Innovative Payment Solutions, Inc 10-K/A for FY2023
Innovative Payment Solutions, Inc. (IPSI)
About this 10-K/A
Innovative Payment Solutions, Inc filed this 10-K/A on April 17, 2024, covering the fiscal year ended December 31, 2023 (FY2023).
Headline figures
Fiscal year ended December 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $410
- down 51.6% from $847 a year earlier
- Net loss
- $5.84M
- compared with a net loss of $10.29M a year earlier
- Diluted EPS
- -$0.45
- compared with -$0.83 a year earlier
UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Amendment No. 1)
(Mark one)
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the fiscal period ended
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 –
(Exact Name of Registrant as Specified in Its Charter)
| - 1230229 | ||
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered
pursuant to Section 12 (g) of the Act:
Indicate by check mark
if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
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 ☐
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. ☒
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).
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.:
| Large accelerated filer | ☐ | 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.
If securities are registered
pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
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, 2023,
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 $
As of April 16, 2024, the issuer had
Documents incorporated by reference:
EXPLANATORY NOTE
This Amendment No. 1 on Form 10-K/A (“Amendment No. 1”) to the Annual Report on Form 10-K of Innovative Payment Solutions, Inc. (the “Company”) for the fiscal year ended December 31, 2023, originally filed with the Securities and Exchange Commission (“SEC”) on March 29, 2024 (the “Original Filing”), is being filed solely to correct a typographical error as to the signing date of the Report of Independent Registered Public Accounting Firm contained therein, which read March 29, 2023 instead of March 29, 2024.
This Amendment No. 1 includes: Item 8 of Part II, “Financial Statements and Supplementary Data” in its entirety and without change from the Original Filing other than the correction of the signing date of the Report of Independent Registered Public Accounting Firm.
In addition, pursuant to the rules of the SEC, the exhibit list included herein reflects currently-dated certifications from the Company’s principal executive officer and principal accounting officer, which are filed as exhibits to this Amendment No. 1.
Except for the foregoing amended information, this Amendment No. 1 does not amend or update any other information contained in the Original Filing, or reflect any events that have occurred after the filing date of the Original Filing. Accordingly, this Amendment No. 1 should be read in conjunction with the Original Filing.
PART II
Item 8. Financial Statements and Supplementary Data
F-1
 |
805 Third Avenue New York, NY 10022 Tel. 212.838.5100 Fax 212.838.2676 www.rbsmllp.com |
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, 2023 and 2022, and the related consolidated statements of operations, changes in stockholders’ equity (deficit) and cash flows for each of the two years in the two-year period ended December 31, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the two-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
The Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the accompanying consolidated financial statements, the Company has suffered recurring losses from operations, generated negative cash flows from operating activities, has an accumulated deficit and has stated that substantial doubt exists about Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans in regarding these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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. Based on the previous year’s audits and the reviews performed by RBSM during year ended December 31, 2023, determined there were no CAM’s for the audit of the year ended December 31, 2023.
| We have served as the Company’s auditor since 2014. PCAOB ID |
| March 29, 2024 |
F-2
INNOVATIVE PAYMENT SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
| December 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Other current assets | ||||||||
| Assets held for sale | ||||||||
| Total Current Assets | ||||||||
| Non-current assets | ||||||||
| Plant and equipment | ||||||||
| Intangible assets | ||||||||
| Security deposit | ||||||||
| Equity method investment | ||||||||
| Total Non-Current Assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Equity (Deficit) | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Liabilities held for sale | ||||||||
| Federal relief loans – current portion | ||||||||
| Notes payable | ||||||||
| Convertible debt, net of unamortized discount of $ | ||||||||
| Derivative liability | ||||||||
| Total Current Liabilities | ||||||||
| Non-Current Liabilities | ||||||||
| Federal relief loans | ||||||||
| Total Non-Current Liabilities | ||||||||
| Total Liabilities | ||||||||
| Equity (Deficit) | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in-capital* | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total equity (deficit) attributable to Innovative Payment Solutions, Inc. Stockholders | ( | ) | ( | ) | ||||
| Non-controlling interest | ||||||||
| Total Equity (Deficit) | ( | ) | ( | ) | ||||
| Total Liabilities and Equity (Deficit) | $ | $ | ||||||
| * |
The accompanying notes are an integral part of these audited consolidated financial statements.
F-3
INNOVATIVE PAYMENT SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
| Twelve months ended | Twelve months ended | |||||||
| December | December | |||||||
| 2023 | 2022 | |||||||
| Net Revenue | $ | $ | ||||||
| Cost of Goods Sold | ||||||||
| Gross loss | ( | ) | ( | ) | ||||
| General and administrative | ||||||||
| Depreciation | ||||||||
| Total Expense | ||||||||
| Loss from Operations | ( | ) | ( | ) | ||||
| Investment impairment charge | ( | ) | ||||||
| Loss on debt conversion | ( | ) | ||||||
| Loss on convertible notes | ( | ) | ( | ) | ||||
| Loss on novation | ( | ) | ||||||
| Fair value of warrants issued | ( | ) | ||||||
| Interest expense, net | ( | ) | ( | ) | ||||
| Amortization of debt discount | ( | ) | ( | ) | ||||
| Derivative liability movements | ||||||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Income taxes | ||||||||
| Net loss after income taxes | ( | ) | ( | ) | ||||
| Net loss from equity method investments | ( | ) | ||||||
| Net loss from continuing operations | ( | ) | ( | ) | ||||
| Discontinued operations | ||||||||
| Operating loss from discontinued operations | ( | ) | ( | ) | ||||
| Loss on disposal of subsidiary and investment | ( | ) | ||||||
| Net loss from discontinued operations | ( | ) | ( | ) | ||||
| Net loss | ( | ) | ( | ) | ||||
| Net loss attributable to non-controlling interest | ||||||||
| Net loss attributable Innovative Payment Solutions, Inc. Stockholders’ | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted loss per share* | ||||||||
| $ | ( | ) | $ | ( | ) | |||
| ( | ) | ( | ) | |||||
| $ | ( | ) | $ | ( | ) | |||
| * |
The accompanying notes are an integral part of these audited consolidated financial statements.
F-4
INNOVATIVE PAYMENT SOLUTIONS, INC.
CONSOLIDATED STATEMENTS
OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE PERIOD JANUARY 1, 2022 TO DECEMBER 31, 2023
| 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, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||
| Fair value of warrants issued | - | - | ||||||||||||||||||||||||||||||
| Shares issued for services | - | |||||||||||||||||||||||||||||||
| Stock based option expense | - | - | ||||||||||||||||||||||||||||||
| Restricted stock awards | - | |||||||||||||||||||||||||||||||
| Proceeds from non-controlling shareholders | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
| Conversion of convertible debt | - | |||||||||||||||||||||||||||||||
| Additional shares issued on reverse stock split | - | - | ||||||||||||||||||||||||||||||
| Fair value of warrants issued for services | - | - | ||||||||||||||||||||||||||||||
| Fair value of warrants issued to convertible debt holders | - | - | ||||||||||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||||||
| Fair value of warrants issued for equity method investments | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
| * |
The accompanying notes are an integral part of these audited consolidated financial statements.
F-5
INNOVATIVE PAYMENT SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Twelve months ended |
Twelve months ended |
|||||||
| December 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( |
) | $ | ( |
) | ||
| Net loss from discontinued operations | ||||||||
| Net loss from continuing operations | ( |
) | ( |
) | ||||
| Adjustment to reconcile net loss to net cash used in operating activities: | ||||||||
| Derivative liability movements | ( |
) | ( |
) | ||||
| Depreciation | ||||||||
| Amortization of debt discount | ||||||||
| Loss on novation | ||||||||
| Investment impairment charge | ||||||||
| Loss on conversion of debt to equity | ||||||||
| Loss on convertible notes | ||||||||
| Fair value of warrants issued for services | ||||||||
| Unrealized loss on equity method investments | ||||||||
| Shares issued for services | ||||||||
| Stock based compensation | ||||||||
| Changes in Assets and Liabilities | ||||||||
| Other current assets | ( |
) | ||||||
| Accounts payable and accrued expenses | ||||||||
| Interest accruals | ||||||||
| Cash used in operating activities - continuing operations | ( |
) | ( |
) | ||||
| Cash generated by operating activities - discontinued operations | ( |
) | ||||||
| CASH USED IN OPERATING ACTIVITIES | ( |
) | ( |
) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Investment in equity method investment | ( |
) | ||||||
| Intangibles acquired | ( |
) | ( |
) | ||||
| Investment in deposits | ( |
) | ||||||
| Deposits refunded | ||||||||
| Plant and equipment purchased | ( |
) | ||||||
| Net cash used in investing activities – continuing operations | ( |
) | ( |
) | ||||
| Net cash used in investing activities – discontinued operations | ( |
) | ( |
) | ||||
| NET CASH USED IN INVESTING ACTIVITIES | ( |
) | ( |
) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from short term notes and convertible notes | ||||||||
| Repayment of convertible notes | ( |
) | ( |
) | ||||
| Proceeds from non-controlling shareholders | ||||||||
| NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | ( |
) | ||||||
| NET DECREASE IN CASH | ( |
) | ( |
) | ||||
| CASH AT BEGINNING OF YEAR | ||||||||
| CASH AT END OF YEAR | $ | $ | ||||||
| RECONCILIATION OF OPENING CASH WITHIN THE BALANCE SHEET TO THE STATEMENT OF CASH FLOWS | ||||||||
| Cash | $ | $ | ||||||
| Cash included in assets held for resale | ||||||||
| CASH AT BEGINNING OF THE YEAR | $ | $ | ||||||
| RECONCILIATION OF CLOSING CASH WITHIN THE BALANCE SHEET TO THE STATEMENT OF CASH FLOWS | ||||||||
| Cash | $ | $ | ||||||
| Cash included in assets held for resale | ||||||||
| CASH AT END OF THE YEAR | $ | $ | ||||||
| CASH PAID FOR INTEREST AND TAXES: | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
| Cash paid for interest | $ | ( |
) | $ | ||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Warrants issued for software development | $ | $ | ||||||
| Fair value of warrants issued with convertible notes | $ | $ | ||||||
| Conversion of convertible debt to equity | $ | $ | ||||||
| Fair value of warrants issued for equity method investments | $ | $ | ||||||
The accompanying notes are an integral part of these audited consolidated financial statements.
F-6
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 1 | ORGANIZATION AND DESCRIPTION OF BUSINESS |
| a) | Organization |
On
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 the Company’s common stock, par value $
The Merger was treated as a reverse acquisition of the Company, 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 the Company 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, the board of directors of the Company (the “Board”) changed the Company’s fiscal year end from October 31 to December 31.
On November 1, 2019, the Company
changed its corporate name from “QPAGOS” to “Innovative Payment Solutions, Inc.” Additionally, and immediately
following the name change,
On December 31, 2019, the Company
consummated the disposal of Qpagos Corporation, Qpagos Mexico and Redpag in exchange for
F-7
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 1 | ORGANIZATION AND DESCRIPTION OF BUSINESS (continued) |
| b) | Description of current business |
The Company is currently a fintech provider of digital payment solutions presently focused on, through its participation in IPSIPay Express (as defined below), developing a new account-to-account payment application called Instant Settlement in RealTime as well as traditional credit card processing services. The Company has in the past (under the name IPSIPay) and may in the future develop and operate “e-wallets” that enable consumers to deposit cash, convert it into a digital form and remit funds quickly and securely.
IPSIPay Express
On April 28, 2023, the Company formed a new company called IPSIPay Express LLC (“IPSIPay Express”). This entity was formed as a Delaware limited liability company joint venture with OpenPath, Inc. (“OpenPath”) and EfinityPay, LLC (“EfinityPay”, and the Company, collectively with OpenPath and EfinityPay, the “Members”) to develop and market a proprietary consumer to merchant real-time payment platform initially focused on the fast-growing online gaming and entertainment sectors.
On June 19, 2023, the Company entered into a Limited Liability Company Operating Agreement (the “Operating Agreement”) with OpenPath and EfinityPay to jointly provide for the governance of and rights of the Members with respect to IPSIPay Express. The effective date of the Operating Agreement is April 28, 2023.
IPSIPay Express was formed by the Members with the initial business purposes of providing credit card processing solutions and also a proprietary solution for real time bank-to-bank payment transactions in a manner that provides seamless and frictionless consumer and merchant experiences, with an initial focus on merchants operating in gaming and entertainment sectors. Such solutions are collectively referred to herein as “IPEX.”
Pursuant to the Operating Agreement,
the Company agreed to contribute cash to or on behalf IPSIPay Express to be used for the IPEX business in the aggregate amount of up to
$
Simultaneously with the funding
of the initial Tranche, the Company issued to each of OpenPath and EfinityPay a five-year common stock purchase warrant (the “IPEX
Warrant”) to purchase
Frictionless Financial Technologies
On
June 21, 2021. the Company acquired a
F-8
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 1 | ORGANIZATION AND DESCRIPTION OF BUSINESS (continued) |
| b) | Description of current business (continued) |
On
August 26, 2021, the Company formed a new subsidiary, Beyond Fintech, Inc. (“Beyond Fintech”), in which it owns
a
On
May 12, 2023, the Company entered into an Agreement with Frictionless (the “May 2023 Frictionless Agreement”) to unwind
the equity ownership stakes that the Company and Frictionless have in each other and in Beyond Fintech. Pursuant to the May 2023 Frictionless
Agreement: (i) the Company assigned to Frictionless all common stock of Frictionless owned by the Company; (ii) the warrant to purchase
On September 5, 2023, the Company’s entered into a novation agreement whereby it assigned all its rights and interest in its e-wallet product, IPSIPay, and its receivables and payables due from and to Frictionless, related to IPSIPay, to a third party in order to concentrate all of its efforts on the IPSIPay Express joint venture. See note 5 for further information.
| 2 | ACCOUNTING POLICIES AND ESTIMATES |
| a) | Basis of Presentation |
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.
| b) | Principles of Consolidation |
The consolidated financial statements
as of December 31, 2023, include the financial statements of the Company and its subsidiary, Beyond Fintech, in which it had a majority
voting interest, until May 12, 2023, the date of disposal. Pursuant to the May 2023 Frictionless Agreement, the Company disposed of its
All significant inter-company accounts and transactions have been eliminated in the consolidated financial statements.
| c) | Use of Estimates |
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, convertible notes and amendments thereto, 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.
F-9
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 2 | ACCOUNTING POLICIES AND ESTIMATES (continued) |
| d) | Contingencies |
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.
| 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 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 are and will be subject to significant risks and uncertainties including financial, operational, regulatory, and other risks, including the potential risk of business failure. The recent war in Ukraine and the global inflationary environment which has resulted in significant interest rate increases in the U.S and abroad has resulted 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, which may have an adverse impact on its business and financial condition and may hamper 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.
F-10
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 2 | ACCOUNTING POLICIES AND ESTIMATES (continued) |
| g) | Recent accounting pronouncements |
The Financial Accounting Standards Board (“FASB”) issued additional updates during the year ended December 31, 2023. 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 Company’s consolidated financial statements upon adoption.
| h) | Reporting by Segment |
No segmental information
is required as the Company has only
| 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, 2023 and 2022, 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, 2023 and 2022, the balance exceeds the
federally insured limit by $
| 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, 2023 and 2022.
| k) | Investments |
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
The
Company recorded an impairment charge of and $
F-11
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 2 | ACCOUNTING POLICIES AND ESTIMATES (continued) |
| l) | Plant and Equipment |
| Description | Estimated Useful Life | |
| Kiosks | ||
| Computer equipment | ||
| Leasehold improvements | ||
| Office equipment |
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.
| m) | Long-Term Assets |
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.
| n) | Revenue Recognition |
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 minimal revenues of $
F-12
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 2 | ACCOUNTING POLICIES AND ESTIMATES (continued) |
| 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.
| 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.
| q) | Income Taxes |
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 31, 2023 and December 31, 2022, there have been no interest or penalties incurred on income taxes.
F-13
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 2 | ACCOUNTING POLICIES AND ESTIMATES (continued) |
| r) | Comprehensive income |
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.
| 3 | LIQUIDITY MATTERS AND GOING CONCERN |
The Company’s financial
statements are prepared using accounting principles generally accepted in the United States (“U.S. GAAP”) applicable to a
going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company
has incurred net losses since its inception and anticipates net losses and negative operating cash flows for the near future. For
and as of the year ended December 31, 2023, the Company had a net loss of $
The accompanying financial statements for the period ended December 31, 2023 have been prepared assuming the Company will continue as a going concern, but the ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it establishes a revenue stream and becomes profitable. Management’s plans to continue as a going concern include raising additional capital through sales of equity securities and borrowing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. If the Company is not able to obtain the necessary additional financing on a timely basis, the Company will be required to delay, and reduce the scope of the Company’s development and operations. Continuing as a going concern is dependent upon its ability to successfully secure other sources of financing and attain profitable operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
The Company has determined that there is substantial doubt about their ability to continue as a going concern.
| 4 | DISPOSAL OF INVESTMENT IN FRICTIONLESS AND BEYOND FINTECH |
On
May 12, 2023, the Company entered into the May 2023 Frictionless Agreement to unwind the equity ownership stakes that the Company
and Frictionless have in each other and in Beyond Fintech. Pursuant to the May 2023 Frictionless Agreement: (i) the Company assigned to
Frictionless all common stock of Frictionless owned by the Company (representing a
F-14
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 4 | DISPOSAL OF INVESTMENT IN FRICTIONLESS AND BEYOND FINTECH (continued) |
| Amount | ||||
| Assets | ||||
| Current Assets | ||||
| Cash | $ | |||
| Non-current assets | ||||
| Intangible assets | ||||
| Security deposit | ||||
| Investment | ||||
| Total assets | ||||
| Liabilities | ||||
| Current Liabilities | ||||
| Accounts payable | ||||
| Net assets sold | ||||
| Proceeds due on disposal | ( | ) | ||
| Net loss on disposal | $ | |||
| 5 | NOVATION OF CERTAIN ASSETS AND LIABILITES |
On September 5, 2023, the Company entered into a novation agreement with a third party whereby the third party assumed all of the Company’s debts, clients, and services and assumes all the rights and responsibilities of the Company under the SAAS Cloud Hosted Services Enablement Master Services Agreement, dated September 9, 2021 (the “SAAS Agreement”), including the information technology, supplier access, billing and rating technology, mobile wallet, debit card enablement, back-office support services, customer service, and consulting services related to the Company’s IPSIPay mobile application.
Pursuant to the novation agreement, Frictionless released the Company from all its obligations, debts, and liabilities under the SAAS Agreement as of September 5, 2023 and consented to the third party assuming these obligations. Each party agreed to indemnify the other party harmless for any damages, claims or expenses incurred by the other party.
The novation agreement also provided the third party a 30-day transition period in which the Company assisted the third party in transferring all the assets and obligations, including existing customers and wallets to the third party, thereafter the third party will no longer be permitted to operate the IPSIPay app under the brand name “IPSIPay”.
F-15
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 5 | NOVATION OF CERTAIN ASSETS AND LIABILITES (continued) |
| Amount | ||||
| Assets | ||||
| Current Assets | ||||
| Receivable on sale of subsidiary | $ | |||
| Non-current assets | ||||
| Intangible assets | ||||
| Total assets | ||||
| Current Liabilities | ||||
| Accounts payable | ||||
| Net loss on novation | $ | |||
| 6 | DISCONTINUED OPERATIONS |
Effective May 12, 2023, the Company disposed of its investment in Beyond Fintech pursuant to the May 2023 Frictionless Agreement, as disclosed in note 4 above.
| December 31, | ||||
| 2022 | ||||
| Current assets | ||||
| Cash | $ | |||
| Non-current assets | ||||
| Intangibles, net | ||||
| Investment | ||||
| Security deposit | ||||
| Assets held for sale | $ | |||
| Current liabilities | ||||
| Accounts payable | $ | |||
| Liabilities held for sale | $ | |||
| Year ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Net Revenue | $ | $ | ||||||
| Cost of Goods Sold | ||||||||
| Gross loss | ||||||||
| General and administrative | ||||||||
| Depreciation and amortization | ||||||||
| Total Expense | ||||||||
| Loss from operations before income taxes | ( | ) | ( | ) | ||||
| Income Taxes | ||||||||
| Loss from discontinued operations, net of taxation | $ | ( | ) | $ | ( | ) | ||
F-16
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 7 | INTANGIBLES |
On August 26, 2021, the Company
formed Beyond Fintech to acquire a product known as Beyond Wallet from a third party for gross proceeds of $
During
the year ended December 31, 2021, the Company paid gross proceeds of $
| December 31, 2023 | December 31, 2022 | |||||||||||||||
| Cost | Accumulated amortization | Net Book Value | Net book value | |||||||||||||
| Purchased Technology - IPSIPay | $ | $ | $ | $ | ||||||||||||
Amortization
expense was $
| 8 | EQUITY METHOD INVESTMENT |
On
April 28, 2023, the Company formed IPSIPay Express with OpenPath and EFinityPay (see note 1(b) above). As described in note 1(b), the
Company has agreed to make the IPSI Capital Contributions to IPSIPay Express. As of December 31, 2023, the initial Tranche of $
| December 31, 2023 | ||||
| Cash contribution to IPSIPay Express | $ | |||
| Fair value of warrants issued to third party joint venture partners | ||||
| Equity loss from joint venture | ( | ) | ||
| $ | ||||
| 9 | INVESTMENTS |
Investment in Frictionless Financial Technologies Inc.
On
May 12, 2023, the Company assigned to Frictionless all common stock of Frictionless owned by the Company (representing a
| 10 | LEASES |
On March 22, 2021, the Company
entered into a real property lease for an office located at 56B 5th Street, Lot 1, #AT, Carmel By The Sea, California.
The Company applied the practical expedient whereby operating leases with a duration of twelve months or less are expensed as incurred.
F-17
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 10 | LEASES (continued) |
Total Lease Cost
| Year ended December 31, 2023 | Year ended December 31, 2022 | |||||||
| Operating lease expense | $ | $ | ||||||
| Year ended December 31, 2023 | Year ended December 31, 2022 | |||||||
| Cash paid for amounts included in the measurement of lease liabilities | ||||||||
| Operating cash flows from operating leases | $ | ( | ) | $ | ( | ) | ||
| Remaining lease term – operating lease | ||||||||
| 11 | FEDERAL RELIEF LOANS |
Small Business Administration Disaster Relief loan
On
July 7, 2020, the Company received a Small Business Economic Injury Disaster loan amounting to $
The
company has accrued interest of $
| 12 | NOTES PAYABLE |
On
February 16, 2021, the Company entered into separate Securities Purchase Agreements (the “SPAs”), with each of Cavalry Fund
I LP (“Cavalry”) and Mercer Street Global Opportunity Fund, LLC (“Mercer”), pursuant to which the Company received
$
In
terms of the December 30, 2022 Note Amendment Transaction, described in more detail in Note 9 below, the Original Warrants issued on February
16, 2021 were irrevocably exchanged for 12-month non-convertible promissory notes in the amount of $
The
Exchange Notes have a maturity date of
Subsequent to year end, the maturity date of the notes was extended to April 30, 2024, all other terms remain the same as the previous notes. The Company will perform an analysis to determine whether the amendment meets the definition of a debt extinguishment or modification in terms of ASC 470.
F-18
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 12 | NOTES PAYABLE (continued) |
| Description | Interest Rate | Maturity date | Principal | Accrued Interest | December 31, Amount, net | December 31, net | ||||||||||||||||
| Cavalry Fund I LP | % | |||||||||||||||||||||
| Mercer Street Global Opportunity Fund, LLC | % | |||||||||||||||||||||
| Total convertible notes payable | $ | $ | $ | $ | ||||||||||||||||||
Interest
expense totaled $
| 13 | CONVERTIBLE NOTES PAYABLE |
December 2022 Note Amendment Transaction
The
Company twice extended its indebtedness to each Cavalry and Mercer. On February 3, 2022, the Company agreed to extend the maturity date
of the Cavalry/Mercer Notes to
On December 30, 2022, the Company again extended the maturity dates of each of the Cavalry/Mercer Notes to December 30, 2023. Each of Cavalry and Mercer entered into Note Amendment Letter Agreement with the Company (the “Note Amendment”) pursuant to which the parties agreed to the following:
| (1) | The conversion price of the Cavalry/Mercer Notes was reduced from $ |
| (2) | The Original Warrants issued on February 16, 2021 were irrevocably
exchanged for 12-month non-convertible promissory notes in the amount of $ |
| (3) | Each of Cavalry and Mercer agreed (i) not to convert all or any portion of the Cavalry/Mercer Notes until after March 30, 2023 and (ii) waive any events of default under the Cavalry/Mercer Notes and the Cavalry/Mercer SPAs; |
| (4) | Certain other warrants held by Cavalry and Mercer which contain a mandatory exercise provision allowing us to force exercise of such warrants if the price of the Common Stock is $ |
| (5) | The Company was obligated to register the shares of Common Stock underlying the Cavalry/Mercer Notes and the shares underlying all warrants held by Cavalry and Mercer for resale with the Securities and Exchange Commission and the Company filed the registration statement to satisfy such registration obligation. |
F-19
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 13 | CONVERTIBLE NOTES PAYABLE (continued) |
December 2022 Note Amendment Transaction (continued)
The
parties also acknowledged that the principal and accrued interest under the Cavalry/Mercer Notes as of December 28, 2022 is equal to an
aggregate of $
The
amendments to the Cavalry/Mercer Notes were evaluated in terms of ASC 470, Debt, to determine if the amendments to the Cavalry/Mercer
Notes were considered a modification of the debt or an extinguishment of the debt. Based on the penalty interest incurred on the convertible
notes of $
Effective December 30, 2023 on February 27, 2024, the Company again extended the maturity dates of each of the Cavalry/Mercer Notes to April 30, 2024, other than the maturity date all other terms remained the same. The Company will perform an analysis to determine whether the amendment meets the definition of a debt extinguishment or modification in terms of ASC 470.
| Description | Interest Rate |
Maturity date |
Principal | Accrued Interest |
Unamortized debt discount |
December 31, 2023 Amount, net |
December 31, 2022 Amount, net |
|||||||||||||||||||
| Cavalry Fund I LP | % | - | ||||||||||||||||||||||||
| Mercer Street Global Opportunity Fund, LLC |
% | - | ||||||||||||||||||||||||
| Red Road Holdings Corporation | *% | ( |
) | - | ||||||||||||||||||||||
| *% | ( |
) | - | |||||||||||||||||||||||
| *% | ( |
) | - | |||||||||||||||||||||||
| 2023 convertible notes | |
% | ( |
) | - | |||||||||||||||||||||
| Total convertible notes payable | $ | $ | $ | ( |
) | $ | $ | |||||||||||||||||||
| * |
Interest
expense totaled $
Amortization
of debt discount totaled $
The Cavalry, Mercer and Red Road Holdings 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.
F-20
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 13 | CONVERTIBLE NOTES PAYABLE (continued) |
Cavalry Fund LLP
On
February 16, 2021, the Company closed a transaction with Cavalry pursuant to which the Company received net proceeds of $
As
described more fully above, the maturity date of the note was extended to August 16, 2022, additionally to November 16, 2022 and again
to December 30, 2023. In consideration for the November 16, 2022 extension, the Company agreed to (i) increase the principal amount outstanding
and due to Cavalry by twenty percent (
Between
August 24, 2023 and November 20, 2023, Cavalry converted $
Subsequent to year end, on February 27, 2024, the maturity date of the notes was extended to April 30, 2024, all other terms remain the same as the previous notes. Based on an analysis performed, the amendment to the agreement was determined to be a debt modification, there were no expenses incurred on the amendment and interest will be accrued at the effective interest rate.
The
balance of the Cavalry Note plus accrued interest at December 31, 2023 was $
Mercer Street Global Opportunity Fund, LLC
On
February 16, 2021, the Company closed a transaction with Mercer, pursuant to which the Company received net proceeds of $
As
described more fully above, the maturity date of the note was extended to August 16, 2022, additionally to November 16, 2022 and again
to December 30, 2023. In consideration for the November 16, 2022 extension, the Company agreed to (i) increase the principal amount outstanding
and due to Mercer by twenty percent (
Between
May 19, 2023 and August 30, 2023, Mercer converted an aggregate of $
On February 27, 2024, Cavalry entered into a note amendment with the company extending the maturity date of the convertible note to April 30, 2024.
The
balance of the Mercer Note plus accrued interest at December 31, 2023 was $
Quick Capital, LLC
On
June 20, 2023, the Company closed a transaction with Quick Capital, LLC pursuant to which the Company received net proceeds of $
On
December 20, 2023, the Company settled the outstanding principal of $
F-21
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 13 | CONVERTIBLE NOTES PAYABLE (continued) |
1800 Diagonal Street Lending LLC
| ● | On May 10, 2023, the Company closed
a transaction with 1800 Diagonal Street Lending LLC (“1800 Diagonal”) pursuant to which the Company received net proceeds
of $ |
| ● | On June 13 2023, the Company closed a transaction with 1800 Diagonal, pursuant to which the Company received net proceeds of $
On August 3, 2023, the Company settled in full, the outstanding convertible notes owing to 1800 Diagonal, for $ |
Red Road Holdings Corporation
| ● | On September 9, 2023, the Company closed a transaction with Red Road Holdings Corporation (“RRH”) pursuant to which the Company received net proceeds of $
The balance of the RRH Note 1 plus accrued interest at December 31, 2023 was $ | |
| ● | On October 19, 2023, the Company closed a transaction with RRH pursuant to which the Company received net proceeds of $
The balance of the RRH Note 2 plus accrued interest at December 31, 2023 was $ | |
| ● | On December 20, 2023, the Company closed a transaction with RRH pursuant to which the Company received net proceeds of $
The balance of the RRH Note 3 plus accrued interest at December 31, 2023 was $ |
F-22
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 13 | CONVERTIBLE NOTES PAYABLE (continued) |
2023 Convertible Notes
Between
February 13, 2023 and November 27, 2023, the Company entered into Securities Purchase Agreements with 30 accredited investors, pursuant
to which the Company received an aggregate of $
| ● | Convertible Promissory Notes (the “2023 Notes” and each a “2023 Note”); and |
| ● | five-year warrants (the “2023 Warrants”) to purchase an aggregate |
The
2023 Notes mature between 3.5 months and 12 months, bear interest at rates between
The
2023 Notes and the 2023 Warrants contain conversion limitations providing that a holder thereof may not convert the 2023 Notes or exercise
the 2023 Warrants to the extent that, if after giving effect to such conversion, the holder or any of its affiliates would beneficially
own in excess of
On December 14, 2023, two notes
totaling $
The balance of the 2023 Notes
plus accrued interest at December 31, 2023 was $
| 14 | DERIVATIVE LIABILITY |
The convertible notes and warrants issued by the Company to Cavalry, Mercer and RRH as described herein 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.
On December 30, 2022, the Company entered into the December 2022 Note Amendment transaction (“the Note Amendment”) as fully described under note 12 above. Included in the derivative liability is: (i) the Original Warrants which were exchanged for non-convertible promissory notes, (ii) the Cavalry and Mercer convertible notes which were subject to the Note Amendment and (ii) the Cavalry and Mercer Extension Warrants as well as certain other warrants due to Cavalry and Mercer and certain other warrant holders. The Note Amendment triggered a repricing of certain of these warrants.
The
derivative liability on the Cavalry and Mercer convertible notes and the warrants affected by the note amendment were marked-to-market
immediately prior to the Note Amendment resulting in a market to market movement on the original warrants, the convertible notes and the
extension warrants and certain other warrants, which were subject to a full rachet provision, of $
On
May 10, 2023 and June 13, 2023, the Company entered into convertible note agreements with 1800 Diagonal which 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, which gave rise
to a derivative financial liability, which was initially valued at inception of the convertible notes at $
F-23
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 14 | DERIVATIVE LIABILITY (continued) |
Between September 12, 2023 and December 20, 2023, the Company entered into a convertible note agreement with RRH which 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, which
gave rise to a derivative financial liability, which was initially valued at inception of the convertible notes at $
The
net movement on the derivative liability for the year ended December 31, 2023 was a net mark-to-market credit of $
| Year ended December 31, 2023 | Year ended December 31, 2022 | |||||||
| Conversion price | $ | | $ | | ||||
| Risk free interest rate | % | | % | |||||
| Expected life of derivative liability | ||||||||
| Expected volatility of underlying stock | | % | % | |||||
| Expected dividend rate | % | % | ||||||
| December 31, 2023 | December 31, 2022 | |||||||
| Opening balance | $ | $ | ||||||
| Derivative financial liability arising from convertible note and warrants | ||||||||
| Derivative financial liability arising on note amendment included in loss on convertible notes | ||||||||
| Fair value adjustment to derivative liability | ( | ) | ( | ) | ||||
| $ | $ | |||||||
| 15 | STOCKHOLDERS’ EQUITY |
| a. | Common Stock |
The
Company has total authorized Common Stock of
On July 8, 2022, the Company entered into a consulting agreement with a third-party contractor for a period of twelve months to (i) review the Company’s business plan; (ii) analyze and assess the Company’s revenues, costs, and cash flow; and (iii) introduce the Company to and interface on the Company’s behalf with potential and actual commercial partners.
The
Company issued
On
July 8, 2022, the Company entered into a second consulting agreement with a separate third-party contractor for a period of twelve months
to (i) review the Company’s business plan; (ii) analyze and assess the Company’s revenues, costs, and cash flow; and (iii)
introduce the Company to and interface on the Company’s behalf with potential and actual commercial partners. The Company issued
On
July 11, 2022, the Board approved the issuance of
On
August 5, 2022, the Board approved the issuance of
F-24
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 15 | STOCKHOLDERS’ EQUITY (continued) |
| a. | Common Stock (continued) |
On
May 19, 2023, in terms of a conversion notice received from a convertible note holder, the Company issued
On
August 16, 2023, in terms of a conversion notice received from a convertible note holder, the Company issued
On
August 24, 2023, in terms of a conversion notice received from a convertible note holder, the Company issued
On
August 30, 2023, the Company effectuated a 1 for 30 reverse stock split, resulting in the issuance of an additional
On
August 31, 2023, in terms of a conversion notice received from a convertible note holder, the Company issued
On
November 8, 2023, in terms of a conversion notice received from a convertible note holder, the Company issued
On
November 20, 2023, in terms of a conversion notice received from a convertible note holder, the Company issued
| b. | Restricted stock awards |
On
December 15, 2020, in terms of an employment agreement entered into with an employee, the Company granted
| 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, 2022 | $ | $ | $ | |||||||||||||||||||||
| Granted and issued | ||||||||||||||||||||||||
| Forfeited/Cancelled | ||||||||||||||||||||||||
| Vested | ( | ) | ( | ) | ||||||||||||||||||||
| Outstanding December 31, 2022 | $ | $ | $ | |||||||||||||||||||||
| Granted and issued | ||||||||||||||||||||||||
| Forfeited/Cancelled | ||||||||||||||||||||||||
| Vested | ( | ) | ( | ) | ||||||||||||||||||||
| Outstanding December 31, 2023 | $ | $ | $ | |||||||||||||||||||||
| * |
| Restricted
Stock Granted and Vested | ||||||||||
| Grant date Price | Number Granted* | Weighted
Average Fair Value per Share* | ||||||||
| $ | 1.47 | $ | ||||||||
| $ | 1.50 | |||||||||
| $ | 1.65 | |||||||||
| $ | ||||||||||
| * |
The
Company has recorded an expense of $
F-25
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 15 | STOCKHOLDERS’ EQUITY (continued) |
| c. | Preferred Stock |
The
Company has authorized
| d. | Warrants |
Effective July 8, 2022 (the “Effective Date”), the Company entered into an Endorsement Agreement with Pez-Mar, Inc., a California corporation (“Pez-Mar”), to furnish the services of Mario Lopez (“Lopez”). Pursuant to the Endorsement Agreement, Lopez will act as a Company spokesperson in connection with the promotion, advertisement and endorsement of the Company’s physical and virtual payment processing and money remittance business and the Company’s related products and services.
The Endorsement Agreement has a term of two (2) years from the Effective Date (the “Term”), which is subject to earlier termination on customary terms and conditions. The parties have agreed to certain deliverables of Lopez during the term of the agreement, including with respect to social media posts, television commercials, interviews and photo shoots. The Endorsement Agreement also contains other customary terms, covenants and conditions, including representations and warranties, restrictions on endorsements of competitive products during the term of the agreement, confidentiality, indemnification, and Pez-Mar and Lopez’s independent contractor status.
As
compensation for the services provided under the Endorsement Agreement, Lopez or their designees are entitled to the following payments:
On
August 30, 2022, the Company extended the maturity date of the Cavalry/Mercer Notes and agreed to grant each note holder a warrant exercisable
for
On December 30, 2022, the Company
issued to Frictionless a 5-year warrant to purchase
On
December 30, 2022,
| ● | The warrants issued to Cavalry and Mercer exercisable for 165,798 shares of Common Stock (82,899 for each of Cavalry and Mercer), were exchanged for two promissory notes of $482,000 each, as disclosed in note 11 above; |
| ● | The warrants issued to Cavalry and Mercer on August 30, 2022, were subject to repricing and a full rachet increase in the number of warrants issued, resulting in an increase in the number of warrants by 2,408,696 (1,204,348 to each Cavalry and Mercer) and a reset of the exercise price to $0.345 per share. The additional warrants were valued at $841,003 using a Black-Scholes valuation model and was expensed in the statement of operations as a component of the loss on convertible debt. |
| ● | An additional 457,895 warrants previously issued to Mercer, Iroquois Master Fund and Bellridge Capital LP were subject to repricing of the exercise price from a range of $1.50 to $4.50 per share to $0.345 per share. The change in the fair value of these warrants of $20,079, using a Black-Scholes valuation model was recorded as a component of the loss on convertible debt. |
Between
February 13, 2023 and November 27, 2023, the Company entered into Securities Purchase Agreements with 30 accredited investors, as disclosed
in note 13 above. In terms of these Securities Purchase Agreements, the Company issued five-year warrants to purchase an aggregate
F-26
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 15 | STOCKHOLDERS’ EQUITY (continued) |
| d. | Warrants (continued) |
On
August 11, 2023, the company issued an investor a five-year replacement warrant for a warrant that had expired on February 13, 2023 exercisable
for
On
December 14, 2023, two notes totaling $
During
the current year warrants exercisable for
The
2023 Warrants contain conversion limitations providing that a holder thereof may not exercise the Warrants to the extent that, if after
giving effect to such exercise, the holder or any of its affiliates would beneficially own in excess of
In connection with the formation
of IPSIPay Express, the Company issued to each of the other venture partners, OpenPath and EfinityPay, IPEX Warrants to purchase an aggregate
of
| Year ended December 31, 2023 | ||||
| Exercise price | $ | | ||
| Risk free interest rate | | % | ||
| Expected life | | |||
| Expected volatility of underlying stock | | % | ||
| Expected dividend rate | % | |||
| Shares Underlying Warrants* | Exercise price per share* | Weighted average exercise price* | ||||||||||
| Outstanding January 1, 2022 | $ | | $ | |||||||||
| Granted | | |||||||||||
| Increase in warrants due to debt amendment full rachet trigger | ||||||||||||
| Cancelled on debt amendment | ( | ) | ||||||||||
| Exercised | ||||||||||||
| Outstanding December 31, 2022 | $ | $ | ||||||||||
| Granted | | |||||||||||
| Forfeited | ( | ) | ||||||||||
| Cancelled on disposal of investment in Frictionless and Beyond Fintech | ( | ) | ||||||||||
| Exercised | ||||||||||||
| Outstanding December 31, 2023 | $ | $ | ||||||||||
| * |
F-27
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 15 | STOCKHOLDERS’ EQUITY (continued) |
| d. | Warrants (continued) |
| 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 |
||||||||||||||||||||
| $ | 0.345 | |||||||||||||||||||||||||
| $ | 0.450 | |||||||||||||||||||||||||
| $ | 1.035 | |||||||||||||||||||||||||
| $ | 1.500 | |||||||||||||||||||||||||
| $ | 4.50 | |||||||||||||||||||||||||
| $ | 5.625 | |||||||||||||||||||||||||
| $ | $ | |||||||||||||||||||||||||
| * |
The
warrants outstanding have an intrinsic value of $
| e. | Stock options |
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
The Plan is administered by the Board or a committee appointed by the Board, 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
On
October 22, 2021, the Company established its 2021 Stock Incentive Plan (“2021 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, 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 Plan terminates after a period of
The 2021 Plan is administered by the Board or a Compensation Committee appointed by the Board, 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 2021 Plan is
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
July 11, 2022, the Board approved, granted and issued
On
September 13, 2022, the Company granted ten-year options exercisable for
During
the current financial year, the Company cancelled options exercisable for
F-28
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 15 | STOCKHOLDERS’ EQUITY (continued) |
| e. | Stock options (continued) |
| Shares Underlying options* | Exercise price per share* | Weighted average exercise price* | ||||||||||
| Outstanding January 1, 2022 | $ | $ | ||||||||||
| Granted | ||||||||||||
| Forfeited/Cancelled | ||||||||||||
| Exercised | ||||||||||||
| Outstanding December 31, 2022 | $ | $ | ||||||||||
| Granted | ||||||||||||
| Forfeited/Cancelled | ( | ) | $ | |||||||||
| Exercised | ||||||||||||
| Outstanding December 31, 2023 | $ | $ | ||||||||||
| * |
| 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 | ||||||||||||||||||||
| $ | 1.20 | |||||||||||||||||||||||||
| $ | 4.50 | |||||||||||||||||||||||||
| $ | $ | |||||||||||||||||||||||||
The
options outstanding have an intrinsic value of $
The
option expense was $
| 16 | LOSS ON CONVERTIBLE NOTES |
| December 31, 2023 | December 31, 2022 | |||||||
| Penalty on cash settlement of convertible note | $ | $ | ||||||
| Expense on extension of maturity date of convertible notes | ||||||||
| Fair value of warrants issued to convertible note holders on extension of maturity date | ||||||||
| Fair value of derivative liability arising on the amendment of the exercise price of convertible notes and the full-rachet trigger on certain warrants issued to convertible note holders | ||||||||
| Value of notes exchanged for certain warrants, net of the derivative liability value of $( | ||||||||
| $ | $ | |||||||
Penalty on cash settlement of convertible note
On
February 4, 2022, the Company cash settled the outstanding balance, including early settlement penalty thereon of $
On
August 3, 2023, the Company cash settled the outstanding balance of two convertible notes owing to 1800 Diagonal Street Lending LLC, including
an early settlement penalty thereon of $
F-29
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 16 | LOSS ON CONVERTIBLE NOTES (continued) |
Expense on extension of maturity date of convertible notes
On
December 14, 2023, the Company extended the maturity date of two convertible notes to March 30, 2024, and issued the note holders additional
warrants exercisable for
In
the prior year, The Company twice extended the maturity date of its indebtedness to each Cavalry and Mercer. On February 3, 2022, the
Company agreed to extend the maturity date of the Notes to August 16, 2022. Additionally, on August 30, 2022, the Company entered agreements
for an additional maturity date extension to November 16, 2022, in terms of these extensions, the Company incurred penalties which
increased the principle outstanding of these convertible notes in the aggregate amount of $
Fair value of warrants issued to convertible note holders on extension of maturity date
In
addition to the penalty on extension of maturity date on its indebtedness to each of Cavalry and Mercer, in consideration for the second
extension on August 30, 2022, the Company agreed to issue to each of Cavalry and Mercer a new five-year warrant to purchase an additional
Fair value of derivative liability arising on the amendment of the exercise price of convertible notes and the full-rachet trigger on certain warrants issued to convertible note holders
On
December 30, 2022, the Company again extended the maturity dates of each of the Notes to Cavalry and Mercer to
In
addition to this, certain other warrants outstanding had their conversion price reduced from $
Value
of notes exchanged for certain warrants, net of the derivative liability value of $(
On
December 30, 2022, the Company also agreed to exchange the Original Warrants issued on February 16, 2021 to Cavalry and Mercer for 12-month
non-convertible promissory notes in the amount of $
| 17 | INCOME TAXES |
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
F-30
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 17 | INCOME TAXES (continued) |
Federal Income Tax - United States (continued)
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, 2022 and 2021, there have been no interest or penalties incurred on income taxes.
| Year ended December 31, 2023 | Year ended December 31, 2022 | |||||||
| Current | ||||||||
| Federal | $ | $ | ||||||
| State | ||||||||
| Foreign | ||||||||
| $ | $ | |||||||
| Deferred | ||||||||
| Federal | $ | $ | ||||||
| State | ||||||||
| Foreign | ||||||||
| $ | $ | |||||||
| Year ended December 31, 2023 | Year ended December 31, 2022 | |||||||
| Continuing operations | ||||||||
| Tax expense at the federal statutory rate | $ | ( | ) | $ | ( | ) | ||
| State tax expense, net of federal tax effect | ( | ) | ( | ) | ||||
| Permanent differences | ||||||||
| Prior year net operating loss true up | ( | ) | ( | ) | ||||
| ( | ) | ( | ) | |||||
| Deferred income tax asset valuation allowance | ||||||||
| $ | $ | |||||||
| December 31, 2023 | December 31, 2022 | |||||||
| Other | $ | $ | ||||||
| Capital loss | - | |||||||
| Net operating losses | ||||||||
| Stock based compensation | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Net deferred income tax assets | $ | $ | ||||||
The valuation allowance for deferred
income tax assets as of December 31, 2023 and December 31, 2022 was $
As of December 31, 2023, the prior years remain open for examination by the federal or state regulatory agencies for purposes of an audit for tax purposes.
As
of December 31, 2023, the Company had available for income tax purposes approximately $
F-31
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 17 | INCOME TAXES (continued) |
Federal Income Tax - United States (continued)
The Company’s ability to utilize the previous Federal operating loss carryforwards may be adjusted if, pursuant to IRC Section 382/383 of the Internal Revenue Code of 1986, as amended, a change of ownership occurs. Management does not believe an ownership change has occurred under IRC Section 382/383. A future change in ownership may result in an adjustment to the loss carryforward.
The Company is subject to taxation in the U.S. and CA state. U.S. federal income tax returns for 2019 and after, remain open to examination. No income tax returns are currently under examination. As of December 31, 2023 and 2022, 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, 2023 and 2022, there were no penalties or interest recorded in income tax expense.
| 18 | EQUITY BASED COMPENSATION |
| Year ended December 31, 2023 | Year ended December 31, 2022 | |||||||
| Incentive stock awards | $ | $ | ||||||
| Securities issued for services rendered | ||||||||
| $ | $ | |||||||
| 19 | NET LOSS PER SHARE |
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, 2023 and 2022 all warrants options and convertible debt securities were excluded from the computation of diluted net loss per share.
| Year ended December 31, 2023 (Shares) | Year ended December 31, 2022 (Shares) | |||||||
| Convertible debt | ||||||||
| Stock options | ||||||||
| Warrants to purchase shares of common stock | ||||||||
| 20 | RELATED PARTY TRANSACTIONS |
The following transactions were entered into with related parties:
James Fuller
On
September 13, 2022, the Company granted Mr. Fuller ten-year options exercisable for
The
option expense for Mr. Fuller was $
Mr. Fuller voluntarily resigned as a member of the Board of Directors effective as of our 2022 annual meeting of shareholders which occurred on November 3, 2022.
William Corbett
On
July 11, 2022, the Company granted Mr. Corbett ten-year options exercisable for
F-32
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 20 | RELATED PARTY TRANSACTIONS (continued) |
William Corbett (continued)
On
June 21, 2023, Mr. Corbett advanced the company $
The
option expense for Mr. Corbett was $
Clifford Henry
Mr.
Henry has an oral consulting arrangement with the Company whereby he is paid $
On
September 13, 2022, the Company granted Mr. Henry, immediately vesting, ten-year options exercisable for
The
option expense for Mr. Henry was $
Mr. Henry voluntary elected not to stand for re-election at the company’s annual general meeting, his tenure as a director ended on the date of the annual general meeting, November 30, 2023.
Madisson Butler
On
September 13, 2022, the Company granted Ms. Butler (formerly known as Madisson Corbett), immediately vesting, ten-year options exercisable
for
The
option expense for Ms. Butler was $
David Rios
On
September 13, 2022, the Company granted Mr. Rios, immediately vesting, ten-year options exercisable for
The
option expense for Mr. Rios was $
Richard Rosenblum
On
July 11, 2022, the Company granted Mr. Rosenblum
The
option expense for Mr. Rosenblum was $
| 21 | COMMITMENTS AND CONTINGENCIES |
| 22 | SUBSEQUENT EVENTS |
Convertible note funding
Between February
6 and February 21, 2024, the Company entered into Securities Purchase Agreements pursuant to which the Company issued convertible promissory
notes to four accredited investment entities for total gross proceeds of $
F-33
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 22 | SUBSEQUENT EVENTS (continued) |
Convertible note funding (continued)
On March 4,
2024, the Company entered into a Securities Purchase Agreement pursuant to which the Company issued a convertible promissory note and
a warrant exercisable for shares of common stock to an accredited investor. The Company realized gross proceeds of $
Non-Binding Letter of Intent with Business Warrior
Overview and Cautionary Statement
On February 13, 2024, the Company signed an amended and restated non-binding letter of intent (the “LOI”) with Business Warrior Corporation, a Wyoming corporation (“BZWR”), pursuant to which the Company would acquire BZWR on the general terms described below (the “Proposed Transaction”).
Neither IPSI nor BZWR shall have any legal obligation of any kind with respect to the Proposed Transaction unless and until binding definitive agreements with respect to the Proposed Transaction are executed. Moreover, the Proposed Transaction, assuming definitive agreements are even executed, would be subject to the approval of the stockholders of both IPSI and BZWR and the satisfaction of other conditions to closing.
BZWR is a publicly listed, revenue generating fintech company that offers PayPlan, a comprehensive lending software platform that includes marketing services for lenders and businesses. The Company believes that a potential combination with a fintech company that generates some revenue monthly would complement the development and commercial launch of the Company’s IPSIPay ExpressTM products and potentially other product offerings.
In addition, the Company and BZWR have certain convertible note investors (the “Note Holders”) in common. Therefore, one purpose of the Proposed Transaction would be to convert the indebtedness of both the Company and BZWR held by the Note Holders into equity securities of the Company.
Outline of Proposed Terms
The principal terms of the Proposed Transaction are as follows:
| 1. | Preliminary
Structure. At the closing of the Proposed Transaction (the “Closing”), the Company would acquire |
| 2. | Consideration. The total consideration provided to or for the benefit of BZWR equity holders (including holders of warrants and other outstanding preferred stock or other convertible securities of BZWR), as applicable (the “Transaction Consideration”) would be in the form of newly-issued shares (the “Transaction Shares”) of Company common stock representing forty percent ( |
| 3. | Note Exchange Transaction; Replacement Preferred. Prior to and as a condition to the Closing, the Note Holders of both IPSI and BZWR shall effect a note exchange transaction pursuant to which all of the outstanding convertible notes of IPSI and BZWR held by the Note Holders will be cancelled and exchanged for shares of newly-issued Series A Convertible Preferred Stock of IPSI (“Replacement Preferred”). The terms of the Replacement Preferred will be negotiated with the Note Holders. |
| 4. | BZWR Capitalization Restructure. Prior to the Closing, BZWR shall cause all of its outstanding shares of preferred stock and warrants to be converted into shares of BZWR common stock, net exercised or cancelled, with the effect that only shares of BZWR common stock would be outstanding a Closing, the holders of which would be entitled to receive the Transaction Consideration. |
| 5. | Board of Directors. The post-Closing Board of Directors of IPSI shall consist of a number of individuals to be agreed upon by IPSI and BZWR, provided that (i) the majority of the post-Closing Board of Directors will be appointed by IPSI and (ii) the majority of the post-Closing Board of Directors will be “independent” as defined under Nasdaq Stock Market rules. |
Company Loan to BZWR
On February
12, 2024, and in connection with the LOI and the Proposed Transaction, the Company (utilizing a portion of the proceeds from the issuance
of convertible Notes) loaned funds to BZWR in the principal amount of $
F-34
PART IV
Item 15. Exhibits and Financial Statement Schedules and Reports on Form 10-K
The following documents are filed as part of this amended report:
| (a)(1) | Financial Statements |
For a list of the financial statements included herein, see Index to the Consolidated Financial Statements on page F-1 of this Annual Report on Form 10-K/A, incorporated into this Item by reference.
| (a)(2) | Financial Statement Schedules |
None.
| (a)(3) | The following exhibits are either filed as part of this Annual Report on Form 10-K/A: |
EXHIBIT INDEX
| Exhibit No. | Description | |
| 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 | Inline Cover Page Interaction Data File (embedded within the Inline XBLR document) |
| * | Filed herewith. |
1
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K/A (Amendment No. 1) to be signed on its behalf by the undersigned.
| Innovative Payment Solutions, Inc. | ||
| Date: April 17, 2024 | By: | /s/ William Corbett |
| William Corbett | ||
| Chief Executive Officer and Chairman | ||
| Date: April 17, 2024 | By: | /s/ Richard Rosenblum |
| Richard Rosenblum | ||
| Chief Financial Officer, President and Director | ||
2
Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13a-14 OR RULE
15d-14 OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, William Corbett, certify that:
| 1. | I have reviewed this Amendment No. 1 to the Annual Report on Form 10-K of Innovative Payment Solutions, Inc: |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and. |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: April 17, 2024 | /s/ William Corbett |
| William Corbett | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION PURSUANT TO RULE 13a-14 OR RULE
15d-14 OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Richard Rosenblum, certify that:
| 1. | I have reviewed this Amendment No. 1 to the Annual Report on Form 10-K of Innovative Payment Solutions, Inc.: |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and. |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: April 17, 2024 | /s/ Richard Rosenblum |
| Richard Rosenblum | |
| President and Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Innovative Payment Solutions, Inc. (the “Registrant”) on Form 10-K/A for the year ended December 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William Corbett, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section. 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | To my knowledge, the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
| Date: April 17, 2024 | By: | /s/ William Corbett |
| William Corbett | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Innovative Payment Solutions, Inc. (the “Registrant”) on Form 10-K/A for the year ended December 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard Rosenblum, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section. 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | To my knowledge, the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
| Date: April 17, 2024 | By: | /s/ Richard Rosenblum |
| Richard Rosenblum | ||
| President and Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) |