Crypto Co 10-Q for FY2023 Q3
Crypto Co (CRCW)
About this 10-Q
Crypto Co filed this 10-Q on November 20, 2023, covering the quarter ended September 30, 2023 (FY2023 Q3).
Headline figures
Quarter ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $124.2K
- down 50.9% from $252.73K a year earlier
- Net loss
- $358.85K
- compared with a net loss of $415.74K a year earlier
- Diluted EPS
- $0.00
- compared with -$0.02 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
For the transition period from __________ to __________
Commission
File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
(Address of principal executive offices)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None | N/A | N/A |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period than the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Smaller
reporting company | ||
| Emerging
growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
As of November 20, 2023 the issuer had shares of common stock, par value $0.001 per share, outstanding.
TABLE OF CONTENTS
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NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (the “Quarterly Report”) contains forward-looking statements. All statements contained in this Quarterly Report other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short- term and long-term business operations, and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Annual Report”) as filed with the U.S. Securities and Exchange Commission (“SEC”) and in any subsequent filings with the SEC. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. Our management cannot predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events, and trends discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
Unless expressly indicated or the context requires otherwise, unless expressly indicated or the context requires otherwise, the terms “Crypto,” the “Company,” “we,” “us,” and “our” in these condensed consolidated financial statements refer to The Crypto Company and, where appropriate, its wholly-owned subsidiary Blockchain Training Alliance, Inc. (“BTA”) and an inactive subsidiary Coin Tracking, LLC (“CoinTracking”).
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
THE CRYPTO COMPANY
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In U.S. Dollars, except share data or otherwise stated)
| September 30, 2023 | December 31, 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Fixed assets | ||||||||
| Goodwill | ||||||||
| Intangible assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Notes payable, net | ||||||||
| Total current liabilities | ||||||||
| Convertible debt | ||||||||
| Notes payable - other | ||||||||
| TOTAL LIABILITIES | ||||||||
| STOCKHOLDERS’ DEFICIT | ||||||||
| Common stock, $ par value; shares authorized, and shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ DEFICIT | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
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THE CRYPTO COMPANY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In U.S. Dollars, except share data or otherwise stated)
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | |||||||||||||
| For the three months ended | For the nine months ended | |||||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | |||||||||||||
| Revenue: | ||||||||||||||||
| Services | $ | $ | $ | $ | ||||||||||||
| Cost of services | ||||||||||||||||
| Gross margin | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Amortization | ||||||||||||||||
| Depreciation | ||||||||||||||||
| Share-based compensation - employee | ||||||||||||||||
| Share-based compensation - non-employee | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income | ||||||||||||||||
| Loss on Sale of Equipment | ( | ) | ||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss before provision for income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for income taxes | ||||||||||||||||
| Net (loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income (loss) per share | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average common shares outstanding – basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
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THE CRYPTO COMPANY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In U.S. Dollars, except share data or otherwise stated)
| Shares | Amount | capital | Deficit | Equity | ||||||||||||||||
| Additional | Total | |||||||||||||||||||
| Common stock | paid-in- | Accumulated | Stockholders’ | |||||||||||||||||
| Shares | Amount | capital | Deficit | Equity | ||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Balance | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Stock issued for cash at $ per share | ||||||||||||||||||||
| Stock issued for cash | ||||||||||||||||||||
| Stock compensation expense in connection with issuance of common stock | ||||||||||||||||||||
| Debt discount for warrants | ||||||||||||||||||||
| Stock issued for loan payments | ||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Balance | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Shares | Amount | capital | Deficit | Equity | ||||||||||||||||
| Additional | Total | |||||||||||||||||||
| Common stock | paid-in- | Accumulated | Stockholders’ | |||||||||||||||||
| Shares | Amount | capital | Deficit | Equity | ||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Stock issued for cash at $ per share | | |||||||||||||||||||
| Stock issued for cash | | |||||||||||||||||||
| Stock compensation expense in connection with issuance of common stock | ||||||||||||||||||||
| Stock issued in connection with warrant exercise | ||||||||||||||||||||
| Debt discount for warrants | ||||||||||||||||||||
| Return of shares for financing commitment | ) | ( | ) | |||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Balance | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
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THE CRYPTO COMPANY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In U.S. Dollars, except share data or otherwise stated)
| For the Nine Months Ended | ||||||||
| September 30, 2023 | September 30, 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net (loss) | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operations: | ||||||||
| Depreciation and amortization | ||||||||
| Share-based compensation | ||||||||
| Debt discount for warrants | ||||||||
| Loss on disposal of equipment | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Accounts payable and accrued expenses | ||||||||
| Deferred revenue | ||||||||
| Net cash provided by/used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of computer equipment | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Payment of notes payable | ( | ) | ( | ) | ||||
| Proceeds from issuance of notes payable | ||||||||
| Proceeds from common stock issuance | ||||||||
| Net cash provided by financing activities | ||||||||
| Net (decrease) increase in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at the beginning of the period | ||||||||
| Cash and cash equivalents at the end of the period | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – BASIS OF PRESENTATION
Organization and Description of the Business
The Crypto Company was incorporated in the State of Nevada on March 9, 2017. The Company is engaged in the business of providing consulting, training, and educational and related services for distributed ledger technologies (“blockchain”), for corporate and individual clients, enterprises for general blockchain education, as well as for the building of technological infrastructure and enterprise blockchain technology solutions. In recent periods the Company has generated revenues and incurred expenses primarily through these consulting and related operations.
Unless expressly indicated or the context requires otherwise, the terms “Crypto,” the “Company,” “we,” “us,” and “our” in these condensed consolidated financial statements refer to The Crypto Company and, where appropriate, its wholly-owned subsidiary Blockchain Training Alliance, Inc. (“BTA”) and an inactive subsidiary Coin Tracking, LLC (“CoinTracking”).
The Company entered into a Stock Purchase Agreement (the “SPA”) effective as of March 24, 2021 with BTA and its stockholders. On April 8, 2021, the Company completed the acquisition of all of the issued and outstanding stock of BTA and BTA became a wholly-owned subsidiary of the Company. As a result of this acquisition, the operations of BTA became consolidated with Company operations on April 8, 2021.
BTA is a blockchain training company and service provider that provides training and educational courses focused on blockchain technology and education as to the general understanding of blockchain to corporate and individual clients.
The Company’s accounting year-end is December 31.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Going Concern
The
Company’s condensed consolidated financial statements are prepared using the accrual method of accounting in accordance with
United States (“U.S.”) generally accepted accounting principles (“GAAP”) and have been prepared on a going
concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The
Company has incurred significant losses and experienced negative cash flows since inception. As of September 30, 2023, the Company
had cash of $
The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management is evaluating different strategies to obtain financing to fund the Company’s expenses and achieve a level of revenue adequate to support the Company’s current cost structure. Financing strategies may include, but are not limited to, private placements of capital stock, debt borrowings, partnerships and/or collaborations. There can be no assurance that any of these future-funding efforts will be successful. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.
Management’s Representation of Interim Condensed Consolidated Financial Statements
The accompanying unaudited condensed consolidated financial statements have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in the condensed consolidated financial statements prepared in accordance with GAAP have been condensed or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements include all of the adjustments, which in the opinion of management are necessary to a fair presentation of financial position and results of operations. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative of results for a full year. These condensed consolidated financial statements should be read in conjunction with the audited condensed consolidated financial statements as of December 31, 2022.
The Company prepares its condensed consolidated financial statements based upon the accrual method of accounting, recognizing income when earned and expenses when incurred.
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Basis of Presentation and Principles of Consolidation
Use of Estimates
The preparation of these condensed consolidated financial statements in conformity with GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and the related disclosure of contingent assets and liabilities. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The Company’s significant estimates and assumptions include but are not limited to the valuation allowances of deferred taxes, and share-based compensation expenses. Actual results may differ from these estimates. In addition, any change in these estimates or their related assumptions could have an adverse effect on the Company’s operating results.
Cash and Cash Equivalents
The Company defines its cash and cash equivalents to include only cash on hand and certain highly liquid investments with original maturities of ninety days or less. The Company maintains its cash and cash equivalents at financial institutions, the balances of which may, at times, exceed federally insured limits. Management believes that the risk of loss due to the concentration is minimal.
Investments in Cryptocurrency
Investments were comprised of several cryptocurrencies the Company owned, of which a majority was Bitcoin, that were actively traded on exchanges. During 2018, the Company sold most of its investments and during 2019 wrote-off the remainder of all those investments because there was no method to obtain liquidity for those investments. The Company recorded this recovery as other income in its condensed consolidated financial statements. As previously disclosed, the Company has ceased operations of its former cryptocurrency investment segment, and the Company liquidates newly issued/accessible assets from old investments as promptly as practicable for the sole purpose of winding down the Company’s legacy cryptocurrency investment segment.
The Company records its investments as indefinite-lived intangible assets at cost less impairment and are reported as long-term assets in the consolidated balance sheets. An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value. In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted. The primary exchanges and principal markets the Company utilized for its trading were Kraken, Bittrex, Poloniex, and Bitstamp.
As of September 30, 2023, the Company had written off the value of its investments in cryptocurrency.
Investments Non-cryptocurrency
The Company previously invested in simple agreements for future tokens (“SAFT”) and a simple agreement for future equity (“SAFE”) agreements. The SAFT agreements provide for the issuance of tokens in anticipation of a future token generation event, with the number of tokens predetermined based on the price established in each respective agreement. The SAFE investment included provisions that provide for either equity or tokens, or both. As of September 30, 2023, and December 31, 2022, the Company had written-off its investments in non- cryptocurrency.
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Business Combination
The purchase price of an acquired company is allocated between tangible and intangible assets acquired and liabilities assumed from the acquired business based on their estimated fair values with the residual of the purchase price recorded as goodwill. The results of operations of acquired businesses are included in our operating results from the dates of acquisition.
Income Taxes
Deferred tax assets and liabilities are recognized for expected future consequences of events that have been included in the condensed consolidated financial statements or tax returns. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities.
When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the condensed consolidated financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceed the amount measured as described above is reflected as a liability for unrecognized tax benefits along with any associated interest and penalties that would be payable to the taxing authorities upon examination.
As of September 30, 2023, we are subject to federal taxation in the U.S., as well as state taxes. The Company has not been audited by the U.S. Internal Revenue Service.
Fair Value Measurements
The Company recognizes and discloses the fair value of its assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). Each level of input has different levels of subjectivity and the difficulty involved in determining fair value.
Level 1 Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurable date.
Level 2 Inputs, other than quoted prices included in Level 1, which are observable for the asset or liability through corroboration with market data at the measurement date.
Level 3 Unobservable inputs that reflect management’s best estimate of what participants would use in pricing the asset or liability at the measurement date.
The carrying amounts of the Company’s financial assets and liabilities, including cash, accounts payable and accrued expenses approximate fair value because of the short maturity of these instruments.
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Revenue Recognition
The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of the new revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:
| ● | Step 1: Identify the contract with the customer | |
| ● | Step 2: Identify the performance obligations in the contract | |
| ● | Step 3: Determine the transaction price | |
| ● | Step 4: Allocate the transaction price to the performance obligations in the contract | |
| ● | Step 5: Recognize revenue when the Company satisfies a performance obligation |
In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met: The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct), and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).
If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified that is distinct.
The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. When determining the transaction price, an entity must consider the effects of all of the following:
Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The transaction price is allocated to each performance obligation on a relative standalone selling price basis. The transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate.
The Company adopted ASC 606 as of January 1, 2018, using the modified retrospective transition method for contracts as of the date of initial application. There was no cumulative impact on the Company’s retained earnings.
During the period ended September 30, 2023, the Company’s main source of revenue was consulting and education services to numerous customers provided by and through BTA. The Company has determined that revenue should be recognized over time, as the service is provided. The Company considered the criteria in ASC 606 in reaching this determination, specifically:
| ● | The customer receives and consumes the benefit provided by the Company’s performance as the Company performs. | |
| ● | The Company’s performance enhances an asset controlled by the customer. | |
| ● | The Company’s performance does not create an asset with alternative use, and the Company has an enforceable right to payment for performance completed to date. |
The consulting and education services performed during the period ended September 30, 2023, meet more than one of the criteria above.
In accordance with ASC No. 718, Compensation-Stock Compensation, the Company measures the compensation costs of share-based compensation arrangements based on the grant date fair value of granted instruments and recognizes the costs in condensed financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options.
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On January 1, 2019, the Company adopted ASC No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. Previously, share-based payments to nonemployees was accounted for in accordance with ASC No. 505, Equity-Based Payments to Non-Employees, which required compensation cost to be remeasured at fair value at each reporting period when the award vests. As a result, stock option-based payments to non-employees resulted in significant volatility in compensation expenses in prior years.
The Company accounts for its share-based compensation using the Black-Scholes model to estimate the fair value of stock option awards. Using this model, fair value is calculated based on assumptions with respect to the (i) expected volatility of the Company’s common stock price, (ii) expected life of the award, which for options is the time over which employees and non- employees are expected to hold their options prior to exercise, and (iii) risk-free interest rate.
The Company reports earnings per share (“EPS”) with a dual presentation of basic EPS and diluted EPS. Basic EPS is computed as net income divided by the weighted average of common shares for the period. Diluted EPS reflects the potential dilution that could occur from common shares issued through stock options, or warrants. For the nine-month periods ended September 30, 2023, and 2022, the Company had no potentially dilutive common stock equivalents. Therefore, the basic EPS and diluted EPS are the same.
NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS
The Company has implemented all new accounting pronouncements that are in effect and that may impact its condensed financial statements and does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations.
NOTE 4 -GOODWILL AND INTANGIBLE ASSETS
The
Company entered into a Stock Purchase Agreement (the “SPA”) effective as of March 24, 2021 with BTA and its stockholders.
On April 8, 2021, the Company completed the acquisition of all of the issued and outstanding stock of BTA and BTA became a wholly owned
subsidiary of the Company. At the closing, the Company delivered to the sellers a total of $
As
a result of the foregoing, the Company initially recorded goodwill of $
During
the nine months ended September 30, 2023, the Company recorded $
NOTE 5 – NOTES PAYABLE
On
April 3, 2018, CoinTracking entered into a Loan Agreement (the “Loan Agreement”) with CoinTracking GmbH, which provided for
total borrowings of up to $
Interest
expense for Notes Payable was $
| ● | On June 10, 2020, the Company received a loan from the Small Business Administration of $
As of September 30, 2023, the balance remaining under the 2020 SBA Loan is $ | |
| ● | On February 24, 2022, the Company borrowed funds pursuant to the terms of a Securities Purchase Agreement (the “Feb. SPA”) entered into with AJB, and issued a Promissory Note in the principal amount of $
As of September 30, 2023, the balance remaining under the Feb. Note is $ | |
| ● | On
April 7, 2022, the Company borrowed funds pursuant to the terms of a Securities Purchase Agreement (the “April SPA”)
entered into with Efrat Investments LLC (“Efrat”) and issued a Promissory Note in the principal amount of $ |
| 12 |
The
Efrat Note had a maturity date of
As of September 30, 2023, the balancing remaining under the Efrat Note is $
| ● | On
May 3, 2022, the Company borrowed funds pursuant to the terms of a Securities Purchase Agreement (the “May AJB SPA”)
entered into with AJB Capital Investments, LLC (“AJB”), and issued a Promissory Note in the principal amount of $ |
At
the closing the Company repaid all obligations owed to AJB pursuant to a
The
May AJB Note had a maturity date of
On
December 29, 2022, the Company entered into a First Amendment to Promissory Note (the “May AJB Amendment”) to amend certain
terms of the May AJB Note. Pursuant to the May AJB Amendment, AJB loaned the Company an additional $
The
Company used proceeds of the additional loan amount, in part, to satisfy in full all remaining obligations owed by the Company pursuant
to a promissory note in the principal amount of $
As of September 30, 2023, the balancing
remaining under the May AJB Note is $
| ● | On
July 27, 2022, The Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Coventry Enterprises,
LLC (“Coventry”), pursuant to which Coventry purchased a |
| 13 |
The
Coventry Note bears interest at a rate of
Any or all of the principal amount and the Guaranteed Interest may be prepaid at any time and from time to time, in each case without penalty or premium.
In
addition to certain other remedies, if an Event of Default occurs, consistent with the terms of the Coventry Note, the Coventry Note
will bear interest on the aggregate unpaid principal amount and Guaranteed Interest at the rate of the lesser of
On
April 24, 2023, the Company received a letter (the “Notice of Conversion”) from Coventry formally notifying the Company of
an event of default under Section 7(a)(i) of the Coventry Note. The Company was in violation of covenants in the Coventry Note that require
the Company to make the payment of any principal amount, guaranteed interest, or any other interest due under the Coventry Note, when
due, subject to a five day cure period. Upon an event of default, consistent with the terms of the Coventry Note, the Coventry Note becomes
convertible, in whole or in part, into shares of the Company’s Common Stock at Coventry’s option. As set forth in the Notice
of Conversion, Coventry elected to convert $
With respect to the outstanding Coventry Note, Coventry has agreed to accept $
| ● | On December 15, 2022, the Company borrowed funds pursuant to
a SPA entered into with Diagonal, and Diagonal purchased a convertible promissory note (the “Second Diagonal Note”) from
the Company in the aggregate principal amount of $ |
The
Second Diagonal Note has a maturity date of
| 14 |
Following
an event of default, and subject to certain limitations, the outstanding amount of the Note may be converted into shares of Company common
stock. Amounts due under the Note would be converted into shares of the Company’s common stock at a conversion price equal to
| ● | On January 10, 2023, the Company borrowed funds pursuant to
a SPA entered into with Diagonal, and Diagonal purchased a convertible promissory note (the “Third Diagonal Note”) from the
Company in the aggregate principal amount of $ |
The
maturity date of the Third Diagonal Note is
Pursuant to the Third Diagonal Note, as long as the Company has any obligations under the Third Diagonal Note, the Company cannot without Diagonal’s written consent, sell, lease or otherwise dispose of any significant portion of its assets which would render the Company a “shell company” as such term is defined in SEC Rule 144. Additionally, under the Note, any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.
The
Third Diagonal Note contains standard and customary events of default such as failing to timely make payments under the Note when due,
the failure of the Company to timely comply with the Securities Exchange Act of 1934, as amended, reporting requirements and the failure
to maintain a listing on the OTC Markets. The occurrence of any of the events of default, entitled Diagonal, among other things, to accelerate
the due date of the unpaid principal amount of, and all accrued and unpaid interest on, the Third Diagonal Note.
With respect to the two outstanding Diagonal Notes, Diagonal has agreed to accept $
| ● | On February 2, 2023, the Company borrowed funds pursuant to
a SPA entered into with Fast Capital, LLC (“Fast Capital”), and Fast Capital purchased a |
The
maturity date of the Fast Capital Note is
| 15 |
Fast
Capital has the right at any time after the six-month anniversary of the date of issuance of the Fast Capital Note to convert all or
any part of the outstanding and unpaid principal amount of the Fast Capital Note into Company common stock, subject to a beneficial ownership
limitation. The conversion price of the Fast Capital Note equals
The
Fast Capital Note contains various covenants standard and customary events of default such as failing to timely make payments under the
Fast Capital Note when due, the failure to maintain a listing on the OTC Markets or the Company defaulting on any other note or similar
debt obligation into which the Company has entered and failed to cure within the applicable grace period. The occurrence of any of the
events of default, entitle First Capital, among other things, to accelerate the due date of the unpaid principal amount of, and all accrued
and unpaid interest on, the Fast Capital Note. Upon an “Event of Default”, interest shall accrue at a default interest rate
of
As of September 30, 2023, the balancing remaining under the Fast Capital Note is $
| ● | On March 2, 2023, the Company borrowed funds pursuant to a
SPA entered into with Diagonal, and Diagonal purchased a convertible promissory note (the “Fourth Diagonal Note”) from the
Company in the aggregate principal amount of $ |
The
maturity date of the Fourth Diagonal Note is
Pursuant to the Fourth Diagonal Note, as long as the Company has any obligations under the Fourth Diagonal Note, the Company cannot without Diagonal’s written consent, sell, lease or otherwise dispose of any significant portion of its assets.
The
Fourth Diagonal Note contains standard and customary events of default such as failing to timely make payments under the Note when due,
the failure of the Company to timely comply with the Securities Exchange Act of 1934, as amended, reporting requirements and the failure
to maintain a listing on the OTC Markets. The occurrence of any of the events of default, entitled Diagonal, among other things, to accelerate
the due date of the unpaid principal amount of, and all accrued and unpaid interest on, the Fourth Diagonal Note.
With respect to the two outstanding Diagonal Notes, Diagonal has agreed to accept $
| ● | On June 23, 2023, the Company borrowed funds pursuant to the
terms of a Securities Purchase Agreement (the “AJB SPA”) entered into with AJB, and issued a Promissory Note in the principal
amount of $ |
The
maturity date of the AJB June Note is
As of September 30, 2023, the balancing remaining under the AJB June Note is $
| ● | On November 13, 2023, the Company borrowed funds pursuant to the terms of a Securities Purchase Agreement (the “Nov.
SPA”) entered into with AJB, and issued a Promissory Note in the principal amount of $ |
The maturity date of the Nov. Note is
| 16 |
NOTE 6 – CONVERTIBLE NOTES
The
balance of outstanding Convertible Notes was $
In
June 2020, the Company issued Convertible Notes (“June 2020 Notes”) to an accredited investor for an aggregate amount of
$
In
April 2020, the Company issued three Convertible Notes (“April 2020 Notes”) to three accredited investors for an aggregate
amount of $
In
February 2020, the Company issued three Convertible Notes (“February 2020 Notes”) to three accredited investors for an aggregate
amount of $
Interest
expense for Convertible Notes was $
NOTE 7 – WARRANTS FOR COMMON STOCK
As of September 30, 2023, outstanding warrants to purchase shares of the Company’s common stock were as follows:
SCHEDULE OF OUTSTANDING WARRANTS TO PURCHASE SHARES OF COMMON STOCK
| Issuance Date | Exercisable for | Expiration Date | Exercise Price | Number of Shares Outstanding Under Warrants | ||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| $ | ||||||||||||
The exercise price of the warrants is subject to adjustment from time to time, as provided therein, to prevent dilution of purchase rights granted thereunder. The warrants are considered indexed to the Company’s own stock and therefore no subsequent remeasurement is required.
| 17 |
On July 21, 2017, the Company’s board of directors adopted The Crypto Company 2017 Equity Incentive Plan (the “Plan”), which was approved by its stockholders on August 24, 2017. The Plan is administered by the board of directors (the “Administrator”). Under the Plan, the Company may grant equity awards to eligible participants which may take the form of stock options (both incentive stock options and non-qualified stock options) and restricted stock awards. Awards may be granted to officers, employees, non-employee directors (as defined in the Plan) and other key persons (including consultants and prospective employees). The term of any stock option award may not exceed years and may be subject to vesting conditions, as determined by the Administrator. Incentive stock options may be granted only to employees of the Company or any subsidiary that is a “subsidiary corporation” within the meaning of Section 424(f) of the Internal Revenue Code.
During the nine-month period ended September 30, 2023, the Company did not issue any stock options.
shares of the Company’s common stock are reserved for issuance under the Plan. As of September 30, 2023, there are outstanding stock option awards issued from the Plan covering a total of shares of the Company’s common stock and there remain reserved for future awards shares of the Company’s common stock.
Weighted Average | ||||||||||||||||
| Weighted | Remaining | |||||||||||||||
| Average | Contractual | Aggregate | ||||||||||||||
Number of Shares | Exercise Price | Term (years) | Intrinsic Value | |||||||||||||
| Options outstanding, on December 31, 2022 | $ | |||||||||||||||
| Options granted | - | - | ||||||||||||||
| Options canceled | - | - | ||||||||||||||
| Options exercised | - | - | ||||||||||||||
| Options outstanding, on September 30, 2023 | $ | $ | ||||||||||||||
| Vested and exercisable | $ | $ | ||||||||||||||
The Company recognized $ for share-based compensation related to stock options for the nine-month period ended September 30, 2023. There were no options exercised for the nine months ended September 30, 2023.
The Company granted shares of restricted stock during the nine-month period ended September 30, 2023 (although such shares were not issued under the Plan).
The Company recognized $ for share-based compensation related to restricted stock issued for the nine month period ended September 30, 2023. As of September 30, 2023, there was $ of unrecognized compensation costs related to stock options issued to employees and nonemployees, and the stock options had no intrinsic value since they were all “out of the money” as of September 30, 2023.
NOTE 9- COMMITMENTS AND CONTINGENCIES
Facility
rent expense was $
NOTE 10 – SUBSEQUENT EVENTS
On November 13, 2023, the Company borrowed
funds pursuant to the terms of the Nov. SPA entered into with AJB, and issued the Nov. Note in a private transaction for a purchase price
of $
The maturity date of the Nov. Note is
The Company provided various representations, warranties, and covenants to AJB in the Nov. SPA. The Company’s
breach of any representation or warranty, or failure to comply with the covenants would constitute an event of default. Pursuant to the
Nov. SPA, the Company also issued to AJB a pre-funded common stock warrant (the “Warrant”) to purchase up to
The offer and sale of the Nov. Note and the Warrant was made in a private transaction exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), in reliance on exemptions afforded by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated thereunder.
| 18 |
On November 13, 2023, the Company paid 1800
Diagonal Lending, LLC (“Diagonal”) an agreed upon settlement amount, $
On November 13, 2023, the Company paid Coventry $
On October 3, 2023, the Company entered into an Intellectual Property Assignment Agreement (the “IP Agreement”) with AllFi Technologies, Inc., a Delaware corporation (“AllFi Technologies”), pursuant to which the Company assigned to AllFi Technologies: (i) a sublicense of code instance managed by TelBill, LLC under the Code Licensing Commerical Agreement dated as of August 29, 2023, by and between the Company and TelBill, LLC (“Code Licensing Commerical Agreement”), (ii) one runtime SaaS license for use by AllFi Technologies in the conduct of its coupon business for a term of 12 months in accordance with the Company’s sublicense right under Section 2.1 of the Code Licensing Commerical Agreement in exchange for a fee to be mutually agreed to by the Company and AllFi Technologies through the use of such SaaS license, and (iii) one runtime SaaS license for use by AllFi Technologies in the conduct of its banking and marketplace business for a term of 12 months in accordance with the Company’s sublicense right under Section 2.1 of the Code Licensing Commerical Agreement in exchange for a fee to be mutually agreed to by the Company and AllFi Technologies through the use of such SaaS license. The Company and AllFi Technologies have made customary representations, warranties, and covenants in the IP Agreement.
Also on October 3, 2023, the Company entered into a subscription agreement (the “AllFi Technologies Subscription
Agreement”) with AllFi Technologies, pursuant to which the Company has agreed to purchase from AllFi Technologies an aggregate of
shares of AllFi Technologies’ common stock, which represents % of the current issued and outstanding shares of AllFi Technologies,
for a purchase price of $
On October 7, 2023, the Company sold an aggregate of shares of the Company’s restricted common stock to AllFi Holdings LLC, for a total purchase price of $, pursuant to the terms of a subscription agreement by and between the Company and AllFi Holdings LLC in connection with the Company’s investment in AllFi Technologies, Inc.
Subsequent to September 30, 2023 the Company issued common shares pursuant to the conversion of approximately $
On August 31, 2023, the Company entered into a Code Licensing Commercial Agreement (the “Licensing Agreement”)
with TelBill, LLC (“TelBill”), pursuant to which TelBill granted the Company a non-exclusive, worldwide, revocable, non-transferable,
sublicensable, license to use and market its software and fin-tech products and services to the Company’s customers. In exchange,
the Company agreed to pay TelBill a sum of $
The Licensing Agreement has a one hundred year term or will continue until it is terminated in accordance with the provisions set forth in the Agreement. Each party may terminate the Agreement, upon written notice to the other party. Neither party may assign the Agreement, including through a change of control. The Agreement also contains customary representations, warranties and covenants, and the parties have also agreed to indemnify and hold each other harmless from claims and losses arising directly or indirectly from the Licensing Agreement under certain circumstances.
| 19 |
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion of our financial condition and results of operations in conjunction with the consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q (“Quarterly Report”) and with our audited consolidated financial statements, including the notes thereto, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the “2022 Annual Report”), as filed with the U.S. Securities and Exchange Commission (“SEC”). In addition to historical consolidated financial information, the following discussion and analysis contain forward-looking statements that reflect our plans, estimates, and beliefs and involve risks and uncertainties. The words “may,” “could,” “should,” “estimate,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “target,” “plan” and similar expressions are intended to identify forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report, as well as risks referenced in our other filings with the SEC.
Overview of Our Business
We are primarily engaged in the business of providing consulting, training, and educational services for distributed ledger technologies (“blockchain”), for individual and corporate clients, enterprises for general blockchain education, as well as for the building of technological infrastructure and enterprise blockchain technology solutions. We currently generate revenues and incur expenses through these consulting and educational operations. We have disposed of our entire ownership interest in CoinTracking GmbH and also divested all of our cryptocurrency assets owned by our former cryptocurrency investment segment, which has ceased operations.
The Company entered into a Stock Purchase Agreement (the “SPA”) effective as of March 24, 2021 with Blockchain Training Alliance, Inc (“BTA”) and its stockholders. On April 8, 2021, the Company completed the acquisition of all of the issued and outstanding stock of BTA and BTA became a wholly owned subsidiary of the Company.
BTA is a blockchain training company and service provider that provides training and educational courses focused on blockchain technology and education as to the general understanding of blockchain to corporate and individual clients.
Comparison of the three months ended September 30, 2023 and September 30, 2022
Revenue
Revenues for the three months ended September 30, 2023 and September 30, 2022, were $124,195 and $252,733, respectively. Revenue for the 2023 period consisted primarily of fees received for blockchain training and consulting generated by the Company’s BTA subsidiary which was acquired in April 2021.
General and Administrative Expenses
For the three months ended September 30, 2023, our general and administrative expenses were $244,183, a decrease of $61,540 compared to $305,723 for the period ended September 30, 2022. General and administrative expenses consist primarily of costs relating to professional services, payroll, and payroll-related expenses. Professional services included in general and administrative expenses consist primarily of contracting fees, consulting fees, and accounting fees.
Amortization expense was $10,833 for the three months ended September 30, 2023, and September 30, 2022, respectively. Depreciation expense was $0 and $32,708 for the three months ended September 30, 2023, and September 30, 2022, respectively.
Share-based compensation was $113,818 and $181,487 for the three months ended September 30, 2023, and September 30, 2022, respectively.
| 20 |
Other Income (Expense)
During the three months ended September 30, 2023, other income was $0 compared to $410 during the three months ended September 30, 2022. The decrease is attributable to cryptocurrency investments that had previously been written off became valuable during the 2021 period and the Company liquidated the extent of its holdings at that time for cash.
Interest Expense
During the three months ended September 30, 2023, interest expense was $99,306 compared to $67,286 during the three months ended September 30, 2022. The increase is primarily attributed to the issuance of promissory notes payable during the 2023 period.
Comparison of the nine months ended September 30, 2023 and September 30, 2022
Revenue
Revenues for the nine months ended September 30, 2023 and September 30, 2022, were $379,107 and $515,767, respectively. Revenue for the 2023 period consisted primarily of fees received for blockchain training and consulting generated by the Company’s BTA subsidiary which was acquired in April 2021. The decrease in revenue was primarily due to a decrease in online sales revenue of approximately $153,000 offset by an increase in all other revenue of approximately $16,000.
General and Administrative Expenses
For the nine months ended September 30, 2023, our general and administrative expenses were $979,324, a decrease of $434,730 compared to $1,414,054 for the period ended September 30, 2022. General and administrative expenses consist primarily of costs relating to professional services, payroll, and payroll-related expenses. Professional services included in general and administrative expenses consist primarily of contracting fees, consulting fees, and accounting fees.
Amortization expense was $32,499 for the nine months ended September 30, 2023, and September 30, 2022, respectively. Depreciation expense was $0 and $76,319 for the nine months ended September 30, 2023, and September 30, 2022, respectively.
Share-based compensation was $620,298 and $1,965,997 for the nine months ended September 30, 2023, and September 30, 2022, respectively.
Other Income (Expense)
During the nine months ended September 30, 2023, other income was $25,775 compared to $88,865 during the nine months ended September 30, 2022. The decrease is attributable to cryptocurrency investments that had previously been written off became valuable during the 2021 period and the Company liquidated the extent of its holdings at that time for cash.
Interest Expense
During the nine months ended September 30, 2023, interest expense was $2,416,621 compared to $1,671,4860 during the nine months ended September 30, 2022. The increase is primarily attributed to debt discount calculated on the issuance of warrants in 2023, and the issuance of promissory notes payable during the 2022 period.
Liquidity and Capital Resources
The ability to continue as a going concern is dependent upon us generating profitable operations in the future and/or obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Management is evaluating different strategies to obtain financing to fund our expenses and achieve a level of revenue adequate to support our current cost structure. Financing strategies may include but are not limited to, private placements of capital stock, debt borrowings, partnerships, and/or collaborations. There can be no assurance that any of these future-funding efforts will be successful. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.
The following table summarizes the primary sources and uses of cash for the periods presented below:
| Nine months ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Net cash (used in) operating activities | $ | (763,615 | ) | $ | (897,458 | ) | ||
| Net cash (used in) investing activities | - | (1,033,500 | ) | |||||
| Net cash provided by financing activities | 673,444 | 1,874,473 | ||||||
| Net (decrease) in cash and cash equivalents | $ | (90,171 | ) | $ | (56,485 | ) | ||
Operating Activities
Net cash used in operating activities was $763,615 for the nine months ended September 30, 2023, compared to net cash used by operating activities of $1,075,585 for the nine months ended September 30, 2022. The decrease in net cash used in operating activities during the 2023 period was primarily due to a decrease in general and administrative expenses of $434,730 for the nine months ended September 30, 2023.
Investing Activities
Net cash used in investing activities was $0 for the nine months ended September 30, 2023, compared to $1,033,500 for the nine months ended September 30, 2022. The decrease in cash used in investing activities was primarily due to the acquisition of bitcoin mining equipment in February 2022. In 2023, the Company exited the bitcoin mining initiative because it was not profitable.
Financing Activities
Net cash from financing activities for the nine months ended September 30, 2023, was $673,444, compared to $2,119,447 for the nine months ended September 30, 2022. The decrease in net cash from financing activities was mainly due to the resulting issuance of promissory notes during the nine months ended September 30, 2022.
Trends, Events, and Uncertainties
Blockchain
The blockchain technology market is dynamic and unpredictable. Although we will undertake compliance efforts, including efforts with commercially reasonable diligence, there can be no assurance that there will not be a new or unforeseen law, regulation or risk factor which will materially impact our ability to continue our business as currently operated or raise additional capital to foster our continued growth.
COVID-19
The continuing effect of the COVID-19 virus has resulted in a slowdown in economic activity, disrupting supply chains, and reducing workforces, increasing market volatility and consequently, impacting our operational and financial performance. It is impossible to predict the ultimate degree to which future variants of COVID-19 and their spread could lead to continuing significant and material disruptions in economic activity, and could have a material adverse effect on our results of operations.
Other than as discussed in this Quarterly Report and our 2022 Annual Report, we are not aware of any other trends, events, or uncertainties that are likely to have a material effect on our financial condition.
| 21 |
Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements requires us to make estimates that affect the reported amounts of assets, liabilities, revenue and expenses, and the related disclosure of contingent liabilities. We base our judgments on our historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making estimates about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We have no material changes to our Critical Accounting Policies and Estimates disclosure as filed in our 2022 Annual Report.
Recent Accounting Pronouncements
See Note 3 to the consolidated financial statements for a discussion of recent accounting pronouncements.
Off-Balance Sheet Transactions
We do not have any off-balance sheet transactions.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item.
ITEM 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, including our principal executive officer and principal financial officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of September 30, 2023. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of September 30, 2023, to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures. In designing and evaluating our disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their desired control objectives, and our management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the period ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| 22 |
PART II. Other Information
ITEM 1. Legal Proceedings.
The Company is subject, from time to time, to various legal proceedings that are incidental to the conduct of its business. The Company is not involved in any pending legal proceeding that it believes would reasonably be expected to have a material adverse effect on its financial condition or results of operations.
ITEM 1A. Risk Factors.
In evaluating us and our common stock, we urge you to carefully consider the risks and other information in this Quarterly Report on Form 10-Q, the Risk Factors disclosed in Item 1A. of Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as well as additional risks and uncertainties not currently known to us or that we currently deem immaterial, that could materially and adversely affect our results of operations or financial condition.
ITEM 3. Defaults upon Senior Securities.
On April 24, 2023, the Company defaulted on the July 27, 2022 Coventry Note. The Company was in violation of covenants in the Coventry Note that require the Company to make the payment of any principal amount, guaranteed interest, or any other interest due under the Coventry Note, when due, subject to a five day cure period. Upon an event of default, consistent with the terms of the Coventry Note, the Coventry Note becomes convertible, in whole or in part, into shares of the Company’s Common Stock at Coventry’s option. On April 24, 2023, the Company received a notice of default in the amount of $17,916.94 of principal and $2,083.06 of interest. As per the terms of the Coventry Note, upon the occurrence and during the continuation of an event of default, the Coventry Note will become immediately due and payable. As of the filing date of this quarterly report on Form 10-Q, the total arrearage is $14,097.
ITEM 4. Mine Safety Disclosures.
Not applicable.
ITEM 5. Other Information.
During
the three months ended September 30, 2023, no director or officer of the Company
ITEM 6. Exhibits.
| 23 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Dated: November 20, 2023 | THE CRYPTO COMPANY | |
| (Registrant) | ||
| By: | /s/ Ron Levy | |
| Ron Levy | ||
Chief Executive Officer, Interim Chief Financial Officer, Chief Operating Officer and Secretary (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) | ||
| 24 |
Exhibit 10.4
Exhibit 10.5
Exhibit 10.6
Exhibit 10.7
Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT
I, Ron Levy, certify that:
1. I have reviewed this quarterly report on Form 10-Q for the period ended September 30, 2023, of The Crypto Company;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report;
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.
Date: November 20, 2023
| /s/ Ron Levy | |
| Ron Levy | |
|
Chief Executive Officer, Interim Chief Financial Officer, Chief Operating Officer, and Secretary (Principal Executive Officer and Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of The Crypto Company. (the “Company”) on Form 10-Q for the period ended September 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ron Levy, Chief Executive Officer, Interim Chief Financial Officer, Chief Operating Officer and Secretary of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
IN WITNESS WHEREOF, the undersigned has executed this certification as of November 20, 2023.
| /s/ Ron Levy | |
| Ron Levy | |
|
Chief Executive Officer, Interim Chief Financial Officer, Chief Operating Officer, and Secretary (Principal Executive Officer and Principal Financial Officer) |