Forward-looking Statements
This Quarterly Report on Form 10-Q contains statements reflecting assumptions,
expectations, projections, intentions or beliefs about future events that are
intended as "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements included or
incorporated by reference in this Quarterly Report on Form 10-Q, other than
statements of historical fact, that address activities, events or developments
that the Company expects, believes or anticipates will or may occur in the
future are forward-looking statements. These statements appear in a number of
places, including, but not limited to in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations." These statements
represent our reasonable judgment of the future based on various factors and
using numerous assumptions and are subject to known and unknown risks,
uncertainties and other factors, including the impact of the coronavirus
(COVID-19) pandemic on our business, that could cause our actual results and
financial position to differ materially from those contemplated by the
statements. You can identify these statements by the fact that they do not
relate strictly to historical or current facts, and use words such as
"anticipate," "believe," "estimate," "expect," "forecast," "may," "will",
"should," "plan," "project" and other words of similar meaning. In particular,
these include, but are not limited to, statements relating to the following:
· Projected operating or financial results, including anticipated cash flows used
in operations
· Expectations regarding capital expenditures; and
· Assumptions relating to our liquidity position, including our ability to obtain
additional financing, if required.
· Any or all of our forward-looking statements may turn out to be wrong. They can
be affected by inaccurate assumptions or by known or unknown risks,
uncertainties and other factors including, among others:
· The loss of key management personnel on whom the Company depends;
· Our ability to operate our business efficiently, manage capital expenditures
and costs (including general and administrative expenses) and obtain financing
if required.
· Our expectations with respect to our acquisition activity.
In addition, there may be other factors that could cause our actual results to
be materially different from the results referenced in the forward-looking
statements, some of which are included in this Quarterly Report on Form 10-Q,
including in this "Management's Discussion and Analysis of Financial Condition
and Results of Operations." Many of these factors will be important in
determining our actual future results. Consequently, no forward-looking
statement can be guaranteed. Our actual future results may vary materially from
those expressed or implied in any forward-looking statements. All forward-
looking statements contained in this Quarterly Report on Form 10-Q are qualified
in their entirety by this cautionary statement. Forward-looking statements speak
only as of the date they are made, and the Company disclaims any obligation to
update any forward-looking statements to reflect events or circumstances after
the date of this Quarterly Report on Form 10-Q, except as otherwise required by
applicable law.
This discussion and analysis should be read in conjunction with the accompanying
unaudited condensed consolidated interim financial statements and related notes
for the period ended March 31, 2020 as filed with the Securities and Exchange
Commission and included in this Form 10-Q and the financial statements and
management discussion and analysis for the year ended December 31, 2019.
The discussion and analysis of the financial condition and results of operations
are based upon the financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United States ("U.S.
GAAP"). The preparation of financial statements in conformity with U.S. GAAP
requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosure of any contingent liabilities at the
financial statement date and reported amounts of revenue and expenses during the
reporting period. On an on-going basis management reviews our estimates and
assumptions. The estimates were based on historical experience and other
assumptions that management believes to be reasonable under the circumstances.
Actual results are likely to differ from those estimates under different
assumptions or conditions.
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Nature of Operations
Zoompass Holdings, Inc. formerly known as UVIC. Inc. ("Zoompass Holdings" or the
"Company") was incorporated under the laws of the State of Nevada on August 21,
2013. Effective August 22, 2016, the Company entered into an Agreement for the
Exchange of Stock (the "Agreement") with Zoompass, Inc., an Ontario, Canada
corporation ("Zoompass"). Pursuant to the Agreement, the Company agreed to issue
8,050,784 shares of its restricted common stock to Zoompass' shareholders
("Zoompass' shareholders") in exchange for all the shares of Zoompass Inc. owned
by the Zoompass Inc.'s Shareholders. At the Closing Date, Rob Lee, a significant
shareholder of the Company agreed to cancel 7,000,000 shares of the Company's
common stock, which shares constituted the control shares of the Company. Other
than this one significant shareholder, shareholders of the Company held
2,670,000 shares. As a result of the Agreement, Zoompass is now a wholly owned
subsidiary of the Company. The Company has amended its Articles of Incorporation
to change its name to Zoompass Holdings, Inc. and the appropriate forms were
filed with FINRA and the SEC to change its name, address and symbol and complete
a 3.5-1 forward split, which was consented to by the majority of shareholders on
September 7, 2016 and approved in February 2017, for shareholders of record on
September 7, 2016.
All share figures have been retroactively stated to reflect the stock split
approved by shareholders, unless otherwise indicated. Additionally, the
Company's shareholders consented to an increase of the shares authorized to
500,000,000 and a revision of the par value to $0.0001.
As the former Zoompass shareholders ended up owning the majority of the Company,
the transaction does not constitute a business combination and was deemed to be
a recapitalization of the Company with Zoompass being the accounting acquirer,
accordingly the accounting and disclosure information is that of Zoompass going
forward.
Effective March 6, 2018 (the "Closing Date"), Zoompass Holdings, Inc.'s (the
"Company") Canadian operating subsidiary, Zoompass, Inc., entered into an Asset
Purchase Agreement (the "Agreement") for the sale of its Prepaid Card Business
("Prepaid Business") to Fintech Holdings North America Inc., or its designee.
The aggregate purchase price of the Prepaid Business was C$400,000. The
transaction was completed on March 26, 2018.
During the first fiscal quarter of 2018, the Company implemented a plan to
abandon the mobility solution operation. The Company has determined that the
mobility solution operation represents a component and a reportable segment of
the Company. According to the plan of abandonment, the Company gradually ceased
accepting any new business during first fiscal quarter of 2018 and settled all
the remaining orders and obligations from mobility solution by end of March
2018.
On October 17, 2018, the Company purchased certain business assets that
represents a business from Virtublock Global Corp. ("Virtublock", "VGC") in
return the Company issued 44,911,724 shares to Virtublock and pursuant to the
issuance of shares Virtublock ended up owning 45% of total outstanding common
shares of the Company.
Zoompass Inc., was incorporated under the laws of Ontario on June 8, 2016. On
October 17, 2018, pursuant to an asset purchase agreement with Virtublock,
certain business assets were acquired by the Company in exchange for shares of
the Company. The net assets primarily consisted of certain technology IP
related to cryptocurrency exchange/wallet, certain strategic partnerships and
customer contracts. On March 25, 2019, the name of the company was changed from
Zoompass Inc. to Virtublock Canada Inc. ("VCI").
On February 27, 2020, the Company cancelled 44,911,724 shares of the common
stock which were issued in connection with the asset purchase agreement dated
October 17, 2018 with Virtublock Global Corp. Pursuant to a General Release
agreement dated November 29, 2019, the asset purchase agreement dated October
17, 2018 with Virtublock Global Corp. was deemed cancelled and each party
acknowledged and agreed that no party has or shall have any claim with respect
to intellectual property, software or other assets owned by any other party and
that no agreements exist or remain unsatisfied with respect to the transfer of
any asset from a releasing party to any other party, and Virtublock Global Corp.
assigned and tendered the 44,911,724 shares of common stock of the Company to
the Company for cancellation. Accordingly, $4,491 was transferred from common
stock to additional paid in capital with a corresponding reduction in the number
of common shares outstanding.
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The Company is a Software Fintech company and continue to develop and acquire
software platforms and services to sell to customers globally with a focus on
leading edge technologies and software as a service.
The Company, as part of its business, will seek opportunities to acquire
software companies with existing revenue streams.
The Company has incurred recurring losses from operations and as of March 31,
2020 and December 31, 2019, had net working capital deficiency and an
accumulated deficit. The Company's continued existence is dependent upon its
ability to continue to execute its operating plan and to obtain additional debt
or equity financing. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. There can be no assurance that
the necessary debt or equity financing will be available, or will be available
on terms acceptable to the Company, in which case the Company may be unable to
meet its obligations. Should the Company be unable to realize its assets and
discharge its liabilities in the normal course of business, the net realizable
value of its assets may be materially less than the amounts recorded in the
condensed consolidated financial statements. The condensed consolidated
financial statements do not include any adjustments relating to the
recoverability of recorded asset amounts that might be necessary should the
Company be unable to continue in existence.
There is no certainty that the Company will be successful in generating
sufficient cash flow from operations or achieving and maintaining profitable
operations in the future to enable it to meet its obligations as they come due
and consequently continue as a going concern. The Company will require
additional financing this year to fund its operations and it is currently
working on securing this funding through corporate collaborations, public or
private equity offerings or debt financings. Sales of additional equity
securities by the Company would result in the dilution of the interests of
existing shareholders. There can be no assurance that financing will be
available when required.
The Company expects the forgoing, or a combination thereof, to meet the
Company's anticipated cash requirements for the next 12 months; however, these
conditions raise substantial doubt about the Company's ability to continue as a
going concern.
These unaudited interim condensed consolidated financial statements have been
prepared on the basis that the Company will continue as a going concern, which
presumes that it will be able to realize its assets and discharge its
liabilities in the normal course of business as they come due. These unaudited
interim condensed consolidated financial statements do not reflect the
adjustments to the carrying values of assets and liabilities and the reported
expenses and condensed consolidated balance sheets classifications that would be
necessary if the Company were unable to realize its assets and settle its
liabilities as a going concern in the normal course of operations. Such
adjustments could be material.
Significant Accounting Policies and Estimates
The significant accounting policies and estimates have been disclosed in the
note 2 of the unaudited interim condensed interim consolidated financial
statements.
The discussion and analysis of the financial condition and results of operations
are based upon the interim condensed consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires us to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of any contingent liabilities at the financial statement
date and reported amounts of revenue and expenses during the reporting period.
On an on-going basis management reviews our estimates and assumptions. The
estimates were based on historical experience and other assumptions that
management believes to be reasonable under the circumstances. Actual results are
likely to differ from those estimates under different assumptions or conditions,
but management does not believe such differences will materially affect our
financial position or results of operations.
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Results of operations for the three months ended March 31, 2020
Revenue and cost of sales
The Company did not recognize any revenue for three months ended March 31, 2020
and 2019.
General and administrative and other expenses
Salaries and consultant expenses were $32,553 for the three months ended March
31, 2020 compared with $$47,062 for the same period last year. Salaries and
consultant expenses were lower in the three months ended March 31, 2020 because
the number of employees and consultants during the period were lower compared
with the three months ended March 31, 2019, as a result of changes in management
team.
Rent and occupancy costs were $1,118 during the three months ended March 31,
2020 compared with $$2,996 in the same period last year. The decrease was due to
change in office location of the company during the period.
The share-based payment expense was $416,587 compared with $177,000 in the same
period last year. During the three months March 31, 2020 the company issued
2,000,000 shares in a fair value of $250,000 to new Chief Executive of the
company. The company issued 1,160,00 shares in a fair value of 145,000 to arm's
length third parties as compensation for services. The Company granted 3,000,000
and 2,000,000 stock options to officers, directors and consultant of the Company
on January 15, 2020 and March 11, 2020 respectively and those stock options
would vest over 3-year period, the fair value of vested options during the three
months ended March 31, 2020 was in amount of $21,587.
There is no depreciation and amortization expense for the period ended March 31,
2020 and March 31, 2019.
Professional fees include audit and fee and in line with the amount for the
prior period.
Office and sundry expense include office expenses such as supplies, insurance
and additional costs incurred to support the corporate head office in addition
to travel costs. The decrease is primarily attributed to change in the nature of
operations and lower operating expenses.
Filing fees and regulatory costs are costs associated with the Company's listing
fees and transfer agent costs. These costs are significantly higher than
corresponding period last year because the Company paid listing fees and
incurred expenses on regulatory filings during the period.
The Company recognized a net loss of $619,241 or loss from per share $0.006 for
the three months ended March 31, 2020. The Company recognized a net loss of
$251,791 or loss per share $0.002 for the three months ended March 31, 2019.
Liquidity and Capital Resources
As at March 31, 2020, the Company had $4,579 in cash and cash equivalents
compared with $21,477 as at December 31, 2019.
Operations for three month ended March 31, 2020 were primarily financed through
the issuance of shares in the common stock of the Company.
There is no certainty that we will be successful in generating sufficient cash
flow from operations or achieving and maintaining profitable operations in the
future to enable us to meet our obligations as they come due and consequently
continue as a going concern. The Company may require additional funds to further
develop our expanded business plan. The Company may require additional
financing this year to fund our operations and is examining possible sources of
funding beyond the existing cash generated from operations. Sales of additional
equity securities would result in the dilution of the interests of existing
stockholders.
There can be no assurance that financing will be available when required. In the
event that the necessary additional financing is not obtained, the Company would
reduce its discretionary overhead costs substantially, or otherwise curtail
operations.
The Company expects the forgoing, or a combination thereof, to meet our
anticipated cash requirements for the next 12 months; however, these conditions
raise substantial doubt about our ability to continue as a going concern. The
accompanying unaudited interim condensed financial statements do not include any
adjustments to reflect the possible future effects on recoverability and
reclassification of assets or the amounts and classification of liabilities that
may result from the outcome of this uncertainty.
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Net Cash Used in Operating Activities
During the periods ended March 31, 2020, and 2019, $126,366 and $48,912 in cash,
respectively, was used for operations. For both periods, the cash used in
operations was primarily the result of the net loss and change in non-cash
working capital.
Net Cash Provided by Investing Activities
During the periods ended March 31, 2020 and 2019, no cash was generated from or
used in investing activities.
Net Cash Provided by Financing Activities
For the period ended March 31, 2020 the Company raised $151,584 from the
issuance of shares and repaid $37,262 to related party. For the period ended
March 31, 2019 the Company did not generate or use cash in financing activities.
Financial instruments and risk factors
The Company has exposure to liquidity, foreign currency, Credit, and Interest
Rate risk. The Company's risk management objective is to preserve and redeploy
the existing treasury as appropriate, ultimately to protect shareholder value.
Risk management strategies, as discussed below, are designed and implemented to
ensure the Company's risks and the related exposure are consistent with the
business objectives and risk tolerance.
The Governments of Canada and the United States, as well as other foreign
governments instituted emergency measures as a result of the COVID-19 virus
outbreak. The virus has had a major impact on North America and international
securities, currency markets and consumer activity which may impact the
Company's financial position, its results of future operations and its future
cash flows significantly. Given the daily evolution of the COVID-19 outbreak and
the global responses to curb its spread, the Company is not able to estimate the
effects of the COVID-19 outbreak on its results of future operations, financial
position, and liquidity for the period ended March 31, 2020.
Liquidity Risk: Liquidity risk is the risk that the Company will not be able to
meet its financial obligations as they come due. The Company manages its
liquidity by ensuring that there is sufficient capital to meet short and
long-term business requirements, after taking into account cash requirements
from operations and the Company's holdings of cash and cash equivalents. The
Company also strives to maintain sufficient financial liquidity at all times in
order to participate in investment opportunities as they arise, as well as to
withstand sudden adverse changes in economic circumstances.
Management forecasts cash flows for its current and subsequent fiscal years to
predict future financing requirements. Future requirements may be met through a
combination of credit and access to capital markets. The Company's cash
requirements are dependent on the level of operating activity, a large portion
of which is discretionary. Should management decide to increase its operating
activity, more funds than what is currently in place would be required. It is
not possible to predict whether financing efforts will be successful or
sufficient in the future. At March 31, 2020, the Company had $4,579 in cash and
cash equivalents (December 31, 2019 - $21,477).
Currency risk: The Company's expenditures are incurred in Canadian and US
dollars. The results of the Company's operations are subject to currency
translation risk. The Company mitigates foreign exchange risk through
forecasting its foreign currency denominated expenditures and maintaining an
appropriate balance of cash in each currency to meet the expenditures. As the
Company's reporting currency is the US dollar, fluctuations in US dollar will
affect the results of the Company.
Credit risk: Credit risk is the risk of loss associated with a counterparty's
inability to fulfill its payment obligations. As at March 31, 2020, the
Company's credit risk is primarily attributable to cash and cash equivalents. At
March 31, 2020, the Company's cash and cash equivalents were held with reputable
Canadian chartered banks.
Interest Rate risk: Interest rate risk is the risk borne by an interest-bearing
asset or liability as a result of fluctuations in interest rates. Financial
assets and financial liabilities with variable interest rates expose the Company
to cash flow interest rate risk. The Company's does not have significant
interest rate risk.
Fair Values: The carrying amounts reported in the condensed consolidated
balance sheets for cash and cash equivalents, cash held in trust and customer
deposits, accounts receivables, accounts payable and client funds approximate
fair value because of the short period of time between the origination of such
instruments and their expected realization.
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Related Party Transactions
The balances of due to related party corporations at March 31, 2020 represent
advances from related party corporations which is non-interest bearing,
non-secured and due on demand.
The total amount owing to the former directors and officers of the Company and
corporations controlled by the former directors and officers, in relation to the
services they provided to the Company in their capacity as Officers and service
provider at March 31, 2020 was $54,436 (December 31, 2019 - $319,969) which
includes expense reimbursements. This amount is reflected in accounts payable
and is further described below.
As at March 31, 2020, the Company had an amount owing to Chief Executive Officer
of the Company of $7,083 (December 31, 2019 - $Nil). The amount owing relates to
services provided by the Chief Executive Officer.
As at March 31, 2020, the Company had an amount owing to an entity owned and
controlled by the former Chief Executive Officer of the Company of $Nil
(December 31, 2019 - $265,533). The amount owing relates to services provided by
the former Chief Executive Officer and expense reimbursements. During three
months period ended March 31, 2020, the Company issued 3,319,162 shares of the
common stock and settled the owing owed by the Company. The fair value of these
shares, in amount of 232,342, was determined by using the market price of the
common stock as at the date of issuance. The Company recognized a Gain on
settlement of debt in amount of $33,191 in statement of operations.
As at March 31, 2020, the Company had an amount owing to an entity owned and
controlled by the former Secretary of the Company of $54,436 (December 31, 2019
- $54,436). The amount owing relates to services provided by the former
Secretary and expense reimbursements.
During the three months ended March 31, 2020, $271,587 (Issuance of shares for
service - 250,000, stock options expenses - $21,587) was recognized for
share-based payments expense to directors, officers and related parties of the
Company. No expense for share based payments to directors and officers was
recognized during the three months ended March 31, 2019.
As at March 31, 2020 and December 31, 2019, the amounts owing to officers of the
Company are recorded in accounts payable and accrued liabilities.
Newly Adopted And Recently Issued Accounting Pronouncements
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic
848): Facilitation of the Effects of Reference Rate Reform on Financial
Reporting, which provides optional expedients and exceptions for applying
generally accepted accounting principles (GAAP) to contracts, hedging
relationships, and other transactions affected by reference rate reform if
certain criteria are met. The amendments apply only to contracts, hedging
relationships, and other transactions that reference LIBOR or another reference
rate expected to be discontinued because of reference rate reform. The
amendments are effective for all entities as of March 12, 2020 through December
31, 2022. The Company is currently evaluating the impact this guidance may have
on the condensed consolidated financial statements and related disclosures.
On January 1, 2019, the Company adopted Accounting Standards Codification Topic
842, "Leases" ("ASC 842") to replace existing lease accounting guidance. This
pronouncement is intended to provide enhanced transparency and comparability by
requiring lessees to record right-of-use assets and corresponding lease
liabilities on the balance sheet for most leases. Expenses associated with
leases will continue to be recognized in a manner similar to previous accounting
guidance. The Company adopted ASC 842 utilizing the transition practical
expedient added by the Financial Accounting Standards Board ("FASB"), which
eliminates the requirement that entities apply the new lease standard to the
comparative periods presented in the year of adoption. The Company is the lessee
in a lease contract when the Company obtains the right to use the asset.
Operating leases are included in the line items right-of-use asset, lease
obligation, current, and lease obligation, long-term in the condensed
consolidated balance sheet. Right-of-use ("ROU") asset represents the Company's
right to use an underlying asset for the lease term and lease obligations
represent the Company's obligations to make lease payments arising from the
lease, both of which are recognized based on the present value of the future
minimum lease payments over the lease term at the commencement date. Leases with
a lease term of 12 months or less at inception are not recorded on the condensed
consolidated balance sheets and are expensed on a straight-line basis over the
lease term in our condensed consolidated statement of operations and
comprehensive loss. The Company determines the lease term by agreement with
lessor. As our current operating lease of office space, at the commencement, has
a term of less than 12 months, the Company elects not to apply the recognition
requirements of ASC 842 to the short-term lease, instead lease payments are
recognized in statement of operations on a straight-line basis over the lease
term.
Off Balance Sheet Arrangements
Company does not have any off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that are material to our
investors.
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Subsequent Events
The Company's management has evaluated subsequent events up to May 14, 2020, the
date the unaudited interim condensed consolidated financial statements were
issued, pursuant to the requirements of ASC 855 and has determined the following
material subsequent events:
In April 2020, the Company issued 300,000 non-registered shares of the Company's
common stock for a private placement completed during three months ended March
31, 2020.
On April 20, 2020, the Company entered into a Share Exchange Agreement with
Blockgration Global Corp. ("BGC") and the shareholders of BGC. Pursuant to the
Share Exchange Agreement, the Company agreed to exchange 100% of the outstanding
equity stock of BGC held by shareholders of BGC for shares of common stock of
the Company. Under the terms of the agreement, the Company will issue fifty
million (50,000,000) newly issued shares of the common stock and seventy-five
million (75,000,000) share purchase warrants to the shareholders of BGC. Each
warrant is exercisable into one common share of the Company at an exercise price
of $0.25 within three years of the issue date.
Under the terms of the agreement, 25,000,0000 shares and 6,250,000 warrants will
be issued on the closing date. A second tranche of 25,000,0000 shares and
6,250,000 warrants will be issued on the closing date and will be held in
escrow. These shares and warrants will be released from escrow between June 30,
2020 and December 31, 2020, upon achieving certain milestones. The remaining
62,500,000 warrants will be issued on the closing date and will be released from
escrow within 90 days of the end of fiscal year 2021. The acquiree has the
opportunity of earing bonus shares both in 2020 and 2021, subject to achieving
targets as laid out in the agreement.
As a result of the Share Exchange Agreement, BGC will become a wholly owned
subsidiary of the Company. With this acquisition, the Company will acquire
controlling interest in BGC's three subsidiaries in India and one subsidiary in
Canada. BGC and its subsidiaries are engaged in the business of digital wallet
deployments, prepaid card platform, blockchain and mobile apps development.
Impact of COVID-19:
The unprecedented and rapid spread of COVID-19 and the measures implemented to
contain it have created a significant amount of economic volatility around the
globe. We have taken steps to ensure the health and safety of our employees and
continued service to our customers and partners, while at the same time seeking
to mitigate the impact of the pandemic on our financial condition and results of
operations. While the duration and extent of the impact from the COVID19
pandemic depends on future developments that cannot be accurately predicted at
this time and the ultimate business and economic impact remains unknown, the
conditions caused by this pandemic could adversely affect demand for our
products and services, all of which could adversely affect our business, results
of operations and financial condition.
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