Zoompass Holdings, Inc. - FORM 10-Q

Attached files

file	filename
EX-32.2 - EXHIBIT 32.2 - Zoompass Holdings, Inc.	ex32x2.htm
EX-32.1 - EXHIBIT 32.1 - Zoompass Holdings, Inc.	ex32x1.htm
EX-31.2 - EXHIBIT 31.2 - Zoompass Holdings, Inc.	ex31x2.htm
EX-31.1 - EXHIBIT 31.1 - Zoompass Holdings, Inc.	ex31x1.htm

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 333-203997

ZOOMPASS HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Nevada	30-0796392
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2455 Cawthra Road, Unit 75, Mississauga, Ontario Canada, L5A 3P1
(Address of principal executive offices, including Zip Code)
(647) 406-1199 (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [_] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [X] Yes [_] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or, an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company", and "emerging growth company", in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☒
(Do not check if smaller reporting company)	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). [ ] Yes [X] No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class	Outstanding as of August 19, 2020
Common stock, $0.0001 par value	75,952,743

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION
Item 1.	Interim Condensed Consolidated Financial Statements	3

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	4

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	12

Item 4.	Controls and Procedures	12
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	13

Item1A.	Risk Factors	14

Item 2.	Recent Unregistered Sales of Equity Securities	14

Item 6.	Exhibits	15

SIGNATURES		16

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

Interim Condensed Consolidated Balance Sheets at June 30, 2020 (unaudited) and December 31, 2019 (audited)	F-1

Interim Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2020 and 2019 (unaudited)	F-2

Interim Condensed Consolidated Statements of Stockholders’ Deficiency for the six months ended June 30, 2020 and 2019 (unaudited)	F-3

Interim Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019 (unaudited)	F-4

Notes to the Interim Condensed Consolidated Financial Statements	F-5

Zoompass Holdings Inc.

Interim Condensed Consolidated Balance Sheets

(Expressed in US Dollars)

		June 30. 2020			December 31, 2019
As At,	Note	(Unaudited)			(Audited)
ASSETS
Current assets
Cash and cash equivalents		$	72,059		$	21,477
Accounts receivable			188,425			—
Inventory			5,680			—
Due from related parties	9		58,371			—
Other current assets			63,584			10,563
Total current assets			388,119			32,040
Non-current assets
Property and equipment, net	4		16,789			—
Goodwill	3		3,464,158			—
Intangible assets, net	5		4,331,941			—
Operating right-of-use assets	6		200,734			—
Security deposit			1,754			—
Total non-current assets			8,015,376			—
Total assets		$	8,403,495		$	32,040
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities
Accounts payable and accrued liabilities	9	$	1,030,493		$	710,430
Notes payable	7		139,422			—
Deferred revenue			36,690			38,570
Due to related parties	9		107,435			100,201
Operating lease obligation - current portion	6		59,501			—
Long-term debt - current portion	8		17,330			—
Other current liabilities			30,400			—
Total current liabilities			1,421,271			849,201
Non-current liabilities
Contingent consideration payable	10		11,710,472			—
Operating lease obligation – long term portion	6		146,841			—
Long-term debt	8		106,104			—
Total non-current liabilities			11,963,417			849,201
Total liabilities			13,384,688			841,201
Stockholders' Deficiency
Common shares, $0.0001 par value, authorized - 500,000,000 issued and outstanding - 75,952,743
(December 31, 2019 - 109,746,036)	10		7,596			10,975
Shares to be issued			10,179,225			34,091
Additional paid in capital			28,115,864			27,104,864
Cumulative translation adjustment			381,485			186,874
Accumulated deficit			(43,969,110	)		(28,153,965	)
Total stockholders' equity attributed to owners			(5,284,940)			(817,161	)
Non-controlling interest			303,747			—
Total stockholders' deficiency			(4,981,193)			(817,161	)
Total liabilities and stockholders' deficiency		$	8,403,495		$	32,040

Nature of operations and going concern (note 1); Subsequent events (note 14)

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-1

Zoompass Holdings Inc.
Interim Condensed Consolidated Statements of Operations and Comprehensive Loss
(Expressed in US Dollars)
(Unaudited)

	Three months ended June 30,						Six months ended June 30,
	2020			2019			2020			2019
Revenue
Sale of services	$	86,756			—		$	86,756			—
Cost of sales		(56,289	)		—			(56,289	)		—
Gross Profit		30,467			—			30,467			—
Expenses
Salaries and Consulting fees		180,725			70,822			213,278			117,884
Professional fees		14,625			34,167			44,924			61,635
Insurance		35,914			—			35,914			—
Filing fees and regulatory costs		4,446			—			31,949			—
Rent expense		23,803			2,976			24,921			5,972
Office and sundry expenses		15,091			4,245			15,694			10,420
Depreciation and amortization (notes 4, 5)		65,053			—			65,053			—
Software development costs		12,643			1,721			12,643			50,764
Share-based payments (note 11)		36,015			50,000			452,602			227,000
Travel expense		5,692			—			5,692			—
Impairment of goodwill		13,243,071			—			13,243,071			—
Change in fair value of contingent consideration		2,989,377			—			2,989,377			—
Bad debts		40,572			—			40,572			—
(Gain) on settlement of debt (note 10)		—			—			(33,191	)		—
Foreign exchange loss (gain)		(15,564	)		(46,834	)		128,205			(104,787	)
		16,651,463			117,097			17,270,704			368,888
Loss from operations		(16,620,996	)		(117,097	)		(17,240,237	)		(368,888	)

Income taxes expense		—			—			—			—
Net loss	$	(16,620,996	)	$	(117,097	)	$	(17,240,237	)	$	(368,888	)
Less: net loss attributable to non-controlling interest		(1,425,092	)		—			(1,425,092	)		—
Net loss attributable to the Company	$	(15,195,904	)		(117,097	)	$	(15,815,145	)	$	(368,888	)
Other comprehensive income (loss)
(Loss) gain on foreign currency translation		17,227			(55,955	)		194,771			(119,570	)
Less: Other comprehensive income attributable to non-controlling interest		160			—			160			—
Other comprehensive income attributable to the Company		17,067			—			194,611			—
Total Comprehensive loss	$	(16,603,769	)	$	(173,052	)	$	(17,045,466	)	$	(488,458	)
Basic and diluted net loss per share	$	(0.221	)	$	(0.001	)	$	(0.237	)	$	(0.003	)
Weighted average number of common shares outstanding - basic and diluted		75,108,059			107,359,129			72,801,096			106,802,104

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-2

Zoompass Holdings Inc.

Interim Condensed Consolidated Statements of Cash Flows

(Expressed in US Dollars)

(Unaudited)

Six Months Ended June 30,	2020			2019
Cash flows provided by (used in) operating activities Net loss for the period	$	(17,240,237	)	$	(368,888	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		65,053			—
Impairment of goodwill		13,243,071
Change in fair value of contingent consideration		2,989,377
Shares issued for services		452,602			227,000
Foreign exchange (gain) loss		128,205			(104,787	)
Gain on settlement of debt		(33,191	)		—
(Increase) Decrease in: Due from related parties		(8,856	)		—
Accounts receivable		32,160			—
Other current assets		(9,902	)		(8,238	)
Increase (Decrease) in: Accounts payable and accrued liabilities		79,973			126,403
Due to related parties		52,773			—
Net cash used in operating activities		(248,972	)		(128,510	)
Cash flows provided by used in investing activities Cash acquired from BGC.		52,795			—
Net cash provided by investing activities		52,795			—
Cash flows provided by used in financing activities Proceeds from shares issued		288,586			119,231
Proceeds from CEBA loan		29,351			—
Repayment of debt		(36,011	)		—
Net cash provided by financing activities		281,926			119,231
Net change in cash		85,749			842,115
Effect of exchange rate changes on cash held in foreign currencies		(35,167	)		685
Cash, beginning of period		21,477			36,075
Cash, end of period	$	72,059		$	878,875

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-3

Zoompass Holdings Inc.
Interim Condensed Consolidated Statements of Changes in Shareholders' Deficiency
(Expressed in US Dollars)

	Common shares				Shares to be issued
	Number of				Number of						Additional paid in		Cumulative translation
	Shares		Amount		Shares			Amount			capital		adjustment		Deficit			NCI			Total
Balance, March 31, 2020 (unaudited)		73,101,349		7,311		2,300,000			265,000			27,678,132		364,418		(28,773,206	)		—			(458,345	)

Share issuance for private placement		851,394		85		(300,000	)		(15,000	)		151,917		—		—			—			137,002
Share issuance for services		2,000,000		200		(2,000,000	)		(250,000	)		249,800		—		—			—			—
Share-based payment expense		—		—		—			—			36,015		—		—			—			36,015
Shares issued on business combination		—		—		41,313,430			10,179,225			—		—		—			—			10,179,225
Non-controlling interest upon acquisition																			1,728, 679			1,728, 679
Non-controlling interest		—		—		—			—			—		(160)		—			(1,424,932	)		(1,425,092	)
Foreign currency translation adjustment		—		—		—			—			—		17,227		—			—			17,227
Net loss for the period		—		—		—			—			—		—		(15,195,904	)		—			(15,195,904	)
Balance, June 30, 2020 (unaudited)		75,952,743		7,596		41,313,430			10,179,225			28,115,864		381,645		(43,969,110	)		303,747			(4,981,193	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-4

Zoompass Holdings Inc.
Interim Condensed Consolidated Statements of Changes in Shareholders' Deficiency
(Expressed in US Dollars)

(continued)

	Common shares						Shares to be issued
	Number of						Number of						Additional paid in		Cumulative translation
	Shares			Amount			Shares			Amount			capital		adjustment		Deficit			NCI			Total
					$						$			$		$		$			$			$
Balance, December 31, 2019 (audited)		109,746,036			10,975			757,575			34,091			27,104,864		186,874		(28,153,965	)		—			(817,161	)
Share issuance for private placement		4,639,269			464			(757,575	)		(34,091	)		322,213		—		—			—			288,586
Share-based payment expenses – Issuance of shares for services		3,160,000			316			—			—			394,684		—		—			—			395,000
Shares issued on conversion of debt		3,319,162			332			—			—			232,010		—		—			—			232,342
Cancellation of shares		(44,911,724	)		(4,491	)		—			—			4,491		—		—			—			—
Share-based payment expense		—			—			—			—			57,602		—		—			—			57,602
Shares issued on business combination		—			—			41,313,430			10,179,225			—		—		—			—			10.179,225
Non-controlling interest upon acquisition		—			—			—			—			—		—		—			1,728,679			1,728,679
Non-controlling interest		—			—			—			—			—		(160)		—			(1,424,932	)		(1,425,092	)
Foreign currency translation adjustment		—			—			—			—			—		194,771		—			—			194,771
Net loss for the period		—			—			—			—			—		—		(15,815,145	)		—			(15,815,145	)
Balance, June 30, 2020 (unaudited)		75,952,743			7,596			41,313,430			10,179,225			28,115,864		381,645		(43,969,110	)		303,747			(4,981,193	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-5

Zoompass Holdings Inc.
Interim Condensed Consolidated Statements of Changes in Shareholders' Deficiency
(Expressed in US Dollars)

(continued)

	Common shares				Shares to be issued
	Number of				Number of				Additional paid in		Cumulative translation
	Shares		Amount		Shares		Amount		capital		adjustment			Deficit			NCI		Total
Balance, March 31, 2019 (unaudited)		106,450,000		10,645		—		—		26,824,948		185,844			(27,790,500	)		—		(769,063	)
Shares issued for services		500,000		50		—		—		49,950		—			—			—		50,000
Shares issued for cash		1,038,461		104		181,818		15,385		103,742		—			—			—		119,231
Foreign currency translation adjustment		—		—		—		—		—		(55,955	)		—			—		(55,955	)
Net loss for the period		—		—		—		—		—		—			(117,097	)		—		(117,097	)
Balance, June 30, 2019 (unaudited)		107,988,461		10,799		181,818		15,385		26,978,640		129,889			(27,907,597	)		—		(772,884	)


	Common shares				Shares to be issued
	Number of				Number of				Additional paid in		Cumulative translation
	Shares		Amount		Shares		Amount		capital		adjustment			Deficit			NCI		Total
December 31, 2018 (audited)		105,450,000		10,545		300,000		—		26,648,048		249,459			(27,538,709	)		—		(630,657	)
Shares issued for services		1,500,000		150		—		—		226,850		—			—			—		227,000
Shares issued for cash		1,038,461		104		181,818		15,385		103,742		—			—			—		119,231
Foreign currency translation adjustment		—		—		—		—		—		(119,570	)		—			—		(119,570	)
Net loss for the period		—		—		—		—		—		—			(368,888	)		—		(368,888	)
Balance, June 30, 2019 (unaudited)		107,988,461		10,799		481,818		15,385		26,978,640		129,889			(27,907,597	)		—		(772,884	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-6

ZOOMPASS HOLDINGS, INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

NOTE 1 — NATURE OF OPERATIONS AND GOING CONCERN

Zoompass Holdings, Inc. formerly known as UVIC. Inc. ("Zoompass Holdings" or the "Company") was incorporated under the laws of the State of Nevada on August 21, 2013. The Company is a Software Fintech company with focus on leading edge technologies and software as a service. The company is actively seeking opportunities to acquire software companies with existing revenue streams.

In February 2017, the Company completed a 3.5-1 forward split, which was approved by shareholders of record on September 7, 2016. All share figures have been retroactively stated to reflect the stock split approved by the shareholders, unless otherwise indicated.

Effective March 6, 2018, the Company’s 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.

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.

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.

On May 31, 2020, the Company closed a Share Exchange Agreement (the "Share Exchange Agreement") by and among the Company, Blockgration Global Corp., an Ontario corporation and its subsidiaries ("BGC"), and the shareholders of BGC (the "BGC Shareholders"). This acquisition gives the Company controlling interest in BGC’s subsidiaries in Canada and India which is engaged in the business of digital wallet deployments, prepaid card platform, blockchain and mobile apps deployment.

The Company has incurred recurring losses from operations and as of June 30, 2020 and December 31, 2019, and had net working capital deficiency and an accumulated deficit. The Company’s continued existence is dependent upon its ability to continue to execute its operating plan and to obtain additional debt or equity financing. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. There can be no assurance that the necessary debt or equity financing will be available, or will be available on terms acceptable to the Company, in which case the Company may be unable to meet its obligations. Should the Company be unable to realize its assets and discharge its liabilities in the normal course of business, the net realizable value of its assets may be materially less than the amounts recorded in the unaudited interim condensed consolidated financial statements.

There is no certainty that the Company will be successful in generating sufficient cash flow from operations or achieving and maintaining profitable operations in the future to enable it to meet its obligations as they come due and consequently continue as a going concern. The Company will require additional financing this year to fund its operations and it is currently working on securing this funding through corporate collaborations, public or private equity offerings or debt financings. Sales of additional equity securities by the Company would result in the dilution of the interests of existing shareholders. There can be no assurance that financing will be available when required.

These unaudited interim condensed consolidated financial statements have been prepared on the basis that the Company will continue as a going concern, which presumes that it will be able to realize its assets and discharge its liabilities in the normal course of business as they come due. These unaudited interim condensed consolidated financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and consolidated balance sheets classifications that would be necessary if the Company were unable to realize its assets and settle its liabilities as a going concern in the normal course of operations. Such adjustments could be material.

F-7

ZOOMPASS HOLDINGS, INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

Basis of presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) for interim financial information and the Securities and Exchange Commission (“SEC”) instructions to Form 10-Q and Article 8 of SEC Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with the Company’s audited consolidated financial statements for the years ended December 31, 2019 and 2018 and their accompanying notes.

The Interim condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary to present a fair statement of the results for the period.

Certain prior year and quarter amounts have been reclassified to conform to the current-year’s presentation.

Basis of consolidation:

The unaudited interim condensed consolidated financial statements comprise the accounts of Zoompass Holdings Inc., the legal parent company, and its subsidiaries. The accounts of the subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting policies. All significant inter-company balances and transactions, unrealized gains or losses on transactions between the entities have been eliminated upon consolidation.

Legal Entity	Location		Ownership Interest
Zoompass Inc. (“ZM”)!		Canada		100	%
Paymobile Inc. (“PM”)!		USA		100	%
Mobility Fintech Solutions USA Inc. (MFS”)!		USA		100	%
Blockgration Global Corp. (“BGC”)*		Canada		100	%
Virtublock OU (“VO”)*		Estonia		100	%
Blockline Solutions Private Ltd (“BSP”)*		India		100	%
Msewa Software Solutions (“MSS”)*		India		70	%
Zuum Global Services Inc. (“ZMG”)*		Canada		70	%

*Those entities became subsidiaries of the Company pursuant to the acquisition transaction completed on May 31, 2020.

! No changes in the shareholding since December 31, 2019.(Note 3)

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.

NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS

SIGNIFICANT ACCOUNTING POLICIES

Translation of foreign currencies

The functional currency of the Company, PM and MFS is the US dollar. The Company has determined that the functional currency of ZM, BGC and ZMG is the Canadian dollar. (references to which are denoted "C$"), for BSP and MSS is the Indian Rupees and for VO is the Euro. The reporting currency of the Company is US Dollar.

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 functional currencies to reporting currencies for 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.

F-8

ZOOMPASS HOLDINGS, INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

Revenue recognition

The Company is engaged in the business of enabling various electronic payment transactions including mobile recharges, DTH charges, Bill collection including mobile bills, utility bills, Domestic money transfer, Travel bookings and has business arrangements with various service providers, billers and similar entities for managing various electronic payments and collections services. The Company entered into contract with all the customers and recognize revenue upon service rendered. Each contract represents a single performance obligation. The Company has fixed price per transaction based on the nature of recharges done by the customer and also based on the monthly support cost agreed in the agreement.

The Company is engaged in other computer related activities including provisions for IT services and solutions. The Company entered into contract with all the customers and recognize revenue upon service rendered.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments.” This pronouncement, along with subsequent ASUs issued to clarify provisions of ASU 2016-13, changes the impairment model for most financial assets and will require the use of an “expected loss” model for instruments measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. In developing the estimate for lifetime expected credit loss, entities must incorporate historical experience, current conditions, and reasonable and supportable forecasts. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. The Company adopted the new guidance effectively on January 1, 2020. The Company identified and updated existing internal controls and procedures to ensure compliance with the new guidance, but such modifications were not deemed to be material to the Company's overall system of internal control. While the adoption of this ASU did not have a material impact on the Company's consolidated financial statements, it required changes to the Company's process of estimating expected credit losses on trade receivables.

Leases

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.

F-9

ZOOMPASS HOLDINGS, INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

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 – 8 years

Customer base – 5 years

Intellectual property/Technology – 10 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, Intellectual property/Technology, and customer base 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.

F-10

ZOOMPASS HOLDINGS, INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

Use of estimates

The preparation of the consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

The areas where management has made significant judgments include, but are not limited to:

Accounting for acquisitions: The accounting for acquisitions requires judgement to determine if an acquisition meets the definition of a business combination under ASC 805. Further, management is required to use judgement to determine the fair value of the consideration provided and the net assets and liabilities acquired.

Assessment of Impairment: The Company has certain assets for which a determination of an impairment, if any, requires significant judgement to determine if the carrying amount of any assets are impaired. Management uses judgement in determining among other things, whether or not an indicator of impairment has occurred, future cash flows, time horizons, and likelihood of recoverability. The assets where management has assessed the recoverability the carrying amount includes accounts receivable, equipment, intangibles and goodwill.

Deferred taxes: The Company recognizes the deferred tax benefit related to deferred income tax assets to the extent recovery is probable. Assessing the recoverability of deferred income tax assets requires management to make significant estimates of future taxable profit and the income tax rate at which the future tax assets will be realized. To the extent that future cash flows, taxable profit and income tax rates differ significantly from estimates, the ability of the Company to realize deferred tax assets could be impacted. In addition, future changes in tax laws could limit the ability of the Company to obtain tax deductions in future periods from deferred income tax assets.

NEWLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact this guidance may have on 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.

F-11

ZOOMPASS HOLDINGS, INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

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.

F-12

ZOOMPASS HOLDINGS, INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

NOTE 3 – ACQUISITIONS OF BUSINESS

Acquisition of Virtublock Global Corp:

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 its 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	$	—
Trade name – Virtublock (note 5)		6,600
Intellectual property / Technology (note 5)		11,200
Non-compete agreements		—
Goodwill (note 5)		3,440,403
Total net assets acquired	$	3,458,203
Impairment at December 31, 2018 (note 5)		(3,458,203	)
		—

On February 27, 2020, the Company terminated the agreement with Virtublock Global Corp. and cancelled 44,911,724 shares of the common stock which were issued in connection with the asset purchase agreement. Pursuant to a General Release agreement, 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.

F-13

ZOOMPASS HOLDINGS, INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

NOTE 3 – ACQUISITIONS OF BUSINESS (continued)

Acquisition of Blockgration Global Corp:

On May 31, 2020, the Company closed a share exchange agreement with Blockgration Global Corp. and its subsidiaries, wherein the Company acquired all of the outstanding shares of common stock of Blockgration Global Corp., a company incorporated in Ontario, Canada, that is in the business of digital wallet deployments, prepaid card platform, blockchain and mobile apps development and performance driven web-based applications, for an aggregate purchase price of $18,900,320. The consideration is to be paid by issue of common shares and share purchase warrants in the Company as follows:

41,313,430 newly issued common shares in the Company, fifty percent (50%) of which will be release upon closing and the balance will be released upon meeting certain revenue milestones

ii)

56,186,560 share purchase warrants at an exercise price of $0.25, valid for 3 years

Further, the Company will also issue bonus shares and share purchase warrants on a pro rata basis after the end of each applicable fiscal year, upon achievement of certain operational milestones withing a defined time period

2020 Bonus shares – 5,000,000 shares and 5,000,000 warrants

2021 Bonus shares – 5,000,000 shares and 5,000,000 warrants

Under the acquisition method of accounting, the total purchase price reflects the tangible and intangible assets and liabilities based on their estimated fair values at the date of the completion of the acquisition. The following table summarizes the preliminary allocation of the purchase price of Blockgration Global Corp., and its subsidiaries:

Consideration
Common shares/warrants		7,255,849
Contingent shares/warrants (recorded as contingent liability)		11,644,471
Total consideration	$	18,900,320

Net assets acquired
Cash and cash equivalents	$	52,795
Accounts receivable		220,213
Inventory		5,838
Right-of-use asset		39,922
Other assets		53,083
Property and equipment		17,674
Goodwill		16,711,559
Intangible assets		4,385,000
Accounts payable and accrued liabilities		(516,788	)
Note and debt payable		(263,639	)
Other liabilities		(76,658	)
Non-controlling interest		(1,728,679	)
Total net assets acquired	$	18,900,320

The assessment of fair value is preliminary and is based on information that was available to management at the time the unaudited condensed consolidated financial statements were prepared. Measurement period adjustments will be recorded in the period in which they are determined, as if they had been completed at the acquisition date. Goodwill has been provided in the transaction based on estimates of future earnings of Blockgration Global Corp. and its subsidiaries, including anticipated synergies associated with the positioning of the combined company.

F-14

ZOOMPASS HOLDINGS, INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

NOTE 4 – PROPERTY AND EQUIPMENT

Cost	Office equipment

Balance at December 31, 2019	$	—
Additions on acquisition (note 3)		26,773
Foreign exchange		98
Balance at June 30, 2020 (unaudited)	$	26,871

Accumulated depreciation	Office equipment
Balance at December 31, 2019	$	—
Additions (note 3)		9,099
Depreciation for the period		983
Balance at June 30, 2020 (unaudited)	$	10,082

Balance at December 31, 2019	$	—
Balance at June 30, 2020 (unaudited)	$	16,789

NOTE 5 – INTANGIBLE ASSETS, GOODWILL AND IMPAIRMENT


Cost			Intellectual		Customer
	Tradenames		Property		base		Total
Balance at December 31, 2019	$	—	$	—	$	—	$	—
Additions (note 3)		418,000		768,000		3,199,000		4,385,000
Foreign exchange		—		-		11,012		11,012
Balance at June 30, 2020	$	418,000	$	768,000	$	3,210,012	$	4,396,012


Accumulated Amortization			Intellectual		Customer
	Tradename		Property		base		Total

Balance at December 31, 2019	$	—	$	—	$	—	$	—
Additions on acquisition (note 3)		—		-
Amortization		4,354		6,400		53,317		64,071
Foreign exchange		—		—		—		—
Balance at June 30, 2020	$	4,354	$	6,400	$	53,317	$	64,071

Balance at December 31, 2019	$	—	$	—	$	—	$	—
Balance at June 30, 2020	$	413,646	$	761,600	$	3,156,695	$	4,331,941

The fair value of the above intangible assets is provincial pending receipt of the final independent valuations for these assets.

F-15

ZOOMPASS HOLDINGS, INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

NOTE 5 – INTANGIBLE ASSETS, GOODWILL AND IMPAIRMENT (continued)

Goodwill	Total
		$
Balance at December 31, 2019		—
Acquisition (note 3)		16,711,559
Impairment in 2020		(13,243,071)
Foreign exchange		(4,330)
Balance at June 30, 2020 (unaudited)		3,464,158

NOTE 6 – OPERTAING RIGHT-OF-USE ASSETS AND LEASE OBLIGATIONS

The right-of-use asset consist of the operating lease for the Company's office facility in Toronto and office lease facility for one of the Company’s subsidiary are amortized over the remaining term of the lease of 33 and 36 months, respectively.

The Company adopted ASC 842 – Leases using the modified retrospective cumulative catch-up approach. Under this approach, the Company did not restate its comparative amounts and recognized a right-of-use asset equal to the present value of future lease payments. The Company elected to apply the practical expedient to only transition contracts which were previously identified as leases and elected to not recognize right-of-use assets and lease obligation for leases of low value assets.

ASC 842 – right-of-use asset recognition	$	240,809
		$
Balance at June 1, 2020 (see note 3)		39,922
Additions		175,214
Amortization		(14,912	)
Foreign exchange		510
Balance at June 30, 2020 (unaudited)		200,734

Lease obligation
	$
Balance at June 1, 2020	40,303
Additions	175,214
Repayment of interest accretion	(9,574	)
Foreign exchange	399
Balance at June 30, 2020 (unaudited)	206,342

Current portion of operating lease obligation	59,501
Noncurrent portion of operating lease obligation	146,841

The operating lease expense was $19,005 for the quarter ended June 30, 2020 ($Nil – June 30, 2019) and included in rent expense.

At the commencement date of the lease, the lease liability was measured at the present value of the lease payments that were not paid at that date. The lease payments are discounted using an interest rate of 10.8% for the Company and 17% for the Company’s subsidiary, which is the estimated incremental borrowing rate.

F-16

ZOOMPASS HOLDINGS, INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

NOTE 7 – NOTES PAYABLE

In July 2018, the Company’s subsidiary BGC obtained loan of $36,650 (C$50,000) from an unrelated third party for payment of operating expenses for a term of two years bearing no interest and repayable on demand. The balance of the loan at June 30, 2020 is $36,690 (December 31, 2019 - $Nil).

In September 2019, the Company’s subsidiary BGC obtained loan of $23,142 (C$30,000) from an unrelated third party for payment of operating expenses for a term of one year bearing no interest and repayable on demand. The balance of the loan at June 30, 2020 was $22,014 (December 31, 2019 - $Nil).

In February 2020 and April 2020, the Company’s subsidiary BGC obtained loan of $60,264 (C$80,000) and $22,014 (C$30,000) from a shareholder for payment of operating expenses for a term of one year bearing no interest and repayable on demand. The balance of the loans at June 30, 2020 was $80,718 (December 31, 2019 - $Nil).

NOTE 8– LONG TERM DEBT

At June 30, 2020, long term debt consisted of the following:

On November 30, 2019, a subsidiary of the Company obtained an unsecured loan from Tata Capital in the amount of $26,677 (Indian Rupees 2,015,000) repayable over a period of 40 months at interest rate of 17.99%. The balance of the loan at June 30, 2020 was $27,219.

On January 30, 2020, a subsidiary of the Company obtained an unsecured loan from ICICI Bank in the amount of $33,098 (Indian Rupees 2,500,000) repayable over a period of 40 months at interest rate of 17%. The balance of the loan at June 30, 2020 was $32,406.

On January 30, 2020, a subsidiary of the Company obtained an unsecured loan from IDFC First Bank Limited in the amount of $33,760 (Indian Rupees 2,550,000) repayable over a period of 36 months at interest rate of 17%. The balance of the loan at June 30, 2020 was $34,458.

During the period ended June 30, 2020, a subsidiary of the Company received Canada Emergency Business Account loan for COVID-19 relief amounting to $29,351 (C$ 40,000), unsecured and non-interest bearing, repayable by December 31, 2022.

Total long term debt	$	123,434
Less: current portion		(17,330	)
Long term debt, net of current portion	$	106,104

The future commitments for long term debt are as follows:


Year ended
	2020	$	17,330
	2021		40,209
	2022		64,772
	2023		1,123
	Total	$	123,434

NOTE 9– RELATED PARTY TRANSACTIONS AND BALANCES

The balances of due to and due from related party corporations at June 30, 2020 represent advances and payment from/to related party corporations which is non-interest bearing, non-secured and due on demand. The amount of $100,201 that is recorded as due to related parties at December 31, 2019 are eliminated upon consolidation.

The amounts due from related company at June 30, 2020 of $58,371 (December 31, 2019 - $Nil) is comprised of $50,290 (December 31, 2019 - $Nil) representing the net amounts transferred during the period and due from related companies. A former officer of the Company was Chief Executive Officer of the related companies. It also includes an amount of advance of $8,081 (December 31, 2019 - $Nil) to a shareholder of the Company. These amounts were made to provide working capital and are due on demand and have no set repayment terms.

The due to related parties at June 30, 2020 of $107,435 (December 31, 2019 - $100,201) is comprised of $76,939 (December 31, 2019 - $Nil) representing amount due to the company under significant influence of a shareholder of the Company. It also includes an amount of $30,496 (December 31, 2019 - $Nil) paid to shareholders of the Company. These amounts were made to provide working capital and are due on demand and have no set repayment terms.

F-17

ZOOMPASS HOLDINGS, INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

NOTE 9– RELATED PARTY TRANSACTIONS AND BALANCES (continued)

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 June 30, 2020 was $54,436 (December 31, 2019 - $319,969) which includes expense reimbursements. This amount is reflected in accounts payable and is further described below.

As at June 30, 2020, the Company had an amount owing to an entity owned and controlled by the former Chief Executive Officer of the Company of $Nil (December 31, 2019 - $265,533). The amount owing relates to services provided by the former Chief Executive Officer and expense reimbursements. During the six months period ended June 30, 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, in amount of 232,342, was determined by using the market price of the common stock as at the date of issuance. The Company recognized a Gain on settlement of debt in amount of $33,191 in statement of operations. (Note 10).

As at June 30, 2020, the Company had an amount owing to an entity owned and controlled by the former Secretary of the Company of $54,436 (December 31, 2019 - $54,436). The amount owing relates to services provided by the then Secretary and expense reimbursements.

During the period ending June 30, 2020, $307,601 (Issuance of shares for service – 250,000, stock options expenses - $57,601) was recognized for share-based payments expense to directors and officers of the Company. No expense for share-based payments to directors and officers was recognized during the period ending June 30, 2019.

As at June 30, 2020, the Company had an amount owing to the Chief Executive Officer for $29,352 (December 31, 2019 - $Nil), included in Accounts payable and accrued liabilities. The amount owing relates to services provided and is recorded as consulting expenses.

As at June 30, 2020, the Company had an amount owing to the Chief Financial Officer for $6,865 (December 31, 2019 - $Nil), included in Accounts payable and accrued liabilities. The amount owing relates to services provided and is recorded as consulting expenses.

NOTE 10 – COMMON STOCK AND WARRANTS

Common Stock

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

Shares issued on private placement:

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 $136,584.

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 was issued in April 2020 for gross proceeds of $15,000.

In June 2020, the Company issued total of 551,394 non-registered shares of common stock for net proceeds in the amount of $137,002.

F-18

ZOOMPASS HOLDINGS, INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

Common Stock (continued)

Shares issued on conversion of debt:

In January 2020, the Company issued 3,319,162 shares of the common stock to settle debts owed by the company in the amount $265,533. The $265,533 debt was owed to a corporation controlled by a former Chief Executive Officer of the company (note 9). The fair value of these shares, in amount of 232,342, was determined by using the market price of the common stock as at the date of issuance. The Company recognized a Gain on settlement of debt in amount of $33,191 in statement of operations.

Cancellation of shares:

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 1). 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, consisted of a transfer of $4,491 from common stock to additional paid-in capital and related reduction in the number of common shares outstanding.

Shares issued for services:

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, in amount of $145,000, was determined by using the market price of the common stock as at the date of issuance and charged to statement of operations.

In April 2020, the Company issued 2,000,000 shares of the common stock to Chief Executive of the Company as compensation for services. The fair value of these shares, in amount of $250,000, was determined by using the market price of the common stock as at the date of decision to issue and charged to statement of operations.

Shares issued in year 2019:

On January 20, 2019 and April 20, 2019, the company issued 1,000,000 and 500,000 shares of the common stock, respectively, to an arm’s length third party as compensation for services rendered. The fair value of these shares, in amount of $177,000 and $50,000 respectively, was determined by using the market price of the common stock as at the date of issuance and charged to statement of operations.

In April 2019, the Company received $15,385 (C$20,000) subscription fund from an investor and issued 181,818 non-registered shares of the Company’s common stock in July 2019.

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 $103,846 (C$135,000).

Shares to be issued

On acquisition of BGC:

On April 20, 2020, the Company and its shareholders entered into a Share Exchange Agreement with Blockgration Global Corp. (“BGC”). Pursuant to the Share Exchange Agreement, the Company agreed to exchange 100% of the outstanding equity stock of BGC held by its shareholders for shares of common stock of the Company. Under the terms of the amended agreement, the Company will issue forty one million three hundred and thirteen thousand four hundred and thirty (41,313,430) newly issued shares of the common stock and fifty six million one hundred and eighty six thousand five hundred and sixty (56,186,560) share purchase warrants to the shareholders of the Company. Each warrant is exercisable into one common share of the Company at an exercise price of $0.25 within three years of the issue date.

F-19

ZOOMPASS HOLDINGS, INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

Shares to be issued (continued)

The shares to be issued for this acquisition was calculated using the market price of the shares of the Company on May 31, 2020, the date of closing of the transaction. The value of the contingent consideration common shares and warrants to be issued for this acquisition was calculated using the Black-Scholes pricing model and the projected earnout dates discounted at the cost of equity. The total price was determined to be $18,900,320. The amount of contingent consideration on the date of acquisition was $11,644,471. This was revalued at June 30, 2020 and the change in fair value of $2,989,377 was recorded in the Statement of operations.

On May 31, 2020, common shares of 20,656,720 and warrants of 4,682,026 was released. The common shares were assigned a value of $6,197,015 and the warrants $1,058,834, total amounting to $7,255,849 was recorded as shares to be issued.

On June 30, 2020, common shares of 6,885,573 and warrants of 1,560,675 was released based on the revenue targets. The fair value was determined to be $2,923,376 was recorded as shares to be issued.

NOTE 11 – SHARE-BASED PAYMENTS

On January 15, 2020, the Company issued 3,000,000 common stock purchase options at an exercise price of $0.10 to directors, officers and consultants of the Company. 83,415 of these options vested immediately and are exercisable for seven years from the grant date. Remaining options were exercisable for seven years from the grant date at an exercise price of $0.10 and would vest ratably over a three-year period from the date of grant. The 3,000,000 stock options were assigned a fair value of $172,168 using the Black-Scholes pricing model. The following assumptions were used: Risk free interest rate of – 1.54%; expected volatility of 124%; expected dividend yield – nil; expected life of 7 years. For six months ended June 30, 2020, 500,070 options vested and the fair value of those vested options, in amount of $28,685, was charged to statement of operations with a credit in additional paid-in capital. (Note 9)

On March 1, 2020, the Company decided to issue 2,000,000 shares of the common stock to Chief Executive of the Company as compensation for services. The fair value of these shares, in amount of $250,000, was determined by using the market price of the common stock as at the date of decision of issuance and recognized in statement of operations with a credit in shares to be issued. (Note 9)

On March 1, 2020, the Company issued 1,160,000 shares of the common stock to arm’s length third parties as compensation for services rendered. The fair value of these shares, in amount of $145,000, was determined by using the market price of the common stock as at the date of issuance.

On March 11, 2020, the Company granted 2,000,000 common stock purchase options at an exercise price of $0.10 to two directors of the Company. 55,610 of these options vested immediately and are exercisable for seven years from the grant date. Remaining options were exercisable for seven years from the grant date at an exercise price of $0.10 and would vest ratably over a three-year period from the date of grant. The 2,000,000 stock options were assigned a fair value of $260,195 using the Black-Scholes pricing model. The following assumptions were used: Risk free interest rate of – 0.57%; expected volatility of 130%; expected dividend yield – nil; expected life of 7 years. For six months ended June 30, 2020, 222,272 options vested and the fair value of those vested options, in amount of $28,916, was charged to statement of operations with a credit in additional paid-in capital. (Note 9)

On January 20, 2019, the Company issued 1,000,000 shares of the common stock to an arm’s length third party as compensation for services rendered. The fair value of these shares, in amount of $177,000, was determined by using the market price of the common stock as at the date of issuance.

On April 20, 2019, the Company issued 500,000 shares of the common stock to an arm’s length third party as compensation for services rendered. The fair value of these shares, in amount of $50,000, was determined by using the market price of the common stock as at the date of issuance.

F-20

ZOOMPASS HOLDINGS, INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

The components of share-based payments expense are detailed in the table below.

	Date of grant	Contractual life	Number	Exercise price (C$)		Period ended June 30, 2020 ($)		Period ended June 30, 2019 ($)	Share price (C$)	Risk-free rate		Volatility		Dividend yield	Expected life (years)
Share issued for services	January 20, 2019	N/A	1,000,000	N/A		—		177,000	0.177	—		—		—	—
Stock options for services	April 20, 2019	N/A	500,000	N/A				50,000	0.10	—		—		—	—
Stock options	January 15, 2020	7 years	3,000,000	0.10		28,685		—	0.07	1.54	%	124	%	Nil	6.79
Share issued for services	March 1, 2020	N/A	1,160,000	N/A		145,000		—	0.12	—		—		—	—
Share issued for services	March 1, 2020	N/A	2,000,000	N/A		250,000		—	0.11	—		—		—	—
Stock options	March 11, 2020	7 years	2,000,000	0.10		28,917		—	0.14	0.57	%	130	%	Nil	6.95
					$	452,602	$	227,000

As at June 30, 2020, the Company has the following stock options and deferred stock units:

				Contractual				Number of units		Weighted Average Exercise
Award		Fair Value		Life (years)		Units		vested		Price (C$)
	Options		172,168		6.42		3,000,000		500,070		0.10
	Options		260,195		6.70		2,000,000		222,272		0.10
	Total		432,363				5,000,000		722,342

NOTE 12 – FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The Company has exposure to liquidity risk and foreign currency risk. The Company's risk management objective is to preserve and redeploy the existing treasury as appropriate, ultimately to protect shareholder value. Risk management strategies, as discussed below, are designed and implemented to ensure the Company's risks and the related exposure are consistent with the business objectives and risk tolerance.

Liquidity Risk: Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. The Company manages its liquidity by ensuring that there is sufficient capital to meet short and long-term business requirements, after taking into account cash requirements from operations and the Company's holdings of cash and cash equivalents. The Company also strives to maintain sufficient financial liquidity at all times in order to participate in investment opportunities as they arise, as well as to withstand sudden adverse changes in economic circumstances.

Management forecasts cash flows for its current and subsequent fiscal years to predict future financing requirements. Future requirements may be met through a combination of credit and access to capital markets. The Company's cash requirements are dependent on the level of operating activity, a large portion of which is discretionary. Should management decide to increase its operating activity, more funds than what is currently in place would be required. It is not possible to predict whether financing efforts will be successful or sufficient in the future. At June 30, 2020, the Company had $72,059 in cash and cash equivalents (December 31, 2019 - $21,477).

Currency risk: The Company and its subsidiaries expenditures are incurred in Indian Rupees, Canadian and US dollars. The results of the Company's operations are subject to currency translation risk. The Company mitigates foreign exchange risk through forecasting its foreign currency denominated expenditures and maintaining an appropriate balance of cash in each currency to meet the expenditures. As the Company's reporting currency is the US dollar, fluctuations in US dollar will affect the results of the Company.

Credit risk: Credit risk is the risk of loss associated with a counterparty's inability to fulfill its payment obligations. As at June 30, 2020, the Company's credit risk is primarily attributable to accounts receivable and cash and cash equivalents. At June 30, 2020, the Company's cash and cash equivalents were held with reputable Canadian chartered banks.

F-21

ZOOMPASS HOLDINGS, INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

NOTE 12 – FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)

Interest rate risk: Interest rate risk is the risk borne by an interest-bearing asset or liability as a result of fluctuations in interest rates. Financial assets and financial liabilities with variable interest rates expose the Company to cash flow interest rate risk. The Company's does not have significant interest rate risk.

Fair values: The carrying amounts reported in the unaudited interim condensed consolidated balance sheet for cash and cash equivalents, accounts receivables, accounts payable and accrued liabilities and notes payable approximate fair value because of the short period of time between the origination of such instruments and their expected realization.

NOTE 13 – COMMITMENTS AND CONTINGENCIES

Commitment

There were no commitments as of June 30, 2020 and December 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.

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 10, 2019, the plaintiffs filed an appeal with United States Court of Appeals for the Third Circuit. As of May 27, 2020, the Class Action Complaints, including applicable appeals, have been settled or dismissed by the parties and the applicable courts.

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. As of May 27, 2020, the Derivative Complaints, including applicable appeals, have been settled or dismissed by the parties and the applicable courts.

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. As of May 27, 2020, the Derivative Complaint, including applicable appeals, have been settled or dismissed by the parties and the applicable courts.

As of June 30, 2020, there are no legal proceedings involving the Company.

F-22

ZOOMPASS HOLDINGS, INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Expressed in US dollars)

NOTE 14 – SUBSEQUENT EVENTS

The Company’s management has evaluated subsequent events up to August 19, 2020, the date the unaudited interim condensed consolidated financial statements were issued, pursuant to the requirements of ASC 855 and has determined the following material subsequent events:

On July 15, 2020, the Company entered into certain Intellectual Property Rights Purchase and Transfer Agreement with Moxie Holdings Private Ltd., an Indian corporation for (i) cash consideration of $1.2 million to be paid in installments, (ii) four million (4,000,000) newly issued shares of common stock, and (iii) warrants to purchase two million (2,000,000) shares of common stock at an exercise price of $0.50 per share valid for three years.

F-23

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion and analysis should be read in conjunction with the accompanying unaudited condensed consolidated interim financial statements and related notes for the three and six months ended June 30, 2020 as filed with the Securities and Exchange Commission and included in this Form 10-Q and the annual financial statements and management discussion and analysis for the year ended December 31, 2019 filed on Form 10-K.

Forward-looking Statements

This Quarterly Report on Form 10-Q contains statements reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended as "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements included or incorporated by reference in this Quarterly Report on Form 10-Q, other than statements of historical fact, that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements appear in a number of places, including, but not limited to in this "Management's Discussion and Analysis of Financial Condition and Results of Operations." These statements represent our reasonable judgment of the future based on various factors and using numerous assumptions and are subject to known and unknown risks, uncertainties and other factors, including the impact of the coronavirus (COVID-19) pandemic on our business, that could cause our actual results and financial position to differ materially from those contemplated by the statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts, and use words such as "anticipate," "believe," "estimate," "expect," "forecast," "may," "will", "should," "plan," "project" and other words of similar meaning. In particular, these include, but are not limited to, statements relating to the following:

·	Projected operating or financial results, including anticipated cash flows used in operations
·	Expectations regarding capital expenditures; and
·	Assumptions relating to our liquidity position, including our ability to obtain additional financing, if required.
·	Any or all of our forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and other factors including, among others:
·	The loss of key management personnel on whom the Company depends;
·	Our ability to operate our business efficiently, manage capital expenditures and costs (including general and administrative expenses) and obtain financing if required.
·	Our expectations with respect to our acquisition activity.

In addition, there may be other factors that could cause our actual results to be materially different from the results referenced in the forward-looking statements, some of which are included in this Quarterly Report on Form 10-Q, including in this "Management's Discussion and Analysis of Financial Condition and Results of Operations." Many of these factors will be important in determining our actual future results. Consequently, no forward-looking statement can be guaranteed. Our actual future results may vary materially from those expressed or implied in any forward-looking statements. All forward- looking statements contained in this Quarterly Report on Form 10-Q are qualified in their entirety by this cautionary statement. Forward-looking statements speak only as of the date they are made, and the Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q, except as otherwise required by applicable law.

The discussion and analysis of the financial condition and results of operations are based upon the financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. On an on-going basis management reviews our estimates and assumptions. The estimates were based on historical experience and other assumptions that management believes to be reasonable under the circumstances. Actual results are likely to differ from those estimates under different assumptions or conditions.

Business Overview

The Company is a Software Fintech company and continue to develop and acquire software platforms and services to sell to customers globally with a focus on leading edge technologies and software as a service. The company is actively seeking opportunities to acquire software companies with existing revenue streams.

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.

The Company has incurred recurring losses from operations and as of June 30, 2020 and December 31, 2019, had net working capital deficiency and an accumulated deficit. The Company’s continued existence is dependent upon its ability to continue to execute its operating plan and to obtain additional debt or equity financing. We continue to evaluate various potential strategies with the goal of improving our ability to achieve additional revenue and profit growth for software products and services. These possible strategies, which are generally focused on ways to create a more complete slate of customer experience solutions for potential clients, include further software or technology development expenditures, pursuit of merger, acquisitions or joint ventures with companies that provide complimentary products and services, software licensing arrangements, and investment in additional infrastructure within our Company. Each of these possible strategies will be thoroughly vetted by our board of directors to assess the expected level of enterprise value creation for each strategy compared to the various risks associated with each possible scenario. In addition, we may require financing to pursue these strategies that is beyond our current financial resources. Accordingly, there is no assurance that we will be able to pursue any strategies that are identified by our board of directors.

In addition, in December 2019, a novel strain of coronavirus (“COVID-19”) was reported in Wuhan, China and has since extensively impacted the global health and economic environment. In March 2020, the World Health Organization characterized COVID-19 as a pandemic. The COVID-19 pandemic and the government responses to the outbreak presents uncertainty and risk with respect to the Company and its performance and financial results.

Business Developments

Completed the acquisition of Blockgration Global Corp., and its subsidiaries through a share exchange agreement thereby giving the Company potential revenues from the many significant contracts for the prepaid card platform and digital wallets.

Completed the purchase of the Digital asset platform putting in place the infrastructure required to expand on the multicurrency and cross border technology platform globally.

Appointed executive officers at the corporate level to channel the operations of the Company.

Our Business Model and Objectives

For the near term, our business objectives include:

Continue to leverage our ability as a Program Manager in Asia including India and Singapore, Europe and North America to issue prepaid cards

Target to launch the Ride Hail platform in Vancouver, Canada for the taxi association

Target to launch the Agriculture Supply Chain platform in the Jamaican market

Results of operations for the three months ended June 30, 2020 and 2019

The following table shows our results of operations for the three months ended June 30, 2020 and 2019. The historical results presented below are not necessarily indicative of the results that may be expected for any future period.

	Period						Change
	Three Months Ended June 30, 2020			Three Months Ended June 30, 2019			Dollars			Percentage
Revenues	$	86,756		$	—		$	86,756			100	%
Operating expenses		475,304			117,097			358,207			305	%
Loss from operations		(388,548	)		(117,097	)		(271,451	)		231	%
Other Expenses:
Change in fair value of contingent consideration		(2,989,377	)		—			(2,989,377	)		100	%
Impairment of goodwill		(13,243,071	)		—			(13,243,071	)		100	%
Net loss		(16,620,996	)		(117,097	)		(16,503,899	)		—

Revenue

Total revenue for the three months ended June 30, 2020 was $86,756 which represented an increase of 100%, compared to total revenue of $Nil for the three months ended June 30, 2019. On May 31, 2020, the Company completed acquisition of Blockgration Global Corp and its subsidiaries and the revenue is the result of this acquisition for the month of June 2020. The revenue for the month is relatively lower than the historical amounts due to the impact of COVID-19. The Company did not recognize any revenue for three months ended June 30, 2019.

Operating Expenses

	Period						Change
	Three Months Ended June 30, 2020			Three Months Ended June 30, 2019			Dollars			Percentage
Staff related expenses	$	195,350		$	104,989		$	90,361			86	%
Salaries and consulting fees		180,725			70,822
Professional fees		14,625			34,167
Research and development		68,932			1,721			67,211			3905	%
Cost of sales		56,289			—
Software development costs		12,643			1,721
General and administrative		84,946			7,221			77,725			1076	%
Insurance		35,914			—
Filing fees and regulatory costs		4,446			—
Rent expense		23,803			2,976
Office and sundry expense		15,091			4,245
Travel expense		5,692			—
Bad debts		40,572			—			40,572			100	%
Share-based payments		36,015			50,000			(13,985	)		-28	%
Depreciation and amortization		65,053			—			65,053			100	%
Other expenses		(15,564	)		(46,834	)		31,270			-67	%
(Gain) on settlement of debt		—			—
Foreign exchange loss (gain)		(15,564	)		(46,834	)
Total operating expenses		475,304			117,097			358,207			305	%

Our operating expenses were comprised of staff related costs, research and development costs, general and administrative, share-based payments, depreciation and amortization and other expenses. Our operating expenses during the three months period ended June 30, 2020 and 2019 were $475,304 and $117,097, respectively. The overall increase of $358,207 was primarily attributable to the following changes in operating expenses of:

Staff related expenses increased by $90,361. In comparing the three months ended June 30, 2020 and June 2019 this increase was primarily attributed to the staff expenses for Blockgration Global Corp. and its subsidiaries for June 2020 for approximately 50 employees in India, including benefits that were not previously accrued.

Research and development cost increased by $67,211. For the purpose of analysis, we have classified the cost of generating revenue from the operations in Blockgration Global Corp. and its subsidiaries as development costs and the increase is primarily related to this cost.

General and administrative expenses increased by $77,725. The increase is primarily related to the insurance premium by

$35,914 for the three months ended June 30, 2020 for Officers and directors at the corporate level and rent and office expenses for Blockgration Global Corp. and its subsidiaries.

Bad debt expenses for the three months ended June 30, 2020 amounted to $40,572. This is the uncollectable portion of receivables that were written off due to the impact of COVID-19.

Share-based payments decreased by $13,985. The Company granted 3,000,000 and 2,000,000 stock options to officers, directors and consultant of the Company on January 15, 2020 and March 11, 2020 respectively and those stock options would vest over 3-year period, the fair value of vested options during the three months ended June 30, 2020 was in amount of $36,015. On April 20, 2019, the Company issued 500,000 shares of the common stock to an arm’s length third party as compensation for services rendered. The fair value of these shares was determined to be in the amount of $50,000.

Depreciation and amortization increased by $65,053 all of this relates to the assets acquired from Blockgration Global Corp. and its subsidiaries.

Other expenses increased by $31,270 primarily relating to the foreign currency exchange rate difference for transactions at the corporate office.

Net loss

The Company reported a net loss of $16,620,996 for the three months ended June 30, 2020, compared to net loss of $117,097 for the three months ended June 30, 2019 after taking an impairment on goodwill acquired by $13,243,071 and change in fair value of contingent consideration of $2,989,377. The change is due to the reasons discussed above.

Results of operations for the six months ended June 30, 2020 and 2019

The following table shows our results of operations for the six months ended June 30, 2020 and 2019. The historical results presented below are not necessarily indicative of the results that may be expected for any future period.

	Period						Change
	Six Months Ended June 30, 2020			Six Months Ended June 30, 2019			Dollars			Percentage
Revenues	$	86,756		$	—		$	86,756			100	%
Operating expenses		1,094,545			368,888			725,657			196	%
Loss from operations		(1,007,789	)		(368,888	)		(638,901	)		173	%
Other Expenses
Change in FV of contingent consideration		(2,989,377	)		—			(2,989,377	)		—
Impairment of goodwill		(13,243,071	)		—			(13,243,071	)		—
Net loss		(17,240,237	)		(368,888	)		(16,871,349	)		—

Revenue

Total revenue for the six months ended June 30, 2020 was $86,756 which represented an increase of 100%, compared to total revenue of $Nil for the six months ended June 30, 2019. On May 31, 2020, the Company completed acquisition of Blockgration Global Corp and its subsidiaries and the revenue is the result of this acquisition for the month of June 2020. The Company did not recognize any revenue for six months ended June 30, 2019.

Operating Expenses

Our operating expenses were comprised of staff related costs, research and development costs, general and administrative, share-based payments, depreciation and amortization and other expenses. Our operating expenses during the six months period ended June 30, 2020 and 2019 were $1,094,545 and $368,888, respectively. The increase of $725,657 is primarily due to the increase in share-based payments by $225,602, depreciation and amortization by $95,718, bad debts of $40,572 and foreign exchange conversion difference by $199,801 as shown in the table below:

	Period						Change
	Six Months Ended June 30, 2020			Six Months Ended June 30, 2019			Dollars		Percentage
Staff related expenses	$	258,202		$	179,519		$	78,683		44	%
Salaries and consulting fees		213,278			117,884
Professional fees		44,924			61,635
Research and development		68,932			50,764			18,168		36	%
Cost of sales		56,289			—
Software development costs		12,643			50,764
General and administrative		114,170			16,392			97,778		596	%
Insurance		35,914			—
Filing fees and regulatory costs		31,949			—
Rent expense		24,921			5,972
Office and sundry expense		15,694			10,420
Travel expense		5,692			—
Bad debts		40,572			—			40,572		100	%
Share-based payments		452,602			227,000			225,602		99	%
Depreciation and amortization		65,053			—			65,053		100	%
Other expenses		95,014			(104,787	)		199,801		-191	%
(Gain) on settlement of debt		(33,191	)		—
Foreign exchange loss (gain)		128,205			(104,787	)
Total operating expenses		1,094,545			368,888			725,657		196	%

Net loss

We had net loss of $17,240,237 for the six months period ended June 30, 2020, after taking an impairment on goodwill of $13,243,071 and change in fair value of contingent consideration of $2,989,377, compared to net loss of $368,888 for the six months period ended June 30, 2019. The change is primarily due to the reasons discussed above.

Liquidity, Capital Resources and Cash Flows

Management believes that we will continue to incur losses for the immediate future. Therefore, we will need additional equity or debt financing until we can achieve profitability and positive cash flows from operating activities. These conditions raise substantial doubt about our ability to continue as a going concern. Our unaudited condensed consolidated financial statements do not include and adjustments relating to the recovery of assets or the classification of liabilities that may be necessary should we be unable to continue as a going concern. For the six months ended June 30, 2020, we have generated revenue and are trying to achieve positive cash flows from operations.

As of June 30, 2020, we had a cash balance of $72,059, accounts receivable of $188,425 and $1,421,271 in current liabilities. At the current cash consumption rate, we will need to consider additional funding sources going forward. We are taking proactive measures to reduce operating expenses and drive growth in revenue.

The successful outcome of future activities cannot be determined at this time and there is no assurance that, if achieved, we will have sufficient funds to execute our intended business plan or generate positive operating results.

Capital Resources

The following table summarizes total current assets, liabilities and working capital (deficit) for the periods indicated:

	June 30, 2020			December 31, 2019
Current assets	$	388,119		$	32,040
Current liabilities		1,421,271			849,201
Working capital		(1,033,152	)		(817,161	)

As of June 30, 2020, and December 31, 2019, we had a cash balance of $72,059 and $21,477, respectively.

Summary of Cash Flows

	Six Months Ended June 30, 2020			Six Months Ended June 30, 2019
Net cash used in operating activities	$	(248,972	)	$	(128,510	)
Net cash provided by investing activities	$	52,795		$	—
Net cash provided by financing activities	$	281,926		$	119,231

Net cash used in operating activities.

Net cash used in operating activities for the six months ended June 30, 2020 was $248,972, which included a net loss of $17,240,237, non-cash activity such as impairment of goodwill of $13,243,071, change in fair value of contingent consideration of $2,989,377, gain on settlement of debt of ($33,191), change in operating assets of $146,148, foreign exchange loss of $128,205, shares issued for services of $452,602, and depreciation and amortization of $65,053 to derive the uses of cash in operations.

Net cash provided by investing activities.

Net cash provided by investing activities for the six months ended June 30, 2020 was $52,795 which was the cash acquired from Blockgration Global and its subsidiaries.

Net cash provided by financing activities.

Net cash provided by financing activities for the six months ended June 30, 2020 was $281,926. This is the proceeds from common shares issued in the Company for the period.

Off Balance Sheet Arrangements

Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our investors.

Critical Accounting Policies and Estimates

Critical accounting policies and estimates are further discussed in our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on April 9, 2020.

Related Party Transactions

The due to related parties at June 30, 2020 of $107,435 (December 31, 2019 - $100,201) is comprised of $76,939 (December 31, 2019 - $Nil) representing amount due to the company under significant influence of a shareholder of the Company. It also includes and amount of $30,496 (December 31, 2019 - $Nil) paid to shareholders of the Company. These amounts were made to provide working capital and are due on demand and have no set repayment terms

During the period ending June 30, 2020, $307,601 (Issuance of shares for service – 250,000, stock options expenses - $57,601) was recognized for share-based payments expense to directors and officers of the Company. No expense for share based payments to directors and officers was recognized during the period ending June 30, 2019.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company" (as defined by §229.10(f)(1)), the Company is not required to provide the information required by this Item.

ITEM 4. CONTROLS AND PROCEDURES

During the period ended June 30, 2020, there were no changes in our internal controls over financial reporting (as defined in Rule 13a- 15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Evaluation of Disclosure Controls and Procedures

The Company maintains "disclosure controls and procedures" as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, that are designed to ensure that information required to be disclosed by the Company in reports that are filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

As of the end of the period covered by this Quarterly Report, the Company carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(b) and 15d-15(b). Based upon this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures as of the end of the period covered by this Quarterly Report were effective to ensure that the material information required to be included in our Securities and Exchange Commission reports is accumulated and communicated to our management, including our principal executive and financial officer, as well as recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms relating to the Company.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these, or other matters, may arise from time to time that may harm our business.

As of date hereof, there are no legal proceedings involving the Company.

ITEM 1A. RISK FACTORS

The Company, as a "smaller reporting company" (as defined by §229.10(f)(1)), is not required to provide the information required by this Item.

ITEM 2. RECENT UNREGISTERED SALES OF EQUITY SECURITIES

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 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, in amount of 232,342, was determined by using the market price of the common stock as at the date of issuance. The Company recognized a Gain on settlement of debt in amount of $33,191 in statement of operations.

In April, 2020, the Company issued 2,000,000 shares of the common stock to Chief Executive of the Company as compensation for services. The fair value of these shares, in amount of $250,000, was determined by using the market price of the common stock as at the date of decision to issue and charged to statement of operations.

In June 2020, the Company issued total of 551,394 non-registered shares of common stock for net proceeds in the amount of $137,002.

Shares to be issued

On April 20, 2020, the Company and its shareholders entered into a Share Exchange Agreement with Blockgration Global Corp. (“BGC”). Pursuant to the Share Exchange Agreement, the Company agreed to exchange 100% of the outstanding equity stock of BGC held by its shareholders for shares of common stock of the Company. Under the terms of the amended agreement, the Company will issue fourty one million three hundred and thirteen thousand four hundred and thirty (41,313,400) newly issued shares of the common stock and fifty six million one hundred and eighty six thousand five hundred and sixty (56,186,560) share purchase warrants to the shareholders of the Company. Each warrant is exercisable into one common share of the Company at an exercise price of $0.25 within three years of the issue date.

Purchases of Our Equity Securities

No repurchases of our common stock were made during our six-month ended June 30, 2020.

ITEM 6. EXHIBITS

Exhibit No.	Description
31.1	Certifications of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certifications of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certifications of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certifications of Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Zoompass Holdings, Inc.,

Date: August 19, 2020

/s/ Emanuel (Manny) Bettencourt

Emanuel (Manny) Bettencourt Chief Executive Officer (Principal Executive Officer)

Zoompass Holdings, Inc. - FORM 10-Q - August 19, 2020

Attached files

Zoompass Holdings, Inc. Reports