RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

6 Months Ended

Jun. 30, 2016

Accounting Changes and Error Corrections [Abstract]

RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

3 RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

Revenues, Cost of Goods Sold and Gross Profit

The Company has restated its consolidated financial statements as of June 30, 2016 and December 31, 2015 and for the three months and six months ended June 30, 2016 and 2015. As a part of the Company’s analysis of its books and records, the Company management had discovered a discrepancy in the recording of revenue in its Mexican operations that had resulted in an overstatement of revenue, a corresponding overstatement of cost of goods sold and a net understatement of the gross profit in the Company’s financial statements.

The Company has the following sources of revenue:

• Revenue from the sale of services.

Prepaid services are acquired from providers and is sold to end users through kiosks that the Company owns or kiosks owned by third parties. The Company recognizes the revenue on the sale of these services when the end-user deposits funds into the terminal and the prepaid service is delivered to the end-user. The revenue is recognized at the gross value, including margin of the prepaid service to the company, net of value added tax and the full value of the service acquired as cost of goods sold.

An error in recording this revenue, in the Company’s Mexican operations, resulted in the cost of goods sold recorded as equal to revenues recorded. The gross profit on these revenue transactions whereby the risks and rewards of ownership had passed to end-users remained on its balance sheet in prepayments it had made to its service providers. This error has been corrected by the reduction in the Company’s cost of goods sold expenditure, with a corresponding increase in the gross profit earned and the restatement of Mexican Value Added Taxation related to these entries.

Certain expenses directly related to cost of goods sold were previously reflected as Other Expense have been correctly reclassified as cost of goods sold in the restated financial statements.

• Revenue in the form of payment processing fees.

The company provides a secure means for end-users to pay for certain services, such as utilities through our kiosks.

This revenue was previously recorded at gross value, the full value of the transaction was recorded as revenue and the full value of the service provided to the Company’s end users was recognized as cost of goods sold. The value-added taxation on both the revenue and cost of goods sold was recorded as due to and due from, the Mexican revenue authorities, respectively. The Restated financial statements reversed the difference between the gross revenue recorded and the payment processing fee actually earned and the cost of goods sold entries recorded were reversed. The value-added taxation recorded has been restated and the Company has brought this restatement to the attention of the Mexican revenue authorities and are in the process of correcting our tax returns.

• Revenue from the sale of kiosks.

The company imports and sells kiosks. to customers and distributors, who then make use of its technology to provide services to end-users whereby prepaid services can be acquired and other transactions can be performed utilizing the convenience of its kiosks and payment gateway. The company recognizes the full value of the revenue on the sale of these kiosks and the full value of the cost of the kiosks sold. These transactions were correctly recorded and no restatement was necessary.

Organization – Reverse Merger

The reverse merger transaction and the shares retained by the existing shareholders in Asiya Pearls, Inc. (now known as QPAGOS) were originally pushed back to the earliest period presented, this has been restated to reflect the reverse merger transaction as of the date of the reverse merger, May 12, 2016, whereby the shares retained by the existing shareholders of Asiya Pearls, Inc. were recorded as a share issuance on the effective date of the reverse merger, May 12, 2016.

The balance sheet has been restated to eliminate the effects of pushing back the reverse merger transaction to the opening balance of the earliest period presented.

The restated Consolidated Balance Sheet as of June 30, 2016 and December 31, 2015 and the related Consolidated Statements of Operations for the three and six months ended June 30, 2016 and 2015 and Cash Flows for the six months ended June 30, 2016 and 2015, are presented below:

QPAGOS

CONDENSED CONSOLIDATED BALANCE SHEET

June 30, 2016

	As
	Previously							As
	Reported			Adjustments			Notes	Restated
	(Unaudited)							(Unaudited)
Assets
Current Assets
Cash	$	135,060						$	135,060
Accounts receivable		387,667							387,667
Inventory		508,441							508,441
Recoverable IVA taxes and credits		286,282			55,802		(A), (B)		342,084
Other current assets		1,667			23,078		(B)		24,745
Total Current Assets		1,319,117			78,880				1,397,997
Non-Current Assets
Plant and equipment, net		53,800							53,800
Intangibles, net		189,917							189,917
Investment		3,000							3,000
Other assets		12,131							12,131
Total Non-Current Assets		258,848			-				258,848
Total Assets	$	1,577,965		$	78,880			$	1,656,845
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable	$	142,185						$	142,185
Notes payable		109,307							109,307
IVA and other taxes payable		23,727			64,468		(A), (B)		88,195
Advances from customers		110,468			(40,126	)			70,342
Total Current Liabilities		385,687			24,342				410,029
Total Liabilities		385,687			24,342				410,029
Stockholders' Equity
Common stock, $0.0001 par value; 100,000,000 shares authorized, 55,254,000 shares issued and outstanding as of June 30, 2016.		5,526							5,526
Additional paid-in-capital		8,134,541							8,134,541
Accumulated deficit		(7,463,276	)		57,861				(7,405,415	)
Accumulated other comprehensive income		515,487			(3,323	)	(C)		512,164
Total stockholder's equity - controlling interest		1,192,278			54,538				1,246,816
Non-controlling interest		-			-				-
Total Stockholders' Equity		1,192,278			54,538				1,246,816
Total Liabilities and Stockholders' Equity	$	1,577,965		$	78,880			$	1,656,845

QPAGOS
CONSOLIDATED BALANCE SHEET
December 31, 2015
	As
	Previously							As
	Reported			Adjustments			Notes	Restated
Assets
Current Assets
Cash	$	833,612			(1,453	)	(D)	$	832,159
Accounts receivable		242,075							242,075
Inventory		668,567							668,567
Recoverable IVA taxes and credits		412,143			5,754		(A), (B)		417,897
Other current assets		20,509			31,505		(B)		52,014
Total Current Assets		2,176,906			35,806				2,212,712
Non-Current Assets
Plant and equipment, net		70,537							70,537
Intangibles, net		211,417							211,417
Other assets		11,712							11,712
Total Non-Current Assets		293,666			-				293,666
Total Assets	$	2,470,572		$	35,806			$	2,506,378
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable	$	41,372			(3,000	)	(D)	$	38,372
Notes payable		103,320							103,320
IVA and other taxes payable		181,946			10,098		(A), (B)		192,044
Advances from customers		1,986							1,986
Total Current Liabilities		328,624			7,098				335,722
Total Liabilities		328,624			7,098				335,722
Stockholders' Equity
Common stock, $0.001 par value; 100,000,000 shares authorized, 44,784,000 shares issued and outstanding as of December 31, 2015.		4,981			(503	)	(D)		4,478
Additional paid-in-capital		5,733,811			2,050		(D)		5,735,861
Accumulated deficit		(4,019,428	)		29,739				(3,989,689	)
Accumulated other comprehensive income		422,584			(2,578	)	(C)		420,006
Total stockholder's equity - controlling interest		2,141,948			28,708				2,170,656
Non-controlling interest		-			-				-
Total Stockholders' Equity		2,141,948			28,708				2,170,656
Total Liabilities and Stockholders' Equity	$	2,470,572		$	35,806			$	2,506,378

QPAGOS
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Three Months Ended June 30, 2016
	As
	Previously							As
	Reported			Adjustments			Notes	Restated
Revenues
Sales of services	$	914,358		$	(319,041	)	(A)	$	595,317
Kiosk sales		18,351							18,351
Payment processing fees		12,602							12,602
Other		146							146
		945,457			(319,041	)			626,416
Cost of Goods Sold
Sales of services		914,358			(333,044	)	(A), (B)		581,314
Kiosk sales		10,311							10,311
Other		1,094			4,928		(E)		6,022
		925,763			(328,116	)			597,647
Gross Profit		19,694			9,075		(B)		28,769
General and administrative		615,936							615,936
Depreciation and amortization		19,345							19,345
Total Expense		635,281			-				635,281
Loss from Operations		(615,587	)		9,075				(606,512	)
Other (expense) income		(3,912	)		4,928		(E)		1,016
Interest expense, net		(2,992	)						(2,992	)
Foreign currency loss		(145,827	)						(145,827	)
Loss before Provision for Income Taxes		(768,318	)		14,003				(754,315	)
Provision for Income Taxes		-			-				-
Net Loss		(768,318	)		14,003				(754,315	)
Net loss attributable to non-controlling interest		-							-
Net Loss Attributable to Controlling Interest	$	(768,318	)	$	14,003			$	(754,315	)
Net Loss Per Share -  Basic and Diluted	$	(0.01	)	$	0.00			$	(0.01	)
Weighted Average Number of Shares Outstanding - Basic and Diluted		52,762,601			52,762,601				52,762,601
Other Comprehensive Income
Foreign currency translation adjustment		50,525			(1,349	)			49,176
Total Comprehensive loss		(717,793	)		12,654				(705,139	)
Comprehensive loss attributable to non-controlling interest		-			-				-
Comprehensive Loss Attributable to Controlling Interest	$	(717,793	)	$	12,654			$	(705,139	)

QPAGOS
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Three Months Ended June 30, 2015
	As
	Previously							As
	Reported			Adjustments			Notes	Restated
Revenues
Sales of services	$	127,001		$	(54,038	)	(A)	$	72,963
Kiosk sales		26,426							26,426
Payment processing fee		6,038							6,038
Other		-							-
		159,465			(54,038	)			105,427
Cost of Goods Sold
Sales of services		128,618			(60,151	)	(A), (B)		68,467
Kiosk sales		19,749							19,749
Other		2,603			2,510		(E)		5,113
		150,970			(57,641	)			93,329
Gross Profit		8,495			3,603		(B)		12,098
General and administrative		363,647							363,647
Depreciation and amortization		8,479							8,479
Total Expense		372,126			-				372,126
Loss from Operations		(363,631	)		3,603				(360,028	)
Other (expense) income		(2,510	)		2,510		(E)		-
Interest expense, net		-							-
Foreign currency loss		(172,884	)						(172,884	)
Loss before Provision for Income Taxes		(539,025	)		6,113				(532,912	)
Provision for Income Taxes		-			-				-
Net Loss		(539,025	)		6,113				(532,912	)
Net loss attributable to non-controlling interest		-							-
Net Loss Attributable to Controlling Interest	$	(539,025	)	$	6,113			$	(532,912	)
Net Loss Per Share -  Basic and Diluted	$	(0.03	)	$	0.00			$	(0.02	)
Weighted Average Number of Shares Outstanding - Basic and Diluted		21,477,682			21,477,682				21,477,682
Other Comprehensive Income
Foreign currency translation adjustment		47,422			(186	)			47,236
Total Comprehensive loss		(491,603	)		5,927				(485,676	)
Comprehensive loss attributable to non-controlling interest		-			-				-
Comprehensive Loss Attributable to Controlling Interest	$	(491,603	)	$	5,927			$	(485,676	)

QPAGOS
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Six Months Ended June 30, 2016
	As
	Previously							As
	Reported			Adjustments			Notes	Restated
Revenues
Sales of services	$	1,669,898		$	(576,597	)	(A)	$	1,093,301
Kiosk sales		149,323							149,323
Payment processing fee		13,580							13,580
Other		146							146
		1,832,947			(576,597	)			1,256,350
Cost of Goods Sold
Sales of services		1,669,919			(604,719	)	(A), (B)		1,065,200
Kiosk sales		123,668							123,668
Other		6,344			11,724		(E)		18,068
		1,799,931			(592,995	)			1,206,936
Gross Profit		33,016			16,398		(B)		49,414
General and administrative		3,309,638							3,309,638
Depreciation and amortization		38,690							38,690
Total Expense		3,348,328			-				3,348,328
Loss from Operations		(3,315,312	)		16,398				(3,298,914	)
Other (expense) income		(7,709	)		11,724		(E)		4,015
Interest expense, net		(5,984	)						(5,984	)
Foreign currency loss		(114,843	)						(114,843	)
Loss before Provision for Income Taxes		(3,443,848	)		28,122				(3,415,726	)
Provision for Income Taxes		-			-				-
Net Loss		(3,443,848	)		28,122				(3,415,726	)
Net loss attributable to non-controlling interest		-							-
Net Loss Attributable to Controlling Interest	$	(3,443,848	)	$	28,122			$	(3,415,726	)
Net Loss Per Share -  Basic and Diluted	$	(0.06	)	$	0.00			$	(0.06	)
Weighted Average Number of Shares Outstanding - Basic and Diluted		53,660,993			53,660,993				53,660,993
Other Comprehensive Income
Foreign currency translation adjustment		92,903			(745	)			92,158
Total Comprehensive loss		(3,350,945	)		27,377				(3,323,568	)
Comprehensive loss attributable to non-controlling interest		-			-				-
Comprehensive Loss Attributable to Controlling Interest	$	(3,350,945	)	$	27,377			$	(3,323,568	)

QPAGOS
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Six Months Ended June 30, 2015
	As
	Previously							As
	Reported			Adjustments			Notes	Restated
Revenues
Sales of services	$	181,530		$	(73,994	)	(A)	$	107,536
Kiosk sales		45,195							45,195
Payment processing fee		8,739							8,739
Other		-							-
		235,464			(73,994	)			161,470
Cost of Goods Sold
Sales of services		186,749			(82,826	)	(A), (B)		103,923
Kiosk sales		32,779							32,779
Other		2,603			4,631		(E)		7,234
		222,131			(78,195	)			143,936
Gross Profit		13,333			4,201		(B)		17,534
General and administrative		793,371							793,371
Depreciation and amortization		16,920							16,920
Total Expense		810,291			-				810,291
Loss from Operations		(796,958	)		4,201				(792,757	)
Other (expense) income		(4,160	)		4,631		(E)		471
Interest expense, net		-							-
Foreign currency loss		(213,189	)						(213,189	)
Loss before Provision for Income Taxes		(1,014,307	)		8,832				(1,005,475	)
Provision for Income Taxes		-			-				-
Net Loss		(1,014,307	)		8,832				(1,005,475	)
Net loss attributable to non-controlling interest		-							-
Net Loss Attributable to Controlling Interest	$	(1,014,307	)	$	8,832			$	(1,005,475	)
Net Loss Per Share -  Basic and Diluted	$	(0.08	)	$	0.00			$	(0.08	)
Weighted Average Number of Shares Outstanding -  Basic and Diluted		13,152,412			13,152,412				13,152,412
Other Comprehensive Income
Foreign currency translation adjustment		106,460			(208	)			106,252
Total Comprehensive loss		(907,847	)		8,624				(899,223	)
Comprehensive loss attributable to non-controlling interest		-			-				-
Comprehensive Loss Attributable to Controlling Interest	$	(907,847	)	$	8,624			$	(899,223	)

QPAGOS
CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ended  June 30, 2016
	As
	Previously							As
	Reported			Adjustments			Notes	Restated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss attributable to the company	$	(3,443,848	)	$	28,122		(B)	$	(3,415,726	)
Less: loss attributable to non-controlling interest		-							-
Net loss		(3,443,848	)		28,122				(3,415,726	)
Adjustment to reconcile net loss to net cash used in operating activities:
Depreciation expense		17,190							17,190
Amortization expense		21,500							21,500
Equity based compensation charge		144,000							144,000
Shares issued for services		2,032,274							2,032,274
Non- cash investment in affiliates		(3,000	)						(3,000	)
Changes in Assets and Liabilities
Accounts receivable		(145,592	)						(145,592	)
Inventory		160,126							160,126
Recoverable IVA taxes and credits		125,861			(50,048	)	(A), (B)		75,813
Other current assets		24,872			8,426		(B)		33,298
Other assets		(419	)						(419	)
Accounts payable and accrued expenses		94,783							94,783
IVA and other taxes payable		(158,219	)		54,370		(A), (B)		(103,849	)
Advances from customers		108,482			(40,125	)	(B)		68,357
Interest accruals		5,987							5,987
CASH USED IN OPERATING ACTIVITIES		(1,016,003	)		745				(1,015,258	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(453	)						(453	)
NET CASH USED IN INVESTING ACTIVITIES		(453	)		-				(453	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds on common stock issued		225,000							225,000
Proceeds from loans payable		-							-
NET CASH PROVIDED BY FINANCING ACTIVITIES		225,000			-				225,000
Effect of exchange rate changes on cash and cash equivalents		92,903			(745	)	(C)		92,158
NET DECREASE IN CASH		(698,552	)						(698,552	)
CASH AT BEGINNING OF PERIOD		833,612							833,612
CASH AT END OF PERIOD	$	135,060		$	-			$	135,060
CASH PAID FOR INTEREST AND TAXES:
Cash paid for income taxes	$	-		$	-			$	-
Cash paid for interest	$	-		$	-			$	-

QPAGOS

CONSOLIDATED STATEMENT OF CASH FLOWS

Six Months Ended June 30, 2015

	As
	Previously							As
	Reported			Adjustments			Notes	Restated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss attributable to the company	$	(1,014,308	)	$	8,833		(B)	$	(1,005,475	)
Less: loss attributable to non-controlling interest		-							-
Net loss		(1,014,308	)		8,833				(1,005,475	)
Adjustment to reconcile net loss to net cash used in operating activities:
Depreciation expense		16,920							16,920
Amortization expense		-							-
Equity based compensation charge		-							-
Shares issued for services		-							-
Non- cash investment in affiliates		-							-
Changes in Assets and Liabilities
Accounts receivable		(57,754	)						(57,754	)
Inventory		85,558							85,558
Recoverable IVA taxes and credits		(144,061	)		2,687		(A), (B)		(141,374	)
Other current assets		48,479			(2,122	)	(B)		46,357
Other assets		(5,038	)						(5,038	)
Accounts payable and accrued expenses		23,556							23,556
IVA and other taxes payable		36,743			(1,306	)	(A), (B)		35,437
Advances from customers		26,866			(7,884	)	(B)		18,982
Interest accruals		-							-
CASH USED IN OPERATING ACTIVITIES		(983,039	)		208				(982,831	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(1,819	)						(1,819	)
NET CASH USED IN INVESTING ACTIVITIES		(1,819	)		-				(1,819	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds on common stock issued		-							-
Proceeds from loans payable		719,962							719,962
NET CASH PROVIDED BY FINANCING ACTIVITIES		719,962			-				719,962
Effect of exchange rate changes on cash and cash equivalents		106,460			(208	)	(C)		106,252
NET DECREASE IN CASH		(158,437	)						(158,437	)
CASH AT BEGINNING OF PERIOD		173,828							173,828
CASH AT END OF PERIOD	$	15,391		$	-			$	15,391
CASH PAID FOR INTEREST AND TAXES:
Cash paid for income taxes	$	-						$	-
Cash paid for interest	$	-						$	-

NOTES

A. Management noted an error in the recording of transactions related to a consumer’s use of kiosks to pay for certain services such as utilities through our kiosks.

In these transactions, the Company earns a payment processing fee as an agent, on either a percentage of transaction value or a fixed fee per transaction basis.

This revenue was previously recorded at gross value, the full value of the transaction was recorded as revenue and the full value of the service provided to our end users was recognized as cost of goods sold. The value-added taxation on both the revenue and cost of goods sold was recorded as due to and due from, the Mexican revenue authorities, respectively.

The Restated financial statements reversed the difference between the gross revenue recorded and the payment processing fee actually earned on these transactions; and the cost of goods sold entries originally recorded were reversed. The value-added taxation recorded has been restated and we have brought this restatement to the attention of the Mexican revenue authorities and are in the process of correcting our tax returns.

B. Management noted an error in recording of cost of goods sold of prepaid services sold to end users.

Purchases of prepaid services from providers are recorded as a prepaid asset, which is subsequently expensed to cost of goods sold when the service is sold and the risks and rewards of ownership passed to end users.

The cost of goods sold was incorrectly recorded as equal to revenue on all service sales. The gross profit on these revenue transactions was earned but remained on our balance sheet in prepaid expenditure.

The restated financial statements reduced the costs of goods sold recorded by the gross profit earned on these transactions with a corresponding reduction in prepaid expenditure. The net value added tax effect on these transactions was restated and we have brought this restatement to the attention of the Mexican revenue authorities and are in the process of correcting our tax returns.

C. Represents the restatement of the foreign currency translation adjustment directly related to the restatement of revenues and cost of goods sold discussed in A and B above.

D. To reflect the adjustments necessary to record the effect of the acquisition of the net assets and liabilities and the common shares retained by the shareholders of Asiya Pearls, Inc., on the effective date of the transaction, May 12, 2016, previously this was disclosed effective the earliest date presented in our financial statements.

E. To reclass certain lease payments to retailers for the lease of floor space for the placement of kiosks on their premises from other (expense) income to cost of goods sold.