Form 10-Q Innovative Payment Solut For: Jun 30
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
For the transition period from ____________ to ____________
Commission
file number
| (Exact name of registrant as specified in its charter) |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| (Address of Principal Executive Office) | (Zip Code) |
| (Registrant’s telephone number, including area code) |
| n/a |
| (Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act: None
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.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files.)
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 definition 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 | ☐ |
| ☒ | 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 Exchange Act). Yes ☐ No
As of August 13, 2026, there were
INNOVATIVE PAYMENT SOLUTIONS, INC.
Form 10-Q
For the Quarter Ended June 30, 2026
Index
i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements” (as defined in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that reflect our current expectations and views of future events. The forward-looking statements are contained principally in the section of this Report entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Readers are cautioned that significant known and unknown risks, uncertainties and other important factors (including those over which we may have no control and others listed in this Report and in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Form 10-K”)) may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. You can identify some of these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “is/are likely to,” “potential,” “continue” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include statements relating to:
| ● | our ability to implement our business plan, including our ability to launch and generate revenue from our joint ventures or other digital payment solutions we may seek to develop or commercialize in the future; |
| ● | acceptance by the marketplace of our products and services; |
| ● | our ability to formulate, implement and modify as necessary effective sales, marketing, and strategic initiatives to drive revenue growth; |
| ● | the viability of our current intellectual property and intellectual property created in the future; |
| ● | our ability to comply with currently applicable laws and government regulations and those that may be applicable in the future; |
| ● | our ability to retain key employees and third-party service providers; |
| ● | adverse changes in general market conditions for payment solutions and other products and services we offer; |
| ● | our ability to generate cash flow and profitability and continue as a going concern; |
| ● | our future financing plans and ability to repay outstanding indebtedness; and |
| ● | our ability to adapt to changes in market conditions which could impair our operations and financial performance. |
These forward-looking statements involve numerous and significant risks and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our expectations may later be found to be incorrect. Our actual results of operations or the results of other matters that we anticipate herein could be materially different from our expectations. Important risks and factors that could cause our actual results to be materially different from our expectations are generally set forth in the “Management’s Discussion and Analysis of Financial Condition and Results of Operation,” section contain in this Report and in the “Business,” “Risk Factors” and other sections of the 2025 Form 10-K. You should thoroughly read this Report and the documents that we refer to with the understanding that our actual future results may be materially different from, and worse than, what we expect. We qualify all of our forward-looking statements by these cautionary statements.
The forward-looking statements made in this Report relate only to events or information as of the date of this Report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this Report completely and with the understanding that our actual future results may be materially different from what we expect.
ii
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
INNOVATIVE PAYMENT SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total Current Assets | ||||||||
| Non-current assets | ||||||||
| Plant and equipment | ||||||||
| Intangible assets | ||||||||
| Equity method investment | ||||||||
| Total Non-Current Assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current Liabilities | ||||||||
| Bank overdraft | ||||||||
| Accounts payable | $ | $ | ||||||
| Related party payables | ||||||||
| Accrued interest on federal relief loans | ||||||||
| Notes payable | ||||||||
| Convertible debt, net of unamortized discount of $ | ||||||||
| Convertible debt – related party | ||||||||
| Derivative liability | ||||||||
| Total Current Liabilities | ||||||||
| Non-Current Liabilities | ||||||||
| Federal relief loans | ||||||||
| Total Non-Current Liabilities | ||||||||
| Total Liabilities | ||||||||
| Stockholders’ Deficit | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total deficit attributable to Innovative Payment Solutions, Inc. Stockholders | ( | ) | ( | ) | ||||
| Non-controlling interest | ||||||||
| Total shareholders’ deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | $ | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
1
INNOVATIVE PAYMENT SOLUTIONS, INC.
Condensed consolidated Statements of Operations
(Unaudited)
| Three months ended | Three months ended | Six months ended | Six months ended | |||||||||||||
| June 30, | June 30, | June 30, | June 30, | |||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Net Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of Goods Sold | ||||||||||||||||
| Gross loss | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Total Expense | ||||||||||||||||
| Loss from Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss on settlement and repricing of convertible notes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Fair value adjustment to price protected warrants | ( | ) | ( | ) | ||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest income | ||||||||||||||||
| Amortization of debt discount | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Derivative liability movements | ||||||||||||||||
| Loss before Income Taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income Taxes | ||||||||||||||||
| Consolidated net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Add: Net loss attributable to non-controlling interest | ||||||||||||||||
| Net loss attributable to Innovative Payment Solutions stockholders’ | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Deemed dividend | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss attributable to Innovative Payment Solutions common stockholders | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Basic and diluted loss per share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted Average Number of Shares Outstanding – Basic and diluted | ||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
2
INNOVATIVE PAYMENT SOLUTIONS, INC.
Condensed consolidated Statements of Changes in Stockholders’ Equity (Deficit)
(Unaudited)
| Preferred Stock Shares | Amount | Common Stock Shares* | Amount | Additional Paid-in Capital | Accumulated Deficit | Non-controlling shareholders interest | Total Stockholders’ Equity (Deficit) | |||||||||||||||||||||||||
| Balance at December 31, 2025 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
| Conversion of convertible debt | - | |||||||||||||||||||||||||||||||
| Fair value of common stock issued for services | - | |||||||||||||||||||||||||||||||
| Fair value of warrants issued to convertible debt holders | - | - | ||||||||||||||||||||||||||||||
| Fair value of convertible debt extinguishment | - | - | ||||||||||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at March 31, 2026 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
| Reversal of loss on convertible debt | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Conversion of convertible debt | - | |||||||||||||||||||||||||||||||
| Settlement of legal liability | - | |||||||||||||||||||||||||||||||
| Fair value of common stock issued for interest in variable interest entity | - | |||||||||||||||||||||||||||||||
| Fair value of non-controlling interest | - | - | ||||||||||||||||||||||||||||||
| Fair value of common stock issued for services | - | |||||||||||||||||||||||||||||||
| Fair value of warrants issued to convertible debt holders | - | - | ||||||||||||||||||||||||||||||
| Fair value of convertible debt extinguishment | - | - | ||||||||||||||||||||||||||||||
| Fair value of securities, anti-dilution deemed dividend | - | - | ( | ) | ||||||||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance at June 30, 2026 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
| Preferred Stock Shares | Amount | Common Stock Shares* | Amount | Additional Paid-in Capital | Accumulated Deficit | Non-controlling shareholders interest | Total Stockholders’ Equity (Deficit) | |||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
| Conversion of convertible debt | - | |||||||||||||||||||||||||||||||
| Fair value of securities anti-dilution deemed dividend | - | - | ( | ) | ||||||||||||||||||||||||||||
| Fair value of warrants issued to convertible debt holders | - | - | ||||||||||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at March 31, 2025 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
| Conversion of convertible debt | - | |||||||||||||||||||||||||||||||
| Fair value of securities anti-dilution deemed dividend | - | - | ( | ) | ||||||||||||||||||||||||||||
| Fair value of warrants issued to convertible debt holders | - | - | ||||||||||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
INNOVATIVE PAYMENT SOLUTIONS, INC.
Condensed consolidated Statements of Cash Flows
(Unaudited)
| Six months ended | Six months ended | |||||||
| June 30, | June 30, | |||||||
| 2026 | 2025 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Consolidated net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Derivative liability movements | ( | ) | ( | ) | ||||
| Depreciation | ||||||||
| Amortization of debt discount | ||||||||
| Loss on settlement and repricing of convertible notes | ||||||||
| Fair value of price protected warrants | ||||||||
| Fair value of common stock issued for services | ||||||||
| Deemed interest income | ( | ) | ||||||
| Stock based compensation | ||||||||
| Changes in Assets and Liabilities | ||||||||
| Prepaid expenses | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Related party payables | ( | ) | ||||||
| Interest receivable | ( | ) | ||||||
| Interest accruals | ||||||||
| CASH USED IN OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from bank overdraft | ||||||||
| Proceeds from convertible notes | ||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
| NET (DECREASE) INCREASE IN CASH | ( | ) | ||||||
| Cash at the beginning of the period | ||||||||
| CASH AT END OF PERIOD | $ | $ | ||||||
| CASH PAID FOR INTEREST AND TAXES: | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Fair value of warrants issued with convertible notes | $ | $ | ||||||
| Conversion of convertible debt to equity | $ | $ | ||||||
| Fair value of common stock issued for investment in joint venture | $ | $ | ||||||
| Fair value of non-controlling shareholders interest | $ | $ | ||||||
| Settlement of legal liabilities | $ | $ | ||||||
See notes to the unaudited condensed consolidated financial statements.
4
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed consolidated Financial Statements
| 1 | ORGANIZATION AND DESCRIPTION OF BUSINESS |
| a) | Organizational History |
On May 12, 2016, Innovative Payment Solutions, Inc., a Nevada corporation (“IPSI” or the “Company”) (originally formed on September 23, 2013 under the name “Asiya Pearls, Inc.”), entered into an Agreement and Plan of Merger (the “Qpagos Merger Agreement”) with Qpagos Corporation, a Delaware corporation (“Qpagos Corporation”), and Qpagos Merge, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”). Pursuant to the Qpagos Merger Agreement, on May 12, 2016, the merger was consummated, and Qpagos Corporation and Merger Sub merged (the Qpagos “Merger”), with Qpagos Corporation continuing as the surviving corporation of the Merger. On May 27, 2016, the Company’s name was changed from “Asiya Pearls, Inc.” to “QPAGOS”.
Pursuant to
the Qpagos Merger Agreement, upon consummation of the Qpagos Merger, each share of Qpagos Corporation’s capital stock issued and
outstanding immediately prior to the Merger was converted into the right to receive two shares of the Company’s common stock, par
value $
The Qpagos Merger was treated as a reverse acquisition of the Company, then a public shell company, for financial accounting and reporting purposes. As such, Qpagos Corporation was treated as the acquirer for accounting and financial reporting purposes while the Company was treated as the acquired entity for accounting and financial reporting purposes.
Qpagos Corporation was incorporated on May 1, 2015 under the laws of the state of Delaware to effectuate a reverse merger transaction with Qpagos, S.A.P.I. de C.V. (“Qpagos Mexico”) and Redpag Electrónicos S.A.P.I. de C.V. (“Redpag”). Each of the entities were incorporated in November 2013 in Mexico. Qpagos Mexico was formed to process payment transactions for service providers it contracts with, and Redpag was formed to deploy and operate kiosks as a distributor.
On June 1, 2016, the board of directors of the Company (the “Board”) changed the Company’s fiscal year end from October 31 to December 31.
On November
1, 2019, the Company changed its corporate name from “QPAGOS” to “Innovative Payment Solutions, Inc.” Additionally,
and immediately following the name change, the Company filed a Certificate of Change with the Secretary of State of the State of
Nevada to effect a reverse split of the then outstanding Common Stock at a ratio of
On
December 31, 2019, the Company consummated the disposal of Qpagos Corporation, Qpagos Mexico and Redpag in exchange for
On
June 21, 2021, the Company acquired a
5
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed consolidated Financial Statements
| 1 | ORGANIZATION AND DESCRIPTION OF BUSINESS (continued) |
| a) | Organizational History (continued) |
On
August 26, 2021, the Company formed a new subsidiary, Beyond Fintech, Inc. (“Beyond Fintech”), in which it owns
a
On
May 12, 2023, the Company entered into an Agreement with Frictionless (the “May 2023 Frictionless Agreement”) to unwind
the equity ownership stakes that the Company and Frictionless have in each other and in Beyond Fintech. Pursuant to the May 2023 Frictionless
Agreement: (i) the Company assigned to Frictionless all common stock of Frictionless owned by the Company; (ii) the warrant to purchase
On
August 30, 2023, the Company implemented a
On September 5, 2023, the Company’s entered into a novation agreement whereby it assigned all its rights and interest in its e-wallet product, IPSIPay, and its receivables and payables due from and to Frictionless, related to IPSIPay, to a third party in order to concentrate all of its efforts on the IPSIPay Express LLC (“IPSIPay Express”) joint venture. See note 1(b) for further information.
On
October 29, 2025, the Company formed a limited liability corporation, Jetties Partners, LLC (“Jetties”), d/b/a IPSIPAY. Jetties
was formed to develop, market, distribute and operate a merchant processing payment solution, with an initial focus on the gaming industry.
Jetties consists of two
On
April 10, 2026, the Company formed an LLC, FINAP USA, LLC (“FINAP USA”) and on April 27, 2026, the Company entered into a
limited liability operating agreement with FINAP Worldwide Co. W.L.L (“FINAP”), whereby FINAP USA was owned
FAPL is the owner of certain financial technology platforms, software systems, and associated intellectual property and Cixor is the owner of certain payment technology platforms, software systems and associated intellectual property. FAPL and Cixor have agreed to license their technology platforms and payment technology platforms to Finap USA, on an exclusive, perpetual basis for the United States of America, including all fifty states, the District of Columbia, and all US territories and possessions; and Canada and Mexico.
The Company intends using these license agreements to pursue payment processing opportunities as well as cross-selling opportunities to potential customers.
| b) | Description of current business |
The Company is a fintech provider of digital payment solutions presently focused on credit card processing services for undeveloped and underserved markets. We have in the past (under the name IPSIPay) and may in the future develop and operate “e-wallets” that enable consumers to deposit cash, convert it into a digital form and remit funds quickly and securely.
We expect that revenue will be generated by Jetties and FINAP through fees derived from merchant processing fees, money transfer fees, and commissions on international bill payment processing.
6
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed consolidated Financial Statements
| 2 | ACCOUNTING POLICIES AND ESTIMATES |
| a) | Basis of Presentation |
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, these unaudited condensed consolidated financial statements do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments (consisting only of normal recurring adjustments), which the Company considers necessary, for a fair presentation of those financial statements. The results of operations and cash flows for the three and six months ended June 30, 2026 may not necessarily be indicative of results that may be expected for any succeeding quarter or for the entire fiscal year. The information contained in this Report should be read in conjunction with the audited financial statements of IPSI for the year ended December 31, 2025, included in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2026.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP.
All amounts referred to in the notes to the unaudited condensed consolidated financial statements are in United States Dollars ($) unless stated otherwise.
| b) | Variable Interest Entities |
The Company follows the provisions of ASC 810 regarding consolidation of variable interest entities (VIEs). A VIE is a legal entity that does not have enough equity at risk to fund its activities, or where the equity investors lack typical voting rights or the core rights and obligations of ownership.
| ● | Evaluation: The Company checks if it holds a variable interest in any entity through equity, loans, guarantees, or other contracts. |
| ● | Primary Beneficiary: The Company consolidates a VIE when it is deemed the primary beneficiary. This status applies if the Company has both: |
| o | The power to direct the activities that most significantly impact the VIE’s economic performance. |
| o | The obligation to absorb losses or the right to receive benefits that could be significant to the VIE. |
| ● | Ongoing Review: The Company reviews its relationships with all potential VIEs on an ongoing basis to reassess primary beneficiary status. |
| c) | Principals of consolidation |
The consolidated financial statements as of June 30, 2026, include the financial statements of the Company and its Variable interest entities, Jetties Partners, LLC and Finap Usa, LLC, in which it is considered the primary beneficiary with the power to direct activities and share, significantly in the benefits and obligations of the Variable Interest Entity.
All significant inter-company accounts and transactions have been eliminated in the consolidated financial statements.
| d) | Use of Estimates |
The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions, which are evaluated on an ongoing basis, that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the amounts of revenues and expenses that are not readily apparent from other sources. Actual results could differ from those estimates and judgments. In particular, significant estimates and judgments include those related to, the estimated useful lives for plant and equipment, the fair value of long-lived investments, the fair value of warrants and stock options granted for services, debt extinguishments or compensation, convertible debt and amendments thereto, derivative liabilities, the valuation allowance for deferred tax assets due to continuing operating losses and the allowance for doubtful accounts.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed consolidated financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from our estimates.
7
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed consolidated Financial Statements
| 2 | ACCOUNTING POLICIES AND ESTIMATES (continued) |
| e) | Contingencies |
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur.
The Company’s management assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s unaudited condensed consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.
| f) | Fair Value of Financial Instruments |
The Company adopted the guidance of Accounting Standards Codification (“ASC”) 820 for fair value measurements which clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level 2 - Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.
Level 3 - Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.
The carrying amounts reported in the balance sheets for cash, accounts receivable, notes receivable, other current assets, other assets, accounts payable, accrued liabilities, and notes payable, approximate fair value due to the relatively short period to maturity for these instruments. The Company has identified the short-term convertible debt and certain warrants attached to certain of the notes that are required to be presented on the balance sheets at fair value in accordance with the accounting guidance.
ASC 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. We evaluate the fair value of variably priced derivative liabilities on a quarterly basis and report any movements thereon in earnings.
| g) | Risks and Uncertainties |
The Company’s operations and prospects are and will be subject to significant risks and uncertainties including financial, operational, regulatory, and other risks, including the potential risk of business failure. In particular, there is a risk that that the Company may never generate revenue for the Company. Further, the recent war in the Middle East, with direct involvement of the U.S., and the ongoing wars in Ukraine and between Israel, Hamas and Hezbollah and uncertainties regarding the global energy supply and the impact on the economic environment which may result in a general tightening in the credit markets, lower levels of liquidity, increases in the rates of default and bankruptcy, and extreme volatility in credit, equity and fixed income markets. These conditions may not only limit the Company’s access to capital, but also make it difficult for its customers, vendors and the Company to accurately forecast and plan future business activities, which may have an adverse impact on its business and financial condition and may hamper the Company’s ability to generate revenue and access usual sources of liquidity on reasonable terms.
The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, and rates and methods of taxation, among other things.
8
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed consolidated Financial Statements
| 2 | ACCOUNTING POLICIES AND ESTIMATES (continued) |
| h) | Recent accounting pronouncements |
The Financial Accounting Standards Board (“FASB”) issued additional updates during the six months ended June 30, 2026. None of these standards are either applicable to the Company or require adoption at a future date and none are expected to have a material impact on the Company’s unaudited condensed consolidated financial statements upon adoption.
| i) | Reporting by Segment |
The
Company adopted FASB issued ASU 2023-07, “Segment Reporting (ASC Topic 280) for the annual reporting period ended December
31, 2024. The most significant provision was for the Company to disclose significant segment expenses that are regularly provided to
the chief operating decision maker (“CODM”), who is the . All expense categories on the Statements of Operations are significant
and there are no other significant segment expenses that would require disclosure. The Company’s CODM, reviews financial information
presented on an aggregated basis for the purpose of making operating decisions, allocating resources, assessing financial performance
and making strategic decisions related to headcount and capital expenditures.
Since
the Company operates as
| j) | Cash and Cash Equivalents |
The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. At June 30, 2026 and December 31, 2025, respectively, the Company had cash equivalents.
The Company minimizes credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution in the United States. The balance at times may exceed federally insured limits. At June 30, 2026 and December 31, 2025, the balance did not exceed federally insured limits.
| k) | Accounts Receivable and Allowance for Doubtful Accounts |
Accounts receivable are reported at realizable value, net of allowances for doubtful accounts, which is estimated and recorded in the period the related revenue is recorded. The Company has a standardized approach to estimate and review the collectability of its receivables based on a number of factors, including the period they have been outstanding. Historical collection and payer reimbursement experience is an integral part of the estimation process related to allowances for doubtful accounts. In addition, the Company regularly assesses the state of its billing operations in order to identify issues, which may impact the collectability of these receivables or reserve estimates. Revisions to the allowance for doubtful accounts estimates are recorded as an adjustment to bad debt expense. Receivables deemed uncollectible are charged against the allowance for doubtful accounts at the time such receivables are written off. Recoveries of receivables previously written-off are recorded as credits to the allowance for doubtful accounts. There were no revenues or recoveries during the period ended June 30, 2026 and 2025.
9
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed consolidated Financial Statements
| 2 | ACCOUNTING POLICIES AND ESTIMATES (continued) |
| l) | Investments |
The
Company’s non-marketable equity securities are investments in privately held companies without readily determinable market values.
The carrying value of our non-marketable equity securities is adjusted to fair value for observable transactions for identical or similar
investments of the same issuer or impairment (referred to as the measurement alternative). All gains and losses on non-marketable equity
securities, realized and unrealized, are recognized in other income (expense), net. Non-marketable equity securities that have been remeasured
during the period are classified within Level 3 in the fair value hierarchy because the Company estimates the value based on valuation
methods using the observable transaction price at the transaction date and other unobservable inputs including volatility, rights, and
obligations of the securities the Company holds. The cost method is used when the Company has a passive, long-term investment that doesn’t
result in influence over the Company. The cost method is used when the investment results in an ownership stake of less than
| m) | Plant and Equipment |
Plant
and equipment is stated at cost, less accumulated depreciation. Plant and equipment with costs greater than $
| Description | Estimated Useful Life | |
| Computer equipment | ||
| Office equipment |
The cost of repairs and maintenance is expensed as incurred. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition.
| n) | Intangible assets |
Indefinite lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to fair value. If such assets are considered impaired, the impairment is recognized in the statement of operations as the amount by which the carrying amount of the assets exceeds the fair value of the assets. The reduction in the carrying value of the indefinite lived intangible asset is permanent.
10
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed consolidated Financial Statements
| 2 | ACCOUNTING POLICIES AND ESTIMATES (continued) |
| o) | Revenue Recognition |
The Company’s revenue recognition policy is consistent with the requirements of FASB ASC 606, Revenue.
The Company’s revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those services. The Company derives its revenues from the sale of its services, as defined below. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its revenue transactions:
| i. | identify the contract with a customer; |
| ii. | identify the performance obligations in the contract; |
| iii. | determine the transaction price; |
| iv. | allocate the transaction price to performance obligations in the contract; and |
| v. | recognize revenue as the performance obligation is satisfied. |
The Company had revenues for the three and six months ended June 30, 2026 and 2025.
| p) | Share-Based Payment Arrangements |
Generally, all forms of share-based payments, including stock option grants, restricted stock grants and stock appreciation rights are measured at their fair value on the awards’ grant date, based on the estimated number of awards that are ultimately expected to vest. Share-based compensation awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable. The expense resulting from share-based payments is recorded in operating expenses in the statement of operations.
Subsequent to the Company’s reverse merger which took place on May 12, 2016, the Company has utilized the market value of its Common Stock as quoted on the OTCQB, as an indicator of the fair value of its Common Stock in determining share- based payment arrangements.
| q) | Derivative Liabilities |
ASC 815 generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re- measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument subject to the requirements of ASC 815. ASC 815 also provides an exception to this rule when the host instrument is deemed to be conventional, as described.
| r) | Marketing and advertising expenses |
Marketing
and advertising expenditure incurred on promoting the Company’s previous products were expensed as incurred. Marketing and
advertising costs amounted to $
11
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed consolidated Financial Statements
| 2 | ACCOUNTING POLICIES AND ESTIMATES (continued) |
| s) | Income Taxes |
The Company is based in the U.S. and currently enacted U.S. tax laws are used in the calculation of income taxes.
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A full valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. It is the Company’s policy to classify interest and penalties on income taxes as interest expense or penalties expense. As of June 30, 2026 and December 31, 2025, there have been no interest or penalties incurred on income taxes.
| t) | Comprehensive income |
Comprehensive income is defined as the change in equity of a company during a period from transactions and other events and circumstances excluding transactions resulting from investments from owners and distributions to owners. The Company does not have any comprehensive income (loss) for the periods presented.
| u) | Reclassification of prior year presentation |
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.
| 3 | LIQUIDITY MATTERS AND GOING CONCERN |
The Company’s financial statements
are prepared using U.S. GAAP applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities
in the normal course of business. The Company has incurred net losses since its inception and anticipates net losses and negative operating
cash flows for the near future. For and as of the six months ended June 30, 2026, the Company had a net loss of $
The accompanying financial statements for the period ended June 30, 2026 have been prepared assuming the Company will continue as a going concern, but the ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it establishes a revenue stream and, ultimately, becomes profitable. Management’s plans to continue as a going concern include raising additional capital through sales of equity securities and borrowing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. If the Company is not able to obtain the necessary additional financing on a timely basis, the Company will be required to delay and reduce the scope of the Company’s development and operations. Continuing as a going concern is dependent upon its ability to successfully secure other sources of financing and attain profitable operations. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
The Company has determined that management’s current plans have not alleviated the substantial doubt about the Company’s ability to continue as a going concern.
12
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed consolidated Financial Statements
| 4 | NOTES RECEIVABLE |
We have declared the notes receivable with business Warrior to be in default and negotiations regarding the repayment of these notes is ongoing. The Company has been unsuccessful in securing repayment of these notes and accordingly has provided against the collectability of these notes as of June 30, 2026.
Loans receivable consists of the following:
| Description | Interest Rate | Maturity date | Principal | Accrued interest | June 30, 2026 Amount, net | December 31, 2025 Amount, net | ||||||||||||||||
| Business Warrior Corporation | % | $ | $ | $ | $ | |||||||||||||||||
| % | ||||||||||||||||||||||
| % | ||||||||||||||||||||||
| % | ||||||||||||||||||||||
| % | ||||||||||||||||||||||
| % | ||||||||||||||||||||||
| Total Notes receivable | ||||||||||||||||||||||
| Less: impairment provision | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||||
Discount
amortized to income as deemed interest during the three and six months ended June 30, 2026 and 2025 was
Interest
earned for the three and six months ended June 30, 2026 and 2025 was
| 5 | VARIABLE INTEREST INVESTMENTS |
The Company enters into various arrangements with Variable Interest Entities (VIEs) where the equity at risk is insufficient to finance the entity’s activities without additional subordinated support, or where equity holders lack typical controlling financial rights.
JETTIES PARTNERS, LLC
On October 29, 2025, the Company entered into a Limited Liability Company Operating Agreement with Brant Point Solutions, LLC to form a new Delaware limited liability company, Jetties Partners, LLC (d/b/a IPSIPAY) (the “Joint Venture”).
The purpose of the Joint Venture is to develop, market, distribute, and operate real-time financial technology merchant processing payment solutions branded as IPSIPay or PayzliPlus, initially targeting gaming, sportsbook, and casino entertainment markets.
The Agreement outlines the parties’ respective contributions, governance structure, management rights, and other material terms relating to the operation of the Joint Venture. The Company believes that this collaboration will expand its reach within the real-time payments and gaming merchant processing industries through the integration of complementary technologies and market relationships.
The
Company issued
The Company had expected to finalize two revenue generating contracts with customers during the second quarter, however, the contracts are expected to be finalized during the second half of the year. There has been no business activity since inception of the joint venture.
The
Company has consolidated its interest in Jetties Partners, LLC as it is deemed the primary beneficiary of Jetties Partners, LLC because
it has the power to direct activities that most significantly impact the entity’s economic performance and holds the obligation to absorb
significant losses. The consolidated carrying amount of Jetties Partners, LLC includes intangible assets of $
13
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed consolidated Financial Statements
| 5 | VARIABLE INTEREST INVESTMENTS (continued) |
FINAP USA, LLC
On
April 10, 2026, the Company formed an LLC, FINAP USA, LLC (“FINAP USA”) and on April 27, 2026, the Company entered into a
limited liability operating agreement with FINAP Worldwide Co. W.L.L (“FINAP”), whereby FINAP USA was owned
FAPL is the owner of certain financial technology platforms, software systems, and associated intellectual property and Cixor is the owner of certain payment technology platforms, software systems and associated intellectual property. FAPL and Cixor have agreed to license their technology platforms and payment technology platforms to Finap USA, on an exclusive, perpetual basis for the United States of America, including all fifty states, the District of Columbia, and all US territories and possessions; and Canada and Mexico.
The Company intends using these license agreements to pursue payment processing opportunities as well as cross-selling opportunities to potential customers. The Company is presently negotiating with a specialized banking operation and an online sports betting operator to process transactions through its licensed technology using the banking platform. Should we be able to reach mutually acceptable terms we anticipate revenue generation in the fourth quarter.
The Company has consolidated FINAP
USA, LLC as it is deemed the primary beneficiary of FINAP USA, LLC because it has the power to manage the day-to-day affairs and direct
activities that most significantly impact the entity’s economic performance and holds the obligation to absorb significant losses.
The consolidated carrying amount of FINAP USA, LLC includes intangible assets of $
| 6 | INTANGIBLES |
The Company has determined that its
interest in Jetties Partners, LLC is a variable interest entity and has consolidated Jetties Partners LLC into the Company’s financial
statements (Refer note 5). The consolidated carrying value of Jetties Partners, LLC includes technology access rights with a fair value
of $
The Company has determined that its
interest in FINAP USA, LLC is a variable interest entity and has consolidated FINAP USA, LLC into the Company’s financial statements
(Refer note 5). The consolidated carrying value of FINAP USA, LLC includes license agreement with a fair value of $
Intangible assets consist of the following:
| Useful lives | June 30, 2026 | December 31, 2025 | ||||||||||||||||
| Cost | Impairment charge | Net book value | Net book value | |||||||||||||||
| Technology access rights | $ | $ | $ | $ | ||||||||||||||
| License agreements | ||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||
The Company evaluates intangible assets for impairment on an annual basis during the last month of each year and at an interim date if indications of impairment exist. Intangible asset impairment is determined by comparing the fair value of the asset to its carrying amount with an impairment being recognized only when the fair value is less than carrying value and the impairment is deemed to be permanent in nature.
The Technology Access rights and the License agreements have indefinite lives and are therefore not amortized.
14
| 7 | EQUITY METHOD INVESTMENT |
On
April 28, 2023, the Company formed IPSIPay Express with OpenPath and EfinityPay. The Company had agreed to make IPSI Capital Contributions
to IPSIPay Express. As of December 31, 2023, the initial Tranche of $
The Company accounts for its investment in joint ventures in accordance with ASC 323, Investments – Equity Method and Joint Ventures, the movement in equity method investments for the six months ended June 30, 2026 and the year ended December 31, 2025 is as follow:
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Equity method Investment | ||||||||
| IPSIPay Express | ||||||||
| Cash contribution to IPSIPay Express | $ | $ | ||||||
| Fair value of warrants issued to third party joint venture partners | ||||||||
| Equity loss from joint venture | ( | ) | ( | ) | ||||
| Receivable from IPSIPay Express | ||||||||
| Impairment of investment | ( | ) | ( | ) | ||||
| Net Investment in IPSIPay Express | $ | $ | ||||||
| Jetties Partners, LLC | ||||||||
| Fair value of equity issued to joint venture partners | $ | $ | ||||||
| Equity loss from joint venture | ||||||||
| Derecognition of equity method investment in Jetties Partners and reclassified as a consolidated Variable Interest Entity (Note 5) | ( | ) | ||||||
| Net Investment in Jetties Partners, LLC | $ | $ | ||||||
| Equity method investments | $ | $ | ||||||
| 8 | FEDERAL RELIEF LOANS |
Small Business Administration Disaster Relief loan
On
July 7, 2020, the Company received a Small Business Economic Injury Disaster loan amounting to $
The
company has accrued interest of $
15
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed consolidated Financial Statements
| 9 | NOTES PAYABLE |
Notes payable consists of the following:
| Description | Interest Rate | Maturity date* | Principal | Accrued Interest | June 30, 2026 | December 31, 2025 | ||||||||||||||||
| Cavalry Fund I LP | % | $ | $ | $ | $ | |||||||||||||||||
| Mercer Street Global Opportunity Fund, LLC | % | $ | ||||||||||||||||||||
| 2024 notes | % | |||||||||||||||||||||
| Total notes payable | $ | $ | $ | $ | ||||||||||||||||||
| * |
Interest
expense totaled $
Amortization
of debt discount totaled
Cavalry Fund I LP and Mercer Street Global Opportunity Fund, LLC
On
February 16, 2021, the Company entered into separate Securities Purchase Agreements (the “SPAs”), with each of Cavalry Fund
I LP (“Cavalry”) and Mercer Street Global Opportunity Fund, LLC (“Mercer”), pursuant to which the Company received
$
In
terms of the December 30, 2022 Note Amendment Transaction, described in more detail in note 10 below, the Original Warrants issued on
February 16, 2021 were irrevocably exchanged for 12-month non-convertible promissory notes in the amount of $
The
Exchange Notes had a maturity date of
On February 27, 2024, the maturity date of the notes was extended to April 30, 2024 with an automatic one-month extension each month until such time as the note is declared to be in default, all other terms remain the same as the previous notes. The automatic extension of the maturity date may not extend past November 27, 2024, thereafter all amounts due under the note are immediately due and payable. The Company performed an analysis in terms of ASC 470 and it was determined that the extension was a debt modification, in addition, no additional consideration was paid for the maturity date extension.
With
effect from November 27, 2024, the notes accrue interest at
On March 30, 2026, effective December 31, 2025, Cavalry and Mercer entered into a forbearance agreement with the Company whereby the notes forbore until May 1, 2026. The forbearance was not renewed and the notes are in default.
2024 Notes
The
2024 Notes matured between February 28, 2025 and October 10, 2025 and bear interest at rates ranging from
The
2024 Notes have restrictions relating to fundamental transactions which require the approval of the note holder, in addition the note
holders have optional redemption rights on subsequent transactions that may require the Company to redeem all or part of the Note at
a premium of
As
of June 30, 2026, the 2024 Notes with an aggregate amount outstanding of $
16
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed consolidated Financial Statements
| 10 | CONVERTIBLE DEBT |
Convertible debt payable consists of the following:
| Description | Interest Rate | Maturity date** | Principal | Accrued Interest | Unamortized debt discount | June 30, 2026 Amount, net | December 31, 2025 Amount, net | |||||||||||||||||||
| Cavalry Fund I LP | %* | $ | $ | $ | $ | $ | ||||||||||||||||||||
| Mercer Street Global Opportunity Fund, LLC | %* | |||||||||||||||||||||||||
| 2023, 2024, 2025 and 2026 convertible notes | % | May 19, 2027 | ( | ) | ||||||||||||||||||||||
| Total convertible notes payable | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||
| * | |
| ** |
Interest
expense totaled $
Amortization
of debt discount totaled $
The Cavalry, Mercer, and certain of the 2025 convertible notes have variable conversion prices based on a discount to market price of trading activity over a specified period of time. The variable conversion features were valued using a Black Scholes valuation model. The difference between the fair market value of the Common Stock and the calculated conversion price on the issuance date was recorded as a debt discount with a corresponding credit to derivative financial liability.
In
addition, certain convertible notes have anti-dilution price protection which results in a reduction in the conversion price of the convertible
note. Any reduction in the conversion price results in a deemed dividend expense. During the six months ended June 30, 2026, changes
in conversion prices resulted in a deemed dividend expense of $
Cavalry and Mercer December 2022 Note Amendment Transaction
The
Company twice extended its indebtedness to each Cavalry and Mercer. On February 3, 2022, the Company agreed to extend the maturity date
of the Cavalry/Mercer Notes to
17
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed consolidated Financial Statements
| 10 | CONVERTIBLE DEBT (continued) |
Cavalry and Mercer December 2022 Note Amendment Transaction (continued)
On December 30, 2022, the Company again extended the maturity dates of each of the Cavalry/Mercer Notes to December 30, 2023. Each of Cavalry and Mercer entered into Note Amendment Letter Agreement with the Company (the “Note Amendment”) pursuant to which the parties agreed to the following:
| (1) | The conversion price of the Cavalry/Mercer Notes was reduced from $ |
| (2) | The Original Warrants issued on February 16, 2021 were irrevocably exchanged for 12-month non-convertible promissory notes in the amount of $ |
| (3) | The Company was obligated to register the shares of Common Stock underlying the Cavalry/Mercer Notes and the shares underlying all warrants held by Cavalry and Mercer for resale with the Securities and Exchange Commission and the Company filed the registration statement to satisfy such registration obligation. |
Effective December 30, 2023 on February 27, 2024, the Company again extended the maturity dates of each of the Cavalry/Mercer Notes to April 30, 2024 with an automatic one-month extension each month until such time as the note is declared to be in default, all other terms remain the same as the previous notes. The automatic extension of the maturity date may not extend past November 27, 2024, thereafter all amounts due under the note are immediately due and payable. The Company performed an analysis in terms of ASC 470 and it was determined that the extension was a debt modification, in addition, no additional consideration was paid for the maturity date extension.
Cavalry Fund LLP
On
February 16, 2021, the Company closed a transaction with Cavalry pursuant to which the Company received net proceeds of $
As
described more fully above, the maturity date of the note was extended to August 16, 2022, additionally to November 16, 2022, additionally
to December 30, 2023 and again to April 30, 2024, with an automatic one-month extension each month until such time as the note is declared
to be in default, all other terms remain the same as the previous notes. The automatic extension of the maturity date may not extend
past November 27, 2024, thereafter all amounts due under the note are immediately due and payable. The note currently bears interest
at the default rate of
In
consideration for the November 16, 2022 extension, the Company agreed to (i) increase the principal amount outstanding and due to Cavalry
by twenty percent (
18
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed consolidated Financial Statements
| 10 | CONVERTIBLE DEBT (continued) |
Cavalry Fund LLP (continued)
Between
August 24, 2023 and November 20, 2023, Cavalry converted $
Between
September 5, 2024 and November 11, 2024, Cavalry converted an aggregate of $
Between
January 14, 2025 and August 12, 2025, Cavalry converted an aggregate $
In
terms of the agreement with Cavalry, the conversion price of the convertible note will be adjusted downwards on any dilutive issuances.
The conversion price of the convertible debt has been adjusted to $
On
August 13, 2025, the Company entered into an agreement to modify the conversion price of the Cavalry convertible debt from $
The
Company was not able to maintain its stock price above $
The
balance of the Cavalry Note plus accrued interest at June 30, 2026 was $
Mercer Street Global Opportunity Fund, LLC
On
February 16, 2021, the Company closed a transaction with Mercer, pursuant to which the Company received net proceeds of $
As
described more fully above, the maturity date of the note was extended to August 16, 2022, additionally to November 16, 2022, additionally
to December 30, 2023 and again to April 30, 2024, with an automatic one-month extension each month until such time as the note is declared
to be in default, all other terms remain the same as the previous notes. The automatic extension of the maturity date may not extend
past November 27, 2024, thereafter all amounts due under the note are immediately due and payable. The note currently bears interest
at the default rate of
19
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed consolidated Financial Statements
| 10 | CONVERTIBLE DEBT (continued) |
Mercer Street Global Opportunity Fund, LLC (continued)
In
consideration for the November 16, 2022 extension, the Company agreed to (i) increase the principal amount outstanding and due to Mercer
by twenty percent (
Between
May 19, 2023 and August 30, 2023, Mercer converted an aggregate of $
Between
August 20, 2024 and November 11, 2024, Mercer converted an aggregate of $
Between
January 14, 2025 and August 12, 2025, Mercer converted an aggregate $
In
terms of the agreement with Mercer, the conversion price of the convertible note will be adjusted downwards on any dilutive issuances.
The conversion price of the convertible debt has been adjusted to $
On
August 13, 2025, the Company entered into an agreement to modify the conversion price of the Mercer convertible debt from $
The
Company was not able to maintain its stock price above $
The
balance of the Mercer Note plus accrued interest at June 30, 2026 was $
20
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed consolidated Financial Statements
| 10 | CONVERTIBLE DEBT (continued) |
2023, 2024, 2025 and 2026 Convertible Notes
Between
February 13, 2023 and November 27, 2023, the Company entered into Securities Purchase Agreements with 30 accredited investors to purchase
convertible notes (the “2023 Convertible Notes”), receiving an aggregate of $
Between
February 6, 2024 and October 23, 2024, the Company entered into Securities Purchase Agreements with 9 accredited investors
to purchase convertible notes (the “2024 Convertible Notes”), receiving an aggregate of $
Between
January 7, 2025 and December 5, 2025, the Company entered into Securities Purchase Agreements with 6 accredited investors to purchase
convertible notes (the “2025 Convertible Notes”), receiving an aggregate of $
On
April 18, 2025, the Company entered into a debt exchange agreement with our previous CFO, Mr. Rosenblum, whereby $
Between
February 27, 2026 and May 19, 2026, the Company entered into Securities Purchase Agreements with 7 accredited investors to purchase
convertible notes (the “2026 Convertible Notes”), receiving an aggregate of $
In terms of the above private placements through the issuance of :
| ● | the 2023 Convertible Notes, the 2024 Convertible Notes, the 2025 Convertible notes, the 2026 convertible notes; and |
| ● | five-year warrants to purchase an aggregate |
The
2023 Convertible Notes, the 2024 Convertible Notes, the 2025 Convertible Notes and the 2026 convertible notes bear interest at rates
ranging from
Convertible
notes with an aggregate principal balance outstanding of $
21
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed consolidated Financial Statements
| 10 | CONVERTIBLE DEBT (continued) |
2023, 2024, 2025 and 2026 Convertible Notes (continued)
The 2023 Convertible Notes, the 2024 Convertible Notes, the 2025 Convertible Notes and the 2026 Convertible notes may be prepaid at any time without penalty.
The Company is under no obligation to register the shares of Common Stock underlying the 2023 Convertible Notes, the 2024 Convertible Notes, the 2025 Convertible Notes, the 2026 Convertible notes, or the 2023 Warrants, the 2024 Warrants, the 2025 Warrants and the 2026 Warrants, for public resale.
The
2023 Convertible Notes, the 2024 Convertible Notes, the 2025 Convertible Notes, the 2026 Convertible notes and the 2023 Warrants, the
2024 Warrants, the 2025 Warrants and the 2026 Warrants, contain conversion limitations providing that a holder thereof may not convert
or exercise such securities to the extent that, if after giving effect to such conversion or exercise, the holder or any of its affiliates
would beneficially own in excess of
On
December 14, 2023, two notes totaling $
On
March 14, 2024, the Company extended the maturity date of 11 convertible notes maturing between February 13, 2024 and February 23, 2024
by an additional six months and as consideration for the extension, the note holders were issued additional warrants exercisable for
On
June 2, 2025, a 2024 convertible note holder converted principal of $
On
September 30, 2025, a 2023 convertible note holder converted principal of $
On
October 9, 2025, a 2023 convertible note holder converted principal of $
On
October 6, 2025, a 2025 convertible note holder with an aggregate principal amount outstanding of $
On
February 9, 2026 and April 29, 2026, the third party converted an additional $
On
April 20, 2026, a convertible note holder converted $
The
2023 convertible notes have an aggregate outstanding balance of $
22
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed consolidated Financial Statements
| 10 | CONVERTIBLE DEBT (continued) |
2023, 2024, 2025 and 2026 Convertible Notes (continued)
The
2024 Convertible Notes have an aggregate amount outstanding of $
The
2025 Convertible Notes have an aggregate amount outstanding of $
The
2026 Convertible Notes have an aggregate amount outstanding of $
| 11 | DERIVATIVE LIABILITY |
The convertible debt and warrants issued by the Company to Cavalry, Mercer, Quick Capital and certain of the 2025 Convertible Note holders, as described in Note 10 have variable priced conversion rights with no fixed floor price and will re-price dependent on the share price performance over varying periods of time and certain convertible notes and warrants have fundamental transaction clauses which might result in cash settlement, due to these factors, all convertible debt and any warrants attached thereto are valued and give rise to a derivative financial liability, which was initially valued at inception of the convertible debt using a Black-Scholes valuation model.
The
expiration of the forbearance agreement with Cavalry and Mercer, disclosed in note 10 above resulted in a revaluation of the conversion
feature of certain Cavalry and Mercer variable priced convertible notes on May 1, 2026, using a Black Scholes valuation model. This resulted
in an additional derivative liability of $
The
net mark-to-market movement of the derivative liability for the three months ended June 30, 2026 was a net mark-to-market credit of $
The following assumptions were used in the Black-Scholes valuation model:
| Six
months ended June 30, 2026 |
Year
ended December 31, 2025 |
|||||||
| Conversion price | $ | $ | ||||||
| Risk free interest rate | % | % | ||||||
| Expected life of derivative liability | ||||||||
| Expected volatility of underlying stock | % | |||||||
| Expected dividend rate | % | % | ||||||
The movement in derivative liability is as follows:
| Six
months ended June 30, 2026 | Year
ended December 31, 2025 | |||||||
| Opening balance | $ | $ | ||||||
| Derivative financial liability arising from convertible notes and warrants | ||||||||
| Derivative liability arising on anti-dilutive convertible debt and warrants | ||||||||
| Fair value of derivative liability on cancelled warrants | ( | ) | ||||||
| Fair value adjustment to derivative liability | ( | ) | ( | ) | ||||
| Closing balance | $ | $ | ||||||
23
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed consolidated Financial Statements
| 11 | DERIVATIVE LIABILITY (continued) |
Fluctuations in the Company’s
stock price are a primary driver for the changes in the derivative valuations during each reporting period. As the stock price increases
for each of the related derivative instruments, the value to the holder of the instrument generally increases, therefore increasing the
liability on the Company’s balance sheet. Additionally, stock price volatility is one of the significant unobservable inputs used
in the fair value measurement of each of the Company’s derivative instruments. The simulated fair value of these liabilities is
sensitive to changes in the conversion price and changes in the stock price. Changes in the Company’s expected stock price volatility
and movements in interest rates are less sensitive.
| June 30, 2026 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||
| Liabilities | ||||||||||||||||
| Derivative liability | $ | $ | $ | $ | ||||||||||||
| December 31, 2025 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||
| Liabilities | ||||||||||||||||
| Derivative liability | $ | $ | $ | $ | ||||||||||||
| 12 | STOCKHOLDERS’ EQUITY |
| a. | Common Stock |
Between
January 7, 2025 and June 27, 2025, in terms of conversion notices received from 5 convertible note holders, the Company issued
On
January 14, 2026, the Board of directors authorized the amendment to the articles of incorporation of the Company to increase the authorized
shares of common stock from
The
Company has total authorized Common Stock of
On
February 3, 2026, in terms of a board resolution the company issued
On
February 3, 2026, the Board approved the issuance of
Between
February 9, 2026 and April 29, 2026, in terms of a conversion notice received from a convertible note holders, the Company issued
24
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed consolidated Financial Statements
| 12 | STOCKHOLDERS’ EQUITY (continued) |
| a. | Common Stock (continued) |
On
March 12, 2026, the Company entered into a management consulting agreement and granted
On
April 6, 2026, the Company issued
On April 14, 2026, the company issued
On April 24, 2026, the Company issued
| b. | Restricted stock awards |
On
February 3, 2026, The Board of Directors authorized the issue of
A summary of restricted stock activity during the period January 1, 2025 to June 30, 2026 is as follows:
| Total restricted shares | Weighted average fair market value per share | Total unvested restricted shares | Weighted average fair market value per share | Total
vested restricted shares | Weighted average fair market value per share | |||||||||||||||||||
| Outstanding January 1, 2025 | $ | $ | $ | |||||||||||||||||||||
| Granted and issued | ||||||||||||||||||||||||
| Forfeited/Cancelled | ||||||||||||||||||||||||
| Vested | ||||||||||||||||||||||||
| Outstanding December 31, 2025 | $ | $ | $ | |||||||||||||||||||||
| Granted and issued | ||||||||||||||||||||||||
| Forfeited/Cancelled | ||||||||||||||||||||||||
| Vested | ||||||||||||||||||||||||
| Outstanding June 30, 2026 | $ | $ | $ | |||||||||||||||||||||
The restricted stock granted, issued and exercisable at June 30, 2026 is as follows:
| Restricted
Stock Granted and Vested |
||||||||||
| Grant date Price | Number Granted | Weighted
Average Fair Value per Share |
||||||||
| $ | 0.0037 | $ | ||||||||
| $ | 0.0126 | $ | ||||||||
| $ | 1.4700 | $ | ||||||||
| $ | 1.5000 | $ | ||||||||
| $ | 1.6500 | $ | ||||||||
| $ | ||||||||||
The Company has recorded an expense and settled outstanding liabilities as follows:
| Grant date | Number of shares granted | Vesting terms | Grant date fair value | Expensed during the period | Liability settled | |||||||||||||
| February 3, 2026 | $ | $ | $ | |||||||||||||||
| c. | Preferred Stock |
On
January 14, 2026, the Board of directors authorized the amendment to the articles of incorporation of the Company to increase the authorized
shares of preferred stock from
The
Company has authorized
25
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed consolidated Financial Statements
| 12 | STOCKHOLDERS’ EQUITY (continued) |
| d. | Warrants |
Certain warrants
have anti-dilution price protection which results in a reduction in the exercise price of the warrants. In addition, certain warrants
have a full rachet price protection which will result an increase in the amount of shares issuable upon a reduction in exercise price,
a Triggering event. On April 29, 2026, a convertible note holder converted the remaining balance of a convertible note into shares of
common stock at a conversion price of $
Between
March 16 and May 7, 2026, the Company entered into a Securities Purchase Agreement with three accredited investors. In terms of the Securities
Purchase Agreement, the Company issued three-year warrants to purchase an aggregate of
The price protected warrants that had exercise prices revised to $
The
2023, 2024, 2025 and 2026 Warrants contain exercise limitations providing that a holder thereof may not exercise the Warrants to the
extent that, if after giving effect to such exercise, the holder or any of its affiliates would beneficially own in excess of
The fair value of the warrants granted and issued, as described above, were determined by using a Black Scholes valuation model using the following assumptions:
| Six
months ended June 30, 2026 |
Year
ended December 31, 2025 |
|||||||
| Exercise price | $ | $ | ||||||
| Risk free interest rate | % | % | ||||||
| Expected life of derivative liability | ||||||||
| Expected volatility of underlying stock | % | % | ||||||
| Expected dividend rate | % | % | ||||||
A summary of warrant activity during the period January 1, 2025 to June 30, 2026 is as follows:
| Shares Underlying Warrants | Exercise price per share | Weighted
average exercise price | |||||||||
| Outstanding January 1, 2025 | $ | $ | |||||||||
| Granted | |||||||||||
| Increase in warrants issued due to anti-dilution price protection | |||||||||||
| Forfeited | ( | ) | |||||||||
| Exercised | ( | ) | |||||||||
| Outstanding December 31, 2025 | $ | $ | |||||||||
| Granted | |||||||||||
| Forfeited | ( | ) | |||||||||
| Exercised | |||||||||||
| Outstanding June 30, 2026 | $ | $ | |||||||||
26
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed consolidated Financial Statements
| 12 | STOCKHOLDERS’ EQUITY (continued) |
| d. | Warrants (continued) |
The warrants outstanding and exercisable at June 30, 2026 are as follows:
| Warrants Outstanding | Warrants Exercisable | ||||||||||||||||||||||||
| Exercise Price* | Number Outstanding | Weighted Average Remaining Contractual life in years | Weighted Average Exercise Price | Number Exercisable | Weighted Average Exercise Price | Weighted Average Remaining Contractual life in years | |||||||||||||||||||
| $ | 0.0005 | ||||||||||||||||||||||||
| 0.0050 | |||||||||||||||||||||||||
| $ | 0.0100 | ||||||||||||||||||||||||
| $ | 0.3450 | ||||||||||||||||||||||||
| $ | 0.4500 | ||||||||||||||||||||||||
| $ | 1.5000 | ||||||||||||||||||||||||
| $ | $ | ||||||||||||||||||||||||
The
warrants outstanding have an intrinsic value of $
| e. | Stock options |
On
June 18, 2018, the Company established its 2018 Stock Incentive Plan (the “Plan”). The purpose of the Plan is to promote
the interests of the Company and the stockholders of the Company by providing directors, officers, employees and consultants of the Company
with appropriate incentives and rewards to encourage them to enter into and continue in the employ or service of the Company, to acquire
a proprietary interest in the long-term success of the Company and to reward the performance of individuals in fulfilling long-term corporate
objectives. The Plan terminates after a period of
The Plan is administered by the Board or a committee appointed by the Board, who have the authority to administer the Plan and to exercise all the powers and authorities specifically granted to it under the Plan.
The
maximum number of securities available under the Plan is
On
October 22, 2021, the Company established its 2021 Stock Incentive Plan (“2021 Plan”). The purpose of the Plan is to promote
the interests of the Company and the stockholders of the Company by providing directors, officers, employees and consultants, advisors
and service providers of the Company with appropriate incentives and rewards to encourage them to enter into and continue in the employ
or service of the Company, to acquire a proprietary interest in the long-term success of the Company and to reward the performance of
individuals in fulfilling long-term corporate objectives. The Plan terminates after a period of
The 2021 Plan is administered by the Board or a Compensation Committee appointed by the Board, who have the authority to administer the Plan and to exercise all the powers and authorities specifically granted to it under the Plan.
The
maximum number of securities available under the 2021 Plan is
Under the 2021 Plan the Company may award the following: (i) non-qualified stock options; (ii)) incentive stock options; (iii) stock appreciation rights; (iv) restricted stock; (v) restricted stock unit; and (vi) other stock-based awards.
27
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed consolidated Financial Statements
| 12 | STOCKHOLDERS’ EQUITY (continued) |
| e. | Stock options (continued) |
A summary of option activity during the period January 1, 2025 to June 30, 2026 is as follows:
| Shares Underlying options | Exercise
price per share | Weighted average exercise price | ||||||||||
| Outstanding January 1, 2025 | $ | $ | ||||||||||
| Granted | ||||||||||||
| Forfeited/Cancelled | ( | ) | ||||||||||
| Exercised | ||||||||||||
| Outstanding December 31, 2025 | $ | $ | ||||||||||
| Granted | ||||||||||||
| Forfeited/Cancelled | ||||||||||||
| Exercised | ||||||||||||
| Outstanding June 30, 2026 | $ | $ | ||||||||||
The options outstanding and exercisable at June 30, 2026 are as follows:
| Options Outstanding | Options Exercisable | |||||||||||||||||||||||||
| Exercise Price* | Number Outstanding | Weighted Average Remaining Contractual life in years | Weighted Average Exercise Price | Number Exercisable | Weighted Average Exercise Price | Weighted Average Remaining Contractual life in years | ||||||||||||||||||||
| $ | 0.09 | |||||||||||||||||||||||||
| $ | 1.20 | |||||||||||||||||||||||||
| $ | 4.50 | |||||||||||||||||||||||||
| $ | $ | |||||||||||||||||||||||||
The
options outstanding have an intrinsic value of
The option expense was $
| 13 | LOSS ON SETTLEMENT AND REPRICING OF CONVERTIBLE NOTES |
The loss on settlement and repricing of convertible notes consists of the following:
| Three months ended | Three months ended | Six months ended | Six months ended | |||||||||||||
| June 30, | June 30, | June 30, | June 30, | |||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Penalty on convertible debt | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Reversal of loss and loss on convertible debt | ( | ) | ( | ) | ||||||||||||
| Conversion fees on convertible debt | ( | ) | ( | ) | ||||||||||||
| (Loss) on repriced convertible debt | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| (Loss) on debt extinguishment | ( | ) | ( | ) | ||||||||||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
Penalty on convertible debt
Between
January 7, 2025 and June 27, 2025, $
In
terms of the legal settlement, convertible notes were issued to guarantee payment of the liability. These convertible notes, including
a late settlement penalty of $
28
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed consolidated Financial Statements
| 13 | LOSS ON SETTLEMENT AND REPRICING OF CONVERTIBLE NOTES (continued) |
Reversal of loss and loss on conversion of convertible debt
Between
January 7, 2025 and June 27, 2025, in terms of conversion notices received from 5 convertible note holders, the Company issued
Between February 9, 2026 and April
29, 2026, in terms of conversion notices received from a convertible note holder, the Company issued
Conversion fees on convertible debt
The Company
incurred a conversion fee of $
Loss on repriced convertible debt
In
the prior year, as a result of the conversion of the convertible debt, in 2025, referred to in the paragraph above, all other outstanding
convertible debt of the Company that contain price-based anti-dilution protection had the conversion prices of such notes adjusted to
$
In
the prior year, the value of the derivative liability related to the anti-dilution price protected convertible debt was evaluated immediately
prior to the Triggering Event and immediately after the Triggering Event, resulting in an additional derivative liability and loss on
convertible debt of $
On
May 1, 2026, the forbearance agreement with Cavalry and Mercer expired, resulting in the repricing of the Cavalry, Mercer and their associated
entities convertible debt to their original conversion prices ranging from $
Loss on debt extinguishment
Between
February 27, 2026 and May 7, 2026, the Company and certain convertible note holders entered into forbearance agreements, extending the
maturity date of the convertible debt to December 31, 2026 in exchange for a reduction in the conversion price of the convertible debt
to between $
| 14 | NET LOSS PER SHARE |
Basic loss per share is based on the weighted-average number of Common Stock outstanding during each period. Diluted loss per share is based on basic shares as determined above plus Common Stock equivalents. The computation of diluted net loss per share does not assume the issuance of Common Stock that have an anti-dilutive effect on net loss per share. For the three and six months ended June 30, 2026 and 2025 all warrants options and convertible debt securities were excluded from the computation of diluted net loss per share.
Dilutive shares which could exist pursuant to the exercise of outstanding stock instruments and which were not included in the calculation because their affect would have been anti-dilutive for the three and six months ended June 30, 2026 and 2025 are as follows:
| Three
and six months ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| (Shares) | (Shares) | |||||||
| Convertible debt | ||||||||
| Stock options | ||||||||
| Warrants to purchase shares of Common Stock | ||||||||
29
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed consolidated Financial Statements
| 15 | RELATED PARTY TRANSACTIONS |
The following transactions were entered into with related parties:
William Corbett
The
option expense for options still vesting for Mr. Corbett was $
On
February 3, 2026, the board of directors granted Mr. Corbett
As of June 30, 2026 and December 31,
2025, the company owed Mr. Corbett and $
Mr. Corbett, the Company’s CEO,
has a convertible note payable to him which matured on
Madisson Butler
On
February 3, 2026, the board of directors granted Ms. Butler
David Rios
On
February 3, 2026, the board of directors granted Mr. Rios
| 16 | COMMITMENTS AND CONTINGENCIES |
The Company is subject to a matter
which is currently in arbitration whereby a plaintiff is seeking $
The variable interest entity, FINAP
USA, which is consolidated into the Company’s results has a contingent license fee payable of $
The Company has notes payable and convertible
debt, disclosed under Notes 9 and 10 above, of which $
| 17 | SUBSEQUENT EVENTS |
Conversion of convertible debt
On July 10,
2026, in terms of a conversion notice received from a convertible note holder, the Company issued
On
July 23, 2026, in terms of conversion notices received from
Consulting agreement
On July 8,
2026, the Company entered into a consulting agreement with an entity whereby the company issued
30
INNOVATIVE PAYMENT SOLUTIONS, INC.
Notes to the Unaudited Condensed consolidated Financial Statements
| 17 | SUBSEQUENT EVENTS (continued) |
Convertible debt funding
On
July 16, 2026, the Company entered into Securities Purchase Agreements with an accredited investor to purchase a convertible note
for gross proceeds of $
Cancellation of common stock
On April 14, 2026, the company issued
On August 11,2026, the Company canceled the
Other than disclosed above, the Company has evaluated subsequent events through the date of the financial statements were available to be issued and has concluded that no such events or transactions took place that would require disclosure herein.
31
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
All references to “we,” “us,” “our” and the “Company” refer to Innovative Payment Solutions, Inc., a Nevada corporation unless the context requires otherwise.
Overview
We are a fintech provider of digital payment solutions presently focused on credit card processing services for undeveloped and underserved markets. We have in the past (under the name IPSIPay) and may in the future develop and operate “e-wallets” that enable consumers to deposit cash, convert it into a digital form and remit funds quickly and securely.
Known Trends, Demands, Commitments, Events or Uncertainties Impacting Our Business
Development of Jetties Partners, LLC (d/b/a IPSIPAY)(“IPSIPAY”)
On October 29, 2025, we formed a limited liability corporation, Jetties Partners, LLC (“Jetties”), d/b/a IPSIPAY. The Company was formed to develop, market, distribute and operate a merchant processing payment solution, with an initial focus on the gaming industry. The Company consists of two 50% partners, the Company and Brant Point Solutions, LLC (“BP”). The Company issued 200,000,000 shares for its 50% interest in the joint venture, while BP will provide access to and full utilization of technology that may be owned, licensed or controlled by BP, including but not limited to all agreements between BP and United Payment Systems LLC, as well as its presence in the gaming markets.
We have consolidated our interest in Jetties Partners, LLC as we are deemed to be the primary beneficiary of Jetties Partners, LLC because we have the power to direct activities that most significantly impact the entity’s economic performance and hold the obligation to absorb significant losses. The consolidated carrying amount of Jetties Partners, LLC includes intangible assets of $8,400,000 and liabilities of $0 recorded on the balance sheet.
Joint venture with Fintechnology Asia Pacific Lanka
On April 10, 2026, the Company formed, FINAP USA, LLC (“FINAP USA”) and on April 27, 2026, the Company entered into a limited liability operating agreement with FINAP Worldwide Co. W.L.L (“FINAP”), whereby FINAP USA was owned 50% by the Company and 50% by FINAP, the sole purpose of which is to hold the Intellectual; Property License Agreement, between the licensors, Fintechnology Asia Pacific Lanka, Ltd (“FAPL”) and Cixor (Private) limited (“Cixor”), both of which are wholly owned subsidiaries of FINAP.
FAPL is the owner of certain financial technology platforms, software systems, and associated intellectual property and Cixor is the owner of certain payment technology platforms, software systems and associated intellectual property. FAPL and Cixor have agreed to license their technology platforms and payment technology platforms to Finap USA, on an exclusive, perpetual basis for the United States of America, including all fifty states, the District of Columbia, and all US territories and possessions; and Canada and Mexico.
We have consolidated FINAP USA, LLC as we are deemed to be the primary beneficiary of FINAP USA, LLC because we have the power to manage the day-to-day affairs and direct activities that most significantly impact the entity’s economic performance and hold the obligation to absorb significant losses. The consolidated carrying amount of FINAP USA, LLC includes intangible assets of $1,200,000 and contingent liability of $600,000 related to additional license fees payable dependent on revenue generation in excess of operating expenses.
The Company intends using the license agreements acquired to pursue payment processing opportunities as well as cross-selling opportunities to potential customers.
The licensed products include the following:
| ECORU (FAPL) | Core Banking platform Enterprise-grade core banking system providing multi-entity, multi-currency general ledger, loan management, regulatory reporting, and full API connectivity. Serves as the institutional ledger backbone for financial service providers. | ||
| OCEANUS (FAPL) | Neo-Banking Platform Next-generation digital banking platform providing mobile wallet, digital account opening and management, bank-to-bank transfers, merchant ecosystem connectivity, and open banking API layer. Deployed across 10+ international markets. | ||
| MULA (FAPL) | Field Agent Application Mobile field agent banking application enabling on-ground agent onboarding, KYC verification, compliance workflows, and customer management. Applicable to multi-location operator environments. |
32
| iPayLater (FAPL) | Buy Now Pay Later Closed-loop consumer and B2B Buy Now Pay Later platform. Enables customers to split purchases installments within the operator ecosystem using in-ecosystem spending behavior. B2B functionality enables operators to finance inventory and operational expenses in installments. | ||
| CLORI (FAPL) | Asset Finance Platform Asset finance and leasing management platform providing end-to-end lifecycle management of asset-backed financing, including origination, drawdown, repayment scheduling, and regulatory reporting. | ||
| CIXOR PAYDAY (Cixor) | Earned Wage Access Patent-pending WageTech platform, providing dual-sided earned wage access. Employer-integrated payroll system allows employees to view accrued wages in real time and withdraw a portion before scheduled payday via the CIXOR PayDay mobile application. Employer rollover options of 7, 14, and 21 days supported. | ||
| Cixor CashDay (Cixor) | Merchant Liquidity / Invoice Finance Invoice-linked business liquidity platform providing real-time working capital advances against confirmed receivables within the closed-loop ecosystem. No external credit bureau dependency. Repayment automated from incoming settlements. Solves acute cash flow gaps for compliance-intensive operators. | ||
| CIXOR PayNow (Cixor) | Closed Loop Payments Closed-loop payment platform and RFID-enabled payment card (formerly known as CIXOR PayCard) operating entirely within the FINAP Inc USA ecosystem without dependence on open card network scheme providers. Eliminates scheme provider fee barriers (typically 3–5% for compliance-intensive operators). Zero chargeback exposure. Enables wage disbursement to employees (linked to CIXOR PayDay) and consumer payment at merchant locations. Supports both mobile and physical card-based transactions. |
Finap USA will pay a one-time contingent license fee of $600,000 for the licenses granted to it, to be paid by applying 10% of gross monthly revenue to the fee after all operational costs of Finap USA have been met, before making any distributions to the members.
The Company will manage the Finap USA joint venture and will be responsible for marketing, sales and distribution of the technology platforms.
Inflation
Macro-economic conditions could affect consumer spending adversely and consequently our future operations when we fully launch our e-wallet products commercially. The recent war in Iran and uncertainty and volatility in energy markets may have a ripple effect on inflation, and this may impact consumer’s desire to adopt our products and services and may increase our costs overall. However, as of the date of this report, we do not expect there to be any material impact on our liquidity as forecast in our business plan.
Foreign Exchange Risks
We intend to operate in several foreign countries. Changes and fluctuations in the foreign exchange rate between the US Dollar and other foreign currencies may in future have an effect our results of operations.
Dilution Risk
Our shareholders face significant dilution risk due to the fixed price convertible debt and variable price convertible debt totaling $6,028,384, net of debt discount of $104,801 and convertible debt due to a related party of $263,040, as of June 30, 2026.
As of June 30, 2026, we calculated that the potential dilutive impact of conversion of the convertible notes is a total of 5,094,790,511 shares of common stock after the expiry of a forbearance agreement with significant convertible note holders.
The dilutive risk will also be effected by any increases or decreases of our stock price due to the variable nature of the conversion price of certain notes with a total outstanding balance of $2,508,425 as of June 30, 2026. Any decreases in stock price below $0.01 per share increases the dilutive potential of these convertible notes, which have a maximum conversion price of $0.01 per share.
Critical Accounting Estimates
Preparation of our financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of certain assets, liabilities, revenues and expenses, as well as related disclosure of contingent assets and liabilities. Significant accounting policies are fundamental to understanding our financial condition and results as they require the use of estimates and assumptions which affect the financial statements and accompanying notes. See Note 2 - Summary of Significant Accounting Policies of the Notes to the condensed consolidated Financial Statements included in Part I, Item I of this Form 10-Q for further information.
33
The critical accounting policies that involved significant estimation included the following:
Derivative liabilities
We have certain short-term convertible debt which have variable conversion prices and certain convertible notes have fundamental transaction clauses which might result in cash settlement. The conversion feature of these convertible notes are recorded as derivative liabilities which are valued at each reporting date.
The derivative liability is valued using the following inputs:
| ● | Conversion prices; | |
| ● | Current market prices of our equity | |
| ● | Risk free interest rates; | |
| ● | Expected remaining life of the derivative liability; | |
| ● | Expected volatility of the underlying stock; and expected dividend rates |
Any change in the above factors such as a change in risk free interest rates, a significant increase or decrease in our current stock prices and a change in the volatility of our Common Stock may result in a significant increase or decrease in the derivative liability.
Fluctuations in the Company’s stock price are a primary driver for the changes in the derivative valuations during each reporting period. As the stock price increases for each of the related derivative instruments, the value to the holder of the instrument generally increases, therefore increasing the liability on the Company’s balance sheet. Additionally, stock price volatility is one of the significant unobservable inputs used in the fair value measurement of each of the Company’s derivative instruments. The simulated fair value of these liabilities is sensitive to changes in the conversion price and changes in the stock price. Changes in the Company’s expected stock price volatility and movements in interest rates are less sensitive. A 10% change in volatilities and interest rate factors would not result in a material change in our Level 3 fair values.
Indefinite-lived intangible assets
We evaluate intangible assets for impairment on an annual basis during the last month of each year and at an interim date if indications of impairment exist. Intangible asset impairment is determined by comparing the fair value of the asset to its carrying amount with an impairment being recognized only when the fair value is less than carrying value and the impairment is deemed to be permanent in nature.
We have interests in two joint ventures, which have been considered to be variable interest entities.
The Jetties Partners, LLC joint venture grants the entity perpetual access to technology rights which were valued at $8,400,000 based on the value of the Company’s common shares, valued at $4,200,000, issued to the 50% joint venture party for our stake in Jetties Partners, LLC.
The Jetties Partners, LLC joint venture has not commenced operations as yet and reliable forecasts are not possible as we are uncertain as to the extent of the business we expect to gain.
The FINAP USA, LLC joint venture has a perpetual license to technology held by subsidiaries of our JV partner, FINAP Worldwide. These technology rights were valued at $1,200,000 based on the value of the Company’s shares issued to our 50% joint venture party for our stake in FINAP USA.
The FINAP USA, LLC joint venture has not commenced operations as yet and reliable forecasts of potential business is not possible, as we are in the early stage of negotiations with potential customers and banking partners.
Variable interest entities
The Company follows the provisions of ASC 810 regarding consolidation of variable interest entities (VIEs). A VIE is a legal entity that does not have enough equity at risk to fund its activities, or where the equity investors lack typical voting rights or the core rights and obligations of ownership.
In evaluating our interests in our joint ventures we determined that each joint venture was thinly capitalized with minimal, if any, equity contribution, no loan guarantees or other agreements to guarantee any losses generated by the joint venture entities
We determined that the primary beneficiary in the joint ventures was the entity that had economic power and management power.
| ● | In the Jetties Partners, LLC, the agreement specifically states that sales and marketing would be overseen by the Company and that all transaction activity would be recorded through the Company’s accounting records. The Company has a significant interest of 50% in the gains and losses of the joint venture, indicating we are significantly impacted by the performance of the joint venture. Based on the above, we determined that the Company has both economic and management power to qualify the Company as the primary beneficiary.. |
| ● | In the FINAP USA, LLC, the agreement provides for the Company to have responsibility for sales and marketing efforts, while our joint venture partner, FINAP Worldwide would be responsible for providing the licensed technology. In addition all administrative functions are to be undertaken by the Company. The Company has a significant interest of 50% in the gains and losses of the joint venture, indicating we are significantly impacted by the performance of the joint venture. Based on the above, we determined that the Company has both economic and management power to qualify the Company as the primary beneficiary.. |
We will continue to evaluate our position as the primary beneficiary and whether the joint venture continues to be a variable interest entity subject to consolidation.
34
Results of Operations
Results of Operations for the Three Months Ended June 30, 2026 and 2025
Net revenue
We had no revenues for the three months ended June 30, 2026 and 2025. We pivoted to focus our attention on the Jetties IPSIPay joint venture and the FINAP USA joint venture and potential payment processing opportunities to generate revenues, however there can be no guarantees that we will be successful in our endeavors.
The Company will, through its joint venture operations, earn a commission percentage of the gross amount of transactions processed through the payment processing platforms its owns or licenses from third parties. The income will be consolidated into our operations as both joint ventures are considered to be variable interest entities in terms of ASC 810. We expect that the joint venture operations will distribute the excess cash flow to the joint venture parties on a regular basis.
Cost of goods sold
We had no cost of goods sold for the three months ended June 30, 2026 and 2025.
General and administrative expenses
General and administrative expenses were $368,366 and $170,638 for the three months ended June 30, 2026 and 2025, respectively, an increase of $197,728 or 115.9%. The increase is primarily due to the following:
| i) | Consulting fees were $132,000 and $21,696 for the three months ended June 30, 2026 and 2025, respectively, an increase of $110,304 or 508.4%. The increase is primarily due to the value of shares issued to a marketing professional for our joint venture businesses amounting to $65,000, tax preparation fees of $30,000 for previous periods tax filings and amortization of the value of shares issued to consultants amounting to $17,000. | |
| ii) | Legal fees were $106,400 and $4,000 for the three months ended June 30, 2026 and 2025, respectively, an increase of $102,400 or 2,560.0%. The increase is primarily due to legal activity on the arbitration matter with Minkovich, as disclosed under legal matters. | |
| iii) | Audit fees were $39,000 and $14,000 for the three months ended June 30, 2026 and 2025, an increase of $25,000 or 178.6%. The increase is dependent on the timing of billings received and not an increase in overall audit fees. | |
| iv) | Salaries and wages were $62,569 and $73,119 for the three months ended June 30, 2026 and 2025, respectively, a decrease of $10,550 or 14.4%. The decrease is primarily due to the resignation of our CFO during the previous year, resulting in a saving of $4,500, and a reduction in employment taxes of $5,248 as all salary payments are currently made on a 1099 basis, offset by an increase in employee benefits of $1,198. | |
| v) | Research and developments costs was $0 and $32,000 for the three months ended June 30, 2026 and 2025, respectively, a decrease of $32,000 or 100.0%. The decrease was due to a cost incurred on developing a new revenue source during the prior year. | |
| vi) | The balance of the general and administrative expenses was $28,397 and $25,823 for the three months ended June 30, 2026 and 2025, respectively, an increase of $2,574 or 10.0%. The increase is made up of several individually insignificant items. |
Depreciation and amortization
Depreciation was $330 and $542 for the three months ended June 30, 2026 and 2025. Depreciation is on small office related equipment.
Loss on settlement and repricing of convertible notes
Loss on settlement and repricing of convertible notes was $20,233,349 and $15,199,321 for the three months ended June 30, 2026 and 2025, respectively, an increase of $5,034,028 or 33.1%.
The loss on settlement and repricing of convertible notes during the current year related to; (i) a loss of $20,196,476 realized on the repricing of the conversion feature of certain notes which were under a forbearance agreement which expired on May 1, 2026; (ii) a penalty on conversion of $100,000 realized on the conversion of a legal liability settled in common stock; (iii) a reversal of a loss realized on the conversion of convertible debt of $94,000, (iv) conversion fees on conversion of convertible debt of $16,757, and (v) a debt extinguishment charge of $14,116 during the current period, due to forbearance agreements entered into with certain convertible noteholders to modify the conversion price of convertible notes in exchange for an extension of the maturity date to December 31, 2026.
The loss on settlement and repricing of convertible notes during the prior year related to; (i) a loss of $14,584,238 realized on an anti-dilution adjustment to the conversion feature of certain convertible debt; (ii) a penalty on conversion of $22,500 on conversion of convertible debt which is in default; and (iii) a loss of $592,583 realized on conversion of certain convertible debt at prices lower than the market price on the day of conversion.
Fair value adjustment to price protected warrants
Fair value on price protected warrants was $0 and $6,631,924 for the three months ended June 30, 2026 and 2025, respectively. During the prior year, the exercise price of certain warrants was reset due to the anti-dilution price protection and in the case of certain warrants, full ratchet price protection, from an exercise price of $0.001105 to $0.0005. This resulted in a Black -Scholes derived valuation difference related to those certain warrants.
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Interest expense
Interest expense was $223,572 and $227,806 for the three months ended June 30, 2026 and 2025, respectively, a decrease of $4,234 or 1.9%. The decrease is primarily related to the conversion of several convertible notes since the prior period, offset by additional notes entered into during the current period.
Interest income
Interest income was $0 and $13,193 for the three months ended June 30, 2026 and 2025, respectively, a decrease of $13,193 or 100.0%. The interest income in the prior year relates to funds advanced to Business Warrior prior to the cessation of our merger plans with them. We have fully provided for the recoverability of these notes and the interest thereon.
Amortization of debt discount
Amortization of debt discount was $99,610 and $60,434 for the three months ended June 30, 2026 and 2025, respectively, an increase of $39,176 or 64.8%. The increase is primarily due to the amortization of the value of warrants issued on new convertible debt funding and the value of derivative liabilities on variable priced conversion feature notes issued in the prior year.
Derivative liability movements
Derivative liability movements were $8,189,992 and $1,706,229 for the three months ended June 30, 2026 and 2025, respectively, a net movement of $6,483,763 or 380.0%. The derivative liability arose primarily due to the revaluation of certain repriced conversion features on convertible debt during the current period and the subsequent mark-to-market of these derivatives due to a declining stock price.
Net loss attributable to non-controlling interest
Net loss attributable to non-controlling interest was $26 and $0 for the three months ended June 30, 2026 and 2025, respectively, an increase of $26 or 100.0%. The loss is attributable to the non-controlling interest share of expenses of the variable interest consolidated entity, FINAP USA.
Deemed dividend
Deemed dividend was $36,973 and $1,430,065 for the three months ended June 30, 2026 and 2025, respectively, a decrease of $1,393,092 or 97.4%. The deemed dividend in the current period related to the repricing of fixed priced anti-dilution adjustments to certain convertible notes and warrants and in the prior period, related to a full rachet anti-dilution adjustment to certain fixed exercise price warrants issued to convertible note holders during the prior year. The deemed dividend was recorded as a component of additional paid in capital.
Net loss attributable to Innovative Payment Solutions common stockholders
Net loss attributable to Innovative Payment Solutions Common Stockholders was $12,772,182 and $22,001,308 for the three months ended June 30, 2026 and 2025, respectively, a decrease of $9,229,126 or 41.9%. The decrease is primarily due to the decrease in the fair value adjustment to price protected warrants, the net credit on derivative liability movements and the reduction in deemed dividends, offset by an increase in general and administrative expenses, and an increase in the loss on settlement and repricing of convertible notes, discussed in detail above.
Results of Operations for the Six Months Ended June 30, 2026 and June 30, 2025
Net revenue
We had no revenues for the six months ended June 30, 2026 and 2025. We pivoted to focus our attention on the Jetties IPSIPay joint venture and the FINAP USA joint venture and potential payment processing opportunities to generate revenues, however there can be no guarantees that we will be successful in our endeavors.
The Company will, through its joint venture operations, earn a commission percentage of the gross amount of transactions processed through the payment processing platforms its owns or licenses from third parties. The income will be consolidated into our operations as both joint ventures are considered to be variable interest entities in terms of ASC 810. We expect that the joint venture operations will distribute the excess cash flow to the joint venture parties on a regular basis.
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Cost of goods sold
We had no cost of goods sold for the six months ended June 30, 2026 and 2025.
General and administrative expenses
General and administrative expenses were $1,513,329 and $424,944 for the six months ended June 30, 2026 and 2025, respectively, an increase of $1,088,385 or 256.1%. The increase is primarily due to the following:
| i) | Consulting fees was $548,343 and $38,696 for the six months ended June 30, 2026 and 2025, respectively, an increase of $509,647 or 1,317.1%. The increase is primarily due to a stock award to a consultant, valued at $378,000, the value of shares issued to a marketing professional for our joint venture businesses amounting to $65,000, tax preparation fees of $30,000 for previous tax years and the amortization of the value of shares issued to consultants amounting to $29,843. | |
| ii) | Salaries and wages were $413,481 and $184,667 for the six months ended June 30, 2026 and 2025, respectively, an increase of $228,814 or 123.9%. The increase is primarily due the issue of restricted stock to our CEO valued at $378,000, an increase in employee benefits of $10,183, offset by a credit to payroll taxes and accrued payroll of $82,375, previously accrued and no longer payable, a reduction in stock based compensation of $16,444, primarily due to the immediate vesting of a portion of options granted in the prior year, and a reduction in payroll expenses of $60,000 due to the to the resignation of our CFO and administrative personnel in the prior year. | |
| iii) | Legal fees were $197,400 and $7,805 for the six months ended June 30, 2026 and 2025, respectively, an increase of $189,595 or 2,429.1%. The increase is primarily due to arbitration expenses and legal fees for the settlement of the unfair dismissal matters which were claimed in prior years by several individuals. | |
| iv) | Audit fees were $109,000 and $109,500 for the six months ended June 30, 2026 and 2025, a decrease of $500 or 0.5%, in line with the prior year audit fee and our expectations. | |
| v) | Directors fee were $193,000 and $18,000 for the six months ended June 30, 2026 and 2025, respectively, an increase of $175,000 or 972.2%. The increase is due to restricted stock awarded to our directors valued at $252,000 which was offset against our existing directors fee accrual of $77,000, with a net additional $175,000 expense. | |
| vi) | Research and developments costs was $0 and $32,000 for the six months ended June 30, 2026 and 2025, respectively, a decrease of $32,000 or 100.0%. The decrease was due to a cost incurred on developing a new revenue source during the prior year. | |
| vii) | Professional fees were $16,138 and $18,985 for the six months ended June 30, 2026 and 2025, respectively, a decrease of $2,847 or 15.0%. The decrease is primarily due to a reduction in public filing fees incurred in the prior year. | |
| viii) | The balance of the general and administrative expenses was $35,967 and $15,311 for the six months ended June 30, 2026 and 2025, respectively, an increase of $20,656 or 134.9%. The increase is made up of several individually insignificant items. |
Depreciation
Depreciation was $660 and $1,084 for the six months ended June 30, 2026 and 2025, respectively. Depreciation is on small office related equipment.
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Loss on settlement and repricing of convertible notes
Loss on settlement and repricing of convertible debt was $20,371,357 and $17,686,534 for the six months ended June 30, 2026 and 2025, respectively, an increase of $2,684,823 or 15.2%.
The loss on convertible debt during the current year related to; (i) a loss of $20,196,476 realized on the repricing of the conversion feature of certain notes which were under a forbearance agreement which had expired during the current period; (ii) a penalty on conversion of $100,000 realized on the conversion of a legal liability settlement by the issue of common stock; (iii) conversion fees on conversion of convertible debt of $16,757, and (iv) a debt extinguishment charge of $58,124 during the current year, due to forbearance agreements entered into with certain convertible noteholders to modify the conversion price of convertible notes in exchange for an extension of the maturity date to December 31, 2026.
The loss on settlement and repricing of convertible notes during the prior year related to; (i) a loss of $16,925,718 realized on an anti-dilution adjustment to the conversion feature of certain convertible debt; (ii) a penalty on conversion of $61,729 on conversion of convertible debt which is in default; and (iii) a loss of $699,087 realized on conversion of certain convertible debt at prices lower than the current market price during the prior year.
Fair value adjustment to price protected warrants
Fair value on price protected warrants was $0 and $8,250,469 for the six months ended June 30, 2026 and 2025, respectively. During the prior period, the exercise price of certain warrants was reset due to the anti-dilution price protection and in the case of certain warrants, full ratchet price protection, from an exercise price of $0.084 to $0.0005. This resulted in a Black -Scholes derived valuation difference related to those certain warrants.
Interest expense
Interest expense was $449,682 and $440,549 for the six months ended June 30, 2026 and 2025, respectively, an increase of $9,133 or 2.1%. The increase is primarily related to the contractual increase in the interest rates on several matured notes and additional notes issued during the current period, offset by notes converted during the current year.
Interest income
Interest income was $0 and $25,799 for the six months ended June 30, 2026 and 2025, respectively, a decrease of $25,799 or 100.0%. The interest income in the prior year relates to funds advanced to Business Warrior prior to the cessation of our merger plans with them. We have fully provided for the recoverability of these notes and the interest thereon.
Amortization of debt discount
Amortization of debt discount was $193,740 and $178,491 for the six months ended June 30, 2026 and 2025, respectively, an increase of $15,249 or 8.5%. The increase is primarily due to the value of warrant issued on new convertible debt funding and the value of derivative liabilities on variable priced conversion feature notes issued in the prior year.
Derivative liability movements
Derivative liability movements were $9,208,075 and $2,635,208 for the six months ended June 30, 2026 and 2025, respectively, an increase in movement of $6,572,867 or 249.4%. The derivative liability arose primarily due to the revaluation of certain repriced conversion features on convertible debt during the current period and the subsequent mark-to-market of these derivatives due to a declining stock price.
Net loss attributable to non-controlling interest
Net loss attributable to non-controlling interest was $26 and $0 for the six months ended June 30, 2026 and 2025, respectively, an increase of $26 or 100.0%. The loss is attributable to the non-controlling interest share of the losses of the variable interest consolidated entity, FINAP USA.
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Deemed dividend
Deemed dividend was $36,973 and $1,780,429 for the six months ended June 30, 2026 and 2025, respectively, a decrease of $1,743,456 or 97.9%. The deemed dividend in the current period related to the repricing of fixed priced anti-dilution adjustments to certain convertible notes and warrants and in the prior period, related to a full rachet anti-dilution adjustment to certain fixed exercise price warrants issued to convertible note holders during the prior year. The deemed dividend was recorded as a component of additional paid in capital.
Net loss attributable to Innovative Payment Solutions common stockholders
Net loss attributable to Innovative Payment Solutions Common Stockholders was $13,357,640 and $26,101,493 for the six months ended June 30, 2026 and 2025, respectively, a decrease of $12,743,853 or 48.8%. The decrease is primarily due to the reduction in the fair value of price protected warrants, the net credit on derivative liability movements and the reduction in deemed dividends, offset by the increase in general and administrative expenses, and an increase in the loss on settlement and repricing of convertible notes, discussed in detail above.
Liquidity and Capital Resources
To date, our primary sources of cash have been funds raised primarily from the sale of our debt and equity securities.
We have an accumulated deficit of $82.4 million at June 30, 2026 and incurred negative cash flow from operations of $0.4 million for the six months ended June 30, 2026. Our primary focus is on our Jetties IPSIPay joint venture and our FINAP USA joint venture to develop and market real-time payment platform initially focused on the fast-growing online gaming and entertainment sectors. To date, the joint ventures have not generated revenue, but we believe much of the background work necessary to commence revenue generating operations from payment processing has been completed, we are also actively seeking alternative payment processing opportunities. No assurances can be given, however, that such revenue generation will commence or be meaningful to us.
At June 30, 2026, we had cash of $48 and working capital deficit of $23.0 million, including a derivative liability of $12.6 million. After eliminating the derivative liability our working capital deficit is $10.4 million.
We used cash of $0.4 million and $0.4 million in operations for the six months ended June 30, 2026 and 2025, respectively. We maintain minimal expenditure while we actively seek other revenue generating opportunities
We generated cash of $0.4 million from convertible debt during the current year. In the prior year we generated $0.4 million of convertible debt.
At June 30, 2026, we had outstanding convertible debt, including interest thereon of $6.0 million, net of unamortized debt discount of $0.1 million and outstanding notes payable, including interest thereon of $2.1 million. The notes contain certain covenants, such as restrictions on: (i) distributions on capital stock, (ii) stock repurchases, and (iii) sales and the transfer of assets. The notes bear interest at a rates ranging from 8% to 18% per annum. and are convertible into our common stock at conversion prices ranging from fixed conversion prices of $0.0005 per share (as adjusted for stock splits, stock combinations, dilutive issuances and similar events), to variable conversion prices of 90% of the two lowest volume weighted average prices over a 20-trading day period. Should the investors choose not to convert these convertible notes, we may need to repay these notes together with interest thereon which will impact on our liquidity.
Given our losses and negative cash flows, we will be required to raise significant additional funds by issuing equity or equity-linked securities to progress our existing business model. Additional debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Any additional debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders and require significant debt service payments, which diverts resources from other activities. Moreover, there is a risk that financing may be unavailable to support our operations on favorable terms, or at all.
There is also a significant risk that none of our plans to raise financing will be implemented in a manner necessary to sustain us for an extended period of time. If adequate funds are not available to us when needed, we may be required to continue with reduced or discontinued operations or to obtain funds through arrangements that may require us to relinquish rights to technologies or potential markets, any of which could have a material adverse effect on our Company. In addition, our inability to secure additional funding when needed could cause our business to fail or become bankrupt or force us to wind down or discontinue operations, accordingly, there is substantial doubt relating to our ability to continue as a going concern.
We do not have any off-balance sheet financing arrangements as of the date of this Report.
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Capital Expenditures
Our capital expenditure is dependent on our cash resources, currently we are not forecasting any capital expenditure for the 2026 fiscal year.
Item 3. Quantitative and Qualitative Disclosures About Market Risks
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this Item.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
Pursuant to Rule 13a-15(b) under the Exchange Act, our management carried out an evaluation, with the participation of our Chief Executive Officer (“CEO”) who also fulfils the role of our President and Chief Financial Officer (“CFO”), of the effectiveness of our disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this Report. Based upon that evaluation, our CEO concluded that our disclosure controls and procedures as of June 30, 2026 are not effective due to a lack of written policies and procedures to address all material transactions and developments impacting our financial statements.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during our fiscal quarter ended June 30, 2026.
Our management is committed to improving our controls and procedures by, among other matters, continuing to consider and adopt appropriate policies and procedures to address all material transactions and developments impacting our financial statements. However, our management does not expect that our disclosure controls and procedures and our internal control processes, even if improved, will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of error or fraud, if any, within our Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that the breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
40
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. Below is a description of outstanding pending litigation matters. As also noted previously, litigation is subject to inherent uncertainties and an adverse result in the below described or other matters may arise from time to time that may harm our business. Other than as set forth below, we are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition or cash flows.
Voloshin, et al., v. Innovative Payment Solutions, Inc., et al.
On March 4, 2025, the Company and Mr. Corbett, entered into a settlement agreement with Naum Voloshin, Andrey Novikov, Frank Perez, Yulia Rey and Alexander Voloshin (the “Plaintiff Group”), whereby the Company agreed to pay $500,000 in settlement and full and final resolution of all claims and causes of action that the Plaintiff Group, or any member thereof, holds or has asserted (or could have asserted) against the Company and Mr. Corbett.
Within 5 days of March 4, 2025, the Company agreed to pay $100,000 (the “First Payment”) and within 60 days the Company agreed to pay a further $100,000 including interest thereon at 10% per annum from March 5, 2025, and within 240 days, a final payment of $300,000, including interest thereon at 10% per annum from March 5, 2025. The initial payment of $100,000 was made on March 24, 2025. The Company had not made any further payments in terms of the settlement agreement.
Any breach of the terms of the settlement agreement will result in a payment to the Plaintiffs of liquidated damages of $25,000 for each event of default.
On April 6, 2026, the Company issued an aggregate of 27,180,823 shares of common stock to settle the outstanding liability of $543,616, including interest and a liquidated damages penalty of $100,000 for not adhering to the original settlement terms, thereby extinguishing the legal settlement liability.
Minkovich v. Corbett, et al.
On May 26, 2022, Mr. Jan Minkovich (“Minkovich”) filed a lawsuit in California Superior Court in Los Angeles County (Minkovich v. Corbett, et al., CASE NO. 22CHCV00377) against the Company and its Chairman and Chief Executive Officer William Corbett. The complaint asserts six causes of action for: (i) breach of contract; (ii) nonpayment of wages; (iii) waiting time penalties; (iv) failure to indemnify for alleged employee business expenses; (v) violation of Section 17200 of the California Business and Professional Code; and (vi) wrongful termination of employment in violation of public policy. Minkovich seeks $570,000 in damages, penalties, and attorneys’ fees plus shares equal to five percent (5%) ownership of our company.
Mr. Minkovich bases his claim in part on the unilateral expectation that he receive 2.7 million shares of the company. Assuming he is owed any shares, a claim which we dispute, after the reverse 30-1 split he would receive only 90,000 shares.
Through prior counsel, the Company and Mr. Corbett filed a motion to compel arbitration. The motion was denied on October 4, 2022. Again, through prior counsel, the Company and Mr. Corbett then appealed that decision to the California Court of Appeal. As a result of the appeal, the court case was stayed until the appeal was decided. As a result of the stay, the demurrer (the equivalent of a motion to dismiss) filed through prior counsel was not decided.
On February 27, 2024, the California Court of Appeal, Second District, reversed the Superior Court’s decision denying our motion to compel arbitration. The Court of Appeal remanded the case to the Superior Court with directions to issue a new order compelling to arbitration the parties’ dispute regarding the enforceability of the arbitration clause. As the prevailing parties, the Company and Mr. Corbett were awarded costs on appeal. This firm timely filed the cost bill on appeal, which value is less than $2,000.
The plaintiff then initiated arbitration before the American Arbitration Association (“AAA”) based on the appellate ruling (AAA case number Case 01-24-0005-5191). Management vigorously defended the claims, and intends to continue to do so. After a lull in activity during which the Arbitrator weighed several issues, the new date for commencement of arbitration was set for May 26-29, 2026.
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Discovery re-opened. The parties remain engaged in informal efforts to resolve the matter but to date have been unable to agree on a resolution. Recent changes in California law may impact the Court’s previous decision that sent this case to arbitration in February 2024.
Mr. Minkovich’s attorney, Paul Cullen, took leave the entire month of March 2026 for surgery. This informal “stay,” while a legitimate exercise, seriously impeded our preparation for the arbitration set at the end of May. It was thus this firm’s opinion that we should request a continuance of the arbitration by several months.
The AAA arbitration hearing has now concluded as to all witnesses. Closing briefs from both sides are due by September 4, 2026, to the Honorable Arbitrator Epstein. Once the briefs have been delivered, Arbitrator Epstein will take sixty days to issue his ruling.
Item 1A. Risk Factors.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities
On April 6, 2026, we issued 27,180,823 shares of common stock to settle a legal liability outstanding. The liability was $543,616 on the date of settlement
Between April 20, 2026 and April 29, 2026, we received conversion notices from convertible note holders, converting $68,917 of principal, interest and conversion fees into 9,309,353 shares of common stock.
On April 14, 2026 we issued 10,000,000 shares, valued at $65,000 to an employee of our joint venture partner Brant Point Solutions in terms of an employment agreement to provide sales and marketing services to the group.
On April 24, 2026 we issued 100,000,000 shares valued at $600,000 to FINAP Worldwide, our joint venture partner as partial compensation for the provision of licensed technology to the joint venture.
Between May 7, 2026 and May 19, 2026, we entered into Securities Purchase Agreement pursuant to which the Company issued 3 convertible promissory notes and warrants to certain noteholders to 3 accredited investors for total gross proceeds of $110,000. The notes are unsecured, mature 12 months from issuance date and bear interest at a rate of 8% per annum based on a 360-day trading-year, and are convertible into shares of common stock of the Company at a conversion prices ranging from $0.01 to $0.02 per share (as adjusted for stock splits, stock combinations, and similar events). The Notes may be prepaid at any time without penalty. The Note contains customary events of default. The Company is under no obligation to register the shares of Common Stock underlying the Notes for public resale. In terms of the Securities Purchase Agreement, the Company issued one five-year warrant to purchase an aggregate of 5,000,000 shares of Common Stock at an exercise price of $0.01 per share (as adjusted for stock splits, stock combinations, and similar events). The warrants have price protection which allows for the exercise price to decrease for any issuances below the exercise price. The Company is under no obligation to register the shares of Common Stock underlying the Note or the Warrant, for public resale.
On July 10, 2026, in terms of a conversion notice received from a convertible note holder, we issued 1,312,500 shares of common stock for the conversion of principal and interest of $26,250 of convertible debt at a conversion price of $0.02 per share.
On July 16, 2026, we entered into Securities Purchase Agreements with an accredited investor to purchase a convertible note for gross proceeds of $78,000, bearing interest at 8% per annum and maturing on July 16, 2027. The note is convertible into shares of common stock at an exercise price of $0.01 per share (as adjusted for stock splits, stock combinations, dilutive issuances and similar events). The Company also issued a five-year warrant to purchase an aggregate of 7,800,000 shares of common stock at exercise price of $0.01 per share (as adjusted for stock splits, stock combinations, dilutive issuances and similar events), associated with the Convertible Note. The warrant has price protection which reduces the exercise price of the warrant for any subsequent stock issuances lower than the current exercise price.
On July 23, 2026, in terms of conversion notices received from two convertible note holders, we issued an aggregate of 47,500,000 shares of common stock for the conversion of interest of $27,786 of convertible debt, at a conversion price of $0.000585 per share.
42
Use of Proceeds from Public Offering of Common Stock
Not applicable.
Item 3. Defaults upon Senior Securities.
Certain of the convertible debt with an aggregate balance outstanding of $4,243,085 and notes payable with an aggregate balance outstanding of $2,124,119 are technically in default, although no default has been declared, except for one investor with a balance due of $20,329. Where the notes are in default we provide for default penalties and interest, if applicable.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Item 6. Exhibits
| * | Filed herewith |
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SIGNATURES
Pursuant to the requirements of the Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| INNOVATIVE PAYMENT SOLUTIONS, INC. | ||
| Date: August 14, 2026 | By: | /s/ William Corbett |
| William Corbett | ||
| Principal Officer, Chief Executive Officer, President & Chief Financial Officer | ||
| (Principal Executive Officer, Principal Financial and Accounting Officer) | ||
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ATTACHMENTS / EXHIBITS
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