Indicate by check mark if registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act. Yes ☐
No☒.
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 ☒ .
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 ☒
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 ☒
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. ☒
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 April 9, 2020 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, 2019, 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 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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|
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Low
|
|
|
FISCAL YEAR ENDED DECEMBER 31, 2019:
|
|
|
|
|
|
|
|
Fourth Quarter
|
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$
|
0.13
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|
|
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0.05
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4
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|
Third Quarter
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|
|
0.15
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|
|
|
0.05
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8
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|
Second Quarter
|
|
|
0.13
|
|
|
|
0.05
|
|
|
First Quarter
|
|
|
0.205
|
|
|
|
0.10
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|
|
|
|
|
|
|
|
|
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|
FISCAL YEAR ENDED DECEMBER 31, 2018:
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Fourth Quarter
|
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$
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0.12
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|
|
|
0.07
|
|
|
Third Quarter
|
|
|
0.09
|
|
|
|
0.07
|
|
|
Second Quarter
|
|
|
0.16
|
|
|
|
0.08
|
|
|
First Quarter
|
|
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0.23
|
|
|
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0.14
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(1)
|
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 April 9, 2020, the Company had 104 active
stockholders of record and 73,101,349 shares 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
During January 2018,
the Company completed a private placement for the sale of non-registered shares of the Company's common stock. As a result of the
private placement 200,000 non-registered shares of the Company's common stock was issued for proceeds of $40,671.
During April 2018,
the Company completed several private placements for the sale of non-registered shares of the Company's common stock. As a result
of these private placements 687,500 non-registered shares of the Company's common stock was issued for proceeds of $39,672.
On April 11, 2018,
the company issued 1,500,000 shares of the common stock to a corporation controlled by an officer of the company as compensation
for services rendered, and on April 14, 2018, the company issued 1,000,000 shares of the common stock to a current officer of the
company who at that time was an arm’s length consultant, as compensation for services rendered. The fair value of these shares
was determined by using the market price of the common stock as at the date of issuance.
On September 10, 2018,
the Company issued 8,370,000 shares of the common stock to various arm’s length third parties upon settlement of promissory
notes.
On October 17, 2018,
the Company issued 44,911,724 shares of the common stock in respect of the assets purchase from Virtublock Global Corp.
During the months
of November and December 2018, the Company completed several private placements for the sale of non-registered shares of the Company's
common stock. As a result of these private placements 5,450,000 non-registered shares of the Company's common stock was issued
for proceeds of $399,483.
On January 20, 2019,
the company issued 1,000,000 shares of the common stock to a consultant as compensation for services rendered, and on April 20,
2019, the company issued 500,000 shares of the common stock to a consultant as compensation for services rendered. The fair value
of these shares was determined by using the market price of the common stock as at the date of issuance.
In May 2019, the Company
completed several private placements for the sale of non-registered shares of the Company's common stock. As a result of these
private placements 1,038,461 non-registered shares of the Company's common stock was issued for proceeds of C$135,000.
In July 2019, the
Company completed a private placement for the sale of non-registered shares of the Company's common stock. As a result of the private
placement 500,000 non-registered shares of the Company's common stock was issued for proceeds of C$55,000.
In August 2019, the Company completed
a private placement for the sale of non-registered shares of the Company's common stock. As a result of the private placement
500,000 non-registered shares of the Company's common stock was issued for proceeds of $50,000.
In December 2019, the Company completed
a private placement for the sale of non-registered shares of the Company's common stock. As a result of the private placement 757,575
non-registered shares of the Company's common stock was issued for proceeds of $39,041.
In January 2020, the
Company issued 757,575 non-registered shares of the Company's common stock. The net proceeds in amount of $34,091 was received
in December 31, 2019.
In January 2020, the
Company completed a private placement for the sale of non-registered shares of the Company's common stock. As a result of the private
placement 3,030,300 non-registered shares of the Company's common stock was issued for gross proceeds of $151,515.
In January 2020, the
Company issued 3,319,162 shares of the common stock to settle a debt owed by the company in amount $265,533. The $265,533 debt
was owed to a corporation controlled by a former Chief Executive Officer of the company. The fair value of these shares was determined
by using the market price of the common stock as at the date of issuance.
In March 2020, the
company issued 1,160,000 shares of the common stock to as compensation for services rendered. The fair value of these shares was
determined by using the market price of the common stock as at the date of issuance.
In March 2020, the
Company completed a private placement for the sale of non-registered shares of the Company's common stock. As a result of the private
placement 300,000 non-registered shares of the Company's common stock will be issued for gross proceeds of $15,000.
Purchases of Our Equity Securities
No repurchases of our common stock were made
during our fiscal year ended December 31, 2019.
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
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 reached an Asset Purchase Agreement and 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 net 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.
As the share cancellation occurred on February 27, 2020, the accounting recognition of this transaction, consisting of a transfer
of $4,492 from common stock to additional paid-in capital and related reduction in the number of common shares outstanding, will
be reflected in the consolidated financial statements for the first quarter ended March 31, 2020.
The Company is actively
seeking opportunities to enter into partnership or acquire third parties with existing revenue streams. The company is well positioned
to achieve this objective and will continue to pursue such opportunities going forward.
The Company will remain
a 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 has incurred
recurring losses from operations and as of December 31, 2019 had a 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 consolidated financial statements. The 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.
In January 2020, the Company completed a private
placement for the sale of non-registered shares of the Company's common stock. As a result of the private placement 3,030,300 non-registered
shares of the Company's common stock was issued for gross proceeds of $151,515.
In March 2020, the Company completed a private
placement for the sale of non-registered shares of the Company's common stock. As a result of the private placement 300,000 non-registered
shares of the Company's common stock will be issued for gross proceeds of $15,000.
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.
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.
For the year ended
December 31, 2019, the Company incurred a net loss of $615,256 (2018 - $ 6,236,176).
The Company may incur additional operating
losses for the 2020 fiscal year.
Beginning
in March 2020, 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 in fiscal year 2020.
Results of operations
for the year ended December 31, 2019 and for the period ended December 31, 2018
Revenue and cost
of sales
During the year ended
December 31, 2019, the Company has not generated revenue and incurred no cost of sales.
During the year ended
December 31, 2018, the Company discontinued its prepaid card business via disposal and its mobility solution business via abandonment.
For the year ended December 31, 2018, the Company had gross prepaid card revenue of $97,861 and mobility products revenue of $323,074
and $40,350 from mobility product commissions. Net of commissions and agent fees the Company recognized net revenue of $434,947.
The cost of sales was $469,947 for year ended December 31, 2018.
Up to March 31, 2018,
The Company's revenue consisted 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.
General and administrative
and other expenses
For the year ended
December 31, 2019, the Company incurred $266,433 (Continued operations - $266,433; Discontinued operations - $NIL) in salaries
and consultant costs. For the year ended December 31, 2018, the Company incurred $354,684 (Continued operations - $354,684; Discontinued
operations - $NIL) in salaries and consultant costs. The decrease was due to the reduction of the Company’s headcount during
the year 2019 as a result of the discontinuation of its prepaid card business and mobility solution business.
Share-based payment expense was $227,000 for the year ended December
31, 2019, compared with $863,324 for the year ended December 31, 2018. The decrease was due to decreased level of activity in 2019
and issuance of stock options and shares as compensation when compared with December 2018.
Depreciation and amortization
expenses were $NIL for the year ended December 31, 2019 compared with $NIL for the year ended December 31, 2018, as a result of
the sale of its prepaid card business.
For the year ended
December 31, 2019 the Company incurred $168,429 in professional fees compared with $215,420 due to a reduction in legal costs during
2019.
Filing fees and regulatory
costs were $4,892 for the year ended December 31, 2019 compared with $18,769 year ended December 31, 2018.
Net bank fees for
the year ended December 31, 2019 were $1,323 compared with $14,291 for the year ended December 31, 2018 as a result of reduced
operations during 2019 compared with the year 2018.
For the year
ended December 31, 2019, the Company incurred a net loss of $Nil from discontinued operations compared with a net loss of $430,271
for 2018. For the year ended December 31, 2019, the Company incurred a net loss of $615,256 from continuing operations compared
with a net loss of $5,805,905 for 2018.
For year
ended December 31, 2018, the impairment provision related to intangible assets and goodwill was $3,458,203 which was included
in continuing operations. For year ended December 31, 2019, the recovery of doubtful account was 163,872 compared to allowance
of $192,305 for 2018. In 2018, included in the net loss from discontinued operation, the loss on disposal of assets was $13,682.
The loss per share
from continuing operations is 0.006 and 0.100 for year ended December 31, 2019 and 2018 respectively. The loss per share from discontinued
operations is 0.000 and 0.007 for year ended December 31, 2019 and 2018 respectively.
Liquidity and Capital
Resources
As at December 31,
2019, the Company had $21,477 in cash and cash equivalents compared with $36,075 as at December 31, 2018.
Operations for the
year ended December 31, 2019 were primarily financed through the issuance of shares in the common stock of the Company and advances
from related party corporations. Operations for the year ended December 2018 were primarily financed through the issuance of shares
in the common stock of the Company, and the issuance of promissory notes.
There is no certainty
that we will be successful in generating sufficient cash flow from operations or achieving and maintaining profitable operations
in the future to enable us to meet our obligations as they come due and consequently continue as a going concern. The Company may
require additional funds to further develop our expanded business plan. The Company may require additional financing this
year to fund our operations and is examining possible sources of funding beyond the existing cash generated from operations.
Sales of additional equity securities would result in the dilution of the interests of existing stockholders. There can be no assurance
that financing will be available when required. In the event that the necessary additional financing is not obtained, the Company
would reduce its discretionary overhead costs substantially, or otherwise curtail operations.
Net Cash Used
in Operating Activities
During the years ended
December 31, 2019 and 2018, $538,609 and $1,276,582 in cash, respectively, was used for operations.
Net Cash
Provided by Investing Activities
During the year ended
December 31, 2019, the Company generated $nil from investing activities compared with cash provided in investing activities of
$152,871 for year ended December 31, 2018.
Net Cash Provided
by Financing Activities
For the year ended December 31, 2019 the Company
raised $264,337 from the issuances of shares of its common stock and received advances in amount of $286,188 from related party
corporations.
For the year ended December 31, 2018, $479,826
was raised from issuance of shares of its common stock and $477,402 through the issuance of a promissory note. Additionally, the
$837,000 was raised of promissory notes.
Commitments
There were no commitments
as of December 31, 2019. At December 31, 2018, the Company sub-leased office space under a contract which ran to October 31, 2019.
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, 2019, the Company had $21,477 in cash and cash equivalents (December 31, 2018 - $36,075).
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, 2019.
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2020
|
|
2021 and later
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
710,430
|
|
|
$
|
—
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|
|
Due to related party corporations
|
|
|
100,201
|
|
|
|
|
|
|
|
|
$
|
810,631
|
|
|
$
|
—
|
|
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 December 31, 2019, the Company's credit
risk is primarily attributable to cash and cash equivalents, and accounts receivable. At December 31, 2019, the Company's cash
and cash equivalents were held with reputable Canadian chartered banks. At December 31, 2019, the Company had an allowance
for doubtful accounts of $NIL (December 31, 2018 - $192,305) as a result of a review of collectability of the amount outstanding
and the duration of time it was outstanding.
Interest rate risk: Interest rate risk
is the risk borne by an interest-bearing asset or liability as a result of fluctuations in interest rates. Financial assets
and financial liabilities with variable interest rates expose the Company to cash flow interest rate risk. The Company's
does not have significant interest rate risk as the promissory note have been settled during the year.
Fair values: The carrying amounts reported
in the consolidated balance sheet for cash and cash equivalents, accounts receivables, accounts payable and accrued liabilities
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 year ended December 31, 2017. The amount reflected
in prepaids and other current assets as at December 31, 2019 was $Nil after a 100% provision (December 31, 2018 - $$Nil).
During 2018, the Company made advance
to two corporations related to the former Chief Executive Officer in the amount of $201,711 in the normal course of operations.
After the impairment assessment, the company made a 100% provision for the advanced amounts. During the year 2019, $163,872 of
the amount written off in 2019 were recovered.
The balances of due to related party
corporations at December 31, 2019 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 December 31, 2019 was $319,969 (December 31,
2018 - $337,762) which includes expense reimbursements. This amount is reflected in accounts payable and is further described below.
As at December 31, 2019, the Company
had an amount owing to an entity owned and controlled by the former Chief Executive Officer of the Company of $265,533 (December
31, 2018 - $265,533). The amount owing relates to services provided by the then Chief Executive Officer and expense reimbursements.
As at December 31, 2019, 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,
2018 - $14,861). The amount owing relates to services provided by the then Chief Executive Officers and expense reimbursements.
As at December 31, 2019, the Company
had an amount owing to an entity owned and controlled by the former Secretary of the Company of $54,436 (December 31, 2018 - $54,436).
The amount owing relates to services provided by the then Secretary and expense reimbursements.
As at December 31, 2019, the Company
had an amount owing to the former Chief Financial Officer of the Company of Nil (December 31, 2018 - $2,932). The amount owing
relates to services provided by the then Chief Financial Officer.
No amount was recorded in 2019 for
share based payments to directors and officers of the company. A total of $863,324 (Issuance of shares for service – 337,250,
stock options expenses - $313,504, deferred stock options expenses - $212,570) was recognized during 2018 for share-based payments
expense to directors and officers of the Company.
As at December 31, 2019 and December
31, 2018, the amounts owing to officers of the Company are recorded in accounts payable and accrued liabilities.
Subsequent events
In January 2020, the
Company issued 757,575 non-registered shares of the Company's common stock. The net proceeds in amount of $34,091 was received
in December 31, 2019.
In January 2020, the
Company completed a private placement for the sale of non-registered shares of the Company's common stock. As a result of the private
placement 3,030,300 non-registered shares of the Company's common stock was issued for gross proceeds of $151,515.
In January 2020, the
Company issued 3,319,162 shares of the common stock to settle a debt owed by the company in amount $265,533. The $265,533 debt
was owed to a corporation controlled by a former Chief Executive Officer of the company. The fair value of these shares was determined
by using the market price of the common stock as at the date of issuance.
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. (note 3). 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. As the share cancellation occurred on February 27, 2020, the accounting recognition of this transaction, consisting
of a transfer of $4,492 from common stock to additional paid-in capital and related reduction in the number of common shares outstanding,
will be reflected in the consolidated financial statements for the first quarter ended March 31, 2020.
In March 2020, the
company issued 1,160,000 shares of the common stock to as compensation for services rendered. The fair value of these shares was
determined by using the market price of the common stock as at the date of issuance.
In March 2020, the
Company completed a private placement for the sale of non-registered shares of the Company's common stock. As a result of the private
placement 300,000 non-registered shares of the Company's common stock will be issued for gross proceeds of $15,000.
Off-Balance Sheet Arrangements
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.
Basis of consolidation
The consolidated financial statements comprise
the accounts of Zoompass Holdings, the legal parent company, and its wholly-owned subsidiaries, Virtublock Canada Inc. and Paymobile
Inc. (“Paymobile”), a company incorporated in Florida, USA, after the elimination of all intercompany balances and
transactions.
Subsidiaries are all entities (including special
purpose entities) over which the Company, either directly or indirectly, has the power to govern the financial and operating policies
generally accompanying a shareholding of more than one half of the voting rights. Where the group does not directly hold more than
one half of the voting rights, significant judgment is used to determine whether control exists. These significant judgments include
assessing whether the group can control the operating policies through the group's ability to appoint the majority of directors
to the board. The existence and effect of potential voting rights that are currently exercisable or convertible are considered
when assessing whether the group controls another entity. Subsidiaries are fully consolidated from the date on which control is
transferred to the group until the date on which control ceases.
The accounts of subsidiaries are prepared for
the same reporting period as the parent entity, using consistent accounting policies. Inter-company transactions, balances and
unrealised gains or losses on transactions between the entities are eliminated.
Translation of foreign currencies
The reporting and functional currency of the
Company and Paymobile is the US dollar. The Company has determined that the functional currency of VCI is the Canadian dollar.
(references to which are denoted "C$").
Transactions in currencies other than the functional
currency are recorded at the rates of the exchange prevailing on dates of transactions. At each balance sheet reporting date, monetary
assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing at each reporting date.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated at the exchange rate at the
historical date of the transaction. The impact from the translation of foreign currency denominated items are reflected in
the statement of operations and comprehensive loss.
Translation of 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 income in the statement of changes in stockholders’ deficiency.
Revenue recognition
Revenue is measured based on a consideration
specified in a contract with a customer, and excludes any sales incentives and amounts collected on behalf of third parties.
The Company recognizes revenue when it satisfies
a performance obligation by transferring control over a product or service to a customer.
Taxes assessed by a governmental authority
that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a
customer, are excluded from revenue.
Shipping and handling costs associated with
outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are in
included in cost of revenues.
Prepaid cards: The Company’s
revenues are primarily generated from financial service fees charged to cardholders and merchants accepting the cards for payment.
Revenue for prepaid financial services is generated from multiple sources including transaction fees, cardholder fees, load fees
and interchange fees. These fees are recognized on the transaction date. Funds received from customers are held in trust and the
corresponding amount of funds available for use are recorded as a liability. Fees charged for card program, website and card design
are recognized when services are performed or when the product is transferred to the customer. Other revenue represents gains realized
on de-recognition of clients' funds payable. The prepaid card business operation discontinued at end of March 2018.
Mobility solution: The Company
recognizes revenue in products revenue when a customer takes possession of the device. This usually occurs when the customer signs
a contract. For mobile devices, customers usually pay within company specified credit term which is within 12 months. The mobility
solution business operation discontinued at end of March 2018.
Cryptocurrency platform: The
company offers organizations the cryptocurrencies exchange & wallets platforms as a service in order to facilitate the exchange
of different cryptocurrencies to its end users. The revenue is mainly generated from the software customization services fees charged
to the organizations and transaction fees charged to the end users when using the exchange platform. The Company, for the years
ended December 31, 2019 and 2018, has not generated revenue from the Cryptocurrency platform.
The Company accounts for individual
products and services separately if they are distinct – i.e. if a product or service is separately identifiable from other
items in the bundled package and if a customer can benefit from it on its own or with other resources that are readily available
to the customer. The consideration (including any discounts) is allocated between separate products and services in a bundle based
on their stand-alone selling prices. The stand-alone selling prices are determined based on the prices at which the Company separately
provides prepaid cards related financial services and sells the mobile devices.
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 sheets for cash and cash equivalents, cash in trust and customer deposits, accounts receivables and due from related party
corporations, net of any allowances for doubtful accounts, accounts payable and accrued liabilities, promissory note, due to related
party corporations, 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. Per ASC Topic 820 framework these are considered Level 2 inputs where
inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar
assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs
that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
The Company's policy is to recognize transfers
into and out of Level 3 as of the date of the event or change in the circumstances that caused the transfer. There were no such
transfers during the year.
Basic and diluted loss per share
Basic and diluted loss per share has been determined
by dividing the net loss available to shareholders for the applicable period by the basic and diluted weighted average number of
shares outstanding, respectively. The diluted weighted average number of shares outstanding is calculated as if all dilutive options
had been exercised or vested at the later of the beginning of the reporting period or date of grant, using the treasury stock method.
Loss per common share is computed by dividing
the net loss by the weighted average number of shares of common shares outstanding during the period. Common share equivalents,
options and warrants are excluded from the computation of diluted loss per share when their effect as anti-dilutive.
Segment reporting
ASC 280-10, "Disclosures about Segments
of an Enterprise and Related Information", establishes standards for the way that public business enterprises report information
about operating segments in the Company's consolidated financial statements. Operating segments are components of an enterprise
about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding
how to allocate resources and in assessing performance. Significantly all of the assets of the Company are located in, all revenues
are currently earned in Canada and the Company’s research, development and strategical planning operations are carried out
and served as an integral part of the Company’s business. The Company’s reportable segments and operating segments
include prepaid card operations, mobility solution operations, cryptocurrency platform operations and research, development and
strategical planning operations.
Cash and cash equivalents
Cash and cash equivalents include demand deposits
held with banks and highly liquid investments with original maturities of ninety days or less at acquisition date. For purposes
of reporting cash flows, the Company considers all cash accounts that are not subject to withdrawal restrictions or penalties to
be cash and cash equivalents. Cash in trust and customer deposits are amounts held by the Company at various financial institutions
for settlement of clients' funds payable. Client funds are amounts owing on behalf of clients for prepaid debit cards.
Equipment
Equipment is stated at historic cost. The Company
has the following sub-categories of property and equipment with useful lives and depreciation methods as follows:
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Computer equipment and furniture – 30% declining balance per year
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The cost of assets sold, retired, or otherwise
disposed of and the related accumulated depreciation are eliminated from the accounts. Expenditures for maintenance and repairs
are charged to expense as incurred.
The Company follows the ASC Topic
360, which requires that long-lived assets be reviewed annually for impairment whenever events or changes in circumstances indicate
that the assets' carrying amounts may not be recoverable.
In performing the review for recoverability,
if future undiscounted cash flows (excluding interest charges) from the use and ultimate disposition of the assets are less than
their carrying values, an impairment loss represented by the difference between its fair value and carrying value, is recognized.
When properties are classified as held for sale they are recorded at the lower of the carrying amount or the expected sales price
less costs to sell.
Goodwill
Goodwill represents the excess purchase price
over the estimated fair value of net assets acquired by the Company in business combinations. Business acquisitions are accounted
for using the acquisition method whereby acquired assets and liabilities are recorded at fair value as of the date of acquisition
with the excess of the acquisition amount over such fair value being recorded as goodwill and allocated to reporting units ("RU").
RUs are the smallest identifiable group of assets, liabilities and associated goodwill that generate cash inflows that are largely
independent of the cash inflows from other assets or groups of assets. Given how the Company is structured and managed, the
Company has one RU. Goodwill arises principally because of the following factors among other things: (1) the going concern
value of the Company's capacity to sustain and grow revenues through securing additional contracts and customers,; (2) the undeserved
market of consumers looking for financial transactional alternatives; (3) technological and mobile capabilities beyond acquired
lines of business to capture buyer specific synergies arising upon a transaction and (4) the requirement to record a deferred tax
liability for the difference between the assigned values and the tax bases of the assets acquired and liabilities assumed in a
business combination, if any.
Intangibles
The Company has applied the provisions of ASC
topic 350 – Intangibles – goodwill and other, in accounting for its intangible assets. Intangible assets subject to
amortization are amortized on a straight-line method on the basis over the useful life of the respective intangibles. The following
useful lives are used in the calculation of amortization:
Trademark – 7.25 years
Acquired payment platform – 5 years
Intellectual property/Technology – 7.25
years
Impairment goodwill and indefinite-lived
intangible assets and intangible assets with definite lives
The Company accounts for goodwill and intangible
assets in accordance with ASC No. 350, Intangibles-Goodwill and Other ("ASC 350"). ASC 350 requires that goodwill and
other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate
that the fair value of an asset has decreased below its carrying value. In addition, ASC 350 requires that goodwill be tested for
impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis and between
annual tests when circumstances indicate that the recoverability of the carrying amount of goodwill may be in doubt. Application
of the goodwill impairment test requires judgment, including the identification of reporting units; assigning assets and liabilities
to reporting units, assigning goodwill to reporting units, and determining the fair value. Significant judgments required to estimate
the fair value of reporting units include estimating future cash flows, determining appropriate discount rates and other assumptions.
Changes in these estimates and assumptions or the occurrence of one or more confirming events in future periods could cause the
actual results or outcomes to materially differ from such estimates and could also affect the determination of fair value and/or
goodwill impairment at future reporting dates.
The Company assesses the carrying
value of goodwill, indefinite-lived intangible assets and intangible assets with definite lives, such as Trademark, Technology
platform, customer base and other intangible assets for potential impairment annually as of December 31, or more frequently if
events or changes in circumstances indicate such assets might be impaired.
When assessing goodwill for impairment the
Company elects to first perform a qualitative assessment for a reporting unit to determine if the quantitative impairment test
is necessary. If we do not perform a qualitative assessment, or if the qualitative assessment indicates it is more likely than
not that the fair value of the reporting units, is less than its carrying amount, the Company performs a quantitative test. The
Company recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value;
however, the loss recognized would not exceed the total amount of goodwill allocated to that reporting unit. The Company estimates
fair value using the income approach, to estimate the future undiscounted cash flows (excluding interest charges) from the use
and ultimate disposition of the assets.
Income taxes
Deferred tax is recognized using the asset
and liability method, on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for tax purposes. However, the deferred tax is not recognized if it arises from initial recognition of an
asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting
nor taxable profit or loss. Deferred taxes determined using tax rates (and laws) that have been enacted by the reporting date and
are expected to apply when the related deferred taxation asset is realized, or the deferred taxation liability is settled. Deferred
tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and
they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they
intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.
A deferred tax asset is recognized to the extent
that it is probable that future taxable profits will be available against which the temporary difference can be utilized. Deferred
tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax
benefit will be realized.
Share-based payment expense
The Company follows the fair value method of
accounting for stock awards granted to employees, directors, officers and consultants. Share-based awards to employees are measured
at the fair value of the related share-based awards. Share-based payments to others are valued based on the related services rendered
or goods received or if this cannot be reliably measured, on the fair value of the instruments issued. Issuances of shares are
valued using the fair value of the shares at the time of grant; issuances of warrants and other share-based awards are valued using
the Black-Scholes model with assumptions based on historical experience and future expectations. All issuances of share-based payments
have been fully-vested, otherwise the Company recognizes such awards over the vesting period based on expectations of the number
of awards expected to vest over that period on a straight-line basis.
Business combinations
A business combination is a transaction or
other event in which control over one or more businesses is obtained. A business is an integrated set of activities and assets
that is capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower costs or other
economic benefits. A business consists of inputs and processes applied to those inputs that have the ability to create outputs
that provide a return to the Company and its shareholders. A business need not include all of the inputs and processes that were
used by the acquiree to produce outputs if the business can be integrated with the inputs and processes of the Company to continue
to produce outputs. The Company considers several factors to determine whether the set of activities and assets is a business.
Business acquisitions are accounted for using
the acquisition method whereby acquired assets and liabilities are recorded at fair value as of the date of acquisition with the
excess of the purchase consideration over such fair value being recorded as goodwill and allocated to reporting units (“RUs”).
If the fair value of the net assets acquired exceeds the purchase consideration, the difference is recognized immediately as a
gain in the consolidated statement of operations. Acquisition related costs are expensed during the period in which they are incurred,
except for the cost of debt or equity instruments issued in relation to the acquisition which is included in the carrying amount
of the related instrument. Certain fair values may be estimated at the acquisition date pending confirmation or completion of the
valuation process. Where provisional values are used in accounting for a business combination, they are adjusted retrospectively
in subsequent periods. However, the measurement period will not exceed one year from the acquisition date. If the assets acquired
are not a business, the transaction is accounted for as an asset acquisition.
Assets and disposal groups held for sale and discontinued
operations
Assets and disposal groups (assets and
liabilities relating to an activity that is to be sold or abandoned) are classified as ‘held for sale’ if their carrying
amount is to be recovered principally through a sales transaction rather than through continuing use. The reclassification takes
place when the assets are available for immediate sale and the sale is highly probable. These conditions are usually met as from
the date on which agreement to sell is ready for signing or an abandonment plan starts to implement. Assets held for sale and disposal
groups are measured at the lower of carrying amount and fair value less costs to sell. Assets held for sale are not depreciated
or amortized.
Discontinued operations comprise those
activities that were disposed of either via sales or abandonment during the period or which were classified as held for sale at
the end of the period, and represent a separate major line of business or geographical area that can be clearly distinguished for
operational and financial reporting purposes.
Leases
On January 1, 2019, the Company adopted
Accounting Standards Codification Topic 842, “Leases” (“ASC 842”) to replace existing lease accounting
guidance. This pronouncement is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use
assets and corresponding lease liabilities on the balance sheet for most leases. Expenses associated with leases will continue
to be recognized in a manner similar to previous accounting guidance. The Company adopted ASC 842 utilizing the transition practical
expedient added by the Financial Accounting Standards Board (“FASB”), which eliminates the requirement that entities
apply the new lease standard to the comparative periods presented in the year of adoption.
The Company is the lessee in a lease contract
when the Company obtains the right to use the asset. Operating leases are included in the line items right-of-use asset, lease
obligation, current, and lease obligation, long-term in the 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 consolidated balance sheet and are expensed on a straight-line basis over the lease term in our consolidated
statement of income. The Company determines the lease term by agreement with lessor.
As our current operating lease of office
space, at the commencement, has a term of less than 12 months, we elect not to apply the recognition requirements of ASC 842 to
the short-term lease, instead lease payments are recognized in statement of operations on a straight-line basis over the lease
term.
Use of estimates
The preparation of the consolidated financial
statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements
and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
The areas where management has made significant
judgments include, but are not limited to:
Accounting for acquisitions: The accounting
for acquisitions requires judgement to determine if an acquisition meets the definition of a business combination under ASC 805.
Further, management is required to use judgement to determine the fair value of the consideration provided and the net assets and
liabilities acquired.
Assessment of Impairment: The Company has certain
assets for which a determination of an impairment, if any, requires significant judgement to determine if the carrying amount of
any assets are impaired. Management uses judgement in determining among other things, whether or not an indicator of impairment
has occurred, future cash flows, time horizons, and likelihood of recoverability. The assets where management has assessed
the recoverability the carrying amount includes accounts receivable, equipment, intangibles and goodwill.
Deferred taxes: The Company recognizes the
deferred tax benefit related to deferred income tax assets to the extent recovery is probable. Assessing the recoverability
of deferred income tax assets requires management to make significant estimates of future taxable profit and the income tax rate
at which the future tax assets will be realized. To the extent that future cash flows, taxable profit and income tax rates
differ significantly from estimates, the ability of the Company to realize deferred tax assets could be impacted. In addition,
future changes in tax laws could limit the ability of the Company to obtain tax deductions in future periods from deferred income
tax assets.
Share-based payment expense: The
calculation of share-based payment expense requires management to use significant judgment in determining the fair value of share-based
payment expense. Additionally, the management is required to make certain assumptions in arriving at the fair value of share-based
payment expense.
Derivative financial instruments: The Company
does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks.
The Company reviews the terms of equity instruments
and other financing arrangements, if any, to determine whether there are embedded derivative instruments, including embedded conversion
options that are required to be bifurcated and accounted for separately as a derivative financial instrument. Also, in connection
with the issuance of financing instruments, the Company may issue freestanding options or warrants to employees and non-employees
in connection with consulting or other services. These options or warrants may, depending on their terms, be accounted for as derivative
instrument liabilities, rather than as equity.
Derivative financial instruments are initially
measured at their fair value. For derivative financial instruments that are accounted for as liabilities, the derivative instrument
is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as
charges or credits to income. To the extent that the initial fair values of the freestanding and/or bifurcated derivative instrument
liabilities exceed the total proceeds received an immediate charge to income is recognized in order to initially record the derivative
instrument liabilities at their fair value.
The classification of derivative instruments,
including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period.
If reclassification is required, the fair value of the derivative instrument, as of the determination date, is reclassified. Any
previous charges or credits to income for changes in the fair value of the derivative instrument are not reversed. Derivative instrument
liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative
instrument could be required within twelve months of the balance sheet date.
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. We are currently evaluating
the impact this guidance may have on our consolidated financial statements and related disclosures.
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. We are currently evaluating
the impact this guidance may have on our consolidated financial statements and related disclosures.
In June 2018, the FASB issued an accounting
pronouncement (FASB ASU 2018-07) to expand the scope of ASC Topic 718, Compensation - Stock Compensation, to include share-based
payment transactions for acquiring goods and services from nonemployees. The pronouncement is effective for fiscal years, and for
interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The Company adopted
this pronouncement and such adoption did not have a material impact on our financial position and/or results of operations.
On January 1, 2018, the Company adopted the
accounting pronouncement issued by the Financial Accounting Standards Board (“FASB”) Accounting Standards Update No.
2014-09 (“ASU”), Revenue from Contracts with Customers (Topic 606) to clarify existing guidance on revenue recognition.
This guidance includes the required steps to achieve the core principle that a company should recognize revenue when it transfers
promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled
in exchange for those goods or services. The Company adopted this pronouncement on a modified retrospective and such adoption did
not have a material impact on our financial position and/or results of operations.
On January 1, 2018, the Company adopted the
accounting pronouncement issued by the FASB to clarify how entities should present restricted cash and restricted cash equivalents
in the statement of cash flows. This guidance requires entities to show changes in the total of cash, cash equivalents and restricted
cash in the combined statement of cash flows. This guidance was adopted on a retrospective basis, and such adoption did not have
a material impact on combined financial position and/or results of operations.
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 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 consolidated balance sheet and are expensed on a straight-line basis over the lease term in our consolidated statement of
income. The Company determines the lease term by agreement with lessor. As our current operating lease of office space, at the
commencement, has a term of less than 12 months, we elect not to apply the recognition requirements of ASC 842 to the short-term
lease, instead lease payments are recognized in statement of operations on a straight-line basis over the lease term.
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
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, 2019, the Company had $21,477 in cash and cash equivalents (December 31, 2018 - $36,075).
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, 2019.
|
|
|
2020
|
|
2021 and later
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
710,430
|
|
|
$
|
—
|
|
|
Due to related party corporations
|
|
|
100,201
|
|
|
|
|
|
|
|
|
$
|
810,631
|
|
|
$
|
—
|
|
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 December 31, 2019, the Company's
credit risk is primarily attributable to cash and cash equivalents, and accounts receivable. At December 31, 2019, the Company's
cash and cash equivalents were held with reputable Canadian chartered banks. At December 31, 2019, the Company had an allowance
for doubtful accounts of $NIL (December 31, 2018 - $192,305) as a result of a review of collectability of the amount outstanding
and the duration of time it was outstanding.
Interest rate risk: Interest rate
risk is the risk borne by an interest-bearing asset or liability as a result of fluctuations in interest rates. Financial
assets and financial liabilities with variable interest rates expose the Company to cash flow interest rate risk. The Company's
does not have significant interest rate risk as the promissory note have been settled during the year.
Fair values: The carrying amounts
reported in the consolidated balance sheet for cash and cash equivalents, accounts receivables, accounts payable and accrued liabilities
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 approved the engagement of MNP, LLP ("MNP"), as the Company's new independent
registered public accounting firm.
On
June 19, 2019, our board of directors approved the engagement of SRCO Professional Corporation ("SRCO"), 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, 2019, 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 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 ineffective as of December 31, 2019, to provide e 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, 2018, and determined that our controls and procedures
were ineffective 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, 2019, 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 internal control over financial reporting
as of the end of December 31, 2019, 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, 2019, 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
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 net 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”).
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in US dollars)
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. (note 3). 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. As the share cancellation occurred on February 27, 2020, the accounting recognition of this transaction, consisting
of a transfer of $4,492 from common stock to additional paid-in capital and related reduction in the number of common shares outstanding,
will be reflected in the consolidated financial statements for the first quarter ended March 31, 2020.
The Company is actively seeking opportunities
to enter into partnership or acquire third parties with existing revenue streams. The company is well positioned to achieve this
objective and will continue to pursue such opportunities going forward.
The Company will remain a 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 has incurred
recurring losses from operations and as of December 31, 2019 had a 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 consolidated financial statements. The 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.
In January 2020, the Company completed a private
placement for the sale of non-registered shares of the Company's common stock. As a result of the private placement 3,030,300 non-registered
shares of the Company's common stock was issued for gross proceeds of $151,515.
In March 2020, the Company completed a private
placement for the sale of non-registered shares of the Company's common stock. As a result of the private placement 300,000 non-registered
shares of the Company's common stock will be issued for gross proceeds of $15,000.
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. Issuance 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 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 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 period.
Basis of consolidation
The consolidated financial statements comprise
the accounts of Zoompass Holdings, the legal parent company, and its wholly-owned subsidiaries, Virtublock Canada Inc. and Paymobile
Inc. (“Paymobile”), a company incorporated in Florida, USA, after the elimination of all intercompany balances and
transactions.
Subsidiaries are all entities (including special
purpose entities) over which the Company, either directly or indirectly, has the power to govern the financial and operating policies
generally accompanying a shareholding of more than one half of the voting rights. Where the group does not directly hold more than
one half of the voting rights, significant judgment is used to determine whether control exists. These significant judgments include
assessing whether the group can control the operating policies through the group's ability to appoint the majority of directors
to the board. The existence and effect of potential voting rights that are currently exercisable or convertible are considered
when assessing whether the group controls another entity. Subsidiaries are fully consolidated from the date on which control is
transferred to the group until the date on which control ceases.
The accounts of subsidiaries are prepared for
the same reporting period as the parent entity, using consistent accounting policies. Inter-company transactions, balances and
unrealised gains or losses on transactions between the entities are eliminated.
Translation of foreign currencies
The reporting and functional currency of the
Company and Paymobile is the US dollar. The Company has determined that the functional currency of VCI is the Canadian dollar.
(references to which are denoted "C$").
Transactions in currencies other than the functional
currency are recorded at the rates of the exchange prevailing on dates of transactions. At each balance sheet reporting date, monetary
assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing at each reporting date.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated at the exchange rate at the
historical date of the transaction. The impact from the translation of foreign currency denominated items are reflected in
the statement of operations and comprehensive loss.
Translation of 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 income in the statement of changes in stockholders’ deficiency.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in US dollars)
NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES AND RECENT
ACCOUNTING PRONOUNCEMENTS (Continued)
Revenue recognition
Revenue is measured based on a consideration
specified in a contract with a customer, and excludes any sales incentives and amounts collected on behalf of third parties.
The Company recognizes revenue when it satisfies
a performance obligation by transferring control over a product or service to a customer.
Taxes assessed by a governmental authority
that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a
customer, are excluded from revenue.
Shipping and handling costs associated with
outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are in
included in cost of revenues.
The following is a description of principal
activities – separated by reportable segments – from which the Company generates its revenue.
Prepaid cards: The Company’s
revenues are primarily generated from financial service fees charged to cardholders and merchants accepting the cards for payment.
Revenue for prepaid financial services is generated from multiple sources including transaction fees, cardholder fees, load fees
and interchange fees. These fees are recognized on the transaction date. Funds received from customers are held in trust and the
corresponding amount of funds available for use are recorded as a liability. Fees charged for card program, website and card design
are recognized when services are performed or when the product is transferred to the customer. Other revenue represents gains realized
on de-recognition of clients' funds payable. The prepaid card business operation discontinued at end of March 2018. (note 4)
Mobility solution: The Company
recognizes revenue in products revenue when a customer takes possession of the device. This usually occurs when the customer signs
a contract. For mobile devices, customers usually pay within company specified credit term which is within 12 months. The mobility
solution business operation discontinued at end of March 2018. (note 4)
Cryptocurrency platform: The
company offers organizations the cryptocurrencies exchange & wallets platforms as a service in order to facilitate the exchange
of different cryptocurrencies to its end users. The revenue is mainly generated from the software customization services fees charged
to the organizations and transaction fees charged to the end users when using the exchange platform. The Company, for the years
ended December 31, 2019 and 2018, has not generated revenue from the Cryptocurrency platform.
The Company accounts for individual
products and services separately if they are distinct – i.e. if a product or service is separately identifiable from other
items in the bundled package and if a customer can benefit from it on its own or with other resources that are readily available
to the customer. The consideration (including any discounts) is allocated between separate products and services in a bundle based
on their stand-alone selling prices. The stand-alone selling prices are determined based on the prices at which the Company separately
provides prepaid cards related financial services and sells the mobile devices.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in US dollars)
NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES AND RECENT
ACCOUNTING PRONOUNCEMENTS (Continued)
Disaggregation of revenue, In the
following table, revenue is disaggregated by major product line and timing of revenue recognition. The table also includes a reconciliation
of the disaggregated revenue with the reportable and operating segments. Also see note 4.
|
|
|
Reportable and operating segments
|
|
|
|
December 31, 2019
|
|
|
|
Prepaid Cards
|
|
Mobility Solution
|
|
Total
|
|
Major products/services lines
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross prepaid card revenue (note 4)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Commissions and agent fees (note 4)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Mobility products revenue (note 4)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Fees and other revenue (note 4)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Mobility product commissions (note 4)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timing of revenue recognition
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products transferred at a point in time (note 4)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
Reportable and operating segments
|
|
|
|
December 31, 2018
|
|
|
|
Prepaid Cards
|
|
Mobility Solution
|
|
Total
|
|
Major products/services lines
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross prepaid card revenue (note 4)
|
|
|
97,861
|
|
|
|
—
|
|
|
|
97,861
|
|
|
Commissions and agent fees (note 4)
|
|
|
(26,338
|
)
|
|
|
—
|
|
|
|
(26,338
|
)
|
|
Mobility products revenue (note 4)
|
|
|
—
|
|
|
|
323,074
|
|
|
|
323,074
|
|
|
Fees and other revenue (note 4)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Mobility product commissions (note 4)
|
|
|
—
|
|
|
|
40,350
|
|
|
|
40,350
|
|
|
|
|
|
71,523
|
|
|
|
363,424
|
|
|
|
434,947
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timing of revenue recognition
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products transferred at a point in time (note 4)
|
|
|
71,523
|
|
|
|
363,424
|
|
|
|
434,947
|
|
|
|
|
|
71,523
|
|
|
|
363,424
|
|
|
|
434,947
|
|
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in US dollars)
NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES AND RECENT
ACCOUNTING PRONOUNCEMENTS (Continued)
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 sheets for cash and cash equivalents, cash in trust and customer deposits, accounts receivables and due from related party
corporations, net of any allowances for doubtful accounts, accounts payable and accrued liabilities, promissory note, due to related
party corporations, 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. Per ASC Topic 820 framework these are considered Level 2 inputs where
inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar
assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs
that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
The Company's policy is to recognize transfers
into and out of Level 3 as of the date of the event or change in the circumstances that caused the transfer. There were no such
transfers during the year.
Basic and diluted loss per share
Basic and diluted loss per share has been determined
by dividing the net loss available to shareholders for the applicable period by the basic and diluted weighted average number of
shares outstanding, respectively. The diluted weighted average number of shares outstanding is calculated as if all dilutive options
had been exercised or vested at the later of the beginning of the reporting period or date of grant, using the treasury stock method.
Loss per common share is computed by dividing
the net loss by the weighted average number of shares of common shares outstanding during the period. Common share equivalents,
options and warrants are excluded from the computation of diluted loss per share when their effect as anti-dilutive.
Segment reporting
ASC 280-10, "Disclosures about Segments
of an Enterprise and Related Information", establishes standards for the way that public business enterprises report information
about operating segments in the Company's consolidated financial statements. Operating segments are components of an enterprise
about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding
how to allocate resources and in assessing performance. Significantly all of the assets of the Company are located in, all revenues
are currently earned in Canada and the Company’s research, development and strategical planning operations are carried out
and served as an integral part of the Company’s business. The Company’s reportable segments and operating segments
include prepaid card operations, mobility solution operations, cryptocurrency platform operations and research, development and
strategical planning operations.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in US dollars)
NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES AND RECENT
ACCOUNTING PRONOUNCEMENTS (Continued)
Cash and cash equivalents
Cash and cash equivalents include demand deposits
held with banks and highly liquid investments with original maturities of ninety days or less at acquisition date. For purposes
of reporting cash flows, the Company considers all cash accounts that are not subject to withdrawal restrictions or penalties to
be cash and cash equivalents. Cash in trust and customer deposits are amounts held by the Company at various financial institutions
for settlement of clients' funds payable. Client funds are amounts owing on behalf of clients for prepaid debit cards.
Equipment
Equipment is stated at historic cost. The Company
has the following sub-categories of property and equipment with useful lives and depreciation methods as follows:
|
|
•
|
Computer equipment and furniture – 30% declining balance per year
|
The cost of assets sold, retired, or otherwise
disposed of and the related accumulated depreciation are eliminated from the accounts. Expenditures for maintenance and repairs
are charged to expense as incurred.
The Company follows the ASC Topic
360, which requires that long-lived assets be reviewed annually for impairment whenever events or changes in circumstances indicate
that the assets' carrying amounts may not be recoverable.
In performing the review for recoverability,
if future undiscounted cash flows (excluding interest charges) from the use and ultimate disposition of the assets are less than
their carrying values, an impairment loss represented by the difference between its fair value and carrying value, is recognized.
When properties are classified as held for sale they are recorded at the lower of the carrying amount or the expected sales price
less costs to sell.
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.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES AND RECENT
ACCOUNTING PRONOUNCEMENTS (Continued)
Intangibles
The Company has applied the provisions of ASC
topic 350 – Intangibles – goodwill and other, in accounting for its intangible assets. Intangible assets subject to
amortization are amortized on a straight-line method on the basis over the useful life of the respective intangibles. The following
useful lives are used in the calculation of amortization:
Trademark – 7.25 years
Acquired payment platform – 5 years
Intellectual property/Technology – 7.25
years
Impairment goodwill and indefinite-lived
intangible assets and intangible assets with definite lives
The Company accounts for goodwill and intangible
assets in accordance with ASC No. 350, Intangibles-Goodwill and Other ("ASC 350"). ASC 350 requires that goodwill and
other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate
that the fair value of an asset has decreased below its carrying value. In addition, ASC 350 requires that goodwill be tested for
impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis and between
annual tests when circumstances indicate that the recoverability of the carrying amount of goodwill may be in doubt. Application
of the goodwill impairment test requires judgment, including the identification of reporting units; assigning assets and liabilities
to reporting units, assigning goodwill to reporting units, and determining the fair value. Significant judgments required to estimate
the fair value of reporting units include estimating future cash flows, determining appropriate discount rates and other assumptions.
Changes in these estimates and assumptions or the occurrence of one or more confirming events in future periods could cause the
actual results or outcomes to materially differ from such estimates and could also affect the determination of fair value and/or
goodwill impairment at future reporting dates.
FV
The Company assesses the carrying
value of goodwill, indefinite-lived intangible assets and intangible assets with definite lives, such as Trademark, Technology
platform, customer base and other intangible assets for potential impairment annually as of December 31, or more frequently if
events or changes in circumstances indicate such assets might be impaired.
When assessing goodwill for impairment the
Company elects to first perform a qualitative assessment for a reporting unit to determine if the quantitative impairment test
is necessary. If the Company do not perform a qualitative assessment, or if the qualitative assessment indicates it is more likely
than not that the fair value of the reporting units, is less than its carrying amount, the Company performs a quantitative test.
The Company recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair
value; however, the loss recognized would not exceed the total amount of goodwill allocated to that reporting unit. The Company
estimates fair value using the income approach, to estimate the future undiscounted cash flows (excluding interest charges) from
the use and ultimate disposition of the assets.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in US dollars)
NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES AND RECENT
ACCOUNTING PRONOUNCEMENTS (Continued)
Income taxes
Deferred tax is recognized using the asset
and liability method, on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for tax purposes. However, the deferred tax is not recognized if it arises from initial recognition of an
asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting
nor taxable profit or loss. Deferred taxes determined using tax rates (and laws) that have been enacted by the reporting date and
are expected to apply when the related deferred taxation asset is realized, or the deferred taxation liability is settled. Deferred
tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and
they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they
intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.
A deferred tax asset is recognized to the extent
that it is probable that future taxable profits will be available against which the temporary difference can be utilized. Deferred
tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax
benefit will be realized.
Share-based payment expense
The Company follows the fair value method of
accounting for stock awards granted to employees, directors, officers and consultants. Share-based awards to employees are measured
at the fair value of the related share-based awards. Share-based payments to others are valued based on the related services rendered
or goods received or if this cannot be reliably measured, on the fair value of the instruments issued. Issuances of shares are
valued using the fair value of the shares at the time of grant; issuances of warrants and other share-based awards are valued using
the Black-Scholes model with assumptions based on historical experience and future expectations. All issuances of share-based payments
have been fully-vested, otherwise the Company recognizes such awards over the vesting period based on expectations of the number
of awards expected to vest over that period on a straight-line basis.
Business combinations
A business combination is a transaction or
other event in which control over one or more businesses is obtained. A business is an integrated set of activities and assets
that is capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower costs or other
economic benefits. A business consists of inputs and processes applied to those inputs that have the ability to create outputs
that provide a return to the Company and its shareholders. A business need not include all of the inputs and processes that were
used by the acquiree to produce outputs if the business can be integrated with the inputs and processes of the Company to continue
to produce outputs. The Company considers several factors to determine whether the set of activities and assets is a business.
Business acquisitions are accounted for using
the acquisition method whereby acquired assets and liabilities are recorded at fair value as of the date of acquisition with the
excess of the purchase consideration over such fair value being recorded as goodwill and allocated to reporting units (“RUs”).
If the fair value of the net assets acquired exceeds the purchase consideration, the difference is recognized immediately as a
gain in the 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)
NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES AND RECENT
ACCOUNTING PRONOUNCEMENTS (Continued)
Assets and disposal groups held for sale and discontinued
operations
Assets and disposal groups (assets and
liabilities relating to an activity that is to be sold or abandoned) are classified as ‘held for sale’ if their carrying
amount is to be recovered principally through a sales transaction rather than through continuing use. The reclassification takes
place when the assets are available for immediate sale and the sale is highly probable. These conditions are usually met as from
the date on which agreement to sell is ready for signing or an abandonment plan starts to implement. Assets held for sale and disposal
groups are measured at the lower of carrying amount and fair value less costs to sell. Assets held for sale are not depreciated
or amortized.
Discontinued operations comprise those
activities that were disposed of either via sales or abandonment during the period or which were classified as held for sale at
the end of the period, and represent a separate major line of business or geographical area that can be clearly distinguished for
operational and financial reporting purposes.
Leases
On January 1, 2019, the Company adopted
Accounting Standards Codification Topic 842, “Leases” (“ASC 842”) to replace existing lease accounting
guidance. This pronouncement is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use
assets and corresponding lease liabilities on the balance sheet for most leases. Expenses associated with leases will continue
to be recognized in a manner similar to previous accounting guidance. The Company adopted ASC 842 utilizing the transition practical
expedient added by the Financial Accounting Standards Board (“FASB”), which eliminates the requirement that entities
apply the new lease standard to the comparative periods presented in the year of adoption.
The Company is the lessee in a lease contract
when the Company obtains the right to use the asset. Operating leases are included in the line items right-of-use asset, lease
obligation, current, and lease obligation, long-term in the 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 consolidated balance sheet and are expensed on a straight-line basis over the lease term in our consolidated
statement of income. 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.
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.
Going concern assessment: As disclosed in Note
1.
Deferred taxes: The Company recognizes the
deferred tax benefit related to deferred income tax assets to the extent recovery is probable. Assessing the recoverability
of deferred income tax assets requires management to make significant estimates of future taxable profit and the income tax rate
at which the future tax assets will be realized. To the extent that future cash flows, taxable profit and income tax rates
differ significantly from estimates, the ability of the Company to realize deferred tax assets could be impacted. In addition,
future changes in tax laws could limit the ability of the Company to obtain tax deductions in future periods from deferred income
tax assets.
Share-based payment expense: The
calculation of share-based payment expense requires management to use significant judgment in determining the fair value of share-based
payment expense. Additionally, the management is required to make certain assumptions in arriving at the fair value of share-based
payment expense.
Derivative financial instruments: The Company
does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in US dollars)
NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES AND RECENT
ACCOUNTING PRONOUNCEMENTS (Continued)
NEWLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
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.
In December 2019, the FASB issued ASU 2019-12,
Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The new rules reduce complexity by removing specific exceptions
to general income tax accounting methodology including an exception for interim periods showing operating losses in excess of anticipated
operating losses for the year. The new rules will be effective for us in the first quarter of 2021. The Company is currently evaluating
the impact this guidance may have on our consolidated financial statements and related disclosures.
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 our consolidated financial statements and related disclosures.
In June 2018, the FASB issued an accounting
pronouncement (FASB ASU 2018-07) to expand the scope of ASC Topic 718, Compensation - Stock Compensation, to include share-based
payment transactions for acquiring goods and services from nonemployees. The pronouncement is effective for fiscal years, and for
interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The Company adopted
this pronouncement and such adoption did not have a material impact on our financial position and/or results of operations.
On January 1, 2018, the Company adopted the
accounting pronouncement issued by the Financial Accounting Standards Board (“FASB”) Accounting Standards Update No.
2014-09 (“ASU”), Revenue from Contracts with Customers (Topic 606) to clarify existing guidance on revenue recognition.
This guidance includes the required steps to achieve the core principle that a company should recognize revenue when it transfers
promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled
in exchange for those goods or services. The Company adopted this pronouncement on a modified retrospective and such adoption did
not have a material impact on our financial position and/or results of operations.
On January 1, 2018, the Company adopted the
accounting pronouncement issued by the FASB to clarify how entities should present restricted cash and restricted cash equivalents
in the statement of cash flows. This guidance requires entities to show changes in the total of cash, cash equivalents and restricted
cash in the combined statement of cash flows. This guidance was adopted on a retrospective basis, and such adoption did not have
a material impact on combined financial position and/or results of operations.
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 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 consolidated balance sheet and are expensed on a straight-line basis over the lease term in our consolidated statement of
income. 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.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
NOTE 3 – ACQUISTIONS OF BUSINESS
On October 16, 2018, the Company entered into
an agreement with Virtublock Global Corp (VGC), a corporation incorporated in Ontario Canada, to acquire assets and intellectual
property of VGC. Based on an examination of the net assets acquired, the acquisition of the net assets was determined to be a business
as defined under ASC 805.
Pursuant to the agreement, the Company issued
44,911,724 shares of it’s common stock to VGC as purchase consideration. The fair value of the shares issued was determined
to be $3,458,203 based on the market value of the common stock as the date of issuance. The following table sets forth the allocation
of the purchase consideration to the fair value of the net assets acquired. The acquired goodwill is primarily related to the value
attributed to a company that is expected to experience accelerated growth.
The Company assessed the goodwill and intangible assets assigned
as a result of the acquisition for impairment and considered them impaired.
Management tested goodwill and intangibles
for impairment and determined them to be impaired. The main cause of the impairment was Company’s inability to secure the
required financing and customer contracts in order to operationalize the new acquisition of VirtuBlock Global, Inc. As a result,
the carrying amounts of intangibles and goodwill could not be supported.
Impairment of Goodwill and intangible assets:
Management used the Income approach to estimate the value of the
Company’s intangible assets based on projections (adjusted for multiple scenarios and weighted probabilities) of future cash
flows.
Impairment regarding Goodwill
The fair value of the business unit based on the discounted cash
flow analysis and net asset valuations of the reporting unit do not exceed the carrying amount, therefore goodwill was considered
impaired.
Impairment regarding Intangibles
The undiscounted (pre-tax) cash flows of the reporting unit using
projections do not exceed its’s carrying value, and therefore intangibles were considered impaired.
|
Consideration
|
|
|
|
Common shares issued
|
|
$
|
3,458,203
|
|
|
Net assets acquired
|
|
|
|
|
|
Customer base (note 6)
|
|
$
|
-
|
|
|
Trade name – Virtublock (note 6)
|
|
|
6,600
|
|
|
Intellectual property/ Technology (note 6)
|
|
|
11,200
|
|
|
Non-compete agreements (note 6)
|
|
|
-
|
|
|
Goodwill (note 6)
|
|
|
3,440,403
|
|
|
Total net assets acquired
|
|
$
|
3,458,203
|
|
|
Impairment provision for the year (note 6)
|
|
|
(3,458,203)
|
|
|
|
|
|
-
|
|
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in US dollars)
NOTE 3 – ACQUISTIONS OF BUSINESS (Continued)
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.
During 2018, the planned acquisition transaction
was cancelled.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in US dollars)
NOTE 4 – ASSETS AND LIABILITIES FROM
DISCONTINUED OPERATIONS
On March 6, 2018, the Company entered into
an asset purchase agreement to sell the prepaid card business for total consideration of C$400,000, comprised of C$200,000 upon
closing, C$100,000 12 months from the date of closing and the equivalent of C$100,000 in shares. A former Director and Chief Executive
Officer was related to an officer of the acquirer of the prepaid card business. The transaction was approved by the Board of Directors.
The Company has determined that the prepaid card business represents a component and is a reportable segment of the Company. The
transaction completed in March 2018. As of March 31, 2018, the Company received C$200,000 ($152,871).
During the first fiscal quarter of 2018, the
Company implemented a plan to abandon the mobility solution operation. The Company has determined that the mobility solution operation
represents a component and a reportable segment of the Company. According to the plan of abandonment, the Company gradually ceased
accepting any new business during first quarter of 2018 and settled all the remaining orders and obligations from mobility solution
by end of March 2018.
The Company determined
that the disposal of prepaid card business and abandonment of mobility solution operations represent a strategical shift of the
company’s business operations. The prepaid card operation and mobility solution operation were part of the company’s
plan of disposal and both met the held-for-sale criteria within a short period of time, therefor, the two operations were accounted
for, presented and disclosed as discontinued operations.
A reconciliation of the carrying amounts
of major classes of assets and liabilities of the discontinued operations to total assets and liabilities of the disposal group
classified as discontinued that are presented separately in the consolidated balance Sheets is as below:
|
|
|
|
December 31,
|
|
|
|
December 31,
|
|
|
|
|
|
2019
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Major classes of assets included in discontinued operations:
|
|
|
|
|
|
|
|
|
|
Cash held in trust and customer deposits
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Accounts receivable
|
|
|
—
|
|
|
|
—
|
|
|
Equipment (note 5)
|
|
|
—
|
|
|
|
—
|
|
|
Intangible assets (note 6)
|
|
|
—
|
|
|
|
—
|
|
|
Total assets from discontinued operations
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Major classes of liabilities included in discontinued operations
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
—
|
|
|
|
—
|
|
|
Client funds
|
|
|
—
|
|
|
|
—
|
|
|
Total liabilities from
discontinued operations
|
|
|
—
|
|
|
|
—
|
|
The
assets and liabilities were classified as discontinued operation because that have been discontinued in March 2018.A reconciliation
of the major classes of line items constituting net loss from discontinued operations to net loss from discontinued operations
that are presented in the consolidated statements of operations and comprehensive loss is as below:
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in US dollars)
NOTE 4 – ASSETS AND LIABILITIES
FROM DISCONTINUED OPERATIONS (Continued)
|
|
|
For the year ended
|
|
For the year ended
|
|
|
|
December 31,
2019
|
|
December 31, 2018
|
|
|
|
|
|
|
|
Major classes of line items constituting net loss from discontinued operations
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
Gross prepaid card revenue (Note 2)
|
|
$
|
-
|
|
|
$
|
97,861
|
|
|
Commissions and agent fees (Note 2)
|
|
|
-
|
|
|
|
(26,338
|
)
|
|
Mobility products revenue (Note 2)
|
|
|
-
|
|
|
|
323,074
|
|
|
Fees and other revenue (Note 2)
|
|
|
-
|
|
|
|
-
|
|
|
Mobility product commissions (Note 2)
|
|
|
-
|
|
|
|
40,350
|
|
|
Net revenue
|
|
|
-
|
|
|
|
434,947
|
|
|
Processing and card fees
|
|
|
-
|
|
|
|
(118,180
|
)
|
|
Mobility products cost of goods sold
|
|
|
-
|
|
|
|
(351,767
|
)
|
|
Gross margin
|
|
|
-
|
|
|
|
(35,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
Impairment goodwill and trademark
|
|
|
-
|
|
|
|
-
|
|
|
Salaries and consultants
|
|
|
-
|
|
|
|
(189,284
|
)
|
|
Depreciation and amortization
|
|
|
-
|
|
|
|
-
|
|
|
Office and sundry expenses and other
|
|
|
-
|
|
|
|
(192,305
|
)
|
|
Loss on disposal of assets
|
|
|
-
|
|
|
|
(13,682
|
)
|
|
|
|
|
-
|
|
|
|
(395,271
|
)
|
|
Net loss from discontinued operations that are presented in the consolidated statements of operations and comprehensive loss
|
|
$
|
-
|
|
|
$
|
(430,271
|
)
|
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in US dollars)
NOTE 5 – EQUIPMENT
|
Cost
|
|
Computer equipment
|
|
Furniture
|
|
Total
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Balance at December 31, 2017
|
|
$
|
66,005
|
|
|
$
|
2,497
|
|
|
$
|
68,502
|
|
|
Disposal
|
|
|
(64,207
|
)
|
|
|
(2,429
|
)
|
|
|
(66,636
|
)
|
|
Foreign exchange
|
|
|
(1798
|
)
|
|
|
(68
|
)
|
|
|
(1,866
|
)
|
|
Balance at December 31, 2018
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Addition
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Disposal
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Foreign exchange
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Balance at December 31, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
Computer equipment
|
|
|
|
Furniture
|
|
|
|
Total
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Balance at December 31, 2017$
|
|
$
|
(26,732
|
)
|
|
$
|
(699
|
)
|
|
$
|
(27,431
|
)
|
|
Disposal
|
|
|
26,022
|
|
|
|
681
|
|
|
|
26,703
|
|
|
Foreign exchange
|
|
|
710
|
|
|
|
18
|
|
|
|
728
|
|
|
Balance at December 31, 2018
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Addition
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Disposal
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Foreign exchange
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Balance at December 31, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Balance at December 31, 2018 (note 4)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Balance at December 31, 2019
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in US dollars)
NOTE 6 – INTANGIBLE ASSETS AND GOODWILL
Intangible assets
|
Cost
|
|
Trademark/
|
|
Technology
|
|
Customer
|
|
|
|
|
|
Trade name
|
|
platform/ IP
|
|
base
|
|
Total
|
|
Balance at December 31, 2017
|
|
$
|
168,620
|
|
|
$
|
239,649
|
|
|
$
|
-
|
|
|
$
|
408,269
|
|
|
Additions
|
|
|
6,600
|
|
|
|
11,200
|
|
|
|
-
|
|
|
|
17,800
|
|
|
Disposal
|
|
|
(164,145
|
)
|
|
|
(230,626
|
)
|
|
|
-
|
|
|
|
(394,771
|
)
|
|
Foreign exchange
|
|
|
(4,475
|
)
|
|
|
(9,023
|
)
|
|
|
-
|
|
|
|
(13,498
|
)
|
|
Balance at December 31, 2018
|
|
$
|
6,600
|
|
|
$
|
11,200
|
|
|
$
|
-
|
|
|
$
|
17,800
|
|
|
Additions
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Disposal
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Foreign exchange
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Balance at December 31, 2019
|
|
$
|
6,600
|
|
|
$
|
11,200
|
|
|
$
|
-
|
|
|
$
|
17,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Amortization
|
|
|
Trademark/
|
|
|
|
Technology
|
|
|
|
Customer
|
|
|
|
Total
|
|
|
Trade name
|
|
|
Trade
name
|
|
|
|
platform/
IP
|
|
|
|
base
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2017
|
|
$
|
(168,620
|
)
|
|
$
|
(24,677
|
)
|
|
$
|
-
|
|
|
$
|
(193,297
|
)
|
|
Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
Disposal
|
|
|
164,145
|
|
|
|
23,437
|
|
|
|
-
|
|
|
|
187,582
|
|
|
Foreign exchange
|
|
|
4,475
|
|
|
|
1,240
|
|
|
|
-
|
|
|
|
5,715
|
|
|
Balance at December 31, 2018
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
Disposal
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Foreign exchange
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Balance at December 31, 2019
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at Dec 31, 2018 before impairment
|
|
|
6,600
|
|
|
|
11,200
|
|
|
|
|
|
|
|
17,800
|
|
|
Impairment in 2018
|
|
|
(6,600
|
)
|
|
|
(11,200
|
)
|
|
|
|
|
|
|
(17,800
|
)
|
|
Balance at December 31, 2018
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
Balance at December 31, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Balance at January 1, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
Acquisition (Note 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,440,403
|
|
|
Impairment (Note 3)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
(3,440,403
|
)
|
|
Foreign exchange
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
Balance at December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
Acquisition
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
Foreign exchange
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
Balance at December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in US dollars)
NOTE 7 – PROMISSORY NOTES
On December 5, 2017, the Company entered into
a promissory note in the amount of $477,402 (C$588,600) with an arm’s length third party. The note was to be repaid no later
than 90 days from the date of issuance with an interest rate of 1.75% per 30-day period. The Promissory note was settled in full
in February 2018.
On February 1, 2018, the Company entered into
two promissory notes in the aggrege amount of $87,000 with arm’s length third parties. The notes were to be repaid on December
31, 2018 with an interest rate of 4% per annum. The promissory notes were settled on September 10, 2018 by issuance of 870,000
common shares of the company (note 9).
On March 20, 2018, the Company entered into
a promissory note in the amount of $750,000 with an arm’s length third party. The note was to be repaid on December 31, 2018
with an interest rate of 4% per annum. The Promissory note was settled on September 10, 2018 by issuance of 7,500,000 common shares
of the company (note 9).
NOTE 8 – 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, 2019, the Company had $21,477
in cash and cash equivalents (December 31, 2018 - $36,075).
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, 2019.
|
|
|
2020
|
|
2021 and later
|
|
Accounts payable and accrued liabilities
|
|
$
|
710,430
|
|
|
$
|
—
|
|
|
Due to related party corporations
|
|
|
100,201
|
|
|
|
|
|
|
|
|
$
|
810,631
|
|
|
$
|
—
|
|
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in US dollars)
NOTE 8 – FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
(Continued)
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 December 31, 2019, the Company's credit
risk is primarily attributable to cash and cash equivalents and accounts receivable. At December 31, 2019, the Company's cash and
cash equivalents were held with reputable Canadian chartered banks. At December 31, 2019, the Company had an allowance for
doubtful accounts of $NIL (December 31, 2018 - $192,305) as a result of a review of collectability of the amount outstanding and
the duration of time it was outstanding.
Interest rate risk: Interest rate risk
is the risk borne by an interest-bearing asset or liability as a result of fluctuations in interest rates. Financial assets
and financial liabilities with variable interest rates expose the Company to cash flow interest rate risk. The Company's
does not have significant interest rate risk as the promissory note have been settled during the year.
Fair values: The carrying amounts reported
in the consolidated balance sheets 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 9 – COMMON STOCK, SHARES TO BE
ISSUED AND COMMON SHARE PURCHASE WARRANTS
Common Stock, Shares to be issued and Common
Share Purchase Warrants
Common Stock
The Company is authorized to issue 500,000,000
common stock with a par value of $0.0001.
During January and
April 2019, the company issued 1,500,000 shares of the common stock to an arm’s length third party as compensation for services
rendered.
In May 2019, the Company
completed various private placements for the sale of non-registered shares of the Company's common stock. As a result of these
private placements 1,038,461 non-registered shares of the Company's common stock was issued for proceeds of $103,846.
During July and August
2019, the Company completed private placements for the sale of non-registered shares of the Company's common stock. As a result
of these private placements 1,000,000 non-registered shares of the Company's common stock was issued for proceeds of $92,308.
In December 2019, the Company completed
a private placement for the sale of non-registered shares of the Company's common stock. As a result of the private placement 757,575
non-registered shares of the Company's common stock was issued for proceeds of $34,091.
Shares to be issued
In December 2019, the Company received
$34,091 from an investor and 757,575 non-registered shares of the Company's common stock was issued in January 2020. (note 14)
ZOOMPASS HOLDINGS,
INC.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in US dollars)
NOTE 9 – COMMON STOCK, SHARES TO BE
ISSUED AND COMMON SHARE PURCHASE WARRANTS (Continued)
During January 2018,
the Company completed a private placement for the sale of non-registered shares of the Company's common stock. As a result of the
private placement 200,000 non-registered shares of the Company's common stock was issued for proceeds of $40,671.
During April 2018,
the Company completed several private placements for the sale of non-registered shares of the Company's common stock. As a result
of these private placements 687,500 non-registered shares of the Company's common stock was issued for proceeds of $39,672.
On April 11, 2018,
the Company issued 1,500,000 shares of the common stock to a corporation controlled by an officer of the company as compensation
for services rendered, and on April 14, 2018, the company issued 1,000,000 shares of the common stock to a current officer of the
company who at that time was an arm’s length consultant, as compensation for services rendered. The fair value in amount
of $337,250 of these shares was determined by using the market price of the common stock as at the date of issuance. (note 10,
note 11)
On September 10, 2018,
the Company issued 8,370,000 shares of the common stock to various arm’s length third parties in respect of settlement of
promissory notes. (note 7)
On October 17, 2018,
the Company issued 44,911,724 shares of the common stock in respect of the assets purchase from Virtublock Global Corp. (note 3)
During November and
December, 2018, the Company completed several private placements for the sale of non-registered shares of the Company's common
stock. As a result of these private placements 5,450,000 non-registered shares of the Company's common stock was issued for proceeds
of $399,483.
Common Share Purchase Warrants
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.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in US dollars)
NOTE 9 – COMMON STOCK, SHARES TO BE
ISSUED AND COMMON SHARE PURCHASE WARRANTS (Continued)
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.
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.
All warrants issued by the company have expired
and as of December 31, 2018, there are no outstanding warrants at December 31, 2019.
NOTE 10 – SHARE-BASED PAYMENTS
During January and April 2019, the Company
issued 1,500,000 common shares of the company to an arm’s length third party as compensation for services rendered. The fair
value was determined as $227,000 by using the market price of the common stock as at the date of issuance. (note 9, note 11)
During the year ended December 31, 2018, in
April 2018, the Company issued 2,500,000 common shares of the company to certain parties including management. The fair value was
determined as $337,250 by using the market price of the common stock as at the date of issuance. (note 9, note 11).
On December 13, 2018, 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 20,000,000 which 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 14, 2018, the Company issued 5,400,000
common stock purchase options at an exercise price of C$0.10 to directors, officers, employees and consultants of the Company.
These options vested immediately and are exercisable for five years from the grant date. The 5,400,000 stock purchase options were
assigned a fair value of $313,504 using the Black-Scholes pricing model. The following assumptions were used: Risk free interest
rate of – 2.00; expected volatility of 108%, based on comparable companies; expected dividend yield – nil; expected
life of 5 years. During year ended December 31, 2019, the Company cancelled those common stock purchase options.
On August 31, 2017, the Company amended the
expiry date of 600,000 warrants, extending them to October 31, 2018, all other terms remained unchanged. These warrants expired
on October 31, 2018.
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 with a fair value of $493,080 vested immediately and are exercisable for five years from the grant date.
917,500 of the options were exercisable for five years from the grant date at an exercise price of C$1.50 and would vest ratably
over a three-year period from the date of grant. Subsequent to the Company’s discontinuation of the two businesses (note
4) during year 2018, employment and services of certain Directors, Officers, Employees and Consultants were terminated, and those
stock options vested on December 31, 2016 were expired during year 2018.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in US dollars)
NOTE 10 – SHARE-BASED PAYMENTS
(Continued)
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 of those options with a fair value of $210,961 vested 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 and the remaining
272,500 options would vest ratably over a 36 month period from the grant date. Subsequent to the Company’s discontinuation
of the two businesses (note 4) during year 2018, employment and services of certain Directors, Officers, Employees and Consultants
were terminated, and those stock options vested on December 31, 2016 were expired during year 2018.
The awards during the year ended December 31,
2019 and 2018, 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 (stock options and
warrants) are detailed in the table below.
|
|
Date of grant
|
Contractual life
|
Number
|
Exercise
price (C$)
|
Year ended
December 31, 2019 ($)
|
Year ended
December 31, 2018 ($)
|
Share price (C$)
|
Risk-free rate
|
Volatility
|
Dividend yield
|
Expected life (years)
|
|
Deferred stock unit grant
|
December 1, 2016
|
December 1, 2021
|
917,500
|
1.50
|
|
155,377
|
1.50
|
1%
|
108%
|
Nil
|
4
|
|
Deferred stock unit grant
|
December 1, 2016
|
December 1, 2021
|
272,500
|
N/A
|
|
57,193
|
1.50
|
1%
|
108%
|
Nil
|
4
|
|
Warrant amendment
|
August 31, 2017
|
October 31, 2018
|
|
|
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Share issued for services
|
April 14, 2018
|
-
|
2,500,000
|
N/A
|
|
337,250
|
0.14
|
-
|
-
|
-
|
-
|
|
Fully vested option grant
|
December 14, 2018
|
December 31, 2023
|
5,400,000
|
0.10
|
|
313,504
|
0.056
|
2%
|
108%
|
Nil
|
4
|
|
Share issued for services
|
January 20, 2019
|
N/A
|
1,000,000
|
N/A
|
177,000
|
-
|
0.177
|
-
|
-
|
-
|
-
|
|
Share issued for services
|
April 20, 2019
|
N/A
|
500,000
|
N/A
|
50,000
|
-
|
0.10
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
$227,000
|
$863,324
|
|
|
|
|
|
For year ended December
31, 2018 the Company had the following stock options and deferred stock units.
|
Award
|
Fair Value
|
Contractual Life (years)
|
Units
|
Number of units vested
|
Weighted Average Exercise Price (C$)
|
|
Options
|
493,080
|
*
|
562,500
|
562,500
|
0.50
|
|
Fully vested options
|
210,961
|
*
|
187,500
|
187,500
|
-
|
|
Deferred stock units
|
304,405
|
*
|
272,500
|
107,319
|
-
|
|
Deferred stock units
|
798,517
|
*
|
917,500
|
367,164
|
0.50
|
|
Options
|
-
|
-
|
-
|
-
|
-
|
|
Total
|
1,806,963
|
|
1,940,000
|
1,224,483
|
|
*Subsequent to the Company’s discontinuation
of the two businesses (note 4) during year 2018, employment and services of certain Directors, Officers, Employees and Consultants
were terminated. Those stock options and deferred option units from 2016 were expired during 2018.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in US dollars)
NOTE 11 – RELATED PARTY TRANSACTIONS
AND BALANCES
During 2016, the Company paid an
advance on behalf of certain shareholders in the amount of $250,000. These shareholders also serve as directors and officers of
the Company. $120,000 was returned by December 31, 2016, and $50,000 was returned during the year ended December 31, 2017. The
amount reflected in prepaids and other current assets as at December 31, 2019 was $Nil after a 100% provision (December 31, 2018
- $$Nil).
During 2018, the Company made advance
to two corporations related to the former Chief Executive Officer in the amount of $201,711 in the normal course of operations.
At December 31, 2018, the Company assessed this amount for impairment and recorded an impairment loss for the full amount under
Office and sundry expenses. During 2019, $163,872 of the impaired amount was recovered and recorded as reversal of impairment
under Office and sundry expenses.
The balances of due to related party
corporations at December 31, 2019 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 December 31, 2019 was $319,969 (December 31,
2018 - $337,762) which includes expense reimbursements. This amount is reflected in accounts payable and is further described below.
As at December 31, 2019, the Company
had an amount owing to an entity owned and controlled by the former Chief Executive Officer of the Company of $265,533 (December
31, 2018 - $265,533). The amount owing relates to services provided by the then Chief Executive Officer and expense reimbursements.
(note 14)
As at December 31, 2019, 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,
2018 - $14,861). The amount owing relates to services provided by the then Chief Executive Officers and expense reimbursements.
As at December 31, 2019, the Company
had an amount owing to an entity owned and controlled by the former Secretary of the Company of $54,436 (December 31, 2018 - $54,436).
The amount owing relates to services provided by the then Secretary and expense reimbursements.
As at December 31, 2019, the Company
had an amount owing to the former Chief Financial Officer of the Company of Nil (December 31, 2018 - $2,932). The amount owing
relates to services provided by the then Chief Financial Officer.
No amount was recorded in 2019 for
share based payments to directors and officers of the company. A total of $863,324 (Issuance of shares for service – 337,250,
stock options expenses - $313,504, deferred stock options expenses - $212,570) was recognized during 2018 for share-based payments
expense to directors and officers of the Company.
As at December 31, 2019 and December
31, 2018, the amounts owing to officers of the Company are recorded in accounts payable and accrued liabilities.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
NOTE 12 – INCOME TAXES
A reconciliation of the differences between
the statutory income tax rates for different jurisdictions and the Company's effective tax rate is as follows:
For the year ended December 31, 2019 and December
31, 2018, the Company's long-term combined effective tax rate was 35%.
|
|
|
For the year ended December 31, 2019
|
|
For the year ended December 31, 2018
|
|
|
|
$
|
|
$
|
|
Net loss before income taxes
|
|
$
|
(615,256
|
)
|
|
$
|
(6,236,176
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Expected income tax recovery
|
|
|
(215,341
|
)
|
|
|
(2,182,663
|
)
|
|
Impact of tax rate differences in foreign jurisdictions
|
|
|
64,800
|
|
|
|
783,081
|
|
|
Tax rate changes and other adjustments
|
|
|
(4,693
|
)
|
|
|
57,356
|
|
|
Permanent differences
|
|
|
47,736
|
|
|
|
907,896
|
|
|
Change in valuation allowance
|
|
|
107,498
|
|
|
|
434,330
|
|
|
Total income tax expense
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
December 31,
|
December 31,
|
|
|
2019
|
2018
|
|
Deferred Tax Items
|
$
|
$
|
|
Net operating loss carry forwards
|
166,513
|
166,446
|
|
Non-capital loss carry forwards - Canada
|
1,376,411
|
1,273,674
|
|
Others
|
-
|
(4,694)
|
|
Valuation allowance
|
(1,542,924)
|
(1,435,426)
|
|
|
-
|
-
|
The Company has $138,001 of net operating loss
carryforwards in the US expiring in 2036, $440,437 expiring in 2037, $214,173 expiring in 2038 and $322 expiring in 2039. The Company
has $912,072 non-capital loss carryforwards in Canada expiring in 2036, $2,258,953 expiring in 2037, $1,634,662 expiring in 2038
and $387,685 expiring in 2039. As of December 31, 2019 and 2018, the Company decided that a valuation allowance relating to the
above deferred tax assets of the Company was necessary, largely based on the negative evidence represented by recurring losses
incurred and a determination that it is not more likely than not to realize these assets, therefore a corresponding valuation allowance,
for each respective period, was recorded to offset deferred tax assets.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
NOTE 13 – COMMITMENTS AND CONTINGENCIES
Commitment
There were no commitments
as of December 31, 2019. At December 31, 2018, the Company sub-leased office space under a contract which ran to October 31, 2019.
Contingencies
During the year ended December 31, 2017, the
Company learned that a class action complaint (the “Class Action Complaint”) had been filed against the Company, its
Chief Executive Officer and its Chief Financial Officer in the United States District Court for the District of New Jersey.
The Class Action Complaint alleges, inter alia, that defendants violated the federal securities laws by, among other things, failing
to disclose that the Company was engaged in an unlawful scheme to promote its stock. The Company has been served with the
Class Action Complaint. The Company has analyzed the Class Action Complaint and, based on that analysis, has concluded that
it is legally deficient and otherwise without merit. The Company intends to vigorously defend against these claims.
Also during the year ended December 31, 2017,
the Company learned that two derivative complaints (the “Derivative Complaints”) on behalf of the Company have been
filed against the Company’s Directors and Chief Executive Officer, President, Corporate Secretary, and Chief Financial Officer,
and nominally against the Company, in Nevada state and federal court. The state court action subsequently was removed to
federal court. The Derivative Complaints allege, inter alia, that the Company’s officers and directors directed the
Company to undertake an unlawful scheme to promote its stock. The Company has been served with the Derivative Complaints.
The Company has analyzed them and, based on its analysis, has concluded that the Derivative Complaints are legally deficient and
otherwise without merit. The Company intends to vigorously defend against these claims.
On August 7, 2018, the United States District
Court for the District of New Jersey dismissed the Class Action Complaint. Additionally, subsequent to the year end on August
21, 2018, the Company was served with the Second Amended Complaint in the District of New Jersey. The Company filed a motion
to dismiss the Second Amended Complaint on September 18, 2018. On January 23, 2019, the United States District Court for
the District of New Jersey dismissed the Second Amended Complaint with prejudice. Plaintiff filed a motion for reconsideration
of the dismissal order on February 7, 2019. On May 14, 2019, the Plaintiff’s motion to reconsider was denied. On June
27, 2019, the plaintiffs filed an appeal with United States Court of Appeals for the Third Circuit. On March 12, 2020, the United
States Court of Appeal for the Third Circuit dismissed the Third appeal.
The Company was also served with a third derivative
action, which was filed March 23, 2018, against the Company’s Directors and Chief Executive Officer, President, and Corporate
Secretary, and nominally against the Company, in Nevada state court. Subsequently, this case was removed to federal court.
ZOOMPASS HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
NOTE 14 – SUBSEQUENT EVENTS
The Company’s
management has evaluated subsequent events up to April 9, 2020, the date the consolidated financial statements were issued, pursuant
to the requirements of ASC 855 and has determined the following material subsequent events:
In January 2020,
the Company issued 757,575 non-registered shares of the Company's common stock. The net proceeds in amount of $34,091 was received
in December 31, 2019. (note 9)
In January 2020,
the Company completed a private placement for the sale of non-registered shares of the Company's common stock. As a result of
the private placement 3,030,300 non-registered shares of the Company's common stock was issued for gross proceeds of $151,515.
In January 2020,
the Company issued 3,319,162 shares of the common stock to settle a debt owed by the company in amount $265,533. The $265,533
debt was owed to a corporation controlled by a former Chief Executive Officer of the company. The fair value of these shares was
determined by using the market price of the common stock as at the date of issuance. (note 11)
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. (note 3). 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. As the share cancellation occurred on February 27, 2020, the accounting recognition of this transaction,
consisting of a transfer of $4,492 from common stock to additional paid-in capital and related reduction in the number of common
shares outstanding, will be reflected in the consolidated financial statements for the first quarter ended March 31, 2020.
In March 2020, the
company issued 1,160,000 shares of the common stock to as compensation for services rendered. The fair value of these shares was
determined by using the market price of the common stock as at the date of issuance.
In March 2020, the
Company completed a private placement for the sale of non-registered shares of the Company's common stock. As a result of the
private placement 300,000 non-registered shares of the Company's common stock will be issued for gross proceeds of $15,000.
Beginning
in March 2020, 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 in fiscal year 2020.
