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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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
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Indicate by check mark
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of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required
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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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| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
As of May 10, 2023, there
were
INNOVATIVE PAYMENT SOLUTIONS, INC.
Form 10-Q
For the Quarter Ended March 31, 2023
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, 2022 (the “2022 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 our ability to launch, achieve customer downloads of and generate revenue from our IPSIPay or other digital payment solutions; |
| ● | acceptance by the marketplace of our products and services, notably IPSIPay; |
| ● | 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 and third-party service providers; |
| ● | adverse changes in general market conditions for payment solutions such as IPSIPay and other products and services we offer; |
| ● | our ability to generate cash flow and profitability and continue as a going concern; |
| ● | our future financing plans and ability to repay outstanding indebtedness; and |
| ● | our ability to adapt to changes in market conditions (including as a result of the COVID-19 pandemic) 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 2022 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
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (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 | $ | $ | ||||||
| Federal relief loans – current portion | ||||||||
| Notes payable | ||||||||
| Convertible debt, net of unamortized discount of $ | ||||||||
| Derivative liability | ||||||||
| Total Current Liabilities | ||||||||
| Non-Current Liabilities | ||||||||
| Federal relief loans | ||||||||
| Total Non-Current Liabilities | ||||||||
| Total Liabilities | ||||||||
| Equity (Deficit) | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total equity (deficit) attributable to Innovative Payment Solutions, Inc. Stockholders | ( | ) | ( | ) | ||||
| Non-controlling interest | ||||||||
| Total Equity (Deficit) | ( | ) | ( | ) | ||||
| Total Liabilities and Equity (Deficit) | $ | $ | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
1
INNOVATIVE PAYMENT SOLUTIONS, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
| Three months ended | Three months ended | |||||||
| March 31, | March 31, | |||||||
| 2023 | 2022 | |||||||
| Net Revenue | $ | $ | ||||||
| Cost of Goods Sold | ||||||||
| Gross loss | ( | ) | ||||||
| General and administrative | ||||||||
| Depreciation and amortization | ||||||||
| Total Expense | ||||||||
| Loss from Operations | ( | ) | ( | ) | ||||
| 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 the unaudited condensed consolidated financial statements.
2
INNOVATIVE PAYMENT SOLUTIONS, INC.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
| 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, 2022 | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | ||||||||||||||||||||||
| Fair value of warrants issued | - | - | ||||||||||||||||||||||||||||||
| Stock based option expense | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | ||||||||||||||||||||||
| Preferred Stock Shares | Amount | Common Stock Shares* | Amount | Additional Paid-in Capital | Accumulated Deficit | Non- controlling shareholders interest | Total Stockholders’ Equity (Deficit) | |||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||
| Stock based option expense | - | - | ||||||||||||||||||||||||||||||
| Restricted stock awards | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
3
INNOVATIVE PAYMENT SOLUTIONS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Three months ended | Three months ended | |||||||
| March 31, | March 31, | |||||||
| 2023 | 2022 | |||||||
| 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 | ||||||||
| Penalty on convertible debt | ||||||||
| Stock based compensation | ||||||||
| Changes in Assets and Liabilities | ||||||||
| Other current assets | ||||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Interest accruals | ( | ) | ||||||
| CASH USED IN OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Investment in intangibles | ( | ) | ( | ) | ||||
| NET CASH USED IN INVESTING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from convertible notes | ||||||||
| Repayment of convertible notes | ( | ) | ||||||
| Repayment of federal relief loans | ( | ) | ||||||
| NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | ( | ) | ||||||
| NET 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 | ||||||||
| Fair value of warrants issued with convertible notes | $ | $ | ||||||
See accompanying notes to the unaudited condensed consolidated 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 to the Merger Agreement,
upon consummation of the Merger, each share of Qpagos Corporation’s capital stock issued and outstanding immediately prior to the
Merger was converted into the right to receive two shares of the Company’s common stock, par value $
The Merger was treated as a reverse acquisition of the Company, then a public shell company, for financial accounting and reporting purposes. As such, Qpagos Corporation was treated as the acquirer for accounting and financial reporting purposes while the Company was treated as the acquired entity for accounting and financial reporting purposes.
Qpagos Corporation was incorporated on May 1, 2015 under the laws of the state of Delaware to effectuate a reverse merger transaction with Qpagos, S.A.P.I. de C.V. (“Qpagos Mexico”) and Redpag Electrónicos S.A.P.I. de C.V. (“Redpag”). Each of the entities were incorporated in November 2013 in Mexico. Qpagos Mexico was formed to process payment transactions for service providers it contracts with, and Redpag was formed to deploy and operate kiosks as a distributor.
On June 1, 2016, the board of directors of the Company (the “Board”) changed the Company’s fiscal year end from October 31 to December 31.
On November 1, 2019, the
Company changed its corporate name from “QPAGOS” to “Innovative Payment Solutions, Inc.” Additionally, and immediately
following the name change, 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
On December 31, 2019, the Company
consummated the disposal of Qpagos Corporation, Qpagos Mexico and Redpag in exchange for
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 fully launched in July 2022 after a soft launch in December 2021. Previously the Company intended to invest in physical kiosks where any payment processing could be undertaken by customers in person. The Company has shifted its business to focus solely on downloadable apps used via smartphones and other online payment processing solutions..
The Company acquired a
On August 26, 2021, the Company formed
a new subsidiary, Beyond Fintech, Inc. (“Beyond Fintech”), in which it owns a
See Note 15 for subsequent event disclosure regarding the Company’s relationship with Frictionless.
| 2 | ACCOUNTING POLICIES AND ESTIMATES |
| a) | Basis of Presentation |
The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, these unaudited condensed financial statements do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments (consisting only of normal recurring adjustments), which the Company considers necessary, for a fair presentation of those financial statements. The results of operations and cash flows for the three months ended March 31, 2023 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, 2022, included in the Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2023.
All amounts referred to in the notes to the unaudited condensed consolidated financial statements are in United States Dollars ($) unless stated otherwise.
| 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.,
See Note 15 for subsequent event disclosure regarding the Company’s ownership interest in Beyond Fintech.
6
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 2 | ACCOUNTING POLICIES AND ESTIMATES (continued) |
| 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 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 March 31, 2023. None of these standards are either applicable to the Company or require adoption at a future date and none are expected to have a material impact on the Company’s 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 only has
| 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 March 31, 2023 and December 31, 2022, respectively, the Company had no cash equivalents.
The Company minimizes credit risk associated
with cash by periodically evaluating the credit quality of its primary financial institution in the United States. The balance at times
may exceed federally insured limits. At March 31, 2023 and December 31, 2022, 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 March 31, 2023 and December 31, 2022.
| k) | Investments |
The Company’s non-marketable
equity securities are investments in privately held companies without readily determinable market values. The carrying value of our non-marketable
equity securities is adjusted to fair value for observable transactions for identical or similar investments of the same issuer or impairment
(referred to as the measurement alternative). All gains and losses on non-marketable equity securities, realized and unrealized, are
recognized in other income (expense), net. Non-marketable equity securities that have been remeasured during the period are classified
within Level 3 in the fair value hierarchy because the Company estimates the value based on valuation methods using the observable transaction
price at the transaction date and other unobservable inputs including volatility, rights, and obligations of the securities the Company
holds. The cost method is used when the Company has a passive, long-term investment that doesn’t result in influence over the Company.
The cost method is used when the investment results in an ownership stake of less than
| 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 | ||
| 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 are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those services. The Company derives its revenues from the sale of its services, as defined below. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its revenue transactions:
| i. | identify the contract with a customer; |
| ii. | identify the performance obligations in the contract; |
| iii. | determine the transaction price; |
| iv. | allocate the transaction price to performance obligations in the contract; and |
| v. | recognize revenue as the performance obligation is satisfied. |
The Company had minimal revenues of
$
| 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 March 31, 2023 and December 31, 2022, 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.
| 3 | LIQUIDITY MATTERS AND GOING CONCERN |
The Company’s financial statements
are prepared using accounting principles generally accepted in the United States (“U.S. GAAP”) applicable to a going concern,
which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has incurred
net losses since its inception and anticipates net losses and negative operating cash flows for the near future. For and as of the
three months ended March 31, 2023 and the year ended December 31, 2022, the Company had a net loss of $
The accompanying financial statements for the three months ended March 31, 2023 have been prepared assuming the Company will continue as a going concern, but the ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it establishes a revenue stream and becomes profitable. Management’s plans to continue as a going concern include raising additional capital through sales of equity securities and borrowing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. If the Company is not able to obtain the necessary additional financing on a timely basis, the Company will be required to delay, and reduce the scope of the Company’s development and operations. Continuing as a going concern is dependent upon its ability to successfully secure other sources of financing and attain profitable operations. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
The Company has determined that there is substantial doubt about their ability to continue as a going concern.
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 $
| March 31, 2023 |
December 31, 2022 |
|||||||||||||||
| Cost | Accumulated amortization |
Net Book Value |
Net book value |
|||||||||||||
| Purchase Technology – Beyond Wallet | $ | $ | $ | $ | ||||||||||||
| Purchased Technology - IPSIPay | ( |
) | ||||||||||||||
| $ | $ | ( |
) | $ | $ | |||||||||||
Amortization expense was $
| 5 | INVESTMENTS |
Investment in Frictionless Financial Technologies Inc.
The Company has an irrevocable right
to acquire up to an additional
The shares in Frictionless are unlisted as of March 31, 2023.
March 31, 2023 |
December 31, 2022 |
|||||||
| Investment in Frictionless Financial Technologies, Inc. | $ | $ | ||||||
| $ | $ | |||||||
| 6 | LEASES |
On March 22, 2021, the Company entered
into a real property lease for an office located at 56B 5th Street, Lot 1, #AT, Carmel By The Sea, California.
The Company applied the practical expedient whereby operating leases with a duration of twelve months or less are expensed as incurred.
Total Lease Cost
Individual components of the total lease cost incurred by the Company is as follows:
| Three months ended March 31, 2023 | Three months ended March 31, 2022 | |||||||
| Operating lease expense | $ | $ | ||||||
12
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 6 | LEASES (continued) |
Other lease information:
| Three months ended March 31, 2023 | Three months ended March 31, 2022 | |||||||
| Cash paid for amounts included in the measurement of lease liabilities | ||||||||
| Operating cash flows from operating leases | $ | ( | ) | $ | ( | ) | ||
| Remaining lease term – operating lease | ||||||||
| 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 repaid an aggregate principal amount of $
| 8 | NOTES PAYABLE |
On
February 16, 2021, the Company entered into separate Securities Purchase Agreements (the “SPAs”), with each of Cavalry Fund
I LP (“Cavalry”) and Mercer Street Global Opportunity Fund, LLC (“Mercer”), pursuant to which the Company received
$
In
terms of the December 30, 2022 Note Amendment Transaction, described in more detail in Note 9 below, the Original Warrants issued on
February 16, 2021 were irrevocably exchanged for 12-month non-convertible promissory notes in the amount of $
The
Exchange Notes have a maturity date of
Notes payable consists of the following:
| Description | Interest Rate |
Maturity date |
Principal | Accrued Interest |
March 31, 2023 Amount, net |
December 31, 2022 Amount, net |
||||||||||||||||
| Cavalry Fund I LP | % | |||||||||||||||||||||
| Mercer Street Global Opportunity Fund, LLC | % | |||||||||||||||||||||
| Total convertible notes payable | $ | $ | $ | $ | ||||||||||||||||||
Interest expense totaled $
13
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 9 | CONVERTIBLE NOTES PAYABLE |
December 2022 Note Amendment Transaction
On
February 16, 2021, we entered into separate SPAs with each of Cavalry and Mercer, pursuant to which we received $
The Original Warrants are discussed in note 8 above.
The
Company twice extended its indebtedness to each Cavalry and Mercer. On February 3, 2022, the Company agreed to extend the maturity date
of the Notes to
On December 30, 2022, the Company again extended the maturity dates of each of the Notes to December 30, 2023. Each of Cavalry and Mercer entered into Note Amendment Letter Agreement with the Company (the “Note Amendment”) pursuant to which the parties agreed to the following:
| (1) | The conversion price of the Notes was reduced from $ |
| (2) | The Original Warrants issued on February 16, 2021 were irrevocably exchanged for 12-month non-convertible promissory notes in the amount of $ |
| (3) | Each of Cavalry and Mercer agreed (i) not to convert all or any portion of the Notes until after March 30, 2023 and (ii) waive any events of default under the Notes and the SPAs; |
| (4) | Certain other warrants held by Cavalry and Mercer which contain a mandatory exercise provision allowing us to force exercise of such warrants if the price of the common stock is $ |
| (5) | The company was obligated to register the shares of common stock underlying the Notes and the shares underlying all warrants held by Cavalry and Mercer for resale with the Securities and Exchange Commission and the Company filed the registration statement to satisfy such registration obligation. |
The parties also acknowledged that
the principal and accrued interest under the Notes as of December 28, 2022 is equal to an aggregate of $
The amendments to the convertible
debt were evaluated in terms of ASC470, Debt, to determine if the amendments to the convertible debt were considered a modification of
the debt or an extinguishment of the debt. Based on the penalty interest incurred on the convertible notes of $
14
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 9 | CONVERTIBLE NOTES PAYABLE (continued) |
Convertible notes payable consists of the following:
| Description | Interest Rate |
Maturity date |
Principal | Accrued Interest |
Unamortized debt discount |
March 31, 2023 Amount, net | December 31, 2022 Amount, net | |||||||||||||||||||
| Cavalry Fund I LP | % | 2023 |
||||||||||||||||||||||||
| Mercer Street Global Opportunity Fund, LLC | % | 2023 |
||||||||||||||||||||||||
| February 2023 convertible notes | % | to February 23, 2024 |
( |
) | ||||||||||||||||||||||
| Total convertible notes payable | $ | $ | $ | ( |
) | $ | $ | |||||||||||||||||||
Interest expense totaled $
Amortization of debt discount totaled
$
The Cavalry and Mercer convertible notes have variable conversion prices based on a discount to market price of trading activity over a specified period of time. The variable conversion features were valued using a Black Scholes valuation model. The difference between the fair market value of the common stock and the calculated conversion price on the issuance date was recorded as a debt discount with a corresponding credit to derivative financial liability.
Cavalry Fund LLP
On February 16, 2021, the Company
closed a transaction with Cavalry, pursuant to which the Company received net proceeds of $
As described more fully above, the
maturity date of the note was extended to August 16, 2022, additionally to November 16, 2022 and again to December 30, 2023. In consideration
for the November 16, 2022 extension, the Company agreed to (i) increase the principal amount outstanding and due to Cavalry by twenty
percent (
The balance of the Cavalry Note plus
accrued interest at March 31, 2023 was $
15
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 9 | CONVERTIBLE NOTES PAYABLE (continued) |
Mercer Street Global Opportunity Fund, LLC
On February 16, 2021, the Company
closed a transaction with Mercer, pursuant to which the Company received net proceeds of $
As described more fully above, the
maturity date of the note was extended to August 16, 2022, additionally to November 16, 2022 and again to December 30, 2023. In consideration
for the November 16, 2022 extension, the Company agreed to (i) increase the principal amount outstanding and due to Mercer by twenty
percent (
The balance of the Mercer Note plus
accrued interest at March 31, 2023 was $
February 2023 convertible notes
Between February 13, 2023 and February
23, 2023, the Company, entered into Securities Purchase Agreements (the “Securities Purchase Agreement”) with 11 accredited
investors, pursuant to which the Company received an aggregate of $
| ● | Convertible Notes Promissory (the “Notes” and each a “Note”); and |
| ● | five-year warrants (the “Warrants”) to purchase an aggregate |
The Notes mature in 12 months, bears
interest at a rate of
The Notes and the Warrants contain
conversion limitations providing that a holder thereof may not convert the Notes or exercise the Warrants to the extent that, if after
giving effect to such conversion, the holder or any of its affiliates would beneficially own in excess of
The balance of the February 2023 Notes
plus accrued interest at March 31, 2023 was $
| 10 | DERIVATIVE LIABILITY |
Certain of the short-term convertible notes disclosed in note 9 above and certain warrants disclosed in note 11 below, have variable priced conversion rights with no fixed floor price and will re-price dependent on the share price performance over varying periods of time and certain notes and warrants have fundamental transaction clauses which might result in cash settlement, due to these factors, all convertible notes and any warrants attached thereto are valued and give rise to a derivative financial liability, which was initially valued at inception of the convertible notes using a Black-Scholes valuation model.
16
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 10 | DERIVATIVE LIABILITY (continued) |
On December 30, 2022, the Company entered into the December 2022 Note Amendment transaction (“the Note Amendment”) as fully described under note 9 above. Included in the derivative liability is: (i) the Original Warrants which were exchanged for non-convertible promissory notes, (ii) the Cavalry and Mercer convertible notes which were subject to the Note Amendment and (ii) the Cavalry and Mercer Extension Warrants as well as certain other warrants due to Cavalry and Mercer and certain other warrant holders. The Note Amendment triggered a repricing of certain of these warrants.
The derivative liability on the Cavalry
and Mercer convertible notes and the warrants affected by the note amendment were marked-to-market immediately prior to the Note Amendment
resulting in a market to market movement on the original warrants, the convertible notes and the extension warrants and certain other
warrants, which were subject to a full rachet provision, of $
The net movement on the derivative
liability for the three months ended March 31, 2023 was a net mark-to-market release of derivative liability of $
The following assumptions were used in the Black-Scholes valuation model:
| Three months ended March 31, 2023 | Year ended December 31, 2022 | |||||||
| Conversion price | $ | $ | ||||||
| Risk free interest rate | % | % | ||||||
| Expected life of derivative liability | ||||||||
| Expected volatility of underlying stock | | % | | % | ||||
| Expected dividend rate | % | % | ||||||
The movement in derivative liability is as follows:
March 31, | December 31, | |||||||
| Opening balance | $ | $ | ||||||
| Derivative financial liability arising from convertible note and warrants | ||||||||
| Derivative financial liability arising on note amendment included in loss on convertible notes | ||||||||
| Fair value adjustment to derivative liability | ( | ) | ( | ) | ||||
| $ | $ | |||||||
| 11 | STOCKHOLDERS’ EQUITY |
| a. | Common Stock |
The Company has total authorized Common
Stock of
17
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 11 | STOCKHOLDERS’ EQUITY (continued) |
| b. | Restricted stock awards |
A summary of restricted stock activity during the period January 1, 2022 to March 31, 2023 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, 2022 | $ | $ | $ | |||||||||||||||||||||
| Granted and issued | ||||||||||||||||||||||||
| Forfeited/Cancelled | ||||||||||||||||||||||||
| Vested | ( | ) | ( | ) | ||||||||||||||||||||
| Outstanding December 31, 2022 | $ | $ | $ | |||||||||||||||||||||
| Granted and issued | ||||||||||||||||||||||||
| Forfeited/Cancelled | ||||||||||||||||||||||||
| Vested | ( | ) | ( | ) | ||||||||||||||||||||
| Outstanding March 31, 2023 | $ | - | $ | $ | ||||||||||||||||||||
The restricted stock granted, issued and exercisable at March 31, 2023 is as follows:
| Restricted Stock Granted and Vested | |||||||||
| Grant date Price | Number Granted | Weighted Average Fair Value per Share | |||||||
| $ | 0.049 | $ | |||||||
| $ | 0.050 | ||||||||
| $ | 0.055 | ||||||||
| $ | |||||||||
The Company has recorded an expense
of $
| c. | Preferred Stock |
The Company has authorized
| d. | Warrants |
Effective July 8, 2022 (the “Effective Date”), the Company entered into an Endorsement Agreement with Pez-Mar, Inc., a California corporation (“Pez-Mar”), to furnish the services of Mario Lopez (“Lopez”). Pursuant to the Endorsement Agreement, Lopez will act as a Company spokesperson in connection with the promotion, advertisement and endorsement of the Company’s physical and virtual payment processing and money remittance business and the Company’s related products and services.
The Endorsement Agreement has a term of two (2) years from the Effective Date (the “Term”), which is subject to earlier termination on customary terms and conditions. The parties have agreed to certain deliverables of Lopez during the term of the agreement, including with respect to social media posts, television commercials, interviews and photo shoots. The Endorsement Agreement also contains other customary terms, covenants and conditions, including representations and warranties, restrictions on endorsements of competitive products during the term of the agreement, confidentiality, indemnification, and Pez-Mar and Lopez’s independent contractor status.
18
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 11 | STOCKHOLDERS’ EQUITY (continued) |
| d. | Warrants (continued) |
As compensation for the services provided
under the Endorsement Agreement, Lopez or their designees are entitled to the following payments:
On August 30, 2022, the Company extended
the maturity date of convertible notes issued to Cavalry and Mercer and agreed to grant each note holder a warrant exercisable for
On December 30, 2022, the Company issued
to Frictionless a 5 year warrant to purchase
On December
30, 2022,
| ● | The warrants issued to Cavalry and Mercer exercisable for 4,973,914 shares of common stock (2,486,957 for each of Cavalry and Mercer), were exchanged for two promissory notes of $482,000 each, as disclosed in note 8 above; |
| ● | The warrants issued to Cavalry and Mercer on August 30, 2022, were subject to repricing and a full rachet increase in the number of warrants issued, resulting in an increase in the number of warrants by 72,260,870 (36,130,435 to each Cavalry and Mercer) and a reset of the exercise price to $0.0115 per share. The additional warrants were valued at $841,003 using a Black-Scholes valuation model and was expensed in the statement of operations as a component of the loss on convertible debt. |
| ● | An additional 13,736,857 warrants previously issued to Mercer, Iroquois Master Fund and Bellridge Capital LP were subject to repricing of the exercise price from a range of $0.05 to $0.15 per share to $0.0115 per share. The change in the fair value of these warrants of $20,079, using a Black-Scholes valuation model was recorded as a component of the loss on convertible debt. |
Between February
13, 2023 and February 23, 2023, the Company entered into Securities Purchase Agreements with 11 accredited investors, as disclosed in
Note 9 above. In terms of these Securities Purchase Agreements, the Company issued five-year warrants to purchase an aggregate
The Warrants
contain conversion limitations providing that a holder thereof may not exercise the Warrants to the extent that, if after giving effect
to such exercise, the holder or any of its affiliates would beneficially own in excess of
19
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 11 | STOCKHOLDERS’ EQUITY (continued) |
| d. | Warrants (continued) |
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:
| Three months ended March 31, 2023 |
||||
| Exercise price | $ | |||
| Risk free interest rate | % | |||
| Expected life | ||||
| Expected volatility of underlying stock | % | |||
| Expected dividend rate | % | |||
A summary of warrant activity during the period January 1, 2022 to March 31, 2023 is as follows:
| Shares Underlying Warrants |
Exercise price per share |
Weighted average exercise price |
||||||||||
| Outstanding January 1, 2022 | $ | $ | ||||||||||
| Granted | |
|||||||||||
| Increase in warrants due to debt amendment full rachet trigger | ||||||||||||
| Cancelled on debt amendment | ( |
) | ||||||||||
| Exercised | ||||||||||||
| Outstanding December 31, 2022 | $ | |
$ | |||||||||
| Granted | |
|||||||||||
| Forfeited | ( |
) | ||||||||||
| Cancelled on debt amendment | ||||||||||||
| Exercised | ||||||||||||
| Outstanding March 31, 2023 | $ | |
$ | |||||||||
The warrants outstanding and exercisable at March 31, 2023 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 $
20
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 11 | STOCKHOLDERS’ EQUITY (continued) |
| e. | Stock options |
On June 18, 2018, the Company established
its 2018 Stock Incentive Plan (the “Plan”). The purpose of the Plan is to promote the interests of the Company and the stockholders
of the Company by providing directors, officers, employees and consultants of the Company with appropriate incentives and rewards to
encourage them to enter into and continue in the employ or service of the Company, to acquire a proprietary interest in the long-term
success of the Company and to reward the performance of individuals in fulfilling long-term corporate objectives. The Plan terminates
after a period of
The Plan is administered by the Board or a committee appointed by the Board, who have the authority to administer the Plan and to exercise all the powers and authorities specifically granted to it under the Plan.
The maximum number of securities available
under the Plan is
On October 22, 2021, the Company established
its 2021 Stock Incentive Plan (“2021 Plan”). The purpose of the Plan is to promote the interests of the Company and the stockholders
of the Company by providing directors, officers, employees and consultants, advisors and service providers of the Company with appropriate
incentives and rewards to encourage them to enter into and continue in the employ or service of the Company, to acquire a proprietary
interest in the long-term success of the Company and to reward the performance of individuals in fulfilling long-term corporate objectives.
The Plan terminates after a period of
The 2021 Plan is administered by the Board or a Compensation Committee appointed by the Board, who have the authority to administer the Plan and to exercise all the powers and authorities specifically granted to it under the Plan.
The maximum number of securities available
under the 2021 Plan is
Under the 2021 Plan the company may award the following: (i) non-qualified stock options; (ii)) incentive stock options; (iii) stock appreciation rights; (iv) restricted stock; (v) restricted stock unit; and (vi) other stock-based awards.
On July 11, 2022, the Board approved,
granted and issued
On September 13, 2022, the Company
granted ten-year options exercisable for
A summary of option activity during the period January 1, 2022 to March 31, 2023 is as follows:
| Shares Underlying options |
Exercise price per share |
Weighted average exercise price |
||||||||||
| Outstanding January 1, 2022 | $ | $ | ||||||||||
| Granted | |
|||||||||||
| Forfeited/Cancelled | ||||||||||||
| Exercised | ||||||||||||
| Outstanding December 31, 2022 | $ | $ | ||||||||||
| Granted | ||||||||||||
| Forfeited/Cancelled | ||||||||||||
| Exercised | ||||||||||||
| Outstanding March 31, 2023 | $ | $ | ||||||||||
21
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 11 | STOCKHOLDERS’ EQUITY (continued) |
| e. | Stock options (continued) |
The options outstanding and exercisable at March 31, 2023 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 $
| 12 | 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 months ended March 31, 2023 and 2022 all warrants, options and convertible debt securities were excluded from the computation of diluted net loss per share.
Dilutive shares which could exist pursuant to the exercise of outstanding stock instruments and which were not included in the calculation because their affect would have been anti-dilutive for the three months ended March 31, 2023 and 2022 are as follows:
| Three months ended March 31, 2023 (Shares) | Three months ended March 31, 2022 (Shares) | |||||||
| Convertible debt | ||||||||
| Stock options | ||||||||
| Warrants to purchase shares of Common Stock | ||||||||
22
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 13 | RELATED PARTY TRANSACTIONS |
The following transactions were entered into with related parties:
James Fuller
On September 13, 2022, the Company
granted Mr. Fuller ten-year options exercisable for
The option expense for Mr. Fuller
was $
Mr. Fuller voluntarily resigned as a member of the Board of Directors effective as of our 2022 annual meeting of shareholders which occurred on November 3, 2022.
William Corbett
On July 11, 2022, the Company granted
Mr. Corbett ten-year options exercisable for
The option expense for Mr. Corbett
was $
Clifford Henry
Mr. Henry has an oral consulting arrangement
with the Company whereby he is paid $
On September 13, 2022, the Company
granted Mr. Henry, immediately vesting, ten-year options exercisable for
The option expense for Mr. Henry was
$
Madisson Corbett
On September 13, 2022, the Company
granted Ms. Corbett, immediately vesting, ten-year options exercisable for
The option expense for Ms. Corbett
was $
David Rios
On September 13, 2022, the Company
granted Mr. Rios, immediately vesting, ten-year options exercisable for
The option expense for Mr. Rios was
$
23
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| 13 | RELATED PARTY TRANSACTIONS (continued) |
Richard Rosenblum
On July 11, 2022, the Company granted
Mr. Rosenblum
The option expense for Mr. Rosenblum
was $
| 14 | COMMITMENTS AND CONTINGENCIES |
The Company has notes payable and convertible notes payable, disclosed under note 8 and 9 above, which mature between December 30, 2023 and February 23, 2024. The Company may settle the notes payable, at its option by the issue of common shares and should the convertible notes not be converted to Common Stock prior to their maturity dates, the Company may need to repay the principal and interest outstanding on these notes.
| 15 | SUBSEQUENT EVENTS |
On April 28, 2023, the Company formed a new Delaware limited liability company called IPSIPay Express LLC. This entity was formed as a three-way joint venture with two other entities to develop and market a proprietary consumer to merchant real-time payment platform initially focused on the fast-growing online gaming and entertainment sectors. As of the date of issuance of these financial statements, definitive documentation memorializing the joint venture are being finalized.
On May 10,
2023, the Company entered into a Securities Purchase Agreement with 1800 Diagonal Lending LLC (“1800”) pursuant to which the
Company issued a promissory note (the “1800 Note”) to 1800 in the aggregate principal amount of $
On May 12,
2023,
24
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 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.
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. As of May 10, 2023, we had achieved approximately 56,600 downloads and over 5,400 active users with wallets.
Our launch plan for IPSIPay 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.
Known Trends, Demands, Commitments, Events or Uncertainties Impacting Our Business
Launch and Scaling of E-Wallets; IPSIPay Express
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 downloads achieved and revenue generated from transactions process by customers via IPSIPay. Presently, our ability to generate meaningful revenue from customer use of IPSIPay 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 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 generated nominal IPSIPay-related revenue during the first quarter of 2023, with the goal of increasing revenues over time. In the current environment, it has proven to take longer to win a customer’s trust and resulting fee generating usage of our apps. This is especially true when it relates to the unbanked and underserved sending money abroad. We initiated an aggressive digital marketing campaign late in the third quarter of 2022, and have since achieved over 50,000 downloads of IPSIPay and seen a steady growth of the issuance of debit Visa cards via IPSIPay. While we have not seen any significant revenue from these endeavors, we believe the brand we are building and the impressions we have recorded should help us grow the awareness and use of our apps during 2023. Our ability to reach sufficient scale of our business and generate sufficient revenue is, however, unproven and speculative 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 business, our company could be severely harmed or could fail.
In May 2023, we publicly announced a new line of business called IPSIPay Express, a three-way joint venture with payment industry veterans OpenPath and eFinityPay to develop and market a proprietary consumer to merchant real-time payment platform initially focused on the fast-growing online gaming and entertainment sectors. As of the date of this Report, the definitive documentation memorializing this joint venture remains in the process of being finalized. While we believe the IPSIPay Express opportunity has great promise, no assurances can be given that IPSIPay Express will be successfully launched or will generate revenues or otherwise have a positive impact on our results of operations.
Also, May 12, 2023, we entered into an agreement with one of our technology partners, Frictionless Financial Technologies, Inc. (“Frictionless”), to, among other things, divest ourselves of our interest in Frictionless and in Beyond Fintech, Inc., a joint venture entity we owned with Frictionless which has been developing an application called Beyond Wallet. See Note 15 to the accompanying financial statements for further information.
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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.
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.
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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; |
| ● | 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 $500,000 and Intangible assets of $1,631,739 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 March 31, 2023.
Results of Operations
Results of Operations for the Three Months Ended March 31, 2023 and 2022
Net revenue
We recorded minimal revenues of $433 during the three months ended March 31, 2023 and we did not have revenues during the three months ended March 31, 2022. Our goal is to increase revenue as our product becomes more widely used and we are exploring different market segments to increase our revenue from our e-wallets. We have utilized financial promotional strategies to encourage downloads and use of IPSIPay, which has reduced our ability to generate revenues in the near term while such strategies are in effect.
Cost of goods sold
Cost of goods sold was $2,085 for the three months ended March 31, 2023 and consists primarily of bank and merchant related fees and chargebacks. We had no cost of goods sold, as we did not have revenues during the three months ended March 31, 2022.
General and administrative expenses
General and administrative expenses were $965,207 and $869,387 for the three months ended March 31, 2023 and 2022, respectively, an increase of $95,820 or 11.0%. The increase is primarily due to the following:
| (i) | Professional fees was $240,136 and $63,966 for the three months ended March 31, 2023 and 2022, respectively, an increase of $176,170 or 275.4%. The increase is primarily due to the increase in fees from Frictionless related to operating the payment platform which was launched in the second quarter of the prior year. |
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| (ii) | Legal fees was $135,523 and $35,369 for the three months ended March 31, 2023 and 2022, respectively, an increase of $100,154 or 283.2%. The increase is primarily due to a lawsuit filed against the company at the end of the first quarter in the prior year and other general corporate legal fees related to financing and corporate structure. | |
| (iii) | Selling and marketing expenses was $169,958 and $118,677 for the three months ended March 31, 2023 and 2022, respectively, an increase of $51,281 or 43.2%. The increase is primarily related to the Lopez endorsement agreement entered into during the third quarter of the prior year to facilitate the launch of the IPSIPay wallet, this was offset by a reduction in social media activity during the current period. | |
| (iv) | Payroll expenses was $279,764 and $377,596 for the three months ended March 31, 2023 and 2022, respectively, a decrease of $97,832 or 25.9%. The decrease is primarily due to the reduction in head count of 2 over the prior period and the amortization of restricted stock in the prior year of $62,766, which was fully vested on January 1, 2023. | |
| (v) | Other general and administrative expenses was $25,942 and $174,294 for the three months ended March 31, 2023 and 2022, respectively, a decrease of $148,352 or 85.1%. The decrease includes a decrease in audit fees of $105,000 due to the timing of billing, a reduction in directors fees of $16,500 due to the resignation of a director in the fourth quarter of the prior year and the reduction in directors fees by $3,000 per quarter per director and a reduction in investor relations expense of $22,500, no investor relations expenditure was incurred during the current period. | |
| (iv) | The balance of the general and administrative expenses decreased by $14,399, which is made up of several individually insignificant expenses. |
Depreciation
Depreciation was $140,690 and $4,496 for the three months ended March 31, 2023 and 2022, respectively, an increase of $136,194 or 3,029.2%, primarily due to the amortization of the IPSIPay platform which commenced during the third quarter of the prior year.
Penalty on convertible notes
Penalty on convertible notes was $0 and $719,558 for the three months ended March 31, 2023 and 2022, a decrease of $719,558 or 100.0%. The decrease is due to the repayment of one convertible note and the modification of the maturity date of two convertible notes in the prior period, resulting in the triggering of the repayment penalty per the convertible note agreements as well as an additional 10% penalty for the extension of the maturity date.
Interest expense, net
Interest expense was $85,221 and $45,766 for the three months ended March 31, 2023 and 2022, respectively, an increase of $39,455 or 86.2%. The increase is due to: (i) the issuance of promissory notes in the aggregate principal amount of $964,000 in exchange for certain warrants on December 30, 2022, which promissory notes bear interest at 10% per annum; (ii) the issuance of convertible debt with an aggregate principal amount of $535,000 during February 2023, bearing interest at 8% per annum; and (iii) the penalty and capitalization of interest on the extension of the maturity of certain convertible notes during 2022, resulting in an increase in the interest charge during the current period.
Amortization of debt discount
Amortization of debt discount was $22,967 and $263,200 for the three months ended March 31, 2023 and 2022, respectively, a decrease of $240,233 or 91.3%. The decrease is primarily due to the complete amortization of debt discount on convertible notes issued on February 2021, offset by amortization of debt discount on the convertible notes issued during February of the current period.
Derivative liability movements
Derivative liability movements were $(940,750) and $(92,161) for the three months ended March 31, 2023 and 2022, respectively, an increase of $(848,589) or 920.8%. The derivative liability arose due to the issuance of convertible securities with a fundamental transaction clause allowing for a cash settlement of the convertible note and the associated warrants at the option of the holder. The charge during the current period represents the reduction in the mark -to -market value of the derivative liability outstanding as of March 31, 2023.
Net loss
Net loss was $274,987 and $1,810,246 for the three months ended March 31, 2023 and 2022, respectively, a decrease in loss of $1,535,259 or 84.8%. The decrease is primarily due to the increase in the derivative liability movements, the decrease in the penalty on convertible debt and the decrease in the amortization of debt discount, offset by an increase in general and administrative expenses, depreciation expense and interest expense, as discussed above.
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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 $52,673,248 through March 31, 2023 and incurred negative cash flow from operations of $688,304 for the three months ended March 31, 2023. Our primary focus is on launching and 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 March 31, 2023, we had cash of $155,868 and working capital deficit of $5,892,017 including a derivative liability of $1,609,892. After eliminating the derivative liability our working capital deficit is $4,282,125. Subsequent to March 31, 2023, on May 10, 2023 we raised $104,750 through the issuance of a promissory note to an institutional investor.
We utilized cash of $688,304 and $760,918 in operations for the three months ended March 31, 2023 and 2022, respectively. Overall cash utilized in operations decreased by $72,614, due to cost containment to preserve cash balances.
We invested a further $64,783 in our e-wallet platforms to enhance the product offering and to further develop the Beyond Wallet application. As of the date of this Report, we have entered into an agreement to divest ourselves of our interest in Beyond Fintech and the Beyond Wallet application (see Note 15 to the accompanying financial statements for further information).
We generated cash of $534,191 during the current period primarily $535,000 from convertible notes issued to investors to bridge our working capital needs and minor repayments of $809 on federal relief loans during the current period. Cash utilized in financing activities for the three months ended March 31, 2022 was the repayment of a convertible note of $1,147,063.
At March 31, 2023, we had outstanding notes in the principal amount of $2,861,339 ($2,632,451 net of debt discount of $228,888). 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 rates of 8% to 10% per annum. and are convertible into our common stock at a conversion price of $0.0115 per share (as adjusted for stock splits, stock combinations, dilutive issuances and similar events). 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 restrict our investment in our e-wallet products, capital expenditure is expected to be less than $100,000 during the next twelve month period.
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.
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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 March 31, 2023 are not effective due to a lack of written policies and procedures to address all material transactions and developments impacting our financial statements.
(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 March 31, 2023.
Our management is committed to improving our controls and procedures by, among other matters, continuing to consider and adopt appropriate policies and procedures to address all material transactions and developments impacting our financial statements. However, our management does not expect that our disclosure controls and procedures and our internal control processes, even if improved, will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of error or fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that the breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
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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 States 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 alleged that complainants, four former employees of our company and one employee who was 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 sought 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 May 25, 2022, the parties held a mediation in an attempt to resolve the matters. The mediation was unsuccessful.
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 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.
On November 7, 2022, the same five employees filed a lawsuit, not in federal court, but in the California Superior Court for the County of Los Angeles, against IPSI and the same individuals against whom they had asserted their OSHA claim. The complaint asserted claims for, inter alia, breach of contract, failure to pay wages and failure to reimburse expenses under the California Labor Code and asserting retaliation claims under the California Labor Code. On December 16, 2022, the same five employees filed an amended complaint dropping all defendants from the case except Mr. Corbett and IPSI. The amended complaint asserts claims for violations of California Labor Code Section 1102.5; wrongful termination in violation of public policy; breach of contract; breach of covenant of good faith and fair dealing; violation of California Labor Code Section 201; waiting time penalties (Cal. Lab. Code Sections 201 & 203) and violation of California Labor Code Section 2802
Defendants moved to compel arbitration on February 17, 2023. As a result of that motion and a stipulated order entered by the court, all proceedings are stayed until the motion to compel arbitration is heard and decided. The hearing for the motion to compel arbitration was scheduled for May 4, 2023. The court held its ruling in abeyance to allow limited discovery and additional briefing. Another hearing is expected to be held in mid-June 2023.
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.
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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. Our opening brief in the appeal is due on May 19, 2023.
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.
(a) Between February 13, 2023 and February 17, 2023, we entered into Securities Purchase Agreements with 7 accredited investors, pursuant to which we received an aggregate of $535,000 in gross proceeds from the Investors through the initial closing of a private placement issuance of:
| ● | Convertible Notes Promissory (the “Notes” and each a “Note”); and |
| ● | five-year warrants (the “Warrants” and each a “Warrant”) to purchase an aggregate 36,956,521 shares of the Company’s common stock (the “Common Stock”) at an exercise price of $0.0115 per share (as adjusted for stock splits, stock combinations, dilutive issuances and similar events). |
The Notes mature in 12 months, bears interest at a rate of 8% per annum, and are convertible into shares of Common Stock at a conversion price of $0.0115 per share (as adjusted for stock splits, stock combinations, dilutive issuances and similar events).
The Notes may be prepaid at any time without penalty. The Company is under no obligation to register the shares of Common Stock underlying the Notes or the Warrants for public resale.
(b) On May 10, 2023, we entered into a Securities Purchase Agreement with 1800 Diagonal Lending LLC (“1800”) pursuant to which we issued a promissory note (the “1800 Note”) to 1800 in the aggregate principal amount of $117,320 (including $12,570 of original issue discount) for gross proceeds to us of $104,750. The 1800 Note carries a one-time interest charge equal to thirteen percent (13%) of the principal amount of the 1800 Note. The 1800 Note is unsecured, has a maturity date of May 10, 2024, carries a default interest rate of twenty-two percent (22%) per annum and contains customary events of default. We are required to begin mandatory monthly repayments of the 1800 Note beginning June 15, 2023 in the amount of $13,257.10 per month. Only following an event of default under the 1800 Note, the principal amount then outstanding under the 1800 Note (plus, at 1800’s option accrued interest thereon, including default interest if applicable) is convertible into shares of Common Stock at a price equal to sixty (60%) multiplied by the lowest trading price for the Common Stock during the twenty (20) trading days prior to the date of conversion.
The securities described above were sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and/or Rule 506(b) of Regulation D promulgated thereunder. The Investors are accredited investors who have purchased the securities as an investment in a private placement that did not involve a general solicitation. The Common Stock to be issued upon conversion of the Notes or the 1800 Note and the exercise of the Warrants have not been registered under the Securities Act and may not be offered or sold in the United States in the absence of an effective registration statement or exemption from the registration requirements.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits
| * | Filed herewith |
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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: May 15, 2023 |
By: | /s/ William D. Corbett |
| William D. Corbett | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
Date: May 15, 2023 |
By: | /s/ Richard Rosenblum |
| Richard Rosenblum | ||
| President & Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) |
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Exhibit 10.1
AGREEMENT
This Agreement (the “Agreement”) is made and entered into as of this 12th day of May, 2023 by and between FRICTIONLESS FINANCIAL TECHNOLOGIES, INC., a Delaware corporation (“FFT”) and INNOVATIVE PAYMENT SOLUTIONS, INC., a Nevada corporation (“IPSI”).
RECITALS
WHEREAS, FFT and IPSI entered into that certain Stock Purchase Agreement dated as of June 22, 2021 (the “SPA”); and
WHEREAS, pursuant to the provisions of the SPA, IPSI purchased 150 shares of common stock of FTT (the “FFT Shares”) for $500,000 (the “FFT Shares Purchase Price”), representing ten percent (10%) of the outstanding shares of common stock of FFT; and
WHEREAS, pursuant to the provisions of Section 7.4 of the SPA, IPSI is obligated to issue to FFT a non-restricted non-dilutable 5 year warrant to purchase 30,000,000 shares of IPSI common stock (the “Warrant”); and
WHEREAS, pursuant to Section 7.6 of the SPA, IPSI has been granted the right to acquire an additional 41% of the issued and outstanding shares of common stock of FFT at $300,000 for each 1% of the outstanding FFT Shares issued (the “IPSI Option”); and
WHEREAS, IPSI is the record owner of 765 shares of capital stock of Beyond Fintech, Inc., a Delaware corporation (“Fintech”), constituting 51% of the issued and outstanding shares of capital stock of Fintech (the “Fintech Shares”); and
WHEREAS, FFT and IPSI are parties to that certain SaaS Cloud Hosted Services Enablement Master Services Agreement, dated September 9, 2021 (including its exhibits and attachments, the “SAAS Agreement”), pursuant to which FFT has provided certain information technology, supplier access, billing and rating technology, mobile wallet/debit card enablement, back-office support services, customer service, and consulting services to IPSI (as further defined in the SAAS Agreement, the “Services”) related to IPSI’s IPSIPay® mobile application (“IPSIPay”); and
WHEREAS, as a result of extensive discussions and negotiations between FFT and IPSI, it has been decided that it is in the mutual best interests of both parties to disengage their various ownership interests and designated other rights, with the result that, from and after the Closing Date, the sole relationship between FFT and IPSI, and their respective Affiliates, shall be one where FFT and its Affiliates are strictly providers of Services to IPSI under the SAAS Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows.
ARTICLE I
RECITALS AND DEFINITIONS
| 1.1 | Recitals. The Recitals set forth above are incorporated herein in their entirety by this reference, and this Agreement shall be interpreted in light thereof. |
| 1.2 | Definitions. Each initially-capitalized term used but not defined has the meaning set forth below in this Section 1.2. |
“Affiliate” means, with respect to any specified Person, any Person that directly or indirectly controls, is directly or indirectly controlled by or is directly or indirectly under common control with such specified Person. As used in this definition, “control” (including “controlled by’ and “under common control with” ) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise and shall be construed as such term is used in the rules promulgated under the Securities Act of 1933.
“Business Day” means any day other than a Saturday or Sunday or any other day on which banks in Boston, Massachusetts or San Francisco, California are permitted or required to be closed.
“Closing Date” means the date on which the Closing actually takes place, but in no event later than May 15, 2023.
“Governmental Entity” means any federal, state or local department, agency or governing or regulatory body or self-regulatory organization (including any stock exchange) in the United States or any foreign country which has jurisdiction over a party hereto or its Affiliate.
“Person” means an individual, partnership, corporation, business trust, limited liability company, limited liability partnership, joint stock company, trust, estate, unincorporated association, joint venture or other entity or Governmental Entity.
ARTICLE II
FFT SHARES, THE WARRANT AND THE IPSI OPTION
2.1 Assignment and Transfer of FFT Shares. At the Closing on the Closing Date, and in consideration of the benefits received or to be received by IPSI pursuant to this Agreement, IPSI shall assign and transfer to FFT the FFT Shares free and clear of any and all taxes, charges, impositions, purchase rights, liens, claims, equities, security interests or encumbrances. Such transfer and assignment shall be effectuated by IPSI’s execution and delivery to FFT of an Assignment in the form of Exhibit 1 attached hereto.
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2.2 Cancellation of the Warrant. At the Closing on the Closing Date, without the requirement of any action by FFT or any other person or entity, and subject to the performance of the transfer obligation of IPSI set forth in Section 2.1 above, the Warrant and all rights of FTT under the SPA to any warrant or other securities of IPSI or its Affiliates or subsidiaries as provided for in the SPA or otherwise shall be deemed automatically cancelled and terminated in its entirety and of no further force or effect, and such cancellation shall be deemed to be in full payment and consideration for the transfer to FFT of the FFT Shares and further in consideration of the benefits received or to be received by FFT pursuant to this Agreement.
2.3 The IPSI Option. In addition to the cancellation of the Warrant constituting payment and consideration for the FFT Shares, the cancellation of the Warrant is also deemed to constitute full and complete payment and consideration for the cancellation of the IPSI Option. At the Closing on the Closing Date, without the requirement of any action by IPSI or any other person or entity, the IPSI Option shall be deemed automatically cancelled in its entirety and of no further force or effect.
ARTICLE III
THE FINTECH SHARES
3.1 The Fintech Shares. At the Closing on the Closing Date IPSI shall transfer and assign to FFT the Fintech Shares free and clear of any and all taxes, charges, impositions, purchase rights, liens, claims, security interests, equities and encumbrances. The transfer and assignment of the Fintech Shares shall be effectuated by the execution and delivery by IPSI to FFT of an Assignment in the form of Exhibit 1 attached hereto.
3.2 Purchase Price and Method of Payment for the Fintech Shares. The purchase price for the Fintech Shares is $250,000 United States Dollars (the “Fintech Shares Purchase Price”). The Fintech Shares Purchase Price shall not bear interest and shall be paid in the form of a 20% credit against invoices issued by FFT or its Affiliates to IPSI or its Affiliates for work done under the SAAS Agreement between the Closing Date and the 18 month anniversary of the Closing Date (the “Anniversary Date”) until the Fintech Shares Purchase Price is paid in full; provided, however, that FFT may, at any time and in its sole discretion accelerate payment of all or any portion of the Fintech Shares Purchase Price with payments to IPSI in cash. Anything herein to the contrary notwithstanding, if the 20% credits contemplated in this Section 3.2 shall be insufficient to pay the Fintech Shares Purchase Price in full on or before the Anniversary Date, then any unpaid balance of the Fintech Shares Purchase Price as of the Anniversary Date shall be deemed immediately and irrevocably cancelled and forgiven and neither FFT nor any of its Affiliates shall be deemed to have any further obligation with respect thereto.
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ARTICLE IV
ADDITIONAL COVENANTS AND AGREEMENTS
4.1 Right to Provide Financing. Effective with the consummation of the Closing on the Closing Date, and without the requirement of any action by FFT, IPSI, or any other Person, Section 7.6.1 of the SPA shall be deemed immediately and irrevocably deleted and of no further force or effect, so that IPSI shall no longer have the right to participate in any future financing activity of FFT.
4.2 Appointment of Director. IPSI acknowledges that, upon the consummation of the Closing on the Closing Date, IPSI shall no longer be the record or beneficial owner of shares of FFT and, as a result thereof, IPSI shall no longer have any right to appoint any individual to serve as its representative on the Board of Directors of FFT pursuant to Section 7.5 of the SPA.
4.3 No Continuing Interest by IPSI or its Affiliates. IPSI, on its own behalf and on behalf of each of its Affiliates and as it relates to any of FFT, Fintech or any of their respective Affiliates, acknowledges and agrees that, upon the consummation of the Closing on the Closing Date, it shall have no claim to, or interest in, any portion of FFT’s, Fintech’s or any of their respective Affiliate’s assets (whether tangible, intangible or mixed), rights, privileges, options, proceeds, or business opportunities in development or operation, and whether currently existing or hereafter arising. IPSI further acknowledges and agrees that, except for FFT’s obligation to pay the purchase price for shares hereunder, or FFT’s obligations to provide Services under the SAAS Agreement, neither FFT nor Fintech, nor any of their respective Affiliates, is obligated to IPSI or any of its Affiliates for any amount, performance or other obligation of any type or description.
4.4 No Continuing Interest by FFT or its Affiliates. FFT, on its own behalf and on behalf of each of its Affiliates and as it relates to any of IPSI or any of its Affiliates, acknowledges and agrees that, upon the consummation of the Closing on the Closing Date, it shall have no claim to, or interest in, any portion of IPSI or its Affiliate’s assets (whether tangible, intangible or mixed), rights, privileges, options, proceeds, or business opportunities in development or operation, and whether currently existing or hereafter arising.
4.5 Release by IPSI and its Affiliates. Except with respect to (a) the payment and performance obligations of FFT set forth in this Agreement or (b) the payment or performance obligations of FFT under the SAAS Agreement or (c) the right to enforce this Agreement or the SAAS Agreement, all of which are expressly not waived or released by this Section 4.5, IPSI, on its own behalf and on behalf of each of its Affiliates, fully and forever waives, releases and discharges FFT and its past and current officers, directors, employees, shareholders, agents and attorneys, from any and all claims, demands, actions, causes of action, obligations, judgments, rights, fees, damages, debts, obligations, liabilities, and expenses (inclusive of attorneys’ fees) of any kind whatsoever, whether known or unknown, from the beginning of time to the Closing Date.
4.6 Release by FFT and its Affiliates. Except with respect to (a) the payment and performance obligations of IPSI set forth in this Agreement or (b) the payment or performance obligations of IPSI under the SAAS Agreement or (c) the right to enforce this Agreement or the SAAS Agreement, all of which are expressly not waived or released by this Section 4.6, FFT, on its own behalf and on behalf of its Affiliates, fully and forever waives, releases and discharges IPSI and its past and current officers, directors, employees, agents and attorneys from any and all claims, demands, actions, causes of actions, obligations, judgments, rights, fees, damages, debts, obligations, liabilities and expenses (inclusive of attorneys’ fees) of any kind whatsoever, whether known or unknown, from the beginning of time to the Closing Date.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES BY IPSI
5.1 Representations and Warranties of IPSI. IPSI hereby makes the following representations and warranties to FFT as of the date hereof and as of the Closing Date as though made at the Closing Date:
5.1.1 Organization. IPSI is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada, and has the requisite corporate power and authority to own, lease and operate its assets and properties, and to carry on its business as it is now being conducted.
5.1.2 Power and Authority. IPSI has all necessary corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder, and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by IPSI and the consummation by IPSI of the transactions contemplated hereby that are applicable to IPSI have been duly and validly authorized and approved by all necessary corporate action on the part of IPSI, and no other corporate proceedings on the part of IPSI are necessary to authorize and approve this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed by IPSI and, assuming the execution and delivery of this Agreement by FFT, constitutes legal and binding obligations of IPSI, enforceable against IPSI in accordance with its terms.
5.1.3 No Conflict; Required Filings and Consents. The execution and delivery of this Agreement by IPSI does not, and the performance of IPSI’s obligations hereunder will not, (i) conflict with or violate the Articles of Incorporation or Bylaws or equivalent organizational documents of IPSI, or (ii) require any consent, approval, authorization or permit of, or registration, filing with or notification to, any Governmental Entity, except for applicable requirements, if any, of the Securities Act of 1933 , as amended, the Securities Exchange Act of 1934, as amended, state securities laws, and the rules and regulations promulgated under each such act or state law.
5.1.4 Ownership of FFT Shares and Fintech Shares. IPSI is the record and beneficial owner of the FFT Shares and the Fintech Shares free and clear of any and all taxes, charges, impositions, purchase rights, liens, claims, security interests, equities or encumbrances.
5.2 Representations and Warranties of FFT. FFT hereby makes the following representations and warranties to IPSI (as regards the Warrant, the FFT Shares and the Fintech Shares):
5.2.1 Organization. FFT is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has the requisite corporate power and authority to own, lease and operate its assets and properties, and to carry on its business as it is now being conducted.
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5.2.2 Power and Authority. FFT has all necessary corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder, and to consummate the transactions contemplated hereby. The execution and delivery by FFT of this Agreement and the consummation by FFT of the transactions contemplated hereby have been duly and validly authorized and approved by all necessary corporate action on the part of FFT, and no other corporate proceedings on the part of FFT are necessary to authorize and approve the execution and delivery of this Agreement by FFT or the consummation by FFT of the transactions contemplated hereby. This Agreement has been duly and validly executed by FFT and, assuming the execution and delivery of this Agreement by IPSI, constitutes legal and binding obligations of FFT, enforceable against FFT in accordance with its terms.
5.2.3 No Conflict; Required Filings and Consents. The execution and delivery of this Agreement does not, and the performance by FFT of its obligations hereunder will not, (i) conflict with or violate the Articles of Incorporation or Bylaws of FFT or equivalent organizational documents of FFT, or (ii) require any consent, approval, authorization or permit of, or registration, filing with or notification to any Governmental Entity.
5.2.4 Ownership of the Warrant. FFT is the record and beneficial owner of the Warrant free and clear of any and all taxes, charges, impositions, purchase rights, liens, claims, security interests, equities and encumbrances. FFT has not sold, transferred, hypothecated or assigned all or any portion of or any interest in the Warrant.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification of FFT by IPSI. IPSI shall indemnify, defend from any third party claim and hold FFT, as the case may be, harmless from and against any and all losses (including, without limitation, any loss caused by the diminution in value of any asset purchased or acquired by FFT hereunder), damages, liabilities, fees (including, without limitation, expert witness fees, court reporter’s fees and reasonable attorneys’ fees), out of pocket unaffiliated third party costs and expenses FFT shall have suffered, sustained or incurred as a result of, related to or in connection with any breach of representation and warranty by IPSI, or a breach of any covenant or agreement hereunder by IPSI. Any defense of FFT shall be by highly qualified counsel which shall first be approved in writing by FFT. If IPSI shall fail to retain FFT approved counsel within 21 days after the date upon which IPSI receives written notice of a third party claim against FFT, then FFT shall have the right to retain counsel and conduct and control directly the defense against any such third party claim, and IPSI shall remain obligated for the fees, costs and expenses of such counsel pursuant to this indemnification as well as the other obligations imposed by this Section 6.1. No settlement of any third party claim against FFT may be made by IPSI unless (i) it is solely for cash and payable solely by IPSI, and (ii) FFT receives a full general release from the person or entity asserting such third party claim. Any amount owing to FFT by IPSI pursuant to this Section 6.1 shall be payable to FFT within 10 Business Days after the date upon which FFT makes demand therefor in writing, accompanied by a copy of all receipts, invoices and other evidence of obligation or payment reasonably necessary to support such demand for payment. Any amount payable to FFT pursuant to this indemnification which is not paid when due shall bear interest at the rate of 10% per annum until it is paid in full along with any accrued but unpaid interest.
6.2 Indemnification of IPSI by FFT. FFT shall indemnify, defend from any third party claim and hold IPSI, as the case may be, harmless from and against any and all losses, damages, liabilities, fees (including, without limitation, expert witness fees, court reporters’ fees and reasonable attorneys’ fees), unaffiliated third party costs and expenses IPSI shall have suffered, sustained or incurred as a result of, related to or in connection with any breach of representation and warranty by FFT hereunder or any breach by FFT of any covenant or agreement by FFT hereunder. The provisions of Section 6.1 respecting third party claims, the payment of any indemnification obligation and interest upon any unpaid indemnification obligation shall be fully applicable pursuant to this Section 6.2, substituting only IPSI for FFT, where applicable.
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ARTICLE VII
CLOSING DELIVERIES
7.1 Closing Deliveries of IPSI. At the Closing on the Closing Date, and as a condition to the effectiveness of the transactions contemplated by this Agreement, IPSI shall deliver to FFT each of the following:
7.1.1 A certificate evidencing the FFT Shares, duly registered in the name of IPSI;
7.1.2 An Assignment of the FFT Shares to FFT, duly executed and dated by an officer of IPSI, in the form of Exhibit 1 attached hereto;
7.1.3 A certificate evidencing the Fintech Shares, duly registered in the name of IPSI,; and
7.1.4. An Assignment of the Fintech Shares to FFT, duly executed and dated by an officer of IPSI, in the form of Exhibit 1 hereto; and
7.1.5 A complete copy of resolutions or unanimous written consent to adopted by the Board of Directors of IPSI authorizing and approving the execution and delivery of this Agreement to FFT and the performance of all of IPSI’s obligations set forth herein, accompanied by a Secretary’s Certificate of IPSI, dated as of the Closing Date and duly executed by the Secretary of IPSI, certifying to FFT that such resolutions were duly adopted by the Board of Directors of IPSI, are in full force and effect on the Closing Date and have not been modified since the date of adoption.
7.2 Closing Deliveries of FFT. At the Closing on the Closing Date, and as a condition to the effectiveness of the transactions contemplated by this Agreement, FFT shall deliver to IPSI a complete copy of resolutions adopted by the Board of Directors of FFT authoring and approving the execution and delivery of this Agreement to IPSI and the performance of all of FFT’s obligations set forth herein, accompanied by a Secretary’s Certificate of FFT, dated as of the Closing Date and duly executed by the Secretary of FFT, certifying to IPSI that such resolutions were duly adopted by the Board of Directors of FFT are in full force and effect on the Closing Date and have not been modified since the date of adoption.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Expenses. All costs and expenses, including fees and disbursements of counsel, financial advisors, and accountants, incurred in connection with the preparation and execution of this Agreement, or any amendment or waiver hereof, and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses.
8.2 Further Assurances. In connection with this Agreement and the transactions contemplated hereby, each of IPSI and FFT agrees, at the request of the other party hereto to which an obligation is owed or an agreement or acknowledgement given hereunder, to execute and deliver such additional documents, instruments, and assurances and to take such further actions as may be required to carry out the provisions hereof and give effect to the transactions contemplated hereby.
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8.3 Notices. All notices, requests, consents, claims, demands, waivers, and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or email of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 8.3):
| If to FFT: |
Frictionless Financial Technologies, Inc. 50 Milk Street, Floor 16 Boston, MA. 02109 E-mail: s.harake@frictionlessft.com Attention: Chief Executive Officer
|
| with a copy to: |
Law Office of Stephen A. Landsman 200 East Randolph Street, Suite 5100 Chicago, Illinois 60601 Facsimile: (312) 233-0063 E-mail: lands@landslawpc.com Attention: Stephen A. Landsman
|
| If to IPSI: |
Innovative Payment Solutions, Inc. 56 B 5th Street, Lot 1, #AT Carmel by the Sea, CA. 93921 Attention: William Corbett
|
| with a copy to: |
Ellenoff Grossman & Schole LLP 1345 Avenue of the Americas New York, NY 10105 |
Notice received by counsel to any party hereto shall not be deemed effective notice to that party hereunder.
8.4 Headings. The headings in this Agreement are inserted for convenience or reference only and are in no way intended to describe, interpret, define, or limit the scope, extent, or intent of this Agreement or any provision of this Agreement.
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8.5 Severability. If any term or provision of this Agreement is held to be invalid, illegal, or unenforceable under applicable law in any jurisdiction, such invalidity, illegality, or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal, or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.
8.6 Entire Agreement. This Agreement, together with all related Exhibits and Schedules, constitutes the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein and therein, and supersedes all prior and contemporaneous understandings, agreements, representations, and warranties, both written and oral, with respect to such subject matter.
8.7 Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors, and assigns.
8.8 No Third Party Beneficiaries . Except as provided in Sections 4.6 and 4.7 hereof, which shall be for the benefit of and enforceable by Persons as described therein, this Agreement is for the sole benefit of the parties hereto (and their respective heirs, executors, administrators, successors, and assigns) and nothing herein, express or implied, is intended to or shall confer upon any other Person, including any creditor of a party hereto, any legal or equitable right, benefit, or remedy of any nature whatsoever under or by reason of this Agreement.
8.9 Amendment. No provision of this Agreement may be amended or modified except by an instrument in writing executed by the parties affected by such amendment.
8.10 Waiver. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach, or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any right, remedy, power, or privilege arising from this Agreement shall operate or be construed as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power, or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power, or privilege.
8.11 Governing Law. All issues and questions concerning the application, construction, validity, interpretation, and enforcement of this Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the State of Delaware.
8.12 Submission to Jurisdiction. The parties hereby agree that any suit, action, or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby, whether in contract, tort, or otherwise, shall be brought in the United States District Court for the District of Delaware or in the Court of Chancery of the State of Delaware (or, if such court lacks subject matter jurisdiction, in the Superior Court of the State of Delaware), so long as one of such courts shall have subject-matter jurisdiction over such suit, action, or proceeding, and that any cause of action arising out of this Agreement shall be deemed to have arisen from a transaction of business in the State of Delaware. Each of the parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient form. Service of process, summons, notice, or other document by registered mail to the address set forth in Section 8.3 above shall be effective service of process for any suit, action, or other proceeding brought in any such court.
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8.13 Waiver of Jury Trial. Each party hereto hereby acknowledges and agrees that any controversy which may arise under this Agreement is likely to involve complicated and difficult issues and, therefore, each such party irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any legal action arising out of or relating to this Agreement or the transactions contemplated hereby.
8.14 Equitable Remedies. Each party hereto acknowledges that a breach or threatened breach by such party of any of its obligations under this Agreement would give rise to irreparable harm to the other parties, for which monetary damages would not be an adequate remedy, and hereby agrees that in the event of a breach or a threatened breach by such party of any such obligations, each of the other parties hereto shall, in addition to any and all other rights and remedies that may be available to them in respect of such breach, be entitled to equitable relief, including a temporary restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction (without any requirement to post bond).
8.15 Attorneys’ Fees. In the event that any party hereto institutes any legal suit, action, or proceeding against another party in respect of a matter arising out of or relating to this Agreement, the prevailing party in the suit, action, or proceeding shall be entitled to receive, in addition to all other damages to which it may be entitled, the costs incurred by such party in conducting the suit, action or proceeding, including reasonable attorneys’ fees and expenses, and court costs.
8.16 Remedies Cumulative. The rights and remedies under this Agreement are cumulative and are in addition to and not in substitution for any other rights and remedies available at law or in equity or otherwise.
8.17 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, email, or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.
(Signature page follows-no further text)
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above.
| FFT: | ||
| Frictionless Financial Technologies, Inc. | ||
| By: | /s/ Sarmad Harake | |
| Name: | Sarmad Harake | |
| Title: | CEO | |
| IPSI: | ||
| Innovative Payment Solutions, Inc. | ||
| By: | /s/ William Corbett | |
| Name: | William Corbett | |
| Title: | CEO | |
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Exhibit 1
Form of Assignment
ASSIGNMENT OF SHARES
For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, effective immediately the undersigned hereby sells, transfers and assigns to Frictionless Financial Technologies, Inc., a Delaware corporation, __________ shares of common stock in ______________________________, a ________________corporation (“___________”), constituting the undersigned’s entire stock ownership in ____________.
IN WITNESS WHEREOF, the undersigned executes and delivers this Assignment of Shares this ___ day of May, 2023.
| INNOVATIVE PAYMENT SOLUTIONS, INC. | ||
| By: | ||
| Name: | ||
| Its (Title): | ||
| ACCEPTED BY: | ||
| FRICTIONLESS FINANCIAL TECHNOLOGIES, INC. | ||
| By: | ||
| Name: | Sarmad Harake | |
| Its: | CEO | |
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 D. 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-15I and 15d-15I) 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, 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; |
| 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: May 15, 2023 | 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 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; |
| 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: May 15, 2023 | 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 quarterly period ended March 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William D. Corbett, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 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: May 15, 2023 | 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 quarterly period ended March 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard Rosenblum, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 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: May 15, 2023 | By: | /s/ Richard Rosenblum |
| Richard Rosenblum | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) |
Condensed Consolidated Balance Sheets (Parentheticals) - USD ($) |
Mar. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Convertible debt, net of unamortized discount (in Dollars) | $ 228,888 | $ 0 |
| Preferred stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
| Preferred stock, shares authorized | 25,000,000 | 25,000,000 |
| Preferred stock, shares issued | 0 | 0 |
| Preferred stock, shares outstanding | 0 | 0 |
| Common stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
| Common stock, shares authorized | 750,000,000 | 750,000,000 |
| Common stock, shares issued | 376,901,679 | 376,901,679 |
| Common stock, shares outstanding | 376,901,679 | 376,901,679 |
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Income Statement [Abstract] | ||
| Net Revenue | $ 433 | |
| Cost of Goods Sold | 2,085 | |
| Gross loss | (1,652) | |
| General and administrative | 965,207 | 869,387 |
| Depreciation and amortization | 140,690 | 4,496 |
| Total Expense | 1,105,897 | 873,883 |
| Loss from Operations | (1,107,549) | (873,883) |
| Penalty on convertible notes | (719,558) | |
| Interest expense | (85,221) | (45,766) |
| Amortization of debt discount | (22,967) | (263,200) |
| Derivative liability movements | 940,750 | 92,161 |
| Loss before Income Taxes | (274,987) | (1,810,246) |
| Income Taxes | ||
| Net Loss | (274,987) | (1,810,246) |
| Net loss attributable to non-controlling interest | 1,597 | 8,752 |
| Net loss attributable to Innovative Payment Solutions, Inc. stockholders | $ (273,390) | $ (1,801,494) |
| Basic and diluted loss per share (in Dollars per share) | $ 0 | $ 0 |
| Weighted Average Number of Shares Outstanding - Basic (in Shares) | 376,901,679 | 367,901,679 |
Condensed Consolidated Statements of Operations (Unaudited) (Parentheticals) - $ / shares |
3 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Income Statement [Abstract] | ||
| Diluted loss per share | $ 0.00 | $ 0.00 |
| Weighted Average Number of Shares Outstanding – Diluted | 376,901,679 | 376,901,679 |
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, 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, 2022 | $ 37,690 | 48,405,921 | (52,399,858) | 1,597 | (3,954,650) | |
| Balance (in Shares) at Dec. 31, 2022 | 376,901,679 | |||||
| Fair value of warrants issued | 251,856 | 251,856 | ||||
| Stock based option expense | 130,671 | 130,671 | ||||
| Net loss | (273,390) | (1,597) | (274,987) | |||
| Balance at Mar. 31, 2023 | $ 37,690 | $ 48,788,448 | $ (52,673,248) | $ (3,847,110) | ||
| Balance (in Shares) at Mar. 31, 2023 | 376,901,679 |
Organization and Description of Business |
3 Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | |||||||||
| 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 fully launched in July 2022 after a soft launch in December 2021. Previously the Company intended to invest in physical kiosks where any payment processing could be undertaken by customers in person. The Company has shifted its business to focus solely on downloadable apps used via smartphones and other online payment processing solutions..
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.
See Note 15 for subsequent event disclosure regarding the Company’s relationship with Frictionless. |
Accounting Policies and Estimates |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Organization and Description of Business [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ACCOUNTING POLICIES AND ESTIMATES |
The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, these unaudited condensed financial statements do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments (consisting only of normal recurring adjustments), which the Company considers necessary, for a fair presentation of those financial statements. The results of operations and cash flows for the three months ended March 31, 2023 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, 2022, included in the Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2023.
All amounts referred to in the notes to the unaudited condensed consolidated 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.
See Note 15 for subsequent event disclosure regarding the Company’s ownership interest in Beyond Fintech.
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 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 March 31, 2023. None of these standards are either applicable to the Company or require adoption at a future date and none are expected to have a material impact on the Company’s condensed consolidated financial statements upon adoption.
No segmental information is required as the Company 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 March 31, 2023 and December 31, 2022, respectively, the Company had no cash equivalents.
The Company minimizes credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution in the United States. The balance at times may exceed federally insured limits. At March 31, 2023 and December 31, 2022, the balance exceed the federally insured limit by $0 and $120,580, 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 March 31, 2023 and December 31, 2022.
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 are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those services. The Company derives its revenues from the sale of its services, as defined below. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its revenue transactions:
The Company had minimal revenues of $433 and $0 for the three months ended March 31, 2023 and 2022, respectively.
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 March 31, 2023 and December 31, 2022, 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. |
Liquidity Matters and Going Concern |
3 Months Ended | |||
|---|---|---|---|---|
Mar. 31, 2023 | ||||
| Liquidity Matters [Abstract] | ||||
| LIQUIDITY MATTERS AND GOING CONCERN |
The Company’s financial statements are prepared using accounting principles generally accepted in the United States (“U.S. GAAP”) applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has incurred net losses since its inception and anticipates net losses and negative operating cash flows for the near future. For and as of the three months ended March 31, 2023 and the year ended December 31, 2022, the Company had a net loss of $274,987 and $10,331,424, respectively. In connection with preparing the unaudited condensed consolidated financial statements for the three months ended March 31, 2023, 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 accompanying financial statements for the three months ended March 31, 2023 have been prepared assuming the Company will continue as a going concern, but the ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it establishes a revenue stream and becomes profitable. Management’s plans to continue as a going concern include raising additional capital through sales of equity securities and borrowing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. If the Company is not able to obtain the necessary additional financing on a timely basis, the Company will be required to delay, and reduce the scope of the Company’s development and operations. Continuing as a going concern is dependent upon its ability to successfully secure other sources of financing and attain profitable operations. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
The Company has determined that there is substantial doubt about their ability to continue as a going concern. |
Intangibles |
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| Intangibles [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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, 2022 and the three months ended March 31, 2023, an additional $41,320 and $35,891, respectively, was spent on the software to further enhance the Beyond Wallet product offering. See Note 15 for subsequent event disclosure regarding the Company’s relationship with 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 year ended December 31, 2022 and the three months ended March 31, 2023, an additional $1,127,400 and $28,893, respectively, was incurred by the Company to facilitate the functioning of the IPSIPay software in the cloud environment.
Amortization expense was $125,856 and $0 for the three months ended March 31, 2023 and 2022, respectively. |
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Investments |
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| Investments, All Other Investments [Abstract] | |||||||||||||||||||||||||||||||
| INVESTMENTS |
Investment in Frictionless Financial Technologies Inc.
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. See Note 15 for subsequent event disclosure regarding the Company’s relationship with Frictionless.
The shares in Frictionless are unlisted as of March 31, 2023.
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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 Street, 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. 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. On January 1, 2023, the Company entered into a new month-to-month lease, with a 90 day termination clause, for a monthly rental of $5,088.
The Company applied the practical expedient whereby operating leases with a duration of twelve months or less are expensed as incurred.
Total Lease Cost
Individual components of the total lease cost incurred by the Company is as follows:
Other lease information:
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Federal Relief Loans |
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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 Company has repaid an aggregate principal amount of $809 and interest of $1,384 as of March 31, 2023. The loan balance outstanding as of March 31, 2023, consists of principal of $149,191 and accrued interest thereon of $13,978, of which $3,217 is disclosed as current. |
Notes Payable |
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| NOTES PAYABLE |
On February 16, 2021, the Company entered into separate Securities Purchase Agreements (the “SPAs”), with each of Cavalry Fund I LP (“Cavalry”) and Mercer Street Global Opportunity Fund, LLC (“Mercer”), pursuant to which the Company received $500,500 and $500,500 from Cavalry and Mercer, respectively, in exchange for the issuance of: (i) Original Issue Discount 12.5% Convertible Notes (the “Notes” and each a “Note”) in the principal amount of $572,000 to each of Cavalry and Mercer; and (ii) five-year warrants (the “Original Warrants”) issued to each of Cavalry and Mercer to purchase 2,486,957 shares of the Company’s common stock at an exercise price of $0.24 per share.
In terms of the December 30, 2022 Note Amendment Transaction, described in more detail in Note 9 below, the Original Warrants issued on February 16, 2021 were irrevocably exchanged for 12-month non-convertible promissory notes in the amount of $482,000 (the “Exchange Notes”) to each of Cavalry and Mercer. This exchange caused the cancellation of the Original Warrants for all purposes. The Company accounted for the aggregate value of the notes issued of $964,000, less the fair value of the warrants exchanged for these notes of $43,608, totaling $920,392 as a component of the loss on convertible debt.
The Exchange Notes have a maturity date of December 30, 2023 and carry an interest rate of ten percent (10%). The Company shall have the right, but not the obligation, in lieu of a cash payment upon maturity of the Exchange Notes, to issue 51,901,711 shares of common stock, as adjusted for any stock splits, dividends or other similar corporate events, in full satisfaction of its obligations under each of the Exchange Notes (or any pro rata portion of such number of shares in partial satisfaction of such obligations). The Company is under no legal obligation to reserve such number of shares for future issuance.
Notes payable consists of the following:
Interest expense totaled $24,100 and $0 for the three months ended March 31, 2023 and 2022, respectively. |
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Convertible Notes Payable |
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| CONVERTIBLE NOTES PAYABLE |
December 2022 Note Amendment Transaction
On February 16, 2021, we entered into separate SPAs with each of Cavalry and Mercer, pursuant to which we received $500,500 and $500,500 from Cavalry and Mercer, respectively, in exchange for the issuance of: (i) Original Issue Discount 12.5% Convertible Notes (the “Notes”) in the principal amount of $572,000 to each of Cavalry and Mercer; and (ii) five-year warrants (the “Original Warrants”) issued to each of Cavalry and Mercer to purchase 2,486,957 shares of the Company’s common stock (the “Common Stock”) at an exercise price of $0.24 per share. Cavalry and Mercer are Selling Stockholders listed in this prospectus.
The Original Warrants are discussed in note 8 above.
The Company twice extended its indebtedness to each Cavalry and Mercer. On February 3, 2022, the Company agreed to extend the maturity date of the Notes to August 16, 2022. Additionally, on August 30, 2022, the Company entered agreements for an additional maturity date extension to November 16, 2022. In consideration for the second extension, the Company agreed to (i) increase the principal amount outstanding and due to Cavalry and Mercer under their respective Notes by twenty percent (20%) and (ii) issue to each of Cavalry and Mercer a new five-year warrant (each, an “Extension Warrant”) to purchase an additional 3,000,000 shares of common stock at an exercise price of $0.15 per share. The Extension Warrant contains the same terms and provisions in all material respects as the Original Warrants, except for difference in exercise price.
On December 30, 2022, the Company again extended the maturity dates of each of the Notes to December 30, 2023. Each of Cavalry and Mercer entered into Note Amendment Letter Agreement with the Company (the “Note Amendment”) pursuant to which the parties agreed to the following:
The parties also acknowledged that the principal and accrued interest under the Notes as of December 28, 2022 is equal to an aggregate of $2,264,784, or $1,132,392 for each of Cavalry and Mercer. In addition, as a result of the reduction in the conversion price of the Notes, certain other warrants held by third parties have their exercise price of such warrants reduced to $0.0115 per share. All of the shares of our common stock underlying the Notes as amended and all warrants held by Cavalry and Mercer as adjusted were registered for resale pursuant to the filed registration statement.
The amendments to the convertible debt were evaluated in terms of ASC470, Debt, to determine if the amendments to the convertible debt were considered a modification of the debt or an extinguishment of the debt. Based on the penalty interest incurred on the convertible notes of $836,414, the reduction in the conversion price of the convertible notes from $0.15 to $0.0115 per share, which was valued at $1,499,577 using a Black-Scholes valuation model, the issuance of additional warrants to the convertible note holders valued at $238,182 using a Black-Scholes valuation model and the conversion of certain warrants to notes payable, resulting in an additional charge of $920,392, consisting of a mark-to-market warrant cost of $(43,608) and the value of the notes of $964,000 (Note 8 above) and the value of full rachet provisions of certain of the warrants issued to the convertible note holders amounting to $841,003, see note 12 below, the amendment of the convertible notes was determined to be a debt extinguishment.
Convertible notes payable consists of the following:
Interest expense totaled $59,737 and $44,379 for the three months ended March 31, 2023 and 2022, respectively.
Amortization of debt discount totaled $22,967 and $263,200 for the three months ended March 31, 2023 and 2022, respectively.
The Cavalry and Mercer convertible notes have variable conversion prices based on a discount to market price of trading activity over a specified period of time. The variable conversion features were valued using a Black Scholes valuation model. The difference between the fair market value of the common stock and the calculated conversion price on the issuance date was recorded as a debt discount with a corresponding credit to derivative financial liability.
Cavalry Fund LLP
On February 16, 2021, the Company closed a transaction with Cavalry, pursuant to which the Company received net proceeds of $500,500, after an original issue discount of $71,500 in exchange for the issuance of a $572,000 Senior Secured Convertible Note, bearing interest at 10% per annum and maturing on February 16, 2022. The Note was 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.
As described more fully above, the maturity date of the note was extended to August 16, 2022, additionally to November 16, 2022 and again to December 30, 2023. In consideration for the November 16, 2022 extension, the Company agreed to (i) increase the principal amount outstanding and due to Cavalry by twenty percent (20%) and (ii) issue a new five-year warrant to purchase an additional 3,000,000 shares of common stock at an exercise price of $0.15 per share. In consideration of the December 30, 2022 extension, the Company agreed to the following terms; (i) the conversion price of the Note was reduced from $0.15 to $0.0115 per share; (ii) Cavalry agreed (a) not to convert all or any portion of the Notes until after March 30, 2023 and (b) waive any events of default under the Note and the SPA; (iii) the Company agreed to and registered the shares of common stock underlying the Note and the shares underlying all warrants held by Cavalry for resale with the Securities and Exchange Commission and filed the registration statement to satisfy the Company’s registration obligation.
The balance of the Cavalry Note plus accrued interest at March 31, 2023 was $1,160,595. Mercer Street Global Opportunity Fund, LLC
On February 16, 2021, the Company closed a transaction with Mercer, pursuant to which the Company received net proceeds of $500,500, after an original issue discount of $71,500 in exchange for the issuance of a $572,000 Senior Secured Convertible Note, bearing interest at 10% per annum and maturing on February 16, 2022. The Note is convertible into shares of common stock at an initial conversion price of $0.23 per share, in addition, the Company issued a warrant exercisable for 2,486,957 shares of common stock at an initial exercise price of $0.24 per share.
As described more fully above, the maturity date of the note was extended to August 16, 2022, additionally to November 16, 2022 and again to December 30, 2023. In consideration for the November 16, 2022 extension, the Company agreed to (i) increase the principal amount outstanding and due to Mercer by twenty percent (20%) and (ii) issue a new five-year warrant to purchase an additional 3,000,000 shares of common stock at an exercise price of $0.15 per share. In consideration of the December 30, 2022 extension, the Company agreed to the following terms; (i) the conversion price of the Note was reduced from $0.15 to $0.0115 per share; (ii) Mercer agreed (a) not to convert all or any portion of the Notes until after March 30, 2023 and (b) waive any events of default under the Note and the SPA; (iii) the Company agreed to and registered the shares of common stock underlying the Note and the shares underlying all warrants held by Mercer for resale with the Securities and Exchange Commission and filed the registration statement to satisfy the Company’s registration obligation.
The balance of the Mercer Note plus accrued interest at March 31, 2023 was $1,160,595.
February 2023 convertible notes
Between February 13, 2023 and February 23, 2023, the Company, entered into Securities Purchase Agreements (the “Securities Purchase Agreement”) with 11 accredited investors, pursuant to which the Company received an aggregate of $535,000 in gross proceeds from the Investors through the initial closing of a private placement issuance of:
The Notes mature in 12 months, bears interest at a rate of 8% per annum, and are convertible into shares of Common Stock at a conversion price of $0.0115 per share (as adjusted for stock splits, stock combinations, dilutive issuances and similar events). The Notes may be prepaid at any time without penalty. The Company is under no obligation to register the shares of Common Stock underlying the Notes or the Warrants for public resale.
The Notes and the Warrants contain conversion limitations providing that a holder thereof may not convert the Notes or exercise the Warrants to the extent that, if after giving effect to such conversion, the holder or any of its affiliates would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the outstanding shares of the Common Stock immediately after giving effect to such conversion or exercise. A holder may increase or decrease its beneficial ownership limitation upon notice to the Company provided that in no event such limitation exceeds 9.99%, and that any increase shall not be effective until the 61st day after such notice.
The balance of the February 2023 Notes plus accrued interest at March 31, 2023 was $311,261, net of unamortized debt discount of $228,888. |
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Derivative Liability |
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| DERIVATIVE LIABILITY |
Certain of the short-term convertible notes disclosed in note 9 above and certain warrants disclosed in note 11 below, have variable priced conversion rights with no fixed floor price and will re-price dependent on the share price performance over varying periods of time and certain notes and warrants have fundamental transaction clauses which might result in cash settlement, due to these factors, all convertible notes and any warrants attached thereto are valued and give rise to a derivative financial liability, which was initially valued at inception of the convertible notes using a Black-Scholes valuation model.
On December 30, 2022, the Company entered into the December 2022 Note Amendment transaction (“the Note Amendment”) as fully described under note 9 above. Included in the derivative liability is: (i) the Original Warrants which were exchanged for non-convertible promissory notes, (ii) the Cavalry and Mercer convertible notes which were subject to the Note Amendment and (ii) the Cavalry and Mercer Extension Warrants as well as certain other warrants due to Cavalry and Mercer and certain other warrant holders. The Note Amendment triggered a repricing of certain of these warrants.
The derivative liability on the Cavalry and Mercer convertible notes and the warrants affected by the note amendment were marked-to-market immediately prior to the Note Amendment resulting in a market to market movement on the original warrants, the convertible notes and the extension warrants and certain other warrants, which were subject to a full rachet provision, of $474,614. In addition, the Note and warrant Amendment gave rise to an additional derivative liability charge of $2,317,051 which was recorded as an expense in the loss on convertible notes charge in the statement of operations.
The net movement on the derivative liability for the three months ended March 31, 2023 was a net mark-to-market release of derivative liability of $940,750, determined by using a Black-Scholes valuation model.
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 shares of Common Stock issued and outstanding as of March 31, 2023 and December 31, 2022, respectively.
A summary of restricted stock activity during the period January 1, 2022 to March 31, 2023 is as follows:
The restricted stock granted, issued and exercisable at March 31, 2023 is as follows:
The Company has recorded an expense of $0 and $62,766 for the three months March 31, 2023 and 2022, 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 March 31, 2023 and December 31, 2022.
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.
On December 30, 2022, the Company issued to Frictionless a 5 year warrant to purchase 30,000,000 shares of common stock in the Company at an exercise price of $0.0115 per share as disclosed in note 5 above. The fair value of these warrants was $348,938 determined by using a Black-Scholes valuation model, which fair value was capitalized to purchased technology on the date of grant. Subsequent to March 31, 2023, the Company entered into an agreement to cancel this warrant (see Note 15).
On December 30, 2022, the Company entered into the December 2022 Note Amendment Transaction, as fully described in note 9 above. In terms of the Note Amendment Transaction the following occurred:
Between February 13, 2023 and February 23, 2023, the Company entered into Securities Purchase Agreements with 11 accredited investors, as disclosed in Note 9 above. In terms of these Securities Purchase Agreements, the Company issued five-year warrants to purchase an aggregate 46,521,739 shares of the Company’s common stock at an exercise price of $0.0115 per share (as adjusted for stock splits, stock combinations, dilutive issuances and similar events). The Company is under no obligation to register the shares of Common Stock underlying the Notes or the Warrants for public resale.
The Warrants contain conversion limitations providing that a holder thereof may not exercise the Warrants to the extent that, if after giving effect to such exercise, the holder or any of its affiliates would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the outstanding shares of the Common Stock immediately after giving effect to such exercise. A holder may increase or decrease its beneficial ownership limitation upon notice to the Company provided that in no event such limitation exceeds 9.99%, and that any increase shall not be effective until the 61st day after such notice.
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, 2022 to March 31, 2023 is as follows:
The warrants outstanding and exercisable at March 31, 2023 are as follows:
The warrants outstanding have an intrinsic value of $0 as of March 31, 2023 and March 31, 2022.
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 year ended December 31, 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 year ended December 31, 2022.
A summary of option activity during the period January 1, 2022 to March 31, 2023 is as follows:
The options outstanding and exercisable at March 31, 2023 are as follows:
The options outstanding have an intrinsic value of $0 as of March 31, 2023 and March 31, 2022.
The option expense was $94,464 and $94,466 for the three months ended March 31, 2023 and 2022, respectively. |
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Net Loss Per Share |
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net Loss 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 months ended March 31, 2023 and 2022 all warrants, options and convertible debt securities were excluded from the computation of diluted net loss per share.
Dilutive shares which could exist pursuant to the exercise of outstanding stock instruments and which were not included in the calculation because their affect would have been anti-dilutive for the three months ended March 31, 2023 and 2022 are as follows:
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Related Party Transactions |
3 Months Ended | |||
|---|---|---|---|---|
Mar. 31, 2023 | ||||
| Related Party Transactions [Abstract] | ||||
| RELATED PARTY TRANSACTIONS |
The following transactions were entered into with related parties:
James Fuller
On September 13, 2022, the Company granted Mr. Fuller ten-year options exercisable for 200,000 shares of Common Stock at an exercise price of $0.04 per share.
The option expense for Mr. Fuller was $0 and $7,993 for the three months ended March 31, 2023 and the year ended December 31, 2022, respectively.
Mr. Fuller voluntarily resigned as a member of the Board of Directors effective as of our 2022 annual meeting of shareholders which occurred on November 3, 2022.
William Corbett
On July 11, 2022, the Company granted Mr. Corbett ten-year options exercisable for 15,000,000 shares of Common Stock at an exercise price of $0.15 per share.
The option expense for Mr. Corbett was $66,587 and $1,090,201 for the three months ended March 31, 2023 and the year ended December 31, 20221, respectively.
Clifford Henry
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 was $0 and $7,993 for the three months ended March 31, 2023 and the year ended December 31, 2022, respectively.
Madisson Corbett
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 was $0 and $7,993 for the three months ended March 31, 2023 and the year ended December 31, 2022, respectively.
David Rios
On September 13, 2022, the Company granted Mr. Rios, 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. Rios was $0 and $7,993 for the three months ended March 31, 2023 and the year ended December 31, 2022, respectively. Richard Rosenblum
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 was $27,879 and $111,514 for the three months ended March 31, 2023 and the year ended December 31, 2022, respectively. |
Commitments and Contingencies |
3 Months Ended | |||
|---|---|---|---|---|
Mar. 31, 2023 | ||||
| Commitments and Contingencies Disclosure [Abstract] | ||||
| COMMITMENTS AND CONTINGENCIES |
The Company has notes payable and convertible notes payable, disclosed under note 8 and 9 above, which mature between December 30, 2023 and February 23, 2024. The Company may settle the notes payable, at its option by the issue of common shares and should the convertible notes not be converted to Common Stock prior to their maturity dates, the Company may need to repay the principal and interest outstanding on these notes. |
Subsequent Events |
3 Months Ended | |||
|---|---|---|---|---|
Mar. 31, 2023 | ||||
| Subsequent Events [Abstract] | ||||
| SUBSEQUENT EVENTS |
On April 28, 2023, the Company formed a new Delaware limited liability company called IPSIPay Express LLC. This entity was formed as a three-way joint venture with two other entities to develop and market a proprietary consumer to merchant real-time payment platform initially focused on the fast-growing online gaming and entertainment sectors. As of the date of issuance of these financial statements, definitive documentation memorializing the joint venture are being finalized.
On May 10, 2023, the Company entered into a Securities Purchase Agreement with 1800 Diagonal Lending LLC (“1800”) pursuant to which the Company issued a promissory note (the “1800 Note”) to 1800 in the aggregate principal amount of $117,320 (including $12,570 of original issue discount) for gross proceeds to the Company of $104,750. The 1800 Note carries a one-time interest charge equal to thirteen percent (13%) of the principal amount of the 1800 Note. The 1800 Note is unsecured, has a maturity date of May 10, 2024, carries a default interest rate of twenty-two percent (22%) per annum and contains customary events of default. The Company is required to begin mandatory monthly repayments of the 1800 Note beginning June 15, 2023 in the amount of $13,257.10 per month. Only following an event of default under the 1800 Note, the principal amount then outstanding under the 1800 Note (plus, at 1800’s option accrued interest thereon, including default interest if applicable) is convertible into shares of Common Stock at a price equal to sixty (60%) multiplied by the lowest trading price for the Common Stock during the twenty (20) trading days prior to the date of conversion.
On May 12, 2023, the Company entered into an Agreement with Frictionless (the “May 2023 Frictionless Agreement”) to unwind the equity ownership stakes that the Company and Frictionless have in each other and in Beyond Fintech. Pursuant to the May 2023 Frictionless Agreement: (i) the Company assigned to Frictionless all common stock of Frictionless owned by the Company (representing a 10% ownership interest in Frictionless); (ii) the warrant to purchase 30,000,000 shares of Common Stock previously issued by the Company to Frictionless as of December 30, 2022 was cancelled; (iii) the Company assigned to Frictionless all shares of common stock of Beyond Fintech owned by the Company (representing a 51% ownership interest in Beyond Fintech) (the “Beyond Fintech Shares”); and (iv) the rights previously granted to the Company to (a) acquire additional equity interests in Frictionless, (b) participate in future financings of Frictionless and (c) appoint a board member of Frictionless were terminated. The consideration to the Company for the assignment of the Beyond Fintech Shares to Frictionless is $250,000, which will be paid by Frictionless exclusively in the form of 20% credits against invoices for work done by Frictionless for the Company for the 18 month period following the closing under the existing software services between the Company and Frictionless. The May 2023 Frictionless Agreement has customary representations, indemnification and mutual release provisions. The closing of the transactions contemplated by the May 2023 Frictionless Agreement occurred on May 12, 2023. |
Accounting Policies, by Policy (Policies) |
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Mar. 31, 2023 | |||||||||||||||||||||||||
| Organization and Description of Business [Abstract] | |||||||||||||||||||||||||
| Basis of Presentation |
The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, these unaudited condensed financial statements do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments (consisting only of normal recurring adjustments), which the Company considers necessary, for a fair presentation of those financial statements. The results of operations and cash flows for the three months ended March 31, 2023 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, 2022, included in the Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2023.
All amounts referred to in the notes to the unaudited condensed consolidated 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.
See Note 15 for subsequent event disclosure regarding the Company’s ownership interest in Beyond Fintech.
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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 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 March 31, 2023. None of these standards are either applicable to the Company or require adoption at a future date and none are expected to have a material impact on the Company’s condensed consolidated financial statements upon adoption.
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| Reporting by Segment |
No segmental information is required as the Company 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 March 31, 2023 and December 31, 2022, respectively, the Company had no cash equivalents.
The Company minimizes credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution in the United States. The balance at times may exceed federally insured limits. At March 31, 2023 and December 31, 2022, the balance exceed the federally insured limit by $0 and $120,580, 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 March 31, 2023 and December 31, 2022.
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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 are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those services. The Company derives its revenues from the sale of its services, as defined below. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its revenue transactions:
The Company had minimal revenues of $433 and $0 for the three months ended March 31, 2023 and 2022, respectively.
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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 March 31, 2023 and December 31, 2022, 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. |
Accounting Policies and Estimates (Tables) |
3 Months Ended | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | ||||||||||||||||||||||
| Organization and Description of Business [Abstract] | ||||||||||||||||||||||
| Schedule of estimated useful lives of the assets |
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Intangibles (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Intangibles Table [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of facilitate the functioning of the IPSIPay software |
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Investments (Tables) |
3 Months Ended | |||||||||||||||||||||||||||
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Mar. 31, 2023 | ||||||||||||||||||||||||||||
| Investments, All Other Investments [Abstract] | ||||||||||||||||||||||||||||
| Schedule of investment |
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Leases (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| Disclosure Text Block [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of total lease cost |
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| Schedule of other lease information |
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Notes Payable (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Payable [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of notes payable |
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Convertible Notes Payable (Tables) |
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Convertible Notes Payable [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of convertible notes payable |
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Derivative Liability (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| Net Loss Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of dilutive shares |
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Accounting Policies and Estimates (Details) |
3 Months Ended | ||
|---|---|---|---|
|
Mar. 31, 2023
USD ($)
|
Mar. 31, 2022
USD ($)
|
Dec. 31, 2022
USD ($)
|
|
| Accounting Policies and Estimates (Textual) | |||
| Ownership percentage | 20.00% | ||
| Operating segment | 1 | ||
| Federally insured limit | $ 0 | $ 120,580 | |
| Plant and equipment costs | 1,000 | ||
| Revenues | $ 433 | $ 0 | |
| Beyond Fintech Inc. [Member] | |||
| Accounting Policies and Estimates (Textual) | |||
| Ownership percentage | 51.00% | ||
Accounting Policies and Estimates (Details) - Schedule of estimated useful lives of the assets |
Mar. 31, 2023 |
|---|---|
| Kiosks [Member] | |
| Estimated useful lives | 7 years |
| Computer equipment [Member] | |
| Estimated useful lives | 3 years |
| Office equipment [Member] | |
| Estimated useful lives | 10 years |
Liquidity Matters and Going Concern (Details) - USD ($) |
3 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2023 |
Dec. 31, 2022 |
|
| Liquidity Matters (Textual) | ||
| Net loss | $ 274,987 | $ 10,331,424 |
Intangibles (Details) - USD ($) |
1 Months Ended | 3 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|---|
Aug. 26, 2021 |
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
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 of software | $ 35,891 | $ 41,320 | |||
| IPSIPay software amount | 28,893 | $ 1,127,400 | |||
| Amortization expense | $ 125,856 | $ 0 | |||
Intangibles (Details) - Schedule of facilitate the functioning of the IPSIPay software - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Dec. 31, 2022 |
|
| Schedule of facilitate the functioning of the IPSIPay software [Abstract] | ||
| Cost | $ 1,858,504 | |
| Accumulated amortization | (226,765) | |
| Net Book Value | 1,631,739 | $ 1,692,811 |
| Purchase Technology – Beyond Wallet [Member] | ||
| Schedule of facilitate the functioning of the IPSIPay software [Abstract] | ||
| Cost | 327,211 | |
| Accumulated amortization | ||
| Net Book Value | 327,211 | 291,320 |
| Purchased Technology - IPSIPay [Member] | ||
| Schedule of facilitate the functioning of the IPSIPay software [Abstract] | ||
| Cost | 1,531,293 | |
| Accumulated amortization | (226,765) | |
| Net Book Value | $ 1,304,528 | $ 1,401,491 |
Investments (Details) |
3 Months Ended |
|---|---|
|
Mar. 31, 2023
USD ($)
| |
| Investment (Textual) | |
| Right to acquire percentage | 1.00% |
| Frictionless Financial Technologies, Inc.[Member] | |
| Investment (Textual) | |
| Right to acquire percentage | 41.00% |
| Purchase price (in Dollars) | $ 300,000 |
Investments (Details) - Schedule of investment - USD ($) |
Mar. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Investments (Details) - Schedule of investment [Line Items] | ||
| Investment | $ 500,000 | $ 500,000 |
| Investment in Frictionless Financial Technologies, Inc. [Member] | ||
| Investments (Details) - Schedule of investment [Line Items] | ||
| Investment | $ 500,000 | $ 500,000 |
Leases (Details) - USD ($) |
3 Months Ended | |
|---|---|---|
Jan. 01, 2023 |
Mar. 31, 2023 |
|
| Leases (Textual) | ||
| Lease, description | The lease commenced on April 1, 2021 and is for a twelve month period, terminating on April 1, 2022. | |
| Lease amount | $ 4,800 | |
| Monthly rent | $ 5,088 |
Leases (Details) - Schedule of total lease cost - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Schedule of total lease cost [Abstract] | ||
| Operating lease expense | $ 15,264 | $ 14,400 |
Leases (Details) - Schedule of other lease information - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Cash paid for amounts included in the measurement of lease liabilities | ||
| Operating cash flows from operating leases | $ (15,264) | $ (14,400) |
| Remaining lease term – operating lease | Monthly | Monthly |
Federal Relief Loans (Details) - USD ($) |
1 Months Ended | 3 Months Ended | |
|---|---|---|---|
Jul. 07, 2020 |
Feb. 16, 2021 |
Mar. 31, 2023 |
|
| Federal Relief Loans [Abstract] | |||
| Disaster loan amount | $ 150,000 | ||
| Bearing interest, percentage | 3.75% | ||
| Repayable installments | $ 731 | ||
| Aggregate principal amount | $ 572,000 | $ 809 | |
| Aggregate principal amount interest | 1,384 | ||
| Loan balance outstanding | 149,191 | ||
| Accrued interest | 13,978 | ||
| Disclosed amount of accrued interest | $ 3,217 |
Notes Payable (Details) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Feb. 16, 2021 |
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Notes Payable (Details) [Line Items] | |||
| Company received | $ 500,500 | ||
| Interest rate | 12.50% | ||
| Common stock, shares (in Shares) | 2,486,957 | ||
| Exercise price per share (in Dollars per share) | $ 0.24 | ||
| Promissory note | $ 482,000 | ||
| Notes issued | 964,000 | ||
| Fair value of the warrants | 43,608 | ||
| Convertible debt | $ 920,392 | ||
| Interest expense | $ 24,100 | $ 0 | |
| December 30, 2022 Note [Member] | |||
| Notes Payable (Details) [Line Items] | |||
| Interest rate | 10.00% | ||
| Common stock, shares (in Shares) | 51,901,711 | ||
| Promissory note | $ 482,000 | ||
| Maturity date | Dec. 30, 2023 | ||
| Cavalry and Mercer [Member] | |||
| Notes Payable (Details) [Line Items] | |||
| Company received | $ 500,500 | ||
| Principal amount | $ 572,000 | ||
Notes Payable (Details) - Schedule of notes payable - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Dec. 31, 2022 |
|
| Notes Payable (Details) - Schedule of notes payable [Line Items] | ||
| Principal | $ 964,000 | |
| Accrued Interest | 24,368 | |
| Amount, net | $ 988,368 | $ 964,268 |
| Cavalry Fund I LP [Member] | ||
| Notes Payable (Details) - Schedule of notes payable [Line Items] | ||
| Interest Rate | 10.00% | |
| Maturity date | December 30, 2023 | |
| Principal | $ 482,000 | |
| Accrued Interest | 12,184 | |
| Amount, net | $ 494,184 | 482,134 |
| Mercer Street Global Opportunity Fund, LLC [Member] | ||
| Notes Payable (Details) - Schedule of notes payable [Line Items] | ||
| Interest Rate | 10.00% | |
| Maturity date | December 30, 2023 | |
| Principal | $ 482,000 | |
| Accrued Interest | 12,184 | |
| Amount, net | $ 494,184 | $ 482,134 |
Convertible Notes Payable (Details) - Schedule of convertible notes payable - Construction Loan Payable [Member] - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Dec. 31, 2022 |
|
| Principal | $ 2,718,508 | |
| Accrued Interest | 142,831 | |
| Unamortized debt discount | (228,888) | |
| Convertible notes payable | $ 2,632,451 | $ 2,266,602 |
| Cavalry Fund I LP [Member] | ||
| Interest Rate | 10.00% | |
| Maturity date | December 30, 2023 | |
| Principal | $ 1,091,754 | |
| Accrued Interest | 68,841 | |
| Unamortized debt discount | ||
| Convertible notes payable | $ 1,160,595 | 1,133,301 |
| Mercer Street Global Opportunity Fund, LLC [Member] | ||
| Interest Rate | 10.00% | |
| Maturity date | December 30, 2023 | |
| Principal | $ 1,091,754 | |
| Accrued Interest | 68,841 | |
| Unamortized debt discount | ||
| Convertible notes payable | $ 1,160,595 | 1,133,301 |
| February 2023 convertible notes [Member] | ||
| Interest Rate | 8.00% | |
| Maturity date | February 13, 2024 to February 23, 2024 | |
| Principal | $ 535,000 | |
| Accrued Interest | 5,149 | |
| Unamortized debt discount | (228,888) | |
| Convertible notes payable | $ 311,261 |
Derivative Liability (Details) |
3 Months Ended |
|---|---|
|
Mar. 31, 2023
USD ($)
| |
| Derivative Liability (Textual) | |
| Rachet provision | $ 474,614 |
| Derivative liability | 940,750 |
| Cavalry and Mercer [Member] | |
| Derivative Liability (Textual) | |
| Derivative liability | $ 2,317,051 |
Derivative Liability (Details) - Schedule of assumptions were used in the black-scholes valuation model - $ / shares |
3 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2023 |
Dec. 31, 2022 |
|
| Conversion price (in Dollars per share) | $ 0.0115 | |
| Expected dividend rate | 0.00% | 0.00% |
| Minimum [Member] | ||
| Conversion price (in Dollars per share) | $ 0.0115 | |
| Risk free interest rate | 3.60% | 0.79% |
| Expected life of derivative liability | 9 years | 1 year 6 months |
| Expected volatility of underlying stock | 158.72% | 120.49% |
| Maximum [Member] | ||
| Conversion price (in Dollars per share) | $ 0.15 | |
| Risk free interest rate | 4.79% | 4.73% |
| Expected life of derivative liability | 53 years | 59 years |
| Expected volatility of underlying stock | 192.53% | 258.30% |
Derivative Liability (Details) - Schedule of movement in derivative liability - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Dec. 31, 2022 |
|
| Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
| Opening balance | $ 2,550,642 | $ 407,161 |
| Derivative financial liability arising from convertible note and warrants | 238,182 | |
| Derivative financial liability arising on note amendment included in loss on convertible notes | 2,317,051 | |
| Fair value adjustment to derivative liability | (940,750) | (411,752) |
| Total | $ 1,609,892 | $ 2,550,642 |
Stockholders’ Equity (Details) - USD ($) |
1 Months Ended | 3 Months Ended | 12 Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 13, 2022 |
Jul. 11, 2022 |
Dec. 31, 2019 |
Dec. 30, 2022 |
Aug. 30, 2022 |
Aug. 30, 2022 |
Feb. 23, 2021 |
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
Feb. 16, 2021 |
|
| Stockholders' Equity (Textual) | |||||||||||
| Common Stock, Shares Authorized | 750,000,000 | 750,000,000 | |||||||||
| Common Stock, Par or Stated Value Per Share (in Dollars per share) | $ 0.0001 | $ 0.0001 | |||||||||
| Common Stock, Shares, Issued | 376,901,679 | 376,901,679 | |||||||||
| Common Stock, Shares, Outstanding | 376,901,679 | 376,901,679 | |||||||||
| Other Tax Expense (Benefit) (in Dollars) | $ 0 | $ 62,766 | |||||||||
| Preferred stock, authorized | 25,000,000 | 25,000,000 | |||||||||
| Preferred stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 | |||||||||
| Description of compensation service | (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. | ||||||||||
| Shares of Common Stock | 2,500 | 51,901,711 | |||||||||
| Expiration Date | Aug. 30, 2027 | ||||||||||
| Purchased shares | 2,250,000 | ||||||||||
| Exercise price (in Dollars per share) | $ 0.04 | ||||||||||
| Note amendment transaction description | the Company entered into the December 2022 Note Amendment Transaction, as fully described in note 9 above. In terms of the Note Amendment Transaction the following occurred: ● The warrants issued to Cavalry and Mercer exercisable for 4,973,914 shares of common stock (2,486,957 for each of Cavalry and Mercer), were exchanged for two promissory notes of $482,000 each, as disclosed in note 8 above; ● The warrants issued to Cavalry and Mercer on August 30, 2022, were subject to repricing and a full rachet increase in the number of warrants issued, resulting in an increase in the number of warrants by 72,260,870 (36,130,435 to each Cavalry and Mercer) and a reset of the exercise price to $0.0115 per share. The additional warrants were valued at $841,003 using a Black-Scholes valuation model and was expensed in the statement of operations as a component of the loss on convertible debt. ● An additional 13,736,857 warrants previously issued to Mercer, Iroquois Master Fund and Bellridge Capital LP were subject to repricing of the exercise price from a range of $0.05 to $0.15 per share to $0.0115 per share. The change in the fair value of these warrants of $20,079, using a Black-Scholes valuation model was recorded as a component of the loss on convertible debt. | ||||||||||
| Limitation exceeds percentage | 9.99% | ||||||||||
| Warrants outstanding an intrinsic value (in Dollars) | $ 0 | 0 | |||||||||
| Incentive stock options | 201,112,800 | ||||||||||
| Amount of immediate expense (in Dollars) | $ 31,970 | ||||||||||
| Options exercisable shares | 200,000 | ||||||||||
| Intrinsic value outstanding options (in Dollars) | $ 0 | 0 | |||||||||
| Option expense (in Dollars) | $ 94,464 | $ 94,466 | |||||||||
| Common Stock [Member] | |||||||||||
| Stockholders' Equity (Textual) | |||||||||||
| Shares of Common Stock | 3,000,000 | 3,000,000 | |||||||||
| Exercise price (in Dollars per share) | $ 0.15 | ||||||||||
| Exercise price (in Dollars per share) | $ 0.0115 | ||||||||||
| Options exercisable shares | 800,000 | ||||||||||
| Warrant [Member] | |||||||||||
| Stockholders' Equity (Textual) | |||||||||||
| Purchased shares | 30,000,000 | ||||||||||
| Fair value of warrants (in Dollars) | $ 348,938 | ||||||||||
| Maximum [Member] | |||||||||||
| Stockholders' Equity (Textual) | |||||||||||
| Shares of Common Stock | 800,000 | ||||||||||
| Maximum [Member] | Common Stock [Member] | |||||||||||
| Stockholders' Equity (Textual) | |||||||||||
| Shares of Common Stock | 100,000 | ||||||||||
| Maximum [Member] | |||||||||||
| Stockholders' Equity (Textual) | |||||||||||
| Warrants beneficially percentage | 4.99% | ||||||||||
| Chief Executive Officer [Member] | |||||||||||
| Stockholders' Equity (Textual) | |||||||||||
| Incentive stock options | 15,000,000 | ||||||||||
| Stock option exercise price (in Dollars per share) | $ 0.15 | ||||||||||
| Amount of immediate expense (in Dollars) | $ 823,854 | ||||||||||
| Debt Conversion Notices [Member] | |||||||||||
| Stockholders' Equity (Textual) | |||||||||||
| Aggregate shares of common stock | 46,521,739 | ||||||||||
| Convertible debt amount (in Dollars) | $ 0.0115 | ||||||||||
| 2021 Stock Incentive Plan [Member] | Maximum [Member] | |||||||||||
| Stockholders' Equity (Textual) | |||||||||||
| Shares of Common Stock | 53,000,000 | ||||||||||
| 2018 Stock Incentive Plan [Member] | |||||||||||
| Stockholders' Equity (Textual) | |||||||||||
| Terminates period | 10 years | ||||||||||
| 2021 Stock Incentive Plan [Member] | |||||||||||
| Stockholders' Equity (Textual) | |||||||||||
| Terminates period | 10 years | ||||||||||
Stockholders’ Equity (Details) - Schedule of restricted stock granted and exercisable |
3 Months Ended |
|---|---|
|
Mar. 31, 2023
$ / shares
shares
| |
| Restricted stock granted, number granted | shares | 23,495,000 |
| Restricted stock granted, weighted average fair value per share (in Dollars per share) | $ / shares | $ 0.05 |
| Grant date Price 0.049 [Member] | |
| Restricted stock granted, number granted | shares | 20,495,000 |
| Restricted stock granted, weighted average fair value per share (in Dollars per share) | $ / shares | $ 0.049 |
| Grant date Price 0.050 [Member] | |
| Restricted stock granted, number granted | shares | 1,000,000 |
| Restricted stock granted, weighted average fair value per share (in Dollars per share) | $ / shares | $ 0.05 |
| Grant date Price 0.055 [Member] | |
| Restricted stock granted, number granted | shares | 2,000,000 |
| Restricted stock granted, weighted average fair value per share (in Dollars per share) | $ / shares | $ 0.055 |
Stockholders’ Equity (Details) - Schedule of fair value of the warrants and options granted and issued Black Scholes valuation model - Warrants [Member] |
3 Months Ended |
|---|---|
|
Mar. 31, 2023
$ / shares
| |
| Stockholders’ Equity (Details) - Schedule of fair value of the warrants and options granted and issued Black Scholes valuation model [Line Items] | |
| Exercise price (in Dollars per share) | $ 0.0115 |
| Expected life | 5 years |
| Expected dividend rate | 0.00% |
| Minimum [Member] | |
| Stockholders’ Equity (Details) - Schedule of fair value of the warrants and options granted and issued Black Scholes valuation model [Line Items] | |
| Risk free interest rate | 3.93% |
| Expected volatility of underlying stock | 189.15% |
| Maximum [Member] | |
| Stockholders’ Equity (Details) - Schedule of fair value of the warrants and options granted and issued Black Scholes valuation model [Line Items] | |
| Risk free interest rate | 4.16% |
| Expected volatility of underlying stock | 189.37% |
Net Loss Per Share (Details) - Schedule of dilutive shares - shares |
3 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Anti-dilutive shares | 496,241,594 | 79,508,625 |
| Convertible debt [Member] | ||
| Anti-dilutive shares | 248,812,128 | 11,687,855 |
| Stock options [Member] | ||
| Anti-dilutive shares | 46,316,666 | 30,516,666 |
| Warrants to purchase shares of common stock [Member] | ||
| Anti-dilutive shares | 201,112,800 | 37,304,104 |
Subsequent Events (Details) - USD ($) |
1 Months Ended | ||
|---|---|---|---|
May 11, 2023 |
Jun. 15, 2023 |
May 10, 2023 |
|
| Subsequent Event [Member] | |||
| Subsequent Events (Details) [Line Items] | |||
| Aggregate principal amount | $ 117,320 | ||
| Original issue discount | 12,570 | ||
| Gross proceeds | $ 104,750 | ||
| Interest charge | 13.00% | ||
| Maturity date | May 10, 2024 | ||
| Frictionless agreement description | the Company entered into an Agreement with Frictionless (the “May 2023 Frictionless Agreement”) to unwind the equity ownership stakes that the Company and Frictionless have in each other and in Beyond Fintech. Pursuant to the May 2023 Frictionless Agreement: (i) the Company assigned to Frictionless all common stock of Frictionless owned by the Company (representing a 10% ownership interest in Frictionless); (ii) the warrant to purchase 30,000,000 shares of Common Stock previously issued by the Company to Frictionless as of December 30, 2022 was cancelled; (iii) the Company assigned to Frictionless all shares of common stock of Beyond Fintech owned by the Company (representing a 51% ownership interest in Beyond Fintech) (the “Beyond Fintech Shares”); and (iv) the rights previously granted to the Company to (a) acquire additional equity interests in Frictionless, (b) participate in future financings of Frictionless and (c) appoint a board member of Frictionless were terminated. The consideration to the Company for the assignment of the Beyond Fintech Shares to Frictionless is $250,000, which will be paid by Frictionless exclusively in the form of 20% credits against invoices for work done by Frictionless for the Company for the 18 month period following the closing under the existing software services between the Company and Frictionless | ||
| Forecast [Member] | |||
| Subsequent Events (Details) [Line Items] | |||
| Interest charge | 60.00% | ||
| Repayments amount | $ 13,257.1 |
#WWRRU