Attached files

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EX-32.2 - EXHIBIT 32.2 - Zoompass Holdings, Inc.ex32x2.htm
EX-32.1 - EXHIBIT 32.1 - Zoompass Holdings, Inc.ex32x1.htm
EX-31.2 - EXHIBIT 31.2 - Zoompass Holdings, Inc.ex31x2.htm
EX-31.1 - EXHIBIT 31.1 - Zoompass Holdings, Inc.ex31x1.htm

 

 

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

Form 10-Q

 

 

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2020

 

or

 

[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ____to  ___


 

Commission File No. 333-203997

 

ZOOMPASS HOLDINGS, INC.

 (Exact name of registrant as specified in its charter)

 

Nevada 30-0796392

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer Identification No.)
   

2455 Cawthra Rd, Unit 75

Mississauga, Ontario Canada, L5A3P1

(Address of principal executive offices, including Zip Code)

 

(416) 862-5257

(Registrant's telephone number, including area code)

 

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.   [X] Yes   [  ] No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   [X] Yes   [  ] No

 

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 the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company", and "emerging growth company", in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   Accelerated filer
Non-accelerated filer     Smaller reporting company
(Do not check if smaller reporting company)   Emerging growth company 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).   [  ] Yes   [X] No

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

 

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

 

Class Outstanding as of May 14, 2020
Common stock, $0.0001 par value 75,401,349 

 

 

 

 
 

 

TABLE OF CONTENTS

 

 

 

       
PART I – FINANCIAL INFORMATION  
       
  Item 1. Condensed Consolidated Financial Statements 3
       
  Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 4
       
  Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
       
  Item 4. Controls and Procedures 11
       
PART II – OTHER INFORMATION  
       
  Item 1. Legal Proceedings 12
       
  Item1A.   Risk Factors 13
       
  Item 2.   Recent Unregistered Sales of Equity Securities  13
       
  Item 3. Exhibits 14
       
SIGNATURES 15

 


 

2 
 

PART I – FINANCIAL INFORMATION

 

 ITEM 1.  FINANCIAL STATEMENTS.

 

Condensed Consolidated Balance Sheets at March 31, 2020 (unaudited) and December 31, 2019 (audited)     F-1  
         
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2020 and 2019 (unaudited)     F-2  
         
Condensed Consolidated Statements of Stockholders’ Deficiency for the three months ended March 31, 2020 and 2019 (unaudited)     F-3  
         
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019 (unaudited)     F-4  
         
Notes to the Condensed Consolidated Financial Statements     F-5  

 

 

 

3 
 

 

 

ZOOMPASS HOLDINGS, INC.

Interim Condensed Consolidated Balance Sheets as at March 31, 2020 and December 31, 2019

(Expressed in US dollars) 

 

 

        March 31,   December 31,
        2020   2019
    Note   (unaudited)   (audited)
              $       $  
ASSETS                        
Current assets                        
Cash and cash equivalents     6       4,579       21,477  
Prepaid expenses and other current assets             17,398       10,563  
Total current assets             21,977       32,040  
                         
Total assets             21,977       32,040  
                         
LIABILITIES AND STOCKHOLDERS' DEFICIENCY                        
Current liabilities                        
Accounts payable and accrued liabilities     7, 9       388,312       710,430  
Deferred revenue             35,417       38,570  
Due to related parties     9       56,593       100,201  
Total liabilities             480,322       849,201  
                         
Stockholders' deficiency                        

Common stock, $0.0001 par value 500,000,000 shares authorized,

73,101,349 shares issued and outstanding (December 31, 2019 –

109,746,036)

    1,7       7,311       10,975  
Shares to be issued      7       265,000       34,091  
Additional paid in capital     7,8       27,678,132       27,104,864  
Accumulated deficit             (28,773,206 )     (28,153,965 )
Accumulated other comprehensive income             364,418       186,874  
Total stockholders' deficiency             (458,345 )     (817,161 )
Total liabilities and stockholders' deficiency             21,977       32,040  
                         
Going concern     1                  
Commitments and contingencies     10                  
Subsequent events     11                  

 

 

 

  

*See accompanying notes to unaudited interim condensed consolidated financial statements

 

 

F-1 
 

 

 

ZOOMPASS HOLDINGS, INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Expressed in US dollars)  

 

   Note 

For the

three months ended
March 31,
2020
(unaudited)

 

For the

three months ended
March 31,
2019
(unaudited)

         $    $ 
Expenses               
Impairment of intangible assets and goodwill   4,5    —      —   
Salaries and consultants        (32,553)   (47,062)
Rent and occupancy costs        (1,118)   (2,996)
Share-based payment expense   7,8,9    (416,587)   (177,000)
Professional fees        (30,299)   (27,468)
Office and sundry expenses and other        —      (2,420)
Filing fees and regulatory costs        (27,503)   (1,369)
Business Licenses and Permits        —      (2,009)
Software development expenses        —      (49,043)
Foreign exchange gain (loss)        (143,769)   57,959 
Gain on settlement of debts   7,9    33,191    —   
Net Bank fees        (603)   (383)
         (619,241)   (251,791)
Loss before income taxes        (619,241)   (251,791)
Income taxes expenses        —      —   
Net loss        (619,241)   (251,791)
                
Other comprehensive income               
Foreign exchange translation gain (loss)        177,544    (63,615)
Net loss and comprehensive loss        (441,697)   (315,406)
                
Loss per share - basic and diluted        (0.006)   (0.002)
Weighted average number of common shares outstanding - basic and diluted        103,153,567    106,238,889 

 

 

 

 *See accompanying notes to unaudited interim condensed consolidated financial statement

 

F-2 
 

 

ZOOMPASS HOLDINGS, INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIENCY FOR THREE MONTHS ENDED MARCH 31, 2020 AND 2019

(Expressed in US dollars) 

 

 

         Common stock    Shares to be issued                     
    Note    Number of
Shares
    Amount    Number of
Shares
    Amount    Additional
paid in
capital
    Deficit    Accumulated other comprehensive income    Total 
              $         $    $    $    $    $ 
December 31, 2019 (audited)        109,746,036    10,975    757,575    34,091    27,104,864    (28,153,965)   186,874    (817,161)
Issuance of shares for private placement   7    3,787,875    379    (757,575)   (34,091)   170,296    —      —      136,584 
Issuance of shares for private placement   7    —      —      300,000    15,000    —      —      —      15,000 
Share-based payment expense - Issuance of shares for services    7,8,9    —      —      2,000,000    250,000    —      —      —      250,000 
Share-based payment expense - Issuance of shares for services   7,8    1,160,000    116              144,884    —      —      145,000 
Issued on conversion of debt   7,9    3,319,162    332    —      —      232,010    —      —      232,342 
Share-based payment expense – Issuance of stock options   8,9    —      —      —      —      21,587    —      —      21,587 
Cancellation of shares   7    (44,911,724)   (4,491)   —      —      4,491    —      —      —   
Net loss        —      —      —      —      —      (619,241)   —      (619,241)
Foreign currency translation        —      —      —      —      —      —      177,544    177,544 
March 31, 2020 (unaudited)        73,101,349    7,311    2,300,000    265,000    27,678,132    (28,773,206)   364,418    (458,345)

 

 

 

         Common stock    Shares to be issued                     
    Note    Number of
Shares
    Amount    Number of
Shares
    Amount    Additional
paid in
capital
    Deficit    Accumulated other comprehensive income (loss)    Total 
              $         $    $    $    $    $ 
December 31, 2018 (audited)        105,450,000    10,545    —      —      26,648,048    (27,538,709)   249,459    (630,657)
Share-based payment expense - Issuance of shares for services   7,8    1,000,000    100    —      —      176,900    —      —      177,000 
Net loss        —      —      —      —      —      (251,791)   —      (251,791)
Foreign currency translation        —      —      —      —      —      —      (63,615)   (63,615)
March 31, 2019 (unaudited)        106,450,000    10,645    —      —      26,824,948    (27,790,500)   185,844    (769,063)

 

 

*See accompanying notes to unaudited interim condensed consolidated financial statements

 

 

 

F-3 
 

ZOOMPASS HOLDINGS, INC.

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

((Unaudited, Expressed in US dollars)

 

 

     

For the three months ended March 31,

2020

 

For the three months ended March 31,

2019

   Note  (unaudited)  (unaudited)
         $    $ 
Cash flow from operating activities               
Net loss        (619,241)   (251,791)
Non-cash items:               
Impairments and reversals               
Share-based payment expense - Issuance of shares for services   7, 8    145,000    177,000 
Share-based payment expense - Issuance of shares for services   7, 8, 9    250,000    —   
Share-based payment expense – Issuance of stock options   8, 9    21,587    —   
Gain on settlement of debt   7, 9    (33,191)   —   
Foreign exchange (gain) loss        143,769    (57,959)
Changes in non-cash operating assets and liabilities               
Prepaids and other current assets        (8,098)   (1,271)
Accounts payable and accrued liabilities        (26,192)   85,109 
Net cash used in operating activities        (126,366)   (48,912)
                
                
Cash flow from financing activities               
Issuance of common stock   7    151,584    —   
Repayment to related party        (37,262)   —   
Net cash provided by financing activities        114,322    —   
                
Effect of exchange rate changes on cash        (4,854)   20,021 
Decrease in cash and cash equivalents        (16,898)   (28,891)
Cash and cash equivalents, beginning of the period        21,477    36,075 
Cash and cash equivalents, end of the period        4,579    7,184 
                
Supplementary Cash Flow Information               
Interest paid        —      —   
Taxes paid        —      —   

 

 

  *See accompanying notes to the unaudited interim condensed consolidated financial statements

 

F-4 
 

 

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

 

 

NOTE 1 — NATURE OF OPERATIONS AND GOING CONCERN

 

Zoompass Holdings, Inc. formerly known as UVIC. Inc. ("Zoompass Holdings" or the "Company") was incorporated under the laws of the State of Nevada on August 21, 2013. Effective August 22, 2016, the Company entered into an Agreement for the Exchange of Stock (the "Agreement") with Zoompass, Inc., an Ontario, Canada corporation ("Zoompass"). Pursuant to the Agreement, the Company agreed to issue 8,050,784 shares of its restricted common stock to Zoompass' shareholders ("Zoompass' shareholders") in exchange for all the shares of Zoompass Inc. owned by the Zoompass Inc.'s Shareholders. At the Closing Date, Rob Lee, a significant shareholder of the Company agreed to cancel 7,000,000 shares of the Company's common stock, which shares constituted the control shares of the Company. Other than this one significant shareholder, shareholders of the Company held 2,670,000 shares. As a result of the Agreement, Zoompass is now a wholly owned subsidiary of the Company. The Company has amended its Articles of Incorporation to change its name to Zoompass Holdings, Inc. and the appropriate forms were filed with FINRA and the SEC to change its name, address and symbol and complete a 3.5-1 forward split, which was consented to by the majority of shareholders on September 7, 2016 and approved in February 2017, for shareholders of record on September 7, 2016.

All share figures have been retroactively stated to reflect the stock split approved by shareholders, unless otherwise indicated. Additionally, the Company's shareholders consented to an increase of the shares authorized to 500,000,000 and a revision of the par value to $0.0001.

As the former Zoompass shareholders ended up owning the majority of the Company, the transaction does not constitute a business combination and was deemed to be a recapitalization of the Company with Zoompass being the accounting acquirer, accordingly the accounting and disclosure information is that of Zoompass going forward.

Effective March 6, 2018 (the "Closing Date"), Zoompass Holdings, Inc.'s (the "Company") Canadian operating subsidiary, Zoompass, Inc., entered into an Asset Purchase Agreement (the "Agreement") for the sale of its Prepaid Card Business ("Prepaid Business") to Fintech Holdings North America Inc., or its designee. The aggregate purchase price of the Prepaid Business was C$400,000. The transaction was completed on March 26, 2018.

During the first fiscal quarter of 2018, the Company implemented a plan to abandon the mobility solution operation. The Company has determined that the mobility solution operation represents a component and a reportable segment of the Company. According to the plan of abandonment, the Company gradually ceased accepting any new business during first fiscal quarter of 2018 and settled all the remaining orders and obligations from mobility solution by end of March 2018.

On October 17, 2018, the Company purchased certain business assets that represents a business from Virtublock Global Corp. (“Virtublock”, “VGC”) in return the Company issued 44,911,724 shares to Virtublock and pursuant to the issuance of shares Virtublock ended up owning 45% of total outstanding common shares of the Company. (note 4)

Zoompass Inc., was incorporated under the laws of Ontario on June 8, 2016.  On October 17, 2018, pursuant to an asset purchase agreement with VGC, certain business assets were acquired by the Company in exchange for shares of the Company.  The business assets primarily consisted of certain technology IP related to cryptocurrency exchange/wallet, certain strategic partnerships and customer contracts. On March 25, 2019, the name of the company was changed from Zoompass Inc. to Virtublock Canada Inc. (“VCI”).

 

On February 27, 2020, the Company cancelled 44,911,724 shares of the common stock which were issued in connection with the asset purchase agreement dated October 17, 2018 with VGC. (note 4). Pursuant to a General Release agreement dated November 29, 2019, the asset purchase agreement dated October 17, 2018 with VGC. was deemed cancelled and each party acknowledged and agreed that no party has or shall have any claim with respect to intellectual property, software or other assets owned by any other party and that no agreements exist or remain unsatisfied with respect to the transfer of any asset from a releasing party to any other party, and VGC assigned and tendered the 44,911,724 shares of common stock of the Company to the Company for cancellation. Accordingly, $4,491 was transferred from common stock to additional paid in capital with a corresponding reduction in the number of common shares outstanding.

 

F-5 
 

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

 

 

NOTE 1 — NATURE OF OPERATIONS AND GOING CONCERN (Continued)

 

The Company is a Software Fintech company and continues to develop and acquire software platforms and services to sell to customers globally with a focus on leading edge technologies and software as a service.

The Company, as part of its business, will seek opportunities to acquire software companies with existing revenue streams.

The Company has incurred recurring losses from operations and as of March 31, 2020 and December 31, 2019, and had net working capital deficiency and an accumulated deficit. The Company’s continued existence is dependent upon its ability to continue to execute its operating plan and to obtain additional debt or equity financing. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. There can be no assurance that the necessary debt or equity financing will be available, or will be available on terms acceptable to the Company, in which case the Company may be unable to meet its obligations. Should the Company be unable to realize its assets and discharge its liabilities in the normal course of business, the net realizable value of its assets may be materially less than the amounts recorded in the unaudited interim condensed consolidated financial statements. The unaudited interim condensed consolidated financial statements do not include any adjustments relating to the recoverability of recorded asset amounts that might be necessary should the Company be unable to continue in existence.

There is no certainty that the Company will be successful in generating sufficient cash flow from operations or achieving and maintaining profitable operations in the future to enable it to meet its obligations as they come due and consequently continue as a going concern. The Company will require additional financing this year to fund its operations and it is currently working on securing this funding through corporate collaborations, public or private equity offerings or debt financings. Sales of additional equity securities by the Company would result in the dilution of the interests of existing shareholders. There can be no assurance that financing will be available when required.

These unaudited interim condensed consolidated financial statements have been prepared on the basis that the Company will continue as a going concern, which presumes that it will be able to realize its assets and discharge its liabilities in the normal course of business as they come due. These unaudited interim condensed consolidated financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and unaudited interim condensed consolidated balance sheet classifications that would be necessary if the Company were unable to realize its assets and settle its liabilities as a going concern in the normal course of operations. Such adjustments could be material.

Basis of presentation

 

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) for interim financial information and the Securities and Exchange Commission (“SEC”) instructions to Form 10-Q and Article 8 of SEC Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with the Company’s audited consolidated financial statements for the years ended December 31, 2019 and 2018 and their accompanying notes.

The unaudited interim condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary to present a fair statement of the results for the period.

 

F-6 
 

 

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

 

 

NOTE 1 — NATURE OF OPERATIONS AND GOING CONCERN (Continued)

 

Basis of consolidation: 

 

The unaudited interim condensed consolidated financial statements comprise the accounts of Zoompass Holdings, Inc., the legal parent company, and its wholly owned subsidiaries, VCI and Paymobile Inc. (“Paymobile”), a company incorporated in Florida, USA, after the elimination of all intercompany balances and transactions.

 

Subsidiaries are all entities (including special purpose entities) over which the Company, either directly or indirectly, has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. Where the group does not directly hold more than one half of the voting rights, significant judgment is used to determine whether control exists. These significant judgments include assessing whether the group can control the operating policies through the group's ability to appoint the majority of directors to the board. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group until the date on which control ceases.

 

The accounts of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting policies. Inter-company transactions, balances and unrealized gains or losses on transactions between the entities are eliminated.

 

 

NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS

 

SIGNIFICANT ACCOUNTING POLICIES

 

Translation of foreign currencies

 

The reporting and functional currency of the Company and Paymobile is the US dollar. The Company has determined that the functional currency of VCI is the Canadian dollar. (references to which are denoted "C$").

 

Transactions in currencies other than the functional currency are recorded at the rates of the exchange prevailing on dates of transactions. At each balance sheet reporting date, monetary assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing at each reporting date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated at the exchange rate at the historical date of the transaction.  The impact from the translation of foreign currency denominated items are reflected in the statement of operations and comprehensive loss.

 

Translation of VCI assets and liabilities is done using the exchange rates at each balance sheet date; revenue and expenses are translated at average rates prevailing during the reporting period or at the date of the transaction; shareholders' equity is translated at historical rates. Adjustments resulting from translating the unaudited interim condensed consolidated financial statements into the US Dollar are recorded as a separate component of accumulated other comprehensive income in the statement of changes in stockholders’ deficiency.

 

Revenue recognition

 

Revenue is measured based on a consideration specified in a contract with a customer, and excludes any sales incentives and amounts collected on behalf of third parties.

 

The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer.

 

Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue.

 

 

 

 

F-7 
 

 

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

 

 

NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

 

The following is a description of principal activities from which the Company generates its revenue.

 

Prepaid cards: The Company’s revenues are primarily generated from financial service fees charged to cardholders and merchants accepting the cards for payment. Revenue for prepaid financial services is generated from multiple sources including transaction fees, cardholder fees, load fees and interchange fees. These fees are recognized on the transaction date. Funds received from customers are held in trust and the corresponding amount of funds available for use are recorded as a liability. Fees charged for card program, website and card design are recognized when services are performed or when the product is transferred to the customer. Other revenue represents gains realized on de-recognition of clients' funds payable. At end of March 2018, the Company discontinued the Prepaid cards business and stopped generating revenue from this operation.

Mobility solution: The Company recognizes revenue in products revenue when a customer takes possession of the device. This usually occurs when the customer signs a contract. For mobile devices, customers usually pay within company specified credit term which is within 12 months. At end of March 2018, the Company discontinued the mobility solution business and stopped generating revenue from this operation.

 

Cryptocurrency platform: The Company offers organizations the cryptocurrencies exchange as a service in order to facilitate the exchange of different cryptocurrencies to its end users. The revenue is mainly generated from the software customization services fees charged to the organizations and transaction fees charged to the end users when using the exchange platform. The Company, for the quarter ended March 31, 2020 and 2019, has not generated revenue from the Cryptocurrency platform.

Wallet platforms: The Company offers organizations the wallet platforms as a service in order to facilitate the mobile wallet transactions to its end users. The revenue is mainly generated from the software customization services fees charged to the organizations and transaction fees charged to the end users when using the wallet platform. The Company, for the quarter ended March 31, 2020 and 2019, has not generated revenue from the Wallet platform.

Technology consulting: The company offers consulting services for software applications. The revenue is recognized when the services are performed. The Company, for the quarter ended March 31, 2020 and 2019, has not generated revenue from the Technology consulting.

The Company accounts for individual products and services separately if they are distinct – i.e. if a product or service is separately identifiable from other items in the bundled package and if a customer can benefit from it on its own or with other resources that are readily available to the customer. The consideration (including any discounts) is allocated between separate products and services in a bundle based on their stand-alone selling prices. The stand-alone selling prices are determined based on the prices at which the Company separately provides the products and services.

Financial instruments

 

ASC Topic 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. Included in the ASC Topic 820 framework is a three level valuation inputs hierarchy with Level 1 being inputs and transactions that can be effectively fully observed by market participants spanning to Level 3 where estimates are unobservable by market participants outside of the Company and must be estimated using assumptions developed by the Company. The Company discloses the lowest level input significant to each category of asset or liability valued within the scope of ASC Topic 820 and the valuation method as exchange, income or use. The Company uses inputs which are as observable as possible and the methods most applicable to the specific situation of each company or valued item.

 

The carrying amounts reported in the unaudited interim condensed consolidated balance sheets for cash and cash equivalents, accounts payable and accrued liabilities and due to related parties approximate fair value because of the short period of time between the origination of such instruments and their expected realization.  Per ASC Topic 820 framework these are considered Level 2 inputs where inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

The Company's policy is to recognize transfers into and out of Level 3 as of the date of the event or change in the circumstances that caused the transfer. There were no such transfers during the year.

 

 

F-8 
 

 

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

 

 

 

NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

 

Basic and diluted loss per share

 

Basic and diluted loss per share has been determined by dividing the net loss available to shareholders for the applicable period by the basic and diluted weighted average number of shares outstanding, respectively. The diluted weighted average number of shares outstanding is calculated as if all dilutive options had been exercised or vested at the later of the beginning of the reporting period or date of grant, using the treasury stock method.

 

Loss per common share is computed by dividing the net loss by the weighted average number of shares of common shares outstanding during the period. Common share equivalents, options and warrants are excluded from the computation of diluted loss per share when their effect as anti-dilutive.

 

Segment reporting

 

ASC 280-10, "Disclosures about Segments of an Enterprise and Related Information", establishes standards for the way that public business enterprises report information about operating segments in the Company's consolidated financial statements. Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Significantly all of the assets of the Company are located in, all revenues are currently earned in Canada and the Company’s research, development and strategical planning operations are carried out and served as an integral part of the Company’s business. The Company’s reportable segments and operating segments include cryptocurrency platform operations and research, development and strategical planning operations.

 

Cash and cash equivalents

 

Cash and cash equivalents include demand deposits held with banks and highly liquid investments with original maturities of ninety days or less at acquisition date.  For purposes of reporting cash flows, the Company considers all cash accounts that are not subject to withdrawal restrictions or penalties to be cash and cash equivalents. Cash in trust and customer deposits are amounts held by the Company at various financial institutions for settlement of clients' funds payable.  Client funds are amounts owing on behalf of clients for prepaid debit cards.

 

Equipment

 

Equipment is stated at historic cost. The Company has the following sub-categories of property and equipment with useful lives and depreciation methods as follows:

 

    Computer equipment and furniture – 30% declining balance per year

 

The cost of assets sold, retired, or otherwise disposed of and the related accumulated depreciation are eliminated from the accounts. Expenditures for maintenance and repairs are charged to expense as incurred.

The Company follows the ASC Topic 360, which requires that long-lived assets be reviewed annually for impairment whenever events or changes in circumstances indicate that the assets' carrying amounts may not be recoverable.

In performing the review for recoverability, if future undiscounted cash flows (excluding interest charges) from the use and ultimate disposition of the assets are less than their carrying values, an impairment loss represented by the difference between its fair value and carrying value, is recognized. When properties are classified as held for sale, they are recorded at the lower of the carrying amount or the expected sales price less costs to sell.

 

F-9 
 

 

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

 

 

 

NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

 

Goodwill

 

Goodwill represents the excess purchase price over the estimated fair value of net assets acquired by the Company in business combinations. Business acquisitions are accounted for using the acquisition method whereby acquired assets and liabilities are recorded at fair value as of the date of acquisition with the excess of the acquisition amount over such fair value being recorded as goodwill and allocated to reporting units ("RU").  RUs are the smallest identifiable group of assets, liabilities and associated goodwill that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets.  Given how the Company is structured and managed, the Company has one RU.  Goodwill arises principally because of the following factors among other things: (1) the going concern value of the Company's capacity to sustain and grow revenues through securing additional contracts and customers,; (2) the undeserved market of consumers looking for financial transactional alternatives; (3) technological and mobile capabilities beyond acquired lines of business to capture buyer specific synergies arising upon a transaction and (4) the requirement to record a deferred tax liability for the difference between the assigned values and the tax bases of the assets acquired and liabilities assumed in a business combination, if any.

 

Intangibles

 

The Company has applied the provisions of ASC topic 350 – Intangibles – goodwill and other, in accounting for its intangible assets. Intangible assets subject to amortization are amortized on a straight-line method on the basis over the useful life of the respective intangibles. The following useful lives are used in the calculation of amortization:

 

Trademark – 7.25 years  
Acquired payment platform – 5 years  

Intellectual property/Technology – 7.25 years

 

 

Impairment goodwill and indefinite-lived intangible assets and intangible assets with definite lives

 

The Company accounts for goodwill and intangible assets in accordance with ASC No. 350, Intangibles-Goodwill and Other ("ASC 350"). ASC 350 requires that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value. In addition, ASC 350 requires that goodwill be tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis and between annual tests when circumstances indicate that the recoverability of the carrying amount of goodwill may be in doubt. Application of the goodwill impairment test requires judgment, including the identification of reporting units; assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value. Significant judgments required to estimate the fair value of reporting units include estimating future cash flows, determining appropriate discount rates and other assumptions. Changes in these estimates and assumptions or the occurrence of one or more confirming events in future periods could cause the actual results or outcomes to materially differ from such estimates and could also affect the determination of fair value and/or goodwill impairment at future reporting dates.

The Company assesses the carrying value of goodwill, indefinite-lived intangible assets and intangible assets with definite lives, such as Trademark, Technology platform, customer base and other intangible assets for potential impairment annually as of December 31, or more frequently if events or changes in circumstances indicate such assets might be impaired.

When assessing goodwill for impairment the Company elects to first perform a qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. If we do not perform a qualitative assessment, or if the qualitative assessment indicates it is more likely than not that the fair value of the reporting units, is less than its carrying amount, the Company performs a quantitative test. The Company recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized would not exceed the total amount of goodwill allocated to that reporting unit. The Company estimates fair value using the income approach, to estimate the future undiscounted cash flows (excluding interest charges) from the use and ultimate disposition of the assets. 

 

 

 

F-10 
 

 

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

 

 

NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

 

Income taxes

 

Deferred tax is recognized using the asset and liability method, on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. However, the deferred tax is not recognized if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred taxes determined using tax rates (and laws) that have been enacted by the reporting date and are expected to apply when the related deferred taxation asset is realized, or the deferred taxation liability is settled. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

 

A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

 

Share-based payment expense

 

The Company follows the fair value method of accounting for stock awards granted to employees, directors, officers and consultants. Share-based awards to employees are measured at the fair value of the related share-based awards. Share-based payments to others are valued based on the related services rendered or goods received or if this cannot be reliably measured, on the fair value of the instruments issued. Issuances of shares are valued using the fair value of the shares at the time of grant; issuances of warrants and other share-based awards are valued using the Black-Scholes model with assumptions based on historical experience and future expectations. All issuances of share-based payments have been fully vested, otherwise the Company recognizes such awards over the vesting period based on expectations of the number of awards expected to vest over that period on a straight-line basis.

 

Business combinations

 

A business combination is a transaction or other event in which control over one or more businesses is obtained. A business is an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower costs or other economic benefits. A business consists of inputs and processes applied to those inputs that have the ability to create outputs that provide a return to the Company and its shareholders. A business need not include all of the inputs and processes that were used by the acquiree to produce outputs if the business can be integrated with the inputs and processes of the Company to continue to produce outputs. The Company considers several factors to determine whether the set of activities and assets is a business.

 

Business acquisitions are accounted for using the acquisition method whereby acquired assets and liabilities are recorded at fair value as of the date of acquisition with the excess of the purchase consideration over such fair value being recorded as goodwill and allocated to reporting units (“RUs”). If the fair value of the net assets acquired exceeds the purchase consideration, the difference is recognized immediately as a gain in the condensed consolidated statement of operations. Acquisition related costs are expensed during the period in which they are incurred, except for the cost of debt or equity instruments issued in relation to the acquisition which is included in the carrying amount of the related instrument. Certain fair values may be estimated at the acquisition date pending confirmation or completion of the valuation process. Where provisional values are used in accounting for a business combination, they are adjusted retrospectively in subsequent periods. However, the measurement period will not exceed one year from the acquisition date. If the assets acquired are not a business, the transaction is accounted for as an asset acquisition.

 

 

F-11 
 

 

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

 

NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

 

Leases

 

On January 1, 2019, the Company adopted Accounting Standards Codification Topic 842, “Leases” (“ASC 842”) to replace existing lease accounting guidance. This pronouncement is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet for most leases. Expenses associated with leases will continue to be recognized in a manner similar to previous accounting guidance. The Company adopted ASC 842 utilizing the transition practical expedient added by the Financial Accounting Standards Board (“FASB”), which eliminates the requirement that entities apply the new lease standard to the comparative periods presented in the year of adoption.

 

The Company is the lessee in a lease contract when the Company obtains the right to use the asset. Operating leases are included in the line items right-of-use asset, lease obligation, current, and lease obligation, long-term in the condensed consolidated balance sheet. Right-of-use (“ROU”) asset represents the Company’s right to use an underlying asset for the lease term and lease obligations represent the Company’s obligations to make lease payments arising from the lease, both of which are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Leases with a lease term of 12 months or less at inception are not recorded on the condensed consolidated balance sheet and are expensed on a straight-line basis over the lease term in the condensed consolidated statement of operations and comprehensive. The Company determines the lease term by agreement with lessor.

 

As our current operating lease of office space, at the commencement, has a term of less than 12 months, we elect not to apply the recognition requirements of ASC 842 to the short-term lease, instead lease payments are recognized in statement of operations on a straight-line basis over the lease term.

 

Use of estimates

 

The preparation of the unaudited interim condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

 

The areas where management has made significant judgments include, but are not limited to:

 

Accounting for acquisitions: The accounting for acquisitions requires judgement to determine if an acquisition meets the definition of a business combination under ASC 805.  Further, management is required to use judgement to determine the fair value of the consideration provided and the net assets and liabilities acquired.

Assessment of Impairment: The Company has certain assets for which a determination of an impairment, if any, requires significant judgement to determine if the carrying amount of any assets are impaired.  Management uses judgement in determining among other things, whether or not an indicator of impairment has occurred, future cash flows, time horizons, and likelihood of recoverability.  The assets where management has assessed the recoverability the carrying amount includes accounts receivable, equipment, intangibles and goodwill.

 

Deferred taxes: The Company recognizes the deferred tax benefit related to deferred income tax assets to the extent recovery is probable.  Assessing the recoverability of deferred income tax assets requires management to make significant estimates of future taxable profit and the income tax rate at which the future tax assets will be realized.  To the extent that future cash flows, taxable profit and income tax rates differ significantly from estimates, the ability of the Company to realize deferred tax assets could be impacted.  In addition, future changes in tax laws could limit the ability of the Company to obtain tax deductions in future periods from deferred income tax assets.

 

F-12 
 

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

 

 

 

NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

 

Share-based payment expense: The calculation of share-based payment expense requires management to use significant judgment in determining the fair value of share-based payment expense. Additionally, the management is required to make certain assumptions in arriving at the fair value of share-based payment expense.

 

Derivative financial instruments: The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks.

 

The Company reviews the terms of equity instruments and other financing arrangements, if any, to determine whether there are embedded derivative instruments, including embedded conversion options that are required to be bifurcated and accounted for separately as a derivative financial instrument. Also, in connection with the issuance of financing instruments, the Company may issue freestanding options or warrants to employees and non-employees in connection with consulting or other services. These options or warrants may, depending on their terms, be accounted for as derivative instrument liabilities, rather than as equity.

 

Derivative financial instruments are initially measured at their fair value. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. To the extent that the initial fair values of the freestanding and/or bifurcated derivative instrument liabilities exceed the total proceeds received an immediate charge to income is recognized in order to initially record the derivative instrument liabilities at their fair value.

 

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period. If reclassification is required, the fair value of the derivative instrument, as of the determination date, is reclassified. Any previous charges or credits to income for changes in the fair value of the derivative instrument are not reversed. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within twelve months of the balance sheet date.

 

NEWLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

 

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact this guidance may have on the condensed consolidated financial statements and related disclosures.

 

On January 1, 2019, the Company adopted Accounting Standards Codification Topic 842, “Leases” (“ASC 842”) to replace existing lease accounting guidance. This pronouncement is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet for most leases. Expenses associated with leases will continue to be recognized in a manner similar to previous accounting guidance. The Company adopted ASC 842 utilizing the transition practical expedient added by the Financial Accounting Standards Board (“FASB”), which eliminates the requirement that entities apply the new lease standard to the comparative periods presented in the year of adoption. The Company is the lessee in a lease contract when the Company obtains the right to use the asset. Operating leases are included in the line items right-of-use asset, lease obligation, current, and lease obligation, long-term in the condensed consolidated balance sheet. Right-of-use (“ROU”) asset represents the Company’s right to use an underlying asset for the lease term and lease obligations represent the Company’s obligations to make lease payments arising from the lease, both of which are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Leases with a lease term of 12 months or less at inception are not recorded on the condensed consolidated balance sheets and are expensed on a straight-line basis over the lease term in our condensed consolidated statement of operations and comprehensive loss. The Company determines the lease term by agreement with lessor. As our current operating lease of office space, at the commencement, has a term of less than 12 months, the Company elects not to apply the recognition requirements of ASC 842 to the short-term lease, instead lease payments are recognized in statement of operations on a straight-line basis over the lease term.

 

F-13 
 

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

 

 

NOTE 3 — ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

 

On March 6, 2018, the Company entered into an asset purchase agreement to sell the prepaid card business for total consideration of C$400,000, comprised of C$200,000 upon closing, C$100,000 12 months from the date of closing and the equivalent of C$100,000 in shares. A former Director and Chief Executive Officer was related to an officer of the acquirer of the prepaid card business. The transaction was approved by the Board of Directors. The Company has determined that the prepaid card business represents a component and is a reportable segment of the Company. The transaction completed in March 2018. As of March 31, 2018, the Company received C$200,000 ($152,871).

 

During the first fiscal quarter of 2018, the Company implemented a plan to abandon the mobility solution operation. The Company has determined that the mobility solution operation represents a component and a reportable segment of the Company. According to the plan of abandonment, the Company gradually ceased accepting any new business during first quarter of 2018 and settled all the remaining orders and obligations from mobility solution by end of March 2018.

 

The Company determined that the disposal of prepaid card business and abandonment of mobility solution operations represent a strategical shift of the company’s business operations. The prepaid card operation and mobility solution operation were part of the company’s plan of disposal and both met the held-for-sale criteria within a short period of time, therefor, the two operations were accounted for, presented and disclosed as discontinued operations for year ended December 31, 2018 and 2019.

 

On January 1, 2020, the Company has determined that there were no further involvements in those discontinued operations.

 

 

F-14 
 

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (Unaudited, Expressed in US dollars)

 


NOTE 4 – ACQUISITIONS OF BUSINESS

 

On October 16, 2018, the Company entered into an agreement with Virtublock Global Corp (VGC), a corporation incorporated in Ontario Canada, to acquire assets and intellectual property of VGC. Based on an examination of the net assets acquired, the acquisition of the net assets was determined to be a business as defined under ASC 805. 

 

Pursuant to the agreement, the Company issued 44,911,724 shares of its common stock to VGC as purchase consideration.  The fair value of the shares issued was determined to be $3,458,203 based on the market value of the common stock as the date of issuance. The following table sets forth the allocation of the purchase consideration to the fair value of the net assets acquired. The acquired goodwill is primarily related to the value attributed to a company that is expected to experience accelerated growth. 

 

The Company assessed the goodwill and intangible assets assigned as a result of the acquisition for impairment and considered them impaired.

 

Management tested goodwill and intangibles for impairment and determined them to be impaired. The main cause of the impairment was Company’s inability to secure the required financing and customer contracts in order to operationalize the new acquisition of VirtuBlock Global, Inc. As a result, the carrying amounts of intangibles and goodwill could not be supported.

 

Impairment of Goodwill and intangible assets:

Management used the Income approach to estimate the value of the Company’s intangible assets based on projections (adjusted for multiple scenarios and weighted probabilities) of future cash flows.

Impairment regarding Goodwill

The fair value of the business unit based on the discounted cash flow analysis and net asset valuations of the reporting unit do not exceed the carrying amount, therefore goodwill was considered impaired.

Impairment regarding Intangibles

The undiscounted (pre-tax) cash flows of the reporting unit using projections do not exceed its’s carrying value, and therefore intangibles were considered impaired.

 

Consideration   
Common shares issued  $3,458,203 
      
Net assets acquired     
Customer base  $—   
Trade name – Virtublock (note 5)   6,600 
Intellectual property / Technology (note 5)   11,200 
Non-compete agreements   —   
Goodwill (note 5)   3,440,403 
Total net assets acquired  $3,458,203 
Impairment at December 31, 2018 (note 5)   (3,458,203)
    —   

 

 

 

F-15 
 

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

 

 

NOTE 5 – INTANGIBLE ASSETS, GOODWILL AND IMPAIRMENT 

 

   Trademark/  Technology   
Cost  Trade name  platform/ IP  Total
Balance at December 31, 2019  $6,600   $11,200   $17,800 
Additions   —      —      —   
Disposal   —      —      —   
Foreign exchange   —      —      —   
Balance at March 31, 2020 (unaudited)  $6,600   $11,200   $17,800 
                
    Trademark/    Technology      
Accumulated Amortization   Trade name    platform/ IP    Total 
Balance at December 31, 2019  $—     $—     $—   
Amortization   —      —      —   
Disposal   —      —      —   
Foreign exchange   —      —      —   
Balance at March 31, 2020 (unaudited)  $—     $—     $—   
                
Balance at December 31, 2019 before impairment  $6,600   $11,200   $17,800 
Impairment in 2018 (note 4)   (6,600)   (11,200)   (17,800)
Balance at December 31, 2019 (audited)  $—     $—     $—   
Balance at March 31, 2020 (unaudited)  $—     $—     $—   

  

 

Goodwill  Total
    $ 
Balance at January 1, 2019   3,440,403 
Acquisition (note 4)   —   
Impairment in 2018   (3,440,403)
Foreign exchange   —   
Balance at December 31, 2019   —   
Acquisition   —   
Foreign exchange   —   
Balance at March 31, 2020 (unaudited)   —   

 

 

 

 

 

 

 

F-16 
 

 

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

 

 

 

NOTE 6 – FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

 

The Company has exposure to liquidity risk and foreign currency risk.  The Company's risk management objective is to preserve and redeploy the existing treasury as appropriate, ultimately to protect shareholder value.  Risk management strategies, as discussed below, are designed and implemented to ensure the Company's risks and the related exposure are consistent with the business objectives and risk tolerance.

 

The Governments of Canada and the United States, as well as other foreign governments instituted emergency measures as a result of the COVID-19 virus outbreak. The virus has had a major impact on North America and international securities, currency markets and consumer activity which may impact the Company's financial position, its results of future operations and its future cash flows significantly. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of future operations, financial position, and liquidity for the period ended March 31, 2020.

 

Liquidity Risk: Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due.  The Company manages its liquidity by ensuring that there is sufficient capital to meet short and long-term business requirements, after taking into account cash requirements from operations and the Company's holdings of cash and cash equivalents. The Company also strives to maintain sufficient financial liquidity at all times in order to participate in investment opportunities as they arise, as well as to withstand sudden adverse changes in economic circumstances.

 

Management forecasts cash flows for its current and subsequent fiscal years to predict future financing requirements.  Future requirements may be met through a combination of credit and access to capital markets.  The Company's cash requirements are dependent on the level of operating activity, a large portion of which is discretionary.  Should management decide to increase its operating activity, more funds than what is currently in place would be required.  It is not possible to predict whether financing efforts will be successful or sufficient in the future.   At March 31, 2020, the Company had $4,579 in cash and cash equivalents (December 31, 2019 - $21,477).

 

Currency risk: The Company's expenditures are incurred in Canadian and US dollars.  The results of the Company's operations are subject to currency translation risk.  The Company mitigates foreign exchange risk through forecasting its foreign currency denominated expenditures and maintaining an appropriate balance of cash in each currency to meet the expenditures.  As the Company's reporting currency is the US dollar, fluctuations in US dollar will affect the results of the Company.

 

Credit risk: Credit risk is the risk of loss associated with a counterparty's inability to fulfill its payment obligations. As at March 31, 2020, the Company's credit risk is primarily attributable to cash and cash equivalents. At March 31, 2020, the Company's cash and cash equivalents were held with reputable Canadian chartered banks. 

 

Interest rate risk: Interest rate risk is the risk borne by an interest-bearing asset or liability as a result of fluctuations in interest rates.  Financial assets and financial liabilities with variable interest rates expose the Company to cash flow interest rate risk.  The Company's does not have significant interest rate risk.

 

Fair values:  The carrying amounts reported in the unaudited interim condensed consolidated balance sheets for cash and cash equivalents, accounts receivables, accounts payable and accrued liabilities and promissory note approximate fair value because of the short period of time between the origination of such instruments and their expected realization.

 

 

F-17 
 

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

 

 

NOTE 7 – COMMON STOCK AND SHARES TO BE ISSUED

 

Common Stock

 

The Company is authorized to issue 500,000,000 common stock with a par value of $0.0001.

 

In January 2020, the Company issued 757,575 non-registered shares of the Company's common stock. The net proceeds in amount of $34,091 was received in December 31, 2019.

 

In January 2020, the Company completed a private placement for the sale of non-registered shares of the Company's common stock. As a result of the private placement 3,030,300 non-registered shares of the Company's common stock was issued for gross proceeds of $136,584.

 

In January 2020, the Company issued 3,319,162 shares of the common stock to settle a debt owed by the company in amount $265,533. The $265,533 debt was owed to a corporation controlled by a former Chief Executive Officer of the company (note 9). The fair value of these shares, in amount of 232,342, was determined by using the market price of the common stock as at the date of issuance. The Company recognized a Gain on settlement of debt in amount of $33,191 in statement of operations.

 

On February 27, 2020, the Company cancelled 44,911,724 shares of the common stock which were issued in connection with the asset purchase agreement dated October 17, 2018 with VGC. (note 1). Pursuant to a General Release agreement dated November 29, 2019, the asset purchase agreement dated October 17, 2018 with VGC was deemed cancelled and each party acknowledged and agreed that no party has or shall have any claim with respect to intellectual property, software or other assets owned by any other party and that no agreements exist or remain unsatisfied with respect to the transfer of any asset from a releasing party to any other party, and Virtublock Global Corp. assigned and tendered the 44,911,724 shares of common stock of the Company to the Company for cancellation. Accordingly, $4,491 was transferred from common stock to additional paid in capital with a corresponding reduction in the number of common shares outstanding.

 

In March 2020, the company issued 1,160,000 shares of the common stock to as compensation for services rendered. The fair value of these shares, in amount of $145,000, was determined by using the market price of the common stock as at the date of issuance and charged to statement of operations.

 

During January 2019, the company issued 1,000,000 shares of the common stock to an arm’s length third party as compensation for services rendered. The fair value of these shares, in amount of $177,000, was determined by using the market price of the common stock as at the date of issuance and charged to statement of operations.

 

Shares to be issued

On March 1, 2020, the Company decided to issue 2,000,000 shares of the common stock to a corporation owned by Chief Executive of the Company as compensation for services. The fair value of these shares, in amount of $250,000, was determined by using the market price of the common stock as at the date of decision to issue and charged to statement of operations. The shares were subsequently issued in April 2020. (note 8 and 9)

 

In March 2020, the Company completed a private placement for the sale of non-registered shares of the Company's common stock. As a result of the private placement 300,000 non-registered shares of the Company's common stock would be issued for gross proceeds received in amount of $15,000. The shares were subsequently issued in April 2020. (note 11)

 

 

F-18 
 

 

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

 

 

NOTE 8 – SHARE-BASED PAYMENTS

 

On January 15, 2020, the Company issued 3,000,000 common stock purchase options at an exercise price of $0.10 to directors, officers and consultants of the Company. 83,415 of these options vested immediately and are exercisable for seven years from the grant date. Remaining options were exercisable for seven years from the grant date at an exercise price of $0.10 and would vest ratably over a three-year period from the date of grant. The 3,000,000 stock options were assigned a fair value of $172,168 using the Black-Scholes pricing model. The following assumptions were used: Risk free interest rate of – 1.54%; expected volatility of 124%; expected dividend yield – nil; expected life of 7 years. For three months ended March 31, 2020, 250,077 options vested and the fair value of those vested options, in amount of $14,352, was charged to statement of operations with a credit in additional paid-in capital. (note 9)

 

On March 1, 2020, the Company decided to issue 2,000,000 shares of the common stock to Chief Executive of the Company as compensation for services. The fair value of these shares, in amount of $250,000, was determined by using the market price of the common stock as at the date of decision of issuance and recognized in statement of operations with a credit in shares to be issued. (note 7 and note 9)

 

On March 1, 2020, the Company issued 1,160,000 shares of the common stock to arm’s length third parties as compensation for services rendered. The fair value of these shares, in amount of $145,000, was determined by using the market price of the common stock as at the date of issuance. (note 7)

 

On March 11, 2020, the Company granted 2,000,000 common stock purchase options at an exercise price of $0.10 to two directors of the Company. 55,610 of these options vested immediately and are exercisable for seven years from the grant date. Remaining options were exercisable for seven years from the grant date at an exercise price of $0.10 and would vest ratably over a three-year period from the date of grant. The 2,000,000 stock options were assigned a fair value of $260,195 using the Black-Scholes pricing model. The following assumptions were used: Risk free interest rate of – 0.57%; expected volatility of 130%; expected dividend yield – nil; expected life of 7 years. For three months ended March 31, 2020, 55,610 options vested and the fair value of those vested options, in amount of $7,235, was charged to statement of operations with a credit in additional paid-in capital. (note 9)

 

On January 20, 2019, the Company issued 1,000,000 shares of the common stock to an arm’s length third party as compensation for services rendered. The fair value of these shares, in amount of $177,000, was determined by using the market price of the common stock as at the date of issuance. (note 7)

 

The components of share-based payments expense are detailed in the table below. 

 

  Date of grant Contractual life Number Exercise
price (C$)
Period ended
 March 31, 2020 ($)
Period ended
 March 31, 2019 ($)
Share price (C$) Risk-free rate Volatility Dividend yield Expected life (years)
Share issued for services January 20, 2019 N/A 1,000,000 N/A - 177,000 0.177 - - - -
Stock options January 15, 2020 7 years 3,000,000 0.10 14,352 - 0.07 1.54% 124% Nil 6.79
Share issued for services March 1, 2020 N/A 1,160,000 N/A 145,000 - 0.12 - - - -
Share to be issued for services March 1, 2020 N/A 2,000,000 N/A 250,000 - 0.11 - - - -
Stock options March 11, 2020 7 years 2,000,000 0.10 7,235 - 0.14 0.57% 130% Nil 6.95
          $416,587 $177,000          

 

As at March 31, 2020, the Company has the following stock options:

 

Award  Fair Value 

Contractual

Life (years)

  Units  Number of units vested  Weighted Average Exercise Price (C$)
               
Stock options (January 15, 2020)   172,168    6.67    3,000,000    250,077    0.10 
Stock options (March 11, 2020)   260,195    6.95    2,000,000    55,610    0.10 
Total   432,363         5,000,000    305,687      

 

 

F-19 
 

 

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

 

 

NOTE 9– RELATED PARTY TRANSACTIONS AND BALANCES

 

The balances of due to related party corporations at March 31, 2020 represent advances from related party corporations which is non-interest bearing, non-secured and due on demand.

The total amount owing to the former directors and officers of the Company and corporations controlled by the former directors and officers, in relation to the services they provided to the Company in their capacity as Officers and service provider at March 31, 2020 was $54,436 (December 31, 2019 - $319,969) which includes expense reimbursements. This amount is reflected in accounts payable and is further described below:

As at March 31, 2020, the Company had an amount owing to Chief Executive Officer of the Company of $7,083 (December 31, 2019 - $Nil). The amount owing relates to services provided by the Chief Executive Officer.

As at March 31, 2020, the Company had an amount owing to an entity owned and controlled by the former Chief Executive Officer of the Company of $Nil (December 31, 2019 - $265,533). The amount owing relates to services provided by the former Chief Executive Officer and expense reimbursements. During three months period ended March 31, 2020, the Company issued 3,319,162 shares of the common stock and settled the owing owed by the Company. The fair value of these shares, in amount of 232,342, was determined by using the market price of the common stock as at the date of issuance. The Company recognized a Gain on settlement of debt in amount of $33,191 in statement of operations. (note 7).

As at March 31, 2020, the Company had an amount owing to an entity owned and controlled by the former Secretary of the Company of $54,436 (December 31, 2019 - $54,436). The amount owing relates to services provided by the former Secretary and expense reimbursements.

During the three months ended March 31, 2020, $271,587 (Issuance of shares for service – 250,000, stock options expenses - $21,587) was recognized for share-based payments expense to directors, officers and related parties of the Company. No expense for share based payments to directors and officers was recognized during the three months ended March 31, 2019.  

As at March 31, 2020 and December 31, 2019, the amounts owing to officers of the Company are recorded in accounts payable and accrued liabilities.

 

NOTE 10 – COMMITMENTS AND CONTINGENCIES

 

Commitment

 

There were no commitments as of March 31, 2020 and December 31, 2019.

 

Contingencies

 

During the year ended December 31, 2017, the Company learned that a class action complaint (the “Class Action Complaint”) had been filed against the Company, its Chief Executive Officer and its Chief Financial Officer in the United States District Court for the District of New Jersey.  The Class Action Complaint alleges, inter alia, that defendants violated the federal securities laws by, among other things, failing to disclose that the Company was engaged in an unlawful scheme to promote its stock.  The Company has been served with the Class Action Complaint.  The Company has analyzed the Class Action Complaint and, based on that analysis, has concluded that it is legally deficient and otherwise without merit.  The Company intends to vigorously defend against these claims.

 

 

 

 

F-20 
 

 

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

 

 

NOTE 10 – COMMITMENTS AND CONTINGENCIES (Continued)

 

Also during the year ended December 31, 2017, the Company learned that two derivative complaints (the “Derivative Complaints”) on behalf of the Company have been filed against the Company’s Directors and Chief Executive Officer, President, Corporate Secretary, and Chief Financial Officer, and nominally against the Company, in Nevada state and federal court.  The state court action subsequently was removed to federal court.  The Derivative Complaints allege, inter alia, that the Company’s officers and directors directed the Company to undertake an unlawful scheme to promote its stock.  The Company has been served with the Derivative Complaints.  The Company has analyzed them and, based on its analysis, has concluded that the Derivative Complaints are legally deficient and otherwise without merit.  The Company intends to vigorously defend against these claims.   

 

On August 7, 2018, the United States District Court for the District of New Jersey dismissed the Class Action Complaint.  Additionally, subsequent to the year end on August 21, 2018, the Company was served with the Second Amended Complaint in the District of New Jersey.  The Company filed a motion to dismiss the Second Amended Complaint on September 18, 2018.  On January 23, 2019, the United States District Court for the District of New Jersey dismissed the Second Amended Complaint with prejudice.  Plaintiff filed a motion for reconsideration of the dismissal order on February 7, 2019.  On May 14, 2019, the Plaintiff’s motion to reconsider was denied. On June 27, 2019, the plaintiffs filed an appeal with United States Court of Appeals for the Third Circuit. On March 12, 2020, the United States Court of Appeal for the Third Circuit dismissed the Third appeal. 

 

The Company was also served with a third derivative action, which was filed March 23, 2018, against the Company’s Directors and Chief Executive Officer, President, and Corporate Secretary, and nominally against the Company, in Nevada state court.  Subsequently, this case was removed to federal court.

 

 NOTE 11 – SUBSEQUENT EVENTS

 

The Company’s management has evaluated subsequent events up to May 14, 2020, the date the unaudited interim condensed consolidated financial statements were issued, pursuant to the requirements of ASC 855 and has determined the following material subsequent events:

 

In April 2020, the Company issued 300,000 non-registered shares of the Company's common stock for a private placement completed during three months ended March 31, 2020 (note 7).

 

In April 2020, the company issued 2,000,000 shares of the common stock to Chief Executive of the Company as compensation for services. (note 7)

 

On April 20, 2020, the Company entered into a Share Exchange Agreement with Blockgration Global Corp. (“BGC”) and the shareholders of BGC. Pursuant to the Share Exchange Agreement, the Company agreed to exchange 100% of the outstanding equity stock of BGC held by shareholders of BGC for shares of common stock of the Company. Under the terms of the agreement, the Company will issue fifty million (50,000,000) newly issued shares of the common stock and seventy-five million (75,000,000) share purchase warrants to the shareholders of BGC. Each warrant is exercisable into one common share of the Company at an exercise price of $0.25 within three years of the issue date.

 

Under the terms of the agreement, 25,000,0000 shares and 6,250,000 warrants will be issued on the closing date. A second tranche of 25,000,0000 shares and 6,250,000 warrants will be issued on the closing date and will be held in escrow. These shares and warrants will be released from escrow between June 30, 2020 and December 31, 2020, upon achieving certain milestones. The remaining 62,500,000 warrants will be issued on the closing date and will be released from escrow within 90 days of the end of fiscal year 2021. The acquiree has the opportunity of earing bonus shares both in 2020 and 2021, subject to achieving targets as laid out in the agreement.

 

As a result of the Share Exchange Agreement, BGC will become a wholly owned subsidiary of the Company. With this acquisition, the Company will acquire controlling interest in BGC’s three subsidiaries in India and one subsidiary in Canada. BGC and its subsidiaries are engaged in the business of digital wallet deployments, prepaid card platform, blockchain and mobile apps development.

 

Impact of COVID-19:

The unprecedented and rapid spread of COVID-19 and the measures implemented to contain it have created a significant amount of economic volatility around the globe. The Company has taken steps to ensure the health and safety of our employees and continued service to our customers and partners, while at the same time seeking to mitigate the impact of the pandemic on our financial condition and results of operations. While the duration and extent of the impact from the COVID19 pandemic depends on future developments that cannot be accurately predicted at this time and the ultimate business and economic impact remains unknown, the conditions caused by this pandemic could adversely affect demand for our products and services, all of which could adversely affect our business, results of operations and financial condition.

 

 

 

F-21 
 

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

 

Forward-looking Statements

 

This Quarterly Report on Form 10-Q contains statements reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended as "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements included or incorporated by reference in this Quarterly Report on Form 10-Q, other than statements of historical fact, that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements appear in a number of places, including, but not limited to in this "Management's Discussion and Analysis of Financial Condition and Results of Operations." These statements represent our reasonable judgment of the future based on various factors and using numerous assumptions and are subject to known and unknown risks, uncertainties and other factors, including the impact of the coronavirus (COVID-19) pandemic on our business, that could cause our actual results and financial position to differ materially from those contemplated by the statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts, and use words such as "anticipate," "believe," "estimate," "expect," "forecast," "may," "will", "should," "plan," "project" and other words of similar meaning. In particular, these include, but are not limited to, statements relating to the following:

 

·Projected operating or financial results, including anticipated cash flows used in operations
·Expectations regarding capital expenditures; and
·Assumptions relating to our liquidity position, including our ability to obtain additional financing, if required.
·Any or all of our forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and other factors including, among others:
·The loss of key management personnel on whom the Company depends;
·Our ability to operate our business efficiently, manage capital expenditures and costs (including general and administrative expenses) and obtain financing if required.
·Our expectations with respect to our acquisition activity.

 

In addition, there may be other factors that could cause our actual results to be materially different from the results referenced in the forward-looking statements, some of which are included in this Quarterly Report on Form 10-Q, including in this "Management's Discussion and Analysis of Financial Condition and Results of Operations." Many of these factors will be important in determining our actual future results. Consequently, no forward-looking statement can be guaranteed. Our actual future results may vary materially from those expressed or implied in any forward-looking statements. All forward- looking statements contained in this Quarterly Report on Form 10-Q are qualified in their entirety by this cautionary statement. Forward-looking statements speak only as of the date they are made, and the Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q, except as otherwise required by applicable law.

 

This discussion and analysis should be read in conjunction with the accompanying unaudited condensed consolidated interim financial statements and related notes for the period ended March 31, 2020 as filed with the Securities and Exchange Commission and included in this Form 10-Q and the financial statements and management discussion and analysis for the year ended December 31, 2019.

 

The discussion and analysis of the financial condition and results of operations are based upon the financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. On an on-going basis management reviews our estimates and assumptions. The estimates were based on historical experience and other assumptions that management believes to be reasonable under the circumstances. Actual results are likely to differ from those estimates under different assumptions or conditions.

 

4 
 

 

Nature of Operations

 

Zoompass Holdings, Inc. formerly known as UVIC. Inc. ("Zoompass Holdings" or the "Company") was incorporated under the laws of the State of Nevada on August 21, 2013. Effective August 22, 2016, the Company entered into an Agreement for the Exchange of Stock (the "Agreement") with Zoompass, Inc., an Ontario, Canada corporation ("Zoompass"). Pursuant to the Agreement, the Company agreed to issue 8,050,784 shares of its restricted common stock to Zoompass' shareholders ("Zoompass' shareholders") in exchange for all the shares of Zoompass Inc. owned by the Zoompass Inc.'s Shareholders. At the Closing Date, Rob Lee, a significant shareholder of the Company agreed to cancel 7,000,000 shares of the Company's common stock, which shares constituted the control shares of the Company. Other than this one significant shareholder, shareholders of the Company held 2,670,000 shares. As a result of the Agreement, Zoompass is now a wholly owned subsidiary of the Company. The Company has amended its Articles of Incorporation to change its name to Zoompass Holdings, Inc. and the appropriate forms were filed with FINRA and the SEC to change its name, address and symbol and complete a 3.5-1 forward split, which was consented to by the majority of shareholders on September 7, 2016 and approved in February 2017, for shareholders of record on September 7, 2016.

All share figures have been retroactively stated to reflect the stock split approved by shareholders, unless otherwise indicated. Additionally, the Company's shareholders consented to an increase of the shares authorized to 500,000,000 and a revision of the par value to $0.0001.

As the former Zoompass shareholders ended up owning the majority of the Company, the transaction does not constitute a business combination and was deemed to be a recapitalization of the Company with Zoompass being the accounting acquirer, accordingly the accounting and disclosure information is that of Zoompass going forward.

Effective March 6, 2018 (the "Closing Date"), Zoompass Holdings, Inc.'s (the "Company") Canadian operating subsidiary, Zoompass, Inc., entered into an Asset Purchase Agreement (the "Agreement") for the sale of its Prepaid Card Business ("Prepaid Business") to Fintech Holdings North America Inc., or its designee. The aggregate purchase price of the Prepaid Business was C$400,000. The transaction was completed on March 26, 2018.

During the first fiscal quarter of 2018, the Company implemented a plan to abandon the mobility solution operation. The Company has determined that the mobility solution operation represents a component and a reportable segment of the Company. According to the plan of abandonment, the Company gradually ceased accepting any new business during first fiscal quarter of 2018 and settled all the remaining orders and obligations from mobility solution by end of March 2018.

On October 17, 2018, the Company purchased certain business assets that represents a business from Virtublock Global Corp. (“Virtublock”, “VGC”) in return the Company issued 44,911,724 shares to Virtublock and pursuant to the issuance of shares Virtublock ended up owning 45% of total outstanding common shares of the Company.

Zoompass Inc., was incorporated under the laws of Ontario on June 8, 2016.  On October 17, 2018, pursuant to an asset purchase agreement with Virtublock, certain business assets were acquired by the Company in exchange for shares of the Company.  The net assets primarily consisted of certain technology IP related to cryptocurrency exchange/wallet, certain strategic partnerships and customer contracts. On March 25, 2019, the name of the company was changed from Zoompass Inc. to Virtublock Canada Inc. (“VCI”).

 

On February 27, 2020, the Company cancelled 44,911,724 shares of the common stock which were issued in connection with the asset purchase agreement dated October 17, 2018 with Virtublock Global Corp. Pursuant to a General Release agreement dated November 29, 2019, the asset purchase agreement dated October 17, 2018 with Virtublock Global Corp. was deemed cancelled and each party acknowledged and agreed that no party has or shall have any claim with respect to intellectual property, software or other assets owned by any other party and that no agreements exist or remain unsatisfied with respect to the transfer of any asset from a releasing party to any other party, and Virtublock Global Corp. assigned and tendered the 44,911,724 shares of common stock of the Company to the Company for cancellation. Accordingly, $4,491 was transferred from common stock to additional paid in capital with a corresponding reduction in the number of common shares outstanding.

5 
 

 

The Company is a Software Fintech company and continue to develop and acquire software platforms and services to sell to customers globally with a focus on leading edge technologies and software as a service.

The Company, as part of its business, will seek opportunities to acquire software companies with existing revenue streams.

The Company has incurred recurring losses from operations and as of March 31, 2020 and December 31, 2019, had net working capital deficiency and an accumulated deficit. The Company’s continued existence is dependent upon its ability to continue to execute its operating plan and to obtain additional debt or equity financing. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. There can be no assurance that the necessary debt or equity financing will be available, or will be available on terms acceptable to the Company, in which case the Company may be unable to meet its obligations. Should the Company be unable to realize its assets and discharge its liabilities in the normal course of business, the net realizable value of its assets may be materially less than the amounts recorded in the condensed consolidated financial statements. The condensed consolidated financial statements do not include any adjustments relating to the recoverability of recorded asset amounts that might be necessary should the Company be unable to continue in existence.

There is no certainty that the Company will be successful in generating sufficient cash flow from operations or achieving and maintaining profitable operations in the future to enable it to meet its obligations as they come due and consequently continue as a going concern. The Company will require additional financing this year to fund its operations and it is currently working on securing this funding through corporate collaborations, public or private equity offerings or debt financings. Sales of additional equity securities by the Company would result in the dilution of the interests of existing shareholders. There can be no assurance that financing will be available when required.

The Company expects the forgoing, or a combination thereof, to meet the Company's anticipated cash requirements for the next 12 months; however, these conditions raise substantial doubt about the Company's ability to continue as a going concern.

These unaudited interim condensed consolidated financial statements have been prepared on the basis that the Company will continue as a going concern, which presumes that it will be able to realize its assets and discharge its liabilities in the normal course of business as they come due. These unaudited interim condensed consolidated financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and condensed consolidated balance sheets classifications that would be necessary if the Company were unable to realize its assets and settle its liabilities as a going concern in the normal course of operations. Such adjustments could be material.

Significant Accounting Policies and Estimates

 

The significant accounting policies and estimates have been disclosed in the note 2 of the unaudited interim condensed interim consolidated financial statements.

 

The discussion and analysis of the financial condition and results of operations are based upon the interim condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. On an on-going basis management reviews our estimates and assumptions. The estimates were based on historical experience and other assumptions that management believes to be reasonable under the circumstances. Actual results are likely to differ from those estimates under different assumptions or conditions, but management does not believe such differences will materially affect our financial position or results of operations.

 

 

6 
 

 

Results of operations for the three months ended March 31, 2020

 

Revenue and cost of sales

 

The Company did not recognize any revenue for three months ended March 31, 2020 and 2019.

 

General and administrative and other expenses

 

Salaries and consultant expenses were $32,553 for the three months ended March 31, 2020 compared with $$47,062 for the same period last year. Salaries and consultant expenses were lower in the three months ended March 31, 2020 because the number of employees and consultants during the period were lower compared with the three months ended March 31, 2019, as a result of changes in management team.

 

Rent and occupancy costs were $1,118 during the three months ended March 31, 2020 compared with $$2,996 in the same period last year. The decrease was due to change in office location of the company during the period.

 

The share-based payment expense was $416,587 compared with $177,000 in the same period last year. During the three months March 31, 2020 the company issued 2,000,000 shares in a fair value of $250,000 to new Chief Executive of the company. The company issued 1,160,00 shares in a fair value of 145,000 to arm’s length third parties as compensation for services. The Company granted 3,000,000 and 2,000,000 stock options to officers, directors and consultant of the Company on January 15, 2020 and March 11, 2020 respectively and those stock options would vest over 3-year period, the fair value of vested options during the three months ended March 31, 2020 was in amount of $21,587.

 

There is no depreciation and amortization expense for the period ended March 31, 2020 and March 31, 2019.

 

Professional fees include audit and fee and in line with the amount for the prior period.

 

Office and sundry expense include office expenses such as supplies, insurance and additional costs incurred to support the corporate head office in addition to travel costs.  The decrease is primarily attributed to change in the nature of operations and lower operating expenses.

 

Filing fees and regulatory costs are costs associated with the Company's listing fees and transfer agent costs. These costs are significantly higher than corresponding period last year because the Company paid listing fees and incurred expenses on regulatory filings during the period.

 

The Company recognized a net loss of $619,241 or loss from per share $0.006 for the three months ended March 31, 2020. The Company recognized a net loss of $251,791 or loss per share $0.002 for the three months ended March 31, 2019.

 

Liquidity and Capital Resources

 

As at March 31, 2020, the Company had $4,579 in cash and cash equivalents compared with $21,477 as at December 31, 2019.

 

Operations for three month ended March 31, 2020 were primarily financed through the issuance of shares in the common stock of the Company.

 

There is no certainty that we will be successful in generating sufficient cash flow from operations or achieving and maintaining profitable operations in the future to enable us to meet our obligations as they come due and consequently continue as a going concern. The Company may require additional funds to further develop our expanded business plan.  The Company may require additional financing this year to fund our operations and is examining possible sources of funding beyond the existing cash generated from operations.  Sales of additional equity securities would result in the dilution of the interests of existing stockholders.

 

There can be no assurance that financing will be available when required. In the event that the necessary additional financing is not obtained, the Company would reduce its discretionary overhead costs substantially, or otherwise curtail operations.

 

The Company expects the forgoing, or a combination thereof, to meet our anticipated cash requirements for the next 12 months; however, these conditions raise substantial doubt about our ability to continue as a going concern. The accompanying unaudited interim condensed financial statements do not include any adjustments to reflect the possible future effects on recoverability and reclassification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

 

 

7 
 

 

Net Cash Used in Operating Activities

 

During the periods ended March 31, 2020, and 2019, $126,366 and $48,912 in cash, respectively, was used for operations. For both periods, the cash used in operations was primarily the result of the net loss and change in non-cash working capital.

 

Net Cash Provided by Investing Activities

 

During the periods ended March 31, 2020 and 2019, no cash was generated from or used in investing activities.

 

Net Cash Provided by Financing Activities

 

For the period ended March 31, 2020 the Company raised $151,584 from the issuance of shares and repaid $37,262 to related party. For the period ended March 31, 2019 the Company did not generate or use cash in financing activities.

 

Financial instruments and risk factors

 

The Company has exposure to liquidity, foreign currency, Credit, and Interest Rate risk.  The Company's risk management objective is to preserve and redeploy the existing treasury as appropriate, ultimately to protect shareholder value.  Risk management strategies, as discussed below, are designed and implemented to ensure the Company's risks and the related exposure are consistent with the business objectives and risk tolerance.

 

The Governments of Canada and the United States, as well as other foreign governments instituted emergency measures as a result of the COVID-19 virus outbreak. The virus has had a major impact on North America and international securities, currency markets and consumer activity which may impact the Company's financial position, its results of future operations and its future cash flows significantly. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of future operations, financial position, and liquidity for the period ended March 31, 2020.

 

Liquidity Risk: Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due.  The Company manages its liquidity by ensuring that there is sufficient capital to meet short and long-term business requirements, after taking into account cash requirements from operations and the Company's holdings of cash and cash equivalents. The Company also strives to maintain sufficient financial liquidity at all times in order to participate in investment opportunities as they arise, as well as to withstand sudden adverse changes in economic circumstances.

 

Management forecasts cash flows for its current and subsequent fiscal years to predict future financing requirements.  Future requirements may be met through a combination of credit and access to capital markets.  The Company's cash requirements are dependent on the level of operating activity, a large portion of which is discretionary.  Should management decide to increase its operating activity, more funds than what is currently in place would be required.  It is not possible to predict whether financing efforts will be successful or sufficient in the future. At March 31, 2020, the Company had $4,579 in cash and cash equivalents (December 31, 2019 - $21,477).

 

Currency risk: The Company's expenditures are incurred in Canadian and US dollars.  The results of the Company's operations are subject to currency translation risk.  The Company mitigates foreign exchange risk through forecasting its foreign currency denominated expenditures and maintaining an appropriate balance of cash in each currency to meet the expenditures.  As the Company's reporting currency is the US dollar, fluctuations in US dollar will affect the results of the Company.

 

Credit risk: Credit risk is the risk of loss associated with a counterparty's inability to fulfill its payment obligations. As at March 31, 2020, the Company's credit risk is primarily attributable to cash and cash equivalents. At March 31, 2020, the Company's cash and cash equivalents were held with reputable Canadian chartered banks. 

 

Interest Rate risk: Interest rate risk is the risk borne by an interest-bearing asset or liability as a result of fluctuations in interest rates.  Financial assets and financial liabilities with variable interest rates expose the Company to cash flow interest rate risk.  The Company's does not have significant interest rate risk.

 

Fair Values:  The carrying amounts reported in the condensed consolidated balance sheets for cash and cash equivalents, cash held in trust and customer deposits, accounts receivables, accounts payable and client funds approximate fair value because of the short period of time between the origination of such instruments and their expected realization.

 

 

 

8 
 

 

Related Party Transactions

 

The balances of due to related party corporations at March 31, 2020 represent advances from related party corporations which is non-interest bearing, non-secured and due on demand.

The total amount owing to the former directors and officers of the Company and corporations controlled by the former directors and officers, in relation to the services they provided to the Company in their capacity as Officers and service provider at March 31, 2020 was $54,436 (December 31, 2019 - $319,969) which includes expense reimbursements. This amount is reflected in accounts payable and is further described below.

As at March 31, 2020, the Company had an amount owing to Chief Executive Officer of the Company of $7,083 (December 31, 2019 - $Nil). The amount owing relates to services provided by the Chief Executive Officer.

As at March 31, 2020, the Company had an amount owing to an entity owned and controlled by the former Chief Executive Officer of the Company of $Nil (December 31, 2019 - $265,533). The amount owing relates to services provided by the former Chief Executive Officer and expense reimbursements. During three months period ended March 31, 2020, the Company issued 3,319,162 shares of the common stock and settled the owing owed by the Company. The fair value of these shares, in amount of 232,342, was determined by using the market price of the common stock as at the date of issuance. The Company recognized a Gain on settlement of debt in amount of $33,191 in statement of operations.

As at March 31, 2020, the Company had an amount owing to an entity owned and controlled by the former Secretary of the Company of $54,436 (December 31, 2019 - $54,436). The amount owing relates to services provided by the former Secretary and expense reimbursements.

During the three months ended March 31, 2020, $271,587 (Issuance of shares for service – 250,000, stock options expenses - $21,587) was recognized for share-based payments expense to directors, officers and related parties of the Company. No expense for share based payments to directors and officers was recognized during the three months ended March 31, 2019.  

As at March 31, 2020 and December 31, 2019, the amounts owing to officers of the Company are recorded in accounts payable and accrued liabilities.

Newly Adopted And Recently Issued Accounting Pronouncements

 

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact this guidance may have on the condensed consolidated financial statements and related disclosures.

 

On January 1, 2019, the Company adopted Accounting Standards Codification Topic 842, “Leases” (“ASC 842”) to replace existing lease accounting guidance. This pronouncement is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet for most leases. Expenses associated with leases will continue to be recognized in a manner similar to previous accounting guidance. The Company adopted ASC 842 utilizing the transition practical expedient added by the Financial Accounting Standards Board (“FASB”), which eliminates the requirement that entities apply the new lease standard to the comparative periods presented in the year of adoption. The Company is the lessee in a lease contract when the Company obtains the right to use the asset. Operating leases are included in the line items right-of-use asset, lease obligation, current, and lease obligation, long-term in the condensed consolidated balance sheet. Right-of-use (“ROU”) asset represents the Company’s right to use an underlying asset for the lease term and lease obligations represent the Company’s obligations to make lease payments arising from the lease, both of which are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Leases with a lease term of 12 months or less at inception are not recorded on the condensed consolidated balance sheets and are expensed on a straight-line basis over the lease term in our condensed consolidated statement of operations and comprehensive loss. The Company determines the lease term by agreement with lessor. As our current operating lease of office space, at the commencement, has a term of less than 12 months, the Company elects not to apply the recognition requirements of ASC 842 to the short-term lease, instead lease payments are recognized in statement of operations on a straight-line basis over the lease term.

 

Off Balance Sheet Arrangements

 

Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our investors. 

 

 

 

 

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Subsequent Events

 

The Company’s management has evaluated subsequent events up to May 14, 2020, the date the unaudited interim condensed consolidated financial statements were issued, pursuant to the requirements of ASC 855 and has determined the following material subsequent events:

In April 2020, the Company issued 300,000 non-registered shares of the Company's common stock for a private placement completed during three months ended March 31, 2020.

On April 20, 2020, the Company entered into a Share Exchange Agreement with Blockgration Global Corp. (“BGC”) and the shareholders of BGC. Pursuant to the Share Exchange Agreement, the Company agreed to exchange 100% of the outstanding equity stock of BGC held by shareholders of BGC for shares of common stock of the Company. Under the terms of the agreement, the Company will issue fifty million (50,000,000) newly issued shares of the common stock and seventy-five million (75,000,000) share purchase warrants to the shareholders of BGC. Each warrant is exercisable into one common share of the Company at an exercise price of $0.25 within three years of the issue date.

 

Under the terms of the agreement, 25,000,0000 shares and 6,250,000 warrants will be issued on the closing date. A second tranche of 25,000,0000 shares and 6,250,000 warrants will be issued on the closing date and will be held in escrow. These shares and warrants will be released from escrow between June 30, 2020 and December 31, 2020, upon achieving certain milestones. The remaining 62,500,000 warrants will be issued on the closing date and will be released from escrow within 90 days of the end of fiscal year 2021. The acquiree has the opportunity of earing bonus shares both in 2020 and 2021, subject to achieving targets as laid out in the agreement.

As a result of the Share Exchange Agreement, BGC will become a wholly owned subsidiary of the Company. With this acquisition, the Company will acquire controlling interest in BGC’s three subsidiaries in India and one subsidiary in Canada. BGC and its subsidiaries are engaged in the business of digital wallet deployments, prepaid card platform, blockchain and mobile apps development.

 

Impact of COVID-19:

The unprecedented and rapid spread of COVID-19 and the measures implemented to contain it have created a significant amount of economic volatility around the globe. We have taken steps to ensure the health and safety of our employees and continued service to our customers and partners, while at the same time seeking to mitigate the impact of the pandemic on our financial condition and results of operations. While the duration and extent of the impact from the COVID19 pandemic depends on future developments that cannot be accurately predicted at this time and the ultimate business and economic impact remains unknown, the conditions caused by this pandemic could adversely affect demand for our products and services, all of which could adversely affect our business, results of operations and financial condition.

 

 

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

As a smaller reporting company" (as defined by §229.10(f)(1)), the Company is not required to provide the information required by this Item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

During the period ended March 31, 2020, there were no changes in our internal controls over financial reporting (as defined in Rule 13a- 15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Evaluation of Disclosure Controls and Procedures

 

The Company maintains "disclosure controls and procedures" as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, that are designed to ensure that information required to be disclosed by the Company in reports that are filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 


As of the end of the period covered by this Quarterly Report, the Company carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(b) and 15d-15(b). Based upon this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures as of the end of the period covered by this Quarterly Report were effective to ensure that the material information required to be included in our Securities and Exchange Commission reports is accumulated and communicated to our management, including our principal executive and financial officer, as well as recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms relating to the Company.
 

 

 

 

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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. However, litigation is subject to inherent uncertainties, and an adverse result in these, or other matters, may arise from time to time that may harm our business.

 

During the year ended December 31, 2017, the Company learned that a class action complaint (the “Class Action Complaint”) had been filed against the Company, its Chief Executive Officer and its Chief Financial Officer in the United States District Court for the District of New Jersey.  The Class Action Complaint alleges, inter alia, that defendants violated the federal securities laws by, among other things, failing to disclose that the Company was engaged in an unlawful scheme to promote its stock.  The Company has been served with the Class Action Complaint.  The Company has analyzed the Class Action Complaint and, based on that analysis, has concluded that it is legally deficient and otherwise without merit.  The Company intends to vigorously defend against these claims.

 

Also during the year ended December 31, 2017, the Company learned that two derivative complaints (the “Derivative Complaints”) on behalf of the Company have been filed against the Company’s Directors and Chief Executive Officer, President, Corporate Secretary, and Chief Financial Officer, and nominally against the Company, in Nevada state and federal court.  The state court action subsequently was removed to federal court.  The Derivative Complaints allege, inter alia, that the Company’s officers and directors directed the Company to undertake an unlawful scheme to promote its stock.  The Company has been served with the Derivative Complaints.  The Company has analyzed them and, based on its analysis, has concluded that the Derivative Complaints are legally deficient and otherwise without merit.  The Company intends to vigorously defend against these claims.   

 

On August 7, 2018, the United States District Court for the District of New Jersey dismissed the Class Action Complaint.  Additionally, subsequent to the year end on August 21, 2018, the Company was served with the Second Amended Complaint in the District of New Jersey.  The Company filed a motion to dismiss the Second Amended Complaint on September 18, 2018.  On January 23, 2019, the United States District Court for the District of New Jersey dismissed the Second Amended Complaint with prejudice.  Plaintiff filed a motion for reconsideration of the dismissal order on February 7, 2019.  On May 14, 2019, the Plaintiff’s motion to reconsider was denied. On June 27, 2019, the plaintiffs filed an appeal with United States Court of Appeals for the Third Circuit. On March 12, 2020, the United States Court of Appeal for the Third Circuit dismissed the Third appeal. 

 

The Company was also served with a third derivative action, which was filed March 23, 2018, against the Company’s Directors and Chief Executive Officer, President, and Corporate Secretary, and nominally against the Company, in Nevada state court.  Subsequently, this case was removed to federal court.

 

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ITEM 1A. RISK FACTORS

 

The Company, as a "smaller reporting company" (as defined by §229.10(f)(1)), is not required to provide the information required by this Item.

 

ITEM 2.  RECENT UNREGISTERED SALES OF EQUITY SECURITIES

 

In January 2020, the Company issued 757,575 non-registered shares of the Company's common stock. The net proceeds in amount of $34,091 was received in December 31, 2019.

 

In January 2020, the Company completed a private placement for the sale of non-registered shares of the Company's common stock. As a result of the private placement 3,030,300 non-registered shares of the Company's common stock was issued for gross proceeds of $136,584.

 

In January 2020, the Company issued 3,319,162 shares of the common stock to settle a debt owed by the company in amount $265,533. The $265,533 debt was owed to a corporation controlled by a former Chief Executive Officer of the company.

 

On March 1, 2020, the Company decided to issue 2,000,000 shares of the common stock to Chief Executive of the Company as compensation for services. The fair value of these shares, in amount of $250,000, was determined by using the market price of the common stock as at the date of decision to issue and charged to statement of operations. The shares were issued in April 2020.

 

In March 2020, the company issued 1,160,000 shares of the common stock to as compensation for services rendered. The fair value of these shares, in amount of $145,000, was determined by using the market price of the common stock as at the date of issuance.

 

In March 2020, the Company completed a private placement for the sale of non-registered shares of the Company's common stock. As a result of the private placement 300,000 non-registered shares of the Company's common stock were issued for gross proceeds of $15,000. The shares were issued in April 2020.

 

Purchases of Our Equity Securities

 

No repurchases of our common stock were made during our three-month ended March 31, 2020. 

 

 

 

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ITEM 3. EXHIBITS

 

Exhibit No.   Description
     
31.1   Certifications of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2   Certifications of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1   Certifications of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2   Certifications of Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS    XBRL Instance Document
101.SCH    XBRL Taxonomy Extension Schema Document
101.CAL    XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF    XBRL Taxonomy Extension Definition Linkbase Document
101.LAB    XBRL Taxonomy Extension Label Linkbase Document
101.PRE    XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 

 

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

Zoompass Holdings, Inc.,

 

 

Date: May 14, 2020 /s/ Emanuel (Manny) Bettencourt
 

Emanuel (Manny) Bettencourt

Chief Executive Officer

(Principal Executive Officer) 

 

 

 

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