Quarterly Report (10-q)

 

 

 

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 June 30, 2018   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.)
155 Gordon Baker Rd, Suite 101 Toronto, Ontario Canada, M2H 3N5
(Address of principal executive offices, including Zip Code)
[phone] (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 November 15, 2019
Common stock, $0.0001 par value	108,988,461

 

 

 

 

 

TABLE OF CONTENTS

 

 

 

PART I – FINANCIAL INFORMATION
	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	15
	Item 2.	Recent Unregistered Sales of Equity Securities	15
	Item 3.	Exhibits	16
SIGNATURES			17

 

 

2

 

 

PART I – FINANCIAL INFORMATION

 

 ITEM 1.  FINANCIAL STATEMENTS.

 

 

Condensed Consolidated Balance Sheets at June 30, 2018 (unaudited) and December 31, 2017 (audited)			F-1
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2018 and 2017 (unaudited)			F-2
Condensed Consolidated Statements of Stockholders’ Deficiency for the three and six months ended June 30, 2018 and 2017 (unaudited)			F-3
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017 (unaudited)			F-5
Notes to the Condensed Consolidated Financial Statements			F-6

 

 

3

 

 

ZOOMPASS HOLDINGS, INC.

Interim Condensed Consolidated Balance Sheets as at March 31, 2018 and December 31, 2017

(Expressed in US dollars) 

 

						June 30,				December 31,
						2018				2017
		Note				(unaudited)				(audited)
ASSETS
Current assets
Cash and cash equivalents			7			$	186,699			$	78,370
Cash held in trust and customer deposits			3				-				-
Accounts receivable (net of allowance for doubtful accounts of $38,889, December 31, 2017 - $41,077)			3				-				-
Prepaid expenses and other current assets			10				94,782				95,014
Assets from discontinued operations			3				167,011				3,118,297
Total current assets							448,492				3,291,681
Equipment			4				-				-
Intangible assets			5				-				-
Total assets						$	448,492			$	3,291,681
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities
Accounts payable and accrued liabilities			10			$	598,782			$	670,042
Promissory note			6				837,000				477,402
Client funds			3				-				-
Liabilities from discontinued operations			3				-				2,453,922
Total liabilities						$	1,435,782			$	3,601,366
Stockholders' deficiency
Common stock, $0.0001 par value 500,000,000 shares authorized, 46,718,276 shares issued and outstanding (December 31, 2017 – 43,330,776)			1,8			$	4,671			$	4,332
Additional paid in capital			8,9				21,575,774				21,015,908
Accumulated deficit							(22,700,254	)			(21,302,533	)
Accumulated other comprehensive income (loss)							132,519				(27,392	)
Total stockholders' deficiency							(987,290	)			(309,685	)
Total liabilities and stockholders' deficiency						$	448,492			$	3,291,681
Going concern			1
Commitments and contingencies			11
Subsequent events			12

 

 

 

  

*See accompanying notes to interim condensed consolidated financial statements

 

 

 

F-1

 

  

 

ZOOMPASS HOLDINGS, INC.

INTERIM CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS

(Expressed in US dollars)  

 

						For the three months ended				For the six months ended				For the three months ended				For the six months ended
						June 30, 2018				June 30, 2018				June 30, 2017				June 30, 2017
		Note				(unaudited)				(unaudited)				(unaudited)				(unaudited)
Revenue			2,3			$	-			$	-			$	-			$	-
Expenses
Salaries and consultants							(101,952	)			(241,955	)			(190,098	)			(414,604	)
Rent and occupancy costs							-				(39,918	)			(48,374	)			(83,577	)
Share-based payment expense			8,9,10				(406,446	)			(479,863	)			(330,584	)			(422,532	)
Professional fees							(55,713	)			(82,374	)			(109,705	)			(148,237	)
Telecommunications							-				(2,859	)			(3,483	)			(6,474	)
Office and sundry expenses and other							(31,964	)			(178,128	)			(136,884	)			(193,322	)
Filing fees and regulatory costs							(15,498	)			(16,103	)			(13,612	)			(24,217	)
Foreign exchange loss							(78,647	)			(67,263	)			26,639				13,865
Net Bank fees							(499	)			(14,231	)			(3,905	)			(9,592	)
							(690,719	)			(1,122,694	)			(810,006	)			(1,288,690	)
Loss before income taxes						$	(690,719	)		$	(1,122,694	)		$	(810,006	)		$	(1,288,690	)
Income taxes expenses							-				-				-				-
Net loss from continuing operations							(690,719	)			(1,122,694	)			(810,006	)			(1,288,690	)
Net loss from discontinued operations, net of tax			3				(13,880	)			(275,027	)			(283,183	)			(448,857	)
Net loss						$	(704,599	)		$	(1,397,721	)		$	(1,093,189	)		$	(1,737,547	)
Other comprehensive income
Foreign exchange translation gain							40,543				159,911				56,510				142,759
Net loss and comprehensive loss						$	(664,056	)		$	(1,237,810	)		$	(1,036,679	)		$	(1,594,788	)
Loss per share - basic and diluted
Loss from continuing operations per share							(0.015	)			(0.025	)			(0.020	)			(0.032	)
Loss from discontinued operations per share							(0.000	)			(0.006	)			(0.007	)			(0.011	)
Weighted average number of common shares outstanding - basic and diluted							46,293,004				44,909,367				40,119,780				39,781,332

 

 

 

 

 *See accompanying notes to interim condensed consolidated financial statements

 

 

F-2

 

 

ZOOMPASS HOLDINGS, INC.

INTERIM CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIENCY

(Expressed in US dollars) 

  

 

 

			Common stock
	Note		Number of Shares		Amount		Additional paid in capital		Deficit		Accumulated other comprehensive income (loss)		Total
March 31, 2018 (unaudited)			43,530,776	$	4,352	$	21,129,976	$	(21,995,655)	$	91,976	$	(769,351)
Issuance of shares for private placement	8		687,500		69		39,602		-		-		39,671
Share-based payment expense - Issuance of shares for services	8,9,10		2,500,000		250		337,000		-		-		337,250
Share-based payment expense - stock options	9,10		-		-		69,196		-		-		69,196
Net loss for the period			-		-				(704,599)		-		(704,599)
Foreign currency translation			-		-						40,543		40,543
June 30, 2018 (unaudited)			46,718,276	$	4,671	$	21,575,774	$	(22,700,254)	$	132,519	$	(987,290)

    

 

			Common stock
	Note		Number of Shares		Amount		Additional paid in capital		Deficit		Accumulated other comprehensive income (loss)		Total
March 31, 2017 (unaudited)			39,820,611	$	3,981	$	18,770,837	$	(14,648,371)	$	(22,028)	$	4,104,419
Share-based payment expense - stock options and warrants	9,10		-		-		330,584		-		-		330,584
Issuance of shares	8		654,130		65		735,252		-		-		735,317
Net loss for the period			-		-		-		(1,093,189)		-		(1,093,189)
Foreign currency translation			-		-		-		-		56,510		56,510
June 30, 2017 (unaudited)			40,474,741	$	4,046	$	19,836,673	$	(15,741,560)	$	34,482	$	4,133,641

 

 

  

 

*See accompanying notes to interim condensed consolidated financial statements

 

 

F-3

  

 

ZOOMPASS HOLDINGS, INC.

INTERIM CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIENCY

(Expressed in US dollars) 

 

 

			Common stock
	Note		Number of Shares		Amount		Additional paid in capital		Deficit		Accumulated other comprehensive income (loss)		Total
December 31, 2017			43,330,776	$	4,332	$	21,015,908	$	(21,302,533)	$	(27,392)	$	(309,685)
Issuance of shares for private placement	8		887,500		89		80,253		-		-		80,342
Share-based payment expense - Issuance of shares for services	8,9,10		2,500,000		250		337,000		-		-		337,250
Share-based payment expense - stock options	9,10		-		-		142,613		-		-		142,613
Net loss for the period			-		-				(1,397,721)		-		(1,397,721)
Foreign currency translation			-		-						159,911		159,911
June 30, 2018 (unaudited)			46,718,276	$	4,671	$	21,575,774	$	(22,700,254)	$	132,519	$	(987,290)

 

 

 

			Common stock
	Note		Number of Shares		Amount		Additional paid in capital		Deficit		Accumulated other comprehensive income (loss)		Total
December 31, 2016			39,300,400	$	3,929	$	18,484,743	$	(14,004,013)	$	(108,277)	$	4,376,382
Exercise of warrants	8		520,211		52		194,146		-		-		194,198
Share-based payment expense - stock options and warrants	9,10		-		-		422,532		-		-		422,532
Issuance of shares	8		654,130		65		735,252		-		-		735,317
Net loss for the period			-		-		-		(1,737,547)		-		(1,737,547)
Foreign currency translation			-		-		-		-		142,759		142,759
June 30, 2017 (unaudited)			40,474,741	$	4,046	$	19,836,673	$	(15,741,560)	$	34,482	$	4,133,641

 

*See accompanying notes to interim condensed consolidated financial statements

 

 

F-4

 

 

ZOOMPASS HOLDINGS, INC.

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

((Unaudited, Expressed in US dollars)

  

						For the six months ended June 30, 2018				For the six months ended June 30, 2017
		Note				(unaudited)				(unaudited)
Cash flow from operating activities
Net loss						$	(1,397,721	)		$	(1,737,547	)
Net loss from discontinued operations			3				275,027				448,857
Non-cash items:
Share-based payment expense - Issuance of shares for services			8,9.10				337,250				-
Share-based payment expense - stock options and warrants			9,10				142,613				422,532
Foreign exchange loss							67,263				(13,865	)
Changes in non-cash operating assets and liabilities
Prepaids and other current assets							(3,851	)			39,342
Accounts payable and accrued liabilities							(58,247	)			(33,956	)
Net cash used in operating activities - continuing operations							(637,666	)			(874,637	)
Net cash used in operating activities - discontinued operations							(24,035	)			(342,487	)
Net cash used in operating activities							(661,701	)			(1,217,124	)
Cash flow from investing activities
Proceeds from disposal of prepaid card business			3				152,871				-
Additions to intangibles							-				(20,000	)
Net cash used in investing activities - continuing operations							-				-
Net cash provided by (used in) investing activities - discontinued operations							152,871				(20,000	)
Net cash provided by (used in) investing activities							152,871				(20,000	)
Cash flow from financing activities
Issuance of common stock			8				80,342				735,317
Repayment of promissory note			6				(477,402	)			-
Issuance of promissory note			6				837,000				-
Exercise of warrants							-				194,198
Net cash provided by financing activities							439,940				929,515
Effect of exchange rate changes on cash							177,219				22,111
Increase (Decrease) in cash and cash equivalents							108,329				(285,498	)
Cash and cash equivalents, beginning of the period							78,370				422,385
Cash and cash equivalents, end of the period						$	186,699			$	136,887
Supplementary Cash Flow Information
Interest paid							9,807				-
Taxes paid							-				-

 

 

See accompanying notes to the unaudited interim condensed consolidated financial statements

  

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

  

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. 

Zoompass Inc. (‘Zoompass”), was incorporated under the laws of Ontario on June 8, 2016. On June 28, 2016, pursuant to an agreement with a shareholder of Zoompass, certain net assets were acquired by Zoompass in exchange for shares of Zoompass. The net assets primarily consisted of a virtual payment platform, certain customer contracts, cash held in trust and customer deposits as well as the associated client funds.

Effective August 22, 2016, the Company entered into an Agreement for the Exchange of Stock (the "Agreement") with Zoompass.   Pursuant to the Agreement, the Company agreed to issue 8,060,913 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 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.

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 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.

F-6

 

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

 

 

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, 2017 and 2016 and their accompanying notes.

 

The 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. 

 

Certain prior year amounts have been reclassified to conform to the discontinued operations in current year. See note 3.

 

Basis of consolidation: 

 

The interim condensed consolidated financial statements comprise the accounts of Zoompass Holdings, the legal parent company, and its wholly owned subsidiaries, Zoompass 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.

 

 

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

 

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 Zoompass 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 Zoompass' 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 consolidated financial statements into the US Dollar are recorded as a separate component of accumulated other comprehensive loss in the statement of changes in stockholders’ equity (deficiency).

 

Revenue recognition (effective January 1, 2018)

 

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.

 

Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are in included in cost of revenues.

 

The following is a description of principal activities – separated by reportable segments – 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.

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.

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 prepaid cards related financial services and sells the mobile devices.

F-8

 

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

 

Disaggregation of revenue, In the following table, revenue is disaggregated by major product line and timing of revenue recognition. The table also includes a reconciliation of the disaggregated revenue with the reportable and operating segments. Also see Note 3. 

		Reportable and operating segments
		June 30, 2018
		Prepaid Cards				Mobility Solution				Total
Major products/services lines
Gross prepaid card revenue (note 3)		$	99,251			$	—			$	99,251
Commissions and agent fees (note 3)			(26,712	)			—				(26,712	)
1 Mobility products revenue (note 3)			—				327,374				327,374
Fees and other revenue (note 3)			—				—				—
Mobility product commissions (note 3)			40,644				—				40,644
		$	113,183			$	327,374			$	440,557
Timing of revenue recognition
Products transferred at a point in time (note 3)			113,183				327,374				440,557
		$	113,183			$	327,374			$	440,557

 

Subsequent to the discontinuation of the prepaid card business and mobility solution business operations as of March 31, 2018, for the three months ended June 30, 2018, the Company has not generated revenue from the two discontinued operations. The difference between reported amounts for three months ended March 31, 2018 and reported amounts for six months ended June 30, 2018 was a result of the fluctuation of foreign currency exchange rate for three months ended March 31, 2018 and for six months ended June 30, 2018. 

		Reportable and operating segments
		June 30, 2017
		Prepaid Cards				Mobility Solution				Total
Major products/services lines
Gross prepaid card revenue (note 3)		$	445,465			$	—			$	445,465
Commissions and agent fees (note 3)			(58,070	)			—				(58,070	)
Mobility products revenue (note 3)			—				36,045				36,045
Fees and other revenue (note 3)			—				—				—
Mobility product commissions (note 3)			7,101				—				7,101
		$	394,496			$	36,045			$	430,541
Timing of revenue recognition
Products transferred at a point in time (note 3)			394,496				36,045				430,541
		$	394,496			$	36,045			$	430,541

 

F-9

 

 

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

 

 

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 interim condensed consolidated balance sheet for cash and cash equivalents, accounts receivables, net of any allowances for doubtful accounts, 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. The allowance for doubtful accounts is reflected in "Office and Sundry" expenses on the statement of operations and comprehensive loss. 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.

 

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 prepaid card operations, mobility solution operations, and research, development and strategical planning operations.

 

 

 

F-10

 

 

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

  

 

Cash and cash equivalents

 

Cash and cash equivalents include demand deposits held with banks and highly liquid investments with remaining 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.

 

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.

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.

 

F-11

 

 

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

  

 

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

 

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. 

 

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.

 

 

F-12

 

 

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

  

 

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 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.

 

Assets and disposal groups held for sale and discontinued operations

 

Assets and disposal groups (assets and liabilities relating to an activity that is to be sold or abandoned) are classified as ‘held for sale’ if their carrying amount is to be recovered principally through a sales transaction rather than through continuing use. The reclassification takes place when the assets are available for immediate sale and the sale is highly probable. These conditions are usually met as from the date on which agreement to sell is ready for signing or an abandonment plan starts to implement. Assets held for sale and disposal groups are measured at the lower of carrying amount and fair value less costs to sell. Assets held for sale are not depreciated or amortized.

 

Discontinued operations comprise those activities that were disposed of either via sales or abandonment during the period or which were classified as held for sale at the end of the period, and represent a separate major line of business or geographical area that can be clearly distinguished for operational and financial reporting purposes.

 

F-13

  

 

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

  

 

Use of estimates

 

The preparation of the 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 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.

 

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.

 

 

F-14

 

 

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

  

 

Changes in accounting policies

 

Except for the changes above regarding revenue recognition, the Company has consistently applied the accounting policies to all periods presented in these consolidated financial statements.

The Company adopted Topic 606 Revenue from Contracts with Customers with a date of the initial application of January 1, 2018. As a result, the Company has changed its accounting policy for revenue recognition as detailed above in revenue recognition.

The Company applied Topic 606 by using modified retrospective approach and the Company assessment the impact on opening deficit as at January 1, 2018 is nil. The accounting policy to recognize revenue prior to January 1, 2018 is describe as below:

Revenue recognition (Policy applicable before January 1, 2018)

 The Company recognizes revenue at the time persuasive evidence of an agreement exists, price is fixed and determinable, the delivery has occurred, or the service has been performed and collectability is reasonably assured, particularly with respect to the mobility products sold and mobility products commissions.

 

 In addition, the Company applies the following specific revenue recognition policies:

 

 

a)	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.
b)	Fees charged for card program, website and card design are recognized when services are performed or when the product is transferred to the customer.
c)	Other revenue represents gains realized on de-recognition of clients' funds payable.

 

 

 

F-15

 

 

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

  

 

NEWLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

 

In June 2018, the FASB issued an accounting pronouncement (FASB ASU 2018-07) to expand the scope of ASC Topic 718, Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. We are currently in the process of evaluating the effects of this pronouncement on our interim condensed consolidated financial statements, including potential early adoption.

 

On January 1, 2018, the Company adopted the accounting pronouncement issued by the Financial Accounting Standards Board (“FASB”) Accounting Standards Update No. 2014-09 (“ASU”), Revenue from Contracts with Customers (Topic 606) to clarify existing guidance on revenue recognition. This guidance includes the required steps to achieve the core principle that a company should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company adopted this pronouncement on a modified retrospective and such adoption did not have a material impact on our financial position and/or results of operations.

 

On January 1, 2018, the Company adopted the accounting pronouncement issued by the FASB to clarify how entities should present restricted cash and restricted cash equivalents in the statement of cash flows. This guidance requires entities to show changes in the total of cash, cash equivalents and restricted cash in the combined statement of cash flows. This guidance was adopted on a retrospective basis, and such adoption did not have a material impact on combined financial position and/or results of operations.

 

In July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2017-11 (“ASU 2017-11”), which addressed accounting for (I) certain financial instruments with down round features and (II) replacement of the indefinite deferral for mandatorily redeemable financial instruments of certain non-public entities and certain mandatorily redeemable non-controlling interests with a scope exception. The main provisions of Part I of ASU 2017-11 “change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS.” Under previous US GAAP, warrants with a down round feature are not being considered indexed to the entity’s own stock, which results in classification of the warrant as a derivative liability. Under ASU 2017-11, the down round feature qualifies for a scope exception from derivative treatment. ASU 2017-11 is effective for public companies as of December 15, 2018 and interim periods within that fiscal year. Early adoption is permitted, including adoption in an interim period, with adjustments reflected as of the beginning of the fiscal year. We are currently in the process of evaluating the effects of this pronouncement on our consolidated financial statements, including potential early adoption.

 

The amendments in this Update require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this Update do not provide a definition of restricted cash or restricted cash equivalents. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments in this Update should be applied using a retrospective transition method to each period presented. Management does not expect to have a significant impact of this ASU on the Company’s consolidated financial statements.

 

 

F-16

 

 

 

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

  

 

NEWLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (continued)

 

In May 2017, an accounting pronouncement was issued by the Financial Accounting Standards Board (“FASB”) ASU 2017-09, “Compensation - Stock Compensation: Scope of Modification Accounting.” ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The updated guidance is effective for interim and annual periods beginning after December 15, 2017, and early adoption is permitted. The adoption of this pronouncement is not expected to have a material impact on the unaudited interim condensed consolidated financial position and/or results of operations.

 

On April 1, 2017, the Company adopted the accounting pronouncement issued by the Financial Accounting Standards Board (“FASB”) to simplify the presentation of deferred income taxes within the balance sheet. This pronouncement eliminates the requirement that deferred tax assets and liabilities are presented as current or noncurrent based on the nature of the underlying assets and liabilities. Instead, the pronouncement requires that all deferred tax assets and liabilities, including valuation allowances, be classified as noncurrent. We adopted this pronouncement on a retrospective basis. The adoption of this guidance did not have a material impact on the Company’s consolidated financial position and/or results of operations.

 

In February 2016, an accounting pronouncement was issued by the FASB 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 current accounting guidance. This pronouncement is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. The adoption is required to be applied on a modified retrospective basis for each prior reporting period presented. Although the Company has not yet quantified the impact that the adoption of this pronouncement will have on the consolidated financial position and/or results of operations, however, the management has begun a process to identify a complete population of the leases. Such process includes reviewing various contracts to identify whether such arrangements convey the right to control the use of an identified asset. The Company continue to evaluate the impact of the new accounting pronouncement, including enhanced disclosure requirements, on our business processes, controls and systems

 

F-17

 

 

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 at the time. 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 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 represents a strategical shift of the company’s business operations. The prepaid card and mobility solution operations 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.

 

A reconciliation of the carrying amounts of major classes of assets and liabilities of the discontinued operations to total assets and liabilities of the disposal group classified as discontinued that are presented separately in the interim condensed consolidated balance Sheets is as below:

		June 30, 2018				December 31, 2017
		(unaudited)				(audited)
Major classes of assets included in discontinued operations:
Cash held in trust and customer deposits		$	—			$	2,351,578
Accounts receivable			167,011				510,676
Equipment (note 4)			—				41,071
Intangible assets (note 5)			—				214,972
Total assets of from discontinued operations		$	167,011			$	3,118,297
Major classes of liabilities included in discontinued operations
Accounts payable and accrued liabilities			—				201,125
Client funds			—				2,252,797
Total liabilities from discontinued operations		$	—			$	2,453,922

 

 The assets and liabilities from discontinued operations are classified as current on the December 31, 2017 balance sheet because the operations have been discontinued in March 2018.

 

 

F-18

 

 

 

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

 

 

 

NOTE 3 – ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS (continued)

 

A reconciliation of the major classes of line items constituting net loss from discontinued operations to net loss from discontinued operations that are presented in the consolidated statements of operations and comprehensive loss is as below:

 

		For the six months ended June 30, 2018				For the six months ended June 30, 2017
		(unaudited)				(unaudited)
Major classes of line items constituting net loss from discontinued operations
Revenue
Gross prepaid card revenue (note 2)		$	99,251			$	445,465
Commissions and agent fees (note 2)			(26,712	)			(58,070	)
Mobility products revenue (note 2)			327,374				36,045
Fees and other revenue (note 2)			—				—
Mobility product commissions (note 2)			40,644				7,101
Net revenue			440,557				430,541
Processing and card fees			(119,447	)			(425,657	)
Mobility products cost of goods sold			(351,767	)			(27,470	)
Gross margin			(30,657	)			(22,586	)
Expenses
Impairment goodwill and trademark			—				—
Salaries and consultants			(187,257	)			(381,868	)
Rent and occupancy costs			—				—
Depreciation and amortization			—				(26,460	)
Office and sundry expenses and other			(38,889	)			(17,943	)
Loss on disposal of assets			(18,224	)			—
			(244,370	)			(426,271	)
Net loss from discontinued operations that are presented in the consolidated statements of operations and comprehensive loss		$	(275,027	)		$	(448,857	)

 

The assets and liabilities from discontinued operations are classified as current on the December 31, 2017 balance sheet because the operations have been discontinued in March 2018.

 

F-19

  

  

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

 

 

NOTE 4 - EQUIPMENT

 

Cost		Computer equipment				Furniture				Total
Balance at December 31, 2017		$	66,005			$	2,497			$	68,502
Disposal			(64,207	)			(2,429	)			(66,636	)
Foreign exchange			(1,798	)			(68	)			(1,866	)
Balance at June 30, 2018 (unaudited)		$	-			$	-			$	-
Accumulated depreciation			Computer equipment				Furniture				Total
Balance at December 31, 2017		$	(26,732	)		$	(699	)		$	(27,431	)
Disposal			26,022			$	681			$	26,703
Foreign exchange			710				18				728
Balance at June 30, 2018 (unaudited)		$	-			$	-			$	-
Balance at December 31, 2017 (note 3)		$	39,273			$	1,798			$	41,071
Balance at June 30, 2018 (unaudited)		$	-			$	-			$	-

 

 

 

 

F-20

 

 

 

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, 2017		$	168,620			$	239,649			$	408,269
Additions			-				-				-
Disposal			(164,145	)			(230,626	)			(394,771	)
Foreign exchange			(4,475	)			(9,023	)			(13,498	)
Balance at June 30, 2018 (unaudited)		$	-			$	-			$	-
			Trademark/				Technology
Accumulated Amortization			Trade name				platform/ IP				Total
Balance at December 31, 2017		$	(168,620	)		$	(24,677	)		$	(193,297	)
Amortization			-				-				-
Disposal			164,145				23,437				187,582
Foreign exchange			4,475				1,240				5,715
Balance at June 30, 2018 (unaudited)		$	-			$	-			$	-
Balance at December 31, 2017 (note 3)		$	-			$	214,972			$	214,972
Balance at June 30, 2018 (unaudited)		$	-			$	-			$	-

 

  

Goodwill		Total
Balance at January 1, 2017		$	3,622,388
Impairment			(3,740,909	)
Foreign exchange			118,521
Balance at December 31, 2017			-
Acquisition			-
Foreign exchange			-
Balance at June 30, 2018 (unaudited)			-

 

 

F-21

 

 

 

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

 

NOTE 6 – PROMISSORY NOTES

 

On December 5, 2017, the Company entered into a promissory note in the amount of $477,402 (C$588,600) with an arm’s length third party. The note was to be repaid no later than 90 days from the date of issuance with an interest rate of 1.75% per 30-day period. The Promissory note was settled in full in February 2018.

 

On February 1, 2018, the Company entered into two promissory notes in the aggregate amount of $87,000 with arm’s length third parties and with an interest rate of 4% per annum.

 

On March 20, 2018, the Company entered into a promissory note in the amount of $750,000 with an arm’s length third party and with an interest rate of 4% per annum.

 

 

NOTE 7 – 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.

 

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 June 30, 2018, the Company had $186,699 in cash and cash equivalents (December 31, 2017 - $78,370).

 

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 June 30, 2018, the Company's credit risk is primarily attributable to cash and cash equivalents, and accounts receivable. At June 30, 2018, the Company's cash and cash equivalents were held with reputable Canadian chartered banks.  At June 30, 2018, the Company had an allowance for doubtful accounts of $38,889 (December 31, 2017 - $41,077) as a result of a review of collectability of the amount outstanding and the duration of time it was outstanding

 

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 consolidated balance sheet 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-22

 

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

 

 

NOTE 8 – COMMON STOCK AND WARRANTS

 

Common Stock

 

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

 

For the three months ended June 30, 2018, the Company completed several private placements for the sale of non-registered shares of the Company's common stock. As a result of these private placements 687,500 non-registered shares of the Company's common stock was issued for proceeds of $39,671.

 

For the six months ended June 30, 2018, the Company completed several private placements for the sale of non-registered shares of the Company's common stock. As a result of these private placements 887,500 non-registered shares of the Company's common stock were issued for proceeds of $80,342.

 

For the three months ended June 30, 2018, on April 11, 2018, the company issued 1,500,000 shares of the common stock to a corporation controlled by an officer of the company as compensation for services rendered, and on April 14, 2018, the company issued 1,000,000 shares of the common stock to a current officer of the company who at that time was an arm’s length consultant, as compensation for services rendered. The fair value of these shares in amount of $337,250 was determined by using the market price of the common stock as at the date of issuance. (note 9, note 10)

During March 2017 the Company issued 520,211 shares in the common stock of the Company through the exercise of warrants for proceeds of $194,198.

During the three months ended June 30, 2017, the Company completed several private placements for the sale of non-registered shares of the Company's common stock. As a result of these private placements 654,130 non-registered shares of the Company's common stock was issued for gross proceeds of $735,317.

 

Common Share Purchase Warrants

 

The Company had the following warrants outstanding at June 30, 2018.

 

Grant date		Warrants		Weighted Average Exercise Price (C$)		Expiry
November 23, 2016		600,000		0.50		October 31, 2018
		600,000

 

During the three and six months ended June 30, 2017, the Company issued 351,328 warrants. The warrants have an exercise price of C$0.50 per warrant and exercisable into one share in the common stock of the Company. The warrants have an expiry of September 1, 2017.

 

The Company had the following warrants outstanding at June 30, 2017.

 

Grant date		Warrants		Weighted Average Exercise Price (C$)		Expiry
November 23, 2016 (1)		600,000		0.50		October 31, 2018
June 8, 2017		351,328		0.50		September 1, 2017
		951,328

 

 

(1)

During the three and nine months ended September 30, 2017, the Company amended the expiry date of these warrants, extending them to October 31, 2018, all other terms remain unchanged.

 

 

 

F-23

 

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

 

 

NOTE 9– SHARE-BASED PAYMENTS

 

For the three and six months ended June 30, 2018, on April 11, 2018, the company issued 1,500,000 shares of the common stock to a corporation controlled by an officer of the company as compensation for services rendered, and on April 14, 2018, the company issued 1,000,000 shares of the common stock to a current officer of the company who at that time was an arm’s length consultant, as compensation for services rendered. The fair value of these shares in amount of $337,250 was determined by using the market price of the common stock as at the date of issuance. (note 8, note 10)

 

2016 stock option plan

 

For the three months ended June 30, 2018, the company recognized stock option expenses in amount of 69,196 (June 30, 2017 – $330,584).

 

For the six months ended June 30, 2018, the company recognized stock option expenses in amount of 142,613 (June 30, 2017 – $422,532).

 

The components of share-based payments expense (options and warrants) are detailed in the table below.

 

	Date of grant	Contractual life	Number	Exercise price (C$)	Six months ended June 30, 2018 ($)	Six months ended June 30, 2017 ($)	Share price (C$)	Risk-free rate	Volatility	Dividend yield	Expected life (years)
Warrant issuance	June 8, 2017	September 1, 2017	351,328	0.50	-	239,078	1.42	1%	54%	Nil	0.23
Deferred stock unit grant	December 1, 2016	December 1, 2021	917,500	1.50	104,191	132,821	1.50	1%	108%	Nil	5
Deferred stock unit grant	December 1, 2016	December 1, 2021	272,500	N/A	38,422	50,633	1.50	1%	108%	Nil	5
					$142,613	422,532

 

As at June 30, 2018, the Company has the following stock options and deferred stock units:

 

Award	Fair Value		Units	Number of units vested	Weighted Average Exercise Price (C$)
		Contractual
		Life (years)
Options	493,080	3.42	562,500	562,500	0.50
Fully vested options	210,961	3.42	187,500	187,500	-
Deferred stock units	304,405	3.42	272,500	93,255	-
Deferred stock units	798,517	3.42	917,500	317,940	0.50
Total	1,806,963		1,940,000	1,161,196

 

Subsequent to the Company’s discontinuation of the two businesses operations (note 3) for the three months ended March 31, 2018, Employment and services of certain Directors, Officers, Employees and Consultants were terminated. Those stock options and deferred option units granted and issued in prior years were expired subsequent to the termination of employment and services. 

 

 

 

F-24

 

 

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

 

NOTE 10– RELATED PARTY TRANSACTIONS AND BALANCES

 

During 2016, the Company paid an advance on behalf of certain shareholders in the amount of $250,000.  These shareholders also serve as directors and officers of the Company.  $120,000 was returned by December 31, 2016, and $50,000 was returned during the year ended December 31, 2017.  The amount reflected in prepaids and other current assets as at June 30, 2018 was $76,000 (December 31, 2017 - $$80,000).

 

The total amount owing to the directors and officers of the Company and corporations controlled by the directors and officers, in relation to the services they provide to the Company in their capacity as Officers and service provider at June 30, 2018 was 397,976 (December 31, 2017 - $379,976) which includes expense reimbursements.  This amount is reflected in accounts payable and is further described below. 

 

 

As at June 30, 2018, the Company had an amount owing to an entity owned and controlled by the Chief Executive Officer of the Company of $343,540 (December 31, 2017 - $325,540).  The amount owing relates to services provided by the Chief Executive Officer and expense reimbursements.

 

The Company had an amount owing to an entity owned and controlled by the Secretary of the Company of $54,436 as at June 30, 2018, (December 31, 2017 - $54,436).  The amount owing relates to services provided by the Secretary and expense reimbursements.

 

A total of $406,446 (Issuance of shares for service – 337,250, stock options expenses - $69,196) was recognized during three months ended June 30, 2018 (June 30, 2017 – stock options and warrants expenses - $330,584), for share-based payments expense to directors and officers of the Company.

 

A total of $479,863 (Issuance of shares for service – 337,250, stock options expenses - $142,613) was recognized during six months ended June 30, 2018 (June 30, 2017 – stock options and warrants expenses - $422,532), for share-based payments expense to directors and officers of the Company.

 

 As at June 30, 2018 and December 31, 2017, the amounts owing to officers of the Company are recorded in accounts payable and accrued liabilities.

 

 

NOTE 11 – COMMITMENTS AND CONTINGENCIES

 

Contingencies

 

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.

 

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.

 

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. 

 

 

F-25

 

 

 

 

ZOOMPASS HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

 

 

 NOTE 12 – SUBSEQUENT EVENTS 

 

The Company’s management has evaluated subsequent events up to November15, 2019, the date the interim condensed consolidated financial statements were issued, pursuant to the requirements of ASC 855 and has determined the following material subsequent events:

 

On September 10, 2018, the Company issued 8,370,000 shares of the common stock to various arm’s length third parties in respect of settlement of promissory notes. See note 6.

 

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 The Company issued 44,911,724 shares of the Company’s common stock to VGC as purchase consideration.  

 

During the months of November and December, 2018, the Company completed two private placements for the sale of non-registered shares of the Company's common stock. As a result of these private placements 5,450,000 non-registered shares of the Company's common stock was issued for gross proceeds of C$545,000.

 

On January 20, 2019, the company issued 1,000,000 shares of the common stock to a consultant as compensation for services rendered, and on April 20, 2019, the company issued 500,000 shares of the common stock to a consultant as compensation for services rendered. The fair value of these shares was determined by using the market price of the common stock as at the date of issuance.

In March 25, 2019, the name of Zoompass Inc. was changed to Virtublock Canada Inc.

In May 2019, the Company completed several private placements for the sale of non-registered shares of the Company's common stock. As a result of these private placements 1,038,461 non-registered shares of the Company's common stock was issued for proceeds of C$135,000.

In July 2019, 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 500,000 non-registered shares of the Company's common stock was issued for proceeds of C$55,000.

In August 2019, 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 500,000 non-registered shares of the Company's common stock was issued for proceeds of $50,000.

 

 

F-26

 

 

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 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 interim condensed consolidated financial statements and related notes for the period ended June 30, 2018 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 period ended December 31, 2017.

 

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.

 

 

 

5

 

 

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. 

Zoompass Inc. (‘Zoompass”), was incorporated under the laws of Ontario on June 8, 2016. On June 28, 2016, pursuant to an agreement with a shareholder of Zoompass, certain net assets were acquired by Zoompass in exchange for shares of Zoompass. The net assets primarily consisted of a virtual payment platform, certain customer contracts, cash held in trust and customer deposits as well as the associated client funds.

Effective August 22, 2016, the Company entered into an Agreement for the Exchange of Stock (the "Agreement") with Zoompass.   Pursuant to the Agreement, the Company agreed to issue 8,060,913 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 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.

 

As of June 30, 2018, the Company has incurred recurring losses from operations 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 interim condensed financial statements. The 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 in the future 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 o 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.

 

 

 

 

6

 

 

Significant Accounting Policies and Estimates

 

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

 

From the inception of Zoompass Inc. to June 30, 2018 the Company has incurred recurring losses from operations and an accumulated deficit.  The Company may incur an additional operating loss in subsequent period until such time that its additional pipeline of new revenue streams is launched.

 

 

7

 

 

Results of operations for the six months ended June 30, 2018

 

Revenue and cost of sales

 

The Company's revenue consisted of various fees associated with its prepaid debit card program, sales from mobility devices as well as sales commissions from the sale of mobility devices. For the three months ended March 31, 2018, the Company discontinued its prepaid card business and mobility solution business operations.

Subsequent to the discontinuation of the prepaid card business and mobility solution business operations as of March 31, 2018, for the three months ended June 30, 2018, the Company has not generated revenue from the two discontinued operations. The difference between reported amounts for three months ended March 31, 2018 and reported amounts for six months ended June 30, 2018 was a result of the fluctuation of foreign currency exchange rate for three months ended March 31, 2018 and for six months ended June 30, 2018.

For three months ended June 30, 2018

 

No revenue generated for the three months ended June 30, 2018.

 

For six months ended June 30, 2018

For the six months ended June 30, 2018, the Company generated gross card revenue of $99,251 and commissions and agent fees of $(26,712). Additionally, the Company recognized revenue from the sale of mobility products of $327,374 and $40,644 from mobility product commission. The Company recorded processing and card fees of $(119,477) and cost of goods sold related to mobility products of $(351,767).

For three months ended June 30, 2017

 

For the three months ended June 30, 2017, the Company generated gross card revenue of $199,984 and commissions and agent fees of $(31,227). Additionally, the Company recognized commissions from the sale of mobility products of $7,101. The Company recorded processing and card fees of $(236,103). The decrease in revenue compared with the first quarter of 2017, is largely due to a decrease in mobility sales as well as sales in the first quarter included one time set up fees for new programs that issued during the first quarter.

 

For six months ended June 30, 2017

For the six months ended June 30, 2017, the Company generated gross card revenue of $445,465 and commissions and agent fees of $(58,070). Additionally, the Company recognized revenue from the sale of mobility products of $36,045. The Company recorded processing and card fees of $(425,657) and cost of goods sold related to mobility products of $(27,470).

General and administrative and other expenses

The Company incurred salaries and full-time consultant expenses of $101,952 (Continuing operation - $101,952; Discontinued operations - $NIL) and $429,212 (Continuing operation - $241,955; Discontinued operations - $187,257) for the three and six months ended June 30, 2018, respectively. The decrease in Salaries and full-time consultant expenses were largely due to those employees left the company after the Company discontinued its prepaid card business operation for the three months ended March 31, 2018.

The Company incurred salaries and full-time consultant expenses of $399,164 (Continuing operation - $190,098; Discontinued operations - $209,066) and $796,472 (Continuing operation - $414,604; Discontinued operations - $381,868) for the three and six months ended June 30, 2017, respectively. Salaries and full-time consultant expenses were largely in-line with the three months ended March 31, 2017. 

Rent and occupancy costs of $39,918 were a lower for the six months ended June 30, 2018 compared with $83,557 in for the same period in 2017 because the company ended the lease for the premises after the sale of prepaid card business for three months ended March 31, 2018.

 

 

 

8

 

 

The share-based payment expense, which is similarly in line with the expense for the same period last year, relates to certain options and deferred stock units that were granted in December 2016 and vested over a period of 36 months from the date of grant as well as the shares issued for services for the three months ended June 30, 2018.

 

There is no depreciation and amortization expense for the three and six months period ended June 30, 2018. The Company recognized depreciation and amortization expense of $12,460 and $26,460 for the three and six months ended June 30, 2017, respectively.

 

Professional fees are lower primarily due to additional legal costs incurred in 2017 associated with certain corporate matters, legal costs related to the acquisitions of a transportation enablement platform. 

 

Office and sundry expense and other include office expenses such as supplies, insurance and additional costs incurred to support the corporate head office in addition to travel costs.  The decrease was in line with reduced operations.

 

Filing fees and regulatory costs are costs associated with the Company's listing fees and transfer agent costs. The expenses related to filing and regulatory costs were in line with the expenses incurred for same period in 2017.

 

Foreign exchange loss of $67,263 was primarily attributed to change in exchange rate of the Canadian dollar relative to the US dollar.

 

The company recognized a net loss of $1,397,721 (loss from continuing operations – 1,122,694, loss from discontinued operations -$275,027) or loss from continuing operations per share $0.025 and loss from discontinued operations per share $0.006 (basic-diluted) for the six months ended June 30, 2018.

 

Liquidity and Capital Resources

 

As at June 30, 2018, the Company had $186,699 in cash and cash equivalents compared with $78,370 as at December 31, 2017.

 

Operations for six month ended June 30, 2018 and the year ended December 31, 2017, were primarily financed through the issuance of shares in the common stock of the Company, the exercise of warrants and the issuance of promissory notes.

 

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 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.

 

9

 

 

 

Net Cash Used in Operating Activities

 

During the periods ended June 30, 2018, and 2017, $661,701 and $1,217,124 in cash, respectively, was used for operations. For both periods, the cash used in operations was primarily the result of the net loss and a change in non-cash working capital. The cash used in operations was primarily the result of share-based payment expense for period ended June 30, 2018 and for June 30, 2017.

 

Net Cash Provided by Investing Activities

 

During the period ended June 30, 2018, the Company generated $152,871 from disposal of prepaid card business compared with cash used in purchase of intangibles asset of $20,000 for the period ended June 30, 2018.

 

Net Cash Provided by Financing Activities

 

For the period ended June 30, 2018 the Company raised $80,342 from the issuances of common shares, repaid promissory note in amount of $477,402 and issued promissory notes for $837,000. In comparison, $735,317 were raised from the issuance of common stock for the period ended June 30, 2017. There were no exercise of warrants for period ended June 30, 2018 that compared with $194,198 were raised from the exercises of warrants for the period ended June 30, 2017.

 

Financial instruments and risk factors

 

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.

 

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 June 30, 2018, the Company had $186,699 in cash and cash equivalents (December 31, 2017 - $78,370).

 

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 June 30, 2018, the Company's credit risk is primarily attributable to cash and cash equivalents, and accounts receivable. At June 30, 2018, the Company's cash and cash equivalents were held with reputable Canadian chartered banks.  At June 30, 2018, the Company had an allowance for doubtful accounts of $38,889 (December 31, 2017 - $41,077) as a result of a review of collectability of the amount outstanding and the duration of time it was outstanding

 

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 consolidated balance sheet 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.

 

 

 

 

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Related Party Transactions

 

During 2016, the Company paid an advance on behalf of certain shareholders in the amount of $250,000.  These shareholders also serve as directors and officers of the Company.  $120,000 was returned by December 31, 2016, and $50,000 was returned during the year ended December 31, 2017.  The amount reflected in prepaids and other current assets as at June 30, 2018 was $76,000 (December 31, 2017 - $$80,000).

 

The total amount owing to the directors and officers of the Company and corporations controlled by the directors and officers, in relation to the services they provide to the Company in their capacity as Officers and service provider at June 30, 2018 was 397,976 (December 31, 2017 - $379,976) which includes expense reimbursements.  This amount is reflected in accounts payable and is further described below. 

 

As at June 30, 2018, the Company had an amount owing to an entity owned and controlled by the Chief Executive Officer of the Company of $343,540 (December 31, 2017 - $325,540).  The amount owing relates to services provided by the Chief Executive Officer and expense reimbursements.

 

The Company had an amount owing to an entity owned and controlled by the Secretary of the Company of $54,436 as at June 30, 2018, (December 31, 2017 - $54,436).  The amount owing relates to services provided by the Secretary and expense reimbursements.

 

A total of $406,446 (Issuance of shares for service – 337,250, stock options expenses - $69,196) was recognized during three months ended June 30, 2018 (June 30, 2017 – stock options and warrants expenses - $330,584), for share-based payments expense to directors and officers of the Company.

 

A total of $479,863 (Issuance of shares for service – 337,250, stock options expenses - $142,613) was recognized during six months ended June 30, 2018 (June 30, 2017 – stock options and warrants expenses - $422,532), for share-based payments expense to directors and officers of the Company.

 

As at June 30, 2018 and December 31, 2017, the amounts owing to officers of the Company are recorded in accounts payable and accrued liabilities.

 

Newly Adopted Accounting Standards

 

In June 2018, the FASB issued an accounting pronouncement (FASB ASU 2018-07) to expand the scope of ASC Topic 718, Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. We are currently in the process of evaluating the effects of this pronouncement on our consolidated financial statements, including potential early adoption.

 

On January 1, 2018, the Company adopted the accounting pronouncement issued by the Financial Accounting Standards Board (“FASB”) Accounting Standards Update No. 2014-09 (“ASU”), Revenue from Contracts with Customers (Topic 606) to clarify existing guidance on revenue recognition. This guidance includes the required steps to achieve the core principle that a company should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company adopted this pronouncement on a modified retrospective and such adoption did not have a material impact on our financial position and/or results of operations. 

 

On January 1, 2018, the Company adopted the accounting pronouncement issued by the FASB to clarify how entities should present restricted cash and restricted cash equivalents in the statement of cash flows. This guidance requires entities to show changes in the total of cash, cash equivalents and restricted cash in the combined statement of cash flows. This guidance was adopted on a retrospective basis, and such adoption did not have a material impact on combined financial position and/or results of operations.

 

In July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2017-11 (“ASU 2017-11”), which addressed accounting for (I) certain financial instruments with down round features and (II) replacement of the indefinite deferral for mandatorily redeemable financial instruments of certain non-public entities and certain mandatorily redeemable non-controlling interests with a scope exception. The main provisions of Part I of ASU 2017-11 “change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS.” Under previous US GAAP, warrants with a down round feature are not being considered indexed to the entity’s own stock, which results in classification of the warrant as a derivative liability. Under ASU 2017-11, the down round feature qualifies for a scope exception from derivative treatment. ASU 2017-11 is effective for public companies as of December 15, 2018 and interim periods within that fiscal year. Early adoption is permitted, including adoption in an interim period, with adjustments reflected as of the beginning of the fiscal year. We are currently in the process of evaluating the effects of this pronouncement on our consolidated financial statements, including potential early adoption.

 

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The amendments in this Update require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this Update do not provide a definition of restricted cash or restricted cash equivalents. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments in this Update should be applied using a retrospective transition method to each period presented. Management does not expect to have a significant impact of this ASU on the Company’s consolidated financial statements.

 

In May 2017, an accounting pronouncement was issued by the Financial Accounting Standards Board (“FASB”) ASU 2017-09, “Compensation - Stock Compensation: Scope of Modification Accounting.” ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The updated guidance is effective for interim and annual periods beginning after December 15, 2017, and early adoption is permitted. The adoption of this pronouncement is not expected to have a material impact on the unaudited interim condensed consolidated financial position and/or results of operations.

 

On April 1, 2017, the Company adopted the accounting pronouncement issued by the Financial Accounting Standards Board (“FASB”) to simplify the presentation of deferred income taxes within the balance sheet. This pronouncement eliminates the requirement that deferred tax assets and liabilities are presented as current or noncurrent based on the nature of the underlying assets and liabilities. Instead, the pronouncement requires that all deferred tax assets and liabilities, including valuation allowances, be classified as noncurrent. We adopted this pronouncement on a retrospective basis. The adoption of this guidance did not have a material impact on the Company’s consolidated financial position and/or results of operations.

 

  

In February 2016, an accounting pronouncement was issued by the FASB 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 current accounting guidance. This pronouncement is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. The adoption is required to be applied on a modified retrospective basis for each prior reporting period presented. Although the Company has not yet quantified the impact that the adoption of this pronouncement will have on the consolidated financial position and/or results of operations, however, the management has begun a process to identify a complete population of the leases. Such process includes reviewing various contracts to identify whether such arrangements convey the right to control the use of an identified asset. The Company continue to evaluate the impact of the new accounting pronouncement, including enhanced disclosure requirements, on our business processes, controls and systems.

 

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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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 June 30, 2018, 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.

 

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.

 

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.

 

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.

 

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.

 

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.

 

 

 

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ITEM 2.  RECENT UNREGISTERED SALES OF EQUITY SECURITIES

 

On September 10, 2018, the Company issued 8,370,000 shares of the common stock to various arm’s length third parties in respect of settlement of promissory notes. See note 6.

 

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 The Company issued 44,911,724 shares of the Company’s common stock to VGC as purchase consideration.  

 

During the months of November and December, 2018, the Company completed two private placements for the sale of non-registered shares of the Company's common stock. As a result of these private placements 5,450,000 non-registered shares of the Company's common stock was issued for gross proceeds of C$545,000.

 

On January 20, 2019, the company issued 1,000,000 shares of the common stock to a consultant as compensation for services rendered, and on April 20, 2019, the company issued 500,000 shares of the common stock to a consultant as compensation for services rendered. The fair value of these shares was determined by using the market price of the common stock as at the date of issuance.

 

In May 2019, the Company completed several private placements for the sale of non-registered shares of the Company's common stock. As a result of these private placements 1,038,461 non-registered shares of the Company's common stock was issued for proceeds of C$135,000.

In July 2019, 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 500,000 non-registered shares of the Company's common stock was issued for proceeds of C$55,000.

In August 2019, 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 500,000 non-registered shares of the Company's common stock was issued for proceeds of $50,000.

  

 

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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:  November 20, 2019	/s/ Mahmoud Hashem
	Mahmoud Hashem Chief Executive Officer (Principal Executive Officer)

 

 

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