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FORM 10-K
TABLE OF CONTENTS
i
PART I
Unless the context requires otherwise, references to “we,” “us,” “our,” “the Company” “IPSI” and “Innovative Payment Solutions,” refer to Innovative Payment Solutions, Inc. and its subsidiaries.
CAUTIONARY Note Regarding Forward-Looking Statements
Many of the matters discussed within this Annual Report on Form 10-K (this “Annual Report”) which do not expressly relate to historical facts, contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), on our current expectations, intentions and projections about future events. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “potential,” “continue,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” and similar expressions. These statements are based on our current beliefs, expectations, and assumptions and are subject to significant risks and uncertainties, many of which are difficult to predict and generally beyond our control, that could cause actual results (including, without limitation, the results of our digital payment product launches and other strategic plans and initiatives) to differ materially from those expressed, projected or implied in or by the forward-looking statements. Such significant risks and uncertainties include the risks noted under Part 1. “Business”, and Part I, Item 1A, Risk Factors, Part II, Item 7”, “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” but are also contained elsewhere. We do not undertake any obligation to update any forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Annual Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. Considering the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We do not undertake any obligation to update any forward-looking statements.
1
SUMMARY RISK FACTORS
Our business faces significant risks and uncertainties of which investors should be aware before making a decision to invest in our common stock. If any of the following risks are realized, our business, financial condition and results of operations could be materially and adversely affected. The following is a summary of the more significant risks relating to the Company. A more detailed description of our risk factors set forth under the caption “Risk Factors” in Item 1A in Part I of, and elsewhere in, this Annual Report.
Risks Relating to our Company
| ● | We have had very limited operations to date with our new business model. |
| ● | We have generated, and we will likely continue to generate, operating losses and experience negative cash flows, and it is uncertain whether we will achieve profitability. | |
| ● | The COVID-19 pandemic has caused and may continue to cause a delay in our roll out plans, which has negatively impacted our ability to generate revenue and operations and our results of operations. | |
| ● | We will need additional funding and may be unable to raise capital when needed, which would force us to delay, reduce or eliminate our product development programs or commercialization efforts. | |
| ● | We have identified material weaknesses in our internal controls, and we cannot provide assurances that these weaknesses will be effectively remediated or that additional material weaknesses will not occur in the future. | |
| ● | We have not generated sufficient revenue or cash flow to pay our convertible debt, and conversion of such debt into shares of common stock, which could cause significant dilution. | |
| ● | Servicing our debt requires a significant amount of cash. Our ability to generate sufficient cash to service our debt depends on many factors beyond our control. | |
| ● | Covenant restrictions under our indebtedness may limit our ability to operate our business. |
Risks Relating to our Business
| ● | The payment services industry is highly competitive, and many of our competitors are larger and have greater financial and other resources. |
| ● | There is uncertainty as to market acceptance of our technology, products and services. | |
| ● | We expect to be subject to extensive government regulation if we are deemed to be engaged in a regulated business or if we implement our cryptocurrency operations, we are faced with the risk that new regulations applicable to our business will be enacted. |
Risks Related to our Plans to Launch Various Digital Payment Products
| ● | There can be no assurance that we will be successful in developing digital payment products. |
| ● | There is uncertainty in the accounting treatment of digital assets and therefore we cannot predict the impact our new digital asset line of business will have on our financial statements. | |
| ● | The regulatory regime governing digital assets and offerings of digital assets is evolving and uncertain, and new regulations or policies may materially adversely affect our development. | |
| ● | We may have difficulty managing our growth, which may divert resources and limit our ability to successfully expand our operations. |
2
General Risk Factors
| ● | The laws and regulations regarding our industry is constantly evolving and failure to comply adversely impact our business. | |
| ● | As our business develops, we will need to implement enhanced compliance processes, procedures and controls with respect to the rules and regulations that apply to our business. | |
| ● | Our systems and our third party providers’ systems may fail due to factors beyond our control, which could interrupt our service, cause us to lose business and increase our costs. | |
| ● | Our payment system might be used for fraudulent, illegal or improper purposes, which could expose us to additional liability and harm our business. | |
| ● | We may not be able to successfully protect the intellectual property we license or own and may be subject to infringement claims. |
Risks Relating to our Securities
| ● | There is currently a limited public trading market for our common stock and an active market may never develop. | |
| ● | Our stock price has fluctuated in the past, has recently been volatile and may be volatile in the future, and as a result, investors in our common stock could incur substantial losses. | |
| ● | Because we became public by means of a reverse merger, we may not be able to attract the attention of brokerage firms. | |
| ● | Our board of directors has historically had significant control over us and we have yet to establish committees comprised of independent directors. |
Item 1. Business
Company Overview
We are a provider of digital payment solutions and services to businesses and consumers. We are focused on operating and developing “e-wallets” that enable consumers to deposit cash, convert it into a digital form, and remit the funds to Mexico and other countries quickly and securely. Our first e-wallet, the Beyond Wallet, is currently operational. Our flagship e-wallet, IPSIPay, was soft launched in December 2021 and will be fully launched during the second quarter of 2022.
Previously, we intended to invest in physical kiosks which required the user presence at digital payment kiosk locations, and we still intend to use our existing kiosks in certain target markets within Southern California.
We acquired a 10% strategic interest in Frictionless Financial Technologies, Inc. (“Frictionless”), on June 22, 2021. Frictionless agreed to deliver to us, a live fully compliant financial payment Software as a Service solution for use by us as a digital payment platform that enables payments within the United States and abroad, including Mexico, together with a service agreement providing a full suite of product services to facilitate our anticipated product offerings. We have an irrevocable right to acquire up to an additional 41% of the outstanding common stock of Frictionless at a purchase price of $300,000 for each 1% acquired.
On August 26, 2021, we formed a new majority owned subsidiary, Beyond Fintech Inc. (“Beyond Fintech”), in which we own a 51% stake, with Frictionless owning the remaining 49%. Beyond Fintech acquired an exclusive license to our Beyond Wallet offering to further its objective of providing virtual payment services allowing U.S. persons to transfer funds to Mexico and other countries.
Our Strategy and Market
We offer a simple digital e-wallet and digital payment solution for consumers and businesses. We soft launched our IPSIPay app in December 2021 and plan to fully launch our IPSIPay and Beyond Wallet e-wallet brands in the second quarter of 2022. As a California based fintech company, our initial launch will be in the Central Valley region in California, which is the largest agricultural belt in the U.S. Our platform (which can be used both business-to-business and business-to-consumer) will facilitate the transfer of funds in digital form to other countries, initially Mexico but also, India and the Philippines, primarily from hand-held devices as well as on desktop or laptop computers.
3
Our launch plan for IPSIPay and Beyond Wallet is to target lower income, migrant communities in California (notably in the agriculture industry), and expanding to other states with large migrant populations such as Texas and Florida. According to the American Immigration Counsel, in 2018, 10.6 million immigrants (foreign-born individuals) comprised 27 percent of the population of California, and the top country of origin for immigrants was Mexico, at 38 percent of immigrants. According to The Wilson Center Mexico Institute, the market for money remittance from California to Mexico during 2021 was estimated to be approximately $16.25 billion. We therefore believe our market is not only large and growing, but that servicing this market is socially responsible. We believe our digital payment facilitation platform and related apps will empower and enable the unbanked and under-served and payment providers who service these users, acting as a bridge to provide access to comprehensive and easy to use payment solutions. Given the large size of our addressable market, our ability to capture even a very small share of the market represents a significant revenue opportunity for our company.
Previously, we intended to provide digital payment solutions via kiosks, as part of our strategy. However due to the delays experienced with the COVID-19 pandemic, we pivoted to a mobile platform, we believe will offer our users more convenience, security and efficiency through hand-held mobile devices, while significantly reducing our capital expenditures.
Services and Business Model
Our primary sources of revenue is commissions and fees from the use of our digital suite of products without physical custody of customer funds. Our fully functional apps includes the ability to use an e-wallet, Visa debit cards, bill payment platform, e-commerce and the ability to buy gold and silver. We believe we have the ability and technology to add micro-loans, tele-medicine services as well as payroll services to our apps in the future.
In addition to these revenue generators, we intend releasing our BeyondAgro software to enable growers to improve business management and management of contract employees, particularly migrant workers. This will be offered as a monthly fee-based SaaS platform.
Our revenue will include fees derived from the use of debit cards, ATM fees, merchant processing fees, money transfer fees, commissions on international bill payments and, in the near future micro-loans and tele-medicine.
Marketing
We intend to initially focus on the underserved labor markets, initially focusing on the Californian agriculture industry to acquire customers for our IPSIPay and Beyond Wallet apps. We will use direct social media marketing strategies to the business to consumer market.
Our marketing effort will be directed towards businesses, initially towards agricultural businesses. In marketing our software platform, we believe we have a differentiated product that will allow agricultural companies to pay their laborers with e-wallet money transfers instead of traditional check payments. The laborers will then be able to transfer funds, pay utility bills and send money abroad cheaper and more conveniently with instant settlement, a product offering that, we believe, does not exist at present.
Competition
The payment service business is highly competitive and continued growth depends on our ability to compete effectively. Companies like Western Union, Money Gram, Paypal, and Venmo, dominate the money remittance business, and most of our competitors have far greater sources of financing, greater name recognition and have been engaged in the industry longer than we have.
We believe, however that the differentiator with the IPSIPay and Beyond Wallet apps is our ability to provide the unbanked and under-served the ability to transact without the use of a traditional bank account, with greater convenience, lower costs and instant settlement, and with free wallet-to-wallet transfers, and the ability to upload funds onto Visa debit cards across borders. We believe the design of our apps will be highly attractive to our initial target communities, thus allowing our product to compete effectively.
Intellectual Property
We rely on a combination of contractual rights, copyright, trademark and trade secret laws to establish and protect our technology and the technology that we license and/or that we develop in the future. We presently have three trademark applications on file and under review, and our 51% subsidiary Beyond Fintech has an additional three trademark applications on file and under review.
Government and Environmental Regulation and Laws
We act as a facilitator between consumers and finance product providers, and therefore operate in a highly regulated industry. While we do not believe that our core business as a facilitator presently is subject to significant government regulation our finance product providers are subject to a variety of regulations aimed at preventing money laundering and financing criminal activity and terrorism, financial services regulations, payment services regulations, consumer protection laws, currency control regulations, advertising laws and privacy and data protection laws and therefore may expect to experience periodic investigations by various regulatory authorities in connection with the same, which may sometimes result in monetary or other sanctions being imposed upon them. Many of these laws and regulations are constantly evolving and are often unclear and inconsistent with other applicable laws and regulations, making compliance challenging, and may indirectly increase our operating costs and legal risks (or directly should it be determined that our business model is or becomes subject to more extensive regulation). In particular, there has been increased public attention and heightened legislation and regulations regarding money laundering and terrorist financing. Our providers may have to make significant judgment calls in applying anti-money laundering legislation and risk being found in non-compliance with such laws, and these judgement calls, to the extent they curtail the availability of the applicable financial product, could harm our business.
4
To the extent our business is or will be involved in the utilization of blockchain or cryptocurrency, the regulatory regime governing these sectors is highly uncertain, and new regulations or policies may materially adversely affect our business plans. Regulation of cryptocurrencies, blockchain technologies and cryptocurrency exchanges, is currently undeveloped and likely to rapidly evolve as government agencies take greater interest in them. Regulation also varies significantly among international, federal, state and local jurisdictions and is subject to significant uncertainty.
In addition, any violations of laws and regulations relating to the safeguarding of private information in connection with IPSIPay and Beyond Wallet, could subject us to fines, penalties or other regulatory actions, as well as to civil actions by affected parties.
Any violations of any of the foregoing or similar laws, rules or regulations could adversely affect our ability to maintain IPSIPay and Beyond Wallet, which could have a material adverse effect on our operations and financial condition. Failure by us to comply with any laws, rules and regulations, some of which may not exist yet or are subject to interpretation and may be subject to change, could result in a variety of adverse consequences, including civil penalties and fines.
Human Capital/Employees
As of December 31, 2021, we had 6 full time employees, including our Chief Executive Officer and President or Chief Financial Officer and 4 employees. None of our employees are represented by a labor union, and we consider our employee relations to be good.
Our Corporate History and Background
We were incorporated on September 25, 2013 under the laws of the State of Nevada originally under the name Asiya Pearls, Inc. On May 27, 2016, Asiya Pearls, Inc. filed a Certificate of Amendment to its Articles of Incorporation to change its name from Asiya Pearls, Inc. to QPAGOS.
On May 12, 2016, we (at that time, under the name QPAGOS), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Qpagos Corporation, a Delaware corporation (“Qpagos Corporation”), and Qpagos Merge, Inc., a Delaware corporation and wholly owned subsidiary of our company (“Merger Sub”). Pursuant to the Merger Agreement, on May 12, 2016, the merger was consummated, and Qpagos Corporation and Merger Sub merged (the “Merger”), with Qpagos Corporation continuing as the surviving corporation of the Merger.
Pursuant to the Merger Agreement, upon consummation of the Merger, each share of Qpagos Corporation’s capital stock issued and outstanding immediately prior to the Merger was converted into the right to receive two shares of our common stock, par value $0.0001 per share (the “Common Stock”). Additionally, pursuant to the Merger Agreement, upon consummation of the Merger, we assumed all of Qpagos Corporation’s warrants issued and outstanding immediately prior to the Merger, which were exercisable for approximately 621,920 shares of Common Stock, respectively, as of the date of the Merger. Prior to and as a condition to the closing of the Merger, the then-current stockholder of 500,000 shares of Common Stock agreed to return to us 497,500 shares of Common Stock held by such holder and the then-current stockholder retained an aggregate of 2,500 shares of Common Stock and the other stockholders retained 500,000 shares of Common Stock. Therefore, immediately following the Merger, Qpagos Corporation’s former stockholders held 4,992,900 shares of Common Stock which represented approximately 91% of the then outstanding Common Stock.
The Merger was treated as a reverse acquisition of our company, which was then a public shell company, for financial accounting and reporting purposes. As such, Qpagos Corporation was treated as the acquirer for accounting and financial reporting purposes while IPSI was treated as the acquired entity for accounting and financial reporting purposes.
Qpagos Corporation was incorporated on May 1, 2015 under the laws of the state of Delaware to effectuate a reverse merger transaction with Qpagos, S.A.P.I. de C.V. (“Qpagos Mexico”) and Redpag Electrónicos S.A.P.I. de C.V. (“Redpag”). Each of the entities were incorporated in November 2013 in Mexico.
Qpagos Mexico was formed to process payment transactions for service providers it contracts with, and Redpag was formed to deploy and operate kiosks as a distributor.
On June 1, 2016, our board of directors of changed our fiscal year end from October 31 to December 31.
On November 1, 2019, we changed our name from QPAGOS to Innovative Payment Solutions, Inc. Additionally, and immediately following the name change, we filed a Certificate of Change with the Secretary of State of the State of Nevada to affect a reverse split of the Common Stock at a ratio of 1-for-10, effective on November 1, 2019 (the Reverse Stock Split”). As a result of the Reverse Stock Split, each ten pre-split shares of Common Stock outstanding automatically combined into one new share of Common Stock without any further action on the part of the holders, and the number of outstanding shares of Common Stock was reduced from 320,477,867 shares to 32,047,817 after rounding for fractional shares.
On December 31, 2019, we consummated the disposal of Qpagos Corporation, Qpagos Mexico and Redpag in exchange for 2,250,000 shares (the “Vivi Shares”) of common stock of Vivi Holdings, Inc. (“Vivi” or “Vivi Holdings”) pursuant to a Stock Purchase Agreement dated August 5, 2019 (the “SPA”). Of the 2,250,000 shares of Vivi, nine percent (9%) was allocated as follows: Gaston Pereira (5%), Andrey Novikov (2.5%), and Joseph Abrams (1.5%). The SPA closed on December 31, 2019 after the satisfaction of customary conditions, the receipt of a final fairness opinion and the approval of our shareholders. As a result of this transaction, we no longer has any Mexican subsidiaries.
5
We acquired a 10% strategic interest in Frictionless on June 22, 2021. Frictionless agreed to deliver to us, a live, fully compliant financial payment Software as a Service solution for use by us as a digital payment platform that enables payments within the United States and abroad, including Mexico, together with a service agreement providing a full suite of product services to facilitate our anticipated product offerings. We hold an irrevocable right to acquire up to an additional 41% of the outstanding common stock of Frictionless at a purchase price of $300,000 for each 1% acquired.
On August 26, 2021, we formed a new subsidiary, Beyond Fintech to acquire a product known as Beyond Wallet from a third party, together with the logo, use of name and implementation of the product into our technology. We own 51% of Beyond Fintech with the other 49% owned by Frictionless.
Corporate Information
Our principal offices are located at 56B 5th Street, Lot 1, AT#, Carmel by the Sea, CA, 93921, and our telephone number at that office is (866) 477-4729. Our website address is www.ipsipay.com. Information contained in our website does not form part of this Annual Report and is intended for informational purposes only.
Available Information
We have included our website address as a factual reference and do not intend it to be an active link to our website. We make available on our website, www.ipsipay.com., our Annual Reports on Form 10-K, quarterly Reports on Form 10-Q and Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. These reports are available free of charge through the investor relations page of our internet website as soon as reasonably practicable after those reports are filed with the SEC.
Item 1A. Risk Factors
Risks Relating to our Company
We have had very limited operations to date with our new business model.
In December 2019, we sold our Mexican subsidiaries and are now focused on developing our U.S. based business. To date, as a result of COVID-19 business closures and the resultant impact on being able to travel and meet suppliers and customers, in person, the launch of our e-wallets and the installation of a limited network of kiosks in Southern California has been delayed. As such, we have a very limited operating history in our current business model, which makes it difficult to evaluate both our operating history and our future potential. We have yet to demonstrate our ability to overcome the risks frequently encountered in the payment services industry in the United States and are still subject to many of the risks common to early stage companies, including the uncertainty as to our ability to implement our business plan, market acceptance of our proposed business and services, under-capitalization, cash shortages, limitations with respect to personnel, financing and other resources and uncertainty of our ability to generate revenues. There is no assurance that our activities will be successful or will result in any revenues or profit, and the likelihood of our success must be considered in light of the stage of our development. There can be no assurance that we will be able to consummate our business strategy and plans, or that financial, technological, market, or other limitations may force us to modify, alter, significantly delay, or significantly impede the implementation of such plans. We have insufficient results for investors to use to identify historical trends. Investors should consider our prospects considering the risk, expenses and difficulties we will encounter as an early-stage company. Our revenue and income potential is unproven and our business model is continually evolving. We are subject to the risks inherent to the operation of a new business enterprise and cannot assure you that we will be able to successfully address these risks.
We have generated and we will likely continue to generate, operating losses and experience negative cash flows, and it is uncertain whether we will achieve profitability.
For the years ended December 31, 2021 and 2020, we incurred a net loss of $14,494,915 and $5,444,544, respectively. We have an accumulated deficit of $42,111,701 through December 31, 2021. We expect to continue to incur operating losses until such time, if ever, as we are able to achieve sufficient levels of revenue from operations. There can be no assurance that we will ever generate significant sales or achieve profitability. Accordingly, the extent of future losses and the time required to achieve profitability, if ever, cannot be predicted.
We also expect to experience negative cash flows for the foreseeable future as we fund our operating losses. Although we believe our existing cash and cash equivalents will be sufficient for the next twelve months, if in the long term we do not generate significant revenues or raise additional financing in order to achieve and maintain profitability. We may not be able to generate these revenues or achieve profitability in the future. Our failure to achieve or maintain profitability would likely negatively impact the value of our securities and financing activities.
6
The COVID-19 pandemic has caused and may continue to cause a delay in our roll out plans, which has negatively impacted our ability to generate revenue and operations and results of operations.
The COVID-19 pandemic has required our management to focus their attention primarily on responding to the challenges presented by the pandemic, including ensuring continuous operations, and adjusting our operations to address changes in the virtual payments industry. Due to measures imposed by the local governments in areas affected by COVID-19, businesses have been suspended due to quarantine intended to contain this outbreak and many people have been forced to work from home in those areas. As a result, development of our e-wallets and the limited installation of our network of kiosks in Southern California has been delayed, which has had an adverse impact on our business and financial condition and has hampered our ability to generate revenue and access usual sources of liquidity on reasonable terms. As the COVID-19 pandemic evolves, we may face similar challenges in the future which could lead to material adverse impacts on our company.
We will need additional funding and may be unable to raise capital when needed, which would force us to delay, reduce or eliminate our product development programs or commercialization efforts.
As of December 31, 2021, we had cash and cash equivalents of $5,449,751. We believe that based on our current operating plan, our existing cash and cash equivalents will be sufficient to enable us to fund our operations and our debt and other obligations for the near term. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” below. However, we will need additional funds to fully implement our business plan as we seek to achieve revenues, positive cash flow and profitability. There is a material risk that we will be unable to generate sufficient revenues to pay our expenses, and if our existing sources of cash and cash flows are insufficient to fund our activities, we will need to raise additional funds. Additional equity or debt financing may not be available on acceptable terms, if at all, particularly in the current economic environment. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of our new products in development.
Until such time, if ever, as we can generate substantial product revenues, we will be required to finance our cash needs through public or private equity offerings, debt financings and corporate collaboration and licensing arrangements. If we raise additional funds by issuing equity securities, our stockholders may experience dilution. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Any debt financing or additional equity that we may raise may contain terms, such as liquidation and other preferences, that are not favorable to us or our stockholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish valuable rights to our technologies, research programs or product candidates or grant licenses on terms that may not be favorable to us.
If we are unsuccessful in achieving profitability, and we cannot obtain additional funds on commercially reasonable terms or at all, we may be required to significantly reduce or cease our operations, which could result in the loss to investors of their investment in our securities.
We have identified material weaknesses in our internal controls, and we cannot provide assurances that these weaknesses will be effectively remediated or that additional material weaknesses will not occur in the future.
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a- 15(f) under the Exchange Act. We have identified material weaknesses in our internal controls. As of December 31, 2021, which included (i) insufficient segregation of duties and oversight of work performed in our accounting and finance function due to limited personnel with the appropriate skill sets and (ii) lack of written policies and procedures to address all material transactions and developments impacting our financial statements. As a result of these weaknesses, we are faced with the risk that we may not always be able to detect errors or omissions in our financial reporting. We may be unable to satisfactorily remediate our internal control weaknesses, and if we fail to comply with the rules under Sarbanes-Oxley related to disclosure controls and procedures in the future, or, if we continue to have material weaknesses and other deficiencies in our internal control and accounting procedures and disclosure controls and procedures, our stock price could decline significantly and raising capital could be more difficult. If additional material weaknesses or significant deficiencies are discovered or if we otherwise fail to address the adequacy of our internal control and disclosure controls and procedures our business may be harmed. Moreover, effective internal controls are necessary for us to produce reliable financial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our securities could drop significantly.
7
We have not generated sufficient revenue or cash flow to pay our convertible debt, and conversion of such debt into shares of common stock, which could cause significant dilution.
As of December 31, 2021, we had outstanding convertible debt in the principal amount of $2,044,000. To date, we have not generated sufficient revenue or cash flows to pay the balances owed under these notes and provide sufficient working capital to run our business. The outstanding principal amount of the notes is convertible at any time and from time to time at the election of the holder after certain periods of time into shares of our common stock at discounts to the market price of our common stock. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the notes), the notes each will become immediately due and payable and we have agreed to pay additional default interest rates. We may not have sufficient cash resources or access to funding to repay such notes. Moreover, upon conversion of these notes, our current shareholders will suffer dilution, which could be significant.
Servicing our debt requires a significant amount of cash. Our ability to generate sufficient cash to service our debt depends on many factors beyond our control.
Our ability to make payments on and to refinance our debt, to fund planned capital expenditures and to maintain sufficient working capital depends on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. We cannot assure you that our business will generate sufficient cash flow from operations or from other sources in an amount sufficient to enable us to service our debt or to fund our other liquidity needs. If our cash flow and capital resources are insufficient to allow us to make scheduled payments on our debt, we may need to seek additional capital or restructure or refinance all or a portion of our debt on or before the maturity thereof, any of which could have a material adverse effect on our business, financial condition or results of operations. We cannot assure you that we will be able to refinance any of our debt on commercially reasonable terms or at all, or that the terms of that debt will allow any of the above alternative measures or that these measures would satisfy our scheduled debt service obligations. If we are unable to generate sufficient cash flow to repay or refinance our debt on favorable terms, it could significantly adversely affect our financial condition and the value of our outstanding debt. Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. There can be no assurance that we will be able to obtain any financing when needed.
Covenant restrictions under our indebtedness may limit our ability to operate our business.
Our outstanding convertible notes contain, and our future indebtedness agreements may contain covenants that restrict our ability to finance future operations or capital needs or to engage in other business activities. The Notes restrict our ability to:
| ● | incur, assume or guarantee or suffer to exist any indebtedness for borrowed money of any kind, including, but not limited to, a guarantee, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom other than Permitted Indebtedness (as defined in the notes); |
| ● | repurchase capital stock; |
| ● | repay any Indebtedness (as defined in the notes) other than certain secured notes which are no longer outstanding or Permitted Indebtedness or make other restricted payments including, without limitation, paying dividends and making investments; |
| ● | create liens; |
| ● | sell or otherwise dispose of assets; and |
| ● | enter into transactions with affiliates. |
In addition, the notes contain price protection anti-dilution provisions that will discourage financing at prices below the conversion price of the notes and will result in a decrease in the conversion price of the notes if we should issue securities below such price.
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We are dependent on technology networks and systems to process, transmit and securely store electronic information and we could be subject to liability if our technology systems fail to be secure.
We could be held liable for damages or our reputation could suffer from security breaches or disclosure of confidential information or personal data. We are dependent on technology networks and systems to process, transmit and securely store electronic information and to communicate with our kiosks, with our partners and with our customers. Security breaches of this infrastructure could lead to shutdowns or disruptions of our systems and potential loss or unauthorized disclosure of confidential information or data, including personal data. The theft and/or unauthorized use or publication of our, or our customers’, confidential information or other proprietary business information as a result of such an incident could adversely affect our competitive position and reduce marketplace acceptance of our services. Any failure in the networks or computer systems used by us or our customers could result in a claim for substantial damages against us and significant reputational harm, regardless of our responsibility for the failure. In addition, the Company will have access to or are required to manage, utilize, collect and store sensitive or confidential customer or employee data, including personal data. As a result, we are subject to numerous U.S. and non-U.S. laws and regulations designed to protect this information, such as various U.S. federal and state laws governing the protection of personal data. If any person, including any of our employees, negligently disregards or intentionally breaches controls or procedures with which we are responsible for complying with respect to such data, or otherwise mismanages or misappropriates that data, or if unauthorized access to or disclosure of data in our possession or control occurs, we could be subject to liability and penalties in connection with any violation of applicable privacy laws and/or criminal prosecution, as well as significant liability to our customers or our customers’ clients’ for breaching contractual confidentiality and security provisions or privacy laws. The loss or unauthorized disclosure of sensitive or confidential customer or employee data, including personal data, whether through breach of computer systems, systems failure, employee negligence, fraud or misappropriation, or otherwise, could damage our reputation and cause us to lose customers. Similarly, unauthorized access to or through our information systems and networks or those we develop or manage for our customers, whether by our employees or third parties, could result in negative publicity, legal liability and damage to our reputation, which could in turn harm our business, results of operations, or financial condition.
Risks Related to Our Business
The payment services industry is highly competitive, and many of our competitors are larger and have greater financial and other resources.
The payment services industry is highly competitive, and our continued growth depends on our ability to compete effectively with both traditional and non-traditional payment service providers. We currently expect to face competition from a variety of financial and non-financial business groups which include retail banks, non-traditional payment service providers which provide mobile top-up services, and mobile network operators, traditional kiosk and terminal operators, electronic payment system operators, as well as other companies that provide various forms of payment services, including electronic payment and payment processing services. Competitors in our industry seek to differentiate themselves by features and functionalities such as speed, convenience, network size, accessibility, hours of operation, reliability and price. A significant number of these competitors have greater financial, technological and marketing resources than we have, and operate robust networks and are highly regarded by consumers.
There is uncertainty as to market acceptance of our technology, products and services.
We have conducted our own research into the markets for our technology, products and services; however, because we are a new entrant into the market, there is a risk that the market will not accept our technology, products and services. Further, we have limited information on which to estimate our anticipated level of sales. Our products and services require consumers and service providers to adopt our technology. Our industry is susceptible to rapid technological developments and there can be no assurance that we will be able to match any new technological advances. If we are unable to match the technological changes in the needs of our customers, the demand for our products will be reduced and our ability to generate revenue could be adversely impacted.
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We are subject to the economic risk and business cycles of our merchants, agents and the overall level of consumer spending.
The payment services industry depends heavily on the overall level of consumer spending. We are exposed to general economic conditions that affect consumer confidence, consumer spending, consumer discretionary income or changes in consumer purchasing habits. Economic factors such as employment levels, business conditions, energy and fuel costs, interest rates, and inflation rate could reduce consumer spending or change consumer purchasing habits. A reduction in the amount of consumer spending could result in a decrease in our revenue and profits. If our merchants make fewer sales of their products and services using our services or consumers spend less money per transaction, we will have fewer transactions to process at lower amounts, resulting in lower revenue. Weakening in the Mexican economy could have a negative impact on our merchants, as well as consumers who purchase products and services using our payment processing systems, which could, in turn, negatively impact our business, financial condition and results of operations, particularly if the recessionary environment disproportionately affects some of the market segments that represent a larger portion of our payment processing volume. In addition, these factors could force some of our merchants and/or agents to liquidate their operations or go bankrupt, or could cause our agents to reduce the number of their locations or hours of operation, resulting in reduced transaction volumes. We also have a certain amount of fixed costs, including salaries and rent, which could limit our ability to adjust costs and respond quickly to changes affecting the economy and our business.
If consumer confidence in our business deteriorates, our business, financial condition and results of operations could be adversely affected.
Our business is built on consumers’ confidence in our brands, as well as our ability to provide fast, reliable payment services. As a consumer business, the strength of our brand and reputation are of paramount importance to us. Several factors could adversely affect consumer confidence in our brand, many of which are beyond our control, and could have an adverse impact on our results of operations. These factors include:
| ● | any regulatory action or investigation against us; |
| ● | any significant interruption to our systems and operations; and |
| ● | any breach of our security systems or any compromises of consumer data. |
Our business will initially be geographically concentrated and could be significantly affected by any adverse change in the region in which we operate.
Initially our business will be concentrated in states such as California and later Texas and Florida, which have high migrant populations. We plan to derive all of our revenues from our businesses operating from these migrant states and expect to continue to derive a significant portion of our revenue from customers in these migrant states for the near future. Therefore, our business is exposed to adverse regulatory and competitive changes, economic downturns and changes in political conditions in these migrant states. Moreover, due to the concentration of our businesses in these migrant states, our business is less diversified and, accordingly, is subject to regional risks, including inclement weather, power outages, labor shortages, and state and local laws, rules and regulations.
We expect to be subject to extensive government regulation if we are deemed to be engaged in a regulated business or if we implement our cryptocurrency operations, and we are faced with the risk that new regulations applicable to our business will be enacted
Currently, we are indirectly impacted by government regulation, however, we may be directly subject to a variety of regulations aimed at preventing money laundering and financing criminal activity and terrorism, financial services regulations, payment services regulations, consumer protection laws, currency control regulations, advertising laws and privacy and data protection laws which may sometimes result in monetary or other sanctions being imposed on our financial service providers or us. Many of these laws and regulations are constantly evolving, and are often unclear and inconsistent with other applicable laws and regulations, making compliance challenging and could directly or indirectly increase our related operating costs and legal risks. In particular, there has been increased public attention and heightened legislation and regulations regarding money laundering and terrorist financing. Our financial service providers or us, may have to make significant judgment calls in applying anti-money laundering legislation and risk being found in non-compliance with such laws. The cryptocurrency business is subject to extensive regulation, see Risks Related to our Plans to Launch Various Digital Payment Cryptocurrency Products-The regulatory regime governing blockchain technologies and cryptocurrencies is evolving and uncertain, and new regulations or policies may materially adversely affect our business in the future.
We may have difficulty managing our growth, which may divert resources and limit our ability to successfully expand our operations.
Our implementation of our business plan and current or future strategic initiatives will place significant demands on our operations and management. Our future success will depend on the ability of our officers and other key employees to continue to implement and improve our operational, credit, financial, management and other internal risk controls and processes, along with our reporting systems and procedures, as the number and geographical scope of our customer and vendor relationships continue to expand. We may be unable to implement improvements to our management information and control systems and control procedures and processes in an efficient or timely manner, and we may discover additional deficiencies in existing systems and controls. In particular, our controls and procedures must be able to accommodate our expected increase in revenue. Our growth strategy may require us to incur additional expenditures to expand our administrative and operational infrastructure. If we are unable to manage future expansion in our operations, we may experience compliance and operational problems, have to slow the pace of growth or have to incur additional expenditures beyond current projections to support such growth, any one of which could adversely affect our business and results of operations. We may be unable to increase the volume of sales at acceptable risk levels, expand our customer base and manage the costs and implementation risks associated with our growth strategy. We also cannot provide you with any assurance that our further expansion will be profitable, that we will be able to maintain any specific level of growth, if any, that we will be able to maintain capital sufficient to support our continued growth or that we will be able to adequately and profitably manage that growth.
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Risks Related to our Plans to Launch Various Digital Payment Products
There can be no assurance that we will be successful in launching digital payment products.
We have developed and will launch various digital payment products in the second quarter, including, IPSIPay and Beyond Wallet. No assurance can be given that we will be able to successfully launch these products as and when planned. Moreover, the growth of the digital payments industry in general is subject to a high degree of uncertainty, and the slowing or stopping of the development or acceptance of developing protocols may occur unpredictably. This would have a material adverse impact on our results of operations and the viability of our current business model.
The regulatory regime governing digital assets and offerings of digital assets is evolving and uncertain, and new regulations or policies may materially adversely affect our development.
The regulatory regime governing digital assets and offerings of digital assets is uncertain, and new regulations or policies may materially adversely affect the development and the value of the Company. Regulation of digital assets is currently undeveloped and likely to rapidly evolve as government agencies take greater interest in them. Regulation also varies significantly among international, federal, state and local jurisdictions and is subject to significant uncertainty. Various legislative and executive bodies in the United States and in other countries may in the future adopt laws, regulations, or guidance, or take other actions, which may severely impact the digital assets market. In addition, any violations of laws and regulations relating to the safeguarding of private information in connection with e-Wallets could subject us to fines, penalties or other regulatory actions, as well as to civil actions by affected parties. Any such violations could adversely affect the ability of the Company to maintain e-Wallets, which could have a material adverse effect on our operations and financial condition. Failure by us to comply with any laws, rules and regulations, some of which may not exist yet or are subject to interpretation and may be subject to change, could result in a variety of adverse consequences, including civil penalties and fines.
General Risk Factors
The laws and regulations indirectly affecting our industry is constantly evolving and failure to comply adversely impact our business.
Our business is indirectly subject to a wide range and increasing number of laws and regulations, as described below. Liabilities or loss of business resulting from a failure by us, our agents or their subagents to comply with laws and regulations and regulatory or judicial interpretations thereof, including laws and regulations designed to protect consumers, or detect and prevent money laundering, terrorist financing, fraud and other illicit activity, and increased costs or loss of business associated with compliance with those laws and regulations has had and we expect will continue to have an adverse effect on our business, financial condition, results of operations, and cash flows. Our services are subject to increasingly strict legal and regulatory requirements, including those intended to help detect and prevent money laundering, terrorist financing, fraud, and other illicit activity. The interpretation of those requirements by judges, regulatory bodies and enforcement agencies may change quickly and with little notice. Additionally, these requirements or their interpretations in one jurisdiction may conflict with those of another jurisdiction. As United States federal and state as well as foreign legislative and regulatory scrutiny and enforcement action in these areas increase, we expect that our costs of complying with these requirements could continue to increase, perhaps substantially, and may make it more difficult or less desirable for consumers and others to use our services or for us to contract with certain intermediaries, either of which would have an adverse effect on our revenue and operating income. For example, we have made additional investments in our compliance programs based on the rapidly evolving and increasingly complex global regulatory and enforcement environment and our internal reviews. These additional investments relate to enhancing our compliance capabilities, including our consumer protection efforts. Further, failure by us or partners and service providers to comply with any of these requirements or their interpretation could result in the suspension or revocation of a license or registration required to provide money transfer, payment or foreign exchange services, the limitation, suspension or termination of services, changes to our business model, loss of consumer confidence, the seizure of our assets, and/or the imposition of civil and criminal penalties, including fines and restrictions on our ability to offer services. We are subject to numerous regulations such as those imposed by the Foreign Corrupt Practices Act (the “FCPA”) in the United States and similar laws in other countries, which generally prohibit companies and those acting on their behalf from making improper payments to foreign government officials for the purpose of obtaining or retaining business. Some of these laws, such as the Bribery Act, also prohibit improper payments between commercial enterprises. Because our services are offered in other countries, we face significant risks associated with our obligations under the FCPA and other national anti-corruption laws. Any determination that we have violated these laws could have an adverse effect on our business, financial condition, results of operations, and cash flows. Our United States business is subject to reporting, recordkeeping and anti-money laundering provisions of the BSA and could be subject to regulatory oversight and enforcement by FinCEN.
The remittance and digital payments industry has come under increasing scrutiny from government regulators and others in connection with its ability to prevent its services from being abused by people seeking to defraud others. Our failure to continue to help prevent frauds and increased costs related to the implementation of enhanced anti-fraud measures, or a change in fraud prevention laws or their interpretation or the manner in which they are enforced has had and could in the future have an adverse effect on our business, financial condition, results of operations, and cash flows.
Further, any determination that our partners have violated laws and regulations could seriously damage our reputation and brands, resulting in diminished revenue and profit and increased operating costs. In some cases, we could be liable for the failure of our partners to comply with laws which also could have an adverse effect on our business, financial condition, results of operations, and cash flows. The regulations implementing the remittance provisions of the Dodd-Frank Act also impose responsibility on us for any related compliance failures of our partners.
The requirements under the PSD/PSD2, the Dodd-Frank Act and similar legislation enacted or proposed in other countries have resulted and will likely continue to result in increased compliance costs, and in the event we or our agents are unable to comply, could have an adverse impact on our business, financial condition, results of operations, and cash flows. Additional countries may adopt similar legislation.
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We may not be able to complete or integrate successfully any potential future acquisitions, partnerships or joint ventures.
From time-to-time, we may evaluate possible acquisition transactions, partnerships or joint ventures, some of which may be material. Potential future acquisitions, partnerships and joint ventures may pose significant risks to our existing operations if they cannot be successfully integrated. These projects would place additional demands on our managerial, operational, financial and other resources, create operational complexity requiring additional personnel and other resources and require enhanced control procedures. In addition, we may not be able to successfully finance or integrate any businesses, services or technologies that we acquire or with which we form a partnership or joint venture. Furthermore, the integration of any acquisition may divert management’s time and resources from our core business and disrupt our operations. Moreover, even if we were successful in integrating newly acquired assets, expected synergies or cost savings may not materialize, resulting in lower than expected benefits to us from such transactions. We may spend time and money on projects that do not increase our revenue. Additionally, when making acquisitions it may not be possible for us to conduct a detailed investigation of the nature of the assets being acquired due to, for instance, time constraints in making the decision and other factors. We may become responsible for additional liabilities or obligations not foreseen at the time of an acquisition. In addition, in connection with any acquisitions, we must comply with various antitrust requirements. It is possible that perceived or actual violations of these requirements could give rise to regulatory enforcement action or result in us not receiving all necessary approvals in order to complete a desired acquisition. To the extent we pay the purchase price of any acquisition in cash, it would reduce our cash reserves, and to the extent the purchase price is paid with our stock, it could be dilutive to our stockholders. To the extent we pay the purchase price with proceeds from the incurrence of debt, it would increase our level of indebtedness and could negatively affect our liquidity and restrict our operations. All of the above risks could have a material adverse effect on our business, results of operations, financial condition, and prospects.
We are subject to the discretion of administrative enforcement agencies.
In certain cases, regulations may provide administrative discretion regarding enforcement, and regulations may be applied inconsistently across the industry, resulting in increased costs for the Company that may not be incurred by competitors. Changes in laws, regulations or other industry practices and standards, or interpretations of legal or regulatory requirements, may reduce the market for or value of our products or services or render our products or services less profitable or obsolete. For example, policymakers may impose heightened customer due diligence requirements or other restrictions, fees or taxes on remittances. Changes in the laws affecting the kinds of entities that are permitted to act as money transfer agents (such as changes in requirements for capitalization or ownership) could adversely affect our ability to distribute certain services and the costs of providing those services.
A significant change or disruption in international migration patterns could adversely affect our business, financial condition and results of operations.
Our money transfer business relies in part on international migration patterns, as individuals move from their native countries to countries with greater economic opportunities or a more stable political environment. A significant portion of money transfer transactions are initiated by immigrants or refugees sending money back to their native countries. Changes in immigration laws that discourage international migration and political or other events (such as war, trade wars, terrorism or health emergencies including but not limited to the COVID-19 pandemic) that make it more difficult for individuals to migrate or work abroad could adversely affect our money transfer remittance volume or growth rate. Specifically, since the start of the COVID-19 pandemic, many governments have initiated, resumed or extended social distancing rules, lockdowns or shelter-in-place orders resulting in the inability of many individuals to migrate or work abroad, which has impacted our business. The resulting economic impact of prior and ongoing COVID-19 governmental lockdown orders could continue to negatively impact our business. Furthermore, continuing increases in COVID-19 cases occurring now or in the future could result in a return to lockdowns and shelter-in-place orders by governments which could negatively impact our business. Additionally, sustained weakness in global economic conditions could reduce economic opportunities for migrant workers and result in reduced or disrupted international migration patterns. Reduced or disrupted international migration patterns, particularly in the U.S. or Europe, are likely to reduce money transfer transaction volumes and therefore have an adverse effect.
Major bank failure or sustained financial market illiquidity, or illiquidity at our clearing, cash management and custodial financial institutions, could adversely affect our business, financial condition and results of operations.
We face certain risks in the event of a sustained deterioration of financial market liquidity, as well as in the event of sustained deterioration in the liquidity, or failure, of our clearing, cash management and custodial financial institutions. In particular:
| ● | We may be unable to access funds in our investment portfolio, deposit accounts and clearing accounts on a timely basis to settle our payment instruments, pay money transfers and make related settlements to agents. Any resulting need to access other sources of liquidity or short-term borrowing would increase our costs. Any delay or inability to settle our payment instruments, pay money transfers or make related settlements with our agents could adversely impact our business, financial condition and results of operations. |
| ● | In the event of a major bank failure, we could face major risks to the recovery of our bank deposits used for the purpose of settling with our agents and to the recovery of a significant portion of our investment portfolio. A substantial portion of our cash, cash equivalents and interest-bearing deposits are either held at banks that are not subject to insurance protection against loss or exceed the deposit insurance limit. |
| ● | may be unable to borrow from financial institutions or institutional investors on favorable terms, which could adversely impact our ability to pursue our growth strategy and fund key strategic initiatives. |
If financial liquidity deteriorates, there can be no assurance we will not experience an adverse effect, which may be material, on our ability to access capital and on our business, financial condition and results of operations.
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As our business develops, we will need to implement enhanced compliance processes, procedures and controls with respect to the rules and regulations that apply to our business.
Our success requires significant public confidence in our ability to handle large and growing payment volumes and amounts of consumer funds, as well as comply with applicable regulatory requirements. Any failure to manage consumer funds or to comply with applicable regulatory requirements could result in the imposition of fines, harm our reputation and significantly diminish use of our products. In addition, if we are not in compliance with anti-corruption laws and other laws governing the conduct of business with government entities and/or officials (including local laws), we may be subject to criminal and civil penalties and other remedial measures, which could have an adverse impact on our business, financial condition, results of operations and prospects.
If we cannot keep pace with rapid developments and change in our industry and provide new services to our clients, the use of our services could decline, reducing our revenues.
The payment services industry in which we operate is characterized by rapid technological change, new product and service introductions, evolving industry standards, changing customer needs and the entrance of more established market players seeking to expand into these businesses. In order to remain competitive, we continually seek to expand the services we offer and to develop new projects, including, for example, the electronic wallet. These projects carry risks, such as delays in delivery, performance problems and lack of customer acceptance. In our industry, these risks are acute. Any delay in the delivery of new services or the failure to differentiate our services or to accurately predict and address market demand could render our services less desirable, or even obsolete, to consumers. In addition, if alternative payment mechanisms become widely available, substituting our current products and services, and we do not develop and offer similar alternative payment mechanisms successfully and on a timely basis, our business and prospects could be adversely affected. Furthermore, we may be unable to recover the costs we have incurred in developing new services. Our development efforts could result in increased costs and we could also experience a loss in business that could reduce our earnings or could cause a loss of revenue if promised new services are not timely delivered to our clients, we are not able to compete effectively with our competitors’ or do not perform as anticipated. If we are unable to develop, adapt to or access technological changes or evolving industry standards on a timely and cost effective basis, our business, financial condition and results of operations could be materially adversely affected.
Our systems and our third party providers’ systems may fail due to factors beyond our control, which could interrupt our service, cause us to lose business and increase our costs.
We depend on the efficient and uninterrupted operation of numerous systems, including our computer systems, software and telecommunications networks, as well as the data centers that we lease from third parties. Our systems and operations, or those of our third party providers, could be exposed to damage or interruption from, among other things, fire, flood, natural disaster, power loss, telecommunications failure, vendor failure, unauthorized entry, improper operation and computer viruses. Substantial property and equipment loss, and disruption in operations, as well as any defects in our systems or those of third parties or other difficulties could expose us to liability and materially adversely impact our business, financial condition and results of operations. In addition, any outage or disruptive efforts to our data center would result in the failure of our computers and kiosks to operate and would, if for an extensive period, adversely impact our reputation, brand and future prospects.
Unauthorized disclosure of data, whether through cybersecurity breaches, computer viruses or otherwise, could expose us to liability, protracted and costly litigation and damage our reputation.
We store and/or transmit sensitive data, such as mobile phone numbers, and we have ultimate liability to our consumers for our failure to protect this data. If breaches occur our encryption of data and other protective measures may not prevent unauthorized disclosure of data. Unauthorized disclosure of data or a cybersecurity breach could harm our reputation and deter clients from using electronic payments generally, our kiosks and our products and services specifically, increase our operating expenses in order to correct the breaches or failures, expose us to uninsured liability, increase our risk of regulatory scrutiny, subject us to lawsuits, result in the imposition of material penalties and fines by state authorities and otherwise materially adversely affect our business, financial condition and results of operations.
Customer complaints or negative publicity about our customer service could affect attractiveness of our services adversely and, as a result, could have an adverse effect on our business, financial condition and results of operations.
Customer complaints or negative publicity about our customer service could diminish consumer confidence in, and the attractiveness of, our services. Breaches of our consumers’ privacy and our security systems could have the same effect. We sometimes take measures to combat risks of fraud and breaches of privacy and security, such as freezing consumer funds, which could damage relations with our consumers. These measures heighten the need for prompt and attentive customer service to resolve irregularities and disputes. Effective customer service requires significant personnel expense, and this expense, if not managed properly, could impact our profitability significantly. Any inability by us to manage or train our customer service representatives properly could compromise our ability to handle customer complaints effectively. If we do not handle customer complaints effectively, our reputation may suffer, and we may lose our customers’ confidence, which could have a material adverse effect on our business, financial condition and results of operations.
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Our payment system might be used for fraudulent, illegal or improper purposes, which could expose us to additional liability and harm our business.
Despite measures we have taken and continue to take, our payment system remains susceptible to potentially illegal or improper uses. These may include use of our payment services in connection with fraudulent sales of goods or services, illicit sales of prescription medications or controlled substances, software and other intellectual property piracy, money laundering, bank fraud and prohibited sales of restricted products. In the past there have been news articles on how organized crime groups have used other payment services to transfer money in the course of illegal transactions.
Criminals are using increasingly sophisticated methods to engage in illegal activities such as counterfeiting and fraud. It is possible that incidents of fraud could increase in the future. Our risk management policies and procedures may not be fully effective to identify, monitor and manage these risks. We are not able to monitor in each case the sources for our counterparties’ funds or the ways in which they use them. Increases in chargebacks or other liability could have a material adverse effect on our business, financial condition and results of operations. Furthermore, an increase in fraudulent transactions or publicity regarding chargeback disputes could harm our reputation and reduce consumer confidence in the use of our kiosks and electronic wallets.
We may not be able to successfully protect the intellectual property we license or own and may be subject to infringement claims.
We rely on a combination of contractual rights, copyright, trademark and trade secret laws to establish and protect our technology and the technology that we license and/or that we develop in the future. We and our subsidiary have applied for trademark protection for certain marks (notably IPSIPay), but there is a risk that such trademarks will not be approved, which could leave us without important protections for our brand.
Also, we customarily require our employees and independent contractors to execute confidentiality agreements or otherwise to agree to keep our proprietary information and the information we license confidential when their relationship with us begins. Typically, our employment contracts also include clauses requiring our employees to assign to us all the inventions and intellectual property rights they develop in the course of their employment and to agree not to disclose our confidential information. Nevertheless, others, including our competitors, may independently develop similar technology to that licensed by us, duplicate our services or design around our intellectual property. Further, contractual arrangements may not prevent unauthorized disclosure of our confidential information or ensure an adequate remedy in the event of any unauthorized disclosure of our confidential information. We may have to litigate to enforce or determine the scope or enforceability of our intellectual property rights (including trade secrets and know-how), which could be expensive, could cause a diversion of resources and may not prove successful. The loss of intellectual property protection could harm our business and ability to compete and could result in costly redesign efforts, discontinuance of certain service offerings or other competitive harm. Additionally, we do not hold any patents for our business model or our business processes, and we do not currently intend to obtain any such patents in the United States or elsewhere.
We may also be subject to costly litigation in the event our services or the technology that we license are claimed to infringe, misappropriate or otherwise violate any third party’s intellectual property or proprietary rights. Such claims could include patent infringement, copyright infringement, trademark infringement, trade secret misappropriation or breach of licenses. We may not be able to successfully defend against such claims, which may result in a limitation on our ability to use the intellectual property subject to these claims and might require us to redesign affected services, enter into costly settlement or license agreements, pay costly damage awards, or face a temporary or permanent injunction prohibiting us from marketing or selling certain of our services. In such circumstances, if we cannot or do not license the infringed technology on reasonable terms or substitute similar technology from another source, our revenue and earnings could be adversely impacted. Additionally, in recent years, non-practicing entities have been acquiring patents, making claims of patent infringement and attempting to extract settlements from companies in our industry. Even if we believe that such claims are without merit and successfully defend these claims, defending against such claims is time consuming and expensive and could result in the diversion of the time and attention of our management and employees.
We may use open-source software in a manner that could be harmful to our business.
We use open source software in connection with our technology and services. The original developers of the open source code provide no warranties on such code. Moreover, some open source software licenses require users who distribute open source software as part of their software to publicly disclose all or part of the source code to such software and/or make available any derivative works of the open source code on unfavorable terms or at no cost. The use of such open source code may ultimately require us to replace certain code used in our products, pay a royalty to use some open source code or discontinue certain products. Any of the above requirements could be harmful to our business, financial condition and operations.
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We do not have and may be unable to obtain sufficient insurance to protect ourselves from business risks.
While we hold certain mandatory types of insurance policies, we do not currently maintain insurance coverage for business interruption, property damage or loss of key management personnel, as we have been unable to obtain these on commercially acceptable terms. We do not hold insurance policies to cover for any losses resulting from counterparty and credit risks or fraudulent transactions. We also do not generally maintain separate funds or otherwise set aside reserves for most types of business-related risks. Accordingly, our lack of insurance coverage or reserves with respect to business-related risks may expose us to substantial losses, which could materially adversely affect our business, financial condition and results of operations.
We rely on certain key personnel and in a dynamic industry like ours, the ability to attract, recruit, retain and develop qualified personnel is critical to our success and growth.
We rely substantially on the efforts of our current senior management, including our Chief Executive Officer, William Corbett, and our President and Chief Financial Officer, Richard Rosenblum. Our business would be impeded or harmed if we were to lose their services. In addition, our business functions at the intersection of rapidly changing technological, social, economic and regulatory developments that require a wide-ranging set of expertise and intellectual capital. In order for us to compete and grow successfully, we must attract, recruit, retain and develop the necessary personnel who can provide the needed expertise across the entire spectrum of our capital needs. This is particularly true with respect to qualified and experienced software engineers and IT staff, who are highly sought after. The market for such personnel is highly competitive, and we may not succeed in recruiting additional personnel or may fail to replace effectively current personnel who depart with qualified or effective successors. Our efforts to retain and develop personnel may result in significant additional expenses, which could adversely affect our profitability. We cannot assure you that we will be able to attract and retain qualified personnel in the future. Failure to retain or attract key personnel could have a material adverse effect on our business, financial condition and results of operations.
Risks Relating to Our Securities
There is currently a limited public trading market for our common stock and one may never develop.
There currently is a limited public trading market for our securities, and it is not assured that any such public market will develop in the foreseeable future. Moreover, there can be no assurance that even if our common stock is approved for listing on an exchange or is quoted in the over-the-counter market in the future, that an active trading market will develop or be sustained. Therefore, we cannot predict the prices at which our common stock will trade in the future, if at all. As a result, our investors may have limited or no ability to liquidate their investments.
Trading in our common stock is conducted on the OTCQB, as we currently do not meet the initial listing criteria for any registered securities exchange. The OTCQB and OTC Markets are less recognized markets than the registered securities exchanges and is often characterized by low trading volume and significant price fluctuations. These and other factors may further impair our stockholders’ ability to sell their shares when they want to and/or could depress our stock price. As a result, stockholders could find it difficult to dispose of, or obtain accurate quotations of the price of our securities because smaller quantities of shares could be bought and sold, transactions could be delayed and security analyst and news coverage of our Company may be limited. If a public market for our common stock does develop, these factors could result in lower prices and larger spreads in the bid and ask prices for our shares of common stock.
Because our common stock may be a “penny stock,” it may be more difficult for investors to sell shares of our common stock, and the market price of our common stock may be adversely affected.
Our common stock is deemed to be a “penny stock” if, among other things, the stock price is below $5.00 per share, it is not listed on a national securities exchange, or it has not met certain net tangible asset or average revenue requirements. Broker-dealers who sell penny stocks must provide purchasers of these stocks with a standardized risk-disclosure document prepared by the SEC. This risk-disclosure document provides information about penny stocks and the nature and level of risks involved in investing in the penny-stock market. A broker must also give a purchaser, orally or in writing, bid and offer quotations and information regarding broker and salesperson compensation, make a written determination that the penny stock is a suitable investment for the purchaser and obtain the purchaser’s written agreement to the purchase. Broker-dealers must also provide customers that hold penny stock in their accounts with such broker-dealer a monthly statement containing price and market information relating to the penny stock. If a penny stock is sold to an investor in violation of the penny stock rules, the investor may be able to cancel its purchase and get their money back.
If applicable, the penny stock rules may make it difficult for stockholders to sell their shares of our common stock. Because of the rules and restrictions applicable to a penny stock, there is less trading in penny stocks and the market price of our common stock may be adversely affected. Also, many brokers choose not to participate in penny stock transactions. Accordingly, stockholders may not always be able to resell their shares of our common stock publicly at times and prices that they feel are appropriate.
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Our stock price has fluctuated in the past, and has been subject to volatility and future volatility may result in our investors incurring substantial losses.
Our stock price has fluctuated in the past, has been subject to volatility and may be volatile in the future. We may incur rapid and substantial decreases in our stock price in the foreseeable future that are unrelated to our operating performance. For example, the COVID-19 pandemic and its variants and the Russia-Ukraine conflict has caused broad stock market and industry fluctuations. Furthermore, the market prices for companies operating in our industry have experienced extreme volatility. As a result of this volatility, investors may experience losses on their investment in our common stock. The market price for our common stock may be influenced by many factors, including the following:
| ● | investor reaction to our business strategy; |
| ● | the success of competitive products or technologies; |
| ● | regulatory or legal developments in the United States and other countries, especially changes in laws or regulations applicable to our products; |
| ● | variations in our financial results or those of companies that are perceived to be similar to us; |
| ● | our ability or inability to raise additional capital and the terms on which we raise it; |
| ● | declines in the market prices of stocks generally; |
| ● | our public disclosure of the terms of any financing which we consummate in the future; |
| ● | our failure to generate revenue and positive cash flow or to become profitable; |
| ● | our failure to raise working capital; |
| ● | announcements by us or our competitors of significant contracts, new services, acquisitions, commercial relationships, joint ventures or capital commitments; |
| ● | cancellation of key contracts; |
| ● | our failure to meet financial forecasts we publicly disclose; |
| ● | trading volume of our common stock; |
| ● | sales of our common stock by us or our stockholders; |
| ● | general economic, industry and market conditions; and |
| ● | other events or factors, including those resulting from such events, or the prospect of such events, including war, terrorism and other international conflicts, public health issues including health epidemics or pandemics, such as the continued spread of COVID-19 and its variants, and natural disasters such as fire, hurricanes, earthquakes, tornados or other adverse weather and climate conditions, whether occurring in the United States or elsewhere, could disrupt our operations, disrupt the operations of our suppliers or result in political or economic instability. |
These broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance. Since the stock price of our common stock has fluctuated in the past, has been recently volatile and may be volatile in the future, investors in our common stock could incur substantial losses. In the past, following periods of volatility in the market, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect our business, financial condition, results of operations and growth prospects. There can be no guarantee that our stock price will remain at current prices or that future sales of our common stock will not be at prices lower than those sold to investors.
16
Because we became public by means of a reverse merger, we and our shareholders may be faced with regulatory constraints, and we may not be able to attract the attention of brokerage firms.
Additional risks may exist because we became public through a reverse merger. For example, our status as a former “shell company” may limit the ability of shareholders to utilize SEC Rule 144 to sell their shares. Further, as we did not become a public company via a traditional, underwritten initial public offering, securities analysts of brokerage firms may not provide coverage of our company since there is little incentive for brokerage firms to recommend the purchase of our common stock. In addition, institutional investors may have limitations on investing in reverse merger companies, which could limit the universe of potential investors for our company. No assurance can be given that brokerage firms will want to conduct secondary offerings on our behalf in the future. In addition, if we were to attempt to up-list the listing of our securities on a national securities exchange we will likely be subject to additional listing requirements applicable to entities that became public through a reverse merger.
Compliance with the reporting requirements of federal securities laws are expensive and time consuming.
We are a public reporting company in the United States, and accordingly, subject to the information and reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and other federal securities laws, and the compliance obligations of the Sarbanes-Oxley Act of 2002. The costs (in terms of expenses and the required dedication of management’s time and attention) of preparing and filing annual and quarterly reports and other information with the SEC and furnishing audited reports to stockholders are substantial. If we do not provide current information about our company to market makers, they will not be able to trade our stock. Failure to comply with the applicable securities laws could result in private or governmental legal action against us or our officers and directors, which could have a detrimental impact on our business and financials, the value of our stock, and the ability of stockholders to resell their stock.
Our investors’ ownership will likely be diluted in the future.
In the future, we will likely issue additional authorized but previously unissued equity securities, resulting in the dilution of ownership interests of our present stockholders. We expect to need to issue a substantial number of shares of common stock or other securities convertible into or exercisable for common stock in connection with hiring or retaining employees, future acquisitions, raising additional capital in the future to fund our operations, and other business purposes. Additional shares of common stock issued by us in the future, including shares issued upon exercise of the warrants and the outstanding notes, will dilute an investor’s investment in the Company.
Our board of directors has historically had significant control over us and we have yet to establish committees comprised of independent directors.
Each of our board members has significant control over all corporate issues. In addition, two of our six directors serve as our officers. We have not established board committees comprised of independent members, and we do not have an audit or compensation committee comprised of independent directors. Our six directors performed these functions, despite not all being independent directors. Thus, there is potential conflict in that two of our directors were also engaged in management and participated in decisions concerning management compensation and audit issues that may affect management and IPSI’s performance.
We do not expect to pay dividends on our common stock in the foreseeable future.
We have not paid cash dividends on our common stock to date and we do not expect to pay dividends on our common stock for the foreseeable future, and we may never pay dividends. Consequently, the only opportunity for investors to achieve a return on their investment may be if an active trading market develops, and investors are able to sell their shares for a profit or if our business is sold at a price that enables investors to recognize a profit, neither of which we can guarantee will ever take place. Our payment of any future dividends will be at the discretion of our Board of Directors after taking into account various factors, including but not limited to our financial condition, operating results, cash needs, and growth plans. See Item 5 “Dividend Policy.”
We do not have an independent compensation committee, which presents the risk that compensation and benefits paid to those executive officers who are board members and other officers may not be commensurate with its financial performance.
A compensation committee consisting of independent directors is a safeguard against self-dealing by company executives. Our board of directors is comprised of two executive officers and four other directors, and absent an independent compensation committee currently determines the compensation and benefits of our executive officers, administers our employee stock and benefit plans, and reviews policies relating to the compensation and benefits of our employees. Our lack of an independent compensation committee presents the risk that our executive officers on the board may have influence over their personal compensation and benefits levels that may not be commensurate with its financial performance.
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Limitations on director and officer liability and indemnification of our officers and directors by our articles of incorporation, as amended, and by-laws it may discourage stockholders from bringing suit against an officer or director.
Our articles of incorporation, as amended, and bylaws provide, with certain exceptions as permitted by Nevada law, that a director or officer shall not be personally liable to us or our stockholders for breach of fiduciary duty as a director or officer, unless the director or officer committed both a breach of fiduciary duty and such breach was accompanied by intentional misconduct, fraud or knowing violation of law. These provisions may discourage stockholders from bringing suit against a director or officer for breach of fiduciary duty and may reduce the likelihood of derivative litigation brought by stockholders on behalf of us against a director or officer.
We are responsible for the indemnification of our officers and directors.
Should our officers and/or directors require us to contribute to their defense in an action brought against them in their capacity as such, we may be required to spend significant amounts of our capital. Our articles of incorporation, as amended, and bylaws also provide for the indemnification of our directors, officers, employees, and agents, under certain circumstances, against attorney’s fees and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities on behalf of us. In addition, we have entered into an indemnification agreement with our Chief Executive Officer. This indemnification policy could result in substantial expenditures, which we may be unable to recoup. If these expenditures are significant or involve issues which result in significant liability for our key personnel, we may be unable to continue operating as a going concern.
Item 1B. Unresolved Staff Comments
None
Item 2. Properties
The Company operates out of leased premises in Carmel by the Sea, California. The lease commenced on March 22, 2021 and terminates on April 1, 2022, monthly rental expense is $4,800 per month with no escalations during the term of the lease.
Item 3. Legal Proceedings
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business.
On October 20, 2021, a complaint was filed against our company and certain of its officers and directors with the Occupational Safety and Health Administration of the United Stated Department of Labor, captioned Naum Voloshin, Yulia Rey, Alexander Voloshin, Andrey Novikov, and Frank Perez v. Innovative Payment Solutions, Inc., William Corbett, Richard Rosenblum, Madisson Corbett, Jim Fuller, Cliff Henry and David Rios. The complaint generally alleges that complainants, former employees of our company, did not receive compensation to which they claim they were entitled and that they were wrongfully terminated for engaging in protected activities in violation of the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1514A, including reporting concerns about the adequacy of our internal controls. The complaint seeks reinstatement of complainants’ employment, monetary damages including back pay, raises, bonuses, benefits, overtime, emotional distress and loss of reputation, orders of abatement and injunctive relief, and costs of litigation. While the outcome of this action is presently uncertain at this point, we intend to vigorously defend against the action. To date, this matter has proceeded in the ordinary course of litigation. We may engage in alternative dispute resolution with the plaintiffs but there can be no assurance that these efforts will be successful.
Other than as set forth above, we are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition or cash flows.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities
From November 3, 2014 to July 4, 2016, our common stock traded on the OTC Pink Markets under the symbol “ASYP” but no trading took place during this time. Since July 5, 2016 our common stock has traded on the OTCQB Market, and our symbol was changed to “QPAG” on June 2, 2016 and to “IPSI” on December 3, 2019.
The last reported sale price of our common stock on the OTCQB on March 29, 2022, was $0.0189 per share. As of March 29, 2022, there were approximately 65 holders of record of our common stock.
Dividend Policy
We have not paid any cash dividends on our common stock to date, and we have no intention of paying cash dividends in the foreseeable future. Whether we declare and pay dividends is determined by our Board of Directors at their discretion, subject to certain limitations imposed under Nevada corporate law. The timing, amount and form of dividends, if any, will depend on, among other things, our results of operations, financial condition, cash requirements and other factors deemed relevant by our Board of Directors.
Equity Compensation Plan Information
The purpose of our equity incentive plans is to promote the interests of our company and our stockholders by providing directors, officers, employees and consultants of our company with appropriate incentives and rewards to encourage them to enter into and continue in the employ or service of our company, to acquire a proprietary interest in our long-term success and to reward the performance of individuals in fulfilling long-term corporate objectives.
On June 18, 2018, we established our 2018 Stock Incentive Plan (the “Plan”). The Plan terminates after a period of ten years in June 2028. The Plan is administered by our board of directors or a committee appointed by our board of directors who have the authority to administer the Plan and to exercise all the powers and authorities specifically granted to it under the Plan.
The maximum number of securities available under the Plan is 800,000 shares of Common Stock. The maximum number of shares of Common Stock awarded to any individual during any fiscal year may not exceed 100,000 shares of Common Stock.
On October 22, 2021, our board of directors and stockholders established our 2021 Stock Incentive Plan (the “2021 Plan”). The 2021 Plan terminates after a period of ten years in August 2031.
The maximum number of securities available under the 2021 Plan is 53,000,000 shares of Common Stock.
Under the 2021 Plan, we may award the following: (i) non-qualified stock options; (ii)) incentive stock options; (iii) stock appreciation rights; (iv) restricted stock; (v) restricted stock unit; and (vi) other stock-based awards.
Recent Sales of Unregistered Securities
On February 3, 2021, we closed a transaction with Cavalry, pursuant to which we received net proceeds of $150,500, after an original issue discount of $21,500 in exchange for the issuance of a $172,000 Senior Secured Convertible Note, bearing interest at 10% per annum and maturing on February 3, 2022. The Note is convertible into shares of common stock at an initial conversion price of $0.045 per share, in addition, we issued a warrant exercisable for 3,822,223 shares of common stock at an initial exercise price of $0.05 per share.
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On February 3, 2021, we closed a transaction with Mercer, pursuant to which the Company received net proceeds of $250,250, after an original issue discount of $35,750 in exchange for the issuance of a $286,000 Senior Secured Convertible Note, bearing interest at 10% per annum and maturing on February 3, 2022. The Note was convertible into shares of common stock at an initial conversion price of $0.045 per share, in addition, we issued a warrant exercisable for 6,355,556 shares of common stock at an initial exercise price of $0.05 per share.
On February 3, 2021, we closed a transaction with Iroquois Master Fund Ltd., pursuant to which we received net proceeds of $199,500, after an original issue discount of $28,500 in exchange for the issuance of a $228,000 Senior Secured Convertible Note, bearing interest at 10% per annum and maturing on February 3, 2022. The Note was convertible into shares of common stock at an initial conversion price of $0.045 per share, in addition, we issued a warrant exercisable for 5,066,667 shares of common stock at an initial exercise price of $0.05 per share.
On February 16, 2021, we closed a transaction with Cavalry, pursuant to which we received net proceeds of $500,500, after an original issue discount of $71,500 in exchange for the issuance of a $572,000 Senior Secured Convertible Note, bearing interest at 10% per annum and maturing on February 16, 2022. The Note is convertible into shares of common stock at an initial conversion price of $0.23 per share, in addition, we issued a warrant exercisable for 2,486,957 shares of common stock at an initial exercise price of $0.24 per share.
On February 16, 2021, we closed a transaction with Mercer, pursuant to which we received net proceeds of $500,500, after an original issue discount of $71,500 in exchange for the issuance of a $572,000 Senior Secured Convertible Note, bearing interest at 10% per annum and maturing on February 16, 2022. The Note is convertible into shares of common stock at an initial conversion price of $0.23 per share, in addition, we issued a warrant exercisable for 2,486,957 shares of common stock at an initial exercise price of $0.24 per share.
On February 16, 2021, we closed a transaction with Bellridge Capital LP., pursuant to which we received net proceeds of $180,250, after an original issue discount of $25,750 in exchange for the issuance of a $206,000 Senior Secured Convertible Note, bearing interest at 10% per annum and maturing on February 16, 2022. The Note was convertible into shares of common stock at an initial conversion price of $0.045 per share, in addition, we issued a warrant exercisable for 4,577,778 shares of common stock at an initial exercise price of $0.05 per share.
On February 16, 2021, we closed a transaction with Bellridge Capital LP., pursuant to which we received net proceeds of $787,500, after an original issue discount of $112,500 in exchange for the issuance of a $900,000 Senior Secured Convertible Note, bearing interest at 10% per annum and maturing on February 16, 2022. The Note is convertible into shares of common stock at an initial conversion price of $0.23 per share, in addition, we issued a warrant exercisable for 3,913,044 shares of common stock at an initial exercise price of $0.24 per share.
In terms of debt conversion notices received between January 5, 2021 and February 23, 2021, the Company issued an aggregate of 61,793,616 shares of common stock for the conversion of $2,259,221 of convertible debt and interest thereon, realizing a loss on conversion of $5,498,820.
In terms of warrant exercise notices received between February 18, 2021 and June 23, 2021, the Company issued 60,186,982 shares of common stock for gross proceeds of $3,009,349.
On March 17, 2021, we entered into Securities Purchase Agreements with several institutional investors, pursuant to which we agreed to sell to the Investors in a private placement (i) 30,333,334 shares of its common stock; and (ii) warrants to purchase up to an aggregate of 15,166,667 shares of its common stock for gross proceeds of approximately $4,550,000. In addition, we agreed to issue to placement agent warrants to purchase an aggregate of up to 2,426,667 shares of the Company’s common stock. The Placement Agent Warrants have an exercise price of $0.1875.
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On April 5, 2021, we awarded four advisory board members, each 2,000,000 restricted shares of common stock, the restricted shares of common stock vest as to 75% on the effective date and 25% on the anniversary date of the agreement.
On July 22, 2021, we awarded 7,000,000 shares of common stock to board members that were appointed during the year. In addition, a further 300,000 shares of common stock were issued to an employee and a further 3,650,000 shares of common stock were issued to various consultants.
On August 9, 2021, we awarded 2,000,000 shares of common stock to a third party vendor.
Other than as previously disclosed in our filings with the Securities and Exchange Commission, we did not sell any equity securities during the year ended December 31, 2021 in transactions that were not registered under the Securities Act.
Issuer Purchases of Equity Securities
There were no issuer purchases of equity securities during the fiscal year ended December 31, 2021.
Item 6. Reserved
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with, and is qualified in its entirety by, our audited annual financial statements and the related notes thereto, each of which appear elsewhere in this Annual Report. This discussion contains certain forward-looking statements that involve risks and uncertainties, as described under the heading “About Forward-Looking Statements” in this Annual Report. Actual results could differ materially from those projected in the forward-looking statements. For additional information regarding these risks and uncertainties. The Management Discussion and Analysis of Financial Condition and Results of Operations below is based upon only the financial performance of Innovate Payment Solutions.
Overview and Financial Condition
Recent Developments
Repayment and extension of convertible notes
Previously, we entered into separate Securities Purchase Agreements, each dated February 16, 2021 (the “Securities Purchase Agreements”), with each of Bellridge Capital, LP (“Bellridge”), Cavalry Fund I LP (“Cavalry”), and Mercer Street Global Opportunity Fund, LLC (“Mercer”), pursuant to which we received $787,500, $500,500 and $500,500 from the Investors, respectively, in exchange for the issuance of: (i) Original Issue Discount 12.5% Convertible Notes in the principal amounts of $900,000 issued to Bellridge and $572,000 to each of Cavalry and Mercer.
On February 3, 2022, we extended our indebtedness to Cavalry and Mercer from February 16, 2022 to August 16, 2022 in consideration of increasing the principal amount outstanding and due to each of Cavalry and Mercer under their notes by a penalty amount plus an additional 10%. The aggregate principal amount of each of the Cavalry and Mercer Note after extension is $866,242.
Additionally, on February 4, 2022, we paid in full our indebtedness of $1,235,312.50 (inclusive of early settlement penalty and accrued interest) to Bellridge.
Management Discussion and Analysis of Financial Condition
The discussion and analysis of our financial condition and results of operations are based upon the consolidated financial statements as of December 31, 2021 and 2020, of Innovative Payment Solutions, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. On an on-going basis we review our estimates and assumptions. The estimates are based on our historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results are likely to differ from those estimates under different assumptions or conditions.
21
Results of Operations for the years Ended December 31, 2021 and December 31, 2020
Net revenue
We did not have revenues during the years ended December 31, 2021 and 2020.We anticipate that we will recommence generating revenue when we launch our e-wallets once we have determined our deployment strategy, the timing of which is uncertain.
Cost of goods sold
As we did not have revenues during the years ended December 31, 2021 and 2020, we anticipate that we will begin to recognize cost of goods sold when we launch our e-wallets once we have determined our deployment strategy.
General and administrative expenses
General and administrative expenses were $10,284,815 and $1,742,008 for the years ended December 31, 2021 and 2020, respectively, an increase of $8,542,807 or 490.4%. The increase is primarily due to the following;
| (i) | Salaries and wages of $7,066,725 and $761,946 for the years ended December 31, 2021 and 2020, respectively, an increase of $6,304,779 or 827.5%. The increase is due to the value of warrants issued to our CEO of $4,327,899, which were subsequently cancelled and replaced with stock options; the increase in stock option compensation expense of $1,291,024; the amortization of restricted stock expense with vesting rights of $301,064 during the current year and $502,128 in the prior year; the increase in payroll of $564,828 due to the increase in head count from two people to six people and the increase in our CEO’s salary from $12,500 per month to $30,000 per month; the employment of a CFO at a monthly salary of $18,000 with effect from July 1, 2021; and a severance provision of $302,000 raised due to the termination of several employees, the severance is still being negotiated with the individuals concerned. |
| (ii) | Consulting fees of $1,340,134 and $362,180 for the years ended December 31, 2021 and 2020, respectively, an increase of $977,954 or 270.0%. The increase is due to 8,000,000 restricted shares issued to various advisory board members valued at $776,000 in April 2021 and 3,650,000 shares issued to various consultants and advisory board members valued at $443,050 during July and August 2021. The remaining decrease of $(241,096) is due to management fees paid to various employees before they were appointed to official positions within the Company. |
| (iii) | Directors’ fees of $722,114 and $88,000 for the years ended December 31, 2021 and 2020, respectively, an increase of $634,114 or 720.6%, Directors fees in the current year included shares issued to directors valued at $539,000, the value of options granted to directors of $91,614 and cash fees paid of $91,500. Directors’ fees expense in the prior period represents the value of restricted shares issued to a director. |
| (iv) | Selling and marketing costs of $117,185 and $30,828 for the years ended December 31, 2021 and 2020, respectively, an increase of $86,357 or 280.1%. The increase is due to initial expenses paid for software development and public relations expenses incurred during the current period amounting to $110,680. In the prior year marketing expenses related to marketing activities undertaken by third parties. |
| (v) | Professional fees of $405,552 and $150,812 for the years ended December 31, 2021 and 2020, respectively, an increase of $254,740 or 168.9%. The increase is primarily due to social media expense of $123,242, fees paid to Frictionless of $51,940 as part of the ongoing software development agreement we have in place with them; $40,000 paid to an individual for professional administrative advice and an additional $89,866 for proxy solicitation services conducted prior to the Annual General Meeting. |
| (vi) | The balance of the increase is made up of several individually insignificant expenses. |
Depreciation
Depreciation was $17,935 and $12,500 for the years ended December 31, 2021 and 2020, respectively, an increase of $5,435. Depreciation during the current period represents depreciation on the kiosks received from Qpagos Mexico and miscellaneous assets acquired during the current year. Depreciation in the prior year is related to kiosks acquired from Mexico.
Investment impairment charge
Investment impairment charge was $0 and $1,019,960 for the years ended December 31, 2021 and 2020, respectively, the Company raised an impairment charge against the investment in Vivi Holdings Inc, as Vivi continues to not meet any of its indicated milestones concerning its proposed IPO and fund-raising efforts.
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Loss on debt conversion
Loss on debt conversion was $5,498,820 and $433,610 for the years ended December 31, 2021 and 2020, respectively, an increase of $5,065,210. The loss on debt conversion during the current year represents a loss realized on the conversion of convertible notes, into equity at fixed conversion prices which ranged from $0.035 to $0.045 per share, when the stock price ranged from $0.05 per share to $0.238 per share, resulting in a significant loss. A total of $2,259,221 was converted from convertible debt to equity during the year ended December 31, 2021.
Loss on settlement of liabilities
Loss on settlement of liabilities was $0 and $95,082 for the years ended December 31, 2021 and 2020, respectively. The loss on settlement of liabilities represents the settlement of certain promissory notes during the prior period by the issuance of 1,692,764 shares of common stock at a discount to current market prices resulting in a loss on settlement of $50,082 and the issuance of 1,500,000 shares of common stock to a previous note holder in settlement of a dispute over the repayment of a convertible note during the current period, at the market value of the shares of $45,000, on the date of settlement.
Debt extension fee
Debt extension fee was $0 and $40,000 for the years ended December 31, 2021 and 2020, respectively, we incurred a debt extension fee of $40,000 in the prior year, on a convertible note which was maturing, this note has subsequently been repaid.
Forgiveness of federal relief loan
Forgiveness of federal relief loan was $60,292 and $0 for the years ended December 31, 2021 and 2020, respectively. During the current period the company applied and was granted on the PPP loan advanced by the federal government during the prior year.
Interest expense
Interest expense was $228,240 and $381,034 for the years ended December 31, 2021 and 2020, respectively, a decrease of $152,794 or 40.1%. The decrease is primarily due to a penalty interest expense in the prior period of $238,080 related to the settlement of convertible debt prior to conversion by the note holders offset by the increase in the principal outstanding of convertible debt from $1,505,000 in the prior period to $2,044,000 in the current period.
Amortization of debt discount
Amortization of debt discount was $3,653,652 and $1,065,879 for the years ended December 31, 2021 and 2020, respectively, an increase of $2,587,773 or 242.8%. The increase is primarily due to the accelerated amortization of debt discount related to notes converted to equity during the first quarter of the current year, in addition, the increase is also due to the increase in the debt discount of $2,569,000 associated with the increase in convertible debt over the prior year.
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Derivative liability movements
Derivative liability movements were $5,128,255 and $(654,471) for the years ended December 31, 2021 and 2020, respectively. The derivative liability arose due to the issuance of convertible securities with variable conversion prices and no floor conversion price. The credit during the current year represents the mark-to-market of the derivative liability outstanding as of December 31, 2021, primarily as a result of a decrease in the share price over the prior year.
Net loss
We incurred a net loss of $14,494,915 and $5,444,544 for the years ended December 31, 2021 and 2020 respectively, an increase in loss of $9,050,371 or 166.2%. The increase is due to the increase in general and administrative expenses, the loss realized on the conversion of convertible debt and the amortization of debt discount, offset by the movement in derivative liabilities, discussed in detail above.
Liquidity and Capital Resources
To date, our primary sources of cash have been funds raised primarily from the sale of our debt and equity securities.
We incurred an accumulated deficit of $42,111,701 through December 31, 2021 and incurred negative cash flow from operations of $2,608,118 for the year ended December 31, 2021. The Company’s focus on operating and developing e-wallets that enable consumers to deposit cash, convert it into a digital form and remit the funds to Mexico and other countries quickly and securely, will require us to spend, substantial amounts in connection with implementing our business strategy, including our planned product development.
To meet our financing needs, we have raised net convertible debt funding of $2,048,000, received proceeds from warrant exercises of $3,009,349 and additional gross proceeds $4,550,000 from a private placement of equity securities, we believe we have sufficient funding to implement our business strategy.
At December 31, 2021, we had cash of $5,449,751 and working capital of $2,701,065, including a derivative liability of $407,161. After eliminating the derivative liability our working capital is $3,108,226.
We utilized cash of $2,608,118 and $1,256,279 in operations for the year ended December 31, 2021 and 2020, respectively. Overall cash utilized in operations increased by $1,351,839, primarily due to the increase in corporate overhead as we ready ourselves for our new technology platform.
We invested $500,000 in the common stock of Frictionless which has been contracted to develop our payment platform for the Mexican and other markets. This is a strategic investment and we expect a platform to be ready to utilize within the current year. We also invested a further $625,000 in the acquisition of a license and services for the Beyond Wallet software in the furtherance of our objectives.
Cash provided by financing activities for the year ended December 31, 2021 was primarily comprised of gross proceeds of $4,550,000 from the private placement on March 17, 2021, $3,009,349 from warrants exercised and a net $2,048,000 from convertible debt issued, net of convertible debt repayments of $521,000. We utilized $501,100 for share issue expenses.
At December 31, 2021, we had outstanding notes in the principal amount of $2,044,000. The notes were issued on February 16, 2021 and may be prepaid at any time for the first 90 days in an amount equal to 115% of the principal amount plus accrued interest. From day 91 through day 180, the Notes may be prepaid in an amount equal to 120% of the principal amount plus accrued interest. From day 181 through day 365, it may be prepaid in an amount equal to 125% of the principal amount plus accrued interest. The notes contain certain covenants, such as restrictions on: (i) distributions on capital stock, (ii) stock repurchases, and (iii) sales and the transfer of assets. The notes mature in 12 months, bears interest at a rate of 10% per annum, and are initially convertible into our common stock at a conversion price of $0.23 per share (as adjusted for stock splits, stock combinations, dilutive issuances and similar events). Upon the occurrence of an event of default under the notes, the respective holder has the right to be prepaid at 140% of the outstanding principal balance and accrued interest, and interest accrues at 18% per annum (or the maximum amount permitted by law). In addition, if an event of default under a note has occurred, regardless of whether it has been cured or remains ongoing, such Note will thereafter be convertible at 65% of the lowest closing price of our common stock for the last 10 consecutive trading days.
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Other than amounts owed under convertible notes, we have a commitment for a property lease which expires in April 2022.
The amount of future minimum lease payments under operating leases are as follows:
| Amount | ||||
| Undiscounted minimum future lease payments | ||||
| Total instalments due: | ||||
| 2022 | $ | 14,400 | ||
Capital Expenditures
Our capital expenditure is expected to be less than $100,000 during the next twelve month period.
Critical Accounting Policies
Preparation of our consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of certain assets, liabilities, revenues and expenses, as well as related disclosure of contingent assets and liabilities. Significant accounting policies are fundamental to understanding our financial condition and results as they require the use of estimates and assumptions which affect the financial statements and accompanying notes. See Note 2 - Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10- K for further information.
Recently Issued Accounting Pronouncements
See Note 2 - Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for information regarding recently issued accounting standards.
Contractual Obligations
We have contractual obligations in the form of convertible notes which are described in the financial statements presented below.
Inflation
The effect of inflation on the Company’s operating results was not significant.
Interest rate sensitivity
We are not subject to interest rate sensitivity; our only debt consists of fixed rate convertible debt.
Cybersecurity
We believe we employ industry standard cybersecurity protocols and tools, which are constantly evolving, to protect our apps and software. While we are not aware of any cybersecurity breaches or similar issues relating to our company, there is a risk that our efforts will be insufficient to defend against all cybersecurity threats.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable because we are a smaller reporting company.
25
Item 8. Financial Statements and Supplemental Data
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Innovative Payment Solutions,
Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Innovative Payment Solutions, Inc. (the Company) as of December 31, 2021 and 2020, and the related consolidated statements of operations, equity (deficit) and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis
for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
F-2
Assessment of Derivative Liabilities- Refer to Note 10 of the consolidated financial statements
Certain of the short-term convertible notes disclosed in note 9 and certain warrants disclosed in note 11 to the consolidated financial statements, have variable priced conversion rights with no fixed floor price and will re-price dependent on the share price performance over varying periods of time and certain notes and warrants have fundamental transaction clauses which might result in cash settlement, due to these factors, all convertible notes and any warrants attached thereto are valued and give rise to a derivative financial liability, which was initially valued at inception of the convertible notes and warrants using a Black-Scholes valuation model. The value of this derivative financial liability was re-assessed at December 31, 2021.
We identified the accounting for derivative liability for short term convertible notes and warrants as a critical audit matter. Our principal considerations included the existence of subjective judgments related to certain provisions of the convertible notes and warrant agreements in connection with the determination of the classification of the notes and warrants, including provisions related to market volatility. Auditing these elements required especially challenging auditor judgment and significant audit effort, including the need for specialized knowledge and skill in assessing these elements of the agreements.
The primary procedures we performed to address this critical audit matter included:
| ● | Reading the agreements related to the short-term convertible notes and warrants issued along with management’s technical accounting memos to understand the facts and circumstances within the notes and warrant agreements. |
| ● | Utilizing personnel with specialized knowledge and skill in debt and equity accounting to evaluate the appropriateness of management’s interpretation on how to apply relevant accounting guidance for the classification of the warrants issued, including evaluating the terms associated with market volatility. |
| /s/ | |
| We have served as the Company’s auditor since 2014. | |
| PCAOB ID | |
| March 31, 2022 | |
F-3
INNOVATIVE PAYMENT SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
| December 31, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Other current assets | ||||||||
| Total Current Assets | ||||||||
| Non-current assets | ||||||||
| Plant and equipment | ||||||||
| Intangible assets | ||||||||
| Right of use asset | ||||||||
| Security deposit | ||||||||
| Investment | ||||||||
| Total Non-Current Assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Equity (Deficit) | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| 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 | ||||||||
| Equity (Deficit) | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total equity (deficit) attributable to Innovative Payment Solutions, inc. Stockholders | ( | ) | ||||||
| Non-controlling interest | ||||||||
| Total Equity (Deficit) | ( | ) | ||||||
| Total Liabilities and Equity (Deficit) | $ | $ | ||||||
The accompanying notes are an integral part of these audited consolidated financial statements.
F-4
INNOVATIVE PAYMENT SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
| Twelve months ended | Twelve months ended | |||||||
| December | December | |||||||
| 2021 | 2020 | |||||||
| Net Revenue | $ | $ | ||||||
| Cost of Goods Sold | ||||||||
| Gross profit | ||||||||
| General and administrative | ||||||||
| Depreciation | ||||||||
| Total Expense | ||||||||
| Loss from Operations | ( | ) | ( | ) | ||||
| Investment impairment charge | ( | ) | ||||||
| Loss on debt conversion | ( | ) | ( | ) | ||||
| Loss on settlement of liabilities | ( | ) | ||||||
| Debt extension fee | ( | ) | ||||||
| Forgiveness of federal relief loans | ||||||||
| Interest expense, net | ( | ) | ( | ) | ||||
| Amortization of debt discount | ( | ) | ( | ) | ||||
| Derivative liability movements | ( | ) | ||||||
| Loss before taxation | ( | ) | ( | ) | ||||
| Taxation | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Net loss attributable to non-controlling interest | ||||||||
| Net loss attributable Innovative Payment Solutions, Inc. Stockholders’ | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted loss per share | $ | ( | ) | $ | ( | ) | ||
| Weighted Average Number of Shares Outstanding - Basic and diluted | ||||||||
The accompanying notes are an integral part of these audited consolidated financial statements.
F-5
INNOVATIVE PAYMENT SOLUTIONS, INC.
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE PERIOD JANUARY 1, 2020 TO DECEMBER 31, 2021
| Preferred Stock Shares | Amount | Common Stock Shares* | Amount | Additional Paid-in Capital | Accumulated Deficit | Non-controlling shareholders interest | Total Stockholders’ Equity (Deficit) | |||||||||||||||||||||||||
| Balance at December 31, 2019 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
| Conversion of debt to equity | - | |||||||||||||||||||||||||||||||
| Settlement of liabilities | - | |||||||||||||||||||||||||||||||
| Shares issued for services | - | |||||||||||||||||||||||||||||||
| Shares subscriptions | - | |||||||||||||||||||||||||||||||
| Stock based compensation | - | |||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at December 31, 2020 | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Warrants exercised | - | |||||||||||||||||||||||||||||||
| Conversion of convertible debt to equity | - | |||||||||||||||||||||||||||||||
| Shares issued for services | - | |||||||||||||||||||||||||||||||
| Shares subscriptions | - | |||||||||||||||||||||||||||||||
| Share issue expenses | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Fair value of warrants issued | - | - | ||||||||||||||||||||||||||||||
| Stock based option expense | - | - | ||||||||||||||||||||||||||||||
| Restricted stock awards | - | - | - | - | ||||||||||||||||||||||||||||
| Proceeds from non-controlling shareholders | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance at December 31, 2021 | - | $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||
The accompanying notes are an integral part of these audited consolidated financial statements.
F-6
INNOVATIVE PAYMENT SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Twelve months ended | Twelve months ended | |||||||
| December 31, | December 31, | |||||||
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustment 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 | ||||||||
| Forgiveness of federal relief loans | ( | ) | ||||||
| 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. | ( | ) | ||||||
| Intangibles acquired | ( | ) | ||||||
| Investment in deposits | ( | ) | ||||||
| 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 issued | ||||||||
| Proceeds from loans payable | ||||||||
| Repayment of loans payable | ( | ) | ( | ) | ||||
| Proceeds from short term notes and convertible notes | ||||||||
| Repayment of convertible notes | ( | ) | ( | ) | ||||
| Proceeds from non-controlling shareholders | ||||||||
| Proceeds from federal relief loans | ||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
| Effect of exchange rate changes on cash and cash equivalents | ||||||||
| NET INCREASE IN CASH | ||||||||
| CASH AT BEGINNING OF YEAR | ||||||||
| CASH AT END OF YEAR | $ | $ | ||||||
| CASH PAID FOR INTEREST AND TAXES: | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Derecognition of right of use assets on early termination | $ | $ | ||||||
| Conversion of convertible debt to equity | $ | $ | ||||||
| Settlement of liabilities | $ | $ | ||||||
The accompanying notes are an integral part of these audited consolidated financial statements.
F-7
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED 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 to IPSI and the then-current IPSI stockholder retained an aggregate of 2,500 shares of Common Stock and the other stockholders of IPSI retained 500,000 shares of Common Stock. Therefore, immediately following the Merger, Qpagos Corporation’s former stockholders held 4,992,900 shares of IPSI common stock which represented approximately 91% of the outstanding Common Stock.
The Merger was treated as a reverse acquisition of IPSI, a public shell company, for financial accounting and reporting purposes. As such, Qpagos Corporation was treated as the acquirer for accounting and financial reporting purposes while IPSI was treated as the acquired entity for accounting and financial reporting purposes.
Qpagos Corporation (“Qpagos”) was incorporated on May 1, 2015 under the laws of the state of Delaware to effectuate a reverse merger transaction with Qpagos, S.A.P.I. de C.V. (“Qpagos Mexico”) and Redpag Electrónicos S.A.P.I. de C.V. (“Redpag”). Each of the entities were incorporated in November 2013 in Mexico.
Qpagos Mexico was formed to process payment transactions for service providers it contracts with, and Redpag was formed to deploy and operate kiosks as a distributor.
On May 27, 2016 Asiya changed its name to QPAGOS.
On June 1, 2016, the board of directors of QPAGOS (the “Board”) changed the Company’s fiscal year end from October 31 to December 31.
On
F-8
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 1 | ORGANIZATION AND DESCRIPTION OF BUSINESS (continued) |
| b) | Description of the business |
Subsequent to the merger of Qpagos Corporation into IPSI and until the divestiture of Qpagos Corporation, Qpagos Mexico and Redpag, the Company’s focus was on the operations of Qpagos Corporation in Mexico. The Company’s current focus is on providing payment services to allow US persons to transfer funds to Mexico and other countries.
The Company is focused on operating and developing e-wallets that enable consumers to deposit cash, convert it into a digital form and remit the funds to Mexico and other countries quickly and securely. The Company’s first e-wallet, the Beyond Wallet, is currently operational. The Company’s flagship e-wallet, IPSIPay, is in final stages of development and testing. Previously the Company intended to invest in physical kiosks, which required the user presence at the kiosk location. The Company still intends to use its existing kiosks in certain target markets within Southern California.
The Company acquired a
On August 26, 2021, the Company formed
a new subsidiary, Beyond Fintech, in which its owns a
| c) | COVID-19 |
The COVID-19 pandemic has required the Company’s management to focus its attention primarily on responding to the challenges presented by the pandemic, including ensuring continuous operations, and adjusting its operations to address changes in the virtual payments industry. Due to measures imposed by the local governments in areas affected by COVID-19, businesses had been suspended due to quarantine intended to contain this outbreak and many people had been forced to work from home in those areas. As a result, development of our e-wallets and the limited installation of our network of kiosks in Southern California had been delayed, which has had an adverse impact on our business and financial condition and has hampered our ability to generate revenues. As the COVID-19 pandemic evolves, we may face similar challenges in the future which could lead to material adverse impacts on our company.
| 2 | ACCOUNTING POLICIES AND ESTIMATES |
| a) | Basis of Presentation |
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).
All amounts referred to in the notes to the consolidated financial statements are in United States Dollars ($) unless stated otherwise.
F-9
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 2 | ACCOUNTING POLICIES AND ESTIMATES (continued) |
| b) | Principles of Consolidation |
The consolidated financial statements include the financial statements of the Company and its subsidiary in which it has a majority voting interest. All significant inter-company accounts and transactions have been eliminated in the consolidated financial statements.
The entities included in these consolidated financial statements are as follows:
Innovative Payment Solutions, Inc. - Parent Company
Beyond Fintech Inc.,
| c) | Use of Estimates |
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions, which are evaluated on an ongoing basis, that affect the amounts reported in the consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the amounts of revenues and expenses that are not readily apparent from other sources. Actual results could differ from those estimates and judgments. In particular, significant estimates and judgments include those related to, the estimated useful lives for plant and equipment, the fair value of long-lived investments, the fair value of warrants and stock options granted for services or compensation, estimates of the probability and potential magnitude of contingent liabilities, derivative liabilities, the valuation allowance for deferred tax assets due to continuing operating losses and the allowance for doubtful accounts.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the consolidated financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from our estimates.
| d) | Contingencies |
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur.
The Company’s management assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.
F-10
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 2 | ACCOUNTING POLICIES AND ESTIMATES (continued) |
| e) | Fair Value of Financial Instruments |
The Company adopted the guidance of Accounting Standards Codification (“ASC”) 820 for fair value measurements which clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.
Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.
The carrying amounts reported in the balance sheets for the investment in Vivi Holdings Inc., was evaluated at fair value using Level 3 Inputs based on the Company’s estimate of the market value of the entities disposed to Vivi Holdings, Inc. Vivi Holdings Inc., does not have sufficient information available to assess the current market price of its equity.
The carrying amounts reported in the balance sheets for cash, accounts receivable, other current assets, other assets, accounts payable, accrued liabilities, and notes payable, approximate fair value due to the relatively short period to maturity for these instruments. The Company has identified the short-term convertible notes and certain warrants attached to certain of the notes that are required to be presented on the balance sheets at fair value in accordance with the accounting guidance.
ASC 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. We evaluate the fair value of variably priced derivative liabilities on a quarterly basis and report any movements thereon in earnings.
| f) | Risks and Uncertainties |
The Company’s operations will be subject to significant risks and uncertainties including financial, operational, regulatory, and other risks, including the potential risk of business failure. The recent global Covid-19 breakout has caused an economic crisis which may result in a general tightening in the credit markets, lower levels of liquidity, increases in the rates of default and bankruptcy, and extreme volatility in credit, equity and fixed income markets. These conditions may not only limit the Company’s access to capital, but also make it difficult for its customers, vendors and the Company to accurately forecast and plan future business activities. In addition, businesses have been suspended due to quarantines intended to contain this outbreak and many people have been forced to work from home in those areas. As a result, installation of the Company’s network of kiosks, terminals and payment channels in Southern California has been delayed, which has had an adverse impact on its business and financial condition and has hampered the Company’s ability to generate revenue and access usual sources of liquidity on reasonable terms.
The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, and rates and methods of taxation, among other things.
F-11
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 2 | ACCOUNTING POLICIES AND ESTIMATES (continued) |
| g) | Recent accounting pronouncements |
In November 2021, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2021-10, Disclosures by Entities about Government Assistance (Topic 832), the update increases the transparency of government assistance, including the following disclosures: (1) the types of assistance, (2) an entity’s accounting for the assistance, and (3) the effect of the assistance on an entity’s financial statements.
This ASU is effective for fiscal years beginning after December 15, 2021.
The effects of this ASU on the Company’s consolidated financial statements is currently being assessed and is not expected to have an impact on current disclosure.
The FASB issued several additional updates during the period, none of these standards are either applicable to the Company or require adoption at a future date and none are expected to have a material impact on the consolidated financial statements upon adoption.
| h) | Reporting by Segment |
No segmental information is required as the Company has not generated any revenue for the years ended December 31, 2021 and 2020 and only has one operating segment.
| i) | Cash and Cash Equivalents |
The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. At December 31, 2021 and 2020, respectively, the Company had no cash equivalents.
The Company
minimizes credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution in the
United States. The balance at times may exceed federally insured limits. At December 31, 2021 and 2020, the balance exceed the federally
insured limit by $
| j) | Accounts Receivable and Allowance for Doubtful Accounts |
Accounts receivable are reported at realizable value, net of allowances for doubtful accounts, which is estimated and recorded in the period the related revenue is recorded. The Company has a standardized approach to estimate and review the collectability of its receivables based on a number of factors, including the period they have been outstanding. Historical collection and payer reimbursement experience is an integral part of the estimation process related to allowances for doubtful accounts. In addition, the Company regularly assesses the state of its billing operations in order to identify issues, which may impact the collectability of these receivables or reserve estimates. Revisions to the allowance for doubtful accounts estimates are recorded as an adjustment to bad debt expense. Receivables deemed uncollectible are charged against the allowance for doubtful accounts at the time such receivables are written-off. Recoveries of receivables previously written-off are recorded as credits to the allowance for doubtful accounts. There were no recoveries during the period ended December 31, 2021 and 2020.
F-12
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 2 | ACCOUNTING POLICIES AND ESTIMATES (continued) |
| k) | Investments |
The Company’s non-marketable
equity securities are investments in privately held companies without readily determinable market values. The carrying value of our non-marketable
equity securities is adjusted to fair value for observable transactions for identical or similar investments of the same issuer or impairment
(referred to as the measurement alternative). All gains and losses on non-marketable equity securities, realized and unrealized, are
recognized in other income (expense), net. Non-marketable equity securities that have been remeasured during the period are classified
within Level 3 in the fair value hierarchy because the Company estimates the value based on valuation methods using the observable transaction
price at the transaction date and other unobservable inputs including volatility, rights, and obligations of the securities the Company
holds. The cost method is used when the Company has a passive, long-term investment that doesn’t result in influence over the Company.
The cost method is used when the investment results in an ownership stake of less than
The Company recorded an impairment
charge of $
| l) | 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 | ||
| Computer equipment | ||
| Leasehold improvements | ||
| Office equipment |
The cost of repairs and maintenance is expensed as incurred. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition.
| m) | Long-Term Assets |
Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets
F-13
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 2 | ACCOUNTING POLICIES AND ESTIMATES (continued) |
| n) | Revenue Recognition |
The Company’s revenue recognition policy is consistent with the requirements of FASB ASC 606, Revenue.
The Company’s revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those services. The Company derives its revenues from the sale of its services, as defined below. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its revenue transactions:
| i. | identify the contract with a customer; |
| ii. | identify the performance obligations in the contract; |
| iii. | determine the transaction price; |
| iv. | allocate the transaction price to performance obligations in the contract; and |
| v. | recognize revenue as the performance obligation is satisfied. |
The Company had no revenues during the years ended December 31, 2021 and 2020.
| o) | Share-Based Payment Arrangements |
Generally, all forms of share-based payments, including stock option grants, restricted stock grants and stock appreciation rights are measured at their fair value on the awards’ grant date, based on the estimated number of awards that are ultimately expected to vest. Share-based compensation awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable. The expense resulting from share-based payments is recorded in operating expenses in the consolidated statement of operations.
Prior to the Company’s reverse merger which took place on May 12, 2016, all share-based payments were based on management’s estimate of market value of the Company’s equity. The factors considered in determining managements estimate of market value includes, assumptions of future revenues, expected cash flows, market acceptability of our technology and the current market conditions. These assumptions are complex and highly subjective, compounded by the business being in its early stage of development in a new market with limited data available.
Where equity transactions with arms-length third parties, who had applied their own assumptions and estimates in determining the market value of our equity, had taken place prior to and within a reasonable time frame of any share-based payments, the value of those share transactions have been used as the fair value for any share-based equity payments.
Where equity transactions with arms-length third parties, included both shares and warrants, the value of the warrants have been eliminated from the unit price of the securities using a Black-Scholes valuation model to determine the value of the warrants. The assumptions used in the Black Scholes valuation model includes market related interest rates for risk-free government issued treasury securities with similar maturities; the expected volatility of the Company’s common stock based on companies operating in similar industries and markets; the estimated stock price of the Company; the expected dividend yield of the Company and; the expected life of the warrants being valued.
Subsequent to the Company’s reverse merger which took place on May 12, 2016, the Company has utilized the market value of its common stock as quoted on the OTCQB, as an indicator of the fair value of its common stock in determining share- based payment arrangements.
F-14
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 2 | ACCOUNTING POLICIES AND ESTIMATES (continued) |
| p) | Derivative Liabilities |
ASC 815 generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re- measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument subject to the requirements of ASC 815. ASC 815 also provides an exception to this rule when the host instrument is deemed to be conventional, as described.
| q) | Income Taxes |
The Company is based in the US and currently enacted US tax laws are used in the calculation of income taxes.
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A full valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. It is the Company’s policy to classify interest and penalties on income taxes as interest expense or penalties expense. As of December 30, 2021 and December 31, 2020, there have been no interest or penalties incurred on income taxes.
| r) | Comprehensive income |
Comprehensive income is defined as the change in equity of a company during a period from transactions and other events and circumstances excluding transactions resulting from investments from owners and distributions to owners. The Company does not have any comprehensive income (loss) for the periods presented.
| s) | Reclassification of prior year presentation |
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.
F-15
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED 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 year ended December
31, 2021, the Company had a net loss of $
The Company had a cash balance of
$
If the Company is required to raise additional funds by issuing equity securities, its stockholders would experience dilution. Additional debt financing, if available, may involve covenants restricting its operations or its ability to incur additional debt. Any additional debt financing or additional equity that the Company raises may contain terms that are not favorable to it or its stockholders and require significant debt service payments, which diverts resources from other activities.
Based on this current business plan, the Company believes its existing cash is sufficient to conduct planned operations for one year from the issuance of the December 31, 2021 financial statements.
| 4 | INTANGIBLES |
On August 26, 2021, The Company formed
a new subsidiary, Beyond Fintech. to acquire a product known as Beyond Wallet from a third party for gross proceeds of $
During the year, the Company paid
gross proceeds of $
| December 31, 2021 | December 31, 2020 | |||||||
| Purchased Technology | $ | $ | ||||||
| 5 | INVESTMENTS |
Investment in Frictionless Financial Technologies Inc.
On June 22, 2021, the Company entered
into a Stock Purchase Agreement (the “SPA”) with Frictionless, to purchase
The company has undertaken to issue
Frictionless a non-restricted, non-dilutable
The Company has the right to appoint and has appointed, one member to the board of directors of Frictionless, which appointee will remain on the board as long as the Company is the holder of the Frictionless common stock.
The Company has an irrevocable right
to acquire up to an additional
The shares in Frictionless are unlisted as of December 31, 2021.
F-16
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 5 | INVESTMENTS (continued) |
Investment in Vivi Holdings, Inc.
Effective December 31, 2019, the Company sold 100% of the outstanding common stock of its subsidiary, Qpagos Corp, together with its 99.9% ownership interest of Qpagos Corporations’ two Mexican entities: QPagos S.A.P.I. de C.V. and Redpag Electrónicos S.A.P.I. de C.V, to Vivi.
As consideration for the disposal
Vivi issued an aggregate of
Due to the lack of available information, the Vivi Shares were valued by a modified market method, whereby the value of the assets disposed of were determined by management using the enterprise value of the entire Company less the liabilities and assets retained by the Company.
As of December 31, 2021 and 2020,
the Company impaired the carrying value of the investment in Vivi Holdings, Inc by $
The shares in Vivi Holdings, Inc., are unlisted as of December 31, 2021.
| December 31, 2021 | December 31, 2020 | |||||||
| Investment in Frictionless Financial Technologies, Inc. | $ | $ | ||||||
| Investment in Vivi Holdings, Inc. | ||||||||
| $ | $ | |||||||
| 6 | 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,
F-17
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 6 | LEASES (continued) |
Right of use assets
Right of use assets are included in the consolidated Balance Sheet are as follows:
December 31, 2021 | December 31, 2020 | |||||||
| Non-current assets | ||||||||
| Right of use assets, operating leases, net of amortization | $ | $ | ||||||
Total Lease Cost
Individual components of the total lease cost incurred by the Company is as follows:
Year
ended 2021 | Year ended December 31, 2020 | |||||||
| Operating lease expense | $ | $ | ||||||
Other lease information:
Year
ended 2021 | Year ended December 31, 2020 | |||||||
| 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 | % | |||||||
Maturity of Operating Leases
The amount of future minimum lease payments under operating leases are as follows:
| Amount | ||||
| Undiscounted minimum future lease payments under leases with terms twelve months or less | ||||
| Total instalments due: | ||||
| 2022 | $ | |||
| 7 | 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, of which $
F-18
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 7 | FEDERAL RELIEF LOANS (continued) |
Small Business Administration Disaster Relief loan
On July 7, 2020, the Company received
a Small Business Economic Injury Disaster loan amounting to $
The company has accrued interest of
$
| 8 | LOANS PAYABLE |
Loans payable consisted of the following:
| Description | Interest Rate | Maturity | December 31, 2021 | December 31, 2020 | ||||||||||
| Stanislav Minaychenko | % | $ | $ | |||||||||||
| Maxim Pukhoskiy | % | |||||||||||||
| Dieter Busenhart | % | |||||||||||||
| Total loans payable | $ | $ | ||||||||||||
Interest expense totaled $
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 year ended December 31,
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 year ended December 31,
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 year ended December 31,
2021, the Company repaid the aggregate principal sum of $
The balance remaining on the promissory
note consists of accrued interest of $
F-19
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 9 | CONVERTIBLE NOTES PAYABLE |
Convertible notes payable consists of the following:
| Description | Interest Rate | Maturity date | Principal | Accrued Interest | Unamortized debt discount | December 31, 2021 Amount, net | December 31, Amount, | |||||||||||||||||||
| Power Up Lending Group | % | 2021 | $ | $ | $ | $ | $ | |||||||||||||||||||
| Cavalry Fund I LP | % | 2021 | ||||||||||||||||||||||||
| % | 2021 | |||||||||||||||||||||||||
| % | 2021 | |||||||||||||||||||||||||
| % | 2021 | |||||||||||||||||||||||||
| % | 2022 | |||||||||||||||||||||||||
| % | 2022 | ( | ) | |||||||||||||||||||||||
| Mercer Street Global Opportunity Fund, LLC | % | 2021 | ||||||||||||||||||||||||
| % | 2022 | |||||||||||||||||||||||||
| % | 2022 | ( | ) | |||||||||||||||||||||||
| Iroquois Master Fund Ltd. | % | 2021 | ||||||||||||||||||||||||
| % | 2022 | |||||||||||||||||||||||||
| Mark Geist | % | 2021 | ||||||||||||||||||||||||
| Bellridge Capital LP. | % | 2021 | ||||||||||||||||||||||||
| % | 2022 | |||||||||||||||||||||||||
| % | 2022 | ( | ) | |||||||||||||||||||||||
| Total convertible notes payable | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||
Interest expense, including penalty
interest totaled $
Amortization of debt discount 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.
F-20
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 9 | CONVERTIBLE NOTES PAYABLE (continued) |
Power Up Lending Group Ltd
| ● | On July 13, 2020, the Company issued a Convertible Promissory Note in the aggregate principal amount of $
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 $ |
| ● | 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 $ |
F-21
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 9 | CONVERTIBLE NOTES PAYABLE (continued) |
Cavalry Fund LLP (continued)
| ● | On September 24, 2020, the Company closed a transaction with Cavalry pursuant to which the Company received net proceeds of $
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 $ |
| ● | 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 December 31, 2021 was $ |
F-22
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 9 | CONVERTIBLE NOTES PAYABLE (continued) |
Mercer Street Global Opportunity Fund, LLC
| ● | On August 3, 2020, the Company closed a transaction with Mercer Street Global Opportunity Fund, LLC, (“Mercer”), pursuant to which the Company received net proceeds of $
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 $ |
| ● | 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 December 31, 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, the Company received conversion notices from Iroquois Master Fund Ltd., |
F-23
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 9 | CONVERTIBLE NOTES PAYABLE (continued) |
Iroquois Master Fund Ltd. (continued)
| ● | On February 3, 2021, the Company closed a transaction with Iroquois Master Fund Ltd., pursuant to which the Company received net proceeds of $
On February 19, 2021, the Company received a conversion notice from Iroquois Master Fund Ltd., converting the aggregate principal amount of $ |
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 $ |
F-24
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 9 | CONVERTIBLE NOTES PAYABLE (continued) |
Bellridge Capital LP. (continued)
| ● | On February 16, 2021, the Company closed a transaction with Bellridge Capital LP., pursuant to which the Company received net proceeds of $
On February 16, 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 $
The balance of the Third Bellridge Note plus accrued interest at December 31, 2021 was $ |
| 10 | DERIVATIVE LIABILITY |
Certain of the short-term convertible notes disclosed in note 9 above and certain warrants disclosed in note 11 below, have variable priced conversion rights with no fixed floor price and will re-price dependent on the share price performance over varying periods of time and certain notes and warrants have fundamental transaction clauses which might result in cash settlement, due to these factors, all convertible notes and any warrants attached thereto are valued and give rise to a derivative financial liability, which was initially valued at inception of the convertible notes using a Black-Scholes valuation model.
During the year ended December 31,
2021, an additional $
The value of this derivative financial
liability was re-assessed at December 31, 202 at $
The following assumptions were used in the Black-Scholes valuation model:
Year Ended |
Year
Ended December 31, 2020 |
|||||||
| Conversion price | $ |
$ |
||||||
| Risk free interest rate | % | % | ||||||
| Expected life of derivative liability | ||||||||
| Expected volatility of underlying stock | % | % | ||||||
| Expected dividend rate | % | % | ||||||
F-25
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 10 | DERIVATIVE LIABILITY (continued) |
The movement in derivative liability is as follows:
| December 31, 2021 | December 31, 2020 | |||||||
| Opening balance | $ | $ | ||||||
| Derivative financial liability arising from convertible note | ||||||||
| Fair value adjustment to derivative liability | ( | ) | ( | ) | ||||
| $ | $ | |||||||
| 11 | STOCKHOLDERS’ EQUITY |
| a. | Common Stock |
The Company
has authorized
The following shares of common stock were issued by the Company during the year ended December 31, 2021:
| ● | In terms of debt conversion notices received between January 5, 2021 and February 23, 2021, the Company issued an aggregate of |
| ● | In terms of warrant exercise notices received between February 18, 2021 and June 23, 2021, the Company issued |
| ● | On March 17, 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 |
| ● | On April 5, 2021, the Board of directors approved advisory board agreements with |
| a. | Common Stock (continued) |
The following shares of common stock were issued by the Company during the year ended December 31, 2021:
| ● | On July 22, 2021, the Board of directors approved the issuance of |
F-26
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 11 | STOCKHOLDERS’ EQUITY (continued) |
| ● | On August 9, 2021, the Board of directors approved the issuance of |
| ● | The |
| b. | Restricted stock awards |
On December 15, 2020,
A summary of restricted stock activity during the period January 1, 2020 to December 31, 2021 is as follows:
| Total restricted shares | Weighted average fair market value per share |
Total unvested restricted shares |
Weighted average fair market value per share |
Total vested restricted shares | Weighted average fair market value per share |
|||||||||||||||||||
| Outstanding January 1, 2020 | $ | $ | $ | |||||||||||||||||||||
| Granted | ||||||||||||||||||||||||
| Forfeited/Cancelled | ||||||||||||||||||||||||
| Vested | ( |
) | ( |
) | ||||||||||||||||||||
| Outstanding December 31, 2020 | $ | |||||||||||||||||||||||
| Granted | ||||||||||||||||||||||||
| Forfeited/Cancelled | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
| Vested | ( |
) | ( |
) | ||||||||||||||||||||
| Outstanding December 31, 2021 | $ | $ | $ | |||||||||||||||||||||
The restricted stock granted and exercisable at December 31, 2021 is as follows:
| Restricted Stock Granted | Restricted Stock Vested | |||||||||||||||||
| Grant
date Price |
Number Granted |
Weighted Average Fair Value per Share |
Number Vested |
Weighted Average Fair Value per Share |
||||||||||||||
| $ | $ | $ | ||||||||||||||||
| $ | ||||||||||||||||||
| $ | $ | |||||||||||||||||
The Company has recorded an expense
of $
| 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 9 above, the Company issued five year warrants exercisable for a total of 28,709,182 shares of common stock at initial exercise prices ranging from $0.05 to $0.24 per share. The warrants have a cashless exercise option and an exercise limitation based on a certain beneficial ownership percentage of 4.99% which may be adjusted to 9.99%. The exercise price of the warrant is adjustable under the following conditions; i) subsequent equity sales are at a price below the exercise price of the warrant; ii) the Company issues options with an exercise price lower than the exercise price of the warrants; iii) issues convertible securities which are convertible into common stock at a price lower than the warrant exercise price; and iv) the option exercise price or rate of conversion for convertible securities results in a lower exercise price than the exercise price of the warrants.
F-27
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 11 | STOCKHOLDERS’ EQUITY (continued) |
| d. | Warrants (continued) |
The warrant holders also have the option to acquire subsequent rights offering rights, under certain circumstances and are entitled to pro-rata distributions made by the Company in assets or securities other than common stock.
The warrants include a fundamental transaction clause which will give the warrant holder the right on an as converted basis to the proceeds which common shareholders would be entitled to as a result of a fundamental transaction. Notwithstanding the aforementioned rights, provided the warrants are not registered under an effective registration statement, the holder of the warrant has the right to receive cash equal to the Black-Scholes value of the unexercised portion of the warrant in accordance with the terms of the warrant agreement.
On February 22, 2021, the Board of
Directors of the Company appointed William Corbett, its Chief Executive Officer and then Interim Chief Financial Officer, as its Chairman
of the Board and issued him a five-year warrant to purchase
In connection with the Securities Purchase Agreements with several institutional investors, disclosed in Note 9(a) above, the Company sold warrants to purchase up to an aggregate of 15,166,667 shares of its common stock. The combined purchase price for one share of common stock and associated Warrant is $0.15. The warrants were valued at $2,028,509 using a Black Scholes valuation model and using the assumptions disclosed below.
The Warrants are exercisable for a
period of
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
On August 16, 2021, the Company and
Mr. Corbett entered into an Executive Employment Agreement that replaced and superseded the previous executive employment agreement whereby
the
The fair value of the warrants granted and issued were determined by using a Black Scholes valuation model using the following assumptions:
| Year ended December 31, 2021 |
||||
| Exercise price | $ |
|||
| Risk free interest rate | % | |||
| Expected life | ||||
| Expected volatility of underlying stock | % | |||
| Expected dividend rate | % | |||
F-28
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 11 | STOCKHOLDERS’ EQUITY (continued) |
| d. | Warrants (continued) |
A summary of warrant activity during the period January 1, 2020 to December 31, 2021 is as follows:
| Shares Underlying Warrants |
Exercise price per share |
Weighted average exercise price |
||||||||||
| Outstanding January 1, 2020 | $ | $ | ||||||||||
| Granted | ||||||||||||
| Forfeited/Cancelled | ( |
) | |
|||||||||
| Exercised | ||||||||||||
| Outstanding December 31, 2020 | $ | $ | ||||||||||
| Granted | |
|||||||||||
| Forfeited/Cancelled | ( |
) | ||||||||||
| Exercised | ( |
) | ||||||||||
| Outstanding December 31, 2021 | $ | |
$ | |||||||||
The warrants outstanding and exercisable at December 31, 2021 are as follows:
| Warrants Outstanding | Warrants Exercisable | |||||||||||||||||||||||||
| Exercise Price* | Number Outstanding |
Weighted Average Remaining Contractual life in years |
Weighted Average Exercise Price |
Number Exercisable |
Weighted Average Exercise Price |
Weighted Average Remaining Contractual life in years |
||||||||||||||||||||
| $ | ||||||||||||||||||||||||||
| $ | ||||||||||||||||||||||||||
| $ | ||||||||||||||||||||||||||
| $ | $ | |||||||||||||||||||||||||
The warrants outstanding have an intrinsic
value of $
| e. | Stock options |
On June 18, 2018, the Company established
its 2018 Stock Incentive Plan (the “Plan”). The purpose of the Plan is to promote the interests of the Company and the stockholders
of the Company by providing directors, officers, employees and consultants of the Company with appropriate incentives and rewards to
encourage them to enter into and continue in the employ or service of the Company, to acquire a proprietary interest in the long-term
success of the Company and to reward the performance of individuals in fulfilling long-term corporate objectives. The Plan terminates
after a period of
The Plan is administered by the board 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
On October 22, 2021, the Company (with
the approval of the Company’s shareholders) established its 2021 Stock Incentive Plan (“2021 Plan”). The purpose of
the 2021 Plan is to promote the interests of the Company and the stockholders of the Company by providing directors, officers, employees
and consultants, advisors and service providers of the Company with appropriate incentives and rewards to encourage them to enter into
and continue in the employ or service of the Company, to acquire a proprietary interest in the long-term success of the Company and to
reward the performance of individuals in fulfilling long-term corporate objectives. The 2021 Plan terminates after a period of
F-29
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 11 | STOCKHOLDERS’ EQUITY (continued) |
| e. | Stock options (continued) |
The 2021 Plan is administered by the board of directors or a Compensation Committee appointed by the Board of Directors who have the authority to administer the 2021 Plan and to exercise all the powers and authorities specifically granted to it under the 2021 Plan.
The maximum number of securities available
under the 2021 Plan is
Under the 2021 Plan the company may award the following: (i) non-qualified stock options; (ii)) incentive stock options; (iii) stock appreciation rights; (iv) restricted stock; (v) restricted stock unit; and (vi) other stock-based awards.
On February 22, 2021, the board awarded
each of its directors, James Fuller and Andrey Novikov, options under the Company’s 2018 Stock Incentive Plan to purchase
On August 16, 2021, the Company and Mr. Corbett entered into an Executive Employment Agreement that replaced and superseded the previous executive employment agreement whereby the 20,000,000 warrants previously issued to Mr. Corbett were cancelled and as a replacement for the warrants, he was granted options to purchase 20,000,000 shares of common stock of the Company at a per share exercise price of $0.15. The options are exercisable for a period of ten years from the date of grant, vesting as to 50% on grant date and the remaining 50%, equally over a period of 36 months.
In terms of an employment agreement
dated August 16, 2021, on August 31, 2021, the Board awarded Richard Rosenblum, the Company’s Chief Financial Officer an option
to purchase
The fair value of the options granted and issued were determined by using a Black Scholes valuation model using the following assumptions:
| Year
ended December 31, 2021 |
||||
| Exercise price | $ | |||
| Risk free interest rate | % | |||
| Expected life | ||||
| Expected volatility of underlying stock | % | |||
| Expected dividend rate | % | |||
On July 22. 2021, the board of directors
authorized the reduction in the exercise price of the options exercisable for
The value of the reduction in the exercise price was determined using a Black Scholes valuation model utilizing the following assumptions:
| Year ended December 31, 2021 | ||||
| Revised exercise price | $ | |||
| Original exercise price | $ | |||
| Risk free interest rate | % | |||
| Expected life | ||||
| Expected volatility of underlying stock | % | |||
| Expected dividend rate | % | |||
F-30
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 11 | STOCKHOLDERS’ EQUITY (continued) |
| e. | Stock options (continued) |
No options were granted for the year ended December 31, 2020.
A summary of option activity during the period January 1, 2020 to December 31, 2021 is as follows:
| Shares Underlying options |
Exercise price per share |
Weighted average exercise price |
||||||||||
| Outstanding January 1, 2020 | $ | $ | ||||||||||
| Granted | ||||||||||||
| Forfeited/Cancelled | ||||||||||||
| Exercised | ||||||||||||
| Outstanding December 31, 2020 | ||||||||||||
| Granted | ||||||||||||
| Forfeited/Cancelled | ||||||||||||
| Exercised | ||||||||||||
| Outstanding December 31, 2021 | $ | |
$ | |||||||||
The options outstanding and exercisable at December 31, 2021 are as follows:
Outstanding | Average Remaining Contractual life in years | Average Exercise Price | Exercisable | Average Exercise Price | Average Remaining Contractual life in years | |||||||||||||||||||||
The options outstanding have an intrinsic value of $0 as of December 31, 2021 and 2020, respectively. The option expense was $1,382,639 and $0 for the years ended December 31, 2021 and 2020.
F-31
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 12 | INCOME TAXES |
The Company’s operations are based in the US and currently enacted tax laws in the US are used in the calculation of income taxes.
Federal Income Tax - United States
On December
22, 2017, the Tax Cuts and Jobs Act (the TCJA), which significantly modified U.S. corporate income tax law, was signed into law by President
Trump.
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A full valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. It is the Company’s policy to classify interest and penalties on income taxes as interest expense or penalties expense. As of December 31, 2020 and 2019, there have been no interest or penalties incurred on income taxes.
In the prior year, the Company’s primary operations were based in Mexico and enacted tax laws in Mexico were used in the calculation of income taxes, the holding company was based in the US and enacted US tax laws were used in the calculation of income taxes.
The provision for income taxes consists of the following:
| Year
ended December 31, 2021 | Year
ended December 31, 2020 | |||||||
| Current | ||||||||
| Federal | $ | $ | ||||||
| State | ||||||||
| Foreign | ||||||||
| $ | $ | |||||||
| Deferred | ||||||||
| Federal | $ | $ | ||||||
| State | ||||||||
| Foreign | ||||||||
| $ | $ |
F-32
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 12 | INCOME TAXES (continued) |
A reconciliation of the U.S. Federal statutory income tax to the effective income tax is as follows:
| Year ended December 31, 2021 | Year ended December 31, 2020 | |||||||
| Continuing operations | ||||||||
| Tax expense at the federal statutory rate | $ | ( | ) | $ | ( | ) | ||
| State tax expense, net of federal tax effect | ( | ) | ( | ) | ||||
| Permanent differences | ||||||||
| Prior year net operating loss true up | ( | ) | ||||||
| Temporary timing differences | ||||||||
| ( | ) | ( | ) | |||||
| Deferred income tax asset valuation allowance | ||||||||
| $ | $ | |||||||
Significant components of the Company’s deferred income tax assets are as follows:
| December 31, 2021 |
December 31, 2020 |
|||||||
| Other | $ | $ | ||||||
| Net operating losses | ||||||||
| Stock based compensation | ||||||||
| Valuation allowance | ( |
) | ( |
) | ||||
| Net deferred income tax assets | $ | $ | ||||||
The valuation allowance for deferred
income tax assets as of December 31, 2021 and December 31, 2020 was $
As of December 31, 2021, the prior three years remain open for examination by the federal or state regulatory agencies for purposes of an audit for tax purposes.
As of December 31, 2021, and 2020,
the Company had available for income tax purposes approximately $
The Company’s ability to utilize the United States Federal operating loss carryforwards may be subject to an annual limitation if pursuant to IRC Section 382/383 of the Internal Revenue Code of 1986, as amended, if a change of ownership has occurred. Management does not believe if an ownership change has occurred under IRC Section 382/383, but is evaluating, if such change has occurred. If such change has occurred, it is also possible that the loss carryforward could be eliminated.
The Company is subject to taxation in the U.S. and CA state. U.S. federal income tax returns for 2018 and after, remain open to examination. No income tax returns are currently under examination. As of December 31, 2021 and 2020, the Company does not have any unrecognized tax benefits, and continues to monitor its current and prior tax positions for any changes. The Company recognizes penalties and interest related to unrecognized tax benefits as income tax expense. For the years ended December 31, 2021 and 2020, there were no penalties or interest recorded in income tax expense.
F-33
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 13 | EQUITY BASED COMPENSATION |
Equity based compensation is made up of the following:
| Year
ended December 31, 2021 |
Year
ended December 31, 2020 |
|||||||
| Incentive stock awards | $ | $ | ||||||
| Stock issued for services rendered | ||||||||
| $ | $ | |||||||
| 14 | NET LOSS PER SHARE |
Basic loss per share is based on the weighted-average number of common shares outstanding during each period. Diluted loss per share is based on basic shares as determined above plus common stock equivalents. The computation of diluted net loss per share does not assume the issuance of common shares that have an anti-dilutive effect on net loss per share. For the years ended December 31, 2021 and 2020 all warrants options and convertible debt securities were excluded from the computation of diluted net loss per share.
Dilutive shares which could exist pursuant to the exercise of outstanding stock instruments and which were not included in the calculation because their affect would have been anti-dilutive for the years ended December 31, 2021 and 2020 are as follows:
| Year ended December 31, 2021 (Shares) | Year ended December 31, 2020 (Shares) | |||||||
| Convertible debt | ||||||||
| Stock options | ||||||||
| Warrants to purchase shares of common stock | ||||||||
| 15 | RELATED PARTY TRANSACTIONS |
The following transactions were entered into with related parties:
James Fuller
On February 22, 2021, the board of
directors awarded James Fuller options under the Company’s 2018 Stock Incentive Plan to purchase
On July 22. 2021, the Company granted
Mr. Fuller
Additionally, the board of directors
approved the repricing of the options exercisable for
Andrey Novikov
On February 22, 2021, the board of
directors awarded Andrey Novikov options under the Company’s 2018 Stock Incentive Plan to purchase
On May 31, 2021, Mr. Novikov notified the board of directors of his decision to resign as a member of the Board and as Secretary of the Company, effective as of June 1, 2021. Since August 2021, Mr. Novikov has been on suspension from service as the Company’s Chief Technology Officer.
F-34
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 15 | RELATED PARTY TRANSACTIONS (continued) |
William Corbett
On February 22, 2021, the board of
directors of the Company appointed William Corbett, its Chief Executive Officer and Interim Chief Financial Officer, as its Chairman
of the Board and issued him a five-year warrant to purchase
On August 16, 2021, the Company and
Mr. Corbett entered into an Executive Employment Agreement that replaced and superseded the previous executive employment agreement (the
“August 2021 Corbett Employment Agreement”). The purpose of the August 2021 Corbett Employment Agreement was to provide a
replacement grant for warrants previously granted to Mr. Corbett under the terms of his previous employment agreement with the Company.
Pursuant to the August 2021 Corbett Employment Agreement, Mr. Corbett would continue to serve as the Company’s Chief Executive
Officer on a full time basis effective as of the date of the August 2021 Corbett Employment Agreement until the close of business on
December 31, 2024. Mr. Corbett’s base salary will be $
In addition, the Company and Mr. Corbett entered into an Indemnification Agreement on August 16, 2021 (the “August 2021 Corbett Indemnification Agreement”), pursuant to which the Company agreed to indemnify Mr. Corbett to indemnify Indemnitee to the fullest extent permitted by or under the Nevada Corporation Law in respect of claims, including third-party claims and derivative claims and provides for advancement of expenses. The August 2021 Corbett Indemnification Agreement amends the indemnification agreement in effect prior to entering into the August 2021 Corbett Indemnification Agreement to provide that unless Company shall pay Mr. Corbett’s attorneys’ fees and costs, including the compensation and expenses of any arbitrator, unless the arbitrator or the court determines that (a) Company has no liability in such dispute, or (b) the action or claims by Executive are frivolous in nature. In any other case or matter, the Company and Mr. Corbett shall each bear its or his own attorney fees and costs.
Clifford Henry
On May 1, 2021, the Company appointed Mr. Henry to the Board of Directors.
On July 22, 2021, the Company granted
Mr. Henry
Mr. Henry has a consulting agreement
with the Company whereby he is paid $
Madisson Corbett
On May 1, 2021, the Company appointed Ms. Corbett to the Board of Directors. Ms. Corbett is the daughter of Mr. William Corbett, the Company’s Chief Executive Officer and Chairman of the Board.
On July 22, 2021, the Company granted
Ms. Corbett
David Rios
On July 22, 2021, the Company appointed David Rios to the Board of Directors.
On July 22, 2021, the Company granted
Mr. Rios
F-35
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 15 | RELATED PARTY TRANSACTIONS (continued) |
Richard Rosenblum
On July 22, 2021, the Company appointed Richard Rosenblum as President and Chief Financial Officer of the Company. In addition, Mr. Rosenblum was elected to the board of directors of the Company to serve until the Company’s next annual meeting of shareholders.
On July 27, 2021,
If Mr. Rosenblum’s employment
with Company is terminated at any time during the term of the Employment Agreement other than for Cause (as defined in the Employment
Agreement), or due to voluntary termination, retirement, death or disability, then Mr. Rosenblum shall be entitled to severance equal
to fifty percent (
On August 16, 2021, the Company entered
into an amendment to the Rosenblum Executive Employment Agreement (the “First Amendment”) with Mr. Rosenblum. Under the terms
of the Executive Employment Agreement, the Company had agreed to grant to Mr. Rosenblum an option to purchase
In addition, the Company and Mr. Rosenblum entered into an Indemnification Agreement, pursuant to which the Company agreed to indemnify Mr. Rosenblum to indemnify Indemnitee to the fullest extent permitted by or under the Nevada Corporation Law in respect of claims, including third-party claims and derivative claims and provides for advancement of expenses.
F-36
INNOVATIVE PAYMENT SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 16 | COMMITMENTS AND CONTINGENCIES |
The Company has property lease commitments disclosed under note 6 above.
The Company may have an obligation to repay certain convertible notes and accrued interest thereon, on maturity date, if these notes are not converted into equity prior to maturity date as disclosed under note 9 above.
| 17 | SUBSEQUENT EVENTS |
Convertible note funding
On February
3, 2022, the Company extended the maturity date of its convertible notes to each of Cavalry and Mercer from February 16, 2022 to August
16, 2022 in consideration of increasing the principal amount outstanding and due to each of Cavalry and Mercer under the convertible
notes by
On February
4, 2022, the Company paid in full the convertible note owing to Bellridge including interest and penalties thereon for gross proceeds
of $
Other than disclosed above, the Company has evaluated subsequent events through the date the consolidated financial statements were available to be issued and has concluded that no such events or transactions took place that would require disclosure herein.
F-37
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
We have adopted and maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports filed under the Exchange Act, such as this Annual Report, is collected, recorded, processed, summarized and reported within the time periods specified in the rules of the SEC. Our disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to management to allow timely decisions regarding required disclosure. As required under Exchange Act, Rule 13a-15, our management, including our Chief Executive Officer (who is our Principal Executive Officer and our President and Chief Financial Officer (who is our Principal Financial Officer), after evaluating the effectiveness of disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Annual Report have concluded that our disclosure controls are not effective due to a lack of written policies and procedures to address all material transactions and developments impacting the financial statements.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is also responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of published financial statements. Management conducted an assessment of our internal control over financial reporting as of December 31, 2021 based on the framework and criteria established by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework 2013 (“COSO”). The COSO framework requires rigid adherence to control principles that require sufficient and adequately trained personnel to operate the control system. While our management believes that our internal control over financial reporting improved in 2021 due to an upgrade in accounting personnel and efforts to implement segregation ed duties as required by COSO based on management’s assessment, our management has concluded that our internal control over financial reporting continued to be ineffective as of December 31, 2021 as a result of continuing insufficient segregation of duties and oversight of work performed in the finance and accounting function due to limited personnel with the appropriate skill sets. During 2022, our management plans to continue to address these matters with a view towards remediating the weaknesses.
Our management, including our Chief Executive Officer and President and Chief Financial Officer, does not expect that our disclosure controls and procedures and our internal control processes, even if improved, will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of error or fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that the breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
Changes in Internal Control Over Financial Reporting
Other than disclosed above, there has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during our year ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permit us provide only management’s report in this annual report.
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
26
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The table below sets certain information concerning our executive officers and directors, including their names, ages, anticipated positions with us. Our executive officers are chosen by our Board and hold their respective offices until their resignation or earlier removal by the Board.
In accordance with our Articles of Incorporation, as amended, incumbent directors are elected to serve until our next annual meeting and until each director’s successor is duly elected and qualified.
| Name | Age | Position | ||
| William Corbett | 62 | Chairman of the Board, Chief Executive Officer, and Director | ||
| Richard Rosenblum | 62 | Chief Financial Officer and President | ||
| Clifford Henry | 82 | Director | ||
| Madisson Corbett | 32 | Director | ||
| David Rios | 78 | Director | ||
| James Fuller | 82 | Director |
The following information pertains to the members of our Board and executive officers, their principal occupations and other public Company directorships for at least the last five years and information regarding their specific experiences, qualifications, attributes and skills:
William Corbett, Chairman of the Board, Chief Executive Officer and Director
Mr. Corbett has been serving as the Company’s Chief Executive Officer and a Director since August 6, 2019 and as its Chairman since February 22, 2021. He was also the Company’s Interim Chief Financial Officer from August 6, 2019 to July 22, 2021.
William Corbett has over thirty years of Wall Street experience. Starting with Bear Stearns in the mid-1980’s he became a managing director responsible for managing over 50 brokers and was subsequently hired by Lehman Brothers where he was one of the top producers in the 1990’s. In 1995, he co-founded and became CEO of The Shemano Group, a San Francisco investment banking boutique, which developed into one of the leading banks for funding small cap companies. He pioneered the PIPE industry (Private Investment in Public Equities) perennially leading the country in monies raised by investment banking firms in micro-cap companies. Shemano Group was also responsible for bringing companies public through IPO’s and reverse mergers, and was also a leading underwriter for follow-on public offerings, raising billions for companies over 20 years. Over the last five years, Mr. Corbett was a managing director at Paulson Investment Co. from October 2013 until October 2016, responsible for West Coast investment banking activities. He also has served as CEO of DPL a lending company, and a wholly owned subsidiary of DPW Holdings, Inc., from October of 2016 until May 2019. Mr. Corbett graduated from the University of the Pacific with a B.S. in Finance, and was inducted into the Pacific Hall of Fame in 2005 for collegiate golf.
Mr. Corbett’s financial experience on Wall Street, specifically with micro-cap companies, we believe provide him with the attributes that make him a valuable member of the Company’s Board of Directors.
Richard Rosenblum, Chief Financial Officer, President and Director
Mr. Rosenblum was appointed as our Chief Financial Officer, President and to serve as a member of the Board of directors on July 22, 2021.
Since its founding in 2004, Mr. Rosenblum has been Chief Executive Officer and Principal at Harborview Capital Advisors LLC (“Harborview”), which provided strategic advisory services in the areas of capital formation, merchant banking and management consulting. Additionally, Mr. Rosenblum has been the owner of Harborview Property Management (“HPM”) for over twenty- years, where he invests and manages domestic and international commercial real-estate, and multi-family real-estate assets. From 2008 to 2014, Mr. Rosenblum was a Director, President and Executive Chairman of Alliqua Biomedical Inc. (NASDAQ: ALQA), which developed and marketed hydrogel manufacturing technology in the wound care sector. His philanthropic and community-centered activities include being a founding board member of the Dr. David Feit Memorial Foundation (DFM), which for over 15 years raised money for the benefit and support of youth activities. Since 2018, Mr. Rosenblum has served on the Board of Directors of the Chilton Hospital Foundation. Mr. Rosenblum graduated Summa Cum Laude from SUNY Buffalo with a B.A. in Finance & Accounting.
We chose Mr. Rosenblum to serve as our Chief Financial Officer, President and as a member of our Board of Directors due to his extensive business and finance experience.
27
Clifford Henry, Director
Mr. Henry was appointed to our board of directors on May 1, 2021.
Mr. Henry is Chairman and CIO of CWH Associates (“CWH”), an investment management and consulting firm he founded in 1989. CWH is the owner and General Partner of Worthington Growth, LP, one of the earliest thematic focused, research-driven investment funds specializing in small and mid-cap companies. In addition to his investment work, Mr. Henry has served a number of companies as a director or advisor. He is also involved extensively in pro bono work most recently as a Chairman of the Indian River (Florida) Cultural Council and was a founding Chairman of the Board of Trustees of the Clay Art Center in Port Chester New York. Mr. Henry obtained a bachelor’s degree in French and English literature in 1961 from Princeton and an MBA from Columbia University in 1966.
We chose Mr. Henry to serve as a member of our Board of Directors due to his extensive business experience.
Madisson Corbett, Director
Ms. Corbett was appointed to our board of directors on May 1, 2021.
Ms. Corbett has extensive experience in sales and built the sales development organizations at Series A-C tech companies. Ms. Corbett’s career in sales began in 2012 in San Diego, overseeing global sales and marketing at the top surf wax company in the U.S. Beginning in 2011, Ms. Corbett worked at the International Surfing Association, recognized by the International Olympic, Committee and helped introduce surfing to the Olympics in 2020. From 2014 to 2016, she served as Operation Specialist at nutraceutical company Neuliven Health, Inc. Starting in 2016, Ms. Corbett began working for various Y Combinator companies including a payroll and benefits platform (Gusto), a hiring software provider (Lever) and a mental health start up (Modern Health). Since 2019, Ms. Corbett has worked for fintech start-up Brex.com. She built out the entire sales development organization from scratch and oversaw top of funnel production for the Go To Market Team at Brex.com. Ms. Corbett managed the increase of reoccurring annual revenue from $20,000,000 to $100,000,000 in just 18 months and her team accounted for 85% of the net new revenue generated during the period. Ms. Corbett graduated in 2011 from the University of California, San Diego with a Bachelor’s degree in Economics and Environmental Science.
We chose Ms. Corbett to serve as a member of our Board of Directors due to her business and sales experience.
David Rios, Director
Mr. Rios was appointed to our board of directors on July 22, 2021.
Mr. Rios is a currently a philanthropist. Prior to turning to philanthropy approximately ten years ago, Mr. Rios was the founder, Chairman, and Chief Executive Officer of D.F. Rios Construction, Inc., the largest framing construction company in the state of California, for over 30 years. Mr. Rios was also President of the California Framers Association and on the Board of Carpenters. Additionally, Mr. Rios sat on the Board of Pan Pacific Bank where he was instrumental in closing its acquisition by California Bank of Commerce in December 2015.
We chose Mr. Rios to serve as a member of our Board of Directors due to his extensive business experience.
James Fuller, Director
Mr. James W. Fuller, MBA, was appointed to our Board of Directors in May 2017. He has been the Chief Executive Officer, President, Chief Financial Officer, Chairman, Principal Accounting Officer and Secretary of Beauty Brands Group Inc. since February 5, 2013. Since March 2008, Mr. Fuller has been a Partner in the Private equity firm, Baytree Capital Associates, LLC, where he oversees the West Coast operations and their interests in the Far East including China. In 2007 and 2008, he was the Owner of Northcoast Financial brokerage. He served as Senior Vice President of Marketing for Charles Schwab and Company from 1981 to 1985. Subsequently, he served key roles as the President of Bull & Bear Group, a mutual fund/discount brokerage company in New York. He served as the Senior Vice President of the New York Stock Exchange (NYSE) from 1976 to 1981, where he was responsible for corporate development, marketing, corporate listing and regulation oversight, research and public affairs. He also served as Senior Vice president of Bridge Information Systems and was the Founder and Head of Morgan Fuller Capital Group. He has over 30 years of experience in the brokerage and related financial services industries. His financial career started in 1968 with J. Barth & Company in San Francisco. He served as West Coast Managing Director for a New York based investment banking and trading firm from 1972 to 1974. He managed the consulting practice for the Investment Industries Division of SRI International, where he directed a study on the future of the Securities Industry from 1974 to 1976. His other projects included the development and implementation of the Cash Management Account for Merrill Lynch, which is a standard throughout the brokerage industry. He served as the Chairman of Pacific Research Institute. He has been a Director at Beauty Brands Group Inc. since February 5, 2013, Kogeto, Inc. since April 10, 2015 and Oklahoma Energy Corp. since 1998. He has been an Independent Director of Cavitation Technologies, Inc., since February 15, 2010 and serves as its Member of Advisory Board. He served as a Director of Bridge Information Systems. He served as an Independent Director of Propell Technologies Group, Inc. from October 14, 2011 to February 17, 2015. He served as a Director of TapImmune, Inc. from May 18, 2012 to February 6, 2013. He served on the Board of Trustees of the University of California, Santa Cruz for 12 years. He served on the Board of Directors of the Securities Investor Protection Corporation (SIPC) until 1987. He is a Member of the Board of the International Institute of Education. He is an Elected Member and Vice Chairman for Finance of the San Francisco Republican Central Committee and is a Member of the Pacific Council for International Policy, Commonwealth Club. He was a Member of the Committee of Foreign Relations. Mr. Fuller received his MBA in Finance from California State University and Bachelor of Science in Marketing and Political Science from San Jose State University.
We chose Mr. Fuller to serve as a member of our Board of Directors due to his extensive business and finance experience, which makes him a valuable member of our Board of Directors.
28
Suspension of Andrey Novikov as Chief Technology Officer
In August, 2021, we suspended Andrey Novikov from his serving as our Chief Technology Officer, and such suspension remains in effect as of the date of this Annual Report. As described elsewhere herein, Mr. Novikov is presently a plaintiff in an action against us before the Occupational Safety and Health Administration of the United Stated Department of Labor. As such, as of the date of this Annual Report, he is not acting as an officer of our company and as not since August 2021.
Mr. Novikov originally served as our Chief Operating Officer since the consummation of the Merger on May 12, 2016 and was appointed as our Chief Technology Officer in December 2019. He was appointed to our Board on May 12, 2016 and resigned as a member of the board of directors on May 31, 2021.
Corporate Governance
Code of Conduct and Ethics
Effective as of May 12, 2016, we adopted a Code of Conduct and Ethics that applies to, among other persons, our president or chief executive officer as well as the individuals performing the functions of our chief financial officer, corporate secretary and controller. As adopted, our Code of Business Conduct and Ethics sets forth written standards that are designed to deter wrongdoing and to promote:
| ● | honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; | |
| ● | full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to regulatory agencies, including the SEC; | |
| ● | the prompt internal reporting of violations of the Code of Conduct and Ethics to an appropriate person or persons identified in the Code of Conduct and Ethics; and | |
| ● | accountability for adherence to the Code of Conduct and Ethics. |
Our Code of Conduct and Ethics requires, among other things, that all of our personnel be afforded full access to our president or chief executive officer with respect to any matter which may arise relating to the Code of Conduct and Ethics. Further, all of our personnel are to be afforded full access to our Board of Directors if any such matter involves an alleged breach of the Code of Conduct and Ethics by our president or chief executive officer.
In addition, our Code of Conduct and Ethics emphasizes that all employees, and particularly managers and/or supervisors, have a responsibility for maintaining financial integrity within our company, consistent with generally accepted accounting principles, and federal, provincial and state securities laws. Any employee who becomes aware of any incidents involving financial or accounting manipulation or other irregularities, whether by witnessing the incident or being told of it, must report it to his or her immediate supervisor or to our president or chief executive officer. If the incident involves an alleged breach of the Code of Conduct and Ethics by our president or chief executive officer, the incident must be reported to any member of our Board of Directors or use of a confidential and anonymous hotline phone number. Any failure to report such inappropriate or irregular conduct of others is to be treated as a severe disciplinary matter. It is against our company policy to retaliate against any individual who reports in good faith the violation or potential violation of our Code of Conduct and Ethics by another. Our Code of Conduct and Ethics is available, free of charge, to any stockholder upon written request to our Corporate Secretary at Innovative Payment Solutions, 56B 5th Street, Lot 1, Carmel by the Sea, California, 93921. A copy of our Code of Conduct and Ethics can be found at www.ipsipay.com.
Composition of the Board
In accordance with our Articles of Incorporation, our Board is to be elected annually as a single class.
Board Committees
We currently do not have a separate Audit Committee, Nominating, Governance Committee or Compensation Committee. Our full board currently serves as our Audit Committee and Compensation Committee. Due to the size of our Board of Directors and our company, we believe the structure is sufficient. None of our directors, other than James Fuller, is considered an “Audit Committee” financial expert. The Audit Committee will review the results and scope of the audit and other services provided by the independent auditors and review and evaluate the system of internal controls. The Compensation Committee will manage any stock option plan we may establish and review and recommend compensation arrangements for the officers. The Nominating and Governance Committee will assist our Board of Directors in fulfilling its oversight responsibilities and identify, select and evaluate our Board of Directors and committees. No final determination has yet been made as to the memberships of the other committees.
We will reimburse all directors for any expenses incurred in attending directors’ meetings provided that we have the resources to pay these fees. We will provide officers and directors liability insurance.
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Leadership Structure
The chairman of our Board of Directors, and Chief Executive Officer positions are currently the same person, Mr. Corbett. Our Bylaws do not require our Board of Directors to separate the roles of chairman and chief executive officer but provides our Board of Directors with the flexibility to determine whether the two roles should be combined or separated based upon our needs. Our Board of Directors believes the combination of the chairman and the chief executive officer roles is the appropriate structure for our company at this time. Our Board of Directors believes the current leadership structure serves as an aid in the Board of Directors’ oversight of management and it provides us with sound corporate governance practices in the management of our business.
Risk Management
The Board of Directors discharges its responsibilities, and assesses the information provided by our management and the independent auditor, in accordance with its business judgment. Management is responsible for the preparation, presentation, and integrity of the Company’s financial statements, and management is responsible for conducting business in an ethical and risk mitigating manner where decisions are undertaken with a culture of ownership. Our Board of Directors oversees management in their duty to manage the risk of our company and each of our subsidiaries. Our Board of Directors regularly reviews information provided by management as management works to manage risks in the business. Our Board of Directors intends to establish Board Committees to assist the full Board of Directors’ oversight by focusing on risks related to the particular area of concentration of the relevant committee.
Director Independence
The Board, in the exercise of its reasonable business judgment, has determined that Clifford Henry, David Rios and James Fuller, that qualifies as independent directors pursuant to Nasdaq Stock Market Rule 5605(a)(2) and applicable SEC rules and regulations. Mr. Corbett, Ms. Corbett and Mr. Rosenblum currently employed as our Chief Executive Officer and Chairman of the Board, Director and daughter of Mr. Corbett, and Chief Financial Officer, respectively, and therefore would not be considered independent directors.
Delinquent Section 16 reports
Section 16(a) of the Exchange Act requires our executive officers, directors and persons who beneficially own more than 10 percent of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of our Common Stock. Such officers, directors and persons are required by SEC regulation to furnish us with copies of all Section 16(a) forms that they file with the SEC.
Based solely on a review of the copies of such forms that were received by us, or written representations from certain reporting persons that no Forms 5 were required for those persons, the following individuals failed to file the following reports relating to the following transaction in a timely manner during the year ended December 31, 2021.
| ● | Mr. Fuller filed two form 4’s late relating to two transactions; and | |
| ● | Mr. Rios filed one form 3 late; | |
| ● | Mr. Henry filed one form 3 late and one form 4 late relating to one transaction; | |
| ● | Ms. Corbett filed one form 4 late relating to one transaction; | |
| ● | Mr. Corbett filed one form 4 late relating to one transaction; | |
| ● | Mr. Rosenblum filed one form 3 late |
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Item 11. Executive Compensation
The following table summarizes all compensation earned in each of IPSI and its subsidiaries during its last two fiscal years ended December 31, 2021 and 2020 by: (i) its principal executive officer; and (ii) its most highly compensated executive officer other than the principal executive officer who was serving as an executive officer of IPSI as of the end of the last completed fiscal year. The tables below reflect the compensation for the IPSI executive officers who are also named executive officers of the combined company.
| Name and principal position | Year | Salary | Bonus | Stock awards |
Option awards |
All other comp. |
Total | |||||||||||||||||||
| William Corbett, | 2021 | $ | 359,640 | $ | - | $ | 251,064 | (a) | $ | 910,019 | (b) | $ | 4,327,899 | (b) | $ | 5,848,622 |
||||||||||
| Chairman of the Board and Chief Executive Officer (1) | 2020 | $ | 142,750 | $ | 28,605 | $ | 502,128 | (a) | $ | - | $ | 33,000 | (c) | $ | 706,483 | |||||||||||
| Richard Rosenblum | 2021 | $ | 108,000 | $ | - | $ | 194,000 | (d) | $ | 381,006 | (e) | $ | - | $ | 683,006 | |||||||||||
| Chief Financial Officer and President (2) | 2020 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||
| Andrey Novikov | 2021 | $ | - | $ | - | $ | - | $ | 45,804 | (f) | $ | 83,500 | $ | 129,304 |
||||||||||||
| Chief Technology Officer(3) | 2020 | $ | 96,000 | $ | - | $ | 39,000 | (g) | $ | - | $ | - | $ | 135,000 | ||||||||||||
| (1) | Mr. Corbett was appointed as Chief Executive Officer on August 6, 2019 and appointed as Chairman of the Board on February 22, 2021. |
| (2) | Mr. Rosenblum was appointed as our President and Chief Financial Officer on July 22, 2021. |
| (3) | Mr. Novikov served as our Chief Operating Officer and a director from May 2015 to December 2019, and was appointed our Chief Technology Officer in December 2019. On May 31, 2021, Mr. Novikov resigned as a director and secretary of the Company, and since August 2021, he has been suspended from his service as our Chief Technology Officer. As such, as of the date of this Annual Report, he is not acting as an officer of our company. |
| (a) | Mr. Corbett was granted 20,495,000 restricted shares of common stock on January 1, 2020, of which 10,247,500 are vested and the remaining 10,247,500 vest equally on January 1, 2022, January 1, 2023. |
| (b) | Mr. Corbett was initially granted a warrant exercisable for 20,000,000 shares of common stock at an exercise price of $0.24 per share on February 22, 2021. On August 16, 2021, the warrant exercisable for 20,000,000 shares of common stock was cancelled and replaced with a ten-year option exercisable for 20,000,000 shares of common stock at an exercise price of $0.15 per share, of which 10,000,000 vested immediately and the remaining 10,000,000 vest equally over 36 months. |
| (c) | Consists of healthcare related expenses for the benefit of Mr. Corbett. |
| (d) | Mr. Rosenblum was granted 2,000,000 restricted shares of common stock on April 5, 2021, as an advisory board member prior to being appointed as the Chief Financial Officer, director and president of the Company on July 22, 2021. |
| (e) | Mr. Rosenblum was granted a ten year option exercisable for 10,000,000 shares of common stock at an exercise price of $0.15 per share on August 31, 2021, of which 5,000,000 vested immediately and the remaining 5,000,000 vest equally over 36 months. |
| (f) | On February 22, 2021, the Board of Directors of the Company granted Mr. Novikov an option to purchase 208,333 shares of the Company’s common stock at an exercise price of $0.24. |
| (g) | Mr. Novikov is issued shares of common stock valued at $3,000 per month, as partial payment of his base salary, pursuant to the terms of his employment agreement. |
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Outstanding Equity Awards at Fiscal Year End
The following table lists the outstanding equity awards held by our named executive officers at December 31, 2021:
| OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END | ||||||||||||||||||||||||||||||||||
| OPTION AWARDS | STOCK AWARDS | |||||||||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options Exercisable* | Number of Securities Underlying Unexercised Options Unexercisable* | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options* | Option Exercisable Price* | Option Expiration Date | Number of Shares or Units of Stock that have Not Vested | Market Value of Shares or Units of Stock that have not Vested | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that have Not Vested | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that have Not Vested | |||||||||||||||||||||||||
| William Corbett | 11,111,111 | 8,888,888 | - | $ | 0.15 | 8/16/2031 | 10,247,500 | $ | 245,940 | - | - | |||||||||||||||||||||||
| Richard Rosenblum | 5,555,556 | 4,444,444 | - | $ | 0.15 | 8/16/2031 | - | $ | - | - | - | |||||||||||||||||||||||
| Andrey Novikov(1) | 100,000 | - | - | $ | 0.40 | 12/27/2028 | - | $ | - | - | - | |||||||||||||||||||||||
| 208,333 | - | - | $ | 0.24 | 2/22/2031 | - | $ | - | - | - | ||||||||||||||||||||||||
| (1) | Since August 2021, Mr. Novikov has been suspended from his service as our Chief Technology Officer. As such, as of the date of this Annual Report, he is not acting as an officer of our company. |
Agreements with Named Executive Officers
William Corbett
The Company entered into an executive employment agreement with William Corbett effective June 24, 2020 (as amended, the “Corbett Employment Agreement”) which provided that Mr. Corbett be (i) employed as the Company’s Chief Executive Officer for a term of three (3) years, provide for a base salary of $12,500 per month, (ii) granted a signing bonus of $25,000, (iii) receive a bonus of up to 50% of his the annual base salary upon the Company’s achievement of $2,000,000 EBITDA and additional performance bonus payments as may be determined by the Company’s Board of Directors and (iv) provide for severance in the event of a termination without cause in amount equal to equal to fifty percent (50%) of his annual base salary rate then in effect, provided that if such termination without cause occurs after an Acquisition of the Company (as defined in the agreement), Mr. Corbett will be entitled to receive severance in an amount equal to equal to 100% of his annual base salary rate then in effect.
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Further, pursuant to the Corbett Employment Agreement the Company granted Mr. Corbett 5,123,750 shares of the Company’s common stock, which are fully vested and not subject to forfeiture.
On June 24, 2020, the Company entered into a restricted stock agreement with Mr. Corbett pursuant to which the Company granted him a restricted stock award of 15,371,250 shares of the Company’s common stock, with such shares are subject to forfeiture and which forfeiture restriction lapse 33%, 33% and 34%, respectively, on the first, second and third anniversary of the date of grant.
On June 24, 2020, the Company entered into an indemnification agreement with Mr. Corbett to indemnify him, in connection with his position of employment with the Company and in the discharge of his duties and responsibilities to the Company, to the maximum extent allowed under the laws of the State of Nevada. The Company is not required or obligated to indemnify Mr. Corbett to extent it would violate the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, or the rules and regulations thereunder.
On December 14, 2020, the Company entered into an amendment to the Corbett Employment Agreement whereby the Company agreed to increase Mr. Corbett’s base salary to $20,000 per month and to pay Mr. Corbett a bonus of $20,000 for the year ended December 31, 2020.
On February 22, 2021, the Board of Directors of the Company appointed William Corbett, its Chief Executive Officer and Interim Chief Financial Officer, as its Chairman of the Board and issued him a five-year warrant to purchase 20,000,000 shares of the Company’s common stock at an exercise price of $0.24. The Board also agreed to increase Mr. Corbett’s monthly base salary to $30,000.
On August 16, 2021, the Company and Mr. Corbett entered into an Executive Employment Agreement that replaced and superseded the previous executive employment agreement (the “August 2021 Corbett Employment Agreement”). The purpose of the August 2021 Corbett Employment Agreement was to provide a replacement grant for warrants previously granted to Mr. Corbett under the terms of his previous employment agreement with the Company. Pursuant to the August 2021 Corbett Employment Agreement, Mr. Corbett would continue to serve as the Company’s Chief Executive Officer on a full time basis effective as of the date of the August 2021 Corbett Employment Agreement until the close of business on December 31, 2024. Mr. Corbett’s base salary will be $30,000 per month, which shall be paid in accordance with the Company’s standard payroll practice for its executives, managers and salaried employees. In addition, the August 2021 Corbett Employment Agreement provides that: (1) Mr. Corbett will be eligible for a cash bonus as determined by the Board to the extent the Company achieves (or exceeds) annual revenue or other financial performance objectives established by the Board, in its sole discretion, from time to time; (2) the Company will grant to Mr. Corbett options to purchase 20,000,000 shares of common stock of the Company at a per share exercise price of $0.15; and (3) a car allowance for Mr. Corbett in the amount of $800 per month. Fifty percent (50%) of the shares subject to the options shall vest on the grant date and the other 50% of the shares subject to the option shall vest at the rate of 1/36 per month over a three-year period. The options will be exercisable for a period of ten years after the date of grant and the Company shall provide for cashless exercise of the option. The options are being granted pursuant to the Company’s 2021 Stock Incentive Plan.
In addition, the Company and Mr. Corbett entered into an Indemnification Agreement on August 16, 2021 (the “August 2021 Corbett Indemnification Agreement”), pursuant to which the Company agreed to indemnify Mr. Corbett to indemnify Indemnitee to the fullest extent permitted by or under the Nevada Corporation Law in respect of claims, including third-party claims and derivative claims and provides for advancement of expenses. The August 2021 Corbett Indemnification Agreement amends the indemnification agreement in effect prior to entering into the August 2021 Corbett Indemnification Agreement to provide that unless Company shall pay Mr. Corbett’s attorneys’ fees and costs, including the compensation and expenses of any arbitrator, unless the arbitrator or the court determines that (a) Company has no liability in such dispute, or (b) the action or claims by Executive are frivolous in nature. In any other case or matter, the Company and Mr. Corbett shall each bear its or his own attorney fees and costs.
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Richard Rosenblum
On July 22, 2021, the Company appointed Richard Rosenblum as President and Chief Financial Officer of the Company. In addition, Mr. Rosenblum was elected to the board of directors of the Company to serve until the Company’s next annual meeting of shareholders.
On July 27, 2021, the Company and Mr. Rosenblum entered into an Executive Employment Agreement (the “Employment Agreement”), pursuant to which Mr. Rosenblum will serve as the Company’s President and Chief Financial Officer on a full time basis effective as of July 1. The effectiveness of the Employment Agreement is subject to the approval of the Employment Agreement by the Board, unless earlier terminated as provided in the Employment Agreement. The term of the Employment Agreement is until December 31, 2024. Mr. Rosenblum’s base salary will be $18,000 per month. In addition, the Employment Agreement provides that: (1) Mr. Rosenblum will be eligible for a cash bonus as determined by the Board to the extent the Company achieves (or exceeds) annual revenue or other financial performance objectives established by the Board, in its sole discretion, from time to time; and (2) the Company will grant to Mr. Rosenblum options to purchase 10,000,000 shares of common stock of the Company at a per share exercise price equal to the fair market value of the Company’s common stock, as reflected in the closing price of the Company’s common shares on the OTC exchange or, in the event the stock is up listed, on the NASDAQ exchange, on the date of grant (the “Options”)”. Fifty percent (50%) of the shares subject to the Options shall vest on the grant date and the other 50% of the shares subject to the Option shall vest at the rate of 1/36 per month over a three-year period. The Options will be exercisable for a period of ten (10) years after the date of grant and the Company shall provide for cashless exercise of the Option by Executive. The Options are being granted pursuant to the Company’s 2021 Stock Incentive Plan.
If Mr. Rosenblum’s employment with Company is terminated at any time during the term of the Employment Agreement other than for Cause (as defined in the Employment Agreement), or due to voluntary termination, retirement, death or disability, then Mr. Rosenblum shall be entitled to severance equal to fifty percent (50%) of his annual base salary rate in effect as of the date of termination. If Mr. Rosenblum’s employment with Company is terminated at any time during the term of the Employment Agreement other than for Cause (as defined in the Employment Agreement), or due to voluntary termination, retirement, death or disability, within 12 months following an Acquisition (as defined in the Employment Agreement), then Mr. Rosenblum shall be entitled to severance equal to 100% of his annual base salary rate in effect as of the date of termination. Severance payments shall be subject to execution and delivery of a general release in favor of the Company.
On August 16, 2021, the Company entered into an amendment to the Rosenblum Executive Employment Agreement (the “First Amendment”) with Mr. Rosenblum. Under the terms of the Executive Employment Agreement, the Company had agreed to grant to Mr. Rosenblum an option to purchase 10,000,000 (ten million) common shares of Company Stock at a per share exercise price equal to the fair market value of the Company’s common stock, as reflected in the closing price of the Company’s common shares on the OTC exchange or, in the event the stock is uplisted, on the NASDAQ exchange, on the date of grant (the “Option”).” The First Amendment provided that the Option was granted on August 31, 2021 at an exercise price of $0.15.
In addition, the Company and Mr. Rosenblum entered into an Indemnification Agreement, pursuant to which the Company agreed to indemnify Mr. Rosenblum to indemnify Indemnitee to the fullest extent permitted by or under the Nevada Corporation Law in respect of claims, including third-party claims and derivative claims and provides for advancement of expenses.
Andrey Novikov
On December 3, 2019, we entered into a one-year employment agreement with Mr. Novikov to serve as our Chief Technology Officer and Secretary (the “Novikov Employment Agreement”) which replaced the agreement that Qpagos Corporation entered into with Mr. Novikov on May 18, 2015, which was extended for one year on June 12, 2019. pursuant to the terms of the agreement, Mr. Novikov is entitled to receive an annual salary at a rate of $8,000 per month, payable $5,000 in cash in accordance with the regular payroll practices of the Company and $3,000 in Common Stock (based on then current fair market value of the Common Stock on the date of grant as determined by our Board of Directors. Mr. Novikov is also eligible to earn an annual performance bonus up to fifty percent (50%) of the base salary based upon the Board’s assessment of his performance and attainment of targeted goals as set by the board of directors in its sole discretion. The Novikov Employment Agreement provides for a severance payment in the event of employment termination by us without Cause (as defined in the Agreement), by Mr. Novikov for Good Reason (as defined in the Agreement), due to Disability (as defined in the Agreement) or death, in certain circumstances (such as upon termination without Cause or for Good Reason) equal to the continuation of the payment of Mr. Novikov’s base salary until the last day of the employment term. The Novikov Employment Agreement also includes confidentiality obligations and invention assignments by Mr. Novikov. On December 14, 2020, we amended the Novikov Employment Agreement to extend the term of his employment agreement by 1 year until December 3, 2021 and on December 18, 2020 the Board approved the issuance of 1,016,408 shares of the Company’s restricted common stock. Additionally, on February 22, 2021, the Board awarded Mr. Novikov options to purchase 208,333 shares of common stock under the Company’s 2018 Stock Incentive Plan (the “Stock Incentive plan”), exercisable for ten years at a price of $0.24 per share.
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The Novikov Employment Agreement replaced the agreement that Qpagos Corporation entered into on May 18, 2016 with Andrey Novikov to serve as its Chief Operating Officer and Secretary, which term was extended on June 12, 2019 for an additional one year. During the term of the original employment agreement, Mr. Novikov received an annual base salary of not less than $180,000, which base salary was reduced to $108,000 effective May 1, 2019, and he was entitled to an annual performance cash bonus targeted at up to 50% of his base salary, in the discretion of the Board of Directors.
On February 22, 2021, the Board of Directors of the Company granted Mr. Novikov an option to purchase 208,333 shares of the Company’s common stock at an exercise price of $0.24.
On May 31, 2021, Mr. Novikov notified the board of directors of his decision to resign as a member of the Board and as Secretary of the Company, effective as of June 1, 2021. Since August 2021, Mr. Novikov has been suspended from his service as our Chief Technology Officer. As such, as of the date of this Annual Report, he is not acting as an officer of our company.
Director Compensation
The executive directors were not paid any fees for their service as directors; however, each of Messrs. Novikov and Corbett received compensation for service as officers of Innovative Payment Solutions, Inc.
Board of Directors Compensation
The following table sets forth information for the fiscal year ended December 31, 2021 regarding the compensation of our directors who on December 31, 2021 were not also our Named Executive Officers.
| Name | Fees Earned or Paid in Cash | Option Awards | Restricted stock awards | Total | ||||||||||||
| James Fuller(1)(5) | $ | 18,000 | $ | 45,810 | $ | 154,000 | $ | 217,810 | ||||||||
| Clifford Henry(2)(5) | 52,000 | - | 154,000 | 206,000 | ||||||||||||
| Madisson Corbett (3)(5) | 18,000 | - | 154,000 | 172,000 | ||||||||||||
| David Rios(4)(5) | $ | 12,500 | $ | - | $ | 77,000 | $ | 89,500 | ||||||||
| (1) | On February 22, 2021, the Board of Directors of the Company granted Mr. Fuller an option to purchase 208,333 shares of the Company’s common stock at an exercise price of $0.24, which was subsequently repriced to $0.15 per share.
On July 22, 2021, the Company granted Mr. Fuller, a director of the Company, 2,000,000 shares of restricted common stock pursuant to the terms of the 2021 Stock Incentive Plan, which was approved by the board of directors in August 2021, subject to approval of the 2021 Plan by the shareholders, which approval was obtained at the annual general meeting held on October 22, 2021. |
| (2) | On July 22, 2021, the Company granted Mr. Henry, a director of the Company, 2,000,000 shares of restricted common stock pursuant to the terms of the 2021 Stock Incentive Plan, which was approved by the board of directors in August 2021, subject to approval of the 2021 Plan by the shareholders, which approval was obtained at the annual general meeting held on October 22, 2021. |
| (3) | On July 22, 2021, the Company granted Ms. Corbett, a director of the Company, 2,000,000 shares of restricted common stock pursuant to the terms of the 2021 Stock Incentive Plan, which was approved by the board of directors in August 2021, subject to approval of the 2021 Plan by the shareholders, which approval was obtained at the annual general meeting held on October 22, 2021. |
| (4) | On July 22, 2021, the Company granted Mr. Rios, a director of the Company, 1,000,000 shares of restricted common stock pursuant to the terms of the 2021Stock Incentive Plan, which was approved by the board of directors in August 2021, subject to approval of the 2021 Plan by the shareholders, which approval was obtained at the annual general meeting held on October 22, 2021. |
| (5) | As of December 31, 2021, he following table sets forth the number of aggregate outstanding stock awards held by each of our directors who were not also named executive officers: |
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| Aggregate | ||||
| Number of | ||||
| Name | Stock Awards | |||
| James Fuller(1) | 4,227,333 | |||
| Clifford Henry(2) | 2,000,000 | |||
| Madisson Corbett (3) | 2,000,000 | |||
| David Rios | 1,000,000 | |||
| (1) | On March 18, 2020, the Company granted Mr. Fuller, a director of the Company, 2,000,000 shares of restricted common stock.
On February 22, 2021, the Board of Directors of the Company granted Mr. Fuller an option to purchase 208,333 shares of the Company’s common stock at an exercise price of $0.24.
On July 22, 2021, the Company granted Mr. Fuller, a director of the Company, 2,000,000 shares of restricted common stock pursuant to the terms of the 2021 Stock Incentive Plan, which was approved by the board of directors in August 2021, subject to approval of the 2021 Plan by the shareholders, which approval was obtained at the annual general meeting held on October 22, 2021. |
| (2) | On July 22, 2021, the Company granted Mr. Henry, a director of the Company, 2,000,000 shares of restricted common stock pursuant to the terms of the 2021 Stock Incentive Plan, which was approved by the board of directors in August 2021, subject to approval of the 2021 Plan by the shareholders, which approval was obtained at the annual general meeting held on October 22, 2021. |
| (3) | On July 22, 2021, the Company granted Ms. Corbett, a director of the Company, 2,000,000 shares of restricted common stock pursuant to the terms of the 2021 Stock Incentive Plan, which was approved by the board of directors in August 2021, subject to approval of the 2021 Plan by the shareholders, which approval was obtained at the annual general meeting held on October 22, 2021. |
| (4) | On July 22, 2021, the Company granted Mr. Rios, a director of the Company, 1,000,000 shares of restricted common stock pursuant to the terms of the 2021 Stock Incentive Plan, which was approved by the board of directors in August 2021, subject to approval of the 2021 Plan by the shareholders, which approval was obtained at the annual general meeting held on October 22, 2021. |
Each director is reimbursed for travel and other out-of-pocket expenses incurred in attending Board of Director and committee meetings.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth certain information with respect to the beneficial ownership of our common stock as of March 29, 2022 for:
| ● | each of our directors and nominees for director; | |
| ● | each of our named executive officers; | |
| ● | all of our current directors and executive officers as a group; and | |
| ● | each person, entity or group, who beneficially owned more than 5% of each of our classes of securities. |
The address of each beneficial owner is 56B 5th Street, Lot 1 AT#, Carmel by the Sea, CA 93921.
We have based our calculations of the percentage of beneficial ownership on 329,838,982 shares of our common stock. We have deemed shares of our common stock subject to options and warrants that are currently exercisable within 60 days of March 31, 2022 to be outstanding and to be beneficially owned by the person holding the warrant or restricted stock unit for the purpose of computing the percentage ownership of that person. We did not deem these, however, for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the principal business address for each of the individuals and entities listed below is 56B 5th Street, Lot 1 AT#, Carmel by the Sea, CA 93921.
We have not deemed shares of common stock to be outstanding for variable priced convertible notes for the purposes of calculating beneficial ownership.
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The information provided in the table is based on our records, information filed with the SEC, and information provided to us, except where otherwise noted.
| Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership Common Stock Included* | Percentage of Common Stock Beneficially Owned | ||||||
| William Corbett (Executive Chairman and Chief Executive Officer) | 32,995,000 | (1) | 8.7 | % | ||||
| Richard Rosenblum (President and Chief Financial Officer) | 8,250,000 | (2) | 2.2 | % | ||||
| Andrey Novikov (Chief Operating Officer) | 1,750,887 | (3) | ** | |||||
| James Fuller (Director) | 4,227,333 | (4) | 1.1 | % | ||||
| Madisson Corbett (Director) | 2,000,000 | (5) | ** | |||||
| Clifford Henry (Director) | 2,000,000 | (6) | ** | |||||
| David Rios (Director) | 1,000,000 | (7) | ** | |||||
| All officers and directors as a group (7 persons) | 52,223,220 | 12.20 | % | |||||
| 5% or more Shareholders | ||||||||
| Jimmy J. Gibbs | 18,922,912 | (8) | 5.14 | % | ||||
| * | Excludes any shares deemed to be outstanding on variable priced convertible securities. |
| ** | Less than 1% |
| (1) | Includes (i) 20,495,000 restricted shares of common stock of which 10,247,500 are subject to forfeiture restrictions and which forfeiture restriction lapses as to 5,123,750 shares on each of January 1, 2022 and 2023. (iii) a ten year option granted to Mr. Corbett on August 16, 2021 exercisable for 20,000,000 shares of common stock, of which 11,944,444 are vested and a further 555,555 vest in the next sixty days. The options replaced a warrant exercisable for 20,000,000 shares of common stock, previously issued to Mr. Corbett on February 22, 2021. |
| (2) | Consists of 2,000,000 shares of the Company’s restricted common stock and options exercisable for 10,000,000 shares of common stock of which 5,972,222 are vested and a further 277,778 vest in the next sixty days. |
| (3) | Consists of 1,442,554 shares of common stock and options exercisable for 308,333 shares of common stock, all of which are vested. Since August 2021, Mr. Novikov has been suspended from his service as our Chief Technology Officer. As such, as of the date of this Annual Report, he is not acting as an officer of our company. |
| (4) | Consists of 4,019,000 shares of the Company’s restricted common stock, and options exercisable for 208,333 shares of common stock of which all are vested. |
| (5) | Consists of 2,000,000 shares of the Company’s restricted common stock. |
| (6) | Consists of 2,000,000 shares of the Company’s restricted common stock. |
| (7) | Consists of 1,000,000 shares of the Company’s restricted common stock. |
| (8) | Consists of (i) 18,816,412 shares of common stock; and (ii) 106,500 shares of common stock held by Gibbs Investment Holdings, LLC, of which Mr. Gibbs is an equity holder and controller. The business address for each of Mr. Gibbs, Gibbs International, Inc., and Gibbs Investment Holdings, LLC is 9855 Warren H. Abernathy Highway, Spartanburg, South Carolina 29301. |
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Equity Compensation Plan Information
As of December 31, 2021, there was an aggregate of 516,666 options to purchase shares of common stock granted under our 2018 Plan and 283,334 reserved for future grants, and an aggregate of 30,000,000 options to purchase shares of common stock granted under our 2021 Plan and 23,000,000 reserved for future grants.
| Plan Category | Number of securities to be issued upon exercise of outstanding options | Weighted-average exercise price of outstanding options | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||||
| (a) | (b) | (c) | ||||||||||
| Equity compensation plans approved by security holders | ||||||||||||
| 2018 Equity Incentive Plan | 516,666 | $ | 0.23 | 283,334 | ||||||||
| 2021 Equity Incentive Plan | 30,000,000 | 0.15 | 23,000,000 | |||||||||
| Equity compensation plans not approved by security holders | - | - | - | |||||||||
| Total | 30,516,666 | $ | 0.15 | 23,283,334 | ||||||||
38
Item 13. Certain Relationships and Related Transactions, and Director Independence
Transactions with Related Persons
The following includes a summary of any transaction occurring since January 1, 2020 for us and our subsidiaries or any proposed transaction, in which we and our subsidiaries were or are to be a participant and the amount involved exceeded or exceeds 1% of the average of our total assets for at year end for the last two completed fiscal years, and in which any related person had or will have a direct or indirect material interest (other than compensation described under “Executive Compensation” above). We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, in arm’s-length transactions:
William Corbett
Effective June 24, 2020, the Company entered into the Corbett Employment Agreement. Pursuant to the Corbett Employment Agreement we granted Mr. Corbett 5,123,750 shares of the Company’s common stock, which are fully
vested and not subject to forfeiture.
On June 24, 2020, the Company entered into a restricted stock agreement with Mr. Corbett pursuant to which the Company granted him a restricted stock award of 15,371,250 shares of the Company’s common stock, which forfeiture restriction lapse 33%, 33% and 34%, respectively, on the first, second and third anniversary of the date of grant
On June 24, 2020, we entered into an indemnification agreement with Mr. Corbett to indemnify him, in connection with his position of employment with us and in the discharge of his duties and responsibilities to us, to the maximum extent allowed under the laws of the State of Nevada.
On December 14, 2020, we entered into an amendment to the Corbett Employment Agreement whereby we agreed to increase Mr. Corbett’s base salary to $20,000 per month and to pay Mr. Corbett a bonus of $20,000 for the year ended December 31, 2020.
On February 22, 2021, the board of directors of the Company appointed William Corbett, its Chief Executive Officer and Interim Chief Financial Officer, as its Chairman of the Board and issued him a five-year warrant to purchase 20,000,000 shares of the Company’s common stock at an exercise price of $0.24. The Board also agreed to increase Mr. Corbett’s monthly base salary to $30,000. The warrant expense for Mr. Corbett for the year ended December 31, 2021 was $4,327,899.
On August 16, 2021, the Company and Mr. Corbett entered into an Executive Employment Agreement that replaced and superseded the previous executive employment agreement (the “August 2021 Corbett Employment Agreement”). The purpose of the August 2021 Corbett Employment Agreement was to provide a replacement grant for warrants previously granted to Mr. Corbett under the terms of his previous employment agreement with the Company. Pursuant to the August 2021 Corbett Employment Agreement, Mr. Corbett would continue to serve as the Company’s Chief Executive Officer on a full time basis effective as of the date of the August 2021 Corbett Employment Agreement until the close of business on December 31, 2024. Mr. Corbett’s base salary will be $30,000 per month, which shall be paid in accordance with the Company’s standard payroll practice for its executives, managers and salaried employees. In addition, the August 2021 Corbett Employment Agreement provides that: (1) Mr. Corbett will be eligible for a cash bonus as determined by the Board to the extent the Company achieves (or exceeds) annual revenue or other financial performance objectives established by the Board, in its sole discretion, from time to time; (2) the Company will grant to Mr. Corbett options to purchase 20,000,000 shares of common stock of the Company at a per share exercise price of $0.15; and (3) a car allowance for Mr. Corbett in the amount of $800 per month. Fifty percent (50%) of the shares subject to the options shall vest on the grant date and the other 50% of the shares subject to the option shall vest at the rate of 1/36 per month over a three-year period. The options will be exercisable for a period of ten years after the date of grant and the Company shall provide for cashless exercise of the option. The options are being granted pursuant to the Company’s 2021 Stock Incentive Plan.
In addition, the Company and Mr. Corbett entered into an Indemnification Agreement on August 16, 2021 (the “August 2021 Corbett Indemnification Agreement”), pursuant to which the Company agreed to indemnify Mr. Corbett to indemnify Indemnitee to the fullest extent permitted by or under the Nevada Corporation Law in respect of claims, including third-party claims and derivative claims and provides for advancement of expenses. The August 2021 Corbett Indemnification Agreement amends the indemnification agreement in effect prior to entering into the August 2021 Corbett Indemnification Agreement to provide that unless Company shall pay Mr. Corbett’s attorneys’ fees and costs, including the compensation and expenses of any arbitrator, unless the arbitrator or the court determines that (a) Company has no liability in such dispute, or (b) the action or claims by Executive are frivolous in nature. In any other case or matter, the Company and Mr. Corbett shall each bear its or his own attorney fees and costs.
39
Richard Rosenblum
On July 22, 2021, the Company appointed Richard Rosenblum as President and Chief Financial Officer of the Company. In addition, Mr. Rosenblum was elected to the board of directors of the Company to serve until the Company’s next annual meeting of shareholders.
On July 27, 2021, the Company and Mr. Rosenblum entered into an Executive Employment Agreement (the “Employment Agreement”), pursuant to which Mr. Rosenblum will serve as the Company’s President and Chief Financial Officer on a full time basis effective as of July 1. The effectiveness of the Employment Agreement is subject to the approval of the Employment Agreement by the Board, unless earlier terminated as provided in the Employment Agreement. The term of the Employment Agreement is until December 31, 2024. Mr. Rosenblum’s base salary will be $18,000 per month. In addition, the Employment Agreement provides that: (1) Mr. Rosenblum will be eligible for a cash bonus as determined by the Board to the extent the Company achieves (or exceeds) annual revenue or other financial performance objectives established by the Board, in its sole discretion, from time to time; and (2) the Company will grant to Mr. Rosenblum options to purchase 10,000,000 shares of common stock of the Company at a per share exercise price equal to the fair market value of the Company’s common stock, as reflected in the closing price of the Company’s common shares on the OTC exchange or, in the event the stock is up listed, on the NASDAQ exchange, on the date of grant (the “Options”)”. Fifty percent (50%) of the shares subject to the Options shall vest on the grant date and the other 50% of the shares subject to the Option shall vest at the rate of 1/36 per month over a three-year period. The Options will be exercisable for a period of ten (10) years after the date of grant and the Company shall provide for cashless exercise of the Option by Executive. The Options are being granted pursuant to the Company’s 2021 Stock Incentive Plan.
If Mr. Rosenblum’s employment with Company is terminated at any time during the term of the Employment Agreement other than for Cause (as defined in the Employment Agreement), or due to voluntary termination, retirement, death or disability, then Mr. Rosenblum shall be entitled to severance equal to fifty percent (50%) of his annual base salary rate in effect as of the date of termination. If Mr. Rosenblum’s employment with Company is terminated at any time during the term of the Employment Agreement other than for Cause (as defined in the Employment Agreement), or due to voluntary termination, retirement, death or disability, within 12 months following an Acquisition (as defined in the Employment Agreement), then Mr. Rosenblum shall be entitled to severance equal to 100% of his annual base salary rate in effect as of the date of termination. Severance payments shall be subject to execution and delivery of a general release in favor of the Company.
On August 16, 2021, the Company entered into an amendment to the Rosenblum Executive Employment Agreement (the “First Amendment”) with Mr. Rosenblum. Under the terms of the Executive Employment Agreement, the Company had agreed to grant to Mr. Rosenblum an option to purchase 10,000,000 (ten million) common shares of Company Stock at a per share exercise price equal to the fair market value of the Company’s common stock, as reflected in the closing price of the Company’s common shares on the OTC exchange or, in the event the stock is uplisted, on the NASDAQ exchange, on the date of grant (the “Option”).” The First Amendment provided that the Option was granted on August 31, 2021 at an exercise price of $0.15.
In addition, the Company and Mr. Rosenblum entered into an Indemnification Agreement, pursuant to which the Company agreed to indemnify Mr. Rosenblum to indemnify Indemnitee to the fullest extent permitted by or under the Nevada Corporation Law in respect of claims, including third-party claims and derivative claims and provides for advancement of expenses.
James Fuller
On March 18, 2020, we granted Mr. Fuller, a director of the Company, 2,000,000 shares of restricted common stock pursuant to the terms of the Stock Incentive Plan.
On February 22, 2021, we agreed to pay Mr. Fuller an annual director’s fee of $12,000 and awarded him options under the Stock Incentive Plan to purchase 208,333 shares of the Company’s common stock. The options are exercisable for a period of ten years from the date of grant, vest in full on the date of grant and have an exercise price of $0.24 per share.
On July 22, 2021, the Company granted Mr. Fuller 2,000,000 shares of common stock, valued at $154,000.
Additionally, the board of directors approved the repricing of the options exercisable for 208,333 shares of common stock granted to Mr. Fuller on February 22, 2021, from $0.24 per share to $0.15 per share.
40
Andrey Novikov
On December 3, 2019, we entered into the Novikov Employment Agreement which replaced the agreement that Qpagos Corporation entered into with Mr. Novikov on May 18, 2015, which was extended for one year on June 12, 2019. On December 14, 2020, we amended the Novikov Employment Agreement to extend the term of his employment agreement by 1 year until December 3, 2021
On December 18, 2020, the Company issued Mr. Novikov 1,016,408 shares of the Company’s restricted common stock pursuant to Mr. Novikov’s employment agreement.
On April 7, 2020, the Company issued 282,146 shares of the Company’s common stock for services rendered by Mr. Novikov as our Chief Technology Officer.
On February 22, 2021, we awarded Mr. Novikov options under the Stock Incentive Plan to purchase 208,333 shares of the Company’s common stock. The options are exercisable for a period of ten years from the date of grant, vest in full on the date of grant and have an exercise price of $0.24 per share.
On May 31, 2021, Mr. Novikov notified the board of directors of his decision to resign as a member of the Board and as Secretary of the Company, effective as of June 1, 2021. Since August 2021, Mr. Novikov has been suspended from his service as our Chief Technology Officer. As such, as of the date of this Annual Report, he is not acting as an officer of our company.
Clifford Henry
On May 1, 2021, the Company appointed Mr. Henry to the Board of Directors.
On July 22, 2021, the Company granted Mr. Henry 2,000,000 shares of common stock.
Madisson Corbett
On May 1, 2021, the Company appointed Ms. Corbett to the Board of Directors. Ms. Corbett is the daughter of Mr. William Corbett, the Company’s Chief Executive Officer and Chairman of the Board.
On July 22, 2021, the Company granted Ms. Corbett 2,000,000 shares of common stock.
David Rios
On July 22, 2021, the Company appointed David Rios to the Board of Directors.
On July 22, 2021, the Company granted Mr. Rios 1,000,000 shares of common stock.
Director Independence
Board of Directors
The Board, in the exercise of its reasonable business judgment, has determined that Clifford Henry, David Rios and James Fuller, that qualifies as independent directors pursuant to Nasdaq Stock Market Rule 5605(a)(2) and applicable SEC rules and regulations. Mr. Corbett, Ms. Corbett and Mr. Rosenblum currently employed as our Chief Executive Officer and Chairman of the Board, Director and daughter of Mr. Corbett, and Chief Financial Officer, respectively, and therefore would not be considered independent directors.
Potential Conflicts of Interest
Since we did not have an Audit Committee or Compensation Committee comprised of independent directors, the functions that would have been performed by such committees were performed by our directors. Thus, there was an inherent conflict of interest.
41
Item 14. Principal Accountant Fees and Services
RBSM LLP serves as our independent registered public accounting firm.
Independent Registered Public Accounting Firm Fees and Services
The following table sets forth the aggregate fees including expenses billed to us for the years ended December 31, 2021 and 2020 by our auditors:
| Year Ended December 31, | Year Ended December 31, | |||||||
| 2021 | 2020 | |||||||
| Audit fees and expenses | $ | 88,000 | $ | 67,500 | ||||
| Taxation preparation fees | - | - | ||||||
| Audit related fees | - | - | ||||||
| Other fees | - | - | ||||||
| $ | 88,000 | $ | 67,500 | |||||
| (1) | Audit fees and expenses were for professional services rendered for the audit and reviews of the consolidated financial statements of the Company, professional services rendered for issuance of consents and assistance with review of documents filed with the SEC. |
Audit Committee’s Pre-Approval Practice.
Prior to our engagement of our independent auditor, such engagement was approved by our board of directors. The services provided under this engagement may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. Pursuant our requirements, the independent auditors and management are required to report to our board of directors at least quarterly regarding the extent of services provided by the independent auditors in accordance with this pre-approval, and the fees for the services performed to date. Our board of directors may also pre-approve particular services on a case-by-case basis. All audit-related fees, tax fees and other fees incurred by us for the year ended December 31, 2021, were approved by our board of directors.
42
PART IV
Item 15. Exhibits and Financial Statement Schedules and Reports on Form 10-K
| (a)(1) | The following financial statements are included in this Annual Report for the fiscal year ended December 31, 2021 |
| (a)(2) | All financial statement schedules have been omitted as the required information is either inapplicable or included in the Consolidated Financial Statements or related notes. |
| (a)(3) | The following exhibits are either filed as part of this report or are incorporated herein by reference: |
43
EXHIBIT INDEX
44
| * | Filed herewith |
| # | Indicates management contract or compensatory plan |
Item 16. Form 10-K Summary
Not applicable
45
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned.
| Innovative Payment Solutions, Inc. | ||||
| Signature | Title | Date | ||
| /s/ William Corbett | Chief Executive Officer and Chairman | March 31, 2022 | ||
| William Corbett | (Principal Executive Officer) | |||
Pursuant to the requirements of the Securities Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Date: March 31, 2022 | By: | /s/ William Corbett |
William Corbett Chief Executive Officer and Chairman (Principal Executive Officer) | ||
| Date: March 31, 2022 | By: | /s/ Richard Rosenblum |
Richard Rosenblum Chief Financial Officer, President and Director (Principal Financial Officer and Principal Accounting Officer) | ||
| Date: March 31, 2022 | By: | /s/ James Fuller |
James Fuller | ||
| Director | ||
| Date: March 31, 2022 | By: | /s/ Clifford Henry |
Clifford Henry | ||
| Director | ||
| Date: March 31, 2022 | By: | /s/ Madisson Corbett |
Madisson Corbett | ||
| Director | ||
| Date: March 31, 2022 | By: | /s/ David Rios |
David Rios | ||
| Director |
46
Exhibit 4.9
DESCRIPTION OF SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Innovative Payment Solutions, Inc. (the “Registrant,” “we,” “us,” and “our”) had one class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which is our common stock, par value $0.0001 per share (the “Common Stock”).
General
The following description of the Common Stock is a summary and does not purport to be complete. It is subject to and qualified in its entirety by reference to the Registrant’s Articles of Incorporation, as amended (the “Articles of Incorporation”), and Amended and Restated Bylaws (the “Bylaws”), each of which are incorporated by reference as an exhibit to the Annual Report on Form 10-K of which this Exhibit is a part. We encourage you to read our Articles of Incorporation, our Bylaws and the applicable provisions of Nevada Revised Statute (the “NRS”), for additional information.
Description of Common Stock
Authorized Shares of Common Stock
The authorized number of shares of Common Stock is 750,000,000.
Voting Rights
The holders of the Common Stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders, including the election of directors, and do not have cumulative voting rights. Accordingly, the holders of a majority of the shares of the Common Stock entitled to vote in any election of directors can elect all of the directors standing for election.
Dividend Rights
Subject to preferences that may be applicable to any then outstanding preferred stock, the holders of Common Stock are entitled to receive dividends, if any, as may be declared from time to time by our board of directors out of legally available funds.
Liquidation Rights
In the event of our liquidation, dissolution or winding up, holders of the Common Stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities, subject to the satisfaction of any liquidation preference granted to the holders of any then outstanding shares of preferred stock.
Other Rights and Preferences
The holders of the Common Stock have no preemptive, conversion or subscription rights, and there are no redemption or sinking fund provisions applicable to the Common Stock. The rights, preferences and privileges of the holders of the Common Stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of our preferred stock that we may designate and issue in the future.
Fully Paid and Nonassessable
All of our outstanding shares of Common Stock are fully paid and nonassessable.
Transfer Agent and Registrar
The transfer agent and registrar for the Common Stock is Nevada Agency and Transfer Company. Its address is 50 West Liberty Street, Suite 880, Reno, Nevada 89501 and its telephone number is (775) 322-0626.
OTCQB
The Common Stock is quoted on the OTCQB Venture Market under the symbol “IPSI.”
Anti-Takeover Effects of Certain Provisions of our Articles of Incorporation and Bylaws
Our Articles of Incorporation and Bylaws contain certain provisions that may have anti-takeover effects, making it more difficult for or preventing a third party from acquiring control of the Registrant or changing our board of directors and management. According to our Articles of Incorporation and Bylaws, the holders of the Common Stock do not have cumulative voting rights in the election of our directors. The lack of cumulative voting makes it more difficult for other stockholders to replace our board of directors or for a third party to obtain control of our company by replacing its board of directors.
Authorized but Unissued Shares
Our authorized but unissued shares of Common Stock will be available for future issuance without stockholder approval. We may use additional shares of Common Stock for a variety of purposes, including future public offerings to raise additional capital, to fund acquisitions and as employee compensation. The existence of authorized but unissued shares of Common Stock could render more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.
Anti-Takeover Effects of Nevada Law
Business Combinations
The “business combination” provisions of Sections 78.411 to 78.444, inclusive, of the NRS generally prohibit a Nevada corporation with at least 200 stockholders from engaging in various “combination” transactions with any interested stockholder for a period of two years after the date of the transaction in which the person became an interested stockholder, unless the transaction is approved by the board of directors prior to the date the interested stockholder obtained such status or the combination is approved by the board of directors and thereafter is approved at a meeting of the stockholders by the affirmative vote of stockholders representing at least 60% of the outstanding voting power held by disinterested stockholders, and extends beyond the expiration of the two-year period, unless:
| ● | the combination was approved by the board of directors prior to the person becoming an interested stockholder or the transaction by which the person first became an interested stockholder was approved by the board of directors before the person became an interested stockholder or the combination is later approved by a majority of the voting power held by disinterested stockholders; or |
| ● | if the consideration to be paid by the interested stockholder is at least equal to the highest of: (a) the highest price per share paid by the interested stockholder within the two years immediately preceding the date of the announcement of the combination or in the transaction in which it became an interested stockholder, whichever is higher, (b) the market value per share of Common Stock on the date of announcement of the combination and the date the interested stockholder acquired the shares, whichever is higher, or (c) for holders of preferred stock, the highest liquidation value of the preferred stock, if it is higher. |
2
A “combination” is generally defined to include mergers or consolidations or any sale, lease exchange, mortgage, pledge, transfer, or other disposition, in one transaction or a series of transactions, with an “interested stockholder” having: (a) an aggregate market value equal to 5% or more of the aggregate market value of the assets of the corporation, (b) an aggregate market value equal to 5% or more of the aggregate market value of all outstanding shares of the corporation, (c) 10% or more of the earning power or net income of the corporation, and (d) certain other transactions with an interested stockholder or an affiliate or associate of an interested stockholder.
In general, an “interested stockholder” is a person who, together with affiliates and associates, owns (or within two years, did own) 10% or more of a corporation’s voting stock. The statute could prohibit or delay mergers or other takeover or change in control attempts and, accordingly, may discourage attempts to acquire our company even though such a transaction may offer our stockholders the opportunity to sell their stock at a price above the prevailing market price.
Control Share Acquisitions
The “control share” provisions of Sections 78.378 to 78.3793, inclusive, of the NRS apply to “issuing corporations” that are Nevada corporations with at least 200 stockholders, including at least 100 stockholders of record who are Nevada residents, and that conduct business directly or indirectly in Nevada. The control share statute prohibits an acquirer, under certain circumstances, from voting its shares of a target corporation’s stock after crossing certain ownership threshold percentages, unless the acquirer obtains approval of the target corporation’s disinterested stockholders. The statute specifies three thresholds: one-fifth or more but less than one-third, one-third but less than a majority, and a majority or more, of the outstanding voting power. Generally, once an acquirer crosses one of the above thresholds, those shares in an offer or acquisition and acquired within 90 days thereof become “control shares” and such control shares are deprived of the right to vote until disinterested stockholders restore the right. These provisions also provide that if control shares are accorded full voting rights and the acquiring person has acquired a majority or more of all voting power, all other stockholders who do not vote in favor of authorizing voting rights to the control shares are entitled to demand payment for the fair value of their shares in accordance with statutory procedures established for dissenters’ rights.
A corporation may elect to not be governed by, or “opt out” of, the control share provisions by making an election in its articles of incorporation or bylaws, provided that the opt-out election must be in place on the 10th day following the date an acquiring person has acquired a controlling interest, that is, crossing any of the three thresholds described above. We have not opted out of the control share statutes and will be subject to these statutes if we are an “issuing corporation,” as defined in such statutes.
The effect of the Nevada control share statutes is that the acquiring person, and those acting in association with the acquiring person, will obtain only such voting rights in the control shares as are conferred by a resolution of the stockholders at an annual or special meeting. The Nevada control share law, if applicable, could have the effect of discouraging takeovers of our company.
3
Exhibit 21
SUBSIDIARIES OF Innovative Payment Solutions, INC.
| Name of Company and Name Doing Business | Jurisdiction of Organization | |
| Beyond Fintech Inc. | State of Delaware |
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 Annual Report on Form 10-K of Innovative Payment Solutions, Inc.: |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and. |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: March 31, 2022 | /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 Annual Report on Form 10-K of Innovative Payment Solutions, Inc.: |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and. |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: March 31, 2022 | /s/ Richard Rosenblum |
| Richard Rosenblum | |
| President and Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Innovative Payment Solutions, Inc. (the “Registrant”) on Form 10-K for the year ended December 31, 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: March 31, 2022 | By: | /s/ William Corbett |
| William Corbett | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Innovative Payment Solutions, Inc. (the “Registrant”) on Form 10-K for the year ended December 31, 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: March 31, 2022 | By: | /s/ Richard Rosenblum |
| Richard Rosenblum | ||
| President and Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) |
CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($) |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Convertible debt, net of unamortized discount (in Dollars) | $ 263,200 | $ 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 | 750,000,000 | 500,000,000 |
| Common stock, issued | 367,901,679 | 193,637,747 |
| Common stock, outstanding | 367,901,679 | 193,637,747 |
ORGANIZATION AND DESCRIPTION OF BUSINESS |
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| ORGANIZATION AND DESCRIPTION OF BUSINESS [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 to IPSI and the then-current IPSI stockholder retained an aggregate of 2,500 shares of Common Stock and the other stockholders of IPSI retained 500,000 shares of Common Stock. Therefore, immediately following the Merger, Qpagos Corporation’s former stockholders held 4,992,900 shares of IPSI common stock which represented approximately 91% of the outstanding Common Stock.
The Merger was treated as a reverse acquisition of IPSI, a public shell company, for financial accounting and reporting purposes. As such, Qpagos Corporation was treated as the acquirer for accounting and financial reporting purposes while IPSI was treated as the acquired entity for accounting and financial reporting purposes.
Qpagos Corporation (“Qpagos”) was incorporated on May 1, 2015 under the laws of the state of Delaware to effectuate a reverse merger transaction with Qpagos, S.A.P.I. de C.V. (“Qpagos Mexico”) and Redpag Electrónicos S.A.P.I. de C.V. (“Redpag”). Each of the entities were incorporated in November 2013 in Mexico.
Qpagos Mexico was formed to process payment transactions for service providers it contracts with, and Redpag was formed to deploy and operate kiosks as a distributor.
On May 27, 2016 Asiya changed its name to QPAGOS.
On June 1, 2016, the board of directors of QPAGOS (the “Board”) changed the Company’s fiscal year end from October 31 to December 31.
On November 1, 2019, the Company changed its name from QPAGOS to Innovative Payment Solutions, Inc. Additionally, and immediately following the name change, the Company filed a Certificate of Change with the Secretary of State of the State of Nevada to effect a reverse split of the Company’s common stock, par value $0.0001 per share (the “common stock”) at a ratio of 1-for-10, effective on November 1, 2019 (the Reverse Stock Split”). As a result of the Reverse Stock Split, each ten pre-split shares of common stock outstanding automatically combined into one new share of common stock without any further action on the part of the holders, and the number of outstanding shares of common stock was reduced from 320,477,867 shares to 32,047,817 after rounding for fractional shares.
On December 31, 2019, Innovative Payment Solutions consummated the disposal of Qpagos Corporation, Qpagos Mexico and Redpag in exchange for 2,250,000 shares (the “Vivi Shares”) of common stock of Vivi Holdings, Inc. (“Vivi” or “Vivi Holdings”) pursuant to a Stock Purchase Agreement dated August 5, 2019 (the “SPA”). Of the 2,250,000 shares of Vivi, nine percent (9%) was allocated as follows: Gaston Pereira (5%), Andrey Novikov (2.5%), and Joseph Abrams (1.5%). The SPA was closed on December 31, 2019 after the satisfaction of customary conditions, the receipt of a final fairness opinion and the approval of the Company’s shareholders. Innovative Payment Solutions no longer has any business operations in Mexico and has retained its U.S. operations based in Calabasas, California.
Subsequent to the merger of Qpagos Corporation into IPSI and until the divestiture of Qpagos Corporation, Qpagos Mexico and Redpag, the Company’s focus was on the operations of Qpagos Corporation in Mexico. The Company’s current focus is on providing payment services to allow US persons to transfer funds to Mexico and other countries.
The Company is focused on operating and developing e-wallets that enable consumers to deposit cash, convert it into a digital form and remit the funds to Mexico and other countries quickly and securely. The Company’s first e-wallet, the Beyond Wallet, is currently operational. The Company’s flagship e-wallet, IPSIPay, is in final stages of development and testing. Previously the Company intended to invest in physical kiosks, which required the user presence at the kiosk location. The Company still intends to use its existing kiosks in certain target markets within Southern California.
The Company acquired a 10% strategic interest in Frictionless on June 22, 2021. Frictionless agreed to deliver to the Company, a live fully compliant financial payment Software as a Service solution for use by the Company as a digital payment platform that enables payments within the United states and abroad, including Mexico, together with a service agreement providing a full suite of product services to facilitate the Company’s anticipated product offerings. The Company has an irrevocable right to acquire up to an additional 41% of the outstanding common stock of Frictionless at a purchase price of $300,000 for each 1% acquired.
On August 26, 2021, the Company formed a new subsidiary, Beyond Fintech, in which its owns a 51% stake, with Frictionless owning the remaining 49%. Beyond Fintech acquired an exclusive license to a product known as Beyond Wallet, to further its objective of providing virtual payment services allowing US persons to transfer funds to Mexico and other countries.
The COVID-19 pandemic has required the Company’s management to focus its attention primarily on responding to the challenges presented by the pandemic, including ensuring continuous operations, and adjusting its operations to address changes in the virtual payments industry. Due to measures imposed by the local governments in areas affected by COVID-19, businesses had been suspended due to quarantine intended to contain this outbreak and many people had been forced to work from home in those areas. As a result, development of our e-wallets and the limited installation of our network of kiosks in Southern California had been delayed, which has had an adverse impact on our business and financial condition and has hampered our ability to generate revenues. As the COVID-19 pandemic evolves, we may face similar challenges in the future which could lead to material adverse impacts on our company. |
ACCOUNTING POLICIES AND ESTIMATES |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ACCOUNTING POLICIES AND ESTIMATES |
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).
All amounts referred to in the notes to the consolidated financial statements are in United States Dollars ($) unless stated otherwise.
The consolidated financial statements include the financial statements of the Company and its subsidiary in which it has a majority voting interest. All significant inter-company accounts and transactions have been eliminated in the consolidated financial statements.
The entities included in these consolidated financial statements are as follows:
Innovative Payment Solutions, Inc. - Parent Company Beyond Fintech Inc., 51% owned.
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions, which are evaluated on an ongoing basis, that affect the amounts reported in the consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the amounts of revenues and expenses that are not readily apparent from other sources. Actual results could differ from those estimates and judgments. In particular, significant estimates and judgments include those related to, the estimated useful lives for plant and equipment, the fair value of long-lived investments, the fair value of warrants and stock options granted for services or compensation, estimates of the probability and potential magnitude of contingent liabilities, derivative liabilities, the valuation allowance for deferred tax assets due to continuing operating losses and the allowance for doubtful accounts.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the consolidated financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from our estimates.
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur.
The Company’s management assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.
The Company adopted the guidance of Accounting Standards Codification (“ASC”) 820 for fair value measurements which clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.
Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.
The carrying amounts reported in the balance sheets for the investment in Vivi Holdings Inc., was evaluated at fair value using Level 3 Inputs based on the Company’s estimate of the market value of the entities disposed to Vivi Holdings, Inc. Vivi Holdings Inc., does not have sufficient information available to assess the current market price of its equity.
The carrying amounts reported in the balance sheets for cash, accounts receivable, other current assets, other assets, accounts payable, accrued liabilities, and notes payable, approximate fair value due to the relatively short period to maturity for these instruments. The Company has identified the short-term convertible notes and certain warrants attached to certain of the notes that are required to be presented on the balance sheets at fair value in accordance with the accounting guidance.
ASC 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. We evaluate the fair value of variably priced derivative liabilities on a quarterly basis and report any movements thereon in earnings.
The Company’s operations will be subject to significant risks and uncertainties including financial, operational, regulatory, and other risks, including the potential risk of business failure. The recent global Covid-19 breakout has caused an economic crisis which may result in a general tightening in the credit markets, lower levels of liquidity, increases in the rates of default and bankruptcy, and extreme volatility in credit, equity and fixed income markets. These conditions may not only limit the Company’s access to capital, but also make it difficult for its customers, vendors and the Company to accurately forecast and plan future business activities. In addition, businesses have been suspended due to quarantines intended to contain this outbreak and many people have been forced to work from home in those areas. As a result, installation of the Company’s network of kiosks, terminals and payment channels in Southern California has been delayed, which has had an adverse impact on its business and financial condition and has hampered the Company’s ability to generate revenue and access usual sources of liquidity on reasonable terms.
The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, and rates and methods of taxation, among other things.
In November 2021, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2021-10, Disclosures by Entities about Government Assistance (Topic 832), the update increases the transparency of government assistance, including the following disclosures: (1) the types of assistance, (2) an entity’s accounting for the assistance, and (3) the effect of the assistance on an entity’s financial statements.
This ASU is effective for fiscal years beginning after December 15, 2021.
The effects of this ASU on the Company’s consolidated financial statements is currently being assessed and is not expected to have an impact on current disclosure.
The FASB issued several additional updates during the period, none of these standards are either applicable to the Company or require adoption at a future date and none are expected to have a material impact on the consolidated financial statements upon adoption.
No segmental information is required as the Company has not generated any revenue for the years ended December 31, 2021 and 2020 and only has one operating segment.
The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. At December 31, 2021 and 2020, respectively, the Company had no cash equivalents.
The Company minimizes credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution in the United States. The balance at times may exceed federally insured limits. At December 31, 2021 and 2020, the balance exceed the federally insured limit by $5,117,551 and $0, respectively.
Accounts receivable are reported at realizable value, net of allowances for doubtful accounts, which is estimated and recorded in the period the related revenue is recorded. The Company has a standardized approach to estimate and review the collectability of its receivables based on a number of factors, including the period they have been outstanding. Historical collection and payer reimbursement experience is an integral part of the estimation process related to allowances for doubtful accounts. In addition, the Company regularly assesses the state of its billing operations in order to identify issues, which may impact the collectability of these receivables or reserve estimates. Revisions to the allowance for doubtful accounts estimates are recorded as an adjustment to bad debt expense. Receivables deemed uncollectible are charged against the allowance for doubtful accounts at the time such receivables are written-off. Recoveries of receivables previously written-off are recorded as credits to the allowance for doubtful accounts. There were no recoveries during the period ended December 31, 2021 and 2020.
The Company’s non-marketable equity securities are investments in privately held companies without readily determinable market values. The carrying value of our non-marketable equity securities is adjusted to fair value for observable transactions for identical or similar investments of the same issuer or impairment (referred to as the measurement alternative). All gains and losses on non-marketable equity securities, realized and unrealized, are recognized in other income (expense), net. Non-marketable equity securities that have been remeasured during the period are classified within Level 3 in the fair value hierarchy because the Company estimates the value based on valuation methods using the observable transaction price at the transaction date and other unobservable inputs including volatility, rights, and obligations of the securities the Company holds. The cost method is used when the Company has a passive, long-term investment that doesn’t result in influence over the Company. The cost method is used when the investment results in an ownership stake of less than 20%, and there is no substantial influence. Under the cost method, the stock purchased is recorded on a balance sheet as a non-current asset at the historical acquisition/purchase price, and is not modified unless shares are sold, additional shares are purchased or there is evidence of the fair market value of the investment declining below carrying value. Any dividends received are recorded as income.
The Company recorded an impairment charge of $0 and $1,019,960 on its non-marketable equity securities for the years ended December 31, 2021 and 2020, respectively. The impairment charge was based on management’s determination that due to the lack of ability, to date, by Vivi Holdings (“Vivi”) to fulfill its capital raising requirements and implement its business strategy that there is a significant risk that Vivi may not be able to meet its obligations.
Plant and equipment is stated at cost, less accumulated depreciation. Plant and equipment with costs greater than $1,000 are capitalized and depreciated. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The estimated useful lives of the assets are as follows:
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 years ended December 31, 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 consolidated statement of operations.
Prior to the Company’s reverse merger which took place on May 12, 2016, all share-based payments were based on management’s estimate of market value of the Company’s equity. The factors considered in determining managements estimate of market value includes, assumptions of future revenues, expected cash flows, market acceptability of our technology and the current market conditions. These assumptions are complex and highly subjective, compounded by the business being in its early stage of development in a new market with limited data available.
Where equity transactions with arms-length third parties, who had applied their own assumptions and estimates in determining the market value of our equity, had taken place prior to and within a reasonable time frame of any share-based payments, the value of those share transactions have been used as the fair value for any share-based equity payments.
Where equity transactions with arms-length third parties, included both shares and warrants, the value of the warrants have been eliminated from the unit price of the securities using a Black-Scholes valuation model to determine the value of the warrants. The assumptions used in the Black Scholes valuation model includes market related interest rates for risk-free government issued treasury securities with similar maturities; the expected volatility of the Company’s common stock based on companies operating in similar industries and markets; the estimated stock price of the Company; the expected dividend yield of the Company and; the expected life of the warrants being valued.
Subsequent to the Company’s reverse merger which took place on May 12, 2016, the Company has utilized the market value of its common stock as quoted on the OTCQB, as an indicator of the fair value of its common stock in determining share- based payment arrangements.
ASC 815 generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re- measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument subject to the requirements of ASC 815. ASC 815 also provides an exception to this rule when the host instrument is deemed to be conventional, as described.
The Company is based in the US and currently enacted US tax laws are used in the calculation of income taxes.
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A full valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. It is the Company’s policy to classify interest and penalties on income taxes as interest expense or penalties expense. As of December 30, 2021 and December 31, 2020, there have been no interest or penalties incurred on income taxes.
Comprehensive income is defined as the change in equity of a company during a period from transactions and other events and circumstances excluding transactions resulting from investments from owners and distributions to owners. The Company does not have any comprehensive income (loss) for the periods presented.
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. |
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 year ended December 31, 2021, the Company had a net loss of $14,494,915 and had $5,449,751 in cash. In connection with preparing the consolidated financial statements for the year ended December 31, 2021, management evaluated the extent of the impact from the COVID-19 pandemic on the Company’s business and its future liquidity for the next twelve months through March 31, 2023.
The Company had a cash balance of $5,449,751 available as of December 31, 2021. Management has determined that this cash balance is sufficient to meet its expected cash requirements until at least March 31, 2023.
If the Company is required to raise additional funds by issuing equity securities, its stockholders would experience dilution. Additional debt financing, if available, may involve covenants restricting its operations or its ability to incur additional debt. Any additional debt financing or additional equity that the Company raises may contain terms that are not favorable to it or its stockholders and require significant debt service payments, which diverts resources from other activities.
Based on this current business plan, the Company believes its existing cash is sufficient to conduct planned operations for one year from the issuance of the December 31, 2021 financial statements. |
INTANGIBLES |
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| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||
| INTANGIBLES |
On August 26, 2021, The Company formed a new subsidiary, Beyond Fintech. to acquire a product known as Beyond Wallet from a third party for gross proceeds of $250,000, together with the logo, use of name and implementation of the product into the Company’s technology. The company owns 51% of Beyond Fintech with the other 49% owned by Frictionless.
During the year, the Company paid gross proceeds of $375,000 to frictionless for the development of the IPSIPay wallet, which is now complete.
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INVESTMENTS |
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| Investments, All Other Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||
| INVESTMENTS |
Investment in Frictionless Financial Technologies Inc.
On June 22, 2021, the Company entered into a Stock Purchase Agreement (the “SPA”) with Frictionless, to purchase 150 common shares for gross proceeds of $500,000, representing 10.0% of the outstanding common shares. In terms of the SPA, Frictionless agreed to deliver to the Company on or before August 30, 2021, a live fully compliant financial payment Software as a Service solution for use by the Company as a digital payment platform that enables payments within the United states and abroad, including Mexico, together with a service agreement providing a full suite of product services to facilitate to Company’s anticipated product offerings.
The company has undertaken to issue Frictionless a non-restricted, non-dilutable 5 year warrant to purchase 30,000,000 shares of common stock in the Company at an exercise price of $0.15 per share, upon delivery of the financial payment software. Frictionless delivered the software subsequent to year end and the warrants will be issued in accordance with the agreement.
The Company has the right to appoint and has appointed, one member to the board of directors of Frictionless, which appointee will remain on the board as long as the Company is the holder of the Frictionless common stock.
The Company has an irrevocable right to acquire up to an additional 41% of the outstanding common stock of Frictionless at a purchase price of $300,000 for each 1% acquired.
The shares in Frictionless are unlisted as of December 31, 2021.
Investment in Vivi Holdings, Inc.
Effective December 31, 2019, the Company sold 100% of the outstanding common stock of its subsidiary, Qpagos Corp, together with its 99.9% ownership interest of Qpagos Corporations’ two Mexican entities: QPagos S.A.P.I. de C.V. and Redpag Electrónicos S.A.P.I. de C.V, to Vivi.
As consideration for the disposal Vivi issued an aggregate of 2,250,000 Shares of its common stock as follows: 2,047,500 Shares to the Company; 56,250 Shares to the Company’s designee, Mr. Andrey Novikov; 33,750 Shares to the Company’s designee, the Joseph W. & Patricia G. Abrams Family Trust; and 112,500 Shares to the Company’s designee, Mr. Gaston Pereira.
Due to the lack of available information, the Vivi Shares were valued by a modified market method, whereby the value of the assets disposed of were determined by management using the enterprise value of the entire Company less the liabilities and assets retained by the Company.
As of December 31, 2021 and 2020, the Company impaired the carrying value of the investment in Vivi Holdings, Inc by $0 and $1,019,960, respectively, based on Vivi’s indicated timeline for its proposed IPO and fund raising activities, largely impacted by the COVID-19 pandemic. The total impairment as of December 31, 2021 and 2020 was $1,019,960.
The shares in Vivi Holdings, Inc., are unlisted as of December 31, 2021.
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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 consolidated 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:
Maturity of Operating Leases
The amount of future minimum lease payments under operating leases are as follows:
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FEDERAL RELIEF LOANS |
12 Months Ended | ||
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Dec. 31, 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 has applied for the loan to be forgiven in whole or in part based on the loan being utilized for payroll costs, continuation of healthcare benefits, mortgage interest payments, rent, utility and interest payments on any other debt obligation.
The company has not made any payments on this loan, of which $60,292 was forgiven on June 7, 2021.
Small Business Administration Disaster Relief loan
On July 7, 2020, the Company received a Small Business Economic Injury Disaster loan amounting to $150,000, bearing interest at 3.75% per annum and repayable in monthly installments of $731 commencing twelve months after inception with the balance of interest and principal repayable on July 7, 2050. The loan is secured by all tangible and intangible assets of the Company. The proceeds are to be used for working capital purposes to alleviate economic injury caused by the COVID-19 pandemic.
The company has accrued interest of $8,353 on this loan as of December 31, 2021. |
LOANS PAYABLE |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans Payable [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LOANS PAYABLE |
Loans payable consisted of the following:
Interest expense totaled $134 and $1,558 for the year ended December 31, 2021 and 2020, respectively.
Stanislav Minaychenko
On December 17, 2019, in terms of a settlement agreement entered into between the Company, Qpagos Corporation and Stanislav Minaychenko, the Company issued a promissory note to Mr. Minaychenko in settlement of $23,893 owing to him in terms of a service agreement dated September 1, 2015. The promissory note bears interest at 4% per annum, is unsecured and matures on June 16, 2020.
During the year ended December 31, 2021, the Company repaid the aggregate principal sum of $13,893 and interest thereon of $717, thereby extinguishing the note.
Maxim Pukhoskiy
On December 17, 2019, in terms of a settlement agreement entered into between the Company, Qpagos Corporation and Maxim Pukhoskiy, the Company issued a promissory note to Mr. Pukhoskiy in settlement of $17,856 owing to him in terms of a service agreement dated May 1, 2015. The promissory note bears interest at 4% per annum, is unsecured and matures on June 16, 2020.
During the year ended December 31, 2021, the Company repaid the aggregate principal sum of $7,656 and interest thereon of $429, thereby extinguishing the note.
Dieter Busenhart
On July 17, 2020, the Company issued a promissory note to Dieter Busenhart in the aggregate principal amount of $50,000 for net proceeds of $50,000, bearing interest at 10% per annum and maturing on January 17, 2021.
During the year ended December 31, 2021, the Company repaid the aggregate principal sum of $500.
The balance remaining on the promissory note consists of accrued interest of $571 was recorded under accrued liabilities. |
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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, including penalty interest totaled $221,930 and $366,964 for the years ended December 31, 2021 and 2020, respectively.
Amortization of debt discount totaled $3,653,652 and $1,065,879 for the years ended December 31, 2021 and 2020, respectively.
The convertible notes have variable conversion prices based on a discount to market price of trading activity over a specified period of time. The variable conversion features were valued using a Black Scholes valuation model. The difference between the fair market value of the common stock and the calculated conversion price on the issuance date was recorded as a debt discount with a corresponding credit to derivative financial liability.
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.
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DERIVATIVE LIABILITY |
12 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 9 above and certain warrants disclosed in note 11 below, have variable priced conversion rights with no fixed floor price and will re-price dependent on the share price performance over varying periods of time and certain notes and warrants have fundamental transaction clauses which might result in cash settlement, due to these factors, all convertible notes and any warrants attached thereto are valued and give rise to a derivative financial liability, which was initially valued at inception of the convertible notes using a Black-Scholes valuation model.
During the year ended December 31, 2021, an additional $2,569,000 was raised as a derivative liability on convertible notes and warrants and $2,569,000 was recorded as a debt discount against the convertible notes
The value of this derivative financial liability was re-assessed at December 31, 202 at $407,161, and $5,128,255 was credited to the statement of operations, respectively. The value of the derivative liability will be re-assessed at each financial reporting period, with any movement thereon recorded in the statement of operations in the period in which it is incurred.
The following assumptions were used in the Black-Scholes valuation model:
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 367,901,679 and 193,637,747 shares of common stock as of December 31, 2021 and 2020, respectively.
The following shares of common stock were issued by the Company during the year ended December 31, 2021:
The following shares of common stock were issued by the Company during the year ended December 31, 2021:
On December 15, 2020, in terms of an employment agreement entered into with an employee, the Company granted 2,500,000 restricted shares of which 1,000,000 vested on January 1, 2021 and the remaining 1,500,000 shares vest over a period of two years. The 1,500,000 shares of unvested restricted stock which was not physically issued to the employee were not earned due to the cessation of employment with the Company.
A summary of restricted stock activity during the period January 1, 2020 to December 31, 2021 is as follows:
The restricted stock granted and exercisable at December 31, 2021 is as follows:
The Company has recorded an expense of $301,064 and $502,127 for the years ended December 31, 2021 and 2020, respectively.
The Company has authorized 25,000,000 shares of preferred stock with a par value of $0.0001 authorized, no preferred stock is issued and outstanding as of December 31, 2021 and December 31, 2020.
In terms of the Senior Secured convertible notes entered into with various noteholders as described in note 9 above, the Company issued five year warrants exercisable for a total of 28,709,182 shares of common stock at initial exercise prices ranging from $0.05 to $0.24 per share. The warrants have a cashless exercise option and an exercise limitation based on a certain beneficial ownership percentage of 4.99% which may be adjusted to 9.99%. The exercise price of the warrant is adjustable under the following conditions; i) subsequent equity sales are at a price below the exercise price of the warrant; ii) the Company issues options with an exercise price lower than the exercise price of the warrants; iii) issues convertible securities which are convertible into common stock at a price lower than the warrant exercise price; and iv) the option exercise price or rate of conversion for convertible securities results in a lower exercise price than the exercise price of the warrants.
The warrant holders also have the option to acquire subsequent rights offering rights, under certain circumstances and are entitled to pro-rata distributions made by the Company in assets or securities other than common stock.
The warrants include a fundamental transaction clause which will give the warrant holder the right on an as converted basis to the proceeds which common shareholders would be entitled to as a result of a fundamental transaction. Notwithstanding the aforementioned rights, provided the warrants are not registered under an effective registration statement, the holder of the warrant has the right to receive cash equal to the Black-Scholes value of the unexercised portion of the warrant in accordance with the terms of the warrant agreement.
On February 22, 2021, the Board of Directors of the Company appointed William Corbett, its Chief Executive Officer and then Interim Chief Financial Officer, as its Chairman of the Board and issued him a five-year warrant to purchase 20,000,000 shares of the Company’s common stock at an exercise price of $0.24, valued at $4,327,899 and expensed as stock based compensation during the current period.
In connection with the Securities Purchase Agreements with several institutional investors, disclosed in Note 9(a) above, the Company sold warrants to purchase up to an aggregate of 15,166,667 shares of its common stock. The combined purchase price for one share of common stock and associated Warrant is $0.15. The warrants were valued at $2,028,509 using a Black Scholes valuation model and using the assumptions disclosed below.
The Warrants are exercisable for a period of five years from the date of issuance and have an exercise price of $0.15 per share, subject to adjustment as set forth in the Warrants for stock splits, stock dividends, recapitalizations and similar events. The Investors may exercise the Warrants on a cashless basis if after the six month anniversary of date of issuance the shares of common stock underlying the Warrants (the “Warrant Shares”) are not then registered pursuant to an effective registration statement. Each Investor has contractually agreed to restrict its ability to exercise the Warrants such that the number of shares of the Company’s common stock held by the Investor and its affiliates after such exercise does not exceed the beneficial ownership limitation set forth in the Warrants which may not exceed initially 4.99% or 9.99% of the Company’s then issued and outstanding shares of common stock.
Pursuant to an engagement letter dated as of March 6, 2021, by and between the Company and Wainwright, the Company engaged Wainwright to act as the Company’s exclusive placement agent in connection with the private placement, discussed above. The Company agreed to issue to Wainwright (or its designees) Placement Agent Warrants to purchase an aggregate of up to 2,426,667 shares of the Company’s common stock. The Placement Agent Warrants generally will have the same terms as the Warrants, except they will have an exercise price of $0.1875. The warrants were valued at $323,924 using a Black Scholes valuation model and using the assumptions disclosed below.
On August 16, 2021, the Company and Mr. Corbett entered into an Executive Employment Agreement that replaced and superseded the previous executive employment agreement whereby the 20,000,000 warrants previously issued to Mr. Corbett were cancelled and as a replacement for the warrants, he was granted options to purchase 20,000,000 shares of common stock of the Company at a per share exercise price of $0.15.
The fair value of the warrants granted and issued were determined by using a Black Scholes valuation model using the following assumptions:
A summary of warrant activity during the period January 1, 2020 to December 31, 2021 is as follows:
The warrants outstanding and exercisable at December 31, 2021 are as follows:
The warrants outstanding have an intrinsic value of $0 as of December 31, 2021 and 2020.
On June 18, 2018, the Company established its 2018 Stock Incentive Plan (the “Plan”). The purpose of the Plan is to promote the interests of the Company and the stockholders of the Company by providing directors, officers, employees and consultants of the Company with appropriate incentives and rewards to encourage them to enter into and continue in the employ or service of the Company, to acquire a proprietary interest in the long-term success of the Company and to reward the performance of individuals in fulfilling long-term corporate objectives. The Plan terminates after a period of ten years in June 2028.
The Plan is administered by the board of directors or a Committee appointed by the Board of Directors who have the authority to administer the Plan and to exercise all the powers and authorities specifically granted to it under the Plan.
The maximum number of securities available under the Plan is 800,000 shares of common stock. The maximum number of shares of common stock awarded to any individual during any fiscal year may not exceed 100,000 shares of common stock.
On October 22, 2021, the Company (with the approval of the Company’s shareholders) established its 2021 Stock Incentive Plan (“2021 Plan”). The purpose of the 2021 Plan is to promote the interests of the Company and the stockholders of the Company by providing directors, officers, employees and consultants, advisors and service providers of the Company with appropriate incentives and rewards to encourage them to enter into and continue in the employ or service of the Company, to acquire a proprietary interest in the long-term success of the Company and to reward the performance of individuals in fulfilling long-term corporate objectives. The 2021 Plan terminates after a period of ten years in August 2031.
The 2021 Plan is administered by the board of directors or a Compensation Committee appointed by the Board of Directors who have the authority to administer the 2021 Plan and to exercise all the powers and authorities specifically granted to it under the 2021 Plan.
The maximum number of securities available under the 2021 Plan is 53,000,000 shares of common stock.
Under the 2021 Plan the company may award the following: (i) non-qualified stock options; (ii)) incentive stock options; (iii) stock appreciation rights; (iv) restricted stock; (v) restricted stock unit; and (vi) other stock-based awards.
On February 22, 2021, the board awarded each of its directors, James Fuller and Andrey Novikov, options under the Company’s 2018 Stock Incentive Plan to purchase 208,333 shares of the Company’s common stock. The options are exercisable for a period of ten years from the date of grant, vest in full on the date of grant and have an exercise price of $0.24 per share.
On August 16, 2021, the Company and Mr. Corbett entered into an Executive Employment Agreement that replaced and superseded the previous executive employment agreement whereby the 20,000,000 warrants previously issued to Mr. Corbett were cancelled and as a replacement for the warrants, he was granted options to purchase 20,000,000 shares of common stock of the Company at a per share exercise price of $0.15. The options are exercisable for a period of ten years from the date of grant, vesting as to 50% on grant date and the remaining 50%, equally over a period of 36 months.
In terms of an employment agreement dated August 16, 2021, on August 31, 2021, the Board awarded Richard Rosenblum, the Company’s Chief Financial Officer an option to purchase 10,000,000 shares of the Company’s common stock at an exercise price of $0.15 per share. The options are exercisable for a period of ten years from the date of grant, vesting as to 50% on grant date and the remaining 50%, equally over a period of 36 months.
The fair value of the options granted and issued were determined by using a Black Scholes valuation model using the following assumptions:
On July 22. 2021, the board of directors authorized the reduction in the exercise price of the options exercisable for 208,333 shares of common stock granted to Mr. Fuller on February 22, 2021, from $0.24 per share to $0.15 per share, resulting in an immediate compensation charge of $6, the remaining terms of the option were unchanged.
The value of the reduction in the exercise price was determined using a Black Scholes valuation model utilizing the following assumptions:
No options were granted for the year ended December 31, 2020.
A summary of option activity during the period January 1, 2020 to December 31, 2021 is as follows:
The options outstanding and exercisable at December 31, 2021 are as follows:
The options outstanding have an intrinsic value of $0 as of December 31, 2021 and 2020, respectively. The option expense was $1,382,639 and $0 for the years ended December 31, 2021 and 2020. |
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INCOME TAXES |
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| Income Taxes [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INCOME TAXES |
The Company’s operations are based in the US and currently enacted tax laws in the US are used in the calculation of income taxes.
Federal Income Tax - United States
On December 22, 2017, the Tax Cuts and Jobs Act (the TCJA), which significantly modified U.S. corporate income tax law, was signed into law by President Trump. The TCJA contains significant changes to corporate income taxation, including but not limited to the reduction of the corporate income tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for interest expense to 30% of earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80% of current year taxable income and generally eliminating net operating loss carrybacks, allowing net operating losses to carryforward without expiration, one-time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits (including changes to the orphan drug tax credit and changes to the deductibility of research and experimental expenditures that will be effective in the future). Notwithstanding the reduction in the corporate income tax rate, the overall impact of the new federal tax law is uncertain, including to what extent various states will conform to the newly enacted federal tax law.
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A full valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. It is the Company’s policy to classify interest and penalties on income taxes as interest expense or penalties expense. As of December 31, 2020 and 2019, there have been no interest or penalties incurred on income taxes.
In the prior year, the Company’s primary operations were based in Mexico and enacted tax laws in Mexico were used in the calculation of income taxes, the holding company was based in the US and enacted US tax laws were used in the calculation of income taxes.
The provision for income taxes consists of the following:
A reconciliation of the U.S. Federal statutory income tax to the effective income tax is as follows:
Significant components of the Company’s deferred income tax assets are as follows:
The valuation allowance for deferred income tax assets as of December 31, 2021 and December 31, 2020 was $5,929,095 and $4,245,681, respectively. The net change in the deferred income tax assets valuation allowance was an increase of $1,683,414 and is primarily attributable to tax operating losses realized during the current year.
As of December 31, 2021, the prior three years remain open for examination by the federal or state regulatory agencies for purposes of an audit for tax purposes.
As of December 31, 2021, and 2020, the Company had available for income tax purposes approximately $20.6 million in federal and $13.8 million in state net operating loss carry forwards, which may be available to offset future taxable income. $3.5 million of the net operating losses will begin to expire in 2034 and $17.1 million has an indefinite life. Due to the uncertainty of the utilization and recoverability of the loss carryforwards and other deferred tax assets, Management has determined a full valuation allowance for the deferred tax assets, since it is more likely than not that the deferred tax assets will not be realizable.
The Company’s ability to utilize the United States Federal operating loss carryforwards may be subject to an annual limitation if pursuant to IRC Section 382/383 of the Internal Revenue Code of 1986, as amended, if a change of ownership has occurred. Management does not believe if an ownership change has occurred under IRC Section 382/383, but is evaluating, if such change has occurred. If such change has occurred, it is also possible that the loss carryforward could be eliminated.
The Company is subject to taxation in the U.S. and CA state. U.S. federal income tax returns for 2018 and after, remain open to examination. No income tax returns are currently under examination. As of December 31, 2021 and 2020, the Company does not have any unrecognized tax benefits, and continues to monitor its current and prior tax positions for any changes. The Company recognizes penalties and interest related to unrecognized tax benefits as income tax expense. For the years ended December 31, 2021 and 2020, there were no penalties or interest recorded in income tax expense. |
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EQUITY BASED COMPENSATION |
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| Equity Based Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||
| EQUITY BASED COMPENSATION |
Equity based compensation is made up of the following:
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NET LOSS PER SHARE |
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| 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 years ended December 31, 2021 and 2020 all warrants options and convertible debt securities were excluded from the computation of diluted net loss per share.
Dilutive shares which could exist pursuant to the exercise of outstanding stock instruments and which were not included in the calculation because their affect would have been anti-dilutive for the years ended December 31, 2021 and 2020 are as follows:
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RELATED PARTY TRANSACTIONS |
12 Months Ended | ||
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Dec. 31, 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 of directors awarded James Fuller options under the Company’s 2018 Stock Incentive Plan to purchase 208,333 shares of the Company’s common stock. The options are exercisable for a period of ten years from the date of grant, vest in full on the date of grant and have an exercise price of $0.24 per share. The option expense for Mr. Fuller for the year ended December 31, 2021 was $45,804.
On July 22. 2021, the Company granted Mr. Fuller 2,000,000 shares of common stock, valued at $154,000.
Additionally, the board of directors approved the repricing of the options exercisable for 208,333 shares of common stock granted to Mr. Fuller on February 22, 2021, from $0.24 per share to $0.15 per share.
Andrey Novikov
On February 22, 2021, the board of directors awarded Andrey Novikov options under the Company’s 2018 Stock Incentive Plan to purchase 208,333 shares of the Company’s common stock. The options are exercisable for a period of ten years from the date of grant, vest in full on the date of grant and have an exercise price of $0.24 per share. The option expense for Mr. Novikov for the year ended December 31, 2021 was $45,804.
On May 31, 2021, Mr. Novikov notified the board of directors of his decision to resign as a member of the Board and as Secretary of the Company, effective as of June 1, 2021. Since August 2021, Mr. Novikov has been on suspension from service as the Company’s Chief Technology Officer.
William Corbett
On February 22, 2021, the board of directors of the Company appointed William Corbett, its Chief Executive Officer and Interim Chief Financial Officer, as its Chairman of the Board and issued him a five-year warrant to purchase 20,000,000 shares of the Company’s common stock at an exercise price of $0.24. The Board also agreed to increase Mr. Corbett’s monthly base salary to $30,000. The warrant expense for Mr. Corbett for the year ended December 31, 2021 was $4,327,899.
On August 16, 2021, the Company and Mr. Corbett entered into an Executive Employment Agreement that replaced and superseded the previous executive employment agreement (the “August 2021 Corbett Employment Agreement”). The purpose of the August 2021 Corbett Employment Agreement was to provide a replacement grant for warrants previously granted to Mr. Corbett under the terms of his previous employment agreement with the Company. Pursuant to the August 2021 Corbett Employment Agreement, Mr. Corbett would continue to serve as the Company’s Chief Executive Officer on a full time basis effective as of the date of the August 2021 Corbett Employment Agreement until the close of business on December 31, 2024. Mr. Corbett’s base salary will be $30,000 per month, which shall be paid in accordance with the Company’s standard payroll practice for its executives, managers and salaried employees. In addition, the August 2021 Corbett Employment Agreement provides that: (1) Mr. Corbett will be eligible for a cash bonus as determined by the Board to the extent the Company achieves (or exceeds) annual revenue or other financial performance objectives established by the Board, in its sole discretion, from time to time; (2) the Company will grant to Mr. Corbett options to purchase 20,000,000 shares of common stock of the Company at a per share exercise price of $0.15; and (3) a car allowance for Mr. Corbett in the amount of $800 per month. Fifty percent (50%) of the shares subject to the options shall vest on the grant date and the other 50% of the shares subject to the option shall vest at the rate of 1/36 per month over a three-year period. The options will be exercisable for a period of ten years after the date of grant and the Company shall provide for cashless exercise of the option. The options are being granted pursuant to the Company’s 2021 Stock Incentive Plan which was approved by the board of directors in August 2021, subject to approval of the 2021 Plan by the shareholders, which approval was obtained at the annual general meeting held on October 22, 2021. The option expense for Mr. Corbett for the year ended December 31, 2021 was $910,019.
In addition, the Company and Mr. Corbett entered into an Indemnification Agreement on August 16, 2021 (the “August 2021 Corbett Indemnification Agreement”), pursuant to which the Company agreed to indemnify Mr. Corbett to indemnify Indemnitee to the fullest extent permitted by or under the Nevada Corporation Law in respect of claims, including third-party claims and derivative claims and provides for advancement of expenses. The August 2021 Corbett Indemnification Agreement amends the indemnification agreement in effect prior to entering into the August 2021 Corbett Indemnification Agreement to provide that unless Company shall pay Mr. Corbett’s attorneys’ fees and costs, including the compensation and expenses of any arbitrator, unless the arbitrator or the court determines that (a) Company has no liability in such dispute, or (b) the action or claims by Executive are frivolous in nature. In any other case or matter, the Company and Mr. Corbett shall each bear its or his own attorney fees and costs.
Clifford Henry
On May 1, 2021, the Company appointed Mr. Henry to the Board of Directors.
On July 22, 2021, the Company granted Mr. Henry 2,000,000 shares of common stock, valued at $154,000.
Mr. Henry has a consulting agreement with the Company whereby he is paid $3,500 per month.
Madisson Corbett
On May 1, 2021, the Company appointed Ms. Corbett to the Board of Directors. Ms. Corbett is the daughter of Mr. William Corbett, the Company’s Chief Executive Officer and Chairman of the Board.
On July 22, 2021, the Company granted Ms. Corbett 2,000,000 shares of common stock, valued at $154,000.
David Rios
On July 22, 2021, the Company appointed David Rios to the Board of Directors.
On July 22, 2021, the Company granted Mr. Rios 1,000,000 shares of common stock, valued at $77,000.
Richard Rosenblum
On July 22, 2021, the Company appointed Richard Rosenblum as President and Chief Financial Officer of the Company. In addition, Mr. Rosenblum was elected to the board of directors of the Company to serve until the Company’s next annual meeting of shareholders.
On July 27, 2021, the Company and Mr. Rosenblum entered into an Executive Employment Agreement (the “Employment Agreement”), pursuant to which Mr. Rosenblum will serve as the Company’s President and Chief Financial Officer on a full time basis effective as of July 1. The effectiveness of the Employment Agreement is subject to the approval of the Employment Agreement by the Board, unless earlier terminated as provided in the Employment Agreement. The term of the Employment Agreement is until December 31, 2024. Mr. Rosenblum’s base salary will be $18,000 per month. In addition, the Employment Agreement provides that: (1) Mr. Rosenblum will be eligible for a cash bonus as determined by the Board to the extent the Company achieves (or exceeds) annual revenue or other financial performance objectives established by the Board, in its sole discretion, from time to time; and (2) the Company will grant to Mr. Rosenblum options to purchase 10,000,000 shares of common stock of the Company at a per share exercise price equal to the fair market value of the Company’s common stock, as reflected in the closing price of the Company’s common shares on the OTC exchange or, in the event the stock is up listed, on the NASDAQ exchange, on the date of grant (the “Options”)”. Fifty percent (50%) of the shares subject to the Options shall vest on the grant date and the other 50% of the shares subject to the Option shall vest at the rate of 1/36 per month over a three-year period. The Options will be exercisable for a period of ten (10) years after the date of grant and the Company shall provide for cashless exercise of the Option by Executive. The options are being granted pursuant to the Company’s 2021 Stock Incentive Plan which was approved by the board of directors in August 2021, subject to approval of the 2021 Plan by the shareholders, which approval was obtained at the annual general meeting held on October 22, 2021. The Options are being granted pursuant to the Company’s 2021 Stock Incentive Plan. The option expense for Mr. Rosenblum for the year ended December 31, 2021 was $381,006.
If Mr. Rosenblum’s employment with Company is terminated at any time during the term of the Employment Agreement other than for Cause (as defined in the Employment Agreement), or due to voluntary termination, retirement, death or disability, then Mr. Rosenblum shall be entitled to severance equal to fifty percent (50%) of his annual base salary rate in effect as of the date of termination. If Mr. Rosenblum’s employment with Company is terminated at any time during the term of the Employment Agreement other than for Cause (as defined in the Employment Agreement), or due to voluntary termination, retirement, death or disability, within 12 months following an Acquisition (as defined in the Employment Agreement), then Mr. Rosenblum shall be entitled to severance equal to 100% of his annual base salary rate in effect as of the date of termination. Severance payments shall be subject to execution and delivery of a general release in favor of the Company.
On August 16, 2021, the Company entered into an amendment to the Rosenblum Executive Employment Agreement (the “First Amendment”) with Mr. Rosenblum. Under the terms of the Executive Employment Agreement, the Company had agreed to grant to Mr. Rosenblum an option to purchase 10,000,000 (ten million) common shares of Company Stock at a per share exercise price equal to the fair market value of the Company’s common stock, as reflected in the closing price of the Company’s common shares on the OTC exchange or, in the event the stock is uplisted, on the NASDAQ exchange, on the date of grant (the “Option”).” The First Amendment provided that the Option was granted on August 31, 2021 at an exercise price of $0.15.
In addition, the Company and Mr. Rosenblum entered into an Indemnification Agreement, pursuant to which the Company agreed to indemnify Mr. Rosenblum to indemnify Indemnitee to the fullest extent permitted by or under the Nevada Corporation Law in respect of claims, including third-party claims and derivative claims and provides for advancement of expenses. |
COMMITMENTS AND CONTINGENCIES |
12 Months Ended | ||
|---|---|---|---|
Dec. 31, 2021 | |||
| Commitments and Contingencies Disclosure [Abstract] | |||
| COMMITMENTS AND CONTINGENCIES |
The Company has property lease commitments disclosed under note 6 above.
The Company may have an obligation to repay certain convertible notes and accrued interest thereon, on maturity date, if these notes are not converted into equity prior to maturity date as disclosed under note 9 above. |
SUBSEQUENT EVENTS |
12 Months Ended | ||
|---|---|---|---|
Dec. 31, 2021 | |||
| Subsequent Events [Abstract] | |||
| SUBSEQUENT EVENTS |
Convertible note funding
On February 3, 2022, the Company extended the maturity date of its convertible notes to each of Cavalry and Mercer from February 16, 2022 to August 16, 2022 in consideration of increasing the principal amount outstanding and due to each of Cavalry and Mercer under the convertible notes by 10%. The aggregate principal amount of each of the Cavalry and Mercer Notes after extension is $866,242.
On February 4, 2022, the Company paid in full the convertible note owing to Bellridge including interest and penalties thereon for gross proceeds of $1,235,313.
Other than disclosed above, the Company has evaluated subsequent events through the date the consolidated financial statements were available to be issued and has concluded that no such events or transactions took place that would require disclosure herein. |
Accounting Policies, by Policy (Policies) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||
| Basis of Presentation |
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).
All amounts referred to in the notes to the consolidated financial statements are in United States Dollars ($) unless stated otherwise.
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| Principles of Consolidation |
The consolidated financial statements include the financial statements of the Company and its subsidiary in which it has a majority voting interest. All significant inter-company accounts and transactions have been eliminated in the consolidated financial statements.
The entities included in these consolidated financial statements are as follows:
Innovative Payment Solutions, Inc. - Parent Company Beyond Fintech Inc., 51% owned.
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| Use of Estimates |
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions, which are evaluated on an ongoing basis, that affect the amounts reported in the consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the amounts of revenues and expenses that are not readily apparent from other sources. Actual results could differ from those estimates and judgments. In particular, significant estimates and judgments include those related to, the estimated useful lives for plant and equipment, the fair value of long-lived investments, the fair value of warrants and stock options granted for services or compensation, estimates of the probability and potential magnitude of contingent liabilities, derivative liabilities, the valuation allowance for deferred tax assets due to continuing operating losses and the allowance for doubtful accounts.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the consolidated financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from our estimates.
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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 consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.
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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.
The carrying amounts reported in the balance sheets for cash, accounts receivable, other current assets, other assets, accounts payable, accrued liabilities, and notes payable, approximate fair value due to the relatively short period to maturity for these instruments. The Company has identified the short-term convertible notes and certain warrants attached to certain of the notes that are required to be presented on the balance sheets at fair value in accordance with the accounting guidance.
ASC 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. We evaluate the fair value of variably priced derivative liabilities on a quarterly basis and report any movements thereon in earnings.
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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 recent global Covid-19 breakout has caused an economic crisis which may result in a general tightening in the credit markets, lower levels of liquidity, increases in the rates of default and bankruptcy, and extreme volatility in credit, equity and fixed income markets. These conditions may not only limit the Company’s access to capital, but also make it difficult for its customers, vendors and the Company to accurately forecast and plan future business activities. In addition, businesses have been suspended due to quarantines intended to contain this outbreak and many people have been forced to work from home in those areas. As a result, installation of the Company’s network of kiosks, terminals and payment channels in Southern California has been delayed, which has had an adverse impact on its business and financial condition and has hampered the Company’s ability to generate revenue and access usual sources of liquidity on reasonable terms.
The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, and rates and methods of taxation, among other things.
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| Recent accounting pronouncements |
In November 2021, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2021-10, Disclosures by Entities about Government Assistance (Topic 832), the update increases the transparency of government assistance, including the following disclosures: (1) the types of assistance, (2) an entity’s accounting for the assistance, and (3) the effect of the assistance on an entity’s financial statements.
This ASU is effective for fiscal years beginning after December 15, 2021.
The effects of this ASU on the Company’s consolidated financial statements is currently being assessed and is not expected to have an impact on current disclosure.
The FASB issued several additional updates during the period, none of these standards are either applicable to the Company or require adoption at a future date and none are expected to have a material impact on the consolidated financial statements upon adoption.
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| Reporting by Segment |
No segmental information is required as the Company has not generated any revenue for the years ended December 31, 2021 and 2020 and only has one operating segment.
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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 December 31, 2021 and 2020, respectively, the Company had no cash equivalents.
The Company minimizes credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution in the United States. The balance at times may exceed federally insured limits. At December 31, 2021 and 2020, the balance exceed the federally insured limit by $5,117,551 and $0, respectively.
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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 December 31, 2021 and 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 $0 and $1,019,960 on its non-marketable equity securities for the years ended December 31, 2021 and 2020, respectively. The impairment charge was based on management’s determination that due to the lack of ability, to date, by Vivi Holdings (“Vivi”) to fulfill its capital raising requirements and implement its business strategy that there is a significant risk that Vivi may not be able to meet its obligations.
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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 years ended December 31, 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 consolidated statement of operations.
Prior to the Company’s reverse merger which took place on May 12, 2016, all share-based payments were based on management’s estimate of market value of the Company’s equity. The factors considered in determining managements estimate of market value includes, assumptions of future revenues, expected cash flows, market acceptability of our technology and the current market conditions. These assumptions are complex and highly subjective, compounded by the business being in its early stage of development in a new market with limited data available.
Where equity transactions with arms-length third parties, who had applied their own assumptions and estimates in determining the market value of our equity, had taken place prior to and within a reasonable time frame of any share-based payments, the value of those share transactions have been used as the fair value for any share-based equity payments.
Where equity transactions with arms-length third parties, included both shares and warrants, the value of the warrants have been eliminated from the unit price of the securities using a Black-Scholes valuation model to determine the value of the warrants. The assumptions used in the Black Scholes valuation model includes market related interest rates for risk-free government issued treasury securities with similar maturities; the expected volatility of the Company’s common stock based on companies operating in similar industries and markets; the estimated stock price of the Company; the expected dividend yield of the Company and; the expected life of the warrants being valued.
Subsequent to the Company’s reverse merger which took place on May 12, 2016, the Company has utilized the market value of its common stock as quoted on the OTCQB, as an indicator of the fair value of its common stock in determining share- based payment arrangements.
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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 December 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. The Company does not have any comprehensive income (loss) for the periods presented.
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| Reclassification of prior year presentation |
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. |
ACCOUNTING POLICIES AND ESTIMATES (Tables) |
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Dec. 31, 2021 | ||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||
| Schedule of estimated useful lives of the assets |
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INTANGIBLES (Tables) |
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Dec. 31, 2021 | |||||||||||||||||||
| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||
| Schedule of Beyond Fintech, Inc (“Fintech”) |
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INVESTMENTS (Tables) |
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||
| Investments, All Other Investments [Abstract] | |||||||||||||||||||||||||||||||||||||
| Schedule of investment |
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LEASES (Tables) |
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Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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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| Schedule of maturity of operating leases |
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LOANS PAYABLE (Tables) |
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans Payable [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of loans payable |
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CONVERTIBLE NOTES PAYABLE (Tables) |
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Convertible Notes Payable [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of convertible notes payable |
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DERIVATIVE LIABILITY (Tables) |
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Dec. 31, 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) |
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| Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of restricted stock activity |
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| Schedule of restricted stock granted and exercisable |
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| Schedule fair value of the warrants granted and issued were determined by using a 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 the reduction in the exercise price was determined using a black scholes valuation model |
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| Schedule of option activity |
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| Schedule of warrants outstanding and exercisable |
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INCOME TAXES (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Taxes [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of provision for income taxes |
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| Schedule of statutory income tax |
|
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| Schedule of deferred income tax assets |
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EQUITY BASED COMPENSATION (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||
| Equity Based Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||
| Schedule of equity based compensation |
|
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NET LOSS PER SHARE (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of dilutive shares |
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ORGANIZATION AND DESCRIPTION OF BUSINESS (Details) - USD ($) |
12 Months Ended | |||
|---|---|---|---|---|
Aug. 26, 2021 |
Dec. 31, 2021 |
Dec. 31, 2019 |
Jun. 22, 2021 |
|
| Organization and Description of Business (Textual) | ||||
| Description of changed its name | November 1, 2019, the Company changed its name from QPAGOS to Innovative Payment Solutions, Inc. Additionally, and immediately following the name change, the Company filed a Certificate of Change with the Secretary of State of the State of Nevada to effect a reverse split of the Company’s common stock, par value $0.0001 per share (the “common stock”) at a ratio of 1-for-10, effective on November 1, 2019 (the Reverse Stock Split”). As a result of the Reverse Stock Split, each ten pre-split shares of common stock outstanding automatically combined into one new share of common stock without any further action on the part of the holders, and the number of outstanding shares of common stock was reduced from 320,477,867 shares to 32,047,817 after rounding for fractional shares. | |||
| Percentage of ownership | 1.00% | |||
| Percentage of remaining shares owned | 49.00% | |||
| Beyond Fintech [Member] | ||||
| Organization and Description of Business (Textual) | ||||
| Stake owned percentage | 51.00% | |||
| Frictionless [Member] | ||||
| Organization and Description of Business (Textual) | ||||
| Strategic interest | 10.00% | |||
| Outstanding common stock percentage | 41.00% | |||
| Purchase price (in Dollars) | $ 300,000 | |||
| 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 $0.0001 per share (the “Common Stock”). Additionally, pursuant to the Merger Agreement, upon consummation of the Merger, IPSI assumed all of Qpagos Corporation’s warrants issued and outstanding immediately prior to the Merger, which were exercisable for approximately 621,920 shares of Common Stock, respectively, as of the date of the Merger. Prior to and as a condition to the closing of the Merger, the then-current IPSI stockholder of 500,000 shares of Common Stock agreed to return to IPSI 497,500 shares of Common Stock held by such holder to IPSI and the then-current IPSI stockholder retained an aggregate of 2,500 shares of Common Stock and the other stockholders of IPSI retained 500,000 shares of Common Stock. Therefore, immediately following the Merger, Qpagos Corporation’s former stockholders held 4,992,900 shares of IPSI common stock which represented approximately 91% of the outstanding Common Stock. | |||
ACCOUNTING POLICIES AND ESTIMATES (Details) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Accounting Policies and Estimates (Textual) | ||
| Ownership percentage | 20.00% | |
| Federally insured limit | $ 5,117,551 | $ 0 |
| Impairment charge | 0 | $ 1,019,960 |
| Plant and equipment costs | $ 1,000 | |
| Beyond Fintech Inc., [Member] | ||
| Accounting Policies and Estimates (Textual) | ||
| Ownership percentage | 51.00% | |
ACCOUNTING POLICIES AND ESTIMATES (Details) - Schedule of estimated useful lives of the assets |
12 Months Ended |
|---|---|
Dec. 31, 2021 | |
| Kiosks [Member] | |
| Estimated useful lives | 7 years |
| Computer Equipment [Member] | |
| Estimated useful lives | 3 years |
| Leasehold Improvements [Member] | |
| Estimated useful lives of property | Lesser of estimated useful life or life of lease |
| Office Equipment [Member] | |
| Estimated useful lives | 10 years |
LIQUIDITY MATTERS (Details) |
12 Months Ended |
|---|---|
|
Dec. 31, 2021
USD ($)
| |
| Liquidity Matters (Textual) | |
| Net loss | $ 14,494,915 |
| Cash | 5,449,751 |
| Cash balance | $ 5,449,751 |
INTANGIBLES (Details) - USD ($) |
1 Months Ended | 12 Months Ended |
|---|---|---|
Aug. 26, 2021 |
Dec. 31, 2021 |
|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||
| Gross proceeds | $ 250,000 | $ 375,000 |
| Beyond fintech percentage | 51.00% | |
| Owned frictionless financial technologies | 49.00% |
INTANGIBLES (Details) - Schedule of Beyond Fintech, Inc (“Fintech”) - USD ($) |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Schedule of Beyond Fintech, Inc (“Fintech”) [Abstract] | ||
| Purchased Technology | $ 625,000 |
INVESTMENTS (Details) - Schedule of investment - USD ($) |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| INVESTMENTS (Details) - Schedule of investment [Line Items] | ||
| Investment | $ 500,001 | $ 1 |
| Frictionless Technologies, Inc. [Member] | ||
| INVESTMENTS (Details) - Schedule of investment [Line Items] | ||
| Investment | 500,000 | |
| Vivi Holdings, Inc. [Member] | ||
| INVESTMENTS (Details) - Schedule of investment [Line Items] | ||
| Investment | $ 1 | $ 1 |
LEASES (Details) |
12 Months Ended |
|---|---|
|
Dec. 31, 2021
USD ($)
| |
| Leases (Textual) | |
| Operating lease expire term | 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. |
| Operating leases rent expense | $ 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 ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 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 ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Leases [Abstract] | ||
| Operating lease expense | $ 74,803 | $ 41,423 |
LEASES (Details) - Schedule of other lease information - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Cash paid for amounts included in the measurement of lease liabilities | ||
| Operating cash flows from operating leases | $ (74,803) | $ (41,423) |
| Remaining lease term – operating lease | 3 months | 14 months |
| Discount rate – operating lease | 10.00% | |
LEASES (Details) - Schedule of maturity of operating leases |
Dec. 31, 2008
USD ($)
|
|---|---|
| Total instalments due: | |
| 2022 | $ 14,400 |
FEDERAL RELIEF LOANS (Details) - USD ($) |
12 Months Ended | ||||
|---|---|---|---|---|---|
Jun. 07, 2021 |
Nov. 05, 2020 |
Jul. 07, 2020 |
May 07, 2020 |
Dec. 31, 2021 |
|
| FEDERAL RELIEF LOANS (Details) [Line Items] | |||||
| Earning interest, percentage | 3.75% | ||||
| Repayable installments | $ 2,538 | $ 731 | |||
| Loan payments | $ 60,292 | ||||
| Disaster loan amount | $ 150,000 | ||||
| Accrued interest | $ 8,353 | ||||
| Well Fargo Bank [Member] | |||||
| FEDERAL RELIEF LOANS (Details) [Line Items] | |||||
| Bank loan | $ 60,292 | ||||
| Earning interest, percentage | 1.00% |
LOANS PAYABLE (Details) - USD ($) |
1 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|
Jul. 17, 2020 |
Dec. 17, 2019 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Loans Payable (Textual) | ||||
| Interest expense | $ 134 | $ 1,558 | ||
| Notes payable | $ 23,633 | |||
| Stanislav Minaychenko [Member] | ||||
| Loans Payable (Textual) | ||||
| Notes payable | $ 23,893 | |||
| Interest rate | 4.00% | |||
| Maturity date | Jun. 16, 2020 | |||
| Aggregate principal amount | 13,893 | |||
| Interest repaid | 717 | |||
| Maxim Pukhoskiy [Member] | ||||
| Loans Payable (Textual) | ||||
| Notes payable | $ 17,856 | |||
| Interest rate | 4.00% | |||
| Maturity date | Jun. 16, 2020 | |||
| Aggregate principal amount | 7,656 | |||
| Interest repaid | 429 | |||
| Dieter Busenhart [Member] | ||||
| Loans Payable (Textual) | ||||
| Interest rate | 10.00% | |||
| Aggregate principal amount | $ 50,000 | 500 | ||
| Net proceeds | $ 50,000 | |||
| Accrued interest | $ 571 | |||
LOANS PAYABLE (Details) - Schedule of loans payable - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Notes payable | $ 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 | $ 1,062 |
CONVERTIBLE NOTES PAYABLE (Details) - USD ($) |
1 Months Ended | 12 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 |
Sep. 16, 2020 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Convertible Notes Payable (Textual) | ||||||||||||||||||||||
| Interest expense | $ 221,930 | $ 366,964 | ||||||||||||||||||||
| Amortized of debt discount | 3,653,652 | 1,065,879 | ||||||||||||||||||||
| Repayments of debt | $ 22,049 | $ 104,500 | ||||||||||||||||||||
| Exercise price per share (in Dollars per share) | $ 0.15 | |||||||||||||||||||||
| Debt percentage | 115.00% | 125.00% | ||||||||||||||||||||
| Iroquois Master Fund Ltd.[Member] | ||||||||||||||||||||||
| Convertible Notes Payable (Textual) | ||||||||||||||||||||||
| Debt percentage | 125.00% | |||||||||||||||||||||
| 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 I LP [Member] | ||||||||||||||||||||||
| Convertible Notes Payable (Textual) | ||||||||||||||||||||||
| Aggregate principal amount | $ 300,000 | $ 100,000 | $ 114,000 | $ 300,000 | ||||||||||||||||||
| Net proceeds | $ 500,500 | $ 150,500 | $ 99,750 | |||||||||||||||||||
| Interest rate | 10.00% | 10.00% | 10.00% | 10.00% | ||||||||||||||||||
| 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. | 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. | ||||||||||||||||||||
| Accrued interest and penalty interest | $ 16,083 | $ 5,583 | $ 4,623 | $ 16,639 | ||||||||||||||||||
| Senior secured convertible note | $ 572,000 | 172,000 | $ 100,000 | $ 114,000 | ||||||||||||||||||
| Original issue discount rate | 12.50% | 10.00% | ||||||||||||||||||||
| Original issue discount | $ 71,500 | $ 37,500 | $ 21,500 | $ 14,000 | ||||||||||||||||||
| Conversion price (in Dollars per share) | $ 0.23 | $ 0.035 | $ 0.035 | $ 0.035 | $ 0.035 | $ 0.035 | $ 0.035 | $ 0.035 | ||||||||||||||
| Warrant exercisable (in Shares) | 2,486,957 | 8,571,428 | 2,857,143 | 3,257,143 | ||||||||||||||||||
| Exercise price per share (in Dollars per share) | $ 0.24 | $ 0.05 | $ 0.05 | $ 0.05 | ||||||||||||||||||
| Common stock shares (in Shares) | 9,030,953 | 3,016,667 | 3,389,238 | 9,046,826 | ||||||||||||||||||
| Cavalry Fund I LP [Member] | 10% Per annum and maturing on June 30, 2021 [Member] | ||||||||||||||||||||||
| Convertible Notes Payable (Textual) | ||||||||||||||||||||||
| Net proceeds | $ 246,600 | |||||||||||||||||||||
| Senior secured convertible note | $ 300,000 | |||||||||||||||||||||
| Cavalry Fund I LP [Member] | Convertible Promissory [Member] | ||||||||||||||||||||||
| Convertible Notes Payable (Textual) | ||||||||||||||||||||||
| Senior secured convertible note | $ 300,000 | |||||||||||||||||||||
| Second Cavalry Note [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. | |||||||||||||||||||||
| Third Cavalry Note [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. | |||||||||||||||||||||
| Fourth Cavalry Note [Member] | ||||||||||||||||||||||
| Convertible Notes Payable (Textual) | ||||||||||||||||||||||
| Repayments of debt | $ 172,000 | |||||||||||||||||||||
| Accrued interest and penalty interest | $ 669 | |||||||||||||||||||||
| 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 | |||||||||||||||||||||
| Fifth Cavalry Note [Member] | ||||||||||||||||||||||
| Convertible Notes Payable (Textual) | ||||||||||||||||||||||
| Accrued interest and penalty interest | $ 548,872 | |||||||||||||||||||||
| Unamortized debt discount | $ 73,655 | |||||||||||||||||||||
| 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 | $ 548,872 | |||||||||||||||||||
| 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 | $ 73,655 | |||||||||||||||||||||
| 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% | 10.00% | |||||||||||||||||||
| Description of conversion terms | converting the aggregate principal amount of $228,000 relating to the Initial Iroquois Note entered into on September 16, 2020 into 6,514,288 shares of common stock at a conversion price of $0.035 per share. The accrued interest of $8,041 on the Initial Iroquois Note remains outstanding and was recorded under accrued liabilities. | 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 | $ 228,000 | |||||||||||||||||||
| Original issue discount | $ 28,500 | $ 28,500 | ||||||||||||||||||||
| Conversion price (in Dollars per share) | $ 0.045 | $ 0.035 | $ 0.045 | $ 0.035 | ||||||||||||||||||
| Warrant exercisable (in Shares) | 6,514,286 | 5,066,667 | 6,514,286 | |||||||||||||||||||
| Exercise price per share (in Dollars per share) | $ 0.05 | $ 0.05 | $ 0.05 | |||||||||||||||||||
| Common stock shares (in Shares) | 5,066,667 | |||||||||||||||||||||
| Mark Geist [Member] | ||||||||||||||||||||||
| Convertible Notes Payable (Textual) | ||||||||||||||||||||||
| Aggregate principal amount | $ 28,600 | |||||||||||||||||||||
| Net proceeds | $ 25,025 | |||||||||||||||||||||
| Interest rate | 10.00% | |||||||||||||||||||||
| 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 | |||||||||||||||||||||
| Senior secured convertible note | $ 28,600 | |||||||||||||||||||||
| Original issue discount | $ 3,575 | |||||||||||||||||||||
| Conversion price (in Dollars per share) | $ 0.035 | $ 0.035 | ||||||||||||||||||||
| Warrant exercisable (in Shares) | 817,143 | |||||||||||||||||||||
| Exercise price per share (in Dollars per share) | $ 0.05 | |||||||||||||||||||||
| Common stock shares (in Shares) | 833,172 | |||||||||||||||||||||
| Bellridge Capital LP. [Member] | ||||||||||||||||||||||
| Convertible Notes Payable (Textual) | ||||||||||||||||||||||
| Aggregate principal amount | $ 206,000 | $ 286,000 | ||||||||||||||||||||
| Accrued interest and penalty interest | $ 5,720 | $ 863,609 | ||||||||||||||||||||
| Conversion price (in Dollars per share) | $ 0.045 | $ 0.035 | ||||||||||||||||||||
| Common stock shares (in Shares) | 4,577,778 | 8,334,857 | ||||||||||||||||||||
| Unamortized debt discount | $ 115,891 | |||||||||||||||||||||
| Debt percentage | 115.00% | |||||||||||||||||||||
| 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. | |||||||||||||||||||||
DERIVATIVE LIABILITY (Details) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Derivative Liability (Textual) | ||
| Derivative liability | $ 2,569,000 | |
| Debt discount | 2,569,000 | $ 1,877,375 |
| Derivative liability | 407,161 | 2,966,416 |
| Derivative liability movements | $ (5,128,255) | $ 654,471 |
DERIVATIVE LIABILITY (Details) - Schedule of assumptions were used in the Black-Scholes valuation model - $ / shares |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Expected dividend rate | 0.00% | 0.00% |
| Minimum [Member] | ||
| Conversion price | $ 0.05 | $ 0.015 |
| Risk free interest rate | 0.05% | 0.09% |
| Expected life of derivative liability | 1 year 7 months 6 days | 1 month |
| Expected volatility of underlying stock | $ 161.19 | $ 171.7 |
| Maximum [Member] | ||
| Conversion price | $ 0.24 | $ 2 |
| Risk free interest rate | 1.12% | 1.53% |
| Expected life of derivative liability | 49 years 7 months 6 days | 12 months |
| Expected volatility of underlying stock | $ 2.1533 | $ 2.226 |
DERIVATIVE LIABILITY (Details) - Schedule of movement in derivative liability - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 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 | (5,128,255) | (654,471) |
| Closing balance | $ 407,161 | $ 2,966,416 |
STOCKHOLDERS’ EQUITY (Details) |
1 Months Ended | 2 Months Ended | 4 Months Ended | 12 Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Apr. 05, 2021 |
Mar. 06, 2021
USD ($)
$ / shares
shares
|
Dec. 15, 2020 |
Aug. 31, 2021
$ / shares
shares
|
Aug. 16, 2021
$ / shares
shares
|
Mar. 17, 2021 |
Feb. 22, 2021
USD ($)
$ / shares
shares
|
Feb. 23, 2021
USD ($)
shares
|
Jun. 23, 2021
USD ($)
shares
|
Dec. 31, 2021
USD ($)
$ / shares
shares
|
Dec. 31, 2020
USD ($)
$ / shares
shares
|
Aug. 09, 2021
shares
|
Jul. 22, 2021
shares
|
|
| Stockholders' Equity (Textual) | |||||||||||||
| Gross proceeds of common stock (in Dollars) | $ | $ (501,100) | ||||||||||||
| Purchase agreements, description | the Company, entered into Securities Purchase Agreements with several institutional investors, pursuant to which the Company agreed to sell to the Investors in a private placement (i) 30,333,334 shares of its common stock (the “Shares”) and (ii) warrants (the “Warrants”) to purchase up to an aggregate of 15,166,667 shares of its common stock for gross proceeds of approximately $4,550,000. The combined purchase price for one share of common stock and associated Warrant is $0.15. | ||||||||||||
| Percentage of cash fee | 8.00% | ||||||||||||
| Number of approved advisory board agreements with individuals | 4 | ||||||||||||
| Term of effective date | 2 years | ||||||||||||
| Shares of common stock | 208,333 | 3,650,000 | |||||||||||
| Shares of unvested restricted stock | 1,500,000 | ||||||||||||
| Restricted stock awards expense (in Dollars) | $ | $ 301,064 | $ 502,127 | |||||||||||
| Preferred stock, shares authorized | 25,000,000 | 25,000,000 | |||||||||||
| Preferred stock, par value (in Dollars per share) | $ / shares | $ 0.0001 | $ 0.0001 | |||||||||||
| Warrants, description | In terms of the Senior Secured convertible notes entered into with various noteholders as described in note 9 above, the Company issued five year warrants exercisable for a total of 28,709,182 shares of common stock at initial exercise prices ranging from $0.05 to $0.24 per share. The warrants have a cashless exercise option and an exercise limitation based on a certain beneficial ownership percentage of 4.99% which may be adjusted to 9.99%. The exercise price of the warrant is adjustable under the following conditions; i) subsequent equity sales are at a price below the exercise price of the warrant; ii) the Company issues options with an exercise price lower than the exercise price of the warrants; iii) issues convertible securities which are convertible into common stock at a price lower than the warrant exercise price; and iv) the option exercise price or rate of conversion for convertible securities results in a lower exercise price than the exercise price of the warrants. | ||||||||||||
| Purchase of shares | 20,000,000 | ||||||||||||
| Exercise price per share (in Dollars per share) | $ / shares | $ 0.15 | ||||||||||||
| Stock based compensation expenses (in Dollars) | $ | $ 4,327,899 | ||||||||||||
| Exercise price (in Dollars per share) | $ / shares | $ 0.1875 | ||||||||||||
| Warrants value (in Dollars) | $ | $ 323,924 | ||||||||||||
| Warrants issued | 20,000,000 | ||||||||||||
| Granted options to purchase shares | 20,000,000 | ||||||||||||
| Warrants outstanding an intrinsic value (in Dollars) | $ | $ 0 | $ 0 | |||||||||||
| Terminates period | 10 years | ||||||||||||
| Options exercisable period | 10 years | ||||||||||||
| Common stock exercise price, per share (in Dollars per share) | $ / shares | $ 0.15 | ||||||||||||
| Options exercisable shares of common stock | 208,333 | ||||||||||||
| Compensation charge (in Dollars) | $ | $ 6 | ||||||||||||
| Restricted stock awards, description | in terms of an employment agreement entered into with an employee, the Company granted 2,500,000 restricted shares of which 1,000,000 vested on January 1, 2021 and the remaining 1,500,000 shares vest over a period of two years. The 1,500,000 shares of unvested restricted stock which was not physically issued to the employee were not earned due to the cessation of employment with the Company. | ||||||||||||
| Options [Member] | |||||||||||||
| Stockholders' Equity (Textual) | |||||||||||||
| Terminates period | 10 years | ||||||||||||
| Chief Financial Officer [Member] | |||||||||||||
| Stockholders' Equity (Textual) | |||||||||||||
| Purchase of shares | 10,000,000 | ||||||||||||
| Mr Fuller [Member] | |||||||||||||
| Stockholders' Equity (Textual) | |||||||||||||
| Exercise price per share (in Dollars per share) | $ / shares | $ 0.24 | ||||||||||||
| Debt Conversion Notices [Member] | |||||||||||||
| Stockholders' Equity (Textual) | |||||||||||||
| Aggregate shares of common stock | 61,793,616 | ||||||||||||
| Convertible debt amount (in Dollars) | $ | $ 2,259,221 | ||||||||||||
| Realizing a loss on conversion (in Dollars) | $ | $ 5,498,820 | ||||||||||||
| Board of Directors [Member] | |||||||||||||
| Stockholders' Equity (Textual) | |||||||||||||
| Shares of common stock | 2,000,000 | ||||||||||||
| Private Placement [Member] | |||||||||||||
| Stockholders' Equity (Textual) | |||||||||||||
| Purchase agreements, 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. | ||||||||||||
| Options [Member] | |||||||||||||
| Stockholders' Equity (Textual) | |||||||||||||
| Options outstanding, description | The options outstanding have an intrinsic value of $0 as of December 31, 2021 and 2020, respectively. The option expense was $1,382,639 and $0 for the years ended December 31, 2021 and 2020. | ||||||||||||
| 2018 Stock Incentive Plan [Member] | |||||||||||||
| Stockholders' Equity (Textual) | |||||||||||||
| Purchase of shares | 208,333 | ||||||||||||
| Grant date exercise price per share (in Dollars per share) | $ / shares | $ 0.24 | ||||||||||||
| Common Stock [Member] | |||||||||||||
| Stockholders' Equity (Textual) | |||||||||||||
| Common stock, shares authorized | 500,000,000 | ||||||||||||
| Common stock, shares par value (in Dollars per share) | $ / shares | $ 0.0001 | ||||||||||||
| Common stock, shares issued | 367,901,679 | 193,637,747 | |||||||||||
| Common stock, shares outstanding | 367,901,679 | 193,637,747 | |||||||||||
| Shares issued | 60,186,982 | ||||||||||||
| Gross proceeds of common stock (in Dollars) | $ | $ 3,009,349 | ||||||||||||
| Shares of common stock | 300,000 | ||||||||||||
| Shares of unvested restricted stock | 1,000,000 | ||||||||||||
| Exercise price per share (in Dollars per share) | $ / shares | $ 0.24 | ||||||||||||
| Purchase an aggregate shares | 2,426,667 | ||||||||||||
| Exercise price (in Dollars per share) | $ / shares | $ 0.15 | ||||||||||||
| Restricted shares vesting, description | As compensation the Company awarded each advisory board member 2,000,000 restricted shares of common stock, the restricted shares of common stock vest as to 75% on the effective date and 25% on the anniversary date of the agreement.The following shares of common stock were issued by the Company during the year ended December 31, 2021: ● On July 22, 2021, the Board of directors approved the issuance of 7,000,000 shares of common stock to board members that were appointed during the year. In Addition, a further 300,000 shares of common stock were issued to an employee of the Company and a further 3,650,000 shares of common stock were issued to various consultants. ● On August 9, 2021, the Board of directors approved the issuance of 2,000,000 shares of common stock to a third party vendor. ● The 1,500,000 shares of unvested restricted stock which was not physically issued to an employee were not earned due to the cessation of employment with the Company and were therefore cancelled. b. Restricted stock awards On December 15, 2020, in terms of an employment agreement entered into with an employee, the Company granted 2,500,000 restricted shares of which 1,000,000 vested on January 1, 2021 and the remaining 1,500,000 shares vest over a period of two years. The 1,500,000 shares of unvested restricted stock which was not physically issued to the employee were not earned due to the cessation of employment with the Company. A summary of restricted stock activity during the period January 1, 2020 to December 31, 2021 is as follows: Total restricted shares Weighted average fair market value per share Total unvested restricted shares Weighted average fair market value per share Total vested restricted shares Weighted average fair market value per share Outstanding January 1, 2020 - $ - - $ - - $ - Granted 20,495,000 0.049 20,495,000 0.049 - - Forfeited/Cancelled - - - - - - Vested - - (5,123,750 ) (0.049 ) 5,123,750 0.049 Outstanding December 31, 2020 20,495,000 0.049 15,371,250 0.049 5,123,750 $ 0.049 Granted 2,500,000 0.050 2,500,000 0.050 - - Forfeited/Cancelled (1,500,000 ) (0.050 ) (1,500,000 ) (0.050 ) - - Vested - - (6,123,750 ) (0.049 ) 6,123,750 0.049 Outstanding December 31, 2021 21,495,000 $ 0.049 10,247,500 $ 0.049 11,247,500 $ 0.049 The restricted stock granted and exercisable at December 31, 2021 is as follows: Restricted Stock Granted Restricted Stock Vested Grant date Price Number Granted Weighted Average Fair Value per Share Number Vested Weighted Average Fair Value per Share $ 0.049 20,495,000 $ 0.049 10,247,500 $ 0.049 $ 0.050 1,000,000 0.050 1,000,000 0.050 21,495,000 $ 0.049 11,247,500 $ 0.049 The Company has recorded an expense of $301,064 and $502,127 for the years ended December 31, 2021 and 2020, respectively. c. Preferred Stock The Company has authorized 25,000,000 shares of preferred stock with a par value of $0.0001 authorized, no preferred stock is issued and outstanding as of December 31, 2021 and December 31, 2020. d. Warrants In terms of the Senior Secured convertible notes entered into with various noteholders as described in note 9 above, the Company issued five year warrants exercisable for a total of 28,709,182 shares of common stock at initial exercise prices ranging from $0.05 to $0.24 per share. The warrants have a cashless exercise option and an exercise limitation based on a certain beneficial ownership percentage of 4.99% which may be adjusted to 9.99%. The exercise price of the warrant is adjustable under the following conditions; i) subsequent equity sales are at a price below the exercise price of the warrant; ii) the Company issues options with an exercise price lower than the exercise price of the warrants; iii) issues convertible securities which are convertible into common stock at a price lower than the warrant exercise price; and iv) the option exercise price or rate of conversion for convertible securities results in a lower exercise price than the exercise price of the warrants. The warrant holders also have the option to acquire subsequent rights offering rights, under certain circumstances and are entitled to pro-rata distributions made by the Company in assets or securities other than common stock. The warrants include a fundamental transaction clause which will give the warrant holder the right on an as converted basis to the proceeds which common shareholders would be entitled to as a result of a fundamental transaction. Notwithstanding the aforementioned rights, provided the warrants are not registered under an effective registration statement, the holder of the warrant has the right to receive cash equal to the Black-Scholes value of the unexercised portion of the warrant in accordance with the terms of the warrant agreement. On February 22, 2021, the Board of Directors of the Company appointed William Corbett, its Chief Executive Officer and then Interim Chief Financial Officer, as its Chairman of the Board and issued him a five-year warrant to purchase 20,000,000 shares of the Company’s common stock at an exercise price of $0.24, valued at $4,327,899 and expensed as stock based compensation during the current period. In connection with the Securities Purchase Agreements with several institutional investors, disclosed in Note 9(a) above, the Company sold warrants to purchase up to an aggregate of 15,166,667 shares of its common stock. The combined purchase price for one share of common stock and associated Warrant is $0.15. The warrants were valued at $2,028,509 using a Black Scholes valuation model and using the assumptions disclosed below. The Warrants are exercisable for a period of five years from the date of issuance and have an exercise price of $0.15 per share, subject to adjustment as set forth in the Warrants for stock splits, stock dividends, recapitalizations and similar events. The Investors may exercise the Warrants on a cashless basis if after the six month anniversary of date of issuance the shares of common stock underlying the Warrants (the “Warrant Shares”) are not then registered pursuant to an effective registration statement. Each Investor has contractually agreed to restrict its ability to exercise the Warrants such that the number of shares of the Company’s common stock held by the Investor and its affiliates after such exercise does not exceed the beneficial ownership limitation set forth in the Warrants which may not exceed initially 4.99% or 9.99% of the Company’s then issued and outstanding shares of common stock. Pursuant to an engagement letter dated as of March 6, 2021, by and between the Company and Wainwright, the Company engaged Wainwright to act as the Company’s exclusive placement agent in connection with the private placement, discussed above. The Company agreed to issue to Wainwright (or its designees) Placement Agent Warrants to purchase an aggregate of up to 2,426,667 shares of the Company’s common stock. The Placement Agent Warrants generally will have the same terms as the Warrants, except they will have an exercise price of $0.1875. The warrants were valued at $323,924 using a Black Scholes valuation model and using the assumptions disclosed below. On August 16, 2021, the Company and Mr. Corbett entered into an Executive Employment Agreement that replaced and superseded the previous executive employment agreement whereby the 20,000,000 warrants previously issued to Mr. Corbett were cancelled and as a replacement for the warrants, he was granted options to purchase 20,000,000 shares of common stock of the Company at a per share exercise price of $0.15. The fair value of the warrants granted and issued were determined by using a Black Scholes valuation model using the following assumptions: Year ended December 31, 2021 Exercise price $0.05 to $0.24 Risk free interest rate 0.46% to 0.92 % Expected life 5.0 years Expected volatility of underlying stock 213.84% to 215.33 % Expected dividend rate 0 % A summary of warrant activity during the period January 1, 2020 to December 31, 2021 is as follows: Shares Underlying Warrants Exercise price per share Weighted average exercise price Outstanding January 1, 2020 852,775 $ 2.00 to 6.25 $ 5.10 Granted 51,188,572 0.05 0.05 Forfeited/Cancelled (852,775 ) 2.00 to 6.25 5.10 Exercised - - - Outstanding December 31, 2020 51,188,572 $ 0.05 $ 0.05 Granted 66,302,515 0.05 to 0.24 0.16 Forfeited/Cancelled (20,000,000 ) 0.24 0.24 Exercised (60,186,982 ) 0.05 0.05 Outstanding December 31, 2021 37,304,105 $ 0.05 – 0.1875 $ 0.12 The warrants outstanding and exercisable at December 31, 2021 are as follows: Warrants Outstanding Warrants Exercisable Exercise Price* Number Outstanding Weighted Average Remaining Contractual life in years Weighted Average Exercise Price Number Exercisable Weighted Average Exercise Price Weighted Average Remaining Contractual life in years $ 0.05 10,823,813 3.78 10,823,813 3.78 $ 0.15 24,053,625 4.18 24,053,625 4.18 $ 0.1875 2,426,667 4.21 2,426,667 4.21 37,304,105 4.07 $ 0.12 37,304,105 $ 0.12 4.07 The warrants outstanding have an intrinsic value of $0 as of December 31, 2021 and 2020. 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 October 22, 2021, the Company (with the approval of the Company’s shareholders) established its 2021 Stock Incentive Plan (“2021 Plan”). The purpose of the 2021 Plan is to promote the interests of the Company and the stockholders of the Company by providing directors, officers, employees and consultants, advisors and service providers of the Company with appropriate incentives and rewards to encourage them to enter into and continue in the employ or service of the Company, to acquire a proprietary interest in the long-term success of the Company and to reward the performance of individuals in fulfilling long-term corporate objectives. The 2021 Plan terminates after a period of ten years in August 2031. The 2021 Plan is administered by the board of directors or a Compensation Committee appointed by the Board of Directors who have the authority to administer the 2021 Plan and to exercise all the powers and authorities specifically granted to it under the 2021 Plan. The maximum number of securities available under the 2021 Plan is 53,000,000 shares of common stock. Under the 2021 Plan the company may award the following: (i) non-qualified stock options; (ii)) incentive stock options; (iii) stock appreciation rights; (iv) restricted stock; (v) restricted stock unit; and (vi) other stock-based awards. On February 22, 2021, the board awarded each of its directors, James Fuller and Andrey Novikov, options under the Company’s 2018 Stock Incentive Plan to purchase 208,333 shares of the Company’s common stock. The options are exercisable for a period of ten years from the date of grant, vest in full on the date of grant and have an exercise price of $0.24 per share. On August 16, 2021, the Company and Mr. Corbett entered into an Executive Employment Agreement that replaced and superseded the previous executive employment agreement whereby the 20,000,000 warrants previously issued to Mr. Corbett were cancelled and as a replacement for the warrants, he was granted options to purchase 20,000,000 shares of common stock of the Company at a per share exercise price of $0.15. The options are exercisable for a period of ten years from the date of grant, vesting as to 50% on grant date and the remaining 50%, equally over a period of 36 months. In terms of an employment agreement dated August 16, 2021, on August 31, 2021, the Board awarded Richard Rosenblum, the Company’s Chief Financial Officer an option to purchase 10,000,000 shares of the Company’s common stock at an exercise price of $0.15 per share. The options are exercisable for a period of ten years from the date of grant, vesting as to 50% on grant date and the remaining 50%, equally over a period of 36 months. The fair value of the options granted and issued were determined by using a Black Scholes valuation model using the following assumptions: Year ended December 31, 2021 Exercise price $ 0.15 Risk free interest rate 1.26% to 1.27 % Expected life 10.0 years Expected volatility of underlying stock 209.3% to 210.4 % Expected dividend rate 0 % On July 22. 2021, the board of directors authorized the reduction in the exercise price of the options exercisable for 208,333 shares of common stock granted to Mr. Fuller on February 22, 2021, from $0.24 per share to $0.15 per share, resulting in an immediate compensation charge of $6, the remaining terms of the option were unchanged. The value of the reduction in the exercise price was determined using a Black Scholes valuation model utilizing the following assumptions: Year ended December 31, 2021 Revised exercise price $0.15 Original exercise price $0.24 Risk free interest rate 1.27% Expected life 9.6 years Expected volatility of underlying stock 210.4% Expected dividend rate 0% No options were granted for the year ended December 31, 2020. A summary of option activity during the period January 1, 2020 to December 31, 2021 is as follows: Shares Underlying options Exercise price per share Weighted average exercise price Outstanding January 1, 2020 100,000 $ 0.40 $ 0.40 Granted - - - Forfeited/Cancelled - - - Exercised - - - Outstanding December 31, 2020 100,000 0.40 0.40 Granted 30,416,666 0.15 – 0.24 0.15 Forfeited/Cancelled - - - Exercised - - - Outstanding December 31, 2021 30,516,666 $ 0.15 to 0.40 $ 0.15 The options outstanding and exercisable at December 31, 2021 are as follows: Options Outstanding Options Exercisable Exercise Price* Number Outstanding Weighted Average Remaining Contractual life in years Weighted Average Exercise Price Number Exercisable Weighted Average Exercise Price Weighted Average Remaining Contractual life in years $ 0.15 30,208,333 9.64 16,875,000 9.64 $ 0.24 208,333 9.15 208,333 9.15 $ 0.40 100,000 6.99 100,000 6.99 30,516,666 9.63 $0.15 17,183,333 $0.15 9.62 | ||||||||||||
| Common Stock [Member] | Board of Directors [Member] | |||||||||||||
| Stockholders' Equity (Textual) | |||||||||||||
| Shares of common stock | 7,000,000 | ||||||||||||
| Common Stock [Member] | Minimum [Member] | |||||||||||||
| Stockholders' Equity (Textual) | |||||||||||||
| Percentage of issued and outstanding shares | 4.99% | ||||||||||||
| Common Stock [Member] | Maximum [Member] | |||||||||||||
| Stockholders' Equity (Textual) | |||||||||||||
| Percentage of issued and outstanding shares | 9.99% | ||||||||||||
| Warrant [Member] | |||||||||||||
| Stockholders' Equity (Textual) | |||||||||||||
| Purchase agreements, description | In connection with the Securities Purchase Agreements with several institutional investors, disclosed in Note 9(a) above, the Company sold warrants to purchase up to an aggregate of 15,166,667 shares of its common stock. The combined purchase price for one share of common stock and associated Warrant is $0.15. The warrants were valued at $2,028,509 using a Black Scholes valuation model and using the assumptions disclosed below. | ||||||||||||
| Exercise price per share (in Dollars per share) | $ / shares | $ 0.15 | ||||||||||||
| Warrant exercisable period | 5 years | ||||||||||||
| Maximum [Member] | |||||||||||||
| Stockholders' Equity (Textual) | |||||||||||||
| Shares of common stock | 800,000 | ||||||||||||
| Maximum [Member] | 2021 Plan [Member] | |||||||||||||
| Stockholders' Equity (Textual) | |||||||||||||
| Shares of common stock | 53,000,000 | ||||||||||||
| Maximum [Member] | Common Stock [Member] | |||||||||||||
| Stockholders' Equity (Textual) | |||||||||||||
| Shares of common stock | 100,000 | ||||||||||||
STOCKHOLDERS’ EQUITY (Details) - Schedule of the reduction in the exercise price was determined using a black scholes valuation model |
12 Months Ended |
|---|---|
|
Dec. 31, 2021
$ / shares
| |
| Schedule of the reduction in the exercise price was determined using a black scholes valuation model [Abstract] | |
| Revised exercise price (in Dollars per share) | $ 0.15 |
| Original exercise price (in Dollars per share) | $ 0.24 |
| Risk free interest rate | 1.27% |
| Expected life | 9 years 7 months 6 days |
| Expected volatility of underlying stock | 210.40% |
| Expected dividend rate | 0.00% |
INCOME TAXES (Details) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Income Taxes [Abstract] | ||
| Description of tax rate | The TCJA contains significant changes to corporate income taxation, including but not limited to the reduction of the corporate income tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for interest expense to 30% of earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80% of current year taxable income and generally eliminating net operating loss carrybacks, allowing net operating losses to carryforward without expiration, one-time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits (including changes to the orphan drug tax credit and changes to the deductibility of research and experimental expenditures that will be effective in the future). | |
| Deferred income tax assets | $ 5,929,095 | $ 4,245,681 |
| Deferred income tax assets valuation allowance | $ 1,683,414 | |
| Descriptions of tax credit expiration period | As of December 31, 2021, the prior three years remain open for examination by the federal or state regulatory agencies for purposes of an audit for tax purposes. | |
| Income tax amount | $ 20,600,000 | |
| Federal and state net operating loss | $ 13,800,000 | |
| Description of net operating losses | $3.5 million of the net operating losses will begin to expire in 2034 and $17.1 million has an indefinite life. |
INCOME TAXES (Details) - Schedule of provision for income taxes - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Current | ||
| Federal | ||
| State | ||
| Foreign | ||
| Total current tax benefits | ||
| Deferred | ||
| Federal | ||
| State | ||
| Foreign | ||
| Total current tax benefits | ||
INCOME TAXES (Details) - Schedule of statutory income tax - Continuing Operations [Member] - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Continuing operations | ||
| Tax expense at the federal statutory rate | $ (3,043,932) | $ (1,143,354) |
| State tax expense, net of federal tax effect | (409.279) | (79,743) |
| Permanent differences | 1,813,210 | 453,667 |
| Prior year net operating loss true up | (43,413) | 487,927 |
| Temporary timing differences | ||
| Deffered tax assets, gross | (1,683,414) | (281,503) |
| Deferred income tax asset valuation allowance | 1,683,414 | 281,503 |
| Deferred tax assets, net | ||
INCOME TAXES (Details) - Schedule of deferred income tax assets - USD ($) |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Schedule of deferred income tax assets [Abstract] | ||
| Other | $ 241,491 | $ 246,069 |
| Net operating losses | 5,284,205 | 3,999,612 |
| Stock based compensation | 403,399 | |
| Valuation allowance | (5,929,095) | (4,245,681) |
| Net deferred income tax assets |
EQUITY BASED COMPENSATION (Details) - Schedule of equity based compensation - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Schedule of equity based compensation [Abstract] | ||
| Incentive stock awards | $ 6,011,601 | $ 502,128 |
| Stock issued for services rendered | 1,781,150 | 88,000 |
| Equity based compensation | $ 7,792,751 | $ 590,128 |
NET LOSS PER SHARE (Details) - Schedule of dilutive shares - shares |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Anti-dilutive shares | 81,477,436 | 107,775,249 |
| Convertible debt [Member] | ||
| Anti-dilutive shares | 13,626,666 | 56,486,677 |
| Stock options [Member] | ||
| Anti-dilutive shares | 30,516,666 | 100,000 |
| Warrants to purchase shares of common stock [Member] | ||
| Anti-dilutive shares | 37,304,104 | 51,188,572 |
RELATED PARTY TRANSACTIONS (Details) - USD ($) |
1 Months Ended | 12 Months Ended | ||||
|---|---|---|---|---|---|---|
Jul. 27, 2021 |
Jul. 22, 2021 |
Feb. 22, 2021 |
Aug. 31, 2021 |
Aug. 16, 2021 |
Dec. 31, 2021 |
|
| Related Party Transactions (Textual) | ||||||
| Options exercisable (in Shares) | 3,650,000 | 208,333 | ||||
| Exercise price per share (in Dollars per share) | $ 0.24 | |||||
| Shares subject to the options | 50.00% | |||||
| Option expense | $ 910,019 | |||||
| Consulting agreement | $ 3,500 | |||||
| Related party transactions description | the Company and Mr. Rosenblum entered into an Executive Employment Agreement (the “Employment Agreement”), pursuant to which Mr. Rosenblum will serve as the Company’s President and Chief Financial Officer on a full time basis effective as of July 1. The effectiveness of the Employment Agreement is subject to the approval of the Employment Agreement by the Board, unless earlier terminated as provided in the Employment Agreement. The term of the Employment Agreement is until December 31, 2024. Mr. Rosenblum’s base salary will be $18,000 per month. In addition, the Employment Agreement provides that: (1) Mr. Rosenblum will be eligible for a cash bonus as determined by the Board to the extent the Company achieves (or exceeds) annual revenue or other financial performance objectives established by the Board, in its sole discretion, from time to time; and (2) the Company will grant to Mr. Rosenblum options to purchase 10,000,000 shares of common stock of the Company at a per share exercise price equal to the fair market value of the Company’s common stock, as reflected in the closing price of the Company’s common shares on the OTC exchange or, in the event the stock is up listed, on the NASDAQ exchange, on the date of grant (the “Options”)”. Fifty percent (50%) of the shares subject to the Options shall vest on the grant date and the other 50% of the shares subject to the Option shall vest at the rate of 1/36 per month over a three-year period. The Options will be exercisable for a period of ten (10) years after the date of grant and the Company shall provide for cashless exercise of the Option by Executive. The options are being granted pursuant to the Company’s 2021 Stock Incentive Plan which was approved by the board of directors in August 2021, subject to approval of the 2021 Plan by the shareholders, which approval was obtained at the annual general meeting held on October 22, 2021. The Options are being granted pursuant to the Company’s 2021 Stock Incentive Plan. The option expense for Mr. Rosenblum for the year ended December 31, 2021 was $381,006. | |||||
| Annual base salary percentage | 50.00% | |||||
| James Fuller [Member] | ||||||
| Related Party Transactions (Textual) | ||||||
| Purchase of shares (in Shares) | 208,333 | |||||
| Exercise price (in Dollars per share) | $ 0.24 | |||||
| Mr Fuller [Member] | ||||||
| Related Party Transactions (Textual) | ||||||
| Option expense | $ 45,804 | |||||
| Restricted share (in Shares) | 2,000,000 | |||||
| Common stock, valued | $ 154,000 | |||||
| Andrey Novikov [Member] | ||||||
| Related Party Transactions (Textual) | ||||||
| Purchase of shares (in Shares) | 208,333 | |||||
| Mr Novikov [Member] | ||||||
| Related Party Transactions (Textual) | ||||||
| Option expense | $ 45,804 | |||||
| William Corbett [Member] | ||||||
| Related Party Transactions (Textual) | ||||||
| Warrant to purchase shares (in Shares) | 20,000,000 | |||||
| Exercise price (in Dollars per share) | $ 0.24 | |||||
| Salary expense | $ 30,000 | |||||
| Warrant expense | $4,327,899 | |||||
| Mr. Corbett [Member] | ||||||
| Related Party Transactions (Textual) | ||||||
| Common stock, valued | $ 154,000 | |||||
| Salary per month | $ 30,000 | |||||
| Options to purchase (in Shares) | 20,000,000 | |||||
| Exercise price per share (in Dollars per share) | $ 0.15 | |||||
| Car allowance | $ 800 | |||||
| Shares subject to the options | 50.00% | |||||
| Granted shares (in Shares) | 2,000,000 | |||||
| Mr. Henry [Member] | ||||||
| Related Party Transactions (Textual) | ||||||
| Granted shares (in Shares) | 2,000,000 | |||||
| Clifford Henry [Member] | ||||||
| Related Party Transactions (Textual) | ||||||
| Common stock, valued | $ 154,000 | |||||
| Mr. Rios [Member] | ||||||
| Related Party Transactions (Textual) | ||||||
| Common stock, valued | $ 77,000 | |||||
| Granted shares (in Shares) | 1,000,000 | |||||
| Mr. Rosenblum [Member] | ||||||
| Related Party Transactions (Textual) | ||||||
| Common stock granted, per share (in Dollars per share) | $ 0.15 | |||||
| Options to purchase (in Shares) | 10,000,000 | |||||
| Annual base salary percentage | 100.00% | |||||
| Maximum [Member] | Mr Fuller [Member] | ||||||
| Related Party Transactions (Textual) | ||||||
| Common stock granted, per share (in Dollars per share) | $ 0.24 | |||||
| Minimum [Member] | Mr Fuller [Member] | ||||||
| Related Party Transactions (Textual) | ||||||
| Common stock granted, per share (in Dollars per share) | $ 0.15 | |||||
SUBSEQUENT EVENTS (Details) - Subsequent Event [Member] - USD ($) |
Feb. 03, 2022 |
Feb. 04, 2022 |
|---|---|---|
| SUBSEQUENT EVENTS (Details) [Line Items] | ||
| Percentage of convertible notes | 10.00% | |
| Aggregate principal amount | $ 866,242 | |
| Gross proceeds | $ 1,235,313 |
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