U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q


[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2017
 
or
 
[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ___ _to  ___

 
Commission File No. 333-203997

ZOOMPASS HOLDINGS, INC.
 (Exact name of registrant as specified in its charter)


Nevada
30-0796392
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)
   
107 Atlantic Ave. , Suite 201
Toronto, Ontario M6K1Y2
(Address of principal executive offices, including Zip Code)
 
(416) 767-8920
(Registrant's telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   [X] Yes   [  ] No

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

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).   [  ] Yes   [X] No

APPLICABLE ONLY TO CORPORATE ISSUERS:

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

Class
Outstanding as of August 21, 2017
Common stock, $0.0001 par value
41,759,117

 
 
 
 
 

 

TABLE OF CONTENTS
 
 
 
 
 
 
 
PART I – FINANCIAL INFORMATION
3
 
 
 
 
 
Item 1.
Financial Statements
3
 
 
 
 
 
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
18
 
 
 
 
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
26
 
 
 
 
 
Item 4.
Controls and Procedures
26
 
   
 
PART II – OTHER INFORMATION
 
 
 
 
 
 
Item 1.
Legal Proceedings
27
 
 
 
 
 
Item 1A.  
Risk Factors
27
 
 
 
 
 
 Item 2.  
Recent Unregistered Sales of Equity Securities 
27
 
 
 
 
 
Item 3.
Exhibits
27
 
 
 
 
SIGNATURES
28
 

 


 



- 2 -




PART I – FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS
 

ZOOMPASS HOLDINGS, INC. (formerly known as UVIC, INC.)
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(Expressed in US dollars)
 
 
         
June 30,
   
December 31,
 
ASSETS
 
Note
   
2017
   
2016
 
Current assets
             
(note 3)
 
Cash and cash equivalents
 
6
   
$
136,887
   
$
422,385
 
Cash held in trust and customer deposits
         
3,673,677
     
2,016,369
 
Accounts receivable (net of allowance for doubtful accounts of $16,531, December 31, 2016 - $16,396)
         
113,771
     
63,274
 
Inventories
         
7,100
     
27,850
 
Prepaid expenses and other current assets
 
9
     
108,997
     
144,440
 
Total current assets
         
4,040,432
     
2,674,318
 
Equipment
 
3,4
     
48,057
     
54,519
 
Intangible assets
 
3,5
     
332,807
     
339,875
 
Goodwill
 
3,5
     
3,748,001
     
3,622,388
 
Total assets
       
$
8,169,297
   
$
6,691,100
 
 
                     
LIABILITIES AND SHAREHOLDERS' EQUITY
                     
Current liabilities
                     
Accounts payable and accrued liabilities
 
9
   
$
477,657
   
$
474,508
 
Client funds
         
3,557,999
     
1,840,210
 
Total liabilities
         
4,035,656
     
2,314,718
 
 
                     
Shareholders' equity
                     
Common stock, $0.0001 par value 500,000,000 shares authorized, 40,474,471 shares issued and outstanding (December 31, 2016 - 39,300,400)
 
1,7
   
$
4,046
   
$
3,929
 
Additional paid in capital
 
7,8
     
19,836,673
     
18,484,743
 
Accumulated deficit
         
(15,741,560
)
   
(14,004,013
)
Accumulated other comprehensive income (loss)
         
34,482
     
(108,277
)
Total liabilities and shareholders' equity
         
4,133,641
     
4,376,382
 
         
$
8,169,297
   
$
6,691,100
 
Going concern
 
1
                 
Commitments and contingencies
 
10
                 
 
 
 
See accompanying notes to the unaudited interim condensed consolidated financial statements
 
 
 
 

- 3 -


ZOOMPASS HOLDINGS, INC. (formerly known as UVIC, INC.)
INTERIM CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS (unaudited)
(Expressed in US dollars)
 
 
       
For the three months ended
   
For the six months ended
 
 
Note
   
June 30, 2017
   
June 30, 2017
 
Revenue
               
    Gross prepaid card revenue
     
$
199,984
   
$
445,465
 
    Commissions and agent fees
       
(31,227
)
   
(58,070
)
    Mobility products revenue
       
-
     
36,045
 
    Mobility product commissions
       
7,101
     
7,101
 
Net revenue
       
175,858
     
430,541
 
    Processing and card fees
       
(236,103
)
   
(425,657
)
    Mobility products cost of goods sold
       
-
     
(27,470
)
Gross margin
       
(60,245
)
   
(22,586
)
Expenses
                   
    Salaries and consultants
9
     
(400,576
)
   
(796,472
)
    Rent and occupancy costs
       
(48,374
)
   
(83,577
)
    Share-based payment expense
8
     
(330,584
)
   
(422,532
)
    Depreciation and amortization
4,5
     
(12,460
)
   
(26,460
)
    Professional fees
       
(109,705
)
   
(148,237
)
    Telecommunications
       
(3,483
)
   
(6,474
)
    Office and sundry expenses and other
       
(136,884
)
   
(211,265
)
    Filing fees and regulatory costs
       
(13,612
)
   
(24,217
)
    Foreign exchange
       
26,639
     
13,865
 
    Bank fees
       
(3,905
)
   
(9,592
)
         
(1,032,944
)
   
(1,714,961
)
Net loss
     
$
(1,093,189
)
 
$
(1,737,547
)
                     
Other comprehensive income
                   
    Foreign exchange translation gain
       
56,510
   
$
142,759
 
Net loss and comprehensive loss
     
$
(1,036,679
)
 
$
(1,594,788
)
                     
Net loss per share - basic and diluted
     
$
(0.03
)
 
$
(0.04
)
                     
Weighted average number of common shares outstanding - basic and diluted
     
40,119,780
     
39,781,332
 
 

 
See accompanying notes to the unaudited interim condensed consolidated financial statements

 

 
- 4 -

 

ZOOMPASS HOLDINGS, INC. (formerly known as UVIC, INC.)
INTERIM CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (unaudited)
(Expressed in US dollars)
 
 
 
         
Common stock
                         
   
Note
   
Number
of
Shares
   
Amount
   
Additional
paid in
capital
(note 3)
   
Deficit
(note 3)
   
Accumulated other comprehensive income (loss) (note 3)
   
Total
 
Reverse merger with Zoompass Inc.
 
3
     
9,345,000
   
$
(4,470,156
)
 
$
4,470,156
   
$
-
   
$
-
   
$
-
 
Issuance of additional founders shares
         
12,025,752
     
1,182
     
-
     
-
     
-
     
1,182
 
Issued in respect of share-based payments
         
8,125,772
     
-
     
9,489,767
     
-
     
-
     
9,489,767
 
Issued in respect of acquisition of net assets
 
3
     
8,060,913
     
4,472,730
     
-
     
-
     
-
     
4,472,730
 
Issued in respect of private placements
         
613,252
     
61
     
671,703
     
-
     
-
     
671,764
 
Exercise of warrants
         
1,129,711
     
112
     
427,873
                     
427,985
 
Warrants issued
         
-
     
-
     
2,690,764
     
-
     
-
     
2,690,764
 
Share-based payment expense
         
-
     
-
     
734,480
     
-
     
-
     
734,480
 
Net loss
         
-
     
-
     
-
     
(14,004,013
)
   
-
     
(14,004,013
)
Foreign currency translation
         
-
     
-
     
-
     
-
     
(108,277
)
   
(108,277
)
December 31, 2016
         
39,300,400
   
$
3,929
   
$
18,484,743
   
$
(14,004,013
)
 
$
(108,277
)
 
$
4,376,382
 
Exercise of warrants
 
7
     
520,211
     
52
     
194,146
                     
194,198
 
Net loss
         
-
     
-
     
-
     
(1,737,547
)
   
-
     
(1,737,547
)
Share-based payment expense
         
-
     
-
     
422,532
     
-
     
-
     
422,532
 
Issuance of shares
 
7
     
654,130
     
65
     
735,252
     
-
     
-
     
735,317
 
Foreign currency translation
         
-
     
-
     
-
     
-
     
142,759
     
142,759
 
June 30, 2017
         
40,474,741
   
$
4,046
   
$
19,836,673
   
$
(15,741,560
)
 
$
34,482
   
$
4,133,641
 
 
 

 
See accompanying notes to the unaudited interim condensed consolidated financial statements
 

 

 
- 5 -



ZOOMPASS HOLDINGS, INC. (formerly known as UVIC, INC.)
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
(Expressed in US dollars)
 
 
 
         
For the three months ended
   
For the six months ended
 
   
Note
   
June 30, 2017
   
June 30, 2017
 
Cash flow from operating activities
                 
Net loss
       
$
(1,093,189
)
 
$
(1,737,547
)
Non-cash items:
                     
Depreciation and amortization
         
12,460
     
26,460
 
Share-based payment expense
 
7,8
     
330,584
     
422,532
 
Foreign exchange gain
         
(26,639
)
   
(13,865
)
Changes in non-cash operating assets and liabilities
                     
    Accounts receivable
         
67,882
     
(46,976
)
    Deposits
         
(1,045,619
)
   
(1,543,815
)
    Inventories
         
-
     
21,109
 
    Prepaids and other current assets
         
(2,050
)
   
(10,658
)
    Accounts payable and accrued liabilities
         
(11,909
)
   
7,059
 
    Advances to related parties
 
9
     
-
     
50,000
 
    Client funds
         
1,052,938
     
1,608,577
 
Net cash used in operating activities
         
(715,542
)
   
(1,217,124
)
Cash flow from investing activities
                     
    Additions to intangibles
 
5
     
-
     
(20,000
)
Net cash used in investing activity
         
-
     
(20,000
)
Cash flow from financing activities
                     
    Issuance of common stock
         
735,317
     
735,317
 
    Exercise of warrants
 
7
     
-
     
194,198
 
Net cash provided by financing activities
         
735,317
     
929,515
 
Effect of exchange rate changes on cash
         
24,011
     
22,111
 
Increase (decrease) in cash and cash equivalents
         
43,786
     
(285,498
)
Cash and cash equivalents, beginning of period
         
93,101
     
422,385
 
Cash and cash equivalents, end of period
       
$
136,887
   
$
136,887
 
 
 
 
See accompanying notes to the unaudited interim condensed consolidated financial statements




- 6 -




ZOOMPASS HOLDINGS, INC. (FORMERLY UVIC Inc.)
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)


NOTE 1 — NATURE OF OPERATIONS AND GOING CONCERN
 
Zoompas Holdings, Inc. formerly known as UVIC. Inc. ("Zoompass Holdings," or the "Company") was incorporated under the laws of the State of Nevada on August 21, 2013.  Effective August 22, 2016, the Company entered into an Agreement for the Exchange of Stock (the "Agreement") with Zoompass, Inc., an Ontario, Canada corporation ("Zoompass").   Pursuant to the Agreement, the Company agreed to issue 8,050,784 shares of its restricted common stock to Zoompass' shareholders ("Zoompass' shareholders") in exchange for all the shares of Zoompass Inc. owned by the Zoompass Inc.'s Shareholders.  At the Closing Date, Rob Lee, a significant shareholder of the Company agreed to cancel 7,000,000 shares of the Company's common stock, which shares constituted the control shares of the Company.  Other than this one significant shareholder, shareholders of the Company held 2,670,000 shares. As a result of the Agreement, Zoompass is now a wholly owned subsidiary of the Company.  The Company has amended its Articles of Incorporation to change its name to Zoompass Holdings, Inc. and the appropriate forms were filed with FINRA and the SEC to change its name, address and symbol and complete a 3.5-1 forward split, which was consented to by the majority of shareholders on September 7, 2016 and approved in February 2017, for shareholders of record on September 7, 2016.

All share figures have been retroactively stated to reflect the stock split approved by shareholders, unless otherwise indicated.  Additionally, the Company's shareholders consented to an increase of the shares authorized to 500,000,000 and a revision of the par value to $0.0001.

As the former Zoompass shareholders ended up owning the majority of the Company, the transaction does not constitute a business combination and was deemed to be a recapitalization of the Company with Zoompass being the accounting acquirer, accordingly the accounting and disclosure information is that of Zoompass going forward.
 
Zoompass Inc., was incorporated under the laws of Ontario on June 8, 2016.  On June 28, 2016, pursuant to an agreement with a shareholder of Zoompass, certain net assets were acquired by Zoompass in exchange for shares of Zoompass (note 3).  The net assets primarily consisted of a virtual payment platform, certain customer contracts, cash held in trust and customer deposits as well as the associated client funds.  As Zoompass Inc. was incorporated in June 2016, comparative information for the three and six months ended June 30, 2016 has not been presented.

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

The Company expects the forgoing, or a combination thereof, to meet the Company's anticipated cash requirements for the next 12 months; however, these conditions raise substantial doubt about the Company's ability to continue as a going concern.
 
 
 


- 7 -


ZOOMPASS HOLDINGS, INC. (FORMERLY UVIC Inc.)
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)


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

NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS

SIGNIFICANT ACCOUNTING POLICIES
These unaudited condensed consolidated interim financial statements have been prepared on the same basis as the annual audited financial statements and should be read in conjunction with those annual audited financial statements filed on Form 10-K for the period ended December 31, 2016. In the opinion of management, these unaudited interim condensed consolidated financial statements reflect adjustments, necessary to present fairly the Company's financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.
 
The Company's significant accounting policies have not changed from the year ended December 31, 2016, except as described below.

Goodwill:  Goodwill represents the excess purchase price over the estimated fair value of net assets acquired by the Company in business combinations. Business acquisitions are accounted for using the acquisition method whereby acquired assets and liabilities are recorded at fair value as of the date of acquisition with the excess of the acquisition amount over such fair value being recorded as goodwill and allocated to reporting units ("RU").  RUs are the smallest identifiable group of assets, liabilities and associated goodwill that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets.  Given how the Company is structured and managed, the Company is one RU.  Goodwill arises principally because of the following factors among other things: (1) the going concern value of the Company's capacity to sustain and grow revenues through securing additional contracts and customers,; (2) the undeserved market of consumers looking for financial transactional alternatives; (3) technological and mobile capabilities beyond acquired lines of business to capture buyer specific synergies arising upon a transaction and (4) the requirement to record a deferred tax liability for the difference between the assigned values and the tax bases of the assets acquired and liabilities assumed in a business combination, if any.

The Company accounts for goodwill and intangible assets in accordance with ASC No. 350,  Intangibles-Goodwill and Other  ("ASC 350"). ASC 350 requires that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value. In addition, ASC 350 requires that goodwill be tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis and between annual tests when circumstances indicate that the recoverability of the carrying amount of goodwill may be in doubt. Application of the goodwill impairment test requires judgment, including the identification of reporting units; assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value. Significant judgments required to estimate the fair value of reporting units include estimating future cash flows, determining appropriate discount rates and other assumptions. Changes in these estimates and assumptions or the occurrence of one or more confirming events in future periods could cause the actual results or outcomes to materially differ from such estimates and could also affect the determination of fair value and/or goodwill impairment at future reporting dates.

Intangibles:  On acquisition, intangible assets, other than goodwill, are initially recorded at their fair value. Following initial recognition, intangible assets with a finite life are amortized on a straight line basis over their useful life. Useful lives are assessed at year end.
 
The following useful lives are used in the calculation of amortization:
 
Trademark – 7.25 years
 
Acquired payment platform – 5 years 
 
 
 
- 8 -
 
 

ZOOMPASS HOLDINGS, INC. (FORMERLY UVIC Inc.)
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
 
 

NEWLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Newly Adopted Accounting Standards
In August 2014, the FASB issued a new financial accounting standard on going concern, ASU No. 2014-15, "Presentation of Financial Statements – Going Concern (Sub-Topic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern." The standard provides guidance about management's responsibility to evaluate whether there is a substantial doubt about the organization's ability to continue as a going concern. The amendments in this Update apply to all companies. They become effective in the annual period ending after December 15, 2016, with early application permitted. There was no impact on the unaudited interim condensed consolidated balance sheets or the unaudited interim condensed consolidated statements of operations and comprehensive loss from the adoption of this standard.

Recently issued accounting pronouncements
In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)". The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. The accounting standard is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2017. Early adoption is not permitted. The impact on the unaudited interim condensed consolidated financial statements of adopting ASU 2014-09 will be assessed by management.

In November 2015, the FASB issued ASU No. 2015-17, "Balance Sheet Classification of Deferred Taxes," which requires that deferred tax liabilities and assets be classified on our Consolidated Balance Sheets as noncurrent based on an analysis of each taxpaying component within a jurisdiction. ASU No. 2015-17 is effective for the fiscal year commencing after December 15, 2017. The Company does not anticipate that the adoption of ASU No. 2015-17 will have a material effect on the consolidated balance sheet or the consolidated results of operations.
 
In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 740): Recognition and Measurement of Financial Assets and Financial Liabilities. This ASU is effective for annual and interim reporting periods beginning after December 15, 2017. ASU 2016-01 enhances the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The Company is currently assessing the impact of ASU 2016-01.

 In February 2016, the FASB issued ASU 2016-02, Leases. This update requires organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The new guidance will also require additional disclosure about the amount, timing and uncertainty of cash flows arising from leases. The provisions of this update are effective for annual and interim periods beginning after December 15, 2018. The Company is still assessing the impact that the adoption of ASU 2016-02 will have on the consolidated balance sheet and the consolidated results of operations.
 
 
 
 

- 9 -


ZOOMPASS HOLDINGS, INC. (FORMERLY UVIC Inc.)
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)


 
NOTE 3 – ACQUISTION AND REVERSE TAKEOVER TRANSACTION
 
Acquisition
 
Zoompass Inc.
Pursuant to an agreement dated June 28, 2016, certain net assets were acquired by Zoompass in exchange for 8,060,913 shares of Zoompass.  The net assets primarily consisted of a virtual payment platform, certain customer contracts, cash held in trust and deposits and the associated customer liabilities.

Based on an examination of the net assets acquired, the acquisition of the net assets was determined to be a business as defined under ASC 805. 

During the quarter ended June 30, 2017, the Company finalized the purchase price with the assistance of a third party valuator.  As part of the finalization of the purchase price, the consideration was determined to be $4,472,730 based on the fair value of the business acquired.  The following table sets forth the allocation of the consideration to the fair value of the net assets acquired.  The acquired goodwill is primarily related to personnel and the value attributed to a company that is expected to experience accelerated growth.
 
 
     
Consideration
     
Common shares issued
 
$
4,472,730
 
Net assets acquired
       
Cash and cash equivalents
 
$
208,723
 
Customer deposits and cash in trust
   
1,843,296
 
Other current assets
   
76,214
 
Furniture and computer equipment
   
65,651
 
Trademark
   
161,600
 
Payment platform
   
109,710
 
Goodwill
   
3,715,646
 
Accounts payable
   
(31,019
)
Customer liabilities
   
(1,677,091
)
Total net assets acquired
 
$
4,472,730
 
 
As a result of the finalization of the purchase price, certain adjustments were recorded to the consolidated balance sheet at December 31, 2016 and the consolidated statement of loss and comprehensive loss for the period ended December 31, 2016.  The following table detail the adjustments to the consolidated balance sheet and consolidated statement of loss and comprehensive loss as a result of the finalization of the purchase price.
 
 
   
Consolidated balance sheet
As at December 31, 2016
 
 
As reported
 
Adjusted
 
Acquired intangible assets
 
$
8,627,349
   
$
-
 
Trademark
   
-
     
146,602
 
Payment platform
   
-
     
193,273
 
Goodwill
   
-
     
3,622,388
 
Additional paid in capital
   
23,251,123
     
18,484,743
 
Accumulated deficit
   
(13,984,951
)
   
(14,004,013
)
Accumulated other comprehensive loss
   
(228,633
)
   
(108,277
)
 
               
 
   
Consolidated statement of loss and comprehensive loss
For the period ended December 31, 2016
 
 
As reported
 
Adjusted
 
Depreciation and amortization
 
$
(9,655
)
 
$
(28,717
)
Net loss
   
(13,984,951
)
   
(14,004,013
)
Foreign currency translation
   
(228,633
)
   
(108,277
)
Net loss and other comprehensive loss
   
(14,213,584
)
   
(14,112,290
)
 
 
 
- 10 -
 


ZOOMPASS HOLDINGS, INC. (FORMERLY UVIC Inc.)
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
 

 
The adjustments were the result of valuing the consideration based on the fair value of the acquired business and the allocation of and amortization of the acquired trademark and payment platform as well as the translation of foreign currency denominated balances.
 
Agreement with Zoompass Inc.
 
Effective August 22, 2016, UVIC, Inc. ("UVIC") entered into an Agreement for the Exchange of Stock (the "Agreement") with Zoompass, Inc., an Ontario, Canada corporation.   Pursuant to the Agreement, the Company agreed to issue 8,060,913 shares of its restricted common stock to Zoompass' shareholders ("Zoompass' shareholders") in exchange for all the shares of Zoompass Inc. owned by the Zoompass' Shareholders.  At the Closing Date, Rob Lee, a significant shareholder, of UVIC agreed to cancel 7,000,000 shares of UVIC's common stock, which shares constituted the control shares of the Company.  Other than this one significant shareholder, shareholders of the Company held 2,670,000 shares. As a result of the Agreement, Zoompass is now a wholly owned subsidiary of the Company.

 As the former Zoompass shareholders ended up owning the majority of the Company, Zoompass is deemed to be the accounting acquirer.  As UVIC was the accounting acquiree the net assets acquired are reflected in the statement of equity.

As at the effective date of the reverse takeover UVIC Inc. had $nil in net assets.

Proforma information has not been presented as there was no operating activity in Zoompass Inc. from the date of incorporation to the date of the acquisition of assets, accordingly the results presented reflect all results of Zoompass during the period as well as that of the consolidated entity.
 
 
NOTE 4 - EQUIPMENT

Cost
Computer
equipment
 
Furniture
 
Total
 
Balance at December 31, 2016
 
$
61,670
   
$
2,333
   
$
64,003
 
Foreign exchange and other
   
2,137
     
81
     
2,218
 
Balance at June 30, 2017
 
$
63,807
   
$
2,414
   
$
66,221
 
                         
Accumulated depreciation
Computer
equipment
 
Furniture
 
Total
 
Balance at December 31, 2016
 
$
(9,250
)
 
$
(234
)
 
$
(9,484
)
Depreciation
   
(7,912
)
   
(211
)
   
(8,123
)
Foreign exchange and other
   
(544
)
   
(13
)
   
(557
)
Balance at June 30, 2017
 
$
(17,706
)
 
$
(458
)
 
$
(18,164
)
 
                       
Balance at December 31, 2016
 
$
52,420
   
$
2,099
   
$
54,519
 
Balance at June 30, 2017
 
$
46,101
   
$
1,956
   
$
48,057
 

 
 
- 11 -
 
 
ZOOMPASS HOLDINGS, INC. (FORMERLY UVIC Inc.)
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
 
 
 
NOTE 5 – INTANGIBLE ASSETS AND GOODWILL

Intangible assets
Cost
 
Trademark
   
Payment platform
   
Total
 
Balance at December 31, 2016
 
$
157,544
   
$
201,056
   
$
358,600
 
Foreign exchange
   
5,463
     
6,972
     
12,435
 
Balance at June 30, 2017
 
$
163,007
   
$
208,028
   
$
371,035
 
                         
Accumulated amortization
 
Trademark
   
Payment platform
   
Total
 
Balance at December 31, 2016
 
$ 
(10,942
)
 
$
(7,783
)
 
$ 
(18,725
)
Amortization
   
(10,715
)
   
(7,622
)
   
(18,337
)
Foreign exchange and other
   
(682
)
   
(484
)
   
(1,166
)
Balance at June 30, 2017
   
(22,339
)
 
$
(15,889
)
   
(38,228
)
                         
Balance at December 31, 2016
 
$
146,602
   
$
193,273
   
$
339,875
 
Balance at June 30, 2017
 
$
140,668
   
$
192,139
   
$
332,807
 

The Company has capitalized $100,000 in costs related to improvements made on the payment platform to further develop it for alternative business plans, since its acquisition.  When the Company has completed the development of these improvements, they will be put into service and amortized over their expected life.  The amortization relates to the amortization of the cost of the acquired payment platform at the acquisition date, see note 3 for additional details.
 
Of the $100,000 capitalized since acquisition, as at December 31, 2016, the Company had additions of $20,000 recorded in Accounts payable and accrued liabilities, which was paid during the six months ended June 30, 2017.

Cost
 
Goodwill
 
Balance at December 31, 2016
 
$
3,622,388
 
Foreign exchange
   
125,613
 
Balance at June 30, 2017
 
$
3,748,001
 



 

- 12 -



ZOOMPASS HOLDINGS, INC. (FORMERLY UVIC Inc.)
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)



NOTE 6 – FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The Company has exposure to liquidity risk and foreign currency risk.  The Company's risk management objective is to preserve and redeploy the existing treasury as appropriate with the business objectives and risk tolerance.

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

Management forecasts cash flows for its current and subsequent fiscal years to predict future financing requirements.  Future requirements may be met through a combination of credit and access to capital markets.  The Company's cash requirements are dependent on the level of operating activity, a large portion of which is discretionary.  Should management decide to increase its operating activity, more funds than what is currently in place would be required.  It is not possible to predict whether financing efforts will be successful or sufficient in the future.   At June 30, 2017, the Company had $136,887 (December 31, 2016, $422,385), in cash and cash equivalents.

Additionally, the Company has commitments as detailed in note 10.

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

Credit risk:   Credit risk is the risk of loss associated with a counterparty's inability to fulfill its payment obligations. As at June 30, 2017 and December 31, 2016, the Company's credit risk is primarily attributable to cash and cash equivalents, cash held in trust and customer deposits, and accounts receivable. At June 30, 2017 and December 31, 2016, the Company's cash and cash equivalents, cash held in trust and customer deposits was held with reputable Canadian chartered banks.  At June 30, 2017, the Company had an allowance for doubtful accounts of $16,531 (December 31, 2016, - $16,396) as a result of a review of collectability of the amount outstanding and the duration of time it was outstanding.
Interest rate risk:   Interest rate risk is the risk borne by an interest-bearing asset or liability as a result of fluctuations in interest rates.  Financial assets and financial liabilities with variable interest rates expose the Company to cash flow interest rate risk.  The Company's does not have significant interest rate risk.

Fair values:  The carrying amounts reported in the consolidated balance sheet for cash and cash equivalents, cash held in trust and customer deposits, accounts receivables, accounts payable and accrued liabilities and client funds approximate fair value because of the short period of time between the origination of such instruments and their expected realization.
 
 
 
 
 
 

- 13 -



ZOOMPASS HOLDINGS, INC. (FORMERLY UVIC Inc.)
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)

 

 
NOTE 7 – COMMON STOCK AND WARRANTS

Common stock

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

During March 2017 the Company issued 520,211 shares in the common stock of the Company through the exercise of warrants for proceeds of $194,198.

During the three months ended June 30, 2017, the Company completed several private placements for the sale of non-registered shares of the Company's common stock.  As a result of these private placements 654,130 non-registered shares of the Company's common stock was issued for gross proceeds of $735,317.

Warrants

During the three and six months ended June 30, 2017, the Company issued 351,328 warrants.  The warrants have an exercise price of C$0.50 per warrant and exercisable into one share in the common stock of the Company.  The warrants have an expiry of September 1, 2017.

The Company had the following warrants outstanding at June 30, 2017
 
        Grant date
Warrants
Weighted Average
Exercise Price (C$)
       Expiry
November 23, 2016
600,000
0.50
October 31, 2017
November 23, 2016 (1)
-
0.50
March 31, 2017
June 8, 2017
351,328
0.50
September 1, 2017
 
951,328
 
 
 
  (1) On November 30, 2016, the warrants expiry was amended from November 30, 2016 to March 31, 2017.
 
 
 
- 14 -
 
 

ZOOMPASS HOLDINGS, INC. (FORMERLY UVIC Inc.)
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)


NOTE 8– SHARE-BASED PAYMENTS

The components of share-based payments expense and the black-scholes valuation assumptions are detailed in the table below.

                     
Expense
                           
Date of grant
 
Contractual
life
 
Number
   
Exercise
price
(C$)
   
Three
months
ended
June 30,
2017
   
Six months ended June 30, 2017
   
Share
price
(C$)
   
Risk-free
rate
   
Volatility
 
Dividend
yield
 
Expected
life
(years)
 
Warrant issuance
June 8, 2017
 
September 1, 2017
   
351,328
   
$
0.50
   
$
239,078
   
$
239,078
   
$
1.42
     
1
%
   
54
%
Nil
   
0.23
 
Option grant
December 1, 2016
 
December 1, 2021
   
917,500
   
$
1.50
     
66,252
     
132,821
   
$
1.50
     
1
%
   
108
%
Nil
   
5.00
 
Deferred stock unit grant
December 1, 2016
 
December 1, 2021
   
272,500
     
N/A
     
25,254
     
50,633
   
$
1.50
     
1
%
   
108
%
Nil
   
5.00
 
                         
$
330,584
   
$
422,532
                                   

 As at June 30, 2017, the Company had the following stock options and deferred stock units outstanding.
 
Award
 
Fair
Value
   
Contractual
Life
(years)
   
Units
   
Number of
units
vested
   
Weighted
Average
Exercise
Price
(C$)
 
Remaining 
Expiry Date
Options
 
$
493,080
     
4.42
     
562,500
     
562,500
     
0.50
 
December 1, 2021
 Deferred stock units
   
210,961
     
4.42
     
187,500
     
187,500
     
-
 
December 1, 2021
Options
   
798,517
     
4.42
     
917,500
     
106,078
     
0.50
 
December 1, 2021
 Deferred stock units
   
304,405
     
4.42
     
272,500
     
31,505
     
-
 
December 1, 2021
 
 
$
1,806,963
     
4.42
     
1,940,000
     
887,583
             
 
 


- 15 -



ZOOMPASS HOLDINGS, INC. (FORMERLY UVIC Inc.)
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
 

 
NOTE 9– RELATED PARTY TRANSACTIONS AND BALANCES

During 2016, the Company paid an advance on behalf of certain shareholders in the amount of $250,000.  These shareholders also serve as directors and officers of the Company.  $120,000 was returned by December 31, 2016, and $50,000 was returned during the period ended June 30, 2017.  The $80,000 is reflected in prepaids and other current assets as at June 30, 2017 (December 31, 2016 - $130,000).

The total amount owing to the same shareholders, in relation to the services they provide to the Company in their capacity as Officers at June 30, 2017 was $248,488 (December 31, 2016 - $186,818) which includes expense reimbursements.  This amount is reflected in accounts payable and is further described below. 

As at June 30, 2017, the Company had an amount owing to an entity owned and controlled by the Chief Executive Officer of the Company of $194,052 (December 31, 2016 - $127,073).  The amount owing relates to services provided by the Chief Executive Officer and expense reimbursements.

As at June 30, 2017, the Company had an amount owing to an entity owned and controlled by the Secretary of the Company of $54,436 (December 31, 2016 - $59,745).  The amount owing relates to services provided by the Secretary and expense reimbursements.

As at June 30, 2017, the Company had an amount owing to the President of the Company of $10,530 (December 31, 2016 - $28,092) for salary. 

As at June 30, 2017, the Company had an amount owing to an entity owned and controlled by the Chief Financial Officer of the Company of $5,394 (December 31, 2016 - $31,653).  The amount owing relates to services provided by the Chief Financial Officer.

A total of $94,962 and $173,377 was recognized during the three and six month period ended June 30, 2017, respectively, for share-based payments expense to directors and officers of the Company.

As at June 30, 2017 and December 31, 2016, the amounts owing to officers of the Company are recorded in accounts payable and accrued liabilities.
 

NOTE 10 – COMMITMENTS AND CONTINGENCIES

The Company is currently using leased office space under a contract which runs to October 31, 2020.  The amount due under this contract is as follows:

Fiscal year
 
$
   
2017
   
69,709
 
2018
   
139,418
 
2019
   
139,418
 
2020
   
116,182
 
     
464,727
 
 

 

- 16 -



ZOOMPASS HOLDINGS, INC. (FORMERLY UVIC Inc.)
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)

 

Contingencies
From time to time, the Company may be involved in a variety of claims, suits, investigations and other proceedings arising in the ordinary course of our business, collections claims, breach of contract claims, labor and employment claims, tax and other matters. Although claims, suits, investigations and proceedings are inherently uncertain and their results cannot be predicted with certainty, the Company believes that the resolution of current pending matters will not have a material adverse effect on its business, balance sheet, results of operations or cash flow. Regardless of the outcome, litigation can have an adverse impact on the Company because of legal costs, diversion of management resources and other factors.

The Company's trademark application has been opposed in the US based on the most recent application.  The trademark had been previously acquired through a US registration obtained on the basis of its Canadian registration. 

The same party has challenged the Company's trademark in Canada, the Company has filed its affidavit evidence in response and is awaiting a final decision.  The Company is confident that the Company's registration will be maintained.

During the three and six months ended June 30, 2017, the Company learned that a class action complaint had been filed against the Company, its Chief Executive Officer and its Chief Financial Officer in the United States District Court for the District of New Jersey.  The complaint alleges, inter alia, that defendants violated the federal securities laws by, among other things, failing to disclose that the Company was engaged in an unlawful scheme to promote its stock.  Neither the Company nor the other defendants have yet been served with the complaint.  The Company has analyzed the complaint and, based on that analysis, has concluded that the complaint is legally deficient and otherwise without merit.  The Company intends to vigorously defend against these claims if the complaints are served upon it.

 
NOTE 11 – SUBSEQUENT EVENTS

Subsequent to June 30, 2017, 18,332 shares in the common stock of the Company were issued as a result of the exercise of warrants.

Subsequent to June 30, 2017, 1,266,044 shares in the common stock of the Company were issued for gross proceeds of $307,591 as a result of the several private placements.
 
Acquisition of transportation enablement platform
During the three months ended June 30, 2017, the Company entered into an agreement to acquire a transportation enablement platform (the "Platform") which provides fully automated dispatching and bookings management built for taxi companies, limousine companies and ride-sharing service providers. The Platform gives customers an app based experience while the acquired cloud-based Platform, provides service providers a range of functions which include customer booking, accounts management, driver tracking, real-time notifications, auto dispatching algorithms, accounting and settlements, corporate account management as well as providing reporting and analytics. The Platform has also shown to have a direct application in the B2B space in providing corporations with a more efficient taxi chit solution to combat fraud and excessive administration costs.

In exchange for the acquisition of the Platform from a private Canadian based company, the Company will be providing as consideration the equivalent of up to C$1,000,000 in the form of non-registered shares in the common stock of the Company, based on a share price of the lesser of US$3.00 per share, or the share price on closing. The equivalent of C$400,000 in shares is payable on closing with C$300,000 payable in shares on the first anniversary of the closing, subject to the satisfaction of certain milestones, and an additional C$300,000 payable in shares on the second anniversary of the closing, subject to the satisfaction of certain milestones.

Transaction costs incurred with respect to the acquisition of the Platform have been expensed in the statements of loss and comprehensive loss for the three and six months ended June 30, 2017.

The transaction is expected to close in the third quarter of 2017, as there are currently conditions of closing that have not been completed.  As the transaction has not closed, the Company cannot calculate the total number of shares that are to be issued, nor is the financial information of Zerowire Group Inc., currently available.  As a result, pro forma information has not been presented.  The Company will make a determination of how the transaction will be accounted for when it prepares its financial statements for the period ended September 30, 2017.
 

 

- 17 -




ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Forward-looking Statements

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

 
●
projected operating or financial results, including anticipated cash flows used in operations;

 
●
expectations regarding capital expenditures; and

 
●
assumptions relating to our liquidity position, including our ability to obtain additional financing, if required.

Any or all of our forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and other factors including, among others:

 
●
the loss of key management personnel on whom the Company depends;

 
●
our ability to operate our business efficiently, manage capital expenditures and costs (including general and administrative expenses) and obtain financing if required.

 
●
our expectations with respect to our acquisition activity.

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


- 18 -



This discussion and analysis should be read in conjunction with the accompanying consolidated interim financial statements and related notes for the period ended June 30, 2017 as filed with the Securities and Exchange Commission and included in this Form 10-Q and the financial statements and management discussion and analysis for the period ended December 31, 2016.

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

As detailed in this 10-Q, the historic accounts are that of Zoompass Inc., a Company incorporated in June 2016.  As a result there is no comparative information for the three and six months ended June 30, 2016 as operating activity did not begin until the third quarter of 2016.
 
Nature of Operations

Zoompas Holdings, Inc. formerly known as UVIC. Inc. ("Zoompass Holdings," or the "Company") was incorporated under the laws of the State of Nevada on August 21, 2013.  Effective August 22, 2016, the Company entered into an Agreement for the Exchange of Stock (the "Agreement") with Zoompass, Inc., an Ontario, Canada corporation ("Zoompass").   Pursuant to the Agreement, the Company agreed to issue 8,050,784 shares of its restricted common stock to Zoompass' shareholders ("Zoompass' shareholders") in exchange for all the shares of Zoompass Inc. owned by the Zoompass Inc.'s Shareholders.  At the Closing Date, Rob Lee, a significant shareholder of the Company agreed to cancel 7,000,000 shares of the Company's common stock, which shares constituted the control shares of the Company.  Other than this one significant shareholder, shareholders of the Company held 2,670,000 shares. As a result of the Agreement, Zoompass is now a wholly owned subsidiary of the Company.  The Company has amended its Articles of Incorporation to change its name to Zoompass Holdings, Inc. and the appropriate forms were filed with FINRA and the SEC to change its name, address and symbol and complete a 3.5-1 forward split, which was consented to by the majority of shareholders on September 7, 2016 and approved in February 2017, for shareholders of record on September 7, 2016.

All share figures have been retroactively stated to reflect the stock split approved by shareholders, unless otherwise indicated.  Additionally, the Company's shareholders consented to an increase of the shares authorized to 500,000,000 and a revision of the par value to $0.0001.

As the former Zoompass shareholders ended up owning the majority of the Company, the transaction does not constitute a business combination and was deemed to be a recapitalization of the Company with Zoompass being the accounting acquirer, accordingly the accounting and disclosure information is that of Zoompass going forward.

Zoompass Inc., was incorporated under the laws of Ontario on June 8, 2016.  On June 28, 2016, pursuant to an agreement with a shareholder of Zoompass, certain net assets were acquired by Zoompass in exchange for shares of Zoompass (note 3).  The net assets primarily consisted of a virtual payment platform, certain customer contracts, cash held in trust and customer deposits as well as the associated client funds.
 
 

 

- 19 -




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

The Company expects the forgoing, or a combination thereof, to meet the Company's anticipated cash requirements for the next 12 months; however, these conditions raise substantial doubt about the Company's ability to continue as a going concern.

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

Significant Accounting Policies and Estimates

The discussion and analysis of the financial condition and results of operations are based upon the condensed consolidated interim financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. On an on-going basis management reviews our estimates and assumptions. The estimates were based on historical experience and other assumptions that management believes to be reasonable under the circumstances. Actual results are likely to differ from those estimates under different assumptions or conditions, but management does not believe such differences will materially affect our financial position or results of operations.

From the inception of Zoompass Inc. to June 30, 2017 the Company, inclusive of the results of Zoompass Holdings, Inc., from August 22, 2016, has generated net losses.  The Company may incur an additional operating loss for the three month period ended September 30, 2017, until such time that its additional pipeline of new revenue streams are launched.

Recent developments

The Company has launched its mobility products and solutions program consisting of new and certified customer pre-owned phones and tablets, branded accessories and endless aisle program availability.

In connection with the launch of the mobility products and solutions programs the Company entered into several agreements more fully described below.

AGREEMENT WITH SYNNEX
The Company has entered into to a sales agent agreement with SYNNEX Canada Limited.  ("SYNNEX Canada").  SYNNEX Canada Limited, is a wholly-owned subsidiary of SYNNEX Corporation a leading distributor of technology products to resellers and system builders across Canada. It is expected that the agreement will propel the existing mobility strategy within Synnex to increase their reach within North America through national retail and wholesale channels, as well as value added resellers. The agreement should benefit Zoompass by giving direct access to those channels for cross-selling opportunities. Through this partnership, Synnex will gain access to Zoompass' expertise and established relationships with original equipment manufacturers and mobile virtual network operations and other channels opportunities.
 
 
 

- 20 -




AGREEMENT WITH SKY
The Company has agreed to a marketing partnership with SKY Devices LLC ("SKY") to provide international brand exposure into expanding markets and key retailers. "SKY is a fast growing mobile manufacturer developing smartphones with premium quality modern designs and robust performance". This partnership is in line with our strategy of being a unique integrated fintech company by bridging mobility with a global mobile money platform.

AGREEMENT WITH U-VEND GROUP
Zoompass has entered into an agreement with U-Vend Group to fit U-Vend Group vending solutions with mobility products and provide North American brand exposure into key markets and retailers.  U-Vend Group owns and operates kiosks and has partnered with numerous national consumer product companies to deliver new and innovative customer retail experiences in automated "frictionless" settings.  The Company is well positioned to sell U-Vend Group solutions within Canada, USA and Mexico by leveraging its existing relationships and network within the national retailer, airport and mall channels. The offering will leverage a "Grab and Go" model where consumers can use their credit card in a vending machine to purchase mobility devices and products.

AGREEMENT WITH STARLINK GROUP LLC
The Company has agreed to a marketing partnership with Starlink Group LLC ("STARLINK") to provide international brand exposure into expanding markets and key retailers.  STARKLINK is a wholesale distributor qualified in marketing cellphones and electronic equipment offering a variety of models and brands.  This partnership is in line with Zoompass' strategy of being a unique integrated fintech company by bridging mobility with a global mobile money platform.

The Company has entered into a Lender Referral Agreement with a third party to provide financing allowing the Company to launch is virtual financing program.  Enabled by the Zoompass Mobile Money Platform, the program provides complete turnkey financing options for retail customers within locations across North America.

The program allows for real time credit approval and allows the Company to leverage its card products to provide greater credit to the consumer with residual approved funds issued through prepaid cards.

GIANT TIGER PROGRAM
The Company through its alliance with Home Trust, launched of an onsite credit program with retail chain Giant Tiger.  Giant Tiger was founded in 1961 and is Canadian owned and operated. The privately held, franchise based company, has over 200 stores in eight provinces, with many more opening, and employs over 7,000 team members. This program combines Zoompass' core competencies with its ability to facilitate the offering of credit facilities through its partners. The success of the launch hinged on the ability to offer "on-the-spot" quick credit approval for customers. This was accomplished utilizing Zoompass' mobile money platform in conjunction with Home Trust's credit and adjudication facilities. In total, consumers are on-boarded in under 5 minutes and are approved in under 20 seconds.

The Company launched its new reloadable prepaid card during December of 2016.  The Company shipped 15,000 prepaid cards to select retail locations in December 2016 and is currently in the process of delivering another 50,000 cards to retail locations.

ACQUISITION OF TRANSPORTATION ENABLEMENT PLATFORM
During the three months ended June 30, 2017, the Company entered into an agreement to acquire a transportation enablement platform (the "Platform") which provides fully automated dispatching and bookings management built for taxi companies, limousine companies and ride-sharing service providers. The Platform gives customers an app based experience while the acquired cloud-based Platform, provides service providers a range of functions which include customer booking, accounts management, driver tracking, real-time notifications, auto dispatching algorithms, accounting and settlements, corporate account management as well as providing reporting and analytics. The Platform has also shown to have a direct application in the B2B space in providing corporations with a more efficient taxi chit solution to combat fraud and excessive administration costs.

In exchange for the acquisition of the Platform from a private Canadian based company, the Company will be providing as consideration the equivalent of up to C$1,000,000 in the form of non-registered shares in the common stock of the Company, based on a share price of the lesser of US$3.00 per share, or the share price on closing. The equivalent of C$400,000 in shares is payable on closing with C$300,000 payable in shares on the first anniversary of the closing, subject to the satisfaction of certain milestones,, and an additional C$300,000 payable in shares on the second anniversary of the closing, subject to the satisfaction of certain milestones.

The transaction closed in the third quarter of 2017.
 


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Results of operations for the three and six months ended June 30, 2017

Revenue and cost of sales

The Company's revenue consists of various fees associated with its prepaid debit card program, sales from mobility devices as well as sales commissions from the sale of mobility devices.

  For the three months ended June 30, 2017, the Company generated gross card revenue of $199,984 and commissions and agent fees of $(31,227).  Additionally, the Company recognized commissions from the sale of mobility products of $7,101.  The Company recorded processing and card fees of $(236,103).  The decrease in revenue compared with the first quarter of 2017, is largely due to the a decrease in mobility sales as well as sales in the first quarter included one time set up fees for new programs that issued during the first quarter.
 
 For the six months ended June 30, 2017, the Company generated gross card revenue of $445,465 and commissions and agent fees of $(58,070).  Additionally, the Company recognized revenue from the sale of mobility products of $36,045.  The Company recorded processing and card fees of $(425,657) and cost of goods sold related to mobility products of $(27,470).

General and administrative and other expenses

The Company incurred salaries and full-time consultant expenses of $400,576 and $796,472 for the three and six months ended June 30, 2017, respectively.  Salaries and full-time consultant expenses were largely in-line with the three months ended March 31, 2017.

Rent and occupancy costs for the period ended June 30, 2017, was $48,374 compared with $35,203 for the period ended March 31, 2017.  Rent and occupancy costs were higher for the second quarter of 2017 compared with the first quarter due to certain enhanced security features the Company implemented at its corporate office.  Rent and occupancy costs for the six months ended June 30, 2017, was $83,577.

Share-based payment expense for the three months ended June 30, 2017, was $330,584, an increase from the three months ended March 31, 2017.  The increase was due to the issuance of warrants made during the second quarter.  For the period ended June, 2017, the Company incurred share-based payment expense of $422,532.  The share-based payment expense relates to certain options and deferred stock units that were granted in December, 2016 and vests over a period of 36 months from the date of grant as well as the warrants issued during the second quarter.

The Company recognized depreciation and amortization expense of $12,460 and $26,460 for the three and six months ended June 30, 2017, respectively.  Depreciation and amortization was largely in-line with the first quarter ended March 31, 2017.  As the Company, is currently enhancing the payment platform acquired to support its additional pipeline of revenue streams, costs incurred to enhance the platform are capitalized and are not being depreciated.

The Company incurred $109,705 in professional fees for the three months ended June 30, 2017, compared with, $38,532 for the three months ended March 31, 2017.  Professional fees were higher primarily due to additional legal costs associated with certain corporate matters, legal costs related to the acquisition of a transportation enablement platform and audit related to the period ended December 31, 2017.  During the six months ended June 30, 2017, professional fees amounted to $148,237.

Telecommunication expense is comprised of telephone and internet expenses.  Included in telecommunication expense is the costs related to regular and ongoing technological support.  For the period ended June 30, 2017, the Company incurred telecommunication expense of $3,483 for the three months ended June 30, 2017 and $6,474 for the six months ended June 30, 2017.

Office and sundry expense and other includes office expenses such as supplies, insurance and additional costs incurred to support the corporate head office in addition to travel costs.   For the three months June 30, 2017, the Company incurred $136,884 in these costs, up from the first quarter of 2017.  The increase was primarily attributed to travel costs. For the six months ended June 30, 2017, the Company incurred $211,265 in office and sundry expenses.

Included in filing fees and regulatory costs are costs associated with the Company's listing fees and transfer agent costs.  For the three months ended June 30, 2017, the Company incurred $13,612 in filing fees and regulatory costs, slightly higher than the $10,605 incurred for the three months ended March 31, 2017.  For the six months ended June 30, 2017, the Company incurred filing fees and regulatory costs of $24,217.

The Company recorded a foreign exchange gain of $26,639 for the three months June 30, 2017, and $13,685 for the six months ended June 30, 2017.  The gain was primarily attributed to the strengthening of the Canadian dollar relative to the US dollar.
 
The Company incurred $3,905 and $9,592 in bank fees during the three and six months ended June 30, 2017, respectively.
 
For the three months ended June 30, 2017, the Company incurred a net loss of $1,093,189 or $0.03 per share and $1,737,547 or $0.04 per share for the six months ended June 30, 2017.
 


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Liquidity and Capital Resources

As at June 30, 2017, the Company had a positive net working capital balance of $4,776 compared with $359,600 at December 31, 2016.  The decrease was primarily due to a use of cash for operating and investing activities during the period.

Operations for the period ended June 30, 2017, were primarily funded through cash balances at December 31, 2016, and the cash received from the issuances of shares of the Company's common stock as a result of the exercise of warrants and private placements.
 
Subject to the launch and ramp up of the additional pipeline of revenue streams, there is no certainty that we will be successful in generating sufficient cash flow from operations or achieving and maintaining profitable operations in the future to enable us to meet our obligations as they come due and consequently continue as a going concern. The Company may require additional funds to further develop our expanded business plan.  The Company may require additional financing this year to fund our operations and is examining possible sources of funding beyond the existing cash generated from operations.  Sales of additional equity securities would result in the dilution of the interests of existing stockholders. There can be no assurance that financing will be available when required. In the event that the necessary additional financing is not obtained, the Company would reduce its discretionary overhead costs substantially, or otherwise curtail operations.

The Company expects the forgoing, or a combination thereof, to meet our anticipated cash requirements for the next 12 months; however, these conditions raise substantial doubt about our ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on recoverability and reclassification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

Net Cash Used in Operating Activities

During the three months ended June 30, 2017, cash used in operations was $715,542 and $1,217,124 for the three months ended June 30, 2017.  This was primarily the result of the net loss incurred offset to some extent by changes in non-cash working capital of $61,242 and $85,296 for the three and six months ended June 30, 2017, respectively.

Net Cash Provided by Investing Activities

During the six months ended June 30, 2017, the Company invested $20,000 during the period related to its software platform.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was $735,317 for the three months ended June 30, 2017 as a result of several private placements which occurred during the second quarter.  Earlier in the year $194,198 was generated through the issuance of shares in the common stock of the Company as a result of the exercise of warrants.

Commitments

The Company is currently using leased office space under a contract which runs to October 31, 2020.  The amount due under this contract is as follows:
 
   
 
   
2017
 
$ 
69,709
 
2018
   
139,418
 
2019
   
139,418
 
2020
   
116,182
 
     
464,727
 

 
 
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Financial instruments and risk factors

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

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

Management forecasts cash flows for its current and subsequent fiscal years to predict future financing requirements.  Future requirements may be met through a combination of credit and access to capital markets.  The Company's cash requirements are dependent on the level of operating activity, a large portion of which is discretionary.  Should management decide to increase its operating activity, more funds than what is currently in place would be required.  It is not possible to predict whether financing efforts will be successful or sufficient in the future.   At June 30, 2017, the Company had $136,887 (December 31, 2016, $422,385), in cash and cash equivalents.

Additionally, the Company has commitments as detailed in note 10.

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

Credit risk:   Credit risk is the risk of loss associated with a counterparty's inability to fulfill its payment obligations. As at June 30, 2017 and December 31, 2016, the Company's credit risk is primarily attributable to cash and cash equivalents, cash held in trust and customer deposits, and accounts receivable. At June 30, 2017 and December 31, 2016, the Company's cash and cash equivalents, cash held in trust and customer deposits was held with reputable Canadian chartered banks.  At June 30, 2017, the Company had an allowance for doubtful accounts of $16,531 (December 31, 2016, - $16,396) as a result of a review of collectability of the amount outstanding and the duration of time it was outstanding.
Interest rate risk:   Interest rate risk is the risk borne by an interest-bearing asset or liability as a result of fluctuations in interest rates.  Financial assets and financial liabilities with variable interest rates expose the Company to cash flow interest rate risk.  The Company's does not have significant interest rate risk.

Fair values:  The carrying amounts reported in the consolidated balance sheet for cash and cash equivalents, cash held in trust and customer deposits, accounts receivables, accounts payable and client funds approximate fair value because of the short period of time between the origination of such instruments and their expected realization.
 
Additionally, the following has been updated from the risks factors disclosed in the Company's 10-K filing for the year ended December 31, 2016.

Securities class action litigation is often instituted against companies following periods of volatility in their stock price. Should this type of litigation be instituted against us, it could result in substantial costs to us and divert our management's attention and resources.
 
Moreover, securities markets may from time to time experience significant price and volume fluctuations for reasons unrelated to the operating performance of particular companies. These market fluctuations may adversely affect the price of our common stock and other interests in our Company at a time when you want to sell your interest in our common stock.
 
 
 
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Related Party Transactions

During 2016, the Company paid an advance on behalf of certain shareholders in the amount of $250,000.  These shareholders also serve as directors and officers of the Company.  $120,000 was returned by December 31, 2016, and $50,000 was returned during the period ended June 30, 2017.  The $80,000 is reflected in prepaids and other current assets as at June 30, 2017 (December 31, 2016 - $130,000).

The total amount owing to the same shareholders, in relation to the services they provide to the Company in their capacity as Officers at June 30, 2017 was $248,488 (December 31, 2016 - $186,818) which includes expense reimbursements.  This amount is reflected in accounts payable and is further described below. 

As at June 30, 2017, the Company had an amount owing to an entity owned and controlled by the Chief Executive Officer of the Company of $194,052 (December 31, 2016 - $127,073).  The amount owing relates to services provided by the Chief Executive Officer and expense reimbursements.

As at June 30, 2017, the Company had an amount owing to an entity owned and controlled by the Secretary of the Company of $54,436 (December 31, 2016 - $59,745).  The amount owing relates to services provided by the Secretary and expense reimbursements.

As at June 30, 2017, the Company had an amount owing to the President of the Company of $10,530 (December 31, 2016 - $28,092) for salary. 

As at June 30, 2017, the Company had an amount owing to an entity owned and controlled by the Chief Financial Officer of the Company of $5,394 (December 31, 2016 - $31,653).  The amount owing relates to services provided by the Chief Financial Officer.

A total of $94,962 and $173,377 was recognized during the three and six month period ended June 30, 2017, respectively, for share-based payments expense to directors and officers of the Company.

As at June 30, 2017 and December 31, 2016, the amounts owing to officers of the Company are recorded in accounts payable and accrued liabilities.
 
Newly Adopted and  Recently Issued Accounting Pronouncements

Newly Adopted Accounting Standards
In August 2014, the FASB issued a new financial accounting standard on going concern, ASU No. 2014-15, "Presentation of Financial Statements – Going Concern (Sub-Topic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern." The standard provides guidance about management's responsibility to evaluate whether there is a substantial doubt about the organization's ability to continue as a going concern. The amendments in this Update apply to all companies. They become effective in the annual period ending after December 15, 2016, with early application permitted. There was no impact on the unaudited interim condensed consolidated balance sheets or the unaudited interim condensed consolidated statements of operations and comprehensive loss from the adoption of this standard.

Recently issued accounting pronouncements
In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)". The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. The accounting standard is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2017. Early adoption is not permitted. The impact on the unaudited interim condensed consolidated financial statements of adopting ASU 2014-09 will be assessed by management.

In August 2014, the FASB issued a new financial accounting standard on going concern, ASU No. 2014-15, "Presentation of Financial Statements – Going Concern (Sub-Topic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern." The standard provides guidance about management's responsibility to evaluate whether there is a substantial doubt about the organization's ability to continue as a going concern. The amendments in this Update apply to all companies. They become effective in the annual period ending after December 15, 2016, with early application permitted. There was no impact on the unaudited interim condensed consolidated balance sheets or the unaudited interim condensed consolidated statements of operations and comprehensive loss from this standard.
 
 
 
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In November 2015, the FASB issued ASU No. 2015-17, "Balance Sheet Classification of Deferred Taxes," which requires that deferred tax liabilities and assets be classified on our Consolidated Balance Sheets as noncurrent based on an analysis of each taxpaying component within a jurisdiction. ASU No. 2015-17 is effective for the fiscal year commencing after December 15, 2017. The Company does not anticipate that the adoption of ASU No. 2015-17 will have a material effect on the consolidated balance sheet or the consolidated results of operations.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 740): Recognition and Measurement of Financial Assets and Financial Liabilities. This ASU is effective for annual and interim reporting periods beginning after December 15, 2017. ASU 2016-01 enhances the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The Company is currently assessing the impact of ASU 2016-01.

 In February 2016, the FASB issued ASU 2016-02, Leases. This update requires organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The new guidance will also require additional disclosure about the amount, timing and uncertainty of cash flows arising from leases. The provisions of this update are effective for annual and interim periods beginning after December 15, 2018. The Company is still assessing the impact that the adoption of ASU 2016-02 will have on the consolidated balance sheet and the consolidated results of operations.

Off Balance Sheet Arrangements

The Company has no off-balance sheet transactions.
 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company" (as defined by §229.10(f)(1)), the Company is not required to provide the information required by this Item.
 
 
ITEM 4. CONTROLS AND PROCEDURES

During the period ended June 30, 2017, there were no changes in our internal controls over financial reporting (as defined in Rule 13a- 15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Evaluation of Disclosure Controls and Procedures

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

As of the end of the period covered by this Quarterly Report, the Company carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(b) and 15d-15(b). Based upon this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures as of the end of the period covered by this Quarterly Report were ineffective due to a lack of segregation of duties,  due to limited administrative and financial personnel and related resources and as only one of our directors is independent .
 
 
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PART II – OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS

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

During the three and six months ended June 30, 2017, the Company learned that a class action complaint had been filed against the Company, its Chief Executive Officer and its Chief Financial Officer in the United States District Court for the District of New Jersey.  The complaint alleges, inter alia, that defendants violated the federal securities laws by, among other things, failing to disclose that the Company was engaged in an unlawful scheme to promote its stock.  Neither the Company nor the other defendants have yet been served with the complaint.  The Company has analyzed the complaint and, based on that analysis, has concluded that the complaint is legally deficient and otherwise without merit.  The Company intends to vigorously defend against these claims if the complaints are served upon it.
 

ITEM 1A. RISK FACTORS

The Company, as a "smaller reporting company" (as defined by §229.10(f)(1)), is not required to provide the information required by this Item.
 
 
ITEM 2.  RECENT UNREGISTERED SALES OF EQUITY SECURITIES

During March 2017 the Company issued 520,211 shares in the common stock of the Company through the exercise of warrants.

During the second quarter of 2017, the Company issued 654,130 shares in the common stock of the Company through the completion of several private placements for proceeds of $735,317.

During August 2017, the Company issued 18,332 shares in the common stock of the Company through the exercise of warrants.

During July and August of 2017, the Company issued 1,266,044 shares in the Common stock of the Company through the completion of several private placements for proceeds of $307,591.

Subsequent to June 30, 2017, 462,802 shares in the common stock of the Company were issued in connection with the acquisition of the taxi deployment platform.

 
ITEM 3. EXHIBITS

Exhibit No.
 
Description
     
31.1
 
31.2
 
32.1
 
32.2
 
101.INS
 
 XBRL Instance Document
101.SCH
 
 XBRL Taxonomy Extension Schema Document
101.CAL
 
 XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
 
 XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
 
 XBRL Taxonomy Extension Label Linkbase Document
101.PRE
 
 XBRL Taxonomy Extension Presentation Linkbase Document




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SIGNATURES

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



 
Zoompass Holdings, Inc.,
 
 
August 21, 2017
/s/ Rob Lee
 
Rob Lee
Chief Executive Officer
(Principal Executive Officer) 










 
 
 
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