NOTES
TO THE UNAUDITED CONDENSED 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.
Also
on November 1, 2019, 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 UNAUDITED CONDENSED 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 physical and virtual
payment services to the United States market, leveraging the knowledge it obtained from the operations of Qpagos Corporation.
On December 31, 2019, the Company consummated the disposal of Qpagos Corporation, including the two Mexican subsidiaries, Qpagos
Mexico and Redpag pursuant to the SPA, in exchange for 2,250,000 shares of common stock of Vivi Holdings, of which nine percent
(9%) was allocated to the following: 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. The Company no longer has any business operations in Mexico and has retained its U.S. operations
based in Northridge, California.
Qpagos
Corporation, through its subsidiaries Qpagos Mexico and Redpag, provided physical and virtual payment services to the Mexican
market. Qpagos Corporation provided an integrated network of kiosks, terminals and payment channels that enabled consumers in
Mexico to deposit cash, convert it into a digital form and remit the funds to any merchant in our network quickly and securely.
Qpagos Mexico helped consumers and merchants connect more efficiently in markets and consumer segments, such as Mexico, that are
largely cash-based and lack convenient alternatives for consumers to pay for goods and services in physical, online and mobile
environments.
In
March 2020, the outbreak of COVID-19 (also known as the coronavirus) caused by a novel strain of the coronavirus was recognized
as a pandemic by the World Health Organization, and the outbreak has become increasingly widespread in the United States, including
in each of the areas in which the Company operates. While, to date, the Company has not been required to stop operating, management
is evaluating its use of its office space, virtual meetings and the like.
The
Company provides an integrated network of kiosks, terminals and payment channels that enable consumers to deposit cash, convert
it into a digital form and remit the funds to any merchant in its network quickly and securely. The Company has plans to roll
out 50 kiosks in Southern California to provide digital payments for the unbanked and underbanked using self-service kiosks and
an E wallet ecosystem. The kiosks are currently located in the Company’s warehouses in Southern California awaiting installation.
Due to measures imposed by the local governments in areas affected by COVID-19, businesses have been suspended due to local and
state stay-at-home orders intended to contain the COVID-19 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 the Company’s business and financial condition and has hampered its
ability to generate revenue and access usual sources of liquidity on reasonable terms.
The
Company continues to monitor the impact of the COVID-19 outbreak closely. The extent to which the COVID-19 outbreak will continue
to impact the Company’s operations, ability to obtain financing or future financial results is uncertain.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
|
2
|
ACCOUNTING
POLICIES AND ESTIMATES
|
The
accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting
principles (“U.S. GAAP”) for interim financial information with the instructions to Form 10-Q and Rule 8-03 of Regulation
S-X. Accordingly, these unaudited condensed financial statements do not include all of the information and disclosures required
by U.S. GAAP for complete financial statements. In the opinion of management, the accompanying unaudited condensed financial statements
include all adjustments (consisting only of normal recurring adjustments), which the Company considers necessary, for a fair presentation
of those financial statements. The results of operations and cash flows for the three months ended March 31, 2021 may not necessarily
be indicative of results that may be expected for any succeeding quarter or for the entire fiscal year. The information contained
in this Quarterly Report on Form 10-Q (“Report”) should be read in conjunction with the audited financial statements
of IPSI for the year ended December 31, 2020, included in the Annual Report on Form 10-K as filed with the Securities and Exchange
Commission (the “SEC”) on March 31, 2021.
All
amounts referred to in the notes to the unaudited condensed financial statements are in United States Dollars ($) unless stated
otherwise.
The
preparation of 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 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 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 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 UNAUDITED CONDENSED FINANCIAL STATEMENTS
|
2
|
ACCOUNTING
POLICIES AND ESTIMATES (continued)
|
|
d)
|
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. The Company evaluates the fair value of
variably priced derivative liabilities on a quarterly basis and report any movements thereon in earnings.
|
e)
|
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 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 UNAUDITED CONDENSED FINANCIAL STATEMENTS
|
2
|
ACCOUNTING
POLICIES AND ESTIMATES (continued)
|
|
f)
|
Recent
accounting pronouncements
|
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 financial statements upon adoption.
No segmental information is required as the Company has not generated
any revenue for the three months ended March 31, 2021 and 2020 and only has one operating segment.
|
h)
|
Cash and Cash Equivalents
|
The
Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be
cash equivalents. At March 31, 2021 and December 31, 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 March 31, 2021, the balance exceeded the federally
insured limit by $7,344,288 and at December 31, 2020, the balance did not exceed the federally insured limit.
|
i)
|
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 March 31, 2021 and December 31, 2020.
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 $1,019,960 on its non-marketable equity securities for the year ended December
31, 2020. 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.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
|
2
|
ACCOUNTING
POLICIES AND ESTIMATES (continued)
|
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
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 three months ended March 31, 2021 and 2020.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
|
2
|
ACCOUNTING
POLICIES AND ESTIMATES (continued)
|
|
n)
|
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 statement of operations.
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.
|
o)
|
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 March 31, 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. For the Company, there is no comprehensive income
for the periods presented.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED 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 three months ended March 31, 2021, the Company had a net loss of $11,394,106 and had $7,594,288 in cash. In
connection with preparing the financial statements for the three months ended March 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
May 15, 2022.
Management
has executed the following to address the Company’s liquidity during the three months ended March 31, 2021:
|
●
|
The
Company received net proceeds of $1,788,500 after an original issue discount of $255,500 upon its issuance of Senior Secured Convertible
Notes in the principal amount of $2,044,000, bearing interest at 10% per annum and maturing on February 16, 2022.
|
|
●
|
Between
February 18, 2021 and March 9, 2021 warrants for 44,074,285 shares were exercised by investors at an exercise price of $0.05
per share, for gross proceeds of $2,203,714.
|
|
●
|
On March
17, 2021, the Company entered into Securities Purchase Agreements (the “SPAs”) with several institutional investors,
pursuant to which we sold to the Investors in a private placement (i) 30,333,334 shares of our common stock (the “Shares”)
and (ii) warrants (the “Warrants”) to purchase up to an aggregate of 15,166,667 shares of our common stock for
gross proceeds of approximately $4,550,000. The combined purchase price for one share of common stock and associated Warrant
was $0.15.
|
The
funding the Company received will be used primarily for development of technology, the digital payment platform and marketing,
as well as for working capital and general corporate purposes.
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 March 31, 2021 financial statements.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
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 March 31, 2021 and March 31, 2020, the Company impaired
the carrying value of the investment in Vivi Holdings, Inc by $0 and $509,981, 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 March 31, 2021
and December 31, 2020 was $1,019,960.
The
shares in Vivi Holdings, Inc., are unlisted as of March 31, 2021.
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
Investment in Vivi Holdings, Inc.
|
|
$
|
1
|
|
|
$
|
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.
On
March 22, 2021, the Company entered into a real property lease for an office located at 7677 Topaz Circle, Dublin, 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 UNAUDITED CONDENSED FINANCIAL STATEMENTS
Right
of use assets
Right
of use assets are included in the unaudited condensed Balance Sheet are as follows:
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
Right of use assets, operating leases, net of amortization
|
|
$
|
41,301
|
|
|
$
|
51,926
|
|
Total
Lease Cost
Individual
components of the total lease cost incurred by the Company is as follows:
|
|
Three
Months Ended
March 31,
2021
|
|
|
Three
months ended
March 31,
2020
|
|
Operating lease expense
|
|
$
|
11,835
|
|
|
$
|
5,918
|
|
Maturity
of Operating Leases
The
amount of future minimum lease payments under operating leases are as follows:
|
|
Amount
|
|
Undiscounted minimum future lease payments
|
|
|
|
|
Total instalments due:
|
|
|
|
|
Remainder of 2021
|
|
$
|
35,505
|
|
2022
|
|
|
7,890
|
|
|
|
|
43,395
|
|
Imputed interest
|
|
|
(2,094
|
)
|
Total operating lease liability
|
|
$
|
41,301
|
|
|
|
|
|
|
Disclosed as:
|
|
|
|
|
Current portion
|
|
$
|
41,301
|
|
Non-current portion
|
|
|
-
|
|
|
|
$
|
41,301
|
|
Other
lease information:
|
|
Three
months ended
March 31,
2021
|
|
Cash paid for amounts included in the measurement of lease liabilities
|
|
|
|
|
Operating cash flows from operating leases
|
|
$
|
(11,835
|
)
|
Remaining lease term – operating lease
|
|
|
11 months
|
|
Discount rate – operating lease
|
|
|
10.0
|
%
|
INNOVATIVE
PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
Loans
payable consisted of the following:
Description
|
|
Interest
Rate
|
|
|
Maturity
|
|
|
March 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
|
|
|
|
571
|
|
|
|
1,062
|
|
Total loans payable
|
|
|
|
|
|
|
|
|
$
|
571
|
|
|
$
|
23,633
|
|
Interest
expense totaled $134 and $323 for the three months ended March 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 three months ended March 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 three months ended March 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 three months ended March 31, 2021, the Company repaid the aggregate principal sum of $500.
The
balance remaining on the promissory note consists of accrued interest of $571.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
7
|
CONVERTIBLE
NOTES PAYABLE
|
Convertible
notes payable consists of the following:
Description
|
|
Interest
Rate
|
|
|
Maturity date
|
|
Principal
|
|
|
Accrued
Interest
|
|
|
Unamortized
debt
discount
|
|
|
March 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
|
|
|
-
|
|
|
|
669
|
|
|
|
-
|
|
|
|
669
|
|
|
|
-
|
|
|
|
|
10
|
%
|
|
February 16, 2022
|
|
|
572,000
|
|
|
|
6,833
|
|
|
|
(504,614
|
)
|
|
|
74,219
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mercer Street Global Opportunity Fund, LLC
|
|
|
10
|
%
|
|
August 3, 2021
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
288,895
|
|
|
|
|
10
|
%
|
|
February 3, 2022
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
10
|
%
|
|
February 16, 202
|
|
|
572,000
|
|
|
|
6,833
|
|
|
|
(504,614
|
)
|
|
|
74,219
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Iroquois Master Fund Ltd.
|
|
|
10
|
%
|
|
September 16, 2021
|
|
|
-
|
|
|
|
8,041
|
|
|
|
-
|
|
|
|
8,041
|
|
|
|
72,835
|
|
|
|
|
10
|
%
|
|
February 3, 2022
|
|
|
-
|
|
|
|
822
|
|
|
|
-
|
|
|
|
822
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
10,750
|
|
|
|
(793,972
|
)
|
|
|
116,778
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total convertible notes payable
|
|
|
|
|
|
|
|
$
|
2,044,000
|
|
|
$
|
33,948
|
|
|
$
|
(1,803,200
|
)
|
|
$
|
274,748
|
|
|
$
|
903,641
|
|
Interest
expense totaled $65,792 and $53,991 and amortization of debt discount totaled $2,113,652 and $160,078 for the three months ended
March 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.
The
total value of the beneficial conversion feature recorded as a debt discount during the three months ended March 31, 2021 and
2020 was $2,569,000 and $326,750, respectively.
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 has a maturity date of July 13, 2021
and a coupon of 12% per annum. The Company may prepay the note with prepayment penalties ranging from 115% to 135%. The
outstanding principal amount of the note is convertible after 180 days, at the election of the holder into shares of the
Company’s common stock at a conversion price equal to 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.
|
INNOVATIVE
PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
7
|
CONVERTIBLE
NOTES PAYABLE (continued)
|
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.
|
|
●
|
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.
|
INNOVATIVE
PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
7
|
CONVERTIBLE
NOTES PAYABLE (continued)
|
Cavalry
Fund LLP (continued)
|
●
|
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 March 31, 2021 was $74,219, after unamortized debt discount of $504,614.
|
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.
|
INNOVATIVE
PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
7
|
CONVERTIBLE
NOTES PAYABLE (continued)
|
Mercer
Street Global Opportunity Fund, LLC (continued)
|
●
|
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 March 31, 2021 was $74,219, after unamortized debt discount of $504,614.
|
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.
|
|
●
|
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.
|
INNOVATIVE
PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
7
|
CONVERTIBLE
NOTES PAYABLE (continued)
|
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.
|
●
|
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.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
7
|
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 $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 March 31, 2021 was $116,777, after unamortized debt discount of $793,973.
|
Certain
of the short-term convertible notes disclosed in note 7 above and certain warrants disclosed in note 9 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 three months ended March 31, 2021, an additional $2,569,000 was raised as a derivative liability on convertible notes and
warrants.
The
value of this derivative financial liability was re-assessed at March 31, 2021, and $965,144 was credited to the statement of
operations and comprehensive loss, respectively. The value of the derivative liability will be re-assessed at each financial reporting
period, with any movement thereon recorded in the statement of operations in the period in which it is incurred.
The
following assumptions were used in the Black-Scholes valuation model:
|
|
Three
months
Ended
March 31,
2021
|
|
|
Year
Ended
December 31,
2020
|
|
Conversion price
|
|
$
|
0.045 to 0.24
|
|
|
$
|
0.015
to 2.00
|
|
Risk free interest rate
|
|
|
0.07 to 0.92
|
%
|
|
|
0.09 to 1.53
|
%
|
Expected life of derivative liability
|
|
|
1 to 5 years
|
|
|
|
1 to 12 months
|
|
Expected volatility of underlying stock
|
|
|
181.31 to 215.33
|
%
|
|
|
171.7 to 222.6
|
%
|
Expected dividend rate
|
|
|
0
|
%
|
|
|
0
|
%
|
The
movement in derivative liability is as follows:
|
|
March 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
|
|
|
(965,144
|
)
|
|
|
(654,471
|
)
|
|
|
$
|
4,570,272
|
|
|
$
|
2,966,416
|
|
INNOVATIVE
PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
The
Company has authorized 500,000,000 common shares with a par value of $0.0001 each. The Company has issued and outstanding 332,338,981
and 193,637,747 shares of common stock as of March 31, 2021 and December 31, 2020, respectively.
The
following common shares were issued by the Company during the three months ended March 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 $5,184,447.
|
|
●
|
In terms of warrant
exercise notices received between February 18, 2021 and March 9, 2021, the Company issued 44,074,285 shares of common stock
for gross proceeds of $2,203,714.
|
|
●
|
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.
|
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
restricted stock granted and exercisable at March 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
|
|
|
0.05
|
|
|
|
2,500,000
|
|
|
|
0.050
|
|
|
|
1,000,000
|
|
|
|
0.050
|
|
|
|
|
|
|
22,995,000
|
|
|
$
|
0.049
|
|
|
|
11,247,500
|
|
|
|
0.049
|
|
The
Company has recorded an expense of $122,141 and $313,830 for the three months ended March 31, 2021 and 2020, respectively.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
9
|
STOCKHOLDERS’
EQUITY (continued)
|
The
Company has authorized 25,000,000 shares of preferred stock with a par value of $0.0001 authorized, no preferred stock is issued
and outstanding as of March 31, 2021 and December 31, 2020.
In
terms of the Senior Secured convertible notes entered into with various noteholders as described in note 7 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.
The
warrant holders also have the option to acquire subsequent rights offering rights, under certain circumstances and is 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 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 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 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, discussed above. The Company agreed to issue to Wainwright (or its designees) placement agent warrants
(the “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.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
9
|
STOCKHOLDERS’
EQUITY (continued)
|
The
fair value of the warrants granted and issued were determined by using a Black Scholes valuation model using the following assumptions:
|
|
Three months
ended
March 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
|
%
|
A
summary of warrant activity during the period January 1, 2020 to March 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
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
|
(44,074,285
|
)
|
|
|
0.05
|
|
|
|
0.05
|
|
Outstanding March 31, 2021
|
|
|
|
73,416,802
|
|
|
|
$ 0.05
– 0.24
|
|
|
$
|
0.15
|
|
The
warrants outstanding and exercisable at March 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
|
|
|
|
26,936,510
|
|
|
|
4.65
|
|
|
|
|
|
|
|
26,936,510
|
|
|
|
|
|
|
|
4.65
|
|
|
0.15
|
|
|
|
15,166,667
|
|
|
|
4.96
|
|
|
|
|
|
|
|
15,166,667
|
|
|
|
|
|
|
|
4.96
|
|
|
0.1875
|
|
|
|
2,426,667
|
|
|
|
4.96
|
|
|
|
|
|
|
|
2,426,667
|
|
|
|
|
|
|
|
4.96
|
|
|
0.24
|
|
|
|
28,886,958
|
|
|
|
4.89
|
|
|
|
|
|
|
|
28,886,958
|
|
|
|
|
|
|
|
4.89
|
|
|
|
|
|
|
73,416,802
|
|
|
|
4.82
|
|
|
|
0.15
|
|
|
|
73,416,802
|
|
|
|
0.15
|
|
|
|
4.82
|
|
The
warrants outstanding have an intrinsic value of $1,831,683 and $0 as of March 31, 2021 and December 31, 2020, respectively.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
9
|
STOCKHOLDERS’
EQUITY (continued)
|
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
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.
No
options were granted for the year ended December 31, 2020.
A
summary of option activity during the period January 1, 2020 to March 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
|
|
|
|
416,666
|
|
|
|
0.24
|
|
|
|
0.24
|
|
Forfeited/Cancelled
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding March 31, 2021
|
|
|
|
516,666
|
|
|
$
|
0.24 to 0.40
|
|
|
$
|
0.27
|
|
The
options outstanding and exercisable at March 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
|
|
|
0.24
|
|
|
|
416,666
|
|
|
|
9.90
|
|
|
|
|
|
|
|
416,666
|
|
|
|
|
|
|
|
9.90
|
|
|
0.40
|
|
|
|
100,000
|
|
|
|
7.75
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
7.75
|
|
|
|
|
|
|
516,666
|
|
|
|
9.49
|
|
|
$
|
0.27
|
|
|
|
516,666
|
|
|
$
|
0.27
|
|
|
|
9.49
|
|
The
options outstanding have an intrinsic value of $0 and $0 as of March 31, 2021 and December 31, 2020, respectively.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
Basic
loss per share is based on the weighted-average number of common shares outstanding during each period. Diluted loss per share
is based on basic shares as determined above plus common stock equivalents. The computation of diluted net loss per share does
not assume the issuance of common shares that have an anti-dilutive effect on net loss per share. For the three months ended March
31, 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 three months ended March 31, 2021 and 2020 are as follows:
|
|
Three months ended
March 31,
2021
(Shares)
|
|
|
Three months ended
March 31,
2020
(Shares)
|
|
Convertible debt
|
|
|
8,993,106
|
|
|
|
44,283,120
|
|
Stock options
|
|
|
516,666
|
|
|
|
100,000
|
|
Warrants to purchase shares of common stock
|
|
|
73,416,802
|
|
|
|
1,852,775
|
|
|
|
|
82,926,574
|
|
|
|
46,235,895
|
|
11
|
RELATED
PARTY TRANSACTIONS
|
The
following transactions were entered into with related parties:
James
Fuller
On
February 22, 2021, the Board 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.
Andrey
Novikov
On
February 22, 2021, the Board 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.
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.
INNOVATIVE
PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
12
|
COMMITMENTS
AND CONTINGENCIES
|
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.
|
|
Amount
|
|
Undiscounted minimum future lease payments
|
|
|
|
|
Total instalments due:
|
|
|
|
|
Remainder of 2021
|
|
$
|
35,505
|
|
2022
|
|
|
7,890
|
|
|
|
|
43,395
|
|
On
March 22, 2021, the Company entered into a real property lease for an office located at 7677 Topaz Circle, Dublin, 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. The monthly rental
is $4,800 per month.
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.
On
April 22, 2021, warrants for 5,179,363 shares were exercised at $0.05 per share for gross proceeds of $258,968.
On April 28, 2021, warrants for 6,355,556
shares were exercised at $0.05 per share for gross proceeds of $317,778.
On May 3, 2021, the Company appointed Clifford W. Henry andf Madisson
G Corbett to the Company’s board of directors.
The
Company has evaluated subsequent events through the date the financial statements were issued, other than disclosed above, we
did not identify any other subsequent events that would have required adjustment or disclosure in the financial statements.
Item
2.