ZOOMPASS HOLDINGS, INC. 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 endedJune 30, 2020 as filed with theSecurities and Exchange Commission and included in this Form 10-Q and the annual financial statements and management discussion and analysis for the year endedDecember 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 inthe United States ("U.S. GAAP"). The preparation of financial statements in conformity withU.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. 4 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 asUVIC. Inc. ("Zoompass Holdings " or the "Company") was incorporated under the laws of theState of Nevada onAugust 21, 2013 .
In
EffectiveMarch 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") toFintech Holdings North America Inc. , or its designee. The aggregate purchase price of the Prepaid Business wasC$400,000 . The transaction was completed onMarch 26, 2018 . OnOctober 17, 2018 , the Company purchased certain business assets that represents a business fromVirtublock 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. OnFebruary 27, 2020 , the Company cancelled 44,911,724 shares of the common stock which were issued in connection with the asset purchase agreement datedOctober 17, 2018 withVirtublock Global Corp. Pursuant to a General Release agreement datedNovember 29, 2019 , the asset purchase agreement datedOctober 17, 2018 withVirtublock 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, andVirtublock Global Corp. assigned and tendered the 44,911,724 shares of common stock of the Company to the Company for cancellation. OnMay 31, 2020 , the Company closed a Share Exchange Agreement (the "Share Exchange Agreement") by and among the Company,Blockgration Global Corp. , anOntario corporation and its subsidiaries ("BGC"), and the shareholders of BGC (the "BGC Shareholders"). This acquisition gives the Company controlling interest in BGC's subsidiaries inCanada andIndia which is engaged in the business of digital wallet deployments, prepaid card platform, blockchain and mobile apps deployment. OnJuly 15, 2020 , the Company entered into certain Intellectual Property Rights Purchase and Transfer Agreement withMoxie 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. The Company has incurred recurring losses from operations and as ofJune 30, 2020 andDecember 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, inDecember 2019 , a novel strain of coronavirus ("COVID-19") was reported inWuhan, China and has since extensively impacted the global health and economic environment. InMarch 2020 , theWorld 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. 5 Business Developments Completed the acquisition ofBlockgration 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
and
· Target to launch the Ride Hail platform in
association
· Target to launch the Agriculture Supply Chain platform in the Jamaican market
Results of operations for the three months ended
The following table shows our results of operations for the three months endedJune 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, Three Months Ended 2020 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 endedJune 30, 2020 was$86,756 which represented an increase of 100%, compared to total revenue of $Nil for the three months endedJune 30, 2019 . OnMay 31, 2020 , the Company completed acquisition ofBlockgration Global Corp and its subsidiaries and the revenue is the result of this acquisition for the month ofJune 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 endedJune 30, 2019 .
6
Operating Expenses
Period Change
Three Months Three Months
Ended Ended
June 30, June 30,
2020 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 endedJune 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
ended
staff expenses for
for approximately 50 employees in
previously accrued.
· Research and development cost increased by
analysis, we have classified the cost of generating revenue from the operations
in
increase is primarily related to this cost. 7
· General and administrative expenses increased by
primarily related to the insurance premium by
$35,914 for the three months endedJune 30, 2020 for Officers and directors at the corporate level and rent and office expenses forBlockgration Global Corp. and its subsidiaries.
· Bad debt expenses for the three months ended
This is the uncollectable portion of receivables that were written off due to
the impact of COVID-19.
· Share-based payments decreased by
2,000,000 stock options to officers, directors and consultant of the Company on
vest over 3-year period, the fair value of vested options during the three
months ended
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
· Depreciation and amortization increased by
assets acquired fromBlockgration Global Corp. and its subsidiaries.
· Other expenses increased by
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 endedJune 30, 2020 , compared to net loss of$117,097 for the three months endedJune 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
The following table shows our results of operations for the six months endedJune 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 Six Months Ended June 30, June 30, 2020 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 endedJune 30, 2020 was$86,756 which represented an increase of 100%, compared to total revenue of $Nil for the six months endedJune 30, 2019 . OnMay 31, 2020 , the Company completed acquisition ofBlockgration Global Corp and its subsidiaries and the revenue is the result of this acquisition for the month ofJune 2020 . The Company did not recognize any revenue for six months endedJune 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 endedJune 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: 8 Period Change Six Months Ended Six Months Ended June 30, June 30, 2020 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 endedJune 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 endedJune 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 endedJune 30, 2020 , we have generated revenue and are trying to achieve positive cash flows from operations. As ofJune 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. 9 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
849,201
Working capital (1,033,152 ) (817,161 )
As of
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