Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
As previously reported by Innovative Payment Solutions, Inc. (the "Company"),
the Company entered into separate Securities Purchase Agreements, each dated
February 16, 2021 (the "SPAs"), with each of Cavalry Fund I LP ("Cavalry") and
Mercer Street Global Opportunity Fund, LLC ("Mercer"), pursuant to which the
Company received $500,500 and $500,500 from Cavalry and Mercer, respectively, in
exchange for the issuance of: (i) Original Issue Discount 12.5% Convertible
Notes (the "Notes" and each a "Note") in the principal amount of $572,000 to
each of Cavalry and Mercer; and (ii) five-year warrants (the "Original
Warrants") issued to each of Cavalry and Mercer to purchase 2,486,957 shares of
the Company's common stock (the "Common Stock") at an exercise price of $0.24
per share.
The Company has twice extended its indebtedness to each Cavalry and Mercer. On
February 3, 2022, the Company agreed to extend the agreement's maturity date to
August 16, 2022. Additionally, on August 30, 2022, the Company entered an
agreement for an additional extension to November 16, 2022. In consideration for
the second extension the Company agreed to (i) increase the principal amount
outstanding and due to Cavalry and Mercer under their respective Notes by twenty
percent (20%) and (ii) issue to each of Cavalry and Mercer a new five-year
warrant (each, an "Extension Warrant") to purchase an additional 3,000,000
shares of Company common stock at an exercise price of $0.15 per share. The
Extension Warrant contains the same terms and provisions in all material
respects as the Original Warrants, except for difference in exercise price.
On December 30, 2022, the Company further extended the maturity date of the
Notes for each of Cavalry and Mercer to December 30, 2023. Each of Cavalry and
Mercer entered into separate Note Amendment Letter Agreements with the Company
(the "Note Amendment") pursuant to which the parties agreed to the following:
(1) The conversion price of the Notes was reduced from $0.15 to $0.0115 per
share (such reduced conversion price being the current conversion price of the
Notes give the passage of the maturity date of the Notes). As a result of this
change in conversion price, under the existing terms of the Notes, the 3,000,000
shares of Common Stock underlying the Extension Warrants was increased to
39,130,435 shares of Common Stock and the exercise price of the Extension
Warrants was reduced to $0.0115 per share.
(2) The Original Warrants issued on February 16, 2021 were irrevocably exchanged
for 12-month non-convertible promissory notes issued to each of Cavalry and
Mercer in the amount of $482,000 each (the "Exchange Notes"). This exchange
caused the cancellation of the Original Warrants for all purposes. The Exchange
Notes have a maturity date of December 30, 2023 and carry an interest rate of
ten percent (10%). The Company shall have the right, but not the obligation, in
lieu of a cash payment upon maturity of the Exchange Notes, to issue 51,901,711
shares of the Common Stock, as adjusted for any stock splits, dividends or other
similar corporate events, in full satisfaction of its obligations under each of
the Notes (or any pro rata portion of such number of shares in partial
satisfaction of such obligations). The Company shall be under no legal
obligation to reserve such number of shares for future issuance.
(3) Each of Cavalry and Mercer agreed (i) not to convert all or any portion of
the Notes until after March 30, 2023 and (ii) waive any events of default under
the Notes and the SPA.
(4) Certain other warrants held by Cavalry and Mercer which contain a mandatory
exercise provision allowing the Company to force exercise of such warrants if
the price of the Common Stock is $0.06 per share or above were amended to reduce
such forced exercise price to $0.04 per share.
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(5) The Company is obligated to register the shares of Common Stock underlying
the Notes and the shares underlying all warrants held by Cavalry and Mercer for
resale with the Securities and Exchange Commission (the "SEC"), with the
associated registration statement to be filed by January 14, 2023 and be
declared effective by January 29, 2023 (if such registration statement is not
reviewed by the SEC) or March 30, 2023 (if such registration statement is
partially or fully reviewed by the SEC).
The parties also acknowledged that the principal and accrued interest under the
Notes as of December 28, 2022 is equal to an aggregate of $2,264,784, or
$1,132,392 for each of Cavalry and Mercer. In addition, as a result of the
reduction in the conversion price of the Note, certain other warrants held by
third parties will have the exercise price of such warrants reduced to $0.0115
per share.
The Exchange Notes in favor of Cavalry and Mercer are filed as Exhibits 4.1 and
4.2 to this Current Report, respectively. The Note Amendments between the
Company and each of Cavalry and Mercer are filed as Exhibits 10.1 and 10.2 to
this Current Report, respectively. The foregoing description of the terms and
provisions of the Exchange Notes and the Note Amendments is a summary only, does
not purport to be complete, and is qualified in its entirety by reference to the
full text of such documents, which text is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits
The following exhibits are filed as part of this Current Report:
Exhibit No. Exhibits
4.1 Promissory Note (Warrant Exchange), dated December 30, 2022, by the
Company in favor of Cavalry Fund I LP.
4.2 Promissory Note (Warrant Exchange) for Mercer Street Global
Opportunity Fund, LLC.
10.1 Note Amendment, dated December 30, 2022, between the Company and
Cavalry Fund I LP.
10.2 Note Amendment, dated December 30, 2022, between the Company and
Mercer Street Global Opportunity Fund, L.L.C.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
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INNOVATIVE PAYMENT SOLUTIONS, INC. 
