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
| (Exact name of registrant as specified in its charter) |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| (Address of Principal Executive Office) | (Zip Code) |
| (Registrant’s telephone number, including area code) |
| n/a |
| (Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Indicate by check mark
whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required
to submit such files.)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of May 14, 2025, there were
INNOVATIVE PAYMENT SOLUTIONS, INC.
Form 10-Q
For the Quarter Ended March 31, 2025
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 (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) 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 this Report and in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 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 and generate revenue from our IPSIPay Express joint venture or other digital payment solutions we may seek to develop or commercialize in the future; |
| ● | acceptance by the marketplace of our products and services, notably IPSIPay Express; |
| ● | 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 Express 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 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 2024 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 BALANCE SHEETS
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Assets | (Unaudited) | |||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Other current assets | ||||||||
| Notes receivable – current portion | ||||||||
| Total Current Assets | ||||||||
| Non-current assets | ||||||||
| Plant and equipment | ||||||||
| Equity method investment | ||||||||
| Total Non-Current Assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Equity (Deficit) | ||||||||
| Current Liabilities | ||||||||
| Bank overdraft | $ | $ | ||||||
| Accounts payable | ||||||||
| Related party payables | ||||||||
| Federal relief loans – current portion | ||||||||
| Notes payable, net of unamortized discount of $ | ||||||||
| Convertible debt, net of unamortized discount of $ | ||||||||
| Derivative liability | ||||||||
| Total Current Liabilities | ||||||||
| Non-Current Liabilities | ||||||||
| Federal relief loans | ||||||||
| Total Non-Current Liabilities | ||||||||
| Total Liabilities | ||||||||
| Stockholders’ (Deficit) | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ (deficit) | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ (Deficit) | $ | $ | ||||||
See accompanying notes to the unaudited condensed financial statements.
1
INNOVATIVE PAYMENT SOLUTIONS, INC.
Condensed Statements of Operations
(Unaudited)
| Three months ended | Three months ended | |||||||
| March 31, | March 31, | |||||||
| 2025 | 2024 | |||||||
| Net Revenue | $ | $ | ||||||
| Cost of Goods Sold | ||||||||
| Gross profit | ||||||||
| General and administrative | ||||||||
| Depreciation and amortization | ||||||||
| Total Expense | ||||||||
| Loss from Operations | ( | ) | ( | ) | ||||
| Loss on convertible debt | ( | ) | ( | ) | ||||
| Fair value adjustments to price protected warrants | ( | ) | ||||||
| Interest income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Amortization of debt discount | ( | ) | ( | ) | ||||
| Derivative liability movements | ||||||||
| Loss before Income Taxes | ( | ) | ( | ) | ||||
| Income Taxes | ||||||||
| Net Loss after income taxes | ( | ) | ( | ) | ||||
| Net loss from equity method investments | ( | ) | ||||||
| Net loss | ( | ) | ( | ) | ||||
| Deemed dividend | ( | ) | ||||||
| Net loss attributable to common stockholders | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted loss per share | $ | ( | ) | $ | ( | ) | ||
| Weighted Average Number of Shares Outstanding – Basic and diluted | ||||||||
See accompanying notes to the unaudited condensed financial statements.
2
INNOVATIVE PAYMENT SOLUTIONS, INC.
Condensed Statements of Changes in Stockholders’ Equity (Deficit)
(Unaudited)
| Preferred Stock Shares | Amount | Common Stock Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders’ Equity (Deficit) | ||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Conversion of convertible debt | - | |||||||||||||||||||||||||||
| Fair value of warrants anti-dilution deemed dividend | - | - | ( | ) | ||||||||||||||||||||||||
| Fair value of warrants issued to convertible debt holders | - | - | ||||||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance at March 31, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Preferred Stock Shares | Amount | Common Stock Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders’ Equity (Deficit) | ||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Fair value of warrants issued to convertible debt holders | - | - | ||||||||||||||||||||||||||
| Fair value of warrants issued on debt extinguishment | - | - | ||||||||||||||||||||||||||
| Fair value of warrants issued for services | - | - | ||||||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
See accompanying notes to unaudited condensed financial statements.
3
INNOVATIVE PAYMENT SOLUTIONS, INC.
Condensed Statements of Cash Flows
(Unaudited)
| Three months ended | Three months ended | |||||||
| March 31, | March 31, | |||||||
| 2025 | 2024 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustment to reconcile net loss to net cash used in operating activities: | ||||||||
| Derivative liability movements | ( | ) | ( | ) | ||||
| Depreciation | ||||||||
| Amortization of debt discount | ||||||||
| Loss on convertible debt | ||||||||
| Fair value of price protected warrants | ||||||||
| Fair value of warrants issued for services | ||||||||
| Deemed interest income | ( | ) | ( | ) | ||||
| Unrealized loss on equity method investments | ||||||||
| Stock based compensation | ||||||||
| Changes in Assets and Liabilities | ||||||||
| Other current assets | ||||||||
| Accounts payable and accrued expenses | ||||||||
| Related party payables | ||||||||
| Interest receivable | ( | ) | ||||||
| Interest accruals | ||||||||
| CASH USED IN OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Investment in notes receivable | ( | ) | ||||||
| Investment in equity method investment | ( | ) | ||||||
| NET CASH USED IN INVESTING ACTIVITIES | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from bank overdraft | ||||||||
| Proceeds from notes payable and convertible debt | ||||||||
| Repayment of convertible debt | ( | ) | ||||||
| Repayment of federal relief loans | ||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
| NET DECREASE IN CASH | ( | ) | ( | ) | ||||
| CASH AT BEGINNING OF YEAR | ||||||||
| 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 debt | $ | $ | ||||||
| Conversion of convertible debt to equity | $ | $ | ||||||
See notes to the unaudited condensed financial statements.
4
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed Financial Statements
| 1 | ORGANIZATION AND DESCRIPTION OF BUSINESS |
| a) | Organizational History |
On
Pursuant to the Qpagos Merger
Agreement, upon consummation of the Qpagos 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 Qpagos 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
On December 31, 2019, the Company
consummated the disposal of Qpagos Corporation, Qpagos Mexico and Redpag in exchange for
On June 21, 2021, the Company acquired
a
5
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed Financial Statements
| 1 | ORGANIZATION AND DESCRIPTION OF BUSINESS (continued) |
| a) | Organizational History (continued) |
On August 26, 2021, the Company formed
a new subsidiary, Beyond Fintech, Inc. (“Beyond Fintech”), in which it owns a
On May 12, 2023, the Company
entered into an Agreement with Frictionless (the “May 2023 Frictionless Agreement”) to unwind the equity ownership stakes
that the Company and Frictionless have in each other and in Beyond Fintech. Pursuant to the May 2023 Frictionless Agreement: (i) the Company
assigned to Frictionless all common stock of Frictionless owned by the Company; (ii) the warrant to purchase
On August 30, 2023, the Company
implemented a
On September 5, 2023, the Company’s entered into a novation agreement whereby it assigned all its rights and interest in its e-wallet product, IPSIPay, and its receivables and payables due from and to Frictionless, related to IPSIPay, to a third party in order to concentrate all of its efforts on the IPSIPay Express LLC (“IPSIPay Express”) joint venture. See note 1(b) for further information.
| b) | Description of current business |
The Company is currently a fintech provider of digital payment solutions presently focused on, through its participation in IPSIPay Express, developing a new account-to-account payment application called Instant Direct Payments as well as traditional credit card processing services. The Company has in the past (under the name IPSIPay) and may in the future develop and operate “e-wallets” that enable consumers to deposit cash, convert it into a digital form and remit funds quickly and securely.
IPSIPay Express
On April 28, 2023, the Company formed a new company called IPSIPay Express. This entity was formed as a Delaware limited liability company joint venture with OpenPath, Inc. (“OpenPath”) and EfinityPay, LLC (“EfinityPay”, and the Company, collectively with OpenPath and EfinityPay, the “Members”) to develop and market a proprietary consumer to merchant real-time payment platform initially focused on the fast-growing online gaming and entertainment sectors.
On June 19, 2023, the Company entered into a Limited Liability Company Operating Agreement (the “Operating Agreement”) with OpenPath and EfinityPay to jointly provide for the governance of and rights of the Members with respect to IPSIPay Express. The effective date of the Operating Agreement is April 28, 2023.
IPSIPay Express was formed by the Members with the initial business purposes of providing credit card processing solutions and also a proprietary solution for real time bank-to-bank payment transactions in a manner that provides seamless and frictionless consumer and merchant experiences, with an initial focus on merchants operating in gaming and entertainment sectors. Such solutions are collectively referred to herein as “IPEX.”
6
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed Financial Statements
| 1 | ORGANIZATION AND DESCRIPTION OF BUSINESS (continued) |
| b) | Description of current business (continued) |
Pursuant to the Operating Agreement,
the Company agreed to contribute cash to or on behalf IPSIPay Express to be used for the IPEX business in the aggregate amount of up to
$
Simultaneously with the funding of the
initial Tranche, the Company issued to each of OpenPath and EfinityPay a five-year Common Stock purchase warrant (the “IPEX Warrant”)
to purchase
| c) | Merger Agreement with Business Warrior |
Business Warrior Corporation (“Business Warrior”) is a publicly listed, revenue generating fintech company that offers PayPlan, a comprehensive lending software platform that includes marketing services for lenders and businesses. We believed that a potential combination with a fintech company that generates some revenue monthly would complement the development and commercial launch of our IPSIPay ExpressTM products and potentially other product offerings.
On July 28, 2024, the Company entered into an Agreement and Plan of Merger by and among the Company, IPSI Merger Sub, Inc., a Delaware corporation and a newly formed, wholly owned subsidiary of the Company (“Merger Sub”) and Business Warrior.
On January 22, 2025, the Company and Business Warrior mutually agreed to terminate the Agreement and Plan of Merger dated July 28, 2024. This decision reflects our shared understanding and agreement that discontinuing the merger is in the best interest of both parties.
7
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed Financial Statements
| 2 | ACCOUNTING POLICIES AND ESTIMATES |
| a) | Basis of Presentation |
The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, these unaudited condensed financial statements do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments (consisting only of normal recurring adjustments), which the Company considers necessary, for a fair presentation of those financial statements. The results of operations and cash flows for the three months ended March 31, 2025 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 Report should be read in conjunction with the audited financial statements of IPSI for the year ended December 31, 2024, included in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2025.
The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. GAAP.
All amounts referred to in the notes to the unaudited condensed financial statements are in United States Dollars ($) unless stated otherwise.
| b) | Use of Estimates |
The preparation of unaudited condensed 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 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, debt extinguishments or compensation, convertible debt and amendments thereto, derivative liabilities, the valuation allowance for deferred tax assets due to continuing operating losses and the allowance for doubtful accounts.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from our estimates.
| c) | Contingencies |
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur.
The Company’s management assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s unaudited condensed 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.
8
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed Financial Statements
| 2 | ACCOUNTING POLICIES AND ESTIMATES (continued) |
| d) | Fair Value of Financial Instruments |
The Company adopted the guidance of Accounting Standards Codification (“ASC”) 820 for fair value measurements which clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level 2 - Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.
Level 3 - Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.
The carrying amounts reported in the balance sheets for cash, accounts receivable, notes 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 debt 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.
| e) | Risks and Uncertainties |
The Company’s operations and prospects are and will be subject to significant risks and uncertainties including financial, operational, regulatory, and other risks, including the potential risk of business failure. In particular, there is a risk that that IPSIPay Express business (the commercial launch of which has taken longer than originally expected) may never generate revenue for the Company. Further, the ongoing wars in Ukraine and between Israel, Hamas and more recently, Hezbollah and uncertainties regarding the global economic environment which has resulted in a general tightening in the credit markets, lower levels of liquidity, increases in the rates of default and bankruptcy, and extreme volatility in credit, equity and fixed income markets. These conditions may not only limit the Company’s access to capital, but also make it difficult for its customers, vendors and the Company to accurately forecast and plan future business activities, which may have an adverse impact on its business and financial condition and may hamper the Company’s ability to generate revenue and access usual sources of liquidity on reasonable terms.
The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, and rates and methods of taxation, among other things.
9
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed Financial Statements
| 2 | ACCOUNTING POLICIES AND ESTIMATES (continued) |
| f) | Recent accounting pronouncements |
The Financial Accounting Standards Board (“FASB”) issued additional updates during the quarter ended March 31, 2025. 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 unaudited condensed financial statements upon adoption.
| g) | Reporting by Segment |
The Company adopted FASB issued ASU 2023-07, “Segment Reporting (ASC Topic 280) for the annual reporting period ended December 31, 2024. The most significant provision was for the Company to disclose significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), who is the CEO. All expense categories on the Statements of Operations are significant and there are no other significant segment expenses that would require disclosure. The Company’s CODM, reviews financial information presented on an aggregated basis for the purpose of making operating decisions, allocating resources, assessing financial performance and making strategic decisions related to headcount and capital expenditures. The CODM regularly reviews net loss as reported on the Company’s statements of operations. The CODM uses net loss as the measure of profit or loss to allocate resources and assess performance.
Since the Company operates as
| h) | Cash and Cash Equivalents |
The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. At March 31, 2025 and December 31, 2024, 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, 2025 and December 31, 2024, the balance did not exceed federally insured limits.
| i) | Accounts Receivable and Allowance for Doubtful Accounts |
Accounts receivable are reported at realizable value, net of allowances for doubtful accounts, which is estimated and recorded in the period the related revenue is recorded. The Company has a standardized approach to estimate and review the collectability of its receivables based on a number of factors, including the period they have been outstanding. Historical collection and payer reimbursement experience is an integral part of the estimation process related to allowances for doubtful accounts. In addition, the Company regularly assesses the state of its billing operations in order to identify issues, which may impact the collectability of these receivables or reserve estimates. Revisions to the allowance for doubtful accounts estimates are recorded as an adjustment to bad debt expense. Receivables deemed uncollectible are charged against the allowance for doubtful accounts at the time such receivables are written-off. Recoveries of receivables previously written-off are recorded as credits to the allowance for doubtful accounts. There were no recoveries during the period ended March 31, 2025 and 2024.
10
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed Financial Statements
| 2 | ACCOUNTING POLICIES AND ESTIMATES (continued) |
| j) | Investments |
The Company’s non-marketable equity
securities are investments in privately held companies without readily determinable market values. The carrying value of our non-marketable
equity securities is adjusted to fair value for observable transactions for identical or similar investments of the same issuer or impairment
(referred to as the measurement alternative). All gains and losses on non-marketable equity securities, realized and unrealized, are recognized
in other income (expense), net. Non-marketable equity securities that have been remeasured during the period are classified within Level
3 in the fair value hierarchy because the Company estimates the value based on valuation methods using the observable transaction price
at the transaction date and other unobservable inputs including volatility, rights, and obligations of the securities the Company holds.
The cost method is used when the Company has a passive, long-term investment that doesn’t result in influence over the Company.
The cost method is used when the investment results in an ownership stake of less than
| k) | Plant and Equipment |
Plant and equipment is stated at cost,
less accumulated depreciation. Plant and equipment with costs greater than $
| Description | Estimated Useful Life | |||
| 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.
| l) | Long-Term Assets |
Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.
11
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed Financial Statements
| 2 | ACCOUNTING POLICIES AND ESTIMATES (continued) |
| m) | Revenue Recognition |
The Company’s revenue recognition policy is consistent with the requirements of FASB ASC 606, Revenue.
The Company’s revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those services. The Company derives its revenues from the sale of its services, as defined below. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its revenue transactions:
| i. | identify the contract with a customer; |
| ii. | identify the performance obligations in the contract; |
| iii. | determine the transaction price; |
| iv. | allocate the transaction price to performance obligations in the contract; and |
| v. | recognize revenue as the performance obligation is satisfied. |
The Company had revenues for the three months ended March 31, 2025 and 2024.
| n) | Share-Based Payment Arrangements |
Generally, all forms of share-based payments, including stock option grants, restricted stock grants and stock appreciation rights are measured at their fair value on the awards’ grant date, based on the estimated number of awards that are ultimately expected to vest. Share-based compensation awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable. The expense resulting from share-based payments is recorded in operating expenses in the statement of operations.
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.
| o) | Derivative Liabilities |
ASC 815 generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re- measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument subject to the requirements of ASC 815. ASC 815 also provides an exception to this rule when the host instrument is deemed to be conventional, as described.
| p) | Marketing and advertising expenses |
Marketing and advertising expenditure
incurred on promoting the Company’s previous products were expensed as incurred. Marketing and advertising costs amounted to $
12
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed Financial Statements
| 2 | ACCOUNTING POLICIES AND ESTIMATES (continued) |
| q) | Income Taxes |
The Company is based in the U.S. and currently enacted U.S. 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, 2025 and December 31, 2024, there have been no interest or penalties incurred on income taxes.
| r) | Comprehensive income |
Comprehensive income is defined as the change in equity of a company during a period from transactions and other events and circumstances excluding transactions resulting from investments from owners and distributions to owners. The Company does not have any comprehensive income (loss) for the periods presented.
| s) | Reclassification of prior year presentation |
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.
| 3 | LIQUIDITY MATTERS AND GOING CONCERN |
The Company’s financial statements
are prepared using 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, 2025, the Company had a net loss of $
The accompanying financial statements for the period ended March 31, 2025 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, ultimately, 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 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 its ability to continue as a going concern.
13
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed Financial Statements
| 4 | NOTES RECEIVABLE |
On February
22, 2024, the Company (utilizing a portion of the proceeds from the issuance of convertible debt) loaned funds to Business Warrior in
the principal amount of $
The debt discount on the Business Warrior’s note is amortized as income utilizing the effective interest rate method.
Between
June 19, 2024 and November 27, 2024, the Company (utilizing a portion of the proceeds from the issuance of convertible debt and notes
payable) loaned additional funds to Business Warrior in the aggregate principal amount of $
We have declared the notes with maturity dates prior to the filing of these financial statements, to be in default with Business Warrior and are currently negotiating the repayment of these notes with them.
Loans receivable consists of the following:
| Description | Interest Rate | Maturity date | Principal | Accrued interest | Unamortized debt discount | March 31, 2025 Amount, net | December 31, 2024 Amount, net | |||||||||||||||||||
| Business Warrior Corporation | % | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||
| % | ||||||||||||||||||||||||||
| % | ||||||||||||||||||||||||||
| % | ||||||||||||||||||||||||||
| % | ||||||||||||||||||||||||||
| % | ||||||||||||||||||||||||||
| Total Notes receivable | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||
Discount amortized
to income as deemed interest during the three months ended March 31, 2025 and 2024 was $
Interest earned
for the three months ended March 31, 2025 and 2024 was $
14
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed Financial Statements
| 5 | EQUITY METHOD INVESTMENT |
On April 28, 2023, the Company formed
IPSIPay Express with OpenPath and EfinityPay (see note 1(b) above). As described in note 1(b), the Company has agreed to make the IPSI
Capital Contributions to IPSIPay Express. As of March 31, 2025, the initial Tranche of $
On December 31, 2024, the company impaired
the equity method investment and all receivables from the joint venture by $
The Company accounts for its investment in IPSIPay Express in accordance with ASC 323, Investments – Equity Method and Joint Ventures, the equity method investments related to IPSIPay Express as of March 31, 2025 and December 31, 2024 is as follows:
March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Equity method Investment | ||||||||
| Cash contribution to IPSIPay Express | $ | $ | ||||||
| Fair value of warrants issued to third party joint venture partners | ||||||||
| Equity loss from joint venture | ( | ) | ( | ) | ||||
| Receivable from IPSIPay Express | ||||||||
| Impairment of investment | ( | ) | ( | ) | ||||
| Equity method investment | $ | $ | ||||||
The loss from equity method investments for the three months ended March 31, 2025 and 2024, is as follows:
| Three months ended March 31, | Three months ended March 31, | |||||||
| 2025 | 2024 | |||||||
| Loss from Equity method investment | ||||||||
| Loss from joint venture | $ | $ | ( | ) | ||||
| 6 | FEDERAL RELIEF LOANS |
Small Business Administration Disaster Relief loan
On July 7, 2020, the Company received
a Small Business Economic Injury Disaster loan amounting to $
The company has accrued interest of
$
15
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed Financial Statements
| 7 | NOTES PAYABLE |
Notes payable consists of the following:
| Description | Interest Rate | Maturity date* | Principal | Accrued Interest | Unamortized debt discount | March 31, 2025 Amount, net | December 31, 2024 Amount, net | |||||||||||||||||||
| Cavalry Fund I LP | % | $ | $ | $ | $ | $ | ||||||||||||||||||||
| Mercer Street Global Opportunity Fund, LLC | % | |||||||||||||||||||||||||
| 2024 notes | | % | ( | ) | ||||||||||||||||||||||
| Total notes payable | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||
Interest expense totaled $
Amortization of debt discount totaled
$
Cavalry Fund I LP and Mercer Street Global Opportunity Fund, LLC
In terms of
the December 30, 2022 Note Amendment Transaction, described in more detail in note 8 below, the Original Warrants issued on February 16,
2021 were irrevocably exchanged for 12-month notes payable in the amount of $
The Exchange
Notes had a maturity date of
On February 27, 2024, the maturity date of the notes was extended to April 30, 2024 with an automatic one-month extension each month until such time as the note is declared to be in default, all other terms remain the same as the previous notes. The automatic extension of the maturity date may not extend past November 27, 2024, thereafter all amounts due under the note are immediately due and payable. The Company performed an analysis in terms of ASC 470 and it was determined that the extension was a debt modification, in addition, no additional consideration was paid for the maturity date extension.
With effect
from November 27, 2024, the notes accrue interest at
2024 Notes
Between May
29, 2024 and November 27, 2024, the Company entered into nine Securities Purchase Agreements with four accredited investors, pursuant
to which the Company issued nine notes payable (the “2024 Notes”) with an aggregate principal amount of $
The 2024 Notes
mature between February 28, 2025 and October 10, 2025 and bear interest at rates ranging from
The 2024 Notes
have restrictions relating to fundamental transactions which require the approval of the note holder, in addition the note holder has
an optional redemption right on subsequent transactions that may require the Company to redeem all or part of the Note, at a premium of
As of
March 31, 2025, notes with a principal amount of $
16
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed Financial Statements
| 8 | CONVERTIBLE DEBT |
Convertible debt payable consists of the following:
| Description | Interest Rate | Maturity date*** | Principal | Accrued Interest | Unamortized debt discount | March 31, 2025 Amount, net | December 31, 2024 Amount, net | ||||||||||||||||||||
| Cavalry Fund I LP | %* | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Mercer Street Global Opportunity Fund, LLC | %* | ||||||||||||||||||||||||||
| Red Road Holdings Corporation | %** | ||||||||||||||||||||||||||
| %** | - | ||||||||||||||||||||||||||
| Quick Capital LLC | %** | ||||||||||||||||||||||||||
| 2023, 2024 and 2025 convertible debt | | % | ( | ) | |||||||||||||||||||||||
| Total convertible debt | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||
| * | |
| ** |
| *** |
Interest
expense totaled $
Amortization
of debt discount totaled $
The Cavalry, Mercer, Red Road Holdings Corporation and Quick Capital 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 and Mercer December 2022 Note Amendment Transaction
The
Company twice extended its indebtedness to each Cavalry and Mercer. On February 3, 2022, the Company agreed to extend the maturity date
of the Cavalry/Mercer Notes to
17
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed Financial Statements
| 8 | CONVERTIBLE DEBT (continued) |
Cavalry and Mercer December 2022 Note Amendment Transaction (continued)
On December 30, 2022, the Company again extended the maturity dates of each of the Cavalry/Mercer Notes to December 30, 2023. Each of Cavalry and Mercer entered into Note Amendment Letter Agreement with the Company (the “Note Amendment”) pursuant to which the parties agreed to the following:
| (1) | The conversion price of the
Cavalry/Mercer Notes was reduced from $ |
| (2) | The Original Warrants issued
on February 16, 2021 were irrevocably exchanged for 12-month notes payable in the amount of $ |
| (3) | Each of Cavalry and Mercer agreed (i) not to convert all or any portion of the Cavalry/Mercer Notes until after March 30, 2023 and (ii) waive any events of default under the Cavalry/Mercer Notes and the Cavalry/Mercer SPAs; |
| (4) | Certain other warrants held
by Cavalry and Mercer which contain a mandatory exercise provision allowing us to force exercise of such warrants if the price of the
Common Stock is $ |
| (5) | The Company was obligated to register the shares of Common Stock underlying the Cavalry/Mercer Notes and the shares underlying all warrants held by Cavalry and Mercer for resale with the Securities and Exchange Commission and the Company filed the registration statement to satisfy such registration obligation. |
As
a result of the reduction in the conversion price of the Cavalry/Mercer Notes, certain other warrants held by third parties have their
exercise price of such warrants reduced to $
The
amendments to the Cavalry/Mercer Notes were evaluated in terms of ASC 470, Debt, to determine if the amendments to the Cavalry/Mercer
Notes were considered a modification of the debt or an extinguishment of the debt. Based on the penalty interest incurred on the convertible
notes of $
Effective December 30, 2023 on February 27, 2024, the Company again extended the maturity dates of each of the Cavalry/Mercer Notes to April 30, 2024 with an automatic one-month extension each month until such time as the note is declared to be in default, all other terms remain the same as the previous notes. The automatic extension of the maturity date may not extend past November 27, 2024, thereafter all amounts due under the note are immediately due and payable. The Company performed an analysis in terms of ASC 470 and it was determined that the extension was a debt modification, in addition, no additional consideration was paid for the maturity date extension.
18
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed Financial Statements
| 8 | CONVERTIBLE DEBT (continued) |
Cavalry Fund LLP
On
February 16, 2021, the Company closed a transaction with Cavalry pursuant to which the Company received net proceeds of $
As
described more fully above, the maturity date of the note was extended to August 16, 2022, additionally to November 16, 2022, additionally
to December 30, 2023 and again to April 30, 2024, with an automatic one-month extension each month until such time as the note is declared
to be in default, all other terms remain the same as the previous notes. The automatic extension of the maturity date may not extend past
November 27, 2024, thereafter all amounts due under the note are immediately due and payable. The Company is currently negotiating with
Cavalry to place the note into forbearance, currently interest is being accrued at the default interest rate of
In
consideration for the November 16, 2022 extension, the Company agreed to (i) increase the principal amount outstanding and due to Cavalry
by twenty percent (
Between
August 24, 2023 and November 20, 2023, Cavalry converted $
Between
September 5, 2024 and November 11, 2024, Cavalry converted an aggregate of $
On January 14, 2025, Cavalry
converted an aggregate $
In terms of the agreement with Cavalry,
the conversion price of the convertible note will be adjusted downwards on any dilutive issuances. The conversion price of the convertible
debt has been adjusted to $
The
balance of the Cavalry Note plus accrued interest at March 31, 2025 was $
Mercer Street Global Opportunity Fund, LLC
On
February 16, 2021, the Company closed a transaction with Mercer, pursuant to which the Company received net proceeds of $
As
described more fully above, the maturity date of the note was extended to August 16, 2022, additionally to November 16, 2022, additionally
to December 30, 2023 and again to April 30, 2024, with an automatic one-month extension each month until such time as the note is declared
to be in default, all other terms remain the same as the previous notes. The automatic extension of the maturity date may not extend past
November 27, 2024, thereafter all amounts due under the note are immediately due and payable. The Company is currently negotiating with
Mercer to place the note into forbearance, currently interest is being accrued at the default interest rate of
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 (
19
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed Financial Statements
| 8 | CONVERTIBLE DEBT (continued) |
Mercer Street Global Opportunity Fund, LLC (continued)
Between
May 19, 2023 and August 30, 2023, Mercer converted an aggregate of $
Between
August 20, 2024 and November 11, 2024, Mercer converted an aggregate of $
On January 14, 2025, Mercer converted an aggregate $13,346 of interest into 526,474 shares of common stock at a conversion price of $0.0254 per share. The Company realized a gain on conversion of $184.
In terms of the agreement with Cavalry,
the conversion price of the convertible note will be adjusted downwards on any dilutive issuances. The conversion price of the convertible
debt has been adjusted to $
The
balance of the Mercer Note plus accrued interest at March 31, 2025 was $
Red Road Holdings Corporation
| ● | On April 2, 2024, the
Company closed a transaction with RRH pursuant to which the Company received net proceeds of $ |
|
| On January 7, 2025 and January 8, 2025, Red Road Holdings converted an aggregate of $ |
| ● | On June 25, 2024, the Company closed a transaction with RRH pursuant to which the Company received net proceeds of $
The first instalment was not made, automatically placing the note into default, with a penalty charge of
Between January 13, 2025 and March 21, 2025, RRH converted an aggregate of $
The balance owing on the RRH Note 5 plus accrued interest, at March 31, 2025 was $ |
20
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed Financial Statements
| 8 | CONVERTIBLE DEBT (continued) |
Quick Capital, LLC
| ● | On May 28, 2024, the Company closed a transaction with Quick Capital pursuant to which the Company received net proceeds of $
No repayments have been made on the Quick Capital Note 2 which provides for a no notice default, whereupon the note accrued penalty interest at a rate of
On December 6, 2024, Quick Capital converted an aggregate of $
Between January 7, 2025 and March 28, 2025, Quick Capital converted an aggregate of |
2023, 2024 and 2025 Convertible Notes
Between
February 13, 2023 and November 27, 2023, the Company entered into Securities Purchase Agreements with 30 accredited investors to purchase
convertible notes (the “2023 Convertible Notes”), receiving an aggregate of $
Between
February 6, 2024 and October 23, 2024, the Company entered into Securities Purchase Agreements with 9 accredited investors to
purchase convertible notes (the “2024 Convertible Notes”), receiving an aggregate of $
Between
January 7, 2025 and February 20, 2025, the Company entered into Securities Purchase Agreements with 1 accredited investor to purchase
convertible notes (the “2025 Convertible Notes”), receiving an aggregate of $
In terms of the above private placements through the issuance of :
| ● | the 2023 Convertible Notes, the 2024 Convertible Notes and the 2025 Convertible notes; and |
| ● | five-year warrants to purchase an aggregate |
The
2023 Convertible Notes, the 2024 Convertible Notes, and the 2025 Convertible Notes bear interest at rates ranging from
21
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed Financial Statements
| 8 | CONVERTIBLE DEBT (continued) |
2023, 2024 and 2025 Convertible Notes (continued)
The Company is under no obligation to register the shares of Common Stock underlying the 2023 Convertible Notes, the 2024 Convertible Notes, the 2025 Convertible Notes or the 2023 Warrants, the 2024 Warrants and the 2025 Warrants, for public resale.
The
2023 Convertible Notes, the 2024 Convertible Notes, the 2025 Convertible Notes and the 2023 Warrants, the 2024 Warrants and the 2025 Warrants,
contain conversion limitations providing that a holder thereof may not convert or exercise such securities to the extent that, if after
giving effect to such conversion or exercise, the holder or any of its affiliates would beneficially own in excess of
On
December 14, 2023, two notes totaling $
On
March 14, 2024, the Company extended the maturity date of 11 convertible notes maturing between February 13, 2024 and February 23, 2024
by an additional six months and as consideration for the extension, the note holders were issued additional warrants exercisable for
The Company attempted to extend the maturity date of the convertible debt to December 31, 2025, however this was not formally agreed to and was not approved by the Board of Directors, the Company is still pursuing a global settlement with all convertible note holders and note holders, no agreement has been reached as of the date of this report.
The
2023 Convertible Notes have an aggregate amount outstanding of $
The
2024 Convertible Notes have an aggregate amount outstanding of $
One
noteholder with an aggregate amount outstanding of $
The
2025 Convertible Notes have an aggregate amount outstanding of $
| 9 | DERIVATIVE LIABILITY |
The convertible debt and warrants issued by the Company to Cavalry, Mercer, RRH and Quick Capital, as described in Note 8 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 debt and any warrants attached thereto are valued and give rise to a derivative financial liability, which was initially valued at inception of the convertible debt using a Black-Scholes valuation model.
Between January 7, 2025 and March 28,
2025, the Company received conversion notices from Cavalry, Mercer, RRH and Quick Capital, pursuant to which $
22
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed Financial Statements
| 9 | DERIVATIVE LIABILITY (continued) |
Convertible debt with an aggregate
principal and interest balance outstanding on March 20, 2025 of $
The value of the derivative liability
related to the anti-dilution price protected convertible debt and warrants was evaluated immediately prior to the Triggering Event and
immediately after the Triggering Event, resulting in an additional of $
The net mark-to-market movement of
the derivative liability for the three months ended March 31, 2025 was a net mark-to-market credit of $
The following assumptions were used in the Black-Scholes valuation model:
| Three months ended March 31, 2025 | Year ended December 31, 2024 | |||||||
| 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:
| Three months ended March 31, 2025 | Year ended December 31, 2024 | |||||||
| Opening balance | $ | $ | ||||||
| Derivative financial liability arising from convertible debt and warrants | ||||||||
| Derivative liability arising on anti-dilutive convertible debt and warrants | ||||||||
| Fair value adjustment to derivative liability | ( | ) | ( | ) | ||||
| Closing balance | $ | $ | ||||||
23
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed Financial Statements
| 10 | STOCKHOLDERS’ EQUITY |
| a. | Common Stock |
The Company has total
authorized Common Stock of
On August 6, 2024, the Company received
a conversion notice from the holder of RRH Note 2 (see Note 12) pursuant to which $
Between August 6, 2024 and September
17, 2024, in terms of conversion notices received from 4 convertible note holders, including the RRH Note 2 described above, the Company
issued
Between January 7, 2025 and March 28,
2025, in terms of conversion notices received from 5 convertible note holders, the Company issued
| b. | Restricted stock awards |
The restricted stock granted, issued and exercisable at March 31, 2025 is as follows:
| Restricted Stock Granted and Vested | ||||||||||
| Grant date Price | Number Granted | Weighted Average Fair Value per Share | ||||||||
| $ | 1.47 | $ | ||||||||
| $ | 1.50 | |||||||||
| $ | 1.65 | |||||||||
| $ | ||||||||||
The Company has recorded an expense of
$
| c. | Preferred Stock |
The Company
has authorized
| d. | Warrants |
On March 4,
2024, the Company entered into a Securities Purchase Agreement with an accredited investor. In terms of the Securities Purchase Agreement,
the Company issued a five-year warrant to purchase an aggregate of
On March 14,
2024, the Company extended the maturity date of 11 convertible notes maturing between February 13, 2024 and February 23, 2024 by an additional
six months and as compensation for the extension, the note holders were issued warrants exercisable for
24
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed Financial Statements
| 10 | STOCKHOLDERS’ EQUITY (continued) |
| d. | Warrants (continued) |
Between May
3, 2024 and May 28, 2024, the Company entered into a Securities Purchase Agreements with four accredited investors. In terms of the Securities
Purchase Agreement, the Company issued five-year warrants to purchase an aggregate of
On May 4, 2024,
the maturity date of two notes totaling $
On August 6, 2024, the Company received
a conversion notice from the holder of RRH Note 2. As a result of the conversion of the RRH Note 2, all warrants of the Company that contain
price-based anti-dilution protection had the exercise price of such warrants adjusted to $
On January 7,
2025 and February 20, 2025, the Company entered into a Securities Purchase Agreements with one accredited investor. In terms of the Securities
Purchase Agreements, the Company issued five-year warrants to purchase an aggregate of
Between January 7, 2025 and March 28,
2025, the Company received conversion notices from 5 note holders. As a result of these conversion notices, all warrants of the Company
that contain price-based anti-dilution protection had the exercise price of such warrants adjusted to $
25
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed Financial Statements
| 10 | STOCKHOLDERS’ EQUITY (continued) |
| d. | Warrants (continued) |
The 2023, 2024
and 2025 Warrants contain exercise 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
The fair value of the warrants granted, repriced and issued, as described above, were determined by using a Black Scholes valuation model using the following assumptions:
| Three months ended March 31, 2025 | ||||
| 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, 2024 to March 31, 2025 is as follows:
| Shares Underlying Warrants | Exercise price per share | Weighted average exercise price | ||||||||||
| Outstanding January 1, 2024 | $ | $ | ||||||||||
| Granted | ||||||||||||
| Increase in warrants issued due to anti-dilution price protection | ||||||||||||
| Forfeited | ||||||||||||
| Exercised | ||||||||||||
| Outstanding December 31, 2024 | $ | $ | ||||||||||
| Granted | ||||||||||||
| Increase in warrants issued due to anti-dilution price protection | ||||||||||||
| Forfeited | ||||||||||||
| Exercised | ||||||||||||
| Outstanding March 31, 2025 | $ | $ | ||||||||||
26
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed Financial Statements
| 10 | STOCKHOLDERS’ EQUITY (continued) |
| d. | Warrants (continued) |
The warrants outstanding and exercisable at March 31, 2025 are as follows:
| Warrants Outstanding | Warrants Exercisable | |||||||||||||||||||||||||
| Exercise Price* | Number Outstanding | Weighted Average Remaining Contractual life in years | Weighted Average Exercise Price | Number Exercisable | Weighted Average Exercise Price | Weighted Average Remaining Contractual life in years | ||||||||||||||||||||
| $ | 0.001105 | |||||||||||||||||||||||||
| 0.084000 | ||||||||||||||||||||||||||
| $ | 0.345000 | |||||||||||||||||||||||||
| $ | 0.450000 | |||||||||||||||||||||||||
| $ | 1.035000 | |||||||||||||||||||||||||
| $ | 1.500000 | |||||||||||||||||||||||||
| $ | 4.500000 | |||||||||||||||||||||||||
| $ | 5.625000 | |||||||||||||||||||||||||
| $ | $ | |||||||||||||||||||||||||
The
warrants outstanding have an intrinsic value of $
| e. | Stock options |
On June 18, 2018, the Company established
its 2018 Stock Incentive Plan (the “Plan”). The purpose of the Plan is to promote the interests of the Company and the stockholders
of the Company by providing directors, officers, employees and consultants of the Company with appropriate incentives and rewards to encourage
them to enter into and continue in the employ or service of the Company, to acquire a proprietary interest in the long-term success of
the Company and to reward the performance of individuals in fulfilling long-term corporate objectives. The Plan terminates after a period
of
The Plan is administered by the Board or a committee appointed by the Board, who have the authority to administer the Plan and to exercise all the powers and authorities specifically granted to it under the Plan.
The maximum number of securities available
under the Plan is
On October 22, 2021, the Company established
its 2021 Stock Incentive Plan (“2021 Plan”). The purpose of the Plan is to promote the interests of the Company and the stockholders
of the Company by providing directors, officers, employees and consultants, advisors and service providers of the Company with appropriate
incentives and rewards to encourage them to enter into and continue in the employ or service of the Company, to acquire a proprietary
interest in the long-term success of the Company and to reward the performance of individuals in fulfilling long-term corporate objectives.
The Plan terminates after a period of
The 2021 Plan is administered by the Board or a Compensation Committee appointed by the Board, who have the authority to administer the Plan and to exercise all the powers and authorities specifically granted to it under the Plan.
The maximum number of securities available
under the 2021 Plan is
Under the 2021 Plan the Company may award the following: (i) non-qualified stock options; (ii)) incentive stock options; (iii) stock appreciation rights; (iv) restricted stock; (v) restricted stock unit; and (vi) other stock-based awards.
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INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed Financial Statements
| 10 | STOCKHOLDERS’ EQUITY (continued) |
| e. | Stock options (continued) |
During 2024, options exercisable for
On January 7, 2025, in terms of an employment
agreement entered into with Mr. Corbett, the Company awarded him
The fair value of the options granted were determined by using a Black Scholes valuation model using the following assumptions:
| Three months ended March 31, 2025 | ||||
| Exercise price | $ | |||
| Risk free interest rate | % | |||
| Expected life | Ten years | |||
| Expected volatility of underlying stock | % | |||
| Expected dividend rate | % | |||
A summary of option activity during the period January 1, 2024 to March 31, 2025 is as follows:
| Shares Underlying options |
Exercise price per share |
Weighted average exercise price |
||||||||||
| Outstanding January 1, 2024 | $ | $ | ||||||||||
| Granted | ||||||||||||
| Forfeited/Cancelled | ( |
) | ||||||||||
| Exercised | ||||||||||||
| Outstanding December 31, 2024 | $ | $ | ||||||||||
| Granted | ||||||||||||
| Forfeited/Cancelled | - | - | - | |||||||||
| Exercised | ||||||||||||
| Outstanding March 31, 2025 | $ | $ | ||||||||||
The options outstanding and exercisable at March 31, 2025 are as follows:
| Options Outstanding | Options Exercisable | |||||||||||||||||||||||||
| Exercise Price* | Number Outstanding | Weighted Average Remaining Contractual life in years | Weighted Average Exercise Price | Number Exercisable | Weighted Average Exercise Price | Weighted Average Remaining Contractual life in years | ||||||||||||||||||||
| $ | 0.09 | |||||||||||||||||||||||||
| $ | 1.20 | | | |||||||||||||||||||||||
| $ | 4.50 | |||||||||||||||||||||||||
| $ | | $ | ||||||||||||||||||||||||
The options outstanding have an intrinsic
value of $
The option expense was $
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INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed Financial Statements
| 11 | LOSS ON CONVERTIBLE DEBT |
The loss on convertible debt consists of the following:
| Three months ended March 31, 2025 | Three months ended March 31, 2024 | |||||||
| Penalty on convertible debt | $ | $ | ||||||
| Expense on extension of maturity date of convertible debt | ||||||||
| Loss on conversion of convertible debt | ||||||||
| Loss on anti-dilution price protection adjustment | ||||||||
| $ | $ | |||||||
Penalty on convertible debt
Between January
7, 2025 and March 28, 2025, $
Expense on extension of maturity date of convertible debt
On March 14,
2024, the Company extended the maturity date of 11 convertible notes which matured between February 13, 2024 and February 23, 2024 by
six months and issued the note holders additional warrants exercisable for
The debt extinguishments
resulted in a charge of $
Loss on conversion of convertible debt
Between January 7, 2025 and March 28,
2025, in terms of conversion notices received from 5 convertible note holders, the Company issued
Loss on anti-dilution price protection adjustment
As a result
of the conversion of the convertible debt, referred to in the paragraph above, all other outstanding convertible debt of the Company that
contain price-based anti-dilution protection had the conversion prices of such notes adjusted to $
The value
of the derivative liability related to the anti-dilution price protected convertible debt was evaluated immediately prior to the Triggering
Event and immediately after the Triggering Event, resulting in an additional derivative liability and loss on convertible debt of $
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INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed Financial Statements
| 12 | NET LOSS PER SHARE |
Basic loss per share is based on the weighted-average number of Common Stock 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 Stock that have an anti-dilutive effect on net loss per share. For the three months ended March 31, 2025 and 2024 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, 2025 and 2024 are as follows:
Three
months | Three months ended March 31, 2024 (Shares) | |||||||
| Convertible debt | ||||||||
| Stock options | ||||||||
| Warrants to purchase shares of Common Stock | ||||||||
| 13 | RELATED PARTY TRANSACTIONS |
The following transactions were entered into with related parties:
William Corbett
In terms of an employment agreement
entered into on January 7, 2025, with Mr. Corbett, which is for a term expiring on December 31, 2025 at a base salary of $
The option expense for options still
vesting for Mr. Corbett was $
As of March 31, 2025 and December 31,
2024, the company owed Mr. Corbett $
Richard Rosenblum
An option expense for options still
vesting for Mr. Rosenblum was $
Mr. Rosenblum resigned all his positions with the Company with effect from January 7, 2025.
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INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed Financial Statements
| 14 | COMMITMENTS AND CONTINGENCIES |
The Company has notes payable and convertible debt, disclosed under Notes 7 and 8 above, which had and have already matured and are technically in default or mature by February 20, 2026. Should the convertible debt not be converted to Common Stock prior to their maturity dates, the Company may need to repay the principal and interest outstanding on this convertible debt.
| 15 | SUBSEQUENT EVENTS |
Conversion of convertible debt
Between April 7, 2025 and May 14, 2025,
The Company received conversion notices from convertible note holders converting an aggregate of $
As a result of the conversion notices
received, warrants exercisable for
Convertible debt funding
On April 29, 2025, the Company entered
into Securities Purchase Agreement pursuant to which the Company issued a convertible promissory note and a warrants to one accredited
investment entity for total gross proceeds of $
Other than the above, the Company has evaluated subsequent events through the date the financial statements were issued and did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
All references to “we,” “us,” “our” and the “Company” refer to Innovative Payment Solutions, Inc., a Delaware corporation unless the context requires otherwise.
Overview
We are a fintech provider of digital payment solutions presently focused on, through its participation in IPSIPay Express, developing a new account-to-account payment application called Instant Direct Payments (which we call IPEX) as well as traditional credit card processing services. We have in the past (under the name IPSIPay) and may in the future develop and operate “e-wallets” that enable consumers to deposit cash, convert it into a digital form and remit funds quickly and securely.
Known Trends, Demands, Commitments, Events or Uncertainties Impacting Our Business
IPSIPay Express
While we believe the IPSIPay Express opportunity has great promise, as of the date of this report, IPEX has not been launched and we have derived no revenue or cash distributions from IPSIPay Express. We expect that revenue will be generated by IPSIPay Express through fees derived from merchant processing fees, money transfer fees, and commissions on international bill payment processing. To date, our activities related to IPSIPay Express have included the following:
| ● | Securing Banking Relationships. To engage in traditional credit card processing or the proposed IPEX account-to-account payment solution, it is necessary to work with qualified banking institutions through which transactions are processed. As of the date of this Report, such relationships are not in place. |
| ● | Assisting with Payment Logistics. We have been working with our IPSIPay Express joint venture partners to establish the systems and technology necessary to effectuate payments through IPEX. As of the date of this Report, the establishment of such systems and technology is still ongoing, which is the primary reason why IPEX has not been commercially launched to date. |
| ● | Securing Customers. Our management has also been working to secure potential customers for IPEX. These customers would include gaming and entertainment businesses. |
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. We believe IPSIPay Express could be commercially launched and generate initial revenues during the current fiscal year, but no assurances can be provided that this will be achieved or that (i) we will be able to raise funds satisfactory to fulfill all of our capital contributions to IPSIPay Express or (ii) that we will ever receive distributions of free cash flow from IPSIPay Express. Moreover, the IPSIPay Express product offering will be targeting so-called “high risk” sectors such as online gaming and entertainment, which also carries certain risks.
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. Changes and fluctuations in the foreign exchange rate between the US Dollar and other foreign currencies may in future have an effect our results of operations.
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Critical Accounting Estimates
Preparation of our financial statements in accordance with U.S. 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 Financial Statements included in Part I, Item I of this Form 10-Q for further information.
The critical accounting policies that involved significant estimation included the following:
Derivative liabilities
We have certain short-term convertible debt 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.
Results of Operations
Results of Operations for the Three Months Ended March 31, 2025 and 2024
Net revenue
We had no revenues for the three months ended March 31, 2025 and 2024. We pivoted to focus our attention on the IPSIPay Express joint venture and potential payment processing opportunities to generate revenues, however there can be no guarantees that we will be successful in our endeavors.
Cost of goods sold
We had no cost of goods sold for the three months ended March 31, 2025 and 2024.
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General and administrative expenses
General and administrative expenses were $254,308 and $626,797 for the three months ended March 31, 2025 and 2024, respectively, a decrease of $372,489 or 59.4%. The decrease is primarily due to the following:
| (i) | Legal fees were $3,805 and $152,594 for the three months ended March 31, 2025 and 2024, respectively, a decrease of $148,789 or 97.5%. The decrease is primarily due to the settlement of the unfair dismissal matters which were claimed in the prior year by several individuals. | |
| (ii) | Salaries and wages were $111,548 and $269,003 for the three months ended March 31, 2025 and 2024, respectively, a decrease of $157,455 or 58.5%. the decrease is primarily due to the resignation of our CFO during the quarter, resulting in a saving of $45,000 and the reduction of our CEO’s salary by $30,000 during the current period and a reduction in stock based compensation of $76,649, the options granted in 2021, were fully amortized in 2024, the current charge represents new options granted during the current period and a reduction in overall payroll taxes due to the reduction in salaries. | |
| (iii) | Marketing expenses were $0 and $75,707 for the three months ended March 31, 2025 and 2024, respectively, a decrease of $75,707 or 100.0%. The decrease is primarily due to the full amortization of warrants in the prior year. These warrants were issued to Mario Lopez to endorse the IPSIPay wallets in 2021. | |
| (iv) | Audit fees were $95,500 and $80,000 for the three months ended March 31, 2025 and 2024, an increase of $15,500 or 19.4%, primarily due to the timing of invoices received from our auditors. | |
| (v) | The balance of the general and administrative expenses was $43,455 and $49,493 for the three months ended March 31, 2025 and 2024, respectively, a decrease of $6,038 or 12.2%. The decrease is made up of several individually insignificant items. |
Depreciation and amortization
Depreciation was $542 and $542 for the three months ended March 31, 2025 and 2024. The depreciation is on small office related equipment.
Loss on convertible debt
Loss on convertible debt was $2,487,213 and $66,047 for the three months ended March 31, 2025 and 2024, respectively, an increase of $2,421,166 or 3,665.8%. The loss on convertible debt during the current year related to; (i) a loss of $2,341,480 realized on an anti-dilution adjustment to the conversion feature of certain convertible debt; (ii) a penalty on conversion of 39,229 on conversion of convertible debt which are in default; and (iii) a loss of $106,504 realized on conversion of certain convertible debt at prices lower than the current market price during the current period. In the prior period, the loss on convertible debt related to the extension warrants issued to certain noteholders to extend the maturity date of their notes by 6 months, the value of the warrants was determined to be a debt extinguishment and were therefore expensed.
Fair value on price protected warrants
Fair value on price protected warrants was $1,618,545 and $0 for the three months ended March 31, 2025 and 2024, respectively. During the current period, the exercise price of certain warrants was reset due to the anti-dilution price protection and in the case of certain warrants, full ratchet price protection, from an exercise price of $0.084 to $0.001105. This resulted in a Black -Scholes derived valuation difference related to those certain warrants.
Interest income
Interest income was $12,607 and $3,282 for the three months ended March 31, 2025 and 2024, respectively, an increase of $9,325 or 284.1%. The interest income relates to funds advanced to Business Warrior prior to the cessation of our merger plans with them, we increased our investment in Business Warrior over the second half of the prior year.
34
Interest expense, net
Interest expense was $212,743 and $136,919 for the three months ended March 31, 2025 and 2024, respectively, an increase of $75,824 or 55.4%. The increase is primarily related to the contractual increase in the interest rates on several matured notes which are currently in forbearance.
Amortization of debt discount
Amortization of debt discount was $118,056 and $319,899 for the three months ended March 31, 2025 and 2024, respectively, a decrease of $201,843 or 63.1%. The decrease is primarily due to the full amortization of debt discount on convertible debt in the prior year, these notes were carried over from the prior year. The current period funding and debt discount, and consequent amortization thereof, on this funding is significantly lower than the prior period.
Derivative liability movements
Derivative liability movements were $928,979 and $815,941 for the three months ended March 31, 2025 and 2024, respectively, a net movement of $113,038 or 13.9%. The derivative liability arose primarily due to the revaluation of certain repriced conversion features on convertible debt and the reset of the exercise price and full ratchet reset of certain warrants during the current period, and the subsequent mark-to-market of these derivatives due to a declining stock price on the exercise of certain convertible debt during the current period.
Net loss from equity method investment
Net loss from equity method investment was $0 and $484 for the three months ended March 31, 2025 and 2024, respectively, a decrease of $484 or 100.0%. No further expense is being incurred on the Joint Venture, in the prior period expenses were minimal and administrative in nature.
Deemed dividend
Deemed dividend was $350,364 and $0 for the three months ended March 31, 2025 and 2024, respectively, an increase of $350,364 or 100.0%. the deemed dividend in the current period related to a full rachet anti-dilution adjustment to certain fixed exercise price warrants issued to a convertible note holder during the current year. The deemed dividend was recorded as a component of additional paid in capital.
Net loss
Net loss was $3,749,821 and $331,465 for the three months ended March 31, 2025 and 2024, respectively, an increase of $3,418,356 or 1,031.3%. The increase is primarily due to the increase in the loss on convertible debt and the increase in the fair value adjustment on price protected warrants, offset by the decrease in general and administrative expenses, as discussed in detail above.
Liquidity and Capital Resources
To date, our primary sources of cash have been funds raised primarily from the sale of our debt and equity securities.
We have an accumulated deficit of $66.9 million through March 31, 2025 and incurred negative cash flow from operations of $0.2 million for the three months ended March 31, 2025. Our primary focus is on our IPSIPay Express LLC three-way joint venture to develop and market a proprietary consumer to merchant real-time payment platform initially focused on the fast-growing online gaming and entertainment sectors. To date, this joint venture has not generated revenue, but we believe much of the background work necessary for IPSIPay Express to commence revenue generating operations from payment processing has been completed, we are also actively seeking alternative payment processing opportunities. No assurances can be given, however, that such revenue generation will commence or be meaningful to us as an approximately 22% joint venture partner in IPSIPay Express.
At March 31, 2025, we had cash of $57 and working capital deficit of $13.8 million, including a derivative liability of $4.2 million. After eliminating the derivative liability our working capital deficit is $9.6 million.
We used cash of $0.2 million and $0.2 million in operations for the three months ended March 31, 2025 and 2024, respectively. We have reduced our expenditure substantially while we actively seek other revenue generating opportunities
We had no investing activities during the current period. In the prior period we had invested $0.2 million in Business Warrior while we were still pursuing merger discussions with them.
We generated cash of $0.2 million from convertible debt during the current period. In the prior period we generated $0.4 million and repaid $0.1 million of convertible debt.
35
At March 31, 2025, we had outstanding convertible debt, including interest thereon of $5.2 million, net of unamortized debt discount of $0.1 million and outstanding notes payable, including interest thereon of $1.8 million, net of unamortized debt discount of $0.05 million. 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 ranging from 8% to 24.51% per annum. and are convertible into our common stock at conversion prices ranging from fixed conversion prices of $0.001105 per share (as adjusted for stock splits, stock combinations, dilutive issuances and similar events), to variable conversion prices of 65% of lowest trading prices over a 10 to 20-trading day period. 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.
Given our losses and negative cash flows, we will be required to raise significant additional funds by issuing equity or equity-linked securities to progress our existing business model with IPSIPay Express. 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 or discontinued 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, accordingly, there is substantial doubt relating to our ability to continue as a going concern.
We do not have any off balance sheet financing arrangements as of the date of this Report.
Capital Expenditures
Our capital expenditure is dependent on our cash resources, currently we are not forecasting any additional capital expenditure for the 2025 fiscal year.
Item 3. Quantitative and Qualitative Disclosures About Market Risks
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this Item.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
Pursuant to Rule 13a-15(b) under the Exchange Act, our management carried out an evaluation, with the participation of our Chief Executive Officer (“CEO”) who also fulfils the role of our President 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 concluded that our disclosure controls and procedures as of March 31, 2025 are not effective due to a lack of written policies and procedures to address all material transactions and developments impacting our financial statements.
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, 2025.
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 outstanding pending litigation matters. As also noted previously, 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. Other than as set forth below, 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.
Voloshin, et al., v. Innovative Payment Solutions, Inc., et al.
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 (or independent consultants) 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, and they appealed that decision. Prior counsel moved to dismiss the remaining claims and as of this writing OSHA took no action with respect to that motion as ultimately the former employees elected to proceed in federal court. Pursuant to agreement and stipulation, dismissal of the OSHA claims was accomplished without prejudice 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 our Company and the same individuals against whom they had asserted their OSHA claim. The complaint asserted claims for, among other things, 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 our Company. 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.
We and Mr. Corbett, the sole remaining individual defendant, through prior counsel moved to compel arbitration on February 17, 2023. As a result of that motion and a stipulated order entered by the court, all proceedings in the Superior Court were stayed.
On June 8, 2023, while our motion to compel arbitration was pending in the Superior Court three of the employees (Naum Voloshin, Alexander Voloshin, and Novikov) filed a civil action in the U.S. District Court for the Central District of California. Naum Voloshin, et al., v. Innovative Payment Solutions, Inc., Case No. CV 23-4515-JFW (PVCx), which alleges a single cause of action for retaliation in violation of The Sarbanes-Oxley Act of 2002 (the “Federal Action”). The plaintiffs in the Federal Action made no attempt to serve their complaint or to give notice to any defendant in the Federal Action until August 2023.
On August 30, 2023, the Hon. William A. Crowfoot granted our and Mr. Corbett’s motion to compel arbitration, concluding that all of the claims alleged in the former employees’ first amended complaint were subject to arbitration. The California Court of Appeal subsequently denied the former employees’ petition for writ of mandate on November 1, 2023. On December 15, 2023, all five former employees filed a demand for arbitration. We withdrew our motion to compel appointment of an arbitrator.
Upon motion of our Company and Mr. Corbett, on January 10, 2024, the U.S. District Court for the Central District of California stayed all proceedings in the Federal Action until the arbitration is completed.
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Plaintiffs Naum Voloshin, Andrey Novikov, and Alexander Voloshin asserted, in the Federal Action, that they are entitled to damages in the following amounts: Naum Voloshin: $950,000 plus an unstated amount of lost wages and emotional distress damages. The claim is premised upon Mr. Voloshin earning $15,000 per month and a claim that he was entitled to receive 333,334 shares of Common Stock (after giving effect to our August 2023 reverse stock split) on or about June 29, 2021 that he would have sold on July 1, 2021 for $2.85 per share on July 1, 2021 for $950,000. Andrey Novikov: $285,000 plus emotional distress and punitive damages. The claim is premised upon Mr. Novikov earning $15,000 per month and a claim that he was entitled to receive 100,000 shares of Common Stock (after giving effect to our August 2023 reverse stock split) on or about June 29, 2021, that he would have sold at $2.85 per share on July 1, 2021 for $285,000. Alexander Voloshin: $263,000 plus emotional distress and punitive damages. The claim is premised upon an alleged two-year contract signed in May 2021 that paid him $7,000 per month and that promised him 333,334 shares of Common Stock (after giving effect to our August 2023 reverse stock split) on or about June 29, 2021. We have not received meaningful information on the amount of the claims of the other two plaintiffs.
An arbitrator was appointed through the American Arbitration Association and the arbitrator issued a scheduling order and Notice of Hearing. The ten-day arbitration has been set for April 7-11, 2025, and April 14-18, 2025. Management continues its vigorous defense of the claims.
In mid-April 2024, the Company and Mr. Corbett changed attorneys. The Law Offices of Jeffrey B. Neustadt replaced prior counsel. Mr. Neustadt and Plaintiffs’ counsel conferred and timely submitted the required joint statement on April 25, 2024.
Initial discovery was served by both sides. Documents were exchanged, and depositions proceeded for all persons.
On March 4, 2025, the Company and Mr. Corbett, entered into a settlement agreement with Naum Voloshin, Andrey Novikov, Frank Perez, Yulia Rey and Alexander Voloshin (the “Plaintiff Group”), whereby the Company agreed to pay $500,000 in settlement and full and final resolution of all claims and causes of action that the Plaintiff Group, or any member thereof, holds or has asserted (or could have asserted) against the Company and Mr. Corbett.
Within 5 days of March 4, 2025, the Company will pay $100,000 (the “First Payment”) and within 60 days the Company will pay a further $100,000 including interest thereon at 10% per annum from March 5, 2025, and within 240 days, a final payment of $300,000, including interest thereon at 10% per annum from March 5, 2025. The initial payment of $100,000 was made on March 24, 2025. The Company has not made the second instalment as of the date of this report and has not issued the convertible notes, securing the obligations, as discussed below, as of the date of this report.
Any breach of the terms of the settlement agreement will result in a payment to the Plaintiffs of liquidated damages of $25,000 for each event of default. We are negotiating with the plaintiffs on the payment of the second instalment, and may be obligated to pay the additional $25,000 default penalty, if we are unable to agree to waive it.
In order to secure the obligations to the Plaintiff Group, the Company is to execute two convertible notes, the first note for $100,000 (“Note 1”) and the second note for $300,000 (“Note 2”). Each note bears interest at the rate of 10% per annum, Note 1 has a maturity date of 60 days and Note 2, 240 days from March 5, 2025. The Notes will be convertible upon an event of default, which includes any failure to pay any of the installments. The Notes plus any accrued interest thereon, are convertible into common stock of the Company at a conversion price of $0.02 per share or the lowest conversion price of the senior secured note holders, as determined and established as the conversion price for all their notes outstanding as of March 5, 2025, if there are any limits on trading or the trading price falls below $0.01 per share, the conversion price will be discounted by a further 15%. The notes provide for certain events such as mergers and consolidations, distributions to shareholders, and stock splits and dividends.
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. He bases his claim in part on the unilateral expectation that he receives 2.7 million shares of the Company. Assuming he is owed any shares, a claim which we dispute, after the reverse 30-1 split he would receive only 90,000 shares.
Through prior counsel, we and Mr. Corbett filed a motion to compel arbitration. The motion was denied on October 4, 2022. We and Mr. Corbett then appealed that decision to the California Court of Appeal. As a result of the appeal, the court case was stayed until the appeal was decided. As a result of the stay, the demurrer (the equivalent of a motion to dismiss) we filed through prior counsel was not decided.
On February 27, 2024, the California Court of Appeal, Second District, reversed the Superior Court’s decision denying our motion to compel arbitration. The Court of Appeal remanded the case to the Superior Court with directions to issue a new order compelling to arbitration the parties’ dispute regarding the enforceability of the arbitration clause. As the prevailing parties, the Company and Mr. Corbett were awarded costs on appeal.
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As expected, the plaintiff-initiated arbitration before the American Arbitration Association (“AAA”) based on the appellate ruling. While, as the court order states, the plaintiff may renew his challenge to the arbitration clause before the arbitrator, we believe such challenges are rare and rarely succeed. Accordingly, we expect the dispute likely will be resolved through AAA arbitration. Management is vigorously defending the claims and intends to continue to do so.
In mid-April 2024, the Company and Mr. Corbett changed attorneys. The Law Offices of Jeffrey B. Neustadt replaced prior counsel. Mr. Neustadt’s office submitted the cost bill and an attorneys’ fees motion that will be decided on September 10, 2024, by the trial court for the fees incurred on the successful appeal. As with the Voloshin matter, we are contractually bound to proceed through arbitration and to that end completed the process of selecting an arbitrator under the AAA rules. That appointment was made on August 7, 2024. Henceforth, the Minkovich matter will track along the same lines as the Voloshin matter but on a smaller scale as there is only one plaintiff in the Minkovich matter as opposed to five in the Voloshin matter. The arbitration hearing (“trial”) in the Minkovich matter was set for June 30, 2025 to July 3, 2025 at the continued “preliminary conference” held on October 7, 2024. Before the arbitration hearing, the parties will engage in discovery and some motion work which may (1) either dispose of all or some of the case, and/or (2) result in the Minkovich matter being sent back to the Superior Court for final determination.
We have a $22,000 deposit on account for the arbitration of the Minkovich matter, the arbitrator has indicated that he will proceed as the deposit is expected to be sufficient to cover all expenses of the arbitration. The arbitration summary call is scheduled for May 16, 2025 with all parties involved. We expect a favorable outcome from the arbitration process.
Item 1A. Risk Factors.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities
Between January 7, 2025 and March 28, 2025, in terms of conversion notices received from 5 convertible note holders, the Company issued 54,807,989 shares of common stock for the conversion of $230,798 of convertible debt at a weighted average conversion price of $0.004211 (conversion prices ranging from ($0.0325 to $0.001105) realizing an aggregate loss on conversion of $106,504.
Between April 7, 2025 and May 8, 2025, The Company received conversion notices from convertible note holders converting an aggregate of $79,652 into 80,052,341 shares of common stock at conversion prices ranging from $0.000585 to $0.001170 per share, resulting in a loss on conversion of $52,187.
On April 29, 2025, the Company entered into Securities Purchase Agreement pursuant to which the Company issued a convertible promissory note and a warrants to one accredited investment entity for total gross proceeds of $150,000, less expenses of $6,000 for net proceeds of $144,000. The notes are unsecured, mature 12 months from issuance date and bear interest at a rate of 8% per annum based on a 360 day trading-year, and are convertible into shares of common stock of the Company at a conversion price of $0.005 per share (as adjusted for stock splits, stock combinations, and similar events). The Notes may be prepaid at any time without penalty. The Note contains customary events of default. The Company is under no obligation to register the shares of Common Stock underlying the Notes for public resale. In terms of the Securities Purchase Agreement, the Company issued five-year warrants to purchase an aggregate of 30,000,000 shares of the Common Stock at an exercise price of $0.005 per share (as adjusted for stock splits, stock combinations, and similar events). The Company is under no obligation to register the shares of Common Stock underlying the Note or the Warrant, for public resale.
Use of Proceeds from Public Offering of Common Stock
Not applicable.
Item 3. Defaults upon Senior Securities.
All of the convertible debt and notes payable of the Company are technically in default, although no default has been declared, except for one investor with a balance due of $22,704. Where the notes in default provide for default penalties or interest, these have been accrued.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
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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, 2025 | By: | /s/ William Corbett |
| William Corbett | ||
| Principal Officer, Chief Executive Officer, President & Chief Financial Officer | ||
| (Principal Executive Officer, Principal Financial and Accounting Officer) | ||
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