Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)

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 Delaware corporation unless the context requires otherwise.

Overview

We are a fintech provider of digital payment solutions presently focused on, through its participation in IPSIPay Express, developing a new account-to-account payment application called Instant Direct Payments (which we call IPEX) as well as traditional credit card processing services. 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

IPSIPay Express

While we believe the IPSIPay Express opportunity has great promise, as of the date of this report, IPEX has not been launched and we have derived no revenue or cash distributions from IPSIPay Express. We expect that revenue will be generated by IPSIPay Express through fees derived from merchant processing fees, money transfer fees, and commissions on international bill payment processing. To date, our activities related to IPSIPay Express have included the following:

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Securing Banking Relationships. To engage in traditional credit card processing or the proposed IPEX account-to-account payment solution, it is necessary to work with qualified banking institutions through which transactions are processed. As of the date of this Report, such relationships are not in place.

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Assisting with Payment Logistics. We have been working with our IPSIPay Express joint venture partners to establish the systems and technology necessary to effectuate payments through IPEX. As of the date of this Report, the establishment of such systems and technology is still ongoing, which is the primary reason why IPEX has not been commercially launched to date.

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Securing Customers. Our management has also been working to secure potential customers for IPEX. These customers would include gaming and entertainment businesses.

No assurances can be given that IPSIPay Express will be successfully launched or will generate revenues or otherwise have a positive impact on our results of operations. We believe IPSIPay Express could be commercially launched and generate initial revenues during the current fiscal year, but no assurances can be provided that this will be achieved or that (i) we will be able to raise funds satisfactory to fulfill all of our capital contributions to IPSIPay Express or (ii) that we will ever receive distributions of free cash flow from IPSIPay Express. Moreover, the IPSIPay Express product offering will be targeting so-called "high risk" sectors such as online gaming and entertainment, which also carries certain risks.

Inflation

Macro-economic conditions could affect consumer spending adversely and consequently our future operations when we fully launch our e-wallet products commercially. The U.S. has entered a period of significant 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 due to recent inflationary concerns in the U.S.

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.

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 Financial Statements included in Part I, Item I of this Form 10-Q for further information.

The critical accounting policies that involved significant estimation included the following:

Derivative liabilities

We have certain short-term convertible debt and certain warrants which have fundamental transaction clauses which might result in cash settlement. The conversion feature of these convertible notes and warrants are recorded as derivative liabilities which are valued at each reporting date.

The derivative liability is valued using the following inputs:

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Conversion prices;

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Current market prices of our equity

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Risk free interest rates;

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Expected remaining life of the derivative liability;

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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.

Results of Operations

Results of Operations for the Three Months Ended June 30, 2025 and 2024

Net revenue

We had no revenues for the three months ended June 30, 2025 and 2024. We pivoted to focus our attention on the IPSIPay Express joint venture and potential payment processing opportunities to generate revenues, however there can be no guarantees that we will be successful in our endeavors.

Cost of goods sold

We had no cost of goods sold for the three months ended June 30, 2025 and 2024.

General and administrative expenses

General and administrative expenses were $170,638 and $407,132 for the three months ended June 30, 2025 and 2024, respectively, a decrease of $236,494 or 58.1%. The decrease is primarily due to the following:

	i)	Salaries and wages were $73,119 and $204,990 for the three months ended June 30, 2025 and 2024, respectively, a decrease of $131,871 or 64.3%. The decrease is primarily due to the resignation of our CFO during the previous quarter, resulting in a saving of $49,500, a reduction in stock based compensation expense of $93,093 related to the amortization of stock options issued in the prior year, the reduction in administrative salaries by $20,500 offset by an increase in our CEO's salary by $30,000 due to increased responsibilities assumed on the resignation of our CFO.
	ii)	Research and developments costs was $32,000 and $0 for the three months ended June 30, 2025 and 2024, respectively, an increase of $32,000 or 100.0%. The increase was due to a cost incurred on developing a new revenue source during the current period.

	iii)	Consulting fees was $21,695 and $17,000 for the three months ended June 30, 2025 and 2024, respectively, an increase of $4,695 or 27.6%. The increase is primarily due to additional administrative functions assumed by consultants.
	iv)	Audit fees were $14,000 and $12,500 for the three months ended June 30, 2025 and 2024, a decrease of $1,500 or 12.0%. The increase represents an increase in our quarterly review fees.
	v)	Professional fees were $10,804 and $14,276 for the three months ended June 30, 2025 and 2024, respectively, a decrease of $3,472 or 24.3%. The decrease is primarily due to a reduction in soliciting agents fees incurred in the prior year.
	vi)	Legal fees were $4,000 and $66,069 for the three months ended June 30, 2025 and 2024, respectively, a decrease of $62,069 or 93.9%. The decrease is primarily due to the settlement of the unfair dismissal matters which were claimed in the prior year by several individuals.
	vii)	Selling and marketing expenses was $0 and $73,167 for the three months ended June 30, 2025 and 2024, respectively, a decrease of $73,167 or 100.0%. Selling and marketing costs related to an endorsement deal with a celebrity ceased during the prior year.
	viii)	The balance of the general and administrative expenses was $15,020 and $19,130 for the three months ended June 30, 2025 and 2024, respectively, a decrease of $4,110 or 21.5%. The decrease is made up of several individually insignificant items.

Depreciation and amortization

Depreciation was $542 and $542 for the three months ended June 30, 2025 and 2024. Depreciation is on small office related equipment.

Loss on settlement and repricing of convertible notes

Loss on convertible debt was $15,199,321 and $36,305 for the three months ended June 30, 2025 and 2024, respectively, an increase of $15,163,016 or 41,765.6%. The loss on convertible debt during the current 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 current market price during the current period. In the prior period, the loss on convertible debt related to the extension warrants issued to certain noteholders to extend the maturity date of their notes by 6 months, the value of the warrants was determined to be a debt extinguishment and were therefore expensed.

Fair value adjustment to price protected warrants

Fair value on price protected warrants was $6,631,924 and $0 for the three months ended June 30, 2025 and 2024, respectively. During the current 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 $0.001105 to $0.0005. This resulted in a Black -Scholes derived valuation difference related to those certain warrants.

Loss on disposal of assets

Loss on disposal of assets was $0 and $2,600 for the three months ended June 30, 2025 and 2024, respectively. The loss on disposal of assets relates to costs incurred on disposing of our kiosks in the prior year.

Interest expense

Interest expense was $227,806 and $146,176 for the three months ended June 30, 2025 and 2024, respectively, an increase of $81,630 or 55.8%. The increase is primarily related to the contractual increase in the interest rates on several matured notes which are currently in forbearance and additional notes issued during the current period.

Interest income

Interest income was $13,193 and $7,997 for the three months ended June 30, 2025 and 2024, respectively, an increase of $5,196 or 65.0%. The interest income relates to funds advanced to Business Warrior prior to the cessation of our merger plans with them, we increased our investment in Business Warrior over the second half of the prior year.

Amortization of debt discount

Amortization of debt discount was $60,434 and $320,346 for the three months ended June 30, 2025 and 2024, respectively, a decrease of $259,912 or 81.1%. The decrease is primarily due to the full amortization of debt discount on convertible debt in the prior year. The current period funding and debt discount, and consequent amortization thereof, .is significantly lower than the prior period.

Derivative liability movements

Derivative liability movements were $1,706,229 and $107,547 for the three months ended June 30, 2025 and 2024, respectively, a net movement of $1,598,682 or 1,486.5%. The derivative liability arose primarily due to the revaluation of certain repriced conversion features on convertible debt and the reset of the exercise price and full ratchet reset of certain warrants during the current period, and the subsequent mark-to-market of these derivatives due to a declining stock price.

Net loss from equity method investment

Net loss from equity method investment was $0 and $88 for the three months ended June 30, 2025 and 2024, respectively, a decrease of $88 or 100.0%. No further expense is being incurred on the Joint Venture, in the prior period expenses were minimal and administrative in nature.

Deemed dividend

Deemed dividend was $1,430,065 and $0 for the three months ended June 30, 2025 and 2024, respectively, an increase of $1,430,065 or 100.0%. the deemed dividend in the current period related to a full rachet anti-dilution adjustment to certain fixed exercise price warrants issued to convertible note holders during the current year. The deemed dividend was recorded as a component of additional paid in capital.

Net loss attributable to common stockholders

Net loss was $22,001,308 and $797,645 for the three months ended June 30, 2025 and 2024, respectively, an increase of $21,203,663 or 2,658.3%. The increase is primarily due to the increase in the loss on convertible debt, the increase in the fair value adjustment to price protected securities and the deemed dividend expense, offset by the decrease in general and administrative expenses and the increase in derivative liability movement, discussed in detail above.

Results of Operations for the Six Months Ended June 30, 2025 and June 30, 2024

Net revenue

We had no revenues for the three months ended June 30, 2025 and 2024. We pivoted to focus our attention on the IPSIPay Express joint venture and potential payment processing opportunities to generate revenues, however there can be no guarantees that we will be successful in our endeavors.

Cost of goods sold

We had no cost of goods sold for the three months ended June 30, 2025 and 2024.

General and administrative expenses

General and administrative expenses were $424,944 and $1,033,929 for the six months ended June 30, 2025 and 2024, respectively, a decrease of $608,985 or 58.9%. The decrease is primarily due to the following:

	i)	Salaries and wages were $184,667 and $473,993 for the six months ended June 30, 2025 and 2024, respectively, a decrease of $289,326 or 61.0%. The decrease is primarily due to the resignation of our CFO, resulting in a saving of $94,500, the resignation of our administrative personnel resulting in a saving of $20,500, a reduction in stock based compensation of $169,742 due to the full amortization of options in the prior period.
	ii)	Audit fees were $109,500 and $92,500 for the six months ended June 30, 2025 and 2024, an increase of $17,000 or 18.4%, primarily due to the timing of invoices received for services provided by our external auditors.
	iii)	Consulting fees was $38,696 and $32,000 for the six months ended June 30, 2025 and 2024, respectively, an increase of $6,696 or 20.9%. The increase is primarily related to certain administrative functions assumed by consultants during the current period.
	iv)	Research and developments costs was $32,000 and $0 for the six months ended June 30, 2025 and 2024, respectively, an increase of $32,000 or 100.0%. The increase was due to a cost incurred on developing a new revenue source during the current period.

	v)	Professional fees were $18,985 and $23,834 for the six months ended June 30, 2025 and 2024, respectively, a decrease of $4,849 or 20.3%. The decrease is primarily due to a reduction in solicitation fees incurred in the prior year.
	vi)	Legal fees were $7,805 and $218,664 for the six months ended June 30, 2025 and 2024, respectively, a decrease of $210,859 or 96.4%. The decrease is primarily due to the prior year legal fees related to unfair dismissal matters which were claimed in the prior year by several individuals.
	vii)	Selling and marketing expenses were $0 and $148,874 for the six months ended June 30, 2025 and 2024, respectively, a decrease of $148,874 or 100.0%. Selling and marketing costs related to an endorsement deal with a celebrity ceased during the prior year.
	viii)	The balance of the general and administrative expenses was $33,291 and $44,064 for the six months ended June 30, 2025 and 2024, respectively, a decrease of $10,773 or 24.4%. The decrease is made up of several individually insignificant items.

Depreciation

Depreciation was $1,084 and $1,084 for the six months ended June 30, 2025 and 2024, respectively. Depreciation is on small office related equipment.

Loss on settlement and repricing of convertible notes

Loss on convertible debt was $17,686,534 and $102,352 for the six months ended June 30, 2025 and 2024, respectively, an increase of $17,584,182 or 17,180.1%. The loss on convertible debt during the current 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 current period. In the prior period, the loss on convertible debt related to the extension warrants issued to certain noteholders to extend the maturity date of their notes by 6 months, the value of the warrants was determined to be a debt extinguishment and were therefore expensed.

Fair value adjustment to price protected warrants

Fair value on price protected warrants was $8,250,469 and $0 for the six months ended June 30, 2025 and 2024, respectively. During the current 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.

Loss on disposal of assets

Loss on disposal of assets was $0 and $2,600 for the six months ended June 30, 2025 and 2024, respectively. The loss on disposal of assets relates to costs incurred on disposing of our kiosks in the prior year.

Interest expense

Interest expense was $440,549 and $283,095 for the six months ended June 30, 2025 and 2024, respectively, an increase of $157,454 or 55.6%. The increase is primarily related to the contractual increase in the interest rates on several matured notes which are currently in forbearance and additional notes issued during the current period.

Interest income

Interest income was $25,799 and $11,279 for the six months ended June 30, 2025 and 2024, respectively, an increase of $14,520 or 128.7%. The interest income relates to funds advanced to Business Warrior prior to the cessation of our merger plans with them, we increased our investment in Business Warrior over the second half of the prior year.

Amortization of debt discount

Amortization of debt discount was $178,491 and $640,245 for the six months ended June 30, 2025 and 2024, respectively, a decrease of $461,754 or 72.1%. The decrease is primarily due to the full amortization of debt discount on convertible debt in the prior year. The current period funding and debt discount, and consequent amortization thereof, .is significantly lower than the prior period.

Derivative liability movements

Derivative liability movements were $2,635,208 and $923,488 for the six months ended June 30, 2025 and 2024, respectively, an increase of $1,711,720 or 185.4%. The derivative liability arose primarily due to the revaluation of certain repriced conversion features on convertible debt and the reset of the exercise price and full ratchet reset of certain warrants during the current period, and the subsequent mark-to-market of these derivatives due to a declining stock price.

Net loss from equity method investment

Net loss from equity method investment was $0 and $572 for the six months ended June 30, 2025 and 2024, respectively, a decrease of $572 or 100.0%. No further expense is being incurred on the Joint Venture, in the prior period expenses were minimal and administrative in nature.

Deemed dividend

Deemed dividend was $1,780,429 and $0 for the six months ended June 30, 2025 and 2024, respectively, an increase of $1,7890,429 or 100.0%. the deemed dividend in the current period related to a full rachet anti-dilution adjustment to certain fixed exercise price warrants issued to convertible note holders during the current year. The deemed dividend was recorded as a component of additional paid in capital.

Net loss attributable to common stockholders

Net loss was $26,101,493 and $1,129,110 for the six months ended June 30, 2025 and 2024, respectively, an increase of $24,972,383 or 2,211.7%. The increase is primarily due to the increase in the loss on convertible debt, the increase in the fair value adjustment to price protected securities and the deemed dividend expense, offset by the decrease in general and administrative expenses and the increase in derivative liability movement, 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 $88.9 million through June 30, 2025 and incurred negative cash flow from operations of $0.4 million for the six months ended June 30, 2025. Our primary focus is on developing and marketing a proprietary consumer to merchant real-time payment platform initially focused on the fast-growing online gaming and entertainment sectors to generate revenues. No assurances can be given, however, that such revenue generation will commence or be meaningful to us.

At June 30, 2025, we had cash of $20,214 and working capital deficit of $33.5 million, including a derivative liability of $23.7 million. After eliminating the derivative liability our working capital deficit is $9.8 million.

We used cash of $0.4 million and $0.4 million in operations for the six months ended June 30, 2025 and 2024, respectively. We have reduced our expenditure substantially while we actively seek other revenue generating opportunities

We had no investing activities during the current period. In the prior period we had invested $0.2 million in Business Warrior while we were still pursuing merger discussions with them.

We generated cash of $0.4 million from convertible debt during the current period. In the prior period we generated $0.8 million of notes payable and convertible debt. and repaid $0.1 million of convertible debt.

At June 30, 2025, we had outstanding convertible debt, including interest thereon of $5.6 million, net of unamortized debt discount of $0.1 million and outstanding notes payable, including interest thereon of $1.9 million, net of unamortized debt discount of $0.01 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 $0.005 per share (as adjusted for stock splits, stock combinations, dilutive issuances and similar events), to fixed conversion prices of $0.345. 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 with IPSIPay Express. 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.

Capital Expenditures

Our capital expenditure is dependent on our cash resources, currently we are not forecasting any additional capital expenditure for the 2025 fiscal year.