UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
or
For the transition period from ___________ to ___________
Commission
File Number
(Exact Name of Registrant as Specified in its Charter)
| (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
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report
19355 Business Center Drive., #9, Northridge CA 91324
Securities registered pursuant to Section 12(b) of the Act: None
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate
by check mark whether the registrant (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 (§ 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, 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 is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
Number of shares of common stock outstanding as of August 11, 2021 was 356,451,678.
INNOVATIVE PAYMENT SOLUTIONS, INC.
The COVID-19 pandemic has required the management of Innovative Payment Solutions, Inc. (the “Company”) to focus its attention on responding to the challenges presented by the COVID-19 pandemic, including ensuring continuous operations, and adjusting the Company’s operations to address changes in the virtual payments industry.
The Company provides an integrated network of kiosks, terminals and payment channels that enable consumers to deposit cash, convert it into a digital form and remit the funds to any merchant in its network quickly and securely. The Company has plans to roll out 50 kiosks in Southern California to provide digital payments for the unbanked and underbanked using self-service kiosks and an E-wallet ecosystem. The kiosks are currently located in the Company’s warehouses in Southern California awaiting the installation of a suitable payment platform which is currently under development. As a result, installation of the Company’s network of kiosks, terminals and payment channels in Southern California continues to be delayed, which has had an adverse impact on the Company’s business and financial condition and has hampered its ability to generate revenue.
The Company continues to monitor the continuous impact of COVID-19 closely. The extent to which COVID-19 will continue to impact the Company’s operations, ability to obtain financing or future financial results is uncertain.
Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In particular, statements contained in this Report, including but not limited to, the sufficiency of our cash, our ability to finance our operations and business initiatives and obtain funding for such activities; our future results of operations and financial position, business strategy and plan prospects, or costs and objectives of management for future acquisitions, are forward-looking statements. These forward-looking statements relate to our future plans, objectives, expectations and intentions and may be identified by words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “seeks,” “goals,” “estimates,” “predicts,” “potential” and “continue” or similar words. Readers are cautioned that these forward-looking statements are based on our current beliefs, expectations and assumptions and are subject to risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed, projected or implied in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason.
NOTE REGARDING COMPANY REFERENCES
Throughout this Report, “IPSI,” the “Company,” “we,” “us” and “our” refer to Innovative Payment Solutions, Inc.
INNOVATIVE PAYMENT SOLUTIONS, INC.
Index
i
Item 1.
INNOVATIVE PAYMENT SOLUTIONS, INC.
TABLE OF CONTENTS
June 30, 2021
F-1
INNOVATIVE PAYMENT SOLUTIONS, INC.
CONDENSED BALANCE SHEETS
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Other current assets | ||||||||
| Total Current Assets | ||||||||
| Non-current assets | ||||||||
| Plant and equipment | ||||||||
| Right of use asset | ||||||||
| Security deposit | ||||||||
| Investment | ||||||||
| Total Non-Current Assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity (Deficit) | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Related party payables | ||||||||
| Federal relief loans | ||||||||
| Loans payable | ||||||||
| Convertible debt, net of unamortized discount of $ | ||||||||
| Operating lease liability | ||||||||
| Derivative liability | ||||||||
| Total Current Liabilities | ||||||||
| Non-Current Liabilities | ||||||||
| Federal relief loans | ||||||||
| Operating lease liability | ||||||||
| Total Non-Current Liabilities | ||||||||
| Total Liabilities | ||||||||
| Stockholders’ Equity (Deficit) | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity (Deficit) | ( | ) | ||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
See notes to the unaudited condensed financial statements.
F-2
INNOVATIVE PAYMENT SOLUTIONS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| Three months ended | Three months ended | Six months ended | Six months ended | |||||||||||||
| June 30, | June 30, | June 30, | June 30, | |||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Net Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of Goods Sold | ||||||||||||||||
| Gross profit | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Total Expense | ||||||||||||||||
| Loss from Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Investment impairment charge | ( | ) | ( | ) | ||||||||||||
| Loss on debt conversion | ( | ) | ( | ) | ( | ) | ||||||||||
| Loss on settlement of liabilities | ( | ) | ||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Amortization of debt discount | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Derivative liability movements | ||||||||||||||||
| Other (expense) income | ( | ) | ( | ) | ||||||||||||
| Loss before Income Taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income Taxes | ||||||||||||||||
| Net Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Basic and diluted loss per share | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Weighted Average Number of Shares Outstanding – Basic and diluted | ||||||||||||||||
See notes to the unaudited condensed financial statements
F-3
INNOVATIVE PAYMENT SOLUTIONS, INC.
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020
| Additional | Total | |||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Accumulated | Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares* | Amount* | Capital* | Deficit | Deficit | ||||||||||||||||||||||
| Balance as of December 31, 2020 | - | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Warrants exercised | - | - | ||||||||||||||||||||||||||
| Share subscriptions | - | - | ||||||||||||||||||||||||||
| Share issue expenses | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Conversion of debt to equity | - | |||||||||||||||||||||||||||
| Fair value of warrants issued as compensation | - | - | ||||||||||||||||||||||||||
| Stock based compensation | - | |||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance as of March 31, 2021 | - | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
| Warrants exercised | - | - | - | |||||||||||||||||||||||||
| Shares issued for services | - | - | - | |||||||||||||||||||||||||
| Stock based compensation | - | - | - | - | - | |||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance as of June 30, 2021 | - | $ | - | | $ | $ | | $ | ( | ) | $ | |||||||||||||||||
| Preferred Stock | Common Stock | Additional Paid-in | Accumulated | Accumulated Other Comprehensive | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares* | Amount* | Capital* | Deficit | Income | Deficit | |||||||||||||||||||||||||
| Balance as of December 31, 2019 | - | $ | $ | $ | $ | ( | ) | $ | - | $ | ( | ) | ||||||||||||||||||||
| Settlement of liabilities | - | - | ||||||||||||||||||||||||||||||
| Conversion of debt to equity | - | - | ||||||||||||||||||||||||||||||
| Shares issued for services | - | - | ||||||||||||||||||||||||||||||
| Share subscriptions | - | - | ||||||||||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||||||
| Fair value of Restricted Stock Awards | - | - | - | |||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | - | ( | ) | |||||||||||||||||||||||||
| Balance as of March 31, 2020 | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Conversion of debt to equity | - | - | - | |||||||||||||||||||||||||||||
| Shares issued for services | - | |||||||||||||||||||||||||||||||
| Fair value of Restricted Stock Awards | - | - | ||||||||||||||||||||||||||||||
| Net income | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance as of June 30, 2020 | $ | | $ | $ | | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||
See notes to the unaudited condensed financial statements.
F-4
INNOVATIVE PAYMENT SOLUTIONS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Six months ended | Six months ended | |||||||
| June 30, | June 30, | |||||||
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Derivative liability movements | ( | ) | ( | ) | ||||
| Depreciation | ||||||||
| Amortization of debt discount | ||||||||
| Investment impairment charge | ||||||||
| Loss on conversion of debt to equity | ||||||||
| Loss on settlement of liabilities | ||||||||
| Deposit forfeited | ||||||||
| Shares issued for services | ||||||||
| Stock based compensation | ||||||||
| Amortization of right of use asset | ||||||||
| Changes in Assets and Liabilities | ||||||||
| Other current assets | ( | ) | ||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Interest accruals | ||||||||
| CASH USED IN OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Investment in Frictionless Financial Technologies Inc. | ( | ) | ||||||
| Deposits paid | ( | ) | ||||||
| Plant and equipment purchased | ( | ) | ( | ) | ||||
| NET CASH USED IN INVESTING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from share issuances | ||||||||
| Share issue expenses | ( | ) | ||||||
| Proceeds from warrants exercised | ||||||||
| Repayment of loans payable | ( | ) | ( | ) | ||||
| Repayment of convertible notes | ( | ) | ( | ) | ||||
| Proceeds from short term notes and convertible notes | ||||||||
| Proceeds from federal relief funds | ||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
| NET INCREASE (DECREASE) IN CASH | ( | ) | ||||||
| CASH AT BEGINNING OF PERIOD | ||||||||
| CASH AT END OF PERIOD | $ | $ | ||||||
| CASH PAID FOR INTEREST AND TAXES: | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
| NON CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| De-recognition of right of use lease on early termination | $ | ( | ) | $ | ||||
| Recognition of right of use lease | $ | $ | ||||||
| Conversion of convertible debt to equity | $ | $ | ||||||
| Settlement of liabilities with equity | $ | $ | ||||||
| Debt discount on convertible debt | $ | $ | ||||||
See notes to the unaudited condensed financial statements.
F-5
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
| 1 | ORGANIZATION AND DESCRIPTION OF BUSINESS |
| a) | Organization |
On May 12, 2016, Innovative Payment Solutions, Inc. (formerly known as QPAGOS and Asiya Pearls, Inc.), a Nevada corporation (“IPSI” or the “Company”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Qpagos Corporation, a Delaware corporation (“Qpagos Corporation”), and Qpagos Merge, Inc., a Delaware corporation and wholly owned subsidiary of IPSI (“Merger Sub”). Pursuant to the Merger Agreement, on May 12, 2016, the merger was consummated, and Qpagos Corporation and Merger Sub merged (the “Merger”), with Qpagos Corporation continuing as the surviving corporation of the Merger.
Pursuant to the Merger Agreement, upon consummation of the Merger, each share of Qpagos Corporation’s capital stock issued and outstanding immediately prior to the Merger was converted into the right to receive two shares of IPSI common stock, par value $0.0001 per share (the “Common Stock”). Additionally, pursuant to the Merger Agreement, upon consummation of the Merger, IPSI assumed all of Qpagos Corporation’s warrants issued and outstanding immediately prior to the Merger, which were exercisable for approximately 621,920 shares of Common Stock, respectively, as of the date of the Merger. Prior to and as a condition to the closing of the Merger, the then-current IPSI stockholder of 500,000 shares of Common Stock agreed to return to IPSI 497,500 shares of Common Stock held by such holder and the then-current IPSI stockholder retained an aggregate of 2,500 shares of Common Stock and the other stockholders of IPSI retained 500,000 shares of Common Stock. Therefore, immediately following the Merger, Qpagos Corporation’s former stockholders held 4,992,900 shares of IPSI common stock which represented approximately 91% of the outstanding Common Stock.
The Merger was treated as a reverse acquisition of IPSI, a public shell company, for financial accounting and reporting purposes. As such, Qpagos Corporation was treated as the acquirer for accounting and financial reporting purposes while IPSI was treated as the acquired entity for accounting and financial reporting purposes.
Qpagos Corporation (“Qpagos”) was incorporated on May 1, 2015 under the laws of the state of Delaware to effectuate a reverse merger transaction with Qpagos, S.A.P.I. de C.V. (“Qpagos Mexico”) and Redpag Electrónicos S.A.P.I. de C.V. (“Redpag”). Each of the entities were incorporated in November 2013 in Mexico.
Qpagos Mexico was formed to process payment transactions for service providers it contracts with, and Redpag was formed to deploy and operate kiosks as a distributor.
On May 27, 2016 Asiya changed its name to QPAGOS.
On June 1, 2016, the board of directors of QPAGOS (the “Board”) changed the Company’s fiscal year end from October 31 to December 31.
On November 1, 2019, the Company changed its name from QPAGOS to Innovative Payment Solutions, Inc.
Also
on
F-6
INNOVATIVE
PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
| 1 | ORGANIZATION AND DESCRIPTION OF BUSINESS (continued) |
| b) | Description of the business |
Subsequent to the merger of Qpagos Corporation into IPSI and until the divestiture of Qpagos Corporation, Qpagos Mexico and Redpag, the Company’s focus was on the operations of Qpagos Corporation in Mexico. The Company’s current focus is on providing physical and virtual payment services to the United States market, leveraging the knowledge it obtained from the operations of Qpagos Corporation.
| c) | COVID-19 Outbreak |
In March 2020, the outbreak of COVID-19 (also known as the coronavirus) caused by a novel strain of the coronavirus was recognized as a pandemic by the World Health Organization, and the outbreak has become increasingly widespread in the United States, including in each of the areas in which the Company operates. The Company has continued operating and is in the process of developing a payment platform for installation in its kiosks which it expects to deploy in the Southern Californian market in the medium term.
The Company provides an integrated network of kiosks, terminals and payment channels that enable consumers to deposit cash, convert it into a digital form and remit the funds to any merchant in its network quickly and securely. The Company has plans to roll out 50 kiosks in Southern California to provide digital payments for the unbanked and underbanked using self-service kiosks and an E wallet ecosystem. The kiosks are currently located in the Company’s warehouses in Southern California awaiting the installation of a suitable payment platform which is currently under development. As a result, installation of the Company’s network of kiosks, terminals and payment channels in Southern California continues to be delayed, which has had an adverse impact on the Company’s business and financial condition and has hampered its ability to generate revenue.
The Company continues to monitor the continuous impact of COVID-19 closely. The extent to which COVID-19 will continue to impact the Company’s operations, ability to obtain financing or future financial results is uncertain.
F-7
INNOVATIVE
PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
| 2 | ACCOUNTING POLICIES AND ESTIMATES |
| a) | Basis of Presentation |
The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, these unaudited condensed financial statements do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments (consisting only of normal recurring adjustments), which the Company considers necessary, for a fair presentation of those financial statements. The results of operations and cash flows for the three and six months ended June 30, 2021 may not necessarily be indicative of results that may be expected for any succeeding quarter or for the entire fiscal year. The information contained in this Quarterly Report on Form 10-Q (“Report”) should be read in conjunction with the audited financial statements of IPSI for the year ended December 31, 2020, included in the Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2021.
All amounts referred to in the notes to the unaudited condensed financial statements are in United States Dollars ($) unless stated otherwise.
| b) | Use of Estimates |
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions, which are evaluated on an ongoing basis, that affect the amounts reported in the financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the amounts of revenues and expenses that are not readily apparent from other sources. Actual results could differ from those estimates and judgments. In particular, significant estimates and judgments include those related to, the estimated useful lives for plant and equipment, the fair value of long-lived investments, the fair value of warrants and stock options granted for services or compensation, estimates of the probability and potential magnitude of contingent liabilities, derivative liabilities, the valuation allowance for deferred tax assets due to continuing operating losses and the allowance for doubtful accounts.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from our estimates.
| c) | 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 financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.
F-8
INNOVATIVE
PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
| 2 | ACCOUNTING POLICIES AND ESTIMATES (continued) |
| d) | Fair Value of Financial Instruments |
The Company adopted the guidance of Accounting Standards Codification (“ASC”) 820 for fair value measurements which clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level 2 - Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.
Level 3 - Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.
The carrying amounts reported in the balance sheets for the investment in Vivi Holdings Inc., was evaluated at fair value using Level 3 Inputs based on the Company’s estimate of the market value of the entities disposed to Vivi Holdings, Inc. Vivi Holdings Inc., does not have sufficient information available to assess the current market price of its equity.
On
June 22, 2021. the Company made a strategic investment of $
The carrying amounts reported in the balance sheets for cash, accounts receivable, other current assets, other assets, accounts payable, accrued liabilities, and notes payable, approximate fair value due to the relatively short period to maturity for these instruments. The Company has identified the short-term convertible notes and certain warrants attached to certain of the notes that are required to be presented on the balance sheets at fair value in accordance with the accounting guidance.
ASC 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company evaluates the fair value of variably priced derivative liabilities on a quarterly basis and report any movements thereon in earnings.
| e) | Risks and Uncertainties |
The Company’s operations will be subject to significant risks and uncertainties including financial, operational, regulatory, and other risks, including the potential risk of business failure. The global Covid-19 breakout has caused an economic crisis which may result in a general tightening in the credit markets, lower levels of liquidity, increases in the rates of default and bankruptcy, and extreme volatility in credit, equity and fixed income markets. These conditions may not only limit the Company’s access to capital, but also make it difficult for its customers, vendors and the Company to accurately forecast and plan future business activities. In addition, businesses have been suspended due to quarantines intended to contain this outbreak and many people have been forced to work from home in those areas. As a result, installation of the Company’s network of kiosks, terminals and payment channels in Southern California has been delayed, which has had an adverse impact on its business and financial condition and has hampered the Company’s ability to generate revenue and access usual sources of liquidity on reasonable terms.
The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, and rates and methods of taxation, among other things.
F-9
INNOVATIVE
PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
| 2 | ACCOUNTING POLICIES AND ESTIMATES (continued) |
| f) | Recent accounting pronouncements |
The FASB issued several additional updates during the period, none of these standards are either applicable to the Company or require adoption at a future date and none are expected to have a material impact on the financial statements upon adoption.
| g) | Reporting by Segment |
No
segmental information is required as the Company has not generated any revenue for the six months ended June 30, 2021 and 2020 and only
has
| h) | Cash and Cash Equivalents |
The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. At June 30, 2021 and December 31, 2020, respectively, the Company had no cash equivalents.
The
Company minimizes credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution
in the United States. The balance at times may exceed federally insured limits. At June 30, 2021, the balance exceeded the federally
insured limit by $
| i) | Accounts Receivable and Allowance for Doubtful Accounts |
Accounts receivable are reported at realizable value, net of allowances for doubtful accounts, which is estimated and recorded in the period the related revenue is recorded. The Company has a standardized approach to estimate and review the collectability of its receivables based on a number of factors, including the period they have been outstanding. Historical collection and payer reimbursement experience is an integral part of the estimation process related to allowances for doubtful accounts. In addition, the Company regularly assesses the state of its billing operations in order to identify issues, which may impact the collectability of these receivables or reserve estimates. Revisions to the allowance for doubtful accounts estimates are recorded as an adjustment to bad debt expense. Receivables deemed uncollectible are charged against the allowance for doubtful accounts at the time such receivables are written-off. Recoveries of receivables previously written-off are recorded as credits to the allowance for doubtful accounts. There were no recoveries during the period ended June 30, 2021 and December 31, 2020.
| j) | 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 $
F-10
INNOVATIVE
PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
| 2 | ACCOUNTING POLICIES AND ESTIMATES (continued) |
| k) | Plant and Equipment |
Plant
and equipment is stated at cost, less accumulated depreciation. Plant and equipment with costs greater than $
| Description | Estimated Useful Life | |
| Kiosks | ||
| Furniture and fixtures | ||
| Computer 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.
| l) | 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
| m) | 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 no revenues during the three and six months ended June 30, 2021 and 2020.
F-11
INNOVATIVE
PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
| 2 | ACCOUNTING POLICIES AND ESTIMATES (continued) |
| n) | Share-Based Payment Arrangements |
Generally, all forms of share-based payments, including stock option grants, restricted stock grants and stock appreciation rights are measured at their fair value on the awards’ grant date, based on the estimated number of awards that are ultimately expected to vest. Share-based compensation awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable. The expense resulting from share-based payments is recorded in operating expenses in the statement of operations.
Where equity transactions with arms-length third parties, who had applied their own assumptions and estimates in determining the market value of our equity, had taken place prior to and within a reasonable time frame of any share-based payments, the value of those share transactions have been used as the fair value for any share-based equity payments.
Where equity transactions with arms-length third parties, included both shares and warrants, the value of the warrants have been eliminated from the unit price of the securities using a Black-Scholes valuation model to determine the value of the warrants. The assumptions used in the Black Scholes valuation model includes market related interest rates for risk-free government issued treasury securities with similar maturities; the expected volatility of the Company’s common stock based on companies operating in similar industries and markets; the estimated stock price of the Company; the expected dividend yield of the Company and; the expected life of the warrants being valued.
| o) | Derivative Liabilities |
ASC 815 generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re- measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument subject to the requirements of ASC 815. ASC 815 also provides an exception to this rule when the host instrument is deemed to be conventional, as described.
| p) | 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 June 30, 2021 and December 31, 2020, there have been no interest or penalties incurred on income taxes.
| q) | 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. For the Company, there is no comprehensive income for the periods presented.
F-12
INNOVATIVE
PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
| 3 | LIQUIDITY MATTERS |
The
Company has incurred net losses since its inception and anticipates net losses and negative operating cash flows for the near future.
For the six months ended June 30, 2021, the Company had a net loss of $
Management has executed the following to address the Company’s liquidity during the six months ended June 30, 2021:
| ● | The
Company received net proceeds of $ |
| ● | Between
February 18, 2021 and June 23, 2021 warrants for |
| ● | On
March 17, 2021, |
The funding the Company received will be used primarily for development of technology, the digital payment platform and marketing, as well as for working capital and general corporate purposes.
If the Company is required to raise additional funds by issuing equity securities, its stockholders would experience dilution. Additional debt financing, if available, may involve covenants restricting its operations or its ability to incur additional debt. Any additional debt financing or additional equity that the Company raises may contain terms that are not favorable to it or its stockholders and require significant debt service payments, which diverts resources from other activities.
Based on this current business plan, the Company believes its existing cash is sufficient to conduct planned operations for one year from the issuance of the June 30, 2021 financial statements.
F-13
INNOVATIVE
PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
| 4 | INVESTMENT |
Investment in Frictionless Financial Technologies Inc.
On June 22, 2021, the Company
entered into a Stock Purchase Agreement (the “SPA”) with Frictionless Financial Technologies Inc.
(“Frictionless”), to purchase
The company has undertaker to issue
Frictionless a non-restricted, non-dilutable
In the event that Frictionless is unable
to deliver the financial payment software on or before June 15, 2022, Frictionless shall immediately refund the $
The Company may appoint one member to the Board of Frictionless, as long as the Company is the holder of the common stock acquired in Frictionless.
The Company has an irrevocable right
to acquire up to an additional
The shares in Frictionless are unlisted as of June 30, 2021.
Investment in Vivi Holdings, Inc.
Effective December 31, 2019, the Company sold 100% of the outstanding common stock of its subsidiary, Qpagos Corp, together with its 99.9% ownership interest of Qpagos Corporations’ two Mexican entities: QPagos S.A.P.I. de C.V. and Redpag Electrónicos S.A.P.I. de C.V, to Vivi.
As
consideration for the disposal Vivi issued an aggregate of
Due to the lack of available information, the Vivi Shares were valued by a modified market method, whereby the value of the assets disposed of were determined by management using the enterprise value of the entire Company less the liabilities and assets retained by the Company.
As
of June 30, 2021 and June 30, 2020, the Company impaired the carrying value of the investment in Vivi Holdings, Inc by $
The shares in Vivi Holdings, Inc., are unlisted as of June 30, 2021.
| June 30, 2021 | December 31, 2020 | |||||||
| Investment in Frictionless Technologies, Inc. | $ | $ | ||||||
| Investment in Vivi Holdings, Inc. | $ | |||||||
F-14
INNOVATIVE
PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
| 5 | LEASES |
The
Company entered into a real property lease for office and warehouse space located at 19355 Business Center Drive in Northridge California,
Los Angeles County.
The
initial value of the right-of-use asset was $
Effective
June 1, 2021, the Company entered into a Mutual Termination of Lease Agreement with the landlord. The security deposit of $
On
March 22, 2021, the Company entered into a real property lease for an office located at 56B 5th Street, Lot 1 Carmel By
The Sea, California.
Discount Rate
To determine the present value of minimum future lease payments for operating leases at February 15, 2020, the Company was required to estimate a rate of interest that it would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment (the “incremental borrowing rate” or “IBR”).
The
Company determined the appropriate IBR by identifying a reference rate and making adjustments that take into consideration financing
options and certain lease-specific circumstances. For the reference rate,
Right of use assets
Right of use assets are included in the unaudited condensed Balance Sheet are as follows:
June 30, 2021 | December 31, 2020 | |||||||
| Non-current assets | ||||||||
| Right of use assets, operating leases, net of amortization | $ | $ | ||||||
Total Lease Cost
Individual components of the total lease cost incurred by the Company is as follows:
Six Months Ended 2021 | Six months ended June 30, 2020 | |||||||
| Operating lease expense | $ | $ | ||||||
F-15
INNOVATIVE
PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
| 5 | LEASES (continued) |
Other lease information:
| Six months ended June 30, 2021 | ||||
| Cash paid for amounts included in the measurement of lease liabilities | ||||
| Operating cash flows from operating leases | $ | ( | ) | |
| Remaining lease term – operating lease | ||||
| Discount rate – operating lease | % | |||
| 6 | FEDERAL RELIEF LOANS |
Payroll Protection Program loan
On
May 7, 2020, the Company received a Payroll Protection Program (“PPP”) loan through its bankers, Wells Fargo Bank, amounting
to $
The company has not made any payments on this loan and is in the process of applying for forgiveness of the loan balance.
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 $
| 7 | LOANS PAYABLE |
Loans payable consisted of the following:
| Description | Interest Rate |
Maturity | June 30, 2021 |
December 31, 2020 |
|||||||||||
| Stanislav Minaychenko | % | $ | $ | ||||||||||||
| Maxim Pukhoskiy | % | ||||||||||||||
| Dieter Busenhart | % | ||||||||||||||
| Total loans payable | $ | $ | |||||||||||||
Interest
expense totaled $
F-16
INNOVATIVE
PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
| 7 | LOANS PAYABLE (continued) |
Stanislav Minaychenko
On December 17, 2019, in terms of a
settlement agreement entered into between the Company, Qpagos Corporation and Stanislav Minaychenko, the Company issued a promissory note
to Mr. Minaychenko in settlement of $
During the six months ended June 30, 2021, the Company repaid the aggregate
principal sum of $
Maxim Pukhoskiy
On December 17, 2019, in terms of a
settlement agreement entered into between the Company, Qpagos Corporation and Maxim Pukhoskiy, the Company issued a promissory note to
Mr. Pukhoskiy in settlement of $
During
the six months ended June 30, 2021, the Company repaid the aggregate principal sum of $
Dieter Busenhart
On
July 17, 2020, the Company issued a promissory note to Dieter Busenhart in the aggregate principal amount of $
During
the six months ended June 30, 2021, the Company repaid the aggregate principal sum of $
The
balance remaining on the promissory note consists of accrued interest of $
| 8 | CONVERTIBLE NOTES PAYABLE |
Convertible notes payable consists of the following:
| Description | Interest Rate |
Maturity date | Principal | Accrued Interest |
Unamortized debt discount |
June 30, Amount, net |
December 31, Amount, |
|||||||||||||||||||
| Power Up Lending Group | % | $ | $ | $ | $ | $ | ||||||||||||||||||||
| Cavalry Fund I LP | % | |||||||||||||||||||||||||
| % | ||||||||||||||||||||||||||
| % | ||||||||||||||||||||||||||
| % | ||||||||||||||||||||||||||
| % | ||||||||||||||||||||||||||
| % | ( |
) | ||||||||||||||||||||||||
| Mercer Street Global Opportunity Fund, LLC | % | |||||||||||||||||||||||||
| % | ||||||||||||||||||||||||||
| % | ( |
) | ||||||||||||||||||||||||
| Iroquois Master Fund Ltd. | % | |||||||||||||||||||||||||
| % | ||||||||||||||||||||||||||
| Mark Geist | % | |||||||||||||||||||||||||
| Bellridge Capital LP. | % | |||||||||||||||||||||||||
| % | ||||||||||||||||||||||||||
| % | ( |
) | ||||||||||||||||||||||||
| Total convertible notes payable | $ | $ | $ | ( |
) | $ | $ | |||||||||||||||||||
F-17
INNOVATIVE
PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
| 8 | CONVERTIBLE NOTES PAYABLE (continued) |
Interest
expense totaled $
The convertible notes have variable conversion prices based on a discount to market price of trading activity over a specified period of time. The variable conversion features were valued using a Black Scholes valuation model. The difference between the fair market value of the common stock and the calculated conversion price on the issuance date was recorded as a debt discount with a corresponding credit to derivative financial liability.
The
total value of the beneficial conversion feature recorded as a debt discount during the six months ended June 30, 2021 and 2020 was $
Power Up Lending Group Ltd
| ● | On July 13, 2020, the Company issued a Convertible Promissory Note in the aggregate principal amount of $
On January 11, 2021, the Company repaid the principal sum of $ |
Cavalry Fund LLP
| ● | On July 1, 2020, the Company closed a transaction with Cavalry Fund I LP (“Cavalry”), pursuant to which the Company received net proceeds of $
Between January 4, 2021 and February 3, 2021, the Company received conversion notices from Cavalry, converting the aggregate principal amount of $ |
F-18
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
| 8 | CONVERTIBLE NOTES PAYABLE (continued) |
Cavalry Fund LLP (continued)
| ● | Cavalry had agreed to purchase an additional $
Between February 8, 2021 and February 12, 2021, the Company received conversion notices from Cavalry, converting the aggregate principal amount of $ |
| ● | On September 24, 2020, the Company closed a transaction with Cavalry pursuant to which the Company received net proceeds of $
On February 18, 2021, the Company received a conversion notice from Cavalry, converting the aggregate principal amount of $
|
| ● | On October 20, 2020, Cavalry entered into an Assignment and Transfer agreement whereby the Senior Secured Convertible Note with a face value of $
On February 22, 2021, the Company received a conversion notice from Cavalry, converting the aggregate principal amount of $ |
F-19
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
| 8 | CONVERTIBLE NOTES PAYABLE (continued) |
Cavalry Fund LLP (continued)
| ● | On February 3, 2021, the Company closed a transaction with Cavalry, pursuant to which the Company received net proceeds of $
On February 17, 2021, the Company repaid the aggregate principal sum of $ |
| ● | On February 16, 2021, the Company closed a transaction with Cavalry, pursuant to which the Company received net proceeds of $
The balance of the Fifth Cavalry Note plus accrued interest at June 30, 2021 was $ |
Mercer Street Global Opportunity Fund, LLC
| ● | On August 3, 2020, the Company closed a transaction with Mercer Street Global Opportunity Fund, LLC, (“Mercer”), pursuant to which the Company received net proceeds of $
Between January 4, 2021 and February 9, 2021, the Company received conversion notices from Mercer, converting the aggregate principal amount of $ |
| ● | On February 3, 2021, the Company closed a transaction with Mercer, pursuant to which the Company received net proceeds of $
On February 16, 2021 and February 22, 2021, the Company repaid the aggregate principal sum of $ |
F-20
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
| 8 | CONVERTIBLE NOTES PAYABLE (continued) |
Mercer Street Global Opportunity Fund, LLC (continued)
| ● | On February 16, 2021, the Company closed a transaction with Mercer, pursuant to which the Company received net proceeds of $
The balance of the Third Mercer Note plus accrued interest at June 30, 2021 was $ |
Iroquois Master Fund Ltd.
| ● | On September 16, 2020, the Company closed a transaction with Iroquois Master Fund Ltd., pursuant to which the Company received net proceeds of $
Between January 5, 2021 and February 5, 2021, |
| ● | On February 3, 2021, the Company closed a transaction with Iroquois Master Fund Ltd., pursuant to which the Company received net proceeds of $
On February 19, 2021, the Company received a conversion notice from Iroquois Master Fund Ltd., converting the aggregate principal amount of $ |
F-21
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
| 8 | CONVERTIBLE NOTES PAYABLE (continued) |
Mark Geist
On October 20, 2020, the Company closed
a transaction with Mark Geist., pursuant to which the Company received net proceeds of $
The note could be prepaid at any time for the first 90 days at face value plus accrued interest. From day 91 through day 180, the note could be prepaid in an amount equal to 115% of the principal amount plus accrued interest. From day 181 through day 365, it could be prepaid in an amount equal to 125% of the principal amount plus accrued interest. The note contained certain covenants, such as restrictions on: (i) distributions on capital stock, (ii) stock repurchases, and (iii) sales and the transfer of assets.
On January 15, 2021, the Company received
a conversion notice from Mark Geist, converting the aggregate principal amount of $
Bellridge Capital LP.
| ● | On November 25, 2020, the Company closed a transaction with Bellridge Capital LP., pursuant to which the Company received net proceeds of $ |
The Initial Bellridge Note could be
prepaid at any time for the first 90 days at face value plus accrued interest. From day 91 through day 180, the note could be prepaid
in an amount equal to
On February 6, 2021, the Company received
a conversion notice from Bellridge Capital, LP. converting the aggregate principal amount of $
| ● | On February 16, 2021, the Company closed a transaction with Bellridge Capital LP., pursuant to which the Company received net proceeds of $ |
On February 16, 2021, the Company
received a conversion notice from Bellridge Capital, LP. converting the aggregate principal amount of $
F-22
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
| 8 | CONVERTIBLE NOTES PAYABLE (continued) |
Bellridge Capital LP. (continued)
| ● | On February 16, 2021, the Company closed a transaction with Bellridge Capital LP., pursuant to which the Company received net proceeds of $
The balance of the Third Bellridge Note plus accrued interest at June 30, 2021 was $ |
| 9 | DERIVATIVE LIABILITY |
Certain of the short-term convertible notes disclosed in note 8 above and certain warrants disclosed in note 10 below, have variable priced conversion rights with no fixed floor price and will re-price dependent on the share price performance over varying periods of time and certain notes and warrants have fundamental transaction clauses which might result in cash settlement, due to these factors, all convertible notes and any warrants attached thereto are valued and give rise to a derivative financial liability, which was initially valued at inception of the convertible notes using a Black-Scholes valuation model.
During the six months ended June 30,
2021, an additional $
The value of this derivative financial
liability was re-assessed at June 30, 2021, and $
The following assumptions were used in the Black-Scholes valuation model:
| Six months Ended June 30, 2021 | Year Ended December 31, 2020 | |||||||
| Conversion price | $ | $ | ||||||
| Risk free interest rate | % | % | ||||||
| Expected life of derivative liability | ||||||||
| Expected volatility of underlying stock | % | % | ||||||
| Expected dividend rate | % | % | ||||||
The movement in derivative liability is as follows:
| June 30, 2021 | December 31, 2020 | |||||||
| Opening balance | $ | $ | ||||||
| Derivative financial liability arising from convertible note | ||||||||
| Fair value adjustment to derivative liability | ( | ) | ( | ) | ||||
| $ | $ | |||||||
F-23
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
| 10 | STOCKHOLDERS’ EQUITY |
| a. | Common Stock |
The Company has authorized
The following shares of common stock were issued by the Company during the six months ended June 30, 2021:
| ● | In terms of debt conversion
notices received between January 5, 2021 and February 23, 2021, the Company issued an aggregate of |
| ● | In terms of warrant exercise
notices received between February 18, 2021 and June 23 2021, the Company issued |
| ● | On March 17, 2021, the Company,
entered into Securities Purchase Agreements with several institutional investors, pursuant to which the Company agreed to sell to the
Investors in a private placement |
Pursuant to an engagement letter dated
as of March 6, 2021, by and between the Company and H.C. Wainwright & Co., LLC (“Wainwright”), the Company engaged Wainwright
to act as the Company’s exclusive placement agent in connection with the private placement. Pursuant to the engagement agreement,
the Company agreed to pay Wainwright a cash fee of
| ● | On April 5, 2021, the Board
of directors approved advisory board agreements with |
| b. | Restricted stock awards |
On December 15, 2020, in terms of an
employment agreement entered into with an employee, the Company granted
The restricted stock granted and exercisable at June 30, 2021 is as follows:
| Restricted Stock Granted | Restricted Stock Vested | |||||||||||||||||
| Grant date Price | Number Granted | Weighted Average Fair Value per Share | Number Vested | Weighted Average Fair Value per Share | ||||||||||||||
| $ | $ | $ | ||||||||||||||||
| $ | ||||||||||||||||||
The Company has recorded an expense
of $
F-24
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
| 10 | STOCKHOLDERS’ EQUITY (continued) |
| c. | Preferred Stock |
The Company has authorized
| d. | Warrants |
In terms of the Senior Secured convertible notes entered into with various noteholders as described in note 8 above, the Company issued five year warrants exercisable for a total of 28,709,182 shares of common stock at initial exercise prices ranging from $0.05 to $0.24 per share. The warrants have a cashless exercise option and an exercise limitation based on a certain beneficial ownership percentage of 4.99% which may be adjusted to 9.99%. The exercise price of the warrant is adjustable under the following conditions; i) subsequent equity sales are at a price below the exercise price of the warrant; ii) the Company issues options with an exercise price lower than the exercise price of the warrants; iii) issues convertible securities which are convertible into common stock at a price lower than the warrant exercise price; and iv) the option exercise price or rate of conversion for convertible securities results in a lower exercise price than the exercise price of the warrants.
The warrant holders also have the option to acquire subsequent rights offering rights, under certain circumstances and is entitled to pro-rata distributions made by the Company in assets or securities other than common stock.
The warrants include a fundamental transaction clause which will give the warrant holder the right on an as converted basis to the proceeds which common shareholders would be entitled to as a result of a fundamental transaction. Notwithstanding the aforementioned rights, provided the warrants are not registered under an effective registration statement, the holder of the warrant has the right to receive cash equal to the Black-Scholes value of the unexercised portion of the warrant in accordance with the terms of the warrant agreement.
On February 22, 2021, the Board of Directors
of the Company appointed William Corbett, its Chief Executive Officer and Interim Chief Financial Officer, as its Chairman of the Board
and issued him a five-year warrant to purchase
In connection with the Securities Purchase
Agreements with several institutional investors, disclosed in 9(a) above, the Company sold warrants to purchase up to an aggregate of
The Warrants are exercisable for a period
of
Pursuant to an engagement letter dated as of March 6, 2021, by and
between the Company and Wainwright, the Company engaged Wainwright to act as the Company’s exclusive placement agent in connection
with the private placement, discussed above. The Company agreed to issue to Wainwright (or its designees) Placement Agent Warrants to
purchase an aggregate of up to
F-25
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
| 10 | STOCKHOLDERS’ EQUITY (continued) |
| d. | Warrants (continued) |
The fair value of the warrants granted and issued were determined by using a Black Scholes valuation model using the following assumptions:
| Six months ended June 30, 2021 | ||||
| Exercise price | $ | |||
| Risk free interest rate | % | |||
| Expected life | ||||
| Expected volatility of underlying stock | % | |||
| Expected dividend rate | % | |||
A summary of warrant activity during the period January 1, 2020 to June 30, 2021 is as follows:
| Shares Underlying Warrants | Exercise price per share | Weighted average exercise price | ||||||||||
| Outstanding January 1, 2020 | $ | $ | ||||||||||
| Granted | ||||||||||||
| Forfeited/Cancelled | ( | ) | | |||||||||
| Exercised | ||||||||||||
| Outstanding December 31, 2020 | $ | $ | ||||||||||
| Granted | | |||||||||||
| Forfeited/Cancelled | ||||||||||||
| Exercised | ( | ) | ||||||||||
| Outstanding June 30, 2021 | $ | $ | ||||||||||
The warrants outstanding and exercisable at June 30, 2021 are as follows:
| Warrants Outstanding | Warrants Exercisable | |||||||||||||||||||||||||
| Exercise Price* | Number Outstanding | Weighted Average Remaining Contractual life in years | Weighted Average Exercise Price | Number Exercisable | Weighted Average Exercise Price | Weighted Average Remaining Contractual life in years | ||||||||||||||||||||
| $ | ||||||||||||||||||||||||||
The warrants outstanding have an intrinsic
value of $
F-26
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
| 10 | STOCKHOLDERS’ EQUITY (continued) |
| 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 ten years in June 2028.
The Plan is administered by the Board of Directors or a Committee appointed by the Board of Directors who have the authority to administer the Plan and to exercise all the powers and authorities specifically granted to it under the Plan.
The maximum number of securities available under the Plan is 800,000 shares of common stock. The maximum number of shares of common stock awarded to any individual during any fiscal year may not exceed 100,000 shares of common stock.
On February 22, 2021, the Board awarded
each of its directors, James Fuller and Andrey Novikov, options under the Company’s 2018 Stock Incentive Plan to purchase
No options were granted for the year ended December 31, 2020.
A summary of option activity during the period January 1, 2020 to June 30, 2021 is as follows:
| Shares Underlying options | Exercise price per share | Weighted average exercise price | ||||||||||
| Outstanding January 1, 2020 | $ | $ | ||||||||||
| Granted | ||||||||||||
| Forfeited/Cancelled | ||||||||||||
| Exercised | ||||||||||||
| Outstanding December 31, 2020 | ||||||||||||
| Granted | ||||||||||||
| Forfeited/Cancelled | ||||||||||||
| Exercised | ||||||||||||
| Outstanding June 30, 2021 | $ | $ | ||||||||||
The options outstanding and exercisable at June 30, 2021 are as follows:
| Options Outstanding | Options Exercisable | |||||||||||||||||||||||||
| Exercise Price* | Number Outstanding | Weighted Average Remaining Contractual life in years | Weighted Average Exercise Price | Number Exercisable | Weighted Average Exercise Price | Weighted Average Remaining Contractual life in years | ||||||||||||||||||||
| 0.24 | ||||||||||||||||||||||||||
| 0.40 | ||||||||||||||||||||||||||
| $ | $ | |||||||||||||||||||||||||
The options outstanding have an intrinsic
value of $
F-27
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
| 11 | 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 three and six months ended June 30, 2021 and 2020 all warrants, options and convertible debt securities were excluded from the computation of diluted net loss per share.
Dilutive shares which could exist pursuant to the exercise of outstanding stock instruments and which were not included in the calculation because their affect would have been anti-dilutive for the three and six months ended June 30, 2021 and 2020 are as follows:
| Three and six months ended June 30, 2021 (Shares) | Three and six months ended June 30, 2020 (Shares) | |||||||
| Convertible debt | ||||||||
| Stock options | ||||||||
| Warrants to purchase shares of common stock | ||||||||
| 12 | RELATED PARTY TRANSACTIONS |
The following transactions were entered into with related parties:
James Fuller
On February 22, 2021, the Board awarded
James Fuller options under the Company’s 2018 Stock Incentive Plan to purchase
Andrey Novikov
On February 22, 2021, the Board awarded
Andrey Novikov options under the Company’s 2018 Stock Incentive Plan to purchase
William Corbett
On February 22, 2021, the Board of
Directors of the Company appointed William Corbett, its Chief Executive Officer and Interim Chief Financial Officer, as its Chairman of
the Board and issued him a five-year warrant to purchase
F-28
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
| 13 | COMMITMENTS AND CONTINGENCIES |
The Company entered into a real property
lease for office and warehouse space located at 19355 Business Center Drive in Northridge California, Los Angeles County. The lease commenced
on February 15, 2020 and expires on February 28, 2022, monthly rental expense is $
On March 22, 2021, the Company entered into a real property lease for an office located at 56B 5th Street, Lot 1 Carmel By The Sea, California. The lease commenced on April 1, 2021 and is for a twelve month period, terminating on April 1, 2022.
| Amount | ||||
| Undiscounted minimum future lease payments | ||||
| Total instalments due: | ||||
| Remainder of 2021 | $ | |||
| 2022 | ||||
| $ | ||||
| 14 | SUBSEQUENT EVENTS |
The Company has evaluated subsequent events through the date the financial statements were issued, other than disclosed above, we did not identify any other subsequent events that would have required adjustment or disclosure in the financial statements.
F-29
Item 2.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with and is qualified in its entirety by our audited annual financial statements and the related notes thereto, each of which appear on Form 10-K filed with the SEC on March 31, 2021. This discussion contains certain forward-looking statements that involve risks and uncertainties, as described under the heading “Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q. Actual results could differ materially from those projected in the forward-looking statements. The Management Discussion and Analysis of Financial Condition and Results of Operations below is based upon only the financial performance of Innovative Payment Solutions, Inc.
Overview and Financial Condition
We are a provider of next generation digital payment solutions and services to businesses and consumers. Our business model has substantially changed during the course of 2020. We have focused on developing a technology driven digital infrastructure via IPSIPay Platform and IPSIPay applications and have plans to launch various digital payment cryptocurrency products, including, IPSI Pay, IPSI Stable Coin, IPSI Wallet and IPSI Payroll, using blockchain technology. We are developing a flexible ecosystem that will enable businesses and customers to adopt and utilize IPSIPay prepaid card services, integrated payment service solutions in US and Mexico, money transfer to and from US swiftly at minimal cost compared to traditional money transfer service providers, utilizing stable dollar backed coins thus allowing small businesses and consumers to have access to various payment routes previously not available to them. We also intend to use our kiosk payment system and service in US.
We intend to continue to expand our operations in the United States with a focus initially on Southern California. We are also exploring acquisition opportunities that we believe will be accretive to our business.
We offer a simple payment solution for consumers and businesses. We have plans to roll out 50 kiosks in Southern California to provide digital payments for the unbanked and underbanked using self-service kiosks and an E-wallet ecosystem. The kiosks are currently located in our warehouses in Southern California awaiting installation. Due to measures imposed by the local governments in areas affected by the novel coronavirus outbreak (“COVID-19”), businesses have been suspended due to local and state stay-at-home orders intended to contain the COVID-19 outbreak and many people have been forced to work from home in those areas. As a result, installation of our network of kiosks, terminals and payment channels in Southern California has been delayed, which has had an adverse impact on our business and financial condition and has hampered our ability to generate revenue. During this delay, the Company decided to take measures to reengineer its kiosks to provide for additional functionality and features, which reengineering should be complete by the time of installation, assuming no further delays due to the COVID-19 pandemic or otherwise.
Management Discussion and Analysis of financial condition
The discussion and analysis of our financial condition and results of operations is based upon the unaudited condensed financial statements as of June 30, 2021 and 2020, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. On an on-going basis, we review our estimates and assumptions. The estimates are based on our historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results are likely to differ from those estimates under different assumptions or conditions.
1
Results of Operations for the Three Months Ended June 30, 2021 and June 30, 2020
Net revenue
We did not have revenues during the three months ended June 30, 2021 and June 30, 2020.We anticipate that we will recommence generating revenue once we are able to install our kiosks, the timing of which is uncertain due to the development of our payment platform software and the COVID-19 pandemic.
Cost of goods sold
As we did not have revenues during the three months ended June 30, 2021 and June 30, 2020, we anticipate that we will begin to recognize cost of goods sold once we are able to install our kiosks, the timing of which is uncertain due to the development of our payment platform software and the COVID-19 pandemic.
General and administrative expenses
General and administrative expenses were $1,719,770 and $297,764 for the three months ended June 30, 2021 and 2020, respectively, an increase of $1,422,506 or 477.7%. The increase is primarily due to the following: (i) the issuance of restricted stock to four advisory board members with a related expense of $776,000; (ii) an increase in payroll related expenses of $513,895, including a severance provision of $294,000 and an increase in our CEO salary expense of $52,500 and additional headcount employed during the current year; and (iii) the remaining increase of $132,611 consists of several individually immaterial expenses related to the increase in business activity in preparation for the development of our payment platform software.
Depreciation
Depreciation was $4,484 and $4,167 for the three months ended June 30, 2021 and 2020, respectively, an increase of $317 or 7.6%. Depreciation during the current period consists primarily of depreciation on the kiosks received from Qpagos Mexico.
Investment impairment charge
Investment impairment charge was $0 and $509,979 for the three months ended June 30, 2021 and 2020, respectively. The Company raised an impairment charge in the prior year against the investment in Vivi Holdings Inc, as Vivi continues to not meet any of its indicated milestones concerning its proposed IPO and fund raising efforts.
Loss on debt conversion
Loss on debt conversion was $0 and $79,467 for the three months ended June 30, 2021 and 2020, respectively, a decrease of $79,467 or 100.0%. The loss on debt conversion represents a loss realized in the prior year on the conversion of convertible notes into equity at conversion prices ranging from 38% to 40% below current market prices. During the three months ended June 30, 2020, $76,000 of principal and interest was converted into equity.
Interest expense, net
Interest expense was $53,371 and $29,750 for the three months ended June 30, 2021 and 2020, respectively, an increase of $23,621 or 79.4%. The increase is primarily due to the increase in the principal outstanding of convertible debt from $856,664 in the prior year to $2,044,000 in the current year.
Amortization of debt discount
Amortization of debt discount was $509,600 and $213,101 for the three months ended June 30, 2021 and 2020, respectively, an increase of $296,499 or 139.1%. The increase is primarily due to the increase in the debt discount of $2,569,000 associated with the increase in convertible debt over the prior year.
Derivative liability movements
Derivative liability movements were $2,170,946 and $176,490 for the three months ended June 30, 2021 and 2020, respectively, an increase of $1,994,456 or 1130.1%. The derivative liability arose due to the issuance of convertible securities with variable conversion prices and no floor conversion price. The charge during the current period represents the mark-to-market of the derivative liability outstanding as of June 30, 2021.
Net loss
Net loss was $116,279 and $977,738 for the three months ended June 30, 2021 and 2020, respectively, a decrease in loss of $861,459 or 88.1%. While there was an increase in general and administrative expenses and an increase in amortization expense, a decrease resulted from such increases being offset by the derivative liability movement, discussed in detail above.
2
Results of Operations for the Six Months Ended June 30, 2021 and June 30, 2020
Net revenue
We did not have revenues during the six months ended June 30, 2021 and June 30, 2020.We anticipate that we will recommence generating revenue once we are able to install our kiosks, the timing of which is uncertain due to the development of our payment platform software and the COVID-19 pandemic.
Cost of goods sold
As we did not have revenues during the six months ended June 30, 2021 and June 30, 2020, we anticipate that we will begin to recognize cost of goods sold once we are able to install our kiosks, the timing of which is uncertain due to the development of our payment platform software and the COVID-19 pandemic.
General and administrative expenses
General and administrative expenses were $6,709,441 and $952,663 for the six months ended June 30, 2021 and 2020, respectively, an increase of $5,756,778 or 604.3%. The increase is primarily due to the following; (i) the increase in stock based compensation expense of $4,237,193 related to the fair value of warrants exercisable for 20,000,000 shares of common stock granted to our CEO, and Chairman on February 22, 2021, 2,500,000 non-plan restricted shares granted to an employee on December 15, 2020, which began vesting on January 1, 2021, and stock options exercisable for 416,666 shares of common stock granted to our directors on February 22, 2021; (ii) severance expense of $294,000 accrued during the current period for employees who were terminated; (iii) increase in payroll expenses of $320,206 related to the increase in headcount and our CEO’s salary during the current year as activity increases towards launching the payment platform currently being developed; (iv) the issuance of restricted stock to four advisory board members with a related expense of $776,000; and (v) the remaining increase of $133,863 consists of several individually immaterial expenses related to the increase in business activity in preparation for the development of our payment platform software.
Depreciation
Depreciation was $8,651 and $4,167 for the six months ended June 30, 2021 and 2020, respectively, an increase of $4,484 or 107.6%. Depreciation during the current period consists primarily of depreciation on the kiosks received from Qpagos Mexico. The increase in depreciation is primarily due to the kiosks being acquired in the second quarter of 2020 and were only amortized for one quarter, during the current year these kiosks have been amortized for two quarters.
Investment impairment charge
Investment impairment charge was $0 and $1,019,960 for the six months ended June 30, 2021 and 2020, respectively, in the prior year the Company raised an impairment charge against the investment in Vivi Holdings Inc, as Vivi continues to not meet any of its indicated milestones concerning its proposed IPO and fund raising efforts.
Loss on debt conversion
Loss on debt conversion was $5,184,447 and $150,274 for the six months ended June 30, 2021 and 2020, respectively, a decrease of $5,034,173. The loss on debt conversion during the current year represents a loss realized on the conversion of convertible notes, into equity at fixed conversion prices which ranged from $0.035 to $0.05 per share, when the stock price ranged from $0.05 per share to $0.22 per share, resulting in a significant loss. A total of $2,259,221 was converted from convertible debt to equity during the six months ended June 30, 2021.
Loss on settlement of liabilities
Loss on settlement of liabilities was $0 and $50,082 for the six months ended June 30, 2021 and 2020, respectively, a decrease of $50,082 or 100.0%. The loss on settlement of liabilities in the prior year represents the settlement of certain promissory notes during the current period by the issuance of 1,692,764 shares of common stock at a discount to market prices.
Interest expense, net
Interest expense was $120,684 and $84,088 for the six months ended June 30, 2021 and 2020, respectively, an increase of $36,596 or 43.5%. The increase is primarily due to the increase in the principal outstanding of convertible debt from $856,664 in the prior year to $2,044,000 in the current year.
3
Amortization of debt discount
Amortization of debt discount was $2,623,252 and $373,178 for the six months ended June 30, 2021 and 2020, respectively, an increase of $2,250,074 or 602.9%. The increase is primarily due to the accelerated amortization of debt discount related to notes converted to equity during the first quarter of the current year, in addition, the increase is also due to the increase in the debt discount of $2,569,000 associated with the increase in convertible debt over the prior year.
Derivative liability movements
Derivative liability movements were $3,136,090 and $278,611 for the six months ended June 30, 2021 and 2020, respectively. The derivative liability arose due to the issuance of convertible securities with variable conversion prices and no floor conversion price. The charge during the current period represents the mark-to-market of the derivative liability outstanding as of June 30, 2021.
Net loss
Net loss was $11,510,385 and $2,375,801 for the six months ended June 30, 2021 and 2020, respectively, an increase in loss of $9,134,584 or 384.5%. The increase is due to the increase in general and administrative expenses, the loss realized on the conversion of convertible debt and the amortization of debt discount, offset by the movement in derivative liabilities, discussed in detail above.
Liquidity and Capital Resources
To date, our primary sources of cash have been funds raised primarily from the sale of our debt and equity securities.
We incurred an accumulated deficit of $39,139,960 through June 30, 2021 and incurred negative cash flow from operations of $1,393,200 for the six months ended June 30, 2021. The new direction of the Company into the US payment services market will require us to spend, substantial amounts in connection with implementing our business strategy, including our planned product development effort and we will be required to raise additional funding.
To meet our financing needs, we have raised net convertible debt funding of $2,048,000, received proceeds from warrant exercises of $2,780,460 and additional gross proceeds $4,550,000 from a private placement of equity securities, we believe we have sufficient funding to implement our business strategy in the US market.
At June 30, 2021, we had cash of $7,271,669 and working capital of $3,563,140, including a derivative liability of $2,399,326. After eliminating the derivative liability our working capital is $5,962,466. Due to the COVID-19 pandemic our ability to generate revenue has been significantly impacted and it is difficult to determine when we my start to generate revenue from operations.
We utilized cash of $1,393,200 and $273,972 in operations for the six months ended June 30, 2021 and 2020, respectively. Overall cash utilized in operations increased by $1,119,228, primarily due to the increase in corporate overhead as we ready ourselves for our new technology platform.
We invested $500,000 in the common stock of Frictionless Financial Technologies Inc. which has been contracted to develop our payment platform for the Mexican and other markets. This is a strategic investment and we expect a platform to be ready to utilize within the current year.
Cash provided by financing activities for the six months ended June 30, 2021 was primarily comprised of gross proceeds of $4,550,000 from the private placement on March 17, 2021, $3,009,349 from warrants exercised and $2,569,000 from convertible debt issued, we utilized $501,100 for share issue expenses and repaid convertible debt of $521,000 during the period.
At June 30, 2021, we had outstanding notes in the principal amount of $2,044,000. The notes were issued on February 16, 2021 and may be prepaid at any time for the first 90 days in an amount equal to 115% of the principal amount plus accrued interest. From day 91 through day 180, the Notes may be prepaid in an amount equal to 120% of the principal amount plus accrued interest. From day 181 through day 365, it may be prepaid in an amount equal to 125% of the principal amount plus accrued interest. The notes contain certain covenants, such as restrictions on: (i) distributions on capital stock, (ii) stock repurchases, and (iii) sales and the transfer of assets. The notes mature in 12 months, bears interest at a rate of 10% per annum, and are initially convertible into our common stock at a conversion price of $0.23 per share (as adjusted for stock splits, stock combinations, dilutive issuances and similar events). Upon the occurrence of an event of default under the notes, the respective holder has the right to be prepaid at 140% of the outstanding principal balance and accrued interest, and interest accrues at 18% per annum (or the maximum amount permitted by law). In addition, if an event of default under a note has occurred, regardless of whether it has been cured or remains ongoing, such Note will thereafter be convertible at 65% of the lowest closing price of our common stock for the last 10 consecutive trading days.
4
Other than amounts owed under convertible notes, we have a commitment for a property lease which expires in April 2022.
The amount of future minimum lease payments under operating leases are as follows:
| Amount | ||||
| Undiscounted minimum future lease payments | ||||
| Total instalments due: | ||||
| Remainder of 2021 | $ | 28,800 | ||
| 2022 | 19,200 | |||
| $ | 48,000 | |||
Capital Expenditures
Our capital expenditure will depend on our ability to roll out kiosks to serve the US market, we anticipate we could spend up to $1,000,000 in acquiring hardware in the next twelve month period.
Off Balance Sheet Arrangements
None
Item 3. Quantitative and Qualitative Disclosures About Market Risks
None.
Item 4. Controls and Procedures
(a) Evaluation of disclosure controls and procedures
Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that due to insufficient controls over review and accounting for certain complex transactions, that the Company’s disclosure controls and procedures as of June 30, 2021 were not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, was recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, to allow timely decisions regarding required disclosure. The Company intends to retain additional individuals to remedy the ineffective controls. We have begun to take actions that we believe will substantially remediate the material weaknesses identified. In response to the identification of our material weaknesses, we are in the process of expanding our finance and accounting staff. However, we cannot assure you that our internal control over financial reporting, as modified, will enable us to identify or avoid material weaknesses in the future.
(b) Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during our fiscal quarter ended June 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
5
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business.
We are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition or cash flows.
Item 1A. Risk Factors
Not applicable.
6
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Except as described below or as disclosed in Current Reports on Form 10-Q, we did not have any unregistered sales of equity securities during the six months ended June 30, 2021.
As described above, we issued notes in the aggregate principal amount of $2,936,000 in February 2021 convertible into 28,709,182 shares of our common stock and warrants to purchase an aggregate of 28,709,182 shares of common stock.
The Company issued an aggregate of 61,793,616 shares of common stock upon the conversion of $2,259,221 of convertible debt and interest thereon between January 5, 2021 and February 23, 2021.
The Company issued 60,186,982 shares of common stock upon the exercise of warrants between February 18, 2021 and June 23, 2021.
All sales to persons in each of the transactions set forth above were issued relying on the exemption provided by Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder for the offer and sale of securities not involving a public offering, except for debt conversions which were effected relying on Section 3(a)(9) of the Securities Act as the common stock was exchanged by us with our existing security holders exclusively and no commission or other remuneration was paid or given directly or indirectly for soliciting such exchange. The recipients of securities in each of these transactions relying on Section 4(a)(2) of the Securities Act and/or Rule 506 promulgated thereunder acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions was an accredited investor within the meaning of Rule 501 of Regulation D under the Securities Act and had adequate access, through employment, business or other relationships, to information about us.
Item 3. Defaults upon Senior Securities
None
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.
7
Item 6. Exhibits
EXHIBIT INDEX
| Exhibit No. | Description | |
| 31.1* | Certification of William Corbett, Chief Executive Officer, pursuant to Rule 13a-14(a) or Rule 15d-14(a) | |
| 31.2* | Certification of Richard Rosenblum, Chief Financial Officer, pursuant to Rule 13a-14(a) or Rule15d-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 Officer pursuant to Section 1350 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS | Inline XBRL Instance Document.* | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document.* | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document.* | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document.* | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document.* | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document.* | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).* |
| * | Filed herewith |
8
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Innovative Payment Solutions, Inc. | ||
| Date: August 12, 2021 | By: | /s/ William Corbett |
| William Corbett | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| By: | /s/ Richard Rosenblum | |
| Richard Rosenblum | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) |
9
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 Quarterly Report on Form 10-Q 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: August 12, 2021 | /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 Quarterly Report on Form 10-Q 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: August 12, 2021 | /s/ Richard Rosenblum |
| Richard Rosenblum | |
| Chief Financial Officer | |
| (Principal Financial 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 Quarterly Report of Innovative Payment Solutions, Inc. (the “Registrant”) on Form 10-Q for the period ending June 30, 2021, 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: August 12, 2021 | 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 Quarterly Report of Innovative Payment Solutions, Inc. (the “Registrant”) on Form 10-Q for the period ending June 30, 2021, 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: August 12, 2021 | By: | /s/ Richard Rosenblum |
| Richard Rosenblum | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) |
CONDENSED BALANCE SHEETS (Parentheticals) - USD ($) |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Convertible debt, net of unamortized discount (in Dollars) | $ 1,293,600 | $ 980,852 |
| Preferred stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
| Preferred stock, authorized | 25,000,000 | 25,000,000 |
| Preferred stock, issued | 0 | 0 |
| Preferred stock, outstanding | 0 | 0 |
| Common stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
| Common stock, authorized | 500,000,000 | 500,000,000 |
| Common stock, issued | 356,451,678 | 193,637,747 |
| Common stock, outstanding | 356,451,678 | 193,637,747 |
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
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| Income Statement [Abstract] | ||||
| Net Revenue | ||||
| Cost of Goods Sold | ||||
| Gross profit | ||||
| General and administrative | 1,719,770 | 297,764 | 6,709,441 | 952,663 |
| Depreciation and amortization | 4,484 | 4,167 | 8,651 | 4,167 |
| Total Expense | 1,724,254 | 301,931 | 6,718,092 | 956,830 |
| Loss from Operations | (1,724,254) | (301,931) | (6,718,092) | (956,830) |
| Investment impairment charge | (509,979) | (1,019,960) | ||
| Loss on debt conversion | (79,467) | (5,184,447) | (150,274) | |
| Loss on settlement of liabilities | (50,082) | |||
| Interest expense | (53,371) | (29,750) | (120,684) | (84,088) |
| Amortization of debt discount | (509,600) | (213,101) | (2,623,252) | (373,178) |
| Derivative liability movements | 2,170,946 | 176,490 | 3,136,090 | 278,611 |
| Other (expense) income | (20,000) | (20,000) | ||
| Loss before Income Taxes | (116,279) | (977,738) | (11,510,385) | (2,375,801) |
| Income Taxes | ||||
| Net Loss | $ (116,279) | $ (977,738) | $ (11,510,385) | $ (2,375,801) |
| Basic and diluted loss per share (in Dollars per share) | $ 0.00 | $ (0.01) | $ (0.04) | $ (0.02) |
| Weighted Average Number of Shares Outstanding – Basic and diluted (in Shares) | 347,857,137 | 158,738,117 | 301,820,387 | 155,830,492 |
ORGANIZATION AND DESCRIPTION OF BUSINESS |
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| Accounting Policies [Abstract] | ||||||||||||
| ORGANIZATION AND DESCRIPTION OF BUSINESS |
On May 12, 2016, Innovative Payment Solutions, Inc. (formerly known as QPAGOS and Asiya Pearls, Inc.), a Nevada corporation (“IPSI” or the “Company”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Qpagos Corporation, a Delaware corporation (“Qpagos Corporation”), and Qpagos Merge, Inc., a Delaware corporation and wholly owned subsidiary of IPSI (“Merger Sub”). Pursuant to the Merger Agreement, on May 12, 2016, the merger was consummated, and Qpagos Corporation and Merger Sub merged (the “Merger”), with Qpagos Corporation continuing as the surviving corporation of the Merger.
Pursuant to the Merger Agreement, upon consummation of the Merger, each share of Qpagos Corporation’s capital stock issued and outstanding immediately prior to the Merger was converted into the right to receive two shares of IPSI common stock, par value $0.0001 per share (the “Common Stock”). Additionally, pursuant to the Merger Agreement, upon consummation of the Merger, IPSI assumed all of Qpagos Corporation’s warrants issued and outstanding immediately prior to the Merger, which were exercisable for approximately 621,920 shares of Common Stock, respectively, as of the date of the Merger. Prior to and as a condition to the closing of the Merger, the then-current IPSI stockholder of 500,000 shares of Common Stock agreed to return to IPSI 497,500 shares of Common Stock held by such holder and the then-current IPSI stockholder retained an aggregate of 2,500 shares of Common Stock and the other stockholders of IPSI retained 500,000 shares of Common Stock. Therefore, immediately following the Merger, Qpagos Corporation’s former stockholders held 4,992,900 shares of IPSI common stock which represented approximately 91% of the outstanding Common Stock.
The Merger was treated as a reverse acquisition of IPSI, a public shell company, for financial accounting and reporting purposes. As such, Qpagos Corporation was treated as the acquirer for accounting and financial reporting purposes while IPSI was treated as the acquired entity for accounting and financial reporting purposes.
Qpagos Corporation (“Qpagos”) was incorporated on May 1, 2015 under the laws of the state of Delaware to effectuate a reverse merger transaction with Qpagos, S.A.P.I. de C.V. (“Qpagos Mexico”) and Redpag Electrónicos S.A.P.I. de C.V. (“Redpag”). Each of the entities were incorporated in November 2013 in Mexico.
Qpagos Mexico was formed to process payment transactions for service providers it contracts with, and Redpag was formed to deploy and operate kiosks as a distributor.
On May 27, 2016 Asiya changed its name to QPAGOS.
On June 1, 2016, the board of directors of QPAGOS (the “Board”) changed the Company’s fiscal year end from October 31 to December 31.
On November 1, 2019, the Company changed its name from QPAGOS to Innovative Payment Solutions, Inc.
Also on November 1, 2019, immediately following the name change, the Company filed a Certificate of Change with the Secretary of State of the State of Nevada to effect a reverse split of the Company’s common stock, par value $0.0001 per share (the “common stock”) at a ratio of 1-for-10, effective on November 1, 2019 (the Reverse Stock Split”). As a result of the Reverse Stock Split, each ten pre-split shares of common stock outstanding automatically combined into one new share of common stock without any further action on the part of the holders, and the number of outstanding shares of common stock was reduced from 320,477,867 shares to 32,047,817 after rounding for fractional shares.
On December 31, 2019, Innovative Payment Solutions consummated the disposal of Qpagos Corporation, Qpagos Mexico and Redpag in exchange for 2,250,000 shares (the “Vivi Shares”) of common stock of Vivi Holdings, Inc. (“Vivi” or “Vivi Holdings”) pursuant to a Stock Purchase Agreement dated August 5, 2019 (the “SPA”). Of the 2,250,000 shares of Vivi, nine percent (9%) was allocated as follows: Gaston Pereira (5%), Andrey Novikov (2.5%), and Joseph Abrams (1.5%). The SPA was closed on December 31, 2019 after the satisfaction of customary conditions, the receipt of a final fairness opinion and the approval of the Company’s shareholders. Innovative Payment Solutions no longer has any business operations in Mexico and has retained its U.S. operations based in Calabasas, California.
Subsequent to the merger of Qpagos Corporation into IPSI and until the divestiture of Qpagos Corporation, Qpagos Mexico and Redpag, the Company’s focus was on the operations of Qpagos Corporation in Mexico. The Company’s current focus is on providing physical and virtual payment services to the United States market, leveraging the knowledge it obtained from the operations of Qpagos Corporation.
In March 2020, the outbreak of COVID-19 (also known as the coronavirus) caused by a novel strain of the coronavirus was recognized as a pandemic by the World Health Organization, and the outbreak has become increasingly widespread in the United States, including in each of the areas in which the Company operates. The Company has continued operating and is in the process of developing a payment platform for installation in its kiosks which it expects to deploy in the Southern Californian market in the medium term.
The Company provides an integrated network of kiosks, terminals and payment channels that enable consumers to deposit cash, convert it into a digital form and remit the funds to any merchant in its network quickly and securely. The Company has plans to roll out 50 kiosks in Southern California to provide digital payments for the unbanked and underbanked using self-service kiosks and an E wallet ecosystem. The kiosks are currently located in the Company’s warehouses in Southern California awaiting the installation of a suitable payment platform which is currently under development. As a result, installation of the Company’s network of kiosks, terminals and payment channels in Southern California continues to be delayed, which has had an adverse impact on the Company’s business and financial condition and has hampered its ability to generate revenue.
The Company continues to monitor the continuous impact of COVID-19 closely. The extent to which COVID-19 will continue to impact the Company’s operations, ability to obtain financing or future financial results is uncertain. |
ACCOUNTING POLICIES AND ESTIMATES |
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| ACCOUNTING POLICIES AND ESTIMATES |
The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, these unaudited condensed financial statements do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments (consisting only of normal recurring adjustments), which the Company considers necessary, for a fair presentation of those financial statements. The results of operations and cash flows for the three and six months ended June 30, 2021 may not necessarily be indicative of results that may be expected for any succeeding quarter or for the entire fiscal year. The information contained in this Quarterly Report on Form 10-Q (“Report”) should be read in conjunction with the audited financial statements of IPSI for the year ended December 31, 2020, included in the Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2021.
All amounts referred to in the notes to the unaudited condensed financial statements are in United States Dollars ($) unless stated otherwise.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions, which are evaluated on an ongoing basis, that affect the amounts reported in the financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the amounts of revenues and expenses that are not readily apparent from other sources. Actual results could differ from those estimates and judgments. In particular, significant estimates and judgments include those related to, the estimated useful lives for plant and equipment, the fair value of long-lived investments, the fair value of warrants and stock options granted for services or compensation, estimates of the probability and potential magnitude of contingent liabilities, derivative liabilities, the valuation allowance for deferred tax assets due to continuing operating losses and the allowance for doubtful accounts.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from our estimates.
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur.
The Company’s management assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.
The Company adopted the guidance of Accounting Standards Codification (“ASC”) 820 for fair value measurements which clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level 2 - Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.
Level 3 - Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.
The carrying amounts reported in the balance sheets for the investment in Vivi Holdings Inc., was evaluated at fair value using Level 3 Inputs based on the Company’s estimate of the market value of the entities disposed to Vivi Holdings, Inc. Vivi Holdings Inc., does not have sufficient information available to assess the current market price of its equity.
On June 22, 2021. the Company made a strategic investment of $500,000 in Frictionless Financial Technologies, Inc. (”Frictionless”), whereby Frictionless will provide the Company with software to run its payment platform. The investment is recent and the technology has not been developed as yet. In future periods, the company will evaluate this investment at fair value using Level 3 inputs based on the Company’s estimate of market value.
The carrying amounts reported in the balance sheets for cash, accounts receivable, other current assets, other assets, accounts payable, accrued liabilities, and notes payable, approximate fair value due to the relatively short period to maturity for these instruments. The Company has identified the short-term convertible notes and certain warrants attached to certain of the notes that are required to be presented on the balance sheets at fair value in accordance with the accounting guidance.
ASC 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company evaluates the fair value of variably priced derivative liabilities on a quarterly basis and report any movements thereon in earnings.
The Company’s operations will be subject to significant risks and uncertainties including financial, operational, regulatory, and other risks, including the potential risk of business failure. The global Covid-19 breakout has caused an economic crisis which may result in a general tightening in the credit markets, lower levels of liquidity, increases in the rates of default and bankruptcy, and extreme volatility in credit, equity and fixed income markets. These conditions may not only limit the Company’s access to capital, but also make it difficult for its customers, vendors and the Company to accurately forecast and plan future business activities. In addition, businesses have been suspended due to quarantines intended to contain this outbreak and many people have been forced to work from home in those areas. As a result, installation of the Company’s network of kiosks, terminals and payment channels in Southern California has been delayed, which has had an adverse impact on its business and financial condition and has hampered the Company’s ability to generate revenue and access usual sources of liquidity on reasonable terms.
The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, and rates and methods of taxation, among other things.
The FASB issued several additional updates during the period, none of these standards are either applicable to the Company or require adoption at a future date and none are expected to have a material impact on the financial statements upon adoption.
No segmental information is required as the Company has not generated any revenue for the six months ended June 30, 2021 and 2020 and only has one operating segment.
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 June 30, 2021 and December 31, 2020, respectively, the Company had no cash equivalents.
The Company minimizes credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution in the United States. The balance at times may exceed federally insured limits. At June 30, 2021, the balance exceeded the federally insured limit by $7,021,669 and at December 31, 2020, the balance did not exceed the federally insured limit.
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 June 30, 2021 and December 31, 2020.
The Company’s non-marketable equity securities are investments in privately held companies without readily determinable market values. The carrying value of our non-marketable equity securities is adjusted to fair value for observable transactions for identical or similar investments of the same issuer or impairment (referred to as the measurement alternative). All gains and losses on non-marketable equity securities, realized and unrealized, are recognized in other income (expense), net. Non-marketable equity securities that have been remeasured during the period are classified within Level 3 in the fair value hierarchy because the Company estimates the value based on valuation methods using the observable transaction price at the transaction date and other unobservable inputs including volatility, rights, and obligations of the securities the Company holds. The cost method is used when the Company has a passive, long-term investment that doesn’t result in influence over the Company. The cost method is used when the investment results in an ownership stake of less than 20%, and there is no substantial influence. Under the cost method, the stock purchased is recorded on a balance sheet as a non-current asset at the historical acquisition/purchase price, and is not modified unless shares are sold, additional shares are purchased or there is evidence of the fair market value of the investment declining below carrying value. Any dividends received are recorded as income.
The Company recorded an impairment charge of $1,019,960 on its non-marketable equity securities for the year ended December 31, 2020. The impairment charge was based on management’s determination that due to the lack of ability, to date, by Vivi Holdings (“Vivi”) to fulfill its capital raising requirements and implement its business strategy that there is a significant risk that Vivi may not be able to meet its obligations.
Plant and equipment is stated at cost, less accumulated depreciation. Plant and equipment with costs greater than $1,000 are capitalized and depreciated. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The estimated useful lives of the assets are as follows:
The cost of repairs and maintenance is expensed as incurred. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition.
Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets
The Company’s revenue recognition policy is consistent with the requirements of FASB ASC 606, Revenue.
The Company’s revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those services. The Company derives its revenues from the sale of its services, as defined below. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its revenue transactions:
The Company had no revenues during the three and six months ended June 30, 2021 and 2020.
Generally, all forms of share-based payments, including stock option grants, restricted stock grants and stock appreciation rights are measured at their fair value on the awards’ grant date, based on the estimated number of awards that are ultimately expected to vest. Share-based compensation awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable. The expense resulting from share-based payments is recorded in operating expenses in the statement of operations.
Where equity transactions with arms-length third parties, who had applied their own assumptions and estimates in determining the market value of our equity, had taken place prior to and within a reasonable time frame of any share-based payments, the value of those share transactions have been used as the fair value for any share-based equity payments.
Where equity transactions with arms-length third parties, included both shares and warrants, the value of the warrants have been eliminated from the unit price of the securities using a Black-Scholes valuation model to determine the value of the warrants. The assumptions used in the Black Scholes valuation model includes market related interest rates for risk-free government issued treasury securities with similar maturities; the expected volatility of the Company’s common stock based on companies operating in similar industries and markets; the estimated stock price of the Company; the expected dividend yield of the Company and; the expected life of the warrants being valued.
ASC 815 generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re- measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument subject to the requirements of ASC 815. ASC 815 also provides an exception to this rule when the host instrument is deemed to be conventional, as described.
The Company is based in the US and currently enacted US tax laws are used in the calculation of income taxes.
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A full valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. It is the Company’s policy to classify interest and penalties on income taxes as interest expense or penalties expense. As of June 30, 2021 and December 31, 2020, there have been no interest or penalties incurred on income taxes.
Comprehensive income is defined as the change in equity of a company during a period from transactions and other events and circumstances excluding transactions resulting from investments from owners and distributions to owners. For the Company, there is no comprehensive income for the periods presented. |
LIQUIDITY MATTERS |
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| Liquidity Matters [Abstract] | ||||||||||||
| LIQUIDITY MATTERS |
The Company has incurred net losses since its inception and anticipates net losses and negative operating cash flows for the near future. For the six months ended June 30, 2021, the Company had a net loss of $11,510,385 and had $7,271,669 in cash. In connection with preparing the financial statements for the six months ended June 30, 2021, management evaluated the extent of the impact from the COVID-19 pandemic on the Company’s business and its future liquidity for the next twelve months through August 13, 2022.
Management has executed the following to address the Company’s liquidity during the six months ended June 30, 2021:
The funding the Company received will be used primarily for development of technology, the digital payment platform and marketing, as well as for working capital and general corporate purposes.
If the Company is required to raise additional funds by issuing equity securities, its stockholders would experience dilution. Additional debt financing, if available, may involve covenants restricting its operations or its ability to incur additional debt. Any additional debt financing or additional equity that the Company raises may contain terms that are not favorable to it or its stockholders and require significant debt service payments, which diverts resources from other activities.
Based on this current business plan, the Company believes its existing cash is sufficient to conduct planned operations for one year from the issuance of the June 30, 2021 financial statements. |
INVESTMENT |
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| Investments, All Other Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||
| INVESTMENT |
Investment in Frictionless Financial Technologies Inc.
On June 22, 2021, the Company entered into a Stock Purchase Agreement (the “SPA”) with Frictionless Financial Technologies Inc. (“Frictionless”), to purchase 150 common shares for gross proceeds of $500,000, representing 11.3% of the outstanding common shares (which percentage holding will decrease to 10% upon the issuance of the remaining authorized but unissued shares). In terms of the SPA, Frictionless agreed to deliver to the Company on or before August 30, 2021, a live fully compliant financial payment Software as a Service solution for use by the Company as a digital payment platform that enables payments within the United states and abroad, including Mexico, together with a service agreement providing a full suite of product services to facilitate to Company’s anticipated product offerings.
The company has undertaker to issue Frictionless a non-restricted, non-dilutable 5 year warrant to purchase 30,000.000 shares of common stock in the Company at an exercise price of $0.15 per share, upon delivery of the financial payment software.
In the event that Frictionless is unable to deliver the financial payment software on or before June 15, 2022, Frictionless shall immediately refund the $500,000 to the Company, provided non-delivery is not due to Frictionless trademark issues, non-approval by the Company or banking related issues.
The Company may appoint one member to the Board of Frictionless, as long as the Company is the holder of the common stock acquired in Frictionless.
The Company has an irrevocable right to acquire up to an additional 41% of the outstanding common stock of Frictionless at a purchase price of $300,000 for each 1% acquired.
The shares in Frictionless are unlisted as of June 30, 2021. Investment in Vivi Holdings, Inc.
Effective December 31, 2019, the Company sold 100% of the outstanding common stock of its subsidiary, Qpagos Corp, together with its 99.9% ownership interest of Qpagos Corporations’ two Mexican entities: QPagos S.A.P.I. de C.V. and Redpag Electrónicos S.A.P.I. de C.V, to Vivi.
As consideration for the disposal Vivi issued an aggregate of 2,250,000 Shares of its common stock as follows: 2,047,500 Shares to the Company; 56,250 Shares to the Company’s designee, Mr. Andrey Novikov; 33,750 Shares to the Company’s designee, the Joseph W. & Patricia G. Abrams Family Trust; and 112,500 Shares to the Company’s designee, Mr. Gaston Pereira.
Due to the lack of available information, the Vivi Shares were valued by a modified market method, whereby the value of the assets disposed of were determined by management using the enterprise value of the entire Company less the liabilities and assets retained by the Company.
As of June 30, 2021 and June 30, 2020, the Company impaired the carrying value of the investment in Vivi Holdings, Inc by $0 and $1,019,960, respectively, based on Vivi’s indicated timeline for its proposed IPO and fund raising activities, largely impacted by the COVID-19 pandemic. The total impairment as of June 30, 2021 and December 31, 2020 was $1,019,960.
The shares in Vivi Holdings, Inc., are unlisted as of June 30, 2021.
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LEASES |
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| LEASES |
The Company entered into a real property lease for office and warehouse space located at 19355 Business Center Drive in Northridge California, Los Angeles County. The lease commenced on February 15, 2020 and expires on February 28, 2022, monthly rental expense is $3,945 per month with no escalations during the term of the lease.
The initial value of the right-of-use asset was $86,741 and the operating lease liability was $86,741. The Company monitors for events or changes in circumstances that require a reassessment of its lease. When a reassessment results in the remeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding right-of-use asset unless doing so would reduce the carrying amount of the right-of-use asset to an amount less than zero. In that case, the amount of the adjustment that would result in a negative right-of-use asset balance is recorded as a loss in the statement of operations.
Effective June 1, 2021, the Company entered into a Mutual Termination of Lease Agreement with the landlord. The security deposit of $4,000 was forfeited.
On March 22, 2021, the Company entered into a real property lease for an office located at 56B 5th Street, Lot 1 Carmel By The Sea, California. The lease commenced on April 1, 2021 and is for a twelve month period, terminating on April 1, 2022. The Company applied the practical expedient whereby operating leases with a duration of twelve months or less are expensed as incurred.
Discount Rate
To determine the present value of minimum future lease payments for operating leases at February 15, 2020, the Company was required to estimate a rate of interest that it would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment (the “incremental borrowing rate” or “IBR”).
The Company determined the appropriate IBR by identifying a reference rate and making adjustments that take into consideration financing options and certain lease-specific circumstances. For the reference rate, the Company used the 5 year ARM interest rate at the time of entering into the agreement and compared that rate to the Company’s weighted average cost of funding at the time of entering into the operating lease. The Company determined that 10.00% was an appropriate incremental borrowing rate to apply to its real-estate operating lease.
Right of use assets
Right of use assets are included in the unaudited condensed Balance Sheet are as follows:
Total Lease Cost
Individual components of the total lease cost incurred by the Company is as follows:
Other lease information:
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FEDERAL RELIEF LOANS |
6 Months Ended | ||
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Jun. 30, 2021 | |||
| Federal Relief Loans [Abstract] | |||
| FEDERAL RELIEF LOANS |
Payroll Protection Program loan
On May 7, 2020, the Company received a Payroll Protection Program (“PPP”) loan through its bankers, Wells Fargo Bank, amounting to $60,292 earning interest at 1% per annum, maturing on May 5, 2022 and repayable in installments of $2,538 commencing on November 5, 2020. The Company may apply for the loan to be forgiven in whole or in part based on the loan being utilized for payroll costs, continuation of healthcare benefits, mortgage interest payments, rent, utility and interest payments on any other debt obligation. The Company anticipates that the loan will be forgivable and therefore no interest has been accrued on this loan.
The company has not made any payments on this loan and is in the process of applying for forgiveness of the loan balance.
Small Business Administration Disaster Relief loan
On July 7, 2020, the Company received a Small Business Economic Injury Disaster loan amounting to $150,000, bearing interest at 3.75% per annum and repayable in monthly installments of $731 commencing twelve months after inception with the balance of interest and principal repayable on July 7, 2050. The loan is secured by all tangible and intangible assets of the Company. The proceeds are to be used for working capital purposes to alleviate economic injury caused by the COVID-19 pandemic.
The company has accrued interest of $5,517 on this loan as of June 30, 2021. |
LOANS PAYABLE |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans Payable [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LOANS PAYABLE |
Loans payable consisted of the following:
Interest expense totaled $0 and $238 for the three months ended June 30, 2021 and 2020, respectively, and $134 and $561 for the six months ended June 30, 2021 and 2020, respectively.
Stanislav Minaychenko
On December 17, 2019, in terms of a settlement agreement entered into between the Company, Qpagos Corporation and Stanislav Minaychenko, the Company issued a promissory note to Mr. Minaychenko in settlement of $23,893 owing to him in terms of a service agreement dated September 1, 2015. The promissory note bears interest at 4% per annum, is unsecured and matures on June 16, 2020.
During the six months ended June 30, 2021, the Company repaid the aggregate principal sum of $13,893 and interest thereon of $717, thereby extinguishing the note.
Maxim Pukhoskiy
On December 17, 2019, in terms of a settlement agreement entered into between the Company, Qpagos Corporation and Maxim Pukhoskiy, the Company issued a promissory note to Mr. Pukhoskiy in settlement of $17,856 owing to him in terms of a service agreement dated May 1, 2015. The promissory note bears interest at 4% per annum, is unsecured and matures on June 16, 2020.
During the six months ended June 30, 2021, the Company repaid the aggregate principal sum of $7,656 and interest thereon of $429, thereby extinguishing the note.
Dieter Busenhart
On July 17, 2020, the Company issued a promissory note to Dieter Busenhart in the aggregate principal amount of $50,000 for net proceeds of $50,000, bearing interest at 10% per annum and maturing on January 17, 2021.
During the six months ended June 30, 2021, the Company repaid the aggregate principal sum of $500.
The balance remaining on the promissory note consists of accrued interest of $571. |
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CONVERTIBLE NOTES PAYABLE |
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| Convertible Notes Payable [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CONVERTIBLE NOTES PAYABLE |
Convertible notes payable consists of the following:
Interest expense totaled $51,667 and $29,535 and amortization of debt discount totaled $509,600 and $213,100 for the three months ended June 30, 2021 and 2020, respectively, and interest expense totaled $117,459 and $83,526 and amortization of debt discount totaled $2,623,252 and $373,178 for the six months ended June 30, 2021 and 2020, respectively.
The convertible notes have variable conversion prices based on a discount to market price of trading activity over a specified period of time. The variable conversion features were valued using a Black Scholes valuation model. The difference between the fair market value of the common stock and the calculated conversion price on the issuance date was recorded as a debt discount with a corresponding credit to derivative financial liability.
The total value of the beneficial conversion feature recorded as a debt discount during the six months ended June 30, 2021 and 2020 was $2,569,000 and $326,750, respectively.
Power Up Lending Group Ltd
Cavalry Fund LLP
Mercer Street Global Opportunity Fund, LLC
Iroquois Master Fund Ltd.
Mark Geist
On October 20, 2020, the Company closed a transaction with Mark Geist., pursuant to which the Company received net proceeds of $25,025 after an original issue discount of $3,575 in exchange for the issuance of a $28,600 Senior Secured Convertible Note, bearing interest at 10% per annum and maturing on October 20, 2021. The note was convertible into shares of common stock at an initial conversion price of 0.035 per share. In addition, the Company issued a warrant exercisable over 817,143 shares of common stock at an initial exercise price of $0.05 per share.
The note could be prepaid at any time for the first 90 days at face value plus accrued interest. From day 91 through day 180, the note could be prepaid in an amount equal to 115% of the principal amount plus accrued interest. From day 181 through day 365, it could be prepaid in an amount equal to 125% of the principal amount plus accrued interest. The note contained certain covenants, such as restrictions on: (i) distributions on capital stock, (ii) stock repurchases, and (iii) sales and the transfer of assets.
On January 15, 2021, the Company received a conversion notice from Mark Geist, converting the aggregate principal amount of $28,600 and accrued interest thereon of $561 into 833,172 shares of common stock at a conversion price of $0.035 per share, thereby extinguishing the note.
Bellridge Capital LP.
The Initial Bellridge Note could be prepaid at any time for the first 90 days at face value plus accrued interest. From day 91 through day 180, the note could be prepaid in an amount equal to 115% of the principal amount plus accrued interest. From day 181 through day 365, it could be prepaid in an amount equal to 125% of the principal amount plus accrued interest. The Initial Bellridge Note contained certain covenants, such as restrictions on: (i) distributions on capital stock, (ii) stock repurchases, and (iii) sales and the transfer of assets.
On February 6, 2021, the Company received a conversion notice from Bellridge Capital, LP. converting the aggregate principal amount of $286,000 and accrued interest thereon of $5,720 into 8,334,857 shares of common stock at a conversion price of $0.035 per share, thereby extinguishing the Initial Bellridge Note.
On February 16, 2021, the Company received a conversion notice from Bellridge Capital, LP. converting the aggregate principal amount of $206,000, relating to a convertible note entered into on the same day into 4,577,778 shares of common stock at a conversion price of $0.045 per share, thereby extinguishing the Second Bellridge Note.
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DERIVATIVE LIABILITY |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DERIVATIVE LIABILITY |
Certain of the short-term convertible notes disclosed in note 8 above and certain warrants disclosed in note 10 below, have variable priced conversion rights with no fixed floor price and will re-price dependent on the share price performance over varying periods of time and certain notes and warrants have fundamental transaction clauses which might result in cash settlement, due to these factors, all convertible notes and any warrants attached thereto are valued and give rise to a derivative financial liability, which was initially valued at inception of the convertible notes using a Black-Scholes valuation model.
During the six months ended June 30, 2021, an additional $2,569,000 was raised as a derivative liability on convertible notes and warrants.
The value of this derivative financial liability was re-assessed at June 30, 2021, and $3,136,090 was credited to the statement of operations and comprehensive loss, respectively. The value of the derivative liability will be re-assessed at each financial reporting period, with any movement thereon recorded in the statement of operations in the period in which it is incurred.
The following assumptions were used in the Black-Scholes valuation model:
The movement in derivative liability is as follows:
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STOCKHOLDERS' EQUITY |
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| Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| STOCKHOLDERS' EQUITY |
The Company has authorized 500,000,000 common shares with a par value of $0.0001 each. The Company has issued and outstanding 356,451,678 and 193,637,747 shares of common stock as of June 30, 2021 and December 31, 2020, respectively.
The following shares of common stock were issued by the Company during the six months ended June 30, 2021:
Pursuant to an engagement letter dated as of March 6, 2021, by and between the Company and H.C. Wainwright & Co., LLC (“Wainwright”), the Company engaged Wainwright to act as the Company’s exclusive placement agent in connection with the private placement. Pursuant to the engagement agreement, the Company agreed to pay Wainwright a cash fee of 8.0% of the gross proceeds raised by the Company in the private placement. The Company also agreed to pay Wainwright (i) a management fee equal to 1.0% of the gross proceeds raised in the private placement; (ii) $35,000 for non-accountable expenses and (iii) up to $50,000 for fees and expenses of legal counsel and other out-of-pocket expenses. In addition, the Company agreed to issue to Wainwright (or its designees) placement agent warrants (the “Placement Agent Warrants”) to purchase a number of shares equal to 8.0% of the aggregate number of Shares sold under the Purchase Agreement or warrants to purchase an aggregate of up to 2,426,667 shares of the Company’s common stock. The Placement Agent Warrants generally will have the same terms as the Warrants, except they will have an exercise price of $0.1875.
On December 15, 2020, in terms of an employment agreement entered into with an employee, the Company granted 2,500,000 restricted shares of which 1,000,000 vested on January 1, 2021 and the remaining 1,500,000 shares vest over a period of two years.
The restricted stock granted and exercisable at June 30, 2021 is as follows:
The Company has recorded an expense of $72,141 and $62,765 for the three months ended June 30, 2021 and 2020, respectively, and $194,282 and $376,596 for the six months ended June 30, 2021 and 2020, respectively.
The Company has authorized 25,000,000 shares of preferred stock with a par value of $0.0001 authorized, no preferred stock is issued and outstanding as of June 30, 2021 and December 31, 2020.
In terms of the Senior Secured convertible notes entered into with various noteholders as described in note 8 above, the Company issued five year warrants exercisable for a total of 28,709,182 shares of common stock at initial exercise prices ranging from $0.05 to $0.24 per share. The warrants have a cashless exercise option and an exercise limitation based on a certain beneficial ownership percentage of 4.99% which may be adjusted to 9.99%. The exercise price of the warrant is adjustable under the following conditions; i) subsequent equity sales are at a price below the exercise price of the warrant; ii) the Company issues options with an exercise price lower than the exercise price of the warrants; iii) issues convertible securities which are convertible into common stock at a price lower than the warrant exercise price; and iv) the option exercise price or rate of conversion for convertible securities results in a lower exercise price than the exercise price of the warrants.
The warrant holders also have the option to acquire subsequent rights offering rights, under certain circumstances and is entitled to pro-rata distributions made by the Company in assets or securities other than common stock.
The warrants include a fundamental transaction clause which will give the warrant holder the right on an as converted basis to the proceeds which common shareholders would be entitled to as a result of a fundamental transaction. Notwithstanding the aforementioned rights, provided the warrants are not registered under an effective registration statement, the holder of the warrant has the right to receive cash equal to the Black-Scholes value of the unexercised portion of the warrant in accordance with the terms of the warrant agreement.
On February 22, 2021, the Board of Directors of the Company appointed William Corbett, its Chief Executive Officer and Interim Chief Financial Officer, as its Chairman of the Board and issued him a five-year warrant to purchase 20,000,000 shares of the Company’s common stock at an exercise price of $0.24, valued at $4,327,899 and expensed as stock based compensation during the current period.
In connection with the Securities Purchase Agreements with several institutional investors, disclosed in 9(a) above, the Company sold warrants to purchase up to an aggregate of 15,166,667 shares of its common stock. The combined purchase price for one share of common stock and associated Warrant is $0.15. The warrants were valued at $2,028,509 using a Black Scholes valuation model and using the assumptions disclosed below.
The Warrants are exercisable for a period of five years from the date of issuance and have an exercise price of $0.15 per share, subject to adjustment as set forth in the Warrants for stock splits, stock dividends, recapitalizations and similar events. The Investors may exercise the Warrants on a cashless basis if after the six month anniversary of date of issuance the shares of common stock underlying the Warrants (the “Warrant Shares”) are not then registered pursuant to an effective registration statement. Each Investor has contractually agreed to restrict its ability to exercise the Warrants such that the number of shares of the Company’s common stock held by the Investor and its affiliates after such exercise does not exceed the beneficial ownership limitation set forth in the Warrants which may not exceed initially 4.99% or 9.99% of the Company’s then issued and outstanding shares of common stock.
Pursuant to an engagement letter dated as of March 6, 2021, by and between the Company and Wainwright, the Company engaged Wainwright to act as the Company’s exclusive placement agent in connection with the private placement, discussed above. The Company agreed to issue to Wainwright (or its designees) Placement Agent Warrants to purchase an aggregate of up to 2,426,667 shares of the Company’s common stock. The Placement Agent Warrants generally will have the same terms as the Warrants, except they will have an exercise price of $0.1875. The warrants were valued at $323,924 using a Black Scholes valuation model and using the assumptions disclosed below.
The fair value of the warrants granted and issued were determined by using a Black Scholes valuation model using the following assumptions:
A summary of warrant activity during the period January 1, 2020 to June 30, 2021 is as follows:
The warrants outstanding and exercisable at June 30, 2021 are as follows:
The warrants outstanding have an intrinsic value of $519,543 and $0 as of June 30, 2021 and December 31, 2020, respectively.
On June 18, 2018, the Company established its 2018 Stock Incentive Plan (the “Plan”). The purpose of the Plan is to promote the interests of the Company and the stockholders of the Company by providing directors, officers, employees and consultants of the Company with appropriate incentives and rewards to encourage them to enter into and continue in the employ or service of the Company, to acquire a proprietary interest in the long-term success of the Company and to reward the performance of individuals in fulfilling long-term corporate objectives. The Plan terminates after a period of ten years in June 2028.
The Plan is administered by the Board of Directors or a Committee appointed by the Board of Directors who have the authority to administer the Plan and to exercise all the powers and authorities specifically granted to it under the Plan.
The maximum number of securities available under the Plan is 800,000 shares of common stock. The maximum number of shares of common stock awarded to any individual during any fiscal year may not exceed 100,000 shares of common stock.
On February 22, 2021, the Board awarded each of its directors, James Fuller and Andrey Novikov, options under the Company’s 2018 Stock Incentive Plan to purchase 208,333 shares of the Company’s common stock. The options are exercisable for a period of ten years from the date of grant, vest in full on the date of grant and have an exercise price of $0.24 per share.
No options were granted for the year ended December 31, 2020.
A summary of option activity during the period January 1, 2020 to June 30, 2021 is as follows:
The options outstanding and exercisable at June 30, 2021 are as follows:
The options outstanding have an intrinsic value of $0 and $0 as of June 30, 2021 and December 31, 2020, respectively. |
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NET LOSS PER SHARE |
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||
| 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 three and six months ended June 30, 2021 and 2020 all warrants, options and convertible debt securities were excluded from the computation of diluted net loss per share.
Dilutive shares which could exist pursuant to the exercise of outstanding stock instruments and which were not included in the calculation because their affect would have been anti-dilutive for the three and six months ended June 30, 2021 and 2020 are as follows:
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RELATED PARTY TRANSACTIONS |
6 Months Ended | ||
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Jun. 30, 2021 | |||
| Related Party Transactions [Abstract] | |||
| RELATED PARTY TRANSACTIONS |
The following transactions were entered into with related parties:
James Fuller
On February 22, 2021, the Board awarded James Fuller options under the Company’s 2018 Stock Incentive Plan to purchase 208,333 shares of the Company’s common stock. The options are exercisable for a period of ten years from the date of grant, vest in full on the date of grant and have an exercise price of $0.24 per share.
Andrey Novikov
On February 22, 2021, the Board awarded Andrey Novikov options under the Company’s 2018 Stock Incentive Plan to purchase 208,333 shares of the Company’s common stock. The options are exercisable for a period of ten years from the date of grant, vest in full on the date of grant and have an exercise price of $0.24 per share.
William Corbett
On February 22, 2021, the Board of Directors of the Company appointed William Corbett, its Chief Executive Officer and Interim Chief Financial Officer, as its Chairman of the Board and issued him a five-year warrant to purchase 20,000,000 shares of the Company’s common stock at an exercise price of $0.24. The Board also agreed to increase Mr. Corbett’s monthly base salary to $30,000. |
COMMITMENTS AND CONTINGENCIES |
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||
| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||
| COMMITMENTS AND CONTINGENCIES |
The Company entered into a real property lease for office and warehouse space located at 19355 Business Center Drive in Northridge California, Los Angeles County. The lease commenced on February 15, 2020 and expires on February 28, 2022, monthly rental expense is $3,945 per month with no escalations during the term of the lease. The lease was terminated by mutual consent with effect from June 1, 2021.
On March 22, 2021, the Company entered into a real property lease for an office located at 56B 5th Street, Lot 1 Carmel By The Sea, California. The lease commenced on April 1, 2021 and is for a twelve month period, terminating on April 1, 2022.
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SUBSEQUENT EVENTS |
6 Months Ended | ||
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Jun. 30, 2021 | |||
| Subsequent Events [Abstract] | |||
| SUBSEQUENT EVENTS |
The Company has evaluated subsequent events through the date the financial statements were issued, other than disclosed above, we did not identify any other subsequent events that would have required adjustment or disclosure in the financial statements. |
Accounting Policies, by Policy (Policies) |
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Jun. 30, 2021 | ||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||
| Basis of Presentation |
The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, these unaudited condensed financial statements do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments (consisting only of normal recurring adjustments), which the Company considers necessary, for a fair presentation of those financial statements. The results of operations and cash flows for the three and six months ended June 30, 2021 may not necessarily be indicative of results that may be expected for any succeeding quarter or for the entire fiscal year. The information contained in this Quarterly Report on Form 10-Q (“Report”) should be read in conjunction with the audited financial statements of IPSI for the year ended December 31, 2020, included in the Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2021.
All amounts referred to in the notes to the unaudited condensed financial statements are in United States Dollars ($) unless stated otherwise.
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| Use of Estimates |
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions, which are evaluated on an ongoing basis, that affect the amounts reported in the financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the amounts of revenues and expenses that are not readily apparent from other sources. Actual results could differ from those estimates and judgments. In particular, significant estimates and judgments include those related to, the estimated useful lives for plant and equipment, the fair value of long-lived investments, the fair value of warrants and stock options granted for services or compensation, estimates of the probability and potential magnitude of contingent liabilities, derivative liabilities, the valuation allowance for deferred tax assets due to continuing operating losses and the allowance for doubtful accounts.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from our estimates.
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| 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 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.
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| Fair Value of Financial Instruments |
The Company adopted the guidance of Accounting Standards Codification (“ASC”) 820 for fair value measurements which clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level 2 - Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.
Level 3 - Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.
The carrying amounts reported in the balance sheets for the investment in Vivi Holdings Inc., was evaluated at fair value using Level 3 Inputs based on the Company’s estimate of the market value of the entities disposed to Vivi Holdings, Inc. Vivi Holdings Inc., does not have sufficient information available to assess the current market price of its equity.
On June 22, 2021. the Company made a strategic investment of $500,000 in Frictionless Financial Technologies, Inc. (”Frictionless”), whereby Frictionless will provide the Company with software to run its payment platform. The investment is recent and the technology has not been developed as yet. In future periods, the company will evaluate this investment at fair value using Level 3 inputs based on the Company’s estimate of market value.
The carrying amounts reported in the balance sheets for cash, accounts receivable, other current assets, other assets, accounts payable, accrued liabilities, and notes payable, approximate fair value due to the relatively short period to maturity for these instruments. The Company has identified the short-term convertible notes and certain warrants attached to certain of the notes that are required to be presented on the balance sheets at fair value in accordance with the accounting guidance.
ASC 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company evaluates the fair value of variably priced derivative liabilities on a quarterly basis and report any movements thereon in earnings.
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| Risks and Uncertainties |
The Company’s operations will be subject to significant risks and uncertainties including financial, operational, regulatory, and other risks, including the potential risk of business failure. The global Covid-19 breakout has caused an economic crisis which may result in a general tightening in the credit markets, lower levels of liquidity, increases in the rates of default and bankruptcy, and extreme volatility in credit, equity and fixed income markets. These conditions may not only limit the Company’s access to capital, but also make it difficult for its customers, vendors and the Company to accurately forecast and plan future business activities. In addition, businesses have been suspended due to quarantines intended to contain this outbreak and many people have been forced to work from home in those areas. As a result, installation of the Company’s network of kiosks, terminals and payment channels in Southern California has been delayed, which has had an adverse impact on its business and financial condition and has hampered the Company’s ability to generate revenue and access usual sources of liquidity on reasonable terms.
The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, and rates and methods of taxation, among other things.
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| Recent accounting pronouncements |
The FASB issued several additional updates during the period, none of these standards are either applicable to the Company or require adoption at a future date and none are expected to have a material impact on the financial statements upon adoption.
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| Reporting by Segment |
No segmental information is required as the Company has not generated any revenue for the six months ended June 30, 2021 and 2020 and only has one operating segment.
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| 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 June 30, 2021 and December 31, 2020, respectively, the Company had no cash equivalents.
The Company minimizes credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution in the United States. The balance at times may exceed federally insured limits. At June 30, 2021, the balance exceeded the federally insured limit by $7,021,669 and at December 31, 2020, the balance did not exceed the federally insured limit.
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| 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 June 30, 2021 and December 31, 2020.
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| 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 20%, and there is no substantial influence. Under the cost method, the stock purchased is recorded on a balance sheet as a non-current asset at the historical acquisition/purchase price, and is not modified unless shares are sold, additional shares are purchased or there is evidence of the fair market value of the investment declining below carrying value. Any dividends received are recorded as income.
The Company recorded an impairment charge of $1,019,960 on its non-marketable equity securities for the year ended December 31, 2020. The impairment charge was based on management’s determination that due to the lack of ability, to date, by Vivi Holdings (“Vivi”) to fulfill its capital raising requirements and implement its business strategy that there is a significant risk that Vivi may not be able to meet its obligations.
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| Plant and Equipment |
Plant and equipment is stated at cost, less accumulated depreciation. Plant and equipment with costs greater than $1,000 are capitalized and depreciated. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The estimated useful lives of the assets are as follows:
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.
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| 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
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| 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:
The Company had no revenues during the three and six months ended June 30, 2021 and 2020.
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| Share-Based Payment Arrangements |
Generally, all forms of share-based payments, including stock option grants, restricted stock grants and stock appreciation rights are measured at their fair value on the awards’ grant date, based on the estimated number of awards that are ultimately expected to vest. Share-based compensation awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable. The expense resulting from share-based payments is recorded in operating expenses in the statement of operations.
Where equity transactions with arms-length third parties, who had applied their own assumptions and estimates in determining the market value of our equity, had taken place prior to and within a reasonable time frame of any share-based payments, the value of those share transactions have been used as the fair value for any share-based equity payments.
Where equity transactions with arms-length third parties, included both shares and warrants, the value of the warrants have been eliminated from the unit price of the securities using a Black-Scholes valuation model to determine the value of the warrants. The assumptions used in the Black Scholes valuation model includes market related interest rates for risk-free government issued treasury securities with similar maturities; the expected volatility of the Company’s common stock based on companies operating in similar industries and markets; the estimated stock price of the Company; the expected dividend yield of the Company and; the expected life of the warrants being valued.
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| 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.
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| 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 June 30, 2021 and December 31, 2020, there have been no interest or penalties incurred on income taxes.
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| 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. For the Company, there is no comprehensive income for the periods presented. |
ACCOUNTING POLICIES AND ESTIMATES (Tables) |
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| Accounting Policies [Abstract] | |||||||||||||||||||
| Schedule of estimated useful lives of the assets |
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INVESTMENT (Tables) |
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| Investments, All Other Investments [Abstract] | |||||||||||||||||||||||||||||||||||||
| Schedule of investment |
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LEASES (Tables) |
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| Leases [Abstract] | ||||||||||||||||||||||||||||
| Schedule of right of use assets |
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| Schedule of lease cost |
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| Schedule of other lease information |
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LOANS PAYABLE (Tables) |
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| Loans Payable [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of loans payable |
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CONVERTIBLE NOTES PAYABLE (Tables) |
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| Convertible Notes Payable [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of convertible notes payable |
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DERIVATIVE LIABILITY (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of assumptions were used in the Black-Scholes valuation model |
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| Schedule of movement in derivative liability |
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STOCKHOLDERS' EQUITY (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders' Equity Note [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of restricted stock granted and exercisable |
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| Schedule of assumptions were used in the Black-Scholes valuation model |
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| Schedule of warrant activity |
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| Schedule of warrants outstanding and exercisable |
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| Schedule of option activity |
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| Schedule of warrants outstanding and exercisable |
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NET LOSS PER SHARE (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of dilutive shares |
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COMMITMENTS AND CONTINGENCIES (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 | |||||||||||||||||||||||||||||||
| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||
| Schedule of lease commitments |
|
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ORGANIZATION AND DESCRIPTION OF BUSINESS (Details) - shares |
6 Months Ended | 12 Months Ended |
|---|---|---|
Jun. 30, 2021 |
Dec. 31, 2019 |
|
| Organization and Description of Business (Textual) | ||
| Description of changed its name | November 1, 2019, immediately following the name change, the Company filed a Certificate of Change with the Secretary of State of the State of Nevada to effect a reverse split of the Company’s common stock, par value $0.0001 per share (the “common stock”) at a ratio of 1-for-10, effective on November 1, 2019 (the Reverse Stock Split”). As a result of the Reverse Stock Split, each ten pre-split shares of common stock outstanding automatically combined into one new share of common stock without any further action on the part of the holders, and the number of outstanding shares of common stock was reduced from 320,477,867 shares to 32,047,817 after rounding for fractional shares. | |
| Percentage of ownership | 20.00% | |
| Vivi Holdings [Member] | ||
| Organization and Description of Business (Textual) | ||
| Exchange of shares (in Shares) | 2,250,000 | |
| Percentage of ownership | 9.00% | |
| Gaston Pereira [Member] | ||
| Organization and Description of Business (Textual) | ||
| Percentage of ownership | 5.00% | |
| Andrey Novikov [Member] | ||
| Organization and Description of Business (Textual) | ||
| Percentage of ownership | 2.50% | |
| Joseph Abrams [Member] | ||
| Organization and Description of Business (Textual) | ||
| Percentage of ownership | 1.50% | |
| Stock Purchase Agreement [Member] | ||
| Organization and Description of Business (Textual) | ||
| Business Acquisition, Planned Restructuring Activities, Description | On December 31, 2019, Innovative Payment Solutions consummated the disposal of Qpagos Corporation, Qpagos Mexico and Redpag in exchange for 2,250,000 shares (the “Vivi Shares”) of common stock of Vivi Holdings, Inc. (“Vivi” or “Vivi Holdings”) pursuant to a Stock Purchase Agreement dated August 5, 2019 (the “SPA”). Of the 2,250,000 shares of Vivi, nine percent (9%) was allocated as follows: Gaston Pereira (5%), Andrey Novikov (2.5%), and Joseph Abrams (1.5%). | |
| Common Stock [Member] | ||
| Organization and Description of Business (Textual) | ||
| Reverse stock split, description | Pursuant to the Merger Agreement, upon consummation of the Merger, each share of Qpagos Corporation’s capital stock issued and outstanding immediately prior to the Merger was converted into the right to receive two shares of IPSI common stock, par value $0.0001 per share (the “Common Stock”). Additionally, pursuant to the Merger Agreement, upon consummation of the Merger, IPSI assumed all of Qpagos Corporation’s warrants issued and outstanding immediately prior to the Merger, which were exercisable for approximately 621,920 shares of Common Stock, respectively, as of the date of the Merger. Prior to and as a condition to the closing of the Merger, the then-current IPSI stockholder of 500,000 shares of Common Stock agreed to return to IPSI 497,500 shares of Common Stock held by such holder and the then-current IPSI stockholder retained an aggregate of 2,500 shares of Common Stock and the other stockholders of IPSI retained 500,000 shares of Common Stock. Therefore, immediately following the Merger, Qpagos Corporation’s former stockholders held 4,992,900 shares of IPSI common stock which represented approximately 91% of the outstanding Common Stock. |
ACCOUNTING POLICIES AND ESTIMATES (Details) |
6 Months Ended | 12 Months Ended | |
|---|---|---|---|
|
Jun. 30, 2021
USD ($)
|
Dec. 31, 2020
USD ($)
|
Jun. 22, 2021
USD ($)
|
|
| Accounting Policies and Estimates (Textual) | |||
| Investments | $ 500,001 | $ 1 | |
| Number of operating segments | 1 | ||
| Federally insured limit | $ 7,021,669 | ||
| Ownership percentage | 20.00% | ||
| Impairment charge | 1,019,960 | ||
| Plant and equipment costs | $ 1,000 | ||
| Frictionless Technologies, Inc. [Member] | |||
| Accounting Policies and Estimates (Textual) | |||
| Investments | $ 500,000 | $ 500,000 |
ACCOUNTING POLICIES AND ESTIMATES (Details) - Schedule of estimated useful lives of the assets |
6 Months Ended |
|---|---|
Jun. 30, 2021 | |
| Kiosks [Member] | |
| Estimated useful lives | 7 years |
| Furniture and Fixtures [Member] | |
| Estimated useful lives | 7 years |
| Computer Equipment [Member] | |
| Estimated useful lives | 3 years |
LIQUIDITY MATTERS (Details) - USD ($) |
1 Months Ended | 6 Months Ended | |
|---|---|---|---|
Mar. 17, 2021 |
Jun. 30, 2021 |
Jun. 23, 2021 |
|
| Liquidity Matters (Textual) | |||
| Net losses | $ (11,510,385) | ||
| Cash | 7,271,669 | ||
| Received net proceeds | 1,788,500 | ||
| Original issue discount | 255,500 | ||
| Principal amount | $ 2,044,000 | ||
| Rate of interest | 10.00% | ||
| Warrants shares (in Shares) | 60,186,982 | ||
| Exercise price (in Dollars per share) | $ 0.05 | ||
| Gross proceeds | $ 3,009,349 | ||
| Agreement, description | the Company entered into Securities Purchase Agreements (the “SPAs”) with several institutional investors, pursuant to which we sold to the Investors in a private placement (i) 30,333,334 shares of our common stock (the “Shares”) and (ii) warrants (the “Warrants”) to purchase up to an aggregate of 15,166,667 shares of our common stock for gross proceeds of approximately $4,550,000. The combined purchase price for one share of common stock and associated Warrant was $0.15. | ||
| Maturity date | Feb. 16, 2022 |
INVESTMENT (Details) - Schedule of investment - USD ($) |
Jun. 30, 2021 |
Jun. 22, 2021 |
Dec. 31, 2020 |
|---|---|---|---|
| INVESTMENT (Details) - Schedule of investment [Line Items] | |||
| Investment | $ 500,001 | $ 1 | |
| Frictionless Technologies, Inc. [Member] | |||
| INVESTMENT (Details) - Schedule of investment [Line Items] | |||
| Investment | 500,000 | $ 500,000 | |
| Vivi Holdings, Inc [Member] | |||
| INVESTMENT (Details) - Schedule of investment [Line Items] | |||
| Investment | $ 1 | $ 1 |
LEASES (Details) |
6 Months Ended |
|---|---|
|
Jun. 30, 2021
USD ($)
| |
| Leases (Textual) | |
| Operating lease expire term | The lease commenced on February 15, 2020 and expires on February 28, 2022, monthly |
| OperatingLeasesRentExpense | $ 3,945 |
| Right of use asset | 86,741 |
| Operating lease liability | 86,741 |
| Security deposit forfeited | $ 4,000 |
| Lease, description | The lease commenced on April 1, 2021 and is for a twelve month period, terminating on April 1, 2022. |
| IBR [Member] | |
| Leases (Textual) | |
| Operating lease expire term | the Company used the 5 year ARM interest rate at the time of entering into the agreement and compared that rate to the Company’s weighted average cost of funding at the time of entering into the operating lease. The Company determined that 10.00% was an appropriate incremental borrowing rate to apply to its real-estate operating lease. |
| Appropriate incremental borrowing rate | 10.00% |
LEASES (Details) - Schedule of right of use assets - USD ($) |
6 Months Ended | 12 Months Ended |
|---|---|---|
Jun. 30, 2021 |
Dec. 31, 2020 |
|
| Non-current assets | ||
| Right of use assets, operating leases, net of amortization | $ 51,926 |
LEASES (Details) - Schedule of lease cost - USD ($) |
6 Months Ended | |
|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Leases [Abstract] | ||
| Operating lease expense | $ 17,857 | $ 17,753 |
LEASES (Details) - Schedule of other lease information |
6 Months Ended |
|---|---|
|
Jun. 30, 2021
USD ($)
| |
| Cash paid for amounts included in the measurement of lease liabilities | |
| Operating cash flows from operating leases | $ (39,070) |
| Remaining lease term – operating lease | 9 months |
| Discount rate – operating lease | 10.00% |
FEDERAL RELIEF LOANS (Details) - USD ($) |
6 Months Ended | |||
|---|---|---|---|---|
Jul. 07, 2020 |
May 07, 2020 |
Jun. 30, 2021 |
Nov. 05, 2020 |
|
| FEDERAL RELIEF LOANS (Details) [Line Items] | ||||
| Earning interest, percentage | 3.75% | |||
| Maturity date | Feb. 16, 2022 | |||
| Repayable installments | $ 731 | $ 2,538 | ||
| Disaster loan amount | $ 150,000 | |||
| Accrued interest | $ 5,517 | |||
| Well Fargo Bank [Member] | ||||
| FEDERAL RELIEF LOANS (Details) [Line Items] | ||||
| Bank loan | $ 60,292 | |||
| Earning interest, percentage | 1.00% | |||
| Payroll Protection Program loan [Member] | ||||
| FEDERAL RELIEF LOANS (Details) [Line Items] | ||||
| Maturity date | May 05, 2022 | |||
LOANS PAYABLE (Details) - USD ($) |
1 Months Ended | 3 Months Ended | 6 Months Ended | ||||
|---|---|---|---|---|---|---|---|
Jul. 17, 2020 |
Dec. 17, 2019 |
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
Dec. 31, 2020 |
|
| Loans Payable (Textual) | |||||||
| Interest expense | $ 0 | $ 238 | $ 134 | $ 561 | |||
| Notes payable | 571 | $ 571 | $ 23,633 | ||||
| Maturity date | Feb. 16, 2022 | ||||||
| Stanislav Minaychenko [Member] | |||||||
| Loans Payable (Textual) | |||||||
| Notes payable | $ 23,893 | ||||||
| Maturity date | Jun. 16, 2020 | ||||||
| Interest rate | 4.00% | ||||||
| Aggregate principal amount | 13,893 | $ 13,893 | |||||
| Interest repaid | 717 | ||||||
| Maxim Pukhoskiy [Member] | |||||||
| Loans Payable (Textual) | |||||||
| Notes payable | $ 17,856 | ||||||
| Maturity date | Jun. 16, 2020 | ||||||
| Interest rate | 4.00% | ||||||
| Aggregate principal amount | 7,656 | 7,656 | |||||
| Interest repaid | 429 | ||||||
| Dieter Busenhart [Member] | |||||||
| Loans Payable (Textual) | |||||||
| Maturity date | Jan. 17, 2021 | ||||||
| Interest rate | 10.00% | ||||||
| Aggregate principal amount | $ 50,000 | $ 500 | 500 | ||||
| Net proceeds | $ 50,000 | ||||||
| Accrued interest | $ 571 | ||||||
LOANS PAYABLE (Details) - Schedule of loans payable - USD ($) |
6 Months Ended | |
|---|---|---|
Jun. 30, 2021 |
Dec. 31, 2020 |
|
| Maturity | Feb. 16, 2022 | |
| Notes payable | $ 571 | $ 23,633 |
| Stanislav Minaychenko [Member] | ||
| Interest Rate | 4.00% | |
| Maturity | Sep. 16, 2020 | |
| Notes payable | 14,530 | |
| Maxim Pukhoskiy [Member] | ||
| Interest Rate | 4.00% | |
| Maturity | Jun. 16, 2020 | |
| Notes payable | 8,041 | |
| Dieter Busenhart [Member] | ||
| Interest Rate | 10.00% | |
| Maturity | Jan. 17, 2021 | |
| Notes payable | $ 571 | $ 1,062 |
CONVERTIBLE NOTES PAYABLE (Details) - USD ($) |
1 Months Ended | 3 Months Ended | 6 Months Ended | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Feb. 19, 2021 |
Feb. 17, 2021 |
Feb. 16, 2021 |
Feb. 12, 2021 |
Feb. 06, 2021 |
Jan. 15, 2021 |
Jan. 11, 2021 |
Sep. 16, 2020 |
Aug. 03, 2020 |
Jul. 13, 2020 |
Jul. 01, 2020 |
Feb. 22, 2021 |
Feb. 18, 2021 |
Feb. 09, 2021 |
Feb. 05, 2021 |
Feb. 03, 2021 |
Nov. 25, 2020 |
Oct. 20, 2020 |
Sep. 24, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Convertible Notes Payable (Textual) | |||||||||||||||||||||||
| Interest expense | $ 51,667 | $ 29,535 | $ 117,459 | $ 83,526 | |||||||||||||||||||
| Amortized of debt discount | 509,600 | $ 213,100 | 2,623,252 | 373,178 | |||||||||||||||||||
| Value of the beneficial conversion feature | 2,569,000 | 326,750 | |||||||||||||||||||||
| Aggregate principal amount | $ 2,044,000 | $ 2,044,000 | |||||||||||||||||||||
| Maturity date | Feb. 16, 2022 | ||||||||||||||||||||||
| Repayments of debt | $ 22,049 | $ 20,000 | |||||||||||||||||||||
| Accrued interest and penalty interest | $ 1.25 | ||||||||||||||||||||||
| Warrant exercisable (in Shares) | 15,166,667 | 15,166,667 | |||||||||||||||||||||
| Exercise price per share (in Dollars per share) | $ 0.24 | $ 0.15 | $ 0.15 | ||||||||||||||||||||
| Description of secured convertible note | On July 28, 2020 the registration statement was declared effective and on July 31, 2020, the Company received the additional net proceeds of $262,500. In addition, the Company issued a warrant exercisable over 8,571,429 shares of common stock at an initial exercise price of $0.05 per share. | ||||||||||||||||||||||
| Bellridge Capital LP. [Member] | |||||||||||||||||||||||
| Convertible Notes Payable (Textual) | |||||||||||||||||||||||
| Accrued interest and penalty interest | $ 1.15 | ||||||||||||||||||||||
| Power Up Lending Group Ltd [Member] | |||||||||||||||||||||||
| Convertible Notes Payable (Textual) | |||||||||||||||||||||||
| Repayments of debt | $ 63,000 | ||||||||||||||||||||||
| Accrued interest and penalty interest | $ 27,083 | ||||||||||||||||||||||
| Power Up Lending Group Ltd [Member] | Convertible Notes Payable Due July 13 2020 [Member] | |||||||||||||||||||||||
| Convertible Notes Payable (Textual) | |||||||||||||||||||||||
| Aggregate principal amount | $ 63,000 | ||||||||||||||||||||||
| Net proceeds | $ 60,000 | ||||||||||||||||||||||
| Maturity date | Jul. 13, 2021 | ||||||||||||||||||||||
| Interest rate | 12.00% | ||||||||||||||||||||||
| Description of conversion terms | The Company could prepay the note with prepayment penalties that ranged from 115% to 135%. The outstanding principal amount of the note was convertible after 180 days, at the election of the holder into shares of the Company’s common stock at a conversion price equal to 61% of the lowest trading price during the previous fifteen trading days. | ||||||||||||||||||||||
| Cavalry Fund LLP [Member] | |||||||||||||||||||||||
| Convertible Notes Payable (Textual) | |||||||||||||||||||||||
| Aggregate principal amount | $ 300,000 | $ 100,000 | $ 114,000 | $ 300,000 | |||||||||||||||||||
| Net proceeds | $ 500,500 | $ 99,750 | |||||||||||||||||||||
| Interest rate | 10.00% | 10.00% | |||||||||||||||||||||
| Description of conversion terms | The transferred Note could be prepaid at any time for the first 90 days at face value plus accrued interest. From day 91 through day 180, the Transferred Note could be prepaid in an amount equal to 115% of the principal amount plus accrued interest. From day 181 through day 365, it could be prepaid in an amount equal to 125% of the principal amount plus accrued interest. The Transferred note contained certain covenants, such as restrictions on: (i) distributions on capital stock, (ii) stock repurchases, and (iii) sales and the transfer of assets. | ||||||||||||||||||||||
| Repayments of debt | $ 172,000 | ||||||||||||||||||||||
| Accrued interest and penalty interest | $ 669 | $ 16,083 | $ 5,583 | $ 4,623 | $ 16,639 | $ 231,286 | |||||||||||||||||
| Senior secured convertible note | $ 572,000 | $ 100,000 | $ 114,000 | ||||||||||||||||||||
| Original issue discount rate | 10.00% | ||||||||||||||||||||||
| Original issue discount | $ 71,500 | $ 14,000 | |||||||||||||||||||||
| Conversion price (in Dollars per share) | $ 0.23 | $ 0.035 | $ 0.035 | $ 0.035 | $ 0.035 | $ 0.035 | $ 0.035 | ||||||||||||||||
| Warrant exercisable (in Shares) | 2,486,957 | 2,857,143 | 3,257,143 | ||||||||||||||||||||
| Exercise price per share (in Dollars per share) | $ 0.24 | $ 0.05 | $ 0.05 | ||||||||||||||||||||
| Common stock shares (in Shares) | 9,030,953 | 3,016,667 | 3,389,238 | 9,046,826 | |||||||||||||||||||
| Unamortized debt discount | $ 362,005 | $ 362,005 | |||||||||||||||||||||
| Cavalry Fund LLP [Member] | 10% Per annum and maturing on June 30, 2021 [Member] | |||||||||||||||||||||||
| Convertible Notes Payable (Textual) | |||||||||||||||||||||||
| Net proceeds | $ 246,600 | ||||||||||||||||||||||
| Interest rate | 10.00% | ||||||||||||||||||||||
| Senior secured convertible note | $ 300,000 | ||||||||||||||||||||||
| Original issue discount rate | 12.50% | ||||||||||||||||||||||
| Original issue discount | $ 37,500 | ||||||||||||||||||||||
| Conversion price (in Dollars per share) | $ 0.035 | ||||||||||||||||||||||
| Warrant exercisable (in Shares) | 8,571,428 | ||||||||||||||||||||||
| Exercise price per share (in Dollars per share) | $ 0.05 | ||||||||||||||||||||||
| Cavalry Fund LLP [Member] | Convertible Promissory Note Two [Member] | |||||||||||||||||||||||
| Convertible Notes Payable (Textual) | |||||||||||||||||||||||
| Description of conversion terms | The Initial Cavalry Note could be prepaid at any time for the first 90 days at face value plus accrued interest. From day 91 through day 180, the Initial Note could be prepaid in an amount equal to 115% of the principal amount plus accrued interest. From day 181 through day 365, it could be prepaid in an amount equal to 125% of the principal amount plus accrued interest. The Initial Cavalry Note contained certain covenants, such as restrictions on: (i) distributions on capital stock, (ii) stock repurchases, and (iii) sales and the transfer of assets. | ||||||||||||||||||||||
| Senior secured convertible note | 300,000 | $ 300,000 | |||||||||||||||||||||
| Cavalry Fund LLP [Member] | Convertible Prommisory Note Two [Member] | |||||||||||||||||||||||
| Convertible Notes Payable (Textual) | |||||||||||||||||||||||
| Description of conversion terms | The Second Cavalry Note could be prepaid at any time for the first 90 days at face value plus accrued interest. From day 91 through day 180, the Second Note could be prepaid in an amount equal to 115% of the principal amount plus accrued interest. From day 181 through day 365, it could be prepaid in an amount equal to 125% of the principal amount plus accrued interest. The Second Cavalry Note contained certain covenants, such as restrictions on: (i) distributions on capital stock, (ii) stock repurchases, and (iii) sales and the transfer of assets. | ||||||||||||||||||||||
| Cavalry Fund LLP [Member] | Convertible Prommisory Note Three [Member] | |||||||||||||||||||||||
| Convertible Notes Payable (Textual) | |||||||||||||||||||||||
| Description of conversion terms | The Third Cavalry Note could be prepaid at any time for the first 90 days at face value plus accrued interest. From day 91 through day 180, the Third Note could be prepaid in an amount equal to 115% of the principal amount plus accrued interest. From day 181 through day 365, it could be prepaid in an amount equal to 125% of the principal amount plus accrued interest. The Third Cavalry Note contained certain covenants, such as restrictions on: (i) distributions on capital stock, (ii) stock repurchases, and (iii) sales and the transfer of assets. | ||||||||||||||||||||||
| Cavalry Fund LLP [Member] | 10% per annum and maturing on February 3, 2022 [Member] | |||||||||||||||||||||||
| Convertible Notes Payable (Textual) | |||||||||||||||||||||||
| Net proceeds | $ 150,500 | ||||||||||||||||||||||
| Interest rate | 10.00% | ||||||||||||||||||||||
| Senior secured convertible note | $ 172,000 | ||||||||||||||||||||||
| Original issue discount | $ 21,500 | ||||||||||||||||||||||
| Conversion price (in Dollars per share) | $ 0.045 | ||||||||||||||||||||||
| Warrant exercisable (in Shares) | 3,822,223 | ||||||||||||||||||||||
| Exercise price per share (in Dollars per share) | $ 0.05 | ||||||||||||||||||||||
| Mercer Street Global Opportunity Fund, LLC [Member] | |||||||||||||||||||||||
| Convertible Notes Payable (Textual) | |||||||||||||||||||||||
| Aggregate principal amount | $ 286,000 | $ 400,000 | |||||||||||||||||||||
| Net proceeds | $ 500,500 | $ 350,000 | $ 250,250 | ||||||||||||||||||||
| Interest rate | 10.00% | 10.00% | 10.00% | ||||||||||||||||||||
| Description of conversion terms | The Initial Mercer note could be prepaid at any time for the first 90 days at face value plus accrued interest. From day 91 through day 180, the note could be prepaid in an amount equal to 115% of the principal amount plus accrued interest. From day 181 through day 365, it could be prepaid in an amount equal to 125% of the principal amount plus accrued interest. The Initial Mercer Note contained certain covenants, such as restrictions on: (i) distributions on capital stock, (ii) stock repurchases, and (iii) sales and the transfer of assets | ||||||||||||||||||||||
| Accrued interest and penalty interest | $ 1,033 | $ 19,411 | $ 231,286 | ||||||||||||||||||||
| Senior secured convertible note | $ 572,000 | $ 400,000 | $ 286,000 | ||||||||||||||||||||
| Original issue discount | $ 71,500 | $ 50,000 | $ 35,750 | ||||||||||||||||||||
| Conversion price (in Dollars per share) | $ 0.23 | $ 0.035 | $ 0.035 | $ 0.045 | |||||||||||||||||||
| Warrant exercisable (in Shares) | 2,486,957 | 11,428,571 | 6,355,556 | ||||||||||||||||||||
| Exercise price per share (in Dollars per share) | $ 0.24 | $ 0.05 | $ 0.05 | ||||||||||||||||||||
| Common stock shares (in Shares) | 11,983,170 | ||||||||||||||||||||||
| Unamortized debt discount | 362,005 | $ 362,005 | |||||||||||||||||||||
| Iroquois Master Fund Ltd.[Member] | |||||||||||||||||||||||
| Convertible Notes Payable (Textual) | |||||||||||||||||||||||
| Aggregate principal amount | $ 228,000 | ||||||||||||||||||||||
| Net proceeds | $ 199,500 | $ 199,500 | |||||||||||||||||||||
| Interest rate | 10.00% | 10.00% | |||||||||||||||||||||
| Description of conversion terms | the Company received conversion notices from Iroquois Master Fund Ltd., converting the aggregate principal amount of $228,000 relating to the Initial Iroquois Note entered into on September 16, 2020 into 6,514,288 shares of common stock at a conversion price of $0.035 per share. The accrued interest of $8,041 on the Initial Iroquois Note remains outstanding. | The Initial Iroquois Note could be prepaid at any time for the first 90 days at face value plus accrued interest. From day 91 through day 180, the note could be prepaid in an amount equal to 115% of the principal amount plus accrued interest. From day 181 through day 365, it could be prepaid in an amount equal to 125% of the principal amount plus accrued interest. The Initial Iroquois Note contained certain covenants, such as restrictions on: (i) distributions on capital stock, (ii) stock repurchases, and (iii) sales and the transfer of assets. | |||||||||||||||||||||
| Accrued interest and penalty interest | $ 823 | ||||||||||||||||||||||
| Senior secured convertible note | $ 228,000 | $ 228,000 | |||||||||||||||||||||
| Original issue discount | $ 28,500 | $ 28,500 | |||||||||||||||||||||
| Conversion price (in Dollars per share) | $ 0.045 | $ 0.035 | $ 0.045 | ||||||||||||||||||||
| Warrant exercisable (in Shares) | 6,514,286 | 5,066,667 | |||||||||||||||||||||
| Exercise price per share (in Dollars per share) | $ 0.05 | $ 0.05 | |||||||||||||||||||||
| Common stock shares (in Shares) | 5,066,667 | ||||||||||||||||||||||
| Mark Geist [Member] | |||||||||||||||||||||||
| Convertible Notes Payable (Textual) | |||||||||||||||||||||||
| Aggregate principal amount | $ 28,600 | ||||||||||||||||||||||
| Description of conversion terms | The note could be prepaid at any time for the first 90 days at face value plus accrued interest. From day 91 through day 180, the note could be prepaid in an amount equal to 115% of the principal amount plus accrued interest. From day 181 through day 365, it could be prepaid in an amount equal to 125% of the principal amount plus accrued interest. The note contained certain covenants, such as restrictions on: (i) distributions on capital stock, (ii) stock repurchases, and (iii) sales and the transfer of assets. | ||||||||||||||||||||||
| Accrued interest and penalty interest | $ 561 | ||||||||||||||||||||||
| Conversion price (in Dollars per share) | $ 0.035 | ||||||||||||||||||||||
| Common stock shares (in Shares) | 833,172 | ||||||||||||||||||||||
| Mark Geist [Member] | 10% Convertible Notes Payable Due October 20, 2021 [Member] | |||||||||||||||||||||||
| Convertible Notes Payable (Textual) | |||||||||||||||||||||||
| Net proceeds | $ 25,025 | ||||||||||||||||||||||
| Interest rate | 10.00% | ||||||||||||||||||||||
| Senior secured convertible note | $ 28,600 | ||||||||||||||||||||||
| Original issue discount | $ 3,575 | ||||||||||||||||||||||
| Conversion price (in Dollars per share) | $ 0.035 | ||||||||||||||||||||||
| Warrant exercisable (in Shares) | 817,143 | ||||||||||||||||||||||
| Exercise price per share (in Dollars per share) | $ 0.05 | ||||||||||||||||||||||
| Bellridge Capital LP. [Member] | |||||||||||||||||||||||
| Convertible Notes Payable (Textual) | |||||||||||||||||||||||
| Aggregate principal amount | $ 206,000 | $ 286,000 | |||||||||||||||||||||
| Accrued interest and penalty interest | $ 5,720 | $ 363,911 | |||||||||||||||||||||
| Conversion price (in Dollars per share) | $ 0.045 | $ 0.035 | |||||||||||||||||||||
| Common stock shares (in Shares) | 4,577,778 | 8,334,857 | |||||||||||||||||||||
| Unamortized debt discount | $ 569,589 | $ 569,589 | |||||||||||||||||||||
| Bellridge Capital LP. [Member] | 10% Convertible Notes Payable Due November 25, 2021 [Member] | |||||||||||||||||||||||
| Convertible Notes Payable (Textual) | |||||||||||||||||||||||
| Net proceeds | $ 250,250 | ||||||||||||||||||||||
| Interest rate | 10.00% | ||||||||||||||||||||||
| Senior secured convertible note | $ 286,000 | ||||||||||||||||||||||
| Original issue discount | $ 35,750 | ||||||||||||||||||||||
| Conversion price (in Dollars per share) | $ 0.035 | ||||||||||||||||||||||
| Warrant exercisable (in Shares) | 8,171,429 | ||||||||||||||||||||||
| Exercise price per share (in Dollars per share) | $ 0.05 | ||||||||||||||||||||||
| Bellridge Capital LP. [Member] | 10% Convertible Notes Payable Due February 16, 2022 [Member] | |||||||||||||||||||||||
| Convertible Notes Payable (Textual) | |||||||||||||||||||||||
| Net proceeds | $ 180,250 | ||||||||||||||||||||||
| Interest rate | 10.00% | ||||||||||||||||||||||
| Senior secured convertible note | $ 206,000 | ||||||||||||||||||||||
| Original issue discount | $ 25,750 | ||||||||||||||||||||||
| Conversion price (in Dollars per share) | $ 0.045 | ||||||||||||||||||||||
| Warrant exercisable (in Shares) | 4,577,778 | ||||||||||||||||||||||
| Exercise price per share (in Dollars per share) | $ 0.05 | ||||||||||||||||||||||
| Bellridge Capital LP. [Member] | 10% Convertible Notes Payable Due February 16, 2022 One [Member] | |||||||||||||||||||||||
| Convertible Notes Payable (Textual) | |||||||||||||||||||||||
| Net proceeds | $ 787,500 | ||||||||||||||||||||||
| Interest rate | 10.00% | ||||||||||||||||||||||
| Senior secured convertible note | $ 900,000 | ||||||||||||||||||||||
| Original issue discount | $ 112,500 | ||||||||||||||||||||||
| Conversion price (in Dollars per share) | $ 0.23 | ||||||||||||||||||||||
| Warrant exercisable (in Shares) | 3,913,044 | ||||||||||||||||||||||
| Exercise price per share (in Dollars per share) | $ 0.24 | ||||||||||||||||||||||
| Bellridge Capital LP. [Member] | Third Bellridge Note [Member] | |||||||||||||||||||||||
| Convertible Notes Payable (Textual) | |||||||||||||||||||||||
| Description of conversion terms | The Third Bellridge Note may be prepaid at any time for the first 90 days at face value plus accrued interest. From day 91 through day 180, the note may be prepaid in an amount equal to 115% of the principal amount plus accrued interest. From day 181 through day 365, it may be prepaid in an amount equal to 125% of the principal amount plus accrued interest. The note contains certain covenants, such as restrictions on: (i) distributions on capital stock, (ii) stock repurchases, and (iii) sales and the transfer of assets. | ||||||||||||||||||||||
DERIVATIVE LIABILITY (Details) |
6 Months Ended |
|---|---|
|
Jun. 30, 2021
USD ($)
| |
| Derivative Liability (Textual) | |
| Derivative liability | $ 2,569,000 |
| Comprehensive loss | $ 3,136,090 |
DERIVATIVE LIABILITY (Details) - Schedule of assumptions were used in the Black-Scholes valuation model - $ / shares |
6 Months Ended | 12 Months Ended |
|---|---|---|
Jun. 30, 2021 |
Dec. 31, 2020 |
|
| Expected dividend rate | 0.00% | 0.00% |
| Minimum [Member] | ||
| Conversion price (in Dollars per share) | $ 0.05 | $ 0.015 |
| Risk free interest rate | 0.07% | 0.09% |
| Expected life of derivative liability | 1 year | 1 month |
| Expected volatility of underlying stock | 181.31% | 171.70% |
| Maximum [Member] | ||
| Conversion price (in Dollars per share) | $ 0.24 | $ 2.00 |
| Risk free interest rate | 0.92% | 1.53% |
| Expected life of derivative liability | 5 years | 12 months |
| Expected volatility of underlying stock | 215.33% | 222.60% |
DERIVATIVE LIABILITY (Details) - Schedule of movement in derivative liability - USD ($) |
6 Months Ended | 12 Months Ended |
|---|---|---|
Jun. 30, 2021 |
Dec. 31, 2020 |
|
| Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
| Opening balance | $ 2,966,416 | $ 905,576 |
| Derivative financial liability arising from convertible note | 2,569,000 | 1,406,369 |
| Fair value adjustment to derivative liability | (3,136,090) | (654,471) |
| Closing balance | $ 2,399,326 | $ 2,966,416 |
STOCKHOLDERS' EQUITY (Details) |
1 Months Ended | 2 Months Ended | 3 Months Ended | 4 Months Ended | 6 Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Apr. 05, 2021
shares
|
Mar. 06, 2021
USD ($)
$ / shares
|
Feb. 22, 2021
$ / shares
shares
|
Dec. 15, 2020
shares
|
May 17, 2021 |
Feb. 22, 2021
$ / shares
shares
|
Feb. 23, 2021
USD ($)
shares
|
Mar. 31, 2021
USD ($)
|
Mar. 31, 2020
USD ($)
|
Jun. 23, 2021
USD ($)
$ / shares
shares
|
Jun. 30, 2021
USD ($)
$ / shares
shares
|
Dec. 31, 2020
USD ($)
$ / shares
shares
|
Jun. 30, 2020
USD ($)
|
|
| Stockholders' Equity (Textual) | |||||||||||||
| Common stock, authorized | 500,000,000 | 500,000,000 | |||||||||||
| Common stock par value (in Dollars per share) | $ / shares | $ 0.0001 | $ 0.0001 | |||||||||||
| Common stock, outstanding | 356,451,678 | 193,637,747 | |||||||||||
| Common stock, issued | 356,451,678 | 193,637,747 | |||||||||||
| Shares of common stock | 2,047,500 | ||||||||||||
| Gross proceeds of common stock (in Dollars) | $ | $ (501,100) | ||||||||||||
| Warrants, description | (i) 30,333,334 shares of its common stock (the “Shares”) and (ii) warrants (the “Warrants”) to purchase up to an aggregate of 15,166,667 shares of its common stock for gross proceeds of approximately $4,550,000. The combined purchase price for one share of common stock and associated Warrant is $0.15. | In terms of the Senior Secured convertible notes entered into with various noteholders as described in note 8 above, the Company issued five year warrants exercisable for a total of 28,709,182 shares of common stock at initial exercise prices ranging from $0.05 to $0.24 per share. The warrants have a cashless exercise option and an exercise limitation based on a certain beneficial ownership percentage of 4.99% which may be adjusted to 9.99%. The exercise price of the warrant is adjustable under the following conditions; i) subsequent equity sales are at a price below the exercise price of the warrant; ii) the Company issues options with an exercise price lower than the exercise price of the warrants; iii) issues convertible securities which are convertible into common stock at a price lower than the warrant exercise price; and iv) the option exercise price or rate of conversion for convertible securities results in a lower exercise price than the exercise price of the warrants. | |||||||||||
| Percentage of cash fee | 8.00% | ||||||||||||
| Sale of stock, description | (i) a management fee equal to 1.0% of the gross proceeds raised in the private placement; (ii) $35,000 for non-accountable expenses and (iii) up to $50,000 for fees and expenses of legal counsel and other out-of-pocket expenses. In addition, the Company agreed to issue to Wainwright (or its designees) placement agent warrants (the “Placement Agent Warrants”) to purchase a number of shares equal to 8.0% of the aggregate number of Shares sold under the Purchase Agreement or warrants to purchase an aggregate of up to 2,426,667 shares of the Company’s common stock. The Placement Agent Warrants generally will have the same terms as the Warrants, except they will have an exercise price of $0.1875. | ||||||||||||
| Number of approved advisory board agreements with individuals | 4 | ||||||||||||
| Agreement duration | 2 years | ||||||||||||
| Notice for termination of agreement | 30 days | ||||||||||||
| Restricted shares awarded for each advisory board member | 2,000,000 | ||||||||||||
| Restricted shares vesting, description | the restricted shares of common stock vest as to 75% on the effective date and 25% on the anniversary date of the agreement. | ||||||||||||
| Shares of restricted common stock | 2,500,000 | ||||||||||||
| Remaining restricted share | 1,000,000 | ||||||||||||
| Restricted stock awards vested | 1,500,000 | ||||||||||||
| Restricted stock awards expense (in Dollars) | $ | $ 72,141 | $ 62,765 | |||||||||||
| Amount of Restricted Net Assets for Consolidated and Unconsolidated Subsidiaries (in Dollars) | $ | $ 194,282 | $ 376,596 | |||||||||||
| Preferred stock, authorized | 25,000,000 | 25,000,000 | |||||||||||
| Preferred stock, par value (in Dollars per share) | $ / shares | $ 0.0001 | $ 0.0001 | |||||||||||
| Purchase of warrants | 20,000,000 | ||||||||||||
| Warrants exercise price (in Dollars per share) | $ / shares | $ 0.24 | $ 0.24 | $ 0.15 | ||||||||||
| Stock based compensation during the current period expense | 4,327,899 | ||||||||||||
| Warrant purchase shares | 15,166,667 | ||||||||||||
| Share price (in Dollars per share) | $ / shares | $ 0.1875 | $ 0.15 | |||||||||||
| Warrants value (in Dollars) | $ | $ 323,924 | $ 2,028,509 | |||||||||||
| Warrant exercisable period | 5 years | ||||||||||||
| Purchase of shares (in Dollars) | $ | $ 2,426,667 | ||||||||||||
| Options intrinsic value, outstanding (in Dollars) | $ | $ 519,543 | $ 0 | |||||||||||
| exercise price than the exercise price of the warrants. Stock options, description | The maximum number of securities available under the Plan is 800,000 shares of common stock. The maximum number of shares of common stock awarded to any individual during any fiscal year may not exceed 100,000 shares of common stock. | ||||||||||||
| Exercise price (in Dollars per share) | $ / shares | $ 0.05 | ||||||||||||
| Debt Conversion Notices [Member] | |||||||||||||
| Stockholders' Equity (Textual) | |||||||||||||
| Number of shares issued on debt conversion | 61,793,616 | ||||||||||||
| Debt conversion (in Dollars) | $ | $ 2,259,221 | ||||||||||||
| Debt conversion (in Dollars) | $ | $ 5,184,447 | ||||||||||||
| Subscription Agreements [Member] | Investor [Member] | |||||||||||||
| Stockholders' Equity (Textual) | |||||||||||||
| Shares of common stock | 60,186,982 | ||||||||||||
| Gross proceeds of common stock (in Dollars) | $ | $ 3,009,349 | ||||||||||||
| Equity Option [Member] | |||||||||||||
| Stockholders' Equity (Textual) | |||||||||||||
| Options intrinsic value, outstanding (in Dollars) | $ | $ 0 | $ 0 | |||||||||||
| Minimum [Member] | |||||||||||||
| Stockholders' Equity (Textual) | |||||||||||||
| Percentage of warrants | 4.99% | ||||||||||||
| Maximum [Member] | |||||||||||||
| Stockholders' Equity (Textual) | |||||||||||||
| Percentage of warrants | 9.99% | ||||||||||||
| 2018 Stock Incentive Plan [Member] | |||||||||||||
| Stockholders' Equity (Textual) | |||||||||||||
| Purchase of shares | 208,333 | ||||||||||||
| Exercise price (in Dollars per share) | $ / shares | $ 0.24 | $ 0.24 | |||||||||||
| Common Stock [Member] | |||||||||||||
| Stockholders' Equity (Textual) | |||||||||||||
| Common stock, authorized | 500,000,000 | 500,000,000 | |||||||||||
| Common stock par value (in Dollars per share) | $ / shares | $ 0.0001 | $ 0.0001 | |||||||||||
| Common stock, outstanding | 356,451,678 | ||||||||||||
| Common stock, issued | 356,451,678 | 193,637,747 | |||||||||||
| Gross proceeds of common stock (in Dollars) | $ | |||||||||||||
| Preferred Stock [Member] | |||||||||||||
| Stockholders' Equity (Textual) | |||||||||||||
| Gross proceeds of common stock (in Dollars) | $ | |||||||||||||
| Preferred stock, authorized | 25,000,000 | 25,000,000 | |||||||||||
| Preferred stock, par value (in Dollars per share) | $ / shares | $ 0.0001 | $ 0.0001 | |||||||||||
STOCKHOLDERS' EQUITY (Details) - Schedule of assumptions were used in the Black-Scholes valuation model |
Jun. 30, 2021
$ / shares
|
|---|---|
| Expected life [Member] | |
| Expected life | 5 years |
| Expected dividend rate [Member] | |
| Warrants percentage | 0.00% |
| Minimum [Member] | Exercise price [Member] | |
| Exercise price (in Dollars per share) | $ 0.05 |
| Minimum [Member] | Risk free interest rate [Member] | |
| Warrants percentage | 0.46% |
| Minimum [Member] | Expected volatility of underlying stock [Member] | |
| Warrants percentage | 213.84% |
| Maximum [Member] | Exercise price [Member] | |
| Exercise price (in Dollars per share) | $ 0.24 |
| Maximum [Member] | Risk free interest rate [Member] | |
| Warrants percentage | 0.92% |
| Maximum [Member] | Expected volatility of underlying stock [Member] | |
| Warrants percentage | 215.33% |
NET LOSS PER SHARE (Details) - Schedule of dilutive shares - shares |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Anti-dilutive shares | 76,025,215 | 101,297,827 | 76,025,215 | 101,297,827 |
| Convertible debt [Member] | ||||
| Anti-dilutive shares | 13,626,666 | 99,663,682 | 13,626,666 | 99,663,682 |
| Stock options [Member] | ||||
| Anti-dilutive shares | 516,666 | 100,000 | 516,666 | 100,000 |
| Warrants to purchase shares of common stock [Member] | ||||
| Anti-dilutive shares | 57,304,104 | 1,534,145 | 57,304,104 | 1,534,145 |
RELATED PARTY TRANSACTIONS (Details) |
Feb. 22, 2021
USD ($)
$ / shares
shares
|
|---|---|
| James Fuller [Member] | |
| Related Party Transactions (Textual) | |
| Purchase of shares | shares | 208,333 |
| Exercise price | $ / shares | $ 0.24 |
| Andrey Novikov [Member] | |
| Related Party Transactions (Textual) | |
| Purchase of shares | shares | 208,333 |
| Exercise price | $ / shares | $ 0.24 |
| William Corbett [Member] | |
| Related Party Transactions (Textual) | |
| Exercise price | $ / shares | $ 0.24 |
| Warrant to purchase shares | shares | 20,000,000 |
| Salary expense | $ | $ 30,000 |
COMMITMENTS AND CONTINGENCIES (Details) |
6 Months Ended |
|---|---|
|
Jun. 30, 2021
USD ($)
| |
| Commitments and Contingencies (Textual) | |
| Rental expense | $ 3,945 |
COMMITMENTS AND CONTINGENCIES (Details) - Schedule of lease commitments |
Jun. 30, 2021
USD ($)
|
|---|---|
| Total instalments due: | |
| Remainder of 2021 | $ 28,800 |
| 2022 | 19,200 |
| Total operating lease liability | $ 48,000 |
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