Item 2.03. Creation of a Direct Financial Obligation
or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
As previously reported by Innovative
Payment Solutions, Inc. (the “Company”), the Company entered into separate Securities Purchase Agreements, each dated February
16, 2021 (the “SPAs”), with each of Cavalry Fund I LP (“Cavalry”) and Mercer Street Global Opportunity Fund, LLC
(“Mercer”), pursuant to which the Company received $500,500 and $500,500 from Cavalry and Mercer, respectively, in exchange
for the issuance of: (i) Original Issue Discount 12.5% Convertible Notes (the “Notes” and each a “Note”) in the
principal amount of $572,000 to each of Cavalry and Mercer; and (ii) five-year warrants (the “Original Warrants”) issued to
each of Cavalry and Mercer to purchase 2,486,957 shares of the Company’s common stock (the “Common Stock”) at an exercise
price of $0.24 per share.
The Company has twice extended
its indebtedness to each Cavalry and Mercer. On February 3, 2022, the Company agreed to extend the agreement’s maturity date to
August 16, 2022. Additionally, on August 30, 2022, the Company entered an agreement for an additional extension to November 16, 2022.
In consideration for the second extension the Company agreed to (i) increase the principal amount outstanding and due to Cavalry and Mercer
under their respective Notes by twenty percent (20%) and (ii) issue to each of Cavalry and Mercer a new five-year warrant (each, an “Extension
Warrant”) to purchase an additional 3,000,000 shares of Company common stock at an exercise price of $0.15 per share. The Extension
Warrant contains the same terms and provisions in all material respects as the Original Warrants, except for difference in exercise price.
On December 30, 2022, the Company
further extended the maturity date of the Notes for each of Cavalry and Mercer to December 30, 2023. Each of Cavalry and Mercer
entered into separate Note Amendment Letter Agreements with the Company (the “Note Amendment”) pursuant to which the parties
agreed to the following:
(1) The
conversion price of the Notes was reduced from $0.15 to $0.0115 per share (such reduced conversion price being the current conversion
price of the Notes give the passage of the maturity date of the Notes). As a result of this change in conversion price, under the existing
terms of the Notes, the 3,000,000 shares of Common Stock underlying the Extension Warrants was increased to 39,130,435 shares of Common
Stock and the exercise price of the Extension Warrants was reduced to $0.0115 per share.
(2) The
Original Warrants issued on February 16, 2021 were irrevocably exchanged for 12-month non-convertible promissory notes issued to each
of Cavalry and Mercer in the amount of $482,000 each (the “Exchange Notes”). This exchange caused the cancellation of the
Original Warrants for all purposes. The Exchange Notes have a maturity date of December 30, 2023 and carry an interest rate of ten percent
(10%). The Company shall have the right, but not the obligation, in lieu of a cash payment upon maturity of the Exchange Notes, to issue
51,901,711 shares of the Common Stock, as adjusted for any stock splits, dividends or other similar corporate events, in full satisfaction
of its obligations under each of the Notes (or any pro rata portion of such number of shares in partial satisfaction of such obligations).
The Company shall be under no legal obligation to reserve such number of shares for future issuance.
(3) Each
of Cavalry and Mercer agreed (i) not to convert all or any portion of the Notes until after March 30, 2023 and (ii) waive any events of
default under the Notes and the SPA.
(4) Certain
other warrants held by Cavalry and Mercer which contain a mandatory exercise provision allowing the Company to force exercise of such
warrants if the price of the Common Stock is $0.06 per share or above were amended to reduce such forced exercise price to $0.04 per share.
(5) The
Company is obligated to register the shares of Common Stock underlying the Notes and the shares underlying all warrants held by Cavalry
and Mercer for resale with the Securities and Exchange Commission (the “SEC”), with the associated registration statement
to be filed by January 14, 2023 and be declared effective by January 29, 2023 (if such registration statement is not reviewed by the SEC)
or March 30, 2023 (if such registration statement is partially or fully reviewed by the SEC).
The parties also acknowledged
that the principal and accrued interest under the Notes as of December 28, 2022 is equal to an aggregate of $2,264,784, or $1,132,392
for each of Cavalry and Mercer. In addition, as a result of the reduction in the conversion price of the Note, certain other warrants
held by third parties will have the exercise price of such warrants reduced to $0.0115 per share.
The Exchange Notes in favor
of Cavalry and Mercer are filed as Exhibits 4.1 and 4.2 to this Current Report, respectively. The Note Amendments between the Company
and each of Cavalry and Mercer are filed as Exhibits 10.1 and 10.2 to this Current Report, respectively. The foregoing description
of the terms and provisions of the Exchange Notes and the Note Amendments is a summary only, does not purport to be complete, and is qualified
in its entirety by reference to the full text of such documents, which text is incorporated herein by reference.
