We are writing to provide an interim update on the current status and operations of TipTapPay Micropayments Ltd. (“TipTap”).

2022 Challenges

2022 was a challenging year for the Company. As market conditions remained weak and corporate valuations were being compressed, the Company was unable to raise significant equity financing to fund its ongoing burn rate. In addition to this backdrop, TipTap did not complete a liquidity event by October 31st which was a condition of its previously completed $11.5 million convertible debenture financing in 2021. As a consequence, the interest that had accrued in the bond became due and payable in cash exacerbating the Company’s already growing liquidity crisis.

Restructuring Efforts

In an effort to create a path forward for the Company, three Special Advisors were appointed to assist management and the team. The Special Advisors (Bios Attached) are currently receiving no cash compensation and will be paid in equity of TipTap. After the appointment of the Special Advisors, the Company was downsized and efforts were undertaken to preserve cash. In December, the Advisory group finalized a new financial model that would seek to achieve profitability with minimal new equity capital. The new model was dependent on restructuring the convertible notes, negotiating settlement terms with existing vendors, and an injection of new equity capital. At this time, the Company’s trade payables totaled approximately $4 million leading to negative working capital of $3.7 million excluding work in process/component inventory and debenture interest payable to bondholders.

Board of Director Changes

Subsequent to the new plan, Jack Hidi of Caravel Capital, Erik Bermel, and Derek Ham of Canaccord Genuity were appointed to the TipTap Board replacing Margarida Roncon and Chris Foster in December. In early January, Chris Greenfield resigned from the Board of Directors and as CEO, and Mr. Barry Hildred was appointed Acting CEO.

Restructuring Plan

The Company is currently finalizing discussions with Debenture Holders and Vendors, that will see 50% of the Company’s debenture Principal and Interest converted to equity at a price of $0.20 per share. The remaining 50% of the outstanding Principal and Interest will be converted to a 2yr Senior Secured Note that accrues interest at 6.25% per annum. In addition, certain debenture holders and the Special Advisors have agreed to invest a minimum of $1 million in new equity at $0.15 per share.

Given the Company’s capital needs and to allow maximum participation, we will be extending this equity offer to existing shareholders for the next 60 days at the same price of $0.15 per share. The Company is targeting an additional $1.5 million in equity proceeds bringing total new capital raised to $2.5 million.

Under the leadership of Jason Parker, EVP Sales and Operations, the Company has also refocused its sales efforts and streamlined its operations as follows:

• Launched a new setup & activation fee to make sure short-term campaigns are profitable.
• Created service and support packages for all campaigns that need management assistance to ensure the company is properly compensated.
• Outsourced all campaign creative and marketing collateral.
• Focused sales strategy directed at establishing long-term enterprise partnerships:
  • High volume of devices being utilized 12 months of the year (“always on”).
  • Verticals such as Faith-based giving, Hospitality (tipping), and Community Banks.
• In order to reduce return shipping costs and encourage repeat customers, all campaigns now purchase their accessory kits, consisting of, displays, stands, and batteries.
• Partnered with WorldPay in the United States so that we can now onboard new clients with a merchant account within 24-48 hours, which previously took 3-4 weeks.

During this period of restructuring the team has continued to deliver quality services to our customers and partners including recent highlights as follows:

• Completed a Master Services Agreement with Comcast (USA) to work with all their lines of business.
• Extended our current relationship with VISA to work with their community banks and credit unions for year-round charitable support within each community.
• Salvation Army Canada has assisted in securing Salvation Army USA ministry units for this year’s holiday season kettle campaign in addition to year-round giving.
• Converting website visits to booked meetings at a rate of 35% and our current close rate is tracking at 25%, creating new and recurring monthly revenue.

Under the leadership of Mauro Spagnolo, EVP Finance and Administration, the Company will be working on implementing tighter Financial Controls while working to create greater transparency and financial reporting. We have successfully reduced average monthly operating expenses by 15% during the past 3 months and continue to look for cost-saving opportunities. Key expense reduction initiatives have included the following:

• Headcount reduction from 27 to 14 full-time individuals.
• Consolidating office locations from 4 to 1.
• Refocused marketing expenses on core initiatives only.

• Canceling nonessential expenses including non-core subscriptions and consultant fees