Cautionary Note Regarding Forward-Looking Statements
Certain of the statements contained in this report should be considered
forward-looking statements. These forward-looking statements may be identified
by words such as "may," "will," "expect," "intend," "anticipate," "believe,"
"estimate," "plan," "project," "could," "should," "would," "continue," "seek,"
"target," "guidance," "outlook," "if current trends continue," "optimistic,"
"forecast" and other similar words. Such statements include, but are not limited
to, statements about the Company's plans, objectives, expectations, intentions,
estimates and strategies for the future, and other statements that are not
historical facts. These forward- looking statements are based on the Company's
current objectives, beliefs and expectations, and they are subject to
significant risks and uncertainties that may cause actual results and financial
position and timing of certain events to differ materially from the information
in the forward-looking statements. These risks and uncertainties include, but
are not limited to, those set forth in the Company's Annual Report on Form 10-K
for the year ended December 31, 2020 and for the year ended March 31, 2020, and
other risks and uncertainties listed from time to time in the Company's other
filings with the SEC. There may be other factors of which the Company is not
currently aware that may affect matters discussed in the forward-looking
statements and may also cause actual results to differ materially from those
discussed. In addition, there is uncertainty about the spread of the COVID-19
virus and the impact it may have on the Company's operations, the demand for the
Company's products or services, global supply chains and economic activity in
general. The Company does not assume any obligation to publicly update or
supplement any forward-looking statement to reflect actual results, changes in
assumptions or changes in other factors affecting these forward-looking
statements other than as required by law. Any forward-looking statements speak
only as of the date hereof or as of the dates indicated in the statement.
Management's Discussion and Analysis should be read in conjunction with the
financial statements included in this Annual Report on Form 10-K (the "Financial
Statements"). The financial statements have been prepared in accordance with
generally accepted accounting principles in the United States. Except as
otherwise disclosed, all dollar figures included therein and in the following
management discussion and analysis are quoted in United States dollars.
The following discussion of the Company's financial condition and the results of
operations should be read in conjunction with the Financial Statements and
footnotes thereto appearing elsewhere in this Report.
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements. In order to comply with the terms of the safe
harbor, the Company notes that in addition to the description of historical
facts contained herein, this report contains certain forward-looking statements
that involve risks and uncertainties as detailed herein and from time to time in
the Company's other filings with the Securities and Exchange Commission and
elsewhere. Such statements are based on management's current expectations and
are subject to a number of factors and uncertainties, which could cause actual
results to differ materially from those, described in the forward-looking
statements. These factors include, among others: (a) the Company's fluctuations
in sales and operating results; (b) risks associated with international
operations; (c) regulatory, competitive and contractual risks; (d) development
risks; (e) the ability to achieve strategic initiatives, including but not
limited to the ability to achieve sales growth across the business segments
through a combination of enhanced sales force, new products, and customer
service; and (f) pending litigation.
The Company
NetPay International, Inc. (the "Company" or "NetPay") was incorporated under
the laws of the State of Nevada on March 31, 2016. The Company issued 5,500,000
shares of its common stock to its founder in exchange for organizational
services incurred upon incorporation. Upon incorporation, the Company acquired
the hair-care formula that its business had been based upon. The Company had
been engaged in the business of developing, manufacturing, marketing, and
selling of an all-natural organic products collection. The Company sold the
rights to certain intellectual property that was the main ingredient in the
Company's hair care collection to a vendor.
On August 29, 2018, the Company experienced a change in control ("Change in
Control"). With the Change in Control, certain liabilities of the Company were
forgiven and/or paid for on behalf of the Company by its founder and former
president and chief executive officer. Total liabilities at the time
approximated $225,000. On August 29, 2018, the board of directors nominated Mr.
Alon Elbaz to the board and appointed him as the Chief Executive Officer. Mr.
Elbaz serves in the same capacity for the Company's majority shareholder,
Compunet Holdings AA Ltd. It is the intent of Compunet Holdings to expand its
operations to the United States and the North American continent with the
Company as its primary operational entity.
21
On September 17, 2018, the board of directors and a majority of the shareholders
of record approved the name change from Allegro Beauty Products, Inc. to NetPay
International, Inc. On or about October 16, 2018, the Company mailed an
Information Statement to its shareholders. The holders of a majority of the
outstanding shares of the Company's common stock executed a written consent in
lieu of a special meeting, approving the amendment to the Articles of
Incorporation to change the name to NetPay International, Inc. The effective
date of the name change was November 7, 2018. The Company is rebranding itself
as NetPay.
On December 5, 2018, the Company launched its Delaware subsidiary, NetPay (USA),
Inc., to act as an independent sales organization (ISO) to seek opportunities
related to the provision to merchants of merchant's credit card acquiring,
clearing, and other value-added services. The services provided by NetPay (USA),
Inc. will be different from the payment facilitation business, which will be the
core business of the Company. The Company owns ninety percent (90%) of NetPay
(USA), with the remaining ten percent (10%) owned by two experienced executives
in the credit card services industry.
Recent Developments
On August 11, 2020, Ms. Limor Mamon, a director of the Company and the Company's
Chief Financial Officer, resigned from the Board of Directors and from her
position as the CFO of the Company.
On March 26, 2020, the Company entered into an Affiliate Partner Agreement with
Network Merchants, LLC, pursuant to which the Company may access and use Network
Merchants' FACe Platform for payment facilitation processing. The FACe platform
is a unified commerce platform that operates on a sub-merchant basis such that
each merchant is not required to obtain its own Merchant Identification Number
(MID).
On March 24, 2020, the Company entered into a ProFac Agreement with ProPay,
Inc., pursuant to which the Company may (a) refer its clients to ProPay to
participate in ProPay's transaction processing program in relation to financial
services cards issued by Mastercard International Incorporated, Visa U.S.A.
Inc., American Express Travel Related Services Company, Inc., and DFS Services
LLC, and (b) incorporate ProPay's transaction processing program into the
Company's own service offering. ProPay will deduct its fees from the proceeds
received from referred clients and pay the residual amounts to the Company. This
agreement allows the Company to utilize ProPay's services to clear card
transactions through MasterCard, Visa, and other networks.
On October 16, 2019, the Company entered into a long-term Payment Facilitator
Merchant Agreement with WorldPay, LLC, pursuant to which the Company may process
an unlimited amount of credit card transactions, subject to the terms of the
agreement on fees, chargebacks, and other costs associated with the business and
the agreement. According to the agreement, WorldPay will provide sponsorship
services to the Company, and the Company will be registered through WorldPay as
a Visa third-party agent and a MasterCard service provider. The sponsorship
services allow the Company to route transactions under WorldPay's membership in
order to clear card transactions through MasterCard, Visa and other networks.
On October 11, 2019, the Company entered into an agreement with a commercial
bank to issue a standby letter of credit on behalf of the Company to WorldPay,
LLC for $500,000 allowing the Company to provide payment facilitator merchant
services in the continental United States through WorldPay. The standby letter
of credit is valid until cancelled or maturity and is collateralized by a
revolving credit facility with the bank. The terms of the letter of credit are
extended for a term of one year at a time. The Company intends to renew the
standby letter of credit for as long as the Company continues to do business
with WorldPay in the USA. No amounts have been drawn under the standby letter of
credit. The Company funded the initial $500,000 with Bank Leumi, its commercial
bank of record. The Company incurred a fee of approximately $12,600 in
connection with the standby letter of credit. The Company amortizes the fee
associated with the standby letter of credit over 12 months. The Company had a
remaining balance associated with that fee at March 31, 2020 of $6,662. This
amount is included in prepaid expense and other. The Company recognizes
approximately $1,040 per month until maturity.
Impact of the Novel Coronavirus ("COVID-19")
In March, 2020, the WHO declared the outbreak of COVID-19 as a pandemic, which
has spread globally and created significant volatility, uncertainty, and
economic disruption in many countries, including the countries in which we
operate. National, state, and local governments in these countries have
implemented a variety of measures in response to the COVID-19 pandemic that have
the effect of restricting or limiting, among other activities, the operations of
certain businesses.
22
Our business has continued to operate but at a reduced capacity. We believe that
the effects of the COVID-19 pandemic did not materially impact our financial
results for the fourth quarter of fiscal 2019; however, the effects of the
pandemic on our financial results for the first quarter of fiscal 2020 and other
future periods may be significant and cannot currently be reasonably estimated
due to the significant volatility, uncertainty and economic disruption caused by
the pandemic. See Item 1A "Risk Factors" of this Form 10- K for further
discussion of the potential impact of the COVID-19 pandemic on our business,
results of operations and financial condition. We continue to analyze our cost
structure and may implement cost reduction measures as may be necessary due to
the on- going economic challenges resulting from the COVID-19 pandemic.
Plan of Operations
As of August 14, 2020, we have one employee, our President and Chief Executive
Officer, Mr. Alon Elbaz, and a consultant who is based out of New York City in
order to expand our business operations. NetPay is a development stage company
and has little to no financial resources besides shareholder loans. We have not
established or attempted to establish a source of equity or debt financing.
As of March 31, 2020, we had assets which consist of cash ($619,338) (which
mostly consists of $500,000 certificate of deposit as collateral for our letter
of credit with the financial institution) and prepaid expenses ($30,207). We
expect to increase our assets over the next year as we further develop our
payment processing business with capital investment in fixed assets such as
computers and management information systems to improve and secure services and
product offering. In order to fund our business activities over the next 12
months, we will attempt to secure sufficient and satisfactory funding from our
majority shareholder, Compunet Holdings AA Ltd., an international Israeli-based
company, from Mr. Elbaz, and from others. There can be no assurance that we will
be able to obtain any funds or that such funds will be offered on terms
acceptable to us.
Netpay EUR Limited ("Netpay Europe") is a payment service provider owned by
Compunet Holdings AA Ltd. and managed by Mr. Elbaz. Founded in 1998, Netpay
Europe built a successful credit card clearing service based on state-of-the-art
technologies. Netpay Europe evolved over the years to better satisfy and
understand the needs of e-commerce and the payment services industry. Netpay
Europe acts as a one-stop-shop for e-commerce merchant's payments needs by
providing secure and innovative payment solutions and enhanced payment services.
Netpay Europe's goal is to support and protect the interests of its customers by
providing industry leading technology combined with premier-quality service.
Netpay Europe has provided secure and safe credit card clearing (payment)
services for years. These services are easy to use and include innovative and
strategic payment solutions. Based on Netpay Europe's technology, transactions
are completed speedily and simply, with stringent data-security standards.
Netpay Europe's tech-team has been working for more than twenty years to improve
systems for merchant payment and servicing needs, with a key focus on risk
management. Netpay Europe offers businesses a complete turn-key solution, and
acts as a one-stop-shop for all merchants' payment servicing needs.
In order to achieve Netpay Europe's global business goals, Compunet Holdings AA
Ltd., a company controlled by Mr. Alon Elbaz (Netpay Europe's founder and Chief
Executive Officer), acquired the Company, a publicly traded and reporting
company in the United States of America. Under the guidance of Mr. Elbaz and
Netpay Europe, the Company believes that it will be able to establish and
acquire a payment facilitator license (or PayFac). This will allow the Company
to become a sub-merchant account for a merchant service provider in order to
provide payment processing services to merchant clients, particularly in the
e-commerce marketplace. A payment facilitator license will allow the Company to
offer merchant services on a sub-merchant platform. Allowing sub-merchants to be
on-boarded under the master of the Company, which will be sponsored by a bank or
financial institution.
Put simply, the Company has set out to build a payment facilitator model for
streamlining merchant services within the U.S. as well as partnering with Netpay
Europe's well-established international business. As a payment facilitator, the
Company will eliminate the need for individual merchants to establish a
traditional merchant account. In the payment facilitator model, a software
provider registers with an acquirer to provide payment services to sub-merchants
that utilize its software. By registering as a payment facilitator with an
acquirer, the software provider acts as a "master" merchant account provider,
including the onboarding of sub-merchants under its own account in order to
facilitate payment transactions for the sub-merchants.
In this model, there are three main parties involved: The acquirer, the payment
facilitator (the Company), and the sub-merchant. The acquirer provides overall
structure for operations while the Company acts as the go-between with the
acquirer and the sub-merchants. The sub-merchants will operate underneath the
Company. The acquirer works with the Company to get these sub-merchants running
and servicing their payment needs. This includes application administration and
the underwriting process, working out pricing agreements and facilitating
payment technology integration. The acquirer is responsible for monitoring the
Company's compliance with operating regulations and ensuring due diligence when
the Company on-boards (signs-on) sub-merchants. The Company will undergo a
comprehensive process in order to register with an acquirer, including
integrating the payment technology and infrastructure needed. The Company will
assume all the risk and liability for its sub-merchants. Industry standards are
that sub-merchants sign up with payment facilitators in order to be able to
accept payments from their customers.
23
The greatest benefit of the Company's payment facilitator model will be the
ability to simplify and streamline the merchant account enrollment and
onboarding process by offering a complete, white-label payment processing
solution. This is expected to lead to more control over the processing
experience, higher merchant conversion rates, and the opportunity to earn more
revenue from credit card processing for the sub-merchant. This process has been
implemented by Netpay Europe and its management in Europe, and Netpay Europe
intends on providing that knowledge and service to the US market through the
Company.
The greatest challenge to the Company's payment facilitator model will be the
level of responsibility the Company will be required to assume with the
acquirer. This includes greater liability for fraud, chargebacks, and data
breaches; the resources to build or purchase payments technology; and the
ability to meet compliance mandates and ever-changing regulatory rules.
On December 5, 2018, we launched a new Delaware subsidiary, NetPay (USA), Inc.,
to act as an independent sales organization (ISO) to seek opportunities related
to the provision of merchant's credit card acquiring clearing service, and other
value-added services. These services to be provided by NetPay (USA), Inc. will
be different than the payment facilitation business, which is our core business.
To date, Netpay (USA), Inc. has entered into a binding agreement with eData
Financial Group LLC, located in Florida, for the resale of merchant's credit
card acquiring and processing services, and a memorandum of understanding with
Blue Parasol Group LLC for the provision of similar services to that of eData
Financial Group and NetPay (USA). We currently own ninety percent (90%) of
NetPay (USA), with the remaining ten percent (10%) owned by two highly qualified
experienced executives in the credit card payment services industry. We believe
that with their expertise and guidance NetPay (USA) is well-positioned to become
an industry leader within the North American market and worldwide. A brief
description of the services to be provided by NetPay (USA) is set forth below:
? NetPay (USA) will act as an independent sales organization (ISO).
? NetPay (USA) will seek merchants that will obtain services primarily from us,
such as - clearing, providing credit, and other value-added services.
? Merchant underwriting.
? Managing and monitoring merchant activity, and irregularity resolution.
? Margin sharing between the Company and NetPay (USA).
? Onboard interface with merchants, e-commerce support, and high-risk merchant
assessment.
We anticipate that our new business will begin to generate sales of core
services during 2021, although no assurances can be given that we will achieve
this goal. The launch of our new business will depend on our ability to obtain
sufficient financing.
In order to further our plan of operations, we will need to secure additional
financing of approximately $3,000,000. If we are not successful in securing this
capital, we will not be able to proceed with our business plan as contemplated.
Our plan of operations will require us to establish additional sources of
capital to fulfill our operational requirements if we do not obtain sufficient
financing from our majority shareholder. These funds will go towards building
out the US operations to ultimately generate sales.
Alongside the development of our business activities, we will continue to pursue
additional sources of financing and attempt to establish a public market for our
common stock, which may then allow us to seek financing from sources that would
not be available to us if we were private. Accordingly, we believe that we may
be able to negotiate from increased strength in pursuing financing or agreements
with vendors, manufacturers, and capital sources. We cannot predict the
likelihood or timing of any success from our intended actions.
Our goal as stated above is for us to become a leading payment/service
facilitator in the United States. We believe that our key alliance with Netpay
Europe will assist us in achieving that goal. We currently have no other sources
of or commitment for financing beyond a verbal commitment from our majority
shareholder and its management personnel. There are no assurances we will obtain
sufficient financing or resources from others or enter into beneficial
agreements with others in our industry. We believe that we must raise additional
capital or debt financing in order to fully execute and implement our business
strategy and develop our proposed services.
Necessity of Additional Financing
Management believes that if it is successful in raising the necessary funds, of
which there can be no assurances, we may generate revenue within the next 12
months. While we hope that we will be successful in these efforts, additional
equity or debt financing may not be available to us on acceptable terms or at
all, and thus we would fail to satisfy our future cash requirements. We received
approximately $837,000 in loans from our majority shareholder. We expect this
amount to increase over the next year as our plan of operations is rolled out.
Securing additional financing is critical to the implementation of our timeline.
If and when we obtain the required additional financing, we should be able to
take our business plan through the necessary steps. In the event we are unable
to raise any additional funds we will not be able to pursue our business plan,
and we may fail entirely. We have no committed sources of financing besides the
verbal commitment from our majority shareholder to provide us with financing in
the short term until we are able to obtain reliable sources of financing.
24
Other
As a corporate policy, we do not intend to incur obligations that we cannot
satisfy with known resources. We do not intend to incur any obligation that
needs to be satisfied with cash payments in the short-term unless we have a
secure funding source to pay. We believe the perception that many people have of
a public company makes it more likely that they will accept restricted
securities as consideration for indebtedness owed to them than they would from a
private company. We have not performed any studies on this matter. Our belief is
based solely on the advice and informal consultation with professionals whom we
know have public company experience. Being a public company may afford the
business (management and its shareholders) with a higher degree of recognition
than would be typically attained as a small private (or non-public) company and
may increase its ability and/or options to obtain financing for growth.
In addition, we believe being a public company increases our opportunities to
raise funds and to pay vendors by issuing restricted stock rather than cash.
There can be no assurances that we will be successful in any of these efforts.
Additionally, issuance of restricted stock would dilute the percentage of
ownership for all of our stockholders.
Result of Operations for period ended December 31, 2020 and for the Year ended
March 31, 2020 and 2019 Expenses.
Expenses for the nine months ended December 31,2020 was $171,552 and for the
years ended March 31, 2020 and March 31, 2019 was $206,340 and $45,497,
respectively. This represents an increase of $160,843 or 353.5% for year over
year. Product development costs for the nine months ended December 31,2020 were
none, and for the years ended March 31, 2020 and March 31, 2019 were none and
$6,643, respectively. This represents a decrease of $6,643 or 100.0% for year
over year. The Company for the nine months ended December 31,2020 incurred
$14,450 and for the years ended March 31, 2020 and March 31, 2019 $172,743 and
none, respectively, in legal and other professional fees associated with its
business expansion. A significant amount of these costs for the year ended March
31, 2020 would have not been incurred except for the efforts moving forward on
the business expansion and start- up costs associated with this business
expansion. The Company entered into several consulting agreements associated
with its business expansion as well as incurred significant legal expense
associated with its business expansion. The Company believes that its legal and
other professional fees will increase as its business expansion accelerates in
its growth. The Company for nine months ended December 31,2020 incurred $83,844
and for the years ended March 31, 2020 and March 31, 2019, $12,585 and $38,820,
respectively, in consulting, administrative and other costs associated with its
operations. This represents a decrease of $26,235 or 67.6% for year over year.
The Company for the nine months ended December 31,2020 and for the year ended
March 31, 2020, incurred none and for the year ended March 31, 2019, $34, in
depreciation expense. The Company sold its prior business operations and
intangible assets to a former vendor of the Company.
Other Income/(Expense)
Other income/(expense) for the nine months ended December 31,2020 was $35,732
and for the years ended March 31, 2020 and March 31, 2019 was $(18,227) and
$220,910, respectively. The Company for the year ended March 31, 2019 recognized
a gain on sale of assets of $9,748. This was a one-time sale. Additionally, the
Company for the year ended March 31, 2019 realized income from forgiveness of
certain debts of $211,162. Both of these transactions are considered one-time
transactions and are not expected to occur again. The Company for the nine
months ended December 31,2020 and for the year ended March 31, 2020, recognized
$23,170 and $15,847, respectively, in interest expense associated mostly from
related party debt. The company for the nine months ended December 31,2020 and
for the year ended March, 31 2020, recognized $20,067 and $5,988, respectively,
in interest expense associated with fees on our payment facilitator license. The
Company for the nine months ended December 31,2020, and for the year ended March
31, 2020 recognized $7,505 and $3,680, respectively, in interest income derived
from its certificate of deposit in the amount of $500,000. Other
income/(expense) is not able to be compared to year over year percentages or
dollar increase or decrease.
Income/(Loss) before provision for income taxes
Income/(loss) before provision for income taxes for the nine months ended
December 31,2020 and for the years ended March 31, 2020 and March 31, 2019 was
$(159,883), $(225,367) and $175,413, respectively. The Company recorded
provisions for income taxes of $800 for the year ended March 31, 2020 and $800
for the year ended March 31, 2019.
Basic and diluted income/(loss) per share
Basic and diluted income/(loss) per share for the nine months ended December
31,2020 and for the years ended March 31, 2020 and March 31, 2019 was $(0.02),
$(0.03) and $0.02 per share, respectively. Basic and diluted number of shares
outstanding was 8,025,000 and 8,025,000, respectively, for the periods
presented.
25
Liquidity
A significant portion of our public offering was used to pay for offering
expenses. Our current cash position (approximately $120,000) was provided
through a series of loans from our majority shareholder to cover working
expenditures and to provide the necessary collateral for the Company's $500,000
letter of credit established with a US financial institution. Prepaid expense
was approximately
$30,000 attributable to deposits on business activities and assets used within
the US.
Prior to August 2018, most of our resources and efforts had been devoted to
planning our business, implementing systems and controls for growth, and
completing our public offering. Post-2018 we have been working diligently on our
business expansion in the United States. We currently owe our majority
shareholder approximately $837,000 as payment for expenses and other collateral
assets incurred after our Change in Control transaction. We expect this amount
to increase over the next 12 months.
Although there can be no assurances whatsoever that we will obtain this funding,
we believe that if we do, we may be able to successfully commence the launch of
our new business for 2020/2021. Obstacles may prevent us from launching our new
business despite the availability of funding and our efforts. If we are unable
to raise additional funds, significant funding amounts may have to be provided
by our majority shareholder to the extent that it is capable and willing to
provide such loans. We do not have any oral or written agreements in place with
our majority shareholder or any third parties for such funds and cannot provide
any assurances that we will be able to obtain such funds.
Private capital, if sought, will most likely be sought from business associates
of our executive officers or a network of private investors referred to us by
those same associates. To date, we have not sought any significant funding
source, other than from sources that have provided loans to us already, and we
have not authorized any persons or entities to seek funding on our behalf. If a
market for our common stock develops, of which there can be no assurances, we
may use our restricted shares to compensate others whenever possible. We cannot
predict the likelihood of a source of capital or that funds needed to complete
our planned business objectives will be obtained or identified.
As a public entity, we are subject to the reporting requirements of the Exchange
Act, certain ongoing expenses will be incurred. These consist of various
professional services along with a host of other expenses that surround the
preparation of annual and quarterly reports as well as proxy statements required
to be distributed to our stockholders. We estimate these costs can be more than
$75,000 per year and maybe higher if business volume and activity increases.
There are no current plans to seek private investment. We do not have any
current plans to raise funds through the sale of securities. We intend to seek
additional financing from our current lender in order to further fund our
working capital needs, especially in instances where we cannot defer payment of
services.
Going Concern Alleviation
In prior years there was doubt about our ability to continue as a going concern.
Our financial statements contained additional note disclosures with respect to
this matter. During the year ended March 31, 2020 we achieved what would be
called a Going Concern Alleviation.
Going Concern Alleviation - The accompanying financial statements have been
prepared assuming that the Company no longer has a going concern issue. As of
December 31, 2020, the Company has no committed sources of capital or financing
besides the $840,000 in funding from the Company's majority shareholder. The
Company's majority shareholder and its verbal commitment to fund the execution
of the Company's new business plan, however, make the going concern issue no
longer relevant.
Management believes the actions recently taken by the Company to implement its
business plan and the entering into a payment facilitator merchant agreement
provides the basis for long term revenue production. The Company's management
believes that with the continued and substantial financial support of and
backing from its majority shareholder, financing will become available to
support its expansion plans. With the assistance and guidance of the Company's
majority shareholder, management believes that the Company will be in a position
to thrive.
26
Regulation
Government regulation could affect key areas of NetPay's business, in the United
States of America as well as internationally. NetPay, along with the rest of the
financial services industry, continues to experience increased legislative and
regulatory scrutiny, including the enactment of additional legislative and
regulatory initiatives such as the Dodd-Frank Wall Street Reform and Consumer
Protection Act ("Financial Reform Act") in 2010. This legislation, which
provides for sweeping financial regulatory reform, may have a significant and
negative impact on the Company and its clients, which could impact NetPay's
earnings through fee reductions, higher costs (both regulatory and
implementation) and new restrictions on operations. The Financial Reform Act may
also impact the competitive dynamics of the financial services industry in the
U.S. by more adversely impacting large financial institutions, some of which may
become NetPay clients, and by adversely impacting the competitive position of
U.S. financial institutions in comparison to foreign competitors in certain
businesses.
The Financial Reform Act created the Consumer Financial Protection Bureau
("CFPB") with responsibility for regulating consumer financial products and
services and enforcing most federal consumer protection laws in the area of
financial services, including consumer credit and the prepaid card industry. For
example, the CFPB has promulgated a new rule regarding prepaid financial
products, which, among other things, will establish new disclosure requirements
specific to prepaid accounts, eliminate certain fees that may currently be
imposed on prepaid accounts, and make it more difficult for a prepaid provider
such as the Company's business to offer courtesy overdraft protection on prepaid
accounts. The rule is scheduled to become effective on April 1, 2019. Similarly,
other future actions of the CFPB may make payment card or product transactions
generally less attractive to card issuers, acquirers, consumers and merchants,
and thus negatively impact the Company's business.
On June 23, 2016, a referendum was held on the United Kingdom's membership in
the European Union, the outcome of which was a vote in favor of leaving the
European Union. Effective as of January 31, 2020, the United Kingdom formally
withdrew its membership from the European Union. The United Kingdom's decision
to leave the European Union has created an uncertain political and economic
environment in the United Kingdom and across other European Union member states.
The political and economic instability created by the United Kingdom's decision
to leave the European Union has caused and may continue to cause volatility in
global financial markets and the value of the British Pound or other currencies,
including the Euro. In addition, this uncertainty may cause some of our
customers or potential customers to curtail or delay spending. Depending on the
market and regulatory effects of the United Kingdom's exit from the European
Union, it is possible that there may be adverse practical or operational
implications on our business. For example, the UK Data Protection Act, which
substantially implements the GDPR, became effective in May 2018. It remains
unclear, however, how United Kingdom data protection laws or regulations will
develop and be interpreted in the medium to longer term and how data transfers
to and from the United Kingdom will be regulated and how those regulations may
differ from those in the European Union. Further, the United Kingdom's exit from
the European Union may create increased compliance costs and an uncertain
regulatory. Management believes that Brexit-related issues will not affect our
financial statement recognition, measurement or disclosure items, such as
inventory write-downs, long-lived asset impairments, collectability of
receivables, assumptions underlying fair value measurements, foreign currency
matters, hedge accounting or income taxes for the Company and its consolidated
financial statements.
Recently Issued Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect
and that may impact its financial statements. The Company does not believe that
there are any other new accounting pronouncements that have been issued that
might have a material impact on its financial position or results of operations.
Critical Accounting Policies
The preparation of financial statements and related notes requires us to make
judgments, estimates, and assumptions that affect the reported amounts of
assets, liabilities, revenue and expenses, and related disclosure of contingent
assets and liabilities.
27
An accounting policy is considered to be critical: (a) if it requires an
accounting estimate to be made based on assumptions about matters that are
highly uncertain at the time the estimate is made; and (b) if different
estimates that reasonably could have been used, or changes in the accounting
estimates that are reasonably likely to occur periodically, could materially
impact the financial statements.
Financial Reporting Release No. 60 requires all companies to include a
discussion of critical accounting policies or methods used in the preparation of
financial statements. There are no critical policies or decisions that rely on
judgments that are based on assumptions about matters that are highly uncertain
at the time the estimate is made. Note 2 to the financial statements, included
elsewhere in this prospectus, includes a summary of the significant accounting
policies and methods used in the preparation of our financial statements.
Seasonality
We have not generated any revenues so we have no direct experience with
seasonality for our business. We do not expect that our planned business
operations as currently outlined will be affected by seasonality.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of
Regulation S-K, obligations under any guarantee contracts or contingent
obligations. We also have no other commitments other than the costs of being a
public company that will increase our operating costs or cash requirements in
the future.
© Edgar Online, source Glimpses
NETPAY INTERNATIONAL, INC. 
