Indicate by check mark if registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X].
Indicate by check mark if registrant is not required to file
reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes [ ] No [X].
Indicate by check mark whether the registrant: (1) filed
all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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. Yes
[ ] No [X]
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 (Section 232.405 of this chapter) during the preceding 12 months or such shorter period that the
registrant was required to submit and post such files. Yes [ ] No [X]
Check if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained herein to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this Form 10-K. [X]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, 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.
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 7(a)(2)(B) of the Securities Act [ ]
The aggregate market value of the voting stock of the Registrant
held by non-affiliates as of June 30, 2017 was approximately $_________.
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Statements contained in this annual report
include "forward-looking statements" within the meaning of such term in Section 27A of the Securities Act and Section
21E of the Exchange Act. Forward-looking statements involve known and unknown risks, uncertainties and other factors which could
cause actual financial or operating results, performances or achievements expressed or implied by such forward-looking statements
not to occur or be realized. Forward-looking statements made in this annual report generally are based on our best estimates of
future results, performances or achievements, predicated upon current conditions and the most recent results of the companies involved
and their respective industries. Forward-looking statements may be identified by the use of forward-looking terminology such as
"may", "will", "could", "should", "project", "expect", "believe",
"estimate", "anticipate", "intend", "continue", "potential", "opportunity"
or similar terms, variations of those terms or the negative of those terms or other variations of those terms or comparable words
or expressions. Potential risks and uncertainties include, among other things, such factors as:
These statements are only predictions and involve
known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors"
set forth in this Annual Report on Form 10-K for the year ended December 31, 2017, any of which may cause our company's or our
industry's actual results, levels of activity, performance or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks may cause
the Zoompass Holdings, Inc. or its industry's actual results, levels of activity or performance to be materially different from
any future results, levels of activity or performance expressed or implied by these forward-looking statements.
Readers are urged to carefully review and consider
the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission. We
undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated
events or changes in the future operating results over time except as required by law. We believe that our assumptions are based
upon reasonable data derived from and known about our business and operations. No assurances are made that actual results of operations
or the results of our future activities will not differ materially from our assumptions.
As used in this Annual Report on Form 10-K
and unless otherwise indicated, the terms "we," "us," "our," or the "Company" refer to
Zoompass Holdings, Inc. and our subsidiaries. Unless otherwise specified, all dollar amounts are expressed in United States
dollars.
PART I
ITEM 1. BUSINESS
Overview of Our Business
Recent Developments
UVIC, Inc., was incorporated in Nevada
on August 21, 2013.
On May 8, 2015, UVIC,
Inc., filed a registration statement with the Securities and Exchange Commission Form S-1 to register 7,000,000 shares of our common
stock at a per share price of $0.01 on behalf of selling shareholders. The SEC file number of the registration statement is 333-203997. The
Form S-1 was declared effective by the SEC on August 7, 2015.
Prior to the transaction described below, UVIC., Inc., had limited
operating and development activities.
Effective
August 22, 2016, the Company entered into an Agreement for the Exchange of Stock (the "Agreement") with Zoompass, Inc.,
an Ontario, Canada corporation ("Zoompass"). Pursuant to the Agreement, the Company agreed to issue 8,060,913
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 filed the appropriate forms 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 were subsequently
approved by the applicable regulatory bodies in February 2017, for shareholders of record on September 7, 2016.
On
October 17, 2018, Zoompass Holdings, Inc. (the "Company") entered into an Asset Purchase Agreement (the "Asset
Purchase Agreement") with Virtublock Global Corp. (“virtublock”) pursuant to which the Company acquired certain
cryptocurrency Exchange/Wallet platform assets. Virtublock will receive 45% of the issued and outstanding shares of common stock
of the Company, after giving effect to such issuance, or approximately forty-four million nine hundred eleven thousand seven hundred
and twenty four (44,911,724) shares of the Company’s common shares based on fifty-five million eighty-eight thousand two
hundred seventy-six (55,088,276) shares outstanding.
The
Asset Purchase Agreement contains standard and customary representations, warranties and covenants. The foregoing description
does not purport to be complete and is qualified in its entirety by reference to the Asset Purchase Agreement, a copy of which
is filed as Exhibit 2.1 to this Current Report on Form 8-K and incorporated herein by reference.
The
Company’s directors and officers Mahmoud (Moody) Hashem and Nayeem Saleem Alli are principal shareholder of Virtublock.
The purchase price of the assets was set using the book, or carrying value, of the assets, which was paid in shares of common
stock of the Company.
ITEM 1A. RISK FACTORS
Global Economic Conditions
The unprecedented events in global financial
markets in the past several years have had a profound impact on the global economy. Many industries, have been impacted by these
market conditions. Market events and conditions, including volatility in the international credit markets and other financial systems
and the deterioration of global economic conditions, could impede the Company's access to capital or increase the cost of capital
and may adversely affect the Company's operations. The Company is also exposed to liquidity risks in meeting its operating and
capital expenditure requirements in instances where the Company's cash position is unable to be maintained or appropriate financing
is unavailable. These factors may impact the Company's ability to obtain capital on terms favourable to it or at all. Increased
market volatility may impact the Company's operations which could adversely affect the trading price of the Common Shares.
Operating and Capital Requirements
The Company competes for financing and personnel
with other financial technology companies. There can be no assurance that additional capital or other types of financing will be
available, when needed, or that, if available, the terms of such financing will be favourable to the Company. The Company may need
to make significant expenditures in connection with the development of its platform or other lines of business. There is
no assurance that any such funds will be available for operations and the ability of the Company to raise such capital will depend,
in part, upon conditions in the capital markets at the time and its historical business performance. If additional capital is raised
by the issuance of shares from the treasury of the Company, shareholders may suffer dilution. Future borrowings by the Company
or its subsidiaries may increase the level of financial and interest rate risk to the Company as the Company will be required to
service future indebtedness. Further, failure to obtain additional financing on a timely basis could cause the Company to reduce,
suspend, or terminate its proposed operations.
Dependence on Highly Skilled Personnel
The Company's prospects depend in part on the
services of key executives and other highly skilled and experienced personnel focused on managing the Company's interests, in addition
to the identification of new opportunities for growth and funding. The loss of these persons or the Company's inability to attract
and retain additional highly skilled employees required for the Company's activities may have a material adverse effect on its
business or future operations. The Company does not currently maintain "key person" life insurance on any of its key
employees.
Negative Operating Cash Flow
The Company has negative operating cash flow
and may continue to have negative operating cash flow in future periods. To the extent that the Company has negative operating
cash flow, the Company will need to continue to deploy a portion of its cash reserves to fund such negative operating cash flow.
Limited operating history of the Company's
new direction; No assurance of profitability; anticipated losses.
The Company has a limited operating history
and, accordingly, has a limited operating history on which to base an evaluation of our business. Our business must be considered
in light of the risks, expenses and problems frequently encountered by companies in their early stages of development, particularly
companies in new and rapidly evolving markets which involve technology. The in development operations are subject to all of the
risks inherent in the establishment of a new business enterprise. Accordingly, the likelihood of our success must be considered
in the light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with the starting
and expansion of a business and the relatively competitive environment in which we will operate. Unanticipated delays, expenses
and other problems such as setbacks in launch and development, product sourcing manufacturing, and market acceptance are frequently
encountered in establishing a new business such as the Company`s. There can be no assurance that the Company will be successful
in addressing such risks, and any failure to do so could have a material adverse effect on the Company's business, results of operations
and financial condition.
Because of the Company`s limited operating
history, the Company has limited historical financial data on which to base planned operating expenses. Accordingly, our expense
levels, which are, to a large extent, variable, will be based in part on our expectations of future revenues. As a result of the
variable nature of many of our expenses, we may be unable to adjust spending in a timely manner to compensate for any unexpected
delays in the development and marketing of our products or any subsequent revenue shortfall. Any such delays or shortfalls will
have an immediate adverse impact on our business, operating results and financial condition.
The Company has not achieved profitability
to date. To the extent that net revenue does not grow at anticipated rates or that increases in its operating expenses precede
or are not subsequently followed by commensurate increases in net revenue, or that the Company is unable to adjust operating expense
levels accordingly, the Company's business, results of operations and financial condition will be materially and adversely affected.
There can be no assurance that the Company's operating losses will not increase in the future or that the Company will ever achieve
or sustain profitability.
Regulatory Risk
Although the Company follows certain laws and
regulations and receives the requisite approvals to operate in the lines of business it currently or intends to operate in there
is no guarantee that these laws, regulations and approvals will not be challenged or impugned. Further changing regulatory regimes
may subject the Company to new laws and regulations. Changes in the regulatory environment the Company operates in can have
a material adverse affect on operations.
Demand for our products and services
may not develop as expected our projected revenues and profits will be affected.
Future profits are influenced by many factors,
including economics, and will be predicated on a stable and/or growing market and the purchase and consumption of our products
and services. The Company believes, and our growth expectations assume, that the markets for our suite of products and services
will continue to grow, that the Company will increase its penetration of these markets and that our anticipated revenue from
selling into this market will continue to increase. If the Company's expectations as to the size of these markets and its ability
to sell our products and services in this market are not correct, our revenue may not materialize and our business will be harmed.
Operating results may fluctuate and may
fall below expectations in any fiscal quarter.
Our operating results are difficult to predict
and are expected to fluctuate from quarter to quarter due to a variety of factors, many of which are outside of our control. As
a result, comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely on our past
results or future predictions prepared by the Company as an indication of our future performance. If our revenue or operating results
fall in any period, the value of our common stock would likely decline.
Factors that may cause our operating results
to fluctuate include:
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our ability to arrange potential financing or generate operating cash flows;
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our ability to acquire products to resell to our customers;
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changes in federal, state and local government;
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availability and costs of labor and equipment;
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the addition of new customers or the loss of existing customers;
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our ability to control costs, including operating expenses;
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changes in the mix of our products and services;
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the length of our sales cycle;
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the productivity and growth of our sales force;
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the timing of opening of new offices or making other significant investments in the growth of our business, as the revenue we hope to generate from those expenses often lags several quarters behind those expenses;
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changes in pricing by us or our competitors;
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costs related to the acquisition and integration of companies or assets;
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general economic trends, including changes in geopolitical events such as war or incidents of terrorism; and
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future accounting pronouncements and changes in accounting policies.
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The Company operates in a highly competitive
industry and competitors may compete more effectively.
Many of our competitors have longer operating
histories and greater resources than us, and could focus their substantial financial resources to develop a competing business
model, develop products or services that are more attractive to potential customers than what we offer or convince our potential
customers that they should require financing arrangements that would be impractical for smaller companies to offer. Our competitors
may also offer products and services at prices below cost and/or devote significant sales forces to competing with us or attempt
to recruit our key personnel by increasing compensation, any of which could improve their competitive positions. Any of these competitive
factors could make it more difficult for us to attract and retain customers; cause us to lower our prices in order to compete,
and reduce our market share and revenue, any of which could have a material adverse effect on our financial condition and operating
results. We can provide no assurance that we will continue to effectively compete against our current competitors or additional
companies that may enter our markets.
International operations could expose
business to additional risks
The Company expects to generate a portion of
sales outside of Canada in the future. Operating internationally is one of our growth strategies, and we expect our revenue and
operations outside of North America will expand in the future. These operations will be subject to a variety of risks that we do
not face currently:
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establishing and managing highly experienced foreign suppliers, distributors and relationships and overseeing and ensuring the performance of foreign subcontractors;
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increased travel, infrastructure and legal and compliance costs associated with multiple international locations;
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additional withholding taxes or other taxes on our foreign income, and tariffs or other restrictions on foreign trade or investment;
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imposition of, or unexpected adverse changes in, foreign laws or regulatory requirements, many of which differ from those which the Company currently operates in;
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increased exposure to foreign currency exchange rate risk;
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longer payment cycles for sales in some foreign countries and potential difficulties in enforcing contracts and collecting accounts receivable;
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difficulties in repatriating overseas earnings;
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general economic conditions in the countries in which we operate; and
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political unrest, war, incidents of terrorism or responses to such events.
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Our overall success in international markets
will depend, in part, on our ability to succeed in differing legal, regulatory, economic, social and political conditions. We may
not be successful in developing and implementing policies and strategies that will be effective in managing these risks in each
country where we do business. Our failure to manage these risks successfully could harm our international operations, reduce our
international sales and increase our costs, thus adversely affecting our business, financial condition and operating results.
The Company relies on outside consultants,
service providers and suppliers
We will rely on the experience of consultants,
service providers and suppliers . In the event that one or more of these consultants or terminates its relationship with the
Company, or becomes unavailable, suitable replacements will need to be obtained and there is no assurance that such consultants,
service providers and suppliers could be obtained under conditions favorable to us.
We rely on strategic relationships to
promote our products
The Company relies on strategic partnerships
with outside companies and individuals to promote and supply certain of our products and services, thus making the future success
of our business particularly contingent on the efforts of other parties. An important part of our strategy is to promote acceptance
of our products through with certain service providers who we feel could assist us with our promotion strategies. Our dependence,
raises potential risks with respect to the future success of our business. Our success is dependent on the successful completion
and commercial deployment of our products and services and on the future commitment of our distributors to our products and technology.
Reliance on our suppliers
The Company relies vendors and suppliers to
provide power, as well as high quality products and services on a consistent basis. The future success of the Company is
contingent on the efforts and performance of these suppliers. The Company may have difficulty in locating or using alternative
resources should supply problems arise with the current suppliers. An interruption or reduction in the source of supply of or an
unanticipated increase in vendor prices, could materially affect our operating results and damage customer relationships as well
as our business.
Future growth could strain resources,
and if the Company is unable to manage growth, it may not be able to successfully implement our business plan.
The Company hopes to experience rapid growth
in operations, which will place a significant strain on our management, administrative, operational and financial infrastructure.
Our future success will depend in part upon the ability of our executive officers to manage growth effectively. This will require
that we hire and train additional personnel to manage our expanding operations. In addition, we must continue to improve our operational,
financial and management controls and our reporting systems and procedures. If we fail to successfully manage our growth, we may
be unable to execute upon our business plan.
Failure to protect intellectual property,
our planned business could be adversely affected.
Despite efforts to protect and ensure the Company
has proprietary rights, parties may attempt to copy aspects of our products, obtain, claim and use information that we regard as
proprietary. Unauthorized use of our proprietary technology could harm our business. Litigation to protect our intellectual property
rights can be costly and time-consuming to prosecute, and there can be no assurance that we will have the financial or other resources
necessary to enforce or defend a patent infringement or proprietary rights violation action.
Unforeseen Liabilities from Past Acquisitions
There may be liabilities and claims that the
Company has failed to discover or has underestimated in connection with previous acquisitions. In addition, there may be expenditure
requirements that the Company has failed to discover or underestimated in connection with these acquisitions, which amounts may
be material. Any such liabilities or expenditure requirements could have a material adverse effect on the Company's business, financial
condition or future prospects.
Conflicts of Interest
Certain of the directors and officers of the
Corporation also serve as directors and/or officers of other companies there exists the possibility for such directors and officers
to be in a position of conflict. Any decision made by any of such directors and officers will be made in accordance with their
duties and obligations to deal fairly and in good faith with a view to the best interests of the Company and its shareholders.
In addition, each director is required to declare and refrain from voting on any matter in which such director may have a conflict
of interest.
If we issue additional shares in the
future, it will result in the dilution of our existing stockholders.
Our articles of incorporation authorize the
issuance of up to 500,000,000 shares of our common stock, with a par value of $0.0001 per share. Our board of directors may choose
to issue some or all of such shares to acquire one or more companies or products and to fund our overhead and general operating
requirements. The issuance of any such shares will reduce the book value per share and may contribute to a reduction in the market
price of the outstanding shares of our common stock. If we issue any such additional shares, such issuance will reduce the proportionate
ownership and voting power of all current stockholders. Further, such issuance may result in a change of control of our company.
Trading of our stock is restricted by
the Securities Exchange Commission's penny stock regulations, which may limit a stockholder's ability to buy and sell our common
stock.
The Securities and Exchange Commission has
adopted regulations which generally define "penny stock" to be any equity security that has a market price (as defined)
less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are
covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other
than established customers and "accredited investors". The term "accredited investor" refers generally to institutions
with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000
or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the Securities and Exchange
Commission, which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer
also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer
and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the
customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given
to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or
with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise
exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment
for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the
effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules.
Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny
stock rules discourage investor interest in and limit the marketability of our common stock.
FINRA sales practice requirements may
also limit a stockholder's ability to buy and sell our stock.
In addition to the "penny stock"
rules described above, the Financial Industry Regulatory Authority ("FINRA") has adopted rules that require that in recommending
an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that
customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information.
Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will
not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their
customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market
for our stock.
The price of our common stock may be
negatively impacted by factors that are unrelated to our operations.
Although our common stock is currently listed
for quotation on the OTC Markets and a market is established and trading has begun, trading through the OTCQB is frequently thin
and highly volatile. There is no assurance that a sufficient market will continue in our stock, in which case it could be difficult
for stockholders to sell their stock. The market price of our common stock could fluctuate substantially due to a variety of factors,
including market perception of our ability to achieve our planned growth, quarterly operating results of our competitors, trading
volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting
our competitors or us. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has had
a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance
and could have the same effect on our common stock.
We do not intend to pay dividends on
any investment in the shares of stock of our company.
We have never paid any cash dividends, and
currently do not intend to pay any dividends for the foreseeable future. Because we do not intend to declare dividends, any gain
on an investment in our company will need to come through an increase in the stock's price. This may never happen and investors
may lose all of their investment in our company.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
We maintain our head office at #404-2075 Kennedy
Rd., Toronto, Ontario, Canada, M1T 3V3.
ITEM 3. LEGAL PROCEEDINGS
From time to time,
we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation
is subject to inherent uncertainties, and an adverse result in these, or other matters, may arise from time to time that may harm
our business.
During the year ended December 31, 2017, the
Company learned that a class action complaint (the “Class Action Complaint”) had been filed against the Company, its
Chief Executive Officer and its Chief Financial Officer in the United States District Court for the District of New Jersey.
The Class Action Complaint alleges, inter alia, that defendants violated the federal securities laws by, among other things, failing
to disclose that the Company was engaged in an unlawful scheme to promote its stock. The Company has been served with the
Class Action Complaint. The Company has analyzed the Class Action Complaint and, based on that analysis, has concluded that
it is legally deficient and otherwise without merit. The Company intends to vigorously defend against these claims.
Also during the year ended December 31, 2017,
the Company learned that two derivative complaints (the “Derivative Complaints”) on behalf of the Company have been
filed against the Company’s Directors and Chief Executive Officer, President, Corporate Secretary, and Chief Financial Officer,
and nominally against the Company, in Nevada state and federal court. The state court action subsequently was removed to
federal court. The Derivative Complaints allege, inter alia, that the Company’s officers and directors directed the
Company to undertake an unlawful scheme to promote its stock. The Company has been served with the Derivative Complaints.
The Company has analyzed them and, based on its analysis, has concluded that the Derivative Complaints are legally deficient and
otherwise without merit. The Company intends to vigorously defend against these claims.
Subsequent to the year end, 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.
Also after year end, the company was served
with a third derivative action, 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 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. Market for Registrant's Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity Securities
Market for Our Common Stock
Since November 2016, our common stock has been
quoted on the OTCQB, which is part of the OTC Market Group's quotation system. We were initially traded under the symbol "UVVC"
but beginning in January 2017, our stock began trading under the symbol "ZPAS".
The following table sets forth, for the periods
indicated, the high and low closing prices of our common stock. These prices reflect inter-dealer prices, without retail mark-up,
mark-down or commission, and may not represent actual transactions.
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Closing Prices
(1)
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High
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Low
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FISCAL YEAR ENDED DECEMBER 31, 2017:
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Fourth Quarter
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$
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0.76
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$
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0.17
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Third Quarter
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1.00
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0.25
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Second Quarter
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3.75
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0.56
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First Quarter
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1.90
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0.71
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FISCAL YEAR ENDED DECEMBER 31, 2016:
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Fourth Quarter
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$
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2.27
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$
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2.25
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Third Quarter
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n/a
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n/a
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Second Quarter
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n/a
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n/a
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First Quarter
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n/a
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n/a
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The above tables set forth the range of high and low closing prices per share of our common stock as per the OTC Markets.
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(2)
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The Company shares are currently halted.
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Approximate Number of Holders of Our Common
Stock
As of June 10, 2019, the Company had approximately
140 stockholders of record and 100,000,000shares of common stock were issued and outstanding. Because some of our common stock
is held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders
represented by these record holders.
Our registrar and transfer agent for our common
stock is VStock Transfer. Their address is 18 Lafayette Place, Woodmere, NY 11598 and their telephone number and facsimile are
+1 (646) 536-3179 and +1 (212) 828-8436, respectively.
Dividend Policy
The Company has not declared any dividends
since incorporation and does not anticipate doing so in the foreseeable future. We currently intend to retain most, if not all,
of our available funds and any future earnings to operate and expand our business.
Our board of directors has discretion on whether
to pay dividends unless the distribution would render us unable to repay our debts as they become due. Even if our board of directors
decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements
and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant.
Securities Authorized for Issuance Under
Equity Compensation Plans
See Item 12 - Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters,
"Securities Authorized for Issuance Under Equity Compensation
Plans"
.
Recent Sales of Unregistered Securities
Recent Sales of Unregistered Securities
On November 22, 2017, the Company issued
1,400,000 shares in the common stock of the Company for gross proceeds of $490,000.
On December 5, 2017, the Company entered into
a promissory note in the amount of 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.
On March 31, 2018, the Company issued a Secured Convertible Promissory Note in the amount of $750,000. The note bears an interest
rate of 18% per annum. The holders of the note at any time have the option to convert the outstanding and unpaid principal
of under the note into fully paid and non-assesable shares of common stock of the Company at a conversion price of $0.10 per
share. On September 10, 2018, , the note was converted into 7,500,000 shares of common stock in the Company.At the end of
January 2018, the Company received funds in the amount of $125,000 from shareholders and a former director of the Company.
There were no terms of repayment and no interest charged on the amount. On September 10, 2018, 2018, the note was converted
into 870,000 shares of common stock in the Company.
On October 17,
2018, Zoompass Holdings, Inc. (the "Company") entered into an Asset Purchase Agreement (the "Asset Purchase Agreement")
with Virtublock Global Corp. (“virtublock”) pursuant to which the Company acquired certain cryptocurrency Exchange/Wallet
platform assets. Virtublock will receive 45% of the issued and outstanding shares of common stock of the Company, after giving
effect to such issuance, or approximately forty-four million nine hundred eleven thousand seven hundred and twenty four (44,911,724)
shares of the Company’s common shares based on fifty-five million eighty-eight thousand two hundred seventy-six (55,088,276)
shares outstanding
.
Purchases of Our Equity Securities
No repurchases of our common stock were made
during our fiscal year ended December 31, 2017.
ITEM 6. Selected financial data
Smaller reporting companies are not required to provide the information
required by this item.
ITEM 7. Management's Discussion and Analysis of financial
Condition and Results of Operations
The following management's discussion and
analysis should be read in conjunction with our consolidated financial statements and the notes thereto and the other financial
information appearing elsewhere in this annual report. In addition to historical information, the following discussion contains
certain forward-looking information. See "Special Note Regarding Forward-Looking Statements" above for certain information
concerning those forward looking statements. Our financial statements are prepared in U.S. dollars and in accordance with U.S.
GAAP. References in this Report to a particular "fiscal" year are to our fiscal year ended on December 31.
Nature of Operations
Zoompas
Holdings, Inc. formerly known as UVIC. Inc. ("Zoompass Holdings," or the "Company") was incorporated under
the laws of the State of Nevada on August 21, 2013. Effective August 22, 2016, the Company entered into an Agreement for
the Exchange of Stock (the "Agreement") with Zoompass, Inc., an Ontario, Canada corporation ("Zoompass").
Pursuant to the Agreement, the Company agreed to issue 8,050,784 shares of its restricted common stock to Zoompass' shareholders
("Zoompass' shareholders") in exchange for all the shares of Zoompass Inc. owned by the Zoompass Inc.'s Shareholders.
At the Closing Date, Rob Lee, a significant shareholder of the Company agreed to cancel 7,000,000 shares of the Company's common
stock, which shares constituted the control shares of the Company. Other than this one significant shareholder, shareholders
of the Company held 2,670,000 shares. As a result of the Agreement, Zoompass is now a wholly owned subsidiary of the Company.
The Company has amended its Articles of Incorporation to change its name to Zoompass Holdings, Inc. and the appropriate forms were
filed with FINRA and the SEC to change its name, address and symbol and complete a 3.5-1 forward split, which was consented to
by the majority of shareholders on September 7, 2016 and approved in February 2017, for shareholders of record on September 7,
2016.
All
share figures have been retroactively stated to reflect the stock split approved by shareholders, unless otherwise indicated.
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. Comparative information has not been presented in this Management's
Discussion and Analysis as Zoompass Inc., was incorporated in June 2016.
Zoompass
Inc., 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.
On
October 17, 2018, Zoompass Holdings, Inc. (the "Company") entered into an Asset Purchase Agreement (the "Asset Purchase
Agreement") with Virtublock Global Corp. (“virtublock”) pursuant to which the Company acquired certain cryptocurrency
Exchange/Wallet platform assets. Virtublock will receive 45% of the issued and outstanding shares of common stock of the Company,
after giving effect to such issuance, or approximately forty-four million nine hundred eleven thousand seven hundred and twenty
four (44,911,724) shares of the Company’s common shares based on fifty-five million eighty-eight thousand two hundred seventy-six
(55,088,276) shares outstanding
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.
Financial
information in this filing 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. Financial
information in this filing do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses
and balance sheet classifications that would be necessary if the Company were unable to realize its assets and settle its liabilities
as a going concern in the normal course of operations. Such adjustments could be material.
For
the year ended December 31, 2017, the Company incurred a net loss of $ 7,298,520. From the inception of Zoompass Inc. to December
31, 2016, the Company, inclusive of the results of UVIC Inc., from August 22, 2016, generated a net loss of $14,004,013.
Included in the loss was an amount of $12,915,010 related to share-based payments, a non-cash item.
The
Company may incur additional operating losses for the 2018 fiscal year.
Results of operations
for the year ended December 31, 2017 and for the period ended December 31, 2016
Revenue and cost
of sales
The
Company's revenue consists of various fees associated with the legacy prepaid debit card program that was acquired as part of the
acquisition of the payment platform. Additionally, the Company recognized revenue from the sale of mobility products. For
the year ended December 31, 2017, the Company had gross prepaid card revenue of $804,074 and mobility products revenue of $643,990.
Net of commissions and agent fees the Company recognized net revenue of $1,441,232.
For
the period ended December 31, 2016, the Company had gross revenue of $284,345 and commission and agent fees of $63,324. Additionally,
the Company incurred processing, production and card fees of $272,034, which included the production and delivery of prepaid cards
to select retail locations in December 2016. Revenues were higher for the year ended December 31, 2017, as 2017 reflects a full
year of operations whereas 2016 only reflects operations from the incorporation date.
General and administrative
and other expenses
For the year ended
December 31, 2017, the Company recognized an impairment charge related to its trademark and goodwill of $3,874,836. As a result,
of financing concerns required to advanced the Company’s business and personnel departures, the Company determined that the
carrying amount of the trademark and goodwill could not be supported. As a result, the trademark and the goodwill were written
to $nil.
For the year ended December
31, 2017, $1,641,354 in salaries and full-time consultant costs compared with $691,981 for the period ended December 31, 2016.
Salaries and full-time consultant costs were higher as a result of twelve full months of costs recognized for 2017.
For
the year ended December 31, 2017, $717,462 was incurred in respect of share-based payment expense. For the period ended December
31, 2016, the Company incurred share-based payment expense of $12,915,010. Included in share-based payment expense
is an amount related to the grant of restricted shares to certain employees and full-time consultants. Additionally, share-based
payments expense was recognized for the value attributed to the grant of warrants to certain individuals as well as the grant of
stock options and deferred stock units. Share-based payment expense was lower in the current year as the majority of share-based
payment expense related to the issuance of share awards, options and deferred share units were recognized on issuance.
Rent and occupancy costs
for the year ended December 31, 2017, was $160,175 compared with $90,036 for the period ended December 31, 2016. Rent and occupancy
costs were higher as 2016 only reflects the period of incorporation to December 31.
For the year ended December
31, 2017, depreciation and amortization expense of $54,689 was recorded compared with $28,209 for the period ended December 31,
2016.
The Company incurred $550,553
in professional fees for the year ended December 31, 2017 compared with $62,113 for the period ended December 31, 2016. Professional
fees were significantly higher due to increased corporate activity including certain legal matter, for 12 months and the fact that
the Company completed its reverse take-over in August 2016, and did not incur any significant legal or accountant costs.
The Company recognized $11,553 in transaction
costs during the period year ended December 31, 2016, related to certain corporate transactions.
Telecommunication expense
is comprised of telephone and internet expenses. Included in telecommunication expense is the costs related to regular and
ongoing technological support. For the year ended December 31, 2017, telecommunication costs were $13,259 down from the $42,558
for the period ended December 31, 2016.
Office and sundry expense
and other includes office expenses such as supplies, insurance and additional costs incurred to support the corporate head office
in addition to travel costs. Office and sundry expense and other for the year ended December 31, 2017, was $351,323
compared with $92,549 for the period ended December 31, 2016. These expenditures were higher largely due to twelve months of insurance
costs incurred during the current year.
Included in filing fees
and regulatory costs are costs associated with the Company's listing fees and transfer agent costs. For the year ended December
31, 2017, $34,160 compared with $nil in the period ended December 31, 2016.
The Company recorded a
foreign exchange loss of $7,048 for the year ended December 31, 2017, largely due to the strengthening of the US dollar relative
to the Canadian dollar. During the period ended December 31, 2016, the Company recognized a foreign exchange gain of $7,117.
The Company incurred $25,663
in net bank fees for year ended December 31, 2017. Bank fees for the period ended December 31, 2016, was $14,818.
For the year ended December 31, 2017, the Company
incurred a net loss of $7,298,520 or $0.18 per share. For the period ended December 31, 2016, the Company incurred a net loss of
$14,004,013 or $0.42 per share.
Liquidity and Capital
Resources
For
the year ended December 31, 2017, the Company had a net decrease in cash of $344,015.
As
part of the acquisition of certain assets, Zoompass acquired $208,723 in cash on June 28, 2016. For the period ended December
31, 2016, the Company had cash used in operations of $800,443. As at December 31, 2016, the Company had a positive net working
capital balance of $359,600.
Operations
for 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 a promissory note.
Operations
for the period ended December 31, 2016, were primarily funded through the cash acquired as part of the acquisition of assets, the
exercise of warrants and private placements which generated proceeds of $1,099,748. At December 31, 2016, the Company had
cash and cash equivalents of $422.385. Subsequent, to December 31, 2016, the Company generated approximately $226,042 in
proceeds through the exercise of warrants.
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.
Net Cash Used
in Operating Activities
During
the year ended December 31, 2017, $2,391,623 in cash, respectively, was used for operations. This was primarily the result of the
net loss and a negative change in non-cash working capital.
During
the period ended December 31, 2016, the Company had net cash used in operations of $800,443. The net loss incurred during
the period was somewhat offset by an increase in non-cash operating assets and liabilities of $245,533.
Net Cash Provided
by Investing Activities
During
the year ended December 31, 2017, the Company invested $45,000 in intangibles. During the period ended December 31, 2016, the Company
acquired $208,298 in cash and cash equivalents from the acquisition of certain assets on June 28, 2016. Additionally, the
Company invested cash of $80,000 during the period related to its software platform.
Net Cash Provided
by Financing Activities
For the year ended December
31, 2017, net cash provided by financing activities was $2,266,962 as a result of issuance of a promissory note and issuance of
warrants.
Net
cash provided by financing activities at at December 31, 2016 was $1,099,748 as a result of private placements and the issuance
of common shares.
Commitments
At December 31, 2017, the Company leased office
space under a contract which ran to October 31, 2020. The amount due under this contract is as follows:
|
|
|
$
|
|
|
2018
|
|
160,152
|
|
|
2019
|
|
160,152
|
|
|
2020
|
|
133,460
|
|
|
|
|
453,764
|
|
Subsequent to December 31, 2017, the Company
no longer occupies the office space.
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.
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 December 31, 2017, had $78,370, in cash and cash equivalents (December 31, 2016 - $422,385).
The following are the maturities, excluding
interest payments, reflecting undiscounted future cash disbursements of the Company's financial liabilities based on the period
ending December 31, 2017.
|
|
|
2018
|
|
2019 and later
|
|
Accounts payable
|
|
$
|
871,167
|
|
|
$
|
-
|
|
|
Promissory note
|
|
|
477,402
|
|
|
|
-
|
|
|
Client funds
|
|
|
2,252,797
|
|
|
|
|
|
|
|
|
$
|
3,601,366
|
|
|
$
|
-
|
|
Additionally, the Company has commitments as
detailed in note 12.
Currency risk: The Company's expenditures are
incurred in Canadian and US dollars. The results of the Company's operations are subject to currency transaction 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. A 10% fluctuation would have an impact of $17,332 on the
Company's US dollar denominated balances at December 31, 2017.
Credit risk: Credit risk is the risk of loss
associated with a counterparty's inability to fulfill its payment obligations. As at December 31, 2017, the Company's credit risk
is primarily attributable to cash and cash equivalents, cash in trust and customer deposits, and accounts receivable. At December
31, 2017, the Company's cash and cash equivalents, cash held in trust and customer deposits was held with reputable Canadian chartered
banks. At December 31, 2017, the Company had an allowance for doubtful accounts of $41,077 (December 31, 2016 - $16,396) as a result
of a review of collectability of the amount outstanding and the duration of time it was outstanding. Approximately 33% (2016 –
68%) of net revenue is derived from one corporate customer and the underlying and approximately 91% of accounts receivable is from
the same corporate customer (2016 – 51%).
.Substantially all of the Company's cost of
goods sold is derived from 3 service providers. As at December 31, 2017, and together they represented 8% (2016 – 16%) of
the accounts payable and accrued liabilities. The majority of the cost of sales for mobility products were sourced from 2 vendors
and there was no accounts payable balance at December 31, 2017.
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 as the promissory note has a fixed rate of interest.
Fair values: The carrying amounts reported
in the consolidated balance sheet for cash and cash equivalents, cash held in trust and customer deposits, accounts receivables,
accounts payable and client funds approximate fair value because of the short period of time between the origination of such instruments
and their expected realization.
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 period ended September 30, 2017.
The $80,000 is reflected in prepaids and other current assets as at December 31, 2017 (December 31, 2016 - $130,000).
The total amount owing to the same shareholders,
in relation to the services they provide to the Company in their capacity as Officers at December 31, 2017 was $379,976 (December
31, 2016 - $186,818) which includes expense reimbursements. This amount is reflected in accounts payable and is further described
below.
As at December 31, 2017, the Company had an
amount owing to an entity owned and controlled by the Chief Executive Officer of the Company of $325,540 (December 31, 2016 - $127,073).
The amount owing relates to services provided by the Chief Executive Officer and expense reimbursements.
As at December 31, 2017, the Company had an
amount owing to an entity owned and controlled by the Secretary of the Company of $54,436 (December 31, 2016 - $59,745).
The amount owing relates to services provided by the Secretary and expense reimbursements.
As at December 31, 2017, the Company had an
amount owing to the President of the Company of $nil (December 31, 2016 - $28,092) for salary.
As at December 31, 2017, the Company had an
amount owing to an entity owned and controlled by the Chief Financial Officer of the Company of $nil (December 31, 2016 - $31,653).
The amount owing relates to services provided by the Chief Financial Officer.
A total of $357,556 was recognized during the
year ended December 31, 2017, for share-based payments expense to directors and officers of the Company.
A total of $2,868,702 was recognized during
the period ended December 31, 2016, for share-based payments expense to directors and officers of the Company.
As at December 31, 2017 and December 31, 2016,
the amounts owing to officers of the Company are recorded in accounts payable and accrued liabilities.
As previously noted in note 3, in June 2016,
the Company had acquired certain net assets from a shareholder of Zoompass.
Off-Balance Sheet Arrangements
Other than the rent commitments,
the 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.
Critical Accounting Policies
Basis of presentation:
The consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange
Commission, in accordance with accounting principles generally accepted in the United States of America ("US GAAP").
The 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. From the date of incorporation on
June 8, 2016, until the asset acquisition on June 28, further described in note 3, there was no operating activity, only the issuance
of incorporation shares, the operations from June 28, 2016, to June 30, 2016, were immaterial. Accordingly, as a result of the
Agreement, as described in Note 1, the Company has presented the consolidated statements of operations, comprehensive loss, shareholders'
equity and cash flows from the date of incorporation until December 31, 2016.
Basis of consolidation
:
The
consolidated financial statements comprise the accounts of Zoompass Holdings, the legal parent company, and its wholly-owned subsidiaries,
Zoompass and Paymobile Inc., 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
unrealised gains or losses on transactions between the entities are eliminated.
Translation of foreign currencies:
The reporting currency of the Company is the US dollar. The Company has determined that the functional currency of its subsidiaries
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.
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 shareholders' equity.
Revenue recognition:
The Company recognizes revenue at the time persuasive evidence of an agreement exists, price is
fixed and determinable, the delivery has occurred
and collectability is reasonably assured.
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
income represents gains realized on de-recognition of clients' funds payable.
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 consolidated
balance sheet for cash and cash equivalents, cash in trust and customer deposits, accounts receivables, accounts payable and client
funds approximate fair value because of the short period of time between the origination of such instruments and their expected
realization. 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 is 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. The Company does not
have any reportable segments and significantly all assets are located in, and all revenues are currently earned in Canada.
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. Cash in trust and customer deposits are amounts
held by the Company at various financial institutions for settlement of clients' funds payable. Client funds are amounts
owing on behalf of clients for prepaid debit cards.
Inventories
: Inventory
is stated at the lower of cost or net realizable value. Cost is recorded at standard cost, which approximates actual cost, on the
first-in first-out basis.
Equipment:
Property
and 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:
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●
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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.
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.
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 is 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.
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.
Intangibles:
On acquisition, intangible
assets, other than goodwill, are initially recorded at their fair value. Following initial recognition, intangible assets with
a finite life are amortized on a straight line basis over their useful life. Useful lives are assessed at year end.
The following useful lives are used in the
calculation of amortization:
Trademark – 7.25 years
Acquired payment platform – 5 years
Impairment of non-financial
assets:
The Company follows the ASC Topic 360, which requires that long-lived assets be reviewed for impairment whenever events
or changes in circumstances indicate that the assets' carrying amounts may not be recoverable, or in the case of intangible assets
having an indefinite useful life, assessed for impairment annually.
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.
Income taxes:
Deferred taxation is recognised 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 taxation purposes. However, the deferred taxation
is not recognised 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 taxation is 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 realised 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 realised simultaneously.
A deferred tax asset is recognised to the extent
that it is probable that future taxable profits will be available against which the temporary difference can be utilised. 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 realised.
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.
The Company recognizes such awards over the vesting period, if any, based on 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.
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 recorded 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 and intangibles.
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.
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.
Recent Accounting Pronouncements
In August 2014, the FASB issued a new financial
accounting standard on going concern, ASU No. 2014-15, "Presentation of Financial Statements – Going Concern (Sub-Topic
205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern." The standard provides guidance
about management's responsibility to evaluate whether there is a substantial doubt about the organization's ability to continue
as a going concern. The amendments in this Update apply to all companies. They become effective in the annual period ending after
December 15, 2016, with early application permitted. There was no impact on the consolidated balance sheets or the consolidated
statements of operations and comprehensive loss from the adoption of this standard.
Recently issued accounting pronouncements
In May 2014, the FASB issued ASU No. 2014-09,
"Revenue from Contracts with Customers (Topic 606)". The standard outlines a single comprehensive model for entities
to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance.
The accounting standard is effective for annual reporting periods (including interim reporting periods within those periods) beginning
after December 15, 2017. Early adoption is not permitted. The impact on the consolidated financial statements of adopting ASU 2014-09
will be assessed by management.
In November 2015, the FASB issued ASU No. 2015-17,
"Balance Sheet Classification of Deferred Taxes," which requires that deferred tax liabilities and assets be classified
on the Consolidated Balance Sheets as noncurrent based on an analysis of each taxpaying component within a jurisdiction. ASU No.
2015-17 is effective for the fiscal year commencing after December 15, 2017. The Company does not anticipate that the adoption
of ASU No. 2015-17 will have a material effect on the consolidated balance sheet or the consolidated results of operations.
In January 2016, the FASB issued ASU 2016-01,
Financial Instruments - Overall (Subtopic 740): Recognition and Measurement of Financial Assets and Financial Liabilities. This
ASU is effective for annual and interim reporting periods beginning after December 15, 2017. ASU 2016-01 enhances the reporting
model for financial instruments to provide users of financial statements with more decision-useful information. The Company is
currently assessing the impact of ASU 2016-01.
In February 2016, the FASB issued ASU
2016-02, Leases. This update requires organizations that lease assets to recognize on the balance sheet the assets and liabilities
for the rights and obligations created by those leases. The new guidance will also require additional disclosure about the amount,
timing and uncertainty of cash flows arising from leases. The provisions of this update are effective for annual and interim periods
beginning after December 15, 2018. The Company is still assessing the impact that the adoption of ASU 2016-02 will have on the
consolidated balance sheet and the consolidated results of operations.
ITEM 7A. Quantitative and Qualitative Disclosures About
Market Risk
The follow discussion about
our market risk disclosures involves forward-looking statements. Actual results could differ from those projected in the forward-looking
statements. We are exposed to market risk related to changes in interest rates and foreign currency exchange rates. We do not use
derivative financial instruments for speculative or trading purposes.
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 December 31, 2017, had $78,370, in cash and cash equivalents (December 31, 2016 - $422,385).
The following are the maturities, excluding
interest payments, reflecting undiscounted future cash disbursements of the Company's financial liabilities based on the period
ending December 31, 2017.
|
|
|
2018
|
|
2019 and later
|
|
Accounts payable and accrued liabilities
|
|
$
|
871,167
|
|
|
$
|
-
|
|
|
Promissory note
|
|
|
477,402
|
|
|
|
-
|
|
|
|
|
$
|
1,348,569
|
|
|
$
|
-
|
|
Additionally, the Company has commitments as
detailed in note 12.
Credit risk: Credit risk is the risk of loss
associated with a counterparty's inability to fulfill its payment obligations. As at December 31, 2017, the Company's credit risk
is primarily attributable to cash and cash equivalents, cash in trust and customer deposits, and accounts receivable. At December
31, 2017, the Company's cash and cash equivalents, cash held in trust and customer deposits was held with reputable Canadian chartered
banks. At December 31, 2017, the Company had an allowance for doubtful accounts of $41,077 (December 31, 2016 - $16,396) as a result
of a review of collectability of the amount outstanding and the duration of time it was outstanding. Approximately 33% (2016 -
68%) of net revenue is derived from one corporate customer and the underlying and approximately 91% of accounts receivable is from
the same corporate customer (2016 – 51%).
Substantially all of the Company's cost of
goods sold is derived from 3 service providers. As at December 31, 2017, and together they represented 8% (2016 – 16%) of
the accounts payable and accrued liabilities. The majority of the cost of sales for mobility products were sourced from 2 vendors
and there was no accounts payable balance at December 31, 2017.
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 as the promissory note has a fixed rate of interest.
Fair values: The carrying amounts reported
in the consolidated balance sheet for cash and cash equivalents, cash held in trust and customer deposits, accounts receivables,
accounts payable and client funds approximate fair value because of the short period of time between the origination of such instruments
and their expected realization.
ITEM 8 Financial Statements and Supplementary Data
Consolidated Financial Statements
The financial statements required by this item begin on page F-1
hereof.
ITEM 9 Changes in and Disagreements with Accountants and Accounting
and Financial Disclosure
On
November 10, 2016, our board of directors dismissed AJSH & Co LLP ("AJSH"), as the independent registered public
accounting firm of the Company.
AJSH's
report on the financial statements for the fiscal year ended March 31, 2016 and 2015, contained no adverse opinion or disclaimer
of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principle, other than an explanatory
paragraph as to a going concern.
On November 10, 2016,
our board of directors approved the engagement of MNP, LLP ("MNP"), as the Company's new independent registered public
accounting firm.
During the fiscal years
ended December 31, 2014 and 2015, and the subsequent interim period prior to the engagement of MNP, the Company has not consulted
MNP regarding (i) the application of accounting principles to any specified transaction, either completed or proposed; (ii) the
type of audit opinion that might be rendered on the Company's financial statements, and either a written report was provided to
the registrant or oral advice was provided that the new accountant concluded was an important factor considered by the registrant
in reaching a decision as to the accounting, auditing or financial reporting issue; or (iii) any matter that was either the subject
of a disagreement (as defined in Item 304(o)(1)(iv)) or a reportable event (as defined in Item 304(a)(1)(v)).
ITEM 9A Controls and Procedures
Our management is responsible
for establishing and maintaining a system of disclosure controls and procedures designed to ensure that information required to
be disclosed by us in the reports it files or submitted under the Securities Exchange Act of 1934, as amended (Exchange Act), is
recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC. Our disclosure
controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be
disclosed by us in the reports it files or submitted under the Exchange Act is accumulated and communicated to management, including
the principal executive officer and principal financial officer, or persons performing similar functions, as appropriate, to allow
timely decisions regarding required disclosure. Because of inherent limitations, disclosure controls and procedures, as well as
internal control over financial reporting, may not prevent or detect all inaccurate statements or omissions.
Our management, with the
supervision and participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design
and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934 (the "Exchange Act"). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures as of December 31, 2017, were effective such that the information required
to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to our management to allow
timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the
controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of
fraud, if any, within a company have been detected.
Inherent Limitations Over Internal
Controls
Our internal control over
financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with U.S. generally accepted accounting principles ("GAAP").
Our internal control over financial reporting includes those policies and procedures that:
(i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
(ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and
that our receipts and expenditures are being made only in accordance with authorizations of the our management and directors; and
(iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have
a material effect on the financial statements.
Management, including our
Chief Executive Officer and Chief Financial Officer, does not expect that our internal controls will prevent or detect all errors
and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are
resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations
in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances
of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the
risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Management's Annual Report on Internal
Control Over Financial Reporting
Our management is responsible
for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange
Act). Management conducted an assessment of the effectiveness of the Company's internal control over financial reporting based
on the criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (1992 framework). Based on the Company's assessment, management has concluded that its internal control
over financial reporting was effective as of December 31, 2016, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statement.
Our management is responsible
for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange
Act). Management conducted an assessment of the effectiveness of the Company's internal control over financial reporting based
on the criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (1992 framework). Based on the Company's assessment, management has concluded that its internal control
over financial reporting was effective as of December 31, 2017, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements in accordance with GAAP.
Management assessed the
effectiveness of our internal control over financial reporting as of December 31, 2017, and determined that our controls and procedures
were effective at the reasonable assurance level. This annual report does not include an attestation report of our independent
registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation
by our independent registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permits us
to provide only management's report in this annual report.
We have assessed the effectiveness of our internal control over financial reporting as of December 31, 2017,
the period covered by this Annual Report on Form 10-K, as discussed above. In making this assessment, we used the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework.
Based upon this evaluation, our chief executive officer and chief financial officer concluded
that our disclosure controls and procedures as of the end of December 31, 2017, were ineffective due to the following: lack of
segregation of duties, due to limited administrative and financial personnel and related resources and as only one of our directors
is independent.
Changes In Internal Control Over Financial
Reporting
During the year ended December
31, 2017, there were no changes in our internal controls over financial reporting that materially affected, or is reasonably likely
to have a materially affect, on our internal control over financial reporting.
Item 9B. Other Information
None.
Where You Can Find More Information
We file annual, quarterly
and current reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission").
Our Commission filings are available to the public over the Internet at the Commission's website at
http://www.sec.gov
.
The public may also read and copy any document we file with the Commission at its Public Reference Room at 100 F Street, N.E.,
Washington, D.C. 20549, on official business days during the hours of 10:00 am to 3:00 pm. The public may obtain information on
the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. We maintain a website at http://www. yappn.com
(which website is expressly not incorporated by reference into this filing). Information contained on our website is not part of
this report on Form 10-K.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in US dollars)
NOTE 1 — NATURE OF OPERATIONS
AND GOING CONCERN
Zoompas Holdings, Inc. formerly known as UVIC.
Inc. ("Zoompass Holdings" or the "Company") was incorporated under the laws of the State of Nevada on August
21, 2013. Effective August 22, 2016, the Company entered into an Agreement for the Exchange of Stock (the "Agreement")
with Zoompass, Inc., an Ontario, Canada corporation ("Zoompass"). Pursuant to the Agreement, the Company
agreed to issue 8,050,784 shares of its restricted common stock to Zoompass' shareholders ("Zoompass' shareholders")
in exchange for all the shares of Zoompass Inc. owned by the Zoompass Inc.'s Shareholders. At the Closing Date, Rob Lee,
a significant shareholder of the Company agreed to cancel 7,000,000 shares of the Company's common stock, which shares constituted
the control shares of the Company. Other than this one significant shareholder, shareholders of the Company held 2,670,000
shares. As a result of the Agreement, Zoompass is now a wholly owned subsidiary of the Company. The Company has amended its
Articles of Incorporation to change its name to Zoompass Holdings, Inc. and the appropriate forms were filed with FINRA and the
SEC to change its name, address and symbol and complete a 3.5-1 forward split, which was consented to by the majority of shareholders
on September 7, 2016 and approved in February 2017, for shareholders of record on September 7, 2016
All share figures have been retroactively stated
to reflect the stock split approved by shareholders, unless otherwise indicated. Additionally, the Company's shareholders
consented to an increase of the shares authorized to 500,000,000 and a revision of the par value to $0.0001.
As the former Zoompass shareholders ended up
owning the majority of the Company, the transaction does not constitute a business combination and was deemed to be a recapitalization
of the Company with Zoompass being the accounting acquirer, accordingly the accounting and disclosure information is that of Zoompass
going forward.
Zoompass Inc., 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 (note 3). 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.
During 2017, 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 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.
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 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 consolidated financial statements
do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and consolidated statement
of balance sheet classifications that would be necessary if the Company were unable to realize its assets and settle its liabilities
as a going concern in the normal course of operations. Such adjustments could be material.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in US dollars)
NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES AND RECENT
ACCOUNTING PRONOUNCEMENTS
SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation:
The consolidated
financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, in accordance
with accounting principles generally accepted in the United States of America ("US GAAP"). The 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 periods. From the date of incorporation on June 8, 2016, until the asset
acquisition on June 28, 2016, which is further described in note 3, there was no operating activity, with only the issuance of
incorporation shares. The operations from June 28, 2016, to June 30, 2016, were immaterial. Accordingly, as a result of the Agreement,
as described in Note 1, the Company has presented the consolidated statement of operations and comprehensive loss, shareholders'
stockholders (deficiency) equity and cash flows from the date of incorporation until December 31, 2016.
Basis of consolidation:
The
consolidated financial statements comprise the accounts of Zoompass Holdings, the legal parent company, and its wholly-owned subsidiaries,
Zoompass and Paymobile Inc., 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
unrealised gains or losses on transactions between the entities are eliminated.
Translation of foreign currencies:
The
reporting and functional currency of the Company is the US dollar. The Company has determined that the functional currency of its
subsidiaries 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’ (deficiency) equity.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in US dollars)
Revenue recognition:
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.
|
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 consolidated
balance sheet for cash and cash equivalents, cash in trust and customer deposits, accounts receivables, net of any allowances for
doubtful accounts, accounts payable and accrued liabilities, promissory note and client funds 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.
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.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in US dollars)
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. The Company does not have any reportable segments and
significantly all of the assets are located in, and all revenues are currently earned in Canada.
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. Cash in trust and customer deposits are amounts
held by the Company at various financial institutions for settlement of clients' funds payable. Client funds are amounts
owing on behalf of clients for prepaid debit cards.
Inventories:
Inventory is stated at
the lower of cost or net realizable value. Cost is recorded at standard cost, which approximates actual cost, on the first-in
first-out basis.
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.
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.
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.
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
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
Impairment of non-financial assets:
The
Company follows the ASC Topic 360, which requires that long-lived assets be reviewed for impairment whenever events or changes
in circumstances indicate that the assets' carrying amounts may not be recoverable, or in the case of intangible assets having
an indefinite useful life, assessed for impairment annually.
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.
Income taxes
: Deferred tax is
recognised 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 taxis not recognised 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 taxis 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 realised 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 realised simultaneously.
The Company assesses the likelihood of the
financial statement effect of a tax position that should be recognized when it is more likely than not that the position will be
sustained upon examination by a taxing authority based on the technical merits of the tax position, circumstances, and information
available as of the reporting date. The Company is subject to examination by taxing authorities in jurisdictions such as the United
States and Canada. Management does not believe that there are any uncertain tax positions that would result in an asset or liability
for taxes being recognized in the accompanying consolidated financial statements. The Company recognizes tax-related interest and
penalties, if any, as a component of income tax expense.
A deferred tax asset is recognised to the extent
that it is probable that future taxable profits will be available against which the temporary difference can be utilised. 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 realised.
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.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(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:
Deferred tax assets
and liabilities are recognized for the expected future tax consequences of temporary differences between the tax bases of assets
and liabilities and their financial statement reported amounts using enacted tax rates and laws in effect in the year in which
the differences are expected to reverse. A valuation allowance is provided against deferred tax assets when it is determined to
be more likely than not that the deferred tax asset will not be realized.
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.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in US dollars)
NEWLY ADOPTED AND RECENTLY ISSUED ACCOUNTING
PRONOUNCEMENTS
Newly Adopted Accounting Standards
In August 2014, the FASB issued a new financial
accounting standard on going concern, ASU No. 2014-15, "Presentation of Financial Statements – Going Concern (Sub-Topic
205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern." The standard provides guidance
about management's responsibility to evaluate whether there is a substantial doubt about the organization's ability to continue
as a going concern. The amendments in this Update apply to all companies. They become effective in the annual period ending after
December 15, 2016, with early application permitted. There was no impact on the consolidated balance sheets or the consolidated
statements of operations and comprehensive loss from the adoption of this standard.
Recently issued accounting pronouncements
In May 2014, the FASB issued ASU No. 2014-09,
"Revenue from Contracts with Customers (Topic 606)". The standard outlines a single comprehensive model for entities
to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance.
The accounting standard is effective for annual reporting periods (including interim reporting periods within those periods) beginning
after December 15, 2017. Early adoption is not permitted. The impact on the consolidated financial statements of adopting ASU 2014-09
will be assessed by management.
In November 2015, the FASB issued ASU No. 2015-17,
"Balance Sheet Classification of Deferred Taxes," which requires that deferred tax liabilities and assets be classified
on the Consolidated Balance Sheets as noncurrent based on an analysis of each taxpaying component within a jurisdiction. ASU No.
2015-17 is effective for the fiscal year commencing after December 15, 2017. The Company does not anticipate that the adoption
of ASU No. 2015-17 will have a material effect on the consolidated balance sheet or the consolidated results of operations.
In January 2016, the FASB issued ASU 2016-01,
Financial Instruments - Overall (Subtopic 740): Recognition and Measurement of Financial Assets and Financial Liabilities. This
ASU is effective for annual and interim reporting periods beginning after December 15, 2017. ASU 2016-01 enhances the reporting
model for financial instruments to provide users of financial statements with more decision-useful information. The Company is
currently assessing the impact of ASU 2016-01.
In February 2016, the FASB issued ASU 2016-02,
Leases. This update requires organizations that lease assets to recognize on the balance sheet the assets and liabilities for the
rights and obligations created by those leases. The new guidance will also require additional disclosure about the amount, timing
and uncertainty of cash flows arising from leases. The provisions of this update are effective for annual and interim periods beginning
after December 15, 2018. The Company is still assessing the impact that the adoption of ASU 2016-02 will have on the consolidated
balance sheet and the consolidated results of operations, however, the Company does not anticipate that the adoption will have
a material effect on the consolidated balance sheet or the consolidated statement of operations as the Company no longer occupied
the office space associated with the lease and sold its prepaid card business. See note 14 for additional details.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
NOTE 3 – ACQUISTION AND REVERSE TAKEOVER
TRANSACTION
Acquisition
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.
During the year ended December 31, 2017, the
Company finalized the purchase price with the assistance of a third party valuator. As part of the finalization of the purchase
price, the consideration was determined to be $4,472,730 based on the fair value of the business acquired. The following table
sets forth the allocation of the consideration to the fair value of the net assets acquired. The acquired goodwill is primarily
related to personnel and the value attributed to a company that is expected to experience accelerated growth.
|
|
|
|
|
Consideration
|
|
|
|
Common shares issued
|
|
$
|
4,472,730
|
|
|
|
|
|
|
|
|
Net assets acquired
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
208,723
|
|
|
Cash held in trust and customer deposits
|
|
|
1,843,296
|
|
|
Other current assets
|
|
|
76,214
|
|
|
Equipment
|
|
|
65,651
|
|
|
Trademark
|
|
|
161,600
|
|
|
Payment platform
|
|
|
109,710
|
|
|
Goodwill
|
|
|
3,715,646
|
|
|
Accounts payable and accrued liabilities
|
|
|
(31,019
|
)
|
|
Client funds
|
|
|
(1,677,091
|
)
|
|
Total net assets acquired
|
|
$
|
4,472,730
|
|
As a result of the finalization of the purchase
price, certain adjustments were recorded to the consolidated balance sheet at December 31, 2016 and the consolidated statement
of operations and comprehensive loss for the year ended December 31, 2016. The following table details the adjustments to
the consolidated balance sheet and consolidated statement of operations as at December 31, 2016, and comprehensive loss, for the
year ended December 31, 2016, as a result of the finalization of the purchase price.
|
Consolidated balance sheet
|
|
As at December 31, 2016
|
|
|
|
|
As reported
|
|
|
Adjusted
|
|
|
Acquired intangible assets
|
|
$
|
8,627,349
|
|
|
$
|
-
|
|
|
Trademark
|
|
|
-
|
|
|
|
146,602
|
|
|
Payment platform
|
|
|
-
|
|
|
|
193,273
|
|
|
Goodwill
|
|
|
-
|
|
|
|
3,622,388
|
|
|
Additional paid in capital
|
|
|
23,251,123
|
|
|
|
18,484,743
|
|
|
Accumulated deficit
|
|
|
(13,984,951
|
)
|
|
|
(14,004,013
|
)
|
|
Accumulated other comprehensive loss
|
|
|
(228,633
|
)
|
|
|
(108,277
|
)
|
|
|
|
|
|
|
|
|
|
|
The adjustments were the result of valuing
the consideration based on the fair value of the acquired business and the allocation of and amortization of the acquired trademark
and payment platform as well as the translation of foreign currency denominated balances.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in US dollars)
Agreement with Zoompass Inc.
Effective August 22, 2016, UVIC, Inc. ("UVIC")
entered into an Agreement for the Exchange of Stock (the "Agreement") with Zoompass, Inc., an Ontario, Canada corporation.
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' Shareholders.
At the Closing Date, Rob Lee, a significant shareholder, of UVIC agreed to cancel 7,000,000 shares of UVIC'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.
As the former Zoompass shareholders ended
up owning the majority of the Company, Zoompass is deemed to be the accounting acquirer. As UVIC was the accounting acquiree
the net assets acquired are reflected in the statement of equity.
As at the effective date of the reverse takeover
UVIC Inc. had $nil in net assets.
Proforma information has not been presented
as there was no operating activity in Zoompass Inc. from the date of incorporation to the date of the acquisition of assets, accordingly
the results presented reflect all results of Zoompass during the period as well as that of the consolidated entity.
Acquisition of transportation enablement platform
During the year ended
December 31, 2017, the Company entered into an agreement to acquire a transportation enablement platform (the "Platform")
which provides fully automated dispatching and bookings management built for taxi companies, limousine companies and ride-sharing
service providers. The Platform gives customers an app based experience while the acquired cloud-based Platform, provides service
providers a range of functions which include customer booking, accounts management, driver tracking, real-time notifications, auto
dispatching algorithms, accounting and settlements, corporate account management as well as providing reporting and analytics.
The Platform has also shown to have a direct application in the B2B space in providing corporations with a more efficient taxi
chit solution to combat fraud and excessive administration costs.
In exchange for the acquisition of the Platform
from a private Canadian based company, the Company will be providing as consideration the equivalent of up to C$1,000,000 in the
form of non-registered shares in the common stock of the Company, based on a share price of the lesser of US$3.00 per share, or
the share price on closing. The equivalent of C$400,000 in shares is payable on closing with C$300,000 payable in shares on the
first anniversary of the closing, subject to the satisfaction of certain milestones, and an additional C$300,000 payable in shares
on the second anniversary of the closing, subject to the satisfaction of certain milestones.
Transaction costs incurred with respect to
the acquisition of the Platform have been expensed in the statements of operations and comprehensive loss for the year ended December
31, 2017.
As there were conditions of closing that had
not been completed, the transaction did not close. As a result, pro forma information has not been presented. The Company
will make a determination of how the transaction will be accounted for when it prepares its consolidated financial statements for
the period ended December 31, 2019.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
NOTE 4 – EQUIPMENT
|
Cost
|
|
Computer equipment
|
|
Furniture
|
|
Total
|
|
June 8, 2016
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Additions
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Acquisitions
|
|
|
63,258
|
|
|
|
2,393
|
|
|
|
65,651
|
|
|
Foreign exchange
|
|
|
(1,588
|
)
|
|
|
(60
|
)
|
|
|
(1,648
|
)
|
|
Balance at December 31, 2016
|
|
$
|
61,670
|
|
|
$
|
2,333
|
|
|
$
|
64,003
|
|
|
Foreign exchange and other
|
|
|
4,335
|
|
|
|
164
|
|
|
|
4,499
|
|
|
Balance at December 31, 2017
|
|
$
|
66,005
|
|
|
$
|
2,497
|
|
|
$
|
68,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
Computer equipment
|
|
|
|
Furniture
|
|
|
|
Total
|
|
|
June 8, 2016
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Depreciation
|
|
|
(9,417
|
)
|
|
|
(238
|
)
|
|
|
(9,655
|
)
|
|
Foreign exchange
|
|
|
167
|
|
|
|
4
|
|
|
|
171
|
|
|
Balance at December 31, 2016
|
|
($
|
9,250
|
)
|
|
($
|
234
|
)
|
|
($
|
9,484
|
)
|
|
Depreciation
|
|
|
(16,260
|
)
|
|
|
(434
|
)
|
|
|
(16,694
|
)
|
|
Foreign exchange and other
|
|
|
(1,222
|
)
|
|
|
(31
|
)
|
|
|
(1,253
|
)
|
|
Balance at December 31, 2017
|
|
$
|
(26,732
|
)
|
|
$
|
(699
|
)
|
|
$
|
(27,431
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
|
$
|
52,420
|
|
|
$
|
2,099
|
|
|
$
|
54,519
|
|
|
Balance at December 31, 2017
|
|
$
|
39,273
|
|
|
$
|
1,798
|
|
|
$
|
41,071
|
|
NOTE 5 – INTANGIBLE ASSETS, GOODWILL
AND IMPAIRMENT
|
Cost
|
|
Trademark
|
|
Payment
platform
|
|
Total
|
|
June 8, 2016
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Additions
|
|
|
-
|
|
|
|
100,000
|
|
|
|
100,000
|
|
|
Acquisitions
|
|
|
161,600
|
|
|
|
109,710
|
|
|
|
271,310
|
|
|
Foreign exchange
|
|
|
(4,056
|
)
|
|
|
(8,654
|
)
|
|
|
(12,710
|
)
|
|
Balance at December 31, 2016
|
|
$
|
157,544
|
|
|
$
|
201,056
|
|
|
$
|
358,600
|
|
|
Additions
|
|
|
-
|
|
|
|
25,000
|
|
|
|
25,000
|
|
|
Foreign exchange
|
|
|
11,076
|
|
|
|
13,593
|
|
|
|
24,669
|
|
|
Balance at December 31, 2017
|
|
$
|
168,620
|
|
|
$
|
239,649
|
|
|
$
|
408,269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in US dollars)
|
Accumulated amortization
|
|
Trademark
|
|
Payment platform
|
|
Total
|
|
June 8, 2016
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Depreciation
|
|
|
(10,748
|
)
|
|
|
(7,645
|
)
|
|
|
(18,393
|
)
|
|
Foreign exchange
|
|
|
(194
|
)
|
|
|
(138
|
)
|
|
|
(332
|
)
|
|
Balance at December 31, 2016
|
|
($
|
10,942
|
)
|
|
$
|
(7,783
|
)
|
|
($
|
18,725
|
)
|
|
Impairment
|
|
|
(133,927
|
)
|
|
|
-
|
|
|
|
(133,927
|
)
|
|
Amortization
|
|
|
(22,202
|
)
|
|
|
(15,793
|
)
|
|
|
(37,995
|
)
|
|
Foreign exchange and other
|
|
|
(1,549
|
)
|
|
|
(1,101
|
)
|
|
|
(2,650
|
)
|
|
Balance at December 31, 2017
|
|
|
(168,620
|
)
|
|
$
|
(24,677
|
)
|
|
|
(193,297
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
|
$
|
146,602
|
|
|
$
|
193,273
|
|
|
$
|
339,875
|
|
|
Balance at December 31, 2017
|
|
$
|
-
|
|
|
$
|
214,972
|
|
|
$
|
214,972
|
|
|
Cost
|
|
Goodwill
|
|
June 8, 2016
|
|
$
|
-
|
|
|
Acquisitions
|
|
|
3,715,646
|
|
|
Foreign exchange
|
|
|
(92,358
|
)
|
|
Balance at December 31, 2016
|
|
$
|
3,622,388
|
|
|
Impairment
|
|
|
(3,740,909
|
)
|
|
Foreign exchange
|
|
|
118,521
|
|
|
Balance at December 31, 2017
|
|
$
|
-
|
|
The Company has capitalized $125,000 in costs
related to improvements made on the payment platform to further develop it for alternative business plans, since its acquisition.
When the Company has completed the development of these improvements, they will be put into service and amortized over their expected
life. The amortization relates to the amortization of the cost of the acquired payment platform at the acquisition date,
see note 3 for additional details.
The Company had additions of $20,000 recorded in Accounts payable
and accrued liabilities at December 31, 2016, which were paid during the year ended December 31, 2017.
IMPAIRMENT
As at December 31, 2017, as a result of continual cash flow concerns
as well as employee departures, the Company identified that indicators of impairment existed. As a result, the Company determined
the fair value of its trademark, payment platform and goodwill.
In arriving at the fair value, which was based on the selling price
less the cost to sell, the Company determined that the carrying amount of the trademark and goodwill could not be supported and
as a result the carrying value was written down to nil as at December 31, 2017.
Subsequent to December 31, 2017, the payment platform was sold pursuant
to an agreement. See note 14 for additional details.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
NOTE 6 – PROMISSORY NOTE
On December 5, 2017, the Company entered into
a promissory note in the amount of 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 repaid subsequent to
December 31, 2017.
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 December 31, 2017, had $78,370, in cash and cash equivalents (December 31, 2016 - $422,385).
The following are the maturities, excluding
interest payments, reflecting undiscounted future cash disbursements of the Company's financial liabilities based on the period
year ended December 31, 2017.
|
|
|
2018
|
|
2019 and later
|
|
Accounts payable
|
|
$
|
871,167
|
|
|
$
|
-
|
|
|
Promissory note
|
|
|
477,402
|
|
|
|
-
|
|
|
Client funds
|
|
|
2,252,797
|
|
|
|
-
|
|
|
|
|
$
|
3,601,366
|
|
|
$
|
-
|
|
Additionally, the Company has commitments as
detailed in note 12.
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. A 10% fluctuation would have an impact of $17,332 on the
Company's US dollar denominated balances at December 31, 2017 (2016 - $4,772), which would be reflected in other comprehensive
income.
Credit risk:
Credit risk
is the risk of loss associated with a counterparty's inability to fulfill its payment obligations. As at December 31, 2017, the
Company's credit risk is primarily attributable to cash and cash equivalents, cash in trust and customer deposits, and accounts
receivable. At December 31, 2017, the Company's cash and cash equivalents, cash held in trust and customer deposits was held with
reputable Canadian chartered banks. At December 31, 2017, the Company had an allowance for doubtful accounts of $41,077 (December
31, 2016 - $16,396) as a result of a review of collectability of the amount outstanding and the duration of time it was outstanding.
Approximately 33% of net revenue (2016 – 68%) is derived from one corporate customer and the underlying cardholders under
each program and approximately 91% of accounts receivable (2016 – 51%) is from the same corporate customers
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in US dollars)
Substantially all of the Company’s cost
of goods sold is derived from 3 service providers and one vendor. As at December 31, 2017, and together they represented 8% of
the accounts payable and accrued liabilities (2016 – 16%).
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 as the promissory note has a fixed rate of interest.
Fair values: The carrying amounts reported
in the consolidated balance sheet for cash and cash equivalents, cash held in trust and customer deposits, accounts receivables,
accounts payable and accrued liabilities, promissory note and client funds approximate fair value because of the short period of
time between the origination of such instruments and their expected realization.
NOTE 8 – COMMON STOCK AND COMMON SHARE
PURCHASE WARRANTS
Common Stock and Common Share Purchase Warrants
The Company is authorized to issue 500,000,000
common stock with a par value of $0.0001.
During
the year ended December 31, 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 3,430,173 non-registered shares of the Company's common
stock was issued for gross proceeds of $1,563,518.
For
the year ended December 31, 2017, the Company issued 600,203 shares in the common stock of the Company thorough the exercise of
warrants for gross proceeds of $226,042.
On December 15, 2016, the Company issued
379,921 shares through subscriptions of non-registered shares at $1.12 per common stock (C$1.50 per common stock) for net proceeds
of $401,285, net of a financing fee of $24,096. (C$537,601).
On October 12, 2016, the Company issued
1,129,711 shares through the exercise of 1,129,711 share purchase warrants raising gross proceeds of $427,985 (C$537,601).
On September 7, 2016, the Company's shareholders
approved a forward common stock split of 3.5 to 1.
On August 24, 2016, the Company completed
an offering of 233,331 non-registered shares, which reflects the forward split, at $1.16 per common stock (C$1.50 per common stock)
for aggregate gross proceeds of $270,479 (C$350,000).
On August 22, 2016,
the Company issued 9,345,000 common stock, which reflects the forward split, in respect of the reverse takeover transaction.
See note 3 for additional details.
On June 28, 2016,
Zoompass issued 8,060,913 shares, which reflects the forward split, to acquire certain net assets from a shareholder. See
note 3 for additional details.
On June 15, 2016, Zoompass issued 12,025,752
shares, which reflects the forward split, to the founders of Zoompass.
On June 8, 2016, Zoompass issued 5,250
common shares, which reflects the forward split, on the initial incorporation of the Company.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in US dollars)
Common Share Purchase Warrants
During the year ended December 31, 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 expired on September 1, 2017.
During the year ended December 31, 2017, on
October 27, 2017, the Company issued 332,996 warrants at an exercise price of C$0.50. Each warrant is exercisable into one share
of the common stock of the Company and expired on December 31, 2017.
On November 23, 2016, the Company issued 1,471,659
common share purchase warrants to certain individuals. Each warrant was exercisable into one common stock of the Company.
600,000 warrants are exercisable into one common stock of the Company until October 31, 2017, at an exercise price of C$0.50 which
reflects the forward split. 871,659 warrants were exercisable to November 30, 2016, at an exercise price of C$0.50, which reflects
the forward split. The exercise period was later amended by the Company to March 31, 2017. All of the warrants were
outstanding as at December 31, 2016.
The 871,659 warrants were assigned a fair value
of $647,168 using the Black-Scholes pricing model. The following assumptions were used: Risk free interest rate of
– 1.00; expected volatility of 140%, based on comparable companies; expected dividend yield – nil; expected life of
0.02 years. As a result of the amendment of the exercise period, the fair value was adjusted to $652,994 based on the following
assumptions: Risk free interest rate of – 1.00; expected volatility of 107%, based on comparable companies; expected
dividend yield – nil; expected life of 0.33 years.
On July 29, 2016, the Company issued 2,039,710
common share purchase warrants to certain individuals. Each warrant was exercisable into one common stock of the Company
until October 31, 2016, which reflects the forward split at an exercise price of C$0.50. As described above, 1,129,711 of
these warrants were exercised. The warrants were assigned a fair value of $1,566,362. As the warrants were not issued
in connection with an offering of shares, the fair value has been reflected in the consolidated statement of operations as share-based
payment expense
The weighted-average remaining contractual
term of the outstanding warrants is 0.08 years and the weighted-average exercise price is C$0.50.
NOTE 9– SHARE-BASED PAYMENTS
During the period ended December 31, 2016,
the Company issued 8,125,772 common shares of Zoompass to certain parties including management, which reflects the forward split.
As no consideration was received for these common shares, the fair value was recorded as share-based payment expense in the consolidated
statement of operations. The value of the shares given was based on recent financings.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in US dollars)
In December 2016, the Board of Directors and
stockholders, respectively, approved a Stock Incentive Plan (the "Plan"). Awards granted under the plan are up
to a maximum of 10% of the common shares issued and outstanding and can be issued in the form of an Option, Deferred Stock Unit,
Dividend Equivalent Right, Deferred Stock, or other right or benefit under the Plan and can be issued to officers, directors, employees
and consultants and any individual awardee would be subject to certain maximum grants under the plan. Awards granted would
be subject to certain conditions, such as vesting, which is determined by the Board of Directors.
On December 1, 2016, the Company issued 1,480,000
common stock purchase options at an exercise price of C$1.50 to directors, officers, employees and consultants of the Company.
562,500 of these options vest immediately and are exercisable for five years from the grant date. 917,500 of the options
are exercisable for five years from the grant date at an exercise price of C$1.50 and vest ratably over a three year period from
the date of grant.
On December 1, 2016, the Company issued 460,000
deferred stock units to directors, officers, employees and consultants of the Company and have a life of five years from date of
grant. 187,500 vest immediately and may be exercised by the recipient. Settlement of the deferred stock unit may be
in cash or common stock of the Company at the option of the Company the remaining awards vest ratably over a 36 month period from
the grant date.
The awards during the period ended December 31, 2016, consisted
of common stock, stock options and deferred stock units, which were granted to Directors, Officers, Employees and Consultants and
is noted in the table below.
The components of share-based payments expense
is detailed in the table below.
|
|
|
Date of grant
|
|
Contractual
life
|
|
Number
|
|
Exercise
price (C$)
|
Year ended
December 31, 2017
|
Period
ended
December 31, 2016
|
Share price (C$)
|
Risk-free rate
|
Volatility
|
Dividend yield
|
Expected life (years)
|
|
Share award
|
|
June 28, 2016
|
|
-
|
|
8,125,772
|
|
-
|
$-
|
$9,489,767
|
$1.50
|
-
|
-
|
-
|
-
|
|
Issuance of warrants
|
|
July 29, 2016
|
|
October 31, 2016
|
|
2,039,710
|
|
$0.50
|
-
|
1,566,362
|
$1.50
|
1%
|
100%
|
Nil
|
0.26
|
|
Issuance of warrants
|
|
November 23, 2016
|
|
October 31, 2017
|
|
600,000
|
|
$0.50
|
-
|
471,408
|
$1.50
|
1%
|
104%
|
Nil
|
0.94
|
|
Issuance of warrants
|
|
November 23, 2016
|
|
October 31, 2017
|
|
871,659
|
|
$0.50
|
-
|
647,168
|
$1.50
|
1%
|
140%
|
Nil
|
0.02
|
|
Amendment of warrants
|
|
November 30, 2016
|
|
March 31, 2017
|
|
871,659
|
|
$0.50
|
-
|
5,825
|
$1.50
|
1%
|
107%
|
Nil
|
0.33
|
|
Fully vested option grant
|
|
December 1, 2016
|
|
December 1, 2021
|
|
562,500
|
|
$1.50
|
-
|
493,080
|
$1.50
|
1%
|
108%
|
Nil
|
5.00
|
|
Fully vested deferred stock unit
|
|
December 1, 2016
|
|
December 1, 2021
|
|
187,500
|
|
$ -
|
-
|
210,961
|
$1.50
|
1%
|
108%
|
Nil
|
5.00
|
|
Warrant issuance
|
|
June 8, 2017
|
|
September 1, 2017
|
|
351,328
|
|
$0.50
|
$239,077
|
-
|
$1.42
|
1%
|
54%
|
Nil
|
0.23
|
|
Option grant
|
|
December 1, 2016
|
|
December 1, 2021
|
|
917,500
|
|
$1.50
|
243,890
|
22,038
|
$1.50
|
1%
|
108%
|
Nil
|
5.00
|
|
Deferred stock unit grant
|
|
December 1, 2016
|
|
December 1, 2021
|
|
272,500
|
|
N/A
|
136,241
|
8,401
|
$1.50
|
1%
|
108%
|
Nil
|
5.00
|
|
Warrant amendment
|
|
August 31, 2017
|
|
October 31, 2018
|
|
|
|
|
98,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$717,462
|
$12,915,010
|
|
|
|
|
|
On August 31, 2017, the Company amended the
expiry date of 600,000 warrants, extending them to October 31, 2018, all other terms remain unchanged.
As at December 31, 2017 the Company had the
following stock options and deferred stock units outstanding.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in US dollars)
|
Award
|
Fair Value
|
Contractual
Life (years)
|
Units
|
Number of units vested
|
Weighted Average Exercise Price (C$)
|
Remaining
Expiry
Date
|
|
Options
|
$493,080
|
3.92
|
562,500
|
562,500
|
0.50
|
December 1, 2021
|
|
Deferred stock units
|
210,961
|
3.92
|
187,500
|
187,500
|
-
|
December 1, 2021
|
|
Options
|
798,517
|
3.92
|
917,500
|
198,582
|
0.50
|
December 1, 2021
|
|
Deferred stock units
|
304,405
|
3.92
|
272,500
|
58,979
|
-
|
December 1, 2021
|
|
|
$1,806,963
|
3.92
|
1,940,000
|
1,007,561
|
|
|
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 $80,000 is reflected in prepaids and other current assets as at December 31, 2017 (December 31, 2016 - $130,000).
The total amount owing to the same shareholders,
in relation to the services they provide to the Company in their capacity as Officers at December 31, 2017 was $379,976 (December
31, 2016 - $186,818) which includes expense reimbursements. This amount is reflected in accounts payable and is further described
below.
As at December 31, 2017, the Company had an
amount owing to an entity owned and controlled by the Chief Executive Officer of the Company of $325,540 (December 31, 2016 - $127,073).
The amount owing relates to services provided by the Chief Executive Officer and expense reimbursements.
As at December 31, 2017, the Company had an
amount owing to an entity owned and controlled by the Secretary of the Company of $54,436 (December 31, 2016 - $59,745).
The amount owing relates to services provided by the Secretary and expense reimbursements.
As at December 31, 2017, the Company had an
amount owing to the President of the Company of $nil (December 31, 2016 - $28,092) for salary.
As at December 31, 2017, the Company had an
amount owing to an entity owned and controlled by the Chief Financial Officer of the Company of $nil (December 31, 2016 - $31,653).
The amount owing relates to services provided by the Chief Financial Officer.
A total of $357,556 was recognized during the
year ended December 31, 2017 (2016 - $2,868,702), for share-based payments expense to directors and officers of the Company.
A total of $2,868,702 was recognized during
the period ended December 31, 2016, for share-based payments expense to directors and officers of the Company.
As at December 31, 2017 and December 31, 2016,
the amounts owing to officers of the Company are recorded in accounts payable and accrued liabilities.
As previously noted in note 3, in June 2016,
the Company had acquired certain net assets from a shareholder of Zoompass.
See note 14 for additional subsequent
events.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
NOTE 11 – INCOME TAXES
A reconciliation of the differences between
the statutory Canadian income tax rate and the Company's effective tax rate is as follows:
For the year ended December 31, 2017, and during
the period ended December 31, 2016, the Company's long-term Canadian effective tax rate was 35%.
|
|
|
For the year ended
|
|
For the period ended
|
|
|
|
December 31, 2017
|
|
December 31, 2016
|
|
Net loss for the year before income taxes
|
|
$
|
(7,298,520
|
)
|
|
$
|
(14,004,013
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Expected income tax recovery
|
|
|
(2,554,482
|
)
|
|
|
(4,901,405
|
)
|
|
Impact of tax rate differences in foreign jurisdictions
|
|
|
527,069
|
|
|
|
879,845
|
|
|
Tax rate changes and other adjustments
|
|
|
67,004
|
|
|
|
45
|
|
|
Permanent differences
|
|
|
1,259,889
|
|
|
|
3,721,637
|
|
|
Change in valuation allowance
|
|
|
700,448
|
|
|
|
299,878
|
|
|
Total current year permanent items
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Changes in tax assets not recognized
|
|
|
|
|
|
|
-
|
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
A change in federal corporate income tax rate
form 35% to 21% was enacted in 2017 and effective January 1, 2018. For the year ending December 31, 2017, the rate does not impact
the calculation of current income tax liability but does impact the future rate to be applied to deferred income tax assets and
liabilities. As a result of tax rate, the company revalued its ending net deferred tax assets and liabilities at December 31,
2017 and recognized total amount of $nil as tax expense for the year ending December 31, 2017.
|
|
|
As at December 31,
|
|
|
|
2017
|
|
2016
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
107,946
|
|
|
$
|
48,300
|
|
|
Non-capital loss carryforwards - Canada
|
|
|
800,489
|
|
|
|
241,866
|
|
|
Exploration and development costs
|
|
|
-
|
|
|
|
2,513
|
|
|
Intangible assets
|
|
|
-
|
|
|
|
7,970
|
|
|
Property and equipment
|
|
|
57,536
|
|
|
|
|
-
|
|
|
|
|
1,005,790
|
|
|
|
300,649
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
|
Unrealized foreign exchange
|
|
|
(4,694)
|
|
|
|
-
|
|
|
|
|
|
(4,694)
|
|
|
|
-
|
|
|
Valuation allowance
|
|
|
(1001,096
|
)
|
|
|
(300,649
|
)
|
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
The Company has $138,001 of net operating loss
carryforwards in the US, expiring in 2036, and $376,027 expiring in 2037 and $912,072 non-capital loss carryforwards in Canada
also expiring in 2036 and 2,258,953expiring in 2037.
ZOOMPASS HOLDINGS, INC. (FORMERLY UVIC Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
NOTE 12 – COMMITMENTS AND CONTINGENCIES
At December 31, 2017, the Company leased office
space under a contract which ran to October 31, 2020. The amount due under this contract is as follows:
|
|
$
|
|
2018
|
160,152
|
|
2019
|
160,152
|
|
2020
|
133,460
|
|
|
453,764
|
Subsequent to December 31, 2017, the Company
no longer occupies the office space.
Contingencies
During the year ended December 31, 2017, the
Company learned that a class action complaint (the “Class Action Complaint”) had been filed against the Company, its
Chief Executive Officer and its Chief Financial Officer in the United States District Court for the District of New Jersey.
The Class Action Complaint alleges, inter alia, that defendants violated the federal securities laws by, among other things, failing
to disclose that the Company was engaged in an unlawful scheme to promote its stock. The Company has been served with the
Class Action Complaint. The Company has analyzed the Class Action Complaint and, based on that analysis, has concluded that
it is legally deficient and otherwise without merit. The Company intends to vigorously defend against these claims.
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.
Subsequent to the year end, 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.
Also after year end, the Company was served
with a third derivative action, was filed March 23, 2018, against the Company’s Directors and Chief Executive Officer, President,
and Corporate Secretary, and nominally against the Company, in Nevada state court. Subsequently, this case was removed to
federal court.
NOTE 13 – SEGMENT INFORMATION
During the year ended December 31, 2017, the
Company operated in two reportable operating segments prepaid cards and mobility products and solutions. In order to determine
reportable operating segments, the key decision makers review various factors including market factors, quantitative thresholds
and managerial structure. The assets attributed to the reporting segments are as follows:
|
|
|
Total Assets
|
|
Prepaid cards
|
|
$
|
2,612,506
|
|
|
Mobility solutions
|
|
|
463,089
|
|
|
Corporate
|
|
|
216,086
|
|
|
Total assets
|
|
$
|
3,291,681
|
|
NOTE 14 – SUBSEQUENT EVENTS
On March 6, 2018, the Company entered into an asset purchase
agreement to sell the prepaid card business for total consideration of C$200,000, 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.
On March 31, 2018, the Company issued a Secured
Convertible Promissory Note in the amount of $750,000. The note bears an interest rate of 18% per annum. The holders of the note
at any time have the option to convert the outstanding and unpaid principal of under the note into fully paid and non-assesable
shares of common stock of the Company at a conversion price of $0.10 per share.
On September 10, 2018, the note was converted
into 870,000 shares of common stock in the Company.
At the end of January 2018, the Company received
funds in the amount of $125,000 from shareholders and a former director of the Company. There were no terms of repayment and no
interest charged on the amount.
On October 17, 2018, Zoompass Holdings, Inc.
(the "Company") entered into an Asset Purchase Agreement (the "Asset Purchase Agreement") with Virtublock Global
Corp. ("virtublock") pursuant to which the Company acquired certain cryptocurrency Exchange/Wallet platform assets. Virtublock
will receive approximately 45% of the issued and outstanding shares of common stock of the Company, after giving effect to such
issuance, or approximately forty-four million nine hundred eleven thousand seven hundred and twenty four (44,911,724) shares of
the Company's common shares based on fifty-five million eighty-eight thousand two hundred seventy-six (55,088,276) shares outstanding.
The Asset Purchase Agreement
contains standard and customary representations, warranties and covenants. The Company's directors and officers Mahmoud (Moody)
Hashem and Nayeem Saleem Alli are principal shareholder of virtublock. The purchase price of the assets was set using the book,
or carrying value, of the assets, which was paid in shares of common stock of the Company.
