UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period
ended
For the transition period from ____________ to ____________
Commission file number
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| n/a |
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Indicate by check mark
whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Indicate by check mark
whether the Registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required
to submit such files.)
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer | ☐ | Accelerated Filer | ☐ | |
| ☒ | Smaller Reporting Company | |||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
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Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
As of November 14, 2022,
there were
INNOVATIVE PAYMENT SOLUTIONS, INC.
Form 10-Q
For the Quarter Ended September 30, 2022
Index
i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “report”) contains “forward-looking statements” (as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) that reflect our current expectations and views of future events. The forward-looking statements are contained principally in the section of this report entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Readers are cautioned that significant known and unknown risks, uncertainties and other important factors (including those over which we may have no control and others listed in report and in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”)) may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. You can identify some of these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “is/are likely to,” “potential,” “continue” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include statements relating to:
| ● | our ability to implement our business plan, including scaling our IPSIPay® and Beyond Wallet product offerings by increasing app downloads and usage by customers; | |
| ● | acceptance by the marketplace of our products and services, notably IPSIPay and Beyond Wallet; | |
| ● | our ability to formulate, implement and modify as necessary effective sales, marketing, and strategic initiatives to drive revenue growth; | |
| ● | the viability of our current intellectual property and intellectual property created in the future; | |
| ● | our ability to comply with currently applicable laws and government regulations and those that may be applicable in the future; | |
| ● | our ability to retain key employees; | |
| ● | adverse changes in general market conditions for digital payment solutions such as IPSIPay, Beyond Wallet and other products and services we offer or may in future offer; | |
| ● | our ability to generate revenue, positive cash flow and, ultimately, profitability and continue as a going concern; | |
| ● | our future financing plans; and | |
| ● | our ability to adapt to changes in market conditions which could impair our operations and financial performance. |
These forward-looking statements involve numerous and significant risks and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our expectations may later be found to be incorrect. Our actual results of operations or the results of other matters that we anticipate herein could be materially different from our expectations. Important risks and factors that could cause our actual results to be materially different from our expectations are generally set forth in the “Management’s Discussion and Analysis of Financial Condition and Results of Operation,” section contain in this report and in the “Business,” “Risk Factors” and other sections of the 2021 Form 10-K. You should thoroughly read this report and the documents that we refer to with the understanding that our actual future results may be materially different from, and worse than, what we expect. We qualify all of our forward-looking statements by these cautionary statements.
The forward-looking statements made in this report relate only to events or information as of the date of this report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this report completely and with the understanding that our actual future results may be materially different from what we expect
ii
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
INNOVATIVE PAYMENT SOLUTIONS, INC.
Condensed Consolidated Balance Sheets
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Other current assets | ||||||||
| Total Current Assets | ||||||||
| Non-current assets | ||||||||
| Plant and equipment | ||||||||
| Intangible assets | ||||||||
| Security deposit | ||||||||
| Investment | ||||||||
| Total Non-Current Assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Equity (Deficit) | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Convertible debt, net of unamortized discount of $ | ||||||||
| Derivative liability | ||||||||
| Total Current Liabilities | ||||||||
| Non-Current Liabilities | ||||||||
| Federal relief loans | ||||||||
| Total Non-Current Liabilities | ||||||||
| Total Liabilities | ||||||||
| Equity (Deficit) | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total equity (deficit) attributable to Innovative Payment Solutions, Inc. Stockholders | ( | ) | ||||||
| Non-controlling interest | ||||||||
| Total Equity (deficit) | ( | ) | ||||||
| Total Liabilities and Equity (Deficit) | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
1
INNOVATIVE PAYMENT SOLUTIONS, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
| Three months ended | Three months ended | Nine months ended | Nine months ended | |||||||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Net Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of Goods Sold | ||||||||||||||||
| Gross profit | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Total Expense | ||||||||||||||||
| Loss from Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss on debt conversion | ( | ) | ||||||||||||||
| Penalty on convertible notes | ( | ) | ( | ) | ||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Amortization of debt discount | ( | ) | ( | ) | ( | ) | ||||||||||
| Derivative liability movements | ( | ) | ||||||||||||||
| Loss before Income Taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income Taxes | ||||||||||||||||
| Net Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss attributable to non-controlling interest | ||||||||||||||||
| Net loss attributable to Innovative Payment Solutions, Inc. stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
See accompanying notes to condensed consolidated financial statements.
2
INNOVATIVE PAYMENT SOLUTIONS, INC.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
For the Three and Nine Months Ended September 30, 2022
| Preferred Stock Shares |
Amount | Common Stock Shares* |
Amount | Additional Paid-in Capital |
Accumulated Deficit |
Non- controlling shareholders interest |
Total Stockholders’ Equity (Deficit) |
|||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||||||||||
| Stock based option expense | - | - | ||||||||||||||||||||||||||||||
| Restricted stock awards | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||||||||||
| Contribution by minority shareholders | ||||||||||||||||||||||||||||||||
| Stock based option expense | - | - | ||||||||||||||||||||||||||||||
| Restricted stock awards | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||||||||||
| Fair value of warrants issued | - | - | ||||||||||||||||||||||||||||||
| Shares issued for services | ||||||||||||||||||||||||||||||||
| Restricted stock awards | ||||||||||||||||||||||||||||||||
| Stock based option expense | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | ||||||||||||||||||||||
| 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, 2020 | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | ||||||||||||||||||||||
| Warrants exercised | ||||||||||||||||||||||||||||||||
| Share subscriptions | ||||||||||||||||||||||||||||||||
| Share issue expenses | - | - | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Conversion of debt to equity | ||||||||||||||||||||||||||||||||
| Fair value of warrants issued as compensation | - | - | ||||||||||||||||||||||||||||||
| Stock based compensation | ||||||||||||||||||||||||||||||||
| Net loss | - | - | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Balance at March 31, 2021 | $ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||||||||||
| Warrants exercised | ||||||||||||||||||||||||||||||||
| Shares issued for services | ||||||||||||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | ( |
) | ( |
) | |||||||||||||||||||||||||||
| Balance as of June 30, 2021 | $ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||||||||||
| Shares issued for services | ||||||||||||||||||||||||||||||||
| Stock based compensation | ||||||||||||||||||||||||||||||||
| Net loss | - | - | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Balance as of September 30, 2021 | $ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
3
INNOVATIVE PAYMENT SOLUTIONS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Nine months ended | Nine months ended | |||||||
| September 30, | September 30, | |||||||
| 2022 | 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Derivative liability movements | ( | ) | ||||||
| Depreciation | ||||||||
| Amortization of debt discount | ||||||||
| Loss on conversion of debt to equity | ||||||||
| Penalty on convertible debt | ||||||||
| Deposit forfeited | ||||||||
| Shares issued for services | ||||||||
| Stock based compensation | ||||||||
| Fair value of warrants issued | ||||||||
| 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 intangibles | ( | ) | ( | ) | ||||
| Investment in Frictionless Financial Technologies Inc. | ( | ) | ||||||
| Deposits paid | ( | ) | ( | ) | ||||
| Plant and equipment purchased | ( | ) | ( | ) | ||||
| NET CASH USED IN INVESTING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from minority shareholder contributions | ||||||||
| Proceeds from share issuances | ||||||||
| Share issue expenses | ( | ) | ||||||
| Pr0oceeds from warrants exercised | ||||||||
| Repayment of loans payable | ( | ) | ||||||
| Repayment of convertible notes | ( | ) | ( | ) | ||||
| Proceeds from short term notes and convertible notes | ||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | ( | ) | ||||||
| NET INCREASE (DECREASE) IN CASH | ( | ) | ||||||
| CASH AT BEGINNING OF PERIOD | ||||||||
| CASH AT END OF PERIOD | $ | $ | ||||||
| CASH PAID FOR INTEREST AND TAXES: | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
| NON CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| De-recognition of right of use lease on early termination | $ | $ | ||||||
| Conversion of convertible debt to equity | $ | $ | ||||||
| Debt discount on convertible debt | $ | $ | ||||||
See notes to the unaudited condensed financial statements.
4
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 1 | ORGANIZATION AND DESCRIPTION OF BUSINESS |
| a) | Organizational History |
On May 12, 2016, Innovative Payment Solutions, Inc., a Nevada corporation (“IPSI” or the “Company”) (originally formed on September 23, 2013 under the name “Asiya Pearls, Inc.”), 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 the 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. On May 27, 2016, the Company’s name was changed from “Asiya Pearls, Inc.” to “QPAGOS”.
Pursuant
The Merger was treated as a reverse acquisition of the Company, then a public shell company, for financial accounting and reporting purposes. As such, Qpagos Corporation was treated as the acquirer for accounting and financial reporting purposes while the Company was treated as the acquired entity for accounting and financial reporting purposes.
Qpagos Corporation was incorporated on May 1, 2015 under the laws of the state of Delaware to effectuate a reverse merger transaction with Qpagos, S.A.P.I. de C.V. (“Qpagos Mexico”) and Redpag Electrónicos S.A.P.I. de C.V. (“Redpag”). Each of the entities were incorporated in November 2013 in Mexico. Qpagos Mexico was formed to process payment transactions for service providers it contracts with, and Redpag was formed to deploy and operate kiosks as a distributor.
On June 1, 2016, the board of directors of the Company (the “Board”) changed the Company’s fiscal year end from October 31 to December 31.
On November 1, 2019, the Company changed its corporate name from “QPAGOS” to “Innovative Payment Solutions, Inc.” Additionally, and immediately following the name change, the Company filed a Certificate of Change with the Secretary of State of the State of Nevada to effect a reverse split of the then outstanding 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.
5
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 1 | ORGANIZATION AND DESCRIPTION OF BUSINESS (continued) |
| b) | Description of current business |
The Company is presently 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, Beyond Wallet, is currently operational and is focused on business customers. The Company’s flagship e-wallet, IPSIPay, is also fully operational. IPSIPay, which is focused on individual customers, was first launched in December 2021 and its commercial launch has continued during 2022. 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, but its principal focus will be on downloadable apps used via smartphones.
The
Company acquired a
On
August 26, 2021, the Company formed a new subsidiary, Beyond Fintech, Inc. (“Beyond Fintech”), in which it owns
a
| 2 | ACCOUNTING POLICIES AND ESTIMATES |
| a) | Basis of Presentation |
The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, these unaudited condensed financial statements do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments (consisting only of normal recurring adjustments), which the Company considers necessary, for a fair presentation of those financial statements. The results of operations and cash flows for the nine months ended September 30, 2022 may not necessarily be indicative of results that may be expected for any succeeding quarter or for the entire fiscal year. The information contained in this Quarterly Report on Form 10-Q (“Report”) should be read in conjunction with the audited financial statements of IPSI for the year ended December 31, 2021, included in the Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2022.
All amounts referred to in the notes to the unaudited condensed financial statements are in United States Dollars ($) unless stated otherwise.
6
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 2 | ACCOUNTING POLICIES AND ESTIMATES (continued) |
| b) | Principles of Consolidation |
The unaudited condensed 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 unaudited condensed consolidated financial statements.
The entities included in the accompanying unaudited condensed consolidated financial statements are as follows:
Innovative Payment Solutions, Inc. - Parent Company
Beyond Fintech Inc.,
| c) | Use of Estimates |
The preparation of unaudited condensed 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 unaudited condensed 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 unaudited condensed 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 the generation of continuing losses by 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 unaudited condensed 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.
7
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 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 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. Vivi Holdings 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 are and will be subject to significant risks and uncertainties including financial, operational, regulatory, and other risks, including the potential risk of business failure. These risks include, without limitation, risks associated with (i) COVID-19 and its variants, (ii) launching and scaling the Company’s e-wallet and related products and the use by customers of such products, (iii) developing and implementing successful marketing campaigns and other strategic initiatives; (iv) competition, (iv) compliance with applicable laws, rules and regulations (including those related to fund remittance); (v) the Company’s outstanding indebtedness, including the Company’s ability to repay or extend the maturity of such indebtedness (see Note 8); (vi) inflation and other economic factors and (vii) the Company’s ability to obtain necessary financing. 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.
The Company’s results may also 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. Many of these risks are beyond the Company’s control and are unpredictable. The Company may be unable to adequately manage such risks and similar risks, which could impair the viability of the Company.
| g) | Recent accounting pronouncements |
The Financial Accounting Standards Board (“FASB”) issued additional updates during the quarter ended September 30, 2022. None of these standards are either applicable to the Company or require adoption at a future date and none are expected to have a material impact on the Company’s condensed consolidated financial statements upon adoption.
8
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 2 | ACCOUNTING POLICIES AND ESTIMATES (continued) |
| h) | Reporting by Segment |
No segmental information is required as the Company has not generated any revenue for the nine months ended September 30, 2022 and 2021 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 September 30, 2022 and 2021, 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 September 30, 2022 and December 31, 2021, 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 September 30, 2022 and December 31, 2021.
| 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
| 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 (not used in the Company’s current business) | ||
| 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.
9
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 2 | ACCOUNTING POLICIES AND ESTIMATES (continued) |
| m) | Long-Term Assets |
Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.
| n) | Revenue Recognition |
The Company’s revenue recognition policy is consistent with the requirements of FASB ASC 606, Revenue Recognition.
The Company’s revenues will be 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 nine months ended September 30, 2022 and 2021.
| 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 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.
10
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 2 | ACCOUNTING POLICIES AND ESTIMATES (continued) |
| p) | Derivative Liabilities |
ASC Topic 815, Derivatives and hedging (“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 September 30, 2022 and December 31, 2021, 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.
| 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 and as of the end of nine months ended September 30, 2022, the Company had a net loss of $
The
Company had a cash balance of $
However, given the Company’s losses, negative cash flows and existing indebtedness, the Company will be required to raise significant additional funds to progress its business as planned by issuing equity or equity-linked securities. Should this occur, the Company’s stockholders would experience dilution, perhaps significantly. Additional debt financing, if available, may involve covenants restricting the Company’s 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 the Company or its stockholders and require significant debt service payments, which diverts resources from other activities. Moreover, there is a risk that financing may be unavailable to support the Company’s operations on favorable terms, or at all.
There is also a significant risk that none of the Company’s plans to raise financing will be implemented in a manner necessary to sustain the Company for an extended period of time. If adequate funds are not available to the Company when needed, the Company may be required to continue with reduced operations or to obtain funds through arrangements that may require the Company to relinquish rights to technologies or potential markets, any of which could have a material adverse effect on the Company. In addition, the Company’s inability to secure additional funding when needed could cause the Company’s business to fail or become bankrupt or force the Company to wind down or discontinue operations.
11
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 4 | INTANGIBLES |
On
August 26, 2021, the Company formed a subsidiary, Beyond Fintech. to acquire a product known as Beyond Wallet from a third party for gross
proceeds of $
During the year ended December
31, 2021, the Company paid gross proceeds of $
| September 30, 2022 | December 31, 2021 | |||||||
| Purchased Technology | $ | $ | ||||||
| Accumulated amortization | ( | ) | ||||||
| $ | $ | |||||||
Amortization expense was $
| 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 September 30, 2022.
Investment in Vivi Holdings, Inc.
Effective December 31, 2019, the Company sold 100% of the outstanding common stock of its subsidiary, Qpagos Corporation, together with its 99.9% ownership interest of Qpagos Corporation’s 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.
12
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 5 | INVESTMENTS (continued) |
As
of September 30, 2022 and December 31, 2021, the Company maintained the impairment of the carrying value of the investment in Vivi Holdings
based on no activity by Vivi’s management for its proposed initial public offering and fund raising activities. The total impairment
as of September 30, 2022 and December 31, 2021 was $
The shares in Vivi Holdings are unlisted as of September 30, 2022.
| September 30, 2022 | December 31, | |||||||
| Investment in Frictionless Financial Technologies, Inc. | $ | $ | ||||||
| Investment in Vivi Holdings, Inc. | ||||||||
| $ | $ | |||||||
| 6 | LEASES |
On
March 22, 2021, the Company entered into a real property lease for an office located at 56B 5th Avenue, Lot 1 #AT, 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. Following
the expiry of the lease term, the landlord has agreed to continue the lease on a month-to-month basis at $
Total Lease Cost
Individual components of the total lease cost incurred by the Company is as follows:
Nine
months | Nine months ended September 30, 2021 | |||||||
| Operating lease expense | $ | $ | ||||||
Other lease information:
|
Nine 2022 |
Nine months ended September 30, 2021 |
|||||||
| Cash paid for amounts included in the measurement of lease liabilities | ||||||||
| Operating cash flows from operating leases | $ | ( |
) | $ | ( |
) | ||
| Remaining lease term – 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 | $ | |||
13
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 7 | FEDERAL RELIEF LOANS |
Small Business Administration Disaster Relief loan
On
July 7, 2020, the Company received a Small Business Economic Injury Disaster loan amounting to $
The
Company has accrued interest of $
| 8 | CONVERTIBLE NOTES PAYABLE |
Convertible notes payable consists of the following:
| Description | Effective Interest Rate | Maturity date | Principal | Accrued Interest | Unamortized debt discount | September 30, | December 31, | |||||||||||||||||||
| Cavalry Fund I LP | % | $ | $ | $ | $ | $ | ||||||||||||||||||||
| Mercer Street Global Opportunity Fund, LLC | % | |||||||||||||||||||||||||
| Bellridge Capital LP. | % | |||||||||||||||||||||||||
| Total convertible notes payable | $ | $ | $ | $ | $ | |||||||||||||||||||||
Interest
expense totaled $
Cavalry Fund I LP
| ● | On February 16, 2021, the Company closed a transaction with Cavalry Fund I LP (“Cavalry”), pursuant to which the Company received net proceeds of $ |
This change to the maturity dates of
the Cavalry Note from February 16, 2022 to August 31, 2022 and subsequently to November 16, 2022, was assessed in terms of ASC 470-50
as a debt extinguishment, which resulted in a penalty expense of $
The balance
of the Cavalry Note plus accrued interest at September 30, 2022 was $
14
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 8 | CONVERTIBLE NOTES PAYABLE (continued) |
Mercer Street Global Opportunity Fund, LLC
| ● |
On February 3, 2022, the Company extended the maturity date of its Mercer Note from February 16, 2022 to August 16, 2022. The Mercer Note was due to mature on February 16, 2022 and would have resulted in the accrual of a $157,499 prepayment penalty on the principal of $572,000 and interest of $57,994 outstanding, totaling $787,493. Mercer agreed to extend the maturity date of the Mercer Note to August 16, 2022 in consideration of the principal amount outstanding under the Mercer Note being increased by an additional $78,749, thereby increasing the total principal outstanding to $866,242. On August 30, 2022, the Company further extended the maturity date of its Mercer note from August 16, 2022 to November 16, 2022. In terms of the agreement entered into with Mercer, the principal outstanding was increased by $181,959 and the interest outstanding as of August 31, 2022 of $43,553 was capitalized, resulting in a principal balance outstanding of $1,091,754. In addition, the Company granted Mercer a warrant exercisable for 3,000,000 shares of Common Stock at an exercise price of $0.15 per share, maturing on August 30, 2027 and valued at the date of grant at $119,091.
This change to the maturity dates of the Mercer Note from February 16, 2022 to August 31, 2022 and subsequently to November 16, 2022, was assessed in terms of ASC 470-50 as a debt extinguishment, which resulted in a penalty expense of $181,959 and $260,708 for the three months and nine months ended September 30, 2022, respectively, in addition the value of the warrant issued on the debt extension from August 16, 2022 to November 16, 2022, resulted in an additional penalty expense of $119,091 for the three and nine months ended September 30, 2022.
The
balance of the Mercer Note plus accrued interest at September 30, 2022 was $
Bellridge Capital LP.
| ● | On February 16, 2021, the Company closed a transaction with Bellridge Capital LP., pursuant to which the Company received net proceeds of $ |
The
Bellridge Note was repaid on February 4, 2022 for gross proceeds of $
| 9 | DERIVATIVE LIABILITY |
Certain of the short-term convertible notes disclosed in note 8 above and certain warrants disclosed in note 10 below have fundamental transaction clauses which might result in cash settlement, due to these factors, all convertible notes and any warrants attached thereto are valued and give rise to a derivative financial liability, which was initially valued at inception of the convertible notes using a Black-Scholes valuation model.
On
August 30, 2022, the company extended the maturity date of convertible notes issued to Cavalry and Mercer and agreed to grant each note
holder a warrant exercisable for
15
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 9 | DERIVATIVE LIABILITY (continued) |
The
value of this derivative financial liability was re-assessed at September 30, 2022 at $
The following assumptions were used in the Black-Scholes valuation model:
Nine months September 30, | Year ended December 31, 2021 | |||||||
| Conversion price | $ | $
| ||||||
| Risk free interest rate | % | % | ||||||
| Expected life of derivative liability | ||||||||
| Expected volatility of underlying stock | % | % | ||||||
| Expected dividend rate | % | % | ||||||
The movement in derivative liability is as follows:
| September 30, 2022 | December 31, 2021 | |||||||
| Opening balance | $ | $ | ||||||
| Derivative financial liability arising from convertible note and warrants | ||||||||
| Fair value adjustment to derivative liability | ( | ) | ||||||
| $ | $ | |||||||
| 10 | STOCKHOLDERS’ EQUITY |
| a. | Common Stock |
The
Company has total authorized Common Stock of
On
July 8, 2022, the Company entered into a consulting agreement with a third-party contractor for a period of twelve months to (i) review
the Company’s business plan; (ii) analyze and assess the Company’s revenues, costs, and cash flow; and (iii) introduce the
Company to and interface on the Company’s behalf with potential and actual commercial partners. The Company issued
On
July 8, 2022, the Company entered into a second consulting agreement with a separate third-party contractor for a period of twelve months
to (i) review the Company’s business plan; (ii) analyze and assess the Company’s revenues, costs, and cash flow; and (iii)
introduce the Company to and interface on the Company’s behalf with potential and actual commercial partners. The Company issued
On
July 11, 2022, the Board approved the issuance of
On
August 5, 2022, the Board approved the issuance of
16
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 10 | STOCKHOLDERS’ EQUITY (continued) |
| b. | Restricted stock awards |
A summary of restricted stock activity during the period January 1, 2021 to September 30, 2022 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, 2021 | $ | $ | $ | |||||||||||||||||||||
| Granted and issued | ||||||||||||||||||||||||
| Forfeited/Cancelled | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Vested | ( | ) | ( | ) | ||||||||||||||||||||
| Outstanding December 31, 2021 | $ | $ | $ | |||||||||||||||||||||
| Granted and issued | ||||||||||||||||||||||||
| Forfeited/Cancelled | ||||||||||||||||||||||||
| Vested | ( | ) | ( | ) | ||||||||||||||||||||
| Outstanding September 30, 2022 | $ | $ | $ | |||||||||||||||||||||
The restricted stock granted, issued and exercisable at September 30, 2022 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
17
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 10 | STOCKHOLDERS’ EQUITY (continued) |
| d. | Warrants |
Effective July 8, 2022 (the “Effective Date”), the Company entered into an Endorsement Agreement with Pez-Mar, Inc., a California corporation (“Pez-Mar”), to furnish the services of Mario Lopez (“Lopez”). Pursuant to the Endorsement Agreement, Lopez will act as a Company spokesperson in connection with the promotion, advertisement and endorsement of the Company’s physical and virtual payment processing and money remittance business and the Company’s related products and services.
The Endorsement Agreement has a term of two (2) years from the Effective Date (the “Term”), which is subject to earlier termination on customary terms and conditions. The parties have agreed to certain deliverables of Lopez during the term of the agreement, including with respect to social media posts, television commercials, interviews and photo shoots. The Endorsement Agreement also contains other customary terms, covenants and conditions, including representations and warranties, restrictions on endorsements of competitive products during the term of the agreement, confidentiality, indemnification, and Pez-Mar and Lopez’s independent contractor status.
On
August 30, 2022, the Company extended the maturity date of convertible notes issued to Cavalry and Mercer and agreed to grant each note
holder a warrant exercisable for
The fair value of the warrants granted and issued, as described above, were determined by using a Black Scholes valuation model using the following assumptions:
| Nine months ended September 30, 2022 | ||||
| Exercise price | $ | | ||
| Risk free interest rate | % | |||
| Expected life | ||||
| Expected volatility of underlying stock | % | |||
| Expected dividend rate | % | |||
18
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 10 | STOCKHOLDERS’ EQUITY (continued) |
| d. | Warrants (continued) |
A summary of warrant activity during the period January 1, 2021 to September 30, 2022 is as follows:
| Shares Underlying Warrants | Exercise price per share | Weighted average exercise price | ||||||||||
| Outstanding January 1, 2021 | $ | $ | ||||||||||
| Granted | | |||||||||||
| Forfeited/Cancelled | ( | ) | ||||||||||
| Exercised | ( | ) | ||||||||||
| Outstanding December 31, 2021 | $ | | $ | |||||||||
| Granted | | |||||||||||
| Forfeited/Cancelled | ||||||||||||
| Exercised | ||||||||||||
| Outstanding September 30, 2022 | $ | | $ | |||||||||
The warrants outstanding and exercisable at September 30, 2022 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 or a committee appointed by the Board, who have the authority to administer the Plan and to exercise all the powers and authorities specifically granted to it under the Plan.
The
maximum number of securities available under the Plan is
19
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 10 | STOCKHOLDERS’ EQUITY (continued) |
| e. | Stock options (continued) |
On
October 22, 2021, the Company established its 2021 Stock Incentive Plan (“2021 Plan”). The purpose of the Plan is to promote
the interests of the Company and the stockholders of the Company by providing directors, officers, employees and consultants, advisors
and service providers of the Company with appropriate incentives and rewards to encourage them to enter into and continue in the employ
or service of the Company, to acquire a proprietary interest in the long-term success of the Company and to reward the performance of
individuals in fulfilling long-term corporate objectives. The Plan terminates after a period of
The 2021 Plan is administered by the Board or a Compensation Committee appointed by the Board, who have the authority to administer the Plan and to exercise all the powers and authorities specifically granted to it under the Plan.
The
maximum number of securities available under the 2021 Plan is
Under the 2021 Plan the company may award the following: (i) non-qualified stock options; (ii)) incentive stock options; (iii) stock appreciation rights; (iv) restricted stock; (v) restricted stock unit; and (vi) other stock-based awards.
On
July 11, 2022, the Board approved, granted and issued
The fair value of the options granted and issued were determined by using a Black Scholes valuation model using the following assumptions:
| Nine months ended September 30, 2022 | ||||
| Exercise price | $ | |||
| Risk free interest rate | | % | ||
| Expected life | | |||
| Expected volatility of underlying stock | | % | ||
| Expected dividend rate | % | |||
A summary of option activity during the period January 1, 2021 to September 30, 2022 is as follows:
| Shares Underlying options | Exercise price per share | Weighted average exercise price | ||||||||||
| Outstanding January 1, 2021 | $ | $ | ||||||||||
| Granted | | |||||||||||
| Forfeited/Cancelled | ||||||||||||
| Exercised | ||||||||||||
| Outstanding December 31, 2021 | $ | | $ | |||||||||
| Granted | | |||||||||||
| Forfeited/Cancelled | ||||||||||||
| Exercised | ||||||||||||
| Outstanding September 30, 2022 | $ | | $ | |||||||||
20
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 10 | STOCKHOLDERS’ EQUITY (continued) |
| e. | Stock options (continued) |
The options outstanding and exercisable at September 30, 2022 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 | ||||||||||||||||||||
| | | |||||||||||||||||||||||||
| $ | $ | |||||||||||||||||||||||||
The
options outstanding have an intrinsic value of $
The
option expense was $
| 11 | NET LOSS PER SHARE |
Basic loss per share is based on the weighted-average number of common shares outstanding during each period. Diluted loss per share is based on basic shares as determined above plus Common Stock equivalents. The computation of diluted net loss per share does not assume the issuance of common shares that have an anti-dilutive effect on net loss per share. For the three and nine months ended September 30, 2022 and 2021 all warrants, options and convertible debt securities were excluded from the computation of diluted net loss per share.
Dilutive shares which could exist pursuant to the exercise of outstanding stock instruments and which were not included in the calculation because their affect would have been anti-dilutive for the three and nine months ended September 30 2022 and 2021 are as follows:
| Three and nine months ended September 30, 2022 (Shares) | Three and nine months ended September 30, 2021 (Shares) | |||||||
| Convertible debt | ||||||||
| Stock options | ||||||||
| Warrants to purchase shares of Common Stock | ||||||||
21
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 12 | RELATED PARTY TRANSACTIONS |
The following transactions were entered into with related parties:
James Fuller
On
February 22, 2021, the Board awarded James Fuller ( a director of the Company until November 2, 2022 when he voluntarily retired as a
member of the Board) options under the Company’s 2018 Stock Incentive Plan to purchase
On
July 22. 2021, the Company granted Mr. Fuller
Additionally,
the Board approved the repricing of the options exercisable for
On
September 13, 2022, the Company granted Mr. Fuller ten-year options exercisable for
The
option expense for Mr. Fuller for the three and the nine months ended September 30, 2022 was $
Andrey Novikov
On
February 22, 2021, the Board awarded Andrey Novikov options under the Company’s 2018 Stock Incentive Plan to purchase
On May 31, 2021, Mr. Novikov notified the Board 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. On November 11, 2022, with the recommendation of a special committee of disinterested members of the Board who had reviewed this matter, the Board approved the formal termination of Mr. Novikov’s employment with the Company for “cause.”
William Corbett
On
February 22, 2021, the Board appointed William Corbett as the Company’s 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 $
22
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 12 | RELATED PARTY TRANSACTIONS (continued) |
William Corbett (continued)
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.
On
July 11, 2022, the Company granted Mr. Corbett ten-year options exercisable for
The
option expense for Mr. Corbett for the three and the nine months ended September 30, 2022 was $
Clifford Henry
On May 1, 2021, the Company appointed Mr. Henry to the Board.
On
July 22, 2021, the Company granted Mr. Henry
Mr.
Henry has an oral consulting arrangement with the Company whereby he is paid $
On
September 13, 2022, the Company granted Mr. Henry, immediately vesting, ten-year options exercisable for
The
option expense for Mr. Henry for the three and the nine months ended September 30, 2022 was $
Madisson Corbett
On May 1, 2021, the Company appointed Ms. Corbett to the Board. 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
On
September 13, 2022, the Company granted Ms. Corbett, immediately vesting, ten-year options exercisable for
The
option expense for Ms. Corbett for the three and the nine months ended September 30, 2022 was $
David Rios
On July 22, 2021, the Company appointed David Rios to the Board.
On
July 22, 2021, the Company granted Mr. Rios
On
September 13, 2022, the Company granted Mr. Rios, immediately vesting, -year options exercisable for
The
option expense for Mr. Rios for the three and the nine months ended September 30, 2022 was $
23
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 12 | 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 to serve until the Company’s next annual meeting of shareholders and was subsequently appointed as the Company’s Secretary.
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, 2021. 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.
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.
On
July 11, 2022, the Company granted Mr. Rosenblum
The
option expense for Mr. Rosenblum for the three months and nine months ended September 30, 2022 was $
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INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 13 | COMMITMENTS AND CONTINGENCIES |
The Company has convertible notes, disclosed under note 8 above, which mature on November 16, 2022. Should these notes not be converted to Common Stock prior to that date, the Company may need to repay the principal and interest outstanding on these notes.
| 14 | SUBSEQUENT EVENTS |
On November 2, 2022, the Company conducted its 2022 annual meeting of stockholders.
At the Annual Meeting, the Company’s stockholders (i) elected each of William D. Corbett, Richard Rosenblum, Madisson Corbett, Clifford Henry and David Rios as directors’ of the Company until the next annual meeting or until their successors shall be elected and qualified, (ii) ratified the appointment of RBSM LLP as the Company’s independent registered public accounting firm for fiscal year ended December 31, 2022, (iii) approved an amendment to the Company’s Articles of Incorporation to effect a reverse stock split of the issued and outstanding shares of common stock at a ratio (to be determined in the discretion of the Company’s Board during a two year period ending on November 2, 2024) within a range of one (1) share of Common Stock for every two (2) to thirty (30) shares of Common Stock, and (iv) approved a potential adjournment of the annual meeting,
The Company’s stockholders did not approve the proposed amendment to the Company’s Articles of Incorporation to provide the board of directors with the authority to, at its discretion, fix by resolution or resolutions, the designations, rights and privileges of the Company’s authorized preferred stock.
Other than the above, the Company has evaluated subsequent events through the date the financial statements were issued, and did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
All references to “we,” “us,” “our” and the “Company” refer to Innovative Payment Solutions, Inc., a Delaware corporation and its consolidated subsidiaries unless the context requires otherwise.
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 focused on the business market and is currently operational. Our flagship e-wallet, IPSIPay, is focused on the consumer market and was fully launched in July 2022 after a soft launch in December 2021.
Our platform (which can be used both business-to-business and business-to-consumer) facilitates 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.
During the third quarter of 2022, we completed the key integration of our IPSIPay mobile application and back-end payment processing infrastructure through our commercial partners. Additionally, in July 2022 we entered into an endorsement agreement with Mexican-American actor and television personality, Mario Lopez, which we believe will be a significant part of our commercial launch efforts in our target markets as described below.
In October 2022, we announced that since the commencement of our new IPSIPay marketing campaign featuring Mr. Lopez in August 2022, we achieved 10,000 downloads of IPSIPay, and of the 10,000 downloads, 1,200 have been converted to active users with wallets, meaning the users have initiated at least one transaction via IPSIPay.
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. We not only believe the addressable market for our products and services is 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 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. . IPSIPay is the digital payment solution provided to us by Frictionless, and Frictionless continues to provide back-end technical services to our company. 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.
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Known Trends, Demands, Commitments, Events or Uncertainties Impacting Our Business
Launch and Scaling of E-Wallets
Having achieved full commercial integration and launch of the IPSIPay app during the third quarter of 2022, the key for our business for the foreseeable future is to scale the number of IPSIPay and, to a lesser extent, Beyond Wallet downloads achieved and revenue generated from transactions process by customers via IPSIPay and Beyond Wallet. Presently, our ability to generate meaningful revenue from customer use of IPSIPay or Beyond Wallet is limited, given the relatively recent commencement of launch activities, the relatively limited app downloads and active users achieved to date and our launch promotional activities. While we see great potential for our product offerings in our initial target markets as described above, both the near- and long-term viability of our business is dependent in large part on our ability to scale our IPSIPay and Beyond Wallet business and add complimentary offerings (such as our telemedicine collaboration with MeMD (also known as Walmart Health Virtual Care), which we announced in October 2022), all with the goal of increasing app downloads and active users who would generate transaction processing and other fees for our company.
We expect to generate some initial IPSIPay-related revenue during the fourth quarter of 2022, with the goal of increasing revenues during 2023. However, our ability to scale our business and generate revenue is unproven at this time, so we remain faced with all of the risks associated with launching and seeking to scale a new business. If we are unable to grow our IPSIPay and Beyond Wallet business, our business would be severely harmed.
Outstanding Indebtedness
At September 30, 2022, we had outstanding convertible notes (described in note 8 to the accompanying condensed consolidated financial statements) in the principal amount of approximately $2.2 million. The notes mature on November 16, 2022 and are convertible into shares of our Common Stock at a conversion price of $0.15 per share (as adjusted for stock splits, stock combinations, dilutive issuances and similar events). We may be unable to repay these notes on maturity, and our inability to extent, repay or refinancing this indebtedness would have a material adverse effect on our ability to operate our company.
COVID-19
The novel coronavirus (“COVID-19”) pandemic has resulted in government authorities and businesses throughout the world implementing numerous measures intended to contain and limit the spread of COVID-19, including travel restrictions, border closures, quarantines, shelter-in-place and lock-down orders, mask and social distancing requirements, and business limitations and shutdowns. The spread of COVID-19 and increased variants has caused, and may continue to cause us to make significant modifications to our business practices, including enabling most of our workforce to work from home, establishing strict health and safety protocols for our offices, restricting physical participation in meetings, events, and conferences, and imposing restrictions on employee travel. We will continue to actively monitor the situation and may take further actions that alter our business practices as may be required by federal, state, or local authorities or that we determine are in the best interests of our employees, customers, or business partners.
The rapidly changing global market and economic conditions as a result of the COVID-19 pandemic have impacted, and are expected to continue to impact, our operations and business. For example, COVID-19 related issues has caused a delay in our ability to launch our products and services. The broader implications of the COVID-19 pandemic and related global economic unpredictability on our business, financial condition, and results of operations remain uncertain.
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Russia’s Invasion of Ukraine
In February 2022, Russia invaded Ukraine, with Belarus complicit in the invasion. As of the date of this report, the conflict between these two countries is ongoing. We do not have any direct or indirect exposure to Ukraine, Belarus or Russia, through our operations, employee base or any investments in any of these countries. In addition, our securities are not traded on any stock exchanges in these three countries. We do not believe that the sanction levied against Russia or Belarus or individuals and entities associated with these two countries will have a material impact on our operations or business, if any. Further, we do not believe that we have any direct or indirect reliance on goods sourced from Russia, Ukraine or Belarus or countries that are supportive of Russia.
We have commercially launched our e-wallet platforms which provide online money transfer and payment services to our customers which may expose us to cybersecurity risks. We employ the latest encryption techniques and firewall practices and constantly monitor the usage of our software, however, this may not be sufficient to prevent the heightened risk of cybersecurity attacks emanating from Russia, Ukraine, Belarus, or any other country.
The impact of the invasion by Russia of Ukraine has increased volatility in stock trading prices and commodities throughout the world. To date, we have not seen a material impact on our operations; however, a prolonged conflict may impact on consumer spending, in general, which could have an adverse impact on the payment services industry as a whole and our business.
Inflation
Macro-economic conditions could affect consumer spending adversely and consequently our future operations when we fully launch our e-wallet products commercially. The U.S. has entered a period of significant inflation, and this may impact consumer’s desire to adopt our products and services and may increase our costs overall. However, as of the date of this report, we do not expect there to be any material impact on our liquidity as forecast in our business plan due to recent inflationary concerns in the U.S.
Foreign Exchange Risks
We intend to operate in several foreign countries, including Mexico. Changes and fluctuations in the foreign exchange rate between the US Dollar and other foreign currencies, including the Mexican Peso, may in future have an effect our results of operations.
Critical Accounting Estimates
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 condensed Consolidated Financial Statements included in Part I, Item I of this Form 10-Q for further information.
The critical accounting policies that involved significant estimation included the following:
Derivative liabilities
We have certain short-term convertible notes and certain warrants which have fundamental transaction clauses which might result in cash settlement. The conversion feature of these convertible notes and warrants are recorded as derivative liabilities which are valued at each reporting date.
The derivative liability is valued using the following inputs:
| ● | Conversion prices; |
| ● | Current market prices of our equity |
| ● | Risk free interest rates; |
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| ● | Expected remaining life of the derivative liability; |
| ● | Expected volatility of the underlying stock; and expected dividend rates |
Any change in the above factors such as a change in risk free interest rates, a significant increase or decrease in our current stock prices and a change in the volatility of our Common Stock may result in a significant increase or decrease in the derivative liability.
Impairment of Investments and Intangible assets
We carried investments of $500,001 and Intangible assets of $964,310 as more fully described in Notes 4 and 5 to the accompanying condensed consolidated financial statements. The Company tests its investments and intangible assets with an indefinite useful life annually for impairment or more frequently if indicators for impairment exist. The value of our Investments and intangibles is based upon our mutual goal of providing payment services to an underserved market. Currently our investments or our intangible assets have not produced any revenues on which to assess whether the income generated from these assets can support the carrying value of these assets. For impairment testing of investments and intangibles we determine the fair value of the underlying assets using an income-based approach which estimates the fair value using a discounted cash flow model. Key assumptions in estimating fair values include projected revenue growth and the weighted average cost of capital. In addition, management recently reviewed the future revenue and profit projections of our e-wallet services based on management forecasts of the size of the market and expected customer growth and retention, we determined that no impairment charges were necessary, however if we are unable to achieve our forecasts once operations begin, we may need to re-evaluate our forecasts which could result in an impairment charge. Since performing this analysis we have no reason to believe that further impairment is necessary as of September 30, 2022.
Results of Operations
Results of Operations for the Three Months Ended September 30, 2022 and 2021
Net revenue
We did not have revenues during the three months ended September 30, 2022 and 2021. We anticipate that we will commence generating revenue during the fourth quarter as we have fully launched our IPSIPay e-wallet.
Cost of goods sold
As we did not have revenues during the three months ended September 30, 2022 and 2021, we anticipate that we will begin to recognize cost of goods sold during the fourth quarter as we have launched our IPSIPay e-wallet.
General and administrative expenses
General and administrative expenses were $2,721,451 and $2,747,693 for the three months ended September 30, 2022 and 2021, respectively, a decrease of $26,242 or 1.0%. The decrease is primarily due to the following:
| (i) | Consulting fees were $193,000 and $470,250 for the three months ended September 30, 2022 and 2021, respectively, a decrease of $277,250. In the prior year 5,650,000 shares valued at $443,050 were issued to various consultants for services rendered in connection with developing the IPSIPay platform, in the current year, we issued a further 4,000,000 shares of our Common Stock to two consultants for marketing efforts related to our platform, valued at $168,000. | |
| (ii) | Payroll expenses were $1,290,681 and $1,437,751 for the three months ended September 30, 2022 and 2021, respectively, a decrease of $147,070 or 10.2%. The decrease is primarily due to the reduction is stock based compensation of $140,620 over the prior period based on the amortization of option and restricted stock expense and shares of Common Stock issued for salaries. | |
| (iii) | Professional fees were $454,613 and $104,756 for the three months ended September 30, 2022 and 2021, respectively, an increase of $349,857 or 334.0%. The increase is primarily due to; (i) professional fees paid to Frictionless in managing and providing customer support for the IPSIPay platform, including expenses incurred on setting up Mexican operations; and (ii) social media expenses incurred to promote the IPSIPay platform to our target market. | |
| (iv) | Selling and marketing expenses were $412,567 and $2,333 for the three months ended September 30, 2022 and 2021, respectively, an increase of $410,234. The increase is primarily attributable to Mario Lopez related endorsement expenses of $357,370 and marketing expenses of $33,553 incurred during the current period to promote the launch of the IPSIPay wallet and platform. | |
| (v) | Legal fees were $213,760 and $39,025 for the three months ended September 30, 2022 and 2021, respectively, an increase of $174,735.The increase is primarily due to legal expenses incurred on labor disputes filed by several employees who were severed in the prior year. | |
| (vi) | Directors fees were $30,000 and $583,006 for the three months ended September 30, 2022 and 2021, respectively, a decrease of $553,006, primarily due to the prior year issuance of 7,000,000 shares of Common Stock to directors valued at $538,300. | |
| (vii) | The balance of the general and administrative expenses increased by approximately $16,258, which is made up of several individually insignificant expenses. |
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Depreciation and amortization
Depreciation was $20,500 and $4,642 for the three months ended September 30, 2022 and 2021, respectively, an increase of $15,858 or 341.6%, the increase is primarily due to the amortization of the IPSIPay intangible which was brought into use during the current period.
Penalty on convertible notes
Penalty on convertible notes was $602,100 and $0 for the three months ended September 30, 2022 and 2021, an increase of $602,100 or 100.0%. The increase is due to the modification of the maturity date of two convertible notes, resulting in the negotiation of a 20% repayment penalty on the convertible notes and the value of the warrants to purchase 6,000,0000 shares of our Common Stock that were issued to the note holders as additional compensation for extending the maturity date to November 16, 2022.
Interest expense, net
Interest expense was $51,340 and $53,903 for the three months ended September 30, 2022 and 2021, respectively, a decrease of $2,563 or 4.8%. The decrease is due to the repayment of our convertible note with Bellridge, offset by an increase in the principal due on the two remaining convertible notes.
Amortization of debt discount
Amortization of debt discount was $0 and $515,200 for the three months ended September 30, 2022 and 2021, respectively, a decrease of $515,200 or 100.0%. The decrease is due to the full amortization of the debt discount on convertible notes in the first quarter of the current year, in the prior year, debt discount was amortized on the three remaining convertible notes.
Derivative liability movements
Derivative liability movements were $84,895 and $1,578,361 for the three months ended September 30, 2022 and 2021, respectively, a decrease of $1,493,466 or 94.6%. The derivative liability arose due to the issuance of convertible securities and warrants with a fundamental transaction clause allowing for a cash settlement of the convertible note at the option of the holder. The charge during the current period represents the increase in the mark-to-market value of the derivative liability due to an increase in the share price over the prior quarter.
Net loss
Net loss was $3,310,496 and $1,743,077 for the three months ended September 30, 2022 and 2021, respectively, an increase in loss of $1,567,419 or 89.9%. The increase is primarily due to the increase in penalty on convertible notes and the reduction in the derivative liability movement, offset by the reduction in amortization of debt discount, as discussed above.
Results of Operations for the Nine Months Ended September 30, 2022 and September 30, 2021
Net revenue
We did not have revenues during the nine months ended September 30, 2022 and 2021. We anticipate that we will commence generating revenue during the fourth quarter as we have fully launched our IPSIPay e-wallet.
Cost of goods sold
As we did not have revenues during the nine months ended September 30, 2022 and 2021, we anticipate that we will begin to recognize cost of goods sold during the fourth quarter as we have launched our IPSIPay e-wallet.
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General and administrative expenses
General and administrative expenses were $4,386,375 and $9,457,134 for the nine months ended September 30, 2022 and 2021, respectively, a decrease of $5,070,759 or 53.6%. The decrease is primarily due to the following:
| (i) | Consulting fees were $247,900 and $1,313,134 for the nine months ended September 30, 2022 and 2021, respectively, a decrease of $1,065,234. In the prior year 10,000,000 shares valued at $938,000 were issued to 4 advisory board members and a third party as compensation for their services and consulting fees of $60,000 were paid to our previous CTO. | |
| (ii) | Payroll expenses were $1,998,232 and $6,656,270 for the nine months ended September 30, 2022 and 2021, respectively, a decrease of $4,658,038 or 70.0%. The decrease is primarily due to the issue of warrants exercisable for 20,000,000 shares of Common Stock to our CEO in the prior period with a fair value of $4,327,899 and restricted Common Stock of 1,000,000 shares with a fair value of $50,000 issued to one of our previous employees and the creation of a severance provision of $294,000 representing six months of pay for five former employees in the prior year, offset by an increase in base salaries over the prior period due to an improvement in the caliber of employees, including the hiring of our current CFO. | |
| (iii) | Professional fees were $734,300 and $226,866 for the nine months ended September 30, 2022 and 2021, respectively, an increase of $507,434, or 223.7%. The increase is primarily due to; (i) professional fees paid to Frictionless in managing and providing customer support for the IPSIPay platform, including expenses incurred on setting up Mexican operations; and (ii) social media expenses incurred to promote the IPSIPay platform to our target market. | |
| (iv) | Selling and marketing expenses were $498,494 and $119,514 for the nine months ended September 30, 2022 and 2021, respectively, an increase of $378,980. The increase is primarily attributable to Mario Lopez related endorsement expenses of $357,370 and an increase in marketing expenses of $40,363 incurred during the current period to promote the launch of the IPSIPay wallet and platform. | |
| (v) | Legal fees were $335,846 and $171,866 for the nine months ended September 30, 2022 and 2021, respectively, an increase of $163,980.The increase is primarily due to legal expenses incurred on labor disputes filed by several employees who were severed in the prior year. | |
| (vi) | Directors fees were $90,000 and $681,614 for the nine months ended September 30, 2022 and 2021, respectively, a decrease of $591,614, primarily due to the prior year issuance of 7,000,000 shares of Common Stock to directors valued at $538,300. | |
| (iv) | The balance of the general and administrative expenses decreased by $193,733, which is made up of several individually insignificant expenses. |
Depreciation
Depreciation was $29,493 and $13,293 for the nine months ended September 30, 2022 and 2021, respectively, an increase of $16,200 or 121.9%, primarily due to the amortization of the IPSIPay platform which commenced during the third quarter.
Penalty on convertible notes
Penalty on convertible notes was $1,321,658 and $0 for the nine months ended September 30, 2022 and 2021, an increase of $1,321,658, or 100.0%. The increase is due to the repayment of one convertible note and the modification of the maturity date of two convertible notes during the first and the third quarters, respectively, resulting in the triggering of the repayment penalty per the convertible note agreements as well as additional penalties for the extension of the maturity date.
Loss on debt conversion
Loss on debt conversion was $0 and $5,184,447 for the nine months ended September 30, 2022 and 2021, respectively, a decrease of $5,184,447. The loss on debt conversion during the prior year represented a loss realized on the conversion of convertible notes, into equity at fixed conversion prices which ranged from $0.035 to $0.05 per share, when the stock price ranged from $0.05 per share to $0.22 per share, resulting in a significant loss. A total of $2,259,221 was converted from convertible debt to equity during the nine months ended September 30, 2021.
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Interest expense, net
Interest expense was $142,302 and $174,587 for the nine months ended September 30, 2022 and 2021, respectively, a decrease of $32,285 or 18.5%. The decrease is due to the repayment of our convertible note with Bellridge, offset by an increase in the principal due on the two remaining convertible notes.
Amortization of debt discount
Amortization of debt discount was $263,200 and $3,138,452 for the nine months ended September 30, 2022 and 2021, respectively, a decrease of $2,875,252 or 91.6%. The decrease is primarily due to the accelerated amortization of debt discount related to notes converted to equity during the first quarter of the prior year.
Derivative liability movements
Derivative liability movements were $(65,046) and $4,714,451 for the nine months ended September 30, 2022 and 2021, respectively. The derivative liability arose due to the issuance of convertible securities and warrants with a fundamental transaction clause allowing for a cash settlement of the convertible note at the option of the holder. The charge during the current period represents the increase in the mark-to-market value of the derivative liability due to an increase in the share price over the prior period.
Net loss
Net loss was $6,208,074 and $13,253,462 for the nine months ended September 30, 2022 and 2021, respectively, a decrease in loss of $7,045,388, or 53.2%. The decrease is due to the decrease in general and administrative expenses, the loss realized on the conversion of convertible debt in the prior year and the decrease in 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 have an accumulated deficit of approximately $48.3 million through September 30, 2022 and incurred negative cash flow from operations of $2.3 million for the nine months ended September 30, 2022. Our primary focus is on operating 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, which will require us to spend, substantial amounts in connection with implementing our business strategy.
At September 30, 2022, we had cash of approximately $1.35 million and a working capital deficit of $2.0 million including a derivative liability of approximately $0.7 million, after eliminating the derivative liability our working capital is $1.3 million.
We utilized cash of approximately $2.3 million and $1.9 million in operations for each of the nine months ended September 30, 2022 and 2021, respectively.
We invested approximately $0.6 million during the first nine months of 2022 in our e-wallet platforms to enhance our product offering.
We utilized cash of $1.1 million during the current period to repay a convertible note together with a prepayment penalty. Cash provided by financing activities for the nine months ended September 30, 2021 was primarily comprised of gross proceeds of approximately $4.6 million from the private placement on March 17, 2021, approximately $3.0 million from warrants exercised and approximately $2.6 million from convertible debt issued, we utilized $0.5 million for share issue expenses and repaid convertible debt of approximately $0.5million during the prior period.
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At September 30, 2022, we had outstanding notes in the principal amount of approximately $2.2 million. The notes were issued on February 16, 2021, and the maturity date was extended from February 16, 2022 to August 16, 2022 and again to November 16, 2022. 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 bear interest at a rate of 10% per annum. and are convertible into shares of our Common Stock at a conversion price of $0.15 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. Should the investors choose not to convert these convertible notes, we may need to repay these notes together with interest thereon which will impact on our liquidity.
We expect to invest an additional $250,000 to enhance our e-wallet products, other capital expenditure is expected to be less than $100,000 during the next twelve-month period. Accordingly, we expect to meet our cash requirements for the next twelve months, and beyond twelve months, we expect to raise either debt or equity funding and generate revenue from operations to meet cash requirements. We will also incur costs and expenses on sales and marketing initiatives and for our general working capital.
However, given our losses and negative cash flows, we will be required to raise significant additional funds to progress our business as planned by issuing equity or equity-linked securities. Should this occur, our stockholders would experience dilution, perhaps significantly. Additional debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Any additional debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders and require significant debt service payments, which diverts resources from other activities. Moreover, there is a risk that financing may be unavailable to support our operations on favorable terms, or at all.
There is also a significant risk that none of our plans to raise financing will be implemented in a manner necessary to sustain us for an extended period of time. If adequate funds are not available to us when needed, we may be required to continue with reduced operations or to obtain funds through arrangements that may require us to relinquish rights to technologies or potential markets, any of which could have a material adverse effect on our company. In addition, our inability to secure additional funding when needed could cause our business to fail or become bankrupt or force us to wind down or discontinue operations.
We do not have any off-balance sheet financing arrangements as of the date of this report.
Item 3. Quantitative and Qualitative Disclosures About Market Risks
Not required for smaller reporting companies.
Item 4. Controls and Procedures
(a) Evaluation of disclosure controls and procedures
Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), our management carried out an evaluation, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of our disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures as of September 30, 2022 are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act, was recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosure.
(b) Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during our fiscal quarter ended September 30, 2022.
33
Part II. Other Information
Item 1. Legal Proceedings.
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Below is a description of our outstanding pending litigation matters. Litigation is subject to inherent uncertainties and an adverse result in the below described or other matters may arise from time to time that may harm our business.
Voloshin v. Innovative Payment Solutions, Inc.
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 (“OSHA”), 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, four former employees of our company and one employee who is on suspension, 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. 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.
In early 2022, OSHA dismissed the claims of Ms. Rey and Mr. Perez; they appealed that decision. We moved to dismiss the remaining claims and as of this writing OSHA took no action with respect to that motion. On October 26, 2022, OSHA scheduled a hearing on Ms. Rey’s and Mr. Perez’s appeal for April 5, 2023. On November 8, 2022, the claimants’ counsel informed us that all five claimants intended to exercise their right to file a lawsuit in federal court and asked if we would to stipulate to dismissal of Rey’s and Perez’s OSHA claims without prejudice. We agreed and a stipulation of dismissal without prejudice was filed on November 10, 2022. No other formal activity has taken place in the proceedings. We may engage in alternative dispute resolution with the plaintiffs but there can be no assurance that these efforts will be successful. While the outcome of the anticipated civil action is uncertain at this point, we intend to vigorously defend against the action.
Minkovich v. Corbett, et al.
On May 26, 2022, Mr. Jan Minkovich (“Minkovich”) filed a lawsuit in California Superior Court in Los Angeles County (Minkovich v. Corbett, et al., CASE NO. 22CHCV00377) against our company and our Chairman and Chief Executive Officer William Corbett. The complaint asserts six causes of action for: (I) breach of contract; (II) nonpayment of wages; (III) waiting time penalties; (IV) failure to indemnify for alleged employee business expenses; (V) violation of Section 17200 of the California Business and Professional Code; and (VI) wrongful termination of employment in violation of public policy. Minkovich seeks $570,000 in damages, penalties, and attorneys’ fees plus shares equal to five percent (5%) ownership of our company.
We are vigorously defending these claims, which are premised upon a putative three-year employment agreement that is not signed by our company or Mr. Corbett, and which Minkovich admits in his complaint that we expressly refused to sign.
We and Mr. Corbett filed a motion to compel arbitration. The motion was denied on October 4, 2022. We and Mr. Corbett have appealed that decision to the California Court of Appeal. As a result of the appeal, the court case is stayed until the appeal is decided, which we expect to take at least six months. As a result of the stay, the demurrer (the equivalent of a motion to dismiss) we and Mr. Corbett filed has yet to be decided and will not be decided unless the court’s decision is sustained on appeal. Otherwise, the case shall proceed to arbitration.
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 1A. Risk Factors.
Not applicable to smaller reporting companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
On November 11, 2022, with the recommendation of a special committee of disinterested members of the Board who had reviewed this matter, the Board approved the formal termination of Andrei Novikov’s employment with the Company as Chief Technology Officer for “cause.” Since August 2021, Mr. Novikov had been on suspension from service as an employee of the Company.
34
Item 6. Exhibits
| Exhibit No. | Exhibit Description | |
| 31.1* | Certification of William Corbett, Chief Executive Officer, pursuant to Rule 13a-14(a) or Rule 15d-14(a) | |
| 31.2* | Certification of Richard Rosenblum, Chief Financial Officer, pursuant to Rule 13a-14(a) or Rule15d-14(a) | |
| 32.1* | Certification of William Corbett, Chief Executive Officer pursuant to Section 1350 of the Sarbanes-Oxley Act of 2002 | |
| 32.2* | Certification of Richard Rosenblum, Chief Financial Officer pursuant to Section 1350 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS | Inline XBRL Instance Document.* | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document.* | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document.* | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document.* | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document.* | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document.* | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).* |
| * | Filed herewith |
35
SIGNATURES
Pursuant to the requirements of the Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| INNOVATIVE PAYMENT SOLUTIONS, INC. | ||
| Date: November 14, 2022 | By: | /s/ William D. Corbett |
| William D. Corbett | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: November 14, 2022 | By: | /s/ Richard Rosenblum |
| Richard Rosenblum | ||
| President & Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) |
36
Exhibit 31.1
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(a) AND RULE 15d-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, William Corbett, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Innovative Payment Solutions, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 14, 2022 | By: | /s/ William D. Corbett |
| William D. Corbett | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a) AND RULE 15d-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Richard Rosenblum, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Innovative Payment Solutions, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 14, 2022 | By: | /s/ Richard Rosenblum |
| Richard Rosenblum | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION OF THE
PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Innovative Payment Solutions, Inc. (the “Company”) for the quarter ended September 30, 2022, as filed with the Securities and Exchange Commission (the “Report”), I, William Corbett, Chief Executive Officer of the Company, 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, as amended; and |
| 2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report. |
| Date: November 14, 2022 | By: | /s/ William D. Corbett |
| William D. Corbett | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION OF THE
PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Innovative Payment Solutions, Inc. (the “Company”) for the quarter ended September 30, 2022, as filed with the Securities and Exchange Commission (the “Report”), I, Richard Rosenblum, Chief Financial Officer of the Company, 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, as amended; and |
| 2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report. |
| Date: November 14, 2022 | By: | /s/ Richard Rosenblum |
| Richard Rosenblum | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) |
Condensed Consolidated Balance Sheets (Parentheticals) - USD ($) |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Convertible debt, net of unamortized discount (in Dollars) | $ 0 | $ 263,200 |
| 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 | 376,901,679 | 367,901,679 |
| Common stock, outstanding | 376,901,679 | 367,901,679 |
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Income Statement [Abstract] | ||||
| Net Revenue | ||||
| Cost of Goods Sold | ||||
| Gross profit | ||||
| General and administrative | 2,721,451 | 2,747,693 | 4,386,375 | 9,457,134 |
| Depreciation and amortization | 20,500 | 4,642 | 29,493 | 13,293 |
| Total Expense | 2,741,951 | 2,752,335 | 4,415,868 | 9,470,427 |
| Loss from Operations | (2,741,951) | (2,752,335) | (4,415,868) | (9,470,427) |
| Loss on debt conversion | (5,184,447) | |||
| Penalty on convertible notes | (602,100) | (1,321,658) | ||
| Interest expense | (51,340) | (53,903) | (142,302) | (174,587) |
| Amortization of debt discount | (515,200) | (263,200) | (3,138,452) | |
| Derivative liability movements | 84,895 | 1,578,361 | (65,046) | 4,714,451 |
| Loss before Income Taxes | (3,310,496) | (1,743,077) | (6,208,074) | (13,253,462) |
| Income Taxes | ||||
| Net Loss | (3,310,496) | (1,743,077) | (6,208,074) | (13,253,462) |
| Net loss attributable to non-controlling interest | 7,652 | 29,381 | ||
| Net loss attributable to Innovative Payment Solutions, Inc. stockholders | $ (3,302,844) | $ (1,743,077) | $ (6,178,693) | $ (13,253,462) |
| Basic and diluted loss per share (in Dollars per share) | $ (0.01) | $ 0 | $ (0.02) | $ (0.04) |
| Weighted Average Number of Shares Outstanding – Basic and diluted (in Shares) | 375,956,027 | 364,722,331 | 370,615,966 | 323,034,956 |
Condensed Consolidated Statements of Operations (Unaudited) (Parentheticals) - $ / shares |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Income Statement [Abstract] | ||||
| Basic and diluted loss per share | $ (0.01) | $ 0.00 | $ (0.02) | $ (0.04) |
| Weighted Average Number of Shares Outstanding – Basic and diluted | 375,956,027 | 364,722,331 | 370,615,966 | 323,034,956 |
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) - USD ($) |
Preferred Stock |
Common Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Non-controlling shareholders interest |
Total |
|---|---|---|---|---|---|---|
| Balance at Dec. 31, 2020 | $ 19,363 | $ 23,179,399 | $ (27,629,575) | $ (4,430,813) | ||
| Balance (in Shares) at Dec. 31, 2020 | 193,637,747 | |||||
| Fair value of warrants issued as compensation | 4,327,899 | 4,327,899 | ||||
| Warrants exercised | $ 4,407 | 2,199,307 | 2,203,714 | |||
| Warrants exercised (in Shares) | 44,074,284 | |||||
| Share subscriptions | $ 3,033 | 4,546,967 | 4,550,000 | |||
| Share subscriptions (in Shares) | 30,333,334 | |||||
| Share issue expenses | (501,100) | (501,100) | ||||
| Conversion of debt to equity | $ 6,180 | 7,437,488 | 7,443,668 | |||
| Conversion of debt to equity (in Shares) | 61,793,616 | |||||
| Stock based compensation | $ 250 | 213,499 | 213,749 | |||
| Stock based compensation (in Shares) | 2,500,000 | |||||
| Net loss | (11,394,106) | (11,394,106) | ||||
| Balance at Mar. 31, 2021 | $ 33,233 | 41,403,459 | (39,023,681) | 2,413,011 | ||
| Balance (in Shares) at Mar. 31, 2021 | 332,338,981 | |||||
| Balance at Dec. 31, 2020 | $ 19,363 | 23,179,399 | (27,629,575) | (4,430,813) | ||
| Balance (in Shares) at Dec. 31, 2020 | 193,637,747 | |||||
| Net loss | (13,253,462) | |||||
| Balance at Sep. 30, 2021 | $ 36,789 | 45,299,411 | (40,883,037) | 4,453,163 | ||
| Balance (in Shares) at Sep. 30, 2021 | 367,901,679 | |||||
| Balance at Mar. 31, 2021 | $ 33,233 | 41,403,459 | (39,023,681) | 2,413,011 | ||
| Balance (in Shares) at Mar. 31, 2021 | 332,338,981 | |||||
| Shares issued for services | $ 800 | 775,200 | 776,000 | |||
| Shares issued for services (in Shares) | 8,000,000 | |||||
| Warrants exercised | $ 1,611 | 804,024 | 805,635 | |||
| Warrants exercised (in Shares) | 16,112,698 | |||||
| Stock based compensation | 72,141 | 72,141 | ||||
| Net loss | (116,279) | (116,279) | ||||
| Balance at Jun. 30, 2021 | $ 35,644 | 43,054,824 | (39,139,960) | 3,950,508 | ||
| Balance (in Shares) at Jun. 30, 2021 | 356,451,679 | |||||
| Shares issued for services | $ 565 | 442,485 | 443,050 | |||
| Shares issued for services (in Shares) | 5,650,000 | |||||
| Stock based compensation | $ 580 | 1,802,102 | 1,802,682 | |||
| Stock based compensation (in Shares) | 5,800,000 | |||||
| Net loss | (1,743,077) | (1,743,077) | ||||
| Balance at Sep. 30, 2021 | $ 36,789 | 45,299,411 | (40,883,037) | 4,453,163 | ||
| Balance (in Shares) at Sep. 30, 2021 | 367,901,679 | |||||
| Balance at Dec. 31, 2021 | $ 36,790 | 45,771,012 | (42,111,701) | 35,211 | 3,731,312 | |
| Balance (in Shares) at Dec. 31, 2021 | 367,901,679 | |||||
| Stock based option expense | 94,466 | 94,466 | ||||
| Restricted stock awards | 62,766 | 62,766 | ||||
| Net loss | (1,801,494) | (8,752) | (1,810,246) | |||
| Balance at Mar. 31, 2022 | $ 36,790 | 45,928,244 | (43,913,195) | 26,459 | 2,078,298 | |
| Balance (in Shares) at Mar. 31, 2022 | 367,901,679 | |||||
| Balance at Dec. 31, 2021 | $ 36,790 | 45,771,012 | (42,111,701) | 35,211 | 3,731,312 | |
| Balance (in Shares) at Dec. 31, 2021 | 367,901,679 | |||||
| Net loss | (6,208,074) | |||||
| Balance at Sep. 30, 2022 | $ 37,690 | 47,863,546 | (48,290,394) | 15,483 | (373,675) | |
| Balance (in Shares) at Sep. 30, 2022 | 376,901,679 | |||||
| Balance at Mar. 31, 2022 | $ 36,790 | 45,928,244 | (43,913,195) | 26,459 | 2,078,298 | |
| Balance (in Shares) at Mar. 31, 2022 | 367,901,679 | |||||
| Contribution by minority shareholders | 9,653 | 9,653 | ||||
| Stock based option expense | 94,462 | 94,462 | ||||
| Restricted stock awards | 62,766 | 62,766 | ||||
| Net loss | (1,074,355) | (12,977) | (1,087,332) | |||
| Balance at Jun. 30, 2022 | $ 36,790 | 46,085,472 | (44,987,550) | 23,135 | 1,157,847 | |
| Balance (in Shares) at Jun. 30, 2022 | 367,901,679 | |||||
| Fair value of warrants issued as compensation | 322,918 | 322,918 | ||||
| Shares issued for services | $ 700 | 332,300 | 333,000 | |||
| Shares issued for services (in Shares) | 7,000,000 | |||||
| Stock based option expense | 1,013,056 | 1,013,056 | ||||
| Restricted stock awards | $ 200 | 109,800 | 110,000 | |||
| Restricted stock awards (in Shares) | 2,000,000 | |||||
| Net loss | (3,302,844) | (7,652) | (3,310,496) | |||
| Balance at Sep. 30, 2022 | $ 37,690 | $ 47,863,546 | $ (48,290,394) | $ 15,483 | $ (373,675) | |
| Balance (in Shares) at Sep. 30, 2022 | 376,901,679 |
ORGANIZATION AND DESCRIPTION OF BUSINESS |
9 Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||
| ORGANIZATION AND DESCRIPTION OF BUSINESS [Abstract] | |||||||||
| ORGANIZATION AND DESCRIPTION OF BUSINESS |
On May 12, 2016, Innovative Payment Solutions, Inc., a Nevada corporation (“IPSI” or the “Company”) (originally formed on September 23, 2013 under the name “Asiya Pearls, Inc.”), 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 the 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. On May 27, 2016, the Company’s name was changed from “Asiya Pearls, Inc.” to “QPAGOS”.
Pursuant to the Merger Agreement, upon consummation of the Merger, each share of Qpagos Corporation’s capital stock issued and outstanding immediately prior to the Merger was converted into the right to receive two shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”). Additionally, pursuant to the Merger Agreement, upon consummation of the Merger, the Company assumed all of Qpagos Corporation’s warrants issued and outstanding immediately prior to the Merger, which were exercisable for an aggregate of approximately 621,920 shares of Common Stock as of the date of the Merger. Prior to and as a condition to the closing of the Merger, a then-current holder of 500,000 shares of Common Stock agreed to return 497,500 shares of Common Stock held by such holder to the Company and such holder retained an aggregate of 2,500 shares of Common Stock. The other then stockholders of the Company 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 outstanding Common Stock.
The Merger was treated as a reverse acquisition of the Company, then a public shell company, for financial accounting and reporting purposes. As such, Qpagos Corporation was treated as the acquirer for accounting and financial reporting purposes while the Company was treated as the acquired entity for accounting and financial reporting purposes.
Qpagos Corporation was incorporated on May 1, 2015 under the laws of the state of Delaware to effectuate a reverse merger transaction with Qpagos, S.A.P.I. de C.V. (“Qpagos Mexico”) and Redpag Electrónicos S.A.P.I. de C.V. (“Redpag”). Each of the entities were incorporated in November 2013 in Mexico. Qpagos Mexico was formed to process payment transactions for service providers it contracts with, and Redpag was formed to deploy and operate kiosks as a distributor.
On June 1, 2016, the board of directors of the Company (the “Board”) changed the Company’s fiscal year end from October 31 to December 31.
On November 1, 2019, the Company changed its corporate name from “QPAGOS” to “Innovative Payment Solutions, Inc.” Additionally, and immediately following the name change, the Company filed a Certificate of Change with the Secretary of State of the State of Nevada to effect a reverse split of the then outstanding 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, the Company 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 transactions contemplated by the SPA 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. As a result, the Company no longer has any business operations in Mexico and has retained its U.S. operations, currently based in Carmel By The Sea, California.
The Company is presently 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, Beyond Wallet, is currently operational and is focused on business customers. The Company’s flagship e-wallet, IPSIPay, is also fully operational. IPSIPay, which is focused on individual customers, was first launched in December 2021 and its commercial launch has continued during 2022. 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, but its principal focus will be on downloadable apps used via smartphones.
The Company acquired a 10% strategic interest in Frictionless Financial Technologies, Inc. (“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 $300,000 for each 1% acquired.
On August 26, 2021, the Company formed a new subsidiary, Beyond Fintech, Inc. (“Beyond Fintech”), in which it owns a 51% stake, with Frictionless owning the remaining 49%. Beyond Fintech acquired an exclusive license to a product known as Beyond Wallet, to further its objective of providing virtual payment services allowing U.S. persons to transfer funds to Mexico and other countries. |
ACCOUNTING POLICIES AND ESTIMATES |
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| ACCOUNTING POLICIES AND ESTIMATES |
The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, these unaudited condensed financial statements do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments (consisting only of normal recurring adjustments), which the Company considers necessary, for a fair presentation of those financial statements. The results of operations and cash flows for the nine months ended September 30, 2022 may not necessarily be indicative of results that may be expected for any succeeding quarter or for the entire fiscal year. The information contained in this Quarterly Report on Form 10-Q (“Report”) should be read in conjunction with the audited financial statements of IPSI for the year ended December 31, 2021, included in the Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2022.
All amounts referred to in the notes to the unaudited condensed financial statements are in United States Dollars ($) unless stated otherwise.
The unaudited condensed 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 unaudited condensed consolidated financial statements.
The entities included in the accompanying unaudited condensed consolidated financial statements are as follows:
Innovative Payment Solutions, Inc. - Parent Company Beyond Fintech Inc., 51% owned.
The preparation of unaudited condensed 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 unaudited condensed 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 unaudited condensed 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 the generation of continuing losses by 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 unaudited condensed 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 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. Vivi Holdings 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 are and will be subject to significant risks and uncertainties including financial, operational, regulatory, and other risks, including the potential risk of business failure. These risks include, without limitation, risks associated with (i) COVID-19 and its variants, (ii) launching and scaling the Company’s e-wallet and related products and the use by customers of such products, (iii) developing and implementing successful marketing campaigns and other strategic initiatives; (iv) competition, (iv) compliance with applicable laws, rules and regulations (including those related to fund remittance); (v) the Company’s outstanding indebtedness, including the Company’s ability to repay or extend the maturity of such indebtedness (see Note 8); (vi) inflation and other economic factors and (vii) the Company’s ability to obtain necessary financing. 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.
The Company’s results may also 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. Many of these risks are beyond the Company’s control and are unpredictable. The Company may be unable to adequately manage such risks and similar risks, which could impair the viability of the Company.
The Financial Accounting Standards Board (“FASB”) issued additional updates during the quarter ended September 30, 2022. None of these standards are either applicable to the Company or require adoption at a future date and none are expected to have a material impact on the Company’s condensed consolidated financial statements upon adoption.
No segmental information is required as the Company has not generated any revenue for the nine months ended September 30, 2022 and 2021 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 September 30, 2022 and 2021, 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 September 30, 2022 and December 31, 2021, the balance exceed the federally insured limit by $1,094,504 and $5,117,551, 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 September 30, 2022 and December 31, 2021.
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.
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 Recognition.
The Company’s revenues will be 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 nine months ended September 30, 2022 and 2021.
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 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 Topic 815, Derivatives and hedging (“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 September 30, 2022 and December 31, 2021, 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 and as of the end of nine months ended September 30, 2022, the Company had a net loss of $6,208,074. In connection with preparing the unaudited condensed consolidated financial statements for the nine months ended September 30, 2022, management evaluated the risks described in Note 2(f) above on the Company’s business and its future liquidity for the next twelve months from the date of issuance of these financial statements.
The Company had a cash balance of $1,352,983 available as of September 30, 2022. Based on its evaluation of the Company’s current business plan, and assuming the Company can extend the maturity date of its existing indebtedness (see Note 8), management believes the Company’s existing cash is sufficient to conduct planned operations for at least one year from the date of issuance of these financial statements.
However, given the Company’s losses, negative cash flows and existing indebtedness, the Company will be required to raise significant additional funds to progress its business as planned by issuing equity or equity-linked securities. Should this occur, the Company’s stockholders would experience dilution, perhaps significantly. Additional debt financing, if available, may involve covenants restricting the Company’s 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 the Company or its stockholders and require significant debt service payments, which diverts resources from other activities. Moreover, there is a risk that financing may be unavailable to support the Company’s operations on favorable terms, or at all.
There is also a significant risk that none of the Company’s plans to raise financing will be implemented in a manner necessary to sustain the Company for an extended period of time. If adequate funds are not available to the Company when needed, the Company may be required to continue with reduced operations or to obtain funds through arrangements that may require the Company to relinquish rights to technologies or potential markets, any of which could have a material adverse effect on the Company. In addition, the Company’s inability to secure additional funding when needed could cause the Company’s business to fail or become bankrupt or force the Company to wind down or discontinue operations. |
INTANGIBLES |
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| INTANGIBLES |
On August 26, 2021, the Company formed a 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 ended December 31, 2021, the Company paid gross proceeds of $375,000 to Frictionless for the development of the IPSIPay wallet, and during the nine months ended September 30, 2022, an additional $544,320 was spent by the Company to facilitate the functioning of the IPSIPay software in the cloud environment. Beyond Fintech spent an additional $41,320 on software to further enhance the Beyond Wallet product offering.
Amortization expense was $12,629 for the three and nine months ended September 30, 2022 and $0 for the three and the nine months ended September 30, 2021. |
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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 product offerings. The Company’s IPSIPay app is the digital payment platform developed by Frictionless for the Company, and currently Frictionless provides back-end technical services to the Company relating to IPSIPay.
The Company has undertaken to issue Frictionless a non-restricted, non-dilutable 5 year warrant to purchase 30,000,000 shares of Common Stock at an exercise price of $0.15 per share, upon delivery of the financial payment software. Frictionless has delivered the IPSIPay-related software 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 September 30, 2022.
Investment in Vivi Holdings, Inc.
Effective December 31, 2019, the Company sold 100% of the outstanding common stock of its subsidiary, Qpagos Corporation, together with its 99.9% ownership interest of Qpagos Corporation’s 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 Vivi Shares as follows: 2,047,500 Vivi Shares to the Company; 56,250 Vivi Shares to the Company’s designee, Mr. Andrey Novikov; 33,750 Vivi Shares to the Company’s designee, the Joseph W. & Patricia G. Abrams Family Trust; and 112,500 Vivi 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 September 30, 2022 and December 31, 2021, the Company maintained the impairment of the carrying value of the investment in Vivi Holdings based on no activity by Vivi’s management for its proposed initial public offering and fund raising activities. The total impairment as of September 30, 2022 and December 31, 2021 was $1,019,960.
The shares in Vivi Holdings are unlisted as of September 30, 2022.
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LEASES |
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| LEASES |
On March 22, 2021, the Company entered into a real property lease for an office located at 56B 5th Avenue, Lot 1 #AT, 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. Following the expiry of the lease term, the landlord has agreed to continue the lease on a month-to-month basis at $4,800 per month.
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 [Abstract] | ||||
| FEDERAL RELIEF LOANS |
Small Business Administration Disaster Relief loan
On July 7, 2020, the Company received a Small Business Economic Injury Disaster loan amounting to $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 $12,560 on this loan as of September 30, 2022. |
CONVERTIBLE NOTES PAYABLE |
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| Convertible Notes Payable [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CONVERTIBLE NOTES PAYABLE |
Convertible notes payable consists of the following:
Interest expense totaled $49,912 and $52,236 and amortization of debt discount totaled $0 and $515,200 for the three months ended September 30, 2022 and 2021, respectively, and interest expense totaled $138,085 and $169,695 and amortization of debt discount totaled $263,200 and $3,138,452 for the nine months ended September 30, 2022 and 2021, respectively.
Cavalry Fund I LP
On February 3, 2022, the Company extended the maturity date of its Cavalry Note from February 16, 2022 to August 16, 2022. The Cavalry Note was due to mature on February 16, 2022 and would have resulted in the accrual of a $157,499 prepayment penalty on the principal of $572,000 and interest of $57,994 outstanding, totaling $787,493. Cavalry agreed to extend the maturity date of the Cavalry Note to August 16, 2022 in consideration of the principal amount outstanding under the Cavalry Note being increased by an additional $78,749, thereby increasing the total principal outstanding to $866,242. On August 30, 2022, the Company further extended the maturity date of its Cavalry note from August 16, 2022 to November 16, 2022. In terms of the agreement entered into with Cavalry, the principal outstanding was increased by $181,959 and the interest outstanding as of August 31, 2022 of $43,553 was capitalized, resulting in a principal balance outstanding of $1,091,754. In addition, the Company granted Cavalry a warrant exercisable for 3,000,000 shares of Common Stock at an exercise price of $0.15 per share, maturing on August 30, 2027 and valued at $119,091 on the date of grant.
This change to the maturity dates of the Cavalry Note from February 16, 2022 to August 31, 2022 and subsequently to November 16, 2022, was assessed in terms of ASC 470-50 as a debt extinguishment, which resulted in a penalty expense of $181,959 and $260,708 for the three months and nine months ended September 30, 2022, respectively, in addition the value of the warrant issued on the debt extension from August 16, 2022 to November 16, 2022, resulted in an additional penalty expense of $119,091 for the three and nine months ended September 30, 2022.
The balance of the Cavalry Note plus accrued interest at September 30, 2022 was $1,105,401.
Mercer Street Global Opportunity Fund, LLC
On February 3, 2022, the Company extended the maturity date of its Mercer Note from February 16, 2022 to August 16, 2022. The Mercer Note was due to mature on February 16, 2022 and would have resulted in the accrual of a $157,499 prepayment penalty on the principal of $572,000 and interest of $57,994 outstanding, totaling $787,493. Mercer agreed to extend the maturity date of the Mercer Note to August 16, 2022 in consideration of the principal amount outstanding under the Mercer Note being increased by an additional $78,749, thereby increasing the total principal outstanding to $866,242. On August 30, 2022, the Company further extended the maturity date of its Mercer note from August 16, 2022 to November 16, 2022. In terms of the agreement entered into with Mercer, the principal outstanding was increased by $181,959 and the interest outstanding as of August 31, 2022 of $43,553 was capitalized, resulting in a principal balance outstanding of $1,091,754. In addition, the Company granted Mercer a warrant exercisable for 3,000,000 shares of Common Stock at an exercise price of $0.15 per share, maturing on August 30, 2027 and valued at the date of grant at $119,091.
This change to the maturity dates of the Mercer Note from February 16, 2022 to August 31, 2022 and subsequently to November 16, 2022, was assessed in terms of ASC 470-50 as a debt extinguishment, which resulted in a penalty expense of $181,959 and $260,708 for the three months and nine months ended September 30, 2022, respectively, in addition the value of the warrant issued on the debt extension from August 16, 2022 to November 16, 2022, resulted in an additional penalty expense of $119,091 for the three and nine months ended September 30, 2022.
The balance of the Mercer Note plus accrued interest at September 30, 2022 was $1,105,401.
Bellridge Capital LP.
The Bellridge Note was repaid on February 4, 2022 for gross proceeds of $1,235,313, including interest thereon of $88,250, thereby extinguishing the Bellridge Note. |
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DERIVATIVE LIABILITY |
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| Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DERIVATIVE LIABILITY |
Certain of the short-term convertible notes disclosed in note 8 above and certain warrants disclosed in note 10 below have fundamental transaction clauses which might result in cash settlement, due to these factors, all convertible notes and any warrants attached thereto are valued and give rise to a derivative financial liability, which was initially valued at inception of the convertible notes using a Black-Scholes valuation model.
On August 30, 2022, the company extended the maturity date of convertible notes issued to Cavalry and Mercer and agreed to grant each note holder a warrant exercisable for 3,000,000 shares of Common Stock at an exercise price of $0.15 per share with a maturity date of August 30, 2027. The warrant has full ratchet anti-dilution clauses and have fundamental transaction clauses which may give rise to cash settlement which gives rise to a derivative financial liability, which was originally valued at the grant date using a Black--Scholes valuation model at $238,182.
The value of this derivative financial liability was re-assessed at September 30, 2022 at $710,389, and $84,895 was credited and $65,046 was charged to the statement of operations for the three and nine months ended September 30, 2022, 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 total authorized Common Stock of 750,000,000 shares with a par value of $0.0001 each. The Company had 376,901,679 and 367,901,679 shares of Common Stock issued and outstanding as of September 30, 2022 and December 31, 2021, respectively.
On July 8, 2022, the Company entered into a consulting agreement with a third-party contractor for a period of twelve months to (i) review the Company’s business plan; (ii) analyze and assess the Company’s revenues, costs, and cash flow; and (iii) introduce the Company to and interface on the Company’s behalf with potential and actual commercial partners. The Company issued 2,000,000 shares of Common Stock as compensation for the services rendered which were fully earned on the date of issue. These shares were valued at $84,000 at the date of grant. In addition, the contractor will receive a monthly fee of $3,000 for the term of the Agreement, commencing on August 1, 2022.
On July 8, 2022, the Company entered into a second consulting agreement with a separate third-party contractor for a period of twelve months to (i) review the Company’s business plan; (ii) analyze and assess the Company’s revenues, costs, and cash flow; and (iii) introduce the Company to and interface on the Company’s behalf with potential and actual commercial partners. The Company issued 2,000,000 shares of Common Stock as compensation for the services rendered which were fully earned on the date of issue. These shares were valued at $84,000 at the date of grant.
On July 11, 2022, the Board approved the issuance of 2,000,000 restricted shares of Common Stock to Richard Rosenblum, the Company’s President and Chief Financial Officer. These shares were valued at $110,000 at the date of grant.
On August 5, 2022, the Board approved the issuance of 3,000,000 shares of Common Stock to Samad Harake or his designees as compensation for the services rendered which were fully earned on the date of issue., Mr. Harake is the president and control person of Frictionless. These shares were valued at $165,000 at the date of grant.
A summary of restricted stock activity during the period January 1, 2021 to September 30, 2022 is as follows:
The restricted stock granted, issued and exercisable at September 30, 2022 is as follows:
The Company has recorded an expense of $172,766 and $44,165 for the three months ended September 30, 2022 and 2021, respectively and $298,298 and $188,448 for the nine months ended September 30, 2022 and 2021, respectively.
The Company has authorized 25,000,000 shares of preferred stock with a par value of $0.0001 authorized. No preferred stock was issued and outstanding as of September 30, 2022 and December 31, 2021.
Effective July 8, 2022 (the “Effective Date”), the Company entered into an Endorsement Agreement with Pez-Mar, Inc., a California corporation (“Pez-Mar”), to furnish the services of Mario Lopez (“Lopez”). Pursuant to the Endorsement Agreement, Lopez will act as a Company spokesperson in connection with the promotion, advertisement and endorsement of the Company’s physical and virtual payment processing and money remittance business and the Company’s related products and services.
The Endorsement Agreement has a term of two (2) years from the Effective Date (the “Term”), which is subject to earlier termination on customary terms and conditions. The parties have agreed to certain deliverables of Lopez during the term of the agreement, including with respect to social media posts, television commercials, interviews and photo shoots. The Endorsement Agreement also contains other customary terms, covenants and conditions, including representations and warranties, restrictions on endorsements of competitive products during the term of the agreement, confidentiality, indemnification, and Pez-Mar and Lopez’s independent contractor status.
As compensation for the services provided under the Endorsement Agreement, Lopez or their designees are entitled to the following payments: (i) a cash endorsement fee of Three Hundred Thousand U.S. Dollars ($300,000 USD), payable as follows: (i) One Hundred Twenty-Five Thousand Dollars ($125,000) upon execution of the Endorsement Agreement, (ii) One Hundred Twenty-Five Thousand Dollars ($125,000) quarterly during the Term, beginning on the 90th day following the Effective Date, and (iii) Fifty Thousand Dollars ($50,000) on or prior to the first anniversary of the Effective Date and (ii) warrants exercisable for an aggregate of Fifteen Million (15,000,000) shares of the Common Stock at an exercise price of $0.0345 per share. The Warrants shall have a three-year term commencing from the Effective Date. The right to exercise the Warrants shall be subject to vesting during the Term but shall vest in full upon the consummation of a fundamental transaction involving the Company or upon certain termination events provided for in the Endorsement Agreement. The Exercise Price may be payable via “cashless exercise”, unless the underlying Shares are registered under an effective registration statement under the Securities Act of 1933, as amended. The Shares are subject to certain “piggyback” registration rights.
On August 30, 2022, the Company extended the maturity date of convertible notes issued to Cavalry and Mercer and agreed to grant each note holder a warrant exercisable for 3,000,000 shares of Common Stock at an exercise price of $0.15 per share with an expiration date of August 30, 2027.
The fair value of the warrants granted and issued, as described above, were determined by using a Black Scholes valuation model using the following assumptions:
A summary of warrant activity during the period January 1, 2021 to September 30, 2022 is as follows:
The warrants outstanding and exercisable at September 30, 2022 are as follows:
The warrants outstanding have an intrinsic value of $0 as of September 30, 2022 and December 31, 2021.
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 or a committee appointed by the Board, who have the authority to administer the Plan and to exercise all the powers and authorities specifically granted to it under the Plan.
The maximum number of securities available under the Plan is 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 established its 2021 Stock Incentive Plan (“2021 Plan”). The purpose of the Plan is to promote the interests of the Company and the stockholders of the Company by providing directors, officers, employees and consultants, advisors and service providers of the Company with appropriate incentives and rewards to encourage them to enter into and continue in the employ or service of the Company, to acquire a proprietary interest in the long-term success of the Company and to reward the performance of individuals in fulfilling long-term corporate objectives. The Plan terminates after a period of ten years in August 2031.
The 2021 Plan is administered by the Board or a Compensation Committee appointed by the Board, who have the authority to administer the Plan and to exercise all the powers and authorities specifically granted to it under the Plan.
The maximum number of securities available under the 2021 Plan is 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 July 11, 2022, the Board approved, granted and issued 15,000,000 ten-year incentive stock options, with immediate vesting, to the Company’s Chairman and Chief Executive Officer at an exercise price of $0.15 per share. This resulted in an immediate expense of $823,854 for the three and nine months ended September 30, 2022.
On September 13, 2022, the Company granted ten-year options exercisable for 200,000 shares of Common Stock, with immediate vesting, to each of its four non-executive directors, totaling options exercisable for 800,000 shares of Common Stock at an exercise price of $0.04 per share. This resulted in an immediate expense of $31,970 for the three and nine months ended September 30, 2022.
The fair value of the options granted and issued were determined by using a Black Scholes valuation model using the following assumptions:
A summary of option activity during the period January 1, 2021 to September 30, 2022 is as follows:
The options outstanding and exercisable at September 30, 2022 are as follows:
The options outstanding have an intrinsic value of $0 as of September 30, 2022 and December 31, 2021, respectively.
The option expense was $950,290 and $1,196,566 for the three months ended September 30, 2022 and 2021, respectively and $1,139,220 and $1,288,174 for the nine months ended September 30, 2022 and 2021, respectively. |
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NET LOSS PER SHARE |
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
| NET LOSS PER SHARE |
Basic loss per share is based on the weighted-average number of common shares outstanding during each period. Diluted loss per share is based on basic shares as determined above plus Common Stock equivalents. The computation of diluted net loss per share does not assume the issuance of common shares that have an anti-dilutive effect on net loss per share. For the three and nine months ended September 30, 2022 and 2021 all warrants, options and convertible debt securities were excluded from the computation of diluted net loss per share.
Dilutive shares which could exist pursuant to the exercise of outstanding stock instruments and which were not included in the calculation because their affect would have been anti-dilutive for the three and nine months ended September 30 2022 and 2021 are as follows:
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RELATED PARTY TRANSACTIONS |
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Sep. 30, 2022 | ||||
| Related Party Transactions [Abstract] | ||||
| RELATED PARTY TRANSACTIONS |
The following transactions were entered into with related parties:
James Fuller
On February 22, 2021, the Board awarded James Fuller ( a director of the Company until November 2, 2022 when he voluntarily retired as a member of the Board) options under the Company’s 2018 Stock Incentive Plan to purchase 208,333 shares of 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 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.
On September 13, 2022, the Company granted Mr. Fuller ten-year options exercisable for 200,000 shares of Common Stock at an exercise price of $0.04 per share.
The option expense for Mr. Fuller for the three and the nine months ended September 30, 2022 was $7,993.
Andrey Novikov
On February 22, 2021, the Board awarded Andrey Novikov options under the Company’s 2018 Stock Incentive Plan to purchase 208,333 shares of 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 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. On November 11, 2022, with the recommendation of a special committee of disinterested members of the Board who had reviewed this matter, the Board approved the formal termination of Mr. Novikov’s employment with the Company for “cause.”
William Corbett
On February 22, 2021, the Board appointed William Corbett as the Company’s 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 Common Stock at an exercise price of $0.24 per share. 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 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 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.
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.
On July 11, 2022, the Company granted Mr. Corbett ten-year options exercisable for 15,000,000 shares of Common Stock at an exercise price of $0.15 per share.
The option expense for Mr. Corbett for the three and the nine months ended September 30, 2022 was $890,442 and $1,023,614, respectively.
Clifford Henry
On May 1, 2021, the Company appointed Mr. Henry to the Board.
On July 22, 2021, the Company granted Mr. Henry 2,000,000 shares of Common Stock, valued at $154,000.
Mr. Henry has an oral consulting arrangement with the Company whereby he is paid $3,500 per month for financial and capital markets advice. This consulting agreement commenced in May, 2021 and was approved and ratified by the Board in March 2022. This consulting agreement and related payments were terminated in September 2022.
On September 13, 2022, the Company granted Mr. Henry, immediately vesting, ten-year options exercisable for 200,000 shares of Common Stock at an exercise price of $0.04 per share, valued at $7,993 using a Black Scholes valuation model.
The option expense for Mr. Henry for the three and the nine months ended September 30, 2022 was $7,993.
Madisson Corbett
On May 1, 2021, the Company appointed Ms. Corbett to the Board. 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.
On September 13, 2022, the Company granted Ms. Corbett, immediately vesting, ten-year options exercisable for 200,000 shares of Common Stock at an exercise price of $0.04 per share, valued at $7,993 using a Black Scholes valuation model.
The option expense for Ms. Corbett for the three and the nine months ended September 30, 2022 was $7,993.
David Rios
On July 22, 2021, the Company appointed David Rios to the Board.
On July 22, 2021, the Company granted Mr. Rios 1,000,000 shares of Common Stock, valued at $77,000.
On September 13, 2022, the Company granted Mr. Rios, immediately vesting, -year options exercisable for 200,000 shares of Common Stock at an exercise price of $0.04 per share, valued at $7,993 using a Black Scholes valuation model.
The option expense for Mr. Rios for the three and the nine months ended September 30, 2022 was $7,993.
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 to serve until the Company’s next annual meeting of shareholders and was subsequently appointed as the Company’s Secretary.
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, 2021. 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 at a per share exercise price equal to the fair market value of the Common Stock, as reflected in the closing price of the Common Stock on the OTC exchange or, in the event the stock is up listed, on a national stock 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 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.
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 Common Stock, as reflected in the closing price of the Common Stock on the OTC exchange or, in the event the stock is uplisted, on a national stock 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 per share.
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.
On July 11, 2022, the Company granted Mr. Rosenblum 2,000,000 restricted shares of Common Stock valued at $110,000, all of which are vested.
The option expense for Mr. Rosenblum for the three months and nine months ended September 30, 2022 was $27,879 and $83,636, respectively. |
COMMITMENTS AND CONTINGENCIES |
9 Months Ended | ||
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Sep. 30, 2022 | |||
| Commitments and Contingencies Disclosure [Abstract] | |||
| COMMITMENTS AND CONTINGENCIES |
The Company has convertible notes, disclosed under note 8 above, which mature on November 16, 2022. Should these notes not be converted to Common Stock prior to that date, the Company may need to repay the principal and interest outstanding on these notes. |
SUBSEQUENT EVENTS |
9 Months Ended | |||
|---|---|---|---|---|
Sep. 30, 2022 | ||||
| Subsequent Events [Abstract] | ||||
| SUBSEQUENT EVENTS |
On November 2, 2022, the Company conducted its 2022 annual meeting of stockholders.
At the Annual Meeting, the Company’s stockholders (i) elected each of William D. Corbett, Richard Rosenblum, Madisson Corbett, Clifford Henry and David Rios as directors’ of the Company until the next annual meeting or until their successors shall be elected and qualified, (ii) ratified the appointment of RBSM LLP as the Company’s independent registered public accounting firm for fiscal year ended December 31, 2022, (iii) approved an amendment to the Company’s Articles of Incorporation to effect a reverse stock split of the issued and outstanding shares of common stock at a ratio (to be determined in the discretion of the Company’s Board during a two year period ending on November 2, 2024) within a range of one (1) share of Common Stock for every two (2) to thirty (30) shares of Common Stock, and (iv) approved a potential adjournment of the annual meeting,
The Company’s stockholders did not approve the proposed amendment to the Company’s Articles of Incorporation to provide the board of directors with the authority to, at its discretion, fix by resolution or resolutions, the designations, rights and privileges of the Company’s authorized preferred stock.
Other than the above, the Company has evaluated subsequent events through the date the financial statements were issued, and did not identify any subsequent events that would have required adjustment or disclosure in the financial statements. |
Accounting Policies, by Policy (Policies) |
9 Months Ended | ||||||||||||||||||||||||||||||
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||
| Basis of Presentation |
The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, these unaudited condensed financial statements do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments (consisting only of normal recurring adjustments), which the Company considers necessary, for a fair presentation of those financial statements. The results of operations and cash flows for the nine months ended September 30, 2022 may not necessarily be indicative of results that may be expected for any succeeding quarter or for the entire fiscal year. The information contained in this Quarterly Report on Form 10-Q (“Report”) should be read in conjunction with the audited financial statements of IPSI for the year ended December 31, 2021, included in the Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2022.
All amounts referred to in the notes to the unaudited condensed financial statements are in United States Dollars ($) unless stated otherwise.
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| Principles of Consolidation |
The unaudited condensed 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 unaudited condensed consolidated financial statements.
The entities included in the accompanying unaudited condensed 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 unaudited condensed 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 unaudited condensed 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 unaudited condensed 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 the generation of continuing losses by 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 unaudited condensed 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 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. Vivi Holdings 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 are and will be subject to significant risks and uncertainties including financial, operational, regulatory, and other risks, including the potential risk of business failure. These risks include, without limitation, risks associated with (i) COVID-19 and its variants, (ii) launching and scaling the Company’s e-wallet and related products and the use by customers of such products, (iii) developing and implementing successful marketing campaigns and other strategic initiatives; (iv) competition, (iv) compliance with applicable laws, rules and regulations (including those related to fund remittance); (v) the Company’s outstanding indebtedness, including the Company’s ability to repay or extend the maturity of such indebtedness (see Note 8); (vi) inflation and other economic factors and (vii) the Company’s ability to obtain necessary financing. 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.
The Company’s results may also 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. Many of these risks are beyond the Company’s control and are unpredictable. The Company may be unable to adequately manage such risks and similar risks, which could impair the viability of the Company.
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| Recent accounting pronouncements |
The Financial Accounting Standards Board (“FASB”) issued additional updates during the quarter ended September 30, 2022. None of these standards are either applicable to the Company or require adoption at a future date and none are expected to have a material impact on the Company’s condensed 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 nine months ended September 30, 2022 and 2021 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 September 30, 2022 and 2021, 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 September 30, 2022 and December 31, 2021, the balance exceed the federally insured limit by $1,094,504 and $5,117,551, 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 September 30, 2022 and December 31, 2021.
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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.
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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 Recognition.
The Company’s revenues will be 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 nine months ended September 30, 2022 and 2021.
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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 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 Topic 815, Derivatives and hedging (“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 September 30, 2022 and December 31, 2021, 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) |
9 Months Ended | |||||||||||||||||||||||||||
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Sep. 30, 2022 | ||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||
| Schedule of estimated useful lives of the assets |
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INTANGIBLES (Tables) |
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||
| Intangibles Table [Abstract] | |||||||||||||||||||||||||||||||||||||
| Schedule of facilitate the functioning of the IPSIPay software |
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INVESTMENTS (Tables) |
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||
| Investments, All Other Investments [Abstract] | |||||||||||||||||||||||||||||||||||||
| Schedule of investment |
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LEASES (Tables) |
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Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of total 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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CONVERTIBLE NOTES PAYABLE (Tables) |
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| Convertible Notes Payable [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of convertible notes payable |
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DERIVATIVE LIABILITY (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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 of fair value of the warrants and options granted and issued Black Scholes valuation model |
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| Schedule of warrant activity |
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| Schedule of warrants outstanding and exercisable |
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| Schedule of option activity |
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| Schedule of options outstanding and exercisable |
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NET LOSS PER SHARE (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of dilutive shares |
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ORGANIZATION AND DESCRIPTION OF BUSINESS (Details) - USD ($) |
1 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Nov. 01, 2019 |
Aug. 26, 2021 |
Dec. 31, 2019 |
Sep. 30, 2022 |
Jun. 22, 2022 |
|
| Organization and Description of Business (Textual) | |||||
| Reverse stock split, description | On November 1, 2019, the Company changed its corporate 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 then outstanding 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. | ||||
| Stock purchase agreement, description | On December 31, 2019, the Company 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%). | ||||
| Percentage of remaining shares owned | 49.00% | ||||
| Common Stock [Member] | |||||
| Organization and Description of Business (Textual) | |||||
| Merger agreement, description | to the Merger Agreement, upon consummation of the Merger, each share of Qpagos Corporation’s capital stock issued and outstanding immediately prior to the Merger was converted into the right to receive two shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”). Additionally, pursuant to the Merger Agreement, upon consummation of the Merger, the Company assumed all of Qpagos Corporation’s warrants issued and outstanding immediately prior to the Merger, which were exercisable for an aggregate of approximately 621,920 shares of Common Stock as of the date of the Merger. Prior to and as a condition to the closing of the Merger, a then-current holder of 500,000 shares of Common Stock agreed to return 497,500 shares of Common Stock held by such holder to the Company and such holder retained an aggregate of 2,500 shares of Common Stock. The other then stockholders of the Company 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 outstanding Common Stock. | ||||
| Frictionless Financial Technologies, Inc. [Member] | |||||
| Organization and Description of Business (Textual) | |||||
| Acquired percentage | 1.00% | ||||
| 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% | ||||
| Common stock outstanding percentage | 41.00% | ||||
| Purchase price (in Dollars) | $ 300,000 | ||||
ACCOUNTING POLICIES AND ESTIMATES (Details) - USD ($) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2022 |
Dec. 31, 2021 |
|
| Accounting Policies and Estimates (Textual) | ||
| Beyond fintech inc owned percentage | 51.00% | |
| Federally insured limit | $ 1,094,504 | $ 5,117,551 |
| Ownership percentage | 20.00% | |
| Plant and equipment costs | $ 1,000 |
ACCOUNTING POLICIES AND ESTIMATES (Details) - Schedule of estimated useful lives of the assets |
9 Months Ended |
|---|---|
Sep. 30, 2022 | |
| 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) |
9 Months Ended |
|---|---|
|
Sep. 30, 2022
USD ($)
| |
| Liquidity Matters (Textual) | |
| Net loss | $ 6,208,074 |
| Cash balance | $ 1,352,983 |
INTANGIBLES (Details) - USD ($) |
1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|---|---|
Aug. 26, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Dec. 31, 2021 |
|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||||||
| Gross proceeds | $ 250,000 | $ 375,000 | ||||
| Beyond fintech percentage | 51.00% | |||||
| Owned frictionless percentage | 49.00% | |||||
| Additional amount | $ 544,320 | $ 544,320 | ||||
| Additional amount of software | 41,320 | |||||
| Amortization expense | $ 12,629 | $ 0 | $ 12,629 | $ 0 | ||
INTANGIBLES (Details) - Schedule of facilitate the functioning of the IPSIPay software - USD ($) |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Schedule of Facilitate The Functioning of The Ipsipay Software [Abstract] | ||
| Purchased Technology | $ 1,210,640 | $ 625,000 |
| Accumulated amortization | (12,629) | |
| Total | $ 1,198,011 | $ 625,000 |
INVESTMENTS (Details) - Schedule of investment - USD ($) |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| INVESTMENTS (Details) - Schedule of investment [Line Items] | ||
| Investment | $ 500,001 | $ 500,001 |
| Frictionless Financial Technologies, Inc. [Member] | ||
| INVESTMENTS (Details) - Schedule of investment [Line Items] | ||
| Investment | 500,000 | 500,000 |
| Vivi Holdings, Inc. [Member] | ||
| INVESTMENTS (Details) - Schedule of investment [Line Items] | ||
| Investment | $ 1 | $ 1 |
LEASES (Details) |
9 Months Ended |
|---|---|
|
Sep. 30, 2022
USD ($)
| |
| Leases (Textual) | |
| Lease amount | $ 4,800 |
LEASES (Details) - Schedule of total lease cost - USD ($) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Schedule Of Total Lease Cost Abstract | ||
| Operating lease expense | $ 43,200 | $ 17,857 |
LEASES (Details) - Schedule of other lease information - USD ($) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Cash paid for amounts included in the measurement of lease liabilities | ||
| Operating cash flows from operating leases | $ (45,200) | $ (60,403) |
| Remaining lease term – operating lease | 6 months | |
LEASES (Details) - Schedule of maturity of operating leases |
Sep. 30, 2022
USD ($)
|
|---|---|
| Total instalments due: | |
| 2022 |
FEDERAL RELIEF LOANS (Details) - USD ($) |
9 Months Ended | |
|---|---|---|
Jul. 07, 2020 |
Sep. 30, 2022 |
|
| Federal Relief Loans [Abstract] | ||
| Disaster loan amount | $ 150,000 | |
| Bearing interest, percentage | 3.75% | |
| Repayable installments | $ 731 | |
| Accrued interest | $ 12,560 |
CONVERTIBLE NOTES PAYABLE (Details) - USD ($) |
1 Months Ended | 3 Months Ended | 9 Months Ended | ||||||
|---|---|---|---|---|---|---|---|---|---|
Feb. 03, 2022 |
Feb. 16, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Aug. 30, 2022 |
Jul. 08, 2022 |
Feb. 04, 2022 |
|
| Convertible Notes Payable (Textual) | |||||||||
| Interest expense | $ 49,912 | $ 52,236 | $ 138,085 | $ 169,695 | |||||
| Amortization of debt discount | 0 | $ 515,200 | 263,200 | $ 3,138,452 | |||||
| Warrant exercisable (in Shares) | 2,486,957 | ||||||||
| Exercise price per share (in Dollars per share) | $ 0.24 | $ 0.15 | |||||||
| Common stock shares (in Shares) | 2,000,000 | ||||||||
| Cavalry Fund I LP [Member] | |||||||||
| Convertible Notes Payable (Textual) | |||||||||
| Net proceeds | $ 500,500 | ||||||||
| Senior secured convertible note | 71,500 | ||||||||
| Original issue discount | $ 572,000 | ||||||||
| Original issue discount rate | 10.00% | ||||||||
| initial conversion price per share (in Dollars per share) | $ 0.23 | ||||||||
| Warrant exercisable (in Shares) | 2,486,957 | ||||||||
| Exercise price per share (in Dollars per share) | $ 0.24 | ||||||||
| Description of conversion terms | On February 3, 2022, the Company extended the maturity date of its Cavalry Note from February 16, 2022 to August 16, 2022. The Cavalry Note was due to mature on February 16, 2022 and would have resulted in the accrual of a $157,499 prepayment penalty on the principal of $572,000 and interest of $57,994 outstanding, totaling $787,493. Cavalry agreed to extend the maturity date of the Cavalry Note to August 16, 2022 in consideration of the principal amount outstanding under the Cavalry Note being increased by an additional $78,749, thereby increasing the total principal outstanding to $866,242. On August 30, 2022, the Company further extended the maturity date of its Cavalry note from August 16, 2022 to November 16, 2022. In terms of the agreement entered into with Cavalry, the principal outstanding was increased by $181,959 and the interest outstanding as of August 31, 2022 of $43,553 was capitalized, resulting in a principal balance outstanding of $1,091,754. In addition, the Company granted Cavalry a warrant exercisable for 3,000,000 shares of Common Stock at an exercise price of $0.15 per share, maturing on August 30, 2027 and valued at $119,091 on the date of grant. | ||||||||
| Penalty expense | 181,959 | 260,708 | |||||||
| Additional penalty expense | $ 119,091 | $ 119,091 | |||||||
| Conversion price (in Dollars per share) | $ 1,105,401 | $ 1,105,401 | |||||||
| Mercer Street Global Opportunity Fund, LLC [Member] | |||||||||
| Convertible Notes Payable (Textual) | |||||||||
| Net proceeds | $ 500,500 | ||||||||
| Senior secured convertible note | 572,000 | ||||||||
| Original issue discount | $ 71,500 | ||||||||
| Description of conversion terms | On February 16, 2021, the Company closed a transaction with Mercer Street Global Opportunity Fund, LLC (“Mercer”), pursuant to which the Company received net proceeds of $500,500, after an original issue discount of $71,500 in exchange for the issuance of a $572,000 Senior Secured Convertible Note, bearing interest at 10% per annum and maturing on February 16, 2022 (the “Mercer Note”). The Mercer Note is convertible into shares of Common Stock at an initial conversion price of $0.23 per share, in addition, the Company issued a warrant exercisable for 2,486,957 shares of Common Stock at an initial exercise price of $0.24 per share.On February 3, 2022, the Company extended the maturity date of its Mercer Note from February 16, 2022 to August 16, 2022. The Mercer Note was due to mature on February 16, 2022 and would have resulted in the accrual of a $157,499 prepayment penalty on the principal of $572,000 and interest of $57,994 outstanding, totaling $787,493. Mercer agreed to extend the maturity date of the Mercer Note to August 16, 2022 in consideration of the principal amount outstanding under the Mercer Note being increased by an additional $78,749, thereby increasing the total principal outstanding to $866,242. On August 30, 2022, the Company further extended the maturity date of its Mercer note from August 16, 2022 to November 16, 2022. In terms of the agreement entered into with Mercer, the principal outstanding was increased by $181,959 and the interest outstanding as of August 31, 2022 of $43,553 was capitalized, resulting in a principal balance outstanding of $1,091,754. In addition, the Company granted Mercer a warrant exercisable for 3,000,000 shares of Common Stock at an exercise price of $0.15 per share, maturing on August 30, 2027 and valued at the date of grant at $119,091. This change to the maturity dates of the Mercer Note from February 16, 2022 to August 31, 2022 and subsequently to November 16, 2022, was assessed in terms of ASC 470-50 as a debt extinguishment, which resulted in a penalty expense of $181,959 and $260,708 for the three months and nine months ended September 30, 2022, respectively, in addition the value of the warrant issued on the debt extension from August 16, 2022 to November 16, 2022, resulted in an additional penalty expense of $119,091 for the three and nine months ended September 30, 2022. | ||||||||
| Conversion price (in Dollars per share) | $ 0.23 | ||||||||
| Interest rate | 10.00% | ||||||||
| Accrued interest and penalty interest | $ 1,105,401 | ||||||||
| Bellridge Capital LP. [Member] | |||||||||
| Convertible Notes Payable (Textual) | |||||||||
| Net proceeds | $ 787,500 | ||||||||
| Senior secured convertible note | 900,000 | ||||||||
| Original issue discount | $ 112,500 | ||||||||
| Warrant exercisable (in Shares) | 3,913,044 | ||||||||
| Exercise price per share (in Dollars per share) | $ 0.24 | ||||||||
| Conversion price (in Dollars per share) | $ 0.23 | ||||||||
| Interest rate | 10.00% | ||||||||
| Aggregate principal amount | $ 1,235,313 | ||||||||
| Common stock shares (in Shares) | 88,250 | ||||||||
CONVERTIBLE NOTES PAYABLE (Details) - Schedule of convertible notes payable - USD ($) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2022 |
Dec. 31, 2021 |
|
| Accrued Interest | $ 12,560 | |
| Unamortized debt discount | $ 0 | $ (263,200) |
| Cavalry Fund I LP [Member] | ||
| Interest Rate | 28.70% | |
| Maturity date | November 16, 2022 | |
| Principal | $ 1,091,754 | |
| Accrued Interest | 13,647 | |
| Unamortized debt discount | ||
| Convertible notes payable | $ 1,105,401 | 548,872 |
| Mercer Street Global Opportunity Fund, LLC [Member] | ||
| Interest Rate | 28.70% | |
| Maturity date | November 16, 2022 | |
| Principal | $ 1,091,754 | |
| Accrued Interest | 13,647 | |
| Unamortized debt discount | ||
| Convertible notes payable | $ 1,105,401 | 548,872 |
| Bellridge Capital LP., [Member] | ||
| Interest Rate | 10.00% | |
| Maturity date | February 16, 2022 | |
| Principal | ||
| Accrued Interest | ||
| Unamortized debt discount | ||
| Convertible notes payable | 863,609 | |
| Total Convertible Notes Payable [Member] | ||
| Principal | 2,183,508 | |
| Accrued Interest | 27,294 | |
| Unamortized debt discount | ||
| Convertible notes payable | $ 2,210,802 | $ 1,961,353 |
DERIVATIVE LIABILITY (Details) - USD ($) |
1 Months Ended | 3 Months Ended | 9 Months Ended |
|---|---|---|---|
Aug. 30, 2022 |
Sep. 30, 2022 |
Sep. 30, 2022 |
|
| Derivative Liability (Textual) | |||
| Shares of common stock (in Shares) | 3,000,000 | ||
| Exercise price (in Dollars per share) | $ 0.15 | ||
| Derivative financial liability | $ 238,182 | $ 710,389 | $ 710,389 |
| Derivative liability credited | $ 84,895 | $ 65,046 |
DERIVATIVE LIABILITY (Details) - Schedule of assumptions were used in the Black-Scholes valuation model - $ / shares |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2022 |
Dec. 31, 2021 |
|
| Expected dividend rate | 0.00% | 0.00% |
| Minimum [Member] | ||
| Conversion price (in Dollars per share) | $ 0.05 | $ 0.05 |
| Risk free interest rate | 0.79% | 0.05% |
| Expected life of derivative liability | 1 year 6 months | 1 year 7 months 6 days |
| Expected volatility of underlying stock | 120.49% | 161.19% |
| Maximum [Member] | ||
| Conversion price (in Dollars per share) | $ 0.15 | $ 0.24 |
| Risk free interest rate | 4.25% | 1.12% |
| Expected life of derivative liability | 59 months | 49 months 18 days |
| Expected volatility of underlying stock | 258.30% | 215.33% |
DERIVATIVE LIABILITY (Details) - Schedule of movement in derivative liability - USD ($) |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2022 |
Dec. 31, 2021 |
|
| Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
| Opening balance | $ 407,161 | $ 2,966,416 |
| Derivative financial liability arising from convertible note and warrants | 238,182 | 2,569,000 |
| Fair value adjustment to derivative liability | 65,046 | (5,128,255) |
| Closing balance | $ 710,389 | $ 407,161 |
STOCKHOLDERS’ EQUITY (Details) - USD ($) |
3 Months Ended | 9 Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 13, 2022 |
Jul. 11, 2022 |
Jul. 08, 2022 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Aug. 30, 2022 |
Aug. 05, 2022 |
Dec. 31, 2021 |
Feb. 16, 2021 |
|
| Stockholders' Equity (Textual) | |||||||||||
| Common stock, authorized (in Shares) | 750,000,000 | 750,000,000 | 500,000,000 | ||||||||
| Common stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||||||||
| Common stock, shares issued (in Shares) | 376,901,679 | 376,901,679 | 367,901,679 | ||||||||
| Common stock, shares outsatnding (in Shares) | 376,901,679 | 376,901,679 | 367,901,679 | ||||||||
| Issued shares (in Shares) | 2,000,000 | ||||||||||
| Value of grant date | $ 110,000 | $ 84,000 | |||||||||
| Agreement fee | $ 3,000 | ||||||||||
| Grant value | $ 165,000 | ||||||||||
| Expense | $ 172,766 | $ 44,165 | $ 298,298 | $ 188,448 | |||||||
| Preferred stock, authorized (in Shares) | 25,000,000 | 25,000,000 | 25,000,000 | ||||||||
| Preferred stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||||||||
| Description of compensation service | As compensation for the services provided under the Endorsement Agreement, Lopez or their designees are entitled to the following payments: (i) a cash endorsement fee of Three Hundred Thousand U.S. Dollars ($300,000 USD), payable as follows: (i) One Hundred Twenty-Five Thousand Dollars ($125,000) upon execution of the Endorsement Agreement, (ii) One Hundred Twenty-Five Thousand Dollars ($125,000) quarterly during the Term, beginning on the 90th day following the Effective Date, and (iii) Fifty Thousand Dollars ($50,000) on or prior to the first anniversary of the Effective Date and (ii) warrants exercisable for an aggregate of Fifteen Million (15,000,000) shares of the Common Stock at an exercise price of $0.0345 per share. | ||||||||||
| Warrant exercisable (in Shares) | 3,000,000 | ||||||||||
| Exercise price per share (in Dollars per share) | $ 0.15 | $ 0.24 | |||||||||
| Warrants outstanding an intrinsic value | $ 0 | $ 0 | $ 0 | ||||||||
| Incentive stock options (in Shares) | 58,304,105 | 58,304,105 | |||||||||
| Amount of immediate expense | $ 31,970 | $ 31,970 | |||||||||
| Description of granted options exercisable | On September 13, 2022, the Company granted ten-year options exercisable for 200,000 shares of Common Stock, with immediate vesting, to each of its four non-executive directors, totaling options exercisable for 800,000 shares of Common Stock at an exercise price of $0.04 per share. | ||||||||||
| Intrinsic value outstanding options | 0 | 0 | $ 0 | ||||||||
| Option expense | $ 950,290 | $ 1,196,566 | $ 1,139,220 | $ 1,288,174 | |||||||
| Common Stock [Member] | |||||||||||
| Stockholders' Equity (Textual) | |||||||||||
| Issued shares (in Shares) | 2,000,000 | ||||||||||
| Value of grant date | $ 84,000 | ||||||||||
| Maximum [Member] | Common Stock [Member] | |||||||||||
| Stockholders' Equity (Textual) | |||||||||||
| Shares of Common Stock (in Shares) | 100,000 | 100,000 | |||||||||
| Chief Executive Officer [Member] | |||||||||||
| Stockholders' Equity (Textual) | |||||||||||
| Incentive stock options (in Shares) | 15,000,000 | ||||||||||
| Stock option exercise price (in Dollars per share) | $ 0.15 | ||||||||||
| Amount of immediate expense | $ 823,854 | $ 823,854 | |||||||||
| 2021 Stock Incentive Plan [Member] | Maximum [Member] | |||||||||||
| Stockholders' Equity (Textual) | |||||||||||
| Shares of Common Stock (in Shares) | 53,000,000 | 53,000,000 | |||||||||
| 2018 Stock Incentive Plan [Member] | |||||||||||
| Stockholders' Equity (Textual) | |||||||||||
| Terminates period | 10 years | ||||||||||
| 2018 Stock Incentive Plan [Member] | Maximum [Member] | |||||||||||
| Stockholders' Equity (Textual) | |||||||||||
| Shares of Common Stock (in Shares) | 800,000 | 800,000 | |||||||||
| 2021 Stock Incentive Plan [Member] | |||||||||||
| Stockholders' Equity (Textual) | |||||||||||
| Terminates period | 10 years | ||||||||||
| Richard Rosenblum [Member] | |||||||||||
| Stockholders' Equity (Textual) | |||||||||||
| Restricted shares (in Shares) | 2,000,000 | ||||||||||
| Option expense | $ 27,879 | $ 83,636 | |||||||||
| Samad Harake [Member] | |||||||||||
| Stockholders' Equity (Textual) | |||||||||||
| Issued shares (in Shares) | 3,000,000 | ||||||||||
NET LOSS PER SHARE (Details) - Schedule of dilutive shares - shares |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Anti-dilutive shares | 119,359,453 | 81,447,436 | 119,359,453 | 81,447,436 |
| Convertible debt [Member] | ||||
| Anti-dilutive shares | 14,738,682 | 13,626,666 | 14,738,682 | 13,626,666 |
| Stock options [Member] | ||||
| Anti-dilutive shares | 46,316,666 | 30,516,666 | 46,316,666 | 30,516,666 |
| Warrants to purchase shares of common stock [Member] | ||||
| Anti-dilutive shares | 58,304,105 | 37,304,104 | 58,304,105 | 37,304,104 |
RELATED PARTY TRANSACTIONS (Details) - USD ($) |
1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 13, 2022 |
Jul. 11, 2022 |
Aug. 31, 2021 |
Aug. 16, 2021 |
Jul. 27, 2021 |
Jul. 22, 2021 |
Feb. 22, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Dec. 31, 2021 |
|
| Related Party Transactions (Textual) | ||||||||||||
| Shares of common stock (in Shares) | 208,333 | |||||||||||
| Option expense | $ 950,290 | $ 1,196,566 | $ 1,139,220 | $ 1,288,174 | ||||||||
| Exercise price (in Dollars per share) | $ 0.24 | |||||||||||
| Salary rate | 100.00% | |||||||||||
| James Fuller [Member] | ||||||||||||
| Related Party Transactions (Textual) | ||||||||||||
| Shares of common stock (in Shares) | 200,000 | 2,000,000 | 208,333 | |||||||||
| Exercise price (in Dollars per share) | $ 0.04 | $ 0.24 | ||||||||||
| Common stock, value | $ 154,000 | |||||||||||
| Option expense | 7,993 | $ 7,993 | ||||||||||
| James Fuller [Member] | Maximum [Member] | ||||||||||||
| Related Party Transactions (Textual) | ||||||||||||
| Common stock, per share (in Dollars per share) | 0.24 | |||||||||||
| James Fuller [Member] | Minimum [Member] | ||||||||||||
| Related Party Transactions (Textual) | ||||||||||||
| Common stock, per share (in Dollars per share) | $ 0.15 | |||||||||||
| Andrey Novikov [Member] | ||||||||||||
| Related Party Transactions (Textual) | ||||||||||||
| Shares of common stock (in Shares) | 208,333 | |||||||||||
| William Corbett [Member] | ||||||||||||
| Related Party Transactions (Textual) | ||||||||||||
| Shares of common stock (in Shares) | 15,000,000 | 20,000,000 | ||||||||||
| Exercise price (in Dollars per share) | $ 0.15 | $ 0.24 | ||||||||||
| Option expense | 890,442 | 1,023,614 | ||||||||||
| Salary amount | $ 30,000 | $ 30,000 | ||||||||||
| Warrant expense | $4,327,899 | |||||||||||
| Related party transactions, description | 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 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 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. | |||||||||||
| Clifford Henry [Member] | ||||||||||||
| Related Party Transactions (Textual) | ||||||||||||
| Shares of common stock (in Shares) | 200,000 | 2,000,000 | ||||||||||
| Exercise price (in Dollars per share) | $ 0.04 | |||||||||||
| Common stock, value | $ 7,993 | $ 154,000 | ||||||||||
| Option expense | 7,993 | 7,993 | ||||||||||
| Financial and capital markets advice | 3,500 | |||||||||||
| Madisson Corbett [Member] | ||||||||||||
| Related Party Transactions (Textual) | ||||||||||||
| Shares of common stock (in Shares) | 200,000 | 2,000,000 | ||||||||||
| Exercise price (in Dollars per share) | $ 0.04 | |||||||||||
| Common stock, value | $ 7,993 | $ 154,000 | ||||||||||
| Option expense | 7,993 | 7,993 | ||||||||||
| David Rios [Member] | ||||||||||||
| Related Party Transactions (Textual) | ||||||||||||
| Shares of common stock (in Shares) | 200,000 | 1,000,000 | ||||||||||
| Exercise price (in Dollars per share) | $ 0.04 | |||||||||||
| Common stock, value | $ 7,993 | $ 77,000 | ||||||||||
| Option expense | 7,993 | 7,993 | ||||||||||
| Vesting term | 10 years | |||||||||||
| Mr. Rosenblum [Member] | ||||||||||||
| Related Party Transactions (Textual) | ||||||||||||
| Shares of common stock (in Shares) | 2,000,000 | 10,000,000 | ||||||||||
| Exercise price (in Dollars per share) | $ 0.15 | |||||||||||
| Common stock, value | $ 110,000 | |||||||||||
| Option expense | $ 27,879 | $ 83,636 | ||||||||||
| Employment agreement, description | 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 at a per share exercise price equal to the fair market value of the Common Stock, as reflected in the closing price of the Common Stock on the OTC exchange or, in the event the stock is up listed, on a national stock 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. | |||||||||||
| Salary rate | 50.00% | |||||||||||
SUBSEQUENT EVENTS (Details) |
9 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Subsequent Events [Abstract] | |
| Annual meeting of stockholders description | At the Annual Meeting, the Company’s stockholders (i) elected each of William D. Corbett, Richard Rosenblum, Madisson Corbett, Clifford Henry and David Rios as directors’ of the Company until the next annual meeting or until their successors shall be elected and qualified, (ii) ratified the appointment of RBSM LLP as the Company’s independent registered public accounting firm for fiscal year ended December 31, 2022, (iii) approved an amendment to the Company’s Articles of Incorporation to effect a reverse stock split of the issued and outstanding shares of common stock at a ratio (to be determined in the discretion of the Company’s Board during a two year period ending on November 2, 2024) within a range of one (1) share of Common Stock for every two (2) to thirty (30) shares of Common Stock, and (iv) approved a potential adjournment of the annual meeting, |