could adversely affect our
profitability. We cannot assure you that we will be able to attract
and retain qualified personnel in the future. Failure to retain or
attract key personnel could have a material adverse effect on our
business, financial condition and results of operations.
Risks Relating to Our Securities
There is currently a limited public trading market for our
common stock and one may never develop.
There currently is a limited public trading market for our
securities, and it is not assured that any such public market will
develop in the foreseeable future. Moreover, there can be no
assurance that even if our common stock is approved for listing on
an exchange or is quoted in the over-the-counter market in the
future, that an active trading market will develop or be sustained.
Therefore, we cannot predict the prices at which our common stock
will trade in the future, if at all. As a result, our investors may
have limited or no ability to liquidate their investments.
Trading in our common stock is conducted on the OTCQB, as we
currently do not meet the initial listing criteria for any
registered securities exchange. The OTCQB and OTC Markets are less
recognized markets than the registered securities exchanges and is
often characterized by low trading volume and significant price
fluctuations. These and other factors may further impair our
stockholders’ ability to sell their shares when they want to and/or
could depress our stock price. As a result, stockholders could find
it difficult to dispose of, or obtain accurate quotations of the
price of our securities because smaller quantities of shares could
be bought and sold, transactions could be delayed and security
analyst and news coverage of our Company may be limited. If a
public market for our common stock does develop, these factors
could result in lower prices and larger spreads in the bid and ask
prices for our shares of common stock.
Because our common stock may be a “penny stock,” it may be
more difficult for investors to sell shares of our common stock,
and the market price of our common stock may be adversely
affected.
Our common stock is deemed to be a “penny stock” if, among other
things, the stock price is below $5.00 per share, it is not listed
on a national securities exchange, or it has not met certain net
tangible asset or average revenue requirements. Broker-dealers who
sell penny stocks must provide purchasers of these stocks with a
standardized risk-disclosure document prepared by the SEC. This
risk-disclosure document provides information about penny stocks
and the nature and level of risks involved in investing in the
penny-stock market. A broker must also give a purchaser, orally or
in writing, bid and offer quotations and information regarding
broker and salesperson compensation, make a written determination
that the penny stock is a suitable investment for the purchaser and
obtain the purchaser’s written agreement to the purchase.
Broker-dealers must also provide customers that hold penny stock in
their accounts with such broker-dealer a monthly statement
containing price and market information relating to the penny
stock. If a penny stock is sold to an investor in violation of the
penny stock rules, the investor may be able to cancel its purchase
and get their money back.
If applicable, the penny stock rules may make it difficult for
stockholders to sell their shares of our common stock. Because of
the rules and restrictions applicable to a penny stock, there is
less trading in penny stocks and the market price of our common
stock may be adversely affected. Also, many brokers choose not to
participate in penny stock transactions. Accordingly, stockholders
may not always be able to resell their shares of our common stock
publicly at times and prices that they feel are appropriate.
Our stock price has fluctuated in the past, and has been
subject to volatility and future volatility may result in our
investors incurring substantial losses.
Our stock price has fluctuated in the past, has been subject to
volatility and may be volatile in the future. We may incur rapid
and substantial decreases in our stock price in the foreseeable
future that are unrelated to our operating performance. For
example, the COVID-19 pandemic and its variants and the
Russia-Ukraine conflict has caused broad stock market and industry
fluctuations. Furthermore, the market prices for companies
operating in our industry have experienced extreme volatility. As a
result of this volatility, investors may experience losses on their
investment in our common stock. The market price for our common
stock may be influenced by many factors, including the
following:
|
● |
investor reaction to our business
strategy; |
|
● |
the
success of competitive products or technologies; |
|
● |
regulatory or legal developments in the United
States and other countries, especially changes in laws or
regulations applicable to our products; |
|
● |
variations in our financial results or those of
companies that are perceived to be similar to us; |
|
● |
our
ability or inability to raise additional capital and the terms on
which we raise it; |
|
● |
declines in the market prices of stocks
generally; |
|
● |
our
public disclosure of the terms of any financing which we consummate
in the future; |
|
● |
our
failure to generate revenue and positive cash flow or to become
profitable; |
|
● |
our
failure to raise working capital; |
|
● |
announcements by us or our competitors of
significant contracts, new services, acquisitions, commercial
relationships, joint ventures or capital commitments; |
|
● |
cancellation of key contracts; |
|
● |
our
failure to meet financial forecasts we publicly
disclose; |
|
● |
trading volume of our common stock; |
|
● |
sales
of our common stock by us or our stockholders; |
|
● |
general economic, industry and market conditions;
and |
| |
● |
other events or factors, including those
resulting from such events, or the prospect of such events,
including war, terrorism and other international conflicts, public
health issues including health epidemics or pandemics, such as the
continued spread of COVID-19 and its variants, and natural
disasters such as fire, hurricanes, earthquakes, tornados or other
adverse weather and climate conditions, whether occurring in the
United States or elsewhere, could disrupt our operations, disrupt
the operations of our suppliers or result in political or economic
instability. |
These broad market and industry factors may seriously harm the
market price of our common stock, regardless of our operating
performance. Since the stock price of our common stock has
fluctuated in the past, has been recently volatile and may be
volatile in the future, investors in our common stock could incur
substantial losses. In the past, following periods of volatility in
the market, securities class-action litigation has often been
instituted against companies. Such litigation, if instituted
against us, could result in substantial costs and diversion of
management’s attention and resources, which could materially and
adversely affect our business, financial condition, results of
operations and growth prospects. There can be no guarantee
that our stock price will remain at current prices or that future
sales of our common stock will not be at prices lower than those
sold to investors.
Because we became public by means of a reverse merger, we and
our shareholders may be faced with regulatory constraints, and we
may not be able to attract the attention of brokerage
firms.
Additional risks may exist because we became public through a
reverse merger. For example, our status as a former “shell company”
may limit the ability of shareholders to utilize SEC Rule 144 to
sell their shares. Further, as we did not become a public company
via a traditional, underwritten initial public offering, securities
analysts of brokerage firms may not provide coverage of our company
since there is little incentive for brokerage firms to recommend
the purchase of our common stock. In addition, institutional
investors may have limitations on investing in reverse merger
companies, which could limit the universe of potential investors
for our company. No assurance can be given that brokerage firms
will want to conduct secondary offerings on our behalf in the
future. In addition, if we were to attempt to up-list the listing
of our securities on a national securities exchange we will likely
be subject to additional listing requirements applicable to
entities that became public through a reverse merger.
Compliance with the reporting requirements of federal
securities laws are expensive and time consuming.
We are a public reporting company in the United States, and
accordingly, subject to the information and reporting requirements
of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and other federal securities laws, and the compliance
obligations of the Sarbanes-Oxley Act of 2002. The costs (in terms
of expenses and the required dedication of management’s time and
attention) of preparing and filing annual and quarterly reports and
other information with the SEC and furnishing audited reports to
stockholders are substantial. If we do not provide current
information about our company to market makers, they will not be
able to trade our stock. Failure to comply with the applicable
securities laws could result in private or governmental legal
action against us or our officers and directors, which could have a
detrimental impact on our business and financials, the value of our
stock, and the ability of stockholders to resell their stock.
Our investors’ ownership will likely be diluted in the
future.
In the future, we will likely issue additional authorized but
previously unissued equity securities, resulting in the dilution of
ownership interests of our present stockholders. We expect to need
to issue a substantial number of shares of common stock or other
securities convertible into or exercisable for common stock in
connection with hiring or retaining employees, future acquisitions,
raising additional capital in the future to fund our operations,
and other business purposes. Additional shares of common stock
issued by us in the future, including shares issued upon exercise
of the warrants and the outstanding notes, will dilute an
investor’s investment in the Company.
Our board of directors has historically had significant
control over us and we have yet to establish committees comprised
of independent directors.
Each of our board members has significant control over all
corporate issues. In addition, two of our six directors serve as
our officers. We have not established board committees comprised of
independent members, and we do not have an audit or compensation
committee comprised of independent directors. Our six directors
performed these functions, despite not all being independent
directors. Thus, there is potential conflict in that two of our
directors were also engaged in management and participated in
decisions concerning management compensation and audit issues that
may affect management and IPSI’s performance.
We do not expect to pay dividends on our common stock in the
foreseeable future.
We have not paid cash dividends on our common stock to date and we
do not expect to pay dividends on our common stock for the
foreseeable future, and we may never pay dividends. Consequently,
the only opportunity for investors to achieve a return on their
investment may be if an active trading market develops, and
investors are able to sell their shares for a profit or if our
business is sold at a price that enables investors to recognize a
profit, neither of which we can guarantee will ever take place. Our
payment of any future dividends will be at the discretion of our
Board of Directors after taking into account various factors,
including but not limited to our financial condition, operating
results, cash needs, and growth plans. See Item 5 “Dividend
Policy.”
We do not have an independent compensation committee, which
presents the risk that compensation and benefits paid to those
executive officers who are board members and other officers may not
be commensurate with its financial performance.
A compensation committee consisting of independent directors is a
safeguard against self-dealing by company executives. Our board of
directors is comprised of two executive officers and four other
directors, and absent an independent compensation committee
currently determines the compensation and benefits of our executive
officers, administers our employee stock and benefit plans, and
reviews policies relating to the compensation and benefits of our
employees. Our lack of an independent compensation committee
presents the risk that our executive officers on the board may have
influence over their personal compensation and benefits levels that
may not be commensurate with its financial performance.
Limitations on director and officer liability and
indemnification of our officers and directors by our articles of
incorporation, as amended, and by-laws it may discourage
stockholders from bringing suit against an officer or
director.
Our articles of incorporation, as amended, and bylaws provide, with
certain exceptions as permitted by Nevada law, that a director or
officer shall not be personally liable to us or our stockholders
for breach of fiduciary duty as a director or officer, unless the
director or officer committed both a breach of fiduciary duty and
such breach was accompanied by intentional misconduct, fraud or
knowing violation of law. These provisions may discourage
stockholders from bringing suit against a director or officer for
breach of fiduciary duty and may reduce the likelihood of
derivative litigation brought by stockholders on behalf of us
against a director or officer.
We are responsible for the indemnification of our officers
and directors.
Should our officers and/or directors require us to contribute to
their defense in an action brought against them in their capacity
as such, we may be required to spend significant amounts of our
capital. Our articles of incorporation, as amended, and bylaws also
provide for the indemnification of our directors, officers,
employees, and agents, under certain circumstances, against
attorney’s fees and other expenses incurred by them in any
litigation to which they become a party arising from their
association with or activities on behalf of us. In addition, we
have entered into an indemnification agreement with our Chief
Executive Officer. This indemnification policy could result in
substantial expenditures, which we may be unable to recoup. If
these expenditures are significant or involve issues which result
in significant liability for our key personnel, we may be unable to
continue operating as a going concern.
Item 1B. Unresolved Staff Comments
None
Item 2. Properties
The Company operates out of leased premises in Carmel by the Sea,
California. The lease commenced on March 22, 2021 and terminates on
April 1, 2022, monthly rental expense is $4,800 per month with no
escalations during the term of the lease.
Item 3. Legal Proceedings
From time to time, we may become involved in various lawsuits and
legal proceedings which arise in the ordinary course of business.
However, litigation is subject to inherent uncertainties and an
adverse result in these or other matters may arise from time to
time that may harm our business.
On October 20, 2021, a complaint was filed against our company and
certain of its officers and directors with the Occupational Safety
and Health Administration of the United Stated Department of Labor,
captioned Naum Voloshin, Yulia Rey, Alexander Voloshin, Andrey
Novikov, and Frank Perez v. Innovative Payment Solutions, Inc.,
William Corbett, Richard Rosenblum, Madisson Corbett, Jim Fuller,
Cliff Henry and David Rios. The complaint generally alleges
that complainants, former employees of our company, did not receive
compensation to which they claim they were entitled and that they
were wrongfully terminated for engaging in protected activities in
violation of the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1514A,
including reporting concerns about the adequacy of our internal
controls. The complaint seeks reinstatement of complainants’
employment, monetary damages including back pay, raises, bonuses,
benefits, overtime, emotional distress and loss of reputation,
orders of abatement and injunctive relief, and costs of litigation.
While the outcome of this action is presently uncertain at this
point, we intend to vigorously defend against the action. To
date, this matter has proceeded in the ordinary course of
litigation. We may engage in alternative dispute resolution with
the plaintiffs but there can be no assurance that these efforts
will be successful.
Other than as set forth above, we are not presently a party to any
legal proceedings that, if determined adversely to us, would
individually or taken together have a material adverse effect on
our business, operating results, financial condition or cash
flows.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related
Stockholder Matters and Issuer Purchase of Equity
Securities
From November 3, 2014 to July 4, 2016, our
common stock traded on the OTC Pink Markets under the symbol “ASYP”
but no trading took place during this time. Since
July 5, 2016 our common stock has traded on the OTCQB
Market, and our symbol was changed to “QPAG” on
June 2, 2016 and to “IPSI” on December 3, 2019.
The last reported sale price of our common stock on the OTCQB on
March 29, 2022, was $0.0189 per share. As of March
29, 2022, there were approximately 65 holders of record of our
common stock.
Dividend Policy
We have not paid any cash dividends on our common stock to date,
and we have no intention of paying cash dividends in the
foreseeable future. Whether we declare and pay dividends is
determined by our Board of Directors at their discretion, subject
to certain limitations imposed under Nevada corporate law. The
timing, amount and form of dividends, if any, will depend on, among
other things, our results of operations, financial condition, cash
requirements and other factors deemed relevant by our Board of
Directors.
Equity Compensation Plan Information
The purpose of our equity incentive plans is to promote the
interests of our company and our stockholders by providing
directors, officers, employees and consultants of our company with
appropriate incentives and rewards to encourage them to enter into
and continue in the employ or service of our company, to acquire a
proprietary interest in our long-term success and to reward the
performance of individuals in fulfilling long-term corporate
objectives.
On June 18, 2018, we established our 2018 Stock Incentive Plan (the
“Plan”). The Plan terminates after a period of ten years in June
2028. The Plan is administered by our board of directors or a
committee appointed by our 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
800,000 shares of Common Stock. The maximum number of shares of
Common Stock awarded to any individual during any fiscal year may
not exceed 100,000 shares of Common Stock.
On October 22, 2021, our board of directors and stockholders
established our 2021 Stock Incentive Plan (the “2021 Plan”). The
2021 Plan terminates after a period of ten years in August
2031.
The maximum number of securities available under the 2021 Plan
is 53,000,000 shares of Common Stock.
Under
the 2021 Plan, we may award the following: (i) non-qualified stock
options; (ii)) incentive stock options; (iii) stock appreciation
rights; (iv) restricted stock; (v) restricted stock unit; and (vi)
other stock-based awards.
Recent
Sales of Unregistered Securities
On
February 3, 2021, we closed a transaction with Cavalry, pursuant to
which we received net proceeds of $150,500, after an original issue
discount of $21,500 in exchange for the issuance of a
$172,000 Senior Secured Convertible Note, bearing interest
at 10% per annum and maturing on February 3, 2022. The Note is
convertible into shares of common stock at an initial conversion
price of $0.045 per share, in addition, we issued a
warrant exercisable for 3,822,223 shares of common stock
at an initial exercise price of $0.05 per share.
On
February 3, 2021, we closed a transaction with Mercer, pursuant to
which the Company received net proceeds of $250,250, after an
original issue discount of $35,750 in exchange for the
issuance of a $286,000 Senior Secured Convertible Note,
bearing interest at 10% per annum and maturing on February 3,
2022. The Note was convertible into shares of common stock at an
initial conversion price of $0.045 per share, in
addition, we issued a warrant exercisable
for 6,355,556 shares of common stock at an initial
exercise price of $0.05 per share.
On
February 3, 2021, we closed a transaction with Iroquois Master Fund
Ltd., pursuant to which we received net proceeds of $199,500, after
an original issue discount of $28,500 in exchange for the
issuance of a $228,000 Senior Secured Convertible Note,
bearing interest at 10% per annum and maturing on February 3,
2022. The Note was convertible into shares of common stock at an
initial conversion price of $0.045 per share, in
addition, we issued a warrant exercisable
for 5,066,667 shares of common stock at an initial
exercise price of $0.05 per share.
On
February 16, 2021, we closed a transaction with Cavalry, pursuant
to which we received net proceeds of $500,500, after an original
issue discount of $71,500 in exchange for the issuance of a
$572,000 Senior Secured Convertible Note, bearing interest
at 10% per annum and maturing on February 16, 2022. The Note
is convertible into shares of common stock at an initial conversion
price of $0.23 per share, in addition, we issued a
warrant exercisable for 2,486,957 shares of common stock
at an initial exercise price of $0.24 per share.
On
February 16, 2021, we closed a transaction with Mercer, pursuant to
which we received net proceeds of $500,500, after an original issue
discount of $71,500 in exchange for the issuance of a
$572,000 Senior Secured Convertible Note, bearing interest
at 10% per annum and maturing on February 16, 2022. The Note
is convertible into shares of common stock at an initial conversion
price of $0.23 per share, in addition, we issued a
warrant exercisable for 2,486,957 shares of common stock
at an initial exercise price of $0.24 per share.
On
February 16, 2021, we closed a transaction with Bellridge Capital
LP., pursuant to which we received net proceeds of $180,250, after
an original issue discount of $25,750 in exchange for the
issuance of a $206,000 Senior Secured Convertible Note,
bearing interest at 10% per annum and maturing on February 16,
2022. The Note was convertible into shares of common stock at an
initial conversion price of $0.045 per share, in
addition, we issued a warrant exercisable
for 4,577,778 shares of common stock at an initial
exercise price of $0.05 per share.
On
February 16, 2021, we closed a transaction with Bellridge Capital
LP., pursuant to which we received net proceeds of $787,500, after
an original issue discount of $112,500 in exchange for the
issuance of a $900,000 Senior Secured Convertible Note,
bearing interest at 10% per annum and maturing on February 16,
2022. The Note is convertible into shares of common stock at an
initial conversion price of $0.23 per share, in addition,
we issued a warrant exercisable for 3,913,044 shares of
common stock at an initial exercise price of $0.24 per
share.
In
terms of debt conversion notices received between January 5, 2021
and February 23, 2021, the Company issued an aggregate
of 61,793,616 shares of common stock for the conversion
of $2,259,221 of convertible debt and interest thereon,
realizing a loss on conversion of $5,498,820.
In
terms of warrant exercise notices received between February 18,
2021 and June 23, 2021, the Company
issued 60,186,982 shares of common stock for gross
proceeds of $3,009,349.
On
March 17, 2021, we entered into Securities Purchase Agreements with
several institutional investors, pursuant to which we agreed to
sell to the Investors in a private placement (i) 30,333,334
shares of its common stock; and (ii) warrants to purchase up to an
aggregate of 15,166,667 shares of its common stock for gross
proceeds of approximately $4,550,000. In addition, we agreed to
issue to placement agent warrants to purchase an aggregate of up to
2,426,667 shares of the Company’s common stock. The
Placement Agent Warrants have an exercise price of
$0.1875.
On April 5, 2021, we awarded four advisory board members, each
2,000,000 restricted shares of common stock, the
restricted shares of common stock vest as to 75% on the effective
date and 25% on the anniversary date of the agreement.
On July 22, 2021, we awarded 7,000,000 shares of common stock
to board members that were appointed during the year. In addition,
a further 300,000 shares of common stock were issued to an employee
and a further 3,650,000 shares of common stock were issued to
various consultants.
On August 9, 2021, we awarded 2,000,000 shares of common stock
to a third party vendor.
Other than as previously disclosed in our filings with the
Securities and Exchange Commission, we did not sell any equity
securities during the year ended December 31, 2021 in
transactions that were not registered under the Securities Act.
Issuer Purchases of Equity Securities
There were no issuer purchases of equity securities during the
fiscal year ended December 31, 2021.
Item 6. Reserved
Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion and analysis should be read in
conjunction with, and is qualified in its entirety by, our audited
annual financial statements and the related notes thereto, each of
which appear elsewhere in this Annual Report. This discussion
contains certain forward-looking statements that involve risks and
uncertainties, as described under the heading “About
Forward-Looking Statements” in this Annual Report. Actual results
could differ materially from those projected in the forward-looking
statements. For additional information regarding these risks and
uncertainties. The Management Discussion and Analysis of Financial
Condition and Results of Operations below is based upon only the
financial performance of Innovate Payment Solutions.
Overview and Financial Condition
Recent Developments
Repayment and extension of convertible notes
Previously, we entered into separate Securities Purchase
Agreements, each dated February 16, 2021 (the “Securities Purchase
Agreements”), with each of Bellridge Capital, LP (“Bellridge”),
Cavalry Fund I LP (“Cavalry”), and Mercer Street Global Opportunity
Fund, LLC (“Mercer”), pursuant to which we received $787,500,
$500,500 and $500,500 from the Investors, respectively, in exchange
for the issuance of: (i) Original Issue Discount 12.5% Convertible
Notes in the principal amounts of $900,000 issued to Bellridge and
$572,000 to each of Cavalry and Mercer.
On February 3, 2022, we extended our indebtedness to Cavalry and
Mercer from February 16, 2022 to August 16, 2022 in consideration
of increasing the principal amount outstanding and due to each of
Cavalry and Mercer under their notes by a penalty amount plus an
additional 10%. The aggregate principal amount of each of the
Cavalry and Mercer Note after extension is $866,242.
Additionally, on February 4, 2022, we paid in full our indebtedness
of $1,235,312.50 (inclusive of early settlement penalty and accrued
interest) to Bellridge.
Management Discussion and Analysis of Financial
Condition
The discussion and analysis of our financial condition and results
of operations are based upon the consolidated financial statements
as of December 31, 2021 and 2020, of Innovative Payment
Solutions, which have been prepared in accordance with accounting
principles generally accepted in the United States. The preparation
of financial statements in conformity with accounting principles
generally accepted in the United States requires us to make
estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of any contingent liabilities at
the financial statement date and reported amounts of revenue and
expenses during the reporting period. On an on-going basis we
review our estimates and assumptions. The estimates are based on
our historical experience and other assumptions that we believe to
be reasonable under the circumstances. Actual results are likely to
differ from those estimates under different assumptions or
conditions.
Results of Operations for the years Ended
December 31, 2021 and December 31, 2020
Net revenue
We did not have revenues during the years ended December 31, 2021
and 2020.We anticipate that we will recommence generating revenue
when we launch our e-wallets once we have determined our deployment
strategy, the timing of which is uncertain.
Cost
of goods sold
As we did not have revenues during the years ended December 31,
2021 and 2020, we anticipate that we will begin to recognize cost
of goods sold when we launch our e-wallets once we have determined
our deployment strategy.
General and administrative expenses
General and administrative expenses were $10,284,815 and $1,742,008
for the years ended December 31, 2021 and 2020, respectively, an
increase of $8,542,807 or 490.4%. The increase is primarily due to
the following;
|
(i) |
Salaries and wages of $7,066,725 and $761,946 for
the years ended December 31, 2021 and 2020, respectively, an
increase of $6,304,779 or 827.5%. The increase is due to the value
of warrants issued to our CEO of $4,327,899, which were
subsequently cancelled and replaced with stock options; the
increase in stock option compensation expense of $1,291,024; the
amortization of restricted stock expense with vesting rights of
$301,064 during the current year and $502,128 in the prior year;
the increase in payroll of $564,828 due to the increase in head
count from two people to six people and the increase in our CEO’s
salary from $12,500 per month to $30,000 per month; the employment
of a CFO at a monthly salary of $18,000 with effect from July 1,
2021; and a severance provision of $302,000 raised due to the
termination of several employees, the severance is still being
negotiated with the individuals concerned. |
| |
|
| (ii) |
Consulting fees of $1,340,134 and $362,180 for
the years ended December 31, 2021 and 2020, respectively, an
increase of $977,954 or 270.0%. The increase is due to 8,000,000
restricted shares issued to various advisory board members valued
at $776,000 in April 2021 and 3,650,000 shares issued to various
consultants and advisory board members valued at $443,050 during
July and August 2021. The remaining decrease of $(241,096) is due
to management fees paid to various employees before they were
appointed to official positions within the Company. |
| |
|
| (iii) |
Directors’ fees of $722,114 and $88,000 for the
years ended December 31, 2021 and 2020, respectively, an increase
of $634,114 or 720.6%, Directors fees in the current year included
shares issued to directors valued at $539,000, the value of options
granted to directors of $91,614 and cash fees paid of $91,500.
Directors’ fees expense in the prior period represents the value of
restricted shares issued to a director. |
| |
|
| (iv) |
Selling and marketing costs of $117,185 and
$30,828 for the years ended December 31, 2021 and 2020,
respectively, an increase of $86,357 or 280.1%. The increase is due
to initial expenses paid for software development and public
relations expenses incurred during the current period amounting to
$110,680. In the prior year marketing expenses related to marketing
activities undertaken by third parties. |
| |
|
| (v) |
Professional fees of $405,552 and $150,812 for
the years ended December 31, 2021 and 2020, respectively, an
increase of $254,740 or 168.9%. The increase is primarily due to
social media expense of $123,242, fees paid to Frictionless of
$51,940 as part of the ongoing software development agreement we
have in place with them; $40,000 paid to an individual for
professional administrative advice and an additional $89,866 for
proxy solicitation services conducted prior to the Annual General
Meeting. |
| |
|
| (vi) |
The balance of the increase is made up of several
individually insignificant expenses. |
Depreciation
Depreciation was $17,935 and $12,500 for the years ended December
31, 2021 and 2020, respectively, an increase of $5,435.
Depreciation during the current period represents depreciation on
the kiosks received from Qpagos Mexico and miscellaneous assets
acquired during the current year. Depreciation in the prior year is
related to kiosks acquired from Mexico.
Investment impairment charge
Investment impairment charge was $0 and $1,019,960 for the years
ended December 31, 2021 and 2020, respectively, the Company raised
an impairment charge against the investment in Vivi Holdings Inc,
as Vivi continues to not meet any of its indicated milestones
concerning its proposed IPO and fund-raising efforts.
Loss on debt conversion
Loss on debt conversion was $5,498,820 and $433,610 for the years
ended December 31, 2021 and 2020, respectively, an increase of
$5,065,210. The loss on debt conversion during the current year
represents a loss realized on the conversion of convertible notes,
into equity at fixed conversion prices which ranged from $0.035 to
$0.045 per share, when the stock price ranged from $0.05 per share
to $0.238 per share, resulting in a significant loss. A total of
$2,259,221 was converted from convertible debt to equity during the
year ended December 31, 2021.
Loss on settlement of liabilities
Loss on settlement of liabilities was $0 and $95,082 for the years
ended December 31, 2021 and 2020, respectively. The loss on
settlement of liabilities represents the settlement of certain
promissory notes during the prior period by the issuance of
1,692,764 shares of common stock at a discount to current market
prices resulting in a loss on settlement of $50,082 and the
issuance of 1,500,000 shares of common stock to a previous note
holder in settlement of a dispute over the repayment of a
convertible note during the current period, at the market value of
the shares of $45,000, on the date of settlement.
Debt extension fee
Debt extension fee was $0 and $40,000 for the years ended December
31, 2021 and 2020, respectively, we incurred a debt extension fee
of $40,000 in the prior year, on a convertible note which was
maturing, this note has subsequently been repaid.
Forgiveness of federal relief loan
Forgiveness of federal relief loan was $60,292 and $0 for the years
ended December 31, 2021 and 2020, respectively. During the current
period the company applied and was granted on the PPP loan advanced
by the federal government during the prior year.
Interest expense
Interest expense was $228,240 and $381,034 for the years ended
December 31, 2021 and 2020, respectively, a decrease of $152,794 or
40.1%. The decrease is primarily due to a penalty interest expense
in the prior period of $238,080 related to the settlement of
convertible debt prior to conversion by the note holders offset by
the increase in the principal outstanding of convertible debt from
$1,505,000 in the prior period to $2,044,000 in the current
period.
Amortization of debt discount
Amortization of debt discount was $3,653,652 and $1,065,879 for the
years ended December 31, 2021 and 2020, respectively, an increase
of $2,587,773 or 242.8%. The increase is primarily due to the
accelerated amortization of debt discount related to notes
converted to equity during the first quarter of the current year,
in addition, the increase is also due to the increase in the debt
discount of $2,569,000 associated with the increase in convertible
debt over the prior year.
Derivative liability movements
Derivative liability movements were $5,128,255 and $(654,471) for
the years ended December 31, 2021 and 2020, respectively. The
derivative liability arose due to the issuance of convertible
securities with variable conversion prices and no floor conversion
price. The credit during the current year represents the
mark-to-market of the derivative liability outstanding as of
December 31, 2021, primarily as a result of a decrease in the share
price over the prior year.
Net loss
We incurred a net loss of $14,494,915 and $5,444,544 for the years
ended December 31, 2021 and 2020 respectively, an increase in loss
of $9,050,371 or 166.2%. The increase is due to the increase in
general and administrative expenses, the loss realized on the
conversion of convertible debt and the amortization of debt
discount, offset by the movement in derivative liabilities,
discussed in detail above.
Liquidity and Capital Resources
To date, our primary sources of cash have been funds raised
primarily from the sale of our debt and equity securities.
We incurred an accumulated deficit of $42,111,701 through December
31, 2021 and incurred negative cash flow from operations of
$2,608,118 for the year ended December 31, 2021. The Company’s
focus on operating and developing e-wallets that enable consumers
to deposit cash, convert it into a digital form and remit the funds
to Mexico and other countries quickly and securely, will require us
to spend, substantial amounts in connection with implementing our
business strategy, including our planned product development.
To meet our financing needs, we have raised net convertible debt
funding of $2,048,000, received proceeds from warrant exercises of
$3,009,349 and additional gross proceeds $4,550,000 from a private
placement of equity securities, we believe we have sufficient
funding to implement our business strategy.
At December 31, 2021, we had cash of $5,449,751 and working capital
of $2,701,065, including a derivative liability of $407,161. After
eliminating the derivative liability our working capital is
$3,108,226.
We utilized cash of $2,608,118 and $1,256,279 in operations for the
year ended December 31, 2021 and 2020, respectively. Overall cash
utilized in operations increased by $1,351,839, primarily due to
the increase in corporate overhead as we ready ourselves for our
new technology platform.
We invested $500,000 in the common stock of Frictionless which has
been contracted to develop our payment platform for the Mexican and
other markets. This is a strategic investment and we expect a
platform to be ready to utilize within the current year. We also
invested a further $625,000 in the acquisition of a license and
services for the Beyond Wallet software in the furtherance of our
objectives.
Cash provided by financing activities for the year ended December
31, 2021 was primarily comprised of gross proceeds of $4,550,000
from the private placement on March 17, 2021, $3,009,349 from
warrants exercised and a net $2,048,000 from convertible debt
issued, net of convertible debt repayments of $521,000. We utilized
$501,100 for share issue expenses.
At December 31, 2021, we had outstanding notes in the principal
amount of $2,044,000. The notes were issued on February 16,
2021 and may be prepaid at any time for the first 90 days in an
amount equal to 115% of the principal amount plus accrued interest.
From day 91 through day 180, the Notes may be prepaid in an amount
equal to 120% of the principal amount plus accrued interest. From
day 181 through day 365, it may be prepaid in an amount equal to
125% of the principal amount plus accrued interest. The notes
contain certain covenants, such as restrictions on: (i)
distributions on capital stock, (ii) stock repurchases, and (iii)
sales and the transfer of assets. The notes mature in 12
months, bears interest at a rate of 10% per annum, and are
initially convertible into our common stock at a conversion price
of $0.23 per share (as adjusted for stock splits, stock
combinations, dilutive issuances and similar events). Upon the
occurrence of an event of default under the notes, the respective
holder has the right to be prepaid at 140% of the outstanding
principal balance and accrued interest, and interest accrues at 18%
per annum (or the maximum amount permitted by law). In addition, if
an event of default under a note has occurred, regardless of
whether it has been cured or remains ongoing, such Note will
thereafter be convertible at 65% of the lowest closing price of our
common stock for the last 10 consecutive trading days.
Other than amounts owed under convertible notes, we have a
commitment for a property lease which expires in April 2022.
The amount of future minimum lease payments under operating leases
are as follows:
| |
|
Amount |
|
| Undiscounted minimum future lease
payments |
|
|
|
| Total instalments due: |
|
|
|
|
2022 |
|
$ |
14,400 |
|
Capital Expenditures
Our capital expenditure is expected to be less than $100,000 during
the next twelve month period.
Critical Accounting Policies
Preparation of our consolidated financial statements in accordance
with U.S. generally accepted accounting principles (“GAAP”)
requires us to make estimates and assumptions that affect the
reported amounts of certain assets, liabilities, revenues and
expenses, as well as related disclosure of contingent assets and
liabilities. Significant accounting policies are fundamental to
understanding our financial condition and results as they require
the use of estimates and assumptions which affect the financial
statements and accompanying notes. See Note 2 - Summary of
Significant Accounting Policies of the Notes to the Consolidated
Financial Statements included in Part II, Item 8 of this Form 10- K
for further information.
Recently Issued Accounting Pronouncements
See Note 2 - Summary of Significant Accounting Policies of the
Notes to the Consolidated Financial Statements included in Part II,
Item 8 of this Form 10-K for information regarding recently issued
accounting standards.
Contractual Obligations
We have contractual obligations in the form of convertible notes
which are described in the financial statements presented
below.
Inflation
The effect of inflation on the Company’s operating results was not
significant.
Interest rate sensitivity
We are not subject to interest rate sensitivity; our only debt
consists of fixed rate convertible debt.
Cybersecurity
We believe we employ industry standard cybersecurity protocols and
tools, which are constantly evolving, to protect our apps and
software. While we are not aware of any cybersecurity breaches or
similar issues relating to our company, there is a risk that our
efforts will be insufficient to defend against all cybersecurity
threats.
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk
Not applicable because we are a smaller reporting company.
Item 8. Financial Statements and Supplemental
Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Innovative Payment Solutions, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of
Innovative Payment Solutions, Inc. (the Company) as of December 31,
2021 and 2020, and the related consolidated statements of
operations, equity (deficit) and cash flows for each of the two
years in the period ended December 31, 2021, and the related notes
(collectively referred to as the consolidated financial
statements). In our opinion, the consolidated financial statements
present fairly, in all material respects, the financial position of
the Company as of December 31, 2021 and 2020, and the results of
its operations and its cash flows for each of the two years in the
period ended December 31, 2021, in conformity with accounting
principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of
the Company’s management. Our responsibility is to express an
opinion on the Company’s consolidated financial statements based on
our audits. We are a public accounting firm registered with the
Public Company Accounting Oversight Board (United States) (PCAOB)
and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audits in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting. As part of our audits, we are required to obtain an
understanding of internal control over financial reporting, but not
for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable
basis
for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period
audit of the financial statements that were communicated or
required to be communicated to the audit committee and that: (1)
relate to accounts or disclosures that are material to the
financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of critical
audit matters does not alter in any way our opinion on the
financial statements, taken as a whole, and we are not, by
communicating the critical audit matters below, providing separate
opinions on the critical audit matters or on the accounts or
disclosures to which they relate.
Assessment of Derivative
Liabilities- Refer to Note 10 of the consolidated financial
statements
Certain of the short-term convertible notes disclosed in note 9 and
certain warrants disclosed in note 11 to the consolidated financial
statements, have variable priced conversion rights with no fixed
floor price and will re-price dependent on the share price
performance over varying periods of time and certain notes and
warrants have fundamental transaction clauses which might result in
cash settlement, due to these factors, all convertible notes and
any warrants attached thereto are valued and give rise to a
derivative financial liability, which was initially valued at
inception of the convertible notes and warrants using a
Black-Scholes valuation model. The value of this derivative
financial liability was re-assessed at December 31, 2021.
We identified the accounting for derivative liability for short
term convertible notes and warrants as a critical audit matter. Our
principal considerations included the existence of subjective
judgments related to certain provisions of the convertible notes
and warrant agreements in connection with the determination of the
classification of the notes and warrants, including provisions
related to market volatility. Auditing these elements required
especially challenging auditor judgment and significant audit
effort, including the need for specialized knowledge and skill in
assessing these elements of the agreements.
The primary procedures we performed to address this critical audit
matter included:
|
● |
Reading the agreements related to
the short-term convertible notes and warrants issued along with
management’s technical accounting memos to understand the facts and
circumstances within the notes and warrant agreements. |
|
● |
Utilizing personnel with
specialized knowledge and skill in debt and equity accounting to
evaluate the appropriateness of management’s interpretation on how
to apply relevant accounting guidance for the classification of the
warrants issued, including evaluating the terms associated with
market volatility. |
| /s/
RBSM LLP |
|
| |
|
| We
have served as the Company’s auditor since 2014. |
| |
| PCAOB
ID 587 |
|
| New
York, NY |
|
| March
31, 2022 |
|
INNOVATIVE PAYMENT SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
| |
|
December 31, |
|
|
December 31, |
|
| |
|
2021 |
|
|
2020 |
|
| Assets |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Current Assets |
|
|
|
|
|
|
|
Cash |
|
$ |
5,449,751 |
|
|
$ |
94,703 |
|
|
Other current assets |
|
|
85,034 |
|
|
|
5,270 |
|
|
Total Current Assets |
|
|
5,534,785 |
|
|
|
99,973 |
|
| |
|
|
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
|
|
| Plant
and equipment |
|
|
28,799 |
|
|
|
37,500 |
|
|
Intangible assets |
|
|
625,000 |
|
|
|
-
|
|
| Right
of use asset |
|
|
-
|
|
|
|
51,926 |
|
|
Security deposit |
|
|
34,800 |
|
|
|
4,000 |
|
|
Investment |
|
|
500,001 |
|
|
|
1 |
|
|
Total Non-Current Assets |
|
|
1,188,600 |
|
|
|
93,427 |
|
|
Total Assets |
|
$ |
6,723,385 |
|
|
$ |
193,400 |
|
| |
|
|
|
|
|
|
|
|
|
Liabilities and Equity (Deficit) |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
465,205 |
|
|
$ |
461,577 |
|
| Related
party payables |
|
|
-
|
|
|
|
4,000 |
|
| Federal
relief loans |
|
|
-
|
|
|
|
60,292 |
|
| Loans
payable |
|
|
-
|
|
|
|
23,633 |
|
|
Convertible debt, net of unamortized discount of $263,200 and
$980,852, respectively |
|
|
1,961,354 |
|
|
|
903,641 |
|
|
Operating lease liability |
|
|
-
|
|
|
|
44,134 |
|
|
Derivative liability |
|
|
407,161 |
|
|
|
2,966,416 |
|
|
Total Current Liabilities |
|
|
2,833,720 |
|
|
|
4,463,693 |
|
| |
|
|
|
|
|
|
|
|
|
Non-Current Liabilities |
|
|
|
|
|
|
|
|
| Federal
relief loans |
|
|
158,353 |
|
|
|
152,728 |
|
|
Operating lease liability |
|
|
-
|
|
|
|
7,792 |
|
|
Total Non-Current Liabilities |
|
|
158,353 |
|
|
|
160,520 |
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
|
2,992,073 |
|
|
|
4,624,213 |
|
| |
|
|
|
|
|
|
|
|
|
Equity (Deficit) |
|
|
|
|
|
|
|
|
| Preferred
stock, $0.0001 par value, 25,000,000 shares authorized, and 0
shares issued and outstanding as of December 31, 2021 and December
31, 2020. |
|
|
-
|
|
|
|
-
|
|
| Common stock,
$0.0001 par value; 750,000,000 and 500,000,000 shares authorized,
367,901,679 and 193,637,747 shares issued and outstanding as of
December 31, 2021 and December 31, 2020, respectively. |
|
|
36,790 |
|
|
|
19,363 |
|
|
Additional paid-in-capital |
|
|
45,771,012 |
|
|
|
23,179,399 |
|
|
Accumulated deficit |
|
|
(42,111,701 |
) |
|
|
(27,629,575 |
) |
|
Total equity (deficit) attributable to Innovative Payment
Solutions, inc. Stockholders |
|
|
3,696,101 |
|
|
|
(4,430,813 |
) |
|
Non-controlling interest |
|
|
35,211 |
|
|
|
-
|
|
|
Total Equity (Deficit) |
|
|
3,731,312 |
|
|
|
(4,430,813 |
) |
|
Total Liabilities and Equity (Deficit) |
|
$ |
6,723,385 |
|
|
$ |
193,400 |
|
The accompanying notes are an integral part of these audited
consolidated financial statements.
INNOVATIVE PAYMENT SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
| |
|
Twelve
months ended |
|
|
Twelve
months ended |
|
| |
|
December |
|
|
December |
|
| |
|
2021 |
|
|
2020 |
|
| |
|
|
|
|
|
|
| Net Revenue |
|
$ |
-
|
|
|
$ |
-
|
|
| |
|
|
|
|
|
|
|
|
| Cost of Goods
Sold |
|
|
-
|
|
|
|
-
|
|
| |
|
|
|
|
|
|
|
|
| Gross profit |
|
|
-
|
|
|
|
-
|
|
| |
|
|
|
|
|
|
|
|
| General and
administrative |
|
|
10,284,815 |
|
|
|
1,742,008 |
|
| Depreciation |
|
|
17,935 |
|
|
|
12,500 |
|
| Total
Expense |
|
|
10,302,750 |
|
|
|
1,754,508 |
|
| |
|
|
|
|
|
|
|
|
| Loss from
Operations |
|
|
(10,302,750 |
) |
|
|
(1,754,508 |
) |
| |
|
|
|
|
|
|
|
|
| Investment impairment charge |
|
|
-
|
|
|
|
(1,019,960 |
) |
| Loss on debt conversion |
|
|
(5,498,820 |
) |
|
|
(433,610 |
) |
| Loss on settlement of liabilities |
|
|
-
|
|
|
|
(95,082 |
) |
| Debt extension fee |
|
|
-
|
|
|
|
(40,000 |
) |
| Forgiveness of federal relief
loans |
|
|
60,292 |
|
|
|
-
|
|
| Interest expense, net |
|
|
(228,240 |
) |
|
|
(381,034 |
) |
| Amortization of debt discount |
|
|
(3,653,652 |
) |
|
|
(1,065,879 |
) |
| Derivative
liability movements |
|
|
5,128,255 |
|
|
|
(654,471 |
) |
| Loss before
taxation |
|
|
(14,494,915 |
) |
|
|
(5,444,544 |
) |
| |
|
|
|
|
|
|
|
|
| Taxation |
|
|
-
|
|
|
|
-
|
|
| |
|
|
|
|
|
|
|
|
| Net loss |
|
|
(14,494,915 |
) |
|
|
(5,444,544 |
) |
| |
|
|
|
|
|
|
|
|
| Net loss attributable to
non-controlling interest |
|
|
12,789 |
|
|
|
-
|
|
| |
|
|
|
|
|
|
|
|
| Net loss
attributable Innovative Payment Solutions, Inc. Stockholders’ |
|
$ |
(14,482,126 |
) |
|
$ |
(5,444,544 |
) |
| |
|
|
|
|
|
|
|
|
| Basic
and diluted loss per share |
|
$ |
(0.04 |
) |
|
$ |
(0.03 |
) |
| |
|
|
|
|
|
|
|
|
| Weighted Average
Number of Shares Outstanding - Basic and diluted |
|
|
334,343,830 |
|
|
|
171,391,733 |
|
The accompanying notes are an integral part of these audited
consolidated financial statements.
INNOVATIVE PAYMENT SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(DEFICIT)
FOR THE PERIOD JANUARY 1, 2020 TO DECEMBER
31, 2021
| |
|
Preferred
Stock
Shares |
|
|
Amount |
|
|
Common
Stock
Shares* |
|
|
Amount |
|
|
Additional
Paid-in
Capital |
|
|
Accumulated
Deficit |
|
|
Non-controlling shareholders interest |
|
|
Total
Stockholders’
Equity (Deficit) |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019 |
|
|
-
|
|
|
$ |
-
|
|
|
|
128,902,124 |
|
|
$ |
12,890 |
|
|
$ |
21,579,022 |
|
|
$ |
(22,185,031 |
) |
|
$ |
-
|
|
|
$ |
(593,119 |
) |
|
Conversion of debt to equity |
|
|
- |
|
|
|
-
|
|
|
|
35,002,245 |
|
|
|
3,500 |
|
|
|
766,058 |
|
|
|
-
|
|
|
|
-
|
|
|
|
769,558 |
|
| Settlement of
liabilities |
|
|
- |
|
|
|
-
|
|
|
|
4,004,110 |
|
|
|
400 |
|
|
|
144,764 |
|
|
|
-
|
|
|
|
-
|
|
|
|
145,164 |
|
| Shares
issued for services |
|
|
- |
|
|
|
-
|
|
|
|
1,834,268 |
|
|
|
183 |
|
|
|
68,817 |
|
|
|
-
|
|
|
|
-
|
|
|
|
69,000 |
|
| Shares
subscriptions |
|
|
- |
|
|
|
-
|
|
|
|
1,400,000 |
|
|
|
140 |
|
|
|
32,860 |
|
|
|
-
|
|
|
|
-
|
|
|
|
33,000 |
|
| Stock
based compensation |
|
|
- |
|
|
|
-
|
|
|
|
22,495,000 |
|
|
|
2,250 |
|
|
|
587,878 |
|
|
|
-
|
|
|
|
-
|
|
|
|
590,128 |
|
|
Net loss |
|
|
- |
|
|
|
-
|
|
|
|
- |
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,444,544 |
) |
|
|
-
|
|
|
|
(5,444,544 |
) |
|
Balance at December 31, 2020 |
|
|
- |
|
|
|
-
|
|
|
|
193,637,747 |
|
|
|
19,363 |
|
|
|
23,179,399 |
|
|
|
(27,629,575 |
) |
|
|
-
|
|
|
|
(4,430,813 |
) |
| Warrants
exercised |
|
|
- |
|
|
|
-
|
|
|
|
60,186,982 |
|
|
|
6,019 |
|
|
|
3,003,330 |
|
|
|
-
|
|
|
|
-
|
|
|
|
3,009,349 |
|
|
Conversion of convertible debt to equity |
|
|
- |
|
|
|
-
|
|
|
|
61,793,616 |
|
|
|
6,180 |
|
|
|
7,751,860 |
|
|
|
-
|
|
|
|
-
|
|
|
|
7,758,040 |
|
| Shares
issued for services |
|
|
- |
|
|
|
-
|
|
|
|
20,950,000 |
|
|
|
2,095 |
|
|
|
1,779,055 |
|
|
|
-
|
|
|
|
-
|
|
|
|
1,781,150 |
|
| Shares
subscriptions |
|
|
- |
|
|
|
-
|
|
|
|
30,333,334 |
|
|
|
3,033 |
|
|
|
4,546,967 |
|
|
|
-
|
|
|
|
-
|
|
|
|
4,550,000 |
|
| Share issue
expenses |
|
|
- |
|
|
|
-
|
|
|
|
- |
|
|
|
-
|
|
|
|
(501,100 |
) |
|
|
-
|
|
|
|
-
|
|
|
|
(501,100 |
) |
| Fair value of
warrants issued |
|
|
- |
|
|
|
-
|
|
|
|
- |
|
|
|
-
|
|
|
|
4,327,899 |
|
|
|
-
|
|
|
|
-
|
|
|
|
4,327,899 |
|
| Stock based
option expense |
|
|
- |
|
|
|
-
|
|
|
|
- |
|
|
|
-
|
|
|
|
1,382,638 |
|
|
|
-
|
|
|
|
-
|
|
|
|
1,382,638 |
|
|
Restricted stock awards |
|
|
- |
|
|
|
- |
|
|
|
1,000,000 |
|
|
|
100 |
|
|
|
300,964 |
|
|
|
- |
|
|
|
- |
|
|
|
301,064 |
|
| Proceeds
from non-controlling shareholders |
|
|
- |
|
|
|
-
|
|
|
|
- |
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
48,000 |
|
|
|
48,000 |
|
|
Net loss |
|
|
- |
|
|
|
-
|
|
|
|
- |
|
|
|
-
|
|
|
|
-
|
|
|
|
(14,482,126 |
) |
|
|
(12,789 |
) |
|
|
(14,494,915 |
) |
|
Balance at December 31, 2021 |
|
|
- |
|
|
$ |
-
|
|
|
|
367,901,679 |
|
|
$ |
36,790 |
|
|
$ |
45,771,012 |
|
|
$ |
(42,111,701 |
) |
|
$ |
35,211 |
|
|
$ |
3,731,312 |
|
The accompanying notes are an integral part of these audited
consolidated financial statements.
INNOVATIVE PAYMENT SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| |
|
Twelve
months ended |
|
|
Twelve
months ended |
|
| |
|
December 31, |
|
|
December 31, |
|
| |
|
2021 |
|
|
2020 |
|
| CASH FLOWS FROM OPERATING
ACTIVITIES: |
|
|
|
|
|
|
|
Net loss |
|
$ |
(14,494,915 |
) |
|
$ |
(5,444,544 |
) |
|
Adjustment to reconcile net loss to net cash used in operating
activities: |
|
|
|
|
|
|
|
|
|
Derivative liability movements |
|
|
(5,128,255 |
) |
|
|
654,471 |
|
|
Depreciation |
|
|
17,935 |
|
|
|
12,500 |
|
|
Amortization of debt discount |
|
|
3,653,652 |
|
|
|
1,065,879 |
|
|
Investment impairment charge |
|
|
-
|
|
|
|
1,019,960 |
|
| Loss on
conversion of debt to equity |
|
|
5,498,820 |
|
|
|
433,610 |
|
| Loss on
settlement of liabilities |
|
|
-
|
|
|
|
95,082 |
|
| Deposit
forfeited |
|
|
4,000 |
|
|
|
-
|
|
|
Forgiveness of federal relief loans |
|
|
(60,292 |
) |
|
|
-
|
|
| Shares
issued for services |
|
|
1,219,050 |
|
|
|
69,000 |
|
| Stock
based compensation |
|
|
6,573,701 |
|
|
|
590,128 |
|
|
Amortization of right of use asset |
|
|
17,857 |
|
|
|
34,815 |
|
|
Changes in Assets and Liabilities |
|
|
|
|
|
|
|
|
| Other
current assets |
|
|
(79,764 |
) |
|
|
45,788 |
|
| Accounts
payable and accrued expenses |
|
|
(373 |
) |
|
|
151,054 |
|
|
Operating lease liabilities |
|
|
(17,857 |
) |
|
|
(34,815 |
) |
|
Interest accruals |
|
|
188,323 |
|
|
|
50,793 |
|
|
CASH USED IN OPERATING ACTIVITIES |
|
|
(2,608,118 |
) |
|
|
(1,256,279 |
) |
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Investment in Frictionless Financial Technologies, Inc. |
|
|
(500,000 |
) |
|
|
-
|
|
|
Intangibles acquired |
|
|
(625,000 |
) |
|
|
-
|
|
|
Investment in deposits |
|
|
(34,800 |
) |
|
|
-
|
|
|
Plant and equipment purchased |
|
|
(9,234 |
) |
|
|
(50,000 |
) |
|
NET CASH USED IN INVESTING ACTIVITIES |
|
|
(1,169,034 |
) |
|
|
(50,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
| Proceeds
from share issuances |
|
|
4,550,000 |
|
|
|
33,000 |
|
| Share issue
expenses |
|
|
(501,100 |
) |
|
|
-
|
|
| Proceeds
from warrants issued |
|
|
3,009,349 |
|
|
|
-
|
|
| Proceeds
from loans payable |
|
|
-
|
|
|
|
85,000 |
|
|
Repayment of loans payable |
|
|
(22,049 |
) |
|
|
(104,500 |
) |
| Proceeds
from short term notes and convertible notes |
|
|
2,569,000 |
|
|
|
1,877,375 |
|
|
Repayment of convertible notes |
|
|
(521,000 |
) |
|
|
(703,164 |
) |
| Proceeds
from non-controlling shareholders |
|
|
48,000 |
|
|
|
-
|
|
|
Proceeds from federal relief loans |
|
|
-
|
|
|
|
210,292 |
|
|
NET CASH PROVIDED BY FINANCING ACTIVITIES |
|
|
9,132,200 |
|
|
|
1,398,003 |
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
| NET
INCREASE IN CASH |
|
|
5,355,048 |
|
|
|
91,724 |
|
|
CASH AT BEGINNING OF YEAR |
|
|
94,703 |
|
|
|
2,979 |
|
|
CASH AT END OF YEAR |
|
$ |
5,449,751 |
|
|
$ |
94,703 |
|
|
|
|
|
|
|
|
|
|
|
|
CASH PAID FOR INTEREST AND TAXES: |
|
|
|
|
|
|
|
|
|
Cash paid for income taxes |
|
$ |
-
|
|
|
$ |
-
|
|
|
Cash paid for interest |
|
$ |
29,813 |
|
|
$ |
330,242 |
|
|
|
|
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
Derecognition of right of use assets on early termination |
|
$ |
34,070 |
|
|
$ |
-
|
|
|
Conversion of convertible debt to equity |
|
$ |
2,259,220 |
|
|
$ |
769,558 |
|
|
Settlement of liabilities |
|
$ |
-
|
|
|
$ |
145,164 |
|
The accompanying notes are an integral part of these audited
consolidated financial statements.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 1 |
ORGANIZATION AND DESCRIPTION OF
BUSINESS |
On May 12, 2016, Innovative Payment Solutions, Inc. (formerly known
as QPAGOS and Asiya Pearls, Inc.), a Nevada corporation (“IPSI” or
the “Company”), entered into an Agreement and Plan of Merger (the
“Merger Agreement”) with Qpagos Corporation, a Delaware corporation
(“Qpagos Corporation”), and Qpagos Merge, Inc., a Delaware
corporation and wholly owned subsidiary of IPSI (“Merger
Sub”). Pursuant to the Merger Agreement, on May 12, 2016, the
merger was consummated, and Qpagos Corporation and Merger Sub
merged (the “Merger”), with Qpagos Corporation continuing as the
surviving corporation of the Merger.
Pursuant to the Merger Agreement, upon consummation of the Merger,
each share of Qpagos Corporation’s capital stock issued and
outstanding immediately prior to the Merger was converted into the
right to receive two shares of IPSI common stock, par value $0.0001
per share (the “Common Stock”). Additionally, pursuant to the
Merger Agreement, upon consummation of the Merger, IPSI assumed all
of Qpagos Corporation’s warrants issued and outstanding immediately
prior to the Merger, which were exercisable for approximately
621,920 shares of Common Stock, respectively, as of the date of the
Merger. Prior to and as a condition to the closing of the Merger,
the then-current IPSI stockholder of 500,000 shares of Common Stock
agreed to return to IPSI 497,500 shares of Common Stock held by
such holder to IPSI and the then-current IPSI stockholder retained
an aggregate of 2,500 shares of Common Stock and the other
stockholders of IPSI retained 500,000 shares of Common Stock.
Therefore, immediately following the Merger, Qpagos Corporation’s
former stockholders held 4,992,900 shares of IPSI common stock
which represented approximately 91% of the outstanding Common
Stock.
The Merger was treated as a reverse acquisition of IPSI, a public
shell company, for financial accounting and reporting purposes. As
such, Qpagos Corporation was treated as the acquirer for accounting
and financial reporting purposes while IPSI was treated as the
acquired entity for accounting and financial reporting
purposes.
Qpagos Corporation (“Qpagos”) was incorporated on May 1, 2015 under
the laws of the state of Delaware to effectuate a reverse merger
transaction with Qpagos, S.A.P.I. de C.V. (“Qpagos Mexico”) and
Redpag Electrónicos S.A.P.I. de C.V. (“Redpag”). Each of the
entities were incorporated in November 2013 in Mexico.
Qpagos Mexico was formed to process payment transactions for
service providers it contracts with, and Redpag was formed to
deploy and operate kiosks as a distributor.
On May 27, 2016 Asiya changed its name to QPAGOS.
On June 1, 2016, the board of directors of QPAGOS (the “Board”)
changed the Company’s fiscal year end from October 31 to December
31.
On November 1, 2019, the Company changed its name from QPAGOS to
Innovative Payment Solutions, Inc. Additionally, and immediately
following the name change, the Company filed a Certificate of
Change with the Secretary of State of the State of Nevada to effect
a reverse split of the Company’s common stock, par value $0.0001
per share (the “common stock”) at a ratio of 1-for-10, effective on
November 1, 2019 (the Reverse Stock Split”). As a result of the
Reverse Stock Split, each ten pre-split shares of common stock
outstanding automatically combined into one new share of common
stock without any further action on the part of the holders, and
the number of outstanding shares of common stock was reduced from
320,477,867 shares to 32,047,817 after rounding for fractional
shares.
On December 31, 2019, Innovative Payment Solutions consummated the
disposal of Qpagos Corporation, Qpagos Mexico and Redpag in
exchange for 2,250,000 shares (the “Vivi Shares”) of common stock
of Vivi Holdings, Inc. (“Vivi” or “Vivi Holdings”) pursuant to a
Stock Purchase Agreement dated August 5, 2019 (the “SPA”). Of the
2,250,000 shares of Vivi, nine percent (9%) was allocated as
follows: Gaston Pereira (5%), Andrey Novikov (2.5%), and Joseph
Abrams (1.5%). The SPA was closed on December 31, 2019 after the
satisfaction of customary conditions, the receipt of a final
fairness opinion and the approval of the Company’s shareholders.
Innovative Payment Solutions no longer has any business operations
in Mexico and has retained its U.S. operations based in Calabasas,
California.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 1 |
ORGANIZATION AND DESCRIPTION OF BUSINESS
(continued) |
|
b) |
Description of the business |
Subsequent to the merger of Qpagos Corporation into IPSI and until
the divestiture of Qpagos Corporation, Qpagos Mexico and Redpag,
the Company’s focus was on the operations of Qpagos Corporation in
Mexico. The Company’s current focus is on providing payment
services to allow US persons to transfer funds to Mexico and other
countries.
The Company is focused on operating and developing e-wallets that
enable consumers to deposit cash, convert it into a digital form
and remit the funds to Mexico and other countries quickly and
securely. The Company’s first e-wallet, the Beyond Wallet, is
currently operational. The Company’s flagship e-wallet, IPSIPay, is
in final stages of development and testing. Previously the Company
intended to invest in physical kiosks, which required the user
presence at the kiosk location. The Company still intends to use
its existing kiosks in certain target markets within Southern
California.
The Company acquired a 10% strategic interest in Frictionless
on June 22, 2021. Frictionless agreed to deliver to the Company, a
live fully compliant financial payment Software as a Service
solution for use by the Company as a digital payment platform that
enables payments within the United states and abroad, including
Mexico, together with a service agreement providing a full suite of
product services to facilitate the Company’s anticipated product
offerings. The Company has an irrevocable right to acquire up to an
additional 41% of the outstanding common stock of Frictionless
at a purchase price of $300,000 for each 1% acquired.
On August 26, 2021, the Company formed a new
subsidiary, Beyond Fintech, in which its owns a 51%
stake, with Frictionless owning the remaining 49%. Beyond
Fintech acquired an exclusive license to a product known
as Beyond Wallet, to further its objective of providing virtual
payment services allowing US persons to transfer funds to
Mexico and other countries.
The COVID-19 pandemic has required the Company’s management to
focus its attention primarily on responding to the challenges
presented by the pandemic, including ensuring continuous
operations, and adjusting its operations to address changes in the
virtual payments industry. Due to measures imposed by the local
governments in areas affected by COVID-19, businesses had been
suspended due to quarantine intended to contain this outbreak and
many people had been forced to work from home in those areas. As a
result, development of our e-wallets and the limited installation
of our network of kiosks in Southern California had been delayed,
which has had an adverse impact on our business and financial
condition and has hampered our ability to generate revenues. As the
COVID-19 pandemic evolves, we may face similar challenges in the
future which could lead to material adverse impacts on our
company.
| 2 |
ACCOUNTING POLICIES AND
ESTIMATES |
The accompanying consolidated financial statements have been
prepared in accordance with U.S. generally accepted accounting
principles (“U.S. GAAP”).
All amounts referred to in the notes to the consolidated financial
statements are in United States Dollars ($) unless stated
otherwise.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 2 |
ACCOUNTING POLICIES AND ESTIMATES
(continued) |
| |
b) |
Principles of Consolidation |
The consolidated financial statements include the financial
statements of the Company and its subsidiary in which it has a
majority voting interest. All significant inter-company accounts
and transactions have been eliminated in the consolidated financial
statements.
The entities included in these consolidated financial statements
are as follows:
Innovative Payment Solutions, Inc. - Parent Company
Beyond Fintech Inc., 51% owned.
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 long-lived
investments, the fair value of warrants and stock options granted
for services or compensation, estimates of the probability and
potential magnitude of contingent liabilities, derivative
liabilities, the valuation allowance for deferred tax assets due to
continuing operating losses and the allowance for doubtful
accounts.
Making estimates requires management to exercise significant
judgment. It is at least reasonably possible that the estimate of
the effect of a condition, situation or set of circumstances that
existed at the date of the consolidated financial statements, which
management considered in formulating its estimate could change in
the near term due to one or more future confirming events.
Accordingly, the actual results could differ significantly from our
estimates.
Certain conditions may exist as of the date the financial
statements are issued, which may result in a loss to the Company,
but which will only be resolved when one or more future events
occur or fail to occur.
The Company’s management assesses such contingent liabilities, and
such assessment inherently involves an exercise of judgment.
If the assessment of a contingency indicates that it is probable
that a material loss has been incurred and the amount of the
liability can be estimated, then the estimated liability would be
accrued in the Company’s consolidated financial statements. If the
assessment indicates that a potential material loss contingency is
not probable but is reasonably possible, or is probable but cannot
be estimated, then the nature of the contingent liability, together
with an estimate of the range of possible loss if determinable and
material would be disclosed. Loss contingencies considered to be
remote by management are generally not disclosed unless they
involve guarantees, in which case the guarantee would be
disclosed.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 2 |
ACCOUNTING POLICIES AND ESTIMATES
(continued) |
| |
e) |
Fair
Value of Financial Instruments |
The Company adopted the guidance of Accounting Standards
Codification (“ASC”) 820 for fair value measurements which
clarifies the definition of fair value, prescribes methods for
measuring fair value, and establishes a fair value hierarchy to
classify the inputs used in measuring fair value as follows:
Level 1-Inputs are unadjusted quoted prices in active markets for
identical assets or liabilities available at the measurement
date.
Level 2-Inputs are unadjusted quoted prices for similar assets and
liabilities in active markets, quoted prices for identical or
similar assets and liabilities in markets that are not active,
inputs other than quoted prices that are observable, and inputs
derived from or corroborated by observable market data.
Level 3-Inputs are unobservable inputs which reflect the reporting
entity’s own assumptions on what assumptions the market
participants would use in pricing the asset or liability based on
the best available information.
The carrying amounts reported in the balance sheets for the
investment in Vivi Holdings Inc., was evaluated at fair value using
Level 3 Inputs based on the Company’s estimate of the market value
of the entities disposed to Vivi Holdings, Inc. Vivi Holdings Inc.,
does not have sufficient information available to assess the
current market price of its equity.
The carrying amounts reported in the balance sheets for cash,
accounts receivable, other current assets, other assets, accounts
payable, accrued liabilities, and notes payable, approximate fair
value due to the relatively short period to maturity for these
instruments. The Company has identified the short-term convertible
notes and certain warrants attached to certain of the notes that
are required to be presented on the balance sheets at fair value in
accordance with the accounting guidance.
ASC 825-10 “Financial Instruments” allows entities to
voluntarily choose to measure certain financial assets and
liabilities at fair value (fair value option). The fair value
option may be elected on an instrument-by-instrument basis and is
irrevocable, unless a new election date occurs. If the fair value
option is elected for an instrument, unrealized gains and losses
for that instrument should be reported in earnings at each
subsequent reporting date. We evaluate the fair value of variably
priced derivative liabilities on a quarterly basis and report any
movements thereon in earnings.
| |
f) |
Risks and Uncertainties |
The Company’s operations will be subject to significant risks and
uncertainties including financial, operational, regulatory, and
other risks, including the potential risk of business failure. The
recent global Covid-19 breakout has caused an economic crisis which
may result in a general tightening in the credit markets, lower
levels of liquidity, increases in the rates of default and
bankruptcy, and extreme volatility in credit, equity and fixed
income markets. These conditions may not only limit the Company’s
access to capital, but also make it difficult for its customers,
vendors and the Company to accurately forecast and plan future
business activities. In addition, businesses have been suspended
due to quarantines intended to contain this outbreak and many
people have been forced to work from home in those areas. As a
result, installation of the Company’s network of kiosks, terminals
and payment channels in Southern California has been delayed,
which has had an adverse impact on its business and financial
condition and has hampered the Company’s ability to generate
revenue and access usual sources of liquidity on reasonable
terms.
The Company’s results may be adversely affected by changes in
governmental policies with respect to laws and regulations,
anti-inflationary measures, and rates and methods of taxation,
among other things.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 2 |
ACCOUNTING POLICIES AND ESTIMATES
(continued) |
| |
g) |
Recent accounting
pronouncements |
In November 2021, the Financial Accounting Standards Board (the
“FASB”) issued Accounting Standards Update (“ASU”) 2021-10,
Disclosures by Entities about Government Assistance (Topic 832),
the update increases the transparency of government assistance,
including the following disclosures: (1) the types of assistance,
(2) an entity’s accounting for the assistance, and (3) the effect
of the assistance on an entity’s financial statements.
This ASU is effective for fiscal years beginning after December 15,
2021.
The effects of this ASU on the Company’s consolidated financial
statements is currently being assessed and is not expected to have
an impact on current disclosure.
The FASB issued several additional updates during the period, none
of these standards are either applicable to the Company or require
adoption at a future date and none are expected to have a material
impact on the consolidated financial statements upon adoption.
No segmental information is required as the Company has not
generated any revenue for the years ended December 31, 2021 and
2020 and only has one operating segment.
| |
i) |
Cash and Cash Equivalents |
The Company considers all highly liquid investments with original
maturities of three months or less at the time of purchase to be
cash equivalents. At December 31, 2021 and 2020, 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, 2021 and 2020, the
balance exceed the federally insured limit by $5,117,551 and $0,
respectively.
| |
j) |
Accounts Receivable and Allowance for Doubtful Accounts |
Accounts receivable are reported at realizable value, net of
allowances for doubtful accounts, which is estimated and recorded
in the period the related revenue is recorded. The Company has a
standardized approach to estimate and review the collectability of
its receivables based on a number of factors, including the period
they have been outstanding. Historical collection and payer
reimbursement experience is an integral part of the estimation
process related to allowances for doubtful accounts. In addition,
the Company regularly assesses the state of its billing operations
in order to identify issues, which may impact the collectability of
these receivables or reserve estimates. Revisions to the allowance
for doubtful accounts estimates are recorded as an adjustment to
bad debt expense. Receivables deemed uncollectible are charged
against the allowance for doubtful accounts at the time such
receivables are written-off. Recoveries of receivables previously
written-off are recorded as credits to the allowance for doubtful
accounts. There were no recoveries during the period ended December
31, 2021 and 2020.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 2 |
ACCOUNTING POLICIES AND ESTIMATES
(continued) |
The Company’s non-marketable equity securities are investments in
privately held companies without readily determinable market
values. The carrying value of our non-marketable equity securities
is adjusted to fair value for observable transactions for identical
or similar investments of the same issuer or impairment (referred
to as the measurement alternative). All gains and losses on
non-marketable equity securities, realized and unrealized, are
recognized in other income (expense), net. Non-marketable equity
securities that have been remeasured during the period are
classified within Level 3 in the fair value hierarchy because the
Company estimates the value based on valuation methods using the
observable transaction price at the transaction date and other
unobservable inputs including volatility, rights, and obligations
of the securities the Company holds. The cost method is used when
the Company has a passive, long-term investment that doesn’t result
in influence over the Company. The cost method is used when the
investment results in an ownership stake of less than 20%, and
there is no substantial influence. Under the cost method, the stock
purchased is recorded on a balance sheet as a non-current asset at
the historical acquisition/purchase price, and is not modified
unless shares are sold, additional shares are purchased or there is
evidence of the fair market value of the investment declining below
carrying value. Any dividends received are recorded as income.
The Company recorded an impairment charge of $0 and $1,019,960 on
its non-marketable equity securities for the years ended December
31, 2021 and 2020, respectively. The impairment charge was based on
management’s determination that due to the lack of ability, to
date, by Vivi Holdings (“Vivi”) to fulfill its capital raising
requirements and implement its business strategy that there is a
significant risk that Vivi may not be able to meet its
obligations.
Plant and equipment is stated at cost, less accumulated
depreciation. Plant and equipment with costs greater than $1,000
are capitalized and depreciated. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets.
The estimated useful lives of the assets are as follows:
|
Description |
|
Estimated Useful
Life |
| |
|
|
| Kiosks |
|
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.
Assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to
future undiscounted net cash flows expected to be generated by the
asset. If such assets are considered impaired, the impairment to be
recognized is measured by the amount by which the carrying amount
of the assets exceeds the fair value of the assets
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 2 |
ACCOUNTING POLICIES AND ESTIMATES
(continued) |
The Company’s revenue recognition policy is consistent with the
requirements of FASB ASC 606, Revenue.
The Company’s revenues are recognized when control of the promised
goods or services are transferred to a customer, in an amount that
reflects the consideration that the Company expects to receive in
exchange for those services. The Company derives its revenues from
the sale of its services, as defined below. The Company applies the
following five steps in order to determine the appropriate amount
of revenue to be recognized as it fulfills its obligations under
each of its revenue transactions:
| |
i. |
identify the contract with a
customer; |
| |
ii. |
identify the performance obligations in the
contract; |
| |
iii. |
determine the transaction price; |
| |
iv. |
allocate the transaction price to performance
obligations in the contract; and |
| |
v. |
recognize revenue as the performance obligation
is satisfied. |
The Company had no revenues during the years ended December 31,
2021 and 2020.
| |
o) |
Share-Based Payment Arrangements |
Generally, all forms of share-based payments, including stock
option grants, restricted stock grants and stock appreciation
rights are measured at their fair value on the awards’ grant date,
based on the estimated number of awards that are ultimately
expected to vest. Share-based compensation awards issued to
non-employees for services rendered are recorded at either the fair
value of the services rendered or the fair value of the share-based
payment, whichever is more readily determinable. The expense
resulting from share-based payments is recorded in operating
expenses in the consolidated statement of operations.
Prior to the Company’s reverse merger which took place on May 12,
2016, all share-based payments were based on management’s estimate
of market value of the Company’s equity. The factors considered in
determining managements estimate of market value includes,
assumptions of future revenues, expected cash flows, market
acceptability of our technology and the current market conditions.
These assumptions are complex and highly subjective, compounded by
the business being in its early stage of development in a new
market with limited data available.
Where equity transactions with arms-length third parties, who had
applied their own assumptions and estimates in determining the
market value of our equity, had taken place prior to and within a
reasonable time frame of any share-based payments, the value of
those share transactions have been used as the fair value for any
share-based equity payments.
Where equity transactions with arms-length third parties, included
both shares and warrants, the value of the warrants have been
eliminated from the unit price of the securities using a
Black-Scholes valuation model to determine the value of the
warrants. The assumptions used in the Black Scholes valuation model
includes market related interest rates for risk-free government
issued treasury securities with similar maturities; the expected
volatility of the Company’s common stock based on companies
operating in similar industries and markets; the estimated stock
price of the Company; the expected dividend yield of the Company
and; the expected life of the warrants being valued.
Subsequent to the Company’s reverse merger which took place on May
12, 2016, the Company has utilized the market value of its common
stock as quoted on the OTCQB, as an indicator of the fair value of
its common stock in determining share- based payment
arrangements.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 2 |
ACCOUNTING POLICIES AND ESTIMATES
(continued) |
| |
p) |
Derivative Liabilities |
ASC 815 generally provides three criteria that, if met, require
companies to bifurcate conversion options from their host
instruments and account for them as free standing derivative
financial instruments. These three criteria include circumstances
in which (a) the economic characteristics and risks of the embedded
derivative instrument are not clearly and closely related to the
economic characteristics and risks of the host contract, (b) the
hybrid instrument that embodies both the embedded derivative
instrument and the host contract is not re- measured at fair value
under otherwise applicable generally accepted accounting principles
with changes in fair value reported in earnings as they occur and
(c) a separate instrument with the same terms as the embedded
derivative instrument would be considered a derivative instrument
subject to the requirements of ASC 815. ASC 815 also provides an
exception to this rule when the host instrument is deemed to be
conventional, as described.
The Company is based in the US and currently enacted US tax laws
are used in the calculation of income taxes.
Income taxes are computed using the asset and liability method.
Under the asset and liability method, deferred income tax assets
and liabilities are determined based on the differences between the
financial reporting and tax bases of assets and liabilities and are
measured using the currently enacted tax rates and laws. A full
valuation allowance is provided for the amount of deferred tax
assets that, based on available evidence, are not expected to be
realized. It is the Company’s policy to classify interest and
penalties on income taxes as interest expense or penalties expense.
As of December 30, 2021 and December 31, 2020, there have been no
interest or penalties incurred on income taxes.
Comprehensive income is defined as the change in equity of a
company during a period from transactions and other events and
circumstances excluding transactions resulting from investments
from owners and distributions to owners. The Company does not have
any comprehensive income (loss) for the periods presented.
| |
s) |
Reclassification of prior year
presentation |
Certain prior year amounts have been reclassified for consistency
with the current year presentation. These reclassifications had no
effect on the reported results of operations.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company has incurred net losses since its inception and
anticipates net losses and negative operating cash flows for
the near future. For the year ended December 31, 2021, the
Company had a net loss of $14,494,915 and had $5,449,751 in cash.
In connection with preparing the consolidated financial statements
for the year ended December 31, 2021, management evaluated the
extent of the impact from the COVID-19 pandemic on the Company’s
business and its future liquidity for the next twelve months
through March 31, 2023.
The Company had a cash balance of $5,449,751 available as of
December 31, 2021. Management has determined that this cash balance
is sufficient to meet its expected cash requirements until at least
March 31, 2023.
If the Company is required to raise additional funds by issuing
equity securities, its stockholders would experience dilution.
Additional debt financing, if available, may involve covenants
restricting its operations or its ability to incur additional debt.
Any additional debt financing or additional equity that the Company
raises may contain terms that are not favorable to it or its
stockholders and require significant debt service payments, which
diverts resources from other activities.
Based on this current business plan, the Company believes its
existing cash is sufficient to conduct planned operations for one
year from the issuance of the December 31, 2021 financial
statements.
On August 26, 2021, The Company formed a new subsidiary, Beyond
Fintech. to acquire a product known as Beyond Wallet from a third
party for gross proceeds of $250,000, together with the logo, use
of name and implementation of the product into the Company’s
technology. The company owns 51% of Beyond Fintech with the
other 49% owned by Frictionless.
During the year, the Company paid gross proceeds of $375,000 to
frictionless for the development of the IPSIPay wallet, which is
now complete.
| |
|
December 31,
2021 |
|
|
December 31,
2020 |
|
|
Purchased Technology |
|
$ |
625,000 |
|
|
$ |
-
|
|
Investment in Frictionless Financial Technologies Inc.
On June 22, 2021, the Company entered into a Stock Purchase
Agreement (the “SPA”) with Frictionless, to
purchase 150 common shares for gross proceeds of
$500,000, representing 10.0% of the outstanding common shares.
In terms of the SPA, Frictionless agreed to deliver to the Company
on or before August 30, 2021, a live fully compliant financial
payment Software as a Service solution for use by the Company as a
digital payment platform that enables payments within the United
states and abroad, including Mexico, together with a service
agreement providing a full suite of product services to facilitate
to Company’s anticipated product offerings.
The company has undertaken to issue Frictionless a non-restricted,
non-dilutable 5 year warrant to
purchase 30,000,000 shares of common stock in the Company
at an exercise price of $0.15 per share, upon delivery of the
financial payment software. Frictionless delivered the
software subsequent to year end and the warrants will be issued in
accordance with the agreement.
The Company has the right to appoint and has appointed, one member
to the board of directors of Frictionless, which appointee will
remain on the board as long as the Company is the holder of the
Frictionless common stock.
The Company has an irrevocable right to acquire up to an
additional 41% of the outstanding common stock of Frictionless
at a purchase price of $300,000 for each 1% acquired.
The shares in Frictionless are unlisted as of December 31,
2021.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
| 5 |
INVESTMENTS (continued) |
|
Investment in Vivi Holdings, Inc.
Effective December 31, 2019, the Company sold 100% of the
outstanding common stock of its subsidiary, Qpagos Corp, together
with its 99.9% ownership interest of Qpagos Corporations’ two
Mexican entities: QPagos S.A.P.I. de C.V. and Redpag Electrónicos
S.A.P.I. de C.V, to Vivi.
As consideration for the disposal Vivi issued an aggregate
of 2,250,000 Shares of its common stock as
follows: 2,047,500 Shares to the
Company; 56,250 Shares to the Company’s designee, Mr.
Andrey Novikov; 33,750 Shares to the Company’s designee,
the Joseph W. & Patricia G. Abrams Family Trust;
and 112,500 Shares to the Company’s designee, Mr. Gaston
Pereira.
Due to the lack of available information, the Vivi Shares were
valued by a modified market method, whereby the value of the assets
disposed of were determined by management using the enterprise
value of the entire Company less the liabilities and assets
retained by the Company.
As of December 31, 2021 and 2020, the Company impaired the carrying
value of the investment in Vivi Holdings, Inc by $0 and
$1,019,960, respectively, based on Vivi’s indicated timeline for
its proposed IPO and fund raising activities, largely impacted by
the COVID-19 pandemic. The total impairment as of December 31, 2021
and 2020 was $1,019,960.
The shares in Vivi Holdings, Inc., are unlisted as of December 31,
2021.
| |
|
December 31,
2021 |
|
|
December 31,
2020 |
|
| Investment in Frictionless
Financial Technologies, Inc. |
|
$ |
500,000 |
|
|
$ |
-
|
|
| Investment in
Vivi Holdings, Inc. |
|
|
1 |
|
|
|
1 |
|
| |
|
$ |
500,001 |
|
|
$ |
1 |
|
The Company entered into a real property lease for office and
warehouse space located at 19355 Business Center Drive in
Northridge California, Los Angeles County. The lease commenced
on February 15, 2020 and expires on February 28, 2022,
monthly rental expense is $3,945 per month with no
escalations during the term of the lease.
The initial value of the right-of-use asset was $86,741 and
the operating lease liability was $86,741. The Company monitors for
events or changes in circumstances that require a reassessment of
its lease. When a reassessment results in the remeasurement of a
lease liability, a corresponding adjustment is made to the carrying
amount of the corresponding right-of-use asset unless doing so
would reduce the carrying amount of the right-of-use asset to an
amount less than zero. In that case, the amount of the adjustment
that would result in a negative right-of-use asset balance is
recorded as a loss in the statement of operations.
Effective June 1, 2021, the Company entered into a Mutual
Termination of Lease Agreement with the landlord. The security
deposit of $4,000 was forfeited.
On March 22, 2021, the Company entered into a real property lease
for an office located at 56B 5th Street, Lot 1
Carmel By The Sea, California. The lease commenced on April 1,
2021 and is for a twelve month period, terminating on April 1,
2022. The Company applied the practical expedient whereby
operating leases with a duration of twelve months or less are
expensed as incurred.
Discount Rate
To determine the present value of minimum future lease payments for
operating leases at February 15, 2020, the Company was required to
estimate a rate of interest that it would have to pay to borrow on
a collateralized basis over a similar term an amount equal to the
lease payments in a similar economic environment (the “incremental
borrowing rate” or “IBR”).
The Company determined the appropriate IBR by identifying a
reference rate and making adjustments that take into consideration
financing options and certain lease-specific circumstances. For the
reference rate, the Company used the 5 year ARM interest rate
at the time of entering into the agreement and compared that rate
to the Company’s weighted average cost of funding at the time of
entering into the operating lease. The Company determined
that 10.00% was an appropriate incremental borrowing rate
to apply to its real-estate operating lease.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
Right of use assets
Right of use assets are included in the consolidated Balance Sheet
are as follows:
| |
|
December 31,
2021
|
|
|
December 31,
2020 |
|
| Non-current assets |
|
|
|
|
|
|
| Right of use assets,
operating leases, net of amortization |
|
$ |
-
|
|
|
$ |
51,926 |
|
| |
|
|
|
|
|
|
|
|
Total Lease Cost
Individual components of the total lease cost incurred by the
Company is as follows:
| |
|
Year ended
December 31,
2021
|
|
|
Year ended
December 31,
2020 |
|
|
Operating lease expense |
|
$ |
74,803 |
|
|
$ |
41,423 |
|
| |
|
|
|
|
|
|
|
|
Other lease information:
| |
|
Year ended
December 31,
2021
|
|
|
Year ended
December 31,
2020 |
|
| Cash paid for amounts included in the
measurement of lease liabilities |
|
|
|
|
|
|
| Operating cash flows from
operating leases |
|
$ |
(74,803 |
) |
|
$ |
(41,423 |
) |
| |
|
|
|
|
|
|
|
|
| Remaining lease term – operating
lease |
|
|
3
months |
|
|
|
14
months |
|
| |
|
|
|
|
|
|
|
|
| Discount rate – operating lease |
|
|
-
|
|
|
|
10.0 |
% |
Maturity of Operating Leases
The amount of future minimum lease payments under operating leases
are as follows:
| |
|
Amount |
|
| Undiscounted minimum future lease
payments under leases with terms twelve months or less |
|
|
|
| Total instalments due: |
|
|
|
|
2022 |
|
$ |
14,400 |
|
Payroll Protection Program loan
On May 7, 2020, the Company received a Payroll Protection Program
(“PPP”) loan through its bankers, Wells Fargo Bank, amounting to
$60,292 earning interest at 1% per annum, maturing
on May 5, 2022 and repayable in installments of
$2,538 commencing on November 5, 2020. The Company has applied
for the loan to be forgiven in whole or in part based on the loan
being utilized for payroll costs, continuation of healthcare
benefits, mortgage interest payments, rent, utility and interest
payments on any other debt obligation.
The company has not made any payments on this loan, of which
$60,292 was forgiven on June 7, 2021.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
| 7 |
FEDERAL RELIEF LOANS
(continued) |
Small Business Administration Disaster Relief loan
On July 7, 2020, the Company received a Small Business Economic
Injury Disaster loan amounting to $150,000, bearing interest
at 3.75% per annum and repayable in monthly installments of
$731 commencing twelve months after inception with the balance
of interest and principal repayable on July 7, 2050. The loan is
secured by all tangible and intangible assets of the Company. The
proceeds are to be used for working capital purposes to alleviate
economic injury caused by the COVID-19 pandemic.
The company has accrued interest of $8,353 on this loan as of
December 31, 2021.
Loans payable consisted of the following:
|
Description |
|
Interest
Rate |
|
|
Maturity |
|
December 31,
2021 |
|
|
December 31,
2020 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| Stanislav Minaychenko |
|
|
4.0 |
% |
|
September 16, 2020 |
|
$ |
-
|
|
|
$ |
14,530 |
|
| Maxim Pukhoskiy |
|
|
4.0 |
% |
|
June 16, 2020 |
|
|
-
|
|
|
|
8,041 |
|
| Dieter Busenhart |
|
|
10.0 |
% |
|
January 17, 2021 |
|
|
-
|
|
|
|
1,062 |
|
|
Total loans payable |
|
|
|
|
|
|
|
$ |
-
|
|
|
$ |
23,633 |
|
Interest expense totaled $134 and $1,558 for the year ended
December 31, 2021 and 2020, respectively.
Stanislav Minaychenko
On December 17, 2019, in terms of a settlement agreement entered
into between the Company, Qpagos Corporation and Stanislav
Minaychenko, the Company issued a promissory note to Mr.
Minaychenko in settlement of $23,893 owing to him in terms of
a service agreement dated September 1, 2015. The promissory note
bears interest at 4% per annum, is unsecured and matures
on June 16, 2020.
During the year ended December 31, 2021, the Company repaid the
aggregate principal sum of $13,893 and interest thereon of
$717, thereby extinguishing the note.
Maxim Pukhoskiy
On December 17, 2019, in terms of a settlement agreement entered
into between the Company, Qpagos Corporation and Maxim Pukhoskiy,
the Company issued a promissory note to Mr. Pukhoskiy in settlement
of $17,856 owing to him in terms of a service agreement dated
May 1, 2015. The promissory note bears interest at 4% per
annum, is unsecured and matures on June 16, 2020.
During the year ended December 31, 2021, the Company repaid the
aggregate principal sum of $7,656 and interest thereon of
$429, thereby extinguishing the note.
Dieter Busenhart
On July 17, 2020, the Company issued a promissory note to Dieter
Busenhart in the aggregate principal amount of $50,000 for net
proceeds of $50,000, bearing interest at 10% per annum and
maturing on January 17, 2021.
During the year ended December 31, 2021, the Company repaid the
aggregate principal sum of $500.
The balance remaining on the promissory note consists of accrued
interest of $571 was recorded under accrued liabilities.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE
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 |
|
|
December 31, 2021
Amount, net
|
|
|
December 31,
2020
Amount,
net
|
|
|
Power Up Lending Group |
|
|
12 |
% |
|
July 13,
2021 |
|
$ |
-
|
|
|
$ |
-
|
|
|
$ |
-
|
|
|
$ |
-
|
|
|
$ |
33,057 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cavalry Fund I LP |
|
|
10 |
% |
|
June 30,
2021 |
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
157,149 |
|
| |
|
|
10 |
% |
|
July 31,
2021 |
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
217,248 |
|
| |
|
|
10 |
% |
|
September 24,
2021 |
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
33,669 |
|
| |
|
|
10 |
% |
|
August 5,
2021 |
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
63,553 |
|
| |
|
|
10 |
% |
|
February 3,
2022 |
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
| |
|
|
10 |
% |
|
February 16,
2022 |
|
|
572,000 |
|
|
|
50,527 |
|
|
|
(73,655 |
) |
|
|
548,872 |
|
|
|
-
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mercer Street Global Opportunity Fund, LLC |
|
|
10 |
% |
|
August 3,
2021 |
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
288,895 |
|
| |
|
|
10 |
% |
|
February 3,
2022 |
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
| |
|
|
10 |
% |
|
February 16,
2022 |
|
|
572,000 |
|
|
|
50,527 |
|
|
|
(73,655 |
) |
|
|
548,872 |
|
|
|
-
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Iroquois Master Fund Ltd. |
|
|
10 |
% |
|
September 16,
2021 |
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
72,835 |
|
| |
|
|
10 |
% |
|
February 3,
2022 |
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark Geist |
|
|
10 |
% |
|
October 20,
2021 |
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,206 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bellridge Capital LP. |
|
|
10 |
% |
|
November 25,
2021 |
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
31,029 |
|
| |
|
|
10 |
% |
|
February 16,
2022 |
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
10 |
% |
|
February
16,
2022 |
|
|
900,000 |
|
|
|
79,500 |
|
|
|
(115,891 |
) |
|
|
863,609 |
|
|
|
-
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total convertible notes payable |
|
|
|
|
|
|
|
$ |
2,044,000 |
|
|
$ |
180,554 |
|
|
$ |
(263,201 |
) |
|
$ |
1,961,353 |
|
|
$ |
903,641 |
|
Interest expense, including penalty interest totaled $221,930 and
$366,964 for the years ended December 31, 2021 and 2020,
respectively.
Amortization of debt discount totaled $3,653,652 and $1,065,879 for
the years ended December 31, 2021 and 2020, respectively.
The convertible notes have variable conversion prices based on a
discount to market price of trading activity over a specified
period of time. The variable conversion features were valued using
a Black Scholes valuation model. The difference between the fair
market value of the common stock and the calculated conversion
price on the issuance date was recorded as a debt discount with a
corresponding credit to derivative financial liability.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
| 9 |
CONVERTIBLE NOTES PAYABLE
(continued) |
Power Up Lending Group Ltd
| |
● |
On July 13, 2020, the Company issued a Convertible Promissory Note
in the aggregate principal amount of $63,000 to Power Up
Lending Group Ltd for net proceeds of $60,000 after certain
expenses. The note had a maturity date of July 13,
2021 and a coupon of 12% per annum. The Company
could prepay the note with prepayment penalties that ranged from
115% to 135%. The outstanding principal amount of the note was
convertible after 180 days, at the election of the holder into
shares of the Company’s common stock at a conversion price equal to
61% of the lowest trading price during the previous fifteen trading
days.
On January 11, 2021, the Company repaid the principal sum of
$63,000 and accrued interest and penalty interest thereon of
$27,083, thereby extinguishing the note.
|
Cavalry Fund LLP
| |
● |
On July 1, 2020, the Company closed a transaction with Cavalry Fund
I LP (“Cavalry”), pursuant to which the Company received net
proceeds of $246,600, after certain expenses in exchange for the
issuance of a $300,000 Senior Secured Convertible Note
(“Initial Cavalry Note”), with an original issue discount
of 12.5% or $37,500, bearing interest at 10% per annum
and maturing on June 30, 2021. The Initial Cavalry Note was
convertible into shares of common stock at an initial conversion
price of $0.035 per share. In addition, the Company issued a
warrant exercisable over 8,571,428 shares of common stock
at an initial exercise price of $0.05 per share.
The Initial Cavalry Note could be prepaid at any time for the first
90 days at face value plus accrued interest. From day 91 through
day 180, the Initial Note could be prepaid in an amount equal to
115% of the principal amount plus accrued interest. From day 181
through day 365, it could be prepaid in an amount equal to 125% of
the principal amount plus accrued interest. The Initial Cavalry
Note contained certain covenants, such as restrictions on: (i)
distributions on capital stock, (ii) stock repurchases, and (iii)
sales and the transfer of assets.
Between January 4, 2021 and February 3, 2021, the Company received
conversion notices from Cavalry, converting the aggregate principal
amount of $300,000 and accrued interest thereon of
$16,639 into 9,046,826 shares of common stock at a
conversion price of $0.035 per share, thereby extinguishing
the Initial Cavalry Note.
|
| |
● |
Cavalry had agreed to purchase an additional $300,000 Senior
Secured Convertible Note (the “Second Cavalry Note”); from the
Company upon the same terms as the Initial Cavalry Note, within
three trading days of a registration statement registering the
shares of the Company’s common stock issuable under the Initial
Cavalry Note and upon exercise of the Warrants that had been issued
being declared effective by the SEC. On July 28, 2020 the
registration statement was declared effective and on July 31, 2020,
the Company received the additional net proceeds of $262,500. In
addition, the Company issued a warrant exercisable over 8,571,429
shares of common stock at an initial exercise price of $0.05 per
share.
The Second Cavalry Note could be prepaid at any time for the first
90 days at face value plus accrued interest. From day 91 through
day 180, the Second Note could be prepaid in an amount equal to
115% of the principal amount plus accrued interest. From day 181
through day 365, it could be prepaid in an amount equal to 125% of
the principal amount plus accrued interest. The Second Cavalry Note
contained certain covenants, such as restrictions on: (i)
distributions on capital stock, (ii) stock repurchases, and (iii)
sales and the transfer of assets.
Between February 8, 2021 and February 12, 2021, the Company
received conversion notices from Cavalry, converting the aggregate
principal amount of $300,000 and accrued interest thereon of
$16,083 into 9,030,953 shares of common stock at a
conversion price of $0.035 per share, thereby extinguishing
the Second Cavalry Note.
|
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
| 9 |
CONVERTIBLE NOTES PAYABLE
(continued) |
Cavalry Fund LLP (continued)
| |
● |
On September 24, 2020, the Company closed a transaction with
Cavalry pursuant to which the Company received net proceeds of
$99,750, after certain expenses in exchange for the issuance of a
$114,000 Senior Secured Convertible Note (the “Third Cavalry
Note”), with an original issue discount of $14,000, bearing
interest at 10% per annum and maturing on September 24, 2021,
the Third Cavalry Note was convertible into shares of common stock
at an initial conversion price of $0.035 per share, in
addition, the Company issued a warrant exercisable
over 3,257,143 shares of common stock at an initial
exercise price of $0.05 per share.
The Third Cavalry Note could be prepaid at any time for the first
90 days at face value plus accrued interest. From day 91 through
day 180, the Third Note could be prepaid in an amount equal to 115%
of the principal amount plus accrued interest. From day 181 through
day 365, it could be prepaid in an amount equal to 125% of the
principal amount plus accrued interest. The Third Cavalry Note
contained certain covenants, such as restrictions on: (i)
distributions on capital stock, (ii) stock repurchases, and (iii)
sales and the transfer of assets.
On February 18, 2021, the Company received a conversion notice from
Cavalry, converting the aggregate principal amount of
$114,000 and accrued interest thereon of
$4,623 into 3,389,238 shares of common stock at a
conversion price of $0.035 per share, thereby extinguishing
the Third Cavalry Note.
|
| |
● |
On October 20, 2020, Cavalry entered into an Assignment and
Transfer agreement whereby the Senior Secured Convertible Note with
a face value of $100,000, bearing interest at 10% per annum
and maturing on August 5, 2021, together with the warrant
exercisable over 2,857,143 shares of common stock at an
initial exercise price of $0.05 per share, was acquired by
Cavalry (the “Transferred note”). The Transferred Note was
convertible into shares of common stock at an initial conversion
price of $0.035 per share.
The transferred Note could be prepaid at any time for the first 90
days at face value plus accrued interest. From day 91 through day
180, the Transferred Note could be prepaid in an amount equal to
115% of the principal amount plus accrued interest. From day 181
through day 365, it could be prepaid in an amount equal to 125% of
the principal amount plus accrued interest. The Transferred note
contained certain covenants, such as restrictions on: (i)
distributions on capital stock, (ii) stock repurchases, and (iii)
sales and the transfer of assets.
On February 22, 2021, the Company received a conversion notice from
Cavalry, converting the aggregate principal amount of
$100,000 and accrued interest thereon of
$5,583 into 3,016,667 shares of common stock at a
conversion price of $0.035 per share, thereby extinguishing
the Transferred Note.
|
| |
● |
On February 3, 2021, the Company closed a transaction with Cavalry,
pursuant to which the Company received net proceeds of $150,500,
after an original issue discount of $21,500 in exchange for
the issuance of a $172,000 Senior Secured Convertible Note,
bearing interest at 10% per annum and maturing on February 3,
2022 (the Fourth Cavalry Note”). The fourth Cavalry Note is
convertible into shares of common stock at an initial conversion
price of $0.045 per share, in addition, the Company issued a
warrant exercisable for 3,822,223 shares of common stock
at an initial exercise price of $0.05 per share.
On February 17, 2021, the Company repaid the aggregate principal
sum of $172,000 owing on the Fourth Cavalry Note it had
entered into on February 3, 2021. The accrued interest of $669,
remains outstanding.
|
| |
● |
On February 16, 2021, the Company closed a transaction with
Cavalry, pursuant to which the Company received net proceeds of
$500,500, after an original issue discount of $71,500 in
exchange for the issuance of a $572,000 Senior Secured
Convertible Note, bearing interest at 10% per annum and
maturing on February 16, 2022 (the Fifth Cavalry Note”). The Fifth
Cavalry Note is convertible into shares of common stock at an
initial conversion price of $0.23 per share, in addition,
the Company issued a warrant exercisable
for 2,486,957 shares of common stock at an initial
exercise price of $0.24 per share.
The balance of the Fifth Cavalry Note plus accrued interest at
December 31, 2021 was $548,872, after unamortized debt discount of
$73,655.
|
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
| 9 |
CONVERTIBLE NOTES PAYABLE
(continued) |
Mercer Street Global Opportunity Fund, LLC
| |
● |
On August 3, 2020, the Company closed a transaction with Mercer
Street Global Opportunity Fund, LLC, (“Mercer”), pursuant to which
the Company received net proceeds of $350,000, after an original
issue discount of $50,000 in exchange for the issuance of a
$400,000 Senior Secured Convertible Note, bearing interest
at 10% per annum and maturing on August 3, 2021(the Initial
Mercer Note”). The Initial Mercer Note was convertible into
shares of common stock at an initial conversion price
of 0.035 per share, in addition, the Company issued a
warrant exercisable over 11,428,571 shares of common
stock at an initial exercise price of $0.05 per share.
The Initial Mercer note could be prepaid at any time for the first
90 days at face value plus accrued interest. From day 91 through
day 180, the note could be prepaid in an amount equal to 115% of
the principal amount plus accrued interest. From day 181 through
day 365, it could be prepaid in an amount equal to 125% of the
principal amount plus accrued interest. The Initial Mercer Note
contained certain covenants, such as restrictions on: (i)
distributions on capital stock, (ii) stock repurchases, and (iii)
sales and the transfer of assets.
Between January 4, 2021 and February 9, 2021, the Company received
conversion notices from Mercer, converting the aggregate principal
amount of $400,000 and accrued interest thereon of $19,411,
relating to the Initial Mercer Note entered into on August 3, 2020
into 11,983,170 shares of common stock at a conversion
price of $0.035 per share, thereby extinguishing the Initial
Mercer Note.
|
| |
● |
On February 3, 2021, the Company closed a transaction with Mercer,
pursuant to which the Company received net proceeds of $250,250,
after an original issue discount of $35,750 in exchange for
the issuance of a $286,000 Senior Secured Convertible Note,
bearing interest at 10% per annum and maturing on February 3,
2022 (the Second Mercer Note”). The second Mercer Note was
convertible into shares of common stock at an initial conversion
price of $0.045 per share, in addition, the Company
issued a warrant exercisable for 6,355,556 shares of
common stock at an initial exercise price of $0.05 per
share.
On February 16, 2021 and February 22, 2021, the Company repaid the
aggregate principal sum of $286,000 and interest thereon of
$1,033, owing on the Second Mercer Note it had entered into with
Mercer on February 3, 2021, thereby extinguishing the Second Mercer
Note.
|
| |
● |
On February 16, 2021, the Company closed a transaction with Mercer,
pursuant to which the Company received net proceeds of $500,500,
after an original issue discount of $71,500 in exchange for
the issuance of a $572,000 Senior Secured Convertible Note,
bearing interest at 10% per annum and maturing on February 16,
2022 (the Third Mercer Note”). The Third Mercer Note is convertible
into shares of common stock at an initial conversion price
of $0.23 per share, in addition, the Company issued a
warrant exercisable for 2,486,957 shares of common stock
at an initial exercise price of $0.24 per share.
The balance of the Third Mercer Note plus accrued interest at
December 31, 2021 was $548,872, after unamortized debt discount of
$73,655.
|
Iroquois Master Fund Ltd.
| |
● |
On September 16, 2020, the Company closed a transaction with
Iroquois Master Fund Ltd., pursuant to which the Company received
net proceeds of $199,500, after an original issue discount of
$28,500 in exchange for the issuance of a $228,000 Senior
Secured Convertible Note, bearing interest at 10% per annum
and maturing on September 16, 2021 (the Initial Iroquois
Note”). The Initial Iroquois Note is convertible into shares
of common stock at an initial conversion price of $0.035 per
share. In addition, the Company issued a warrant exercisable
over 6,514,286 shares of common stock at an initial
exercise price of $0.05 per share.
The Initial Iroquois Note could be prepaid at any time for the
first 90 days at face value plus accrued interest. From day 91
through day 180, the note could be prepaid in an amount equal to
115% of the principal amount plus accrued interest. From day 181
through day 365, it could be prepaid in an amount equal to 125% of
the principal amount plus accrued interest. The Initial Iroquois
Note contained certain covenants, such as restrictions on: (i)
distributions on capital stock, (ii) stock repurchases, and (iii)
sales and the transfer of assets.
Between January 5, 2021 and February 5, 2021, the Company
received conversion notices from Iroquois Master Fund Ltd.,
converting the aggregate principal amount of $228,000 relating to
the Initial Iroquois Note entered into on September 16, 2020 into
6,514,288 shares of common stock at a conversion price of $0.035
per share. The accrued interest of $8,041 on the Initial Iroquois
Note remains outstanding and was recorded under accrued
liabilities.
|
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
| 9 |
CONVERTIBLE NOTES PAYABLE
(continued) |
Iroquois Master Fund Ltd. (continued)
|
|
● |
On February 3, 2021, the Company closed a transaction with Iroquois
Master Fund Ltd., pursuant to which the Company received net
proceeds of $199,500, after an original issue discount of
$28,500 in exchange for the issuance of a $228,000 Senior
Secured Convertible Note, bearing interest at 10% per annum
and maturing on February 3, 2022 (the Second Iroquois Note”). The
Second Iroquois Note was convertible into shares of common stock at
an initial conversion price of $0.045 per share, in
addition, the Company issued a warrant exercisable
for 5,066,667 shares of common stock at an initial
exercise price of $0.05 per share.
On February 19, 2021, the Company received a conversion notice from
Iroquois Master Fund Ltd., converting the aggregate principal
amount of $228,000 into 5,066,667 shares of common
stock at a conversion price of $0.045 per share. The accrued
interest of $823 on the Second Iroquois Note remains
outstanding and was recorded under accrued liabilities.
|
Mark Geist
On October 20, 2020, the Company closed a transaction with Mark
Geist., pursuant to which the Company received net proceeds of
$25,025 after an original issue discount of $3,575 in
exchange for the issuance of a $28,600 Senior Secured
Convertible Note, bearing interest at 10% per annum and
maturing on October 20, 2021. The note was convertible into shares
of common stock at an initial conversion price
of $0.035 per share. In addition, the Company issued a
warrant exercisable over 817,143 shares of common stock
at an initial exercise price of $0.05 per share.
The note could be prepaid at any time for the first 90 days at face
value plus accrued interest. From day 91 through day 180, the
note could be prepaid in an amount equal to 115% of the principal
amount plus accrued interest. From day 181 through day 365, it
could be prepaid in an amount equal to 125% of the principal amount
plus accrued interest. The note contained certain covenants,
such as restrictions on: (i) distributions on capital stock, (ii)
stock repurchases, and (iii) sales and the transfer of assets.
On January 15, 2021, the Company received a conversion notice from
Mark Geist, converting the aggregate principal amount of
$28,600 and accrued interest thereon of
$561 into 833,172 shares of common stock at a
conversion price of $0.035 per share, thereby extinguishing
the note.
Bellridge Capital LP.
| |
● |
On November 25, 2020, the Company closed a transaction with
Bellridge Capital LP., pursuant to which the Company received net
proceeds of $250,250 after an original issue discount of
$35,750 in exchange for the issuance of a $286,000 Senior
Secured Convertible Note, bearing interest at 10% per annum
and maturing on November 25, 2021 (the “Initial Bellridge Note”).
The Initial Bellridge Note was convertible into shares of common
stock at an initial conversion price of 0.035 per share,
in addition, the Company issued a warrant exercisable
over 8,171,429 shares of common stock at an initial
exercise price of $0.05 per share.
The Initial Bellridge Note could be prepaid at any time for the
first 90 days at face value plus accrued interest. From day 91
through day 180, the note could be prepaid in an amount equal
to 115% of the principal amount plus accrued interest. From
day 181 through day 365, it could be prepaid in an amount equal
to 125% of the principal amount plus accrued interest. The
Initial Bellridge Note contained certain covenants, such as
restrictions on: (i) distributions on capital stock, (ii) stock
repurchases, and (iii) sales and the transfer of assets.
On February 6, 2021, the Company received a conversion notice from
Bellridge Capital, LP. converting the aggregate principal amount of
$286,000 and accrued interest thereon of
$5,720 into 8,334,857 shares of common stock at a
conversion price of $0.035 per share, thereby extinguishing
the Initial Bellridge Note.
|
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
| 9 |
CONVERTIBLE NOTES PAYABLE
(continued) |
Bellridge Capital LP. (continued)
| |
● |
On February 16, 2021, the Company closed a transaction with
Bellridge Capital LP., pursuant to which the Company received net
proceeds of $180,250, after an original issue discount of
$25,750 in exchange for the issuance of a $206,000 Senior
Secured Convertible Note, bearing interest at 10% per annum
and maturing on February 16, 2022, (the “Second Bellridge Note”).
The Second Bellridge Note was convertible into shares of common
stock at an initial conversion price of $0.045 per share,
in addition, the Company issued a warrant exercisable
for 4,577,778 shares of common stock at an initial
exercise price of $0.05 per share.
On February 16, 2021, the Company received a conversion notice from
Bellridge Capital, LP. converting the aggregate principal amount of
$206,000, relating to a convertible note entered into on the same
day into 4,577,778 shares of common stock at a conversion
price of $0.045 per share, thereby extinguishing the Second
Bellridge Note.
|
| |
● |
On February 16, 2021, the Company closed a transaction with
Bellridge Capital LP., pursuant to which the Company received net
proceeds of $787,500, after an original issue discount of
$112,500 in exchange for the issuance of a
$900,000 Senior Secured Convertible Note, bearing interest
at 10% per annum and maturing on February 16, 2022 (the “Third
Bellridge Note”). The Third Bellridge Note is convertible into
shares of common stock at an initial conversion price
of $0.23 per share, in addition, the Company issued a
warrant exercisable for 3,913,044 shares of common stock
at an initial exercise price of $0.24 per share.
The Third Bellridge Note may be prepaid at any time for the first
90 days at face value plus accrued interest. From day 91 through
day 180, the note may be prepaid in an amount equal to 115% of the
principal amount plus accrued interest. From day 181 through day
365, it may be prepaid in an amount equal to 125% of the principal
amount plus accrued interest. The note contains certain
covenants, such as restrictions on: (i) distributions on capital
stock, (ii) stock repurchases, and (iii) sales and the transfer of
assets.
The balance of the Third Bellridge Note plus accrued interest at
December 31, 2021 was $863,609, after unamortized debt discount of
$115,891.
|
Certain of the short-term convertible notes disclosed in note 9
above and certain warrants disclosed in note 11 below, have
variable priced conversion rights with no fixed floor price and
will re-price dependent on the share price performance over varying
periods of time and certain notes and warrants have fundamental
transaction clauses which might result in cash settlement, due to
these factors, all convertible notes and any warrants attached
thereto are valued and give rise to a derivative financial
liability, which was initially valued at inception of the
convertible notes using a Black-Scholes valuation model.
During the year ended December 31, 2021, an additional
$2,569,000 was raised as a derivative liability on convertible
notes and warrants and $2,569,000 was recorded as a debt discount
against the convertible notes
The value of this derivative financial liability was re-assessed at
December 31, 202 at $407,161, and $5,128,255 was credited to
the statement of operations, respectively. The value of the
derivative liability will be re-assessed at each financial
reporting period, with any movement thereon recorded in the
statement of operations in the period in which it is incurred.
The following assumptions were used in the Black-Scholes valuation
model:
| |
|
Year Ended
December 31,
2021
|
|
|
Year
Ended
December 31,
2020 |
|
| Conversion
price |
|
|
$0.05 to $0.24 |
|
|
|
$0.015 to $2.00 |
|
| Risk
free interest rate |
|
|
0.05 to 1.12 |
% |
|
|
0.09 to 1.53 |
% |
|
Expected
life of derivative liability |
|
|
1.6
to 49.6 months |
|
|
|
1 to 12 months
|
|
| Expected
volatility of underlying stock |
|
|
161.19 to 215.33 |
% |
|
|
171.7 to 222.6 |
% |
|
Expected
dividend rate |
|
|
0 |
% |
|
|
0 |
% |
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
| 10 |
DERIVATIVE LIABILITY
(continued) |
The movement in derivative liability is as follows:
| |
|
December 31,
2021 |
|
|
December 31,
2020 |
|
|
Opening balance |
|
$ |
2,966,416 |
|
|
$ |
905,576 |
|
|
Derivative financial liability arising from convertible note |
|
|
2,569,000 |
|
|
|
1,406,369 |
|
|
Fair value adjustment to derivative liability |
|
|
(5,128,255 |
) |
|
|
(654,471 |
) |
|
|
|
$ |
407,161 |
|
|
$ |
2,966,416 |
|
The Company has authorized 500,000,000 common shares with a par
value of $0.0001 each. The Company has issued and outstanding
367,901,679 and 193,637,747 shares of common stock as of
December 31, 2021 and 2020, respectively.
The following shares of common stock were issued by the Company
during the year ended December 31, 2021:
| |
● |
In
terms of debt conversion notices received between January 5, 2021
and February 23, 2021, the Company issued an aggregate
of 61,793,616 shares of common stock for the conversion
of $2,259,221 of convertible debt and interest thereon,
realizing a loss on conversion of $5,498,820. |
| |
● |
In
terms of warrant exercise notices received between February 18,
2021 and June 23, 2021, the Company
issued 60,186,982 shares of common stock for gross
proceeds of $3,009,349. |
| |
● |
On
March 17, 2021, the Company, entered into Securities Purchase
Agreements with several institutional investors, pursuant to which
the Company agreed to sell to the Investors in a private
placement (i) 30,333,334 shares of its common stock (the
“Shares”) and (ii) warrants (the “Warrants”) to purchase up to an
aggregate of 15,166,667 shares of its common stock for gross
proceeds of approximately $4,550,000. The combined purchase price
for one share of common stock and associated Warrant is
$0.15. |
| |
● |
Pursuant to an engagement letter dated as of
March 6, 2021, by and between the Company and H.C. Wainwright &
Co., LLC (“Wainwright”), the Company engaged Wainwright to act as
the Company’s exclusive placement agent in connection with the
private placement. Pursuant to the engagement agreement, the
Company agreed to pay Wainwright a cash fee of 8.0% of the
gross proceeds raised by the Company in the private placement. The
Company also agreed to pay Wainwright (i) a management fee
equal to 1.0% of the gross proceeds raised in the private
placement; (ii) $35,000 for non-accountable expenses and (iii) up
to $50,000 for fees and expenses of legal counsel and other
out-of-pocket expenses. In addition, the Company agreed to issue to
Wainwright (or its designees) placement agent warrants (the
“Placement Agent Warrants”) to purchase a number of shares equal to
8.0% of the aggregate number of Shares sold under the Purchase
Agreement or warrants to purchase an aggregate of up to 2,426,667
shares of the Company’s common stock. The Placement Agent Warrants
generally will have the same terms as the Warrants, except they
will have an exercise price of $0.1875. |
| |
● |
On
April 5, 2021, the Board of directors approved advisory board
agreements with four individuals, each agreement for a
period of two years form the effective date of the
agreement and may be terminated by each party
with 30 days’ notice. As compensation the Company
awarded each advisory board member 2,000,000 restricted
shares of common stock, the restricted shares of common stock
vest as to 75% on the effective date and 25% on the anniversary
date of the agreement. |
| |
a. |
Common Stock (continued) |
The following shares of common stock were issued by the Company
during the year ended December 31, 2021:
| |
● |
On
July 22, 2021, the Board of directors approved the issuance
of 7,000,000 shares of common stock to board members that
were appointed during the year. In Addition, a
further 300,000 shares of common stock were issued
to an employee of the Company and a
further 3,650,000 shares of common stock were
issued to various consultants. |
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
| 11 |
STOCKHOLDERS’ EQUITY
(continued) |
| |
● |
On
August 9, 2021, the Board of directors approved the issuance
of 2,000,000 shares of common stock to a third party
vendor. |
| |
● |
The 1,500,000 shares of unvested
restricted stock which was not physically issued to an employee
were not earned due to the cessation of employment with the Company
and were therefore cancelled. |
| |
b. |
Restricted stock awards |
On December 15, 2020, in terms of an employment agreement entered
into with an employee, the Company
granted 2,500,000 restricted shares of
which 1,000,000 vested on January 1, 2021 and the
remaining 1,500,000 shares vest over a period of two years.
The 1,500,000 shares of unvested restricted stock which
was not physically issued to the employee were not earned due to
the cessation of employment with the Company.
A summary of restricted stock activity during the period
January 1, 2020 to December 31, 2021 is as follows:
| |
|
Total
restricted shares |
|
|
Weighted
average
fair market value per share |
|
|
Total
unvested restricted shares
|
|
|
Weighted
average
fair market value per share |
|
|
Total
vested restricted shares |
|
|
Weighted
average
fair market value per share |
|
| Outstanding
January 1, 2020 |
|
|
-
|
|
|
$ |
-
|
|
|
|
-
|
|
|
$ |
-
|
|
|
|
-
|
|
|
$ |
-
|
|
| Granted |
|
|
20,495,000 |
|
|
|
0.049 |
|
|
|
20,495,000 |
|
|
|
0.049 |
|
|
|
-
|
|
|
|
-
|
|
| Forfeited/Cancelled |
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
| Vested |
|
|
-
|
|
|
|
-
|
|
|
|
(5,123,750 |
) |
|
|
(0.049 |
) |
|
|
5,123,750 |
|
|
|
0.049 |
|
| Outstanding
December 31, 2020 |
|
|
20,495,000 |
|
|
|
0.049 |
|
|
|
15,371,250 |
|
|
|
0.049 |
|
|
|
5,123,750 |
|
|
$ |
0.049 |
|
| Granted |
|
|
2,500,000 |
|
|
|
0.050 |
|
|
|
2,500,000 |
|
|
|
0.050 |
|
|
|
-
|
|
|
|
-
|
|
| Forfeited/Cancelled |
|
|
(1,500,000 |
) |
|
|
(0.050 |
) |
|
|
(1,500,000 |
) |
|
|
(0.050 |
) |
|
|
-
|
|
|
|
-
|
|
| Vested |
|
|
-
|
|
|
|
-
|
|
|
|
(6,123,750 |
) |
|
|
(0.049 |
) |
|
|
6,123,750 |
|
|
|
0.049 |
|
| Outstanding
December 31, 2021 |
|
|
21,495,000 |
|
|
$ |
0.049 |
|
|
|
10,247,500 |
|
|
$ |
0.049 |
|
|
|
11,247,500 |
|
|
$ |
0.049 |
|
The restricted stock granted and exercisable at December 31, 2021
is as follows:
| |
|
|
Restricted
Stock Granted |
|
|
Restricted
Stock Vested |
|
Grant
date
Price |
|
|
Number
Granted |
|
|
Weighted
Average
Fair Value per
Share |
|
|
Number
Vested |
|
|
Weighted
Average
Fair Value per
Share |
|
| $ |
0.049 |
|
|
|
20,495,000 |
|
|
$ |
0.049 |
|
|
|
10,247,500 |
|
|
$ |
0.049 |
|
| $ |
0.050 |
|
|
|
1,000,000 |
|
|
|
0.050 |
|
|
|
1,000,000 |
|
|
|
0.050 |
|
| |
|
|
|
|
21,495,000 |
|
|
$ |
0.049 |
|
|
|
11,247,500 |
|
|
$ |
0.049 |
|
The Company has recorded an expense of $301,064 and
$502,127 for the years ended December 31, 2021 and 2020,
respectively.
The Company has authorized 25,000,000 shares of preferred
stock with a par value of $0.0001 authorized, no preferred
stock is issued and outstanding as of December 31, 2021 and
December 31, 2020.
In terms of the Senior Secured convertible notes entered into with
various noteholders as described in note 9 above, the Company
issued five year warrants exercisable for a total of 28,709,182
shares of common stock at initial exercise prices ranging from
$0.05 to $0.24 per share. The warrants have a cashless exercise
option and an exercise limitation based on a certain beneficial
ownership percentage of 4.99% which may be adjusted to 9.99%. The
exercise price of the warrant is adjustable under the following
conditions; i) subsequent equity sales are at a price below the
exercise price of the warrant; ii) the Company issues options with
an exercise price lower than the exercise price of the warrants;
iii) issues convertible securities which are convertible into
common stock at a price lower than the warrant exercise price; and
iv) the option exercise price or rate of conversion for convertible
securities results in a lower exercise price than the exercise
price of the warrants.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
| 11 |
STOCKHOLDERS’ EQUITY
(continued) |
The warrant holders also have the option to acquire subsequent
rights offering rights, under certain circumstances and are
entitled to pro-rata distributions made by the Company in assets or
securities other than common stock.
The warrants include a fundamental transaction clause which will
give the warrant holder the right on an as converted basis to the
proceeds which common shareholders would be entitled to as a result
of a fundamental transaction. Notwithstanding the aforementioned
rights, provided the warrants are not registered under an effective
registration statement, the holder of the warrant has the right to
receive cash equal to the Black-Scholes value of the unexercised
portion of the warrant in accordance with the terms of the warrant
agreement.
On February 22, 2021, the Board of Directors of the Company
appointed William Corbett, its Chief Executive Officer and then
Interim Chief Financial Officer, as its Chairman of the Board and
issued him a five-year warrant to
purchase 20,000,000 shares of the Company’s common stock
at an exercise price of $0.24, valued at $4,327,899 and
expensed as stock based compensation during the current period.
In connection with the Securities Purchase Agreements with several
institutional investors, disclosed in Note 9(a) above, the Company
sold warrants to purchase up to an aggregate
of 15,166,667 shares of its common stock. The combined
purchase price for one share of common stock and associated Warrant
is $0.15. The warrants were valued at $2,028,509 using a Black
Scholes valuation model and using the assumptions disclosed
below.
The Warrants are exercisable for a period of five
years from the date of issuance and have an exercise price of
$0.15 per share, subject to adjustment as set forth in the
Warrants for stock splits, stock dividends, recapitalizations and
similar events. The Investors may exercise the Warrants on a
cashless basis if after the six month anniversary of date of
issuance the shares of common stock underlying the Warrants (the
“Warrant Shares”) are not then registered pursuant to an effective
registration statement. Each Investor has contractually agreed to
restrict its ability to exercise the Warrants such that the number
of shares of the Company’s common stock held by the Investor and
its affiliates after such exercise does not exceed the beneficial
ownership limitation set forth in the Warrants which may not exceed
initially 4.99% or 9.99% of the Company’s then issued and
outstanding shares of common stock.
Pursuant to an engagement letter dated as of March 6, 2021, by and
between the Company and Wainwright, the Company engaged Wainwright
to act as the Company’s exclusive placement agent in connection
with the private placement, discussed above. The Company agreed to
issue to Wainwright (or its designees) Placement Agent Warrants to
purchase an aggregate of up to 2,426,667 shares of the
Company’s common stock. The Placement Agent Warrants generally will
have the same terms as the Warrants, except they will have an
exercise price of $0.1875. The warrants were valued at
$323,924 using a Black Scholes valuation model and using the
assumptions disclosed below.
On August 16, 2021, the Company and Mr. Corbett entered into an
Executive Employment Agreement that replaced and superseded the
previous executive employment agreement whereby
the 20,000,000 warrants previously issued to Mr. Corbett
were cancelled and as a replacement for the warrants, he was
granted options to purchase 20,000,000 shares of common
stock of the Company at a per share exercise price of $0.15.
The fair value of the warrants granted and issued were determined
by using a Black Scholes valuation model using the following
assumptions:
| |
|
Year ended
December 31,
2021 |
|
| Exercise
price |
|
|
$0.05 to $0.24 |
|
| Risk
free interest rate |
|
|
0.46%
to 0.92 |
% |
| Expected
life |
|
|
5.0 years |
|
| Expected
volatility of underlying stock |
|
|
213.84% to 215.33 |
% |
|
Expected
dividend rate |
|
|
0 |
% |
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
| 11 |
STOCKHOLDERS’ EQUITY
(continued) |
A summary of warrant activity during the period
January 1, 2020 to December 31, 2021 is as follows:
| |
|
Shares
Underlying
Warrants |
|
|
Exercise
price per
share |
|
|
Weighted
average
exercise
price |
|
| Outstanding
January 1, 2020 |
|
|
852,775 |
|
|
$ |
2.00 to 6.25 |
|
|
$ |
5.10 |
|
| Granted |
|
|
51,188,572 |
|
|
|
0.05 |
|
|
|
0.05 |
|
| Forfeited/Cancelled |
|
|
(852,775 |
) |
|
|
2.00 to 6.25 |
|
|
|
5.10 |
|
| Exercised |
|
|
-
|
|
|
|
- |
|
|
|
-
|
|
| Outstanding
December 31, 2020 |
|
|
51,188,572 |
|
|
$ |
0.05 |
|
|
$ |
0.05 |
|
| Granted |
|
|
66,302,515 |
|
|
|
0.05 to 0.24 |
|
|
|
0.16 |
|
| Forfeited/Cancelled |
|
|
(20,000,000 |
) |
|
|
0.24 |
|
|
|
0.24 |
|
| Exercised |
|
|
(60,186,982 |
) |
|
|
0.05 |
|
|
|
0.05 |
|
| Outstanding
December 31, 2021 |
|
|
37,304,105 |
|
|
$ |
0.05 – 0.1875 |
|
|
$ |
0.12 |
|
The warrants outstanding and exercisable at December 31, 2021 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 |
|
| $ |
0.05 |
|
|
|
10,823,813 |
|
|
|
3.78 |
|
|
|
|
|
|
|
10,823,813 |
|
|
|
|
|
|
|
3.78 |
|
| $ |
0.15 |
|
|
|
24,053,625 |
|
|
|
4.18 |
|
|
|
|
|
|
|
24,053,625 |
|
|
|
|
|
|
|
4.18 |
|
| $ |
0.1875 |
|
|
|
2,426,667 |
|
|
|
4.21 |
|
|
|
|
|
|
|
2,426,667 |
|
|
|
|
|
|
|
4.21 |
|
| |
|
|
|
|
37,304,105 |
|
|
|
4.07 |
|
|
$ |
0.12 |
|
|
|
37,304,105 |
|
|
$ |
0.12 |
|
|
|
4.07 |
|
The warrants outstanding have an intrinsic value of $0 as of
December 31, 2021 and 2020.
On June 18, 2018, the Company established its 2018 Stock Incentive
Plan (the “Plan”). The purpose of the Plan is to promote the
interests of the Company and the stockholders of the Company by
providing directors, officers, employees and consultants of the
Company with appropriate incentives and rewards to encourage them
to enter into and continue in the employ or service of the Company,
to acquire a proprietary interest in the long-term success of the
Company and to reward the performance of individuals in fulfilling
long-term corporate objectives. The Plan terminates after a period
of ten years in June 2028.
The Plan is administered by the board of directors or a Committee
appointed by the Board of Directors who have the authority to
administer the Plan and to exercise all the powers and authorities
specifically granted to it under the Plan.
The maximum number of securities available under the Plan is
800,000 shares of common stock. The maximum number of shares of
common stock awarded to any individual during any fiscal year may
not exceed 100,000 shares of common stock.
On October 22, 2021, the Company (with the approval of the
Company’s shareholders) established its 2021 Stock Incentive Plan
(“2021 Plan”). The purpose of the 2021 Plan is to promote the
interests of the Company and the stockholders of the Company by
providing directors, officers, employees and consultants, advisors
and service providers 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 2021 Plan terminates after a period of ten years in
August 2031.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
| 11 |
STOCKHOLDERS’ EQUITY
(continued) |
| |
e. |
Stock options (continued) |
The 2021 Plan is administered by the board of directors or a
Compensation Committee appointed by the Board of Directors who have
the authority to administer the 2021 Plan and to exercise all the
powers and authorities specifically granted to it under the 2021
Plan.
The maximum number of securities available under the 2021 Plan
is 53,000,000 shares of common stock.
Under the 2021 Plan the company may award the following: (i)
non-qualified stock options; (ii)) incentive stock options; (iii)
stock appreciation rights; (iv) restricted stock; (v) restricted
stock unit; and (vi) other stock-based awards.
On February 22, 2021, the board awarded each of its directors,
James Fuller and Andrey Novikov, options under the Company’s 2018
Stock Incentive Plan to purchase 208,333 shares of the
Company’s common stock. The options are exercisable for a period of
ten years from the date of grant, vest in full on the date of grant
and have an exercise price of $0.24 per share.
On August 16, 2021, the Company and Mr. Corbett entered into an
Executive Employment Agreement that replaced and superseded the
previous executive employment agreement whereby
the 20,000,000 warrants previously issued to Mr. Corbett
were cancelled and as a replacement for the warrants, he was
granted options to purchase 20,000,000 shares of common
stock of the Company at a per share exercise price of $0.15. The
options are exercisable for a period of ten years from the date of
grant, vesting as to 50% on grant date and the remaining 50%,
equally over a period of 36 months.
In terms of an employment agreement dated August 16, 2021, on
August 31, 2021, the Board awarded Richard Rosenblum, the Company’s
Chief Financial Officer an option to
purchase 10,000,000 shares of the Company’s common stock
at an exercise price of $0.15 per share. The options are
exercisable for a period of ten years from the date of grant,
vesting as to 50% on grant date and the remaining 50%, equally over
a period of 36 months.
The fair value of the options granted and issued were determined by
using a Black Scholes valuation model using the following
assumptions:
| |
|
Year
ended December 31,
2021 |
|
|
Exercise
price |
|
$ |
0.15 |
|
| Risk
free interest rate |
|
|
1.26% to 1.27 |
% |
| Expected
life |
|
|
10.0 years |
|
| Expected
volatility of underlying stock |
|
|
209.3% to 210.4 |
% |
| Expected
dividend rate |
|
|
0 |
% |
On July 22. 2021, the board of directors authorized the reduction
in the exercise price of the options exercisable
for 208,333 shares of common stock granted to Mr. Fuller
on February 22, 2021, from $0.24 per share to $0.15 per
share, resulting in an immediate compensation charge of $6, the
remaining terms of the option were unchanged.
The value of the reduction in the exercise price was determined
using a Black Scholes valuation model utilizing the following
assumptions:
| |
|
Year ended December 31,
2021 |
|
|
Revised exercise price |
|
$ |
0.15 |
|
| Original exercise
price |
|
$ |
0.24 |
|
|
Risk free interest rate |
|
|
1.27 |
% |
|
Expected life |
|
|
9.6 years |
|
|
Expected volatility of underlying stock |
|
|
210.4 |
% |
|
Expected dividend rate |
|
|
0 |
% |
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
| 11 |
STOCKHOLDERS’ EQUITY
(continued) |
| |
e. |
Stock options (continued) |
No options were granted for the year ended December 31, 2020.
A summary of option activity during the period
January 1, 2020 to December 31, 2021 is as follows:
| |
|
Shares
Underlying
options |
|
|
Exercise
price per
share |
|
|
Weighted
average
exercise
price |
|
| Outstanding
January 1, 2020 |
|
|
100,000 |
|
|
$ |
0.40 |
|
|
$ |
0.40 |
|
| Granted |
|
|
-
|
|
|
|
- |
|
|
|
-
|
|
| Forfeited/Cancelled |
|
|
-
|
|
|
|
- |
|
|
|
-
|
|
| Exercised |
|
|
-
|
|
|
|
- |
|
|
|
-
|
|
| Outstanding
December 31, 2020 |
|
|
100,000 |
|
|
|
0.40 |
|
|
|
0.40 |
|
| Granted |
|
|
30,416,666 |
|
|
|
0.15 – 0.24 |
|
|
|
0.15 |
|
| Forfeited/Cancelled |
|
|
-
|
|
|
|
- |
|
|
|
-
|
|
| Exercised |
|
|
-
|
|
|
|
- |
|
|
|
-
|
|
| Outstanding
December 31, 2021 |
|
|
30,516,666 |
|
|
$ |
0.15 to 0.40 |
|
|
$ |
0.15 |
|
The options outstanding and exercisable at December 31, 2021 are as
follows:
| |
|
|
Options
Outstanding |
|
|
Options
Exercisable |
|
|
Exercise Price* |
|
|
Number
Outstanding |
|
|
Weighted
Average
Remaining
Contractual
life in years |
|
|
Weighted
Average
Exercise Price |
|
|
Number
Exercisable |
|
|
Weighted
Average
Exercise Price |
|
|
Weighted
Average
Remaining
Contractual
life in years |
|
| $ |
0.15 |
|
|
|
30,208,333 |
|
|
|
9.64 |
|
|
|
|
|
|
|
16,875,000 |
|
|
|
|
|
|
|
9.64 |
|
| $ |
0.24 |
|
|
|
208,333 |
|
|
|
9.15 |
|
|
|
|
|
|
|
208,333 |
|
|
|
|
|
|
|
9.15 |
|
| $ |
0.40 |
|
|
|
100,000 |
|
|
|
6.99 |
|
|
|
|
|
|
|
100,000 |
|
|
|
|
|
|
|
6.99 |
|
| |
|
|
|
|
30,516,666 |
|
|
|
9.63 |
|
|
$ |
0.15 |
|
|
|
17,183,333 |
|
|
$ |
0.15 |
|
|
|
9.62 |
|
The options outstanding have an intrinsic value of $0 as of
December 31, 2021 and 2020, respectively. The option expense was
$1,382,639 and $0 for the years ended December 31, 2021 and
2020.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
The Company’s operations are based in the US and currently enacted
tax laws in the US are used in the calculation of income taxes.
Federal Income Tax - United States
On December 22, 2017, the Tax Cuts and Jobs Act (the TCJA), which
significantly modified U.S. corporate income tax law, was signed
into law by President Trump. The TCJA contains significant changes
to corporate income taxation, including but not limited to the
reduction of the corporate income tax rate from a top marginal rate
of 35% to a flat rate of 21%, limitation of the tax deduction for
interest expense to 30% of earnings (except for certain small
businesses), limitation of the deduction for net operating losses
to 80% of current year taxable income and generally eliminating net
operating loss carrybacks, allowing net operating losses to
carryforward without expiration, one-time taxation of offshore
earnings at reduced rates regardless of whether they are
repatriated, elimination of U.S. tax on foreign earnings (subject
to certain important exceptions), immediate deductions for certain
new investments instead of deductions for depreciation expense over
time, and modifying or repealing many business deductions and
credits (including changes to the orphan drug tax credit and
changes to the deductibility of research and experimental
expenditures that will be effective in the
future). Notwithstanding the reduction in the corporate income
tax rate, the overall impact of the new federal tax law is
uncertain, including to what extent various states will conform to
the newly enacted federal tax law.
Income taxes are computed using the asset and liability method.
Under the asset and liability method, deferred income tax assets
and liabilities are determined based on the differences between the
financial reporting and tax bases of assets and liabilities and are
measured using the currently enacted tax rates and laws. A full
valuation allowance is provided for the amount of deferred tax
assets that, based on available evidence, are not expected to be
realized. It is the Company’s policy to classify interest and
penalties on income taxes as interest expense or penalties expense.
As of December 31, 2020 and 2019, there have been no interest or
penalties incurred on income taxes.
In the prior year, the Company’s primary operations were based in
Mexico and enacted tax laws in Mexico were used in the calculation
of income taxes, the holding company was based in the US and
enacted US tax laws were used in the calculation of income
taxes.
The provision for income taxes consists of the following:
| |
|
|
Year ended
December 31,
2021 |
|
|
|
Year ended
December 31,
2020 |
|
| Current |
|
|
|
|
|
|
|
|
| Federal |
|
$ |
-
|
|
|
$ |
-
|
|
| State |
|
|
-
|
|
|
|
-
|
|
| Foreign |
|
|
-
|
|
|
|
-
|
|
| |
|
$ |
-
|
|
|
$ |
-
|
|
| |
|
|
|
|
|
|
|
|
| Deferred |
|
|
|
|
|
|
|
|
| Federal |
|
$ |
-
|
|
|
$ |
-
|
|
| State |
|
|
-
|
|
|
|
-
|
|
| Foreign |
|
|
-
|
|
|
|
-
|
|
| |
|
$ |
-
|
|
|
$ |
-
|
|
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
| 12 |
INCOME TAXES (continued) |
A reconciliation of the U.S. Federal statutory income tax to
the effective income tax is as follows:
| |
|
Year ended
December 31,
2021 |
|
|
Year ended
December 31,
2020 |
|
| Continuing operations |
|
|
|
|
|
|
| Tax expense at the federal
statutory rate |
|
$ |
(3,043,932 |
) |
|
$ |
(1,143,354 |
) |
| State tax expense, net of federal tax
effect |
|
|
(409.279 |
) |
|
|
(79,743 |
) |
| Permanent differences |
|
|
1,813,210 |
|
|
|
453,667 |
|
| Prior year net operating loss true
up |
|
|
(43,413 |
) |
|
|
487,927 |
|
| Temporary
timing differences |
|
|
-
|
|
|
|
-
|
|
| |
|
|
(1,683,414 |
) |
|
|
(281,503 |
) |
| Deferred income
tax asset valuation allowance |
|
|
1,683,414 |
|
|
|
281,503 |
|
| |
|
$ |
-
|
|
|
$ |
-
|
|
Significant components of the Company’s deferred income tax assets
are as follows:
| |
|
December 31,
2021 |
|
|
December 31,
2020 |
|
| Other |
|
$ |
241,491 |
|
|
$ |
246,069 |
|
| Net
operating losses |
|
|
5,284,205 |
|
|
|
3,999,612 |
|
| Stock
based compensation |
|
|
403,399 |
|
|
|
-
|
|
| Valuation
allowance |
|
|
(5,929,095 |
) |
|
|
(4,245,681 |
) |
| Net
deferred income tax assets |
|
$ |
-
|
|
|
$ |
-
|
|
The valuation allowance for deferred income tax assets as of
December 31, 2021 and December 31, 2020 was
$5,929,095 and $4,245,681, respectively. The net change in the
deferred income tax assets valuation allowance was an increase of
$1,683,414 and is primarily attributable to tax operating losses
realized during the current year.
As of December 31, 2021, the prior three years remain
open for examination by the federal or state regulatory agencies
for purposes of an audit for tax purposes.
As of December 31, 2021, and 2020, the Company had available for
income tax purposes approximately $20.6 million in federal and
$13.8 million in state net operating loss carry forwards, which may
be available to offset future taxable income. $3.5 million of the
net operating losses will begin to expire in 2034 and $17.1 million
has an indefinite life. Due to the uncertainty of the utilization
and recoverability of the loss carryforwards and other deferred tax
assets, Management has determined a full valuation allowance for
the deferred tax assets, since it is more likely than not that the
deferred tax assets will not be realizable.
The Company’s ability to utilize the United States Federal
operating loss carryforwards may be subject to an annual limitation
if pursuant to IRC Section 382/383 of the Internal Revenue Code of
1986, as amended, if a change of ownership has occurred. Management
does not believe if an ownership change has occurred under IRC
Section 382/383, but is evaluating, if such change has occurred. If
such change has occurred, it is also possible that the loss
carryforward could be eliminated.
The Company is subject to taxation in the U.S. and CA state. U.S.
federal income tax returns for 2018 and after, remain open to
examination. No income tax returns are currently under examination.
As of December 31, 2021 and 2020, the Company does not have any
unrecognized tax benefits, and continues to monitor its current and
prior tax positions for any changes. The Company recognizes
penalties and interest related to unrecognized tax benefits as
income tax expense. For the years ended December 31, 2021 and 2020,
there were no penalties or interest recorded in income tax
expense.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
| 13 |
EQUITY BASED COMPENSATION |
Equity based compensation is made up of the following:
| |
|
Year
ended December 31,
2021 |
|
|
Year
ended December 31,
2020 |
|
| Incentive
stock awards |
|
$ |
6,011,601 |
|
|
$ |
502,128 |
|
| Stock
issued for services rendered |
|
|
1,781,150 |
|
|
|
88,000 |
|
| |
|
$ |
7,792,751 |
|
|
$ |
590,128 |
|
Basic loss per share is based on the weighted-average number of
common shares outstanding during each period. Diluted loss per
share is based on basic shares as determined above plus common
stock equivalents. The computation of diluted net loss per share
does not assume the issuance of common shares that have an
anti-dilutive effect on net loss per share. For the years ended
December 31, 2021 and 2020 all warrants options and
convertible debt securities were excluded from the computation of
diluted net loss per share.
Dilutive shares which could exist pursuant to the exercise of
outstanding stock instruments and which were not included in the
calculation because their affect would have been anti-dilutive for
the years ended December 31, 2021 and 2020 are as follows:
| |
|
Year ended
December 31,
2021
(Shares) |
|
|
Year ended
December 31,
2020
(Shares) |
|
| Convertible debt |
|
|
13,626,666 |
|
|
|
56,486,677 |
|
| Stock options |
|
|
30,516,666 |
|
|
|
100,000 |
|
| Warrants to
purchase shares of common stock |
|
|
37,304,104 |
|
|
|
51,188,572 |
|
| |
|
|
81,477,436 |
|
|
|
107,775,249 |
|
| 15 |
RELATED PARTY TRANSACTIONS |
The following transactions were entered into with related
parties:
James Fuller
On February 22, 2021, the board of directors awarded James Fuller
options under the Company’s 2018 Stock Incentive Plan to
purchase 208,333 shares of the Company’s common stock.
The options are exercisable for a period of ten years from the date
of grant, vest in full on the date of grant and have an exercise
price of $0.24 per share. The option expense for Mr. Fuller
for the year ended December 31, 2021 was $45,804.
On July 22. 2021, the Company granted Mr.
Fuller 2,000,000 shares of common stock, valued at
$154,000.
Additionally, the board of directors approved the repricing of the
options exercisable for 208,333 shares of common stock
granted to Mr. Fuller on February 22, 2021, from $0.24 per
share to $0.15 per share.
Andrey Novikov
On February 22, 2021, the board of directors awarded Andrey Novikov
options under the Company’s 2018 Stock Incentive Plan to
purchase 208,333 shares of the Company’s common stock.
The options are exercisable for a period of ten years from the date
of grant, vest in full on the date of grant and have an exercise
price of $0.24 per share. The option expense for Mr.
Novikov for the year ended December 31, 2021 was $45,804.
On May 31, 2021, Mr. Novikov notified the board of directors of his
decision to resign as a member of the Board and as Secretary of the
Company, effective as of June 1, 2021. Since August 2021, Mr.
Novikov has been on suspension from service as the Company’s Chief
Technology Officer.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
| 15 |
RELATED PARTY TRANSACTIONS
(continued) |
William Corbett
On February 22, 2021, the board of directors of the Company
appointed William Corbett, its Chief Executive Officer and Interim
Chief Financial Officer, as its Chairman of the Board and issued
him a five-year warrant to purchase 20,000,000 shares of
the Company’s common stock at an exercise price of $0.24. The Board
also agreed to increase Mr. Corbett’s monthly base salary to
$30,000. The warrant expense for Mr. Corbett for the year ended
December 31, 2021 was $4,327,899.
On August 16, 2021, the Company and Mr. Corbett entered into an
Executive Employment Agreement that replaced and superseded the
previous executive employment agreement (the “August 2021 Corbett
Employment Agreement”). The purpose of the August 2021 Corbett
Employment Agreement was to provide a replacement grant for
warrants previously granted to Mr. Corbett under the terms of his
previous employment agreement with the Company. Pursuant to the
August 2021 Corbett Employment Agreement, Mr. Corbett would
continue to serve as the Company’s Chief Executive Officer on a
full time basis effective as of the date of the August 2021 Corbett
Employment Agreement until the close of business on December 31,
2024. Mr. Corbett’s base salary will be $30,000 per month,
which shall be paid in accordance with the Company’s standard
payroll practice for its executives, managers and salaried
employees. In addition, the August 2021 Corbett Employment
Agreement provides that: (1) Mr. Corbett will be eligible for a
cash bonus as determined by the Board to the extent the Company
achieves (or exceeds) annual revenue or other financial performance
objectives established by the Board, in its sole discretion, from
time to time; (2) the Company will grant to Mr. Corbett options to
purchase 20,000,000 shares of common stock of the Company
at a per share exercise price of $0.15; and (3) a car allowance for
Mr. Corbett in the amount of $800 per month. Fifty percent
(50%) of the shares subject to the options shall vest on the grant
date and the other 50% of the shares subject to the option
shall vest at the rate of 1/36 per month over a three-year period.
The options will be exercisable for a period of ten years after the
date of grant and the Company shall provide for cashless exercise
of the option. The options are being granted pursuant to the
Company’s 2021 Stock Incentive Plan which was approved by the board
of directors in August 2021, subject to approval of the 2021 Plan
by the shareholders, which approval was obtained at the annual
general meeting held on October 22, 2021. The option expense for
Mr. Corbett for the year ended December 31, 2021 was $910,019.
In addition, the Company and Mr. Corbett entered into an
Indemnification Agreement on August 16, 2021 (the “August 2021
Corbett Indemnification Agreement”), pursuant to which the Company
agreed to indemnify Mr. Corbett to indemnify Indemnitee to the
fullest extent permitted by or under the Nevada Corporation Law in
respect of claims, including third-party claims and derivative
claims and provides for advancement of expenses. The August 2021
Corbett Indemnification Agreement amends the indemnification
agreement in effect prior to entering into the August 2021 Corbett
Indemnification Agreement to provide that unless Company shall pay
Mr. Corbett’s attorneys’ fees and costs, including the compensation
and expenses of any arbitrator, unless the arbitrator or the court
determines that (a) Company has no liability in such dispute, or
(b) the action or claims by Executive are frivolous in nature. In
any other case or matter, the Company and Mr. Corbett shall each
bear its or his own attorney fees and costs.
Clifford Henry
On May 1, 2021, the Company appointed Mr. Henry to the Board of
Directors.
On July 22, 2021, the Company granted Mr.
Henry 2,000,000 shares of common stock, valued at
$154,000.
Mr. Henry has a consulting agreement with the Company whereby he is
paid $3,500 per month.
Madisson Corbett
On May 1, 2021, the Company appointed Ms. Corbett to the Board of
Directors. Ms. Corbett is the daughter of Mr. William Corbett, the
Company’s Chief Executive Officer and Chairman of the Board.
On July 22, 2021, the Company granted Ms.
Corbett 2,000,000 shares of common stock, valued at
$154,000.
David Rios
On July 22, 2021, the Company appointed David Rios to the Board of
Directors.
On July 22, 2021, the Company granted Mr.
Rios 1,000,000 shares of common stock, valued at
$77,000.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
| 15 |
RELATED PARTY TRANSACTIONS
(continued) |
Richard Rosenblum
On July 22, 2021, the Company appointed Richard Rosenblum as
President and Chief Financial Officer of the Company. In addition,
Mr. Rosenblum was elected to the board of directors of the Company
to serve until the Company’s next annual meeting of
shareholders.
On July 27, 2021, the Company and Mr. Rosenblum entered into
an Executive Employment Agreement (the “Employment Agreement”),
pursuant to which Mr. Rosenblum will serve as the Company’s
President and Chief Financial Officer on a full time basis
effective as of July 1. The effectiveness of the Employment
Agreement is subject to the approval of the Employment Agreement by
the Board, unless earlier terminated as provided in the Employment
Agreement. The term of the Employment Agreement is until December
31, 2024. Mr. Rosenblum’s base salary will be $18,000 per month. In
addition, the Employment Agreement provides that: (1) Mr. Rosenblum
will be eligible for a cash bonus as determined by the Board to the
extent the Company achieves (or exceeds) annual revenue or other
financial performance objectives established by the Board, in its
sole discretion, from time to time; and (2) the Company will grant
to Mr. Rosenblum options to purchase 10,000,000 shares of common
stock of the Company at a per share exercise price equal to the
fair market value of the Company’s common stock, as reflected in
the closing price of the Company’s common shares on the OTC
exchange or, in the event the stock is up listed, on the NASDAQ
exchange, on the date of grant (the “Options”)”. Fifty percent
(50%) of the shares subject to the Options shall vest on the grant
date and the other 50% of the shares subject to the Option shall
vest at the rate of 1/36 per month over a three-year period. The
Options will be exercisable for a period of ten (10) years after
the date of grant and the Company shall provide for cashless
exercise of the Option by Executive. The options are being granted
pursuant to the Company’s 2021 Stock Incentive Plan which was
approved by the board of directors in August 2021, subject to
approval of the 2021 Plan by the shareholders, which approval was
obtained at the annual general meeting held on October 22, 2021.
The Options are being granted pursuant to the Company’s 2021 Stock
Incentive Plan. The option expense for Mr. Rosenblum for the
year ended December 31, 2021 was $381,006.
If Mr. Rosenblum’s employment with Company is terminated at any
time during the term of the Employment Agreement other than for
Cause (as defined in the Employment Agreement), or due to voluntary
termination, retirement, death or disability, then Mr. Rosenblum
shall be entitled to severance equal to fifty percent (50%) of his
annual base salary rate in effect as of the date of termination. If
Mr. Rosenblum’s employment with Company is terminated at any time
during the term of the Employment Agreement other than for Cause
(as defined in the Employment Agreement), or due to voluntary
termination, retirement, death or disability, within 12 months
following an Acquisition (as defined in the Employment Agreement),
then Mr. Rosenblum shall be entitled to severance equal
to 100% of his annual base salary rate in effect as of the
date of termination. Severance payments shall be subject to
execution and delivery of a general release in favor of the
Company.
On August 16, 2021, the Company entered into an amendment to the
Rosenblum Executive Employment Agreement (the “First Amendment”)
with Mr. Rosenblum. Under the terms of the Executive Employment
Agreement, the Company had agreed to grant to Mr. Rosenblum an
option to purchase 10,000,000 (ten million) common shares
of Company Stock at a per share exercise price equal to the fair
market value of the Company’s common stock, as reflected in the
closing price of the Company’s common shares on the OTC exchange
or, in the event the stock is uplisted, on the NASDAQ exchange, on
the date of grant (the “Option”).” The First Amendment provided
that the Option was granted on August 31, 2021 at an exercise price
of $0.15.
In addition, the Company and Mr. Rosenblum entered into an
Indemnification Agreement, pursuant to which the Company agreed to
indemnify Mr. Rosenblum to indemnify Indemnitee to the fullest
extent permitted by or under the Nevada Corporation Law in respect
of claims, including third-party claims and derivative claims and
provides for advancement of expenses.
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
| 16 |
COMMITMENTS AND CONTINGENCIES |
The Company has property lease commitments disclosed under note 6
above.
The Company may have an obligation to repay certain convertible
notes and accrued interest thereon, on maturity date, if these
notes are not converted into equity prior to maturity date as
disclosed under note 9 above.
Convertible note funding
On February 3, 2022, the Company extended the maturity date of its
convertible notes to each of Cavalry and Mercer from February 16,
2022 to August 16, 2022 in consideration of increasing the
principal amount outstanding and due to each of Cavalry and Mercer
under the convertible notes by 10%. The aggregate principal amount
of each of the Cavalry and Mercer Notes after extension is
$866,242.
On February 4, 2022, the Company paid in full the convertible note
owing to Bellridge including interest and penalties thereon for
gross proceeds of $1,235,313.
Other than disclosed above, the Company has evaluated subsequent
events through the date the consolidated financial statements were
available to be issued and has concluded that no such events or
transactions took place that would require disclosure herein.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
We have adopted and maintain disclosure controls and procedures
that are designed to provide reasonable assurance that information
required to be disclosed in the reports filed under the Exchange
Act, such as this Annual Report, is collected, recorded, processed,
summarized and reported within the time periods specified in the
rules of the SEC. Our disclosure controls and procedures are also
designed to ensure that such information is accumulated and
communicated to management to allow timely decisions regarding
required disclosure. As required under Exchange Act, Rule 13a-15,
our management, including our Chief Executive Officer (who is our
Principal Executive Officer and our President and Chief Financial
Officer (who is our Principal Financial Officer), after evaluating
the effectiveness of disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the
period covered by this Annual Report have concluded that our
disclosure controls are not effective due to a lack of written
policies and procedures to address all material transactions and
developments impacting the financial statements.
Management’s Annual Report on Internal Control over Financial
Reporting
Our management is also responsible for establishing and maintaining
adequate internal control over financial reporting, as defined in
Exchange Act Rule 13a-15. Internal control over financial reporting
is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act
as a process designed to provide reasonable assurance to our
management and Board of Directors regarding the preparation and
fair presentation of published financial statements. Management
conducted an assessment of our internal control over financial
reporting as of December 31, 2021 based on the framework and
criteria established by the Committee of Sponsoring Organizations
of the Treadway Commission in Internal Control-Integrated Framework
2013 (“COSO”). The COSO framework requires rigid adherence to
control principles that require sufficient and adequately trained
personnel to operate the control system. While our management
believes that our internal control over financial reporting
improved in 2021 due to an upgrade in accounting personnel and
efforts to implement segregation ed duties as required by COSO
based on management’s assessment, our management has concluded that
our internal control over financial reporting continued to be
ineffective as of December 31, 2021 as a result of continuing
insufficient segregation of duties and oversight of work performed
in the finance and accounting function due to limited personnel
with the appropriate skill sets. During 2022, our management plans
to continue to address these matters with a view towards
remediating the weaknesses.
Our management, including our Chief Executive Officer and President
and Chief Financial Officer, does not expect that our disclosure
controls and procedures and our internal control processes, even if
improved, will prevent all error and all fraud. A control system,
no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the
control system are met. Further, the design of a control system
must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs.
Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all
control issues and instances of error or fraud, if any, within our
company have been detected. These inherent limitations include the
realities that judgments in decision-making can be faulty, and that
the breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts
of some persons, by collusion of two or more people, or by
management override of the control. The design of any system of
controls also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any
design will succeed in achieving its stated goals under all
potential future conditions. Over time, controls may become
inadequate because of changes in conditions, or the degree of
compliance with the policies or procedures may deteriorate. Because
of the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and may not be
detected. However, these inherent limitations are known features of
the financial reporting process. Therefore, it is possible to
design into the process safeguards to reduce, though not eliminate,
this risk.
Changes in Internal Control Over Financial Reporting
Other than disclosed above, there has been no change in our
internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during
our year ended December 31, 2021 that has materially affected, or
is reasonably likely to materially affect, our internal control
over financial reporting.
This annual report does not include an attestation report of our
registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to
attestation by our registered public accounting firm pursuant to
rules of the SEC that permit us provide only management’s report in
this annual report.
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent
Inspections
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate
Governance
The table below sets certain information concerning our executive
officers and directors, including their names, ages, anticipated
positions with us. Our executive officers are chosen by our Board
and hold their respective offices until their resignation or
earlier removal by the Board.
In accordance with our Articles of Incorporation, as amended,
incumbent directors are elected to serve until our next annual
meeting and until each director’s successor is duly elected and
qualified.
|
Name |
|
Age |
|
Position |
| |
|
|
|
|
| William Corbett |
|
62 |
|
Chairman of the Board, Chief
Executive Officer, and Director |
| Richard Rosenblum |
|
62 |
|
Chief Financial Officer and
President |
| Clifford Henry |
|
82 |
|
Director |
| Madisson Corbett |
|
32 |
|
Director |
| David Rios |
|
78 |
|
Director |
| James Fuller |
|
82 |
|
Director |
The following information pertains to the members of our Board and
executive officers, their principal occupations and other public
Company directorships for at least the last five years and
information regarding their specific experiences, qualifications,
attributes and skills:
William Corbett, Chairman of the Board, Chief Executive
Officer and Director
Mr. Corbett has been serving as the Company’s Chief Executive
Officer and a Director since August 6, 2019 and as its Chairman
since February 22, 2021. He was also the Company’s Interim Chief
Financial Officer from August 6, 2019 to July 22, 2021.
William Corbett has over thirty years of Wall Street experience.
Starting with Bear Stearns in the mid-1980’s he became a managing
director responsible for managing over 50 brokers and was
subsequently hired by Lehman Brothers where he was one of the top
producers in the 1990’s. In 1995, he co-founded and became CEO of
The Shemano Group, a San Francisco investment banking boutique,
which developed into one of the leading banks for funding small cap
companies. He pioneered the PIPE industry (Private Investment in
Public Equities) perennially leading the country in monies raised
by investment banking firms in micro-cap companies. Shemano Group
was also responsible for bringing companies public through IPO’s
and reverse mergers, and was also a leading underwriter for
follow-on public offerings, raising billions for companies over 20
years. Over the last five years, Mr. Corbett was a managing
director at Paulson Investment Co. from October 2013 until October
2016, responsible for West Coast investment banking activities. He
also has served as CEO of DPL a lending company, and a wholly owned
subsidiary of DPW Holdings, Inc., from October of 2016 until May
2019. Mr. Corbett graduated from the University of the Pacific with
a B.S. in Finance, and was inducted into the Pacific Hall of Fame
in 2005 for collegiate golf.
Mr. Corbett’s financial experience on Wall Street, specifically
with micro-cap companies, we believe provide him with the
attributes that make him a valuable member of the Company’s Board
of Directors.
Richard Rosenblum, Chief Financial Officer, President and
Director
Mr. Rosenblum was appointed as our Chief Financial Officer,
President and to serve as a member of the Board of directors on
July 22, 2021.
Since its founding in 2004, Mr. Rosenblum has been Chief Executive
Officer and Principal at Harborview Capital Advisors LLC
(“Harborview”), which provided strategic advisory services in the
areas of capital formation, merchant banking and management
consulting. Additionally, Mr. Rosenblum has been the owner of
Harborview Property Management (“HPM”) for over twenty- years,
where he invests and manages domestic and international commercial
real-estate, and multi-family real-estate assets. From 2008 to
2014, Mr. Rosenblum was a Director, President and Executive
Chairman of Alliqua Biomedical Inc. (NASDAQ: ALQA), which developed
and marketed hydrogel manufacturing technology in the wound care
sector. His philanthropic and community-centered activities include
being a founding board member of the Dr. David Feit Memorial
Foundation (DFM), which for over 15 years raised money for the
benefit and support of youth activities. Since 2018, Mr. Rosenblum
has served on the Board of Directors of the Chilton Hospital
Foundation. Mr. Rosenblum graduated Summa Cum Laude from SUNY
Buffalo with a B.A. in Finance & Accounting.
We chose Mr. Rosenblum to serve as our Chief Financial Officer,
President and as a member of our Board of Directors due to his
extensive business and finance experience.
Clifford Henry, Director
Mr. Henry was appointed to our board of directors on May 1,
2021.
Mr. Henry is Chairman and CIO of CWH Associates (“CWH”), an
investment management and consulting firm he founded in 1989. CWH
is the owner and General Partner of Worthington Growth, LP, one of
the earliest thematic focused, research-driven investment funds
specializing in small and mid-cap companies. In addition to his
investment work, Mr. Henry has served a number of companies as a
director or advisor. He is also involved extensively in pro bono
work most recently as a Chairman of the Indian River (Florida)
Cultural Council and was a founding Chairman of the Board of
Trustees of the Clay Art Center in Port Chester New York. Mr. Henry
obtained a bachelor’s degree in French and English literature in
1961 from Princeton and an MBA from Columbia University in
1966.
We chose Mr. Henry to serve as a member of our Board of Directors
due to his extensive business experience.
Madisson Corbett, Director
Ms. Corbett was appointed to our board of directors on May 1,
2021.
Ms. Corbett has extensive experience in sales and built the sales
development organizations at Series A-C tech companies. Ms.
Corbett’s career in sales began in 2012 in San Diego, overseeing
global sales and marketing at the top surf wax company in the U.S.
Beginning in 2011, Ms. Corbett worked at the International Surfing
Association, recognized by the International Olympic, Committee and
helped introduce surfing to the Olympics in 2020. From 2014 to
2016, she served as Operation Specialist at nutraceutical
company Neuliven Health, Inc. Starting in 2016, Ms. Corbett
began working for various Y Combinator companies including a
payroll and benefits platform (Gusto), a hiring software provider
(Lever) and a mental health start up (Modern Health). Since 2019,
Ms. Corbett has worked for fintech start-up Brex.com. She built out
the entire sales development organization from scratch and oversaw
top of funnel production for the Go To Market Team at Brex.com. Ms.
Corbett managed the increase of reoccurring annual revenue from
$20,000,000 to $100,000,000 in just 18 months and her team
accounted for 85% of the net new revenue generated during the
period. Ms. Corbett graduated in 2011 from the University of
California, San Diego with a Bachelor’s degree in Economics and
Environmental Science.
We chose Ms. Corbett to serve as a member of our Board of Directors
due to her business and sales experience.
David Rios, Director
Mr. Rios was appointed to our board of directors on July 22,
2021.
Mr. Rios is a currently a philanthropist. Prior to turning to
philanthropy approximately ten years ago, Mr. Rios was the founder,
Chairman, and Chief Executive Officer of D.F. Rios Construction,
Inc., the largest framing construction company in the state of
California, for over 30 years. Mr. Rios was also President of the
California Framers Association and on the Board of Carpenters.
Additionally, Mr. Rios sat on the Board of Pan Pacific Bank where
he was instrumental in closing its acquisition by California Bank
of Commerce in December 2015.
We chose Mr. Rios to serve as a member of our Board of Directors
due to his extensive business experience.
James Fuller, Director
Mr. James W. Fuller, MBA, was appointed to our Board of Directors
in May 2017. He has been the Chief Executive Officer, President,
Chief Financial Officer, Chairman, Principal Accounting Officer and
Secretary of Beauty Brands Group Inc. since February 5, 2013. Since
March 2008, Mr. Fuller has been a Partner in the Private equity
firm, Baytree Capital Associates, LLC, where he oversees the West
Coast operations and their interests in the Far East including
China. In 2007 and 2008, he was the Owner of Northcoast
Financial brokerage. He served as Senior Vice President of
Marketing for Charles Schwab and Company from 1981 to 1985.
Subsequently, he served key roles as the President of Bull &
Bear Group, a mutual fund/discount brokerage company in New York.
He served as the Senior Vice President of the New York Stock
Exchange (NYSE) from 1976 to 1981, where he was responsible for
corporate development, marketing, corporate listing and regulation
oversight, research and public affairs. He also served as Senior
Vice president of Bridge Information Systems and was the Founder
and Head of Morgan Fuller Capital Group. He has over 30 years of
experience in the brokerage and related financial services
industries. His financial career started in 1968 with J. Barth
& Company in San Francisco. He served as West Coast Managing
Director for a New York based investment banking and trading firm
from 1972 to 1974. He managed the consulting practice for the
Investment Industries Division of SRI International, where he
directed a study on the future of the Securities Industry from 1974
to 1976. His other projects included the development and
implementation of the Cash Management Account for Merrill Lynch,
which is a standard throughout the brokerage industry. He served as
the Chairman of Pacific Research Institute. He has been a Director
at Beauty Brands Group Inc. since February 5, 2013, Kogeto, Inc.
since April 10, 2015 and Oklahoma Energy Corp. since 1998. He has
been an Independent Director of Cavitation Technologies, Inc.,
since February 15, 2010 and serves as its Member of Advisory Board.
He served as a Director of Bridge Information Systems. He served as
an Independent Director of Propell Technologies Group, Inc. from
October 14, 2011 to February 17, 2015. He served as a Director of
TapImmune, Inc. from May 18, 2012 to February 6, 2013. He served on
the Board of Trustees of the University of California, Santa Cruz
for 12 years. He served on the Board of Directors of the Securities
Investor Protection Corporation (SIPC) until 1987. He is a Member
of the Board of the International Institute of Education. He is an
Elected Member and Vice Chairman for Finance of the San Francisco
Republican Central Committee and is a Member of the Pacific Council
for International Policy, Commonwealth Club. He was a Member of the
Committee of Foreign Relations. Mr. Fuller received his MBA in
Finance from California State University and Bachelor of Science in
Marketing and Political Science from San Jose State University.
We chose Mr. Fuller to serve as a member of our Board of Directors
due to his extensive business and finance experience, which makes
him a valuable member of our Board of Directors.
Suspension of Andrey Novikov as Chief Technology Officer
In August, 2021, we suspended Andrey Novikov from his
serving as our Chief Technology Officer, and such suspension
remains in effect as of the date of this Annual Report. As
described elsewhere herein, Mr. Novikov is presently a plaintiff in
an action against us before the Occupational Safety and Health
Administration of the United Stated Department of Labor. As such,
as of the date of this Annual Report, he is not acting as an
officer of our company and as not since August 2021.
Mr. Novikov originally served as our Chief Operating Officer since
the consummation of the Merger on May 12, 2016 and was appointed as
our Chief Technology Officer in December 2019. He was appointed to
our Board on May 12, 2016 and resigned as a member of the board of
directors on May 31, 2021.
Corporate Governance
Code of Conduct and
Ethics
Effective as of May 12, 2016, we adopted a Code of Conduct and
Ethics that applies to, among other persons, our president or chief
executive officer as well as the individuals performing the
functions of our chief financial officer, corporate secretary and
controller. As adopted, our Code of Business Conduct and Ethics
sets forth written standards that are designed to deter wrongdoing
and to promote:
| |
● |
honest and ethical conduct, including the ethical
handling of actual or apparent conflicts of interest between
personal and professional relationships; |
| |
|
|
| |
● |
full,
fair, accurate, timely, and understandable disclosure in reports
and documents that we file with, or submit to regulatory agencies,
including the SEC; |
| |
|
|
| |
● |
the
prompt internal reporting of violations of the Code of Conduct and
Ethics to an appropriate person or persons identified in the Code
of Conduct and Ethics; and |
| |
|
|
| |
● |
accountability for adherence to the Code of
Conduct and Ethics. |
Our Code of Conduct and Ethics requires, among other things, that
all of our personnel be afforded full access to our president or
chief executive officer with respect to any matter which may arise
relating to the Code of Conduct and Ethics. Further, all of our
personnel are to be afforded full access to our Board of Directors
if any such matter involves an alleged breach of the Code of
Conduct and Ethics by our president or chief executive officer.
In addition, our Code of Conduct and Ethics emphasizes that all
employees, and particularly managers and/or supervisors, have a
responsibility for maintaining financial integrity within our
company, consistent with generally accepted accounting principles,
and federal, provincial and state securities laws. Any employee who
becomes aware of any incidents involving financial or accounting
manipulation or other irregularities, whether by witnessing the
incident or being told of it, must report it to his or her
immediate supervisor or to our president or chief executive
officer. If the incident involves an alleged breach of the Code of
Conduct and Ethics by our president or chief executive officer, the
incident must be reported to any member of our Board of Directors
or use of a confidential and anonymous hotline phone number. Any
failure to report such inappropriate or irregular conduct of others
is to be treated as a severe disciplinary matter. It is against our
company policy to retaliate against any individual who reports in
good faith the violation or potential violation of our Code of
Conduct and Ethics by another. Our Code of Conduct and Ethics is
available, free of charge, to any stockholder upon written request
to our Corporate Secretary at Innovative Payment Solutions, 56B
5th Street, Lot 1, Carmel by the
Sea, California, 93921. A copy of our Code of Conduct and
Ethics can be found at www.ipsipay.com.
Composition of the
Board
In accordance with our Articles of Incorporation, our Board is to
be elected annually as a single class.
Board
Committees
We currently do not have a separate Audit Committee, Nominating,
Governance Committee or Compensation Committee. Our full board
currently serves as our Audit Committee and Compensation Committee.
Due to the size of our Board of Directors and our company, we
believe the structure is sufficient. None of our directors, other
than James Fuller, is considered an “Audit Committee” financial
expert. The Audit Committee will review the results and scope of
the audit and other services provided by the independent auditors
and review and evaluate the system of internal controls. The
Compensation Committee will manage any stock option plan we may
establish and review and recommend compensation arrangements for
the officers. The Nominating and Governance Committee will assist
our Board of Directors in fulfilling its oversight responsibilities
and identify, select and evaluate our Board of Directors and
committees. No final determination has yet been made as to the
memberships of the other committees.
We will reimburse all directors for any expenses incurred in
attending directors’ meetings provided that we have the resources
to pay these fees. We will provide officers and directors liability
insurance.
Leadership
Structure
The chairman of our Board of Directors, and Chief Executive Officer
positions are currently the same person, Mr. Corbett. Our Bylaws do
not require our Board of Directors to separate the roles of
chairman and chief executive officer but provides our Board of
Directors with the flexibility to determine whether the two roles
should be combined or separated based upon our
needs. Our Board of Directors believes the combination
of the chairman and the chief executive officer roles is the
appropriate structure for our company at this time. Our Board of
Directors believes the current leadership structure serves as an
aid in the Board of Directors’ oversight of management and it
provides us with sound corporate governance practices in the
management of our business.
Risk
Management
The Board of Directors discharges its responsibilities, and
assesses the information provided by our management and the
independent auditor, in accordance with its business
judgment. Management is responsible for the preparation,
presentation, and integrity of the Company’s financial statements,
and management is responsible for conducting business in an ethical
and risk mitigating manner where decisions are undertaken with a
culture of ownership. Our Board of Directors oversees
management in their duty to manage the risk of our company and each
of our subsidiaries. Our Board of Directors regularly reviews
information provided by management as management works to manage
risks in the business. Our Board of Directors intends to establish
Board Committees to assist the full Board of Directors’ oversight
by focusing on risks related to the particular area of
concentration of the relevant committee.
Director
Independence
The Board, in the exercise of its reasonable business judgment, has
determined that Clifford Henry, David Rios and James Fuller, that
qualifies as independent directors pursuant to Nasdaq Stock Market
Rule 5605(a)(2) and applicable SEC rules and regulations. Mr.
Corbett, Ms. Corbett and Mr. Rosenblum currently employed as our
Chief Executive Officer and Chairman of the Board, Director and
daughter of Mr. Corbett, and Chief Financial Officer, respectively,
and therefore would not be considered independent directors.
Delinquent Section 16 reports
Section 16(a) of the Exchange Act requires our executive officers,
directors and persons who beneficially own more than 10 percent of
a registered class of our equity securities, to file with the SEC
initial reports of ownership and reports of changes in ownership of
our Common Stock. Such officers, directors and persons are required
by SEC regulation to furnish us with copies of all Section 16(a)
forms that they file with the SEC.
Based solely on a review of the copies of such forms that were
received by us, or written representations from certain reporting
persons that no Forms 5 were required for those persons, the
following individuals failed to file the following reports relating
to the following transaction in a timely manner during the year
ended December 31, 2021.
| |
● |
Mr.
Fuller filed two form 4’s late relating to two transactions;
and |
| |
|
|
| |
● |
Mr.
Rios filed one form 3 late; |
| |
|
|
| |
● |
Mr.
Henry filed one form 3 late and one form 4 late relating to one
transaction; |
| |
|
|
| |
● |
Ms.
Corbett filed one form 4 late relating to one
transaction; |
| |
|
|
| |
● |
Mr.
Corbett filed one form 4 late relating to one
transaction; |
| |
|
|
| |
● |
Mr.
Rosenblum filed one form 3 late |
Item 11. Executive Compensation
The following table summarizes all compensation earned in each of
IPSI and its subsidiaries during its last two fiscal years ended
December 31, 2021 and 2020 by: (i) its principal executive officer;
and (ii) its most highly compensated executive officer other than
the principal executive officer who was serving as an executive
officer of IPSI as of the end of the last completed fiscal year.
The tables below reflect the compensation for the IPSI executive
officers who are also named executive officers of the combined
company.
| Name
and principal position |
|
Year |
|
Salary |
|
|
Bonus |
|
|
Stock
awards |
|
|
Option
awards |
|
|
All
other
comp. |
|
|
Total |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
Corbett, |
|
2021 |
|
$ |
359,640 |
|
|
$ |
- |
|
|
$ |
251,064 |
(a) |
|
$ |
910,019 |
(b) |
|
$ |
4,327,899 |
(b) |
|
$ |
5,848,622
|
|
| Chairman
of the Board and Chief Executive Officer (1) |
|
2020 |
|
$ |
142,750 |
|
|
$ |
28,605 |
|
|
$ |
502,128 |
(a) |
|
$ |
- |
|
|
$ |
33,000 |
(c) |
|
$ |
706,483 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Richard
Rosenblum |
|
2021 |
|
$ |
108,000 |
|
|
$ |
- |
|
|
$ |
194,000 |
(d) |
|
$ |
381,006 |
(e) |
|
$ |
- |
|
|
$ |
683,006 |
|
| Chief
Financial Officer and President (2) |
|
2020 |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Andrey
Novikov |
|
2021 |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
45,804 |
(f) |
|
$ |
83,500 |
|
|
$ |
129,304
|
|
| Chief
Technology Officer(3) |
|
2020 |
|
$ |
96,000 |
|
|
$ |
- |
|
|
$ |
39,000 |
(g) |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
135,000 |
|
| (1) |
Mr.
Corbett was appointed as Chief Executive Officer on August 6, 2019
and appointed as Chairman of the Board on February 22,
2021. |
| (2) |
Mr.
Rosenblum was appointed as our President and Chief Financial
Officer on July 22, 2021. |
| (3) |
Mr.
Novikov served as our Chief Operating Officer and a director from
May 2015 to December 2019, and was appointed our Chief Technology
Officer in December 2019. On May 31, 2021, Mr. Novikov resigned as
a director and secretary of the Company, and since August 2021, he
has been suspended from his service as our Chief Technology
Officer. As such, as of the date of this Annual Report, he is not
acting as an officer of our company. |
| |
|
| (a) |
Mr.
Corbett was granted 20,495,000 restricted shares of common stock on
January 1, 2020, of which 10,247,500 are vested and the remaining
10,247,500 vest equally on January 1, 2022, January 1,
2023. |
| (b) |
Mr.
Corbett was initially granted a warrant exercisable for 20,000,000
shares of common stock at an exercise price of $0.24 per share on
February 22, 2021. On August 16, 2021, the warrant exercisable for
20,000,000 shares of common stock was cancelled and replaced with a
ten-year option exercisable for 20,000,000 shares of common stock
at an exercise price of $0.15 per share, of which 10,000,000 vested
immediately and the remaining 10,000,000 vest equally over 36
months. |
| (c) |
Consists of healthcare related expenses for the
benefit of Mr. Corbett. |
| (d) |
Mr.
Rosenblum was granted 2,000,000 restricted shares of common stock
on April 5, 2021, as an advisory board member prior to being
appointed as the Chief Financial Officer, director and president of
the Company on July 22, 2021. |
| (e) |
Mr.
Rosenblum was granted a ten year option exercisable for 10,000,000
shares of common stock at an exercise price of $0.15 per share on
August 31, 2021, of which 5,000,000 vested immediately and the
remaining 5,000,000 vest equally over 36 months. |
| (f) |
On
February 22, 2021, the Board of Directors of the Company granted
Mr. Novikov an option to purchase 208,333 shares of the Company’s
common stock at an exercise price of $0.24. |
| (g) |
Mr.
Novikov is issued shares of common stock valued at $3,000 per
month, as partial payment of his base salary, pursuant to the terms
of his employment agreement. |
Outstanding Equity
Awards at Fiscal Year End
The following table lists the outstanding equity awards held by our
named executive officers at December 31, 2021:
|
|
|
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END |
|
|
|
|
|
OPTION
AWARDS |
|
|
STOCK AWARDS |
|
|
Name |
|
|
Number of
Securities
Underlying
Unexercised
Options
Exercisable* |
|
|
|
Number of
Securities
Underlying
Unexercised
Options
Unexercisable* |
|
|
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options* |
|
|
|
Option
Exercisable
Price* |
|
|
Option
Expiration
Date |
|
|
Number of
Shares or
Units of
Stock
that have
Not Vested |
|
|
|
Market
Value of
Shares or
Units of
Stock
that have
not Vested |
|
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
that have
Not Vested |
|
|
|
Equity
Incentive
Plan
Awards:
Market
or Payout
Value of
Unearned
Shares,
Units or Other
Rights
that have
Not Vested |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William Corbett |
|
|
11,111,111 |
|
|
|
8,888,888 |
|
|
|
- |
|
|
$ |
0.15 |
|
|
8/16/2031 |
|
|
10,247,500 |
|
|
$ |
245,940 |
|
|
|
- |
|
|
|
- |
|
|
Richard Rosenblum |
|
|
5,555,556 |
|
|
|
4,444,444 |
|
|
|
- |
|
|
$ |
0.15 |
|
|
8/16/2031 |
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
|
- |
|
|
Andrey
Novikov(1) |
|
|
100,000 |
|
|
|
- |
|
|
|
- |
|
|
$ |
0.40 |
|
|
12/27/2028 |
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
208,333 |
|
|
|
- |
|
|
|
- |
|
|
$ |
0.24 |
|
|
2/22/2031 |
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
|
- |
|
|
(1) |
Since August 2021, Mr. Novikov has
been suspended from his service as our Chief Technology Officer. As
such, as of the date of this Annual Report, he is not acting as an
officer of our company. |
Agreements with Named
Executive Officers
William Corbett
The Company entered into an executive employment agreement with
William Corbett effective June 24, 2020 (as amended, the “Corbett
Employment Agreement”) which provided that Mr. Corbett be (i)
employed as the Company’s Chief Executive Officer for a term of
three (3) years, provide for a base salary of $12,500 per month,
(ii) granted a signing bonus of $25,000, (iii) receive a bonus of
up to 50% of his the annual base salary upon the Company’s
achievement of $2,000,000 EBITDA and additional performance
bonus payments as may be determined by the Company’s Board of
Directors and (iv) provide for severance in the event of a
termination without cause in amount equal to equal to fifty percent
(50%) of his annual base salary rate then in effect, provided that
if such termination without cause occurs after an Acquisition of
the Company (as defined in the agreement), Mr. Corbett will be
entitled to receive severance in an amount equal to equal to 100%
of his annual base salary rate then in effect.
Further, pursuant to the Corbett Employment Agreement the Company
granted Mr. Corbett 5,123,750 shares of the Company’s common stock,
which are fully vested and not subject to forfeiture.
On June 24, 2020, the Company entered into a restricted stock
agreement with Mr. Corbett pursuant to which the Company granted
him a restricted stock award of 15,371,250 shares of the Company’s
common stock, with such shares are subject to forfeiture and which
forfeiture restriction lapse 33%, 33% and 34%, respectively, on the
first, second and third anniversary of the date of grant.
On June 24, 2020, the Company entered into an indemnification
agreement with Mr. Corbett to indemnify him, in connection with his
position of employment with the Company and in the discharge of his
duties and responsibilities to the Company, to the maximum extent
allowed under the laws of the State of Nevada. The Company is not
required or obligated to indemnify Mr. Corbett to extent it would
violate the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, or the rules and regulations
thereunder.
On December 14, 2020, the Company entered into an amendment to the
Corbett Employment Agreement whereby the Company agreed to increase
Mr. Corbett’s base salary to $20,000 per month and to pay Mr.
Corbett a bonus of $20,000 for the year ended December 31,
2020.
On February 22, 2021, the Board of Directors of the Company
appointed William Corbett, its Chief Executive Officer and Interim
Chief Financial Officer, as its Chairman of the Board and issued
him a five-year warrant to purchase 20,000,000 shares of the
Company’s common stock at an exercise price of $0.24. The Board
also agreed to increase Mr. Corbett’s monthly base salary to
$30,000.
On August 16, 2021, the Company and Mr. Corbett entered into an
Executive Employment Agreement that replaced and superseded the
previous executive employment agreement (the “August 2021 Corbett
Employment Agreement”). The purpose of the August 2021 Corbett
Employment Agreement was to provide a replacement grant for
warrants previously granted to Mr. Corbett under the terms of his
previous employment agreement with the Company. Pursuant to the
August 2021 Corbett Employment Agreement, Mr. Corbett would
continue to serve as the Company’s Chief Executive Officer on a
full time basis effective as of the date of the August 2021 Corbett
Employment Agreement until the close of business on December 31,
2024. Mr. Corbett’s base salary will be $30,000 per month,
which shall be paid in accordance with the Company’s standard
payroll practice for its executives, managers and salaried
employees. In addition, the August 2021 Corbett Employment
Agreement provides that: (1) Mr. Corbett will be eligible for a
cash bonus as determined by the Board to the extent the Company
achieves (or exceeds) annual revenue or other financial performance
objectives established by the Board, in its sole discretion, from
time to time; (2) the Company will grant to Mr. Corbett options to
purchase 20,000,000 shares of common stock of the Company
at a per share exercise price of $0.15; and (3) a car allowance for
Mr. Corbett in the amount of $800 per month. Fifty percent
(50%) of the shares subject to the options shall vest on the grant
date and the other 50% of the shares subject to the option
shall vest at the rate of 1/36 per month over a three-year period.
The options will be exercisable for a period of ten years after the
date of grant and the Company shall provide for cashless exercise
of the option. The options are being granted pursuant to the
Company’s 2021 Stock Incentive Plan.
In addition, the Company and Mr. Corbett entered into an
Indemnification Agreement on August 16, 2021 (the “August 2021
Corbett Indemnification Agreement”), pursuant to which the Company
agreed to indemnify Mr. Corbett to indemnify Indemnitee to the
fullest extent permitted by or under the Nevada Corporation Law in
respect of claims, including third-party claims and derivative
claims and provides for advancement of expenses. The August 2021
Corbett Indemnification Agreement amends the indemnification
agreement in effect prior to entering into the August 2021 Corbett
Indemnification Agreement to provide that unless Company shall pay
Mr. Corbett’s attorneys’ fees and costs, including the compensation
and expenses of any arbitrator, unless the arbitrator or the court
determines that (a) Company has no liability in such dispute, or
(b) the action or claims by Executive are frivolous in nature. In
any other case or matter, the Company and Mr. Corbett shall each
bear its or his own attorney fees and costs.
Richard Rosenblum
On July 22, 2021, the Company appointed Richard Rosenblum as
President and Chief Financial Officer of the Company. In addition,
Mr. Rosenblum was elected to the board of directors of the Company
to serve until the Company’s next annual meeting of
shareholders.
On July 27, 2021, the Company and Mr. Rosenblum entered into
an Executive Employment Agreement (the “Employment Agreement”),
pursuant to which Mr. Rosenblum will serve as the Company’s
President and Chief Financial Officer on a full time basis
effective as of July 1. The effectiveness of the Employment
Agreement is subject to the approval of the Employment Agreement by
the Board, unless earlier terminated as provided in the Employment
Agreement. The term of the Employment Agreement is until December
31, 2024. Mr. Rosenblum’s base salary will be $18,000 per month. In
addition, the Employment Agreement provides that: (1) Mr. Rosenblum
will be eligible for a cash bonus as determined by the Board to the
extent the Company achieves (or exceeds) annual revenue or other
financial performance objectives established by the Board, in its
sole discretion, from time to time; and (2) the Company will grant
to Mr. Rosenblum options to purchase 10,000,000 shares of common
stock of the Company at a per share exercise price equal to the
fair market value of the Company’s common stock, as reflected in
the closing price of the Company’s common shares on the OTC
exchange or, in the event the stock is up listed, on the NASDAQ
exchange, on the date of grant (the “Options”)”. Fifty percent
(50%) of the shares subject to the Options shall vest on the grant
date and the other 50% of the shares subject to the Option shall
vest at the rate of 1/36 per month over a three-year period. The
Options will be exercisable for a period of ten (10) years after
the date of grant and the Company shall provide for cashless
exercise of the Option by Executive. The Options are being granted
pursuant to the Company’s 2021 Stock Incentive Plan.
If Mr. Rosenblum’s employment with Company is terminated at any
time during the term of the Employment Agreement other than for
Cause (as defined in the Employment Agreement), or due to voluntary
termination, retirement, death or disability, then Mr. Rosenblum
shall be entitled to severance equal to fifty percent (50%) of his
annual base salary rate in effect as of the date of termination. If
Mr. Rosenblum’s employment with Company is terminated at any time
during the term of the Employment Agreement other than for Cause
(as defined in the Employment Agreement), or due to voluntary
termination, retirement, death or disability, within 12 months
following an Acquisition (as defined in the Employment Agreement),
then Mr. Rosenblum shall be entitled to severance equal
to 100% of his annual base salary rate in effect as of the
date of termination. Severance payments shall be subject to
execution and delivery of a general release in favor of the
Company.
On August 16, 2021, the Company entered into an amendment to the
Rosenblum Executive Employment Agreement (the “First Amendment”)
with Mr. Rosenblum. Under the terms of the Executive Employment
Agreement, the Company had agreed to grant to Mr. Rosenblum an
option to purchase 10,000,000 (ten million) common shares
of Company Stock at a per share exercise price equal to the fair
market value of the Company’s common stock, as reflected in the
closing price of the Company’s common shares on the OTC exchange
or, in the event the stock is uplisted, on the NASDAQ exchange, on
the date of grant (the “Option”).” The First Amendment provided
that the Option was granted on August 31, 2021 at an exercise price
of $0.15.
In addition, the Company and Mr. Rosenblum entered into an
Indemnification Agreement, pursuant to which the Company agreed to
indemnify Mr. Rosenblum to indemnify Indemnitee to the fullest
extent permitted by or under the Nevada Corporation Law in respect
of claims, including third-party claims and derivative claims and
provides for advancement of expenses.
Andrey Novikov
On December 3, 2019, we entered into a one-year employment
agreement with Mr. Novikov to serve as our Chief Technology Officer
and Secretary (the “Novikov Employment Agreement”) which replaced
the agreement that Qpagos Corporation entered into with Mr. Novikov
on May 18, 2015, which was extended for one year on June 12, 2019.
pursuant to the terms of the agreement, Mr. Novikov is entitled to
receive an annual salary at a rate of $8,000 per month, payable
$5,000 in cash in accordance with the regular payroll practices of
the Company and $3,000 in Common Stock (based on then current fair
market value of the Common Stock on the date of grant as determined
by our Board of Directors. Mr. Novikov is also eligible to earn an
annual performance bonus up to fifty percent (50%) of the base
salary based upon the Board’s assessment of his performance and
attainment of targeted goals as set by the board of directors in
its sole discretion. The Novikov Employment Agreement provides for
a severance payment in the event of employment termination by us
without Cause (as defined in the Agreement), by Mr. Novikov for
Good Reason (as defined in the Agreement), due to Disability (as
defined in the Agreement) or death, in certain circumstances (such
as upon termination without Cause or for Good Reason) equal to the
continuation of the payment of Mr. Novikov’s base salary until the
last day of the employment term. The Novikov Employment Agreement
also includes confidentiality obligations and invention assignments
by Mr. Novikov. On December 14, 2020, we amended the Novikov
Employment Agreement to extend the term of his employment agreement
by 1 year until December 3, 2021 and on December 18, 2020 the Board
approved the issuance of 1,016,408 shares of the Company’s
restricted common stock. Additionally, on February 22, 2021, the
Board awarded Mr. Novikov options to purchase 208,333 shares of
common stock under the Company’s 2018 Stock Incentive Plan (the
“Stock Incentive plan”), exercisable for ten years at a price of
$0.24 per share.
The Novikov Employment Agreement replaced the agreement that Qpagos
Corporation entered into on May 18, 2016 with Andrey Novikov to
serve as its Chief Operating Officer and Secretary, which term was
extended on June 12, 2019 for an additional one year. During the
term of the original employment agreement, Mr. Novikov received an
annual base salary of not less than $180,000, which base salary was
reduced to $108,000 effective May 1, 2019, and he was entitled to
an annual performance cash bonus targeted at up to 50% of his base
salary, in the discretion of the Board of Directors.
On February 22, 2021, the Board of Directors of the Company granted
Mr. Novikov an option to purchase 208,333 shares of the Company’s
common stock at an exercise price of $0.24.
On May 31, 2021, Mr. Novikov notified the board of directors of his
decision to resign as a member of the Board and as Secretary of the
Company, effective as of June 1, 2021. Since August 2021, Mr.
Novikov has been suspended from his service as our Chief Technology
Officer. As such, as of the date of this Annual Report, he is not
acting as an officer of our company.
Director
Compensation
The executive directors were not paid any fees for their
service as directors; however, each of Messrs. Novikov and Corbett
received compensation for service as officers of Innovative Payment
Solutions, Inc.
Board of Directors Compensation
The following table sets forth information for the fiscal year
ended December 31, 2021 regarding the compensation of our directors
who on December 31, 2021 were not also our Named Executive
Officers.
|
Name |
|
Fees Earned or
Paid in Cash |
|
|
Option
Awards |
|
|
Restricted stock awards |
|
|
Total |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| James
Fuller(1)(5) |
|
$ |
18,000 |
|
|
$ |
45,810 |
|
|
$ |
154,000 |
|
|
$ |
217,810 |
|
| Clifford
Henry(2)(5) |
|
|
52,000 |
|
|
|
- |
|
|
|
154,000 |
|
|
|
206,000 |
|
| Madisson
Corbett (3)(5) |
|
|
18,000 |
|
|
|
- |
|
|
|
154,000 |
|
|
|
172,000 |
|
| David
Rios(4)(5) |
|
$ |
12,500 |
|
|
$ |
- |
|
|
$ |
77,000 |
|
|
$ |
89,500 |
|
| (1) |
On February 22, 2021, the Board of Directors of the Company granted
Mr. Fuller an option to purchase 208,333 shares of the Company’s
common stock at an exercise price of $0.24, which was subsequently
repriced to $0.15 per share.
On July 22, 2021, the Company granted Mr. Fuller, a director of the
Company, 2,000,000 shares of restricted common stock pursuant to
the terms of the 2021 Stock Incentive Plan, which was approved by
the board of directors in August 2021, subject to approval of the
2021 Plan by the shareholders, which approval was obtained at the
annual general meeting held on October 22, 2021.
|
| (2) |
On
July 22, 2021, the Company granted Mr. Henry, a director of the
Company, 2,000,000 shares of restricted common stock pursuant to
the terms of the 2021 Stock Incentive Plan, which was approved by
the board of directors in August 2021, subject to approval of the
2021 Plan by the shareholders, which approval was obtained at the
annual general meeting held on October 22, 2021. |
| (3) |
On
July 22, 2021, the Company granted Ms. Corbett, a director of the
Company, 2,000,000 shares of restricted common stock pursuant to
the terms of the 2021 Stock Incentive Plan, which was approved by
the board of directors in August 2021, subject to approval of the
2021 Plan by the shareholders, which approval was obtained at the
annual general meeting held on October 22, 2021. |
| (4) |
On
July 22, 2021, the Company granted Mr. Rios, a director of the
Company, 1,000,000 shares of restricted common stock pursuant to
the terms of the 2021Stock Incentive Plan, which was approved by
the board of directors in August 2021, subject to approval of the
2021 Plan by the shareholders, which approval was obtained at the
annual general meeting held on October 22, 2021. |
| (5) |
As of
December 31, 2021, he following table sets forth the number of
aggregate outstanding stock awards held by each of our directors
who were not also named executive officers: |
| |
|
Aggregate |
|
| |
|
Number of |
|
|
Name |
|
Stock Awards |
|
| James
Fuller(1) |
|
|
4,227,333 |
|
| Clifford
Henry(2) |
|
|
2,000,000 |
|
| Madisson
Corbett (3) |
|
|
2,000,000 |
|
| David Rios |
|
|
1,000,000 |
|
| (1) |
On March 18, 2020, the Company granted Mr. Fuller, a director of
the Company, 2,000,000 shares of restricted common stock.
On February 22, 2021, the Board of Directors of the Company granted
Mr. Fuller an option to purchase 208,333 shares of the Company’s
common stock at an exercise price of $0.24.
On July 22, 2021, the Company granted Mr. Fuller, a director of the
Company, 2,000,000 shares of restricted common stock pursuant to
the terms of the 2021 Stock Incentive Plan, which was approved by
the board of directors in August 2021, subject to approval of the
2021 Plan by the shareholders, which approval was obtained at the
annual general meeting held on October 22, 2021.
|
| (2) |
On
July 22, 2021, the Company granted Mr. Henry, a director of the
Company, 2,000,000 shares of restricted common stock pursuant to
the terms of the 2021 Stock Incentive Plan, which was approved by
the board of directors in August 2021, subject to approval of the
2021 Plan by the shareholders, which approval was obtained at the
annual general meeting held on October 22, 2021. |
| |
|
| (3) |
On
July 22, 2021, the Company granted Ms. Corbett, a director of the
Company, 2,000,000 shares of restricted common stock pursuant to
the terms of the 2021 Stock Incentive Plan, which was approved by
the board of directors in August 2021, subject to approval of the
2021 Plan by the shareholders, which approval was obtained at the
annual general meeting held on October 22, 2021. |
| |
|
| (4) |
On
July 22, 2021, the Company granted Mr. Rios, a director of the
Company, 1,000,000 shares of restricted common stock pursuant to
the terms of the 2021 Stock Incentive Plan, which was approved by
the board of directors in August 2021, subject to approval of the
2021 Plan by the shareholders, which approval was obtained at the
annual general meeting held on October 22, 2021. |
Each director is reimbursed for travel and other out-of-pocket
expenses incurred in attending Board of Director and committee
meetings.
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
The following table sets forth certain information with respect to
the beneficial ownership of our common stock as of March 29,
2022 for:
| |
● |
each
of our directors and nominees for director; |
| |
|
|
| |
● |
each
of our named executive officers; |
| |
|
|
| |
● |
all
of our current directors and executive officers as a group;
and |
| |
|
|
| |
● |
each
person, entity or group, who beneficially owned more than 5% of
each of our classes of securities. |
The address of each beneficial owner is 56B
5th Street, Lot 1 AT#, Carmel by the Sea, CA
93921.
We have based our calculations of the percentage of beneficial
ownership on 329,838,982 shares of our common stock. We have deemed
shares of our common stock subject to options and warrants that are
currently exercisable within 60 days of March 31, 2022 to be
outstanding and to be beneficially owned by the person holding the
warrant or restricted stock unit for the purpose of computing the
percentage ownership of that person. We did not deem these,
however, for the purpose of computing the percentage ownership of
any other person. Unless otherwise indicated, the principal
business address for each of the individuals and entities listed
below is 56B 5th Street, Lot 1 AT#, Carmel by the
Sea, CA 93921.
We have not deemed shares of common stock to be outstanding for
variable priced convertible notes for the purposes of calculating
beneficial ownership.
The information provided in the table is based on our records,
information filed with the SEC, and information provided to us,
except where otherwise noted.
|
Name and Address of Beneficial Owner |
|
Amount and
Nature of
Beneficial
Ownership
Common Stock
Included* |
|
|
Percentage of
Common Stock
Beneficially
Owned |
|
| |
|
|
|
|
|
|
| William Corbett (Executive
Chairman and Chief Executive Officer) |
|
|
32,995,000 |
(1) |
|
|
8.7 |
% |
| |
|
|
|
|
|
|
|
|
| Richard Rosenblum (President and Chief
Financial Officer) |
|
|
8,250,000 |
(2) |
|
|
2.2 |
% |
| |
|
|
|
|
|
|
|
|
| Andrey Novikov (Chief Operating
Officer) |
|
|
1,750,887 |
(3) |
|
|
** |
|
| |
|
|
|
|
|
|
|
|
| James Fuller (Director) |
|
|
4,227,333 |
(4) |
|
|
1.1 |
% |
| |
|
|
|
|
|
|
|
|
| Madisson Corbett (Director) |
|
|
2,000,000 |
(5) |
|
|
** |
|
| |
|
|
|
|
|
|
|
|
| Clifford Henry (Director) |
|
|
2,000,000 |
(6) |
|
|
** |
|
| |
|
|
|
|
|
|
|
|
| David Rios (Director) |
|
|
1,000,000 |
(7) |
|
|
** |
|
| |
|
|
|
|
|
|
|
|
| All officers and
directors as a group (7 persons) |
|
|
52,223,220 |
|
|
|
12.20 |
% |
| |
|
|
|
|
|
|
|
|
| 5% or more
Shareholders |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Jimmy J. Gibbs |
|
|
18,922,912 |
(8) |
|
|
5.14 |
% |
| * |
Excludes any shares deemed to be outstanding on
variable priced convertible securities. |
| ** |
Less
than 1% |
| (1) |
Includes (i) 20,495,000 restricted shares of
common stock of which 10,247,500 are subject to forfeiture
restrictions and which forfeiture restriction lapses as to
5,123,750 shares on each of January 1, 2022 and 2023. (iii) a ten
year option granted to Mr. Corbett on August 16, 2021 exercisable
for 20,000,000 shares of common stock, of which 11,944,444 are
vested and a further 555,555 vest in the next sixty days. The
options replaced a warrant exercisable for 20,000,000 shares of
common stock, previously issued to Mr. Corbett on February 22,
2021. |
| (2) |
Consists of 2,000,000 shares of the
Company’s restricted common stock and options exercisable for
10,000,000 shares of common stock of which 5,972,222 are vested and
a further 277,778 vest in the next sixty days. |
| (3) |
Consists of 1,442,554 shares of common stock and
options exercisable for 308,333 shares of common stock, all of
which are vested. Since August 2021, Mr. Novikov has been suspended
from his service as our Chief Technology Officer. As such, as of
the date of this Annual Report, he is not acting as an officer of
our company. |
| (4) |
Consists of 4,019,000 shares of the Company’s
restricted common stock, and options exercisable for 208,333 shares
of common stock of which all are vested. |
| (5) |
Consists of 2,000,000 shares of the
Company’s restricted common stock. |
| (6) |
Consists of 2,000,000 shares of the
Company’s restricted common stock. |
| (7) |
Consists of 1,000,000 shares of the
Company’s restricted common stock. |
| (8) |
Consists of (i) 18,816,412 shares of common
stock; and (ii) 106,500 shares of common stock held by Gibbs
Investment Holdings, LLC, of which Mr. Gibbs is an equity holder
and controller. The business address for each of Mr. Gibbs, Gibbs
International, Inc., and Gibbs Investment Holdings, LLC is 9855
Warren H. Abernathy Highway, Spartanburg, South Carolina
29301. |
Equity Compensation Plan
Information
As of December 31, 2021, there was an aggregate of 516,666 options
to purchase shares of common stock granted under our 2018 Plan and
283,334 reserved for future grants, and an aggregate of 30,000,000
options to purchase shares of common stock granted under our 2021
Plan and 23,000,000 reserved for future grants.
| Plan Category |
|
Number of securities to be issued upon
exercise of outstanding options |
|
|
Weighted-average exercise price of outstanding
options |
|
|
Number of securities remaining available for
future issuance under equity compensation plans (excluding
securities reflected in column (a)) |
|
| |
|
(a) |
|
|
(b) |
|
|
(c) |
|
| Equity compensation plans approved by security
holders |
|
|
|
|
|
|
|
|
|
| 2018 Equity Incentive Plan |
|
|
516,666 |
|
|
$ |
0.23 |
|
|
|
283,334 |
|
| 2021
Equity Incentive Plan |
|
|
30,000,000 |
|
|
|
0.15 |
|
|
|
23,000,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Equity compensation plans not approved by
security holders |
|
|
- |
|
|
|
- |
|
|
|
- |
|
| Total |
|
|
30,516,666 |
|
|
$ |
0.15 |
|
|
|
23,283,334 |
|
Item 13. Certain Relationships and Related Transactions, and
Director Independence
Transactions with
Related Persons
The following includes a summary of any transaction occurring since
January 1, 2020 for us and our subsidiaries or any proposed
transaction, in which we and our subsidiaries were or are to be a
participant and the amount involved exceeded or exceeds 1% of the
average of our total assets for at year end for the last two
completed fiscal years, and in which any related person had or will
have a direct or indirect material interest (other than
compensation described under “Executive Compensation” above). We
believe the terms obtained or consideration that we paid or
received, as applicable, in connection with the transactions
described below were comparable to terms available or the amounts
that would be paid or received, as applicable, in arm’s-length
transactions:
William Corbett
Effective June 24, 2020, the Company entered into the Corbett
Employment Agreement. Pursuant to the Corbett Employment Agreement
we granted Mr. Corbett 5,123,750 shares of the Company’s common
stock, which are fully
vested and not subject to forfeiture.
On June 24, 2020, the Company entered into a restricted stock
agreement with Mr. Corbett pursuant to which the Company granted
him a restricted stock award of 15,371,250 shares of the Company’s
common stock, which forfeiture restriction lapse 33%, 33% and 34%,
respectively, on the first, second and third anniversary of the
date of grant
On June 24, 2020, we entered into an indemnification agreement with
Mr. Corbett to indemnify him, in connection with his position of
employment with us and in the discharge of his duties and
responsibilities to us, to the maximum extent allowed under the
laws of the State of Nevada.
On December 14, 2020, we entered into an amendment to the Corbett
Employment Agreement whereby we agreed to increase Mr. Corbett’s
base salary to $20,000 per month and to pay Mr. Corbett a bonus of
$20,000 for the year ended December 31, 2020.
On February 22, 2021, the board of directors of the Company
appointed William Corbett, its Chief Executive Officer and Interim
Chief Financial Officer, as its Chairman of the Board and issued
him a five-year warrant to purchase 20,000,000 shares of
the Company’s common stock at an exercise price of $0.24. The Board
also agreed to increase Mr. Corbett’s monthly base salary to
$30,000. The warrant expense for Mr. Corbett for the year ended
December 31, 2021 was $4,327,899.
On August 16, 2021, the Company and Mr. Corbett entered into an
Executive Employment Agreement that replaced and superseded the
previous executive employment agreement (the “August 2021 Corbett
Employment Agreement”). The purpose of the August 2021 Corbett
Employment Agreement was to provide a replacement grant for
warrants previously granted to Mr. Corbett under the terms of his
previous employment agreement with the Company. Pursuant to the
August 2021 Corbett Employment Agreement, Mr. Corbett would
continue to serve as the Company’s Chief Executive Officer on a
full time basis effective as of the date of the August 2021 Corbett
Employment Agreement until the close of business on December 31,
2024. Mr. Corbett’s base salary will be $30,000 per month,
which shall be paid in accordance with the Company’s standard
payroll practice for its executives, managers and salaried
employees. In addition, the August 2021 Corbett Employment
Agreement provides that: (1) Mr. Corbett will be eligible for a
cash bonus as determined by the Board to the extent the Company
achieves (or exceeds) annual revenue or other financial performance
objectives established by the Board, in its sole discretion, from
time to time; (2) the Company will grant to Mr. Corbett options to
purchase 20,000,000 shares of common stock of the Company
at a per share exercise price of $0.15; and (3) a car allowance for
Mr. Corbett in the amount of $800 per month. Fifty percent
(50%) of the shares subject to the options shall vest on the grant
date and the other 50% of the shares subject to the option shall
vest at the rate of 1/36 per month over a three-year period. The
options will be exercisable for a period of ten years after the
date of grant and the Company shall provide for cashless exercise
of the option. The options are being granted pursuant to the
Company’s 2021 Stock Incentive Plan.
In addition, the Company and Mr. Corbett entered into an
Indemnification Agreement on August 16, 2021 (the “August 2021
Corbett Indemnification Agreement”), pursuant to which the Company
agreed to indemnify Mr. Corbett to indemnify Indemnitee to the
fullest extent permitted by or under the Nevada Corporation Law in
respect of claims, including third-party claims and derivative
claims and provides for advancement of expenses. The August 2021
Corbett Indemnification Agreement amends the indemnification
agreement in effect prior to entering into the August 2021 Corbett
Indemnification Agreement to provide that unless Company shall pay
Mr. Corbett’s attorneys’ fees and costs, including the compensation
and expenses of any arbitrator, unless the arbitrator or the court
determines that (a) Company has no liability in such dispute, or
(b) the action or claims by Executive are frivolous in nature. In
any other case or matter, the Company and Mr. Corbett shall each
bear its or his own attorney fees and costs.
Richard Rosenblum
On July 22, 2021, the Company appointed Richard Rosenblum as
President and Chief Financial Officer of the Company. In addition,
Mr. Rosenblum was elected to the board of directors of the Company
to serve until the Company’s next annual meeting of
shareholders.
On July 27, 2021, the Company and Mr. Rosenblum entered into
an Executive Employment Agreement (the “Employment Agreement”),
pursuant to which Mr. Rosenblum will serve as the Company’s
President and Chief Financial Officer on a full time basis
effective as of July 1. The effectiveness of the Employment
Agreement is subject to the approval of the Employment Agreement by
the Board, unless earlier terminated as provided in the Employment
Agreement. The term of the Employment Agreement is until December
31, 2024. Mr. Rosenblum’s base salary will be $18,000 per month. In
addition, the Employment Agreement provides that: (1) Mr. Rosenblum
will be eligible for a cash bonus as determined by the Board to the
extent the Company achieves (or exceeds) annual revenue or other
financial performance objectives established by the Board, in its
sole discretion, from time to time; and (2) the Company will grant
to Mr. Rosenblum options to purchase 10,000,000 shares of common
stock of the Company at a per share exercise price equal to the
fair market value of the Company’s common stock, as reflected in
the closing price of the Company’s common shares on the OTC
exchange or, in the event the stock is up listed, on the NASDAQ
exchange, on the date of grant (the “Options”)”. Fifty percent
(50%) of the shares subject to the Options shall vest on the grant
date and the other 50% of the shares subject to the Option shall
vest at the rate of 1/36 per month over a three-year period. The
Options will be exercisable for a period of ten (10) years after
the date of grant and the Company shall provide for cashless
exercise of the Option by Executive. The Options are being granted
pursuant to the Company’s 2021 Stock Incentive Plan.
If Mr. Rosenblum’s employment with Company is terminated at any
time during the term of the Employment Agreement other than for
Cause (as defined in the Employment Agreement), or due to voluntary
termination, retirement, death or disability, then Mr. Rosenblum
shall be entitled to severance equal to fifty percent (50%) of his
annual base salary rate in effect as of the date of termination. If
Mr. Rosenblum’s employment with Company is terminated at any time
during the term of the Employment Agreement other than for Cause
(as defined in the Employment Agreement), or due to voluntary
termination, retirement, death or disability, within 12 months
following an Acquisition (as defined in the Employment Agreement),
then Mr. Rosenblum shall be entitled to severance equal
to 100% of his annual base salary rate in effect as of the
date of termination. Severance payments shall be subject to
execution and delivery of a general release in favor of the
Company.
On August 16, 2021, the Company entered into an amendment to the
Rosenblum Executive Employment Agreement (the “First Amendment”)
with Mr. Rosenblum. Under the terms of the Executive Employment
Agreement, the Company had agreed to grant to Mr. Rosenblum an
option to purchase 10,000,000 (ten million) common shares
of Company Stock at a per share exercise price equal to the fair
market value of the Company’s common stock, as reflected in the
closing price of the Company’s common shares on the OTC exchange
or, in the event the stock is uplisted, on the NASDAQ exchange, on
the date of grant (the “Option”).” The First Amendment provided
that the Option was granted on August 31, 2021 at an exercise price
of $0.15.
In addition, the Company and Mr. Rosenblum entered into an
Indemnification Agreement, pursuant to which the Company agreed to
indemnify Mr. Rosenblum to indemnify Indemnitee to the fullest
extent permitted by or under the Nevada Corporation Law in respect
of claims, including third-party claims and derivative claims and
provides for advancement of expenses.
James Fuller
On March 18, 2020, we granted Mr. Fuller, a director of the
Company, 2,000,000 shares of restricted common stock pursuant to
the terms of the Stock Incentive Plan.
On February 22, 2021, we agreed to pay Mr. Fuller an annual
director’s fee of $12,000 and awarded him options under the Stock
Incentive Plan to purchase 208,333 shares of the Company’s common
stock. The options are exercisable for a period of ten years from
the date of grant, vest in full on the date of grant and have an
exercise price of $0.24 per share.
On July 22, 2021, the Company granted Mr.
Fuller 2,000,000 shares of common stock, valued at
$154,000.
Additionally, the board of directors approved the repricing of the
options exercisable for 208,333 shares of common stock
granted to Mr. Fuller on February 22, 2021, from $0.24 per
share to $0.15 per share.
Andrey Novikov
On December 3, 2019, we entered into the Novikov Employment
Agreement which replaced the agreement that Qpagos Corporation
entered into with Mr. Novikov on May 18, 2015, which was extended
for one year on June 12, 2019. On December 14, 2020, we amended the
Novikov Employment Agreement to extend the term of his employment
agreement by 1 year until December 3, 2021
On December 18, 2020, the Company issued Mr. Novikov 1,016,408
shares of the Company’s restricted common stock pursuant to Mr.
Novikov’s employment agreement.
On April 7, 2020, the Company issued 282,146 shares of the
Company’s common stock for services rendered by Mr. Novikov as our
Chief Technology Officer.
On February 22, 2021, we awarded Mr. Novikov options under the
Stock Incentive Plan to purchase 208,333 shares of the Company’s
common stock. The options are exercisable for a period of ten years
from the date of grant, vest in full on the date of grant and have
an exercise price of $0.24 per share.
On May 31, 2021, Mr. Novikov notified the board of directors of his
decision to resign as a member of the Board and as Secretary of the
Company, effective as of June 1, 2021. Since August 2021, Mr.
Novikov has been suspended from his service as our Chief Technology
Officer. As such, as of the date of this Annual Report, he is not
acting as an officer of our company.
Clifford Henry
On May 1, 2021, the Company appointed Mr. Henry to the Board of
Directors.
On July 22, 2021, the Company granted Mr.
Henry 2,000,000 shares of common stock.
Madisson Corbett
On May 1, 2021, the Company appointed Ms. Corbett to the Board of
Directors. Ms. Corbett is the daughter of Mr. William Corbett, the
Company’s Chief Executive Officer and Chairman of the Board.
On July 22, 2021, the Company granted Ms.
Corbett 2,000,000 shares of common stock.
David Rios
On July 22, 2021, the Company appointed David Rios to the Board of
Directors.
On July 22, 2021, the Company granted Mr.
Rios 1,000,000 shares of common stock.
Director
Independence
Board of
Directors
The Board, in the exercise of its reasonable business judgment, has
determined that Clifford Henry, David Rios and James Fuller, that
qualifies as independent directors pursuant to Nasdaq Stock Market
Rule 5605(a)(2) and applicable SEC rules and regulations. Mr.
Corbett, Ms. Corbett and Mr. Rosenblum currently employed as our
Chief Executive Officer and Chairman of the Board, Director and
daughter of Mr. Corbett, and Chief Financial Officer, respectively,
and therefore would not be considered independent directors.
Potential Conflicts of
Interest
Since we did not have an Audit Committee or Compensation Committee
comprised of independent directors, the functions that would have
been performed by such committees were performed by our directors.
Thus, there was an inherent conflict of interest.
Item 14. Principal Accountant Fees and Services
RBSM LLP serves as our independent registered public accounting
firm.
Independent Registered Public Accounting Firm Fees and Services
The following table sets forth the aggregate fees including
expenses billed to us for the years ended December 31, 2021 and
2020 by our auditors:
| |
|
Year
Ended
December 31, |
|
|
Year
Ended
December 31, |
|
| |
|
2021 |
|
|
2020 |
|
| |
|
|
|
|
|
|
| Audit fees and
expenses |
|
$ |
88,000 |
|
|
$ |
67,500 |
|
| Taxation preparation fees |
|
|
- |
|
|
|
- |
|
| Audit related fees |
|
|
- |
|
|
|
- |
|
| Other fees |
|
|
- |
|
|
|
- |
|
| |
|
$ |
88,000 |
|
|
$ |
67,500 |
|
| (1) |
Audit fees and expenses were for professional
services rendered for the audit and reviews of the consolidated
financial statements of the Company, professional services rendered
for issuance of consents and assistance with review of documents
filed with the SEC. |
Audit Committee’s
Pre-Approval Practice.
Prior to our engagement of our independent auditor, such engagement
was approved by our board of directors. The services provided under
this engagement may include audit services, audit-related services,
tax services and other services. Pre-approval is generally provided
for up to one year and any pre-approval is detailed as to the
particular service or category of services and is generally subject
to a specific budget. Pursuant our requirements, the independent
auditors and management are required to report to our board of
directors at least quarterly regarding the extent of services
provided by the independent auditors in accordance with this
pre-approval, and the fees for the services performed to date. Our
board of directors may also pre-approve particular services on a
case-by-case basis. All audit-related fees, tax fees and other fees
incurred by us for the year ended December 31, 2021, were approved
by our board of directors.
PART IV
Item 15. Exhibits and Financial Statement Schedules and Reports
on Form 10-K
| (a)(1) |
The following financial statements are included
in this Annual Report for the fiscal year ended December 31,
2021 |
| (a)(2) |
All financial statement schedules have been
omitted as the required information is either inapplicable or
included in the Consolidated Financial Statements or related
notes. |
| |
|
| (a)(3) |
The
following exhibits are either filed as part of this report or are
incorporated herein by reference: |
EXHIBIT INDEX
|
Exhibit No. |
|
Description |
| 2.1 |
|
Agreement
and Plan of Merger, dated as of May 12, 2016, by and among Asiya
Pearls, Inc., QPAGOS Merge, Inc. and Qpagos Corporation
(Incorporated by reference to Exhibit 2.1 to the Current Report on
Form 8-K (File No. 333-192877) filed with the Securities and
Exchange Commission on May 13, 2016) |
| 3.1 |
|
Articles
of Incorporation of the Registrant (Incorporated by reference to
Exhibit 3.1 to the Registration Statement on Form S-1 (File No.
333-192877) filed with the Securities and Exchange Commission on
December 16, 2013) |
| 3.2 |
|
Amended
and Restated Bylaws (Incorporated by reference to Exhibit 3.1 to
the Current Report on Form 8-K (File No. 000-55648) filed with the
Securities and Exchange Commission on May 6, 2021) |
| 3.3 |
|
Certificate
of Amendment to Articles of Incorporation of the Registrant
(Incorporated by reference to Exhibit 3.1 to the Current Report on
Form 8-K (File No. 333-192877) filed with the Securities and
Exchange Commission on June 2, 2016) |
| 3.4 |
|
Certificate
of Amendment to Articles of Incorporation of the Registrant
(Incorporated by reference to Exhibit 3.1 to the Current Report on
Form 8-K (File No. 000-55648) filed with the Securities and
Exchange Commission on March 6, 2018) |
| 3.5 |
|
Certificate
of Amendment to the Articles of Incorporation of the Registrant
(Name Change) (Incorporated by reference to Exhibit 3.1 to the
Current Report on Form 8-K (File No. 000-55648) filed with the
Securities and Exchange Commission on November 4,
2019) |
| 3.6 |
|
Certificate
of Change to the Articles of Incorporation of the Registrant
(Reverse) (Incorporated by reference to Exhibit 3.2 to the Current
Report on Form 8-K (File No. 000-55648) filed with the Securities
and Exchange Commission on November 4, 2019) |
| 4.1 |
|
2018 Stock Incentive Plan (Incorporated by reference to Exhibit B
to the Definitive Information Statement on Schedule 14C (File No.
000-55648) filed with the Securities and Exchange Commission on May
14, 2018) |
| 4.2 |
|
2021
Stock Incentive Plan (Incorporated by reference to Appendix C to
the Definitive Information Statement on Schedule 14A (File No.
000-55648) filed with the Securities and Exchange Commission on
September 15, 2021) |
| 4.3 |
|
Warrant
issued to Pinz Capital Special Opportunities Fund, LP., dated
August 5, 2020 (incorporated by reference to the Current
Report on Form 8-K (File No. 000-55648) filed with the Securities
and Exchange Commission on August 6, 2020) |
| 4.4 |
|
Form
of Warrant (Incorporated by reference to Exhibit 10.1 to the
Current Report on Form 8-K (File No. 000-55648) filed with the
Securities and Exchange Commission on February 3,
2021) |
| 4.5 |
|
Form
of Original Issue Discount 12.5% Convertible Note (Incorporated by
reference to Exhibit 4.1 to the Current Report on Form 8-K (File
No. 000-55648) filed with the Securities and Exchange Commission on
February 17, 2021) |
| 4.6 |
|
Form
of Warrant Agreement, dated February 16, 2021 (Incorporated by
reference to Exhibit 4.3 to the Current Report on Form 8-K (File
No. 000-55648) filed with the Securities and Exchange Commission on
February 17, 2021) |
| 4.7 |
|
Form
of Warrant (Incorporated by reference to Exhibit 4.1 to the Current
Report on Form 8-K (File No. 000-55648) filed with the Securities
and Exchange Commission on March 15, 2021) |
| 4.8 |
|
Form
of Placement Agent Warrant (Incorporated by reference to Exhibit
4.2 to the Current Report on Form 8-K (File No. 000-55648) filed
with the Securities and Exchange Commission on March 15,
2021) |
| 4.9* |
|
Description
of Securities |
| 10.1 |
|
Employment
Agreement Andrey Novikov (Incorporated by reference to Exhibit 10.4
to the Current Report on Form 8-K (File No. 333-192877) filed with
the Securities and Exchange Commission on May 13,
2016) |
| 10.2 |
|
Amendment
to Employment Agreement between QPAGOS and Andrey Novikov
(Incorporated by reference to Exhibit 10.2 to the Current Report on
Form 8-K (File No. 000-55648) filed with the Securities and
Exchange Commission on June 17, 2019) |
| 10.3 |
|
Stock
Purchase Agreement between QPAGOS and Vivi Holdings, Inc.
(Incorporated by reference to Exhibit 10.1 to the Current Report on
Form 8-K (File No. 000-55648) filed with the Securities and
Exchange Commission on August 8, 2019) |
| 10.4 |
|
Employment
Agreement between Innovative Payment Solutions, Inc. and Andrey
Novikov (Incorporated by reference to Exhibit 10.1 to the Current
Report on Form 8-K (File No. 000-55648) filed with the Securities
and Exchange Commission on December 6, 2019) |
| 10.5 |
|
Partial
Settlement of Outstanding Balance Between the Company and Andrey
Novikov (Incorporated by reference to Exhibit 10.1 to the Current
Report on Form 8-K (File No. 000-55648) filed with the Securities
and Exchange Commission on December 11, 2019) |
| 10.6 |
|
Executive
Employment Agreement between Innovative Payment Solutions, Inc. and
William Corbett, effective June 24, 2020 (Incorporated by reference
to Exhibit 10.1 to the Current Report on Form 8- K (File No.
000-55648) filed with the Securities and Exchange Commission on
June 29, 2020) |
| 10.7 |
|
Executive
Employment Agreement between Innovative Payment Solutions, Inc. and
William Corbett, effective August 16, 2021 (Incorporated by
reference to Exhibit 10.1 to the Current Report on Form 8- K (File
No. 000-55648) filed with the Securities and Exchange Commission on
August 20, 2021) |
| 10.8 |
|
Indemnification Agreement between Innovative Payment Solutions,
Inc. and Richard Rosenblum, effective August 20,
2021 (Incorporated by reference to Exhibit 10.2 to the Current
Report on Form 8-K (File No. 000-55648) filed with the Securities
and Exchange Commission on August 20, 2021) |
| 10.9 |
|
Executive
Employment Agreement between Innovative Payment Solutions, Inc. and
Richard Rosenblum, effective July 27, 2021 (Incorporated by
reference to Exhibit 10.1 to the Current Report on Form 8- K (File
No. 000-55648) filed with the Securities and Exchange Commission on
July 28, 2021) |
| 10.10 |
|
Executive
Employment Agreement between Innovative Payment Solutions, Inc. and
Richard Rosenblum, First Amendment, effective August 16, 2021
(Incorporated by reference to Exhibit 10.3 to the Current Report on
Form 8- K (File No. 000-55648) filed with the Securities and
Exchange Commission on August20, 2021) |
| 10.11 |
|
Restricted Stock Agreement between Innovative Payment Solutions,
Inc. and William Corbett, effective June 24, 2020 (Incorporated by
reference to Exhibit 10.2 to the Current Report on Form 8-K (File
No. 000-55648) filed with the Securities and Exchange Commission on
June 29, 2020) |
| 10.12 |
|
Indemnification Agreement between Innovative Payment Solutions,
Inc. and William Corbett, effective June 24,
2020 (Incorporated by reference to Exhibit 10.3 to the
Current Report on Form 8-K (File No. 000-55648) filed with the
Securities and Exchange Commission on June 29,
2020) |
| 10.13 |
|
Registration Rights Agreement, between Innovative Payment
Solutions, Inc. and Pinz Capital Special Opportunities Fund, LP.,
dated August 5, 2020 (incorporated by reference to Exhibit
10.6 to Current Report on the Form 8-K (File No. 000-55648) filed
with the Securities and Exchange Commission on August 6,
2020) |
| 10.14 |
|
Independent Director Services Agreement between Innovative Payment
Solutions, Inc. and James Fuller, dated March 18, 2020
(incorporated by reference to Exhibit 10.1 to the Current Report on
Form 8-K (File No. 000-55648) filed with the Securities and
Exchange Commission on March 24, 2020). |
| 10.15 |
|
Amendment, dated December 14, 2020, to the Executive Employment
Agreement between Innovative Payment Solutions, Inc. and William
Corbett (Incorporated by reference to Exhibit 10.1 to the Current
Report on Form 8-K (File No. 000-55648) filed with the Securities
and Exchange Commission on December 16, 2020) |
| 10.16 |
|
Amendment, dated December 14, 2020, to the Employment Agreement
between Innovative Payment Solutions, Inc. and Andrey Novikov
(Incorporated by reference to Exhibit 10.2 to the Current Report on
Form 8-K (File No. 000-55648) filed with the Securities and
Exchange Commission on December 16, 2020) |
| 10.17 |
|
Form of Securities Purchase Agreement, dated February 16, 2021
(Incorporated by reference to Exhibit 10.1 to the Current Report on
Form 8-K (File No. 000-55648) filed with the Securities and
Exchange Commission on February 17, 2021) |
| 10.18 |
|
Form of Registration Rights Agreement, dated February 16, 2021
(Incorporated by reference to Exhibit 10.3 to the Current Report on
Form 8-K (File No. 000-55648) filed with the Securities and
Exchange Commission on February 17, 2021) |
| 10.19 |
|
Form of Securities Purchase Agreement (Incorporated by reference to
Exhibit 10.1 to the Current Report on Form 8-K (File No. 000-55648)
filed with the Securities and Exchange Commission on March 15,
2021) |
| 10.20 |
|
Form of Registration Rights Agreement (Incorporated by reference to
Exhibit 10.2 to the Current Report on Form 8-K (File No. 000-55648)
filed with the Securities and Exchange Commission on March 15,
2021) |
| 10.21 |
|
Engagement Letter, dated March 6, 2021, by and between H.C.
Wainwright & Co. and Innovative Payment Solutions, Inc.
(Incorporated by reference to Exhibit 10.3 to the Current Report on
Form 8-K (File No. 000-55648) filed with the Securities and
Exchange Commission on March 15, 2021) |
| 99.1 |
|
Assignment
and Transfer Agreement by and between Pinz Capital Special
Opportunities Fund, L.P. and Cavalry Fund I LP, dated October 20,
2020 (Incorporated by reference to Exhibit 99.1 to the Registration
Statement on Form S-1 (File No. 333-250132) filed with the
Securities and Exchange Commission on November 16,
2020) |
| 14.1 |
|
Code
of Ethics (Incorporated by reference to Exhibit 14.1 to the Current
Report on Form 8-K (File No. 333-192877) filed with the Securities
and Exchange Commission on May 13, 2016) |
| 21* |
|
List
of Subsidiaries |
| 31.1* |
|
Certification of William Corbett, Chief Executive Officer, pursuant
to Rule 13a-14(a)/15d-14(a) |
| 31.2* |
|
Certification of Richard Rosenblum, Chief Financial Officer,
pursuant to Rule 13a-14(a)/15d-14(a) |
| 32.1* |
|
Certification of William Corbett, Chief Executive Officer pursuant
to Section 1350 of the Sarbanes-Oxley Act of 2002 |
| 32.2* |
|
Certification of Richard Rosenblum, Chief Financial pursuant to
Section 1350 of the Sarbanes-Oxley Act of 2002 |
| 101.INS |
|
Inline XBRL
Instance Document * |
| 101.SCH |
|
Inline XBRL Taxonomy Extension
Schema Document * |
| 101.CAL |
|
Inline XBRL Taxonomy Extension
Calculation Linkbase Document * |
| 101.DEF |
|
Inline XBRL Taxonomy Extension
Definition Linkbase Document * |
| 101.LAB |
|
Inline XBRL Taxonomy Extension
Label Linkbase Document * |
| 101.PRE |
|
Inline XBRL Taxonomy Extension
Presentation Linkbase Document * |
| 104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL and
contained in Exhibit 101).* |
|
# |
Indicates management contract or compensatory
plan |
Item 16. Form 10-K Summary
Not applicable
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned.
| |
|
Innovative Payment Solutions, Inc. |
| |
|
|
|
|
| Signature |
|
Title |
|
Date |
| |
|
|
|
|
|
/s/ William
Corbett |
|
Chief
Executive Officer and Chairman |
|
March
31, 2022 |
| William Corbett |
|
(Principal Executive
Officer) |
|
|
Pursuant to the requirements of the Securities Act of 1934, this
report has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
| Date: March
31, 2022 |
By: |
/s/ William Corbett |
| |
|
William Corbett
Chief Executive Officer and Chairman
(Principal Executive Officer)
|
| |
|
|
| Date: March 31, 2022 |
By: |
/s/ Richard Rosenblum |
| |
|
Richard Rosenblum
Chief Financial Officer, President and Director
(Principal Financial Officer and Principal Accounting Officer)
|
| |
|
|
| Date: March 31, 2022 |
By: |
/s/ James Fuller |
| |
|
James Fuller
|
| |
|
Director |
| |
|
|
| Date: March 31, 2022 |
By: |
/s/ Clifford Henry |
| |
|
Clifford Henry
|
| |
|
Director |
| |
|
|
| Date: March 31, 2022 |
By: |
/s/ Madisson Corbett |
| |
|
Madisson Corbett
|
| |
|
Director |
| |
|
|
| Date: March 31, 2022 |
By: |
/s/ David Rios |
| |
|
David Rios
|
| |
|
Director |
46